DEBTS OF UNSECURED FINANCIAL CREDITORS HAVE PRIORITY OVER OUTSTANDING ELECTRICITY DUES IN THE IBC LIQUIDATION PROCESS: PASCHIMANCHAL VIDYUT VITRAN NIGAM LTD v RAMAN ISPAT PVT LTD[1]
Authored by Aditya Gupte and Alexandra Celestine
Facts
1. The electricity board supplied electricity to the corporate debtor, Raman Ispat, which was in liquidation proceedings. As per the agreement between the parties, any outstanding electricity dues would constitute a “charge” on Raman Ispat’s assets. Raman Ispat defaulted in paying for its electricity and its properties were attached.
2. In the liquidation proceedings, the NCLT, Allahabad directed the release of the attached properties in favour of the liquidator to enable their sale as per the provisions of the IBC.
3. The electricity board appealed to the NCLAT. It argued that the outstanding electricity dues were a security interest by relying on the definition of “secured creditor” and “transfer” under the IBC. The Electricity Board also argued that recovery of the electricity dues should be as per the Electricity Act, which prevailed over the IBC.
4. The NCLAT rejected the Electricity Board’s appeal, which was challenged before the Supreme Court.
Supreme Court’s Decision
