Case Title: Damodar Valley Corporation v. Dimension Steel and Alloys
The National Company Law Appellate Tribunal bench while adjudicating the present case, considered issue of payment to operational creditors under the resolution plan as per the provisions of IBC and thereby requested both the Central Government and Insolvency and Bankruptcy Board of India in this regard. Furthermore, the Tribunal inquired from the aforementioned authorities whether there is a possibility to consider an alteration in the legislative scheme consisting of government dues and other statutory dues.
In this case, the NCLAT was adjudicating an appeal in the case between Damodar Valley Corporation, an operational creditor, and corporate debtors, called Alloys Private Limited and Dimension Steel. The subject matter of the dispute was a power purchase agreement that was entered into by corporate debtor and appellant for supply of electricity on premises of the corporate debtor.
After the execution of the power purchase agreement, the corporate debtor defaulted on the same through non-payment of electricity dues, and thereafter, disconnection notices were also issued by the Damodar Valley Corporation to the corporate debtor, which subsequently led to the disconnection of electricity on June 7, 2019. Thereafter, an application was filed under purview of section 9 of the IBC and thereby CIRP was initiated against the corporate debtor by the concerned authority vide its order dated October 18, 2019.
In furtherance of the same, a public announcement was made by the Interim Resolution Professional, which led to the submission of a claim by appellant for Rs. 36,356,214 as pre-CIRP electricity dues. However, the resolution plan of the committee of creditors didn't get any response, which led to their decision to opt for liquidation.
Thereafter, CP Ispat Private Limited prayed before the adjudicating authority to direct the resolution professional to accept their resolution plan, which was duly accepted on March 16, 2021. Furthermore, the above-mentioned was also approved by the CoC with 80.93% voting shares on April 22, 2022. Thereafter, the appellant challenged the order of NCLT before NCLAT in regard to the allowing of a plea filed by C.P. Ispat Private Limited pertaining to the direction in regard to the acceptance of a resolution plan.
The NCLAT bench analysed the contentions of appellant and urged the Central Government and IBBI to consider a legislative change in the same and held as follows:
"As the law stands today, no exception can be made to such plans, which provide payment to operational creditors in accordance with Section 30(2)(b) of the Code. However, the time has come when it should be examined by the government and the board."