Section 14(2) of the Insolvency and Bankruptcy Code, 2016 (I&B Code 2016) provides that during the moratorium period the supply of essential goods or services to the Corporate Debtor as may be specified shall not be terminated or suspended or interrupted so that Corporate Debtor keeps running as Going Concern. However, the I&B Code 2016 is silent with respect to the situation wherein the supply of essential goods or services has been terminated before the insolvency date or order for initiating the Corporate Insolvency Resolution Process (CIRP) has been passed by the Adjudicating Authority (AA). Furthermore, the I&B Code 2016 is also silent w.r.t cost to be paid w.r.t such supply of essential goods or services during the Mortarium period.

Recently, National Company Law Appellate Authority (NCLAT) have come across the following issues for deciding in case of Uttarakhand Power Corporation Limited V/s M/s ANG Industries Limited (Company Appeal (AT) (Insolvency) No. 298 of 2017.

  1. Whether the outstanding charges due to which the electricity supply was disconnected prior to the insolvency date need to be paid at first instance before restoring the electricity during the moratorium period in terms of Section 14(2) of the I&B Code 2016?
  2. Whether during the moratorium period under Section 14, for the supply of the electricity, the charges are liable to be paid on month to month basis?

In the case before the Hon'ble NCLAT, Uttarakhand Power  Corporation limited (Appellant) had disconnected the supply of electricity of ANG Industries Limited (Respondent/Corporate Debtor) prior to the Order of the Adjudicating Authority dated 31.08.2017. The Insolvency Resolution Professional (IRP) who was appointed to undertake the insolvency resolution process filed an application before Adjudicating Authority to seek an order of restoration of electricity supply. The Ld Adjucating Authority vide its order dated 9th October 2017 (impugned order) directed the Appellant to restore the electricity so that the Corporate Debtor remains going concern.

The Appellant challenged the impugned order before the Hon'ble NCLAT. The Hon'ble Appellate Authority after hearing the contentions of both the parties held that the Appellant cannot recover the dues unpaid w.r.t period prior to the insolvency order however they can submit the claim before the Resolution professional like other operational creditors.

Further, w.r.t the dues which are w.r.t current period i.e. after insolvency order date the appellants are entitled to be paid for such charges and the Insolvency Resolution Professional is required to pay the amount on behalf of the Corporate Debtor on month to month basis. Furthermore, in case the Insolvency Resolution Professional fails to pay the same the Appellant the charges due, the Appellant can give a notice and disconnect the electricity supply.

Meaning thereby, even though the I&B Code 2016 provides for supply of essential goods or services to the Corporate Debtor during the moratorium period, the above referred judgment of Hon'ble NCLAT clarified that the Insolvency Resolution Professional needs to pay for such supply of essential services received during the Moratorium period and if not then the supply can be terminated or suspended or interrupted.

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