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Showing contexts for: moratorium period in Damodar Valley Corporation vs Karthik Alloys Limited on 14 March, 2022Matching Fragments
6. We heard the arguments advanced by the Learned Senior Counsel of the Appellant and the Learned Counsel of the Respondent No.2/IRP.
7. The Learned Senior Counsel for Appellant has argued that since electricity connection had already been disconnected at Durgapur plant of the Corporate Debtor prior to initiation of the CIRP, its reconnection is not covered under the provision of section 14(2) of the IBC in the present case as section 14(2) only prohibits termination or suspension or interruption of supply of essential goods or services to the Corporate Debtor during moratorium period. He has further referred to the definition of 'essential supplies' as provided in regulation 32 of the CIRP Regulations, 2016 to claim that essential goods and services referred to in section 14(2) shall mean electricity, water, telecommunication services and information technology services only to the extent they are not a direct input to the output produced or supplied by the Corporate Debtor and from the illustration given with regulation 32 it is clear that water supplied to a Corporate Debtor will be essential supplies Company Appeal (AT) (Insolvency) No. 13 of 2021 for drinking and sanitation purposes and not for generation of hydro electricity. He has also argued that the scope of section 14(2) is limited to prohibiting termination or suspension or interruption during the period of moratorium only, and therefore the Adjudicating Authority has passed the Impugned Order without considering the actual intent of the provision under section 14(2).
10. The Ld. Senior Counsel has contended that the Appellant has at every stage rebutted the claim of Respondent No. 2 that it is a going concern also claiming that the contract demand of the Corporate Debtor was 9500 KVA, and after disconnection of electricity supply in September 2019it is highly improbable that the Corporate Debtor was doing manufacturing using a diesel generator for a 9500 KVA furnace. In view of such improbability it is not possible that the Corporate Debtor would have been a going concern at the beginning of the moratorium period. He has further argued that supporting documents such as payment of GST starting from Company Appeal (AT) (Insolvency) No. 13 of 2021 March 2019 till date should have been verified by the Adjudicating Authority before assuming that the Corporate Debtor was a going concern and consequently giving the benefit of reconnection of power supply. She has also claimed that the Appellant is losing revenue through such non-payments and is unable to serve new customers, thereby affecting industrial growth in its area of operation as defaulting entities are not paying their dues, and in the present case it stands to lose Rs.27,78,95,386/- if the plea of Resolution Professional is accepted.
20. We may now notice the provisions regarding the requirement of maintaining supply of electricity supply isincluded in Section 14(2) and 14(2-A), which are as follows:-
"14. Moratorium. -
xxxxxxxxxxxx (2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.
(2-A) Where the interim resolution professional or resolution professional, as the case may be, considers the supply of goods or services critical to protect and preserve the value of the corporate debtor and manage the operations of such corporate debtor as a going concern, then the supply of such goods or services shall not be terminated, suspended or interrupted during the period of moratorium, except where such corporate debtor has not paid dues arising from such supply during the moratorium period or in such circumstances as may be specified."
23. Admittedly the disconnection of the electricity supply to the Company Appeal (AT) (Insolvency) No. 13 of 2021 Durgapur unit took place on 14.9.2019. According to clause 4.6.1 of the Power Supply Agreement, deemed termination of the agreement could happen only after 180 days from the date of disconnection. Thus deemed termination could have taken place on or after 12.3.2020 i.e. 180 days after the date of disconnection. The order for initiation of CIRP was passed on 17.12.2019 and moratorium was imposed under section 14 from the same date. Thus the deemed termination of the Power Supply Agreement to the Durgapur unit of the corporate debtor which could not take place by 17.12.2019, could not happen during the moratorium period, by virtue of protection provided under Section 14(2).The IRP has claimed reconnection of electricity supply as the same was essential supply during the moratorium period and the Power Supply Agreement had not been terminated. It is also noted that the IRP has asked for reconnection of the electricity supply so that a 'better' resolution plan can be obtained in the resolution of the CD which is the intent of the IBC.