The NCLAT upheld the Committee of Creditors' authority to adjust maintenance charges and recover essential service dues during the Corporate Insolvency Resolution Process.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka ruled that the Resolution Professional (RP), with the Committee of Creditors' (CoC) approval, was authorized to increase maintenance charges and take coercive measures to recover outstanding electricity dues, as essential service payments must be made during the CIRP period and commercial decisions by the CoC are not subject to judicial review.
The appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) was filed by Home Buyers of the 'Sanskriti' project, developed by Earthcon Infracon Pvt. Ltd., challenging the Order dated June 14, 2023, issued by the National Company Law Tribunal (NCLT) in the context of I.A. No. 1146/2022 and I.A. No. 3234/2023 in C.P. (IB) No. 1348/ND/2019. The NCLT had dismissed IA No. 1146/2022 as infructuous and granted IA No. 3234/2023, allowing the Resolution Professional (RP) to take necessary actions regarding maintenance and electricity charges.
The case arose after the Corporate Debtor was admitted to Corporate Insolvency Resolution Proceedings (CIRP) in 2019. At the time of insolvency commencement, Home Buyers were paying maintenance fees of Rs.1 per square foot plus GST, while there were outstanding electricity dues to Noida Power Corporation Limited (NPCL). The Committee of Creditors (CoC) resolved to increase the maintenance charges to Rs.2 per square foot plus GST to address these dues. This increase was communicated to Home Buyers on January 28, 2022. In response, the Appellants challenged this decision, arguing that it was arbitrary and that maintenance and electricity dues should be classified as CIRP costs rather than being borne by Home Buyers.
On March 14, 2022, the Adjudicating Authority directed the payment of outstanding dues but prohibited the disconnection of electricity. Following non-payment, the RP filed IA No. 3234/2023 seeking to modify the earlier order to permit disconnection for non-payment. On June 14, 2023, the NCLT dismissed IA No. 1146/2022 and allowed IA No. 3234/2023, authorizing the RP to take coercive measures to recover the dues.
The Appellate Tribunal evaluated whether the RP had adhered to due process and if the CoC’s decision to increase maintenance charges was justified. It was found that the RP had a duty to manage the Corporate Debtor, including handling outstanding dues, and that the CoC’s decision to increase maintenance fees was necessary to cover expenses for maintenance and electricity in common areas. The Tribunal affirmed that the RP's actions were within the scope of their responsibilities and that the decisions made by the CoC were not subject to legal challenge.
The Appellate Tribunal also reaffirmed that essential service dues, including electricity charges, are required to be paid during the CIRP period. This aligns with the judgment in Shailesh Verma vs Maharashtra State Electricity Distribution Company, which emphasized the continuation of essential services and the obligation to pay current dues. The NCLAT concluded that there was no fault in the directive for the Corporate Debtor to settle the electricity dues as approved by the CoC and to take necessary actions for collection. The appeal was dismissed with no costs, affirming the NCLT’s order and the decisions made by the CoC and the RP.
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