The Supreme Court dismissed the appeal by Paschimanchal Vidyut Vitran Nigam Limited (PVVNL) and instructed the liquidator to process PVVNL’s claims according to the Insolvency and Bankruptcy Code (IBC). PVVNL had entered into an electricity supply agreement with Ram Ispat Pvt. Ltd. in 2010, allowing it to create a charge on the debtor’s assets if dues were unpaid. After non-payment, PVVNL attached the debtor’s properties, which were later subjected to liquidation when the Corporate Insolvency Resolution Process (CIRP) under the IBC failed.
PVVNL argued that the Electricity Act, 2003, took precedence over the IBC, allowing it to recover dues independently of the liquidation process, citing cases like Port of Mumbai v. Indian Oil Corp. and STO v. Rainbow Papers Ltd. The liquidator countered, asserting that PVVNL's claims must follow the IBC’s priority system under Section 53 and that electricity dues should not be given special priority.
The Supreme Court clarified that PVVNL's dues should be treated as financial or operational debt, not government debt, and noted that PVVNL's functions could be performed by other entities under the Electricity Act. The Court distinguished this case from Rainbow Papers, which involved insolvency resolution, emphasizing that the legislative intent was to separate government dues from secured creditor claims. Additionally, Section 52 of the IBC allows secured creditors to opt out of liquidation, but with specific procedures and timelines.
The Court ruled that the decision in Rainbow Papers was specific to its circumstances and did not establish a precedent. Consequently, PVVNL's appeal was dismissed, and the liquidator was directed to adjudicate the claims as per the relevant IBC procedures.
Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat (P) Ltd.
(2023) 10 SCC 60
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