Harsh Kumar vs The Assistant Engineer, Electrical Sub Division, Himachal Pradesh State Electricity Board Limited & Ors.

The Assistant Engineer, Electrical Sub Division, Himachal Pradesh State Electricity Board Limited, Dulehar, Una, Himachal Pradesh-177211 (hereinafter referred to as the “Respondent No.1”) for lifting of lien on the properly so detailed in the sale certificate, so as to facilitate the transfer/ registration of same in the name of the Applicant, who is a successful bidder of the same for which sale certificate already stands issued;

The Tehsildar Haroli, District Una, Government of Himachal Pradesh, Una-177220 (hereinafter referred to as the “Respondent No.2”) for taking effective steps for vacation of lien from the revenue records, and transferring/ registering the above captioned property in the name of the Applicant and;

Sh. Sawinder Singh Chug, Liquidator, M/s Addinath Rubbers Private Limited, 44-B, Jawahar Market, Nangal Dam, District Rupnagar, Punjab-140125 (hereinafter referred to as the “Respondent No.3”) for effecting the transfer of the property so captioned in the sale certificate in the name of the Applicant, who being the successful applicant/ bidder pursuant to e-auction process.

The Respondent No.3 was appointed the Liquidator of Addinath Rubbers Private Limited having CIN: U25199HP2007PTC030819 (hereinafter referred to as the “Corporate Debtor”) by this Tribunal vide its order dated 06.10.2021 in IA No. 819/2020 [in CP(IB) No. 42/Chd/HP/2019] under the Section 33(2) of the IBC for conducting liquidation process of Corporate Debtor. The copy of the said Order has been annexed as Annexure A-1 with the IA.

Pursuant to the public notice published on 21.03.2022 and its addendum issued on 03.04.2022 read along with the e-auction process document dated on 21.03.2022 and its addendum dated 03.04.2022, as amended and supplemented from time to time, bids were invited for conduct of e-auction for sale of various categories of assets of the Corporate Debtor in accordance with the provisions of the IBC and rules and regulations framed there under.

Pursuant to the said public announcement and process document, the Applicant submitted a binding bid with financial proposal of Rs.2,24,00,000/ (Rupees Two Crore and Twenty Four Lakhs Only) for one of assets under category D provided in Annexure-II to the Appendix-1 of the auction process document.

Pursuant to the evaluation of the bid by the Respondent No.3, the Applicant was identified as a Qualified bidder and post conduct of the auction process, the Applicant being the highest Bidder was selected as the successful and the Letter of Intent (LoI) was issued subject to the terms and conditions contained therein. The copy of the said LoI dated 09.04.2022 has been annexed as Annexure A-2 with the IA.

The Respondent No.3 pursuant to e-auction process documents dated 20.04.2022, sold all that part & parcel of the property consisting of Land comprising an area of 5,269 sq. metre, including boundary walls and entrance gates- 8 Blocks of buildings constructed on the land mentioned above having a total built up area of 2,894 sq. metre both, situated at PO Nangal Kalan, Industrial Area, Tahliwala, Tehsil Haroli, Distt UNA, Himachal Pradesh in the name of Corporate Debtor vide Wasika Number 110S/1 dated 05/09/200S on "AS IS WHRE IS BASIS* "AS IS WHAT IS BASIS", "WHATEVER THERE IS BASIS" and "NO RECOURSE BASIS”, to the Applicant and also the Plant & Machinery & Fixed Assets lying at village Nangal Kalan, Industrial Area, Tahliwala, Tehsil Haroli, District UNA, Himachal Pradesh, in the name of Corporate Debtor on "AS IS WHRE IS BASIS* "AS IS WHAT IS BASIS", "WHATEVER THERE IS BASIS" and "NO RECOURSE BASIS” to the Applicant, pursuant to successful e-bidding under e-auction dated 08.04.2022 pursuant to successful e-auction process documents 02.04.2022 conducted on the platform of Linkstar Infosys Pvt. Ltd. on 08.04.2022 upon declaring successful bidder based on the highest bid of Rs.2,24,00,000 plus GST@18% on Rs.55,81,553/- amounting to Rs.10,04,680/to the Applicant, which has been received under designation liquidation account no. 40795711737 maintained with State Bank of India, Naya Nangal (Punjab). The Respondent no 3 issued the Sale Certificate dated 12.07.2022 to the Applicant, a copy of which has been annexed as Annexure A-3 with the IA.

Subsequent to the issuance of the sale certificate, when the Applicant approached the revenue authorities of Una District, for registration of the sale deed of the immovable property as comprised in the Sale Certificate, he was told that the said property is encumbered one and a lien is created on the said property as comprised in the said sale certificate, therefore, till the said lien so created on the said immovable property is not removed/vacated, the revenue authorities will not be able to do the registration of sale deed. The copy of the revenue record pertaining to the said property so obtained from the concerned revenue has been annexed as Annexure A-4 with the IA.

Thereafter, the Applicant approached the Respondent No. 3, who facilitated in arranging the NOC cum No objection regarding charge on assets of the Corporate Debtor M/s Addinath Rubbers Pvt. Ltd., from the Respondent No 1 i.e. Authorities of HPSEBL at Dulehar, Una, HP, which clearly elucidates that the Respondent No. 1 does not have any objection, if the said property is sold to the Applicant, and also made a request therein for settling of their claim with the Respondent No. 3. Thus this fact of clear cut ‘No Objection’ for registration/ transfer of property in name of the Applicant is explicitly visible and can be made out. But despite the said effect, the Respondent No. 2 has not been able to register/ transfer the assets in the name of the Applicants, as they have shown inability in registering the same in name of the Applicant in the absence of the removal of the lien from the revenue record pertaining to the said property so captioned in the sale certificate. The copy of the ‘No Objection regarding charge on assets of Corporate Debtor dated 24.08.2022 has been annexed as AnnexureA-5 with the IA.

The Respondent No. 1 be directed to take effective steps in vacation of lien on the said property from the revenue records pertaining to the Corporate Debtor, as it is they themselves who have got the lien registered in the revenue records pertaining to the Corporate Debtor.

The Applicant has referred to section 36(3)(b) of the IBC and has also relied on the following Judgments:

Hon'ble Supreme Court in B. Arvind Kumar vs. Govt. of India and Others, reported in 2007 volume 5 Supreme Court cases 745.

Hon'ble NCLAT in KTC Foods Pvt. Ltd., Company Appeal (AT) (Insolvency) No. 650 of 2020.

Hon'ble Supreme Court in Ghanshyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd. & Ors., (2021) ibclaw.in 54SC.

Hon'ble Supreme Court in CoC of Essar Steel India Ltd. Vs. Satish Gupta & Ors (2019) ibclaw.in 07 SC.

Himachal Pradesh State Electricity Board Limited (hereinafter referred to as the “HPSEBL”) is a State Government Undertaking and the functioning of its Board is governed by the Electricity (Supply) Act, 1948. It is a Distribution Licensee under the Electricity Act, 2003 and is authorised to operate and maintain a distribution system for supplying electricity to its consumers in the State of Himachal Pradesh. It was supplying electricity to the factory premises of Corporate Debtor.

As per its manual instruction 38.2.4 regarding defaulting customers, it is provided that

The Corporate Debtor was a regular defaulter as on various occasions, the electricity dues were not paid. The last meter reading taken by the Respondent for consumption of electricity by the Corporate Debtor was on 01.10.2018. Since the Corporate Debtor was not paying the outstanding dues for use/ consumption of electricity in spite of repeated follow-ups, the Respondent No.1 vide its Permanent Disconnection Order dated 10.10.2018 had disconnected the electricity connection to avoid any further issue of the electricity and adjusted the security amount lying with it.

The last bill for outstanding dues of electricity as payable by the Corporate Debtor after adjustment of security amount and issue of permanent disconnection order was issued by the Sub-Division- Dulehar of HPSEBL on 10.01.2019, according to which the total outstanding amount payable by the Corporate Debtor was Rs.6,87,815/- as per the Consumer’s ledger account, a copy of which has been annexed as Annexure 1 with the reply.

Even after the commencement of the CIRP an amount of Rs.6,87,815/-is outstanding and payable to the Respondent No.1 along with interest and penalty. As provided under the sales manual instruction number 38.2.4, regarding defaulted customers, the Respondent No.1 on 23.09.2019 intimated the Naib Tehsildar of District Una, Himachal Pradesh that the Corporate Debtor is a permanent defaulter of the HPSEBL and requested to create a charge on the property located at Khasra No. 54/ (0-52=69 kita). Accordingly, the Naib Tehsildar recorded the fact in revenue records, pursuant to which the land cannot be transferred to anyone. The copy of the letter issued to Naib Tehsildar has been annexed as Annexure 2 with the reply.

As provided under the sales manual instruction number 38.2.4, regarding defaulted customers, the Respondent No.1 had also filed a civil suit bearing no. 284/2021 before Judicial Magistrate, UNA, District Una, Himachal Pradesh, which is still pending. The copy of the civil suit has been annexed as Annexure 3 with the reply.

The Respondent No.1 had filed its claim of outstanding dues in Form C on 24.03.2022, a copy of which along with covering letter has been annexed as Annexure 4 with the reply.

The Respondent No.3 vide its email dated 16.08.2022 requested that since the property land records maintained by the Land Registrar in Tehsil Haroli, Una, Himachal Pradesh mention that certain asset (property) was pledged with Respondent No.1 at some point of time due to which the land register require NOC from Respondent No.1 and accordingly asked the Respondent No.1to issue NOC in favour of transferee for the assets, so that the assets can be transferred and the money can be realised. A copy of the above email has been annexed as Annexure 6 with the reply.

In response to the above mentioned email, the Respondent No.1 vide its letter no. HPSEBL/DES/casefile/2022-960-61 dated 24.08.2022 has given the NOC to sell the property of the Corporate Debtor to the new buyer and requested to settle the claim on priority at the earliest as per the provisions of Insolvency law. No objection Certificate was a conditional one, whereby it has been asked to the liquidator to clear the outstanding dues as per the claim of the Respondent No.1 on priority basis. But till date the claim for outstanding dues towards the electricity charges have not been cleared. A copy of the above NOC has been annexed as Annexure 7 with the reply.

The HPSEBL has no authority to waive off the outstanding dues, which involves public money by issue of NOC and NOC was issued just to support the Respondent No.3 to complete his process and it was made understood that once the sale is completed and consideration received the outstanding dues of HPSEBL will be cleared. But the outstanding dues of electricity charges, which will go to government exchequer, are still due and payable.

The Applicant is not entitled for any relief and should clear the outstanding dues of electricity charges of HPSEBL in view of the recent Judgment of 19.05.2023 of the Hon'ble Supreme Court in K.C. Ninan vs. Kerla State Electricity Board & Ors., wherein it has been decided that “a condition of supply under section 49 of the 1948 Act requiring the new owner of the premises to clear the electricity arrears of the previous owner as a precondition to availing electricity supply will have a statutory character”. Accordingly, the Applicant being new owner of the premises, which has been purchased by him, shall pay the outstanding dues of the previous owner.

All the judgement referred by the Applicant are applicable in the circumstances, when the Corporate Debtor has been taken over as a going concern and the assets are not sold in liquidation and thus do not apply in the instant case.

HPSEBL is a secured creditor by virtue of lien created in its favour by virtue of a statutory enactment of the State of Himachal Pradesh as admitted by the Applicant and the outstanding electricity dues be cleared before lifting the lien and allowing the Applicant to get the immovable property of the Corporate Debtor registered in its favour.

If any transaction regarding sale or purchase of the property takes place, the HPSEBL will not get its outstanding dues and the public money will go down drain and therefore the Applicant is not entitled for any relief and shall clear the outstanding dues of electricity charges.

The Applicant had been declared as a successful bidder for the assets (i.e. Land & Building and Plant & Machinery) of the Corporate Debtor in the auction conducted by the Respondent No. 3. After receipt of the sale consideration, the Sale Certificate was issued to the Applicant on 12.07.2022.

The electricity department had intimated to the Tehsildar about their pending dues towards the Corporate Debtor and requested him not to transfer the property of the Corporate Debtor, due to which, the Tehsildar is not transferring the property of the Corporate Debtor in favour of the Applicant.

The Respondent No. 3 had approached the electricity department for issue of the No Objection Certificate (NOC) for transfer of the assets of the Corporate Debtor vide emails dated 26.07.2022 and 16.08.2022. After continuous follow up, the electricity department (HPSEBL) had issued the NOC for transfer of property of the Corporate Debtor in favour of the successful bidder/ Applicant vide letter dated 24.08.2022. The copies of the above emails sent by the Respondent No. 3 and NOC issued by the Respondent No.1 have been annexed as Annexure R-3/1, Annexure R-3/2 and Annexure R-3/3 with the reply.

The Respondent No. 3 had also requested the Applicant on numerous occasions to get the registration of the sale deed of the assets of the Corporate Debtor in his favour, which has been annexed as Annexure R-3/4 with the reply.

The Respondent No. 3 had been continuously following up with the Respondent No. 1, Respondent No. 2 and the Applicant for the transfer of the assets of the Corporate Debtor in favour of the Applicant and performed his part of the duties as per the Code for the transfer of the assets of the Corporate Debtor in favour of the Applicant.

The lien created on the property in revenue records does not hold valid as per the provisions of the Code, because a secured creditor while filing a claim for its pending dues under the Code has to prove the security interest held by it. Further, as per Regulation 21 of the Liquidation Process Regulations, the existence of a security interest may be proved by a secured creditor on the basis of (a) the records available in an information utility, if any; (b) Certificate of registration of charge issued by the Registrar of Companies; or (c) Proof of registration of charge with the Central Registry of Securitisation Assets Reconstruction and Security Interest of India. The existence of the security interest is not registered with any of the above mentioned offices/ entities.

The security interest held by HPSEBL does not hold valid as per Regulation 21A of the Liquidation Process Regulations, because a secured creditor shall inform the Liquidator of its decision to relinquish its security interest to the liquidation estate or realise its security interest, as the case may be, in Form C or Form D of Schedule II, which was never informed within 30 days by the HPSEBL to the Liquidator and the details of security were never mentioned in the claim Form filed by the HPSEBL. The copy of the claim form filed by the HPSEBL has been annexed as Annexure R-3/5 with the reply.

In the e-auction documents, it was clearly mentioned that the properties i.e. Land and Building, and Plant and Machinery being sold by the Respondent No.3 are on “AS IS WHERE IS BASIS”, “AS IS WHAT IS BASIS”, “WHATEVER THERE IS BASIS” and “NO RECOURSE BASIS”. The HPSEBL had filed a claim for Rs.6,87,815/- in Form C in the capacity as Operational Creditor with the Liquidator. The HPSEBL had not even uttered a single word about the lien or security interest in the claim form annexed at page no.18 to 22.

Upon receiving information from the Applicant, the Respondent No.3 requested the HPSEBL to provide a NOC for removal of encumbrances and transfer of property, which they did with a condition that their claim should be settled. The said NOC was handed over to the Applicant for transfer of property in his favour. It may also be taken on record that the HPSEBL had filed a claim for Rs.687,815/- with the Respondent No.3, which was admitted in full and settled (but not paid) as per the section 53 of the Code in the light of insufficient funds available to distribute to the unsecured creditors, hence the claim stands settled.

The Respondent No.3 has performed his part of the duties as per the Code for transfer of property in favour of the Applicant and will adhere to the directions, if any, given to him and therefore the present Application is liable to be dismissed qua the Respondent No.3.

The HPSEBL, a State Government Undertaking governed by the Electricity (Supply) Act, 1948, is a Distribution Licensee under the Electricity Act, 2003 and is authorised to operate and maintain a distribution system for supplying electricity to its consumers in the State of Himachal Pradesh.

Since the Corporate Debtor was not paying the outstanding dues for use/ consumption of electricity in spite of repeated follow-ups, the Respondent No.1 vide its Permanent Disconnection Order dated 10.10.2018 had disconnected the electricity connection. The last bill for outstanding dues of electricity as payable by the Corporate Debtor after adjustment of security amount and issue of permanent disconnection order was issued by the Sub-Division- Dulehar of HPSEBL on 10.01.2019, according to which the total outstanding amount payable by the Corporate Debtor was Rs.6,87,815/- is outstanding and payable to the Respondent No.1 along with interest and penalty.

As provided under the sales manual instruction number 38.2.4, regarding defaulted customers, the Respondent No.1 on 23.09.2019 intimated the Naib Tehsildar of District Una, Himachal Pradesh that the Corporate Debtor is a permanent defaulter of the HPSEBL and requested to create a charge on the property located at Khasra No. 54/ (0-52=69 kita). Based on the intimation given by the Respondent No.1 on 23.09.2019, the Naib Tehsildar recorded the lien in the revenue records The scanned copy of the above letter and lien created on the property in the revenue records, as annexed as Annexure 2 with the reply of the Respondent No.1, is as below:

It is observed from the above that the intimation to create the charge on the property was sent to the Naib Tehsildar vide letter dated 23.09.2019, and, the lien has been created on the property in the revenue records. The Respondent No.1 has also attached the copy generated from the database of the Revenue Department as Annexure 2 with the reply, which is as below:

Further, the Applicant has also annexed the copy of the revenue record pertaining to the said property, so obtained from the concerned revenue and Annexure A-4 to the IA as shown below, which shows that the charge on the land was created on 03.10.2019.

This Tribunal, vide its Order dated 25.09.2019, admitted the CIRP against the Corporate Debtor in petition filed under section 9 of IBC by Ms. Jai Ganesh Trading Company bearing CP(IB) No.42/Chd/HP/2019. It is noted that the charge was recorded in the revenue records on 03.10.2019 after the CIRP date even though the intimation was sent by the Respondent No.1 the Naib Tehsildar of District Una, Himachal Pradesh on 23.09.2019.

The Hon’ble Supreme Court in the matter of KC Ninan v. Kerala State Electricity Board, 2023 SCC OnLine SC 663, decided on 19.05.2023 has decided that the electricity utilities can create a charge by framing subordinate legislation or statutory conditions of supply enabling recovery of electricity arrears from a subsequent transferee.:

In the e-auction documents, it was clearly mentioned that the properties i.e. Land and Building, and Plant and Machinery being sold by the Respondent No.3 are on “AS IS WHERE IS BASIS”, “AS IS WHAT IS BASIS”, “WHATEVER THERE IS BASIS” and “NO RECOURSE BASIS”.

The LoI dated 09.04.2022 issued to the Applicant (annexed with the Application as Annexure A-2) has clear mention of the above condition. The relevant part of the LoI is reproduced below:

The Sale Certificate dated 12.07.2022 annexed with the Application as Annexure A-3 also finds clear mention of the above condition.

On this issue the Hon’ble Supreme Court in the matter of KC Ninan v. Kerala State Electricity Board, 2023 SCC OnLine SC 663, decided on 19.05.2023 has decided that all prospective auction purchasers are put on notice of the liability to pay the pending dues when an appropriate “as is where is” clause is incorporated in the auction sale agreement. It is for the intending auction purchaser to satisfy themselves in all respects about circumstances such as title, encumbrances and pending statutory dues in respect of the property they propose to purchase. In a public auction sale, auction purchasers have the opportunity to inspect the premises and ascertain the facilities available, including whether electricity is supplied to the premises. Information about the disconnection of power is easily discoverable with due diligence, which puts a prudent auction purchaser on a reasonable enquiry about the reasons for the disconnection. When electricity supply to a premises has been disconnected, it would be implausible for the purchaser to assert that they were oblivious of the existence of outstanding electricity dues.”

It is noted that four Judgements (supra) relied upon by the Applicant are either related sale in auction was as a going concern only related to title deed and relates to pre IBC period and therefore would not be applicable in the present case.

In view of the above discussions, we are of the considered view that the Applicant would be liable to pay the arrears of the electricity dues.

This Tribunal, vide its Order dated 25.09.2019, admitted the CIRP against the Corporate Debtor in petition filed under section 9 of IBC by Ms. Jai Ganesh Trading Co. bearing CP(IB) No.42/Chd/HP/2019.

Subsequently, this Tribunal in the hearing in IA No. 819/2020 [in CP(IB) No. 42/Chd/HP/2019] dated 06.10.2021 noted that in the 5^th meeting of the CoC held on 07.03.2020, Andhra Bank holding 100% voting share, did not extend the time of CIRP and decided to pass resolution to liquidate the Corporate Debtor in the best interest of all the stakeholders. In view of the satisfaction of the conditions provided under Section 33 (1) of the Code, this Tribunal, vide its order dated 06.10.2021, directed the corporate debtor to be liquidated in the manner as laid down in Chapter Ill of the Code and appointed the Respondent No.3 as the Liquidator under the Section 33(2) of the Insolvency and Bankruptcy Code 2016 for conducting liquidation process of Corporate Debtor.

The Respondent No.1 filed its claim of outstanding dues in Form C vide its letter dated 24.03.2022. From perusal of para 8A of Form C, it is observed that the Respondent No.1 has clearly mentioned that the security interest has not been relinquished. The relevant extract of Form C is produced as below:

It is noted from the pleadings of the Applicant that pursuant to the public notice and e-auction process document dated 21.03.2022 and its addendum dated 03.04.2022, e-auction was conducted on 08.04.2022 on the platform of Linkstar Infosys Pvt. Ltd. and the Applicant was declared successful bidder on the basis of highest bid and LoI was issued on 09.04.2022. Subsequently, after payment of the entire sale consideration, the sale certificate was issued to the Applicant on 12.07.2022.It is noted that although petitioner filed its claim after the public notice, but the Respondent No. 3 was aware of the security interest of the Respondent No. 1, because in all the documents to the sale i.e. public notice and e-auction process document, LoI and sale certificate have clear mention that the sale is on "AS IS WHRE IS BASIS* "AS IS WHAT IS BASIS", "WHATEVER THERE IS BASIS" and "NO RECOURSE BASIS”.

After verification of the above claim filed, the Respondent No.3after verification of the claim in terms of section 39 and 40 of the IBC read with Regulation 30 of the IBBI (Liquidation Process) Regulations 2016, informed, vide his letter dated 02.08.2022 to Respondent No.1 that its claim of Rs.6,87,815/- has been accepted. The relevant extract of the letter dated 02.08.2022 of Respondent No.3 is produced as below:

Subsequently, the Respondent No. 3 after issue of sale certificate to the Applicant communication to the Respondent No. 1 vide letter dated 15.08.2022 that it does not have security interest in terms of Regulations 21 of Liquidation Regulations, as it failed to intimate security interest within 30 days of liquidation commencement date and also in terms of Rule 21A of Liquidation Process Regulations.

We are of the considered view that once the claim of Respondent No. 1 has been admitted by the liquidator (Respondent No. 3), no subsequent impediments can be imposed by the liquidator. However, we observe that the Respondent No. 1 has given NoC to the liquidator (Respondent No. 3) vide its letter dated 24.08.2022, the relevant extracts of which are as below: