As the jurisprudence on the Insolvency and Bankruptcy Code, 2016 (Code) is rapidly evolving, Judicial Member Anantha Padbanabha Swamy of the Chennai Bench of NCLT will soon be pronouncing an order on whether insolvency process can be initiated against a Government Company under provisions of the Code.
An application has been filed under Section 9 of the Code, in their capacity as operational creditors, by Ind Bharath Power Gencom Ltd, Ind Bharath Thermal Limited and Aarkay Energy (Rameshwaram) Limited against TANGEDCO, a Government company controlled by the State of Tamil Nadu responsible for the distribution of electricity across the State.
One of the key questions, likely to be dealt with for the first time by any court, is whether a Government Company would fall under the definition of “Corporate Person”. It has been argued by the applicants that “Corporate Person” will include Government Companies as well, in view of specific exceptions carved out by the Legislature – financial companies being the only one, no other exemption can be read in.
Another question which the Bench will have to rule on is, whether “interest” forms a part of the “debt” owed (to an operational creditor). This question has been dealt with before by the Chandigarh bench, where it was ruled that interest would in fact not be a part of the debt owed inasmuch as the Legislature consciously chose to omit the word “interest” from the definition of an operational debt, while it has been included in the definition of a “financial debt”.
It has also been argued that interest is payable under Power Purchase Agreement between the parties and the quantum is irrelevant so long as it is more than Rs. 1 Lakh.
The third question which the Bench is likely to deal with is whether any dispute relating to an electricity matter would have to go before the Tamil Nadu Electricity Regulatory Commission pursuant to the provisions of the Electricity Act, 2003.
It has also been argued that the Electricity Act and the Code are separate concurrent enactments. If there is a dispute (for example: on tariff) the remedy is under Section 86(1)(f) of Electricity Act, 2003. If there is no dispute, relief may be sought under the Code. Supreme Court ruling of Innoventive is also being relied on here to show that Code overrides other statutes by virtue of Section 238.
Arguments were advanced by Senior Advocate M.S. Krishnan on behalf of Ind Bharath Power Gencom Ltd, Advocate Anirudh Krishnan on behalf of Ind Bharath Thermal Limited and Aarkay Energy (Rameshwaram) Limited and the Additional Advocate General Senior Counsel Manishankar on behalf of TANGEDCO.
