Calcutta High Court Bars WBSEDCL From Seeking Pre-CIRP Late Surcharge From SRA For New Electricity Connection

The Calcutta High Court has recently held that West Bengal State Electricity Distribution Company Limited (WBSEDCL) could not insist that Pinax Paper Mills Private Limited pay pre-CIRP Late Payment Surcharge (LPSC) before granting a fresh electricity connection after approval of the company's resolution plan.

Justice Ravi Krishan Kapur held that the successful resolution applicant was entitled to the benefit of the "clean slate" principle and that claims not forming part of the approved resolution plan could not be recovered indirectly.

"In such circumstances, the demand on the petitioner for LPSC as a pre-condition for reconnection of electricity is arbitrary and without authority of law.", the court ruled.

The dispute arose after Pinax Paper Mills Private Limited became the successful resolution applicant for India Pulp & Paper Private Limited.

India Pulp & Paper entered the Corporate Insolvency Resolution Process in July 2022 and a resolution plan was approved in December 2024.

After the plan was approved, Pinax sought a fresh electricity connection. On May 6, 2025, WBSEDCL demanded about ₹1.29 crore towards outstanding electricity charges and about ₹1.27 crore towards LPSC before providing the connection.

During the hearing, WBSEDCL dropped its claim for the outstanding electricity charges but continued to defend its demand for LPSC. It argued that the liability arose only when the demand was raised in May 2025.

The court rejected the contention after examining WBSEDCL's records. It noted that the electricity bill dated August 2, 2022 had already included an LPSC component, contradicting the distribution company's stand that the claim arose only in May 2025.

It noted that the electricity bill dated August 2, 2022 already included an LPSC component. The court held that WBSEDCL had already demanded LPSC during the pre-CIRP stage and rejected its contention that the claim arose only in May 2025.

"The Resolution Plan was approved by NCLT on 28 December 2024. In such circumstances, the contention of WBSEDCL that the claim for LPSC was triggered only on 6 May 2025 in response to the request of the petitioner to provide electricity in terms of the Resolution Plan is false, incorrect and contrary to the records.", it noted.

The court relied on the Supreme Court's decisions in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta and Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. It reiterated that claims which do not form part of an approved resolution plan stand extinguished once the plan is approved.

The court noted that the resolution plan specifically granted concessions relating to electricity dues, including waiver of minimum demand charges. It allocated about ₹10 lakh towards full and final settlement of operational creditors' and statutory dues. The plan also recorded that WBSEDCL had submitted its claim before the Resolution Professional but that a nil amount was sanctioned in its favour.

The court held that permitting recovery of pre-CIRP LPSC after approval of the resolution plan would defeat the clean slate principle. It observed that once the underlying electricity dues stood extinguished, the connected surcharge could not survive independently.

WBSEDCL relied on Prem Cottex, Shree Rajasthan Syntex and Jaishree Steels to support its stand. The court distinguished those decisions, observing that they dealt with escaped assessment or subsequent billing under Section 56(2) of the Electricity Act. In the present case, WBSEDCL had already included the LPSC component in the bills raised during the pre-CIRP stage.

The court also rejected WBSEDCL's argument that recovery of part of the outstanding electricity dues through invocation of a bank guarantee created a fresh cause of action for claiming LPSC.

"Any recovery or part payment through invocation of bank guarantee furnished by the corporate debtor has no connection with the recovery of dues on account of LPSC and does not constitute a fresh cause of action or extend the period of limitation."

Allowing the writ petition, the court restrained WBSEDCL from recovering pre-CIRP electricity dues or the connected LPSC from Pinax Paper Mills Private Limited as a condition for providing electricity.