Public Announcement Under IBC Sufficient, Individual Notice Not Required: Allahabad High Court

The Allahabad High Court on 24 April, held that under the Insolvency and Bankruptcy Code, 2016, individual notice to each creditor is not required and that a public announcement under Section 15 of the Code constitutes sufficient notice to corporate creditors.

A Bench comprising Justices Ajit Kumar and Swarupama Chaturvedi, while allowing a petition by South East U.P. Power Transmission Company Limited (and a connected petition by Tata Steel Limited) further held that creditors must exercise due diligence and file their claims within the prescribed timelines during the Corporate Insolvency Resolution Process (CIRP). It observed:

“individual notice to each creditor is not contemplated under the mechanism of IBC, and public announcement is treated as sufficient notice. Creditors are expected to act with necessary diligence and file their claims within the prescribed time during CIRP.”

South East U.P. Power Transmission Company Limited, the petitioner, is a special purpose vehicle constituted to establish a 765 kV transmission system on a Build-Own-Operate-Maintain & Transfer (BOOT) basis for the Mainpuri-Bara line.

Its entire shareholding was held by Isolux Corsan Concesiones S.A. The petitioner entered into various agreements with DISCOMs for execution of the project and obtained necessary permissions for commissioning the transmission lines.

Subsequently, the petitioner underwent insolvency proceedings before the National Company Law Tribunal (NCLT). Resurgent Power Ventures Pvt. Limited emerged as the successful resolution applicant and acquired 100% shareholding of the petitioner pursuant to the approved resolution plan.

During inspection, authorities found no meter at the Rewa Road Sub-station. The Prescribed Authority issued a demand of Rs. 2,17,49,692.58 towards alleged auxiliary consumption of power from ICT-II for the period from 2 October 2015 to 1 December 2022. The petitioner challenged the demand notices on the ground that they were issued during the CIRP period and were not maintainable.

Further, the respondents issued another notice alleging unauthorised use of electricity and indicating initiation of recovery proceedings against the petitioner. These actions were challenged before the High Court.

The Court held that the Insolvency and Bankruptcy Code overrides electricity laws in matters concerning insolvency resolution. It further held that Section 15 of the Code only mandates a public announcement containing details of the corporate debtor, the resolution professional, and the last date for filing claims, along with consequences of non-compliance, and does not require individual service of notice to each creditor. It emphasised that claims not filed within the CIRP timeline cannot be entertained after completion of the resolution process.

The Bench also observed that while pre-CIRP dues that could have been raised and submitted during the resolution process cannot be enforced later, dues arising from post-resolution or newly detected unauthorised consumption may still remain recoverable depending on the facts. It also reiterated that the approved resolution plan is binding on all stakeholders.

The judges held:

“To the extent the demand is of past dues which could have been determined prior to approval of the resolution plan and the claims could have been filed if the respondent authorities were vigilant, that demand would not be sustainable. However, to the extent demand arises from detection of unauthorized consumption revealed during inspection, and the same is for the consumption by the resolved company and after resolution plan got implemented, the dues are liable to be paid.”

Accordingly, the High Court quashed the impugned demand notices and allowed the writ petitions.

Counsel for Petitioner(s): Anurag Khanna, senior adv assisted by Shubham Agarwal, Varad Nath, Sadhavi Kumar