NCLAT Rejects Cosmic Ferro Alloys' Refund Claim On Revised Power Tariffs Post Resolution Plan

The National Company Law Appellate Tribunal (NCLAT) at Delhi has dismissed an appeal filed by Cosmic Ferro Alloys Ltd., the corporate debtor now under new management pursuant to an approved resolution plan, holding that no refund or adjustment arises from revised electricity tariffs after approval of the plan.

A bench of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra reiterated that once the resolution plan is approved, it binds all stakeholders and settles pre-insolvency claims.

“It is well settled that approved Plan is binding on all Operational Creditors, including the Respondent as well as the CD and the Successful Resolution Applicant.”

Cosmic Ferro Alloys Ltd., acting through its new management after resolution, had challenged an order of the Kolkata bench of the National Company Law Tribunal rejecting its plea for adjustment of amounts allegedly arising from tariff revisions.

Damodar Valley Corporation, the operational creditor supplying electricity to the corporate debtor, had filed claims of about Rs 64.44 crore towards pre-insolvency dues. Under the approved resolution plan, this was settled at Rs 24.67 crore, with the remaining dues waived.

After the plan approval, tariff revisions were carried out following a Supreme Court judgment dated December 3, 2018, and subsequent orders of the West Bengal Electricity Regulatory Commission. Based on these revisions, the company claimed that excess amounts had been billed and paid earlier and sought a refund and adjustment against the balance payable under the plan.

The appellant argued that it was not seeking modification of the resolution plan but only enforcement of financial entitlements arising from subsequent developments.

Opposing the plea, Damodar Valley Corporation submitted that once the resolution plan was approved, all claims stood settled and no new or adjusted claims could be raised. It also clarified that the revised bills were generated only for internal accounting purposes to determine bad debts and did not create any enforceable liability or refund.

“The DVC, however, in its reply to the application before the Adjudicating Authority has clearly mentioned that DVC is not asking the Appellant to pay any of the arrears pertaining to the period prior to CIRP and the bill was only for the record for finding out the bad debt. We, thus, do not find any substance in the submission of the Appellant that the Appellant is entitled for refund of any amount towards revision of tariff for the years 2006-09 and 2009-13”, it observed.

The tribunal noted that the tariff revision only resulted in adjustment of dues and did not entitle the appellant to any refund in the present case.

“When claim pertaining to pre-CIRP period stood settled and liabilities stood waived any revision of tariff, which was to take place with respect to tariff from 2006-09 to 2009-13 was to be adjusted and revised in the claim of the Respondent against the Appellant and according to the accounting as done by the DVC, claim of the Respondent against the CD was reduced to Rs.56.57 crores, after giving effect to the tariff revision, which amount is not being in any manner claimed by the DVC against the Appellant.”

Holding that no additional demand was being raised beyond what was fixed under the resolution plan, the tribunal found no merit in the appeal and dismissed it.