The Hon’ble NCLAT, in the case of Maharashtra State Electricity Distribution Co. Ltd. V. Ravi Sethia, Resolution Professional of Morarjee Textiles Ltd: 2025 SCC OnLine NCLAT 382, has recently held that electricity is an essential service under Section 14(2) of the Insolvency & Bankruptcy Code, 2016 and cannot be discontinued even if dues remain unpaid during CIRP.
CIRP proceedings were initiated against the corporate debtor on 09.02.2024. The appellant filed for its pre-CIRP period electricity dues and also issued notices under section 56 of the Electricity Act, 2003, threatening discontinuance of. The supply was eventually discontinued on 28.08.2024.
The point of contention before the Hon’ble NCLAT in this case was whether to distinguish electricity supply under the ambit of essential services as given via section 14(2) or to construe it to be a part of 14(2A), which delves on to the aspect of critical services. The difference being that essential supplies should continue irrespective of payment of dues whereas, critical services mandate the requirement of payment for continuance.
The appellant contested that electricity dues fell under section 14(2A) and were required to be paid for continuance of service. It relied on the case of Shailesh Verma V. Maharashtra State Electricity Distribution: 2022 SCC OnLine NCLAT 4321, wherein it was held that payment of electricity dues is an essential requisite for continuance of service. However, the respondent, that is the Resolution Professional for the Corporate Debtor contested that the same should fall under the purview of section 14(2). It relied on the case of Sandeep Khaitan V. JSVM Plywood Industries: (2021) 9 SCC 401, wherein it was stated that essential services should not be interrupted during the moratorium period. The respondent also states that section 14(2A) relating to critical services only applied when the Resolution Professional designated services as critical to preserving the Corporate Debtor’s value.
The Hon’ble NCLAT held that electricity supply in this case would fall under section 14(2) since the Corporate Debtor required the supply of electricity for running its machinery and not as a direct input for its textile production. It stated that electricity supply should be construed as essential service until and unless it is proven to be a direct input to the production entailed by the corporate debtor. However, the NCLAT also observed that an IBBI amendment should be made to clarify the distinction, but until the same is made, the application of section 14(2) to electricity services should continue.
