Introduction:

In a recent judgment by the Madras High Court, the court emphasized the importance of recognizing the rights of operational creditors, particularly in the context of insolvency proceedings. The case involved National Sewing Thread Co. Ltd. and Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO), addressing a dispute regarding unpaid electricity charges. The petitioner argued that the Resolution Plan approved by the National Company Law Tribunal (NCLT) extinguished all outstanding claims not covered by the plan, including the electricity charges claimed by TANGEDCO.

Petitioner (National Sewing Thread Co. Ltd.):

The petitioner contended that the Resolution Plan approved by the NCLT rendered all outstanding claims, including the electricity charges, extinguished. They filed a writ petition seeking to quash the Demand Notice issued by TANGEDCO and to direct the provision of electricity connection.

Respondent (Tamil Nadu Generation and Distribution Corporation Limited):

TANGEDCO argued that the unpaid electricity charges were legitimate claims and were not extinguished by the Resolution Plan. They sought to recover the outstanding amount and insisted on the payment of the dues.

Court’s Judgment:

The Madras High Court, presided over by Justice N. Seshasayee, dismissed the writ petition filed by National Sewing Thread Co. Ltd. The court emphasized that every claim by operational creditors involves a right to their property under Article 300A of the Constitution of India. It cited various Supreme Court decisions recognizing the right to property as integral to the right to life under Article 21. The court underscored the duty of the Interim Resolution Professional (IRP) and the Resolution Professional (RP) to conduct thorough due diligence to uphold creditors’ constitutionally protected rights. It outlined the necessary steps for proper due diligence, including investigating the corporate debtor’s premises, statutory liabilities, pending litigation, and other financial obligations. The court concluded that such diligence is essential to safeguard creditors’ rights and uphold their constitutional right to enforce their property.