Madras High Court Denies Relief to National Sewing Thread Co. in Electricity Dues Case

Madras, Jun 11 (KNN) The Madras High Court has dismissed a writ petition filed by National Sewing Thread Co. Ltd., seeking relief from paying outstanding electricity dues of Rs. 32 lakhs to Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO).

The court held that the company and the Financial Creditor cannot exploit the "Clean Slate Theory" by withholding information and disregarding the rights of undisclosed creditors.

National Sewing Thread Co., a public limited MSME company, had obtained financial assistance from Indian Overseas Bank (IOB) but defaulted on the loan due to business losses. IOB later assigned the loan to Alchemist Asset Reconstruction Company Ltd. (Financial Creditor).

The Financial Creditor initiated insolvency proceedings against National Sewing Thread Co. under the Insolvency and Bankruptcy Code (IBC).

A resolution plan was approved by the National Company Law Tribunal (NCLT) in December 2021, partially compensating the Financial Creditor.

However, TANGEDCO issued a demand notice in January 2022 for unpaid electricity charges owed by the company since June 2019.

National Sewing Thread Co. argued that all outstanding dues were extinguished after the NCLT approved the resolution plan.

The High Court observed that the company failed to disclose its liability for electricity dues to TANGEDCO during the resolution process, despite its management's duty to do so.

The court questioned the intent behind the Financial Creditor's choice to invoke IBC instead of the SARFAESI Act, which could have protected the interests of operational creditors like TANGEDCO.

Consequently, the writ petition was dismissed, and National Sewing Thread Co. remains obligated to pay the outstanding electricity dues to TANGEDCO.

(KNN Bureau)