Purchaser Cannot Avoid Liabilities Voluntarily Accepted At Auction: NCLT Hyderabad

The Hyderabad Bench of the National Company Law Tribunal (NCLT) on 11 March, held that a purchaser of assets in a liquidation auction cannot resile from liabilities voluntarily accepted at the time of purchase, including outstanding electricity dues.

A Bench comprising Judicial Member Rajeev Bhardwaj and Technical Member Sanjay Puri dismissed the application filed by Sri Lakshminarasimha Oil Mills Pvt Ltd, and refused to direct the Northern Power Distribution Company of Telangana to grant a fresh electricity connection without clearing arrears of Rs. 92.68 lakh. The Tribunal observed:

“The Applicant, having accepted these terms at the time of purchase, cannot now seek directions that contradict the obligations they voluntarily undertook. By agreeing to the auction conditions, the Applicant assumed responsibility for any electricity-related liabilities attached to the asset as of that date. Accordingly, the Respondent, i.e., the electricity distribution company, cannot be compelled to waive, absorb, or adjust such dues.”

Lakshminarasimha Oil Mills had undergone liquidation pursuant to an order dated 13 May 2021, and its assets were sold as a going concern through e-auction on 20 October 2021 for Rs. 12 crore. The successful bidder completed payment on 4 January 2024, following which the liquidation process was closed on 18 April 2024.

Subsequently, the applicant sought a fresh electricity connection, but the Northern Power Distribution Company of Telangana required clearance of Rs. 92.68 lakh in outstanding dues. The applicant contended that past liabilities stood extinguished under the IBC framework.

Rejecting this argument, the Tribunal held that where assets are sold on an “as is where is”, “as is what is”, and “without recourse” basis, all statutory liabilities, including electricity dues, are to be borne by the successful bidder.

Accordingly, the Tribunal ruled that the electricity company cannot be compelled to waive or adjust the arrears and dismissed the application.

For Respondent: Advocate G. Sai Prasen