IBC Auction Purchaser Not Liable For Past Electricity Dues: Telangana HC Sets Aside ₹2.64 Lakh Demand

The Telangana High Court has recently set aside a demand raised against an auction purchaser under the Insolvency and Bankruptcy Code, holding that such a purchaser cannot be made liable for electricity dues of the previous owner where the claim was not part of the insolvency process, and further that a demand raised after nearly 16 years is barred by limitation.

Justice Renuka Yara, allowing the writ petition, emphasised that once the resolution process concludes, undisclosed statutory dues cannot be enforced against a successful purchaser.

The court held, “once the statutory dues have extinguished, the respondents cannot make any claims against the auction purchaser.”

On limitation, the court made it clear that recovery could not be sustained even otherwise, observing:

“the respondents under Section 56 (2) of the Electricity Act, are precluded from making original as well as supplementary demand for recovery of arrears of electricity dues.”

The petitioner, Sanjiv Kumar Gupta, had purchased an industrial unit in 2020 through liquidation proceedings under the IBC from Victory Transformers and Switchgears Ltd., the corporate debtor. The company had entered insolvency and its assets were sold through an auction conducted by the insolvency professional.

A sale certificate was issued in September 2020 and a registered sale deed followed in June 2021 transferring absolute title. In July 2025, the electricity distribution company issued a demand of about Rs. 2.64 lakh towards dues from 2008 to 2009 incurred when the corporate debtor owned the unit. Gupta challenged the demand, stating that such liabilities stood extinguished in the insolvency process and could not be enforced against him as a subsequent purchaser.

The respondents argued that the property was sold on an “as is where is, whatever there is and without recourse basis” and that the purchaser must clear past dues. They relied on the Supreme Court's ruling in Telangana State Southern Power Distribution Company Limited v. Srigdhaa Beverages to contend that electricity dues, being statutory in nature, survive such sales and can be recovered from the purchaser.

The Court then addressed the reliance on Srigdhaa Beverages and clarified that the principle laid down there applies to SARFAESI sales and not to insolvency proceedings under the IBC.

It observed, "The rights of an auction purchaser under SARFAESI Act are not similar to rights of an auction purchaser under IBC.”

Applying this distinction, the court concluded, “the writ petitioner, who is an auction purchase under IBC is not liable to pay statutory dues i.e., electricity dues stood extinguished once there was approved resolution plan.”

The court noted that the electricity department had not submitted its claim before the resolution professional for consideration under the insolvency process. In these circumstances, it held that the dues could not be enforced against the petitioner. It also found that a demand raised in 2025 for dues dating back to 2008 to 2009 was beyond the permissible statutory period.

Setting aside the demand notice, the Court directed that electricity supply to Gupta's unit shall not be disconnected