Auction Purchaser Not Liable For Corporate Debtor's Electricity Dues: NCLT Chandigarh Reiterates

The National Company Law Tribunal (NCLT) at Chandigarh has recently directed the Himachal Pradesh State Electricity Board to restore electricity to a property purchased in liquidation, holding in the case that the successful auction purchaser cannot be made liable for electricity dues owed by the corporate debtor prior to the auction sale.

A coram of Judicial Member K Biswal and Technical Member K K Singh, while dealing with a dispute arising from the electricity board's refusal to grant a fresh connection on account of past arrears of the corporate debtor, clarified,

“It is clarified that the present successful auction purchaser is not liable to pay the arrears of electricity dues which were payable by the erstwhile Corporate Debtor. The dues, if any, of the Respondent No.1 were to be settled in the liquidation proceedings out of the realization made by the Liquidator and balance, if any, gets extinguished as per the provisions of the IBC.”

The ruling arose from an application filed by an auction purchaser of the assets of Hike Leather Pvt. Ltd., which was undergoing liquidation. The applicant, Mohammad Kashif Kazmi, had acquired the company's property in auction, including the land, buildings and inventory.

After taking possession, Kazmi planned to set up a manufacturing unit for aluminium powder coating at the site. He obtained in-principle approvals from the Himachal Pradesh Directorate of Industries in August 2025. However, the Himachal Pradesh State Electricity Board declined to restore the electricity supply to the premises, citing outstanding power dues of about Rs 3 lakh dating back to April 2019, when the property was still owned by the corporate debtor.

Challenging this refusal, the auction purchaser approached the NCLT seeking restoration and transfer of the electricity connection in his name without being asked to clear past dues. He relied on the Supreme Court's ruking laid down in Yarn Sales Corporation v. Punjab State Power Corporation Ltd. to argue that electricity arrears of a corporate debtor cannot be recovered from a subsequent purchaser of its assets. Despite being served with notice, the electricity board did not appear before the tribunal.

The tribunal agreed, holding that electricity dues relating to the period before the auction sale must be dealt with in the liquidation process and cannot be fastened on the auction purchaser. It reiterated that such claims are to be settled from the liquidation proceeds and that any remaining unpaid amount stands extinguished under the IBC.

Accordingly, the NCLT directed the Himachal Pradesh State Electricity Board to grant an electricity connection to the applicant for his proposed manufacturing unit without insisting on payment of the corporate debtor's past dues, and disposed of the application.

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