NCLT Mumbai: Electricity Company Cannot Deny Connection To Auction Purchaser Of Corporate Debtor’s Property Over Past Dues Once Claims Are Filed Before Liquidator
Pranav B Prem
The National Company Law Tribunal (NCLT), Mumbai Bench of Justice Ms. Lakshmi Gurung (Judicial Member) and Shri Hariharan Neelakanta Iyer (Technical Member) has held that electricity connection cannot be denied to the successful auction purchaser of the corporate debtor’s properties on account of past dues, when such claims have already been filed before the liquidator and are to be dealt with in accordance with Section 53 of the Insolvency and Bankruptcy Code, 2016 (IBC).
The application (I.A. 857/2024) was filed by M/s Agra Gwalior Pathways Pvt. Ltd., the successful auction purchaser of properties of S Kumars Nationwide Ltd. (corporate debtor), against Madhya Pradesh Paschim Kshetra Vidyut Vitaran Company Ltd. (R-1), seeking directions not to withhold the electricity connection for non-payment of dues prior to the date of issuance of the sale certificate dated 13.04.2021.
Applicant’s Case
The corporate debtor’s CIRP commenced on 24.04.2018, and during liquidation, the properties were put to e-auction. The applicant emerged successful, having paid the entire sale consideration, following which two sale certificates were issued:
13.04.2021 – Land admeasuring 50,810 sq. mtrs. at Gram Balgarh along with Tulja Building, staff quarters etc. – ₹21.30 crore.
18.04.2021 – Chamunda Standard Mill including land and building – ₹35.98 crore.
After acquisition, the applicant applied for an electricity connection on 26.05.2022, but the request was denied by R-1 citing outstanding dues of ₹99,49,857. The applicant argued that since the respondent had already filed its claim before the liquidator, which was fully admitted, the dues must be dealt with in accordance with Section 53 waterfall mechanism. Therefore, the statutory authority could not withhold electricity connection against the auction purchaser for the past liabilities of the corporate debtor.
Respondent’s Submissions
R-1 resisted the application stating that the assets were sold on an “As is where is, As is what is, Whatever there is, and No recourse” basis, meaning that liabilities, including electricity dues, were passed on to the purchaser. Relying on Telangana State Southern Power Distribution Company Ltd. v. Srigdhaa Beverages [(2020) 6 SCC 404], it was submitted that electricity dues are statutory in nature and cannot be waived, as per Section 56 of the Electricity Act, 2003. It was further contended that the Electricity Act, 2003 has an overriding effect over all other legislations and therefore prevails even against the provisions of the IBC. On this basis, R-1 sought payment of ₹99,49,857 before releasing the electricity connection.
Liquidator’s Stand
The liquidator confirmed that R-1 had filed its claim for ₹99,49,857, which had been fully admitted. It was clarified that upon sale of the corporate debtor’s property, payments would be distributed to stakeholders as per Section 53 of the IBC, and the dues of R-1 would accordingly stand settled.
Tribunal’s Findings
The Bench noted that the law is well settled: once a statutory authority files its claim before the liquidator, such claim must be settled in accordance with Section 53 of the IBC. Government dues are specifically covered under Section 53(1)(e) of the Code and rank below secured creditors, workmen’s dues, and even unsecured and operational creditors. The Tribunal also relied on several precedents:
Tata Power Western Odisha Distribution Ltd. v. Jagannath Sponge Pvt. Ltd. (2023)
Official Liquidator v. Ujjain Nagar Palika Nigam (2010)
Ghanshyamdas Mishra v. Edelweiss Asset Reconstruction Company (2019)
Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Pvt. Ltd. (2023), where the Supreme Court reiterated the hierarchy of claims under Section 53.
Referring to these rulings, the NCLT emphasized that once R-1’s claim was admitted by the liquidator, the dues could not be enforced against the auction purchaser of the property. The statutory authority was bound to receive its share only through the liquidation distribution process.
Holding that R-1’s admitted claim of ₹99,49,857 shall stand settled in accordance with the waterfall mechanism under Section 53 of the IBC, the Tribunal directed the electricity authority to consider the applicant’s request for connection without insisting on clearance of past dues. Accordingly, the application was allowed and the electricity company was directed not to withhold supply on account of past dues once its claim stood admitted by the liquidator.
Appearance
For Liquidator: Adv. Prakash Shinde a/w Ruchita Jain i/b MDP legal
For Applicant: Adv. Amir Arsiwala a/w. Adv. Vaishnavi Dhure in IA 857/2024 Adv. Nikhat Chaudhary i/b Jyoyi Narayan Kholia & Co. in IA. 3969/2025 Adv. Maithili Gala i/b Lex conseiller in IA 446/2021
For Respondent: Adv. Monisha Kasturi for R-1 Electricity Department Adv. Siddharth Singh in I.A. 860/2024
Cause Title: IDBI Bank Ltd. V. S Kumars Nationwide Ltd.
Case No: I.A. 857/2024 I.A. 860/2024 I.A. 3446/2024 I.A. 446/2021 In C.P. (IB)294(MB)/2018
Coram: Justice Ms. Lakshmi Gurung [Judicial Member], Shri Hariharan Neelakanta Iyer [Technical Member]
