Auction Purchaser not liable to clear the outstanding dues of the Electricity of previous owner

 Property purchased under the liquidation proceedings conducted under the IBC, the issue which is very debatable over the period of time, the auction purchaser is not liable to clear the outstanding dues of the previous owner of the property.  the National Company Law Appellate Tribunal, Principal Bench New Delhi,  has  set at rest the proposition in the in the Company Appeal No. 961 of 2021 decided on 26-05-2022  titled as Eastern Power Distribution Company of Andhra Pradesh Limited versus Maintan Alloys Limited and others wherein the Hon'ble Appellate Tribunal held as under: (para 17)

   

“17. It is noted that the Hon’ble Supreme Court in the above case was considering the Auction Sale under SARFAESI Act, 2002. No provision of IBS were under consideration of  Hon’ble Supreme Court. In the IBC proceedings, the electricity supplier is also an Operational Creditor who files claims for its operational debt as well as the charges during the CIRP period. IBC deals with the claims and require for payment of the claim of the electricity services provider under section 53 of the Code in a liquidation proceeding. Regulations formed under Electricity Act, 2003 fastening liability on the successfully auction purchaser in the liquidation proceedings will be in conflict with the provision of the IBC. IBC having been given overriding effect under section 238, any contrary provision in any other statute under Electricity Act, 2003 shall be overridden. Therefore, it shall not open for the Appellant to contend that appellant shall recover the entire pre-CIRP and post CIRP dues from the successful auction purchaser in pursuance of regulation 8.4, as noticed above.   The appellant is entitled to recover its dues under the IBC proceedings”


The Insolvency of Bankruptcy Code, 2016 having overriding effect on the Electricity Act, 2003, the claim of the  distribution company is required to be  dealt in accordance with the IBC. 

It was held that if the provision of the Regulations, Supply Code provide for the recovery of the outstanding dues of the previous occupier of the premises, those provisions being in conflict with the IBC, same are  overridden by the law of insolvency. 

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