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2026 Supreme(Telangana) 257
IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
Renuka Yara, J.
Sanjiv Kumar Gupta - Petitioner
Versus
The State of Telangana and others - Respondents
W.P.No.27253 of 2025
Decided On : 16-03-2026
Important Points
Subject
Energy Law - Electricity Supply and Recovery
Act Referred
Headnote
(B) Electricity Act, 2003 - Section 56(2) - Limitation period for recovery of arrears - The right of a licensee company to recover arrears or disconnect electricity supply is subject to a limitation period of two years - Even in cases of mistake or bona fide error, a supplementary demand cannot empower the disconnection of electricity supply after the expiry of the limitation period (Paras 12, 21).
(C) Distinction between IBC and SARFAESI Act - The rights of an auction purchaser under the Insolvency and Bankruptcy Code are different from those under the SARFAESI Act - While liability for statutory dues may survive in "as-is-where-is" auctions under SARFAESI, such dues stand extinguished under the IBC if they are not part of the approved resolution plan (Paras 17, 19).
Facts of the case:
The petitioner purchased an industrial property in an auction conducted by an insolvency professional under liquidation proceedings. Subsequent to the purchase, the electricity department issued a demand notice for arrears pertaining to the period 2008-2009, threatening to disconnect the power supply if the dues were not cleared. The petitioner challenged the notice on the grounds that the dues were extinguished under the resolution plan of the insolvency process and were also barred by limitation.
Findings of Court:
The court found that since the respondents did not submit their claim for arrears before the resolution professional for inclusion in the approved resolution plan, the statutory dues stood extinguished. Furthermore, the demand notice was issued 16 years after the relevant period, which is well beyond the two-year limitation period prescribed under Section 56(2) of the Electricity Act.
Issues: Whether a purchaser of a property through an auction under the Insolvency and Bankruptcy Code is liable for the previous owner's electricity dues and whether a demand notice issued after the expiry of the statutory limitation period under the Electricity Act is sustainable.
Ratio Decidendi: The "clean slate" doctrine under the Insolvency and Bankruptcy Code ensures that any claims not included in an approved resolution plan are extinguished, regardless of the "as-is-where-is" nature of the sale. Additionally, Section 56(2) of the Electricity Act precludes the recovery of arrears beyond a two-year period, rendering delayed demands for recovery legally unsustainable.
Result: Writ petition allowed; impugned demand notice set aside; respondents directed not to disconnect power supply.
Advocate Appeared:
Petitioner Counsel: K.K. Waghray
Respondent Counsel: Government Pleader for Energy
ORDER :
RENUKA YARA, J.
Heard Sri K.K.Waghray, learned counsel for the petitioner, learned Government Pleader for Power Supply and Energy Department appearing for respondent No.1 and Sri N.Sreedhar Reddy, learned Standing Counsel for TGSPDCL appearing for respondent Nos.2 to 4.
2. The Writ Petition is filed seeking following relief:
“to issue orders, writ or direction more particularly one in the nature of writ of mandamus declaring the impugned demand notice issued in Lr. No.SE/OP/MCL/SAO/AAO(HT)/JAO(HT)/D. No.1328, dt.26.07.2025 issued to the petitioner claiming arrears of Rs.2,64,364/- pertaining to the period 2008-2009 in respect of the petitioner’s unit as illegal, arbitrary, unwarranted and contrary to law and the same may be set aside and consequently direct the respondents not to disconnect the power supply to the petitioner unit No.D-4, Phase -IV Extn, IDA Jeedimetla, Hyderabad”
3. The brief facts of the case are that the petitioner purchased premises bearing No.D-4, Phase-IV Extension, IDA Jeedimetla, Hyderabad from M/s. Victory Transformers and Switchgears Ltd., in an auction conducted on 21.02.2020 by the Insolvency Professional under aegis of NCLAT. In the said auction, the sale certificate was issued in favour of the petitioner on 02.09.2020. On 24.06.2021, the Official Liquidator executed a registered sale deed in favour of the petitioner and the same was registered vide document No.17172 of 2021 and conveyed with absolute title, right and interest with respect to the property consisting of industrial plot with constructed structures, shed bearing No.D-4 (ground plus two floors) with a plinth area of 28684 Sq.fts., RCC and 1800 Sq.ft., ACC, in all admeasuring 2917.33 Sq.yds., in IDA, Phase-IV (Extn), IDA Jeedimetla situated at Gajularamaram Village, Qutubullahpur Mandal.
4. The property which was originally owned and possessed by M/s. Victory Transformers and Switchgears Ltd., went into liquidation vide insolvency proceedings dated 29.10.2019 in M.A.No.1139/2019 in CP No.1515/IB/2018 of NCLT. After the petitioner purchased the subject property in the auction, respondent No.3 issued a demand notice dated 26.07.2025 for payment of Rs.2,64,364/- along with applicable surcharges towards FSA charges. The petitioner submitted an explanation on 11.08.2025 stating that the claim of respondent No.3 was set aside by National Company Law Tribunal (NCLT) by holding that it is only after purchase of the property that the authorities can levy tax on the petitioner but not for the period during which M/s. Victoria Transformers was the owner. The claim for power charges made in the impugned demand notice is therefore arbitrary and illegal.
5. Learned counsel for the petitioner referred to the doctrine of clean slate scheme applicable to the property purchased in liquidation proceedings. Instead of accepting the petitioner’s explanation, respondent No.4 threatened to disconnect the power supply to petitioner’s unit and therefore left with no option, the writ petition has been filed.
6. The respondent Nos.2 to 4 have filed counter stating that as per sale deed, the petitioner has purchased the property in the auction on “as-is-where-is”, as-is-what-is, “whatever-there-is” and without recourse basis and therefore, purchased the property with exclusive and absolute rights, title and interest under the Insolvency and Bankruptcy Board of India (Liquidation process) Regulations, 2016.
7. The indemnity bond signed by the previous owner i.e., M/s. Victory Transformers and Switchgears Ltd., contains points which are accepted by the subsequent purchaser i.e., the indemnifier undertakes to indemnify the TSSPDCL against any damages or loss caused to the TSSPDCL in respect of the service connection in his name, undertakes to make good any sum that may be found to be done payable to the TSSPDCL with regards to all liabilities and claims personally as well as by means of both movable and immovable properties and the indemnifier further undertakes the r
