IBC primacy over electricity arrears: auction purchaser cannot be forced to pay the previous owner's dues for connection.

In insolvency proceedings under the Insolvency and Bankruptcy Code, 2016, old electricity dues of the previous owner must be dealt with through the liquidation process and statutory priority framework, because the Code has overriding effect over inconsistent recovery conditions under the Electricity Act, 2003. An electricity distribution company cannot insist that an auction purchaser clear those arrears as a condition for grant of connection, and money deposited under such a demand is refundable. Reliance on earlier electricity law decisions was treated as inapposite in light of the primacy of the insolvency regime, and the writ for refund was maintainable where entitlement turned on a pure question of law and admitted payment.

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Issues: Whether, in view of the Insolvency and Bankruptcy Code, 2016, the electricity distribution company could insist that the auction purchaser clear the previous owner's electricity arrears as a condition for grant of connection and retain the amount deposited for that purpose.

Analysis: The dispute turned on the interaction between the insolvency regime and the electricity supply conditions. The Code contains an overriding provision giving it effect notwithstanding anything inconsistent in any other law. Once liquidation had commenced, the dues of creditors were required to be dealt with through the liquidation process and distributed according to the statutory priority structure. The claim for old electricity dues was therefore to be pursued in the insolvency process and not recovered from the purchaser of the industrial unit. The contrary reliance on pre-Code electricity cases was found inapposite in light of the later authoritative pronouncements on the primacy of the insolvency framework. The objection based on alternate remedy and on maintainability of the writ for refund was also repelled because the controversy was one of pure legal entitlement arising from admitted payment.

Conclusion: The respondents were not entitled to insist on payment of the previous owner's arrears from the petitioner, and the amount deposited under that demand was liable to be refunded; the petitioner succeeded.

Ratio Decidendi: Where insolvency proceedings are governed by the Insolvency and Bankruptcy Code, 2016, its overriding effect prevails over inconsistent recovery conditions under the Electricity Act, 2003, and a transferee or auction purchaser cannot be compelled to discharge the previous owner's electricity arrears outside the liquidation waterfall mechanism.

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