Auction Purchaser Must Clear Old Electricity Dues, says Allahabad High Court

The division bench of Justice Arindam Sinha and Justice Avnish Saxena delivered the order on September 16, 2025, while disposing of a writ petition filed by Amir Ahmed against the State of Uttar Pradesh and the electricity supply company.

Ahmed had purchased a property through auction proceedings conducted under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. He was issued a sale certificate dated April 24, 2024, by the authorized bank officer, declaring that the property was sold free of all encumbrances.

However, when Ahmed approached the electricity distribution company for a new connection, his request was turned down on the ground that arrears remained unpaid for the premises. The company relied upon Clause 4.3(f)(i) and (viii) of the U.P. Electricity Supply Code, 2005, which mandates that both seller and purchaser are liable for outstanding dues, and that applications for fresh connections are processed only after clearing such dues.

The company also cited the Supreme Court’s 2023 decision in K.C. Ninan v. Kerala State Electricity Board, where the apex court had upheld that electricity utilities can impose conditions requiring recovery of arrears from subsequent purchasers in order to protect public utilities and ensure their financial health.

Counsel for the petitioner argued that the petitioner was a bona fide purchaser for value and that the authorized officer who sold the property had never consumed electricity, so no liability could attach. He further submitted that the property had been sold free from encumbrances, and therefore, arrears could not be enforced against him.

Rejecting these submissions, the high court observed that auction purchases under SARFAESI are carried out on an “as-is-where-is” basis, which necessarily invokes the principle of buyer beware. The petitioner, having bid for such a property, ought to have made enquiry regarding unpaid electricity dues attaching to the property, the court said.

The bench held that the petitioner’s contention that the authorized officer had not consumed electricity was unsustainable in light of the declaration of law in K.C. Ninan. It stressed that the liability to clear arrears flows by operation of law and attaches to the premises, not merely the person who consumed electricity.

Consequently, the writ petition was disposed of with the direction that the petitioner would have to comply with the requirements of Clause 4.3 of the Supply Code, including clearing dues, before being granted a new electricity connection.