Allahabad High Court quashes notice related to electricity dues, grants relief in matters related to the insolvency resolution process period

News Topical, Digital Desk : The Allahabad High Court has clarified that old electricity dues cannot be recovered after a resolution plan is approved under the Insolvency and Bankruptcy Code (IBC) 2016. The court stated that Section 238 of the IBC takes precedence over all other laws.

The High Court accepted the petition 

This order was issued by a division bench of Justice Ajit Kumar and Justice Swarupama Chaturvedi, accepting the petitions of South East Power Corporation Limited and Tata Steel Limited. Advocates Shubham Agarwal, Pratik J. Nagar, and Narendra Kumar Tiwari argued on behalf of the petitioners. The court declared the various disputed demand notices issued in 2023 and 2025 illegal and quashed them.

In these cases, only the provisions of IBC will be applicable.

The court acknowledged that Section 174 of the Electricity Act takes precedence over other laws, but also stated that the IBC is a later law and Section 238 of the IBC clearly overrides all conflicting laws. Therefore, the provisions of the IBC will prevail in matters involving insolvency proceedings. Any outstanding amount arising prior to the Corporate Insolvency Resolution Process (CIRP) period and not included in the resolution plan will automatically be considered extinguished.

The court cited the Supreme Court's decision 

Citing Supreme Court decisions, the court reiterated that a successful resolution applicant must find the company in a clean state. If the relevant authority (such as the electricity department) did not submit its claim during the CIRP, the outstanding dues cannot be recovered later. The court rejected the argument that electricity dues are a "statutory liability" and therefore cannot be liquidated.

Can issue a new notice

However, the court also clarified that the relevant departments may issue new notices in accordance with the law to recover outstanding dues arising after the resolution plan. In doing so, they must provide a clear description of the amount, the basis of calculation, and the classification. Allowing both petitions, the court quashed all the disputed demand notices and granted the liberty to issue new notices for the outstanding dues remaining in the post-resolution period.

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