Successful Auction Purchaser Liable To Pay 'True-Up' Charges After Sale Of Corporate Debtor As Going Concern: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Rakesh Kumar Jain, Justice Mohammad Faiz Alam Khan and Mr. Naresh Salecha (Technical Member) has held that once the Corporate Debtor is taken over by a Successful Auction Purchaser on a going-concern basis and a sale certificate is issued by the Liquidator, the purchaser cannot avoid its responsibility to pay true-up charges payable under law.

The present appeal has been filed under section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) against an order passed by National Company Law Tribunal (NCLT) Kolkata.

The Appellant submitted that the Impugned Order wrongly upheld the deduction as true-charges for the year from 2014 to 2019 which was contrary to the Andhra Pradesh Electricity Regulatory Commission (APERC)'s common order and the order of the Appellate Tribunal.

It was further argued that burdening the Appellant with pre-CIRP and during CIRP deus goes against section 53 of the IBC therefore it sought reversal of the order, asserting entitlement to Rs. 20,72,74,635/- less the refunded amount.

Per contra, the Respondent submitted that the true-up charges of Rs. 3,16,08,440/- were levied in strict compliance with the common order dated 30.03.2022, with detailed calculations based on monthly electricity bills from July 2022 to June 2023, each amounting to Rs. 26,34,036.63/-.

It was further argued that this retention from the Appellant's security deposit, originally Rs. 4,90,00,000/-, was a lawful adjustment of outstanding dues accrued prior to and during the CIRP, which the Appellant, as the purchaser of the corporate debtor on a going concern basis, is obligated to settle.

The Tribunal observed that the terms as per law does not relieve the corporate debtor of its responsibility to pay true-up charges. This was not a typical case under CIRP Regulations but a takeover of the corporate debtor under IBBI (Liquidation Process) Regulations, 2016. Once the purchaser acquired the corporate debtor and a sale certificate issued, it was liable to pay charges levied thereafter. The plea that Rule 470(5) of the APERC Order absolved the Appellant from paying the charges was rejected.

Accordingly, the present appeal was dismissed.

Case Title: Maithan Alloys Limited Versus Easter Power Distribution Company

Case Number: Comp. App. (AT) (Ins) No. 1514 of 2024 & I.A. No. 5492, 5493 of 2024

Judgment Date: 04/09/2025

Click Here To Read/Download The Order