In a stark reminder of the hidden risks in bank auction purchases, the Telangana High Court has ruled that a buyer who snapped up a prime industrial property for over ₹53 crore must still foot the bill for the previous owner’s unpaid electricity dues of nearly ₹48 lakh to secure a fresh power connection.
The judgment, delivered by Justice Nagesh Bheemapaka on March 13, 2026, in Writ Petition No. 16580 of 2019, dismissed the plea of M/s Pragathi Leasing & Developers, upholding the Southern Power Distribution Company of Telangana Ltd. (TGSPDCL)’s refusal to grant a new electricity service without clearing the arrears.
The case highlights a shocking reality: even properties bought in public auctions under the SARFAESI Act — often advertised as a “clean slate” opportunity — can come with massive unseen liabilities tied to the premises itself, not the previous owner.
Sequence of Events
The saga began in September 2017 when ARCIL (Asset Reconstruction Company India Ltd.) conducted an open public auction of a large industrial plot (approximately 20.30 acres in Survey Nos. 71, 72, and 73, Gundla Pochampally Village, Medchal Mandal, Ranga Reddy District) belonging to M/s Abhishek Steels (the 7th respondent). The property, sold on an “as is where is and whatever there is” basis, fetched a whopping ₹53.83 crore for Pragathi Leasing & Developers, the highest bidder.
A Sale Certificate was issued on December 11, 2017 (registered as Document No. 9756/2017), and physical possession was handed over to the new owner.
In March 2018, the petitioner applied for a new electricity connection to revive operations on the site. To their dismay, TGSPDCL rejected the application on April 10, 2018, citing outstanding dues of ₹48,07,878.72 (as on December 23, 2014) from the previous owner’s High Tension Service Connection (HT SC No. MCL 418), which had been disconnected on April 3, 2013, for non-payment.
The distribution company relied on Clause 5.9.4.3 of its General Terms and Conditions of Supply (GTCS), which bars new connections until old dues on the premises are cleared. Recovery proceedings, including revenue attachment notices, had already been initiated against the previous owner.
Aggrieved, Pragathi Leasing approached the Telangana High Court in 2019 via a writ petition, seeking to quash the rejection order and direct TGSPDCL to provide the connection without insisting on payment of the old arrears. They argued that as auction purchasers under SARFAESI, they enjoyed priority as secured creditors, and electricity dues were not a charge on the property.
The court initially granted an interim direction in August 2019 to provide the connection without clearing the dues.
However, after detailed arguments, the court reversed course. It relied on binding Supreme Court precedents, particularly Telangana State Southern Power Distribution Company Limited v. Srigdhaa Beverages (2020) and the landmark K.C. Ninan v. Kerala State Electricity Board (2023, 3-judge bench), which clarified that under the Electricity Act, 2003:
- Electricity supply is tied to the premises, not just the person.
- Statutory conditions requiring new owners/occupiers to clear prior arrears for a fresh supply are valid and have statutory force.
- Such rules have a reasonable nexus with the Act’s objectives.
Justice Bheemapaka held that older judgments (like Isha Marbles, 1995) no longer apply post-2003 Act, and the “as is where is” sale terms put bidders on notice of such statutory liabilities.
The writ petition was dismissed with no costs, effectively leaving the buyer to pay the ₹48 lakh (plus any accrued interest or adjustments) to get power restored.
This ruling sends a chilling message to investors eyeing distressed assets in auctions: due diligence must go beyond title searches to include verifying utility arrears, as these can add lakhs — or even crores — to the effective cost of acquisition.
Legal experts warn that similar shocks await buyers in other states, where electricity regulators have adopted comparable rules post the 2023 Supreme Court verdict.
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