SCA/15737/2004 1/27 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 15737 of 2004 With SPECIAL CIVIL APPLICATION No. 15545 of 2004 With SPECIAL CIVIL APPLICATION No. 13216 of 2004 And CIVIL APPLICATION No. 7764 of 2005 in S.C.A. No. 15545 of 2004 For Approval and Signature: HONOURABLE MR.JUSTICE KS JHAVERI ============================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ============================================================== RAIPUR (RAKHIAL) COMMERCIAL CO-OP HOUSING SOCIETY LTD & 1 - Petitioner(s) Versus AHMEDABAD ELECTRICTY CO LTD & 1 - Respondent(s) ============================================================== Appearance : Mr. SN Soparkar Sr. Advocate with Mr. Amar N. Bhatt for the petitioners (In S.C.A.No.15737 of 2004) Mr. PK Jani with MR MAYUR RAJGURU for the petitioner (In S.C.A.No.15545 of 2004) Mr. Shaikh with Ms. Ratna Vora for the petitioner (In S.C.A.No.13216 of 2004) SCA/15737/2004 2/27 JUDGMENT Mr. KB Pujara with Mr. PRAFUL N THAKKAR for the Respondent. RULE SERVED for Respondent(s) : 2, ===================================================================== CORAM : HONOURABLE MR.JUSTICE KS JHAVERI Date : 31/08/2005 ORAL JUDGMENT 1.0 These three petitions raise a common question and are directed against the action of respondent – Ahmedabad Electricity Company Limited (for short, “the Company”) of insisting upon the payment of the arrears of electricity dues in respect of the power supplied to the previous owners as a condition precedent for the restoration of electric connection in the premises of the new owners. Hence, they are disposed of by this common judgment. 2.0 The facts leading to the filing of Special Civil Application No. 15737 of 2004 are as under; 2.1 The petitioner in this petition is a Co-operative Society registered under the provisions of the Gujarat Co-operative Societies Act, 1961, engaged in commercial activities and in the construction of houses for its members. Respondent no.2 herein, M/s. Ajar Enterprises Pvt. Ltd., had purchased the assets of one Raipur SCA/15737/2004 3/27 JUDGMENT Manufacturing Company Limited for Rs. 13.30 crores, pursuant to the winding-up proceedings in Company Petition No.114 of 2001 held before this Court. The said petition was filed on 14.06.2001 and it came to be disposed of on 15.10.2001. 2.2 As per the conditions of the said auction, the assets of the Company were conveyed to the petitioner Society by the Official Liquidator as per the Deed of Conveyance executed on 02.08.2004 read with the Deed of Rectification dated 01.10.2004 executed between the Official Liquidator of the Company i.e. of Raipur Manufacturing Company Limited, ICICI Bank Ltd., respondent no.2 herein – M/s. Ajar Enterprises Pvt. Ltd and the petitioner herein, and, one Shreeji (Rakhial) Commercial Co-operative Housing Society Ltd. (i.e. petitioner in S.C.A.No.15545 of 2004) by which the entire property purchased by respondent no.2 vide order dated 02.12.2004 was transferred to the petitioner - Society and Shreeji (Rakhial) Commercial Co-operative Housing Society Ltd. (i.e. petitioner in S.C.A.No.15545 of 2004). 2.3 After taking possession of the said Company, the petitioner applied to respondent no.1 - Company for the grant of electric connection for the said premises. SCA/15737/2004 4/27 JUDGMENT However, respondent no.1, vide letter dated 07.01.2004, declined to grant power supply to the petitioner, unless the petitioner pays the demand in the sum of approximately Rs. 12.3 crores claiming to be the outstanding dues in connection with the power supplied to the previous owner, i.e. Raipur Manufacturing Company Limited (in liquidation) prior to 15.07.1999. 2.4 In response to the above, the petitioner addressed letter dated 25.11.2004 to respondent no.1 claiming that in view of the judgment of the Apex Court in the case of Isha Marbles v. Bihar State Electricity Board, reported in (1995) 2 S.C.C. pg. 648 and some other judgments, the respondent Company could not insist upon the petitioner to pay up the demands due from the previous owner as a condition precedent for the release of fresh connection in view of the auction purchase. 2.5 No reply was given by respondent no. 1 to the said letter of the petitioner. The petitioner was not extended with the power supply, thereby preventing it from starting its construction activity. Since electricity connection was not released by the respondent - Company, the petitioner has approached this Court by way of this writ petition. SCA/15737/2004 5/27 JUDGMENT 3.0 The short facts in Special Civil Application No. 15545 of 2004 are that the petitioner in this petition is one of the two purchasers, being purchaser no.2, of the premises of the said Raipur Manufacturing Company Limited, which went into liquidation and was wound up in Company Petition No. 114 of 2001 disposed of on 15.10.2001. On 13.08.2004, the petitioner made an application to respondent Company for the supply of power. But, the petitioner was denied electricity connection on the same grounds as stated in the aforesaid Special Civil Application. 4.0 The facts in Special Civil Application No. 13216 of 2004 are that the petitioner in this petition had purchased property belonging to one M/s. Ajit Mills Company Limited pursuant to the liquidation proceedings held before this Court in Company Petition No. 197 of 1987. The said petition was filed on 28.12.1987 and it came to be disposed of on 08.02.1994 pursuant to the winding up order passed as back as on 28.04.1989. On 28.05.2004, in order to restart the activities in the premises, the petitioner made an application to the respondent Company for release of power supply to the premises. However, the petitioner was denied electricity SCA/15737/2004 6/27 JUDGMENT connection on the same grounds as stated in the aforesaid petitions. Hence, these petitions. 5.0 Heard Mr. S.N. Soparkar with Mr. Amar N. Bhatt, Mr. P.K. Jani with Mr. Mayur Rajguru and Mr. Shaikh with Ms. Ratna Vora learned Advocates appearing for the petitioners and Mr. K.B. Pujara with Mr. P.N. Thakkar learned Advocates appearing for the respondent Company. 6.0 Mr. S.N. Soparkar learned advocate for the petitioner has contended that the petitioner Society, being the auction-purchaser of the assets of the Company in question, is not liable to pay the electricity dues of the previous owner, in the absence of their being a statutory provision in that behalf. He has submitted that the respondent Company could not have and ought not to have denied the petitioner fresh electricity connection on the ground that the dues of M/s. Raipur Mills Pvt. Ltd are not paid by the petitioner Company, in view of the law laid down by the Apex Court in the case of Isha Marbles v. Bihar State Electricity Board reported in (1995) 2 S.C.C. pg. 648, and, more particularly, in view of the observations made in Paras 55 & 56 of the said decision, which read as under; SCA/15737/2004 7/27 JUDGMENT “55. In all the present cases the supply of electricity to a particular premises which had the benefit of enjoying electricity had been disconnected under Section 24 of the Electricity Act. The auction-purchasers want reconnection. The Board says no; unless and until the consumption charges in relation to that property which came to be incurred during the ownership of the previous incumbent are cleared off. Is that stand of the Board correct? The High Court, in the main judgment in Suman Packaging (CWJC No. 5358 of 1992) given the following reasons for answering the question against the Board; 1. Section 24 stipulates discontinuance of supply of electrical energy to the consumer in respect of a sum due from him. We are afraid the High Court had not read Section 24 in conjunction with other statutory provisions though they had been noted, namely, Section 26 of the Supply Act; Section 22 of the Electricity Act and clause VI of Schedule to the Electricity Act. They clearly postulate the obligation to supply energy for such premises. At the risk of repetition we hold that the premises had enjoyed the benefit of electricity. The owner of the premises or even the occupier of the premises, as stated under Rule 2(af) of the Indian Electricity Rules, becomes liable to pay the consumption charges together with other dues. In other words, the liability is in respect of the dues of electricity which came to be supplied pursuant to the contract with the former owner. The discharge of such liability will be on such owner or occupier. 56. From the above it is clear that the High Court has chosen to construe Section 24 of the Electricity Act correctly. There is no charge over the property. Where that premises comes to be owned or occupied by the auction-purchaser, when such purchaser seeks supply of electric energy he cannot be called upon to clear the past arrears as a condition precedent to supply. What matter is the contract entered into by the erstwhile consumer with the Board. The Board cannot seek the enforcement of contractual liability against the third party. Of course, the bona fides of the sale may not be relevant.” SCA/15737/2004 8/27 JUDGMENT (Emphasis Supplied) 6.1 Mr. Soparkar has further contended that it is well settled law that where there is power there is duty. He has submitted that in the present case no doubt the respondent Company has the power to recover the outstanding dues, but, the said power is to be exercised with responsibility. Learned counsel has submitted that the respondent Company has not exercised its power in a prudent manner at the relevant point of time, by waiting for such a long period in recovering the dues of the past owners without initiating any action, thereby resulting in the mounting of the dues, which in some cases, may even be more than the value of the property in question. Apart from the above, the debts of the Company that has gone into liquidation might in some cases would even be time-barred. 6.2 Learned counsel has submitted that before the dues had assumed huge figures, the respondent Company ought to have disconnected the power supply at the relevant point of time and initiated necessary proceedings against the defaulter. Therefore, it is now not open to the respondent Company to claim the dues from the auction- purchasers, i.e the petitioners herein, for the SCA/15737/2004 9/27 JUDGMENT negligence committed by the respondent authorities in performing its duties responsibly at the relevant point time of time. 6.3 Mr. Soparkar has relied upon a decision in the case of Ahmedabad Electricity Co. Ltd. v. Gujarat Inns Pvt. Ltd and others reported in 2004 AIR S.C.W. pg. 2106 = (2004) 3 S.C.C. pg.587 = 2004 (2) G.L.R. pg.1363, and, more particularly, on the following observations made in Paras 1 & 3; “1. ...... It appears that the respondents sought for fresh connections for supply of power to the respective premises. The appellant insisted on the previous arrears being cleared. It also appears that some arrears were paid by respondents no. 1 & 2 in Civil Appeal no. 1691 of 1999. However, the supply of electricity has been resumed. The dispute is whether the respondents should be held liable to pay the arrears which were outstanding against the previous owners. 3. ....... We are clearly of the opinion that in case of a fresh connection though the premises are the same, the auction-purchasers cannot be held liable to clear the arrears incurred by the previous owners in respect of power supply to the premises in the absence of there being a specific statutory provision in that regard. Though we find some merit in the submission of the learned counsel for the appellant calling for reconsideration of the wide propositions of law laid down in Isha Marbles case, we think the present one is not a case for such exercise. We leave the plea open for consideration in an appropriate case.” (Emphasis Supplied) 6.4 Learned counsel has submitted that this Court in a SCA/15737/2004 10/27 JUDGMENT similar matter being Special Civil Application No. 3014 of 1998 disposed of on 24.07.1998, while adopting the principle laid down in M/s. Isha Marbles case (supra), had observed that the purchaser of a property at public auction by the State Financial Corporation cannot be made liable to pay the electricity dues of the previous consumer unless there is an agreement to that effect and that there is no allegation of relationship or complicity between the petitioner and the old owner of the premises. Learned counsel has submitted that since in the present case there is no such agreement to the aforesaid effect, the petitioners cannot be held to be liable to pay the electricity dues of the previous consumer. 6.5 The aforesaid decision was carried in Appeal being Letters Patent Appeal No. 1027 of 1998 which came to be disposed of on 04.09.1998. Learned counsel has pointed out to the following observations made in the aforesaid Appeal, which reads as under; “Learned Single Judge, following a decision of the Honourable the Supreme Court in M/s. Isha Marbles v. Bihar State Electricity Board and anr. 1995 (2) GLH 134 (SC), allowed the petition filed by the petitioners. We do not see any infirmity in the order passed by learned Single Judge. No doubt, Mr. H.B. Shah for the appellant submitted that various points were not placed before the Honourable the Supreme Court when M/s. Isha Marbles (supra) came to be decided by the SCA/15737/2004 11/27 JUDGMENT Honourable the Supreme Court. In our opinion, so far as this Court is concerned, this Court is bound by the law laid down by the Honourable the Supreme Court and the learned Single Judge has correctly observed that the point is “squarely covered” by the above decision. We, therefore, do not see any merits in the LPA. LPA stands dismissed.” The aforesaid decision was challenged before the Hon'ble the Apex Court unsuccessfully. 6.6 Mr. Soparkar has next relied upon a decision of a Division Bench of this Court dated 21.10.2004 passed in Special Civil Application No. 2162 of 2003 against the respondent Company, wherein the Bench has made the following observations in its order; “During the course of hearing, two decisions namely M/s. Isha Marbles v. Bihar State Electricity Board and anr [1995 (2) SCC 648] and Ahmedabad Electricity Co. Ltd. v. Gujarat Inns Pvt. Ltd. and ors. [2004 (2) GLH 691] are brought to the notice of this Court. These decisions clearly hold that the liability cannot be fastened on the auction purchasers/third party. The petitioner is auction purchaser/third party in this case, therefore, Ahmedabad Electricity Co. Ltd cannot seek recovery of electricity dues from the petitioner. The contention that the property has been purchased subject to all risks would not be applicable in this case in view of the legal position discussed above.” (Emphasis Supplied) SCA/15737/2004 12/27 JUDGMENT 6.7 Mr. Soparkar has, therefore, submitted that the action of the respondent Company in withholding of power supply, until the dues of the previous owners are paid, is wholly unreasonable and improper and appropriate directions may be issued to the respondent Company for immediate resumption of power supply to the premises of the petitioners. 6.8 Mr. P.K. Jani appearing with Mr. Mayur Rajguru and Mr. Shaikh appearing with Ms. Ratna Vora learned Advocates for the petitioners in the respective petitions have adopted the arguments advanced by Mr. S.N. Soparkar. Learned counsel has submitted that the respondent Company's total revenue dues in S.C.A. No. 15737 of 2004 and S.C.A. No.15545 of 2004 are to the tune of Rs.12,30,16,068.54 and in S.C.A. No.13216 of 2004 are to the tune of Rs.38,58,945.84. Learned counsel has submitted that since the petitioners herein have purchased the property in question from the auction purchasers, there is no liability cast upon the auction purchasers towards the aforesaid dues of the respondent Company. Therefore, while deriving the right title and the interest over the property in question, the petitioners herein cannot be held liable towards the said dues of the respondent Company. SCA/15737/2004 13/27 JUDGMENT 7.0 Mr. K.B. Pujara learned advocate appearing with Mr. P.N. Thakkar for the respondent Company has contended that in view of the provisions of Section 43 of The Electricity Act, 2003 (for short, “the Act”), dues are attached to the property and not to the consumer. The said Section 43 reads as under; “Section 43 : Duty to supply on request.-(1) Every distribution licensee, shall, on an application by the owner or occupier of any premises, give supply of electricity to such premises, within one month after receipt of the application requiring such supply; Provided that where such supply requires extension of distribution mains, or commissioning of new sub-stations, the distribution licensee shall supply the electricity to such premises immediately after such extension or commissioning or within such period as may be specified by the Appropriate Commission; Provided further that in case of a village or hamlet or area wherein no provision for supply of electricity exists, the Appropriate Commission may extend the said period as it may consider necessary for electrification of such village or hamlet or area. (2) It shall be the duty of every distribution licensee to provide, if required, electric plant or electric line for giving electric supply to the premises specified in sub-section (1): Provided that no person shall be entitled to demand, or to continue to receive, from a licensee a supply of electricity for any premises having a separate supply unless he has agreed with the licensee to pay to him such price as determined by the Appropriate Commission. SCA/15737/2004 14/27 JUDGMENT (3) If a distribution licensee fails to supply the electricity within the period specified in sub-section (1), he shall be liable to a penalty which may extend to one thousand rupees for each day of default.” 7.1 Learned counsel has submitted that the aforesaid provision casts a duty on the distribution licensee that every distribution licensee shall on an application by the owner or occupier of any premises give supply of electricity to such premises. Therefore, the electricity connection and the outstanding dues in respect of the electricity connection are relatable to the premises and not to the owner or occupier of the premises alone. 7.2 Learned counsel has further submitted that as long as there are any outstanding dues of electricity connection given at particular premises, the licensee is entitled to disconnect the supply and also to keep the supply discontinued, till the entire outstanding dues are paid, as is provided in Section 56 of the Electricity Act, 2003, and therefore, the respondent Company can deny power supply to a consumer unless and until the dues of the earlier occupier are paid up. 8.0 Mr. Pujara has relied upon the definition of “Consumer” as provided in Section 2(15) of the Electricity Act, 2003, which reads as under; SCA/15737/2004 15/27 JUDGMENT “2(15) : “Consumer” means any person who is supplied with electricity for his own use by a licensee or the Government or by any other person engaged in the business of supplying electricity to the public under this Act or any other law for the time being in force and includes any person whose premises are for the time being connected for the purpose of receiving electricity with the works of a licensee, the Government or such other person, as the case may be;” 8.1 Learned counsel has submitted that a combined reading of Section 2(15) with Section 43, 50 & 56 of “the Act” clearly establishes that the connection to be given at any premises need to be considered with regard to the arrears of charges for electricity supplied at the said premises, notwithstanding the change in the ownership and the appropriate authority can direct clearance of such outstanding dues as a condition precedent for reconnection. 9.0 Mr. Pujara has further contended that in view of the provisions of Section 24 of the old Act, it is open to the respondent Company either to refuse power connection to the consumer or to file a civil suit before the appropriate Court. 9.1 Learned counsel has submitted that the said aspect has been considered by the Apex Court in the case of SCA/15737/2004 16/27 JUDGMENT Swastic Industries v. Maharashtra State Electricity Board reported in (1997) 9 S.C.C. pg. 465, wherein it has been held that the Board's right under Section 24 of the Act to recover charges for energy and to discontinue supply of energy, if consumer neglects to pay the charges, is not taken away by Section 60-A of the Electricity Supply Act, 1948 which provides an option to the Board to file suit within the period of limitation stipulated therein for recovery of the charges. 9.2 Mr. Pujara has relied upon a Division Bench decision of this Court (Coram : Hon'ble Mr. Justice G. S. Singhvi and Hon'ble Mr. Justice Anant S. Dave) dated 18.07.2005 passed in Letters Patent Appeal No. 691 of 2003 and group matters, and, more particularly, on the following observations made in Page 37 of the said decision; “...... The object of Clause 2(j) is to ensure that the Board is not deprived of the charges of electricity supplied by it. It requires the prospective buyers of electricity to deposit the outstanding dues. Those who purchase the factories and establishments by giving highest bid at the auction or otherwise are deemed to be aware that for the purpose of availing electricity supply they will have to pay the outstanding arrears and, in our opinion, the Court cannot prevent the Board from enforcing Clause 2(j) of the Conditions of Supply, which has been enacted in larger public interest by directing the Board to file Civil Suit or application under the Companies Act. That SCA/15737/2004 17/27 JUDGMENT alternative is always open to the Board and the applicants like the writ petitioners are free to persuade the concerned authorities to adopt that course.” 10.0 Mr. Pujara has further contended that in view of the Conditions of Supply & Miscellaneous Charges of the respondent Company, and, more particularly, the provisions of Clause 17 read with Condition No. 7 of Form 'D', the respondent Company cannot guarantee that the supply of a consumer will not be disconnected for the non-payment of the consumers' energy bill, inclusive of past arrears, even if the consumer may have paid the said bill on the same day prior to the disconnection of supply. Learned counsel has submitted that it is not proper on the part of the petitioners to contend that there was negligence on the part of the Officials of the respondent Company in recovering the arrears of electricity charges of the previous owners. He has submitted that on account of the policy of the State Government of preventing the workers of the textile mills from being unemployed due to the closure of the mills, the respondent Company had not initiated any coercive measures against the mills owners. 10.1 Mr. Pujara has relied upon a decision of this Court in the case of Sun Chem v. G.E.B. Chairman & ors reported SCA/15737/2004 18/27 JUDGMENT in (2004) 6 G.H.J. pg. 251, wherein it has been held that when there was an agreement between respondent no.3 and the petitioner with respect to Clause 13, the petitioner is liable to pay the dues of electricity consumption remained unpaid by the predecessor-in-title. 10.2 Mr. Pujara has next relied upon a Division Bench decision of this Court (Coram : Hon'ble Mr. Justice G. S. Singhvi and Hon'ble Mr. Justice Anant S. Dave) dated 18.07.2005 passed in Letters Patent Appeal No. 691 of 2003 and group matters, wherein the Bench has upheld the provision of Clause 2(j) of the Conditions of Supply, while recovering the dues of the consumer. The said Clause 2(j) reads as under; “2(j) : Recovery of old dues :- Recovery or new connection for any premises, where there are arrears of the Board pending from the consumer/occupier, shall not be entertained. The new successor/occupier has