IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Special Appeal No. 25 of 2008 & Special Appeal No. 198 of 2007 Judgment Reserved on: 05.05.2008 Date of decision: 22.05.2008 Judgment for consideration please. (V.K. Gupta, C.J.) I agree / do not agree. (J.C.S. Rawat, J.) List for pronouncement of judgment on 22nd May, 2008 (V.K. Gupta, C.J.) Bench Secretary IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Chapter VIII, Rule 32(2) (b) Description of case Special Appeal No. 25 of 2008 Uttarakhand Power Corporation Ltd. & another. ……... Appellants Versus M/s Salasar Iron Syndicate Ltd. & others. ……… Respondents Mr. Alok Singh, Senior Advocate with Mr. N.S. Negi, Advocate, for the appellants. Mr. V.K. Kohli, Senior Advocate with Mr. I.P. Kohli, Advocate for the respondents. & Special Appeal No. 198 of 2007 Uttarakhand Power Corporation Ltd. & another. ……… Appellants Versus M/s Shree Prabhu Sharan Ispat Pvt. Ltd. ……... Respondent Mr. Alok Singh, Senior Advocate with Mr. B.D. Uadhyaya, Advocate, for the appellants. Mr. Sudhanshu Dhulia, Senior Advocate with Ms. Menaka Tripathi, Advocate, for the respondent. Date of Judgment: 22.05.2008 A.F.R. (Approved for Reporting) Not Approved for Reporting Date: 22.05.2008 Initials of Judge Note: Bench Reader will attach this at the top of first page of judgment when it is put up before the Judge for signature. IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Special Appeal No. 25 of 2008 Uttarakhand Power Corporation Ltd. & another. ……… Appellants Versus M/s Salasar Iron Syndicate Ltd. & others. …….. Respondents Mr. Alok Singh, Senior Advocate with Mr. N.S. Negi, Advocate, for the appellants. Mr. V.K. Kohli, Senior Advocate with Mr. I.P. Kohli, Advocate for the respondents. & Special Appeal No. 198 of 2007 Uttarakhand Power Corporation Ltd. & another. ……… Appellants Versus M/s Shree Prabhu Sharan Ispat Pvt. Ltd. ……… Respondent Mr. Alok Singh, Senior Advocate with Mr. B.D. Upadhyaya, Advocate, for the appellants. Mr. Sudhanshu Dhulia, Senior Advocate with Ms. Menaka Tripathi, Advocate, for the respondents. Coram: Hon’ble V.K. Gupta, C.J. Hon’ble J.C.S. Rawat, J. Dated: 22nd May, 2008 V.K. GUPTA, C. J. By this common judgment, we propose to dispose of both these appeals. 2. In both the appeals, common questions of law and fact are involved. In Special Appeal No. 25 of 2008, the judgment dated 14th February, 2008 passed by a learned Single Judge of this Court in Writ Petition No. 869 of 2007 (M/S) is under challenge, whereas in Special Appeal No. 198 of 2007, the judgment dated 7th November, 2007 passed by a learned Single Judge of this Court in Writ Petition No. 1136 of 2007 (M/S) has been assailed by the appellants. The judgment dated 14th February, 2008 passed in Writ Petition No. 869 of 2007 (M/S) actually in turn itself is based upon the judgment dated 7th November, 2007 passed in Writ Petition No. 1136 of 2007 (M/S) and, therefore, while disposing of these two appeals by this Common judgment, we shall be actually examining the legality and correctness of the judgment dated 7th November, 2007. 3. The common question of law, involved in both these appeals, revolves around the obligation and the liability of the respondents to pay the arrears of electricity bills with respect to the premises purchased by them in auction from financial institutions, such arrears of electricity bills being outstanding and due from the previous owners of these premises. It is the undisputed case of the parties before us that the respondents in both the appeals have nothing to do with the previous owners of the premises and the consumers of the electricity. It is not the case of the appellants before us that either there is any commonality of identity or interest between the respondents – writ petitioners – auction purchasers and the previous consumers / owners of the premises purchased, or that the previous owners have either set up the writ petitioners as the new owners or that the writ petitioners, in the guise of new owners, are in fact and in effect and substance, the re-incarnation of the previous owners. On the other hand, the admitted case of the parties before us is that the respondents – writ petitioners – purchasers, in their capacity as the new owners, have absolutely no link or connection with the previous owners of the premises and the consumers of the electricity under the old connections. 4. Let us notice the relevant facts first. In Special Appeal No. 25 of 2008, the property in question, admittedly, was purchased on 17th August, 2006 by the respondents. M/s Searsole Chemical Ltd. was the previous owner of the property situated at Kauwanwala, Dehradun. M/s Searsole Chemical Ltd. was under liquidation. A Civil Petition No. 207 of 2001 was filed in Calcutta High Court and Calcutta High Court, in exercise of its original jurisdiction, after taking over the property, appointed an official liquidator. In an open auction, the official liquidator, by inviting bids, sold the property for Rs. 4,65,00,000/- (Rupees Four Crores and Sixty Five Lakhs only) in favour of the writ petitioners. The sale was confirmed by Calcutta High Court and accordingly a Deed of Conveyance was executed on 17th August, 2006 in favour of respondent No. 1 by the official liquidator, Calcutta High Court. After becoming the owner of the property, based upon the execution of the Conveyance Deed dated 17th August, 2006 and after entering into the possession of the property, the respondents applied on 5th February, 2007 for an electric connection. The appellants rejected the application / request of the respondents for a fresh electric connection on the ground that with respect to an earlier electric connection in the premises in question, an amount of Rs. 98,83,735/- was due against and outstanding from M/s Searsole Chemical Ltd., the previous owner of the premises in question and the holder of the earlier/ previous electric connection. 5. In Special Appeal No. 198 of 2007, the writ petitioner, sole respondent, M/s Shree Prabhu Sharan Ispat Pvt. Ltd. purchased a Unit by the name of M/s J.K.M. Steel Pvt. Ltd. M/s J.K.M. Steel Pvt. Ltd. was a debtor of the Union Bank of India and since it had failed to repay the loan outstanding against it, Union Bank of India initiated proceedings against M/s J.K.M. Steel Pvt. Ltd, under the provisions of The Securitisation & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘2002 Act’ for short) for recovery of its dues from the said concern. Under the provisions of 2002 Act, the Bank took possession of the Unit in question and held an open auction for its sale. Along with others, the respondent participated in the open auction and purchased the Unit for an amount of Rs. 28,50,000/- (Rupees Twenty Eight Lakhs and Fifty Thousand only), which is situated at 437, M. Garhinegi, Kashipur, District Udham Singh Nagar. The property in question was purchased vide a sale certificate issued on 18th November, 2006. Sale Deed in favour of the respondent / writ petitioner was executed by the Union Bank of India on 28th March, 2007. After becoming the owner of the property in question and after entering upon its possession, the respondent / writ petitioner applied to the appellants for obtaining a fresh electric connection for the premises in question. This application was made on 13th December, 2006. Apparently because nothing was done, one more application was made on 20th December, 2006 with the request to sanction a fresh electricity connection of 1800 KVA. The appellants have refused to sanction / grant electricity connection to the respondent / writ petitioner on the ground that there is an outstanding due of Rs. 7,26,00,000/- (Rupees Seven Crores and Twenty Six Lakhs only) over the premises in question against the previous owner and unless this amount is paid / cleared by the respondent / writ petitioner, the electric connection in its favour cannot be granted. 6. Reliance has been placed by Mr. Alok Singh, learned Senior Counsel appearing for the appellants upon Regulation No. 3(2) and Regulation No. 5(7) of the Uttarakhand Electricity Regulatory Commission (Release of new LT Connections, Enhancement and Reduction of Loads) Regulations, 2007 (hereinafter called as ‘2007 Regulations’). Regulation 3(2) of these Regulations reads as under: “3(2) Where the applicant has purchased an existing property whose electricity connection has been disconnected, it shall be the duty of the applicant to verify that the previous owner has paid all dues to the Licensee and has obtained a “no-dues certificate” from him. In case such “no-dues certificate” has not been obtained by the previous owner, before purchase of property, the new owner may approach the concerned officer of the Licensee for a such certificate. The licensee shall acknowledge the receipt of such request and shall either intimate in writing the dues outstanding on the premises, if any, or issue the “no-dues certificate” within one month from the date of receipt of such application. In case the Licensee does not intimate the outstanding dues or issue the “no-dues certificate” within this time, new connection on the premises shall not be denied on ground of outstanding dues of the previous consumer. In such an event, the licensee shall have to recover his sues from previous consumer as per provisions of law.” Regulation 5(7) of the 2007 Regulations reads as under: “5(7) Licensee shall also ascertain whether any dues are outstanding on the premises, and if so, the licensee shall issue a demand not within 5 days from date of application giving full details of such outstanding amount. The applicant shall be required to deposit outstanding dues within 15 days failing which his application shall lapse and the applicant shall be informed accordingly in writing under acknowledgement.” 7. Whether the aforesaid two particular regulations, namely Regulation 3(2) and Regulation 5(7), are attracted in the cases of the respondents or not is a matter, which we shall advert to later in this judgment. 8. At the outset, let us find out whether the 2007 Regulations at all apply to the cases of the respondents or not. First and foremost, it has to be seen that even though the 2007 Regulations were issued vide notification dated 26th February, 2007, these were published in the Official Gazette on 3rd March, 2007. As per Regulation No. 1(2), the Regulations would come into force on the date of the publication in the official Gazette. As has been noticed, the properties in question, in both the cases, were purchased on 17th August, 2006 and 18th November, 2006, even though in Special Appeal No. 198 of 2007, the sale deed was executed on 28th March, 2007, but by looking at the sale letter as well as the contents of the sale deed, we have no doubt in our minds that the title with respect to the property in question passed over in favour of the respondent in Special Appeal No. 198 of 2007, on 18th November, 2006. If the properties were purchased by the respondents before the coming into force of the 2007 Regulations, can it be said that the 2007 Regulations would be applicable to their cases? Our answer is in the negative because the liability if at all to pay the dues of the previous owners of the properties and the previous consumers is traceable only to the 2007 Regulations. It is in 2007 Regulations, for the first time, that liability to pay, if at all might be said to have come into existence because the respondents had purchased the properties before the Regulations came into force. Therefore, as on the date of the purchase of the properties, they were not liable to pay the dues of the previous owners. 9. Mr. Alok Singh, learned Senior Counsel relief upon a judgment of the Supreme Court in the case of Dakshin Haryana Bijli Vitran Nigam Ltd. Vs. Paramount Polymers (P) Ltd. reported in (2006) 13 S.C.C. 101, to contend that by virtue of the ratio laid down in the aforesaid judgment of the Supreme Court, the date of purchase of the property is not relevant. He has relied upon this judgment also in support of his contention that by virtue of an identical condition, the new purchaser in the aforesaid case was held liable to pay the outstanding dues of the previous consumer. 10. On two counts, we disagree with the contention of Mr. Alok Singh and hold that the aforesaid Supreme Court judgment in Dakshin Haryana Bijli Vitran Nigam Ltd. (supra) is not attracted and applicable to the facts of these cases. The particular condition of the Terms and Conditions of Supply of electric energy by the appellant in the aforesaid Supreme Court case, upon which their Lordships of the Supreme Court placed reliance to hold that the respondent was liable to pay for the electric dues of the previous consumer, has been extracted in para 9 of the said judgment. For ready reference, we also, on our part, wish to take note of and rely upon the said condition, being condition No. 21-A in the aforesaid case, which reads thus: “21-A(a) When there is transfer of ownership or right of occupancy of a premises, the registered consumer shall intimate the transfer of right of occupancy of the premises within 15 days to the Assistant Engineer/Assistant Executive Engineer concerned. Intimation having been received, the service shall be disconnected unless application for transfer is allowed. If the transferee desires to enjoy the service connection, h e shall pay the outstanding dues, if any, to the Nigam and apply for transfer of the service connection within 30 days and execute fresh agreement and furnish fresh security. New consumer number shall be allotted in such cases cancelling the previous number. (b) Reconnection or new connection shall not be given to any premises where there are arrears on any account due to the Nigam unless these are cleared in advance. If the new owner/occupier/allottee remits the amount due from the previous consumer, the Nigam shall provide reconnection or new connection depending upon whether the service remains disconnected/dismantled, as the case may be. The amount so remitted will be adjusted against the dues from the previous consumer. If the Nigam gets the full or partial dues from the previous consumer through legal proceedings or otherwise, the amount remitted by the new owner/occupier to whom the connection has been effected shall be refunded to that extent. But the amount already remitted by him/her shall not bear any interest. (c) The above proposed provisions of clauses 21- A(a) and (b) shall be applicable to existing consumers also where defaulting amount exists against premises occupied by such consumer.” 11. Comparing Regulation No. 3(2) and Regulation No. 5(7) of 2007 Regulations in our case with the aforesaid Condition No. 21-A, we immediately come to the conclusion that whereas in Condition No. 21-A, thee is a clear, unequivocal and categorical obligation on the part of the transferee of the ownership of the property to clear the dues in advance of the previous owner and unless the transferee does so, he is not entitled to the grant of new connection, in Regulation No. 3(2) or Regulation No. 5(7), there is absolutely no such obligation on the part of the new purchaser of the property. All that the aforesaid two regulations of 2007 Regulations, read together, provide for and require is that where a person has purchased a property, the electricity connection whereof stood disconnected, it would be his duty to verify that the previous owner had paid all dues to the licensee and had obtained a “no dues certificate”. If no such certificate had been obtained by the previous owner before the purchase of the property, the new owner has to approach the licensee for the issuance of such a certificate. The licensee shall acknowledge the receipt of such request and either intimate in writing the dues outstanding, if any, or issue the “no dues certificate”. In other words, these Regulations do not cast any obligation upon or create nay liability in the new purchaser to clear the outstanding dues of the previous owner as a condition precedent for obtaining the electric connection. For whatever it is worthy of interpretation and whatever it meaning and purport may be, these Regulations only cast a duty on the new purchaser to either obtain the “no dues certificate” from the previous owner or from the licensee or obtain from the licensee, the amount due from the previous owner. These Regulations stop at that. These do not create any further, additional liability upon the new purchaser. 12. Coming specifically to the applicability of the 2007 Regulations after noticing the clearly stated intent and purport of Regulations Nos. 3(2) and 5(7) (supra), in the light of the ratio of the aforesaid Supreme Court judgment, what we find is that their Lordships in Dakshin Haryana Bijli Vitran Nigam Ltd. (supra) clearly held that the aforesaid condition No. 21-A would apply if after the coming into force of the condition, the respondent in that case had made the application for new connection. As we have seen in our cases, apart from the fact that the properties were purchased prior to the coming into force of the 2007 Regulations, the applications for new connections by the respondents stood filed on 5th February, 2007 and 13th December, 2006, that is much prior to the coming into force of the 2007 Regulations. 13. Apart from the aforesaid, it is noteworthy to observe that 2007 Regulations apply only to Low Tension (LT) Connections. These Regulations, therefore, do not apply to High Tension Connections at all. In Special Appeal No. 198 of 2007, the new connection applied for was of High Tension. 14. During the course of arguments, reference was also invited to Uttarakhand Electricity Regulatory Commission (The Electricity Supply Code) Regulations, 2007 (‘2007 April Regulations’ for short). These Regulations were issued vide notification dated 17th April, 2007 and as per para 1.1(3), these would come into force on the date of the publication in the official Gazette. Undoubtedly, the publication must have taken place after 17th April, 2007, the date of issuance of the notification because we have not been told by Mr. Alok Singh as to when actually these were published. Based on the reasoning that we have adopted with respect to 2007 Regulations, we have no hesitation in holding that as far as the cases of the respondents are concerned, 2007 April Regulations also have no applicability because the properties in question were purchased before the coming into force of these two Regulations and the respondents had also applied for electric connections much before the date when these Regulations came into force. 15. The law on the subject has very succinctly been stated by their Lordships of the Supreme Court in the case of Isha Marbles Vs. Bihar State Electricity Board & another reported in (1995) 2 S.C.C. 648. In para 63 of the judgment, it has been observed as under: “63. We are clearly of the opinion that there is great reason and justice in holding as above. Electricity is public property. Law, in its majesty, benignly protects public property and behoves everyone to respect public property. Hence, the courts must be zealous in this regard. But, the law, as it stands, is inadequate to enforce the liability of the previous contracting party against the auction-purchaser who is a third party and is in no way connected with the previous owner/occupier. It may not be correct to state, if we hold as we have done above, it would permit dishonest consumers transferring their units from one hand to another, from time to time, infinitum without the payment of the dues to the extent of lakhs and lakhs of rupees and each one of them can easily say that he is not liable for the liability of the predecessor in interest. No doubt, dishonest consumers cannot be allowed to play truant with the public property but inadequacy of the law can hardly be a substitute for overzealousness…………” 16. Referring to Section 24 of the Indian Electricity Act, 1910 (since repealed by the Electricity Act, 2003) and quoting with approval the observations of Patna High Court, the following observation in para 56 of the same judgment was made to hold that as far as the outstanding dues of the previous consumers are concerned, there is no charge over the property. We quote the following observations in para 56 with advantage: “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 the clear the past arrears as a condition precedent to supply. What matters 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.” 17. What was applicable with respect to Indian Electricity Act, 1910, is applicable with equal force to the Electricity Act, 2003, because even in the latter Act, there is no provision, which creates a charge over the property or obliges the purchaser of the property to pay the outstanding dues of the previous consumer. The observations made in para 63 of the Supreme Court judgment in Isha Marbles quoted above also are apposite to our case because, while we have minutely discussed 2007 Regulations and 2007 April Regulations, especially also in the context of their comparison with Condition No. 21-A in the Supreme Court judgment in the case of Dakshin Haryana Bijli Vitran Nigam Ltd. (supra), we found and accordingly hold that the law as it stood at the relevant time was totally and wholly inadequate to enforce the liability of the previous contracting parties against the two auction purchasers in our cases, who are respondents / writ petitioners and, both of whom, as we have already held, had no connection whatsoever with the previous owners / occupiers. At the relevant time the law as it stood (either 2007 Regulations or 2007 April Regulations) was inadequate to enforce the liability of the previous contracting parties against the auction purchasers, who are strangers and third parties as far as the previous owners are concerned and they are in no way connected with the previous owners. What would be the effect of these two sets of Regulations with respect to the purchases made and applications for new electric connections filed after these Regulations came into existence is an issue upon which we are not presently pronouncing. 18. In the course of the impugned judgment dated 7th November, 2007, the learned Single Judge relied upon Office Memorandum dated 16th August, 2004 issued by Uttarakhand Power Corporation Ltd., appellant No. 1 in both the appeals, wherein it has been stated that in so far as the issue regarding recovery of the past electricity dues of industrial units taken over by U.P. Financial Corporation Ltd. (UPFC) is concerned, it has been provided that the new managements of the Units, which purchase these units form Uttar Pradesh Financial Corporation (UPFC), would be allowed / released a new electric connection in the same premises without insisting upon the payment of outstanding dues against electricity bills of previous owners relating to these premises. The extract of this Office Memorandum is reproduced herein-below, which reads thus: “OFFICE MEMORANDUM In compliance of Board’s decision taken in its meeting held on 06.08.2004, UPCL’s Office Memorandum No. 2562 /mikdkfy /dkWe /bZ -1, dated 09.03.2004 regarding recovery of the past electricity dues from industrial units taken over by U.P. Finance Corporation Limited (UPFC) is hereby superceded and following provisions are made: 1. The new management of the unit who has purchased the unit / premises from UPFC will be allowed / released a new connection in the same premises after completion of all the formalities as per applicable rules and