WP(C) 1183/2010 BEFORE HON’BLE THE CHIEF JUSTICE MR. R.S. GARG HON’BLE MR. JUSTICE HRISHIKESH ROY Heard Mr. Ajit K. Sinha, the learned Senior Counsel appearing for the petitioner . Mr. B.D. Das, learned Senior Standing Counsel of the Assam State Electricity B oard represents the respondents 2 to 5 - who are referred to hereinafter as the Distributor . Mr. A.K. Thukur represents the Regulatory Commission (respondent No.1). 2. The issue that needs to be answered in the instant case is whether the p etitioner as an auction purchaser is obliged to clear the electricity dues of th e previous consumer, before he can be supplied electricity in the premises, wher e connection was disconnected for non payment of power dues. RELEVANT FACTS 3.1 On 29.12.2007, an Auction Sale Notice was published by the Recovery Offi cer of the Debt Recovery Tribunal (DRT), Guwahati in respect of M/s Eastern Stee l & Alloys Company Ltd.’s hypothecated premises and land measuring 16 Bighas, 1 Katha, 12 Lachas with AT (Assam Type) & RCC Building/Sheds etc. besides scraps of plant and machinery and boundary wall on As is where is basis . 3.2 The petitioner was the only one who responded to the sale notice and the DRT by order dated 24.3.2008 ordered confirmation of sale at the petitioner’s o ffer of Rs.1,08,50,000.00 and Certificate of Sale in respect of the auctioned pr operty was granted in favour of the petitioner. 3.3 As a portion of the auctioned property was under occupation of the CRPF personnel, the petitioner wrote to the UCO Bank Authorities to remove the CRPF p ersonnel camping in the property and by the reply dated 27.3.2008 given by the C hief Manager of the UCO Bank, the auction purchaser were informed that the Bank will take responsibility for de-camping the CRPF personnel in occupation of the auctioned property. 3.4 On 21.1.2009 (Annexure-VIII) the petitioner wrote to the Manager, Bongai gaon Sub-Division, Lower Assam Electricity Distribution Company Ltd. (respondent No.4) about the purchase of the hypothecated property and requested the Distrib utor for sanctioning of 50 to 150 KVA Electricity Connection, to set up a Calcin ed Petroleum Coke Industry, in the purchased premises. 3.5 In the mean time, the petitioner learnt that fresh connection cannot be given in the purchased property as some old power dues are pending in respect of the said premises and accordingly the petitioner requested for intervention of the Chairman of the Distributor for early release of the electricity connection . 3.6 By the impugned communication dated 27.6.2009, the Sr. Manager of the Bo ngaigaon Electrical Sub-Division (respondent No.5) informed that the total outst anding dues of the old consumer with principal and additional surcharge, was Rs. 4,57,23,633.81 for power supplied in the hypothecated property. 3.7 As the Distributor was not prepared to give a fresh connection without clearance of the outstanding dues of the old consumer, the present petition came to be filed. PETITIONER’S CONTENTIONS 4. Mr. A.K. Sinha, learned Senior Counsel submits that the prepayment of t he power dues of a previous consumer cannot be insisted upon by the Distributor as a pre-condition for providing power in his purchased premises by contending that the petitioner is not in default of such dues.H He contends that under Sect ion 43 of the Electricity Act, 2003 (hereinafter referred to as the 2003 Act ), the Distributor is obliged to provide supply of electricity within 1 month fro m the date of application of an intending consumer and outstanding dues of a pre vious consumer should have no bearing in the matter. 4.1 Referring to Clause 3.6.4 of the Assam Electricity Regulatory Commissio n (Electricity, Supply Code and Related Matters) Regulations, 2004 (hereinafter referred to as the Regulations, 2004 ) on the basis of which the Distributor i s seeking to recover the outstanding electricity dues, Mr. Sinha contends that t he said clauses are inconsistent with the provisions of the parent Act as accor ding to him, the 2003 Act does not provide for clearance of outstanding electric ity dues when a new consumer applies for fresh electricity connection in respect of the same premises. It is also submitted that Clause 3.6.4 of the Regulation s, 2004 cannot be resorted to for such pre-deposit as the State Regulatory Comm ission as the delegatee has exceeded their jurisdiction in incorporating the sa id clause in the Regulation. 4.2 The petitioner contends that under Section 56(2) of the 2003 Act, a dist ributor is not entitled to recover dues of a consumer 2 years after such dues be come payable and since the dues in the present case are beyond the said period, there can be no demand for payment of such dues by the Distributor . 4.3 Referring to the provisions of the Recovery of Debts Due to Banks and Fi nancial Institutions Act, 1993 (hereinafter referred to as the Recovery Act ), the learned counsel contends that the hypothecated premises having been sold by the bank without encumbrance, recovery of outstanding electricity dues if it is to be made, can be realized only from the seller and not from a bona fide purcha ser. Reference to the provisions of Section 55(g) of the Transfer of Property Ac t (hereinafter referred to as the T.P. Act ) is also made to advance the submis sion that it is the responsibility of the seller and not of the purchaser, to pa y all public charges in respect of the property. 4.3 In support of his contentions, Mr. Sinha relies upon the following decis ions of the Apex Court :- (i) (1995) 2 SCC 648 - Isha Marbles vs. Bihar State Electricity Board. (ii) (2004) 3 SCC 587 - Ahmedabad Electricity Co. Ltd. vs. Gujarat Inns Pvt. Ltd. (iii) (2006) 13 SCC 101 - Dakshin Haryana Bijli Vitran Nigam Ltd. vs. Paramount Polymers Ltd. (iv) (2008) 10 SCC 720 - Dakshin Haryana Bijli Vitran Nigam Ltd. vs. Excel Buildcon Pvt. Ltd. (v) (2009) 2 SCC 121 - Union of India vs. Sicom Ltd. (vi) (2009) 4 SCC 486 - Al Champdany Industries Ltd. vs. Official Liquidator. (vii) (2009) 15 SCC 570 - Global Energy Ltd. vs. Central Electricity Regulatory Commission. RESPONDENTS CONTENTION 5. Arguing for the Distributor /respondents, Mr. B.D. Das, learned Standing Counsel of the Assam State Electricity Board (ASEB) refers to Section 50 of the 2003 Act to submit that an Electricity Supply Code is required to be framed by the Regulatory Commission to provide for recovery of electricity charges. Accord ing to him, the Regulations, 2004 containing Clause 3.6.4 have been framed under the authority of Section 50 and therefore there is no basis to contend that Cla use 3.6.4 is either ultra vires the Electricity Act, 2003 or that the said Claus es have been enacted by the State Regulatory Commission, in excess of the power delegated by the Act. 5.1 Mr. Das also submits that demand for clearance of outstanding dues is ju stified because fresh electricity connection is sought in the same premises wher e electricity was disconnected for non-payment of dues and such recovery having been provided for through appropriate Regulation, the time limitation prescribed for recovery of electricity dues from the earlier consumer under Section 56(2) of the 2003 Act, would not apply in the instant case. 5.2 The learned counsel for the Distributor further submits that neither th e provisions of the Recovery Act nor the T.P. Act, 1882 would apply as the impu gned action is not against the previous consumer or the seller (Bank) and the d emand for payment of outstanding dues is made only because the petitioner seeks power to a premises where supply was disconnected for non-payment of power dues. 5.3 In support of his contentions, the respondents relies upon the following decisions :- (i) AIR 2006 Kerala 194 - Suraj K. R. vs. Secretary, Kerala State Electricity Board (ii) AIR 2007 Kerala 201 - K.G. Purushothaman vs. Kerala State Electricity Board (iii) AIR 2010 Madhya Pradesh 105 - Mahila Kamla Dubey vs. Madhya Pradesh Vidyut Mandal, Gwalior (iv) (2009) 1 SCC 210 - Paschimanchal Bidyut Vitran Nigam Ltd. vs. DVS Steels and Alloys Pvt. Ltd. LEGALITY OF THE SUPPLY CONDITIONS 6. In the present case, we find that conditions have been incorporated thro ugh Clause 3.6.4 under the Regulations, 2004 providing, inter alia, the terms un der which electricity supply is to be made by the Distributor. As this Clause has a material bearing on the issue, the same is extracted herei nbelow for ready reference - 3.6.4. In case of a person occupying a new property, it will be the obligation of that person to check the bills for the previous months or in case of disconnected supply, the amount due as per the licensee’s records immediately before his occupation and ensure that all outstanding electricity dues as speci fied in the bills subject to limitation as per subsection (2) of Section 56 of t he Act are duly paid up and discharge. The licensee shall be obliged to issue a certificate of the amount outstanding from the connection in such premises on re quest made by such person. 6.1 Clause 3.6.4. requires a new occupier to ensure that all outstanding ele ctricity dues are duly paid up prior to his occupation. Regulations, 2004 have b een framed under Section 50 of the Electricity Act, by the Regulatory Commission . As Supply Code is required to provide for Recovery of Electricity Charges we a re of the view the said Regulation and the Clauses contained therein cannot be s aid to be ultra vires the provisions of the Electricity Act. For the same reason it cannot also said to be an excessive exercise of power by a delegatee and acc ordingly we are enable to accept the contrary arguments raised by the petitioner with regard to the legality of the Regulations, 2004 and clauses contained ther ein. 7. In so far as the argument advanced that the Distributor is entitled to proceed only against the seller of the hypothecated property i.e. UCO bank and n ot against the purchaser, we find that the Distributor is demanding prepayment of the outstanding dues before electricity connection is given to the petitioner , in terms of the notified conditions. Therefore the petitioner’s contention tha t recovery has to be made from the seller and not the buyer does not appeal to u s and the same is accordingly rejected. 8. Since conditions have been prescribed for making supply to a premises wh ere electricity has been disconnected for non-payment of the dues, it would be u njust in our view to compel the Distributor to give electricity connection at t he same premises as the Distributor’s rights to recover outstanding dues would then be adversely impacted. This cannot certainly be in public interest and we a re unable to accept the argument of the petitioner on this count. CASE LAW 9. As regards the decisions relied upon by the petitioner in the case of Is ha Marbles (Supra) and Ahmedabad Electricity Co. Ltd. (Supra), we find that th e said decisions were rendered at a stage when conditions of supply were yet to be notified unlike in the present case where Regulations, 2004 is available. The refore we feel that the said 2 decisions cannot be applied for deciding the issu e in the facts of this case. 10 We may also take note of paragraph 63 of the judgment in Isha Marbles (S upra) to understand that even in that case, the Supreme Court had expected the Courts to be vigilant in respect of electricity which is considered to be a publ ic property and only because inadequacy of law at that point of time, the Suprem e Court gave its decision against the Distributor. Paragraph 63 reads as under : - 63 We are clearly of the opinion that there is great reason and jus tice in holding as above. Electricity is public property. Law, in its majesty, b enignly 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 d one 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 t o the extent of lakhs and lakhs of rupees and each one of them can easily say th at 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 bu t inadequacy of the law can hardly be a substitute for overzealousness. & & & & &. 11. The 3 High Court decisions i.e. Suraj K. R. (Supra), K.G. Purushothaman (Supra) and Mahila Kamla Dubey (Supra) relied upon by the respondents took not e of the change in law after the Apex Court’s decision in Isha Marbles (Supra) and on the basis of the subsequently notified supply conditions, the Distributor ’s right to demand prepayment of past electricity dues, when fresh connection i s applied in the same premises, was upheld by the High Courts in these cases. 12. That apart, the issue raised in the present case in our view is now squa rely covered by the Apex Court’s decision in Paschimanchal Bidyut Vitran Nigam L td. vs. DVS Steels and Alloys Pvt. Ltd reported in (2009) 1 SCC 210 where th e Supreme Court while examining similar conditions of supply as laid down in the Regulations, 2004 have held as follows : & & & & & & & & &.. 11. The supply of electricity by a distributor to a consumer is sal e of goods . The distributor as the supplier, and the owner/occupier of a premis es with whom it enters into a contract for supply of electricity are the parties to the contract. A transferee of the premises or a subsequent occupant of a pre mises with whom the supplier has no privity of contract cannot obviously be aske d to pay the dues of his predecessor-in-title or possession, as the amount payab le towards supply of electricity does not constitute a charge on the premises. A purchaser of a premises, cannot be foisted with the electricity dues of any p revious occupant, merely because he happens to be the current owner of the premi ses. The supplier can therefore neither file a suit nor initiate revenue recover y proceedings against a purchaser of a premises for the outstanding electricity dues of the vendor of the premises in the absence of any contract to the contrar y. 12. But the above legal position is not of any practical help to a p urchaser of a premises. When the purchaser of a premises approaches the distribu tor seeking a fresh electricity connection to its premises for supply of electri city, the distributor can stipulate the terms subject to which it would supply e lectricity. It can stipulate as one of the conditions for supply, that the arrea rs due in regard to the supply of electricity made to the premises when it was i n the occupation of the previous owner/occupant, should be cleared before the el ectricity supply is restored to the premises or a fresh connection is provided t o the premises. If any statutory rules govern the conditions relating to sanctio n of a connection or supply of electricity, the distributor can insist upon fulf illment of the requirements of such rules and regulations. If the rules are sile nt, it can stipulate such terms and conditions as it deems fit and proper to reg ulate its transactions and dealings. So long as such rules and regulations or th e terms and conditions are not arbitrary and unreasonable, courts will not inter fere with them. 13. A stipulation by the distributor that the dues in regard to the electricity supplied to the premises should be cleared before electricity supply is restored or a new connection is given to a premises, cannot be terms as unre asonable or arbitrary. In the absence of such a stipulation, an unscrupulous con sumer may commit defaults with impunity, and when the electricity supply is disc onnected for non-payment, may sell away the property and move on to another prop erty, thereby making it difficult, if not impossible for the distributor to reco ver the dues. Having regard to the very large number of consumers of electricity and the frequent moving or translocating of industrial, commercial and resident ial establishments, provisions similar to Clauses 4.3 (g) and (h) of the Electri city Supply Code are necessary to safeguard the interests of the distributor. 14. We do not find anything unreasonable in a provision enabling the distributor/supplier to disconnect electricity supply if dues are not paid, or where the electricity supply has already been disconnected for non-payment, insi st upon clearance of arrears before a fresh electricity connection is given to t he premises. It is obviously the duty of the purchasers/occupants of premises to satisfy themselves that there are no electricity dues before purchasing/occupyi ng a premises. They can also incorporate in the deed of sale or lease, appropria te clauses making the vendor/lessor responsible for clearing the electricity due s up to the date of sale/lease and for indemnity in the event they are made liab le. Be that as it may. 13. Having regard to the aforesaid decision of the Supreme Court in DVS Stee ls (Supra), we are unable to hold that the Distributor was without any legal au thority in seeking to recover outstanding dues of a previous occupier, from the petitioner, when he applied for fresh electricity connection in the same premise s. 14. In Paramount Polymers (Supra), the Supreme Court while examining the rig ht of the Electricity Company to demand liquidation of the outstanding dues for a premises where power were disconnected have held that dues of a previous owner can be recovered by proceeding against the Transferee. The Court also held that the newly inserted Clause 21A would clearly apply to the Transferee when it mad e application for fresh power connection in the disconnected premises, when a pu rchaser acquires such premises on As is where is basis . 14.1 In so far as the decision in Sicom Ltd. (Supra) where the Supreme Court held that debt owed to the State is an unsecured debt and a secured debt has th e first charge over a property and in Al Champdany Industries Ltd. (Supra), wher e the Supreme Court held that Municipality is an Unsecured Creditor and dues to Municipality can only be discharged after the Secured Creditors are paid, we are of the opinion that these decisions, can have no application in the present cas e. In this case demand of liquidation of the outstanding dues is made on the bas is of laid down terms and conditions for giving fresh connection and the applica nt as a consumer is entitled according to us, to obtain power supply only on ful fillment of the laid down terms. 14.2. In view of our finding that the Regulatory Commission has acted within t he ambit of the powers conferred by Section 50 of the 2003 Act in laying down co nditions for recovery of electricity charges, we see no basis for applications o f the legal principles enunciated by the Supreme Court in the case of Global Ene rgy (Supra), where the delegated authority acted beyond the power given in the p arent Statute. 15. It is also relevant to record that steps have been taken by the Distribu tor through newspaper to notify all prospective buyers of property that they ar e liable to clear the earlier dues of old consumer before power supply can be pr ovided to a premises where supply has been disconnected for non payment of dues. Therefore the auction purchaser cannot be said to un-informed about his obligat ion to pay the arrear dues of the old consumer, before he can receive fresh powe r supply in the same premises. 16. Section 56(2) of the 2003 Act which prohibits recovery of a sum due fro m any consumer after a period of 2 years from the due date in our view has no ap plication here as the Distributor had already instituted Money Suit 3/95 in the Court of District Judge, Bongaigaon for recovery of the dues from the previous consumer. After they obtained a decree, an execution proceeding was also started by the decree holder. So the Distributor proceeded against the old consumer as per law and they were vigilant about the recovery of the dues owed to them. Alth ough in this case, we are not required to pronounce on the legality of the steps taken by the Distributor, considering that steps have also been initiated for execution of the decree, to balance the interest of the parties, it is made clea r that if any outstanding amount is received from the old consumer, such amount be adjusted with the power bills of the new consumer. 17. In view of the above discussion, we find no merit in this petition and t he same is accordingly dismissed directing the parties to bear their respective costs.