IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 9032 of 2002 with SPECIAL CIVIL APPLICATION Nos. 5686 of 2002 11982 of 2002, 12423 of 2002, 419 of 2002, 259 of 2003, 231 of 2003, 7941 of 2001, 8078 of 2001, 7715 of 2001 and 8469 of 2002. For Approval and Signature: Hon'ble MR.JUSTICE KUNDAN SINGH ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- SONA COOPERATIVE HOUSING SOCIETY LIMITED Versus GUJARAT ELECTRICITY BOARD -------------------------------------------------------------- Appearance: 1. Special Civil Application No. 9032 of 2002 Mr. S.B.Vakil, Sr. Advocate with MR VIJAY H PATEL for the Petitioner in all petitions. Mr. Suresh N Shelat, Sr. Advocate for MS LILU K BHAYA for the Respondent No. 1. MR DG CHAUHAN for Respondent No. 2 Mr. R.M.Chauhan, ASSTT. GOVERNMENT PLEADER for Respondent No. 3.. 2. Special Civil Application No. 5686 of 2002 MR TUSHAR MEHTA for the Petitioner. Mr. S.N.Shelat, Sr. Advocate with Ms. Lilu K Bhaya, for the respondents. 3. Special Civil Application no. 11982 of 2002 Mr. Z.F.Bharda for the petitioner. Mr. S.N.Shelat, Sr. Advocate with Ms. Lilu K Bhaya for the respondents. 4. Special Civil Application no. 12423 of 2002 Mr. Z.F.Bharda for the petitioner. Mr. S.N.Shelat, Sr. Advocate with Ms. Lilu K Bhaya for the respondents. 5. Special Civil Application no. 419 of 2002 Ms. Sudha Gangwar for the petitioner. Mr. S.N.Shelat, Sr. Advocate with Ms. Lilu K. Bhaya for the respondents. 6. Special Civil Application no. 259 of 2003 Mr.S.A.Qureshi for the petitioner. Mr. S.Shelat, Sr. Advocate with Ms. Lilu K. Bhaya for the respondents. 7. Special Civil Application no. 231 of 2003 Nanavati Associates for the petitioner. Mr. S.N.Shelat, Sr. Advocate with Ms. Lilu K Bhaya for the respondents. 8. Special Civil Applicationno. 7941 of 2001 Mr. Hasim Qureshi for the petitioner. Mr.S.N.Shelat, Sr. Advocate with Ms. Lilu K. Bhaya for the respondents. 9. Special Civil Application no. 8078 of 2001 Mr. Hasim Qureshi for the petitioner. Mr. S.N.Shelat, Sr. Advocate with Ms. Lilu K Bhaya for the respondents. 10. Special Civil Application no. 7715 of 2001 Mr. R.S.Sanjanwala for the petitioner. Mr. S.N.Shelat, Sr. Advocate with Ms. Lilu K Bhaya for the respondents. 11. Special Civil Application no. 8469 of 2002 Mr. R.M.Chhaya for the petitioner. Mr. S.N.Shelat, Sr. Advocate with Ms.Lilu K Bhaya for the respondents. -------------------------------------------------------------- CORAM : MR.JUSTICE KUNDAN SINGH Date of decision: 19/06/2003 CAV JUDGEMENT In all the aforesaid petitions, since the validity of clause/condition 2(j) of Conditions and Miscellaneous Charges for Supply of Electrical Energy (hereinafter referred to as "the Conditions of Supply") has been challenged either directly or indirectly, hence all these petitions are being disposed of by this common judgment. 2. In Special Civil Application no. 9032 of 2002, it has been averred that Visnagar Co-operative Spinning Mills Ltd. went in liquidation and a final order of liquidation was passed. Pursuant to the order of liquidation, Liquidator was appointed and the Liquidator started exercising statutory powers conferred under sections 107 to 115 of the Co-operative Societies' Act, 1961. There were several creditors of Visnagar Co-operative Spinning Mills Ltd. whose dues were outstanding against the said mills. There were also dues of workers running into crores of rupees against the said mill. A petition being Special Civil Application no. 1178 of 1988 was filed in this Court. By an order dated 20th September, 1999, this Court directed for the disposal of the assets of the mill company by a committee under the Chairmanship of the Commissioner, Kutir Udyog for satisfying the dues of secured creditors, workers and other creditors including the dues of the Government and some Government organisations. Under the order, a committee was constituted for the disposal of the assets of the aforesaid mill. A tender notice was issued on 18th September, 2000. As the offer of the petitioner society was the highest and that offer was accepted and hence a registered sale deed was executed by the Liquidator on 4.4.2001 and that was registered in the office of Sub-Registrar on 30th June, 2001. The petitioner made complete payment of Rs. 13.25 crores to the Liquidator. The petitioner society demolished the superstructure standing on the land and constructed complete new shops cum residential units on the said land. After making a substantial investment and after completing necessary legal formalities, the petitioner society applied for temporary connection of electricity to the respondent no.1 Board for making fresh construction. A temporary connection was given to the petitioner after the petitioner paid the estimate on 16.3.2001. When the new construction was made, the petitioner made an application for a new connection, for the supply of electricity to the petitioner society, the petitioner was required to deposit the entire dues of the previous owner by GEB. The Joint Director, Kutir Udyog by his letter dated 14.9.2001 made it clear to Gujarat Electricity Board that the dues of the GEB were to be claimed from the Liquidator and the auction purchaser was not liable for the dues of GEB and recommended for giving a fresh regular electricity connection to the petitioner society. Accordingly, the respondent Board made a claim of Rs. 5,75,57,299.27 ps. Out of the aforesaid total claim of the GEB, a proportionate sum of Rs. 2,23,80,443.00 were paid towards GEB's claim on 17.11.2002. The Chief Engineer of GEB informed the Superintending Engineer(O and M) of GEB, Mahesana that the competent authority has directed to recover arrears first and then to release the connection to the petitioner. The Deputy Engineer of the respondent GEB by an order dated 16th March, 2003 intimated the petitioner that its temporary connection would be disconnected. When the petitioner applied for a regular connection of the electricity on 20th April, 2002 to the respondent Board, the Board asked the petitioner society that unless the petitioner clears the dues of previous owner Visnagar Co-operative Spinning Mills Ltd., the petitioner society would not be entitled for a fresh connection. Since then the respondent Board has not issued a regular electricity connection as required by the petitioner society inspite of various representations made to various authorities beginning from the liquidator to the Chief Minister of the State. The petitioner has already paid the entire amount of consideration of Rs. 13,25 crores in a public auction for the purchase of the assets of the previous owner and approximately 50% of the amount is still lying with the State Government and the Government has to appropriate that amount as per the priorities of the creditors in accordance with law. The remaining amount is to be disbursed amongst creditors. GEB has no right to insist for the payment from the petitioner society and challenged the action of the Board in not giving a fresh regular electricity connection to the petitioner and the petitioner has also challenged the condition no. 2(j) of the Conditions of Supply in the present petition. 3. The respondent no.1 Board has filed affidavit-in-reply wherein it has been stated that it is immaterial that the petitioner has purchased the property in a public auction. The condition no. 2(j) is a statutory condition and for getting connection it is necessary for the petitioner to comply with the said condition. It is denied that the respondent Board has acted contrary to the provisions of The Indian Electricity Act, 1910 (hereinafter referred to as "the Act"), The Electricity (Supply) Act, 1948 (hereinafter referred to as "the Supply Act", The Indian Contract Act and The Co-operative Societies' Act. It is also denied that condition no. 2(j) is unconstitutional and violative of Articles 14, 19 and 21 of the Constitution of India. The petitioner is liable to pay the dues of the earlier consumer as per condition no. 2(j) of the Conditions of Supply. The letter dated 29th November, 2000 of the Liquidator will have no implication on the demand of the respondent Board. The proceeding which the respondent Board is required to take as per the Company law or as per Co-operative Societies Act cannot prevent the respondent Board from enforcing and implementing the condition no. 2(j) of the Conditions of Supply. The petitioner applied for a regular connection on 20th April, 2002 and the petitioner was informed that unless it clears the dues of the earlier owner, the petitioner would not be entitled to a fresh connection as per condition no.2(j) of the Conditions of Supply. The earlier owner was in arrears of GEB itself for a sum of Rs. 3,51,64,857.84 ps. being Board charges (including delayed payment charges upto 1.7.1998) + Electricity Duty of Rs. 2,04,85,943.42 ps. + Rs. 19,06,498.01 ps. towards tax on Sale of Electricity, the total being Rs. 5,75,57,299.27 ps. The ratio laid down by the Supreme Court in the case of Isha Marble will not come in the way of the respondent Board for its claim as at the relevant time, condition no. 2(j) was not in existence and that decision of the Supreme Court would not be applicable to the case of the petitioner society. As per the decision of the Supreme Court reported in 1983, SCC, 1296, the tariff would equally apply to the "security" that being a condition for the contract of supply. The Supreme Court has held in the case of M/s. Hyderabad Vanaspati Ltd. vs. APSEB reported in 1998(4) SCC, 470 that the terms and conditions of supply of electricity by the Board are statutory. Even in absence of individual contract such terms and conditions of supply will be applicable to all the consumers and he will be bound by them. In the case reported in AIR 1998, Kerala, 343 wherein before Kerala High Court, the premises in question was purchased in a public auction and connection in the same premises was disconnected for the non-payment of the arrears by the previous occupier and for reconnection the applicant had applied. But the Board had refused on the ground of non-payment of arrears of the previous owner. For reconnection, the applicant had applied, but the Board had refused on the ground of non-payment of arrears. The Kerala High Court has held that it is not illegal since the Board has a legal right under Regulations to recover the amount from the new customer. The ratio of Isha Marble's case has been distinguished by the Kerala High Court saying that this condition to recover the dues of the earlier consumer has been amended and is a part of terms and conditions for the supply which was not in earlier case before the Supreme Court. The Kerala High Court in the case reported in AIR 2001, Kerala, 380 has held that denial by the Board to supply electrical energy to premises where there are arrears due to non-payment by the occupier in accordance with regulations of the Board cannot be said to be illegal or arbitrary. 4. Affdiavits have already been exchanged. Heard the learned Senior Advocate Mr. S.B.Vakil and other advocates for the petitioners and the learned counsel for the Official Liquidator and learned Advocate General on behalf of the respondent Board as well as the State of Gujarat at length. 5. The arguments advanced by the learned Senior Counsel Mr. Vakil have been adopted by some other learned counsel and some learned advocates for the petitioners in other petitions have been heard. 6. In all these petitions, the validity of condition 2(j) of the Conditions of Supply has been challenged on various grounds. The said condition reads as under: "2(j) Recovery of old dues : Reconnection 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 to clear these dues of the previous consumer before the application of successor/occupier is processed for supply of electricity. If the Board, at a later date, gets the full or part of these dues from the previous consumer, the amount shall be refunded to the successor/occupier after adjusting the costs including legal expenses to recover such arrears and the refund shall bear no interest." It is submitted that the Board has no power to frame regulations in respect of the terms and conditions which are not covered under clause VI of the schedule of Indian Electricity Act, 1910 which is described as under: "VI. Requisition for supply to owners or occupiers in vicinity- (1) Where (after distributing mains have been laid down under the provisions of Clause IV or Clause V and the supply of energy through those mains or any of them has commenced) a requisition is made by the owner or occupier of any premises situated within (the area of supply) requiring the licensee to supply energy for such premises, the licensee shall, within one month from the making of the requisition (or within such longer period as the (Electrical Inspector) may allow) supply, and save in so far as he is prevented from doing so by cyclones, floods, storms or other occurrences beyond his control, continue to supply, energy in accordance with requisition: Provided firstly, that the licensee shall not be bound to comply with any such requisition unless and until the person making it- (a) within fourteen days after the service on him by the licensee of a notice in writing in this behalf, tenders to the licensee a written contract, in a form approved by the (State Government) duly executed and with sufficient security, binding himself, to take a supply of energy for not less than two years to such amount as will (assure to the licensee at the current rates charged by him, an annual revenue not exceeding fifteen per centum of the cost of the service-line required to comply with the requisition), and (b) if required by the licensee so to do, pays to the licensee the cost of so much of any service-line as may be laid down or placed for the purposes of the supply upon the property in respect of which the requisition is made, and of so much of any service-line as it may be necessary for the said purposes to lay down or place beyond one hundred feet from the licensee's distributing main, although not on that property; Provided secondly, that the licensee shall be entitled to discontinue such supply- (a) If the owner or occupier of the property to which the supply is made has not alrelady given security, or if any security given by him has become invalid or insufficient, and such owner or occupier fails to furnish security or to make up the original security to a sufficient amount, as the case may be, within seven days, after the service upon him of notice from the licensee requiring him so to do or (b) if the owner or occupier of the property to which the supply is made adopts any appliance, or uses the energy supplied to him by the licensee for any purposes, or deals with it in any manner, so as to unduly or improperly to interfere with efficient supply of energy to any other person by the licensee, or (d) if the owner or occupier makes any alterations of, or additions to, any electric wires, fittings, works or apparatus within such property as aforesaid and does not notify the same to the licensee before the same are connected to the source of supply, with a view to their being examined and tested; (but the licensee shall re-connect the supply with all reasonable speed on the cessation of the act or default or both, as the case may be, which entitled him to discontinue it): Provided, thirdly, that the maximum rate per unit of time at which the owner or occupier shall be entitled to be supplied with energy shall not exceed what is necessary for the maximum consumption on his premises, and, where the owner or occupier has required a licensee to supply him at a specified maximum rate, he shall not be entitled to alter that maximum, except after one month's notice in writing to the licensee, and the licensee may recover from the owner or occupier any expenses incurred by him by reason of such alteration in respect of the service-lines by which energy is supplied to the property beyond one hundred feet from the licensee's distributing main, or in respect of any fittings or apparatus of the licensee upon that property; and Provided, fourthly, that (if any requisition is made for a supply of energy and) the licensee can prove, to the satisfaction of an (Electrical Inspector)- (a) that (the nearest distributing main) is already loaded up to its full current-carrying capacity, or (b) that, in case of a large amount of current being transmitted by it, the loss of pressure will seriously affect the efficiency of the supply to other consumers in the vicinity, the licensee may refuse to accede to the requisition for such reasonable period, not exceeding six months, as such Inspector may think sufficient for the purpose of amending the distributing main laying down or placing a further distributing main. (2) Any service-line laid for the purpose of supply in pursuance of a requisition under sub-clause(1) shall, notwithstanding that a portion of it may have been paid for by the person making the requisition, be (maintained by the licensee who shall also have the right to use it for the supply of energy to any other person). (3) Where any difference or dispute arises as to the amount of energy to be taken or guaranteed as aforesaid, or as to the cost of any service-line or as to the sufficiency of the security offered by any owner or occupier, (or as to the position of the meter board) or as to the improper use of energy, or to any alleged defect in any wires, fittings, works or apparatus, or as to the amount of the expenses incurred under the third proviso to sub-clause (1), the matter shall be referred to an (Electrical Inspector) and decided by him. (4) Every requisition under this clause shall be signed by the maker or makers thereof and shall be served on the licensee. (5) Every requisition under this clause, shall be in a form to be prescribed by rules under the Indian Electricity Act, 1910; and copies of the form shall be kept at the office of the licensee and supplied free of charge to any applicant." 7. This condition "2(j)" has been challenged on the following grounds: (i) This condition which is not covered under clause VI of the schedule, cannot be framed by the Board. Clause VI of the Schedule is legislative enactment. This condition can only be framed by the State Legislature. As such, the Board has no power to frame such condition which is not covered under clause VI of the schedule. (ii) The provisions of the second proviso to section 26 of the Supply Act lay down obligation on the Board to supply energy to any person who requires and say that the provisions of clause VI of the Schedule to that Act shall apply to the Board in respect of that area only where distribution mains have been laid by the Board and the supply of energy through any of them has commenced. There is an obligation on the Board to supply electric energy under section 3(2)(f) and section 22 of the Electricity Act read with clause VI of the schedule which forms part of the Act and under section 26 of the Supply Act, there is a provision for disconnection under clause VI of the schedule and under section 24 of the Electricity Act. There is no provision either in section 24 or in clause VI of the schedule for disconnection of power for non-payment of dues of erstwhile consumer. Conditions can be varied or added only by State Government under section 2(3)(f) of Electricity Act read with sections 78 and 78-A of the Supply Act. As such pre-condition is illegal and ultra vires both the Acts. The Board cannot lay down any terms and conditions of supply which would dilute the Board's obligation to supply energy in terms of clause VI of the schedule. The condition that requiring requisitionist for supply of energy for any premises to clear dues of the previous owner or occupier of the premises is a new condition diluting the Board's obligation to supply energy as provided in clause VI of the schedule. (iii) Such term cannot be framed against the provisions of the Supply Act and the Electricity Act in this behalf. (iv) It is not a charge on the property. As BPMC Act provides that the tax on the premises will be realised even from the subsequent owner who purchased that property, but electrical charges on the person who consumes electric energy, not on the property. (v) Such condition prohibits the business of the petitioner. Hence, it is against the fundamental rights of business under Article 19 of the Constitution of India. (vi) The outstanding dues of the previous owner come within the contractual liability between the Board and the previous owner/ occupier and not against the third party as held by the Supreme Court in the case of Bihar State Electricity Board vs. M/s. Green Rubber Industries and others reported in 1990(1) SCC, 731. That relationship between the Board and the consumer is purely contractual which has been confirmed by the Supreme Court in the case of Isha Marble vs. Bihar State Electricity Board and another reported in 1995(2) SCC, 648. As the Board and the previous owner were party to the agreement for the supply of electricity to the previous owner, that obligation for the payment of dues of electric energy is only on the previous owner who consumed the electric energy, not on the subsequent owner/occupier who is not party to that agreement nor has consumed that electric energy The Board cannot insist upon the petitioners for the payment of dues of electric energy consumed by the erstwhile consumer as condition precedent to provide electricity connection. The obligation of the previous owner cannot be enforced against the subsequent owner as there was no contract between the Board and the subsequent owner for the payment of the energy consumed by the previous owner/ occupier and that contractual liability cannot be enforced against the third party which was not a party to the contract by implementation of condition 2(j). It is just like a person who has eaten food and the charges to be recovered from a third party (subsequent owner/occupier who has not eaten food and has no concern with the food eaten. ). The concept of contractual liability is like principle of natural justice. As such, such contractual liability cannot be enforced against the third party. The Board is required to frame conditions to protect the public revenue by making provisions of disconnection of supply as soon as the charges exceed the amount of deposit as security just like telephone bills. The Board can ask the consumer to deposit further security or to clear all the amounts of outstanding dues as soon as the amount of the dues exceeds the amount of security deposit. The Board if allows huge and large accumulation of arrears in lacs and lacs even in crores without resorting to recover either by disconnection of the supply of elegy under section 24 of the Supply Act or by requiring additional security from the consumer or by instituting legal proceedings against the consumer, the Board is responsible for its own sheer negligence and cannot fasten its own responsibility and negligence on the bonafide auction purchaser who is a third party, after several years. (vii) Section