K. C. NINAN versus KERALA STATE ELECTRICITY BOARD & ORS.
[2023] 9 S.C.R. 637, Supreme Court of India, 2023
Outcome: Disposed off
Segment: Ratio
precedent to electricity supply.
161. The relevant date to determine the applicability of the
Conditions of Supply is the date on which the auction purchaser applies
for a fresh connection of electricity for the premises, and not the date of
purchase of the undertaking. The issue before this Court is whether
there was any statutory provision in operation governing the issue of
recovery of the defaulted amount as on the date when the appellant
applied for a new electric connection.
162. The respondent in their counter affidavit has raised a dispute
on the factum of the date of application for a fresh connection of
electricity. The respondent submits that the court sale was held on 31
October 1989, which was confirmed on 22 January 1990 and the sale
certificate was signed on 6 April 1990. It is argued that in these
circumstances, it is unlikely that the appellant would have received
75 Reliance placed on State of Madhya Pradesh v. Tikamdas, (1975) 2 SCC 100
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possession of the premises or would have applied for an electric
connection on 1 December 1989, as alleged by the appellant.
163. However, neither party has submitted any material on record
to prove the date of the application for the grant of a power connection.
In view of the material factual dispute and insufficient evidence on record,
we remand the matter to the High Court to determine whether Condition
15 of Conditions of Supply of Electrical Energy would apply to the
appellant’s case, bearing in mind the principles which have been laid
down in this judgment.
II. Maharashtra
164. In the state of Maharashtra, the terms and conditions under
which the MSEB supplied electrical energy were provided in the MSEB
Conditions of Supply. The MSEB Conditions of Supply were made
effective from 1 January 1976. The MSEB Conditions of Supply laid
down a detailed procedure in respect of the application for supply of
electrical energy, payment of bills, procedure to be adopted in case of
prejudicial use of electrical energy and the terms on which the supply of
electrical energy is released to a consumer.Condition 23 of MSEB
Conditions of Supply provides for assignment and transfer of agreement.
165. In light of the New Industrial Development Policy 1993, aimed
at reviving sick industries,the MSEB issued Circular 518 dated 18 June
1993, titled “Power Supply to closed and Sick Industrial Unit”. The aim
of Circular 518 was to
encourage prospective entrepreneurs to take
over sick industrial units under Section 29 of the State Financial
Corporation Act 1957. The Circular presented prospective owners who
purchased sick/ closed industrial units in auction with two options —
either pay arrears including minimum charges to get electricity supply
reconnected, or apply for a fresh connection after completing necessary
formalities, without being liable for outstanding arrears of the previous
owner. The circular further provided that Condition 23(b) of the MSEB
Conditions of Supply would not apply to prospective consumers with
effect from 1 April 1993.
166. The circular was withdrawn by the Circular 607 dated 19
December 1998, whereby it was mandated that reconnection or fresh
connection would be released only after the arrears of the Electricity
Board are cleared. The circular purported to emanate from Condition
23(b) of the Conditions of Supply, as framed by the MSEB. The circular
was made operative with immediate and prospective effect.
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167. In light of the impugned judgments of the Bombay High Court,
which are in appeal before us, MSEB by its Circular 684 dated 25
September 2003 allowed auction purchasers of closed/ sick industrial
units to exercise either of the options as prescribed by Circular 518
dated 18 June 1993. However, an undertaking was required by the
incoming consumers to unconditionally agree to pay the arrears of previous
owners in case the Supreme Court decided in favour of MSEB.
168. After the enactment of the 2003 Act, the Maharashtra
Electricity Supply Code, 2005 was framed under Section 50 of the 2003
Act. The regulations came into effect from 20 January 2005, and apply
prospectively. Regulation 10.5 of the Maharashtra Electricity Supply Code
provides that dues owed to the distribution licensee are charge on the
property and as a statutory effect, the liability for the payment of
electricity dues is passed on to the new owner/ occupier of the premises,
albeit to a certain time restriction. Regulation 10.5 provides as follows:
“10.5: Any charge for electricity or any sum other than a charge
for electricity due to the Distribution Licensee which remains
unpaid by a deceased consumer or the erstwhile owner / occupier
of any premises, as a case may be, shall be a charge on the
premises transmitted to the legal representatives / successors-in-
law or transferred to the new owner / occupier of the premises,
as the case may be, and the same shall be recoverable by the
Distribution Licensee as due from such legal representatives or
successors-in-law or new owner / occupier of the premises, as
the case may be.
Provided that, except in the case of transfer of connection to a
legal heir, the liabilities transferred under this Regulation 10.5 shall
be restricted to a maximum period of six months of the unpaid
charges for electricity supplied to such premises”
169. Presently, the Maharashtra Electricity Regulatory Commission
(Electricity Supply Code and other Standards of Performance of
Distribution Licensees including Power Quality) Regulations 202176 have
been enacted repealing the Maharashtra Electricity Supply Code 2005.
Clause 12.5 of the 2021 Regulations reiterates that any unpaid charges
for electricity shall be a charge on the premises. 
76  “2021 Regulations”
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170. From the state of Maharashtra, there are six judgments of
the Bombay High Court which are in appeal before us.
169. Mr. Ajit Bhasme, learned senior counsel appearing on behalf
of the appellant-Board urged the following common legal submissions:
a.
MSEB Conditions of Supply, as then prevalent under the 1910
Act and the 1948 Act, are statutory in character, as held by
this Court in Hyderabad Vanaspati (supra). The Conditions
of Supply are in addition to and not in lieu of other modes of
recovery;
b.
MSEB Conditions of Supply are a part of the standard
agreement entered into between the consumer and the
Electricity Company. Clause 14 of the standard agreement
between the Electricity Board and the consumer incorporates
the Conditions of Supply as a part of the agreement;
c.
The reliance placed by the Bombay High Court on the
judgement in Isha Marbles (supra) cannot be sustained since
the case of Isha Marbles (supra)is distinguishable on facts;
d.
The General Auction Conditions of Sale of SICOM in Clause
2 stipulate that the sale is on “as is where is and what is”
basis. Auction purchasers were put on notice of their liability
for the past electricity arrears due to the inclusion of the
standard auction proclamation (Clause 6) while inviting bids;
e.
Regulation 10.5 of Maharashtra Electricity Supply Code 2005
explicitly states that any unpaid electricity dues shall be a
charge on the premises transferred; and
f.
All
six cases pertain to the period prior to 2005 i.e., before
the enactment of the Maharashtra Electricity Supply Code
2005. The 1976 MSEB Conditions of Supply would continue
to operate till the enactment of the Maharashtra Electricity
Supply Code in 2005.
171. In Maharashtra, the right of the Electric Utilities to demand
outstanding dues is traceable to provisions across different time periods:
a.
Up to enactment of the 2003 Act on 10 June 2003: The
governing laws are the 1910 Act and the 1948 Act. The MSEB
Conditions of Supply were framed under Section 49 of the
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1948 Act. The MSEB Conditions of Supply which were made
effective from 1 January 1976 would apply;
b.
From 10 June 2003 to 20 January 2005: The provisions
of the 2003 Act were brought into force with effect from 10
June 2003. The 1910 Act and 1948 stood repealed after the
enactment of the 2003 Act. The Maharashtra Electricity
Supply Code 2005 came into force from 20 January 2005. In
the interregnum, the MSEB Conditions of Supply would
continue to apply, so far as they are not inconsistent with the
provisions of the 2003 Act. This is due to the following
reasons:
i.
By virtue of Section 185(2)(a) of the 2003 Act,
notwithstanding such repeal anything done or any action
taken or purported to have been done or taken including
any rule, notification, inspection, order or notice made
etc. under the repealed law shall, in so far as it is not
inconsistent with the provisions of this Act, be deemed
to have been done or taken under the corresponding
provisions of this Act. Section 185(2)(5) further provides
that Section 6 of the General Clauses Act 1897 would
be applicable in relation to matters prescribed in Section
185(2) with regard to the effect of repeals;
ii.
Regulation 19(1) of the Electricity Supply Code 2005,
provides that any terms and conditions of supply which
are inconsistent with the provisions of the Maharashtra
Electricity Supply Code 2005 shall be deemed to be
invalid from the date on which these regulations come
into force; and
c.
From 20 January
2005till the enactment of the 2021
Regulations: The Maharashtra Electricity Supply Code 2005,
which came into force from 20 January 2005, would apply.
To determine whether the Maharashtra Electricity Supply
Code 2005 would govern the facts of a particular case, the
relevant date would be when the auction purchaser had
requested the Electricity Board to supply electricity.
172. In the six cases originating from Maharashtra, the respondents
were successful auction purchasers who purchased the premises in court
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auction sales. The appellant-Board relied on Condition 23 of the MSEB
Conditions of Supply to impose a precondition of clearing electricity
arrears of the erstwhile consumer, before a new electricity connection
could be provided. The High Court in all the cases directed the appellant-
Board to provide reconnection or fresh connection to the respondents,
without insisting on payment of arrears.
173. These impugned judgments raise a common question on the
applicability and the scope of Condition 23. This Court would first deal
with the overall argument on the applicability of Condition 23 of the
MSEB Conditions of Supply, and its interpretation, before delving into
the specific factual matrix of the cases.
174. In Maharashtra State Electricity Board v. Super &
Stainless Hi Alloys Ltd.,77 the Bombay High Court relied on the decision
of this Court in Isha Marbles (supra) to quash the impugned circular
dated 19 December 1998 for lack of jurisdiction as it was held to be
beyond the powers of the Electricity Board under Section 24 of the 1910
Act. The High Court concluded that the contract of supply was only
between the Electricity Board and the previous consumer, and since the
subsequent purchaser was a third party, it cannot be made liable for the
past liabilities of the erstwhile consumer.
175. In Supdt. Engg. Maharashtra State Electricity Board v.
M/s Umang Enterprises,78 the High Court placed reliance on the
decisions
of this Court in Isha Marbles (supra)and Gujarat Inns
(supra) to reject the argument of the appellant-Board. The Bombay High
Court disposed of the writ petition with a direction to the appellant to
grant an electricity connection to the premises, without insisting on
clearance of past dues of the previous consumer. It is important to note
that the High Court in its reasoning did not refer to the MSEB Conditions
of Supply and the import of Condition 23 on the liability of the auction
purchasers.
176. In Maharashtra State Electricity Board v. Ecto
Spinners,79 and Maharashtra State Electricity Distribution Co. Ltd.
v. M/s Zia Iron Store,80 the High Court considered the purport of
Condition 23 of the MSEB Conditions of Supply. It concluded that
77 Civil Appeal 5312-5313 of 2005
78 Civil Appeal No. 5314 of 2005
79 Civil Appeal No. 6587 of 2005
80 SLP(Civil) No. 6068 of 2006
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Condition 23 was not applicable to involuntary transfers, such as by
operation of law or in pursuance of the decree of a competent court.
Accordingly, it held that the respondent-purchasers could not be made
liable for the dues of the erstwhile owners as a prerequisite to obtain a
new electricity connection.
177. The Bombay High Court in the impugned judgement dated
20 July 2005 in Ecto Spinners was aided by the following reasons to
arrive at this conclusion:
a.
Condition 23(b) does not refer to an involuntary transfer though
it does refer to a voluntary transfer or a transfer on account
of the death of the owner. The word “successor” in the
expression “any person claiming to be heir, legal
representative, transferee, assignee or successor of the
defaulting consumer” would have to be understood by applying
the principle of ejusdem generis. Accordingly, the words
preceding the word “successor” clearly disclose a reference
to a person who acquires the right to the property on account
of either voluntary transfer or on account of death of the
owner; and
b.
Transfer of a property purchased in a public auction is an
involuntary transfer by the owner. Hence, Condition 23 does
not impose any liability on a transferee occupying the premises
of the erstwhile consumer on account of having acquired right
by public auction or any other mode of non-voluntary transfer.
178. The Electricity Board can demand arrears due by an erstwhile
defaulting consumer in regard to
supply of electricity to premises from
the purchaser of a property seeking reconnection or fresh connection of
electricity when either of two conditions are met:
a.
An express provision exists in law providing that electricity
arrears constitute a charge over the property. For the statutory
charge to be enforced against the property in the hands of a
person to whom such property has been transferred for
consideration, the transferee must have notice, either actual
or constructive, of the charge; and
b.
The statutory regulations or terms and conditions of supply
which are statutory in character, authorise the supplier of
electricity to make such a demand.
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179. In general law, electricity arrears do not constitute a charge
over the property. Under the provisions of the 1910 Act read with the1948
Act, electricity arrears do not create a charge over the property. In the
cases before us governed by the 1910 Act read with 1948 Act, no charge
was created on the property in favour of the Electricity Board for the
payment of electricity dues. The arrears of electricity dues were not
levied against the premises, but were levied against the erstwhile
consumer.
180. We are of the opinion that the Bombay High Court’s
interpretation of the ratio in Isha Marbles (supra) in Super & Stainless
Hi Alloys Ltd and M/s Umang Enterprises is incorrect due to the
reason that the High Court failed to enquire into whether any statutory
regulation or statutory terms and conditions of supply existed which
pertained to the liability of a third person who acquires the property of
the erstwhile consumer.
181. In the cases pertaining to Maharashtra, MSEB or its
successor the Maharashtra State Electricity Distribution Co. Ltd. placed
specific reliance on Condition 23 of the statutory Conditions of Supply.
Condition 23 is the only clause in the statutory provisions which pertains
to the liability of a person who acquires the property of the erstwhile
consumer in circumstances specified thereunder. Circular 607 dated 19
December 1998 is stated to emanate from Condition 23(b) of the
Conditions of Supply.
The Bihar State Electricity Board in Isha Marbles
(supra) did not have a specific condition having a similar effect as
Condition 23.
182. In Hyderabad Vanaspathi (supra) this Court held that the
Conditions of Supply in the State of Andhra Pradesh, notified in exercise
of the powers conferred by Section 49 of the 1948 Act, are statutory in
character. The Court noted that no regulation has been made under
Section 79(j) of the 1948 Act.
183. In the present case, the appellant-Board in exercise of its
powers under Section 49 of the Electricity Supply Act formulated the
MSEB Conditions of Supply.  Accordingly, the MSEB Conditions of Supply
are statutory in nature.
184. When a provision having a statutory force and effect is relied
upon by the Electric Utilities to impose the liability of clearing the
outstanding dues of the erstwhile consumer on a third party, it is for the
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courts to determine whether the said statutory provision is applicable to
the facts of the case before it. In Special Officer, Commerce, North
Eastern Electricity Supply Company of Orissa v. Raghunath Paper
Mills Private Limited,81 this Court observed that Regulation 13(10)(b)
of the Orissa Electricity Regulatory Commission Distribution (Conditions
of Supply), Code, 2004 was inapplicable to the facts of the case as the
auction purchaser had requested for a fresh connection, whereas in terms
of the concerned regulation, previous dues had to be cleared only with
respect to a reconnection or a transfer of service connection from the
name of the erstwhile consumer.
185. The submission of the appellant on the applicability of
Condition 23 rests on the meaning and scope of Condition 23 in relation
to the liability of a person who becomes the new owner or occupier of
the premises of the erstwhile consumer, to which electricity was being
supplied. Condition 23 is extracted below:
“Clause 23: Assignment or Transfer of Agreement 
a) The consumer shall not without previous consent in writing of
the Board, assign, transfer or part with the benefit of his Agreement
with the Board nor shall the consumer in any manner part with or
create any partial or separate interest thereunder. 
b) A consumer who commits breach of condition 23(a) above
and neglects to pay to the Board any charges for energy or to
deposit with the Board amount of security deposit or compensation
and
the supply of such consumer is disconnected under Section
24 of the Indian Electricity Act, 1910 or under condition no. 31(a)
of these conditions dies, or transfers, assigns or otherwise
dispenses of the undertaking or the premises to which energy
was being supplied to the consumer, any person claiming to be
heir, legal representative, transferee, assignee or successor
of the defaulting consumer with or without consideration in
any manner shall be deemed to be liable to pay the arrears of
electricity charges, security deposit or compensation due payable
by the consumer and it shall be lawful for the Board to refuse to
supply or reconnect the supply or to give a new connection to
such personclaiming to be the heir, legal representative, transferee,
assignee or successor of the defaulting consumer of such premises,
81 (2012) 13 SCC 479
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unless the amount of such charges due and / or the compensation
demanded from the defaulting consumer, is as the case may be
duly paid to or deposited with the Board.”
(emphasis supplied)
186. In terms of Condition 23(a), a consumer is not entitled to
transfer the benefit under their agreement with the Electricity Board
without the previous consent of the Board. In terms of Condition 23(b),
if the consumer commits breach of Condition 23(a) and neglects to pay
the Board any charges for energy and consequently, the electricity supply
of such consumer is disconnected, then the third party upon whom such
a transfer was effected is liable to pay arrears of electricity which the
defaulting consumer has not paid. Liability of a third party to pay dues of
the erstwhile consumer is attached when the conditions specified in
Condition 23(a) and Condition 23(b) are satisfied.
187. The rule of “ejusdem generis” is a principle of construction.
The rule is that when general words follow particular and specific words
of the same nature, the general words must be confined to the things of
the same kind as those specified. It applies when the following ingredients
are present: (i) the statute contains an enumeration of specific words;
(ii) the subjects of enumeration constitute a class or category; (iii) that
category is not exhausted by the enumeration; (iv) a general term follows
the enumeration; and (v) there is no indication of a
different legislative
intent.82
188. For the application of the ejusdem generis rule, it is essential
that enumerated things before the general words must constitute a distinct
category or a genus or a family which admits of a number of members.83
In Adoni Cotton Mills Ltd. v. Andhra Pradesh State Electricity
Board,84 this Court had to interpret Section 49(3) of the 1948 Act, which
empowered the Electricity Board to fix different tariffs for the supply of
electricity to any person having regard to the geographical position of
any area, the nature of supply and purpose for which the supply is required
and any other relevant factors. This Court refused to limit the generality
82 Amar Chandra v. Collector of Excise, Tripura, (1972) 2 SCC 442; Grasim Industries
Ltd. v. Collector of Customs, (2002) 4 SCC 297
83 Lokmat Newspapers (P) Ltd. v. Shankarprasad, (1999) 6 SCC 275; Jaiprakash
Associates Ltd. v. Tehri Hydro Development Cor
pn. (India) Ltd., (2019) 17 SCC 786
84 (1976) 4 SCC 68
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of “other relevant factors” since there was no genus of the enumerated
factors. Geographical position of the area and the nature and purpose of
the supply were held not to be related to any common genus.
189. In the impugned judgment Ecto Spinners, the Bombay High
Court observed that the word “successor”, occurs in the collocation of
other words “heir”, “legal representative”, “transferee” and “assignee”,
and its meaning must take colour from the preceding words in association
with which it is used. It held that the word “successor” has to be
understood to refer to an owner acquiring the right by way of voluntary
transfer or on account of the right of inheritance.
190. We are unable to accept the reasoning of the High Court.
The dictionary meaning of some words and expressions, which have a
bearing on this case, has been set out in Black’s law Dictionary as follows:
“Heir: A person who, under the laws of intestacy, is entitled to
receive an intestate decedent’s property85
Legal representative: A legal heir; or an executor, administrator
or other legal representative86
Transferee: One to whom a property interest is conveyed87
Assignee: One to whom property rights are transferred by
another”88
191. It is clear from the plain meaning of the words that the
expressions “heir”, “legal representative”, “transferee” and “assignee”
do not fall into one single distinct category. According to the reasoning in
the impugned judgment, Condition 23 itself consists of
more than one
genus or category of transfer — acquiring the right to a property on
account of voluntary transfer, or on account of death of the owner. The
word “successor”, which was interpreted by the High Court in a
restricted manner, is itself of wide amplitude and will have to be given a
plain meaning. The expression “successor” has been defined in Black’s
Law Dictionary as “a person who succeeds to the office, rights,
responsibilities, or place of another; one who replaces or follows a
predecessor.”89 The category of a “universal successor” is further
85 Black’s Law Dictionary (WEST: Thomson Reuters 9th edition), Pg 791
86 Black’s Law Dictionary (WEST: Thomson Reuters 9th edition), Pg 1416
87 Black’s Law Dictionary (WEST: Thomson Reuters 9th edition), Pg 136
88 Black’s Law Dictionary (WEST: Thomson Reuters 9th edition), Pg 1636
89 Black’s Law Dictionary (WEST: Thomson Reuters 9th edition), Pg 1569
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understood to mean “someone who succeeds to all the rights and powers
of a former owner, as with an intestate estate or an estate in
bankruptcy”.90
192. The wide compass of the expression “any person claiming to
be heir, legal representative, transferee, assignee or successor of the
defaulting consumer” can be understood with regard to the former
corresponding phrase “dies, or transfers, assigns or otherwise dispenses
of the undertaking or the premises”.
193. In the case at hand, the use of the expression “otherwise
dispenses of” in the phrase “a consumer…dies, or transfers, assigns or
otherwise dispenses of the undertaking or premises’’, does not bring into
play the rule of ejusdem generis for the preceding words “dies”,
“transfers”, “assigns” do not belong to a single limited genus.
194. The word “transfer” itself is generally regarded to have a
wide connotation, comprehending within it both voluntary and involuntary
transfers. In Mangalore Electric Supply Co. Ltd. v. The
Commissioner of Income Tax, West Bengal,91 a three-judge Bench
of this Court held that a compulsory acquisition of property can constitute
a “transfer” within the meaning of Section 12B(1) of the Indian Income
Tax Act 1962. It rejected the argument that the word “transfer” must be
construed ejusdem generis with the preceding words “sale”, “exchange”,
“relinquishment”. On the wide amplitude of the word ‘transfer’, this
Court observed:
“8. We find it
impossible to accept this submission. In the first
place if it was intended that voluntary transfers alone should fall
within the meaning of the section, it was unnecessary for the
legislature to use the expression “transfer”, an expression
acknowledged in law as having a wide connotation and amplitude.
Earl Jowitt, in “The Dictionary of English Law” says:
“In the law of property, a transfer is where a right passes
from one person to another, either (1) by virtue of an act
done by the transferor with that intention, as in the case of a
conveyance or assignment by way of sale or gift, etc; or (2)
by operation of law, as in the case of forfeiture,
bankruptcy, descent, or intestacy.”
90 Id
91 (1978) 3 SCC 248
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Roland Burrows on “Words and Phrases”, Volume V, contains a
statement under the caption “Transfer on Sale” at p. 331 that
even a transfer of land under compulsory powers is a transfer
“on sale”. It is unnecessary for us to consider the question whether
a compulsory acquisition of property is a “sale” within the meaning
of Section 12-B(1) and indeed, it is needless for the present purpose
to go that far. We are concerned with the narrower question
whether a compulsory acquisition of property can amount to a
“transfer” within the meaning of Section 12-B(1) and upon that
question it is important to bear in mind that the word “transfer” is
comprehensive and is regarded generally as comprehending within
its scope transfers both of the voluntary and involuntary kinds.
Without more, therefore, there is no reason for limiting the operation
of the word “transfer” to voluntary acts of transfer so as to exclude
compulsory acquisitions of property.”
(emphasis supplied)
195. The rule of ejusdem generis cannot be applied when there is
no distinct category or a genus. In the absence of a genus, the words
‘transfer’ or ‘otherwise dispenses of’, which are wide in their meaning,
cannot be restricted to only mean voluntary transfers by the application
of the ejusdem generis principle.
196. The rule of ejusdem generis is not an inviolable rule of law.92
Where the context and mischief of the statutory enactment do not require
a restricted meaning to be attached to words of
general import, the court
has to give the words their plain and ordinary meaning.93 Condition 23 of
the MSEB Conditions of Supply is a mode of recovery of electricity
arrears of the erstwhile consumer, which could be recovered even from
a successor. The MSEB, in our opinion, intended to cover all possible
cases of transfer of the undertaking or premises of the erstwhile consumer,
be it voluntary, on account of death of the consumer, or by operation of
law. Circular 518 dated 18 June 1993 and Circular 607 dated 19 December
1998 issued by the MSEB emanated from Condition 23 of the MSEB
Conditions of Supply. They contained directions vis-à-vis power supplied
to those property owners who purchased sick and closed industrial units.
The context and the purpose of the statutory terms and conditions of
92 Valparaiso Kottarathil Kochuni v. States of Madras & Kerala, (1960) 3 SCR 887
93 BHEL v. Globe Hi-Fabs Ltd., (2015) 5 SCC 718
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supply demand that a broader construction should be adopted, and there
is no room for the application of the rule of ejusdem generis.
197. On our interpretation of Condition 23 of the MSEB Conditions
of Supply with particular reference to subclause (b) thereof, we are of
the view that the said sub-clause is applicable to involuntary transfers,
such as court auctions.
198. Applying the above considerations to the appeals our
conclusions are as follows:
Item 101.1: Maharashtra State Electricity Board v. Super
& Stainless Hi Alloys Ltd; Civil Appeal 5312-5313 of 2005
199. The first respondent purchased a sick industrial unit in auction
from the SICOM under Section 29 of the State Financial Corporations
Act. It filed a writ petition challenging the actions of the appellant-Board
in denying it a new electricity connection. A subsequent writ petition
was filed by SICOM challenging the vires of Circular 607 dated 19
December 1998. By a common judgment dated 19 December 2002, the
Bombay High Court disposed of the writ petitions and quashed the
impugned Circular 607 on the ground that MSEB lacked jurisdiction as
the circular was beyond the powers of the Board under Section 24 of
the 1910 Act. The High Court relied on Isha Marbles (supra), to reach
the conclusion that although Section 24 provides for payment of arrears
for reconnection after the supply is disconnected, it only refers to the
consumer who failed to pay the dues
and does not concern itself with a
new owner or occupier of the premises.
200. The appellant preferred the present Special Leave Petition.
This Court issued notice on 6 May 2003 and leave was granted on 25
August 2005. By an order dated 24 August 2006, the question whether
electricity dues constitute a charge on the property so far as the transferor
and the transferee of the unit are concerned was referred to a larger
bench.
201. In our considered view, the decision in Isha Marbles
(supra)and Section 24 of the Electricity Act 1910 are by themselves not
an answer on whether the appellant-Board had a power to issue Circular
607. In Srigdhaa Beverages (supra), this Court held that the electricity
dues, where they are statutory in character under the Electricity Act
and as per the terms and conditions of supply, cannot be waived in view
of the provisions of the Act itself, more specifically Section 56 of the
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2003 Act (pari materia with Section 24 of the 1910 Act), and cannot
partake the character of purely contractual dues. The power of the
appellant-Board to impose a condition that the purchaser of an
undertaking will have the obligation to clear the arrears of electricity
dues of the prior consumer is sourced from Condition 23 of the MSEB
Conditions of Supply framed under Section 49 of the 1948 Act.
202. It was the submission of the respondents that the impugned
circular cannot affect the rights of the auction purchasers who purchased
sick/ closed industrial units under Section 29 of the State Financial
Corporation Act 1951 as the sale was “not voluntary”. As discussed
above, Condition 23 is of wide import, which covers sale of property
made in court auctions. Furthermore, Section 29(2) of the State Financial
Corporation Act provides that a sale under Section 29 which resulted in
transfer of property shall vest in the successor all rights in the property
transferred as if the transfer has been made by the owner of the property.
Accordingly, a sale made by the corporation is deemed to be a sale
made by the owner of the property, attracting Condition 23 of the MSEB
Conditions of Supply.
203. It is necessary to reproduce some of the relevant clauses of
the “General Auction Conditions of Sale” of properties put on sale by
SICOM. The clauses are extracted below:
“Clause 4: The purchaser may take inspection of the property to
be sold. Even if the purchaser does
not take inspection, he
shall be deemed to have inspected all the assets put up for
sale on “As is where is and what is basis” in regard to the
condition thereof, before making the offer for purchase of
the same. It is hereby expressly agreed and declared that
notwithstanding the provisions of Section 55 of the Transfer of
Property Act or any other enactment for the time being in force in
that behalf, SICOM shall not be bound to disclose to the purchaser
any defect, whether material or otherwise in the property, whether
or not SICOM may be or may not be aware of such defect and
whether or not the purchaser could not with ordinary care and
diligence discover such defects.
Clause 6: The purchaser shall make his own arrangement for
getting required power connection, water and other facilities and
payment of arrears of rates and taxes of the said property and
shall meet all the costs of whatever nature to be incurred in that
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behalf. SICOM shall not be liable to pay any arrears if charges
and costs/ expenses, if any, in respect of power, water or any
other facilities required. The purchaser shall make own
inquiries about arrears of dues for supply of power, water
and other facilities, if any, and the same shall be borne and
paid by the purchaser alone.”
(emphasis supplied)
204. The aforesaid terms and conditions of the auction as set out
by SICOM indicate that the property was being sold on “as is where is
and what is basis”. The auction purchaser was at all times on clear
notice of the fact that the property was being sold on an “as is where is”
basis and that SICOM did not undertake any liability for the payment of
dues. This clause was further subject to another provision in Clause 6,
where the purchaser was liable to make their own inquiries about arrears
of dues for supply of power, water and other facilities and the auction
purchaser was made liable to pay such arrears. This makes it clear that
apart from the MSEB Conditions of Supply, which have statutory effect,
the purchaser who purchased property in auctions conducted under
Section 29 of the State Financial Corporations Act also had knowledge
of his liability for the past arrears of electricity of the premises when he
bid in the auction. By virtue of the stipulations in the sale deed, as far as
the first respondent is concerned, it was liable to discharge the electricity
dues
payable to the Electricity Board by the erstwhile consumer.
205. In light of what we have stated above, we set aside the
judgement of the Division Bench and allow the appeal.
Item 101.10: Supdt. Engg. Maharashtra State Electricity
Board v. M/s Umang Enterprises; Civil Appeal No. 5314 of 2005
206. The first respondent was a successful auction purchaser of
the property of M/s Creekay Yarn Industries Ltd, which was put to sale
in consequence of an arbitral award. The respondent-purchaser took
out a Judges Order94 in a civil suit before the Bombay High Court, seeking
a clarification that it was not liable for past dues and liabilities of any
kind in respect of the property purchased through the auction sale. The
Bombay High Court by its order dated 29 January 2003 declared that
the respondent-purchaser was not liable to pay any arrears payable by
the erstwhile owner. The appellant alleges that this order was passed
94 Judges Order No. 10 of 2003 in Civil Suit no. 2978 of 1991
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ex-parte. The order of the Bombay High Court in Judges Order dated
29 January 2003 has not been placed on record before this Court.
207. The respondent-purchaser requested the appellant for a new
electricity connection, which was denied on 6 June 2003 on the ground
that the respondent was not eligible for a new connection unless the
dues of the erstwhile consumer were discharged in terms of Condition
23 of the MSEB Conditions of Supply. The respondent filed a writ petition,
with an interim prayer seeking a direction to grant a new electric
connection. The main prayer in the writ petition sought a declaration
that the demand made by the Electricity Board to pay arrears was
unfounded in law. The Bombay High Court by its impugned judgment
dated 24 September 2004 disposed of the writ petition with a direction to
the appellant to grant an electricity connection to the premises within
one month, without insisting on clearance of past dues of the previous
consumer. The High Court placed reliance on the decisions of this Court
in Isha Marbles (supra)and Gujarat Inns (supra).
208. The appellant preferred the present Special Leave petition.
This Court issued notice on 6 January 2005.
209. As already stated before, this Court in both Isha Marbles
(supra)and Gujarat Inns (supra)did not hold the auction purchaser liable
to clear the electricity arrears incurred by the previous owners because
there was no specific statutory provision in that regard, or any clause
dealing with the issue of electricity dues. In the present case, the MSEB
placed specific reliance on Condition 23 of MSEB Conditions of Supply
to hold the auction purchasers liable. The MSEB Conditions of Supply
were incorporated in the individual contracts entered between the
Electricity Board and the consumers. Clause 14 in the standard
agreements entered between the MSEB and consumers provides that
the Conditions of Supply, as amended from time to time, shall be deemed
to be part of the agreement. The erstwhile consumers were aware of
the statutory MSEB Conditions of Supply. The relevant clause is extracted
below:
“Clause 14(a): Condition and Miscellaneous Charges for supply
of electrical energy of the Maharashtra State Electricity Board
for the time being in force and as amended by supplier from time
to time shall be deemed to be part of the Agreement and shall
govern the parties hereto in so far as applicable. A copy of the
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current Conditions and Miscellaneous Charges for supply is set
out in the second schedule hereto.”
210. We are of the considered view that the impugned order cannot
be sustained and is accordingly set aside.
Item 101.11: Maharashtra State Electricity Board v. Ecto
Spinners; Civil Appeal No. 6587 of 2005
211. In 1999, the unit of M/s Prabhavati Spinning Mill, a co-
operative spinning mill, was closed down. The electricity supplied to M/
s Prabhavati Spinning Mill had earlier been disconnected by the appellant
in default of payment of consumption charges. In 2004, the first respondent
purchased M/s Prabhavati Spinning Mill, which was liquidated by the
authorities under the Maharashtra Co-operative Societies Act 1960. The
agreement of sale was executed in favour of the first respondent on 26
July 2004 and since then, the first respondent had the possession of the
property. The final deed of assignment was yet to be executed. The first
respondent incurred an expenditure of Rs 4 crores to overhaul the plant
and machinery at the premises, and thereafter applied for a fresh
electricity connection as a High Tension Consumer for the premises.
Meanwhile, the plots were transferred by the Maharashtra Industrial
Development Corporation to the first respondent on 4 February 2005.
The appellant, however, relied on the MSEB Conditions of Supply and
the agreement entered with the erstwhile consumer to decline granting
electricity
connection until the arrears of the erstwhile consumer were
cleared. The respondent filed a writ petition before the Aurangabad Bench
of the Bombay High Court, seeking a direction to the appellant to supply
electricity to the respondent at its premises.
212. By the impugned judgement dated 20 July 2005, the Bombay
High Court allowed the writ petition. The High Court held that the
respondent could not be made liable for the dues of the erstwhile owner
as a prerequisite for obtaining a new electricity connection as there was
neither any statutory provision nor an agreement creating any charge
over the property in relation to the electricity arrears.
213. This Court granted leave on 24 October 2005. As discussed
above, Condition 23 of MSEB Conditions of Supply is a specific provision
applicable to the case of the first respondent. In view of the above, we
allow this appeal, and set aside the judgment and order of the High
Court.
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Item 101.12: Maharashtra State Electricity Distribution Co.
Ltd. v. M/s Zia Iron Store; SLP(Civil) No. 6068 of 2006
214. The original consumer, M/s Sumit Re-Rolling Mills Pvt. Ltd,
Nagpur, defaulted in the payment of a loan taken from the Nagpur Nagrik
Sahakari Bank. The bank filed a dispute before the Co-operative court
at Nagpur. The Judge, Cooperative court at Nagpur by an order dated
23 February 2005 granted permission to sell the hypothecated plant and
machinery and mortgaged land and building of M/s Sumit Re-Rolling
Mills Pvt. Ltd. In the execution of the award, the property belonging to
M/s Sumit Re-Rolling Mills Pvt. Ltd was purchased by the first
respondent.
215. The authorised officer of the bank handed over the physical
possession of the entire moveable plant and machinery and immovable
land and building, mortgaged with the bank, to the respondent on 21
March 2005 on “as is where is” and “as is what is” basis.
216. A deed of assignment and sale dated 17 February 2006 was
entered between the Nagpur Nagarik Sahakair Bank Ltd. and the
respondent. Clause 2 of the indenture notes that the bank would not take
any liability for any dues like electricity dues and charges for fresh power
connection. The relevant clause is extracted below:
“The liabilities, if any and the liabilities which may arise in future
in respect of the dues of Local authorities and dues of Revenue
Authority, MIDC Authority and Sales Tax etc. and also for transfer
of property in
question, shall be for transfer of property in question
shall be payable by the purchaser. The property hereby assigned
in on “as is where is” and “as is what is” basis. The Bank does
not undertake any liability or responsibility to procure any
permission/licence etc. in respect, of the property offered for sale
or for any dues like water/service charges of the MIDC, transfer
fees, electricity dues and charges for fresh power connection,
Local Authority, or Nazul/NIT dues, in respect of the said property
and the same shall be solely and exclusively borne and paid by the
Purchaser.”
217. The first respondent applied for a fresh electricity connection
for the premises. The appellant-MSEDC refused the request of the first
respondent by a letter dated 9 September 2005 on the ground that the
arrears of electricity charges of the earlier owner were pending, and the
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]
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first respondent was liable to clear them in light of Condition 23 of MSEB
Conditions of Supply. The Bombay High Court by its impugned judgment
dated 12 December 2005 held that Condition 23 was inapplicable and
directed the appellant to grant a fresh connection to the first respondent,
if otherwise eligible. The High Court observed that Condition 23 intended
to apply to voluntary acts of the original consumer by which he transfers
the benefit of his agreement with the Board.
218. The appellant filed a Special Leave Petition challenging the
impugned judgement. The appellant has argued that the concept of
voluntariness is not a sine qua non for Condition 23 of the MSEB
Conditions of Supply. In the reply filed by the respondent, it has been
urged that it is not a necessary party to the present petition since it had
sold the premises in dispute to Rajaram Steel Industries Pvt Ltd by a
deed of assignment dated 29 March 2006.
219. The High Court in the impugned judgment has based its
decision on the MSEB Conditions of Supply 1976. What is the effect of
the respondent applying for a fresh electricity connection after the
enactment of the Maharashtra Electricity Supply Code on 20 January
2005 was not considered. The relevant date to determine the applicability
of the statutory provisions governing conditions of supply of electricity is
the date on which the auction purchaser applies for an electricity
connection.
220. The
application by the respondent in which it sought a fresh
electricity connection has not been placed on record. At the same time,
from the deed of assignment and sale placed on record, it emerges that
the sale of the premises and possession was given after 20 January
2005. The permission to sell was granted to the bank only on 23 February
2005. The physical possession of the premises was given to the respondent
only on 21 March 2005. A fresh connection of electricity supply could
not have been requested even before the sale was confirmed in favour
of the respondent. Accordingly, the relevant statutory provision governing
this case is the Maharashtra Electricity Supply Code 2005.
221. In terms of Regulation 10.5, any charge for electricity or any
sum other than a charge for electricity due to the distribution licensee
which remains unpaid by a deceased consumer or the erstwhile occupier/
owner of any premises shall be a charge on the premises transmitted to
the legal representatives / successors-in-law or transferred to the new
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owner / occupier of the premises, as the case may be, and the same
shall be recoverable by the Distribution Licensee as due from such legal
representatives or successors-in-law or new owner / occupier of the
premises. However, the proviso lays down that except in the case of a
transfer of a connection to a legal heir, the liabilities which are transferred
under Regulation 10.5 are restricted to a maximum period of six months
of the unpaid charges for electricity supplied to the premises. Accordingly,
the dues owed by M/s Sumit Re-Rolling Mills Pvt. Ltd, Nagpur are charged
on the property purchased by the first respondent in a public auction.
222. The sale was conducted on “as is where is” basis and the
respondent accordingly had adequate notice of the charge. Hence, the
distribution licensee is entitled to recover the unpaid dues from the first
respondent subject to the permitted period specified in the proviso to
Regulation 10.5.
223. In view of the aforesaid legal position, which has emerged,
we are of the view that the impugned order of the High Court cannot be
sustained. The appeal is allowed.
Item 101.13: Maharashtra State Electricity Board v. M/s
Jai Tirath Financiers Pvt. Ltd.; SLP(Civil) No. 10732 of 2006
224. ÿþIn 1999, liquidation proceedings were initiated against M/
s Hariganga Alloys & Steel Ltd. By a sale notice dated 2 May 2001,
offers were invited from interested bidders for purchase of properties of
M/s Hariganga Alloys & Steel Ltd on “as
is where is” and “as is what
is” basis. The first respondent successfully purchased the assets in the
auction sale and took possession of the purchased property in 2002.
225. On 17 June 2005, the respondent applied to the appellant for
a new electricity connection to the premises purchased in the auction.
By a letter dated 22 June 2005, the appellant rejected the application on
the ground that arrears of electricity charges of Rs 83 lakhs of the erstwhile
owner were pending and a permanent electricity connection could not
be released till full dues were paid. The appellant permitted release for a
temporary connection. The respondent filed Company Application No.
106 of 2005 in Company Petition No.6 of 1999 in the matter of liquidation
of M/s Hariganga Alloys & Steel Ltd, seeking the release of a new
electricity connection without clearance of arrears.
226. The application of the respondent was allowed by the
impugned order dated 10 February 2006, passed by a Single Judge at the
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
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Nagpur Bench of the Bombay High Court. The High Court held that the
appellant could not deny electricity connection to the respondent on the
ground of recovery of arrears of the erstwhile owner of the plot. The
High Court noted that the appellant was one of the secured creditors
and directed it to make its claim before the Official Liquidator in
accordance with law.
227. The appellant preferred the present Special Leave petition.
On 17 July 2006, this Court issued notice and stayed the operation of the
impugned order.
228. During the pendency of the appeal, the respondent had sold
the property to M/s Ankush Shikshan Santha and the new owner had
submitted a proposal dated 9 August 2007 to the appellant that it was
prepared to settle the dues of M/s Hariganga Alloys & Steel Ltd in
twelve instalments. By an order dated 22 October 2007, this Court
directed the appellant to restore the electricity connection after receipt
of the first two instalments by the respondent in view of the undertaking
given by the respondent that it shall deposit the entire arrears of Rs 83
lakhs in terms of the proposal dated 9 August 2007. The Court has been
informed that pursuant to the order, M/s Ankush Shikshan Santha had
paid the arrears to the tune of Rs 83 lakhs and the appellant has granted
a fresh electricity connection.
229. In the meantime, an Interlocutory Application95 was filed by
the respondent for disposing the petition on the
ground that it had become
infructuous. The appellant in the reply affidavit has contested the IA on
the ground that even though the principal amount of Rs 83 lakhs has
been paid towards arrears, interest charges to the tune of approximately
Rs 2 crore on the principal amount are still to be recovered.
230. Since the respondent applied for electricity connection on 17
June 2005, the Maharashtra Electricity Supply Code 2005, which came
into force from 20 January 2005, is applicable in the instant case.
Accordingly, a charge was created on the electricity arrears in terms of
Regulation 10.5. At the same time, the Court cannot be oblivious to the
commercial exigencies in view of which the settlement proposal was
complied with. The appellant has recovered an amount of Rs 83 lakhs.
In the facts and circumstances of the case it would be iniquitous to
direct the payment of interest at this stage. We therefore direct a closure
95 IA No. 2 of 2007
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of the dispute in the above terms in the exercise of the jurisdiction under
article 142 of the Constitution.
231. In the circumstances, it is not possible to entertain the appeal
at this stage. The appeal is accordingly dismissed. Pending applications,
if any, stand disposed of.
Item 101.14: Maharashtra State Electricity Distribution Co.
Ltd. v. M/s Garib Nawaj Scrap Merchant; Civil Appeal No. 10732
of 2006
232. In 2002, the electricity supply of M/s R & J Alloys Pvt. Ltd
was permanently disconnected by the appellant. On 3 October 2005, the
first respondent successfully purchased the properties of M/s R & J
Alloys Pvt. Ltd in an auction held pursuant to a sale conducted for
enforcement of a recovery certificate issued by the Debt Recovery
Tribunal. The respondent took over possession of the property and the
sale was confirmed by the order of the Recovery Officer dated 8
December 2005. The terms of the auction sale of the properties of M/s
R & J Alloys Pvt. Ltd stated that the sale was conducted on “as is
where is basis”.
233. On 30 December 2005, the respondent applied to the appellant
for a new electricity connection. This was followed by a subsequent
letter dated 2 January 2006. By letter dated 12 January 2006, the appellant
refused to give a new electric connection unless the arrears of Rs 11
crores of the erstwhile owner of the property were paid. The respondent
filed a writ petition before the Bombay High Court, seeking an electricity
connection. On
13 October 2006, the High Court passed the impugned
order granting interim relief to the first respondent. The High Court took
note of the pending referral of the legal issue to a larger bench of this
Court. It observed that the right of the Electricity Board to claim arrears
from auction purchasers hinged upon the adjudication of the said issued.
The High Court directed the Electricity Board to grant interim electricity
connection subject to final adjudication of the rights of the parties.
234. The appellant herein preferred the present Special Leave
Petition against the interim order of the High Court. On 9 July 2007,
leave was granted by this Court and the case was tagged with Civil
Appeal No. 5312-5313 of 2005. The impugned order of the High Court
granting interim electricity connection was stayed by this Court.
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]
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235. The submission which has been urged by Mr Ajit Bhasme,
senior counsel appearing on behalf of the appellant is that the first
respondent knowingly purchased the premises with the liability to pay
past dues, evident from clause 3 and clause 4 of the terms of the auction
sale. Accordingly, it has been urged that the respondent is liable to pay
the dues in view of Condition 23(b) of the MSEB Conditions of Supply.
Mr MY Deshmukh, counsel appearing on behalf of the first respondent
has urged that the MSEB Conditions of Supply 1976 are inapplicable
after the enactment of the Maharashtra Electricity Supply Code 2005.
236. The respondent has in its written submissions has brought to
the attention of this Court the suit for recovery96 initiated by the appellant
against the erstwhile owner. During the pendency of the present appeal,
the trial court by an order dated 30 September 2009 passed a decree in
favour of the appellant for the debt due from the erstwhile consumer
and its proprietor in respect of the arrears of electricity bills. The first
respondent has urged that in view of the decree, the appellant ought to
have withdrawn the present appeal instead of protracting the litigation.
237. At the outset, we would deal with the submissions on the
applicability of the 2003 Act. The electricity connection was permanently
disconnected in 2002, and the first respondent acquired ownership rights
in the premises in 2005. The
first respondent made the application for a
new electricity connection on 30 December 2005. Hence, the first
respondent requested the appellant to supply electricity after the
Maharashtra Electricity Supply Code 2005 came into effect on 20 January
2005. Accordingly, the Maharashtra Electricity Supply Code 2005 would
govern the facts in the present case. In terms of Regulation 10.5 of the
Maharashtra Electricity Supply Code 2005, any unpaid electricity dues
constitute a charge on the premises, and would be recoverable from the
new owner or occupier of the premises to whom the premises have
been transferred.
238. Furthermore, the terms of the auction sale put the first
respondent on notice that this was a sale on “as is where is” basis and
the purchaser would be liable for arrears of different authorities, including
MSEB, if an excess amount in sale proceeds was not available. The
relevant clauses are extracted below:
96 Spl. Civil No. 104 of 2003
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“3. So far known to this office there are (no) arrears of Municipal
tax, MSEB or Corporation tax or both taxes. However, any
legitimate claim made in that behalf shall be paid from out of the
sale proceeds if the same is in excess of the amount mentioned in
the Recovery Certificate. In case such excess amount is not
available the liability shall be borne by the purchaser.
However, prospective purchaser is expected to check up
from MIDC, CIDCO, MSEB, Municipal corporation etc. for the
dues if any on the property.
4. The properties shall be sold on “AS IS WHERE IS BASIS”.”
(emphasis supplied)
239. Accordingly, the dues owed by M/s R & J Alloys Pvt. Ltd to
the MSEB are a charge on the property purchased by the first respondent
in a public auction. The charge attaches to the property and a distribution
licensee is entitled to recover the unpaid dues from the first respondent
subject to the permitted period specified in the proviso to Regulation
10.5.
240. So far as the filing of civil suit by the appellant in 2003 against
the erstwhile owner is concerned, that is an alternative remedy provided
by law which the appellant can undertake in order to recover electricity
arrears from the erstwhile consumer. Besides disconnection of electricity,
the MSEB has the remedy to file civil suits followed by execution petitions
for recovery of the dues from the erstwhile consumer. The filing of the
civil suit will not debar the appellant from recovering any outstanding
charge for electricity from a person to whom the property is transferred
or the occupier of the said premises where new electricity connection is
sought in terms of Regulation 10.5.
241. The counsel for the respondent has urged that although the
decree in the civil suit was passed in favour of the appellant on 30
September 2009, the appellant has failed to execute it till date. The
distribution licensee should not let arrears mount up and must be prompt
in disconnecting electricity supply and thereafter pursuing its remedy by
filing a suit for recovery of moneys/ dues. It becomes the bounden duty
of the distribution licensee to diligently pursue the decree awarded and
recover amounts from the real defaulter. Any amount that may have
been realised in the execution of the decree would have to be given due
credit for in determining the amount payable by the respondent.
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
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242. In view of the reasons which have been adduced earlier, we
allow the appeal and set aside the order of the High Court.
III. Gujarat
243. In Gujarat, the right of the Electric Utilities to demand
outstanding dues is traceable to the following provisions:
a. Up to the enactment of the 2003 Act on 10 June 2003:
The governing legislation consists of the 1910 Act and the
1948 Act. Clause 2(j) of Conditions of Supply of the Gujarat
Electricity Board was inserted by a notification dated 10 August
2001. It reads:
“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.”
b. From 10 June 2003 to 31 March 2005: As per Section
185(2)(a) of the 2003 Act, the extant Conditions of Supply
continued to apply.
c. From 31 March 2005 when the Supply Code came into
force: Clause 4.1.11 was notified under the Supply Code. The
relevant regulation is as follows:
“Regulation 4.1.11
An Application for
new connection, reconnection, addition or
reduction of load, change of name or shifting of Service Line
need not be entertained unless any dues of the Applicant to
the Distribution Licensee in respect of any other service
connection held in his name anywhere in the jurisdiction of
the Distribution Licensee have been cleared.”
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d. From 20 August 2010 when the Supply Code was
amended: Clauses 4.1.11, 4.1.16, and 4.8 of the Supply Code
were notified under Section 43 read with Section 50. Clause
4.1.11 post the amendment in 2010 reads thus:
“Clause 4.1.11
An application for new connection, reconnection, addition or
reduction of load, change of name or shifting of service line
for any premises need not be entertained unless any dues
relating to that premises or any dues of the applicant to the
Distribution Licensee in respect of any other service
connection held in his name anywhere in the jurisdiction of
the Distribution Licensee have been cleared.
Provided that in case the connection is released after recovery
of earlier dues from the new applicant and in case the licensee,
after availing appropriate legal remedies, get the full or part of
the dues from the previous consumer/owner or occupier of
that premise, the amount shall be refunded to the new
consumer/owner or occupier from whom the dues have been
recovered after adjusting the expenses to recover such dues.”
The High Court of Gujarat had occasion to deal with the validity
of Clause 2(j) of the Conditions of Supply and Clause 4.1.11 of the Gujarat
Electricity Supply Code.
Item 101.2: M/s Navyug Steel Cast and Anr. v. Paschim
Gujarat Vij Co.; Civil Appeal No. 7303 of 2005
244. On 10 August 1998, a petition for winding up of Anik Steel
Ltd. was filed wherein an order for winding up of the company was
passed and an Official
Liquidator was appointed. By an advertisement
dated 21 December 2001, the Official Liquidator invited tenders for the
auction sale of the property of the previous owner. The appellant
submitted an offer of Rs. 35.5 lakhs for purchase of the property on an
“as is where is” basis. The offer letter specified that the petitioner “shall
not be responsible for any of the past dues of the Gujarat Electricity
Board, Excise and Customs Department, Sales Tax and Income Tax
Department and of any outsiders whether it is Government, Semi-
Government Corporations and/ or Board, Bank or of any private
parties”. After inter se bidding, the appellant’s offer of Rs. 45.5 lakhs
was found to be highest. On 23 July 2022, the Official Liquidator submitted
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]
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a report before the Gujarat High Court for confirmation of the sale in
favour of the appellant for Rs. 45.5 lakhs. The High Court accepted the
sale in favour of the appellant subject to certain terms and conditions.
One such condition was:
“10. The purchaser shall be liable to pay all statutory dues,
if any, due and payable on the properties of the company
for the period after the date of winding up. The payment of
such dues for pre-liquidation period shall be settled as per the
provisions of the Companies Act, 1956. However, dues, taxes,
cess, if any applicable on the sale of assets shall be paid by the
purchaser.”
(emphasis supplied)
245. In accordance with the auction terms laid down by the High
Court, the consideration was paid and possession of the assets was handed
over to the appellant. When the appellant applied for a fresh connection,
the respondent insisted on payment of outstanding dues of the previous
owner before granting a fresh connection. The appellant filed a writ
petition challenging Clause 2(j) of the Conditions of Supply. The Single
Judge allowed the writ petition and struck down clause 2(j) of the
Conditions of Supply for being arbitrary and inconsistent with statutory
provisions of the law. The respondent preferred special appeals against
the judgment of the Single Judge before the Division Bench. The Division
Bnech by judgment dated 18 July 2005 upheld the validity of Clause 2(j)
on the ground
that it fell within the ambit and scope of Section 49(1) of
the 1948 Act.
246. On 10 August 2001, Gujarat Electricity Board issued a
notification under Section 49 of the 1948 Act incorporating Condition
2(j) in the ‘Condition and Miscellaneous Charges for Supply of Electrical
Energy’. Condition 2(j) empowered the Board to insist on payment of
arrears of electricity dues of the former consumer as a condition
precedent to the restoration of the earlier connection or release of a
fresh connection in favour of the new owner/occupier of the premises.
As discussed in preceding paragraphs, such conditions can lawfully be
stipulated in light of the overall scheme of the 1910 Act and the 1948
Act. Such terms and conditions stipulated in accordance with Section 49
of the 1948 Act have a statutory character.
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247. On 23 July 2002, the High Court passed an order confirming
the sale in favour of the appellant on the terms and conditions mentioned
in the order. The terms and conditions of the auction sale show that the
property was sold on an “as is where is” basis to the appellant. The
appellant has relied on Condition 10 to argue that it was only liable to pay
charges accrued after the date of winding up order. It has been further
averred by the appellant that the arrears are for a period before the date
of winding up order, which is 10 August 1998. The facts of the case
make it evident that the appellant requested supply of electricity by a
letter dated 12 August 2002. In the present case, the payment of electricity
dues, being statutory in nature, cannot be waived. The auction conditions
are subservient to the statutory demand made under Condition 2(j) of
the Conditions of Supply. Therefore, we uphold the impugned judgment
of the High Court.
248. Before parting, we would like to highlight that by an order
dated 18 November 2011, this Court directed the appellant to deposit
Rs. 25 lakhs with the respondent and secure the balance principal amount
by giving a bank guarantee of a nationalised bank in the name of the
respondent within a period of eight weeks from the date of the order to
obtain a fresh electricity connection. The relevant part of the said order
is reproduced below:
“The principal amount claimed by Paschim Gujarat Vij Company
Limited is to the tune
of Rs. 1.26 crores. The applicant-petitioner
has applied for grant of fresh electricity connection which is being
denied on the ground that arrears, referred to above, have not
been paid by the previous owner [consumer]. The petitioner is an
auction purchaser. Pending further orders, we direct the petitioner
to deposit Rs. 25 lakhs with Respondent No. 1 and secure balance
principal amount by giving a Bank Guarantee of a Nationalised
Bank in the name of Paschim Gujarat Vij Company Limited -
Respondent No. 1 within a period of eight weeks from today,
without prejudice to their rights and contentions. Upon compliance
of above conditions, electricity connection shall be granted.”
249. This Court has been informed that the appellant chose not to
get the fresh connection in terms as set out by this Court. Through an
Interlocutory Application, the appellant has indicated that it is impossible
for them to pay the total accumulated dues amounting to Rs. 578 lakhs
with interest and other charges. Therefore, the appellant seeks the benefit
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
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of the amnesty scheme dated 29 March 2012 issued by the Gujarat
government. Further, the appellant submits that it can only clear its original
liability upto Rs. 126 lakhs. The relevant part of the said application is
extracted hereunder:
“10. The applicants submit that the applicant is approaching this
Hon’ble Court with the intention to get the benefit of this amnesty
scheme of Government of Gujarat for only reasons that if the
applicant succeeds, the Applicant would be required to pay original
dues if the applicant lose the matter in the Hon’ble Supreme Court
the liability of the applicant will be only upto Rs. 126.00 Lakhs
(original amount) and the Applicant will not be liable to pay any
other delay payment charges and other charges, etc. Therefore,
the applicant prays before this Hon’ble Court that is liability of the
Applicant is fixed only upto the amount of the original dues i.e.
Rs. 126.00 Lakhs without any interest and penalty, etc., the
applicant is ready to deposit such sum as is required by this Hon’ble
Court to be deposited with respondent no. 1 and for the balance
the applicant is ready to submit the bank guarantee and/ or is
ready to deposit the whole amount with this Hon’ble Court as
security.”
We allow the above application in the interests of equity, justice,
and fairness to the extent that the appellant is only liable to pay the
principal amount of Rs. 126 lakhs and any outstanding interest accrued
prior to the date of application for supply of electricity.
Item 101.3: Torrent Power AEC Limited v. M/s Shreeji
(Rakhail) Commercial Cooperative Housing Society Limited &
Others; SLP (C) No. 2880 of 2007
250. The appellant is an electric utility engaged in distribution and
retail supply of electricity in Ahmedabad. Raipur Manufacturing Company
Ltd, the previous owner, became liable to pay an amount of Rs. 12 crores
towards electricity dues together with running interest thereon. On
account of the outstanding debt, the appellant disconnected electricity
supply to the premises of the company at Ahmedabad on 15 July 1999.
In 2001, winding up proceedings were filed against the previous owner
before the Company Court of the High Court of Gujarat. The sale of
property of the previous owner was sanctioned by the High Court of
Gujarat by an order dated 2 December 2002 in favour of the respondent.
The relevant terms and conditions imposed by the High Court were:
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“1. The sale of properties of the Company shall be on “as is where
is and whatever there is” basis and the Official Liquidator will not
transfer the title except the title which the company was having
prior to its liquidation.
***
5. All the statutory dues including the municipal dues, taxes, cess,
etc. shall be paid and borne by the purchaser, Ajar Enterprises
Private Limited. The purchaser shall be solely liable to all levies,
charges, claims, arrears, etc. that may be existing or imposed by
any Central, State or local authorities or any other person claiming
through them in whatever manner, on the said properties sold.”
251. After taking possession of the property, the respondent
addressed a letter dated 7 January 2004 to the appellant for grant of an
electricity connection. However, the appellant declined to grant supply
of electricity unless the respondent paid the pending dues of the erstwhile
owner. The respondent filed a writ petition before the High Court of
Gujarat challenging the appellant’s refusal to grant an electricity
connection. Through a common judgment, the Single Judge held that
respondent, being an auction purchaser, cannot be called upon to clear
the past arrears of the previous owners in the absence of any statutory
provision. Further, it was observed that there was no condition between
the parties by which the respondents were made liable to pay the arrears
of electricity dues of the previous owners. It was also observed that the
state government had not incorporated any condition similar to Condition
2(j) of the Conditions of Supply in respect of the Petitioners. The Division
Bench in the impugned judgment dated 1 May 2006 upheld the decision
of the Single Judge.
252. The respondent has submitted that the Gujarat Electricity
Supply Code relied upon by the distribution licensee has no application to
the facts of the present case. According to the auction purchaser, the
Gujarat Electricity Supply Code came into force with effect from 31
March 2005, whereas the respondent auction purchaser applied for
electricity on 13 August 2004, that is, much prior to the Electricity Supply
Code having come into effect.
253. In the impugned judgment, the High Court considered the
purport of the Regulation 4.1.11 of the Gujarat Electricity Supply Code
and held that it was not applicable to the respondent. According to the
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]
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High Court, the sole reason that Regulation 4.1.11 of the Gujarat
Electricity Supply Code was inapplicable was because the said regulations
only applied to the electricity dues of the applicant, and did not make
the applicant liable to clear the dues of the previous owner.
254. The High Court omitted to notice that the Gujarat Electricity
Supply Code came into force with effect from 31 March 2005 while the
respondent applied for electricity connection on 13 August 2004. Hence,
the respondent had applied for a connection before the coming into force
of the Gujarat Electricity Supply Code. Thus, the said regulations will
not be applicable to the facts of the present case.
255. Since the respondent applied for electricity connection on 13
August 2004, the 2003 Act and the rules and regulations made thereunder
are inapplicable in the instant case. It has been admitted by the appellant
that there was no statutory condition requiring the respondents to pay
the outstanding electricity dues of the previous owner at the point of
time when they applied for electricity connection.
256. The appellant has submitted that Ahmedabad Electricity
Company,97 the predecessor of the appellant, notified the Conditions of
Supply on 14 October 1994, and that would be applicable. For the period
from 10 June 2003 till 31 March 2005, when the Electricity Supply Code
came into force, the 1994 Conditions of Supply continued to operate in
terms of
Section 185(2)(a) of the 2003 Act. Condition 2 of the 1994
Conditions of Supply provided that a requisition for supply of electrical
energy shall be made in accordance with the requisition form attached
at Annexure A of the said conditions and shall be signed by the owner or
occupier of the premises for which supply is required. Annexure A of
the said conditions provides a form of requisition for supply of energy.
The requisition form is not only limited to a new connection, but also
extends to reconnection, extension of load, tapping connection, and name
change. The form also requires the applicant to pay all the dues of energy
bills and other charges up to the date of transfer. The relevant undertaking
is extracted below:
“I/We hereby give consent to transfer above mentioned service
in the name of the applicant and I/We abide to pay all the dues of
energy bills & other charges upto the date of transfer.”
97  “AEC”
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257. A perusal of Annexure A makes it evident that the above
extracted undertaking is actually the undertaking of a ‘current consumer’
giving consent to transfer the service connection and undertaking to pay
all past dues. This is not an undertaking of an applicant, which has been
separately provided for in the same form. Therefore, Annexure A makes
a clear distinction between a ‘current consumer’ and an applicant for
electricity connection. Since the respondent purchased the said property
through an auction-purchase, there was no ‘current consumer’ to give
any consent. Therefore, the undertaking under Form A will not be
applicable qua the respondent. Hence, we find no reason to interfere
with the findings of the High Court. The appeal shall stand dismissed.
Item 101.4: Dakshin Gujarat Vij Co. v. Apurva Chemicals,
SLP (C) No. 37871 of 2012 and 101.17: Paschim Gujarat Vij
Company v. Apurva Chemicals, SLP (C) No. 18280 of 2013
258. A power connection was issued in favour of Arunesh
Processors Pvt Ltd, the previous owner. Due to non-payment of energy
bills, the agreement with the power supply company was terminated
with effect from 01 February 1995. In 1995, the appellant filed a suit for
recovery of Rs. 3.41 lakhs against the previous owner before the Civil
Judge, Sr. Division, Valsad. In 2002, the suit was decreed in favour of
Gujarat Electricity Board, which was the predecessor of the appellant.
Arunesh Processors Pvt Ltd was wound up in 2002 and its
assets were
auctioned by the Bombay High Court on an “as is where is basis”. The
respondent participated in the auction proceedings and acquired the assets
of Arunesh Processors Pvt Ltd at Vapi, Gujarat. The sale was confirmed
in favour of the respondent for Rs. 70 lakhs on 11 August 2005 by the
Bombay High Court. Thereafter, on 12 December 2008 a deed of
conveyance was executed between the Official Liquidator, High Court
of Bombay and the respondent. In 2010, the appellant filed Darkhast
No. 7 of 2010 for execution of the decree passed in the suit in 2002.
259. On 16 December 2010, the respondent approached the
appellant requesting it to release power supply to the plot at Vapi, Gujarat.
On 03 January 2011, the appellant informed the respondent that power
supply cannot be released on the plot because Darkhast No. 7 of 2010
was pending and dues were not recovered from the previous owner.
Since the respondent was in need of power supply on the said plot, it
paid the outstanding dues of the previous owner to the tune of Rs. 17
lakhs on 25 February 2011. However, on 17 August 2011, the respondent
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
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approached the appellant to refund the paid amount. The appellant refused
to refund the amount, contending that the previous owner had not yet
acknowledged the receipt of their claim. The respondent instituted a
writ petition before the High Court of Gujarat for challenging Clause
4.1.11 of the Gujarat Electricity Supply Code as being inconsistent with
the 2003 Act. The High Court in the impugned judgment dated 03
December 2012 held that Clause 4.1.11 of the Conditions of Supply was
ultra-vires the provisions of 2003 Act.
260. It is beyond the pale of doubt that the respondent requested
the appellant to release power supply to their premises on 16 December
2010. At the relevant point of time, the amended Clause 4.1.11 was in
force. In the impugned judgment dated 03 December 2012, the High
Court held that the State Commission is not authorised to prescribe a
condition under Section 50 of the 2003 Act for payment of dues of a
previous owner or occupier from the new owner as a precondition to
supply electricity. It was further held that Section 43 of the 2003 Act
does not impose any condition for payment of electricity dues attached
to the premises before getting supply of electricity. The High Court
observed that the phrase “any dues relating to that premises” conveyed
that the premises were held to be a defaulter of electricity dues and
charges, and was inconsistent with the provisions of the 2003 Act. On
the basis of
the above reasons, the High Court concluded that the first
part of Clause 4.1.11 was ultra vires the provisions of Sections 43, 50,
56, and 181 of the 2003 Act.
261. The appellant submitted that the Board is empowered to
frame terms and conditions providing for recovery of electricity dues
attached to the premises. It has been further contended that since the
auction was held on “as is where is basis”, the auction purchaser was
required to carry out due diligence in regard to the dues owed against
the property being purchased. The appellant has further submitted that
the regulations imposing a condition that the dues relating to particular
premises should be cleared before electricity supply is restored or a new
connection is given to the premises cannot be termed as arbitrary or
unreasonable. To reinforce their argument, the appellant has relied upon
the observations made by this Court in Paschimanchal Vidyut Vitran
Nigam (supra).
262. On the other hand, the respondent contended that there is no
provision under the 2003 Act enabling the distribution licensee to impose
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a pre-condition of the clearance of dues relating to the previous owner
or their premises. It has been further argued that Clause 4.1.11 affixing
the dues to the premises is contrary to Section 43 of the 2003 Act, which
affixes the liability to pay electricity dues and charges on the consumer.
The dues relating to the premises would be a financial encumbrance on
the property, and as such would be transferred with the sale of the land.
263. In the instant case, the first part of Clause 4.1.11 provides
that an application for electricity supply for any premises need not be
entertained unless any dues relating to the premises have been cleared.
The said clause indicates that a distribution licensee can withhold
connection to the premises unless its dues with respect to the said
premises have been cleared. In our opinion, the High Court has erred in
observing that the phrase “any dues relating to that premises” is
inconsistent with the provisions of the 2003 Act. The use of the said
phrase does not entail that the premises are deemed to be a defaulter
and made liable to pay electricity dues, as the High Court suggests.
According to Clause 4.1.1 of Electricity Supply Code, it is the applicant
who has to make an application in terms of Annexure A and pay all the
required electricity dues and charges, including the electricity arrears of
the previous owner relating to the premises. Thus, on the overall reading
of the Electricity Supply Code, it becomes evident
that dues of the
previous consumer relating to that premises are sought to be recouped
from the new owner or occupier of the premises.
264. In the impugned judgment, the High Court referred to the
example of a multi-storied residential building to observe that “the
licensee may successfully demand that a new purchaser of a different
flat whose vendor was not a defaulter, would still be liable to pay
the arrears of a defaulting consumer of another flat of the same on
the ground that it is a part of the same premises.” In this context, we
have already held that there is a synergy between the consumer and
premises. A new owner can only be obligated to pay the electricity arrears
of the previous owner with respect to the premises to which electricity
connection is being sought. Therefore, the phrase “any dues relating to
that premises” has to be understood with regard to the supply of electricity
made to the premises when it was in occupation of the previous owner.
265. We have already clarified that electricity arrears do not
automatically become a charge over the premises. A Statutory charge is
created only where there is an express provision of law providing for
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
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creation of a statutory charge upon the transferee. Clause 4.1.11 does
not have the effect of creating a charge on the property as it does not
specifically provide for creation of a statutory charge. Besides, the phrase
“any dues relating to that premises” cannot be interpreted to impute
financial liability on the premises.
266. Moreover, the High Court has held that the 2003 Act does
not enable the Electric Utilities to frame conditions to recover dues of a
previous consumer from a subsequent owner or occupier. We disagree
with this reasoning of the High Court in view of our analysis in the
preceding paragraphs, where we have held that the Electric Utilities can
specify the requirement that the subsequent owner or occupier of the
premises has to pay the arrears of electricity dues of the previous
consumer as a pre-condition for the grant of an electricity connection.
However, such terms and conditions of supply should be valid and
reasonable by conforming to the overall scheme and purpose of the
2003 Act.
267. Consequently, we set aside the impugned judgment of the
High Court dated 2 December 2012. Any pending IAs are disposed of
accordingly.
Item 101.5: Madhya Gujarat Vij Co. Ltd. v. Agriculture
Produce Market Committee, SLP (C) No. 8197-8198 of 2014
268. Rajprakash Spinning Mills Ltd.98 was a consumer of the
Gujarat Electricity Board since 1967. On 31 December 1994, its power
was disconnected due to the non-payment
of electricity dues. On 18
July 1995, the Gujarat Electricity Board instituted a suit in the Civil Court,
Nadiad against RSML for recovery of electricity charges amounting to
Rs. 78 lakhs. In the meantime, RSML went into liquidation and the High
Court appointed the Official Liquidator. On 20 August 2002, the suit was
decreed in favour of the Electricity Board. In 2003, the Board lodged a
claim before the Official Liquidator with decree in the suit for Rs. 78
lakhs and legal expenses and interest up to December 2002, which
cumulatively amounted to Rs. 1.39 crores.
269. On 17 December 2003, the Official Liquidator executed a
sale deed in favour of the respondent. The sale deed specifically mentions
the liability of the purchaser about the dues. On 25 February 2004, a
revised sale deed was registered and executed in favour of the respondent
98 “RSML”
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and the said sale deed was executed by the Official Liquidator in
pursuance of the confirmation of the sale for a consideration of Rs. 97
lakhs.
270. On 10 April 2007, the respondent addressed a letter to the
appellant for release of the electricity connection. On 13 April 2007, the
appellant declined to grant a new connection unless the electricity charges
amounting to Rs. 78 lakhs outstanding against the premises were paid.
The respondent filed a writ petition for the grant of an electricity
connection. The petition was dismissed by a Single Judge by an order
dated 08 September 2009 on the ground that the person who purchased
the premises had to pay the electricity dues of the previous occupant.
The Division Bench in the impugned judgment dated 16 July 2013 held
that the subsequent purchaser is not liable to pay the electricity dues of
the previous owner.
271. The auction-purchaser submitted an application for a new
electric connection on 10 April 2007. The Gujarat Electricity Supply Code
was notified on 31 March 2005. At the relevant time, unamended
Regulation 4.1.11 was applicable, according to which only the dues of
the applicant to the distribution licensee had to be cleared for the grant
of a new connection or for reconnection of electric supply. The said
regulation did not obligate the new owner to clear the electricity dues of
the previous owner. Therefore, the respondent could not have been made
liable to pay the arrears of the previous owner as
a pre-condition to
obtain a new electricity connection.
272. In view of the above reasons, we uphold the impugned
judgment dated 16 July 2013 of the High Court. The appeal shall stand
dismissed.
Item 101.6: Torrent Power Limited v. M/s Shashwat Homes
Private Limited; SLP No. 19878 of 2007
273. Gujarat Steel Tubes Company99, the previous owner, was
subjected to liquidation proceedings and the electricity connection was
disconnected for non-payment of dues amounting to Rs. 1.5 crores. GSTC
was ordered to be wound up by the Gujarat High Court. A parcel of the
GSTC’s land was bought in auction by Spectra Enterprises Private
Limited for a sum of Rs. 42.10 crores. In 2006, the name of the respondent
came to be mutated in the revenue records pertaining to the said parcel
99 “GSTC”
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]
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of land. On 24 January 2007, the respondent approached the appellant
seeking a new connection for electricity in respect of the premises. The
appellant declined to grant a new connection pending the payment of the
outstanding electricity dues of the previous owner. The respondent
instituted a writ petition before the Gujarat High Court. By the impugned
judgment dated 31 January 2014, the High Court held that the subsequent
owner is not liable to pay the electricity dues of the previous owner.
274. The respondent approached the appellant for seeking a new
electricity connection on 24 January 2007. At the relevant time, the 2005
Electricity Supply Code was in force. Regulation 4.1.11 of the 2005
Electricity Supply Code required only the dues of the applicant, if any, to
be paid at the time of the application for a new connection. In the affidavit
filed before the High Court, the appellant conceded that unamended
Regulation 4.1.11 was applicable to the respondent, who is the auction-
purchaser. The facts of the present clearly demonstrate that on 24 January
2007, when the auction-purchaser applied for electricity, unamended
Clause 4.1.11 was operational and applicable. Therefore, the respondent
cannot be made liable to clear the dues of the previous owner in the
absence of any express statutory condition in that regard. The impugned
judgment of the High Court is upheld. The appeal shall stand dismissed.
Item 101.7:
Dakshin Gujarat Vij Co. Ltd v. Amardeep
Association; SLP (C) No. 73 of 2015
275. In 1994, Navsari Cotton and Silk Mills Ltd100 was declared a
sick industrial unit. As on the date of NCSML’s closure, it owed
outstanding electricity dues of Rs. 416.36 lakhs. On 17 October 1994,
the electricity supply was permanently disconnected. On 15 December
1996, the Board for Industrial and Financial Reconstruction101 prepared
a New Rehabilitation Scheme under Section 18 of SICA. The said
scheme provided for sale of surplus land of NCSML under paragraph
2(g):
“(g) The plant and machinery of the weaving section and the
process house along with its building and the surplus land with the
company are proposed to be disposed of and the sale proceeds of
about Rs. 500 lakhs would be utilised for the implementation of
the scheme.”
100 “NCSML”
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276. Pursuant to the Rehabilitation Scheme of 1996, the
Government of Gujarat passed a resolution inter alia granting (i)
permission for sale of surplus land of NCSML; and (ii) exemption from
power cut for five years to NCSML with the condition that, any
reconnection charges as in the case of arrears shall be given to the
Gujarat Electricity Board in instalments. Later, in 1997, the workers of
NCSML decided to form a co-operative by the name Morarji Desai
Textile Labour Co-operative Society Industries Limited102 to take over
the unit of the company for its revival.
277. In 2003, the BIFR directed the disposal of the surplus land of
the said company by constituting an Assets Sale Committee. The notice
for sale of the surplus land was published in Gujarat Samachar in 2003
under which the land was to be sold on “as is where is basis”. The
relevant extract of the notice is set out below:
“As per the order of the B.I.F.R., the land situated at Vijalpore
bearing Survey No. 336/1, 311, 310/1, 310/2, 310/5, 310/7, 307/1,
308/1 having ownership of Navsari Cotton and Silk Mills, out of
total admeasuring area of the land, 11 Lakh square feet land with
possession is to be given on AS IS WHERE IS BASIS as per the
prevailing laws and rules.”
278. The Assets Sale Committee accepted the offer made by
respondent for a consideration of Rs. 561 lakhs for the surplus land. The
sale deed dated 29 May 2003 mentioned that the additional open land
was free from all encumbrances
including lien and charge. Clause 9
further specified that “all taxes, land revenue, education cess, and
other outstanding dues up to date has been paid and if any dues
remain unpaid that is to be paid by the Company.”
279. On 01 December 2004, the respondent applied for a new
connection. However, the appellant refused to grant a new connection
until the outstanding dues were cleared in terms of Clause 2(j) of the
Conditions of Supply. In 2006, the respondent moved an application before
the BIFR for a direction to release power supply. On 12 June 2006, the
BIFR sanctioned a Revised Rehabilitation Scheme directing the appellant
to release an electricity connection to the respondent. Since the electricity
supply was not released, the respondent instituted a writ petition before
the High Court of Gujarat. In 2010, a Single Judge of the High Court
102 “MDTLCIL”
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allowed the writ petition by directing the appellant to release the electricity
connection to the residential establishments on the surplus land without
insisting on the payment of the dues of the previous owner. The Single
Judge held that Clause 2(j) was not applicable because the worker’s co-
operative society was a going concern and the Electricity Board can
recover the dues from them. The Division Bench in the impugned
judgment dated 21 November 2014 upheld the decision of the Single
Judge. The Court held that the BIFR scheme would be binding on the
appellant even though they were not a party to the proceedings. It was
further held that SICA is a special Act in comparison to the 2003 Act.
Therefore, a scheme framed under SICA was held to have an overriding
effect over Clause 2(j) of the Conditions of Supply.
280. The respondent has contended that according to the BIFR
Scheme, electricity connection was provided to MDTLCIL separately
and not to the surplus land sold to the respondent. Hence, no dues could
have been recoverable from the respondent. The respondent further
contended that the rehabilitation schemes framed by BIFR have an
overriding effect on the terms and conditions stipulated under Clause
2(j) of the Conditions of Supply. The respondents have also drawn
attention to Clauses 3 and 9 of the sale deed which exempted the
respondent from the payment of the past dues of NCSML. The said
clauses are extracted
below:
“(3) [...] On the said property, there is no debt i.e. lien or charge
of anybody and is not under seize, attachment, or injunction of
any court. [...] On the said property, nobody has maintenance and
residence charge on it, there is no charge of Government taxes/
duties like, Income Tax, Sales Tax, etc. on said property. There is
no acquisition, requisition, or reservation of Government or local
body or with that intention any notice in not served to the company.
In short, there is no one claiming right title or claim as mortgage,
claimant, shareholder or by other way or any other interest in the
said property and the company has all rights and authority for
managing the said property by all way and by giving such trust
and assurance, the company has executed this sale deed. And
even if, in future, any one claims right on the property, then risk
thereof stands on the company and that is if due to such right or
chapter if any loss or expenses occurred by you or your heirs,
that is to be repaid by the company.”
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[...]
(9) All taxes, land revenue, education cess, and other outgoings
related to the said property and outstanding dues upto date has
been paid and if any dues remains to be paid that is to be paid by
the company. Now onwards, the responsibility for payment of all
taxes, etc. related to the said property will be on the first party.
By support of this deed the purchaser can enter its name on said
property in Government, Semi-Government and local records, City
Survey Records and Municipal Records and for that we have to
give our signature, consent, and such signed consent admitted
being considered.”
(emphasis supplied)
281. To decide this issue, the question that arises before us is
whether SICA is special legislation in relation to the 1910 Act and 2003
Act. SICA was enacted with a view to secure the timely detection of
sick companies and speedy determination of the preventive, ameliorative,
remedial and other measures which need to be taken with respect to
such companies. Section 18 mandated an operating agency such as a
BIFR to prepare a scheme providing for transfer of business, properties,
assets, and liabilities of the sick industrial company on terms and conditions
as specified in the scheme. According to Section 18(8) of SICA, once
the scheme is sanctioned, it is binding on the sick industrial company as
well as the shareholders, creditors, and guarantors of the sick industrial
company. Section 32 of the SICA gave overriding effect to any rules or
schemes made under the provisions of the Act:
“32. Effect of the Act on other laws.—(1) The provisions of
this Act and of any rules or schemes made thereunder shall
have effect notwithstanding anything inconsistent therewith
contained in any other law except the provisions of the Foreign
Exchange Regulation Act, 1973 (46 of 1973), and the Urban Land
(Ceiling and Regulation) Act, 1976 (33 of 1976), for the time being
in force or in the Memorandum or Articles of Association of an
industrial company or in any other instrument having effect by
virtue of any law other than this Act.
***
(emphasis supplied)
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282. In Tata Motors Ltd v. Pharmaceutical Products of India
Ltd103 this Court held that SICA is a special legislation in comparison to
the Companies Act. The Court observed:
“22.The provisions of a special Act will override the
provisions of a general Act. The latter of it (sic Act) will
override an earlier Act. The 1956 Act is a general Act. It
consolidates and restates the law relating to companies and certain
other associations. It is prior in point of time to SICA.
23.Wherever any inconstancy (sic inconsistency) is seen
in the provisions of the two Acts, SICA would prevail. SICA
furthermore is a complete code. It contains a non obstante
clause in Section 32.
24. SICA is a special statute. It is a self-contained code.
The jurisdiction of the Company Judge in a case where reference
had been made to BIFR would be subject to the provisions of
SICA.”
(emphasis supplied)
283. The 2003 Act also contains a provision similar to Section 32
of SICA. Section 174 of the 2003 Act provides that the provisions of the
said Act will have overriding effect notwithstanding anything contained
in any other law for the time being in force. It therefore becomes evident
that both SICA and 2003 Act are special laws in their respective field.
284. In LIC v. D J Bahadur,104 this Court was confronted with
the question as to whether the LIC Act is a special legislation or a general
legislation with respect to the Industrial Disputes Act, 1947.
Justice V R
Krishna Iyer(supra) held that in determining whether a particular statute
is general or special, the focus has to be on the principal subject matter
and the particular perspective. On the basis of the observation that a
legislation may be general for some purposes and special for other
purposes it was held that the Industrial Disputes Act, 1947 being a special
law, prevails over the LIC Act. It was held:
“52. In determining whether a statute is a special or a general
one, the focus must be on the principal subject-matter plus the
particular perspective. For certain purposes, an Act may be general
103 (2008) 7 SCC 619
104 (1981) 1 SCC 315
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and for certain other purposes it may be special and we cannot
blur distinctions when dealing with finer points of law. In law, we
have a cosmos of relativity, not absolutes — so too in life.”
285. In UP State Electricity Board v. Hari Shankar Jain,105 a
three-judge Bench of this Court was called upon to determine whether
the Industrial Employment (Standing Orders) Act, 1946 is a special
legislation and overrides the 1948 Act in regard to the age of
superannuation. Justice O Chinnappa Reddy, speaking on behalf of the
Bench held that the Industrial Employment (Standing Orders) Act, 1946
is a special legislation dealing with the conditions of service of workmen
in industrial establishments. On the other hand, the 1948 Act is an act to
coordinate the development of electricity, and does not seek to regulate
the conditions of services of the employees of the State Electricity Board.
The Court held that the 1948 Act is a special legislation in regard to the
subject of development of electricity. It was observed:
“7. [...] The Electricity Supply Act does not presume to be an Act
to regulate the conditions of service of the employees of State
Electricity Boards. It is an Act to regulate the co-ordinated
development of electricity. It is a special Act in regard to the
subject of development of electricity, even as the Industrial
Employment (Standing Orders) Act is a special act in regard to
the subject of conditions of service of workmen in industrial
establishments. If Section 79(c) of the Electricity Supply Act
generally provides for the making of regulations providing for the
conditions of service of the employees of the Board, it can only
be regarded as a general provision which must yield to the special
provisions of the Industrial Employment (Standing Orders) Act in
respect of matters covered by the latter Act.”
286. Keeping the above principle in mind, it is necessary to
examine the subject matter of SICA and the 2003 Act. Under SICA, the
operating agency had to prepare a scheme with respect to a sick industrial
company providing for financial reconstruction, proper management,
amalgamation, and any other preventive, ameliorative, and remedial
measures. On the other hand, the 2003 Act is a consolidating law relating
to generation, transmission, distribution, trading, and use of electricity.
The 2003 Act relates specifically to supply of electricity to consumers,
105 (1978) 4 SCC 16
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whereas SICA is silent on the aspects of the supply of electricity to
consumers. The principal subject matter of SICA is to provide
ameliorative measures for reconstruction of sick companies, while the
purpose of the 2003 Act is development of the electricity industry. Thus,
the purpose of the two enactments is entirely different. The 2003 Act is
a later enactment, and Section 175 specifically provides that the provisions
of the Act are in addition and not in derogation of any other law for the
time being in force, including the SICA.
287. In KSL & Industries Ltd v. Arihant Threads Ltd,106 a
three-judge Bench of this Court was called upon to decide which
enactment between the SICA and Recovery of Debts Due to Banks
and Financial Institutions Act, 1993107 would prevail over the other. The
Court observed that although both the legislations are special laws in
relation to their respective subject matters, SICA would prevail over the
RDDB Act by virtue of the incorporation of a non-derogation clause in
the latter. In the RDDB Act, Parliament had specifically provided that
the RDDB Act shall be in addition to and not in derogation of other laws
mentioned therein including SICA:
“49. The term “not in derogation” clearly expresses the
intention of Parliament not to detract from or abrogate the
provisions of SICA in any way. This, in effect must mean
that Parliament intended the proceedings under SICA for
reconstruction of a
sick company to go on and for that
purpose further intended that all the other proceedings
against the company and its properties should be stayed
pending the process of reconstruction. While the term
“proceedings” under Section 22 of SICA did not originally include
the RDDB Act, which was not there in existence Section 22 covers
proceedings under the RDDB Act.”
(emphasis supplied)
288. Similarly, Section 175 of the 2003 Act provides that the
provisions of the Act are in addition and not in derogation of any other
law for the time being in force. Therefore, by specifically providing that
the 2003 Act shall be in addition to and not in derogation of any other
laws for time being in force, the Parliament has preserved and give
106 (2015) 1 SCC 166
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precedence to the proceedings under SICA. Section 32 of SICA provides
an overriding effect to a scheme framed under it. Section 18 of the
SICA mandates an operating agency such as BIFR to prepare a scheme
providing for transfer of business, properties, assets, and liabilities of the
sick industrial company on terms and conditions as may be specified in
the scheme.
289. SICA is a special statute and Section 32 read with Section
18(8) of the SICA gives an overriding effect to the Scheme. The 1996
Rehabilitation Scheme and the 2006 Revised Rehabilitation Scheme bind
the appellant, but override Clause 2(j) of the terms and conditions of
supply.
290. Applying the above position of law to the facts of the present
case, it is apparent that the respondent purchased ‘surplus land’ of
NCSML in pursuance of the rehabilitation scheme framed by BIFR.
When the respondent was given possession of the land in 2003, NCSML
was a going concern as it continued to be operated by MDTLCIL. The
relevant clauses of the sale deed expressly excluded the respondent
from the past dues of NCSML. In fact, the Clause 9 of the sale deed
reiterated that NCSML would be responsible to pay any outstanding
dues related to the land. Further, the 2006 Revised Rehabilitation Scheme
solely puts the onus of clearance of electricity arrears on NCSML, while
directing the appellant to release electricity connection to the respondent.
Thus, NCSML being the consumer, was obligated to clear the arrears
of
electricity pertaining to the said premises. The appellant could only recover
dues from NCSML, since it was a going concern at the time when the
respondent applied for supply of electricity. It is admittedly the case that
the appellant did not institute any proceeding for recovery of dues from
NCSML. This has been observed in the judgment dated 14 June 2010 of
the High Court:
“Under these circumstances, no recovery was made by
Respondent against NCSML. If no recovery were made against
NCSML, the demand of dues against the Petitioner (respondent
herein) which is the purchaser of portion of land owners by
NCSML is not sustainable.”
291. The High Court has rightly observed that the appellant cannot
selectively withhold electricity to the respondent under the guise of
demand for past electricity arrears. The stance of the appellant is opposed
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to the rehabilitation scheme framed by the BIFR. The Revised
Rehabilitation Scheme formulated by the BIFR will be binding on the
appellant by virtue of Section 18(8) of SICA. According to the said
provision, once a scheme is sanctioned, it shall not only bind the sick
industrial company and the transferee company, but also creditors such
as the appellant. The statutory provision is extracted below:
“18. Preparation and sanction of Schemes -
(8) On and from the date of the coming into operation of the
sanctioned scheme or any provision thereof, the scheme or such
provision shall be binding on the sick industrial company and the
transferee company or, as the case may be, the other company
and also on the shareholders, creditors and guarantors and
employees of the said companies.”
292. On 20 March 2015, a two-judge Bench of this Court passed
an interim order staying the operation of the impugned judgment in the
following terms:
“The impugned judgment and order dated 21.11.2014 passed by
the High Court of Gujarat is stayed subject to Respondent No. 1
furnishing a bank guarantee of 50% of the total dues.
It is made clear that the electricity will be supplied only on
furnishing the aforesaid bank guarantee.
Such of those purchasers who wish to pay the amount due to the
petitioner are permitted to do so. The petitioner will consider the
case on merits and take a decision on providing the electricity
connection.”
293. We
accordingly vacate the stay on the impugned judgment
dated 21 November 2014. Any amount furnished by the respondent shall
be refunded back. The appeal shall stand dismissed.
Item 101.8: Paschim Gujarat Vij Company Limited v.
Sarifaben Mehboobbhai Solanki, SLP (C) No. 13400/2018
294. The electricity supply of Kanti Cotton Mills Pvt Ltd, the
previous owner, was disconnected on 09 June 1981. The mill was deemed
to be a ‘relief undertaking’ under Section 3 of the Bombay Relief
Undertakings (Special Provisions) Act, 1958. In 1982, Gujarat State
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Textile Corporation108 took over the management of the Mill under the
Industries (Development and Regulation) Act, 1951. In 1996, the BIFR
submitted its report stating that huge losses were being suffered and
recommended winding up under Section 20 of SICA. In 1997, the
Company Court ordered winding up and appointed the Official Liquidator.
On 21 October 1997, GSTC requested a disconnection of electricity
supply in view of the winding up proceedings. On 22 July 1998, a court
auction was held for the sale of immovable property. The offer of Jay
Mahakali Infrastructure Pvt Ltd.109 was found acceptable and confirmed
by the High Court. On 28 June 2004, a sale deed was executed in favour
of JMIPL for a consideration of Rs. 5.5 crores.
295. On 23 May 2005, the appellant served a notice on JMIPL
demanding payment of Rs. 2.3 crores. On 05 September 2006, a Single
Judge allowed the petition which was instituted by JMIPL by holding
that the claim of the appellant for arrears of electricity dues, being in the
nature of a money claim, was required to be lodged within 3 years, and
was barred by limitation. The appeal was dismissed by the Division Bench
by a judgment dated 04 April 2014 on the ground that the appropriate
remedy available to the appellant was to file a civil suit or get a garnishee
order so that the purchaser would know that there is a liability on the
property in question. On 16 December 2016, the High Court dismissed
the review petition preferred by
the appellant on the ground of delay.
296. The respondents purchased a small residential house from
JMIPL in 2012. On 4 October 2014, the respondents applied for the
grant of an electricity connection. Since the request was not acceded to,
the respondent instituted a complaint before the Consumer Grievances
Redressal Forum seeking a connection without insistence on the dues of
the earlier owner as they had purchased the plot from JMIPL. The
forum disposed of the case in light of Clause 4.1.11 of the Electricity
Supply Code, which was amended in 2010. The respondent approached
the Electricity Ombudsman, who relied upon the previous order of the
High Court to direct the appellant to supply electricity to the respondents
by an order dated 30 March 2015. The appellants filed a Special Civil
Application before the High Court against the order of the Ombudsman.
On 16 February 2016, the Single Judge of the High Court dismissed the
application. The Division Bench of the High Court by judgment dated 8
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September 2017 declined to interfere on the ground that a Special Leave
Petition110 preferred before this Court against the order dated 4 April
2014 was dismissed.
297. It is important to reiterate that the appellant had also denied
an electricity connection to JMIPL, the predecessor-in-title of respondent.
However, JMIPL filed a petition under Article 226, which was allowed
by a Single Judge of the High Court. The appellant filed a Letters Patent
appeal, which was dismissed by the Division Bench of the High Court
by a judgment dated 04 April 2014 on the ground of limitation. The
Ombudsman, in its order dated 30 March 2015, based its decision on this
judgment of the Division Bench. The judgment dated 04 April 2014 attained
finality. The right of the respondent to receive supply of electricity stood
crystallised on the judgment attaining finality upon the dismissal of the
Special Leave Petition filed by the appellant. Therefore, the order passed
by the Ombudsman, and the subsequent orders passed by the High Court
affirming the decision of the Ombudsman, do not suffer from any infirmity.
The impugned judgment of the High Court is upheld for that reason. The
appeal shall stand dismissed.
Item 101.16: Torrent Power Ltd. v. M/s Abhisar
Developers, SLP(C) 9092-9094 of 2013
298. On 01 September 1986, New Gujarat Synthetic Company,
the previous owner, went into liquidation. On 12 September 1986, the
electricity connection to
the premises of the previous owner was
disconnected for non-payment of dues amounting to Rs. 77 lakhs. On 12
October 2006, a public auction was conducted of the immovable
properties of the previous owner, including their premises. These were
purchased by Star Associates and conveyed to Abhisar Developers, the
respondent herein.
299. On 28 December 2006, the respondent-purchaser applied
for a new connection for the premises. However, the appellant called
upon the respondent to clear the outstanding dues of the premises. In
2007, the respondent filed a writ petition before the High Court of Gujarat
praying for new connection without payment of the arrears. In 2010, the
High Court allowed the petition and directed the Licensee to provide the
connection. On 3 December 2012, the Division Bench of the High Court
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held that the Clause 4.1.11 of the Gujarat Electricity Supply Code, as
amended in 2010, is ultra vires the provisions of the 2003 Act.
300. The appellant has referred to Clauses 4.1.16, 4.8.1, and 4.8.4
of the Electricity Supply Code to argue that the auction-purchaser cannot
deny knowledge of the requirement to clear the outstanding dues of the
premises. In response, the auction-purchaser has submitted that there
was no statutory provision at the relevant time requiring the payment of
the dues of the previous owner from the subsequent owner as a condition
precedent for providing for a fresh connection.
301. The relevant Clauses 4.1.16, 4.8.1, and 4.8.4 of the 2005
Electricity Supply Code are extracted hereunder:
“4.1.16 The Distribution Licensee shall give no dues certificate to
consumer on his request to avoid any possibilities of pending dues
of previous owner while purchasing new house/ premises.
[...]
4.8.1 The Consumer shall not without prior consent in writing of
the Distribution Licensee assign, transfer or part with the benefit
of the Agreement executed with the Distribution Licensee nor
shall part with or create any partial or separate interest there
under in any manner. Transfer of service connection will be
effected on application in case the registered Consumer is dead
or if the ownership or occupation of the property has changed or
transferred. In all cases of such transfers, the arrears of every
description shall be paid in full together
with transfer fee as
prescribed in relevant GERC Regulations.
[...]
4.8.4 Where Premises to which electricity is supplied by Licensee
is transferred to transferee and the transferee does not get service
connection in the Premises transferred to his name, and continues
to use the service connection in previous name, the transferee
shall be responsible for payment of running energy bills as well as
unpaid dues of energy bills and other amounts relating to the
service connection. The dues to the Distribution Licensee shall
be payable on demand, in default of which the supply to the
Premises may be disconnected, subject to the provisions of the
Acts, rules, and regulations for the time being in force. “
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302. Clause 4.1.16 of the Gujarat Electricity Supply Code obligated
the distribution licensee to provide no-dues certificate when requested
by a consumer “to avoid any possibilities of pending dues of the
previous owner while purchasing new house/premises.” This is only
a procedural provision and does not per se impose any obligation on the
subsequent owner of the premises. The term “consumer” will not bring
an auction-purchaser within the ambit of Clause 4.1.16 as an auction-
purchaser does not become a consumer before entering into an agreement
with the distribution licensee.
303. According to Clause 4.8.1, a consumer shall not transfer a
service connection without the prior consent of the distribution licensee.
It further provides that transfer of a service connection will be effected
on application in case the registered consumer is dead or if the ownership
or occupation of property has changed or been transferred. In case of a
transfer, the clause provides that arrears of every description shall be
paid in full together with the transfer fee. However, the said provision
only applies in situations where there has been a transfer of a service
connection. In the facts of the present case, we are dealing with a situation
where the auction-purchaser applied for a new connection of electricity
to the premises. Therefore, Clause 4.8.1 will not be applicable to the
facts of the present case.
304. Clause 4.8.4 provides
that a transferee of premises would
be liable for the unpaid dues of energy bills of the defaulter transferor
only if they continue to use the service connection in the previous name
without transferring to their name. The said clause is only applicable
where a transferee applies for a transfer of connection, and not where a
transferee applies for a new power connection in their own name.
305. In the present matter, from the perusal of facts, it is evident
that the respondent applied for a fresh electricity connection for the
premises on 28 December 2006. Therefore, on the date of the submission
of the application for electricity by the respondent, the unamended Clause
4.1.11 of the Gujarat Electricity Supply Code was in force, according to
which only the dues of the applicant to the distribution licensee had to be
cleared for a new connection or reconnection of electric supply. There
was no statutory provision requiring the auction purchasers to clear the
arrears of the previous owner as a condition precedent for getting a
fresh connection.
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306. It was only in 2010 that clause 4.1.11 of the said Electricity
Supply Code was amended which required the subsequent owner of the
premises to clear the dues of the previous owner as a condition precedent
for receiving a new electricity connection. Thus, at the time when the
respondent applied for a fresh connection of electric supply, there was
no existing provision requiring the applicant of a new connection to clear
the dues of the previous owner linked to the premises. Therefore, the
judgment dated 3 December 2012 of the High Court has to be upheld.
The appeal shall stand dismissed.
IV. Assam
307. The Assam Electricity Regulatory Commission framed the
AERC Supply Code on 30 August 2004 in exercise of its power under
Section 50 of the 2003 Act to provide for recovery of electricity charges.
Clause 3.6 deals with requisition of supply. Clause 3.6.4 is extracted
below:
“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 specified in the bills
subject to limitation as per sub-section (2) of Section 56 of the
Act are duly paid up and discharged. The licensee shall be obliged
to issue a certificate of the amount outstanding from the connection
in such premises on request made by such person.”
The impugned
clause obligates a new occupier of a premises to
check the bills for previous months and ensure that all the outstanding
amounts are duly paid up and discharged.
Item 101.15: Carbon Resources v. Assam Electricity
Regulatory Commission; SLP(C) No. 24502 of 2010
308. The previous owner, Eastern Steel and Alloys Company Ltd,
had electricity dues pending for the period 1988-1989, due to which
electricity supply was disconnected in 1992. The Assam State Electricity
Board111 filed a money suit before the District Judge against the previous
owner, which was decreed in its favour for Rs 2.07 crore on 24 February
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1997. On account of the liabilities due to UCO Bank, a warrant of
attachment was levied on 30 June 2004.
309. In 2002, UCO Bank preferred an application against the
previous owner before the Debt Recovery Tribunal. On 16 March 2007,
the Recovery Officer of the Debt Recovery Tribunal, Guwahati issued
an auction sale notice for the land in question. Clause 7 of the notice of
auction sale stipulated that the properties were being sold on “as is where
is” basis and subject to other conditions prescribed in the Second Schedule
of the Income Tax Act, 1961 and Rules made thereunder. The appellant
was the highest bidder and was declared as an auction-purchaser on 20
February 2008. On 24 March 2008, a sale certificate was issued in favour
of the appellant and possession was handed over to the appellant by
UCO Bank on 27 March 2008. The Recovery Officer confirmed the
auction sale in favor of the appellant, who took over the possession of
the property on 27 March 2008. On 21 January 2009, the appellant applied
for a high-tension industries electricity connection, but ASEB denied it
due to pending arrears of the previous owner.
310. Therefore, the appellant filed a writ petition before the Gauhati
High Court seeking: (i) an electricity connection without having to pay
the arrears of the previous owner; and (ii) challenging the vires of
Regulation No. 3.6.4 of the AERC Electricity Supply Code. On 2 June
2010, a Division Bench of
the High Court delivered a judgment dismissing
the petition.
311. The appellant has drawn the attention of this Court to the
fact that the respondent had filed a suit against the previous consumer,
in which a decree was passed. The appellant submits that recovery of
arrears of the previous owner could be effected in execution of the
decree. From the perusal of the facts, it is true that the respondent had
already instituted a money suit against the previous consumer and obtained
a decree. However, the respondent has stated before the High Court
that the execution could not be carried out successfully. In these
proceedings, we are not concerned with the validity of the execution
proceedings initiated by the respondent against the previous owner.
312. The respondent has submitted that before purchasing the
premises, the appellant was required to undergo due-diligence and verify
that there were no electricity dues in relation to the premises. The
respondent has also questioned the validity of the sale in favor of the
appellant on the ground that there was a subsisting money decree in
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favour of the respondent and the premises were under Court attachment.
The respondent also referred to a State Government order dated 29
November 2004 directing Deputy Commissioners and Sub-divisional
Officers to not issue sale/ transfer permission of land without clearance
of the electricity dues. On 26 June 2006, the electricity distribution
companies also issued a public notice requiring new consumers to clear
the dues of the previous consumer. The relevant extract of the said
public notice is hereunder:
“It is observed that some electricity consumers having outstanding
dues payable against energy consumption are trying to sale or
lease out their premises (including land and building) without
clearing the electricity dues.
Govt. of Assam has already prohibited such transfer of premises
and made it mandatory to obtain electricity dues clearance
certificate from the concerned officers before applying for
permission of transfer.
All prospective buyers or lessee are hereby requested to satisfy
themselves regarding clearance of electricity dues before taking
over the possession of such premises.
In the event of non discharge of liabilities of electricity dues by
the previous owner, the purchaser/ lessee will be liable to clear
the said dues before power supply provided to them in accordance
with provision of Terms and Condition regulation notified by Assam
Electricity Regulatory Commission.”
313. Therefore, it has been contended by the respondent that the
appellants were put to sufficient notice regarding the requirement of
clearing dues before purchasing the property. In the present proceedings,
the validity of the auction sale of the premises to the appellant does not
arise for consideration, as it is a matter to be decided in separate
proceedings. We are only concerned with whether the appellant, being a
new owner of the premises, is liable to clear the dues of the previous
consumer before getting a supply of electricity.
314. By the impugned judgment dated 2 June 2010, the High Court
has upheld the validity of Regulation 3.6.4 of the AERC Electricity Supply
Code. It held that the stipulation contained in the said regulation is
reasonable and within the ambit of the powers conferred by Section 50
of the 2003 Act. We are of the opinion that the impugned clause is
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]
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reasonable and consistent with the provisions of the 2003 Act.
Accordingly, the appellant was obligated to check the bills for previous
months and ensure that all the outstanding amounts are duly paid up and
discharged. Therefore, we find no merit in the challenge to the decision
of the High Court. However, to balance the interests of parties, we
make it clear that if any arrears of electricity are received from the
previous owner, the amount shall be adjusted with the power bills of the
appellant.
V. West Bengal
315.   In West Bengal, the WB Electricity Supply Codehave been
enacted in 2012 under the 2003 Act. The relevant regulations - Clause
3.4.2, 4.6.1 and 4.6.4 - are set out below:
“3.4.2. The licensee shall be eligible to recover from a new and
subsequent consumer(s) the dues of the previous and defaulting
consumers in respect of the same premises only if a nexus
between the previous and the defaulting consumer(s) and the new
consumer(s) in respect of the same premises is proved. The onus
of proving a nexus, if claimed by a licensee, shall lie on the
licensee.”
4.6.1. If the power supply to any consumer remains disconnected
continuously for a period of one hundred and eighty days where
the disconnection has been effected in compliance with any of
the provisions of the Act or Regulations, the agreement of the
licensee with the consumer for supply of electricity shall be deemed
to have been terminated with
consequential effect on expiry of
the said period of one hundred and eighty days. This will be without
prejudice to such other action or the claim that may arise from the
disconnection of supply or related issues therefor. On termination
of agreement, the licensee shall have the right to remove the
service line and other installations through which electricity is
supplied to the consumer.”
“4.6.4. Notwithstanding anything contained contrary elsewhere
in these Regulations where deemed termination of agreement has
taken place, then on the basis of application of any consumer new
service connection can only be provided in the same premises if
the outstanding dues against the deemed terminated consumer is
cleared along with the late payment surcharge.”
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316. Under Regulation 3.4.2 of the WB Electricity Supply Code,
the licensee is entitled to recover the outstanding dues of the previous
owner from the new and subsequent owner if there is a nexus between
the previous owner and the new consumer. Regulation 4.6.1 provides
that there shall be a deemed termination of agreement if the power
supply to any consumer remains disconnected for a continuous period of
180 days. Regulation 4.6.4 overrides other provisions of the WB Electricity
Supply Code as it contains a non-obstante clause. Under Regulation
4.6.4, a new consumer can be given a service connection only if the
outstanding dues against the same premises is cleared along with late
payment surcharge.
Item 101.18: Damodar Valley Corporation v. Sree Ramdoot
Rollers Private; SLP (C) No. 15723 of 2020
317. On 30 June 2012, the appellant electricity utility, Damodar
Valley Corporation, and Capricorn Ispat Udyog Private Limited, the
previous owner, entered into an agreement for supply of electrical energy.
The bank guarantees furnished by the respondent expired on 4 June
2014. The electricity connection to the previous owner was disconnected
on 21 September 2016 for default in payment of electricity dues to the
suit premises. On 14 August 2018, the State Bank of India advertised
the property for e-auction under SARFAESI Act for default of dues on
“as is where is basis”. The relevant terms and condition of e-auction
sale are as follows:
1.
“E-auction is being
held on AS IS WHERE IS and will be
conducted online. ***
2.
[To] the best of knowledge and information of the authorised
officer there is no encumbrance of the properties. However,
the intending bidders should make their own independent
enquiries regarding the encumbrance title of properties put
on auction and claim rights dies affecting the properties
[prior] to submitting their bid. The E-auction advertisement
does not constitute and will not be deemed to constitute
any commitment or any representation of the bank. The
properties is being sold with all the existing and future
encumbrance whether known or unknown to the bank and
authorised officer secured creditor shall not be responsible
in any way for the third party claims, rights, dues.
***
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]
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7. It shall be the responsibility of the interested bidders to
inspect and satisfy themselves about the properties before
submission of the bid.”
Clause 1 of the terms and conditions provided that the e-auction
was being held on an “as is where is basis”. Clause 2 provided that the
property was being sold with all present and future encumbrances,
whether known or unknown to the bank. Clause 7 provided that it was
the responsibility of interested bidders to inspect and satisfy themselves
about the properties before submission of the bid.
318. On 31 August 2018, the assets of the previous owner were
taken over by Magnum Tradelink Private Limited through an e-auction.
The registration of property was done in the name of Shree Ramdoot
Rollers Private Limited, who is the respondent herein. On 04 October
2018, the respondent filed an application seeking a new connection from
the appellant. When the appellant refused, the respondent filed a writ
petition before the High Court of Calcutta. On 17 April 2019, the Single
Judge allowed the petition and ordered the appellant to process the
respondent’s application within a period of three weeks. However, by its
letter dated 10 May 2019 the appellant refused to grant a connection in
view of the electricity dues of Rs. 22.05 crores payable by the erstwhile
owner in respect of premises. The respondent again approached the
High Court seeking a direction for the supply of electricity
to their
premises. On 19 June 2019, the Single Judge of the High Court allowed
the Writ Petition and directed the grant of an electricity connection to
the respondent. The Division Bench by a judgment dated 24 April 2020
dismissed the writ appeal and upheld the decision of the Single Judge.
319. In the impugned judgment dated 24 April 2020, the High
Court’s interpretation largely focused on the phrase “any consumer”
contained in Regulation 4.6.4. Under Regulation 4.6.4, a new consumer
can be given service connection only if the outstanding dues against the
same premises are cleared along with a late payment surcharge. The
Court referred to Isha Marbles (supra) to hold that the definition of
“consumer” contained in Section 2(15) does not include an auction-
purchaser. However, the Court held that it is possible to bring an auction-
purchaser within the ambit of Regulation 4.6.4 if: (i) the distribution
licensee establishes the fact that the premises concerned were connected
to the works of the distribution licensee; (ii) for the purpose of receiving
electricity; and (iii) in such a manner that the supply of electricity can be
resumed by ‘simply putting on a switch’.
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320. The appellant has drawn attention to the fact that the supply
of electricity to the premises was disconnected on 21 September 2016.
Therefore, the appellant submits that on the date of the sale of the
premises to the respondent, that is 31 August 2018, the supply of electricity
was disconnected for more than 180 days. Hence, it is the appellant’s
contention that Regulation 4.6.1 is applicable and there is a deemed
termination of agreement. It has been further contended that Regulation
4.6.4 has an overriding effect as it begins with a non-obstante clause.
The respondent, on the contrary, has argued that Regulation 3.4.2 would
be applicable in the present case. It has been argued that Regulation
4.6.4, despite having a non-obstante clause, has no bearing on the
operation of Regulation 3.4.2.
321. The supply of electricity was disconnected on 21 September
2016. The supply stood disconnected for more than 180 days on 14
August 2018 which was the date of auction notice and on 31 August
2018 which was the date on which the premises were sold to the
respondent. In terms of Regulation 4.6.1, there was deemed termination
of the agreement since the supply was disconnected for more than 180
days. However, Regulation 4.6.4 requires “any consumer” to clear the
outstanding dues of the premises to be eligible for grant of service
connection. In the present case, the respondent cannot be considered a
“consumer” unless an agreement was entered into with the
distribution
licensee. This has also been reiterated in Isha Marbles (supra) in the
following words:
“62. No doubt, from the tabulated statement above set out, the
auction-purchasers came to purchase the property after
disconnection but they cannot be “consumer or occupier” within
the meaning of the above provisions till a contract is entered into.”
An auction-purchaser, such as the respondent, cannot be termed
as a “consumer” unless an agreement was entered into with the
distribution licensee. Therefore, we find no fault with the reasoning of
the High Court.
322. Consequently, we uphold the impugned judgment of the High
Court. The appeal shall stand dismissed.
H. Equity and Fairness
323. This Court is entrusted with the constitutional authority under
Article 142 of the Constitution to render complete justice. Where
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appropriate, this Court has to take recourse to its constitutional power
under Article 142 to bring about substantial justice.
324. Since the decision of this Court in Isha Marbles (supra),
the law as regards the liability of the subsequent owner for the payment
of arrears of the electricity dues of the previous owner has been in flux.
Petitions challenging the decisions of different Electric Utilities were
filed as early as 2001. The orders of the High Courts had the effect of
either directing the Electric Utilities to grant electricity connections to
auction purchasers without insisting on payment of outstanding electricity
dues, or directing the auction purchasers to comply with the conditions
of supply or Electricity Supply Code, as the case may be. In some of the
nineteen cases, this Court while granting leave passed interim orders.
The legal issue of whether electricity dues constitute a charge on the
property so far as the transferor and the transferee are concerned was
referred to a larger bench by an order of this Court way back in 2006.
The litigation in this batch of cases remained pending.
325. In the specific cases before us, where this Court has upheld
the validity of the subordinate regulations (Conditions of Supply or
Electricity Supply Code, as the case may be) and has held the relevant
regulation to be applicable to the factual matrix, the auction purchasers
would be liable to pay the outstanding
dues of the previous consumer.
On behalf of the Electric Utilities, claims have been made for interest on
such arrears.
326. This Court must bear in mind the element of public interest in
balancing the equities, particularly, at this stage where more than two
decades have passed in litigation since the issue first arose. The 2003
Act was enacted to promote the development of the electricity industry,
while protecting the interest of consumers. It must be kept in mind that
many of the auction-purchasers are commercial entities who had
purchased the premises for commercial ventures. Electricity being a
necessity for operation of any commercial venture, denial of electricity
connections to the auction-purchasers for an indefinite period of time
resulted in loss of business. The delay in the court proceedings should
not be to the further detriment of the litigants.
327. Taking all facts and circumstances into consideration, including
the lapse of more than two decades since the appeals were filed before
this Court and the equities arising in favour of one party or the other, we
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direct the Electric Utilities to waive the outstanding interest accrued on
the principal dues from the date of application for supply of electricity by
the auction purchasers.
I.Conclusions
328. The conclusions are summarised below:
a.
The duty to supply electricity under Section 43 of the 2003
Act is not absolute, and is subject to the such charges and
compliances stipulated by the Electric Utilities as part of
the application for supply of electricity;
b.
The duty to supply electricity under Section 43 is with
respect to the owner or occupier of the premises. The
2003 Act contemplates a synergy between the consumer
and premises. Under Section 43, when electricity is
supplied, the owner or occupier becomes a consumer only
with respect to those particular premises for which
electricity is sought and provided by the Electric Utilities;
c.
For an application to be considered as a ‘reconnection’,
the applicant has to seek supply of electricity with respect
to the same premises for which electricity was already
provided. Even if the consumer is the same, but the
premises are different, it will be considered as a fresh
connection and not a reconnection;
d.
A condition of supply enacted under Section 49 of the
1948 Act requiring the new owner of the premises to clear
the electricity arrears of the previous owner as a
precondition to availing electricity supply will have a
statutory character;
e.
The scope of the regulatory powers of the State
Commission under
Section 50 of the 2003 Act is wide
enough to stipulate conditions for recovery of electricity
arrears of previous owners from new or subsequent
owners;
f.
The Electricity Supply Code providing for recoupment of
electricity dues of a previous consumer from a new owner
have a reasonable nexus with the objects of the 2003 Act;
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g.
The rule making power contained under Section 181 read
with Section 50 of the 2003 Act is wide enough to enable
the regulatory commission to provide for a statutory charge
in the absence of a provision in the plenary statute
providing for creation of such a charge;
h.
The power to initiate recovery proceedings by filing a suit
against the defaulting consumer is independent of the
power to disconnect electrical supply as a means of
recovery under Section 56 of the 2003 Act;
i.
The implication of the expression “as is where is” basis is
that every intending bidder isput on notice that the seller
does not undertake responsibility in respect of the property
offered for sale with regard to any liability for the payment
of dues, like service charges, electricity dues for power
connection, and taxes of the local authorities; and
j.
In the exercise of the jurisdiction under Article 142 of the
Constitution, the Electric Utilities have been directed in
the facts of cases before us to waive the outstanding
interest accrued on the principal dues from the date of
application for supply of electricity by the auction
purchasers.
329. Pending applications, if any, shall stand disposed.
Bibhuti Bhushan Bose
Appeals disposed of.
(Assisted by : Shubhanshu Das, LCRA)