JUDGMENT

R.V. RAVEENDRAN, J.

Leave granted. Heard learned counsel.

2. Paschimanchal Vidyut Vitran Nigam Ltd., the appellant herein holding an electricity distribution licence, is one of the successors-in-interest of Uttar Pradesh State Electricity Board (`Board' for short). The third respondent was a consumer receiving electricity supply from the Board to its industrial unit at Ghaziabad. In April, 1994, the Board raised supplementary bills for Rs.105.78 lakhs against the third respondent towards difference in tariff (on the basis of an audit objection that supply ought to have been charged under HV2 category instead of HV1 category). The third respondent filed civil suits disputing the said claim and obtained an order of injunction restraining the Board from recovering the said supplementary bills amount. The Board challenged the order of the civil court by filing appeals before the Allahabad High Court. In those appeals, which are stated to be pending, on 13.12.1996 the High Court stayed the order of injunction granted by the civil court thereby permitted recovery of the outstanding dues.

3. The third respondent closed its unit in the year 1998. In 2001-2002, it sub-divided its industrial plot into 129 smaller plots of different sizes with the permission of Uttar Pradesh State Industrial Development Corporation. One of those plots (A-7/60-67) was sold by the third respondent to the first respondent.

4. The first respondent applied to the appellant (who had succeeded UPSEB by then) for supply of electricity by sanctioning a load of 3200 KVA for running an induction furnace in the plot purchased by it. The appellant sanctioned the request on 4.9.2004 subject to the condition that it should pay the arrears due by the third respondent, in proportion to the area purchased by it, as a condition precedent for supply of electricity. The first respondent agreed to the demand and gave an undertaking that the pro-rata electricity dues of the third respondent would be paid by them. The appellant thereafter called upon the first respondent to pay Rs.8,63,451/- being the arrears, on pro rata basis, by letter dated 9.9.2004 subject to the following condition:

"................the consumer (who) wants to establish its unit, has given an affidavit regarding payment of outstanding dues of M/s. Electro Steel, Ghaziabad installed on that plot that it is agreeable to make payment of outstanding electricity dues on their plot. Therefore, they will deposit the proportionate dues against that unit according to the area of their plot within 15 days .......... Otherwise, the order sanctioning the load will be deemed to be automatically cancelled."

Accordingly on 18.9.2004 the first respondent deposited a sum of Rs.863,451/- being the dues of the third respondent, pro rata, subject to the condition that in the event of the pending challenge to the demand being decided in favour of third respondent, the appellant shall refund the amount deposited by first respondent.

5. Several other plot-purchasers from third respondent, did not pay the dues of the third respondent. Appellant did not give them electricity supply. Therefore, in November, 2005, the third respondent moved an application before the Uttar Pradesh Electricity Regulatory Commission (`Commission' for short) complaining that the appellant was arbitrarily refusing power connection to the purchasers of sub-divided plots on the ground that Rs.105.78 lakhs was due by third respondent, though the said liability was disputed and was pending adjudication in court. The Commission by order dated 25.11.2005, issued the following directions to the appellant : (i) to accept a bank guarantee from the third respondent in regard to the disputed claim of Rs.105.78 lakhs; and (ii) on the third defendant furnishing guarantee, release new power connections to the purchasers of sub-divided plots from the third respondent, without insisting upon payment of any amounts towards the alleged dues of third respondent. In pursu