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SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, CJI., HIMA KOHLI, PAMIDIGHANTAM SRI NARASIMHA, JJ.
K.C. Ninan – Appellant
Versus
Kerala State Electricity Board & Ors. – Respondents
Civil Appeal No 2109-2110 of 2004 With Civil Appeal No 2108 of 2004 With Civil Appeal Nos 5312-5313 of 2005 With Civil Appeal No 5314 of 2005 With Civil Appeal No 6587 of 2005 With Civil Appeal No 7303 of 2005 With Civil Appeal No 6579 of 2022 With Civil Appeal Nos 6593-6594 of 2022 With Civil Appeal No 3018 of 2007 With Civil Appeal No 7169 of 2022 With Civil Appeal No 6591 of 2022 With Civil Appeal No 6595 of 2022 With Civil Appeal Nos 6879-6881 of 2022 With Civil Appeal No 6592 of 2022 With Civil Appeal Nos 7103-7104 of 2022 With Civil Appeal No 6828 of 2022 With Civil Appeal No 7064 of 2022 With Civil Appeal No 6590 of 2022 And with Civil Appeal No 3640 of 2022
Decided on : 19-05-2023
Electricity Act, 2003 – Sections 43, 49 and 50 – Restoration of power connection – Duty to supply electricity under Section 43 of 2003 Act is not absolute and is subject to such charges and compliances stipulated by Electric Utilities as part of application for supply of electricity – Duty to supply electricity under Section 43 is with respect to owner or occupier of premises – 2003 Act contemplates a synergy between consumer and premises – Under Section 43, when electricity is supplied, owner or occupier becomes a consumer only with respect to those particular premises for which electricity is sought and provided by Electric Utilities – For an application to be considered as a ‘reconnection’, applicant has to seek supply of electricity with respect to same premises for which electricity was already provided – Even if consumer is same, but premises are different, it will be considered as a fresh connection and not a reconnection – A condition of supply enacted under Section 49 of 1948 Act requiring new owner of premises to clear electricity arrears of previous owner as a precondition to availing electricity supply will have a statutory character – Scope of regulatory powers of State Commission under Section 50 of 2003 Act is wide enough to stipulate conditions for recovery of electricity arrears of previous owners from new or subsequent owners – Electricity Supply Code providing for recoupment of electricity dues of a previous consumer from a new owner have a reasonable nexus with objects of 2003 Act – Rule making power contained under Section 181 read with Section 50 of 2003 Act is wide enough to enable regulatory commission to provide for a statutory charge in absence of a provision in plenary statute providing for creation of such a charge – Power to initiate recovery proceedings by filing a suit against defaulting consumer is independent of power to disconnect electrical supply as a means of recovery under Section 56 of 2003 Act – Implication of expression “as is where is” basis is that every intending bidder is put on notice that seller does not undertake responsibility in respect of property offered for sale with regard to any liability for payment of dues, like service charges, electricity dues for power connection, and taxes of local authorities – In exercise of jurisdiction under Article 142 of Constitution, Electric Utilities have been directed in facts of cases before this Court to waive outstanding interest accrued on principal dues from date of application for supply of electricity by auction purchasers. (Para 328)
Facts of the case:
New owners, who purchased properties in auction, applied for new electricity connections for premises to which electricity had been disconnected for failure to pay the dues. Electric Utilities refused to provide an electricity connection unless the auction purchaser paid the dues of the previous owner. This refusal was derived from powers conferred under subordinate legislations, notifications, electricity Supply Codes or state regulations. Denial of electricity supply resulted in the institution of petitions under Article 226 before High Court, leading to the judgments which are in appeal.
Findings of Court:
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. Delay in the court proceedings should not be to the further detriment of the litigants.
Result : Appeal dismissed.
Key Points: - The duty to supply electricity under Section 43 is not absolute and is subject to compliances such as payment of charges and other conditions stipulated in the Electricity Supply Code (!) . - Electricity arrears of a previous owner can be recovered from a new owner if there is a statutory provision or valid terms and conditions of supply that authorize such recovery (!) (!) . - An "as is where is" sale puts the purchaser on notice that they may be liable for existing dues, unless the law expressly provides otherwise (!) (!) . - The Electricity Supply Code framed by the State Commission can stipulate conditions for recovery of arrears from a new owner, and such conditions have a reasonable nexus with the objectives of the 2003 Act (!) (!) . - The principle of caveat emptor applies, and the purchaser is expected to verify the status of electricity dues before purchase (!) (!) . - Section 56(2) bars the remedy of disconnection after two years from when the sum first became due, but does not bar other civil remedies for recovery (!) (!) . - A condition requiring a new owner to clear previous owner’s dues is valid and enforceable if it conforms to the Electricity Supply Code and the scheme of the 2003 Act (!) (!) . - In cases involving old industrial units and rehabilitation schemes, statutory provisions like SICA may override standard conditions of supply (!) (!) . - The court has directed that auction purchasers be waived from bearing interest on outstanding principal dues from the date of application for supply (!) (!) . - The right to disconnect supply under Section 56 is a continuing right and is not extinguished by the limitation period (!) .
JUDGMENT :
Dhananjaya Y. Chandrachud, CJI.
| Table of Contents | |
| A. | Overview |
| B. | Regulatory Regime |
| C. | The position in law |
| D. | Issues |
| E. | Submissions |
| F. | Analysis |
| G. | Application: Facts of Individual Cases |
| I. Kerala | |
| II. Maharashtra | |
| III. Gujarat | |
| IV. Assam | |
| V. West Bengal | |
| H. | Equity and Fairness |
| I. | Conclusions |
A. Overview
1. The nineteen cases in this batch of appeals follow a similar pattern of facts. The supply of electricity was discontinued due to the failure of the previous owners to pay the dues for consumption of electricity on the premises. The previous owners had borrowed money or raised loans on the security of their premises. In some cases, the erstwhile owner went into liquidation. The premises were sold in auction sales generally on an “as is where is” basis. The new owners, who purchased the properties in auction, applied for new electricity connections for the premises to which electricity had been disconnected for failure to pay the dues. The Electric Utilities refused to provide an electricity connection unless the auction purchaser paid the dues of the previous owner. This refusal was derived from powers conferred under subordinate legislations, notifications, electricity Supply Codes or state regulations. The denial of electricity supply resulted in the institution of petitions under Article 226 before the High Court, leading to the judgments which are in appeal.
2. In Maharashtra State Electricity Board v. Super & Stainless Hi Alloy Ltd, Civil Appeal Nos 5312-5313 of 2005, this Court by an order dated 24 August 2006 referred the Civil Appeals to a Bench of three Judges for dealing with the issue of the recovery of arrears of electricity. The order of reference referred the question of whether electricity dues constitute a charge on the property so far as the transferor and the transferee of the unit are concerned.
3. The matters involving similar nature of dispute were tagged along with the above reference by an order dated 1 November 2007. The issue which is raised in these appeals is whether the arrears of unpaid electricity dues outstanding from the erstwhile owner can be claimed from the subsequent owner, who has acquired the property in proceedings initiated to enforce mortgages or to pay off the dues of creditors.
B. Regulatory Regime
4. Electricity is a concurrent subject under the Constitution of India. Prior to the enactment of the Electricity Act 20032[“2003 Act”], the Electricity Act 19103[“1910 Act”] governed the supply and use of electrical energy in India. The 1910 Act prescribed the legal framework for laying down cables and other works related to the supply of electricity. It also laid down a legal framework for supply of electrical energy and imposed certain responsibilities and obligations on persons licensed to supply electricity with a view to incentivise the growth of the electricity industry through private licensees.
5. Section 2(c) of the 1910 Act defined “consumer” as any person supplied with energy by a licensee or any other person engaged in the business of supplying energy to the public under the Act, and included any person whose premises were for the time being connected for the purposes of receiving energy. Section 21(2) empowered a licensee to make conditions to regulate their relations with persons who were or intend to become consumers. Section 22 obligated a licensee to supply electrical energy, on application, to every person within the area of supply on the same terms as those on which any other person in the same area was entitled. Section 24 empowered the licensee to disconnect the supply of electricity if any person neglected to pay any charge or sum for energy due to the licensee.
6. The 1910 Act was found inadequate for a coordinated development of electricity and a “grid-system” in India. Therefore, the Electricity
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