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SUPREME COURT OF INDIA
Sanjay Kishan Kaul, K.M. Joseph, JJ.
TELANGANA STATE SOUTHERN POWER DISTRIBUTION COMPANY LIMITED & ANR. – Appellants
Versus
M/S. SRIGDHAA BEVERAGES – Respondent
CIVIL APPEAL NO.1815 OF 2020 (Arising out of Special Leave Petition (C) No.19292 of 2018)
Decided On : 01-06-2020
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 13 – Security Interest (Enforcement) Rules, 2002 – Rules 8 and 9 – Electricity Act, 2003 – Section 56 – Auction sale of secured asset – Liability of auction-purchaser towards previous electricity dues – Unit was being sold on “as is where is, what is there is and without any recourse basis” – Dues under terms and conditions of supply partake character of statutory dues – As an auction purchaser bidding in an “as is where is, whatever there is and without recourse basis”, respondent would have inspected premises and made inquiries about dues in all respects – Facts of present case are more explicit in character as there is a specific mention of quantification of dues of various accounts including electricity dues – Respondent was clearly put to notice in this behalf – Electricity dues, where they are statutory in character under Electricity Act and as per terms & conditions of supply, cannot be waived in view of provisions of the Act itself more specifically Section 56 of Electricity Act, 2003 and cannot partake character of dues of purely contractual nature – Where, as in cases of E-auction notice in question, existence of electricity dues, whether quantified or not, has been specifically mentioned as a liability of purchaser and sale is on “as is where is, what is there is and without any recourse basis”, liability to pay electricity dues exists on respondent (purchaser) – Appellant No.1 would be well within its right to demand arrears due of last owner, from respondent-purchaser – Impugned orders cannot be sustained and accordingly set aside. (Paras 3, 9, 11, 15 and 16)
Facts of the Case:
Respondent is an auction-purchaser of a unit owned by M/s. SB Beverages Private Limited, which failed to pay its dues, resulting in auction by Syndicate Bank (Secured Creditor) under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). Moot point of law, which arises for consideration, is whether liability towards previous electricity dues of the last owner could be mulled on to the respondent.
Findings of the Court:
As an auction purchaser bidding in an “as is where is, whatever there is and without recourse basis”, the respondent would have inspected the premises and made inquiries about the dues in all respects. The facts of the present case, as in the judgment aforesaid, are more explicit in character as there is a specific mention of the quantification of dues of various accounts including electricity dues. The respondent was, thus, clearly put to notice in this behalf.
Result : Appeal allowed.
Key Points: - Dues under terms and conditions of supply are statutory dues (!) . - Electricity dues, being statutory under the Electricity Act and supply terms, cannot be waived and are not purely contractual (!) . - An auction purchaser bidding "as is where is, whatever there is and without any recourse basis" is put on notice to inspect and inquire about all dues, including electricity (!) . - Specific mention of quantified electricity dues in the auction notice creates liability on the respondent (purchaser) (!) . - Clause 8.4 of the General Terms and Conditions requires the seller to clear all dues before sale; otherwise, the supplier may refuse supply to the premises (!) . - Judicial thinking holds that statutory electricity dues cannot be waived and must be cleared by the purchaser in E-auction sales with such clauses (!) (!) . - The impugned orders are set aside; the appellant is entitled to demand arrears from the respondent-purchaser (!) . - The appeal is allowed, with parties bearing their own costs (!) .
JUDGMENT
SANJAY KISHAN KAUL, J.
1. The respondent is an auction-purchaser of a unit owned by M/s. SB Beverages Private Limited, which failed to pay its dues, resulting in the auction by Syndicate Bank (Secured Creditor) under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the ‘SARFAESI Act’). The moot point of law, which arises for consideration, is whether the liability towards previous electricity dues of the last owner could be mulled on to the respondent.
2. The unit in question is a mineral water bottling plan situated in land measuring 1 acre 13 guntas in Sy. No.283 at Rampally Village, Keesara Mandal, Medchal District. As mentioned aforesaid, on account of failure to repay a loan, the creditor, Syndicate Bank, brought the property to auction for which an E-auction sale notice dated 25.5.2017 was issued in this behalf, in which the respondent was the successful auction-purchaser. In order to appreciate the controversy before us, it is necessary to reproduce some of the relevant clauses of the auction notice:
“The property described below is being sold on “AS IS WHERE IS, WHATEVER THERE IS AND WITHOUT RECOURSE BASIS” under the rule no.8 & 9 of the Security Interest (Enforcement) Rules (hereinafter referred to as the rules) for the recovery of the dues detailed as under:
…. …. …. …. …. ….
The total amount due as on 30-04- 2017
Rs.13,97,26,258.77 (Rs. Thirteen crores ninety seven lakhs twenty six thousand two hundred fifty eight and paisa seventy seven) with future interest & costs till date of payment accounts no 1) 373OSLB140940002 & 2) 30151010006439
Details of encumbrances over the property, as known to the bank
For property no.01 Nil
For property no.02: The subsequent to our MOD, the following transactions observed in EC
1. As per the doc no 2611/2016 dated 15/06/2016, the mortgager has sold the property to the extent of 540 sq yds., to private party, for worth of Rs.972000/-
2. As per the doc no.657/2015 dated 05/02/2015, the mortgager has sold the property to the extent of 620.83 sq.yds. to The Executive officer Ramapally Gramapanchayat for worth of Rs.1242000/-.
3. As per the doc no 2721/2014 dated 05/08/2014, the mortgager has sold the property to the extent of 204.75 sq yds to The Gramapanchayat Executive officer Ramapally for worth of Rs.248000/-.
Details of outstanding dues of Local Government (Property tax, Water sewerage, electricity bills, etc.)
Rs.83,17,152/- (Eighty Three Lakhs Seventeen Thousand One Hundred Fifty Two Only)
Reserve Price of Property
For property no.01 Rs.77,63,000/-
For property no.02 Reserve Price: Rs.5,83,37,000/- (Rupees five crores eighty three Lakhs thirty seven Thousand Only)
Total 28 no of Machineries items reserve price: Rs.3,25,28,000/- (three crores twenty five lakhs twenty eight thousand only)
…. …. …. …. …. ….
TERMS AND CONDITIONS
…. …. …. …. …. ….
21. The successful bidder shall bear the stamp duties, charges including those of sale certificate, registration charges, all statutory dues payable to central/state government, taxes and rates and outgoing, both existing and future relating to the properties.
…. …. …. …. …. ….
24. The property is sold in “AS IS WHERE IS, WHAT IS THERE IS AND WITHOUT ANY RECOURSE BASIS” in all respects and subject to statutory dues if any. The intending bidders should make discrete enquiry as regards any claim, charges/encumbrances on the properties, of any authority, besides the bank’s charges and should satisfy themselves about the title, extent, quality and quantity of the property before submitting their bid. For any discrepancy in the property the participating bidder is solely responsible for all future recourses from the date of submission
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