K. C. NINAN versus KERALA STATE ELECTRICITY BOARD & ORS. on 19 May 2023

[2023] 9 S.C.R. 637 : 2023 INSC 560

K. C. NINAN

v.

KERALA STATE ELECTRICITY BOARD & ORS.

(Civil Appeal No 2109-2110 of 2004)

MAY 19, 2023

[DR DHANANJAYA Y CHANDRACHUD, CJI,HIMA KOHLI AND PAMIDIGHANTAM SRINARASIMHA, JJ.]

Electricity Act, 2003 – ss. 42 and 61 – Liability of subsequentowner to pay electricity charges due on previous owner – Whetherthe arrears of unpaid electricity dues outstanding from the erstwhileowner can be claimed from the subsequent owner, who has acquiredthe property in proceedings initiated to enforce mortgages or topay off the dues of creditors – Held: In order to provide a supply ofelectricity to consumers, a distribution licensee is required to laydown infrastructure such as electricity lines, transformers, and otherequipment – The licensees are required to maintain the infrastructureeven if the consumer does not consume electricity – The 2003 Acthas been enacted to promote the development of the electricityindustry as well as to protect the interests of the consumers and toensure the supply of electricity to all areas – The Supply Conditionsproviding for recoupment of electricity dues of a previous consumerfrom a new owner are necessary to recover the costs incurred forlaying down the infrastructure as well as the ongoing currentliabilities towards the electricity generation and transmissioncompanies – Apart from protecting a public good, such conditionsalso have a reasonable nexus with objects of the 2003 Act, such asa robust development of the electricity industry, protecting theinterests of consumers as well as the financial interests of thedistribution licensees – It is just and reasonable for distributionlicensees to specify conditions of supply requiring the subsequentowner or occupier of premises to pay the arrears of electricity duesof the previous owner or occupier as a pre-condition for the grantof an electricity connection to protect their commercial interests, aswell as the welfare of consumers of electricity.

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ATransfer of Property Act, 1882 – s.100 – Charge – Whetherarrears of electricity can become a charge or encumbrance overthe premise – Effect of statutory regulations or rules enacted by aregulatory commission – Held: A charge cannot be enforced againsta transferee if they have no notice of the same, unless the requirementof such notice has been dispensed with by law – The provisions ofBthe 1910 Act, 1948 Act, and the 2003 Act do not provide that thearrears of electricity dues would constitute a charge on the propertyor that such a charge shall be enforceable against a transfereewithout notice – In Isha Marbles, the Supreme Court observed thatunder the provisions of 1910 Act r/w. 1948 Act, electricity arrearsCdo not create a charge over the property – Consequently, in generallaw, a transferee of the premises cannot be made liable for theoutstanding dues of the previous owner since electricity arrears donot automatically become a charge over the premises – The rulemaking power contained u/s. 181 r/w. s. 50 of Electricity Act, 2003is wide enough to enable the regulatory commission to provide forDa statutory charge in the absence of a provision in the plenary statuteproviding for creation of such a charge – The electricity utilitiescan create a charge by framing subordinate legislation or statutoryconditions of supply enabling recovery of electricity arrears from asubsequent transferee – Such a condition is rooted in the importanceEof protecting electricity which is a public good – Public utilitiesinvest huge amounts of capital and infrastructure in providingelectricity supply – The failure or inability to recover outstandingelectricity dues of the premises would negatively impact thefunctioning of such public utilities and licensees – Electricity Act,2003 – ss. 50 and 181– Maharashtra Electricity RegulatoryFCommission (Electricity Supply Code and other Conditions ofSupply) Regulations, 2005 – Regulation 10.5.

Conclusion

Electricity Act, 2003 – s. 43 – Whether the duty to supplyelectricity is absolute – Held: s.43 begins with the words “Save asotherwise provided in this Act” – Hence, the operation of s.43 willGalso be subject to compliance with the other provisions of the 2003Act – Under s.43, the distribution licensee is obligated to supplyelectricity to the premises of an owner or occupier, provided thatthe owner or occupier pays all charges and complies with allconditions stipulated by the distribution licensee – The proviso toHs.43(2) further refers to the “price” payable by an applicant to demand or to continue to receive the supply of electricity from adistribution licensee – The term “price” has to be given a broadmeaning to include all the ‘tariffs’ and ‘charges’ that may bedetermined by the appropriate commission – Thus, the duty to supplyelectricity u/s.43 is not absolute, and is subject to the such chargesand compliances stipulated by the distribution licensees as part ofthe application.

Electricity Act, 2003 – ss.2(15) and 43 – Whether duty tosupply electricity is with respect to the premises or to the consumer– Held: The definition of ‘supply’ specifically states that supplymeans the sale of electricity to a consumer – Considering the overallscheme of the 2003 Act, the supply of electricity is to the consumerand not the premises – It is the owner or occupier who has thestatutory right to “demand” electricity for the premises under theiruse or occupation – Thus, it is always the consumer who is suppliedelectricity and is held liable for defaulting on payment of dues orcharges for supply of electricity Auction – Auction sale of premises on “as in where is” basis– With or without reference to electricity arrears-Implication – Held:When a property is sold on an “as is where is” basis, encumbranceson the property stand transferred to the purchaser upon the sale –All prospective auction purchasers are put on notice of the liabilityto pay the pending dues when an appropriate “as is where is” clauseis incorporated in the auction sale agreement – While examiningthe effect of an “as is where is” clause, the facts and circumstancesof each case individually, along with the terminology of the clausesgoverning the auction sales must be taken into consideration, toarrive at an equitable decision.

Interpretation of Statutes – Principle of Ejusdem Generis –Rule of Construction – Applicability of – Ingredients – Discussed.

Disposing of the appeals, the Court

HELD:1. Under Section 43 of the Electricity Act, 2003, thedistribution licensee is obligated to supply electricity to thepremises of an owner or occupier, provided that the owner oroccupier pays all charges and complies with all conditionsstipulated by the distribution licensee. Section 43 begins with AB

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Athe words “Save as otherwise provided in this Act”. Hence, theoperation of Section 43 will also be subject to compliance withthe other provisions of the 2003 Act. The proviso to Section 43(2)further refers to the “price” payable by an applicant to demandor to continue to receive the supply of electricity from adistribution licensee. The “price” is to be determined by theBappropriate commission. This “price” is the consideration, asdetermined by the State Commission, that an applicant pays forreceiving a supply of electricity. The term “price” has to be givena broad meaning to include all the ‘tariffs’ and ‘charges’ that maybe determined by the appropriate commission. This includes theC‘charges’ fixed under Section 45 by the appropriate commissionfrom time to time and the ‘charges’ that a distribution licenseemay impose under Section 46 to recover any reasonableexpenditure. The ambit of the term ‘price’ is wide enough to alsoinclude the statutory dues that the State Commission decides toenact by way of regulations under Section 50. Thus, the duty toDsupply electricity under Section 43 is not absolute, and is subjectto such charges and compliances stipulated by the distributionlicensees as part of the application. [Paras 32, 40, 41-43][670-B-C; 672-F-G; 673-A-B]

E2. The definition of ‘supply’ specifically states that supplymeans the sale of electricity to a consumer. The said definitiondoes not indicate that supply of electricity is vis-a-vis thepremises of the consumer. Considering the overall scheme ofthe 2003 Act, the supply of electricity is to the consumer and notthe premises. It is always the consumer who is supplied electricityFand is held liable for defaulting on payment of dues or charges forsupply of electricity. Perforce, the premises cannot be held to bea defaulter and no dues can be attached to the premises of theconsumer. [Paras 50 and 56][676-D]

G3. Under Section 43 of the 2003 Act, the owner or occupierof premises can seek a supply of electricity for particularpremises. Perforce, when electricity is supplied, the owner oroccupier becomes a consumer only with respect to thoseparticular premises for which electricity is sought and provided.For example, when a person owning an apartment in a residentialHcomplex applies for supply of electricity to such an apartment, they become a consumer only with respect to the apartment forwhich the application is made and to which electricity is supplied.Such a person may own another apartment to which electricitymay already be supplied, but they will be considered a separateconsumer with respect to the second apartment. For an applicationto be considered as a ‘reconnection’, the applicant has to seeksupply of electricity with respect to the same premises for whichelectricity was already provided. Even if the consumer is the same,but the premises are different, it will be considered as a freshconnection and not a reconnection. [Para 61][679-H; 680-A-C]

4. The scheme of the 2003 Act makes it evident that theregulatory powers of the State Commission under section 181(2)are of wide import. The Commission has certain plenary powersto regulate on matters contained in section 181(2), includingElectric Supply Code under Section 50. Accordingly, theCommission can notify a Supply Code governing all the matterspertaining to supply of electricity such as “recovery of charges”,“disconnection of supply” and “restoration of supply”. In theopinion of this Court, such an authority also extends to stipulatingconditions for recovery of electricity arrears of previous ownersfrom new or subsequent owners. [Para 84][690-F-G]

5. The 2003 Act has been enacted to promote thedevelopment of the electricity industry as well as to protect theinterests of the consumers and to ensure the supply of electricityto all areas. The Supply Conditions providing for recoupment ofelectricity dues of a previous consumer from a new owner arenecessary to recover the costs incurred for laying down theinfrastructure as well as the ongoing current liabilities towardsthe electricity generation and transmission companies. In theabsence of such conditions, it may be difficult for the distributionlicensees to recover defaulted payments, adding to the revenuedeficits. This may adversely impact the financial health of thedistribution licensees to the detriment of the interests of theconsumers. The Conditions of Supply and Electricity Supply Code AB

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Awhich require the payment of electricity dues of a previous owneras a condition for the grant of an electricity connection have aclear nexus to the scheme of the parent legislations and theobjectives sought to be achieved. It is just and reasonable fordistribution licensees to specify conditions of supply requiringthe subsequent owner or occupier of premises to pay the arrearsBof electricity dues of the previous owner or occupier as a pre-condition for the grant of an electricity connection to protect theircommercial interests, as well as the welfare of consumers ofelectricity. [Paras 87 and 91][691-G-H; 692-A; 693-E-F]

C6. The electricity utilities can create a charge by framingsubordinate legislation or statutory conditions of supply enablingrecovery of electricity arrears from a subsequent transferee. Sucha condition is rooted in the importance of protecting electricitywhich is a public good. Public utilities invest huge amounts ofcapital and infrastructure in providing electricity supply. TheDfailure or inability to recover outstanding electricity dues of thepremises would negatively impact the functioning of such publicutilities and licensees. In the larger public interest, conditionsare incorporated in subordinate legislation whereby ElectricUtilities can recoup electricity arrears. Recoupment of electricityEarrears is necessary to provide funding and investment in layingdown new infrastructure and maintaining the existinginfrastructure. In the absence of such a provision, Electric Utilitieswould be left without any recourse and would be compelled togrant a fresh electricity connection, even when huge arrears ofelectricity are outstanding. Besides impacting on the financialFhealth of the Utilities, this would impact the wider body ofconsumers. [Para 113][700-F-H; 701-A]

7. The period of limitation under Section 56(2) is relatableto the sum due under Section 56. The sum due under Section 56relates to the sum due on account of the negligence of a personGto pay for electricity. Section 56(2) provides that such sum duewould not be recoverable after the period of two years from whensuch sum became first due. The means of recovery provided underSection 56 relate to the remedy of disconnection of electric supply.The right to recover still subsists. This Court rejects thesubmission of the auction purchasers that the recovery ofH

outstanding electricity arrears either by instituting a civil suitagainst the erstwhile consumer or from a subsequent transfereein exercise of statutory power under the relevant conditions ofsupply is barred on the ground of limitation under Section 56(2)of the 2003 Act. Accordingly, while the bar of limitation underSection 56(2) restricts the remedy of disconnection under Section56, the licensee is entitled to recover electricity arrears throughcivil remedies or in exercise of its statutory power under theconditions of supply. [Paras 129 and 131][709-B-C; F-H]

8. All prospective auction purchasers are put on notice ofthe liability to pay the pending dues when an appropriate “as iswhere is” clause is incorporated in the auction sale agreement.It is for the intending auction purchaser to satisfy themselves inall respects about circumstances such as title, encumbrances andpending statutory dues in respect of the property they proposeto purchase. In a public auction sale, auction purchasers havethe opportunity to inspect the premises and ascertain the facilitiesavailable, including whether electricity is supplied to the premises.Information about the disconnection of power is easilydiscoverable with due diligence, which puts a prudent auctionpurchaser on a reasonable enquiry about the reasons for thedisconnection. When electricity supply to a premises has beendisconnected, it would be implausible for the purchaser to assertthat they were oblivious of the existence of outstanding electricitydues. In terms of the legal doctrine of caveat emptor, it becomesthe duty of the buyer to exercise due diligence. A seller is notunder an obligation to disclose patent defects of which a buyerhas actual or constructive notice in terms of Section 3 of theTransfer of Property act, 1882. However, in terms of Section55(1)(a), in the absence of a contract to the contrary, the seller isunder an obligation to disclose material defects in the propertyor in the seller’s title thereto of which he is aware and which abuyer could not with ordinary care discover for himself. Whileexamining the effect of an “as is where is” clause, the facts andcircumstances of each case individually, along with the terminologyof the clauses governing the auction sales must be taken intoconsideration, to arrive at an equitable decision. [Paras 141-143][715-G-H; 716-A-E]

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A9. The rule of “ejusdem generis” is a principle ofconstruction. The rule is that when general words follow particularand specific words of the same nature, the general words mustbe confined to the things of the same kind as those specified. Itapplies when the following ingredients are present: (i) the statutecontains an enumeration of specific words; (ii) the subjects ofBenumeration constitute a class or category; (iii) that category isnot exhausted by the enumeration; (iv) a general term followsthe enumeration; and (v) there is no indication of a differentlegislative intent. For the application of the ejusdem generis rule,it is essential that enumerated things before the general wordsCmust constitute a distinct category or a genus or a family whichadmits of a number of members. [Paras 187 and 188][732-D-F]Conclusions

10. a). The duty to supply electricity under Section 43 ofthe 2003 Act is not absolute, and is subject to the such chargesDand compliances stipulated by the Electric Utilities as part of theapplication for supply of electricity; b). The duty to supplyelectricity under Section 43 is with respect to the owner oroccupier of the premises. The 2003 Act contemplates a synergybetween the consumer and premises. Under Section 43, whenEelectricity is supplied, the owner or occupier becomes a consumeronly with respect to those particular premises for which electricityis sought and provided by the Electric Utilities; c). For anapplication to be considered as a ‘reconnection’, the applicanthas to seek supply of electricity with respect to the same premisesfor which electricity was already provided. Even if the consumerFis the same, but the premises are different, it will be consideredas a fresh connection and not a reconnection; d). A condition ofsupply enacted under Section 49 of the 1948 Act requiring thenew owner of the premises to clear the electricity arrears of theprevious owner as a precondition to availing electricity supplyGwill have a statutory character; e). The scope of the regulatorypowers of the State Commission under Section 50 of the 2003Act is wide enough to stipulate conditions for recovery ofelectricity arrears of previous owners from new or subsequentowners; f). The Electricity Supply Code providing for recoupment of electricity dues of a previous consumer from a new owner havea reasonable nexus with the objects of the 2003 Act; g). The rulemaking power contained under Section 181 read with Section 50of the 2003 Act is wide enough to enable the regulatorycommission to provide for a statutory charge in the absence of aprovision in the plenary statute providing for creation of such acharge; h). The power to initiate recovery proceedings by filing asuit against the defaulting consumer is independent of the powerto disconnect electrical supply as a means of recovery underSection 56 of the 2003 Act; i). The implication of the expression“as is where is” basis is that every intending bidder is put onnotice that the seller does not undertake responsibility in respectof the property offered for sale with regard to any liability for thepayment of dues, like service charges, electricity dues for powerconnection, and taxes of the local authorities; and j). In theexercise of the jurisdiction under Article 142 of the Constitution,the Electric Utilities have been directed in the facts of cases towaive the outstanding interest accrued on the principal dues fromthe date of application for supply of electricity by the auctionpurchasers. [Para 328][781-B-H; 782-A-E]

PTC India Ltd. v. Central Electricity RegulatoryCommission (2010) 4 SCC 603 : [2010] 3 SCR 609 –followed.

Deputy Commercial Tax Officer, Park Town Division v.Sha Sukhraj Peerajee AIR 1968 SC 67 : [1967] 3 SCR 661 and State of Kerala v. VT Kallianikutty (1999) 3SCC 657 : [1999] 2 SCR 372 - held not applicable.

Indian Council of Legal Aid and Advice v. Bar Councilof India (1995) 1 SCC 732 : [1995] 1 SCR 304; IndiaCement Ltd & Ors v. State of Tamil Nadu (1990) 1 SCC12 : [1989] 1 Suppl. SCR 692; Punjab Urban Planningand Development Authority v. Raghu Nath Gupta (2012)8 SCC 197 : [2012] 8 SCR 118; Delhi DevelopmentAuthority v. Kenneth Builders and Developers PvtLimited (2016) 13 SCC 561 : [2016] 3 SCR 1126 –distinguished.

Deepak Theatre v. State of Punjab (1992) 1 Supp SCC684 : [1991] 3 Suppl. SCR 242; K Ramanathan v. State AB

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of Tamil Nadu (1985) 2 SCC 116 : [1985] 2 SCR 1028;V S Rice and Oil Mills v. State of Andhra Pradesh [1964]7 SCR 456; Dakshin Haryana Bijli Vitran Nigam Ltd v.M/s Paramount Polymers Pvt Ltd. AIR 2007 SC 2 :[2006] 7 Suppl. SCR 635 and Paschimanchal VidyutVitran Nigam Limited v. DVS Steels and Alloys PrivateLimited (2009) 1 SCC 210 : [2008] 15 SCR 766 – reliedon.

Brihanmumbai Electric Supply & TransportUndertaking v. Maharashtra Electricity RegulatoryCommission (2015) 2 SCC 438 : [2014] 6 SCR 50 –affirmed.

Isha Marbles v. Bihar State Electricity Board (1995) 2SCC 648 : [1995] 1 SCR 847; Ahmedabad ElectricityCo. Ltd. v. Gujarat Inns (P) Ltd. (2004) 3 SCC 587 :[2004] 3 SCR 23; Hyderabad Vanaspathi Ltd v. AndhraPradesh State Electricity Board (1998) 4 SCC 470 :[1998] 2 SCR 620; Telangana State Southern PowerDistribution Co. Ltd. v. Srigdhaa Beverages (2020) 6SCC 404 : [2020] 4 SCR 295; Chandu Khamaru v.Nayan Malik (2011) 12 SCC 314 : [2011] 11 SCR 112 ;AP TRANSCO v. Sai Renewable Power (P) Ltd. (2011)11 SCC 34 : [2010] 8 SCR 636; BSES Ltd. v. TataPower Co. Ltd. (2004) 1 SCC 195 : [2003] 4 Suppl.SCR 932; Commissioner of Sales Tax, Madhya Pradesh,Indore v. Madhya Pradesh Electricity Board, Jabalpur(1969) 1 SCC 200 : [1969] 2 SCR 939; State of AP v.National Thermal Power Corporation Ltd. (2002) 5 SCC203 : [2002] 3 SCR 278; Uttar Pradesh PowerCorporation Limited v. Anis Ahmad (2013) 8 SCC 491: [2013] 13 SCR 388; Jivendra Nath Kaul v. Collector/District Magistrate (1992) 3 SCC 576 : [1992] 3 SCR 642; State of Uttar Pradesh v. Hindustan AluminiumCorporation (1979) 3 SCC 229 : [1979] 3 SCR 709;Punjab State Electricity Board v. Bassi Cold Storage,Kharar and Another (1994) 2 Supp SCC 124 : [1994]3 SCR 33; Jagdamba Paper Industries (P) Ltd v.Haryana State Electricity Board (1983) 4 SCC 508 :

K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &ORS.

[1984] 1 SCR 165; Bihar State Electricity Board v.Parmeshwar Kumar Agarwala (1996) 4 SCC 686 :[1996] 3 Suppl. SCR 29; Ferro Alloys Corpn. Ltd v. AP State Electricity Board (1993) 4 Supp SCC 136 :[1993] 3 SCR 199; India Thermal Power Ltd v. State ofMP (2000) 3 SCC 379 : [2000] 1 SCR 925; HaryanaState Electricity Board v. Hanuman Rice Mills, Dhanaur(2010) 9 SCC 145 : [2010] 10 SCR 217; JK IndustriesLtd. v. Union of India (2007) 13 SCC 673 : [2007]12 SCR 136; M.L. Abdul Jabbar Sahib v. M.V. VenkataSastri & Sons (1969) 1 SCC 573 : [1969] 3 SCR 513;Ahmedabad Municipal Corporation v. Haji AbdulgafurHaji Hussenbha (1971) 1 SCC 757; Dattatreya ShankerMote v. Anand Chintaman Datar & Ors. (1974) 2 SCC799 : [1975] 2 SCR 224; State of Karnataka v. ShreyasPapers Pvt. Ltd. (2006) 1 SCC 615 : [2006] 1 SCR 235;AI Champdany Industries Ltd. v. Official Liquidator(2009) 4 SCC 486 : [2009] 2 SCR 705; Ajmer VidyutVitran Nigam Limited v. Rahamatullah Khan (2020) 4SCC 650 : [2020] 2 SCR 929; M/s Prem Cortex v. UttarHaryana Bijli Vitran Nigam Limited Judgment dt.5.10.2021 in CA 7235 of 2009; Bihar SEB v. IcebergIndustries Ltd. (2020) 20 SCC 745 : [2020] 6 SCR 231;M/s Swastic Industries v. Maharashtra State ElectricityBoard (1997) 9 SCC 465 : [1997] 1 SCR 532;Kusumam Hotels Pvt Ltd v. Kerala State Electricity Board(2008) 12 SCC 213 : [2008] 9 SCR 752; U.T.Chandigarh Administration v. Amarjeet Singh (2009) 4SCC 660 : [2009] 4 SCR 54; State of Madhya Pradeshv. Tikamdas (1975) 2 SCC 100 : [1975] Suppl. SCR 234; Special Officer, Commerce, North EasternElectricity Supply Company of Orissa v. RaghunathPaper Mills Private Limited (2012) 13 SCC 479 : [2012]13 SCR 71; Amar Chandra v. Collector of Excise,Tripura (1972) 2 SCC 442 : [1973] 1 SCR 533; GrasimIndustries Ltd. v. Collector of Customs (2002) 4 SCC297 : [2002] 2 SCR 945; Lokmat Newspapers (P) Ltd.v. Shankarprasad (1999) 6 SCC 275 : [1999] 3 SCR 907; Jaiprakash Associates Ltd. v. Tehri Hydro A

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[2023] 9 S.C.R.

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ADevelopment Corpn. (India) Ltd. (2019) 17 SCC 786 :[2019] 2 SCR 41; Adoni Cotton Mills Ltd. v. AndhraPradesh State Electricity Board (1976) 4 SCC 68 :[1977] 1 SCR 133; Mangalore Electric Supply Co. Ltd.v. The Commissioner of Income Tax, West Bengal (1978)3 SCC 248 : [1978] 3 SCR 913; Valparaiso KottarathilBKochuni v. States of Madras & Kerala [1960] 3 SCR887; BHEL v. Globe Hi-Fabs Ltd. (2015) 5 SCC 718;Tata Motors Ltd v. Pharmaceutical Products of IndiaLtd. (2008) 7 SCC 619 : [2008] 9 SCR 267; LIC v. D JBahadur (1981) 1 SCC 315 : [1981] 1 SCR 1083; UPCState Electricity Board v. Hari Shankar Jain (1978) 4SCC 16 : [1979] 1 SCR 355; KSL & Industries Ltd v.Arihant Threads Ltd. (2015) 1 SCC 166 : [2014] 14SCR 1097 – referred to.

Suraj v. KSEB 2005 (3) KLT 856; A Ramachandran v.DKSEB 2000 SCC OnLine Ker 75 – referred to.

Case Law Reference

K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &ORS.

[2023] 9 S.C.R.

From the Judgment and Order dated 13.02.2003 of the High Courtof Kerala at Ernakulam in O.P. No.10441 of 1991 and dated 03.09.2003in R.P. No. 307 of 2003.G

With

Civil Appeal Nos. 2108 of 2004, 5312-5313, 5314, 6587, 7303 of2005, 6579, 6593-6594 of 2022, 3018 of 2007, 7169, 6591, 6595, 6879-6881, 6592, 7103-7104, 6828, 7064, 6590 and 3640 of 2022.

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ORS.

Ranjit Kumar, Vijay Hansaria, M.G. Ramachandran, Ajit S Bhasme,V. Giri, Shekhar Naphade, Rana Mukherjee, Bharat Patel, P.S. Patwalia,Ravindra Kumar, Sr. Advs., Mahesh Agarwal, Ankur Saigal, Ms. SayareeBasu Mallick, Abhinabh Garg, Shashwat Singh, E.C. Agrawala, PradeepMisra, Daleep Dhyani, Manoj Kumar Sharma, Kshitij Mittal, Ms.Madhumita Bhattacharjee, Ms. Srija Choudhury, Ms. Kavya Jhawar,Ms. Srishti Khindaria, Bhargava V. Desai, Ms. Charu Modi, Deepanshu,Sanjay Kumar Visen, Mukesh Kumar Pandey, Suresh Kumar Bhan,Sandeep Joshi, Ms. Ritu Rastogi, Ms. Mohini Kumari, Aman, E. M. S.Anam, Puneet Jain, Christi Jain, Yogit Kamat, Mann Arora, UmangMehta, Ms. Shruti Singh, Ms. Pratibha Jain, Romy Chacko, Sudesh KumarSingh, Nikhil Jain, Susheel Tomar, Puneet Singh Bindra, Satya Prakash,Vinod Kumar Jain, Prashant Mohla, Ms. Simran Jeet, Yasharth Kant,Ms. Zinnea Mehta, Shrirang B. Varma, Sagar Juneja, Harshit Sethi,Neeraj Kumar Verma, Ms. Kavya Jhawar, Ms. Sneha Kalita, Ms.Hemantika Wahi, Ms. Jesal Wahi, Anand Ganesan, Ms. Aneesh Bajaj,Amar Dave, Ms. Nandini Gore, Ms. Neha Khandelwal, Ms. RamyaKhanna, Ms. Farah Hashmi, Dr. Prashant Pratap, Kumar Mitakshar,Yashwant Gaggar, Mrs. Manik Karanjawala, R.B. Phookan, Ms. NehaTandon, Shailesh Madiyal, Chirag M. Shroff, Ms. Ruby Singh Ahuja,Raj Singh Rana, Vijay K Verma, Ms. Akshita Mohnot, Rajat Srivastav,Praveen Chaturvedi, M.Y. Deshmukh, Ms. Manjeet Kirpal, Ms.Adveetiya Sharma, Rameshwar Prasad Goyal, Ashok Mathur, PurvishJitendra Malkan, Alok Kumar, Mrs. Dharita Purvish Malkan, Ms. NandiniChhabra, Vismay Malkan, Ms. Dhruva Kumar, Chandan Kumar Mandal,Shakti Chand Jaidwal, D.N. Ray, Dillip Kumar Nayak, Ms. Disha Ray,Mrs. Sumita Ray, P. V. Dinesh, Raghenth Basant, Rahul Raj Mishra,Bineesh K., Ashwini Kumar Singh, Sudhir, Parinay Deep Shah, Ms.Sharmila Upadhyay, Shivaji M. Jadhav, Brij Kishor Sah, Ms. ShivaniRautela, Ms. Apurva, Adarsh Kumar Pandey, M/s. Ap & J Chambers,Jatin Zaveri, T. Srinivasa Murthy, P. N. Gupta, Mrs. Bharti Gupta, RamLal Roy, Ms. Anukriti Sugam, Abhijeet Sinha, P. V. Yogeswaran, Ms.Bansuri Swaraj, Sidhesh Kotwal, Ms. Ana Upadhyay, Ms. Manya Hasija,Nihar Dharmadhikari, Akash Singh, Ms. Harshika Verma, NirnimeshDube, Ms. Divya Roy, P. S. Sudheer, Ms. Anne Mathew, Bharat Sood,Ms. Shruti Jose, Siddharth Dharmadhikari, Aaditya A. Pande, BharatBagla, Ms. Deepanwita Priyanka, Advs. for the appearing parties.

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652SUPREME COURT REPORTS

AThe Judgment of the Court was delivered by DR DHANANJAYA Y CHANDRACHUD, CJI

Table of Contents*

A. Overview .......................................................................... 4

BB.Regulatory Regime........................................................... 5

C.The position in law ......................................................... 10

D. Issues.............................................................................. 14

E.Submissions .................................................................... 15F.Analysis .......................................................................... 25

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G.Application: Facts of Individual Cases ........................... 89

I.Kerala ............................................................................. 90

II.Maharashtra ................................................................... 99

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III. Gujarat .......................................................................... 132

IV. Assam........................................................................... 166

V.West Bengal ................................................................. 170

H. Equity and Fairness ...................................................... 175E

I.Conclusions................................................................... 177

A. Overview

1. The nineteen cases in this batch of appeals follow a similarpattern of facts. The supply of electricity was discontinued due to theFfailure of the previous owners to pay the dues for consumption ofelectricity on the premises. The previous owners had borrowed moneyor raised loans on the security of their premises. In some cases, theerstwhile owner went into liquidation. The premises were sold in auctionsales generally on an “as is where is” basis. The new owners, whoGpurchased the properties in auction, applied for new electricity connectionsfor the premises to which electricity had been disconnected for failureto pay the dues. The Electric Utilities refused to provide an electricityconnection unless the auction purchaser paid the dues of the previousowner. This refusal was derived from powers conferred under subordinatelegislations, notifications, electricity Supply Codes or state regulations.H

*Ed. Note : Pagination in the Table is as per the original Judgment.

The denial of electricity supply resulted in the institution of petitions underArticle 226 before the High Court, leading to the judgments which are inappeal.

2. In Maharashtra State Electricity Board v. Super &Stainless Hi Alloy Ltd[1], this Court by an order dated 24 August 2006referred the Civil Appeals to a Bench of three Judges for dealing withthe issue of the recovery of arrears of electricity. The order of referencereferred the question of whether electricity dues constitute a charge onthe property so far as the transferor and the transferee of the unit areconcerned.

3. The matters involving similar nature of dispute were taggedalong with the above reference by an order dated 1 November 2007.The issue which is raised in these appeals is whether the arrears ofunpaid electricity dues outstanding from the erstwhile owner can beclaimed from the subsequent owner, who has acquired the property inproceedings initiated to enforce mortgages or to pay off the dues ofcreditors.

B. Regulatory Regime

4. Electricity is a concurrent subject under the Constitution ofIndia. Prior to the enactment of the Electricity Act 2003[2], the ElectricityAct 1910[3] governed the supply and use of electrical energy in India. The1910 Act prescribed the legal framework for laying down cables andother works related to the supply of electricity. It also laid down a legalframework for supply of electrical energy and imposed certainresponsibilities and obligations on persons licensed to supply electricitywith a view to incentivise the growth of the electricity industry throughprivate licensees.

5. Section 2(c) of the 1910 Act defined “consumer” as any personsupplied with energy by a licensee or any other person engaged in thebusiness of supplying energy to the public under the Act, and includedany person whose premises were for the time being connected for thepurposes of receiving energy. Section 21(2) empowered a licensee tomake conditions to regulate their relations with persons who were orintend to become consumers. Section 22 obligated a licensee to supply 1 Civil Appeal Nos 5312-5313 of 2005

2 “2003 Act”

3 “1910 Act”

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Aelectrical energy, on application, to every person within the area of supplyon the same terms as those on which any other person in the same areawas entitled. Section 24 empowered the licensee to disconnect the supplyof electricity if any person neglected to pay any charge or sum for energydue to the licensee.

B6. The 1910 Act was found inadequate for a coordinateddevelopment of electricity and a “grid-system” in India. Therefore, theElectricity (Supply) Act 1948[4] was enacted for the rationalisation of theproduction and supply of electricity and for taking measures conduciveto the development of electricity. The 1948 Act mandated the stategovernments to constitute State Electricity Boards under Section 5 andCentrusted them with the responsibility of administering the grid-systemand arranging the supply of electricity in the state. Section 26 providedthat, subject to the provisions of the Act, the Board shall have all thepowers and the obligations of a licensee under the 1910 Act. Section 49empowered the Boards to supply electricity to any person, not being aDlicensee, on such terms and conditions as laid down by the Board. Interms of Section 70(2), the provisions of the 1948 Act were in additionto, and not in derogation of the 1910 Act.

7. Parliament enacted the Electricity Regulatory Commissions Act1998[5] with an aim to distance the government from determination ofEtariffs. The 1998 Act created the Central Electricity RegulatoryCommission and enabled the state governments to create State ElectricityRegulatory Commissions.

8. Parliament consolidated and harmonised the provisions of the1910 Act, 1948 Act, and 1998 Act by enacting the 2003 Act. In theFprocess, the 2003 Act repealed the aforesaid three legislations. The longtitle of the 2003 Act reads as follows:

“An Act to consolidate the laws relating to generation, transmission,distribution, trading and use of electricity and generally for takingmeasures conducive to development of electricity industry,Gpromoting competition therein, protecting interests of consumersand supply of electricity to all areas, rationalisation of electricitytariff, ensuring transparent policies regarding subsidies, promotionof efficient and environmentally benign policies, constitution ofCentral Electricity Authority, Regulatory Commissions and 4 “1948 Act”H5 “1998 Act”

establishment of Appellate Tribunal and for matters connectedtherewith or incidental thereto.”

9. The 2003 Act has been enacted in pursuance of the policy ofencouraging private sector participation in the generation, transmission,and distribution of electricity. Other objectives of the 2003 Act includevesting the regulatory responsibilities from government to the regulatorycommissions, delicensing of electricity generation, promotion of captivegeneration, and encouraging open access transmission. Section 2(15) ofthe 2003 Act defines ‘consumer ‘in terms similar to Section 2(c) of the1910 Act. Part VI of the 2003 Act deals with distribution of electricity.Section 43 casts a Universal Service Obligation[6] on the distributionlicensee to provide supply of electricity to the premises of an owner oroccupier. The State Commission has been empowered under Section 50to specify an Electricity Supply Code to provide among other things forthe recovery of electricity charges, intervals for billing of electricitycharges and disconnection of supply of electricity for non-payment. UnderSection 56, the generating company or distribution licensee, as the casemay be, may disconnect electricity supply of any person who neglects topay any charge or sum for electricity. Section 181(2)(x) provides thatthe State Commission may make regulations inter alia providing for, theElectricity Supply Code under Section 50.

10. In light of the provisions contained in the 1910 Act, 1948 Act,and 2003 Act, various Electric Utilities such as State Electricity RegulatoryCommissions, State Electricity Boards, and distribution licensees notifiedConditions of Supply requiring the new owner of premises to clear theoutstanding dues of the previous owner. The nineteen cases in the batchof appeals originate from the States of Kerala, Maharashtra, Gujarat,Assam, and West Bengal.

11. In Kerala, the Kerala State Electricity Board[7] notified theConditions of Supply of Electrical Energy in 1990. Condition 15(e) of theConditions of Supply provides that reconnection or a new connectionshall not be given to any premises unless the arrears due to the Boardare cleared.

12. In Maharashtra, the Maharashtra State Electricity Board[8]framed MSEB Conditions and Miscellaneous Charges for Supply of6 “USO”7 “KSEB”8 “MSEB”

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AElectrical Energy, 1976[9] in exercise of power under the 1948 Act. Clause23(b) of the MSEB Conditions of Supply allowed the Board to refuse tosupply or give a new electricity connection to any person claiming to bean heir, legal representative, transferee, assignee or successor of thedefaulting consumer. After the enactment of the 2003 Act, theMaharashtra Electricity Regulatory Commission (Electricity Supply CodeBand other Conditions of Supply) Regulations 2005[10] were framed.Regulation 10.5provides that unpaid electricity dues constitute a chargeon the property and can be recovered from the transferee (subject to amaximum of six months of unpaid charges for electricity supplied).

13. In Gujarat, the Gujarat Electricity Board inserted ConditionC2(j) in the Conditions and Miscellaneous Charges for Supply of ElectricalEnergy in 2001.[11] This condition empowered the Board to insist that thenew occupier of the premises clear the pending electricity dues of theprevious consumer as a precondition to reconnection or release of afresh connection. In 2005, the Gujarat Electricity Regulatory Board Dnotified the Gujarat Electricity Regulatory Commission (Electricity SupplyCode and Related Matters) Regulations, 2005[12]. Clause 4.1.11 of GujaratElectricity Supply Code, 2005 provided that only the dues of the applicant,if any, were required to be paid at the time of the application for a newconnection. The said Clause was later amended in 2010 to provide thatthe distribution licensee need not entertain an application for reconnectionEor a new connection unless any dues relating to those premises arecleared.

14. In Assam, the Assam Electricity Regulatory Commission[13]framed the Assam Electricity Regulatory Commission (Electricity SupplyCode and Related Matters) Regulations, 2004.[14] Clause 3.6 dealing withFthe requisition of electricity supply requires a person occupying a newpremises to ensure that all the outstanding electricity dues are duly paidup and discharged.

15. In West Bengal, the West Bengal Electricity RegulatoryCommission (Electricity Supply Code) Regulations, 2012[15] have beenG9 “MSEB Conditions of Supply”

10 “Maharashtra Electricity Supply Code 2005’’

11 “Gujarat Conditions of Supply”

12 “Gujarat Electricity Supply Code”

13 “AERC”

14 “AERC Supply Code”H15 “WB Electricity Supply Code”

notified under the 2003 Act. Clause 3.4.2 of the said regulations empowersthe licensee to recover the dues of a previous consumer in respect ofthe premises from a new consumer only if there is a nexus between theprevious consumer and the new consumer.

16. The subsequent owners or occupiers of the premises challengedthe Conditions of Supply and Electricity Supply Codes enacted by theElectric Utilities before the respective High Courts when they werecalled upon to clear the arrears of the previous owners or dues relatingto the premises.

C. The position in law

17. Prior to the enactment of the 2003 Act, in Isha Marbles v.Bihar State Electricity Board,[16] a three-judge Bench of this Courtheld that in the absence of a charge being created over the premises bya statutory regulation, an auction purchaser cannot be asked to clear thepast arrears of electricity dues as a condition precedent to the grant ofelectricity. This Court elucidated the position in the context of Section 24of the 1910 Act to emphasise that the contract for supply was onlybetween the Electricity Board and the previous consumer, and thesubsequent purchaser was neither a consumer within the meaning ofthe 1910 Act nor had any contractual relationship with the ElectricityBoard. This Court noted that though electricity is public property whichthe law must protect, yet the law, as it stood at that time, was inadequateto enforce the liability of unpaid electricity charges of a previous consumeragainst a subsequent purchaser of the premises. In Isha Marbles(supra), this Court did not have to deal with any statutory rule, regulationor conditions of supply dealing with the imposition of liability for thepayment of electricity dues on a subsequent purchaser.

18. Thereafter, another Bench of three judges in AhmedabadElectricity Co. Ltd. v. Gujarat Inns (P) Ltd,[17 ]held that in a case of afresh connection, though the premises are the same, the auctionpurchasers cannot be held liable to clear the arrears incurred by theprevious owners in respect of power supplied to the premises in theabsence of a specific statutory provision in that regard. However, thisCourt opined that there was a need for reconsideration of the “widepropositions of law” laid down in Isha Marbles (supra).

16 1995 SCC (2) 648

17 (2004) 3 SCC 587

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A19. In Hyderabad Vanaspathi Ltd v. Andhra Pradesh StateElectricity Board,[18] a three-judge Bench of this Court observed thatthe terms and conditions of supply notified by the Electricity Boards arestatutory in character as they have been framed in exercise of statutorypower under Section 49 of the 1948 Act. The mere fact that individualagreements were entered into with every consumer did not make theBagreement contractual in nature.

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20. In a series of subsequent decisions of this Court, various two-judge Bench decisions have taken note of specific statutory regulationsenabling recovery of dues from subsequent purchasers. In the process,this Court distinguished Isha Marbles (supra), where the Court had noCoccasion to consider similar provisions. In Dakshin Haryana Bijli Vitran

Nigam Ltd v. M/s Paramount Polymers Pvt Ltd,[19] this Court wasdealing with Clause 21A of the relevant Conditions of Supply, whichentitled a licensee to demand payment of outstanding dues from atransferee if they desired a service connection. It was held that IshaDMarbles (supra) cannot be applied to strike down Clause 21A as theCourt in that case had no occasion to consider the effect of a similarclause. The matter was remitted back to the High Court for a freshdecision since it had not adjudicated on the implication of Clause 21A ofthe Conditions of Supply.

E21. In Paschimanchal Vidyut Vitran Nigam Limited v. DVSSteels and Alloys Private Limited,[20] this Court observed that alicensee or an electricity distributor can insist upon fulfilment of statutoryrules, regulations or the conditions of supply so long as they are notarbitrary and unreasonable. It was further held that the conditions ofsupply mandating the clearance of electricity dues of a previous ownerFby a new purchaser before electricity supply is restored or a newconnection is given to the premises cannot be termed as unreasonableor arbitrary.

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22. The position of law as formulated in Paramount Polymers(supra) and Paschimanchal Vidyut Vitaran Nigam Limited (supra)Ghas been consistently followed by this Court in ensuing decisions. Recently,in Telangana State Southern Power Distribution Co. Ltd. v.

18 (1998) 4 SCC 47019 AIR 2007 SC 2H20 (2009) 1 SCC 210

Srigdhaa Beverages,[21] this Court reiterated the judicial thinking on theliability of subsequent owners with regard to the electricity dues of thepast owners. This Court observed:

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“16.1. That electricity dues, where they are statutory in characterunder the Electricity Act and as per the terms & conditions ofsupply, cannot be waived in view of the provisions of the Actitself more specifically Section 56 of the Electricity Act, 2003 (inpari materia with Section 24 of the Electricity Act, 1910), andcannot partake the character of dues of purely contractual nature B

16.2. Where, as in cases of the E-auction notice in question, theexistence of electricity dues, whether quantified or not, has beenspecifically mentioned as a liability of the purchaser and the saleis on “AS IS WHERE IS, WHATEVER THERE IS ANDWITHOUT RECOURSE BASIS”, there can be no doubt thatthe liability to pay electricity dues exists on the respondent(purchaser)

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16.3. The debate over connection or reconnection would not existin cases like the present one where both aspects are covered asper clause 8.4 of the General Terms & Conditions of Supply.”

Having set the stage of the legal and decisional framework, wehave been tasked to decide the present batch of appeals.

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D. Issues

23. Based on the submissions of the parties, the specific issueswhich arise for determination are:

a. Whether the Universal Service Obligation under Section 43 ofFthe 2003 Act is linked to premises to which the connection issought;

b. Whether a connection of electricity supply sought by an auction-purchaser comprises a reconnection or a fresh connection;

c. Whether the power to recover arrears of a previous owner oroccupier from an auction-purchaser of the premises falls withinthe regulatory regime of the 2003 Act; G

d. Whether the power to enable the recovery of arrears of theprevious owner or occupier from an auction-purchaser can be 21 (2020) 6 SCC 404

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Aprovided through subordinate legislation by the StateCommissions;

e. Whether the 1910 Act, 1948 Act, and the 2003 Act have expressprovisions enabling the creation of a charge or encumbranceover the premises;Bf. Whether the statutory bar on recovery of electricity dues afterthe limitation of two years provided under Section 56(2) of the2003 Act, will have an implication on civil remedies of theElectric Utilities to recover such arrears; and

g. What is the implication of an auction-sale of premises on “as isCwhere is” basis, with or without reference to electricity arrearsof the premises?

E. Submissions

24. To put the above-mentioned issues in their proper context, weDrefer to the broad legal submission adduced before us by the parties.

I. Electric Utilities

25. Sarvashri M G Ramachandran, Mr Ranjit Kumar, Mr VijayHansaria, Mr. Ajit Bhasme, learned senior counsel appearing for ElectricUtilities have made the following submissions:

Ea. USO is not absolute

i.The duty of the licensee to supply electricity underSection 43 of the 2003 Act is not absolute. Section 43provides that an applicant has to fulfil the correspondingobligations to become entitled to the supply of electricity; F

ii.Section 43(1) opens with the words “save as otherwiseprovided in the Act”, which brings in compliance withother provisions of the 2003 Act including Section 50which empowers the State Commission to specify theElectricity Supply Code; G

iii.The Explanation to Section 43(1) requires the applicantto submit an application complete in all respects alongwith documents showing payment of necessary chargesand other compliances. This payment not only includesapplication fees, but also includes the charges related H

to supply of electricity; The other compliances wouldinclude due discharge of any pending or outstandingdues, if so demanded by the licensee; and A

iv.Section 43(2) specifically provides that the applicanthas to fulfil the obligation to pay the price as determinedby the State Commission to demand the supply ofBelectricity. The term “price” used in Section 43 is theconsideration for the supply of electricity.

b. Supply of electricity is with respect to premises

i.The supply of electricity is with reference to the“premises” according to Sections 2(15), 43, 45, and 50of the 2003 Act. Similar provisions existed in the 1910Act and 1948 Act. Further, the disconnection dealt inSection 56 of the 2003 Act and Section 24 of the 1910Act necessarily relate to identified premises; C

ii.The definition of consumer under Section 2(15) of theD2003 Act includes “any person whose premises arefor the time being connected for the purpose ofreceiving electricity with the works of a licensee…”Hence the expression “premises” is the continuedidentified place for supply of electricity, irrespective ofEany change in the owner or occupier; and

iii.The Electric Utilities are required to have aninfrastructure in place for the purposes of supplyingelectricity to consumers. They have to incur operationand maintenance costs to be in readiness to supplyelectricity. Therefore, if liability is not fastened to thepremises, such charges would ultimately be borne bythe general consumers since this would be factored inthe fixation of tariff.

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c.Regulatory regime to recover arrears of electricity dues G

i.Section 49 of the 1948 Act empowers the ElectricityBoard to supply electricity upon such terms andconditions as the Board thinks fit. Under Section 79 ofthe 1948 Act, the Board can make regulations notinconsistent with the Act and the Rules made H

662SUPREME COURT REPORTS

Athereunder. In Hyderabad Vanaspathi (supra) thisCourt held that terms and conditions of supply framedby the Electricity Board under Section 49 of the 1948Act are statutory in character;

ii.The terms and conditions of supply under the 2003 ActBare framed by independent regulators in terms of Section50 read with Section 181(2)(x) of the 2003 Act afterfollowing a detailed procedure. Therefore, the ElectricitySupply Code framed by the State Commission is asubordinate legislation and has a statutory character.This statutory authority enables the Supply Code toCprovide for recovery of dues of the previous owner fromthe subsequent owner; and

iii.The condition of payment of outstanding dues is not acompulsory extraction of money and does not require aprimary legislation by Parliament or state legislature.DSuch a condition can be prescribed by a subordinatelegislation.

d.Electricity arrears as charge over the premises

i.i.It is not the case of the Electric Utilities that there isEany mortgage or charge over the property in the formthat thelicensee is a secured creditor. The licensee hasthe right to insist on clearance of outstanding dues ofthe premises before giving a new connection.

e.Civil and Statutory remedies to recover electricityarrears of the UtilitiesF

(i) Section 56(2) of the 2003 Act does not bar the recoveryof electricity arrears through other avenues of recoveryin accordance with law;

(ii) The limitation of two years under Section 56(2) of theG2003 Act is with reference to bar on disconnection bythe licensee. There is no limitation under Section 56after the electricity is discontinued for non-payment ofdues. A Condition of Supply to recover electricityarrears is not barred by limitation under Section 56(2)of the 2003 Act; and H

(iii) The right of a distribution licensee to deny electricityAconnection till outstanding dues are cleared is acontinuing right and cannot be said to be extinguished.It can be exercised when the new owner or occupierapproaches the licensee for connection.

f. Implication of an auction-sale of premises on “as is where B

is” basis

I.i.The auction purchasers were put to notice of therequirement of clearing the dues as the public auction-sale of the premises on “as is where is” basis wouldinclude a condition of acknowledging all liabilities inrespect of the said premises, with or without specificreference to the payment of electricity dues; C

i.ii.There is an obligation on persons acquiring the premisesto verify and obtain a no dues certificate from thelicensee or otherwise factor the dues while quoting theDbid price in the auction; and

ii.iii.The purchaser cannot deny knowledge of therequirement to clear outstanding dues of the premiseswhen these are provided for in the conditions of supplyor Supply Code.

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II. Auction Purchasers

26. Sarvashri Shekhar Naphade, Mr. V Giri, Mr. PS Patwalia,Mr. S Ganesh, senior counsel, and Mr. Puneet Jain, Mr. Amar Dave,Mr. EMS Anam, Mr. DN Ray, Mr. T Srinavasa Murthy, Mr. BharatPatel, Mr. Ram Lal Roy, Mr. Purvish Jitendra Malkan, and Mr. MYDeshmukh learned counsel on behalf of the auction purchasers haveurged the following submissions:

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a. USO is absolute

i.(i)Electricity constitutes goods within the meaning ofEntries 53, 54, and 56 of List II of the Seventh Scheduleof the Constitution and under the Sale of Goods Act1930; G

ii.(ii)The obligation to provide electricity to consumers underSection 43 of the 2003 Act is not hedged by a condition H

to discharge the arrears incurred by the previousconsumer; A

iii.(iii)The phrase “price as determined by the appropriatecommission” in Section 43(2) of the 2003 Act couldonly be the price at which electricity is supplied to thedistribution licensee. Thus, ‘price’ under Section 43cannot include the arrears of the previous consumer; B

(iv) The payment of necessary “charges” and “othercompliances” contemplated under Section 43 relates tothe application fees, and cannot be stretched to includea power to require the payment of third-party arrears; C

(v) The statutory duty of a licensee to supply power on anapplication by the owner or occupier of any premiseswithin one month is contained in Section 43(1) of the2003 Act. The only exception to this statutory obligationis provided by Section 44 where the licensee isprevented from giving supply due to cyclone, floods,storms or other circumstances beyond his control; and D

(vi) The legislature has consciously inserted all thesubstantive requirements which the person making anEapplication for supply of electricity is required to meet,which has been primarily captured under Sections 43(2),45, 46, 47, and 48 of the 2003 Act. Therefore, no powerhas been endowed upon the State Commission to imposeany other substantive condition in the form of providinga precondition of clearance of a previous owners’ duesFon a subsequent owner who seeks a fresh connection.Any such condition would be in conflict with Section43.

b. Supply of electricity is with respect to consumer

(i) The reference to “premises” in the definition ofG“consumer” under Section 2(15) as well as under Section43 of the 2003 Act is only to fix a situs, that is, to identifya licensee operating in the area vis-à-vis the property.The emphasis under Section 2(15) is therefore on the“person” who is the owner or occupier of the premises;Hand H

(ii) Sections 2(15), 43, and 44 refer to “premises” becauseAwhile an ordinary manufacturer or distributor may insiston the consumer to come to this factory or warehouseto take the supply of goods, the distribution licensee isobliged to take the supply to the consumer’s premises.Therefore, the premises where the supply is to be madeBhad to be necessarily identified.

c. Regulatory regime to recover arrears of electricity dues a.The provisions of the 1910 Act and 1948 Act do notempower the Electricity Board to recover the electricitydues of the previous owner or occupier from the newowner or occupier of such premises. The liability topay electricity dues is only on the person to whom thesupply of electricity is made. It is a contractual liability; C

b.Section 49 of the 1948 Act only enables the Board toprescribe the conditions of supply in a contract to beDentered into with the prospective consumer. Suchconditions of supply cannot be termed as rules orregulations as they are not published in the officialgazette and therefore, cannot have the character ofregulations and are not statutory in character; and E

c.A condition requiring an applicant to clear the past duesof a previous consumer before the application for a freshconnection is considered is manifestly unfair. The arrearsare due to a default committed by a previous consumerand the negligence of the Electric Utilities whichcontinued to supply electricity despite default, withoutFresorting to its power of disconnection.

d.Subordinate Legislation

a.The liability of one person, whether statutory orcontractual, cannot be enforced against another personGunless there is a substantive provision in law to do so.Such enforcement of liability cannot be provided by apiece of delegated legislation; b.Even if it is assumed that such liability can be enforcedby a delegated legislation, the parent law must clearly H

666SUPREME COURT REPORTS

prescribe the power of framing such a piece oflegislation. Neither the 1910 Act nor the 1948 Actprovides any specific provision empowering theElectricity Board to recover the electricity dues of theprevious owner or occupier of the premises from thenew owner or occupier of premises in question; A

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c.The scheme of the 2003 Act, from Sections 43 to 49,makes it evident that no specific power has beenconferred upon the State Commission under Section 50read with Section 181 of the 2003 Act or with the Stateunder Section 180 of the 2003 Act to add furtherCsubstantive conditions like clearance of past dues ofanother consumer; and d.It is a settled principle of law that for framing any ruleor regulation, a specific source of power must beprovided in the parent legislation.

De. Electricity arrears do not constitute a charge over thepremises a.Electricity dues do not constitute a charge over propertyas they do not run with the land. Only a fiscal levy byEway of statutory exaction could be fastened on land orany other immovable property. The State Commissionunder Section 50 of the 2003 Act can only frameregulations for supply of electricity and has no powerto provide for any fiscal exaction. Only a state legislationcan provide for a charge on a property by providing forFlevy of a duty on consumption or sale of electricity,under Entry 53 of List II of the Seventh Schedule; b.There is no provision under the 2003 Act for creatingcharge on the premises and a charge cannot beintroduced by way of Regulations as the subject matterGis not covered under Section 50 of the 2003 Act;

c.The Conditions of Supply are contractual and thereforedo not constitute a charge under Section 100 of theTransfer of Property Act 1882. The Conditions of Supplyare contained in a contract and to constitute a charge, H

it must be registered under Section 17 of the IndianRegistration Act 1908; and A

d.Enforcement of a charge against the property in thehands of the transferee for consideration without noticeof the charge does not arise. Electricity dues are simplyan unsecured debt.

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f. Civil and Statutory remedies to recover electricity arrearsof the Utilities a.Under Section 56 of the 2003 Act, the right to disconnectthe supply in default of payment is relatable to the defaultCcommitted by the defaulting consumer. Electric Utilitiescannot recover dues over and above what is providedfor in the Section 56 (2) of the 2003 Act; and b.To the extent that the monies realised from sale of thecompany in liquidation were insufficient to clear theunsecured debts such as electricity dues, they wouldDabate. The Electric Utilities allowed the dues to mountup instead of taking effective steps to recover thedues. Conditions of Supply cannot be used to resurrecta time-barred debt.

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g. Implication of an auction-sale of premises on “as is where is” basis

(i) A condition such as “as is where is and whatever thereis” is a feature of physical properties and does not extendto claims that are not charges, mortgages, or otherencumbrances running with the land; and F

(ii) There was no obligation on the applicants to ascertainthe electricity dues and more so in view of the judgementin Isha Marbles (supra), which held the field then,and which continues to hold the field in all cases wherethere is no statutory imposition of liability for past duesGof previous owners on subsequent purchasers.

F. Analysis

I. Universal Service Obligation is not absolute A27. The Electric Utilities have argued that the duty to supplyelectricity under Section 43 of the 2003 Act is not absolute. It has beensubmitted that under Section 43, an applicant has to fulfil the obligationto pay the ‘price’ as determined by the State Commission to becomeentitled to receive supply of electricity. The ‘price’, it is urged, includesapplication fees as well as arrears of unpaid electricity dues of theBprevious owner or occupier. The Electric Utilities argue that in casethere are outstanding dues of the previous owner they are entitled torefuse a new connection or decline to commence the supply of electricityuntil the dues owed by the previous owner are cleared. On the contrary,the auction purchasers have urged that Section 43 obligates the distributionClicensees to supply electricity when demanded by the auction purchaser.It is further urged that the ‘price’ in Section 43 can only mean the priceat which electricity is supplied to the distribution licensee, and cannotinclude the arrears of the previous owner or occupier of the premises.

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28. To contextualise the submissions of counsel, it is appropriateDto refer to the relevant provisions of the 1910 and 2003 enactments.Under Section 3 of the 1910 Act, the State Government could grant alicence to any person to supply energy in any specified area. By virtueof Section 3(2)(f), the provisions contained in the Schedule stoodincorporated in the licence. Under Section 22 read with Section 3(2)(f)and Clause VI of the first Schedule, there was an obligation to supplyEelectricity on the distribution licensees. Section 22 of the 1910 Actobligated the licensee to supply energy to every person within the areaof supply on the same terms as those on which any other person in thesame area was entitled. Clause VI provided that the licensee shall supplyenergy within one month of a requisition by the owner or occupier ofFany premises situated within the area of supply.

29. Section 43 of the 2003 Act is similar to Section 22 of 1910 Actread with Clause VI of Schedule I of the latter Act. Part VI of the 2003Act contains provisions dealing with distribution of electricity bydistribution licensees. Section 2(17) defines a ‘distribution licensee’ as aGlicensee authorised to operate and maintain a distribution system forsupplying electricity to the consumer in their area of supply. Section 43of the 2003 Act casts a duty on every distribution licensee to supplyelectricity to the premises on an application made by the owner or occupierof such premises. The provision requires the distribution licensee to laydown its network in a particular area to supply electricity to a consumer,Hwho demands supply.

30. The relevant portion of Section 43 reads as follows:

“43. Duty to supply on request – (1) Save as otherwise providedin this Act, every distribution licensee, shall, on an applicationby the owner or occupier of any premises, give supply ofelectricity to such premises, within one month after receiptof the application requiring such supply:

***

Explanation – For the purposes of this sub-section,“application” means application complete in all respects inthe appropriate form, as required by the distributionlicensee, along with the documents showing payment ofnecessary charges and other compliances.

(2) It shall be the duty of every distribution licensee to provide, ifrequired, electric plant or electric line for giving electric supply tothe premises specified in sub-section (1):

Provided that no person shall be entitled to demand, or to continueto receive, from a licensee a supply of electricity for any premiseshaving a separate supply unless he has agreed with the licenseeto pay to him such priceas determined by the AppropriateCommission.”

31. According to Section 43, the distribution licensee is obligatedto supply electricity to the premises of an owner or occupier within amonth of the receipt of an application requiring such supply. The provisioncasts a duty on the distribution licensee to supply electricity to the owneror occupier’s premises. Correspondingly, the owner or occupier of thepremises has a right to apply for and obtain electric supply from thedistribution licensee.[22] Both the right and the corresponding duty areimposed by the statute. The owner or occupier of the premises has tosubmit an application to avail of the supply of electricity.

32. In Brihanmumbai Electric Supply & TransportUndertaking v. Maharashtra Electricity Regulatory Commission,[23]a two-judge Bench of this Court observed that the obligation of thedistribution licensee to supply electricity to premises will begin after the 22 Chandu Khamaru v. Nayan Malik, (2011) 12 SCC 31423 (2015) 2 SCC 438

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Aowner or occupier of such premises submits a completed application.The explanation to Section 43 clarifies that the application must becomplete in all respects along with the necessary documents showingpayment of “necessary charges” and other compliances, as required bythe distribution licensee. Thus, under Section 43, the distribution licenseeis obligated to supply electricity to the premises of an owner or occupier,Bprovided that the owner or occupier pays all charges and complies withall conditions stipulated by the distribution licensee. Section 43 beginswith the words “Save as otherwise provided in this Act”. Hence, theoperation of Section 43 will also be subject to compliance with the otherprovisions of the 2003 Act.C

33. Section 45 lays down the manner of computation of the priceto be charged by the distribution licensee for supply of electricity underSection 43. It provides that a distribution licensee may fix charges forsupply of electricity in accordance with the tariffs fixed from time totime in accordance with the methods and principles specified by theDconcerned State Commission. Under Section 46, a distribution licenseeis empowered to charge from any person who seeks supply of electricityany expenses reasonably incurred in providing any electric line or electricplant used for the purpose of giving electricity. Section 47 empowers thedistribution licensee to seek a reasonable security from any person whorequires supply under Section 43. It further provides that the distributionElicensee can refuse to supply electricity to any person who fails to givethe security deposit. The provision is extracted below:

“47. Power to require security – (1) Subject to the provisionsof this section, a distribution licensee may require any person,who requires a supply of electricity in pursuance of section 43, toFgive him reasonable security, as may be determined by regulations,for the payment to him of all monies which may become due tohim –

(a) in respect of the electricity supplied to such person; or G(b) where any electricity line or electrical plant or electric meteris to be provided for supplying electricity to such person, in respectof the provision of such line or plant or meter, And if that person fails to give such security, the distributionlicensee may, if he thinks fit, refuse to give the supply of H

electricity or to provide the line or plant or meter for theperiod during which the failure continues.”

(emphasis supplied)

34. Section 47 indicates that a distribution licensee can refuse tosupply electricity under Section 43 if the applicant fails to furnish therequisite security. Under Section 48, a distribution licensee may requirethe applicant, who requires a supply of electricity in pursuance of Section43, to accept (i) any restrictions which may be imposed for the purposeof enabling the distribution licensee to comply with the regulations madeunder Section 53; and (ii) any terms restricting any liability of thedistribution licensee for economic loss resulting from negligence of theperson to whom electricity is supplied. Thus, it is implicit that thedistribution licensee may refuse electricity supply to the applicant untilthey accept such terms and restrictions reasonably imposed by thedistribution licensee incidental to the statute.

35. Further, Section 50 empowers the State Commission to specifyan Electricity Supply Code providing for recovery of electricity charges,among other things. The Electric Utilities have urged that the duty tosupply electricity is subject to the Electricity Supply Code specified underSection 50. As mentioned in the preceding paragraphs, an applicant isrequired to submit a completed application along with documents showingthe payment of necessary charges and other compliances. The ElectricitySupply Code can stipulate such other compliances that an applicant hasto observe for getting the supply of electricity under Section 43. Therefore,reading Section 43 along with Sections 45, 46, 47, 48, and 50, it becomesevident that the right of an applicant to seek supply of electricity underSection 43 is not absolute. The right is subject to the payment of charges,security deposit, as well as terms and restrictions imposed by thedistribution licensee.

36. The distribution licensee can stipulate such terms and conditionsas it deems necessary when an owner or occupier of the premisesapproaches it seeking the supply of electricity. A two-judge Bench ofthis Court in Paschimanchal Vidyut Vitran Nigam (supra) held that adistribution licensee can stipulate terms and conditions subject to whichit will supply electricity to the applicant which are not arbitrary andunreasonable.

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A37. The auction purchasers have urged that the “charges” leviedby the distribution licensee are explicitly dealt with by Section 45. It wasfurther urged that Section 45 does not provide that charges should includethe arrears of the previous owner or occupier of the premises. On thecontrary, the distribution licensees have argued that the term ‘price’ usedin Section 43 is the consideration for the supply of electricity as determinedBby the State Commission. It has been argued that the arrears of theprevious owner or occupier of the premises is also a ‘price’ determinedby the State Commission and payable at the time of making an applicationfor the supply of electricity.

38. The words “price”, “tariff”, or “charges” have not been definedCin the 1910 Act or the 2003 Act. In AP TRANSCO v. Sai RenewablePower (P) Ltd,[24] this Court observed that the term “tariff” has neitherbeen defined nor explained in the 2003 Act. The Court held that in theabsence of any specific definition in the legislation, recourse has to betaken to the “meaning attached to these expressions under the generalDlaw or in common parlance.”[25]

39. In BSES Ltd. v. Tata Power Co. Ltd.,[26] a two-judge Benchof this Court interpreted ‘tariff’ in the context of the Electricity RegulatoryCommissions Act, 1998. It observed:

“16. The word “tariff” has not been defined in the Act. “Tariff”Eis a cartel of commerce and normally it is a book of rates. It willmean a schedule of standard prices or charges provided to thecategory or categories of customers specified in the tariff.”

40. The proviso to Section 43(2) further refers to the “price”payable by an applicant to demand or to continue to receive the supplyFof electricity from a distribution licensee. The “price” is to be determinedby the appropriate commission. This “price” is the consideration, asdetermined by the State Commission, that an applicant pays for receivinga supply of electricity.

41. The term “price” has to be given a broad meaning to includeGall the ‘tariffs’ and ‘charges’ that may be determined by the appropriatecommission. This includes the ‘charges’ fixed under Section 45 by theappropriate commission from time to time and the ‘charges’ that a 24 (2011) 11 SCC 3425 (2011) 11 SCC 34H26 (2004) 1 SCC 195

distribution licensee may impose under Section 46 to recover anyreasonable expenditure. The ambit of the term ‘price’ is wide enough toalso include the statutory dues that the State Commission decides toenact by way of regulations under Section 50.

42. Thus, the duty to supply electricity under Section 43 is notabsolute, and is subject to the such charges and compliances stipulatedby the distribution licensees as part of the application.

II. Duty to supply electricity is with respect to consumer

43. The Electric Utilities urge that the duty to supply electricity iswith respect to the premises and not to an individual. They refer to thedefinition of ‘consumer’ under Section 2(15) and to Section 43 of the2003 Act. Further, it was urged that Section 50 and Section 181(2)(x) ofthe 2003 Act enable the distribution licensee to provide for payment ofdues of electricity supplied to the premises if a reconnection or newconnection is sought for the same premises. Contrariwise, the auctionpurchasers have submitted that the consumption of electricity is alwaysby the owner or occupier of the premises through appliances andapparatus installed within the premises. The reference to premises inthe definition of ‘consumer’ under Section 2(15) as well as Section 43 ofthe 2003 Act is, it is urged, only to fix a situs for the supply of electricityto the owner or occupier of the premises.

44. Electricity is a movable good because it can be transmitted,transferred, delivered, and possessed like any other movable property.[27]This position of law was established by a Constitution Bench of thisCourt in State of AP v. National Thermal Power Corporation Ltd.[28]In Paschimanchal Vidyut Vitaran Nigam (supra) a two-judge benchof this Court held that the supply of electricity to a consumer is a sale ofgoods. The charges paid by the consumer to the distribution licensee isessentially the price paid for goods supplied and consumed. Theconsumption of electricity by a consumer is always effected throughequipment or appliances installed within the premises.

45. Section 2(15) of the 2003 Act defines the expression‘consumer’ as follows:

27 Commissioner of Sales Tax, Madhya Pradesh, Indore v. Madhya Pradesh ElectricityBoard, Jabalpur (1969) 1 SCC 200

28 (2002) 5 SCC 203, paragraph 20.

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A“(15) “consumer” means any person who is supplied withelectricity for his own use by a licensee or the Government orby any other person engaged in the business of supplying electricityto the public under this Act or any other law for the time being inforce and includes any person whose premises are for thetime being connected for the purpose of receiving electricityBwith the works of a licensee, the Government or such otherperson, as the case may be;”

46. The definition of “consumer” under Section 2(15) of the 2003CAct is similar to the definition of “consumer” in the 1910 Act. The definitionconsists of two limbs:

(i) any person who is supplied with electricity for their own use;and

(ii) any person whose premises are for the time being connectedDfor the purposes of receiving electricity, irrespective of whetheror not such person is supplied with electricity for his ownuse.[29]

The first limb of the definition is prefaced with “means” while thesecond limb is prefaced with “includes”. The definition is thus exhaustiveEof the ambit of the expression defined. The inclusive part is intended toexpand the ambit of the initial limb of the definition.

47. In Jivendra Nath Kaul v. Collector/District Magistrate[30],a two judge Bench of this Court held that the meaning of the phrase “forthe time being” means at the moment or the existing position. TheFreference to premises in the second limb connotes that the demand forguaranteed charges or dues will incur even if the owner or occupier hasstopped consuming power for the time being, but the premises remainconnected. The second limb clarifies that a consumer who commencesreceiving power at the premises will continue to remain a consumereven if they stop consuming power for the time being, so long as theGpremises are connected to the power system. The second limbencompasses a variety of foreseeable and practical situations. Forexample, the consumer may have rented out the premises to a tenant. In 29 Uttar Pradesh Power Corporation Limited v. Anis Ahmad, (2013) 8 SCC 491H30 (1992) 3 SCC 576

this situation, the consumer continues to remain a consumer as thepremises are connected for the time being for the purposes of receivingthe supply of electricity, though the consumer may not themselves beconsuming electricity (the consumption being by the tenant). Here, thedistribution licensee demands charges incurred from the consumer, eventhough the electricity is being consumed by the tenant. Another situationcontemplated under the second limb is where the consumer is unable toconsume electricity due to circumstances such as accident or strike. Inthis case, as long as the premises of the consumer are connected to thepower system, they will have to pay the demand charges and minimumguaranteed charges stipulated by the distribution licensee.

48. We are unable to accept the submission of Electric Utilitiesthat the second limb of Section 2(15) connotes a supply of electricity topremises, irrespective of a change in the owner or occupier. The 2003Act provides an inclusive definition of ‘premises’ under Section 2(51).According to the definition, premises include land, building, or structure.The second limb goes only so far as to say that when electricity is suppliedto any person at a particular land, building, or structure, such person willcontinue to remain a consumer, even though they are not consumingelectricity, so long as the electricity connection exists. The expression‘premises’ used in the second limb identifies the place where the supplyof electricity has to be made.

49. It would be material to refer to some other definitions underthe 2003 Act which emphasise that supply of electricity is with respectto consumer:

“2. Definitions.- In this Act, unless the context otherwise requires,-***

(17) “distribution licensee” means a licensee authorised to operateand maintain a distribution system for supplying electricity tothe consumers in his area of supply; ***

(19) “distribution system” means the system of wires andassociated facilities between the delivery points on the transmissionlines or generating station connection and the point of connectionto the installation of the consumers;***

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A(61) “service line” means any electric supply line through which-electricity is, or is intended to be, supplied (a) to a single consumer either from a distributing main orimmediately from the Distribution Licensee’s premises; or (b) from a distributing main to a group of consumers on thesame premises or on contiguous premises supplied from thesame point of the distribution main; B

***

(70) “supply”, in relation to electricity, means the sale ofCelectricity to a licensee or consumer;”

50. The definition of ‘supply’ specifically states that supply meansthe sale of electricity to a consumer. The said definition does not indicatethat supply of electricity is vis-a-vis the premises of the consumer.DConsidering the overall scheme of the 2003 Act, the supply of electricityis to the consumer and not the premises.

51. Section 43 of the 2003 Act obligates a distribution licensee tosupply electricity “on an application by the owner or occupier of anypremises”. Under the provision, the right to obtain a supply of electricityEis vested with the owner or occupier of the premises. Invariably, suchowner or occupier means the consumer under Section 2(15). As held in Brihanmumbai Electric Supply & Transport Undertaking (supra),the duty to supply electricity comes into play only on an application madeby the owner or occupier of the premises. Hence, the term “premises”has to be contextualised and understood with respect to the precedingFportion, that is, the owner or occupier of the premises.

52. The duty to supply electricity under Section 43 is only withrespect to the owner or occupier of the premises, and not the premises,as it is the owner or occupier who has the statutory right to “demand”electricity for the premises under their use or occupation. Further, it isGthe applicant who has to fulfil all the statutory conditions laid down underthe 2003 Act to become entitled to get supply of electricity to theirpremises. The applicant has to pay the necessary charges and complywith all terms and conditions as determined by the appropriate commissionfor the supply of electricity.

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53. It is true that Sections 43 and 44 of the 2003 Act talk aboutsupply of electricity to premises. However, the use of such phrases isborne out of the practical consideration of supply of electricity. Unlikeother goods, a distribution licensee cannot insist that the consumer cometo their factory or warehouse to receive the supply of electricity. Thedistribution licensee necessarily has to lay down special infrastructuresuch as electricity lines and transformers to transmit electricity and supplyit directly to the consumer, at their premises. On an application, thedistribution licensee is statutorily obliged to supply electricity to theconsumer. Consequently, the place where the supply of electricity is tobe made has to be necessarily identified. Thus, Section 43 and 44 referto the consumer’s premises to fix the situs for the purpose of supplyingelectricity.

54. Section 56 provides that it is the liability of the consumer topay the charge for electricity in respect of the supply of electricity. UnderSection 56 the duty of effecting the payment of charges for electricity ison a person, that is, the consumer. Further, Section 56(2) specificallycontains the expression “no sum due from any consumer”. Section 126also uses the words “the electricity charges payable by such person orany other person benefited by such use.” Thus, the overall scheme ofthe 2003 Act makes it evident that only a consumer can be held liable fordefault in payment of electricity dues or charges.

55. Under the 2003 Act, the Central government has enactedvarious rules and regulations for carrying out the provisions of the Act.The government notified the Electricity (Rights of Consumers) Rules,2020[31] laying down the rights of the consumers of electricity. The Rulesdetail the rights of consumers and obligations of distribution licensees;release of new connections; metering arrangements; billing and payment;disconnection and reconnection; grievance redressal mechanism, amongothers. The Rules define an ‘applicant’ as an owner or occupier of anypremises who files an application form with a distribution licensee forsupply of electricity. The Rules defines ‘point of supply’ to mean thepoint, as may be specified by the State Commission, at which a consumeris supplied electricity. The Rules make it evident that electricity is suppliedto the consumer.

56. Thus, it is always the consumer who is supplied electricity andis held liable for defaulting on payment of dues or charges for supply of31 “Rules”

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Aelectricity. Perforce, the premises cannot be held to be a defaulter andno dues can be attached to the premises of the consumer.

III. Whether electricity connection sought by a subsequentowner constitutes a reconnection or fresh connection

57. Another issue before us, as argued by the counsel, is whetherBthe connection sought by a subsequent owner constitutes a reconnectionor fresh connection. In IshaMarbles (supra), the Electricity Board haddisconnected electricity supplied to the erstwhile owner pursuant to itspower under Section 24 of the 1910 Act. The Electricity Board insistedupon the auction purchaser paying the arrears owed by the erstwhileCowner as a condition precedent to provide an electricity connection. TheBoard did not place reliance on any statutory conditions of supply. ThisCourt observed that the law, as it stood then, was inadequate to enforcesuch a liability. The Court further held that a connection sought by asubsequent purchaser should be regarded as a reconnection:

D“49.It is important to note that though the purchasers askedfor electricity connection as a new connection it cannot beregarded as a new connection. It is only a reconnectionsince the premises had already been supplied with electricalenergy. Such a supply had been disconnected owing to thedefault of the consumer. That consumer had bound himself toEthe Board to pay the dues. He also agreed to abide by the conditionas stipulated in the Act and the Rules including the payment of thedues.”

58. This Court further went on to hold that a distribution licenseeFcannot make the auction-purchaser liable when seeking reconnection ofelectricity supply for the same premises. According to the Court, thiswas not feasible considering the fact that “with change of everyownership new connections have to be issued [which] does notappear to be the correct line of approach as such situation is broughtGby the inaction of the Electricity Board in not recovering the arrearsas and when they fall due or not providing itself by adequatedeposits.” However, this Court also conceded that liability of previousowners could be fastened on auction-purchasers if the law so prescribed.59. In Gujarat Inns (supra), another three-judge Bench of thisHCourt held that the connection sought by auction-purchasers of properties

would constitute a fresh connection. The Court held that in case of afresh connection, the auction purchasers cannot be held liable to clearthe arrears incurred by the previous owners in the absence of any specificstatutory provision. It was observed:

“3. In our opinion, the present two cases are cases of freshconnection. The learned counsel for the respondents (auction-purchasers) have stated that they have taken fresh connectionsand they have no objection if their connections are treated asfresh connections given on the dates on which the supply ofelectricity was restored to the premises. We are clearly of theopinion that in case of a fresh connection though thepremises are the same, the auction-purchasers cannot beheld liable to clear the arrears incurred by the previousowners in respect of power supply to the premises in theabsence of there being a specific statutory provision in thatregard. Though we find some merit in the submission of thelearned counsel for the appellant calling for reconsideration of thewide propositions of law laid down in Isha Marbles case [(1995)2 SCC 648] we think the present one is not a case for such exercise.We leave the plea open for consideration in an appropriate case.”

60. In Isha Marbles (supra), a three-judge Bench of this Courtheld that an application for supply of electricity to the same premises isto be regarded as a reconnection. This Court, while interpreting theprovisions of the 1910 Act, gave its reasoning on the assumption that thesupply of electricity is with respect to premises and not the consumer.However, the 2003 Act has statutorily clarified the position that supplyof electricity is with respect to the consumer. It necessarily follows thatwhen a new owner or occupier of the premises applies for supply ofelectricity in terms of Section 43 of the 2003 Act, it will constitute afresh connection, regardless of the fact that the premises for which theelectricity is sought was being supplied with electricity previously. Anapplication for supply of electricity can be categorised as reconnectiononly when the same owner or occupier of the premises, who was alreadya consumer, applies for supply of electricity with respect to the samepremises in case the electricity supply is disconnected.

61. We need to highlight that the 2003 Act contemplates a synergybetween the consumer and premises. Under Section 43 of the 2003 Act, A

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Athe owner or occupier of premises can seek a supply of electricity forparticular premises. Perforce, when electricity is supplied, the owner oroccupier becomes a consumer only with respect to those particularpremises for which electricity is sought and provided. For example, whena person owning an apartment in a residential complex applies for supplyof electricity to such an apartment, they become a consumer only withBrespect to the apartment for which the application is made and to whichelectricity is supplied. Such a person may own another apartment towhich electricity may already be supplied, but they will be considered aseparate consumer with respect to the second apartment. For anapplication to be considered as a ‘reconnection’, the applicant has toCseek supply of electricity with respect to the same premises for whichelectricity was already provided. Even if the consumer is the same, butthe premises are different, it will be considered as a fresh connectionand not a reconnection.

62. In Gujarat Inns. (supra), this Court held that an applicationDfor electricity by an auction-purchaser will constitute fresh connectioneven though the premises are the same. The reasoning is based on thecorrect assumption that supply of electricity is with respect to the consumer,and not the premises. Therefore, even if the premises may be the sameto which electricity had already been supplied, it will be considered as afresh connection in the situation where a different applicant, in that caseEan auction-purchaser, applies for supply of electricity.IV. Regulatory power of the Electricity Boards/ StateCommissions

63. The Electric Utilities have submitted that: (i) Section 49 of theF1948 Act empowered the Board to supply electricity upon such termsand conditions as it thinks fit; (ii) the phrase “regulate” in Section 79 ofthe 1948 Act has a wider implication allowing the State Commission todo everything necessary to prescribe the principles governing the supplyof electricity; (iii) the Electricity Supply Code notified under Section 50read with Section 181(2)(x) of the 2003 Act governs all matters relatingGto the supply of electricity to premises; and (iv) the Conditions of Supplywhich provide for payment of outstanding dues of the previous consumerhave a clear nexus to the scheme of the 2003 Act and the objectivessought to be achieved.

64. From the other side, the auction purchasers have urged that:H(i) the provisions of the 1910 Act, 1948 Act, and the 2003 Act do not

empower the Electricity Board or, as the case may be the distributionlicencee to recover the arrears of electricity of the previous consumerfrom the new owner or occupier of the premises; and (ii) the conditionsof supply prescribed under the 1948 Act do not have the character ofregulations and are not statutory.

65. Section 2(h) of the 1910 Act defined “licensee” as any personlicensed under Part II to supply energy. Section 21 provided that adistribution licensee shall not interfere with the use of energy by anyperson. Section 21(2) empowered the licensee to make conditions forthe purpose of regulating its relations with the consumer with the previoussanction of the State Government.

66. The 1910 Act did not include the State Electricity Board withinthe definition of “licensee”. Section 26 of the 1948 Act states that theBoard shall, in respect of the whole State, have all the powers andobligations of a licensee under the 1910 Act. The first proviso specifiedthat certain provisions of the 1910 Act relating to the duties and obligationsof a licensee shall not be applicable to the Board. In its decision in Stateof Uttar Pradesh v. Hindustan Aluminium Corporation[32] this Courtanalysed the interconnection between Section 26 of the 1948 Act andSection 22 of the 1910 Act. The court held that the obligation underSection 22 of the 1910 Act to supply energy to every person within thearea of supply is not fastened to the Board. Although Clause VI ofSchedule to the 1910 Act also mandates the licensee to supply electricityon demand, the second proviso specifies that the said clause is applicableto the Board only when the distribution mains have been laid by theBoard and the supply through any of them has commenced.

67. Under Section 21 of the 1910 Act, the Supply Licenseeprescribed conditions with the previous sanction of the state government.Similarly, the Boards could also prescribe conditions under Section 21 ofthe 1910 Act by virtue of Section 26 of the 1948 Act.

68. Section 49 of the 1948 Act read as follows:

“49. Provisions for the sale of electricity by the Board topersons other than licensees.- (1) Subject to the provisions ofthis Act and of regulations, if any made in this behalf, the Boardmay supply electricity to any person not being a licensee A

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Aupon such terms and conditions as the Board thinks fit andmay for the purposes of such supply frame uniform tariffs.”***

BUnder the 1948 Act, the Electricity Boards were empowered toprescribe terms and conditions of supply under Section 49 read withSection 79(j). The Board was empowered to fix such terms and conditionsas it thinks fit for supply of electricity to any person not being a licensee.Section 79 permitted the Board to make regulations providing for theprinciples governing the supply of electricity by the Board to personsCother than licensees under Section 49:

“79. Power to make regulations.- The Board may by notificationin the Official Gazette, make regulations not inconsistent with thisAct and the rules made thereunder to provide for all or any of thefollowing matters, namely:-D***

(j) principles governing the supply of electricity by the Board topersons other than licensees under section 49;”

Clause (j) of Section 79 empowered the Board to make regulationsEprescribing the principles governing the supply of electricity to consumers.According to Section 79A, any regulation made by the Board had to belaid before the State Legislature. Thus, the conditions of supply framedby the Board under section 49 read with section 79 and section 79Apossessed a statutory nature and would be binding on consumers.

F69. It has been a consistent position in law that the conditions ofsupply stipulated by the licensees or Boards have a statutory character.[33]A two-judge Bench of this Court, in Jagdamba Paper Industries (P)Ltd v. Haryana State Electricity Board,[34] was dealing with a challengeto the unilateral enhancement of security by the Board under theagreement with consumers of electric energy. This Court held that theGBoard has been conferred with statutory powers under section 49(1) ofthe 1948 Act to determine the conditions on the basis of which supply is to be made. Similarly, in Bihar State Electricity Board v. Parmeshwar 33 Punjab State Electricity Board v. Bassi Cold Storage, Kharar and Another, 1994 Supp(2) SCC 124H34 (1983) 4 SCC 508

Kumar Agarwala[35], a two-judge Bench of this Court held that the termsand conditions on which the Board supplies electricity to a consumerhave a statutory character.

70. In Ferro Alloys Corpn. Ltd v. A P State Electricity Board[36]a two-judge Bench of this Court upheld the validity of Section 49 of the1948 Act. The Court observed that the terms and conditions notifiedunder Section 49 must relate to the object and purpose for which theywere issued. There, the Court upheld the authority of the Board toprescribe a security deposit in the following terms:

“102. [...] Under the regulations framed by the Board in exerciseof powers of Section 49 read with Section 79(j) the consumer isonly entitled and the Board has an obligation to supply energy tothe consumer upon such terms and conditions as laid down in theregulations. If, therefore, the regulations prescribed a securitydeposit that will have to be complied with. It also requires to benoticed under Clause VI of the Schedule to the Electricity Actthat the requisition for supply of energy by the Board is to bemade under proviso (a) after a written contract is duly executedwith sufficient security. This, together with the regulations statedabove, could be enough to clothe it with legal sanction.”

71. In Hyderabad Vanaspathi (supra), a three-judge Bench ofthis Court had to decide upon the validity of Condition 39 of the “Termsand Conditions of Supply” prescribing an adjudicatory machinery forassessing and levying penal damages. This Court considered the legalprovisions under the 1910 Act and 1948 Act to hold that terms andconditions notified under Section 49 of the latter enactment were validand had statutory force. The relevant paragraph is extracted below:

“20. We have already seen that Section 49 of the Supply Actempowers the Board to prescribe such terms and conditions as itthinks fit for supplying electricity to any person other than a licensee.The Section empowers the Board also to frame uniform tariffsfor such supply. Under Section 79(j) the Board could have maderegulation therefor but admittedly no regulation has so far beenmade by the Board. The Terms and Conditions of Supply werenotified in BPMs No. 690 dated 17-9-1975 in exercise of the 35 (1996) 4 SCC 686

36 1993 Supp (4) SCC 136

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Apowers conferred by Section 49 of the Supply Act. They cameinto effect from 20-10-1975. They were made applicable to allconsumers availing supply of electricity from the Board. TheSection in the Act does not require the Board to enter intoa contract with individual consumer. Even in the absenceof an individual contract, the Terms and Conditions ofBSupply notified by the Board will be applicable to theconsumer and he will be bound by them. Probably in orderto avoid any possible plea by the consumer that he had noknowledge of the Terms and Conditions of Supply,agreements in writing are entered into with each consumer.CThat will not make the terms purely contractual. The Boardin performance of a statutory duty supplied energy oncertain specific terms and conditions framed in exercise ofa statutory power. Undoubtedly the terms and conditionsare statutory in character and they cannot be said to bepurely contractual.”

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72. The above discussion shows that Conditions of Supply werenotified: first, by the Supply Licensee and Electricity Boards under Section21 of 1910 Act; and second, by the Electricity Boards under Section 49Eof 1948 Act. The decision in Hyderabad Vanaspathi Ltd (supra) isillustrative of the fact that the courts have upheld the validity of theConditions of Supply notified by the Electricity Boards. Significantly, thedecision in Hyderabad Vanaspati Ltd. (supra) holds that the power ofthe Board to formulate terms and conditions under Section 49 of the1948 Act is distinct from the power to make regulations embodied underFsection 79 of the said Act. Therefore, the terms and conditions of supplynotified by the Board under Section 49, although in the nature ofsubordinate legislation, were not required to be placed before the StateLegislature under section 79A of the 1948 Act. In that case, it was alsoheld that statutory conditions could be invalidated only if they were inGconflict with any provisions of the 1948 Act or the Constitution.

73. The auction-purchasers have referred to India ThermalPower Ltd v. State of MP[37] to argue that the conditions of supply arenot statutory, but form a part of the contract between the Electricity H37 (2000) 3 SCC 379

Board and the consumer. Hence, it was submitted that these contractualterms cannot be enforced by the Board against the new owner oroccupier of the premises. In India Thermal Power Ltd (supra), theissue before the two-judge Bench was whether the State Governmentcan alter the terms of the Power Purchase Agreement entered into underSections 43 and 43-A of the 1948 Act. Section 43 empowered the Boardto enter into an arrangement with any person for purchase or sale ofelectricity. Section 43-A provided that the tariff for the sale of electricityby a generating company shall be determined in accordance with thenorms regarding the operation and plant-load factor as determined bythe Central Government from time to time. It was in light of theseprovisions, that this Court observed that every provision of an agreemententered into between a generating company and Electricity Board inexercise of the enabling power conferred under Sections 43 and 43-Adoes not render the entirety of the contract statutory. The relevantobservations are extracted below:

“11. [...] Merely because a contract is entered into in exercise ofan enabling power conferred by a statute that by itself cannotrender the contract a statutory contract. If entering into acontract containing the prescribed terms and conditions isa must under the statute then that contract becomes astatutory contract. If a contract incorporates certain termsand conditions in it which are statutory then the said contractto that extent is statutory. A contract may contain certain otherterms and conditions which may not be of a statutory characterand which have been incorporated therein as a result of mutualagreement between the parties. Therefore, the PPAs can beregarded as statutory only to the extent that they containprovisions regarding determination of tariff and otherstatutory requirements of Section 43-A(2). Opening andmaintaining of an escrow account or an escrow agreement arenot the statutory requirements and, therefore, merely becausePPAs contemplate maintaining escrow accounts that obligationcannot be regarded as statutory.”

74. We are of the opinion that the reasoning of this Court in IndiaThermal Power Ltd (supra) actually supports the arguments of theElectric Utilities. As evinced from Hyderabad Vanaspathi (supra), the AB

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Aconditions of supply enacted by the Boards have a statutory character.Therefore, any condition enacted under Section 49 of the 1948 Act,specifically one requiring the new owner to clear the arrears of theprevious owner as a precondition to availing electricity supply, will havea statutory character. When such a condition is incorporated as part of acontract, such contract also attains a statutory character and the liabilityBcontained therein becomes a statutory liability, which can be enforcedby the utilities against third parties, including the new owners of thepremises in question.

75. The next question that comes up for consideration is whetherthe Electric utilities can enact a condition providing for recoupment ofCelectricity arrears of a previous owner from the new owner. Under the1948 Act, the Board could enact terms and conditions for the supply ofelectricity under Section 49 read with Section 79(j). This Court has heldon many occasions that the term ‘regulate’ is to be given a wideinterpretation allowing the performance of everything necessary for theDorganised implementation, development, and conduct of business. InDeepak Theatre v. State of Punjab[38] a three-judge Bench of theSupreme Court held that the power to regulate implies the power toprescribe and enforce all such proper and reasonable rules necessaryfor conduct of business. It was held:

E“3. It is settled law that the rules validly made under the Act, forall intents and purposes, be deemed to be part of the statute. Theconditions of the licence issued under the rules form an integralpart of the statute. The question emerges whether the wordregulation would encompass the power to fix rates of admissionand classification of the seats. The power to regulate may includeFthe power to license or to refuse the licence or to require takingout a licence and may also include the power to tax or exemptfrom taxation, but not the power to impose a tax for the revenuein rule making power unless there is a valid legislation in thatbehalf. Therefore, the power to regulate a particular businessGor calling implies the power to prescribe and enforce allsuch proper and reasonable rules and regulations as maybe deemed necessary to conduct the business in a properand orderly manner. It also includes the authority toprescribe the reasonable rules, regulations or conditions H38 1992 Supp (1) SCC 684

subject to which the business may be permitted orconducted. A conjoint reading of Section 5, Section 9, Rule 4 andcondition 4-A gives, therefore, the power to the licensing authorityto classify seats and prescribe rates of admission into the cinematheatre.”

(emphasis supplied)

76. In K Ramanathan v. State of Tamil Nadu[39] a three-judgeBench of this Court held that the word “regulation” does not have a rigidor inflexible meaning. This Court observed that “power to regulate carrieswith it full power over the thing subject to regulation and in absence ofrestrictive words, the power must be regarded as plenary over the entiresubject.” The Constitution Bench in V S Rice and Oil Mills v. State ofAndhra Pradesh[40] also observed that the word “regulate” is of wideimport.

77. The above analysis must guide the interpretation of Section49 read with Section 79(j) of the 1948 Act which empowered the Boardto enact such terms and conditions as the Board thinks fit. This power ofthe Board would extend to enacting conditions providing for recovery ofdues of the erstwhile owner from the new owner as a precondition forsupply of electricity. Further, this Court has consistently upheld theConditions of Supply providing for recoupment of arrears of a previousowner from the new owner as a pre-condition for supply of electricity. Atwo-judge bench of this Court in Haryana State Electricity Board v.Hanuman Rice Mills, Dhanauri[41], while summarising the position oflaw laid down in ParamountPolymers (supra) and PaschimanchalVidyut Vitran Nigam Ltd. (supra), observed that the supplier can recoverthe arrears of electricity dues of the previous owner or occupier fromthe purchaser of the property if the statutory rules or terms and conditionsof supply which are statutory in character authorise the same:

“12. The position therefore may be summarised thus:

(i) Electricity arrears do not constitute a charge over the property.Therefore in general law, a transferee of a premises cannot bemade liable for the dues of the previous owner/occupier.

39 (1985) 2 SCC 116

40 (1964) 7 SCR 456

41 (2010) 9 SCC 145

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A(ii) Where the statutory rules or terms and conditions ofsupply which are statutory in character, authorise thesupplier of electricity to demand from the purchaser of aproperty claiming reconnection or fresh connection ofelectricity, the arrears due by the previous owner/occupierin regard to supply of electricity to such premises, theBsupplier can recover the arrears from a purchaser.”

78. In Paramount Polymers (supra), a two-judge Bench of thisCourt was called upon to decide the validity of clause 21-A of TermsCand Conditions of Supply which provided that no fresh connection inrespect of the premises would be given to a purchaser unless the purchasercleared the amount that was left in arrears by the previous consumer.The Court held that it was within the power of the Electricity Board toinsert clause 21-A in the Terms and Conditions of Supply under section49 of the Supply Act:D

“15. […] Under Section 49 of the Supply Act, the licensee orrather, the Electricity Board, is entitled to set down the Terms andConditions of Supply of electrical energy. In the light of the poweravailable to it, also in the context of Section 79(j) of the SupplyAct, it could not be said that the insertion of clause 21-A inEthe Terms and Conditions of Supply of electrical energy isbeyond the power of the appellant.”

79. As regards the 2003 Act, the Electric Utilities submit thatFSection 50 read with Section 181(2)(x) authorises the State Commissionto frame the conditions governing Electricity Supply enabling recoveryof electrical charges, including the electricity arrears of the previousowner from the new owner. The auction purchasers concede that Section50 of the 2003 Act is exhaustive, but contend that it does not enable theState Commission to lay down conditions for recovery of electricityGarrears of the previous owner. To comprehensively analyse the abovesubmission, it is necessary to refer to the relevant provisions under the2003 Act.

80. Section 2(24) of the 2003 Act defines “Electricity Supply Code”to mean the Electricity Supply Code specified under Section 50. SectionH50 reads as follows:

“50. The Electricity Supply Code – The State Commissionshall specify an Electricity Supply Code to provide for recoveryof electricity charges, intervals for billing of electricity charges,disconnection of supply of electricity for non-paymentthereof, restoration of supply of electricity, measures forpreventing tampering, distress or damage to electric plant orelectrical line or meter, entry of distribution licensee or any personacting or his behalf for disconnecting supply and removing themeter, entry for replacing, altering or maintaining electric lines orelectrical plants or meter and such other matters.”

81. Section 50 of the 2003 Act specifies that the State Commissionshall specify an Electricity Supply Code. Section 2(64) defines “StateCommission” as the State Electricity Regulatory Commission constitutedunder Section 82(1). The State Commission is authorised to notify theElectric Supply Code under section 181(2)(x). The use of expressionssuch as “recovery of electricity charges”, “disconnection of supply”,“restoration of supply”, under Section 50 indicate that the scope of theregulatory powers of the State Commission under the said provision iswide enough to govern all matters relating to the supply of electricity tothe premises.

82. The 2003 Act lays down the legislative framework forgeneration, transmission, distribution, trading, and use of electricity inIndia. In the process, the Parliament has also conferred discretion onthe regulatory authorities, particularly the Central Commission and StateCommission, to work out further details within the framework of thelegislative policy laid down in the legislation. While making subordinatelegislation, the delegated authority has to act within the confines of theplenary legislation.[42] The rules or regulations enacted by the CentralCommission or State Commission cannot override the 2003 Act bystipulating inconsistent provisions or by supplanting the parent statute.

83. The 2003 Act empowers the State Commission to makeregulations on matters specified under Section 181(2). In PTC IndiaLtd. v. Central Electricity Regulatory Commission[43] a ConstitutionBench of this Court held that regulations can be framed by State 42 JK Industries Ltd. v. Union of India, (2007) 13 SCC 673

43 (2010) 4 SCC 603

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ACommissions so long as they satisfy two conditions: first, they must beconsistent with the provisions of Act; and second, they must be madefor carrying out the provisions of the Act. The Court held:

“28. The 2003 Act contemplates three kinds of delegatedlegislation. Firstly, under Section 176, the Central Government isBempowered to make rules to carry out the provisions of the Act.Correspondingly, the State Governments are also given powersunder Section 180 to make rules. Secondly, under Section 177,the Central Authority is also empowered to make regulationsconsistent with the Act and the rules to carry out the provisions ofthe Act. Thirdly, under Section 178, the Central Commission canCmake regulations consistent with the Act and the rules to carryout the provisions of the Act. SERCs have a corresponding powerunder Section 181. The rules and regulations have to be placedbefore Parliament and the State Legislatures, as the case may be,under Sections 179 and 182. Parliament has the power to modifyDthe rules/regulations. This power is not conferred upon the StateLegislatures. A holistic reading of the 2003 Act leads to theconclusion that regulations can be made as long as twoconditions are satisfied, namely, that they are consistentwith the Act and that they are made for carrying out theprovisions of the Act.”

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84. The scheme of the 2003 Act makes it evident that theregulatory powers of the State Commission under section 181(2) are ofwide import. The Commission has certain plenary powers to regulate onFmatters contained in section 181(2), including Electric Supply Code underSection 50. Accordingly, the Commission can notify a Supply Codegoverning all the matters pertaining to supply of electricity such as“recovery of charges”, “disconnection of supply” and “restoration ofsupply”. In our opinion, such an authority also extends to stipulatingconditions for recovery of electricity arrears of previous owners fromGnew or subsequent owners.

85. In Paschimanchal Vidyut Vitran Nigam (supra), a two-judgeBench was considering the legality of the actions of the appellant licenseeto recover electricity dues from the purchaser of subdivided plots. Clause4.3 of the Uttar Pradesh Electricity Supply Code stipulated that a newH

connection to subdivided premises shall be given only after the share ofthe outstanding dues attributed to such premises is duly paid by theapplicant. This Court held that a distribution licensee can stipulate suchterms necessary for supply of electricity, including that the arrears duein regard to the supply of electricity made to the premises when theywere in the occupation of the previous owner or occupant, should becleared before the electricity supply is restored or a fresh connection isprovided to the premises. Therefore, a condition enabling the distributionlicensee to insist on the clearance of the arrears of electricity dues ofthe previous consumer before resuming electricity supply to the premisesis valid and permissible under the scheme of the 2003 Act.

86. The next question that arises for consideration is whether aregulation providing for recouping the arrears of a previous consumerfrom the subsequent owner has a reasonable nexus with the provisionsof the 2003 Act. Section 42 of the 2003 Act requires the distributionlicensee to develop and maintain an efficient, coordinated, and economicaldistribution system in their area of supply to supply electricity inaccordance with the provisions of the said Act. A distribution licensee isan intermediary, performing the function of conveying supply of electricityfrom generating companies to the consumer, at their premises. In orderto provide a supply of electricity to consumers, a distribution licensee isrequired to lay down infrastructure such as electricity lines, transformers,and other equipment. The nature of the supply of electricity also dependsupon the type of consumer as well their needs. The licensee has tomake a significant capital outlay for creating the necessary infrastructureas well as operation and maintenance costs to keep the infrastructure inreadiness according to Section 42. The licensees are required to maintainthe infrastructure even if the consumer does not consume electricity.They are also required to pay the salaries of their employees and paythe dues of electricity generation and transmission companies.

87. The 2003 Act has been enacted to promote the developmentof the electricity industry as well as to protect the interests of theconsumers and to ensure the supply of electricity to all areas. The SupplyConditions providing for recoupment of electricity dues of a previousconsumer from a new owner are necessary to recover the costs incurredfor laying down the infrastructure as well as the ongoing current liabilitiestowards the electricity generation and transmission companies. In theabsence of such conditions, it may be difficult for the distribution licensees AB

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Ato recover defaulted payments, adding to the revenue deficits. This mayadversely impact the financial health of the distribution licensees to thedetriment of the interests of the consumers.

88. In Paschimanchal Vidyut Vitran Nigam (supra), this Courtobserved that a condition stipulating that the distribution licensee canBrecover the electricity dues from the new owner or occupier wasnecessary to safeguard the interests of the distributor. It was observed:

“13.A stipulation by the distributor that the dues in regardto the electricity supplied to the premises should be clearedbefore electricity supply is restored or a new connection isCgiven to a premises, cannot be termed as unreasonable orarbitrary. In the absence of such a stipulation, anunscrupulous consumer may commit defaults with impunity,and when the electricity supply is disconnected for non-payment, may sell away the property and move on toanother property, thereby making it difficult, if notDimpossible for the distributor to recover the dues. Havingregard to the very large number of consumers of electricity andthe frequent moving or translocating of industrial, commercial andresidential establishments, provisions similar to Clauses 4.3(g) and(h) of the Electricity Supply Code are necessary to safeguard theEinterests of the distributor.”

89. Electricity constitutes a public good. The Court’s interpretationof the law must foster this position. In Hyderabad Vanaspati (supra)this Court was adjudicating upon the validity of Clause 39 of the ConditionsFof Supply which defined various malpractices and provided for enquiriesby designated officials. This Court observed that it was the statutoryduty of the Board to supply, transmit, and distribute electricity throughoutthe state in the most efficient and economical manner. It was furtherobserved that terms and conditions such as Clause 39 were necessaryGto prevent unauthorised use, pilferage or malpractices by the consumers.Such terms were necessary to recoup the loss suffered by pilferages,and to stop the continuation of similar malpractices.

90. Apart from protecting a public good, such conditions also havea reasonable nexus with objects of the 2003 Act, such as a robustdevelopment of the electricity industry, protecting the interests ofH

consumers as well as the financial interests of the distribution licensees.The need to protect the financial interests of distribution licensees hasbeen explicitly recognized in Section 61 of the 2003 Act which empowersthe Appropriate Commission to specify the terms and conditions for thedetermination of tariff in accordance with commercial principles. Therelevant part of the Section 61 reads as follows:

“61. Tariff regulations.- The Appropriate Commission shall,subject to the provisions of this Act, specify the terms and conditionsfor the determination of tariff, and in doing do, shall be guided bythe following, namely:- ***

(b) the generation, transmission, distribution, and supply ofelectricity are conducted on commercial principles;***

(d) safeguarding of consumers’ interests and at the sametime, recovery of the cost of electricity in a reasonablemanner;”

91. The Conditions of Supply and Electricity Supply Code whichrequire the payment of electricity dues of a previous owner as a conditionfor the grant of an electricity connection have a clear nexus to the schemeof the parent legislations and the objectives sought to be achieved. It isjust and reasonable for distribution licensees to specify conditions ofsupply requiring the subsequent owner or occupier of premises to paythe arrears of electricity dues of the previous owner or occupier as apre-condition for the grant of an electricity connection to protect theircommercial interests, as well as the welfare of consumers of electricity.

V. Whether arrears of electricity can become a charge orencumbrance over the premises

92. The next issue that arises for our consideration is whetherarrears of electricity can become a charge or encumbrance over thepremises. An ancillary issue is whether such arrears can become a chargeon the property only through an express provision of law. Before weembark upon our analysis, we clarify that it is unnecessary to deal withthe submission of the auction purchasers regarding registration under A

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ASection 17 of the Indian Registration Act 1908 for the conditions ofsupply contained in a contract to constitute a charge. The decision ofthis court in M.L. Abdul Jabbar Sahib v. M.V. Venkata Sastri &Sons,[44] was limited to the extent that it holds that a charge created byan act of parties under Section 100 of the Transfer of Property Act 1882does not attract the provisions of Section 59 of the Indian RegistrationBAct 1908.

93. The contention of the auction purchasers is that arrears ofelectricity are not a charge on property as they do not run with the land.They have relied on the decision in Ahmedabad MunicipalCorporation v. Haji Abdulgafur Haji Hussenbha[45 ]to submit thatCenforcement of a charge against the property in the hands of a transfereefor value without notice of the charge does not arise, and electricitydues are simply an unsecured debt. On the other hand, the Electric Utilitiessubmit that it is not even their case — in the absence of an expressprovision of law — that there is any mortgage or charge over the propertyDin the form that the licensee would be a secured creditor.

94. Section 100 of the Transfer of Property Act 1882 contemplatestwo types of charges: charges created by act of parties and chargesarising by operation of law. It inter alia provides as follows:

“100. Charges:Where immoveable property of one personEis by act of parties or operation of law made security for thepayment of money to another, and the transaction does notamount to a mortgage, the latter person is said to have acharge on the property; and all the provisions hereinbeforecontained [1][which apply to a simple mortgage shall, so far as mayFbe, apply to such charge].Nothing in this section applies to the charge of a trustee on thetrust property for expenses properly incurred in the execution ofhis trust, [and, save as otherwise expressly provided by anylaw for the time being in force, no charge shall be enforcedGagainst any property in the hands of a person to whom suchproperty has been transferred for consideration and withoutnotice of the charge.”

44 (1969) 1 SCC 573H45 (1971) 1 SCC 757

K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]

95. An encumbrance means a burden or charge upon property ora claim or lien upon an estate or on the land. Encumbrance must be acharge on the property, which must run with the property. In terms ofthe first paragraph of Section 100, when an immovable property of oneparty is pledged as security for the payment of money to another, andthe transaction does not constitute a mortgage, the latter would acquirea charge over the property. All provisions that apply to a simple mortgageare applicable to a charge. A charge is neither a sale nor a mortgagebecause it creates no interest in or over an immovable property but it isonly a security for the payment of money.[46] In other words, a chargeonly results in the creation of a right of payment out of the propertytowards the satisfaction of the debt or obligation in question.

96. The second paragraph of Section 100 provides an exceptionto the general proposition that a charge runs with the land and can beenforced even if the property has passed into the hands of a third party.It provides that a charge cannot be enforced against a property in thehands of a transferee without notice. The words “save as otherwiseexpressly provided by any law for the time being in force” indicatethat a charge can be enforced against a transferee without notice whenan express provision of law exists. Hence, a charge cannot be enforcedagainst a transferee if they have no notice of the same, unless therequirement of such notice has been dispensed with by law.[47]

97. In AI Champdany Industries Ltd. v. Official Liquidator,[48]this Court held that such a provision of law should not merely create acharge, but it must expressly provide for the enforcement of a chargeagainst the property in the hands of a transferee for value without noticeof the charge.

98. In Haji Abadulgafur Haji Husseinbhai (supra), this Courtconsidered the doctrine of constructive notice as provided under Section100. In that case, the Municipal Corporation had a charge on the propertyof a person who was in arrears of property tax. An auction purchaser,who became the owner of the property, resisted the attempt of theMunicipal Corporation to recover the arrears of pending taxes in exerciseof its charge on the ground that they were not aware of the past municipal 46 Dattatreya Shanker Mote v. Anand Chintaman Datar & Ors, (1974) 2 SCC 79947 Dattatreya Shanker Mote v. Anand Chintaman Datar, (1974) 2 SCC 799; State ofKarnataka v. Shreyas Papers Pvt. Ltd, 2006 (1) SCC 61548 (2009) 4 SCC 486

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Atax arrears. The Corporation argued that the transferee was imputedwith constructive knowledge of the charge created against the propertydue to Section 141 of the Bombay Provincial Municipal CorporationsAct 1949. The Court held against the Municipal Corporation on the groundthat in the facts of the case, the plaintiff did not have constructive noticeof the arrears of municipality.B

99. While explaining the purport of Section 100, this Court heldthat the second half of Section 100 enacts a general prohibition and nocharge can be enforced against property in the hands of a transferee forconsideration without notice of the charge. In terms of Section 100, anexception to this rule must be expressly provided by law. The Court heldCthat whether a transferee has actual or constructive notice which satisfiesthe requirement of notice in the proviso to Section 100, must be determinedin the facts and circumstances of each case. This Court observed:

“4. This section in unambiguous language lays down that nocharge is enforceable against any property in the hands of aDtransferee for consideration without notice of the charge exceptwhere it is otherwise expressly provided by any law for the timebeing in force. The saving provision of law must expressly providefor enforcement of a charge against the property in the hands ofa transferee for value without notice of the charge and not merelyEcreate a charge. …… The real core of the saving provision oflaw must be not mere enforceability of the charge against theproperty charged but enforceability of the charge against the saidproperty in the hands of a transferee for consideration withoutnotice of the charge. Section 141 of the Bombay Municipal Act isclearly not such a provision. The second contention fails and isFrepelled.”

100. Counsel for the Electric Utilities have not referred to anyprovision in the plenary legislation of the 2003 Act by which electricitydues would constitute a charge on the premises. The provisions of the1910 Act, 1948 Act, and the 2003 Act do not provide that the arrears ofGelectricity dues would constitute a charge on the property or that such acharge shall be enforceable against a transferee without notice.It ispertinent to note that this Court has reiterated that arrears of electricitycannot become a charge or encumbrance over the premises, in the

absence of an express provision of law in the 1910 Act, 1948 Act or2003 Act.[49]

101. In Isha Marbles (supra), this Court observed that under theprovisions of 1910 Act read with 1948 Act, electricity arrears do notcreate a charge over the property. It observed:

“56. From the above it is clear that the High Court has chosen toconstrue Section 24 of the Electricity Act correctly. There is nocharge over the property. Where that premises comes tobe owned or occupied by the auction-purchaser, when suchpurchaser seeks supply of electric energy he cannot becalled upon to clear the past arrears as a conditionprecedent to supply. What matters is the contract enteredinto by the erstwhile consumer with the Board. The Boardcannot seek the enforcement of contractual liability againstthe third party. Of course, the bona fides of the sale may not berelevant.”

102. Similarly, in Paschimanchal Vidyut Vitran Nigam (supra),this Court held that in the absence of any contract to the contrary, theamount payable towards supply of electricity does not constitute a chargeon the premises.

103. Consequently, in general law, a transferee of the premisescannot be made liable for the outstanding dues of the previous ownersince electricity arrears do not automatically become a charge over thepremises. Such an action is permissible only where the statutoryconditions of supply authorise the recovery of outstanding electricitydues from a subsequent purchaser claiming fresh connection of electricity,or if there is an express provision of law providing for creation of astatutory charge upon the transferee.

104. The next issue which falls for consideration is whether anelectricity charge can be introduced by way of statutory regulations orrules enacted by a regulatory commission under its rule making power inthe 2003 Act.

105. Counsel for the auction purchasers have relied on DeputyCommercial Tax Officer, Park Town Division v. Sha SukhrajPeerajee,[50] and Indian Council of Legal Aid and Advice v. Bar 49 1995 SCC (2) 648; AIR 2007 SC 2; (2010) 9 SCC 14550 AIR 1968 SC 67

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ACouncil of India,[51 ]to argue that a charge cannot be introduced by wayof regulations as the subject matter is not covered under Section 50 ofthe 2003 Act. It was further contended that only a fiscal levy by way ofstatutory exaction could be fastened on land. In the context of electricity,it was urged that a state legislation can provide for a charge on propertyonly by providing for levy of a duty on consumption or sale of electricity.BRelying on India Cement Ltd & Ors v. State of Tamil Nadu[52 ]and AlChampdany Industries v. Official Liquidator[53], it has been arguedthat only such a fiscal exaction would get attached to the land.

106. The subject of taxes on the consumption or sale of electricitywithin the State falls under Entry 53, List II of the Seventh Schedule ofCthe Constitution. A number of States have enacted legislations providingfor the levy of electricity duty on consumption or supply of electricity. Inthese instances, the legislature specifically provides that the duty payableunder the state legislation shall be a first charge on the amount recoverableby the licensee for the electrical energy supplied. Further, the manner inDwhich such charges are to be realised from the consumer is provided forin the state legislation and relevant subordinate legislation. For example,the Kerala Electricity Duty Act 1963 and Kerala Electricity Duty Rules1963 provide that the dues from a consumer towards electricity dutycreate a first charge on the amounts recoverable for the energy consumed.

E107. However, Entry 53 of List II of the Seventh Schedule doesnot have any bearing on the issues involved in this batch of cases. Thisis because neither is any tax levied under Article 265 of the Constitutionnor is any levy imposed. It is not the case of the distribution licenseesthat the State Commission under Section 50 of the 2003 Act has thepower to provide for fiscal exactions.F

108. A subordinate rule or regulation, as in the case of the ElectricitySupply Code framed by a regulatory commission, can provide for astatutory charge to be fastened on the premises within which consumptionof electricity was effected. In terms of Section 50 of the 2003 Act, aState Commission is empowered to provide for recovery of electricityGcharges, intervals for billing of electricity charges, disconnection of supplyof electricity for non-payment thereof, restoration of supply of electricityand other cognate matters. In terms of Section 181 of the 2003 Act, the 51 1995 (1) SCC 73252 (1990) 1 SCC 12H53 (2009) 4 SCC 486

State Commission is empowered to make regulations and rules consistentwith the Act which carry out the provisions of the Act. As held in thepreceding paragraphs, the rule making power contained under Section181 read with Section 50 is wide enough to enable the regulatorycommission to provide for a statutory charge in the absence of a provisionin the plenary statute providing for creation of such a charge. The StateCommission is conferred with wide powers under the statutory frameworkto provide for different mechanisms in the Electricity Supply Code forrecovery of electricity arrears of the previous owner. The recovery ofelectricity arrears may take effect either by requiring a subsequent ownerof premises to clear payment of outstanding dues as a condition precedentfor an electricity connection, or by deeming that any amount due to thelicensee shall be a first charge on the assets, or by any other reasonablecondition.

109. In exercise of such power, Regulation 10.5 of theMaharashtra Electricity Supply Code 2005 provides that any charge forelectricity or any other sum which remains unpaid by an erstwhile ownerconstitutes a charge on the property and can be recovered from thetransferee subject to the permitted period specified therein. This provisionspelt out in the present judgement is a mere illustration of a subordinaterule wherein unpaid electricity dues constitute a charge on property andcan be recovered from a subsequent transferee.

110. Reliance by the auction purchasers on the decisions in IndiaCement Ltd (supra) or Indian Council of Legal Aid and Advice(supra) render little assistance to their cause. The question in IndiaCement Ltd (supra)was whether the State Legislature had competenceto enact a cess on royalty on mineral rights under Article 246 read withEntry 49 of List II of the Seventh Schedule. In Indian Council of LegalAid and Advice (supra),this Court dealt with Rule 9 in Chapter III ofPart VI of the Bar Council of India Rules, which barred persons whohave completed 45 years of age from enrolment as an advocate. Boththese decisions bear little relevance to the issue which has arisen in thepresent appeals.

111. The auction purchasers have also relied on the decision inSha Sukhraj Peerajee (supra). This Court held that Rule 21-A framedby the State Government under Section 19 of the Madras General SalesTax Act, 1939 was ultra vires. In terms of Rule 21-A, a purchaser of abusiness carried on by a ‘dealer’ could be made liable for arrears of AB

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Asales tax due from the dealer in respect of transactions of sale whichtook place before the transfer. This Court held that the rule makingpower under Section 19 could not be used to enlarge the scope of recoveryand payment of tax from some person other than a ‘dealer’ under theAct. Section 10, inserted by the Amendment Act of 1956, provided thatthe outstanding amount on the date of default was made a charge on theBproperty of the person liable to pay tax. This Court did not consider theimport of Section 10 of the Act since the business was transferred beforethe amending Act came into force. The ratio of the case is neither helpfulnor applicable in the instant case, since this Court was dealing with thespecific provisions of the Madras General Sales Tax Act 1939.

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112. The provisions of the statute and statutory conditions of supplyneed to be examined to determine whether the conditions of supplyprovide for the creation of a charge in terms of Section 100 of the Transferof Property Act, 1882. Once it is established that a statutory charge iscreated and required notice was given, the charge attaches to the propertyDand the licensee is entitled to recover the unpaid electricity dues byproceeding against the premises. Consequent to the charge created,Article 62 of the Indian Limitation Act, 1963 would come into play. Article62 of the Limitation Act relates to enforcing the payment of moneyprocured by mortgaged or otherwise charged upon the immoveableproperty. The electricity utilities would get a period of twelve years toErecover the dues charged on the immoveable property from the datewhen the money payable became due.

113. In light of the above discussion, we are of the opinion that theelectricity utilities can create a charge by framing subordinate legislationor statutory conditions of supply enabling recovery of electricity arrearsFfrom a subsequent transferee. Such a condition is rooted in the importanceof protecting electricity which is a public good. Public utilities investhuge amounts of capital and infrastructure in providing electricity supply.The failure or inability to recover outstanding electricity dues of thepremises would negatively impact the functioning of such public utilitiesGand licensees. In the larger public interest, conditions are incorporated insubordinate legislation whereby Electric Utilities can recoup electricityarrears. Recoupment of electricity arrears is necessary to provide fundingand investment in laying down new infrastructure and maintaining theexisting infrastructure. In the absence of such a provision, Electric Utilitieswould be left without any recourse and would be compelled to grant aH

fresh electricity connection, even when huge arrears of electricity areoutstanding. Besides impacting on the financial health of the Utilities,this would impact the wider body of consumers.

VI. Implication of Section 56(2) on recovery of electricitydues by Electric Utilities

114. The Electric Utilities have submitted that Section 56 of the2003 Act only deals with the right of the licensee to disconnect supply.Explaining the scope of the relevant provision, it has been submitted thatSection 56 sets out different timelines, namely (a) when the disconnectioncan be made i.e., when payment of charges is not made after givingrequisite notice; (b) how long the disconnection can be maintained i.e.,so long as the outstanding dues remain; and (c) when it is to be restoredi.e., immediately when the outstanding dues are paid. Reliance has beenplaced on Ajmer Vidyut Vitran Nigam Limited v. RahamatullahKhan,[54] and M/s Prem Cortex v. Uttar Haryana Bijli Vitran NigamLimited[55 ]to contend that the use of the expression “under this section”in Section 56(2) means that the avenue of effecting disconnection torecover money cannot be resorted to after the limitation period. It isfurther contended that Section 56 does not bar the recovery of pendingcharges through other avenues of recovery in accordance with law. Thelicensees urge that civil remedies and statutory power to recoverelectricity can be utilised simultaneously. It was urged that Section 56does not restrict the right of the licensee to insist on payment of thearrears of charges incurred on the premises, from a subsequent applicantfor a fresh connection to the same premises.

115. On the implication of the two-year limitation period underSection 56(2), it is submitted that (i) the limitation is with reference tothe bar on disconnection by the licensee; (ii) no limitation is providedunder Section 56 after the electricity is discontinued for non-payment ofdues; (iii) a valid and subsisting money decree in favour of the ElectricityBoard against the erstwhile owner of the premises would not be affectedby the limitation period of two years; (iv) no time limit has been providedÿþfor cessation of the right of the licensee to demand past dues forgiving a new connection to the premises; and (v) the right of the licenseenot to give a connection till the outstanding dues are cleared is a continuingright and cannot be said to be extinguished.

54 (2020) 4 SCC 650

55 Judgment dt. 5.10.2021 in CA 7235 of 2009

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A116. On the other hand counsel representing the auctionpurchasers have urged that (i) the period of limitation under Section56(2), which begins with a non obstante clause, bars the recovery ofoutstanding electricity dues from successful auction purchasers who applyfor a new connection for the supply of electricity from the licensee; (ii)two conditions need to be fulfilled to get over the embargo on the recoveryBof a sum due from any consumer, after a period of two years from thedate when such sum became first due, namely (a) such sum has beenshown continuously as recoverable as arrears of charges for electricitysupplied, and (b) the licensee shall not cut off the supply of the electricity;(iii) the conditions of supply, being subordinate legislation, cannot overrideCthe duty cast upon the licensee, and dues cannot be recoverable either ina manner or over and above what is provided for in the Section 56 (2);and (iv) any alternative interpretation would render the bar under Section56(2) meaningless, and the conditions of supply could be used to resurrecttime barred claims as held in State of Kerala v. VT Kallianikutty.[56]D117. The power to discontinue supply to a consumer is dealt within Section 56 of the 2003 Act. The provision is extracted below:

“Section 56: Disconnection of supply in default of payment

“Section 56: Disconnection of supply in default of payment

(1) Where any person neglects to pay any charge for electricityor any sum other than a charge for electricity due from him to aElicensee or the generating company in respect of supply,transmission or distribution or wheeling of electricity to him, thelicensee or the generating company may, after giving not less thanfifteen clear days’ notice in writing, to such person and withoutprejudice to his rights to recover such charge or other sumFby suit, cut off the supply of electricity and for that purpose cutor disconnect any electric supply line or other works being theproperty of such licensee or the generating company through whichelectricity may have been supplied, transmitted, distributed orwheeled and may discontinue the supply until such charge or othersum, together with any expenses incurred by him in cutting offGand reconnecting the supply, are paid, but no longer:

Provided that the supply of electricity shall not be cut off if suchperson deposits, under protest, -

(a) an amount equal to the sum claimed from him, or (b) the electricity charges due from him for each monthcalculated on the basis of average charge for electricity paidby him during the preceding six months, whichever is less,pending disposal of any dispute between him and the licensee.

(2) Notwithstanding anything contained in any other law forthe time being in force, no sum due from any consumer, underthis section shall be recoverable after the period of twoyears from the date when such sum became first due unless suchsum has been shown continuously as recoverable as arrear ofcharges for electricity supplied and the licensee shall not cut offthe supply of the electricity.”

118. Section 56 falls under Part VI which is titled “Distribution ofElectricity”. Section 56 provides for disconnection of electrical supply incase there is a default in payment of electricity charges.

119. The power to disconnect is a drastic step which can beresorted to only when there is a neglect on the part of the consumer topay the electricity charges or dues owed to the licensee or a generatingcompany, as the case may be. Section 56(1) provides that where anyperson neglects to pay any charge for electricity or any sum other thana charge for electricity due from him to a licensee or a generatingcompany, the licensee or generating company may after giving a writtennotice of fifteen days, disconnect the supply of electricity, until suchcharges, including the expenses incurred are paid. The power todisconnect electricity is conditioned on the fulfilment of the conditionsstipulated. The cutting off or disconnection is without prejudice to therights of the distribution licensee to recover such charge or other sumsby other permissible modes of recovery. The proviso to Section 56(1)carves out an exception by providing that electricity supply will not becut off if the consumer, “under protest”, either deposits the amount claimedor deposits the average charges paid during the preceding six months.

120. The statutory right of the licensee or the generating companyto disconnect the supply of electricity is subject to the period of limitationof two years provided by Section 56(2). Section 56(2) provides thatnotwithstanding anything contained in any other law for the time being inforce, no sum due from any consumer “under this section” shall be A

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Arecoverable after a period of two years from the date when such sumbecame first due unless such sum has been shown continuously asrecoverable as arrears of charges for electricity supplied and the licenseeshall not cut off the supply of electricity. The limitation of two years islimited to recovery of sums under Section 56. This is evident by the useof the expression, “under this section”.B

121. The first issue pertains to the simultaneous exercise ofstatutory and civil remedies by the licensing authority to recover electricityarrears. The liability to pay electricity charges is a statutory liability andSection 56 provides the consequences when a consumer neglects to payany charge for electricity or any sum other than a charge for electricityCdue from him. Section 56(1) provides that the power of the licensee todisconnect electrical supply when a consumer is in default of payment is“without prejudice to his rights to recover such charge or other sum bysuit”. This means that the licensee can exercise both its statutory remedyto disconnect as well as a civil remedy to institute a suit for recoveryDagainst the consumer since the licensee will not necessarily obtain theamount due from the consumer by disconnecting the supply. In its decisionin Bihar SEB v. Iceberg Industries Ltd.,[57] this Court has held thatthe power to disconnect supply under Section 56 is a special powergiven to the supplier in addition to the normal mode of recovery byinstituting a suit. The power to disconnect the supply of electricity as aEconsequence of the non-payment of dues and as a method to recoverdues is supplemental to the right of the licensee to institute a suit or otherproceedings for the recovery of dues on account of electrical charges.

122. Section 56(1) of the 2003 Act is pari materia to Section 24of the 1910 Act. Section 24 of the 1910 Act empowered the ElectricityFBoard to issue a demand and to discontinue supply to consumers whoneglected to pay charges, without prejudice to the right to recover suchcharges or other sums by way of a suit. The import of Section 24 wasconsidered by this Court in Isha Marbles (supra), where it was observedthat the action of cutting off electricity supply after service of the noticeGas prescribed under Section 24 was in addition to the general remedy offiling a suit for recovery.

123. In M/s Swastic Industries v. Maharashtra StateElectricity Board,[58] this Court held that the right to discontinue supply 57 (2020) 20 SCC 745H58 (1997) 9 SCC 465

of energy under Section 24 was not taken away by Section 60A of the1948 Act, which provided an option to the Electricity Board to file a suitwithin the period of limitation stipulated there. This Court observed that:

“5. It would, thus, be clear that the right to recover thecharges is one part of it and right to discontinue supply ofelectrical energy to the consumer who neglects to paycharges is another part of it. The right to file a suit is amatter of option given to the licensee, the Electricity Board.Therefore, the mere fact that there is a right given to theBoard to file the suit and the limitation has been prescribedto file the suit, it does not take away the right conferred onthe Board under Section 24 to make demand for payment of the charges and on neglecting to pay the same they have thepower to discontinue the supply or cut off the supply, as the casemay be, when the consumer neglects to pay the charges. Theintendment appears to be that the obligations aremutual….”

Hence, the power to initiate recovery proceedings by filing a suitagainst the defaulting consumer is independent of the power to disconnectelectrical supply as a means of recovery.

124. The second issue pertains to the implication of the period oftwo years provided in Section 56(2) on the civil remedies of Utilities torecover electricity dues. Section 56(2), which begins with a non obstanteclause, provides a limitation of two years for recovery of dues by thelicensee through the means of disconnecting electrical supply. It puts arestriction on the right of the licensee to recover any sum due from aconsumer under Section 56 after a period of two years from the datewhen such sum became first due. If this provision is invoked against aconsumer after two years, the action will be permissible when the sum,which was first due, has been shown continuously as recoverable asarrears of charges for electricity supplied. Under Section 56, the liabilityto pay arises on the consumption of electricity and the obligation to payarises when a bill is issued by the licensee for the first time. Accordingly,the period of limitation of two years starts only after issuance of the bill.

125. Before we deal with the implication of Section 56(2) on thecivil remedies available to a licensee, it is important to clarify that when A

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Athe liability incurred by a consumer is prior to the period when the 2003Act came into force, then the bar of limitation under Section 56(2) is notapplicable. In Kusumam Hotels Pvt Ltd v. Kerala State ElectricityBoard,[59] this Court has held that Section 56(2) applies after the 2003Act came into force and the bar of limitation under Section 56(2) wouldnot apply to a liability incurred by the consumer prior to the enforcementBof the Act. In terms of Section 6 of the General Clauses Act 1897, theliability incurred under the previous enactment would continue and theclaim of the licensee to recover electricity would be governed by theregulatory framework which was in existence prior to the enforcementof the 2003 Act.C

126. In its report dated 19 December 2002, the StandingCommittee of Energy opined that the restriction for recovery of arrearsunder Section 56 was considered necessary to protect the consumerfrom arbitrary billings.[60] In other words, the enactment of Section 56(2)was to address the mischief of arbitrary billings. Hence, Section 56(2)Dwas incorporated to ensure that a licensee does not abuse its specialpower of disconnection of electrical supply. Section 56(2) ensures that alicensee does not have the liberty to arbitrarily impose a bill after a longperiod and then recover such a huge amount through the drastic step ofdisconnection of electrical supply.

E127. In Rahamatullah Khan (supra), a two judge Bench of thisCourt dealt with the applicability of the period of limitation provided bySection 56(2) on an additional or supplementary demand raised by thelicensee. A consumer was billed under a particular tariff but after anaudit, it was discovered that a different tariff code should have beenapplied. An additional bill was subsequently raised in 2014 for the periodFfrom July 2009 to September 2011. Section 56(2) was interpreted not topreclude the licensee from raising a supplementary demand after theexpiry of the period of limitation under Section 56(2) in the case of amistake or a bona fide error. However, it did not empower the licenseeto take recourse to the coercive measure of disconnection of electricityGsupply for recovery of the additional demand. This Court held that thebar of limitation of two years does not preclude the licensee from resortingto other modes of recovery of electricity arrears. The court observed:

59 (2008) 12 SCC 213

59 (2008) 12 SCC 213

60 Standing Committee of Energy- Thirteenth Lok Sabha, The Electricity Bill 2001-HThirsty First Report, Ministry of Power (2002)

“7.4 Sub-section (1) of Section 56 confers a statutory right to thelicensee company to disconnect the supply of electricity, if theconsumer neglects to pay the electricity dues. This statutory rightis subject to the period of limitation of two years provided by sub-section (2) of Section 56 of the Act 7.5The period of limitation of two years would commencefrom the date on which the electricity charges became “firstdue” under sub-section (2) of Section 56. This provisionrestricts the right of the licensee company to disconnect electricitysupply due to non-payment of dues by the consumer, unless suchsum has been shown continuously to be recoverable as arrears ofelectricity supplied, in the bills raised for the past period. If thelicensee company were to be allowed to disconnect electricitysupply after the expiry of the limitation period of two years afterthe sum became “first due”, it would defeat the object of Section56(2).

8. Section 56(2) however, does not preclude the licensee companyfrom raising a supplementary demand after the expiry of thelimitation period of two years. It only restricts the right of thelicensee to disconnect electricity supply due to non-paymentof dues after the period of limitation of two years hasexpired, nor does it restrict other modes of recovery whichmay be initiated by the licensee company for recovery of asupplementary demand.

9. Applying the aforesaid ratio to the facts of the present case,the licensee company raised an additional demand on 18-3-2014for the period July 2009 to September 2011. The licensee companydiscovered the mistake of billing under the wrong Tariff Code on18-3-2014. The limitation period of two years under Section 56(2)had by then already expired.

9.1. Section 56(2) did not preclude the licensee companyfrom raising an additional or supplementary demand afterthe expiry of the limitation period under Section 56(2) inthe case of a mistake or bona fide error. It did not, however,empower the licensee company to take recourse to thecoercive measure of disconnection of electricity supply, forrecovery of the additional demand.”

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A128. The exposition of law by this Court in Rahamatullah Khan(supra) was considered by a coordinate bench in Prem Cortex (supra).A consumer was served with a short assessment notice and the Courthad to consider whether short billing and the subsequent raising of anadditional demand would tantamount to a deficiency of service. ThisCourt observed that the bar contemplated in Section 56 operates on twoBdistinct rights of the licensee, namely, the right to recover and the right todisconnect. This Court observed that under the law of limitation, theremedy and not the right is extinguished. The bar with reference to theremedy of disconnection was held to be an exception to the law oflimitation. This Court further considered the impact of Section 56(1) onCSection 56(2) and observed:

“15. Therefore, the bar actually operates on two distinctrights of the licensee, namely, (i) the right to recover; and (ii) theright to disconnect. The bar with reference to theenforcement of the right to disconnect, is actually an exception toDthe law of limitation. Under the law of limitation, what isextinguished is the remedy and not the right. To be precise, whatis extinguished by the law of limitation, is the remedy through acourt of law and not a remedy available, if any, de hors through acourt of law. However, section 56(2) bars not merely the normalremedy of recovery but also bars the remedy of disconnection.EThis is why we think that the second part of Section 56(2) is anexception to the law of limitation.

….

….

23. Coming to the second aspect, namely, the impact of Sub-Fsection (1) on Sub-section (2) of Section 56, it is seen that thebottom line of Subsection (1) is the negligence of any person topay any charge for electricity. Sub-section (1) starts with the words“where any person neglects to pay any charge for electricity orany sum other than a charge for electricity due from him”.

24. Sub-section (2) uses the words “no sum due from anyconsumer under this Section”. Therefore, the bar under Sub-section (2) is relatable to the sum due under Section 56. Thisnaturally takes us to Sub-section (1) which deals specificallywith the negligence on the part of a person to pay any chargefor electricity or any sum other than a charge G

H

for electricity. What is covered by section 56, under sub-section (1), is the negligence on the part of a person to payfor electricity and not anything else nor any negligence onthe part of the licensee.”

(emphasis supplied)

129. The period of limitation under Section 56(2) is relatable tothe sum due under Section 56. The sum due under Section 56 relates tothe sum due on account of the negligence of a person to pay for electricity.Section 56(2) provides that such sum due would not be recoverableafter the period of two years from when such sum became first due.The means of recovery provided under Section 56 relate to the remedyof disconnection of electric supply. The right to recover still subsists.

130. We may also briefly deal with the objection of the auctionpurchasers that the conditions of supply cannot be used to resurrecttime barred debts. Counsel placed reliance on VT Kallianikutty (supra),where it was held that a time barred debt cannot be recovered by takingrecourse to the provisions of the Kerala Revenue Recovery Act.Thisdecision is not helpful to the auction purchasers in the present batch ofcases. In that case, a three-judge Bench of this Court while dealing withagricultural loans extended by the Kerala Finance Corporation, held thatsince the Kerala Revenue Recovery Act does not create a new right, aperson could not claim the recovery of amounts which are not legallyrecoverable. In reaching its decision, this Court, however, reasoned thatthe statute of limitation bars the remedy by way of a suit beyond acertain time period, without touching the right to recover the loan. Theright remains untouched and it can be exercised in any other suitablemanner provided.

131. We therefore, reject the submission of the auction purchasersthat the recovery of outstanding electricity arrears either by instituting acivil suit against the erstwhile consumer or from a subsequent transfereein exercise of statutory power under the relevant conditions of supply isbarred on the ground of limitation under Section 56(2) of the 2003 Act.Accordingly, while the bar of limitation under Section 56(2) restricts theremedy of disconnection under Section 56, the licensee is entitled torecover electricity arrears through civil remedies or in exercise of itsstatutory power under the conditions of supply.

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AVII. Implication of the sale of premises on “as is where is”basis, with or without reference to electricity arrears of thepremises

132. The Electric Utilities have urged that (i) the auction purchaserswere put to notice of the requirement of the clearance of dues; (ii) theBpublic auction-sales of premises were held on an “as is where is” basis;(iii) this would include a condition of acknowledging all liabilities in respectof the premises, with or without a specific reference of payment ofelectricity dues; and (iv) in a sale arising out of commercial transactions,the auction purchaser is required to undertake due diligence of outstandingdues which are premises specific. On the other hand, the auctionCpurchasers submitted that (i) a condition such as “as is where is” is afeature of physical property and does not extend to claims which are notcharges or other encumbrances running with land; (ii) the argument findssupport in the decisions in Punjab Urban Planning and DevelopmentAuthority v. Raghu Nath Gupta[61] and Delhi Development AuthorityDv. Kenneth Builders and Developers Pvt Limited[62]; (iii) electricitydues cannot be ascertained merely by looking at a property; and (iv)there was no obligation on the applicants to ascertain the electricity duespayable, more so in view of the judgement in the Isha Marbles (supra).

133. In the present batch of cases, the premises were sold inEauction sales generally held on an “as is where is” basis. A sale on “as iswhere is basis” postulates that the purchaser would be acquiring theasset with all its existing rights, obligations and liabilities. When a propertyis sold on an “as is where is” basis, encumbrances on the property standtransferred to the purchaser upon the sale.

F134. In U.T. Chandigarh Administration v. Amarjeet Singh[63],a two-judge Bench of this Court explained the characteristics of a publicauction in the context of the maintainability of a consumer complaint.This Court held that where existing sites are put up for sale or lease bypublic auction and the sale is confirmed in favour of the highest bidder,the resultant contract relates to sale or lease of immovable property, andGnot a provision of service or sale of goods. This Court delved into thenature of public auctions and opined on the implications of an auctionconducted on an “as is where is basis”, where an auction purchaser is 61 (2012) 8 SCC 19762 (2016) 13 SCC 561H63 (2009) 4 SCC 660

expected to exercise due diligence with regard to the condition of a site.The Court observed:

“19. …. In a public auction of sites, the position is completelydifferent. A person interested can inspect the sites offered andchoose the site which he wants to acquire and participate in theauction only in regard to such site. Before bidding in the auction,he knows or is in a position to ascertain, the condition andsituation of the site. He knows about the existence or lackof amenities. The auction is on `as is where is basis’. Withsuch knowledge, he participates in the auction and offers aparticular bid. There is no compulsion that he should offera particular price. When the sites auctioned are existing sites,without any assurance/representation relating to amenities, thereis no question of deficiency of service or denial of service. Wherethe bidder has a choice and option in regard to the site and priceand when there is no assurance of any facility or amenity, thequestion of the owner of the site becoming a service provider,does not arise…

20. Where there is a public auction without assuring anyspecific or particular amenities, and the prospectivepurchaser/lessee participates in the auction after havingan opportunity of examining the site, the bid in the auctionis made keeping in view the existing situation, position andcondition of the site. If all amenities are available, he wouldoffer a higher amount. If there are no amenities, or if the sitesuffers from any disadvantages, he would offer a lesser amount,or may not participate in the auction. Once with open eyes, aperson participates in an auction, he cannot thereafter be heard tosay that he would not pay the balance of the price/premium or thestipulated interest on the delayed payment, or the ground rent, onthe ground that the site suffers from certain disadvantages or onthe ground that amenities are not provided….”

135. In Raghu Nath Gupta (supra),[64] this Court held that asuccessful auction purchaser of commercial plots sold with a superimposedcondition of “as is where is” basis is estopped from later contending that ABC

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Ahe is not bound by the terms and conditions of the auction notice or thatthe seller had not provided basic amenities. The Court relied on theterms and conditions, specifically Clause 25, stipulated in the auctionnotice published by Punjab Urban Planning and Development Authorityin reaching its conclusion and held that the auction notice would haveconsiderable bearing in resolving the dispute. Clause 25 of the auctionBnotice provided that the site was offered on “as is where is” basis andthe Authority would not be responsible for levelling the site or removingstructures, if any, thereon. The phrase “as is where is” was explained bythis Court in the following terms:

“14. We notice that the respondents had accepted theCcommercial plots with the open eyes, subject to the abovementioned conditions. Evidently, the commercial plots wereallotted on “as is where is” basis. The allottees would haveascertained the facilities available at the time of auctionand after having accepted the commercial plots on “as isDwhere is” basis, they cannot be heard to contend that PUDAhad not provided the basic amenities like parking, lights,roads, water, sewerage etc. If the allottees were not interestedin taking the commercial plots on “as is where is” basis, theyshould not have accepted the allotment and after having acceptedthe allotment on “as is where is” basis, they are estopped fromEcontending that the basic amenities like parking, lights, roads, water,sewerage etc. were not provided by PUDA when the plots wereallotted….”

F136. In Kenneth Builders and Developers (supra), in thecircumstances arising in that particular case, this Court refused to acceptthe seller’s reliance on the “as is where is” condition and held that refusalof the Delhi Pollution Control Committee,[65] to grant permission to theauction purchaser, frustrated the Development Agreement which wasentered into between the seller, Delhi Development Authority,[66] and theGbuilder. DDA had held an auction on an “as is where is” basis for involvingthe private sector for the development of a project land. The bid wasaccepted and a Development Agreement was entered between DDAand the builder. However, when the builder attempted to carry out65 “DPCC”H66 “DDA”

construction activity, it was prohibited by DPCC leading to an impassein the development activity. The terms and conditions of auctionspecifically mentioned that there was a presumption that the intendingpurchaser had inspected the site and had familiarised himself withprevalent conditions in all respects including the status of infrastructuralfacilities available before giving its bid. Under Clause 6 of theDevelopment Agreement, it was the responsibility of the developer toget various approvals and clearances from governmental departments.Clause 11 of the Development Agreement further stipulated that thebuilder was deemed to have inspected the site and its surroundings andchecked the information available. This Court held that the auction saleon an “as is where is” basis and the specific clauses in the DevelopmentAgreement “related only to physical issues pertaining to the project landand ancillary or peripheral legal issues pertaining to the actual constructionactivity”. It was observed:

“34. When the DDA informed Kenneth Builders that theproject land was available on an “as is where is basis” andthat it was the responsibility of the developer to obtain allclearances, the conditions related only to physical issuespertaining to the project land and ancillary or peripherallegal issues pertaining to the actual construction activity,such as compliance with the building bye-laws,environmental clearances etc. The terms and conditions of“as is where is” or environmental clearances emphasized bylearned counsel for the DDA certainly did not extend tocommencement of construction activity prohibited by law exceptafter obtaining permission of the Ridge Management Board andthis Court. On the contrary, it was the obligation of the DDA toensure that the initial path for commencement of constructionwas clear, the rest being the responsibility of the developer. Thefailure of the DDA to provide a clear passage due to an interveningcircumstance beyond its contemplation went to the foundation ofimplementation of the contract with Kenneth Builders and that iswhat frustrated its implementation.

35. Reliance by the learned counsel for DDA on the “as is whereis” concept as well as Clause 6 and 11 of the DevelopmentAgreement in this context is misplaced. As mentionedabove, this primarily pertains to physical issues at site….”

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A137. Reliance placed by the auction purchasers on Raghu NathGupta (supra) and Kenneth Builders and Developers (supra)tocontend that “as is where is” is a feature of physical property, limited toencumbrances or charges running with land, is misconceived. In boththe cases relied upon by the auction purchasers, the judgments wererendered on the peculiar facts at hand. In Raghu Nath Gupta (supra)Bthis Court was dealing with the availability of basic facilities like parking,lights, roads, water and sewerage, but the application of the doctrine of“as is where is” was not limited to only physical features of the property.Further, in Kenneth Builders and Developers (supra) based on thefacts, this Court opined that a sale on “as is where is” could not beCinterpreted to mean that the auction purchaser would be responsible totake permission for the initial commencement of construction itself, whichwas the obligation of the DDA. The observation of this Court that “thisprimarily pertains to physical issues at site” was limited to specific clausesin the Development Agreement.

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D138. Thus, the implication of the expression “as is where is” or“as is what is basis” or “as is where is, whatever there is and withoutrecourse basis” is not limited to the physical condition of the property,but extends to the condition of the title of the property and the extent andstate of whatever claims, rights and dues affect the property, unlessstated otherwise in the contract. The implication of the expression isEthat every intending bidder isput on notice that the seller does not undertakeany responsibility to procure permission in respect of the property offeredfor sale or any liability for the payment of dues, like water/service charges,electricity dues for power connection and taxes of the local authorities,among others.F

D

139. The view which we take finds support in the judgments ofthis Court in Paramount Polymers (supra)and Srigdhaa Beverages(supra). In Paramount Polymers (supra), the premises of the erstwhileowner were sold under the State Financial Corporations Act 1951 on an“as is where is” basis. This Court held that an auction purchaser cannotGbe considered an ignorant party and a reasonable enquiry would haveput it on notice of the subsistence of such a liability. It was observed:

“9. …. Before submitting its bid to the Financial Corporation thefirst respondent would certainly have inspected the premises andcould have come to know that power connection to the premiseshad been snapped and this information should have put it on H

reasonable enquiry about the reasons for the power disconnectionleading to the information that the previous owner of theundertaking or consumer was in default. Moreover, the appellanthad clearly written to the Financial Corporation even before thesale was advertised by it, informing it that a sum of Rs.64,23,695/- was due towards electricity charges to the appellant and whenselling the undertaking, that amount had to be provided for or keptin mind. Therefore, any reasonable enquiry by the first respondentas a prudent buyer would have put it on notice of the subsistenceof such a liability. The sale was also on ‘as is where is’ basis…..”

140. In Srigdhaa Beverages (supra), this Court was consideringan auction sale under the Securitisation and Reconstruction of FinancialAssets and Enforcement of Security Interest Act 2002.[6][7 ]The Courtanalysed Clauses 24 and 26 of the auction notice, which stipulated an“as is where is” sale with respect to all statutory dues and absolved theauthorised officer of all liabilities for any charge, encumbrances anddues, including electricity dues. It concluded that the auction purchaserwas “clearly put to notice” since there was a specific mention of thequantification of dues of various accounts including electricity dues. Onthe liability of the past owners to bear electricity dues when the sale ison “as is where is” and existence of electricity dues is specificallymentioned, this Court categorically held that the auction purchasers werebound to inspect the premises and provide for the dues in all respects.This Court observed:

“16.2. Where, as in cases of the E-auction notice in question, theexistence of electricity dues, whether quantified or not, has beenspecifically mentioned as a liability of the purchaser and the saleis on “AS IS WHERE IS, WHATEVER THERE IS ANDWITHOUT RECOURSE BASIS”, there can be no doubt thatthe liability to pay electricity dues exists on the respondent(purchaser).”

141. To conclude, all prospective auction purchasers are put onnotice of the liability to pay the pending dues when an appropriate “as iswhere is” clause is incorporated in the auction sale agreement. It is forthe intending auction purchaser to satisfy themselves in all respects aboutcircumstances such as title, encumbrances and pending statutory duesin respect of the property they propose to purchase. In a public auction67 “SARFAESI Act”

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Asale, auction purchasers have the opportunity to inspect the premisesand ascertain the facilities available, including whether electricity issupplied to the premises. Information about the disconnection of poweris easily discoverable with due diligence, which puts a prudent auctionpurchaser on a reasonable enquiry about the reasons for the disconnection.When electricity supply to a premises has been disconnected, it wouldBbe implausible for the purchaser to assert that they were oblivious of theexistence of outstanding electricity dues.

142. In terms of the legal doctrine of caveat emptor, it becomesthe duty of the buyer to exercise due diligence. A seller is not under anobligation to disclose patent defects of which a buyer has actual orCconstructive notice in terms of Section 3 of the Transfer of Property act,1882. However, in terms of Section 55(1)(a), in the absence of a contractto the contrary, the seller is under an obligation to disclose material defectsin the property or in the seller’s title thereto of which he is aware andwhich a buyer could not with ordinary care discover for himself.

D

143. While examining the effect of an “as is where is” clause, thefacts and circumstances of each case individually, along with theterminology of the clauses governing the auction sales must be takeninto consideration, to arrive at an equitable decision.

G. Application: Facts of Individual CasesE

144. Before we apply the above analysis to the facts of theindividual cases, it needs to be clarified that each case involves, in oneway or another, application of the conditions of supply or ElectricitySupply Code. At the outset, we note that the relevant date to determinethe applicability of the conditions of supply or Electricity Supply Code isFthe date on which the auction purchaser applied for a fresh connectionor reconnection for supply of electricity to the premises. The cause ofaction arises when a fresh connection or reconnection is sought by theauction purchaser. This has also been reiterated in the decision of thisCourt in Paramount Polymers (supra). This Court observed:G“11. ….. We are also not in a position to agree with the HighCourt that the relevant date is the date of sale of the undertakingby the Financial Corporation to the first respondent. The insertionof clause 21-A was circulated by the communication dated 27-11-2001 and it was subsequently followed by the formal notificationin terms of Section 49 of the Supply Act read with Section 79(j) ofH

that Act. The first respondent having applied for a freshconnection only on 1-1-2002, the application would begoverned by the Terms and Conditions including the terminserted on 27-11-2001, as subsequently formally notified.In the writ petition filed on 27-2-2002 in that behalf, the Courtcould not have come to the conclusion that the application madeby the first respondent was not governed by the amended Termsand Conditions of Supply including clause 21-A thereof…..Onour interpretation of clause 21-A of the Terms and Conditions ofSupply as inserted with particular reference to sub-clauses (b)and (c) thereof, we are of the view that the said sub-clausesclearly applied to the first respondent when it made an applicationon 1-1-2002 seeking a fresh connection for the premises.”

Considering the facts of the nineteen cases, we decide the appealsin the following manner:

I.Kerala

145. The KSEB in exercise of powers conferred under Section49 and Section 79(j) of the 1948 Act framed regulations relating toConditions of Supply of Electrical Energy. The regulations were publishedin the Gazette on 15 December 1989 and came into force with effectfrom 1 January 1990. Clause 15 deals with the agreement for a serviceconnection. The relevant clause, with which we are concerned, isextracted below:

“15. Agreement for Service Connection

15(c): When there is transfer of ownership or right of occupancyof the premises the registered consumer shall intimate the transferof right of occupancy of the premises within 7 days to the AssistantEngineer/Assistant Executive Engineer concerned. On suchintimation having been received the service shall be disconnected.If the transferee desires to enjoy service connection, he shall payoff the dues to the Board and apply for transfer of ownership ofservice connection within 15 days and execute fresh agreementand furnish additional security. New consumer number shall beallotted in such cases cancelling the previous number.

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A15(d): All dues to the Board from a consumer shall be the firstcharge on the assets of the consumer. All dues including penaltyshall be realized as public revenue due on land.

15(e): Reconnection or new connection shall not be given intoany premises where there are arrears on any account due to theBBoard pending payment, unless the arrears including penalty, if,any, are cleared in advance (if the new owner/occupier/ allotteeremits the amount due from the previous consumer, the Boardshall provide re-connection or new connection depending onwhether the service remains disconnected/dismantled, as the casemay be. The amount so remitted will be adjusted against the duesCfrom the previous consumer if the Board gets the full dues fromthe previous consumer through R.R. action or other legalproceedings the amount remitted by the new owner/occupier towhom connection has been effected shall be refunded. But theamount already remitted by him/her shall not bear any interest)”

D

146. In terms of Clause 15(c), when there is a transfer of ownershipor right of occupancy of the premises, the registered consumer shallintimate the transfer of the right of occupancy of the premises withinseven days to the officer concerned. On such intimation being received,the service shall be disconnected. If the transferee desires a serviceEconnection, they shall pay off the dues and apply for transfer of theownership of the service connection. In terms of Clause 15(d), all duesto the KSEB from a consumer shall be the first charge on the assets ofthe consumer. In terms of Clause 15(e), a new connection or reconnectionshall not be given to any premises where there are arrears on any accountunless they are cleared in advance.F

147. The validity of Clause 15(e) was upheld by a Full Benchdecision of the Kerala High Court in Suraj v. KSEB.[68] The High Courtupheld the validity of the said regulation on the ground that it is unjust tocompel the Board to supply electricity to the very same premises withoutthe arrears of the previous owner or occupier being cleared. The HighGCourt observed:

“8. Regulations make no distinction between an auction purchaserand others in the matter of supply of electricity. Regulations 15(d)and (e) have been incorporated with a purpose, or else by

successive transfer of the premises the Board’s right to recoverthe amount from the previous consumers as well as from theassets could be effectively defeated at the same time the Boardis called upon to provide electricity to the same premises.Regulation 15(e) has a reasonable nexus with the objectsought to be achieved, that is to save public property so asto subserve the general interest of the community. Onceelectricity is disconnected and the equipment dismantled,it is unjust to compel the Board to give electricityconnection to the very same premises at the instance of athird party which will not be in public interest especiallywhen electricity is considered as a public property. Furtherpetitioner has also not challenged the validity of Regulations 15(d)and 15(e) in this writ petition.”

148. Two cases — K.C. Ninan v. KSEB[69] andKJ Dennis v.KSEB,[70] arise from the state of Kerala. In both these cases, the KeralaHigh Court upheld the validity of Clause 15(e) and directed that to availa fresh electricity connection for premises where arrears are due, theauction purchasers would have to pay outstanding dues of the previousconsumer in compliance with the said condition.

Item 101.9: KJ Dennis v. Kerala State Electricity Board;Civil Appeal 2108 of 2004

149. The KSEB disconnected the electricity connection of PearliteWire Products Ltd in 1992 on account of unpaid electricity charges.Meanwhile, the Kerala High Court ordered the winding up of thecompany under the Sick Industrial Companies (Special Provision) Act1985,[71] as the original owner failed to pay its dues to Syndicate Bankand Kerala Financial Corporation. On 20 April 1997, KSEB addressed aletter to the Official Liquidator, demanding payment of Rs 66 lakhs, beingarrears of electricity charges and penal interest. On 27 January 1999,the offer of the appellant to purchase the properties of Pearlite WireProducts Ltd was accepted and was confirmed by the Kerala HighCourt on 4 March 1999. The terms of sale, as settled by the High Court,provided that:

69 CA 2109-2110/200470 CA 2108/200471 “SICA”

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A“7. General terms and conditions:-

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(c) The assets are sold on “As Where is and Whatever there Is”condition.

B(d) The assets are sold on the assumption that the tendered haveinspected the assets, know what they are tendering for, whetherthey have inspected or not and the principle of ‘Caveat Emptor’will apply.”

150. The appellant sought permission of the KSEB for wiring forCan electricity connection in the property by a letter dated 4 June 1999.Wiring permission was rejected by KSEB due to the outstanding dues ofthe erstwhile owner, and it was stated that a new connection would beprovided if the appellant was ready to remit the amount due from theprevious consumer.D151. In the interregnum, KSEB filed a claim petition before theCompany Court in a company petition[72] claiming a sum of Rs 86,54,711from Pearlite Wire Products Ltd, which was in liquidation. The claimpetition was admitted for Rs 63 lakhs. The appellant filed a companyapplication[73] seeking a direction to the KSEB to not insist on payment ofarrears of electricity charges by the auction purchaser, which were dueEfrom the company in liquidation. On 18 September 2000, the Single Judgerejected the application filed by the appellant, holding that KSEB caninsist on the arrears being cleared before the connection is given.Aggrieved by the order, the appellant challenged the validity of Clause15(e) before the High Court on the ground that it is violative of ArticleF14 of the Constitution. On 18 July 2001, the Division Bench rejected thechallenge. Finally, on 14 September 2001, the impugned order was passedin which the Review Petition against the order of the Division Benchwas dismissed.

152. By its judgement dated 18 July 2001, the Kerala High Courtupheld the validity of Clause 15(e) and held that the KSEB is not boundGto give a reconnection or a new connection to the premises where thereare arrears on any account due to the Board, unless the arrears includingpenalty, are cleared in advance. It observed that Section 79(j) read with 72 Company Petition 15 of 1994H73 Company Application 349 of 1999 in Company Petition 15 of 1994

Section 49 of the 1948 Act gave considerable latitude to the Board tomake regulations governing the supply of electricity, and the Board couldeffect supply of electricity upon such terms and conditions as it thinksfit, that is, in accordance with Clause 15(e). The Court further notedthat even when all formalities have been satisfied by a prospectiveconsumer in accordance with Clause VI of the Schedule to the 1910Act, the Board retains the power to lay down appropriate regulations tosafeguard electricity, which is public property and take actions in thebest interest of the Board. The Court placed reliance on the judgementof the Kerala High Court in A Ramachandran v. KSEB[74 ]in reachingits decision.

153. In the impugned judgement dated 14 September 2001 in theReview Petition, the Court further clarified that Clause 15(e) can alsobe invoked in winding up proceedings as the manner in which the newperson became owner, allottee or occupier of the property is immaterial.Finally, the High Court clarified that the mere fact that the ElectricityBoard was trying to recover the due amount as a secured creditor beforethe winding up proceedings as against the previous owner, would be ofno consequence on the applicability of Clause 15(e).

154. Notice was issued by this Court on 25 January 2002. By anorder dated 28 February 2007, this Court directed the parties to negotiatea settlement and arrive at a formula to recover the amount agreeable toboth parties. This Court observed:

“Balancing the equities as they arise in the present case would bea delicate task, and whichever way we decide this case the losingparty may feel that justice has been denied to it. At the same time,we cannot lose sight of the fact that the appellants have madehuge investments as claimed by them, and only the interestcomponent on such investment may create a huge liability asagainst the appellant. On the other hand, if the industry startsfunctioning, perhaps the Electricity Board will also stand to gain.We have no doubt that instead of litigating, if the parties couldhave settled the dispute, both would have benefited to a greatextent.”

However, no settlement could be reached.

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A155. We are of the view that the Kerala High Court was correctin upholding the validity of Clause 15(e). Clause 15 of the Conditions ofSupply of the Electrical Energy, which is statutory in character,unequivocally provides that the Board is not obligated to give reconnectionor a new connection in the premises where there are any arrears ofelectricity charges from a previous consumer, unless the arrears includingBpenalty are cleared by the new owner/ occupier/ allottee. Furthermore,in the present case the terms of auction sale provided that the assetswere sold on “as is where is and whatever there is’’ basis. In the light ofthe clear facts, the respondent would be well within its right to demandthe electricity arrears due, from the appellant-purchaser. Since KSEB’sCclaim petition was admitted for Rs 63,94,298 the amount remitted, if any,by the appellant to whom connection has been effected would be adjustedin accordance with Clause 15(e).

A

156. We hold that the decision of the High Court does not call forinterference. The appeal is therefore dismissed.

DItem 101: K.C. Ninan v. Kerala State Electricity Board;Civil Appeal No. 2109-2110 of 2004

157. The appellant purchased the property of United IndustriesCochin Ltd in a court auction on 31 October 1989. The electricityconnection of the premises was earlier disconnected in 1980 and theEelectric supply line was dismantled in 1985 on account of non-paymentof electricity charges. On 1 December 1989, the appellant allegedlyapplied to KSEB for an electric connection to the purchased premises.Subsequently, on 1 January 1990, Clause 15 of the Conditions of Supplyof electrical energy was effectuated. On 12 June 1990, the KSEB sentFa communication to the appellant, refusing to grant an electric connectionunless the appellant paid the arrears of electricity of the premises. As aconsequence, the appellant filed a writ petition seeking a permanentelectrical connection and challenging Clause 15(e) of the Conditions ofSupply.

G158. The High Court in the judgement dated 13 February 2003relied on KJ Dennis (supra)and A Ramachandran (supra), and rejectedthe prayer of the auction purchaser to get an electricity connection withoutpaying the dues of the previous owner to the KSEB. The appellant fileda review petition against the judgement dated 13 February 2003. It wasthe appellant’s contention that the decisions in Ramachandran (supra)andH

KJ Dennis (supra) are inapplicable to the facts of the case. Theappellant submitted that the “judgement under review was deliveredwithout taking note of the fact that condition 15(e) was incorporated inthe Conditions of Supply of Electrical Energy only with effect from1.1.1990 while the petitioner purchased the property on 31.10.1989 in aCourt auction and the application for electric connection was made on1.12.1989.” The review petition filed by the appellant was dismissed onthe ground that the High Court’s decision in Ramachandran (supra)took into consideration the ratio in Isha Marbles (supra)and thereafterupheld the action taken by the respondent-Board.

159. This Court issued notice on 7 January 2004, and grantedleave on 2 April 2004. Recovery proceedings were stayed on 5 May2006.

160. The appellant has submitted in the course of the writtensubmissions that the impugned regulation would apply prospectively assubordinate legislation made by a delegate cannot have retrospectiveeffect unless rule making power in the concerned statute expressly orby necessary implication confers power in this behalf.[75] It was furtherstated that the appellant had applied for electricity connection on 1December 1989, before the Conditions of Supply came into force. It hasbeen urged that in the absence of any existing statutory regulations, theappellant cannot be called upon to clear the past arrears incurred by theerstwhile consumer as a condition precedent to electricity supply.

161. The relevant date to determine the applicability of theConditions of Supply is the date on which the auction purchaser appliesfor a fresh connection of electricity for the premises, and not the date ofpurchase of the undertaking. The issue before this Court is whetherthere was any statutory provision in operation governing the issue ofrecovery of the defaulted amount as on the date when the appellantapplied for a new electric connection.

162. The respondent in their counter affidavit has raised a disputeon the factum of the date of application for a fresh connection ofelectricity. The respondent submits that the court sale was held on 31October 1989, which was confirmed on 22 January 1990 and the salecertificate was signed on 6 April 1990. It is argued that in thesecircumstances, 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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Apossession of the premises or would have applied for an electricconnection on 1 December 1989, as alleged by the appellant.

163. However, neither party has submitted any material on recordto 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,Bwe remand the matter to the High Court to determine whether Condition15 of Conditions of Supply of Electrical Energy would apply to theappellant’s case, bearing in mind the principles which have been laiddown in this judgment.

II. Maharashtra

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164. In the state of Maharashtra, the terms and conditions underwhich the MSEB supplied electrical energy were provided in the MSEBConditions of Supply. The MSEB Conditions of Supply were madeeffective from 1 January 1976. The MSEB Conditions of Supply laiddown a detailed procedure in respect of the application for supply ofDelectrical energy, payment of bills, procedure to be adopted in case ofprejudicial use of electrical energy and the terms on which the supply ofelectrical energy is released to a consumer.Condition 23 of MSEBConditions of Supply provides for assignment and transfer of agreement.

165. In light of the New Industrial Development Policy 1993, aimedEat reviving sick industries,the MSEB issued Circular 518 dated 18 June1993, titled “Power Supply to closed and Sick Industrial Unit”. The aimof Circular 518 was to encourage prospective entrepreneurs to takeover sick industrial units under Section 29 of the State FinancialCorporation Act 1957. The Circular presented prospective owners whopurchased sick/ closed industrial units in auction with two options —Feither pay arrears including minimum charges to get electricity supplyreconnected, or apply for a fresh connection after completing necessaryformalities, without being liable for outstanding arrears of the previousowner. The circular further provided that Condition 23(b) of the MSEBConditions of Supply would not apply to prospective consumers withGeffect from 1 April 1993.

166. The circular was withdrawn by the Circular 607 dated 19December 1998, whereby it was mandated that reconnection or freshconnection would be released only after the arrears of the ElectricityBoard are cleared. The circular purported to emanate from Condition23(b) of the Conditions of Supply, as framed by the MSEB. The circularHwas made operative with immediate and prospective effect.

167. In light of the impugned judgments of the Bombay High Court,which are in appeal before us, MSEB by its Circular 684 dated 25September 2003 allowed auction purchasers of closed/ sick industrialunits to exercise either of the options as prescribed by Circular 518dated 18 June 1993. However, an undertaking was required by theincoming consumers to unconditionally agree to pay the arrears of previousowners in case the Supreme Court decided in favour of MSEB.

168. After the enactment of the 2003 Act, the MaharashtraElectricity Supply Code, 2005 was framed under Section 50 of the 2003Act. The regulations came into effect from 20 January 2005, and applyprospectively. Regulation 10.5 of the Maharashtra Electricity Supply Codeprovides that dues owed to the distribution licensee are charge on theproperty and as a statutory effect, the liability for the payment ofelectricity 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 chargefor electricity due to the Distribution Licensee which remainsunpaid by a deceased consumer or the erstwhile owner / occupierof any premises, as a case may be, shall be a charge on thepremises 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 theDistribution Licensee as due from such legal representatives orsuccessors-in-law or new owner / occupier of the premises, asthe case may be.

Provided that, except in the case of transfer of connection to alegal heir, the liabilities transferred under this Regulation 10.5 shallbe restricted to a maximum period of six months of the unpaidcharges for electricity supplied to such premises”

169. Presently, the Maharashtra Electricity Regulatory Commission(Electricity Supply Code and other Standards of Performance ofDistribution Licensees including Power Quality) Regulations 2021[76] havebeen enacted repealing the Maharashtra Electricity Supply Code 2005.Clause 12.5 of the 2021 Regulations reiterates that any unpaid chargesfor electricity shall be a charge on the premises.

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[2023] 9 S.C.R.

A170. From the state of Maharashtra, there are six judgments ofthe Bombay High Court which are in appeal before us.

169. Mr. Ajit Bhasme, learned senior counsel appearing on behalfof the appellant-Board urged the following common legal submissions:

a.MSEB Conditions of Supply, as then prevalent under the 1910BAct and the 1948 Act, are statutory in character, as held bythis Court in Hyderabad Vanaspati (supra). The Conditionsof Supply are in addition to and not in lieu of other modes ofrecovery; b.MSEB Conditions of Supply are a part of the standardCagreement entered into between the consumer and theElectricity Company. Clause 14 of the standard agreementbetween the Electricity Board and the consumer incorporatesthe Conditions of Supply as a part of the agreement;

c.The reliance placed by the Bombay High Court on theDjudgement in Isha Marbles (supra) cannot be sustained sincethe case of Isha Marbles (supra)is distinguishable on facts; d.The General Auction Conditions of Sale of SICOM in Clause2 stipulate that the sale is on “as is where is and what is”basis. Auction purchasers were put on notice of their liabilityEfor the past electricity arrears due to the inclusion of thestandard auction proclamation (Clause 6) while inviting bids; e.Regulation 10.5 of Maharashtra Electricity Supply Code 2005explicitly states that any unpaid electricity dues shall be acharge on the premises transferred; andF

f.All six cases pertain to the period prior to 2005 i.e., beforethe enactment of the Maharashtra Electricity Supply Code2005. The 1976 MSEB Conditions of Supply would continueto operate till the enactment of the Maharashtra ElectricitySupply Code in 2005.G171. In Maharashtra, the right of the Electric Utilities to demandoutstanding dues is traceable to provisions across different time periods:

a.Up to enactment of the 2003 Act on 10 June 2003: Thegoverning laws are the 1910 Act and the 1948 Act. The MSEBConditions of Supply were framed under Section 49 of theH

1948 Act. The MSEB Conditions of Supply which were madeeffective from 1 January 1976 would apply; b.From 10 June 2003 to 20 January 2005: The provisionsof the 2003 Act were brought into force with effect from 10June 2003. The 1910 Act and 1948 stood repealed after theenactment of the 2003 Act. The Maharashtra ElectricitySupply Code 2005 came into force from 20 January 2005. Inthe interregnum, the MSEB Conditions of Supply wouldcontinue to apply, so far as they are not inconsistent with theprovisions of the 2003 Act. This is due to the followingreasons:

i.By virtue of Section 185(2)(a) of the 2003 Act,notwithstanding such repeal anything done or any actiontaken or purported to have been done or taken includingany rule, notification, inspection, order or notice madeetc. under the repealed law shall, in so far as it is notinconsistent with the provisions of this Act, be deemedto have been done or taken under the correspondingprovisions of this Act. Section 185(2)(5) further providesthat Section 6 of the General Clauses Act 1897 wouldbe applicable in relation to matters prescribed in Section185(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 whichare inconsistent with the provisions of the MaharashtraElectricity Supply Code 2005 shall be deemed to beinvalid from the date on which these regulations comeinto force; and

c.From 20 January 2005till the enactment of the 2021Regulations: The Maharashtra Electricity Supply Code 2005,which came into force from 20 January 2005, would apply.To determine whether the Maharashtra Electricity SupplyCode 2005 would govern the facts of a particular case, therelevant date would be when the auction purchaser hadrequested the Electricity Board to supply electricity.

172. In the six cases originating from Maharashtra, the respondentswere successful auction purchasers who purchased the premises in court A

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Aauction sales. The appellant-Board relied on Condition 23 of the MSEBConditions of Supply to impose a precondition of clearing electricityarrears of the erstwhile consumer, before a new electricity connectioncould 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.B

173. These impugned judgments raise a common question on theapplicability and the scope of Condition 23. This Court would first dealwith the overall argument on the applicability of Condition 23 of theMSEB Conditions of Supply, and its interpretation, before delving intothe specific factual matrix of the cases.C

174. In Maharashtra State Electricity Board v. Super &Stainless Hi Alloys Ltd.,[77 ]the Bombay High Court relied on the decisionof this Court in Isha Marbles (supra) to quash the impugned circulardated 19 December 1998 for lack of jurisdiction as it was held to bebeyond the powers of the Electricity Board under Section 24 of the 1910DAct. The High Court concluded that the contract of supply was onlybetween the Electricity Board and the previous consumer, and since thesubsequent purchaser was a third party, it cannot be made liable for thepast liabilities of the erstwhile consumer.

175. In Supdt. Engg. Maharashtra State Electricity Board v.EM/s Umang Enterprises,[78] the High Court placed reliance on thedecisions of this Court in Isha Marbles (supra)and Gujarat Inns(supra) to reject the argument of the appellant-Board. The Bombay HighCourt disposed of the writ petition with a direction to the appellant togrant an electricity connection to the premises, without insisting onFclearance of past dues of the previous consumer. It is important to notethat the High Court in its reasoning did not refer to the MSEB Conditionsof Supply and the import of Condition 23 on the liability of the auctionpurchasers.

176. In Maharashtra State Electricity Board v. EctoGSpinners,[79 ]and Maharashtra State Electricity Distribution Co. Ltd.v. M/s Zia Iron Store,[80] the High Court considered the purport ofCondition 23 of the MSEB Conditions of Supply. It concluded that 77 Civil Appeal 5312-5313 of 200578 Civil Appeal No. 5314 of 200579 Civil Appeal No. 6587 of 2005H80 SLP(Civil) No. 6068 of 2006

Condition 23 was not applicable to involuntary transfers, such as byoperation of law or in pursuance of the decree of a competent court.Accordingly, it held that the respondent-purchasers could not be madeliable for the dues of the erstwhile owners as a prerequisite to obtain anew electricity connection.

A

177. The Bombay High Court in the impugned judgement dated20 July 2005 in Ecto Spinners was aided by the following reasons toarrive at this conclusion:

B

a.Condition 23(b) does not refer to an involuntary transfer thoughit does refer to a voluntary transfer or a transfer on accountof the death of the owner. The word “successor” in theexpression “any person claiming to be heir, legalrepresentative, transferee, assignee or successor of thedefaulting consumer” would have to be understood by applyingthe principle of ejusdem generis. Accordingly, the wordspreceding the word “successor” clearly disclose a referenceto a person who acquires the right to the property on accountof either voluntary transfer or on account of death of theowner; and C

D

b.Transfer of a property purchased in a public auction is aninvoluntary transfer by the owner. Hence, Condition 23 doesnot impose any liability on a transferee occupying the premisesEof the erstwhile consumer on account of having acquired rightby public auction or any other mode of non-voluntary transfer.

178. The Electricity Board can demand arrears due by an erstwhiledefaulting consumer in regard to supply of electricity to premises fromthe purchaser of a property seeking reconnection or fresh connection ofelectricity when either of two conditions are met:

F

a.An express provision exists in law providing that electricityarrears constitute a charge over the property. For the statutorycharge to be enforced against the property in the hands of aperson to whom such property has been transferred forGconsideration, the transferee must have notice, either actualor constructive, of the charge; and b.The statutory regulations or terms and conditions of supplywhich are statutory in character, authorise the supplier ofelectricity to make such a demand.

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A179. In general law, electricity arrears do not constitute a chargeover the property. Under the provisions of the 1910 Act read with the1948Act, electricity arrears do not create a charge over the property. In thecases before us governed by the 1910 Act read with 1948 Act, no chargewas created on the property in favour of the Electricity Board for thepayment of electricity dues. The arrears of electricity dues were notBlevied against the premises, but were levied against the erstwhileconsumer.

A

180. We are of the opinion that the Bombay High Court’sinterpretation of the ratio in Isha Marbles (supra) in Super & StainlessHi Alloys Ltd and M/s Umang Enterprises is incorrect due to theCreason that the High Court failed to enquire into whether any statutoryregulation or statutory terms and conditions of supply existed whichpertained to the liability of a third person who acquires the property ofthe erstwhile consumer.

181. In the cases pertaining to Maharashtra, MSEB or itsDsuccessor the Maharashtra State Electricity Distribution Co. Ltd. placedspecific reliance on Condition 23 of the statutory Conditions of Supply.Condition 23 is the only clause in the statutory provisions which pertainsto the liability of a person who acquires the property of the erstwhileconsumer in circumstances specified thereunder. Circular 607 dated 19EDecember 1998 is stated to emanate from Condition 23(b) of theConditions of Supply. The Bihar State Electricity Board in Isha Marbles(supra) did not have a specific condition having a similar effect asCondition 23.

182. In Hyderabad Vanaspathi (supra) this Court held that theFConditions of Supply in the State of Andhra Pradesh, notified in exerciseof the powers conferred by Section 49 of the 1948 Act, are statutory incharacter. The Court noted that no regulation has been made underSection 79(j) of the 1948 Act.

183. In the present case, the appellant-Board in exercise of itsGpowers under Section 49 of the Electricity Supply Act formulated theMSEB Conditions of Supply. Accordingly, the MSEB Conditions of Supplyare statutory in nature.

184. When a provision having a statutory force and effect is reliedupon by the Electric Utilities to impose the liability of clearing theoutstanding dues of the erstwhile consumer on a third party, it is for theH

courts to determine whether the said statutory provision is applicable tothe facts of the case before it. In Special Officer, Commerce, NorthEastern Electricity Supply Company of Orissa v. Raghunath PaperMills Private Limited,[81] this Court observed that Regulation 13(10)(b)of the Orissa Electricity Regulatory Commission Distribution (Conditionsof Supply), Code, 2004 was inapplicable to the facts of the case as theauction purchaser had requested for a fresh connection, whereas in termsof the concerned regulation, previous dues had to be cleared only withrespect to a reconnection or a transfer of service connection from thename of the erstwhile consumer.

185. The submission of the appellant on the applicability ofCondition 23 rests on the meaning and scope of Condition 23 in relationto the liability of a person who becomes the new owner or occupier ofthe premises of the erstwhile consumer, to which electricity was beingsupplied. Condition 23 is extracted below:

“Clause 23: Assignment or Transfer of Agreement

a) The consumer shall not without previous consent in writing ofthe Board, assign, transfer or part with the benefit of his Agreementwith the Board nor shall the consumer in any manner part with orcreate any partial or separate interest thereunder.

b) A consumer who commits breach of condition 23(a) aboveand neglects to pay to the Board any charges for energy or todeposit with the Board amount of security deposit or compensationand the supply of such consumer is disconnected under Section24 of the Indian Electricity Act, 1910 or under condition no. 31(a)of these conditions dies, or transfers, assigns or otherwisedispenses of the undertaking or the premises to which energywas being supplied to the consumer, any person claiming to beheir, legal representative, transferee, assignee or successorof the defaulting consumer with or without consideration inany manner shall be deemed to be liable to pay the arrears ofelectricity charges, security deposit or compensation due payableby the consumer and it shall be lawful for the Board to refuse tosupply or reconnect the supply or to give a new connection tosuch personclaiming to be the heir, legal representative, transferee,assignee or successor of the defaulting consumer of such premises, A

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Aunless the amount of such charges due and / or the compensationdemanded from the defaulting consumer, is as the case may beduly paid to or deposited with the Board.”

186. In terms of Condition 23(a), a consumer is not entitled toBtransfer the benefit under their agreement with the Electricity Boardwithout the previous consent of the Board. In terms of Condition 23(b),if the consumer commits breach of Condition 23(a) and neglects to paythe Board any charges for energy and consequently, the electricity supplyof such consumer is disconnected, then the third party upon whom suchCa transfer was effected is liable to pay arrears of electricity which thedefaulting consumer has not paid. Liability of a third party to pay dues ofthe erstwhile consumer is attached when the conditions specified inCondition 23(a) and Condition 23(b) are satisfied.

187. The rule of “ejusdem generis” is a principle of construction.DThe rule is that when general words follow particular and specific wordsof the same nature, the general words must be confined to the things ofthe same kind as those specified. It applies when the following ingredientsare present: (i) the statute contains an enumeration of specific words;(ii) the subjects of enumeration constitute a class or category; (iii) thatcategory is not exhausted by the enumeration; (iv) a general term followsEthe enumeration; and (v) there is no indication of a different legislativeintent.[82]

188. For the application of the ejusdem generis rule, it is essentialthat enumerated things before the general words must constitute a distinctcategory or a genus or a family which admits of a number of members.[83]FIn Adoni Cotton Mills Ltd. v. Andhra Pradesh State ElectricityBoard,[84] this Court had to interpret Section 49(3) of the 1948 Act, whichempowered the Electricity Board to fix different tariffs for the supply ofelectricity to any person having regard to the geographical position ofany area, the nature of supply and purpose for which the supply is requiredGand any other relevant factors. This Court refused to limit the generality82 Amar Chandra v. Collector of Excise, Tripura, (1972) 2 SCC 442; Grasim IndustriesLtd. v. Collector of Customs, (2002) 4 SCC 297

83 Lokmat Newspapers (P) Ltd. v. Shankarprasad, (1999) 6 SCC 275; JaiprakashAssociates Ltd. v. Tehri Hydro Development Corpn. (India) Ltd., (2019) 17 SCC 786H84 (1976) 4 SCC 68

of “other relevant factors” since there was no genus of the enumeratedfactors. Geographical position of the area and the nature and purpose ofthe supply were held not to be related to any common genus.

189. In the impugned judgment Ecto Spinners, the Bombay HighCourt observed that the word “successor”, occurs in the collocation ofother words “heir”, “legal representative”, “transferee” and “assignee”,and its meaning must take colour from the preceding words in associationwith which it is used. It held that the word “successor” has to beunderstood to refer to an owner acquiring the right by way of voluntarytransfer 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 abearing 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 toreceive an intestate decedent’s property[85]

Legal representative: A legal heir; or an executor, administratoror other legal representative[86]

Transferee: One to whom a property interest is conveyed[87]

Assignee: One to whom property rights are transferred byanother”[88]

191. It is clear from the plain meaning of the words that theexpressions “heir”, “legal representative”, “transferee” and “assignee”do not fall into one single distinct category. According to the reasoning inthe impugned judgment, Condition 23 itself consists of more than onegenus or category of transfer — acquiring the right to a property onaccount of voluntary transfer, or on account of death of the owner. Theword “successor”, which was interpreted by the High Court in arestricted manner, is itself of wide amplitude and will have to be given aplain meaning. The expression “successor” has been defined in Black’sLaw Dictionary as “a person who succeeds to the office, rights,responsibilities, or place of another; one who replaces or follows apredecessor.”[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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Aunderstood to mean “someone who succeeds to all the rights and powersof a former owner, as with an intestate estate or an estate inbankruptcy”.[90]

192. The wide compass of the expression “any person claiming tobe heir, legal representative, transferee, assignee or successor of theBdefaulting consumer” can be understood with regard to the formercorresponding phrase “dies, or transfers, assigns or otherwise dispensesof the undertaking or the premises”.

193. In the case at hand, the use of the expression “otherwisedispenses of” in the phrase “a consumer…dies, or transfers, assigns orCotherwise dispenses of the undertaking or premises’’, does not bring intoplay 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 awide connotation, comprehending within it both voluntary and involuntaryDtransfers. In Mangalore Electric Supply Co. Ltd. v. TheCommissioner of Income Tax, West Bengal,[91] a three-judge Benchof this Court held that a compulsory acquisition of property can constitutea “transfer” within the meaning of Section 12B(1) of the Indian IncomeTax Act 1962. It rejected the argument that the word “transfer” must beconstrued ejusdem generis with the preceding words “sale”, “exchange”,E“relinquishment”. On the wide amplitude of the word ‘transfer’, thisCourt observed:

“8. We find it impossible to accept this submission. In the firstplace if it was intended that voluntary transfers alone should fallwithin the meaning of the section, it was unnecessary for theFlegislature to use the expression “transfer”, an expressionacknowledged 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 passesfrom one person to another, either (1) by virtue of an actGdone by the transferor with that intention, as in the case of aconveyance 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 IdH91 (1978) 3 SCC 248

Roland Burrows on “Words and Phrases”, Volume V, contains astatement under the caption “Transfer on Sale” at p. 331 thateven a transfer of land under compulsory powers is a transfer“on sale”. It is unnecessary for us to consider the question whethera compulsory acquisition of property is a “sale” within the meaningof Section 12-B(1) and indeed, it is needless for the present purposeto go that far. We are concerned with the narrower questionwhether a compulsory acquisition of property can amount to a“transfer” within the meaning of Section 12-B(1) and upon thatquestion it is important to bear in mind that the word “transfer” iscomprehensive and is regarded generally as comprehending withinits scope transfers both of the voluntary and involuntary kinds.Without more, therefore, there is no reason for limiting the operationof the word “transfer” to voluntary acts of transfer so as to excludecompulsory acquisitions of property.”

195. The rule of ejusdem generis cannot be applied when there isno 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 applicationof 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 requirea restricted meaning to be attached to words of general import, the courthas to give the words their plain and ordinary meaning.[93] Condition 23 ofthe MSEB Conditions of Supply is a mode of recovery of electricityarrears of the erstwhile consumer, which could be recovered even froma successor. The MSEB, in our opinion, intended to cover all possiblecases of transfer of the undertaking or premises of the erstwhile consumer,be it voluntary, on account of death of the consumer, or by operation oflaw. Circular 518 dated 18 June 1993 and Circular 607 dated 19 December1998 issued by the MSEB emanated from Condition 23 of the MSEBConditions of Supply. They contained directions vis-à-vis power suppliedto 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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Asupply demand that a broader construction should be adopted, and thereis no room for the application of the rule of ejusdem generis.

197. On our interpretation of Condition 23 of the MSEB Conditionsof Supply with particular reference to subclause (b) thereof, we are ofthe view that the said sub-clause is applicable to involuntary transfers,Bsuch as court auctions.

198. Applying the above considerations to the appeals ourconclusions are as follows:

Item 101.1: Maharashtra State Electricity Board v. Super& Stainless Hi Alloys Ltd; Civil Appeal 5312-5313 of 2005

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199. The first respondent purchased a sick industrial unit in auctionfrom the SICOM under Section 29 of the State Financial CorporationsAct. It filed a writ petition challenging the actions of the appellant-Boardin denying it a new electricity connection. A subsequent writ petitionwas filed by SICOM challenging the vires of Circular 607 dated 19DDecember 1998. By a common judgment dated 19 December 2002, theBombay High Court disposed of the writ petitions and quashed theimpugned Circular 607 on the ground that MSEB lacked jurisdiction asthe circular was beyond the powers of the Board under Section 24 ofthe 1910 Act. The High Court relied on Isha Marbles (supra), to reachEthe conclusion that although Section 24 provides for payment of arrearsfor reconnection after the supply is disconnected, it only refers to theconsumer who failed to pay the dues and does not concern itself with anew owner or occupier of the premises.

200. The appellant preferred the present Special Leave Petition.FThis Court issued notice on 6 May 2003 and leave was granted on 25August 2005. By an order dated 24 August 2006, the question whetherelectricity dues constitute a charge on the property so far as the transferorand the transferee of the unit are concerned was referred to a largerbench.

201. In our considered view, the decision in Isha MarblesG(supra)and Section 24 of the Electricity Act 1910 are by themselves notan answer on whether the appellant-Board had a power to issue Circular607. In Srigdhaa Beverages (supra), this Court held that the electricitydues, where they are statutory in character under the Electricity Actand as per the terms and conditions of supply, cannot be waived in viewHof the provisions of the Act itself, more specifically Section 56 of the

2003 Act (pari materia with Section 24 of the 1910 Act), and cannotpartake the character of purely contractual dues. The power of theappellant-Board to impose a condition that the purchaser of anundertaking will have the obligation to clear the arrears of electricitydues of the prior consumer is sourced from Condition 23 of the MSEBConditions of Supply framed under Section 49 of the 1948 Act.

202. It was the submission of the respondents that the impugnedcircular cannot affect the rights of the auction purchasers who purchasedsick/ closed industrial units under Section 29 of the State FinancialCorporation Act 1951 as the sale was “not voluntary”. As discussedabove, Condition 23 is of wide import, which covers sale of propertymade in court auctions. Furthermore, Section 29(2) of the State FinancialCorporation Act provides that a sale under Section 29 which resulted intransfer of property shall vest in the successor all rights in the propertytransferred 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 salemade by the owner of the property, attracting Condition 23 of the MSEBConditions of Supply.

203. It is necessary to reproduce some of the relevant clauses ofthe “General Auction Conditions of Sale” of properties put on sale bySICOM. The clauses are extracted below:

“Clause 4: The purchaser may take inspection of the property tobe sold. Even if the purchaser does not take inspection, heshall be deemed to have inspected all the assets put up forsale on “As is where is and what is basis” in regard to thecondition thereof, before making the offer for purchase ofthe same. It is hereby expressly agreed and declared thatnotwithstanding the provisions of Section 55 of the Transfer ofProperty Act or any other enactment for the time being in force inthat behalf, SICOM shall not be bound to disclose to the purchaserany defect, whether material or otherwise in the property, whetheror not SICOM may be or may not be aware of such defect andwhether or not the purchaser could not with ordinary care anddiligence discover such defects.

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Abehalf. SICOM shall not be liable to pay any arrears if chargesand costs/ expenses, if any, in respect of power, water or anyother facilities required. The purchaser shall make owninquiries about arrears of dues for supply of power, waterand other facilities, if any, and the same shall be borne andpaid by the purchaser alone.”B

204. The aforesaid terms and conditions of the auction as set outby SICOM indicate that the property was being sold on “as is where isand what is basis”. The auction purchaser was at all times on clearCnotice 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 ofdues. This clause was further subject to another provision in Clause 6,where the purchaser was liable to make their own inquiries about arrearsof dues for supply of power, water and other facilities and the auctionpurchaser was made liable to pay such arrears. This makes it clear thatDapart from the MSEB Conditions of Supply, which have statutory effect,the purchaser who purchased property in auctions conducted underSection 29 of the State Financial Corporations Act also had knowledgeof his liability for the past arrears of electricity of the premises when hebid in the auction. By virtue of the stipulations in the sale deed, as far asEthe first respondent is concerned, it was liable to discharge the electricitydues payable to the Electricity Board by the erstwhile consumer.

205. In light of what we have stated above, we set aside thejudgement of the Division Bench and allow the appeal.

Item 101.10: Supdt. Engg. Maharashtra State ElectricityFBoard v. M/s Umang Enterprises; Civil Appeal No. 5314 of 2005

206. The first respondent was a successful auction purchaser ofthe property of M/s Creekay Yarn Industries Ltd, which was put to salein consequence of an arbitral award. The respondent-purchaser tookout a Judges Order[94] in a civil suit before the Bombay High Court, seekingGa clarification that it was not liable for past dues and liabilities of anykind in respect of the property purchased through the auction sale. TheBombay High Court by its order dated 29 January 2003 declared thatthe respondent-purchaser was not liable to pay any arrears payable bythe erstwhile owner. The appellant alleges that this order was passed H94 Judges Order No. 10 of 2003 in Civil Suit no. 2978 of 1991

ex-parte. The order of the Bombay High Court in Judges Order dated29 January 2003 has not been placed on record before this Court.

207. The respondent-purchaser requested the appellant for a newelectricity connection, which was denied on 6 June 2003 on the groundthat the respondent was not eligible for a new connection unless thedues of the erstwhile consumer were discharged in terms of Condition23 of the MSEB Conditions of Supply. The respondent filed a writ petition,with an interim prayer seeking a direction to grant a new electricconnection. The main prayer in the writ petition sought a declarationthat the demand made by the Electricity Board to pay arrears wasunfounded in law. The Bombay High Court by its impugned judgmentdated 24 September 2004 disposed of the writ petition with a direction tothe appellant to grant an electricity connection to the premises withinone month, without insisting on clearance of past dues of the previousconsumer. The High Court placed reliance on the decisions of this Courtin 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 liableto clear the electricity arrears incurred by the previous owners becausethere was no specific statutory provision in that regard, or any clausedealing with the issue of electricity dues. In the present case, the MSEBplaced specific reliance on Condition 23 of MSEB Conditions of Supplyto hold the auction purchasers liable. The MSEB Conditions of Supplywere incorporated in the individual contracts entered between theElectricity Board and the consumers. Clause 14 in the standardagreements entered between the MSEB and consumers provides thatthe Conditions of Supply, as amended from time to time, shall be deemedto be part of the agreement. The erstwhile consumers were aware ofthe statutory MSEB Conditions of Supply. The relevant clause is extractedbelow:

“Clause 14(a): Condition and Miscellaneous Charges for supplyof electrical energy of the Maharashtra State Electricity Boardfor the time being in force and as amended by supplier from timeto time shall be deemed to be part of the Agreement and shallgovern the parties hereto in so far as applicable. A copy of the AB

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Acurrent Conditions and Miscellaneous Charges for supply is setout in the second schedule hereto.”

210. We are of the considered view that the impugned order cannotbe sustained and is accordingly set aside.

Item 101.11: Maharashtra State Electricity Board v. EctoBSpinners; 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 appellantin default of payment of consumption charges. In 2004, the first respondentCpurchased M/s Prabhavati Spinning Mill, which was liquidated by theauthorities under the Maharashtra Co-operative Societies Act 1960. Theagreement of sale was executed in favour of the first respondent on 26July 2004 and since then, the first respondent had the possession of theproperty. The final deed of assignment was yet to be executed. The firstDrespondent incurred an expenditure of Rs 4 crores to overhaul the plantand machinery at the premises, and thereafter applied for a freshelectricity connection as a High Tension Consumer for the premises.Meanwhile, the plots were transferred by the Maharashtra IndustrialDevelopment Corporation to the first respondent on 4 February 2005.The appellant, however, relied on the MSEB Conditions of Supply andEthe agreement entered with the erstwhile consumer to decline grantingelectricity connection until the arrears of the erstwhile consumer werecleared. The respondent filed a writ petition before the Aurangabad Benchof the Bombay High Court, seeking a direction to the appellant to supplyelectricity to the respondent at its premises.

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212. By the impugned judgement dated 20 July 2005, the BombayHigh Court allowed the writ petition. The High Court held that therespondent could not be made liable for the dues of the erstwhile owneras a prerequisite for obtaining a new electricity connection as there wasneither any statutory provision nor an agreement creating any chargeGover the property in relation to the electricity arrears.

213. This Court granted leave on 24 October 2005. As discussedabove, Condition 23 of MSEB Conditions of Supply is a specific provisionapplicable to the case of the first respondent. In view of the above, weallow this appeal, and set aside the judgment and order of the HighCourt.H

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 NagrikSahakari Bank. The bank filed a dispute before the Co-operative courtat Nagpur. The Judge, Cooperative court at Nagpur by an order dated23 February 2005 granted permission to sell the hypothecated plant andmachinery and mortgaged land and building of M/s Sumit Re-RollingMills Pvt. Ltd. In the execution of the award, the property belonging toM/s Sumit Re-Rolling Mills Pvt. Ltd was purchased by the firstrespondent.

215. The authorised officer of the bank handed over the physicalpossession of the entire moveable plant and machinery and immovableland and building, mortgaged with the bank, to the respondent on 21March 2005 on “as is where is” and “as is what is” basis.

216. A deed of assignment and sale dated 17 February 2006 wasentered between the Nagpur Nagarik Sahakair Bank Ltd. and therespondent. Clause 2 of the indenture notes that the bank would not takeany liability for any dues like electricity dues and charges for fresh powerconnection. The relevant clause is extracted below:

“The liabilities, if any and the liabilities which may arise in futurein respect of the dues of Local authorities and dues of RevenueAuthority, MIDC Authority and Sales Tax etc. and also for transferof property in question, shall be for transfer of property in questionshall be payable by the purchaser. The property hereby assignedin on “as is where is” and “as is what is” basis. The Bank doesnot undertake any liability or responsibility to procure anypermission/licence etc. in respect, of the property offered for saleor for any dues like water/service charges of the MIDC, transferfees, electricity dues and charges for fresh power connection,Local Authority, or Nazul/NIT dues, in respect of the said propertyand the same shall be solely and exclusively borne and paid by thePurchaser.”

217. The first respondent applied for a fresh electricity connectionfor the premises. The appellant-MSEDC refused the request of the firstrespondent by a letter dated 9 September 2005 on the ground that thearrears of electricity charges of the earlier owner were pending, and the A

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Afirst respondent was liable to clear them in light of Condition 23 of MSEBConditions of Supply. The Bombay High Court by its impugned judgmentdated 12 December 2005 held that Condition 23 was inapplicable anddirected the appellant to grant a fresh connection to the first respondent,if otherwise eligible. The High Court observed that Condition 23 intendedto apply to voluntary acts of the original consumer by which he transfersBthe benefit of his agreement with the Board.

218. The appellant filed a Special Leave Petition challenging theimpugned judgement. The appellant has argued that the concept ofvoluntariness is not a sine qua non for Condition 23 of the MSEBConditions of Supply. In the reply filed by the respondent, it has beenCurged that it is not a necessary party to the present petition since it hadsold the premises in dispute to Rajaram Steel Industries Pvt Ltd by adeed of assignment dated 29 March 2006.

219. The High Court in the impugned judgment has based itsdecision on the MSEB Conditions of Supply 1976. What is the effect ofDthe respondent applying for a fresh electricity connection after theenactment of the Maharashtra Electricity Supply Code on 20 January2005 was not considered. The relevant date to determine the applicabilityof the statutory provisions governing conditions of supply of electricity isthe date on which the auction purchaser applies for an electricityEconnection.

220. The application by the respondent in which it sought a freshelectricity connection has not been placed on record. At the same time,from the deed of assignment and sale placed on record, it emerges thatthe sale of the premises and possession was given after 20 JanuaryF2005. The permission to sell was granted to the bank only on 23 February2005. The physical possession of the premises was given to the respondentonly on 21 March 2005. A fresh connection of electricity supply couldnot have been requested even before the sale was confirmed in favourof the respondent. Accordingly, the relevant statutory provision governingthis case is the Maharashtra Electricity Supply Code 2005.G

221. In terms of Regulation 10.5, any charge for electricity or anysum other than a charge for electricity due to the distribution licenseewhich remains unpaid by a deceased consumer or the erstwhile occupier/owner of any premises shall be a charge on the premises transmitted tothe legal representatives / successors-in-law or transferred to the new H

owner / occupier of the premises, as the case may be, and the sameshall be recoverable by the Distribution Licensee as due from such legalrepresentatives or successors-in-law or new owner / occupier of thepremises. However, the proviso lays down that except in the case of atransfer of a connection to a legal heir, the liabilities which are transferredunder Regulation 10.5 are restricted to a maximum period of six monthsof the unpaid charges for electricity supplied to the premises. Accordingly,the dues owed by M/s Sumit Re-Rolling Mills Pvt. Ltd, Nagpur are chargedon the property purchased by the first respondent in a public auction.

222. The sale was conducted on “as is where is” basis and therespondent accordingly had adequate notice of the charge. Hence, thedistribution licensee is entitled to recover the unpaid dues from the firstrespondent subject to the permitted period specified in the proviso toRegulation 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 besustained. The appeal is allowed.

Item 101.13: Maharashtra State Electricity Board v. M/sJai 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 ofM/s Hariganga Alloys & Steel Ltd on “as is where is” and “as is whatis” basis. The first respondent successfully purchased the assets in theauction sale and took possession of the purchased property in 2002.

225. On 17 June 2005, the respondent applied to the appellant fora new electricity connection to the premises purchased in the auction.By a letter dated 22 June 2005, the appellant rejected the application onthe ground that arrears of electricity charges of Rs 83 lakhs of the erstwhileowner were pending and a permanent electricity connection could notbe released till full dues were paid. The appellant permitted release for atemporary connection. The respondent filed Company Application No.106 of 2005 in Company Petition No.6 of 1999 in the matter of liquidationof M/s Hariganga Alloys & Steel Ltd, seeking the release of a newelectricity connection without clearance of arrears.

226. The application of the respondent was allowed by theimpugned order dated 10 February 2006, passed by a Single Judge at the AB

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ANagpur Bench of the Bombay High Court. The High Court held that theappellant could not deny electricity connection to the respondent on theground of recovery of arrears of the erstwhile owner of the plot. TheHigh Court noted that the appellant was one of the secured creditorsand directed it to make its claim before the Official Liquidator inaccordance with law.B227. The appellant preferred the present Special Leave petition.On 17 July 2006, this Court issued notice and stayed the operation of theimpugned order.

228. During the pendency of the appeal, the respondent had soldCthe property to M/s Ankush Shikshan Santha and the new owner hadsubmitted a proposal dated 9 August 2007 to the appellant that it wasprepared to settle the dues of M/s Hariganga Alloys & Steel Ltd intwelve instalments. By an order dated 22 October 2007, this Courtdirected the appellant to restore the electricity connection after receiptof the first two instalments by the respondent in view of the undertakingDgiven by the respondent that it shall deposit the entire arrears of Rs 83lakhs in terms of the proposal dated 9 August 2007. The Court has beeninformed that pursuant to the order, M/s Ankush Shikshan Santha hadpaid the arrears to the tune of Rs 83 lakhs and the appellant has granteda fresh electricity connection.E[[95]]

229. In the meantime, an Interlocutory Application[[95]] was filed bythe respondent for disposing the petition on the ground that it had becomeinfructuous. The appellant in the reply affidavit has contested the IA onthe ground that even though the principal amount of Rs 83 lakhs hasbeen paid towards arrears, interest charges to the tune of approximatelyFRs 2 crore on the principal amount are still to be recovered.

230. Since the respondent applied for electricity connection on 17June 2005, the Maharashtra Electricity Supply Code 2005, which cameinto force from 20 January 2005, is applicable in the instant case.Accordingly, a charge was created on the electricity arrears in terms ofGRegulation 10.5. At the same time, the Court cannot be oblivious to thecommercial exigencies in view of which the settlement proposal wascomplied with. The appellant has recovered an amount of Rs 83 lakhs.In the facts and circumstances of the case it would be iniquitous todirect the payment of interest at this stage. We therefore direct a closure

of the dispute in the above terms in the exercise of the jurisdiction underarticle 142 of the Constitution.

231. In the circumstances, it is not possible to entertain the appealat 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. 10732of 2006

232. In 2002, the electricity supply of M/s R & J Alloys Pvt. Ltdwas permanently disconnected by the appellant. On 3 October 2005, thefirst respondent successfully purchased the properties of M/s R & JAlloys Pvt. Ltd in an auction held pursuant to a sale conducted forenforcement of a recovery certificate issued by the Debt RecoveryTribunal. The respondent took over possession of the property and thesale was confirmed by the order of the Recovery Officer dated 8December 2005. The terms of the auction sale of the properties of M/sR & J Alloys Pvt. Ltd stated that the sale was conducted on “as iswhere is basis”.

233. On 30 December 2005, the respondent applied to the appellantfor a new electricity connection. This was followed by a subsequentletter dated 2 January 2006. By letter dated 12 January 2006, the appellantrefused to give a new electric connection unless the arrears of Rs 11crores of the erstwhile owner of the property were paid. The respondentfiled a writ petition before the Bombay High Court, seeking an electricityconnection. On 13 October 2006, the High Court passed the impugnedorder granting interim relief to the first respondent. The High Court tooknote of the pending referral of the legal issue to a larger bench of thisCourt. It observed that the right of the Electricity Board to claim arrearsfrom auction purchasers hinged upon the adjudication of the said issued.The High Court directed the Electricity Board to grant interim electricityconnection subject to final adjudication of the rights of the parties.

234. The appellant herein preferred the present Special LeavePetition against the interim order of the High Court. On 9 July 2007,leave was granted by this Court and the case was tagged with CivilAppeal No. 5312-5313 of 2005. The impugned order of the High Courtgranting interim electricity connection was stayed by this Court.

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A235. The submission which has been urged by Mr Ajit Bhasme,senior counsel appearing on behalf of the appellant is that the firstrespondent knowingly purchased the premises with the liability to paypast dues, evident from clause 3 and clause 4 of the terms of the auctionsale. Accordingly, it has been urged that the respondent is liable to paythe dues in view of Condition 23(b) of the MSEB Conditions of Supply.BMr MY Deshmukh, counsel appearing on behalf of the first respondenthas urged that the MSEB Conditions of Supply 1976 are inapplicableafter the enactment of the Maharashtra Electricity Supply Code 2005.

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236. The respondent has in its written submissions has brought tothe attention of this Court the suit for recovery[96] initiated by the appellantCagainst the erstwhile owner. During the pendency of the present appeal,the trial court by an order dated 30 September 2009 passed a decree infavour of the appellant for the debt due from the erstwhile consumerand its proprietor in respect of the arrears of electricity bills. The firstrespondent has urged that in view of the decree, the appellant ought toDhave withdrawn the present appeal instead of protracting the litigation.

237. At the outset, we would deal with the submissions on theapplicability of the 2003 Act. The electricity connection was permanentlydisconnected in 2002, and the first respondent acquired ownership rightsin the premises in 2005. The first respondent made the application for aEnew electricity connection on 30 December 2005. Hence, the firstrespondent requested the appellant to supply electricity after theMaharashtra Electricity Supply Code 2005 came into effect on 20 January2005. Accordingly, the Maharashtra Electricity Supply Code 2005 wouldgovern the facts in the present case. In terms of Regulation 10.5 of theMaharashtra Electricity Supply Code 2005, any unpaid electricity duesFconstitute a charge on the premises, and would be recoverable from thenew owner or occupier of the premises to whom the premises havebeen transferred.

238. Furthermore, the terms of the auction sale put the firstrespondent on notice that this was a sale on “as is where is” basis andGthe purchaser would be liable for arrears of different authorities, includingMSEB, if an excess amount in sale proceeds was not available. Therelevant clauses are extracted below:

“3. So far known to this office there are (no) arrears of Municipaltax, MSEB or Corporation tax or both taxes. However, anylegitimate claim made in that behalf shall be paid from out of thesale proceeds if the same is in excess of the amount mentioned inthe Recovery Certificate. In case such excess amount is notavailable the liability shall be borne by the purchaser.However, prospective purchaser is expected to check upfrom MIDC, CIDCO, MSEB, Municipal corporation etc. for thedues if any on the property.

4. The properties shall be sold on “AS IS WHERE IS BASIS”.”

239. Accordingly, the dues owed by M/s R & J Alloys Pvt. Ltd tothe MSEB are a charge on the property purchased by the first respondentin a public auction. The charge attaches to the property and a distributionlicensee is entitled to recover the unpaid dues from the first respondentsubject to the permitted period specified in the proviso to Regulation10.5.

240. So far as the filing of civil suit by the appellant in 2003 againstthe erstwhile owner is concerned, that is an alternative remedy providedby law which the appellant can undertake in order to recover electricityarrears from the erstwhile consumer. Besides disconnection of electricity,the MSEB has the remedy to file civil suits followed by execution petitionsfor recovery of the dues from the erstwhile consumer. The filing of thecivil suit will not debar the appellant from recovering any outstandingcharge for electricity from a person to whom the property is transferredor the occupier of the said premises where new electricity connection issought in terms of Regulation 10.5.

241. The counsel for the respondent has urged that although thedecree in the civil suit was passed in favour of the appellant on 30September 2009, the appellant has failed to execute it till date. Thedistribution licensee should not let arrears mount up and must be promptin disconnecting electricity supply and thereafter pursuing its remedy byfiling a suit for recovery of moneys/ dues. It becomes the bounden dutyof the distribution licensee to diligently pursue the decree awarded andrecover amounts from the real defaulter. Any amount that may havebeen realised in the execution of the decree would have to be given duecredit for in determining the amount payable by the respondent.

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A242. In view of the reasons which have been adduced earlier, weallow the appeal and set aside the order of the High Court.

III. Gujarat

243. In Gujarat, the right of the Electric Utilities to demandoutstanding dues is traceable to the following provisions:

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a. Up to the enactment of the 2003 Act on 10 June 2003:The governing legislation consists of the 1910 Act and the1948 Act. Clause 2(j) of Conditions of Supply of the GujaratElectricity Board was inserted by a notification dated 10 August2001. It reads:

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Reconnection or new connection for any premises, where thereare arrears of the Board pending from the consumer/occupier,shall not be entertained. The new successor/ occupier has toDclear these dues of the previous consumer before theapplication of successor/occupier is processed for supply ofelectricity. If the Board, at a later date, gets the full or part ofthese dues from the previous consumer, the amount shall berefunded to the successor/occupier after adjusting the costsincluding legal expenses to recover such arrears and the refundEshall bear no interest.”

b. From 10 June 2003 to 31 March 2005: As per Section185(2)(a) of the 2003 Act, the extant Conditions of Supplycontinued to apply.

c. From 31 March 2005 when the Supply Code came intoFforce: Clause 4.1.11 was notified under the Supply Code. Therelevant regulation is as follows:

“Regulation 4.1.11

An Application for new connection, reconnection, addition orreduction of load, change of name or shifting of Service Lineneed not be entertained unless any dues of the Applicant tothe Distribution Licensee in respect of any other serviceconnection held in his name anywhere in the jurisdiction ofthe Distribution Licensee have been cleared.”

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d. From 20 August 2010 when the Supply Code wasamended: Clauses 4.1.11, 4.1.16, and 4.8 of the Supply Codewere notified under Section 43 read with Section 50. Clause4.1.11 post the amendment in 2010 reads thus:

“Clause 4.1.11

An application for new connection, reconnection, addition orreduction of load, change of name or shifting of service linefor any premises need not be entertained unless any duesrelating to that premises or any dues of the applicant to theDistribution Licensee in respect of any other serviceconnection held in his name anywhere in the jurisdiction ofthe Distribution Licensee have been cleared.

Provided that in case the connection is released after recoveryof earlier dues from the new applicant and in case the licensee,after availing appropriate legal remedies, get the full or part ofthe dues from the previous consumer/owner or occupier ofthat premise, the amount shall be refunded to the newconsumer/owner or occupier from whom the dues have beenrecovered after adjusting the expenses to recover such dues.”

The High Court of Gujarat had occasion to deal with the validityof Clause 2(j) of the Conditions of Supply and Clause 4.1.11 of the GujaratElectricity Supply Code.

Item 101.2: M/s Navyug Steel Cast and Anr. v. PaschimGujarat Vij Co.; Civil Appeal No. 7303 of 2005

244. On 10 August 1998, a petition for winding up of Anik SteelLtd. was filed wherein an order for winding up of the company waspassed and an Official Liquidator was appointed. By an advertisementdated 21 December 2001, the Official Liquidator invited tenders for theauction sale of the property of the previous owner. The appellantsubmitted 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 “shallnot be responsible for any of the past dues of the Gujarat ElectricityBoard, Excise and Customs Department, Sales Tax and Income TaxDepartment and of any outsiders whether it is Government, Semi-Government Corporations and/ or Board, Bank or of any privateparties”. After inter se bidding, the appellant’s offer of Rs. 45.5 lakhswas found to be highest. On 23 July 2022, the Official Liquidator submitted A

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Aa report before the Gujarat High Court for confirmation of the sale infavour of the appellant for Rs. 45.5 lakhs. The High Court accepted thesale 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,Bif any, due and payable on the properties of the companyfor the period after the date of winding up. The payment ofsuch dues for pre-liquidation period shall be settled as per theprovisions of the Companies Act, 1956. However, dues, taxes,cess, if any applicable on the sale of assets shall be paid by thepurchaser.”C

245. In accordance with the auction terms laid down by the HighCourt, the consideration was paid and possession of the assets was handedover to the appellant. When the appellant applied for a fresh connection,Dthe respondent insisted on payment of outstanding dues of the previousowner before granting a fresh connection. The appellant filed a writpetition challenging Clause 2(j) of the Conditions of Supply. The SingleJudge allowed the writ petition and struck down clause 2(j) of theConditions of Supply for being arbitrary and inconsistent with statutoryprovisions of the law. The respondent preferred special appeals againstEthe judgment of the Single Judge before the Division Bench. The DivisionBnech 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) ofthe 1948 Act.

246. On 10 August 2001, Gujarat Electricity Board issued aFnotification under Section 49 of the 1948 Act incorporating Condition2(j) in the ‘Condition and Miscellaneous Charges for Supply of ElectricalEnergy’. Condition 2(j) empowered the Board to insist on payment ofarrears of electricity dues of the former consumer as a conditionprecedent to the restoration of the earlier connection or release of aGfresh connection in favour of the new owner/occupier of the premises.As discussed in preceding paragraphs, such conditions can lawfully bestipulated in light of the overall scheme of the 1910 Act and the 1948Act. Such terms and conditions stipulated in accordance with Section 49of the 1948 Act have a statutory character.

247. On 23 July 2002, the High Court passed an order confirmingthe sale in favour of the appellant on the terms and conditions mentionedin the order. The terms and conditions of the auction sale show that theproperty was sold on an “as is where is” basis to the appellant. Theappellant has relied on Condition 10 to argue that it was only liable to paycharges accrued after the date of winding up order. It has been furtheraverred by the appellant that the arrears are for a period before the dateof winding up order, which is 10 August 1998. The facts of the casemake it evident that the appellant requested supply of electricity by aletter dated 12 August 2002. In the present case, the payment of electricitydues, being statutory in nature, cannot be waived. The auction conditionsare subservient to the statutory demand made under Condition 2(j) ofthe Conditions of Supply. Therefore, we uphold the impugned judgmentof the High Court.

248. Before parting, we would like to highlight that by an orderdated 18 November 2011, this Court directed the appellant to depositRs. 25 lakhs with the respondent and secure the balance principal amountby giving a bank guarantee of a nationalised bank in the name of therespondent within a period of eight weeks from the date of the order toobtain a fresh electricity connection. The relevant part of the said orderis reproduced below:

“The principal amount claimed by Paschim Gujarat Vij CompanyLimited is to the tune of Rs. 1.26 crores. The applicant-petitionerhas applied for grant of fresh electricity connection which is beingdenied on the ground that arrears, referred to above, have notbeen paid by the previous owner [consumer]. The petitioner is anauction purchaser. Pending further orders, we direct the petitionerto deposit Rs. 25 lakhs with Respondent No. 1 and secure balanceprincipal amount by giving a Bank Guarantee of a NationalisedBank 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 complianceof above conditions, electricity connection shall be granted.”

249. This Court has been informed that the appellant chose not toget the fresh connection in terms as set out by this Court. Through anInterlocutory Application, the appellant has indicated that it is impossiblefor them to pay the total accumulated dues amounting to Rs. 578 lakhswith interest and other charges. Therefore, the appellant seeks the benefit AB

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Aof the amnesty scheme dated 29 March 2012 issued by the Gujaratgovernment. Further, the appellant submits that it can only clear its originalliability upto Rs. 126 lakhs. The relevant part of the said application isextracted hereunder:

“10. The applicants submit that the applicant is approaching thisBHon’ble Court with the intention to get the benefit of this amnestyscheme of Government of Gujarat for only reasons that if theapplicant succeeds, the Applicant would be required to pay originaldues if the applicant lose the matter in the Hon’ble Supreme Courtthe liability of the applicant will be only upto Rs. 126.00 Lakhs(original amount) and the Applicant will not be liable to pay anyCother delay payment charges and other charges, etc. Therefore,the applicant prays before this Hon’ble Court that is liability of theApplicant is fixed only upto the amount of the original dues i.e.Rs. 126.00 Lakhs without any interest and penalty, etc., theapplicant is ready to deposit such sum as is required by this Hon’bleDCourt to be deposited with respondent no. 1 and for the balancethe applicant is ready to submit the bank guarantee and/ or isready to deposit the whole amount with this Hon’ble Court assecurity.”

We allow the above application in the interests of equity, justice,Eand fairness to the extent that the appellant is only liable to pay theprincipal 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 &FOthers; SLP (C) No. 2880 of 2007

250. The appellant is an electric utility engaged in distribution andretail supply of electricity in Ahmedabad. Raipur Manufacturing CompanyLtd, the previous owner, became liable to pay an amount of Rs. 12 crorestowards electricity dues together with running interest thereon. OnGaccount of the outstanding debt, the appellant disconnected electricitysupply to the premises of the company at Ahmedabad on 15 July 1999.In 2001, winding up proceedings were filed against the previous ownerbefore the Company Court of the High Court of Gujarat. The sale ofproperty of the previous owner was sanctioned by the High Court ofGujarat by an order dated 2 December 2002 in favour of the respondent.HThe relevant terms and conditions imposed by the High Court were:

“1. The sale of properties of the Company shall be on “as is whereis and whatever there is” basis and the Official Liquidator will nottransfer the title except the title which the company was havingprior to its liquidation.

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5. All the statutory dues including the municipal dues, taxes, cess,etc. shall be paid and borne by the purchaser, Ajar EnterprisesPrivate Limited. The purchaser shall be solely liable to all levies,charges, claims, arrears, etc. that may be existing or imposed byany Central, State or local authorities or any other person claimingthrough them in whatever manner, on the said properties sold.”

251. After taking possession of the property, the respondentaddressed a letter dated 7 January 2004 to the appellant for grant of anelectricity connection. However, the appellant declined to grant supplyof electricity unless the respondent paid the pending dues of the erstwhileowner. The respondent filed a writ petition before the High Court ofGujarat challenging the appellant’s refusal to grant an electricityconnection. Through a common judgment, the Single Judge held thatrespondent, being an auction purchaser, cannot be called upon to clearthe past arrears of the previous owners in the absence of any statutoryprovision. Further, it was observed that there was no condition betweenthe parties by which the respondents were made liable to pay the arrearsof electricity dues of the previous owners. It was also observed that thestate government had not incorporated any condition similar to Condition2(j) of the Conditions of Supply in respect of the Petitioners. The DivisionBench in the impugned judgment dated 1 May 2006 upheld the decisionof the Single Judge.

252. The respondent has submitted that the Gujarat ElectricitySupply Code relied upon by the distribution licensee has no application tothe facts of the present case. According to the auction purchaser, theGujarat Electricity Supply Code came into force with effect from 31March 2005, whereas the respondent auction purchaser applied forelectricity on 13 August 2004, that is, much prior to the Electricity SupplyCode having come into effect.

253. In the impugned judgment, the High Court considered thepurport of the Regulation 4.1.11 of the Gujarat Electricity Supply Codeand held that it was not applicable to the respondent. According to the A

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AHigh Court, the sole reason that Regulation 4.1.11 of the GujaratElectricity Supply Code was inapplicable was because the said regulationsonly applied to the electricity dues of the applicant, and did not makethe applicant liable to clear the dues of the previous owner.

254. The High Court omitted to notice that the Gujarat ElectricityBSupply Code came into force with effect from 31 March 2005 while therespondent applied for electricity connection on 13 August 2004. Hence,the respondent had applied for a connection before the coming into forceof the Gujarat Electricity Supply Code. Thus, the said regulations willnot be applicable to the facts of the present case.

C255. Since the respondent applied for electricity connection on 13August 2004, the 2003 Act and the rules and regulations made thereunderare inapplicable in the instant case. It has been admitted by the appellantthat there was no statutory condition requiring the respondents to paythe outstanding electricity dues of the previous owner at the point oftime when they applied for electricity connection.D

256. The appellant has submitted that Ahmedabad ElectricityCompany,[97] the predecessor of the appellant, notified the Conditions ofSupply on 14 October 1994, and that would be applicable. For the periodfrom 10 June 2003 till 31 March 2005, when the Electricity Supply Codecame into force, the 1994 Conditions of Supply continued to operate inEterms of Section 185(2)(a) of the 2003 Act. Condition 2 of the 1994Conditions of Supply provided that a requisition for supply of electricalenergy shall be made in accordance with the requisition form attachedat Annexure A of the said conditions and shall be signed by the owner oroccupier of the premises for which supply is required. Annexure A ofFthe said conditions provides a form of requisition for supply of energy.The requisition form is not only limited to a new connection, but alsoextends to reconnection, extension of load, tapping connection, and namechange. The form also requires the applicant to pay all the dues of energybills and other charges up to the date of transfer. The relevant undertakingis extracted below:G

“I/We hereby give consent to transfer above mentioned servicein the name of the applicant and I/We abide to pay all the dues ofenergy bills & other charges upto the date of transfer.”

257. A perusal of Annexure A makes it evident that the aboveextracted undertaking is actually the undertaking of a ‘current consumer’giving consent to transfer the service connection and undertaking to payall past dues. This is not an undertaking of an applicant, which has beenseparately provided for in the same form. Therefore, Annexure A makesa clear distinction between a ‘current consumer’ and an applicant forelectricity connection. Since the respondent purchased the said propertythrough an auction-purchase, there was no ‘current consumer’ to giveany consent. Therefore, the undertaking under Form A will not beapplicable qua the respondent. Hence, we find no reason to interferewith 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 VijCompany v. Apurva Chemicals, SLP (C) No. 18280 of 2013

258. A power connection was issued in favour of AruneshProcessors Pvt Ltd, the previous owner. Due to non-payment of energybills, the agreement with the power supply company was terminatedwith effect from 01 February 1995. In 1995, the appellant filed a suit forrecovery of Rs. 3.41 lakhs against the previous owner before the CivilJudge, Sr. Division, Valsad. In 2002, the suit was decreed in favour ofGujarat Electricity Board, which was the predecessor of the appellant.Arunesh Processors Pvt Ltd was wound up in 2002 and its assets wereauctioned by the Bombay High Court on an “as is where is basis”. Therespondent participated in the auction proceedings and acquired the assetsof Arunesh Processors Pvt Ltd at Vapi, Gujarat. The sale was confirmedin favour of the respondent for Rs. 70 lakhs on 11 August 2005 by theBombay High Court. Thereafter, on 12 December 2008 a deed ofconveyance was executed between the Official Liquidator, High Courtof Bombay and the respondent. In 2010, the appellant filed DarkhastNo. 7 of 2010 for execution of the decree passed in the suit in 2002.

259. On 16 December 2010, the respondent approached theappellant requesting it to release power supply to the plot at Vapi, Gujarat.On 03 January 2011, the appellant informed the respondent that powersupply cannot be released on the plot because Darkhast No. 7 of 2010was pending and dues were not recovered from the previous owner.Since the respondent was in need of power supply on the said plot, itpaid the outstanding dues of the previous owner to the tune of Rs. 17lakhs on 25 February 2011. However, on 17 August 2011, the respondent AB

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Aapproached the appellant to refund the paid amount. The appellant refusedto refund the amount, contending that the previous owner had not yetacknowledged the receipt of their claim. The respondent instituted awrit petition before the High Court of Gujarat for challenging Clause4.1.11 of the Gujarat Electricity Supply Code as being inconsistent withthe 2003 Act. The High Court in the impugned judgment dated 03BDecember 2012 held that Clause 4.1.11 of the Conditions of Supply wasultra-vires the provisions of 2003 Act.

260. It is beyond the pale of doubt that the respondent requestedthe appellant to release power supply to their premises on 16 December2010. At the relevant point of time, the amended Clause 4.1.11 was inCforce. In the impugned judgment dated 03 December 2012, the HighCourt held that the State Commission is not authorised to prescribe acondition under Section 50 of the 2003 Act for payment of dues of aprevious owner or occupier from the new owner as a precondition tosupply electricity. It was further held that Section 43 of the 2003 ActDdoes not impose any condition for payment of electricity dues attachedto the premises before getting supply of electricity. The High Courtobserved that the phrase “any dues relating to that premises” conveyedthat the premises were held to be a defaulter of electricity dues andcharges, and was inconsistent with the provisions of the 2003 Act. Onthe basis of the above reasons, the High Court concluded that the firstEpart 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 toframe terms and conditions providing for recovery of electricity duesattached to the premises. It has been further contended that since theFauction was held on “as is where is basis”, the auction purchaser wasrequired to carry out due diligence in regard to the dues owed againstthe property being purchased. The appellant has further submitted thatthe regulations imposing a condition that the dues relating to particularpremises should be cleared before electricity supply is restored or a newGconnection is given to the premises cannot be termed as arbitrary orunreasonable. To reinforce their argument, the appellant has relied uponthe observations made by this Court in Paschimanchal Vidyut VitranNigam (supra).

262. On the other hand, the respondent contended that there is noHprovision under the 2003 Act enabling the distribution licensee to impose

a pre-condition of the clearance of dues relating to the previous owneror their premises. It has been further argued that Clause 4.1.11 affixingthe dues to the premises is contrary to Section 43 of the 2003 Act, whichaffixes the liability to pay electricity dues and charges on the consumer.The dues relating to the premises would be a financial encumbrance onthe 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 providesthat an application for electricity supply for any premises need not beentertained unless any dues relating to the premises have been cleared.The said clause indicates that a distribution licensee can withholdconnection to the premises unless its dues with respect to the saidpremises have been cleared. In our opinion, the High Court has erred inobserving that the phrase “any dues relating to that premises” isinconsistent with the provisions of the 2003 Act. The use of the saidphrase does not entail that the premises are deemed to be a defaulterand made liable to pay electricity dues, as the High Court suggests.According to Clause 4.1.1 of Electricity Supply Code, it is the applicantwho has to make an application in terms of Annexure A and pay all therequired electricity dues and charges, including the electricity arrears ofthe previous owner relating to the premises. Thus, on the overall readingof the Electricity Supply Code, it becomes evident that dues of theprevious consumer relating to that premises are sought to be recoupedfrom the new owner or occupier of the premises.

264. In the impugned judgment, the High Court referred to theexample of a multi-storied residential building to observe that “thelicensee may successfully demand that a new purchaser of a differentflat whose vendor was not a defaulter, would still be liable to paythe arrears of a defaulting consumer of another flat of the same onthe ground that it is a part of the same premises.” In this context, wehave already held that there is a synergy between the consumer andpremises. A new owner can only be obligated to pay the electricity arrearsof the previous owner with respect to the premises to which electricityconnection is being sought. Therefore, the phrase “any dues relating tothat premises” has to be understood with regard to the supply of electricitymade to the premises when it was in occupation of the previous owner.

265. We have already clarified that electricity arrears do notautomatically become a charge over the premises. A Statutory charge iscreated only where there is an express provision of law providing for AB

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Acreation of a statutory charge upon the transferee. Clause 4.1.11 doesnot have the effect of creating a charge on the property as it does notspecifically provide for creation of a statutory charge. Besides, the phrase“any dues relating to that premises” cannot be interpreted to imputefinancial liability on the premises.

B266. Moreover, the High Court has held that the 2003 Act doesnot enable the Electric Utilities to frame conditions to recover dues of aprevious consumer from a subsequent owner or occupier. We disagreewith this reasoning of the High Court in view of our analysis in thepreceding paragraphs, where we have held that the Electric Utilities canspecify the requirement that the subsequent owner or occupier of theCpremises has to pay the arrears of electricity dues of the previousconsumer as a pre-condition for the grant of an electricity connection.However, such terms and conditions of supply should be valid andreasonable by conforming to the overall scheme and purpose of the2003 Act.D267. Consequently, we set aside the impugned judgment of theHigh Court dated 2 December 2012. Any pending IAs are disposed ofaccordingly.

Item 101.5: Madhya Gujarat Vij Co. Ltd. v. AgricultureProduce Market Committee, SLP (C) No. 8197-8198 of 2014

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268. Rajprakash Spinning Mills Ltd.[98] was a consumer of theGujarat Electricity Board since 1967. On 31 December 1994, its powerwas disconnected due to the non-payment of electricity dues. On 18July 1995, the Gujarat Electricity Board instituted a suit in the Civil Court,Nadiad against RSML for recovery of electricity charges amounting toFRs. 78 lakhs. In the meantime, RSML went into liquidation and the HighCourt appointed the Official Liquidator. On 20 August 2002, the suit wasdecreed in favour of the Electricity Board. In 2003, the Board lodged aclaim before the Official Liquidator with decree in the suit for Rs. 78lakhs and legal expenses and interest up to December 2002, whichGcumulatively amounted to Rs. 1.39 crores.

269. On 17 December 2003, the Official Liquidator executed asale deed in favour of the respondent. The sale deed specifically mentionsthe liability of the purchaser about the dues. On 25 February 2004, arevised sale deed was registered and executed in favour of the respondent H98 “RSML”

and the said sale deed was executed by the Official Liquidator inpursuance of the confirmation of the sale for a consideration of Rs. 97lakhs.

270. On 10 April 2007, the respondent addressed a letter to theappellant for release of the electricity connection. On 13 April 2007, theappellant declined to grant a new connection unless the electricity chargesamounting to Rs. 78 lakhs outstanding against the premises were paid.The respondent filed a writ petition for the grant of an electricityconnection. The petition was dismissed by a Single Judge by an orderdated 08 September 2009 on the ground that the person who purchasedthe premises had to pay the electricity dues of the previous occupant.The Division Bench in the impugned judgment dated 16 July 2013 heldthat the subsequent purchaser is not liable to pay the electricity dues ofthe previous owner.

271. The auction-purchaser submitted an application for a newelectric connection on 10 April 2007. The Gujarat Electricity Supply Codewas notified on 31 March 2005. At the relevant time, unamendedRegulation 4.1.11 was applicable, according to which only the dues ofthe applicant to the distribution licensee had to be cleared for the grantof a new connection or for reconnection of electric supply. The saidregulation did not obligate the new owner to clear the electricity dues ofthe previous owner. Therefore, the respondent could not have been madeliable to pay the arrears of the previous owner as a pre-condition toobtain a new electricity connection.

272. In view of the above reasons, we uphold the impugnedjudgment dated 16 July 2013 of the High Court. The appeal shall standdismissed.

Item 101.6: Torrent Power Limited v. M/s Shashwat HomesPrivate Limited; SLP No. 19878 of 2007

273. Gujarat Steel Tubes Company[99], the previous owner, wassubjected to liquidation proceedings and the electricity connection wasdisconnected for non-payment of dues amounting to Rs. 1.5 crores. GSTCwas ordered to be wound up by the Gujarat High Court. A parcel of theGSTC’s land was bought in auction by Spectra Enterprises PrivateLimited for a sum of Rs. 42.10 crores. In 2006, the name of the respondentcame to be mutated in the revenue records pertaining to the said parcel99 “GSTC”

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Aof land. On 24 January 2007, the respondent approached the appellantseeking a new connection for electricity in respect of the premises. Theappellant declined to grant a new connection pending the payment of theoutstanding electricity dues of the previous owner. The respondentinstituted a writ petition before the Gujarat High Court. By the impugnedjudgment dated 31 January 2014, the High Court held that the subsequentBowner is not liable to pay the electricity dues of the previous owner.

274. The respondent approached the appellant for seeking a newelectricity connection on 24 January 2007. At the relevant time, the 2005Electricity Supply Code was in force. Regulation 4.1.11 of the 2005Electricity Supply Code required only the dues of the applicant, if any, toCbe paid at the time of the application for a new connection. In the affidavitfiled before the High Court, the appellant conceded that unamendedRegulation 4.1.11 was applicable to the respondent, who is the auction-purchaser. The facts of the present clearly demonstrate that on 24 January2007, when the auction-purchaser applied for electricity, unamendedDClause 4.1.11 was operational and applicable. Therefore, the respondentcannot be made liable to clear the dues of the previous owner in theabsence of any express statutory condition in that regard. The impugnedjudgment of the High Court is upheld. The appeal shall stand dismissed.

Item 101.7: Dakshin Gujarat Vij Co. Ltd v. AmardeepEAssociation; SLP (C) No. 73 of 2015

275. In 1994, Navsari Cotton and Silk Mills Ltd[100] was declared asick industrial unit. As on the date of NCSML’s closure, it owedoutstanding electricity dues of Rs. 416.36 lakhs. On 17 October 1994,the electricity supply was permanently disconnected. On 15 DecemberF1996, the Board for Industrial and Financial Reconstruction[101] prepareda New Rehabilitation Scheme under Section 18 of SICA. The saidscheme provided for sale of surplus land of NCSML under paragraph2(g):

“(g) The plant and machinery of the weaving section and theGprocess house along with its building and the surplus land with thecompany are proposed to be disposed of and the sale proceeds ofabout Rs. 500 lakhs would be utilised for the implementation ofthe scheme.”

100 “NCSML”H101 “BIFR”

276. Pursuant to the Rehabilitation Scheme of 1996, theGovernment of Gujarat passed a resolution inter alia granting (i)permission for sale of surplus land of NCSML; and (ii) exemption frompower cut for five years to NCSML with the condition that, anyreconnection charges as in the case of arrears shall be given to theGujarat Electricity Board in instalments. Later, in 1997, the workers ofNCSML decided to form a co-operative by the name Morarji DesaiTextile Labour Co-operative Society Industries Limited[102] to take overthe unit of the company for its revival.

277. In 2003, the BIFR directed the disposal of the surplus land ofthe said company by constituting an Assets Sale Committee. The noticefor sale of the surplus land was published in Gujarat Samachar in 2003under which the land was to be sold on “as is where is basis”. Therelevant extract of the notice is set out below:

“As per the order of the B.I.F.R., the land situated at Vijalporebearing 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 oftotal admeasuring area of the land, 11 Lakh square feet land withpossession is to be given on AS IS WHERE IS BASIS as per theprevailing laws and rules.”

278. The Assets Sale Committee accepted the offer made byrespondent for a consideration of Rs. 561 lakhs for the surplus land. Thesale deed dated 29 May 2003 mentioned that the additional open landwas free from all encumbrances including lien and charge. Clause 9further specified that “all taxes, land revenue, education cess, andother outstanding dues up to date has been paid and if any duesremain unpaid that is to be paid by the Company.”

279. On 01 December 2004, the respondent applied for a newconnection. However, the appellant refused to grant a new connectionuntil the outstanding dues were cleared in terms of Clause 2(j) of theConditions of Supply. In 2006, the respondent moved an application beforethe BIFR for a direction to release power supply. On 12 June 2006, theBIFR sanctioned a Revised Rehabilitation Scheme directing the appellantto release an electricity connection to the respondent. Since the electricitysupply was not released, the respondent instituted a writ petition beforethe High Court of Gujarat. In 2010, a Single Judge of the High Court AB

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Aallowed the writ petition by directing the appellant to release the electricityconnection to the residential establishments on the surplus land withoutinsisting on the payment of the dues of the previous owner. The SingleJudge held that Clause 2(j) was not applicable because the worker’s co-operative society was a going concern and the Electricity Board canrecover the dues from them. The Division Bench in the impugnedBjudgment dated 21 November 2014 upheld the decision of the SingleJudge. The Court held that the BIFR scheme would be binding on theappellant even though they were not a party to the proceedings. It wasfurther held that SICA is a special Act in comparison to the 2003 Act.Therefore, a scheme framed under SICA was held to have an overridingCeffect over Clause 2(j) of the Conditions of Supply.

280. The respondent has contended that according to the BIFRScheme, electricity connection was provided to MDTLCIL separatelyand not to the surplus land sold to the respondent. Hence, no dues couldhave been recoverable from the respondent. The respondent furtherDcontended that the rehabilitation schemes framed by BIFR have anoverriding effect on the terms and conditions stipulated under Clause2(j) of the Conditions of Supply. The respondents have also drawnattention to Clauses 3 and 9 of the sale deed which exempted therespondent from the payment of the past dues of NCSML. The saidclauses are extracted below:E

“(3) [...] On the said property, there is no debt i.e. lien or chargeof anybody and is not under seize, attachment, or injunction ofany court. [...] On the said property, nobody has maintenance andresidence charge on it, there is no charge of Government taxes/duties like, Income Tax, Sales Tax, etc. on said property. There isFno acquisition, requisition, or reservation of Government or localbody 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 thesaid property and the company has all rights and authority forGmanaging the said property by all way and by giving such trustand assurance, the company has executed this sale deed. Andeven if, in future, any one claims right on the property, then riskthereof stands on the company and that is if due to such right orchapter if any loss or expenses occurred by you or your heirs,that is to be repaid by the company.”H

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(9) All taxes, land revenue, education cess, and other outgoingsrelated to the said property and outstanding dues upto date hasbeen paid and if any dues remains to be paid that is to be paid bythe company. Now onwards, the responsibility for payment of alltaxes, etc. related to the said property will be on the first party.By support of this deed the purchaser can enter its name on saidproperty in Government, Semi-Government and local records, CitySurvey Records and Municipal Records and for that we have togive our signature, consent, and such signed consent admittedbeing considered.”

281. To decide this issue, the question that arises before us iswhether SICA is special legislation in relation to the 1910 Act and 2003Act. SICA was enacted with a view to secure the timely detection ofsick companies and speedy determination of the preventive, ameliorative,remedial and other measures which need to be taken with respect tosuch companies. Section 18 mandated an operating agency such as aBIFR to prepare a scheme providing for transfer of business, properties,assets, and liabilities of the sick industrial company on terms and conditionsas specified in the scheme. According to Section 18(8) of SICA, oncethe scheme is sanctioned, it is binding on the sick industrial company aswell as the shareholders, creditors, and guarantors of the sick industrialcompany. Section 32 of the SICA gave overriding effect to any rules orschemes made under the provisions of the Act:

“32. Effect of the Act on other laws.—(1) The provisions ofthis Act and of any rules or schemes made thereunder shallhave effect notwithstanding anything inconsistent therewithcontained in any other law except the provisions of the ForeignExchange Regulation Act, 1973 (46 of 1973), and the Urban Land(Ceiling and Regulation) Act, 1976 (33 of 1976), for the time beingin force or in the Memorandum or Articles of Association of anindustrial company or in any other instrument having effect byvirtue of any law other than this Act.***

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A282. In Tata Motors Ltd v. Pharmaceutical Products of IndiaLtd[103] this Court held that SICA is a special legislation in comparison tothe Companies Act. The Court observed:

“22.The provisions of a special Act will override theprovisions of a general Act. The latter of it (sic Act) willBoverride an earlier Act. The 1956 Act is a general Act. Itconsolidates and restates the law relating to companies and certainother associations. It is prior in point of time to SICA.

23. Wherever any inconstancy (sic inconsistency) is seenin the provisions of the two Acts, SICA would prevail. SICACfurthermore is a complete code. It contains a non obstanteclause 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 referencehad been made to BIFR would be subject to the provisions ofSICA.”D

283. The 2003 Act also contains a provision similar to Section 32of SICA. Section 174 of the 2003 Act provides that the provisions of thesaid Act will have overriding effect notwithstanding anything containedEin any other law for the time being in force. It therefore becomes evidentthat both SICA and 2003 Act are special laws in their respective field.

284. In LIC v. D J Bahadur,[104] this Court was confronted withthe question as to whether the LIC Act is a special legislation or a generallegislation with respect to the Industrial Disputes Act, 1947. Justice V RFKrishna Iyer(supra) held that in determining whether a particular statuteis general or special, the focus has to be on the principal subject matterand the particular perspective. On the basis of the observation that alegislation may be general for some purposes and special for otherpurposes it was held that the Industrial Disputes Act, 1947 being a speciallaw, prevails over the LIC Act. It was held:G

“52. In determining whether a statute is a special or a generalone, the focus must be on the principal subject-matter plus theparticular perspective. For certain purposes, an Act may be general 103 (2008) 7 SCC 619H104 (1981) 1 SCC 315

and for certain other purposes it may be special and we cannotblur distinctions when dealing with finer points of law. In law, wehave a cosmos of relativity, not absolutes — so too in life.”

285. In UP State Electricity Board v. Hari Shankar Jain,[105] athree-judge Bench of this Court was called upon to determine whetherthe Industrial Employment (Standing Orders) Act, 1946 is a speciallegislation and overrides the 1948 Act in regard to the age ofsuperannuation. Justice O Chinnappa Reddy, speaking on behalf of theBench held that the Industrial Employment (Standing Orders) Act, 1946is a special legislation dealing with the conditions of service of workmenin industrial establishments. On the other hand, the 1948 Act is an act tocoordinate the development of electricity, and does not seek to regulatethe 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 thesubject of development of electricity. It was observed:

“7. [...] The Electricity Supply Act does not presume to be an Actto regulate the conditions of service of the employees of StateElectricity Boards. It is an Act to regulate the co-ordinateddevelopment of electricity. It is a special Act in regard to thesubject of development of electricity, even as the IndustrialEmployment (Standing Orders) Act is a special act in regard tothe subject of conditions of service of workmen in industrialestablishments. If Section 79(c) of the Electricity Supply Actgenerally provides for the making of regulations providing for theconditions of service of the employees of the Board, it can onlybe regarded as a general provision which must yield to the specialprovisions of the Industrial Employment (Standing Orders) Act inrespect of matters covered by the latter Act.”

286. Keeping the above principle in mind, it is necessary toexamine the subject matter of SICA and the 2003 Act. Under SICA, theoperating agency had to prepare a scheme with respect to a sick industrialcompany providing for financial reconstruction, proper management,amalgamation, and any other preventive, ameliorative, and remedialmeasures. On the other hand, the 2003 Act is a consolidating law relatingto generation, transmission, distribution, trading, and use of electricity.The 2003 Act relates specifically to supply of electricity to consumers, AB

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Awhereas SICA is silent on the aspects of the supply of electricity toconsumers. The principal subject matter of SICA is to provideameliorative measures for reconstruction of sick companies, while thepurpose of the 2003 Act is development of the electricity industry. Thus,the purpose of the two enactments is entirely different. The 2003 Act isa later enactment, and Section 175 specifically provides that the provisionsBof the Act are in addition and not in derogation of any other law for thetime being in force, including the SICA.

287. In KSL & Industries Ltd v. Arihant Threads Ltd,[106] athree-judge Bench of this Court was called upon to decide whichenactment between the SICA and Recovery of Debts Due to BanksCand Financial Institutions Act, 1993[107] would prevail over the other. TheCourt observed that although both the legislations are special laws inrelation to their respective subject matters, SICA would prevail over theRDDB Act by virtue of the incorporation of a non-derogation clause inthe latter. In the RDDB Act, Parliament had specifically provided thatDthe RDDB Act shall be in addition to and not in derogation of other lawsmentioned therein including SICA:

“49. The term “not in derogation” clearly expresses theintention of Parliament not to detract from or abrogate theprovisions of SICA in any way. This, in effect must meanEthat Parliament intended the proceedings under SICA forreconstruction of a sick company to go on and for thatpurpose further intended that all the other proceedingsagainst the company and its properties should be stayedpending the process of reconstruction. While the term“proceedings” under Section 22 of SICA did not originally includeFthe RDDB Act, which was not there in existence Section 22 coversproceedings under the RDDB Act.”

288. Similarly, Section 175 of the 2003 Act provides that theGprovisions of the Act are in addition and not in derogation of any otherlaw for the time being in force. Therefore, by specifically providing thatthe 2003 Act shall be in addition to and not in derogation of any otherlaws for time being in force, the Parliament has preserved and give 106 (2015) 1 SCC 166H107 “RDDB Act”

K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]

precedence to the proceedings under SICA. Section 32 of SICA providesan overriding effect to a scheme framed under it. Section 18 of theSICA mandates an operating agency such as BIFR to prepare a schemeproviding for transfer of business, properties, assets, and liabilities of thesick industrial company on terms and conditions as may be specified inthe scheme.

289. SICA is a special statute and Section 32 read with Section18(8) of the SICA gives an overriding effect to the Scheme. The 1996Rehabilitation Scheme and the 2006 Revised Rehabilitation Scheme bindthe appellant, but override Clause 2(j) of the terms and conditions ofsupply.

290. Applying the above position of law to the facts of the presentcase, it is apparent that the respondent purchased ‘surplus land’ ofNCSML in pursuance of the rehabilitation scheme framed by BIFR.When the respondent was given possession of the land in 2003, NCSMLwas a going concern as it continued to be operated by MDTLCIL. Therelevant clauses of the sale deed expressly excluded the respondentfrom the past dues of NCSML. In fact, the Clause 9 of the sale deedreiterated that NCSML would be responsible to pay any outstandingdues related to the land. Further, the 2006 Revised Rehabilitation Schemesolely puts the onus of clearance of electricity arrears on NCSML, whiledirecting the appellant to release electricity connection to the respondent.Thus, NCSML being the consumer, was obligated to clear the arrears ofelectricity pertaining to the said premises. The appellant could only recoverdues from NCSML, since it was a going concern at the time when therespondent applied for supply of electricity. It is admittedly the case thatthe appellant did not institute any proceeding for recovery of dues fromNCSML. This has been observed in the judgment dated 14 June 2010 ofthe High Court:

“Under these circumstances, no recovery was made byRespondent against NCSML. If no recovery were made againstNCSML, the demand of dues against the Petitioner (respondentherein) which is the purchaser of portion of land owners byNCSML is not sustainable.”

291. The High Court has rightly observed that the appellant cannotselectively withhold electricity to the respondent under the guise ofdemand for past electricity arrears. The stance of the appellant is opposed A

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Ato the rehabilitation scheme framed by the BIFR. The RevisedRehabilitation Scheme formulated by the BIFR will be binding on theappellant by virtue of Section 18(8) of SICA. According to the saidprovision, once a scheme is sanctioned, it shall not only bind the sickindustrial company and the transferee company, but also creditors suchas the appellant. The statutory provision is extracted below:B

“18. Preparation and sanction of Schemes -

(8) On and from the date of the coming into operation of thesanctioned scheme or any provision thereof, the scheme or suchprovision shall be binding on the sick industrial company and theCtransferee company or, as the case may be, the other companyand also on the shareholders, creditors and guarantors andemployees of the said companies.”

292. On 20 March 2015, a two-judge Bench of this Court passedan interim order staying the operation of the impugned judgment in theDfollowing terms:

“The impugned judgment and order dated 21.11.2014 passed bythe High Court of Gujarat is stayed subject to Respondent No. 1furnishing a bank guarantee of 50% of the total dues.

It is made clear that the electricity will be supplied only onEfurnishing the aforesaid bank guarantee.

Such of those purchasers who wish to pay the amount due to thepetitioner are permitted to do so. The petitioner will consider thecase on merits and take a decision on providing the electricityconnection.”F293. We accordingly vacate the stay on the impugned judgmentdated 21 November 2014. Any amount furnished by the respondent shallbe refunded back. The appeal shall stand dismissed.

Item 101.8: Paschim Gujarat Vij Company Limited v.Sarifaben Mehboobbhai Solanki, SLP (C) No. 13400/2018G

294. The electricity supply of Kanti Cotton Mills Pvt Ltd, theprevious owner, was disconnected on 09 June 1981. The mill was deemedto be a ‘relief undertaking’ under Section 3 of the Bombay ReliefUndertakings (Special Provisions) Act, 1958. In 1982, Gujarat State H

Textile Corporation[108] took over the management of the Mill under theIndustries (Development and Regulation) Act, 1951. In 1996, the BIFRsubmitted its report stating that huge losses were being suffered andrecommended winding up under Section 20 of SICA. In 1997, theCompany Court ordered winding up and appointed the Official Liquidator.On 21 October 1997, GSTC requested a disconnection of electricitysupply in view of the winding up proceedings. On 22 July 1998, a courtauction was held for the sale of immovable property. The offer of JayMahakali Infrastructure Pvt Ltd.[109] was found acceptable and confirmedby the High Court. On 28 June 2004, a sale deed was executed in favourof JMIPL for a consideration of Rs. 5.5 crores.

295. On 23 May 2005, the appellant served a notice on JMIPLdemanding payment of Rs. 2.3 crores. On 05 September 2006, a SingleJudge allowed the petition which was instituted by JMIPL by holdingthat the claim of the appellant for arrears of electricity dues, being in thenature of a money claim, was required to be lodged within 3 years, andwas barred by limitation. The appeal was dismissed by the Division Benchby a judgment dated 04 April 2014 on the ground that the appropriateremedy available to the appellant was to file a civil suit or get a garnisheeorder so that the purchaser would know that there is a liability on theproperty in question. On 16 December 2016, the High Court dismissedthe review petition preferred by the appellant on the ground of delay.

296. The respondents purchased a small residential house fromJMIPL in 2012. On 4 October 2014, the respondents applied for thegrant of an electricity connection. Since the request was not acceded to,the respondent instituted a complaint before the Consumer GrievancesRedressal Forum seeking a connection without insistence on the dues ofthe earlier owner as they had purchased the plot from JMIPL. Theforum disposed of the case in light of Clause 4.1.11 of the ElectricitySupply Code, which was amended in 2010. The respondent approachedthe Electricity Ombudsman, who relied upon the previous order of theHigh Court to direct the appellant to supply electricity to the respondentsby an order dated 30 March 2015. The appellants filed a Special CivilApplication before the High Court against the order of the Ombudsman.On 16 February 2016, the Single Judge of the High Court dismissed theapplication. The Division Bench of the High Court by judgment dated 8

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ASeptember 2017 declined to interfere on the ground that a Special LeavePetition[110] preferred before this Court against the order dated 4 April2014 was dismissed.

297. It is important to reiterate that the appellant had also deniedan electricity connection to JMIPL, the predecessor-in-title of respondent.BHowever, JMIPL filed a petition under Article 226, which was allowedby a Single Judge of the High Court. The appellant filed a Letters Patentappeal, which was dismissed by the Division Bench of the High Courtby a judgment dated 04 April 2014 on the ground of limitation. TheOmbudsman, in its order dated 30 March 2015, based its decision on thisjudgment of the Division Bench. The judgment dated 04 April 2014 attainedCfinality. The right of the respondent to receive supply of electricity stoodcrystallised on the judgment attaining finality upon the dismissal of theSpecial Leave Petition filed by the appellant. Therefore, the order passedby the Ombudsman, and the subsequent orders passed by the High Courtaffirming the decision of the Ombudsman, do not suffer from any infirmity.DThe impugned judgment of the High Court is upheld for that reason. Theappeal shall stand dismissed.Item 101.16: Torrent Power Ltd. v. M/s AbhisarDevelopers, SLP(C) 9092-9094 of 2013

298. On 01 September 1986, New Gujarat Synthetic Company,Ethe previous owner, went into liquidation. On 12 September 1986, theelectricity connection to the premises of the previous owner wasdisconnected for non-payment of dues amounting to Rs. 77 lakhs. On 12October 2006, a public auction was conducted of the immovableproperties of the previous owner, including their premises. These wereFpurchased by Star Associates and conveyed to Abhisar Developers, therespondent herein.

299. On 28 December 2006, the respondent-purchaser appliedfor a new connection for the premises. However, the appellant calledupon the respondent to clear the outstanding dues of the premises. InG2007, the respondent filed a writ petition before the High Court of Gujaratpraying for new connection without payment of the arrears. In 2010, theHigh Court allowed the petition and directed the Licensee to provide theconnection. On 3 December 2012, the Division Bench of the High Court

held that the Clause 4.1.11 of the Gujarat Electricity Supply Code, asamended 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 4.8.4of the Electricity Supply Code to argue that the auction-purchaser cannotdeny knowledge of the requirement to clear the outstanding dues of thepremises. In response, the auction-purchaser has submitted that therewas no statutory provision at the relevant time requiring the payment ofthe dues of the previous owner from the subsequent owner as a conditionprecedent for providing for a fresh connection.

301. The relevant Clauses 4.1.16, 4.8.1, and 4.8.4 of the 2005Electricity Supply Code are extracted hereunder:

“4.1.16 The Distribution Licensee shall give no dues certificate toconsumer on his request to avoid any possibilities of pending duesof previous owner while purchasing new house/ premises.

[...]

4.8.1 The Consumer shall not without prior consent in writing ofthe Distribution Licensee assign, transfer or part with the benefitof the Agreement executed with the Distribution Licensee norshall part with or create any partial or separate interest thereunder in any manner. Transfer of service connection will beeffected on application in case the registered Consumer is deador if the ownership or occupation of the property has changed ortransferred. In all cases of such transfers, the arrears of everydescription shall be paid in full together with transfer fee asprescribed in relevant GERC Regulations.

[...]

4.8.4 Where Premises to which electricity is supplied by Licenseeis transferred to transferee and the transferee does not get serviceconnection in the Premises transferred to his name, and continuesto use the service connection in previous name, the transfereeshall be responsible for payment of running energy bills as well asunpaid dues of energy bills and other amounts relating to theservice connection. The dues to the Distribution Licensee shallbe payable on demand, in default of which the supply to thePremises may be disconnected, subject to the provisions of theActs, rules, and regulations for the time being in force. “

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A302. Clause 4.1.16 of the Gujarat Electricity Supply Code obligatedthe distribution licensee to provide no-dues certificate when requestedby a consumer “to avoid any possibilities of pending dues of theprevious owner while purchasing new house/premises.” This is onlya procedural provision and does not per se impose any obligation on thesubsequent owner of the premises. The term “consumer” will not bringBan auction-purchaser within the ambit of Clause 4.1.16 as an auction-purchaser does not become a consumer before entering into an agreementwith the distribution licensee.

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303. According to Clause 4.8.1, a consumer shall not transfer aservice connection without the prior consent of the distribution licensee.CIt further provides that transfer of a service connection will be effectedon application in case the registered consumer is dead or if the ownershipor occupation of property has changed or been transferred. In case of atransfer, the clause provides that arrears of every description shall bepaid in full together with the transfer fee. However, the said provisionDonly applies in situations where there has been a transfer of a serviceconnection. In the facts of the present case, we are dealing with a situationwhere the auction-purchaser applied for a new connection of electricityto the premises. Therefore, Clause 4.8.1 will not be applicable to thefacts of the present case.

E304. Clause 4.8.4 provides that a transferee of premises wouldbe liable for the unpaid dues of energy bills of the defaulter transferoronly if they continue to use the service connection in the previous namewithout transferring to their name. The said clause is only applicablewhere a transferee applies for a transfer of connection, and not where atransferee applies for a new power connection in their own name.F

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305. In the present matter, from the perusal of facts, it is evidentthat the respondent applied for a fresh electricity connection for thepremises on 28 December 2006. Therefore, on the date of the submissionof the application for electricity by the respondent, the unamended Clause4.1.11 of the Gujarat Electricity Supply Code was in force, according toGwhich only the dues of the applicant to the distribution licensee had to becleared for a new connection or reconnection of electric supply. Therewas no statutory provision requiring the auction purchasers to clear thearrears of the previous owner as a condition precedent for getting afresh connection.

306. It was only in 2010 that clause 4.1.11 of the said ElectricitySupply Code was amended which required the subsequent owner of thepremises to clear the dues of the previous owner as a condition precedentfor receiving a new electricity connection. Thus, at the time when therespondent applied for a fresh connection of electric supply, there wasno existing provision requiring the applicant of a new connection to clearthe dues of the previous owner linked to the premises. Therefore, thejudgment 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 theAERC Supply Code on 30 August 2004 in exercise of its power underSection 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 extractedbelow:

“3.6.4 In case of a person occupying a new property, it will bethe obligation of that person to check the bills for the previousmonths or, in case of disconnected supply, the amount due as perthe licensee’s records immediately before his occupation andensure that all outstanding electricity dues as specified in the billssubject to limitation as per sub-section (2) of Section 56 of theAct are duly paid up and discharged. The licensee shall be obligedto issue a certificate of the amount outstanding from the connectionin such premises on request made by such person.”

The impugned clause obligates a new occupier of a premises tocheck the bills for previous months and ensure that all the outstandingamounts are duly paid up and discharged.

Item 101.15: Carbon Resources v. Assam ElectricityRegulatory 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 whichelectricity supply was disconnected in 1992. The Assam State ElectricityBoard[111] filed a money suit before the District Judge against the previousowner, which was decreed in its favour for Rs 2.07 crore on 24 February 111 “ASEB”

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A1997. On account of the liabilities due to UCO Bank, a warrant ofattachment was levied on 30 June 2004.

309. In 2002, UCO Bank preferred an application against theprevious owner before the Debt Recovery Tribunal. On 16 March 2007,the Recovery Officer of the Debt Recovery Tribunal, Guwahati issuedBan auction sale notice for the land in question. Clause 7 of the notice ofauction sale stipulated that the properties were being sold on “as is whereis” basis and subject to other conditions prescribed in the Second Scheduleof the Income Tax Act, 1961 and Rules made thereunder. The appellantwas the highest bidder and was declared as an auction-purchaser on 20February 2008. On 24 March 2008, a sale certificate was issued in favourCof the appellant and possession was handed over to the appellant byUCO Bank on 27 March 2008. The Recovery Officer confirmed theauction sale in favor of the appellant, who took over the possession ofthe property on 27 March 2008. On 21 January 2009, the appellant appliedfor a high-tension industries electricity connection, but ASEB denied itDdue to pending arrears of the previous owner.

310. Therefore, the appellant filed a writ petition before the GauhatiHigh Court seeking: (i) an electricity connection without having to paythe arrears of the previous owner; and (ii) challenging the vires ofRegulation No. 3.6.4 of the AERC Electricity Supply Code. On 2 JuneE2010, a Division Bench of the High Court delivered a judgment dismissingthe petition.

311. The appellant has drawn the attention of this Court to thefact that the respondent had filed a suit against the previous consumer,in which a decree was passed. The appellant submits that recovery ofFarrears of the previous owner could be effected in execution of thedecree. From the perusal of the facts, it is true that the respondent hadalready instituted a money suit against the previous consumer and obtaineda decree. However, the respondent has stated before the High Courtthat the execution could not be carried out successfully. In theseproceedings, we are not concerned with the validity of the executionGproceedings initiated by the respondent against the previous owner.

312. The respondent has submitted that before purchasing thepremises, the appellant was required to undergo due-diligence and verifythat there were no electricity dues in relation to the premises. Therespondent has also questioned the validity of the sale in favor of theHappellant on the ground that there was a subsisting money decree in

favour of the respondent and the premises were under Court attachment.The respondent also referred to a State Government order dated 29November 2004 directing Deputy Commissioners and Sub-divisionalOfficers to not issue sale/ transfer permission of land without clearanceof the electricity dues. On 26 June 2006, the electricity distributioncompanies also issued a public notice requiring new consumers to clearthe dues of the previous consumer. The relevant extract of the saidpublic notice is hereunder:

“It is observed that some electricity consumers having outstandingdues payable against energy consumption are trying to sale orlease out their premises (including land and building) withoutclearing the electricity dues.

Govt. of Assam has already prohibited such transfer of premisesand made it mandatory to obtain electricity dues clearancecertificate from the concerned officers before applying forpermission of transfer.

All prospective buyers or lessee are hereby requested to satisfythemselves regarding clearance of electricity dues before takingover the possession of such premises.

In the event of non discharge of liabilities of electricity dues bythe previous owner, the purchaser/ lessee will be liable to clearthe said dues before power supply provided to them in accordancewith provision of Terms and Condition regulation notified by AssamElectricity Regulatory Commission.”

313. Therefore, it has been contended by the respondent that theappellants were put to sufficient notice regarding the requirement ofclearing dues before purchasing the property. In the present proceedings,the validity of the auction sale of the premises to the appellant does notarise for consideration, as it is a matter to be decided in separateproceedings. We are only concerned with whether the appellant, being anew owner of the premises, is liable to clear the dues of the previousconsumer before getting a supply of electricity.

314. By the impugned judgment dated 2 June 2010, the High Courthas upheld the validity of Regulation 3.6.4 of the AERC Electricity SupplyCode. It held that the stipulation contained in the said regulation isreasonable and within the ambit of the powers conferred by Section 50of the 2003 Act. We are of the opinion that the impugned clause is A

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Areasonable and consistent with the provisions of the 2003 Act.Accordingly, the appellant was obligated to check the bills for previousmonths and ensure that all the outstanding amounts are duly paid up anddischarged. Therefore, we find no merit in the challenge to the decisionof the High Court. However, to balance the interests of parties, wemake it clear that if any arrears of electricity are received from theBprevious owner, the amount shall be adjusted with the power bills of theappellant.

V. West Bengal

315. In West Bengal, the WB Electricity Supply Codehave beenCenacted in 2012 under the 2003 Act. The relevant regulations - Clause3.4.2, 4.6.1 and 4.6.4 - are set out below:

“3.4.2. The licensee shall be eligible to recover from a new andsubsequent consumer(s) the dues of the previous and defaultingconsumers in respect of the same premises only if a nexusDbetween the previous and the defaulting consumer(s) and the newconsumer(s) in respect of the same premises is proved. The onusof proving a nexus, if claimed by a licensee, shall lie on thelicensee.”

4.6.1. If the power supply to any consumer remains disconnectedEcontinuously for a period of one hundred and eighty days wherethe disconnection has been effected in compliance with any ofthe provisions of the Act or Regulations, the agreement of thelicensee with the consumer for supply of electricity shall be deemedto have been terminated with consequential effect on expiry ofthe said period of one hundred and eighty days. This will be withoutFprejudice to such other action or the claim that may arise from thedisconnection of supply or related issues therefor. On terminationof agreement, the licensee shall have the right to remove theservice line and other installations through which electricity issupplied to the consumer.”

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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 previousowner from the new and subsequent owner if there is a nexus betweenthe previous owner and the new consumer. Regulation 4.6.1 providesthat there shall be a deemed termination of agreement if the powersupply to any consumer remains disconnected for a continuous period of180 days. Regulation 4.6.4 overrides other provisions of the WB ElectricitySupply Code as it contains a non-obstante clause. Under Regulation4.6.4, a new consumer can be given a service connection only if theoutstanding dues against the same premises is cleared along with latepayment surcharge.

Item 101.18: Damodar Valley Corporation v. Sree RamdootRollers Private; SLP (C) No. 15723 of 2020

317. On 30 June 2012, the appellant electricity utility, DamodarValley Corporation, and Capricorn Ispat Udyog Private Limited, theprevious owner, entered into an agreement for supply of electrical energy.The bank guarantees furnished by the respondent expired on 4 June2014. The electricity connection to the previous owner was disconnectedon 21 September 2016 for default in payment of electricity dues to thesuit premises. On 14 August 2018, the State Bank of India advertisedthe property for e-auction under SARFAESI Act for default of dues on“as is where is basis”. The relevant terms and condition of e-auctionsale are as follows:

1. “E-auction is being held on AS IS WHERE IS and will beconducted online. ***

2. [To] the best of knowledge and information of the authorisedofficer there is no encumbrance of the properties. However,the intending bidders should make their own independentenquiries regarding the encumbrance title of properties puton auction and claim rights dies affecting the properties[prior] to submitting their bid. The E-auction advertisementdoes not constitute and will not be deemed to constituteany commitment or any representation of the bank. Theproperties is being sold with all the existing and futureencumbrance whether known or unknown to the bank andauthorised officer secured creditor shall not be responsiblein any way for the third party claims, rights, dues.***

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A7. It shall be the responsibility of the interested bidders toinspect and satisfy themselves about the properties beforesubmission of the bid.”

Clause 1 of the terms and conditions provided that the e-auctionwas being held on an “as is where is basis”. Clause 2 provided that theBproperty was being sold with all present and future encumbrances,whether known or unknown to the bank. Clause 7 provided that it wasthe responsibility of interested bidders to inspect and satisfy themselvesabout the properties before submission of the bid.

318. On 31 August 2018, the assets of the previous owner wereCtaken over by Magnum Tradelink Private Limited through an e-auction.The registration of property was done in the name of Shree RamdootRollers Private Limited, who is the respondent herein. On 04 October2018, the respondent filed an application seeking a new connection fromthe appellant. When the appellant refused, the respondent filed a writpetition before the High Court of Calcutta. On 17 April 2019, the SingleDJudge allowed the petition and ordered the appellant to process therespondent’s application within a period of three weeks. However, by itsletter dated 10 May 2019 the appellant refused to grant a connection inview of the electricity dues of Rs. 22.05 crores payable by the erstwhileowner in respect of premises. The respondent again approached theEHigh Court seeking a direction for the supply of electricity to theirpremises. On 19 June 2019, the Single Judge of the High Court allowedthe Writ Petition and directed the grant of an electricity connection tothe respondent. The Division Bench by a judgment dated 24 April 2020dismissed the writ appeal and upheld the decision of the Single Judge.

F319. In the impugned judgment dated 24 April 2020, the HighCourt’s interpretation largely focused on the phrase “any consumer”contained in Regulation 4.6.4. Under Regulation 4.6.4, a new consumercan be given service connection only if the outstanding dues against thesame premises are cleared along with a late payment surcharge. TheCourt referred to Isha Marbles (supra) to hold that the definition ofG“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 distributionlicensee establishes the fact that the premises concerned were connectedto the works of the distribution licensee; (ii) for the purpose of receivingHelectricity; and (iii) in such a manner that the supply of electricity can beresumed by ‘simply putting on a switch’.

320. The appellant has drawn attention to the fact that the supplyof electricity to the premises was disconnected on 21 September 2016.Therefore, the appellant submits that on the date of the sale of thepremises to the respondent, that is 31 August 2018, the supply of electricitywas disconnected for more than 180 days. Hence, it is the appellant’scontention that Regulation 4.6.1 is applicable and there is a deemedtermination of agreement. It has been further contended that Regulation4.6.4 has an overriding effect as it begins with a non-obstante clause.The respondent, on the contrary, has argued that Regulation 3.4.2 wouldbe applicable in the present case. It has been argued that Regulation4.6.4, despite having a non-obstante clause, has no bearing on theoperation of Regulation 3.4.2.

321. The supply of electricity was disconnected on 21 September2016. The supply stood disconnected for more than 180 days on 14August 2018 which was the date of auction notice and on 31 August2018 which was the date on which the premises were sold to therespondent. In terms of Regulation 4.6.1, there was deemed terminationof the agreement since the supply was disconnected for more than 180days. However, Regulation 4.6.4 requires “any consumer” to clear theoutstanding dues of the premises to be eligible for grant of serviceconnection. In the present case, the respondent cannot be considered a“consumer” unless an agreement was entered into with the distributionlicensee. This has also been reiterated in Isha Marbles (supra) in thefollowing words:

“62. No doubt, from the tabulated statement above set out, theauction-purchasers came to purchase the property afterdisconnection but they cannot be “consumer or occupier” withinthe meaning of the above provisions till a contract is entered into.”

An auction-purchaser, such as the respondent, cannot be termedas a “consumer” unless an agreement was entered into with thedistribution licensee. Therefore, we find no fault with the reasoning ofthe High Court.

322. Consequently, we uphold the impugned judgment of the HighCourt. The appeal shall stand dismissed.

H. Equity and Fairness

323. This Court is entrusted with the constitutional authority underArticle 142 of the Constitution to render complete justice. Where AB

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Aappropriate, this Court has to take recourse to its constitutional powerunder 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 paymentof arrears of the electricity dues of the previous owner has been in flux.BPetitions challenging the decisions of different Electric Utilities werefiled as early as 2001. The orders of the High Courts had the effect ofeither directing the Electric Utilities to grant electricity connections toauction purchasers without insisting on payment of outstanding electricitydues, or directing the auction purchasers to comply with the conditionsof supply or Electricity Supply Code, as the case may be. In some of theCnineteen cases, this Court while granting leave passed interim orders.The legal issue of whether electricity dues constitute a charge on theproperty so far as the transferor and the transferee are concerned wasreferred to a larger bench by an order of this Court way back in 2006.The litigation in this batch of cases remained pending.

D

325. In the specific cases before us, where this Court has upheldthe validity of the subordinate regulations (Conditions of Supply orElectricity Supply Code, as the case may be) and has held the relevantregulation to be applicable to the factual matrix, the auction purchaserswould be liable to pay the outstanding dues of the previous consumer.EOn behalf of the Electric Utilities, claims have been made for interest onsuch arrears.

326. This Court must bear in mind the element of public interest inbalancing the equities, particularly, at this stage where more than twodecades have passed in litigation since the issue first arose. The 2003FAct was enacted to promote the development of the electricity industry,while protecting the interest of consumers. It must be kept in mind thatmany of the auction-purchasers are commercial entities who hadpurchased the premises for commercial ventures. Electricity being anecessity for operation of any commercial venture, denial of electricityconnections to the auction-purchasers for an indefinite period of timeGresulted in loss of business. The delay in the court proceedings shouldnot be to the further detriment of the litigants.

327. Taking all facts and circumstances into consideration, includingthe lapse of more than two decades since the appeals were filed beforethis Court and the equities arising in favour of one party or the other, weH

direct the Electric Utilities to waive the outstanding interest accrued onthe principal dues from the date of application for supply of electricity bythe auction purchasers.

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I.Conclusions

328. The conclusions are summarised below:

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a.The duty to supply electricity under Section 43 of the 2003Act is not absolute, and is subject to the such charges andcompliances stipulated by the Electric Utilities as part ofthe application for supply of electricity; b.The duty to supply electricity under Section 43 is withCrespect to the owner or occupier of the premises. The2003 Act contemplates a synergy between the consumerand premises. Under Section 43, when electricity issupplied, the owner or occupier becomes a consumer onlywith respect to those particular premises for whichelectricity is sought and provided by the Electric Utilities;D

c.For an application to be considered as a ‘reconnection’,the applicant has to seek supply of electricity with respectto the same premises for which electricity was alreadyprovided. Even if the consumer is the same, but thepremises are different, it will be considered as a freshEconnection and not a reconnection; d.A condition of supply enacted under Section 49 of the1948 Act requiring the new owner of the premises to clearthe electricity arrears of the previous owner as aprecondition to availing electricity supply will have aFstatutory character; e.The scope of the regulatory powers of the StateCommission under Section 50 of the 2003 Act is wideenough to stipulate conditions for recovery of electricityarrears of previous owners from new or subsequentGowners; f.The Electricity Supply Code providing for recoupment ofelectricity dues of a previous consumer from a new ownerhave a reasonable nexus with the objects of the 2003 Act; H

Ag.The rule making power contained under Section 181 readwith Section 50 of the 2003 Act is wide enough to enablethe regulatory commission to provide for a statutory chargein the absence of a provision in the plenary statuteproviding for creation of such a charge; Bh.The power to initiate recovery proceedings by filing a suitagainst the defaulting consumer is independent of thepower to disconnect electrical supply as a means ofrecovery under Section 56 of the 2003 Act;

i.The implication of the expression “as is where is” basis isthat every intending bidder isput on notice that the sellerdoes not undertake responsibility in respect of the propertyoffered for sale with regard to any liability for the paymentof dues, like service charges, electricity dues for powerconnection, and taxes of the local authorities; and C

j.In the exercise of the jurisdiction under Article 142 of theConstitution, the Electric Utilities have been directed inthe facts of cases before us to waive the outstandinginterest accrued on the principal dues from the date ofapplication for supply of electricity by the auctionpurchasers.

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329. Pending applications, if any, shall stand disposed.

Bibhuti Bhushan Bose(Assisted by : Shubhanshu Das, LCRA)

Appeals disposed of.

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