IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6817 OF 2010
[Arising out of SLP (C) No.16396/2006]
Haryana State Electricity Board ... Appellant
Vs.
M/s Hanuman Rice Mills & Ors. ... Respondents
JUDGMENT
R. V. RAVEENDRAN, J.
Leave granted. Heard.
2. The second respondent - Haryana Financial Corporation auctioned the
rice mill premises of one of its borrowers - Durga Rice Mills, to recover its
dues. The first respondent purchased the said premises at the auction on
14.12.1990 for a consideration of Rs. 15,25,000/- and paid the entire sale
consideration to the second respondent. When the first respondent purchased
the mill premises, electricity supply to the premises had been disconnected.
After taking possession of the premises, the first respondent applied for and
obtained electricity connection in its own name in the year 1991. Four years
later, the appellant served upon the first respondent, a notice dated 16.1.1995
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demanding payment of Rs.2,39,251/- towards arrears of electricity charges
due by the previous owner Durga Rice Mills.
3. The first respondent filed a civil suit for permanent injunction and the
said suit ended in dismissal on 5.12.1996 which was affirmed by the appellate
court on 27.2.1998. Thereafter the appellant served a notice dated 2.3.1998
informing the first respondent that the electricity supply will be disconnected
if the said arrears due by Durga Rice Mills were not paid. This was followed
by disconnection of electricity supply on 9.3.1998. First respondent filed a suit
challenging the said demand and disconnection of electricity supply. The said
suit was dismissed by the trial court. While dismissing the suit, the trial court
held that the claim of the appellant was barred by limitation. Feeling
aggrieved by the dismissal, the first respondent filed an appeal; and feeling
aggrieved by the finding that appellant's claim was barred by limitation, the
appellant filed an appeal. The first appellate court decided the appeals by a
common judgment dated 30.10.2003. It dismissed the appeal filed by the
appellant and allowed the appeal filed by the first respondent. It held that first
respondent could not be made liable for the dues of the previous owner, as
there was no provision in the terms and conditions of sale that the electricity
dues of the previous owner should be paid by the first respondent as auction
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purchaser. The judgment of the first appellate court was challenged by the
appellant by filing a second appeal. The Punjab & Haryana High Court by its
judgment dated 8.8.2005 dismissed the said appeal holding that the liability of
a consumer to pay charges for consumption of electricity, cannot be fastened
on a subsequent auction purchaser of the property, in view of the decision of
this court in Isha Marbles vs. Bihar State Electricity Board - (1995) 2
SCC 648.
4. Feeling aggrieved the appellant filed this appeal raising two
contentions:
(i) The dismissal of the first suit filed by the first respondent for permanent
injunction having attained finality, the second suit filed by the first respondent
for a declaration that demand and disconnection were invalid, was barred by
the principles of res judicata.
(ii) The decision in Isha Marbles relied on by the High Court was inapplicable
to the facts of the case. The decision of this court in Dakshin Haryana Bijli
Vitran Nigam Ltd. v. Paramount Polymers (P) Ltd. - (2006) 13 SCC 101,
entitles the appellant to claim and receive the electricity dues of the previous
owner from the new owner/auction purchaser.
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Re: Point No. (i)
5. The first suit by the first respondent was for a permanent injunction to
restrain the appellant Board from enforcing the demand notice dated
16.1.1995 in respect of the electricity consumption charges incurred by the
previous owner. By the second suit, the first respondent sought a declaration
that the notice dated 9.3.1998 threatening disconnection of electricity supply
for non-payment of the arrears of the previous owner and the consequential
disconnection dated 9.3.1998, were invalid and for consequential relief. The
matter that was directly and substantially in issue in the second suit was
completely different from the matter that was directly and substantially in
issue in the first suit. The reliefs claimed were also different, as the first suit
was for a permanent injunction and the second suit was for a declaration and
consequential relief. Therefore the second suit was not barred by res judicata.
Re : Point No. (ii)
6. The High Court held that the demand was untenable in view of the
decision in Isha Marbles. In Isha Marbles this court held that in the absence
of a charge over the property in respect of the previous electricity dues, and in
the absence of any statutory rules authorizing a demand for the dues of the
previous occupant, an auction purchaser seeking supply of electrical energy
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by way of a fresh connection, cannot be called upon to clear the pre-sale
arrears, as a condition precedent for granting fresh connection. This court
further held that an Electricity Board could not seek the enforcement of the
contractual liability of the previous owner/occupier against a purchaser, who
was a third party in so far as the contract between the Electricity Board and
the previous occupant and that an auction purchaser who purchases the
property after disconnection of the electricity supply, could not be considered
as a `consumer' within the meaning of the Electricity Act, 1910 or Electricity
(Supply) Act, 1948, even though he seeks reconnection in respect of the same
premises. This court observed:
"Electricity is public property. Law, in its majesty, benignly protects
public property and behoves everyone to respect public property. Hence,
the courts must be zealous in this regard. But, the law, as it stands, is
inadequate to enforce the liability of the previous contracting party
against the auction purchaser who is a third party and is in no way
connected with the previous owner/occupier. It may not be correct to state,
if we hold as we have done above, it would permit dishonest consumers
transferring their units from one hand to another, from time to time,
infinitum without the payment of the dues to the extent of lakhs and lakhs
of rupees and each one of them can easily say that he is not liable for the
liability of the predecessor in interest. No doubt, dishonest consumers
cannot be allowed to play truant with the public property but inadequacy
of the law can hardly be a substitute for overzealousness."
(emphasis supplied)
7. The appellant relies on the subsequent decision of this court in
Paramount Polymers (supra) to distinguish the decision in Isha Marbles. In
Paramount Polymers (supra), the terms and conditions of supply contained a
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provision (clause 21A) providing that reconnection or new connection shall
not be given to any premises where there are arrears on any account, unless
the arrears are cleared. In view of the said express provision, this Court
distinguished Isha Marbles on the following reasoning:
"This Court in Hyderabad Vanaspati Ltd. v. A.P. SEB [1998] 2 SCR 620
has held that the Terms and Conditions for Supply of Electricity notified
by the Electricity Board under Section 49 of the Electricity (Supply) Act
are statutory and the fact that an individual agreement is entered into by
the Board with each consumer does not make the terms and conditions for
supply contractual. This Court has also held that though the Electricity
Board is not a commercial entity, it is entitled to regulate its tariff in such
a way that a reasonable profit is left with it so as to enable it to undertake
the activities necessary. If in that process in respect of recovery of dues in
respect of a premises to which supply had been made, a condition is
inserted for its recovery from a transferee of the undertaking, it cannot ex
facie be said to be unauthorized or unreasonable. Of course, still a court
may be able to strike it down as being violative of the fundamental rights
enshrined in the Constitution of India. But that is a different matter. In this
case, the High Court has not undertaken that exercise.
The position obtaining in Isha Marbles (supra) was akin to the position
that was available in the case on hand in view of the Haryana Government
Electrical Undertakings (Dues Recovery) Act, 1970. There was no
insertion of a clause like Clause 21A as in the present case, in the Terms
and Conditions of Supply involved in that case. The decision proceeded on
the basis that the contract for supply was only with the previous consumer
and the obligation or liability was enforceable only against that consumer
and since there was no contractual relationship with the subsequent
purchaser and he was not a consumer within the meaning of the Electricity
Act, the dues of the previous consumer could not be recovered from the
purchaser. This Court had no occasion to consider the effect of clause like
Clause 21A in the Terms and Conditions of Supply. We are therefore of
the view that the decision in Isha Marbles (supra) cannot be applied to
strike down the condition imposed and the first respondent has to make
out a case independent on the ratio of Isha Marbles (supra), though it can
rely on its ratio if it is helpful, for attacking the insertion of such a
condition for supply of electrical energy. This Court was essentially
dealing with the construction of Section 24 of the Electricity Act in
arriving at its conclusion. The question of correctness or otherwise of the
decision in Isha Marbles (supra) therefore does not arise in this case
especially in view of the fact that the High Court has not considered the
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question whether Clause 21A of the terms and conditions incorporated is
invalid for any reason."
The decision in Paramount Polymers was followed in Dakshin Haryana Bijli
Vitran Nigam Ltd. v. Excel Buildcon Pvt.Ltd. [2008 (10) SCC 720].
8. In Paschimanchal Vidyut Vitran Nigam Ltd. v. DVS Steels & Alloys
Pvt.Ltd. [2009 (1) SCC 210] this court held, while reiterating the principle that
the electricity dues did not constitute a charge on the premises, that where the
applicable rules requires such payment, the same will be binding on the
purchaser. This court held:
"A transferee of the premises or a subsequent occupant of a premises with
whom the supplier has no privity of contract cannot obviously be asked to
pay the dues of his predecessor in title or possession, as the amount
payable towards supply of electricity does not constitute a `charge' on the
premises. A purchaser of a premises, cannot be foisted with the electricity
dues of any previous occupant, merely because he happens to be the
current owner of the premises.
When the purchaser of a premises approaches the distributor seeking a
fresh electricity connection to its premises for supply of electricity, the
distributor can stipulate the terms subject to which it would supply
electricity. It can stipulate as one of the conditions for supply, that the
arrears due in regard to the supply of electricity made to the premises
when it was in the occupation of the previous owner/occupant, should be
cleared before the electricity supply is restored to the premises or a fresh
connection is provided to the premises. If any statutory rules govern the
conditions relating to sanction of a connection or supply of electricity, the
distributor can insist upon fulfillment of the requirements of such rules
and regulations. If the rules are silent, it can stipulate such terms and
conditions as it deems fit and proper, to regulate its transactions and
dealings. So long as such rules and regulations or the terms and conditions
are not arbitrary and unreasonable, courts will not interfere with them.
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A stipulation by the distributor that the dues in regard to the electricity
supplied to the premises should be cleared before electricity supply is
restored or a new connection is given to a premises, cannot be termed as
unreasonable or arbitrary. In the absence of such a stipulation, an
unscrupulous consumer may commit defaults with impunity, and when the
electricity supply is disconnected for non-payment, may sell away the
property and move on to another property, thereby making it difficult, if
not impossible for the distributor to recover the dues. Provisions similar to
Clause 4.3(g) and (h) of Electricity Supply Code are necessary to
safeguard the interests of the distributor."
9. The position therefore can may be summarized thus :
(i) Electricity arrears do not constitute a charge over the property.
Therefore in general law, a transferee of a premises cannot be made liable for
the dues of the previous owner/occupier.
(ii) Where the statutory rules or terms and conditions of supply which are
statutory in character, authorize the supplier of electricity, to demand from the
purchaser of a property claiming re-connection or fresh connection of
electricity, the arrears due by the previous owner/occupier in regard to supply
of electricity to such premises, the supplier can recover the arrears from a
purchaser.
Position in this case
10. The appellant did not plead in its defence that any statutory rule or
terms and conditions of supply, authorized it to demand the dues of previous
owner, from the first respondent. Though the appellant contended in the
written statement that the dues of Durga Rice Mills were transferred to the
account of the first respondent, the appellant did not specify the statutory
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provision which enabled it to make such a claim. The decision in Paramount
Polymers shows that such an enabling term was introduced in the terms and
conditions of electricity supply in Haryana, only in the year 2001. The
appellant did not demand the alleged arrears, when first respondent
approached the appellant for electricity connection in its own name for the
same premises and obtained it in the year 1991. More than three years
thereafter, a demand was made by the appellant for the first time on 16.1.1995
alleging that there were electricity dues by the previous owner. In these
circumstances the claim relating to the previous owner could not be enforced
against the first respondent.
11. On facts, it has to be held that the decision of the High Court does not
call for interference. The appeal is therefore dismissed. Parties to bear their
respective costs.
..............................J.
(R V Raveendran)
.............................J.
(H L Gokhale)
New Delhi;
August 20, 2010
