REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
1
2 CIVIL APPEAL NO. 7899 OF 2012
3 (Arising out of SLP (C) No. 35573 of 2010
Special Officer, Commerce,
North Eastern Electricity
Company of Orissa (NESCO) & Anr. .... Appellant
(s)
Versus
M/s Raghunath Paper Mills Private
Limited & Anr. .... Respondent (s)
J U D G M E N T
P. Sathasivam, J.
1) Leave granted.
2) This appeal is directed against the final judgment and order dated
04.11.2010 passed by the High Court of Orissa at Cuttack in Writ Appeal No.
237 of 2010 whereby the Division Bench while affirming the order dated
05.08.2010 passed by the learned single Judge dismissed the appeal filed by
the appellants herein.
3) Brief Facts:
a) In the year 2007, pursuant to the order of the Company Judge, High
Court of Orissa, in Companies Act Case No. 25 of 2005, the Official
Liquidator, made an advertisement for sale of movable and immovable assets
and properties of the Factory Unit of M/s Konark Paper & Industries Limited
which was in liquidation on “as is where is and whatever there is” basis.
b) The sale was confirmed in favour of respondent No.1 – M/s Raghunath
Paper Mills Pvt. Ltd., being the highest bidder, and the possession of the
Unit was handed over on 28.03.2008. Since there was no power supply,
respondent No.1 made an application to the Chief Executive Officer, North
Eastern Electricity Supply Company of Orissa Limited (in short “ the
NESCO”) for restoration of the same. Respondent No. 1 also executed an
agreement dated 27.03.2009 with the NESCO for supply of construction power
in the Unit. There being no reply from the side of the NESCO, respondent
No.1, vide letter dated 26.08.2009, again requested for permanent supply of
power. By letter dated 21.05.2010, the NESCO directed respondent No.1 to
pay the arrears of electricity dues amounting to Rs. 79,02,262/-
outstanding against the premises in question.
c) Being aggrieved, respondent No.1 filed a petition being Writ Petition
(C) No. 9807 of 2010 before the High Court of Orissa praying for quashing
of the demand letter dated 21.05.2010 issued by the NESCO with a direction
to provide permanent supply of power.
d) Learned single Judge, by order dated 05.08.2010, after considering
various provisions of law governing the issue in question allowed the
petition and directed the NESCO to provide electricity to the Unit of
respondent No.1 within a period of 7 days from the date of his judgment.
e) Dissatisfied with the decision of the learned single Judge, the
appellants filed Writ Appeal No. 237 of 2010 before the Division Bench of
the High Court. The Division Bench, by order dated 04.11.2010, finding no
illegality in the order of the learned single Judge, dismissed the appeal
filed by the appellants.
f) Aggrieved by the said decision, the appellants have preferred this
appeal by way of special leave petition before this Court.
4) Heard Mr. Suresh Chandra Tripathy, learned counsel for the appellants
and Mr. P.P. Rao, learned senior counsel for respondent No.1.
5) The only point for consideration in this appeal is whether a Company,
which purchased the property of another Company under liquidation through
auction, is liable to pay the arrears of electricity dues outstanding
against the erstwhile Company.
6) It is not in dispute that respondent No. 1 was the highest bidder and
the sale was confirmed in its favour and possession of the Unit was handed
over on 28.03.2008 itself. It is further seen that after getting the
possession and after finding that there is no supply power in the premises
in question, respondent No. 1 made an application for availing the same to
the Chief Executive Officer, NESCO. Since there was no reply on their
part, respondent No. 1, by letter dated 26.08.2009, again requested for
permanent supply of electricity, for which, by letter dated 21.05.2010, the
NESCO directed respondent No. 1 to pay the arrears of electricity dues
amounting to Rs. 79,02,262/- outstanding against the premises which was
purchased in auction through Official Liquidator. Being aggrieved by the
same, respondent No. 1 challenged the said demand order before the High
Court. Learned single Judge, with reference to various guidelines/rules
applicable, quashed the demand order dated 21.05.2010 and the Division
Bench also affirmed the same which necessitated filing of the above appeal.
7) At the foremost, it is useful to refer the original order of demand
dated 21.05.2010 issued by the NESCO which reads as under:-
“NORTH EASTERN ELECTRICITY SUPPLY COMPANY OF ORISSA LTD.
Corporate Office, Januganj, Balasore-756 019, Orissa
Regd. Office: Plot No.N-1/22, Nayapalli,
Bhubaneswar-751 012, Orissa
No. FC/CO/238 12595(3) Dated: 21.05.2010
To By Regd. Post
The Director
M/s Raghunath Paper Mill (P) Ltd.
At-Jharia, Rupsa
Basta, Dist. Balasore
Sub:- Payment of arrear electricity dues amounting to Rs. 79,02,262/-
against the premises.
Ref: Your Letter No. Nil dated 13.01.2010
Sir,
With reference to the subject cited above, you are requested to pay
the arrear electricity dues amounting to Rs. 79,02,262/- outstanding
against the premises to which you intend to avail power. On clearance of
arrear electricity dues, necessary permission letter for providing power
supply shall be issued in your favour.
Please arrange to pay the above arrear immediately for necessary
action regarding power connection to your unit.
Yours faithfully
Sd/-
Special Officer (Commerce)
CC to EE, BTED, Basta for information and necessary action.
CC to SEEC, Balasore for information and necessary action”
8) It is not in dispute that respondent No. 1 has purchased the said
unit from the Official Liquidator in pursuance of the advertisement for
sale and the sale was confirmed on payment of the sale consideration and
possession of the unit was handed over on 28.03.2008. It is also relevant
to mention here that the Official Liquidator, pursuant to the order of the
Company Judge, High Court of Orissa in Companies Act Case No. 25 of 2005,
made an advertisement for the sale of movable and immovable assets and
properties of the Factory Unit of M/s Konark Paper & Industries Ltd.
covering the leasehold land, buildings/sheds, plant and machinery,
furniture and fixtures etc., which was in liquidation on “as is where is”
and “whatever there is” basis. Inasmuch as respondent No. 1 satisfied all
the conditions, made full payment of sale consideration, the possession of
the Unit was handed over by the Official Liquidator to respondent No. 1 on
28.03.2008.
9) After taking possession of the Unit on “as is where is” and “whatever
there is” basis, in order to establish a paper unit in the premises,
respondent No. 1 made an application on 10.12.2008 to the NESCO for
availing power of 100 KW at 33 KV. It is not in dispute that during the
construction period of Basta feeder line to the Unit, respondent No. 1
executed an agreement with the NESCO dated 27.03.2009 for availing the
required load and deposited security amount of Rs. 1,65,156/, however, even
after completion of the work, the NESCO did not provide power supply to the
Unit on the ground of arrears of electricity dues amounting to Rs.
79,02,262/- against the premises. According to the appellant-NESCO,
without clearance of the outstanding dues for the electricity charges by
the previous owner, respondent No. 1 is not entitled to power supply. On
the other hand, it is the stand of respondent No. 1 that inasmuch as the
application is not for seeking transfer of power from a previous owner and
the Unit was purchased on “as is where is” and “whatever there is” basis
after fulfilling all the formalities/conditions and in the absence of any
privity of contract between respondent No. 1 and the NESCO, the demand for
clearance of arrears of electricity dues is not justified.
10) Now, let us consider the relevant provisions of the Orissa
Electricity Regulatory Commission Distribution (Conditions of Supply),
Code, 2004 (in short ‘the Electricity Supply Code’). Sub-clause 10 of
Regulation 13 of the Electricity Supply Code is as follows:-
“(10) Transfer of service connection:-
a) Subject to the Regulation 8, the transfer of service connection
shall be effected within 15 days from the date of receipt of
complete application.
b) The service connection from the name of a person to the name of
another consumer shall not be transferred unless the arrear charges
pending against the previous occupier are cleared.
Provided that this shall not be applicable when the ownership of the
premises is transferred under the provisions of the State Financial
Corporation Act.”
11) It is the case of the appellant that as per the above provision,
viz., sub-clause 10(b) of Regulation 13 of the Electricity Supply Code,
unless respondent No. 1 pays the arrears of electricity dues against the
erstwhile company, electricity supply cannot be restored to its Unit. We
are of the view that the reading of the above sub-clause makes it clear
that the said provision is not applicable to respondent No. 1. We have
already quoted that respondent No. 1, after purchase of the said Unit in an
auction sale conducted by the Official Liquidator on “as is where is” and
“whatever there is” basis has applied for a fresh service connection for
supply of energy (emphasis supplied). In other words, respondent No. 1 has
not applied for transfer of service connection from the name of the
erstwhile company to its name. To make it clear, respondent No. 1 applied
for a fresh connection for its Unit after purchasing the same from the
Official Liquidator. It is also not in dispute that the arrears of
electricity dues were levied against the premises in question, on the other
hand, it was levied against the erstwhile company.
12) From the above factual details in the case on hand and in the light
of sub-clause 10(b) of Regulation 13 of the Electricity Supply Code, we
hold that the said clause applies to a request for transfer of service
connection but not to a fresh connection. The interpretation of this
clause by learned single Judge as well as by the Division Bench was correct
being reasonable, just and fair.
13) Similarly, Section 43 of the Electricity Act, 2003 speaks about
supply of electricity on request which is as under:-
“43. Duty to supply on request.- (1) Save as otherwise provided in
this Act, every distribution licensee, shall, on an application by the
owner or occupier of any premises, give supply of electricity to such
premises, within one month after receipt of the application requiring
such supply:
x x x
x x x
Explanation:--For the purposes of this sub-section, “application”
means the application complete in all respects in the appropriate
form, as required by the distribution licensee, along with documents
showing payment of necessary charges and other compliances:
x x x
x x x”
Section 43 of the Electricity Act, 2003 casts a duty on every distributing
licencee, in the case on hand, the appellant, to supply electricity on the
application made by the owner or occupier of any premises within 1 month
after receipt of the application. No doubt, it should be only after
fulfilling the conditions such as installation of machinery, deposit of
security etc.
14) We were also taken through the other regulations, viz., Regulation
Nos. 3 and 10 and various Forms which would show the words “other dues
including the security as may be payable” does not mean and were not meant
to convey that a new applicant for fresh connection shall pay arrears of
electricity dues or other dues for the same premises “payable by the
earlier consumer” as stated in Regulation 10.
15) As rightly pointed out by Mr. P.P. Rao, learned senior counsel for
respondent No. 1, the absence of these words in para 3 conclusively shows
that the term “other dues” refers to security and other charges payable for
a new connection in terms of the conditions of supply but not the arrears
of electricity dues payable by earlier consumer who was in default.
16) In Isha Marbles vs. Bihar State Electricity Board and Another (1995)
2 SCC 648, a three-Judge Bench of this Court had an occasion to consider a
similar question, viz., whether the auction-purchaser is liable to meet the
liability of old consumer of electricity to the premises which is purchased
by him in the auction sale from Bihar State Financial Corporation under
Section 29(1) of the State Financial Corporations Act, 1951. After
considering relevant provisions of the Electricity Act and the Regulations,
this Court held as under:-
“56. From the above it is clear that the High Court has chosen to
construe Section 24 of the Electricity Act correctly. There is no
charge over the property. Where that premises comes to be owned or
occupied by the auction-purchaser, when such purchaser seeks supply of
electric energy he cannot be called upon to clear the past arrears as
a condition precedent to supply. What matters is the contract entered
into by the erstwhile consumer with the Board. The Board cannot seek
the enforcement of contractual liability against the third party. Of
course, the bona fides of the sale may not be relevant.
61. …..It is impossible to impose on the purchasers a liability which
was not incurred by them.
62. No doubt, from the tabulated statement above set out, the auction-
purchasers came to purchase the property after disconnection but they
cannot be “consumer or occupier” within the meaning of the above
provisions till a contract is entered into.
63. We are clearly of the opinion that there is great reason and
justice in holding as above. 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…..”
17) In Paschimanchal Vidyut Vitran Nigam Ltd. & Ors. vs. DVS Steels &
Alloys Pvt. Ltd. & Ors. AIR 2009 SC 647= (2009) 1 SCC 210, the question
whether the supplier can recover electricity dues from the purchaser of a
sub-divided plot was considered by this Court. The following conclusion is
relevant:-
“9. The supply of electricity by a distributor to a consumer is “sale
of goods”. The distributor as the supplier, and the owner/occupier of
a premises with whom it enters into a contract for supply of
electricity are the parties to the contract. 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. The supplier can therefore
neither file a suit nor initiate revenue recovery proceedings against
a purchaser of a premises for the outstanding electricity dues of the
vendor of the premises in the absence of any contract to the contrary.
Learned counsel for the appellant heavily relied on para 10 of the very
same judgment which reads as under:-
10. But the above legal position is not of any practical help to a
purchaser of 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 fulfilment 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.”
If we apply the above principles as pointed out by Mr. Tripathy, learned
counsel for the appellant, undoubtedly, respondent No. 1-purchaser of the
premises is liable to pay entire arrears or outstanding of power dues.
However, as pointed out by Mr. P.P. Rao, learned senior counsel, respondent
No. 1 is not a party to the contract with the supplier, i.e., the NESCO.
We have already quoted the relevant clauses, particularly, sub-Clause 10(b)
of Regulation 13 of the Electricity Supply Code, which is not applicable to
respondent No. 1 herein. In other words, as mentioned in the earlier
paras, in the case on hand, respondent No. 1 has not applied for transfer
of service connection from the name of the erstwhile company to its name
but applied for a fresh connection to its Unit after purchasing the same
from the Official Liquidator.
18) It is also relevant to refer a decision of a three-Judge Bench of
this Court reported in Ahmedabad Electricity Co. Ltd. vs. Gujarat Inns Pvt.
Ltd. and Others, (2004) 3 SCC 587. This Court, after finding that the
cases are of fresh connection, in para 3, held as under:-
“3…..We are clearly of the opinion that in case of a fresh connection
though the premises are the same, the auction-purchasers cannot be
held liable to clear the arrears incurred by the previous owners in
respect of power supply to the premises in the absence of there being
a specific statutory provision in that regard…..”
19) In a recent decision, i.e. in Haryana State Electricity Board vs.
Hanuman Rice Mills, Dhanauri and Others, (2010) 9 SCC 145, this Court,
after referring to all the earlier decisions including Isha Marbles (supra)
and Paschimanchal Vidyut Vitran Nigam Ltd. (supra) etc., summarized the
position in the following manner which is as under:-
“12. ….(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, authorise the supplier of
electricity to demand from the purchaser of a property claiming
reconnection 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.”
20) In the light of the above discussion, specific factual details
regarding the position of respondent No. 1 which purchased the said
premises under court auction sale from the Official Liquidator on “as is
where is” and “whatever there is” basis and in the light of the regulations
quoted above, particularly, sub-clause 10(b) of Regulation 13, we hold that
the request was not for the transfer from the previous owner to the
purchaser, on the other hand, it was a request for a fresh connection for
the Unit of respondent No. 1 herein. We are in entire agreement with the
decision arrived at by learned single Judge as affirmed by the Division
Bench of the High Court.
21) In view of the above, we find no merit in the appeal, consequently,
the same is dismissed.
...…………….…………………………J.
(P. SATHASIVAM)
.…....…………………………………J.
(RANJAN GOGOI)
NEW DELHI;
NOVEMBER 09, 2012.
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