In C.A.No 2109-2110 of 2004-SC- Distribution licensees can specify conditions of supply requiring subsequent owner or occupier to pay arrears of electricity dues of previous owner as pre-condition for grant of electricity connection: SC
Chief Justice D.Y.Chandrachud, Justices Hima Kohli & PS Narasimha [19-05-2023]

Read Judgment: K C Ninan v. Kerala State Electricity Board & Ors 

Tulip Kanth

Chandigarh, May 202, 2023: The Supreme Court has observed that the scope of the regulatory powers of the State Commission under Section 50 of the Electricity Act, 2003  is wide enough to stipulate conditions for recovery of electricity arrears of previous owners from new or subsequent owners.

“It is just and reasonable for distribution licensees to specify conditions of supply requiring the subsequent owner or occupier of premises to pay the arrears of electricity dues of the previous owner or occupier as a pre-condition for the grant of an electricity connection to protect their commercial interests, as well as the welfare of consumers of electricity”, the Larger Bench of Chief Justice D.Y.Chandrachud, Justice Hima Kohli & Justice Pamidighantam Sri Narasimha held.

The Top Court made such observations while considering nineteen cases following a similar pattern of facts. The supply of electricity was discontinued due to the failure of the previous owners to pay the dues for consumption of electricity on the premises. The previous owners had borrowed money or raised loans on the security of their premises. In some cases, the erstwhile owner went into liquidation. 

The premises were sold in auction sales generally on an as is where is basis. The new owners, who purchased the properties in auction, applied for new electricity connections for the premises to which electricity had been disconnected for failure to pay the dues. 

The Electric Utilities refused to provide an electricity connection unless the auction purchaser paid the dues of the previous owner. This refusal was derived from powers conferred under subordinate legislations, notifications, electricity Supply Codes or state regulations. The denial of electricity supply resulted in the institution of petitions under Article 226 before the High Court, leading to the judgments which were in appeal.

It was the contention of the Electric Utilities that the licensee has the right to insist on clearance of outstanding dues of the premises before giving a new connection.The right of a distribution licensee to deny electricity connection till outstanding dues are cleared is a continuing right and cannot be said to be extinguished. It can be exercised when the new owner or occupier approaches the licensee for connection.

The auction purchasers contended that no power has been endowed upon the State Commission to impose any other substantive condition in the form of providing a precondition of clearance of a previous owners dues on a subsequent owner who seeks a fresh connection. Any such condition would be in conflict with Section 43.

The Bench observed that the duty to supply electricity under Section 43 is not absolute, and is subject to the such charges and compliances stipulated by the distribution licensees as part of the application.

It was held that it is always the consumer who is supplied electricity and is held liable for defaulting on payment of dues or charges for supply of electricity. Perforce, the premises cannot be held to be a defaulter and no dues can be attached to the premises of the consumer.

On the issue whether electricity connection sought by a subsequent owner constitutes a reconnection or fresh connection, the Bench said, “...even if the premises may be the same to which electricity had already been supplied, it will be considered as a fresh connection in the situation where a different applicant, in that case an auction-purchaser, applies for supply of electricity.”

Referring to its judgment in Paschimanchal Vidyut Vitran Nigam Limited v. DVS Steels and Alloys Private Limited ,the Apex Court asserted, “Therefore, a condition enabling the distribution licensee to insist on the clearance of the arrears of electricity dues of the previous consumer before resuming electricity supply to the premises is valid and permissible under the scheme of the 2003 Act.”

Rejecting the submission of the auction purchasers that the recovery of outstanding electricity arrears by instituting a civil suit against the erstwhile consumer is barred on the ground of limitation under Section 56(2), the Bench held that while the bar of limitation under Section 56(2) restricts the remedy of disconnection under Section 56, the licensee is entitled to recover electricity arrears through civil remedies or in exercise of its statutory power under the conditions of supply.

The Bench then went through individual cases of different states and reaffirmed that the Electricity Supply Code providing for recoupment of electricity dues of a previous consumer from a new owner have a reasonable nexus with the objects of the 2003 Act. The Bench also added that the power to initiate recovery proceedings by filing a suit against the defaulting consumer is independent of the power to disconnect electrical supply as a means of recovery under Section 56.

As per the Top Court, the implication of the expression as is where is basis is that every intending bidder is put on notice that the seller does not undertake responsibility in respect of the property offered for sale with regard to any liability for the payment of dues, like service charges, electricity dues for power connection, and taxes of the local authorities.

Exercising its  jurisdiction under Article 142 of the Constitution, the Apex Court directed the Electric Utilities to waive the outstanding interest accrued on the principal dues from the date of application for supply of electricity by the auction purchasers.