Electricity Dues Of Previous Occupier Can Be Recovered From Subsequent Occupier Of Premises : Supreme Court

In a significant judgment, the Supreme Court has held that electricity dues of the previous owner of a property can be recovered from the subsequent owner or an auction purchaser.

"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", the Court observed. It further held that "the electricity utilities can create a charge by framing subordinate legislation or statutory conditions of supply enabling recovery of electricity arrears from a subsequent transferee".

A bench comprising Chief Justice of India DY Chandrachud, Justice PS Narasimha and Justice Hima Kohli held so while answering a reference in a batch of cases, in which one of the issues was whether electricity dues of the prior owner would constitute a charge on the property.

The issue arose in the nineteen cases before the Court, in which the electric utilities refused to provide connection to new purchasers unless the dues of the previous owner were cleared. The premises were sold in auction on "as is where is basis" and the new owners who purchased the property in auction applied for electricity supply in the premises.

The issues in the reference were answered as follows.

Whether there is a universal service obligation under Section 43 of the Electricity Act 2003 is linked to premises where the connection is sought 

The Court held that the duty to supply electricity under Section 43 of the Act is not absolute and is subject to such charges and compliances stipulated by the electric utilities. The duty to supply electricity is with respect to the owner or occupier of the premises. The 2003 Act contemplates a synergy between the consumer and the premises. Under the Act, when Electricity is supplied, the owner or occupier becomes the consumer only with respect to those particular premises for which electricity supply is sought.

Whether a connection of electricity sought by the auction purchaser is a reconnection or a fresh connection.

The Court held that for an application to be held as reconnection, the applicant has to seek connection to the same premises for which electricity was already provided. Even if the consumer is the same and premises are different, it will be considered as a fresh connection and not a reconnection.

Whether the power to recover the arrears of the previous owner or occupier from an auction purchaser falls within the regime of the 2003 Act and whether such power can be provided through subordinate legislations enacted by the state legislations

The Court held that the scope of the Act is wide enough to stipulate conditions for recovery of electricity arrears of previous owners from new or subsequent owners. This has a reasonable nexus with the objects of the 2003 Act.

Whether the 2003 Act has express provisions for creation of charge or encumbrances on the premises.

The rule making power under Section 181 read with Section 50 of the Act is wide enough to enable the regulatory commissions to provide for a statutory charge in the absence of the provisions in the plenary statute.

Whether the statutory bar for recovery of electricity dues after two the limitation of two years provided in Section 56(2) of the 2003 Act will have an implication on the civil remedies of the electric utilities to recover such arrears

The Court held that the power to initiate recover proceeding by filing a suit against the defaulting consumer is independent of power to disconnect electricity supply as a means of the recovery.

What is the implication of auction sale of a premises on a "as is where is basis" with reference to electricity arrears.

The implication of the expression "as is where is basis" is that every intending bidder is put on notice that the seller does not take responsibilities in respect of the property offered for sale with regard to any liability for payment of dues like service charges, taxes of local authorities and other dues. 

Even while answering these issues in favour of the electric utilities, the Court invoked its special powers under Article 142 of the Constitution to waive the outstanding interest accrued on the principal dues from the date of application for supply of electricity by the auction purchaser. The Court passed this direction having regard to the fact that the cases were pending in the Supreme Court for nearly two decades.

Case : KC Ninan vs Kerala State Electricity Board and others C.A 2109-2110/2004

Citation : 2023 LiveLaw (SC) 453

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