Supreme Court: The bench of Sanjay Kaul and KM Joseph, JJ. has held that electricity dues, where they are statutory in nature under the Electricity Act and as per the terms & conditions of supply, cannot be waived in view of the provisions of the Act itself more specifically Section 56 of the Electricity Act, 2003, in pari materia with Section 24 of the Electricity Act, 1910, and cannot partake the character of dues of purely contractual nature.

The Court was hearing the case of an auction-purchaser of a unit owned by SB Beverages Private Limited, which failed to pay its dues, resulting in the auction by Syndicate Bank (Secured Creditor) under SARFAESI Act, 2002. The Court was called upon to decide whether the liability towards previous electricity dues of the last owner could be mulled on to the respondent.

The Auction Notice showed that the unit was being sold on “as is where is, what is there is and without any recourse basis”, as per Rules 8 & 9 of the Security Interest (Enforcement) Rules, 2002. The total outstanding dues were much larger, but the reserve price fixed was lower, and the actual sale consideration of the successful auctioneer was Rs.9,18,65,000, which is approximately Rs.10 lakh more than the minimum reserve price. The holistic reading of all the clauses showed that the auction notice provided for a reserve price, with a bid being made about Rs.10 lakh over and above that, and certain nature of charges, lien, encumbrances, including electricity dues were clearly beyond the sale consideration paid.

Relying on the decision in Dakshin Haryana Bijli Vitran Nigam Ltd. v. Paramount Polymers (P) Ltd., (2006) 13 SCC 101, the bench noticed that in such a scenario if a transferee desires to enjoy the service connection, he shall pay the outstanding dues, if any, to the supplier of electricity and a re-connection or a new connection shall not be given to any premises where there are arrears on account of dues to the supplier unless they are so declared in advance.

The Court noticed that the facts of the present case are more explicit in character as there is a specific mention of the quantification of dues of various accounts including electricity dues. The respondent was, thus, clearly put to notice in this behalf. It, hence, said,

“as an auction purchaser bidding in an “as is where is, whatever there is and without recourse basis”, the respondent would have inspected the premises and made inquiries about the dues in all respects.”

It, further, noticed that 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 so long as such rules and regulations or the terms and conditions are not arbitrary and unreasonable. A condition for clearance of dues cannot per se be termed as unreasonable or arbitrary.

[Telangana State Southern Power Distribution Company Limited v. Srigdhaa Beverages, 2020 SCC OnLine SC 478, decided on 01.06.2020]

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