Full Judgment Text
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PETITIONER:
M/S ISHA MARBLES
Vs.
RESPONDENT:
BIHAR STATE ELECTRICITY BOARD
DATE OF JUDGMENT03/02/1995
BENCH:
MOHAN, S. (J)
BENCH:
MOHAN, S. (J)
SAWANT, P.B.
PARIPOORNAN, K.S.(J)
CITATION:
1995 SCC (2) 648 JT 1995 (2) 626
1995 SCALE (1)721
ACT:
HEADNOTE:
JUDGMENT:
1. Leave granted.
2. All these appeals can be dealt with by a common
judgment since the issue that arises for our consideration
is one and the same, namely, whether the auction purchaser
is liable to meet the liability of old consumer or
electricity to the premises which is purchased by him in the
auction sale from Bihar State Financial Corporation
(hereinafter referred to as the Corporation) under Section
29 (1) of the Bihar State Financial Corporation Act, 1951
(hereinafter referred to as the Corporation Act)?
Civil Appeal No. 1418 of 1995 (Arising out of SLP No.
617 of 1992 (M/s.Isha Marbles:
3. In this case, the appellant is a purchaser of the
mortgated &wets of M/s. Patel Industries. Daltonganj in an
open auction sale held by the Corporation Act. The
appellant has paid a substantial sum towards the said
transaction and thereafter got the possession of the
industry on 31.1.1991. However, the electrical connection of
the premises was disconnected when the appellant got
possession of the said unit. The appellant was called upon
to the discharge all the liabilities of the previous
consumer. This was challenged in C.W.J.C. No. 1536 of 1991
before the High Court of Patna, Ranchi Bench, Ranchi. The
stand taken by the writ petitioner before the High Court
was, there is a transfer of a unit; it had not been supplied
with electricity; hence, it had no occasion to consume
electricity: and as transferee it is not liable for energy
consumed before such transfer. The writ petition was
dismissed by a Division Bench of the High Court holding that
the Bihar State Electricity Board (hereinafter referred to
as the ’Board’) would be entitled to take action in
accordance with law.
4. Aggrieved by the impugned judgment the appellant has
come in appeal before this Court.
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Civil Appeal No 1420 of 1995 (Arising out of SLP No. 16227
of 1992: Bihar State Electricity Board & Ors vs M/s Waxpol
Industries Ltd & Anr.
5. In this case, the facts arc slightly different. The
Bihar Financial Corporation sanctioned loan to Ws. Neo
Chemicals & Metal Products (P) Ltd.for setting up a unit for
manufactured of Graphite Beneficiation. The said unit
occupied Plot Nos. 1818 and 1820 at P.O. village Boot,
District Ranchi, Bihar. For non-payment of electricity
bills the electricity was disconnected. They were
outstanding to the tune of Rs.2,35,924.78/- against such
electricity consumption charges. The Corporation had
advanced a sum of Rs. 3,40,000 to M/s Neo Chemicals. To
secure this loan, the properties of the company had en
hypotecated/mortgaged. In order to
630
realise this sum the properties were sought to be sold under
Section 29 of the Corporation Act. The sale was through an
advertisment. The Waxpol Industries, the respondent, filed
its tender. That was the highest. Therefore, the
properties were sold in favour of the respondent for a con-
sideration of Rs.2,97,578.27/-.
6. Waxpol Industries applied for electricity connection to
the Board. After the purchase, in that application, Column
No. 6 required Waxpol Industries to state whether it would
undertake to clear the previous dues. As against this, it
was stated "does not apply". Terefore, on 3.1.86, the Board
informed waxpol Industries that it was unable to restore
electricity as its dues had not been paid either by the con-
sumer or by the subsequent occupant of the said premises.
7. Aggrieved by this, the respondent herein preferred
C.W.J.C. No. 25 of 1980. By the impugned judgment, the
writ petition was allowed on the ground that the present
occupants arc free from any encumberance or liability
towards the payment of outstanding electricity dues: Neo
Chemicals and waxpol Industries are two distinct companies
and of such two Legal entitles. In view of the judgment in
Ram Krishna Choudhary v. Bihar State Electricity Board and
others (C.W.J.C.No.204 of 1984 disposed of on 15th October,
1990 unless there is a clause that the auction purchaser
shall not only have the assets but also the liability
including the liability of the Electricity Board, the latter
cannot take the stand that unless the dues of the erstwhile
are cleared, no electric connection will be given to the
auction purchaser.
8. The case C.A. No., 1419 of 1995 (Arising out of S.L.P.
(C) No. 18244 of 1993: Chairman Bihar State Electricity
Board and others vs. Suman Packaging Private Limited) is
identical to the case in Civil Appeal No. 1420 of 1995
(arising out of SLP(C) No. 16227 of 1992: Waxpol
Industries). The respondent purchased the unit of M/s.
Sanjay Packaging Industries in an auction sale held under
Section 29 of the Corporation Act for a sum of Rs. 8 lacs.
The said Sanjay Packaging Industries had committed default
in payment of electricity dues amounting to Rs.87,137.34/-.
9. On 9.6.1992, the respondent (auction purchaser) applied
for electricity connection. The appellant-Board called upon
the respondent to clear off the dues of Sanjay Packaging
Industries. Therefore, the respondent filed C.W.J.C.
No.5358 of 1992 for a writ of mandamus to the Board to
supply electricity. The case of the respondent as
petitioner before the High Court was when the matter was
brought to the notice of the Corporation it wrote to the
Board to the effect that the writ petitioner was not liable
for any dues of the erstwhile owner and application might be
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favourably considered. Further, the Board had issued a
circular on 19.1.72 that in a case of genuine purchase if
the old consumer had committed default and the purchaser has
no connection with the old consumer it would neither be
legal nor proper to insist on the realisation of the arrears
due for giving re-connection. The High Court took the view
that remedy under Section 24 of the Electricity Act could be
to file a suit to recover the dues from a consumer. That
Section merely enables the disconnection of electricity it
arrears are not paid by the consumer. Therefore, Section 24
cannot apply in a case where, a transferee who had no
connection with the
631
original consumer and purchases the property bona fide and
in good faith.
10. The Board is under statutory obligation to supply
electrical energy to any pawn whenever a requisition is made
subject to the fulfilment of conditions under Clause VI of
Schedule 1 of the Electricity Act. It is in this background
the circular of the Board dated 19.1.72 has to be con-
sidered.
11. The Board is a ’State within the meaning of Article 12
of the Constitution. Therefore, its action must pass the
test of fairness and reasonableness. A purchaser like the
writ petitioner was not expected to make an enquary from the
Board so as to know whether may dues were outstanding to the
card from the previous consumer: nor is it possible for
auction purchaser to find out the personal liability of the
debtor. The Division Bench went on to hold that the
previous decisions on the High Court in Isha Marbles v.
Bihar State Electricity Board and another in C.W.J.C. No.
1538 of 1991 and Dani Mordhwaj Cold Storage Pvt. Ltd. v.
Bihar State Electricity Board and others in C.W.J.C. No.6437
of 1992 must be held to be per incuriam because those
decisions had not considered the important legal aspects.
12. Besides, the writ petitioner was a bona fide purchaser
under a statutory sale. The agreement entered into between,
the consumer and the Board contained personal bond as
between the parties to the agreement. In any event, the
Board cannot take advantage of its own wrong in allowing the
arrears to get accumulated without either resorting to
Section 24 or by calling upon the consumer to furnish
additional security. In this view, the writ petition came
to be allowed and a writ of mandamus was issued to the Board
to provide electricity connection on the terms and
conditions laid down in class of Schedule to the Electricity
Act.
C.A. No. 1422 of 1995 (arising out of SLP (C) No. 10253:
Bihar State Electricity Board vs. Abhay Kumar and others):
Under identical circumstances, following the earlier
decision in C.W.J.C. No. 5358 of 1992 (suman packaging
Private Limited) the High Court allowed the writ petition in
this case.
13. Similar is the case in Civil Appeal No. 1421 of 1994
(arising out of SLP (c) No. 11806 of 1994.
14. Mr. Gopal Subramaniam, learned counsel for the
appellant urges the following:
The appellant is a bona fide purchaser of the assess of the
mortgaged assets of Ws. Patel Industries in an auction
sale. Such an auction was held under the Corporation Act by
the respondent-Corporation. The appellant is neither the
transferee nor the successor to the previous owner of the
premises. It is an independent buyer under the Bihar Public
Demands Recovery (Amendment) Act, 1982. The dues towards
the consumption of electricity could be recovered only if
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the appellant was a consumer. He cannot be held to be a
consumer since, factually, the appellant is yet to be given
electricity connection.
15.The electricity dues by the previous industry is a
contractual liability be-
632
tween the industry and the respondent Board. It is not
statutory in nature since electricity is consumed by
consumer on the basis of a written contract as prescribed in
Form EB-70 approved by Section 26 of the Indian Electricity
Act. 1910 (hereinafter referred to as the ’Electricity
Act’).
16.Section 24 of the Electricity Act has no application
since that presupposes an electricity connection which
connection the appellant is yet to be given. Therefore, the
appellant cannot be held liable for any default committed by
the previous consumer. In support of this submission reli-
ance is placed on Sauriyar Luka. v. Kerala Electricity Board
AIR 1959 Kerala 199. In that case, the test applied was
whether the applicant seeking electricity connection is a
legal representative of the defaulter. Further, the payment
of arrears due form the defaulting consumer cannot be
insisted for the supply of electricity to the premises used
by the erstwhile consumer.
17.Similarly, in National Textile Corporation (M.P.) Ltd.,
Bhopal v. MP. Electricity Board AIR 1980 M.P. 32 it was
held that any liability of a former owner of National
Textile Undertaking prior to the appointed day cannot be
fastened on the successors by mere inference.
18.In Civil Appeal No. 1420 of 1995 (arising out of SLP (C)
No. 16227 of 1992 and Civil Appeal No. 1422 of 1995 (arising
out of SLP (C) No. 10253 of 1994 the written submissions
filed by Mr. Muralidhar, learned advocate on behalf on the
respondent No. 1, Abhay Kumar inter alia run as under:
Section 24 of the Electricity Act could be invoked only as
against the person to whom energy has been supplied. Under
Section 2(C) of the Electricity Act "consumer" means "any
person who is supplied with energy" Therefore, the liability
to pay electricity dues is obviously fastened only to the
consumer.
19. Neither under the scheme of the Electricity Act nor the
Electricity (Supply) Act 1948 (hereinafter referred to as
the ’Supply Act’) is there any concept of the premises of
the consumer being liable for the electricity dues de hors
the consumer, whose premises it is.
20.No doubt, by reason of the amendment made on 28th April.
1982 to the Bihar and Orissa Public Demands Recovery Act,
1914 electricity dues are recovered by bringing the property
of the consumer concerned to sale in certificate
proceedings. Such a provision cannot be invoked against a
subsequent bona fide auction purchaser of the assets.
21.This Court had held in Bihar State Electricity Board v.
Green Rubber Industries 1990 1 SCC 731 that the relationship
between the Board and consumer is purely contractual.
22.In so far as this respondent had not consumed
electricity, it was merely seeking re-connection and there
being no statutory dues towards consumption charges, the
Board cannot insist upon the respondent to pay the arrears
owing by the erstwhile consumer, is a condition precedent to
provide electricity connection. On the contrary, there is
an obligation under Section 3(2) (f) and Section 22 of the
Electricity Act read with Clause VI of the Scheme 1 thereof
to supply electricity. The
633
said Clause VI Schedule 1 contains conditions under which
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supply can be discontinued. These conditions do not
stipulate that the supply will be discontinued if the
arrears of the electricity owing by an erstwhile consumer in
the premises are not paid first. Such a pre-condition is
illegal and ultra vires both the Acts. In Sanjay Dhinora &
Anr. vs. M.P Faculty Board, Jabalpur 1990 M.P. LJ 48 the
High Court laid stress on a specific clause viz. 22A.
Without such a specific provision, it will not be possible
to foist any such obligation to pay dues on a subsequent
bona fide purchaser of assets like the present respondent.
23.The auction notice issued by the Corporation or even the
subsequent transfer by it, did not mention anything about
the outstanding electricity dues. Neo Chemicals and Waxpol
Industries arc two different entities. Therefore, the
liability of the previous consumer cannot be fastened to
this respondent.
24.In Abhay Kumar’s case (SLP (C) No. 12253 of 1994 the
further point which is raised is, the Board has initiated
certain proceedings against the erstwhile owner of the
assets, namely, Allied Paper and Chemical Industries Pvt.
Limited under the Bihar and Orissa Public Demands Recovery
Act, 1994. By an order dated 2.7.94 the Certificate Officer
dismissed the case of the Board. The Board has filed an ap-
peal before the Collector. The said appeal is pending.
Hence, the Board is now estopped from demanding that
Respondent No. 1 should pay to the Board the dues owing to
it by Allied Papers and Chemical Industries Private Limited.
25. Mr. Pramod Swarup, learned counsel for the Board urges
as under:
The Board, after giving notice under Section 24 of the
Electricity Act to the previous consumer for not receiving
payment towards electricity bills in respect of the
premises, had disconnected/cut off the supply to the
premises. ’Mat premises was sold in auction by the
Corporation to the appellant in Isha Marbles case (SLP (C)
No.617 of 1992) and the respondents in other cases.
26. Section 24 confers a statutory right to the Board to
cut off the supply and for that purpose cut or disconnect
any electricity supply line or other works being the
property of the licensee (the Board) through which energy
may be supplied and may discontinue the supply and surcharge
or other sum together with any expenses incurred by him in
cutting off and reconnecting the Supply are paid. This
right is without prejudice to the right of the Board to file
a suit. Therefore, the Board need not necessary file a
suit. When the Board has exercised its statutory right un-
der Section 24 it cannot be forced to reconnect supply,
unless the entire charges due in respect of the building arc
paid off to the Board.
27. The Corporation has not given any notice to the Board.
The auction purchasers could have easily ascertained the.
availability of the electricity to the premises.
28. The bona fides of the purchaser could have no relevance
to the issue. Nor again, the circular of the Board could be
relied on to find a cause for reconnection When the Division
Bench decided the case of Suman Packaging Private Limited
(C.W.J.C. No.5358 of 1992) it chose to
634
differ from the ruling in Isha Marbles’s case (C.W.J.C.No.
1536 of 1991). It should have referred the matter to a full
bench since by the law of precedent previous ruling of the
Division Bench was building on it.
29.Electrical connection was already given to the premises
in question in each of the cases. Therefore, no new connec-
tion could be given under Section 24 of the Act unless the
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previous arrears had been cleared off. The transferee by
purchasing the unit in the auction sale held under Section
29 of the Corporation Act cannot be said to have discharged
the liabilities of the transferor who was in arrears of
electricity due under the Act. For not making payment for
electricity, connection had been cut -off in the premises.
It is not correct to urge that the contractual liability
between the Board and the previous consumer is sought to be
enforced against the third party like the auction purchaser.
The Board is exercising a statutory right under Section 24
of the Electricity Act. If the contentions of the Appellant
is Isha Marbles (SLP (C) No. 617 of 1992, and the
respondents in other cases were to be accepted, as rightly
pointed out by the High Court in Isha Marbles (C.W.J.C. No.
1536 of 1991) the previous consumer could always avoid
payment of his arrears by transfering the unit in favour of
the third party. The proper test is to see whether the
arrears are due in relation to the premises to which
electricity was supplied.
30.In order to determine the question as to the liability of
the auction purchaser (the subsequent transferee) to
discharge the arrears of consumption charges in respect of
electricity supplied to that premises (the subject - matter
of transfer) we, will have to refer to the important
provisions of the Indian Electricity Act, 1910 and the Elec-
tricity (Supply) Act, 1948.
31. The law relating to electricity is principally
contained in these two Acts:
(1) The Electricity Act: This provides for grant of license
in relation to supply and electricity and the purchase of
the undertakings. It also provides for supply of
electricity including the protective clauses.
(11) The supply Act: It provides for constitution of State
Electricity Boards, the powers and duties of such Boards.
32. Section 2 of the Electricity Act in clause (C)
defines a "consumer" thus:
consumer" means by person who is supplied with
energy by a licenses or the Government or by
any other person engaged in the business of
supplying energy to the public under this Act
or any other law for the time being in force,
and includes any person whose premises are for
time being connected for the purpose of
receiving energy with the works of a licensee.
the Government or such other person, as the
case may be:
(Emphasis supplied)
33. Undoubtedly, this is an inclusive
definition. It consists of two parts:
(i) The person who is supplied with energy,,
and
(ii)It includes within it any person whose
premises are connected for the purpose of
receiving energy with the works of a licensee.
635
34.Rule 2A(f) defines an "occupier" as under:
" " occupier" means the owner or per-
son in occupation of the premises where energy
is used or proposed to be used."
35. Section 22 of the Electricity Act
runs:
"Obligation on licensee to supply energy:-
Where energy is supplied by a licensee every
person within the area of supply shall except
in so far as is otherwise provided by the term
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and conditions of the licensee entitled on
application, to a supply on the same as those
on which any other person in the same area is
entitled in similar circumstances to a
corresponding supply.
Provided that no person shall be entitled to
demand, or to continue to receive, from a
licensee a supply of energy for any premises
having a separate supply unless he has agreed
with the licensee to pay to him such minimum
annual sum as will give him a reasonable
return on the capital expenditure, and will
cover other standing charges incurred by him
in order to meet the possible maximum demand
for those premises, the sum payable to be
determined in case of difference or dispute by
arbitration."
36. Section 26 of the supply Act provides that subject
to the provisions of this Act, the Board shall, in respect
of the whole State, have all the powers and obligation of a
licensee under the electricity Act.
37. The requisition for supply to owners or occupiers is
contained in Clause VI of Schedule to the Electricity Act.
That reads:
VI. Requisition for supply to owners or occupiers in
vicinity:-
(Where, (after distributing mains have been laid down under
the provisions of Clause VI or Clause V and the supply of
energy through those mains or any of them has commenced) a
requisition is made by the owner or occupier of any premises
situate within (the area of supply) requiting the licensee
to supply energy for such premises, the licensee shall,
within one month from the making of the requisition, (or
within such longer period as the Electrical Inspector may
allow), supply, and, save in so far as he is prevented from
doing so by cyclones, floods, storms of other occurrences
beyond his control, continue to supply, energy in accordance
with the requisition."
(Emphasis supplied)
(The rest of Clause VI of the Schedule is omitted as
not necessary for our purposes).
38. Section 3(2) (f) of the electricity Act reads:
"the provisions contained in the Schedule shall be deemed to
be incorporated with, and to form part of, every licensee
granted under this part, save in so far as they are
expressly added to, varied or expected by the license, and
shall subject to any such additions, variations or
exceptions which the State Government is hereby empowered to
make, apply to the undertaking authorised by the licence."
39. In Requisition VI the form prescribed by the Rules in
contained in Annexure "A" to the Rules.
40. The Inter-connection between
636
Section 22 of the Electricity Act and Sec-
tion 26 of the Supply Act came to be dealt with by this
Court in State of UP. and others v. Hindustan Aluminium
Corporation and others 1979 (3) SCC 229 at paragraphs 19 to
21 at pages 239-240:
"Clause (h) of Section 2 of the Act defines a "Licensee" to
mean any person licensed under Part 11 to supply energy.
Section 26 of the Act of 1948 provides. Inter alia, that
subject to the provisions of that Act, the Electricity Board
shall in respect of the whole states, have all the powers
and obligations of a lincensee under the Indian Electricity
Act, 1910 and the Act of J948 ’shall be deemed to be the
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licence of the Board" for purposes of the Act (of 1910).
The first proviso to the section excludes the application of
some sections, including Section 22 of the Act, and the
second proviso states that the provisions of Clause VI of
the Scheduled to the Act shall apply to the Board in respect
of that area only where distribution mains have been laid by
the Board and the supply of energy through any of them has
commenced.
While, therefore, the UPSEB is a licensee under the Act it
will be sufficient, for purpose of the controversy before
us, to say that Section 22 of the Act is not applicable to
it, and Clause VI of the Schedule is applicable to it
subject to the restriction contained in the second proviso
Section 26 of the Act of 1948. So even though the Board is
a licensee, the obligation under Section 22 of the Act to
supply energy to every person within the area of its supply
is not fastened on it.
The provisions of the Schedule to the Act are deemed to be
incorporated in, and to form part of, every licence granted
under Part II. Clause VI of that Schedule states that where
after distributing mains have been laid down and the supply
of energy through them has commenced, a requisition is made
by the owner or occupier of any premises situate within the
area of supply requiring the licensee to supply energy for
such premises, the licensee shall make the supply and shall
continue to do so in accordance with the requisition. But,
as has been pointed out, the second proviso to Section 26 of
the Act of 1948 places a restriction on that obligation for
it says that the provisions of Clause VI shall apply to the
Board in respect of that area only "where distribution
mains have been laid by the Board and the supply of energy
through any of them has commenced."
41. As to the manner for getting electricity supply for
premises the following requirements have to be fulfilled.
They are succintly stated in Shiva Gopal’s law relating to
Electricity Sixth Edition at page 359.
(1) A prospective consumer shall make an sign a requisition
in the form prescribed by the rules (Annexure VII to the
Rules) for a connection of his premises for the supply of
energy.
(2) The licensee shall then serve on the prospective
consumer a notice requesting him in writing to tender to him
a written contract (in such form as the State Government may
have approved).
(3) The prospective consumer shall within 14 days of the
receipt of such notice tender the contract duly executed by
with sufficient security, binding him self thereunder to
take a supply of energy for not less than two years to such
amount as will secure to the licensee at the cur rent rates
charged by bun in annual revenue not exceeding fifteen per
centum of the cost of the service line required to comply
with the requisition.
(4) In addition to the security, the
637
licensee may also require the prospective consumer to pay to
him the cost of so much of any service line as may be laid
down or placed for the purposes of the supply upon the
premises required to be connected, and of so much of any
service line as may be laid down or placed for the purpose
of the supply upon the premises required to be connected and
or so much of any services line as it may be necessary for
the said purposes to -lay down or place beyond one hundred
feet from the licensee’s distributing main, although not on
that premises.
(5) If the prospective consumer fails to tender the written
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contract duly executed, fails to give sufficient security
and fails to give the cost demanded within the said period
of 14 days, the licensee shall be under no obligation to
make the connection.
(6) But if these formalities have been complied with the
licensee shall be bound to make the supply within one month
or such extended time as the.Electrical Inspector may allow,
the period to the counted from the date of receipt by the
licensee of the requisition.
(7) And after the connection has been made the licensee
shall be bound to continue the supply unless he is prevented
from doing so by cyclone, floods, storms or other
occurrences beyond his control.
42. Next comes the important Section under the Electricity
Act, namely, Section 24.
43. Section 24(1) provides where a consumer neglects to pay
any charge for energy of any sum other than charge for
energy-the licensee, after the requisite noticed shall be
entitled to stop supply of electrical energy. Of course,
this power of disconnection Is subject to sub-section (2) of
the said Section. Thus, Section 24 relieves the licensee of
its obligation under section 22 to supply energy if the
consumer has not paid to the charges for electricity
supplied or where the consumer neglects to pay the name.
44. Now, we will set out, by means of the following
tabulated statement, as to what the factual position is:
---------------------------------------------------------------
Sl. SLP No. Parties filed Date of Datewhen Date of appli-
No. against discon- sale/ cation for
nection parchase re-connection
to the took
previous
consumer
---------------------------------------------------------------
1. 617/92 M/s.Isha Judg No conn- 6-1-90 4-3-91
Marbles ment ection
vs. dt. at the
BSEB 5-9-91 time of
in CWJC delivery
No1536/91 of possession
2. 16227/92 BSEB dt. 14-7-84 7/8.5.85 after
Vs 28.7.92 possession
638
Waxpol in CWJC
Indus. No.25/86
3.18224/93 BSWB dt. 17.7.91 29.11.91 9.6.92
Vs. 27.7.93
Suman in CWJC
Pack- No.5358/92
Aging
P.Ltd.
4. 10253/94 BSWB dt. no conne- 5.1.93 5.10.93
vs. 4.2.94 ction
Abhay in CWJC
Kumar No.11330/93
5. 11806/94 BSEB dt. -do- 5.4.91 23.11.91
vs. 29.7.93
North in CWJC
East No.7299/92
fert-
lisers
P.Ltd.
----------------------------------------------------------
45 The indisputable facts are:
1.The previous units had the benefit of electricity supply.
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2.The previous units/owners had borrowed from the
corporation.
3.To secure those loans they had mortgaged/hypothecated the
properties.
4. The electricity arrears in relation to those
premises had fallen due since they had neglected to pay
5. By exercise of power under Section 24 of the
Electricity Act the electricity supply was disconnected.
6.For recovery of the loans the mortgaged/hypothecated
Properties were brought to sale under Section 28 of the
Corporation Act.
46. The appellant in Isha Marble (SLP(C) No. 617 of
1992) and the respondents in other civil appeals became the
auction purchases. They applied for supply of electricity
for the same premises to which already electricity was
supplied and disconnected for the non-clearance of the dues
on account of such supply.
47. We may, by way of a sample, quote the relevent portions
of the requisition term filled in by Isha Marbles (SLP (C)
617 of 1992:
"Form No. E.B-70
BIHAR STATE ELECTRICITY
BOARD REQUISITION FORM
THE ASSISTANT ELECTRICAL
ENGINEER, ELECTRIC SUPPLY
SUB-DIVISION DOLTONGANJ,
RURAL NO.1
Sir,
639
I/We hereby require you to supply energy for the premises
owned/occupied by me/us and situated within the area supply
of the Bihar State Electricity Board.
I/We further require you to supply me/us with the necessary
meter/meters on hire in terms of Section 26 of the Indian
Electricity Act, 191 0. I/We agree to give YOU such security
as may be required for the period of the meter/meters,
whenever called upon to do so.
xxx xxx xxx xxx
Particulars of the premises where supply is required.
(a)Holding No. with name of the premises, if any 93/ Plot
No.2727 Ward No.x Khara No.2 Mohalla/-Village Bhimgarhi P.O.
Dottonganj P.S. Dottonganj. Sub Divn. Doltanganj Distt.
Palanpur (Strike out the words not applicable).
xxx xxx xxx xxx
(4) whether the applicant undertakes to clear the past
liability on the previous connection in these premises No.
xxx XXX xxx xxx
I/We further hereby as agreed to pay every sum that may be
come due from me us for the energy, or other charges of the
Board to the officer authorized by the Board to receive it
and in the event of nonpayment of the said sum, it shall be
recoverable from menus as public demand under the Bihar and
Orissa Public Demands Recovery Act. 1914.
(Emphasis supplied)
48. It is important to note that though the purchaser
asked for electricity connection as a new connection it
cannot be regarded as a new connection. It is only a re-
connection since the premises had already been supplied with
electrical energy. Such a supply had been disconnected owing
to the default of the consumer. That consumer had bound
himself to the Board to pay the dues. He also agreed to
abide by the condition as stipulated in the Act and the
Rules including the payment of dues.
49. Under Section 79 Clause (i) read with Section of the
Supply Act it is open to the Board to make Regulations to
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stipulate the terms and. conditions of supply of electrical
energy. One such stipulation is that the consumption
charges must be paid. In Ferro Alloys Corporation Ltd. v.
A.P. State Electricity Board and another 1993 Supp (4) SCC
136 at page 171 (to which one of Us was a party) it was held
thus.
"..... Under the regulations framed by the
Board In exercise of powers of section 49 read
with Section 79 (j) the consumer is only
entitled and the Board has an obligation to
supply energy to the consumer upon such terms
and conditions as laid down in the
regulations. If therefore the regulations
prescribed a security deposit that will have
to be complied wit, it also requires to be
noticed under Clause VI of the Schedule to the
Electricity Act that the requisition for
supply of energy by the Board is to be made
under proviso (a)after a written contract is
duly executed with sufficient security.
50.What then are the remedies of the Board, should the
consumer fail to pay? Undoubtedly, resort could be had to
Section 24 of the Electricity Act. The provisions of this
Section come into play when;
(a) the consumer neglects to pay any charge for energy due
from him to a licensee, or
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(b)the consumer neglects to pay sums other than a charge for
energy due from him to the licensee.
51. In these circumstances, the licensee may after giving
the consumer a written notice of not less than seven clear
days cut off the supply and continue to keep the supply cut
off till the consumer shall have paid the sum or sums due.
52. We want to make it clear that resorting Section 24 is
not the only remedy available. The general remedy to file a
suit will always be available to the Board.
53. Besides, in the case of Bihar State Electricity Board,
by reason of an amendment of Bihar and Orissa Public Demands
and Recovery Act, 1914 (46 of 1982) electricity dues could
be recovered by bringing the property of the consumer
concerned to sale in certificate proceedings. This is
because Rule 15 of Schedule I specifically mentions that any
money payable to the;
(i) ..................
(ii)...................
(iii)...................
(iv) Bihar State Electricity Board
in respect of which the person liable to pay the same as
agreed by a written instrument that it shall be recoverable
as public demand.
54. In all the present cases the supply of electricity to a
particular premises which had the benefit of enjoying
electricity had been disconnected under Section 24 of the
Electricity Act. The auction purchasers want reconnection.
The Board says no; unless and until the consumption charges
in relation to that property which came to be incurred
during the ownership of the previous incumbent are cleared
off. Is the stand of the Board correct? The High Court, in
the main judgment in Suman Packaging (C.W.J.C. No. 5358 of
1972) gives the following reasons for answering the question
against the Board:
1.Section 24 stipulates discontinuance of supply of
electrical energy to the consumer in respect of a sum due
from him. We are afraid the High Court had not read Section
24 in conjunction with other statutory provisions though
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they had been noted, namely, Section 26 of the Supply Act;
Section 22 of the Electricity Act and Clause VI of Schedule
of the Electricity Act. They clearly postulate the obliga-
tion to supply energy for such premises. At the risk of
repetition we hold the premises had enjoyed the benefit of
electricity. The owner of the premises or even the occupier
of the premises, as stated under Rule 2(af) of the Indian
Electricity Rules, becomes liable to pay the consumption
charges together with other dues, in other words, the
liability is in respect of the dues of electricity which
came to be supplied pursuant to the contract with the former
owner. The discharge of such Liability will be on such
owner or occupier.
55. From the above it is clear, 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 past arrears as a condition precedent
to supply.
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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.
56.The form of requisition relating to the contract is in
Annexure VIII prescribed under Clause VI of the Schedule to
the Electricity Act. They cannot make the auction purchaser
liable. In the case of Isha Marbles we have already
extracted the relevant clause wherein the consumer was asked
to state his willingness to clear off the arrears to which
the answer was in the negative. Therefore, the High Court
has rightly held that the auction purchaser, namely, "the
writ petitioner before us is ready and willing to enter into
a now contract that the auction purchaser does not intend to
obtain the continuance of supply of electrical energy on the
basis of the old agreement". It Is true that it was the
same premises to which reconnection is to be given.
Otherwise, with the change of every ownership new
connections have to be issued does not appear to be the
correct line of approach as such a situation is brought
about by the inaction of the Electricity Board in not
recovering the arrears as and when they fall due or not
providing itself by adequate deposits.
57.This is a case of sale under Section 29 of the
Corporation Act. Of course, what the Corporation seeks to
recover are the loans advanced by enforcement of a mortgage.
Such sale cannot affect the right of the Board to rev\cover
the dues as and when such dues arose, is a point to be put
against it.
58. Turning to the instruction issued by the Chairman of
the Board and a Circular dated 19.1.72 on which the High
Court had relied, in our considered view, is again to be
weighed against the Electricity Board.
59. In view of the above, we hold that the decision in the
Souriyar Luka (supra) on which reliance is placed by Mr.
Gopal Subramaniam is correct. The ruling of National
Textile Corporation (M.P.) Ltd., Bhopal (supra) rested on
the interpretation. of the provisions of Sick Textile Under-
takings (Nationalisation) Act (57 of 1974). That is not
relevant, The question with which we are concerned did not
directly arise in Bihar State Electricity Board, Patna and
others v. M/s. Green Rubber Industries and others 1990 (1)
SCC 73 1. We do not think it is necessary for us to refer to
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Rant Chandra Prasad Sharma and others v. State of Vihar and
another AIR 1967 SC 349 since that case related to co-owner.
60.What we have discussed above pears to be the law
gatherable from the various provisions which we have
detailed out above. It is impossible to impose on the
purchasers a liability which was not incurred by them.
61. 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.
62. 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, behighly protects
public property and behoves everyone to
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respect public property. 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 lacs and lacs 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. The relevant portions of the details of
Directorship of Waxpol Industries and Promoters of Neo
Chemical and Metal Products Pvt. Ltd. from 1. 1.83 as on
date of purchase of mortgaged assets by Waxpol and
thereafter (filed as Annexure ’D’ to the counter affidavit
on behalf of Waxpol Industries) are extracted below:
Names of promoters Names of Directors
of M/s. Neo Chemicals of Waxpol Industries
1. Indu Gupta w/o 1. R.P. Gupta
R.P. Gupta
2. Kusum Garg w/o 2.Parmanand Garg
Parmanand Garg
3. Smt. S. Natarajan w/o 3. G. Natarajan
G. Natarajan
63. Factually, it appears that there is no new entity.
Hence, in this case M/s Neo Chemical and Metal Products Pvt.
Ltd. would be liable for the past arrears.
64. In view of the foregoing, we upheld the judgment of the
High Court in Waxpol Industries (CWJC No. 25 of 1986).
However, in view of the peculiar facts, the judgments of the
High Court in Suman Packaging (CWJC No. 5358/92), Abhay
Kumar (CWJC No. 11330/93) and North East Fertilizers Pvt.
Ltd. (CWJC No. 7299 of 1992) are also upheld.
65 As regards M/s. Isha Marbles (CWJC No. 1536 of 1991)
we set aside the judgment of the High Court.
66. Civil Appeal No. 1418 of 1995 (arising out of SLP(C)
No. 617 of 1992 (Isha Marbles) is allowed accordingly with
costs. Civil Appeal Nos. 1420, 1419, 1422 & 1421 of 1995
(arising out of SLP (C) Nos. 16227/92 - Waxpol Industries
Pvt. Ltd., SLP (C) No. 18224 of 1993 - Suman Packaging Pvt.
Ltd., SLP(C) No. 10253 of 1994 - Abhay Kumar and SLP(C) No.
II 806 of 1994 - North East Fertilizers Pvt. Ltd.
respectively) are dismissed with costs.
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