Electricity Act, 2003 – ss. 42 and 61 – Liability of subsequent owner to pay electricity charges due on previous owner – Whether the arrears of unpaid electricity dues outstanding from the erstwhile owner can be claimed from the subsequent owner, who has acquired the property in proceedings initiated to enforce mortgages or to pay off the dues of creditors – Held: In order to provide a supply of electricity to consumers, a distribution licensee is required to lay down infrastructure such as electricity lines, transformers, and other equipment – The licensees are required to maintain the infrastructure even if the consumer does not consume electricity – The 2003 Act has been enacted to promote the development of the electricity industry as well as to protect the interests of the consumers and to ensure the supply of electricity to all areas – The Supply Conditions providing for recoupment of electricity dues of a previous consumer from a new owner are necessary to recover the costs incurred for laying down the infrastructure as well as the ongoing current liabilities towards the electricity generation and transmission companies – Apart from protecting a public good, such conditions also have a reasonable nexus with objects of the 2003 Act, such as a robust development of the electricity industry, protecting the interests of consumers as well as the financial interests of the distribution licensees – 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. Transfer of Property Act, 1882 – s.100 – Charge – Whether arrears of electricity can become a charge or encumbrance over the premise – Effect of statutory regulations or rules enacted by a regulatory commission – Held: A charge cannot be enforced against a transferee if they have no notice of the same, unless the requirement of such notice has been dispensed with by law – The provisions of the 1910 Act, 1948 Act, and the 2003 Act do not provide that the arrears of electricity dues would constitute a charge on the property or that such a charge shall be enforceable against a transferee without notice – In Isha Marbles, the Supreme Court observed that under the provisions of 1910 Act r/w. 1948 Act, electricity arrears do not create a charge over the property – Consequently, in general law, a transferee of the premises cannot be made liable for the outstanding dues of the previous owner since electricity arrears do not automatically become a charge over the premises – The rule making power contained u/s. 181 r/w. s. 50 of Electricity Act, 2003 is wide enough to enable the regulatory commission to provide for a statutory charge in the absence of a provision in the plenary statute providing for creation of such a charge – 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 – Such a condition is rooted in the importance of protecting electricity which is a public good – Public utilities invest huge amounts of capital and infrastructure in providing electricity supply – The failure or inability to recover outstanding electricity dues of the premises would negatively impact the functioning of such public utilities and licensees – Electricity Act, 2003 – ss. 50 and 181– Maharashtra Electricity Regulatory Commission (Electricity Supply Code and other Conditions of Supply) Regulations, 2005 – Regulation 10.5.
Electricity Act, 2003 – s. 43 – Whether the duty to supply electricity is absolute – Held: s.43 begins with the words “Save as otherwise provided in this Act” – Hence, the operation of s.43 will also be subject to compliance with the other provisions of the 2003 Act – Under s.43, the distribution licensee is obligated to supply electricity to the premises of an owner or occupier, provided that the owner or occupier pays all charges and complies with all conditions stipulated by the distribution licensee – The proviso to s.43(2) further refers to the “price” payable by an applicant to ORS.
demand or to continue to receive the supply of electricity from a distribution licensee – The term “price” has to be given a broad meaning to include all the ‘tariffs’ and ‘charges’ that may be determined by the appropriate commission – Thus, the duty to supply electricity u/s.43 is not absolute, and is subject to the such charges and compliances stipulated by the distribution licensees as part of the application.
Electricity Act, 2003 – ss.2(15) and 43 – Whether duty to supply electricity is with respect to the premises or to the consumer – Held: The definition of ‘supply’ specifically states that supply means the sale of electricity to a consumer – Considering the overall scheme of the 2003 Act, the supply of electricity is to the consumer and not the premises – It is the owner or occupier who has the statutory right to “demand” electricity for the premises under their use or occupation – Thus, 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
Auction – Auction sale of premises on “as in where is” basis – With or without reference to electricity arrears-Implication – Held: When a property is sold on an “as is where is” basis, encumbrances on the property stand transferred to the purchaser upon the sale – All prospective auction purchasers are put on notice of the liability to pay the pending dues when an appropriate “as is where is” clause is incorporated in the auction sale agreement – While examining the effect of an “as is where is” clause, the facts and circumstances of each case individually, along with the terminology of the clauses governing the auction sales must be taken into consideration, to arrive at an equitable decision.
Interpretation of Statutes – Principle of Ejusdem Generis – Rule of Construction – Applicability of – Ingredients – Discussed. Disposing of the appeals, the Court
HELD:1. Under Section 43 of the Electricity Act, 2003, the distribution licensee is obligated to supply electricity to the premises of an owner or occupier, provided that the owner or occupier pays all charges and complies with all conditions stipulated by the distribution licensee. Section 43 begins with the words “Save as otherwise provided in this Act”. Hence, the operation of Section 43 will also be subject to compliance with the other provisions of the 2003 Act. The proviso to Section 43(2) further refers to the “price” payable by an applicant to demand or to continue to receive the supply of electricity from a distribution licensee. The “price” is to be determined by the appropriate commission. This “price” is the consideration, as determined by the State Commission, that an applicant pays for receiving a supply of electricity. The term “price” has to be given a broad meaning to include all the ‘tariffs’ and ‘charges’ that may be determined by the appropriate commission. This includes the ‘charges’ fixed under Section 45 by the appropriate commission from time to time and the ‘charges’ that a distribution licensee may impose under Section 46 to recover any reasonable expenditure. The ambit of the term ‘price’ is wide enough to also include the statutory dues that the State Commission decides to enact by way of regulations under Section 50. Thus, the duty to supply electricity under Section 43 is not absolute, and is subject to such charges and compliances stipulated by the distribution licensees as part of the application. [Paras 32, 40, 41-43][670-BC; 672-F-G; 673-A-B]
2. The definition of ‘supply’ specifically states that supply means the sale of electricity to a consumer. The said definition does not indicate that supply of electricity is vis-a-vis the premises of the consumer. Considering the overall scheme of the 2003 Act, the supply of electricity is to the consumer and not the premises. 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. [Paras 50 and 56][676-D]
3. Under Section 43 of the 2003 Act, the owner or occupier of premises can seek a supply of electricity for particular premises. Perforce, when electricity is supplied, the owner or occupier becomes a consumer only with respect to those particular premises for which electricity is sought and provided. For example, when a person owning an apartment in a residential complex applies for supply of electricity to such an apartment, ORS.
they become a consumer only with respect to the apartment for which the application is made and to which electricity is supplied. Such a person may own another apartment to which electricity may already be supplied, but they will be considered a separate consumer with respect to the second apartment. For an application to be considered as a ‘reconnection’, the applicant has to seek supply of electricity with respect to the same premises for which electricity was already provided. Even if the consumer is the same, but the premises are different, it will be considered as a fresh connection and not a reconnection. [Para 61][679-H; 680-A-C]
4. The scheme of the 2003 Act makes it evident that the regulatory powers of the State Commission under section 181(2) are of wide import. The Commission has certain plenary powers to regulate on matters contained in section 181(2), including Electric Supply Code under Section 50. Accordingly, the Commission can notify a Supply Code governing all the matters pertaining to supply of electricity such as “recovery of charges”, “disconnection of supply” and “restoration of supply”. In the opinion of this Court, such an authority also extends to stipulating conditions for recovery of electricity arrears of previous owners from new or subsequent owners. [Para 84][690-F-G]
5. The 2003 Act has been enacted to promote the development of the electricity industry as well as to protect the interests of the consumers and to ensure the supply of electricity to all areas. The Supply Conditions providing for recoupment of electricity dues of a previous consumer from a new owner are necessary to recover the costs incurred for laying down the infrastructure as well as the ongoing current liabilities towards the electricity generation and transmission companies. In the absence of such conditions, it may be difficult for the distribution licensees to recover defaulted payments, adding to the revenue deficits. This may adversely impact the financial health of the distribution licensees to the detriment of the interests of the consumers. The Conditions of Supply and Electricity Supply Code which require the payment of electricity dues of a previous owner as a condition for the grant of an electricity connection have a clear nexus to the scheme of the parent legislations and the objectives sought to be achieved. 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 precondition for the grant of an electricity connection to protect their commercial interests, as well as the welfare of consumers of electricity. [Paras 87 and 91][691-G-H; 692-A; 693-E-F]
6. 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. Such a condition is rooted in the importance of protecting electricity which is a public good. Public utilities invest huge amounts of capital and infrastructure in providing electricity supply. The failure or inability to recover outstanding electricity dues of the premises would negatively impact the functioning of such public utilities and licensees. In the larger public interest, conditions are incorporated in subordinate legislation whereby Electric Utilities can recoup electricity arrears. Recoupment of electricity arrears is necessary to provide funding and investment in laying down new infrastructure and maintaining the existing infrastructure. In the absence of such a provision, Electric Utilities would be left without any recourse and would be compelled to grant a fresh electricity connection, even when huge arrears of electricity are outstanding. Besides impacting on the financial health of the Utilities, this would impact the wider body of consumers. [Para 113][700-F-H; 701-A]
7. The period of limitation under Section 56(2) is relatable to the sum due under Section 56. The sum due under Section 56 relates to the sum due on account of the negligence of a person to pay for electricity. Section 56(2) provides that such sum due would not be recoverable after the period of two years from when such sum became first due. The means of recovery provided under Section 56 relate to the remedy of disconnection of electric supply. The right to recover still subsists. This Court rejects the submission of the auction purchasers that the recovery of ORS.
outstanding electricity arrears either by instituting a civil suit against the erstwhile consumer or from a subsequent transferee in exercise of statutory power under the relevant conditions of supply is barred on the ground of limitation under Section 56(2) of the 2003 Act. Accordingly, 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. [Paras 129 and 131][709-B-C; F-H]
8. All prospective auction purchasers are put on notice of the liability to pay the pending dues when an appropriate “as is where is” clause is incorporated in the auction sale agreement. It is for the intending auction purchaser to satisfy themselves in all respects about circumstances such as title, encumbrances and pending statutory dues in respect of the property they propose to purchase. In a public auction sale, auction purchasers have the opportunity to inspect the premises and ascertain the facilities available, including whether electricity is supplied to the premises. Information about the disconnection of power is easily discoverable with due diligence, which puts a prudent auction purchaser on a reasonable enquiry about the reasons for the disconnection. When electricity supply to a premises has been disconnected, it would be implausible for the purchaser to assert that they were oblivious of the existence of outstanding electricity dues. In terms of the legal doctrine of caveat emptor, it becomes the duty of the buyer to exercise due diligence. A seller is not under an obligation to disclose patent defects of which a buyer has actual or constructive notice in terms of Section 3 of the Transfer of Property act, 1882. However, in terms of Section 55(1)(a), in the absence of a contract to the contrary, the seller is under an obligation to disclose material defects in the property or in the seller’s title thereto of which he is aware and which a buyer could not with ordinary care discover for himself. While examining the effect of an “as is where is” clause, the facts and circumstances of each case individually, along with the terminology of the clauses governing the auction sales must be taken into consideration, to arrive at an equitable decision. [Paras 141143][715-G-H; 716-A-E]
9. The rule of “ejusdem generis” is a principle of construction. The rule is that when general words follow particular and specific words of the same nature, the general words must be confined to the things of the same kind as those specified. It applies when the following ingredients are present: (i) the statute contains an enumeration of specific words; (ii) the subjects of enumeration constitute a class or category; (iii) that category is not exhausted by the enumeration; (iv) a general term follows the enumeration; and (v) there is no indication of a different legislative intent. For the application of the ejusdem generis rule, it is essential that enumerated things before the general words must constitute a distinct category or a genus or a family which admits of a number of members. [Paras 187 and 188][732-D-F] Conclusions
10. a). The duty to supply electricity under Section 43 of the 2003 Act is not absolute, and is subject to the such charges and compliances stipulated by the Electric Utilities as part of the application for supply of electricity; b). The duty to supply electricity under Section 43 is with respect to the owner or occupier of the premises. The 2003 Act contemplates a synergy between the consumer and premises. Under Section 43, when electricity is supplied, the owner or occupier becomes a consumer only with respect to those particular premises for which electricity is sought and provided by the Electric Utilities; c). For an application to be considered as a ‘reconnection’, the applicant has to seek supply of electricity with respect to the same premises for which electricity was already provided. Even if the consumer is the same, but the premises are different, it will be considered as a fresh connection and not a reconnection; d). A condition of supply enacted under Section 49 of the 1948 Act requiring the new owner of the premises to clear the electricity arrears of the previous owner as a precondition to availing electricity supply will have a statutory character; e). The scope of the regulatory powers of the State Commission under Section 50 of the 2003 Act is wide enough to stipulate conditions for recovery of electricity arrears of previous owners from new or subsequent owners; f). The Electricity Supply Code providing for recoupment ORS.
of electricity dues of a previous consumer from a new owner have a reasonable nexus with the objects of the 2003 Act; g). The rule making power contained under Section 181 read with Section 50 of the 2003 Act is wide enough to enable the regulatory commission to provide for a statutory charge in the absence of a provision in the plenary statute providing for creation of such a charge; h). 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 of the 2003 Act; i). 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; and j). In the exercise of the jurisdiction under Article 142 of the Constitution, the Electric Utilities have been directed in the facts of cases to waive the outstanding interest accrued on the principal dues from the date of application for supply of electricity by the auction purchasers. [Para 328][781-B-H; 782-A-E]
PTC India Ltd. v. Central Electricity Regulatory Commission (2010) 4 SCC 603 : [2010] 3 SCR 609 – followed.
Deputy Commercial Tax Officer, Park Town Division v. Sha Sukhraj Peerajee AIR 1968 SC 67 : [1967] 3 SCR
661 and State of Kerala v. VT Kallianikutty (1999) 3 SCC 657 : [1999] 2 SCR 372 - held not applicable. Indian Council of Legal Aid and Advice v. Bar Council of India (1995) 1 SCC 732 : [1995] 1 SCR 304; India Cement Ltd & Ors v. State of Tamil Nadu (1990) 1 SCC
12 : [1989] 1 Suppl. SCR 692; Punjab Urban Planning and Development Authority v. Raghu Nath Gupta (2012)
8 SCC 197 : [2012] 8 SCR 118; Delhi Development Authority v. Kenneth Builders and Developers Pvt Limited (2016) 13 SCC 561 : [2016] 3 SCR 1126 – distinguished.
Deepak Theatre v. State of Punjab (1992) 1 Supp SCC
684 : [1991] 3 Suppl. SCR 242; K Ramanathan v. State of Tamil Nadu (1985) 2 SCC 116 : [1985] 2 SCR 1028; V S Rice and Oil Mills v. State of Andhra Pradesh [1964]
7 SCR 456; Dakshin Haryana Bijli Vitran Nigam Ltd v. M/s Paramount Polymers Pvt Ltd. AIR 2007 SC 2 : [2006] 7 Suppl. SCR 635 and Paschimanchal Vidyut Vitran Nigam Limited v. DVS Steels and Alloys Private Limited (2009) 1 SCC 210 : [2008] 15 SCR 766 – relied on.
Brihanmumbai Electric Supply & Transport
Undertaking v. Maharashtra Electricity Regulatory Commission (2015) 2 SCC 438 : [2014] 6 SCR 50 – affirmed.
Isha Marbles v. Bihar State Electricity Board (1995) 2 SCC 648 : [1995] 1 SCR 847; Ahmedabad Electricity Co. Ltd. v. Gujarat Inns (P) Ltd. (2004) 3 SCC 587 : [2004] 3 SCR 23; Hyderabad Vanaspathi Ltd v. Andhra Pradesh State Electricity Board (1998) 4 SCC 470 : [1998] 2 SCR 620; Telangana State Southern Power Distribution Co. Ltd. v. Srigdhaa Beverages (2020) 6 SCC 404 : [2020] 4 SCR 295; Chandu Khamaru v. Nayan Malik (2011) 12 SCC 314 : [2011] 11 SCR 112 ; AP TRANSCO v. Sai Renewable Power (P) Ltd. (2011)
11 SCC 34 : [2010] 8 SCR 636; BSES Ltd. v. Tata Power Co. Ltd. (2004) 1 SCC 195 : [2003] 4 Suppl. SCR 932; Commissioner of Sales Tax, Madhya Pradesh, Indore v. Madhya Pradesh Electricity Board, Jabalpur (1969) 1 SCC 200 : [1969] 2 SCR 939; State of AP v. National Thermal Power Corporation Ltd. (2002) 5 SCC
203 : [2002] 3 SCR 278; Uttar Pradesh Power
Corporation Limited v. Anis Ahmad (2013) 8 SCC 491 : [2013] 13 SCR 388; Jivendra Nath Kaul v. Collector/District Magistrate (1992) 3 SCC 576 : [1992] 3 SCR 642; State of Uttar Pradesh v. Hindustan Aluminium Corporation (1979) 3 SCC 229 : [1979] 3 SCR 709; Punjab State Electricity Board v. Bassi Cold Storage, Kharar and Another (1994) 2 Supp SCC 124 : [1994]
3 SCR 33; Jagdamba Paper Industries (P) Ltd v. Haryana State Electricity Board (1983) 4 SCC 508 : ORS.
[1984] 1 SCR 165; Bihar State Electricity Board v. Parmeshwar Kumar Agarwala (1996) 4 SCC 686 :
[1996] 3 Suppl. SCR 29; Ferro Alloys Corpn. Ltd v. A P State Electricity Board (1993) 4 Supp SCC 136 : [1993] 3 SCR 199; India Thermal Power Ltd v. State of MP (2000) 3 SCC 379 : [2000] 1 SCR 925; Haryana State Electricity Board v. Hanuman Rice Mills, Dhanaur (2010) 9 SCC 145 : [2010] 10 SCR 217; JK Industries Ltd. v. Union of India (2007) 13 SCC 673 : [2007]
12 SCR 136; M.L. Abdul Jabbar Sahib v. M.V. Venkata Sastri & Sons (1969) 1 SCC 573 : [1969] 3 SCR 513; Ahmedabad Municipal Corporation v. Haji Abdulgafur Haji Hussenbha (1971) 1 SCC 757; Dattatreya Shanker Mote v. Anand Chintaman Datar & Ors. (1974) 2 SCC
799 : [1975] 2 SCR 224; State of Karnataka v. Shreyas Papers Pvt. Ltd. (2006) 1 SCC 615 : [2006] 1 SCR 235; AI Champdany Industries Ltd. v. Official Liquidator (2009) 4 SCC 486 : [2009] 2 SCR 705; Ajmer Vidyut Vitran Nigam Limited v. Rahamatullah Khan (2020) 4 SCC 650 : [2020] 2 SCR 929; M/s Prem Cortex v. Uttar Haryana Bijli Vitran Nigam Limited Judgment dt. 5.10.2021 in CA 7235 of 2009; Bihar SEB v. Iceberg Industries Ltd. (2020) 20 SCC 745 : [2020] 6 SCR 231; M/s Swastic Industries v. Maharashtra State Electricity Board (1997) 9 SCC 465 : [1997] 1 SCR 532;
Kusumam Hotels Pvt Ltd v. Kerala State Electricity Board (2008) 12 SCC 213 : [2008] 9 SCR 752; U.T.
Chandigarh Administration v. Amarjeet Singh (2009) 4 SCC 660 : [2009] 4 SCR 54; State of Madhya Pradesh v. Tikamdas (1975) 2 SCC 100 : [1975] Suppl. SCR 234; Special Officer, Commerce, North Eastern Electricity Supply Company of Orissa v. Raghunath Paper Mills Private Limited (2012) 13 SCC 479 : [2012]
13 SCR 71; Amar Chandra v. Collector of Excise, Tripura (1972) 2 SCC 442 : [1973] 1 SCR 533; Grasim Industries Ltd. v. Collector of Customs (2002) 4 SCC
297 : [2002] 2 SCR 945; Lokmat Newspapers (P) Ltd. v. Shankarprasad (1999) 6 SCC 275 : [1999] 3 SCR 907; Jaiprakash Associates Ltd. v. Tehri Hydro Development Corpn. (India) Ltd. (2019) 17 SCC 786 : [2019] 2 SCR 41; Adoni Cotton Mills Ltd. v. Andhra Pradesh State Electricity Board (1976) 4 SCC 68 : [1977] 1 SCR 133; Mangalore Electric Supply Co. Ltd. v. The Commissioner of Income Tax, West Bengal (1978)
3 SCC 248 : [1978] 3 SCR 913; Valparaiso Kottarathil Kochuni v. States of Madras & Kerala [1960] 3 SCR 887; BHEL v. Globe Hi-Fabs Ltd. (2015) 5 SCC 718; Tata Motors Ltd v. Pharmaceutical Products of India Ltd. (2008) 7 SCC 619 : [2008] 9 SCR 267; LIC v. D J Bahadur (1981) 1 SCC 315 : [1981] 1 SCR 1083; UP State Electricity Board v. Hari Shankar Jain (1978) 4 SCC 16 : [1979] 1 SCR 355; KSL & Industries Ltd v. Arihant Threads Ltd. (2015) 1 SCC 166 : [2014] 14 SCR 1097 – referred to.
Suraj v. KSEB 2005 (3) KLT 856; A Ramachandran v. KSEB 2000 SCC OnLine Ker 75 – referred to.
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