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CASE NO.: Appeal (civil)  4574 of 2006

PETITIONER: Dakshin Haryana Bijli Vitran Nigam Ltd

RESPONDENT: M/s. Paramount Polymers Pvt. Ltd

DATE OF JUDGMENT: 19/10/2006

BENCH: H.K. SEMA & P.K. BALASUBRAMANYAN

JUDGMENT:

J U D G M E N T (Arising out of SLP (C) No. 9514 of 2006)

P.K. BALASUBRAMANYAN, J

1.              Leave granted.  2.              M/s L.L.C. Steels Pvt. Ltd. was a consumer of  electricity from the appellant, a distributing company  established in the place of the State Electricity Board.  It  allegedly fell into arrears to the tune of Rs.64,23,695/-  towards consumption charges of electrical energy including  interest and other incidental charges.  Because of the failure  to pay the consumption charges, the power to the undertaking  was disconnected on 6.4.1998.  M/s L.L.C. Steels Pvt. Ltd. had  also borrowed amounts from the Haryana Financial  Corporation and had mortgaged the undertaking to the  Financial Corporation.     In exercise of power under Section  29 of the State Financial Corporations Act, 1951, the  undertaking was taken over by the Financial Corporation and  advertised for sale.   In the advertisement, the undertaking  was offered for sale on "as is where is basis".   The first  respondent herein bid the undertaking and its bid was  accepted.  Possession was given by the Financial Corporation  to the first respondent on 22.4.1999.   

3.              On 27.11.2001, the appellant- Company decided to  incorporate a term in the Terms and Conditions of Supply of  electrical energy by providing that in cases where a consumer  had defaulted in paying electrical charges and there had been  a consequent disconnection of supply, no fresh connection in  respect of the premises would be given to a purchaser unless  the purchaser cleared the amount that was left in arrears by  the consumer whose undertaking had been purchased.   It is  seen that the first respondent applied for a connection on  1.1.2002.  The appellant- Company took the stand that unless  the first respondent paid the amount outstanding against M/s  L.L.C. Steels Pvt. Ltd., the prior consumer, no fresh  connection could be given to the first respondent.   Since the  first respondent was not willing to comply, the application of  the first respondent was rejected.  The first respondent  thereupon filed a suit, Civil Suit No. 23 of 2002 in the Court of  Civil Judge (Senior Division), Faridabad, seeking to restrain  the appellant- Company from interfering with the use of  generators by the first respondent for generating electricity for  its use and for a mandatory injunction directing the appellant-  Company to give a fresh electric connection to the first

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respondent without insisting on the clearing of the dues of the  prior owner of the premises.  Even while the suit was pending,  the first respondent filed a Writ Petition, Civil Writ Petition No.  5350 of 2002 in the High Court of Punjab & Haryana praying  for the issue of a writ of certiorari to quash the circular dated  27.11.2001 introducing a condition for fresh connection only  on payment of the dues of the previous consumer of electricity  in the premises concerned, for a writ of prohibition restraining  the appellant from removing the generators installed by the  first respondent in the premises, for a writ of mandamus  directing the appellant to provide electric connection  temporarily to enable the first respondent to run its factory  during the pendency of the Writ Petition and for other  incidental reliefs.  The scrutiny of the prayers made in the Writ  Petition shows that there was no prayer for a writ of  mandamus directing the appellant- Company to provide a  permanent electric connection to the first respondent.  The  appellant resisted the Writ Petition submitting that the first  respondent having already approached the Civil Court for  relief, the Writ Petition was not maintainable.  It was further  contended that the Circular dated 27.11.2001 sought to be  challenged in the Writ Petition was issued in exercise of power  under Section 49 of the Electricity (Supply) Act, 1948 by the  competent authority thereunder and that incorporation of  such a condition in the Terms and Conditions of Supply was  statutory in nature and was perfectly valid.  It was also  pleaded that the fact that a substantial amount was due to the  appellant from M/s L.L.C. Steels Pvt. Ltd. was brought to the  notice of the Financial Corporation and a request was made  that the amount of Rs.60,48,504/- should also be recovered  when the sale was effected by it.  The sale by the Financial  Corporation was on "as is where is basis" and hence the first  respondent was liable for the dues run up in respect of the  premises by the prior consumer.  It was submitted that there  was no merit in the Writ Petition and it was liable to be  dismissed.   

4.              Almost the whole case of the first respondent in the  Writ Petition was based on the decision of this Court in M/s  Isha Marbles Vs. Bihar State Electricity Board [(1995) 1  S.C.R. 847].  In that decision, this Court held that in the  absence of there being a charge over the property and the  premises comes to be owned or occupied by the auction  purchaser and that auction purchaser seeks supply of  electrical energy by way of a fresh connection, he cannot be  called upon to clear the past arrears as a condition precedent  for the fresh connection or supply.  What mattered was the  contract entered into by the erstwhile consumer with the  Electricity Board.  The Electricity Board could not seek the  enforcement of the contractual liability of the prior consumer  against the third party, the purchaser.  Even the bona fides of  the sale may not be relevant.  It was impossible to impose on  the purchaser a liability which was not incurred by him.  The  auction purchaser came to purchase the property after  disconnection but it could not be understood as a consumer or  occupier within the meaning of the Electricity Act until a  contract was entered into.  Though, it was stated that  electricity is public property and law, in its majesty, benignly  protects public property and it behoves everyone to respect  public property, since the law, as it stood, was inadequate to  enforce the liability of the previous contracting party against  the auction purchaser who was a third party and was in no  way connected with the previous owner/occupier, the liability  could not be enforced against the purchaser or the clearing off  of the earlier dues made a condition precedent for grant of a

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fresh connection.  The answer of the appellant- Company to  the argument based on this ratio of Isha Marbles (supra) was  that on 27.11.2001, the appellant- Company had incorporated  a specific term in that regard in the Terms and Conditions of  Supply and since there was no infirmity or invalidity attached  to such a condition, the ratio of the decision in Isha Marbles  (supra)  would not enable the first respondent to ignore the  condition specifically inserted in exercise of statutory power  and consequently, no relief could be granted to the first  respondent unless that condition was also fulfilled by the first  respondent.   

5.              The High Court did not go into the question of the  validity or otherwise of the amendment to the Terms and  Conditions incorporated as clause 21A on 27.11.2001.  The  learned single judge accepted the argument on behalf of the  first respondent that since there was no charge on the  premises for the electricity charges run up by M/s L.L.C.  Steels Pvt. Ltd. and the purchase by the first respondent was  on 22.4.1999, the amendment promulgated on 27.11.2001  could not be applied in the case of the first respondent and  that the appellant- Company was bound to provide the electric  connection to the first respondent without insisting on the  Terms and Conditions introduced with effect from 27.11.2001.   The argument that what was relevant was the date of the  application for connection made by the first respondent herein  and the application was made after the amended term was  incorporated, was brushed aside stating that in the absence of  any charge or of contractual liability created against the  auction purchaser, the liability could not be fastened unless it  is shown that on the date of transfer, the auction purchaser  was either bound by a statute or by a contract.  The judge also  noticed that in another case where a transfer was effected in  the year 2003, the appellant had conceded that the decision of  the Supreme Court in Isha Marbles (supra) applied and a  different stand could not be taken in the present case by the  appellant.  Thus, it was directed that the appellant release the  power connection to the first respondent expeditiously and not  later than 30 days from the date of the judgment.  The  appellant filed an appeal. The Division Bench of the High  Court even without admitting the appeal and without  appreciating that some questions of importance do arise for  decision in the appeal dismissed the same by referring to the  decision in Isha Marbles (supra) and stating that the  amendment of the Terms and Conditions of Supply could not  be made applicable since the purchase by the first respondent  was prior to the introduction of condition 21A and as  legislation which affected substantive rights are presumed  prospective.  The High Court also relied heavily on the fact  that in another case of disconnection and transfer in the year  2003, the appellant had not taken up the stance it had taken  up in the present case and had conceded that the decision in  Isha Marbles (supra) applied to that case.   It is this dismissal  that is challenged in this appeal.

6.              We may observe even at this stage that though the  main contention raised on behalf of the first respondent was  that the condition incorporated on 27.11.2001 was not valid in  the light of the ratio of the decision in Isha Marbles (supra),  that question has not been decided by the High Court.  The  High Court has proceeded on the basis that there is no charge  created on the undertaking for the consumer’s dues and  consequently, the incorporation of a condition on 27.11.2001  could not have operation in a case where the sale of the  undertaking and purchase by the first respondent, were prior

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to the date of the amendment.  What is the effect of the first  respondent applying for a fresh connection only on 1.1.2002  after the amendment was incorporated was not considered  properly.  The terms incorporated were also not scrutinized.   The court proceeded on the basis that the relevant date was  the date of purchase of the undertaking by the first  respondent.   

7.              Even at the outset, learned counsel for the first  respondent submitted that the correctness of the decision in  Isha Marbles (supra), which is a three judge Bench decision,  has been doubted by a Bench of two judges in Civil Appeal  Nos. 5312 and 5313 of 2005 and the appeals have been  referred to a Bench of three judges and these appeals can also  be so referred.  But on scrutinizing the order of reference, this  is what we find recorded:                 "       Heard.

The basic question is whether electricity  dues constitute a charge on the property so far  as the transferor or the transferee of the unit  are concerned.                  Considering the importance of the issues  involved, it would be appropriate if the matters  are heard by a three judge Bench.  The matters  may be placed before Hon’ble The Chief Justice  of India for necessary directions."                          

On a scrutiny of the decisions of the High Court of Bombay  giving rise to those appeals, we find that the primary question  in those appeals would be the correctness of the view of the  High Court that the Electricity Board had no power to impose  a condition that the purchaser of an undertaking will have the  obligation to clear the arrears of charges of the prior  consumer.  Of course, incidentally the correctness of some of  the observations in Isha Marbles (supra) may also be involved.   Anyway, that aspect will also have to be borne in mind while  we consider the elaborate submissions made before us in this  appeal.  

8.              It appears to be appropriate to set down Clause 21A  inserted in the Terms and Conditions of Supply of electrical  energy by the appellant with effect from 27.11.2001, which  reads as under: "21-A (a)       When there is transfer of ownership  or right of occupancy of a premises,  the registered consumer shall  intimate the transfer of right of  occupancy of the premises within 15  days to the Assistant  Engineer/Assistant Executive  Engineer concerned.  Intimation  having been received, the service  shall be disconnected unless  application for transfer is allowed.  If  the transferee desires to enjoy the  service connection, he shall pay the  outstanding dues, if any, to the  Nigam and apply for transfer of the  service connection within 30 days  and execute fresh agreement and  furnish fresh security.  New  Consumer number shall be allotted

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in such cases canceling the previous  number.  

(b)     Reconnection or new connection  shall not be given to any premises  where there are arrears on any  account due to the Nigam unless  these are cleared in advance.  If the  new owner/occupier/allottee remits  the amount due from the previous  consumer, the Nigam shall provide  reconnection or new connection  depending upon whether the service  remains disconnected/dismantled  as the case may be.  The amount so  remitted will be adjusted against the  dues from the previous consumer.   If the Nigam get the full or partial  dues from the previous consumer  through legal proceedings or  otherwise, the amount remitted by  the new owner/occupier to whom  the connection has been effected  shall be refunded to that extent.   But the amount already remitted by  him/her shall not bear any interest.   

(c)     The above proposed provisions of  clause 21-A(a) & (b) shall be  applicable to existing consumers  also where defaulting amount exists  against premises occupied by such  consumer."

It is seen that the above amendment was also formally notified  on 11.2.2002.   As we see it, a transferee of ownership or of  right of occupancy of a premises to which electrical connection  had been given, is given the option to enjoy the service  connection already granted by paying the outstanding dues, if  any, to the appellant and apply for transfer of service  connection and obtain the same by executing a fresh  agreement and furnishing a fresh security.  Sub-clause (b)  provides that reconnection or new connection shall not be  given to any premises where there are arrears on any account  to the appellant unless the arrears are cleared in advance.   It  has to be noted that reconnection is related to the premises  and arrears again is related to the premises.   The amount  remitted by the transferee towards arrears are to be adjusted  against the dues from the previous consumer.  But it is  provided that if meanwhile the appellant is enabled to recover  the amount from the transferor or consumer, the amount   remitted by the transferee-consumer is to be refunded, but  without interest.   Sub-clause (c) provides that provisions  contained in sub-clauses (a) and (b) of clause 21A shall be  applicable to an existing consumer also where defaulting  amount exists against the premises occupied by such  consumer.                          9.              According to us, the High Court has  gone wrong in  holding that this newly inserted clause 21A of the terms and  conditions was not applicable to the first respondent.  It is  true that the sale of the undertaking at the instance of the  Financial Corporation to the first respondent was prior to  27.11.2001 and possession was also given to the first

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respondent on 22.4.1999, prior to the insertion of clause 21A.     But going by clause 21A(c) it is clear that even if the view  taken by the High Court that the relevant date is the date of  sale in favour of the first respondent is accepted, even then,  the appellant would be entitled to apply sub-clause (b) of  clause 21A to the first respondent as an existing consumer,  since defaulting amount existed against the premises occupied  by the first respondent.   We are also not in a position to agree  with the High Court that the relevant date is the date of sale of  the undertaking by the Financial Corporation to the first  respondent.   The insertion of clause 21A was circulated by  the communication dated 27.11.2001 and it was subsequently  followed by the formal notification in terms of Section 49 of the  Supply Act read with Section 79(j) of that Act.  The first  respondent having applied for a fresh connection only on  1.1.2002, the application would be governed by the terms and  conditions including the term inserted on 27.11.2001, as  subsequently formally notified.   In the writ petition filed on  27.2.2002 in that behalf, the court could not have come to the  conclusion that the application made by the first respondent  was not governed by the amended terms and conditions  including clause 21A thereof.   It is not as if the first  respondent was an ignorant party.   Before submitting its bid  to the Financial Corporation the first respondent would  certainly have inspected the premises and could have come to  know that power connection to the premises had been  snapped and this information should have put it on  reasonable enquiry about the reasons for the power  disconnection leading to the information that the previous  owner of the undertaking or consumer was in default.    Moreover, the appellant had clearly written to the Financial  Corporation even before the sale was advertised by it,  informing it that a sum of Rs.64,23,695/- was due towards  electricity charges to the appellant and when selling the  undertaking, that amount had to be provided for or kept in  mind.   Therefore, any reasonable enquiry by the first  respondent as a prudent buyer would have put it on notice of  the subsistence of such a liability.  The sale was also on ’as is  where is’ basis.  On our interpretation of clause 21A of the  Terms and Conditions of Supply as inserted with particular  reference to clauses (b) and (c) thereof, we are of the view that  the said clauses clearly applied to the first respondent when it  made an application on 1.1.2002 seeking a fresh connection  for the premises.

10.             We find that the High Court has also not referred to  the Haryana Government Electrical Undertakings (Dues  Recovery) Act, 1970 which came into effect on 27.10.1970.   The said Act enabled the Electricity Board, of which the  appellant is the successor, to recover the dues to the Board on  account of consumption of electrical energy and other charges  as defined in that Act to be recovered as an arrear of land  revenue notwithstanding anything contained in any other law  or instrument or agreement to the contrary.   We may set  down Section 6 of that Act herein: "6.     Recovery of dues, etc., if not paid \026 If the  aggregate amount of the various dues, penalty  and costs mentioned in the notice of demand  served under Section 4 is not deposited with  the prescribed authority within sixty days of  the date of such service or such extended  period as the prescribed authority may from  time to time allow, the debtor shall be deemed  to be in default in respect of such amount and  the same shall be recoverable as an arrear of

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land revenue, notwithstanding anything  contained in any other law or instrument or  agreement to the contrary.

(2)     For the purpose of such recovery, the  prescribed authority may forward to the  Collector a certificate under his signature in  the prescribed form stating the amount and  details of the demand and the name and  description of the debtor in default and the  Collector shall on receipt of such certificate,  proceed to recover from the debtor the amount  of the demand as if it were an arrear of land  revenue."          

11.             The recovery of arrears of land revenue is provided  for in the Punjab Land Revenue Act, 1887.   Chapter 6 thereof  deals with recovery.  Section 61 provides that the entire estate  and the land owner shall be liable for the land revenue for the  time being assessed on the estate.   Section 62 provides as  further security that the land revenue payable in respect of a  holding shall be the first charge upon rents, profits and  produce thereof.  Section 67 deals with the modes of recovery  of arrears of land revenue.   That section contemplates  recovery, inter alia, by way of arrest and detention of the  person who is liable to pay the land revenue; by distress and  sale of his movable property and uncut or ungathered crops;  by transfer of the holding in respect of which the arrears is  due; by attachment of the estate or holding in respect of which  the arrears is due; by sale of that estate or holding or by  proceeding against other immovable property of the defaulter.   Under Section 72 of the Act, the Collector can takeover the  management of the estate or effect attachment thereof and  under Section 75 he can sell the estate itself for recovery with  the previous sanction of the Commissioner.  Thus, the amount  due from the prior owner of the undertaking or consumer  could be recovered by proceeding against the undertaking even  in the hands of the transferee if we go by the relevant  provisions of the above two enactments applicable to recovery  of dues by the appellant or its predecessor, the Electricity  Board.   If in the context of such provisions, the appellant  introduced a term in the Terms and Conditions of Supply in  the case of a transfer that the transferee has to discharge the  prior amounts due in respect of that undertaking by the prior  consumer, could it be said that it had no authority to do so or  that the provision is not a reasonable one in the interests of  safeguarding the rights of the appellant?

12.             We must notice that the High Court did not  consider the effect of the above enactments relating to recovery  of dues.   Counsel for the first respondent submitted that no  such contention was raised in the High Court and even in this  petition for special leave to appeal such a contention is not  raised.  But considering that the contention is based on  statutes enacted by the State Legislature and are in force, the  arguments cannot be ignored by merely stating that they were  not put forward before the High Court, since they have been  put forward before us at the time of arguments.  At best, the  first respondent could plead that it did not get a proper  opportunity to meet this contention in the circumstances of  this case.

13.             We must observe that the decision in Isha Marbles  (supra) is by itself not an answer to the validity of clause 21A

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of the terms and conditions inserted by notification.   Under  section 49 of the Supply Act, the licensee or rather, the  Electricity Board, is entitled to set down terms and conditions  for supply of electrical energy.   In the light of the power  available to it, also in the context of Section 79(j) of the Supply  Act, it could not be said that the insertion of clause 21A into  the Terms and Conditions for supply of electrical energy is  beyond the power of the appellant.  It is also not merely  contractual.  This Court in M/s Hyderabad Vanaspati Ltd.  Vs. Andhra Pradesh State Electricity Board and others  [(1998) 2 S.C.R. 620] has held that the Terms and Conditions  for Supply of Electricity notified by the Electricity Board under  Section 49 of the Electricity (Supply) Act are statutory and the  fact that an individual agreement is entered into by the Board  with each consumer does not make the terms and conditions  for supply contractual.  This Court has also held that though  the Electricity Board is not a commercial entity, it is entitled to  regulate its tariff in such a way that a reasonable profit is left  with it so as to enable it to undertake the activities necessary.   If in that process in respect of recovery of dues in respect of a  premises to which supply had been made, a condition is  inserted for its recovery from a transferee of the undertaking,  it cannot ex facie be said to be unauthorized or unreasonable.   Of course, still a court may be able to strike it down as being  violative of the fundamental rights enshrined  in the  Constitution of India.  But that is a different matter.   In this  case, the High Court has not undertaken that exercise.

14.             The position obtaining in Isha Marbles (supra) was  akin to the position that was available in the case on hand in  view of the Haryana Government Electrical Undertakings  (Dues Recovery) Act, 1970.  There was no insertion of a clause  like clause 21A as in the present case, in the Terms and  Conditions of Supply involved in that case.  The decision  proceeded on the basis that the contract for supply was only  with the previous consumer and the obligation or liability was  enforceable only against that consumer and since there was  no contractual relationship with the subsequent purchaser  and he was not a consumer within the meaning of the  Electricity Act, the dues of the previous consumer could not be  recovered from the purchaser.  This Court had no occasion to  consider the effect of clause like clause 21A in the Terms and  Conditions of Supply.  We are therefore of the view that the  decision in Isha Marbles (supra) cannot be applied to strike  down the condition imposed and the first respondent has to  make out a case independent on the ratio of Isha Marbles  (supra), though it can rely on its ratio if it is helpful, for  attacking the insertion of such a condition for supply of  electrical energy.  This Court was essentially dealing with the  construction of Section 24 of the Electricity Act in arriving at  its conclusion.  The question of correctness or otherwise of the  decision in Isha Marbles (supra) therefore does not arise in  this case especially in view of the fact that the High Court has  not considered the question whether clause 21A of the terms  and conditions incorporated is invalid for any reason.  

15.             In the light of what we have stated above we think  that the proper course to adopt is to set aside the judgments  of the learned Single Judge and that of the Division Bench and  remit the writ petition filed by the first respondent to the High  Court for a fresh decision in accordance with law.   The first  respondent would be free to amend its writ petition including  the prayers therein and in the case of such an amendment the  appellant would be entitled to file an additional statement in  opposition.  The writ petition will be considered afresh by the

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High Court in the light of what we have stated above.

16.             It is seen that after the High Court allowed the writ  petition, the connection was restored to the first respondent in  obedience to the writ, even though subsequently, this Court  stayed the operation of the judgment of the High Court by its  order dated 5.7.2006.   It is now brought to our notice that a  fresh connection has been provided to the first respondent in  the light of the direction in the judgment under appeal without  collecting the arrears that were due from M/s L.L.C. Steel Pvt.  Ltd.  Strictly, in view of the fact that we have set aside the  judgment of the High Court, the first respondent should lose  the benefit of the fresh connection.  But considering that the  first respondent is an industrial undertaking and taking note  of the plea that investments have been made by it to make the  unit workable, we think that it will be appropriate to direct the  first respondent to deposit a portion of the amount in arrears  as a condition for continuance of the supply to it by the  appellant on payment of regular monthly bills as per the terms  and conditions between the parties.   We, therefore, direct that  if the first respondent pays to the appellant, without prejudice  to its contentions in the writ petition, a sum of Rs.25 lakhs  (rupees twenty five lakhs) within a period of six weeks from  today, the fresh connection given to the first respondent will  not be disconnected by the appellant, until the writ petition is  disposed of afresh by the High Court pursuant to this order of  remand.  In case the High Court accepts the challenge of the  first respondent to clause 21A as inserted in the terms and  conditions of supply, the appellant will refund the sum of  Rs.25 lakhs with six per cent interest thereon from the date of  payment by the first respondent till the date of its return by  the appellant.   In case the writ petition is dismissed by the  High Court, the appellant would be entitled, at the volition of  the first respondent, to adjust the amount of Rs.25 lakhs  towards the dues claimed from the previous consumer, M/s  L.L.C. Steel Pvt. Ltd. and maintain the fresh connection given  to the first respondent on it fulfilling its obligations in terms of  clause 21A and act on that basis.  If the first respondent, does  not desire to have a power connection based on clause 21A of  the Terms and Conditions of Supply, the appellant will refund  the sum of Rs. 25 lakhs to the first respondent without  interest within two months of the judgment of the High Court  and would disconnect the power connection now given.  Of  course, if the first respondent fails to deposit the sum of Rs.25  lakhs within the time fixed by us, the appellant would be free  to disconnect the power supply granted to the first respondent  pursuant to the judgment of the High Court which we have set  aside herein and take all steps that may be permissible in law  for recovery of the amounts due.

17.             The appeal is allowed in the above manner.   There  will be no order as to costs.  The High Court is requested to  expeditiously dispose of the writ petition afresh according to  law and in the light of the observations contained herein.