Reportable  

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.6565 OF 2008 (Arising out of SLP [C] No.14003 of 2007)

Paschimanchal Vidyut Vitran Nigam Ltd. & Ors. … Appellants

Vs.

M/s. DVS Steels & Alloys Pvt. Ltd. & Ors. ... Respondents

J U D G M E N T

R.V. RAVEENDRAN, J.

Leave granted. Heard learned counsel.

2. Paschimanchal  Vidyut  Vitran  Nigam  Ltd.,  the  appellant  herein

holding  an  electricity  distribution  licence,  is  one  of  the  successors-in-

interest of Uttar Pradesh State Electricity Board (‘Board’ for short). The

third  respondent  was  a  consumer  receiving  electricity  supply  from the

Board to its industrial unit at Ghaziabad. In April, 1994, the Board raised

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supplementary  bills  for  Rs.105.78  lakhs  against  the  third  respondent

towards difference in tariff (on the basis of an audit objection that supply

ought to have been charged under HV2 category instead of HV1 category).

The third respondent filed civil suits disputing the said claim and obtained

an  order  of   injunction  restraining  the  Board  from recovering  the  said

supplementary bills amount. The Board challenged the order of the civil

court by filing appeals before the Allahabad High Court. In those appeals,

which are stated to be pending, on 13.12.1996 the High Court stayed the

order of injunction granted by the civil court thereby permitted recovery of

the outstanding dues.  

3. The third respondent closed its unit in the year 1998. In 2001-2002,

it  sub-divided its industrial  plot into 129 smaller plots of different sizes

with  the  permission  of  Uttar  Pradesh  State  Industrial  Development

Corporation.  One  of  those  plots  (A-7/60-67)  was  sold  by  the  third

respondent to the first respondent.  

4. The first  respondent  applied to the appellant  (who had succeeded

UPSEB by then) for supply of electricity by sanctioning a load of 3200

KVA for running an induction furnace in the plot  purchased by it.  The

appellant sanctioned the request on 4.9.2004 subject to the condition that it

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should pay the arrears due by the third respondent,  in proportion to the

area purchased by it, as a condition precedent for supply of electricity. The

first  respondent agreed to the demand and gave an undertaking that  the

pro-rata electricity dues of the third respondent would be paid by them.

The  appellant  thereafter  called  upon  the  first  respondent  to  pay

Rs.8,63,451/- being the arrears, on pro rata basis, by letter dated 9.9.2004

subject to the following condition:

“…………….the consumer  (who) wants to  establish  its  unit,  has  given an affidavit regarding payment of outstanding dues of M/s. Electro Steel, Ghaziabad installed on that plot that it is agreeable to make payment of outstanding electricity dues on their plot. Therefore, they will deposit the proportionate dues against that unit according to the area of their plot within 15 days ………. Otherwise, the order sanctioning the load will be deemed to be automatically cancelled.”

Accordingly  on  18.9.2004  the  first  respondent  deposited  a  sum  of

Rs.863,451/- being the dues of the third respondent,  pro rata,  subject to

the condition  that  in  the event  of  the pending challenge to  the demand

being decided in favour of third respondent, the appellant shall refund the

amount deposited by first respondent.   

5. Several other plot-purchasers from third respondent, did not pay the

dues  of  the  third  respondent.  Appellant  did  not  give  them  electricity

supply.  Therefore,  in  November,  2005,  the  third  respondent  moved  an

application  before  the  Uttar  Pradesh Electricity Regulatory Commission

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(‘Commission’  for  short)  complaining  that  the  appellant  was  arbitrarily

refusing power connection to the purchasers of sub-divided plots on the

ground that Rs.105.78 lakhs was due by third respondent, though the said

liability  was  disputed  and  was  pending  adjudication  in  court.  The

Commission by order dated 25.11.2005, issued the following directions to

the appellant : (i) to accept a bank guarantee from the third respondent in

regard  to  the  disputed  claim of  Rs.105.78  lakhs;  and  (ii)  on  the  third

defendant  furnishing  guarantee,  release  new  power  connections  to  the

purchasers  of  sub-divided  plots  from  the  third  respondent,  without

insisting upon payment of any amounts towards the alleged dues of third

respondent. In pursuance of the said order,   the third respondent furnished

a  bank  guarantee  on  5.12.2005  for  Rs.105.78  lakhs  to  the  appellant.

Thereafter the appellant did not demand payment of the pro-rata amount in

regard to the arrears of third defendant,  from the purchasers of the sub-

divided plots seeking new power connections.

6. The first respondent by letter dated 15.9.2006 made a demand for

refund of the sum of Rs.863,451/- with interest, on two grounds:  

(i) The first  respondent  being  the  purchaser  of  a  plot  from the  third respondent, was not liable to bear and pay the dues of third respondent, as it was not the consumer during the period for which the dues were claimed

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and  there  was  no  privity  of  contract  between  the  appellant  and  first respondent.   

(ii) Third  respondent  had  furnished  a  bank  guarantee  for  the  entire disputed  claim  and  the  Commission  had  directed  the  appellant  not  to recover  from the purchasers  of  sub-divided plots,  any amount  allegedly due by the third respondent.

The appellant refused the request of the first respondent. According to the

appellant, it was entitled to recover the dues of the previous occupier of a

premises,  from  any  subsequent  occupier  thereof  who  seeks  electricity

supply.  It  also  pointed  out  the  order  of  the  Commission  operated

prospectively and did not  apply to payments received by the Appellant,

prior  to  the  order  and  there  was  no  direction  to  refund  the  pro-rata

payments already received.  

7. Feeling  aggrieved,  the  first  respondent  filed W.P.  No.59163/2006

seeking a direction to the appellant not to recover from it, any dues of the

third respondent. It  also sought a consequential direction to appellant to

refund the sum of Rs.8,63,451/- with interest at 12% per annum. The High

Court by order dated 14.5.2007 allowed the said writ petition and directed

the appellant to refund the sum of Rs.8,63,451/- with interest at the rate of

6% per annum from the date of payment. The High Court was of the view

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that the amounts said to be due by third respondent were secured by a bank

guarantee furnished by the third respondent,  and therefore there was no

need to retain any amount from the purchasers of the sub-divided plots.

The said order is challenged in this appeal by special leave.  

Whether  the  supplier  can  recover  the  electricity  dues  from  the purchaser of a sub-divided plot ?

8. The appellant submitted that if a consumer disposed of its premises,

or any portion thereof, without clearing the dues in regard to the electricity

supplied to its premises, any transferee seeking fresh electricity connection

or supply of electricity to the premises, will  have to clear the electricity

dues of the previous occupant.  The appellant referred to sub-clauses (g)

and (h) of clause 4.3 of the Electricity Supply Code, which is extracted

below :

“(g) Where  the  property has  been legally sub-divided,  the  outstanding dues  for  the consumption of energy on such premises, if any, shall be divided on pro-rata basis.  

(h) A new connection to such sub-divided premises shall be given only after the share of outstanding dues attributed to such sub-divided premises, is duly paid by the applicant. Licensee shall not refuse connection to an applicant only on the ground that, dues on the other portion(s) of such premises have not been paid, nor shall  the licensee demand record of last paid bills of other portion(s) from such applicants.”  

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The  appellant  submitted  that  similar  provisions  existed  in  the  relevant

regulations of the Board even before the said Code came into force.  

9. The supply of electricity by a distributor to a consumer is ‘sale of

goods’.  The  distributor  as  the  supplier,  and  the  owner/  occupier  of  a

premises with whom it enters into a contract for supply of electricity are

the parties to the contract. A transferee of the premises or a subsequent

occupant of a premises with whom the supplier has no privity of contract

cannot obviously be asked to pay the dues of his predecessor in title or

possession, as the amount payable towards supply of electricity does not

constitute a ‘charge’ on the premises.  A purchaser of a premises, cannot

be  foisted  with  the  electricity  dues  of  any  previous  occupant,  merely

because he happens to be the current owner of the premises. The supplier

can therefore neither file a suit nor initiate revenue recovery proceedings

against a purchaser of a premises for the outstanding electricity dues of the

vendor of the premises, in the absence of any contract to the contrary.  

10. But  the  above  legal  position  is  not  of  any  practical  help  to  a

purchaser of a premises. When the purchaser of a premises approaches the

distributor seeking a fresh electricity connection to its premises for supply

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of  electricity,  the  distributor  can stipulate  the  terms subject  to  which  it

would  supply  electricity.  It  can  stipulate  as  one  of  the  conditions  for

supply, that the arrears due in regard to the supply of electricity made to

the  premises  when  it  was  in  the  occupation  of  the  previous

owner/occupant, should be cleared before the electricity supply is restored

to the premises or a fresh connection is provided to the premises. If any

statutory rules govern the conditions relating to sanction of a connection or

supply  of  electricity,  the  distributor  can  insist  upon  fulfillment  of  the

requirements of such rules and regulations. If the rules are silent, it  can

stipulate such terms and conditions as it deems fit and proper, to regulate

its transactions and dealings. So long as such rules and regulations or the

terms and conditions are not  arbitrary and unreasonable,  courts will  not

interfere with them.  

11. A  stipulation  by  the  distributor  that  the  dues  in  regard  to  the

electricity  supplied  to  the  premises  should  be cleared  before  electricity

supply is restored or a new connection is given to a premises, cannot be

termed as unreasonable or arbitrary. In the absence of such a stipulation,

an unscrupulous consumer may commit defaults with impunity, and when

the electricity supply is disconnected for non-payment, may sell away the

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property and move on to another property, thereby making it difficult, if

not impossible for the distributor to recover the dues. Having regard to the

very large number of consumers of electricity and the frequent moving or

translocating  of  industrial,  commercial  and  residential  establishments,

provisions similar to clause 4.3(g) and (h) of Electricity Supply Code are

necessary  to  safeguard  the  interests  of  the  distributor.  We do  not  find

anything unreasonable in a provision enabling the distributor/supplier, to

disconnect electricity supply if dues are not paid, or where the electricity

supply  has  already  been  disconnected  for  non-payment,  insist  upon

clearance of arrears before a fresh electricity connection is  given to the

premises. It is obviously the duty of the purchasers/occupants of premises

to  satisfy  themselves  that  there  are  no  electricity  dues  before

purchasing/occupying a premises. They can also incorporate in the deed of

sale or lease, appropriate clauses making the vendor/lessor responsible for

clearing the electricity dues up to the date of sale/lease and for indemnity

in the event they are made liable. Be that as it may.  

12. In this case, when the first respondent, who was the purchaser of a

sub-divided plot, wanted a new electricity connection for its premises, the

appellant  informed  the  first  respondent  that  such  connection  will  be

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provided only if the electricity dues are paid pro-rata. They were justified

in making the demand. Therefore, it cannot be said that the collection of

Rs.8,63,451/-  from  first  respondent  was  illegal  or  unauthorized.  It  is

relevant to note that when the said amount was demanded and paid, there

was  no  injunction  or  stay  restraining  the  appellant  from demanding  or

receiving the dues.  

Whether appellant is liable to refund the pro rata payment made by first respondent ?

13. On 25.11.2005, the Commission passed an order that the appellant

should not  demand payment of  pro  rata  arrears,  from the purchasers  of

plots who seek new connections to their respective portions, if the third

respondent  furnished  a  bank  guarantee  for  its  outstanding  dues.  The

Commission directed the third respondent to furnish a Bank Guarantee for

the dues, because the claim under the supplementary bills was disputed by

the  third  respondent  and  the  tenability  of  the  claim  was  pending

consideration  in  court.   But  the  first  respondent  had  voluntarily  paid

Rs.8,63,451/-  being  the  pro  rata  dues  on  18.9.2004  long  before  the

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Commission  issued  the  interim  order  on  25.11.2005.  Though  the

Commission directed that the appellant should not demand or recover any

arrears  from  the  purchasers  of  sub-divided  plots  applying  for  fresh

connection, after the third respondent furnished the bank guarantee, it did

not  direct  refund  of  amounts  already  paid  by  applicants  seeking  fresh

connection. In this case, the first respondent had voluntarily paid the said

amount to the appellant to obtain a fresh electricity connection. It cannot

seek refund on the basis of any subsequent order of the Commission, in the

absence of  a specific  direction for  refund.   The first  respondent  having

paid the said amount in pursuance of its  undertaking as a condition for

obtaining fresh connection,  is  estopped from claiming the amount back,

except  in  accordance  with  the  terms subject  to  which the  payment was

made. The amount deposited by first respondent will however have to be

refunded by the appellant, with appropriate interest, if the third respondent

is  ultimately found to be not  liable in respect  of  the demand under the

supplementary bills, or if third respondent actually clears the dues.  

14. In view of the above, we allow this appeal, set aside the order of the

High Court and dismiss the writ petition of the first respondent.        

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…………………………J. (R V Raveendran)

New Delhi; ………………………..J. November  7, 2008. (Lokeshwar Singh Panta)

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