Vitran Nigm.Ld. & Ors Vs. M/S DVS Steels & Alloys Pvt. Ltd. & Ors.
 INSC 1899 (7 November 2008)
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 M/s. DVS Steels & Alloys Pvt. Ltd.
& Ors. ... Respondents
R.V. RAVEENDRAN, J.
granted. Heard learned counsel.
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 2 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.
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
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 3 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.
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
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
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
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 4 (`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.
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.
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 5 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.
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 6 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 ?
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."
7 The appellant
submitted that similar provisions existed in the relevant regulations of the
Board even before the said Code came into force.
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.
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 8 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.
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 9
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 trans locating
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
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 10 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 ?
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 11 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.
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.
(R V Raveendran)