Haryana
State Electricity Board Vs. M/S. Hanuman Rice Mills Dhanauri & Ors. [2010]
INSC 655 (20 August 2010)
Judgment
CIVIL
APPELLATE JURISDICTION CIVIL APPEAL NO. 6817 OF 2010 [Arising out of SLP (C)
No.16396/2006] Haryana State Electricity Board ... Appellant M/s Hanuman Rice
Mills & Ors. ... Respondents
R. V.
RAVEENDRAN, J.
1.
Leave granted. Heard.
2.
The second respondent - Haryana Financial Corporation auctioned
the rice mill premises of one of its borrowers - Durga Rice Mills, to recover
its dues. The first respondent purchased the said premises at the auction on
14.12.1990 for a consideration of Rs. 15,25,000/- and paid the entire sale
consideration to the second respondent. When the first respondent purchased the
mill premises, electricity supply to the premises had been disconnected.
After
taking possession of the premises, the first respondent applied for and obtained
electricity connection in its own name in the year 1991. Four years later, the
appellant served upon the first respondent, a notice dated 16.1.1995 2
demanding payment of Rs.2,39,251/- towards arrears of electricity charges due
by the previous owner Durga Rice Mills.
3.
The first respondent filed a civil suit for permanent injunction
and the said suit ended in dismissal on 5.12.1996 which was affirmed by the
appellate court on 27.2.1998. Thereafter the appellant served a notice dated
2.3.1998 informing the first respondent that the electricity supply will be
disconnected if the said arrears due by Durga Rice Mills were not paid. This
was followed by disconnection of electricity supply on 9.3.1998. First
respondent filed a suit challenging the said demand and disconnection of
electricity supply. The said suit was dismissed by the trial court. While
dismissing the suit, the trial court held that the claim of the appellant was
barred by limitation. Feeling aggrieved by the dismissal, the first respondent
filed an appeal; and feeling aggrieved by the finding that appellant's claim
was barred by limitation, the appellant filed an appeal. The first appellate
court decided the appeals by a common judgment dated 30.10.2003. It dismissed
the appeal filed by the appellant and allowed the appeal filed by the first
respondent. It held that first respondent could not be made liable for the dues
of the previous owner, as there was no provision in the terms and conditions of
sale that the electricity dues of the previous owner should be paid by the
first respondent as auction 3 purchaser. The judgment of the first appellate
court was challenged by the appellant by filing a second appeal. The Punjab
& Haryana High Court by its judgment dated 8.8.2005 dismissed the said appeal
holding that the liability of a consumer to pay charges for consumption of
electricity, cannot be fastened on a subsequent auction purchaser of the
property, in view of the decision of this court in Isha Marbles vs. Bihar State
Electricity Board - (1995) 2 SCC 648.
4.
Feeling aggrieved the appellant filed this appeal raising two
contentions:
(i) The
dismissal of the first suit filed by the first respondent for permanent
injunction having attained finality, the second suit filed by the first respondent
for a declaration that demand and disconnection were invalid, was barred by the
principles of res judicata.
(ii) The
decision in Isha Marbles relied on by the High Court was inapplicable to the
facts of the case. The decision of this court in Dakshin Haryana Bijli Vitran
Nigam Ltd. v. Paramount Polymers (P) Ltd. - (2006) 13 SCC 101, entitles the
appellant to claim and receive the electricity dues of the previous owner from
the new owner/auction purchaser.
4 Re:
Point No. (i)
5.
The first suit by the first respondent was for a permanent
injunction to restrain the appellant Board from enforcing the demand notice
dated 16.1.1995 in respect of the electricity consumption charges incurred by
the previous owner. By the second suit, the first respondent sought a
declaration that the notice dated 9.3.1998 threatening disconnection of
electricity supply for non-payment of the arrears of the previous owner and the
consequential disconnection dated 9.3.1998, were invalid and for consequential
relief. The matter that was directly and substantially in issue in the second
suit was completely different from the matter that was directly and
substantially in issue in the first suit. The reliefs claimed were also
different, as the first suit was for a permanent injunction and the second suit
was for a declaration and consequential relief. Therefore the second suit was
not barred by res judicata.
Re :
Point No. (ii)
6.
The High Court held that the demand was untenable in view of the
decision in Isha Marbles. In Isha Marbles this court held that in the absence
of a charge over the property in respect of the previous electricity dues, and
in the absence of any statutory rules authorizing a demand for the dues of the
previous occupant, an auction purchaser seeking supply of electrical energy 5
by way of a fresh connection, cannot be called upon to clear the pre-sale
arrears, as a condition precedent for granting fresh connection. This court
further held that an Electricity Board could not seek the enforcement of the
contractual liability of the previous owner/occupier against a purchaser, who
was a third party in so far as the contract between the Electricity Board and
the previous occupant and that an auction purchaser who purchases the property
after disconnection of the electricity supply, could not be considered as a
`consumer' within the meaning of the Electricity Act, 1910 or Electricity
(Supply) Act, 1948, even though he seeks reconnection in respect of the same
premises. This court observed:
"Electricity
is public property. Law, in its majesty, benignly protects public property and
behoves everyone to respect public property. Hence, the courts must be zealous
in this regard. 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
lakhs and lakhs 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."
(emphasis
supplied)
7.
The appellant relies on the subsequent decision of this court in
Paramount Polymers (supra) to distinguish the decision in Isha Marbles. In
Paramount Polymers (supra), the terms and conditions of supply contained a 6
provision (clause 21A) providing that reconnection or new connection shall not
be given to any premises where there are arrears on any account, unless the
arrears are cleared. In view of the said express provision, this Court
distinguished Isha Marbles on the following reasoning:
"This
Court in Hyderabad Vanaspati Ltd. v. A.P. SEB [1998] 2 SCR 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.
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 7 question whether Clause 21A
of the terms and conditions incorporated is invalid for any reason."
The
decision in Paramount Polymers was followed in Dakshin Haryana Bijli Vitran
Nigam Ltd. v. Excel Buildcon Pvt.Ltd. [2008 (10) SCC 720].
8.
In Paschimanchal Vidyut Vitran Nigam Ltd. v. DVS Steels & Alloys
Pvt.Ltd. [2009 (1) SCC 210] this court held, while reiterating the principle
that the electricity dues did not constitute a charge on the premises, that
where the applicable rules requires such payment, the same will be binding on
the purchaser. This court held:
"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.
When the
purchaser of a premises approaches the distributor seeking a fresh electricity
connection to its premises for supply 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.
8 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 property
and move on to another property, thereby making it difficult, if not impossible
for the distributor to recover the dues. Provisions similar to Clause 4.3(g)
and (h) of Electricity Supply Code are necessary to safeguard the interests of
the distributor."
9.
The position therefore can may be summarized thus :
(i)
Electricity arrears do not constitute a charge over the property.
Therefore
in general law, a transferee of a premises cannot be made liable for the dues
of the previous owner/occupier.
(ii)
Where the statutory rules or terms and conditions of supply which are statutory
in character, authorize the supplier of electricity, to demand from the
purchaser of a property claiming re-connection or fresh connection of
electricity, the arrears due by the previous owner/occupier in regard to supply
of electricity to such premises, the supplier can recover the arrears from a
purchaser.
Position
in this case
10.
The appellant did not plead in its defence that any statutory rule
or terms and conditions of supply, authorized it to demand the dues of previous
owner, from the first respondent. Though the appellant contended in the written
statement that the dues of Durga Rice Mills were transferred to the account of
the first respondent, the appellant did not specify the statutory 9 provision
which enabled it to make such a claim. The decision in Paramount Polymers shows
that such an enabling term was introduced in the terms and conditions of
electricity supply in Haryana, only in the year 2001. The appellant did not
demand the alleged arrears, when first respondent approached the appellant for
electricity connection in its own name for the same premises and obtained it in
the year 1991. More than three years thereafter, a demand was made by the
appellant for the first time on 16.1.1995 alleging that there were electricity
dues by the previous owner. In these circumstances the claim relating to the
previous owner could not be enforced against the first respondent.
11.
On facts, it has to be held that the decision of the High Court
does not call for interference. The appeal is therefore dismissed. Parties to
bear their respective costs.
..............................J. (R V Raveendran)
.............................J. (H L Gokhale)
New Delhi;
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