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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