The Supreme Court has ruled that electricity dues of the previous owner of a property can be recovered from an auction purchaser or the subsequent owner.

A bench headed by Chief Justice of India D.Y. Chandrachud and comprising Justices Hima Kohli and P.S. Narasimha said: "A condition enabling the distribution licensee to insist on the clearance of the arrears of electricity dues of the previous consumer before resuming electricity supply to the premises is valid and permissible under the scheme of the 2003 Act (Electricity Act 2003)".

The apex court was examining the issue raised in a batch of appeals, whether the arrears of unpaid electricity dues outstanding from the erstwhile owner can be claimed from the subsequent owner, who has acquired the property in proceedings initiated to enforce mortgages or to pay off the dues of creditors.

The electric utilities had argued that the duty to supply electricity under Section 43 of the 2003 Act is not absolute and in case, there are outstanding dues of the previous owner, they are entitled to refuse a new connection or decline to commence the supply of electricity until the dues owed by the previous owner are cleared.

On the contrary, the auction purchasers have urged that Section 43 obligates the distribution licensees to supply electricity when demanded by the auction purchaser. It was argued that the provisions of the Electricity Act 1910 and the Electricity (Supply) Act 1948, do not empower the electricity board to recover the electricity dues of the previous owner or occupier from the new owner or occupier of such premises and the liability to pay electricity dues is only on the person to whom the supply of electricity is made.

The bench noted that the duty to supply electricity under Section 43 is only with respect to the owner or occupier of the premises, and not the premises, as it is the owner or occupier who has the statutory right to "demand" electricity for the premises under their use or occupation.

"Further, it is the applicant who has to fulfil all the statutory conditions laid down under the 2003 Act to become entitled to get supply of electricity to their premises. The applicant has to pay the necessary charges and comply with all terms and conditions as determined by the appropriate commission for the supply of electricity," it said.

The bench said: "The duty to supply electricity under Section 43 is with respect to the owner or occupier of the premises. The 2003 Act contemplates a synergy between the consumer and premises. Under Section 43, when electricity is supplied, the owner or occupier becomes a consumer only with respect to those particular premises for which electricity is sought and provided by the electric utilities".

Chief Justice Chandrachud, who authored the 179-page judgment on behalf of the bench, said: "For an application to be considered as a 'reconnection', the applicant has to seek supply of electricity with respect to the same premises for which electricity was already provided. Even if the consumer is the same, but the premises are different, it will be considered as a fresh connection and not a reconnection."

The bench noted that the duty to supply electricity under Section 43 of the 2003 Act is not absolute, and is subject to the such charges and compliances stipulated by the electric utilities as part of the application for supply of electricity. "A condition of supply enacted under Section 49 of the 1948 Act requiring the new owner of the premises to clear the electricity arrears of the previous owner as a precondition to availing electricity supply will have a statutory character," said the bench.

The bench noted that Electricity Supply Code providing for recoupment of electricity dues of a previous consumer from a new owner have a reasonable nexus with the objects of the 2003 Act. It said the implication of the expression "as is where is" basis is that every intending bidder is put on notice that the seller does not undertake responsibility in respect of the property offered for sale with regard to any liability for the payment of dues, like service charges, electricity dues for power connection, and taxes of the local authorities.

Concluding the judgment, the Chief Justice said: "In the exercise of the jurisdiction under Article 142 of the Constitution, the electric utilities have been directed in the facts of cases before us to waive the outstanding interest accrued on the principal dues from the date of application for supply of electricity by the auction purchasers".

In the judgment passed on May 19, the apex court decided 19 cases, which were pending adjudication for close to two decades.

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