Telangana State Southern Power Distribution Company Limited & Anr. Vs. Srigdhaa Beverages (Supreme Court)
1. M/s. SB Beverages, owner of a piece of land, failed to repay a loan to Syndicate Bank (creditor).
2. To this measure, on 25.05.2017 the Bank (secured creditor) brought the property to auction under the SARFAESI Act.
3. The land was sold on three prime conditions being;
1) The successful bidder shall bear all statutory dues.
2) The property is sold in “AS IS WHERE IS, WHAT IS THERE IS AND WITHOUT ANY RECOURSE BASIS”.
3) The Authorised officer will not be responsible for any charges including that of electricity dues in respect of the property under sale.
4. The problem arose when the purchaser sought a sanction for connection to appellant No.1 to which request was denied considering that there were previous electricity dues to the tune of 50,47,715 as on 26.10.2017.
5. The respondent, therefore, filed a writ petition to have the demands quashed, considering that as a subsequent purchaser, the respondent was not responsible for the dues of the earlier owner.
6. The moot point of question is whether the liability towards previous electricity dues of the last owner could be mulled on to the respondent.
7. Upon trial, taking precedence from Isha Marbles[1] and Southern Power[2] the court issued directions quashing the demand of appellant No.1.
8. It was argued by Learned counsel for the purchaser that under Section 2(c) of the Electricity Act, liability to pay electricity dues is fastened only on to the consumer and at the relevant time, the purchaser was not the consumer. The purchaser was merely seeking a reconnection there being no statutory dues towards consumption charges.
9. The respondent relied on the case of Dakshin Haryana Bijli Vitran[3] where it was observed that in such a scenario if a transferee desires to enjoy the service connection, he shall pay the outstanding dues, and a new connection shall not be given to the premises where there are arrears on account of dues to supplier unless they are so declared in advance.
10. The facts of the case being explicit mention quantification of dues of various accounts including electricity dues. The respondent was, thus clearly put to notice in this behalf. Hence, as an auction purchaser bidding in an “as is where is, whatever there is and without recourse basis”, the respondent would have inspected the premises and made inquiries about the dues in all respects.
11. Further, if any statutory rules govern the conditions relating to sanction of a connection or supply of electricity, the distributor can insist upon fulfilment of the requirements of such rules and regulations so long as such rules and regulations or the terms and conditions are not arbitrary and unreasonable. A condition for clearance of dues cannot per se be termed as unreasonable or arbitrary.
12. Allowing the appeal, the Supreme Court held that;
13. That electricity dues, where they are statutory in character under the Electricity Act and as per the terms & conditions of supply, cannot be waived in view of the provisions of Section 56 of the Electricity Act, 2003 and cannot partake the character of dues of purely contractual nature.
14. Where, as in cases of the E-auction notice in question, the existence of electricity dues, whether quantified or not has been specifically mentioned as a liability of the purchaser and the sale is on “AS IS WHERE IS, WHATEVER THERE IS AND WITHOUT RECOURSE BASIS” there can be no doubt that the liability to pay electricity due exists on the respondent(purchaser).
15. The debate over connection or reconnection would not exist in cases like the present one where both aspects are covered as per clause 8.4 of the General Terms & Conditions of Supply.
16. This order related to Caveat Emptor [4]principle that places the onus on to the buyer to perform due diligence before making a purchase.
17. Thus, it is opined that appellant No.1 would be well within its rights to demand the arrears due of the last owner, from the respondent-purchaser.
FULL TEXT OF THE SUPREME COURT JUDGEMENT
1. The respondent is an auction-purchaser of a unit owned by M/s. SB Beverages Private Limited, which failed to pay its dues, resulting in the auction by Syndicate Bank (Secured Creditor) under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the ‘SARFAESI Act’). The moot point of law, which arises for consideration, is whether the liability towards previous electricity dues of the last owner could be mulled on to the respondent.
2. The unit in question is a mineral water bottling plan situated in land measuring 1 acre 13 guntas in Sy. No.283 at Rampally Village, Keesara Mandal, Medchal District. As mentioned aforesaid, on account of failure to repay a loan, the creditor, Syndicate Bank, brought the property to auction for which an E-auction sale notice dated 25.5.2017 was issued in this behalf, in which the respondent was the successful auction-purchaser. In order to appreciate the controversy before us, it is
necessary to reproduce some of the relevant clauses of the auction notice:
“The property described below is being sold on “AS IS WHERE IS, WHATEVER THERE IS AND WITHOUT RECOURSE BASIS” under the rule no.8 & 9 of the Security Interest (Enforcement) Rules (hereinafter referred to as the rules) for the recovery of the dues detailed as under:
…. …. …. …. …. ….
