Duty to supply power under Electricity Act not absolute; dues of previous owners can be recovered from new ones: Supreme Court

The Supreme Court on Friday held that the duty to supply electricity under Section 43 of the 2003 Electricity Act is not absolute, and that state-owned power utilities can stall new connections until arrears from the same premises are cleared. [KC Ninan v. Kerala State Electricity Board and ors].A Bench of Chief Justice of India DY Chandrachud and Justices Hima Kohli and PS Narasimha made it clear that the Electricity Supply Code provisions providing for such recoveries have a reasonable nexus with the object of the 2003 Act.Referring to Section 43(2) of the Act, which refers to price in terms of tariffs, the top court observed,"This “price” is the consideration, as determined by the State Commission, that an applicant pays for receiving a supply of electricity. The term “price” has to be given a broad meaning to include all the ‘tariffs’ and ‘charges’ that may be determined by the appropriate commission. This includes the ‘charges’ fixed under Section 45 by the appropriate commission from time to time and the ‘charges’ that a distribution licensee may impose under Section 46 to recover any reasonable expenditure. The ambit of the term ‘price’ is wide enough to also include the statutory dues that the State Commission decides to enact by way of regulations under Section 50.".The verdict came in a batch of appeals where the supply of electricity was discontinued due to the failure of previous owners to pay dues. The previous owners had borrowed money or raised loans on the security of premises, and in some cases, went into liquidation. New owners who had purchased the properties in auction applied for new electricity connections, which was refused by various state power utilities till the older dues were cleared. Different High Courts had refused relief starting some time in 2003, leading to the present batch of pleas before the Supreme Court..The top court underscored that it is always the consumer who is supplied electricity and held liable for defaulting on payment of dues."Perforce, the premises cannot be held to be a defaulter and no dues can be attached to the premises of the consumer."Even if the premises may be the same to which electricity had already been supplied, it will be considered a fresh connection in the situation where it is utilised by a different applicant.Relying on a catena of precents, it was stressed that a condition enabling the distribution-licensee to insist on clearance of arrears is valid and permissible under the scheme of the 2003 Act."Recoupment of electricity arrears is necessary to provide funding and investment in laying down new infrastructure and maintaining the existing infrastructure. In the absence of such a provision, Electric Utilities would be left without any recourse and would be compelled to grant a fresh electricity connection, even when huge arrears of electricity are outstanding. Besides impacting on the financial health of the Utilities, this would impact the wider body of consumers.".It was observed that there is no bar or limitation imposed on such recoveries through civil suits."While the bar of limitation under Section 56(2) restricts the remedy of disconnection under Section 56, the licensee is entitled to recover electricity arrears through civil remedies or in exercise of its statutory power under the conditions of supply.".The Court, therefore, came to following conclusions:- 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".- 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;- 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;- 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;- The scope of the regulatory powers of the State Commission under Section 50 of the 2003 Act is wide enough to stipulate conditions for recovery of electricity arrears of previous owners from new or subsequent owners;- The 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;- The rule making power contained under Section 181 read with Section 50 of the 2003 Act is wide enough to enable the regulatory commission to provide for a statutory charge in the absence of a provision in the plenary statute providing for creation of such a charge;- The power to initiate recovery proceedings by filing a suit against the defaulting consumer is independent of the power to disconnect electrical supply as a means of recovery under Section 56 of the 2003 Act;- 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..The Court exercised its plenary powers under Article 142 of the Constitution to direct the utilities to waive the outstanding interest accrued on principal dues from the date of application for supply of electricity by the appellant-auction purchasers..Senior Advocates MG Ramachandran, Ranjit Kumar, Vijay Hansaria and Ajit Bhasme appeared for the State power utility companies.Senior Advocates Shekhar Naphade, V Giri, PS Patwalia and S Ganesh, with Advocates Puneet Jain, Amar Dave, EMS Anam, DN Ray, Srinavasa Murthy, Bharat Patel, Ram Lal Roy, Purvish Jitendra Malkan and MY Deshmukh appeared for the appellants..[Read judgment]