Shree Ramdoot Rollers Private Limited vs Damodar Valley Corporation & Ors on 19 June, 2019

[Cites 14, Cited by 1]

Calcutta High Court (Appellete Side)

Shree Ramdoot Rollers Private Limited vs Damodar Valley Corporation & Ors on 19 June, 2019

Bench: Rajasekhar Mantha

82 19.06.2019 WP 10085(W) of 2019
AN Ct. No. 14
Shree Ramdoot Rollers Private Limited
-vs.-
Damodar Valley Corporation & Ors.

Mr. Sagar Bandopadhyay
Mr. Tapas Saha
Mr. S. Dewanji
... for the petitioner

Mr. Pradip Tarafdar
Mr. Subir Pal
... for the D.V.C.

The writ petitioner purchased the land, factory and

building relating to one M/s. Capricorn Ispat Udyog Pvt. Ltd. in an

auction sale conducted by the State Bank of India under the

provisions of SARFAESI Act, 2002. The sale was conducted on an "as

is where is basis".

It was stipulated in the terms and conditions of the

auction sale that the intending purchaser is required to make himself

aware of any other encumbrances relating to the property, since the

Bank had disclosed all known encumbrances thereat.

Since after purchase of the plant and machinery

alongwith building and land, for a sum of about Rs. 10 crores, the

writ petitioner applied for a fresh electricity connection from the

respondent Damodar Valley Corporation (D.V.C.), a deemed licensee,

under the Electricity Act 2003.

Since after purchase, the writ petitioner changed its name

from M/s. Magnum Tradelink Pvt. Ltd. to the present name Ramdoot

Rollers Pvt. Ltd.
2

In view of the delay in the processing the petitioner's

application, the writ petitioner moved this Hon'ble Court. By an order

dated 17.04.2019 passed in W.P. 7801(W)/2019 this court directed

the D.V.C. to expedite the consideration of the writ petitioner's

request for fresh electricity connection.

By a communication dated 10.05.2019, the D.V.C.

informed that the earlier consumer at the said premises, M/s.

Capricorn Ispat Udyog Pvt. Ltd. had outstanding dues payable to the

D.V.C. to the extent of about Rs. 22 crores. The liquidation of the

said dues of Rs.22 crores of M/s. Capricorn Ispat Udyog Pvt. Ltd. by

the petitioner, was made condition precedent to the petitioner being

allowed fresh electricity connection.

The said position was reiterated in its letter dated

17.05.2019 by the D.V.C. in reply to further communication to the

writ petitioner.

The writ petitioner contends before this court that since

after purchase of the said factory, land and building and plant and

machinery, they had no liability in law that would require them to pay

the outstanding electricity dues of the previous owners. Reliance has

been placed by the writ petitioner firstly on Section 43 of the

Electricity Act, 2003 which mandated that the licensee or deemed

licensee is statutorily obliged to supply electricity, on request.

The writ petitioner also relied upon Section 56 of the said

Act, to highlight the statutory obligation of the DVC. The writ

petitioner referred to several judgments of the Hon'ble Supreme Court

two of which have been placed.
3

The first of such judgment is the case of Special Officer,

Commerce, NESCO Vs. Raghunath Paper Mills Pvt. Ltd. reported

in (2012) 13 SCC 479. In the said judgment, the Hon'ble Supreme

Court had occasion to consider the case of Ahmedabad Electricity

Co. Ltd. vs. Gujarat Inns (P) Ltd. reported in (2004) 3 SCC 587 and

Haryana SEB Vs. Hanuman Rice Mills reported in (2010) 9 SCC

145.

The decision of Isha Marbles vs. Bihar SEB reported in

(1995) 2 SCC 648 and the case of Paschimanchal Vidyut Vitran

Nigam Ltd. vs. DVS Steels & Alloys (P) Ltd. reported in (2009) 1

SCC 210 were addressed and distinguished. At paragraph 15, 16

and 17, in the NESCO case (supra) the Hon'ble Supreme Court

analysed the aforesaid judgments in the following manner:-

"15. In Isha Marbles v. Bihar SEB [(1995) 2
SCC 648] a three-Judge Bench of this Court had
an occasion to consider a similar question viz.
whether the auction-purchaser is liable to meet
the liability of old consumer of electricity to the
premises which is purchased by him in the
auction-sale from Bihar State Financial
Corporation under Section 29(1) of the State
Financial Corporations Act, 1951. After
considering the relevant provisions of the
Electricity Act and the Regulations, this Court held
as under: (SCC pp. 663-64, paras 56 and 61-63)
"56. From the above it is clear that the High
Court has chosen to construe Section 24 of the
Electricity Act correctly. There is no charge over
the property. Where that premises comes to be
owned or occupied by the auction-purchaser,
when such purchaser seeks supply of electric
energy he cannot be called upon to clear the past
arrears as a condition precedent to supply. What
matters is the contract entered into by the
erstwhile consumer with the Board. The Board
cannot seek the enforcement of contractual
4

liability against the third party. Of course, the
bona fides of the sale may not be relevant.
***

61. ... It is impossible to impose on the purchasers a liability which was not incurred by them.

62. No doubt, from the tabulated statement above set out, the auction-purchasers came to purchase the property after disconnection but they cannot be 'consumer or occupier' within the meaning of the above provisions till a contract is entered into.

63. We are clearly of the opinion that there is great reason and justice in holding as above. 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."

16. In PaschimanchalVidyutVitran Nigam Ltd. v. DVS Steels and Alloys (P) Ltd.[(2009) 1 SCC 210 : (2009) 1 SCC (Civ) 85 : AIR 2009 SC 647] the question whether the supplier can recover electricity dues from the purchaser of a sub- divided plot was considered by this Court. The following conclusion is relevant: (SCC p. 214, para

11) "11. 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 5 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."

17. The learned counsel for the appellant heavily relied on para 12 of the very same judgment which reads as under:

(PaschimanchalVidyut case [(2009) 1 SCC 210 :

(2009) 1 SCC (Civ) 85 : AIR 2009 SC 647] , SCC p.

214) "12. 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 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 fulfilment 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."

It is abundantly clear from the above that the liability of a defaulter of electricity dues, whose plant & machinery and building and land have been put up for sale in auction for default of other secured debts cannot be saddled on an auction purchaser like that of the writ petitioner.

The writ petitioner next relied upon decision of Southern Power Distribution Company of Telangana Ltd. vs. Gopal Agarwal & Ors. reported in (2018) 12 SCC 644. In the said decision a two Judge Bench of the Hon'ble Supreme Court reiterated the aforesaid of NESCO decision (supra).

Relying on the aforesaid decision, the writ petitioner would argue that the refusal on part of the D.V.C. to supply electricity to the writ petitioner unless the dues of the previous owner for Rs. 22 crores are paid for by the petitioner is illegal and arbitrary and is liable to be interfered with.

Per contra, the learned counsel for the D.V.C. has made detailed submissions. He would first place reliance on the Explanation to Section 43 of the Electricity Act, 2003 which is set out hereinbelow.

"Section 43: Duty to supply on request. - (1) Save as otherwise provided in this Act, every distribution licensee, shall, on an application by the owner or occupier of any premises, give supply of electricity to such premises, within one month after receipt of the application requiring such supply:

Provided that where such supply requires extension of distribution mains, or commissioning of new sub- stations, the distribution licensee shall supply the electricity to such premises immediately after such extension or commissioning or within such period as may be specified by the Appropriate Commission:

Provided further that in case of a village or hamlet or area wherein no provision for supply of electricity exists, the Appropriate Commission may extend the said 7 period as it may consider necessary for electrification of such village or hamlet or area.

Explanation.- For the purposes of this sub-section, "application" means the application complete in all respects in the appropriate form, as required by the distribution licensee, alongwith documents showing payment of necessary charges and other compliances."

Learned counsel for the DVC would submit that the expression other compliances in the explanation to Section 43 would entitle the licensee to claim to any dues including that of the previous owner from an auction purchaser like the writ petitioner.

He next relied upon Section 50 and Section 181(s) of the Electricity Act, 2003 which authorized the State Electricity Commission to frame suitable regulations and/or Codes to regulate the supply of electricity and also to provide for terms and conditions for recovery of existing dues.

It is in this light that the West Bengal Electricity Regulatory Commission had framed what is called the WBERC (Electricity Supply Code) Regulations, 2003. Regulation 3.4.2. thereof is set out hereinbelow:

"Regulation 3.4.2: The licensee shall be eligible to recover from a new and subsequent consumer(s) the dues of the previous and defaulting consumers in respect of the same premises only if a nexus between the previous and defaulting consumer(s) and the new consumer(s) in respect of the same premises is proved. The onus of proving a nexus, if claimed by a licensee, shall lie on the licensee."

Relying on the aforesaid Regulation, learned counsel for the D.V.C. would argue that there is in fact an existing nexus between the writ petitioner and the previous owner since supply is to be effected at the same premises where the previous consumer was located and running his business.

The learned counsel for the D.V.C. would argue that the expression nexus is not necessarily only between the consumers but must also be inferred if the intending consumer is seeking fresh supply on the same property. The land and building to which supply has been applied for which is in fact and indeed, the same.

In that context, the DVC also placed reliance upon Regulation 4.6.4. to claim a right to recover dues of the previous owner from the writ petitioner. For the purpose of a fair analysis of the arguments advanced by the DVC Regulation 4.6 is set out hereinbelow.

"4.6 Deemed termination of agreement:

4.6.1 If the power supply to any consumer remains disconnected continuously for a period of one hundred and eighty days where the disconnection has been effected in compliance with any of the provisions of the Act or Regulations, the agreement of the licensee with the consumer of supply of electricity shall be deemed to have been terminated with consequential effect on expiry of the said period of one hundred and eighty days. This will be without prejudice to such other action or the claim that may arise from the disconnection of supply or related issues therefor. On termination of agreement, the licensee shall have the right to remove the service line and other installations through which electricity is supplied to the consumer.

4.6.2 The licensee shall take appropriate action against the consumer or consumer-in-default in terms of the provisions of the Act, Rules and Regulations apart from any other remedy provided in any other law for the time being in force.

4.6.3 If any occasion during the period of 180 days as mentioned in 4.6.1 the security deposit becomes inadequate then the agreement for supply of electricity shall be deemed to have been terminated instantly and outstanding dues shall be realized by way of invocation of the security amount.

4.6.4 Notwithstanding anything contained contrary elsewhere in these Regulations were deemed termination of agreement has taken place, then on the basis of application for any consumer new service connection can only be provided in the same premises if the outstanding dues against the deemed terminated consumer is cleared alongwith the late payment surcharge."

The D.V.C. would next argue by placing reliance in the case of Ahemdabad Electricity Co. Ltd. vs. Gujarat Inns (P) Ltd. reported in (2004) 3 SCC 587, particularly, paragraph 3 that the said judgment was rendered at a time when the Supplied Code Regulations, were not available within the State of West Bengal. Since after coming into force of the aforesaid supply code in 2013, the DVC claims that it is entitled to pass on the liability of Capricon on the petitioner.

This court has carefully considered the arguments advanced by the rival parties.

This court is of the view that right of licensee to recover the dues of an owner of the land from that of subsequent owner can arise only if the Electricity Act of 2003 provided for a "charge" to attach to the land in question where the supply was effected. It is only such statutory charge that would secure electricity dues and would pass on to any subsequent purchaser upon transfer of such land. Admittedly, there is no such provision under the Electricity Act of 2003. Electricity dues thus do not attach as a change to the property of the consumer to whom supply is effected. The decision of the Hon'ble Supreme Court in the Case of Central Bank of India Vs. State of Kerala reported in (2009) 4 SCC 94 is an authority for the aforesaid proposition. The DVC thus cannot claim to recover the dues of the M/s. Capricon from this writ petition.

Let us now analyse the relevant Regulations relied upon by the licensee.

Regulation 3.4.2, on a plain reading, indicates that the liability of a previous owner can be saddled on the subsequent owner 10 only if there is clear nexus established between two owners or consumers. Such nexus is required to be established by the licensee.

Far from establishing any nexus, we find in the instant case there is only a bland statement in the letters addressed to the writ petitioner issued by the licensee that the writ petitioner has to clear the dues of the earlier owners. There is absolutely no discussion whatsoever as how the DVC sees any nexus between Capricon and the petitioners. The DVC has thus not been able to establish any nexus between the erstwhile owners of the land and the subsequent purchaser petitioner.

In fact, there is admittedly no nexus otherwise between the writ petitioner and the erstwhile consumer. No such nexus has been demonstrated or canvassed by the licensee in any of their communication to the writ petition.

In so far as the argument of the licensee is concerned, that the expression nexus has been determined on the basis of the transfer of the land in question, this court is of the view that such interpretation is rather far fetched and completely outside of the scope of Regulation 3.4.2. The nexus under the aforesaid Regulation must be established between one consumer and another in the latter claiming a fresh connection despite having outstanding dues from the previous consumer, and despite being the direct or indirect beneficiary of the earlier electric supply. Nexus can also be established if the same old connection is sought to be revived or if the subsequent consumer / proposed consumer already has same connection to the business/property of the erstwhile consumer. The nexus between erstwhile and subsequent consumer cannot be 11 construed merely because the land on which supply is requested by a subsequent purchaser, from an auction conducted by a 3rd party creditor, was also having a supply to a different consumer.

Now coming to the Regulation 4.6, a plain reading of the aforesaid would essentially mean and apply to the same consumer applying for a fresh service connection after the deemed termination occurs as a consequence of expiry of 180 days after non-payment of dues by the said same consumer.

The said regulation can have no manner of application to the present case as the writ petitioner is a completely new consumer. He was in no way connected with either the earlier consumer or the earlier business of the consumer.

It is true that the writ petitioner seeks to start a similar business manufacture of Iron Billets, that was being conducted by the erstwhile consumer. The same can, however, not establish any relation between the present and the previous consumers.

It would be relevant to set out here Paragraph of the Southern Power decision (supra). At Paragraph 6 and 7 it was held as follows:-

"6. We have heard the learned counsel appearing for the parties and we are of the opinion that there is no reason to interfere with the judgment of the High Court. The High Court relied upon the judgment in Isha Marbles [Isha Marbles v. Bihar SEB, (1995) 2 SCC 648] to grant relief to the first respondent. It was held in the said judgment that an auction-purchaser cannot be called upon to clear the past arrears. It was also held that a power connection to an auction- purchaser cannot be withheld for the dues of the past owner. The High Court also referred to a judgment in Ahmedabad Electricity Co.

Ltd. [Ahmedabad Electricity Co. Ltd. v. Gujarat Inns (P) Ltd., (2004) 3 SCC 587] wherein the ratio of the judgment in Isha Marbles case[IshaMarbles v. Bihar SEB, (1995) 2 SCC 648] was reiterated, particularly with reference to a fresh connection for supply of electricity.

In NESCO v. Raghunath Paper Mills (P) Ltd. [NESCO v. Raghunath Paper Mills (P) Ltd., (2012) 13 SCC 479] , the purchaser in an auction-

sale conducted by the Official Liquidator on "as-is- where-is" and "whatever-there-is" basis was found not liable for payment of the electricity arrears. In the said case an advertisement was issued by the Official Liquidator for sale of movable and immovable property of M/s Konark Paper and Industries Limited on "as-is-where-is" and whatever-there-is basis. The auction-purchaser applied for a fresh electricity connection to its unit which was denied on the ground of non-payment of arrears by the past owner. After considering the judgments in Ahmedabad Electricity Co. [Ahmedabad Electricity Co. Ltd. v. Gujarat Inns (P) Ltd., (2004) 3 SCC 587] and Isha Marbles [Isha Marbles v. Bihar SEB, (1995) 2 SCC 648] , this Court held that the request of the auction- purchaser for a fresh connection could not have been rejected.

7. The facts of this case are similar to that of NESCO v. Raghunath Paper Mills (P) Ltd. [NESCO v. Raghunath Paper Mills (P) Ltd., (2012) 13 SCC 479] The tender/sale notice mentioned that the property was being auctioned on "as-is-where-is" basis. The first respondent applied for a fresh connection and he is in no way connected to the past owner. He has also not undertaken to pay the past arrears of the previous owner. In view of the above, the appeal is dismissed."

For the reasons stated above, this court is of the view that the neither has the licensee has been able to establish the nexus between M/s. Capricorn Ispat Udyog Pvt. Ltd. and the writ petitioner 13 nor is this a case where M/s. Capricorn Ispat Udyog Pvt. Ltd. is applying for revival of the old connection or a fresh connection at the same place, in a new name.

The impugned communications dated 10.05.2019 and 17.05.2019 are hereby quashed and set aside.

The D.V.C. shall be obliged to supply electricity after effecting connection within a period of four weeks from date to the writ petitioner upon complying with rules and all requisite formalities, applicable to a fresh and new licensee without any liability on the writ petitioner to pay any dues of the previous owner, M/s. Capricorn Ispat Udyog Pvt. Ltd.

With the above observations, the instant writ petition is hereby disposed of.

Learned counsel for the licensee prays for stay of operation of the order. Having considered such prayer, the same is rejected.

There will be no order as to costs.

Urgent certified photostat copy of this order, if applied for, shall be given to the parties as expeditiously as possible on compliance of all necessary formalities.

(Rajasekhar Mantha, J.)

Unlock Advanced Research with PRISMAI

Calcutta High Court (Appellete Side)