Karnataka High Court
M/S Bidar Rubber And Reclaims Private ... vs M/S Gulbaraga Electricity Cupply ... on 25 September, 2012
Author: Aravind Kumar
Bench: Aravind Kumar
1
IN THE HIGH COURT OF KARNATAKA
CIRCUIT BENCH, GULBARGA
DATED THIS THE 25th DAY OF SEPTEMBER, 2012
BEFORE
THE HON'BLE MR.JUSTICE ARAVIND KUMAR
WRIT PETITION Nos. 38957/2011 C/w
84141-142/2011 (GM-KEB)
W.P.No.38957/2011
BETWEEN:
KARNATAKA STATE INDUSTRIAL AND
INFRASTRUCTURE DEVELOPMENT CORPOATION LTD.
BY ITS MANAGER
KHANIJA BHAVAN
NO.49, 4TH FLOOR, EAST WING
RACE COURSE ROAD
BANGALORE - 560 001
...PETITIONER
(BY SRI:ASHOK S KINAGI, ADVOCATE)
AND:
1. KARNATAKA ELECTRICITY REGULATORY
COMMISSION
BY ITS CHAIRMAN
6TH & 7TH FLOORS, MAHALAKSHMI CHAMBERS
NO.9/2, M G ROAD
BANGALORE - 560 001
2. KARNATAKA POWER TRANSMISSION
CORPORATION LTD.
BY ITS MANAGING DIRECTOR
CAUVERY BHAVAN
BANGALORE - 560 009
2
3. GULBARGA ELECTRICITY SUPPLY COMPANY LTD.,
BY ITS ASST. EXECUTIVE ENGINEER
O & M SUB DIVISION
BIDAR - 585 401
4. BIDAR RUBER & RECLAIMS PVT. LTD.,
BY ITS MANAGER
PLOT NO.24-28, INDUSTRIAL AREA
NAUBAD, BIDAR - 585 403.
...RESPONDENTS
(BY SRI:RAVINDRA REDDY, ADV FOR R3,
SRI:S S ASPALLI, ADV FOR R4
NOTICE TO R-1 DISPENSED WITH)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE
ODER DATED 11.08.2011 OF THE FIRST RESPONDENT
KARNATAKA ELECTRICITY REGULATORY COMMISSION,
BANGALORE IN CASE NO.D/07/06 AS AT ANNEXURE-A AND
ETC.,
W.P.Nos.84141-142/2011
BETWEEN:
M/S.BIDAR RUBBER & RECLAIMS
PRIVATE LIMITED
PLOT NO.24-28, INDUSTRIAL AREA
NAUBAD
BIDAR 585 403
REPRESENTED BY ITS MANAGER
MR.C ANANDAKUMAR .... PETITIONER
(BY SRI S S ASPALLI, ADVOCATE)
AND:
1 M/S.GULBARGA ELECTRICITY
SUPPLY COMPANY LIMITED
ASSISTANT EXECUTIVE ENGINEER
WORK & IMPLEMENTATION
SUB-DIVISION GESCOM
BIDAR 585 401
3
2 THE KARNATAKA STATE INDUSTRIAL
INVESTMENT AND DEVELOPMENT
CORPORATION LIMITED
MSIL HOUSE
36, CUNNINGHAM ROAD
BANGALORE - 560 052
3 THE KARNATAKA ELECTRICITY
REGULATORY COMMISSION
6TH & 7TH FLOOR, MAHALAXMI CHAMBERS
9/2, M.G.ROAD
BANGALORE - 560 001 ... RESPONDENTS
(BY SRI RAVINDRA REDDY, ADVOCATE FOR R-1
SRI ASHOK S KINAGI, ADVOCATE FOR R-2
R-3 SERVED)
THESE WRIT PETITIONS ARE FILED UNDER ARTICLES
226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO
QUASH ORDER DATED 11.08.2011 PASSED BY THIRD
RESPONDENT VIDE ANNEXURE-O AND ETC.,.
THESE WRIT PETITIONS COMING ON FOR DICTATING
ORDERS THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
These writ petitions are directed against order passed by the Karnataka Electricity Regulatory Commission in case No.D/07/2006 dated 11.08.2011 whereunder it has been held that M/s.Bidar Rubber and Reclaims Private Limited (hereinafter referred to as 'petitioner') is liable to pay arrears due to Gulbarga 4 Electricity Supply Company Limited (hereinafter referred to as 'GESCOM') and petitioner would be entitled to make claim against Karnataka State Industrial and Infrastructure Development Corporation Limited (hereinafter referred to as 'KSIIDC) in view of sale conditions agreed to it while selling the unit to petitioner.
2. Heard arguments of Sri S S Aspalli, learned Advocate appearing for petitioner, Sri Ravindra Reddy, learned Advocate appearing for GESCOM and Sri Ashok S Kinagi, learned Advocate appearing for KSIIDC and perused writ papers and statement of objections filed thereunder.
3. Petitioner is a private limited company engaged in manufacture and sale of reclaimed rubber, natural rubber, synthetic rubber and their products. Petitioner was successful bidder in an auction held by KSIIDC of assets of sick company called M/s.Supersonic Rubber 5 (P) Limited, Bidar for total consideration of Rs.87.50 lakhs. On purchasing said unit, petitioner sought for fresh electricity supply connection to the said factory since supply of electricity to sick company had been stopped by disconnecting the meter on account of non- payment of electricity consumption charges. After having purchased the said industry on 20.09.2001 an application was made for power connection by petitioner. The then KPTCL, by letter No.EEE/BDR/ DO/AAC-11/SA-4 2001-02/175-76 dated 12.10.2001 informed the petitioner that arrears of M/s.Supersonic Rubber Industry Limited amounting to Rs.8,99,036/- should be cleared. As such, petitioner approached vendor namely KSIIDC with a copy of said letter and requested them to clear dues/arrears on the ground that as per terms and conditions agreed with petitioner while selling the unit in public auction, KSIIDC had to make such payment. It is not in dispute that KSIIDC held discussion with CMD, KPTCL and it was informed 6 by the then Managing Director of KSIIDC to the Chairman and Managing Director of KPTCL by communication dated 04.02.2002 (Annexure-B to W.P.Nos.84141-142/2011) as under:
"Regarding the arrears payable, the issue can be sorted out separately between the two institutions i.e.KSIIDC and KPTCL. As per the terms and conditions of the sale letter in favour of the above purchaser, the purchaser is liable to pay only the fresh deposit and other charges applicable for a fresh power connection."
Thereafter on 21.03.2002 KSIIDC was informed by KPTCL to arrange for payment of Rs.5,10,364/- for arranging power supply to petitioner. Accordingly, KSIIDC made payment of arrears of M/s.Supersonic Rubber Industries Private Limited, Bidar namely dues of sick company which had been taken over by KSIIDC. On receipt of such payment, application of petitioner came to be processed and after collecting necessary deposits, power supply was granted.
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4. However, during this interregnum period i.e., after sale of unit to petitioner and before giving fresh power supply, a notice dated 17.08.2004 (Annexure-F) was issued to KSIIDC by KPTCL to clear balance of Rs.11.94 lakhs (interest portion) which was claimed to be dues of erstwhile sick company towards interest on arrears. A copy of said letter was also marked to petitioner intimating the petitioner that if balance dues are not settled within 15 days, power supply to its unit would be disconnected. Being aggrieved by this communication, petitioner filed Writ Petition No.35500/2004 before this Court and said writ petition came to be disposed of by order dated 25.08.2006 with a direction to petitioner to treat said communication as show cause notice and file reply to said communication within two weeks from the date of receipt of copy of said order and further direction was issued to respondents to dispose of the same within four months from the date of 8 reply filed by petitioner. Petitioner was also directed to make payment of Rs.6 lakhs along with reply to GESCOM. Aggrieved by said order, petitioner filed Writ Appeal No.1678/2006 and same came to be disposed of on 13.10.2006 and it was made clear that it was open to petitioner to make a request to GESCOM not to appropriate adhoc deposit of Rs.6 lakhs until such time liability of parties are finally adjudicated by GESCOM. It was also observed therein that petitioner may also consider filing an appeal before the Karnataka Electricity Regulatory Commission (hereinafter referred to as 'KERC') and/or instituted a duly contemplated suit for appropriate reliefs. Said order has undisputedly reached finality.
5. In view of liberty granted to petitioner to approach KERC, a representation was submitted by petitioner to KERC for adjudication of dispute as per representation dated 25.10.2006 (Annexure-J to W.P.Nos.84141- 9 142/2011) . After submission of representation to KERC, matter was pending before said Authority and it was not adjudicated. In the meanwhile, GESCOM issued a notice dated 30.07.2008 informing petitioner that by order dated 05.10.2006 petitioner's request not to appropriate adhoc deposit of Rs.6 lakhs until such time liability of parties are finally adjudicated, has been rejected and directed petitioner to pay balance amount of Rs.5,84,044/-, failing which, petitioner was informed that installation would be disconnected. Being aggrieved by this order, petitioner approached this Court once again in Writ Petition No.40148/2008. After considering rival contentions, this Court directed first respondent to keep communication/notice dated 30.07.2008 in abeyance till KERC adjudicates dispute pending between parties. Accordingly, writ petition came to be disposed of by order dated 06.12.2010. It is thereafter KERC has passed the impugned order dated 11.08.2011 Annexure-A whereunder it has been held 10 that as per Karnataka Electricity Regulatory Commission (Electricity Supply and Distribution) Code, 2000-01 in particular, Regulation 4.12(v) to arrive at a conclusion that it is the new consumer i.e., petitioner who has to pay outstanding arrears in respect of premises for which electricity was disconnected and KSIIDC is not liable by relying upon judgment of Hon'ble Apex Court in the case of HARYANA STATE ELECTRICITY BOARD vs HANUMAN RICE MILL reported in AIR 2010 SC 3835 and in conclusion, it has been held that GESCOM was entitled to recover the amount from petitioner and it would be at liberty to make claim against KSIIDC in view of sale conditions referred to in KSIIDC correspondence with KPTCL dated 04.02.2002.
6. Insofar as reserving liberty to petitioner to make a claim against KSIIDC has been called in question by KSIIDC in Writ Petition No.38957/2011. Petitioner has 11 challenged the order of KERC dated 11.08.2011 directing it to pay the amount to GESCOM and demand raised by GESCOM thereunder dated 20.09.2011 - Annexure-P in Writ Petition Nos.84141-142/2011.
7. The grounds raised by Sri.Aspalli, learned counsel for petitioner can be summarized as under:
(i) Correspondence between KSIIDC with KPTCL would go to show that dispute is only with regard to interest and admittedly principal amount has been paid by KSIIDC to GESCOM.
(ii) Regulations of GESCOM do not provide for demanding arrears from petitioner after providing electricity supply to new consumer and regulation 4.12(v) do not provide for it;
(iii) Demand/recovery if any will have to be made before giving supply of electricity and not 12 thereafter as contemplated under regulation 4.12(v).
(iv) At no point of time there has been demand raised on the petitioner;
(v) Regulation 4.12(v) would clearly go to show that recovery or demand is to be made before connection is given and not thereafter. In support of his submissions, he relies upon judgment of Hon'ble Apex Court in the matter of HARYANA STATE ELECTRICITY BOARD vs M/S.HANUMAN RICE MILLS & ORS reported in AIR 2010 SC 3835.
8. Per contra, Sri Ravindra Reddy, learned Advocate appearing for GESCOM would support the order passed by KERC and submits that in the instant case, demand had infact been raised on petitioner way back in the year 2001 itself i.e., on 12.10.2001 and this fact is known to petitioner since in the representation submitted to KERC on 25.10.2006, a reference has been 13 made by petitioner itself to said demand raised by GESCOM, then KEB and as such, Regulation 4.12(v) gives full power to GESCOM to claim arrears in respect of dues of sick unit from subsequent purchaser and as such, he would submit that judgment of the Hon'ble Apex Court in HARYANA STATE ELECTRICITY BOARD supra would assist GESCOM and not the petitioner. In support of his submissions, he would rely upon judgment of a co-ordinate Bench of this Court in B.K.SYED ZAKIR vs BANGALORE ELECTRICITY SUPPLY COMPANY LIMITED & OTHERS reported in ILR 2005 KAR. 1676.
9. Sri Ashok Kinagi, learned Advocate appearing for KSIIDC would assail order of KERC by contending that arrears of electricity charges of erstwhile sick unit M/s.Supersonic Rubber Industry which has been purchased in public auction by petitioner, has to be paid by petitioner since what was sold to petitioner was 14 the unit in 'as is where is' condition and also it was the term of contract that any statutory liability if applicable, should be borne by the purchaser and as such, KSIIDC cannot be saddled with any liability since it is a Government Company and as such, he seeks for the allowing the writ petition filed by KSIIDC.
10. Having heard the learned Advocates appearing for parties, I am of the considered view that following point would arise for consideration in respect of arrears due from sick unit M/s.Supersonic Rubber Private Limited:
"Whether petitioner or KSIIDC is liable to pay said amount or liability is to be fastened jointly on KSIIDC and petitioner and order dated 11.08.2001 passed by KERC has to be sustained, quashed or modified?
11. In order to answer the above point formulated hereinabove, I am of the considered view that judgment of Hon'ble Apex Court in the case of HARYANA STATE ELECTRICITY BOARD referred to supra rendered in 15 identical and similar circumstances, is required to be examined since contentions raised in these petitions are identical to contentions raised in said matter. It has been held by Apex Court in HARYANA ELECTRICITY BOARD'S case after examining ISHA MARBLES vs BIHAR STATE ELECTRICITY BOARD (1995)2 SCC 648) by summing up the arguments as under:
(i) Electricity arrears do not constitute a charge over the property.
Therefore in general law, a transferee of a premises cannot be made liable for the dues of the previous owner/occupier.
(ii) Where the statutory rules or terms and conditions of supply which are statutory in character, authorize the supplier of electricity, to demand from the purchaser of a property claiming re-connection or fresh connection of electricity, the arrears due by the previous owner/occupier in regard to supply of electricity to such premises, the supplier can recover the arrears from a purchaser.16
When a purchaser of premises seeks for fresh power connection to premises purchased by him in a public auction, the Distributor of electricity can stipulate terms to which it would supply electricity. It can stipulate that arrears due with regard to supply of electricity made to premises when it was in occupation of previous owner/occupant should be cleared before electricity is supplied to premises afresh as one of the conditions. In ISHA MARBLES case referred to supra it was held by Hon'ble Apex Court as under:
"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 17 of them can easily say that he is not liable for the liability of the predecessor in interest. No doubt, dishonest consumers cannot be allowed to play truant with the public property but inadequacy of the law can hardly be a substitute for overzealousness."
12. Thus, from perusal of these judgments, it would emerge that arrears of electricity charges does not create charge over the property. If terms and conditions of contract provide for enforcing the term of a contract to claim arrears in such circumstances, company as in the instant case, GESCOM, would be within its right to seek payment of arrears due from erstwhile company from subsequent purchaser. In other words, there should be privity of contract between GESCOM and petitioner or in the alternative, if statutory rules and regulations which govern such supply provide for supplier of electricity to seek payment of arrears from subsequent purchaser, even in such circumstances, GESCOM as in the present case, would be within its 18 limits to seek enforcement of dues or recovery of amounts from subsequent purchaser.
13. It is in this sphere, facts on hand are required to be examined. Regulation which has been relied upon by both the learned Advocates and which the umbilical chord to demand raised by GESCOM on petitioner is extracted herein below:
"4.12(v): If any person desires to have electricity for a premises for which the power supply agreement has been terminated (whether the service line is dismantled or not) he will be treated as a fresh consumer and the licencee shall collect the outstanding arrears in respect of the said premises from such person before connection is given."
(Emphasis supplied)
14. Admittedly, there is no privity of contract between KSIIDC and GESCOM and this fact has also been reiterated and or affirmed by KERC in the order impugned in present writ petitions. A reading of above provision makes it explicitly clear that electricity 19 supplier before giving connection for a premises to which power supply Agent has been terminated on account of arrears outstanding can give connection by treating him as fresh consumer to recover the said amount from such person. Perusal of HARYANA STATE ELECTRICITY BOARD case supra relied on by learned Advocates would go to show that in the said case, Corporation did not plead in its defence that any statutory rule or terms and conditions of supply authorised it to demand dues of previous owner from respondent was pleaded. In this factual background and also in the background that Corporation did not demand alleged arrears when first respondent therein approached appellant for electricity connection, held that demand made after three years could not be enforced against first respondent thereon i.e., subsequent purchaser. Said factual matrix is conspicuously absent in the instant case for the following reason:
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(1) Petitioner purchased the unit in a public auction from KSIIDC on 20.09.2001 and submitted a representation to the then KEB (now GESCOM) seeking supply of electricity to which reply came to be given on 12.10.2001 to petitioner by raising the demand in following manner:
"Referring to the above, I write to inform you that the HT installation bearing R.R.No.HT-25 M/s.Super Sonic Rubber Industry I.A., Naubad serviced on 3.8.1988 with a contract demand 600 KVA, the installation was disconnected on 4.11.1991 for non payment of arrears of Rs.6,15,897/- later on recovery notices such as form 'A', 'B' & 'C' served for Rs.8,99,036/- arrears.
At present the Industry has been taken over by you and intended to re- start the same, you have to clear the arrears of Rs.8,99,036/- and to pay the required fresh D-2 and D-11 duly observing the Corporate formalities for availing fresh power supply at the above premises."
Receipt of this demand notice is admitted by petitioner in its representation submitted to KERC on 25.10.2006. 21 However, there is no whisper in the writ petition about it. In that view of the matter, dicta laid down in HARYANA STATE ELECTRICITY BOARD's case supra by Hon'ble Apex Court in para 9(ii) which is already extracted herein above leads to one and only conclusion that petitioner cannot escape its liability to pay amount to GESCOM inasmuch as, regulation which governs supply of electricity are statutory in nature and admittedly at the first instance on 12.10.2001 itself GESCOM had raised a demand on petitioner undisputedly and as such petitioner cannot contend there was no statutory demand raised by GESCOM on petitioner before supplying electricity or it has been raised after supply of electricity. To that extent, order of KERC cannot be faulted with and requires to be affirmed.
15. Though Sri Aspalli, learned Advocate for petitioner has made a valiant effort to persuade this Court that 22 GESCOM after having supplied electricity cannot again start renewing its demand for payment of arrears of erstwhile company, though looks attractive, cannot be accepted. As already noted herein above, statutory regulation override any concession extended even if any, to the petitioner by either providing electricity supply fresh or by treating petitioner as a fresh consumer since there was already a demand raised by GESCOM against petitioner and raising of such demand having not been denied by petitioner, but on the contrary it has admitted to have received such a demand in its communication dated 25.10.2006 Annexure-J.
16. Now, turning my attention to second limb of point formulated herein above namely, contention of Sri Ashok Kinagi, learned Advocate for KSIIDC that order of KERC to the extent of reserving liberty to the petitioner to make claim against KSIIDC is to be modified or set 23 aside or quashed requires to be examined for the purpose of outright rejection.
17. KSIIDC is a Government Company as defined under Section 617 of Indian Evidence Act, 1956. After having taken over assets of M/s.Super Sonic Rubber Industries Private Limited in exercise of its powers under Section 29 of State Financial Corporations Act, 1951 brought the assets of said Company to sale by public auction. Petitioner herein was the successful bidder and having paid a sum of Rs.87.50 lakhs purchased it and terms of the sale conditions were stipulated and for purpose of this case, condition Nos.(1), (5) and (9) would suffice and they read as under:
(1) The sale is on "AS IS WHERE IS BASIS"
(5) Fresh power connection charges towards KPTCL shall be borne by the purchaser. (9) Any other statutory liabilities, if applicable, shall be borne by the purchaser.24
Condition No.(9) is pressed into service by Mr.Ashok Kinagi to buttress his argument that KSIIDC should be absolved its liability of erstwhile company since petitioner had been notified dues like the one has to be paid by it. In ISHA MARBLES's case referred supra Hon'ble Apex Court has held that in the absence of a charge over property in respect of previous electricity dues and in the absence of statutory rules authorising demand for the dues of previous occupant, an auction purchaser seeking supply of electrical energy by way of a fresh connection, cannot be called upon to clear pre- sale arrears as a condition precedent for granting fresh connection or cannot be saddled with such liability. In other words, if statutory rules governing conditions relating to sanction of connection or supply of electricity, distributor of electricity can insist upon fulfillment of requirements of such rules and regulations and if rules are silent, it can stipulate such 25 terms and conditions as it deems fit and proper to regulate its transactions and dealings.
18. The correspondence that ensued between KSIIDC and GESCOM particularly communication dated 04.02.2002 Annexure-B would clearly indicate the stand of KSIIDC to the effect that purchaser/petitioner was prepared to pay new power connection charges as applicable and it is agreed to by KSIIDC itself in the penultimate paragraph of said communication to the following effect:
"As per the terms and conditions of the sale letter in favour of above purchaser, the purchaser is liable to pay only the fresh deposit and other charges applicable for a fresh power connection."
It was also agreed that said issue can be sorted out between two agencies and in furtherance of said communication, GESCOM raised a demand on KSIIDC for Rs.5,10,364/- which admittedly came to be paid by KSIIDC on 21.03.2002. It is the term of contract that 26 purchaser is liable to pay to KPTCL/GESCOM only fresh power connection charges and not arrears if any. Words used "AS IS WHERE IS BASIS" obviously refers to assets as found in the unit and it cannot be presumed or construed that it would also refer to a liability that had accrued on the company which was sold by way of public auction. Clause No.(9) pressed in to service with regard to other statutory liabilities to be borne by the purchaser would not assist or come to the rescue of KSIIDC to saddle the liability of erstwhile company taken over by it inasmuch as, such liabilities would be prospective and not retrospective insofar as auction purchaser is concerned as held by the Hon'ble Apex Court in judgment referred to above. It is in this factual background, KSIIDC had agreed to pay amount of Rs.5,10,364/- as demanded by GESCOM and accordingly it has also paid without raising its little finger and now it cannot turn around and contend that it should be absolved of such liability particularly 27 having received the entire consideration of 87.50 lakhs from petitioner. Hence, contention of Sri Ashok Kinagi, learned Advocate appearing for KSIIDC that it should be absolved of any liability cannot be accepted and it is liable to be rejected and accordingly it stands rejected.
19. Further, having held that petitioner cannot wriggle out of its statutory liability as already discussed herein supra, respondents and particularly KSIIDC cannot be heard to contend that petitioner need not recover said amount from it. Though a ray of hope has been bestowed by KERC by extending olive branch i.e., by permitting petitioner to make claim against KSIIDC in view of sale conditions between KSIIDC and petitioner and there being no privity of contract between KSIIDC and GESCOM, petitioner is required to be indemnified or paid the amount that may be paid by it to GESCOM and in fact, this direction would be in furtherance of direction issued by KERC, since petitioner cannot be 28 made to approach civil Court after recovering the amount from KSIIDC particularly when it has not disputed its liability of erstwhile company taken over by it in exercise of its power under Section 29 of SFC Act.
20. In view of aforesaid discussion, following order is passed:
ORDER
(i) Writ Petition Nos.84141-142/2011 are hereby allowed in part;
(ii) Order of KERC dated 11.08.2011 in
case No.D/07/06 is affirmed to the
extent of affirming demand raised by
GESCOM against petitioner in
W.P.Nos.84141-142/2011.
(iii) Petitioner has to be indemnified by KSIIDC of the amount that may be paid by it to GESCOM and amount already paid by KSIIDC would be given 29 set off or given credit as payment made by petitioner or be treated as payment made by KSIIDC towards due of erstwhile company.
(iv) Amounts paid by petitioner to
GESCOM shall be reimbursed by
KSIIDC with interest at 6% p.a. within three months from the date of demand made by petitioner on KSIIDC and on production of proof of such payment.
(v) Writ Petition No.38957/2011 filed by KSIIDC is hereby dismissed.
(vi) Parties to bear their respective costs.
Sd/-
JUDGE *sp