Case Note & Summary
The judgment concerns a batch of appeals before the Supreme Court of India arising from disputes between auction purchasers of industrial units and the Bihar State Electricity Board regarding liability for unpaid electricity dues of previous consumers. The appeals were consolidated because they raised the same issue: whether an auction purchaser is liable to meet the liability of the old consumer for electricity dues to premises purchased in auction sale from the Bihar State Financial Corporation under Section 29(1) of the Bihar State Financial Corporation Act, 1951. In Civil Appeal No. 1418 of 1995, the appellant M/s Isha Marbles purchased the mortgaged assets of M/s Patel Industries, Daltonganj, in an open auction sale held by the Corporation. After paying a substantial sum, it obtained possession on 31 January 1991, but the electrical connection had been disconnected. The Board required the appellant to discharge all liabilities of the previous consumer. The appellant challenged this demand before the Patna High Court, Ranchi Bench, contending that as a transferee it had not consumed electricity and was not liable for energy consumed before transfer. The Division Bench dismissed the writ petition, holding that the Board would be entitled to take action in accordance with law. Aggrieved, the appellant appealed. In Civil Appeal No. 1420 of 1995, the Board appealed against a High Court order in favour of M/s Waxpol Industries Ltd. The Bihar Financial Corporation had sold the unit of M/s Neo Chemicals & Metal Products (P) Ltd, which had outstanding electricity dues of Rs.2,35,924.78, to Waxpol Industries for Rs.2,97,578.27 in an auction under Section 29. Waxpol applied for connection and stated that previous dues did not apply. The Board refused to restore electricity because dues had not been paid. The High Court allowed Waxpol's writ petition, holding that the present occupants were free from encumbrance or liability towards outstanding electricity dues, relying on Ram Krishna Choudhary v. Bihar State Electricity Board, and that without a clause making the auction purchaser liable for liabilities, the Board could not refuse connection. In Civil Appeal No. 1419 of 1995, the Board appealed against a High Court decision in favour of Suman Packaging Private Limited. Suman Packaging purchased the unit of M/s Sanjay Packaging Industries for Rs.8 lakhs in an auction, but Sanjay Packaging had electricity dues of Rs.87,137.34. The Board demanded these dues before providing connection. The High Court held that Section 24 of the Electricity Act enables disconnection only against the consumer who defaults, and cannot apply to a bona fide transferee who had no connection with the original consumer. The Board was under a statutory obligation to supply electricity under Clause VI of Schedule I, and as a State under Article 12, its action must be fair and reasonable. It could not take advantage of its own wrong in allowing arrears to accumulate. The High Court also held that previous decisions in Isha Marbles and Dani Mordhwaj Cold Storage were per incuriam. In Civil Appeal No. 1422 of 1995 and Civil Appeal No. 1421 of 1994, similar writ petitions were allowed following the Suman Packaging decision. Before the Supreme Court, arguments were advanced. The auction purchasers contended they were not consumers as defined under Section 2(c) of the Electricity Act, had no electricity connection, and could not be held liable for contractual dues of previous consumers. They relied on Sauriyar Luka v. Kerala Electricity Board and National Textile Corporation v. M.P. Electricity Board, and argued that the relationship between Board and consumer is purely contractual as held in Bihar State Electricity Board v. Green Rubber Industries. They also argued that the Board could not impose precondition of clearing old dues as it would be ultra vires the Electricity Act and Supply Act. The Board's stand was that it could demand arrears from subsequent occupants as a condition for connection. The excerpt of the judgment ends before the Supreme Court's analysis and final operative order.
Issue of Consideration
Whether an auction purchaser is liable to meet the liability of the old consumer for electricity dues to the premises purchased in auction sale from the Bihar State Financial Corporation under Section 29(1) of the Bihar State Financial Corporation Act, 1951.
Case Details
1995 LawText (SC) (02) 11
Civil Appeal No. 1418 of 1995 (Arising out of SLP No. 617 of 1992); Civil Appeal No. 1420 of 1995 (Arising out of SLP No. 16227 of 1992); Civil Appeal No. 1419 of 1995 (Arising out of SLP (C) No. 18244 of 1993); Civil Appeal No. 1422 of 1995 (Arising out of SLP (C) No. 10253 of 1994); Civil Appeal No. 1421 of 1994 (Arising out of SLP (C) No. 11806 of 1994)
S. Mohan, P.B. Sawant, K.S. Paripoornan
1995 SCC (2) 648, JT 1995 (2) 626, 1995 SCALE (1)721
Mr. Gopal Subramaniam, Mr. Muralidhar
Bihar State Electricity Board
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Nature of Litigation
Writ petitions and civil appeals concerning whether auction purchasers of industrial units are liable for outstanding electricity dues of previous consumers.
Remedy Sought
Auction purchasers sought electricity connection without being required to pay previous consumer's dues; Board sought to uphold demand and set aside High Court orders directing supply.
Filing Reason
Electricity Board refused to provide new connection until previous dues were cleared, leading to writ petitions by purchasers and appeals by Board against adverse orders.
Previous Decisions
In Isha Marbles case, Patna High Court dismissed the writ petition and held Board entitled to action in accordance with law. In Waxpol, Suman Packaging, and Abhay Kumar cases, High Court allowed writ petitions and held auction purchasers not liable for previous dues.
Issues
Whether an auction purchaser is liable to meet the liability of the old consumer for electricity dues to premises purchased in auction sale from Bihar State Financial Corporation under Section 29(1) of Bihar State Financial Corporation Act, 1951.
Whether Section 24 of Indian Electricity Act, 1910 can be invoked against a bona fide auction purchaser who was not the consumer at the time of default.
Whether the Bihar State Electricity Board can impose condition of clearing previous dues as precondition for new connection under Clause VI of Schedule I of Electricity Act, 1910.
Submissions/Arguments
Auction purchaser is not a consumer under Section 2(c) of Electricity Act, 1910, as no electricity connection was given, and cannot be held liable for contractual dues of previous consumer.
Section 24 of Electricity Act presupposes an existing connection and cannot apply to a transferee who had no connection with the original consumer.
Relationship between Board and consumer is purely contractual, and there is no statutory basis to fasten previous consumer's liability on a subsequent bona fide purchaser.
Board is under statutory obligation to supply electricity under Clause VI of Schedule I, and cannot impose additional precondition not stipulated therein.
Board cannot take advantage of its own wrong in allowing arrears to accumulate without resorting to Section 24 or demanding additional security.
Board contended that it could demand arrears from subsequent occupant as condition for connection.
Judgment Excerpts
whether the auction purchaser is liable to meet the liability of old consumer or electricity to the premises which is purchased by him in the auction sale from Bihar State Financial Corporation under Section 29 (1) of the Bihar State Financial Corporation Act, 1951
The Board is a 'State' within the meaning of Article 12 of the Constitution. Therefore, its action must pass the test of fairness and reasonableness.
Section 24 of the Electricity Act has no application since that presupposes an electricity connection which connection the appellant is yet to be given.
No doubt, by reason of the amendment made on 28th April. 1982 to the Bihar and Orissa Public Demands Recovery Act, 1914 electricity dues are recovered by bringing the property of the consumer concerned to sale in certificate proceedings. Such a provision cannot be invoked against a subsequent bona fide auction purchaser of the assets.
Procedural History
Isha Marbles purchased assets in auction, got possession on 31.1.1991, Board demanded previous dues; filed C.W.J.C. No. 1536 of 1991 before Patna High Court, Ranchi Bench, which was dismissed. Waxpol Industries purchased property in auction, applied for connection, Board refused on 3.1.86; filed C.W.J.C. No.25 of 1980, High Court allowed. Suman Packaging purchased unit, Board demanded dues, filed C.W.J.C. No.5358 of 1992, High Court allowed and issued mandamus. Abhay Kumar case similar, High Court allowed following Suman Packaging. Civil Appeal No. 1421 of 1994 similar. Appeals filed in Supreme Court, leave granted, and common judgment directed.
Acts & Sections
- Bihar State Financial Corporation Act, 1951: Section 29(1)
- Indian Electricity Act, 1910: Section 2(c), Section 3(2)(f), Section 22, Section 24, Section 26, Clause VI of Schedule I
- Electricity (Supply) Act, 1948:
- Bihar and Orissa Public Demands Recovery Act, 1914:
- Bihar Public Demands Recovery (Amendment) Act, 1982:
- Constitution of India: Article 12
