Case Title: M/s Pure & Cure Healthcare Pvt. Ltd V/s HPSEBL(Nine cases)

Bench Chief Justice of India DY Chandrachud, Justice PS Narasimha and Justice Hima Kohli 

Decided on 19 Apr 2024 

Issue: Whether electricity dues of the prior owner would constitute a charge on the property.

Facts 

The issue arose in the nineteen cases before the Court, in which the electric utilities refused to provide connection to new purchasers unless the dues of the previous owner M/s  Ankur   Drug Private   Ltd., to the tune of  Rs. 20,43,837/ were cleared. The premises were sold in auction on “as is where is basis” and the new owners who purchased the property in auction applied for electricity supply in the premises. 

The Sale Certificate issued to M/s Pure & Cure Healthcare Pvt. Ltd. clearly stated that the property was free from all encumbrances. the Himachal Pradesh State Electricity Board (HPSEBL) refused to grant a new electricity connection to the new owner

Law Point as per Electricity Act 2003 as Explained by Himachal Pradesh High Court 

• Obligation under Section 43 of the Electricity Act 2003 is linked to premises where the connection is sought

The Court held that the duty to supply electricity under Section 43 of the Act is not absolute. The duty to supply electricity is with respect to the owner or occupier of the premises. The 2003 Act contemplates a synergy between the consumer and the premises. Under the Act, when Electricity is supplied, the owner or occupier becomes the consumer only with respect to those particular premises for which electricity supply is sought.

• Electricity sought by the auction purchaser is a reconnection or a fresh connection.

Supreme Court’s judgment in K.C. Ninan Vs. Kerala State Electricity Board & Ors. (2023) the bench at the outset clarified that electricity dues are linked to the consumer, not the premises and added that a new owner or occupier applying for a connection is considered a fresh connection.

1. An application by an auction purchase is to be held as reconnection even if the applicant has to seek connection to the same premises for which electricity was already provided. 
2. Even if the consumer is the same and premises are different, it will be considered as a fresh connection and not a reconnection

• What is the implication of auction sale of a premises on a “as is where is basis” with reference to electricity arrears.

The implication of the expression “as is where is basis” is that every intending bidder is put on notice that the seller does not take responsibilities in respect of the property offered for sale with regard to any liability for payment of dues like service charges, taxes of local authorities and other dues.

Peculiar circumstances of the case in hands 

Held by Himachal Pradesh High Court In this particular case where transfer of property is not done 

The Himachal Pradesh High Court has ruled 

• That electricity dues cannot be passed on to new occupants of a property if a charge wasn’t created following the Transfer of Property Act and Companies Act.

Even if the dues were to be attributed to the premises, a charge needs to be created following the Transfer of Property Act (Section 100) and the Companies Act (Sections 77 & 78) for the Electricity Board to claim them from the new owner.

• The implication of the expression “as is where is basis” is that every intending bidder is put on notice that the seller does not take responsibilities in respect of the property offered for sale with regard to any liability for payment of dues like service charges, taxes of local authorities and other dues.

Supreme Court views

“A condition enabling the distribution licensee to insist on the clearance of the arrears of electricity dues of the previous consumer before resuming electricity supply to the premises is valid and permissible under the scheme of the 2003 Act”,  

• Agreed to the the implication of the expression “as is where is basis” is that every intending bidder is put on notice that the seller does not take responsibilities in respect of the property offered for sale with regard to any liability for payment of dues like service charges, taxes of local authorities and other dues.

• But Court invoked its special powers under Article 142 of the Constitution to waive the outstanding interest accrued on the principal dues from the date of application for supply of electricity by the auction purchaser. The Court passed this direction having regard to the fact that the cases were pending in the Supreme Court for nearly two decades.

Thus, ruling in favour of M/s Pure & Cure Healthcare Pvt. Ltd the order asking them to clear previous dues was quashed. HPSEBL was accordingly directed to consider their request for a new electricity connection without insisting on payment of outstanding dues from the former owner.