K. C. NINAN v. KERALA STATE ELECTRICITY BOARD & ORS.

A upon such terms and conditions as the Board thinks fit and may for the purposes of such supply frame uniform tariffs.” *** (emphasis supplied) B Under the 1948 Act, the Electricity Boards were empowered to prescribe terms and conditions of supply under Section 49 read with Section 79(j). The Board was empowered to fix such terms and conditions as it thinks fit for supply of electricity to any person not being a licensee. Section 79 permitted the Board to make regulations providing for the principles governing the supply of electricity by the Board to persons C other than licensees under Section 49: “79. Power to make regulations.- The Board may by notification in the Official Gazette, make regulations not inconsistent with this Act and the rules made thereunder to provide for all or any of the following matters, namely:- D *** (j) principles governing the supply of electricity by the Board to persons other than licensees under section 49;” Clause (j) of Section 79 empowered the Board to make regulations E prescribing the principles governing the supply of electricity to consumers. According to Section 79A, any regulation made by the Board had to be laid before the State Legislature. Thus, the conditions of supply framed by the Board under section 49 read with section 79 and section 79A possessed a statutory nature and would be binding on consumers.

69Copy pinpoint69. It has been a consistent position in law that the conditions of supply stipulated by the licensees or Boards have a statutory character.33 A two-judge Bench of this Court, in Jagdamba Paper Industries (P) Ltd v. Haryana State Electricity Board,34 was dealing with a challenge to the unilateral enhancement of security by the Board under the agreement with consumers of electric energy. This Court held that the G Board has been conferred with statutory powers under section 49(1) of the 1948 Act to determine the conditions on the basis of which supply is to be made. Similarly, in Bihar State Electricity Board v. Parmeshwar 33 Punjab State Electricity Board v. Bassi Cold Storage, Kharar and Another, 1994 Supp (2) SCC 124 34 (1983) 4 SCC 508 H

K. C. NINAN v. KERALA STATE ELECTRICITY BOARD & 683 ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]

Kumar Agarwala35, a two-judge Bench of this Court held that the terms and conditions on which the Board supplies electricity to a consumer have a statutory character.

70Copy pinpoint70. In Ferro Alloys Corpn. Ltd v. A P State Electricity Board36 a two-judge Bench of this Court upheld the validity of Section 49 of the 1948 Act. The Court observed that the terms and conditions notified under Section 49 must relate to the object and purpose for which they were issued. There, the Court upheld the authority of the Board to prescribe a security deposit in the following terms: “102. [...] Under the regulations framed by the Board in exercise of powers of Section 49 read with Section 79(j) the consumer is only entitled and the Board has an obligation to supply energy to the consumer upon such terms and conditions as laid down in the regulations. If, therefore, the regulations prescribed a security deposit that will have to be complied with. It also requires to be noticed under Clause VI of the Schedule to the Electricity Act that the requisition for supply of energy by the Board is to be made under proviso (a) after a written contract is duly executed with sufficient security. This, together with the regulations stated above, could be enough to clothe it with legal sanction.”

71Copy pinpoint71. In Hyderabad Vanaspathi (supra), a three-judge Bench of this Court had to decide upon the validity of Condition 39 of the “Terms E and Conditions of Supply” prescribing an adjudicatory machinery for assessing and levying penal damages. This Court considered the legal provisions under the 1910 Act and 1948 Act to hold that terms and conditions notified under Section 49 of the latter enactment were valid and had statutory force. The relevant paragraph is extracted below: F “20. We have already seen that Section 49 of the Supply Act empowers the Board to prescribe such terms and conditions as it thinks fit for supplying electricity to any person other than a licensee. The Section empowers the Board also to frame uniform tariffs for such supply. Under Section 79(j) the Board could have made G regulation therefor but admittedly no regulation has so far been made by the Board. The Terms and Conditions of Supply were notified in BPMs No. 690 dated 17-9-1975 in exercise of the 35 (1996) 4 SCC 686 36 1993 Supp (4) SCC 136 H

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A powers conferred by Section 49 of the Supply Act. They came into effect from 20-10-1975. They were made applicable to all consumers availing supply of electricity from the Board. The Section in the Act does not require the Board to enter into a contract with individual consumer. Even in the absence of an individual contract, the Terms and Conditions of B Supply notified by the Board will be applicable to the consumer and he will be bound by them. Probably in order to avoid any possible plea by the consumer that he had no knowledge of the Terms and Conditions of Supply, agreements in writing are entered into with each consumer. C That will not make the terms purely contractual. The Board in performance of a statutory duty supplied energy on certain specific terms and conditions framed in exercise of a statutory power. Undoubtedly the terms and conditions are statutory in character and they cannot be said to be purely contractual.” D (emphasis supplied)

72Copy pinpoint72. The above discussion shows that Conditions of Supply were notified: first, by the Supply Licensee and Electricity Boards under Section 21 of 1910 Act; and second, by the Electricity Boards under Section 49 E of 1948 Act. The decision in Hyderabad Vanaspathi Ltd (supra) is illustrative of the fact that the courts have upheld the validity of the Conditions of Supply notified by the Electricity Boards. Significantly, the decision in Hyderabad Vanaspati Ltd. (supra) holds that the power of the Board to formulate terms and conditions under Section 49 of the 1948 Act is distinct from the power to make regulations embodied under section 79 of the said Act. Therefore, the terms and conditions of supply notified by the Board under Section 49, although in the nature of subordinate legislation, were not required to be placed before the State Legislature under section 79A of the 1948 Act. In that case, it was also held that statutory conditions could be invalidated only if they were in conflict with any provisions of the 1948 Act or the Constitution.

73Copy pinpoint73. The auction-purchasers have referred to India Thermal Power Ltd v. State of MP37 to argue that the conditions of supply are not statutory, but form a part of the contract between the Electricity

H 37 (2000) 3 SCC 379

K. C. NINAN v. KERALA STATE ELECTRICITY BOARD & 685 ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]

Board and the consumer. Hence, it was submitted that these contractual A terms cannot be enforced by the Board against the new owner or occupier of the premises. In India Thermal Power Ltd (supra), the issue before the two-judge Bench was whether the State Government can alter the terms of the Power Purchase Agreement entered into under Sections 43 and 43-A of the 1948 Act. Section 43 empowered the Board B to enter into an arrangement with any person for purchase or sale of electricity. Section 43-A provided that the tariff for the sale of electricity by a generating company shall be determined in accordance with the norms regarding the operation and plant-load factor as determined by the Central Government from time to time. It was in light of these provisions, that this Court observed that every provision of an agreement entered into between a generating company and Electricity Board in exercise of the enabling power conferred under Sections 43 and 43-A does not render the entirety of the contract statutory. The relevant observations are extracted below: “11. [...] Merely because a contract is entered into in exercise of an enabling power conferred by a statute that by itself cannot render the contract a statutory contract. If entering into a contract containing the prescribed terms and conditions is a must under the statute then that contract becomes a statutory contract. If a contract incorporates certain terms and conditions in it which are statutory then the said contract to that extent is statutory. A contract may contain certain other terms and conditions which may not be of a statutory character and which have been incorporated therein as a result of mutual agreement between the parties. Therefore, the PPAs can be regarded as statutory only to the extent that they contain provisions regarding determination of tariff and other statutory requirements of Section 43-A(2). Opening and maintaining of an escrow account or an escrow agreement are not the statutory requirements and, therefore, merely because PPAs contemplate maintaining escrow accounts that obligation cannot be regarded as statutory.” G

(emphasis supplied)

74Copy pinpoint74. We are of the opinion that the reasoning of this Court in India Thermal Power Ltd (supra) actually supports the arguments of the Electric Utilities. As evinced from Hyderabad Vanaspathi (supra), the H

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A conditions of supply enacted by the Boards have a statutory character. Therefore, any condition enacted under Section 49 of the 1948 Act, specifically one requiring the new owner to clear the arrears of the previous owner as a precondition to availing electricity supply, will have a statutory character. When such a condition is incorporated as part of a contract, such contract also attains a statutory character and the liability contained therein becomes a statutory liability, which can be enforced by the utilities against third parties, including the new owners of the premises in question.

75Copy pinpoint75. The next question that comes up for consideration is whether the Electric utilities can enact a condition providing for recoupment of electricity arrears of a previous owner from the new owner. Under the 1948 Act, the Board could enact terms and conditions for the supply of electricity under Section 49 read with Section 79(j). This Court has held on many occasions that the term ‘regulate’ is to be given a wide interpretation allowing the performance of everything necessary for the organised implementation, development, and conduct of business. In Deepak Theatre v. State of Punjab38 a three-judge Bench of the Supreme Court held that the power to regulate implies the power to prescribe and enforce all such proper and reasonable rules necessary for conduct of business. It was held: E “3. It is settled law that the rules validly made under the Act, for all intents and purposes, be deemed to be part of the statute. The conditions of the licence issued under the rules form an integral part of the statute. The question emerges whether the word regulation would encompass the power to fix rates of admission and classification of the seats. The power to regulate may include the power to license or to refuse the licence or to require taking out a licence and may also include the power to tax or exempt from taxation, but not the power to impose a tax for the revenue in rule making power unless there is a valid legislation in that behalf. Therefore, the power to regulate a particular business or calling implies the power to prescribe and enforce all such proper and reasonable rules and regulations as may be deemed necessary to conduct the business in a proper and orderly manner. It also includes the authority to prescribe the reasonable rules, regulations or conditions

H 38 1992 Supp (1) SCC 684

K. C. NINAN v. KERALA STATE ELECTRICITY BOARD & 687 ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]

subject to which the business may be permitted or A conducted. A conjoint reading of Section 5, Section 9, Rule 4 and condition 4-A gives, therefore, the power to the licensing authority to classify seats and prescribe rates of admission into the cinema theatre.” (emphasis supplied) B 39

76Copy pinpoint76. In K Ramanathan v. State of Tamil Nadu a three-judge Bench of this Court held that the word “regulation” does not have a rigid or inflexible meaning. This Court observed that “power to regulate carries with it full power over the thing subject to regulation and in absence of restrictive words, the power must be regarded as plenary over the entire C subject.” The Constitution Bench in V S Rice and Oil Mills v. State of Andhra Pradesh40 also observed that the word “regulate” is of wide import.

77Copy pinpoint77. The above analysis must guide the interpretation of Section 49 read with Section 79(j) of the 1948 Act which empowered the Board D to enact such terms and conditions as the Board thinks fit. This power of the Board would extend to enacting conditions providing for recovery of dues of the erstwhile owner from the new owner as a precondition for supply of electricity. Further, this Court has consistently upheld the Conditions of Supply providing for recoupment of arrears of a previous owner from the new owner as a pre-condition for supply of electricity. A E two-judge bench of this Court in Haryana State Electricity Board v. Hanuman Rice Mills, Dhanauri41, while summarising the position of law laid down in ParamountPolymers (supra) and Paschimanchal Vidyut Vitran Nigam Ltd. (supra), observed that the supplier can recover the arrears of electricity dues of the previous owner or occupier from the purchaser of the property if the statutory rules or terms and conditions of supply which are statutory in character authorise the same: “12. The position therefore may be summarised thus: (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.

39 (1985) 2 SCC 116 40 (1964) 7 SCR 456 41 (2010) 9 SCC 145 H

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A (ii) Where the statutory rules or terms and conditions of supply which are statutory in character, authorise the supplier of electricity to demand from the purchaser of a property claiming reconnection or fresh connection of electricity, the arrears due by the previous owner/occupier in regard to supply of electricity to such premises, the B supplier can recover the arrears from a purchaser.” (emphasis supplied)

78Copy pinpoint78. In Paramount Polymers (supra), a two-judge Bench of this Court was called upon to decide the validity of clause 21-A of Terms C and Conditions of Supply which provided that no fresh connection in respect of the premises would be given to a purchaser unless the purchaser cleared the amount that was left in arrears by the previous consumer. The Court held that it was within the power of the Electricity Board to insert clause 21-A in the Terms and Conditions of Supply under section 49 of the Supply Act: D “15. […] Under Section 49 of the Supply Act, the licensee or rather, the Electricity Board, is entitled to set down the Terms and Conditions of Supply of electrical energy. In the light of the power available to it, also in the context of Section 79(j) of the Supply Act, it could not be said that the insertion of clause 21-A in E the Terms and Conditions of Supply of electrical energy is beyond the power of the appellant.” (emphasis supplied)

79Copy pinpoint79. As regards the 2003 Act, the Electric Utilities submit that F Section 50 read with Section 181(2)(x) authorises the State Commission to frame the conditions governing Electricity Supply enabling recovery of electrical charges, including the electricity arrears of the previous owner from the new owner. The auction purchasers concede that Section 50 of the 2003 Act is exhaustive, but contend that it does not enable the State Commission to lay down conditions for recovery of electricity G arrears of the previous owner. To comprehensively analyse the above submission, it is necessary to refer to the relevant provisions under the 2003 Act.

80Copy pinpoint80. Section 2(24) of the 2003 Act defines “Electricity Supply Code” to mean the Electricity Supply Code specified under Section 50. Section H 50 reads as follows:

K. C. NINAN v. KERALA STATE ELECTRICITY BOARD & 689 ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]

“50. The Electricity Supply Code – The State Commission A shall specify an Electricity Supply Code to provide for recovery of electricity charges, intervals for billing of electricity charges, disconnection of supply of electricity for non-payment thereof, restoration of supply of electricity, measures for preventing tampering, distress or damage to electric plant or B electrical line or meter, entry of distribution licensee or any person acting or his behalf for disconnecting supply and removing the meter, entry for replacing, altering or maintaining electric lines or electrical plants or meter and such other matters.” (emphasis supplied) C

81Copy pinpoint81. Section 50 of the 2003 Act specifies that the State Commission shall specify an Electricity Supply Code. Section 2(64) defines “State Commission” as the State Electricity Regulatory Commission constituted under Section 82(1). The State Commission is authorised to notify the Electric Supply Code under section 181(2)(x). The use of expressions such as “recovery of electricity charges”, “disconnection of supply”, D “restoration of supply”, under Section 50 indicate that the scope of the regulatory powers of the State Commission under the said provision is wide enough to govern all matters relating to the supply of electricity to the premises.

82Copy pinpoint82. The 2003 Act lays down the legislative framework for generation, transmission, distribution, trading, and use of electricity in India. In the process, the Parliament has also conferred discretion on the regulatory authorities, particularly the Central Commission and State Commission, to work out further details within the framework of the legislative policy laid down in the legislation. While making subordinate legislation, the delegated authority has to act within the confines of the plenary legislation.42 The rules or regulations enacted by the Central Commission or State Commission cannot override the 2003 Act by stipulating inconsistent provisions or by supplanting the parent statute.

83Copy pinpoint83. The 2003 Act empowers the State Commission to make regulations on matters specified under Section 181(2). In PTC India Ltd. v. Central Electricity Regulatory Commission43 a Constitution Bench of this Court held that regulations can be framed by State 42 JK Industries Ltd. v. Union of India, (2007) 13 SCC 673 43 (2010) 4 SCC 603 H

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A Commissions so long as they satisfy two conditions: first, they must be consistent with the provisions of Act; and second, they must be made for carrying out the provisions of the Act. The Court held: “28. The 2003 Act contemplates three kinds of delegated legislation. Firstly, under Section 176, the Central Government is empowered to make rules to carry out the provisions of the Act. Correspondingly, the State Governments are also given powers under Section 180 to make rules. Secondly, under Section 177, the Central Authority is also empowered to make regulations consistent with the Act and the rules to carry out the provisions of the Act. Thirdly, under Section 178, the Central Commission can make regulations consistent with the Act and the rules to carry out the provisions of the Act. SERCs have a corresponding power under Section 181. The rules and regulations have to be placed before Parliament and the State Legislatures, as the case may be, under Sections 179 and 182. Parliament has the power to modify the rules/regulations. This power is not conferred upon the State Legislatures. A holistic reading of the 2003 Act leads to the conclusion that regulations can be made as long as two conditions are satisfied, namely, that they are consistent with the Act and that they are made for carrying out the provisions of the Act.” E (emphasis supplied)

84Copy pinpoint84. The scheme of the 2003 Act makes it evident that the regulatory powers of the State Commission under section 181(2) are of wide import. The Commission has certain plenary powers to regulate on matters contained in section 181(2), including Electric Supply Code under Section 50. Accordingly, the Commission can notify a Supply Code governing all the matters pertaining to supply of electricity such as “recovery of charges”, “disconnection of supply” and “restoration of supply”. In our opinion, such an authority also extends to stipulating conditions for recovery of electricity arrears of previous owners from new or subsequent owners.

85Copy pinpoint85. In Paschimanchal Vidyut Vitran Nigam (supra), a two-judge Bench was considering the legality of the actions of the appellant licensee to recover electricity dues from the purchaser of subdivided plots. Clause 4.3 of the Uttar Pradesh Electricity Supply Code stipulated that a new H

K. C. NINAN v. KERALA STATE ELECTRICITY BOARD & 691 ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]

connection to subdivided premises shall be given only after the share of the outstanding dues attributed to such premises is duly paid by the applicant. This Court held that a distribution licensee can stipulate such terms necessary for supply of electricity, including that the arrears due in regard to the supply of electricity made to the premises when they were in the occupation of the previous owner or occupant, should be cleared before the electricity supply is restored or a fresh connection is provided to the premises. Therefore, 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.

86Copy pinpoint86. The next question that arises for consideration is whether a C regulation providing for recouping the arrears of a previous consumer from the subsequent owner has a reasonable nexus with the provisions of the 2003 Act. Section 42 of the 2003 Act requires the distribution licensee to develop and maintain an efficient, coordinated, and economical distribution system in their area of supply to supply electricity in accordance with the provisions of the said Act. A distribution licensee is an intermediary, performing the function of conveying supply of electricity from generating companies to the consumer, at their premises. In order to provide a supply of electricity to consumers, a distribution licensee is required to lay down infrastructure such as electricity lines, transformers, and other equipment. The nature of the supply of electricity also depends upon the type of consumer as well their needs. The licensee has to make a significant capital outlay for creating the necessary infrastructure as well as operation and maintenance costs to keep the infrastructure in readiness according to Section 42. The licensees are required to maintain the infrastructure even if the consumer does not consume electricity. F They are also required to pay the salaries of their employees and pay the dues of electricity generation and transmission companies.

87Copy pinpoint87. The 2003 Act has been enacted to promote the development of the electricity industry as well as to protect the interests of the consumers and to ensure the supply of electricity to all areas. The Supply G Conditions providing for recoupment of electricity dues of a previous consumer from a new owner are necessary to recover the costs incurred for laying down the infrastructure as well as the ongoing current liabilities towards the electricity generation and transmission companies. In the absence of such conditions, it may be difficult for the distribution licensees H

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A to recover defaulted payments, adding to the revenue deficits. This may adversely impact the financial health of the distribution licensees to the detriment of the interests of the consumers.

88Copy pinpoint88. In Paschimanchal Vidyut Vitran Nigam (supra), this Court observed that a condition stipulating that the distribution licensee can recover the electricity dues from the new owner or occupier was necessary to safeguard the interests of the distributor. It was observed: “13.A stipulation by the distributor that the dues in regard to the electricity supplied to the premises should be cleared before electricity supply is restored or a new connection is given to a premises, cannot be termed as unreasonable or arbitrary. In the absence of such a stipulation, an unscrupulous consumer may commit defaults with impunity, and when the electricity supply is disconnected for non- payment, may sell away the property and move on to another property, thereby making it difficult, if not impossible for the distributor to recover the dues. Having regard to the very large number of consumers of electricity and the frequent moving or translocating of industrial, commercial and residential establishments, provisions similar to Clauses 4.3(g) and (h) of the Electricity Supply Code are necessary to safeguard the interests of the distributor.” (emphasis supplied)

89Copy pinpoint89. Electricity constitutes a public good. The Court’s interpretation of the law must foster this position. In Hyderabad Vanaspati (supra) this Court was adjudicating upon the validity of Clause 39 of the Conditions F of Supply which defined various malpractices and provided for enquiries by designated officials. This Court observed that it was the statutory duty of the Board to supply, transmit, and distribute electricity throughout the state in the most efficient and economical manner. It was further observed that terms and conditions such as Clause 39 were necessary G to prevent unauthorised use, pilferage or malpractices by the consumers. Such terms were necessary to recoup the loss suffered by pilferages, and to stop the continuation of similar malpractices.

90Copy pinpoint90. Apart from protecting a public good, such conditions also have a reasonable nexus with objects of the 2003 Act, such as a robust development of the electricity industry, protecting the interests of H

K. C. NINAN v. KERALA STATE ELECTRICITY BOARD & 693 ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]

consumers as well as the financial interests of the distribution licensees. A The need to protect the financial interests of distribution licensees has been explicitly recognized in Section 61 of the 2003 Act which empowers the Appropriate Commission to specify the terms and conditions for the determination of tariff in accordance with commercial principles. The relevant part of the Section 61 reads as follows: B “61. Tariff regulations.- The Appropriate Commission shall, subject to the provisions of this Act, specify the terms and conditions for the determination of tariff, and in doing do, shall be guided by the following, namely:- *** C (b) the generation, transmission, distribution, and supply of electricity are conducted on commercial principles; *** (d) safeguarding of consumers’ interests and at the same time, recovery of the cost of electricity in a reasonable manner;” (emphasis supplied)

91Copy pinpoint91. The Conditions of Supply and Electricity Supply Code which require the payment of electricity dues of a previous owner as a condition for the grant of an electricity connection have a clear nexus to the scheme of the parent legislations and the objectives sought to be achieved. It is just and reasonable for distribution licensees to specify conditions of supply requiring the subsequent owner or occupier of premises to pay the arrears of electricity dues of the previous owner or occupier as a F pre-condition for the grant of an electricity connection to protect their commercial interests, as well as the welfare of consumers of electricity. V. Whether arrears of electricity can become a charge or encumbrance over the premises

92Copy pinpoint92. The next issue that arises for our consideration is whether G arrears of electricity can become a charge or encumbrance over the premises. An ancillary issue is whether such arrears can become a charge on the property only through an express provision of law. Before we embark upon our analysis, we clarify that it is unnecessary to deal with the submission of the auction purchasers regarding registration under H

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A Section 17 of the Indian Registration Act 1908 for the conditions of supply contained in a contract to constitute a charge. The decision of this court in M.L. Abdul Jabbar Sahib v. M.V. Venkata Sastri & Sons,44 was limited to the extent that it holds that a charge created by an act of parties under Section 100 of the Transfer of Property Act 1882 does not attract the provisions of Section 59 of the Indian Registration B Act 1908.

93Copy pinpoint93. The contention of the auction purchasers is that arrears of electricity are not a charge on property as they do not run with the land. They have relied on the decision in Ahmedabad Municipal Corporation v. Haji Abdulgafur Haji Hussenbha45 to submit that enforcement of a charge against the property in the hands of a transferee for value without notice of the charge does not arise, and electricity dues are simply an unsecured debt. On the other hand, the Electric Utilities submit that it is not even their case — in the absence of an express provision of law — that there is any mortgage or charge over the property in the form that the licensee would be a secured creditor.

94Copy pinpoint94. Section 100 of the Transfer of Property Act 1882 contemplates two types of charges: charges created by act of parties and charges arising by operation of law. It inter alia provides as follows: “100. Charges:Where immoveable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained 1[which apply to a simple mortgage shall, so far as may be, apply to such charge]. Nothing in this section applies to the charge of a trustee on the trust property for expenses properly incurred in the execution of his trust, [and, save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge.” (emphasis supplied) 44 (1969) 1 SCC 573 H 45 (1971) 1 SCC 757

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95Copy pinpoint95. An encumbrance means a burden or charge upon property or A a claim or lien upon an estate or on the land. Encumbrance must be a charge on the property, which must run with the property. In terms of the first paragraph of Section 100, when an immovable property of one party is pledged as security for the payment of money to another, and the transaction does not constitute a mortgage, the latter would acquire B a charge over the property. All provisions that apply to a simple mortgage are applicable to a charge. A charge is neither a sale nor a mortgage because it creates no interest in or over an immovable property but it is only a security for the payment of money.46 In other words, a charge only results in the creation of a right of payment out of the property towards the satisfaction of the debt or obligation in question. C

96Copy pinpoint96. The second paragraph of Section 100 provides an exception to the general proposition that a charge runs with the land and can be enforced even if the property has passed into the hands of a third party. It provides that a charge cannot be enforced against a property in the hands of a transferee without notice. The words “save as otherwise D expressly provided by any law for the time being in force” indicate that a charge can be enforced against a transferee without notice when an express provision of law exists. Hence, a charge cannot be enforced against a transferee if they have no notice of the same, unless the requirement of such notice has been dispensed with by law.47 E

97Copy pinpoint97. In AI Champdany Industries Ltd. v. Official Liquidator,48 this Court held that such a provision of law should not merely create a charge, but it must expressly provide for the enforcement of a charge against the property in the hands of a transferee for value without notice of the charge. F

98Copy pinpoint98. In Haji Abadulgafur Haji Husseinbhai (supra), this Court considered the doctrine of constructive notice as provided under Section

100. In that case, the Municipal Corporation had a charge on the property of a person who was in arrears of property tax. An auction purchaser, who became the owner of the property, resisted the attempt of the Municipal Corporation to recover the arrears of pending taxes in exercise G of its charge on the ground that they were not aware of the past municipal 46 Dattatreya Shanker Mote v. Anand Chintaman Datar & Ors, (1974) 2 SCC 799 47 Dattatreya Shanker Mote v. Anand Chintaman Datar, (1974) 2 SCC 799; State of Karnataka v. Shreyas Papers Pvt. Ltd, 2006 (1) SCC 615 48 (2009) 4 SCC 486 H

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A tax arrears. The Corporation argued that the transferee was imputed with constructive knowledge of the charge created against the property due to Section 141 of the Bombay Provincial Municipal Corporations Act 1949. The Court held against the Municipal Corporation on the ground that in the facts of the case, the plaintiff did not have constructive notice of the arrears of municipality. B

99Copy pinpoint99. While explaining the purport of Section 100, this Court held that the second half of Section 100 enacts a general prohibition and no charge can be enforced against property in the hands of a transferee for consideration without notice of the charge. In terms of Section 100, an exception to this rule must be expressly provided by law. The Court held C that whether a transferee has actual or constructive notice which satisfies the requirement of notice in the proviso to Section 100, must be determined in the facts and circumstances of each case. This Court observed: “4. This section in unambiguous language lays down that no charge is enforceable against any property in the hands of a D transferee for consideration without notice of the charge except where it is otherwise expressly provided by any law for the time being in force. The saving provision of law must expressly provide for enforcement of a charge against the property in the hands of a transferee for value without notice of the charge and not merely create a charge. …… The real core of the saving provision of law must be not mere enforceability of the charge against the property charged but enforceability of the charge against the said property in the hands of a transferee for consideration without notice of the charge. Section 141 of the Bombay Municipal Act is clearly not such a provision. The second contention fails and is repelled.”

100Copy pinpoint100. Counsel for the Electric Utilities have not referred to any provision in the plenary legislation of the 2003 Act by which electricity dues would constitute a charge on the premises. The provisions of the 1910 Act, 1948 Act, and the 2003 Act do not provide that the arrears of electricity dues would constitute a charge on the property or that such a charge shall be enforceable against a transferee without notice.It is pertinent to note that this Court has reiterated that arrears of electricity cannot become a charge or encumbrance over the premises, in the

K. C. NINAN v. KERALA STATE ELECTRICITY BOARD & 697 ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]

absence of an express provision of law in the 1910 Act, 1948 Act or A 2003 Act.49

101Copy pinpoint101. In Isha Marbles (supra), this Court observed that under the provisions of 1910 Act read with 1948 Act, electricity arrears do not create a charge over the property. It observed: “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 liability against the third party. Of course, the bona fides of the sale may not be relevant.” D

102Copy pinpoint102. Similarly, in Paschimanchal Vidyut Vitran Nigam (supra), this Court held that in the absence of any contract to the contrary, the amount payable towards supply of electricity does not constitute a charge on the premises.

103Copy pinpoint103. Consequently, in general law, a transferee of the premises E cannot be made liable for the outstanding dues of the previous owner since electricity arrears do not automatically become a charge over the premises. Such an action is permissible only where the statutory conditions of supply authorise the recovery of outstanding electricity dues from a subsequent purchaser claiming fresh connection of electricity, or if there is an express provision of law providing for creation of a F statutory charge upon the transferee.

104Copy pinpoint104. The next issue which falls for consideration is whether an electricity charge can be introduced by way of statutory regulations or rules enacted by a regulatory commission under its rule making power in the 2003 Act. G

105Copy pinpoint105. Counsel for the auction purchasers have relied on Deputy Commercial Tax Officer, Park Town Division v. Sha Sukhraj Peerajee,50 and Indian Council of Legal Aid and Advice v. Bar 49 1995 SCC (2) 648; AIR 2007 SC 2; (2010) 9 SCC 145 50 AIR 1968 SC 67 H

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A Council of India,51 to argue that a charge cannot be introduced by way of regulations as the subject matter is not covered under Section 50 of the 2003 Act. It was further contended that only a fiscal levy by way of statutory exaction could be fastened on land. In the context of electricity, it was urged that a state legislation can provide for a charge on property only by providing for levy of a duty on consumption or sale of electricity. B Relying on India Cement Ltd & Ors v. State of Tamil Nadu52 and Al Champdany Industries v. Official Liquidator53, it has been argued that only such a fiscal exaction would get attached to the land.

106Copy pinpoint106. The subject of taxes on the consumption or sale of electricity within the State falls under Entry 53, List II of the Seventh Schedule of the Constitution. A number of States have enacted legislations providing for the levy of electricity duty on consumption or supply of electricity. In these instances, the legislature specifically provides that the duty payable under the state legislation shall be a first charge on the amount recoverable by the licensee for the electrical energy supplied. Further, the manner in which such charges are to be realised from the consumer is provided for in the state legislation and relevant subordinate legislation. For example, the Kerala Electricity Duty Act 1963 and Kerala Electricity Duty Rules 1963 provide that the dues from a consumer towards electricity duty create a first charge on the amounts recoverable for the energy consumed.

107Copy pinpoint107. However, Entry 53 of List II of the Seventh Schedule does not have any bearing on the issues involved in this batch of cases. This is because neither is any tax levied under Article 265 of the Constitution nor is any levy imposed. It is not the case of the distribution licensees that the State Commission under Section 50 of the 2003 Act has the power to provide for fiscal exactions. F

108Copy pinpoint108. A subordinate rule or regulation, as in the case of the Electricity Supply Code framed by a regulatory commission, can provide for a statutory charge to be fastened on the premises within which consumption of electricity was effected. In terms of Section 50 of the 2003 Act, a State Commission is empowered to provide for recovery of electricity G charges, intervals for billing of electricity charges, disconnection of supply of electricity for non-payment thereof, restoration of supply of electricity and other cognate matters. In terms of Section 181 of the 2003 Act, the 51 1995 (1) SCC 732 52 (1990) 1 SCC 12 53 (2009) 4 SCC 486 H

K. C. NINAN v. KERALA STATE ELECTRICITY BOARD & 699 ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]

State Commission is empowered to make regulations and rules consistent A with the Act which carry out the provisions of the Act. As held in the preceding paragraphs, the rule making power contained under Section 181 read with Section 50 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 State B Commission is conferred with wide powers under the statutory framework to provide for different mechanisms in the Electricity Supply Code for recovery of electricity arrears of the previous owner. The recovery of electricity arrears may take effect either by requiring a subsequent owner of premises to clear payment of outstanding dues as a condition precedent for an electricity connection, or by deeming that any amount due to the licensee shall be a first charge on the assets, or by any other reasonable condition.

109Copy pinpoint109. In exercise of such power, Regulation 10.5 of the Maharashtra Electricity Supply Code 2005 provides that any charge for electricity or any other sum which remains unpaid by an erstwhile owner constitutes a charge on the property and can be recovered from the transferee subject to the permitted period specified therein. This provision spelt out in the present judgement is a mere illustration of a subordinate rule wherein unpaid electricity dues constitute a charge on property and can be recovered from a subsequent transferee. E

110Copy pinpoint110. Reliance by the auction purchasers on the decisions in India Cement Ltd (supra) or Indian Council of Legal Aid and Advice (supra) render little assistance to their cause. The question in India Cement Ltd (supra)was whether the State Legislature had competence to enact a cess on royalty on mineral rights under Article 246 read with Entry 49 of List II of the Seventh Schedule. In Indian Council of Legal F Aid and Advice (supra),this Court dealt with Rule 9 in Chapter III of Part VI of the Bar Council of India Rules, which barred persons who have completed 45 years of age from enrolment as an advocate. Both these decisions bear little relevance to the issue which has arisen in the present appeals. G

111Copy pinpoint111. The auction purchasers have also relied on the decision in Sha Sukhraj Peerajee (supra). This Court held that Rule 21-A framed by the State Government under Section 19 of the Madras General Sales Tax Act, 1939 was ultra vires. In terms of Rule 21-A, a purchaser of a business carried on by a ‘dealer’ could be made liable for arrears of H

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A sales tax due from the dealer in respect of transactions of sale which took place before the transfer. This Court held that the rule making power under Section 19 could not be used to enlarge the scope of recovery and payment of tax from some person other than a ‘dealer’ under the Act. Section 10, inserted by the Amendment Act of 1956, provided that the outstanding amount on the date of default was made a charge on the B property of the person liable to pay tax. This Court did not consider the import of Section 10 of the Act since the business was transferred before the amending Act came into force. The ratio of the case is neither helpful nor applicable in the instant case, since this Court was dealing with the specific provisions of the Madras General Sales Tax Act 1939.

112Copy pinpoint112. The provisions of the statute and statutory conditions of supply need to be examined to determine whether the conditions of supply provide for the creation of a charge in terms of Section 100 of the Transfer of Property Act, 1882. Once it is established that a statutory charge is created and required notice was given, the charge attaches to the property and the licensee is entitled to recover the unpaid electricity dues by proceeding against the premises. Consequent to the charge created, Article 62 of the Indian Limitation Act, 1963 would come into play. Article 62 of the Limitation Act relates to enforcing the payment of money procured by mortgaged or otherwise charged upon the immoveable property. The electricity utilities would get a period of twelve years to recover the dues charged on the immoveable property from the date when the money payable became due.

113Copy pinpoint113. In light of the above discussion, we are of the opinion that the electricity utilities can create a charge by framing subordinate legislation or statutory conditions of supply enabling recovery of electricity arrears from a subsequent transferee. Such a condition is rooted in the importance of protecting electricity which is a public good. Public utilities invest huge amounts of capital and infrastructure in providing electricity supply. The failure or inability to recover outstanding electricity dues of the premises would negatively impact the functioning of such public utilities and licensees. In the larger public interest, conditions are incorporated in subordinate legislation whereby Electric Utilities can recoup electricity arrears. 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 H

K. C. NINAN v. KERALA STATE ELECTRICITY BOARD & 701 ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]

fresh electricity connection, even when huge arrears of electricity are A outstanding. Besides impacting on the financial health of the Utilities, this would impact the wider body of consumers. VI. Implication of Section 56(2) on recovery of electricity dues by Electric Utilities

114Copy pinpoint114. The Electric Utilities have submitted that Section 56 of the B 2003 Act only deals with the right of the licensee to disconnect supply. Explaining the scope of the relevant provision, it has been submitted that Section 56 sets out different timelines, namely (a) when the disconnection can be made i.e., when payment of charges is not made after giving requisite notice; (b) how long the disconnection can be maintained i.e., C so long as the outstanding dues remain; and (c) when it is to be restored i.e., immediately when the outstanding dues are paid. Reliance has been placed on Ajmer Vidyut Vitran Nigam Limited v. Rahamatullah Khan,54 and M/s Prem Cortex v. Uttar Haryana Bijli Vitran Nigam Limited55 to contend that the use of the expression “under this section” in Section 56(2) means that the avenue of effecting disconnection to D recover money cannot be resorted to after the limitation period. It is further contended that Section 56 does not bar the recovery of pending charges through other avenues of recovery in accordance with law. The licensees urge that civil remedies and statutory power to recover electricity can be utilised simultaneously. It was urged that Section 56 E does not restrict the right of the licensee to insist on payment of the arrears of charges incurred on the premises, from a subsequent applicant for a fresh connection to the same premises.

115Copy pinpoint115. On the implication of the two-year limitation period under Section 56(2), it is submitted that (i) the limitation is with reference to the bar on disconnection by the licensee; (ii) no limitation is provided under Section 56 after the electricity is discontinued for non-payment of dues; (iii) a valid and subsisting money decree in favour of the Electricity Board against the erstwhile owner of the premises would not be affected by the limitation period of two years; (iv) no time limit has been provided ÿþfor cessation of the right of the licensee to demand past dues for giving a new connection to the premises; and (v) the right of the licensee not to give a connection till the outstanding dues are cleared is a continuing right and cannot be said to be extinguished. 54 (2020) 4 SCC 650 55 Judgment dt. 5.10.2021 in CA 7235 of 2009 H

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116Copy pinpoint116. On the other hand counsel representing the auction purchasers have urged that (i) the period of limitation under Section 56(2), which begins with a non obstante clause, bars the recovery of outstanding electricity dues from successful auction purchasers who apply for a new connection for the supply of electricity from the licensee; (ii) two conditions need to be fulfilled to get over the embargo on the recovery of a sum due from any consumer, after a period of two years from the date when such sum became first due, namely (a) such sum has been shown continuously as recoverable as arrears of charges for electricity supplied, and (b) the licensee shall not cut off the supply of the electricity; (iii) the conditions of supply, being subordinate legislation, cannot override the duty cast upon the licensee, and dues cannot be recoverable either in a manner or over and above what is provided for in the Section 56 (2); and (iv) any alternative interpretation would render the bar under Section 56(2) meaningless, and the conditions of supply could be used to resurrect time barred claims as held in State of Kerala v. VT Kallianikutty.56

117Copy pinpoint117. The power to discontinue supply to a consumer is dealt with in Section 56 of the 2003 Act. The provision is extracted below: “Section 56: Disconnection of supply in default of payment (1) Where any person neglects to pay any charge for electricity or any sum other than a charge for electricity due from him to a E licensee or the generating company in respect of supply, transmission or distribution or wheeling of electricity to him, the licensee or the generating company may, after giving not less than fifteen clear days’ notice in writing, to such person and without prejudice to his rights to recover such charge or other sum by suit, cut off the supply of electricity and for that purpose cut or disconnect any electric supply line or other works being the property of such licensee or the generating company through which electricity may have been supplied, transmitted, distributed or wheeled and may discontinue the supply until such charge or other sum, together with any expenses incurred by him in cutting off and reconnecting the supply, are paid, but no longer: Provided that the supply of electricity shall not be cut off if such person deposits, under protest, -

H 56 (1999) 3 SCC 657

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(a) an amount equal to the sum claimed from him, or A (b) the electricity charges due from him for each month calculated on the basis of average charge for electricity paid by him during the preceding six months, whichever is less, pending disposal of any dispute between him and the licensee. (2) Notwithstanding anything contained in any other law for the time being in force, no sum due from any consumer, under this section shall be recoverable after the period of two years from the date when such sum became first due unless such sum has been shown continuously as recoverable as arrear of charges for electricity supplied and the licensee shall not cut off the supply of the electricity.” (emphasis supplied)

118Copy pinpoint118. Section 56 falls under Part VI which is titled “Distribution of Electricity”. Section 56 provides for disconnection of electrical supply in case there is a default in payment of electricity charges. D

119Copy pinpoint119. The power to disconnect is a drastic step which can be resorted to only when there is a neglect on the part of the consumer to pay the electricity charges or dues owed to the licensee or a generating company, as the case may be. Section 56(1) provides that where any person neglects to pay any charge for electricity or any sum other than E a charge for electricity due from him to a licensee or a generating company, the licensee or generating company may after giving a written notice of fifteen days, disconnect the supply of electricity, until such charges, including the expenses incurred are paid. The power to disconnect electricity is conditioned on the fulfilment of the conditions F stipulated. The cutting off or disconnection is without prejudice to the rights of the distribution licensee to recover such charge or other sums by other permissible modes of recovery. The proviso to Section 56(1) carves out an exception by providing that electricity supply will not be cut off if the consumer, “under protest”, either deposits the amount claimed or deposits the average charges paid during the preceding six months. G

120Copy pinpoint120. The statutory right of the licensee or the generating company to disconnect the supply of electricity is subject to the period of limitation of two years provided by Section 56(2). Section 56(2) provides that notwithstanding anything contained in any other law for the time being in force, no sum due from any consumer “under this section” shall be H

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A recoverable after a period of two years from the date when such sum became first due unless such sum has been shown continuously as recoverable as arrears of charges for electricity supplied and the licensee shall not cut off the supply of electricity. The limitation of two years is limited to recovery of sums under Section 56. This is evident by the use of the expression, “under this section”. B

121Copy pinpoint121. The first issue pertains to the simultaneous exercise of statutory and civil remedies by the licensing authority to recover electricity arrears. The liability to pay electricity charges is a statutory liability and Section 56 provides the consequences when a consumer neglects to pay any charge for electricity or any sum other than a charge for electricity due from him. Section 56(1) provides that the power of the licensee to disconnect electrical supply when a consumer is in default of payment is “without prejudice to his rights to recover such charge or other sum by suit”. This means that the licensee can exercise both its statutory remedy to disconnect as well as a civil remedy to institute a suit for recovery against the consumer since the licensee will not necessarily obtain the amount due from the consumer by disconnecting the supply. In its decision in Bihar SEB v. Iceberg Industries Ltd.,57 this Court has held that the power to disconnect supply under Section 56 is a special power given to the supplier in addition to the normal mode of recovery by instituting a suit. The power to disconnect the supply of electricity as a E consequence of the non-payment of dues and as a method to recover dues is supplemental to the right of the licensee to institute a suit or other proceedings for the recovery of dues on account of electrical charges.

122Copy pinpoint122. Section 56(1) of the 2003 Act is pari materia to Section 24 of the 1910 Act. Section 24 of the 1910 Act empowered the Electricity F Board to issue a demand and to discontinue supply to consumers who neglected to pay charges, without prejudice to the right to recover such charges or other sums by way of a suit. The import of Section 24 was considered by this Court in Isha Marbles (supra), where it was observed that the action of cutting off electricity supply after service of the notice G as prescribed under Section 24 was in addition to the general remedy of filing a suit for recovery.

123Copy pinpoint123. In M/s Swastic Industries v. Maharashtra State Electricity Board,58 this Court held that the right to discontinue supply 57 (2020) 20 SCC 745 H 58 (1997) 9 SCC 465

K. C. NINAN v. KERALA STATE ELECTRICITY BOARD & 705 ORS. [DR DHANANJAYA Y CHANDRACHUD, CJI]

of energy under Section 24 was not taken away by Section 60A of the A 1948 Act, which provided an option to the Electricity Board to file a suit within the period of limitation stipulated there. This Court observed that: “5. It would, thus, be clear that the right to recover the charges is one part of it and right to discontinue supply of electrical energy to the consumer who neglects to pay charges is another part of it. The right to file a suit is a matter of option given to the licensee, the Electricity Board. Therefore, the mere fact that there is a right given to the Board to file the suit and the limitation has been prescribed to file the suit, it does not take away the right conferred on the Board under Section 24 to make demand for payment of the charges and on neglecting to pay the same they have the power to discontinue the supply or cut off the supply, as the case may be, when the consumer neglects to pay the charges. The intendment appears to be that the obligations are mutual….” D (emphasis supplied) Hence, 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. E

124Copy pinpoint124. The second issue pertains to the implication of the period of two years provided in Section 56(2) on the civil remedies of Utilities to recover electricity dues. Section 56(2), which begins with a non obstante clause, provides a limitation of two years for recovery of dues by the licensee through the means of disconnecting electrical supply. It puts a restriction on the right of the licensee to recover any sum due from a F consumer under Section 56 after a period of two years from the date when such sum became first due. If this provision is invoked against a consumer after two years, the action will be permissible when the sum, which was first due, has been shown continuously as recoverable as arrears of charges for electricity supplied. Under Section 56, the liability G to pay arises on the consumption of electricity and the obligation to pay arises when a bill is issued by the licensee for the first time. Accordingly, the period of limitation of two years starts only after issuance of the bill.

125Copy pinpoint125. Before we deal with the implication of Section 56(2) on the civil remedies available to a licensee, it is important to clarify that when H

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A the liability incurred by a consumer is prior to the period when the 2003 Act came into force, then the bar of limitation under Section 56(2) is not applicable. In Kusumam Hotels Pvt Ltd v. Kerala State Electricity Board,59 this Court has held that Section 56(2) applies after the 2003 Act came into force and the bar of limitation under Section 56(2) would not apply to a liability incurred by the consumer prior to the enforcement B of the Act. In terms of Section 6 of the General Clauses Act 1897, the liability incurred under the previous enactment would continue and the claim of the licensee to recover electricity would be governed by the regulatory framework which was in existence prior to the enforcement of the 2003 Act.

126Copy pinpoint126. In its report dated 19 December 2002, the Standing Committee of Energy opined that the restriction for recovery of arrears under Section 56 was considered necessary to protect the consumer from arbitrary billings.60 In other words, the enactment of Section 56(2) was to address the mischief of arbitrary billings. Hence, Section 56(2) D was incorporated to ensure that a licensee does not abuse its special power of disconnection of electrical supply. Section 56(2) ensures that a licensee does not have the liberty to arbitrarily impose a bill after a long period and then recover such a huge amount through the drastic step of disconnection of electrical supply.

127Copy pinpoint127. In Rahamatullah Khan (supra), a two judge Bench of this Court dealt with the applicability of the period of limitation provided by Section 56(2) on an additional or supplementary demand raised by the licensee. A consumer was billed under a particular tariff but after an audit, it was discovered that a different tariff code should have been applied. An additional bill was subsequently raised in 2014 for the period from July 2009 to September 2011. Section 56(2) was interpreted not to preclude the licensee from raising a supplementary demand after the expiry of the period of limitation under Section 56(2) in the case of a mistake or a bona fide error. However, it did not empower the licensee to take recourse to the coercive measure of disconnection of electricity supply for recovery of the additional demand. This Court held that the bar of limitation of two years does not preclude the licensee from resorting to other modes of recovery of electricity arrears. The court observed:

(2008) 12 SCC 213 59

Standing Committee of Energy- Thirteenth Lok Sabha, The Electricity Bill 2001- 60

H Thirsty First Report, Ministry of Power (2002)

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“7.4 Sub-section (1) of Section 56 confers a statutory right to the licensee company to disconnect the supply of electricity, if the consumer neglects to pay the electricity dues. This statutory right is subject to the period of limitation of two years provided by sub- section (2) of Section 56 of the Act 7.5The period of limitation of two years would commence from the date on which the electricity charges became “first due” under sub-section (2) of Section 56. This provision restricts the right of the licensee company to disconnect electricity supply due to non-payment of dues by the consumer, unless such sum has been shown continuously to be recoverable as arrears of electricity supplied, in the bills raised for the past period. If the licensee company were to be allowed to disconnect electricity supply after the expiry of the limitation period of two years after the sum became “first due”, it would defeat the object of Section 56(2).

8. Section 56(2) however, does not preclude the licensee company from raising a supplementary demand after the expiry of the limitation period of two years. It only restricts the right of the licensee to disconnect electricity supply due to non-payment of dues after the period of limitation of two years has expired, nor does it restrict other modes of recovery which may be initiated by the licensee company for recovery of a supplementary demand.

9. Applying the aforesaid ratio to the facts of the present case, the licensee company raised an additional demand on 18-3-2014 for the period July 2009 to September 2011. The licensee company discovered the mistake of billing under the wrong Tariff Code on 18-3-2014. The limitation period of two years under Section 56(2) had by then already expired. 9.1. Section 56(2) did not preclude the licensee company from raising an additional or supplementary demand after the expiry of the limitation period under Section 56(2) in the case of a mistake or bona fide error. It did not, however, empower the licensee company to take recourse to the coercive measure of disconnection of electricity supply, for recovery of the additional demand.” H (emphasis supplied)

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128Copy pinpoint128. The exposition of law by this Court in Rahamatullah Khan (supra) was considered by a coordinate bench in Prem Cortex (supra). A consumer was served with a short assessment notice and the Court had to consider whether short billing and the subsequent raising of an additional demand would tantamount to a deficiency of service. This Court observed that the bar contemplated in Section 56 operates on two B distinct rights of the licensee, namely, the right to recover and the right to disconnect. This Court observed that under the law of limitation, the remedy and not the right is extinguished. The bar with reference to the remedy of disconnection was held to be an exception to the law of limitation. This Court further considered the impact of Section 56(1) on C Section 56(2) and observed: “15. Therefore, the bar actually operates on two distinct rights of the licensee, namely, (i) the right to recover; and (ii) the right to disconnect. The bar with reference to the enforcement of the right to disconnect, is actually an exception to D the law of limitation. Under the law of limitation, what is extinguished is the remedy and not the right. To be precise, what is extinguished by the law of limitation, is the remedy through a court of law and not a remedy available, if any, de hors through a court of law. However, section 56(2) bars not merely the normal remedy of recovery but also bars the remedy of disconnection. E This is why we think that the second part of Section 56(2) is an exception to the law of limitation. ….

23. Coming to the second aspect, namely, the impact of Sub- F section (1) on Sub-section (2) of Section 56, it is seen that the bottom line of Subsection (1) is the negligence of any person to pay any charge for electricity. Sub-section (1) starts with the words “where any person neglects to pay any charge for electricity or any sum other than a charge for electricity due from him”.

G 24. Sub-section (2) uses the words “no sum due from any consumer under this Section”. Therefore, the bar under Sub- section (2) is relatable to the sum due under Section 56. This naturally takes us to Sub-section (1) which deals specifically with the negligence on the part of a person to pay any charge for electricity or any sum other than a charge H

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for electricity. What is covered by section 56, under sub- A section (1), is the negligence on the part of a person to pay for electricity and not anything else nor any negligence on the part of the licensee.” (emphasis supplied)

129Copy pinpoint129. The period of limitation under Section 56(2) is relatable to the sum due under Section 56. The sum due under Section 56 relates to the sum due on account of the negligence of a person to pay for electricity. Section 56(2) provides that such sum due would not be recoverable after the period of two years from when such sum became first due. The means of recovery provided under Section 56 relate to the remedy of disconnection of electric supply. The right to recover still subsists.

130Copy pinpoint130. We may also briefly deal with the objection of the auction purchasers that the conditions of supply cannot be used to resurrect time barred debts. Counsel placed reliance on VT Kallianikutty (supra), where it was held that a time barred debt cannot be recovered by taking recourse to the provisions of the Kerala Revenue Recovery Act.This decision is not helpful to the auction purchasers in the present batch of cases. In that case, a three-judge Bench of this Court while dealing with agricultural loans extended by the Kerala Finance Corporation, held that since the Kerala Revenue Recovery Act does not create a new right, a person could not claim the recovery of amounts which are not legally recoverable. In reaching its decision, this Court, however, reasoned that the statute of limitation bars the remedy by way of a suit beyond a certain time period, without touching the right to recover the loan. The right remains untouched and it can be exercised in any other suitable manner provided. F

131Copy pinpoint131. We therefore, reject the submission of the auction purchasers that the recovery of outstanding electricity arrears either by instituting a civil suit against the erstwhile consumer or from a subsequent transferee in exercise of statutory power under the relevant conditions of supply is barred on the ground of limitation under Section 56(2) of the 2003 Act. G Accordingly, 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.

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A VII. Implication of the sale of premises on “as is where is” basis, with or without reference to electricity arrears of the premises

132Copy pinpoint132. The Electric Utilities have urged that (i) the auction purchasers were put to notice of the requirement of the clearance of dues; (ii) the public auction-sales of premises were held on an “as is where is” basis; (iii) this would include a condition of acknowledging all liabilities in respect of the premises, with or without a specific reference of payment of electricity dues; and (iv) in a sale arising out of commercial transactions, the auction purchaser is required to undertake due diligence of outstanding dues which are premises specific. On the other hand, the auction purchasers submitted that (i) a condition such as “as is where is” is a feature of physical property and does not extend to claims which are not charges or other encumbrances running with land; (ii) the argument finds support in the decisions in Punjab Urban Planning and Development Authority v. Raghu Nath Gupta61 and Delhi Development Authority D v. Kenneth Builders and Developers Pvt Limited62; (iii) electricity dues cannot be ascertained merely by looking at a property; and (iv) there was no obligation on the applicants to ascertain the electricity dues payable, more so in view of the judgement in the Isha Marbles (supra).

133Copy pinpoint133. In the present batch of cases, the premises were sold in E auction sales generally held on an “as is where is” basis. A sale on “as is where is basis” postulates that the purchaser would be acquiring the asset with all its existing rights, obligations and liabilities. When a property is sold on an “as is where is” basis, encumbrances on the property stand transferred to the purchaser upon the sale.

134Copy pinpoint134. In U.T. Chandigarh Administration v. Amarjeet Singh63, a two-judge Bench of this Court explained the characteristics of a public auction in the context of the maintainability of a consumer complaint. This Court held that where existing sites are put up for sale or lease by public auction and the sale is confirmed in favour of the highest bidder, the resultant contract relates to sale or lease of immovable property, and G not a provision of service or sale of goods. This Court delved into the nature of public auctions and opined on the implications of an auction conducted on an “as is where is basis”, where an auction purchaser is 61 (2012) 8 SCC 197 62 (2016) 13 SCC 561 63 (2009) 4 SCC 660 H

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expected to exercise due diligence with regard to the condition of a site. A The Court observed: “19. …. In a public auction of sites, the position is completely different. A person interested can inspect the sites offered and choose the site which he wants to acquire and participate in the auction only in regard to such site. Before bidding in the auction, he knows or is in a position to ascertain, the condition and situation of the site. He knows about the existence or lack of amenities. The auction is on `as is where is basis’. With such knowledge, he participates in the auction and offers a particular bid. There is no compulsion that he should offer a particular price. When the sites auctioned are existing sites, without any assurance/representation relating to amenities, there is no question of deficiency of service or denial of service. Where the bidder has a choice and option in regard to the site and price and when there is no assurance of any facility or amenity, the question of the owner of the site becoming a service provider, does not arise… 20.Where there is a public auction without assuring any specific or particular amenities, and the prospective purchaser/lessee participates in the auction after having an opportunity of examining the site, the bid in the auction is made keeping in view the existing situation, position and condition of the site. If all amenities are available, he would offer a higher amount. If there are no amenities, or if the site suffers from any disadvantages, he would offer a lesser amount, or may not participate in the auction. Once with open eyes, a person participates in an auction, he cannot thereafter be heard to say that he would not pay the balance of the price/premium or the stipulated interest on the delayed payment, or the ground rent, on the ground that the site suffers from certain disadvantages or on the ground that amenities are not provided….” (emphasis supplied) G

135Copy pinpoint135. In Raghu Nath Gupta (supra),64 this Court held that a successful auction purchaser of commercial plots sold with a superimposed condition of “as is where is” basis is estopped from later contending that 64 (2012) 8 SCC 197 H

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A he is not bound by the terms and conditions of the auction notice or that the seller had not provided basic amenities. The Court relied on the terms and conditions, specifically Clause 25, stipulated in the auction notice published by Punjab Urban Planning and Development Authority in reaching its conclusion and held that the auction notice would have considerable bearing in resolving the dispute. Clause 25 of the auction notice provided that the site was offered on “as is where is” basis and the Authority would not be responsible for levelling the site or removing structures, if any, thereon. The phrase “as is where is” was explained by this Court in the following terms: “14. We notice that the respondents had accepted the commercial plots with the open eyes, subject to the above mentioned conditions. Evidently, the commercial plots were allotted on “as is where is” basis. The allottees would have ascertained the facilities available at the time of auction and after having accepted the commercial plots on “as is where is” basis, they cannot be heard to contend that PUDA had not provided the basic amenities like parking, lights, roads, water, sewerage etc. If the allottees were not interested in taking the commercial plots on “as is where is” basis, they should not have accepted the allotment and after having accepted the allotment on “as is where is” basis, they are estopped from contending that the basic amenities like parking, lights, roads, water, sewerage etc. were not provided by PUDA when the plots were allotted….” (emphasis supplied)

136Copy pinpoint136. In Kenneth Builders and Developers (supra), in the circumstances arising in that particular case, this Court refused to accept the seller’s reliance on the “as is where is” condition and held that refusal of the Delhi Pollution Control Committee,65 to grant permission to the auction purchaser, frustrated the Development Agreement which was entered into between the seller, Delhi Development Authority,66 and the G builder. DDA had held an auction on an “as is where is” basis for involving the private sector for the development of a project land. The bid was accepted and a Development Agreement was entered between DDA and the builder. However, when the builder attempted to carry out 65 “DPCC” H 66 “DDA”

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construction activity, it was prohibited by DPCC leading to an impasse A in the development activity. The terms and conditions of auction specifically mentioned that there was a presumption that the intending purchaser had inspected the site and had familiarised himself with prevalent conditions in all respects including the status of infrastructural facilities available before giving its bid. Under Clause 6 of the B Development Agreement, it was the responsibility of the developer to get various approvals and clearances from governmental departments. Clause 11 of the Development Agreement further stipulated that the builder was deemed to have inspected the site and its surroundings and checked the information available. This Court held that the auction sale on an “as is where is” basis and the specific clauses in the Development C Agreement “related only to physical issues pertaining to the project land and ancillary or peripheral legal issues pertaining to the actual construction activity”. It was observed: “34. When the DDA informed Kenneth Builders that the project land was available on an “as is where is basis” and D that it was the responsibility of the developer to obtain all clearances, the conditions related only to physical issues pertaining to the project land and ancillary or peripheral legal issues pertaining to the actual construction activity, such as compliance with the building bye-laws, environmental clearances etc. The terms and conditions of E “as is where is” or environmental clearances emphasized by learned counsel for the DDA certainly did not extend to commencement of construction activity prohibited by law except after obtaining permission of the Ridge Management Board and this Court. On the contrary, it was the obligation of the DDA to F ensure that the initial path for commencement of construction was clear, the rest being the responsibility of the developer. The failure of the DDA to provide a clear passage due to an intervening circumstance beyond its contemplation went to the foundation of implementation of the contract with Kenneth Builders and that is what frustrated its implementation. G

35. Reliance by the learned counsel for DDA on the “as is where is” concept as well as Clause 6 and 11 of the Development Agreement in this context is misplaced. As mentioned above, this primarily pertains to physical issues at site….” H (emphasis supplied)

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137Copy pinpoint137. Reliance placed by the auction purchasers on Raghu Nath Gupta (supra) and Kenneth Builders and Developers (supra)to contend that “as is where is” is a feature of physical property, limited to encumbrances or charges running with land, is misconceived. In both the cases relied upon by the auction purchasers, the judgments were rendered on the peculiar facts at hand. In Raghu Nath Gupta (supra) B this Court was dealing with the availability of basic facilities like parking, lights, roads, water and sewerage, but the application of the doctrine of “as is where is” was not limited to only physical features of the property. Further, in Kenneth Builders and Developers (supra) based on the facts, this Court opined that a sale on “as is where is” could not be C interpreted to mean that the auction purchaser would be responsible to take permission for the initial commencement of construction itself, which was the obligation of the DDA. The observation of this Court that “this primarily pertains to physical issues at site” was limited to specific clauses in the Development Agreement.

138Copy pinpoint138. Thus, the implication of the expression “as is where is” or “as is what is basis” or “as is where is, whatever there is and without recourse basis” is not limited to the physical condition of the property, but extends to the condition of the title of the property and the extent and state of whatever claims, rights and dues affect the property, unless stated otherwise in the contract. The implication of the expression is E that every intending bidder isput on notice that the seller does not undertake any responsibility to procure permission in respect of the property offered for sale or any liability for the payment of dues, like water/service charges, electricity dues for power connection and taxes of the local authorities, among others.

139Copy pinpoint139. The view which we take finds support in the judgments of this Court in Paramount Polymers (supra)and Srigdhaa Beverages (supra). In Paramount Polymers (supra), the premises of the erstwhile owner were sold under the State Financial Corporations Act 1951 on an “as is where is” basis. This Court held that an auction purchaser cannot be considered an ignorant party and a reasonable enquiry would have put it on notice of the subsistence of such a liability. It was observed: “9. …. Before submitting its bid to the Financial Corporation the first respondent would certainly have inspected the premises and could have come to know that power connection to the premises had been snapped and this information should have put it on

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reasonable enquiry about the reasons for the power disconnection leading to the information that the previous owner of the undertaking or consumer was in default. Moreover, the appellant had clearly written to the Financial Corporation even before the sale was advertised by it, informing it that a sum of Rs.64,23,695/ - was due towards electricity charges to the appellant and when selling the undertaking, that amount had to be provided for or kept in mind. Therefore, any reasonable enquiry by the first respondent as a prudent buyer would have put it on notice of the subsistence of such a liability. The sale was also on ‘as is where is’ basis…..”

140Copy pinpoint140. In Srigdhaa Beverages (supra), this Court was considering an auction sale under the Securitisation and Reconstruction of Financial C Assets and Enforcement of Security Interest Act 2002.67 The Court analysed Clauses 24 and 26 of the auction notice, which stipulated an “as is where is” sale with respect to all statutory dues and absolved the authorised officer of all liabilities for any charge, encumbrances and dues, including electricity dues. It concluded that the auction purchaser D was “clearly put to notice” since there was a specific mention of the quantification of dues of various accounts including electricity dues. On the liability of the past owners to bear electricity dues when the sale is on “as is where is” and existence of electricity dues is specifically mentioned, this Court categorically held that the auction purchasers were bound to inspect the premises and provide for the dues in all respects. E This Court observed: “16.2. Where, as in cases of the E-auction notice in question, the existence of electricity dues, whether quantified or not, has been specifically mentioned as a liability of the purchaser and the sale is on “AS IS WHERE IS, WHATEVER THERE IS AND F WITHOUT RECOURSE BASIS”, there can be no doubt that the liability to pay electricity dues exists on the respondent (purchaser).”

141Copy pinpoint141. To conclude, all prospective auction purchasers are put on notice of the liability to pay the pending dues when an appropriate “as is G where is” clause is incorporated in the auction sale agreement. It is for the intending auction purchaser to satisfy themselves in all respects about circumstances such as title, encumbrances and pending statutory dues in respect of the property they propose to purchase. In a public auction 67 “SARFAESI Act” H

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A sale, auction purchasers have the opportunity to inspect the premises and ascertain the facilities available, including whether electricity is supplied to the premises. Information about the disconnection of power is easily discoverable with due diligence, which puts a prudent auction purchaser on a reasonable enquiry about the reasons for the disconnection. When electricity supply to a premises has been disconnected, it would be implausible for the purchaser to assert that they were oblivious of the existence of outstanding electricity dues.

142Copy pinpoint142. In terms of the legal doctrine of caveat emptor, it becomes the duty of the buyer to exercise due diligence. A seller is not under an obligation to disclose patent defects of which a buyer has actual or constructive notice in terms of Section 3 of the Transfer of Property act,

1882. However, in terms of Section 55(1)(a), in the absence of a contract to the contrary, the seller is under an obligation to disclose material defects in the property or in the seller’s title thereto of which he is aware and which a buyer could not with ordinary care discover for himself.

143Copy pinpoint143. While examining the effect of an “as is where is” clause, the facts and circumstances of each case individually, along with the terminology of the clauses governing the auction sales must be taken into consideration, to arrive at an equitable decision. G. Application: Facts of Individual Cases E

144Copy pinpoint144. Before we apply the above analysis to the facts of the individual cases, it needs to be clarified that each case involves, in one way or another, application of the conditions of supply or Electricity Supply Code. At the outset, we note that the relevant date to determine the applicability of the conditions of supply or Electricity Supply Code is F the date on which the auction purchaser applied for a fresh connection or reconnection for supply of electricity to the premises. The cause of action arises when a fresh connection or reconnection is sought by the auction purchaser. This has also been reiterated in the decision of this Court in Paramount Polymers (supra). This Court observed: G “11. ….. We are also not in a position to agree with the High Court that the relevant date is the date of sale of the undertaking by the Financial Corporation to the first respondent. The insertion of clause 21-A was circulated by the communication dated 27- 11-2001 and it was subsequently followed by the formal notification in terms of Section 49 of the Supply Act read with Section 79(j) of H

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that Act. The first respondent having applied for a fresh connection only on 1-1-2002, the application would be governed by the Terms and Conditions including the term inserted on 27-11-2001, as subsequently formally notified. In the writ petition filed on 27-2-2002 in that behalf, the Court could not have come to the conclusion that the application made by the first respondent was not governed by the amended Terms and Conditions of Supply including clause 21-A thereof…..On our interpretation of clause 21-A of the Terms and Conditions of Supply as inserted with particular reference to sub-clauses (b) and (c) thereof, we are of the view that the said sub-clauses clearly applied to the first respondent when it made an application on 1-1-2002 seeking a fresh connection for the premises.” (emphasis supplied) Considering the facts of the nineteen cases, we decide the appeals in the following manner: D I.Kerala

145Copy pinpoint145. The KSEB in exercise of powers conferred under Section 49 and Section 79(j) of the 1948 Act framed regulations relating to Conditions of Supply of Electrical Energy. The regulations were published in the Gazette on 15 December 1989 and came into force with effect from 1 January 1990. Clause 15 deals with the agreement for a service connection. The relevant clause, with which we are concerned, is extracted below: “15. Agreement for Service Connection 15(c): When there is transfer of ownership or right of occupancy of the premises the registered consumer shall intimate the transfer of right of occupancy of the premises within 7 days to the Assistant Engineer/Assistant Executive Engineer concerned. On such intimation having been received the service shall be disconnected. If the transferee desires to enjoy service connection, he shall pay off the dues to the Board and apply for transfer of ownership of service connection within 15 days and execute fresh agreement and furnish additional security. New consumer number shall be allotted in such cases cancelling the previous number.

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A 15(d): All dues to the Board from a consumer shall be the first charge on the assets of the consumer. All dues including penalty shall be realized as public revenue due on land. 15(e): Reconnection or new connection shall not be given into any premises where there are arrears on any account due to the B Board pending payment, unless the arrears including penalty, if, any, are cleared in advance (if the new owner/occupier/ allottee remits the amount due from the previous consumer, the Board shall provide re-connection or new connection depending on whether the service remains disconnected/dismantled, as the case may be. The amount so remitted will be adjusted against the dues C from the previous consumer if the Board gets the full dues from the previous consumer through R.R. action or other legal proceedings the amount remitted by the new owner/occupier to whom connection has been effected shall be refunded. But the amount already remitted by him/her shall not bear any interest)”

146Copy pinpoint146. In terms of Clause 15(c), when there is a transfer of ownership or right of occupancy of the premises, the registered consumer shall intimate the transfer of the right of occupancy of the premises within seven days to the officer concerned. On such intimation being received, the service shall be disconnected. If the transferee desires a service E connection, they shall pay off the dues and apply for transfer of the ownership of the service connection. In terms of Clause 15(d), all dues to the KSEB from a consumer shall be the first charge on the assets of the consumer. In terms of Clause 15(e), a new connection or reconnection shall not be given to any premises where there are arrears on any account unless they are cleared in advance. F

147Copy pinpoint147. The validity of Clause 15(e) was upheld by a Full Bench decision of the Kerala High Court in Suraj v. KSEB.68 The High Court upheld the validity of the said regulation on the ground that it is unjust to compel the Board to supply electricity to the very same premises without the arrears of the previous owner or occupier being cleared. The High G Court observed: “8. Regulations make no distinction between an auction purchaser and others in the matter of supply of electricity. Regulations 15(d) and (e) have been incorporated with a purpose, or else by

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successive transfer of the premises the Board’s right to recover the amount from the previous consumers as well as from the assets could be effectively defeated at the same time the Board is called upon to provide electricity to the same premises. Regulation 15(e) has a reasonable nexus with the object sought to be achieved, that is to save public property so as to subserve the general interest of the community. Once electricity is disconnected and the equipment dismantled, it is unjust to compel the Board to give electricity connection to the very same premises at the instance of a third party which will not be in public interest especially when electricity is considered as a public property. Further C petitioner has also not challenged the validity of Regulations 15(d) and 15(e) in this writ petition.” (emphasis supplied)

148Copy pinpoint148. Two cases — K.C. Ninan v. KSEB69 andKJ Dennis v. KSEB,70 arise from the state of Kerala. In both these cases, the Kerala D High Court upheld the validity of Clause 15(e) and directed that to avail a fresh electricity connection for premises where arrears are due, the auction purchasers would have to pay outstanding dues of the previous consumer in compliance with the said condition. Item 101.9: KJ Dennis v. Kerala State Electricity Board; E Civil Appeal 2108 of 2004

149Copy pinpoint149. The KSEB disconnected the electricity connection of Pearlite Wire Products Ltd in 1992 on account of unpaid electricity charges. Meanwhile, the Kerala High Court ordered the winding up of the company under the Sick Industrial Companies (Special Provision) Act F 1985,71 as the original owner failed to pay its dues to Syndicate Bank and Kerala Financial Corporation. On 20 April 1997, KSEB addressed a letter to the Official Liquidator, demanding payment of Rs 66 lakhs, being arrears of electricity charges and penal interest. On 27 January 1999, the offer of the appellant to purchase the properties of Pearlite Wire G Products Ltd was accepted and was confirmed by the Kerala High Court on 4 March 1999. The terms of sale, as settled by the High Court, provided that: 69 CA 2109-2110/2004 70 CA 2108/2004 71 “SICA” H

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A “7. General terms and conditions:- *** (c) The assets are sold on “As Where is and Whatever there Is” condition. B (d) The assets are sold on the assumption that the tendered have inspected the assets, know what they are tendering for, whether they have inspected or not and the principle of ‘Caveat Emptor’ will apply.”

150Copy pinpoint150. The appellant sought permission of the KSEB for wiring for C an electricity connection in the property by a letter dated 4 June 1999. Wiring permission was rejected by KSEB due to the outstanding dues of the erstwhile owner, and it was stated that a new connection would be provided if the appellant was ready to remit the amount due from the previous consumer.

151Copy pinpoint151. In the interregnum, KSEB filed a claim petition before the Company Court in a company petition72 claiming a sum of Rs 86,54,711 from Pearlite Wire Products Ltd, which was in liquidation. The claim petition was admitted for Rs 63 lakhs. The appellant filed a company application73 seeking a direction to the KSEB to not insist on payment of arrears of electricity charges by the auction purchaser, which were due E from the company in liquidation. On 18 September 2000, the Single Judge rejected the application filed by the appellant, holding that KSEB can insist on the arrears being cleared before the connection is given. Aggrieved by the order, the appellant challenged the validity of Clause 15(e) before the High Court on the ground that it is violative of Article F 14 of the Constitution. On 18 July 2001, the Division Bench rejected the challenge. Finally, on 14 September 2001, the impugned order was passed in which the Review Petition against the order of the Division Bench was dismissed.

152Copy pinpoint152. By its judgement dated 18 July 2001, the Kerala High Court upheld the validity of Clause 15(e) and held that the KSEB is not bound G to give a reconnection or a new connection to the premises where there are arrears on any account due to the Board, unless the arrears including penalty, are cleared in advance. It observed that Section 79(j) read with

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Section 49 of the 1948 Act gave considerable latitude to the Board to A make regulations governing the supply of electricity, and the Board could effect supply of electricity upon such terms and conditions as it thinks fit, that is, in accordance with Clause 15(e). The Court further noted that even when all formalities have been satisfied by a prospective consumer in accordance with Clause VI of the Schedule to the 1910 B Act, the Board retains the power to lay down appropriate regulations to safeguard electricity, which is public property and take actions in the best interest of the Board. The Court placed reliance on the judgement of the Kerala High Court in A Ramachandran v. KSEB74 in reaching its decision.

153Copy pinpoint153. In the impugned judgement dated 14 September 2001 in the C Review Petition, the Court further clarified that Clause 15(e) can also be invoked in winding up proceedings as the manner in which the new person became owner, allottee or occupier of the property is immaterial. Finally, the High Court clarified that the mere fact that the Electricity Board was trying to recover the due amount as a secured creditor before the winding up proceedings as against the previous owner, would be of no consequence on the applicability of Clause 15(e).

154Copy pinpoint154. Notice was issued by this Court on 25 January 2002. By an order dated 28 February 2007, this Court directed the parties to negotiate a settlement and arrive at a formula to recover the amount agreeable to both parties. This Court observed: “Balancing the equities as they arise in the present case would be a delicate task, and whichever way we decide this case the losing party may feel that justice has been denied to it. At the same time, we cannot lose sight of the fact that the appellants have made huge investments as claimed by them, and only the interest component on such investment may create a huge liability as against the appellant. On the other hand, if the industry starts functioning, perhaps the Electricity Board will also stand to gain. We have no doubt that instead of litigating, if the parties could have settled the dispute, both would have benefited to a great extent.” However, no settlement could be reached.

74 2000 SCC OnLine Ker 75 H

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155Copy pinpoint155. We are of the view that the Kerala High Court was correct in upholding the validity of Clause 15(e). Clause 15 of the Conditions of Supply of the Electrical Energy, which is statutory in character, unequivocally provides that the Board is not obligated to give reconnection or a new connection in the premises where there are any arrears of electricity charges from a previous consumer, unless the arrears including B penalty are cleared by the new owner/ occupier/ allottee. Furthermore, in the present case the terms of auction sale provided that the assets were sold on “as is where is and whatever there is’’ basis. In the light of the clear facts, the respondent would be well within its right to demand the electricity arrears due, from the appellant-purchaser. Since KSEB’s C claim petition was admitted for Rs 63,94,298 the amount remitted, if any, by the appellant to whom connection has been effected would be adjusted in accordance with Clause 15(e).

156Copy pinpoint156. We hold that the decision of the High Court does not call for interference. The appeal is therefore dismissed. D Item 101: K.C. Ninan v. Kerala State Electricity Board; Civil Appeal No. 2109-2110 of 2004

157Copy pinpoint157. The appellant purchased the property of United Industries Cochin Ltd in a court auction on 31 October 1989. The electricity connection of the premises was earlier disconnected in 1980 and the E electric supply line was dismantled in 1985 on account of non-payment of electricity charges. On 1 December 1989, the appellant allegedly applied to KSEB for an electric connection to the purchased premises. Subsequently, on 1 January 1990, Clause 15 of the Conditions of Supply of electrical energy was effectuated. On 12 June 1990, the KSEB sent F a communication to the appellant, refusing to grant an electric connection unless the appellant paid the arrears of electricity of the premises. As a consequence, the appellant filed a writ petition seeking a permanent electrical connection and challenging Clause 15(e) of the Conditions of Supply.

158Copy pinpoint158. The High Court in the judgement dated 13 February 2003 relied on KJ Dennis (supra)and A Ramachandran (supra), and rejected the prayer of the auction purchaser to get an electricity connection without paying the dues of the previous owner to the KSEB. The appellant filed a review petition against the judgement dated 13 February 2003. It was the appellant’s contention that the decisions in Ramachandran (supra)and H

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KJ Dennis (supra) are inapplicable to the facts of the case. The A appellant submitted that the “judgement under review was delivered without taking note of the fact that condition 15(e) was incorporated in the Conditions of Supply of Electrical Energy only with effect from 1.1.1990 while the petitioner purchased the property on 31.10.1989 in a Court auction and the application for electric connection was made on B 1.12.1989.” The review petition filed by the appellant was dismissed on the ground that the High Court’s decision in Ramachandran (supra) took into consideration the ratio in Isha Marbles (supra)and thereafter upheld the action taken by the respondent-Board.

159Copy pinpoint159. This Court issued notice on 7 January 2004, and granted leave on 2 April 2004. Recovery proceedings were stayed on 5 May C 2006.

160Copy pinpoint160. The appellant has submitted in the course of the written submissions that the impugned regulation would apply prospectively as subordinate legislation made by a delegate cannot have retrospective effect unless rule making power in the concerned statute expressly or by necessary implication confers power in this behalf. 75 It was further stated that the appellant had applied for electricity connection on 1 December 1989, before the Conditions of Supply came into force. It has been urged that in the absence of any existing statutory regulations, the appellant cannot be called upon to clear the past arrears incurred by the erstwhile consumer as a condition precedent to electricity supply.

161Copy pinpoint161. The relevant date to determine the applicability of the Conditions of Supply is the date on which the auction purchaser applies for a fresh connection of electricity for the premises, and not the date of purchase of the undertaking. The issue before this Court is whether there was any statutory provision in operation governing the issue of recovery of the defaulted amount as on the date when the appellant applied for a new electric connection.

162Copy pinpoint162. The respondent in their counter affidavit has raised a dispute on the factum of the date of application for a fresh connection of electricity. The respondent submits that the court sale was held on 31 October 1989, which was confirmed on 22 January 1990 and the sale certificate was signed on 6 April 1990. It is argued that in these circumstances, it is unlikely that the appellant would have received 75 Reliance placed on State of Madhya Pradesh v. Tikamdas, (1975) 2 SCC 100 H