Holding

An electricity distributor may validly stipulate payment of pro‑rata dues as a condition for a fresh connection, and a purchaser who has voluntarily paid such amount is estopped from claiming a refund unless the original debtor is finally held not liable.

Summary

The appellant, Paschimanchal Vidyut Vitran Nigam Ltd., conditioned the grant of a fresh electricity connection to the first respondent, a purchaser of a sub‑divided industrial plot, on payment of the pro‑rata dues of the previous occupier (the third respondent). The first respondent paid Rs.8.63 lakhs and later sought a refund after the Uttar Pradesh Electricity Regulatory Commission directed the appellant to accept a bank guarantee from the third respondent and not demand arrears from plot purchasers. The High Court ordered a refund with interest, but the Supreme Court held that the distributor’s stipulation was neither unreasonable nor arbitrary and that the payment was made voluntarily as a condition for connection. Consequently, the first respondent is estopped from claiming a refund unless the third respondent is ultimately found not liable for the disputed dues. The Court allowed the appeal, set aside the High Court order and dismissed the writ petition.

Issues considered

Whether an electricity distributor may lawfully condition the provision of a fresh connection on payment of pro‑rata dues of a previous occupant of the premises.
Whether such a stipulation is unreasonable or arbitrary under the Electricity Supply Code.
Whether the purchaser who paid the pro‑rata amount is entitled to a refund after the regulatory commission’s interim order.
Whether the distributor can recover electricity dues from a purchaser of a sub‑divided plot in the absence of a direct contract.

Legislation cited

Electricity Supply Codes. 4.3(g), s. 4.3(h)

Subjects

electricity distributionpro‑rata duesfresh connectionstipulationestoppelElectricity Supply Codeindustrial consumersub‑division of premisesrefundregulatory commission

Judgment

[2008] 15 S.C.R 766

A PASCHIMANCHAL VIDYUT VITRAN NIGAM LTD. & ORS. A.·
v.
M/S. DVS STEELS & ALLOYS PVT. LTD. & ORS.
(Civil Appeal No. 6565 of 2008)

NOVEMBER 7, 2008
B
[R.V. RAVEENDRAN AND ·LOKESHWAR
SINGH PANTA, JJ.]

Electricity:
c
Industrial consumer- Demand of electricity dues - Non-
. payment - Sale of plot - Claim by purchaser for fresh
electricity connection - Stipulation by Electricity distributor that
electricity dues of the original owner be cleared before fresh
D connection is given - Legality of - Held: Such stipulation not
unreasonable or arbitrary - Electricity distributor can stipulate
the terms subject to which it would supply electricity.
_,
Industrial consumer - Demand of electricity dues - Non-
payment - Sub-division of premises by owner into number of
E plots - Sale of plots - Claim for fresh electricity connection
by one purchaser- Allowed on payment of pro-rata electricity
dues of the original owner - Non-payment of pro-rata dues
by other purchasers and as a result electricity connection not
given to them - Electricity Commission passed interim order
F directing the Electricity Distributor to accept bank guarantee 'f
from the original owner in regard to the alleged dues and to
release fresh connections to all purchasers without
demanding pro-rata dues from them - Directions complied
with - Claim of first respondentfor refund of amount paid by
G it - Maintainability of - Held· Not maintainable ~ First
respondent cannot seek refund on basis of subsequent -,
interim order of the Commission, in absence of a specific
direction for refund - First respondent having paid the said >
H 766
PASCHIMANCHAL VIDYUT VITRAN NIGAM LTD. & ORS. 767
v. DVS STEELS & ALLOYS PVT. LTD. & ORS.

~ amount voluntarily and in pursuance of its undertaking as a A
condition for obtaining fresh electricity connection, is estopped
from claiming the amount back, except in accordance with the
terms subject to which the payment was made - Electricity
-( Supply Code - Clause 4.3(g) and (h).
.;
i B
The Electricity Distributor raised supplementary bills
against the third respondent, an industrial consumer. The
third respondent disputed the claim under the bills. The
' .., matter is pending adjudication in the Court.

The third respondent meanwhile closed its unit and c
sub-divided its industrial plot into smaller plots and sold
one plot to the first respondent. The first respondent
applied to the appellant-Electricity Distributor and was
sanctioned a fresh electricity connection on the condition
that it would pay electricity dues of the third respondent, D
in proportion to the area purchased by it. The first
respondent accordingly deposited Rs.8.63 Lakhs being
the pro-rata dues of the third respondent, subject to the
condition that in the event of the pending challenge to
the demand being decided in favour of third respondent, E
the said amount would be refunded to first respondent.

Appellant did not give electricity connection to
several plot-purchasers from third respondent, who did
: y not pay pro-rata dues of the third respondent. The third
respondent moved an application before the Electricity F
Regulatory Commission complaining that the appellant
had arbitrarily refused power connection to the
purchasers of sub-divided plots on the ground that
money was due from third respondent, though the said
G

- ""
liability was disputed and was pending adjudication in
Court.

The Commission directed the appellant to accept a
bank guarantee from the third respondent in regard to the
disputed claim and to release new power connections to H
...
768 SUPREME COURT REPORTS [200~] 15 S.C.R.

A purchasers of the sub-divided plots, without insisting
upon payment of any amount towards the alleged dues
of third :respondent. The third respondent furnished a
bank guarantee. The first respondent demanded refund
of the pro-rata dues paid by it earlier. i.e. Rs.8.63 lacs with I
B interest. The appellant declined the request. The first
respondent filed writ petition.· The High Court held that t
the amounts allegedly due from third respondent were
secured by a bank guarantee furnished by it, and
therefore there was no need to retain any amount from
c the purchasers of the sub-divided plots. Hence the
present appeal.

Allowing the appeal, the Court

HELD: 1.1. The supply of electricity by a distributor
D to a consumer is 'sale of goods'. The distributor as the
supplier, and the owner/ occupier of a premises with
whom it enters into a contract for supply of electricity are
the parties to the contract. A transferee of the premises
or a subsequent occupant of a premises with whom the
E supplier has no privity of contract cannot obviously be
asked to pay the dues of his predecessor in title or
possession, as the amount payable towards supply of
electricity does not constitute a 'charge' on the premises.
A purchaser of a premises, cannot be foisted with the
F electricity dues of any previous occupant, merely y :
because he happens to be the current owner of the
premises. The supplier can therefore neither file a suit nor
initiate revenue recovery proceedings against a
purchaser of a premises for the outstanding electricity
G dues of the vendor of the premises, in the absence of any
contract to the contrary. [Para 9] [775-E-H; 776-A]

1.2. But when the purchaser of a premises
approaches the distributor seeking a fresh electricity J>.
-
connection to its premises for supply of electricity, the
H distributor can stipulate the terms subject to which it
PASCHIMANCHAL VIDYUT VITRAN NIGAM LTD. & ORS. 769
v. DVS STEELS & ALLOYS PVT. LTD. & ORS.
would supply electricity. It can stipulate as one of the A
conditions for supply, that the arrears due in regard to the
supply of electricity made to the premises when it was
in the occupation of the previous owner/occupant,
should be cleared before the electricity supply is restored
to the premises or a fresh connection is provided to the B
premises. If any statutory rules govern the conditions
relating to sanction of a connection or supply of
-i
electricity, the distributor can insist upon fulfillment of the
requirements of such rules and regulations. If the rules
are silent, it can stipulate such terms and conditions as c
it deems fit and proper, to regulate its transactions and
dealings. So long as such rules and regulations or the
terms and conditions are not arbitrary and unreasonable,
Courts will not interfere with them. [Para 1O] [776-A-D]
1.3. A stipulation by the distributor that the dues in D
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 E
defaults with impm1ity, 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 F
of consumers of electricity and the frequent moving or
translocating of industrial, commercial and residential
establishments, provisions similar to clause 4.3(g) and (h)
of Electricity Supply Code are necessary to safeguard the
interests of the distributor. There is nothing unreasonable G
in a provision enabling the distributor/supplier, to
disconnect electricity supply if dues are not paid, or
where the electricity supply has already been
disconnected for non-payment, insist upon clearance of
arrears before a fresh electricity connection is given to H
.......
=ii.
(
770 SUPREME COURT REPORTS [2008] 15 S.C.R.

,.L
A the premises. It is obviously the duty of the purchasers/
occupants of premises to satisfy themselves that there
are no electricity dues before purchasing/occupying a
premises. They can also incorporate in the deed of sale
or lease, appropriate clauses making the vendor/lessor
8 responsible for clearing the electricity dues up to the date
of sale/lease and for indemnity in the event they are made
liable. [Para 11] [776-E-H; 777-A-B]
'Ir-
2.1. In the present case, when the first respondent,
who was the purchaser of a sub-divided plot, wanted a
c new electricity connection for its premises, the appellant
informed the first respondent that such connection will
be provided only if the electricity dues are paid pro-rata.
They were justified in making the demand. Therefore, it
cannot be said that the collection of Rs.8.63 Lakhs from
D first respondent was illegal or unauthorized. It is relevant
· to note that when the said amount was demanded and
paid, there was no injunction or stay restraining the
appellant from demanding or receiving the dues. (Para
12] (777 -C-D]
E
2.2. The first respondent had voluntarily paid Rs.8.63
Lakhs being the pro rata electricity dues long before the
Electricity Regulatory Commission issued the interim
order directing the appellant not to demand or recover !·
y
F any arrears from the purchasers of sub-divided plots
applying for fresh connection. After the third respondent
furnished the bank guarantee, the Electricity Regulafory
Commission did not direct refund of amounts already
}-
paid by applicants seeking fresh connection. In the
present case, the first respondent had voluntarily paid the
G
said amount to the appellant to obtain a fresh electricity
connection. It cannot seek refund on the basis of any I

subsequent order of the Commission, in the absence of ~I-

a specific direction for refund. The first respondent
having paid the said amount in pursuance of its
H
,...
..,,____
PASCHIMANCHAL VIDYUT VITRAN NIGAM LTD. & ORS. 771
v. DVS STEELS & ALLOYS PVT. LTD. & ORS.

undertaking as a condition for obtaining fresh A
connection, is estopped from claiming the amount back,
except in accordance with the terms subject to which the
payment was made. The amount deposited by first
respondent will however have to be refunded by the
appellant, with appropriate interest, if the third ~
respondent is ultimately found to be not liable in respect
of the demand under the supplementary bills, or if third
respondent actually clears the dues. [Para 13] [777-G-H;
778·A-D]

CIVIL APPELLATE JURISDICTION : Civil Appeal No.
c
6565 of 2008.

From the final Judgment and Order dated 14.5.2007 of the
High Court of Judicature at Allahabad in Civil Misc. Writ
Petition No. 59163 of 2006. D
Pradeep Misra, Manoj Kr. Sharma and Daleep Kr. Dhyani
for the Appellants.

Pravir Kumar Jain, Hiren Dasan, Dharmendra Kr. Mishra
and Sarla Chandra for the Respondents. E

The Judgment of the Court was delivered by

R.V. RAVEENDRAN, J. 1. Leave granted. Heard learned
counsel.

2. Paschimanchal Vidyut Vitran Nigam ltd., the appellant
herein holding an electricity distribution licence, is one of the
successors-in-interest of Uttar Pradesh State Electricity Board
CBoard' for short). The third respondent was a consumer
receiving electricity supply from the Board to its industrial unit G
at Ghaziabad. In April, 1994, the Board raised supplementary
bills for Rs.105. 78 lakhs against the third respondent towards
difference in tariff (on the basis of an audit objection that supply
ought to have been charged under HV2 category instead of HV1
category). The third respondent filed civil suits disputing the said H
-.
772 SUPREME COURT REPORTS [2008] 15 S.C.R.

A claim and obtained an order of injunction restraining the Board
from recovering the said supplementary bills amount. The
Board challenged the order of the civil court by filing appeals
before the Allahabad High Court. In those appeals, which are
stated· to be pending, on 13.12.1996 the High Court stayed the
8 order of ihjundion granted by the civil court thereby permitted
recovery of the outstanding dues.

3. The third respondent closed its unit in the year 1998. In
~
2001-2002, it sub-divided its industrial plot into 129 smaller
plots of different sizes with the permission of Uttar Pradesh
c State Industrial Development Corporation. One of those plots
(A-7/60-67) was sold by the third respondent to the first
respondent.

4. The first respondent applied to the appellant (who had
D succeeded UPSEB by then) for supply of electricity by
sanctioning a load of 3200 KVA for running an induction furnace ~

in the plot purchased by it. The appellant sanctioned the request
on 4.9.2004 subject to the condition that it should pay the
arrears due by. the third respondent, in proportion to the area
E purchased by it, as a condition precedent for supply of
electricity. The first respondent agreed to the demand and gave
an undertaking that the pro-rata electricity dues of the third
respondent would be paid by them. The appellant thereafter
called upon the first respondent to pay Rs.8,63,451/- being the
'(
F arrears, on pro rata basis, by letter dated 9.9.2004 subject to
the foll.owing condition:

" ................ the consumer (who) wants to establish its unit,
has given an affidavit regarding payment of outstanding
dues of Mis. Electro Steel, Ghaziabad installed on that plot
G that it is agreeable to make payment of outstanding
~
electricity dues on their plot. Therefore, they will deposit
the proportionate dues against that unit according to the >-.. .
area of their plot within 15 days .......... Otherwise, the order
sanctioning the load will be deemed to be .automati?ally
H cancelled."
PASCHll\.1ANCHAL VIDYUT VITRAN NIGAM LTD. & ORS. v. DVS 773
STEELS & ALLOYS PVT. LTD. & ORS. [RV. RAVEENDRAN, J.]

Accordingly on 18.9.2004 the first respondent deposited a sum A
of Rs.863,451/- being the dues of the third respondent, pro
rata, subject to the condition that in the event of the pending
challenge to the demand being decided ·in favour of third
respondent, the appellant shall refund the amount deposited by
first respondent. B
5. Several other plot-purchasers from third respondent, did
not pay the dues of the third respondent. Appellant did not give
them electricity supply. Therefore, in November, 2005, the third
i' -#
respondent moved an application before the Uttar Pradesh
G
Electricity Regulatory Commission ('Commission' for short)
complaining that the appellant was arbitrarily refusing power
connection to the purchasers of sub-divided plots on the ground ·
that Rs.105. 78 lakhs was due by third respondent, though the
said liability was disputed and was pending adjudication in
court. The Commission by order dated 25.11.2005, issued the D
following directions to the appellant : (i) to accept a bank
guarantee from the third respondent in regard lo the disputed
"" claim of Rs.105. 78 lakhs; and (ii) on the third defendant
furnishing guarantee, release new power connections to the
purchasers of sub-divided plots from the third respondent, E
without insisting upon payment of any amounts towards the
alleged dues of third respondent. In pursuance of the said order,
~
the third respondent furnished a bank guarantee on 5.12.2005
for Rs.105. 78 lakhs to the appellant. Thereafter the appellant
did not demand payment of the pro-rata amount in regard to F
the arrears of third defendant, from the purchasers of the sub-
divided plots seeking new power connections.
----{

---i 6. The first respondent by letter dated 15.9.2006 made a
-----+ demand for refund of the sum of Rs.863,451/- with interest, on
G
two grounds:

• --4.,
(i) The first respondent being the purchaser of a plot from
the third respondent, was not liable to bear and pay the
dues of third 1espondent, as it was not the consumer during
the period for which the dues were claimed and there was H

-
774 SUPREME COURT REPORTS [2008] 15 S.C.R.

A no privity of contract between the appellant and first
respondent. J...

(ii) Third respondent had furnished a bank guarantee for
: the entire disputed claim and the Commission had directed
the appellant not to recover from the purchasers of sub-
B
divided plots, any amount allegedly due by the third
respondent. The appellant refused the request of the first
respondent. According to the appellant, it was entitled to
recover the dues of the previous occupier of a premises,
c
from any subsequent occupier thereof who seeks electricity
supply. It also pointed out the order of the Commission
"'
operated prospectively and did not apply to payments
received by the Appellant, prior to the order and there was
no direction to refund the pro-rata payments already
received.
D
7. Feeling aggrieved, the first respondent filed W.P.
No.59163/2006 seeking a direction to the appellant not to
recover from it, any dues of the third respondent. It also sought
a. consequential direction to appellant to refund the sum of
E Rs.8,63,451/- with interest at 12% per annum. The High Court
by order dated 14.5.2007 allowed the said writ petition and
directed the appellant to refund the sum of Rs.8,63,451/- with
interest at the rate of 6% per annum from the date of payment.
The High Court was of the view that the amounts said to be
F due by third respon.dent were secured by a bank guarantee
furnished by the third respondent, and therefore there was no
need to retain any amount from the purchasers of the sub-
divided plots. The said order is challenged in this appeal by
special leave.
G Whether the supplier can recover the electricity dues from
the purchaser of a sub-divided plot ?

8. The appellant submitted that if a consumer disposed of
,).
its premises, or any portion thereof, without clearing the dues
H in regard to the electricity supplied to its premises, any
".,...
-
'
"":"'"
PASCHIMANCHAL VIDYUT VITRAN NIGAM LTD. & ORS. v. DVS 775
STEELS & ALLOYS PVT. LTD. & ORS. [RV. RAVEENDRAN, J.]
. transferee seeking fresh electricity connection or supply of A
electricity to the premises, will have to clear the electricity dues
of the previous occupant. The appellant referred to sub-clauses
(g) and (h) of clause 4.3 of the Electricity Supply Code, which
is extracted below :
B
"(g) Where the property has been legally sub-divided, the
outstanding dues for the consumption of energy on such
premises, if any, shall be divided on pro-rata basis.

~ (h) A new connection to such sub-divided premises shall
be given only after the share of outstanding dues attributed c
to such sub-divided premises, is duly paid by the
applicant. Licensee shall not refuse connection to an
applicant only on the ground that, dues on the other
portion(s) of such premises have not been paid, nor shall
the licensee demand record of last paid bills of other D
portion(s) from such applicants."
,. The appellant submitted that similar provisions existed in the
relevant regulations of the Board even before the said Code
came into force.
E
9. The supply of electricity by a distributor to a consumer
is 'sale of goods'. The distributor as the supplier, and the owner/
occupier of a premises with whom it enters into a contract for
supply of electricity are the parties to the contract. A transferee
-y
of the premises or a subsequent occupant of a premises with F
whom the supplier has no privity of contract cannot obviously
be asked to pay the dues of his predecessor in title or
possession, as the amount payable towards supply of electricity
does not constitute a ·charge' on the premises. A purchaser
of a premises, cannot be foisted with the electricity dues of any G
previous occupant, merely because he happens to be the
!. current owner of the premises. The supplier can therefore
neither file a suit nor initiate revenue recovery proceedings
.-4 • against a purchaser of a premises for the outstanding electricity
dues of the vendor of the premises, in the absence of any H
I
f
776 SUPREME COURT REPORTS [2008) 15 S.C.R. ~
;
f

-A contract to the contrary.
,.l_

10. B,ut the above legal position is not of any pr~ctical help
to a purchaser bf a premises. When the, purchaser of a
premises' approaches the distributor seeking a fresh electricity .
)

B connection to its premises for supply of electricity, the distributor
can stipulate the terms subject to which it would supply
electricity. It can stipulate as one of the conditions for supply,
that the arrears due in regard to the supply of electricity made
to the premises when it was in the occupation of the previous
owner/occupant, should be cleared before the electricity supply
C is restored to the premises or a fresh connection is provided
to the premises. If any statutory rules govern the conditions
relating to sanction of a connection or supply of electricity, the
distributor can insist upon fulfillment of the requirements of such
rules and regulations. If the rules are silent, it can stipulate such
0 terms and' conditions as it deems fit and proper, to regulate its L
transactions and dealings. So long as such rules and I-
regul_ations or the terms and conditions are not arbitrary and -1
unreasonable, courts will not interfere with them.

E 11. 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 conn~ction is
given to .a.premises, cannot be termed as unreasonable or
arbitrary. lri the absence of such a stipulation, an unscrupulous
F consumer may commit defaults with impunity, arid 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
G industrial, commercial and residential establishments,
provisions similar to clause 4.3(g) and (h) of Electricity Supply
Code are necessary to safeguard the interests of the distributor.
We do not find anything unreasonable in a provision enabling
t~e distributor/supplier, to disconnect electricity supply if dues
H
PASCHIMANCHAL VIDYUT VITRANNIGAM LTD. & ORS. v. DVS 777
,.' STEELS & ALLOYS PVT. LTD. & ORS. [RV RAVEENDRAN, J.]

are not paid, or where the electricity supply has already been A
A
disconnected for non-payment, insist upon clearance of arrears
before a fresh electricity connection is given to the premises.
It is obviously the duty of the purchasers/occupants of premises
to satisfy themselves that there are no electricity dues before
purchasing/occupying a premises. They can also incorporate B
in the deed of sale or lease, appropriate clauses making the
vendor/lessor responsible for clearing the electricity dues up to
the date of sale/lease and for indemnity in the event they are
./ made liable. Be that as it may.

12. In this case, when the first respondent, who was the
c
purchaser of a sub-divided plot, wanted a new electricity
. connection for its premises, the appellant informed the first
respondent that such connection will be provided only if the
'
electricity dues are paid pro-rata. They were justified in;making
::: the demand. Therefore, it cannot be said that the collection of D
~

Rs.8,63,451/- from first respondent was illegal or unauthorized.
1 '"'.
' It is relevant to note that when the said amount was demanded
and paid, there was no injunction or stay restraining the
appellant from demanding or receiving the dues.
E
Whether appellant is liable to refund the pro rata payment
made by first respondent ?

13. On 25.11.2005, the Commission passed an order that
the appellant should not demand payment of pro rata arrears,
... from the purchasers of plots who seek new connections to their
F
respective portions, if the third respondent furnished a bank
guarantee for its outstanding dues. The Commission directed
the third respondent to furnish a Bank Guarantee for the dues,
1 because the claim under the supplementary bills was disputed

• by the third respondent and the tenability of the claim was G
pending consideration in court. But the first respondent had
voluntarily paid Rs.8,63,451/- being the pro rata dues on
~ 18.9.2004 long before the Commission issued the interim order
on 25.11.2005. Though the Commission directed that the
appellant should not demand or recover any arrears from the H
778 SUPREME COURT REPORTS [2008] 15 S.C.R.
:._
'

A purchasers of sub-divided plots applying for fresh connection, J...
after the third respondent furnished the bank guarantee, it did
not direct refund of amounts already paid by applicants seeking
fresh connection. In this case, the first respondent had
voluntarily paid the said amount to the appellant to obtain a
B fresh electricity connection. It cannot seek refund on the basis }.
of any subsequent order of the Commission, in the absence of
a specific direction for refund. The first respondent having paid
j
the said amount in pursuance of its undertaking as a condition I
\·
for obtaining fresh connection, is estopped from claiming the '

c amount back, except in accordance with the terms subject to
which the payment was made. The amount deposited by first
respondent will however have to be refunded by the appellant, •'
with appropriate interest, if the third respondent is ultimately
found to be not liable in respect of the demand under the
D supplementary bills, or if third respondent actually clears the
dues.
-f
,.
14. In view of the above, we allow this appeal, set aside I

the order of the High Court and dismiss the writ petition of the
first respondent.
E
8.8.8. Appeal allowed.
,..
t

¥

n-

,. t

(
r

._ ___
.~-

>-

r,
~