Holding

Electricity dues, being statutory under the Electricity Act, are enforceable against the purchaser when the sale is expressly on an "as is where is, without recourse" basis and the auction notice specifies such liability.

Summary

The respondent purchased a mineral water bottling plant at an e‑auction conducted under the SARFAESI Act, where the sale notice expressly stated that the property was sold "as is where is, whatever there is and without recourse" and that the purchaser would bear all statutory dues, including electricity dues. After the purchase, the electricity department refused to sanction a new 500 kVA connection, claiming the respondent must pay outstanding electricity arrears of the previous owner, relying on clauses 5.9.6 and 8.4 of the General Terms and Conditions of Supply. The respondent argued that, as a subsequent purchaser, it should not be liable for the prior owner's dues, invoking earlier Supreme Court decisions. The Court examined the statutory nature of electricity dues under the Electricity Act, 2003 (s. 56) and the explicit terms of the auction notice, and held that such dues cannot be waived and are enforceable against the purchaser. Consequently, the Court allowed the appeal, affirming the electricity department’s right to recover the arrears from the respondent.

Issues considered

Whether electricity dues, being statutory in nature, can be transferred to a purchaser of a property sold on an "as is where is, without recourse" basis.
Whether the clauses in the auction notice and the General Terms and Conditions of Supply bind the purchaser to pay the previous owner's electricity arrears.
Whether the electricity department can refuse sanction of a new connection until the dues are cleared.

Legislation cited

Subjects

electricity duesstatutory liabilityauction saleas is where isconnection sanctionGeneral Terms and Conditions of SupplySARFAESI ActSection 56 Electricity ActSection 24 Electricity Act

Judgment

[2020] 4 S.C.R. 295 295

TELANGANA STATE SOUTHERN POWER DISTRIBUTION A
COMPANY LIMITED & ANR.
v.
M/S SRIGDHAA BEVERAGES
(Civil Appeal No. 1815 of 2020) B
JUNE 01, 2020
[SANJAY KISHAN KAUL AND K. M. JOSEPH, JJ.]
Electricity: Electricity dues – Liability of auction purchaser
to pay electricity dues of previous owner of purchased unit – In the
C
instant case, auction notice clearly stated that the unit was being
sold on ‘as is where is, what is there is and without any recourse’
basis and that the Authorised Officer carrying out the auction
absolved himself of the liability for any charge, lien, encumbrance,
property tax dues and electricity dues etc. – Auction purchaser
applied to appellant-Electricity Department for sanction of D
connection for running the unit which was refused on the ground
that there were previous electricity dues – The Electricity Department
asserted its right to recover the dues from the new purchaser based
on clause 5.9.6 and 8.4 of General Terms and Conditions of Supply
of Distribution and Retail Supply Licensees in AP – Held: Since in
E
the auction notice, existence of electricity dues was specifically
mentioned as a liability of new purchaser and that the sale was on
‘as is where is, what is there is and without any recourse’ basis, the
Electricity Department was well within its right to demand dues of
the last owner from the respondent purchaser.
F
Electricity: Electricity dues partake the character of statutory
dues under Electricity Act, 2003 r/w General Terms and Conditions
of Supply – Therefore, they cannot be waived in view of provisions
of the Act itself more specifically s.56 of Electricity Act, 2003 (in
pari materia with s.24 of Electricity Act, 1910) and cannot partake
the character of dues of purely contractual nature. G
Allowing the appeal, the Court
HELD: 1.1 The Electricity dues, where they are statutory
in character under the Electricity Act and as per the terms and
conditions of supply cannot be waived in view of the provisions
H
295
296 SUPREME COURT REPORTS [2020] 4 S.C.R.

A of the Act itself more specifically section 56 of the Electricity
Act, 2003 (in pari materia with section 24 of the Electricity Act,
1910 and cannot partake the character of dues of purely
contractual nature. [Para 15A][303-F]
1.2 Where, as in case of the E-auction notice in question,
B 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
WITHOUT RECOURSE BASIS”, there can be no doubt that
the liability to pay electricity dues exists on the respondent
(purchaser). [Para 15B][303-G; 304-A-B]
C
Hyderabad Vanaspathi Ltd. v. A.P. State Electricity Board
& Ors. (1998) 4 SCC 470 : [1998] 2 SCR 620 –
followed.
Dakshin Haryana Bijli Vitran Nigam Ltd. v. Paramount
D Polymers (P) Ltd. (2006) 13 SCC 101 : [2006] 7 Suppl.
SCR 635; Paschimanchal Vidyut Vitran Nigam Limited
& Ors. v. DVS Steels and Alloys Private Limited & Ors.
(2009) 1 SCC 210 : [2008] 15 SCR 766 – relied on
Isha Marbles v. Bihar State Electricity Board & Anr.
E (1995) 2 SCC 648 : [1995] 1 SCR 847; Haryana State
Electricity Board v. Hanuman Rice Mills, Dhanauri &
Ors., (2010) 9 SCC 145 : [2010] 10 SCR 217 –
distinguished.
Southern Power Distribution Company of Telangana
F Limited (through its CMD) & Ors. v. Gopal Agarwal &
Ors. (2018) 12 SCC 644; Special Officer, Commerce,
North Eastern Electricity Supply Company of Orissa
(NESCO) v. Raghunath Paper Mills Private Limited &
Anr. (2012) 13 SCC 479 : [2012] 13 SCR 71 – referred
to.
G
Case Law Reference
[1995] 1 SCR 847 distinguished Para 7
(2018) 12 SCC 644 referred to Para 7
[1998] 2 SCR 620 followed Para 9
H
TELANGANA STATE SOUTHERN POWER DISTRIBUTION COMPANY 297
LIMITED v. M/S SRIGDHAA BEVERAGES

[2006] 7 Suppl. SCR 635 relied on Para 10 A
[2008] 15 SCR 766 relied on Para 12
[2010] 10 SCR 217 distinguished Para 14
[2012] 13 SCR 71 referred to Para 14
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1815 B
of 2020.
From the Judgment and Order dated 30.04.2018 of the High Court
of Judicature at Hyderabad for the States of Telangana and Andhra
Pradesh in Writ Appeal No. 258 of 2018.
C
P. S. Narasimha, Sr. Adv., Mohd. Bande Ali and Rakesh K.
Sharma, Advs. for the Appellants.
Ms. Filza Moonis, G. Ramakrishna Prasad, Suyodhan Byrapaneni,
Mohd. Wasay Khan and Bharat J. Joshi, Advs. for the Respondent.
The Judgment of the Court was delivered by D
SANJAY KISHAN KAUL, J.
1. The respondent is an auction-purchaser of a unit owned by
M/s. SB Beverages Private Limited, which failed to pay its dues, resulting
in the auction by Syndicate Bank (Secured Creditor) under the
Securitisation and Reconstruction of Financial Assets and Enforcement E
of Security Interest Act, 2002 (hereinafter referred to as the ‘SARFAESI
Act’). The moot point of law, which arises for consideration, is whether
the liability towards previous electricity dues of the last owner could be
mulled on to the respondent.
2. The unit in question is a mineral water bottling plan situated in F
land measuring 1 acre 13 guntas in Sy. No. 283 at Rampally Village,
Keesara Mandal, Medchal District. As mentioned aforesaid, on account
of failure to repay a loan, the creditor, Syndicate Bank, brought the
property to auction for which an E-auction sale notice dated 25.5.2017
was issued in this behalf, in which the respondent was the successful G
auction-purchaser. In order to appreciate the controversy before us, it
is necessary to reproduce some of the relevant clauses of the auction
notice:
“The property described below is being sold on “AS IS WHERE
IS, WHATEVER THERE IS AND WITHOUT RECOURSE
H
298 SUPREME COURT REPORTS [2020] 4 S.C.R.

A BASIS” under the rule no.8 & 9 of the Security Interest
(Enforcement) Rules (hereinafter referred to as the rules) for the
recovery of the dues detailed as under:
…. …. …. …. …. ….
The total Rs.13,97,26,258.77 (Rs. Thirteen crores ninety seven lakhs
B amount due as twenty six thousand two hundred fifty eight and paisa seventy
on 30-04-2017 seven) with future interest & costs till date of payment accounts
no 1) 373OSLB140940002 & 2) 30151010006439

Details of For property no.01 Nil
encumbrances For property no.02: The subsequent to our MOD, the
over the following transactions observed in EC
C propert y, as
known to the 1. As per the doc no 2611/2016 dated 15/06/2016, the mortgager
bank has sold the property to the extent of 540 sq yds., to private party,
for worth of Rs.972000/-
2. As per the doc no.657/2015 dated 05/02/2015, the mortgager
has sold the property to the extent of 620.83 sq.yds. to The
D Executive officer Ramapally Gramapanchayat for worth of
Rs.1242000/-.
3. As per the doc no 2721/2014 dated 05/08/2014, the mortgager
has sold the property to the extent of 204.75 sq yds to The
Gramapanchayat Executive officer Ramapally for worth of
Rs.248000/-.

E Details of Rs.83,17,152/- (Eighty Three Lakhs Seventeen Thousand One
outstanding dues Hundred Fifty Two Only)
of Local
Government
(Property tax,
Water sewerage,
F electricity bills,
etc.)
Reserve Price of For property no.01 Rs.77,63,000/-
Property
For property no.02 Reserve Price: Rs.5,83,37,000/- (Rupees five
crores eighty three Lakhs thirty seven Thousand Only)
Total 28 no of Machineries items reserve price: Rs.3,25,28,000/-
G (three crores twenty five lakhs twenty eight thousand only)

…. …. …. …. …. ….
TERMS AND CONDITIONS
…. …. …. …. …. ….
H
TELANGANA STATE SOUTHERN POWER DISTRIBUTION COMPANY 299
LIMITED v. M/S SRIGDHAA BEVERAGES [SANJAY KISHAN KAUL, J.]

21. The successful bidder shall bear the stamp duties, charges A
including those of sale certificate, registration charges, all statutory
dues payable to central/state government, taxes and rates and
outgoing, both existing and future relating to the properties.
…. …. …. …. …. ….
24. The property is sold in “AS IS WHERE IS, WHAT IS THERE B
IS AND WITHOUT ANY RECOURSE BASIS” in all respects
and subject to statutory dues if any. The intending bidders should
make discrete enquiry as regards any claim, charges/
encumbrances on the properties, of any authority, besides the
bank’s charges and should satisfy themselves about the title, extent, C
quality and quantity of the property before submitting their bid.
For any discrepancy in the property the participating bidder is
solely responsible for all future recourses from the date of
submission of bid.
25. No claim of whatsoever nature regarding the property put for D
sale, charges/encumbrances over the property or on any other
matter etc., will be entertained after submission of the bid/
confirmation of sale.
26. The Authorised Officer will not be responsible for any charge,
lien, encumbrance, property tax dues, electricity dues, etc., or any E
other dues to the Government, local authority or anybody, in respect
of the property under sale.”
3. The aforesaid auction notice shows that the unit was being sold
on “as is where is, what is there is and without any recourse basis”, as
per Rules 8 & 9 of the Security Interest (Enforcement) Rules, 2002 F
(hereinafter referred to as the ‘said Rules’). The aforesaid clauses of
the E-auction sale notice show that the total outstanding dues were much
larger, but the reserve price fixed was lower, and the actual sale
consideration of the successful auctioneer was Rs. 9,18,65,000, which is
approximately Rs.10 lakh more than the minimum reserve price. Clause
24 reproduced aforesaid makes it clear that when the reference is to a G
sale on “as is where is, what is there is and without any recourse basis”,
the same is “in all respects and subject to statutory dues”. This clause
was further subject to another Clause 26, where the Authorised Officer
carrying out the auction absolved himself of the liability for any charge,
lien, encumbrance, property tax dues, electricity dues, etc. The purpose
H
300 SUPREME COURT REPORTS [2020] 4 S.C.R.

A is to emphasise that a holistic reading of all these clauses left little in
doubt that the auction notice provided for a reserve price, with a bid
being made about Rs.10 lakh over and above that, and certain nature of
charges, lien, encumbrances, including electricity dues were clearly beyond
the sale consideration paid.
B 4. We may next turn to the sale deed dated 29.9.2017 executed in
pursuance of the auction, which provided for the sale “made free from
all encumbrances known to the Secured Creditor.” An indemnity was
provided by the vendor to the respondent against “any loss arising out of
any defect in the title, including recovery of statutory liabilities taxes, as
also litigation expenses arising out of such defects in title.” This indemnity
C was, thus, confined to aspects mentioned in this clause, but relatable to
defects in title, and not to other liabilities like electricity dues.
5. The problem for the respondent arose when he applied to
appellant No.1 seeking sanction of a 500 KVA connection required for
running the bottling plant. This request was denied on the ground that
D there were previous electricity dues to the tune of Rs. 50,47,715, as on
26.10.2017. Appellant No.1 asserted its right to recover this amount
even from the new purchaser (i.e. respondent), based on a reading of
Clauses 5.9.6 and 8.4 of the General Terms and Conditions of Supply of
Distribution & Retail Supply Licensees in AP (for short ‘General Terms
E & Conditions of Supply’), which clauses are reproduced hereinunder:
“5.9.6 Dismantlement of Service Line after Termination of
Agreement: On the termination of the LT or HT Agreement, the
company is entitled to dismantle the service line and remove the
materials, Meter, cut out etc. After termination of the Agreement,
F the consumer shall be treated as a fresh applicant for the purpose
of giving supply to the same premises when applied for by him
provided there are no dues against the previous service
connection.”
…. …. …. …. …. ….
G “8.4 Transfer of Service Connection
The seller of the property should clear all the dues to the Company
before selling such property. If the seller did not clear the dues as
mentioned above, the Company may refuse to supply electricity
to the premises through the already existing connection or refuse
H
TELANGANA STATE SOUTHERN POWER DISTRIBUTION COMPANY 301
LIMITED v. M/S SRIGDHAA BEVERAGES [SANJAY KISHAN KAUL, J.]

to give a new connection to the premises till all dues to the A
Company are cleared.”
6. We may also take note of the fact that the aforesaid dues
partake the character of statutory dues under the Electricity Act, 2003
read with the General Terms & Conditions of Supply.
7. A writ petition was filed by the respondent before the High B
Court of Telangana and Andhra Pradesh seeking quashing of these
demands predicated on a reasoning that as a subsequent purchaser, the
respondent was not responsible for the dues of the earlier owner, and in
that behalf relied upon the judgments of this Court in Isha Marbles v.
Bihar State Electricity Board & Anr. 1 and Southern Power C
Distribution Company of Telangana Limited (through its CMD) &
Ors. v. Gopal Agarwal & Ors.2 Reliance on these judgments persuaded
the learned single Judge to issue directions quashing the demand of
appellant No.1. The appeal filed before the Division Bench against this
order was also dismissed on 30.4.2018.
D
8. We have examined the submissions in the contours of the
aforesaid controversy, and take note of the fact that in the case of Isha
Marbles,3 the sale was in pursuance of Section 29(1) of the State
Financial Corporations Act, 1951, but the important aspect was that there
was no clause specifically dealing with the issue of electricity dues or
such other dues, as in the present auction notice. This Court elucidated E
the position in the context of Section 24 of the Electricity Act, 1910, to
emphasise that under Section 2(c) of the Electricity Act, a consumer
means any person who is supplied with energy, and since liability to pay
electricity dues is fastened only on the consumer, at the relevant time,
the purchaser was not the consumer. It has also been stated that in the F
absence of consumption of electricity, the subsequent purchaser was
merely seeking reconnection without there being any statutory dues
towards consumption charges. We had specifically posed a question to
the learned counsel for the respondent in the order dated 15.11.2019,
that whether, in the context of the judicial pronouncements sought to be
relied upon, there was a specific clause in the nature of Clause 26 as in G
the present E-auction sale notice, which absolved the Authorized Officer
of various dues including “electricity dues”. On the conspectus of the
1
(1995) 2 SCC 648
2
(2018) 12 SCC 644
3
(supra) H
302 SUPREME COURT REPORTS [2020] 4 S.C.R.

A judgments referred to by the respondent, there were no such clauses in
the cases in question.
9. We may also notice that there have been subsequent judicial
pronouncements dealing with this aspect of electricity dues. A three
Judge Bench of this Court has held that the dues under the terms and
B conditions of supply partake the character of statutory dues (Hyderabad
Vanaspathi Ltd. v. A.P. State Electricity Board & Ors. 4). The mere
fact that agreements were entered into with every consumer only served
the purpose of bringing to the notice of the consumer the terms and
conditions of supply, but did not make the dues purely contractual in
character.
C
10. We can draw strength from the observations of this Court in
Dakshin Haryana Bijli Vitran Nigam Ltd. v. Paramount Polymers
(P) Ltd.,5 where there was a similarity as in the present case, of a
specific clause dealing with electricity dues. It was observed that in
such a scenario if a transferee desires to enjoy the service connection,
D he shall pay the outstanding dues, if any, to the supplier of electricity and
a reconnection or a new connection shall not be given to any premises
where there are arrears on account of dues to the supplier unless they
are so declared in advance.
11. We may also notice that as an auction purchaser bidding in an
E “as is where is, whatever there is and without recourse basis”, the
respondent would have inspected the premises and made inquiries about
the dues in all respects. The facts of the present case, as in the judgment
aforesaid, are more explicit in character as there is a specific mention of
the quantification of dues of various accounts including electricity dues.
F The respondent was, thus, clearly put to notice in this behalf.
12. The same view in case of a similar clause has been taken in
Paschimanchal Vidyut Vitran Nigam Limited & Ors. v. DVS Steels
and Alloys Private Limited & Ors.6 It has been further observed that
if any statutory rules govern the conditions relating to sanction of a
G connection or supply of electricity, the distributor can insist upon fulfillment
of the requirements of such rules and regulations so long as such rules
and regulations or the terms and conditions are not arbitrary and

4
(1998) 4 SCC 470
5
(2006) 13 SCC 101 (2 Judges Bench)
6
H (2009) 1 SCC 210 (2 Judge Bench)
TELANGANA STATE SOUTHERN POWER DISTRIBUTION COMPANY 303
LIMITED v. M/S SRIGDHAA BEVERAGES [SANJAY KISHAN KAUL, J.]

unreasonable. A condition for clearance of dues cannot per se be termed A
as unreasonable or arbitrary.
13. We may notice a slightly contra view in Haryana State
Electricity Board v. Hanuman Rice Mills, Dhanauri & Ors.,7 in a
given scenario where the pendency of electricity dues was not mentioned
in the terms & conditions of sale, and it was held in those facts that the B
dues could not be mulled on to the subsequent transferee.
14. We may notice that in Special Officer, Commerce, North
Eastern Electricity Supply Company of Orissa (NESCO) v.
Raghunath Paper Mills Private Limited & Anr.,8 a distinction was
made between a connection sought to be obtained for the first time and C
a reconnection. In that case, no application had been made for transfer
of a service connection from the previous owner to the auction-purchaser,
but in fact, a fresh connection was requested. In light of the regulations
therein, previous dues had to be cleared only in the case of a
reconnection. Hence, the respondents were held to be free from
electricity liability. This Court in Southern Power Distribution Company D
of Telangana Limited (through its CMD) & Ors.9 found that the facts
were similar to the NESCO10 case, and thus followed the same line.
15. We have gone into the aforesaid judgments as it was urged
before us that there is some ambiguity on the aspect of liability of dues
of the past owners who had obtained the connection. There have been E
some differences in facts but, in our view, there is a clear judicial thinking
which emerges, which needs to be emphasized:
A. That electricity dues, where they are statutory in character
under the Electricity Act and as per the terms & conditions of
supply, cannot be waived in view of the provisions of the Act F
itself more specifically Section 56 of the Electricity Act, 2003
(in pari materia with Section 24 of the Electricity Act, 1910),
and cannot partake the character of dues of purely contractual
nature.
B. Where, as in cases of the E-auction notice in question, the G
existence of electricity dues, whether quantified or not, has
7
(2010) 9 SCC 145 (2 Judge Bench)
8
(2012) 13 SCC 479 (2 Judge Bench)
9
(supra)
10
(supra) H
304 SUPREME COURT REPORTS [2020] 4 S.C.R.

A been specifically mentioned as a liability of the purchaser and
the sale is on “AS IS WHERE IS, WHATEVER THERE IS
AND WITHOUT RECOURSE BASIS”, there can be no doubt
that the liability to pay electricity dues exists on the respondent
(purchaser).
B C. The debate over connection or reconnection would not exist in
cases like the present one where both aspects are covered as
per clause 8.4 of the General Terms & Conditions of Supply.
16. In view of the aforesaid legal position, which has emerged,
we are of the view that the impugned orders cannot be sustained and
C are accordingly set aside while opining that appellant No.1 would be
well within its right to demand the arrears due of the last owner, from
the respondent-purchaser.
17. The appeal is accordingly allowed, leaving the parties to bear
their own costs.
D
Devika Gujral Appeal allowed.

E

F

G

H