Consumer not liable to pay previous owner`s power dues: SC

A consumer cannot be compelled by the State Electricity Board to clear the dues of the previous owner of the premises he has purchased in an auction.

Updated: Sep 02, 2010, 20:08 PM IST

New Delhi: A consumer cannot be compelled
by the State Electricity Board to clear the dues of the
previous owner of the premises he has purchased in an auction
unless there is a statutory requirement or prior agreement to
the effect, the Supreme Court has held.

"In the absence of any statutory rules authorizing a
demand for the dues of the previous occupant, an auction
purchaser seeking supply of electrical energy by way of a
fresh connection, cannot be called upon to clear the pre-sale
arrears, as a condition precedent for granting fresh
connection," a Bench of Justices R V Raveendran and H L
Gokhale said in a judgement.

The apex court passed the judgement while dismissing
the plea of the Haryana State Electricity Board challenging a
Punjab and Haryana High Court ruling that M/s Hanuman Rice
Mills, an auction purchaser was not liable to clear the dues
of Rs.2,39 lakh owed by the previous owner M/s Durga Rice

M/s Hanuman Rice Mills had purchased the premises of
M/s Durga Rice Mills at a cost of Rs.15,25,000 on December 14,
1990 in an auction conducted by the Haryana Financial
Corporation for recovery of its dues .

The State Electricity Board granted a fresh
electricity supply to the Mill, but four years later issued a
notice on January 16, 1995 demanding Rs 2,39,251 towards
arrears of electricity charges due by the previous owner.

After the new Mill owner refused to pay the dues, the Board
disconnected the power supply.

The High Court by its judgement dated August 8, 2006
held that the liability of a consumer to pay charges for
consumption of electricity, cannot be fastened on a subsequent
auction purchaser of the property and cited the apex court`s
earlier ruling in the Isha Marbles vs. Bihar State Electricity
Board - (1995).

Aggrieved, the Board appealed in the apex court.

Dismissing the appeal, the apex court said the Board
could not seek the enforcement of the liability of the
previous owner/occupier against a purchaser, who was a third
party vis-a-vis the contract between the Board and the
previous occupant.

The auction purchaser who buys the property after
disconnection of the electricity supply, of the previous owner
could not be considered as a `consumer` within the meaning of
the Electricity Act, the Bench said.

The Bench then laid certain broad guidelines for
determining such disputes.

"The position therefore can may be summarized 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

(ii) Where the statutory rules or terms and
conditions of supply which are statutory in character,
authorize the supplier of electricity, to demand from the
purchaser of a property claiming re-connection or fresh
connection of electricity, the arrears due by the previous
owner/occupier in regard to supply of electricity to such
premises, the supplier can recover the arrears from a