Subsequent Occupant of Premises Responsible for Clearing Previous Occupant's Electricity Dues: Supreme Court
In a significant verdict, the Supreme Court has ruled that subsequent property owners, including auction purchasers, can be held accountable for settling unpaid electricity dues of previous owners. The Court stated that distribution licensees are authorized to demand the clearance of prior electricity arrears before resuming power supply, in accordance with the 2003 Act. The Court also affirmed the utilities' ability to establish a charge mechanism through subordinate regulations or statutory supply conditions for recovering electricity arrears from subsequent property transferees.
The bench, composed of Chief Justice of India DY Chandrachud, and Justices PS Narasimha and Hima Kohli, issued this decision in response to a reference involving multiple cases. A central question was whether previous owners' electricity dues could constitute a financial claim on the property.
This matter originated from nineteen cases where electric utilities denied power connections to new purchasers until the former owner's outstanding electricity bills were settled. These properties had been auctioned on an "as is where is basis," and the new owners who acquired them via auction sought electricity supply for these premises.
The reference questions were addressed as follows:
1. Universal Service Obligation: The Court clarified that the obligation to provide electricity under Section 43 of the 2003 Electricity Act is not absolute but is subject to the charges and regulations set by the electric utilities. This duty pertains to the property's owner or occupier. The Act establishes a connection between the consumer and the premises, and a person becomes a consumer solely for the specific premises for which electricity supply is sought.
2. Reconnection vs. Fresh Connection: The Court established that an application is considered a reconnection only if the applicant seeks electricity for the same premises that previously had power supply. Even if the consumer remains the same but the premises differ, the application is categorized as a request for a fresh connection, not a reconnection.
3. Authority to Recover Debts: The Court affirmed that the scope of the Act is broad enough to include provisions for recovering electricity arrears from new or subsequent property owners. This aligns with the Act's objectives.
4. Establishment of Charge on Premises: The Court concluded that the rule-making authority under Section 181, read together with Section 50 of the Act, empowers regulatory bodies to institute a statutory charge when the main statute lacks such provisions.
5. Limitation Period and Recovery: The Court confirmed that the power to initiate recovery proceedings through lawsuits against defaulting consumers is distinct from the power to disconnect power supply for recovery. The two-year limitation period specified in Section 56(2) of the 2003 Act does not impede electric utilities' civil remedies for collecting unpaid dues.
6. Auction Sale Implications: The Court interpreted "as is where is basis" as a notice to intending bidders that the seller bears no responsibility for liabilities related to the property, such as outstanding dues like service charges and local taxes.
While ruling in favour of electric utilities on these matters, the Court invoked its Article 142 powers to waive accumulated interest on overdue principal dues from the date of the auction purchaser's electricity supply application as the cases were nearly pending for two decades in the Hon’ble Supreme Court.