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

- **Citation:** 2023 INSC 560
- **Court:** Supreme Court of India
- **Decided:** 2023-05-19
- **Case number:** Civil Appeal Nos. 21092110 of 2004
- **Bench:** Dr Dhananjaya Y Chandrachud
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/k-c-ninan-v-kerala-state-electricity-board-ors-37891
- **Pages:** 146

## Headnote

HIMA KOHLI AND PAMIDIGHANTAM SRI
NARASIMHA, JJ.]
Electricity Act, 2003 - ss. 42 and 61 - Liability of subsequent
owner to pay electricity charges due on previous owner - Whether
the arrears of unpaid electricity dues outstanding from the erstwhile
owner can be claimed from the subsequent owner, who has acquired
the property in proceedings initiated to enforce mortgages or to
pay off the dues of creditors - Held: 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 licensees are required to maintain the infrastructure
even if the consumer does not consume electricity - 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 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 - 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 consumers as well as the financial interests of the
distribution licensees - 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 pre-condition for the grant
of an electricity connection to protect their commercial interests, as
well as the welfare of consumers of electricity.
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SUPREME COURT REPORTS
[2023] 9 S.C.R.
Transfer of Property Act, 1882 - s.100 - Charge - Whether
arrears of electricity can become a charge or encumbrance over
the premise - Effect of statutory regulations or rules enacted by a
regulatory commission - Held: 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 - 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 - In Isha Marbles, the Supreme Court observed that
under the provisions of 1910 Act r/w. 1948 Act, electricity arrears
do not create a charge over the property - Consequently, in general
law, a transferee of the premises cannot be made liable for the
outstanding dues of the previous owner since electricity arrears do
not automatically become a charge over the premises - The rule
making power contained u/s. 181 r/w. s. 50 of Electricity Act, 2003
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 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 - Electricity Act,
2003 - ss. 50 and 181- Maharashtra Electricity Regulatory
Commission (Electricity Supply Code and other Conditions of
Supply) Regulations, 2005 - Regulation 10.5.
Electricity Act, 2003 - s. 43 - Whether the duty to supply
electricity is absolute - Held: s.43 begins with the words "Save as
otherwise prov

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[2023] 9 S.C.R. 637 : 2023 INSC 560
637
K. C. NINAN
v.
KERALA STATE ELECTRICITY BOARD & ORS.
(Civil Appeal No 2109-2110 of 2004)
MAY 19, 2023
[DR DHANANJAYA Y CHANDRACHUD, CJI,
HIMA KOHLI AND PAMIDIGHANTAM SRI
NARASIMHA, JJ.]
Electricity Act, 2003 - ss. 42 and 61 - Liability of subsequent
owner to pay electricity charges due on previous owner - Whether
the arrears of unpaid electricity dues outstanding from the erstwhile
owner can be claimed from the subsequent owner, who has acquired
the property in proceedings initiated to enforce mortgages or to
pay off the dues of creditors - Held: 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 licensees are required to maintain the infrastructure
even if the consumer does not consume electricity - 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 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 - 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 consumers as well as the financial interests of the
distribution licensees - 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 pre-condition for the grant
of an electricity connection to protect their commercial interests, as
well as the welfare of consumers of electricity.
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SUPREME COURT REPORTS
[2023] 9 S.C.R.
Transfer of Property Act, 1882 - s.100 - Charge - Whether
arrears of electricity can become a charge or encumbrance over
the premise - Effect of statutory regulations or rules enacted by a
regulatory commission - Held: 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 - 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 - In Isha Marbles, the Supreme Court observed that
under the provisions of 1910 Act r/w. 1948 Act, electricity arrears
do not create a charge over the property - Consequently, in general
law, a transferee of the premises cannot be made liable for the
outstanding dues of the previous owner since electricity arrears do
not automatically become a charge over the premises - The rule
making power contained u/s. 181 r/w. s. 50 of Electricity Act, 2003
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 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 - Electricity Act,
2003 - ss. 50 and 181- Maharashtra Electricity Regulatory
Commission (Electricity Supply Code and other Conditions of
Supply) Regulations, 2005 - Regulation 10.5.
Electricity Act, 2003 - s. 43 - Whether the duty to supply
electricity is absolute - Held: s.43 begins with the words "Save as
otherwise provided in this Act" - Hence, the operation of s.43 will
also be subject to compliance with the other provisions of the 2003
Act - Under s.43, the distribution licensee is obligated to supply
electricity to the premises of an owner or occupier, provided that
the owner or occupier pays all charges and complies with all
conditions stipulated by the distribution licensee - The proviso to
s.43(2) further refers to the "price" payable by an applicant to
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demand or to continue to receive the supply of electricity from a
distribution licensee - The term "price" has to be given a broad
meaning to include all the 'tariffs' and 'charges' that may be
determined by the appropriate commission - Thus, the duty to supply
electricity u/s.43 is not absolute, and is subject to the such charges
and compliances stipulated by the distribution licensees as part of
the application.
Electricity Act, 2003 - ss.2(15) and 43 - Whether duty to
supply electricity is with respect to the premises or to the consumer
- Held: The definition of 'supply' specifically states that supply
means the sale of electricity to a consumer - Considering the overall
scheme of the 2003 Act, the supply of electricity is to the consumer
and not the premises - It is the owner or occupier who has the
statutory right to "demand" electricity for the premises under their
use or occupation - Thus, it is always the consumer who is supplied
electricity and is held liable for defaulting on payment of dues or
charges for supply of electricity
Auction - Auction sale of premises on "as in where is" basis
- With or without reference to electricity arrears-Implication - Held:
When a property is sold on an "as is where is" basis, encumbrances
on the property stand transferred to the purchaser upon the sale -
All prospective auction purchasers are put on notice of the liability
to pay the pending dues when an appropriate "as is where is" clause
is incorporated in the auction sale agreement - 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.
Interpretation of Statutes - Principle of Ejusdem Generis -
Rule of Construction - Applicability of - Ingredients - Discussed.
Disposing of the appeals, the Court
HELD:1. Under Section 43 of the Electricity Act, 2003, the
distribution licensee is obligated to supply electricity to the
premises of an owner or occupier, provided that the owner or
occupier pays all charges and complies with all conditions
stipulated by the distribution licensee. Section 43 begins with
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
ORS.
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the words "Save as otherwise provided in this Act". Hence, the
operation of Section 43 will also be subject to compliance with
the other provisions of the 2003 Act. The proviso to Section 43(2)
further refers to the "price" payable by an applicant to demand
or to continue to receive the supply of electricity from a
distribution licensee. The "price" is to be determined by the
appropriate commission. This "price" is the consideration, as
determined by the State Commission, that an applicant pays for
receiving a supply of electricity. The term "price" has to be given
a broad meaning to include all the 'tariffs' and 'charges' that may
be determined by the appropriate commission. This includes the
'charges' fixed under Section 45 by the appropriate commission
from time to time and the 'charges' that a distribution licensee
may impose under Section 46 to recover any reasonable
expenditure. The ambit of the term 'price' is wide enough to also
include the statutory dues that the State Commission decides to
enact by way of regulations under Section 50. Thus, the duty to
supply electricity under Section 43 is not absolute, and is subject
to such charges and compliances stipulated by the distribution
licensees as part of the application. [Paras 32, 40, 41-43][670-BC; 672-F-G; 673-A-B]
2. The definition of 'supply' specifically states that supply
means the sale of electricity to a consumer. The said definition
does not indicate that supply of electricity is vis-a-vis the
premises of the consumer. Considering the overall scheme of
the 2003 Act, the supply of electricity is to the consumer and not
the premises. It is always the consumer who is supplied electricity
and is held liable for defaulting on payment of dues or charges for
supply of electricity. Perforce, the premises cannot be held to be
a defaulter and no dues can be attached to the premises of the
consumer. [Paras 50 and 56][676-D]
3. Under Section 43 of the 2003 Act, the owner or occupier
of premises can seek a supply of electricity for particular
premises. Perforce, when electricity is supplied, the owner or
occupier becomes a consumer only with respect to those
particular premises for which electricity is sought and provided.
For example, when a person owning an apartment in a residential
complex applies for supply of electricity to such an apartment,
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they become a consumer only with respect to the apartment for
which the application is made and to which electricity is supplied.
Such a person may own another apartment to which electricity
may already be supplied, but they will be considered a separate
consumer with respect to the second apartment. For an application
to be considered as a 'reconnection', the applicant has to seek
supply of electricity with respect to the same premises for which
electricity was already provided. Even if the consumer is the same,
but the premises are different, it will be considered as a fresh
connection and not a reconnection. [Para 61][679-H; 680-A-C]
4. 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 the
opinion of this Court, such an authority also extends to stipulating
conditions for recovery of electricity arrears of previous owners
from new or subsequent owners. [Para 84][690-F-G]
5. 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 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 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. The Conditions of Supply and Electricity Supply Code
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
ORS.
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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 precondition for the grant of an electricity connection to protect their
commercial interests, as well as the welfare of consumers of
electricity. [Paras 87 and 91][691-G-H; 692-A; 693-E-F]
6. 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 fresh electricity connection, even when huge arrears of
electricity are outstanding. Besides impacting on the financial
health of the Utilities, this would impact the wider body of
consumers. [Para 113][700-F-H; 701-A]
7. 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. This Court rejects the
submission of the auction purchasers that the recovery of
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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. 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. [Paras 129 and 131][709-B-C; F-H]
8. All prospective auction purchasers are put on notice of
the liability to pay the pending dues when an appropriate "as is
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 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. 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. 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. [Paras 141143][715-G-H; 716-A-E]
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
ORS.
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9. The rule of "ejusdem generis" is a principle of
construction. The rule is that when general words follow particular
and specific words of the same nature, the general words must
be confined to the things of the same kind as those specified. It
applies when the following ingredients are present: (i) the statute
contains an enumeration of specific words; (ii) the subjects of
enumeration constitute a class or category; (iii) that category is
not exhausted by the enumeration; (iv) a general term follows
the enumeration; and (v) there is no indication of a different
legislative intent. For the application of the ejusdem generis rule,
it is essential that enumerated things before the general words
must constitute a distinct category or a genus or a family which
admits of a number of members. [Paras 187 and 188][732-D-F]
Conclusions
10. a). The duty to supply electricity under Section 43 of
the 2003 Act is not absolute, and is subject to the such charges
and compliances stipulated by the Electric Utilities as part of the
application for supply of electricity; b). The duty to supply
electricity under Section 43 is with respect to the owner or
occupier of the premises. The 2003 Act contemplates a synergy
between the consumer and premises. Under Section 43, when
electricity is supplied, the owner or occupier becomes a consumer
only with respect to those particular premises for which electricity
is sought and provided by the Electric Utilities; c). For an
application to be considered as a 'reconnection', the applicant
has to seek supply of electricity with respect to the same premises
for which electricity was already provided. Even if the consumer
is the same, but the premises are different, it will be considered
as a fresh connection and not a reconnection; d). A condition of
supply enacted under Section 49 of the 1948 Act requiring the
new owner of the premises to clear the electricity arrears of the
previous owner as a precondition to availing electricity supply
will have a statutory character; e). The scope of the regulatory
powers of the State Commission under Section 50 of the 2003
Act is wide enough to stipulate conditions for recovery of
electricity arrears of previous owners from new or subsequent
owners; f). The Electricity Supply Code providing for recoupment
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of electricity dues of a previous consumer from a new owner have
a reasonable nexus with the objects of the 2003 Act; g). The rule
making power contained under Section 181 read with Section 50
of the 2003 Act 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; h). 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 under
Section 56 of the 2003 Act; i). The implication of the expression
"as is where is" basis is that every intending bidder is put on
notice that the seller does not undertake responsibility in respect
of the property offered for sale with regard to any liability for the
payment of dues, like service charges, electricity dues for power
connection, and taxes of the local authorities; and j). In the
exercise of the jurisdiction under Article 142 of the Constitution,
the Electric Utilities have been directed in the facts of cases to
waive the outstanding interest accrued on the principal dues from
the date of application for supply of electricity by the auction
purchasers. [Para 328][781-B-H; 782-A-E]
PTC India Ltd. v. Central Electricity Regulatory
Commission (2010) 4 SCC 603 : [2010] 3 SCR 609 -
followed.
Deputy Commercial Tax Officer, Park Town Division v.
Sha Sukhraj Peerajee AIR 1968 SC 67 : [1967] 3 SCR
661 and State of Kerala v. VT Kallianikutty (1999) 3
SCC 657 : [1999] 2 SCR 372 - held not applicable.
Indian Council of Legal Aid and Advice v. Bar Council
of India (1995) 1 SCC 732 : [1995] 1 SCR 304; India
Cement Ltd & Ors v. State of Tamil Nadu (1990) 1 SCC
12 : [1989] 1 Suppl. SCR 692; Punjab Urban Planning
and Development Authority v. Raghu Nath Gupta (2012)
8 SCC 197 : [2012] 8 SCR 118; Delhi Development
Authority v. Kenneth Builders and Developers Pvt
Limited (2016) 13 SCC 561 : [2016] 3 SCR 1126 -
distinguished.
Deepak Theatre v. State of Punjab (1992) 1 Supp SCC
684 : [1991] 3 Suppl. SCR 242; K Ramanathan v. State
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
ORS.
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of Tamil Nadu (1985) 2 SCC 116 : [1985] 2 SCR 1028;
V S Rice and Oil Mills v. State of Andhra Pradesh [1964]
7 SCR 456; Dakshin Haryana Bijli Vitran Nigam Ltd v.
M/s Paramount Polymers Pvt Ltd. AIR 2007 SC 2 :
[2006] 7 Suppl. SCR 635 and Paschimanchal Vidyut
Vitran Nigam Limited v. DVS Steels and Alloys Private
Limited (2009) 1 SCC 210 : [2008] 15 SCR 766 - relied
on.
Brihanmumbai Electric Supply &
Transport
Undertaking v. Maharashtra Electricity Regulatory
Commission (2015) 2 SCC 438 : [2014] 6 SCR 50 -
affirmed.
Isha Marbles v. Bihar State Electricity Board (1995) 2
SCC 648 : [1995] 1 SCR 847; Ahmedabad Electricity
Co. Ltd. v. Gujarat Inns (P) Ltd. (2004) 3 SCC 587 :
[2004] 3 SCR 23; Hyderabad Vanaspathi Ltd v. Andhra
Pradesh State Electricity Board (1998) 4 SCC 470 :
[1998] 2 SCR 620; Telangana State Southern Power
Distribution Co. Ltd. v. Srigdhaa Beverages (2020) 6
SCC 404 : [2020] 4 SCR 295; Chandu Khamaru v.
Nayan Malik (2011) 12 SCC 314 : [2011] 11 SCR 112 ;
AP TRANSCO v. Sai Renewable Power (P) Ltd. (2011)
11 SCC 34 : [2010] 8 SCR 636; BSES Ltd. v. Tata
Power Co. Ltd. (2004) 1 SCC 195 : [2003] 4 Suppl.
SCR 932; Commissioner of Sales Tax, Madhya Pradesh,
Indore v. Madhya Pradesh Electricity Board, Jabalpur
(1969) 1 SCC 200 : [1969] 2 SCR 939; State of AP v.
National Thermal Power Corporation Ltd. (2002) 5 SCC
203 : [2002] 3 SCR 278; Uttar Pradesh Power
Corporation Limited v. Anis Ahmad (2013) 8 SCC 491
: [2013] 13 SCR 388; Jivendra Nath Kaul v. Collector/
District Magistrate (1992) 3 SCC 576 : [1992] 3 SCR
642; State of Uttar Pradesh v. Hindustan Aluminium
Corporation (1979) 3 SCC 229 : [1979] 3 SCR 709;
Punjab State Electricity Board v. Bassi Cold Storage,
Kharar and Another (1994) 2 Supp SCC 124 : [1994]
3 SCR 33; Jagdamba Paper Industries (P) Ltd v.
Haryana State Electricity Board (1983) 4 SCC 508 :
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[1984] 1 SCR 165; Bihar State Electricity Board v.
Parmeshwar Kumar Agarwala (1996) 4 SCC 686 :
[1996] 3 Suppl. SCR 29; Ferro Alloys Corpn. Ltd v. A
P State Electricity Board (1993) 4 Supp SCC 136 :
[1993] 3 SCR 199; India Thermal Power Ltd v. State of
MP (2000) 3 SCC 379 : [2000] 1 SCR 925; Haryana
State Electricity Board v. Hanuman Rice Mills, Dhanaur
(2010) 9 SCC 145 : [2010] 10 SCR 217; JK Industries
Ltd. v. Union of India (2007) 13 SCC 673 : [2007]
12 SCR 136; M.L. Abdul Jabbar Sahib v. M.V. Venkata
Sastri & Sons (1969) 1 SCC 573 : [1969] 3 SCR 513;
Ahmedabad Municipal Corporation v. Haji Abdulgafur
Haji Hussenbha (1971) 1 SCC 757; Dattatreya Shanker
Mote v. Anand Chintaman Datar & Ors. (1974) 2 SCC
799 : [1975] 2 SCR 224; State of Karnataka v. Shreyas
Papers Pvt. Ltd. (2006) 1 SCC 615 : [2006] 1 SCR 235;
AI Champdany Industries Ltd. v. Official Liquidator
(2009) 4 SCC 486 : [2009] 2 SCR 705; Ajmer Vidyut
Vitran Nigam Limited v. Rahamatullah Khan (2020) 4
SCC 650 : [2020] 2 SCR 929; M/s Prem Cortex v. Uttar
Haryana Bijli Vitran Nigam Limited Judgment dt.
5.10.2021 in CA 7235 of 2009; Bihar SEB v. Iceberg
Industries Ltd. (2020) 20 SCC 745 : [2020] 6 SCR 231;
M/s Swastic Industries v. Maharashtra State Electricity
Board (1997) 9 SCC 465 : [1997] 1 SCR 532;
Kusumam Hotels Pvt Ltd v. Kerala State Electricity Board
(2008) 12 SCC 213 : [2008] 9 SCR 752; U.T.
Chandigarh Administration v. Amarjeet Singh (2009) 4
SCC 660 : [2009] 4 SCR 54; State of Madhya Pradesh
v. Tikamdas (1975) 2 SCC 100 : [1975] Suppl. SCR
234; Special Officer, Commerce, North Eastern
Electricity Supply Company of Orissa v. Raghunath
Paper Mills Private Limited (2012) 13 SCC 479 : [2012]
13 SCR 71; Amar Chandra v. Collector of Excise,
Tripura (1972) 2 SCC 442 : [1973] 1 SCR 533; Grasim
Industries Ltd. v. Collector of Customs (2002) 4 SCC
297 : [2002] 2 SCR 945; Lokmat Newspapers (P) Ltd.
v. Shankarprasad (1999) 6 SCC 275 : [1999] 3 SCR
907; Jaiprakash Associates Ltd. v. Tehri Hydro
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
ORS.
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Development Corpn. (India) Ltd. (2019) 17 SCC 786 :
[2019] 2 SCR 41; Adoni Cotton Mills Ltd. v. Andhra
Pradesh State Electricity Board (1976) 4 SCC 68 :
[1977] 1 SCR 133; Mangalore Electric Supply Co. Ltd.
v. The Commissioner of Income Tax, West Bengal (1978)
3 SCC 248 : [1978] 3 SCR 913; Valparaiso Kottarathil
Kochuni v. States of Madras & Kerala [1960] 3 SCR
887; BHEL v. Globe Hi-Fabs Ltd. (2015) 5 SCC 718;
Tata Motors Ltd v. Pharmaceutical Products of India
Ltd. (2008) 7 SCC 619 : [2008] 9 SCR 267; LIC v. D J
Bahadur (1981) 1 SCC 315 : [1981] 1 SCR 1083; UP
State Electricity Board v. Hari Shankar Jain (1978) 4
SCC 16 : [1979] 1 SCR 355; KSL & Industries Ltd v.
Arihant Threads Ltd. (2015) 1 SCC 166 : [2014] 14
SCR 1097 - referred to.
Suraj v. KSEB 2005 (3) KLT 856; A Ramachandran v.
KSEB 2000 SCC OnLine Ker 75 - referred to.
Case Law Reference
[1995] 1 SCR 847
referred to
Para 17
[2004] 3 SCR 23
referred to
Para 18
[1998] 2 SCR 620
referred to
Para 19
[2006] 7 Suppl. SCR 635
relied on
Para 20
[2008] 15 SCR 766
relied on
Para 21
[2020] 4 SCR 295
referred to
Para 22
[2011] 11 SCR 112
referred to
Para 31
[2014] 6 SCR 50
affirmed
Para 32
[2010] 8 SCR 636
referred to
Para 38
[2003] 4 Suppl. SCR 932
referred to
Para 39
[1969] 2 SCR 939
referred to
Para 44
[2002] 3 SCR 278
referred to
Para 44
[2013] 13 SCR 388
referred to
Para 46
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[1992] 3 SCR 642
referred to
Para 47
[1979] 3 SCR 709
referred to
Para 66
[1994] 3 SCR 33
referred to
Para 69
[1984] 1 SCR 165
referred to
Para 69
[1996] 3 Suppl. SCR 29
referred to
Para 69
[1993] 3 SCR 199
referred to
Para 70
[2000] 1 SCR 925
referred to
Para 73
[1991] 3 Suppl. SCR 242
relied on
Para 75
[1985] 2 SCR 1028
relied on
Para 75
[1964] 7 SCR 456
relied on
Para 76
[2010] 10 SCR 217
referred to
Para 77
[2007] 12 SCR 136
referred to
Para 82
[2010] 3 SCR 609
followed
Para 83
[1969] 3 SCR 513
referred to
Para 92
(1971) 1 SCC 757
referred to
Para 93
[1975] 2 SCR 224
referred to
Para 96
[2006] 1 SCR 235
referred to
Para 96
[2009] 2 SCR 705
referred to
Para 97
[1967] 3 SCR 661
held not applicable
Para 105
[1995] 1 SCR 304
distinguished
Para 105
[1989] 1 Suppl. SCR 692
distinguished
Para 105
[2020] 2 SCR 929
referred to
Para 114
[1999] 2 SCR 372
held not applicable
Para 116
[2020] 6 SCR 231
referred to
Para 121
[1997] 1 SCR 532
referred to
Para 123
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
ORS.
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[2008] 9 SCR 752
referred to
Para 125
[2012] 8 SCR 118
distinguished
Para 132
[2016] 3 SCR 1126
distinguished
Para 132
[2009] 4 SCR 54
referred to
Para 134
[1975] Suppl. SCR 234
referred to
Para 160
[2012] 13 SCR 71
referred to
Para 185
[1973] 1 SCR 533
referred to
Para 187
[2002] 2 SCR 945
referred to
Para 187
[1999] 3 SCR 907
referred to
Para 188
[2019] 2 SCR 41
referred to
Para 188
[1977] 1 SCR 133
referred to
Para 188
[1978] 3 SCR 913
referred to
Para 194
[1960] 3 SCR 887
referred to
Para 196
(2015) 5 SCC 718
referred to
Para 196
[2008] 9 SCR 267
referred to
Para 282
[1981] 1 SCR 1083
referred to
Para 284
[1979] 1 SCR 355
referred to
Para 285
[2014] 14 SCR 1097
referred to
Para 287
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 21092110 of 2004.
From the Judgment and Order dated 13.02.2003 of the High Court
of Kerala at Ernakulam in O.P. No.10441 of 1991 and dated 03.09.2003
in R.P. No. 307 of 2003.
With
Civil Appeal Nos. 2108 of 2004, 5312-5313, 5314, 6587, 7303 of
2005, 6579, 6593-6594 of 2022, 3018 of 2007, 7169, 6591, 6595, 68796881, 6592, 7103-7104, 6828, 7064, 6590 and 3640 of 2022.
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Ranjit Kumar, Vijay Hansaria, M.G. Ramachandran, Ajit S Bhasme,
V. Giri, Shekhar Naphade, Rana Mukherjee, Bharat Patel, P.S. Patwalia,
Ravindra Kumar, Sr. Advs., Mahesh Agarwal, Ankur Saigal, Ms. Sayaree
Basu Mallick, Abhinabh Garg, Shashwat Singh, E.C. Agrawala, Pradeep
Misra, Daleep Dhyani, Manoj Kumar Sharma, Kshitij Mittal, Ms.
Madhumita Bhattacharjee, Ms. Srija Choudhury, Ms. Kavya Jhawar,
Ms. Srishti Khindaria, Bhargava V. Desai, Ms. Charu Modi, Deepanshu,
Sanjay Kumar Visen, Mukesh Kumar Pandey, Suresh Kumar Bhan,
Sandeep Joshi, Ms. Ritu Rastogi, Ms. Mohini Kumari, Aman, E. M. S.
Anam, Puneet Jain, Christi Jain, Yogit Kamat, Mann Arora, Umang
Mehta, Ms. Shruti Singh, Ms. Pratibha Jain, Romy Chacko, Sudesh Kumar
Singh, Nikhil Jain, Susheel Tomar, Puneet Singh Bindra, Satya Prakash,
Vinod Kumar Jain, Prashant Mohla, Ms. Simran Jeet, Yasharth Kant,
Ms. Zinnea Mehta, Shrirang B. Varma, Sagar Juneja, Harshit Sethi,
Neeraj Kumar Verma, Ms. Kavya Jhawar, Ms. Sneha Kalita, Ms.
Hemantika Wahi, Ms. Jesal Wahi, Anand Ganesan, Ms. Aneesh Bajaj,
Amar Dave, Ms. Nandini Gore, Ms. Neha Khandelwal, Ms. Ramya
Khanna, Ms. Farah Hashmi, Dr. Prashant Pratap, Kumar Mitakshar,
Yashwant Gaggar, Mrs. Manik Karanjawala, R.B. Phookan, Ms. Neha
Tandon, Shailesh Madiyal, Chirag M. Shroff, Ms. Ruby Singh Ahuja,
Raj Singh Rana, Vijay K Verma, Ms. Akshita Mohnot, Rajat Srivastav,
Praveen Chaturvedi, M.Y. Deshmukh, Ms. Manjeet Kirpal, Ms.
Adveetiya Sharma, Rameshwar Prasad Goyal, Ashok Mathur, Purvish
Jitendra Malkan, Alok Kumar, Mrs. Dharita Purvish Malkan, Ms. Nandini
Chhabra, Vismay Malkan, Ms. Dhruva Kumar, Chandan Kumar Mandal,
Shakti Chand Jaidwal, D.N. Ray, Dillip Kumar Nayak, Ms. Disha Ray,
Mrs. Sumita Ray, P. V. Dinesh, Raghenth Basant, Rahul Raj Mishra,
Bineesh K., Ashwini Kumar Singh, Sudhir, Parinay Deep Shah, Ms.
Sharmila Upadhyay, Shivaji M. Jadhav, Brij Kishor Sah, Ms. Shivani
Rautela, Ms. Apurva, Adarsh Kumar Pandey, M/s. Ap & J Chambers,
Jatin Zaveri, T. Srinivasa Murthy, P. N. Gupta, Mrs. Bharti Gupta, Ram
Lal Roy, Ms. Anukriti Sugam, Abhijeet Sinha, P. V. Yogeswaran, Ms.
Bansuri Swaraj, Sidhesh Kotwal, Ms. Ana Upadhyay, Ms. Manya Hasija,
Nihar Dharmadhikari, Akash Singh, Ms. Harshika Verma, Nirnimesh
Dube, Ms. Divya Roy, P. S. Sudheer, Ms. Anne Mathew, Bharat Sood,
Ms. Shruti Jose, Siddharth Dharmadhikari, Aaditya A. Pande, Bharat
Bagla, Ms. Deepanwita Priyanka, Advs. for the appearing parties.
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
ORS.
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The Judgment of the Court was delivered by
DR DHANANJAYA Y CHANDRACHUD, CJI
Table of Contents*
A. Overview .......................................................................... 4
B.
Regulatory Regime........................................................... 5
C.
The position in law ......................................................... 10
D. Issues.............................................................................. 14
E.
Submissions .................................................................... 15
F.
Analysis .......................................................................... 25
G.
Application: Facts of Individual Cases ........................... 89
I.
Kerala ............................................................................. 90
II.
Maharashtra ................................................................... 99
III. Gujarat .......................................................................... 132
IV. Assam........................................................................... 166
V.
West Bengal ................................................................. 170
H. Equity and Fairness ...................................................... 175
I.
Conclusions................................................................... 177
A. Overview
1. The nineteen cases in this batch of appeals follow a similar
pattern of facts. The supply of electricity was discontinued due to the
failure of the previous owners to pay the dues for consumption of
electricity on the premises. The previous owners had borrowed money
or raised loans on the security of their premises. In some cases, the
erstwhile owner went into liquidation. The premises were sold in auction
sales generally on an "as is where is" basis. The new owners, who
purchased the properties in auction, applied for new electricity connections
for the premises to which electricity had been disconnected for failure
to pay the dues. The Electric Utilities refused to provide an electricity
connection unless the auction purchaser paid the dues of the previous
owner. This refusal was derived from powers conferred under subordinate
legislations, notifications, electricity Supply Codes or state regulations.
*Ed. Note : Pagination in the Table is as per the original Judgment.
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The denial of electricity supply resulted in the institution of petitions under
Article 226 before the High Court, leading to the judgments which are in
appeal.
2. In Maharashtra State Electricity Board v. Super &
Stainless Hi Alloy Ltd1, this Court by an order dated 24 August 2006
referred the Civil Appeals to a Bench of three Judges for dealing with
the issue of the recovery of arrears of electricity. The order of reference
referred the question of whether electricity dues constitute a charge on
the property so far as the transferor and the transferee of the unit are
concerned.
3. The matters involving similar nature of dispute were tagged
along with the above reference by an order dated 1 November 2007.
The issue which is raised in these appeals is whether the arrears of
unpaid electricity dues outstanding from the erstwhile owner can be
claimed from the subsequent owner, who has acquired the property in
proceedings initiated to enforce mortgages or to pay off the dues of
creditors.
B. Regulatory Regime
4. Electricity is a concurrent subject under the Constitution of
India. Prior to the enactment of the Electricity Act 20032, the Electricity
Act 19103 governed the supply and use of electrical energy in India. The
1910 Act prescribed the legal framework for laying down cables and
other works related to the supply of electricity. It also laid down a legal
framework for supply of electrical energy and imposed certain
responsibilities and obligations on persons licensed to supply electricity
with a view to incentivise the growth of the electricity industry through
private licensees.
5. Section 2(c) of the 1910 Act defined "consumer" as any person
supplied with energy by a licensee or any other person engaged in the
business of supplying energy to the public under the Act, and included
any person whose premises were for the time being connected for the
purposes of receiving energy. Section 21(2) empowered a licensee to
make conditions to regulate their relations with persons who were or
intend to become consumers. Section 22 obligated a licensee to supply
1 Civil Appeal Nos 5312-5313 of 2005
2 "2003 Act"
3 "1910 Act"
K. C. NINAN v. KERALA STATE ELECTRICITY BOARD &
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electrical energy, on application, to every person within the area of supply
on the same terms as those on which any other person in the same area
was entitled. Section 24 empowered the licensee to disconnect the supply
of electricity if any person neglected to pay any charge or sum for energy
due to the licensee.
6. The 1910 Act was found inadequate for a coordinated
development of electricity and a "grid-system" in India. Therefore, the
Electricity (Supply) Act 19484 was enacted for the rationalisation of the
production and supply of electricity and for taking measures conducive
to the development of electricity. The 1948 Act mandated the state
governments to constitute State Electricity Boards under Section 5 and
entrusted them with the responsibility of administering the grid-system
and arranging the supply of electricity in the state. Section 26 provided
that, subject to the provisions of the Act, the Board shall have all the
powers and the obligations of a licensee under the 1910 Act. Section 49
empowered the Boards to supply electricity to any person, not being a
licensee, on such terms and conditions as laid down by the Board. In
terms of Section 70(2), the provisions of the 1948 Act were in addition
to, and not in derogation of the 1910 Act.
7. Parliament enacted the Electricity Regulatory Commissions Act
19985 with an aim to distance the government from determination of
tariffs. The 1998 Act created the Central Electricity Regulatory
Commission and enabled the state governments to create State Electricity
Regulatory Commissions.
8. Parliament consolidated and harmonised the provisions of the
1910 Act, 1948 Act, and 1998 Act by enacting the 2003 Act. In the
process, the 2003 Act repealed the aforesaid three legislations. The long
title of the 2003 Act reads as follows:
"An Act to consolidate the laws relating to generation, transmission,
distribution, trading and use of electricity and generally for taking
measures conducive to development of electricity industry,
promoting competition therein, protecting interests of consumers
and supply of electricity to all areas, rationalisation of electricity
tariff, ensuring transparent policies regarding subsidies, promotion
of efficient and environmentally benign policies, constitution of
Central Electricity Authority, Regulatory Commissions and
4 "1948 Act"
5 "1998 Act"
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establishment of Appellate Tribunal and for matters connected
therewith or incidental thereto."
9. The 2003 Act has been enacted in pursuance of the policy of
encouraging private sector participation in the generation, transmission,
and distribution of electricity. Other objectives of the 2003 Act include
vesting the regulatory responsibilities from government to the regulatory
commissions, delicensing of electricity generation, promotion of captive
generation, and encouraging open access transmission. Section 2(15) of
the 2003 Act defines 'consumer 'in terms similar to Section 2(c) of the
1910 Act. Part VI of the 2003 Act deals with distribution of electricity.
Section 43 casts a Universal Service Obligation6 on the distribution
licensee to provide supply of electricity to the premises of an owner or
occupier. The State Commission has been empowered under Section 50
to specify an Electricity Supply Code to provide among other things for
the recovery of electricity charges, intervals for billing of electricity
charges and disconnection of supply of electricity for non-payment. Under
Section 56, the generating company or distribution licensee, as the case
may be, may disconnect electricity supply of any person who neglects to
pay any charge or sum for electricity. Section 181(2)(x) provides that
the State Commission may make regulations inter alia providing for, the
Electricity Supply Code under Section 50.
10. In light of the provisions contained in the 1910 Act, 1948 Act,
and 2003 Act, various Electric Utilities such as State Electricity Regulatory
Commissions, State Electricity Boards, and distribution licensees notified
Conditions of Supply requiring the new owner of premises to clear the
outstanding dues of the previous owner.