2008 (11) TMI 736 - SC - Indian Laws

Electricity Supplier Can Demand Arrears Clearance Before New Connection; Refund Conditions Imposed in Dispute Resolution.

The SC ruled that the electricity supplier can require the clearance of arrears from a purchaser of a sub-divided plot before granting a new connection, ... Recovery of electricity dues from subsequent purchaser - condition precedent to supply of electricity - privity of contract - pro-rata division of outstanding dues on sub-division - estoppel against refund after voluntary payment - bank guarantee as security for disputed duesRecovery of electricity dues from subsequent purchaser - privity of contract - condition precedent to supply of electricity - pro-rata division of outstanding dues on sub-division - Whether the supplier can recover the electricity dues from the purchaser of a sub-divided plot who seeks a fresh electricity connection. - HELD THAT: - The Court held that the supplier's contract for supply is with the consumer/occupier and, in the absence of a contract, a transferee is not intrinsically liable for the predecessor's dues because such dues do not constitute a charge on the premises. However, when a purchaser of premises applies for a fresh connection the distributor may lawfully impose terms and conditions for supply; these can include requiring clearance of arrears attributable to the particular sub-divided portion on a pro-rata basis. Such stipulations are not arbitrary or unreasonable; they are necessary to prevent evasion of payment by defaulting consumers and to protect the distributor's ability to recover dues. Consequently, the appellants were justified in demanding and collecting the pro-rata amount from the first respondent as a condition precedent to grant of supply. [Paras 9, 10, 11, 12]Collection of the pro-rata arrears from the purchaser as a condition for supply was lawful and not unauthorized.Estoppel against refund after voluntary payment - bank guarantee as security for disputed dues - Whether the appellant was liable to refund the pro-rata payment made by the first respondent after the Commission later directed acceptance of a bank guarantee and restraint on demanding pro-rata amounts. - HELD THAT: - The Commission's subsequent interim direction required the licensee not to demand pro-rata payments from purchasers applying for fresh connections once the disputed claim was secured by a bank guarantee. But the Commission did not direct repayment of sums already voluntarily paid prior to its order. The first respondent had paid the pro-rata amount to obtain supply pursuant to an undertaking and in the absence of any stay restraining demand; having so paid, the first respondent was estopped from claiming refund except on the terms under which payment was made. The Court nevertheless recognised that if the primary debtor is ultimately found not liable on the disputed claim or actually clears the dues, the amount deposited by the purchaser would have to be refunded with appropriate interest. [Paras 13]No obligation to refund the amount paid by the first respondent in the absence of a specific direction for refund; refund payable only if the disputed claim is finally held not payable or is discharged by the original debtor.Final Conclusion: The appeal is allowed, the High Court order directing refund is set aside, and the writ petition dismissed; collection of the pro rata arrears as a condition for supply was lawful, and refund is only mandated if the disputed liability is ultimately negated or discharged by the original debtor. Issues involved:1. Whether the supplier can recover the electricity dues from the purchaser of a sub-divided plotRs.2. Whether the appellant is liable to refund the pro rata payment made by the first respondentRs.Issue 1: Whether the supplier can recover the electricity dues from the purchaser of a sub-divided plotRs.The appellant contended that a transferee seeking electricity connection to a premises must clear the dues of the previous occupant as per the Electricity Supply Code. The distributor-supplier and the premises owner are parties to the contract, and a subsequent occupant without a contract cannot be asked to pay the predecessor's dues. However, the distributor can require arrears clearance before providing electricity, ensuring compliance with statutory rules or self-imposed conditions. The court upheld the distributor's right to demand dues for electricity supplied to a premises before granting a connection to safeguard against defaults and ensure recovery.Issue 2: Whether the appellant is liable to refund the pro rata payment made by the first respondentRs.The Commission directed the appellant not to demand pro rata arrears from plot purchasers if the third respondent provided a bank guarantee for outstanding dues. The first respondent voluntarily paid the pro rata dues before this order. The court ruled that the first respondent, having paid voluntarily, cannot claim a refund unless specified by the Commission. If the third respondent is found not liable or clears the dues, the appellant must refund with interest. The court allowed the appeal, overturning the High Court's order and dismissing the first respondent's writ petition.