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of <h1>Court clarifies duty to supply electricity under Section 43 of 2003 Act, subject to charges</h1> <h3>K.C. Ninan Versus Kerala State Electricity Board and Ors.</h3> The court clarified that the duty to supply electricity under Section 43 of the 2003 Act is not absolute and subject to charges and compliances. ... Recovery of unpaid Electricity dues from subsequent owner - erstwhile owner went into liquidation - Premises sold in auction sales generally on an 'as is where is' basis - Phrase “as is-where-is” - Obligation to provide electricity to consumers Under Section 43 of the 2003 Act - precondition to reconnection or release of a fresh connection - scope of the regulatory powers of the State Commission Under Section 50 - Jurisdiction Under Article 142 of the Constitution. Supply of electricity discontinued due to the failure of the previous owners to pay the dues for consumption of electricity on the premises - HELD THAT:- Taking all facts and circumstances into consideration, including the lapse of more than two decades since the appeals were filed before this Court and the equities arising in favour of one party or the other, we direct the Electric Utilities to waive the outstanding interest accrued on the principal dues from the date of application for supply of electricity by the auction purchasers. The conclusions are summarised below: 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 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 before us to waive the outstanding interest accrued on the principal dues from the date of application for supply of electricity by the auction purchasers. Application disposed off. Issues Involved:1. Whether the Universal Service Obligation (USO) under Section 43 of the 2003 Act is linked to premises to which the connection is sought.2. Whether a connection of electricity supply sought by an auction-purchaser comprises a reconnection or a fresh connection.3. Whether the power to recover arrears of a previous owner or occupier from an auction-purchaser of the premises falls within the regulatory regime of the 2003 Act.4. Whether the power to enable the recovery of arrears of the previous owner or occupier from an auction-purchaser can be provided through subordinate legislation by the State Commissions.5. Whether the 1910 Act, 1948 Act, and the 2003 Act have express provisions enabling the creation of a charge or encumbrance over the premises.6. Whether the statutory bar on recovery of electricity dues after the limitation of two years provided under Section 56(2) of the 2003 Act will have an implication on civil remedies of the Electric Utilities to recover such arrears.7. What is the implication of an auction-sale of premises on 'as is where is' basis, with or without reference to electricity arrears of the premises.Summary:I. Universal Service Obligation is not absolute:The duty to supply electricity under Section 43 of the 2003 Act is not absolute and is subject to charges and compliances stipulated by the distribution licensees. The term 'price' in Section 43 includes all tariffs and charges determined by the State Commission, including statutory dues. Thus, the right of an applicant to seek supply of electricity under Section 43 is not absolute.II. Duty to supply electricity is with respect to consumer:Electricity is supplied to the consumer and not to the premises. The definition of 'consumer' under Section 2(15) of the 2003 Act includes any person whose premises are connected for the purpose of receiving electricity. The duty to supply electricity under Section 43 is with respect to the owner or occupier of the premises, not the premises itself.III. Whether electricity connection sought by a subsequent owner constitutes a reconnection or fresh connection:A connection sought by a subsequent owner constitutes a fresh connection, not a reconnection. The 2003 Act clarifies that the supply of electricity is with respect to the consumer. An application for supply of electricity can be categorized as reconnection only when the same owner or occupier of the premises applies for supply of electricity with respect to the same premises in case the electricity supply is disconnected.IV. Regulatory power of the Electricity Boards/State Commissions:The Electric Utilities can enact conditions for recovery of dues of the erstwhile owner from the new owner as a precondition for supply of electricity. The Conditions of Supply framed under Section 49 of the 1948 Act and the State Commissions' Electricity Supply Codes under the 2003 Act have a statutory character.V. Whether arrears of electricity can become a charge or encumbrance over the premises:Electricity arrears do not automatically become a charge over the premises. A statutory charge is created only where there is an express provision of law. The State Commission can provide for a statutory charge through subordinate legislation under the 2003 Act.VI. Implication of Section 56(2) on recovery of electricity dues by Electric Utilities:Section 56(2) of the 2003 Act limits the right to disconnect electricity supply for recovery of dues after two years from when the sum became first due. However, it does not preclude the licensee from resorting to other modes of recovery, such as filing a suit.VII. Implication of the sale of premises on 'as is where is' basis:The term 'as is where is' implies that the auction purchaser is put on notice that the seller does not undertake responsibility for any liability for the payment of dues, including electricity dues. The auction purchaser is expected to exercise due diligence regarding the condition of the property and any outstanding dues.Application to Individual Cases:- Kerala: The Kerala High Court upheld the validity of Clause 15(e) of the Conditions of Supply, requiring new owners to clear arrears of previous owners before getting a new connection.- Maharashtra: The Bombay High Court's interpretation of Condition 23 of the MSEB Conditions of Supply was incorrect. The condition applies to both voluntary and involuntary transfers, including court auctions.- Gujarat: The Gujarat Electricity Supply Code 2005, which came into force on 31 March 2005, applies. The auction purchasers are liable to pay the dues of the previous owners as per the conditions of supply.- Assam: The Assam Electricity Regulatory Commission's Regulation 3.6.4, requiring new occupiers to clear previous dues, is valid and reasonable.- West Bengal: Regulation 4.6.4 of the WB Electricity Supply Code, requiring new consumers to clear outstanding dues of the premises, applies.Equity and Fairness:In the exercise of jurisdiction under Article 142 of the Constitution, the Electric Utilities have been directed to waive the outstanding interest accrued on the principal dues from the date of application for supply of electricity by the auction purchasers.Conclusions:The duty to supply electricity is subject to charges and compliances. The supply is to the consumer, not the premises. Conditions of supply requiring new owners to clear previous dues are valid. Electricity arrears do not automatically become a charge on the premises. Section 56(2) limits the right to disconnect but not other recovery modes. Auction purchasers are liable for dues if the sale is on 'as is where is' basis.
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