HARYANA STATE ELECTRICITY BOARDversusM/S. HANUMAN RICE MILLS AND ORS.

                    [2010] 10 S.C.R. 217

         HARYANA STATE ELECTRICITY BOARD                            A
                               v.
         MIS. HANUMAN RICE MILLS AND ORS.
             (Civil Appeal No. 6817 of 2010)
                    . AUGUST 20, 2010
                                                                    B
     [R.V. RAVEENDRAN AND H.L. GOKHALE, JJ.]

     Electricity: Non-payment of electricity bill by previous
owner/occupier of the premises in regard to the supply of
electricity to the premises - Liability of subsequent purchaser C
of the premises to pay such affears - Held: Electricity affears
do not constitute a charge over the property - Therefore, a
transferee of a premises cannot be made liable for the dues
of the previous owner/occupier - However, the electricity
supplier can demand arrears from subsequent purchaser if D
the statutory rules or the terms and conditions of supply which
are statutory in character, authorize it to make such demand.

     Res judicata: First suit filed for permanent injunction for
restraining the electricity Board from enforcing the demand         E
notice, dismi~sed - Second suit fJJed for declaration that the
demand and the disconnection were invalid - Held: The
second suit was not barred by the principle of res judicata
since the matter that was directly and substantially in issue
in the second suit was completely different from the matter that
was directly and substantially in issue in the first suit and the   F
reliefs claimed were also different - Doctrine/Principle.

    The first respondent purchased a rice mill in an
auction. When the mill was purchased, the electricity
supplied to it was already disconnected due to non-                 G
payment of electricity bill. After taking the possession of
the mill, the first respondent applied for and obtained the
electricity connection in its own name in the year 1991.
Four years later, the appellant-Electricity Board served
                             217                                    H
    218     SUPREME COURT REPORTS              [2010] 10 S.C.R.


A upon the first respondent a demand notice dated
  16.1.1995 towards electricity arrears due from the
  previous owner.

      The first respondent filed a suit for permanent
  injunction for restraining the appellant-Board from
8
  enforcing the .demand notice. The suit was dismissed.
  The appellate court upheld the order of dismissal.
  Thereafter, the appellant served a notice dated 2.3.1998
  informing the first respondent that the electricity supply
  would be disconnected if the arrears due from the
C previous owner were not paid. Thereafter the electricity
  supplied was disconnected on 9.3.1998.

         The first respondent filed a suit challenging the
    demand and disconnection of electricity supplied. The
D   said suit was dismissed by the ·trial court holding that the
    claim of the appellant was barred by limitation. Both the
    first respondentand the appellant filed appeals. The first
    appellate court while dismissing. the appeal filed by the
    appellant and allowing the appeal filed by the first
E   respondent held that-the first respondent could not be
    made liable for the dues of the previous owner, as there
    was no provision in the terms and conditions of sale that
    the electricity dues of the p,revious owner should be paid
    by the first. respondent as auction purchaser. The
F   appellant filed an appeal before the High Court. The High,
    Court dismissed the appeal holdii:-g that in view of the
    decision in lsha Marbles case, the liability of a consumer
    to pay charges for consumption of electricity cannot be
    fastened on ;a subsequent auction purchaser of the:
G   prop·erty.
        In appeal to this Court, appellant contended that the
    dismissal of the first suit filed by the first respondent for
    permanent injunction having attained finality, the second

H
     HARYANA STATE ELECTRICITY BOARD v.                   219..
            HANUMAN RICE MILLS
suit filed by the first respondent for a declaration that         A
demand· and disconnection were invalid, was barred by
the principles of res judicata, and that the decision in *lsha
Marbles relied on by the High Court was inapplicable to
the facts of the case.                             ·
                                                                  8
    Dismissing the appeal, the Court

     HELD: 1. The first suit by the first respondent was
for a permanent injunction to restrain the appellant Board
from enforcing the demand notice dated 16.1.1995 in
respect of the electricity consumption charges incurred           C
by the previous owner. By the second suit, the first
respondent sought a declaration that the notice dated
9.3.1998 threatening disconnection. of electricity supply
for non-payment of the arrears of the previous owner and
the consequential disconnection dated 2.3;'1998, were             D
invalid and for consequential relief. The matter that was
directly and substantially in issue in the second suit was
completely different from the matter that was directly and
substantially in issue in the first suit. The reliefs claimed
were also different, as the first.suit was for. a permanent
injunction and the second suit was for a declarat!_on and
consequential relief. Therefore the se~ond suit was not
barred by res judicata. [Para 5] [223-A~D]

     2. Electricity arrears do not constitute a charge over
the property. Therefore, in general .law, a transferee of a
premises cannot be made liab"le for the dues of the
previous owner/occupier. Where the statutory rules or the
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 ebctricity, 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 purchaser. The appellant did not plead in its
    220      SUPREME COURT REPORTS            (2010) 10 S.C.R.


A defence that any statutory rule or terms and conditions
  of supply, authorized it to demand the dues of previous
  owner, from the first respondent. The decision in
  **Paramount Polymers shows that such an enabling term
  was introduced in the terms and conditions of electricity
B supply in Haryana, only in the year 2001. The appellant
  did not demand the alleged arrears, when the first
  respondent approached the appellant for electricity
  connection in its own name for the same premises and
  obtained it in the year 1991. More than three years
c thereafter, a demand was made by the appellant for the
  first time on 16.1.1995 alleging that there were electricity
  dues by the prevjous owner. In these circumstances, the
  claim relating to the previous owner could not be
  enforced against the first respondent. On facts, the
D decision of the High Court does not call for interference.
  [Paras 9, 10, 11] [227-F-H; 228-A~E]

         Paschimanchal Vidyut Vitran 'Nigam Ltd. v. DVS Steels
    & Alloys Pvt.Ltd. 2009 (1) sec 21 o - relied on.

E       *lsha Marbles v. Bihar State Electricity Board (1995) 2
    SCC 648; **Dakshin Haryana Bijli Vitran Nigam Ltd. v.
    Paramount Polymers (P) Ltd. (2006) 13 SCC 101; Dakshin
    Haryana Bijli Vitran Nigam Ltd. v. Excel Build9on Pvt.Ltd.
    2008 (10) sec 720 - referred to.
F                       Case Law Reference:
          (1995) 2 sec 648      referred to          Para 3
          (2006) 13 sec 101     referred to          Para 4
G         2008 (1 O) sec 120    referred to          Para 7
          2009 (1) sec 210      relied on            Para 8
        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    6817 of 2010.
H
                    HARYANA STATE ELECTRICITY BOARD v.                      221
                           HANUMAN RICE MILLS

.ti '   ''   ·   From the Judgment & Order dated 08.08.2005 of the High             A
             Court of Punjab & Haryana at Chandigarh in RS.A. No. 412
             of 2004.

                   Pardeep Dahiya, T.V. George for the Appellant.

                   Amarjit Singh Bedi, Gurbir Singh R. for the Respondents.         B

                   The Judgment of the Court was delivered by

r 1                R. V. RAVEENDRAN, J. 1. Leave granted. Heard.

  '·                2. The second respondent - Haryana Financial Corporation        C
               auctioned the rice mill premises of one of its i;.;rrowers - Durga
               Rice Mills, to recover its dues. The first respondent purchased
               the said premises at;the auction on 14.12.1990 for a
               consideration of Rs. 15,25,000/- and paid the entire sale
               consideration to the second respondent. When the first               D
               respondent purchased the mill premises, electricity supply to
             · the premises had been disconnected. After taking possession
               of the premises, the first respondent applied for and obtained
               electricity connection in its own name in the year 1991. Four
               years later, the appellant served upon the first respondent, a       E
               notice dated 16.1.1995 demanding payment of Rs.2,39,251/-
               towards arrears of electricity charges due by the previous owner
               Durga Rice Mills.

                   3. The first resp~ndent filed a civil suit for permanent         F
              injunction and the said suit ended in dismissal on 5.12.1996
              which was affirmed by the appellate court on 27.2.1998.
              Thereafter the appellant served a notice dated 2.3.1998
              informing the first respondent that the eler.tricity supply will be
              discor:mected if the said arrears due by Durga Rice Mills were        G
              not paid. This was followed by disconnection of electricity
              supply on 9.3.1998. First respondent filed a suit challenging the
              said demand and disconnection of electricity supply. The said
              suit was dismissed by the trial court. While dismissing the suit,
              the trial court held that the c!aim of the appellant was barred
              by limitation. Feeling aggrieved by the dismissal, the first          H
        222        SUPREME COURT REPORTS                  [2010] 10 S.C.R.


  A respondent filed an appeal; and feeling aggrieved by the
    finding that appellant's claim was barred by limitation, the
    appellant filed an appeal. The first appellate court decided the
    appeals by a common judgment dated 30.10.2003. It
    dismissed the appeal filed by the appellant and allowed the
  B appeal filed by the first respondent. It held that first respondent
    could not be made liable.for the dues of the previous owner,
    as there was no provision in the terms and conditions of sale
    that the electricity dues of the previous owner should be paid
    by the first respondent as auction purchaser. The judgment of
  c the first appellate court was challenged by the appellant by filing
    a second appeal. The Punjab & Haryana High Court by its
    judgment dated 8.8.2005 dismissed the said appeal holding
    that the liability of a consumer to pay charges for consumption
    of electricity, cannot be fastened on a subsequent auction
  0 purchaser of the property, in view of the decision of this court
    in lsha Marbles vs. Bihar State. Electricity· Board - (1995) 2
    sec 648.
            4. Feeling aggrieved the appellant filed this appeal raising
        two contentions:
  E
              (i) The dismissal of the first suit filed by the first respondent
              for permanent injunction having attained finality, the second
              suit filed by the first respondent for a declaration that
              demand and disconnection were invalid, was barred by the
  F           principles of res judicata.

             (ii) The decision in lsha Marbles relied on by the High
             Court was inapplicable to the facts of the case. The
             decision of this court in Dakshin Haryana Bijli Vitran
             Nigam Ltd. v. Paramount Polymers (P) Ltd. - (2006) 13
··, G      · SCC 101, entitles the appellant to claim and receive the
             electricity dues of the previous owner from the new owner/
             auction purchaser.


  H
     HARYANA STATE ELECTRICITY BOARD v.                          223
   HANUMAN RICE MILLS [R.V. RAVEENDRAN, J.]
Re: Point No. (i)                                                        A

      5. The first suit by the first respondent was for a permanent
injunction to restrain the app,ellant Board from enf9rcing the
demand notice dated 16.1.1995 in respect.of the electricity
consumption charges incurred by the previous owner. By the
                                                                         B
second suit, the first respondent sought a declaration that the
 notice d~ted 9.3.1998 threatening disconnection of electricity
supply for non-payment of the arrears of the previous owner and
the consequential disconnection dated 9.3.1998, were invalid
and for consequential relief. The. matter that was directly and
 substantially in issue in the second suit was completely different      C
 from the matter that was directly and substantially in issue in
 the first suit. The reliefs claimed were also different, as the first
 suit was for a permanent injunction and the second suit was
 for a declaration and consequential relief. Therefore the second
 suit was not barred by res judicata.                                    D

Re : Point No. (ii)

     6. The High. Court held. that the demand was untenable in
view of the decision in lsha Marbles. In lsha Marbles this court         E
held that in the absence of a charge over the property in
respect of the previous electricity dues, and 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         F
granting fresh connection. This court further held that an
Electricity Board could not seek the enforcement of the
contractual liability of the previous owner/occupier against a
purchaser, who was a third party in so far as the contract
between the Electricity Board and the previous occupant and              G
that an auction purchaser who purchases the property after
disconnection of the electricity supply, could not be considered
as a 'consumer' within the meaning of the Electricity Act, 1910
or Electricity (Supply) Act, 1948, even though he seeks
                                                                         H
    224       SUPREME COURT REPORTS                 [2010) 10 S.C.R.


A   reconnection in respect of the same premises. This court
    observed:

          "Electricity is public property. Law, in its majesty, benignly
          protects public property and behoves everyone to respect
          public property. Hence, the courts must be zealous in this
B
          regard. But, the law, as it stands, is inadequate to enforce
          the liability of the previous contracting party against the
          auction purchaser who is a third party and is in no way
          connected with the previous owner/occupier. It may not be
          correct to state, if we hold as we have done above, it would
c         permit dishonest consumers transferring their units from
          one hand to another, from time to time, infinitum without
          the payment of the dues to the extent of lakhs and lakhs
          of rupees and each one of them can easily say that he is
          not liable for the liability of the predecessor in interest. No
D         doubt, dishonest consumers cannot be allowed to play
          truant with the public property but inadequacy of the law
          can hardly be a substitute for overzealousness."

                                                  (emphasis supplied)
E
         7. The appellant relies on the subsequent decision of this
    court in Paramount Polymers (supra) to distinguish the decision
    in lsha Marbles. In Paramount Polymers (supra), the terms and
    conditions of supply contained a provision (clause 21A)
    providing that reconnection or new connection shall not be given
F   to any premises where there are arrears on any account, unless
    the arrears are cleared. In view of the said express provision,
    this Court distinguished lsha Marbles on the following
    reasoning:

G         "This Court in Hyderabad Vanaspati Ltd. v. A.P. SEB
          [1998) 2 SCR 620 has held that the Terms and Conditions
          for Supply of Electricity notified by the Electricity Board
          under Section 49 of the Electricity (Supply) Act are statutory
          and the fact that an individual agreement is entered into
H         by the Board with each consumer does not make the
  HARYANA STATE ELECTRICITY BOARD v.                          225
HANUMAN RICE MILLS [R.V. RAVEENDRAN, J.]
 terms and conditions for supply contractual. This Court has          A
 also held that though the Electricity Board is not a
 commercial entity, it is entitled to regulate its tariff in such
 a way that a reasonable profit is left with it so as to enable
 it to undertake the activities necessary. If in that process
 in respect of recovery of dues in respect of a premises to           B
 which supply had been made, a condition is inserted for
 its recovery from a transferee of.the undertaking, it cannot
 ex facie be said to be unauthorized or unreasonable. Of
 course, still a court may be able to strike it down as being
 violative of the fundamental rights enshrined in the                 c
 Constitution of India. But that is ·a different matter. In this
 case, the High Court has not undertaken that exercise.

 The position obtaining in /sha Marbles (supra) was akin
 to the position that was available in the case on hand in
 view of the Haryana Government Electrical Undertakings               D
 (Dues Recovery) Act, 1970. :rhere was no insertion of a
 clause like Clause 21A as in the present.case, in the Terms
 and Conditions of Supply involved in that case. The
 decision proceeded on the basis that the contract for
 supply was only with the previous consumer and the                   E
 obligation or liability was enforceable only against that
 consumer and since there was no contractual relationship
 with the subsequent purchaser and he was not a consumer
 within the meaning of the Electricity Act, the dues of the
 previous consumer could not be recovered from the                    F
 purchaser. This Court had no occasion to consider the
 effect of clause like Clause 21A in the Terms and·
 Conditions of Supply.-We are therefore of the view that the
 decision in lsha Marbles (supra) cannot be applied to
 strike down the condition imposed and the first respondent           G
 has to make out a case independent on the ratio of lsha
 Marbles (supra), though it can rely on its ratio if it is helpful,
 for attacking the insertion of such a condition for supply of
 electrical energy. This Court was essentially dealing with
 the construction of Section 24 of the Electricity Act in             H
    226        SUPREME COURT REPORTS               [2010] 10 S.C.R.


A       arriving at its conclusion. The question .of correctness or
        otherwise of the decision in lsha Marbles (supra) therefore
        does not arise in this case especially in view of the fact
      . that the High Court has not considered the question
        whether Clause 21A of the terms and conditions
B       incorporated is invalid for any reason."

    The decision in Paramount Polymers was followed in Oakshin
    Haryana Bijli Vitran Nigam Ltd. v. Excel Buildcon Pvt.Ltd.
    [2008 (10) sec 120].

C      8. lri Paschimanchal Vidyut Vitran Nigam Ltd. v. DVS
  Steels & Alloys Pvt.Ltd. [2009 (1) SCC 210] this court held,
  while reiterating the principle that the electricity dues did not
  constitute a charge on the premises, that where the applicable
  rules requires such payment, the same will be binding on the
D purchaser. This court held:                   ·

           "A transferee of the premises or a subsequent occupant
           of a premises with whom the supplier has no privity of
           contract cannot obviously be asked to pay the dues of his
           predecessor in title or possession, as the amount payable
E
           towards supply of electricity does not constitute a 'charge'
           on the premises. A purchaser of a premises, cannot be
           foisted with the electricity dues of any previous occupant,
           merely because he happens to be the current owner of the
          ·premises.
F
          When the purchaser of a premises approaches the
          distributor seeking a fresh electricity connection to its
          premises for supply of electricity, the distributor can
          stipulate the terms subject to which it would supply
G         electricity. It can stipulate as one of the conditions for
          supply, that the arrears due in regard to the supply of
          electricity· made to the premises when it was in the
          occupation of the previous owner/occupant, should be
          cleared before the electricity supply is restore_d to the
H         premises or a fresh connection is provided to the
  HARYANA STATE ELECTRICITY BOARD v.                          227
HANUMAN RICE MILLS [R.V. RAVEENDRAN, J.]

   premises. If any statutory rules govern the conditions            A
   relating to sanction of a connection or supply of electricity,
   the distributor can insist upon fulfillment of the requirements
   of such rules and regulations. If the rules are silent, it can
   stipulate such terms and conditions as it deems fit and
.. proper, to regulate its transactions and dealings. So long        B
   as such rules and regulations or the terms and conditions
   are not arbitrary and unreasonable, courts will not interfere
   with them.

  A stipulation by the distributor that the dues in regard to C
   the electricity supplied to the premises should be cleared
   before electricity supply is restored or a new connection
   is given to a premises, cannot be termed as unreasonable
   or arbitrary. In the absence of such a stipulation, an
   unscrupulous consumer may commit defaults with
· impunity, and when. the electricity supply is disconnected D
 . for non-payment,. may sell away the property and move on
   to another property, thereby making it difficult, if not
   impossible for the distributor to recover the dues:
   Provisions similar to Clause 4.3(g) and (h) of Electricity
   Supply Code are necessary to safeguard the interests of E
   the distributor."

  9. The position therefore can may be summarized thus :

   (i~   Electricity arrears do not constitute a charge over the
                                                                     F
   property. Therefore in general law, a transferee of a
   premises cannot be made liable for the dues of the
 . previous owner/occupier.

  (ii) Where the statutory rules or terms and conditions of
  supply which are statutory in character, authorize the             G
  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 purchaser.                 H
    228      SUPREME COURT REPORTS               (2010] 10 S.C.R.


A Position in this case

        10. The appellant did· not plead in its defence that any
  statutory rule or terms and conditions of supply, authorized it
  to demand the dues of previous owner, from the first
  respondent. Though the appellant contended in the written
8
  statement that the dues of Durga Rice Mills were transferred
  to the account of the first respondent, the appellant did not
  specify the statutory provision which enabled it to make such
  a claim. The decision in Paramount Polymers shows that such
C an enabling term was introduced in the terms and conditions
  of electricity supply in Haryana, only in the· year 2001. The
  appellant did not demand the alleged arrears, when first
  respondent app.roached the appellant for electricity connection
  in its own name for the same premises and obtained it in the
  year 1991. More than three years thereafter, a demand was
D made by the appellant for the first,time on 16.1.1995 alleging
  that there were electricity dues by the previous owner. In these
  circumstances the· claim relating to the previous owner coula
  not be enforced against the first respondent.

E       11. On facts, it has to be held that the decision of the High
    Court does not call for interference. The appeal is therefore
    dismissed. Parties to bear their respective costs.

    D.G.                                        Appeal dismissed.