Holding

An auction purchaser is not liable for the electricity arrears of the previous consumer; liability remains with the former consumer and the Board cannot condition reconnection on payment by the new owner.

Summary

The Supreme Court considered appeals arising from the sale of mortgaged industrial premises by the Bihar State Financial Corporation. The purchasers, who acquired the assets at auction, were denied reconnection of electricity because the Bihar State Electricity Board demanded payment of arrears incurred by the previous owners. The central issue was whether the auction purchaser, as a third‑party transferee, could be held liable for the former consumer's unpaid electricity charges under the Electricity Act, 1910 and the Electricity (Supply) Act, 1948. The Court held that liability for consumption charges rests with the person who actually consumed the electricity, i.e., the former consumer, and cannot be imposed on a subsequent purchaser who has not yet been supplied. Accordingly, the Board may not condition reconnection on the new owner's payment of past dues, although it retains its right to recover the arrears from the original debtor. The Court allowed Civil Appeal No. 1418 (Isha Marbles) and dismissed the other related appeals.

Issues considered

Whether an auction purchaser of mortgaged industrial premises is liable to pay electricity arrears of the previous consumer under the Electricity Act, 1910 and the Electricity (Supply) Act, 1948.
Whether Section 24 of the Electricity Act can be invoked to make reconnection of supply conditional upon payment of prior dues by a third‑party purchaser.
Whether the Board can enforce the contractual liability of the former consumer against the subsequent purchaser.
Whether the amendment to the Bihar and Orissa Public Demands Recovery Act, 1914 permits recovery of electricity dues from a bona‑fide auction purchaser.
Whether the Board has a statutory duty to supply electricity under Section 22 and Clause VI of the Schedule despite outstanding arrears.

Legislation cited

Electricity Act, 1910s. 22, s. 24, s. 2(c), s. 3(2)(f)
Electricity (Supply) Act, 1948s. 26

Subjects

electricity arrearsconsumer liabilityauction purchaserElectricity Act 1910Section 24public propertyreconnectioncontractual liabilitystatutory duty

Judgment

M/S ISHA MARBLES ETC. ETC. A
v.
BIHAR STATE ELECTRICITY BOARD AND ANR. ETC. ETC.

FEBRUARY 3, 1995
B
[P.B. SAWANT, S. MOHAN AND K.S. PARIPOORNAN, JJ.]

Electricity Act, 1910-Sections 2(c), 22, 24, clause VI of Schedule; Rule
2A(f)-Electricity (Supply) Act, 1948-Section 26-A"ears of consumption
charges in respect of electricity supplied to premises-Failure of consumer to C
pay-Remedies of Electricity Board-Liability of transfere(J.

The appellant was a purchaser of the mortgaged assets of an in-
dustry in an open auction 'sale held by the Bihar State Financial Corpora-
tion. The appellant paid a substantial sum towards the said transaction
and thereafter got the possession of th~ industry. However, the electrical D
connection of the premises was disconnected. The appellant was called
upon to discharge all the liabilities ot the previous consumer. This was
challenged in the writ petition on the' ground that there was a transfer of
a unit and as transferee it was not liable for energy consumed before such
transfer. The writ petition was dismissed by a Division Bench of the High
Court holding that the Bihar State Electricity Board would be entitled to E
take action in accordance with law. T,hese appeals had been filed against
the judgment of the High Court.

The appellants urged that the appella]lt m., the bonafide purchaser
of the mortgaged assets of the industry in an auction sale held under the F
Corporation Act by the respondent - Corpor~fon; that the appellant was
neither the transferee nor the successor to the previous owner of the
premises, it was an independent buyer under ~he }Uhar Public Demands
Recovery (Amendment) Act, 1982; that the dues towards the consumption
of electricity could be recovered only if the appellant was· a consumer and G
he could not be held to be a consumer since, factually, the appellant was
yet to be given electricity connection; that the electricity dues by the
previous industry was a contractual liability between the industry and the
respondent Board, it was not statutory in nature since electricity was
consumed by consumer on the basis of a written contract approved J>Y
I
Section 26 of the Indian Electricity Act, 1910; that Section 24 of the H
847
848 SUPREME COURT REPORTS (1995] 1 S.C.R.

A Electricity Act had no application since that presupposes an electricity
connection which connection the appellant was yet to be given, therefore,
the appellant could not be held liable for any default committed by the
previous consumer; that neither under the scheme of the Electricity Act
nor the Electricity (Supply) Act 1948, was there any concept of the
B premises of the consumer being liable for the electricity dues de hors the
consumer, whose premises it was; that though by reason of the amendment
made on 18.4.1982 to the Bihar and Orissa Public Demands Recovery Act,
1914 electricity dues were recoverable by bringing the property of the
consumer concerned to sale in certificate proceedings, such a provision
could not be invoked against a subsequent bonafide auction purchaser of
C the assets; that in so far as this appellant had not consumed electricity, it
was merely seeking re-connection and there being no statutory dues
towards consumption charges, the Board could not insist upon the respon·
dent to pay the arrears owing by the erstwhile consumer, as a condition
precedent to provide electricity connection, on the contrary, there· was an
D obligation u/s 3(2)(t) and Section 22 of the Electricity Act read with clause
VI of the Schedule I thereof to supply electricity; that the auction notice
issued by the Corporation or even the subsequent transfer by it, did not
mention anything about the outstanding electricity dues and therefore, the
liability of the previous consumer could not be fastened to this appellant.

E On behalf of the Board, it was urged that the Board, after giving
notice u/s 24 . of the Electricity Act to the previous consumer for not
·receiving payment towards electricity bills in respect of the premises, had
disconnected/cut off the supply to the premises and that premises was sold
in auction by the corporation to the appellant; that Section 2.f confers a
F statutory right to the Board to cut off the supply and this right is without
prejudice to the right of the Board to file a suit and, therefore, the Board
need not necessarily file a suit and when the Board had exercised its
statutory right u/s 24 it could not be forced to reconnect the supply unless
the entire charges due in respect of the building were paid off to the Board;
that the Corporation had not given any notice to the Board and the auction
G purchasers could have easily ascertained the availability of electricity to ,
the premises; that the bonafides of the purchaser could have no relevance
to the issue nor the circular of the Board could be relied on to find a cause
for reconnection; that electrical connection was already given to the
premises in question, therefore, no new connection could be given u/s 24
H of the Act unless the previous arrears had been cleared~ off and the
ISHA MARBLES v. BIHAR STATE ELECTRICITY BD. 849

transferee by purchasing the unit in the auction sale held u/s 29 of the A
Corporation Act could not be said to have discharged the liabilities of the
transferor who was in arrears of electricity due under the Act for not
making payment for electricity connection had been cut off in the premises.

Disposing of the matter, this Court
B
HELD : 1. In the instant cases the premises had enjoyed the benefits
of electricity. The owner of the premises or even the occupier of the
premises as stated under Rule 2A(t) of the Indian Electricity Rules,
becomes liable to pay the consumption charges together with other dues.
The liability is in respect of the dues of electricity which came to be C
supplied pursuant to the contract with the former owner. The discharge
of such liabilily will be on such owner or occupier. [867-D]

2._Tbere is no charge over the property. Where that premises comes
to owned or occupied by the auction purchaser, when such purchaser seeks
supply of electric energy he cannot be called upon to clear the past arrears D
as a condition precedent to supply. What matters is the contract entered
into by the erstwhile consumet• with the Board. The Board cannot seek the
enforcement of contractual liability against the third party. Of course, the
bonafides of the sale may not be relevant. [867-E-F]
E
3.1. This is a case of sale under Section 29 of the Bihar State
Financial Corporation Act. What the Corporation sought to recover are
the loans advanced by enforcement of a mortgage. Such sale cannot affect
the right of the Board to recover its dues. The failure of the Board to
recover the dues as and when such dues arose is a point to be put against
it. £868-CJ F
3.2. It is impossible to impose on the purchasers a liability which
was not incurred by them. The auction purchasers came to purchase the
property after disconnection but they could not be consumer or occupier
within the meaning of the provisions of the Electricity Act till a contract G
was entered into. [868-G]

4. 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 regard. But, the law, as it stands, is
inadequate to enforce the liability of the previous contracting party against H
850 SUPREME COURT REPORTS [1995] 1 S.C.R.

A the auction purchaser who is a third party and is in no way connected with
the previous owner/occupier.. No ·doubt,· dishonest consumers cannot be
allowed to play truant with the public property but inadequacy of the law
~n hardly be a substitute for overzealousness. (869-A-C]

In the instant case, the auction purchasers applied for supply of
B electricity for the same premises to which already ele<:tricity was supplied
and disconnected for the non clearance of the dues on account of such
supply. Though the purchasers asked for electricity connection as a new
connection it could not be regarded as a new connection. It was only a
re-connection since the premises had already been supplied with electrical
C energy. The consumer had bound himself to the Board to pay the dues. On
failure of the consumer to pay, undoubtedly, resort could be had to Section
24 of the Electricity Act. But resort to Section 24 is 11ot the orily remedy
available. The general remedy to file a,suit will always be available to the
Board. Besides, in the case of Bihar State Electricity Board, by reason of an
amendment of Bihar and Orissa Public· Demands and Recovery Act, 1914,
D electricity dues could be recovered by bringing the property of the consumer
concerned to sale in certificate proceedings. (866-H, 865-D, 866-D-E]

State of U.P. and Ors. v. Hindustan Aluminium Corporation and Ors.,
[1979) 3 SCC 229 and Fe"o Alloys Cofp;ration Ltd. v. A.P. State Electricity
E Board and Anr., [1993) Supp. 4 SCC 136, relied on.

Sanjay Dhingra and Anr. v. M.P. Faculty Board, (1990) MPLT 48 and
Souriyar Luka v. Kera/a State Electricity Board, AIR (1959) Ker 199, af-
firmed.

F National Textile Corpn. (MP) Ltd. v. M.P. Electricity Board, AIR
(1980) MP 32; Bihar State Electricity Board v. Green Rubber Industries,
(1990) 1 SCC 731 and Ram Chandra Prasad Sharma v. State of Bihar, AIR.
(1967) SC 349, distinguished.

G CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1418 of
1995 etc. etc.

From the Judgment and Order dated 5.9.91 of the Patna High Court
in C.WJ.C. No. 1536 of 1991 (R).

H S.B. Upadhya, Ranjit Kumar and Pramod Swarup for the Appellants.
!SHA MARBLES v. BIHAR STATE ELECTRICITY BD. [MOHAN, J.] 851

R.P. Bhatt, M.P. Jha and S. Muralidhar for the Respondents. A
The Judgment of the Court was delivered by

·MOHAN, J. Leave granted.

All these appeals can be dealt with by a common judgment since the B
issue that arises for our consideration is one and the same, namely, whether
the auction purchaser is liable to meet the liability of old consumer of
electricity to the premises which is purchased by him in the auction sale
from Bihar State Financial Corporation (hereinafter referred to as the
'Corporation') under Section 29(1) of the Bihar State Financial Corpora-
tion Act, 1951 (hereinafter referred to as the 'Corporation Act')? C
Civil Appeal No. 1418 of 1995 (Arising out of SLP(C) No. 617 of 1<)<)2
(Mis lsha Marbles) :

In this case, the appellant is a purchaser of the mortgaged assets of
M/s Patel Industries. Daltonganj in an open auction sale held by the D
Corporation Act. The appellant has paid a substantial sum towards the said
transaction and thereafter got the possession of the industry on 31.1.1991.
However, the electrical connection of the premises was disconnected when
the appellant got possession of the said unit. The appellant was called upon
to discharge all the liabilities of the previous consumer. ·This was chal- E
lenged in C.W J.C. No. 1536 of 1991 before the High Court of_f~na,
Ranchi Bench, Ranchi. The stand taken by the writ petitioner before the
d High Court was, there is a transfer of a unit; it had not b~en supplied with
' electricity; hence, it had no occasion to consume electricity; and as trans-

•• '
feree it is not liable for energy consumed before such trapsfer. The writ
petition was dismissed by a Division Bench of the High Cou~holding that
the Bihar State Electricity Board (hereinafter referred to as the 'Board') ·
F

would be entitled to take action in accordance with law.

Aggrieved by the impugned judgment the appellant has come in
appeal before this· Court. G
Civil Appeal No. 1420 of 1995 (Arising out of SLP(C) No. 16227 of
1992 : Bihar State Electricity Board & Ors. v. Mis Waxpol Industries Ltd. &
Anr.:

In this case, the facts are slightly different. The Bihar Financial H
852. SUPREME COURT REPORTS [1995) 1 S.C.R.

A Corporation sanctioned loan to M/s Neo Chemicals & Metal Products (P)
Ltd. for setting up a unit for manufacture of Graphite Beneficiation. The
said unit occupied Plot Nos. 1819 and 1820 at P.O. Village Booti, District
Ranchi, Bihar. For non-payment of electricity bills the electricity was
disconnected. They were outstanding to the tune of Rs. 2,35,924.78 against
B such electricity consumption charges. The Corporation had advanced a
sum of Rs. 3,40,000 to. M/s Neo Chemicals. To secure this loan, the
properties of the company had been hypotecated/mortgaged. In order to
realise this sum the properties were sought to be sold under Section 29 of
the Corporation Act. The sale was through an advertisment. The Waxpol
- Industries, the respondent, filed its tender. That was the highest. Therefore,
C the properties were sold in favour of the respondent for a consideration of
Rs. 2,97,578.27.

Waxpol Industries applied for electricity connection to the Board.
After the purchase, in that application, Column No ..6 required Waxpol
Industries to state whether it would undertake to clear the previous dues.
D As against this, it was stated "does not apply''. Therefore, on 3.1.89, the
Board informed W axpol Industries that it was unable to restore electricity
as its dues had not been paid either by the consumer or by the subsequent
occupant of the said premises.

E Aggrieved by this, the respondent he:rein preferred C.WJ.C. No. 25
of 1986. By the impugned judgment, the writ petition was allowed on the
ground that the present occupants are. free from any encumbrance or
liability towards the payment of outstanding electricity dues; Neo Chemi-
cals and Waxpol Industries are two distinct Companies and as such two
F separate legal entities. In view of the judgment in Ram .Krishna Choudhary
v. Bihar State Electricity Board and others C.WJ.C. No. 204 of 1984 dis-
posed of on 15th October, 1990 unless there is a clause that the auction
.,.
purchaser shall not only have the assets but also the liability including the
liability of the Electricity Board, the latter cannottake the stand that unless
·the dues of the erstwhile owners are cleared, no electric connection will be
G given to the auction purchaser.

The case in C.A. No. 1419 of 1995 (Arising out of S.L.P. (C) No.
18224 of 1993 : Chainnan B1har State Electricity Board and others v. Suman
Packaging Private Limited is identfoal to the case in Civil Appeal No. 1420
H of 1995 (arising out of SLP(C) No. 16227of1992: Waxpol Industries). The
ISHA MARBLES v. BIHAR STATE ELECTRICITY BD. [MOHAN, J.] 853

respondent purchased the unit of M/s Sanjay Packaging Industries in an A
auction sale held under Section 29 of the Corporation Act for a sum of Rs.
8 lacs. The said Sanjay Packaging Industries had committed default in
payment of electricity dues amounting to Rs. 87,137,34.

On 9.6.1992, the respondent (auction purchaser) applied for
electricity connection. The appellant-Board called upon the respondent to B
clear off the dues of Sanjay Packaging Industries. Thereupon, the respon-
dent filed C.W.J.C. No. 5358of1992 for a writ of mandamus to the Board
to supply electricity. The ca~e of the respondent as petitioner before the
High Court was when the matter was brought to the notice of the Corpora-
tion it wrote to the board to the effect that the writ petitioner was not liable C
for any dues .of the erstwhile owner and application might be favourably
considered. Further, the Board had issued a circular on 19.1.72 that in a
case of genuine purchase if the old consumer had committed default and
the purchaser has no connection with the old consumer it would neither
be legal nor proper to insist on the realisation of the arrears due for giving D
re-connection. The High Court took the view that remedy under Section
24 of the Electricity Act could only be to file a suit to recover the dues
from a consumer. That Section merely enables the disconnection of
electricity if arrears are not paid by the consumer. Therefore, Section 24
cannot apply in a case where a transferee who had no connection with the
original consumer and purchases the property bonafide and in good faith. E

The Board is under statutory obligation to supply electrical energy
to any person whenever a requisition is made subject to the fulfilment of
conditions under Clause VI of Schedule I of the Electricity Act. It is in this
background the circular of the Board dated 19.1.72 has to be considered. F

The Board is a State within the meaning of Article 12 of the Con-
stitution. Therefore, its action must pass the test of fairness and reasonable-
ness. A purchaser like the writ petitioner was not expected to make an
enquiry from the Board so as to know whether any dues were outstanding
to the Board from the previous consumer; nor is it possible for auction G
purchaser to find out the personal liability of the debtor. The Division
Bench went on to hold that the previous decisions of the High Court in
Isha Marbles v. Bihar State Electricity Board, and another in C.W.J.C. No.
1538 of 1992 and Dani Mordhwaj Cold Storage Pvt. Ltd. v. Bihar State
Electricity Board and Others in C.WJ.C. No. 6437 of 1992 must be held to H
854 SUPREME COURT REPORTS ·{1995} l S.C.R,

A be per incuriam because those decisions had not ~onsidered the important
legal aspects. · ·

Besides, the writ petitioner was a bona fide purchaser under a
statutory sale. The agreement entered into between the consumer ap.d the
Board contained personal bond as between the parties to the agreement.
B In any event, the Board cannot take advantage of its own wrong in allowing
the arrears to. get accumulated without either resorting to Section 24 on by
calling upon the consumer to furnish additional security. In this view, the
writ petition came to be allowed and a writ of mandamus was issued to the
Board to provide electricity connection on the ·terms and conditions laid
C down in Class VI of Schedule to the Electricity Act.
CA, No. 1422 of 1995 (arising out of SLP (C) No. 10253 of 1994:
Bihar State Electricity Board v. Abhay Kumm- and others) :

Under identical circumstances, following the earlier decision in
D C.WJ.C. No. 5358 of 1992 (Suman Packaging Private Limited) the High
Court allowed the writ petition in this case.

Similar is the case is Civil Appeal No. 1421 of 1995 (arising out of
SLP(C) No. 11806 of 1994.

E· Mr. Gopal Subramanian, learned counsel for the appellant urges the
following:

The appellant is a bona fide purchaser of the assests of the
mortgaged assets of Mis Patel Industries in an auction sale. Such an aucl:ion
was held under the Corporation Act by the respondent-Corporation. The
F appellant is neither the transferee nor the successor to the previous owner
of the premises. It is an independent buyer under the Bihar Public
Demands Recovery (Amendment) Act, 1982. The dues towards the con-
sumption of electricity could- be recovered only if the appellant was a
consumer. He cannot be held to be a consumer since, factually, the
G appellant is yet to be given electricity connection.

The electricity dues by the previous industry is a contractual liability
between the industry and the respondent-Board. It is not statutory in
nature since electricity is consumed by consumer on the basis of a written
contract as prescribed in Form EB-70 approved by Section 26 of the Indian
H Electricity Act. 1910 (hereinafter referred to as the 'Electricity Act') .

•
''(

~

ISHAMARBLESv. BIHARSTATEELECTRICITYBD. [MOHAN,J.) 855

Section 24 of the Electricity Act was no application since that A
presupposes an electricity connection which connection the appellant is yet
+ to be given. The~efore, the appellant cannot be held liable for any default
committed by the previous consumer. In support of this submission reliance
is placed on Souriyar Luka v. Kera/a State Electricity Board, AIR (1959-)
Kerala 199. In that case, the test applied was whether the applicant seeking
electricity connection is a legal representative of the defaulter. Further, the
B
payment of arrears due from the defaulting consumer cannot be insisted
for the supply of electricity to the premises used by the erstwhile consumer.

1' Similarly, in National Textile Corporation (M.P.) Ltd. Bhopal v. M.P.
Electricity Board, AIR (1980) M.P. 32 it was held that any liability of a c
former owner of National Textile Undertaking prior to the appointed day
cannot be fastened on the successors by mere inference.

In Civil appeal No. 1420 of 1995 (arising out of SLP(C) No. 16227
of 1992 and Civil Appeal No. 1422 of 1995 (arising out of SLP (C) No.
10253 of 1994 the written submissions filed by Mr. S. Murlidhar, learned D
advocate on behalf of the respondent No. 1, Abbay Kumar inter alia as
.... under:

Section 24 of the Electricity Act could be invoked only as against the
person to whom energy has been supplied. Under Section 2(c) of the E
Electricity Act "consumer" means "any person who is supplied with energy''. ·
Therefore, the liability to pay electricify dues is obviously fastened only to
the consumer.

Neither under the scheme of the Electricity Act nor the Electricity
.... ~
(Supply) Act 1948 (hereinafter referred to as the 'Supply Act') is there any F
concept of the premises of the consumer being liable for the electricity
dues de hors the consumer, whose premises it is.

No doubt, by reason of the amendment made on 2&th April, 1982 to
the Bihar and Orissa Public Demands Recovery Act, 1914 electricity dues
are recoverable by bringing the property of the· consumer concerned to sale
G
in certificate proceedings. Such a provision cannot be invoked against a
.4( subsequent bona fide auction purchaser of the assets.

This Court has held in Bihar State Electricity.Board v. Green Rubber
Industries, (1990] 1 SCC 731 that the relationship between the Board and H
.
.. .

l
il-
'L
856 SUPREME COURT REPORTS [1995] 1 S.C.R.

A consumer is purely .co~tractual.
·• In so far as this respondent had not consµmed c~lectricity, it was
merely seeking re-connection and there being no statutory dues towards
consumption charges, the board cannot insist upon the respondent to pay
the a.rrears owing by the erstwhile consumer, as a condition precedent to
B provide electricity connection. On the contrary, there is an obligation under
Section 3(2)(t) and Section 22 of the Electricity Act read with Clause VI
• · of the Schedule I thereof to supply electricity. The said Clause VI Schedule
I contains conditions under which supply can be discontinued. Those
conditions do not stipulate that the supply will be discontinued if the
C lµ'rears of the electricity owing by an erstwhile consumer in the premises
· are not paid first. Such a pre-condition is illegal and ultra vires of both the
Acts. In Sanjay Dhingra & Anr. v. M.P. Faculty Board, Jabalpur, (1990)
MPLT 48 tlie High Court laid stress on a specific clause viz. 22A. Without
such a specific proVision, it will not be possible to foist any such obligation
· to pay dues on: a subsequent bona fide purchaser of assets like the present
D . respondent.
The auction notice issued by the Corporation or even the subs~quent
· transfer by it, did not mention anything about the outstanding electricity
dues. Neo Chemicals and Waxpol Industries are two different entities.
E Therefore, the liability of the previous consumer cannot be fastened to this
respondent ..

InAbhay Kumar's case (SLP(C) No. 12253of1994) the further point
which is raised is, the Board has initiated certain proceedings against the
erstwhile owner of the assets, namely, Allied Paper and Chemical In-
F dustries Pvt. Limited under the Bihar and Orissa Public Demands
Recovery Act, 1914. By an order dated 2.7.94 the Certificate Officer
dismissed the case of the Board. The Board has filed an appeal before the
Collector. The said appeal is pending; Hence, the Board is now estopped
from demanding that Respondent No. 1 should pay to the Board the dues
G owing to it by Allied Papers and Chemical Industries Private Limited.

Mr. Pramod Swamp, learned counsel for the Board urges as under:

The Board, after giving Notice under Section 2'A of the Electricity
Act to the previous consumer for not reeeiving payment towards electricity
H bills in respect of the premises, had disconnected/cut off the supply to the
ISHA MARBLES v. BIHAR STATE ELECTRICITY BD. [MOHAN, J.) 857
...
premises. That premises was sold in auction by the Corporation t~ the A
appellant in Isha Marble's case (SLP (C) No. 617 of 1992) and the resP'&o-
dents in other cases.

Section 24 confers a statutory right to the Board to cut off the supply
and for that purpose cut or disconnect any electricity supply line or other
works being the property of the licensee (the Board) through which energy B
may be supplied and may discontinue the supply and surcharge or other
sum together with any expenses incurred by him iii cutting off and recon-
necting the supply are paid. This right is without prejudice to the right of
the Board to file a suit. Therefore, the Board need not necessary file a suit.
When the Board has exercised its statutory right under Section 24 it cannot C
be forced to reconnect the supply, unless the entire charges due in respect
of the building are paid off to the Board.

The Corporation has not given any notice to the Board. The auction
purchasers could have easily ascertained the availability of the electricity
to the premises. D
The bona fides of the purchaser could have no relevance to the issue.
Nor again the circular of the B.oard could be relied on to found a cause
for reconnection. When the Division Bench decided the case of Suman
Packaging Private Limited (C.WJ.C. No. 5358 of 1992) it chose to differ E
from the ruling in Isha Marble's case (C.W.J.C. No. 1536of1991). It should
have referred the matter to a full beach since by the law of precedent the
previous ruling of the Division.Bench was binding on it.

Electricat connection was· already given to the premises in question
in each of the cases. Therefore, no new connection could be given under p
Section 24 of the Act unless the previous arrears had been cleared off. The
transferee by purchasing the unit in the auction sale held under Section 29
of the Corporation Act cannot be said to have discharged the liabilities. of
the transferor who was in arrears of electricity due under the Act. For not
making payment for electricity, connection had been cut off in the
premises. It is not correct to urge that the contractual liability between the G
Board and the previous consumer is sought to be enforced against the third
party like the auction purchaser. The Board is exercising a statutory right
under Section 24 of the Electricity Act. If the contentions of the appellant
in lsha Marbles (SLP (C) No. 617 of 1992) and the respondents in other
cases were to be accepted, as rightly pointed out by the High Court in Isha H
858 SUPREME COURT REPORTS (1995) 1 S.C.R.

A Marbles (C.W.J.C. No. 1536 of 1991) the previous consumer could alw!ys.
avoid. payment of his arrears by transferring the unit in favour of the ·third
party. The proper test is to see whether the arrears are due in relation to
the premises to which electricity was supplied·.

In order to determine the question as to the liability of the auction
B purchaser (the subsequent transferee) to discharge the arrears of consump-
tion charges in respect of electricity supplied to that premises (the subject-
matter of transfer) we will have to refer to the important provisions of the
Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948.

C The law relating to electricity is principally contained in these two
Acts:

(i) The Electricity Act : This provides for grant of licence in relation
to supply and electricity and the purchase of the undertakings. It also
provides for supply of electricity including the protective clauses.
D (ii) The Supply Act : It provides for constitution of State Electricity
Boards, the powers and duties of such Boards.

Section 2 of the Electricity Act in clause (c) defines a "consumer"
thus:
E
"''consumer" means any person who is supplied with energy by
a licensee or the Government or by any other person engaged in
the business of supplying energy to the public under this Act or
any other law for the time being in force, and includes any person
whose premises are for the time being connected for the purpose of
F receiving energy with the works of a licensee, the Government or .., -
such other person, -as the case may be :"

(Emphasis supplied)

Undoubtedly, this is an inclusive definition. It consists of two parts :
G
(i) The person who is supplied with energy : and

(ii) It includes within it any person whose premises are connected
for the purpose of receiving energy with the works of a licensee.
..
H Rule 2A(t) defines an "occupier" as under :
ISHA MARBLES v. BIHAR STATE ELECTRICI1'Y BD. (MOHAN, J.] 859

"''occupier" means the owner or person in occupation of the A
premises where energy is used or proposed to be. used."

Section 22 of the Electricity Act runs :

"Obligation on licensee to supply energy :-
B
Where energy is supplied by a licensee, every person within the
area of supply shall, except in so 'far as is otherwise provided by
the term and conditions of the licence, be entitled, on application,
to a supply or the same as those on which any other person in the
same area is entitled in similar circumstances to a corresponding
m~: C
Provided that no person shall be entitled· to demand, or to
continue to receive, from a licensee a supply of energy for any
premises having a separate supply unless he has agreed with the
licensee to pay to him such minimum annual sum as will give him D
a reasonable return on the capital expenditure, and will cover other
standing charges incnrred by him in order to meet the possible
maximum demand for those premises, the sum payable to be
determined in case of difference or dispute by arbitration."

Section 26 of the Supply Act provides that subject to the provisions E
of this Act, the Board shall, in respect of the whole State, have all the
powers and obligations of a licensee under the Electricity Act.

The requisition for supply to owners or occupires is contained in
Clause VI of Schedule to the Electricity Act. That reads :
-
~ .,. ...
"VI. Requisition for supply to owners or occupiers in vicinity:-
F

(Where, (after distributing mains have been laid doWn under
the provisions of Clause VI or Clause V and the supply of energy
through those mains or any of them has conimenced) a requisition
is made by the owner or occupier of any premises situate within G
(the area of supply) requiring the licensee to supply energy for
such premises, the licensee shall, within one month from the making
of the requisition, (or within such longer period as the Electrical
Inspector may allow,) supply, and, save in so far as he is prevented
from doing so by cyclones, floods, storms or other occurrences H
860 SUPREME COURT REPORTS [1995] 1 S.C.R.

A beyond his control, continue to supply, energy in accordance with
the requisition." ·

(Emphasis supplied)

(The rest of Clause VI of the Schedule is omitted as not necessary
B for our purposes.) ·

Section 3(2)(f) of the Electricity Act reads:

"the provisions contained in thf- Schedule shall be deemed to
be incorporated with, and to form part of, every licence granted
c under this Part, save in so far as they are expressly added to, varied
or expected by the licence, and, shall, subject to any such additions,
variations or exceptions which the State Government is hereby
empowered to make, apply to the undertaking authorised by the
licence;"
D In Regulation VI the form prescribed by the Rules is contained in
Annexure "A" to the Rules.

The inter-connection between Section 22 of the Electricity Act and
Section 26 of the Supply Act came to be dealt with by this Court in State
E of U.P. and others v. Hindustan Alm'umium Corporation and others, [1979]
3 sec 229 at paragraphs 19 to 21 at pages 239-240 :

"Clause (b) of Section 2 of the Act defines a "Licensee" to mean
any person licensed under Part II to supply energy. Section 26 of
the Act of 1948 provides, inter a/ia, that subject to the provisions
F of that Act, the Electricity Board shall in respect of the whole
State, have all the powers and obligations of a licensee under the
Indian Electricity Act, 1910, and the Act of 1948 "shall be deemed
to be the licence of the Board" for purposes of the Act (of 1910).
The first proviso to the section excludes the application of some
sections, including Section 22 of the Act, and the second proviso
G states that the provisions of Clause VI of the Scheduled to the Act
shall apply to the Board in respect of that area only where dis-
tribution mains have been laid by the Board and the supply of
energy through any of them has commenced.

H While, therefore, the UPSEB is a licensee under the Act, it will
/
ISHA MARBLES v. BIHAR STATE ELECTRICITY BD. [MOHAN, J.) 861

be sufficient, for purpose of the controversy before us, to say that A
Section 22 of the Act is not applicable to it, am;i clause VI of the
Schedule is applicable to it subject to the restriction contained in
the second proviso to Section 26 of the Act of 1948. So even though
the Board is a licensee, the obligation under Section 22 of the Act
to supply energy to every person within the area of its supply is B
not fastened on it.

The provisions of the Schedule to the Act are deemed to be
incorporated in, and to form part of, every licence granted under
Part II, Clause VI of that Schedule states that where after distribut-
ing mains have been laid down and the supply of energy through C
them has commenced, a requisition is made by the owner or
occupier of any premises situate within the area of supply requiring
the licensee to supply energy for such premises, the licensee shall
make the supply and shall continue to do so in accordance with
the requisition. But, as has been pointed out, the second proviso
to Section 26 of the Act of 1948 places a restriction on that D
obligation for it says that the provisions of Clause VI shall apply
to the Board in respect of that area only "where distribution mains
have been laid by the Board and the supply of energy through any
of them has commenced."
E
As to the manner for getting electricity supply for premises the
following requirements have to be fUlfilled. They are succintly stated in
Shiva Gopal's Law Relating to Electricity Sixth Edition at page 359.

(1) A prospective consumer shall make and sign a requisition in
the form prescribed by the rules (Annexure VII to the Rules) for F
a connection of his premises for the supply of energy.

(2) The licensee shall then serve on the prospective consumer a
notice requesting him in writing to tender to him a WFitten contract
(in such form as the State Government may have approved).
G
(3) The prospective consumer shall within 14 days of the receipt
of such notice tender the contract duly executed by him, with
sufficient security, binding himself thereunder to take a supply of
energy for not less than two years to such amount as ·will secure
to the licensee at the current rates charged by him in annu~ H
862 SUPREME COURT REPORTS [1995) 1 S.C.R.

A revenue not exceeding fifteen per centum of the cost of the service
line required to con;-p}ywith the requisition.

(4) In addition to the security, the licensee may also require the
prospective consumer to pay to him the cost of so much of any
service line as may be laid down or placed for the purposes of the
B
supply upon the premises required to be connected, and of so
much of any service line as may be laid do~ or placed for the
purposes of the supply upon the premises required to be con-
nected, and of so much of any service line as it may be necessary
for the said purposes to lay down or place beyond one hundred
c feet from the licensee's distributing main, although not on that
premises.

(5) If the prospective consumer fails to tender the written contract
duly executed, fails to give sufficient security and fails to give the
D cost demanded within the said period of 14 days, the licensee shall ·
be under no obligation to make the connection.

(6) But if these formalities have been complied with the licensee
shall be bound to make the supply within one month or such
E extended time as the Electrical inspector may allow, the period to
the counted from the date of receipt by the licensee of the requi-
sition.

(7) And after the connection has been made the licensee shall be
bound to continue the supply unless he is prevented from doing
F
so by cyclone, floods, storms or other occurrences beyond his
control. -

Next comes the important Section under the Electricity Act, namely,
Section 24.
G
Section 24(1) provides where a consumer neglects to pay any charge
for energy or any sum other than charge for energy the licensee, after the
requisite notice, shall be entitled to stop supply of electrical energy. Of
course, this power of disconnection is subject to sub-section (2) of the said
H Section. Thus; Section 24 relieves the licensee of its obligatibn under:
!SHA MARBLES v. BIHAR $TATE ELECTRICITY BD. [MOHAN, J.] 863

·Section 22 to supply energy if the consumer has not paid to it the charges A
for electricity supplied or where the consumer neglects to pay the same.

Now, we will set out, by means of the following tabulated statement,
as to what the factual position is:

SI. SLP No. Parties Filed against Date of Date When Date of B
No. disconnection sale/ application
to the purchase for re-
prcvisous took place connection
consumer
1. 617/92 Mis Isha Judgment No 6.1.90 4.3.91
Marbles v. di. 5.9.91 in Connection
BSEB CWJC No. at the time c
1536/91 of delivery of
possession
2. 18227/92 BSEBv. dt. 28.7.92 14.7.84 7/8.5.85 after
Waxpol in CWJC possession
Indus. No. 25/86
3. 18224/93 BSEB v. dt. 22.7.93 17.7.91 29.11.91 9.6.92 D
Suman in CWJC
Packaging No. 5358/92
P. Ltd.
. 4. 10253/94 BSEB v. dt. 4.2.94 in no connection 5.1.93 5.10.93
Ab hay CWJC No.
Kumar 11330/93
5. 11806/94 BSEBv. di. 29.7.93 --do-- 5.4.91 23.11.91 E
North East in CWJC
Fertilisers No. 7299/92
P. Ltd.

The undisputable facts are :
F
1. The previous units had the benefit of electricity supply.

2. The previous units/owners had borrowed from the Corporation.

3. To secure those loans they had mortgaged/hypothecated the
properties.
G
4. The electricity arrears in relation to these premises had fallen due
since they had neglected to pay.

5. By exercise of power under Section 24 of the Electricity Act the
electricity supply was disconnected. , H
864 SUPREME COURT REPORTS [1995) 1 S.C.R.

A 6. For recovery of the loans the mortgaged/hypothecated propertil!s ..
were brought to sale under Section 28 of the Corporation Act.

The appellant in Isha Marbles (SLP (C) No. 617 of 1992) and the
respondents in other civil appeals became the auction purchasers. They
applied for supply of electricity for the same premises to which already
B electricity was supplied and disconnected for the non-clearance of the dues
on account of such supply.

j We may, by way of a sample, quote the relevant portions of the
requisition form filled in by Isha Marbles (SLP(C) 617 of 1992):

c Form No. E.B.-70

"BIHAR STATE ELECTRICITY BOARD
REQUISITION FORM

THE ASSISTANT ELE~_IC~L _f:NGINEER, ELECTRIC
D
.
SUPPLY SUB- DIVISION DOLTENGANJ, RURAL NO. 1
'

Sir,

I/We hereby require you to supply energy for the premises
owned/occupied by me/us at?-d situated within the area supply of
E the Bihar State Electricity Board.

, I/We further require you to supply me/us with the necessary
meter/meters on hire in terms of Section 26 of the indian Electricity
Act, 1910. I/We agree to give you such security as may be required
for the period of the meter/meters, whenever called upon to do
F
so.

xxxx xxxx xxxx xxxx

Particulars of the premises where supply is required :
G (a) Holding No. with name of the premises, if any 93/Plot No. 2727
Ward No. X Khara No. 2, Mahalla/-Village Bhimgarhi, P.O. Dol-
tonganj P.S. Dottonganj, Sub-divn. Doltanganj Dist. Falanpur
(Strike out the words not applicable).

H xxxx xxxx xxxx xxxx
ISHAMARBLESv. BIHARSTATEELECTRICITYBD. [MOHAN,J.] 865

(4) Whether the applicant undertakes to clear the past liability on A
the previous connection in these premises No.

xxxx xxxx xxxx xxxx

I/We further hereby as agreed to pay every sum that may
become due from me/us for the energy or other charges of the B
Board to the officer authorised by the Board to receive it and in
the event of non-payment of the said sum, it shall be recoverable
from me/us as public demand under the Bihar and Orissa Public
Demands Recovery Act, 1914."
c
(Emphasis supplied)

It is important to note that though the purchasers asked for
electricity connection as a new connection it cannot be regarded as a new
connection. It is only a re-connection since the premises had already been
supplied with electrical energy. Such a supply had been disconnected owing D
to the default of the consumer. That consumer had bound himself to the
Board to pay the dues. He also agreed to abide by the condition as
stipulated in the Act and the Rules including the payment of the dues.

Under Section 79 Clause G) read with Section 49 of the Supply Act E
it is open to the Board to make Regulations to stipulate the terms and
conditions of supply of electrical energy. One such stipulation is that the
consumption charges must be paid. In FemJ Alloys Corporation Ltd. v. A.P.
State Electricity Board and another, [1993] Supp. 4 SCC 136 at page 171 (to
which one of us was a party) it was held thus : · F
. )....

".... Under the regulations framed by the Board in exercise of
powers Section 49 read with Section 790) the consumer is only
entitled and the Board has an obligation to supply energy to the
consumer upon such terms and conditions as laid down in the
regulations. If, therefore, the regulations prescribed a security G
deposit that will have to be complied with. It also requires to be
noticed under Clause VI of the Schedule to the Electricity Act that
the requisition for supply of energy by the Board is to be made
under proviso (a) after a written contract is duly executed with
sufficient security." H
866 SUPREME COURT REPORTS [1995) 1 S.C.R.

A What then are the remedies of the Board, should the consumer fail
io pay? Undoubtedly, resort could be had to Section 24 of the ·Electricity
Act. The provisions of this Section come into play when :

(a) the consumer neglects to pay any charge for energy due from him
to a licensee,· or
B
(b) the .consumer neglects to pay sums other than a charge for energy
due from him to the licensee.

In these circumstances, the licensee may after giving the consumer a
C written notice of not less than seven clear days cut off the supply and
continue to keep the supply cut off till the consumer shall have paid the
sum or sums due.

We want to make it clear that resort to Section 24 is not the only
remedy available. The general remedy to file a suit will always be available
D to the Board.
Besides, in the case of Bihar State Electricity Board, by reason of an
amendment of Bihar and Orissa Public Demands and Recovery Act, 1914
(46 of 1982) electricity dues could be recovered by bringing the property
E of the consumer concerned to sale in certificate proceedings.. This is
because Rule 15 of Schedule I specifically mentions that any money payable
.to the:

(i) .......................... .

F (ii) ..........................

(111) .........................

(iv) Bihar State Electricity Board in respect of which the person
liable to pay the same as agreed by a written instrument that it shall be
G recoverable as public demaqd.

In all the present cases the supply of electricity to a particular
premises which had the benefit ·of enjoying electricity had been discon-
nected under Section 24 of the Electricity Act. The auction purchasers
H want reconnection. The Board says no; unless and until the consumptior
ISHAMARBLESv. BIHARSTATEELECTRICITYBD. [MOHAN,J.] 867
I
charges in relation to that property which came to be incurred during the A
ownership of the previous incumbent are cleared off. Is the stand of the
Board correct? The High Court, in the main judgment in Suman Packaging
(C.W.J.C. No. 5358 of 1992) gives the following reasons for answering the
question against the Board:

1. Section 24 stipulates discontinuance of supply of electrical energy
B
to the consumer in respect of a sum due from him. We are afraid the High
Court had not read Section 24 in conjunction with other statutory
provisions though they bad been noted, namely, Section 26 of the Supply
Act; Section 21 of the Electricity Act and Clause VI of Schedule of the
Electricity Act. They clearlr postulate the obligation to supply energy for C
such premises. At the risk of repetition we hold the premises had enjoyed
the benefit of electricity. The owner of the premises or even the occupier
of the premises, as stated under Rule 2 (at) of the Indian Electricity Rules,
becomes liable to pay the consumption charges together with other dues.
In other words, the liability is in respect of the dues of electricity which D
came to be supplied pursuant to the contract with the former owner. The
discharge of such liability will be on such owner or occupier.

From the above it is clear, the High Court has chosen to construe
Section 24 of the Electricity Act correctly. There is no charge over the E
property. Where that premises comes to be owned or occupied by the
auction purchaser, when such purchaser seeks supply of electric energy he
cannot be called upon to clear the past arrears as a condition precedent
to supply. What matters is the contrac.t entered into by the erstwhile
consumer with the Board. The Board cannot seek the enforcement of
contractual liability against the third party. Of course, the bona fides of the F
sale may not be relevant.

The form of requisition relating to the contract is in Annexure VIII
prescribed under Clause VI, of the Schedule to the Electricity Act. They
cannot make the auction purchaser liable. In the case of Isha Marbles we G
have already extracted the relevant clause wherein the consumer was asked
to state his willingness to clear off the arrears to which the answer was in
the negative. Therefore, the High Court has rightly held that the auction
purchaser, namely, "the writ petitioner before us is ready and willing to
enter into a new contract that the auction purchaser does not intend to H
868 SUPREME COURT REPORTS [1995) 1 S.C.R.

A obtain the continuance of supply of electrical energy on the basis of the
old agreement". It is true that it was the same premises to which reconnection
fs to be given. OtherWise, with the change of every ownership new connec-
tions have to be issued does not appear to be the correct line of approach
as such a situation is brought about by the inaction of the Electricity Board
B in not recovering the arrears as and when they fall due or not providing
itself by adequate deposits.

This is a case of sale under Section 29 of the Corporation Act. Of
·course, what the Corporation seeks to recover are the loans advanced by
enforcement of a mortgage. Such sale cannot affect the right of the Board
C to recover its dues. The failure of the Board to recover the dues as and
when such dues arose, is a point to be put against it.

Turning to the instruction issued by the Chairman of the Board and
a circular dated 19.1.72 on which the High C~urt had relied, in our
D considered view, is again to be weighed against the Electricity Board.

In view of the above, we hold that the decision in the Souriyar Luka
(supra) on which reliance is placed by Mr. Gopal Subramanian is correct.
The ruling of National Textile Corporation (M.P.) Ltd., Bhopal (supra)
rested on the interpretation of the provisions of Sick Textile Undertakillgs
E (Nationalisation) Act (57of1974). That is not relevant. The question with
which we are concerned did· not directly arise in Bihar State Electricity
Board, Patna and others v. Mis Green Rubber Industries and others, [1990)
1 SCC 731. We do not think it is necessary for us to refer to Ram Chandra
Prasad Shanna and others v. State of Bilmr and another, AIR (1967) SC 349
F since that case related to co-owners.

What we have discussed above appears to be the law gatherable from
the various provisions which we have detailed out above. It is impossible
to impose on the purchasers a liability which was not incurred by them.

G No doubt, from the tabulated statement above set out, the auction
purchasers crune to purchase the property after disconnection but they
cannot be 'consumer or occupier' within the meaning of the above
provisions till a contract is entered into.

H We are clearly of the opinion that there is great reason and justice·
ISHA MARBLES v. BIHAR STATE ELECTRICITY BO. [MOHAN,J.] 869

in holding as above. Electricity is public property. Law, in its majesty, A
benignly protects public property and behoves everyone to respect public
property. Hence, the courts must be zealous in this 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, B
if we hold as we have done above, it would permit dishonest consumers
transferring their units from one hand to another, from time to time,
inrinitum without the payment of the dues to the extent of lacs and lacs of
rupees and each one of them can easily say that he is not liable for the
liability of the predecessor in interest. No doubt, dishonest consumers C
cannot be allowed to play truant with the public property but inadequacy
of the law can hardly be a substitute for overzealousness. The relevant
portions of the details of Directorship of Waxpol Industries and Promotors
of Neo Chemical and Metal Products Pvt. Ltd. from 1.1.83 as on date of
purchase of mortgaged assets by Waxpol and thereafter (filed as Annexure
'D' to the counter affidavit on behalf of Waxpol Industries) are extracted D
below:

Names of promoters of Mis Neo Names of Directors of
Chemicals Waxpol Industries
1. Indu Gupta w/o R.P. Gupta 1. R.P. Gupta E
2. Kusum Garg w/o Parmanand Garg 2. Parmanand Garg
3. Smt. S. Natarajan w/o G. Natarajan 3. G. Natarajan

Factually, it appears that there is no new entity. Hence, in this case
Mis Neo Chemicals and Metal Products Pvt. Ltd. would be liable for the F
past arrears.

In view of the foregoing, we uphold the judgment of the High Court
in Waxpol Industries (CWJC No. 25 of 1986). However, in view of the
peculiar facts, the judgments of the High Court in Suman Packaging G
(CWJC No. 5358/92), Abbay Kumar (CWJC No. 11330/93) and North East
Fertilizers Pvt. Ltd. (CWJC No. 7299 of 1992) are also upheld. .

As regards M/s. Isha Marbles (CWJC No. 1536of1991, we set aside
the judgment of the High Court. H
870 SUPREME COURT REPORTS [1995] 1 S.C.R.

A Civil Appeal No. 1418 of 1995 (arising out of SLP(C) No. 617 of 1992
(Isha Marbles) is allowed accordingly with costs. Civil Appeal Nos. 1420,
1419, 1422 & 1421 of 1995 (arising out of SLP (C) Nos. 16227/92 - Waxpol
Industries Pvt. Ltd., SLP (C) No. 18224 of 1<.?93 - Suman Packaging Pvt.
Ltd., SLP (C) No. 10253 of 1994 - Abhay Kumar and SLP (C) No. 11806
B of 1994 - North East Fertilizers Pvt. Ltd. respectively) are dismissed with
costs.

R.A. Appeals disposed of.

I
'