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Southern Power Distribution Company of Telengana Ltd. through its CMD and Ors. Vs. Gopal Agarwal and Ors. - (Supreme Court) (27 Jul 2017)

An auction purchaser cannot be called upon to clear past arrears

MANU/SC/0906/2017

Civil

In the facts of present case, City Union Bank Limited, Second Respondent issued a tender/sale notice under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002) for sale of land, plant and machinery in Survey Nos. 168/169 in Bollaram Village, Medak District which belonged to M/s. J.T. Alloys Private Limited. Property was brought to sale due to default in payment of outstanding loan amount. It was stated in tender/sale notice that, sale would be on "as is where is" condition. First Respondent participated in the auction and was declared the highest bidder in respect of dry land measuring 0.36 hectares in Survey No. 168, Bollaram Village.

Appellant No. 3, Superintending Engineer, informed Respondent-Bank that an amount of Rs. 1, 88, 23,185/- was due towards electricity charges from M/s. J.T. Alloys Private Limited. Third Appellant requested the Bank to transfer residual amount realised from the sale for adjustment towards arrears payable by M/s. J.T. Alloys Private Limited. Bank informed Third Appellant that, there was no amount left after utilisation of sale proceeds towards its dues.

First Respondent applied for a low tension (domestic) electricity connection to the premises which he purchased in the auction conducted by the Second Respondent-Bank. As there was no response from the Appellants, the First Respondent filed a writ petition in the High Court of Andhra Pradesh. The said writ petition was allowed on the ground that the Petitioner cannot be denied the power supply connection due to non-payment of arrears payable by the previous owner of the property.

A Division Bench of High Court confirmed judgment of Single Judge by dismissing appeal filed by Appellants. Division Bench held that, there was no evidence produced before Court to show that, First Respondent had undertaken to discharge liability of previous consumer. It was also held that, Appellants cannot withhold the supply of power to Respondent No. 1 on specious ground that, arrears have not been cleared by previous consumer. Appellants have filed present appeal assailing said judgment of High Court.

There is no reason to interfere with judgment of High Court. The High Court relied upon judgment in Isha Marbles v. Bihar State Electricity Board, to grant relief to First Respondent. It was held in said judgment that, an auction purchaser cannot be called upon to clear past arrears. It was also held that a power connection to an auction purchaser cannot be withheld for dues of past owner. High Court also referred to a judgment in Ahmedabad Electricity Co. Ltd. v. Gujarat Inns (P) Ltd., wherein ratio of judgment in Isha Marbles case was reiterated, particularly with reference to a fresh connection for supply of electricity.

In NESCO v. Raghunath Paper Mills (P) Ltd., purchaser in an auction sale conducted by official liquidator on "as is where is" and "whatever there is" basis was found not liable for payment of the electricity arrears. In said case, an advertisement was issued by official liquidator for sale of moveable and immoveable property of M/s. Konark Paper and Industries Limited on "as is where is" and whatever there is" basis. Auction purchaser applied for a fresh electricity connection to its unit which was denied on ground of non-payment of arrears by the past owner. After considering judgments in Ahmedabad Electricity Company and Isha Marbles, this Court held that, request of auction purchaser for a fresh connection could not have been rejected.

Facts of this case are similar to that of NESCO v. Raghunath Paper Mills (P) Ltd. Tender/sale notice mentioned that, property was being auctioned on "as is where is" basis. First Respondent applied for a fresh connection and he is in no way connected to past owner. He has also not undertaken to pay past arrears of previous owner. Supreme Court dismissed the appeal.

Relevant : Ahmedabad Electricity Co. Ltd. v. Gujarat Inns (P) Ltd. MANU/SC/0244/2004: (2004) 3 SCC 587; Isha Marbles v. Bihar State Electricity Board MANU/SC/0632/1995: (1995) 2 SCC 648; NESCO v. Raghunath Paper Mills (P) Ltd. MANU/SC/0962/2012: (2012) 13 SCC 479

Tags : PAST ARREARS   PREVIOUS OWNER   PAYMENT  

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