The Supreme Court vide its judgment dated June 1, 2020, in the matter of Telangana State Southern Power Distribution Company Limited and Ors. v. Srigdhaa Beverages held that the liability of previous electricity dues of the last owner can be recovered from the purchaser purchasing in an "as is where is, whatever there is and without recourse basis".
Brief facts:
Srigdhaa Beverages is an auction-purchaser of a unit owned by M/s. SB Beverages Private Limited, which failed to pay its dues, resulting in the auction by Syndicate Bank (secured creditor) under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI”). An E-auction sale notice was issued for conducting the auction wherein it was stated that the unit was being sold on ‘as is where is, what is there is and without any recourse basis’. Srigdhaa Beverages applied to Telangana State Southern Power Distribution Company Limited seeking sanction of electricity connection required for running the unit, which was denied on the ground that there were previous electricity dues. A writ petition was filed seeking quashing of the demands predicated on a reasoning that as a subsequent purchaser, the auction purchaser was not responsible for the dues of the earlier owner.
Issue:
Whether a liability of previous electricity dues of the last owner can be recovered from the subsequent auction purchaser, which has purchased the unit on as is where is basis?
Judgment:
The Supreme Court held that Telangana State Southern Power Distribution Company Limited was well within its right to demand the arrears due to the last owner, from the auction purchaser. It was stated that electricity dues, where they are statutory in character under the Electricity Act, 2003 and as per the terms & conditions of supply, cannot be waived in view of the provisions of the Electricity Act, 2003 itself. The mere fact that agreements were entered into with every consumer only served the purpose of bringing to the notice of the consumer the terms and conditions of supply, but did not make the dues purely contractual in character.
Further, it was noted by the Supreme Court that as an auction purchaser bidding in an "as is where is, whatever there is and without recourse basis", the purchaser would have inspected the premises and made inquiries about the dues in all respects and as there is a specific mention of electricity dues as liability of the purchaser, the purchaser was clearly put to notice in this behalf. Hence it was held that the liability to pay electricity dues exists on the purchaser.
Please find a copy of the judgment here.
This update has been contributed by Arka Majumdar (Partner) and Debanik Bid (Associate).
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