Rafeek. C. A. v. Kerala State Electricity Board Ltd.
2019-08-13
C.K.ABDUL REHIM, R.NARAYANA PISHARADI
body2019
DigiLaw.ai
JUDGMENT : C.K.ABDUL REHIM, J. The petitioner in W.P.(C) No.13386 of 2019 is in appeal against judgment of the Single Judge, dated 14th June, 2019. The respondents herein are the respondents in the writ petition. 2. The appellant is the auction purchaser of 70 cents of land situated in the 'Industrial Development Area' maintained and managed by the Industries Department of the State Government, at Muttom village in Thodupuzha Taluk in Idukki District. The plot in question was originally allotted to a company named 'M/s. Usha Polymers Private Limited'. The industrial unit of the said company was established on availing financial assistance from 'M/s. Kerala State Industrial Development Corporation (KSIDC)' and 'M/s. Kerala Financial Corporation (KFC)'. On default committed in repayment of the loans availed, KFC took over possession of the industrial unit by invoking Section 29 of the State Financial Corporation Act. The Industries Department permitted the KFC to conduct auction sale of the assets. The appellant herein bid in auction the said property. The General Manager of the District Industries Centre had passed an order on 28.02.2019 handing over possession of the land in question to the appellant. Presumably, the proceeds of the auction sale was distributed among KSIDC and KFC on a pro-rata basis in accordance with the arrears due to each of them. The appellant had entered into an agreement with the Industries Department to occupy the land based on a 'licence-cum-lease agreement' executed. For setting up a new industry in the premises, the appellant applied for a new electric connection. The 4th respondent issued Ext.P3 letter to the appellant stating that there exists arrears due to the tune of Rs.9,61,822/ -from M/s.Usha Polymers Private Limited, as on 30.03.2019. It was informed that the appellant will be provided with a new connection only if the said arrears is cleared payment. In reply to Ext.P3, the appellant informed the 4th respondent that, by virtue of the provisions contained in the Kerala Electricity Supply Code, 2014, the arrears have to be realised from previous owner and not from the subsequent purchaser. Since the 4th respondent had not responded to the reply, the appellant approached the 3rd respondent, who in turn issued Ext.P5 letter.
Since the 4th respondent had not responded to the reply, the appellant approached the 3rd respondent, who in turn issued Ext.P5 letter. It was intimated that, KFC had informed the Electricity Board that the auction was conducted on the basis of an undertaking that the purchaser will remit the arrears of the previous owner, due to the KSEB. Therefore the appellant was intimated that the new connection can be provided only after remittance of the arrears. The appellant again submitted Ext.P6 reply to the 3rd respondent pointing out that, he has no liability to pay the arrears due from the previous owner. He further submitted Ext.P7 representation before the 2nd respondent. Since no favourable response was received, the writ petition was filed seeking direction for providing new electric connection to the appellant. 3. During pendency of the writ petition the Single Judge had passed an interim order on 14th May, 2019 as follows:- “Having considered the submissions advanced and taking note of the relevant statutory provisions, particularly Regulation 40 of the Kerala Electricity Supply Code, 2014, there will be an interim order as prayed for, for a period of one month on condition that the petitioner deposits the arrears of electricity charges and other liabilities, excluding interest thereon, within a period of ten days from today.” 4. But it is submitted that, the respondents have not complied with the above direction, despite the appellant depositing the entire arrears, excluding the interest. 5. After passing of the above interim order, the writ petition itself was disposed of on 14th May, 2019 through the judgment impugned herein. The observation in the judgment is that, the appellant had conceded about the agreement executed with the KFC (mistakenly noted in the judgment as 'KSIDC') while allotment of the premises, inter alia agreeing that the entire arrears of electricity charges left unpaid by M/s. Usha Polymers Private Limited will be paid by the appellant. Therefore it was found that, the issue is not whether the appellant is liable for payment of the arrears or interest, but whether there exists any residual liability upon the appellant as per the agreement between him and the KFC. The observation is that; “only if such liability continues, can the KSEB proceed against the said entity under the provisions of Regulation 40(3)”. 6.
The observation is that; “only if such liability continues, can the KSEB proceed against the said entity under the provisions of Regulation 40(3)”. 6. By observing that the entire liability of the previous owner has been transferred by the KFC to the appellant and that the premises has been handed over to the appellant by the Industries Department on such basis alone, it was found that the appellant cannot claim the benefit of Regulation 40(3) of the Supply Code. Further finding is that, since the appellant had expressly conceded the responsibility to pay the arrears of the previous occupier, it is indicating that the original consumer has no such liability left and therefore Regulation 40(3) of the Supply Code cannot be of any avail to the appellant. Based on such observations, the writ petition was dismissed by holding that the appellant is not entitled for getting the connection under Regulation 40(3) of the Supply Code. It was observed that; “he must apply for a fresh connection from the KSEB in terms of the other applicable Statutes and Regulations”. In which event, the learned Single Judge directed, the respondents should grant connection to the appellant without any further delay. 7. The judgment is assailed on various grounds. The impugned judgment proceeds on a total misconception that the agreement executed between the appellant and the KFC will take away the effect of the statutory provisions contained in the Supply Code, 2014. The respondent Board, even though is a company owned by the State Government, is only a 'distribution licensee', under the Electricity Act, 2003. Learned standing counsel pointed out that, the original connection to M/s. Usha Polymers Private Limited was provided before enactment of the Electricity Act, 2003. It is clear from the repeal and saving clause under Section 185 of the Electricity Act,2003, that any actions purported to have been done or initiated under the erstwhile Indian Electricity Act, 1910 or the Electricity (Supply) Act 1948 are specifically saved. The Kerala Electricity Supply Code, 2014 is the Regulations formulated by the Kerala Electricity Regulatory Commission, by virtue of powers conferred under Section 50 read with Section 181 of the Electricity Act, 2003. The respondent Board cannot in any manner contend that those Regulations are not applicable to them.
The Kerala Electricity Supply Code, 2014 is the Regulations formulated by the Kerala Electricity Regulatory Commission, by virtue of powers conferred under Section 50 read with Section 181 of the Electricity Act, 2003. The respondent Board cannot in any manner contend that those Regulations are not applicable to them. Regulation 40 of the Supply Code, 2014 specifically provides that, the arrears of electricity charges and other liabilities of the previous consumer of any premises shall be recovered from such previous consumer, with whom the licensee had executed the 'service connection agreement', and not from the purchaser or lessee or occupier of the premises. Therefore the said Regulation makes it explicitly clear that, the arrears of the previous consumer cannot be realised from the purchaser or subsequent occupier of the premises. Regulation 40(2) insists upon the licensee that, on dismantling the service connection, the licensee shall forthwith initiate legal proceedings for recovery of the arrears from the consumer and the licensee shall obtain necessary interim or final orders in that respect from the appropriate legal forum. Clause (3) of Regulation 40 provides the procedure for providing a new connection when there exists arrears from the previous consumer. It provides that, when the purchaser requires a new connection and when the connection given to the previous consumer remains disconnected and dismantled on the ground of outstanding dues, the new connection shall not be denied to such purchaser, provided he furnishes deposit of the arrears of electricity charges and other liabilities if any, excluding the interest due thereon. It is made clear that such deposit need to be made till the licensee obtains necessary orders from appropriate legal forum with respect to recovery of the arrears and other liabilities or till the licensee settles the arrears and liabilities with the previous consumer or till completion of three years, whichever is earlier. The proviso to Regulation 40(3) specifies that, the licensee on obtaining order from the appropriate legal forum with respect to recovery of the dues and other liabilities or on settlement of the arrears with previous consumer or on completion of three years, shall release the entire deposit furnished by such owner or lessee or occupier of the premises, along with interest at the bank rate prevailing as on the date of furnishing such deposit. 8.
8. In the above context, it is relevant to note Section 43 of the Electricity Act, 2003, which provides that, the licensee shall on an application by the owner or occupier of any premises, give supply of electricity to such premises, within one month after receipt of the application. Explanation (3) to Section 43 provides that if a 'distribution licensee' fails to supply electricity within the period specified in sub-section (1) of Section 43, he shall be liable to pay penalty which may extend to One Thousand rupees for each day of default. Therefore it is evident that, the respondent Board being a 'distribution licensee' is at a statutory obligation to provide any new electric connection based on the application of any owner or occupier of the premises, within one month from the date of receipt of the application. The appellant being the present occupier of the premises, has got a statutory right for getting the electricity connection applied for, subject to performance of other obligations on his part as provided under the Electricity Act, 2003 and the Regulations framed thereunder. When Section 43 is read in consonance with Regulation 40 of the Supply Code, 2014, it is clear and evident that the Board cannot insist upon the appellant for payment of the defaulted electricity charges or other liabilities of the previous owner, but can only insist upon him for making a deposit as stipulated under Sub-Clause(3) of Regulation 40. It is also evident that the liability of the previous owner/consumer will not be extinguished in any manner by virtue of any agreement to which neither such consumer nor the Board is a party. 9. Learned standing counsel for the respondents contended that the appellant had come into possession of the premises only by virtue of the agreement executed between him and the KFC, copy of which is produced along with the Memorandum of Appeal, marked as Annexure-A1. It is a 'deed of sale note' executed between the KFC and the appellant, as 'the seller' and 'the purchaser', respectively. It indicates that the premises was taken over possession by the KFC under Section 29 of the State Financial Corporations Act. The sale was confirmed in favour of the appellant as he was the second highest bidder, based on a decision taken by the KFC, subject to approval of the competent authority in the Corporation.
It indicates that the premises was taken over possession by the KFC under Section 29 of the State Financial Corporations Act. The sale was confirmed in favour of the appellant as he was the second highest bidder, based on a decision taken by the KFC, subject to approval of the competent authority in the Corporation. It indicates that, the appellant as purchaser has to remit the lease premium due to the Industries Department and other statutory dues including GST, Central Excise, KSEB dues etc. and should get the land transferred into the name of the purchaser through the District Industries Centre. It is evident from the recitals that the KFC had transferred the absolute ownership and actual possession of the building, machineries and equipments which were taken over possession by them, situated in the premises, to the appellant. The deed further obliges that, the appellant shall remit all the amounts due to the Government, all applicable taxes such as KSEB dues, GST, Central Excise duties, surcharge etc. which may be levied in respect of the sale of assets. The above said deed was seen executed on 02.03.2019. Evidently on the basis of the sale deed, the KFC had transferred all the rights in favour of the appellant and the appellant executed Ext.P2 agreement of 'licence cum lease' with the District Industries Centre, Idukki and occupied the premises in question. 10. Finding of the Single Judge is that there exists a residual liability on the appellant based on agreement executed between the appellant and KFC and because of such agreement the respondent Board cannot proceed against the previous occupier under provisions of Regulation 40(3). Further finding is that the KFC had transferred the liability due to the Board to the appellant on the basis of the fresh allotment and therefore the appellant cannot claim the benefit of Regulation 40(3) of the Supply Code. Both the above findings, according to us, are legally unsustainable. 11. As already observed, the liability for payment of the electricity charges by a consumer, who is provided with a connection by the 'distribution licencee', is governed under provisions of the Electricity Act, 2003 and the Regulations made thereunder. Thus, basically a contractual obligation exists between the licencee and the consumer.
11. As already observed, the liability for payment of the electricity charges by a consumer, who is provided with a connection by the 'distribution licencee', is governed under provisions of the Electricity Act, 2003 and the Regulations made thereunder. Thus, basically a contractual obligation exists between the licencee and the consumer. The liability for payment of charges for usage of electricity has fallen due on the consumer by virtue of those provisions and the terms of the 'service connection agreement' executed between the licencee and the consumer. If any liability is incurred on the consumer by virtue of the said provisions and the 'service connection agreement', that liability continues and the consumer cannot get rid of such liability by virtue of any transfer of the premises wherein the connection was provided. The above principle is reiterated in Regulation 41 of the Supply Code, 2014. The licencee will be entitled to realise the arrears from the consumer by whatever method available under law. Therefore, the finding of the learned Single Judge that, by virtue of the agreement entered between the appellant and the KFC, the liability of the consumer (previous occupier) is not continuing and that the licencee cannot proceed against them under regulation 43, is an erroneous proposition. Further finding that, since the appellant had conceded the liability with KFC it is equally indicative that the original consumer has no such liability left and consequently Regulation 40(3) cannot be of no avail to him, is equally incorrect and improper. The liability of the previous consumer stands crystallized on the basis of the provisions of the Electricity Act, 2003 and the Regulations framed thereunder and in terms of the 'service connection agreement' executed between the licencee and the consumer. Any rights and obligations arising out of the usage of electricity provided to the consumer continue to be a liability on the consumer and any agreement to the contrary made between any third parties will not affect the terms of such obligation. Therefore we are persuaded to hold that the liability of the previous consumer (previous occupier) cannot in any manner be ceased by virtue of any agreement executed by the appellant with any of the authorities. 12. The next question is regarding entitlement of the appellant for getting a new connection.
Therefore we are persuaded to hold that the liability of the previous consumer (previous occupier) cannot in any manner be ceased by virtue of any agreement executed by the appellant with any of the authorities. 12. The next question is regarding entitlement of the appellant for getting a new connection. Whether any undertaking made by him before KFC will preclude him from getting a new connection in accordance with the provisions contained in Regulation 40 of the Supply Code, 2014? Even if it is accepted that at the time of the purchase, the appellant had agreed to the KFC to make payment of the arrears due to the Electricity Board, such an undertaking cannot be enforced by the respondent Electricity Board, because there exists no privity of contract between the appellant and the KSEB. The respondent Electricity Board cannot take advantage of the terms of the contract if any executed between the KFC and the appellant. At the most, probably the respondent Electricity Board could have insisted upon the KFC to discharge the liability before effecting the transfer, either by KFC themselves or by way of collection from the purchaser. Having not done so by the respondent Electricity Board, they are not entitled to refuse new connection to the appellant, banking upon the terms of the contract between the appellant and the KFC. Going by Section 43 of the Electricity Act, 2003 read with Regulation 40(3) of the Supply Code, 2014 the respondent Electricity Board is at an obligation to provide new electricity connection to the appellant, once the appellant complies with the requirement of deposit as envisaged under Regulation 40(3) of the Supply Code, 2014. In the case at hand, it is evident that, by virtue of an interim order passed by the learned Single Judge, the appellant had complied with the requirement of deposit of the amounts due, excluding the interest. Therefore the respondent Electricity Board is at an obligation to provide new electricity connection to the appellant, within the date stipulated under Section 43(1) of the Electricity Act, 2003. Evidently the matter was delayed considerably in violation of the statutory period stipulated. Therefore, we are of the opinion that a direction to the respondents to provide the connection forthwith, would suffice to meet the ends of justice. For the reasons mentioned as above, the writ appeal is hereby allowed.
Evidently the matter was delayed considerably in violation of the statutory period stipulated. Therefore, we are of the opinion that a direction to the respondents to provide the connection forthwith, would suffice to meet the ends of justice. For the reasons mentioned as above, the writ appeal is hereby allowed. The impugned judgment of the Single Judge in W.P.(C) No.13386 of 2019 is hereby set aside. The respondents are directed to provide new electric connection to the appellant on the basis of the application submitted and on the basis of the deposit made by him under Regulation 43 of the Supply Code, 2014. Necessary steps in this regard shall be taken at the earliest possible, at any rate, within a period of one month from the date of receipt of a copy of this judgment.