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Southern Power Distribution Company of Telangana Ltd. v. Gopal Agarwal

Civil Appeal · 2017 INSC 676Decided 27 Jul 2017
Civil Appeal No. 1918 of 2016
Justice L. Nageswara Rao · Justice Navin Sinha

Background

A company (J.T. Alloys Pvt. Ltd.) defaulted on a bank loan, and its secured property was auctioned by City Union Bank under the SARFAESI Act on an "as is where is" basis. Gopal Agarwal purchased a parcel of the land at the auction and applied for a fresh low-tension domestic electricity connection. The power distribution company refused the connection, citing roughly Rs. 1.88 crore in unpaid electricity arrears owed by the previous owner (J.T. Alloys), which the bank had declined to pay out of the sale proceeds. Agarwal successfully challenged the refusal before the Andhra Pradesh High Court, and the power company appealed to the Supreme Court.

Decision Breakdown

The Supreme Court dismissed the power company's appeal, relying on its earlier rulings in Isha Marbles v. Bihar State Electricity Board and Ahmedabad Electricity Co. v. Gujarat Inns, which hold that a power connection to a bona fide auction purchaser cannot be withheld merely because the previous owner left electricity arrears unpaid. The Court found the facts materially identical to NESCO v. Raghunath Paper Mills, where an "as is where is" auction purchaser with no connection to the former owner was similarly held not liable for the old dues. Since Agarwal had no link to J.T. Alloys and had not undertaken to pay its arrears, the denial of a fresh connection was unjustified.

Lesson Learnt

Buying property at an "as is where is" auction (including a bank/SARFAESI sale) does not make the buyer personally liable for the previous owner's unpaid electricity bills; a utility cannot hold a new, unconnected owner's service application hostage to clear someone else's old dues.

Official source (sci.gov.in)View Judgment (PDF)

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