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Telangana State Southern Power Distribution Company Limited v. M/s Srigdhaa Beverages

Civil Appeal · 2020 INSC 410Decided 1 Jun 2020
Civil Appeal No. 1815 of 2020
Justice Sanjay Kishan Kaul · Justice K.M. Joseph

Background

The respondent bought a bottling plant in a SARFAESI bank auction, where the sale notice was explicitly on an "as is where is, whatever there is, without recourse" basis and specifically flagged pending electricity dues of the previous owner. When the respondent later applied for a new power connection, the electricity distribution company refused unless the prior owner's outstanding electricity dues (over Rs. 50 lakh) were cleared. The respondent challenged this before the High Court, which ruled in its favour relying on earlier judgments holding that a mere purchaser is not the "consumer" liable for a predecessor's dues; the power company appealed to the Supreme Court.

Decision Breakdown

The Supreme Court distinguished the precedents relied upon by the High Court, noting that those cases lacked any specific contractual clause fixing the purchaser with liability for prior electricity dues, whereas here the auction notice explicitly disclosed the dues and disclaimed the bank's own responsibility for them. The Court held that electricity dues are statutory in character and, where the terms of supply and the sale notice specifically make the purchaser liable (as under Clause 8.4 of the applicable supply regulations), the distribution company is entitled to insist on clearance of such dues before granting a connection. The impugned orders quashing the demand were set aside, and the power company's right to recover the arrears from the purchaser was upheld.

Lesson Learnt

A buyer at an "as is where is, without recourse" auction who is put on clear notice of a property's pending statutory dues (like electricity arrears) cannot later claim exemption from paying them merely by calling themselves a "fresh" purchaser: read every clause of the auction notice before bidding.

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

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