SUPREME COURT HELD AUCTION PURCHASER LIABLE FOR UNPAID ELECTRICITY DUES OF A PROPERTY

The Supreme Court has in a recent case of Telangana State Southern Power Distribution Company Limited v. Srigdhaa Beverages 2020 SCC Online SC 478 passed a Judgment dated 01-06-2020,where the Apex Court held the Respondent-Auction Purchaser liable for payment of outstanding #electricitydues of a property purchased on an ‘#asiswhereisbasis’.  

In this case, M/s. SB Beverages Private Limited (the #Debtor) failed to repay certain loan to Syndicate Bank (the #Creditor). As a result, the Creditor conducted an auction of a mineral water bottling plant (the Property) owned by the Debtor, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the Act). In the said #auction, the Creditor sold the Property to the Respondent (the Auction Purchaser) on an “as is where is, whatever there is and without recourse basis” under Rules 8 and 9 of the Security Interest (Enforcement) Rules 2002 (the Rules) for recovery of dues. Later, when the Respondent applied to the Appellant, Telangana State Southern Power Distribution Company Limited (#TSSPDCL), for electricity connection for running the Property, the Appellant refused to give electricity connection on the ground that there were previous electricity dues of Rs.50,47,715.00, which have to be now paid by the Respondent.

Thus, the Respondent-Auction Purchaser herein filed a Writ Petition in the Telangana High Court seeking quashing of the demands of TSSPDCL on the ground that a subsequent purchaser is not liable to pay outstanding dues of an earlier owner. The High Court allowed the Petitioner-Auction Purchaser to file proper application for power connection to the concerned authorities, vide Order dated 17-11-2017. Aggrieved by the High Court Order dated 17-11-2017, the Respondent-TSSPDCL filed a Writ Appeal before the Division Bench of the High Court, which was dismissed, vide Order dated 30-04-2018. Thus, aggrieved by the High Court Order dated 30-04-2018, TSSPDCL filed a Special Leave Petition in the Supreme Court seeking the setting aside of the High Court Orders dated 17-11-2017 and 30-04-2018, and the recovery of outstanding electricity dues from the last owner of the Property, i.e. the Respondent-Auction Purchaser herein.

The Apex Court made the following observations in this case:

1- That the terms and conditions of the Auction Sale Notice dated 25-05-2017 clearly mentioned that the Property would be sold on an “as is where is, what is there is and without any recourse basis” in all respects and subject to statutory dues, if any.

2- Further, the Auction Sale Notice dated 25-05-2017 specified that the Creditor or the Debtor or any other person would not be liable for any charge, lien, encumbrance, property tax dues, electricity dues, Government dues, etc in respect of the Property and that no claim for such dues would be entertained, after submission of the bid/confirmation of sale.

3- That the Respondent-Auction Purchaser must have inspected the premises of the Property and inquired about pending dues in all respects before purchasing the Property.

Thus, based on the aforesaid grounds, the Supreme Court held that electricity dues being statutory in nature under the Electricity Act 2003, the Respondent-Auction Purchaser would be liable to pay the statutory dues including electricity dues, as per the Auction Sale Notice dated 25-05-2017. Further, the Apex Court allowed the Appellant-TSSPDCL to recover the electricity dues from the last owner of the Property, i.e. the Respondent-Auction Purchaser.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer