Muhammed Rafi v. District Collector, Kannur; Special Deputy Tahasildar, Revenue Recovery, Kannur Taluk; Executive Engineer, K.S.E.B. Electrical Division, Payyannur, Kannur

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM** **TUESDAY, THE 3RD DAY OF DECEMBER 2013/12TH AGRAHAYANA, 1935** ## **WP(C).No. 25357 of 2013 (T)** **----------------------------** **PETITIONER:** - **----------** **MUHAMMED RAFI, AGED 50 YEARS, S/O ABDUL KHADER, T.P.K. HOUSE, FERRY ROAD VALAVATTANAM, KANNUR** **BY ADVS.SRI.SUNIL NAIR PALAKKAT SRI.K.N.ABHILASH SMT.R.LEELA** **RESPONDENTS:** **------------** **1. THE DISTRICT COLLECTOR, COLLECTORATE, KANNUR, 670001** **2. THE SPECIAL DEPUTY THAHASILDAR, REVENUE RECOVERY, KANNUR TALUK, KANNUR 670001** **3. THE EXECUTIVE ENGINEER,** - **K.S.E.B ELECTRICAL DIVISION, PAYYANNUR, KANNUR 670307** **R3 BY ADV. SRI.JAICE JACOB,SC,KERALA STATE ELECTRICITY BOARD R BY GOVERNMENT PLEADER SRI. M.A. ABDUL SHUKOOR.** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 03-12-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **WP(C).No. 25357 of 2013 (T)** **----------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS** **-----------------------** **EXHIBIT P1 TRUE COPY OF THE SALE DEED NO 2422/2008 OF SRO PERINGOME EXECUTED BY THE KERALA FINANCIAL CORPORATION DATED 16-09-2008 IN FAVOUR OF THE PETITIOENER** **EXHIBIT P2 TRUE COPY OF THE FORM NO I NOTICE UNDER SECTION 7 OF THE KERALA REVENUE RECOVERY ACT ISSUED BY THE 2ND RESPONDENT AGAINST THE PETITIONER DATED 26-08-2013** **EXHIBIT P3 TRUE COPY OF THE FORM NO 10MNJOTICE UNDER SECTION 34 OF THE KERALA REVENUE RECOVERY ACT ISSUED BY THE 2ND RESPONDENT AGAINST THE PETITIONER DATED 26-08-2013** **EXHIBIT P4 THE TRUE COPY OF THE JUDGMENT DATED 29-06-2009 IN WPC 8278/08 OF THIS HONOURABLE COURT** ## **RESPONDENT(S)' EXHIBITS:** **-----------------------** **R3(A): TRUE COPY OF THE MINUTES OF THE RR CONFERENCE HELD ON 15.3.2013.** **TRUE COPY** **PA TO JUDGE** **SCL.** **C R** ## C.K. ABDUL REHIM, J. -----------------------------------W.P.(C). No. 25357 of 2013 --------------------------------------------------Dated this the 3[rd] day of December, 2013 ## JUDGMENT The petitioner is challenging revenue recovery steps initiated against him pursuant to Exts.P2 and P3 notices, issued under Section 7 and 34 of the Kerala Revenue Recovery Act. The amount sought to be recovered pertains to the arrears of electricity charges due with respect to electric connection with Consumer No.7281 provided from the Electrical Section, Padiyothuchal. The connection was provided to M/s.Softex Industries, on 01.11.1995. All the immovable assets of the said industry was taken over by the Kerala Financial Corporation (KFC) on 15.3.2000 in exercise of power vested under Section 29 of the State Financial Corporation Act, consequent to the default committed by M/s.Softex Industries in repayment of the loan availed. WP(C).25357 /2013 2 2. The said industrial unit along with its assets were bid by the petitioner in an auction conducted by the KFC, pursuant to a notification published on 5.11.2005. Ext. P1 is the 'Deed of Sale' executed in favour of the petitioner by the KFC, on 16.9.2008. Contention of the petitioner is that he is not the consumer who had defaulted payment of the electricity charges and the property which he had purchased from KFC cannot in any way be proceeded against for realising arrears due from the consumer, M/s.Softex Industries. Hence the impugned recovery steps is bad in law and unsustainable, is the contention. 3. In the counter affidavit of the 3[rd] respondent it is conceded that the connection in question was provided on 1.11.95. Take over of the industry by KFC is also admitted. It is stated that the requisition for revenue recovery steps was initially issued against the Managing Partner of M/s. Softex Industries. But in the revenue recovery conference held on 15.2.2013 at the District level, it was decided to return the requisition and the authorities of the Board was directed to submit new requisition against the person who bought the land WP(C).25357 /2013 3 from KFC, since the liability towards the KSEB is pending with the buyer. It is only based on such decision fresh revenue recovery requisition was issued against the petitioner. It is pointed out that by virtue of clause (4) of Ext.P1 Sale Deed the petitioner is at liability, since it is specifically mentioned that the outstanding dues if any on account of usage of electricity and water supply and other statutory liabilities are to be paid by the purchaser. Learned Standing Counsel appearing for the 3[rd] respondent had conceded that the connection was given on 1.11.1995 and it was dismantled during October 2002. 4. From the rival contentions enumerated above, issue evolves as to whether the property in question can be held liable for the arrears of electricity charges due from its previous owner. Regulation 7 of the KSEB Terms and Conditions of Supply Act, 2005 provides that, if the purchaser of a premises requires to have a new electric connection, arrears if any with respect to any connection which was already dismantled should be realised from the previous owner/occupier of the premises and not from the purchaser. The above provision indicates that, if the property is WP(C).25357 /2013 4 transferred after dismantling the connection then the purchaser cannot be held liable for payment of the arrears. Learned Standing Counsel had pointed out Regulation 19(4) of the KSEB Terms and Conditions of Supply which provides that all the dues to the Board from a consumer shall be first charge on his assets. It further provides that all the dues including interest shall be recovered as arrears of revenue recovery. It is pertinent to note that the said Regulation will create a charge only on the assets of the consumer and not on the property in which the connection was provided. Hence it is evident that the consumer or his assets alone are liable for payment of the dues. Regulation 36 (12) of the KSEB Terms and Conditions of Supply enables the Board to realise arrears due to it in the same manner as if it is arrear of land revenue, through revenue recovery proceedings. But the said provision does not create any charge on the property containing the premises wherein the connection was provided. Hence, prima facie it cannot be accepted that the purchaser of a property which contained a dismantled electric connection can be held liable for payment of the arrears. Of course, the situation WP(C).25357 /2013 5 would be different if the electric connection existed at the time of purchase as not dismantled, even in a disconnected stage, or in a case where the transfer is made after initiation of recovery steps in fraudulent manner in order to defeat the recovery or the transfer is in any manner possible to be annulled under the provisions of the Revenue Recovery Act. 5. In deciding the issue with respect to liability for payment of the arrears of electricity charges, the contractual obligation is of prime importance. The hon'ble Supreme Court in the decision in **Isha Marbles vs. Bihar State Electricity Board and another (1995 KHC 1280)** held that the auction purchaser of a property from the State Financial Corporation is not liable to meet the liability of the previous consumer. Analysing section 24 of the Electricity (Supply)Act 1948 it is held that, there is no charge created over the property. The purchaser cannot be called upon to clear the past arrears as a condition precedent to supply. What matters is the contract entered into by the erstwhile consumer with the Board. The Board cannot seek enforcement of the contractual liability against a third party. Of WP(C).25357 /2013 6 course, bonafides of the sale may be of relevant consideration. Eventhough electricity is a public property, the law in its majesty has to protect the public property. The law as it stands is inadequate to enforce liability of the previous contracting party against the auction purchaser, who is a third party and who is in no way connected with the previous owner or occupier, is the findings. 6. In a later decision of the hon'ble Supreme Court in **Paschimanchal Vidyut Vitran Nigam Ltd. & others vs. M/s DVS Steels & Alloys Pvt. Ltd. & others. (AIR 2009 SC 647)** it is held that, supply of electricity by a distributor to a consumer is a 'sale of goods'. The distributor as the supplier enters into a contract with the owner/occupier of the premises for supply of electricity. They are the parties to the contract. A transferee of the premises or a subsequent occupant of the premises with whom the supplier has no privity of contract cannot obviously be asked to pay the dues of his predecessor, as the amounts payable towards supply of electricity do not constitute a charge on the property. The purchaser of a premises cannot be foisted WP(C).25357 /2013 7 with the electricity dues of any previous occupant, merely because he happened to be the current owner of the premises. The supplier cannot therefore initiate revenue recovery proceedings against the purchaser of a premises, for realisation of outstanding electricity dues of the vendor, in the absence of any contract to the contrary, is the ruling. 7. In a still recent ruling of the hon'ble apex court in **Haryana State Electricity Board vs. Hanuman Rice Mills, Dhanauri and others (2010(9) SCC 145)** the position was summarised. After referring to **Isha Marbles case** (Supra) and **Paschimanchal Vidyut Vitran Nigam's** case (supra) it is held that, the arrears of electricity do not constitute a charge over the property. Therefore in general law a transferee of the premises cannot be made liable for the dues of the previous owner or occupier. But it is specifically mentioned that, where the statutory Rules or the terms and conditions of supply authorises the supplier of electricity to make demand from the purchaser of a property claiming reconnection or fresh connection, the arrears due from the previous owner/occupier with respect to such WP(C).25357 /2013 8 premises can be recovered from the purchaser. Yet another recent decision on the issue by the apex court is **Special Officer,** **Commerce, North Eastern Electricity Company of Orissa and another vs. Raghunath Paper Mills Private Limited and another (2012 KHC 4657)** in which the above principles are again reiterated. But in the case at hand it is not a case where the petitioner applied for reconnection or applied for new electricity connection in the very same premises. 8. In view of the legal position remaining settled as above, it cannot be held that the property purchased by the petitioner by virtue of Ext.P1 can be proceeded against for recovery of the arrears of electricity charges due from its previous owner, M/s. Softex Industries or due from the KFC who had taken over the property under section 29 of the SFC Act and kept it in possession until the auction sale. 9. Another contention raised by the 3[rd] respondent is based on the stipulations contained in Ext.P1 sale deed, wherein it is mentioned that it will be the liability of the purchaser for payment of outstanding dues on account of electricity supplied. But in WP(C).25357 /2013 9 view of the legal position remaining settled as enumerated above KSEB cannot enforce the demand against the petitioner based on the terms of the contract of sale, to which the Board is not a party. As contended by learned counsel for the petitioner, rights and obligations arising out of the contract of sale will apply only to the parties of such contract and not to the electricity Board. What is indemnified through the above said terms of the sale is only the liability of KFC with respect to payment of any electricity dues. Since the Electricity Board has not proceeded against the KFC for realisation of any such amounts, the question of recovery from the petitioner does not arise. Further the Board has no case that they were entitled to realise the dues of the consumer from KFC. Such a claim even if raised cannot be sustainable in view of the legal position enumerated. 10. Under the above mentioned circumstances the revenue recovery proceedings initiated against the petitioner pursuant to Exts.P2 and P3 notices cannot be sustained in the eye of law. Hence the writ petition is allowed and Exts.P2 and P3 are hereby quashed. WP(C).25357 /2013 10 11. However, it is made clear that this judgment will not stand in the way of KSEB raising any claim against KFC on the basis that the premises was in their possession prior to dismantling of the electric connection in question and hence they are liable for payment of the arrears, if such claim is sustainable under law. 12. It is further made clear that this court has not decided anything on the rights and obligations between KFC and the petitioner arising out of the terms and conditions of the Deed of Sale (Ext.P1) with respect to liability for payment of the electricity dues. C.K.ABDUL REHIM, JUDGE pmn/