The Jharkhand High Court clarified that an auction purchaser of a premises cannot be forced to pay electricity dues of the erstwhile consumer where Clause 6.10(a) of the Jharkhand State Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2015 applies, quashing two demand notices and ordering a full refund.
Background & Facts
The Dispute
M/S Mangalam Ispat, a partnership firm, acquired the movable and immovable assets of M/s Shree Hanuman Alloys Pvt. Ltd. through a public e-auction conducted by Punjab National Bank. After acquiring the property, the firm applied to Damodar Valley Corporation (DVC) for a fresh electricity connection. DVC refused to grant the connection until the outstanding electricity dues of the erstwhile consumer were cleared. The petitioner challenged two separate demand notices issued by DVC - one dated 24.04.2019 for arrears of Rs.4,92,51,765 and another dated 01.02.2025 for arrears of Rs.1,34,03,401 relating to the period 2006-2012.
Key Facts
- 12.09.2018: Sale certificate issued by Punjab National Bank confirming the auction purchase; the certificate stated the property was free from encumbrances.
- 24.03.2019: DVC issued a letter demanding Rs.4,92,51,765 as outstanding dues of the erstwhile consumer.
- 31.10.2018: Petitioner's application for fresh connection filed with DVC.
- 23.09.2019: Coordinate Bench ordered the petitioner to pay the demanded amount in monthly installments of Rs.25,00,000, subject to the final outcome of the writ petition.
- 24.04.2019: Demand notice (Annexure 13) issued by DVC demanding the same amount; petitioner filed W.P.(C) No.2089 of 2019 seeking quash of the notice and fresh connection.
- 01.02.2025: DVC issued a demand notice (Annexure 8) for arrears of Rs.1,34,03,401 for the period April 2006-March 2012, invoking the tariff order of 23.07.2024.
- 07.04.2025: DVC rejected the petitioner's representation, claiming the arrears were tied to the premises; petitioner filed W.P.(C) No.2639 of 2025.
- 13.07.2026: Judgment reserved.
- 04.08.2026: Judgment pronounced, allowing both writ petitions.
Procedural History
- 12.09.2018: Auction sale certificate executed; petitioner became legal owner.
- 24.04.2019: Petition filed (W.P.(C) No.2089 of 2019) seeking fresh connection and quash of demand notice.
- 23.09.2019: Coordinate Bench fixed monthly instalment of Rs.25,00,000 pending final decision.
- 01.02.2025: Second writ petition filed (W.P.(C) No.2639 of 2025) challenging fresh demand for 2006-2012 arrears.
- 13.07.2026: Judgment reserved.
- 04.08.2026: Judgment delivered, allowing both petitions.
Relief Sought
- Quash of the demand notice dated 24.04.2019 and of the demand notice dated 01.02.2025.
- Grant of fresh electricity connection at the petitioner’s premises.
- Refund of the amount deposited (Rs.4,92,51,765) in five equal quarterly instalments, commencing six weeks from the date of the order.
- Directions that DVC not debar the petitioner from any rebates.
The Legal Issue
The central question was whether Clause 6.10(a) of the Jharkhand State Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2015 bars the recovery of electricity arrears from an auction purchaser who acquired the premises without any nexus to the erstwhile consumer, thereby rendering the demand notices issued by DVC illegal and arbitrary.
Arguments Presented
For the Petitioner
- The petitioner argued that the property was acquired through a public auction; therefore Clause 5.3.3 (which imposes a duty to obtain a “no-dues certificate” in a direct sale) was inapplicable.
- Citing Isha Marbles v. Bihar SEB (1995) 2 SCC 648, Paschimanchal Vidyut Vitran Nigam Ltd. v. DVS Steels (2009) 1 SCC 210, and K.C. Ninan v. Kerala SEB (2023) 14 SCC 431, the petitioner contended that an auction purchaser cannot be held liable for the previous consumer’s dues absent a statutory provision.
- The petitioner relied on Clause 6.10(a), which expressly exempts a transferee who acquires the premises through a court decree or auction and has no relationship with the erstwhile consumer.
- The petitioner also highlighted that the sale certificate expressly stated the property was “free from all encumbrances,” negating any “as-is-where-is” clause that could impose liability.
For the Respondent
- DVC argued that the petitioner purchased the property “as-is-where-is” and therefore bore the responsibility to settle any outstanding dues, invoking Clause 5.3.3 of the 2015 Regulations.
- The respondent relied on Clause 5.3.3, asserting that the purchaser must verify and obtain a “no-dues certificate” before applying for a fresh connection.
- DVC cited K.C. Ninan (supra) to argue that statutory conditions of supply may require the subsequent purchaser to clear prior arrears.
- The respondent also pointed to the letter dated 14.11.2018, which purportedly informed the petitioner of the duty to pay the outstanding dues within one month.
The Court's Analysis
The Court began by interpreting the two competing clauses of the 2015 Regulations. It noted that Clause 5.3.3 applies when the applicant purchases an existing property directly from the seller and must obtain a “no-dues certificate” before connection. Conversely, Clause 6.10(a) applies where the property is transferred by a court decree, order, or auction and the new occupant has no nexus with the erstwhile consumer.
"Clause 6.10(a) of the Regulations bars recovery of the outstanding electricity dues from the petitioner (auction purchaser) on the facts of this case."
The Court emphasized that the petitioner acquired the premises through a public auction, not a direct sale, and had no relationship with the former consumer or its directors. Accordingly, Clause 5.3.3 was inapplicable, while Clause 6.10(a) was squarely applicable. The Court applied the principle of harmonious interpretation, rejecting any construction that would render either clause nugatory.
The Court also examined the statutory backdrop, noting that electricity arrears do not constitute a charge over the property unless expressly provided for in the regulations. Supreme Court precedents (Isha Marbles, Paschimanchal Vidyut, K.C. Ninan) were relied upon to affirm that, absent a specific statutory provision, an auction purchaser cannot be compelled to pay prior dues.
Finally, the Court observed that the sale certificate and accompanying lists expressly declared the property “free from all encumbrances,” negating any “as-is-where-is” liability. The Court therefore concluded that DVC had no legal basis to demand payment from the petitioner.
The Verdict
The Court allowed both writ petitions. It quashed the demand notice dated 24.04.2019 and the demand notice dated 01.02.2025. DVC was directed to refund the entire amount of Rs.4,92,51,765 deposited by the petitioner in five equal quarterly instalments, the first instalment to be paid six weeks from the date of the order. The order also directed DVC to grant a fresh electricity connection and not to debar the petitioner from any rebates.
What This Means For Similar Cases
Clause Selection Determines Liability
- Practitioners must ascertain whether a property acquisition is a direct sale or an auction/court-ordered transfer. If the latter, Clause 6.10(a) will likely shield the purchaser from prior arrears.
- In direct sales, Clause 5.3.3 imposes a duty to obtain a “no-dues certificate”; failure to do so can justify denial of fresh connection.
“As-Is-Where-Is” Does Not Automatically Imply Dues
- An “as-is-where-is” clause alone is insufficient to impose liability unless the auction advertisement expressly mentions the buyer’s responsibility for existing electricity dues.
- Sale certificates stating “free from all encumbrances” further protect the purchaser from hidden liabilities.
Practical Steps for Lawyers
- Verify the exact clause of the Jharkhand Electricity Supply Code that governs the transaction.
- Advise clients to obtain a written confirmation from the distribution licensee regarding any outstanding dues when the purchase is a direct sale.
- In auction purchases, ensure the sale documents clearly state the absence of encumbrances and that no “as-is-where-is” liability for electricity arrears is created.
