Auction Purchaser Not Liable for Previous Owner’s Electricity Arrears: Himachal Pradesh High Court Rules Against HPSEBL [Read Order]

Himachal Pradesh:  In a significant ruling, the Himachal Pradesh High Court has held that the Himachal Pradesh State Electricity Board Limited (HPSEBL) cannot recover arrears from an auction purchaser for dues owed by the previous owner, unless specifically empowered by statutory rules or terms and conditions of supply.

A Division Bench comprising Chief Justice M.S. Ramachandra Rao and Justice Satyen Vaidya allowed a writ petition filed by SMSN Continental Pvt. Ltd. seeking a refund of the late payment surcharge fees of ₹79,88,902 paid to HPSEB.

The court noted that SMSN Continental Pvt. Ltd. had purchased the property of Vardhman Roofing Pvt. Ltd. through an auction under the SARFAESI Act on an “as is where is and as is what is basis.”

When SMSN Continental Pvt. Ltd. applied for a new electricity connection, HPSEB demanded payment of the late payment surcharge fees owed by the previous owner Vardhman Roofing Pvt. Ltd.

Despite the auction terms, the company paid the outstanding dues to obtain a no-dues certificate from HPSEBL.

Subsequently, the company applied for a new electricity connection for the premises.

However, HPSEBL failed to release the new electricity connection, prompting the company to approach the Consumer Grievance Redressal Forum (CGRF). During the complaint’s pendency, HPSEBL issued a demand notice for an additional Rs. 79,88,902/- as a late payment surcharge. The CGRF ruled in favor of HPSEBL, holding the company liable for the surcharge. The decision was later upheld by the Ombudsman.

Aggrieved by the decisions, the company filed a Writ Petition before the Himachal Pradesh High Court. The court set aside the orders of both the CGRF and the Ombudsman. It ruled that, in the absence of any specific provision in the Himachal Pradesh Electricity Supply Code, HPSEBL could not recover the late payment surcharge from the auction purchaser. The court further noted that HPSEBL had erroneously treated the case as one of reconnection, despite the company’s application for a new connection.

The court held that there was non-application of mind by the CGRF to the grievance of the petitioner and it took into account irrelevant factors to decide the petitioner’s grievance. Thereby holding its order as unsustainable. Additionally, it also held that the ombudsman, also erroneously applied Clause 36.2.2 of the Sales Manual which applied to an owner who was seeking reconnection of its permanently terminated electricity connection.

Rejecting the arguments of HPSEB, the court held that "where the statutory rules or terms and conditions of supply which are statutory in character authorize the supplier of electricity to demand from the purchaser of a property claiming reconnection or fresh connection of electricity, the arrears due by the previous owner/occupier in regard to supply of electricity to such premises, the supplier can recover the arrears from a purchaser also. Otherwise the supplier cannot demand the same from the purchaser the electricity dues of the previous owner."

The High Court directed HPSEBL to refund the amount of Rs. 79,88,902/- with interest at 6% per annum to the company.

The petitioner company was represented by Advocates Vibhu Anshuman and Prateek Kumar of Ares Law Offices, New Delhi.

[Read Order]