The Allahabad High Court, in a recent judgment, has ruled that an individual who purchases a property through an auction under the SARFAESI Act, 2002, is liable to clear the outstanding electricity dues of the previous owner before being granted a new electricity connection. The Division Bench of Justice Arindam Sinha and Justice Avnish Saxena disposed of a writ petition, upholding the electricity supply company’s contention that a charge for unpaid dues attaches to the property itself.
Background of the Case
The petitioner, Amir Ahmad, had filed a writ petition after being denied a new electricity connection for a property he had purchased. The property was acquired from an authorized officer of a bank exercising power under Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.
The petitioner held a sale certificate dated 24th April 2024, which, he pointed out, stated that the property was sold to him “free from all encumbrances.” However, when he applied for an electricity connection, the supply company refused, asserting that there were arrear dues attached to the premises.
Arguments of the Parties
The petitioner’s counsel, Mr. Meraj Ahmad Khan, argued that his client was a bona fide purchaser for value. He contended that the vendor, the bank’s authorized officer, had not consumed any electricity, and therefore, no dues could be claimed. He further submitted that the property was explicitly sold free from all known encumbrances and that the Supreme Court’s judgment in K.C. Ninan Vs. Kerala State Electricity Board was not applicable to his client’s case.
Representing the electricity supply company, advocate Mr. Pranjal Mehrotra relied on Clause 4.3(f)(i) and (viii) of the U.P. Electricity Supply Code, 2005. He quoted the provision, which states, “It will be the duty of the seller and of the purchaser to find out the outstanding electricity dues up to the date of sale, and further that both seller and purchaser will be either/or, jointly and severally liable to pay the outstanding electricity dues/ obtain No dues certificate.” The code further stipulates that an application for a new connection shall only be processed by the licensee upon the clearing of dues.
Mr. Mehrotra also cited the Supreme Court’s decision in K.C. Ninan, particularly paragraph 117, which affirms that electricity utilities can create a charge on a property to recover arrears from a subsequent transferee, viewing it as necessary for protecting a public good and ensuring the financial health of the utilities.
Court’s Analysis and Decision
The High Court found “substance in contention of the supply company.” The judgment authored by Justice Arindam Sinha noted that the petitioner was an auction-purchaser of a secured property from a borrower who had defaulted. The sale was conducted on an “as-is-where-is” basis, attaching the requirement of ‘buyer beware’ to the petitioner.
The Court observed, “Petitioner having bid for such a property, in auction conducted by or on behalf of the bank, ought to have made such enquiry regarding charge of unpaid electricity dues attaching to the property, by operation of law.”
Dismissing the petitioner’s argument that his vendor had not consumed electricity, the bench held that it “cannot be sustained by reason of declaration of law made by the Supreme Court in K.C. Ninan (supra) in fact situation covering petitioner.”
The Court reproduced paragraph 1 from the K.C. Ninan judgment to highlight the similarity in facts, where new owners who purchased properties in auction sales were refused electricity connections until the dues of the previous owners were cleared.
Concluding the matter, the bench ruled that the petitioner is bound by the law to comply with the provisions of Clause 4.3 of the U.P. Electricity Supply Code, 2005.
“Petitioner is required under law to comply with, inter alia, aforesaid provision in clause 4.3, to obtain electricity connection in the property he has purchased,” the order stated.
The writ petition was accordingly disposed of.
