Chhattisgarh High Court Holds Auction Purchaser Liable for Previous Owner's Electricity Dues

Court Rules 'As-Is-Where-Is' Auction Sale Transfers All Liabilities to Purchaser

In a significant ruling, the Chhattisgarh High Court has determined that an auction purchaser is liable for the outstanding electricity dues of the previous owner when a property is sold on an 'as-is-where-is' basis. The judgment was delivered by Justice Bibhu Datta Guru in the case of Polybond Rock Fibre Pvt. Ltd. v. Chhattisgarh State Power Distribution Company Limited (CSPDCL).

The case arose when Polybond Rock Fibre Pvt. Ltd., the petitioner, purchased a property in an auction conducted by a bank due to the previous owner's default on loan repayment. After acquiring the property, the petitioner applied for a new electricity connection, only to discover that there were outstanding dues from the previous owner, Arihant Rock Wool Fibre Pvt. Ltd. The electricity department demanded a payment of Rs. 17,67,873/- to clear the arrears.

The petitioner argued that the sale certificate indicated the property was free from all encumbrances known to the secured creditor and contended that the demand for payment was arbitrary and violated their fundamental rights. However, the court held that the 'as-is-where-is' clause in the auction sale meant the purchaser acquired the property with all existing liabilities, including electricity dues.

Justice Guru referenced the Supreme Court's decision in K.C. Ninan v. Kerala State Electricity Board, emphasizing that the auction purchaser must clear any outstanding dues as a precondition for availing electricity supply. The court further noted that under the Electricity Act, 2003, and relevant statutory conditions, new owners are required to clear previous arrears to receive electricity.

The court dismissed the petition, upholding the principle that purchasers in such auctions should conduct due diligence regarding existing liabilities. This judgment reinforces the obligations of auction purchasers to assume responsibility for any dues associated with the property they acquire.

Bottom Line:

Auction purchaser is liable to pay the outstanding electricity dues of the previous owner when the property is sold on 'as-is-where-is' basis, as encumbrances on the property stand transferred to the purchaser upon the sale.

Statutory provision(s): Electricity Act, 2003 Sections 43, 49, 56; Constitution of India, 1950 Article 142

Polybond Rock Fibre Pvt. Ltd. v. Chhattisgarh State Power Distribution Company Limited (CSPDCL), (Chhattisgarh) : Law Finder Doc Id # 2820823