The Kerala High Court has ruled that the Kerala State Electricity Board (KSEB) cannot compel an auction purchaser to clear the previous owner’s electricity arrears before granting a fresh power connection. The judgment clarifies that KSEB Auction Power Dues cannot be recovered from a new consumer who purchased the property through liquidation proceedings. Instead, KSEB must recover its dues through the liquidation process like any other unsecured creditor.
A Division Bench comprising Justice A.K. Jayasankaran Nambiar and Justice Preeta A.K. delivered the ruling in G. Nagendran v. Kerala State Electricity Board and Another. The Court allowed the appeal and set aside an earlier decision that had upheld KSEB’s demand for ₹36.70 lakh in electricity arrears.
Court Rejects Transfer of Previous Consumer’s Liability
The dispute arose after the appellant purchased the assets of a company in liquidation through a court-approved auction.
When the purchaser applied for a fresh electricity connection, KSEB insisted that he first pay the previous consumer’s outstanding electricity dues.
The High Court rejected this demand. It held that neither the Electricity Act, 2003, nor the Kerala Electricity Supply Code, 2005, authorizes KSEB to transfer the previous consumer’s liability to a new consumer.
The Bench observed that a fresh applicant cannot become responsible merely because the property previously belonged to a defaulting consumer.
KSEB Must Follow the Liquidation Process
The Court noted that KSEB had already filed its claim before the Official Liquidator.
Therefore, the Board had accepted its position as an unsecured creditor in the company’s liquidation proceedings.
The judges held that KSEB could not use its authority over electricity connections to obtain priority over other creditors.
Doing so would unfairly disturb the statutory distribution process governing liquidation proceedings.
Regulation 19 Did Not Apply
KSEB relied on Regulation 19 of the KSEB Terms and Conditions of Supply, 2005, to justify its demand.
However, the High Court found that the original electricity supply agreement existed before the 2005 Regulations came into force.
As a result, Regulation 19 could not apply retrospectively to create a charge over the assets.
Consequently, the Court rejected KSEB’s primary legal argument.
Sale Deed Protected the Auction Purchaser
The Bench also examined the auction sale deed.
It found that the Company Court had approved the sale on an encumbrance-free basis. The sale deed specifically stated that the purchaser would not inherit the statutory liabilities of the previous owner.
The Court clarified that the phrase “as is where is” relates only to the physical condition of the assets. It does not transfer legal liabilities unless the sale terms specifically provide for them.
Important Relief for Auction Buyers
The judgment offers significant protection to buyers participating in liquidation auctions.
Purchasers who acquire assets through court-approved sales cannot automatically inherit the previous owner’s electricity dues.
The ruling also confirms that KSEB Auction Power Dues must be recovered through the liquidation process rather than by refusing fresh electricity connections.
The decision strengthens the rights of bona fide auction purchasers and reinforces the statutory framework governing electricity supply and corporate liquidation.
