Jharkhand HC quashes DVC’s ₹6.26 cr electricity demand, says auction buyer not liable for previous owner’s dues
SUMAN K SHRIVASTAVA Ranchi, Aug. 4: In a significant judgment that could have far-reaching implications for auction purchasers of industrial and commercial…
SUMAN K SHRIVASTAVA
Ranchi, Aug. 4: In a significant judgment that could have far-reaching implications for auction purchasers of industrial and commercial properties, the Jharkhand High Court has ruled that an auction buyer cannot be compelled to clear the outstanding electricity dues of the previous owner if there is no nexus between the two.
Justice Ananda Sen delivered the judgment while allowing two writ petitions filed by M/s Mangalam Ispat against the Damodar Valley Corporation (DVC).
The petitions challenged DVC’s demand of over ₹4.92 crore towards the previous owner’s electricity dues as a precondition for granting a fresh power connection, as well as a subsequent demand of ₹1.34 crore raised in 2025 following tariff revisions for the period 2006-2012.
The High Court held that the petitioner had purchased the industrial unit through a bank-conducted public auction and had no connection whatsoever with the erstwhile owner. Therefore, the company could not be saddled with liabilities arising from electricity consumption before the auction.
Clause 6.10 Applies to Auction Purchasers
The Court drew a clear distinction between properties purchased directly from previous owners and those acquired through public auctions.
Interpreting the Jharkhand State Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2015, Justice Sen held that Clause 6.10(a) governs cases where a property is acquired through an auction or by operation of law, whereas Clause 5.3.3 applies to direct private transactions between buyer and seller.
The Court observed:
“Since the petitioner has acquired the property through auction and has no relationship whatsoever with the erstwhile owner, it cannot be held liable to pay the electricity dues of the previous consumer.”
Recovery from Auction Purchaser Not Permissible
After analysing Supreme Court precedents, including Isha Marbles, Paschimanchal Vidyut Vitran Nigam, Haryana State Electricity Board, K.C. Ninan, and earlier Jharkhand High Court decisions, the Court concluded that electricity dues can be recovered from a subsequent purchaser only where statutory provisions specifically permit such recovery and the conditions prescribed by law are fulfilled.
The judgment held that the petitioner fell squarely within the protection available under Clause 6.10(a) because it had become the lawful owner through a public auction and had no nexus with the defaulting consumer.
Refund of Amount Deposited
The Court also noted that the petitioner had deposited the demanded amount in instalments pursuant to an interim order only to obtain an electricity connection and that the payments were subject to the final outcome of the case.
Holding the recovery to be unsustainable in law, the Court directed appropriate relief in favour of the petitioner by setting aside the impugned demand notices.
Significant Relief for Auction Buyers
The ruling is expected to benefit auction purchasers of distressed industrial assets across Jharkhand by clarifying that they cannot automatically be burdened with electricity arrears incurred by previous owners, unless expressly authorised under the applicable statutory framework.
The judgment also reinforces the distinction between direct property purchases and court- or bank-supervised auction sales while interpreting the Electricity Supply Code.
