New Owner Must Deposit Dues Of Previous Owner For Electricity Connection; Refund Subject To Statutory Conditions: Kerala High Court

Justice Mohammed Nias C.P was delivering the judgment in a writ arising out of Electricity dues liability of a subsequent purchaser of a property which had arrears from previous consumer.

The petitioner is a private limited company engaged in manufacture of Ayurvedic Medicines has expanded to an additional space within the industrial estate of Vazhakkala Rubber Industries. Subsequent to the transfer of the property in 2012, the petitioner utilized the electric connection available in the shed situated in the property. Later, in 2016, a communication was issued by the Kerala State Electricity Board (KSEB) to Vazhakkala Rubber Industries stating that a revised bill for Rs.5,04,362/- has to be remitted within 15 days, failure of which will result in dismantling of the connection.

Even though it was informed to the KSEB Engineer that the property has been transferred in favour of the petitioner and sought 30 days time to address the issue, the request was declined and the service connection was disconnected.

Thereafter the petitioner continued using another connection but later in 2025, when the petitioner approached KSEB for additional power allocation during further expansion of the manufacturing activities, it was informed that new connection would be granted only on remittance of the arrears of Rs. 5 Lakh.

The petitioner thus approached the Court contending that under Electricity Code, arrears are recoverable only from previous consumer and not from a subsequent purchaser or occupier.

The Court examined whether a distribution licensee can insist on payment (or deposit) of electricity arrears incurred by a previous consumer as a precondition for granting a new electricity connection to a subsequent purchaser or occupier and whether such insistence is barred by limitation under Section 56(2) of the Electricity Act.

The petitioner relied on Section 43 of the Electricity Act, which imposes a statutory duty on distribution licensees to provide electricity supply upon application. However, the Court clarified that this right is not absolute and is subject to compliance with the regulatory framework framed under the Act.

Regulation 40(3) of the Kerala Electricity Supply Code deals with situations where a prior connection was dismantled due to non-payment. It mandates that a fresh connection shall not be denied, but can be conditioned upon the deposit of outstanding arrears (excluding interest). The Court upheld this provision as a valid piece of delegated legislation with a clear nexus to the statutory scheme.

“The right under Section 43 of the Electricity Act to obtain supply on application is not unqualified, but one that is subject to compliance with the statutory and regulatory framework. Regulation 40(3), framed in exercise of powers under Sections 50 and 181 of the Act, constitutes a valid condition governing the grant of a fresh connection where arrears of a previous consumer subsist. The insistence on deposit of the principal arrears, excluding interest, is therefore in accordance with the binding regulatory regime” Court held.

With regard to the question regarding whether the electricity due automatically creates a charge on the property when it is transferred to a purchaser, the Court held that the purchaser is not directly liable for the previous consumer's dues, but added that the licensee can lawfully require a deposit of such dues as a condition precedent for a new connection.

The petitioner had also argued that recovery of dues was barred under Section 56(2) of the Electricity Act and Regulation 136(3) of the Supply Code. It was contended that the recovery is barred after two years unless arrears are continuously shown.

The Court relied on Assistant Engineer(D1), Ajmer Vidyut Vitram NIgam Limited and Another. V Rahamatullah Khan [(2020) 4 SCC 650], which clarified that Section 56(2) does not extinguish the underlying debt, nor does it preclude the licensee from raising a supplementary demand or pursuing other lawful modes of recovery.

“The provision restricts only the statutory right of disconnection after the expiry of two years from the date when the sum became first due, unless the arrears have been continuously shown as recoverable.” Court added.

The Court noted that the recovery proceedings were initiated within two years from the date on which the sum became first due and hence the dues remained legally enforceable.

“Section 56(2), therefore, cannot be construed as barring recovery in the present case, nor can it be invoked to invalidate the operation of Regulation 40(3).” Court held.

The Court emphasized that the deposit under Regulation 40(3) is not a recovery of dues from the purchaser but a temporary security mechanism. Refund of the deposit is contingent upon specified events, such as recovery from the original defaulter.

The Court noted that following the 2024 amendment to the Regulation, the earlier provision mandating refund after three years has been removed. This means that the purchaser's right to refund is now strictly conditional and not time-bound.

The Court noted that a Division Bench of the Court in Kerala State Electricity Board v Kerala State Electricity Regulatory Commission [2012 (1) KLT 982], emphasised the necessity of regulatory safeguards to prevent defaulting consumers from evading electricity arrears by transferring defaulted premises.

The Court thus stated that the Kerala State Electricity Regulatory Commission should examine the necessity of incorporating appropriate provisions in the Kerala Electricity Supply Code, 2014, by invoking the powers available under Regulation 179, which enables the Commission to address difficulties arising in the implementation or interpretation of the Code.

The Court further urged the Commission to examine the feasibility of a provision requiring mandatory disclosure of electricity dues during property transactions and introduction of a “No Dues Certificate” mechanism.

It also directed that the State government and the distribution licensee should explore the feasibility with regard to the integration of dues verification into property registration processes.

“The State Government may also examine the possibility of incorporating suitable provisions under the Registration Act, 1908 and the relevant registration rules to provide for verification of such certificate as a document to be produced or verified at the time of registration of instruments relating to such property, thereby ensuring that the purchaser is informed of any outstanding electricity dues and is enabled to make necessary arrangements for settlement of the same while determining the consideration for the property.” Court added.

With these directions, the Court disposed of the petition.

Case Title: Bipha Drug Laboratories Pvt. Ltd. v Kerala State Electricity Board and Ors.

Case No: WP(C) 16139/ 2025

Citation: 2026 LiveLaw (Ker) 203

Counsel for Petitioner: S.Ranjith. Gokul Das V.V.H, Vineetha Susan Abraham

Counsel for Respondents: Riji Rajendran. P.U. Shailajan, Devi Shri R (GP)