The Supreme Court has rejected an electricity distribution company’s attempt to recover ₹57.74 lakh as Minimum Consumption Guarantee Charges for an additional power load that was neither accepted by the consumer nor actually released to it.
The Bench of Justice S.V.N. Bhatti and Justice N.V. Anjaria upheld the Electricity Ombudsman’s decision setting aside the demand raised against the consumer.
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The dispute concerned a demand issued in February 2007 for charges allegedly relating to an additional 2,000 KVA load during the period from February 1998 to September 1998.
The Supreme Court held that the distribution licensee was not entitled to raise the impugned demand under Section 56(2) of the Electricity Act, 2003, and dismissed its appeal.
The consumer had applied for an electricity connection with a load of 4,000 KVA. However, owing to the limitations prevailing at the time, the distribution licensee agreed to sanction and release only 2,000 KVA.
An agreement was consequently executed between the parties on February 24, 1997.
The electricity supplier subsequently claimed that an improvement in power availability enabled it to provide the remaining 2,000 KVA. On January 31, 1998, it offered to enhance the consumer’s contracted load, subject to the execution of the necessary agreement and the consumer communicating its acceptance.
The consumer, through a letter dated September 14, 1998, expressed that it was not interested in taking the additional load.
Despite this, the distribution licensee issued a demand on February 13, 2007, requiring the consumer to pay ₹57,74,164 as Minimum Consumption Guarantee Charges for the additional 2,000 KVA for the period between February and September 1998.
The supplier proceeded on the assumption that since it was ready to provide the additional load, the contracted capacity had to be treated as 4,000 KVA. It consequently claimed that the consumer was liable to pay minimum charges even though the additional supply had not been availed.
The consumer challenged the demand before the Consumer Grievance Redressal Forum. As the Forum delivered a split verdict and did not effectively redress the grievance, the consumer approached the Electricity Ombudsman under the Uttar Pradesh Electricity Regulatory Commission (Consumer Grievance Redressal Forum and Electricity Ombudsman) Regulations, 2007.
The Ombudsman set aside the demand after finding that the consumer had never consented to the additional load offered by the distribution company.
It also found that there was no material demonstrating that the additional 2,000 KVA had actually been released to the consumer.
The Ombudsman further concluded that the demand was barred by the limitation contemplated under Section 56(2) of the Electricity Act. It directed the supplier to adjust the amount already deposited by the consumer against its future electricity bills.
The distribution licensee challenged the Ombudsman’s decision before the Allahabad High Court’s Lucknow Bench. It also questioned the validity of Clause 8 of the 2007 Regulations governing representations before the Electricity Ombudsman.
The High Court held that Section 42(6) of the Electricity Act permits a consumer whose grievance has not been redressed by the Consumer Grievance Redressal Forum to approach the Ombudsman.
It observed that the provision did not confer a corresponding remedy upon a distribution licensee against a decision favourable to the consumer. To the extent that Clauses 8.1 and 8.2 purported to provide such a remedy to a distribution company, the High Court found them inconsistent with Section 42(6).
On the merits of the demand, the High Court noted that regular monthly bills were issued under the existing electricity supply arrangement. No charge relating to the proposed additional 2,000 KVA was included in those bills.
The amount was claimed for the first time only in February 2007, although the alleged liability related to February-September 1998.
The High Court held that the word “due” under Section 56(2) had to refer to a specific point in time and could not be left uncertain indefinitely. There was also no pleading or material showing that the disputed amount had been continuously reflected as recoverable arrears in the consumer’s electricity bills.
It further observed that even if other limitation provisions were considered, a demand made in 2007 for an alleged liability arising in 1998 could not be sustained.
The High Court also recorded that the supplier had initially been unable to provide the full load sought by the consumer because of insufficient electricity availability.
When the supplier subsequently claimed that the additional load had become available, it required the consumer to communicate its consent before the load could be released.
The consumer never provided such consent. Nor did the distribution licensee establish that the additional 2,000 KVA was released or made operational for the consumer.
The High Court therefore concluded that the consumer’s liability could arise only when the agreed quantity of electricity was actually released to it, and not merely because the supplier claimed to be ready to provide the additional load.
It accordingly dismissed the distribution company’s writ petition.
Before the Supreme Court, the distribution licensee did not seriously press its challenge to Regulation 8 of the 2007 Regulations. The Court therefore declined to re-examine the High Court’s conclusion on that issue.
The Bench noted that the ancillary arguments concerning the Regulations were also diluted by the Supreme Court’s earlier decision in K.C. Ninan v. Kerala State Electricity Board.
The Court then considered the legality of the February 13, 2007 demand and its conformity with Section 56(2) of the Electricity Act.
It relied upon the ruling in Assistant Engineer (D1), Ajmer Vidyut Vitran Nigam Limited v. Rahamatullah Khan, in which the Supreme Court had explained when electricity charges become “first due”.
The Court accordingly dismissed the civil appeal and disposed of all pending applications.
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