SUPREME COURT ON DEFAULT OF PAYMENT OF ELECTRICITY DUES

 

India is the world’s third largest producer and third largest consumer of electricity. Electricity has been incorporated in the 7^th Schedule of the Constitution of India as a concurrent list subject which connotes that both Central and State Governments are empowered to regulate policies and laws for the electricity sector. The Constitutional Bench of Apex Court in State of Andhra Pradesh v. National Thermal Power Corporation Ltd has held ‘Electricity’ as goods. It can be transmitted, transferred, delivered, possessed but cannot be stored. A purchaser of goods is liable to pay for it at the time of purchase or consumption under the Sale of Goods Act, 1930. The quantum and time of payment may be ascertained post facto either by way of an agreement or the relevant statute.

The law relating to the generation, transmission, distribution and trading and use of Electricity is contained in the Electricity Act, 2003. The Act further empowers the licensee to disconnect the electricity supply if the consumer neglects to pay his dues. The disconnection would take place only after the consumer has consumed the electricity, and the bill has been generated. If the consumer neglects to pay the bill served on him within the stipulated period, the licensee can resort to coercive modes of recovery provided in the Act. The present write-up essentially puts light on this aspect of default of payment of electricity dues and the Supreme Courts latest verdict on it.

“Consumer” under the Act :

Consumer as defined under the Act, means any person who is supplied with electricity for his own use by a licensee or the Government or by any other person engaged in the business of supplying electricity to the public under the Act or any other law for the time being in force and includes any person whose premises are for the time being connected for the purpose of receiving electricity with the works of a licensee, the Government or such other person, as the case may be.

Disconnection of supply in default of payment -Section 56 :

Section 56(1) of the Act confers the power of disconnection of electricity supply for default of payment upon a licensee, and provides the conditions when such a power may be invoked, the procedure and manner of the exercise of such power, the period for which such power can remain effective, and the circumstances under which such a power cannot be exercised. Sub-section (2) of Section 56 bars the remedy of disconnection of supply for default of payment if the demand has been raised two years after the sum became first due, unless the same had been continuously shown to be recoverable as arrears of charges. The ingredients of Section 56 can be culled down as follows:

1.    Consumer neglecting to pay the electricity dues to the licensee company or the generating company in respect of supply, transmission, or distribution or wheeling of electricity;

2.    The licensee or generating company may, after giving prior notice in writing of not less than 15 days cut off the power supply for non-payment of the electricity dues.

3.    The power supply shall not be cut off if the person deposits under protest –(i) an amount equal to the sum claimed from the consumer; (ii) the electricity charges due from him for each month calculated on the basis of average charge for electricity paid by him during the preceding six months, whichever is less, pending disposal of any dispute between him and the licensee.

4.    No sum due from any consumer, shall be recoverable after the period of two years from the date when such sum became first due unless such sum has been shown continuously as recoverable as arrear of charges for electricity supplied and the licensee shall not cut off the supply of the electricity.

SUPREME COURT’S LATEST DECISION ON SECTION 56 OF THE ELECTRICITY ACT, 2003:

The Supreme Court in the case of Assistant Engineer (D1), Ajmer Vidyut Vitran Nigam Ltd. Vs. Rahamatullah Khan alias Rahamjulla discussed in length the provisions of Section 56 of the Electricity Act, 2003.

The brief facts leading to the dispute of the case goes this way: The licensee company in the present case discovered during an internal audit that bills for the past period from July, 2009 to September, 2011 were raised under the wrong code and wrong tariff rate. On 18.03.2014, the licensee company issued a show cause notice raising an additional demand for consumption of electricity for the past period from July, 2009 to September, 2011 and additional bill was raised demanding payment from the consumer. Being aggrieved by the demand the consumer moved to the Consumer Forum wherein it was held that the additional demand was time barred. Thereafter, the State Commission set aside the order of the Consumer Forum on the Appeal preferred by the licensee company. In the Revision Petition filed by the Consumer before the National Consumer Disputes Redressal Commission, the Order passed by the State Commission was set aside. The National Commission held that the additional demand was barred by limitation under Section 56(2) of the Electricity Act, 2003.  The licensee company, subsequently approached the Supreme Court challenging the judgment dated 28.05.2018 passed by the National Commission.

The major issues that were arisen for consideration before the Supreme court in the said case are produced as under:

(i)            What is the meaning to be ascribed to the term first due in Section 56(2) of the Electricity Act, 2003?

(ii)           In the case of a wrong billing tariff having been applied on account of a mistake, when would the amount become first due?

(iii)          Whether recourse to disconnection of electricity supply may be taken by the licensee company after the lapse of two years in case of a mistake?

While considering and interpreting the aforementioned issues the Apex Court finally held and laid down the below mentioned ensuing observations:

(i)            The electricity charges would become ‘first due’ only after the bill is issued to the consumer, even though the liability to pay may arise on the consumption of electricity. Section 56(2) did not preclude the licensee company from raising an additional or supplementary demand after the expiry of the limitation period under Section 56(2) in the case of a mistake or bona fide error. It did not however, empower the licensee company to take recourse to the coercive measure of disconnection of electricity supply, for recovery of the additional demand.

(ii)           The obligation of a consumer to pay electricity charges arises after the bill is issued by the licensee company. The bill sets out the time within which the charges are to be paid. If the consumer fails to pay the charges within the stipulated period, they get carried forward to the next bill as arrears.

(iii)           The proviso to Section 56(1) carves out an exception by providing that the disconnection will not be effected if the consumer either deposits the amount under protest, or deposits the average charges paid during the preceding six months.

(iv)          Sub-section (2) of Section 56 by a non obstante clause provides that notwithstanding anything contained in any other law for the time being in force, no sum due from any consumer, shall be recoverable under Section 56, after the expiry of two years from the date when the sum became first due, unless such sum was shown continuously recoverable as arrears of charges for the electricity supplied, nor would the licensee company disconnect the electricity supply of the consumer.

(v)           The liability to pay arises on the consumption of electricity. The obligation to pay would arise when the Electricity charges would become first due only after the bill is issued to the consumer, even though the liability to pay may arise on the consumption of electricity.

(vi)          Sub-section (1) of Section 56 confers a statutory right to the licensee company to disconnect the supply of electricity, if the consumer neglects to pay the electricity dues. This statutory right is subject to the period of limitation of two years provided by sub-section (2) of Section 56 of the Act

(vii)        The period of limitation of two years would commence from the date on which the electricity charges became first due under sub-section (2) of Section 56. This provision restricts the right of the licensee company to disconnect electricity supply due to non-payment of dues by the consumer, unless such sum has been shown continuously to be recoverable as arrears of electricity supplied, in the bills raised for the past period. If the licensee company were to be allowed to disconnect electricity supply after the expiry of the limitation period of two years after the sum became first due, it would defeat the object of Section 56(2).

(viii)       Section 56(2) however, does not preclude the licensee company from raising a supplementary demand after the expiry of the limitation period of two years. It only restricts the right of the licensee to disconnect electricity supply due to non-payment of dues after the period of limitation of two years has expired, nor does it restrict other modes of recovery which may be initiated by the licensee company for recovery of a supplementary demand.

Finally, the Supreme Court in the present case had held that the period of limitation would commence from the date of discovery of the mistake i.e. 18.03.2014. It was further held that the licensee company may take recourse to any remedy available in law for recovery of the additional demand, but is barred from taking recourse to disconnection of supply of electricity under sub-section (2) of Section 56 of the Act.

  

REFERENCES:

1.    The Electricity Act, 2003

2.    State of Andhra Pradesh v. National Thermal Power Corporation Ltd

3.    Assistant Engineer (D1), Ajmer Vidyut Vitran Nigam Ltd. Vs. Rahamatullah Khan alias Rahamjulla