Date of the Judgment: 4 November 2024
Citation: (2024) INSC 829
Judges: Dipankar Datta, J., Pankaj Mithal, J.
Can a power distribution company recover dues from a consumer after a significant delay, even if the relevant electricity act doesn’t specify a limitation period? The Supreme Court of India recently addressed this question in a case involving a dispute over minimum guaranteed consumption charges. The Court clarified the applicability of limitation periods under the Electricity Act, 2003, and its impact on dues arising under the previous Electricity Act, 1910. This judgment was delivered by a two-judge bench comprising Justice Dipankar Datta and Justice Pankaj Mithal, with Justice Datta authoring the opinion.
Case Background
The dispute arose between Madhya Pradesh Madhya Kshetra Vidyut Vitran Company Limited (the appellant), a state electricity distribution utility, and Bapuna Alcobrew Private Limited (the first respondent), a company engaged in manufacturing alcohol. The core of the issue was the first respondent’s liability to pay minimum guaranteed consumption charges for electricity, even when they did not consume the agreed-upon minimum amount.
The first respondent had an agreement with the appellants for the supply of electricity starting from 18th November, 1991. Supplementary agreements increased the contracted demand to 1170 kVA by 1st June, 1996. The first respondent was also permitted to install an 807 kVA biogas turbo generating set (TG set) for captive use, but it was not supposed to run parallel with the appellants’ supply system. The first respondent was bound to a monthly minimum consumption of units, with 35% load factor in case of no power cut, and 39% load factor in cases of power cut.
The appellants alleged that the first respondent was running the TG set as a parallel source of power, and on 28th March, 2000, they cancelled the permission to run the TG set. The first respondent challenged this cancellation notice in the High Court.
The High Court initially stayed the cancellation notice on 4th May, 2000, subject to the first respondent depositing the minimum guarantee charges. Subsequently, the appellants issued a show cause notice on 14th July, 2000, quantifying the liability at Rs. 70,50,000. The High Court, on 14th February, 2001, held the first respondent liable to pay the minimum guarantee charges, irrespective of actual consumption.
The first respondent withdrew their initial writ petition on 21st October, 2006. However, on 7th January, 2009, the appellants issued another show cause notice for the same amount, covering the period between June 1996 and May 2000. This led to another round of litigation in the High Court.
Timeline
| Date | Event |
|---|---|
| 18th November, 1991 | Agreement between appellants and first respondent for supply of electrical energy. |
| 17th November, 1992 | Supplementary agreement increasing consumption from 136 kVA to 169 kVA. |
| 30th March, 1995 | Supplementary agreement increasing consumption to 305 kVA. |
| 30th May, 1996 | Permission granted to first respondent to install and run an 807 kVA biogas turbo generating set (TG set) with conditions. |
| 1st June, 1996 | Third supplementary agreement increasing total contract demand to 1170 kVA. |
| 28th March, 2000 | Appellants served notice cancelling permission to run TG set. |
| 4th May, 2000 | High Court stayed cancellation notice, subject to deposit of minimum guarantee charges. |
| 14th July, 2000 | Appellants issued first show cause notice quantifying liability at Rs 70,50,000. |
| 14th February, 2001 | High Court held first respondent liable to pay minimum guarantee charges. |
| 21st October, 2006 | First respondent withdrew the first writ petition. |
| 7th January, 2009 | Appellants issued second show cause notice for the same liability. |
| 4th March, 2009 | Demand raised in the form of an energy bill for Rs 70,50,478. |
| 18th March, 2009 | Demand-cum-disconnection notice issued. |
| 6th April, 2009 | High Court stayed second show cause notice, conditional upon bank guarantee. |
| 16th July, 2009 | High Court partly allowed the writ petition, striking down retrospective application of enhanced contract demand. |
| 13th November, 2009 | Appellants informed first respondent of revised demand of Rs 56,81,977.58. |
| 16th November, 2009 | Appellants encashed the bank guarantee. |
| 18th November, 2009 | First respondent initiated contempt proceedings. |
Course of Proceedings
The first respondent initially challenged the cancellation notice in the High Court, which led to an interim order staying the notice, subject to the deposit of minimum guarantee charges. The High Court, in a miscellaneous petition, held the first respondent liable to pay these charges, irrespective of actual consumption.
After withdrawing the first writ petition, the first respondent was issued a second show cause notice for the same dues. The High Court, in the second round of litigation, initially stayed the show cause notice, subject to a bank guarantee. A single judge of the High Court partly allowed the writ petition, striking down the retrospective application of the enhanced contract demand but upholding the liability for minimum consumption.
The first respondent then appealed to a Division Bench of the High Court. The Division Bench allowed the appeal, quashing the second show cause notice based on the limitation period prescribed in Section 56(2) of the Electricity Act, 2003. This decision was then challenged in the Supreme Court by the appellants.
Legal Framework
The case involves the interpretation of several key legal provisions:
- The Electricity Act, 1910: This Act governed the supply and use of electrical energy before the enactment of the 2003 Act. It did not prescribe a limitation period for the recovery of dues. Section 24 of the 1910 Act, authorized a licensee to disconnect supply of energy to any person, if he neglected to pay any charge for energy or sum, other than a charge for energy, due from him, after giving a seven days prior notice.
- The Electricity (Supply) Act, 1948: This Act aimed to facilitate the establishment of regional coordination in the development of electricity.
- The Electricity Act, 2003: This Act consolidated the laws relating to electricity and introduced a limitation period for the recovery of dues. Section 56(2) of the 2003 Act states:
“Notwithstanding anything contained in any other law for the time being in force, no sum due from any consumer, under this section 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.”
- Section 174 of the Electricity Act, 2003: This section deals with the effect of the Act on existing laws.
- Section 185(5) of the Electricity Act, 2003: This section discusses the repeal and saving of previous enactments and the application of Section 6 of the General Clauses Act, 1897.
- The General Clauses Act, 1897: This Act contains general rules for the interpretation of statutes. Section 6 of the 1897 Act deals with the effect of repeal of an enactment.
- The Limitation Act, 1963: Article 15 of the 1963 Act prescribes a three-year limitation period for suits for the price of goods sold and delivered.
Arguments
The appellants, represented by Ms. Liz Mathew, argued that the High Court erred in applying Section 56(2) of the Electricity Act, 2003, to liabilities incurred before the Act came into force. They contended that the 2003 Act did not apply to liabilities incurred under the 1910 Act, and that Section 185(5) of the 2003 Act saved the application of Section 6 of the General Clauses Act, 1897. They relied on the Supreme Court’s decision in K.C. Ninan v. Kerala SEB [2023 SCC OnLine SC 663] to support their argument that the limitation period under Section 56(2) of the 2003 Act would not apply to liabilities incurred before the Act.
The first respondent, represented by Mr. Jayant Mehta, argued that the show cause notices were not demands, but merely notices for quantification. They contended that the appellants could have raised a demand during the pendency of the first writ petition. They also argued that even if the 2003 Act did not apply, the process of recovery had to be initiated within three years from the date of awareness of the dues, or within a reasonable period, which could not be nine years. They further argued that the encashment of the bank guarantee without giving an opportunity to pursue legal remedies was arbitrary.
| Main Submission | Sub-Submissions | Party |
|---|---|---|
| Applicability of Section 56(2) of the Electricity Act, 2003 | Section 174 of the 2003 Act was wrongly interpreted to extend the applicability of the Act to existing proceedings. | Appellants |
| Section 174 of the 2003 Act was wrongly applied as the case concerned liabilities under the 1910 Act, not an inconsistency with any other law. | Appellants | |
| Section 56(2) of the 2003 Act does not apply to liabilities incurred before the enforcement of the 2003 Act. | Appellants | |
| Validity of Demand | The show cause notices were not demands but merely notices for quantification. | First Respondent |
| The appellants could have raised a demand during the pendency of the first writ petition. | First Respondent | |
| Recovery of dues must be initiated within three years or a reasonable period. | First Respondent | |
| Encashment of bank guarantee without opportunity for legal remedies was arbitrary. | First Respondent |
Issues Framed by the Supreme Court
The Supreme Court framed the following issues:
- Whether Section 56(2) of the Electricity Act, 2003, applies to a demand raised by the appellants for recovery of sums payable under the Electricity Act, 1910.
- If not, whether the demand, if treated as one under the 1910 Act, is sustainable given the long delay.
Treatment of the Issue by the Court
| Issue | Court’s Decision | Reasoning |
|---|---|---|
| Whether Section 56(2) of the 2003 Act applies to demands under the 1910 Act? | No. | The limitation period of two years under Section 56(2) of the 2003 Act applies only to liabilities arising under the 2003 Act, not to liabilities incurred before its enforcement. The Court relied on Kusumam Hotels (P) Ltd. v. Kerala SEB [(2008) 13 SCC 213] and K.C. Ninan v. Kerala SEB [2023 SCC OnLine SC 663]. |
| Whether the demand under the 1910 Act is sustainable given the delay? | Yes, but it depends on the facts of each case. | While Section 24 of the 1910 Act does not prescribe a limitation period, the Court held that a suit for recovery of dues would be governed by the Limitation Act, 1963. However, the right to disconnect supply under Section 24(1) is separate from the right to sue. The Court also held that the first respondent was estopped from challenging the demand due to the High Court’s previous orders. |
Authorities
The Court considered the following authorities:
| Authority | Court | How Considered | Legal Point |
|---|---|---|---|
| Kusumam Hotels (P) Ltd. v. Kerala SEB [(2008) 13 SCC 213] | Supreme Court of India | Followed | Liabilities accruing under the previous act would continue even after the enforcement of the 2003 Act. |
| K.C. Ninan v. Kerala SEB [2023 SCC OnLine SC 663] | Supreme Court of India | Followed | The bar of limitation under Section 56(2) of the 2003 Act does not apply to liabilities incurred before the enforcement of the Act. |
| Raymond Limited v. State of M.P. [(2001) 1 SCC 534] | Supreme Court of India | Referred | The electricity board has a right to demand minimum guarantee charges, but also a corresponding duty to supply electricity. |
| Ajmer Vidyut Vitran Nigam Ltd. v. Rahamatullah Khan [(2020) 4 SCC 650] | Supreme Court of India | Followed | A consumer can be said to have neglected to pay only after a demand is raised by the licensee. |
| Prem Cottex v. Uttar Haryana Bijli Vitran Nigam Ltd. [(2021) 20 SCC 200] | Supreme Court of India | Followed | A consumer can be said to have neglected to pay only after a demand is raised by the licensee. |
| State of Orissa v. Madan Gopal Rungta [1951 SCC 1024] | Supreme Court of India | Referred | Interim relief cannot continue beyond the termination of the suit or proceedings. |
| Hope Plantations Ltd. v. Taluk Land Board [(1999) 5 SCC 590] | Supreme Court of India | Referred | Explains the principles of issue estoppel and res judicata. |
| Bhanu Kumar Jain v. Archana Kumar [(2005) 1 SCC 787] | Supreme Court of India | Referred | Distinguishes between res judicata and issue estoppel. |
The Court also considered the following legal provisions:
| Legal Provision | Statute | Description |
|---|---|---|
| Section 24 | The Electricity Act, 1910 | Authorizes a licensee to disconnect supply of energy for non-payment of dues after giving a seven days prior notice. |
| Section 56(2) | The Electricity Act, 2003 | Prescribes a two-year limitation period for the recovery of dues under the Act. |
| Section 174 | The Electricity Act, 2003 | Deals with the effect of the Act on existing laws. |
| Section 185(5) | The Electricity Act, 2003 | Saves the application of Section 6 of the General Clauses Act, 1897. |
| Section 6 | The General Clauses Act, 1897 | Deals with the effect of repeal of an enactment. |
| Article 15 | The Limitation Act, 1963 | Prescribes a three-year limitation period for suits for the price of goods sold and delivered. |
Judgment
| Submission | Court’s Treatment |
|---|---|
| Applicability of Section 56(2) of the 2003 Act to liabilities under the 1910 Act | Rejected. The Court held that Section 56(2) applies only to liabilities arising under the 2003 Act, not to prior liabilities. |
| The show cause notices were not demands | Rejected. The Court held that the first show cause notice was upheld by the High Court’s interim order of 14th February, 2001, and the second show cause notice was for the same amount. |
| The appellants could have raised a demand during the pendency of the first writ petition. | Not relevant. The Court held that the first respondent was bound by the High Court’s order of 14th February, 2001. |
| Recovery of dues must be initiated within three years or a reasonable period. | Partly accepted. The Court held that while Section 24 of the 1910 Act does not prescribe a limitation period for disconnection, a suit for recovery would be governed by the Limitation Act, 1963. However, the right to disconnect under Section 24(1) is separate from the right to sue. The Court also held that the first respondent was estopped from challenging the demand due to the High Court’s previous orders. |
| Encashment of bank guarantee without opportunity for legal remedies was arbitrary. | Not relevant. The Court did not comment on the encashment of the bank guarantee, as the appellants had accepted the single judge’s order and the reduced demand. |
Authorities Viewed by the Court:
- Kusumam Hotels (P) Ltd. v. Kerala SEB [(2008) 13 SCC 213]: The Supreme Court followed this case, which held that the liability to pay electricity charges is a statutory liability, and unless the 2003 Act specifically introduces a bar of limitation, the liability continues.
- K.C. Ninan v. Kerala SEB [2023 SCC OnLine SC 663]: The Supreme Court followed this case, which affirmed that Section 56(2) of the 2003 Act does not apply to liabilities incurred before the enforcement of the Act.
- Raymond Limited v. State of M.P. [(2001) 1 SCC 534]: The High Court relied on this case to observe that the first appellant was within its right to demand minimum guarantee charges but there also existed a corresponding duty upon such appellant to supply electrical energy to such an extent.
- Ajmer Vidyut Vitran Nigam Ltd. v. Rahamatullah Khan [(2020) 4 SCC 650] and Prem Cottex v. Uttar Haryana Bijli Vitran Nigam Ltd. [(2021) 20 SCC 200]: The Supreme Court followed these cases to hold that a consumer can be said to have neglected to pay any sum due to the licensee only after a demand is raised by the licensee.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the principle that statutory liabilities continue to exist even after the repeal of the law under which they arose, unless specifically barred by the new law. The Court emphasized the importance of the orders passed by the High Court in the first round of litigation, which had attained finality and estopped the first respondent from challenging the demand again. The Court also considered the fact that the first respondent had not challenged the High Court’s interim orders and had withdrawn their first writ petition, thus accepting the liability.
| Sentiment | Percentage |
|---|---|
| Statutory Liabilities | 30% |
| Finality of Court Orders | 40% |
| Principle of Issue Estoppel | 20% |
| Conduct of the First Respondent | 10% |
| Ratio | Percentage |
|---|---|
| Fact | 30% |
| Law | 70% |
The Court rejected the argument that the show cause notices were not demands, emphasizing that the first show cause notice was upheld by the High Court’s interim order of 14th February, 2001. The Court also held that the first respondent was bound by the High Court’s order and could not re-agitate the same issue.
The Court observed that the High Court’s orders dated 04th May, 2000 and 14th February, 2001, “judicially crystallised the liability of the first respondent to pay the minimum guarantee charges”, and that these orders, having attained finality, bound the first respondent. The Court also noted that, “no amount of argument by the first respondent, either on the point of delay in raising the demand or a merit-based review of the action of the appellants, in the second writ petition was open to persuade the High Court hold in its (first respondent) favour by allowing the intra-court appeal.” The Court further stated that, “the second writ petition at the instance of the first respondent was not maintainable and, accordingly, ought not to have been entertained at all.”
Key Takeaways
- The limitation period under Section 56(2) of the Electricity Act, 2003, applies only to liabilities arising under the 2003 Act and not to liabilities incurred under the previous Electricity Act, 1910.
- Statutory liabilities continue to exist even after the repeal of the law under which they arose, unless specifically barred by the new law.
- Interim orders passed by a court, if not challenged, attain finality and bind the parties.
- The principle of issue estoppel prevents parties from re-litigating issues that have already been decided by a competent court.
- A consumer can be said to have neglected to pay any sum due to the licensee only after a demand is raised by the licensee.
Directions
The Supreme Court set aside the judgment of the High Court and allowed the appeal. However, since the appellants had accepted the single judge’s order and recovered the reduced amount by encashing the bank guarantee, the Court did not order any change in the existing position.
Development of Law
The ratio decidendi of the case is that the limitation period under Section 56(2) of the Electricity Act, 2003, does not apply to liabilities incurred before the enforcement of the Act. This clarifies the legal position and ensures that electricity distribution companies can recover dues that accrued under the previous act, subject to the limitation period for suits under the Limitation Act, 1963. The Court also reinforced the principles of issue estoppel and the finality of court orders.
Conclusion
The Supreme Court’s judgment clarifies that the limitation period under the Electricity Act, 2003, does not apply to dues that accrued under the previous Electricity Act, 1910. The Court emphasized the importance of the finality of court orders and the principle of issue estoppel. The judgment sets aside the High Court’s decision and upholds the liability of the first respondent to pay the minimum guarantee charges.
Category
- Electricity Law
- Electricity Act, 2003
- Section 56(2), Electricity Act, 2003
- Electricity Act, 1910
- Section 24, Electricity Act, 1910
- Limitation Law
- Limitation Act, 1963
- Article 15, Limitation Act, 1963
- Civil Procedure
- Issue Estoppel
- Res Judicata
FAQ
Q: What is the main issue in this case?
A: The main issue is whether a power distribution company can recover dues from a consumer for minimum guaranteed consumption charges after a significant delay, and whether the limitation period under the Electricity Act, 2003, applies to dues arising under the previous Electricity Act, 1910.
Q: What did the Supreme Court decide about the limitation period?
A: The Supreme Court decided that the limitation period of two years under Section 56(2) of the Electricity Act, 2003, applies only to liabilities arising under the 2003 Act, and not to liabilities incurred before its enforcement under the Electricity Act, 1910.
Q: What is issue estoppel, and how did it apply in this case?
A: Issue estoppel is a legal principle that prevents parties from re-litigating issues that have already been decided by a competent court. In this case, the first respondent was estopped from challenging the demand for minimum guarantee charges because the High Court had already decided the issue in the first round of litigation.
Q: What does this judgment mean for electricity consumers?
A: This judgment means that electricity distribution companies can recover dues that accrued under the previous Electricity Act, 1910, subject to the limitation period for suits under the Limitation Act, 1963. Consumers cannot avoid their liabilities by citing the limitation period under the 2003 Act for dues that arose under the 1910 Act.
Q: What is the significance of the High Court’s interim orders in this case?
A: The High Court’s interim orders played a crucial role in this case. The Supreme Court held that these orders, having attained finality, bound the first respondent, and they could not re-agitate the same issues in subsequent proceedings.