Supreme Court clarifies the meaning of “first due” under Section 56(2) of the Electricity Act, 2003 in cases of incorrect billing: Assistant Engineer (D1), Ajmer Vidyut Vitran Nigam Limited & Anr. vs. Rahamatullah Khan alias Rahamjulla (18 February 2020)

Introduction

Date of the Judgment: 18 February 2020

Citation: 2020 INSC 161

Judges: Uday Umesh Lalit, J., and Indu Malhotra, J.

Can an electricity company disconnect supply for a billing error discovered years later? The Supreme Court of India addressed this question in a case concerning the interpretation of Section 56(2) of the Electricity Act, 2003. The core issue revolved around when an electricity bill is considered “first due” for the purpose of limiting the power of electricity companies to disconnect supply for non-payment. This judgment clarifies that the “first due” date is when the initial bill is raised, not when a billing error is discovered, and sets a two-year limit for disconnection based on the original bill. The judgment was delivered by a two-judge bench consisting of Justice Uday Umesh Lalit and Justice Indu Malhotra, with the opinion authored by Justice Indu Malhotra.

Case Background

The case involves a dispute between the Ajmer Vidyut Vitran Nigam Limited (the licensee company) and one of its consumers, Rahamatullah Khan. From July 2009 to September 2011, the licensee company billed Mr. Khan and other consumers under Tariff Code 4400 at a rate of Rs. 1.65 per unit. An internal audit later revealed that these consumers should have been billed under Tariff Code 9400, which had a higher rate of Rs. 2.10 per unit. On March 18, 2014, the licensee company issued a show cause notice to Mr. Khan and other consumers, seeking additional payment for the electricity consumed between July 2009 and September 2011. On May 25, 2015, the licensee company raised a bill demanding Rs. 29,604 from Mr. Khan under Tariff Code 9400 for the said period. Aggrieved by this demand, Mr. Khan filed a consumer complaint.

Timeline

Course of Proceedings

The District Consumer Forum, Ajmer, ruled in favor of Mr. Khan, stating that the additional demand was time-barred. The State Commission overturned this decision, siding with the licensee company. However, the National Consumer Disputes Redressal Commission reversed the State Commission’s order, holding that the additional demand was indeed barred by limitation under Section 56(2) of the Electricity Act, 2003. The licensee company then appealed to the Supreme Court of India.

Legal Framework

The core of this case revolves around Section 56 of the Electricity Act, 2003, which deals with the disconnection of electricity supply for non-payment.

Section 56 of the Electricity Act, 2003 states:

“Section 56. Disconnection of supply in default of payment –

(1) Where any person neglects to pay any charge for electricity or any sum other than a charge for electricity due from him to a licensee or the generating company in respect of supply, transmission or distribution or wheeling of electricity to him, the licensee or the generating company may, after giving not less than fifteen clear days’ notice in writing, to such person and without prejudice to his rights to recover such charge or other sum by suit, cut off the supply of electricity and for that purpose cut or disconnect any electric supply line or other works being the property of such licensee or the generating company through which electricity may have been supplied, transmitted, distributed or wheeled and may discontinue the supply until such charge or other sum, together with any expenses incurred by him in cutting off and reconnecting the supply, are paid, but no longer:

Provided that the supply of electricity shall not be cut off if such person deposits, under protest, –

a) an amount equal to the sum claimed from him, or

b) 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.

(2) 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.”

This section allows a licensee to disconnect electricity supply if a consumer does not pay their dues after a 15-day notice. However, it also states that no sum can be recovered under this section after two years from when it first became due, unless it has been continuously shown as recoverable in the bills. This provision is intended to protect consumers from arbitrary billing and ensure timely recovery of dues. The Act is a consumer-friendly statute designed to protect consumers from arbitrary billing. The liability to pay arises on the consumption of electricity. The obligation to pay would arise when the bill is issued by the licensee company, quantifying the charges to be paid.

Arguments

Arguments by the Licensee Company:

• The licensee company argued that the power to disconnect electricity supply under Section 56(1) of the Electricity Act, 2003, can be exercised when a consumer neglects to pay their dues.
• The term “due” refers to the amount demanded through a bill, and “first due” implies when the demand is raised for the first time.
• The limitation period of two years under Section 56(2) should start from the date when the bill is raised.
• In cases of a mistake, the limitation period should start from the date when the mistake is discovered. In this case, the additional demand was raised within two years of discovering the mistake.

Arguments by the Amicus Curiae:

• The Amicus Curiae argued that Section 56(1) empowers the licensee to disconnect supply if a consumer neglects to pay the bill within the stipulated period.
• The words “first due” in Section 56(2) refer to the date when the first bill for the supply of electricity was raised by the licensee.
• Treating “first due” as the date of detection of a mistake would dilute the two-year limitation period, as mistakes can be detected at any time.
• The period of limitation under Section 56(2) cannot be extended by raising a supplementary bill. The original bill must show the sum as arrears for it to be recoverable.
• If a genuine mistake is detected after two years, the licensee can raise a supplementary bill but cannot disconnect the supply under Section 56(1).

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. What is the meaning to be ascribed to the term “first due” in Section 56(2) of the Electricity Act, 2003?
2. In the case of a wrong billing tariff having been applied on account of a mistake, when would the amount become “first due”?
3. 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?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

The Supreme Court also considered the following legal provisions:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Supreme Court in State of Andhra Pradesh v. National Thermal Power Corporation Ltd. [ (2002) 5 SCC 203]* considered electricity as “goods”.
• The Supreme Court in Chandavarkar Sita Ratna Rao v. Ashalata S. Guram [(1986) 4 SCC 447]* explained the effect of a non-obstante clause, which gives an overriding effect to a provision.
• The Supreme Court in Swastic Industries v. Maharashtra State Electricity Board [(1997) 9 SCC 465]* distinguished between the right to recover charges and the right to disconnect supply.
• The Supreme Court in Mahabir Kishore and Ors. v. State of Madhya Pradesh [(1989) 4 SCC 1]* clarified that the limitation period for a mistake starts from the date of discovery.

What weighed in the mind of the Court?

The Supreme Court emphasized the consumer-friendly nature of the Electricity Act, 2003, and the need to protect consumers from arbitrary billing. The court also noted that the obligation to pay arises when the bill is issued, not just when electricity is consumed. The court reasoned that the two-year limitation period in Section 56(2) is intended to provide certainty and prevent licensees from raising old demands and disconnecting supply after a long delay. The court also considered the legislative intent behind the Act, which was to protect consumers from arbitrary billing.

Logical Reasoning:

The Court rejected the argument that the limitation period should start from the date of discovery of the mistake, stating that it would defeat the purpose of the two-year limitation period. The court clarified that while the licensee can raise a supplementary bill after two years, it cannot disconnect the electricity supply for non-payment of that supplementary demand. The court emphasized that the limitation period under Section 56(2) of the Electricity Act, 2003, is a restriction on the power to disconnect supply and not on the right to recover dues through other means. The court held that the two-year limitation period under Section 56(2) of the Electricity Act, 2003, starts from the date when the original bill was raised, not from the date when a mistake was discovered.

The court stated, “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.”

The court further stated, “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).”

The court also clarified, “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…”

Key Takeaways

• The “first due” date for electricity charges under Section 56(2) of the Electricity Act, 2003, is the date when the original bill is raised, not when a billing error is discovered.
• Licensee companies cannot disconnect electricity supply for non-payment of dues after two years from the “first due” date, even if a mistake is discovered later.
• Licensee companies can raise supplementary bills after the two-year limitation period, but they cannot disconnect electricity supply to enforce payment of these supplementary bills.
• The two-year limitation period is intended to protect consumers from arbitrary billing and ensure timely recovery of dues.

Directions

The Supreme Court disposed of the appeals in the above terms and clarified that the Appellant – Corporation would not be entitled to recover the additional demand from the Respondent in this case.

Development of Law

The ratio decidendi of this case is that the term “first due” in Section 56(2) of the Electricity Act, 2003, refers to the date when the initial bill is raised, not when a billing error is discovered. This clarifies the limitation period for disconnection of electricity supply and protects consumers from arbitrary billing. This judgment clarifies the interpretation of Section 56(2) of the Electricity Act, 2003, and provides a clear understanding of the limitation period for disconnection of electricity supply. It reinforces the consumer-friendly nature of the Act and ensures that consumers are protected from arbitrary actions by licensee companies.

Conclusion

The Supreme Court’s judgment in Assistant Engineer (D1), Ajmer Vidyut Vitran Nigam Limited & Anr. vs. Rahamatullah Khan alias Rahamjulla clarifies that the “first due” date for electricity charges is when the original bill is issued, not when a billing error is discovered. This ruling limits the power of electricity companies to disconnect supply after two years from the original bill date, even if there is a billing error. This decision protects consumers from arbitrary actions and ensures that electricity companies act promptly in resolving billing issues.

Category

Parent Category: Electricity Act, 2003

Child Category: Section 56, Electricity Act, 2003

Parent Category: Consumer Law

Child Category: Consumer Rights

Parent Category: Limitation Law

Child Category: Limitation Period

FAQ

Q: What does “first due” mean under Section 56(2) of the Electricity Act, 2003?

A: “First due” refers to the date when the original electricity bill is issued to the consumer, not when a billing error is discovered later.

Q: Can an electricity company disconnect my supply if they find a billing error after two years?

A: No, the electricity company cannot disconnect your supply for non-payment of dues if two years have passed since the original bill was issued, even if they discover a billing error later.

Q: Can the electricity company still claim the additional amount if they find a billing error after two years?

A: Yes, the electricity company can raise a supplementary bill to claim the additional amount, but they cannot disconnect your supply to enforce payment. They would need to use other legal means of recovery.

Q: What should I do if I receive a supplementary bill for an old period?

A: You should check the date of the original bill and if it is more than two years old, the company cannot disconnect your supply for non-payment of the supplementary bill. You can seek legal advice on how to handle such a situation.

Q: Does this judgment protect consumers?

A: Yes, this judgment protects consumers from arbitrary actions by electricity companies and ensures that they cannot be disconnected for old dues after a long delay.