Supreme Court Clarifies “Unauthorised Use of Electricity” in Kerala State Electricity Board vs. Thomas Joseph (2022)

Introduction

Date of the Judgment: 16 December 2022

Citation: 2022 INSC 1293

Judges: Justices Dinesh Maheshwari and J.B. Pardiwala

Can a consumer be penalized for using more electricity than their sanctioned load, even if it’s for the same purpose and within the same premises? The Supreme Court of India recently addressed this critical question in a batch of appeals filed by the Kerala State Electricity Board (KSEB). The core issue revolved around whether the consumption of electricity exceeding the connected or contracted load amounts to “unauthorised use of electricity” under Section 126 of the Electricity Act, 2003. This judgment clarifies the extent to which electricity boards can penalize consumers for exceeding their sanctioned load. The bench comprised Justices Dinesh Maheshwari and J.B. Pardiwala, who delivered the judgment.

Case Background

The Kerala State Electricity Board (KSEB), the appellant, is a company controlled by the Government of Kerala, responsible for electricity generation, transmission, and distribution in the state. The respondents are commercial and industrial consumers with Low Tension (LT) connections. During inspections, KSEB officials found that these consumers were drawing electricity in excess of their connected or contracted load. The consumers then approached the High Court of Kerala, seeking a ruling on the correct method of calculating penalties under Section 126(6) of the Electricity Act, 2003. The High Court was asked to determine if consumers could be assessed at twice the applicable tariff for excess consumption.

Timeline

Course of Proceedings

The High Court of Kerala, addressing a batch of writ petitions, ruled that in cases of unauthorized use of electricity with a higher tariff, assessment should be made at twice the tariff applicable to the service for which electricity was unauthorizedly used, not the consumer’s original service category. However, it made an exception for consumers overdrawing electricity within the same premises for the same purpose without changing the tariff. In such cases, the High Court held that the assessment should only be twice the fixed charges, not the energy charges, unless upgrades to the distribution system were needed. The KSEB, dissatisfied with this judgment, filed review applications, which were also rejected. Subsequently, the KSEB filed appeals before the Supreme Court.

Legal Framework

The key legal provisions in this case are:

• Section 126 of the Electricity Act, 2003: This section deals with the assessment of unauthorized use of electricity. It allows assessing officers to provisionally assess electricity charges if they find a person is engaging in unauthorized use. The assessment is made at twice the applicable tariff for the relevant service category. Explanation (b) to this section defines “unauthorised use of electricity” to include usage by artificial means, without authorization, through a tampered meter, for a different purpose, or in different premises than authorized.
• Section 50 of the Electricity Act, 2003: This section empowers the State Commission to specify an Electricity Supply Code for various purposes, including recovery of electricity charges, billing intervals, disconnection of supply, and measures for preventing tampering.
• Section 181 of the Electricity Act, 2003: This section grants the State Commissions the power to make regulations, including those related to the electricity supply code under Section 50.
• Section 45(3)(a) of the Electricity Act, 2003: This section specifies that charges for electricity supplied by a distribution licensee may include a fixed charge in addition to the charge for the actual electricity supplied.
• Regulation 153(15) of the Kerala Electricity Supply Code, 2014: This regulation states that unauthorized additional load in the same premises and under the same tariff shall not be considered “unauthorised use of electricity” except for consumers billed on connected load basis.

These provisions are part of the broader legal framework aimed at regulating electricity supply, preventing misuse, and ensuring fair billing practices.

Arguments

Appellant (KSEB) Arguments

• KSEB argued that the High Court erred in relying on Regulation 153(15) of the Kerala Electricity Supply Code, 2014, as this regulation overstepped the boundaries of Section 126 of the Electricity Act, 2003.
• They contended that the regulation-making power cannot be used to create substantive rights not contemplated by the Act.
• Relying on Executive Engineer, Southern Electricity Supply Company of Orissa Limited (Southco) and Another v. Sri Seetaram Rice Mill [(2012) 2 SCC 108], the KSEB asserted that excess load consumption falls under Explanation (b)(iv) of Section 126, constituting unauthorized use.
• KSEB argued that Section 126 is a complete code, and consumption beyond the sanctioned load is a breach of the Act and contract, causing prejudice to the public by disrupting the entire supply system.
• They emphasized that the connected load/contracted load is crucial for planning and ensuring adequate electricity supply, and overdrawing electricity leads to penalties for the Board when purchasing from the central grid.
• The KSEB submitted that the High Court’s finding that unauthorized use occurs only if it necessitates system upgrades is flawed, as it would unfairly penalize only the last consumer causing disruption and not the collective lot of unauthorized users.

Respondent (Consumers) Arguments

• The consumers argued that the High Court correctly held that overdrawal of electricity in the same premises and for the same purpose does not amount to unauthorized use under Section 126 of the Act.
• They asserted that Regulation 153 of the 2014 Code defines the threshold for additional loads to be considered unauthorized and allows for regularization of such loads.
• The consumers highlighted that Regulation 153(15) specifies that unauthorized additional load in the same premises and under the same tariff is not unauthorized use, except for connected load-based billing.
• They argued that the High Court’s interpretation contextualizes the Act with local conditions, and any other reading would render the Code meaningless.
• The consumers contended that the High Court’s reasoning supplements, rather than supplants, Sections 126 and 135 by considering the relevant regulations of the 2014 Code.
• They stated that the Regulations are intra vires, emphasizing that the Legislature and its delegate are the sole repositories of decision-making power and that court interference is limited to cases of legal infirmity, overreach of regulation-making power, or inconsistency with the parent enactment.
• The consumers pointed out that the KSEB’s stance against regularization contradicts its own Full Board decision to relax penalties for unauthorized additional loads.

Kerala State Electricity Regulatory Commission (KSERC) Arguments

• KSERC submitted that there are two kinds of billing: connected load-based billing and contract demand-based billing.
• In connected load-based billing, connecting additional/excess load is considered unauthorized use of electricity.
• In contract demand-based billing, connecting additional load does not amount to “unauthorised use” under Section 126 of the Act.
• KSERC stated that contract demand is the maximum demand agreed to be supplied, and excess demand does not constitute unauthorized use, but is addressed by Regulation 101 of the Code 2014, which stipulates a 150% charge for excess demand.
• They argued that the Code 2014 and Tariff Order adequately address revenue loss and infrastructural concerns in cases of excess load/demand, unless it results in a change of purpose or tariff.
• KSERC contended that the observations in Seetaram Rice Mill (supra) were specific to the Orissa Electricity Regulatory Commission regulations and should not be uniformly applied to Kerala.
• They maintained that each state has unique considerations for framing supply code regulations, and the supply regulations of Orissa cannot be applied in a straitjacketed manner to Kerala.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether the High Court committed any error in passing the impugned judgment and order, particularly the finding recorded in para 31(vi) of the impugned judgment?

Treatment of the Issue by the Court

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

Authorities

Cases

• Executive Engineer, Southern Electricity Supply Company of Orissa Limited (Southco) and Another v. Sri Seetaram Rice Mill [(2012) 2 SCC 108] – Supreme Court of India: The Court relied on this case to emphasize that excess load consumption falls under Explanation (b)(iv) of Section 126 of the Electricity Act, 2003, constituting unauthorized use of electricity. The Court reiterated that Section 126 is a complete code in itself and that consumption in excess of sanctioned/connected load is unauthorized use.
• Punjab State Electricity Board v. Vishwa Caliber Builders Private Limited [(2010) 4 SCC 539] – Supreme Court of India: This case was referenced to highlight that excess load, even if not a change of user, is considered unauthorized use of electricity. The Court emphasized that the fault for non-release of balance load lay at the door of the respondent.
• Uttar Pradesh Power Corporation Limited and Others v. Anis Ahmad [(2013) 8 SCC 491] – Supreme Court of India: The Court cited this case to establish that the Supply Code cannot provide for assessment of charges for unauthorized use of electricity under Section 126 of the Act, emphasizing the distinction between the scope of Section 50 and Section 126.
• General Officer Commanding -in-Chief and Another v. Dr. Subhash Chandra Yadav and Another [(1988) 2 SCC 351] – Supreme Court of India: This case was used to underscore that a rule must conform to the provisions of the statute under which it is framed and must come within the scope of the rule-making power.
• Additional District Magistrate (Rev.) Delhi Admn. v. Siri Ram [(2000) 5 SCC 451] – Supreme Court of India: The Court relied on this case to emphasize that a rule-making authority cannot make a rule that travels beyond the scope of the enabling Act or is inconsistent with it.
• Sukhdev Singh and Others v. Bhagatram Sardar Singh Raghuvanshi and Another [(1975) 1 SCC 421] – Supreme Court of India: This case was cited to highlight that statutory bodies cannot use rule-making power to enlarge powers beyond what the Legislature intended.
• State of Karnataka and Another v. H. Ganesh Kamath and Others [(1983) 2 SCC 402] – Supreme Court of India: The Court used this case to emphasize that a rule-making power does not enable the rule-making authority to make a rule that travels beyond the scope of the enabling Act.
• Kunj Behari Lal Butail and Others v. State of H.P. and Others [(2000) 3 SCC 40] – Supreme Court of India: This case was cited to establish that rules framed should satisfy the test of falling within the scope of the general power conferred by the parent act.
• St. Johns Teachers Training Institute v. Regional Director, National Council for Teacher Education and Another [(2003) 3 SCC 321] – Supreme Court of India: This case was used to underscore that rules cannot supplant the provisions of the enabling Act but supplement it.
• Global Energy Limited and Another v. Central Electricity Regulatory Commission [(2009) 15 SCC 570] – Supreme Court of India: This case was cited to emphasize that regulation-making power cannot be exercised to bring into existence substantive rights or obligations not contemplated by the Act.
• State of T.N. and Another v. P. Krishnamurthy and Others [(2006) 4 SCC 517] – Supreme Court of India: This case was used to highlight that the court should consider the nature, object, and scheme of the enabling Act when considering the validity of subordinate legislation.
• Pratap Chandra Mehta v. State Bar Council of Madhya Pradesh and others [(2011) 9 SCC 573] – Supreme Court of India: This case was cited to establish that the court can give a purposive construction to a provision while ensuring rules are within the field circumscribed by the parent Act.
• Dr. Mahachandra Prasad Singh v. Chairman, Bihar Legislative Council and Others [(2004) 8 SCC 747] – Supreme Court of India: This case was used to underscore that the delegate’s function is to serve and promote the object of the legislature.
• McEldowney v. Forde [(1971) AC 632] – House of Lords: This case was cited to explain that the courts construe laws, and their view on whether legislation promotes the common weal is irrelevant.

Legal Provisions

• Section 126 of the Electricity Act, 2003: The Court analyzed this section to determine the scope of “unauthorised use of electricity” and the assessment procedures.
• Section 50 of the Electricity Act, 2003: This section was considered to define the scope of the Electricity Supply Code and its limitations.
• Section 181 of the Electricity Act, 2003: This provision was examined to understand the powers of the State Commissions to make regulations.
• Section 45(3)(a) of the Electricity Act, 2003: This provision was considered to determine the composition of electricity charges, including fixed and energy charges.
• Regulation 153(15) of the Kerala Electricity Supply Code, 2014: This regulation was analyzed to determine if it was consistent with Section 126 of the Electricity Act, 2003.

Authority Table

Judgment

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

How each authority was viewed by the Court?

The Supreme Court relied heavily on the principles established in Sri Seetaram Rice Mill (supra)*[ (2012) 2 SCC 108], stating that it is a complete code in itself and that consumption in excess of sanctioned/connected load is unauthorized use. The Court also relied on Punjab State Electricity Board v. Vishwa Caliber Builders Private Limited* [(2010) 4 SCC 539] to support its view that excess load, even without a change of user, constitutes unauthorized use. The Court used Uttar Pradesh Power Corporation Limited v. Anis Ahmad* [(2013) 8 SCC 491] to highlight that the Supply Code cannot provide for assessment of charges for unauthorized use of electricity under Section 126 of the Act. The Court also cited several other cases to reinforce principles of delegated legislation and the limits of rule-making power.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to uphold the integrity of the electricity supply system and prevent unauthorized usage. The Court emphasized that overdrawal of electricity, even within the same premises and for the same purpose, can disrupt the entire supply system, undermining its efficiency and causing voltage fluctuations. The Court was also concerned about the potential for revenue loss and the need to deter consumers from exceeding their sanctioned loads. The Court was also strongly influenced by the fact that Section 126 of the Electricity Act, 2003, is a complete code in itself, and any interpretation must be in line with the legislative intent. The Court also highlighted that the rule-making power cannot be used to bring into existence substantive rights or obligations not contemplated by the Act.

Sentiment Analysis of Reasons

Fact:Law

Logical Reasoning

Decision

The Supreme Court allowed the appeals filed by the Kerala State Electricity Board and set aside the impugned judgment of the High Court of Kerala. The Court held that the High Court erred in carving out an exception that does not exist in Section 126(6) of the Electricity Act, 2003. The Court clarified that overdrawal of electricity, even within the same premises and for the same purpose, constitutes “unauthorised use of electricity” and is liable for assessment at twice the applicable tariff. The Court emphasized that Regulation 153(15) of the Kerala Electricity Supply Code, 2014, which provided an exception for such cases, is inconsistent with Section 126 of the Act and is therefore invalid. The Court directed that assessments for unauthorized use of electricity must be made in accordance with the provisions of Section 126 of the Act.

Implications

The Supreme Court’s judgment has significant implications for both consumers and electricity boards:

For Consumers

• Increased Penalties: Consumers exceeding their sanctioned load, even within the same premises and for the same purpose, will now be penalized at twice the applicable tariff under Section 126 of the Electricity Act, 2003.
• Need for Load Upgrades: Consumers must ensure they have adequate sanctioned load to meet their electricity needs to avoid penalties. This may require applying for load upgrades with the electricity board.
• Awareness and Compliance: Consumers need to be aware of their sanctioned load and the implications of exceeding it. They must also comply with the rules and regulations set by the electricity board.
• Increased Costs: Consumers who frequently exceed their sanctioned load will face increased electricity costs due to penalties, potentially impacting their household budgets or business expenses.

For Electricity Boards

• Uniform Application of Penalties: Electricity boards must now uniformly apply penalties for unauthorized use of electricity as per Section 126 of the Act, without any exceptions for overdrawal within the same premises.
• Enforcement and Monitoring: Boards must enhance their enforcement and monitoring mechanisms to identify and penalize consumers exceeding their sanctioned loads.
• Revenue Enhancement: The judgment can potentially enhance revenue for electricity boards through penalties imposed on unauthorized users, helping to cover costs and improve infrastructure.
• System Stability: By discouraging overdrawal of electricity, boards can better manage the supply system, reduce voltage fluctuations, and ensure a stable and reliable power supply.
• Clarity in Regulations: The judgment necessitates a review of existing electricity supply codes to ensure they are consistent with Section 126 of the Electricity Act, 2003, and to avoid any conflicting interpretations.

Conclusion

The Supreme Court’s judgment in Kerala State Electricity Board vs. Thomas Joseph (2022) provides a crucial clarification on the interpretation of “unauthorised use of electricity” under Section 126 of the Electricity Act, 2003. The Court has firmly established that exceeding the sanctioned load, even within the same premises and for the same purpose, constitutes unauthorized use and is subject to penalties. This decision underscores the importance of adhering to the sanctioned load limits to ensure the integrity and stability of the electricity supply system. The judgment emphasizes that regulations cannot override the provisions of the parent Act and that any interpretation must be in line with the legislative intent. The ruling has significant implications for both consumers and electricity boards, necessitating a review of existing practices and ensuring compliance with the law. This judgment serves as a reminder that the Electricity Act, 2003, is a complete code in itself, and any interpretation must be in line with the legislative intent.