Supreme Court Upholds Electricity Dues Recovery Despite Billing Error: Prem Cottex vs. Uttar Haryana Bijli Vitran Nigam Ltd. (2021)

Date of the Judgment: October 5, 2021
Citation: (2021) INSC 695
Judges: Hemant Gupta, J., V. Ramasubramanian, J.
Can an electricity company recover dues from a consumer after discovering a billing error, even if it’s been more than two years since the initial bill? The Supreme Court of India recently addressed this question in a case involving a cotton yarn manufacturer and an electricity distribution company. The court clarified the scope of Section 56 of the Electricity Act, 2003, and its implications for both consumers and providers. The bench comprised of Justice Hemant Gupta and Justice V. Ramasubramanian, with the majority opinion authored by Justice V. Ramasubramanian.

Case Background

M/s Prem Cottex, the appellant, operates a cotton yarn manufacturing business in Panipat, Haryana. They had an electricity connection that was extended from 404.517 KW to 765 KW on August 3, 2006. Three years later, on September 11, 2009, the Uttar Haryana Bijli Vitran Nigam Ltd. (the respondent) issued a “short assessment notice.” This notice claimed that the multiply factor (MF) used in their bills was incorrectly recorded as 5 instead of 10 from August 3, 2006, to August 2009. As a result, the company was underbilled by ₹1,35,06,585. The notice demanded payment, threatening further action.

Aggrieved, Prem Cottex filed a representation on September 22, 2009, and then a consumer complaint before the National Consumer Disputes Redressal Commission, arguing that the demand was due to the respondents’ negligence. They also contended that Section 56 of the Electricity Act, 2003, bars recovery of dues after two years.

Timeline

Course of Proceedings

The National Consumer Disputes Redressal Commission dismissed Prem Cottex’s complaint on October 1, 2009, stating it was a case of “escaped assessment” and not “deficiency in service.” Prem Cottex then appealed to the Supreme Court. Initially, the Supreme Court granted an interim stay on November 13, 2009, but later modified it on August 19, 2014, directing Prem Cottex to pay 50% of the demanded amount. Prem Cottex complied by paying ₹54,03,293 on September 24, 2014, in addition to ₹13,50,000 paid earlier on October 9, 2009.

Legal Framework

The core of the case revolves around Section 56 of the Electricity Act, 2003, which deals with the disconnection of electricity supply for non-payment. Specifically, Section 56(2) 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.”

This provision essentially limits the time within which an electricity provider can recover dues and disconnect supply due to non-payment. The key question is the interpretation of “first due” and whether it applies to cases of billing errors.

Arguments

Appellant (Prem Cottex)’s Arguments:

• Prem Cottex argued that the demand for ₹1,35,06,585 was a result of the electricity company’s negligence and a glaring mistake.
• They contended that under Section 56(2) of the Electricity Act, 2003, no amount can be recovered after two years from when it first became due.
• They stated that they had already charged their customers based on the bills they received and could not go back to them for additional payments.

Respondent (Uttar Haryana Bijli Vitran Nigam Ltd.)’s Arguments:

• The electricity company argued that the multiply factor (MF) was wrongly recorded as 5 instead of 10, leading to underbilling.
• They claimed that the amount demanded was a result of “escaped assessment” due to a genuine mistake, not a deficiency in service.
• They contended that they are entitled to raise a demand when a short billing is discovered.

The innovativeness of the argument by the appellant was that they argued that Section 56(2) of the Electricity Act, 2003, bars recovery of dues after two years, and the respondents cannot recover the amount due to their own negligence.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues but addressed the following key questions:

1. Whether raising an additional demand due to a billing error constitutes a “deficiency in service” under the Consumer Protection Act, 1986.
2. The correct interpretation of Section 56(2) of the Electricity Act, 2003, particularly regarding the two-year limitation period for recovery of dues.
3. Whether the bar under Section 56(2) applies to both disconnection and recovery of dues.
4. The impact of Sub-section (1) of Section 56 on Sub-section (2) thereto.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Cases:

• Assistant Engineer (D1), Ajmer Vidyut Vitran Nigam Limited and Anr. vs. Rahamatullah Khan alias Rahamjulla [CITATION: (2020) 4 SCC 650] – The Supreme Court examined this case to understand the meaning of “first due” in Section 56(2) of the Electricity Act, 2003, and whether a licensee can raise additional demands after the limitation period. The court in this case held that the period of limitation of two years would commence from the date on which the electricity charges became first due under Section 56(2) and that Section 56(2) does not preclude the licensee from raising an additional or supplementary demand after the expiry of the period of limitation in the case of a mistake or bonafide error.
• Mahabir Kishore & Ors. vs. State of Madhya Pradesh [CITATION: (1989) 4 SCC 1] – The Supreme Court referred to this case in the context of Section 17(1)(c) of the Limitation Act, 1963, to understand the concept of discovery of mistake in relation to limitation.

Legal Provisions:

• Section 56 of the Electricity Act, 2003 – The court analyzed this section, which deals with the disconnection of supply in default of payment. Sub-section (2) of Section 56 provides a limitation period of two years for recovery of dues.
• Section 2(1)(g) of the Consumer Protection Act, 1986 – The court referred to this section to define “deficiency” in service.
• Section 17(1)(c) of the Limitation Act, 1963 – The court referred to this section to understand the concept of discovery of mistake in relation to limitation.

Judgment

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

How each authority was viewed by the Court?

The Supreme Court analyzed the authorities as follows:

• Assistant Engineer (D1), Ajmer Vidyut Vitran Nigam Limited and Anr. vs. Rahamatullah Khan alias Rahamjulla [CITATION: (2020) 4 SCC 650]*: The court distinguished this case on facts. While the court in **Rahamatullah Khan** held that the licensee 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 under Section 56(2), the court in the present case clarified that the bar under Section 56(2) applies to both the recovery of dues and the disconnection of electricity supply.
• Mahabir Kishore & Ors. vs. State of Madhya Pradesh [CITATION: (1989) 4 SCC 1]*: The court referred to this case in the context of Section 17(1)(c) of the Limitation Act, 1963, to understand the concept of discovery of mistake in relation to limitation.
• Section 56 of the Electricity Act, 2003: The court interpreted this section, stating that the bar under Sub-section (2) is relatable to the sum due under Section 56, which deals with the negligence on the part of a person to pay for electricity, and not anything else nor any negligence on the part of the licensee.
• Section 2(1)(g) of the Consumer Protection Act, 1986: The court referred to this section to define “deficiency” in service and held that a billing error does not constitute a deficiency in service.
• Section 17(1)(c) of the Limitation Act, 1963: The court referred to this section to understand the concept of discovery of mistake in relation to limitation.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• The consumer’s responsibility to pay for the electricity they consumed.
• The fact that the consumer did not dispute the correctness of the claim of short assessment.
• The interpretation of Section 56 of the Electricity Act, 2003, which the court clarified applies to both recovery and disconnection.
• The distinction between a “deficiency in service” and an “escaped assessment” due to a billing error.
• The court’s view that the negligence of the licensee is not covered by Sub-section (1) of Section 56 of the Electricity Act, 2003.

The court’s reasoning was a blend of factual considerations (the billing error and the consumer’s non-dispute) and legal interpretations (Section 56 of the Electricity Act, 2003).

Logical Reasoning:

The court rejected the argument that the electricity company’s negligence in billing should prevent them from recovering the dues. The court clarified that the two-year limitation period under Section 56(2) applies to both the recovery of dues and the disconnection of electricity supply. The court also highlighted that the consumer did not dispute the correctness of the claim of short assessment.

The court stated, “the bar actually operates on two distinct rights of the licensee, namely, (i) the right to recover; and (ii) the right to disconnect.”

The court further noted, “What is covered by section 56, under sub-section (1), is the negligence on the part of a person to pay for electricity and not anything else nor any negligence on the part of the licensee.”

The court also emphasized, “So long as limitation has not started running, the bar for recovery and disconnection will not come into effect.”

The court concluded that the National Commission was justified in rejecting the complaint and dismissed the appeal.

Key Takeaways

• Electricity providers can recover dues from consumers even if there was a billing error, provided the consumer does not dispute the correctness of the claim.
• The two-year limitation period under Section 56(2) of the Electricity Act, 2003, applies to both the recovery of dues and the disconnection of electricity supply.
• A billing error by the electricity provider does not automatically constitute a “deficiency in service” under the Consumer Protection Act, 1986.
• The negligence of the licensee is not covered by Sub-section (1) of Section 56 of the Electricity Act, 2003.

Directions

The Supreme Court directed the appellant to pay the balance amount of the dues within eight weeks.

Development of Law

The ratio decidendi of this case is that Section 56(2) of the Electricity Act, 2003, bars both the recovery of dues and the disconnection of electricity supply after a period of two years from when the dues first became due. The court clarified that a billing error does not constitute a deficiency in service, and that the negligence of the licensee is not covered by Sub-section (1) of Section 56 of the Electricity Act, 2003. This decision clarifies the interpretation of Section 56 and provides guidance on the rights and responsibilities of both electricity providers and consumers.

Conclusion

In conclusion, the Supreme Court dismissed the appeal, upholding the electricity company’s right to recover dues from Prem Cottex despite the initial billing error. The court clarified that Section 56(2) of the Electricity Act, 2003, bars both recovery and disconnection after two years, and that a billing error does not constitute a deficiency in service. This judgment provides important guidance for both electricity providers and consumers regarding their rights and responsibilities.