S. 56 Electricity Act 2003 | 2 Year Limitation Period Not Applicable To Dues Incurred Before Enforcement Of 2003 Act : Supreme Court

The Supreme Court held that the liability arising out of the electricity bill dues which accrued before the enforcement of the Electricity Act, 2003 (“2003 Act”) would not be barred by the 2-year old limitation period prescribed under Section 56 of the 2003 Act.The Court held that once a liability is judicially crystallised and remains unchallenged, the person is bound by the principle of estoppel. A bench of Justices Dipankar Datta and Pankaj Mithal heard a challenge related to the electricity consumption in which Respondent no. 1 had challenged the due raised by the Appellants but the same was held against him by the Madhya Pradesh High Court and then in a miscellaneous petition. However, ignoring the order, the petition was withdrawn and a second round of litigation was invoked on the same issue which ended in his favour as the division bench of the High Court applied the law of limitation. BackgroundAs per the brief facts, Respondent No.1 had entered into an agreement in November 1991 with the Madhya Pradesh electricity distribution utility (Appellants) for the supply of electricity energy against guaranteeing a minimum consumption that would yield an annual revenue of Rs. 34,747. Subsequently, supplementary agreements were executed by both parties to increase the consumption of electrical energy. In July 1996, an additional increase of 560 kVA was done making it a total of 1170 kVA. Undisputedly, Respondent No. 1 sought permission from the Appellants to install and run an 807 kVA biogas turbo-generating set for captive use. The permission was granted on the grounds that the TG set should not run parallel to the Appellants' supply system and the TG set should be used only as a stand-by measure upon failure of the Appellants to supply power. Moreover, Respondent No. 1 was bound to pay minimum consumption of units, with 35% load factor in case of no power cut, and 39% load factor in cases of power cut. In 2000, the Appellants sent a notice to Respondent No. 1 for the cancellation of permission to run the TG set, alleging that the latter was running the TG set as a parallel source. This cancellation notice was challenged before the Madhya Pradesh High Court which on May 4, 2000, through an interim order stayed the operation but directed Respondent No. to deposit 'minimum guarantee charges' as against the 807kVA load. Thereafter, the Appellants sent the first show cause notice for amount of Rs. 70,50,000 to be paid within 15 days of the notice. Respondent no.1 challenged the notice in a miscellaneous petition filed in the first writ petition however he was not successful. On February 14, 2001, the High Court held that Respondent No. 1 is liable to pay the minimum guarantee charges irrespective of whether electricity is consumed or not. Eventually, Respondent No. 1 withdrew the first writ petition.In 2009, again a second show-cause notice was issued for period June 1996 and May 2000. Thereafter, demand was raised via an energy bill wherein the pre-existing liability of Rs. 70,50,478 was mentioned as “Other Chars. (sic, charges)”. Simultaneously, a demand-cum-disconnection notice was issued that in the event of non-payment, the supply would be disconnected. The second show cause was challenged in another round of litigation before the High Court. On April 6, 2009, the single judge ordered interim stayed on the second notice but on condition that Respondent no. 1 would furnish a bank guarantee for the amount equivalent, which was duly furnished. Eventually, the High Court on July 16 partly allowed the appeal and the High Court held that Respondent No. 1 is obligated to consume the monthly minimum units on the load factor since it agreed to it. But, the retrospective application of the enhanced contract was struck down and the Appellants were directed to recalculate it, with the enhanced demand (1170 kVA) being applicable from October 14, 1996 onwards. The revised demand came out to be Rs.56,81,977.58, which was recovered through the bank guarantee. However, the encashment was challenged by the Respondent no. 1 in a contempt petition. The High Court's order was also challenged before the division bench. What did the High Court say?On October 13, 2011, the division bench allowed an appeal and quashed the second show cause notice under Section 56(2) of the Electricity Act, 2003. On whether Respondent no. 1 was liable to pay minimum guaranteed consumption, the High Court held that the Appellants were within their right to demand minimum guarantee charges but there also existed a corresponding duty upon such appellant to supply electrical energy to such an extent, fulfilment of which duty had not been.Second, the High Court applied limitation and determined whether the liability which accrued when the Electricity (Supply) Act, 1948 was applicable, when the first show cause was issued, could be enforced after the 2003 Act came into effect when the second show cause was issued. Section 56(2) of the 2003 Act provided...

S. 56 Electricity Act 2003 | 2 Year Limitation Period Not Applicable To Dues Incurred Before Enforcement Of 2003 Act : Supreme Court

Gursimran Kaur Bakshi

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S. 56 Electricity Act 2003 | 2 Year Limitation Period Not Applicable To Dues Incurred Before Enforcement Of 2003 Act : Supreme Court

Gursimran Kaur Bakshi

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Gursimran Kaur Bakshi

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