Electricity Act - Additional Bill Raised By Distributor After Detecting Mistake Not Hit By 2 Years Limitation Under Section 56(2) : Supreme Court

The Supreme Court has held that an additional bill raised by an Electricity Distribution Company as a licensee under the Electricity Act, 2003, after detecting a mistake, will not be hit by the two years limitation under Section 56(2) of the Act.

Section 56(2) says that "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".

The Supreme Court held that any claim made by the licensee after the detection of their mistake may not fall within the mischief, namely, "no sum due from any consumer under this Section", appearing in Sub­section (2) of Section 56.

Holding so, the Court dismissed an appeal filed by a consumer challenging the additional demand raised by the licensee Uttar Haryana Bijli Vitran Nigam Ltd(Case : M/S Prem Cottex v Uttar Haryana Bijli Vitran Nigam Ltd & Ors)

Background facts

The consumer had earlier approached the National Consumer Disputes Redressal Commission against the demand. The NCDRC however dismissed the complaint, holding that there was no 'deficiency of service' on the part of the power company and that the bill was for recovery of "escaped assessment". The consumer appealed to the Supreme Court against the NCDRC order.

Relying on Section 56(2) of the Electricity Act, the appellant argued that no amount due from a customer is recoverable after a period of two years from the date on which it became first due. The appellant also relied on the Supreme Court's verdict in the 2020 case Assistant Engineer (D1), Ajmer Vidyut Vitran Nigam Limited Vs. Rahamatullah Khan alias Rahamjulla, which held that electricity supply cannot be disconnected for additional demand raised after the two year limitation period.

Supreme Court's analysis

Raising additional demand not a "deficiency of service"

A bench comprising Justices Hemant Gupta and V Ramasubramanian first considered the issue whether raising the additional demand will amount to "deficiency of service" within the meaning of the Consumer Protection Act.

The Court held that raising additional demand by itself will not amount to a "deficiency of service".

"The raising of an additional demand in the form of "short assessment notice", on the ground that in the bills raised during a particular period of time, the multiply factor was wrongly mentioned, cannot tantamount to deficiency in service. If a licensee discovers in the course of audit or otherwise that a consumer has been short billed, the licensee is certainly entitled to raise a demand. So long as the consumer does not dispute the correctness of the claim made by the licensee that there was short assessment, it is not open to the consumer to claim that there was any deficiency. This is why, the National Commission, in the impugned order correctly points out that it is a case of "escaped assessment" and not "deficiency in service"".

Observing as above, the bench held the dismissal of NCDRC as "perfectly in order".

Interpretation of Section 56(2)

Next, the Court dealt with the main aspect in the case - the appellant's reliance on Section 56(2).

In this connection, the Court noted that in Rahamatullah decision, it was held that though the liability to pay arises on the consumption of electricity, the obligation to pay would arise only when the bill is raised by the licensee and that, therefore, electricity charges would become "first due" only after the bill is issued, even though the liability would have arisen on consumption. It was held in that decision 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.

Proceeding in this backdrop, the Court in the instant case noted that the key word in Section 56(1) was "where any person neglects to pay".

So, Section 56(1) - which speaks of coercive actions such as disconnection- comes into play only on the negligence of the consumer and not on the negligence of the power distributor.

"What is covered by section 56, under sub­section (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.

In other words, the negligence on the part of the licensee which led to short billing in the first instance and the rectification of the same after the mistake is detected, is not covered by Sub­section (1) of Section 56. Consequently, any claim so made by a licensee after the detection of their mistake, may not fall within the mischief, namely, "no sum due from any consumer under this Section", appearing in Sub­section (2)"(Paras 24 & 25).

The Court also approached the issue from another angle. The judgment authored by Justice V Ramasubramanian observed as follows :

"The matter can be examined from another angle as well. Sub­section (1) of Section 56 as discussed above, deals with the disconnection of electric supply if any person "neglects to pay any charge for electricity". The question of neglect to pay would arise only after a demand is raised by the licensee. If the demand is not raised, there is no occasion for a consumer to neglect to pay any charge for electricity. Sub­section (2) of Section 56 has a non­-obstante clause with respect to what is contained in any other law, regarding the right to recover including the right to disconnect. Therefore, if the licensee has not raised any bill, there can be no negligence on the part of the consumer to pay the bill and consequently the period of limitation prescribed under Sub­section (2) will not start running. So long as limitation has not started running, the bar for recovery and disconnection will not come into effect".

Disagreement with Rahamatullah decision

The judgment expressed disagreement from Rahamatullah verdict to the extent the latter said that remedy of disconnection will be barred after two years. It was held in Rahamatullah that a licensee may take recourse to any remedy available in law for the recovery of the additional demand, but is barred from taking recourse to disconnection of supply under Section 56(2) after the limitation period.

The judgment in the instant case noted that the bar under Section 56(2) applies both to recovery and disconnection.

"A careful reading of Section 56(2) would show that the bar contained therein is not merely with respect to disconnection of supply but also with respect to recovery. If Sub­section (2) of Section 56 is dissected into two parts it will read as follows:­

(i) 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; and

(ii) the licensee shall not cut off the supply of electricity.

Therefore, the bar actually operates on two distinct rights of the licensee, namely, (i) the right to recover; and (ii) the right to disconnect. The bar with reference to the enforcement of the right to disconnect, is actually an exception to the law of limitation. Under the law of limitation, what is extinguished is the remedy and not the right. To be precise, what is extinguished by the law of limitation, is the remedy through a court of law and not a remedy available, if any, de hors through a court of law. However, section 56(2) bars not merely the normal remedy of recovery but also bars the remedy of disconnection. This is why we think that the second part of Section 56(2) is an exception to the law of limitation".

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