14 Dec 2009

Liability to pay minimum dues of electricity remains after disconnection: Supreme Court

In a decision which would not come easy on the consumers, the Supreme Court has upheld the arguments of the State Electricity Board that the consumer is liable to pay minimum electricity dues for a period of six months after disconnection of electricity. The Supreme Court reversed the decision of the High Court which had held in favour of the consumer. The Court was dealing with the applicability of the Regulations framed under Section 49 read with Section 79 of the Electricity (Supply) Act, 1948 which provided that "If the supply to a consumer is disconnected on request or in default before compulsory period of two years is over, he shall be liable for payment of minimum charge for the remaining period by which it falls short of two years or for the period of six months from the date of disconnection whichever is less"

It is intriguing to note the fact situation while bearing in mind this aspect of regulation that minimum electricity charges are not levied on consumers after two years of connection. The consumer was a factory owner at Rudrapur, District Udham Singh Nagar. "In 1990, the Electricity Board sanctioned electric connection of 400 KVA load for the respondent’s factory. Thereafter, as per the requirement of the Regulations, the respondent entered into an agreement with the Board. On 12th February, 1997, the respondent applied for an additional load of 200 KVA, which was duly sanctioned. As a sequel to this, fresh agreement was executed between the parties for the total load of 600 KVA. After one year and seven months, the respondent approached the Board for reduction of load from 600 KVA to 250 KVA. The competent authority of the Board accepted the respondent’s request, who then executed another agreement dated 21st September, 1998. In May 1999, the supply of electricity to the respondent’s factory was discontinued at the latter’s request. After five months, the concerned Executive Engineer sent communication on 5.10.1999 to the respondent requiring it to pay Rs.6,13,592/- towards minimum charges for six months."

The High Court had held in the favour of the consumer being of the opinion that the "Regulations is not applicable to the respondent’s case because the initial guarantee period of two years had ended long ago. The Division Bench also held that the demand of minimum charges cannot be raised after disconnection of the supply of electricity." However the Supreme Court was of the opinion otherwise. It observed as under;

10. A conjoint reading of various paragraphs of agreement dated 21st September, 1998 and the Regulations extracted hereinabove show that before release of supply, every consumer is required to enter into a declaration/agreement for taking electrical energy for minimum period of two years. This period of two years is counted from the date of commencement of supply and is treated as initial period of supply. After expiry of two years, the declaration/agreement continues on year to year basis on the same terms and conditions unless terminated by either party. In terms of para 17 of the agreement, the consumer is treated as old registered consumer of the supplier if there is shifting of connection, change or addition of process or addition or reduction of load. Clause 10(b) of the Regulations lays down that if the consumer applies for reduction of the contracted load and the same is sanctioned by the competent authority, the existing agreement automatically ceases to exist and the consumer is required to sign a fresh agreement for the reduced load effective from the date of allowing such reduction. Clause 17(ii) of the Regulations lays down that if before expiry of the compulsory period of two years, supply is disconnected at the instance of the consumer or on account of default in payment of charges for the energy supplied by the licensee, then the consumer shall have to pay minimum charges for the remaining period or for six months from the date of disconnection, whichever is less. This clause also obligates the consumer to pay estimated expenditure on the erection and demolition of the sub-station and the line actually dismantled due to the disconnection, together with the estimated expenditure on the cartage of the salvaged materials to stores and the cost of unsalvaged materials plus 15% supervision charges on the labour and cartage.
11. From what we have noted above, it is clear that if a consumer applies for reduction of the contracted load, then the existing agreement stands automatically terminated with effect from the date of allowing reduction in load and the consumer is required to execute fresh agreement for the reduced load. If the supply of electricity is disconnected at the consumer’s request or on account of default in payment of the electricity charges before expiry of two years period specified in the agreement and the Regulations, then the consumer is bound to pay minimum charges for the remaining period or for six months counted from the date of disconnection, whichever is less.

Being of this view, the Supreme Court noted that since the fresh agreement was entered into on "21st September, 1998 when the load was reduced from 600 KVA to 250 KVA. The period of two years for which the Board was required to supply electricity to the respondent with a load of 250 KVA commenced from 21st September, 1998. The said period would have ended on 20th September, 2000 and if the respondent had not applied for disconnection, the Board would have supplied electricity to respondent’s factory till that date in accordance with the terms and conditions enumerated in agreement dated 21st September, 1998 and the Regulations. However, the fact of the matter is that just after nine months of execution of fresh agreement, a request was made on behalf of the respondent for disconnection of the supply of electricity and the same was accepted by the competent authority of the Board. As a consequence, supply of electricity to the respondent’s factory was discontinued in May, 1999. Therefore, in terms of second proviso to para 11 of the agreement and Clause 17(ii) of the Regulations, the respondent became liable to pay minimum charges and we do not find any illegality in the action of the Board to create the demand of minimum charges." The Court further noted;

A reading of the order under challenge shows that the High Court decided the writ petition by assuming that the respondent had completed initial guarantee period of two years and Clause 17 of the Regulations is not applicable to its case. In the process, the High Court not only omitted to consider the fact that the respondent had executed fresh agreement dated 21st September, 1998 and in terms thereof the period of two years commenced from the date of agreement, but also misconstrued Clause 17 of the Regulations, subclause (ii) whereof unequivocally lays down that if the supply of electricity is disconnected at the instance of the consumer, the latter is liable to pay minimum charges for the remaining period of the agreement or for six months, whichever is less. The High Court also failed to note that the supply of electricity was disconnected at the respondent’s request within nine months of agreement dated 21st September, 1998. Therefore, the impugned order is liable to be set aside.

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