Recovery of Bills under the Electricity Act

Introduction

The Supreme Court has very famously observed that the Electricity Act, 2003 is a consumer-friendly statute, constituting of provisions designed to suit the best interests of the consumers. Furthermore, the best interests of distribution licensees and suppliers have also been accounted for.[1]

A five-judge Bench of the Hon’ble Supreme Court has held in the case of State of Andhra Pradesh v. National Thermal Power Corporation Ltd[2], that electricity is a ‘good.’ Thereby, like any other good, electricity can be traded based on contractual agreements and so, agreements relating to sale or purchase of electricity have an inherent contractual binding obligation.  A buyer is responsible for paying for the goods at the time of purchase or consumption. The relevant clause from the contract will be used to determine the amount, and the time for such payment. In this article we have tried to answer certain queries on recovery of bills from end-consumer in the electricity sector in India.

Q) Can a distributing company disconnect supply of electricity in default of payment?

When a customer defaults on clearing the electricity bills, the distributing company can use its power to suspend electricity service under Section 56(1). The distributor must make a demand to the consumer for payment within a stipulated time before discontinuation of supply. After the stipulated period is over and the payment is not made, the distributor can discontinue the supply.

Further, if the consumer has paid the electricity charges due from him for each month calculated based on average sum paid by him during past six months or has deposited an amount equal to the sum claimed against him, the supply should not be interfered with.

In case the demand for the outstanding dues has been raised two years after the sum became ‘first due,’ the licensee is not authorised to recover such dues.

In the case of Assistant Engineer (D1), Ajmer Vidyut Vitran Nigam Limited v Rahmatullah Khan[3], the question which came before the Supreme Court was what is the definite meaning of the expression ‘first due?’ In this regard, the court observed that only upon consumption of electricity, the obligation to pay arises. Electricity charges would only become ‘first due,’ after the bill is issued to the consumer, even though the liability to pay arises on the consumption of electricity. 

Q) What legal remedies does a consumer have if he is dissatisfied with the electricity bill generated against him?

On most occasions, the electricity bill comprises of the duration within which the bill must be paid.

If a bill or a demand is raised by the supplier or the distributing company, which is disputed by the consumer, his first step should be approaching the Consumer Grievance Redressal Forum of the distribution licensee. Under the Act, all distribution licensees are required to establish a forum for redressal of grievances of the consumers relating to matters of billing, metering, delay in providing new connection or change in name or enhancement of loads etc. Further, if any consumer is aggrieved by non-redressal of his grievances placed under the forum, such consumer must make a representation for the redressal of his grievance to the office of the Ombudsman. Both, Consumer Grievance Redressal Forum, and the office of the Ombudsman constitute the first appellate authority in cases of issues relating to disputed bills. The state commissions are not the appropriate authority to deal with such matters.

Alternatively, the consumer can take recourse to other remedies available in law. The aggrieved consumer can file a consumer complaint before the respective District Consumer Forum, who upon verifying the veracity of the complaint can hold the distribution company to not bill the consumer with such unjustified amount, as was disputed. Further, a suit for declaration and injunction can be filed at the respective District Court, where the aggrieved party resides.

If the governing agreement provides for arbitration (out of court settlements), the consumer can initiate an arbitration proceeding against the said distributor and avail an order requiring the distributing company to not bill the consumer with such unjustified amount.

Q) Can electricity dues against the previous owner of property be transferred to new owner, upon default of nonpayment by previous owner?

In a case before the Delhi High Court in 2006, the petitioner purchased a new property and had applied for a new electricity connection. However, his electricity connection was disrupted. Upon checking, he found out that since the previous occupant had not cleared his electricity dues, his connection had been disrupted. The Delhi High Court held that it was immaterial whether or not the new owner had information of such outstanding bills, he must clear the dues before the supply is restored based on Clause 2.1 (iv) of the General Conditions of Supply.

However, the Supreme Court held in 2008 that since electricity is regarded as ‘goods,’ sale of electricity is regarded as sale of any goods. Thereby, there must be a privity of contract between the parties. The previous owner had entered a contract of purchase of electricity with the distributor; however, the new owner remains distant from any such contract. Thereby, in absence of any agreement, the new owner cannot be made to pay for outstanding dues of the previous owner.

Furthermore, the Supreme Court noted that it was very reasonable on part of the distributing companies to levy such charges on the new owner, based on provisions of the General Conditions of Supply. Otherwise, it would lead to a tendency where people involved in unscrupulous activities obtain electricity supply for a period, and to escape payment, sell the property and move on to another property. This would make it difficult, rather impossible for the distributor to recover its dues. Importantly, it is the duty of the new occupant to make sure that the property in which he intends to shift, does not have any outstanding bills.

Appropriate clauses must be made in the deed of sale or lease, to avoid payment of any outstanding bills. 

Q) In terms of dispute relating to grant of open access, what is the correct forum to approach?

The APTEL has clearly held that the Electricity Act expressly states that the Commissions must ensure that the obligation to meet Open Access requirements are fulfilled, which would include giving orders to grant Open Access, and that the respective commission would be the only entity authorized to handle disputes relating to the grant of Open Access. The Consumer Grievance Redressal Forum is not permitted to assume authority over this matter. In other words, the Consumer Grievance Redressal Forum formed by the Distribution Licensee will not have the authority to hear or determine a case in which the Distribution Licensee has breached the law’s requirement to provide Open Access. Therefore, the State Commission alone can resolve such an issue.

Q) How does compounding of offence take place under the Electricity Act, 2003?

If any person has committed or is suspected of committing the offence of theft of electricity (which is punishable under the Electricity Act), can deposit a sum of money to discharge himself off the liability. This process is known as compounding of offence. The sum must be deposited to the authorised officer of the state government, who will then accept such sum of money for compounding of offence.

Before the institution of the case, the accused person is served with the option of getting the offence compounded. If the accused accepts the option, the authorised officer gets jurisdiction to compound the offence and call upon the accused to pay the same. Upon compliance therewith, any existing proceedings against the accused would be terminated, and he will be set at liberty and no new proceedings would be brought in any criminal court.

However, the power vested with the authorised officer is discretionary in nature and he can decide to accept or reject a case for compounding, based on the gravity of the offence. Further, an offer for compounding of offence will be allowed only once for any person.

The rate at which the sum of money for compounding must be collected based on per Kilowatt (KW)/Horsepower (HP) is:

Q) Can a consumer raise a dispute when standard of performance is not met by the distribution licensee?

It is the responsibility of the state commissions to specify standards of performance for the licensees. If the licensee fails to meet the specified standards, such licensee/licensee company is liable to pay compensation to the person affected by this. The amount for such compensation will be decided by the state commissions.

Based on principles of natural justice, the compensation can only be granted after hearing the licensee company and their reason for such default. After hearing, if the commission is of the opinion that compensation should be granted, it will order the concerned licensee to compensate the affected party within ninety days of passing of such order.

[1] (2008) 10 SCC 321

[2] (2002) 5 SCC 203

[3] (2020) 4 SCC 650