Case Note & Summary
The case involves a dispute between the Madhya Pradesh Madhya Kshetra Vidyut Vitran Company Limited (appellant), a state electricity distribution utility, and Bapuna Alcobrew Private Limited (respondent), a company manufacturing alcohol. The parties entered into an agreement in 1991 for supply of electrical energy, with the respondent guaranteeing minimum consumption. Supplementary agreements increased the contract demand. In 1996, the respondent was permitted to install a biogas turbo generating set for captive use, subject to conditions including monthly minimum consumption. In 2000, the appellant cancelled the permission alleging parallel operation. The respondent challenged this in the High Court, which stayed the cancellation subject to deposit of minimum guarantee charges. The appellant issued a show cause notice quantifying liability at Rs 70,50,000. The respondent withdrew its writ petition in 2006 after a policy change. In 2009, the appellant issued a second show cause notice for the same amount for the period June 1996 to May 2000, followed by a demand and disconnection notice. The respondent filed a fresh writ petition. A single judge partly allowed it, holding the respondent liable for minimum guarantee charges but striking down retrospective application of enhanced demand. The division bench allowed the appeal, quashing the second show cause notice on the ground that the claim was barred by limitation under Section 56(2) of the Electricity Act, 2003, which provides a two-year limitation period. The Supreme Court held that Section 56(2) is not retrospective and does not apply to arrears that accrued before the Act came into force on June 10, 2003. The dues in question became due between 1996 and 2000, before the Act. Therefore, the limitation period did not apply. However, the Court noted that the High Court had also held that the appellant failed to prove it supplied the minimum guaranteed energy, which was a finding not challenged by the appellant. On that ground, the demand was not sustainable. The Supreme Court allowed the appeal in part, setting aside the division bench's order on limitation but upholding the quashing of the demand on the ground of failure to prove supply.
Headnote
A) Electricity Law - Limitation for Recovery of Dues - Section 56(2) of Electricity Act, 2003 - Retrospectivity - The issue was whether the two-year limitation period under Section 56(2) of the Electricity Act, 2003 applies to arrears that accrued before the Act came into force. The Court held that the Act is not retrospective, and the limitation period does not apply to dues that became due before June 10, 2003. The second show cause notice issued in 2009 for dues from 1996-2000 was not barred by limitation. (Paras 3-4) B) Electricity Law - Minimum Guarantee Charges - Duty to Supply - The Court held that the consumer is liable to pay minimum guarantee charges if agreed, but the supplier must prove it fulfilled its duty to supply. In this case, the High Court's finding that the supplier failed to prove supply was not challenged, so the demand was not sustainable on that ground. (Paras 3-4)
Issue of Consideration
Whether the two-year limitation period under Section 56(2) of the Electricity Act, 2003 applies to arrears that accrued before the Act came into force, and whether the demand for minimum guarantee charges was valid.
Final Decision
The Supreme Court allowed the appeal in part. It held that Section 56(2) of the Electricity Act, 2003 is not retrospective and does not apply to arrears that accrued before the Act came into force. However, the Court upheld the quashing of the demand on the ground that the appellant failed to prove it supplied the minimum guaranteed energy, as found by the High Court and not challenged.
Law Points
- Section 56(2) of Electricity Act
- 2003 is not retrospective
- limitation period does not apply to pre-2003 dues
- minimum guarantee charges are recoverable
- duty to supply must be proved
