Case Note & Summary
The case concerned a dispute between the Bihar State Electricity Board (the licensee) and Hotel Satkar Pvt. Ltd. (the consumer) over electricity charges. The Board had been supplying electricity to the hotel without a formal written agreement. The Board raised bills based on a contract demand of 315 KVA, while the hotel contended that in the absence of an agreement, charges should be based only on actual consumption. When the hotel failed to pay the bills, the Board issued a notice of disconnection under Section 24(1) of the Indian Electricity Act, 1910. The hotel filed a writ petition before the Patna High Court, which by judgment dated 7 September 1979, quashed the disconnection notice and held that no agreement existed, so the Board could only charge for actual consumption. The High Court further held that a bona fide dispute existed and the matter should be referred to the Electrical Inspector under Section 24(2). The Board appealed to the Supreme Court. During pendency, the Court passed interim orders requiring payment for actual consumption. When the Board disconnected supply on 9 May 1984 for alleged non-payment of fresh bills, the hotel moved the Court. By consent order dated 28 May 1984, the parties agreed that an officer not below the rank of Chief Engineer, nominated by the Secretary, Department of Energy, Government of India, would determine the correct amount payable up to date. The Chief Engineer, after hearing both parties, determined that for the period April 1977 to February 1984, the hotel was liable to pay Rs. 9,68,335.67 for actual energy consumption, of which Rs. 5,83,776.34 had been paid, leaving outstanding dues of Rs. 3,84,559.33. The hotel objected to the report, arguing that the consent order was without prejudice to the appeal and that the Electrical Inspector's earlier determination under Section 24(2) could not be ignored, and that the multiplier applied by the Chief Engineer was erroneous. The Supreme Court held that the parties had voluntarily agreed to the consent order and the subsequent determination by the Chief Engineer was binding. The Court found that the Chief Engineer had determined liability on the basis of actual consumption, not contract demand, and that the objections lacked merit. Consequently, the Supreme Court allowed the appeal and upheld the Chief Engineer's determination, making the outstanding amount payable by the hotel.
Headnote
A) Electricity Law - Disconnection under Section 24(1) - Requirement of No Bona Fide Dispute - Indian Electricity Act, 1910, Section 24(1) and 24(2) - The High Court held that a bona fide dispute between licensee and consumer precluded exercise of power under Section 24(1), and the matter should be referred to the Electrical Inspector under Section 24(2). The Supreme Court did not disturb this principle but found that the parties had subsequently consented to an independent expert determination, which superseded the statutory dispute mechanism for the period covered. Held that where parties agree to a consent order, the statutory mechanism under Section 24(2) is not required to be followed for that period. B) Electricity Law - Basis of Charges in Absence of Agreement - Contract Demand vs Actual Consumption - Indian Electricity Act, 1910, Section 24 - The High Court found no agreement between the parties and held that the Board could only charge for actual consumption, not contract demand. The Chief Engineer, appointed by consent, determined liability on the basis of actual consumption, which the Supreme Court accepted. Held that in the absence of an agreement, contract demand is not applicable and actual consumption is the correct basis. C) Civil Procedure - Consent Order and Expert Determination - Binding Effect of Consent Order - Code of Civil Procedure, 1908 (analogous principle) - The parties agreed before the Supreme Court on 28 May 1984 to have an officer determine the dues. The Supreme Court held that having agreed to such determination, the respondent could not wriggle out of it, and the report of the Chief Engineer was binding. Held that a party cannot challenge a consented expert determination unless it is shown to be fraudulent or patently erroneous; here objections were rejected. D) Electricity Law - Statutory Determination under Section 24(2) - Electrical Inspector's Findings Not Final if Superseded by Consent Order - Indian Electricity Act, 1910, Section 24(2) - The respondent argued that the Electrical Inspector's determination in its favor under Section 24(2) could not be ignored. The Supreme Court held that the consent order for a fresh independent determination during pendency of appeal effectively superseded the earlier statutory reference for the period up to February 1984, as the entire controversy was reopened. Held that where parties voluntarily agree to a new mechanism, they are bound by its outcome, and the earlier statutory determination is subsumed.
Issue of Consideration
Whether the licensee could issue a disconnection notice under Section 24(1) of the Indian Electricity Act, 1910 when a bona fide dispute existed; whether the licensee could bill on contract demand in the absence of a written agreement; whether the parties were bound by the consent order dated 28 May 1984 for expert determination and the resulting report.
Final Decision
Supreme Court allowed the appeal, set aside the High Court judgment, and held that the parties were bound by the Chief Engineer's determination of Rs. 9,68,335.67 as total liability up to February 1984, with outstanding dues of Rs. 3,84,559.33 after adjusting Rs. 5,83,776.34 paid. The Court rejected respondent's objections to the report and confirmed that the Chief Engineer had determined liability on the basis of actual consumption, not contract demand. The Board was entitled to recover the outstanding amount.
Law Points
- Bona fide dispute bars disconnection under Section 24(1) of Indian Electricity Act
- 1910
- absence of agreement precludes contract demand billing
- actual consumption is basis for charges
- consent order for expert determination is binding
- party cannot wriggle out of consented adjudication
- statutory determination under Section 24(2) can be superseded by subsequent consent arrangement
