The Supreme Court has dismissed an appeal filed by Dakschinanchal Vidyut Vitran Nigam Ltd. (DVVNL), a distribution licensee in Uttar Pradesh, seeking recovery of Rs.57,74,164 towards Minimum Consumption Guarantee Charges (MCGC) for the period February 1998 to September 1998. The demand was raised on 13 February 2007, nearly nine years after the alleged consumption period.
The dispute originated from an agreement dated 24 February 1997, under which DVVNL sanctioned a 2000 KVA load for the consumer. On 31 January 1998, the licensee offered to increase the contract load to 4000 KVA by adding an additional 2000 KVA facility. However, the consumer expressed no interest in availing this additional load. Despite this, DVVNL raised a demand in 2007 for MCGC corresponding to the 4000 KVA capacity for the period February to September 1998.
The consumer approached the Electricity Ombudsman, which set aside the demand relying on Section 56(2) of the Electricity Act, 2003. The Ombudsman noted that the consumer had not availed the extended load facility and that the amount claimed had not been continuously treated as recoverable arrear from 1998 until the date of demand in 2007.
Aggrieved by the Ombudsman’s order, DVVNL filed a writ petition before the Allahabad High Court. The High Court dismissed the petition, observing that no bill was issued for the additional 2000 KVA load along with regular bills, and there was no material or pleading showing that the sum had been continuously treated as recoverable arrear. The High Court further emphasized that the word 'due' in Section 56(2) refers to a specific point in time and not an uncertain or contingent obligation.
DVVNL then appealed to the Supreme Court. A bench comprising Justice SVN Bhatti and Justice NV Anjaria dismissed the appeal, upholding the High Court’s findings. The Court referenced Section 56(2) of the Electricity Act, 2003, which provides that no sum due from a consumer under the section shall be recoverable after two years from the date it first became due, unless such sum has been continuously shown as recoverable arrear of charges for electricity supplied.
The Court observed that for recovery beyond the two-year limitation period, the licensee must demonstrate that the amount was continuously treated and shown as an arrear in monthly bills. In the present case, since the additional 2000 KVA load was never availed by the consumer and no bills were raised for it, the amount claimed could not be considered as continuously accruing arrear.
The Bench reiterated that even if the demand were otherwise valid, raising it for the first time on 13 February 2007 for consumption pertaining to February–September 1998 would be barred by limitation, as the amount was not continuously treated as recoverable arrear during the intervening period.
The judgment also referred to prior decisions, including KC Ninan vs Kerala State Electricity Board and others (2023) and Assistant Engineer (D1), Ajmer Vidyut Vitran Nigam Limited v. Rahamatullah Khan, to reinforce the principle that delayed demands for electricity charges, without continuous treatment as arrear, are not maintainable under the Act.
By upholding the High Court’s order, the Supreme Court affirmed that the mere existence of a contractual obligation does not suffice to extend the limitation period under Section 56(2); the licensee must actively and continuously treat the sum as arrear through regular billing or other demonstrable actions. The Court concluded that the demand raised by DVVNL was legally unsustainable and dismissed the appeal accordingly.