The Supreme Court has ruled that electricity dues ordinarily cannot be recovered after two years from the date they first become payable unless the outstanding amount has been consistently reflected as an arrear in subsequent electricity bills.
A bench comprising Justices SVN Bhatti and NV Anjaria applied this principle while dismissing an appeal filed by Dakshinanchal Vidyut Vitran Nigam Ltd. (DVVNL), which had sought to recover ₹57.74 lakh from a consumer towards Minimum Consumption Guarantee Charges (MCGC).
The disputed charges related to an additional 2,000 KVA load proposed to the consumer for the period between February and September 1998. The demand, however, was raised only on February 13, 2007—almost nine years after the period for which the charges were claimed.
The Supreme Court agreed with the Allahabad High Court that the demand could not be sustained.
At the heart of the dispute was Section 56(2) of the Electricity Act, 2003. The provision prevents recovery of a sum due from a consumer after two years from the date it first became payable, unless the amount has been continuously shown as recoverable arrears in the electricity bills.
The Court stressed that the exception to the two-year limitation cannot be invoked merely because a licensee later decides to raise a demand. The outstanding amount must have been consistently carried forward as an arrear.
Dispute over additional 2,000 KVA load
The consumer had originally applied for an electricity connection with a contracted load of 4,000 KVA. Owing to limitations at the time, DVVNL sanctioned and released only 2,000 KVA under an agreement executed on February 24, 1997.
On January 31, 1998, the distribution licensee offered to provide another 2,000 KVA. The consumer, however, did not express interest in taking the additional load.
Despite the additional facility never being utilised, DVVNL subsequently sought ₹57,74,164 as MCGC for February to September 1998. The demand was raised for the first time in February 2007, with the licensee taking the position that the contracted capacity during the relevant period was 4,000 KVA.
The consumer challenged the demand before the Electricity Ombudsman.
The Ombudsman relied upon Section 56(2) and set aside the demand. It noted both the fact that the additional load had not been availed and that the alleged dues had not been continuously reflected as recoverable arrears during the intervening years.
DVVNL then approached the Allahabad High Court, but the challenge failed. The distribution licensee subsequently carried the matter to the Supreme Court.
Supreme Court backs limitation rule
The Supreme Court found no reason to disturb the findings of the High Court.
The bench observed that an electricity licensee can pursue older dues beyond the two-year period only where the amount has been continuously shown as recoverable arrears in the consumer’s monthly bills.
In the present case, no such material was produced.
The Court also noted that regular monthly electricity bills were issued under the 1997 agreement, but the alleged charges relating to the additional 2,000 KVA were not included in those bills.
As a result, the amount became due at the point when the licensee was entitled to raise the relevant bill. The Court emphasised that the expression “due” refers to a definite point in time rather than an indefinite or open-ended period.
Since the disputed amount was not continuously carried as arrears and the demand surfaced for the first time in 2007 for charges dating back to 1998, the limitation under Section 56(2) applied.
Demand raised nine years later rejected
The Court endorsed the High Court’s conclusion that even assuming the charges were otherwise payable, a demand first raised on February 13, 2007 for the period February to September 1998 was legally barred.
The bench also referred to the Supreme Court’s earlier decisions in KC Ninan v. Kerala State Electricity Board and Others and Assistant Engineer (D1), Ajmer Vidyut Vitran Nigam Limited v. Rahamatullah Khan alias Rahamjulla while examining the legality of the delayed demand.
With no basis to interfere with the findings of the lower forums, the Supreme Court dismissed DVVNL’s appeal.
The ruling reinforces an important safeguard for electricity consumers: a distribution licensee cannot allow an alleged liability to remain dormant for years and then revive it through a fresh demand. To overcome the two-year limitation, the amount must have been continuously identified and carried forward as an arrear.
