* HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: April 24, 2009
+ LPA No. 356/2007
NORTH DELHI POWER LTD. ..... Appellant
Through: Mr. Sudhir Nandrajog, Senior
Advocate with Mr. Diwakar
Sinha and Mr. Achin Garg,
Advocates.
versus
DELHI BOTTLING CO. LTD. ..... Respondent Through: Mr. Arvind K. Nigam, Senior
Advocate with Mr. Raghav
Tandon and Mr. Rohit Singh,
Advocates.
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE NEERAJ KISHAN KAUL
1. Whether Reporters of local papers may be allowed to see the
judgment?y
2. To be referred to the Reporter or not? y
3. Whether the judgment should be reported in Digest?y
AJIT PRAKASH SHAH, CJ (ORAL) :-
1. This Letters Patent Appeal is directed against the judgment and
order of the learned single Judge dated 30th March, 2007 in W.P.(C)
No. 6705 of 1998, whereby the impugned communications dated 2nd
December, 1998 and 22nd December, 1998 and the enclosed
supplementary bills are quashed.
2. The facts leading to the present appeal are that the respondent,
inter alia, carries on the activities of soft drinks bottling and mineral
water. The respondent was sanctioned an industrial load of 530 HP
on 28th September, 1989 and an additional load of 250 HP on 28 th
September, 1989. An inspection of the premises was carried out on
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9th October, 1991 by the officials of the Delhi Vidyut Board (now
North Delhi Power Limited, in short ‘NDPL’) and the following
irregularities were noticed viz. (i) connected load found more than
committed load, (ii) misuse of supply due to sub-letting, (iii) running
industry without Municipal Licence and (iv) low power factor due to
non-installation of shunt capacitor. A show-cause notice dated
20th/27th January, 1992 for levy of surcharge on account of the load
violation/misuse of supply/non-installation of shunt capacitor was
issued referring to the inspection carried on 9th October, 1991 and
the irregularities found in the said inspection. It was stated that it
was proposed to levy certain penalties as per the provisions of tariff
schedule for the relevant year. It was further stated that necessary
action to revise the bills as per applicable tariff was contemplated in
respondent’s case w.e.f. 9th Octobere, 1988 i.e. last three years from
the date of the inspection or from the date of the installation of the
connection, whichever is longer.
3. The respondent replied to the said notice on 7th February, 1992
denying the allegations and requesting for withdrawal of the notice.
By a communication dated 17th February, 1992 the appellant
informed the respondent that the reply was not satisfactory. The
respondent was asked “to take up the matter with XEN (Enf) 1SRD
for further clarification”. In the meantime, on the basis of the
inspection report dated 9th October, 1991, the appellant started
billing as per relevant tariff entry w.e.f. January, 1992 and this was
challenged by the respondent by a substantive suit filed in civil court.
The subsequent bills were also challenged by separate suits. In all
LPA No. 356/2007 Page 2 of 15
36 suits had been filed by the respondent in the civil court. All 36
suits filed by the respondent were dismissed by the trial court on 1 st
July, 1995. The respondent filed thirty-six regular first appeals,
which were dismissed by the Appellate Court on 11th March, 1996.
In April, 1996, the respondent filed Regular Second Appeals, RSA
Nos. 37 to 72 of 1996, in this Court. These appeals were finally
disposed of vide order dated 2nd December, 2003.
4. Meanwhile, on 12th August, 1996 pursuant to the request made
by the respondent on 20th February, 1992, the appellant re-inspected
the premises. The Inspection report dated 12th August, 1996
indicated that there were no irregularities and that the equipments
connected were in order. The appellant again raised bills indicating
the same levies. The respondent then instituted a fresh civil suit
being Suit No.697/1997 in the court of Civil Judge. In this suit a
compromise was arrived at between the parties, which has been
recorded by the learned Civil Judge in his order dated 23rd November,
1997. As per the said compromise, it was agreed that the penalties
on account of sub-letting shall be withdrawn from the date of
submission of test notice, i.e. 24th February, 1992. The low power
factor penalty was withdrawn with effect from August, 1996. It
appears that since the respondent had applied for re-inspection of
the premises by submitting a test inspection notice on 24th February,
1992, the sub-letting charges were agreed to be withdrawn from the
said date.
5. By the first impugned communication dated 2nd December,
1998, the appellant raised a supplementary bill amounting to Rs.
LPA No. 356/2007 Page 3 of 15
20,33,662.86 for the period from 9th October, 1988 that is last three
years from the date of the inspection i.e. 9th October, 1991. The
respondent protested against this demand by letter dated 7th
December, 1998 issued by its counsel, wherein it was contended that
the demand was barred by limitation and that the regular second
appeals between the parties were still pending adjudication before
this Court. It was further contended that the appellant itself by its
communication dated 20th March, 1998 decided to withdraw the
misuse charges with effect from 24th February, 1992 and therefore,
there was no basis to raise the bills against the respondent for the
period prior to the said date. However, by the second impugned
communication dated 22nd December, 1998, the appellant overruled
the objections and reiterated the demand as raised earlier.
6. Being aggrieved, the respondent has filed the writ petition
being WP(C) No.6705 of 1998 seeking a direction to quash the
impugned communications dated 2nd December, 1998 and 22nd
December, 1998 and the enclosed bills towards the misuse charges
for the period between 9th October, 1988 and October, 1991. The
principal challenge in the petition is that the demand raised is barred
by limitation. Secondly, it is contended that the demand is barred by
constructive res judicata and reference is also made to the provisions
of Order II Rule 2 of the Code of Civil Procedure, 1908 (hereinafter
referred to as ‘CPC’). It is further contended that the impugned
judgment is based on the inspection report dated 9th October, 1991
which also stood repudiated in the light of the said subsequent
development. Lastly, it is contended that the supplementary demand
LPA No. 356/2007 Page 4 of 15
violates the principles of natural justice since the decision contained
in the communication dated 22nd December, 1998 was without
affording the respondent an opportunity of being heard.
7. By order under appeal the learned single Judge has held that
the impugned demand is barred by limitation, that the principles of
constructive res judicata would apply and that the compromise
recorded on 23rd November, 1997 should be read as governing all
liabilities of the respondent upto that date.
8. Mr. Sudhir Nandrajog, learned senior counsel appearing for the
appellant NDPL submitted that under Section 22 of the Indian
Electricity Act, 1910 there is an obligation on the licensee to supply
electricity and on the consumer to receive on the same terms and
conditions as contained in the tariff. There is also an obligation on
the consumer to make payment and therefore, enforcement of this
obligation of the consumer by raising a bill was the right of the
electricity company. According to him, limitation would not begin to
run till such time a bill was not raised. He submitted that there is no
provision in the Act that stipulated the period within which an
electricity bill was to be raised. He placed reliance on the decision of
this Court in H.D. Shourie v. Municipal Corporation of Delhi, AIR
1987 Delhi 219 which was affirmed by the Division Bench in
Municipal Corporation of Delhi v. H.D. Shourie, 53 (1993) DLT 1.
It was further contended by the learned senior counsel for the
appellant that the impugned demand is justified on the principle of
escaped billing” which has been approved by the Supreme Court in
Swastic Industries v. Maharashtra State Electricity Board, AIR
LPA No. 356/2007 Page 5 of 15
1997 SC 1101. It was also contended that there is no question of
constructive res judicata particularly since the compromise dated 23rd
November, 1997 did not cover the period from 9th October, 1988 to 9th
October, 1991. Learned senior counsel submitted that even in the
order dated 2nd December, 2003 disposing of the Regular Second
Appeals, this Court held that “the charged levied or imposed by the
respondent prior to 9.10.1991 are legitimate and payable, however,
charges on the basis of load violation subsequent to 9.10.1991 are
quashed”. Therefore, he contended that this Court had upheld the
right of the appellant to recover charges prior to 9th October, 1991.
9. In reply Mr. Arvind Kumar Nigam, leaned senior counsel
appearing for the respondent contended that under Section 24 of the
Indian Electricity Act, 1910, the undertaking was not entitled to
disconnect the respondent’s supply for non-payment of the claim
which was barred by the law of limitation. It was urged by the
counsel that Section 24 of the Indian Electricity Act, 1910, provided
an alternative drastic and penal remedy or method which may be
followed by a licensee in preference to or by way of an alternative to
filing a suit. It was submitted that such a provision should be
strictly constructed and by any such coercive method or power of
withholding electric supply, the licensee ought not to be allowed to
recover old or stale claims going back over a period of ten years. He
referred to the phrases “neglects to pay” and “charge or sum due
from him”, and submitted that an amount, the recovery of which was
barred by the law of limitation, could not be properly regarded as
‘due’ by the consumer i.e. the respondent to the appellant
LPA No. 356/2007 Page 6 of 15
undertaking. The counsel also referred to the principal governing
Order II Rule 2 CPC and the observations of the Supreme Court in
the case of Forward Construction Company v. Municipal
Corporation of Greater Bombay AIR, 1986 SC 391. According to
him the appellant board having failed to raise the issue about the
additional claim in the civil suit would be barred by the principles of
constructive res judicata from makng such claim. Mr. Nigam finally
contended that the supplementary demand violates the principles of
natural justice since the decision contained in the communication
dated 22nd December, 1998 was taken without affording an
opportunity of hearing to the respondent.
10. Having considered the submissions made in this appeal, the
first question which calls for our consideration is whether the
impugned demand is barred by limitation. In order to appreciate the
issue of limitation, it is necessary to refer to some of the provisions of
the Indian Electricity Act, 1910 which are relevant for our purpose.
Section 22 refers to the obligation on a licensee to supply energy to
every person within the area of supply who makes an application for
such supply. Sections 22A and 22B confer power on the State
Government to give directions to a licensee in regard to supply of
energy to certain class of consumers, and the latter Section confers
power to control the distribution and consumption of energy. Section
23 prohibits the licensee from showing undue preference to any
person in making any agreement for the supply of energy. We then
come to Section 24 of the Indian Electricity Act, 1910, which is
material for the purpose of this appeal, is fully set out and it reads as
LPA No. 356/2007 Page 7 of 15
follows:-
“24. Discontinuance of supply to consumer
neglecting to pay charge.- (1) Where any
person neglects to pay any charge for energy or
any sum, other than a charge for energy due from
him to a licensee in respect of the supply of
energy to him, the licensee may, after giving not
less than seven clear days’ notice in writing to
such person and without prejudice to his right to
recover such charge or other sum by suit, cut off
the supply and for that purpose cut or disconnect
any electric supply-line or other works, being the
property of the licensee, through which energy
may be supplied, and may discontinue the
supply until such charge or other sum, together
with any expenses incurred by him in cutting off
and reconnecting the supply, are paid, but no
longer.
(2) Where any difference or dispute 5[which by or
under this Act is required to be determined by an
Electrical Inspector, has been referred to the
Inspector before notice as aforesaid has been
given by the licensee, the licensee shall not
exercise the powers conferred by this section
until the Inspector has given his decision:
Provided that the prohibition contained in this
sub-section shall not apply in any case in which
the licensee has made a request in writing to the
consumer for a deposit with the 7[Electrical
Inspector] of the amount of the licensee’s charges
or other sums in dispute or for the deposit of the
licensee’s further charge for energy as they
accrue, and the consumer has failed to comply
with such request.”
11. The provisions of Section 24 of the Indian Electricity Act, 1910
have to be properly appreciated in the context of the obligations cast
and the restrictions placed on the licensee under the provisions of
the Indian Electricity Act, 1910, which we have earlier referred to.
Within the supply area the licensee is obliged to supply electricity on
an application to any consumer and cannot discriminate between one
consumer and another. The licensee is also obliged to follow certain
LPA No. 356/2007 Page 8 of 15
directions given by the State Government as also made subject to the
power of the State Government to control the distribution and
consumption of energy within the area of the license. Section 24,
regulates the licensee’s power to disconnect the supply to a consumer
within this area of supply who has defaulted in respect of payment of
amounts owing to the license and a further restriction is imposed on
the license, which is that he can discontinue the supply only until
such time as the charges or the sums due are not paid by the
consumer together with reimbursement of the additional expenses
incurred by the licensee for cutting off and reconnecting the supply.
Therefore, immediately upon the charges or the sums due and these
additional expenses are paid, the supply has to be restored to the
consumer whatever be the nature of the default, the number of
defaults or the period and extent of the default. In the light of these
strict provisions, it is not possible to read the word “due” in the
narrower sense viz. as only restricted to amounts within the period of
limitation or which could be successfully claimed by a suit.
Moreover, this issue is of no longer res integra in view of the
authoritative pronouncement of the law by the Supreme Court in
Swastic Industries Vs. Maharashtra State Electricity Board
(supra) and the judgment of the Division Bench of this Court in H. D.
Shourie Vs. Municipal Corporation of Delhi & Anr. (supra)
12. Before we refer to the decision of the Supreme Court in
Swastic Industries Vs. Maharashtra State Electricity Board
(supra), we may make a reference to the decision of the Division
Bench of the Bombay High Court in Bharat Barrel and Drum
LPA No. 356/2007 Page 9 of 15
Manufacturing Co. Pvt. Ltd. Vs. The Municipal Corporation of
Greater Bombay and Anr., AIR 1978 Bombay 369. In that case,
the contention was that a large portion of the claim of the
Undertaking was time barred except that for the period of three years
immediately preceding the demand. It was contended that under
Section 24 of the Electricity Act the Undertaking was not entitled to
disconnect the appellant’s supply for non-payment of that part of the
claim which was barred by the law of limitation. Rejecting the
argument, the Division Bench in paragraph 13 has held as under:
“13. It was submitted that the interpretation
canvassed for by counsel for the appellants was more
valid by reference to the language employed in sub-
sec.(1) of S. 24, which preserved the licensee’s right to
file a suit to recover the charges or sums due. It was
argued that if in such suit the license can only recover
the charges or sums within the period of limitation,
these could be the only charges or sums (viz. those
within the period of limitation) for the non-payment of
which the electric supply could be cut off by the
licensee. In our opinion, the argument is not well-
founded. It has to be provided that the right to
discontinue the supply of electricity is without
prejudice to the licensee’s right to file a suit to recover
the amounts, since by reason of disconnection of the
supply the licensee will not necessarily obtain the
amounts due from the consumer. It became
necessary therefore to protect the licensee’s right to
recover such amounts by ordinary civil action and
merely because in such an action the defendant to the
suit i.e. the consumer may have the defence of
limitation open to any portion of the claim would not
warrant such considerations being applied to the
licensee’s right of discontinuance of supply for non-
payment of the amounts owed to the licensee. The
provision contained in S.24(1) which enabled the
licensee to discontinue electric supply to a particular
consumer is mainly by way of relieving of the licensee
of the obligation on him to be found contained in S. 22
viz. to make supply of electricity on application to all
consumers within the area of supply. Once the proper
position is perceived, then there is no warrant for
obliging the licensee to go on supplying electricity to aLPA No. 356/2007 Page 10 of 15
consumer who has not paid the amounts in respect of
the supplied made to him in the past on the ground
tht if the license were to file a suit, the claim or part
thereof would be barred by the law of limitation. The
provision in our opinion, would clearly warrant the
wider meaning to be given to the word ‘due’ rather
than the narrower meaning, as the wider meaning
would be more in accord with the scheme of the
statutory provisions under consideration as also with
commercial honesty.”
13. Coming back to the Supreme Court’s decision in the case of
Swastic Industries Vs. Maharashtra State Electricity Board
(supra), the admitted position in that case was that the respondent
Electricity Board had issued a supplementary bill which was paid by
the consumer under protest and a complaint was filed before the
State Consumers’ Disputes Redressal Commission. The State
Commission allowed the complaint and held that the claim was
barred by limitation of three years. Feeling aggrieved, the Electricity
Board filed an appeal. The National Commission relying upon the
decision of the Division Bench of the Bombay High Court in Bharat
Barrel and Drum Manufacturing Co. Pvt. Ltd. Vs. The Municipal
Corporation of Greater Bombay and Anr. (supra) held that there is
no limitation for making the demand by way of supplementary bill
and that Section 24 of the Electricity Act, 1910 gives power to the
Board to issue such demand and to discontinue the supply to a
consumer who neglects to pay the charges. It was contended before
the Supreme Court that Section 60-A of the Electricity (Supply) Act,
1948 prescribes a limitation of 3 years for the Board to institute any
suit, after its constitution, for recovery of the arrears. Thereby the
limitation of 3 years is required to be observed. The Board in
negation of Section 60-A of the Electricity (Supply) Act cannot be
LPA No. 356/2007 Page 11 of 15
permitted to exercise the power under Section 24 of the Indian
Electricity Act, 1910. Rejecting the argument, the Supreme Court
has observed in paragraph-5 as under:-
“5. It would, thus, be clear that the right to recover
the charges is one part of it and right to discontinue
supply of electrical energy to the consumer who
neglects to pay charges is another part of it. The
right to file a suit is a matter of option given to the
licensee, the Electricity Board. Therefore, the mere
fact that there is a right given, to the Board to file the
suit and the limitation has been prescribed to file the
suit, it does not take away the right conferred on the
Board under Section 24 to make demand for
payment of the charges and on neglecting to pay the
same they have the power to discontinue the supply
or cut off the supply, as the case may be, when the
consumer neglects to pay the charges. The
intendment appears to be that the obligations are
mutual. The Board would supply electrical energy
and the consumer is under corresponding duty to
pay the sum due towards the electricity consumed.
Thus the Electricity Board, having exercised that
power, since admittedly the petitioner had neglected
to pay the bill for additional sum, was right in
disconnecting the supply without recourse to filing of
the suit to recover the same. The National
Commission, therefore, was right in following the
judgment of the Bombay High Court and allowing the
appeal setting aside the order of the State
Commission. Moreover, there is no deficiency of
service in making supplementary demand for
escaped billing. There may be negligence or
collusion by subordinate staff in not properly
recording the reading or allowing pilferage to the
consumers. That would be deficiency of service
under the Consumer Protection Act. We do not find
any illegality warranting interference.”
14. In H. D. Shourie Vs. Municipal Corporation of Delhi (supra),
the challenge in the writ petition was to the levy of electricity charges
which was raised by a revised bill. The argument of the petitioner
was that no demand can be raised for a period which is more than
three years after the consumption of the electricity. It was contended
LPA No. 356/2007 Page 12 of 15
that on a correct interpretation of Section 24 of the Act, the amount
becomes due the moment electricity is consumed and under Section
455 of the Delhi Municipal Corporation Act, this amount cannot be
recovered more than three years after it has become due. This
argument was considered in depth by B. N. Kirpal. J. as he then was
and the learned Judge held that the electricity charges become due
after the bill are sent and not earlier. This being so, the proviso to
Section 455 will apply only when the bill has been sent and the
remedy available with the respondents for filing a suit to recover the
said amount would come to an end after three years elapse after the
electricity charges have become due and payable. In other words, the
provisions of Section 455 would come into play after the submission
of the bill for electricity charges and not earlier. The learned Judge
went on to observe that there is no provision either under the
Municipal Corporation Act or under the Electricity Act of 1910 which
provides the period within which a bill for electricity charges must be
sent. Unless and until a statue clearly limits the right of an authority
to assess, compute or to send a bill, it cannot be said that that
authority loses its right to recover the money due it by not sending a
bill within 3 years. Where, however, once a bill has been sent then
the period of limitation for recovery of the same would commence and
if payment is not made within three years, the right of the
Undertaking to file a suit would be lost. The decision of the learned
Judge was affirmed by the Division Bench in Municipal
Corporation of Delhi (DESU) Vs. Mr. H. D. Shourie (supra). In the
light of the law laid down in the aforesaid judgments, it is clear that
LPA No. 356/2007 Page 13 of 15
the electricity Undertaking is at liberty to issue the bill for
consumption of electricity even after three years after the electricity
has been consumed.
15. Coming then to the argument of learned counsel Mr. Nigam,
that as a result of non-filing of counter-claim, the claim has been
barred by principal of ‘constructive res judicata’, it is required to be
noted that in view of the compromise, the demand on account of
misuse due to sub-letting stand withdrawn w.e.f. the date of
submission of test notice i.e. 24th February, 1992. The Low Power
Factor charges stand withdrawn w.e.f. 12th August, 1996. The
compromise does not cover the period three years prior to the notice
in respect of which an additional demand has been raised by the
appellant under the impugned communications. The right to raise a
demand for the period from 9th October, 1988 to 9th October, 1991
was an independent right and was not a necessary defence to the
claim of the respondent in the civil suit. Merely because the licensee
did not seek adjudication of the same in the suit filed by the
respondent and has chosen to enforce it by exercising power under
Section 24 of the Indian Electricity Act, 1910, does not mean that the
Undertaking had abandoned it’s right to recover the said charges and
the principles of constructive res judicata are clearly inapplicable to
the present case.
16. Coming to the last argument of the respondent that there was
violation of principle of natural justice, learned senior counsel for the
appellant was unable to show that the opportunity of hearing was
LPA No. 356/2007 Page 14 of 15
given to the respondent prior to the issuance of the supplementary
demand for the period from 9th October, 1988 to 9th October, 1991.
On this short ground, the impugned judgment is liable to be set
aside. The appellant Undertaking is directed to offer/provide an
opportunity of hearing to the respondent and decide the matter
afresh after considering the objections of the respondent. All
contentions on merits are left open to the parties.
17. The present appeal is accordingly disposed of in terms of what
is stated hereinabove.
CHIEF JUSTICE
NEERAJ KISHAN KAUL, J
APRIL 24, 2009
sb
LPA No. 356/2007 Page 15 of 15