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North Delhi Power Ltd. vs Delhi Bottling Co. Ltd. on 24 April, 2009

Delhi High Court
North Delhi Power Ltd. vs Delhi Bottling Co. Ltd. on 24 April, 2009
Author: Ajit Prakash Shah
*                  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

LPA No. 356/2007 Page 1 of 15
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 a

LPA 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

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