-
by sayum
14 September 2026 6:04 AM
"The period of limitation of two years would commence from the date on which the electricity charges became 'first due' under sub-section (2) of Section 56. This provision restricts the right of the licensee company to disconnect electricity supply due to non-payment of dues... if the licensee company were to be allowed to disconnect electricity supply after the expiry of the limitation period of two years... it would defeat the object of Section 56(2)." Supreme Court, in a judgment dated September 10, 2026, clarified that the two-year limitation period prescribed under Section 56(2) of the Electricity Act, 2003, acts as a bar against the coercive power of disconnection but does not extinguish the licensee’s right to recover arrears through other legal modes.
A bench comprising Justice S.V.N. Bhatti and Justice N.V. Anjaria observed that the statutory restriction on disconnection is intended to prevent the licensee from using the threat of power stoppage as a tool to recover time-barred dues, yet it leaves the civil remedy for recovery intact.
Statutory scope of Section 56(2)
The Court reiterated that the limitation period of two years commences from the date on which electricity charges become "first due," which is when the bill is issued to the consumer. While the liability to pay arises upon consumption, the legal obligation to discharge that liability crystallizes only upon the formal issuance of a bill. Consequently, if a bill is not raised within the statutory framework, or if the recovery is sought after the two-year window, the licensee loses the specific statutory right to disconnect supply under Section 56(1) of the Act.
Distinction between recovery and disconnection
The bench emphasized that the legislature did not intend to provide a blanket immunity to consumers for unpaid dues after two years. The prohibition under Section 56(2) is narrowly tailored to the extraordinary power of disconnection. The Court noted that the provision does not preclude the licensee company from initiating other available modes of recovery for the realization of a supplementary demand. This interpretation ensures that the consumer is protected from arbitrary disconnection while the licensee retains the right to pursue civil litigation for dues.
Court reaffirms legal position on supplementary demands
The Supreme Court underscored that its previous holding in Assistant Engineer (D1), Ajmer Vidyut Vitran Nigam Limited v. Rahamatullah Khan Alias Rahamjulla remains the governing law on this subject. The Court held that allowing a licensee to disconnect supply long after the limitation period would defeat the very object of Section 56(2). By strictly limiting the recovery of "first due" charges, the Act promotes transparency and prevents the accumulation of long-standing, unbilled arrears from being used as a weapon against the consumer.
Facts of the dispute
The controversy arose when the appellant-licensee raised a demand for Minimum Consumption Guarantee Charges (MCGC) in 2007 for the period between February and September 1998. The consumer contested the demand before the Electricity Ombudsman, arguing that the demand was barred by limitation and that no consent for the additional load was ever provided. The High Court had earlier set aside the demand, noting that the appellant was not in a state of readiness to supply the additional load and that the demand was hit by the law of limitation.
Failure to establish liability
Regarding the factual matrix, the Supreme Court noted that the appellant failed to prove that the additional 2000 KVA load was ever released or that the consumer consented to it. As the consumer’s liability arises only when the agreed quantum of electricity is effectively released, the claim for MCGC lacked merit. The Court dismissed the appeal, holding that the demand not only failed on the merits of the agreement but was also unsustainable under the statutory limitations set forth by the Electricity Act, 2003.
Date of Decision: 10 September 2026
