LPA/512/2005 1 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD LETTERS PATENT APPEAL No. 512 of 2005 In SPECIAL CIVIL APPLICATION No. 955 of 2005 with LETTERS PATENT Appeal Nos.513 and 471 of 2005 and 2634 of 2004 with SPECIAL CIVIL APPLICATION Nos 22755, 22731, 22962, 22965, 22989, 23677, 12236, 23836, 24258, 24259, 20825, 23039, 16104, 23514 of 2005 and 352 and 260 of 2006 For Approval and Signature: HONOURABLE MR.JUSTICE M.S.SHAH and HONOURABLE MR.JUSTICE SHARAD D.DAVE ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= TORRENT POWER AEC LTD. - Appellant(s) Versus GAYATRI INTERMEDIATES PVT LTD - Respondent(s) ========================================================= Appearance : M/s. TUSHAR MEHTA, BM VAISHNAV, YM THAKKAR, HARIN RAVAL with MAYUR RAJGURU, BK DAMANI and Ms SUDHA GANGWAR and KRUTI SHAH for Petitioner(s) LPA/512/2005 2 JUDGMENT MR MIHIR THAKORE Sr Advocate with MR PRAFUL THAKKAR, Mr KB Pujara, Ms. Lilu Bhaya, Ms Mayaben Desai for Mr MD Pandya and Mr SN SINHA for AEC/GEB (Licensees) ==================================================================== CORAM : HONOURABLE MR.JUSTICE M.S.SHAH and HONOURABLE MR.JUSTICE SHARAD D.DAVE Date : 13/04/2006 COMMON CAV JUDGMENT (Per : HONOURABLE MR.JUSTICE M.S.SHAH) This group of appeals and writ petitions involve important questions relating to interpretation of the provisions of Sections 126 and 127 as well as Sections 50, 135 and 154 of the Electricity Act, 2003 and more particularly about assessment to be made by the distribution licensee in cases of theft of electricity. Those who wish to go to our conclusions straightaway may turn to paras 21 and 22 at the end without wading through the bulk of the judgment. The rest may join us in meandering through the statutory provisions and case law for enjoying the analytical journey to the destination. LPA/512/2005 3 JUDGMENT Paras (i) Orders of learned Single Judges considered 2 (ii) Legislative History 3 (iii) Electricity Act, 2003 – Statutory provisions 4 - 5 (iv) Controversy and its statutory resolution 6 – 9 (v) Major contentions of the petitioners 10 (a) Theft cases in Section 135 are covered by the expression “unauthorised use of electricity” in Section 126 ? 11 - 12 (b) Assessment in theft cases requires compliance with principles of Natural Justice ? 13 (c) Challenge to Central Government order dated 8.6.2005 and Amendment dated 14.12.2005 to Electricity Supply Code 14 (d) Ouster of Jurisdiction of Civil Court 15 - 17 (vi) Periodization 18 - 20 (vii) Conclusions 21 & 22 (viii) Operative orders 23 - 26 LPA/512/2005 4 JUDGMENT 2. While Letters Patent Appeals are directed against the common judgment and order dated 10.3.2005 of a learned Single Judge of this Court (Coram: Hon'ble Mr Justice Jayant Patel), the Special Civil Applications have been ordered to be heard with the group of appeals pursuant to the order of reference made by another learned Single Judge of this Court (Coram: Hon'ble Mr Justice MR Shah). Apart from the difference of opinion (noticed in the order of reference and set out in para 6 hereinafter) between the view taken by Hon'ble Mr Justice Jayant Patel in the above judgment dated 10.3.2005 and the view taken by another learned Single Judge of this Court (Coram: Hon'ble Mr Justice DN Patel) in judgments dated 10.9.2004 in SCA Nos. 10007 and 10008 of 2004 in the case of Leenaben Soni vs. AEC Ltd., 2005 (1) GLR 247 and dated 15.10.2004 in the case of AEC Ltd. vs. Ramesh D Devnani, 2005 (2) GLR 1202, it also appears that the same controversy came to be considered by still two other learned Single Judges of this Court - Hon'ble Mr Justice AL Dave while delivering judgment dated 20.10.2005 in Appeal from Order No.332 of 2005 and Hon'ble Mr Justice Ravi R. Tripathi while giving verdict dated 30.6.2004 in Appeal From Order No. 197 of 2004. Legislative History LPA/512/2005 5 JUDGMENT 3. Prior to the enactment of the Electricity Act, 2003 (hereinafter referred to as the “new Act” or “the 2003 Act”), while Sections 39 to 50 of the Indian Electricity Act, 1910 (hereinafter referred to as “the 1910 Act”) provided for offences and penalties in prosecutions to be launched at the instance of the Government, State Electricity Board or an Electricity Inspector, neither the 1910 Act nor the Electricity (Supply) Act, 1948 (hereinafter referred to as “the 1948 Act”) contained any direct or specific provision indicating as to how the authority or the licensee distributing electricity may make assessment of electricity charges in cases of theft of electricity or unauthorized use of electricity. Section 26(6) of the 1910 Act merely provided that where there was a difference or dispute about correctness of the meter recording consumption of electricity, the meter was required to be referred to the Electrical Inspector, an officer of the State Government, for his decision. In case the meter was found to be not correctly recording electricity supply, the Electrical Inspector was to estimate the electricity supplied during such time not exceeding six months when the meter was, in his opinion, not correct. It was held in several cases including the case of Hyderabad Vanaspathi Ltd. 1998 (4) SCC 470 that Section 26(6) only related to dispute about a defect in the meter and was not applicable to cases of malpractice and theft of electricity. Under Section 21(2) of the 1910 Act, a licensee and under LPA/512/2005 6 JUDGMENT Section 49 of the 1948 Act, the GEB (while distributing electricity to persons other than licensee) was empowered to frame terms and conditions for supply of electricity. 3.1 The Gujarat Electricity Board and the Ahmedabad Electricity Company, the two distribution licensees involved in this group, had framed their respective terms and conditions providing the formulae as to how the Board/the licensee was to charge consumers for theft of electricity and also for malpractices and providing an aggrieved consumer with the remedy of filing an appeal against the supplementary bill for recovering the amounts in theft cases. Such appeal would lie before the Appellate Committee of the GEB/AEC, as the case may be. 3.2 In exercise of the powers conferred by Section 49 of the Electricity (Supply) Act, 1948, the Gujarat Electricity Board had framed “the Conditions and Misc. Charges for Supply of Electrical Energy” containing detailed provisions, inter alia, for assessment in cases of malpractice and theft of energy. Condition 33(A) defined “malpractice” as contravention by the consumer of any provision of the 1910 Act, the 1948 Act or the Rules framed thereunder and contravention of the Conditions and Miscellaneous Charges for Supply of Electrical Energy and, in particular, including the following cases :- LPA/512/2005 7 JUDGMENT “(a) The supply of electricity by a consumer to any other person whose supply has been disconnected by the Board for any reason. (b) Exceeding the contracted load by a consumer without the specific permission of the Board. (c) Unauthorised addition, alteration and/or extension to the consumer's electrical installation without the permission of the Board. (d) Using supply by a consumer form the service which has been disconnected by the Board for any reason. (e) Supply of energy to any other person without the permission of the Board.” Condition 33(B) defined “theft of energy” as under :- “Any consumer who dishonestly abstracts, consumes or uses any energy shall be deemed to have committed theft within the meaning of the Indian Penal Code and the existence of artificial means for such abstraction shall be prima facie evidence for such dishonest abstraction.” Condition 34 provided for payment for energy dishonestly used or abstracted or maliciously wasted or diverted in the manner specified therein. The condition also provided for remedy of review by the appellate authority on the appellant depositing 30% of the amount of the disputed bill out of which 15% was to be deposited first whereupon reconnection would be granted and another 15% of the amount of supplementary bill was to be paid within 30 days of LPA/512/2005 8 JUDGMENT reconnection and the appeal was to be heard thereafter. This concession was, however, not to be given to a consumer who was found to have committed theft on second or subsequent occasion. Detailed formulae were prescribed for assessment in theft cases depending on whether the consumer was a High Tension consumer or a Low Tension consumer, and also depending on categories such as industrial, residential and also depending on the product being manufactured etc.. 3.3 Similarly, the AEC (now called Torrent Power Ahmedabad Electricity Co. Ltd.) had framed “Conditions of Supply and Miscellaneous Charges” under Section 21(2) of the 1910 Act. Condition No. 22 thereof defined “malpractice” more or less in the same terms as condition 33(A) of GEB Conditions of Supply. Condition 23 of the AEC Conditions referred to theft of energy in terms of the relevant provisions of the 1910 Act. Part II of the conditions containing detailed provisions for assessment of charges also provided for appeal against assessment before the appellate authority (an officer not below the rank of a Senior Engineer/Deputy Manager). The appellant was, however, required to deposit 60% of the disputed bill amount for reconnection of electricity supply during pendency of the appeal; otherwise to deposit 20% of the disputed bill amount for the purpose of maintainability of the appeal. LPA/512/2005 9 JUDGMENT Electricity Act, 2003 – Statutory provisions 4. When the Electricity Act, 2003 came to be enacted by Parliament, as per Section 185(1) thereof, save as otherwise provided in the said Act, the Indian Electricity Act, 1910, the Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions Act, 1998 came to be repealed. To appreciate the controversy, it is necessary to consider the scheme of the Act. The Electricity Act, 2003 has been enacted to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity and generally for taking measures conducive to development of electricity industry, promoting competition therein, protecting interests of consumer and supply of electricity to all areas, rationalization of electricity tariff, ... ... constitution of Regulatory Commission ... ... and for matters connected therewith or incidental thereto. All the provisions of the Act except Section 121 were brought into force on 10th June 2003 as per the Government of India notification dated 10th June 2003 published in the Gazette of the same date. As far as the State of Gujarat is concerned, the provisions were brought into force with effect from 10th December 2003 (vide the notification dated 10.7.2003 issued by the Government of Gujarat in exercise of the powers under Section 172(d) of the Act.). LPA/512/2005 10 JUDGMENT Part III contains provisions relating to generation of electricity, Part IV contains provisions relating to licensing, Section 14 empowers the Appropriate Commission to grant a license to any person, inter alia, to distribute electricity as a distribution licensee or to undertake trading in electricity as an electricity trader in any area as may be specified in the license. A person already engaged in the business of transmission or supply of electricity under the repealed laws shall be deemed to be a licensee under this Act subject to other provisions of the Act. [The Gujarat Electricity Board succeeded by separate regional Companies in the State of Gujarat and the Ahmedabad Electricity Co. Ltd. now called “Torrent Power AEC Ltd.” are accordingly deemed to be distribution licensees under the Act]. 5. It is now necessary to refer to the following specific provisions of the new Act :- 5.1 In part XII of the new Act dealing with investigation and enforcement, Section 126(1) provides that, if on an inspection of any place or premises or after inspection of the equipments, ... devices found connected or used, or after inspection of the records maintained by any person, “the assessing officer comes to the conclusion that such person is indulging in unauthorized use of electricity, he shall provisionally assess to the best of his judgment the electricity charges payable LPA/512/2005 11 JUDGMENT by such person or by any other person benefited by such use”. Explanation to Section 126 contains the following definitions :- (a) “assessing officer” means an officer of a State Government or Board or licensee, as the case may be, designated as such by the State Government; (b) “unauthorised use of electricity” means the usage of electricity - (i) by any artificial means; or (ii) by a means not authorised by the concerned person or authority or licensee; or (iii)through a tampered meter; or (iv) for the purpose other than for which the usage of electricity was authorised.” Sub-section (6) of Section 126 provides that the assessment under this section shall be made at a rate equal to one-and-half times the tariff applicable for the relevant category of services specified in sub-section (5) as under:- Category of services Presumption regarding the period of unauthorised use Domestic and agricultural services 3 months preceding the date of inspection LPA/512/2005 12 JUDGMENT All other categories of services 6 months preceding the date of inspection Sub-sections (2) to (4) of Section 126 lay down the procedure for making the assessment, which broadly speaking, provides for compliance with the principles of natural justice by requiring the assessing officer to serve the order of provisional assessment upon the person in occupation or possession or in charge of the place or premises where electricity is supplied and giving a right to such person to file objections against the provisional assessment and thereafter a reasonable opportunity of hearing is to be afforded to such person before passing the final order of assessment of electricity charges payable by such person. Section 127 enables any person aggrieved by the final order under Section 126 to prefer an appeal within thirty days before an appellate authority to be prescribed, but no such appeal shall be entertained unless 1/3rd of the assessed amount is deposited with the licensee. The order of the appellate authority shall be final. The defaulting consumer is also liable to pay interest at the rate of 16% per annum compounded every six months. 5.2 Part XIV of the new Act contains provisions relating to offences and penalties and also ouster of jurisdiction of Civil Court. LPA/512/2005 13 JUDGMENT Section 135(1)(b) provides that - whoever dishonestly - (a) ... ... ... ... (b) tampers the meter, installs or uses a tampered meter, or uses any device or method which interferes with the proper or accurate meter of electricity or otherwise does an act whereby electricity is stolen or wasted, (c) ... ... ... ... so as to abstract or consume or use electricity shall be punishable with imprisonment upto three years or with fine or with both and also provides that the fine shall not be less than three times the financial gain on account of such theft of electricity. In case of second/subsequent conviction, more stringent penalties/sentences are provided including fine of not less than six times the financial gain. The second proviso also raises a presumption against the consumer that if any artificial means or means not authorised by the Board or licensee exist for the abstraction, consumption or use of electricity by the consumer, it shall be presumed, until the contrary is proved, that any abstraction, consumption or use of electricity has been dishonestly caused by such consumer. Clauses (a) and (c) of sub-section (1) of Section 135 enumerate the other cases of theft of electricity with the same punitive consequences and read as under :- LPA/512/2005 14 JUDGMENT (a) taps, makes or causes to be made any connection with overhead, underground or under water lines or cables, or service wires, or service facilities of a licensee; or (c) damages or destroys an electric meter, apparatus, equipment, or wire or causes or allows any of them to be so damaged or destroyed as to interfere with the proper or accurate metering of electricity. Section 145 of the Act ousts the jurisdiction of the Civil Court to entertain any suit or proceeding in respect of any matter which an assessing officer referred to in Section 126 or an appellate authority referred to in Section 127 or the adjudicating officer appointed under this Act is empowered by or under the Act to determine and no injunction shall be granted by any court or any other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act. [Section 143 read with Sections 29, 33 and 43 require the distribution licensee and generating Company to comply with certain directions in the matter of transmission and supply of electricity. Failure to comply with those directions shall result into imposition of penalty upon the licensee upon adjudication by a Member of the Appropriate Commission appointed as an adjudicating officer under Section 143 of the Act. We are not concerned with this adjudication]. LPA/512/2005 15 JUDGMENT Section 151 provides that no Court shall take cognizance of an offence punishable under the Act except upon a written complaint by the Government, the Commission, their authorized officer or the licensee. Section 152 makes the offence of theft of electricity punishable under the Act as compoundable, but compounding shall be allowed only once for any person or consumer. 5.3 Part XV of the Act contains provisions for constitution, powers and procedure of Special Courts. Section 153 empowers the State Government to constitute Special Courts for the purposes of providing speedy trial of offences referred to in Sections 135 to 139. A Special Court consists of a single Judge who shall be appointed by the State Government with the concurrence of the High Court and he shall have been an Additional District & Sessions Judge before his appointment as a Judge of the Special Court. Section 154 provides that the offences punishable under Sections 135 to 139 of the Act shall be triable only by the Special Court within whose jurisdiction such offence has been committed. The offence is to be tried in a summary way. Sub- section (5) of Section 154 also empowers the Special Court to determine the civil liability against a consumer or a person in terms of money for theft of LPA/512/2005 16 JUDGMENT energy which shall be at least two times the amount as per the tariff rate applicable for a period of twelve months preceding the date of detection of theft of energy or the exact period of theft, if determined, whichever is less. The amount of civil liability so determined shall be recovered as if it were a decree of civil court. Sub-section (6) also provides that in case the civil liability so determined finally by the Special Court is less than the amount deposited by the consumer or the person liable, the excess amount so deposited by the consumer or the person liable shall be refunded with interest at the prevailing bank rate. Section 156 confers on the High Court the powers of appeal and revision against the orders of the Special Court as per the provisions of Chapters XXIX and XXX of Cr PC, as if the Special Court is a District Court, or as the case may be, the Sessions Court trying cases within the territorial jurisdiction of the High Court. Section 157 confers powers of review on the Special Court on certain grounds. 5.4 Part VI of the New Act contains provisions with respect to distribution of electricity by licensees and recovery of charges. Section 45(1) confers power on the distribution licensee to recover charges for the supply of electricity in accordance with such tariffs LPA/512/2005 17 JUDGMENT fixed from time to time and conditions of the license. Sub-sections (2), (3) and (5) read as under:- “(2) The charges for electricity supplied by a distribution licensee shall be - (a) fixed in accordance with the methods and the principles as may be specified by the concerned State Commission; (b) ... .... .... ... ... (3) The charge for electricity supplied by a distribution licensee may include - (a) a fixed charge in addition to the charge for the actual electricity supplied; (b) ... ... ... ... .... (5) The charges fixed by the distribution licensee shall be in accordance with the provisions of this Act and the regulations made in this behalf by the concerned State Commission.” (emphasis supplied) [Section 82 in Part X provides for constitution of State Electricity Regulatory Commission and also provides that the State Commission shall discharge such other functions as may be assigned to it under the Act. Section 181 in Part XVIII confers powers on the State Commissions to make, after previous publication, regulations consistent with the Act and the Rules generally to carry out the provisions of the Act including the LPA/512/2005 18 JUDGMENT provisions of Electricity Supply Code and also to make regulations for the form and manner of filing the appeal. The regulations to be framed by the State Commission shall be laid before each house of the State legislature]. To continue with Part VI, Section 50 of the Act is important and is required to be quoted verbatim. “50. The Electricity Supply Code. - The State Commission shall specify an Electricity Supply Code to provide for recovery of electricity charges, intervals for billing of electricity charges, disconnection of supply of electricity for non-payment thereof, restoration of supply of electricity, tampering, distress or damage to electrical plant, electric lines or meter, entry of distribution licensee or any person acting on his behalf for disconnecting supply and removing the meter, entry for replacing, altering or maintaining electric lines or electrical plant or meter.” (emphasis supplied) Section 56 empowers the licensee to disconnect electricity supply after giving atleast fifteen clear days' notice in writing and may discontinue the supply until the sums due and payable by the person liable together with any expenses incurred by the licensee in cutting and reconnecting the supply, are paid but no longer – provided that the supply of electricity shall not be cut off if LPA/512/2005 19 JUDGMENT such person deposits, under protest, - “(a) an amount equal to the sum claimed from him, or (b) the electricity charges due from him for each month calculated on the basis of average charge for electricity paid by him during the preceding six months, whichever is less, pending disposal of any dispute between him and the licensee. [emphasis supplied] 5.6 Part VII contains provisions relating to tariff. Section 62 empowers the Appropriate Commission (which would be State Electricity Regulatory Commission for the present purposes) to determine the tariff in accordance with the provisions of this Act, inter alia, for retail sale of electricity. 5.7 Section 183 in Part XVIII confers power on the Central Government to remove difficulties within a period of two years from the date of coming into force of the Act. CONTROVERSY & ITS STATUTORY RESOLUTION 6. The controversy giving rise to the appeals and the writ petitions was whether the provisions of Sections 126 and 127 for assessment and appeal relating to “unauthorised use of electricity” in Part XII of the Act are also applicable to theft cases LPA/512/2005 20 JUDGMENT defined in Part XIV of the Act or whether the licensee's power to recover charges in theft cases was governed only by the provisions contained in Parts XIV and XV. While Hon'ble M/s Justice AL Dave and Justice Jayant Patel took the view that even in the cases of theft of electricity, assessment is required to be made under the provisions of Section 126 of the Act and such assessment would be appealable under Section 127 of the Act, that Section 135 of the Act is aimed at prosecution of consumers indulging in theft of electricity but Sections 50 and 135 do not contemplate issuance of a bill in theft cases and that