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Subject: Application of Section 126 of the Electricity Act, 2003 in the matter of

demand exceeding Contract Demand.

As per the prevailing provisions of Tariff, whenever a consumer exceeds his Contract
Demand, he is to be billed on the basis of maximum demand recorded as per the normal
demand charges & in addition such consumer is to be charged penalty @ 50% of the normal
demand charges on the quantum of demand in excess of the Contract Demand. Similarly, on
third occasion of maximum demand exceeding Contract Demand (in a colander year),
additional load is to be sanctioned to such consumer to regularize the excess demand.

In & around January 2012, some of the LT Industrial consumers of the Gondia O & M
Division (Nagpur Zone) had exceeded the Contract Demand and as per the above stated
inbuilt provision of tariff, were billed accordingly.

Such incidence of consumers exceeding Contract Demand was considered by the


Executive Engineer, Gondia as unauthorized use of electricity and accordingly,
proceedings under Section 126 of the Electricity Act, 2003 have been initiated against the
said consumers. Supplementary Bill issued to these consumers in accordance with the
provisions of Section 126 was disputed by these consumers and appeal was filed by
respective consumer before the Appellate Authority as provided under Section 127 of the
Electricity Act, 2003. It was contended by the consumers before the Appellate Authority that
penal charges @ 50% of the normal demand charges for the quantum of demand in excess
of the Contract Demand has already been levied & recovered by MSEDCL and therefore
Section 126 need not be invoked in such cases. The Appellate Authority was pleased to
allow the Appeals and as a consequence, the supplementary bills issued by the Executive
Engineer, Gondia had been set aside.

Being aggrieved by the decision of the Appellate Authority as above, Writ Petitions
were filed before the High Court of Judicature at Mumbai, Nagpur Bench, Nagpur contesting
the decision of Appellate Authority. In all these Petitions, MSEDCL has relied upon Supreme
Court Judgment (Executive Engineer, Southern Electricity Supply Company of Orissa Ltd. &
another v/s Sri Sitaram Rice Mill, (2012) 2 SCC 108) to justify the validity of the action under
Section 126 of the Act.

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Honble High Court as per the common Order & Judgment dated 15th November
2014 was pleased to allow all the Writ Petitions and was further pleased to quash & set
aside the Orders passed by the Appellate Authority. The Honble High Court by the said
Order also remanded back the proceedings to Appellate Authority for fresh consideration in
accordance with the law laid down by the Supreme Court in above mentioned Judgment.

The Honble High Court in its Judgment inter alia has observed as follows:

Paragraph 8: It would be first necessary to consider the decision of the Supreme Court
(Executive Engineer, Southern Electricity Supply Company of Orissa Ltd. & another v/s
Sri Sitaram Rice Mill, (2012) 2 SCC 108) and law laid therein. One of the questions that
fell for consideration before the Supreme Court was as under:

Wherever the consumer consumes electricity in excess of the maximum of


the contracted load, would the provisions of Section 126 of the 2003 Act be
attracted on its true scope & interpretation?

After considering the background in which said provision was introduced and after
considering various other provisions of the said Act, the Supreme Court in paragraph 29
observed that the expression unauthorized use of electricity as used in Section 126 of
the said Act dealt with the cases of of unauthorized use even in the absence of
intention.

In paragraph 62 the Supreme Court observed that if a person unauthorizedly consumed


electricity then he could be dealt with in accordance with law& penalties may be
imposed upon him as contemplated under the contractual, regulatory and statutory
regime.

It is crystal clear that consumption of electricity in excess of the sanctioned / connected


load amounts to unauthorized use of electricity in terms of Section 126 of the Act.

Paragraph 11: It is clear that the Supreme Court was pleased to interpret the provisions
of Section 126 of the said Act. Said interpretation was not in context of of the Orissa
Regulations, but the law as laid down is with regard to harmonious construction of
various provisions of the said Act.

Paragraph 12: In so far as the stand of the respondent no. 1 (consumer) is its appeal
that as penalty at the rate of 150% had been levied, no action under Section 126 of the
said Act is warranted, it is to be noted that the Supreme Court in the aforesaid decision
has considered aforesaid aspect in paragraph 62 of its judgment. It is noted that
penalties could be imposed on the person who unauthorizedly consumes electricity
under contractual, regulatory and statutory regulations.

A copy of the Judgment dated 15th November 2014 passed by the Honble High
Court, Mumbai (Nagpur Bench, Nagpur) along with a copy of the judgment of the Honble

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Supreme Court in the matter of Executive Engineer, Southern Electricity Supply Company of
Orissa Ltd. & another v/s Sri Sitaram Rice Mill ((2012) 2 SCC 108) is kept below for detailed
perusal.

In view of the observations recorded by the Honble High Court and more over the
law laid down by the Honble Supreme Court (Executive Engineer, Southern Electricity
Supply Company of Orissa Ltd. & another v/s Sri Sitaram Rice Mill, (2012) 2 SCC 108), it is
felt that a consumer whenever exceeds Contract Demand cannot escape action under
Section 126 of the Electricity Act, 2003, irrespective of whether or not the consumer has
already been penalized for exceeding the Contract Demand either by means of inbuilt
provision in tariff or any specific provision in any regulation framed by the State
Commission.

On the basis of submissions made in foregoing paragraphs, it is proposed that before


any decision regarding issuing clarification to field offices about application of 126 of the
Electricity Act, 2003 in cases where demand registered is more than the Contract Demand is
issued, we may consider to obtain opinion of our Solicitor Firm or any Sr. Counsel.

Submitted please.