Section 56 in The Electricity Act, 2003

56. Disconnection of supply in default of payment.–

(1)Where any person neglects to pay any charge for electricity or any sum other than a charge
for electricity due from him to a licensee or the generating company in respect of supply,
transmission or distribution or wheeling of electricity to him, the licensee or the generating
company may, after giving not less than fifteen clear days’ notice in writing, to such person
and without prejudice to his rights to recover such charge or other sum by suit, cut off the
supply of electricity and for that purpose cut or disconnect any electric supply line or other
works being the property of such licensee or the generating company through which
electricity may have been supplied, transmitted, distributed or wheeled 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:
Provided that the supply of electricity shall not be cut off if 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.
(2)Notwithstanding anything contained in any other law for the time being in force, no sum
due from any consumer, under this section shall be recoverable after the period of two years
from the date when such sum became first due unless such sum has been shown continuously
as recoverable as arrear of charges for electricity supplied and the licensee shall not cut off
the supply of the electricity. Consumer protection: Standards of performance.
CASES RELATED TO SECTION 56
​ Ajmer Vidyut Vitran Nigam Limited v. Rahamatullah Khan (2020) 4 SCC 650
dated February 18, 2020.
​ M/S Prem Cottex vs Uttar Haryana Bijli Vitran Nigam dated October 05, 2021
​ KC Ninan v. Kerala State Electricity Board, 2023 SCC OnLine SC 663, decided
on 19.05.2023]​
​
Ajmer Vidyut Vitran Nigam Limited v. Rahamatullah Khan (2020) 4 SCC 650

Issues in Cases

a)​ The issues which have arisen for consideration in the present Civil Appeal are : – 2 b)
What is the meaning to be ascribed to the term “first due” in Section 56(2) of the
Electricity Act, 2003? c) In the case of a wrong billing tariff having been applied on
account of a mistake, when would the amount become “first due”? d) Whether
recourse to disconnection of electricity supply may be taken by the licensee company
after the lapse of two years in case of a mistake?

Facts-
In the present case, for the period July, 2009 to September, 2011, the Respondent
along with other consumers were billed by the licensee company (the Appellant
herein) under Tariff Code 4400 @Rs.1.65 per unit. During the course of a regular
audit being conducted by the Internal Audit Party, it was discovered that in 52 cases,
including that of the Respondent, the bills were raised under the wrong Tariff Code
4400, instead of Tariff Code 9400, under which the prescribed tariff rate was
Rs.2.10p. per unit.
On 18.03.2014, the licensee company issued a show cause notice to various
consumers, including the Respondent, raising an additional demand for consumption
of electricity for the past period from July, 2009 to September, 2011. It was mentioned
in the notice that the amount was payable in view of the internal audit conducted by
the department. On 25.05.2015, the licensee company raised a bill demanding
payment of Rs.29,604/- from the Respondent under Tariff Code 9400 for the period
July, 2009 to September, 2011.
Aggrieved by the said demand, the Respondent filed a Consumer Complaint before
the District Consumer Forum, Ajmer. The District Forum vide Order dated
21.06.2016, allowed the Consumer Complaint, and held that the additional demand
was time-barred.
In the Revision Petition filed by the Respondent before the National Consumer
Disputes Redressal Commission, the Order passed by the State Commission was set
aside. The National Commission held that the additional demand was barred by
limitation under Section 56(2) of the Electricity Act, 2003 (“the Act”).
The licensee company has filed the Civil Appeals before the Supreme Court to
challenge the final judgment dated 28.05.2018 passed by the National Commission.

Findings and Analysis

The Electricity Act, 2003 is a consumer-friendly statute.1 The Statement of Objects
and Reasons to the Act notes that over a period of time, the performance of State
Electricity Boards had deteriorated on account of various factors, and the need was
felt to frame a self-contained comprehensive legislation, which led to the enactment
of the Electricity Act, 2003.
Electricity has been held to be “goods” by a Constitution Bench in State of Andhra
Pradesh v. National Thermal Power Corporation Ltd.( (2002) 5 SCC 203.) Under
the Sale of Goods Act, 1930 a purchaser of goods is liable to pay for it at the time of
purchase or consumption. The quantum and time of payment may be ascertained post
facto either by way of an agreement or the relevant statute.
In the case of electricity, the charges are ascertained and recovered as per the tariff
notified by the State Electricity Board, or under an electricity supply agreement
between the parties read with the tariff under Section 62(1)(d), and the Electricity
Supply Code framed under Section 50.
Section 56 provides for disconnection of supply in the case of default in payment of
electricity charges. Sub-section (1) of Section 56 provides that where any person
“neglects” to pay “any charge” for electricity, or “any sum” other than a charge for
electricity due from him to a licensee or generating company, the licensee after giving
15 days’ written notice, may disconnect the supply of electricity, until such charges or
other sums due, including the expenses incurred, are paid. However, the disconnection
cannot continue after the amounts are paid.
The obligation of a consumer to pay electricity charges arises after the bill is issued
by the licensee company. The bill sets out the time within which the charges are to be
paid. If the consumer fails to pay the charges within the stipulated period, they get
carried forward to the next bill as arrears.
The proviso to Section 56(1) carves out an exception by providing that the
disconnection will not be effected if the consumer either deposits the amount “under
protest”, or deposits the average charges paid during the preceding six months.

The liability to pay arises on the consumption of electricity. The obligation to pay
would arise when the bill is issued by the licensee company, quantifying the charges
to be paid.
Electricity charges would become “first due” only after the bill is issued to the
consumer, even though the liability to pay may arise on the consumption of electricity.

The next issue is as to whether the period of limitation of two years provided by
Section 56(2) of the Act, would be applicable to an additional or supplementary
demand.
Sub-section (1) of Section 56 confers a statutory right to the licensee company to
disconnect the supply of electricity, if the consumer neglects to pay the electricity
dues. This statutory right is subject to the period of limitation of two years provided
by sub-section (2) of Section 56 of the Act.
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 by the consumer, unless such sum has been shown
continuously to be recoverable as arrears of electricity supplied, in the bills raised for
the past period.
If the licensee company were to be allowed to disconnect electricity supply after the
expiry of the limitation period of two years after the sum became “first due”, it would
defeat the object of Section 56(2).
Applying the aforesaid ratio to the facts of the present case, the licensee company
raised an additional demand on 18.03.2014 for the period July, 2009 to September,
2011. The licensee company discovered the mistake of billing under the wrong Tariff
Code on 18.03.2014. The limitation period of two years under Section 56(2) had by
then already expired.
Section 56(2) did not preclude the licensee company from raising an additional or
supplementary demand after the expiry of the limitation period under Section 56(2) in
the case of a mistake or bona fide error. It did not however, empower the licensee
company to take recourse to the coercive measure of disconnection of electricity
supply, for recovery of the additional demand.
As per Section 17(1)(c) of the Limitation Act, 1963, in case of a mistake, the
limitation period begins to run from the date when the mistake is discovered for the
first time.
In the present case, the period of limitation would commence from the date of
discovery of the mistake i.e. 18.03.2014. The licensee company may take recourse to
any remedy available in law for recovery of the additional demand, but is barred from
taking recourse to disconnection of supply of electricity under sub-section (2) of
Section 56 of the Act.

M/S Prem Cottex vs Uttar Haryana Bijli Vitran Nigam

Facts-

The appellant is carrying on the business of manufacturing cotton yarn in Panipat,

Haryana. The appellant is having a L.S. connection, which got extended from 404.517
KW to 765 KW with C.D 449 KVA to 850 KVA, on 3.08.2006. After 3 years of the
grant of extension, the appellant was served with a memo dated 11.09.2009 by the
third respondent herein, under the caption “short assessment notice”, claiming that
though the multiply factor (MF) is 10, it was wrongly recorded in the bills for the
period from 3.08.2006 to 8/09 as 5 and that as a consequence there was short billing
to the tune of Rs.1,35,06,585/¬. The notice called upon the appellant to
pay the amount as demanded, failing which certain consequences would
follow.
Aggrieved by the said notice, the appellant gave a representation on 22.09.2009 and
then filed a consumer complaint before the National Commission, contending inter
alia that the demand made by the respondents is the outcome of a glaring
mistake and gross negligence on their part and that under Section 56 of the Electricity
Act, 2003 (for short “the Act”), no amount due from a customer is recoverable after a
period of two years from the date on which it became first due.
By an Order dated 1.10.2009, the National Commission dismissed the complaint on
the ground that it is a case of “escaped assessment” and not a case of “deficiency in
service”. Aggrieved by the said Order, the appellant is before us.
The sheet anchor of the case of the appellant is Section 56(2) of the Act and the
exposition of law made by this Court in the decision in Assistant Engineer , Ajmer
Vidyut Vitran Nigam limited v. Rahamatullah Khan alias Rahamjulla.
Before we proceed to consider the statutory provision and the decision of
this Court relied upon by the appellant, it is relevant to take note of the fact that the
appellant never disputed the correctness of the claim of the respondents that the
multiply factor (MF) to be applied was 10, but it was wrongly applied as 5. The only
grievance raised by the appellant both in their representation and in their consumer
complaint was that they cannot be made to suffer on account of the negligence on the
part of the respondents and that on the basis of the bill already raised, they have
charged their customers and that it may not be possible for them to go back
to their customers with an additional demand now. In addition, the bar under Section
56 was also pleaded.​
In Rahamatullah Khan (supra), three issues arose for the consideration of this
Court. They were (i) what is the meaning to be ascribed to the term “first due” in
Section 56(2) of the Act; (ii) in the case of a wrong billing tariff having been applied
on account of a mistake, when would the amount become first due; and (iii) whether
recourse to disconnection may be taken by the licensee after the lapse of two years
in the case of a mistake.
On the first two issues, this Court held that though the liability to pay arises on the
consumption of electricity, the obligation to pay would arise only when the bill is
raised by the licensee and that, therefore, electricity charges would become “first
due” only after the bill is issued, even though the liability would have arisen on
consumption
On the third issue, this Court held in Rahamatullah Khan (supra), that “the period
of limitation of two years would commence from the date on which the
electricity charges became first due under Section 56(2)”. This Court also held that
Section 56(2) does not preclude the licensee from raising an additional or
supplementary demand after the expiry of the period of limitation in the case of a
mistake or bonafide error. To come to such a conclusion, this Court also referred to
 Section 17(1)(c) of the Limitation Act, 1963 and the decision of this Court in
Mahabir Kishore & Ors. vs. State of Madhya Pradesh.
Despite holding that electricity charges would become first due only after the bill is
issued to the consumer (para 6.9 of the SCC Report) and despite holding that Section
56(2) does not preclude the licensee from raising an additional or supplementary
demand after the expiry of the period of limitation prescribed therein in the case of a
mistake or bonafide error (Para 9.1 of the SCC Report), this Court came to the
conclusion that what is barred under Section 56(2) is only the
disconnection of supply of electricity. In other words, it was held by this Court in the
penultimate paragraph that the licensee may take recourse to any remedy available in
law for the recovery of the additional demand, but is barred from taking recourse to
disconnection of supply under Section 56(2).

But a careful reading of Section 56(2) would show that the bar contained therein is
not merely with respect to disconnection of supply but also with respect to recovery.
If Sub­section (2) of Section 56 is dissected into two parts it will read as follows:­
●​ No sum due from any consumer under this Section shall be recoverable after
the period of two years from the date when such sum became first due; and
●​ the licensee shall not cut off the supply of electricity.

Therefore, the bar actually operates on two distinct rights of the licensee, namely, (i) the
right to recover; and (ii) the right to disconnect.

The bar with reference to the enforcement of the right to disconnect, is actually an
exception to the law of limitation. Under the law of limitation, what is
extinguished is the remedy and not the right. To be precise, what is extinguished by the law
of limitation, is the remedy through a court of law and not a remedy available, if any, de hors
through a court of law. However, section 56(2) bars not merely the normal remedy of
recovery but also bars the remedy of disconnection.

This is why we think that the second part of Section 56(2) is an exception to
the law of limitation.​
Be that as it may, once it is held that the term “first due” would mean the date on which
a bill is issued, (as held in para 6.9 of Rahamatullah Khan) and once it is held that
the period of limitation would commence from the date of discovery of the mistake (as held
in paragraphs 9.1 to 9.3 of Rahamatullah Khan), then the question of allowing licensee to
recover the amount by any other mode but not take recourse to disconnection of supply
would not arise.

But Rahamatullah Khan says in the penultimate paragraph that “the licensee may
take recourse to any remedy available in law for recovery of the additional demand, but
barred from taking recourse to disconnection of supply under sub section (2) of section 56 of
the Act”.

It appears from the narration of facts in paragraph 2 of Rahamatullah Khan

(supra) that this Court was persuaded to take the view that it did, on account of certain
peculiar facts. The consumer in that case was billed under a particular tariff code for the
period from July­2009 to September­2011. But after audit, it was discovered that a different
tariff code should have been applied. Therefore, a show cause notice was issued on
18.03.2014 raising an additional demand for the period from July­2009 to September­2011.
Then a bill was raised on 25.05.2015 for the aforesaid period. Therefore, the
consumer successfully challenged the demand before the District Consumer Forum,
but the Order of the District Forum was reversed by the State Commission on an appeal by
the licensee. The National Commission on a revision filed by the consumer, set aside
the order of the State Commission and restored the order of the District Forum. It was
this Order of the National Commission that was under challenge before this Court in
Rahamatullah Khan (supra).

Even otherwise there are two things in this case, which we cannot overlook. The first is
that the question whether the raising of an additional demand, by itself would
tantamount to any deficiency in service, clothing the consumer fora with a power
to deal with the dispute, was not raised or considered in Rahamatullah Khan (supra). The
second is the impact of Sub­section (1) of Section 56 on Sub­section (2) thereto.

The raising of an additional demand in the form of “short assessment notice”, on

the ground that in the bills raised during a particular period of time, the multiply factor was
wrongly mentioned, cannot tantamount to deficiency in service. If a licensee discovers in the
course of audit or otherwise that a consumer has been short billed, the licensee is certainly
entitled to raise a demand. So long as the consumer does not dispute the correctness of the
claim made by the licensee that there was short assessment, it is not open to the consumer to
claim that there was any deficiency. This is why, the National Commission, in the impugned
order correctly points out that it is a case of “escaped assessment” and not
“deficiency in service”.

In fact, even before going into the question of Section 56(2), the consumer forum is obliged
to find out at the threshold whether there was any deficiency in service. It is only then that the
recourse taken by the licensee for recovery of the amount, can be put to test in terms of
Section 56. If the case on hand is tested on this parameter, it will be clear that the respondents
cannot be held guilty of any deficiency in service and hence dismissal of the
complaint by the National Commission is perfectly in order.

Coming to the second aspect, namely, the impact of Sub­section (1) on Sub­section (2) of
Section 56, it is seen that the bottom line of Sub-section (1) is the negligence of any
person to pay any charge for electricity. Sub­section (1) starts with the words “where
any person neglects to pay any charge for electricity or any some other than a charge for
electricity due from him”.

Sub­section (2) uses the words “no sum due from any consumer under this Section”.
Therefore, the bar under Subsection (2) is relatable to the sum due under Section 56.
This naturally takes us to Sub­section (1) which deals specifically with the negligence on
the part of a person to pay any charge for electricity or any sum other than a charge for
electricity. What is covered by section 56, under sub­section (1), is the negligence on the
part of a person to pay for electricity and not anything else nor any negligence on the
part of the licensee.

In other words, the negligence on the part of the licensee which led to short billing in the first
instance and the rectification of the same after the mistake is detected, is not covered by
Sub­section (1) of Section 56. Consequently, any claim so made by a licensee after the
detection of their mistake, may not fall within the mischief, namely, “no sum due from any
consumer under this Section”, appearing in Sub­section (2).​
The matter can be examined from another angle as well. Sub-section (1) of Section 56
as discussed above, deals with the disconnection of electric supply if any person
“neglects to pay any charge for electricity”. The question of neglect to pay would arise
only after a demand is raised by the licensee. If the demand is not raised, there is no occasion
for a consumer to neglect to pay any charge for electricity. Sub­section (2) of Section 56 has a
non­obstante clause with respect to what is contained in any other law, regarding the right to
recover including the right to disconnect. Therefore, if the licensee has not raised any
bill, there can be no negligence on the part of the consumer to pay the bill and
consequently the period of limitation prescribed under Sub­section (2) will not start
running. So long as limitation has not started running, the bar for recovery and

disconnection will not come into effect. Hence the decision in Rahamatullah
Khan and Section 56(2) will not go to the rescue of the appellant.

Therefore, we are of the view that the National Commission was justified in rejecting the
complaint and we find no reason to interfere with the Order of the National Commission.
Accordingly, the appeal is dismissed. However, since the appellant has already paid 50% of
the demand amount pursuant to an interim order passed by this Court on 19.08.2014, we give
eight weeks’ time to the appellant to make payment of the balance amount. There shall be no
order as to costs.

KC Ninan v. Kerala State Electricity Board, 2023 SCC OnLine SC 663

Implication of Section 56(2) on recovery of electricity dues by Electric Utilities

Section 56 falls under Part VI which is titled “Distribution of Electricity”. Section 56

provides for disconnection of electrical supply in case there is a default in payment of
electricity charges. The power to disconnect is a drastic step which can be resorted to only
when there is a neglect on the part of the consumer to pay the electricity charges or dues
owed to the licensee or a generating company, as the case may be. The statutory right of the
licensee or the generating company to disconnect the supply of electricity is subject to the
period of limitation of two years provided by Section 56(2). Section 56(2) provides that
notwithstanding anything contained in any other law for the time being in force, no sum due
from any consumer “under this section” shall be recoverable after a period of two years from
the date when such sum became first due unless such sum has been shown continuously as
recoverable as arrears of charges for electricity supplied and the licensee shall not cut off the
supply of electricity. The limitation of two years is limited to recovery of sums under Section
56. This is evident by the use of the expression, “under this section”. The period of limitation
under Section 56(2) is relatable to the sum due under Section 56. The sum due under Section
56 relates to the sum due on account of the negligence of a person to pay for electricity.
Section 56(2) provides that such sum due would not be recoverable after the period of two
years from when such sum became first due. The means of recovery provided under Section
56 relate to the remedy of disconnection of electric supply. The right to recover still subsists.
Hence, it could not be held that the recovery of outstanding electricity arrears either by
instituting a civil suit against the erstwhile consumer or from a subsequent transferee in
exercise of statutory power under the relevant conditions of supply is barred on the ground of
limitation under Section 56(2) of the 2003 Act. Accordingly, while the bar of limitation under
Section 56(2) restricts the remedy of disconnection under Section 56, the licensee is entitled
to recover electricity arrears through civil remedies or in exercise of its statutory power under
the conditions of supply.