The Supreme Court has dismissed an electricity distribution company’s appeal over a Rs 57.74 lakh minimum-consumption demand raised in 2007 for a 1998 period, holding the claim time-barred, and reaffirming that a power utility cannot recover dues by disconnection beyond the two-year limitation under Section 56(2) of the Electricity Act.
New Delhi: The Supreme Court has dismissed an appeal by Dakshinanchal Vidyut Vitran Nigam Ltd., a power distribution licensee, upholding the setting-aside of a demand of Rs 57,74,164 it had raised against a consumer towards Minimum Consumption Guarantee Charges (MCGC), on the ground that the demand, made in 2007 for a period in 1998, was barred by limitation and, in any event, had no factual foundation because the additional load in question was never actually supplied to the consumer [Dakshinanchal Vidyut Vitran Nigam Ltd. v. Vidyut Lokpal, Uttar Pradesh and Others].
A Bench of Justice S.V.N. Bhatti and Justice N.V. Anjaria delivered the judgment, marked non-reportable, on September 10, 2026, affirming the view of the Allahabad High Court (Lucknow Bench) and the Electricity Ombudsman.
The dispute: a demand for power that was never supplied
The facts trace back to the late 1990s. The consumer had applied for a 4000 KVA load but, owing to contemporaneous limitations, the licensee sanctioned only 2000 KVA, recorded in an agreement of February 1997. In January 1998, the licensee wrote offering to release the balance 2000 KVA, subject to a fresh agreement, but the consumer, by a letter of September 1998, declined the additional supply.
Nearly a decade later, in February 2007, the licensee raised a demand of Rs 57.74 lakh towards MCGC for the additional 2000 KVA for the February-to-September 1998 period, on the assumption that, having been ready to supply the extra load, it was entitled to charge the consumer as though the contracted capacity were 4000 KVA. The Electricity Ombudsman set aside the demand, finding that the consumer had never consented to the additional load and that there was nothing on record to show the extra 2000 KVA was ever released, and that the demand was time-barred under Section 56(2) of the Electricity Act, 2003. The licensee’s writ petition against that decision was dismissed by the High Court, leading to the present appeal.
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The limitation principle: when do electricity charges become ‘first due’
The decisive issue was the limitation on recovering electricity dues. Section 56(2) of the Electricity Act, 2003 provides that a sum due on account of electricity supplied is not recoverable, by disconnection, after two years from the date it first became due, unless it has been continuously shown as recoverable arrears in the bills raised. The Court applied the settled exposition of this provision from its earlier decision in Assistant Engineer (D1), Ajmer Vidyut Vitran Nigam Ltd. v. Rahamatullah Khan, extracting the key holdings.
On that authority, the liability to pay arises on the consumption of electricity, but the charges become “first due” only when the licensee issues a bill quantifying them, and the two-year limitation under Section 56(2) runs from that point. Crucially, that limitation restricts the licensee’s statutory right to disconnect supply for non-payment: a utility cannot switch off a consumer’s power to enforce a demand more than two years after it first became due, unless the sum has been carried continuously as arrears in the intervening bills. Here, the Court noted, no bill for the additional 2000 KVA had ever been issued alongside the regular bills, and the sum had not been continuously treated as recoverable arrears, so the 2007 demand for a 1998 period was squarely time-barred. The Court observed that the demand would be barred even under the general three-year (or, at the outer limit, six-year) periods that might otherwise apply.
No liability without actual supply
Beyond limitation, the appeal foundered on a more basic point: the additional load for which the charges were claimed was never released to the consumer. The Court affirmed the finding that although the 1997 agreement contemplated an additional 2000 KVA within six months, the licensee was not in a position to supply it due to the non-availability of power, and its belated 1998 offer was expressly declined by the consumer. A consumer’s liability to pay for a contracted load, the Court reasoned, arises only when the agreed quantum of electricity is actually released, not before, and the licensee did not contend either that the consumer had consented or that the extra 2000 KVA had ever been supplied. On that footing, there was simply no basis for the MCGC demand.
The Court also recorded that the appellant had not seriously pressed its challenge to the vires of the ombudsman regulations, and that its ancillary arguments were, in any event, “watered down” by the Court’s decision in K.C. Ninan v. Kerala State Electricity Board. It therefore did not re-examine the High Court’s limited rejection of the challenge to the regulations.
Why the judgment matters
Though marked non-reportable and turning on its own facts, the judgment is a useful, practitioner-friendly restatement of two principles that recur constantly in electricity litigation. The first is the Section 56(2) limitation: power utilities routinely raise long-delayed “supplementary” or arrears demands, sometimes years after the event, and the decision reaffirms that while the utility is not altogether barred from pursuing recovery by other lawful modes, it cannot wield the coercive threat of disconnection to enforce a stale demand beyond two years unless the sum was carried continuously as arrears. For consumers faced with a sudden bill for a long-past period, that is a significant protection.
The second is the common-sense proposition, easily lost in the technicality of minimum-guarantee clauses, that a consumer cannot be charged for a load that was never actually supplied. A licensee’s readiness to supply, unaccompanied by the consumer’s acceptance and the actual release of the load, does not create a payable liability. Together, the two strands make the decision a handy reference point for disputes over delayed electricity demands and minimum-consumption charges, even if it breaks no new doctrinal ground. The appeal was dismissed, leaving the consumer-protective findings of the Ombudsman and the High Court intact.
Case Title: Dakshinanchal Vidyut Vitran Nigam Ltd. v. Vidyut Lokpal, Uttar Pradesh and Others [Civil Appeal No. 5099 of 2013]
Bench: Justice S.V.N. Bhatti and Justice N.V. Anjaria
Citation: 2026 INSC 985
Date of Judgment: September 10, 2026