M/S Bharat Aluminium Company Limited vs State Of Chhattisgarh

The only question for consideration before this Court in the instant petition is whether Respondent 1/Tahsildar has any jurisdiction viz-a-viz Section 170 of the Electricity Act, 2003 (henceforth ‘the Act of 2003’) for initiating recovery proceedings against the Petitioner qua Cross Subsidy Surcharge (henceforth ‘the CSS’) as arrears of land revenue.

Facts of the case, in short, are that the Petitioner/company established a captive generating plant under Section 9 of the Act of 2003 having installed capacity of 2010 MW for the purpose of carrying electricity to the destination of its own use or its captive users. The Petitioner was an extra high voltage consumer connected to the distribution network of Respondent 2/CSPDCL till 30.9.2013 and had been essentially process power under open access for the purpose of meeting its base load requirement. After 30.9.2013, the Petitioner was connected with the central transmission utility which is continuing presently. For the same, the Petitioner has been paying all the open access charges including CSS to the Respondents. The Chhattisgarh State Electricity Regulatory Commission (CSERC) has notified the Regulations, 2011 regarding methodology for determination of CSS and other open access charges payable by open access consumers in the State of Chhattisgarh. The CSERC issued tariff orders for financial year 2013-14, 2014-15, 2015-16 thereby approving the retail supply tariff of the Respondents for the said financial years. The CSERC has also notified the CSERC tariff Regulations, 2015. Respondent 2 imposed CSS upon the Petitioner for the open access power, procured during financial year 2013-14, 2014-15 and 2015-16 and raised bills total amounting to Rs.90,19,21,948 which is in the nature of electricity charges which are paid by open access consumers to the distribution licensee including by a consumer/company owning the captive generating plant if they fail the test of Rule 3 of the Electricity Rules, 2005. In compliance of the interim order dated 21.11.2014 and 10.7.2015 passed by CSERC in Petition No.37/2014, the Petitioner deposited Rs.45,01,73,359. Thereafter, the said petition was dismissed by the CSERC vide its order dated 27.7.2016. In the meantime, the Petitioner proceeded to file appeals before the Appellate Tribunal challenging the tariff orders dated 12.6.2014 and 31.3.2017 passed by CSERC to the extent of determination of CSS. Subsequently, the Petitioner filed Petition No.70/2020 before CSERC. The Petitioner also proceeded to file a writ petition being Writ Petition (C) No.1084 of 2017 before this Court challenging the Regulation 33(6)(b)(iii) of CSERC OA Regulations 2011. The petition was dismissed by this Court vide order dated 11.2.2020. Being aggrieved by the same, the Petitioner proceeded to file an SLP before the Supreme Court which is pending. After the judgment of this Court, Respondent 2 vide demand/invoices dated 2.7.2020, 7.7.2020, 22.7.2020, 4.8.2020 and 2.9.2020 raised a fresh demand of Rs.1,04,47,83,578 upon the Petitioner towards the recovery of the CSS for the quantum of power procured under open access which is in the nature of electricity supply dues. The Petitioner moved a letter before Respondent 2 requesting the recalculation of the CSS which was dismissed by Respondent 2. The Petitioner in Petition No.70/2020 pending before CSERC made an interim application under Section 94(2) of the Act of 2003 seeking stay of the demand notice. In the meantime, even during pendency of said application, Respondent 2, vide letter dated 23.8.2021, requested the office of Respondent 1 for raising a demand of Rs.67,37,74,884 towards recovery of the CSS. Accordingly, Respondent 1/Tahsildar issued the impugned demand notice dated 1.9.2021 (Annexure P4) to the Petitioner. Hence, this petition.

Respondent 2/CSPDCL, in its return, has raised mainly 3 grounds placing reliance on the following provisions of law:

(1) Section 170 of the Act of 2003.

(2) Clause 10.30 of the Chhattisgarh State Electricity Supply Code, 2011 (henceforth ‘the Supply Code of 2011’).

(3) Section 6 of the Chhattisgarh Government Electrical Undertaking (Dues Recovery) Act, 1961 (henceforth ‘the Act of 1961’).

It has been pleaded that as per the provisions of Section 170 of the Act of 2003, the unpaid dues of the electricity can be recovered as arrears of the land revenue. Further, as per Clause 10.30 of the Supply Code of 2011, in case where the consumer is permanently disconnected with the distribution system of distribution licensee, a distribution licensee has to take recourse under the Act of 1961 to recover its dues. Further, as per Section 6 of the Act of 1961 for the purposes of recovery of electrical dues, the demand amount may be recovered by the Collector as if it were arrears of land revenue. Therefore, it is clear that the pending electricity dues for the purposes of recovery are treated as land arrears and can be recovered in the same way as the recovery is done for land arrears by the appropriate authority which is Tahsildar. It is further pleaded that the Petitioner has already filed a similar application seeking interim relief before CSERC in Petition No.70/2020. Therefore, the instant writ petition is not maintainable.

I have heard the arguments raised on behalf of the parties and perused the entire material available with due care.

Before discussing the issue, it would be appropriate to reproduce some of the relevant provisions, which are as under:

“The Electricity Act, 2003:

Section 2(15): Consumer means any person who is supplied with electricity for his own use by a licensee or the Government or by any other person engaged in the business of supplying electricity to the public under this Act or any other law for the time being in force and includes any person whose premises are for the time being connected for the purpose of receiving electricity with the works of a licensee, the Government or such other person, as the case may be.

Section 170: Recovery of Penalty payable under this Act:

Any penalty payable by a person under this Act, if not paid, may be recovered as if it were an arrear of land revenue.

The Chhattisgarh State Electricity Supply Code, 2011:

2(q): ‘Consumer’ means as defined in section 2(15) of the Act and for the purpose of this Code shall also include a person who has applied for an electricity connection or a person who had a connection but whose electricity supply has been disconnected for the time being for whatever reason.

Regulation 10.22:

After temporary disconnection in case the consumer does not come up to get supply reconnect, by making payment of outstanding dues, the connection be permanently disconnected after termination of agreement by following the procedure as stated in para 7.36/7.37 of this Code whichever is applicable.

Regulation 10.22 of the Principal Code is substituted by the following:

(a) After temporary disconnection in case the consumer does not come up to get supply reconnect, by making payment of outstanding dues, the connection be permanently disconnected after termination of agreement by following the procedure as stated in Para 7.36/7.37 of this Code whichever is applicable.

(b) The licensee is entitled to recover old electricity dues in respect of a permanent disconnected connection of a consumer from other existing electricity connection of same consumer within its area of supply.

Regulation 10.30 shall be added after Regulation 10.29 of the Principal Code:

On permanent disconnection of an electricity connection having outstanding dues, a distribution licensee shall take recourse of the Chhattisgarh Government Electrical Undertaking (Dues Recovery) Act, 1961 (No.36 of 1961) towards the recovery of such outstanding dues, without prejudice to its rights to exercise other remedies in respect of provisions of this Code.

The Chhattisgarh Government Electrical Undertaking (Dues Recovery) Act, 1961:

Section 6: Recovery of Dues, etc., if not paid:

(1) If the aggregate amount of the various dues, penalty and cost mentioned in the notice of demand served under Section 4 is not deposited with the prescribed authority, within three months of the date of such service or such extended period as the prescribed authority may from time to time allow,l the debtor shall be deemed to be in default in respect of such amount and the same shall be recoverable as an arrear of land revenue, anything contained in any other law or instrument, or agreement to the contrary notwithstanding.

(2) For the purpose of such recovery, the prescribed authority may forward to the Collector a certificate under his signature in the prescribed form stating the amount and details of the demand and the name, and description of the debtor in default and the Collector shall in receipt of such certificate, proceed to recover from the debtor the amount of the demand as if it were an arrear of land.”

It was the first contention raised by Respondent 2 that as per the provisions under Section 170 of the Act of 2003 the penalties under the Act of 2003 can be recovered as arrears of land revenue. From perusal of Section 170 of the Act of 2003, it is clear that the recovery of any penalty payable by a person under the Act of 2003 if not paid may be recovered as it were arrears of land revenue. Now the question for consideration is that whether the CSS can be treated as penalty as contained in Section 170 of the Act of 2003. With regard to the CSS (Cross Subsidy Surcharge)), dealing with the issue, the Supreme Court in (2014) 8 SCC 444 (Sesa Sterlite Limited v. Orissa Electricity Regulatory Commission) observes as under:

“27. The issue of open access surcharge is very crucial and implementation of the provision of open access depends on judicious determination of surcharge by the State Commissions. There are two aspects to the concept of surcharge – one, the cross-subsidy surcharge i.e. the surcharge meant to take care of the requirements of current levels of cross-subsidy, and the other, the additional surcharge to meet the fixed cost of the distribution licensee arising out of his obligation to supply. The presumption, normally is that generally the bulk consumers would avail of open access, who also pay at relatively higher rates. As such, their exit would necessarily have adverse effect on the finances of the existing licensee, primarily on two counts – one, on its ability to cross-subsidise the vulnerable sections of society and the other, in terms of recovery of the fixed cost such licensee might have incurred as part of his obligation to supply electricity to that consumer on demand (stranded costs). The mechanism of surcharge is meant to compensate the licensee for both these aspects.

Through this provision of open access, the law thus balances the right of the consumers to procure power from a source of his choice and the legitimate claims/interests of the existing licensees. Apart from ensuring freedom to the consumers, the provision of open access is expected to encourage competition amongst the suppliers and also to put pressure on the existing utilities to improve their performance in terms of quality and price of supply so as to ensure that the consumers do not go out of their fold to get supply from some other source.

With this open access policy, the consumer is given a choice to take electricity from any distribution licensee. However, at the same time the Act makes provision of surcharge for taking care of current level of cross-subsidy. Thus, the State Electricity Regulatory Commissions are authorised to frame open access in distribution in phases with surcharge for:

4.(vi)(a) current level of cross-subsidy to be gradually phased out along with cross-subsidies; and

(b) obligation to supply.”

Further, in paragraph 30 of the said judgment, it was held by the Supreme Court that CSS is a compensation to the distribution licensee irrespective of the fact whether it is lying in use or not. The relevant paragraph 30 of the said judgment reads thus:

“30. Therefore, in the aforesaid circumstances though CSS is payable by the consumer to the distribution licensee of the area in question when it decides not to take supply from that company but to avail it from another distribution licensee. In a nutshell, CSS is a compensation to the distribution licensee irrespective of the fact whether its line is used or not, in view of the fact that, but for the open access the consumer would pay tariff applicable for supply which would include an element of cross-subsidy surcharge on certain other categories of consumers. What is important is that a consumer situated in an area is bound to contribute to subsidising a low end consumer if he falls in the category of subsidising consumer. Once a cross-subsidy surcharge is fixed for an area it is liable to be paid and such payment will be used for meeting the current levels of cross-subsidy within the area. A fortiori, even a licensee which purchases electricity for its own consumption either through a “dedicated transmission line” or through “open access” would be liable to pay cross-subsidy surcharge under the Act. Thus, cross-subsidy surcharge, broadly speaking, is the charge payable by a consumer who opt to avail power supply through open access from someone other than such distribution licensee in whose area it is situated. Such surcharge is meant to compensate such distribution licensee from the loss of cross-subsidy that such distribution licensee would suffer by reason of the consumer taking supply from someone other than such distribution licensee.”

Thus, from the above observation of the Supreme Court, it is clear that the CSS is not a penalty. Instead of that it is an electricity charge/tariff.

The second contention of Respondent 2 was that under Regulation 10.30 of the Supply Code of 2011 the Petitioner is a permanently disconnected consumer. Meaning thereby, as per the provision under Section 6 of the Act of 1961, the recovery of the alleged CSS as arrears of land revenue is permissible and accordingly the notice has been issued by the Tahsildar. Though Section 6(2) of the Act of 1961 empowered the prescribed authority to forward a certificate to the Collector stating the amount and details of the demand and the name and description of the debtor in detail and on the basis of such certificate the Collector is empowered to proceed to recover from the debtor the amount of the demand as it were arrears of land revenue, as contained in sub-section (1) of Section 6 of the Act of 1961 the aggregate amount of the various dues, penalty and cost should be demanded from the defaulter/debtor. The argument was raised by Respondent 2 in this regard that as contained under Regulation 10.30 of the Supply Code of 2011, the Petitioner is a permanently disconnected consumer. Meaning thereby, the provisions of Section 6 of the Act of 1961 are applicable and the recovery of the alleged CSS can be done as arrears of land revenue. In this regard, it was submitted on behalf of the Petitioner that though the Petitioner is a consumer as defined in Section 2(15) of the Act of 2003 and Section 2(q) of the Supply Code of 2011, as contained in Regulation 10.30 of the Supply Code of 2011 only in the case of permanently disconnected consumer a distribution licensee can recover old and outstanding dues for taking recourse to the Act of 1961. In this regard, Respondent 2 has not pointed out any of the documents to this Court to show that the Petitioner is a permanently disconnected consumer of the distribution licensee, i.e., CSPDCL/Respondent 2. Rather, it appears that the fresh electricity bills qua CSS could have been raised upon the Petitioner post the period of 2013, i.e., after being connected to the central transmission utility. If the Petitioner was a permanently disconnected consumer, in that condition, no fresh electricity bills relating to CSS would have been raised. Thus, it cannot be said that the Petitioner/company is a permanently disconnected consumer. Therefore, the alleged dues towards CSS can neither be termed as “outstanding” so as to attract Regulation 10.30 of the Supply Code of 2011 nor can be termed as “old” so as to attract Regulation 10.20 of the Supply Code of 2011.

As discussed above, it is clear that the CSS in this case is not a penalty and instead of that it is an electricity charge/tariff as observed by the Supreme Court in Sesa Sterlite case (supra). Therefore, it is held that the CSS may not be recovered as arrears of land revenue as per the provisions of Section 170 of the Act of 2003. It is also clear that though the Petitioner/company is a consumer of Respondent 2, it is not a permanently disconnected consumer. Therefore, the provisions of Section 6 of the Act of 1961 are also not applicable to this case. Thus, the question framed above by this Court is answered in negative and it is held that Respondent 1/Tahsildar has no jurisdiction viz-a-viz Section 170 of the Act of 2003 for initiating recovery proceeding against the Petitioner/company qua the CSS as arrears of land revenue.

Resultantly, the impugned demand notice dated 1.9.2021 (Annexure P4) issued by Respondent 1/Tahsildar to the Petitioner/company is hereby quashed and the instant writ petition is allowed.