Public Utilities as Fiduciaries, Not Arbitrary Authorities: Calcutta High Court Quashes Inflated Electricity Demand

Posted On - 23 April, 2026 • By - Nivedita Bhardwaj

Introduction

The supply of electricity, a critical public utility, is not merely a commercial activity but a statutory obligation imbued with public law responsibilities. Distribution licensees often state-controlled entities, operate within a framework that demands fairness, transparency, and accountability. Disputes relating to excessive billing, defective meters, and retrospective demands frequently test the limits of administrative discretion.

In a significant ruling in West Bengal State Electricity Distribution Company Limited v. Jyotish Chandra Rice Mill (F.M.A. 179 of 2023, decided February 2026)1, the Calcutta High Court emphatically held that a public utility functions as a fiduciary, not an authoritarian administrator. The Court set aside a supplementary electricity demand of over ₹47 lakh raised by West Bengal State Electricity Distribution Company Limited, finding it to be speculative, unsupported by evidence, and contrary to statutory regulations.

Statutory and Regulatory Framework

Electricity Law and Metering Obligations

Under the Electricity Act, 2003:

  • Section 55 mandates supply of electricity through a correct and duly tested meter
  • Section 181 empowers State Electricity Regulatory Commissions to frame binding regulations, including supply codes

In West Bengal, the governing framework is the West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations.

Key provisions include:

  • Regulation 3.3.1: Presumes the correctness of a meter installed by the licensee unless proven defective through appropriate testing (typically by an accredited laboratory)
  • Regulation 3.6.1: Permits revised or average billing only after a defect is established, and upon determination of the period during which the meter was defective

These provisions make it clear that the power to issue supplementary bills is conditional and evidence-based, not discretionary.

Factual Background

The respondent, Jyotish Chandra Rice Mill, was an industrial consumer receiving high-tension electricity supply through a metering system involving a potential transformer (PT).

  • In July 2019, WBSEDCL replaced the meter and PT during routine maintenance
  • In November 2019, it conducted an inspection and alleged a polarity reversal in the PT, purportedly causing under-recording of consumption for approximately 140 days
  • On this basis, WBSEDCL issued a supplementary demand of ₹55.8 lakh (later revised to ₹47.06 lakh), along with late payment surcharge

The consumer challenged the demand before the Consumer Grievance Redressal Forum and subsequently the Electricity Ombudsman. Although both forums noted the absence of conclusive evidence, the demand was effectively sustained, prompting WBSEDCL’s appeal before the High Court.

Issues Before the Court

The Division Bench considered the following key issues:

  1. Whether the potential transformer (PT) forms part of the “meter” for the purpose of regulatory presumption of correctness
  2. Whether WBSEDCL had proved the existence and duration of the alleged defect
  3. Whether the revised billing under Regulation 3.6.1 was legally sustainable
  4. Whether surcharge and interest could be levied on a demand lacking legal foundation

Court’s Analysis

PT as Integral to the Metering System

The Court held that the potential transformer is an integral component of the metering apparatus. Consequently, it falls within the scope of Regulation 3.3.1, and the presumption of correctness applies to the entire metering system.

This presumption could only be rebutted through credible technical evidence, which WBSEDCL failed to provide.

Failure to Establish Defect and Its Duration

A central finding of the Court was that WBSEDCL failed to discharge its evidentiary burden:

  • No laboratory test report or technical certification was produced
  • There was no clear determination of when the alleged defect began or ended

The Court emphasised that revised billing requires precise identification of the defect period (terminus a quo and terminus ad quem). In the absence of such evidence, the demand was reduced to mere conjecture.

Limits on Average Billing

The Court clarified that Regulation 3.6.1 does not grant a blanket or discretionary power to raise average bills.

  • Average billing is permissible only after a defect is conclusively established
  • It cannot be used to retrospectively impose liability based on assumptions

The impugned demand, therefore, lacked jurisdictional foundation.

Perversity and Administrative Law Principles

The Court found the Ombudsman’s order to be perverse, relying on principles laid down in State of Uttar Pradesh v. Johri Mal2, that a decision unsupported by evidence or based on irrelevant considerations is legally unsustainable.

Further, invoking Mohinder Singh Gill v. Chief Election Commissioner3, the Court reiterated that:

  • The validity of an administrative or quasi-judicial order must be judged solely on the reasons recorded therein
  • Authorities cannot supplement deficiencies through subsequent justification

Public Utility as Fiduciary

In a significant doctrinal observation, the Court held that:

  • A public utility discharges a fiduciary function toward consumers
  • Its powers must be exercised fairly, reasonably, and in good faith

The issuance of a speculative demand, coupled with surcharge and threat of disconnection, was characterised as administrative high-handedness.

The Court further held that the Interest or late payment surcharge cannot be levied on an invalid demand and a void demand cannot be validated by the passage of time or accrual of penalties.

Operative Directions

The Court dismissed WBSEDCL’s appeal and issued the following directions:

  • Quashed the supplementary demand of ₹47.06 lakh
  • Directed waiver of late payment surcharge and interest
  • Ordered adjustment of the amount deposited by the consumer against future bills
  • Set aside disconnection notices issued on the basis of the impugned demand
  • Disposed of connected applications without costs

Conclusion

The judgment in WBSEDCL v. Jyotish Chandra Rice Mill is a strong reaffirmation of consumer protection in the realm of public utilities. It underscores that:

  • Meter correctness is presumed unless disproved through credible evidence
  • Supplementary billing must rest on proven defects and defined timelines
  • Administrative discretion cannot override statutory safeguards

By characterising electricity distribution as a fiduciary function, the Court has elevated the standard of accountability expected from utilities. The ruling serves as a clear warning against arbitrary billing practices and strengthens the jurisprudence on fairness, reasonableness, and evidentiary discipline in regulatory governance.

  1. West Bengal State Electricity Distribution Co. Ltd. & Ors. v. Jyotish Chandra Rice Mill & Ors., F.M.A. No. 179 of 2023 (Calcutta High Court, Feb. 2026). ↩︎
  2. State of Uttar Pradesh v. Johri Mal (2004) 4 SCC 714 ↩︎
  3. Mohinder Singh Gill v. Chief Election Commissioner (1978) 1 SCC 405 : AIR 1978 SC 851 ↩︎