Bombay High Court on Electricity Use: Change in Activity Not Unauthorised Without Loss

Introduction

The Electricity Act, 2003 is the law that governs the use and distribution of electricity and according to Section 126, it provides for an assessment in case of unauthorized use of electricity. The extent of application of this provision has been analyzed in various situations, particularly when there is a change in the electricity consumption pattern. The Bombay High Court in Maharashtra State Electricity Distribution Company Ltd. & Anr. v. Azhar Ahmed Qaisar Ahmed & Ors[1]. dealt with the issue of whether a change in industrial activity would be an identification of unauthorised use under Section 126 if there is no financial loss caused to the distribution company.

Summary

The Nagpur Bench of the Bombay High Court decided a petition filed by Maharashtra State Electricity Distribution Company Limited (MSEDCL) against an order of the Appellate Authority. The consumer, Azhar Ahmed Qaisar Ahmed, had shifted his use of electricity from mattress manufacturing to running a water purification and packaging plant. MSEDCL treated this as a change from industrial to commercial use and raised a demand of ₹2,19,000 under Section 126. The Appellate Authority set aside the demand, and the High Court upheld that decision. The Court held that without proof of revenue loss, a change in industrial activity does not amount to unauthorised use of electricity.

Facts of the Case

Electricity supply was sanctioned in the industrial category for mattress manufacturing. On June 13, 2018, MSEDCL carried out an inspection and found that the premises were being used for a water purification plant that filtered, cooled, and packaged water. Treating this as a commercial activity, MSEDCL raised a provisional and final assessment bill of ₹2,19,000 under Section 126. The consumer challenged the order before the Appellate Authority, which on October 24, 2018, quashed the assessment. MSEDCL then filed a writ petition before the High Court challenging the Appellate Authority’s decision.

Issue

The question before the Court was whether the use of electricity for a water purification and packaging plant, in place of mattress manufacturing, amounted to unauthorised use under Section 126 of the Electricity Act, 2003.

Arguments

MSEDCL argued that electricity was sanctioned for mattress manufacturing but was used for water purification and packaging, which it considered a commercial activity. It submitted that this amounted to a change of purpose without intimation and constituted unauthorised use under Section 126.

The consumer argued that water purification through Reverse Osmosis involves processing and qualifies as industrial activity. It was further argued that MERC tariff orders do not classify such activity as commercial and that tariff categories are not limited to listed industries. The consumer relied on MSEDCL’s own circulars, which state that Section 126 applies only where there is revenue loss or wrongful gain. The consumer also relied on documents such as Udyog Aadhaar Registration and MSME recognition to establish that the activity was industrial.

Judgment

The Court held that the demand raised by MSEDCL could not be sustained. It observed that a change in activity from mattress manufacturing to water purification and packaging does not change the nature of electricity usage and cannot be treated as unauthorised use under Section 126 without proof of revenue loss. The Court noted that MSEDCL had not produced material to show that the activity was commercial. It further noted that the MERC tariff orders do not exhaustively define industrial activities and that the Appellate Authority had correctly applied the law. The petition was dismissed, and the order of the Appellate Authority was upheld.

Analysis

The decision shows that Section 126 requires proof of unauthorised use that results in loss to the licensee or wrongful gain to the consumer. The provision is not meant to cover every change in the nature of industrial activity. Water purification through Reverse Osmosis is a process involving manufacturing, and the classification of such activity falls within the industrial category. MSEDCL’s own circulars recognise that unless there is a loss of revenue, Section 126 does not apply. The Court placed weight on tariff orders, regulatory documents, and certificates produced by the consumer. It also referred to earlier decisions where similar activities were recognised as industrial. The ruling restricts the scope of Section 126 to cases involving actual misuse or loss and prevents its application to lawful industrial activities.

Conclusion

The Bombay High Court held that a change in industrial activity, in this case from mattress manufacturing to water purification, does not amount to unauthorised use of electricity under Section 126 of the Electricity Act, 2003, unless it results in revenue loss. The Court upheld the Appellate Authority’s decision and dismissed the petition filed by MSEDCL.

[1] WRIT PETITION NO. 428 OF  2019