Electricity Tariff Dispute: Supreme Court Upholds Bihar Electricity Board’s Demand

The case of Bihar State Electricity Board & Ors. v. M/s. Bhola Ram Steel Pvt. Ltd. & Ors. dealt with an electricity tariff dispute regarding excess consumption beyond contracted demand. The Supreme Court ruled in favor of the Bihar State Electricity Board, upholding the demand for charges based on excess consumption recorded by the Maximum Demand Indicator (MDI) meter.

Background of the Case

M/s. Bhola Ram Steel Pvt. Ltd., an industrial unit in Bihar, was granted an electricity connection with a contract demand of 500 KVA. As per the Bihar State Industrial Policy, units with a connected load of up to 500 KVA were exempt from minimum guarantee charges for five years. However, in 1999-2000, the industry’s maximum demand exceeded the contracted 500 KVA multiple times, leading the Bihar Electricity Board to issue a demand notice for additional charges.

The respondent challenged this demand in the High Court, which ruled in favor of the industry, quashing the demand. The Bihar Electricity Board, aggrieved by this decision, approached the Supreme Court.

Key Arguments by the Petitioner (Bihar State Electricity Board)

• The petitioner contended that the respondent exceeded the contract demand on multiple occasions, as recorded by the MDI meter.
• Clause 16.5 of the tariff notification dated 21.06.1993 provided that if a consumer exceeded 110% of the contracted demand, the highest recorded demand would be treated as the contract demand for that financial year.
• The industry was not entitled to the exemption from minimum guarantee charges since it had violated the connected load limit.
• Meter tests conducted in 1999 confirmed that the readings were accurate, and the demand raised was justified.

Key Arguments by the Respondents (M/s. Bhola Ram Steel Pvt. Ltd.)

• The respondent argued that there was no direct correlation between connected load and contract demand.
• They contended that the readings of the MDI meter were unreliable due to alleged malfunctions and replacements of the meter.
• The industry maintained that it never exceeded the sanctioned 500 KVA load and was entitled to the industrial policy benefits.
• The High Court was correct in its observation that greater power consumption led to economic growth, employment, and development in Bihar.

Supreme Court Judgment

A bench comprising Justices M.Y. Eqbal and Arun Mishra ruled in favor of the Bihar State Electricity Board, holding that:

• The MDI meter readings were credible and established that the industry exceeded the contracted demand on multiple occasions.
• Clause 16.5 of the tariff notification was applicable, making the highest recorded demand the basis for charges.
• The High Court erred in holding that economic benefits justified exceeding the contracted load without paying due charges.
• Past judgments, including Bhilai Rerollers v. M.P. Electricity Board and Orissa State Electricity Board v. IPI Steel Ltd., validated the use of MDI meter readings for determining excess consumption.
• The demand raised by the Bihar Electricity Board was legally valid, and the industry was required to pay the outstanding amount within six weeks.

Conclusion

This judgment clarifies the importance of adhering to contracted power limits in industrial electricity consumption. It reinforces the legality of tariff notifications and the reliability of MDI meters in determining excess usage, ensuring that power suppliers are not unfairly burdened by consumers exceeding their sanctioned limits.

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Download Judgment: Bihar State Electric vs Ms. Bhola Ram Steel Supreme Court of India Judgment Dated 28-01-2016.pdf