Supreme Court Upholds Liability for Minimum Guarantee Charges Under Electricity Supply Agreement, Applies Issue Estoppel to Bar Challenge Against Pre-2003 Liability, and Rejects Limitation Claim Under Section 56(2)

Court’s Decision:
The Supreme Court overturned the High Court’s decision, reinstating the electricity board’s demand for minimum guarantee charges from the respondent. It held that the prior judicial orders conclusively established the respondent’s liability, barring any further challenge under the principle of issue estoppel. The Court ruled that section 56(2) of the Electricity Act, 2003, which prescribes a two-year limitation for raising demands, does not apply to liabilities arising prior to its enactment.

Facts:
The dispute originated from an agreement between the Madhya Pradesh Madhya Kshetra Vidyut Vitran Company and the respondent, where the latter was obligated to a minimum electricity consumption. Despite consuming less than the agreed threshold, the respondent installed a captive power generation unit, prompting the appellant to demand charges based on the minimum consumption clause. Several notices and legal proceedings ensued over nearly a decade, culminating in this appeal to the Supreme Court after the High Court quashed a demand notice under the 2003 Act.

Issues:

1. Whether section 56(2) of the Electricity Act, 2003, applied retrospectively to bar recovery of charges accrued prior to the Act’s enforcement.
2. Whether the electricity board’s demand was enforceable despite delays in issuing notices.

Petitioner’s Arguments:
The electricity board argued that the High Court wrongly applied section 56(2) of the 2003 Act retrospectively, as the demand related to obligations predating the Act. They asserted that the liability remained enforceable under the original contract and did not lapse due to any statutory limitation.

Respondent’s Arguments:
The respondent contended that the demand was time-barred and excessive given the delayed issuance of notices. They claimed that the show cause notices lacked legal enforceability as they were issued years after the initial liability was incurred.

Analysis of the Law:
The Court analyzed section 56(2) of the Electricity Act, 2003, noting its two-year limitation applies only to post-enactment dues. Relying on previous rulings, the Court highlighted that liabilities incurred before 2003 were unaffected by this limitation. Additionally, it examined section 24 of the 1910 Act, which allowed the licensee to disconnect supply for non-payment without any statutory limitation.

Precedent Analysis:
The Court referenced its previous judgments in Kusumam Hotels (P) Ltd. v. Kerala SEB and K.C. Ninan v. Kerala SEB, affirming that liabilities established prior to the 2003 Act are exempt from the two-year limitation under section 56(2).

Court’s Reasoning:
The Court emphasized issue estoppel, holding that the respondent’s failure to challenge prior judicial orders confirming its liability barred it from contesting the subsequent demand. It underscored that prior orders unequivocally required the respondent to pay the minimum guarantee charges, thus foreclosing any argument against the liability itself.

Conclusion:
The Supreme Court ruled that the High Court erred in applying the limitation under section 56(2) of the 2003 Act to pre-existing liabilities. It affirmed the enforceability of the demand, grounded in prior judicial determinations and contractual terms, thereby allowing the appeal.

Implications:
This ruling clarifies the scope of section 56(2) concerning pre-2003 liabilities and reinforces the principle of issue estoppel in contractual disputes. It signals to entities under similar agreements that statutory limitations on demand may not apply retrospectively, and that judicial determinations on liability may restrict future contestations.

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