KERALA STATE ELECTRICITY BOARD & ORS. versus THOMAS JOSEPH ALIAS THOMAS M. J. & ORS. on 16 December 2022

KERALA STATE ELECTRICITY BOARD & ORS.

v.

THOMAS JOSEPH

ALIAS THOMAS M. J. & ORS.

(Civil Appeal Nos. 9252-9253 of 2022)

DECEMBER 16, 2022

[DINESH MAHESHWARI AND J. B. PARDIWALA, JJ.]

Electricity Act, 2003: ss.126 and 127 – Unauthorised use ofelectricity – Consumption of electricity by consumers in excess ofthe connected load/contracted load whether amount to‘unauthorised use of electricity’ under explanation (b) to s.126(6)– Held: ss.126 and 127 of the Act constitute a complete code inthemselves – The expression ‘unauthorised use of electricity’ meansas it appears in s.126 – The purpose of s.126 is to ensure stoppageof misuse/unauthorised use of electricity as well as to ensureprevention of revenue loss – Consumption of electricity in excess ofsanctioned/connected load in very same premise and for the verysame purpose without change in tariff constitutes ‘unauthoriseduse of electricity’ under explanation (b) (iv) to s. 126 of the Act –Kerala Electricity Supply Code, 2014 – r. 153.

Administrative law: Delegated Legislation – Rule makingpower – If a rule goes beyond the rule making power conferred bythe statute, the same has to be declared invalid – If a rule supplantsany provision for which power has not been conferred, it becomesinvalid – The basic test is to determine and consider the source ofpower, which is relatable to the rule – A delegated power to legislateby making rules or regulations cannot be exercised so as to bringinto existence the substantive rights or obligations or disabilitiesnot contemplated by the provisions of the Electricity Act, 2003.

Kerala Electricity Supply Code, 2014: Regn.153(15) –Whether Regn.153(15) is ultra vires of s.126 of Electricity Act, 2003– Held: A rule making body must function within the purview of therule making authority conferred on it by the parent Act – The bodymaking rules or regulations has no inherent power of its own tomake rules, but derives such power only from the statute, it has to

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Anecessarily function within the purview of the statute – IfRegn.153(15) is to be given effect, then the same would frustratethe very object of s.126 of the Act – Therefore, Regn.153(15) isinvalid on the ground that same is inconsistent with the provisionsof s.126 of the Electricity Act, 2003 – Doctrine of ultra vires.

BAllowing the appeals, the Court

HELD: 1. It is not just a matter of overdrawal of electricityin excess of sanctioned/connected load in the very same premisesand for the very same purpose, which does not involve any changein the tariff applicable for the relevant category of services. TheCtariff applicable may remain the same; the overdrawal may be inthe same premises and for the very same purpose, there may notbe any loss of revenue but it may lead to a disastrous situationbeing prejudicial to the public at large, as such overdrawal ofelectricity in excess of sanctioned/connected load may disturbthe entire supply system, undermining its efficiency, efficacy andDeven-increasing voltage demand. High Court have erred incoming to the conclusion that the consumer cannot be chargedtwice the energy charges if the consumer uses in excess of thesanctioned/connected load in the very same premises and forthe very same purpose, which do not involve any change in theEtariff. [Paras 56 and 58][136-B-C; 137-A-B]

2. It is settled law that the regulation making power cannotbe used to bring into existence substantive rights, which are notcontemplated under the Act 2003. If a rule goes beyond the rulemaking power conferred by the statute, the same has to beFdeclared invalid. If a rule supplants any provision for which powerhas not been conferred, it becomes invalid. The basic test is todetermine and consider the source of power, which is relatableto the rule. Similarly, a rule must be in accord with the parentstatute, as it cannot travel beyond it. [Paras 63 and 64][139-E-H]

G3. The doctrine of ultra vires envisages that a rule makingbody must function within the purview of the rule making authorityconferred on it by the parent Act. As the body making rules orregulations has no inherent power of its own to make rules, butderives such power only from the statute, it has to necessarily H

function within the purview of the statute. Delegated legislationshould not travel beyond the purview of the parent Act. If it does,it is ultra vires and cannot be given any effect. Ultra vires mayarise in several ways; there may be simple excess of power overwhat is conferred by the parent Act; delegated legislation may beinconsistent with the provisions of the parent Act or statute lawor the general law; there may be noncompliance with theprocedural requirement as laid down in the parent Act. [Para 65][140-B-D]

4. A delegated power to legislate by making rules orregulations ‘for carrying out the purpose of the Act’, is a generaldelegation without laying down any guidelines; it cannot beexercised so as to bring into existence the substantive rights orobligations or disabilities not contemplated by the provisions ofthe Act 2003 itself. Rules or regulation cannot be made to supplantthe provisions of the enabling Act but to supplement it. What ispermitted is the delegation of ancillary or subordinating legislativefunctions, or, what is fictionally called, a power to fill up details. [Paras 78 and 80][144-H; 145-A, D]

5. Regulation 153(15) of the Code 2014 framed by theCommission is inconsistent with Section 126 of the Act 2003. Ifthe Regulation 153(15) is to be given effect, then the same wouldfrustrate the very object of Section 126 of the Act 2003. It is notjust the question of loss of revenue. At the cost of repetition, weemphasis on the fact that overdrawal of electricity is prejudicialto the public at large as it may throw out of gear the entire supplysystem, undermining its efficiency, efficacy and even-increasingvoltage fluctuations. [Para 82][148-B-C]

Sukhdev Singh and Others v. Bhagatram Sardar SinghRaghuvanshi and Another (1975) 1 SCC 421 : [1975]3 SCR 619 – followed.

Executive Engineer, Southern Electricity SupplyCompany of Orissa Limited (Southco) and Another v.Sri Seetaram Rice Mill (2012) 2 SCC 108 : [2011] 15SCR 211 – relied on.

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APunjab State Electricity Board v. Vishwa CaliberBuilders Private Limited (2010) 4 SCC 539; UttarPradesh Power Corporation Limited and Others v. AnisAhmad (2013) 8 SCC 491 : [2013] 13 SCR 388;Additional District Magistrate (Rev.) Delhi Admn. v. SiriRam (2000) 5 SCC 451 : [2000] 3 SCR 1019; State ofBKarnataka and Another v. H. Ganesh Kamath andOthers (1983) 2 SCC 402 : [1983] 2 SCR 665; KunjBehari Lal Butail and Others v. State of H.P. and Others(2000) 3 SCC 40 : [2000] 1 SCR 1054; St. JohnsTeachers Training Institute v. Regional Director,CNational Council for Teacher Education and Another(2003) 3 SCC 321 : [ 2003] 1 SCR 975; Global EnergyLimited and Another v. Central Electricity RegulatoryCommission (2009) 15 SCC 570 : [2009] 9 SCR 22;State of T.N. and Another v. P. Krishnamurthy and Others(2006) 4 SCC 517 : [2006] 3 SCR 396; PratapDChandra Mehta v. State Bar Council of MadhyaPradesh and Others (2011) 9 SCC 573 : [2011] 11SCR 965; Dr. Mahachandra Prasad Singh v. Chairman,Bihar Legislative Council and Others (2004) 8 SCC747 : [2004] 5 Suppl. SCR 692; McEldowney v. FordeE(1971) AC 632 : (1969) 3 WLR 179 – referred to.“Delegated Legislation” in Francis Bennion’s StatutoryInterpretation, 3rd Edn.) – referred to.

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CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.9252-9253 of 2022.

From the Judgment and Order dated 12.04.2017 of the High Courtof Kerala at Ernakulam in WP (C) No.22644 of 2015 and dated21.08.2017 in Review Petition No.598 of 2017 in WP (C) No.22644 of2015.

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With

Civil Appeal Nos. 9256-9257, 9254-9255, 9262-9263, 9264-9265,9266-9267, 9268-9269, 9270-9271, 9258-9259 and 9260-9261 of 2022.

Basant R., Sr. Adv., Raghenth Basant, P. V. Dinesh, VishnuPazhanganat, Ajay Krishna, Rahul Raj Mishra, Ashwini Kumar Singh,Dineesh K., Advs. for the Appellants.

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Nishe Rajen Shonker, Sriram P., Abraham C. Mathew, Anu K.Joy, Alim Anvar, Mohammed Sadique T.A., Kuriakose Varghese, V.Shyamohan, Akshat Gogna, Ms. Aishwarya Hariharan, M/s. Kmnp Law,Dhananjaya Mishra, C. K. Sasi, Abdulla Naseeh. V. T., Ms. Meena k.Poulose, Advs. for the Respondents.

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The Judgment of the Court was delivered by

J. B. PARDIWALA, J.

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1. Leave granted in all the captioned Special Leave Petitions.

2. Since the issues raised in all the captioned petitions are the sameand the challenge is also to the self-same judgment and order passed bythe High Court of Kerala dated 12.04.2017 deciding a batch of writapplications filed by the respondents herein, those were taken up forhearing analogously and are being disposed by this common judgmentand order.

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3. This batch of petitions is at the instance of the Kerala StateElectricity Board (“Board” or “KSEB”) and is directed against thejudgment and order passed by Division Bench of the High Court of H

90SUPREME COURT REPORTS

AKerala dated 12.04.2017 in Writ Petition (C) No. 22644 of 2015 andallied petitions by which the High Court declared that in case ofunauthorised use of electricity in a higher tariff the assessment shall bemade at the rate equal to twice the tariff applicable for the relevantcategory of services attracting such higher tariff for which electricitysupplied was unauthorisedly used and not the relevant category ofBservices to which the consumer belongs. The High Court proceededfurther to hold that the exception to the above would be in the case of aconsumer who is guilty of overdrawal of electricity in excess of thesanctioned/connected load in the very same premises and for the verysame purpose which does not involve any change in the tariff applicableCfor the relevant category of services, which consumption has alreadybeen metered and paid by the consumer, as such use being not by anyartificial means or through the tampered meter, the assessment underSection 126(6) of the Electricity Act 2003 (for short, ‘the Act 2003’)could only be called to twice the fixed charges payable and such consumercannot be saddled with the liability to pay twice the energy chargesDapplicable for the relevant category of services, unless regularisation ofsuch additional connected load or enhancements of contract demandnecessitates upgradation of the existing distribution system orenhancement of the voltage level of supply.

FACTUAL MATRIXE

4. The neat question of law that falls for the consideration of thisCourt is whether the consumption of electricity by the respondents(consumers) in excess of the connected load/contracted load wouldamount to ‘unauthorised use of electricity’ under explanation (b) to Section126(6) of the Act 2003.F

5. The appellant Board is a company incorporated under theCompanies Act, 1956 (for short, ‘the Act 1956’) and is controlled by theGovernment of Kerala. It is engaged in the business of generation,transmission and distribution of electricity in the State of Kerala.

6. In the present litigation, all the respondents are commercial/industrial consumers having LT (Law Tension) connections. It is not indispute that at the time of the inspection undertaken by the officials ofthe Appellant Board, all the consumers were found to be drawing electricityin excess of the connected/contracted load. The issue that arises iswhether the respondents (consumers) can be assessed at the rate equal G

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to twice the tariff applicable as stipulated in Section 126(6) of the Act2003?

7. The consumers went before the High Court of Kerala andpreferred respected writ petitions seeking an authoritative pronouncementon the quantification of penalty under Section 126(6) of the Act 2003. Itmay not be out of place to state at this stage that the Division Bench ofthe High Court took up the petitions for hearing on the strength of anorder of reference made by a learned Single Judge of the High Courtdated 17.08.2015 observing that an authoritative pronouncement on thequantification of penalty under Section 126(6) of the Act 2003 wasnecessary as everyday many petitions were being filed in the High Courtwith a challenge to the orders imposing penalty involving ‘excess/additionalload’ falling under explanation (b)(ii) to Section 126 of the Act 2003 and‘unauthorised use of electricity’ falling under explanation (b)(iv) to Section126 of the Act 2003, in which cases, the energy charges are alreadymetered and paid by the consumers. The learned Single Judge of theHigh Court while passing an order of reference observed that a differentyardstick may have to be applied to cases falling under the explanation(b)(i), (iii) and (v) to Section 126 of the Act 2003 as the energy chargesare not metered.

8. The Division Bench of the Kerala High Court heard all theconsumers concerned and held as under:

“7.16. Accordingly, in Para. 87 of the judgment in SeetharamRice Mill’s case (supra), the Three-Judge Bench of the ApexCourt concluded that, wherever the consumer commits thebreach of the terms of the agreement, Regulations and theprovisions of the Act by consuming electricity in excess of thesanctioned and connected load,such consumer would be ‘inblame and under liability’ within the ambit and scope of Section126 of the Electricity Act, 2003. The expression ‘unauthoriseduse of electricity means’ as appearing in Section 126 of theAct is an expression of wider connotation and hasto beconstrued purposively in contrast to contextual interpretationwhile keeping in mind the object and purpose of the Act. Thecases of excess load consumption than the connected loadinter alia would fall under Explanation (b)(iv) to Section 126of the Act, besides it being in violation of Regulations 82 and106 of the Regulations and terms of the agreement.

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SUPREME COURT REPORTS

8. Following the law laid down by the Apex Court inSeetharam Rice Mill’s case (supra), a Division Bench of thisCourt in which one among us (AKN J) was a member, held inM/s. Classic Color Lab v. Assistant Engineer and others (2014(3) KLT 57) that, while interpreting the provisions of Section126 of the Electricity Act, 2003 this Court would have to applythe principle of purposive interpretation in preference totextual interpretation, keeping in mind the purpose to beachieved by that Section, i.e., to put an implied restrictiononunauthoriseduseofelectricity. Therefore, a constructionwhich will improve the workability of the Statute, to be moreeffective and purposive, would have to be preferred to anyother interpretation which may lead to undesirable results.

8.1. In Classic Color Lab’s case (supra), in the site inspectionconducted on 3.3.2005, unauthorised use of electricity wasdetected by the APTS in the premises in question where theappellant/consumer was having a Colour Photo ProcessingUnit and Lab. The APTS found that the appellant/consumerwas misusing electricity for industrial purpose under LT-IVtariff for commercial use, attracting higher tariff under LT-VIIA. Accordingly, the appellant/consumer was issued with ademand notice, demanding energy charges at a rate equal toone and a half times LT-VIIA tariff for a period of 6 months,less the amount already paid under LT-IV tariff.

8.2. After referring to Explanation (b) to Section 126 of theAct, this Court held that, once it is found that the appellant/consumer had indulged in unauthorised use of electricity, thepenal assessment contemplated under Section 126 of the Acthas to follow. As per Section 126(6), as it stood prior to theAmendment Act 26 of 2007, such assessment shall be made ata rate equal to one and a half times the tariff applicable forthe relevant category of services specified in sub-section (5).

8.3. In Classic Color Lab’s case (supra), it was contended onbehalf of the appellant/consumer that, assessment underSection 126 of the Act should be made at a rate equal to oneand a half times the tariff applicable for industrial connection.Per contra, it was contended on behalf of the Board that,such assessment should be made at a rate equal to one and a half times the tariff applicable for commercial connection,for which a higher tariff is applicable.

8.4. After taking note of the law laid down by the Apex Courtin Seetharam Rice Mill’s case (supra), this Court held that,once it is found that the appellant/consumer had indulged inunauthorised use of electricity supplied under industrial tariff,the entire consumption in that service connection will have tobe assessed under Section 126(6) of the Act and as such, thecontention of the appellant/consumer that the consumptionthrough the light meter alone should have been charged underLT-VIIA is untenable. This Court held further that, the onlyinterpretation that can be given to Section 126(6) of the Actis that, in an assessment under Section 126 for unauthoriseduse of electricity, assessment shall be made at a rate equal toone and a half times (two times with effect from 15.6.2007)the tariff applicable for the relevant category of servicesattracting higher tariff for which the electricity supplied wasunauthorisedly used, and not the relevant category of serviceto which the consumer belongs. Paras.15 and 16 of thejudgment read thus; “15. On 3.3.2005, the appellant’s premises was inspectedby the APTS. As evident from Ext. P1 site mahazar, the APTSfound that, the power supply through the light meter underindustrial tariff LT- IV was being used for the neon lightsand air conditioners in the studio, which are undercommercial tariff LT-VIIA. The finding in Ext. P1 sitemahazar is to the effect that, the appellant was indulgingin unauthorised use of electricity for industrial purposeunder the tariff LT-IV for commercial purpose, attractinga higher tariff under LT-VIIA. As the appellant used theelectricity supplied for industrial use under LT-IV tarifffor commercial use under LT- VIIA tariff it amounts to‘unauthorised use of electricity’ falling under Clause (b)to the Explanation to Section 126. For such unauthoriseduse the appellant is liable to be assessed under Section126(6), as it stood prior to the Amendment Act 26 of 2007,at a rate equal to one and half times the tariff applicablefor the relevant category of service. On 27.10.2005, the AB

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appellant segregated the commercial load in the industrialconnection and thereafter, the connected load of serviceconnection under commercial tariff was enhanced from 5KWto 28KW and the connected load of service connectionunder industrial tariff was reduced from 88KW to 44KW.This makes it abundantly clear that, the appellant wasindulging in unauthorised use electricity, thereby using amajor portion of the electricity supplied under industrialtariff for commercial use. Once it is found that, the appellanthad indulged in unauthorised use of the electricity suppliedunder industrial tariff the entire consumption in that serviceconnection will have to be assessed under Section 126(6).Therefore, the contention of the appellant that theconsumption through the light meter alone should havebeen charged under LT-VIIA is absolutely untenable.

16. The KSEB is supplying electricity for industrialpurpose, under LT-IV tariff, at a subsidised rate, whereas,supply of electricity for commercial purpose, under LT-VIIAtariff attracts a higher rate. As evident from the calculationsmade in Ext.P5 demand, the commercial tariff under LT-VIIA during the relevant period was Rs. 8.25 per unit. Aspointed out by the learned Standing Counsel for the KSEB,the industrial tariff under LT-IV during the relevant periodwas only Rs.4.25 per unit. Therefore, if the appellant isassessed under Section 126(6) for the unauthorised use ofelectricity, taking LT-IV industrial tariff @Rs. 4.25 per unitas the basis for calculating the rate equal to one and halftimes the tariff applicable for the relevant category ofservice, then the appellant need pay only Rs. 6.37 per unitfor unauthorised use of electricity for commercial purpose,as against the prevailing rate of Rs.8.25 per unit applicablefor the commercial tariff under LT-VIIA. If such aninterpretation is given, it would defeat the very purposethat Section 126 has to achieve, i.e., to put an impliedrestriction on unauthorised consumption of electricity. Onthe other hand, if the appellant is assessed for theunauthorised use of electricity, taking LT-VIIA industrialtariff @Rs.8.25 per unit as the basis for calculating therate equal to one and half times the tariff applicable for the relevant category of service, the appellant has to payonly Rs.12.37 per unit for unauthorised use of electricityfor commercial purpose, as against the prevailing rate ofRs.8.25 per unit applicable for the commercial tariff underLT-VIIA. Therefore, the only interpretation that can be givento Section 126(6) of the Electricity Act, 2003, is that, in anassessment under Section 126 for unauthorised use ofelectricity, assessment shall be made at a rate equal to oneand half times (two times with effect from 15.6.2007) thetariff applicable for the relevant category of serviceattracting higher tariff for which the electricity suppliedwas unauthorisedly used and not the relevant category ofservice to which the consumer belongs, and we hold so.”

8.5. In Classic Color Lab’s case (supra), after taking note ofthe arguments advanced on behalf of the appellant/consumerrelying on the judgment of this Court in J.D.T. IslamOrphanage Committee v. Assistant Engineer, KSEB (2007 (3)KLT 388) and that of the Calcutta High Court in Sk. JafarAli v. West Bengal State Electricity Distribution CompanyLimited (AIR 2010 Cal. 84) this Court observed that, J.D.T.Islam Orphanage Committee’s case (supra) is a case underthe Electricity Act, 1910, in which an orphanage under LT-VItariff was assessed for unauthorised extension, by levyingLT-VIII tariff applicable to temporary extension. It was not acase in which electricity supplied under LT-VI tariff was usedby the consumer for any other purpose attracting higher tariff.That decision was rendered on an entirely different set of factsand it does not in any way support the case of the appellant/consumer.

8.6. In Sk. Jafar Ali’s case (supra) the electricity suppliedunder domestic tariff was used for commercial purposeattracting a higher tariff. The Court found that the meter usedfor commercial purpose situated in the consumer’s premiseshas not been tampered with and it is the meter relating todomestic consumption that has been tampered with. Thelearned Judges of the Calcutta High Court, interpretingSection 126(6) of the Act held that, the phrase ‘applicablefor the relevant category of the services specified in sub-section ABCDE

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(5) ’ appearing in Section 126 should be reasonably construedas the rate ‘applicable for the relevant category of the servicesto which the consumer belongs’. Though, the judgment of theCalcutta High Court does support the view as propoundedby the learned counsel for the appellant/consumer, the DivisionBench of this Court disagreed with that view of the Calcutta HighCourt, stating that, iftheaboveinterpretation is accepted, aconsumer under LT-V Agriculture tariff at the rate of around` 1/- per unit need pay only` 1.50 per unit for unauthoriseduse of electricity for commercial purpose, as against theprevailing rate of` 8.25 per unit applicable for LT-VIIAcommercial tariff.

9. In Maria Plana Society v. KSEB and others (judgment dated21.5.2009 in W.P.(C). No. 12068 of 2009) a learned Judgeof this Court held that, as can be seen from Section 126 ofthe Electricity Act, 2003 as amended, once the assessing officerreaches the conclusion that unauthorised use of electricityhas taken place, the assessment shall be made for the entireperiod and the assessment shall be at the rate equal to twicethe tariff applicable for the relevant category of services. Areading of Section 45(3)(a) of the Act shows that, chargesfor electricity supplied by a distribution licensee include fixedcharges in addition to the charges for the actual electricitysupplied and consumed. In the light of the above statutoryprovisions, the irresistible conclusion is that, tariff includesboth fixed chargesand energy chargesand that, once theassessing officer has reached the conclusion thatunauthorised used of electricity has taken place, he is boundto make assessment at the rate equal to twice the tariffapplicable, which includes the dues payable towards energychargesalso. In the judgment dated 3.4.2014 in W.A.No.1149of 2009 arising out of the judgment in W.P.(C).No.12068 of2009 the Division Bench, without interfering with the judgmentof the learned Single Judge, disposed of the Writ Appealleaving open the question of law as to whether the penaltyunder Section 126 of the Act is applicable to energy chargesalso in the case of unauthorised additional load.

10. In Seetharam Rice Mill’s case (supra) the Apex Courthas stated that, Section 126 of the Act, which embodies acomplete process for assessment, determination and demandhas a purpose to achieve, i.e., to put an implied restriction onsuch unauthorised consumption of electricity. The provisionsof Section 126 of the Act are self- explanatory, which areintended to cover situations other than the situationsspecifically covered under Section 135 of the Act; which wouldbe applicable to cases where there is no theft of electricitybut the electricity is being consumed in violation of the termsand conditions of supply leading to malpractices, which maysquarely fall within the expression ‘unauthorised use ofelectricity’. Section 135 of the Act deals with an offence oftheft of electricity, which squarely falls within the dimensionsof criminal jurisprudence, and mens rea is one of the relevantfactors for finding a case of theft. On the contrary, Section126 of the Act does not speak of any criminal intendment,which does not have features or elements which are traceableto the criminal concept of mens rea. Thus, the expression‘unauthorised use of electricity’ under Section 126 of the Actdealswithcasesof unauthorised use, even in absence ofintention. As such, intention is not the foundation for invokingpowers of the competent authority and passing of an order ofassessment under Section 126 of the Act.

11. As held by the Apex Court in Seetharam Rice Mill’s case(supra), ‘unauthorised use of electricity’ means the usage ofelectricity by the means and for the reasons stated inExplanation (b)(i) to (v) to Section 126 of the Act, which wouldmean what is stated under that Explanation, as well as suchother unauthorised use, which is squarely in violation of thestatutory or contractual provisions in the Act, Regulationsframed thereunder and the terms and conditions of supply inthe form of contract or otherwise. Unauthorised use ofelectricity brings the consumer ‘under liability and in blame’within the ambit and scope of Section 126 of the Act. Theblame is in relation to excess load while the liability is to payon a different tariff for the period prescribed in law and interms of an order of assessment passed by the assessing officer.

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12. After referring to the expression ‘means’ used inExplanation (b) to Section 126 of the Act, the Apex Courtheld that, the primary object of that expression is intended toexplain the term ‘unauthorised use of electricity’ which, evenfrom the plain reading of the provisions of the Act or on acommon sense view cannot be restricted to the examples givenin the Explanation. Section 126(5) and clause (iv) ofExplanation (b) to Section 126 of the Act were amended bythe Electricity (Amendment) Act, 2007 withapurposeandobjectof preventing unauthorised use of electricity notamounting to theft of electricity within the meaning of Section135 of the Act, which has to be given its due meaning, whichwill fit into the scheme of the Act and would achieve its objectand purpose.

13. Taking note of the fact that electricity supply to a consumeris restricted and controlled by the terms and conditions ofsupply, Regulations and the provisions of the Act, the ApexCourt held that, unauthoriseduseofelectricitycannotberestrictedtothestated clauses under Explanation to Section126 but has to be given a wider meaningso as to cover casesof violation of terms and conditions of supply and theRegulations and provisions of the Act governing such supply.Therefore, the Apex Court concluded that, consumption ofelectricity in excess of the sanctioned/connected load shall be an‘unauthorised use of electricity’in terms of Section 126 of theAct, since overdrawal of electricity amounts to breach of the termsand conditions of the contract and the statutory conditions; besidessuch overdrawal being prejudicial to the public at large, as it islikely to throw out of gear the entire supply system, underminingits efficiency, efficacy and even increasing voltage fluctuations.

14. The provisions under Section 126 of the Act, as it stoodprior to the amendment by the Electricity (Amendment) Act,2007 provided for assessment of unauthorised use of electricity‘one and a half times’ the tariff applicable for the relevantcategory of service, for a period of three months immediatelypreceding the date of inspection in the case of domestic andagricultural services and for a period of six monthsimmediately preceding the date of inspection for all other categories of services, unless the onus is rebutted by theperson, occupier or possessor of such premises or place.

15. In tune with the provisions under Section 126 of the Act,Regulation 51(1) of the Conditions of Supply, 2005 providesfor assessment of unauthorised additional load in terms ofRegulation 50(5) and (6), i.e., at a rate equal to one and halftimes the tariff applicable for the relevant category of servicesspecified in Regulation 50(5), for a period of three monthsimmediately preceding the date of inspection in case ofdomestic and agricultural services and for a period of sixmonths immediately preceding the date of inspection for allother categories of services, unless the onus is rebutted bythe person/occupier or possessor of such premises or place.Though Regulation 51(1) of the Conditions of Supply, 2005employs the term ‘penalised’, what is contemplated under thesaid Regulation is only assessment of unauthorised use ofelectricity in terms of Section 126 of the Act for the periodspecified in Section 126(5) and at the rate specified in Section126(5) of the Act. In that view of the matter, Regulation51(1)oftheConditionsofSupply,2005is neither ultra vires theprovisions of Section 126 of the Act nor unenforceable, andweholdso.

16. The provisions under Section 126 of the Act underwent asubstantial change by the Electricity (Amendment) Act, 2007.After the amendment, if the period during which unauthoriseduse of electricity has taken place cannot be ascertained bythe assessing officer, such period shall be limited to a periodof ‘twelve months’ immediately preceding the date of inspectionand assessment shall be made at a rate equal to ‘twice’ thetariff applicable for the relevant category of services specifiedin sub-section (5). The said amendment made to Section 126(5)and (6) of the Act, with a purpose and object of preventingunauthorised use of electricity not amounting to theft ofelectricity within the meaning of Section 135 of the Act has tobe given its due meaning, which will fit into the scheme of theAct and would achieve its object and purpose. In the absenceof any challenge against the said amendment made to Section126(5) of the Act, the petitioners/consumers cannot now AB

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contend that the period of ‘twelve months’ prescribed thereinis unreasonable, in as much as, for theft of electricity the periodprescribed in Section 135 of the Act is only ‘three months’.

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17. When ‘unauthorised use of electricity’ under Section 126of the Act deals with cases of unauthorised use even in absenceof intention, it cannot be contended that, in the absence ofmens rea, assessment at the maximum rate, i.e. at the rate equalto twice the tariff applicable to the relevant category of serviceis legally impermissible. In all cases of ‘unauthorised use ofelectricity’ falling under Explanation (b) to Section 126 ofthe Act, the assessing officer is empowered to assess suchunauthorised use of electricity, at the rate prescribed inSection 126(6) and for the period specified in Section 126(5),as amended by the Electricity (Amendment) Act, 2007. In thatview of the matter, we find no merit in the contention of thelearned counsel for the petitioners/consumers, relying on thejudgment of a Division Bench of this Court in KSEB andothers v. M/s. Alukkas Jewellery (judgment dated 9.11.2005in W.A.No.1262 of 2004) that, in cases where no damage hasbeen caused to the Board’s installation due to overdrawal ofelectricity, assessment at the rate equal to twice the tariffapplicable to the relevant category of service is unwarranted.

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18. In Seetharam Rice Mill’s case (supra) the Three-JudgeBench of the Apex Court laid down that, consumption ofelectricity in excess of the sanctioned/connected load wouldbe squarely covered under Explanation (b)(iv) to Section 126of the Act. Once this factor is established, then the assessingFofficer has to pass the final order of assessment in terms ofSection 126(6) of the Act, which shall be at a rate equal totwice the tariff applicable for the relevant category of servicesspecified in sub-section (5).

19. In PTC India Ltd. v. Central Electricity RegulatoryCommission (2010 (4) SCC 603) the Apex Court held that,the term ‘tariff’, though not defined in the Electricity Act,2003, it includes within its ambit not only the fixation of ratesbut also the rules and regulations relating to it.

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20. Section 45(1) of the Act provides that, subject to theHprovisions of Section 45, the prices to be charged by a distribution licensee for the supply of electricity by him inpursuance of Section 43 shall be in accordance with suchtariffs fixed from time to time and conditions of hislicence.Section45(3)providesfurtherthat,thechargesfor electricitysupplied by a distribution licensee may include a fixedchargein addition to the charge for the actual electricity supplied;andarentorotherchargesinrespectofanyelectricmeterorelectricalplantprovided by the distribution licensee.

21. The provisions under Section 45(3) of the Act makes itexplicitly clear that, the term ‘tariff’ in Section 45(1), whichis the price to be charged by the distribution licensee for thesupply of electricity, includes the fixed charge in addition tothe charge for the actual electricity supplied. If that be so, itcan be safely concluded that, the term ‘tariff ’ in Section 126(6)of the Act includes both fixed charges and charges for theelectricity supplied, which has to be assessed in the case of aconsumer indulged in unauthorised use of electricity, at arate equal to twice the tariff applicable for the relevantcategory of services specified in sub-section (5). Therefore,once the assessing officer has reached the conclusion thatthe consumer has indulged in unauthorised use of electricity,he is bound to make assessment of such consumer at the rateequal to twice the tariff applicable, which includesbothfixedchargesandenergycharges.

22. Relying on the decisions in JDT Islam OrphanageCommittee v. Assistant Engineer, KSEB (2007 (3) KLT 388),George Joseph and another v. KSEB and others (2008 (4)KLT 610), etc. the petitioners/consumers contended that, whenthe energy consumed through meter having been billed andpayment having been made, assessment of penal charges forsuch consumption of energy is legally impermissible and theonly liability that can be fastened upon the consumers foundindulging in unauthorised use of electricity is penal chargeson fixed charges. The said contention can only be repelled inview of our finding made hereinbefore, with reference to theprovisions under Sections 45 and 126 of the Act and the lawlaid down by the Apex Court in Seetharam Rice Mill’s case(supra) and that laid down by this Court in Classic Color ABC

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Lab’s case (supra) that, the assessment of a consumer Section126(6) of the Act, at the rate equal to twice the tariffapplicable, includes both fixed charges and energy charges.

23. In Board Order dated 7.2.2008, which was madeapplicable with effect from 15.6.2007, it was ordered that,the field officers shall strictly follow the provisions of Section126(5) and (6) of the Act, as amended by the Electricity(Amendment) Act, 2007, i.e., two times the respective tarifffor the entire period, and in case the said period cannot beascertained for a period of twelve months, for assessingpenalty in the case of misuse of energy including unauthorisedadditional load, unauthorised extension and meter tamperingcases detected. It was also made clear that, the penalty rateshall be applicable to both fixed and energy charges for theunauthorised use. Penalty charges for current charges shallbe levied for proportionate energychargeandnormalcurrentchargecollectedshallbededucted.

24. Though Board Order dated 7.2.2008 employs the term‘penalty’, what is contemplated under the said order is onlyassessment of unauthorised use of electricity in terms ofSection 126 of the Act, as amended by the Electricity(Amendment) Act, 2007, for the period specified in Section126(5) and at the rate specified in Section 126(6) of the Act.In that view of the matter, Board Order dated 7.2.2008 isneitherultravirestheprovisionsofSection126oftheActnorunenforceable, and we hold so.

25. In Seetharam Rice Mill’s case (supra) the Apex Courtwas dealing with a case in which the tariff applicable to theconsumer was changed from ‘medium industry’ to tariffapplicable for ‘large industry’. Similarly, in Classic Color Lab’scase (supra) this Court was dealing with a case in whichelectricity supplied at a subsidised rate for industrial purposeunder LT-IV tariff, was unauthorisedly used for commercialpurpose, which attracts a higher rate under LT- VIIA tariff.In the said decision, while upholding the demand for fixedcharges and energy charges made under Section 126(6) ofthe Act, this Court held that, in an assessment under Section126 for unauthorised use of electricity, assessment shall be made at a rate equal to one and a half times (two times witheffect from 15.6.2007) the tariff applicable for the relevantcategory of services attracting higher tariff for which theelectricity supplied was unauthorisedly used, and not therelevant category of service to which the consumer belongs.

26. As far as domestic consumers are concerned, the fixedcharge for single phase connection is ` 20/- per month and itis ` 60/- per month for three phase connection, irrespectiveof the connected load. Therefore, a domestic consumer ispaying fixed charge at the specified rate irrespective of theconnected load and the energy charge for the actualconsumption at the rates specified in the tariff order. Even ifthere is excess connected load in the premises of adomesticconsumer,theelectricitychargesrealisablefromthe consumerdonotchangeandassuch,additionalconnectedload wouldnot result in any financial loss to the licensee as per the termsand conditions of the tariff orders in force. That may be thereason whichpersuadedtheElectricityRegulatoryCommissionnottopenalisedomesticconsumers for additionalloads intheir premises, by incorporating Regulation 153(15) of theSupply Code, 2014, which provides that, unauthorisedadditional load in the same premises andundersametariffshallnotbereckonedasunauthoriseduseofelectricity. Suchdomestic consumers will have the option either toregularisesuchadditionalloadortogetsuchadditionalloadremovedat the discretion of the licensee. If the consumer fails toremovethe additional load as directed by the licensee, the supply tothepremisescan be disconnected bythe licensee.

27. Regulation 153(15) of the Supply Code, 2014 hasundergone amendment by the Kerala Electricity Supply(Amendment) Code 2016, which came into force on 4.2.2016,by adding the words ‘except in the case of consumers billed onthe basis of connected load’ at the end of that sub-regulation.Such an amendment was made when it was found that, theapplication of Regulation 153(15) to the consumers who arecharged on connected load basis, would result in the licenseesincurring financial loss in as much as, for the additionalconnected load the licensees are entitled for chargesdemanded on connected load basis.

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28. In cases falling under Explanation (b) to Section 126 ofthe Act, the assessing officer is empowered to assessunauthorised use of electricity at the rate prescribed in Section126(6) and for the period specified in Section 126(5), asamended by the Electricity (Amendment) Act, 2007 for bothfixed charges and energy charges. Penalty charges for currentcharges shall be levied for proportionate energy charge andnormal current charge collected shall be deducted. In case ofunauthorised use of electricity in a higher tariff, suchassessment shall be made at the rate equal to twice the tariffapplicable for the relevant category of services attractingsuch higher tariff for which electricity supply wasunauthorisedly used and not the relevant category of serviceto which the consumer belongs.

29. A different yardstick has to be applied in cases ofconsumption ofelectricity in excess of the sanctioned/connected load in the very same premises and for the verysame purpose, which do not involve any changeintariffapplicablefortherelevantcategoryofservices, whichconsumptionhasalreadybeenmeteredandpaidbytheconsumer, since such usage being notby any artificialmeansor through a tampered meter. This is for the reason that, insuch cases requestmadebythe consumerforregularisationofunauthorisedconnectedloadorenhancementofcontractdemandwillbeacceded to by the Board, as a matter of course,once the consumer fulfills the statutory requirements, unlesssuch regularisation of connected load or enhancement ofcontract demand necessitates upgradation of the existingdistributionsystemorenhancementofvoltagelevelofsupply.

30. As held by the Apex Court in Seetharam Mill’s case(supra), in the case of unauthorised use of electricity, theblame on the consumer is in relation to excess load while theliability is to pay on a different tariff for the period prescribedin law and in terms of the order of assessment passed by theassessing officer under the provisions of Section 126 of theAct. In that view of the matter, in the case of a consumer, whois blamed with overdrawal of electricity in excess of sanctioned/connected load in the very same premises and for the very same purpose, which do not involve any change in tariffapplicable for the relevant category of services, whichconsumption has already been metered and paid by theconsumer, since such usage being not by any artificial meansor through a tampered meter, assessment under Section 126(6)of the Act can only be equal to twice the fixed charges payableand such consumer cannot be saddled with the liability topay twice the energy charges applicable for the relevantcategory of services, unless regularisation of such additionalconnected load or enhancement of contract demandnecessitate upgradation of the existing distribution system orenhancement of voltage level of supply.”

9. After holding as aforesaid, the High Court summarised its finalconclusion, as under:

“31. For the reasons stated hereinbefore, we hold as follows;

(i) The presence of the assessing officer at the time ofinspection and detection of unauthorised use of electricity inthe premises of a consumer is not a mandatory requirementfor initiating assessment proceedings under Section 126(1)of the Act.

(ii) The expression ‘unauthorised use of electricity’ under Section126 of the Act deals with cases of unauthorised use even inthe absence of intention. Hence, the intention of the consumeris not the foundation for invoking powers of the competentauthority and passing of an order of assessment under Section126 of the Act.

(iii) Whenever a consumer commits the breach of the terms ofthe agreement, Regulations and the provisions of the Act byconsuming electricity in excess of the sanctioned/connectedload, such consumer would be in blame and under liability topay at the rate equal to twice the tariff applicable for therelevant category of services in terms of Section 126 of theAct.

(iv) The term ‘tariff’ in Section 126(6) of the Act includes bothfixed charges and charges for the electricity supplied, which AB

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has to be assessed in the case of a consumer indulged inunauthorised use of electricity, at a rate equal to twice thetariff applicable for the relevant category of services specifiedin sub-section (5).

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(v) In case of unauthorised use of electricity in a higher tariff,such assessment shall be made at the rate equal to twice thetariff applicable for the relevant category of servicesattracting such higher tariff for which electricity supplied wasunauthorisedly used and not the relevant category of serviceto which the consumer belongs.

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(vi) However,inthecaseofaconsumer,whoisblamedwithoverdrawal of electricity in excess of sanctioned/connectedload in the very same premises and for the very same purpose,which do not involve any change in tariff applicable for therelevant category of services, which consumption has alreadybeen metered and paid by the consumer, since such usagebeing not by any artificial means or throughatamperedmeter,assessmentunderSection126(6)oftheAct canonlybeequaltotwicethefixedchargespayableandsuch consumer cannotbe saddled with the liability to pay twice the energychargesapplicablefortherelevantcategoryofservices,unlessregularisation of such additional connected load orenhancement of contract demand necessitates upgradationof the existing distribution systemorenhancementofvoltagelevelofsupply.

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(vii) In all other cases falling under Explanation (b) to SectionF126 of the Act, the assessing officer is empowered to assessunauthorised use of electricity at the rate prescribed in Section126(6) and for the period specified in Section 126(5), asamended by the Electricity (Amendment) Act, 2007 for bothfixed charges and energy charges. Penalty charges for currentcharges shall be levied for proportionate energy charge andGnormal current charge collected shall be deducted.

(viii) Though Regulation 51(1) of the Conditions of Supply,2005 employs the term ‘penalised’, what is contemplatedunder the said Regulation is only assessment of unauthoriseduse of electricity in terms of Section 126 of the Act for the H

period specified in Section 126(5) and at the rate specifiedin Section 126(6) of the Act. As such, Regulation 51(1) of theConditions of Supply, 2005 is neither ultra vires the provisionsof Section 126 of the Act nor unenforceable.

(ix) What is contemplated under Board Order dated 7.2.2008is only assessment of unauthorised use of electricity in termsof Section 126 of the Act, as amended by the Electricity(Amendment) Act, 2007, for the period specified in Section126(5) and at the rate specified in Section 126(5) of the Act.As such, the said Board Order is neither ultra vires theprovisions of Section 126 of the Act nor unenforceable.”

10. Thus, the High Court, as evident from para 31(vi) as above,took the view that ‘unauthorised additional load’ in the same premisesand under the same tariff shall not be reckoned as ‘unauthorised use ofelectricity’ except in cases of consumers billed on the basis of theconnected load. The High Court took such view, relying upon Regulation153(15) of the Kerala Electricity Supply Code, 2014 (for short, ‘the Code2014’).

11. The appellant Board being dissatisfied with the judgment andorder passed by the High Court, preferred review applications in theindividual writ petitions filed by the consumers. The review applicationsalso came to be rejected, wherein, the High Court held as under:

“10. What follows from the above is that, in order to come withinthe purview of clause (vi) of Para.31 of the judgment, a consumerwho is blamed with overdrawal of electricity in excess ofsanctioned/connected load must satisfy the following conditions;

(i) Such overdrawal of electricity should be in the very samepremises and for the very same purpose, which do not involveany change in tariff applicable for the relevant category ofservices;

(ii) Such consumption must have already been metered andpaid by the consumer, since such usage being not by anyartificial means or through a tampered meter; and

(iii) Regularisation of such additional connected load orenhancement of contract demand should not necessitate A

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Aupgradation of the existing distribution system orenhancement of voltage level of supply.”

12. Being dissatisfied with the judgment and order passed by theHigh Court in the main matter as well as the order passed in the reviewapplications, the appellant Board has come up with the present appeals.

BSUBMISSIONS ON BEHALF OFTHEAPPELLANTBOARD

13. Mr. R. Basant, the learned Senior Counsel appearing for theappellant Board vehemently submitted that the High Court committed aserious error in deciding the issue in question by relying upon RegulationC153(15) of the Code 2014. He pointed out that the State Regulationshave been enacted in exercise of the powers conferred under Section50 read with Section 181 of the Act 2003. The principal argument of Mr.Basant is that while framing Regulation 153(15), the Kerala StateElectricity Regulatory Commission (“Commission”) could be said to haveDtransgressed into the realm of Section 126 of the Act 2003 which is notprovided for either under Section 50 or Section 181. In other words,the argument of the learned Senior Counsel is that if Section 50 andSection 181 resply, of the Act are read closely, then, the two Sections donot provide any power for such clarification/explanation. The learnedSenior Counsel invited the attention of this Court to Regulation 153(15)Ewhich provides that an unauthorised additional load in the same premisesand under the same tariff shall not be reckoned as ‘unauthorised use ofelectricity’ except in cases of consumers billed on the basis of connectedload.

14. The learned Senior Counsel further submitted that the regulationFmaking power cannot be used to bring into existence substantive rightswhich are not contemplated under the Act 2003.

15. The learned Senior Counsel invited the attention of this Court,to a three- Judge Bench decision of this Court in the case of ExecutiveEngineer, Southern Electricity Supply Company of Orissa LimitedG(Southco) and Another v. Sri Seetaram Rice Mill reported (2012) 2SCC 108, wherein, this Court in clear terms has said that cases of excessload consumption other than the connected load would fall within theExplanation (b)(iv) to Section 126 Act 2003.

16. The learned Senior Counsel would argue that this Court inHSeetaram Rice Mill (supra) has said so many words that Section 126 of the Act 2003 is a complete code in itself. Consumption in excess ofsanctioned/connected load is unauthorised use under Section 126 of theAct 2003. Such an act of consumption in excess of the sanctioned/connected load is prejudicial to the public at large, as the same wouldaffect the entire system.

17. The learned Senior Counsel further submitted that the findingof the High Court in para 31(vi) of the impugned judgment is erroneousand if upheld may result in the entire collapse of the grid. He wouldargue that the appellant Board needs to plan its affairs and ensure that itis able to supply the required electricity to its consumers. The connectedload/contracted load ensures that the Board knows how much electricityis to be supplied to each consumer.

18. The learned senior counsel further submitted that theoverdrawal of excess electricity from the grid would result into a penaltyto the Board, while purchasing electricity from the Central grid. Theconnected load is calculated based on the number of devices connectedby the consumer at its premises. The same would become evident duringinspection. Therefore, if the consumer agrees for a connected load of 10KW and thereafter, connects many more devices resulting in theconnected load, becoming 20 KW, the same would amount to ‘unauthoriseduse of electricity’ under Section 126(6) of the Act 2003 in accordancewith the dictum laid by this Court in Seetaram Rice Mill (supra).

19. The learned Senior Counsel made us understand somethingimportant. According to Mr. Basant, the finding of the High Court that itbecomes unauthorised use only if the said usage leads to necessitationof upgradation of the system, could be termed as perverse as the samewill end up penalising only the last consumer responsible for causing thedisruption of distribution system and not the collective lot of consumerswho are also unauthorised users. The learned Senior Counsel submittedthat the collapse of the system would be as a result of many consumersdrawing electricity in excess of the connected load/ contracted load andtherefore, to penalise only the last consumer/customer for the collapseof the system would be unworkable and would not act as a deterrent forthe consumers from drawing excess electricity.

20. In such circumstances referred to above, Mr. Basant, thelearned Senior Counsel prays that there being merit in his appeals, thosemay be allowed and the impugned judgment and order passed by the A

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AHigh Court to the extent, it relies upon Regulation 153(15) of the Code2014 may be set aside.

SUBMISSIONS ON BEHALF OF THE RESPONDENT(CONSUMERS)

21. The submissions canvassed on behalf of the respondent(consumers) may be summarised, as under:- B

1. The learned counsel appearing for the respondent (consumers)vehemently submitted that no error not to speak of any error oflaw could be said to have been committed by the High Court intaking the view that if the overdrawal of electricity is detected inthe same premises and for the very same purpose, then, the samewould not amount to unauthorised use of electricity within themeaning of Section 126 of the Act 2003.

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2. Moreover, the Regulation 153 of the 2014 Code deals withestimation and regularisation of unauthorised additional load. Theregulation defines the threshold for the additional loads to beconsidered as unauthorised additional load. It is also provided thatthe licensee may, suo motu or on an application from the consumer,regularise such additional loadmentioned in clause (a) and clause(b) of Regulation 153(4).

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3. Regulation 153(15) provides further that the unauthorisedadditional load in the same premises and under the same tariffshall not be reckoned as unauthorised use of electricity, except inthe case of consumers billed on the basis of connected load.Regulation 153(15) of the Code 2014 has undergone amendmentby way of the Kerala Electricity Supply (Amendment) Code 2016,which came into force on 04.02.2016, by adding the words ‘exceptin the case of consumers billed on the basis of connected load’ atthe end of that sub-regulation. Such an amendment was madewhen it was found that, the application of Regulation 153(15) tothe consumers who are charged on connected load basis, wouldresult in the licensees incurring financial loss in as much as, forthe additional connected load the licensees are entitled for chargesdemanded on connected load basis. Even this amendment as ondate is sought to be rendered nugatory by the appellant Boardwith its plea to strike down the Regulation (s) as ultra vires.

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4. To understand the letter and spirit of the impugned judgment itis imperative to note that at paragraph 26 of the impugnedjudgement, the High Court has observed that as far as domesticconsumers are concerned, the fixed charges are imposed at aspecified rate irrespective of the connected load or the energycharges for actual consumption. It is stated by the Court thateven if there is excess connected load in the premises of a domesticconsumer, the electricity charges realisable from the consumerdo not change and as such, additional connected load would notresult in any financial loss to the licensee. Essentially the domesticconsumer would have to pay for the actual energy consumed.Notably, there is no variation in the fixed charges.

5. The Regulations in the Code 2014 seek to contextualise theAct 2003 to the prevalent local conditions and a conjoint (purposive)reading of the Act and the Code is paramount. Any other reading(including reading as ultra vires) renders the Code 2014 an emptyvessel. The aforesaid reasoning of the High Court does not supplantthe provisions of either Section 126 or Section 135, but only seeksto supplement the same, by reading (in conjunction) the relevantRegulations of the Code 2014.

6. Regulation 2(24) of the Code 2014 states that “connected load”expressed in KW or KVA means aggregate of the rated capacitiesof all energy consuming devices or apparatus which can besimultaneously used, excluding the standby load if any, in thepremises of the consumer, which are connected to the serviceline of the distribution licensee. Regulation 2(78) defines‘unauthorised connected load’ to mean the connected load inexcess of the contract connected load and Regulation 2(79) defines‘unauthorised use of electricity’ to mean the usage ofelectricity as explained in Section 126 of the 2003 Act. As shallbe shown Regulation 2(78) is connected load which is in excessof [Regulation 2 (24)]. And Regulation 2(78) is unauthorised useof electricity. The distinction is crucial and has been analysed bythe High Court at Para 5.18 of the impugned judgment.

7. The High Court was well within its scope when it rendered theRegulations intra vires. This Court has emphasised that theLegislature and its delegate are the sole repositories of the powerto take decisions. Further, there is no scope of interference by the A

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Court unless the particular provision impugned suffers from (i)any legal infirmity, or (ii) being wholly beyond the scope ofregulation-making power, or (iii) being inconsistent with any ofthe provisions of the parent enactment. The impugned judgmentof the High Court correctly read and applied the law in the light ofthe settled judicial position.

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8. The stance of the appellant Board that the regularisation isultra vires, is against its very own Full Board decision. A FullBoard of the KSEB, as early as on 27.07.2002 decided to modifyRegulation 42(d) of the Conditions of Supply, 1990 for relaxationof penalty in the case of unauthorised additional loads in theCfollowing manner:

(i) [...]

(ii) In the case of LT customers other than domestic consumers,the penalty for unauthorised additional load shall be leviedDat the rate of twice the fixed charges per KW of additionalload per month or part thereof till the saidunauthorisedadditionalloadisremoved orregularised asperrules.

(iii) In the case of HT and EHT consumers the penalty forunauthorised additional load shall be levied at the rate ofEtwice the demand charges per KVA for the additional load tillthe said unauthorised additional load is removed or regularised as per rules.

9. In such circumstances referred to above, learned counselappearing for the respondent (consumers) prayed that there being noFmerit in the appeals filed by the appellant Board, those may be dismissed.SUBMISSIONS ON BEHALF OF THE KERALA STATEELECTRICITY REGULATORY COMMISSION(RESPONDENT NO. 3)

22. It is submitted on behalf of the Commission i.e., respondentGNo. 3 in SLP (C) No. 7886-7887 of 2018, that there are two kinds ofbilling contemplated:

(a) Connected load based billing – in case of connected load basedbilling, if additional/excess load is connected, then the samewould be treated as unauthorised use. The same is indicatedHin Regulation 153(15) itself, as amended on 11.01.2016.

(b) Contract demand based billing – It is submitted however thatin case of contract demand based billing, connecting additionalload will not amount to “unauthorised use” under Section126 of the Act.

23. It is further submitted that contract demand is the maximumdemand that is agreed to be supplied by the licensee to the consumer.The same is indicative of the maximum load that can be drawn at thepremises of the consumer at any given point of time. It is possible thatthe maximum demand of a consumer may be higher than the contractdemand at any given point of time. However, as per Regulation 153(15),such excess demand will not be construed as unauthorised use ofelectricity. Rather, Regulation 101 of the Code 2014 provides theconsequences where the maximum demand exceeds the contractdemand. The said regulation stipulates that if the maximum demandexceeds the contract demand in 3 billing periods during the previousfinancial year, the distribution licensee shall issue a notice of enhancementof contract demand to such consumer. Furthermore, as already indicated,the present Tariff Order provides that where maximum demand exceedscontract demand, the Fixed/Demand Charges will be collected at 150%of the applicable demand charges for such excess demand. Insofar asEnergy Charges are concerned, the consumer would be billed as peractual usage. Furthermore, as per Regulation 153(12) of the Code 2014where the infrastructure does not allow for the excess load of a consumerto be regularised or the contract demand to be enhanced, such consumersare required to disconnect such load or restrict their demand to the contractlimit, failing which supply of electricity can be disconnected. Therefore,the Code 2014 and the Tariff Order adequately address concerns ofboth (i) revenue loss; and (ii) infrastructural constraints in cases of excessload / excess demand. The exception is where such excess load/ excessdemand results in change of purpose or change of tariff, in which case,it would fall within the ambit of Section 126 of the Act 2003. It is relevantto point out that there is no challenge to the vires of any of the provisionsof the Code 2014 in the present proceedings.

24. It is further submitted that the observations of this Court inSeetaram Rice Mill (supra) were made specifically in the context ofthe Orissa Electricity Regulatory Commission Distribution (Conditionsof Supply) Regulations, 2004 and the Standard Agreement Form forSupply of Electrical Energy by the Grid Corporation of Orissa Ltd. The A

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Aobservations made in the said judgement cannot be uniformly applied tothe present matter. The Explanation to Section 126 of the Act 2003 isreproduced as below (emphasis supplied):

“Explanation.- For the purposes of this section,- (b)”unauthoriseduse of electricity” means the usage of electricity-B(i) by any artificial means; or

(ii) by a means not authorised by the concerned person orauthorityor licensee; /or

(iii) through a tampered meter; or

C(iv) for thepurposeotherthanforwhichtheusageof electricitywas authorised;or

(v) for the premises or areas other than those for which thesupply of electricity was authorized.”

25. It is evident that insofar as Kerala is concerned, the CodeD2014 specifically provides a certain leeway for excess load / excessdemand, within the same premises and under the same tariff, subject tothe rigours of Regulation 101 and Regulation 153, and penal demandcharges at 1.5 times the regular rates in respect of the excess demandunder the relevant Tariff Order. It is submitted that the supply regulationsEapplicable to the State of Orissa may not be applied in a straitjacketedmanner to Kerala. Each State has its own generation, supply anddistribution capacities and other relevant considerations before the SupplyCode regulations are framed by the respective State Commissions.

26. In such circumstances referred to above, the learned counselFappearing for the Commission prayed that there being no merit in theappeals filed by the Board, those may be dismissed.

ANALYSIS

27. Having heard the learned counsel for the parties and havinggone through the materials on record, the only question that falls for ourGconsideration is whether the High Court committed any error in passingthe impugned judgment and order more particularly, the finding recordedin para 31(vi) of the impugned judgment?

28. It is necessary for us to clarify at this stage itself that theappeals have been filed by the appellant Board, essentially, beingH

aggrieved and dissatisfied with the finding recorded by the High Court inpara 31(vi) of the impugned judgment. The High Court, over and abovepara 31(vi), has dealt with many other issues arising between the parties.There is no cross appeal at the instance of any of the consumers. Wepropose to look into and decide only the legality and validity of the findingrecorded by the High Court so far as para 31(vi) is concerned. We shallnot go into any other issue decided by the High Court other than para31(vi).

29. Before adverting to the rival submissions canvassed on eitherside, we must look into the scheme and various relevant provisions ofthe Act 2003 as well as the Code 2014 framed by the Commission inexercise of the powers conferred by the Section 50 read with Section181 of the Act 2003.

ELECTRICITYACT,2003

30. Before the enactment of the Act 2003, the Indian electricitysector was governed by the Indian Electricity Act, 1910, the Electricity(Supply) Act, 1948 and the Electricity Regulatory Commissions Act, 1998.The Indian Electricity Act, 1910 created a basic framework for theelectricity supply industry in India. The Electricity (Supply) Act, 1948mandated the creation of State Electricity Boards, which had theresponsibility of facilitating supply of electricity within states. However,the State Electricity Boards were unable to use their power to fix tariffsjudiciously. It was noted that the State Governments were in practicefixing tariffs. To distance the State Governments from the exercise oftariff fixation, the Electricity Regulatory Commissions Act, 1998 wasenacted.

31. Parliament enacted the Act 2003 to consolidate the laws relatingto generation, transmission, distribution, trading and use of electricity; todevelop the electricity industry; and to promote competition. The Act2003 was enacted with the objective of encouraging the participation ofthe private sector in the generation, transmission, and distribution ofelectricity, and to harmonise and consolidate the provisions into a self-contained code. The Statement of Objects of Reasons for the Act 2003reads as follows :

“With the policy of encouraging private sector participation ingeneration, transmission and distribution and the objectives ofdistancing the regulatory responsibilities from the Government to AB

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Athe Regulatory Commissions, the need for harmonising andrationalising the provisions of the Electricity Act 1910, the Electricity(Supply) Act 1948 and the Electricity Regulatory CommissionsAct 1948 in a new self-contained comprehensive legislation arose.”

32. The long title of the Act 2003 indicates that its object is toBconsolidate the laws relating to generation, transmission, distribution,trading, and use of electricity and to take measures conducive to thedevelopment of the electricity industry; promote competition and protectthe interests of consumers; ensure the supply of electricity to all areas;rationalise electricity tariffs and ensure transparent policies. TheStatement of Objects and Reasons of the Act 2003 states that “it givesCthe States enough flexibility to develop their power sector in the mannerthey consider appropriate.”

33. Section 3 of the Act 2003 provides for the formulation of aNational Electricity Policy and National Tariff Policy:

D“3. National Electricity Policy and Plan.—(1) The CentralGovernment shall, from time to time, prepare the National ElectricityPolicy and tariff policy, in consultation with the State Governmentsand the Authority for development of the power system based onoptimal utilisation of resources such as coal, natural gas, nuclearsubstances or materials, hydro and renewable sources of energy.E(2) The Central Government shall publish National ElectricityPolicy and tariff policy from time to time.

(3) The Central Government may, from time to time, inconsultation with the State Governments and the Authority,Freview or revise, the National Electricity Policy and tariffpolicy referred to in sub-section (1) .

(4) The Authority shall prepare a National Electricity Plan inaccordance with the National Electricity Policy and notifysuch plan once in five years:

GProvided that the Authority while preparing the NationalElectricity Plan shall publish the draft National ElectricityPlan and invite suggestions and objections thereon fromlicensees, generating companies and the public within suchtime as may be prescribed:

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Provided further that the Authority shall –

(a) notify the plan after obtaining the approval of the CentralGovernment; (b) revise the plan incorporating therein the directions, if any,given by the Central Government while granting approvalunder clause (a).

(5) The Authority may review or revise the National ElectricityPlan in accordance with the National Electricity Policy.”

In terms of the above provision, the Union Government has toformulate the National Electricity Policy and National Tariff Policy, inconsultation with the State Governments and the Central ElectricityAuthority.

34. Part III of the Act 2003 deals with the generation of theelectricity; Part IV deals with licensing; Part V with transmission; PartVI with distribution and Part VII with tariff.

35. Section 38 of the Act 2003 provides that the CentralGovernment may notify any government company as the CentralTransmission Utility (CTU). The CTU is statutorily empowered toundertake the transmission of electricity through inter-State transmissionsystems. The CTU has to also discharge functions of planning andcoordination relating to inter-State transmission systems. For this purpose,the CTU is required to coordinate with the State Transmission Utility(STU), Central and State Governments, generating companies, authoritiesand licensees.

36. Section 39 of the Act 2003 stipulates that the State Governmentmay notify the Board or any government company as the STU. TheSTU shall undertake transmission of electricity through the intra-Statetransmission system and discharge functions relating to the planning andcoordination of the intra- State transmission system. While dischargingits functions, the STU is required to reflect the planning initiatives ofintra-State transmission system by publishing a five-year plan periodically.

37. Sections 76 and 82 of the Act 2003 constitute the CentralElectricity Regulatory Commission and State Electricity RegulatoryCommission respectively. The Central and State Electricity RegulatoryCommissions shall among other functions, determine and regulate thetariff for inter-State transmission of electricity and intra-State transmission A

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Aof electricity respectively. Sections 79(3) & (4) and 86(3) & (4) of theAct 2003 stipulate that the Central and State Commissions shall whiledischarging their functions ensure transparency, and ‘shall be guided’ bythe National Electricity Policy, National Electricity Plan and Tariff Policy.The Central and State Commissions also discharge advisory functions,whereby they advise the Central Government and State GovernmentBrespectively on, inter alia, promotion of competition in activities relatedto the electricity industry and in matters concerning generation,transmission, and distribution of electricity. Section 25 states that theCentral Government may make a region-wise demarcation of the countryfor the purpose of integrated transmission of electricity to facilitate inter-CState, regional and inter-regional transmission of electricity. Section 30provides that the State Commission shall facilitate and promotetransmission, wheeling and inter- connection arrangements within itsterritorial jurisdiction for the transmission and supply of electricity.

38. Section 14 of the Act 2003 envisages that the AppropriateDCommission, defined in Section 2(4) to mean the Central or as the casemay be the State Regulatory Commission, may grant a licence to anyperson:

(a) to transmit electricity as a transmission licensee; or (b) to distribute electricity as a distribution licensee; or E

(c) to undertake trading in electricity as an electricity trader, in anyarea as may be specified in the licence.

39. Section 15 of the Act 2003 prescribes the procedure to befollowed for the grant of licence. The application for a licence underFSection 14 has to be filed in such a form and in such manner as may beprescribed by the Appropriate Commission. The person who has appliedfor the grant of a licence must publish a notice of the application. Thelicence shall not be granted by the Appropriate Commission until theobjections, if any received, are considered by the Appropriate Commission.The application shall also be forwarded to the CTU or the STU, as theGcase may be. The CTU or STU must send its recommendations to theAppropriate Commission. The recommendations of the CTU or the STUare however, not binding on the Appropriate Commission. The AppropriateCommission is also required to publish a notice of the application if itproposes to issue the licence. The Appropriate Commission has to H

consider the objections and the recommendations of the TransmissionUtility before granting the licence.

40. In enacting the above provisions of law, the Parliament hasmade a clear demarcation between intra-state and inter-state transmissionof electricity. While the CTU, Central Government and the CentralRegulatory Commission are responsible for the facilitation of inter-statetransmission of electricity, the State Commission and the STU have beengranted full autonomy with respect to intrastate transmission of electricity.

41. Part VII of the Act 2003 deals with Tariff. Part VII comprisesof Section 61(Tariff regulations), Section 62 (Determination of tariff),Section 63 (Determination of tariff by bidding process), Section 64(Procedure for tariff order), Section 65 (Provision of subsidy by the StateGovernment) and Section 66 (Development of market). In terms ofSection 61, the Appropriate Commission is entrusted, subject to theprovisions of the Act 2003, to specify the terms and conditions for thedetermination of tariff. While specifying the terms and conditions, theAppropriate Commission shall be guided by the requirements specifiedin clauses (a) to (i). Amongst them, in clause (i) is the National ElectricityPolicy and tariff policy, while clause (c) emphasises the need toencourage competition, efficiency, economical use of the resources, goodperformance and optimum investments. Section 62(1) empowers theAppropriate Commission to determine the tariff “in accordance withthe provisions of this Act” for :

a. supply of electricity by a generating company to a distributionlicensee;

b. transmission of electricity;

c. wheeling of electricity;

d. retail sale of electricity.

Section 63 provides that notwithstanding anything contained inSection 62, the Appropriate Commission shall adopt the tariff determinedthrough the bidding process if the tariff has been determined through atransparent process in accordance with the guidelines issued by theCentral Government.

42. However, what is relevant for our purpose is Section 50, Section126 and Section 181 resply of the Act 2003. Section 50 is in regard to theElectricity Supply Code. The same reads thus:

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A“50. The Electricity Supply Code.–The State Commission shallspecify an Electricity Supply Code to provide for recovery ofelectricity charges, intervals for billing of electricity charges,disconnection of supply of electricity for non-payment thereof,restoration of supply of electricity, measures for preventingtampering, distress or damage to electrical plant or electrical lineBor meter, entry of distribution licensee or any person acting on hisbehalf for disconnecting supply and removing the meter, entry forreplacing, altering or maintaining electric lines or electrical plantsor meter and such other matters.”

A

43. Section 126 falls in Part XII of the Act 2003. Part XII is inCregard to investigation and enforcement. Section 126 provides forassessment. Section 126 reads thus:

“126. Assessment.–(1) If on an inspection of any place orpremises or after inspection of the equipments, gadgets, machines,devices found connected or used, or after inspection of recordsDmaintained by any person, the assessing officer comes to theconclusion that such person is indulging in unauthorised use ofelectricity, he shall provisionally assess to the best of his judgmentthe electricity charges payable by such person or by any otherperson benefited by such use.

E

(2) The order of provisional assessment shall be served uponthe person in occupation or possession or in charge of theplace or premises in such manner as may be prescribed.

(3) The person, on whom an order has been served undersub- section (2), shall be entitled to file objections, if any,Fagainst the provisional assessment before the assessing officer,who shall, after affording a reasonable opportunity of hearingto such person, pass a final order of assessment within thirtydays from the date of service of such order of provisionalassessment, of the electricity charges payable by such person.

G

(4) Any person served with the order of provisional assessmentmay, accept such assessment and deposit the assessed amountwith the licensee within seven days of service of suchprovisional assessment order upon him.

(5) If the assessing officer reaches to the conclusion thatHunauthorised use of electricity has taken place, the assessment shall be made for the entire period during which suchunauthorised use of electricity has taken place and if, however,the period during which such unauthorised use of electricityhas taken place cannot be ascertained, such period shall belimited to a period of twelve months immediately precedingthe date of inspection.

(6) The assessment under this section shall be made at a rateequal to twice the tariff applicable for the relevant categoryof services specified in sub-section (5).

Explanation.%For the purposes of this section,—

(a) “assessing officer” means an officer of a StateGovernment or Board or licensee, as the case may be,designated as such by the State Government; (b) “unauthorised use of electricity” means the usage ofelectricity%

(i) by any artificial means; or

(ii) by a means not authorised by the concerned personor authority or licensee; or

(iii) through a tampered meter; or

(iv) for the purpose other than for which the usage ofelectricity was authorised; or

(v) for the premises or areas other than those for which thesupply of electricity was authorised.”

44. Section 181 of the Act 2003 confers powers to the StateCommissions to frame regulations. Section 181(2)(x) reads thus:

“—181. Powers of State Commissions to make regulations.

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(2) In particular and without prejudice to the generality of thepower contained in sub-section (1), such regulations may providefor all or any of the following matters, namely:- xx xx xx

(x) electricity supply code under section 50;….”

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45. We shall now look into the Code 2014. Regulation 1 reads A

thus:

“1. Short title, extent and commencement. - (1) This Codeshall be called the Kerala Electricity Supply Code, 2014.

(2) This Code shall be applicable to,-

B

(i) all distribution licensees including deemed licensees andall consumers and users in the State of Kerala; and

(ii) all other persons and institutions who are exempted underSection 13 of the Act.

C(3) It shall come into force with effect from the first day ofApril, 2014.”

46. Regulation 2 provides for the definitions. The phrase ‘contractedconnected load’ as defined under Regulation 2(27) reads thus:

“2. Definitions. - In this Code, unless it is repugnant to theDcontext,- xx xx xx

(27) “contracted connected load” means the connected loadinstalled by the consumer at the time of executing the serviceEconnection agreement and recorded in kW / kVA in theschedule to the said agreement or the connected load dulyrevised thereafter;”

47. Regulation 2(28) defines the terms ‘contracted load’ or‘contract demand’. The same reads thus:F“2. Definitions.- In this Code, unless it is repugnant to thecontext,- xx xx xx

(28) “contracted load” or “contract demand” means themaximum demand in kW or kVA, agreed to be supplied by theGdistribution licensee and indicated in the agreement executedbetween the licensee and the consumer; or the contractedload or contract demand duly revised thereafter;”

48. Regulation 2(78) defines the phrase ‘unauthorised connectedload’. The same reads thus:H

“2. Definitions.- In this Code, unless it is repugnant to thecontext,- xx xx xx

(78) “unauthorised connected load” means the connected loadin excess of the contracted connected load;”

49. Regulation 2(79) defines the phrase ‘unauthorised use ofelectricity’. The same reads thus:

“2. Definitions.- In this Code, unless it is repugnant to thecontext,- xx xx xx

(79) “unauthorised use of electricity” means the usage ofelectricity as explained in Section 126 of the Act;”

50. Regulation 153 falls within Chapter IX of the Code 2014.Chapter IX is in respect of theft, unauthorised use and other irregularities.The Regulation 153 reads thus:

“153. Estimation and regularisation of unauthorisedadditional load.-(1) If it is detected, on inspection, thatadditional load in excess of the sanctioned load has beenconnected to the system without due sanction from the licensee,further action shall be taken in accordance with the followingsubregulations.

(2) The difference between the total connected load in thepremises of the consumer at the time of inspection and thesanctioned load of the consumer shall be reckoned asunauthorised additional load.

(3) Connected load shall be determined as per the followingclauses:- (a) the rated capacities of all energy consuming devices andapparatus which can be simultaneously used, excluding stand-by load if any, in the premises of the consumer and foundconnected to the system shall be considered for estimating thetotal load of the consumer; (b) while estimating the total load of a consumer, the loads ofthe following equipment and apparatus shall not be takeninto account:- A

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i. standby equipment of consumers, when they are operatedthrough a change over switch; A

ii. firefighting equipment;

iii. un-interrupted power supply equipment (UPS), switchmode power supply system (SMPS), transformer, voltagestabilizer, inverter, rectifier and measuring devices:

B

Provided that the rated capacities of the equipment andapparatus connected to the UPS or SMPS or voltage stabilizeror inverter or rectifier shall be considered for computation ofthe connected load.

C

(4) (a) If the additional load in the case of domestic consumersis of and below twenty percent of the sanctioned load it shallnot be reckoned as unauthorised additional load.

(b) If the additional load in the case of other consumers is ofand below ten percent of the sanctioned load, it shall not bereckoned as unauthorised additional load.

D

(c) The licensee may, suo motu or on application from theconsumer, regularise such additional load mentioned in clause(a) and clause (b) above.

(5) When the load in excess of sanctioned load exceeds thelimit as provided in subregulation (4) above, the entire loadin excess of the sanctioned load shall be treated asunauthorised additional load, if express sanction or deemedsanction under clause (c) of subregulation (4) has not beenobtained for it.

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(6) In the case of consumers billed under demand based tariff,the total load declared in the test cum completion report of theinstallation of the consumer, submitted at the time of availingconnection or the load mentioned in the energisationapproval granted by the Electrical Inspector or the load atGthe time of revising contract demand or revising the connectedload may be taken as the sanctioned connected load.

(7) If it is found that any additional load has been connectedwithout due authorisation from the licensee or in violationof any of the provisions of the Central Electricity Authority(Measures relating to safety and electric supply) Regulations, H

2010, as amended from time to time, the licensee shall directthe consumer to disconnect forthwith such additional loadand the consumer shall comply with such direction, failingwhich the supply of electricity to the consumer shall bedisconnected by the licensee.

(8) If it is found that no additional load has been connectedand recorded maximum demand has been exceeded, the demandcharges may be collected for the recorded maximum demandat the rates as approved by the Commission and steps may beinitiated to enhance the contract demand as specified inregulation 99 of the Code.

(9) If it is found that additional load has been connectedwithout any increase in the contract demand, steps may beinitiated to regularise the connected load in accordance withthe provisions in the agreement within a time frame asstipulated by the licensee.

(10) If it is found that additional load has been connectedwithout due authorisation from the licensee and contractdemand has been exceeded, steps may be initiated toregularise the additional load and to enhance the contractdemand in addition to collection of demand charges as perthe agreement conditions, for the recorded maximum demandat the rates approved by the Commission:

Provided that such regularisation of additional load andenhancement of contract demand shall be done only afterensuring that wiring has been done in conformity with theprovisions of Central Electricity Authority (Measures relatingto safety and electric supply) Regulations, 2010 as amendedfrom time to time.

(11) The proceedings specified in subregulations (9) and (10)above, are applicable in the cases where the regularisationof unauthorised connected load or enhancement of contractdemand will not necessitate enhancement of voltage level ofsupply or upgradation of the existing distribution system orboth.

(12) In case such regularisation of unauthorised connectedload or enhancement of contract demand will necessitateupgradation of the existing distribution system or A

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Aenhancement of voltage level of supply, the licensee shall directthe consumer to disconnect forthwith such additional loadand to restrict the contract demand within the agreed limitand the consumer shall comply with such direction, failingwhich the supply of electricity to the consumer shall bedisconnected by the licensee.

B

(13) The regularisation of unauthorised additional load asper the subregulations (9) and (10) above shall be subject torealisation of a fee at the rates notified by the Commission inschedule 1 of the Code.

C(14) The provisions relating to unauthorised additional loadin subregulations (1) to (13) above shall not be applicable toany domestic consumer if his total connected load includingthe additional load detected is of and below 10kW.

(15) Unauthorised additional load in the same premises andDunder same tariff shall not be reckoned as ‘unauthorised useof electricity’.”

51. We shall now look into the decision of this Court in the case ofSeetaram Rice Mill (supra).

52. The respondent in Seetaram Rice Mill (supra) was aEpartnership firm engaged in the production of rice. For supply ofelectricity, it had entered into an Agreement dated 09.12.1997 with theappellant therein. The respondent therein was classified as ‘Mediumindustry’ category, which dealt with contract demand of 99 KVA andabove but below 110 KVA. On 10.06.2009, the Executive Engineer,Jeypore Electrical Division and SDO, Electrical MRT Division, JeyporeFinspected the business premises of the respondent’s unit and dump wasconducted. On 25.07.2009, provisional assessment order was issued bythe appellant therein to the respondent therein. Intimation was issued tothe respondent therein that there was unauthorised use of electricityfalling squarely within the ambit of Section 126 of the Act 2003. In theGdump report, it was stated that there was unauthorised use of electricityand maximum demand had been consumed upto 142 KVA. On this basis,the provisional assessment order was passed by taking the contracteddemand as that applicable to large industry. The respondent therein didnot file objections but challenged the provisional assessment order on H

the ground of lack of authority and jurisdiction on the part of the ExecutiveEngineer to frame the provisional assessment by alleging unauthoriseduse of electricity since 04.06.2008. The respondent therein contendedthat since it was classified as medium scale industry, provisionalassessment could not have been made on the basis of the dump chargesrelating to large industry. The High Court held that overdrawal ofmaximum demand would not fall within the scope of ‘unauthorised useof electricity’ as defined by sub-clause (b) to the Explanation to Section126 of the said Act. The High Court set aside the provisional assessmentorder. While dealing with the challenge to the High Court’s order, thisCourt, inter alia, examined the scope of Sections 126, 127 and 135resply of the said Act against the backdrop of the scheme of the Act2003 and summed up its conclusions as under:

“1. Wherever the consumer commits the breach of the termsof the Agreement, Regulations and the provisions of the Actby consuming electricity in excess of the sanctioned andconnected load, such consumer would be “in blame and underliability” within the ambit and scope of Section 126 of the2003 Act.

2. The expression “unauthorised use of electricity means” asappearing in Section 126 of the 2003 Act is an expression ofwider connotation and has to be construed purposively incontrast to contextual interpretation while keeping in mindthe object and purpose of the Act. The cases of excess loadconsumption than the connected load inter alia would fallunder Explanation (b)(iv) to Section 126 of the 2003 Act,besides it being in violation of Regulations 82 and 106 of theRegulations and terms of the Agreement.

3. In view of the language of Section 127 of the 2003 Act,only a final order of assessment passed under Section 126(3)is an order appealable under Section 127 and a notice-cum-provisional assessment made under Section 126(2) is notappealable.

4. Thus, the High Court should normally decline to interferein a final order of assessment passed by the assessing officerin terms of Section 126(3) of the 2003 Act in exercise of itsjurisdiction under Article 226 of the Constitution of India.

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SUPREME COURT REPORTS

A5. The High Court did not commit any error of jurisdiction inentertaining the writ petition against the order raising ajurisdictional challenge to the notice/provisional assessmentorder dated 25-07-2009. However, the High Courttransgressed its jurisdictional limitations while travelling intothe exclusive domain of the assessing officer relating to passingBof an order of assessment and determining the factualcontroversy of the case.

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6. The High Court having dealt with the jurisdictional issue,the appropriate course of action would have been to remandthe matter to the assessing authority by directing the consumerCto file his objections, if any, as contemplated under Section126(3) and require the authority to pass a final order ofassessment as contemplated under Section 126(5) of the 2003Act in accordance with law.”

53. In our opinion, the first two conclusions quoted hereinaboveDcompletely support the appellant Board. The learned counsel appearingfor the consumers and the Commission tried to distinguish SeetaramRice Mill (supra) from the present case on the ground that there was achange in the classification/category which is not so in this case inasmuchas here the consumers remain commercial/industrial having LT connectionEand, therefore, there is no issue of unauthorised use within the meaningof Section 126 of the Act 2003. We see no force in the submission thatchange of category would not attract Section 126 of the Act 2003. InSeetaram Rice Mill (supra), it was contended that only cases of changeof user would be covered under Section 126 of the Act 2003. Whilerejecting such contention, this Court clarified that the explanation toFSection 126 is not exhaustive and any use of electricity which is notpermissible and beyond the contract demand amounts to unauthoriseduse of electricity and the blame contemplated under Section 126 of theAct 2003 is not dependent on whether the overdrawal transgresses intoanother tariff category or not. We may quote the relevant paragraphsGfrom Seetaram Rice Mill (supra):

“18. It is true that fiscal and penal laws are normallyconstrued strictly but this rule is not free of exceptions. Ingiven situations, this Court may, even in relation to penalstatutes, decide that any narrow and pedantic, literal andHlexical construction may not be given effect to, as the law would have to be interpreted having regard to the subject-matter of the offence and the object that the law seeks toachieve. The provisions of Section 126, read with Section 127of the 2003 Act, in fact, become a code in themselves. Rightfrom the initiation of the proceedings by conducting aninspection, to the right to file an appeal before the appellateauthority, all matters are squarely covered under theseprovisions. It specifically provides the method of computationof the amount that a consumer would be liable to pay forexcessive consumption of the electricity and for the mannerof conducting assessment proceedings. In other words, Section126 of the 2003 Act has a purpose to achieve i.e. to put animplied restriction on such unauthorised consumption ofelectricity.

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22. The relevancy of objects and reasons for enacting an Actis a relevant consideration for the court while applying variousprinciples of interpretation of statutes. Normally, the courtwould not go behind these objects and reasons of the Act.The discussion of a Standing Committee to a Bill may not be avery appropriate precept for tracing the legislative intent butin given circumstances, it may be of some use to notice somediscussion on the legislative intent that is reflected in thesubstantive provisions of the Act itself. The Standing Committeeon Energy, 2001, in its discussion said, “the Committee feelsthat there is a need to provide safeguards to check the misuseof these powers by unscrupulous elements”. The provisionsof Section 126 of the 2003 Act are self-explanatory, they areintended to cover situations other than the situationsspecifically covered under Section 135 of the 2003 Act. Thiswould further be a reason for this Court to adopt aninterpretation which would help in attaining the legislativeintent.

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24. Upon their plain reading, the marked differences in thecontents of Sections 126 and 135 of the 2003 Act are obvious.They are distinct and different provisions which operate in A

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different fields and have no common premise in law. We havealready noticed that Sections 126 and 127 of the 2003 Actread together constitute a complete code in themselves coveringall relevant considerations for passing of an order ofassessment in cases which do not fall under Section 135 of the2003 Act.

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37. Wherever the assessing officer arrives at the conclusionthat unauthorised use of electricity has taken place, theassessment shall be made for the entire period during whichsuch unauthorised use of electricity has taken place and ifsuch period cannot be ascertained, it shall be limited to aperiod of 12 months immediately preceding the date ofinspection and the assessment shall be made at the rate equalto twice the tariff applicable for the relevant category ofservice specified under these provisions. This computationhas to be taken in terms of Sections 126(5), 126(6) and 127of the 2003 Act. The complete procedure is provided underthese sections. Right from the initiation of the proceedings tillpreferring of an appeal against the final order of assessmentand termination thereof, as such, it is a complete code in itself.

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44. The unauthorised use of electricity in the manner as isundisputed on record clearly brings the respondent “underliability and in blame” within the ambit and scope of Section126 of the 2003 Act. The blame is in relation to excess loadwhile the liability is to pay on a different tariff for the periodprescribed in law and in terms of an order of assessment passedby the assessing officer by the powers vested in him underthe provisions of Section 126 of the 2003 Act.

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50. In other words, the purpose sought to be achieved is toensure stoppage of misuse/unauthorised use of the electricityas well as to ensure prevention of revenue loss. It is in thisbackground that the scope of the expression “means” has tobe construed. If we hold that the expression “means” is exhaustive and cases of unauthorised use of electricity arerestricted to the ones stated under Explanation (b) of Section126 alone, then it shall defeat the very purpose of the 2003Act, inasmuch as the different cases of breach of the termsand conditions of the contract of supply, Regulations and theprovisions of the 2003 Act would escape the liability soughtto be imposed upon them by the legislature under the provisionsof Section 126 of the 2003 Act. Thus, it will not be appropriatefor the courts to adopt such an approach.

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60. The expressions “means”, “means and includes” and“does not include” are expressions of different connotationand significance. When the legislature has used a particularexpression out of these three, it must be given its plain meaningwhile even keeping in mind that the use of other twoexpressions has not been favoured by the legislature. To putit simply, the legislature has favoured non-use of suchexpression as opposed to other specific expression. In thepresent case, the Explanation to Section 126 has used theword “means” in contradistinction to “does not include” and/or “means and includes”. This would lead to one obviousresult that even the legislature did not intend to completelyrestrict or limit the scope of this provision.

61. Unauthorised use of electricity cannot be restricted to thestated clauses under the Explanation but has to be given awider meaning so as to cover cases of violation of terms andconditions of supply and the Regulations and provisions ofthe 2003 Act governing such supply. “Unauthorised use ofelectricity” itself is an expression which would, on its plainreading, take within its scope all the misuse of the electricityor even malpractices adopted while using electricity. It isdifficult to restrict this expression and limit its application bythe categories stated in the Explanation. It is indisputable thatthe electricity supply to a consumer is restricted and controlledby the terms and conditions of supply, the Regulations framedand the provisions of the 2003 Act.

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64. Minimum energy charges are to be levied with referenceto “contract demand” at the rate prescribed under the termsand conditions. These clauses of the Agreement clearly showthat the charges for consumption of electricity are directlyrelatable to the sanctioned/connected load and also the loadconsumed at a given point of time if it is in excess of thesanctioned/connected load. The respondent could consumeelectricity up to 110 kVA but if the connected load exceededthat higher limit, the category of the respondent itself couldstand changed from “medium industry” to “large industry”which will be governed by a higher tariff.

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65. Chapter VIII of the Conditions of Supply classifies theconsumers into various categories and heads. The electricitycould be provided for a domestic, LT industrial, LT/HTindustrial, large industry, heavy industries and powerintensive industries, etc. In terms of Regulation 80, the industryDwould fall under LT/HT category, if it relates to supply forindustrial production with a contract demand of 22 kVA andabove but below 110 kVA. However, it will become a “largeindustry” under Regulation 80(10) if it relates to supply ofpower to an industry with a contract demand of 110 kVA andabove but below 25,000 kVA. Once the category standsEchanged because of excessive consumption of electricity, thetariff and other conditions would stand automatically changed.The licensee has a right to reclassify the consumer underRegulation 82 if it is found that a consumer has been classifiedin a particular category erroneously or the purpose of supplyFas mentioned in the agreement has changed or the consumptionof power has exceeded the limit of that category etc. TheConditions of Supply even place a specific prohibition onconsumption of excessive electricity by a consumer.

D

66. Regulation 106 of the Conditions of Supply reads as under:

“106. No consumer shall make use of power in excess ofthe approved contract demand or use power for a purposeother than the one for which agreement has been executedor shall dishonestly abstract power from the licensee’ssystem.”

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67. Onthecumulativereadingofthetermsandconditionsofsupply,thecontractexecutedbetweenthepartiesandthe H

provisions of the 2003 Act, we have no hesitation in holdingthatconsumption of electricity in excess of the sanctioned/connectedloadshallbean“unauthoriseduseofelectricity”intermsof Section 126 of the 2003 Act. This, we also say forthe reason that overdrawalofelectricityamountstobreachofthetermsandconditionsofthecontractandthestatutoryconditions,besides such overdrawal being prejudicial to thepublic at large, as it is likelytothrowoutofgeartheentiresupplysystem,underminingits efficiency,efficacyandevenincreasingvoltagefluctuations.

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71. Consumption in excess of sanctioned load is violative ofthe terms and conditions of the agreement as well as of thestatutory benefits. Under Explanation (b)(iv), “unauthoriseduse of electricity” means if the electricity was used for apurpose other than for which the usage of electricity wasauthorised. Explanation (b) (iv), thus, would also cover thecases where electricity is being consumed in excess ofsanctioned load, particularly when it amounts to change ofcategory and tariff. As is clear from the agreement deed, theelectric connection was given to the respondent on acontractual stipulation that he would consume the electricityin excess of 22 kVA but not more than 110 kVA. The use of thenegative language in the condition itself declares the intentof the parties that there was an implied prohibition inconsuming electricity in excess of the maximum load as it wouldper se be also prejudiced. Not only this, the language ofRegulations 82 and 106 also prescribe that the consumer isnot expected to make use of power in excess of approvedcontract demand otherwise it would be change of user fallingwithin the ambit of “unauthorised use of electricity”.

72. Again, there is no occasion for this Court to give arestricted meaning to the language of Explanation (b)(iv) ofSection 126. According to the learned counsel appearing forthe respondent, it is only the actual change in purpose of useof electricity and not change of category that would attractthe provisions of Section 126 of the 2003 Act. The contentionis that where the electricity was provided for a domestic AB

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purpose and is used for industrial purpose or commercialpurpose, then alone it will amount to change of user orpurpose. The cases of excess load would not fall in thiscategory. This argument is again without any substance and,in fact, needs to be noticed only to be rejected.

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87. Having dealt with and answered determinatively thequestions framed in the judgment, we consider it necessary toprecisely record the conclusions of our judgment which areas follows:

C

1. Wherever the consumer commits the breach of the terms ofthe Agreement, Regulations and the provisions of the Act byconsuming electricity in excess of the sanctioned andconnected load, such consumer would be “in blame and underliability” within the ambit and scope of Section 126 of the2003 Act.

D

2. The expression “unauthorised use of electricity means” asappearing in Section 126 of the 2003 Act is an expression ofwider connotation and has to be construed purposively incontrast to contextual interpretation while keeping in mindthe object and purpose of the Act. The cases of excess loadconsumption than the connected load inter alia would fallunder Explanation (b)(iv) to Section 126 of the 2003 Act,besides it being in violation of Regulations 82 and 106 of theRegulations and terms of the Agreement….”

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F54. The principles of law discernible from the aforesaid may besummarised as under:

(1) The provisions of Section 126, read with Section 127 of theAct 2003 become a Code in themselves. It specifically provides the methodof computation of the amount that a consumer would be liable to pay forexcessive consumption of electricity and for the manner of conductingassessment proceeding. Section 126 of the Act 2003 has been enactedwith a purpose to achieve i.e., to put an implied restriction on suchunauthorised consumption of electricity.

G

(2) The purpose of Section 126 of the Act 2003 is to providesafeguards to check the misuse of powers by unscrupulous elements.

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The provisions of Section 126 of the Act 2003 are self-explanatory.They are intended to cover situations, other than, the situations specificallycovered under Section 135 of the Act 2003. In such circumstances, theCourt should adopt an interpretation which should help in attaining thelegislative intent.

(3) The purpose sought to be achieved with the aid of the provisionsof Section 126 of the Act 2003 is to ensure stoppage of misuse/unauthorised use of the electricity as well as to ensure prevention ofrevenue loss.

(4) The overdrawal of electricity is prejudicial to the public atlarge, as it is likely to throw out of gear the entire supply system,undermining its efficiency, efficacy and even-increasing voltagefluctuations.

(5) The expression ‘unauthorised use of electricity’ means as itappears in Section 126 of the Act 2003. It is an expression of widerconnotation and principle construed purposively in contrast to contextualinterpretation, while keeping in mind the object and purpose of the Act2003.

55. Having read and re-read the decision of this Court in the caseof Seetaram Rice Mill (supra), we are clear in our mind that the HighCourt in its impugned judgment has carved out an exception, which doesnot find a place in Section 126(6) of the Act 2003. Paras 18 & 37 resplyof the judgment, in the case of Seetaram Rice Mill (supra) referred toabove categorically hold that Section 126 and 127 resply of the Act 2003read together constitute a complete code in themselves. Para 50 of thesaid judgment holds that the purpose of Section 126 is to ensure stoppageof misuse/ unauthorised use of electricity. Para 61 of Seetaram RiceMill (supra) referred to above makes the picture abundantly clear.

56. In para 67 of Seetaram Rice Mill (supra) referred to above,it was categorically held that the consumption of electricity in excess ofthe sanctioned/connected load shall be an ‘unauthorised use of electricity’in terms of Section 126 of the Act 2003. According to us, the observationsmade by this Court in Seetaram Rice Mill (supra) as contained in para67 goes to the root of the matter. Seetaram Rice Mill (supra) in para 67has said in so many words that overdrawal of electricity amounts tobreach of the terms and conditions of the contract and the statutoryconditions, besides such overdrawal being prejudicial to the public at A

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Alarge, as it is likely to throw out of gear the entire supply systemundermining its efficiency, efficacy and even-increasing voltagefluctuations. This aspect of the matter has been completely overlookedby the High Court. It is not just a matter of overdrawal of electricity inexcess of sanctioned/connected load in the very same premises and forthe very same purpose, which does not involve any change in the tariffBapplicable for the relevant category of services. The tariff applicablemay remain the same; the overdrawal may be in the same premises andfor the very same purpose, there may not be any loss of revenue but itmay lead to a disastrous situation being prejudicial to the public at large,as such overdrawal of electricity in excess of sanctioned/connected loadCmay disturb the entire supply system, undermining its efficiency, efficacyand even-increasing voltage demand.

57. In para 72 of Seetaram Rice Mill (supra), a contention wasraised by the consumer that it is only the actual change in purpose of useof electricity that would attract Section 126 of the Act 2003. TheDcontention was that where the electricity was provided for domesticpurpose but was actually used for industrial or commercial purpose, thenalone it will amount to change of user or purpose and accordingly acontention was raised that a case of usage of excess load would not fallin this category. This Court rejected the said contention in para 72. Para72 states as follows:E“72. Again, there is no occasion for this Court to give arestricted meaningtothelanguageofExplanation(b)(iv)ofSection126.Accordingto the learnedcounsel appearingforthe respondent, it is only the actual change in purpose of useof electricity and not changeofcategorythatwouldattractFtheprovisionsofSection 126 ofthe2003Act.Thecontentionisthatwheretheelectricity was provided for a domesticpurpose and is used for industrial purposeorcommercialpurpose,thenaloneitwillamountto change of user orpurpose. The cases of excess load would not fall inthisGcategory.Thisargumentisagainwithoutanysubstanceand,infact,needstobe noticed onlytoberejected.”

58. In view of para 72 of Seetaram Rice Mill (supra) referred toabove, the High Court could be said to have erred in coming to theH

conclusion that the consumer cannot be charged twice the energy chargesif the consumer uses in excess of the sanctioned/connected load in thevery same premises and for the very same purpose, which do not involveany change in the tariff. Para 87(2) in Seetaram Rice Mill (supra)categorically holds that consumption in cases of the connected load wouldfall in Explanation (b)(iv) to Section 126 of the Act 2003.

59. This Court in Punjab State Electricity Board v. VishwaCaliber Builders Private Limited reported in (2010) 4 SCC 539 hadthe occasion to consider the Punjab State Electricity RegulatoryCommission (Forum and Ombudsman) Regulations, 2005. In the saidcase, the challenge was to the order passed by a Division Bench of thePunjab and Haryana High Court whereby it had dismissed the writ petitionfiled by the appellant therein against the order of Ombudsman, Electricity,Punjab who in turn reversed the decision of the Disputes SettlementAuthority and directed refund of the amount recovered from therespondent therein towards Advance Consumption Deposit (ACD)service connection charges and load sur charge. In para 13, 14 and 15this Court observed as under:

“13. We have considered the arguments of the learned counseland agree with him that in the absence of any provision inthe Act or the Regulations framed by the appellant, theOmbudsman committed jurisdictional error by directingregularisation of unauthorised use of electricity by therespondent and refund of the alleged excess amount chargedby the appellant.

14. The fact that the appellant could not release connectionwith aload of 2548 kW on account of non-availability oftransformer necessary for transfer of 8 MVA load from 66 kVSub-Station, GTRoad, Ludhiana had no bearing on the issueof consumption of electricitybytherespondentbeyondthesanctionedload. Undisputedly, in terms of the request madeby the respondent, the Chief Engineer had sanctionedconnection on the existing system with a load of 1500 kW, butthe respondent used excess load to the tuneof481.637kWandthisamountedtounauthoriseduseofelectricalenergy.

15. It is also not in dispute that after installation of a newtransformer, the respondent could not avail the balance load A

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Awithin the stipulated time of six months and when the authorityconcerned issued notice dated 13-12-2001 and reminder dated23-5-2002, its representative refused to submit fresh A&A formnecessary for release of the balance load. This being theposition, the fault, if any, for non-release of the balance loadlay at the doors of the respondent and the OmbudsmanBcommitted serious error by directing the appellant to refundthe alleged excess amount collected from the respondent onaccount of use of electricity over and above the sanctionedload.”

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60. Thus, in the aforesaid case, the excess load to the tune of481.637 KW was assessed as unauthorised use of electrical energy.

REGULATION153(15)OF THE CODE2014

61. We shall now look into the main limb of the submissionDcanvassed on behalf of the consumers that the Regulation 153(15) ofthe Code 2014 makes all the difference and the ratio and the principlesas propounded in Seetaram Rice Mill (supra) should be understood inthe light of the Regulation 153(15) of the Code 2014. We have quotedRegulation 153(15) of the Code 2014 in the earlier part of our judgment.EWe do not find any merit in the submission canvassed on behalf of theconsumers in regard to the applicability of Regulation 153(15) of theCode 2014. The Code 2014 is framed under Section 50 read with Section181(x) of the Act 2003.

62. This Court in Uttar Pradesh Power Corporation LimitedFand Others v. Anis Ahmad reported in (2013) 8 SCC 491, held that theSupply Code cannot provide for nor does it relate to assessment of chargesfor ‘unauthorised use of electricity’ under Section 126 of the Act 2003.Paras 53 and 54 resply of the said judgment state as follow:

“53. Section 50 of the Electricity Act, 2003 empowers theState Commission to specify an Electricity Supply Code toGprovide for recovery of electricity charges, intervals for billingof electricity charges, measures for preventing damage toelectrical plant or electrical line or meter, entry of distributionlicensee, etc. and it reads as follows:

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“50. The Electricity Supply Code.—The State Commissionshall specify an Electricity Supply Code to provide forrecovery of electricity charges, intervals for billing ofelectricity charges, disconnection of supply of electricityfor non-payment thereof, restoration of supply of electricity,measures for preventing tampering, distress or damage toelectrical plant or electrical line or meter, entry ofdistribution licensee or any person acting on his behalffor disconnecting supply and removing the meter, entry forreplacing, altering or maintaining electric lines or electricalplants or meter and such other matters.”

54. From reading Section 50, it is clear that under theElectricity Supply Code provisions are to be made for recoveryof electricity charges,billingofelectricitycharges,disconnection,etc.and measuresforpreventingtampering,distressordamagetothe electrical plant or line or meter, etc.But the said Code need not provideprovisionsrelatingtoit/donotrelatetoassessmentof charges for “unauthorised useof electricity” under Section 126 or actiontobetakenagainstthosecommitting“offences”underSections135 to 140 ofthe ElectricityAct, 2003.”

63. Thus, reliance on Regulation 153(15) of the Code 2014 framedunder Section 50 of the Act 2003 by the respondent (consumers) isthoroughly misconceived, as the same does not conform to the provisionsof the Act 2003. In any event, Regulation 153(15) travels much beyondSection 126 and Section 50 resply of the Act 2003. It is settled law thatthe regulation making power cannot be used to bring into existencesubstantive rights, which are not contemplated under the Act 2003.

64. At this stage, it is apposite to state about the rule makingpowers of a delegating authority. If a rule goes beyond the rule makingpower conferred by the statute, the same has to be declared invalid. Ifa rule supplants any provision for which power has not been conferred,it becomes invalid. The basic test is to determine and consider the sourceof power, which is relatable to the rule. Similarly, a rule must be in accordwith the parent statute, as it cannot travel beyond it.

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A65. Delegated legislation has come to stay as a necessarycomponent of the modern administrative process. Therefore, the questiontoday is not whether there ought to be delegated legislation or not, butthat it should operate under proper controls so that it may be ensuredthat the power given to the Administration is exercised properly; thebenefits of the institution may be utilised, but its disadvantages minimised.BThe doctrine of ultra vires envisages that a rule making body mustfunction within the purview of the rule making authority conferred on itby the parent Act. As the body making rules or regulations has no inherentpower of its own to make rules, but derives such power only from thestatute, it has to necessarily function within the purview of the statute.CDelegated legislation should not travel beyond the purview of the parentAct. If it does, it is ultra vires and cannot be given any effect. Ultravires may arise in several ways; there may be simple excess of powerover what is conferred by the parent Act; delegated legislation may beinconsistent with the provisions of the parent Act or statute law or thegeneral law; there may be non- compliance with the proceduralDrequirement as laid down in the parent Act. It is the function of thecourts to keep all authorities within the confines of the law by supplyingthe doctrine of ultra vires.

66. In this context, we may refer with profit to the decision inGeneral Officer Commanding-in-Chief and Another v. Dr. SubhashEChandra Yadavand Another reported in (1988) 2 SCC 351, wherein ithas been held as follows:- “14. ….before a rule can have the effect of a statutoryprovision, two conditions must be fulfilled, namely, (1) it mustconform to the provisions of the statute under which it isFframed; and (2) it must also come within the scope and purviewof the rule making power of the authority framing the rule. Ifeither of these two conditions is not fulfilled, the rule so framedwould be void…..”

67. In Additional District Magistrate (Rev.) Delhi Admn. v.GSiri Ram reported in (2000) 5 SCC 451, it has been ruled that it is a wellrecognised principle that the conferment of rule-making power by anAct does not enable the rule-making authority to make a rule whichtravels beyond the scope of the enabling Act or which is inconsistenttherewith or repugnant thereto.H

68. In Sukhdev Singh and Others v. Bhagatram Sardar SinghRaghuvanshiand Another reported in(1975) 1 SCC 421, theConstitution Bench has held that:

“18. …. These statutory bodies cannot use the power to makerules and regulations to enlarge the powers beyond the scopeintended by the Legislature. Rules and regulations made byreason of the specific power conferred by the statute to makerules and regulations establish the pattern of conduct to befollowed. …”

69. In State of Karnataka and Another v. H. Ganesh Kamathand Others reported in (1983) 2 SCC 402, it has been stated that:

“7. It is a well-settled principle of interpretation of statutesthat the conferment of rule-making power by an Act does notenable the rule-making authority to make a rule which travelsbeyond the scope of the enabling Act or which is inconsistenttherewith or repugnant thereto.”

70. InKunjBehariLalButailandOthersv.StateofH.P.andOthersreported in (2000) 3 SCC 40, it has been ruled thus:- “13. It is very common for the legislature to provide for ageneral rule-making power to carry out the purpose of theAct. When such a power is given, it may be permissible to findout the object of the enactment and then see if the rules framedsatisfy the test of having been so framed as to fall within thescope of such general power confirmed. If the rule-makingpower is not expressed in such a usual general form then itshall have to be seen if the rules made are protected by thelimits prescribed by the parent act…….”

71. In St. Johns Teachers Training Institute v. Regional Director,National Council for Teacher Education and Another reported in(2003) 3 SCC 321, it has been observed that:

“10. A regulation is a rule or order prescribed by a superiorfor the management of some business and implies a rule forgeneral course of action. Rules and regulations are allcomprised in delegated legislation. The power to makesubordinate legislation is derived from the enabling Act and itis fundamental that the delegate on whom such a power is A

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Aconferred has to act within the limits of authority conferredby the Act. Rules cannot be made to supplant the provisionsof the enabling Act but to supplement it. What is permitted isthe delegation of ancillary or subordinate legislativefunctions, or, what is fictionally called, a power to fill updetails…..”B

72. In Global Energy Limited and Another v. Central Electricity Regulatory Commissionreported in (2009) 15 SCC 570, this Courtwas dealing with the validity of clauses (b) and (f) of Regulation 6-A ofthe Central Electricity Regulatory Commission (Procedure, Terms andConditions for Grant of Trading Licence and other Related Matters)CRegulations, 2004. In that context, this Court expressed as under:- “25. It is now a well-settled principle of law that the rule-making power “for carrying out the purpose of the Act” is ageneral delegation. Such a general delegation may not beheld to be laying down any guidelines. Thus, by reason ofDsuch a provision alone, the regulation-making power cannotbe exercised so as to bring into existence substantive rightsor obligations or disabilities which are not contemplated interms of the provisions of the said Act.

73. In the aforementioned case, while discussing further about theEdiscretionary power, delegated legislation and the requirement of law,the Bench observed thus:

“73. The image of law which flows from this framework is itsneutrality and objectivity: the ability of law to put sphere ofgeneral decision-making outside the discretionary power ofFthose wielding governmental power. Law has to provide a basiclevel of “legal security” by assuring that law is knowable,dependable and shielded from excessive manipulation. In thecontest of rule- making, delegated legislation should establishthe structural conditions within which those processes canGfunction effectively. The question which needs to be asked iswhether delegated legislation promotes rational andaccountable policy implementation. While we say so, we arenot oblivious of the contours of the judicial review of thelegislative Acts. But, we have made all endeavours to keepourselves confined within the well- known parameters.”

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74. In this context, it would be apposite to refer to a passage fromState ofT.N. and Another v. P. Krishnamurthy and Othersreportedin (2006) 4 SCC 517 wherein it has been held thus:- “16. The court considering the validity of a subordinatelegislation, will have to consider the nature, object and schemeof the enabling Act, and also the area over which power hasbeen delegated under the Act and then decide whether thesubordinate legislation conforms to the parent statute. Wherea rule is directly inconsistent with a mandatory provision ofthe statute, then, of course, the task of the court is simple andeasy. But where the contention is that the inconsistency ornon-conformity of the rule is not with reference to any specificprovision of the enabling Act, but with the object and schemeof the parent Act, the court should proceed with caution beforedeclaring invalidity.”

75. InPratap Chandra Mehta v. State Bar Council of MadhyaPradesh and others reported in (2011) 9 SCC 573, while discussingabout the conferment of extensive meaning, it has been opined that:

“58. ….The Court would be justified in giving the provision apurposive construction to perpetuate the object of the Act,while ensuring that such rules framed are within the fieldcircumscribed by the parent Act. It is also clear that it may notalways be absolutely necessary to spell out guidelines fordelegated legislation, when discretion is vested in suchdelegatee bodies. In such cases, the language of the ruleframed as well as the purpose sought to be achieved, wouldbe the relevant factors to be considered by the Court.”

76. In Dr. Mahachandra Prasad Singh v. Chairman, BiharLegislative Council and Others reported in (2004) 8 SCC 747, thisCourt explained the concept of delegated legislation thus:

“13. …..Underlying the concept of delegated legislation isthe basic principle that the legislature delegates because itcannot directly exert its will in every detail. All it can in practicedo is to lay down the outline. This means that the intention ofthe legislature, as indicated in the outline (that is the enablingAct), must be the prime guide to the meaning of delegatedlegislation and the extent of the power to make it. The true A

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Aextent of the power governs the legal meaning of the delegatedlegislation. The delegate is not intended to travel wider thanthe object of the legislature. The delegate’s function is to serveand promote that object, while at all times remaining true toit. That is the rule of primary intention. Power delegated byan enactment does not enable the authority by regulations toBextend the scope or general operation of the enactment but isstrictly ancillary. It will authorise the provision of subsidiarymeans of carrying into effect what is enacted in the statuteitself and will cover what is incidental to the execution of itsspecific provision. But such a power will not support attemptsCto widen the purposes of the Act, to add new and differentmeans of carrying them out or to depart from or vary its ends.(See Section 59 in chapter “Delegated Legislation” in FrancisBennion’s Statutory Interpretation, 3rd Edn.)…….”

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77. In McEldowney v. Forde reported in (1971) AC 632 : (1969)D3 WLR 179, Lord Diplock explained the role of the Courts in this area inthe following words :

“The division of functions between Parliament and the courtsas respects legislation is clear. Parliament makes laws andcan delegate part of its power to do so to some subordinateEauthority. The courts construe laws whether made byParliament directly or by a subordinate authority acting underdelegated legislative powers. The view of the courts as towhether particular statutory or subordinate legislationpromotes or hinders the common weal is irrelevant. Thedecision of the courts as to what the words used in the statutoryFor subordinate legislation mean is decisive. Where the validityof subordinate legislation made pursuant to powers delegatedby Act of Parliament to a subordinate authority is challenged,the court has a threefold task: first, to determine the meaningof the words used in the Act of Parliament itself to describeGthe subordinate legislation which that authority is authorisedto make, secondly, to determine the meaning of thesubordinate legislation itself and finally to decide whetherthe subordinate legislation complies with that description.”

78. A delegated power to legislate by making rules or regulationsH‘for carrying out the purpose of the Act’, is a general delegation without laying down any guidelines; it cannot be exercised so as to bring intoexistence the substantive rights or obligations or disabilities notcontemplated by the provisions of the Act 2003 itself. The Court,considering the validity of a subordinate legislation, will have to considerthe nature, object and scheme of the enabling Act, and also the areaover which power as has been delegated under the Act and then decidewhether the subordinate legislation conforms to the parent statute.

79. It is important to keep in mind that where a rule or regulationis directly inconsistent with a mandatory provision of the statute, then, ofcourse, the task of the Court is simple and easy. But where the contentionis that the inconsistency or non-conformity of the rule is not with referenceto any specific provision of the enabling Act, but with the object andscheme of the parent Act, the Court should proceed with caution beforedeclaring the same to be invalid.

80. Rules or regulation cannot be made to supplant the provisionsof the enabling Act but to supplement it. What is permitted is the delegationof ancillary or subordinating legislative functions, or, what is fictionallycalled, a power to fill up details.

81. A Constitution Bench of this Court in the case of SukhdevSingh (supra), while explaining the fine distinction between a rule andregulation and also the power of the delegate authority to frame suchrules or regulations has made few very important observations whichwe must take notice of and quote as under:

“11. The contentions on behalf of the employees are these.Regulations are made under the statute. The origin and sourceof the power to make regulations is statutory. Regulationsare self- binding in character. Regulations have the force oflaw inasmuch as the statutory authorities have no right tomake any departure from the regulations.

12. Rules, regulations, schemes, bye-laws, orders made understatutory powers are all comprised in delegated legislation.The need for delegated legislation is that statutory rules areframed with care and minuteness when the statutory authoritymaking the rules is after the coming into force of the Act in abetter position to adapt the Act to special circumstances.Delegated legislation permits utilisation of experience and AB

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consultation with interests affected by the practical operationof statutes.

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14. Subordinate legislation is made by a person or body byvirtue of the powers conferred by a statute. By-laws are madein the main by local authorities or similar bodies or bystatutory or other undertakings for regulating the conduct ofpersons within their areas or resorting to their undertakings.Regulations may determine the class of cases in which theexercise of the statutory power by any such authorityconstitutes the making of statutory rules.

15. The words “rules” and “regulations” are used in an Actto limit the power of the statutory authority. The powers ofstatutory bodies are derived, controlled and restricted by thestatutes which create them and the rules and regulationsframed thereunder. Any action of such bodies in excess oftheir power or in violation of the restrictions placed on theirpowers is ultra vires. The reason is that itgoestotherootofthepowerofsuchcorporationsandthedeclarationofnullityistheonlyreliefthatisgrantedtothe aggrieved party.

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18. The authority of a statutory body or public administrativebody or agency ordinarily includes the power to make or adoptrules and regulations with respect to matters within the provinceof such body provided such rules and regulations are notinconsistent with the relevant law. In America a “publicagency” has been defined as an agency endowed withgovernmental or public functions. It has been held that theauthority to act with the sanction of Government behind itdetermines whether or not a governmental agency exists. Therules and regulations comprise those actions of the statutoryor public bodies in which the legislative element predominates.Thesestatutorybodiescannotusethepowertomake rulesand regulations to enlarge the powers beyond the scopeintended by the Legislature. Rules and regulations made byreason of the specific power conferred on the statute to make rules and regulations establish the pattern of conduct to befollowed. Rules are duly made relative to the subject-matteron which the statutory bodies act subordinate to the terms ofthe statute under which they are promulgated. Regulationsare in aid of the enforcement of the provisionsofthestatute.Rulesandregulationshavebeen distinguished from ordersor determination of statutory bodies in the sense that the ordersor determination are actions in which thereismoreofthejudicialfunctionandwhichdealwitha particular presentsituation. Rules and regulations on the other handareactionsinwhichthelegislativeelementpredominates.

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136. The regulations framed under the regulation-makingpower conferred by the three Acts in question are not theregulations as defined in the General Clauses Act. Ininterpreting Indian statutes it is unnecessary and mightsometimes be misleading to refer to the provisions of Englishlaw in connection with subordinate legislation. We have torefer only to the General Clauses Act and the Indianlegislative practice. Though “rule” is defined as including aregulation made as a rule, it cannot be said that regulation-making power conferred on the three organisations inquestion is a rule-making power. Under the legislative practicein India the rule-making power is conferred on the State andthe power to make regulations is conferred on bodies ororganisations created by the statute.

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161. I have gone through the various statutes only to pointout that under the Indian legislative practice rules are whatthe Central Government or the State Governments make andthe regulations are made by any institution or organisationestablished by a statute and where it is intended that theregulation should have effect as law the statute itself says so.It is, therefore, as I stated earlier, unnecessary and may beeven misleading to refer to the English practice in interpretingthe word ‘regulation’.”

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A82. If we have to set right the impugned judgment and order ofthe High Court and bring in tune with the principles embodied in thedecision of this Court in the case of Seetaram Rice Mill (supra), thenwe have no other option but to declare that Regulation 153(15) of theCode 2014 framed by the Commission is inconsistent with Section 126of the Act 2003. If the Regulation 153(15) is to be given effect, then theBsame would frustrate the very object of Section 126 of the Act 2003.The High Court in its impugned judgment says that Regulation 153(15)does not lead to any loss of revenue. The stance of the Commission alsois that there is no loss of revenue if the Regulation 153(15) is permittedto be operated. However, we are of the view that it is not just the questionCof loss of revenue. At the cost of repetition, we emphasis on the factthat overdrawal of electricity is prejudicial to the public at large as it maythrow out of gear the entire supply system, undermining its efficiency,efficacy and even-increasing voltage fluctuations.

83. The material on record indicates something very startling.DDuring the year 2014-15, total unauthorised use of electricity in the Stateof Kerala was detected in 1662 units and the total amount assessedcomes to Rs.14,40,82,176/- (Rupees Fourteen Crore Forty Lakhs EightyTwo Thousand One Hundred and Seventy Six only). The correspondingfigures during the years 2015-16 and 2016-17 were 1262 and 1875 unitsresply and the total amount assessed comes to around Rs.10,63,76,776/E- (Rupees Ten Crore Sixty Three Lakhs Seventy Six Thousand SevenHundred and Seventy Six only) and Rs. 34,64,80,421/- (Rupees ThirtyFour Crore Sixty Four Lakh Eighty Thousand Four Hundred and TwentyOne only) resply.

84. In the revenue petitions filed by the appellant Board, it wasFpointed to the High Court that the total amount assessed for all the threeyears referred to above, came to Rs.59,69,39,373/- (Rupees Fifty NineCrore Sixty Nine Lakh Thirty Nine Thousand Three Hundred and SeventyThree only).

85. In addition to the above, an amount of Rs. 41,14,858/- (RupeesGForty One Lakh Fourteen Thousand Eight Hundred and Fifty Eight only)and Rs.1,42,09,148/- (Rupees One Crore Forty Two Lakh Nine Thousandand One Hundred Forty Eight only) were assessed during the years2015-16 and 2016-17 resply, by Regional Audit Office (RAO) Inspection.86. We are really taken by surprise that despite the aforesaid, theHigh Court while rejecting the review applications declared that theH

regularisation of additional connected load or enhancement of contractdemand should not necessitate upgradation of the existing distributionsystem.

87. At this stage, we may also refer to Section 45(3)(a) of the Act2003. The same reads thus:

“45. Power to recover charges. %

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(3) The charges for electricity supplied by a distributionlicensee may include%

(a) a fixed charge in addition to the charge for the actualelectricity supplied;”

88. A plain reading of Section 45(3)(a) of the Act 2003 referred toabove would indicate that the charges for electricity certified by adistribution licensee include the fixed charges, in addition to the chargesfor the actual electricity supplied and consumed. In such circumstances,it can be said that the tariff includes both, fixed charges and energycharges and once the assessing officer arrives at the conclusion thatunauthorised use of electricity has taken place, he is obliged to make theassessment charge equal to twice the tariff applicable, which includesthe dues payable towards the energy charges also.

89. In overall view of the matter, we have reached to the conclusionthat the finding recorded by the High Court in para 31(vi) is not sustainablein law. We have also reached to the conclusion that the Regulation153(15) deserves to be declared invalid being inconsistent with theprovisions of Section 126 of the Act 2003.

90. The order passed by the High Court in the review applicationsmore particularly para 10(i), 10(ii) and 10(iii) resply is also hereby setaside.

91. In the result, all the appeals succeed and are hereby allowedto the aforesaid extent. The declaration issued by the High Court, ascontained in para 31(vi) of the impugned judgment is hereby set aside.

92. Regulation 153(15) of the Code 2014 is declared to be invalidbeing inconsistent with the provision of Section 126 of the Act 2003.

93. No order as to costs.

Devika Gujral(Assisted by : Preetam Bharti, LCRA)

Appeals allowed.

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