In a significant decision, the Calcutta High Court has declared unconstitutional a provision that allowed electricity distributors to penalise consumers for exceeding their prescribed electricity usage limit. The rule, framed under Regulation 4.4 of the West Bengal Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2011, was quashed on the ground of being arbitrary and violative of the constitutional right to equality.
The verdict was delivered by Justice Sabyasachi Bhattacharyya in a writ petition filed by Metsil Exports Private Limited and another company. The petition challenged the imposition of a penalty by Damodar Valley Corporation (DVC) for exceeding a restricted drawal limit, which had been fixed unilaterally by the distribution licensee.
Regulation 4.4 confers unbridled power on the licensee to violate such contract demand clause and, at its own whims, to arbitrarily restrict drawal even below the contract demand limit, since there is nothing in Regulation 4.4 to restrict the imposition of restricted drawal limits up to the contract load and above. This creates an opportunity of unjust enrichment of the licensee and also makes the licensee the judge of its own cause, the Court stated.
The Court further held that the provision lacked any framework or guideline to control the discretion of the licensee, which made it susceptible to misuse. As a result, the Court found that the regulation failed to meet the requirements of Article 14 of the Constitution, which guarantees equality before the law and prohibits arbitrary state action.
Regulation 4.4, by its very fabric, is implicitly abusive of the Constitutional principle of equality and non-discrimination by the very arbitrariness involved therein, since there is nothing in the provision to prevent the licensee from imposing such drawal limits whimsically and at the drop of a hat, even without any justification or reason whatsoever, in the absence of any guideline or framework for working the same. Hence, Regulation 4.4, in the absence of guidelines, is implicitly arbitrary and violative of Article 14 of the Constitution of India as well as all principles of natural justice, the judge observed.
The West Bengal Electricity Regulatory Commission (WBERC) defended the rule, arguing that such penalties were necessary to control excessive electricity usage and prevent overburdening of the power grid. However, the Court found that the logic behind the provision was flawed, as it allowed consumers to overdraw electricity without limits as long as they paid a penalty.
"A consumer is entitled to overdraw electricity to an infinite extent, thereby jeopardizing the power grid or bringing it down altogether, but be purged of such guilt by merely paying additional charges. In the process, if the grid stability is affected and even if the entire grid supply collapses, affecting the entire range of consumers being supplied through it, there is nothing in Regulation 4.4 to prevent the consumer from doing so," the Court remarked.
The Court found that the WBERC, through the 2011 Tariff Regulations, had given electricity licensees unchecked powers to impose limits on drawal, including the ability to alter such limits without proper procedure or communication. This arbitrary discretion led to financial burdens on consumers and created a scenario where the companies could profit unfairly.
The Court observed that although the original contract demand between the consumer and the licensee was fixed mutually, Regulation 4.4 allowed the licensee to impose additional restrictions without giving the consumer an opportunity to be heard.
Highlighting the principle of natural justice, the Court ruled that such changes must be communicated with reasonable notice and justification. It directed the WBERC to frame fresh regulations with appropriate safeguards that ensure any restriction on drawal is communicated to the consumer beforehand and includes a reasonable notice period.
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The order sets an important precedent in protecting consumer rights in the electricity sector and ensuring that regulatory authorities and distribution licensees act within the bounds of fairness and transparency.
Case Title: Metsil Exports Private Limited and Another vs. West Bengal Electricity Regulatory Commission and Others
Case Number: W.P.A. No. 4669 of 2023
Date of Judgment: May 3, 2024
