Hyderabad HC Sets Limits on Electricity Act Section 126
The Telangana High Court has ruled that proceedings under Section 126 of the Electricity Act, 2003 cannot be initiated merely because electricity use allegedly violates other provisions of the law or applicable regulations. Authorities must first establish that the conduct falls within the statutory definition of unauthorised use of electricity.
Justice Nagesh Bheemapaka delivered the ruling while setting aside a provisional assessment of ₹81.18 lakh against ITC Limited concerning electricity generated by its captive power plants and used by a contractor during expansion work at its factory premises in Sarapaka, Khammam district. The case arose after the power distribution authorities alleged that ITC had used electricity for a purpose different from its sanctioned use and had effectively supplied electricity to its contractor, Shapoorji Pallonji & Co. Ltd. The court found that the authorities had not established the jurisdictional basis required to invoke Section 126. It observed that an alleged breach of other provisions relating to open access or electricity supply does not automatically become unauthorised use under Section 126. ITC operates captive co-generation plants at its paper and paperboard manufacturing facility. The company was expanding its operations by installing an additional paper machine and a new 25 MW co-generation facility and had engaged Shapoorji Pallonji as the engineering and construction contractor.
The electricity provided to the contractor was generated from ITC’s own captive plants and was supplied free of cost for construction activities within the company’s premises. The court noted that the authorities did not dispute the existence of ITC’s captive generating facilities or the fact that the electricity had been generated by the company itself. It also rejected the argument that the contractor’s separate corporate identity was enough to establish unauthorised electricity use. According to the court, the nature and purpose of consumption must be examined rather than relying solely on the separate legal identity of the contractor. The court further held that merely carrying out construction work through a contractor does not prove that electricity was transferred or commercially sold to that contractor.
Another issue considered by the court was the reference to theft of electricity in the provisional assessment. The court pointed out that electricity theft is separately governed by Section 135 of the Electricity Act and cannot automatically be treated as a Section 126 matter. The High Court also rejected the objection that ITC should have first pursued an alternative statutory remedy. It held that the company’s challenge concerned the very jurisdiction of the assessing authority to initiate proceedings under Section 126. The ruling reinforces the requirement for electricity authorities to establish the statutory basis for an assessment before initiating proceedings. Regulatory non-compliance and unauthorised use, the court clarified, cannot be treated as interchangeable concepts. The decision could have wider significance for electricity consumers facing assessments under Section 126, particularly where authorities rely on alleged violations of other provisions without independently establishing unauthorised use.
