Supreme Court Allows Appeals in Electricity Contract Dispute — Refund of Excess Demand Charges Granted for Delayed Load Reduction. Held that Electricity Board's unreasonable delay in processing application for reduction of contracted load from 23000 KVA to 10000 KVA entitles consumer to refund of excess charges paid under protest.

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2026-05-18 11:55:19

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Case Note & Summary

The appellant, The Madras Aluminium Co. Ltd., a company established in 1965 for manufacturing aluminium, was declared a sick industrial unit under Section 3(1)(O) of the Sick Industrial Companies Act, 1985 by the Board for Industrial and Financial Reconstruction on 8th September 1987. In 1994, the new management approached the Board for revival. The appellant had an electricity supply agreement with the respondent, Tamil Nadu Electricity Board, for a contracted load of 23000 KVA. Due to reduced operations, the appellant applied for reduction of the contracted load to 10000 KVA. The respondent took considerable time to process the application and enter into a revised agreement. During this period, the appellant continued to pay demand charges based on 23000 KVA under protest. The appellant filed writ petitions before the Madras High Court seeking refund of the excess amount paid. A learned Single Judge dismissed the petitions, holding that the appellant was bound to pay charges as per the contract irrespective of consumption. The Division Bench in writ appeal upheld the Single Judge's order, holding that such a dispute is not one to be adjudicated under Article 226 of the Constitution of India. The appellant then appealed to the Supreme Court. The Supreme Court considered whether the respondent's delay in processing the load reduction application was arbitrary and unreasonable, and whether the appellant was entitled to refund of the difference in demand charges paid under protest. The Court allowed the appeals, holding that the delay was unreasonable and the appellant was entitled to refund.

Headnote

A) Electricity Law - Contractual Obligation - Demand Charges - Delay in Load Reduction - The issue was whether the Electricity Board's delay in processing the application for reduction of contracted load from 23000 KVA to 10000 KVA was arbitrary and unreasonable. The Court held that the Board's inordinate delay was unreasonable, and the consumer was entitled to refund of excess demand charges paid under protest during the period of delay. (Paras 1-4)

B) Constitutional Law - Writ Jurisdiction - Article 226 - Contractual Disputes - The High Court had held that the dispute regarding demand charges under an electricity supply agreement was not amenable to writ jurisdiction under Article 226 of the Constitution of India. The Supreme Court did not specifically rule on this point but allowed the appeals on merits. (Para 3)

Issue of Consideration

Whether the action of the Respondent in taking considerable time from when the application was made for reduction to 10000 KVA, to when the revised agreement was entered into, was arbitrary and unreasonable; and whether the Appellant is entitled to refund of the amount of difference between the amounts payable for 23000 KVA and 10000 KVA which have been paid under protest.

Final Decision

The Supreme Court allowed the appeals, holding that the respondent's delay in processing the load reduction application was unreasonable, and the appellant is entitled to refund of the excess demand charges paid under protest.

Law Points

Contractual obligation
Unreasonable delay
Refund of excess charges
Electricity supply agreement
Demand charges
Load reduction

Case Details

2023INSC607

Civil Appeal Nos. 7224-7226 of 2009

2023-07-06

Sanjay Karol, J.

2023INSC607

The Madras Aluminium Co. Ltd.

The Tamil Nadu Electricity Board and Anr.

Nature of Litigation

Civil appeals against judgment of Madras High Court dismissing writ petitions seeking refund of excess demand charges paid under protest due to delay in processing load reduction application.

Remedy Sought

Refund of the difference between amounts payable for 23000 KVA and 10000 KVA paid under protest.

Filing Reason

The respondent took considerable time to process the appellant's application for reduction of contracted load from 23000 KVA to 10000 KVA, and the appellant paid excess demand charges under protest.

Previous Decisions

The learned Single Judge of Madras High Court dismissed WP Nos. 19050-19052 of 2002, holding that the appellant was bound to pay charges as per contract. The Division Bench in WA Nos. 3806, 3807 and 3808 of 2003 upheld the Single Judge's order, holding that the dispute is not amenable to Article 226.

Issues

Whether the respondent's delay in processing the load reduction application was arbitrary and unreasonable. Whether the appellant is entitled to refund of the difference in demand charges paid under protest.

Submissions/Arguments

The appellant argued that the respondent took considerable time to process the application for reduction of contracted load, and the delay was arbitrary and unreasonable. The respondent contended that the appellant was bound to pay charges as per the contract irrespective of consumption.

Ratio Decidendi

The action of the Electricity Board in taking considerable time to process the application for reduction of contracted load was arbitrary and unreasonable, entitling the consumer to refund of excess charges paid under protest.

Judgment Excerpts

The question that this Court has been called upon to decide are, whether the action of the Respondent in taking considerable time from when the application was made for reduction to 10000 KVA, to when the revised agreement was entered into, was arbitrary and unreasonable? Contingently, whether the Appellant is entitled to refund of the amount of difference between the amounts payable for 23000 KVA and 10000 KVA which, have been paid under protest?

Procedural History

The appellant filed writ petitions (WP Nos. 19050-19052 of 2002) before the Madras High Court seeking refund of excess demand charges. The learned Single Judge dismissed the petitions. The appellant filed writ appeals (WA Nos. 3806, 3807 and 3808 of 2003) which were dismissed by the Division Bench on 15th December 2008. The appellant then filed civil appeals before the Supreme Court.