Power theft bills must follow the Section 126 assessment route, Supreme Court rules against Gujarat discoms

Justice Manoj Misra and Justice K.V. Viswanathan hold that the deposit a theft-accused consumer makes to get supply restored is assessed under Section 126, appealable under Section 127 and subject to the Special Court.

A consumer accused of stealing electricity has no statutory assessor of its own. That gap in the Electricity Act, 2003 is what the Supreme Court filled on 26 October 2026, when it dismissed two appeals by Gujarat distribution licensees who wanted theft demands kept outside the objection-and-appeal machinery of Sections 126 and 127. Justice Manoj Misra, writing for himself and Justice K.V. Viswanathan, held that the “assessed amount” a disconnected consumer must deposit under the third proviso to Section 135(1A) to get supply restored is to be worked out by the same procedure the Act prescribes for unauthorised use of electricity: a provisional assessment, an objection, a hearing, a final order and an appeal. The amount so fixed is final only for the purpose of reconnection. If the licensee prosecutes, the Special Court still determines civil liability, and any excess deposit is refunded with interest. The Court also laid down when a High Court may order reconnection on a 50 per cent deposit, and warned that the figure is a floor, not a formula.

Two Gujarat consumers, two bills labelled supplementary

The first appeal came from Dakshin Gujarat Vij Company Limited. M/s Vaibhav Metal Crusher had been made an accused under Section 135 of the 2003 Act. On 3 January 2024 the licensee served it with a notice titled a supplementary bill, demanding Rs 92,99,077.55 towards theft of electricity and Rs 23,45,845 towards compounding charges. The notice said that if the amount and the compounding charges were not paid, prosecution under Section 135 would follow.

The consumer went to the Gujarat High Court under Article 226 in Special Civil Application No. 1183 of 2024. On 12 February 2024, a Single Judge, following an earlier Division Bench decision in LPA No. 1445 of 2023, passed an interim order allowing the consumer to deposit 50 per cent of the bill amount including reconnection charges, and directed the licensee to reconnect the supply once that deposit was made.

The licensee filed LPA No. 592 of 2024 on three grounds. Reconnection on a 50 per cent deposit was unwarranted because the demand related to theft. No prior hearing was required before raising a theft demand. And the Special Court alone could determine civil liability under Section 154(5) and (6), so a writ petition was not the appropriate remedy. The Division Bench called for the record of the writ petition and disposed of both the appeal and the petition on 25 June 2024. It directed the consumer to file a reply to the 3 January 2024 notice within two weeks before the Executive Engineer concerned, who was obliged to deal with every objection before proceeding further, preferably within three weeks of receiving the reply. The supplementary bill, the deposits already made and the reconnection direction were all kept subject to the Executive Engineer’s decision. If that decision went against the consumer, it would have a remedy of appeal under Section 127, and the deposits already made would be adjusted against the pre-deposit needed to maintain that appeal.

The second appeal came from Paschim Gujarat Vij Company Limited. Jamanbhai Nanajibhai Bhuva had challenged a supplementary bill dated 1 June 2023, also raised for theft, in Special Civil Application No. 13655 of 2023. On 23 January 2024 a Single Judge directed him to deposit 50 per cent of the demand within four weeks, stayed recovery of the balance on that deposit, and gave him liberty to apply for a fresh connection. The licensee was to process that application within two weeks, give an estimate, and provide the connection within two weeks of the estimated amount being deposited. The Single Judge added that the fresh connection was not to be delayed or refused only because arrears stood against the premises. The licensee’s LPA No. 474 of 2024 raised the same three grounds. The Division Bench, after noticing two Supreme Court decisions, West Bengal State Electricity Distribution Company Ltd. v. Orion Metal Pvt. Ltd. and Southern Electricity Supply Company of Orissa Limited (SOUTHCO) v. Sri Seetaram Rice Mill, sent the matter back to the Single Judge on 25 April 2024 for a fresh order.

Both licensees came to the Supreme Court. Leave was granted and the two appeals were heard together. Senior advocate Ranjit Kumar appeared for the licensees; Raghenth Basant appeared for the consumers.

The discoms wanted theft kept out of the objection-and-appeal track

The licensees built their case on the structure of Part XIV of the Act. Section 135(1) defines theft of electricity. Section 135(1A) allows the licensee to disconnect supply immediately on detecting theft, and its third proviso gives the consumer a right to have supply restored on deposit or payment of “the assessed amount” or electricity charges in accordance with the Act. That assessment, they argued, is a different animal from the one under Section 126, which deals with unauthorised use of electricity. It exists only for the limited purpose of reconnection after a theft disconnection. So the consumer gets no right under Section 126(3) to object to a provisional assessment, and no appeal under Section 127. The High Court, on this view, erred twice: once in letting the consumer file objections to the supplementary bill, and again in giving it an appeal.

The licensees pressed a second point on finality. Section 127(4) makes the appellate authority’s order final. If a theft-accused consumer were allowed to appeal, that order would attain finality and the Special Court’s power under Section 154(5) to fix civil liability in money would be rendered nugatory. Put shortly, provisional assessment for unauthorised use and provisional assessment for theft arise in different circumstances and cannot be equated. In an unauthorised-use case the consumer may object and appeal; in a theft case the consumer must suffer disconnection, gets supply back only on paying the entire assessed amount, and must then await the Special Court. High Courts, the licensees said, should not routinely order restoration on a 50 per cent deposit, and should not permit objections or appeals against a theft demand.

For the consumers, the answer was that the third proviso itself speaks of an amount assessed in accordance with the provisions of the Act, and the Act contains no assessment provision other than Section 126. The assessed amount therefore has to mean the amount assessed under Section 126. Since an appeal is a continuation of the original proceeding, the expression also takes in whatever an appellate authority fixes under Section 127. The High Court was right to direct an assessment after considering the objections, subject to the appeal. As for Section 127(4), the finality it attaches is only about restoration of supply; where a complaint is filed, the figure remains subject to the Special Court under Section 154(5). The appeals, the consumers said, were misconceived.

One Act, one formula, one assessing officer

The Court began with a survey of the 2003 Act and the Gujarat Electricity Regulatory Commission (Electricity Supply Code and Related Matters) Regulations, 2015, framed under Section 181(2)(x) read with Section 50 of the Act and Section 42(1)(b) of the Gujarat Electricity Industry (Reorganization and Regulation) Act, 2003. Section 126 lets an assessing officer who concludes, on inspection, that a person is indulging in unauthorised use of electricity make a provisional assessment to the best of his judgment. The order must be served; the person may object; the officer must give a reasonable opportunity of hearing and pass a final order within 30 days of service of the provisional order. The assessment covers the entire period of unauthorised use or, if that cannot be ascertained, 12 months before the inspection, at twice the applicable tariff. Section 127 gives an appeal within 30 days, on deposit of half the assessed amount, and makes the appellate order final. Section 135(1A) permits immediate disconnection on detection of theft, requires a written complaint at the police station within 24 hours of the disconnection, and obliges the licensee to restore supply within 48 hours of deposit or payment of the assessed amount. Section 154(5) requires the Special Court to fix civil liability at not less than twice the tariff for the 12 months before detection, or the exact period of theft if determined, whichever is less, recoverable as a decree. Section 154(6) requires the licensee to refund any excess deposit within a fortnight of the Special Court’s order, with interest at the Reserve Bank of India prime lending rate.

The Court also noticed the Electricity (Removal of Difficulties) Order, 2005, issued under Section 183 and published on 8 June 2005, which required every State Supply Code to include a method of assessing the charges payable in a case of theft pending adjudication by the court. Gujarat’s Supply Code answers that in Para 7. Clause 2.3(7) defines the Assessing Officer as the officer designated under Section 126; clause 2.3(8) defines the Authorised Officer as the one designated under Section 135. Para 7.1 provides that whenever theft is detected on inspection by the Authorised Officer, it is the Assessing Officer who carries out the assessment. Para 7.7 and Para 7.12 send that assessment to the formula in Annexure IV, for the entire period of theft or 12 months before inspection, at twice the applicable tariff. The same Annexure IV formula, units assessed = L x H x F, with load factors by consumer category and a 1.25 multiplier for direct theft capped at 100 per cent, governs assessment for unauthorised use. The Code’s unauthorised-use clauses go further: a provisional assessment order stating when and where objections may be filed (Para 7.31), objections within seven days (Para 7.34), a hearing within seven days of the objection (Para 7.36), a final order with the appellate authority’s address (Para 7.44), an appeal within 30 days (Para 7.45), and refund of any excess with 16 per cent interest compounded half-yearly (Para 7.52).

From this material the Court drew two conclusions. Comparing clause (b) of the Explanation to Section 126 with Section 135(1), theft would include unauthorised use of electricity, “though every unauthorized use of electricity may not constitute theft”. And the Act contains no assessment provision other than Section 126, nor does the Act or the Supply Code designate any assessing officer for theft other than the one who assesses unauthorised use. The logical corollary, the Court said, is that the assessed amount in the third proviso to Section 135(1A) has to be the amount assessed by the Section 126 procedure. If Section 126(2) requires service of a provisional order and Section 126(3) gives a right to object and a hearing before a final order, that same procedure, which conforms to natural justice, must be followed in fixing the reconnection deposit, until the Supply Code prescribes a separate one.

Orion Metal and why the Special Court still has the last word

The Court anchored its reading in its own earlier decision in West Bengal State Electricity Distribution Company Ltd. v. Orion Metal Pvt. Ltd., reported at (2020) 18 SCC 588. There, the licensee had argued that once a theft complaint is filed under Section 135(1)(a), no assessment under Section 126(1) is permissible. The Court rejected that argument. It held that theft covered by Section 135 falls within the definition of unauthorised use; that the authorities can make provisional and final assessments under Section 126(1) even where electricity is unauthorisedly used by way of theft; and that the assessed amount in the third proviso to Section 135(1A) relates to the Section 126(1) assessment only. Orion Metal also held that the Section 126 assessment and the Special Court’s determination of civil liability under Section 154(5) are not parallel proceedings that exclude each other. Where unauthorised use amounts to theft, both run: the assessment, and a complaint before the Special Court, which fixes civil liability on proof beyond reasonable doubt with mens rea, a standard the Section 126 assessment does not require. Any excess deposit is then refunded.

Against that backdrop the Court rejected the licensees’ contention that a theft case admits of no Section 126 assessment at all. The third proviso to Section 135(1A), it said, is an emergency provision for a consumer who has suffered disconnection on an accusation of theft, dealing with “a commodity essential for all aspects of life including business”. If such a person had to wait for the Special Court to fix civil liability before supply could be restored, the proviso would be frustrated. With only one assessment provision in the Act and a single formula in the Supply Code, adopting the Section 126 procedure to fix the reconnection amount could not be faulted.

The finality argument failed for a related reason. Where a complaint of theft has been lodged, the finality that Section 127(4) gives the appellate order is limited to the amount required for restoration of supply. It does not absolve the offender of the civil liability the Special Court determines under Section 154(5). Section 154(6) makes this plain, the Court said, because it contemplates the Special Court fixing a figure lower than what the consumer has deposited and orders the excess refunded.

The Court summarised the law in three propositions. First, for restoration of supply disconnected under Section 135(1A), the assessed amount under the third proviso is to be determined, absent a specific procedure in the Supply Code, by the same procedure used for assessing charges for unauthorised use. Second, that amount is subject to an appeal under Section 127, and the appellate determination is final for the limited purpose of reconnection; where a criminal complaint is filed, it does not bind the Special Court. Third, if the amount deposited exceeds the civil liability fixed by the Special Court, the excess is refunded under Section 154(6).

Fifty per cent is a floor, not a routine

The licensees had a further complaint: that ordering reconnection on half the provisionally assessed amount was too lenient a view of the third proviso and would fail to deter theft. The Court’s answer cut both ways. The powers of a constitutional court cannot be wholly circumscribed by statute, it said, though self-imposed restraint is necessary when a matter falls within a self-contained statutory code. Electricity is essential for life and livelihood, and its deprivation can have serious consequences, so a High Court may in an appropriate case use its constitutional powers to protect a person from arbitrary action by the State or a distribution licensee. But theft necessarily involves criminal intent, and a liberal approach may not be appropriate. Each case must turn on its own facts, and where the facts warrant, a High Court might be justified in refusing restoration until the entire provisionally assessed amount is deposited. In the Court’s words, “a circumspect approach is required” in petitions seeking restoration after a theft disconnection.

At the same time, the Court acknowledged that assessment takes time. A provisional order must be served, an objection filed, a hearing given, a final order passed and an appeal decided. So where the provisional assessment is prima facie arbitrary, a High Court may, for reasons recorded, order restoration on payment of a part of the demand, which should not be less than 50 per cent. The Court explained the figure: under Section 127(2) an appeal is entertained only on deposit of half the assessed amount, and the reconnection threshold should not fall below what the statute itself demands to pursue an appeal.

Applying this to the Vaibhav Metal Crusher case, the Court found the High Court within its jurisdiction in ordering restoration on a 50 per cent deposit of the provisional demand, and justified in letting the consumer contest the assessment by objection and then deposit the balance finally assessed. Those stipulations, it said, sufficiently protected the licensee. What the High Court ought to have added was a clarification: the Executive Engineer’s determination would be subject, first, to any appeal under Section 127 and, finally, to the civil liability fixed by the Special Court under Section 154(5) if the consumer is prosecuted.

Order

Subject to that clarification, the appeal of Dakshin Gujarat Vij Company Limited against the Division Bench order of 25 June 2024 in LPA No. 592 of 2024 was dismissed. The appeal of Paschim Gujarat Vij Company Limited against the order of 25 April 2024 in LPA No. 474 of 2024 was also dismissed, the Court finding no reason to interfere with an order that merely sent the matter back to the Single Judge to decide in accordance with law. All pending applications were disposed of. The judgment is reported as 2026 INSC 1157.