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Supreme Court Rules in Karnataka Power Transmission Case - International Law Office

International Law Office

Litigation - India

Supreme Court Rules in Karnataka Power Transmission Case

May 12 2009

Facts
Decision
Comment


In Karnataka Power Transmission Corporation v Ashok Iron Works Pvt Ltd(1) the Supreme Court arrived at a finding that an electricity consumer falls within the definition of a 'consumer' in Section 2(o) of the Consumer Protection Act 1986 and that any deficiency in the service provided to such a consumer can be raised before the consumer forums established under the act.

Facts

Ashok Iron Works Pvt Ltd manufactures iron products. It applied to Karnataka Power Transmission Corporation (KPTC) for the supply of electrical energy and paid the amount demanded by KPTC for such supply. However, KPTC did not commence the supply of electricity, so Ashok Iron Works filed a complaint with the Karnataka High Court. Having obtained an order in its favour, Ashok Iron Works complied with a further monetary demand by KPTC, but the corporation failed to commence the supply of electricity on time. Accordingly, Ashok Iron Works filed a complaint under the act claiming damages for the delay in the supply of electricity. KPTC contested the claim on the grounds that as Ashok Iron Works was engaged in commercial activity and electricity constituted goods under the act, the claim was invalid as the sale of goods to a commercial consumer for a commercial purpose falls outside the scope of the act.

The district court held in favour of KPTC. Ashok Iron Works appealed to the state commission, which ruled in its favour, holding that the complaint was valid as Ashok Iron Works was covered by the definition of a 'consumer' under the act. On appeal, the national commission dismissed the application, and KPTC further appealed to the Supreme Court. It argued that:

  • Ashok Iron Works was not a person under Section 2(1)(m) of the act;(2)
  • Ashok Iron Works was not a consumer under Section 2(1)(d) of the act;(3) and
  • a dispute relating to the sale and supply of electricity does not come within the ambit of service under Section 2(1)(o) of the act.(4)

Finding that a company constituted a person under the act, the Supreme Court held that Section 2(1)(m) is inclusive and not exhaustive. Moreover, although the court held that the supply of electricity was in no way a sale and purchase of goods under Section 2(1)(d)(i) of the act, it found that the supply of electricity to a consumer is indeed a 'service' as defined in Section 2(1)(o) of the act. In arriving at this conclusion, the court was guided by its previous decision in Southern Petrochemical Industries Co Ltd v Electricity Inspector & ETIO.(5)

Decision

Having concluded that Ashok Iron Works was covered by the definition of 'a person' and that the supply of electricity is indeed a service, the Supreme Court held that if the supply of electricity were not provided in time, this would constitute a service deficiency. The court chose to ignore the wording "but does not include a person who avails of such services for any commercial purpose", which was inserted in the act by an amendment, as the period under consideration was prior to that amendment. Moreover, the court held that Ashok Iron Works's complaint was valid before the National Consumer Disputes Redressal Forum.

Comment

The decision means that private companies now fall within the definition of a 'person' under the act and the supply of electricity is a service under the act. Accordingly, complaints regarding deficiencies in that service can be taken to a consumer redressal forum. However, it remains to be seen how the amendment to the act will affect future court decisions.

For further information on this topic please contact Vijayendra P Singh or Anuj Berry at Amarchand & Mangaldas & Suresh A Shroff & Co by telephone (+91 11 2692 0500) or by fax (+ 91 11 2692 4900) or by email (vijayendra.singh@amarchand.com or anuj.berry@amarchand.com).

Endnotes

(1) (2009) 3 SCC 240.

(2) "[The term] 'person' includes:

(i) a firm whether registered or not;

(ii) a Hindu undivided family;

(iii) a cooperative society; or

(iv) every other association of persons whether registered under the Societies Registration Act 1860 (21/1860)."

(3) "[The term] 'consumer' means any person who:

(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

(ii) [hires or avails of] any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who [hires or avails of] the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person [but does not include a person who avails of such services for any commercial purpose]."

(4) "[The term] 'service' means service of any description which is made available to potential [users and includes, but not limited to, the provision of] facilities in connection with banking, financing insurance, transport, processing, supply of electrical or other energy, board or lodging or both, [housing construction,] entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service."

(5) (2007) 5 SCC 447.


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