Deemed licensee and natural justice in electricity assessment: notification upheld, but recovery notices and provisional assessment were quashed.

A Government company treated as a deemed licensee under the Electricity Act could validly be notified as an assessing officer, so the notification appointing DVVNL officers under Section 126 was upheld. However, DVVNL was held not to be a separately notified Government Electrical Undertaking under the U.P. Government Electrical Undertaking (Dues Recovery) Act, 1958, and its Executive Engineer was not a prescribed authority under that Act, making the recovery notices invalid. The Court also held that provisional assessment for unauthorised use of electricity must follow disclosure of material, adequate reply time, a personal hearing, and a speaking order; the impugned proceedings failed that procedure and were quashed.

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Issues: (i) Whether the State Government notification designating officers of DVVNL as assessing officers under Section 126 of the Electricity Act, 2003 was valid; (ii) whether DVVNL was a Government Electrical Undertaking under the U.P. Government Electrical Undertaking (Dues Recovery) Act, 1958 and whether its Executive Engineer was a prescribed authority competent to issue the demand notice; (iii) whether the demand notices under Section 3 of the 1958 Act were validly issued; and (iv) whether the provisional assessment proceedings complied with Section 126 of the Electricity Act, 2003, the Supply Code and the principles of natural justice.

Issue (i): Whether the State Government notification designating officers of DVVNL as assessing officers under Section 126 of the Electricity Act, 2003 was valid.

Analysis: The proviso to Section 14 treats a Government company as a deemed licensee. DVVNL, being a subsidiary of UPPCL, which was itself a Government company, was held to be a Government company within the meaning of the Companies Act, 1956. On that basis, DVVNL fell within the statutory fiction of a deemed licensee. The validity of the notification under the Electricity Act therefore did not depend on any separate licence having been granted to DVVNL, and the notification was not inconsistent with Section 126.

Conclusion: The notification dated 27.06.2006 was valid and the challenge to it failed.

Issue (ii): Whether DVVNL was a Government Electrical Undertaking under the U.P. Government Electrical Undertaking (Dues Recovery) Act, 1958 and whether its Executive Engineer was a prescribed authority competent to issue the demand notice.

Analysis: DVVNL was held to be a separate and independent distribution company and not the same entity as UPPCL. The earlier notification covering UPPCL and its officers could not automatically extend to DVVNL. Since DVVNL had not been separately notified as a Government Electrical Undertaking under Section 2(c), it could not invoke the recovery machinery of the 1958 Act. For the same reason, its Executive Engineer could not claim status as a prescribed authority under Section 2(b).

Conclusion: DVVNL was not a Government Electrical Undertaking under the 1958 Act and its Executive Engineer was not a prescribed authority under that Act.

Issue (iii): Whether the demand notices under Section 3 of the U.P. Government Electrical Undertaking (Dues Recovery) Act, 1958 were validly issued.

Analysis: The demand notices described the issuing officer as Executive Engineer of UPPCL even though the consumers were under DVVNL after the transfer of distribution undertakings. The notices were also signed by a Sub-Divisional Officer on behalf of the Executive Engineer, whereas the statutory scheme required the prescribed authority itself to issue and sign the notice. In the absence of notification under the 1958 Act and in light of the defective issuance and authentication of the notices, the recovery proceedings were without jurisdiction.

Conclusion: The demand notices under Section 3 of the 1958 Act were invalid and unsustainable.

Issue (iv): Whether the provisional assessment proceedings complied with Section 126 of the Electricity Act, 2003, the Supply Code and the principles of natural justice.

Analysis: The Court held that before making a provisional assessment for unauthorised use of electricity, the assessing officer must form a reasoned conclusion on the alleged unauthorised use and must afford a fair opportunity to the consumer to answer the accusation. Clause 6.8 of the Supply Code required inspection reporting, disclosure of the material relied upon, a provisional assessment notice with adequate time for reply, and a personal hearing before a speaking final order. The notices in question did not follow this procedure, did not disclose the material in a manner enabling an effective defence, and did not comply with the prescribed timelines and hearing requirements.

Conclusion: The provisional assessment proceedings were illegal and contrary to law.

Final Conclusion: The impugned assessment and recovery proceedings could not be sustained, and the petitions succeeded to the extent of quashing those notices, while leaving the respondents free to proceed afresh in accordance with law.

Ratio Decidendi: A deemed licensee under the Electricity Act may be validly notified as an assessing officer, but recovery under a special dues-recovery statute can be undertaken only by a duly notified undertaking and prescribed authority, and an assessment for unauthorised use of electricity is valid only when preceded by disclosure of the basis, a fair opportunity of hearing, and compliance with the statutory procedure.

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