Demand for Electricity Dues Is Not Barred by S.56(2) of the Electricity Act, Which Only Limits Disconnection: Madras High Court - 2025-10-03

Madras High Court Upholds TANGEDCO's ₹6.7 Crore Demand on Infosys, Rules S.56(2) Limitation Applies to Disconnection, Not Recovery

Chennai, India — In a significant ruling with wide-ranging implications for commercial electricity consumers, the Madras High Court has dismissed a writ appeal filed by Infosys Limited, upholding a demand of over ₹6.7 crore in electricity dues levied by the Tamil Nadu Generation and Distribution Corporation (TANGEDCO). The Division Bench, comprising Justice J. Nisha Banu and Justice M. Jothiraman, held that the two-year limitation period under Section 56(2) of the Electricity Act, 2003, primarily restricts the licensee's right to disconnect supply and does not extinguish its right to recover arrears.

The court affirmed that Infosys's campus, which includes both software development and various commercial amenities like branded food courts, banks, and shopping outlets, was correctly reclassified under the higher 'Commercial Tariff' (HT-III) instead of the concessional 'Industrial Tariff' (HT-IA).

Background of the Dispute

The case originated from a demand notice issued by TANGEDCO to Infosys on November 7, 2020, seeking payment of ₹6,72,95,384 as a shortfall amount for the period between April 2009 and November 2011. This followed an audit objection in 2009 which found that Infosys's tariff was incorrectly applied. TANGEDCO also reclassified the company's future billing from the industrial tariff (HT-IA) to the commercial tariff (HT-III), citing the presence of commercial activities on the premises.

Infosys challenged this demand in a writ petition, which was dismissed by a single judge. The present appeal was filed against that order.

Key Arguments Presented

Infosys's Contentions: - Barred by Limitation: Senior Counsel Mr. Vijay Narayanan argued that the demand was barred by Section 56(2) of the Electricity Act, 2003. He contended that since the first demand was made in 2012, the subsequent notice in 2020, after a lapse of eight years, was illegal. He emphasized that the alleged arrears were not "continuously shown as recoverable" in their monthly bills. -

Incorrect Tariff Classification: Infosys asserted that its primary activity is software development, eligible for the industrial tariff. The amenities like food courts (with brands like Murugan Idly Shop), an ICICI Bank branch, and an Apollo Pharmacy were welfare measures for employees, not profit-making commercial ventures. They claimed these facilities consumed less than 4% of the total electricity.

TANGEDCO's Rebuttal: - Limitation Not Applicable to Recovery: Senior Counsel Mr. P. Wilson, representing TANGEDCO, argued that Section 56(2) limits the licensee's right to disconnect supply after two years but does not prevent them from recovering the dues through other means. He stated that the demand made in 2012 established the "first due" and the non-payment constituted a "continuing cause of action." He cited the Supreme Court's decision in Prem Cottex to support that the limitation applies to disconnection, not the demand itself. -

Mixed-Use Premises: TANGEDCO submitted that official approvals granted to Infosys by MEPZ in 2005 were for "Software Development & Exports" as well as "Software Consultancy & BPO" (Business Process Outsourcing), the latter falling under IT Enabled Services (ITES) which attract commercial tariffs. Given the presence of multiple commercial entities operating under their own brand names within the campus, applying the higher tariff for the entire premises was justified as per norms for mixed-use establishments without separate meters.

Court's Analysis and Pivotal Findings

The Division Bench meticulously analyzed the tariff orders issued by the Tamil Nadu Electricity Regulatory Commission (TNERC) and the scope of Section 56(2).

On Limitation: The court sided with TANGEDCO's interpretation, stating:

"The Hon'ble Supreme Court in 'Pretam Cortex versus Uttar Haryana Biji Nigam Ltd' (2021) 20 SCC 200, has observed that the limitation provided under Section 56 of the Electricity Act, 2003 is applicable only for the disconnection and not for the demand of dues by the Board. Therefore, this Court is of the view that the demand of shortfall made in the impugned order dated 7.11.2010 is not barred by limitation in terms of Section 56(2) of the Act."

The Bench noted that the amount was continuously shown as recoverable in TANGEDCO's internal records and the non-payment by Infosys became a continuing cause of action.

On Tariff Classification: The court rejected the "employee welfare" argument, highlighting the commercial nature of the services offered within the Infosys campus. It observed that Infosys had obtained permission for both software development and BPO activities and was housing branded outlets that operate for profit.

"The learned Judge also observed that all service providers are running their business in their brand names, viz., Murugan Idly Shop, Apollo Pharmacies Limited, ICICI Bank, etc., which are very familiar to the general public and no bank would operate on subsidized rate... and no food provider would sell the food without any profit."

The court concluded that since Infosys had not segregated the loads for these commercial activities with separate meters as required, TANGEDCO was correct in applying the higher commercial tariff to the entire premises.

Final Decision and Implications

Dismissing the writ appeal, the High Court found no infirmity in the single judge's order or the original demand made by TANGEDCO. The ruling clarifies that electricity distribution companies can raise demands for past dues even after two years, though their power to disconnect the supply for such old arrears is limited. It also serves as a caution for large industrial consumers to ensure proper segregation and metering of any commercial activities within their premises to avoid being billed entirely under a higher tariff slab.