Bihar State Electricity Board, Patna & Ors Vs. Green Rubber
Industries & Ors [1989] INSC 360 (24 November 1989)
Singh,
K.N. (J) Singh, K.N. (J) Fathima Beevi, M. (J)
CITATION:
1990 AIR 699 1989 SCR Supl. (2) 275 1990 SCC (1) 731 JT 1989 (4) 421 1989 SCALE
(2)1196
CITATOR
INFO : F 1990 SC 706 (4,5)
ACT:
Electricity
Supply Act 1948--Sections 5:7, 23 and 49'Consumer-Liability to pay minimum
guaranteed charges--Agreement-Validity of.
HEAD NOTE:
The
Respondent firm made an application to the appellant Electricity Board for the
supply of 60 KVA electricity and the Board entered into an agreement with the
Respondent-firm in that behalf and gave electricity connection on 13.4.1981.
Thereafter the Respondent-firm applied for reduction of electricity from 60 KVA
to 45 KVA and a fresh agreement was executed on May 2, 1981 and fresh connection of 45 KVA was given on 29.5.1981. It
is respondent's case that it had requested the Electricity Board on 19.6.1981
to cut off the Electricity. The firm received Bills for minimum guaranteed
charges for four months i.e. from June to September 1981. The firm refuted its
liability to pay the bill on the ground that it consumed no electricity during
the aforesaid period of 4 months. Consequent upon the firm's failure to pay the
Bill, the Board disconnected the electricity connection on 28.9.1981. The firm
ultimately received a bill for Rs.22,951.50p for the period commencing from
June to August 1981. On the firm's failure to pay the Bill, the Board sent a
requisition to the Certificate Officer who sent a notice to the firm on
6.7.1981. The Certificate Officer rejected the plea of the firm that it was not
liable to pay the Bill and proceeded to attach the property of the firm. Being
dissatisfied with the action, the respondent firm filed a Writ Petition in the
High Court for quashing the bills as also the certificate proceedings.
The
High Court took the view that the Board itself having disconnected the
connection, it was not entitled to any charges for the period after September
1981 and it was not open to the Board to contend that under clause 9 of the
agreement it was not open to either party to terminate the agreement of minimum
guaranteed charges before the expiry of two years from the date of the
agreement. The High Court accordingly quashed, the bills as well as the
certificate proceedings but allowed the charges for July, August and September
1981 to be adjusted against the security money.
276
The Electricity Board has therefore filed this appeal after obtaining Special
Leave.
Allowing
the appeal, this Court,
HELD:
A supply. agreement to a consumer makes his relation with the Board mainly
contractual, where the basis of supply is held to be statutory rather than
contractual. In cases where such agreements are made, the terms are supposed to
have been negotiated between the consumer and the Board, and unless
specifically assigned, the agreement normally would have affected the consumer
with whom it is made.
[286D-E]
The agreement was reasonable and valid and it was not determined with the
disconnection of supply to the respondent-firm. The liability to pay the
minimum guaranteed charges, therefore, continued till the determination of the
contract. The Board was therefore entitled to submit the bills and make the
demand on that account and recover the same according to law. [285F-G]
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 220 of 1987.
From
the Judgment and Order dated 22.5.1986 of the Patna High Court in Civil Writ
Jurisdiction Case No. 19 15 of 1986.
Soli
J. Sorabjee and Ranjit Kumar for the Appellants.
B .D.
Sharma and S.K. Jain for the Respondents.
The
Judgment of the Court was delivered by K.N. SAIKIA, J. This appeal by special
leave is from the Judgment of the High Court of Judicature at Patna dated May
22, 1986 in Civil Writ Jurisdiction Case No. 19 15 of 1986 quashig the bills
issued by the appellants demanding minimum guaranteed charges from the
respondents.
The
appellants Bihar State Electricity Board, Patna, hereinafter referred to .as
'the Board', entered into an agreement with the respondent--M/s. Green Rubber
Industries, a partnership firm, hereinafter referred to as 'the firm', on the
latter's application dated 26th July, 1978, for supplying the electricity of 60
KVA and on 13.4. 1981 gave electricity connection. The firm later applied that
it 277 may be given 45 KVA instead of 60 KVA and it deposited the requisite sum
of Rs.2700 and a fresh agreement was executed on May 2, 1981. On May
29, 1981 the firm was
given fresh connection of 45KVA. According to the firm it requested the Board
on 19.6. 1981 to cut off the connection. The firm received the bills for
minimum guaranteed charges for the months of June, July, August and September,
1981, though according to it no electricity was consumed by it during that period.
According to the Board on failure to pay the bills, the supply was disconnected
on 28th September, 1981.
The
firm ultimately received a demand notice in October, 1981 for the minimum
guaranteed charges from June, 1981 to August, 1981 amounting to Rs.22,95 1.50p.
The firm having not paid the amount, the Board sent a requisition to the
Certificate Officer who sent a notice to the firm on July 6, 1984. Rejecting the contention of the
firm that it was not liable to pay, the Certificate Officer proceeded to pass
an order for attachment of the firm's property wherefore the firm filed a writ
petition in the High Court of Judicature at Patna under Article 226 and 227 of
the Constitution of India for quashing the bills as well as the certificate
proceedings.
Before
the High Court the Board contended that the firm was liable to pay the minimum
guaranteed charges in terms of the agreement, the disconnection itself having
been in terms thereof.
The
High Court took the view that the Board itself having effected the
disconnection it was not entitled to any charges for the period after
September, 1981 and it was not open to the Board to contend that under clause 9
of the agreement it was not open to either party to terminate the agreement of
minimum guaranteed charges before the expiry of two years from the date of the
agreement. In that view of the matter, the High Court quashed the bills as well
as the certificate proceedings, but allowed the charges for the months of July,
August and September, 1981 to be adjusted against the security money.
Mr. Soli
J. Sorabjee, the learned counsel for the appellants, submits, inter alia, that
the firm under the agreement was liable to pay the minimum guaranteed charges
irrespective of whether energy was consumed or not during the period of the
agreement and that disconnection of the supply on failure of the firm to pay
the energy bills would not affect the obligation; and that the High Court fell
into error in holding that the Board itself having disconnected the energy
supply line it could not claim minimum guaranteed charges thereafter.
278
None appears for the respondents despite notice in the regular as well as
substituted manner of service.
The
question to be decided is whether despite the fact that the supply line was disconnected
on September 28, 1981, the firm was still liable to pay
the minimum guaranteed charges under the agreement. The answer depends on the
agreement itself and the relevant provisions of law.
Clause
4 of the agreement says:
"The
Consumer shall pay to the Board for the energy so supplied and registered or
taken to have been supplied as aforesaid at the appropriate rates applicable to
the Consumer according to the tariffs framed by the Board and enforced from
time to time, the presently enforced tariffs being indicated in the Schedule to
this agreement for easy reference. Such reference is subject to provisions of
clause 15 appearing hereinafter.
Provided
that notwithstanding anything said above but subject to the provisions of
clause 13 hereinafter, the Consumer shall have to pay minimum charges as
specified in the above said tariffs framed by the Board and enforced from time
to time irrespective of whether energy to that extent has been consumed or not.
(Such minimum charges are referred to as "the minimum guaranteed
charges" in other places in this agreement.) That part of minimum
guaranteed charges as is not billed monthly, the assessment for the same will
be generally made at the end of the year commencing from the 1st April, and
ending with the 31st March of the following year which is the financial year of
the Board. In case any agreement is entered into in between this period the
above said part of the minimum guaranteed charges will be proportionate to the
period for which the Consumer is connected. Any bill on account of the minimum
guaranteed consumption for the year or part thereof will be submitted by the
end of June in each year." From a perusal of the above clause it would be
clear that the minimum guaranteed charges would be payable by the consumer
irrespective of whether energy to that extent has been consumed or not. Indeed,
there would be no need for such a provision if the charges were to 279 depend
only on the energy actually consumed.
Clause
5 of the agreement is to the following effect:
"(a)
Readings of meter shall be taken by the
Board once in each month or such other intervals or times as the Board shall
deem expedient and the Board's meter reader shall have access to the consumer's
premises at all reasonable time for the purpose of taking such readings. The
Board shall within reasonable time deliver to the Consumer the bill for energy
consumed during the month in accordance with the readings of the meters and
subject to the minimum guaranteed charges. The consumer shall pay the amount
under the bill so delivered within the due date specified therein as per terms
of the tariffs framed by the Board and enforced from time to time.
(b) If
the consumer fails to pay the amount of any bill due under this agreement
within the due date specified in the bill referred to in clause 5(a) above, he
shall pay a surcharge at the rate given in the tariffs framed by the Board and
enforced from time to time. If the amount of such a bill remains unpaid after
the due date specified in the bill, the Board may discontinue the supply after
giving the Consumer not less than 7 clear days' notice. The service will be
reconnected only on receipt of full payment for all obligations outstanding up
to the date of reconnection and charges for the work of disconnection and
reconnection of service. ' ' On a perusal of this clause there arises no doubt
that if the amount of a bill submitted according to law remains unpaid after
the due date specified in the bill, the Board may discontinue the supply after
giving the consumer not less than 7 clear days' notice. There is no dispute
about notice in this case.
Clauses
8 and 9 of the agreement deal with its duration and termination. Clause 8 of
the agreement says:
"The
agreement shall be ordinarily enforced for a period of not less than two years
in the first instance (except in exceptional cases in which written consent of
the Board will 280 be taken) from the date of commencement of supply, i.e.
.......... and thereafter shall continue from year to year until the agreement
is determined as hereinafter provided.
Note:
In case where the date of commencement of supply is a date subsequent to that
of the execution of this agreement, the Board is given power to fill in the
date in the blank space. provided for the same in this clause with prior
intimation to the Consumer. The Consumer can produce his copy of the agreement
to have such date filled in by the Board." Clause 9 Provides:
"(a)
The consumers shall not be at liberty to determine this agreement before the
expiration of two years from the date of commencement of supply of energy. The
consumer may determine this agreement with effect from any date after the said
period of giving to the Board not less than one calendar month's previous
notice in writing in that behalf and upon the expiration of the period of such
notice this agreement shall cease and determine without prejudice to any right
which may then have accrued to the Board hereunder, provided always that the
consumer may at any time with the previous consent of the Board transfer or
assign this agreement to any other person and upon subscription of such
transfer this agreement shall be binding on the transferee and the Board and
take effect in all respects as if the transferee had originally been a party
hereto in place of the consumer who shall henceforth be discharged from all
liability under or in respect thereof.
(b) In
case the consumer's supply is disconnected by the Board in exercise of its
powers under this agreement and/ or law and consumer does not apply for
reconnection in accordance with law within the remainder period of the above
given compulsorily availing of supply or that of notice whichever be longer, he
will be deemed to have given a notice on the date of disconnection in terms of
the aforesaid clause 9(a) for the determination of the agreement and on expiry
of the above said remainder period of compulsorily availing of supply or notice
whichever is longer, this agreement shall cease and determine in the same way
as above." 281 Thus it is seen that the consumer cannot determine the
agreement before expiry of two years and there is nothing to show in this case
that he did so after expiry thereof with previous notice. In fact the supply
was disconnected by the Board for default. What would be its effect on the
agreement? It is seen that in case of disconnection of the supply by the Board
in exercise of its powers under the agreement it would be open for the consumer
to apply for reconnection in accordance with the law within the remainder
period of the above given compulsorily availing of supply or that of notice
whichever is longer, he will be deemed to have given a notice on the date of
disconnection in terms of aforesaid clause 9(a) for determination of the
agreement and on expiry of the remainder period of compulsorily availing of
supply or notice, whichever is longer, the agreement shall cease and determine.
It is therefore clear that in the instant case the disconnection on the default
of the cosumer having' been effected on 28.9.1981 and the consumer having not
applied for reconnection, it would be deemed to have given a notice on the date
of disconnection in terms of clause 9(a) for the determination of the agreement
and the agreement must be taken to have ceased and determined either at the end
of the notice or at the end of the period of compulsorily availing of supply
i.e. two years of the agreement whichever was longer. The (fresh) agreement
having been executed on May 4, 1981 it would expire on May 1, 1983. The
disconnection having been effected on September 28, 1981 the period of deemed notice of
seven days expired before the period of compulsorily availing of supply under
the agreement expired and hence the agreement must be deemed to have determined
only on May 1, 1983. During this period the consumer's
liability to pay the minimum guaranteed charges must be held to have continued.
Mr. Soli
J. Sorabjee submits, and we think rightly, that the High Court overlooked this
important stipulation in the agreement which was binding on both the parties.
However, as the respondents are not before us, it is necessary to consider the
reasonability of the stipulation as to minimum guaranteed charges as argued by
the learned counsel for the appellant Board. Was there any power of the Board
to enter into the agreement? If so, to what extent? The Indian Electricity Act,
1910, hereinafter called 'the Act'. provides the law relating to the supply and
use of electrical energy. As defined in s. 2(11) of the Act "State
Electricity Board" in relation to any State means the State Electricity
Board, if any consituted for the 282 State under section 5 of the Electricity
(Supply) Act, 1948 (54 of 1948) and includes any Board which functions in that
State under sections 6 and 7 of the said Act. The appellant--the Bihar State
Electricity Board is a Board. As defined in section 2(h) "licensee"
means any person licensed under Part II to supply energy. The appellant Board
is such a licensee under this provision. As defined in section 2(c)
"consumer" means any person who is supplied with energy by a licensee
or the Government or by any other person engaged in the business of supplying
energy to the public under this Act or any other law for the time being in
force, and includes any person whose premises are for the time being connected
for the purpose of receiving energy with the works of a licensee, the
Government or such other person, as the case may be. There is no doubt that the
respondent was consumer.
The
Electricity (Supply) Act, 1948, hereinafter called the 'Supply Act', is an Act
to provide for the realisation of the production and supply of electricity, and
generally for taking measures conducive to electrical development and for all
matters incidental thereto.
Under
sub-section (1) of section 23 of the Act, a licensee shall not, in making any
agreement for the supply of energy, show any undue preference to any person.
Thus, this section envisages making of an agreement by the licensee with the
consumer for the supply of energy. The instant agreement has, therefore, to be
held as one envisaged by this provision. Was the stipulation to pay minimum
guaranteed charges, irrespective of whether energy was consumed or not,
reasonable and valid? What is the consideration when less or no energy is
consumed? Section 49 of the Supply Act makes provision for the sale of
electricity by the Board to persons other than licensees. Under subsection (1),
subject to the provisions of the Supply Act and the Regulations, if any, made
in this behalf, the Board may supply electricity to any person not being a
licensee upon such terms and conditions as the Board thinks fit and may for the
purpose of such supply frame uniform tariff. Under sub-section (2) thereof
nothing m sub-sections (1) and (2) shall derogate from the power of the Board
if it considers it necessary or expedient to fix different tariffs for the
supply of electricity to any person not being a licensee, having regard to the
geographical position of any area, the nature of the supply and purpose for
which supply is required and any other relevant factors. Sub-section (2)
enumerates the factors to be considerd by the Board in fixing the uniform
tariffs.
283 It
is seen that the rule of charging minimum guaranteed charges has been in vogue
since long. In the London Electric Supply Corporation (Limited) v. Priddis, 18
TLR 64, the agreement between the appellant company and the consumer to supply
electricity in clause 4 provided that the "consumer shall have the option
at or after the expiration of five years from the date of installation" of
purchasing the installation at a price. CI. 7 said: "The consumer shall
until purchase as aforesaid pay quarterly to the supply company for the use of
the installation 3/4d. per Board of Trade Unit for every unit of electrical
energy supplied to the said premises and the minimum payment in any year shall
be Is. for each eight-candle power lamp or its equivalent installed."
During the period from Mid-summer to Michaelmas, 1900, the defendant did not
use any electricity supplied by the plaintiff, and the question was whether
under the agreement the defendant was bound to pay the minimum payment provided
for by cl. 7, even though in fact he had used none of the plaintiff's
electricity during the quarter. The Lord Chief Justice in giving judgment said
that "it was sufficiently clear that the installation was put in on the
terms that the customer should have the right to purchase the installation
after five years, and during that five years the customer should be liable to
pay minimum rent whether the current was de facto used or not. The minimum rent
had no reference to the amount of current used, and it was, therefore, clear
that the mere fact that the defendant had not taken any current or a small
current did not affect the case." Channel. J. concurring said that the
"meaning of the clause was that the minimum rent did not merely cover the
actual use but the right to use the current. The customer had to pay for the
right to use the current, although he did not in fact use it." In Saila Bala
v. Darjeeling Municipality, AIR 1936 Calcutta 265, it was held by a learned
single Judge that the minimum charge was not really a charge which had for its
basis the consumption of electric energy. It was really based on the principle
that every consumer's installation involved the licensee in certain amount of
capital expenditure in plant and mains on which he was to have a reasonable
return. He could get a return when the energy was actually consumed, in the
shape of payments of energy consumed. When no such energy was consumed by the
consumer, or a very small amount was consumed in a longer period, the licensee
was allowed to charge minimum charges by his licence, but those minimum charges
were really interest on his capital outlay incurred for the particular
consumer.
Natesan,
J. in Natesa Chettiar v. The Madras State Electricity 284 Board, [1969] 1
Madras L.J. 69, answering the question whether the provision for the minimum
guarantee was just a stipulation by way of penalty or pre-determined damages
for breach on the part of the consumer or something else, held the view that
the minimum fixed was only consideration for keeping the energy available to
the consumer at his end; it was not a penalty for not consuming a stated
quantity of energy but was a concession shown up to the amount fixed, energy at
a specified rates could be consumed free, consumption beyond only had to be
paid for. The statutory basis for the terms in the agreement providing for
minimum annual charge was found in section 22 of the Act and section 48 of the
Supply Act. Section 22 deals with obligation on licensee to supply energy. The
proviso to the section says:
"No
person shall be entitled to demand, or to continue to receive, from a licensee
a supply of energy for any premises having a separate supply unless he has
agreed with the licensee to pay to him such minimum annual sum as will give him
a reasonable return on the capital expenditure, and will cover other standing
charges incurred by him in order to meet the possible maximum demand for those
premises, the sum payable to be determined in case of difference or dispute by
arbitration." Section 48 of the Supply Act empowers the licensee to carry
out arrangement under that Act.
In
Watkins Mayor & Co. v. Jullundhur Electric Supply Co., AIR 1955 Punj. 133
(136), it was observed that the whole scheme of the Act seems to show that the
provision made in any contract for a minimum charge was really to provide for a
fair return on the outlay of the licensee, and it was for this reason that the
law allowed the contract of this kind to be entered into. Clause XI A of the
schedule to the Act, as it then stood, provided:
"A
licensee may charge a consumer a minimum charge for energy of such amount and
determine in such manner as may be specified by his licence, and such minimum
charge shall be payable notwithstanding that no energy has been used by the
consumer during the period for which such minimum charge is made." The
Court accordingly held that there was nothing illegal in the insertion of the
term for payment of a minimum charge in the agreement for 285 supply of energy
and held that it had not been made out that it was an unreasonable levy.
A
Division Bench of Allahabad High Court, in Hari Shankar &
Ors. v. U.P. State Electricity Board & Anr., AIR 1974 Allahabad 70, held
that when the electrical supply was being made on the footing that the consumer
would pay the minimum guaranteed charges that charge was one of the terms and
conditions for supply and fixation of that would be included in the fixation
rates ;or the supply of electricity. Similarly in M/s. Bhagwan Industries Pvt.
Ltd. Lucknow v. U.P. State Electricity Board, Lucknow,
AIR 1979 Allahabad 249, a Division Bench held that an agreement for supply of
electricity with the Board empowered it to revise the rates and that imposition
of minimum consumption guarantee charge imposed by new tariff schedule under
section 49 of the Supply Act was valid. A Division Bench of the Andhra Pradesh
High Court in Md. Abdul,Gaffar v. Andhra Pradesh Electricity Board, [1975] 1
APLJ 119, also held that fixation of monthly minimum charges based on connected
load and revisional rates for electrical consumption by non-domestic consumers
in accordance with the factors in section 49(2) was neither ultra vires nor
arbitrary.
The
High Court in the case at hand relied on Rajeshwar Singh v. State of Bihar, AIR 1983 Patna 194, wherein it was held that when
the disconnection of electric energy was effected by the Board then it could
not ask for the minimum guaranteed charges. That decision must be confined to
the facts of that case only.
It is
true that the agreement is in a standard form of contract. The standard clauses
of this contract have been settled over the years and have been widely adopted
because experience shows that they facilitate the supply of electric energy.
Lord Diplock has observed: "If fairness or reasonableness were relevant to
their enforceability the fact that they are widely used by parties whose
bargaining power is fairly matched would raise a strong presumption that their
terms are fair and reasonable." Schroder Music Co. Ltd. v. Macaulay,
[1974] 3 All ER 6 16 (624). In such contracts a standard form enables the
supplier to say: "If you want these goods or services at all, these are
the only terms on which they are available. Take it or leave it." It is a
type of contract on which the conditions are fixed by one of the parties in
advance and are open to acceptance by anyone. The contract, which frequently
contains many conditions is presented for acceptance and is not open to
discussion. It is settled law that a person who signs a 286 document which
contains contractual terms is normally bound by them even though he has not
read them, even though he is ignorant of the precise legal effect. In view of
clause 4 having formed one of the stipulations in the contract along with
others it cannot be said to be nudurn pactum and the maxim nudum pactum ex quo
non oritur actio does not apply.
Considered
by the test of reasonableness it cannot be said to be unreasonable inasmuch as
the supply of electricity to a consumer involves incurring of overhead
installation expenses by the Board which do not vary with the quantity of
electricity consumed and the installation has to be continued irrespective of
whether the energy is consumed or not until the agreement comes to an end.
Every contract is to be considered with reference to its object and the whole
of its terms and accordingly the whole context must be considered in endeavouring
to collect the intention of the parties, even though the immediate object of
enquiry is the meaning of an isolated clause. This agreement with the
stipulation of minimum guaranteed charges cannot be held to be ultra vires on
the ground that it is incompatible with the statutory duty. Differences between
this contractual element and the statutory duty have to be observed. A supply
agreement to a consumer makes his relation with the Board mainly contractual,
where the basis of supply is held to be statutory rather than contractual. In
cases where such agreements are made the terms are supposed to have been
negotiated between the consumer and the Board, and unless specifically
assigned, the agreement normally would have affected the consumer with whom it
is made, as was held in Northern Ontario Power Co. Ltd. v. La Roche Mines Ltd.,
[1938] 3 All ER 755.
For
the foregoing reasons we have no hesitation in holding that the agreement was
reasonable and valid and it was not determined with the disconnection of supply
to the respondent firm by the Board on 28th September, 1981 but only
accordingly to the stipulations in clause 9(b) of the agreement as discussed
above. The liability to pay the minimum guaranteed charges, therefore,
continued till the determination of the contract. The Board was, therefore, entitled
to submit the bills and make the demand on that account, and recover the same
according to law.
In the
result, the impugned judgment is set aside and the appeal is allowed. No order
as to costs.
Y. Lal
Appeal allowed.
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