U.P.
Power Corporation Ltd. & ANR. Vs. ASP Sealing Products Ltd. [2009] INSC
1550 (8 September 2009)
Judgment
CIVIL
APPELLATE JURISDICTION CIVIL APPEAL NO. 5952 OF 2002 Uttarakhand Power
Corporation Ltd. and another ... Appellants Versus ASP Sealing Products Ltd.
... Respondent
G.S.
Singhvi, J.
1.
Whether the respondent, who was a consumer of electricity supplied
by Uttar Pradesh State Electricity Board [for short, "the Board"] (predecessor
of appellant No.1 herein) is liable to pay minimum charges in terms of second
proviso to para 11 of agreement dated 21st September, 1998 read with Clause 17
(ii) of the Electricity Supply (Consumers) Regulations, 1984 [for short,
"the Regulations"] after disconnection of the 2 supply of electricity
is the question which arises for consideration in this appeal.
2.
The respondent had set up a factory at Rudrapur, District Udham
Singh Nagar, which now forms part of the State of Uttarakhand for manufacture
of PVC and EPDM rubber profiles for automobile vehicles. In 1990, the Board
sanctioned electric connection of 400 KVA load for the respondent's factory.
Thereafter, as per the requirement of the Regulations, the respondent entered
into an agreement with the Board.
On 12th
February, 1997, the respondent applied for an additional load of 200 KVA, which
was duly sanctioned. As a sequel to this, fresh agreement was executed between
the parties for the total load of 600 KVA. After one year and seven months, the
respondent approached the Board for reduction of load from 600 KVA to 250 KVA.
The competent authority of the Board accepted the respondent's request, who
then executed another agreement dated 21st September, 1998.
3.
In May 1999, the supply of electricity to the respondent's factory
was discontinued at the latter's request. After five months, the concerned
Executive Engineer sent communication on 5.10.1999 to the respondent requiring
it to pay Rs.6,13,592/- towards minimum charges for six months.
3 This
was followed by notice dated 4.5.2000 and recovery certificate dated 4.8.2000
issued under Sections 3 and 5 respectively of the U.P. Government Electricity
Undertakings (Recovery of Dues) Act, 1958 [for short, "the 1958
Act"].
4.
The respondent challenged the demand of minimum charges in Civil
Miscellaneous Writ Petition No.511 (M/B) of 2001 by contending that being an
old consumer, it was not liable to pay minimum charges after disconnection of
the supply of electricity. The Board contested the writ petition and pleaded
that in terms of agreement dated 21st September, 1998 and the Regulations
framed under Section 49 read with Section 79 of the Electricity (Supply)
Act, 1948 [for short, "the 1948 Act"], the
respondent is bound to pay minimum charges for the period of six months counted
from the date of disconnection.
5.
By the impugned order, a Division Bench of the High Court quashed
the demand of minimum charges by observing that Clause 17 of the Regulations is
not applicable to the respondent's case because the initial guarantee period of
two years had ended long ago. The Division Bench also held that the demand of
minimum charges cannot be raised after disconnection of the supply of
electricity.
6.
Shri Pradeep Misra, learned counsel for the appellants argued that
the High Court committed an error by entertaining the writ petition ignoring
that an equally efficacious alternative remedy was available to the respondent
by way of arbitration in terms of para 16 of agreement dated 21st September,
1998. He further argued that in view of second proviso to para 11 of agreement
dated 21st September, 1998 and Clause 17(ii) of the Regulations, the respondent
is bound to pay minimum charges for the period of six months despite the fact
that supply of electricity was disconnected sometime in May 1999. Learned
counsel then submitted that the High Court's view on the issue of applicability
of Clause 17 of the Regulations to the respondent's case is ex facie erroneous
and is liable to be upset because in terms of para 6 of agreement dated 21 st
September, 1998 read with para (C) thereof, the date of commencement of supply
was 21st September, 1998 and by May 1999, a period of less than one year had
been completed. Learned counsel argued that with the execution of fresh
agreement, the respondent lost its status as an old consumer and in terms of
Clause 17(ii) of the Regulations, it is liable to pay the minimum charges.
7.
Ms. Neeru Vaid, learned counsel for the respondent submitted that
her client should not be non-suited on the specious ground of availability of
alternative remedy because no argument on this issue was made before 5 the High
Court. She emphasized that minimum charges are levied in lieu of the actual
investment made by the licensee in laying infrastructure for supply of
electricity to the consumer and argued that the High Court did not commit any
error by quashing the demand of minimum charges because the Board did not
provide additional infrastructure for supply of electricity with reduced load
of 250 KVA.
8.
We have considered the respective submissions. In our opinion, the
respondent cannot be non-suited on the ground of availability of alternative
remedy of arbitration, because even though, an objection to this effect was
taken in the written statement filed on behalf of the Board, no such argument
appears to have been made before the High Court. In any case, at this belated
stage, we do not find any justification to non-suit the respondent on the
ground that it did not avail the alternative remedy of arbitration.
9.
We shall now deal with the question posed in the opening paragraph
of this order. For this purpose, it will be profitable to notice the relevant
provisions of agreement dated 21st September, 1998 and Clauses 10(b) and 17(i)
and (ii) of the Regulations.
6
Agreement dated 21st September, 1998
Date of
commencement of supply' means the date mentioned in Para (C) hereunder and if
no such date is mentioned then the date of actual connection of Consumer's
installation or the date of expiry of a period of one month from the date of
intimation to the consumer about the availability of power after completion of
the arrangements required to connect his installation whichever is earlier.
C. AND
WHEREAS this agreement shall be deemed to have been effective from the 21st day
of September One thousand nine hundred ninety eight which date shall be
construed as the date of commencement of supply under this agreement.
11. This
agreement shall subject herein before provided be and remain in force for two
years from the date of commencement of supply (hereinafter / called the initial
period of supply) and thereafter from year to year basis on the terms and
conditions herein contained.
Provided
that either party shall be at liberty to determine this agreement at any time
after the expiration of the initial period of supply on giving one month's
notice in writing of such intention, and on the expiration of such notice this
agreement shall absolutely cease and determine, but without prejudice to the
rights and remedies if any, of either party, which may have accrued or arisen
hereunder in the meantime.
Provided
further that if the consumer ceases taking supply of electrical energy due to
any reason, he shall be liable to pay to the supplier necessary charges as per
provision made in the regulation framed by the supplier under Sections 49 and
79 of Electricity
(Supply) Act, 1948.
17(a). In
case of shifting of the connections, change or addition of process, the
consumer hereby covenants that for all purposes he shall be deemed as old
registered consumer of the supplier and the supplier shall treat him
accordingly.
7 (b) In
case of reduction/addition of loads, the consumer hereby covenants that for all
the purposes he shall be deemed as old registered consumer--the supplier having
taken supply for different loads before execution of this agreement. The
supplier shall treat him accordingly.
Regulations
10(b) Application for reduction of load.- If a consumer, in whose name the
service is connected, wishes to have his contracted load reduced, he shall
submit an application thereof, giving full particular of reduction of load
required by him. The reduction in the contracted load of various categories of
power consumers on such an application shall be allowed by the Supplier on the
terms and conditions detailed below, after completion of necessary formalities
by the consumer, which are subject to revision by the Supplier from time to
time.
(i) xxx
(ii) xxx (iii) xxx (iv) The existing agreement will stand terminated with
effect from the date of allowing reduction in load and the consumer will be
required to sign a fresh agreement for the reduced load effective from the date
of allowing reduction of load.
17.
Agreement.- (i) The consumer shall enter into a formal declaration/agreement
for a minimum period of two years for taking electrical energy before release
of supply. After expiry of the above period of two years, the
declaration/agreement will continue on year to year basis on the same terms and
conditions unless terminated in accordance with the provisions of the
declaration/agreements.
All
consumers shall execute declaration/agreements governing supply of energy in
the form prescribed by the Board from time to time.
8 (ii) If
the supply to a consumer is disconnected on request or in default before
compulsory period of two years is over, he shall be liable for payment of
minimum charge for the remaining period by which it falls short of two years or
for the period of six months from the date of disconnection whichever is less,
together with the estimated expenditure on the erection and demolition of the
sub-station and the line (not paid by the consumer) actually dismantled due to
the disconnection, together with the estimated expenditure on the cartage of
the salvaged materials to stores and the cost of unsalvaged materials plus 15%
supervision charges on the labour and cartage only.
(emphasis
supplied)
10.
A conjoint reading of various paragraphs of agreement dated 21st
September, 1998 and the Regulations extracted hereinabove show that before
release of supply, every consumer is required to enter into a
declaration/agreement for taking electrical energy for minimum period of two
years. This period of two years is counted from the date of commencement of
supply and is treated as initial period of supply. After expiry of two years,
the declaration/agreement continues on year to year basis on the same terms and
conditions unless terminated by either party.
In terms
of para 17 of the agreement, the consumer is treated as old registered consumer
of the supplier if there is shifting of connection, change or addition of
process or addition or reduction of load. Clause 10(b) of the Regulations lays
down that if the consumer applies for reduction of the contracted load and the
same is sanctioned by the 9 competent authority, the existing agreement
automatically ceases to exist and the consumer is required to sign a fresh
agreement for the reduced load effective from the date of allowing such
reduction. Clause 17(ii) of the Regulations lays down that if before expiry of
the compulsory period of two years, supply is disconnected at the instance of
the consumer or on account of default in payment of charges for the energy
supplied by the licensee, then the consumer shall have to pay minimum charges
for the remaining period or for six months from the date of disconnection,
whichever is less. This clause also obligates the consumer to pay estimated
expenditure on the erection and demolition of the sub-station and the line
actually dismantled due to the disconnection, together with the estimated
expenditure on the cartage of the salvaged materials to stores and the cost of
unsalvaged materials plus 15% supervision charges on the labour and cartage.
11.
From what we have noted above, it is clear that if a consumer
applies for reduction of the contracted load, then the existing agreement
stands automatically terminated with effect from the date of allowing reduction
in load and the consumer is required to execute fresh agreement for the reduced
load. If the supply of electricity is disconnected at the consumer's request or
on account of default in payment of the electricity 10 charges before expiry of
two years period specified in the agreement and the Regulations, then the
consumer is bound to pay minimum charges for the remaining period or for six
months counted from the date of disconnection, whichever is less.
12.
There is no dispute between the parties that after sanction of
electric connection with a load of 400 KVA, the respondent entered into an
agreement with the Board as per the requirement of the Regulations. It is also
not in dispute that fresh agreements were entered into between the parties on
12th February, 1997 when the load was increased from 400 KVA to 600 KVA and
again on 21st September, 1998 when the load was reduced from 600 KVA to 250
KVA. The period of two years for which the Board was required to supply
electricity to the respondent with a load of 250 KVA commenced from 21st
September, 1998. The said period would have ended on 20th September, 2000 and
if the respondent had not applied for disconnection, the Board would have
supplied electricity to respondent's factory till that date in accordance with
the terms and conditions enumerated in agreement dated 21st September, 1998 and
the Regulations. However, the fact of the matter is that just after nine months
of execution of fresh agreement, a request was made on behalf of the respondent
for disconnection of the supply of electricity and the same was 11 accepted by
the competent authority of the Board. As a consequence, supply of electricity
to the respondent's factory was discontinued in May, 1999. Therefore, in terms
of second proviso to para 11 of the agreement and Clause 17(ii) of the
Regulations, the respondent became liable to pay minimum charges and we do not
find any illegality in the action of the Board to create the demand of minimum
charges.
13.
The reasons assigned by the High Court for quashing the demand
created by the Board are ex facie untenable. A reading of the order under
challenge shows that the High Court decided the writ petition by assuming that
the respondent had completed initial guarantee period of two years and Clause
17 of the Regulations is not applicable to its case. In the process, the High
Court not only omitted to consider the fact that the respondent had executed
fresh agreement dated 21st September, 1998 and in terms thereof the period of
two years commenced from the date of agreement, but also misconstrued Clause 17
of the Regulations, sub- clause (ii) whereof unequivocally lays down that if
the supply of electricity is disconnected at the instance of the consumer, the
latter is liable to pay minimum charges for the remaining period of the
agreement or for six months, whichever is less. The High Court also failed to
note that the supply of electricity was disconnected at the respondent's
request within 12 nine months of agreement dated 21st September, 1998.
Therefore, the impugned order is liable to be set aside.
14.
The argument of the respondent's counsel that the demand of
minimum charges could not have been created against her client because no
additional infrastructure was laid for supply of electricity at a reduced load
of 250 KVA sounds attractive but the same cannot be accepted because the
respondent did not challenge the vires of the Regulations or the terms of
agreement dated 21st September, 1998.
15.
Before concluding, we may also notice the judgment of this Court
in Bihar State Electricity Board, Patna and others v. M/s. Green Rubber
Industries and others (1990) 1 SCC 731. In that case, a two- Judge Bench
considered a question whether in terms of the agreement entered into between
the Board and the consumer, the latter is liable to pay minimum guarantee
charges irrespective of consumption of electricity and held:
"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 13 terms are fair and reasonable." Schroeder (A.) Music Publishing
Co. Ltd. v. Macaulay. 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 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
nudum pactum and the maxim nudum pactum exquo non or it ur action 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."
16.
In the result, the appeal is allowed and the impugned order is set
aside. As a corollary, the demand of minimum charges created by the predecessor
of appellant No.1 is upheld and the writ petition filed by the 14 respondent is
dismissed. The appellant shall now be entitled to encash the bank guarantee
furnished by the respondent in terms of interim orders dated 13th September, 2002
and 5th December, 2003 passed by this Court.
............................J. [ G.S. Singhvi ]
..............................J. [ Dr. B.S. Chauhan ]
New Delhi
September 08, 2008.
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