M/S Nava Bharat Ferro
Alloys Ltd. Vs Transmission Corporation of A.P. Ltd. and ANR.
(With CA
Nos.1608-1609 of 2004 and CA No.4741 of 2006)
JUDGMENT
T.S. THAKUR, J.
1.
These
appeals by special leave arise out of an order dated 6th June, 2002 passed by
the High Court of Andhra Pradesh whereby Writ Petitions No.9081 of 1999and 13458
of 1993 filed by the appellant have been dismissed and the demand for additional
charges/surcharge payable on the delayed payment of outstanding electricity
dues raised under Clause 32.
2.
1and
34 of the Terms and Conditions of supply (TCS) upheld. Facts necessary for the disposal
of these appeals may be summarised as under:2. The appellant is a public
limited company engaged in the manufacture of Ferro Silicon. The industry setup
by the appellant is energy intensive in as much as it consumes approximately
10,000 units of electricity for every ton of Ferro Silicon produced. The appellant's
case is that the respondent-Electricity Board had initially agreed to supply
power to the appellant @ 6paise per unit but revised the said rate to 11 paise
per unit in the year 1975. The revised rate was in the beginning applicable only
to four consumers who were similarly situate but the number of such power
intensive consumers gradually rose to 84. On 13th December, 1983the Board revised
the general tariff but a separate order applicable to power intensive consumers
like the appellant was issued on 29th January, 1984. Aggrieved by the said
order which permitted charging of a higher rate of tariff, the appellant and few
others filed writ petitions before the High Court of Andhra Pradesh, which were
dismissed by a Division Bench of that Court on 3rdApril, 1985. During the
pendency of the writ petition, however, the High Court had granted an interim
order of against the collection of the disputed amount in the following terms: "There
shall be stay of operation of the order in so far as writ petition is concerned,
subject to the condition if the writ petitioner pays at the rate of 47.89 paise
per unit with effect from April 1984 onwards, furnishing Bank guarantee for the
balance to the satisfaction of the Superintending Engineer concerned in four weeks
from today. In default of any of the conditions, the stay stands vacated. The bank
guarantee furnished shall be renewed for every 3 months. If the petitioner has already
paid the demand for the month of April, on the basis of the impugned order, this
order passed by me shall be effective from the month of May 1984 otherwise it
will be operative from April, 1984."
3.
The
dismissal of the writ petitions filed by the appellants was assailed by them
before this Court by way of special leave petitions nos.9206-9207/1985 (C.A.Nos.2569-2570/1985).
This Court by an order dated 22ndJuly, 1985 while granting leave to appeal directed
continuation of interim arrangement made by the High Court in the following
terms: "As regards stay, after hearing learned counsel for the parties we
felt that the order passed by the High Court dated 24.4.1984 which operated
during the pendency of the writ petitions will continue to operate during the
pendency of the appeals with the modification that the rate of 47.89 paise per
unit mentioned in the order is rounded to 48 paise per unit. We would, however,
like to make it clear that because of the High Court's order dated 13.4.1985,
for a couple of months, there was no such orders in regard to future payments and
the Electricity Board has received the dues at the enhanced rates in lump sum
from some of the consumers. There will no question of refunding the amounts
back to these consumers. The bank guarantee already furnished by the petitioners/appellants
will be kept alive from time to time and will cover all the differences
including the future difference."
4.
It
is not in dispute that the above order was modified subsequently in respect of
the bills issued from16th March, 1990 onwards. The appeals, eventually failed and
were dismissed by this Court by an order dated 2nd May, 1991. In I.As. filed by
the appellant post-dismissal of the appeals, this Court passed an order on9th
May, 1991 to the effect that the appellants could after paying outstanding 50%
of the amount due under the subsisting bank guarantee make representation to the
Board for payment of the balance amount in installments keeping in view the
circumstances and the hardships in each individual case. Consequently, the
appellants made are presentation to the Board praying for grant of installments
for payment of the balance amount. While the said request was under
consideration, the appellant received a communication dated 14th June, 1991
from the Superintending Engineer pointing out that an amount
ofRs.5,57,66,539.18 was recoverable from the appellant for the period April
1984 to August 1987. For the recover of the outstanding amount the Board invoked
the bank guarantee furnished to it for a sum of Rs.2,83,53,120.93thereby
leaving a balance of Rs.2,74,13,218.25 due and payable which amount the appellant
was requested to arrange. The communication also pointed out that in addition
to the above amount arrears of Rs.4,45,63,903.21for the period from August 1987
to July 1989 were also payable besides additional charges for delayed payments of
the said amount which the latter proposed to communicate separately.
5.
The
request made by the appellant for payment of the balance amount of tariff
arrears was accepted by the Board in terms of communication dated 9th July,
1999. It was in the above background that the appellant filed writ petitions No.9081
of 1999 and 13458 of 1993 raising common questions of law relevant to two
different periods in the High Court of Andhra Pradesh, inter alia assailing the
demand of additional charges and interest on the delayed payment of the amounts
determined pursuant to the judgment of this Court. By the order impugned in these
appeals the said petitions have been dismissed by the High Court. The High
Court held that the Terms and Conditions of Supply (TCS) were statutory in
character and were not in conflict with any provision of the Electricity Supply
Act or the Constitution of India. It also held that Clause 32.2.1 and Clause 34
of the said Terms and Conditions of Supply upon which the Board placed reliance
for its demand did not violate any constitutional or statutory provision. The stipulated
terms and conditions were, according to the High Court, intended to achieve the
objective mentioned in Clause (b)of sub-section 2 of Section 49 of the Act,
namely, to discourage delayed payment of electricity dues and to compensate the
Board in cases of delay in the making of the payment. Both these conditions,
according to the High Court were intended to sustain the economic health of the
Board.
6.
The
High Court further held that the decisions of this Court in Kerala State Electricity
Board v. MRF Limited (1996) 1 SCC 597 and Kanoria Chemicals and Industries Ltd.
v. U.P. State Electricity Board (1997) SCC 772 were of no assistance to the
appellants. The High Court noted the factual background in which the said decisions
were rendered and found that in cases before it there was no justification for
nullifying the effect of the Clauses 32.2.1 and 34 of the T.C.S.
7.
Appearing
for the appellants Mr. Sudheer Chandra Agarwal, learned senior counsel,
strenuously agued that the High Court had fallen in error in declining relief
to the appellant which according to the learned counsel was due to it on the
analogy of the orders of this Court in Kerala State Electricity Board's case
(supra). It was submitted that in the light of the decision of this Court in Kerala
State Electricity Board's case (supra) the appellant-consumers could not be
said to be in default of payment of the outstanding amount during the period
the interim order passed by the High Court in its favour had remained
operative. It was further contended that this Court had in the above case and
in Kanoria Chemicals's case (supra) dealt with a similar fact situation and granted
relief, by awarding interest @ 18% to the Board to compensate it for the
monetary loss that it may have suffered on account of delay in the making of such
payment and to prevent any prejudice and consequent injustice to the Board on
account of the direction issued by the Court. It was argued that the
appellant-company was ready and willing to pay interest @ 18% p.a. on the outstanding
amount for the relevant period but the demand raised by the Board being far in
excess, deserves to be suitably reduced.
8.
On
behalf of the respondent it was, on the other hand, argued by Mr. C. Kodanda Ram,
learned senior counsel, that the High Court was, in the facts and circumstances
of the case, right in distinguishing the decisions relied upon by the appellant
and declining the relief prayed for before it. It was submitted that the facts
situation in which the relief was granted in those cases was different from
that of the present case. It was further argued that the additional charges and
interest were payable in terms of the TCS which was statutory in character and
to which the appellant had agreed to abide by.
9.
The
amount which the appellant had not paid would have been utilized by it in its
commercial ventures to make profits. Non-payment of the dues recoverable from
the appellant would, therefore, expose the Board to serious financial prejudice
and loss. The case of the appellant-company rests entirely upon the decisions
of this Court in the case of Kerala State Electricity Board (supra) and that
delivered in the case of Kanoria Chemicals Ltd. (supra). The argument advanced
on behalf of the appellant in essence is that the fact situation in the said
two cases being similar to the one at hand grant of interest @ 18% p.a. on the outstanding
amount would meet the ends of justice in the instant case also.
10.
There
is, in our opinion, a basic fallacy in the analogy which the appellant draws
between its case and the cases referred to above. What is overlooked by the appellant
is the fact that the decision of this Court in the Kerala State Electricity
Board's case (supra) has enforced the terms under which the supply of energy
was made to the consumers in that case. Award of interest @18% p.a. is not an innovation
of this Court. The consequence of non-payment of the amount within the time stipulated
was on the contrary prescribed in the tariff/conditions subject to which energy
was supplied to MRF the consumer in that case. It would not, therefore, be correct
to apply the tariff conditions relevant to that case to the case at hand where such
conditions are materially different. It is on the contrary necessary to cull
out the principle of law settled in the said case for application to the case
at hand. This may require recapitulation of a few facts in the backdrop whereof
the decision in the Kerala State Electricity Board's case(supra) was delivered.
11.
MRF
was engaged in manufacturing automobile tubes and tread rubber in the State of
Kerala. The company entered into an agreement with the Kerala State Electricity
Board for supply of power to the factory setup by it. The agreement contained a
provision for payment of power and energy supplied to the company by the Board within
15 days from the date of the receipt of the invoice by the consumer-company. The
agreement further provided that in the event of a default in the payment of the
amount within the stipulated period, interest @ 18%p.a. or at such other rate
as may be fixed by the Board from time to time would be chargeable.
12.
The
Board revised the tariff for the electricity supplied by it in 1980, 1982 and
1984. These revisions were challenged by MRF in a writ petition filed before the
High Court of Kerala, which was together with other similar petitions disposed
of by a common order by which the revisions made by the Board were struck down.
Consequently MRF Limited and other consumers became entitled to the refund of
the excess amount paid by them pursuant to the revised tariffs. The High Court of
Kerala directed the adjustment of such amounts towards future bills to be
issued by the Board.
13.
Aggrieved
by the order passed by the Kerala High Court the Board filed special leave
petitions before this Court which were entertained by this Court and an interim
order passed, inter alia, directing that pending disposal of the appeals before
this Court, the refund of charges already collected shall remain stayed. It was
further directed that the future charges would be collected to the extent of
50% only and the balance adjusted towards the past charges.
14.
The
appeals filed by the Board were finally allowed by this Court by its judgment
dated 26th August, 1986upholding the validity of the revision of the tariffs by
the Board. The inevitable conclusion flowing from that decision was that the consumer-company
and other consumers became liable to pay the amounts due on the basis of the
revision of tariffs including those that had since been adjusted by them pursuant
to the interim directions of this Court. Consequently, the Board raised a demand
for the payment of the amount inclusive of interest @ 18% p.a. While the
company did not challenge the liability to pay the excess amount pursuant to
there vision that had been upheld by this Court it refused to pay the interest
and challenged the demand to that extent before the High Court of Kerala in a
writ petition filed before it. The Single Judge as also the Division Bench of the
High Court in appeal held that the consumer-company could not be said to be in
default for non-payment of liability which did not factually exist at the relevant
time and struck down the demand for payment ofinterest.
15.
The
Electricity Board appealed to this Court against the said judgment of the High
Court. Allowing the appeals preferred by the Board this Court took the view
that while the consumers had no obligation to take notice of the revised
tariffs and to make any payment on the basis thereof after the judgment of the
High Court of Kerala till the said decision was reversed by this Court, yet no sooner
the decision of this Court upheld the upward revision of the tariffs, the
Board's entitlement to draw bills on the basis of the revisions and
consequently enforce payment of such bills by the consumers revived with full
force. This Court repelled the contention that the liability to pay the revised
tariffs accrued only after the pronouncement of the judgment of this Court upholding
the upward revision and not from any date prior to that. This Court held that
once the upward revision was found to be valid and enforceable such revision
would be effective from the date the revision was made, no matter such revision
had remained unenforceable for some period on account of the decision of the
High Court. The following passage from the decision of this Court is in this
regard apposite:
16.
"But
after the decision of this Court upholding upward revisions of tariffs, the Board's
entitlement to draw bills on the basis of upward revisions and consequential enforceability
of payment of such bills by the consumers revived with full force. Hence, it
would not be correct to contend that although the Company or for that matter other
consumers were required to pay on the basis of revisions of tariffs from the
dates when such revisions became effective, liability for such payment would
accrue only from the date of pronouncement of the judgment by this Court
upholding upward revisions and not from any date prior to that. If the upward
revisions are held as valid, enforceability of such upward revisions being consequential
to such revisions, though it had remained unenforceable for some period on
account of 1 the decision of the High Court, cannot but revive from the dates
of upward revisions."
17.
This
Court then applied the principle of restitution as enunciated by the Privy
Council in Rodger v. Comptoir D'Escompte de Paris 1871 (3) PC 465 and held that
it will be the Endeavour of the Court to ensure that a party who had suffered
on account of a decision that is finally reversed should be put back in the
same position as far as the same is practicable, in which he would have been if
the decision of the Court adversely affecting him had not been passed. This
Court observed: "In giving full and complete relief in an action for
restitution, the court has not only power but also a duty to order for mesne
profits, damages, costs, interest etc. as may deem expedient and fair
conforming to justice to be done in the facts of the case. But in giving such
relief, the court should not be oblivious of any unmerited hardship to be
suffered by the party against whom action by way of restitution is taken. In deciding
appropriate action by way of restitution, the court should take a pragmatic
view and frame relief in such a manner as may be reasonable, fair and practicable
and does not bring about unmerited hardship to either of the parties."
18.
Applying
the above principle to the case before it this Court held that the
consumer-company was an on-going business concern who must have gainfully
utilized the money saved on account of the decision of the High Court, in its
commercial activities. The Court further held that the Board had to suffer
financial loss because of the erroneous decision delivered by the High Court
and that conforming to equity as well as well-established principle of
restitution the Board could claim interest @18% p.a. on the unpaid portion of
the bill drawn on the basis of the revised tariffs to which the consumer-company
had agreed. The Court observed: "The Company is an ongoing business
concern and must have utilised the money, saved on account of the decision of
the High Court, gainfully in its commercial activities. Similarly, other
consumers have gainfully utilised the amount saved for being not required to
pay on the basis of revised tariffs. The Board had to suffer financial loss
because of the said erroneous decision of the High Court. In the aforesaid circumstances,
it will be lawful, conforming to equity and well-established principle of restitution
for the Board to claim interest at 18% on the unpaid portion of the Bill drawn
on the basis of revised tariffs. The Company had agreed to pay interest at 18%
on the bills if not paid when it became due and payable."
19.
It
is quite evident that this Court had upheld the claim for payment of interest @
18% p.a. primarily because of the stipulation contained in the tariffs/agreement
executed between the Board and the consumer providing for payment of interest
at that rate in the event of delay in the payment/discharge of the bills raised
against the consumer. It is not as though this Court had refused to enforce the
stipulation contained in the tariffs providing for recovery of interest from
the consumer if the latter failed to pay the amounts within the time stipulated.
It is also manifest that this Court had in no uncertain terms held that even
after the upward revisions of the tariffs had remained unenforceable for a
certain period on account of erroneous judgment of the High Court, the moment
the said judgment was set aside in appeal, the liability to pay revived with
full force from the date the revisions were made effective.
20.
The
very fact there was during the intervening period an erroneous decision of the High
Court obliterating the revision in full or in part would make little difference
in so far as the liability to pay the amount under the revised tariffs was
concerned. So also the fact that the consumers were not deliberately in default
on account of the judgment of the High Court did not affect the enforceability
of the demand arising from the revised tariffs or the stipulation regarding
payment of interest demanded on the same on account of the non-payment or
delayed payment of the amount recoverable by the Board. Suffice it so say that
the decision of this Court in the case of Kerala State Electricity Board
(supra) does not grant any relief to a defaulting consumer once the demand is
upheld nor does it interfere with the principle of restitution which would
entitle the successful party to be relegated back to the position it would hold
had there been no judgment adverse to it.
21.
Super
added to all this is the fact that this Court was dealing with a case where the
High Court had finally struck down the revised tariff, but the said decision
was reversed in appeal. In the present case the appellant had obtained only an
ad interim order of stay against the enforcement of the tariffs. There is a qualitative
difference in the two situations. Even if one were to take a charitable view of
the legal effect of any direction of the High Court, pending adjudication by the
Court, cases in which the High Court finally held the tariffs to be bad would in
our opinion stand on a different footing than cases where the party obtains an
order granting interim protection to it. While there is an element of finality in
the case of a final adjudication by a competent Court in so far as that Court
is concerned, an interim order can be vacated at any stage. The interim order
may not even prevent a prudent party from paying the charges according to the revised
tariffs if it does not propose to take any chance and suffer recovery of an
additional amount on account of the non-payment of the dues by the date
stipulated for the purpose. We may in this regard refer to the following
observations of this Court in Shree Chamundi Mopeds Ltd.v. Church of South
India Trust Association CSI Cinod Secretariat, Madras 1992 (3) SCC 1: "While
considering the effect of an interim order staying the operation of the order under
challenge, a distinction has to be made between quashing of an order and stay of
operation of an order. Quashing of an order results in the restoration of the position
as it stood on the date of the passing of the order which has been quashed. The
stay of operation of an order does not, however, lead to such a result. It only
means that the order which has been stayed would not be operative from the date
of the passing of the stay order and it does not mean that the said order has
been wiped out from existence.". Suffice it to say that the decision of
this Court in Kerala State Electricity Board's case (supra) does not lend any support
to the appellant-company in its Endeavour to avoid payment of the amount which
became recoverable from it no sooner the judgment of the High Court was
reversed in the earlier round of litigation upholding the revision of the
tariffs.
22.
That
brings us to the decision of this Court in Kanoria Chemicals and Industries
Ltd. and Ors. v. U.P. State Electricity Board and Ors. (1997) 5 SCC 772. That was
also a case where the validity of a notification issued by the U.P. State
Electricity Board revising the electricity rates/tariffs under Section 49 of the
Electricity (Supply) Act, 1948 was challenged by the consumers. Interlocutory
applications filed in the writ petitions for stay of the operation of the impugned
notification were eventually dismissed by the High Court whereupon the
consumers deposited the differential amount between the pre-revised and the revised
electricity rates. Consumers did not, however, deposit the late payment
surcharge "recoverable" in terms of Clause 7(b)of the notification.
Notices of demand were, therefore, issued to the consumers which were
challenged in a fresh batch of writ petitions filed by them. The main contention
urged by the consumers before the High Court was that since the operation of
the notification revising the tariffs had been stayed between 25th July, 1990
and1st March, 1993, no late payment surcharge could be levied on the amount withheld
by the petitioners under the orders of the Court, no matter the writ petitions
were finally dismissed. That contention was rejected by a Division Bench of the
High Court of Allahabad. The matter was then brought up to this Court in appeal
by the consumers, inter alia, contending that the stay of the operation of the impugned
notification relieved the consumers of the obligation to pay the revised tariffs/rates
and consequently additional charges for late payment, if any. Reliance in support
of that submission was placed by the consumers upon the decision of this Court
in Adoni Ginning Factory v. Secy. A.P. Electricity Board (1979) 4 SCC 560. Speaking
for the Court, Hon'ble B.P. Jeevan Reddy, J. held that the decision of this
Court in Adoni Ginning Factory's case(supra) had no application to the case at
hand nor could it be understood to mean that during the period covered by the
stay no demand could be made against the consumers as no such issue has been
raised before this Court in Adoni Ginning Factory's case (supra). This Court observed:"..............We,
therefore, agree with the High Court that Adoni Ginning1 cannot be read as laying
down the proposition that the grant of stay of a notification revising the electricity
charges has the effect of relieving the consumers/petitioners of their obligation
to pay late payment surcharge/interest on the amount withheld by them even when
their writ petitions are dismissed ultimately. Holding otherwise would mean
that even though the Electricity Board, who was the respondent in the writ petitions
succeeded therein, is yet deprived of the late payment surcharge which is due to
it under the tariff rules/regulations. It would be a case where the Board
suffers prejudice on account of the orders of the court and for no fault of
its. It succeeds in the writ petition and yet loses. The consumer files the
writ petition, obtains stay of operation of the notification revising the rates
and fails in his attack upon the validity of the notification and yet he is
relieved of the obligation to pay the late payment surcharge for the period of stay,
which he is liable to pay according to the statutory terms and conditions of
supply -- which terms and conditions indeed form part of the contract of supply
entered into by him with the Board. We do not think that any such unfair and
inequitable proposition can be sustained in law..........."
23.
This
Court further clarified that the terms in which the prayer in the stay application
was made by the consumers did not determine the effect of the order issued by
the Court in the writ petitions raising similar questions of law. The
phraseology used in the prayer for interim orders could be materially different
though in essence the relief may be similar. On a question of principle this
Court held that the impugned order coming to an end upon dismissal of the
substantive proceedings, it is the duty of the Court to put the parties in the same
position as they would have occupied but for the interim orders of the Court
for otherwise it would give rise to unjust results. This Court said: "..............It
is equally well settled that an order of stay granted pending disposal of a writ
petition/suit or other proceeding, comes to an end with the dismissal of the substantive
proceeding and that it is the duty of the court in such a case to put the parties
in the same position they would have been but for the interim orders of the court.
Any other view would result in the act or order of the court prejudicing a party
(Board in this case) for no fault of its and would also mean rewarding a writ petitioner
in spite of his failure. We do not think that any such unjust consequence can
be countenanced by the courts. As a matter of fact, the contention of the consumers
herein, extended logically should mean that even the enhanced rates are also not
payable for the period covered by the order of stay because the operation of
the very notification revising/enhancing the tariff rates was stayed.
Mercifully, no such argument was urged by the appellants. It is un understandable
how the enhanced rates can be said to be payable but not the late payment surcharge
thereon, when both the enhancement and the late payment surcharge are provided
by the same notification - the operation of which was
stayed..............."
24.
It
is manifest from the above that both on the question of restitution of the
benefit drawn by a party during legal proceedings that eventually fail as also on
the general principle that a party who fails in the main proceedings cannot benefit
from the interim order issued during the pendency of such proceedings, this Court
found against the consumers and upheld the demand for payment of additional
charges recoverable on account of the delay in the payment of the outstanding
dues. Far from lending any assistance to the appellant-company the decision
squarely goes against it and has been correctly appreciated and applied by the
High Court.
25.
In
the result these appeals fail and are hereby dismissed but without any orders
as to costs.
.................................J.
(MARKANDEY KATJU)
.................................J.
(T.S. THAKUR)
New
Delhi
November
18, 2010
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