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Nandlal Bhandari Mills Ltd., Indore Vs. Madhya Pradesh Electricity Board - Court Judgment

LegalCrystal Citation
SubjectElectricity;Arbitration
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. Petn. Nos. 121, 124, 139, 145, 146 and 465 of 1967 and 452 of 1966
Judge
Reported inAIR1969MP105; 1969MPLJ374
ActsElectricity (Supply) Act, 1948 - Sections 49 and 59; Electricity (Supply) Amendment Act, 1966 - Sections 24; Constitution of India - Article 226; Contract Act, 1872 - Sections 10; Arbitration Act, 1940 - Sections 2 and 46
AppellantNandlal Bhandari Mills Ltd., Indore
RespondentMadhya Pradesh Electricity Board
Appellant AdvocateK.A. Chitaley, ;A.K. Chitaley and ;V.S. Dabir, Advs.
Respondent AdvocateB.L. Seth, Adv.
DispositionPetition dismissed
Cases ReferredM.S.E. Board v. Kalyan Borough Municipality
Excerpt:
.....board had to work its thermal and diesel stations to their full capacity at a heavy extra cost on fuel and this factor gave rise to the increase of fuel adjustment charge. we do not find that the demand of fuel adjustment charge, which is in accordance with the tariff conditions and the agreement, contravenes any statutory provision and the petitioners' challenge to it must therefore fail, 7. we then come to the main question raised in these petitions whether the imposition of 10 per cent surcharge and the revision of the tariff to that extent from 1st june, 1966 is valid. these clauses in the agreement clearly show that the liability to pay bills of charges continues in spite of disputes or differences between the consumer and the board. the petitioner is therefore not entitled to..........of average fuel cost, for the period of account as certified by the chief accounts officer of the board' clause 26 lays down that in the event of any dispute or difference as to the correctness of the bill the consumer shall nevertheless pay the bill within the period of thirty days and any adjustment necessary due to incorrectness of the bill will be made in the next ensuing bill after settlement of the dispute or difference. clause 29 confers wide discretion on the board to increase the rates of supply of electrical energy or to levy surcharge and the consumer remains bound to pay according to the enhanced rates. in the context of the dispute raised in these petitions this clause is important and reads as under: '29 (a) the rates and other charges set out in the schedule referred to.....
Judgment:

Singh, J.

1. This order wilt dispose of twelve Miscellaneous Petitions Nos. 452 of 1966; 121, 124, 139, 140, 141, 142, 143, 144, 145, 146 and 465 all of 1967.

2. The petitioners in all these petitions are Public Limited Companies and consumers of electrical energy in bulk for industrial purposes which is supplied from Chambal Project by the Madhya Pradesh State Electricity Board, which is the sole respondent in all the petitions. The terms and conditions under which the electrical energy is supplied to the petitioners are same and are contained in agreements which each petitioner has entered into with the Board. At time when the agreements were made, the charges for electrical energy supplied were payable according to the Industrial (High Tension) Tariff applicable to the Chambal area, which was effective from 1st April, 1961 and was framed by the Board under Section 49 of the Electricity (Supply) Act, 1948. This tariff provides for payment of (a) demand charge which is a monthly minimum charge whether energy is consumed or not, and (b) energy charge, which is a charge for the units actually consumed. The tariff also provides that the rates for energy charge are subject to adjustment on account of variation in the cost of fuel according to a formula given in the tariff. The tariff in so far as it is relevant reads as follows:

'A. Two part tariff:Demandcharge per KW of M.D.

Rs. perKW. per month

First500 KW.

7.50

Next 1000 KW.

7.00

Above 1500 KW.

6.50

Plus

Energy charge

N.P. per

unit

First

50,000 Units per month

5.98

Next

1,50,000units per month

5.95

Next

8,00,000units per month

5.98

Over

5,00,000 units per month

5.75

Tariff Minimum

Tariff Minimum

The maximum demand charge on the billing demand or on the contract demand, whichever is higher, is a monthly minimum charge whether energy is consumed or not.

Note: Supply of power under the industrial tariff A and B is intended for industrial motive power only. However, the consumer is permitted to use the electrical energy supplied upto 5% of the monthly consumption for purpose of providing lighting and ventilation etc. within the premises for which supply is given.

The foregoing tariff is subject to the conditions prescribed hereunder: (1) Variation, in energy charge:

(a) The rate per unit mentioned in the tariff shall be deemed to be based on the cost of 155 nP. (sic) per 10,00.000 B.Th.Us. of fuel delivered ex-coal yard at each of the Board's thermal generating stations serving the system in the area to which these tariffs apply. The unit rate under the tariffs shall be increased or decreased by the amount calculated as follows:

For each one per cent variation in the cost of fuel delivered ex-coal yard at each of the said generating stations per 10.00.000 B.Th.Us. there will be a variation in rates of Np. 0.055 per unit In respect of the units generated by the station for the system. The variation per unit for each thermal station shall be determined on the basis of the cost of fuel per 10.00,000 B.Th.Us. at the respective stations and the variation so determined shall be multiplied by the units generated at the respective stations. The sum of the products so obtained shall be divided by the total number of units generated at all the stations (thermal and hydle) in the area to arrive at the variation per unit.

For the purpose of this variation:

The cost of fuel shall be the average cost for the period of account from April to March each year as certified by the Chief Accounts Officer of the Board. The cost of fuel per 10.00.000 B.Th.Us. at each generating station shall be determined by multiplying the total cost of fuel delivered ex-coal yard and consumed in the period of account at the generating station by one million and dividing the product so obtained by the total gross thermal value expressed in B.Th.Us. of the fuel so consumed. The thermal values of the fuel consumed at the different generating stations as determined by the Board shall be final. Final adjustment or account of variation in cost of fuel will be made as soon as possible alter the close of account.'

By notification dated 23rd May. 1965 the Board modified all High Tension Tariffs including the one quoted above with effect from 1st June, 1966 by adding a new clause to the following effect:

'The consumer shall in addition pay surcharge at 10 per cent of the total amount of the bill payable as per the tariff,' The Board also in February. 1966 wrote to the petitioners that they were to pay 2.3 paise per unit as fuel adjustment charge under the conditions of the tariff from April, 1965. The petitioners protested to the imposition of the 10 per cent surcharge and the fuel adjustment charge and after some infructuous correspondence filed these petitions under Article 226 of the Constitution. The main relief claimed in these petitions is that the levy of 10 per cent surcharge and the fuel adjustment charge of 2.3 paise per unit be held to be ultra vires, void and oppressive and the Board be restrained in levying the same. In all the petitions except Misc. Petition No. 452 of 1966 (The Burhanpur Tapti Mills v. The M. P. Electricity Board), the petitioners also attack the validity of section 49 of the Electricity (Supply) Act, 1948 as substituted by the Electricity (Supply) Amendment Act, 1966, and sections 17 and 24 of the Amendment Act. In Misc. Petition No. 452 of 1966, the petitioner further claims that by challenging the levy of 10 per cent surcharge and 2.3 paise per unit fuel adjustment charge, it has raised disputes which fall within the arbitration clause of the agreement; this petition on this ground contains a prayer that the Board be directed to refer the disputes to arbitration.

3. Before we proceed to consider the contentions raised on behalf of the petitioners, it is convenient to notice the relevant clauses of the Agreement under which the electrical energy is supplied. Clause 19 provides that the consumer shall pay to the Board every month charges for the electrical energy at the Board's tariff applicable for the Chambal area as in force from time to time. A copy of the tariff in force at the time of the agreement is set out in a schedule to the agreement. Clause 20 makes specific that the tariff is subject to fuel adjustment clause detailed therein and the incidence of this charge shall be in addition to minimum charges or any minimum or special guarantee. Clause 25 deals with the presentation of monthly bills by the Board to the consumer and provides that the consumer shall pay the same within thirty days of the due date of the bill. This clause also contains reference to fuel adjustment charges and in that connection reads;

'The fuel cost adjustment charges as applicable under the tariff will be calculated and incorporated as a part of the bill on the basis of provisional average fuel cost as may be fixed by the Board from time to time; these charges are subject to final adjustment on the basis of average fuel cost, for the period of account as certified by the Chief Accounts Officer of the Board' Clause 26 lays down that in the event of any dispute or difference as to the correctness of the bill the consumer shall nevertheless pay the bill within the period of thirty days and any adjustment necessary due to incorrectness of the bill will be made in the next ensuing bill after settlement of the dispute or difference. Clause 29 confers wide discretion on the Board to increase the rates of supply of electrical energy or to levy surcharge and the consumer remains bound to pay according to the enhanced rates. In the context of the dispute raised in these petitions this clause is important and reads as under:

'29 (a) The rates and other charges set out in the schedule referred to in clause 19 hereof and the miscellaneous charges in the conditions of supply are those in force at the time of executing the Agreement in the Chambal area. The consumer shall be eligible for whatever reduction in or rebate from these rates and/or in charges is granted by the Board and will be liable for whatsoever surcharge or increase upon them as may from time to time be charged by the Board or be liable to pay any new rate or tariff amount which the Board may in its discretion deem fit to charge in lieu of the payments fixed under this Agreement.' The agreement in Clause 37 contains provision for arbitration, which is worded as follows: '37. In the event of any dispute or difference arising between the Consumer and the Board as regards the interpretation of this Agreement or any other matter arising out of or in connection with this Agreement, except a dispute regarding recovery of charges for energy consumed and any other charges such as minimum charges, miscellaneous and other charges or a dispute regarding any matter for which a method of determination is prescribed in the Acts, rules, regulations and conditions of supply mentioned in Clause 39, hereof, such dispute or difference shall be referred to the arbitration of two arbitrators, one to be appointed by each party hereto, and an umpire to be appointed by the arbitrators before entering upon the reference. The decision or award of the said arbitrators or umpire shall be final and binding on the parties hereto and the provisions of the Indian Arbitration Act, 1910, or any statutory modification thereof for the time being in force shall apply to any such reference.'

4. The statutory provisions having a bearing on the controversy raised in these petitions may now be noticed. A State Electricity Board is constituted under Section 5 of the Electricity (Supply) Act, 1948. Section 49 enables the Board to supply electricity to any person not being a licensee upon such terms and conditions as the Board may from time to time fix. This section as originally enacted read as follows:

'Subject to the provisions of this Act and of any regulations made in this behalf, the Board may supply electricity to any person not being a licensee upon such terms and conditions as the Board may from time to time fix having regard to the nature and geographical position of the supply and the purposes for which it is required:

Provided that in fixing any such terms and conditions the Board shall not show undue preference to any person.' Section 76(1) of the Act as originally enacted provided that

'all questions arising between the State Government or the Board and a licensee or other person shall be determined by Arbitration.' These provisions of the Act were amended by the Electricity (Supply) Amendment Act, 1966 which came into force on 16th September, 1966. By section 11 of the Amendment Act section 49 of the principal Act was substituted by a new section and it was declared that the new section 'shall be deemed always to have been substituted.' New Section 49 is as under:

'49(1) Subject to the provisions of this Act and of 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 purposes of such supply frame uniform tariffs.

(2) In fixing the uniform tariffs, the Board shall have regard to all or any of the following factors, namely;

(a) the nature of the supply and the purposes for which it is required;

(b) the co-ordinated development of the supply and distribution of electricity within the State in the most efficient and economical manner, with particular reference to such development in areas not for the time being served or adequately served by the licensee;

(c) the simplification and standardisation of methods and rates of charges for such supplies;

(d) the extension and cheapening of supplies of electricity to sparsely developed areas.

(3) Nothing in the foregoing provisions of this section 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.

(4) In fixing the tariff and terms and conditions for the supply of electricity, the Board shall not show undue preference to any person.'

Section 17 of the Amendment Act omitted Section 76 (1) from the principal Act Provision for validation of rates fixed by the Board for supply of electricity to consumers before the commencement of the Amendment Act was made in Section 24 which is worded as follows:

'24 (1) Notwithstanding any judgment, decree or order of any court, all rates fixed under Section 49 of the Electricity (Supply) Act, 1943, for the sale of electricity to any person other than a licensee before the commencement of this Act shall be deemed to have been validly fixed as if the provisions of the said section, as amended by this Act, had been in force at all material times when such rates were fixed and accordingly,--

(a) no suit or other proceeding shall be maintained or continued in any court for the refund of any amount collected from any person on the basis of such rates;

(b) no court shall enforce a decree or order directing the refund of any amount collected from such person on the basis of such rates;

(c) any amount due from any person on the basis of such rates before the commencement of this Act but not recovered before such commencement may be recovered in the manner provided under the Electricity (Supply) Act, 1948.

(2) For the removal of doubts, it is hereby declared that nothing contained in Sub-section (1) shall be construed as preventing any person from claiming refund of any amount paid by him in excess of the amount due from him, under the said Act, as amended by this Act, and the rules or regulations made thereunder.'

5. As already stated, the petitioners in their petitions challenged the validity of the amended Section 49, and Sections 17 and 24 of the Amendment Act; but at the time of hearing, objections as to validity of these provisions were not pressed. Indeed, in M.S.E. Board v. Kalyan Borough Municipality, AIE 1968 SC 991, the Supreme Court has upheld the vires of Section 49 of the Act as amended and we have to proceed on the fooling that the Act as amended and the Amending Act are valid and have full force and effect.

6. We first take up the challenge to fuel adjustment charge of 2.3 paise per unit for the period 1905-66. These charges are demanded by the Board in terms of Clause 25 of the Agreement according to the formula contained in the tariff. The charges are first included in the bill on the basis of provisional average fuel cost and are subject to final adjustment on the basis of average fuel cost for the period of account. The final adjustment which is worked out on the basis of actual average fuel cost may have the effect of reducing or increasing the provisional charges for the period of account. It has been explained by the Board that due to failure of rains in 1965 there was little inflow of water in Gandhi Sagar reservoir and the Board had to work its thermal and Diesel stations to their full capacity at a heavy extra cost on fuel and this factor gave rise to the increase of fuel adjustment charge. It has also been stated that in January, 1967 fuel adjustment charge of 2.3 paise per unit has been reduced to 1.65 paise per unit retrospectively from April, 1966 and consequent refunds have been made to all consumers including the petitioners in subsequent bills. We do not find that the demand of fuel adjustment charge, which is in accordance with the tariff conditions and the Agreement, contravenes any statutory provision and the petitioners' challenge to it must therefore fail,

7. We then come to the main question raised in these petitions whether the imposition of 10 per cent surcharge and the revision of the tariff to that extent from 1st June, 1966 is valid. It is first contended that the Agreement does not confer unfettered power on the Board to increase the rates of supply of electricity and to impose surcharge arbitrarily. We do not agree. Clauses 19 and 29 of the Agreement make it quite plain that the consumer is bound to pay charges for the electrical energy in accordance with Board's tariff as in force from time to time and is liable to pay whatever surcharge or increase may be charged by the Board from time to time. These clauses in the Agreement do not contain any limitation on the power of the Board to vary the rates of supply of electricity. The power of the Board to fix from time to time rates of supply of electricity to a consumer flows from Sections 49 and 59 of the Electricity (Supply) Act, 1948. If the statutory power is properly exercised and the rates of supply of electricity fixed by the Board do not go beyond the power conferred fay these sections, the rates fixed cannot be attacked on the basis of any provision contained in the agreement The point then is whether the surcharge imposed by the Board is in excess of its statutory powers.

In this connection, it has to be noticed that the Board in 1961 framed uniform tariff for high tension consumers of the area served by the Chambal project. The petitioners do not challenge this tariff. The challenge is restricted to the surcharge of 10 per cent which was imposed in 1966. The surcharge is a modification of all high tension tariffs in force in the State by providing that the consumer will in addition pay 10 per cent of the total amount of the bill payable as per the tariff. This uniform increase of high tension tariff throughout the State is attacked on the ground that the increase must be related to the excess expenditure within a particular area of supply and not to the excess expenditure which the Board has to incur in relation to its total area of supply. According to the petitioners the increase in the rate, which the Board can make, must be area-wise depending upon the increased expenditure incurred in that area and the Board has no power to make any uniform increase in tariff applicable for the whole State. Whatever may have been the position under the old Section 49, the new section as substituted by the Amendment Act 30 of 1966, makes it plain that the Board can fix uniform tariffs. The power to fix uniform tariffs must necessarily include power to make uniform increase in tariffs.

The petitioners had in fact realised this difficulty and had therefore challenged the validity of new Section 49, which they had to give up in view of the decision of the Supreme Court in AIR 1968 SC 991 (supra) where the validity of new Section 49 was upheld. The petitioners then urged that the surcharge was imposed at a time when new Section 49 had not been enacted and it could not be said that the Board had taken into account the factors mentioned in Section 49(2), and therefore, the surcharge must be held to be invalid. This argument is completely answered by Section 24 of the Amendment Act which validates all rates fixed before under the old Section 49. This section has already been set out and in terms of that section, it must be held that the surcharge had been validly imposed as if the new Section 49 was in force at the time of its imposition. A similar argument was negatived by the Supreme Court in M. S. E. Board's case, AIR 1968 SC 991 (supra), where it was observed:

'On behalf of the respondents, a feeble attempt was made to show that Section 24 of the Amendment Act has not validated the levy and collection in these cases. According to the respondents, in this case, there is nothing to show that the provisions of Section 49, as amended which is deemed to have been in force at all material times, have been complied with by the Board before the levy was made, and therefore, the levy in this' case cannot be sustained. We are not Inclined to accept this contention of the respondents. Section 24 of the Amendment Act, in our opinion, deals with all rates, as a matter of fact fixed under Section 49 of the Act. In this case, the Board has fixed tariffs under Section 49 of the Act. Therefore Section 24 of the Amendment Act has full effect and force.'

8. We now come to the point raised in M. P. No. 452 of 1966 that by challenging the imposition of surcharge and fuel adjustment charge, the petitioner has raised disputes which the Board was bound to refer to arbitration under Clause 37 of the Agreement, and this Court should now issue an order to the Board directing it to refer these disputes to arbitration. We have already quoted Clause 37 of the Agreement. That clause excludes from its purview 'a dispute regarding recovery of charges for energy consumed and any other charges such as minimum charges, miscellaneous or other charges'. In our opinion, the dispute whether the Board is entitled to recover surcharge and fuel adjustment charge is 'a dispute regarding recovery of other charges' within the words of exclusion in Clause 37 and the Arbitration Clause is not attracted. Even otherwise, no direction can be issued by this Court to the Board for referring the matters in dispute to arbitration. The Arbitration Clause expressly makes applicable the provisions of the Arbitration Act, 1940 and it is open to the petitioner to pursue the remedies provided in that Act for enforcing arbitration.

The Agreement does not provide that in case a dispute is raised by a consumer regarding the charges which the Board seeks to recover, there is an automatic suspension of the liability to pay the charges. According to Clause 26 of the Agreement, a bill is to be paid by the consumer within a period of thirty days and Clause 26 expressly provides that even if disputes or differences are raised as to the correctness of any bill, the consumer shall nevertheless pay the same within thirty days and the Board will make adjustments in subsequent bills after the dispute is settled. These clauses in the Agreement clearly show that the liability to pay bills of charges continues in spite of disputes or differences between the consumer and the Board. The petitioner is therefore not entitled to claim any relief from this Court on the basis of the Arbitration Clause in the Agreement

9. As a result of the above discussion,all these petitions fail and are dismissedwith costs with counsel's fee of Rs. 100/-in each. The outstanding amount of security shall be refunded to the petitioners.


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