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Delhi Cloth and General Mills Co. Ltd. Vs. Municipal Corporation of Delhi and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtDelhi High Court
Decided On
Case NumberSuit No. 518 of 1983 and Interim Application No. 1635 of 1983
Judge
Reported inILR1984Delhi758
ActsArbitration Act, 1940 - Sections 20; Delhi Municipal Corporation Act, 1957 - Sections 283; Code of Civil Procedure (CPC), 1908 - Order 39, Rule 1
AppellantDelhi Cloth and General Mills Co. Ltd.
RespondentMunicipal Corporation of Delhi and anr.
Advocates: H.N. Salve,; P.S. Dass Gupta,; V.P. Singhal and;
Cases ReferredMs. Rohtas Industries Ltd. v. Chairman
Excerpt:
(i) arbitration act, 1940 - section 20--whether the agreement between the parties provides for a reference to arbitration of the disputes regarding payment of increased fuel adjustment charges--principles discussed.; (ii) delhi municipal corporation act, 1957 - section 283--scope of powers under explained and discussed.; (iii) civil procedure code - order xxxix, rules 1 & 2--ordinarily petitioner must make out prima facie case for grant of interim relief--balance of convenience must also be in favor of the prayer of the petitioner being granted.; the question that arose for the consideration of the court was whether the dispute with regard tot the demand by delhi electric supply undertaking (d.e.s.u.) respondent no. 2, for payment of increased fuel adjustment charges can be referred.....b.n. kirpal, j.(1) the only question which arises for consideration in this case and in the connected cases, which were all heard together, is whether the dispute with regard to the demand by delhi electric supply undertaking, respondent no. 2, for payment of increased fuel adjustment charges can be referred to arbitration or not. (2) main arguments were addressed in suit no. 5t8-a of 1983 and, thereforee, it is necessary to deal with the facts of this case only. it is agreed by the counsel for the parties that the decision in this suit will govern the other cases also. (3) according to the petitioner, it entered into an agreement on 26th september, 1972 with respondent no. 2 for the supply of electric energy. clause 15(a) of the said agreement pertains to the payment for supply of.....
Judgment:

B.N. Kirpal, J.

(1) The only question which arises for consideration in this case and in the connected cases, which were all heard together, is whether the dispute with regard to the demand by Delhi Electric Supply Undertaking, respondent No. 2, for payment of increased fuel adjustment charges can be referred to arbitration or not.

(2) Main arguments were addressed in Suit No. 5T8-A of 1983 and, thereforee, it is necessary to deal with the facts of this case only. It is agreed by the counsel for the parties that the decision in this suit will govern the other cases also.

(3) According to the petitioner, it entered into an agreement on 26th September, 1972 with respondent No. 2 for the supply of electric energy. Clause 15(a) of the said agreement pertains to the payment for supply of energy. The said subclause reads as under :

'15(A)The Consumer shall pay each month to the Undertaking for electrical energy supplied during the preceding month such amount as shall be calculated and ascertained in accordance with the Rate-Schedule Lip attached hereto. The rates contained in the schedule are those in force at the time of executing this agreement. The Consumer shall be eligible for whatever reduction or rebate as may be granted on the rates and shall be liable to pay for whatever surcharge or increase in those rates as may from time to time be levied or made by the Undertaking. Any other method of charging decided by the Undertaking shall also be applicable.'

The Rate Schedule of LIP. which was annexed to the said agreement, has not been placed on record but it is an agreed case of the parties that the said Rate Schedule was identical to the Tariff which was fixed by respondent No. 2 for the year 1982-83.

(4) In its meeting held on 15th February 1982 the Commissioner of Municipal Corporation of Delhi, while exercising the powers of the Delhi Electric Supply Committee[Standing Committee/Corporation, fixed and approved the charges for the supply of electricity for the year 1982-83. With regard to large industrial power the provision in the said Tariff was as follows, which provision is identical to the Rats Schedule of Lip which was attached to the said agreement:

'B.Large Industrial Power (LTP): (a) Availability: Available as primary power to Large Industrial Consumers having connected load above 100 k.w. (b) Character of Service: Ac 50 cycles, 3 phase, 11KV (c) Tariff : Demand Chargea: Demand Charges: First 500 K.W. of billing demand for the Rs. 20.00 per K.W. or part month, thereof. Next 1000 K.V.A. of billing demand for the Rs. 16.50 per Kva or part month thereof. Next 5000 Kva of billing demand for the Rs. 16.00 per Kva or part month, thereof. All in excess of above billing demand. Rs. 15.50 per Kva or part thereof. plus Energy Charges: First 5,00,000 units per month at 27.5 paise per unit. Next 5,00,000 units per month at 27.0 paise per unit. Next 10,00,000 units per month at 26.5 paise per unit. All above 20,00,000 units per month at 26.0 paise per unit. Subject to: 1. An adjustment of energy charges as under: (1) The above energy charges are based on the basic average fuel and purchase cost of 15.25 paise per KWH. (2) The actual cost of fuel used during any period shall be the amount in rupees of the cost of all types of fuel burnt in the Undertaking's Thermal Generating Plants in that period. (3) The actual cost of energy purchased shall be the amount paid in rupees for import of energy for that period. (4) The cost of energy per Kwh sold shall be the quotient computed on dividing the sum of (ii) and (iii) by the Kwh sold during the period. (5) The increase or decrease in cost of per Kwh sold shall be the difference of (iv) and (i) above and accordingly shall be added or subtracted to the above energy rates. Final adjustment on account of variation in energy charges will be made as soon as possible after the doss of the period of account but adjustment may be provisionally fixed by the Desu Management from time to time will be incorporated as a part of the monthly bill and shall be payable by the consumer. Such provisional rates as and when finalised shall have retrospective effect from the beginning of that financial year.'

(5) A perusal of the aforesaid Tariff shows that, depending upon the quantum of electricity consumed, certain fixed charges . had to be paid ranging from Rs. 15.50 per Kw to Rs. 20 per Kw and in addition thereto, the consumer also had to pay energy charges. The energy charges were also payable depending upon the units consumed and ranged from 26P. per unit to 27.5 B. per unit. The Tariff further provided that the energy charges so fixed were subject to adjustment. This dispute in the present case is with regard to the adjustment of the energy charges, by increasing the same, which are sought to be made under clause I of the said Tariff.

(6) The aforesaid clause I provides that the fixed energy charges are based on the average fuel and purchase cost of 15.25P. per KWH. The energy charges could be adjusted depending upon the variation of the actual cost of fuel-burnt in the Undertaking's Thermal Generating Plants and the actual cost of energy purchased for import of energy during a particular period. The cost of the energy per Kwh was to be the quotient computed by dividing the sum of the aforesaid two items by the Kwh sold during the period. If the cost per Kwh so worked out was more than 15.25 P. per Kwh then there was to be an increase in the energy charges, and vice versa.

(7) The aforesaid Tariff further provides that final adjustment on account of variation in the energy charges is to be made as soon as possible after close of the period of account. Keeping in view the fact that there may be variation in the price during the account period the said tariff permits an adjustment to be fixed by the Desu Management provisionally, from time to time. and that adjusted amount is to form part of the monthly bill and is payable by the consumer. It is lastly provided that such provisional rates as fixed by Desu Management, as and when they are finalised shall have retrospective effect from the beginning of that financial year.

(8) In the year 1980-81 respondent No. 2 levied fuel adjustment charges at the rate of 9.87 P. per unit. On 25th August, 1981 respondent No. 2, enhanced the levy of the fuel adjustment charges from 9.87P. per unit to 20.44P. per unit. Thereupon Suit No. 1219-A of 1981, and other suits were filed under Section 20 of the Arbitration Act wherein clause 25 of the aforesaid agreement was sought to be invoked and it was prayed that the disputes be referred to arbitration. Interim applications were also filed and on 20th December, 1982 it was ordered that pending disposal of the suits, fuel adjustment charges at the rate of 16.50P. per unit would bepaid.

(9) On 12th March, 1983 the petitioners' lawyers received a notice from respondent No. 2 to the effect that the fuel adjustment charges were being increased from 20.44P. per unit to 27.97P per unit. On 17th March, 1983 a supplementary fuel bill for the period April, 1982 to December, 1982 was received by the petitioners. On 25th March, 1983 the petitioners received a further bill whereby fuel adjustment charges were levied at the rate of 27.97P. per Unit for the month of February, 1983.

(10) The present application under Section 226 of the Arbitration Act, being Suit No. 518-A of 1983, was filed on 6th April, 1983. Interim' stay of payment of 27.97P. per unit was granted but on the condition that the petitioners pay fuel adjustment charges at the rate of 16.50P. per unit. On 1st May, 1983 the fuel adjustment charges were increased by respondent No. 2 from 27.97P. per unit to 29.47P. per unit which were again enhanced to 29.95P. per unit. Vide order dated 30th August. 1983 the petitioners were asked to pay fuel adjustment charges at the rate of 20.44P. per unit for July, 1983 and the rest of the demand was stayed.

(11) Respondent No. 2, in its reply to the application under section 226, has contended that the application is not maintainable. According to the respondents the levy has been made in exercise of the powers under section 283 of the Delhi Municipal Corporation Act, 1957 (hereinafter referred to as 'the said Act) and the exercise of such power cannot be a subject matter of arbitration.

(12) Before me it was submitted by the learned counsel for the petitioners that the fuel adjustment charges have-been fixed by respondent No. 2 in exercise of .its. powers contained in the Rate Schedule annexed to the agreement between the parties. A dispute with regard to the levy made under this Schedule is, it is submitted, referable to arbitration under clause 25 of the Arbitration Agreement. In the alternative, it was submitted that the arbitration clause is comprehensive enough to include Within its ambit all types of disputes between the parties relating to .the supply of electric energy, including the dispute with regard to the fixation of fuel adjustment charges.

(13) On behalf of the respondents, Shri V. P. Singh contended that Section 283 of the said Act gives the power to the Delhi Electric Supply Committee to fix charges for the supply of electricity by the Corporation. The said section provides that the charges shall be fixed at such rates as -nay be fixed by the Committee with the approval of the Corporation. According to the learned counsel, the fixation of such charges. amounts to an exercise of legislative power. This legislative power is stated to have been exercised in the present case when the Tariff was fixed. It was further submitted that it was in further exercise of the legislative power that the fuel adjustment charges have been fixed in accordance with the formula laid down in the Tariff. According to the learned counsel, the dispute with regard to the fixation of the fuel adjustment charges does not arise out of the agreement between the parties, but is referable to the Tariff which has been laid down under Section 283 of the said Act.

(14) Clause 15 of the agreement between the parties stipulates that the consumer will pay the amount of electricity charges a,s ascertained according to the rate fixed in the Schedule attached to the agreement. It is specifically mentioned that the rates which are set-out in the Schedule to the agreement are those which are in force at the time of the execution of the agreement. The later part of clause 15(a) refers to, the liability of the consumer to pay the rates which are fixed by the Undertaking from time to time. The rates which have to be so paid, may vary by increase or decrease which may be ordered by the Undertaking from time to time or the rates may be inch as may have to be calculated in a manner different from what is provided in the Schedule and which manner of charging may be decided by the Undertaking. It is not because of this provision contained in the agreement that the Undertaking gets a right to vary the amount which is to be charged for the electricity supply. The source of power of the Undertaking to lay down a new method by which the calculation of electricity rates is to be made or to vary the rates is not contained in clause 15(a). Clause 15(a) has been inserted so as to make it clear to and incumbent upon the consumer to pay such amount of electricity charges as may be levied by the Undertaking from time to time.

(15) The Undertaking gets the power to levy and alter the rates which are fixed or the method in which it is to be calculated, by virtue of Section 283 of the Act. It is in exercise of that statutory right that the Tariff is fixed by the Corporation every year. The power to fix the rates and charges is a statutory right, and the same is not controlled or circumscribed by the provisions of clause 15(a) of the agreement.

(16) On behalf of the petitioners, relying upon' the decision in the case of Indian Aluminium Co. v. K.S.E. Hoard. : [1976]1SCR70 , it was strenuously urgd'that, like in that case, the power to fix the rates is by virtues of the agreement between the parties and noi by virtue of Secion 283 of the Act.

(17) In .'Indian Aluminium Co.is case; and in the other cases connected with it, the Supreme Court was concerned with the provisions of Sections 49 and 59 of the Electricity (Supply) Act, 1948. Section 40 of the Electricity (Supply) Act. as it stood at the relevant time, read asunder

'49.Provision for the sale of electricity by the Board to persons other-than licensees (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-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 toasty or any of the following 'factors, namely :- (a) the nature of the supply..and.the purposes for which it is require (b) the coordinated 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 the 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.

in the case of Indian Aluminium Co (supra), there was an agreement which had been entree into between the Board and the Company 'lt was held by the Supreme Court .that the said agreement was entered into by virtue of the: 'provisions of subsection ( 3) of Section 49. It was further held that.when such an agreement is entered into, the provisions of sub-sections(l) and (2) do not apply. The statute itself, namely, section 49(3), gave the power to the board to fix special tariff. Thereafter, if the tariff had to be' changed, it could not be done under the provisions of sub-sectary (1) of section 49. In the present case, however, by virtue of section 286 of 'the Corporation Act, the provisions of the Electricity (Supply) Act are not applicable ln the Corporation Act the provisions of section 283 are somewhat analogous to section 49 ('1) and (2), of the Supply Act. The Municipal Corporation Act docs not have any provision similar to section 49(3) of the Supply Act- Whereas under section 49(3) of the Supply Act the Board could, by an agreement, fix different tariff for the supply of electricity lo any person, under the Delhi Municipal Corporation Act different tariff cannot be fixed. The tariff which is fixed under section 283 of the Corporation Act is applicable to all the consumers and the statute, namely the Delhi Municipal Corporation Act, docs not recognise tariff being fixed under an agreement. This being so, the decision in Indian Aluminium Co.'s case (supra) can be of little assistance to the petitioners.

(18) Shri V. P. Singh then strenuously contended that the revision of rates under the formula is a dispute which is not referable to arbitration. Strong reliance was placed by him on the decision of the Supreme Court in the case of Mysore State Electricity Board v. Bangalore Woollen, Cotton and Silk Mills Ltd. and others, : AIR1963SC1128 , in which it was observed at page 1140 by Hidayatullah, J. as follows :

'ITis,therefore, quite dear that no dispute between a consumer and the State Electricity Board can arise under the 1948 Act* in the matter of the rates at which the Board supplies electrical energy.'

Reliance was also placed by him on the case of Orissa Textile Mills Ltd. v. Orissa State Electricity Board and another (1975) 2 S.C.C. 437 (3) where at page 442 it was observed as follows:

'THE question as to whether the Board had the power under Sections 49 and 59 and the Sixth Schedule to the Supply Act to levy the coal surcharge is not a question, matter or thing arising under the agreement. It is a claim founded on the provisions of the Supply Act to impose the coal surcharge in addition to the rates payable by the appellant to the Board under the agreement. Such a claim clearly falls outside the ambit and coverage of the arbitration, provision contained in clause (23) of the agreement'.

In the present case, however, there is no challenge to the power of the respondents to levy and impose the surcharge. There can also be no dispute with regard to the rate at which the consumer is required to pay electricity charges. Fixing of rates and the method in which the rates are to be determined, are decided by the Corporation in exercise of its powers under section 283 of the Act. To my mind, there can be no dispute, with the rates so fixed or the method of computation, which can be referred to arbitration.

(19) The question in the present case, however, is slightly different. In the exercise of its statutory power the Corporation has fixed the rates and specified a formula on the basis of which the amount to be charged by way of fuel adjustment charges can be varied. The dispute in the present case is really as to whether the variation of fuel adjustment charges has been done in accordance with the formula or not. The petitioners are ready and willing to pay the energy charges which are fixed in accordance with the said formula. To my mind, though it is not open to the petitioners to challenge the correctness of the rates fixed or the formula which is laid down for computing the amount of the energy charges, but it is open to them to contend that, in working out the formula, irrelevant or extraneous considerations have been taken into account or that the formula has not been properly followed while computing the fuel adjustment charges which are now being demanded. While considering whether the said charges have been worked out in accordance with the formula or not, it is not open to challenge the correctness of the accounts or the figures of respondent No. 2 but, as already noted, it can be contended that some relevant factors have not been taken into consideration or irrelevant factors have been taken into account.

(20) The question is as to how can the fixation of these charges be challenged. Ordinarily a challenge to fixation of the charges may be by a writ petition under Article 226 of the Constitution or by a suit or by arbitration. The fixation of different rates or the formula by the M. C. D. under Section 283 of the Act would clearly be outside the scope of the arbitration clause, because such fixation has nothing to do with the agreement between the parties. The statutory right of the Corporation to fix different rates or formula is not and cannot be controlled by any contract, because a contract, whereby different rates can be fixed, is not envisaged by the statute. Whether the manner in which the statutory formula has been worked out can be challenged in arbitration proceedings is a question which can be answered only by referring to the arbitration clause.

(21) The arbitration clause in the present case is very widely worded. It is as follows :

'IF any question or difference whatsoever arises between the parties to these presents or as to any clause or thing herein contained, or the construction hereof or as to any other matter in any way connected with or arising out of these presents or the operation hereof or the rights duties or liabilities of either party in connection herewith, then, unless the procedure for settling such a question or difference is laid down by the Indian Electricity Act, 1910 or the Electricity (Supply) Act, 1948 as the case may be or otherwise specifically by this agreement, in every such case the matter in difference shall be referred to Arbitration and the provisions of the Arbitration Act, 1940 (Act X of 1940) thereof shall apply to any such arbitration.'

Bare perusal of the aforesaid clause shows that any question or difference arising between the parties as to any matter in any way connected with or arising out of the agreement or with regard to the rights, duties and liabilities of either party in connection with the agreement is referable to arbitration. The dispute in the present case is with regard to the liability of the petitioners to pay the fuel adjustment charges. The quantum of the liability is disputed. To my mind, this is a matter which would squarely fall within the provisions of clause 25 of the agreement, which contains the arbitration clause. In the arbitration proceedings it will be open to the petitioners to contend before the Arbitrator that the fuel adjustment charges have .not been computed in accordance with the formula. Such a dispute would be one which would be connected with the agreement because it would pertain to the liability of the petitioners to pay charges for the consumption of -electricity. It will, of course, not be open to the petitioners to contend before the Arbitrator that the rate fixed in the Tariff is high and nor will it be open to the petitioners to challenge the formula which has been laid down. It will also be outside the scope of the arbitration to ask the Arbitrator to enquire into the correctness of the accounts of D.E.S.U

(22) The problem may be viewed-from another angle. Under Section 283 it is the Delhi Electric Supply Committee constituted under section 44(b) of the Act which is empowered to. fix, with the approval of the Corporation, the rates or to lay down the method of computation. Under the Tariff, which has been prescribed, it is the Management of D.E.S.U., and not the said Committee, which has been empowered to fix the provisional fuel adjustment charges. It is with this entity, which is to determine such charges, with whom the petitioners have an agreement containing the arbitration clause. The exercise of power by the management, even though under or by virtue of a statutory Tariff can be the subject matter of arbitration as it would pertain to liability of the petitioners to pay fuel adjustment charges which are being demanded by the management of D.E.S.U., which management has fixed the fuel adjustment charges and which has also entered into the agreement with the petitioners for the supply of electricity.

(23) For the aforesaid reasons, this petition is allowed. The arbitration agreement be filed in this Court and the following dispute is referred to arbitration :

'WHETHER the fuel adjustment charges have been fixed and are being demanded by respondent No. 2. from time to time, in accordance with the Tariff for the year in question.'

This reference is, to my mind, comprehensive enough to include all questions which can be raised before the Arbitrator, including the question as to whether provisional revision of such charges can be made, from time to time, with retrospective effect.

(24) In the arbitration agreement no arbitrator is named. Considering the magnitude of the stakes involved and the importance of the case, I appoint Shri S. N. Andley, retired Chief Justice of this Court, as the sole-arbitrator. He shall be paid a fee of Rs. 2000 per day of hearing plus all out of pocket expenses. This fee will, in the first instance, be paid by the petitioners but will be subject to such orders as to costs as the Arbitrator may eventually pass.

(25) It was agreed to by the counsel for the parties that if the petition is allowed then, though all the cases would be referred to arbitration, before the arbitrator the proceedings shall take place only in one case i.e. Suit No. 518-A of 1983 (Delhi Cloth & General Mills Co. Ltd. v. Municipal Corporation of Delhi and another) and the decision of the arbitrator in this case would be equally applicable in the other cases and a similar award would be made in those cases, without any further or formal trial. The counsel for the parties are agreed that the cases before the arbitrator be consolidated and tried together and counsel in all the cases be given liberty to represent their points of view. Ordered accordingly.

(26) THE. arbitration award be made within four months of the Arbitrator's entering upon the reference or within such time as the parties may, by mutual consent, extend from time to time. There will be no order as to costs. A. No. 1635 of 1983.

(27) For disposing of the application under Order 39 Rules I and 2 Civil Procedure Code read with section 41 of the Arbitration Act, wherein the claim is that the respondents should be restrained from Realizing the additional fuel adjustment charges which are now being demanded, it is not necessary to reiterate the facts which have already been referred to hereinabove.

(28) In support of the contention that the respondents should be injuncted from Realizing the additional fuel adjustment chargas, it has been submitted on behalf of the petitioners that prima facie the demand is illegal. In this connection it was contended that the amount which is now being demanded has not been calculated in accordance with the prescribed formula because, it is submitted, the fuel adjustment charges can be demanded, even provisionally, only on the basis of the actual cost of fuel consumed or the energy purchased. The demand cannot, it is submitted, be based on the budget estimates which are only provisional and which are projections for the future. It is also the case of the petitioners that the balance of convenience is also in their favor.

(29) Shri V. P. Singh, on the other hand, has strongly contended that even though the budget estimates are based on provisional actual cost but, in any case, it is permissible to the respondents to demand fuel adjustment charges calculated on the basis of the budget estimates. It is also contended by the learned counsel that the formula laid down in the Tariff for calculating the fuel adjustment charges is not applicable while fixing the said charges provisionally though, in the present case, the said formula has in fact been followed.

(30) To my mind, the aforesaid contentions which have been raised are those which have to be gone into and decided by the arbitrator. For the purpose of deciding this application what has ordinarily to be seen is whether the petitioners have been able to make out a prima facie case for the grant of interim relief and, further, in whose favor is the balance of convenience.

(31) Both the petitioners as well as the respondents have placed on record their figures calculating as to what amount can be charged by way of fuel adjustment charges. The fuel adjustment charges are to be computed by D.E.S.U. on the basis of the figures available with it. As already noted, the figures which have been placed on record by Desu do indicate that the fuel adjustment, charges being demanded by it are in accordance with the said formula. In the affidavit of Shri T. D. Kathuria, Assistant Executive Engineer (Commercial), Delhi Electric Supply Undertaking dated 21st September, 1983 it has been stated that the fuel adjustment charges, which arc being demanded at 29.95 P. per unit (provisional), have been worked out in accordance with the said formula. Till the petitioners conclusively show before the Arbitrator that this figure has not been arrived at as per the Tariff, it will not be proper for me, at this stage, to disbelieve the affidavit of Shri Kathuria and to stay the entire additional demand which is being raised.

(32) In such cases it is importance to see the balance of convenience. Reference may usefully be made to the decision of the Supreme Court in the case of The Municipal Corporation of Delhi v. Suresh Chandra Jaipuria and another, : [1977]2SCR10 . In that case demand for house tax was disputed by the respondents. They filed a suit and prayed for an interim injunction. The trial Judge vacated the interim injunction which was granted and an appeal was filed to the Appellate Court. The Supreme Court then quoted the following findings of the Appellate Court on the question of balance of convenience :

'THE balance of convenience is also in favor or the defendant. The defendant renders services, as a civic body and most of the amount which it spends has to come from owners of property 'in the form of property taxes. If the plaintiffs do not pay the property tax then the defendant might not be able to carry out its duty. The plaintiffs have also been unable to show that they would suffer irreparable injury if an injunction is not granted to them. If they ultimately prove that they are not liable to pay full amount demanded by the defendants as property tax then the plaintiffs could compel the defendant either to refund the amount realised in excess or to adjust the amount recovered in excess towards property tax for future years. The plaintiffs do not suffer irreparable injury if they are not granted the temporary injunction'.

The High Court, while agreeing with' the view of the appellate court that the balance of convenience was in favor of discharging the interim injunction, nevertheless held that prima facie the assessment had been erroneously made and accordingly the High Court had observed that the principles of balance of convenience did not apply. The Supreme Court, however, held that the balance of convenience could not be ignored in such cases and that the High Court had erred in holding that it could be. . It is clear from the aforesaid that the observations of the appellate court were approved. ,

(33) To my mind also, the balance of convenience would demand that respondent No. I, which is a public utility service, should not unnecessarily be deprived of 'funds when it cannot, on the face of it, be said that the demand being raised by Desu is highly unreasonable or illegal. In this connection judicial notice can be taken of the fa:t that ordinarily when there is an increase in such tariff the burden is usually passed on to the consumer by the manufacturer who has to pay more for the electricity .More often than not, the increase in tariff or charges is not paid by the manufacturer, like the petitioners, out of its own pocket. Such increase is usually taken into account, along with the prices of the other raw-materials, while fixing the sale price. Furthermore, as per the aforesaid they would have had to pay in other Metropolitan Cities of Bombay, Madras and Calcutta. Furthermore, as per the aforesaid affidavit of Shri Kathuria the Lip consumers, like the petitioners, in Delhi are getting electricity at lower rates than Bombay, Madras and Calcutta. Itis, thereforee, not unjust or unfair, at this stage, to ask the petitioners to pay the demands of electricity.

(34) It was also contended that the aforesaid tariff does not permit the provisional charges to be made with retrospective .effect. The tariff empowers the Desu Management to fix the charges provisionally from time to time.the said charges are to be incorporated as a part of the monthly bill. The said clause does not specifically permit or prohibit the demand of provisional charges with retrospective effect. The question as to how this clause is to be interpreted has to be decided by the arbitrator. For the purposes of deciding this application, however, it is sufficient, to my mind, to refer to the decision in the case of M/s Shriram Bearing Ltd. v. Bihar State Electricity Board. : AIR1982Pat91 . In that case also the Board had the power to raise provisional bills. Dealing with a similar question, namely, that provisional charges cannot be realised with retrospective effect, the Patna High Court, while considering a clause similar to the present, observed as follows : -

'FROM the aforesaid clause it is apparent that till actual calculation of the fuel charge for a financial year in the manner laid down in the Tariff is made, a fuel surcharge during that financial year will be levied at a rate provisionally calculated. This is an enabling provision under which the Board can issue a provisional bill and difference. if any, with the final bill, can the adjusted later. It also presupposes that such bills arc submitted within the financial year in question. To that extent there has been a breach of the said provision in the present cases. But, can such provisional bills be quashed or be declared to be invalid being in contravention of requirement of Clause 16-7-4? This leads to the question whether the said provision is mandatory or directory. In my view, it cannot be held to be mandatory so as. to mollify the bills solely on this ground. It is well known that merely because a Statute provides a time limit for performance of an act or duty, such provision cannot the held to be mandatory.'

The aforesaid judgment was affirmed in appeal in Ms. Rohtas Industries Ltd. v. Chairman, B.S.E.B., : [1984]3SCR59 . In view of the aforesaid observations, with which I see no reason to disagree for the present, no exception can be taken to the demands which have been made in this case with retrospective effect.

(35) It has also been averred by Shri Kathuria in his affidavit that the generation cost in 1982-83 was 48.33P. per unit. After adding to it the other charges, the cost of Desu, according to Mr. V. P. Singh, was 60.48P. per unit. According to the learned counsel what is now being demanded from the petitioners is much less. He submitted that in fact respondent No. I is incurring a loss. It is not necessary to go into the correctness of this averment but I have referred to this submission only for the reason that the balance of convenience is,. in my opinion, in favor of D. E. S, U.

(36) In arriving at the aforesaid conclusion I have borne in mind the observations of the Supreme Court in a recent decision in the case of Siliguri Municipality and others v. AmalenduDas and others, : [1984]146ITR624(SC) . In that case the Calcutta High Court had restrained the Siliguri Municipality from recovering a gradual consolidated rate on the annual value of the holdings. The Supreme Court observed at page 438 as follows :

'WE are constrained to make the observations which follow as we do deal dismayed at the tendency on the part of some of the High Courts to grant interlocutory orders for the mere asking, Normally, the High Courts should not as a rule, in proceedings under Article 226 of the Constitution grant any stay of recovery of tax save under very exceptional circumstances. . The. grant of stay in such matters, should be an exception and not a rule.'

The observations of the Supreme Court made in connection with the proceedings under, Article 226 of the Constitution would apply with equal force to .the proceedings under Order 39 Rules I and 2 Civil Procedure Code At page 439 the Supreme Court also observed as follows :

'THE main purpose of pasting an interim order is to evolve a workable formula or a Workable arrangement to the extent called for by the demands of the situation keeping in mind the presumption regarding the constitutionality of the legislation and the vulnerability of the'challenge, only in order that no irreparable injury is occasioned. The Court has thereforee to strike a delicate balance after considering the pros and cons of the matter lest larger public interest Is not jeopardized and institutional embarrassment is eschewed.'

The. Supreme Court with - great. force emphasised that the Courts.should be slow in granting injunctions incases like this. At page 438 the Supreme Court held as follows:

'It's needless to stress that a levy or impost' does not become bad as soon as a writ petition is instituted in order to assail the validity of the levy. So also there is no warrant for presuming the levy to be bad at the very threshold of the proceedings. The only consideration at that juncture is to ensure that no prejudice is occasioned to the rate payers in case they ultimately succeed at the conclusion of the proceedings. This object can be attained by requiring the body or authority levying the- impost to give an undertaking to refund or adjust against future dues, the levy of tax or rate or a part thereof, as the case may. be, in the event of the entire levy or a part thereof being ultimately held to be Invalid by the court without obliging the tax-payers to institute a civil suit in order to claim the amount already recovered from them. On the other hand, the Court cannot be unmindful of the need to protect the authority levying the tax, for, challenge may or may not succee. The Court has to show awareness of the fagot that in a case lik the present a municipality cannot function or meet its financial obligations if its source of revenue is blocked by an interim order restraining the municipality from recovering the taxes as per the impugned provision. And that the municipality has to maintain essential civic services like water supply, street lighting and public streets etc.. apart from running public institutions like schools, dispensaries, libraries etc, What is more, supplies have to be purchased and salaries have to be paid. The grant of an interlocutory order of this nature would paralyze the administration and dislocate the entire working of the municipality. It seems that these serious ramifications of the matter were lost sight of while making the impugned order. '

(37) - Following the dictum laid down by the Supreme Court in the aforesaid case, in my opinion, this is not a lit case where the injunction prayed for should be granted. In order, however, that the. interests of the petitioners are protected it is directed that in the event of the petitioners succeeding and if it is held that any part of the additional fuel adjustment charges. is not in accordance with the law then the excess amount so realised will either be refunded by the respondents or, at the option of the petitioners, be adjusted against future demands. In addition thereto, in such eventuality arising, the petitioners would also be entitled to interest at the rate of 18% per annum calculated from the date of the payment made by the till the date of repayment or adjustment, as the case may be.

(38) With the aforesaid observations the application for interim relief is disposed of and the interim orders staying Seriallization of additional fuel adjustment charges are vacated. The petitioners are, however, ranted four weeks' time to pay the amount which had been stayed. Parties to bear their own costs.


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