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Hindustan Ferro Alloys Ltd. v. The Executive Engineer, U.P State Electricity Board And Others
Factual and Procedural Background
The petitioner is a public limited company that established a ferro-silicon/ferro-alloys factory in District Hamirpur and applied for a 5000 KVA power connection. The U.P. State Electricity Board ("the Board") sanctioned the connection and an agreement was executed between the parties.
The petitioner filed multiple writ petitions challenging electricity bills and a disconnection order: Writ Petition No. 16810 of 1990 challenged bills for April and May 1990; Writ Petitions Nos. 201 of 1992, 23594 of 1992 and 642 of 1993 challenged bills for other periods; Writ Petition No. 8028 of 1991 (and others) included a prayer for mandamus to compel the Board to implement government concessions for new industries; and Writ Petition No. 35691 of 1993 challenged an order of disconnection of electricity.
The petitions arose after the Government of U.P. decided in April 1990 to grant incentives to new industries, including exemption from minimum consumption guarantee charges for five years, and issued a Government Order dated 15-10-1990. The Board's bills nevertheless included minimum consumption charges, prompting the writ petitions.
Legal Issues Presented
- Whether the Board is estopped by the rule of estoppel from charging minimum consumption guarantee charges.
- Whether the Government of U.P.'s April 1990 policy and G.O. dated 15-10-1990, granting concessions to new industries, are binding on the Board and obligate the Board to give the concessions announced therein.
- Whether, under Section 22 and Clause VI of the Schedule of the Indian Electricity Act, the Board can impose minimum consumption charges in excess of 15% of the cost of the service line required to comply with the requisition.
- Whether the Board validly determined and sought recovery of Rs. 2,998,139.32p without giving the petitioner notice and an opportunity to be heard.
- Whether the Board lawfully disconnected the petitioner's electricity supply without giving the statutory notice required by the Act.
Arguments of the Parties
Petitioner's Arguments
- The Board is estopped, by the rule of estoppel, from charging minimum consumption guarantee charges.
- The April 1990 Government policy (and the Government Order dated 15-10-1990) granting concessions to new industries is binding on the Board and the Board must give the concessions (including exemption from minimum consumption guarantee charges for five years).
- Section 22 and Clause VI of the Schedule to the Indian Electricity Act limit minimum consumption charges such that the Board cannot impose minimum consumption charges exceeding 15% of the cost of the service line required to comply with the requisition; reliance was placed on the proviso to Section 22 read with Clause VI.
- In respect of the disconnection, the petitioner argued (i) the amount sought to be recovered was determined arbitrarily by the Board without giving any opportunity of hearing, and (ii) the electricity supply cannot be disconnected without giving the petitioner notice as required by statute.
The opinion does not contain an itemized or detailed narrative of the Board's affirmative legal arguments in opposition; instead the Court refers to prior decisions and statutory provisions in rejecting or accepting contentions.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sarvodya Ispat Pvt. Ltd. v. U.P. State Electricity Board, (1993) 1 Civil & Revenue Cases Reporter 658 | Decision rejecting contentions similar to the petitioner's first two points (estoppel and binding effect of Government policy). | The Court relied on this Division Bench decision to conclude that the petitioner's first two submissions had already been decided against the petitioner and therefore those points failed. |
| D.C.M. Ltd. v. Assistant Engineer, AIR 1988 Raj 64 | Interpreted proviso to Clause VI of the Schedule and proviso to Section 22 to limit a consumer's liability for minimum charges to not more than 15% of the cost of service line required to comply with the requisition. | The Court observed that although this decision supported the petitioner's contention, it did not take into account the effect of the first proviso to Section 26 of the Electricity (Supply) Act, 1948; consequently the Court declined to follow it. |
| State of U.P. v. Hindustan Aluminium Corporation, (1979) 3 SCC 229 : AIR 1979 SC 1459 | Held that Section 22 of the Indian Electricity Act is not applicable to the U.P. State Electricity Board; Clause VI of the Schedule applies subject to the second proviso to Section 26 of the 1948 Act. | The Court relied on this Supreme Court decision to hold that Section 22 cannot be applied to the Board and that Clause VI is applicable only where distribution mains have been laid and supply commenced (i.e., subject to the second proviso to Section 26). |
| Hari Shankar v. U.P.S.E.B., AIR 1974 All 70 | Held that the Board has power to fix minimum consumption guarantee charges under Section 49 of the Electricity (Supply) Act, 1948, because the term "tariff" in Section 49 includes the power to fix such charges. | The Court cited this Division Bench decision to support the conclusion that the Board's power to fix minimum consumption charges arises under Section 49 of the 1948 Act rather than under Section 22/Clause VI of the Schedule to the Indian Electricity Act. |
| Bhagwan Industries v. U.P.S.E.B., AIR 1979 All 249 | Adopted the same view as in Hari Shankar that the Board can fix minimum consumption guarantee charges under Section 49. | The Court cited this decision as additional in-court authority supporting the Board's power under Section 49. |
| Bihar S.E.B. v. Green Rubber Industries, (1990) 1 SCC 731 : AIR 1990 SC 699 | The Supreme Court affirmed the decisions (such as Hari Shankar and Bhagwan Industries) that the Board's power to fix minimum consumption charges is under Section 49. | The Court relied on this Supreme Court affirmation to conclude that the Board has power to fix minimum consumption guarantee charges under Section 49 (and not under Section 22 read with Clause 71 of the Schedule as argued by petitioner). |
| Municipal Corporation, Delhi v. Ajanta Iron Steel Co., (1990) 2 SCC 659 : AIR 1990 SC 882 | Held that electric supply should not be disconnected by the Board without any notice to the consumer. | The Court invoked this Supreme Court decision to support the conclusion that the Board cannot disconnect supply without giving the notice required by Section 24 (seven clear days' written notice). |
Court's Reasoning and Analysis
The Court proceeded in a sequential analysis addressing the petitioner's multiple contentions and the separate challenge to disconnection.
1. Rejection of estoppel and government-policy binding submissions: The Court noted that the petitioner's first two submissions (estoppel and binding effect of Government concessions) had already been rejected by a Division Bench in Sarvodya Ispat Pvt. Ltd. v. U.P. State Electricity Board. On that basis the Court held those points against the petitioner.
2. Applicability of Section 22 and Clause VI: The petitioner relied on the proviso to Section 22 read with Clause VI of the Schedule to contend that minimum charges could not exceed 15% of the cost of the service line. The Court examined Section 26 of the Electricity (Supply) Act, 1948, which, by its first proviso, makes Section 22 of the Indian Electricity Act not applicable to the Board. The second proviso to Section 26 makes Clause VI of the Schedule applicable to the Board only in areas where distribution mains have been laid and supply through them has commenced.
3. Treatment of contrary authority: The Court observed that the Rajasthan High Court decision in D.C.M. Ltd. supported the petitioner's reading (limiting minimum charges to 15%), but that decision did not consider the effect of the first proviso to Section 26 (making Section 22 inapplicable to the Board). Consequently, the Court declined to follow D.C.M.
4. Source of Board's power to fix minimum consumption charges: The Court referred to this Court's decisions in Hari Shankar and Bhagwan Industries, which held that the Board has power to fix minimum consumption guarantee charges under Section 49 of the Electricity (Supply) Act, 1948 (because "tariff" in Section 49 includes such power). These in-court decisions were affirmed by the Supreme Court in Bihar S.E.B. v. Green Rubber Industries. Based on those authorities and the effect of Section 26 of the 1948 Act, the Court concluded that the Board's power to impose minimum consumption charges arises under Section 49 and not under Section 22 read with Clause VI of the Schedule.
5. Consequence for the writ petitions challenging bills: Given the foregoing statutory interpretation and precedents, the Court found that the writ petitions challenging the electricity bills (Writ Petitions Nos. 16810/1990, 8028/1991, 201/1992, 23594/1992 and 642/1993) lacked merit and were liable to be dismissed.
6. Challenge to the determination of liability and disconnection (Writ Petition No. 35691 of 1993): The Court examined the facts that the Board issued a notice dated 27-9-1993 asserting that a previously dismissed writ required the petitioner to pay Rs. 2,998,139.32p and that, in the event of default, supply would be disconnected. The petitioner asserted the Board disconnected supply on 27-9-1993 even before issuing the notice and contended (a) the amount was determined arbitrarily without hearing, and (b) disconnection cannot be effected without due notice.
The Court found that although the consumer may be liable to pay amounts arising from the dismissal of a writ (and the balance must be paid), the quantum of liability had to be determined by the Board after giving notice and consultation with the consumer. The Board's unilateral determination of the liability (Rs. 2,998,139.32p) without notice or opportunity to be heard could not be sustained.
The Court further relied on Section 24 of the Indian Electricity Act, which requires the licensee to give not less than seven clear days' written notice before cutting off supply for non-payment, and on the Supreme Court's decision in Municipal Corporation, Delhi v. Ajanta Iron Steel Co., which held that electric supply should not be disconnected without any notice. For these reasons the Court held the disconnection order unsustainable.
7. Relief and directions: The Court allowed Writ Petition No. 35691 of 1993, quashed the disconnection order dated 27-9-1993, and directed that the respondents determine the petitioner's liability after giving notice within one month from presentation of a certified copy of the judgment; the petitioner was directed to present itself to respondent No.1 within two weeks to get liability determined. The Court noted that by interim order the connection had been restored on the deposit of Rs. 15 lacs, which the petitioner had deposited, and directed that this sum be adjusted against the eventual demand.
Holding and Implications
Core Rulings:
- Writ Petitions Nos. 16810 of 1990, 8028 of 1991, 201 of 1992, 23594 of 1992 and 642 of 1993: DISMISSED (with costs).
- Writ Petition No. 35691 of 1993: ALLOWED (with costs); the impugned order of disconnection dated 27-9-1993 is quashed.
Direct consequences and directions ordered by the Court (as stated in the opinion):
- Respondents are directed to determine the petitioner's liability after giving notice to the petitioner within one month from the presentation of a certified copy of the judgment before respondent No.1.
- The petitioner is directed to approach respondent No.1 within two weeks from the date of the judgment to have its liability determined.
- The amount so determined shall be paid by the petitioner at the earliest; the Rs. 15 lacs already deposited by the petitioner shall be adjusted while creating a demand against it.
- In the event of non-payment of the determined demand by the petitioner, it will be open to the respondents to recover the same by coercive process and to take action for disconnection of electric supply in accordance with law.
The opinion applies and interprets existing statutory provisions and precedent; it does not purport to announce any novel legal principle beyond the application of cited authorities. The broader legal consequence is limited to the direct effects on the parties as ordered above.
R.A Sharma, J.:— Petitioner is a public Limited Company. It established a factory in District Hamirpur for manufacturing ferro silicon/ferro alloys. For running its factory it applied for power connection of 5000 KVA and the U.P State Electricity Board (hereinafter referred to as the Board) sanctioned the same and an agreement was executed by the petitioner with the Board for that purpose.
2. Petitioner filed Writ Petition No. 16810 of 1990, challenging the electricity bills sent to it by the Board for the months of April and May, 1990. Writ Petitions Nos. 201 of 1992, 23594 of 1992 and 612 of 1993 were filed by the petitioner, challenging the electricity bills issued to it by the Board for various other periods. In all the above writ petitions as well as in Writ Petition No. 8028 of 1991 prayer for writ of mandamus commanding the Board to comply with the policy decision of the Government, granting concessions to new industries has also been made. Writ petition No. 35691 of 1993 has been filed by the petitioner, challenging the order of disconnection of electricity.
3. Government of U.P decided in April, 1990 to give incentives/concessions for establishment of new industries in various districts of this State. One of the concessions was exemption from payment of minimum consumption guarantee charges for a period of five years for new industries. In pursuance of the above policy, the Government issued an order dated 15-10-1990. As the bills issued by. The Board included the minimum Consumption charges also, the petitioner has filed these writ petitions, challenging the above action of the Board.
4. Learned counsel for the petitioner in support of the petitions has made three submissions. Namely, (i) the Board is estopped by Rule of Estoppel from charging the minimum consumption charges, (ii) the policy decision of the Government of April 1990 and as contained in G.O dated 15-10-1990 is binding on the Board and it has to give the concessions announced thereby; and (iii) in any case in view of Section 22 and Clause VI of the Schedule of the Indian Electricity Act (hereinafter referred to as the Act) Board cannot impose minimum consumption charges more than 15% of the cost of service line required to comply, with the requisition.
5. The first two points raised by the learned counsel for the petitioner have been decided against it by a Division Bench of this Court in the case of Sarvodya Ispat Pvt. Ltd. v. U.P State Electricity Board, (1993) 1 Civil & Revenue Cases Reporter 658, wherein similar contentions were rejected.
6. As regards the third submission, learned counsel for the petitioner has placed reliance on proviso to Section 22 read with Clause VI of the Schedule of the Act. According to the proviso to Section 22, a licensee is entitled to demand and realise such minimum annual sum as will give him reasonable return on the capital expenditure and will cover other standing charges incurred by him in order to meet the possible maximum demand of the consumer. Proviso (a) to Clause VI of the Schedule lays down that the licensee is to Supply the power on the basis of a written contract with sufficient security to be given by the consumer binding himself to take supply of energy for not less than two years to such, an amount not exceeding 15% of the cost of service, line required to comply with the requisition.
7. In view of the first proviso to Section 26 of the Electricity (Supply) Act, 1948, Section 22 of the Act does not apply to the Board. Second proviso to the same Section lays down that Clause 71 of the Schedule will apply to the Board in respect of that area where distribution mains have been laid by the Board and the supply of energy through any of them has commenced. Section 26 of the Act is reproduced below:
“26. Board to have powers and obligations of licensee under Act 9 of 1910. Subject to the provisions of this Act, the Board shall, in respect of the whole State, have all the powers and obligations of a licensee under the Indian Electricity Act, 1910 (9 of 1910) and this Act shall be deemed to be the licence of the Board; for the purposes of that Act;
Provided that nothing in Sections 3 to 11, sub-sections (2) and (3) of Section 21 and, Section 22, sub-section (2) of Section 22A, and Sections 23 and 27 of that Act or in Clauses I to V Clause VII and Clauses IX to XII of the Schedule to that Act relating to the duties and obligations of a licensee shall apply to the Board.
Provided further that the provisions of Clause VI of the Schedule to the Act shall apply to the Board in respect of that area where distribution mains have been laid by the Board and the supply of energy through any of them has commenced.”
8. As nothing contained in Section 22 of the Act can be applied to the Board, and no foundation has been laid by the petitioner in his petitions for applying Clause VI of the Schedule. This submission of the learned counsel is also devoid of merit.
9. Learned counsel for the petitioner, has, however in this connection, placed reliance on a decision of Rajasthan High Court in D.C.M Ltd. v. Assistant Engineer, AIR 1988 Raj 64 in which it was laid down asunder (at p. 72 of AIR):
“The first proviso in Cl. VI of the Schedule and the proviso in Section 22 of this Act clearly indicate that the liability of the consumer is to pay the minimum charges which would ensure a reasonable return on the capital expenditure incurred by the Board to meet the possible minimum demand of the consumer and this amount as indicated by the first proviso to Cl. VI should not exceed 15% of the cost of services line required to comply with the requisition of the consumer.”
10. Although this decision of Rajasthan High Court supports the contention of the petitioner; but it has been rendered without taking into consideration the effect of the first proviso to Section 26 of the Electricity (Supply) Act, 1948, whereby Section 22 of the Act has been made non-applicable to the Board. By second proviso, the applicability of. Clause VI of the Schedule has been made, dependent on laying of the mains by the Board for supply of energy. Supreme Court in State of U.P v. Hindustan Aluminium Corporation, (1979) 3 SCC 229 : AIR 1979 SC 1459 has after considering the relevant provisions held that, Section 22 of the Act is not applicable to the Board. The relevant passage, as is contained in paragraph 20 of the judgment of the Supreme Court is reproduced below:
“While, therefore, the U.P.S.E.B Is a licensee under the Act, it will be suficient, for purpose of the controversy before us, to say that Section 22 of the Act is not applicable to it, and Clause VI of the Schedule is applicable to it subject to the restrictions contained in the second proviso to Section 26 of the Act of 1948. So even though the Board is a licensee the obligation under Section 22 of the Act to supply energy to every person with in the area of its supply is not fastened on it.”
11. In view of the above, it is not possible to follow the decision of Rajasthan High Court.
12. In Hari Shankar v. U.P.S.E.B, AIR 1974 All 70 a Division Bench of this Court has laid down that the Board has the power to fix minimum consumption guarantee charges under Section 49 of the Electricity (Supply) Act, 1948, as the word ‘tariff’ in the above Section includes the power to fix minimum consumption guarantee charges. Another Division Bench in Bhagwan Industries v. U.P.S.E.B, AIR 1979 All 249 has taken the same view. The, above two decisions of this Court have been affirmed by the Supreme Court in Bihar S.E.B v. Green Rubber Industries, (1990) 1 SCC 731 : AIR 1990 SC 699. For the reasons given above the Board has the power to fix the minimum consumption guarantee charges under Section 49 of the Electricity (Supply) Act, 1948 and not under-Section 22 read with Clause 71 of the Schedule of the Act.
13. Writ Petitions Nos. 16810 of 1990, 8028 of 1991, 201 of 1992, 23594 of 1992 and 642 of 1993, as such, lack force and are liable to be dismissed.
14. As regards Writ Petition No. 35691 of 1993, it may be mentioned that a notice dated 27-9-1993 was issued to the petitioner by the Board stating therein that Writ Petition No. 8140 of 1990 filed by it challenging the new tariff has been dismissed and as such, it has to pay a sum of Rs. 2998139.32p and in the event of default his supply will be disconnected without any information. It has been asserted by the petitioner that the electricity supply was disconnected at the petitioner's premises on 27-9-1993 itself by the Board even before the above notice was given to the petitioner.
15. Learned counsel for the petitioner has made two submissions in support of this petition, namely, (i) the amount, which is sought to be recovered from the petitioner has been determined arbitrarily by the Board without giving any opportunity of hearing to it: and (ii) electric supply cannot be disconnected without giving any notice to the petitioner.
16. Although the writ petition referred to in the impugned notice was not filed by the petitioner; but it is admitted by the petitioner that another Writ Petition was filed by it assailing the tariff, which was dismissed. As there was a stay order in the writ petition on account of which the enhanced tariff could not be charged, petitioner has to pay the balance amount after the dismissal of its writ petition. But what would be this amount, has to be determined by the Board in consultation with the consumer. Even though the consumer is liable to pay but the actual amount of the liability has to be determined by the Board after giving him a notice. In the instant case no such notice was given to the petitioner and the Board unilaterally without any opportunity to the petitioner, has determined the, liability of Rs. 2998139.32 P. This action of the Board cannot be sustained.
17. The second submission of the learned counsel is also liable to be accepted. Section 24 of the Act lays down that if a person is negligent to pay any charge for energy, the licensee may, after giving him not less than clear seven days' notice in writing, cut off supply and disconnect the electric supply Line. This Section places an obligation on the Board not to disconnect the electric supply without notice to the consumer. Supreme Court in Municipal Corporation, Delhi v. Ajanta Iron Steel Co., (1990) 2 SCC 659 : AIR 1990 SC 882 has laid down that the electric supply should not be disconnected by the Board without any notice to the consumer.
18. For the reasons given above, this writ petition is liable to be allowed and the order of disconnection dated 27-9-1993 is to be quashed. By interim order, this Court has directed the restoration of electric supply to the petitioner subject to payment of Rupees fifteen lacs. Learned counsel for the petitioner has stated that this amount has already been deposited by the petitioner and electric connection has been restored.
19. Writ Petitions Nos. 16810 of 1990, 8028 of 1991, 201 of 1992, 23594 of 1992 and 642 of 1993 are dismissed with costs.
20. Writ Petition No. 35691 of 1993 is allowed with costs. The impugned order dated 27-9-1993 is quashed. Respondents are directed to determine the liability of the petitioner after giving notice to it within a period of one month from the date of presentation of certified copy of this judgment before respondent, No. 1. Petitioner is directed to approach the said respondent within two weeks from today for getting his liability determined. The amount so determined by respondent No. 1 shall be paid by the petitioned at the earliest. The sum of Rupees fifteen lacs which has already been deposited by the petitioner, shall be adjusted while creating a demand against it. In the event of non-payment of the demand, so determined, by the petitioner, it will be open to the respondents to recover the Same by coercive process and take action for disconnection of electric supply in accordance with law.
21. Order accordingly.
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