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Case Number

Civil Writ Jurn. Case No. 1751 of 2000

Judges

M.Y Eqbal, J.

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The petition sought quashing of a bill dated 12-5-2000 assessing Annual Minimum Guarantee (A.M.G.) Charges for the financial year 1999-2000. The petitioner contended that the bill wrongly included A.M.G. Charges for a 240-day period during which the petitioner’s electrical line was not in operation because the respondent Board had disconnected the supply. The matter was heard by counsel for both parties; with their consent the writ application was disposed of at the stage of hearing. The court directed that the petitioner should make a representation under Clause 13 of the High Tension (H.T.) Agreement, and that any such claim would be decided in accordance with law.

Legal Issues Presented

Whether the petitioner is liable to pay Annual Minimum Guarantee (A.M.G.) charges for periods during which there was no supply of electricity because the line had been disconnected by the Board.
Whether, when making a representation/claim under Clause 13 of the H.T. Agreement against the disputed bill, the petitioner is required to deposit 50% of the amount of the disputed bill.
Relatedly, whether mere disconnection of supply by the Board amounts to termination of the supply contract (the H.T. Agreement) or whether the contract continues unless terminated in accordance with its terms.

Arguments of the Parties

Petitioner's Arguments

The A.M.G. Charges for the 240-day period when there was admittedly no electric connection on account of disconnection by the Board do not arise; therefore the bill is illegal and without jurisdiction for that period.
When the supply was disconnected, the agreement between the parties came to an end; on that basis the petitioner argued it was not liable to deposit 50% of the disputed bill while making a claim under Clause 13 of the H.T. Agreement.
The petitioner relied on two decisions of the Patna High Court: Rajeshwar Singh v. State of Bihar (AIR 1983 Patna 194; 1983 BLJ-508) and Dipte Input v. Bihar State Electricity Board (1987 Bihar LJ 494) to support the proposition that no A.M.G. charges are payable during periods with no supply/connection.

Respondent-Board's Arguments

The consumer is liable to pay A.M.G. Charges so long as the Agreement exists, irrespective of whether electricity was actually supplied to the premises during particular periods.
The respondent maintained that while the petitioner makes a claim/representation under Clause 13 of the H.T. Agreement, the petitioner must deposit 50% of the disputed bill amount as a condition of proceeding with that claim.
The respondent relied upon Supreme Court authority: Bihar State Electricity Board v. Green Rubber Industries (AIR 1990 SC 699) and G.M.-cum-Chief Engineer, B.S.E.B. v. Rajeshwar Singh (AIR 1990 SC 706) to support the enforceability of minimum guaranteed charge clauses and the proposition that mere disconnection does not automatically terminate the contract.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Rajeshwar Singh v. State of Bihar (AIR 1983 Patna 194; 1983 BLJ-508)	Division Bench held that petitioner had no liability to pay A.M.G. Charges for periods when there was no supply/connection to the factory premises.	The court noted this decision but recorded that it has been set aside by the Supreme Court (in G.M.-cum-Chief Engineer, B.S.E.B. v. Rajeshwar Singh, AIR 1990 SC 706) and must be confined to its facts; therefore petitioner’s reliance on this decision cannot be accepted as overruling the later Supreme Court view.
Dipte Input v. Bihar State Electricity Board (1987 Bihar LJ 494)	Single Bench decision expressing a similar view to the Division Bench in Rajeshwar Singh that A.M.G. Charges were not payable when there was no supply.	Mentioned as earlier supporting authority for the petitioner’s position; the court treated it as being similar in effect to Rajeshwar Singh but subject to the Supreme Court’s later pronouncements.
Bihar State Electricity Board v. Green Rubber Industries (AIR 1990 SC 699)	Supreme Court explanation that standard-form supply agreements with minimum guaranteed charges are enforceable; reasonableness of such clauses; overhead and installation costs justify minimum charges; contractual relation persists until agreement ends; a firm is liable for minimum charges unless the contract itself is shown to have been terminated.	The court relied on this decision as controlling authority for the proposition that A.M.G. Charges are payable unless the contract is terminated; the decision was used to reject the petitioner's argument that disconnection alone extinguishes liability.
G.M.-cum-Chief Engineer, B.S.E.B. v. Rajeshwar Singh (AIR 1990 SC 706)	Supreme Court set aside the Division Bench decision in Rajeshwar Singh and held (inter alia) that mere disconnection does not amount to termination of contract; if there is no application for restoration within seven days of disconnection it may be deemed a notice for termination; liability must be determined in light of these principles.	The court relied on the Supreme Court’s finding that the Rajeshwar Singh Division Bench decision was set aside and that the correct principle is that the contract continues unless terminated under its terms; this supported the court’s conclusion that the petitioner could not avoid liability for A.M.G. Charges by relying on the earlier Patna High Court Division Bench decision.
A. Schroeder Music Publishing Co. Ltd. v. Macaulay ((1974) 3 All ER 616)	Authority cited by the Supreme Court on the enforceability and reasonableness presumption of widely used standard form contractual clauses.	Referred to (via the Supreme Court's discussion in Green Rubber Industries) as part of the reasoning endorsing enforceability of standard-form contractual provisions like minimum guaranteed charges; the Patna court relied on the Supreme Court's citation of this authority when applying that reasoning to the present dispute.
Northern Ontario Power Co. Ltd. v. Laroche Mines Ltd. (1938) 3 All ER 755	Authority cited in the Supreme Court’s discussion to show that terms of supply agreements affect consumers with whom they are made.	Referred to in the Supreme Court’s analysis (quoted in the opinion) to support the contractual character of supply agreements; the Patna court relied on the Supreme Court’s reliance on this authority when assessing contractual obligations such as minimum guaranteed charges.

Court's Reasoning and Analysis

The court proceeded by examining the competing contentions and the authorities relied upon. Key elements of the court’s reasoning as set out in the opinion are:

The court noted the petitioner’s factual claim that there was no electric connection for 240 days because the Board had disconnected supply, and the petitioner’s submission that consequently A.M.G. Charges for that period could not be levied.
The court examined earlier Patna High Court authority (Rajeshwar Singh and Dipte Input) that supported the petitioner’s position but observed that the Supreme Court had considered and limited or set aside some aspects of that authority.
The court relied principally on the Supreme Court decisions (Green Rubber Industries and G.M.-cum-Chief Engineer, B.S.E.B. v. Rajeshwar Singh) that analyze standard-form supply agreements and the enforceability of minimum guaranteed charge clauses. The Supreme Court’s analysis, as quoted in the opinion, emphasized:
- standard-form contracts are widely used and their terms are ordinarily binding;
- minimum guaranteed charges can be reasonable because the Board incurs fixed overheads and installation costs which continue until the agreement ends;
- the mere disconnection of supply does not automatically terminate the contract; termination depends on the contract's terms (including rules about restoration or failure to apply for restoration within specified time periods, e.g., seven days, which may amount to deemed notice for termination).
Because the Division Bench decision in Rajeshwar Singh had been set aside by the Supreme Court (in the case reported at AIR 1990 SC 706), the court concluded that the petitioner could not rely on that earlier Patna Division Bench decision to avoid liability for A.M.G. Charges.
Applying those precedents, the court held that liability to pay A.M.G. Charges remains unless the contract is shown to have been terminated in accordance with its terms; therefore the petitioner’s contention that disconnection alone eliminated liability was not acceptable on the facts before the court.
As regards procedure for resolving the billing dispute, the court accepted the parties' agreement that the petitioner should make a representation under Clause 13 of the H.T. Agreement and that the respondent should decide that representation in accordance with law—but the court also applied the contractual/legal rule that the petitioner must deposit 50% of the disputed amount when filing such a claim under Clause 13 (as contended by the respondent and required by the agreement/practice applied by the Board).

Holding and Implications

Holding: The writ application was disposed of, with directions to the parties. The court's core rulings were as follows:

DISPOSITION: The writ application is disposed of with a direction that the petitioner shall make a claim/representation under Clause 13 of the H.T. Agreement against the disputed bill.

DEPOSIT REQUIREMENT: If the petitioner makes such a claim/representation, it must deposit 50% of the disputed amount along with the claim.

CONSIDERATION AND DECISION: The concerned respondent (the Board) shall consider the petitioner’s claim/representation and dispose of it by passing a reasoned order in accordance with law after giving the petitioner a reasonable opportunity of hearing.

Implications

Direct effect on the parties: The bill is not quashed at this stage; instead the petitioner must pursue the contractual remedy (Clause 13 representation) and must deposit 50% of the disputed amount to have that representation considered.
Precedential impact: The court applied existing Supreme Court authorities (notably AIR 1990 SC 699 and AIR 1990 SC 706) to reject the petitioner’s reliance on earlier Patna High Court decisions. The opinion does not purport to create new law; it follows and applies the Supreme Court’s rulings, and notes that the earlier Division Bench decision relied upon by the petitioner has been set aside by the Supreme Court.

Order: The court concluded with the direction described above and ordered accordingly.

Order accordingly.

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Rishi Cement Co. Ltd. v. Bihar State Electricity Board, And Others

1. Heard Mr. Biren Poddar, learned counsel for the petitioner and Mr. V.P Singh, learned counsel appearing for the Respondent-Board and with their consent this writ application is disposed of at this stage.

2. In this writ application the petitioner has prayed for quashing the bill dated 12-5-2000 relating to Annual Minimum Guarantee Charges for the financial year 1999-2000 on the ground that the bill is illegal and wholly without jurisdiction as in the said bill the Annual Minium Guarantee Charges for 240 days have been included during which the electrical line of the petitioner was not in operation on account of disconnection of supply of electricity by the Respondent-Board.

3. In course of argument, learned counsel agreed that petitioner should make representation against the said bill under Clause 13 of the H.T Agreement before the appropriate authority and the said claim shall be decided in accordance with law. However, Mr. V.P Singh, learned counsel for the respondent-Board submitted that while marking claim under clause 13 of the H.T Agreement petitioner has to pay 50% of the amount of the disputed bill while Mr. Poddar, learned counsel for the petitioner submits that petitioner is not liable to pay 50% of the disputed bill. The contention of the learned counsel for the petitioner is that the moment supply of electricity was disconnected, the agreement between the parties came to end and therefore petitioner is not liable to deposit 50% of the bill while making claim under Clause 13 of the H.T Agreement. Mr. Poddar submitted that admittedly, there was no electric connection during the period of 240 days then the question of payment of Annual Minimum Guarantee charges does not arise. In this connection learned counsel relied upon two decisions of this Court in the case of “Rajeshwar Singh v. State of Bihar : (AIR 1983 Patna 194), 1983 BLJ-508 and in the case of Dipte Input v. Bihar State Electricity Board, 1987 Bihar LJ-494.

4. On the other hand Mr. V.P Singh, learned counsel for the respondent-Board submitted that irrespective of the fact that there was supply of electric energy in the consumer's premises, the consumer is liable to pay Annual Minimum Guarantee Charges so long as the Agreement exists. Learned counsel relied upon two decisions of the Supreme Court in the case of “Bihar State Electricity Board, Patna v. Green Rubber Industries, AIR 1990 SC - 699, and in the case of “G.M-Cum-Chief Engineer, B.S.E.B v. Rajeshwar Singh, AIR 1990 SC 706.

5. In Rajeshwar Singh's case the fact of the case was that the factory of the petitioner along with its raw materials and finished product was washed away by the devastating flood of August, 1975 and therefore on 15-9-1975 the petitioners asked the respondent, Electricity Board to disconnect the line in order to avoid further financial burden. On 6-9-1975 the Board asked the petitioner that up-to-date bill of the industry amounts to Rs. 51,789 should be paid. Electric line was however, disconnected on 16-10-1975. In spite of disconnection, the Board went on raising the bills. However, on execution of fresh agreement electric connection was restored on 15-6-1977. The representation filed by the petitioner disputing the liability for payment of bills was pending and in the meantime line was again disconnected on 19-4-1978. The question then arose as to whether petitioner was liable to pay Annual Minimum Guarantee charges for the period when there was no electric connection in the factory premises of the petitioner. A Division Bench of this Court held that “petitioner had no liability to pay Annual Minimum Guarantee Charges as there has been no supply of electric connection to the factory premises of the petitioner. A similar view was taken by the Single Bench of this Court in the case of Dipte Input v. BSEB, 1987 Bihar LJ 494).

6. In the case of “Bihar State, Electricity Board v. Green Rubber Industries (AIR 1990 SC 699), similar question came for consideration before the Apex Court as to whether Annual Minimum Guarantee charges would be payable by the consumer for the period when there was no supply of electricity by the Board in the premises of the petitioner. Their Lordship after consideration of various clauses of the agreement Observed that: (Para 21 of AIR)

“It is true that the agreement is in a standard form of contract. The standard clauses of third contract have been settled over the years and have been widely adopted because experience shows that they facilitate the supply of electric energy. Lord Diplock has observed; ‘If fairness or reasonableness were relevant to their enforceability the fact that they are widely used by the parties whose bargaining power is fairly matched would raise a strong presumption that their terms are fair and reasonable.” A Schroeder Music Publishing Co. Ltd. v. Macaulay, (1974) 3 All ER 616 (624). In such contracts a standard form enables the supplier to say: “If you want these goods or services at all, these are the only terms on which they are available. Take it or leave it.” It is a type of contract on which the conditions are fixed by one of the parties in advance and are open to acceptance by anyone. The contract, which frequently contains many conditions is presented for acceptance and is not open to discussion. It is settled law that a person who signs a document which contains contractual terms is normally bound by them even though he has not read them, even though he is ignorant of the precise legal effect. In view of clause 4 having formed one of the stipulations in the contract along with others it cannot be said to be nudum pactum and the maxim nudum pactum ex quo non oritur actio does not apply. Considered by the test of reasonableness it cannot be said to be unreasonable inasmuch as the supply of electricity to a consumer involves incurring of overhead installation expenses by the Board which do not vary with the quantity of electricity consumed and the installation has to be continued irrespective of whether the energy is consumed or not until the agreement comes to an end. Every contract is to be considered with reference to its object and the whole of its terms and accordingly the whole context must be considered in endeavoring to collect the intention of the parties, even though the immediate object of enquiry is the meaning of an isolated clause. This agreement with the stipulation of minimum guaranteed charges cannot be held to be ultra vires on the ground that it is incompatible with the statutory duty. Difference between this contractual element and the statutory duty have to be observed. A supply agreement to a consumer make his relation with the Board mainly contractual, where the basis of supply is held to be statutory rather than contractual. In cases where such agreement are made the terms are supposed to have been negotiated between the consumer and the Board, and unless specifically assigned, the agreement normally would have affected the consumer with whom it is made, as was held in Northern Ontario Power Co. Ltd. v. Laroche Mines Ltd. (1938) 3 All ER 755.”

7. It is worth to mention here that in the aforesaid case the Supreme Court took notice of the decision of the Division Bench of this Court in Rajeshwar Singh's case (AIR 1983 Patna 194) and held that the said decision must be confined to the facts of that case only.

8. Mr. Biren Poddar learned counsel for the petitioner although put heavy reliance on the Division Bench decision of this Court in Rajeshwar Singh's case but the decision of the Division Bench has been set aside by the Supreme Court in the Appeal filed by the Electricity Board being Civil Appeal No. 221 of 1987. The Supreme Court while setting aside the judgment has observed that: [AIR 1990 SC 706 at p. 708]

“The first question, therefore, is whether the firm was liable to pay the minimum guaranteed charges for the period during which the supply remained disconnected. In Civil Appeal No. 220 of 1987 reported in AIR, 1990 SC 699, we have held that the firm would be liable to pay the minimum guaranteed charges unless it could be shown that the contract itself was terminated. The mere disconnection of the electricity supply would not amount to termination. If there was no application for restoration within 7 days of disconnection that would be deemed to be a notice for termination and the contract would be terminated either at the end of this period of notice or the tenure of the agreement whichever was longer. In the instant case the fresh agreement was entered into on 30-5-1977 and connection was restored on 15-6-1977. Earlier the connection given on execution of the agreement was on 12-8-1974 and supply was disconnected on 16-10-1975. The earlier agreement must be deemed to have come to an end on execution of the fresh agreement and restoration of connection if it did not terminate earlier under the terms of the agreement. The firm's liability has therefore to be determined on that basis in view of what has just been held in the judgment in Civil Appeal No. 220 of 1987.”

9. Having regard to the facts and circumstances of the case also in view of the fact that the decision relied upon by the petitioner, 1983 BLJ-508 : (AIR 1983 Patna 194), has been set aside by the Supreme Court in the case of “G.M-cum-Chief Engineer, B.S.E.B v. Rajeshwar Singh, AIR 1990-SC-706, the contention of the petitioner that it has no liability to pay A.M.G Charges for the period when there has been no supply of electricity, cannot be accepted.

10. In view of the conclusion arrived at by me, if the petitioner wants to make claim in terms of the Clause 13 of the H.T Agreement, it has to deposit 50% of the disputed amount along with the claim that may be made by it.

11. For the reasons aforesaid, this writ application is disposed of with a direction to the petitioner to make claim/representation under Clause 13 of the Agreement against the disputed bill in the manner stated herein above. It goes without saying that if such claim/representation is made, the concerned respondent shall consider the claim/representation of the petitioner and dispose of the same by passing a reasoned order in accordance with law after giving reasonable opportunity of hearing to the petitioner.

Order accordingly.

Rishi Cement Co. Ltd. v. Bihar State Electricity Board, And Others

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner's Arguments

Respondent-Board's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Implications

Rishi Cement Co. Ltd. v. Bihar State Electricity Board, And Others

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