Judgement

KODANDARAMAYYA, J.:- The Andhra Pradesh State Electricity Board hereinafter called the Board) is the appellant in this appeal. It filed O. S. No. 13/73 on the file of the Subordinate Judges Court. Parvatipuram against defendants 1 and 2 for recovery of what was described as maximum demand charges. C. C. Charges. Meter Rent. A. M. G. Charge, Surcharge etc. for the period from 1-3-1970 to 30-5-1973 with interest thereon.

2. The allegations in the plaint are as follows:-

The 2nd defendant on behalf of the 1st defendant approached the Board for the purpose of light and power for Krishivali Khandasari Sugar Industry at Artam for a demand not exceeding 150 K. V. A. Accordingly an agreement was entered into on 1-2-1966 for a period of ten years which shall come into force from the date of the commencement of the supply of energy or the date of expiry of the three months, notice in writing to the consumer and such notice was given on 21-12-1966 and the same was received on 2-1-12-1966 by the 2nd defendant and consequently the suit contract cale into force on 24-3-1967. But the defendants failed to pay the annual minimum amount of Rs. 12,000/- every year and the said amount accrued at Rs. 37,716-40 Ps, from 24-3-1967 to the end of November, 1969. However the plaintiff waived Rs. 27,716-40 Ps. and towards the balance of Rs. 10,000/- and (sic) the defendants paid only Rs. 3000/- and entered into an agreement on 29-1-1970 for extension of the agreement for a further period of two years, two months and twenty one days and the electricity connection was given on 1-3-1970 to the factory of the defendants but the supply was disconnected on 28-5-1970 after due notice as defendants committed default in payment of current charges and demand charges due from month to month. It is also alleged that as per B. P. Ms. No. 857 dated 27-10-1969 the terms and conditions of supply are varied and hence the Board is entitled to collect minimum charges even if electricity is not consumed or even if supply has been disconnected. It is also averred that the security deposit of Rs. 11,400/- was adjusted towards what was described as unconnected minimum charges and also part of charges for March, 1970. Hence the present suit was filed for recovery of Rs. 46,726-60 Ps. towards the minimum demand charge for, the period March, 1970 to May, 1973 and also for the recovery of Rs. 6.222-01 Ps. towards the surcharge for the delay in payment of the consumption bills. The 2nd defendant resisted the suit by filing a written statement that he is not the agent of the 1st defendant and that the 1st defendant is not a legal personality and a non-existing person and the contract entered into by him cannot also be enforced against him personally as he did not undertake the liability personally. It is also urged that the suit agreement is unconscionable arbitrary and onesided in its tenor. The demand and the part-payment of unconnected minimum charges of Rs. 37,716-40 Ps. was on pain of refusal to give connection for the supply of electrical energy to the factory and the so-called readiness to supply electricity on the part of the plaintiff is not true and hence the claim for unconnected minimum charges is arbitrary and unjust as there is no stipulation in the agreement for unconnected minimum charges. It is also averred that the disconnection of the energy is arbitrary and unlawful and the appropriation of the security deposit of Rs. 11,400/- towards the unconnected minimum charges is illegal and the demand for consumption charges at the rate of Rs. 1160/- for three months is factually incorrect and unsupportable taking into account the actual consumption of energy and the minimum charges after disconnection is not tenable as the claim is in the nature of damages which cannot be recovered under the terms of the agreement or the regulations.

3. In the additional written statement it is further urged that the minimum charges cannot be collected when consumption was not commenced and also when the electricity was disconnected and the disconnection was unlawful as there is no default in payment of arrears lawfully, due to the plaintiff on 25-8-1970 and further the minimum charges cannot be collected as there is no such agreement to pay such charges and by effecting the disconnection the obligation of the consumer to pay under the contract is altogether put an end to by the plaintiff and the supplemental agreement was got up by coercion and undue influence. It was further urged that the B. P. proceedings dated 27-10-1969 are opposed to the provisions of the Act and not binding on the defendants without any fresh agreement entered into on the basis of those proceedings.

4. In the rejoinder, the plaintiff urged that the proceedings dated 27-10-1969 were issued under S.49 of the Electricity (Supply) Act 54 of 1948 and the 2nd defendant is personally liable irrespective of the legal personality of the 1st defendant.

5. The trial Court framed eight issues and the additional issue is whether the annual minimum guarantee charges in the suit agreement is valid and enforceable. The findings on the material issues are as follows:

It held that the 1st defendant is not a firm or a company and hence the 2nd defendant who entered into contract on behalf of the 1st defendent cannot be sued and the suit is not maintainable against him. It also held that the issue framed in respect of the unconnected minimum charges need not be considered as the suit was filed for charges subsequent to March, 1970. It also held that the disconnection of the electric energy by the plaintiff is wrongful and that itself disentitles the plaintiff for the suit claim as there is no data regarding the actual consumption charges from 1-3-1970 and the meter card Ex. A-7, filed by the plaintiff, did not show that there is any reading of the meter card by any employees of the Board and consequently the minimum charges after the energy was disconnected cannot be collected. It also found that there is no provision in the agreement to collect the minimum charges after disconnection and after observing that the Board is grossly guilty of negligence in dealing with the defendants dismissed the suit holding that the plaintiff is not entitled to recover any amount.

6. Against the said judgment anti decree the above appeal was filed. The learned counsel for the appellant Sri. M. Chandrasekhara Rao has fairly placed before us all the proceedings and broadly raised two questions.

1) The finding that the 2nd defendant is not liable under the contract even though the 1st defendant is not a firm or a corporation is incorrect.

2) Once the contract is binding on the 2nd defendant the collection of minimum charges even after the disconnection of energy is well within the powers of the Board as per the proceedings issued under S.49 of Act 54 of 1948.

7. The learned counsel for the respondent-defendants urged firstly that in the absence of any agreement to pay the unconnected or disconnected minimum charges the Board is not entitled to collect the same and secondly the terms of the agreement and the circumstances clearly make the bargain between the parties unconscionable and the defendants must be relieved from the same.

8. We have no doubt in our mind that the defence of the 2nd defendant so far as the binding nature of the contract is concerned, is desperate and clearly untenable. No doubt the Board should have ascertained the status of the 1st defendant whether it is a firm or a company but so long the 2nd defendant acted on behalf of the so-called Krishivali Khandasari Sugar Industry, he must be deemed to be acting on his own behalf as the 1st defendant is neither a firm nor a company. The 2nd defendant must be taken as the proprietor of the 1st defendant concern. It is the 2nd defendant that entered into agreement under Ex. A-1 though he signed in the agreement on behalf of Krishivali Khandasari Sugar Industry and hence he is virtually liable under the contract. Further under Ex. A-2 he signed the application addressed to the District Electrical Engineer, for the supply of the energy and he is responsible for undertaking to pay the annual minimum guarantee as per Ex. A-3. Ex. A-3 signed in his personal capacity and consequently it cannot be said that the 2nd defendant is not liable for the suit claim as he entered into agreement and acted as though he is transacting the business on behalf of the 1st defendant. The Court below considering the other distressing circumstances of the case persuaded to accept the legal theory that the 2nd defendant is not liable as an agent of the 1st defendant and the 1st defendant is a non-existing entity and hence both are not liable. We have no doubt in our mind that such plea is untenable and the 2nd defendant is liable under the suit agreement and the suit is perfectly maintainable.

9. However, we are also satisfied that in addition to Rs. 14,400/- already received by the Board, the present demand of Rs. 52,948-61 Ps. for the non-payment of consumption charges of nearly Rs. 3000/- appears to be unjust and oppressive.

10. The main question now debated before us is whether the Board is entitled to collect minimum charges after the electricity energy was disconnected.

11. It is admitted that the suit contract does not embody any clause that the minimum charges shall be payable even after the disconnection of the electricity. It is also admitted that there is no Regulation at the time of entering into the contract empowering the Board to collect the minimum charges even after the disconnection of the electricity. But the contention of the Board is that it has got power to issue such Regulation as part of terms and conditions of supply of the electricity. For the proposition the judgment in M/s. Hyderabad Vanaspathi v. A. P. S. E. B (1977) 2 A. P. LJ (HC) 358 was relied on very strongly by the learned counsel for the appellant. In that case there is no agreement entered into between the consumer and the Board and hence the conditions of service of electricity are governed by B. P. M. S. No. 690, dated 17-9-1975 and Cl.33(b) (33.2 as per the revised Regulation issued in February, 1982) of the Regulations clearly provides for collection of such charges even after disconnection. Further, it was found by the learned Judge in that case,

"However, this aspect of the matter is only of academic interest. After, the petitioner has paid the minimum charges the supply has been restored."

Hence the above case is clearly inapplicable to the facts of the present case as the present case is governed by the terms of the contract and the proceedings under S.49 were issued on 29-9-1969 long subsequent to the date of entering into the contract. Once the basis of the present claim is the contract, the Board cannot rely upon a subsequent proceeding without entering into a fresh contract.

12. Recently our learned brother P.A.Choudary, J., in Second Appeal No. 260/79 held that S.49 of the Act does not empower the Board to impose those terms and conditions upon any person who had not agreed afresh to take supply from the Board on new terms and conditions. It is true in that case by the time the new Regulation dated 29-9-1969 was issued there was disconnection of the supply of the electricity.

13. It is clear that S.49 read with S.79(j) empowers the Board to revise the tariff rates unilaterally. The word tariff means a list of charges. S.49 contemplates a charge for supply for electricity which may take in several items of charges such as charge for facility or provision for supply of electricity, charge for energy actually consumed, charge for services rendered and charge for services available on demand and accordingly it was held in A. Krishna Murthy v. A. P. S. E. Board (1976) 2 A. P. LJ (HC) 49 that the terms and conditions in S.49 include pecuniary terms and the Board can collect basic fixed charges and levy fuse charge in addition to the charges maide on contract load. Under the said section levy of higher rates of consumption on excess of quota was justified. Vide A. C. Mills v: A. P. S. E Board, AIR 1976 SC 2414. It can also levy surcharge substituting unilaterally a new formula of determining the power factor. Vide Andhra Steel Corporation v. Electricity Board, Hyderabad, ILR (1973) Andh Pra 304 and Bisra Stone Lime Co. v. O. S. E. Board, AIR 1976 SC 127. It can demand additional security for consumption charges. Vide K. C. Works v. Secretary, Apseb Vidyut Soudha, AIR 1979 Andh Pra 291. It can fix monthly minimum charges vide Mohd. Abdul Gaffar v. A. P. S. E. Board (1975) 2 A. P. LJ (NC) 119. Courts also justified the minimum charges as a reasonable levy vide Natesa Chettiar v. Madras State Electricity Board (1969) 1 Mad LJ. 69.

14. The Supreme Court considered the scope of Ss.49, 50 and 79(J) in respect of contractual Stipulations entered into by the Board under sub-S.(3) of S.49 Bhagwati. J. while examining the scope of these provisions held in Indian Aluminium Co. v. K. S. E. Board, AIR, 1975 SC 1967.

Once the agreements were made containing these stipulations it was not competent to the Board to override these stipulations which were binding as having been validly made in exercise of statutory power. The Board could not enhance the charges in breach of these stipulations. To hold that the Board could unilaterally revise the charges notwithstanding these stipulations would mean that the stipulations had no binding effect or in other words the Board had no power to enter into such stipulations."

Again at page 1980 referring to the Regulations issued under S.79 it was observed:

"Regulations in the nature of subordinate legislation cannot confer authority on the Board to interfere with the contractual rights and obligations, unless specified power to make such regulations is vested in the Board by some provision in the Statute, expressly or by necessary implication. No such power is to be found in S.79(j) or in any other provision of the Supply Act."

15. Hence it was held that the special tariff cannot be unilaterally enhanced by the Board contrary to the agreements. However when the terms of the contract justify such enhancement even in respect of special tariffs the enhancement was sustained vide Bisra Stone Lime Co. v. O. S. E. Board (AIR 1976 SC 127). It cannot be disputed that minimum guarantee amount can be one of the terms and conditions of supply of electricity. The Board may enhance the rate unilaterally treating it as a part of tariff. But the question is whether the condition to pay the amount by the consumer to the Board even during the period of non-supply can come within the purview of S.49. Keeping in view S.59 an obligation to pay minimum charges even after disconnection of electricity for a reasonable period may be justified as the Board may have to restore connection of electricity on payment of arrears. According to us the condition to pay charge during the period of non-supply must be part of the bargain between the parties and it is not one that can unilaterally be stipulated by the Board under S.49. If the liability to pay minimum charges is absolute the consumer is bound to pay even though the Board is unable to supply the electric energy due to power cut. In such circumstances the Supreme Court held in N. I. I. and S. Co.. v. State of Haryana. AIR 1976 SC 1100 that the inability of the Board to supply electric energy due to power cut or any other circumstances beyond its control as per the demand of the consumer according to the contract must necessarily reflect in the minimum demand and the consumer is entitled to the proportionate reduction of the demand charges. Thus it is clear that the minimum guarantee is intended to protect the Board against deficiencies in the monthly consumptions or annual consumptions taking into consideration an average consumption and also to meet the exigencies of demand considering the general production and supply. But it cannot be said that the liability must bean absolute one irrespective of the consumption for the entire period of contract.

16. We are not examining the validity of Regulation 33 (2) which prescribed that the consumer is liable to pay minimum charges even after the supply of electricity has been disconnected. This Court in exercise of its supervisory jurisdiction may restrict its operation if such charges are sought to be collected for unduly long period during the period of non-supply.

17. But we are examining the power of the Board to unilaterally alter the conditions of such supply in the absence of any term in the contract. We cannot accept the view expressed by A.V. Krishna Rao. J., in C. R. P. No. 2179/72 dated 20-8-1973 applying B. P. No. 787 dated 29-9-1969 even though the disconnection took place on 29-1-1968 prior to the coming into force of the above Regulation. In fact there are two Division Bench judgments of this Court which took the view that such minimum charges cannot be collected after disconnection of electricity in the absence of an agreement. (vide C. R. P. No. 1269/07 dt. 25-6-1969 and Appeal No. 387/67 and batch dated 11-11-1970.)

18. No doubt the petitioner entered into an agreement on 29-1-1970 extending the period of agreement. But the said agreement has reaffirmed the previous agreement elated 1-2-1966 and no fresh terms of contract were embodied. The learned counsel for the Board laid strong stress on Cl. 6 which states that

"The Board shall have the unilateral right to vary from time to time the terms and conditions of supply under this agreement, by special tar general proceedings."

This clause in the agreement cannot empower the Board to unilaterally order that the minimum charges must be paid even though there was a disconnection of the electricity. That constitutes a stipulation for terms of damages and it cannot partake the character of prescribing the terms of conditions of supply and such terms cannot at all relate to the tariff, and the. Board by issuing proceedings under S.49 cannot modify the terms of the contract as held by Indian Aluminum Co. v. K. S. E. Board ( AIR 1975 SC 1967).

19. Further it is settled that the Electricity Board is State within the meaning of Art.12 of the Constitution of India and it must exercise statutory powers reasonably, bona fide and without negligence. Under the terms of the present contract, there is no power on the part of the consumer to terminate the contract. That power is given exclusively to the Board. The having realised the inability of the consumer from the inception cannot keep the contract alive for the entire period of ten years or twelve years and insist that the consumer should pay the minimum charges though he has not consumed the energy not even for the full period of three months. In this case though notice was issued by the Board on 21-12-1966 informing the availability of supply, the defendant did not avail the opportunity and the connection was given only on 1-3-1970, but for the entire period unconnected minimum charges were levied though a portion of the claim was waived later. The Board should terminate the contract within a reasonable period. In the guise of keeping the contract alive and on the pretext that the consumer may ask for reconnection, it cannot insist on payment of minimum charges and collect the same, for the entire period.

20. Once we hold the basis of the levy of electric charges is a contract the Court can relieve the party when the bargain is unconscionable. As Lord Selborne describes these cases

"Which according to the language of Lord Hardwicke (Earl of Chesterfield v. Janssen (1751) 2 Ves. Sen. 125 at P. 157), raise from the circumstances or Conditions of the parties contracting - weakness on one side, usury on the other, or extortion, or advantage taken of that weakness - a presumption of fraud. Fraud does not here mean deceit or circumvention; it means an unconscientious use of the power arising out of these circumstances and conditions; and when the relative position of the parties is such as prima facie to raise this presumption, the transaction cannot stand unless the person claiming the benefit of it is able to repel the presumption by contrary evidence, proving it to have been in point, of fact fait, just, and reasonable"

. Vide Earl of Aylesford v. Morris (1873) 8 Ch. App, 484, at P. 490. This general principle of equity is given effect to in this country in dealing with what are called catching bargains and thus where the interest was exorbitant relief was granted to illiterate peasants vide Lalli v. Ram Prasad ( 1887) 9 All 74. This doctrine which was applied initially in usurious loans is applied later in other cases of distressive bargains even after passing the Usury Laws.

21. Further even viewed as a statutory proceeding under S.49, we are clearly of the opinion that such power must be exercised reasonably, and the Courts can relieve the party when the statutory proceedings are found to be unreasonable. Hence we hold that on the facts and circumstances of this case the demand for the disconnected minimum charges is outside the purview of S.49 and illegal and cannot be sustained.

22. However, in view of the separate agreement entered into on 29-1-1970 and in view of the fact that a part payment was made in respect of unconnected charges, we do not want to interfere with the appropriation already made by the Board in respect of those charges. We cannot agree with the trial Courts view that there is no demand for consumption charges. Ex. A-10 dated 5-5-1970 is a notice issued by the Board requesting to pay the consumption charges and the disconnection took place on 28-5-1970. Further the 2nd defendant admitted in the written statement that the plaintiff made demand of consumption charges for three months. Hence we disagree with the finding of the trial Court that the disconnection of the electrical energy is unlawful. Hence we hold that there shall be a decree for the suit claim towards actual consumption and meter rent after excluding the annual minimum guaranteed charges that comes to Rs. 3,924-60 Ps. with surcharge at 1% p.m. or part thereof calculated for the period March, 1970 to May, 1973. The plaintiff is entitled to interest at 6% p.a. from the date of the decree. The appeal is allowed accordingly. No costs.

23. In this connection, it is necessary to observe, though the present Regulation 26 prescribed five years as a minimum period for H. T. supply giving option to the consumer also to terminate the contract it is also necessary to prescribe the minimum period within which the consumer shall apply for reconnection failing which the contract shall stand terminated to avoid oppressive collection of disconnected minimum charges. A similar rule must also be made in the case of unconnected minimum charges as contemplated under Regn. 26(4), we are constrained to make this remark as this case is a striking example where a heavy demand of Rs. 40,000/- of unconnected minimum charges and Rs. 40,000/- of disconnected minimum charges was made against a person who failed to pay the minimum consumption charges of three months which do not exceed even Rs. 3,000/-.

Appeal allowed.