Sri Vishnu Cements Ltd., Nalgonda Dist. v. A.P. State Electricity Board, Hyd.

S.Parvatha Rao, J.:-

(1) The petitioner seeks a writ of mandamus declaring the levy of maximum demand charges during the period of non - supply of power as illegal, arbitrary, high handed and void and consequently directing the respondents to refund the entire amount of maximum demand charges collected from the petitioner for non - supply days during the power cut period etc.

(2) The petitioner is a public limited company. It set up a cement manufacturing unit and received electrical energy from the 1st respondent board under high tension with a maximum contracted demand of 15 mva by 4 - 12 - 1987. It is stated that its annual licensing capacity is 5 lakh tonnes of cement per annum, and that it requires roughly about 55 to 60 lakh units for reaching optimum production. Under b. P. Ms. No. 1013, (commercial) dated 14 - 11 - 1987, the respondents imposed power cut with effect from 15 - 11 - 1987 and all h. T. Consumers were directed to regulate their consumption of power as indicated therein. The petitioner was "required to regulate its consumption by 60% of the average consumption of power during the period 1 - 4 - 1986 to 31 - 3 - 1987, which was subsequently increased to 90% cut". On behalf of the petitioners, it is also stated that as the supply of electrical energy to the petitioner's unit was released in august, 1986 with 4 mva maximum demand, gradually increased to 15 mva by december, 1987, the petitioner's unit came under the category of new industry which came into existence after 1 - 4 - 1986 and the quota for demand and energy were to be fixed on the basis of the formula given in para 2 (i) (a) of b. P. Ms. No. 1013 (commercial) dated 14 - 11 - 1987. On behalf of the petitioner it is stated that it was required to "regulate its power consumption by 40% of its maximum demand and 10% of entitlement of the energy" and due to the cut imposed on the maximum demand the petitioner's unit could work only for six or seven days in a month and it had to be closed down for the remaining part of the month. Thus, according to the petitioner no electrical energy could be availed by the petitioner's unit except for six or seven days in a month in view of the cut in the maximum demand and energy imposed, during the period the said cuts were in operation. Even though no energy could be drawn for the remaining part of the month during the period the said restrictions were in force, the respondents were continuing to collect for the entire month the charges for maximum demand allowed under the cuts. On behalf of the petitioner, it is contended that the respondents were not justified in collecting the maximum demand charges for that part of the month during which power could not be availed by the petitioner due to the restrictions imposed by way of cuts in demand and energy, and that such collection for the period of non - supply days in the month is illegal, arbitrary and void.

(3) In the counter affidavit filed on behalf of the respondents, it is stated that under para 6 of b. P. Ms. No. 1013, dated 14 - 11 - 1987

"where the recorded demand is lower than the quota demand, the quota demand shall be treated as billing demand subject to a maximum of 80% of contracted demand for purposes of billing during this period and minimum charges regulated accordingly"

, and that the respondents were following this in billing the petitioner. It is not in dispute that in the present case, the petitioner was billed on the basis of the quota demand which was lesser than 80% of the contracted demand throughout the period of the cuts. It is further stated on behalf of the respondents that neither the terms and conditions of supply of electrical energy by the board nor the tariff conditions provide for charging for maximum demand on the basis of the number of days during which the petitioner chooses to consume energy during a month; if the petitioner chose to consume the quota of energy fixed for entire month in a few days in a month to suit its convenience availing the demand to the maximum permissible extent during those days, it was not open to the consumer to seek proportionate reduction in m. D. Charges on that basis. On behalf of the respondents an additional counter affidavit dated 12 - 7 - 1996 was filed by the superintending engineer (commercial) a. P. S. E. B. Stating as follows:

"3. I submit that in pursuance of b. P. No. 1013 dated 14 - 11 - 1987, the following quotas were fixed to the petitioner's industry. Demand. 9000 kva energy. 33,04,800 units in view of further deterioration, in the power position, the board extended the power cut to 60% in b. P. Ms. No. 200 dated 12 - 3 - 1988. Accordingly, the petitioner's quotas were revised as under: demand. 6000 kva energy. 11,01,600 units 4. The contention of the petitioner that the quota energy allotted to them is only sufficient to run the industry for 5 or 6 days is not correct. Assuming that the petitioner runs the industry throughout the month without any interruptions, by availing the maximum demand of 9000 kva it can consume maximum energy of 38,55,600 units, as can be seen from the following formula 8000 x. 85 (i. F) x. 7 (l. F.) x 720 mrs: 38,55,600 units. Thus, as against the theoretical requirement of 38,55,600 units, the quota fixed to the petitioner upto 12 - 3 - 1988 was 33,04,800 units. Therefore, the petitioner has to run its industry to consume the quota energy almost for entire month. 5. Even after the issue of b. P. Ms. No. 200 dated 12 - 3 - 1988 enhancing the cut, the petitioner's maximum demand has been correspondingly reduced with its quota energy. Even with this reduction, the petitioner can run the industry for a substantial period in a month to avail this quota. 6. It may be further submitted that even if the petitioner could not avail the maximum demand through out the month it is liable to pay the maximum demand charges to the extent of the quota demand which was made available to the petitioner. This is because the board is entitled to recover the fixed charges towards the expenditure incurred on the huge investments made in establishing the generating stations, sub - stations and in laying the transmission and distribution lines for making supply to the consumers. While the minimum energy charges are required to meet the day to day expenditure incurred towards salaries, wages etc. The demand charges are intended at least to partly recover the expenditure on capital investments which will not vary with the under utilisation of the demand by the consumers. Thus, viewed from this perspective, the levy of the demand charges to the extent of the quota fixed cannot be either unreasonable or arbitrary."

(4) We may straight away observe that the submission made on behalf of the respondents in 'para 6' of the additional counter affidavit does not bear scrutiny. If the board is entitled to recover the fixed charges towards expenditure incurred on the huge investments made in establishing the generating stations, sub - stations and in laying the transmission and distribution lines etc. That expenditure does not in any way be reduced during the periods when cut is imposed: therefore, the board would be well justified in requiring the consumers to pay even during the cut period on the basis of the maximum contracted demand. This is the basis for demand charges part of two parts tariff system meant for h. T. Consumers. In mukand iron and steel works ltd. V. M. S. E board (1) air 1982 bom. 580, bharucha, j. (as the learned judge then was) observed as follows:

"the authorities show. That the minimum charge is intended to compensate the supplier for keeping in a state of readiness the generating capacity and facilities for supplying to a large consumer the quantum of the contract demand. The power cut operates for periods of time, not forever. The board remains liable to supply to the consumer the quantum of the contract demand no sooner the power cut is lifted. Therefore, even during the period of the power cut the board is obliged to maintain in a state of readiness the requisite generating capacity and facilities. Obviously, the board cannot dismantle or even cease to maintain all its facilities and equipment during the period of the power cut. It must follow that even during the period of the power cut the company is obliged to make payment of the minimum charge. There is no provision in the agreement which contemplates a diminution of the minimum billing demand."

The question of reasonableness of claiming and charging the full demand charges by the board during power cuts was dealt with, in a way, in ms. Northern india iron and steel co. V. State of haryana (2) air 1976 sc 1100 by the supreme court. We will advert to this decision presently.

(5) On behalf of the petitioner, an additional affidavit dated 26 - 7 - 1996 is filed wherein the loads of the various machinery in the petitioner's cement unit have been mentioned as follows:

si. no.	particulars	load
1.	crusher	1. 5 mva
2.	raw - mill (two number of 4 mva)	8. 0 mva
3.	kiln	3. 8 kva
4.	coal mill	1. 75 mva
5.	cement mill (two numbers of 4 mv each)	8. 0 mva
6.	packing plant	1. 0 mva
		18. 0 mva

"the manufacturing process in petitioner's industry is as under: - firstly the lime stone will come from the mines and the same will be grinded in the crusher. Then the crushed material will be sent to the raw mill to make it as powder. The said powder along with coal powder which is powdered in the coal mill will be heated in the kiln to produce clinker, upto this stage the works should be carried out simultaneously. The clinker so produced will be mixed with gypsum and further powdered in the cement mills to produce cement there the cement produced will be sent to the packing plant for packing in the bags. It is submitted that to run clinker section with one raw mill the petitioner requires maximum demand of 10 mva. To run the other section i. E. , namely cement mill petitioner requires 4 mva load to run atleast one cement mill. When there was 60% power cut on the maximum demand during the months from april, may and june, '88, the petitioner ran only cement mills since by then there was little stock of clinker available."

(6) The learned counsel for the petitioner advanced two pronged attack. Firstly, he contends that due to the stringent cuts imposed both on demand and energy, the petitioner's unit, which is continuous process unit, could not be operated through out the month. In fact, the petitioner could operate the unit only for a few days in a month during the periods the cuts were imposed. The learned counsel contends that in view of the imposition of the cuts the petitioner was disabled from operating its unit through out the month and thereby suffered loss. Under the circumstances, the board cannot be allowed to require the petitioner to pay for the entire month on the quota of demand fixed for the petitioner under the cuts; the board cannot demand payment for that portion of month the petitioner did not operate its unit in view of the deficient demand and energy allowed under the quotas fixed during the periods the cuts were in force. Secondly, the learned counsel for the petitioner contends that the quota of demand fixed should be substituted in the place of the contracted demand and the petitioner should have been charged only on 80% of the quota demand whenever that was not exceeded or on the actual demand if that exceeded 80% of the quota demand. The learned counsel further submits that the charges, properly speaking, should be on the basis of the actual demand only and not on the quota demand because it may not be possible to reach the quota demand by partial operation of the unit. He also points out that subsequently under b. P. Ms. No. 1121 dated 15 - 12 - 1988 the board itself decided that the billing for the demand and energy would be based on actuals only and that this was brought into effect from the date of implementation of orders in b. P. Ms. No. 1065 (commercial) dated 23 - 11 - 1988 ie. , from the date of taking meter reading as per schedule between 28th november, 1988 to 30th november, 1988 as the case may be.

(7) There is no doubt that the alternatives suggested by the learned counsel for the petitioner could have been adopted by the board in fixing the manner in which the billing for demand was to be done during the periods when cuts were imposed both on demand and energy due to non - availability of electrical energy. But, it is not for this court, in exercise of its jurisdiction under article 226 of the constitution, to interfere when the board has decided to follow one amongst the various alternatives available to it. The choice made by the board would depend on the various exigencies and difficulties faced by the board in supplying energy. Unless the particular method adopted by the board is found to be unreasonable and arbitrary, it is not for this court to make the choice for the board or to decide as to what ought to have been the choice. In the present case it cannot be said that charging for the demand during the periods of sporadic cuts on the basis of the quota demand when the quota demand was less than 80% of the contracted demand was unreasonable or arbitrary. As regards the billing for the entire month on the basis of the quota demand, we find that the petitioner had not informed the board in advance about how it was going to utilise the quota of energy fixed during the months when the cuts were imposed. We have also to notice that the cuts were being imposed and lifted according to the exigencies of the situation and they were not for any specific durations. The board itself was not in a position to predicate as to when the cuts would be lifted and when they would be imposed again during the year in question.

(8) The learned counsel for the petitioner relies on the judgments of the supreme court in m/s. Northern india iron and steel co. (2 supra) and bihar state electricity board v. M/s. Dhanawat rice and oil mills (3) air 1989 sc 1030. In m/s. Northern india iron and steel co. 's case (2 supra) , the question that arose was whether the haryana state electricity board was entitled to claim any demand charge from the appellant before the supreme court in respect of supply of electric energy to them when it was not in a position to supply energy at the contracted demand and when the government of haryana issued orders and directions to it for maintaining the supply and securing the equitable distribution of energy which led to the imposition of substantial power cuts and the appellant not getting supply of energy according to its contracted demand. One of the terms and conditions of supply framed by the haryana state electricity board as follows:

" (f) force majeure: in the event of lock out, fire or any other circumstances considered by the supplier to be beyond the control of the consumer, the consumer shall be entitled to a proportionate reduction of demand charges/minimum charges provided he serves at least 3 days notice on the supplier for shut down of not less than 15 days duration."

The supreme court stated the rival contentions advanced on both sides and observed as follows:

"an argument was advanced before us in the first instance by counsel for the appellants with regard to the definition of the demand charge in clause 1 (h) of the terms and conditions of supply framed by the board that since the board was not ready to serve the consumer and the consumer was ready to consume maximum electric energy the former was not entitled to ask for any demand charge. This argument, in the beginning was combated with equal force, if not more, on behalf of the board and it was asserted that the board was entitled to assess and claim the full demand charge as per clause 4 of the tariff irrespective of the fact whether it was in a position to supply the energy according to the demand of the consumer or not. Such an extreme stand on either side appeared to us a bit puzzling and leading to inequitable results. The difficulty was not easy to solve. If we were to hold that for the board's inability to supply a fraction of the consumers demand as per the contract it could claim only the energy charge and not the demand charge, it would have been very hard and injurious to the board and the consumer would have unjustifiably got the supply at a very cheap rate. If on the other hand, we were to say that the consumer was liable to pay the entire demand charge as per the method of assessment provided in clause 4 of the tariff even when for no fault of it, it could get only a fraction of its demand fulfilled, resulting in its not being able to run the industry to its full capacity, it would be liable to pay a huge amount per month, and this will not only be uneconomical but would seriously affect its economic structure. But, we were happy to find that a just, equitable and legal solution of the difficulty was provided during the course of the argument on either side and that is with reference to sub - clause (f) of clause 4 of the tariff. It is, therefore, not necessary to resolve the extreme stand taken on either side."

The supreme court held that

"the circumstance of power cut which disabled the board to give full supply to the appellant (consumer) because of the government order under section 228 of the 1910 act, undoubtedly would be a circumstance which disabled the consumer from consuming electricity as per the contract"

, and that this was circumstance which was beyond its control and could not be considered otherwise by the board. The supreme court held that this circumstance entitled the consumer to a proportionate reduction in the demand charges and that this interpretation of sub - clause (f) of clause 4 (extracted above) was accepted to be the correct, legal and equitable interpretation on all hands. The supreme court further held that in a circumstance like this, it was plain that the obligation of the consumer to serve at least 3 days' notice on the supplier as per the latter part of sub - clause (f) was not attracted. The supreme court, in that view of the matter, held on the facts of that case as follows:

"we are, therefore, of the view that the inability of the board to supply electric energy due to power cut or any other circumstance beyond its control as per the demand of the consumer according to the contract will be reflected in and considered as a circumstance beyond the control of the consumer which prevented it from consuming electricity as per the contract and to the extent it wanted to consume. The monthly demand charge for a particular month will have to be assessed in accordance with sub - clause (b) of clause 4 of the tariff and therefrom a proportionate reduction will have to be made as per sub - clause (f). We hope, in the light of the judgment, there will be no difficulty in working out the figures of the proportionate reduction in any of the cases and for any period. In case of any difference or dispute as to the quantum of the demand charge or the proportionate reduction, parties will be at liberty to pursue their remedy as may be available to them in accordance with law."

This decision was followed by the supreme court in bihar state electricity board's case (3 supra). The bihar state electricity board also provided for a similar clause in the agreements with its consumers (clause 13) like the force majeure clause in the m/s. Northern india iron and steel co. 's case (2 supra). The supreme court held that the said clause 13 clearly provided

"for the proportionate reduction of the annual minimum guarantee bills when energy was not supplied by the bihar state electricity board". It is not in dispute that there were no similar terms and conditions in the agreement framed by the andhra pradesh state electricity board. On the other hand, every consumer is required to pay the charges based on the 80% of the contracted demand even though that much of energy was not taken by the petitioner whatever be the reason. In the absence of force majeure clause or clause 13 referred to in the above decisions, the petitioner cannot claim proportionate charges based on the actual demand reached by the petitioner. This was reiterated in bihar state electricity board v. Allied refractories (pvt.) ltd. (4) (1996) 7 scc 491, further holding as follows: "this court in bihar state v. Dhanawat rice and oil mitts (3 supra) , arising from the appellant - board itself had held that under section 49, an agreement had been entered into by the consumer with the appellant to pay minimum guarantee of charges to the board. On failure to consume the minimum guaranteed level of electricity due to non - supply of electricity by trippings, load sheadings or power cuts, the consumer would be entitled to make an application for proportionate reduction of the minimum guarantee. Since respondents had not made such an application, the high court was not justified in straight away allowing the writ petitions and directing the grant of the proportionate reduction. "

(9) In grindwell norton ltd. V. A. P. S. E. Board, hyderabad (5) air 1989 ap 14, a division bench of this court referred m/s. Northern india iron and steel co. 's case (2 supra) and observed as follows:

"there is no clause in the agreement - like condition 4 (f) of haryana, considered by the supreme court in northern india iron and steel co. (2 supra) , which relieves the petitioner of the obligation to pay the monthly minimum charges, on account of interruptions. On the contrary, according to condition 41, which constitutes a term of the agreement between the parties, while the board should endeavour to afford continuous supply and to restore interrupted service as early as possible, the board is given the right to stagger or curtail supply of electricity to any consumer or consumers, according to operational or other contingencies. Clause 41, therefore, clearly contemplated interruptions occurring which, no doubt, have to be attended to, and supply restored as early as possible. It also contemplated situations where the supply of energy has to be curtailed, or staggered. This may be necessary both for operational reasons, as well as other contingencies arising. In all such cases, it is declared that the board shall not be responsible for any loss or inconvenience occasioned to any consumer by interruption of supply of any kind, whatever be the reason therefor. This condition was there even when the petitioner applied for supply of power, and when it entered into the agreement. Indeed, as stated above, this condition constitutes a term of the agreement between the parties; (vide clauses 2 and 5 of the agreement, as also para 2 of the form of application for supply of electricity at low tension/high tension, prescribed in appendix i to conditions). In such a situation, i find it difficult to say that merely because there were interruptions now and then, or that there was curtailment of supply on certain occasions, the petitioner is relieved of its obligation to pay the monthly minimum charges, undertaken by it under clause 11 of the agreement, read with condition 33. It is not suggested that the interruptions or curtailments are the result of any deliberate or mala fide action or attitude on the part of the board or its authorities. Admittedly, they are for reasons beyond the control of the board."

In orissa state electricity board v. M/s. Ipi steel ltd. (6) air 1995 sc 1553, the supreme court considered the attack on regulation 46 framed by the orissa state electricity board by its notification dated 25 - 6 - 1987. The said regulation provided as follows:

"if on account of shortage of the generation of electrical energy, restrictions on power supply are imposed by the state government under section 22 (b) of the indian electricity act, 1910 or by the board under section 49 of the electricity supply act, 1948 and all other power available under law, the board and the engineers shall be under no obligation to supply energy contracted for except in accordance with the restriction order and subjected to the other provisions of the regulation. Provided that during the period restrictions are in force, the consumer shall not be liable to pay the minimum charges in accordance with the agreement if the restriction on supply in a month exceeds 150 (one hundred fifty) hours but shall only pay, in case of two part tariff, on the basis of actual energy consumption and the 'maximum demand' as provided in the agreement and in all other cases, on the basis of actual consumption of energy."

The supreme court repelled the attack on that regulation and held as follows:

"we must, therefore, say that no arbitrariness or unreasonableness is involved in regulation 46 or its proviso. It only provides for collecting demand charges for the actual maximum demand availed by such consumers during the period of restricted supply. The consumer cannot legitimately complain of this course nor can it characterise it as confiscatory. We must also say that none of the decisions relied upon by the learned counsel for the respondent lays down any principle which can be said to suggest that such a rule is arbitrary and unreasonable. Once we understand the system of two - part levy and the rationale behind it, as also the compulsions arising from an order under section 22 - b of the electricity act, 1910, there would be no room or ground for impugning the validity of regulation 46 or its proviso. Difficulties are no doubt there - difficulties of the consumer and difficulties of the board. They are essentially the problems of shortages, perhaps endemic to a developing economy. As rightly emphasised by sri hegde, the respondent would have faced the same problems if he had installed his own plant for generating electricity to meet his needs. While the respondent says that it has suffered on account of these cuts, the board says that by reducing the demand charges during such periods, it is also suffering. The consumer accuses board of several failings and the board has its own explanations. It is not possible to go into them. It is enough to say that in the circumstances, regulation 46 or its proviso cannot be termed as arbitrary or unreasonable, much less confiscatory."

The supreme court also observed that the validity of these regulations should not be judged by taking either a stray case or an unusual case but on the generality of the situation.

(10) In the present case also, we have held that we do not find any arbitrariness or unreasonableness in requiring the petitioner to pay the demand charges on the basis of the quota demand fixed.

(11) In the result, the writ petition is dismissed. No costs.