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M/S Balajee Wire Products v. The Bihar State Electricity Board & Ors.

Patna High Court

Sep 22, 1995

Judgment

Subsequent
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Structured Summary of the Opinion

Factual and Procedural Background

The petitioner challenged an order dated 22.05.1995 passed by the General Manager-cum-Chief Engineer of the Central Bihar Area Electricity Board. The impugned order related to the petitioner's claim for remission of minimum guaranteed charges under clause 13 of the High Tension Agreement for the three-year period 1989-1990 to 1991-1992. The present application sought judicial review of that administrative determination by the Chief Engineer.

Legal Issues Presented

Whether the Chief Engineer was legally entitled to exclude interruptions in supply of less than half an hour when computing total hours of non-supply for the purpose of remission under clause 13 of the High Tension Agreement.
Whether remission of guaranteed energy charges could be denied on the basis that the consumer's failure to consume the guaranteed units was due to reasons other than interruptions in supply by the Board (i.e., consumer's own inability or managerial/production issues), rather than being attributable to the Board's failure to supply energy.
Whether the Chief Engineer adopted an incorrect mode of calculation for remission of demand charges by using "total KVA recorded" instead of "total KVA charged" (the latter being the higher figure, 75% of contract demand) and by using an incorrect divisor in the proportional computation.
Whether the Chief Engineer erred in law in refusing to allow any proportionate remission of demand charges under clause 13 for the first year of supply, on the basis of the second part of clause 4(c) of the agreement.

Arguments of the Parties

Petitioner's Arguments (as presented by Mr. Rekhi)

It was impermissible for the Chief Engineer to exclude interruptions of less than half an hour when computing total hours of non-supply; there was no legal sanction for such exclusion.
The Chief Engineer wrongly denied remission of guaranteed energy charges on the ground that the petitioner's shortfall in consumption was due to its own inability (managerial/production issues) rather than interruptions in supply; remission should have been allowed on the basis of the admitted hours of non-supply.
The Chief Engineer used the total KVA recorded (420.17 KVA) rather than the total KVA charged (776.25 KVA, i.e., 75% of contract demand) as the basis for computing remission of demand charges, contrary to clause 4(c) of the agreement.
The Chief Engineer erred in denying any proportionate remission for the first year of supply; clause 13's relief should apply irrespective of the year of supply.

Respondent / Board's Arguments (as presented by Mr. Shiva Kriti Singh)

Conceded that under the tariff provisions and the agreement as they stood for the relevant years it was not open to exclude interruptions of less than half an hour; any change would require an amendment and notification which had not yet occurred.
Accepted that for demand charge remission computation the higher figure (75% of contract demand) should be used rather than the recorded KVA; further conceded that the correct divisor in the proportional calculation is the total hours of power to be supplied (serial no. 5 in the calculation), not the total hours of power supplied (serial no. 7).
Argued that the second part of clause 4(c) (concession for the first year of supply to base charges on actual monthly demand) was not subject to clause 13, and therefore remission under clause 13 should not be available for the first year — i.e., that the first-year concession operated as a counter-measure disallowing remission in the first year.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court analysed each of the four objections raised by the petitioner and the responses of the Board, applying the language and scope of clause 13 (and clause 4(c) where relevant) of the High Tension Agreement. The analysis proceeded in distinct steps:

On exclusion of interruptions of less than half an hour:
The Board's counsel conceded that, under the tariff provisions and the agreement as they stood during the relevant years (and as they then existed), it was not permissible to exclude interruptions of less than half an hour when computing total hours of non-supply. The Board indicated a proposal to amend the provisions but acknowledged no notification had been issued. The court therefore held the Chief Engineer's exclusion of such interruptions to be without legal sanction and upheld the petitioner's objection on this point.
On denying remission because the consumer's failure to consume was allegedly for other reasons:
The court observed that a number of administrative decisions had denied remission on the ground that the consumer failed to consume guaranteed units for reasons other than interruptions (e.g., managerial lapses, production disruptions, stockpiling). The court rejected that approach when applied by the Chief Engineer in calculating remission under clause 13. The court reasoned that the Chief Engineer's authority to adjudicate remission derives from clause 13 and he must confine himself to that provision. Clause 13, by its plain language, entitles the consumer to remission proportionate to the Board's inability to supply energy; hypothetical questions about what the consumer might have consumed if supply had been continuous are irrelevant to the calculation. Accordingly, the Chief Engineer erred in denying remission for the admitted hours of non-supply, and the court upheld the petitioner's second objection.
On the mode of calculation for remission of demand charges:
The court examined the calculation reproduced in the impugned order. That calculation showed (a) Contract Demand 115 KVA; (b) Total KVA recorded 420.17 KVA; and (c) Total KVA charged 776.25 KVA (75% of contract demand). The calculation, however, used the recorded KVA (420.17) in computing proportionate relief. Counsel for the petitioner correctly pointed out this was contrary to clause 4(c), which requires maximum demand charges to be based on the maximum KVA demand for the month or 75% of contract demand, whichever is higher. The Board's counsel agreed and further pointed out that the proportional product should be divided by the total hours of power to be supplied (serial no. 5, 6576 hours), not by the total hours of power supplied (serial no. 7). The court accepted these submissions and concluded that the remission of demand charges was not properly computed in the impugned order; it stated the remission should be calculated using the higher KVA basis and the correct total hours denominator as indicated by counsel.
On remission for the first year of supply:
The Board argued clause 4(c)'s second part (which states that for the first year of supply maximum demand charges will be based on the actual monthly demand) was not subject to clause 13, and thus the consumer was disentitled to remission under clause 13 for the first year. The court disagreed. It reasoned that clause 13 addresses special situations when the Board is unable to supply energy (enumerated reasons) and provides for remission; this relief, the court held, should not be withheld merely because the contract was in its first year. The first-year concession in clause 4(c) presupposes normal supply conditions; where the Board is prevented from supplying energy for reasons within clause 13, the consumer's right to remission under clause 13 applies equally in the first year. The court therefore found the Chief Engineer erred in denying remission for the first year and upheld the fourth objection.
Remedial directions:
On the basis of the errors found (both in law and in arithmetic/application), the court set aside the impugned order and remitted the matter to the Chief Engineer-cum-General Manager, Central Bihar Area Electricity Board, for fresh decision in light of the court's observations and directions. The court expected final disposal by the Chief Engineer within three months from receipt/production of a copy of the order.

Holding and Implications

Core Ruling: The application is allowed; the impugned order dated 22.05.1995 is set aside and the matter is remitted to the Chief Engineer-cum-General Manager for fresh decision in accordance with the court's observations and directions.

Direct consequences and practical implications:

The Chief Engineer's exclusion of interruptions of less than half an hour in computing hours of non-supply was held to be impermissible under the operative tariff/agreement provisions for the relevant period; the consumer is entitled to remission calculated including such interruptions.
The Chief Engineer should compute remission of guaranteed energy charges strictly on the basis of admitted hours of non-supply in accordance with clause 13, without factoring in hypothetical considerations about the consumer's ability to have consumed energy during periods of supply.
Remission of demand charges must be calculated using the higher basis (i.e., the greater of recorded maximum demand for the month or 75% of contract demand) and using the total hours of power to be supplied as the divisor in the proportional calculation; the arithmetic in the impugned order was incorrect and must be revised accordingly.
Remission under clause 13 is available in the first year of supply when the Board is unable to supply energy for reasons enumerated in clause 13; the first-year concession under clause 4(c) does not exclude clause 13 relief in such circumstances.
The Chief Engineer is directed to decide the petitioner's claim afresh within three months from receipt/production of a copy of the court's order.
No order as to costs was made by the court.

No statement in this summary attempts to add information not contained in the provided opinion. If a specific detail (e.g., a cited case name or fuller factual record) was not present in the opinion, it has not been invented or presumed.

Show all summary ...

1. The petitioner, in this application, challenges an order, dated 22.05.95 (copy at Annexure 1), passed by the General Manager-cum-Chief Engineer, Central Bihar Area Electricity Board on the petitioner's claim for remission of minimum guaranteed charges in terms of clause 13 of the High Tension Agreement. The claim for remission relates to a three year period from 1989-1990 to 1991-1992.

2. Mr. Rekhi, learned counsel for the petitioner, assailed the order of the Chief Engineer on the following four grounds:

(i) The action of the Chief Engineer in not taking into account the interruptions in supply of less than half an hour for computing the total hours of non-supply of energy was without any sanction of law.

(ii) The Chief Engineer had acted contrary to law in not allowing remission of guaranteed energy charges on the basis of the admitted hours of non-supply of electricity and in denying remission of guaranteed energy charges on the plea that the petitioner's failure to consume the minimum guaranteed units was not due to the interruption in supply of energy but was due to the petitioner's own inability to consume energy.

(iii) By taking the total K.V.A recorded instead of the total K.V.A charged (the former being lower than the later) as the basis for computing the remission of the demand charges (for the years 1990-1991 and 1991-1992), the Chief Engineer had adopted a wrong mode of calculation.

(iv) The Chief Engineer had erred in law in not allowing any proportionate remission of demand charges in terms of clause 13 of the High Tension Agreement for the first year of supply.

3. As regards the first point, Mr. Shiva Kriti Singh, learned counsel appearing for the Board, fairly stated that as the provisions of the tariff and the agreement etc. stood during the relevant years or even as they exist today it was not open to the Chief Engineer to exclude the interruptions in the supply of less than half an hour for computing the total hours of non-supply of electricity. Mr. Singh stated that a proposal was under consideration to introduce an amendment in the relevant provisions in this regard and, according to him, a notification for this purpose was likely to be made shortly, but, till such time as the notification was issued introducing such an amendment it would not be open to exclude any interruptions of less than half an hour for calculating the total hours of non-supply of energy. This objection made on behalf of the petitioner is, therefore, upheld. As regards the second point it may be noted that recently this Court has come across a number of cases where the consumer was not allowed remission of guranteed energy charges in terms of clouse 13 of the High Tension Agreement on the basis of the admitted hours of non-supply of electricity. The refusal to allow remission is based on the plea that the consumer's failure to consume the guaranteed units was not due to the Board's failure to maintain a continuous supply of energy but for other reasons. It is tried to be shown that the consumer failed to consume the guranteed units even during the period when there was no interruptions in the supply of energy. And on that basis it is contended that the consumer's failure to consume the guaranteed units was primarily or solely due to factors for which the consumer was himself responsible, such as managerial lapses, dislocation in production caused by non-supply or delayed supply of raw materials stockpiling of the finished products etc. etc.; in other words, for reasons, other than, the Board's failure to supply energy. On this ground it is held that the consumer was not entitled to any proportionate remission even for the admitted hours of non-supply of electrical energy. In this case also the Chief Engineer has proceeded on similar lines.

4. In my opinion, this approach for examining a claim of remission on account of Board's failure to supply energy is wholly erroneous and foreign to the provisions contained in clause 13 of the High Tension Agreement. I may clarify here that the refusal to allow remission on the ground that the consumers' failure to consume the guaranteed units was not due to the Board's failure to supply energy but on account of factors for which the consumer himself was responsible may not be per se unreasonable and arbitrary. Objectively speaking there may be some substance in this line of reasoning. But it must be borne in mind that the Chief Engineer derives its power to adjudicate upon a claim for remission of minimum guaranteed charges from clause 13 of the agreement. It, therefore, follows that he must confine himself to that provision and must not take into consideration elements and factors which are foreign to that provision. Clause 13 on a plain meaning of the language, provides that the consumer is entitled to remission proportionate to the Board's inability to supply electrical energy. In case of the Board's inability to supply electrical energy the hypothetical question of the consumer's ability or inability to consume, had the Board been able to maintain a continuous supply is quite immaterial and irrelevant.

5. For the reasons stated it must be held that in this case the Chief Engineer was in error in not allowing remission of guaranteed energy charges on the basis of the admitted hours of non-supply and the second objection of the petitioner must also be upheld.

6. The third objection raised on behalf of the petitioner relates to the mode of calculation for remission of demand charges. To appreciate the precise objection of the petitioner it will be necessary to examine the actual calculation made in the impugned order and for this purpose one such calculation is extracted below:

“B” IN MAXIMUM DEMAND (7/90 to 3/91)

1. Conctract Demand ….. 115 KVA 2. Total KVA recorded ….. 420.17 KVA 3. Total KVA charged ….. 776.25 KVA 4. Total KVA charged over & above 356.08 KVA 5. Total hrs. of power to be supplied (24 × 274) 6576 Hrs. 6. Total admitted hrs. of non supply 587.44 Hrs. Say 588 Hrs. 7. Total Hrs. of power supplied -5988 Hrs. 8. Proportionate Relief in terms of KVA 41.25 KVA Say 41 KVA 9. Admissible relief for 41 KVA @ Rs. 35/- Rs. 1435/-

7. From the above calculation it appears that the total KVA recorded was 420.17 KVA; this was lower than 75 per cent of the contract demand and, hence, the demand charges were raised on the basis of 776.25 KVA, that being 75 percent of the contract demand. However, from serial no. 8 of the calculation reproduced above it appears that in calculating the proportionate relief, it is the recorded KVA (420.17) which has been multiplied by the total admitted hours of non-supply. According to Mr. Rekhi, this is clearly contrary to clause 4(c) of the agreement which stipulates that Maximum Demand Charges will be based on the maximum KVA demand for the month or 75 percent of the contract demand whichever is higher.

8. Mr. Rekhi submitted that for the purpose of raising the demand charges the higher of the two figures (that being 75 percent of the contract demand) was taken into account. So for the purpose of calculating remission of demand charges also the higher figure should have formed the basis of the calculation.

9. Mr. Shiva Kriti Singh, learned counsel for the Board, accepts this position. He, however, points out one more mistake in the calculation of proportionate relief (serial no. 8 of the reproduced calculation). Mr. Singh pointed out that not only the higher of the two figures (being 776.25 at serial no. 3) should have been multiplied by the total admitted hours of non-supply but the product should have been divided not by the total hours of power supplied at serial no. 7 but by the higher figure of total hours of power to be supplied at serial no. 5.

10. In my opinion, Mr. Shiva Kriti Singh, is quite right in his submission. The position that emerges, thus, is that the remission in the demand charges should be calculated in the following manner:

11. For the reasons stated I find that the remission of demand charges has also not been properly computed in the impugned order.

12. On the last question regarding the refusal to grant remission in demand charges for the first year of supply, Mr. Shiva Kriti Singh strenuously argued that the Chief Engineer-cum-General Manager was justified in not allowing remission for the first year of supply. Mr. Singh pointed out that clause 4(c) of the agreement was in two parts; the first part stipulated that maximum demand charges would be raised on the maximum KVA demand for the months or 75 percent of the contract demand, whichever is higher and this was made subject to the provisions of clause 13. The second part of clause 4(c) provided that for the first year of supply the maximum demand charges will be based on the actual monthly demand for that month and this, according to him was not subject to provisions of clause 13. According to Mr. Singh, during the first year of supply the consumer was given the concession that he would be charged on the basis of the actual maximum demand for the month regardless of his failure to achieve 75 percent of the contract demand. As a counter measure to this concession he was also disentitled from any remission in terms of clause 13.

13. I am unable to agree to this view. In my opinion, clause 13 is intended to deal with the special situation when for reasons enumerated there, either the consumer is prevented from receiving or using the electrical energy or the Board is unable to supply it (it is another matter that what was supposed to be a special situation has come to be an every day affair). On the other hand, the concession made available to a consumer in the first year of supply under clause 4(c) of the agreement is under normal conditions, presupposing a normal supply of energy in the first year of the contract as also in the succeeding years. However, in case the Board is prevented from supplying energy for reasons enumerated in clause 13 of the agreement I see no reason to hold that the right for remission under that clause will not be available to a consumer in the first year of the supply. In my considered opinion, the provision for remission under clause 13 would be available to consumers equally and in all respects regardless of the year of supply.

14. Thus, the fourth objection, raised by Mr. Rekhi in this case, must also be upheld.

15. For the reasons, stated above, the impugned order is set aside and the matter is remitted back to the Chief Engineer-cum-General Manager, Central Bihar Area Electricity Board for deciding the matter afresh in the light of the observations and directions made in this judgment. It is expected that the Chief Engineer will finally dispose of the petitioner's claim within three months from the date of receipt/production of a copy of this order.

16. In the result, this application is allowed.

17. No order as to costs.