Full Judgment Text
1
REPORTABLE
2023INSC607
IN THE SUPREME COURT OF INDIA
CIVIL APPELLETE JURISDICTION
CIVIL APPEAL NOS.7224-7226 of 2009
THE MADRAS ALUMINIUM CO. LTD. …APPELLANT(S)
VERSUS
THE TAMIL NADU ELECTRICITY BOARD ...RESPONDENT(S)
AND ANR.
J U D G M E N T
SANJAY KAROL, J.
1. The questions that this Court has been called upon to decide
are, whether the action of the Respondents in taking
considerable time from when the application was made for
reduction to 10000 KVA, to when the revised agreement was
entered into, was arbitrary and unreasonable? Contingently,
whether the Appellant is entitled to refund of the amount of
difference between the amounts payable for 23000 KVA and
Signature Not Verified
Digitally signed by
Anita Malhotra
Date: 2023.07.06
15:53:56 IST
Reason:
10000 KVA which, have been paid under protest?
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2. This judgement will dispose of a cluster of appeals arising out
th
of a judgment and order dated 15 December,2008, in WA
Nos.3806, 3807 and 3808 of 2003 passed by the High Court
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of Madras.
3. By way of the impugned judgment, the Court below sitting in
Writ Appellate Jurisdiction upheld the judgment and order
passed by the Learned Single Judge in WP Nos. 19050-19052
of 2002, dismissing the said writ petitions, holding that the
petitioners (Appellant herein, The Madras Aluminum Co. Ltd.)
were bound to pay charges as per the contract irrespective of
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the consumption of 23000 KVA being the maximum
contracted load of electricity. The High Court, in appeal held
that such a dispute is not one to be adjudicated under Article
226 of the Constitution of India.
4. Past events require recall to lend context to the instant
appeals.
4.1. The Appellant is a company set up in 1965 for the
manufacture of aluminium, which is a power and electricity
1
Hereafter, “the impugned judgment”
2
Kilovolt-ampere.
3
intensive process. With the passage of time, it was declared a
‘sick industrial unit’ as per Section 3(1)(O) of the Sick
Industrial Companies Act, 1985 by the Board for Industrial
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and Financial Reconstruction, Government of India , vide
th
order dated 8 September, 1987.
4.2. In 1994, the present management approached the Board with
a plan for revival, pursuant to which a fresh scheme with
certain additional concessions was issued in terms of the
Government Office Memoranda bearing numbers 165 dated
st th
21 December 1994 and 37, dated 10 February, 1995
respectively. With affairs so taken over by the present
management, production commenced in February, 1995.
4.3. Originally, the maximum demand for electricity of the
Appellant’s plant as per the agreement was 67000 KVA. Given
that cost of consumption of such power constituted more than
40 percent of the cost of production, and that the company
itself had established a captive power plant, a request was
made and consequently agreed to, to reduce the contracted
maximum demand to 23000 KVA. This was done vide
rd 4
agreement 3 May,1999 .
3
Abbreviated as BIFR . Hereafter, “the Board”
4
Hereafter, the “1999 Agreement”
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th
4.4. The Appellant then made a further request on 24 December,
2001, to reduce the contracted maximum demand to 10000
th
KVA with effect from 27 January, 2002, along with an offer
to pay the one-time charge payable on effecting such a
reduction.
4.5. Despite such request being made and some initial
communication, no steps effectuating such request were
taken. Therefore, the Appellant was being forced to pay as per
the contracted demand of 23000 KVA @ 320 Rupees per KVA.
4.6. With the previous concessional power tariffs withdrawn and
repeated high value demands apart from Seventy-Eight Lakhs
th
(78,00,000) already paid on 25 May, 2002 as also the
amounts paid subsequently, forced the filing of the petitions
before different fora.
The Impugned Judgement
5. The Impugned Judgment records the stand of the
Respondents, placing reliance on various clauses of the 1999
agreement and the Terms and Conditions of Supply of
Electricity to justify their stand as being entirely permissible.
Having referred to the contents of the clauses, the High Court
held that it was not open for the Appellant to pay lesser
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charges than that of the contracted demand in absence of a
sanction in respect thereof by the board.
5.1 It was further held that simply because the board took time
in consideration of the application of the Appellants, this
would not enable them to begin automatically paying a
reduced amount.
5.2 In respect of the other examples cited by the Appellants where
similar applications by similarly placed persons were
considered and decided upon by the Board with promptitude,
it was held that such a plea was raised for the first time at
the appellate stage. It was further observed that the manner
in which the Appellant’s application was considered was not
arbitrary or unfair and that interpretation of such an
agreement could not be undertaken in writ jurisdiction.
6. We have heard the Learned Senior Counsel; Mr. C.A.
Sundaram, for the Appellant and Mr. K Radhakrishnan for
the Respondents at length.
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7. The 1999 Agreement acknowledging the changed scenario
vis-à-vis the allocation and the requirement of the supply of
electricity, more so, in view of the policy framed by the
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Central Government encouraging the industrial units to have
captive power plants, while reducing the total energy quota
to a maximum of 23000 KVA inter alia contained the following
terms:
“LOAD
MAXIMUM
DEMAND
NOW IT HEREBY DECLARED AND
AGREED AS FOLLOWS:
Subject to the provisions hereinafter
contained, the Board supply and the
consumer shall take from the Board
electrical energy for a maximum demand
not exceeding 23000 KVA which shall be
in contracted load for its exclusive use for
the purpose above mentioned at the
premises of its factory at P.N. Patty
Village, Mettur Tk. Salem Dt. The
contracted load shall be 23000 KVA for
their Smelter Plant and Extraction Plant
HT SC No.20 (illegible). The consumer
shall not effect any change in maximum
demand as contracted load.”
*
OBLIGATION
OF
CONSUMER
TO PAY ALL
CHARGES
LEVIED BY
BOARD
6. From the date this agreement comes
into force the consumer, shall be bound
by and shall pay to the Board, maximum
demand charges, energy charges,
surcharges, meter rent and other
charges, if any, in accordance with the
tariff applicable and the terms and
conditions of Supply of Electricity
notified by the Board from time to time
for the appropriate class of consumers to
which it belongs.
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BOARD’S
RIGHT TO
VARY
TERMS OF
AGREEMENT
7. The consumer agrees that the board
shall have the right to vary, from time to
time, tariffs, general and miscellaneous
charges and the terms and conditions of
supply of electricity under this
agreement, by special or general
proceedings. The consumer, in
particular, agrees that the board shall
have the right to enhance the rates etc.
chageable for supply of electricity
according to exigencies. It is also open to
Board to restrict or impose powe cuts
totally or partially at any time as it deems
fit.
*
PERIOD OF
AGREEMENT
11. This agreement shall remain in force
for a period of five years from the date of
its commencement as defined in clause 2
and shall remain in force until it is
terminated by either party as provided in
the conditions of supply.”
8. Pursuant thereto, the Appellant finding the requirement of
supply of electricity from the Respondents to be reduced, by
th
a communication dated 24 December 2001 forwarded a
request for reduction of maximum demand of supply of
electricity to 10000 KVA. This was followed vide a reminder
th
dated 27 January, 2002 which facts were acknowledged by
nd
the Respondents vide their communication dated 22
January 2002 informing the Appellant of the matter pending
consideration with the competent authority, awaiting
necessary response.
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9. Pending such consideration, with the Respondents
generating bills for monthly charges for the demand
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stipulated in terms of the 1999 agreement , the Appellant
being left with no option, was forced to have its rights
adjudicated before different fora, including the High Court,
also in terms of the subject matter of the instant lis .
10. Pending such adjudication, in response to the Appellant’s
th
request dated 24 December 2001, the Respondents
communicated as under:
“i. Sanction of the proposal for reduction by the
competent authority after ascertaining the litigancy
with the Board, if any.
ii. Modification of the metering arrangement for the
reduced demand it warrants and also after examining
the technical necessity for continuance of existing
230 KVA Malco S.S. for the reduced demand.
iii. One time payment of twice the demand charges at
the notified rate per KVA for each KVA of the demand
reduced as per the clause 22.07 of terms and
conditions of supply before effecting reduction in
demand.
iv. The company have to execute revised agreement
for the Reduced demand and Revised test report has
to be taken.
v. The CC bill for the reduced demand will be raised
only after completion of the formalities. Until then the
CC bill will be levied for the existing sanctioned
maximum demand only.”
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11. It being a matter of record that eventually and
notwithstanding the pending lis, inter se the parties, by way
of its own right, the Respondents by taking a conscious
4
decision revised the 1999 agreement reducing the maximum
required demand from 23000 KVA to 10000 KVA. This was
in July, 2004.
12. It is also a matter of record that vide communication dated
th
11 August, 1994, the Respondents, in principle, had already
taken a decision of generally accepting the request for
reduction of the load, relevant extract thereof is as under:
“Sub: Reduction of demand requested by H.T.
Consumers – Certain Clarifications – Issued _
Reg.
Ref: CE/D/Trichy lr.No.161666/Accts/A1/94
dt.21.7.94.
With reference to the above, it is informed
that,
(1) As per Clause 21.03 of Terms and Conditions of
supply, “No additional load/demand will be
sanctioned unless all outstanding dues in the
same service connection has been paid”. The
same may be adopted while permitting reduction
of load.
(2) Reduction of load requested by the disputant
H.T. Consumers may be sent to Headquarters
office before processing the same.
(3) Request for reduction of load within a period of
one year from the date of earlier reduction may
be permitted”
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13. A perusal of the record reveals that a request for the
reduction of the contracted demand to 10000 KVA was made
th
on 24 December,2001 and thereafter, repeated letters and
communications in this regard have been made. Vide letter
th
dated 30 January, 2002 it was informed to the Appellants
that the assumption in respect of the reduction being
th
effectuated from 27 January, 2002 was incorrect and the
same would be subject to certain conditions.
th
14. Further, vide a letter dated 20 May, 2002, a meeting was
requested with the concerned authority. Subsequently,
conceding to the threat of disconnection of the supply a
payment of Rs.78,00,000/- was made under protest. The said
th
payment was acknowledged vide letter dated 27 May, 2002,
and it was stated that the ‘under protest’ nature of the same
was not acceptable. It was also informed thereby that a
delayed payment surcharge @ 1.5% per month would also be
applicable.
15. Revised bills were requested in line with the interim order of
th
the High Court dated 28 November,2002, in terms of letter
th
dated 4 June, 2002, but the same does not appear from the
record to have been responded to.
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16. The High Court, in appeal, considered at length the various
clauses of the agreement to hold that no such right to pay the
reduced amount arose in the absence of such a request being
sanctioned by the Board.
17. It is submitted that the unilateral call by the Board not to
alter the contract as requested saddles the Appellant with
unfair cost. It is then submitted that the Board is bound to
grant such permission for reduction so long as the payment
as according to Clause 19.02 is being made.
18. As per Clause 13.04 which states that the agreement of
supply may be terminated by any consumer by giving one
month’s notice, it is urged that the Appellant’s application
th
dated 24 December, 2001 seeking the reduction to 10000
th
KVA with effect from 27 January, 2002, must be treated a
notice of termination of the agreement with respect to the
13000 KVA that is sought to be reduced.
19. On the basis of certain other instances where similar
applications were decided upon within a short period of time,
it is submitted that taking such a large time to deliberate
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upon the Appellant’s application is arbitrary and
unreasonable.
20. The primary thrust of the Respondents’ argument is a clause
in the 1999 agreement reproduced Supra. The effect of this
Clause, as per the Respondents, is that the request for a
reduction in maximum demand as made by the Appellant,
does not acquire any status as till the time such request is
processed by the Board, and a decision allowing such
reduction is taken.
21. It is a settled principle of law that a contract cannot be
amended unilaterally. It has been observed by this court in
Ssangyong Engg. & Construction Co. Ltd. v. National
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Highways Authority of India that, “This being the case, a
fundamental principle of justice has been breached, namely,
that a unilateral addition or alteration of a contract can never
be foisted upon an unwilling party, nor can a party to the
agreement be liable to perform a bargain not entered into with
the other party. Clearly, such a course of conduct would be
5
(2019) 15 SCC 131
13
contrary to fundamental principles of justice as followed in
this country,…”
22. Parties on either side have urged that a unilateral decision
has been taken. The Respondents contend that the Appellant
has unilaterally amended the contract to reduce the
maximum demand to 10000 KVA when no such decision
stands taken by them. The Appellant, per contra, contends
that the unilateral decision on the part of the board not to act
on the application submitted by them has caused prejudice
to them.
23. It is a matter of record that a fresh agreement with the
reduced maximum demand of 10000 KVA was entered into
between the parties in July, 2004. Undisputedly, such fresh
agreement was inked more than two and a half years after
th
the application was made on 24 December, 2001.
24. The contention that others similar agreements have been
processed by the Respondents with promptitude and it is only
the Appellant whose application was singled out, was rejected
by the High Court on the ground that even the fresh
agreement entered into by the parties in July 2004
specifically indicates that the consumer shall not affect any
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change in the maximum demand or the contracted demand
and, that the supplemental agreement is subject to and in
addition to the terms of the subsisting agreement.
25. It appears that the force of this observation of the High Court
is that the 1999 agreement also stated, as reproduced above,
that the consumer shall not effect any change in maximum
demand; and the same restriction has found its place in the
supplemental agreement as well and so, without approval of
the board no change in the maximum demand is possible,
allegedly done by the Appellant herein.
26. The Appellant in pursuance of the reduction of maximum
demand made its application and followed up repeatedly with
the authorities. Save and except two letters on behalf of the
Board one, acknowledging the said application and stating
that same has been put up before the authorities for
consideration: and two, rejecting the date of such reduction
being effectuated and listing down certain conditions upon
which the same would be granted, no other communication
on part of the board forms the record.
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27. No reason whatsoever is forthcoming as to why this particular
application required such a vast length of time to be acted
upon. In the mean while the Appellant has been faced with
the threat of disconnection, and has had to pay, due to such
inaction, large amounts of money for electricity which it has
not utilized.
28. It is true that the agreement states that the consumer,
(Appellant herein) is bound to pay such maximum demand
amount irrespective of utilization and also that such an
agreement will be in effect for a period of five years but in the
considered view of this Court, the Board cannot be allowed to
take refuge of these clauses while the company on the other
side is saddled with heavy cost in the interregnum of such
th
decision. More so in view of the communication dated 11
August 1994.
29. The Writ Court had observed that in the other instances cited
by the Appellant herein, the reduction sought was a small
amount of KVA as opposed to the 13000 KVA reduction
sought vide the instant application. While that may be true,
16
it does not supply reason to the act of keeping an application
pending for such a long period of time.
30. The above discussion gives way to the question whether such
an action of the application remaining pending for an
unreasonable period could in itself be classified as an
arbitrary and unreasonable act.
31. A Constitution Bench of this Court in Natural Resources
6
Allocation, IN Re, Special Reference No.1 of 2012
speaking through J.S. Khehar, J. (as His Lordship then was)
observed in regards to contracts having the State as a party,
as hereinunder reproduced:-
“183. The parameters laid down by this Court on
the scope of applicability of Article 14 of the
Constitution of India, in matters where the State,
its instrumentalities, and their functionaries, are
engaged in contractual obligations (as they
emerge from the judgments extracted in paras
159 to 182, above) are being briefly paraphrased.
For an action to be able to withstand the test of
Article 14 of the Constitution of India, it has
already been expressed in the main opinion that
it has to be fair, reasonable, non-discriminatory,
transparent, non-capricious, unbiased, without
favouritism or nepotism, in pursuit of promotion
of healthy competition and equitable treatment.
The judgments referred to, endorse all those
requirements where the State, its
instrumentalities, and their functionaries, are
engaged in contractual transactions. Therefore,
all “governmental policy” drawn with reference to
6
( 2012) 10 SCC 1
17
contractual matters, it has been held, must
conform to the aforesaid parameters. While
Article 14 of the Constitution of India permits a
reasonable classification having a rational nexus
to the object sought to be achieved, it does not
permit the power of pick and choose arbitrarily
out of several persons falling in the same
category. Therefore, criteria or procedure have to
be adopted so that the choice among those falling
in the same category is based on reason, fair play
and non-arbitrariness. Even if there are only two
contenders falling in the zone of consideration,
there should be a clear, transparent and objective
criteria or procedure to indicate which out of the
two is to be preferred. It is this, which would
ensure transparency.”
(emphasis supplied)
32. A Bench of two learned Judges of this Court in Kumari
Shrilekha Vidyarthi and Others v. State of U.P. and
7
Others observed that there exists “an obvious difference”
between contracts concerning private parties to those which
have State as a party. The primary difference being that the
State while exercising its powers and discharging its
functions “acts indubitably, as is expected of it, for public
good and in public interest”. The said factor singularly is
sufficient to bring into any transaction the minimal
requirements of public law, to which the State is a party. The
fact that a dispute falls into the contractual realm does not
7
(1991) 1 SCC 212
18
relieve the State of its obligation to comply with the
requirements of Article 14.
33. Further the Court had observed that:
“24. The State cannot be attributed the split
personality of Dr Jekyll and Mr Hyde in the
contractual field so as to impress on it all the
characteristics of the State at the threshold while
making a contract requiring it to fulfil the
obligation of Article 14 of the Constitution and
thereafter permitting it to cast off its garb of State
to adorn the new robe of a private body during the
subsistence of the contract enabling it to act
arbitrarily subject only to the contractual
obligations and remedies flowing from it. It is
really the nature of its personality as State which
is significant and must characterize all its
actions, in whatever field, and not the nature of
function, contractual or otherwise, which is
decisive of the nature of scrutiny permitted for
examining the validity of its act. The requirement
of Article 14 being the duty to act fairly, justly and
reasonably, there is nothing which militates
against the concept of requiring the State always
to so act, even in contractual matters. There is a
basic difference between the acts of the State
which must invariably be in pubic interest and
those of a private individual, engaged in similar
activities, being primarily for personal gain,
which may or may not promote public interest.
Viewed in this manner, in which we find no
conceptual difficulty or anachronism, we find no
reason why the requirement of Article 14 should
not extend even in the sphere of contractual
matters for regulating the conduct of the State
activity.”
(emphasis supplied)
34. This case hinges on what would be construed to be
‘reasonable time’ to consider any application for reduction in
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maximum demand, by the authorities. A Three-Judge Bench
of this Court in Adjudicating Officer, Securities and
8
Exchange Board of India v. Bhavesh Pabari has observed
that:
“…There are judgments which hold that when the
period of limitation is not prescribed, such power
must be exercised within a reasonable time. What
would be reasonable time, would depend upon the
facts and circumstances of the case, nature of the
default/statute, prejudice caused, whether the
third-party rights had been created, etc….”
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35. In Mansaram v. S.P. Pathak and Ors. this Court has
observed that when a power exists to effectuate a purpose it
must be exercised within a reasonable time. It has been
observed that this is all too well-settled principle to require
buttressing precedent. Nonetheless, the Court refers to State
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of Gujarat v. Patel Raghav Natha wherein the period of one
year was found to be too long for the Commissioner to
exercise revisional jurisdiction under Section 211 of the
Bombay Land Revenue Code. The principle of reasonable
time as mentioned herein was followed recently by a Two-
Judge Bench in Securities and Exchange Board of India v.
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Sunil Krishna Khaitan and Ors. .
8
(2019) 5 SCC 90
9
(1984) 1 SCC 125
10
(1969) 2 SCC 187
11
(2023) 2 SCC 643
20
36. Keeping in view the above-stated well established principles
that State action irrespective of being in the contractual
realm must abide by Article 14, and that a) after passage of a
considerable period of time, in July, 2004 the reduction to
10000 KVA was agreed to and a new agreement to that effect
was entered into; b) irrespective of the amount of reduction
in KVA sought other applications were considered within a
reasonable period of time; c) no reason has been put forth for
keeping such application pending; d) that the Appellant duly
and repeatedly followed up with the authorities to effectuate
such reduction; and e) the Appellant has been unjustifiably
asked to furnish costs for unutilized electricity which, in any
case should not have extended beyond the period of six
months (considering ‘reasonable period’ to consider an
application, to be so), for a period much larger thereto,
rendering such action unquestionably unreasonable and
arbitrary.
37. In view of the factual narrative, it would not be open for the
Respondents to contend that the petitioner is not liable for
the refund of the amount deposited under protest towards
the bills so generated taking the maximum load to be 23000
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KVA. Particularly, when at no point in time, the Appellant
neither sought for nor consumed the electricity more than the
maximum demand of 10000 KVA.
38. Acknowledging the financial health of the Appellant, in the
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1999 agreement , the Respondent ought to have taken a
decision on the Appellant request with a reasonable dispatch
and terms which ought to have been withing a period latest
by six months and not two and a half years as was so
eventually done.
39. For the aforesaid reasons, the appeals are allowed. Judgment
th
dated 15 December 2008 in WA 3806-3807 & 3808 of 2003
passed by the High Court of Madras is set aside.
40. We direct the Respondent namely The Tamil Nadu Electricity
Board to return the amount as may be calculated and
verified, paid by the Appellant to it for 13000 KVA, in excess
to its request of maximum sanctioned demand of 10000 KVA
(23000-10000 = 13000 KVA). Such amount shall be
th
calculable six months post making of application, i.e. on 24
December, 2001, till the date of execution of the new
agreement in July, 2004. Clarifying that the period is to
22
rd st
commence from 23 June, 2002 till 1 July, 2004 (both
inclusive); interest applicable thereupon would be simple in
nature @ 6 per cent per annum. All payments be made within
two months from today.
41. Questions raised in the instant appeals are answered as
above.
42. The appeals are allowed and pending applications, if any,
stand disposed of.
…….………………J.
(B.R. GAVAI)
……..…………..…J.
(SANJAY KAROL)
…………………….J.
(ARAVIND KUMAR)
DATED : JULY 06, 2023
PLACE : NEW DELHI