Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICITION
CIVIL APPEAL NO.1607 OF 2004
M/s Nava Bharat Ferro Alloys Ltd. …Appellant
Versus
Transmission Corporation of A.P.
Ltd. and Anr. …Respondents
(With CA Nos.1608-1609 of 2004
and CA No.4741 of 2006)
J U D G M E N T
T.S. THAKUR, J.
1. These appeals by special leave arise out of an
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order dated 6 June, 2002 passed by the High Court of
Andhra Pradesh whereby Writ Petitions No.9081 of 1999
and 13458 of 1993 filed by the appellant have been
dismissed and the demand for additional
charges/surcharge payable on the delayed payment of
outstanding electricity dues raised under Clause 32.2.1
and 34 of the Terms and Conditions of supply (TCS)
2
upheld. Facts necessary for the disposal of these
appeals may be summarised as under:
2. The appellant is a public limited company engaged
in the manufacture of Ferro Silicon. The industry set
up by the appellant is energy intensive in as much as it
consumes approximately 10,000 units of electricity for
every ton of Ferro Silicon produced. The appellant’s
case is that the respondent-Electricity Board had
initially agreed to supply power to the appellant @ 6
paise per unit but revised the said rate to 11 paise per
unit in the year 1975. The revised rate was in the
beginning applicable only to four consumers who were
similarly situate but the number of such power intensive
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consumers gradually rose to 84. On 13 December, 1983
the Board revised the general tariff but a separate
order applicable to power intensive consumers like the
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appellant was issued on 29 January, 1984. Aggrieved by
the said order which permitted charging of a higher rate
of tariff, the appellant and few others filed writ
petitions before the High Court of Andhra Pradesh, which
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were dismissed by a Division Bench of that Court on 3
April, 1985. During the pendency of the writ petition,
however, the High Court had granted an interim order of
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stay against the collection of the disputed amount in
the following terms:
“There shall be stay of operation of the
order in so far as writ petition is
concerned, subject to the condition if the
writ petitioner pays at the rate of 47.89
paise per unit with effect from April 1984
onwards, furnishing Bank guarantee for the
balance to the satisfaction of the
Superintending Engineer concerned in four
weeks from today. In default of any of the
conditions, the stay stands vacated. The
bank guarantee furnished shall be renewed
for every 3 months. If the petitioner has
already paid the demand for the month of
April, on the basis of the impugned order,
this order passed by me shall be effective
from the month of May 1984 otherwise it will
be operative from April, 1984.”
3. The dismissal of the writ petitions filed by the
appellants was assailed by them before this Court by way
of special leave petitions nos.9206-9207/1985 (C.A.
nd
Nos.2569-2570/1985). This Court by an order dated 22
July, 1985 while granting leave to appeal directed
continuation of interim arrangement made by the High
Court in the following terms:
“As regards stay, after hearing learned
counsel for the parties we felt that the
order passed by the High Court dated
24.4.1984 which operated during the pendency
of the writ petitions will continue to
operate during the pendency of the appeals
4
with the modification that the rate of 47.89
paise per unit mentioned in the order is
rounded to 48 paise per unit.
We would, however, like to make it clear
that because of the High Court’s order dated
13.4.1985, for a couple of months, there was
no such orders in regard to future payments
and the Electricity Board has received the
dues at the enhanced rates in lump sum from
some of the consumers. There will no
question of refunding the amounts back to
these consumers.
The bank guarantee already furnished by the
petitioners/appellants will be kept alive
from time to time and will cover all the
differences including the future difference.”
4. It is not in dispute that the above order was
modified subsequently in respect of the bills issued from
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16 March, 1990 onwards. The appeals, eventually failed
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and were dismissed by this Court by an order dated 2
May, 1991. In I.As. filed by the appellant post-
dismissal of the appeals, this Court passed an order on
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9 May, 1991 to the effect that the appellants could
after paying outstanding 50% of the amount due under the
subsisting bank guarantee make representation to the
Board for payment of the balance amount in instalments
keeping in view the circumstances and the hardships in
each individual case. Consequently, the appellants made a
representation to the Board praying for grant of
installments for payment of the balance amount. While
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the said request was under consideration, the appellant
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received a communication dated 14 June, 1991 from the
Superintending Engineer pointing out that an amount of
Rs.5,57,66,539.18 was recoverable from the appellant for
the period April 1984 to August 1987. For the recover of
the outstanding amount the Board invoked the bank
guarantee furnished to it for a sum of Rs.2,83,53,120.93
thereby leaving a balance of Rs.2,74,13,218.25 due and
payable which amount the appellant was requested to
arrange. The communication also pointed out that in
addition to the above amount arrears of Rs.4,45,63,903.21
for the period from August 1987 to July 1989 were also
payable besides additional charges for delayed payments
of the said amount which the latter proposed to
communicate separately.
5. The request made by the appellant for payment of the
balance amount of tariff arrears was accepted by the
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Board in terms of communication dated 9 July, 1999. It
was in the above background that the appellant filed writ
petitions No.9081 of 1999 and 13458 of 1993 raising
common questions of law relevant to two different periods
in the High Court of Andhra Pradesh, inter alia ,
assailing the demand of additional charges and interest
6
on the delayed payment of the amounts determined pursuant
to the judgment of this Court. By the order impugned in
these appeals the said petitions have been dismissed by
the High Court. The High Court held that the Terms and
Conditions of Supply (TCS) were statutory in character
and were not in conflict with any provision of the
Electricity Supply Act or the Constitution of India. It
also held that Clause 32.2.1 and Clause 34 of the said
Terms and Conditions of Supply upon which the Board
placed reliance for its demand did not violate any
constitutional or statutory provision. The stipulated
terms and conditions were, according to the High Court,
intended to achieve the objective mentioned in Clause (b)
of sub-section 2 of Section 49 of the Act, namely, to
discourage delayed payment of electricity dues and to
compensate the Board in cases of delay in the making of
the payment. Both these conditions, according to the High
Court were intended to sustain the economic health of the
Board.
6. The High Court further held that the decisions of
this Court in Kerala State Electricity Board v. MRF
(1996) 1 SCC 597 and
Limited Kanoria Chemicals and
Industries Ltd. v. U.P. State Electricity Board (1997) 5
7
SCC 772 were of no assistance to the appellants. The High
Court noted the factual background in which the said
decisions were rendered and found that in cases before it
there was no justification for nullifying the effect of
the Clauses 32.2.1 and 34 of the T.C.S.
7. Appearing for the appellants Mr. Sudheer Chandra
Agarwal, learned senior counsel, strenuously agued that
the High Court had fallen in error in declining relief to
the appellant which according to the learned counsel was
due to it on the analogy of the orders of this Court in
Kerala State Electricity Board’s case (supra). It was
submitted that in the light of the decision of this Court
in Kerala State Electricity Board’s case (supra) the
appellant-consumers could not be said to be in default of
payment of the outstanding amount during the period the
interim order passed by the High Court in its favour had
remained operative. It was further contended that this
Court had in the above case and in Kanoria Chemicals’s
case (supra) dealt with a similar fact situation and
granted relief, by awarding interest @ 18% to the Board
to compensate it for the monetary loss that it may have
suffered on account of delay in the making of such
payment and to prevent any prejudice and consequent
8
injustice to the Board on account of the direction issued
by the Court. It was argued that the appellant-company
was ready and willing to pay interest @ 18% p.a. on the
outstanding amount for the relevant period but the demand
raised by the Board being far in excess, deserves to be
suitably reduced.
8. On behalf of the respondent it was, on the other
hand, argued by Mr. C. Kodanda Ram, learned senior
counsel, that the High Court was, in the facts and
circumstances of the case, right in distinguishing the
decisions relied upon by the appellant and declining the
relief prayed for before it. It was submitted that the
facts situation in which the relief was granted in those
cases was different from that of the present case. It
was further argued that the additional charges and
interest were payable in terms of the TCS which was
statutory in character and to which the appellant had
agreed to abide by. The amount which the appellant had
not paid would have been utilized by it in its commercial
ventures to make profits. Non-payment of the dues
recoverable from the appellant would, therefore, expose
the Board to serious financial prejudice and loss.
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9. The case of the appellant-company rests entirely
upon the decisions of this Court in the case of Kerala
(supra) and that delivered in the
State Electricity Board
case of Kanoria Chemicals Ltd. (supra). The argument
advanced on behalf of the appellant in essence is that
the fact situation in the said two cases being similar to
the one at hand grant of interest @ 18% p.a. on the
outstanding amount would meet the ends of justice in the
instant case also.
10. There is, in our opinion, a basic fallacy in the
analogy which the appellant draws between its case and
the cases referred to above. What is overlooked by the
appellant is the fact that the decision of this Court in
the case (supra) has
Kerala State Electricity Board’s
enforced the terms under which the supply of energy was
made to the consumers in that case. Award of interest @
18% p.a. is not an innovation of this Court. The
consequence of non-payment of the amount within the time
stipulated was on the contrary prescribed in the tariff/
conditions subject to which energy was supplied to MRF
the consumer in that case. It would not, therefore, be
correct to apply the tariff conditions relevant to that
case to the case at hand where such conditions are
1
materially different. It is on the contrary necessary to
cull out the principle of law settled in the said case
for application to the case at hand. This may require
recapitulation of a few facts in the backdrop whereof the
decision in the case
Kerala State Electricity Board’s
(supra) was delivered.
11. MRF was engaged in manufacturing automobile tubes
and tread rubber in the State of Kerala. The company
entered into an agreement with the Kerala State
Electricity Board for supply of power to the factory set
up by it. The agreement contained a provision for payment
of power and energy supplied to the company by the Board
within 15 days from the date of the receipt of the
invoice by the consumer-company. The agreement further
provided that in the event of a default in the payment of
the amount within the stipulated period, interest @ 18%
p.a. or at such other rate as may be fixed by the Board
from time to time would be chargeable.
12. The Board revised the tariff for the electricity
supplied by it in 1980, 1982 and 1984. These revisions
were challenged by MRF in a writ petition filed before
the High Court of Kerala, which was together with other
1
similar petitions disposed of by a common order by which
the revisions made by the Board were struck down.
Consequently MRF Limited and other consumers became
entitled to the refund of the excess amount paid by them
pursuant to the revised tariffs. The High Court of
Kerala directed the adjustment of such amounts towards
future bills to be issued by the Board.
13. Aggrieved by the order passed by the Kerala High
Court the Board filed special leave petitions before this
Court which were entertained by this Court and an interim
order passed, inter alia , directing that pending disposal
of the appeals before this Court, the refund of charges
already collected shall remain stayed. It was further
directed that the future charges would be collected to
the extent of 50% only and the balance adjusted towards
the past charges.
14. The appeals filed by the Board were finally allowed
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by this Court by its judgment dated 26 August, 1986
upholding the validity of the revision of the tariffs by
the Board. The inevitable conclusion flowing from that
decision was that the consumer-company and other
consumers became liable to pay the amounts due on the
1
basis of the revision of tariffs including those that had
since been adjusted by them pursuant to the interim
directions of this Court. Consequently, the Board raised
a demand for the payment of the amount inclusive of
interest @ 18% p.a. While the company did not challenge
the liability to pay the excess amount pursuant to the
revision that had been upheld by this Court it refused to
pay the interest and challenged the demand to that extent
before the High Court of Kerala in a writ petition filed
before it. The Single Judge as also the Division Bench
of the High Court in appeal held that the consumer-
company could not be said to be in default for non-
payment of liability which did not factually exist at the
relevant time and struck down the demand for payment of
interest.
15. The Electricity Board appealed to this Court against
the said judgment of the High Court. Allowing the appeals
preferred by the Board this Court took the view that
while the consumers had no obligation to take notice of
the revised tariffs and to make any payment on the basis
thereof after the judgment of the High Court of Kerala
till the said decision was reversed by this Court, yet no
sooner the decision of this Court upheld the upward
1
revision of the tariffs, the Board’s entitlement to draw
bills on the basis of the revisions and consequently
enforce payment of such bills by the consumers revived
with full force. This Court repelled the contention that
the liability to pay the revised tariffs accrued only
after the pronouncement of the judgment of this Court
upholding the upward revision and not from any date prior
to that. This Court held that once the upward revision
was found to be valid and enforceable such revision would
be effective from the date the revision was made, no
matter such revision had remained unenforceable for some
period on account of the decision of the High Court. The
following passage from the decision of this Court is in
this regard apposite:
But after the decision of this Court
“
upholding upward revisions of tariffs, the
Board’s entitlement to draw bills on the
basis of upward revisions and consequential
enforceability of payment of such bills by
the consumers revived with full force.
Hence, it would not be correct to contend
that although the Company or for that matter
other consumers were required to pay on the
basis of revisions of tariffs from the dates
when such revisions became effective,
liability for such payment would accrue only
from the date of pronouncement of the
judgment by this Court upholding upward
revisions and not from any date prior to
that. If the upward revisions are held as
valid, enforceability of such upward
revisions being consequential to such
revisions, though it had remained
unenforceable for some period on account of
1
the decision of the High Court, cannot but
revive from the dates of upward revisions.”
16. This Court then applied the principle of restitution
as enunciated by the Privy Council in v.
Rodger Comptoir
D’Escompte de Paris 1871 (3) PC 465 and held that it will
be the endeavour of the Court to ensure that a party who
had suffered on account of a decision that is finally
reversed should be put back in the same position as far
as the same is practicable, in which he would have been
if the decision of the Court adversely affecting him had
not been passed. This Court observed:
“In giving full and complete relief in an
action for restitution, the court has not
only power but also a duty to order for
mesne profits, damages, costs, interest etc.
as may deem expedient and fair conforming to
justice to be done in the facts of the case.
But in giving such relief, the court should
not be oblivious of any unmerited hardship
to be suffered by the party against whom
action by way of restitution is taken. In
deciding appropriate action by way of
restitution, the court should take a
pragmatic view and frame relief in such a
manner as may be reasonable, fair and
practicable and does not bring about
unmerited hardship to either of the parties.”
17. Applying the above principle to the case before it
this Court held that the consumer-company was an on-going
business concern who must have gainfully utilized the
1
money saved on account of the decision of the High Court,
in its commercial activities. The Court further held that
the Board had to suffer financial loss because of the
erroneous decision delivered by the High Court and that
conforming to equity as well as well-established
principle of restitution the Board could claim interest @
18% p.a. on the unpaid portion of the bill drawn on the
basis of the revised tariffs to which the consumer-
company had agreed. The Court observed:
“The Company is an ongoing business concern
and must have utilised the money, saved on
account of the decision of the High Court,
gainfully in its commercial activities.
Similarly, other consumers have gainfully
utilised the amount saved for being not
required to pay on the basis of revised
tariffs. The Board had to suffer financial
loss because of the said erroneous decision
of the High Court. In the aforesaid
circumstances, it will be lawful, conforming
to equity and well-established principle of
restitution for the Board to claim interest
at 18% on the unpaid portion of the Bill
drawn on the basis of revised tariffs. The
Company had agreed to pay interest at 18% on
the bills if not paid when it became due and
payable.”
18. It is quite evident that this Court had upheld the
claim for payment of interest @ 18% p.a. primarily
because of the stipulation contained in the
tariffs/agreement executed between the Board and the
consumer providing for payment of interest at that rate
1
in the event of delay in the payment/discharge of the
bills raised against the consumer. It is not as though
this Court had refused to enforce the stipulation
contained in the tariffs providing for recovery of
interest from the consumer if the latter failed to pay
the amounts within the time stipulated. It is also
manifest that this Court had in no uncertain terms held
that even after the upward revisions of the tariffs had
remained unenforceable for a certain period on account of
erroneous judgment of the High Court, the moment the said
judgment was set aside in appeal, the liability to pay
revived with full force from the date the revisions were
made effective. The very fact there was during the
intervening period an erroneous decision of the High
Court obliterating the revision in full or in part would
make little difference in so far as the liability to pay
the amount under the revised tariffs was concerned. So
also the fact that the consumers were not deliberately in
default on account of the judgment of the High Court did
not affect the enforceability of the demand arising from
the revised tariffs or the stipulation regarding payment
of interest demanded on the same on account of the non-
payment or delayed payment of the amount recoverable by
the Board.
1
19. Suffice it so say that the decision of this Court in
the case of (supra) does
Kerala State Electricity Board
not grant any relief to a defaulting consumer once the
demand is upheld nor does it interfere with the principle
of restitution which would entitle the successful party
to be relegated back to the position it would hold had
there been no judgment adverse to it.
20. Super added to all this is the fact that this Court
was dealing with a case where the High Court had finally
struck down the revised tariff, but the said decision was
reversed in appeal. In the present case the appellant
had obtained only an ad interim order of stay against the
enforcement of the tariffs. There is a qualitative
difference in the two situations. Even if one were to
take a charitable view of the legal effect of any
direction of the High Court, pending adjudication by the
Court, cases in which the High Court finally held the
tariffs to be bad would in our opinion stand on a
different footing than cases where the party obtains an
order granting interim protection to it. While there is
an element of finality in the case of a final
adjudication by a competent Court in so far as that Court
is concerned, an interim order can be vacated at any
1
stage. The interim order may not even prevent a prudent
party from paying the charges according to the revised
tariffs if it does not propose to take any chance and
suffer recovery of an additional amount on account of the
non-payment of the dues by the date stipulated for the
purpose. We may in this regard refer to the following
observations of this Court in Shree Chamundi Mopeds Ltd.
v.
Church of South India Trust Association CSI Cinod
Secretariat, Madras 1992 (3) SCC 1:
“While considering the effect of an interim
order staying the operation of the order
under challenge, a distinction has to be
made between quashing of an order and stay
of operation of an order. Quashing of an
order results in the restoration of the
position as it stood on the date of the
passing of the order which has been quashed.
The stay of operation of an order does not,
however, lead to such a result. It only
means that the order which has been stayed
would not be operative from the date of the
passing of the stay order and it does not
mean that the said order has been wiped out
from existence.”
21. Suffice it to say that the decision of this Court in
case (supra) does not
Kerala State Electricity Board’s
lend any support to the appellant-company in its
endeavour to avoid payment of the amount which became
recoverable from it no sooner the judgment of the High
1
Court was reversed in the earlier round of litigation
upholding the revision of the tariffs.
22. That brings us to the decision of this Court in
v.
Kanoria Chemicals and Industries Ltd. and Ors. U.P.
State Electricity Board and Ors. (1997) 5 SCC 772. That
was also a case where the validity of a notification
issued by the U.P. State Electricity Board revising the
electricity rates/tariffs under Section 49 of the
Electricity (Supply) Act, 1948 was challenged by the
consumers. Interlocutory applications filed in the writ
petitions for stay of the operation of the impugned
notification were eventually dismissed by the High Court
whereupon the consumers deposited the differential amount
between the pre-revised and the revised electricity
rates. Consumers did not, however, deposit the late
payment surcharge “recoverable” in terms of Clause 7(b)
of the notification. Notices of demand were, therefore,
issued to the consumers which were challenged in a fresh
batch of writ petitions filed by them. The main
contention urged by the consumers before the High Court
was that since the operation of the notification revising
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the tariffs had been stayed between 25 July, 1990 and
st
1 March, 1993, no late payment surcharge could be levied
2
on the amount withheld by the petitioners under the
orders of the Court, no matter the writ petitions were
finally dismissed. That contention was rejected by a
Division Bench of the High Court of Allahabad. The
matter was then brought up to this Court in appeal by the
consumers, inter alia , contending that the stay of the
operation of the impugned notification relieved the
consumers of the obligation to pay the revised
tariffs/rates and consequently additional charges for
late payment, if any. Reliance in support of that
submission was placed by the consumers upon the decision
of this Court in Adoni Ginning Factory v. Secy. A.P.
(1979) 4 SCC 560. Speaking for the
Electricity Board
Court, Hon’ble B.P. Jeevan Reddy, J. held that the
decision of this Court in ’s case
Adoni Ginning Factory
(supra) had no application to the case at hand nor could
it be understood to mean that during the period covered
by the stay no demand could be made against the consumers
as no such issue has been raised before this Court in
’s case (supra). This Court
Adoni Ginning Factory
observed:
“…………..We, therefore, agree with the High
1
Court that Adoni Ginning cannot be read as
laying down the proposition that the grant
2
of stay of a notification revising the
electricity charges has the effect of
relieving the consumers/petitioners of their
obligation to pay late payment
surcharge/interest on the amount withheld by
them even when their writ petitions are
dismissed ultimately . Holding otherwise
would mean that even though the Electricity
Board, who was the respondent in the writ
petitions succeeded therein, is yet deprived
of the late payment surcharge which is due
to it under the tariff rules/regulations. It
would be a case where the Board suffers
prejudice on account of the orders of the
court and for no fault of its. It succeeds
in the writ petition and yet loses. The
consumer files the writ petition, obtains
stay of operation of the notification
revising the rates and fails in his attack
upon the validity of the notification and
yet he is relieved of the obligation to pay
the late payment surcharge for the period of
stay, which he is liable to pay according to
the statutory terms and conditions of supply
— which terms and conditions indeed form
part of the contract of supply entered into
by him with the Board. We do not think that
any such unfair and inequitable proposition
can be sustained in law………..”
23. This Court further clarified that the terms in which
the prayer in the stay application was made by the
consumers did not determine the effect of the order
issued by the Court in the writ petitions raising similar
questions of law. The phraseology used in the prayer for
interim orders could be materially different though in
essence the relief may be similar. On a question of
principle this Court held that the impugned order coming
2
to an end upon dismissal of the substantive proceedings,
it is the duty of the Court to put the parties in the
same position as they would have occupied but for the
interim orders of the Court for otherwise it would give
rise to unjust results. This Court said:
“…………..It is equally well settled that an
order of stay granted pending disposal of a
writ petition/suit or other proceeding,
comes to an end with the dismissal of the
substantive proceeding and that it is the
duty of the court in such a case to put the
parties in the same position they would have
been but for the interim orders of the
court. Any other view would result in the
act or order of the court prejudicing a
party (Board in this case) for no fault of
its and would also mean rewarding a writ
petitioner in spite of his failure. We do
not think that any such unjust consequence
can be countenanced by the courts. As a
matter of fact, the contention of the
consumers herein, extended logically should
mean that even the enhanced rates are also
not payable for the period covered by the
order of stay because the operation of the
very notification revising/enhancing the
tariff rates was stayed. Mercifully, no such
argument was urged by the appellants. It is
ununderstandable how the enhanced rates can
be said to be payable but not the late
payment surcharge thereon, when both the
enhancement and the late payment surcharge
are provided by the same notification - the
operation of which was stayed……………”
2
24. It is manifest from the above that both on the
question of restitution of the benefit drawn by a party
during legal proceedings that eventually fail as also on
the general principle that a party who fails in the main
proceedings cannot benefit from the interim order issued
during the pendency of such proceedings, this Court
found against the consumers and upheld the demand for
payment of additional charges recoverable on account of
the delay in the payment of the outstanding dues. Far
from lending any assistance to the appellant-company the
decision squarely goes against it and has been correctly
appreciated and applied by the High Court.
25. In the result these appeals fail and are hereby
dismissed but without any orders as to costs.
……………………………J.
(MARKANDEY KATJU)
……………………………J.
(T.S. THAKUR)
New Delhi
November 18, 2010