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PETITIONER: AMALGAMATED ELECTRICITY CO. LTD

       Vs.

RESPONDENT: JALGAON BOROUGH MUNICIPALITY

DATE OF JUDGMENT03/09/1975

BENCH: FAZALALI, SYED MURTAZA BENCH: FAZALALI, SYED MURTAZA KRISHNAIYER, V.R. GUPTA, A.C.

CITATION:  1975 AIR 2235            1976 SCR  (1) 636  1975 SCC  (2) 508  CITATOR INFO :  RF         1989 SC1030  (40)  RF         1990 SC1851  (40)  RF         1991 SC1456  (9)

ACT:      Indian Electricity  Act 1910  Proviso to   section  22- Agreement  to   Supply   electrical   energy-Provision   for guarantee  of   minimum  consonance  of  electricity  if  in consonance with the  proviso

HEADNOTE:      The plaintiff-appellant  entered into an agreement with the respondent to supply electrical energy to the respondent in 1944.  This agreement  expired towards the end of January 1951, and  which was   to  commence from  February 1951, was executed between  the parties. This agreements was to ensure for a  period of five years. Clause 3 of the agreement first of’ all  stipulated that  in normal  times, the Municipality was bound to take supply. Of electrical energy for a minimum period of  16 hours  a day  and  in  view  of  this  minimum guarantee Company  would supply  electricity for  a  maximum period of  20 hours  a day.  In doing,  this,  however  four hours, namely,  from 6 p.m. to 10 p.m would be excluded. The plaintiff averred that under the agreement the agreement was bound to  consume electrical  energy for  16 hours a day and pay the  minimum charges  even if  no actual consumption was made. ’This  claim was  put  forward  by  the  plaintiff  in December. 1953  on the  basis of‘  clause 3 of the agreement Consequent upon  its claim  the plaintiff.  sent a number of bills to the defendant which it refused to pay and hence the present in  was instituted on February ’’,. 1956. Before the Trial  Court   the   defendant   Municipality   denied   the allegations of’  the plaintiff  and averred  that under. the terms of  the agreement  the. Municipality  was not bound to pay to the plaintiff Company any minimum charges even if the electrical energy  was not consumed. It was also alleged the even if  there was  any such  clause in the agreement it was void under  s. 23  of the Indian Electricity Act. 1910.  The Trial Court  accepted the defendant’s plea and dismissed the suit. The  plaintiff thereupon  preferred an  appeal to  the High Court  of Bombay.  ’the high Court dismissed the appeal

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holding that the minimum charges were given only in clause 2 of  the  agreement  and  that  clause  3  could  be  of’  no assistance to the appellant.      Allowing the appeal by special leave. ^      HELD: (i)  An analysis  of clauses  2 and  3  of    the agreement clearly  shows that  these clauses are independent and   separate    provisions    dealing    with    different contingencies. The  terms of  clause 3  are absolutely clear and   unambiguous and  it was  not at  all necessary for the High Court  to halve  gone into  1 a  plethora of extraneous circumstances when  the terms  of that document do not admit of any  ambiguity. The  High Court  seems to have completely overlooked the  fact that clause 3 of the agreement embodied what is  known in common parlance as the doctrine of minimum guarantee  i.e.   the  Company  was  assured  of  a  minimum consumption of electrical energy by the Municipality and for the payment of the same whether it was consumed or not. That was the  reason why  the Company  was prepared  to charge  a minimum rate  of 0.5  anna per unit over and above the first 50  units.   The  minimum  charge  of  0.5  anna  per  unit, therefore. was  actually the  consideration for  the minimum guarantee allowed  to the  plaintiff under  clause 3  of the agreement. [638 H. 639 C-D]      (ii) Clauses 2 and 3 of the agreement are in consonance with the  spirit and  letter of  the proviso  to s.22 of the Indian Electricity  Act. A  bare  reading  of  clause  3  is sufficient  to   which  ensures   a  provision  for  minimum guarantee for the supply of electricity. [639 & G]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal No. 748 of 1968. 637                       (Fazal Ali, J.)      Appeal by  Special Leave  from the  Judgment and Decree dated the  14th February,  1967 of  he Bombay  High Court in Civil First Appeal No. 888 of 1959.      F. S. Nariman and I. N. Shroff for the  appellant.      K. S.  Ramamurthi and  K. Rajendra  Choudhury, for  the Respondent.      The Judgment of the Court was delivered by      FAZAL ALI,  J. This appeal by special leave against the judgment dated  February 14,  1967, of  the  High  Court  of Bombay turns  upon the  interpretation of  clause 3  of  the agreement Ext.  39 executed  between the  parties containing the terms  and conditions  for which the plaintiff appellant was to  supply electricity  to  the  defendant  the  Jalgaon Borough Municipality.      What appears to us to have been a short and simple case has been  rendered cumbersome  and complicated  by  somewhat complex and  involved process  of reasoning  adopted by  the High Court  in  interpreting  the  various  clauses  of  the agreement Ext.  39. The plaintiff/appellant’s case was based mainly on  clause 3  of the  agreement but  the  High  Court instead of concentrating its attention on the interpretation of the  scope and ambit of this particular clause appears to have  entered   upon  a  covering  inquiry  and  a  detailed determination of  the  history  of  the  case,  the  various clauses of  the agreement executed, the licence taken by the appellant, and so on, which, in our opinion, were not at all germane for  the decision of the simple issue which arose in this appeal.

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    The facts of the case lie within a very narrow compass. The plaintiff/appellant  entered into an agreement to supply electrical energy to the Jalgaon Borough Municipality as far back as  1944. The energy was to be supplied on the basis of the agreement executed between the parties in the year 1944. This agreement  expired to wards the end of January 1951 and a fresh  agreement which  is dated  May 29,  1951, Ext.  39, which was  to commence  from February  1, 1951, was executed between the  parties. This  agreement was  to ensure  for  a period of five years. In the present appeal we are concerned with the  terms and recitals of this agreement, particularly clause 3 thereof.      The  plaintiff   averred  inter  alia  that  under  the agreement the  defendant was  bound  to  consume  electrical energy for  16 hours  a day and pay the minimum charges even if no  actual consumption  was  made.  This  claim  was  put forward by  the plaintiff  in December  1953 on the basis of clause 3  of the  agreement. Consequent  upon its  claim the plaintiff sent  a number  of bills to the defendant which it refused to  pay and hence the present suit was instituted on February 27,  1956. Before  the Trial  Court  the  defendant Municipality denied  the allegations  of the  plaintiff  and averred that  under  the  terms  of  is  the  agreement  the Municipality was  not bound  to pay to the plaintiff Company any minimum  charges even  if the  electrical energy was not consumed. It  was also  alleged that  even if  there was any such clause 638 in the  agreement it  was void  under s.  23 of  the  Indian Electricity Act   197.  A number of other defences were also taken with which we are not concerned.      The Trial  Court of  the Civil  Judge, Senior Division, Jalgaon accepted the defendant’s plea and dismissed the suit of  the   plaintiff/appellant.   The   plaintiff   thereupon preferred an appeal to the High Court of Bombay which upheld the decree  of the  Trial Court  and  dismissed  the  appeal negativing the plea put forward by the plaintiff.      Counsel for  both the parties agreed before us that the fate of  the entire case depended upon the interpretation of clause 3  of the agreement Ext. 39 which appears on pp. 275- 277 of  the printed  Paper Book.  Mr. F.  S. Nariman for the appellant submitted  that the interpretation put by the High Court was  absolutely wrong,  whereas Mr.  K. S.  Ramamurthi strenuously supported  the judgment  of the  High Court. The High Court  on consideration  of clauses  2  and  3  of  the agreement appears  to  have  lost  sight  of  the  essential stipulation contained  in clause  3 and  found that  minimum charges were  given only  in clause  2 or  the agreement and clause 3  could be  of no  assistance to  the appellant. The High Court  also considered lot of other circumstances which were not  at all  relevant for  the  purpose  of  construing clause 3  of  the  agreement.  In  order  to  interpret  the document, it  may be necessary to extract clauses 2 and 3 of the said agreement:           "2. The  Company shall  supply to the Municipality      and the  Municipality shall take from the company for a      period of  five years,  the period  commencing from 1st      February  1951,   electrical  energy  for  running  the      electric motors  to  work  water  pumps  at  the  Girna      Pumping Station at the following rates.           1.5 annas  per unit  for the  first 50  units  per      month per B.H.P. installed and the lest at 0.5 anna per      unit plus  an additional  charge at 0.01 anna per- unit      per rupee  rise in  the fuel oil rate over Rs. 68/- per      ton viz.  the rate  ex-Power house ruling prior to war,

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    with a  minimum  of  50  units  per  month  per  B.H.P.      installed, first  50 units  per B.H.P.  shall mean  and      include units  given by  both the  electric Motors  and      Pumps at  the Girna  Pumping  Station.  The  additional      charge is to apply to all units. r           "3. The  hours of  supply of electrical energy for      running the  said electric motors shall be according to      the quota  of diesel  oil sanctioned by the Government.      In normal times, i.e. when diesel oil becomes available      in any  required quantity  and without any restriction,      the Municipality shall take supply of electrical energy      for a  minimum period of 16 hours a day and the Company      shall supply  electricity for  a maximum  period of  20      hours a  day i.e.  excluding the four hours from 6 P.M.      to 10 P.M.      An analysis of clauses 2 and 3 of the agreement clearly shows that  these two  clauses are  independent and separate provisions dealing with 639                       (Fazal Ali, J.) different contingencies.  If there  is any  link between the two it  is only  that the  reason for  making concession  in clause a  for charging rate of 0.5 annas per unit over first 50 units  is the  fact  that  the  plain  tiff  company  was guaranteed payment  for electrical  energy to  be sup  plied during fixed  period whether  or not  it is  consumed by the Municipality. Clause  3 first  of  all  stipulated  that  in normal times  the Municipality  was bound  to take supply of electrical energy  for a"-  minimum period of 16 hours a day and in  view of  this minimum  guarantee the  Company  would supply electricity  for a  maximum period of 20 hours a day. In doing this, however, four hours, namely from 6 P.M. to 10 P.M.., would be excluded, because these being the peak hours the Company  would be  at liberty  to supply  electricity to other consumers.  The terms  of clause  3 appear to us to be absolutely -  clear and  unambiguous and  it was  not at all necessary for the High Court to have gone into a plethora of extraneous circumstances  when the terms of that document do not admit  of any  ambiguity. The  High Court  seems to have completely  overlooked   the  fact  that  clause  3  of  the agreement embodied  what is  known in common parlance as the doctrine of  minimum guarantee  i.e. the Company was assured of  a  minimum  consumption  of  electrical  energy  by  the Municipality and  or the  payment of the same whether it was consumed or  not. That  was the  reason why  the Company was prepared to  charge a minimum rate of 0.5 anna per unit over and above the first 50 units. The minimum charge of 0.5 anna per unit,  therefore, was actually the consideration for the minimum guarantee allowed to the plaintiff under clause 3 of the agreement.      Moreover clauses 2 and 3 of the agreement seem to us to be in  consonance with  the spirit and letter of the proviso to s. 22 of the Indian Electricity Act which runs thus:           "Provided that  no person  shall  be  entitled  to      demand or  to continue  to receive  from a  licensee  a      supply of  energy for  any premises  having a  separate      supply unless he has agreed with the licensee to pay to      him  such  minimum  annual  sum  as  will  give  him  a      reasonable return  on the capital expenditure, and will      cover other  standing charges  incurred by him in order      to meet the possible maximum demand for those premises,      the sum  payable to be determined in case of difference      or dispute by arbitration." A bale  reading of  clause 3  is sufficient to indicate that this  particular   term  of   the  contract  was  in  direct

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compliance with  the provisions  of the  proviso to s. 22 of the Act  which ensures a provision for minimum guarantee for the supply of electricity.      Moreover it  is obvious  that if  the plaintiff company was to  give bulk  supply of  electricity at  a concessional rate of  0.5 anna  per unit  it had to lay down lines and to keep  the  power  ready  for  being  supplied  as  and  when required. The consumers could put their switches on whenever they liked  and therefore  the plaintiff  had to  keep every thing ready  so that power is supplied the moment the switch was put  on.  in  these  circumstances,  it  was  absolutely essential that the plain- 640 tiff should  have been  ensured the  payment of  the minimum charges for the supply of electrical energy whether consumed or not  so that  it may be able to meet the bare maintenance expenses.      For these reasons, therefore, we are satisfied that the interpretation put by the Courts below on the agreement Ext. 39. was legally erroneous and cannot be accepted.      The next  question that falls to be considered is about the question  of quantum  of interest  to be  allowed to the appellant Company.  Mr. F.  S. Nariman,  learned counsel for the appellant,  fairly conceded  that he  would not  be in a position to  press his claim for interest  prior to the date of the suit and would be satisfied if he is awarded interest at the  rate of  4 per  cent. per annum from the date of the suit.      The result is that the appeal is allowed, the judgments of the  Trial Court  and the  High Court  are set aside, the plaintiff’s suit  is decreed with interest at the rate of 4% per annum  from the  date of  the suit  till payment. In the peculiar circumstances  of the case, we leave the parties to bear their own costs throughout. V.M.K.                                       Appeal allowed. 641