IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5952 OF 2002

Uttarakhand Power Corporation Ltd. and another … Appellants

Versus

ASP Sealing Products Ltd. … Respondent

J U D G M E N T

G.S. Singhvi,  J.

1. Whether the respondent, who was a consumer of electricity supplied  

by  Uttar  Pradesh  State  Electricity  Board  [for  short,  “the  Board”]  

(predecessor of appellant No.1 herein) is liable to pay minimum charges in  

terms of second proviso to para 11 of agreement dated 21st September,  

1998  read  with  Clause  17  (ii)  of  the  Electricity  Supply  (Consumers)  

Regulations, 1984 [for short, “the Regulations”] after disconnection of the

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supply of electricity is the question which arises for consideration in this  

appeal.

2. The respondent had set up a factory at Rudrapur, District Udham  

Singh  Nagar,  which  now  forms  part  of  the  State  of  Uttarakhand  for  

manufacture of PVC and EPDM rubber profiles for automobile vehicles.  In  

1990, the Board sanctioned electric connection of 400 KVA load for the  

respondent’s  factory.  Thereafter,  as  per  the  requirement  of  the  

Regulations, the respondent entered into an agreement with the Board.  

On 12th February, 1997, the respondent applied for an additional load of  

200 KVA, which was duly sanctioned.  As a sequel to this, fresh agreement  

was executed between the parties for the total load of 600 KVA.  After one  

year  and  seven  months,  the  respondent  approached  the  Board  for  

reduction of load from 600 KVA to 250 KVA.  The competent authority of  

the Board accepted the respondent’s request, who then executed another  

agreement dated 21st September, 1998.

3. In May 1999, the supply of electricity to the respondent’s factory  

was discontinued at the latter’s request.  After five months, the concerned  

Executive Engineer sent communication on 5.10.1999 to the respondent  

requiring it to pay Rs.6,13,592/- towards minimum charges for six months.

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This was followed by notice dated 4.5.2000 and recovery certificate dated  

4.8.2000  issued  under  Sections  3  and  5  respectively  of  the  U.P.  

Government  Electricity  Undertakings  (Recovery  of  Dues)  Act,  1958 [for  

short, “the 1958 Act”].   

4. The respondent challenged the demand of minimum charges in Civil  

Miscellaneous Writ Petition No.511 (M/B) of 2001 by contending that being  

an  old  consumer,  it  was  not  liable  to  pay  minimum  charges  after  

disconnection of the supply of electricity.  The Board contested the writ  

petition and pleaded that in terms of agreement dated 21st September,  

1998 and the Regulations framed  under Section 49 read with Section 79  

of  the  Electricity  (Supply)  Act,  1948  [for  short,  “the  1948  Act”],  the  

respondent is bound to pay minimum charges for the period of six months  

counted from the date of disconnection.

5. By the impugned order, a Division Bench of the High Court quashed  

the  demand  of  minimum charges  by  observing  that  Clause  17  of  the  

Regulations is not applicable to the respondent’s case because the initial  

guarantee period of two years had ended long ago.  The Division Bench  

also held that the demand of minimum charges cannot be raised after  

disconnection of the supply of electricity.

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6. Shri Pradeep Misra, learned counsel for the appellants argued that  

the  High  Court  committed  an  error  by  entertaining  the  writ  petition  

ignoring that an equally efficacious alternative remedy was available to the  

respondent by way of arbitration in terms of para 16 of agreement dated  

21st September, 1998.  He further argued that in view of second proviso to  

para 11 of agreement dated 21st September, 1998 and Clause 17(ii) of the  

Regulations,  the respondent  is  bound to  pay minimum charges for  the  

period  of  six  months  despite  the  fact  that  supply  of  electricity  was  

disconnected sometime in May 1999.  Learned counsel then submitted that  

the High Court’s  view on the issue of  applicability  of  Clause 17 of  the  

Regulations to the respondent’s case is ex facie erroneous and is liable to  

be upset because in terms of para 6 of agreement dated 21st September,  

1998 read with para (C) thereof, the date of commencement of supply was  

21st September, 1998 and by May 1999, a period of less than one year had  

been completed.  Learned counsel argued that with the execution of fresh  

agreement, the respondent lost its status as an old consumer and in terms  

of Clause 17(ii) of the Regulations, it is liable to pay the minimum charges.

7. Ms. Neeru Vaid, learned counsel for the respondent submitted that  

her client should not be non-suited on the specious ground of availability  

of alternative remedy because no argument on this issue was made before

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the High Court.  She emphasized that minimum charges are levied in lieu  

of the actual investment made by the licensee in laying infrastructure for  

supply of electricity to the consumer and argued that the High Court did  

not  commit  any  error  by  quashing  the  demand  of  minimum  charges  

because the Board did not provide additional infrastructure for supply of  

electricity with reduced load of 250 KVA.

8. We have considered the respective submissions.  In our opinion, the  

respondent  cannot  be  non-suited  on  the  ground  of  availability  of  

alternative remedy of arbitration, because even though, an objection to  

this effect was taken in the written statement filed on behalf of the Board,  

no such argument appears to have been made before the High Court.  In  

any case, at this belated stage, we do not find any justification to non-suit  

the respondent on the ground that it did not avail the alternative remedy  

of arbitration.

9. We shall now deal with the question posed in the opening paragraph  

of this order.  For this purpose, it will be profitable to notice the relevant  

provisions of agreement dated 21st September,  1998 and Clauses 10(b)  

and 17(i) and (ii) of the Regulations.

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Agreement dated 21  st   September, 1998   

6. `Date  of  commencement  of  supply’  means  the  date  mentioned  in  Para  (C)  hereunder  and  if  no  such  date  is  mentioned then the date of actual connection of Consumer’s  installation or the date of expiry of a period of one month  from  the  date  of  intimation  to  the  consumer  about  the  availability  of  power  after  completion  of  the  arrangements  required to connect his installation whichever is earlier.

C. AND WHEREAS this agreement shall be deemed to have  been effective from the 21st day of September One thousand  nine hundred ninety eight which date shall be construed as  the date of commencement of supply under this agreement.

11. This agreement shall subject herein before provided be  and  remain  in  force  for  two  years  from  the  date  of  commencement  of  supply  (hereinafter  /  called  the  initial  period of supply) and thereafter from year to year basis on  the terms and conditions herein contained.

Provided  that  either  party  shall  be  at  liberty  to  determine this agreement at any time after the expiration of  the initial  period of supply  on giving one month’s  notice in  writing of such intention, and on the expiration of such notice  this  agreement  shall  absolutely  cease  and  determine,  but  without prejudice to the rights and remedies if any, of either  party,  which may have accrued or  arisen hereunder  in the  meantime.

Provided  further  that  if  the  consumer  ceases  taking  supply  of  electrical  energy  due to  any reason,  he  shall  be  liable  to  pay  to  the  supplier  necessary  charges  as  per  provision made in the regulation framed by the supplier under  Sections 49 and 79 of Electricity (Supply) Act, 1948.

17(a). In case of shifting of the connections, change or  addition of process, the consumer hereby covenants that for  all purposes he shall be deemed as old registered consumer of  the supplier and the supplier shall treat him accordingly.

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(b) In case of reduction/addition of loads, the consumer hereby  covenants that for all the purposes he shall be deemed as old  registered  consumer—the  supplier  having  taken  supply  for  different  loads  before  execution  of  this  agreement.   The  supplier shall treat him accordingly.

Regulations

10(b) Application for reduction of load.– If a consumer, in  whose name the service is connected, wishes to have  his  contracted  load  reduced,  he  shall  submit  an  application thereof, giving full particular of reduction of  load required by him.  The reduction in the contracted  load of various categories of power consumers on such  an application shall be allowed by the Supplier on the  terms and conditions detailed below, after completion of  necessary  formalities  by  the  consumer,  which  are  subject to revision by the Supplier from time to time.

(i) xxx (ii) xxx (iii) xxx

(iv) The existing agreement will stand terminated  with effect from  the date of allowing reduction in load and the consumer will  be required to sign a fresh agreement for the reduced load  effective from the date of allowing reduction of load.

17. Agreement.– (i) The consumer shall enter into a formal  declaration/agreement for a minimum period of two years for  taking electrical energy before release of supply.  After expiry  of the above period of two years, the declaration/agreement  will  continue on year to year basis on the same terms and  conditions unless terminated in accordance with the provisions  of the declaration/agreements.

All consumers shall execute declaration/agreements governing  supply of energy in the form prescribed by the Board from  time to time.

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(ii) If the supply to a consumer is disconnected on request or    in default before compulsory period of two years is over,  he shall be liable for payment of minimum charge for the  remaining period by which it falls short of two years or for  the period of six months from the date of disconnection  whichever is less, together with the estimated expenditure  on the erection and demolition of the sub-station and the  line (not paid by the consumer) actually dismantled due to  the disconnection, together with the estimated expenditure  on the cartage of the salvaged materials to stores and the  cost of unsalvaged materials plus 15% supervision charges  on the labour and cartage only.

(emphasis supplied)

10. A conjoint reading of various paragraphs of agreement dated 21st  

September,  1998 and the Regulations extracted hereinabove show that  

before  release  of  supply,  every  consumer  is  required  to  enter  into  a  

declaration/agreement for taking electrical energy for minimum period of  

two  years.   This  period  of  two  years  is  counted  from  the  date  of  

commencement of supply and is treated as initial period of supply.  After  

expiry of two years, the declaration/agreement continues on year to year  

basis on the same terms and conditions unless terminated by either party.  

In terms  of para 17 of the agreement, the consumer is treated as old  

registered  consumer  of  the  supplier  if  there  is  shifting  of  connection,  

change or addition of process or addition or reduction of load.  Clause  

10(b)  of  the  Regulations  lays  down  that  if  the  consumer  applies  for  

reduction  of  the  contracted  load  and  the  same  is  sanctioned  by  the

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competent authority, the existing agreement automatically ceases to exist  

and the consumer is required to sign a fresh agreement for the reduced  

load effective from the date of allowing such reduction.  Clause 17(ii) of  

the Regulations lays down that if before expiry of the compulsory period of  

two years, supply is disconnected at the instance of the consumer or on  

account of default in payment of charges for the energy supplied by the  

licensee, then the consumer shall have to pay minimum charges for the  

remaining  period  or  for  six  months  from  the  date  of  disconnection,  

whichever  is  less.   This  clause  also  obligates  the  consumer  to  pay  

estimated expenditure on the erection and demolition of the sub-station  

and the line actually dismantled due to the disconnection, together with  

the  estimated expenditure  on the  cartage of  the salvaged materials  to  

stores and the cost of unsalvaged materials plus 15% supervision charges  

on the labour and cartage.   

11. From what  we have  noted  above,  it  is  clear  that  if  a  consumer  

applies for reduction of the contracted load, then the existing agreement  

stands  automatically  terminated  with  effect  from  the  date  of  allowing  

reduction in load and the consumer is required to execute fresh agreement  

for the reduced load.  If the supply of electricity is disconnected at the  

consumer’s request or on account of default in payment of the electricity

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charges before expiry of two years period specified in the agreement and  

the Regulations, then the consumer is bound to pay minimum charges for  

the  remaining  period  or  for  six  months  counted  from  the  date  of  

disconnection, whichever is less.   

12. There  is  no  dispute  between  the  parties  that  after  sanction  of  

electric connection with a load of 400 KVA, the respondent entered into an  

agreement with the Board as per the requirement of the Regulations.  It is  

also not in dispute that fresh agreements were entered into between the  

parties on 12th February, 1997 when the load was increased from 400 KVA  

to 600 KVA and again on 21st September, 1998 when the load was reduced  

from 600 KVA to 250 KVA.  The period of two years for which the Board  

was required to supply electricity to the respondent with a load of 250 KVA  

commenced  from 21st September,  1998.   The  said  period  would  have  

ended on 20th September, 2000 and if the respondent had not applied for  

disconnection, the Board would have supplied electricity to respondent’s  

factory  till  that  date  in  accordance  with  the  terms  and  conditions  

enumerated  in  agreement  dated  21st September,  1998  and  the  

Regulations.  However, the fact of the matter is that just after nine months  

of execution of fresh agreement, a request was made on behalf of the  

respondent for disconnection of the supply of electricity and the same was

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accepted by the competent authority of the Board.  As a consequence,  

supply of electricity to the respondent’s factory was discontinued in May,  

1999.  Therefore, in terms of second proviso to para 11 of the agreement  

and Clause 17(ii) of the Regulations, the respondent became liable to pay  

minimum charges and we do not find any illegality in the action of the  

Board to create the demand of minimum charges.   

13. The reasons assigned by the High Court for quashing the demand  

created by the Board are ex facie untenable.  A reading of the order under  

challenge shows that the High Court decided the writ petition by assuming  

that the respondent had completed initial guarantee period of two years  

and Clause 17 of the Regulations is not applicable to its case.  In the  

process,  the High Court  not only omitted to consider  the fact  that the  

respondent  had executed fresh agreement  dated 21st September,  1998  

and in terms thereof the period of two years commenced from the date of  

agreement,  but  also  misconstrued  Clause  17  of  the  Regulations,  sub-

clause (ii) whereof unequivocally lays down that if the supply of electricity  

is disconnected at the instance of the consumer, the latter is liable to pay  

minimum charges for the remaining period of the agreement or for six  

months, whichever is less.  The High Court also failed to note that the  

supply of electricity was disconnected at the respondent’s request within

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nine months of agreement dated 21st September, 1998.    Therefore, the  

impugned order is liable to be set aside.

14. The  argument  of  the  respondent’s  counsel  that  the  demand  of  

minimum charges could not have been created against her client because  

no additional infrastructure was laid for supply of electricity at a reduced  

load  of  250  KVA  sounds  attractive  but  the  same  cannot  be  accepted  

because the respondent did not challenge the vires of the Regulations or  

the terms of agreement dated 21st September, 1998.   

15. Before concluding, we may also notice the judgment of this Court in  

Bihar  State  Electricity  Board,  Patna  and  others  v.  M/s.  Green  

Rubber Industries and others (1990) 1 SCC 731. In that case, a two-

Judge Bench considered a question whether in terms of the agreement  

entered into between the Board and the consumer, the latter is liable to  

pay minimum guarantee charges irrespective of consumption of electricity  

and held:

“It  is  true  that  the  agreement  is  in  a  standard  form  of  contract.  The  standard  clauses  of  this  contract  have  been  settled over the years and have been widely adopted because  experience  shows  that  they  facilitate  the  supply  of  electric  energy.  Lord  Diplock  has  observed:  “If  fairness  or  reasonableness were relevant to their enforceability the fact  that they are widely used by parties whose bargaining power  is fairly matched would raise a strong presumption that their

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terms  are  fair  and  reasonable.”  Schroeder  (A.)  Music  Publishing Co. Ltd. v. Macaulay. In such contracts a standard  form enables the supplier to say: “If you want these goods or  services at all,  these are the only terms on which they are  available. Take it or leave it.” It is a type of contract on which  the conditions are fixed by one of the parties in advance and  are  open  to  acceptance  by  anyone.  The  contract,  which  frequently  contains  many  conditions  is  presented  for  acceptance and is not open to discussion. It is settled law that  a person who signs a document which contains contractual  terms is  normally  bound by them even though he has not  read them, even though he is ignorant of the precise legal  effect.  In  view  of  clause  4  having  formed  one  of  the  stipulations in the contract along with others it cannot be said  to be nudum pactum and the maxim nudum pactum ex quo  non oritur  actio does  not  apply.  Considered  by the  test  of  reasonableness it cannot be said to be unreasonable inasmuch  as the supply of electricity to a consumer involves incurring of  overhead  installation  expenses  by  the  Board  which  do  not  vary  with  the  quantity  of  electricity  consumed  and  the  installation has to be continued irrespective of whether the  energy is consumed or not until the agreement comes to an  end. Every contract is to be considered with reference to its  object and the whole of its terms and accordingly the whole  context  must  be  considered  in  endeavouring  to  collect  the  intention of the parties, even though the immediate object of  enquiry is the meaning of an isolated clause. This agreement  with the stipulation of minimum guaranteed charges cannot  be held to be ultra vires on the ground that it is incompatible  with the statutory duty. Differences between this contractual  element and the statutory duty have to be observed. A supply  agreement to a consumer makes his relation with the Board  mainly contractual,  where the basis of supply is held to be  statutory  rather  than  contractual.  In  cases  where  such  agreements are made the terms are supposed to have been  negotiated between the consumer and the Board, and unless  specifically  assigned,  the  agreement  normally  would  have  affected the consumer with whom it is made, as was held in  Northern Ontario Power Co. Ltd. v. La Roche Mines Ltd.”

16. In the result, the appeal is allowed and the impugned order is set  

aside.  As a corollary, the demand of minimum charges created by the  

predecessor of appellant No.1 is upheld and the writ petition filed by the

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respondent is dismissed.  The appellant shall now be entitled to encash the  

bank guarantee furnished by the respondent in terms of interim orders  

dated 13th September, 2002 and 5th December, 2003 passed by this Court.  

……………………….J. [ G.S. Singhvi ]

………..……………….J. [ Dr. B.S. Chauhan ]

New Delhi September 08, 2008.