THE HON'BLE THE CHIEF JUSTICE ALOK ARADHE
AND
THE HON'BLE SRI JUSTICE N.V.SHRAVAN KUMAR
WRIT APPEAL Nos.124 and 125 of 2009
COMMON JUDGMENT: (Per the Hon'ble the Chief Justice Alok Aradhe)
Mr. R.Vinod Reddy, learned counsel for the
appellants.
Mr. Chanakya Basa, learned counsel representing
Mr. B.Chandresen Reddy, learned counsel for the
respondent.
2. These intra court appeals arise from an order dated 31.12.2008 passed by the learned Single Judge in W.P.Nos.1993 of 2007 and 2131 of 2008, by which in the writ petitions filed by the respondent, the order dated 20.12.2007 passed by the 2nd appellant has been set aside and it has been directed to refund the security deposit of Rs.27 lakhs to the respondent.
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3. For the facility of reference, the parties are referred to as per their ranking before the learned Single Judge.
4. The petitioner (hereinafter referred to as 'company') is engaged in the business of steel coated tubes and pipes. The existing assets of the company were purchased in an auction conducted by the erstwhile High Court of Andhra Pradesh under the provisions of the Companies Act, 1956. Thereafter, the company entered into a HT agreement dated 02.05.2005 with the Andhra Pradesh Central Power Distribution Company Limited (hereinafter referred to as 'CPDCL') for sanction of electricity load with Contract Maximum Demand (CMD) in two phases. The first phase of electricity was with the load of 800 Kilo Volt Amperes (KVA) CMD whereas the second phase was with the load of 1000 KVA. In pursuance of the agreement executed between the parties, the company paid an amount of Rs.21.6 lakhs as security deposit and further deposited a sum of Rs.27 lakhs towards development fee.
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5. The CPDCL sanctioned the power and issued certificate for release of 800 KVA for first phase on 16.09.2005. The additional load of 1000 KVA was to be released in second phase after three months from the date of supply. However, it appears that there was a delay in delivery of part of machinery by the foreign collaborator to the company and therefore, the company sought extension of time for release of 1000 KVA for a period of three months.
6. Thereafter again on 24.02.2006 the company sought further extension for release of electricity load with CMD of 1000 KVA. The CPDCL rejected the request made for further extension and released the electricity load of 1000 KVA on 16.06.2006. The company thereupon submitted a representation on 02.08.2006 for temporary deration of 1800 KVA CMD to 800 KVA for a period of one year. However, CPDCL rejected the same vide an order dated 25.09.2006 and the company was informed that the request for deration shall be considered after 16.09.2007.
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7. The company challenged the Memo dated 25.09.2006 in W.P.No.1993 of 2007. The company submitted a representation on 06.07.2007 seeking termination of the HT agreement dated 02.05.2005. Vide communication dated 08.08.2007, the company was asked to pay arrears to the tune of Rs.20,81,543/- within a period of 15 days. The company was further informed that the termination will take effect after three months from 16.09.2007 as per terms and conditions of the HT agreement.
8. The CPDCL terminated the agreement in accordance with Clause 5.9.4.2 of general terms and conditions of supply and disconnected the power supply with effect from 23.10.2007. The CPDCL adjusted the amount of Rs.27 lakhs, which was lying as consumption deposit with it and directed the company to pay a further sum of Rs.22.867/-. The CPDCL already asked the company vide communication dated 20.12.2007 to pay a sum of Rs.22.867/-. The company thereupon challenged the aforesaid communication in two writ petitions.
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9. Learned Single Judge by an order dated 31.12.2008 inter alia held that the company could not set up the industry as it was not supplied the required machinery. Therefore, it was further held that even though frustration of contract is not on account of CPDCL, yet until and unless the machinery was received by the company, it could not have commenced the project and therefore, the HT agreement dated 02.05.2005 executed between the parties has become an impossibility to be performed on the part of the company. The learned Single Judge therefore held that the doctrine of frustration as contained in Section 56 of the Indian Contract Act, 1872 applies and the HT agreement dated 02.05.2005 was frustrated. It was accordingly held that the action of respondents in issuing the impugned communication dated 20.12.2007 is arbitrary and the same was accordingly quashed and the CPDCL was directed to refund the amount of Rs.27 lakhs to the company.
10. with the aforesaid factual background, this appeal has been filed.
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11. We have heard learned counsel for the parties at length.
12. The relevant clauses of the HT agreement executed between the parties are extracted below for the facility of reference:
"9. OBLIGATION OF CONSUMER TO PAY ALL CHARGES LEVIED BY CPDC OF AP LTD:
From the date of this agreement comes into force we shall be bound by the shall pay the CPDC of AP Ltd maximum demand charges, energy charges, surcharges, meter rents and other charges, if any in accordance with the tariffs applicable and the terms and conditions of supply prescribed by the CPDC of AP Ltd from time to time for the particular class of consumers to which we belong.
10. CPDCL OF AP LTD RIGHT TO VARY TERMS OF AGREEMENT:
We agree that the CPDC of AP Ltd shall have the unilateral right to vary, from time to time tariffs, scale of general and miscellaneous charges and the terms and conditions of supply under this agreement by special or general proceedings.
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In particular, the CPDC of AP Ltd shall have the right to enhance the rates chargeable for supply of electricity according to exigencies.
11. MONTHLY MINIMUM CHARGES: We shall pay minimum charges every month as prescribed in prescribed tariff, and terms and conditions of supply even if no electricity is consumed for any reason whatsoever and also if the charges for electricity actually consumed tare less than the minimum charges. The minimum charges shall also be payable by us even if electricity is not consumed because supply has been disconnected by the CPDC of AP Ltd because of non-payment of electricity charges, pilferage or other malpractices or for any other valid reason."
13. Thus, it is evident that the company with its eyes wide open have agreed to pay monthly minimum charges even if it does not consume electricity for any reason whatsoever and even if the charges for electricity consumed are less than the minimum charges. Thus, under the agreement executed between the parties, the company is under obligation to pay minimum charges.
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14. The Supreme Court dealt with a stipulation for payment of minimum guarantee charges in a contract for supply of electricity in Raymond Ltd. v. M.P. Electricity Board 1. It was held that as a matter of general principle, any stipulation for payment of minimum guarantee charges is unexceptional, as the Board which undertakes generation, transmission and supply of electrical energy has to in order to fulfill its obligation lay down lines and install required equipment and gadgets and constantly keep them in a good state of repair and condition to render it possible for the consumer to draw the supply required at any and all times. It was further held that consumers who enter into such commitments openly and knowing fully well will be estopped from going behind the solemn commitment and undertaking on their/its part under the contract. In view of aforesaid enunciation of law by Supreme Court, it is not possible for the respondent to wriggle from its obligation to pay minimum guarantee charges under the agreement.
1 (2001) 1 SCC 534 ::9::
15. In Alopi Parshad and Sons, Limited v. Union of India 2, it was held that Contract Act does not enable a party to a contract to ignore the express covenants thereof.
16. In Naihati Jute Mills Ltd. v. Khyaliram Jagannath 3, it was held that defence of frustration would not be available for the reason where there is an express term the Court cannot find on consideration of the contract an implied term inconsistent with such express term.
17. In Clause 11 of the contract executed between the parties on 02.05.2005 expressly provides for levy of minimum charges even in case of non-consumption of electricity supply.
18. In view of aforesaid enunciation of law, the doctrine of frustration of contract would not apply to facts and circumstances of the case. The learned Single Judge however erred in not appreciating the aforesaid aspect of the matter.
2 1960 SCC onLine SC 13 3 1967 SCC OnLine SC 10 ::10::
19. For the aforementioned reasons, the common order dated 31.12.2008 passed by learned Single Judge in W.P.Nos.1993 of 2007 and 2131 of 2008 is set aside.
20. In the result, the Writ Appeals are allowed. There shall be no order as to costs.
As a sequel, miscellaneous petitions, pending if any, stand closed.
_______________________________ ALOK ARADHE, CJ _______________________________ N.V.SHRAVAN KUMAR, J Date: 11.10.2023 KL/MYK