The A.P. Central Power Dist. Co. ... vs M/S. Thungabhadra Holdings Pvt. ...
2023 Latest Caselaw 3062 Tel

  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