TMI Blog1973 (11) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Gujarat Electricity Board (hereinafter referred to as "the Board") and the Board wrote a letter dated September 27/28, 1966, pointing out to the company that the arrears of bills had accumulated and the Board informed the company that the supply of electricity to the company would be disconnected. On September 28 or 29, 1966, the supply of electricity was disconnected and thus discontinued. On November 1, 1966, a winding-up petition was presented in this court and that is Company Petition No. 21 of 1966. Actual order for winding-up was passed by the court on June 26, 1967. Between the date when the winding-up petition was presented and the date when the order for winding-up was passed, on December 31, 1966, the company wrote a letter treating the disconnection of the supply as summary termination by the Board of the agreement dated January 8, 1962. By this letter the company purported to treat this discontinuance of the supply as summary termination under clause 12 of the agreement and the company was con- -tending that the Board was not entitled to claim any minimum charges after such discontinuance of supply. After the company was ordered to be wound up, the official liqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Board continued to demand the minimum charges and charges for the delayed payment of minimum charges. Our learned brother further held that once the supply was disconnected, there might be a right to get reconnection either under the agreement or under the law but unless reconnection was granted, by a unilateral act of the Board to disconnect supply, the agreement between the parties came to an end and he further observed that too much sanctity should not be attached to such an agreement between unequally placed parties, namely, the Gujarat Electricity Board and a consumer like the company. Our learned brother held that if the Board exercised this power to disconnect supply when the consumer was in arrears, it was inconceivable that the consumer should go on paying minimum charges even though the Board was unable to show that it had to maintain some installations and had to incur expenditure in the maintenance of the installations which would justify the claim of minimum charges. It was on this reasoning that our learned brother dismissed the judge's summons with costs. In order to appreciate the rival contentions between the parties, it is necessary to refer to some of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... censee, through which energy may be supplied, and may discontinue the supply until such charge or other sum, together with any expenses incurred by him in cutting off and reconnecting the supply, are paid, but no longer. Thus, it is clear that the right of the licensee to discontinue electric supply comes into existence when the consumer neglects to pay the charges to the licensee and as soon as the arrears and the expenses incurred by the licensee in cutting off and reconnecting the supply are paid, the licensee is bound to resume the supply and start supplying the electrical energy to the consumer once again. That obligation of the licensee has to be borne in mind in the context of the dispute before us. The Schedule to the 1910 Act sets out provisions which are deemed to be incorporated with, and to form part of, every licence granted under Part II of the 1910 Act. Under clause VI it is open to the owner or occupier of any premises to make a requisition requiring the licensee to supply energy for such premises, and the licensee shall, within one month from the making of the requisition, supply, and, save in so far as he is prevented from doing so by cyclones, floods, storms or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imum charge related to a past or prospective demand of a licensee on the Board. Thus, it is obvious that it is competent to the Board to fix its tariff in such a manner as to make provision for a minimum charge so long as the agreement between the Board and the consumer continues and over and above such minimum charge to make provision for actual energy consumed by the consumer during the billing period. The agreement dated January 8, 1962, in terms provides that even if the power supply is discontinued, the minimum charges shall be continued to be paid to the Board even during the period of such discontinuance. Clause 11 of the agreement is as follows: "In the event of the supply of electrical energy being discontinued by the supplier in consequence of any breach or default on the part of the consumer entitling the supplier so to do under the provisions of the Act and the rules, the amount of charges for the electrical energy already supplied and all other moneys then payable under this agreement shall become due and recoverable forthwith provided always and it is hereby agreed and declared that during the period of such discontinuance the consumer shall continue to pay the mini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the minimum guarantee for the unexpired minimum period of supply as and by way of liquidated damages". It is clear that the supplier, the Board, becomes entitled to the summary termination of the agreement by seven days' notice after the limited company is ordered to be wound up by the court of competent jurisdiction. Therefore, this right of the Board to terminate the agreement of January 8, 1962, summarily would arise on the facts of this case only on June 26, 1967, when this court passed an order for winding up of the company. Any action taken by the Board before June 26, 1967, cannot be referable and in fact cannot derive any support from clause 12. We have already pointed out that the Board discontinued the supply of electricity with effect from September 28 or 29, 1966, but before disconnecting the supply, the Board had addressed certain letters to the company. The first letter to be noticed in this connection is the letter of September 27/28, 1966. Apparently, even before that date, the Board had been demanding payment of the arrears of its bills and by this letter the Board informed the company that more than the normal consideration had been shown to the company regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een December 31,1966, when this notice was given and the next 31st of March, that is, 31st March, 1967, was less than six months, this notice must be deemed to have terminated the agreement between the Board and the company with effect from March 31, 1968. It is because of such termination of theagreement that the minimum charges are claimed by the Board from the company up to 31st March, 1968. On August 24, 1967, the official liquidator who was appointed by this court after the winding up order dated June 26, 1967, wrote a letter to the Board contending that he was disclaiming his liability to pay for energy bill after the appointment of the official liquidator as liquidator of the mills as the supply of power was not needed and used by the mill company. The official liquidator also pointed out in this letter of August 24, 1967, that the company had by a notice dated December 31, 1966, terminated the agreement with the Board for supply of electric power and had also disclaimed their liability to pay the bill thereafter. In any event, according to the official liquidator, the bills after June 30, 1967, were not payable in the ordinary course as the agreement had come to an end on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear that the agreement between the parties, namely, the Board and the company, continued up to March 31, 1968, on which date it stood terminated by the notice given by the company on December 31, 1966. The question then arises as to whether there is anything unconscionable or incomprehensible, as our learned brother, D. A. Desai J., has observed, in the Board insisting on the payment of minimum charges during the period of discontinuance of supply between September 29, 1966, and March 31, 1968, when the agreement between the Board and the company came to an end. It must be borne in mind that, under section 24 of the 1910 Act, a licensee is entitled to discontinue the supply but, at the the same time, the moment all the dues of the licensee are paid up and the charges for disconnection and reconnection are paid, the licensee is bound to resume the supply to the consumer concerned. It is in the light of this obligation to resume the electric supply and reconnect the electric supply that we have to read the terms of the agreement and particularly the provisions of clause 11 regarding payment of minimum charges during the period of discontinuance of supply. This question of minimum c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the day as well as during the dark hours, so that the plant can satisfy a greater number of hours of maximum demand than would otherwise be the case. The proportion of the actual number of units sold to the output capacity of the plant is called the 'load factor' of the station, and the difference between the ratio of the load actually observed at the station to the sum of the loads at the consumers' terminals is called the 'diversity factor'. Power users have a better load and diversity factor than light users, which is the reason for their being usually charged at a lower rate. The increase of the load and diversity factors, therefore, is of the greatest importance, and tariffs are framed to obtain customers and classes of customers whose consumption contributes to this result". In paragraph 12 it is pointed out: "It is really to provide for a reasonable return to the licensee that a minimum charge is provided for which is payable notwithstanding the fact that no energy has been used by the consumer during the period for which such minimum charge is made. And all this is calculated and arrived at by taking into consideration the factors which are mentioned in section 23(4), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . After considering the provisions of section 46 of the 1948 Act, the Division Bench observed that the demand charge is a part of the tariff and the consumer was bound to pay this charge as well as the charge for the actual energy consumed. Again, the Madras High Court has held in Natesa Chettiar v. Madras State Electricity Board [1969] 1 M.L.J. 69; I.L.R. [1968] 2 Mad. 553 , that there is a statutory basis for the term in the agreement providing for a minimum annual charge. There is nothing illegal in the insertion of a term for payment of a minimum charge in the agreement for supply of energy, and it has not been made out that it is an unreasonable levy, and the clause providing for the payment of minimum charges cannot be read as a penalty clause. With respect, we agree with these four decisions which we have referred to above because they set out the effect of the legal provisions which we have set out hereinabove and they correctly point out that provision of minimum charge in the agreement between a consumer and a licensee is but one of the modes of providing for reasonable return to the licensee for the investment that it has made and on the capital outlay that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended on behalf of the official liquidator that, after June 26, 1967, the Board must come in as a creditor and must prove the debts provable in winding up. In this connection we may point out that under section 528 debts of all descriptions are required to be admitted to proof. If the company is an insolvent company, then the provisions of the law of insolvency are brought into play, but subject to the provisions of the law of insolvency, all debts payable on a contingency, and all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims, as may be subject to any contingency, or may sound only in damages, or for some other reason may not bear a certain value. It is clear that from the date of the winding-up order of June 26, 1967, till March 31, 1968, that is, till the termination of the agreement of 1962, the company was under a liability to pay the minimum charge that might be referable up to any date after the date of the winding-up order would still be debts provable on winding up. Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continuance of supply minimum charges would still be payable by the company to the Board cannot be said to be in the nature of penalty. The further argument of Mr. Shah on behalf of the official liquidator of the company was that by the letter of August 24, 1967, the then official liquidator had disclaimed his liability in respect of the minimum charges payable after the date of the winding-up order. We are unable to accept this contention because the only right which the official liquidator has is to disclaim such contract under section 535(1)( d ); where any part of the property of a company which is being wound up consists of unprofitable contracts, the liquidator may, with the leave of the court and subject to the provisions of the section, by writing signed by him, at any time within twelve months after the commencement of the winding-up or such extended period as may be allowed by the court, disclaim the property, in this case the agreement of January 8, 1962. It is nobody's case that prior to writing the letter of August 24, 1967, the leave of the court was obtained for the purpose of such disclaimer or that the procedure laid down in section 525 for disclaiming any such c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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