{"id":222072,"date":"1995-04-21T00:00:00","date_gmt":"1995-04-20T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/orissa-state-electricity-board-vs-ms-ipi-steel-ltd-etc-on-21-april-1995"},"modified":"2015-01-14T23:19:58","modified_gmt":"2015-01-14T17:49:58","slug":"orissa-state-electricity-board-vs-ms-ipi-steel-ltd-etc-on-21-april-1995","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/orissa-state-electricity-board-vs-ms-ipi-steel-ltd-etc-on-21-april-1995","title":{"rendered":"Orissa State Electricity Board … vs M\/S. Ipi Steel Ltd. Etc on 21 April, 1995"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Orissa State Electricity Board … vs M\/S. Ipi Steel Ltd. Etc on 21 April, 1995<\/div>\n
Equivalent citations: 1995 AIR 1553, \t\t 1995 SCC (4) 320<\/div>\n
Author: B Jeevan Reddy<\/div>\n
Bench: Jeevan Reddy, B.P. (J)<\/div>\n
           PETITIONER:\nORISSA STATE ELECTRICITY BOARD AND ANOTHER ETC.\n\n\tVs.\n\nRESPONDENT:\nM\/S. IPI STEEL LTD. ETC.\n\nDATE OF JUDGMENT21\/04\/1995\n\nBENCH:\nJEEVAN REDDY, B.P. (J)\nBENCH:\nJEEVAN REDDY, B.P. (J)\nSEN, S.C. (J)\n\nCITATION:\n 1995 AIR 1553\t\t  1995 SCC  (4) 320\n JT 1995 (4)   102\t  1995 SCALE  (2)919\n\n\nACT:\n\n\n\nHEADNOTE:\n\n\n\nJUDGMENT:\n<\/pre>\n
B.P. JEEVAN REDDY, J.:\n<\/p>\n
1.   Leave granted.  Heard counsel for the   parties.\n<\/p>\n
2.   The  Orissa State Electricity Board is  questioning  in
\nthis  appeal the correctness of the judgment of\t the  Orissa
\nHigh  Court  declaring the proviso to Regulation 46  of\t the
\nOrissa\tState  Electricity  Board  (General  Conditions\t  of
\nSupply) Regula-\n<\/p>\n
107<\/span><\/p>\n
tions,\t1981, (hereinafter referred to as “Regulations”)  as
\nunreasonable, arbitrary and illegal.  Having struck down the
\nproviso\t – i.e., the proviso as substituted by\tNotification
\ndated June 25, 1987 – the High Court has directed the  Board
\nto revise the bills issued to the respondent-writ petitioner
\n“on the basis of proportionate reduction taking into account
\nthe actual consumption of energy”.\n<\/p>\n
3.   The respondent-writ petitioner (NV S.IPI Steel Limited)
\nhas  a mini steel plant in Orissa.  On August 16,  1984,  it
\nhad  entered  into  an agreement  with\tthe  appellant-Board
\nwhereunder the Board undertook to supply power “upto but not
\nexceeding  a  maximum  demand of 7778 KVA\/  7000  KW”.\t The
\nagreement contains the following stipulations among others:
\n(1)  “The  consumer has perused a copy of the  Orissa  State
\nElectricity    Board   (General\t  Conditions   of    supply)
\nRegulations, 1981, understood its contents and undertakes to
\nobserve and abide by all the terms and conditions stipulated
\ntherein\t including all future modifications thereto, to\t the
\nextent\tthey  are  applicable  to  him.\t  The  Orissa  State
\nElectricity    Board   (General\t  Conditions   of    Supply)
\nRegulations,  1981  as modified from time to time  shall  be
\ndeemed\tto  form part of this Agreement” [Vide\tclause\t(2)]
\n(Emphasis added).\n<\/p>\n
(2)  “The  consumer shall pay to the Engineer for the  power
\ndemand\tand electrical energy supplied under this  Agreement
\nin accordance with the tariff as mentioned below, subject to
\nany  revision  that may be made by the Board  from  time  to
\ntime.\n<\/p>\n
Large Industries\n<\/p>\n
(a)  The monthly charges shall be:-\n<\/p>\n
Demand\tcharges at Rs.35.00 per KVA of maximum\tdemand\tplus
\nenergy\tcharges at the following rate on units metered\tless
\nunits billed separately under (c) and (d) below:
\nPaise  36.00 for each unit without prejudice to\t payment  of
\nmonthly minimum charges indicated below:\n<\/p>\n
(b)  The monthly minimum charges shall be calculated at\t the
\nabove  rates, on a demand of 80 percent contract demand\t and
\non units calculated at an average power factor of 0.9 and an
\naverage\t load  factor of 15 per cent on\t the  said  contract
\ndemand. [Vide clause (7)]”. (The remaining portion of clause
\n(7) is omitted as unnecessary.)\n<\/p>\n
4.   The  respondent  complains\t that  notwithstanding\t the
\nagreement,  the Board was in no position to supply the\tfull
\nquantity  of  energy stipulated in the\tagreement.   It\t is,
\nhowever,  not necessary to consider the said plea, since  we
\nare  concerned\therein\twith the  period  January,  1989  to
\nAugust,\t 1990  alone.  During this period,  an\torder  under
\nSection\t 22-B of the Indian Electricity Act, 1910 read\twith
\nSection\t 78(A) of the Electricity (Supply) Act, 1948  issued
\nby  the\t Government of Orissa on February 14,  1990  was  in
\nforce.\t It  would  be appropriate to  notice  the  relevant
\ncontents  of  the Order.  The Order recited that  since\t the
\ntotal availability of power from the generating stations  in
\nOrissa will fall short of the total requirement of power  in
\nthe  State  substantially, the State Government\t is  of\t the
\nopinion\t that  for  maintaining\t the  supply  and   securing
\nequitable  distribution\t of  energy,  it  is  expedient\t  to
\nregulate  the supply, distribution, consumption and  use  of
\nenergy from the Orissa grid.  The Order
\n108<\/span>
\ndirected  “the Orissa State Electricity Board to reduce\t the
\nsupply of energy so as to allow the consumer to avail to the
\nextent as specified in the Annexure anything in any contract
\nagreement  or  requisition  for supply or  increase  in\t the
\nsupply\tof  energy notwithstanding”.  Contravention  of\t the
\nprovisions  of\tthe Order rendered the consumer\t liable\t for
\ndisconnection of service line without notice and for payment
\nof  energy  charges  at double the highest  rate  of  energy
\ncharges\t for any category in addition to the penalties.\t  In
\nthe  Annexure  to the said order,  the\trespondent,  M\/s.IPI
\nSteel\toccurs\tat  Sl.No.  13\tunder  the  Heading   “Large
\nIndustries”.   It  would  be  appropriate  to  extract\t the
\nschedule insofar as it concerns the respondent:\n<\/p>\n
————————————————————-
\nSl. Name of the\t     Allowable\t  drawal       Provisional
\nNo. Industry\t     Period\t  Quantity     allotment for
\n\t\t     of water\t  in Million  the water 90-\n<\/p>\n
\t\t     yr. 1989-\t  KWH.\t      91 (1\/7\/90 to\n\t\t     (1\/7\/89\t  30.6.91)\n\t\t     to\n\t\t     30.6.90)\n<\/pre>\n
————————————————————\n<\/p>\n
 1.  2.\t\t     3.\t\t   4.\t\t 5.\n<\/p>\n
————————————————————<\/p>\n
\nLarge Industries\n13. IPI STEEL\t    1.7.89\t 16.863\t       16.863\nGundichapada\t     to\n\t\t     30.6.90\n<\/pre>\n
————————————————————\n<\/p>\n
5.   It\t is  agreed by the parties that the  effect  of\t the
\nabove order is to reduce the supply by fifty per cent.\t The
\nElectricity Board has explained how the said fifty per\tcent
\nreduction  is being implemented and operated,  by  producing
\nbefore\tus a statement relating to the water  year  1988-89.
\nIt would be appropriate to extract the said statement:\n<\/p>\n
\t\tM\/S.IPI STEEL LTD: DHENKANAL\n<\/p>\n
\t 1.    Contract Demand (C.D.)\t     – 7778 KVA
\n\t\t\t\t\t(Kilo-Volt-Amperes)\n<\/p>\n
\t  2.   80% of C.D. – 0.8 x 7778 KVA  – 6222.4 KVA\n<\/p>\n
\t  3.   100% requirement of energy     – 37.467 MU
\n\t       for the water year 1988-89    (Million Units)\n<\/p>\n
\t  4.   % of level of allocation for- 50% of the full
\n109<\/span>
\n\t      the water year 1988-89requirement\n<\/p>\n
\t  5.   Energy allocation for the    – 18.737 MU
\n\t       year 1988-89\n<\/p>\n
————————————————————
\nSl. Maximum  Month  Rate per  Charges\t       Energy enti-\n<\/p>\n
No. demand\t    KVA\t\t\t       tlement per\n\t\t\t\t\t       month (in MU)\n\t\t\t\t\t       of 80% of C.D\n<\/pre>\n
————————————————————\n<\/p>\n
1.  7778     X 6    Rs.35\/-   Rs.16,33,380\/-   3.122
\n\t\t\t      (no charges for
\n\t\t\t      (18.737\/6) six
\n\t\t\t      months)\n<\/p>\n
2.  3889     X12    Rs.35\/-   Rs.16,33,380\/-   1.561\n<\/p>\n
3.  5185     X 9    Rs.35\/-   Rs.16,33,275\/-   2.081
\n\t\t\t      (no charge for
\n\t\t\t      (18.737\/3) 3
\n\t\t\t      months)\n<\/p>\n
————————————————————\n<\/p>\n
\t\t\t\t\tcont.-\n<\/p>\n
————————————————————
\nLiability of consumer\tRelief\t       Total  consumption
\nfor payment\n<\/p>\n
————————————————————
\nRs. 29,40,084\t\tRs.13,00,704   Rs. 18,737 MU
\nRs. 26,13,408\t\tRs. 9,80,100   Rs. 18,737 MU
\nRs. 19,60,056\t\tRs. 3,26,781   Rs. 18,737 MU\n<\/p>\n
————————————————————\n<\/p>\n
6.Sri\tSantosh\t Hegde,\t learned  counsel  for\tthe   Orissa
\nElectricity  Board explains the contents of the above  table
\nthus: the maximum demand allowed under the Agreement to\t the
\nrespondent is 7778 KVA; the cut is fifty per cent, i.e.,  to
\nthe extent of half, the consumer, however, has been given an
\noption\tin the matter of utilisation of the fifty  per\tcent
\nallowed\t to him.  It is open to him to avail of the  maximum
\ndemand every month but in such a case he can run his factory
\nonly for six months as mentioned under Sl.No. 1 in the Table
\ncontained in the above statement, if, however, the  consumer
\nwants to operate his plant for twelve months in the year, he
\nhas to reduce his maximum demand to half of 7778 KVA,  i.e.,
\nto  3889 KVA as mentioned under Sl.No.2 of the Table; it  is
\nequally\t open  to  the consumer to  distribute\tthe  maximum
\ndemand\tpermitted  to him in such a manner  that  his  plant
\nworks  for  nine  months in the year availing  5185  KVA  as
\nmentioned  under Sl.No.3 of the Table – or for that  matter,
\nin  any\t other manner convenient to him.  But  all  this  is
\nsubject\t to  the  overall  ceiling  prescribed\tduring\tsuch
\nperiod.\t  Sri  Hegde  submits  that  the  energy  was\tmade
\navailable  to  all the bulk consumers on  the  above  basis,
\nwhich  fact, he says, is not disputed by the respondent\t nor
\nany  complaint\tis  made by him that  energy  was  not\tmade
\navailable   in\tthe  manner  stated  in\t the  said   tabular
\nStatement.\n<\/p>\n
7.At this stage, it would be appropriate to explain  certain
\nconcepts relevant herein.  The expression “contract  demand”
\nis  defined  in\t clause\t (viii)\t of  Regulation\t 3  of\t the
\nRegulations.  The definition reads thus:\n<\/p>\n
\t      “(viii)  Contract\t demand, means\tthe  maximum
\n\t      kilowatt (KW) or kilo-volt-ampere (KVA) as the
\n\t      case may be agreed to be supplied by the Board
\n\t      and contracted by the consumer.”\n<\/p><\/blockquote>\n
\t      110<\/span><\/p>\n
(In  the  case\tof the respondent the  contract\t demand,  as
\nstated hereinabove, is 7778 KVA.)\n<\/p>\n
8.   The  expression  “minimum charges” is referred  to\t and
\nexplained  in  clause  7(b) of\tthe  Agreement\tbetween\t the
\nparties.  The clause, extracted hereinabove, says that\t“the
\nmonthly\t minimum  charges shall be calculated at  the  above
\nrates on a demand eighty per cent of contract demand and  on
\nunits  calculated at an average power factor of 0.9  and  an
\naverage load factor of fifteen per cent on the said contract
\ndemand.” (The reason for prescribing the minimum charges  is
\nthat the Board generates and keeps in readiness, energy\t for
\nthe  respondent to the extent of contract demand.   Even  if
\nthe  respondent does not avail of it, the energy  cannot  be
\nstored or preserved.  The respondent is, therefore, made  to
\npay for the energy generated for his use even though he does
\nnot avail of it at the contracted level; even so, the  mini-
\nmum charges arc pegged at eighty per cent.)\n<\/p>\n
9.   The  expression “maximum demand” is defined  in  clause
\n(xx) of Regulation 3. It reads:\n<\/p>\n
\t      “(xx) Maximum demand, means the average amount
\n\t      of kilowatts or kilovolt-amperes, as the\tcase
\n\t      may  be, delivered to the point of  supply  of
\n\t      the  consumer  and recorded  during  a  thirty
\n\t      minutes’ period of maximum use in the month or
\n\t      it  shall\t mean twice the\t largest  number  of
\n\t      kilowatt-hours  (KWH) or\tkilovolt-amperehours
\n\t      (KVAH) delivered to the point of supply by the
\n\t      consumer\tduring any consecutive\t30  minutes’
\n\t      period.\tThe  Board,  however,  reserves\t the
\n\t      right to shorten this period in special cases,
\n\t      if necessary.”\n<\/p><\/blockquote>\n
10.  The above definition has to be read in the light of and
\nin continuation of the definition of the said expression  in
\nclause\t(8)  of Section 2 of the Electricity  (Supply)\tAct,
\n1948, which runs thus:\n<\/p>\n
\t      “(8).   “Maximum\tdemand” in relation  of\t any
\n\t      period shall, unless otherwise provided in any
\n\t      general\tor  special  order  of\t the   State
\n\t      Government,  mean twice the largest number  of
\n\t      kilowatt-hours   or   kilovolt-\tampere-hours
\n\t      supplied\tand  taken  during  any\t consecutive
\n\t      thirty minutes in that period.”\n<\/p><\/blockquote>\n
11.  It is necessary to elaborate what does  the  expression
\n“maximum demand” mean\t and  signify?\tIn the case of\tbulk
\nconsumers and large scale consumers, the Electricity  Boards
\nall over the country generally adopt a two-part levy system.
\nOne  part  is called ‘the maximum demand  charges’  and\t the
\nother  part ‘consumption charges’.  Every such\tconsumer  is
\nprovided  with\ttwo meters.  One is  called  the  ‘trivector
\nmeter’\tand the other is the normal meter which records\t the
\ntotal quantity of energy consumed over a given period  which
\nis  ordinarily- a month.  The meter which records the  total
\nconsumption requires no explanation or elaboration since  we
\nare  all aware of it.  It is the other meter which  requires
\nsome explanation.  Now every large scale consumer knows\t the
\namount\tof energy required by him and requests for  it\tfrom
\nthe Board.  If the Board agrees to supply that or any  other
\nparticular amount of energy, it makes necessary arrangements
\ntherefor  by  laying the lines to the extent  necessary\t and
\ninstalling other requisite equipment.  It is obvious that if
\na factory uses energy at a particular level\/ load and for  a
\nparticular  period,  it consumes a  particular\tquantity  of
\nenergy.\t The trivector meter records the highest level\/
\n111<\/span>
\nload  at which the energy is drawn over any  thirty-  minute
\nperiod\tin a month while the other meter records  the  total
\nconsumption  of energy in units in the month.  Let  us\ttake
\nthe  case  of the respondent to illustrate the\tpoint.\t The
\nmaximum\t demand in his case is upto but not  exceeding\t7778
\nKVA.   That is his requirement.\t In the normal times, he  is
\nentitled  to  draw energy at that level\/load.  That  is\t his
\nmaximum\t demand under the agreement.  But he may not  always
\ndo  so.\t Say, in a given month, he draws energy at 6000\t KVA
\nlevel  only, even then he has to pay the minimum charges  as
\nstipulated  in the agreement.  But if he draws and  consumes
\nenergy\texceeding  eight  per cent of the  energy,  he\tpays
\ndemand and energy charges for what he utilises.\t Now, let us
\nnotice\thow  the  trivector meter,  i.e.,  the\tmeter  which
\nrecords\t the maximum demand works; the meter is so  designed
\nthat it only records the maximum load\/ level at which energy
\nis drawn over any thirty-minute period in a month.  It\tonly
\ngoes forward but never goes back until it is put back  manu-
\nally.  To be more precise, suppose the respondent has  drawn
\nenergy\tat 7770 KVA for a thirty-minute period on the  first
\nday of the month, the meter will record that figure and will
\nstay there even if the respondent consumes at 7000 or lesser
\nKVA  level  during  the\t rest  of  the\tmonth.\t From\tthis
\ncircumstances  however,\t one cannot jump to  the  conclusion
\nthat it is an arbitrary way of levying consumption  charges.
\nNormally  speaking, a factory utilises energy at  a  broadly
\nconstant  level.  May be, on certain occasions,\t whether  on
\naccount\t of  breakdowns, strikes or shutdowns or  for  other
\nreasons, the factory may not utilise energy at the requisite
\nlevel over certain periods, but these are exceptions.  Every
\nfactory expects to work normally.\n<\/p>\n
So  does  the  Electricity Board expect\t –  and\t accordingly
\nproduces  energy  required by the factory and  keeps  it  in
\nreadiness for that factory – keeping it ready on tap, so  to
\nspeak.\t As already emphasised, electricity  once  generated
\ncannot be stored for future use.  This is the reason and the
\njustification  for  the\t demand charges and  the  manner  of
\ncharging  for  it.  There is yet another  justification\t for
\nthis  type  of\tlevy  and it is\t this:\tdemand\tcharges\t and
\nconsumption charges are intended to defray different  items.
\nBroadly\t speaking, while demand charges are meant to  defray
\nthe capital costs, consumption charges are supposed to\tmeet
\nthe  running  charges.\t Every\tElectricity  Board  requires
\nmachinery,  plant,  equipment, sub-  stations,\ttransmission
\nlines and so on, all of which require a huge capital outlay.
\nThe Board like any other corporation has to raise funds\t for
\nthe  purpose which means it has to obtain loans.  The  loans
\nhave  to be repaid, and with interest.\tProvision has to  be
\nmade for depreciation of machinery equipment and  buildings.
\nPlants, machines, stations and transmission lines have to be
\nmaintained,  all of which requires a huge staff.  It  is  to
\nmeet  the capital outlay that demand charges are levied\t and
\ncollected  whereas  the consumption charges are\t levied\t and
\ncollected to meet the running charges.\n<\/p>\n
12. Pausing here for a moment, we may explain the importance
\nand significance of maximum demand.  The maximum demand of a
\ngiven plant\/factory determines the type of lines to be\tlaid
\nand  the  power of transformers and other  equipment  to  be
\ninstalled  for\tthe  purpose.  A factory  having  a  maximum
\ndemand of say 1000 KVA and a factory having a maximum demand
\nof  10,000  KVA require different type of  lines  and  other
\nequipment for providing
\n112<\/span>
\nsupply to them.\t In the case of latter, lines have to be  of
\na  more\t load-bearing  variety.\t  Transformers\thave  to  be
\ninstalled  and of more capacity.  Sometimes in the  case  of
\nbulk consumers even a sub-station may have to be established
\nexclusively  for  such\tfactory\/plant.\t Very  often   these
\nindustries  are situated away from power stations  and\tmain
\ntransmission  lines which means laying special\tpower  lines
\nover  considerable distances to give the supply\t connection.
\nAs a matter of fact, the significance of the maximum  demand
\nwould  be evident from the fact that the  agreement  between
\nthe Board and consumer (like the respondent) specifies\tonly
\nthe  maximum  demand and not the total units allowed  to  be
\nconsumed.   The\t agreement concerned herein  prescribes\t the
\nmaximum demand at 7778 KVA but does not prescribe the  total
\nnumber\tof units of energy allowed to be consumed.  This  is
\nfor the reason, explains Sri Hegde, that the total number of
\nunits of energy consumed is determined by the load\/level  at
\nwhich  power is drawn.\tThe formula, taking the case of\t the
\nrespondent  is\tstated\tto be  –  100%\tunrestricted  energy
\nrequirement  of\t the respondent = contract demand in  KVA  x
\npower  factor  x load factor x total number of\thours  in  a
\nyear.  In concrete terms, it means – 7778 KVA x 0.90 x\t0.61
\n1  x  8760 = 37,467,590 KWH (Units) = 37.46759\tMU  (Million
\nUnits).\t  This formula, as it states expressly, is  premised
\non   unrestricted   supply.   Problems\t arise\t only\twhen
\nrestrictions are placed on consumption on account of fall in
\nproduction  of\telectricity by the Board, as  would  be\t ex-
\nplained hereinafter.\n<\/p>\n
13. Even during normal times, the Electricity Boards are not
\nable  to generate energy commensurate with  their  installed
\ncapacity, though it is true, they do try to achieve it.\t But
\nsituations  arise – situations beyond their control  –\twhen
\nthey  are not able to produce even that much energy as\tthey
\ngenerally do.  They are obliged to cut down their production
\nsubstantially  – at times, as much as by half or  more.\t  We
\nare told that the power generated by Hydro-electric stations
\nin  Orissa  forms a substantial chunk of  the  total  energy
\nproduced  by the Board.\t If in a given year, the rains\tfail
\nand more particularly, if the rains fail during two or three
\nyears  consecutively,  the production of  energy  by  Hydro-
\nelectric units goes down substantially.\t Even in the case of
\nthermal\t stations,  problems  of supply\t of  coal  and\toil,
\nquality\t of coal supplied and other problems result  in\t the
\nBoard  producing electricity at a level far lower than\twhat
\nit   normally\tdoes.\tDuring\tperiods\t of   such   reduced
\ngeneration\/supply,  problems of distribution  arise.   There
\nare  several categories of consumers; industrial  (including
\nbulk  consumers),  commercial,\tagricultural  and   domestic
\nbesides some other categories.\tNaturally, everybody  cannot
\nbe supplied the full quantity of energy required; it has  to
\nbe  rationed and may be, supply staggered.  It is  precisely
\nto  provide  for such situations that Section  22-B  of\t the
\nIndian Electricity Act, 1910 empowers the Government to make
\nan  order  regulating the distribution\tand  consumption  of
\nenergy.\t We may now read he section:\n<\/p>\n
\t      “22-B.  Power to control the distribution\t and
\n\t      consumption  of  energy.– (1)  If  the  State
\n\t      Government is of opinion that it is  necessary
\n\t      or  expedient  so to do, for  maintaining\t the
\n\t      supply and securing the equitable distribution
\n\t      of   energy  it  may  by\torder  provide\t for
\n\t      regulating    the\t   supply,     distribution,
\n\t      consumption or use thereof.\n<\/p><\/blockquote>\n
\t      (2)   Without prejudice to the generality of
\n\t      113<\/span>
\n\t      the  powers  conferred by\t subsection  (1)  an
\n\t      order made thereunder may direct the  licensee
\n\t      not  to comply, except with the permission  of
\n\t      the State Government, with-\n<\/p><\/blockquote>\n
\t      (i)the  provisions of any contract,  agreement
\n\t      or  requisition whether made before  or  after
\n\t      the  commencement\t of the\t Indian\t Electricity
\n\t      (Amendment)  Act, 1959 (32 of 1959),  for\t the
\n\t      supply (other than the resumption of a supply)
\n\t      or an increase in the supply of any energy  to
\n\t      any person, or\n<\/p><\/blockquote>\n
\t      (ii)any  requisition  for\t the  resumption  of
\n\t      supply of energy to a consumer after a  period
\n\t      of   six\t months,  from\tthe  date   of\t its
\n\t      discontinuance, or\n<\/p><\/blockquote>\n
\t      (iii)any\trequisition  for the  resumption  of
\n\t      supply of energy made within six months of its
\n\t      discontinuance,\twhere\tthe   requisitioning
\n\t      consumer\twas not himself the consumer of\t the
\n\t      supply at the time of its discontinuance.\t ”\n<\/p><\/blockquote>\n
14.  It is obvious that an order made under Section 22-B  is
\nbinding upon the Electricity Board and over- rides the\tcon-
\ntracts and agreements which the Board may have entered\tinto
\nwith the consumers.  When an order under Section 22-B is is-
\nsued,  the  Board  is freed from the  obligation  to  supply
\nenergy\tat the level stipulated in the agreements  with\t the
\nconsumers and its obligation is to supply in accordance with
\nthe  order under Section 22-B.\tOn this score, there  is  no
\ncontroversy.   The controversy is with respect to the  power
\nof  the Board to collect maximum demand charges at the\trate
\nprescribed   in\t the  agreement\t during\t such\tperiods\t  of
\nrestricted  supply.  In short, the question is with  respect
\nto  the power of the Board to frame Regulation 46  and\tmore
\nparticularly, the reasonableness of the proviso to the\tsaid
\nRegulation.\n<\/p>\n
15.  Section 79 of the Electricity (Supply)  Act,\t1948
\nempowers the Board to make    Regulations  to  provide\t for
\nmatters\t  specified  therein.\tInter  alia,   the   matters
\nspecified  include “(j) principles governing the  supply  of
\nelectricity  by\t the Board to persons other  than  licensees
\nunder  Section 49”.  Clause (k) is, of course, of a  general
\nnature.\t Section 49(1) says that:\n<\/p>\n
\t      “49.  Provision for the sale of electricity by
\n\t      the  Board to persons other than\tlicensees.–
\n\t      (1) Subject to the provisions of this Act\t and
\n\t      or  regulations, if any, made in this  behalf,
\n\t      the Board may supply electricity to any person
\n\t      not  being  a  licensee upon  such  terms\t and
\n\t      conditions as the Board thinks fit and may for
\n\t      the  purposes  of such supply  framed  uniform
\n\t      tariffs.”\n<\/p><\/blockquote>\n
16.It would help if we notice sub-sections (2), (3) and\t (4)
\nof Section 49 also.  They read thus:\n<\/p>\n
\t      “(2) In fixing the uniform tariffs, the  Board
\n\t      shall  have  regard  to  all  or\tany  or\t the
\n\t      following factors, namely–\n<\/p><\/blockquote>\n
\t      (a)the  nature of the supply and the  purposes
\n\t      for which it is required;\n<\/p><\/blockquote>\n
\t      (b)the  coordinated development of the  supply
\n\t      and  distribution\t of electricity\t within\t the
\n\t      State  in\t the most efficient  and  economical
\n\t      manner, with particular reference to such\t de-
\n\t      velopment\t in  areas not for  the\t time  being
\n\t      served or adequately served by the licensee;\n<\/p><\/blockquote>\n
\t      (c)the  simplification and standardisation  of
\n\t      methods and rates
\n\t      114<\/span>
\n\t      of charges for such supplies;\n<\/p><\/blockquote>\n
\t      S.C.  (d)\t the  extension\t and  cheapening  of
\n\t      supplies of electricity to sparsely  developed
\n\t      areas.\n<\/p><\/blockquote>\n
\t      (3)   Nothing  in the foregoing provisions  of
\n\t      this section shall derogate from the power  of
\n\t      the  Board,  if it considers it  necessary  or
\n\t      expedient\t to  fix different tariffs  for\t the
\n\t      supply of electricity to any person not  being
\n\t      a licensee, having regard to the\tgeographical
\n\t      position of any area, the nature of the supply
\n\t      and  purpose for which supply is required\t and
\n\t      any other relevant factors.\n<\/p><\/blockquote>\n
\t      (4)   In\tfixing\tthe  tariff  and  terms\t and
\n\t      conditions for the supply of electricity,\t the
\n\t      Board  shall not show undue preference to\t any
\n\t      person.”\n<\/p><\/blockquote>\n
17.  In\t exercise of the power conferred by Section 79\tread
\nwith Section 49 of the Electricity (Supply) Act, the  Orissa
\nBoard  has  framed Regulation 46.  Before its  amendment  by
\nNotification  dated  June  25 1987, Regulation\t46  read  as
\nfollows:\n<\/p>\n
\t      “Right  of  Board\t in case of  break  down  in
\n\t      Board’s supply system —\n<\/p><\/blockquote>\n
\t      If  at any time during the continuance of\t any
\n\t      agreement between the Board and consumer,\t due
\n\t      to  reason  mentioned in clause-40(d)  and  43
\n\t      above,  the Board\/Engineer shall be  under  no
\n\t      obligation to give supply of electrical energy
\n\t      as contracted during the period of such  break
\n\t      down\/ force measure situation continues.\tSuch
\n\t      period of discontinuance\/reduced supply  shall
\n\t      not  be  added to the initial  period  of\t the
\n\t      agreement.\n<\/p><\/blockquote>\n
\t      Provided\t that\tduring\t such\tperiod\t  of
\n\t      discontinuance\/reduced  supply,  the  consumer
\n\t      shall not be liable to pay the minimum charges
\n\t      in  accordance with the agreement,  but  shall
\n\t      only  pay\t for the actual quantity  of  demand
\n\t      and\/or energy supplied to the consumer in lieu
\n\t      of the contracted demand. ”\n<\/p><\/blockquote>\n
18.The Regulation was substituted by the Notification  dated
\nJune 25, 1987.\tThe substituted Regulation reads as follows:\n<\/p>\n
\t      “If  on account of shortage of the  generation
\n\t      of  electrical energy, restrictions  on  power
\n\t      supply  arc  imposed by the  State  Government
\n\t      under Section 22(B) of the Indian\t Electricity
\n\t      Act, 1910 or by the Board under Section 49  of
\n\t      the Electricity Supply Act, 1948 and all other
\n\t      power  available under law, the Board and\t the
\n\t      Engineers\t shall\tbe under  no  obligation  to
\n\t      supply  energy  contracted for except  in\t ac-
\n\t      cordance\t with  the  restriction\t order\t and
\n\t      subject\tto  the\t other\tprovisions  of\t the
\n\t      Regulation.\n<\/p><\/blockquote>\n
\t      Provided\tthat during the period\trestrictions
\n\t      are in force, the consumer shall not be liable
\n\t      to pay the minimum charges in accordance\twith
\n\t      the agreement if the restriction on supply  in
\n\t      a month exceeds 150 (One Hundred Fifty)  hours
\n\t      but  shall  only\tpay, in\t case  of  two\tpart
\n\t      tariff,\ton  the\t basis\tof   actual   energy
\n\t      consumption   and\t the  “maximum\tdemand”\t  as
\n\t      provided\tin  the agreement and in  all  other
\n\t      cases,  on the basis of actual consumption  of
\n\t      energy.\n<\/p><\/blockquote>\n
19.  We\t arc  concerned in this case  with  the\t substituted
\nRegulation   46\t and  hence,  reference\t to  Regulation\t  46
\nhereinafter means the amended Regulation 46 only.\n<\/p>\n
20.  Regulation 46, it is evident, is designed to  meet\t the
\nsituation obtaining during the period an order under Section
\n22B  of the Electricity Act, 1910 is in force.\tIt  says  so
\nspecifically.\tThe Regulation says that when such an  order
\nis  in operation, the Board shall be under no obligation  to
\nsupply the contracted demand\/maximum
\n115<\/span>
\ndemand\tand  that it will supply energy only  in  accordance
\nwith the restrictions placed by such order.  To this  extent
\nit  states the obvious.\t The proviso – which is the  one  in
\nquestion  –  then  says\t that  during  the  period  of\tsuch
\nrestricted  supply if the restriction on supply exceeds\t 150
\nhours  in a month, (a) the consumer shall not be  liable  to
\npay minimum charges in accordance with the agreement but (b)
\nhe  shall  pay in case of two-part tariff, on the  basis  of
\nactual energy consumption and the maximum demand as provided
\nin the agreement and (c) in all other cases, (i.e., in\tcase
\nof consumers to whom two-part tariff does not apply) on\t the
\nbasis of actual consumption of energy.\n<\/p>\n
21.  Now, in the case before us, the restriction  on  supply
\ndid  exceed  150 hours in a month; indeed it was  fifty\t per
\ncent.\tIn accordance with the said proviso, therefore,\t the
\nrespondent was obliged to pay (i) the maximum demand charges
\nas  provided  in the agreement and (ii)\t the  actual  energy
\nconsumption charges though he is relieved of the  obligation
\nto  pay minimum charges.  The maximum demand  contracted  by
\nthe  respondent\t is  upto  but not  exceeding  7778  KVA  as
\nmentioned hereinbefore.\t Now, if the respondent draws energy
\nat  full load, i.e., at 7778 KVA, his consumption of  energy
\nover  the  year would be twice the quota  permitted  to\t him
\nduring\tthe year of restriction.  Therefore, the  respondent
\nis  obliged  to\t –  and should – draw  energy  at  half\t the
\nmaximum\/contracted demand, i.e., at 3889 KVA, if he wants to
\nrun  his factory for the whole of the year  of\trestriction.
\nAnd  since,  he\t is relieved of the obligation\tto  pay\t the
\nminimum charges as per the agreement, he pays demand charges
\nonly  on the basis of the actual maximum K.VA drawn  by\t him
\nplus  the charges for the energy actually consumed  by\thim.
\nSecondly,  the Board explains, there is an option  available
\nto  such  consumers.   If  their  unit\tcannot\twork  at   a
\nlevel\/load  less than the maximum demand\/contract demand  or
\nif  the consumer wishes to do so for his own reasons, he  is
\nfree  to draw energy at the contract\/maximum  demand  level,
\nbut  then  he can work only for six months in  the  year  of
\nrestriction  since  he\tis  bound  to  observe\tthe  cut  in
\nconsumption of energy by fifty per cent.  In other words, if
\nhe avails power\/ energy at the maximum agreed level, he will
\nexhaust\t his fifty per cent quota in six months itself.\t  It
\nis  however open to a consumer to draw energy at  any  other
\nlevel so long as he does not exceed the fifty per cent quota
\npermitted  to  him  during  the\t year  of  restriction,\t  as
\nexplained in the tabular statement referred to hereinbefore.
\nThe  option to draw at the maximum level\/load  permitted  is
\nprobably  conceived to provide for those units which  cannot
\noperate\t except when they draw energy at the maximum  demand
\nlevel.\t They  can do so but they can operate only  for\t six
\nmonths in the year of restriction.  So far as the respondent
\nis concerned, it is admitted that it is not a unit which can
\noperate only when it draws energy at 7778 KVA or thereabout;
\nit  can operate even if energy is drawn at half the  maximum
\ndemand\tlevel.\t May be, such functioning may be  less\teco-
\nnomical, but function it can.\n<\/p>\n
22.We  shall  now  deal with the precise  grievance  of\t the
\nrespondent-writ petitioner and the grounds on which the High
\nCourt has invalidated the proviso to Regulation 46.    The
\nrespondent says that where the cut in the supply Is as\tmuch
\nas  half,  there is no justification or\t equity\t behind\t the
\nregulation  which  entitles the Board to  levy\tfull  demand
\ncharges. (There is no com-\n<\/p>\n
116<\/span><\/p>\n
plaint insofar as the levy of actual consumption charges are
\nconcerned, the whole grievance is only about the maximum de-
\nmand  charges  or demand charges, as they are  called.)\t The
\nrespondent  submits  that during the periods  of  restricted
\nsupply,\t there are frequent cuts and breakdowns, the  supply
\nis irregular and yet the Board proposes to levy full] demand
\ncharges only because in any thirty-minute period in a  given
\nmonth,\tthe  power is availed at the maximum  demand  level.
\nAccording to the respondent, during the period of such\tsup-
\nply  the demand charges should not be collected at  all\t but
\nonly the consumption charges.  This submission has been\t up-
\nheld by the High Court on the following reasoning which\t may
\nbetter be put in their own words:\n<\/p>\n
\t      “Under  the  two part tariff system  which  is
\n\t      meant  for big consumers of  electricity,\t the
\n\t      consumer is required to pay the demand charges
\n\t      which  charges are levied to cover  investment
\n\t      installation and the standing charges to\tsome
\n\t      extent  and  energy  charges  for\t the  actual
\n\t      amount  of  energy consumed.   The  expression
\n\t      “Demand  charges” would mean that\t the  charge
\n\t      leviable for the readiness of the supplier  to
\n\t      meet  the\t demand\t of  the  consumer.   Where,
\n\t      therefore,  the  supplier, namely,  the  State
\n\t      Electricity Board was not at all in a position
\n\t      to supply the energy as per the demand of\t the
\n\t      consumer it would be an unreasonable burden on
\n\t      the  consumer if the supplier is permitted  to
\n\t      raise   the   entire  demand   charges.\t The
\n\t      excessiveness of the. burden on the economy of
\n\t      the industry as well as on the consumer  would
\n\t      be  apparent  from a small  illustration.\t  An
\n\t      industry\tneeds  7000 KVA for running  of\t its
\n\t      factory but because of the power\trestrictions
\n\t      issued by the State Government in exercise  of
\n\t      power under section 22(b) of the Supply Act it
\n\t      cannot  run the factory through out the  month
\n\t      as  that\twould exceed the quantum  of  energy
\n\t      which the industry could utilise.\t But to\t run
\n\t      its  machinery if the industry in question  on
\n\t      the first day of the month takes power than in
\n\t      the  demand  meter  it would  show  7000\tKVA.
\n\t      Thereafter  even if for next twenty nine\tdays
\n\t      of  the month, the industry does not take\t any
\n\t      further energy still by virtue of the  proviso
\n\t      to  Regulation  46  in  accordance  with\t the
\n\t      agreement\t between  the parties  the  consumer
\n\t      will  be\trequired  to  pay  towards   “demand
\n\t      charge”  to the extent of Rs.35 x 7000.\tLevy
\n\t      of  such a charge, in our considered  opinion,
\n\t      cannot   but   be\t held\tto   be\t  arbitrary,
\n\t      unreasonable and confiscatory in nature.”\n<\/p><\/blockquote>\n
23.The\tHigh  Court then referred to the  decision  of\tthis
\nCourt in M\/s. Northern India Iron and Steel Co. v. The State
\nof Haryana and Anr.<\/a> (1976 (2) S.C.R.677), Maharashtra  State
\nElectricity  Board v. Kalyan Borough Municipality<\/a> (1968\t (3)
\nS.C.R.\t137)  and to the unreported decision of\t the  Orissa
\nHigh  Court  in\t MI s.J.M.Graphite  Mining  &  Manufacturing
\nCompany\t v.  Orissa  State  Electricity\t Board\t&  Ors.\t and
\nobserved:\n<\/p>\n
\t      “The  ratio of the aforesaid case as  well  as
\n\t      the  observations extracted above would  apply
\n\t      while   testing  the  reasonableness  of\t the
\n\t      proviso to Regulation 46, namely, if the Board
\n\t      is  ready\t and  willing  to  supply  but\t the
\n\t      consumer does not consume, then obviously\t the
\n\t      liability would arise as the Board remains  in
\n\t      readiness to supply energy and non-utilisation
\n\t      of the energy by the consumer does not  affect
\n\t      the liability of the Board to keep the  energy
\n\t      set  apart  for consumption.   But  where\t the
\n\t      Board is not in a position to supply and\tthen
\n\t      by virtue of Regulations like proviso to Regu-
\n\t      lation 46, levies demand charges on the  basis
\n\t      of  contract  demand, it would  be  an  unreal
\n\t      levy,  arbitrary levy, irrational levy and  as
\n\t      such violates the basic mandate
\n\t      117<\/span>
\n\t      enshrined\t in Article 14 of the  Constitution.
\n\t      In  course of arguments, the  learned  counsel
\n\t      for  the petitioner had produced before  us  a
\n\t      calculation sheet showing the unreasonableness
\n\t      of  levy towards demand charge  in  accordance
\n\t      with the proviso to Regulation 46 and we think
\n\t      it  appropriate  to notice the  same  at\tthis
\n\t      stage.  The contract demand of the  petitioner
\n\t      is  7778 KVA and if there would have  been  no
\n\t      power  cut  in any month\tand  the  petitioner
\n\t      would  have been running the  factory  through
\n\t      out,  then in a month the petitioner would  be
\n\t      consuming 40,32,115 K.W.H. of units of  energy
\n\t      taking the power factor at 90 and load  factor
\n\t      at   80%.\t  But  on  account  of\t the   power
\n\t      restriction  imposed by the  State  Government
\n\t      under  Section 22(B) of the Act, the units  of
\n\t      power  actually consumed during the  month  of
\n\t      January,\t1989  as is apparent from  the\tbill
\n\t      No.705  dated 3.2.1989 is 2,56,200 K.W.H.\t and
\n\t      in  terms\t of quantity of demand it  is  478.3
\n\t      K.V.A.  but  on the basis\t of  maximum  demand
\n\t      recorded in the trivector metre it is 683\t KVA
\n\t      and,  therefore, the petitioner has been\tmade
\n\t      liable to pay the demand charge at the rate of
\n\t      35  per KVA, thus amounting  to  Rs.2,51,150\/-
\n\t      ,though  for  478.3  KVA he  could  have\tbeen
\n\t      charged on proportionate reduction basis\tonly
\n\t      to  the  extent  of  17,578.   The   aforesaid
\n\t      concrete\t   illustration\t    exhibits\t the
\n\t      arbitrariness   and   irrationality   of\t the
\n\t      provisions  in  question.\t  On  examining\t the
\n\t      proviso  to Regulation 46, we have  not  found
\n\t      any  nexus for the same for which it has\tbeen
\n\t      introduced.  If the nexus is the readiness  of
\n\t      the supplier to supply power then how can\t the
\n\t      provision be sustained %-hen that readiness is
\n\t      not there.  In the aforesaid facts and circum-
\n\t      stances, we are of the considered opinion that
\n\t      the proviso to Regulation 46 is  unreasonable,
\n\t      arbitrary\t and unreal and the same  cannot  be
\n\t      sustained and we accordingly quash the same.”\n<\/p><\/blockquote>\n
24.\t Apart\tfrom criticizing the  above  reasoning,\t Sri
\nHegde,\tlearned\t counsel for the Board\tcomplains  that\t the
\ndecision  of  the  High Court is  coloured  by\tthe  extreme
\nexample\t taken by it relating to the month of January,\t1989
\n(Bill  No.705 dated February 3, 1989).\tThe learned  counsel
\nexplains that during the month of January, i.e., on  January
\n5, 1989, there was “system disturbance following failure  of
\na  220\/ 132 KV auto-transformer at TTPS, Talcher  for  which
\nloads had to be restricted to all the sub-stations receiving
\npower at 132 KV, from TTPS due to which M\/ s.IPI STEEL, were
\nnot  allowed  to  draw their  furnace  load  during  several
\nperiods\t in the month of January, February and\tMarch,\t1989
\nwhich  extended to more than 3 days at a stretch each  time”
\nand on which account a special remission has been granted to
\nthe respondent under Board Memorandum No.Com-1-70\/83, a copy
\nof  which  has been placed before us.  The  learned  counsel
\nsubmits\t that such an unusual situation cannot be  taken  as
\nthe  standard or as a test case for judging the validity  of
\nthe  provision.\t  One  must  go by  the\t generality  of\t the
\nsituation.  Such breakdowns may occur even during periods of
\nnormal\tsupply.\t Barring the special situation arising\tfrom
\nthe  breakdown\taforementioned, he says, all  the  consumers
\nincluding bulk and large scale consumers have been  supplied
\nenergy\tas  explained in the tabular statement\treferred  to
\nabove.\tSri Hegde relies upon Paras 18 to 24 in the decision
\nof this Court in Bihar State Electricity Board, Patna & Ors.
\nv. M\/s.\t Green Rubber Industries & Ors.<\/a> (1990 (1) S.C.C.731)
\nwhere  this court justified the concept of  minimum  charges
\nwith  reference to several decisions of High Courts.  It  is
\npointed\t out that this Court referred with approval  to\t the
\ndecision  of  the Calcutta High Court in Saila Bala  Roy  v.
\nChairman, Darjeeling
\n118<\/span>
\nMunicipality  (AIR  1936 Cal.265) wherein it was  held\tthat
\n“the  minimum charge was not really a charge which  had\t for
\nits basis the consumption of electric energy.  It was really
\nbased  on the principle that every  consumer’s\tinstallation
\ninvolved  the licensee in certain amount of  capital  expen-
\nditure\tin  plant  and\tmains on which\the  was\t to  have  a
\nreasonable  return. lie could get a return when\t the  energy
\nwas  actually  consumed in the shape of payments  of  energy
\nconsumed.  When no such energy was consumed by the consumer,
\nor a very small amount was consumed in a longer period,\t the
\nlicensee  was  allowed\tto charge  minimum  charges  by\t his
\nlicense,  but those minimum charges were really interest  on
\nhis  capital outlay incurred for the  particular  consumer.”
\nLearned\t counsel points out that this Court has also  quoted
\nwith  approval\tthe  decision of the Madras  High  Court  in
\nMG.Natesa  Chettiar v. Madras State Electricity Board  (1969
\n(1) Mad.LJ 69), where it was held that:\n<\/p>\n
\t      “the minimum fixed was only consideration\t for
\n\t      keeping  the energy available to the  consumer
\n\t      at  his  end;  it was not a  penalty  for\t not
\n\t      consuming a stated quantity of energy but\t was
\n\t      a\t concession  shown up to the  amount  fixed,
\n\t      energy  at a specified rate could be  consumed
\n\t      free,  consumption beyond only had to be\tpaid
\n\t      for.  The statutory basis for the terms in the
\n\t      agreement providing for minimum annual  charge
\n\t      was found in Section 22 of the Act and Section
\n\t      48  of the Supply Act.  Section 22 deals\twith
\n\t      obligation on licensee to supply energy.\t The
\n\t      proviso to the section says:\n<\/p><\/blockquote>\n
\t      “No  person shall be entitled to demand or  to
\n\t      continue to receive, from a licensee a  supply
\n\t      of  energy for any premises having a  separate
\n\t      supply unless he has agreed with the  licensee
\n\t      to pay to him such minimum annual sum as\twill
\n\t      give  him a reasonable return on\tthe  capital
\n\t      expenditure,  and\t will cover  other  standing
\n\t      charges  incurred by him in order to meet\t the
\n\t      possible\tmaximum demand for  those  premises,
\n\t      the  sum payable to be determined in  case  of
\n\t      difference or dispute by arbitration.”
\n\t      Section  48  of the Supply  Act  empowers\t the
\n\t      licensee\tto carry out arrangement under\tthat
\n\t      Act.”\n<\/p><\/blockquote>\n
25.The decision of the Punjab High Court in Watkins Mayor  &
\nCo.  v. Jullundhar Electric Supply Co. (AIR 1955  Punj.133),
\nit  is\tpointed out, was also quoted with approval  by\tthis
\nCourt wherein the High Court had taken the view that:\n<\/p>\n
\t      “…..  the whole scheme of the Act  seems  to
\n\t      show  that the provision made in any  contract
\n\t      for a minimum charge was really to provide for
\n\t      a\t fair return on the outlay of the  licensee,
\n\t      and  it  was  for this  reason  that  the\t law
\n\t      allowed  the  contract  of  this\tkind  to  be
\n\t      entered into.  Clause XI-A of the schedule  to
\n\t      the Act, as it then stood, provided:
\n\t      “A  licensee may charge a consumer  a  minimum
\n\t      charge for energy of such amount and determine
\n\t      in such manner as may be specified by his\t li-
\n\t      cence,  and  such\t minimum  charge  shall\t  be
\n\t      payable  notwithstanding\tthat no\t energy\t has
\n\t      been  used by the consumer during\t the  period
\n\t      for which such minimum charge is made.”
\n\t      The  court  accordingly held  that  there\t was
\n\t      nothing  illegal in the insertion of the\tterm
\n\t      for  payment  of\ta  minimum  charge  in\t the
\n\t      agreement\t of  the supply of energy  and\theld
\n\t      that  it had not been made out that it was  an
\n\t      unreasonable levy.”\n<\/p><\/blockquote>\n
\t      119<\/span><\/p>\n
26.  Sri  Hegde further points out that in Para\t 2  1,\tthis
\nCourt has approved the decisions of the Allahabad and Andhra
\nPradesh\t High  Courts holding that the\trequirement  to\t pay
\nminimum\t charges  was  one of the terms\t and  conditions  of
\nsupply\tand cannot be faulted.\tLearned counsel\t points\t out
\nthat  the  decision of this Court ultimately rested  on\t the
\nprinciple that the stipulation of minimum guarantee  charges
\nin  the\t agreement  cannot be held to  be  ultra  vires\t the
\nstatutory  provisions  governing  the supply  and  that\t the
\nagreement  stipulating\ttherefor was reasonable\t and  valid.
\nSri  Hegde points out that the rationale behind the  concept
\nof  minimum charges referred to in the said decision is\t the
\nvery  rationale\t underlying  the concept  of  two-part\tlevy
\nconcerned  herein  and\twhich is also  incorporated  in\t the
\nagreement  between the parties.\t Learned counsel  emphasises
\nthat the agreement expressly recites that the respondent has
\nread the regulations and has agreed to be bound by them\t not
\nonly  as  they stood on the date of the agreement  but\twith
\nsuch modifications thereto as may be made therein in future.
\nIn  such a situation, he says, the respondent cannot be\t al-
\nlowed  to  wriggle  out of the terms  of  the  agreement  by
\nresorting  to Article 226 of the Constitution.\tlie  submits
\nfurther\t that  during the period of restricted\tsupply,\t the
\ncapital\t charges  remain the same though there may  be\tsome
\nreduction  in  the  running charges, that  even\t during\t the
\nperiod\tof restricted supply, loans have to be\trepaid\twith
\ninterest,  the plants, the stations, the transmission  lines
\nand all other equipment have to be maintained in good  shape
\nand  depreciation etc. provided for.  The  staff  recruited,
\nthe learned counsel submits, cannot be reduced as soon as an
\norder  under  Section 22-B is made and reemployed  when\t the
\nrestriction  ceases.  He submits that if the respondent\t had
\ninstalled  a generating station or unit of his own  for\t the
\npurpose of supplying the energy required by his steel  mill,
\nhe would have been faced with the very same problems as\t are
\nfaced by the Board.\n<\/p>\n
27.  On\t the  other  hand,  the\t learned  counsel  for\t the
\nrespondent-writ\t petitioner  submits that if  the  Board  is
\nallowed to Insist upon its pound of flesh and to enforce the
\nagreement and Regulation 46 as it stand, it would be  highly
\nunjust and inequitable to the consumers like the respondent.
\nThey would not only suffer huge losses but would be  obliged
\nto  close  down,  affecting the\t workers  and  the  national
\neconomy.   He  submits\tthat because of\t the  irregular\t and
\nuncertain   supply  of\tpower  by  the\tOrissa\tBoard,\t the
\nrespondent-company  has become sick already and its case  is
\nnow pending with B.I.F.R. He submits that when the Board  is
\nnot  able  to supply at the agreed level, it cannot  at\t the
\nsame  time seek to recover the demand charges at the  agreed
\nrate.\tBeing  a statutory public corporation  and  a  State
\nwithin\tthe  meaning of Article 12 of  the  Constitution  of
\nIndia,\tit  is submitted, the Board must  act  fairly.\t The
\nlearned\t counsel relies upon the decisions of this court  in
\nNorthern  India\t Steel as also the decision in\tBihar  State
\nElectricity  Board & Anr. v. M\/s.Dhanawat Rice &  Oil  Mills<\/a>
\n(1989 (1) SCC 452) besides the decision in Maharashtra State
\nElectricity Board v. Kalyan Borough Municipality.<\/a>\n<\/p>\n
28.  Northern India Steel was a case where   a power cut was
\nimposed by the\tState\t Government by making an order under
\nSection\t 22-B of the Electricity Act, 191 0.  The  appellant
\nwas an industry governed by two-part levy system.  On ac-\n<\/p>\n
120<\/span><\/p>\n
count  of  the said power cut, the Board  did  give  certain
\nreduction in the demand charges because of its inability  to
\nsupply energy as per the requirement of the appellant.\t The
\nappellant,  however,  took the stand that no  demand  charge
\nshould at all be levied when the Board was not in a position
\nto supply electric energy as per its requirement or that, at
\nany  rate, there should be a proportionate reduction of\t the
\ndemand\tcharges.  Before this Court, the appellant  and\t the
\nBoard took two extreme stands: the Board saying that even if
\nit were not in a position to supply energy according to\t the
\ndemand\tof the consumer, it is entitled to ‘claim  the\tfull
\ndemand\tcharges\t as per clause (4) of the  Tariffs  and\t the
\nappellant saying that in such cases, the Board cannot  claim
\ndemand\tcharges\t but  that it is  entitled  only  to  energy
\ncharges.   This Court, however, did not pronounce  upon\t the
\nsaid  stand  in view of the fact that clause (4)(f)  of\t the
\nTariffs notified by the Board provided a solution, The\tsaid
\nclause\t provided  that\t the  consumer\tis  entitled  to   a
\nproportionate  reduction of demand charges in the  event  of
\nlock-out,  fire or any other circumstance considered by\t the
\nsupplier beyond the control of the consumer.  Ills Court was
\nof the opinion that the disability of the Board to give full
\nsupply\tto the appellant-consumer because of the  Government
\nOrder  under Section 22-B must be treated as a\tcircumstance
\ndisabling the consumer from consuming the electricity as per
\nthe  contract  and, therefore, entitled to  the\t benefit  of
\nclause (4)(f).\n<\/p>\n
29.  So\t far as the decision in M\/ s.Dhanawat Rice  and\t Oil
\nMills is concerned, it does not appear to be a case where  a
\npower  cut  was imposed under Section  22-B.   The  decision
\nentirely  turned upon the language of clauses (1),  (4)\t and
\n(13)  of  the Agreement between the  parties.\tClause\t(13)
\nprovided that where the consumer is prevented from receiving
\nor  using the electrical energy either in whole or  in\tpart
\ndue  to strike, riots, fire, floods, explosions, act of\t God
\nor  any other cause reasonably beyond the control or if\t the
\nBoard  is  prevented from supplying or is unable  to  supply
\nsuch  electrical  energy  owing to any\tor  all\t the  causes
\nmentioned  above,  then\t the demand  charge  and  guaranteed
\nenergy charge set out in the Schedule to the Agreement shall
\nbe  reduced in proportion to the ability of the consumer  to
\ntake or the Board to supply such power; the decision of\t the
\nChief  Engineer of the Board in that behalf was declared  to
\nbe  final.  The High Court had opined that the consumer\t was
\nnot  at\t all  liable to pay  any  annual  minimum  guarantee
\ncharges\t because  of the tripping, load-shedding  and  power
\ncuts.  This Court, however, held that the High Court was not
\nright in saying so. It held that in view of clause (13), the
\nconsumer is entitled to proportionate reduction only.\n<\/p>\n
30.  The decision of the Constitution Bench  in\t Maharashtra
\nState Electricity Board\t v. Kalyan Borough Municipality<\/a> does
\nnot  appear to be relevant on the question at issue  herein.
\nThe  learned counsel for the respondent could not  bring  to
\nour  notice  any  observation in  the  said  judgment  which
\nsupports his contentions.\n<\/p>\n
31.  Now coming back to the facts of the case before us,  it
\nmust   be  stated  at  the  outset  that  the  validity\t  or
\njustifiability of the order made by the Government of Orissa
\nunder Section 22-B is not questioned nor is it in issue.  We
\nmust, therefore, proceed on the assumption that the cut\t was
\nimposed because it was necessary
\n121<\/span>
\nto ensure equitable supply of energy to various consumers in
\nthe State.  It is equally beyond dispute that an order\tmade
\nunder Section 22-B is binding upon the Electricity Board  as
\nwell  as  the consumers and supersedes\tand  over-rides\t the
\nagreements that may have been entered into between the Board
\nand the consumers.  According to the said order, the cut was
\nfifty per cent and the cut was operative for one full  year,
\ncalled\t‘water year’.  The respondent was, therefore,  bound
\nto  utilise only fifty per cent of what is  permitted  under
\nthe  Agreement.\t In other words, it must consume  only\thalf
\nthe  energy  which  it was entitled  to\t consume  under\t the
\nagreement  in  a  month or in a year, as the  case  may\t be.
\nEvidently,  if\tthe respondent drew energy  at\tthe  maximum
\ndemand level, i.e., at the maximum contracted level, and did
\nso for the whole of the year, it would be utilising the full
\nquota  of  energy permissible to him  under  the  agreement,
\nwhich he cannot do in view of the fifty per cent cut imposed
\nby  the order under Section 22-B.  The order  under  Section
\n22-B  read  with  the  option given  by\t the  Board,  means,
\naccording  to  the  Board, that either\tthe  consumer  draws
\nenergy\tat  half the maximum demand level and  operates\t for
\nfull  year or draws energy at full maximum demand level\t and
\noperates only for half the relevant year of restriction,  as
\nexplained hereinbefore.\t The choice is left to the  consumer
\nto  arrange  his  affairs in such manner as  he\t thinks\t fit
\nprovided he does not go beyond the quota (restricted  quota)
\nprescribed for him.  Now, Regulation 46 says that during the
\nperiod\tan order under Section 22-B is in operation and\t the
\nhours  of  restriction\texceed 150 hours  in  a\t month,\t the
\nconsumer  is relieved of the obligation to pay\tthe  minimum
\ncharges, i.e., the obligation to pay eighty per cent of\t the
\ncharges\t even if he avails of and consumes less power.\t The
\nconsumer  governed  by\tthe two- part  tariff  is,  however,
\nobliged\t under the said regulation to pay “on the  basis  of
\nactual\tenergy\tconsumption  and  the  ‘maximum\t demand’  as
\nprovided  in  the agreement”.  Now, what does this  mean  in
\npractice?   If\tthe consumer avails of energy  at  half\t the
\nmaximum\t demand\/contract demand, he will pay demand  charges
\nonly for that.\tIn other words, if the respondent had  drawn
\nenergy\tat  3889 KVA, he would pay demand charges  only\t for
\n3889  KVA  plus the charges for the actual number  of  units
\nconsumed  by him.  Similarly, had the respondent availed  of
\nthe energy at, say 3000 KVA he would have been liable to pay
\ndemand\tcharges only on that basis plus the energy  charges,
\nand  if he had availed of energy at maximum demand  then  he
\nwould have been liable to pay demand charges for the maximum
\ndemand availed by him plus the energy charges – the  overall
\nrestriction  being !hat he should have remained\t within\t the
\nfifty  per  cent  quota prescribed.  Thus, in  no  event,  a
\nconsumer is made to pay maximum demand charges for more than
\nwhat  he  actually availed.  As stated above,  the  over-all
\nlimitation  is that he must have remained within  the  fifty
\nper   cent  quota  allotted  to\t him  during  the  year\t  of
\nrestriction.   We  are unable to see  any  arbitrariness  or
\nunreasonableness  in  the said proviso.\t It means  and\tsays
\nthat during such periods of restricted supply, the  consumer
\npays  the  energy charges for the  actual  consumption\tplus
\nmaximum demand charges for the maximum demand  availed of by
\nhim at the rate prescribed in the agreement.\n<\/p>\n
32.  The High Court faulted the proviso to Regulation 46  on
\nthe ground of arbitrariness and unreasonableness.  The rea-\n<\/p>\n
122<\/span><\/p>\n
soning\tof  the High Court is this: if in a given  case,  an
\nindustry  avails of energy at 7000 KVA on the first  day  of
\nthe  month  but does not take any energy for  the  remaining
\ntwenty\tnine days of the month, it would still be liable  to
\npay the demand charges for the month at the rate  prescribed
\nin  the agreement, viz., 7000 KVA x Rs.35\/ -, which  is\t not
\nonly  arbitrary\t and unreasonable but also  confiscatory  in
\nnature.\t  With great respect, we are unable to subscribe  to
\nthis  view.  This would precisely be the result even in\t the
\nnormal times.  Even when there is no power cut in force,  if
\nan industry draws energy at 7000 KVA on the first day of the
\nmonth and does not draw the energy at all on the  subsequent
\ntwenty\tnine  days, it would still be required\tto  pay\t the
\ndemand\tcharges at 7000 KVA x Rs.35\/-. This is\tbecause\t the
\ndemand charges are meant “to cover investment,\tinstallation
\n‘and  the standing charges to some extent”, as held by\tthis
\nCourt  in Northern India Iron and Steel, which is  precisely
\nwhat  we  have explained hereinbefore.\tTo say\tthat  demand
\ncharges\t should\t not be collected if the consumer  does\t not
\navail  of the electricity on the remaining twenty nine\tdays
\nin  a month in the above illustration would be to  deny\t and
\ndisallow  the  very  concept of\t and  rationale\t behind\t the
\nmaximum\t demand\t charges.   Of course,\tsituation  would  be
\ndifferent, if in the above illustration, the Board does\t not
\nor  is unable to provide even the restricted supply  in\t the
\nmanner\texplained  hereinbefore.  In such a  situation,\t the
\nconsumer  would\t certainly be entitled to the relief  in  an
\nequitable manner, just as he would have been entitled to re-
\nlief in normal times.  In other words, what would happen  if
\nduring normal times such a thing happens?  Same would be the
\nsituation  during the period of cut.  There is in effect  no
\ndistinction  between  both  situations\texcept\tthat  during
\nperiods of restricted supply, the availability of energy  is
\nreduced vis-a-vis the contracted supply.  Now, it is not the
\ncase of the respondent that in any month electricity  energy
\nwas available for the first day of the month or on any\tpar-
\nticular day or days and not for the whole month.  So far  as
\nthe  period  January  to  March,  1989\tis  concerned,\t the
\nsituation in that month was a special one.  It is  explained
\nby  the\t Board that on January 5, 1989 there  was  a  system
\ndisturbance on account of the failure of a 220\/132 KV  auto-
\ntransformer  at\t TTPS  Talcher\ton  account  of\t which\t the
\nindustries like the respondent were not allowed to draw\t en-
\nergy even in accordance with the cut and restriction imposed
\nby  the\t Government  of Orissa and  the\t Orissa\t Electricity
\nBoard.\t It  is explained that on account  of  this  unusual
\nsituation  and\ton the basis of the  representation  of\t the
\nrespondent,  it\t has been given a special  rebate  in  Board
\nMemorandum  No.Com.1-70\/83.  Under this memorandum,  it\t has
\nbeen  decided that “some relief be provided to the  consumer
\nby exempting the demand charge for the period when power was
\nrestricted  to\tthis  industry for a  continuous  period  of
\nseventy\t two  or  more as special case (for  the  months  of
\nJanuary\t ’89 to March ’89 only).  If this is  approved,\t the
\nmonthly\t maximum demand charges of this unit for  the  three
\nmonths\tfrom January, 89 to March, 89 shall be prorated\t for
\nthe period of supply excluding the period when power  supply
\nwas  not given to the consumer continuously for seventy\t two
\nhours  or  more.  This concession, if allowed,\tshall  be  a
\nspecial case not to be cited as a precedent for future.”  It
\nis stated by Sri Hegde, learned counsel for the Board that a
\nspecial\t concession  has  been approved\t and  given  to\t the
\nrespon-\n<\/p>\n
123<\/span><\/p>\n
dent for the said months.\n<\/p>\n
33.  The other reason given by the High Court in support  of
\nits decision is contained in the second of the two  extracts
\nfrom its judgment set out by us hereinbefore.  It takes\t the
\nJanuary,  1989 situation as a representative  situation\t and
\nseeks  to  demonstrate on that basis the  arbitrariness\t and
\nirrationality  of  the\tproviso to Regulation  46.   But  as
\nstated hereinbefore that was an unusual situation for  which
\nappropriate  relief has been given to the  respondent.\t The
\nvalidity of regulations, which have the force of law, should
\nnot  be judged by taking either a stray case or\t an  unusual
\ncase  but  on  the generality of the  situation.   All\tthat
\nhappens during the period of restriction is that electricity
\nis  generated  at a lower level than usual; if the  fall  in
\nproduction is expected to be fifty per cent, a corresponding
\nrestriction is imposed on consumption.\tSo far as breakdowns
\nand  trippings etc. are concerned, they are not confined  to
\nperiods of restrictions alone; they may occur during  normal
\ntimes\tas  well.   If\tthere  is  no  supply  at  all\t for
\nconsiderable  periods,\tthe situation  would  be  different,
\nwhether\t it  happens during the period of normal  supply  or
\nduring\tthe  period  of restricted supply, but\twe  are\t not
\nconcerned  with\t or  called upon to pronounce  upon  such  a
\nsituation.   For  the  unusual\tsituation  obtaining  during
\nJanuary-March,\t 1989  aforesaid,  appropriate\trelief\t has
\nalready been given to the respondent.\n<\/p>\n
34.  We\t must,\ttherefore,  say\t that  no  arbitrariness  or
\nunreasonableness  is  involved\tin  Regulation\t46  or\t its
\nproviso.  It only provides for collecting demand charges for
\nthe  actual maximum demand availed by such consumers  during
\nthe  period of restricted supply.  The consumer\t cannot\t le-
\ngitimately  complain of this course nor can it\tcharacterise
\nit  as\tconfiscatory.\tWe must also say that  none  of\t the
\ndecisions  relied  upon by the learned counsel for  the\t re-
\nspondent  lays\tdown  any principle which  can\tbe  said  to
\nsuggest\t that  such a rule is  arbitrary  and  unreasonable.
\nOnce  we  understand  the system of two-part  levy  and\t the
\nrationale behind it, as also the compulsions arising from an
\norder under Section 22-B of the Electricity Act, 1910, there
\nwould  be  no room or ground for impugning the\tvalidity  of
\nRegulation  46\tof its proviso.\t Difficulties are  no  doubt
\nthere  difficulties of the consumer and difficulties of\t the
\nBoard.\t They  are essentially the  problems  of  shortages,
\nperhaps\t endemic  to  a\t developing  economy.\tAs   rightly
\nemphasised by Sri Hegde, the respondent would have faced the
\nsame  problems\tif  he\thad  installed\this  own  plant\t for
\ngenerating  electricity\t to  meet  his\tneeds.\t While\t the
\nrespondent  says  that it has suffered on account  of  these
\ncuts,  the  Board says that by reducing the  demand  charges
\nduring\tsuch  periods, it is also suffering.   The  consumer
\naccuse\tBoard of several failings and the Board has its\t own
\nexplanations.\tIt is not possible to go into them.   It  is
\nenough\tto say that in the circumstances, Regulation  46  or
\nits  proviso cannot be termed as arbitrary or  unreasonable,
\nmuch less confiscatory.\n<\/p>\n
35.  The appeal is accordingly allowed and the order of\t the
\nHigh  Court  is set aside.  There shall be no  order  as  to
\ncosts.\n<\/p>\n
36.  Before parting with this case, we must  mention\tthat
\nduring the hearing of this    appeal,\t M\/s.Ispat    Alloys
\nLimited filed a Transfer Petition (C) No.335 of 1994 praying
\nfor transferring the writ petition
\n124<\/span>
\nfiled  by them in and pending before the Orissa\t High  Court
\n(O.J.C.No.6565 of 1992) to this Court for being heard  along
\nwith  this appeal on the ground that the points\t arising  in
\nthis  appeal  are  similar  to those  arising  in  its\twrit
\npetition.    We\t told  Sri  Kapil  Sibal,  learned   counsel
\nappearing for the petitioner that while we are not  inclined
\nto  transfer  the said writ petition to this Court,  we\t may
\nhear  him as an intervenor in this appeal, We did  hear\t him
\nfor sometime but then we found that the learned counsel\t was
\nraising several issues and contentions which arc outside the
\npurview of the writ appeal and which were not put forward or
\nargued before the High Court.  We, therefore, did not permit
\nSri  Sibal to raise those contentions.\tIt is not  necessary
\nto  set\t out  the learned counsel’s submissions\t nor  is  it
\nnecessary to express any opinion thereon.  Suffice it to say
\nthat  our decision is confined to the issues arising in\t the
\nappeal\tbefore us and will obviously not govern\t the  issues
\nand questions not raised in this appeal.\n<\/p>\n
37.  Accordingly,  the\tTransfer Petition  is  dismissed  as
\nunnecessary.\n<\/p>\n
127<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Orissa State Electricity Board … vs M\/S. Ipi Steel Ltd. Etc on 21 April, 1995 Equivalent citations: 1995 AIR 1553, 1995 SCC (4) 320 Author: B Jeevan Reddy Bench: Jeevan Reddy, B.P. (J) PETITIONER: ORISSA STATE ELECTRICITY BOARD AND ANOTHER ETC. Vs. RESPONDENT: M\/S. IPI STEEL LTD. ETC. DATE OF JUDGMENT21\/04\/1995 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-222072","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nOrissa State Electricity Board ... vs M\/S. Ipi Steel Ltd. Etc on 21 April, 1995 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/orissa-state-electricity-board-vs-ms-ipi-steel-ltd-etc-on-21-april-1995\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Orissa State Electricity Board ... vs M\/S. Ipi Steel Ltd. 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