ivil Appeal No 220 of 1987
From the Judgment and Order dated 2251986 of the Patna High Court in Civil Writ Jurisdiction Case No 19 15 of 1986
Soli J Sorabjee and Ranjit Kumar for the Appellants
Sharma and SK Jain for the Respondents
The Judgment of the Court was delivered by KN SAIKIA J
This appeal by special leave is from the Judgment of the High Court of Judicature at Patna dated May 22 1986 in Civil Writ Jurisdiction Case No 19 15 of 1986 quashig the bills issued by the appellants demanding minimum guaranteed charges from the respondents
The appellants Bihar State Electricity Board Patna hereinafter referred to as the Board  entered into an agreement with the respondent Ms
Green Rubber Industries a partnership firm hereinafter referred to as the firm  on the latter s application dated 26th July 1978 for supplying the electricity of 60 KVA and on 134
1981 gave electricity connection
The firm later applied that it 277 may be given 45 KVA instead of 60 KVA and it deposited the requisite sum of Rs2700 and a fresh agreement was executed on May 2 1981
On May 29 1981 the firm was given fresh connection of 45KVA
According to the firm it requested the Board on 196
1981 to cut off the connection
The firm received the bills for minimum guaranteed charges for the months of June July August and September 1981 though according to it no electricity was consumed by it during that period
According to the Board on failure to pay the bills the supply was disconnected on 28th September 1981
The firm ultimately received a demand notice in October 1981 for the minimum guaranteed charges from June 1981 to August 1981 amounting to Rs2295 150p
The firm having not paid the amount the Board sent a requisition to the Certificate Officer who sent a notice to the firm on July 6 1984
Rejecting the contention of the firm that it was not liable to pay the Certificate Officer proceeded to pass an order for attachment of the firm s property wherefore the firm filed a writ petition in the High Court of Judicature at Patna under Article 226 and 227 of the Constitution of India for quashing the bills as well as the certificate proceedings
Before the High Court the Board contended that the firm was liable to pay the minimum guaranteed charges in terms of the agreement the disconnection itself having been in terms thereof
The High Court took the view that the Board itself having effected the disconnection it was not entitled to any charges for the period after September 1981 and it was not open to the Board to contend that under clause 9 of the agreement it was not open to either party to terminate the agreement of minimum guaranteed charges before the expiry of two years from the date of the agreement
In that view of the matter the High Court quashed the bills as well as the certificate proceedings but allowed the charges for the months of July August and September 1981 to be adjusted against the security money
Mr Soli J Sorabjee the learned counsel for the appel lants submits inter alia that the firm under the agree ment was liable to pay the minimum guaranteed charges irre spective of whether energy was consumed or not during the period of the agreement and that disconnection of the supply on failure of the firm to pay the energy bills would not affect the obligation and that the High Court fell into error in holding that the Board itself having disconnected the energy supply line it could not claim minimum guaranteed charges thereafter
278 None appears for the respondents despite notice in the regular as well as substituted manner of service
The question to be decided is whether despite the fact that the supply line was disconnected on September 28 1981 the firm was still liable to pay the minimum guaranteed charges under the agreement
The answer depends on the agreement itself and the relevant provi sions of law
Clause 4 of the agreement says The Consumer shall pay to the Board for the energy so supplied and registered or taken to have been supplied as aforesaid at the appropriate rates applicable to the Con sumer according to the tariffs framed by the Board and enforced from time to time the present ly enforced tariffs being indicated in the Schedule to this agreement for easy reference
Such reference is subject to provisions of clause 15 appearing here inafter
Provided that notwithstanding any thing said above but subject to the provisions of clause 13 hereinafter the Consumer shall have to pay minimum charges as specified in the above said tariffs framed by the Board and enforced from time to time irrespective of whether energy to that extent has been con sumed or not
Such minimum charges are re ferred to as the minimum guaranteed charges in other places in this agreement That part of minimum guaranteed charges as is not billed monthly the assess ment for the same will be generally made at the end of the year commencing from the 1st April and ending with the 31st March of the following year which is the financial year of the Board
In case any agreement is entered into in between this period the above said part of the minimum guaranteed charges will be proportionate to the period for which the Consumer is connected
Any bill on account of the minimum guaranteed consumption for the year or part thereof will be submitted by the end of June in each year
 From a perusal of the above clause it would be clear that the minimum guaranteed charges would be payable by the consumer irrespective of whether energy to that extent has been consumed or not
Indeed there would be no need for such a provision if the charges were to 279 depend only on the energy actually consumed
Clause 5 of the agreement is to the following effect a Readings of meter shall be taken by the Board once in each month or such other inter vals or times as the Board shall deem expedi ent and the Board s meter reader shall have access to the consumer s premises at all reasonable time for the purpose of taking such readings
The Board shall within reasonable time deliver to the Consumer the bill for energy consumed during the month in accordance with the readings of the meters and subject to the minimum guaranteed charges
The consumer shall pay the amount under the bill so deliv ered within the due date specified therein as per terms of the tariffs framed by the Board and enforced from time to time
b If the consumer fails to pay the amount of any bill due under this agreement within the due date specified in the bill referred to in clause 5a above he shall pay a surcharge at the rate given in the tariffs framed by the Board and enforced from time to time
If the amount of such a bill remains unpaid after the due date specified in the bill the Board may discontinue the supply after giving the Con sumer not less than 7 clear days  notice
The service will be reconnected only on receipt of full payment for all obligations outstanding up to the date of reconnection and charges for the work of disconnection and reconnection of service   On a perusal of this clause there arises no doubt that if the amount of a bill submitted according to law remains unpaid after the due date specified in the bill the Board may discontinue the supply after giving the consumer not less than 7 clear days  notice
There is no dispute about notice in this case
Clauses 8 and 9 of the agreement deal with its duration and termination
Clause 8 of the agreement says The agreement shall be ordinarily enforced for a period of not less than two years in the first instance except in exceptional cases in which written consent of the Board will 280 be taken from the date of commencement of supply ie   and thereafter shall continue from year to year until the agreement is determined as hereinafter provided
Note In case where the date of commence ment of supply is a date subsequent to that of the execution of this agreement the Board is given power to fill in the date in the blank space
provided for the same in this clause with prior intimation to the Consumer
The Consumer can produce his copy of the agreement to have such date filled in by the Board
 Clause 9 Provides a The consumers shall not be at liberty to determine this agreement before the expiration of two years from the date of commencement of supply of energy
The consumer may determine this agreement with effect from any date after the said period of giving to the Board not less than one calendar month s previous notice in writing in that behalf and upon the expira tion of the period of such notice this agree ment shall cease and determine without preju dice to any right which may then have accrued to the Board hereunder provided always that the consumer may at any time with the previous consent of the Board transfer or assign this agreement to any other person and upon sub scription of such transfer this agreement shall be binding on the transferee and the Board and take effect in all respects as if the transferee had originally been a party hereto in place of the consumer who shall henceforth be discharged from all liability under or in respect thereof
b In case the consumer s supply is discon nected by the Board in exercise of its powers under this agreement and or law and consumer does not apply for reconnection in accordance with law within the remainder period of the above given compulsorily availing of supply or that of notice whichever be longer he will be deemed to have given a notice on the date of disconnection in terms of the aforesaid clause 9a for the determination of the agreement and on expiry of the above said remainder period of compulsorily availing of supply or notice whichever is longer this agreement shall cease and determine in the same way as above
 281 Thus it is seen that the consumer cannot determine the agreement before expiry of two years and there is nothing to show in this case that he did so after expiry thereof with previous notice
In fact the supply was disconnected by the Board for default
What would be its effect on the agree ment It is seen that in case of disconnection of the supply by the Board in exercise of its powers under the agreement it would be open for the consumer to apply for reconnection in accordance with the law within the remainder period of the above given compulsorily availing of supply or that of notice whichever is longer he will be deemed to have given a notice on the date of disconnection in terms of aforesaid clause 9a for determination of the agreement and on expiry of the remainder period of compulsorily availing of supply or notice whichever is longer the agreement shall cease and determine
It is therefore clear that in the instant case the disconnection on the default of the cosumer having  been effected on 2891981 and the consumer having not applied for reconnection it would be deemed to have given a notice on the date of disconnection in terms of clause 9a for the determination of the agreement and the agreement must be taken to have ceased and determined either at the end of the notice or at the end of the period of compulsori ly availing of supply ie two years of the agreement which ever was longer
The fresh agreement having been executed on May 4 1981 it would expire on May 1 1983
The discon nection having been effected on September 28 1981 the period of deemed notice of seven days expired before the period of compulsorily availing of supply under the agree ment expired and hence the agreement must be deemed to have determined only on May 1 1983
During this period the consumer s liability to pay the minimum guaranteed charges must be held to have continued
Mr Soli J Sorabjee submits and we think rightly that the High Court overlooked this important stipulation in the agreement which was binding on both the parties
However as the respondents are not before us it is necessary to con sider the reasonability of the stipulation as to minimum guaranteed charges as argued by the learned counsel for the appellant Board
Was there any power of the Board to enter into the agreement If so to what extent The  hereinafter called the Act 
provides the law relating to the supply and use of electrical energy
As defined in section 211 of the Act State Electricity Board in relation to any State means the State Electricity Board if any consituted for the 282 State under section 5 of the 54 of 1948 and includes any Board which functions in that State under sections 6 and 7 of the said Act
The appellant the Bihar State Electricity Board is a Board
As defined in section 2h licensee means any person licensed under to supply energy
The appellant Board is such a licensee under this provision
As defined in section 2c consumer means any person who is supplied with energy by a licensee or the Government or by any other person engaged in the business of supplying energy to the public under this Act or any other law for the time being in force and in cludes any person whose premises are for the time being connected for the purpose of receiving energy with the works of a licensee the Government or such other person as the case may be
There is no doubt that the respondent was consumer
The  hereinafter called the Supply Act  is an Act to provide for the realisation of the production and supply of electricity and generally for taking measures conducive to electrical development and for all matters incidental thereto
Under sub section 1 of section 23 of the Act a licen see shall not in making any agreement for the supply of energy show any undue preference to any person
Thus this section envisages making of an agreement by the licensee with the consumer for the supply of energy
The instant agreement has therefore to be held as one envisaged by this provision
Was the stipulation to pay minimum guaran teed charges irrespective of whether energy was consumed or not reasonable and valid What is the consideration when less or no energy is consumed Section 49 of the Supply Act makes provision for the sale of electricity by the Board to persons other than licensees
Under subsection 1 subject to the provisions of the Supply Act and the Regulations if any made in this behalf the Board may supply electricity to any person not being a licensee upon such terms and conditions as the Board thinks fit and may for the purpose of such supply frame uniform tariff
Under sub section 2 thereof nothing m sub sections 1 and 2 shall derogate from the power of the Board if it considers it necessary or expedient to fix different tariffs for the supply of electricity to any person not being a licensee having regard to the geographi cal position of any area the nature of the supply and purpose for which supply is required and any other relevant factors
Sub section 2 enumerates the factors to be consi derd by the Board in fixing the uniform tariffs
283 It is seen that the rule of charging minimum guaranteed charges has been in vogue since long
In the London Electric Supply Corporation Limited vs Priddis  the agreement between the appellant company and the consumer to supply electricity in clause 4 provided that the consumer shall have the option at or after the expiration of five years from the date of installation of purchasing the installation at a price
7 said The consumer shall until purchase as aforesaid pay quarterly to the supply company for the use of the installation 34d
per Board of Trade Unit for every unit of electrical energy supplied to the said premises and the minimum payment in any year shall be Is
for each eight candle power lamp or its equivalent installed
 During the period from Mid summer to Michaelmas 1900 the defendant did not use any electricity supplied by the plaintiff and the question was whether under the agree ment the defendant was bound to pay the minimum payment provided for by cl 7 even though in fact he had used none of the plaintiff s electricity during the quarter
The Lord Chief Justice in giving judgment said that it was suffi ciently clear that the installation was put in on the terms that the customer should have the right to purchase the installation after five years and during that five years the customer should be liable to pay minimum rent whether the current was de facto used or not
The minimum rent had no reference to the amount of current used and it was therefore clear that the mere fact that the defendant had not taken any current or a small current did not affect the case
 Channel
J concurring said that the meaning of the clause was that the minimum rent did not merely cover the actual use but the right to use the current
The customer had to pay for the right to use the current although he did not in fact use it In Saila Bala vs Darjeeling Municipality AIR 1936 Calcutta 265 it was held by a learned single Judge that the minimum charge was not really a charge which had for its basis the consumption of electric energy
It was really based on the principle that every consumer s installation involved the licensee in certain amount of capital expendi ture in plant and mains on which he was to have a reasonable return
He could get a return when the energy was actually consumed in the shape of payments of energy consumed
When no such energy was consumed by the consumer or a very small amount was consumed in a longer period the licensee was allowed to charge minimum charges by his licence but those minimum charges were really interest on his capital outlay incurred for the particular consumer
Natesan J in Natesa Chettiar vs The Madras State Electric ity 284 Board  answering the question whether the provision for the minimum guarantee was just a stipulation by way of penalty or pre determined damages for breach on the part of the consumer or something else held the view that the minimum fixed was only consideration for keeping the energy available to the consumer at his end it was not a penalty for not consuming a stated quantity of energy but was a concession shown up to the amount fixed energy at a specified rates could be consumed free consump tion beyond only had to be paid for
The statutory basis for the terms in the agreement providing for minimum annual charge was found in section 22 of the Act and section 48 of the Supply Act
Section 22 deals with obligation on licensee to supply energy
The proviso to the section says No person shall be entitled to demand or to continue to receive from a licensee a supply of energy for any premises having a separate supply unless he has agreed with the licensee to pay to him such minimum annual sum as will give him a reasonable return on the capital expenditure and will cover other standing charges incurred by him in order to meet the possible maximum demand for those premises the sum payable to be determined in case of difference or dispute by arbitration Section 48 of the Supply Act empowers the licensee to carry out arrangement under that Act
In Watkins Mayor  Co vs Jullundhur Electric Supply Co AIR 1955 Punj 133 136 it was observed that the whole scheme of the Act seems to show that the provision made in any contract for a minimum charge was really to provide for a fair return on the outlay of the licensee and it was for this reason that the law allowed the contract of this kind to be entered into
Clause XI A of the schedule to the Act as it then stood provided A licensee may charge a consumer a minimum charge for energy of such amount and determine in such manner as may be specified by his licence and such minimum charge shall be payable notwithstanding that no energy has been used by the consumer during the period for which such minimum charge is made The Court accordingly held that there was nothing illegal in the insertion of the term for payment of a minimum charge in the agreement for 285 supply of energy and held that it had not been made out that it was an unreasonable levy
A Division Bench of Allahabad High Court in Hari Shan kar  Ors
vs UP State Electricity Board  Anr AIR 1974 Allahabad 70 held that when the electrical supply was being made on the footing that the consumer would pay the minimum guaranteed charges that charge was one of the terms and conditions for supply and fixation of that would be included in the fixation rates or the supply of electricity
Simi larly in Ms Bhagwan Industries Pvt
Ltd Lucknow vs UP State Electricity Board Lucknow AIR 1979 Allahabad 249 a Division Bench held that an agreement for supply of elec tricity with the Board empowered it to revise the rates and that imposition of minimum consumption guarantee charge imposed by new tariff schedule under section 49 of the Supply Act was valid
A Division Bench of the Andhra Pradesh High Court in Md AbdulGaffar vs Andhra Pradesh Electricity Board  also held that fixation of monthly minimum charges based on connected load and revisional rates for electrical consumption by non domestic consumers in accordance with the factors in section 492 was neither ultra vires nor arbitrary
The High Court in the case at hand relied on Rajeshwar Singh vs State of Bihar AIR 1983 Patna 194 wherein it was held that when the disconnection of electric energy was effected by the Board then it could not ask for the minimum guaranteed charges
That decision must be confined to the facts of that case only
It is true that the agreement is in a standard form of contract
The standard clauses of this contract have been settled over the years and have been widely adopted because experience shows that they facilitate the supply of electric energy
Lord Diplock has observed If fairness or reasona bleness were relevant to their enforceability the fact that they are widely used by parties whose bargaining power is fairly matched would raise a strong presumption that their terms are fair and reasonable Schroder Music Co Ltd vs Macaulay 16 624
In such contracts a standard form enables the supplier to say If you want these goods or services at all these are the only terms on which they are available
Take it or leave it
 It is a type of contract on which the conditions are fixed by one of the parties in advance and are open to acceptance by anyone
The contract which frequently contains many conditions is presented for acceptance and is not open to discussion
It is settled law that a person who signs a 286 document which contains contractual terms is normally bound by them even though he has not read them even though he is ignorant of the precise legal effect
In view of clause 4 having formed one of the stipulations in the contract along with others it cannot be said to be nudurn pactum and the maxim nudum pactum ex quo non oritur actio does not apply
Considered by the test of reasonableness it cannot be said to be unreasonable inasmuch as the supply of electricity to a consumer involves incurring of overhead installation expenses by the Board which do not vary with the quantity of electricity consumed and the installation has to be contin ued irrespective of whether the energy is consumed or not until the agreement comes to an end
Every contract is to be considered with reference to its object and the whole of its terms and accordingly the whole context must be considered in endeavouring to collect the intention of the parties even though the immediate object of enquiry is the meaning of an isolated clause
This agreement with the stipulation of minimum guaranteed charges cannot be held to be ultra vires on the ground that it is incompatible with the statu tory duty
Differences between this contractual element and the statutory duty have to be observed
A supply agreement to a consumer makes his relation with the Board mainly contractual where the basis of supply is held to be statu tory rather than contractual
In cases where such agreements are made the terms are supposed to have been negotiated between the consumer and the Board and unless specifically assigned the agreement normally would have affected the consumer with whom it is made as was held in Northern Ontario Power Co Ltd vs La Roche Mines Ltd For the foregoing reasons we have no hesitation in holding that the agreement was reasonable and valid and it was not determined with the disconnection of supply to the respondent firm by the Board on 28th September 1981 but only accordingly to the stipulations in clause 9b of the agreement as discussed above
The liability to pay the minimum guaranteed charges therefore continued till the determination of the contract
The Board was therefore entitled to submit the bills and make the demand on that account and recover the same according to law
In the result the impugned judgment is set aside and the appeal is allowed
No order as to costs
Y Lal Appeal al lowed


Summary:
Disciplinary proceedings were started against the appel lant who was a headmaster in a private school in accordance with the Rule 742 of the Grant in aid Code since the school was a recipient of grant as per the code
The Director of Education approved the findings of the Dispute Settlement Committee and permitted the termination of the appellant by the Principal of the School
The said order of termination was challenged by the appellant before the High Court of Bombay Panaji Bench in a Writ Petition
The petition was dismissed by the High Court upholding the preliminary objec tion that the petition was not maintainable under Article 226 of the Constitution of India against the management of the School which was a private body
Aggrieved by the deci sion of the High Court the appellant fried this appeal by special leave
According to the relevant rule of the Grant in aid Code the management could not have terminated the services of the appellant without the communication received by it from the Director of Education who was a public functionary and was discharging a governmental function as an authority consti tuted for the said purpose by the government
Obviously in such circumstances it cannot be said that the decision is just that of a private management governed by private law
The High Court erred in not properly following the ratio of the decision of this Court in Tika Ram s case the facts of which were not substantially different from the facts of the present case
This Court while setting aside the judgment of the High Court and remanding the case to the High Court to hear the Writ Petition on merits 253 HELD Any private school which receives aid from the government under the Grant in aid Code which is promulgated not merely for the benefit of the management but also for the benefit of the employees in the school for whose salary and allowances the government was contributing from public funds under the Grant in aid Code cannot escape from the consequences flowing from the breach of the Code and partic ularly where the Director of Education who is an instrumen tality of the State is participating in the decision making process
260F G The High Court was wrong in upholding that the orders of the Director of Education and of the Dispute Settlement Committee were not amenable to the jurisdiction of the High Court under Article 226 of the Constitution of India
260G Tika Ram vs Mundikota Shikshan Prasarak Mandal  Ors 1985 1 SCR 339 referred to