IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN FRIDAY, THE 23RD JANUARY 2009 / 3RD MAGHA 1930 OP.No. 18602 of 2002(M) --------------------------------- PETITIONER(S): ----------------------- M/S. SLEEVES INDIA PVT.LTD., NEW INDUSTRIAL DEVELOPMENT AREA, KANJIKODE, PALAKKAD, REPRESENTED BY ITS MANAGING DIRECTOR. BY ADV. SRI.PKM.HASSAN SRI.J.JULIAN XAVIER SRI.FIROZ K.ROBIN RESPONDENTS: ----------------------- 1. KERALA STATE ELECTRICITY BOARD, REPRESENTED BY ITS SECRETARY, VYDYUTHI BHAVAN, PATTOM, THIRUVANANTHAPURAM. 2. CHIEF ENGINEER (TARIFF & COMMERCIAL), KERALA STATE ELECTRICITY BOARD, VYDYUTHI BHAVAN, PATTOM, THIRUVANANTHAPURAM. 3. SPECIAL OFFICER (REVENUE) KERALA STATE ELECTRICITY BOARD, VYDYUTHI BHAVAN, PATTOM, THIRUVANANTHAPURAM. 4. DEPUTY CHIEF ENGINEER, ELECTRICAL CIRCLE, PALAKKAD. ADV. SRI.P.SANTHALINGAM, SC, KSEB FOR R1 TO R4 SRI.C.K.KARUNAKARAN, SC FOR KSEB FOR R1 TO 4 THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 23/01/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: OP.No. 18602 of 2002(M) APPENDIX PETITIONER'S EXHIBITS: EXT.P1 - TRUE COPY OF THE LETTER DATED 19.8.2000 INTIMATING THE STOPPAGE OF PETITIONER'S FACTORY. EXT.P2 - TRUE COPY OF THE LETTER DATED 14.11.2000 SEND BY THE PETITIONER TO THE 4TH RESPONDENT. EXT.P3 - TRUE COPY OF THE CERTIFICATE ISSUED BY THE DISTRICT LABOUR OFICER DATED 7.12.2000. EXT.P4 - TRUE COPY OF THE RELEVANT EXTRACT OF THE AGREEMENT BETWEEN THE PETITIONER AND THE BOARD. EXT.P5 - TRUE COPY OF THE CHART SHOWING THE PAYMENT OF ELECTRICITY BILLS BY THE PETITIONER FOR THE PERIOD FROM 1/2000 TO 2/2001. EXT.P6 - TRUE COPY OF THE ORDER DATED 27.2.2001 ISSUED B THE 3RD RESPONDENT. EXT.P7 - TRUE COPY OF THE REVIEW PETITION DATED 17.9.2001. EXT.P8 - TRUE COPY OF THE APPEAL DATED 17.12.2001 FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. EXT.P9- TRUE COPY OF THE ORDER DATED 16.5.2002 PASSED BY THE 2ND RESPONDENT. // TRUE COPY // PA TO JUDGE rhs S.SIRI JAGAN, J - - - - - - - - - - - - - - - - - - - - - - - O.P.No. 18602 of 2002 - - - - - - - - - - - - - - - - - - - - - - - Dated this the 23rd day of January, 2009 J U D G M E N T The petitioner was a High Tension consumer of electricity from the Kerala State Electricity Board. For the purpose of drawing electricity, he entered into Ext.P4 agreement as per which the board agreed to supply a contract demand of 200 KVA on the conditions mentioned therein as per which the petitioner was liable to pay for the contracted power irrespective of whether he uses the same or not. The petitioner's factory suffered a major breakdown of machinery on 19.9.2000. Before they could restart production after repair, the employees started a strike on 19.9.2000 which continued and therefore they could not resume consumption of electrical energy. Ultimately, on 14.11.2000 the petitioner called it quits and issued notice for termination of the agreement and the electrical installation of the petitioner was thereafter dismantled. For the period from 19.9.2000 to 14.2.2001, the petitioner did not consume any electricity. Therefore the petitioner claimed waiver of demand charges for that period, in accordance with clause 16(b) of Ext.P4, which provided for such waiver on the petitioner satisfying the conditions mentioned therein. According to the petitioner, he had satisfied the conditions stipulated in clause 16(b) and O.P.No. 18602 of 2002 - 2 - therefore requested for waiver of demand charges for the said period. The same was rejected by Ext.P6 order thus: “It is reported that the reason for the shut down is “Maintenance”. Your plant is still under shut down ie. from 21-8-2000. Maintenance work cannot be considered as a reason beyond control. You have also failed to resume consumption of energy within a reasonable period. Hence your firm is not eligible for rebate in demand charges under force majure clause.” Petitioner's appeal against P6 was rejected by Ext.P9, in which it was found that the petitioner has satisfied all other conditions except resumption of consumption of energy and on the ground that, that condition was not satisfied the petitioner was denied the benefit of the waiver. The petitioner is challenging Exts.P6 and P9 orders in this writ petition. 2. The contention of the petitioner is that the alleged condition of resumption of consumption of energy as soon as the petitioner reasonably could, is not an essential condition for becoming eligible for waiver under clause 16(b). According to them, in so far as much more than the minimum revenue per year fixed in Ext.P4 has been realised from the petitioner and other conditions in clause 16(b) have been fully satisfied, there was no justification in denying benefit of that clause on the ground that the petitioner did not resume consumption of electrical energy. According to the petitioner once the petitioner has satisfied the essential conditions for becoming eligible for waiver then the benefit cannot be denied to him only because they could not continue the functioning of the O.P.No. 18602 of 2002 - 3 - factory because of circumstances beyond their control. 3. The contentions of the petitioner are opposed by the learned standing counsel appearing for the KSEB. He would contend that if the interpretation sought to be put by the petitioner to Clause 16(b) is adopted then the very purpose of Ext.P4 agreement of contract demand would be defeated in so far as the very agreement contemplates a continued contract between the electricity board and the petitioner for drawing of electrical energy and payment of contract demand. According to him, the clause 16(b) is an incentive for continued consumption of energy and if there is no possibility of continued consumption by the consumer of electrical energy the board would not gain anything by granting that incentive and therefore the benefit of Clause 16(b) cannot be extended to the petitioner. On these contentions the respondents seek to sustain the impugned orders. 4. I have considered the rival contentions in detail. 5. Since a decision on the issue depends on the interpretation of Clause 16(b), I shall extract the same here. “16 (a) xxx xxx xxx xxx xxx (b) The consumer shall not be responsible for non consumption of energy due to lock out, strike of employees of the consumer, major break down of machinery/plant which to the satisfaction of the Board is responsible for the non consumption of energy or other forced majeure condition over which the consumer has no control but shall resume consumption of energy as soon as he reasonably can. In such cases, where the consumer is unable to O.P.No. 18602 of 2002 - 4 - consume energy, he shall promptly intimate the Board the reasons for such non consumption. In any event the consumer shall be bound to pay to the Board the annual minimum guaranteed by the consumer and specified in the schedule appended herewith, irrespective of the question whether any energy has been consumed or not, whatever be the reason for non consumption and also irrespective of the actual quantity consumed. However, the Board shall have the right to take periodical shut down as and when required for the purpose or routine maintenance after giving reasonable notice to the consumer and in such event no claim of any kind for rebate or refund or charges on this account etc. shall be entertainable by the Board.” (underlining supplied) It contemplates essentially the following conditions for the purpose of become eligible for waiver which is also referred to as a rebate. 1) There must be a shut down due to major break down of the machinery. 2) The fact of break down of machinery and shut down should be intimated by the consumer to the Board. 3) Minimum annual revenue guaranteed as per agreement should have been realised already. The above three conditions have been admittedly fulfilled by the petitioner. Clause 16(b) also refers to resumption of consumption of energy as soon as the petitioner reasonably can. The question is whether the petitioner can be denied the benefit of Clause 16(b) on the ground that he had not resumed consumption of energy after the shut down. It is not disputed before me that the petitioner had not so resumed consumption of electrical energy. In fact the whole electrical installation had been dismantled at the request of the petitioner and Ext.P4 agreement itself has been terminated. 6. The object behind the concept of contract demand has been O.P.No. 18602 of 2002 - 5 - stated thus by the Supreme Court in the decision of Orissa State Electricity Board v. IPI Steel Ltd. [1995 (4) SCC 320]. “Normally speaking a factory utilises energy at a broadly constant level. May be, on certain occasions whether on account of breakdowns, strikes or shutdowns or for other reasons, the factory may not utilise energy at the requisite level over certain periods, but these are exceptions. Every factory expects to work normally. So does the Electricity Board expect - and accordingly produces energy required by the factory and keeps it in readiness for that factory - keeping it ready on tap, so to speak. As already emphasised, electricity once generated cannot be stored for future use. This is the reason and the justification for the demand charges and the manner of charging for it. There is yet another justification for this type of levy and it is this: demand charges and consumption charges are intended to defray different items. Broadly speaking while demand charges are meant to defray the capital costs, consumption charges are supposed to meet the running charges. Every Electricity Board requires machinery, plant, equipment, sub-stations, transmission lines and so on, all of which require a huge capital outlay. The Board like any other corporation has to raise funds for the purpose which means it has to obtain loans. The loans have to be repaid, and with interest. Provision has to be made for depreciation of machinery, equipment and buildings, plants, machines, stations and transmission lines have to be maintained, all of which require a huge staff. It is to meet the capital outlay that demand charges are levied and collected whereas the consumption charges are levied and collected to meet the running charges.” 7. The above object can be achieved only if there is continued relationship of licencee and consumer between the Board and the consumer. Therefore the very concept of contract demand contemplates a continued consumption of energy by the consumer. Clause 16(b) offers an incentive to the petitioner to resume consumption of energy as soon as he reasonably can. That being so, the contention that the consumer should be able to consume energy as soon as he can is also one of the essential conditions for becoming eligible for the said benefit appears to be a O.P.No. 18602 of 2002 - 6 - reasonable interpretation of clause 16(b). As far as the Board is concerned once the contract demand agreement is terminated they do not get any benefit from the petitioner with reference to the objects sought to be achieved by entering into the contract demand agreement, which stipulates reciprocal obligations on both parties and that being so the board would not benefit from giving the benefit under Section 16(b) to the petitioner. Therefore, according to me, the very object of granting that benefit contemplates a necessary condition of the petitioner being able to resume consumption of energy as soon as he reasonably can. Hence, if he cannot resume consumption of electrical energy he would not be eligible for the benefit of clause 16(b). I am therefore satisfied that the condition of the petitioner being able to resume consumption of energy as soon as he reasonably can is a very essential condition precedent for becoming eligible for the benefit of waiver under Clause 16(b) and that if the petitioner is not able to resume consumption he ceases to be eligible for the benefit of clause 16(b). In that view, I do not find any infirmity in the impugned orders. Accordingly, the original petition is dismissed. S.SIRI JAGAN, JUDGE rhs