IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY, THE THIRTY FIRST DAY OF DECEMBER TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE C.V.RAMULU W.P. Nos. 1993 of 2007 and 2131 of 2008 WRIT PETITION NO : 1993 of 2007 Between: M/s. Tungabhadra Holdings Private Limite Having work Office at Survey Nos. 205, 206 and 207 of Insapur Village, Patancheru Mandal, Medak District-502 307 andhra Pradesh, rep by Authorised Signatory sri P.V.S. Sastry S/o Late Sri P. Abbaiah Sastry, aged 51 years R/o Hyderabad. ..... PETITIONER AND 1 The Andhra Pradesh Central Power Distribution Company Limited, rep by Chairman and managing Director, III Floor, Singareni Bhavan, Red Hills, Hyderabad. Central Power Distribution Company of A.P. Limited 2 Central Power Distribution Company of A.P. Limited rep by The General manager, APCPDCL< III floor, Singareni Bhavan, Red Hills, Hyderabad. 3 Central Power Distribution Company of A.P. Limited of A.P. rep by The Superintending Engineer, Operation Circle, Medak, At Sanga Reddy. .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue a Writ, order or direction more particularly one in the nature of WRit of Mandamus to set aside the impugned memo No. CGM(Comml)/SE(C)/DE(C)/ADE-II/AE-I/F.HT Ind./D. No. 1178/06 dated 23-09-2006 by declaring the action of the respondents as arbitrary, illegal and violative of Principles of Natural justice of India and consequently direct the Respondents to grant temporary deration of the CMD from 1800 KVA to 800 KVA for a period of one year by collecting consumption charges only for the CMD of 800 KVA starting from January 2007. Counsel for the Petitioner: MR.B.CHANDRASEN REDDY Counsel for the Respondents: MR.O.MANOHER REDDY WRIT PETITION NO : 2131 of 2008 Between: M/s.Tungabhadra Holdings Prviate Limited, having work office at Sy.Nos 205,206,and 207 of Isnapur villae Patancheru Mandal, Medak District-502307, Andhra pradesh rep.by its Authorised Signatory Sri P.V.S.Sastry,S/o.Late P.Abbaiah Sastry aged about 51 years, R/o.Hyderabad ..... PETITIONER AND 1 Central Power Distribution Company of Andhra pradesh Limited, rep.by its Chairman and managing Director III Floor, Singareni bhavan, Red Hills, Hyderabad 2 Central Power Distribution Company of AP Limited, rep.by the Superintending Engineer, Operation circle Medak, at Sanga Reddy .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to set aside the impugned letter vide No.SE/OP/MDK/SAO/HT/D.No.750/2007 dated 20.12.2007 issued by the 2nd respondent by declaring the same as illegal and arbitrary. Counsel for the Petitioner: MR.B.CHANDRASEN REDDY Counsel for the Respondents: MR.O.MANOHER REDDY The Court made the following : THE HON’BLE SRI JUSTICE C.V. RAMULU W.P. Nos. 1993 of 2007 and 2131 of 2008 COMMON ORDER: W.P. No. 1993 of 2007 is filed seeking a Mandamus setting aside the impugned Memo No.CGM (Comm.)/SE(C)/DE(C)/ADE- II/AE-I/F.HT/Ind./D.No. 1178/06 dated 23.9.2006 by declaring the action of the respondents as arbitrary, illegal and violative of the principles of natural justice; consequently, to direct the respondents to grant temporary deration of the CMD from 1800 KVA to 800 KVA for a period of one year by collecting consumption charges only for the CMD of 800 KVA starting from January, 2007. Whereas, W.P. No. 2131 of 2008 is filed seeking a Mandamus to set aside the impugned letter No.SE/OP/MDK/SAO/HT/D.No.750/2007 dated 20.12.2007 issued by 2nd respondent by declaring the same as illegal and arbitrary. Since the issue involved in both these writ petitions is one and the same, both of them are disposed of by this common order. It is the case of the petitioner that it is engaged in the business of manufacture of steel coated tubes and pipes, and situated at Isnapur village, Patancheru Mandal. The existing assets, both moveable and immoveable of the petitioner-company were purchased in the auction conducted by the High Court of A.P. subsequent to winding up of M/s.Nagarjuna Coated Tubes Limited under the provisions of the Companies Act in R.C.C. No. 9/1991. Subsequently, the petitioner- company has entered into a HT agreement dated 2.5.2005 with the Central Power Distribution Company of A.P. Limited (‘CPDC’ for short) for sanction of electricity load with CMD (Contract Maximum Demand) in two phases. The first phase of electricity was with the load of 800 KVA CMD and the second phase was with the load of 1000 KVA. The petitioner has paid an amount of Rs.21.6 lakhs as security deposit and Rs.27.00 lakhs towards development fee, pursuant to the agreement. The CPDC has sanctioned the power and issued certificate for release of 800 KVA for first phase on 16.9.2005 and the additional load of 1000 KVA in second phase was to be released after three months from the date of supply. While that being so, due to unfortunate delay in delivery of part of machinery by the foreign collaborator, the petitioner has sought for extension of time for release of 1000 KVA for a period of three months vide Referece No.THPL/HYD/Elec/14/05-06 dated 21.11.2005 and the respondents have granted the same. However, the petitioner could not streamline the operations and requested for further extension for release of electricity load with CMD of 1000 KVA vide Reference No.THPL/HYD/Elec/21/05-06 dated 24.2.2006, but the respondents have rejected for further extension and released the electricity load of 1000 KVA on 16.6.2006. The grievance of the petitioner is that in spite of the fact that the petitioner was even unable to utilize the electricity load of 800 KVA, it was compelled to pay for additional 1000 KVA. Therefore, the petitioner had given representation on 2.8.2006 for temporary deration of 1800 KVA CMD to 800 KVA for a period of one year, but the respondents have rejected the said request ad stated that the same will be considered after 16.9.2007, vide Memo No.CGM (Coml)/SE(C)/DE(C)/ADE-II/AE- I/F.HT Ind./D.No.1178/06 dated 25.9.2006. The said Memo dated 25.9.2006 of the respondents was challenged in W.P. No. 1993 of 2007. In view of altered circumstances, a representation was made on 6.7.2007 to the respondents vide reference No. THPL/HYD/Elec/01/0708 for terminating the HT agreement dated 2.5.2005 and surrendering the power supply. In reply to the same, the 2nd respondent has issued the impugned letter dated 8.8.2007 vide Reference Lr.No.SE/OP/MDK/SAO/HT/D.No.425/2007 requesting the petitioner to pay the arrears of Rs.20,81,543/ within 15 days from the date of notice, failing which, that the action will be taken under the R.R. Act. The respondents also stated that the termination will be effected after three months from 16.9.2007 as per terms and conditions of the power supply. Insofar as the arrears are concerned, the 3rd respondent has accepted that the amounts are wrongly shown and with respect to the CC charges, the same were calculated till December, 2007 and the same is the subject matter in W.P. No. 2131 of 2008. According to the petitioner, the respondents have terminated the agreement in accordance with clause 5.9.4.2 of the general terms and conditions of supply and also disconnected the power supply with effect from 23.10.2007. The 2nd respondent has issued impugned letter dated 20.12.2007 informing that the HT agreement was terminated with effect from 23.10.2007 i.e. disconnection as per clause 5.9.4.2 of the general terms and conditions of supply, without prejudice to the rights accrued under the subsisting agreement as on the date of such termination. The respondents have adjusted the amount of Rs.27 lakhs, which was lying as consumption deposit with the respondents and, after such adjustment, directed the petitioner to arrange an amount of Rs.22.867/-. According to the petitioner, issuing the impugned letter dated 20.12.2007 is arbitrary and illegal and, in fact, W.P. No. 1993 of 2007 is still pending before this Court. The amount was deposited by the petitioner pursuant to the orders passed by this Court in WPMP No. 2524 of 2007 and WPMP No. 5991 of 2007 in W.P. No. 1993 of 2007. Until disposal of the writ petition, the respondents cannot quantify the amount and make the petitioner liable to pay, more so, when the matter is sub-judiced before this Court. The respondents ought not to have adjusted the security deposit available with them and the same is contemptuous, arbitrary and illegal. A detailed counter affidavit has been filed by respondent No.2 in W.P. No. 2131 of 2008 wherein it is stated that the petitioner had made an application for temporary deration from 1800 KVA to 800 KVA and the same was rejected. Questioning the said order, the petitioner had filed W.P. No. 1993 of 2007 before this Court. As per the test report signed by the consumer, additional load of 1000 KVA was released from 16.10.2006 and the bills have been issued and the petitioner is paying the bills for 800 KVA only. The termination of the agreement was considered and given effect to, on 23.10.2007. Further, as per clause 5.9.4.2 of the general terms and conditions of power supply, if the consumer chooses to derate the CMD or terminate before the expiry of the minimum period of two years’ period of the agreement, the CMD will be derated or the agreement will be terminated with effect from the date of expiry of the initial period of two years or after the expiry of three months notice period, whichever is later. In compliance with the interim directions in WPMP No. 27794 of 2007 in W.P. No. 21434 of 2007, the service was terminated with effect from 23.10.2007, considering the three months’ notice period. As per clause 5.9.4.2 of general terms and conditions of power supply, on termination of HT agreement the consumer shall pay all sums due under the agreement as on the date of its termination. Relying on the above clause, the security deposit available was adjusted towards the CC dues and the balance amount of Rs.22,867 is payable by the consumer. While complying with the directions in WPMP No. 5991 of 2007 in W.P. No. 1993 of 2007, the consumer was billed for 800 KVA only and the same was received, but, however, as per the HT test report agreed by the consumer, bills are issued for 1800 KVA. Further, as per clause 5.9.4.2 of the general terms and conditions of power supply, as and when the service gets terminated, the available security deposit has to be adjusted towards the current consumption charges, and the balance, if any, remained, will be refundable to the consumer. Hence, the security deposit adjusted towards CC charges as on the date of termination is correct. Therefore, there is no illegality in passing the impugned order dated 20.12.2007 and the writ petition is devoid of merit and liable to be dismissed. Learned counsel for the petitioner strenuously contended that the petitioner had purchased a sick Unit i.e. M/s. Nagarjuna Coated Tubes Limited, in the Court auction. It had contracted with the respondents for supply of 1800 KVA and requested the authorities to derate 1000 KVA, till the project commences, on the ground that the project could not be commenced immediately in view of some delay from foreign collaborator in supply of machinery. Initially, it was granted for a period of three months. However, since the operations could not be streamlined, the petitioner requested for postponement of release of electricity load with CMD of 1000 KVA and the same was also granted by the respondents. But, subsequently, the further request of the petitioner for postponement of release of electricity was rejected by the respondents and they have released the electricity load of 1000 KVA on 16.6.2006. Learned counsel for the petitioner submitted that the petitioner was even unable to utilize 800 KVA which was released initially, whereas, it was compelled to pay for additional 1000 KVA, though request was made for postponement of release of 1000 KVA for the reasons beyond the control of the petitioner. In this regard, the petitioner gave a representation on 2.8.2006 for temporary deration of 1800 KVA CMD to 800 KVA for a period of one year, which was rejected by the respondents, and the same is the subject matter in W.P. No. 1993 of 2007. Learned counsel for the petitioner strenuously contended that the whole project could not be commenced in view of failure of the foreign collaborator to supply machinery and ultimately it has to be closed down and whatever machinery available was shifted to Mumbai. Under those circumstances, the petitioner has asked for termination of HT agreement dated 2.5.2005 and to surrender the power supply. Though it was terminated, the CC charges were calculated till December, 2007 and the petitioner was asked to pay the same. In the month of July, 2007 the petitioner-company has become non-operational due to various factors and the manufacturing process could not be commenced because of non-cooperation of the foreign collaborator and technical difficulties and the petitioner-company has become sick and the machinery was shifted to Mumbai due to unfeasibility of the project. These aspects are well within the knowledge of the respondents and there is no denial of these things. Therefore, it must be deemed that the contract was frustrated. Thus, the doctrine of frustration operates and the respondents are not entitled to deny the refund of security deposit and it is illegal on the part of the respondents to adjust the same towards the consumption deposit. Though the full 1800 KVA was released, the petitioner never utilized even 800 KVA and the respondents have diverted 1000 KVA to 3rd parties and collected the charges there-against. Since the contract was frustrated, the respondents cannot say that the amount of Rs.27.00 lakhs, which was lying as consumption deposit with them has been adjusted towards arrears of electricity consumed by the petitioner. Even clause 5.9.4.2 of the general terms and conditions of supply has no application in a case like this, where the contract has been frustrated due to the reasons beyond the control of the petitioner. Therefore, the impugned order passed by the respondents, which is the subject matter of W.P. No. 2131 of 2008, is liable to be quashed. Per contra, learned counsel for the respondents Sri O. Manohar Reddy, while reiterating the stand taken in the counter affidavit filed by the respondents, has strenuously contended that this is purely a matter of contract between the parties and, as per the terms of the contract i.e. clause 5.9.4.2, even if a contract is sought to be terminated either on a notice or even when it is frustrated, the consumer is supposed to pay arrears of the minimum consumption for a period of two years from the date of agreement. The agreement, once entered, cannot be terminated without lapse of two years. Thus, the petitioner is liable to pay the minimum two years’ arrears for 1800 KVA. The doctrine of frustration, as contended by the learned counsel for the petitioner, has no role to play in the facts and circumstances of the case and it cannot be applied in case of statutory contracts. Further, the reasons for frustration of contract cannot be attributed to the respondents. May be, the foreign collaborator might have failed in fulfilling the promise made to the petitioner and the project might not have been commenced, but, that itself does not mean that the petitioner can get over the terms of agreement and it cannot be said that the petitioner is not liable for payment of arrears as demanded in the impugned order. The writ petition is devoid of merits and liable to be dismissed. I have given my earnest consideration to the respective submissions made by the learned counsel on either side, perused the impugned orders and the other material made available on record. The facts are not much in dispute. Thus, the only aspect which needs to be examined is, whether in the facts and circumstances of the case the contract entered into between the parties was frustrated as per Section 56 of the Indian Contract Act, 1872 and thus the petitioner is not liable to pay the minimum consumption charges. Admittedly, the petitioner had applied for 1800 KVA for reviving a sick Unit, which was purchased in a Court auction, namely, M/s. Nagarjuna Coated Tubes Limited, situated at Isnapur village, Patancheru Mandal, Medak District. The company was under revival. The electricity to be supplied was in phased manner and the respondents have sanctioned electricity load with CMD, in two phases. The first phase of electricity was with the load of 800 KVA CMD and the second phase was with the load of 100 KVA. Accordingly, the petitioner entered into an agreement with the respondents on 2.5.2005 by paying an amount of Rs.21.60 lakhs as deposit amount and an amount of Rs.27.00 lakhs towards development fee. The respondents have sanctioned power and issued certificate for release of 800 KVA in first phase on 16.9.2005 and the additional load of 1000 KVA in second phase had to be released after three months from the date of supply. In the meanwhile, the orders placed by the petitioner for importing machinery from different countries for the purpose of its business were delayed. Therefore, the petitioner had sought for extension of release of 1000 KVA initially for three months and again for three months, which was granted by the respondents. The petitioner approached a foreign company in USA for expansion to produce online galvanized coated pipes, but, in the meantime, the respondents have released the electricity load with CMD of 1000 KVA on 16.6.2006 in spite of the fact that the petitioner has sought for extension of time orally and the petitioner was utilizing the then existing load of 800 KVA. Without any intimation to the petitioner or rejecting the case of the petitioner, the respondents have simply released the load of 1000 KVA. The crucial component pertaining to manufacture of tubes and pipes was yet to be received. Therefore, the petitioner has never utilized even the electricity load of 800 KVA, which was released by the respondents in the first phase. The maximum load utilized by the petitioner was 418.5 KVA per month. Due to the drastic decision of the respondents for releasing 1000 KVA to the petitioner, the petitioner was compelled to pay an additional amount of Rs.2,31,000/- without there being any utilization of additional electric power. In the representation made by the petitioner, the fact that the project could not commence due to non-supply of required machinery by the foreign collaborator was clearly mentioned. Therefore, the contract entered into between the parties for supply of electricity was frustrated. The contention of the learned counsel for the respondents that the doctrine of frustration is not applicable in case of statutory contracts cannot be accepted, in the light of the following case law on the subject. I n Satyabrata Ghose v. Mugneeram Bangur and Co. and another[1] it was held by the Supreme Court as follows: “The word “impossible” has not been used in the sense of physical or literal impossibility. The performance of an act may not be literally impossible but it may be impracticable and useless from the point of view of the object and purpose which the parties had in view; and if an untoward event or change of circumstances totally upsets the very foundation upon which the parties rested their bargain, it can very well be said that the promisor finds it impossible to do the act which he promised to do”. In the above decision, the Supreme Court further held: “The essential idea upon which the doctrine of frustration is bases is that of impossibility of performance of the contract; in fact impossibility and frustration are often used as interchangeable expressions. The changed circumstances make the performance of the contract impossible and the parties are absolved from the further performance of it as they did not promise to perform an impossibility. The doctrine of frustration is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of S.56. (emphasis supplied). To the extent that the Contract Act deals with a particular subject, it is exhaustive upon the same and it is not permissible to import the principles of English law ‘dehors’ these statutory provisions. The decisions of the English Courts possess only a persuasive value and may be helpful in showing how the Courts in England have decided cases under circumstances similar to those which have come before Indian Courts. In deciding cases in India the only doctrine that we have to go by is that of supervening impossibility or illegality as laid down in S.56, taking the word ‘impossible’ in its practical and not literal sense. Section 56 lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties. I cases, where the Court gathers as a matter of construction that the contract itself contained impliedly or expressly a term, according to which it would stand discharged o the happening of certain circumstances, the dissolution of the contract would take place under the terms of the contract itself and such cases would be outside the purview of S. 56 altogether. They would be dealt with under S. 32 which deals with contingent contracts or similar other provisions contained in the Act. In the large majority of cases, however, the doctrine of frustration is applied not on the ground that the parties themselves agreed to an implied term which operatd to release the from the performance of the contract. The relief is given by the Court on the ground of subsequent impossibility when it finds that the whole purpose or basis of a contract was frustrated by the intrusion or occurrence of an unexpected event or change of circumstances which was beyond what was contemplated by the parties at the time when they entered into the agreement. (emphasis supplied). When such an event or change of circumstance occurs which is so fundamental as to be regarded by law as striking at the root of the contract as a whole, it is the Court which can pronounce the contract to be frustrated and at an end. The Court undoubtedly has to examine the contract and the circumstances under which it was made. The belief, knowledge and intention of the parties are evidence, but evidence only on which the Court has to form its own conclusion whether the changed circumstances destroyed altogether the basis of the adventure and its underlying object. This is really a rule of positive law and as such comes within the purview of S. 56 of the Contract Act”. Further, in Central Bank of India Staff Cooperative Building Society Limited, Vijayawada v. Dulipalla Ramachandra Koteswara Rao[2], a Division Bench of this Court held: “Frustration signified a certain set of circumstances arising after the formation of the contract, the occurrence of which is due to no fault of either party and which renders performance of the contract by one or both parties physically and commercially impossible. The Court regards these sets of circumstances as releasing the parties from any further obligations. Where the entire performance of a contract becomes substantially impossible without any fault on either side, the contract is prima facie dissolved by the doctrine of frustration. The law excuses further performance under the doctrine of frustration, where the contract is silent as to the position of the parties in the event of performance becoming literally impossible or only possible in a very different way from that originally contemplated. The doctrine of frustration operates to excuse from further performance where (1) it appears from the nature of the contract and the surrounding circumstances that the parties have contracted on the basis that particular person will continue to be available, or that some future event, which forms the basis of the contract, will take place, and (2) before breach, a event in relation to the matter stipulated (a) renders performance impossible or only possible in a very different way from that contemplated, but without default of either party. (emphasis supplied). The impossibility of