IN THE HIGH COURT OF GUJARAT AT AHMEDABAD APPEAL FROM ORDER No 132 of 2002 with Civil Application No. 2412 of 2002 For Approval and Signature: Hon'ble MR.JUSTICE A.M.KAPADIA ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- MARDIA CHEMICALS LIMITED Versus GUJARAT ELECTRICITY BOARD -------------------------------------------------------------- Appearance: 1. Appeal from Order No. 132 of 2002 MR SN SOPARKAR SR. ADVOCATE WITH MR DEVESH A BHATT for appellant. MR NIRAV K MAJMUDAR for Respondents No. 1-2 -------------------------------------------------------------- CORAM : MR.JUSTICE A.M.KAPADIA Date of decision: 27/03/2002 ORAL JUDGEMENT 1. In this Appeal from Order which is filed under Order 43 Rule 1 (r) of the Code of Civil Procedure ('the Code' for short), appellant - Mardia Chemicals Limited a company registered under the provisions of the Companies Act, 1956 ('the Companies Act' for short) seeks to challenge the order dated March 20, 2002 recorded below application Ex.5 of Special Civil Suit No.18 of 2002 by the learned 2nd Joint Civil Judge (S.D.)., Surendranagar by which application Ex.5 seeking ad-interim injunction under the provisions of Order 39 Rule 1 and 2 of the Code filed by the appellant against the respondent - Gujarat Electricity Board ('GEB' for short) - for restraining them from disconnecting the power connections bearing Consumer Nos.17435 and 17447 in the Caustic Chlorine Plant of the appellant company situated in a backward area of Sayala Taluka of Surendranagar District, till disposal of the suit, came to be rejected. 2. Appellant is the original plaintiff whereas respondents are the original defendants and for the sake of convenience and brevity they are referred to in this judgment as 'plaintiff' and 'defendants'. 3. In the peculiar facts and circumstances of the case and in view of the stake of more than Rs.85 crores of energy charges of the GEB involved in this Appeal from Order, with the consent of the learned advocates of the parties, the matter is heard at length at admission stage and decided by way of final hearing by this judgment. 4. Before highlighting the controversy posed for determination in this Appeal from Order, it would be advantageous to refer to the facts of the plaintiff's case and the contentions raised in the written statement by the defendants, in a nut shell, which are as under: 4.1. The plaintiff is a company registered under the provisions of the Companies Act whereas defendant No.2 is a statutory body and defendant No.1 is the Superintending Engineer of defendant No.2 at Surendranagar. The plaintiff company has been allotted SC Consumer No. 17435 and 17447 for its Caustic Chlorine Plant estimated over 450 crores and the electric power is being consumed by the plaintiff company for the production of Caustic Soda, Chlorine and other chemicals in its plant. 4.2. Defendants issued notice dated November 16, 1999 for disconnection of power supply to the plaintiff provided by the defendants. Aggrieved thereby and dissatisfied with the said action on the part of the defendants, the plaintiff had filed Revision Application before Gujarat Electricity Regulatory Commission ('GERC' for short) at Ahmedabad. The GERC was pleased to direct the defendants to reconnect the power supply on the condition of plaintiff paying Rs.50 lacs within 7 days from the date of the order. Accordingly, vide covering letter dated December 23, 1999 plaintiff paid Rs.50 lacs and requested the defendants to reconnect the power supply of CCP Unit Consumer No.17447 against which the defendants had obtained stay order from this Court. Therefore, the plaintiff was required to approach the Gujarat Government and requested the Government and explained the situation. As a result of it, a meeting was held and thereafter the defendants agreed to reconnect the power supply to the installation No. 17447 of 35000 MVA and vide its letter dated July 20, 2000 informed the plaintiff that they are prepared to reconnect the power supply subject to the conditions as mentioned below: (i) That the plaintiff will pay Rs.10 lacs every month towards past energy dues till formulation/sanction of rehabilitation scheme of BIFR, New Delhi; (ii) The plaintiff will pay Rs.1,000/- towards reconnection charges in the office of the Executive Engineer, O&M Division, Gujarat Electricity Board, Surendranagar before reconnection of power supply; (iii) As regards the current electricity bills after reconnection of supply, the plaintiff will arrange payments at interval of every 15 days without waiting for the issuance of monthly energy bills by the defendant. This payment shall be made on the basis of the actual consumption and out of the realisation of the plaintiff's product. The fortnightly payments as regard this shall be generally made at regular intervals and if such days fall on a Sunday or on holiday, the immediate next working day shall be considered for making such payments; (iv) The entire activity will be monitored by GEB by posting an officer at plaintiff's factory office itself. The officer will monitor the consumption of the energy and provision for payment as stated above. The financial burden on account of salaries and allowances of such officer shall be borne by the plaintiff company; (v) In any event if there is a lapse in making payments according to the schedule, the defendants shall reserve their right to recover the delayed payments charges and also to disconnect the power supply as per the provision u/s. 24 of the Indian Electricity Act, 1910." 4.3 On receipt of the letter dated July 20, 2000 addressed by the defendants to the plaintiff, the plaintiff immediately on the same day addressed a letter to the defendants and confirmed to abide by all the conditions as referred to in defendants' letter dated July 20, 2000 and further requested the defendants to reconnect the power supply immediately. 4.4. It is the case of the plaintiff that the plaintiff goes on making regular payment of the electricity consumption without waiting for the bill to be issued fortnightly and plaintiff also goes on making payment of Rs.10 lacs every month towards the past arrears. The plaintiff has, therefore, not committed any default in complying with the terms and conditions mentioned in the letter dated July 20, 2000. According to the plaintiff, the letter dated July 20, 2000 which is addressed by the defendants to the plaintiff and accepted by the plaintiff vide letter dated July 20, 2000 is nothing but an agreement between the plaintiff and the defendants and plaintiff has never committed breach of any of the terms and conditions of the said agreement. It is the case of the plaintiff that the defendants after having entered into an agreement with the plaintiff, are not entitled to commit any breach or deviate from the same and the act on the part of the defendants or deviation or any kind of breach would be barred by the doctrine of promissory estoppel. 4.5. It is the case of the plaintiff that it is a sick unit and, therefore, the plaintiff filed a reference under Section 15 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985 ('SICA' for short) being Reference No.199/2001 before the Board for Industrial and Financial Reconstruction ('BIFR' for short). The said reference has been rejected by the BIFR against which the plaintiff has preferred an appeal before the AAIFR. 4.6. The defendants demanded Rs.25 lacs per month instead of Rs.10 lacs per month and this itself causes a lot of inconvenience to the plaintiff. Notwithstanding the said fact, the plaintiff goes on depositing the said amount of Rs.25 lacs every month even today. 4.7. It is the case of the plaintiff that in spite of the aforesaid fact situation, the State Government, in order to help their own company, that is, Gujarat Alkalies and Chemicals Limited ('GACL' for short) has tried to put burden on the plaintiff and, therefore, the plaintiff was called in the Chamber of the Industries Minister to discuss regarding issue of price cutting policy of the plaintiff and the Government arrears from the plaintiff on December 12, 2001. In the said meeting, Managing Director of GACL was also present. The said act on the part of the defendants as well as Government is malafide because both of them wanted to favour GACL as the plaintiff is a great competitor of GACL. Therefore, a plan was hatched and pursuant to the plan the plaintiff was called on December 12, 2001 in the chamber of the Industries Minister of State of Gujarat and pursuant to the said meeting, the defendants have issued a letter dated January 30, 2002 to the plaintiff wherein the total arrears of the energy bills was shown at Rs.85,28,64,838.84 Ps. in following breakup: (i) Rs.44,15,69,212.24 arrears of principal amount alongwith the bill of November 2001. (ii) Rs.19,25,52,517.44 DPC upto April 30, 2002. (iii) Rs.21,87,43,109.16 Delayed payment charges from 1.5.2000 to 31.12.2001 In the said notice it is also stated that the said notice is issued under section 24 (1) of the Indian Electricity Act, 1910 ('the Act' for short) and the plaintiff was asked to pay up the said amount within ten days from the date of issuance of the notice failing which on expiry of the aforesaid period the electricity supply will be cut off without further notice and the electricity supply shall remain disconnected until the aforesaid amount together with expenses incurred by the GEB in cutting off and reconnecting the supply are paid to the GEB. According to the plaintiff, the said notice dated January 30, 2002 is illegal, malafide, unauthorised, improper and unjust and against the principles of natural justice and barred by the doctrine of promissory estoppel and therefore the plaintiff has filed the suit for a declaration to declare that the notice dated January 30, 2002 issued by the defendants is wrong, illegal, malafide, unauthorized, improper, unjust, against the principles of natural justice and barred by principles of promissory estoppel and further to declare that the defendants are not entitled to take any action against the plaintiff in respect of past arrears in view of the plaintiff being a sick unit and a reference under Section 15 (1) of the SICA is registered vide Registration No.199/2001 before the BIFR which has been rejected and against the order of rejection the plaintiff has preferred an appeal before AAIFR which is pending. 4.8 Alongwith the suit, the plaintiff has also filed application Ex.5 under the provisions of Order 39 Rule 1 and 2 of the Code against the defendants for ad-interim injunction restraining the defendants from disconnecting the power supply to consumer No.17435 and 17447. It is contended that the plaintiff has a prima facie case and balance of convenience also tilts in its favour. If the injunction is not granted, irreparable loss would be caused to it. On this premises, it is prayed that the reliefs claimed in the application Ex.5 may be granted. 4.9. The defendants on being served with notice, contested the suit as well as application Ex.5 by filing their written statement and written objections at Ex.8. It is contended that the suit filed by the plaintiff is premature as the plaintiff has approached the GERC and the proceedings are pending. The suit is filed on insufficient court fee stamp. It is contended that the plaintiff was given concession for payment of its dues to the defendants as the plaintiff has approached the Government and as the plaintiff has approached the Government, the concession for payment of arrears of consumption was given to the plaintiff. It was contended that the concession continued upto the final orders of reference No.103/1999 which was pending before the BIFR and no further. The said reference was rejected by the BIFR and against the rejection of the reference, the plaintiff filed appeal before the AAIFR and the said appeal was withdrawn. The plaintiff was therefore not entitled to concession granted by the defendants vide their letter dated July 20, 2000. The plaintiff has also concealed the fact that another reference being Reference No.270 of 2000 was registered before the BIFR which was also rejected and the appeal filed against the said order was also withdrawn. It was also contended that the third reference being Reference No.199/2001 filed by the plaintiff before the BIFR is also rejected. Therefore, the concession which was granted by the plaintiff vide letter dated July 20, 2000 upto formulation and sanction of rehabilitation scheme by BIFR and the first reference being Reference No.103 of 19999 which has been already rejected and the appeal filed against the said order has been withdrawn, the plaintiff is not entitled to get any protection as per condition No. (i) contained in the letter dated July 20, 2000. It is also contended that the defendants have a right to withdraw the concession given to the plaintiff vide their letter dated July 20, 2000. The plaintiff by filing false reference before the BIFR has tried to evade payment of RS.85,28,64,838.34 ps. which is due from the plaintiff towards the energy consumption and the defendants have right to disconnect the power supply under section 24 (1) of the Act which is a statutory right available to he defendants. So far as the allegation with regard to the meeting in the chamber of the Industries Minister is concerned, the same is denied. It is denied that the defendants have issued notice in collusion with the Ministry of Energy. It is denied that the right of the defendants to disconnect the electricity supply to the plaintiff is barred by section 22 of the SICA. It is as contended that letter dated July 20, 2000 issued by the defendants was not a contract but it is only a concession to enable the plaintiff to pay up the arrears to the GEB till the formulation and sanction of the rehabilitation scheme by the BIFR. It is also denied that the notice issued to the plaintiff is malafide. It is also pleaded that there is no prima facie case in favour of the plaintiff nor the balance of convenience tilts in favour of the plaintiff. If the injunction is granted, irreparable loss would be caused to the defendants as the defendants would be financially affected and it will cause hardship in the administration of the defendants and therefore ultimately it is prayed to dismiss the application Ex.5. 4.10. The learned trial Judge having heard the learned advocates for the parties and on having considered the pleadings and the documents produced in support of their pleadings, came to the conclusion that the letter dated July 20, 2000 is not a contract but it is merely an arrangement between the parties till the formulation/sanction of rehabilitation scheme by the BIFR, New Delhi and since in view of the fact that the BIFR has rejected the reference filed by the plaintiff thrice, the defendants are entitled to withdraw the said letter. It is also held that there is no question of promissory estoppel on the part of the defendant GEB as the plaintiff has represented before the defendants for granting concession on payment of Rs.10 lacs to restore the supply of energy till formulation/sanction of rehabilitation scheme by the BIFR. So far as Ex.22 of the SICA is concerned, it is of no help to the plaintiff and the defendants have not filed suit, on the contrary the plaintiff has filed the suit. Defendants have issued only the statutory notice dated January 30, 2002 under the provisions of Section 24 (1) of the Act. It is further held by the learned trial Judge that the plaintiff company has tried to evade legal recovery of the GEB by claiming relief against disconnection of electricity supply and to recover the amount of past arrears is a statutory right under the Act. There is no prima facie case in favour of the plaintiff, nor balance of convenience tilts in its favour. So far as irreparable injury is concerned, the learned trial Judge has observed that if the injunction is granted, the defendants would suffer irreparable injury as the defendants cannot function without money which would affect the functioning of the GEB. On the aforesaid premises, the learned trial Judge has recorded categorical finding and resultantly application Ex.5 is rejected which has given rise to the present appeal at the instance of the original plaintiff. 5. Mr. Soparkar, learned Senior Counsel appearing for the plaintiff raised following contentions: (I) There was a valid contract between the plaintiff and the defendants by which defendants have agreed to continue to supply electricity to the plaintiff against payment of Rs.10 lacs per month (later on raised to Rs.25 lacs per month) towards past dues and in view of this binding contract, it does not empower the defendants to insist for payment of past dues at this stage or to discontinue power for nonpayment of such dues when the plaintiff has not committed any breach of the said contract. To canvass the proposition that the letter dated July 20, 2000 issued by the defendants in favour of the plaintiff which has been accepted by the plaintiff is a binding contract, the learned counsel has cited the following decisions: (A) Kollipara Sriramulu (dead) by his legal representative v. T. Aswatha Narayana (dead), AIR 1968 SC 1028; (B) Dr. Jiwan Lal and others v,. Brij Mohan Mehta and another, AIR 1973 SC 559; (C) Punjab State Electricity Board, Patiala v. M/s. Abnash Textile Trading Agencies, Ambala City, AIR 1986 P&H 323. (II) The impugned notice dated January 30, 2002 is invalid, illegal, contrary to law and action based on this notice is therefore impermissible. To canvass the aforesaid proposition, the learned counsel has relied upon the following judgments: (A) Corporation of the City of Nagpur v. The Nagpur Electric Light and Power Company Limited, AIR 1958 Bombay 498; (B) Maharashtra State Electricity Board v. M/s. Madhusudandass and Brothers, AIR 1966 Bombay 160. (III) Since the plaintiff's appeal is pending before the AAIFR which is an appeal under the provisions of SICA, it is not open to the defendants to disconnect the power supply. (IV) The defendants have acted arbitrarily or maliciously and they are also acting contrary to the doctrine of promissory estoppel. On the aforesaid premises, the learned counsel contended that there is no prima facie case in favour of the plaintiff, balance of convenience also does not tilt in favour of the plaintiff and if injunction is not granted more than 1100 workers would be unemployed as the plaintiff company would closed down in the event of disconnection of power supply to it and therefore according to the learned senior counsel, the order which is impugned in this appeal is required to be quashed and set aside by granting injunction as prayed for in the application Ex.5 till disposal of the suit and therefore appeal requires admission and he therefore urged to admit the appeal. 6. Mr. Majmudar, learned counsel for the defendants contended that there is no concluded contract. The letter dated July 20, 2000 issued by the defendants in favour of the plaintiff was the off-spring of the request made by the plaintiff company to the State Government for reconnection of the power supply and in pursuance of the said request the Government of Gujarat has advised the GEB to reconnect the power supply subject to the terms and conditions contained in the letter dated July 20, 2000. According to the learned counsel, condition (i) of the said letter amply clear and it unequivocally suggests that the plaintiff will have to pay Rs.10 lacs every month against the past dues till formulation/sanction of the rehabilitation scheme of the BIFR, New Delhi. It is also contended by the learned counsel that the plaintiff has filed first Reference being Reference No.103 of 1999 before the BIFR which came to be dismissed and the appeal preferred against the said order came to be withdrawn on that very day. Therefore, the reference for formulation/sanction of rehabilitation scheme came to be rejected and from that very day the concession granted vide letter dated July 20, 2000 came to an end. What is asserted by the learned counsel is that the plaintiff cannot be permitted to take advantage of clause (1) of the letter dated July 20, 2000 because by filing one after another reference with a view to show that till today the rehabilitation scheme has not been formulated or sanctioned by the BIFR it cannot be permitted to enjoy the electricity only on payment of RS.10 lacs (which has been subsequently raised to RS.25 lacs) which is a very meagre amount and even less than the interest of the total outstanding from the plaintiff. The learned counsel further contended that the principles of promissory estoppel would not be applicable to the facts of the present case. On the contrary the plaintiff has to fulfil its promise, that is, on adjudication of reference No.103 of 1999 it had to come forward with the clear case that the reference has been decided against it and therefore it is not entitled to avail the facility of continued supply of electricity on payment of the meagre amount of Rs.10 lacs only which has been subsequently raised to Rs.25 lacs. It is also contended by the learned counsel that Section 22 of the SICA cannot be made applicable to the facts of the present case since in view of the fact that the defendants have not filed any suit but the defendants have issued a notice under Section 24 (1) of the Act which is a statutorily prescribed notice under the Act and as per the said provisions the defendant GEB is entitled to disconnect the electricity supply forthwith. Lastly it is contended that there is no prima facie case in favour of the plaintiff nor the balance of convenience tilts in its favour. On the contrary there is prima facie case in favour of the defendants and the balance of convenience also tilts in their favour and if the injunction is granted, the defendants have to face tremendous irreparable injury which cannot be compensated in terms of money as the defendant GEB cannot run without funds which would adversely affect the functioning of the GEB and in that event it may not be able to supply electricity to small companies and farmers. The learned counsel also contended that in the last reference being Reference No.199 of 2001 filed by the painful before the BIFR, it has observed in its order that the plaintiff is not rendering the correct accounts by showing its balance sheet and has not come with clean hands and therefore the plaintiff is disentitled to equitable relief of injunction and deserves no protection and in view of this also the plaintiff is not entitled to the discretionary relief of injunction. He therefore urged that there is no merit in the Appeal from Order which deserves to be dismissed and urged that the appeal may be dismissed. Mr. Majmudar, learned counsel for the defendants also heavily pressed for costs. He urged that heavy cost may be imposed on the plaintiff and the appeal may be dismissed with costs. (I) To canvass the proposition that there is no concluded contract between the parties, Mr. Majmudar, learned counsel for the defendants relied upon the following judgments: (A) Multichannel (India) Limited v. Kavitalaya Productions Pvt. Ltd., AIR 1999 Madras 59; (B) M/s. Saral Trading Co. v. M/s. Mahesh Steel Traders, New Delhi, AIR 1987 Delhi 4. (II) To canvass the proposition that in suit challenging the validity of the electricity consumption bill in due course, injunction should not be granted, he relied upon the following judgments: (A) Siliguri Municipality and others v. Amalendu Das, AIR 1984