Case: Bihar State Electricity Board, Patna &amp; Others Vs. M/s. Green Rubber Industries &amp; Others

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 supply of energy and held that it had not been made out that it was an unreasonable levy. 21. A Division Bench of Allahabad High Court, in Hari Shankar v. U. P. State Electricity Board (AIR 1974 All 70 : 1974 All LJ 83), 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 the fixation of that would be included in the fixation rates for the supply of electricity. Similarly in Bhagwan Industries Pvt. Ltd. Lucknow v. U. P. State Electricity Board (AIR 1979 All 249 ), a Division Bench held that an agreement for supply of electricity 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. Abdul Gaffar v. Andhra Pradesh Electricity Board ((1975) 2 APLJ 119), 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 49(2) was neither ultra vires not arbitrary. 22. The High Court in the case at hand relied on Rajeshwar Singh v. State of Bihar (AIR 1983 Pat 194 : 1983 BLJR 429 : 1983 Pat LJR 747), 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. 23. It is true that the agreement is in a standard from a 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 reasonableness 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." Schroeder (A.) Music Publishing Co. Ltd. v. Macaulay ((1974) 3 All ER 616, 624). In such contracts a standard from 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 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 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 nudum 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 continued irrespective of whether the energy is consumed or not until the arrangement comes to an end. Even 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 endeavoring 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 statutory 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 statutory rather than contractual. In case where such agreement 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. v. La Roche Mines Ltd. ((1938) 3 All ER 755 (PC). 24. 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 September 28, 1981 but only according to the stipulations in clause 9(b) 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.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]11. 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, (sic and on his failure to do so) he will be deemed to have given a notice on the date of disconnection in terms of aforesaid clause 9(a) 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 consumer have been effected on September 28, 1981 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 9(a) 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 compulsorily availing of supply i.e. two years of the agreement whichever is longer. The (fresh) agreement having been executed on May 2, 1981 it would expire on May 1, 1983. The disconnection 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 agreement expired and hence the agreement must be deemed to have determined only on May 1, 1983. During this period the consumers liability to pay the minimum guaranteed charges must be held to have continued12. 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 consider 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 ?23. It is true that the agreement is in a standard from a 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 reasonableness 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." Schroeder (A.) Music Publishing Co. Ltd. v. Macaulay ((1974) 3 All ER 616, 624). In such contracts a standard from 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 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 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 nudum 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 continued irrespective of whether the energy is consumed or not until the arrangement comes to an end. Even 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 endeavoring 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 statutory 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 statutory rather than contractual. In case where such agreement 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 inNorthern Ontario Power Co. Ltd. v. La Roche Mines Ltd. ((1938) 3 All ER 755 (PC)24. 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 September 28, 1981 but only according to the stipulations in clause 9(b) 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