Case: Amalgamated Electricity Co. Ltd Vs. Jalgaon Borough Municipality

The facts of the case lie within a very narrow compass. The plaintiff/appellant entered into an agreement to supply electrical energy to the Jalgaon Borough Municipality as far back as 1944. The energy was to be supplied on the basis of the agreement executed between the parties in the year 1944. This agreement expired to wards the end of January 1951 and a fresh agreement which is dated May 29, 1951, Ext. 39, which was to commence from February 1, 1951, was executed between the parties. This agreement was to ensure for a period of five years. In the present appeal we are concerned with the terms and recitals of this agreement, particularly clause 3 thereof.The plaintiff averred inter alia that under the agreement the defendant was bound to consume electrical energy for 16 hours a day and pay the minimum charges even if no actual consumption was made. This claim was put forward by the plaintiff in December 1953 on the basis of clause 3 of the agreement. Consequent upon its claim the plaintiff sent a number of bills to the defendant which it refused to pay and hence the present suit was instituted on February 27, 1956. Before the Trial Court the defendant Municipality denied the allegations of the plaintiff and averred that under the terms of is the agreement the Municipality was not bound to pay to the plaintiff Company any minimum charges even if the electrical energy was not consumed. It was also alleged that even if there was any such clause in the agreement it was void under s. 23 of the Indian Electricity Act 197. A number of other defences were also taken with which we are notTrial Court of the Civil Judge, Senior Division, Jalgaon accepted the defendants plea and dismissed the suit of the plaintiff/appellant. The plaintiff thereupon preferred an appeal to the High Court of Bombay which upheld the decree of the Trial Court and dismissed the appeal negativing the plea put forward by thefor both the parties agreed before us that the fate of the entire case depended upon the interpretation of clause 3 of the agreement Ext. 39 which appears on pp. 275-277 of the printed Paper Book.

Court's reasoning:
The plaintiff/appellants case was based mainly on clause 3 of the agreement but the High Court instead of concentrating its attention on the interpretation of the scope and ambit of this particular clause appears to have entered upon a covering inquiry and a detailed determination of the history of the case, the various clauses of the agreement executed, the licence taken by the appellant, and so on, which, in our opinion, were not at all germane for the decision of the simple issue which arose in thisanalysis of clauses 2 and 3 of the agreement clearly shows that these two clauses are independent and separate provisions dealing with different contingencies. If there is any link between the two it is only that the reason for making concession in clause a for charging rate of 0.5 annas per unit over first 50 units is the fact that the plain tiff company was guaranteed payment for electrical energy to be sup plied during fixed period whether or not it is consumed by the Municipality. Clause 3 first of all stipulated that in normal times the Municipality was bound to take supply of electrical energy for a "- minimum period of 16 hours a day and in view of this minimum guarantee the Company would supply electricity for a maximum period of 20 hours a day. In doing this, however, four hours, namely from 6 P.M. to 10 P.M.., would be excluded, because these being the peak hours the Company would be at liberty to supply electricity to other consumers. The terms of clause 3 appear to us to be absolutely - clear and unambiguous and it was not at all necessary for the High Court to have gone into a plethora of extraneous circumstances when the terms of that document do not admit of any ambiguity. The High Court seems to have completely overlooked the fact that clause 3 of the agreement embodied what is known in common parlance as the doctrine of minimum guarantee i.e. the Company was assured of a minimum consumption of electrical energy by the Municipality and or the payment of the same whether it was consumed or not. That was the reason why the Company was prepared to charge a minimum rate of 0.5 anna per unit over and above the first 50 units. The minimum charge of 0.5 anna per unit, therefore, was actually the consideration for the minimum guarantee allowed to the plaintiff under clause 3 of thebale reading of clause 3 is sufficient to indicate that this particular term of the contract was in direct compliance with the provisions of the proviso to s. 22 of the Act which ensures a provision for minimum guarantee for the supply ofit is obvious that if the plaintiff company was to give bulk supply of electricity at a concessional rate of 0.5 anna per unit it had to lay down lines and to keep the power ready for being supplied as and when required. The consumers could put their switches on whenever they liked and therefore the plaintiff had to keep every thing ready so that power is supplied the moment the switch was put on. in these circumstances, it was absolutely essential that the plaintiff should have been ensured the payment of the minimum charges for the supply of electrical energy whether consumed or not so that it may be able to meet the bare maintenancethese reasons, therefore, we are satisfied that t he interpretation put by the Courts below on the agreement Ext. 39. was legally erroneous and cannot be accepted.