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

2. The appellants Bihar State Electricity Board, Patna hereinafter referred to as the Board, entered into an agreement with the respondent - M/s. Green Rubber Industries, a partnership firm, hereinafter referred to as the firm, on the latters application dated July 26, 1978, for supplying the electricity of 60 KVA and on April 13, 1981 gave electricity connection. The firm later applied that it may be given 45 KVA instead of 60 KVA and it deposited the requisite sum of Rs. 2700 and a fresh agreement was executed on May 2, 1981. On May 29, 1981 the firm was given fresh connection of 45 KVA. According to the firm it requested the Board of June 19, 1981 to cut off the connection. The firm received the bills for minimum guaranteed charges for the months of June, July, August and September 1981, though according to it no electricity was consumed by it during that period. According to the Board on failure to pay the bills, the supply was disconnected on September 28, 1981. The firm ultimately received a demand notice in October 1981 for the minimum guaranteed charges from June 1981 to August 1981 amounting to Rs. 22, 951.50. The firm having not paid the amount, the Board sent a requisition to the Certificate Officer who sent a notice to the firm on July 6, 1984. Rejecting the contention of the firm that it was not liable to pay, the Certificate Officer proceeded to pass an order for attachment of the firms property wherefore the firm filed a writ petition in the High Court of Judicature at Patna under Articles 226 and 227 of the Constitution of India for quashing the bills as well as the certificate proceedings3. Before the High Court at the Board contended that the firm was liable to pay the minimum guaranteed charges in terms of the agreement, the disconnection itself having being in terms thereof4. The High Court took the view that the Board itself having effected the disconnection it was not entitled to any charges for the period after September 1981 and it was not open to the Board to contend that under clause 9 of the agreement it was not open to either party to terminate the agreement of minimum guaranteed charges before the expiry of two years from the date of the agreement. In that view of the matter, the High Court quashed the bills as well as the certificate proceedings, but allowed the charges for the months of July, August and September 1981 to be adjusted against the security money

Court's reasoning:
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