OSWAL WOOLEN MILLS LTD.

PUNJAB STA TE ELECTRICITY BOARD & ANR.

APRIL 28, 2006

[S.B. SINHA AND P.K. BALASUBRAMANY AN, JJ.]

Electricity (Supply) Act. 1948-Sections 46 & 49-Supply to industrial consumers-State Electricity Board issued circular stipulating levy of C surcharge on consumption of electricity till the consumers switched over their supply system to higher voltage-Challenge to-Held: Electricity Board being a statutory authority was entitled to levy surcharge only in terms of tariff notification issued under the Act and not by reason of any circular.

State Electricity Board issued circular dated 2l.l.1991 stipulating levy D of surcharge @ I 7Yz% on actual consumption of electricity in respect of industrial consumers having supply from a 11 KV line till such consumers switched over their supply system to 33 KV or higher voltage. On 03.5.1991, vide another circular, the Board issued a clarification allowing exemption from surcharge for a period of one year to enable all its existing consumers to switch over their supply system to higher voltage.

E The entire controversy in the present set of cross-appeals by a consumer company (mill) and by the Board is as to from what date the period of one year should be calculated. Applicability or otherwise of the tariff notification issued under Sections 46 and 49 of the Electricity (Supply) Act, 1948 which provided F for revision oftariffw.e.f. 01.02.1994 is also in question.

Disposing of the cross-appeals, the Court

HELD: I.I. The Board is a creature of the statute. It is constituted in terms of Section 5 of the Electricity (Supply) Act, 1948. Section 46 of the Act provides for the Grid Tariff and Section 49 thereof empowers the Board to G make provision for the sale of electricity by it to persons other than the licensees. While exercising the said power the Board would be governed by the general terms which may be issued by the State in terms of Section 79 of the Act. [ 487-CJ

H 480

OS WAL WOOLEN MILLS LTD. v. PUNJAB STA TE ELECTRICITY BOARD 481

1.2. The Board being a statutory authority, its power to issue bills for A consumption of the electricity would be governed solely by the tariff notification. Such a power can be exercised by the Board only in exercise of its statutory power and not by reason of an executive power. In terms of a circular letter issued by the Board, therefore, neither any surcharge nor any penalty could be levied. Surcharge by way of additional rate or penalty can be B levied only in terms of a tariff notification. [487-G, DJ

2. The tariff notification dated 26.07.1991 speaks of levy of such surcharge inter alia on Arc furnaces. Similar is the position in regard to the notification dated 01.02.1994. As in the notification, it has clearly been stated that l 7Y. % surcharge on the above tariff should be leviable for all the C Arc furnace load consumers which were being given the supply at 11 KV, the High Court clearly fell in error in arriving at the finding that by reason of the said notification, the circular letters dated 21.01.1991 and 03.05.1991 were not superseded. The High Court failed to pose unto itself the correct question, namely, as to whether after issuance of the tariff notification, the Board could levy any surcharge@ 17Y.% on the tariff on those consumers D who did not have Arc Furnace. (487-F-G; 488-A, BJ

3.1. The question which falls for consideration is from which date the period of one year could have started. Although the company could have contended that from 03.05.1991, no surcharge could have been levied, but it E did not raise such a contention before the High Court. Herein also a limited notice was issued. (488-C)

3.2. The High Court by its order dated 29.01.1992 stated that the period of one year would start from the date when the feasible point for installation of 33KV or higher voltage sub-Station at the factory premises by the Board F was pointed out. But selection of a site for the purpose of drawing 33KV line was not an empty formality. Several factors including the convenience of the Board were required to be taken into consideration. In some cases probably compensation for acquisition of land was required to be paid. The High Court's observations might be incorrect; but then the same was accepted and the parties acted thereupon. [488-H; 489-A, BJ G

3.3. All the Courts below had arrived at a finding of fact, having regard to the Board's letter dated 03.12.1992 that the final notice in terms of the said circular had been given only on 13.05.1992. (489-C)

3.4. For the reasons aforementioned, although the company may be right H

A in its submission that the Board has no jurisdiction to levy surcharge after

29.01.1992, but as the said contention had not been raised and furthermore as notice was issued by the Court on a limited question, the company is liable to pay the surcharge with effect from 13.05.1992. However there cannot be any doubt that the surcharge@ 17Yi% was not required to be paid in terms B of the tariff notification dated 01.02.1994. (489-D-El

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2335 of2006.

From the Judgment & Order dated 23.11.2004 of the High Court of Punjab & Haryana at Chandigarh in R.S.A. Nos. 5666-5710/2003.

C R.K. Jain, Neeraj Kumar Jain and Ugra Shankar Prasad for the Appellant.

Ranjit Kumar, Rajiv Nanda, Ruchi Narula and Arvind Kumar for the Respondents.

The Judgment of the Court was delivered by

S.B. SINHA, J. Leave granted.

The appellant is a mill represented by its authorized representative. For the purpose of its working, it at all material times was and still is a consumer of electrical energy. It had for the said purpose taken electrical connection E from the respondent-Board. The connected load is 6664 KW. In terms of the tariff framed by the Board, the Appellant herein (Company) comes under the category of 'general industry'. The Board on or about 21.0l.199I issued a circular whereby it proposed to levy surcharge @ 17Yi % on the actual consumption of electricity in respect of those industrial consumers who had p been sanctioned load exceeding 5000 KW or sanctioned contract demand exceeding 5000 KVA and had supply from a 11 KV line. The said circular stipulated that surcharge would continue to be levied till conversion of supply to 33 KV or higher voltage by the consumers. It is, however, not in dispute that a letter was issued to the company intimating that for installation of 66 KV Sub Station, a site plan was required to be supplied.

Yet again by circular dated 03.05.1991, it was stipulated:

"Continuation to CC No. 5/91 dt. 21.1.91 vide which it was decided to levy surcharge @ I 7% on general industrial consumers having sanctioned load/demand exceeding 5000 KW/KVA and running at 11 H KV till conversion of supply to 33 KV or higher voltage. The matter

OSW AL WOOLEN MILLS LTD. v. PUNJAB STA TE ELECTRICITY BOARD [S.B. SINHA, J.] 483

has been reconsidered by the Board and it has been decided that the A surcharge @ l 7Yz% shall be levied on such consumers who do not switch over their supply system to 33 KV and higher voltage in line with the following provisions :

(i) A lead time of 12 months may be given to all the existing consumers having load/demand above 5000 KW/KVA and running at 11 KV B to convert supply to higher voltage within stipulated period. This period includes the time spent on getting estimated cost of works, deposit of charges with the PSEB and erection of 33 KV or higher voltage works by the consumer as well as by the PSEB . The time schedule for different activities involved for erection/completion C of higher voltage works shall be fixed by the load sanctioning authority, and any slippage/evasion in adhering to the laid down targets on the part of the consumer shall attract levy of surcharge @ 17Yz%. In case after the stipulated period, the higher voltage works of the consumers are ready but the works of the PSEB are not ready, surcharge shall not be levied and also likewise if the D Board's works of higher voltage are ready but the consumers are not ready this surcharge shall be leviable.

The validity of the said circular dated 21.01.199 I came to be questioned by the company in a writ petition, filed before the High Court, which was marked as CWP No. 7069 of 1991. In the meanwhile, the said circular letter E was modified by the Board, in terms whereof it was stipulated that a time of 12 months extendable upto the maximum of 18 months was to be granted to all the existing consumers having load above 5000 KW /KV A and running at 11 KV to convert supply system to higher voltage.

Another letter dated 19.09.1991 was issued by the Board intimating it F that electric supply had to be converted to 66 KV and hence the company was required to show the place of installation of 66 KV sub-station, failing which a penalty@ I 7Yz% would be levied. A further letter was issued by the Board demanding a sum of Rs.34 lacs towards the tentative cost of conversion.

The writ petition filed by the company, however, was disposed of stating : G

" .. .In the short reply filed on behalf of the Electricity Board, it is stated that from the petitioners I 7Y.% surcharge collected will be adjusted in the subsequent bills. It is further mentioned that there would be conversion from I I KV to 33 KV or 66 KV. Certain formalities are to be observed by both the parties in that connection and one year's H

A time has been given to the petitioners to comply with the directions.

However, it is made clear that the period of one year would start from the pointing out of feasible point for installation of sub station at the factory premises by the Board."

[Emphasis applied]

Yet again, without complying with the said directions, a demand was made by the Board from the company for depositing the said amount ofRs.34 lacs. On or.about 14.02.1992, the company replied to the said letter stating that the matter was pending adjudication before the civil court and furthermore no C other feasible point had been pointed out by the officers of the Board so far.

A site plan was again sought for from the company by the Board by a letter dated 13.05.1992, wherein it was stated :

"Your kind attention is drawn to above references and 1t 1s requested that the site plan and site for the construction of 33/66 KV Sub grid must be shown to the undersigned within 7 days and according to the instructions of the Board required amount may be deposited so that further action may be taken otherwise 17\12% surcharge will be levied."

In exercise of its powers under Sections 46 and 49 of the Electricity E (Supply) Act, 1948, (for short, 'the Act') the Board made a tariff which came into force with effect from 01.02.1994. Section (B) of the said tariff refers to the schedule thereof the relevant portion of which reads as under :

"Schedule of Tariff

F Schedule LS.-Large Industrial Power Supply

Availability

(i) This tariff shall apply to consumers having industrial connected load above I 00 KW. Their contract demand shall not be less than

100 KV A (85 KW).

(ii) No consumer availing supply of energy at high tension 11000

volts and above (33 KV and above for Arc furnace) shall increase his connected load without approval of the Board. The consumer availing supply at high tension shall indicate the rating capacity of all the step-down transformer( s) installed in his premises and H shall not increase the capacity of such step-down transformer(s)

OSW AL WOOLEN MILLS LTD. v. PUNJAB STATE ELECTRICITY BOARD [S.B. SINHA, J.) 485

without prior approval of the Board."

Clause 3 of the Schedule of Tariff reads as under :

"(A) General Category

(a) Consumers with connected load less than 1000 KW 153 Paise/Unit

(b) Consumers with connected load 1000 KW and above :

Demand Charges Rs.90/KVA

PLUS Energy Charges 128 Paise/Unit Maximum overall rate 163 Paise/Unit

(B) Power Intensive Units

(a) Consumers with connected load less than 1000 KW 158 Paise/Unit

(b) Consumers with connected load 1000 KW and above

Demand Charges Rs.90/KVA

PLUS Energy charges 133 Paise/Unit Maximum overall rate 168 Paise/Unit

The energy charges under category (A) and (B) above shall be E without prejudice to the Monthly Minimum Charges leviable under item 7 of this Schedule L.S.

Note (i) ......

(ii) Surcharge of J 7Jt2% on the above tariff shall be leviable for all the F Arc furnace load consumers which are being given supply at 11

K.V;'

From note (ii) of the aforesaid tariff, it is, therefore, evident that surcharge @ I 7Jt2% thereupon was leviable only for all the Arc Furnace load consumers which were being given supply at 11 KV. Moreover, these other mills which G were liable to bear the specified surcharge were specifically mentioned in the tariff notification. It is also not in dispute that prior to issuance of the said notification, executive orders had been issued levying such surcharge. The said executive order, however, was later on made part of the tariff.

However, on 26.07.1991, a notification was issued under Sections 46 and H

A 49 of the Act inter alia stating :

"(b) For consumers with connected load of I MW and above

Demand Charges Rs.60/- per KVA Plus Plus- Energy charges Rs.83 paise/unit

Subject to max. rate of I 07 P/Unit without prejudice to the MMC under item - 7 of this Schedule - LS

(i)

(ii) Surcharge of 17'/i% on the above tariff shall be leviable for all the Arc furnace load consumers which are being given supply at 11

KV.

(iii)

Questioning the said demand, admittedly, a suit was filed by the company.

D The trial court as also the appellate court on the basis of the materials brought on record came to the conclusion that the Board could levy such surcharge only with effect from 13 .05 .1992.

By reason of the impugned judgment the High Court opined :

"Learned counsel for the appellant could not point out any clause in the circular which stipulates the modification or suppression of the earlier circular dated 21.01.1991 and 03.05.1991. In the absence of any supersession of notifications, I am unable to hold that such notification stood superceded by virtue of a fresh notification dealing with revision of tariff for general category consumers as well as contemplate levy of surcharge for the ARC furnace load consumers. There is no clause in the said circular that surcharge will be leviable only on the ARC furnace. Still further, such argument was not raised before the courts below. Therefore, it is apparent that levy of surcharge by notification dated 21.01.1991and03.05.1991 was never superceded."

A limited notice was issued by this Court on the special leave petition filed by the company as to whether revision of tariff issued as per the memo.

No. 10061/10761/CC/T/2/Rev.Nol.XIII dated 01.02.1994 was applicable to the company or not. The Board has also approached this Court in regard to the question as to whether the one year period should be calculated from 13.05.1992 H or from the date of issuance of the notification.

OSWAL WOOLEN MILLS LTD. v. PUNJAB STA TE ELECTRICITY BOARD [S.B. SINHA, J.l 487

Two questions, thus, a.rise for our consideration in these appeals : (i) A Whether the High Court is correct in holding that in view of the fact the matter relating to payment of surcharge was governed by circulars dated 21.0 I.I 991 and 03.05.1991, which having not been superseded by the notification the impugned demand was valid in law; and (ii) what would be the proper interpretation of the judgment of the Division Bench of the Punjab B and Haryana High Court dated 29.01.1992.

The Board is a creature of the statute. It is constituted in terms of Section 5 of the Act. It is incorporated and can sue and be sued in its own name in terms of Section 12 thereof. Section 46 of the Act provides for the Grid Tariff and Section 49 thereof empowers the Board to make provision for C the sale of electricity by it to persons other than the licensees. While exercising the said power the Board would be governed by the general terms which may be issued by the State in terms of Section 79 of the Act. Surcharge by way of additional rate or penalty can be levied only in terms of a tariff notification.

Such a power, therefore, can be exercised by the Board only in exercise of its statutory power and not by reason of an executive power. Jn terms of a D circular letter issued by the Board, therefore, neither any surcharge nor any penalty could be levied.

In the year 1991, indisputably, the said circular letter dated 21.01.199 I was followed by the tariff notification issued in terms of Sections 46 and 49 of the Act. The subsequent circular letter dated 03.05.1991 was, however, not E followed by any notification making the tariff applicable with retrospective effect.

We have noticed hereinbefore that the tariff notification dated 26.07.1991 speaks of levy of such surcharge inter alia on Arc furnaces. Similar is the F position in regard to the notification dated 01.02.1994. The Board, therefore, could levy surcharge only in terms of the notification and not by reason of any circular letter. As in the notification, it has clearly been stated that 17Yz% surcharge on the above tariff should be Ieviable for all the Arc furnace load consumers which were being given the supply at I I KV, the High Court clearly fell in error in arriving at the finding that by reason of the said G notification, the circular letters dated 21.01.1991 and 03.05.1991 were not superseded. The Board being a statutory authority, its power to issue bills for consumption of the electricity would be governed solely by the tariff notification. It bei'rig a statutory authority must act within the four-corners of the statute.

The High Court, therefore, in our opinion was clearly wrong in arriving at the finding that the earlier circulars dated 21.01.1991 and 03.05.1991 were not superseded. The High Court failed to pose unto itself the correct question, namely, as to whether after issuance of the tariff notification, the Board could levy any surcharge @ l 7'h% on the tariff on those consumers who did not have Arc furnace. The High Court, therefore, misdirected itself in law in passing the impugned order.

The question which falls for consideration is from which date the period of one year could have started. Although on the basis of the aforementioned finding, the Company could have contended that from 03.05.1991, no surcharge C could have been levied; but it did not raise such a contention before the High

Court.

We have seen that herein also a limited notice was issued.

It is not in dispute that for the purpose of giving effect to the offer made D by the Board in terms of its letter dated 03.05.1991, no surcharge could have been levied immediately. A Division Bench of the High Court, as noticed herein before, by an order dated 29.01.1992 clearly stated that the period of one year would start from the date when the feasible point is pointed out.

The observation of the High Court in the earlier writ petition was in the E nature of a direction.

The submission of Mr. Ranjit Kumar, the learned Senior Counsel appearing on behalf of the Board, in this behalf, cannot be accepted. Normally the period should be counted from the date of issuance of the notification and not from the date of the High Court's judgment. The High Court, however, F made observations, whereupon both the parties acted. The said observations were made in terms of the affidavit affirmed on behalf of the Board itself.

The High Court's direction leads only to one conclusion that the cutoff date would be considered to be one inji1turo, i.e., a date after 29.01.1992 alone was required to be fixed.

Once the final notice by the Board had been issued, the negligence on the part of the consumer to point out the actual site had not been condoned by the courts.

The High Court's observations might be incorrect; but then the same

OSWAL WOOLEN MILLS LTD. v. PUNJAB STA TE ELECTRICITY BOARD [S.B. SINHA, J.) 489

was accepted. As indicated hereinbefore, the parties acted thereupon. The A period of one year in terms of the judgment of the High Court, therefore, was to start from the date when the feasible point for installation of Sub Station at the factory premises by the Board was pointed out. Selection of a site for the purpose of drawing 33 KV line was not an empty formality. Several factors including the convenience of the Board were required to be taken into B consideration. In some cases probably compensation for acquisition of land was required to be paid.

All the courts had arrived at a finding of fact, having regard to the Board's letter dated 03.12.1992 that the final notice in terms of the said circular had been given only on 13.05.1992. The company had contended that actual C feasibility was found out on 28.05.1994, but as noticed hereinbefore, the court did not accept its plea that even the date of the said notice could not have been considered to be the date for the purpose of the starting point of the period of one year.

For the reasons aforementioned, although Mr. R.K. Jain, the learned D Senior Counsel appearing for the company, may be right in his submission that the Board has no jurisdiction to levy surcharge after 29.01.1992, but as the said contention had not been raised and furthermore as notice was issued by the court on a limited question, we are of the opinion that the company is liable to pay the surcharge with effect from 13.05.1992. We may furthermore notice that the actual amount of surcharge payable from that date has already E been paid by the company to the Board. However, in view of our findings aforementioned, there cannot be any doubt that the surcharge @ 17Yi% was not required to be paid in terms of the tariff notification dated 01.02.1994.

For the reasons aforementioned, the Civil Appeals arising out of S.L.P. F (Civil) Nos .. 1398-1442 of2005 preferred by the Company are allowed to the aforementioned extent and the Civil Appeals arising out S.L.P. (Civil) Nos. 15357-58 of 2005 preferred by the Board are dismissed. In the facts and circumstances of the case, the parties shall pay and bear their own costs.

B.B.B.

Civil Appeal No. 2335/2006 partly allowed and Civil Appeal No. 2334/2006 dismissed. G