1989 (11) TMI 309 - SC - Indian Laws

Summary

Issues Involved:
1. Liability to pay minimum guaranteed charges despite disconnection.
2. Validity and reasonableness of the agreement stipulating minimum guaranteed charges.
3. Power of the Board to enter into the agreement and enforce minimum guaranteed charges.

Summary:

1. Liability to Pay Minimum Guaranteed Charges Despite Disconnection:
The primary issue was whether the firm was liable to pay minimum guaranteed charges even after the electricity supply was disconnected on September 28, 1981. The High Court quashed the bills and certificate proceedings, holding that the Board could not claim charges post-disconnection. However, the Supreme Court found that under clause 9(b) of the agreement, the disconnection did not terminate the agreement immediately. The agreement was deemed to have continued until May 1, 1983, and thus, the firm was liable to pay the minimum guaranteed charges until that date.

2. Validity and Reasonableness of the Agreement Stipulating Minimum Guaranteed Charges:
The agreement included a clause requiring the consumer to pay minimum guaranteed charges irrespective of actual energy consumption. The Supreme Court upheld this clause, referencing historical and legal precedents that supported the reasonableness of such stipulations. The Court noted that these charges were intended to cover the Board's overhead installation expenses, which do not vary with the quantity of electricity consumed. The Court concluded that the stipulation was not "nudum pactum" and was reasonable and valid.

3. Power of the Board to Enter into the Agreement and Enforce Minimum Guaranteed Charges:
The Supreme Court examined the statutory framework, including the Indian Electricity Act, 1910, and the Electricity (Supply) Act, 1948. It found that the Board had the authority to enter into agreements for the supply of electricity and to stipulate terms, including minimum guaranteed charges. The Court held that such agreements were envisaged by the relevant provisions of law and were binding on both parties.

Conclusion:
The Supreme Court set aside the High Court's judgment, holding that the agreement was reasonable and valid, and the firm was liable to pay the minimum guaranteed charges until the agreement was deemed terminated on May 1, 1983. The appeal was allowed with no order as to costs.