| SooperKanoon Citation | sooperkanoon.com/381327 |
| Subject | Civil |
| Court | Karnataka High Court |
| Decided On | Oct-20-1993 |
| Case Number | W.P. Nos. 28054 and 28055 of 1993 |
| Judge | Shivashankar Bhat, J. |
| Reported in | ILR1994KAR205; 1993(4)KarLJ584 |
| Acts | Evidence Act, 1872 - Sections 115; Electricity Supply Act, 1948 - Sections 49; Electric Power Tariff, 1992; Karnataka Electricity Supply Regulations, 1988 - Regulation 2.17 |
| Appellant | Bhoruka Power Corporation Ltd. |
| Respondent | State of Karnataka |
| Appellant Advocate | S.N. Murthy, Adv. |
| Respondent Advocate | B.V. Muralidhar, HCGP for R-1, ;S.G. Sundaraswamy, Sr. Adv. and ;N.K. Gupta, Adv. for R-2 |
| Disposition | Petition dismissed |
Shivashankar Bhat, J.
1. Though there are two petitioners, the first petitioner is the actual petitioner and therefore hereafter the reference will be only to the said petitioner unless the context requires otherwise.
2. The decision of the second respondent-Board dated 29.7.1993 is under challenge. By that decision the Board conveyed to the petitioner that rebate in demand charges sought for by the petitioner cannot be considered as the same is not covered in the Agreement executed by the petitioner. The second subject referred in the said decision is not necessary to be stated since there is no challenge to that aspect. The State of Karnataka decided to invite private participation in the generation of electrical energy in the State, by setting up mini hydel plants in the private sector. The petitioner was the first one to venture into setting up a mini hydel plant. An Agreement was entered into between the State Government and the petitioner on 3.2.1986 (Annexure-A) in this regard. The Agreement permitted the petitioner to supply power to its sister concerns, one of them being the second petitioner. The Agreement as entered into initially was for a period of 25 years. There is no dispute now that subsequently the period was increased to 30 years instead of 25 years. There is also no dispute that the petitioner was permitted to supply electricity to third parties also, apart from the sister concerns of the petitioner. There is also no dispute that the petitioner is permitted to charge its own price for the supply of electricity produced by the petitioner and supplied to its sister concerns and the third parties. Since the dispute pertains to the demand charges, another aspect which is relevant is to note that the petitioner and others to whom petitioner has been supplying electricity are also entitled to draw electricity produced and supplied by the Board for which the uniform tariff rate is applicable. After the agreement with the State Government, the Board (its Chief Engineer, Electricity General) wrote a letter to the petitioner on 16.2.87, which according to the petitioner enumerates the terms and conditions governing the permission accorded to the petitioner under Section 45 of the Electricity Supply Act, 1948. This provision imposes certain restrictions for the establishment of new generating stations, etc. The previous consent in writing of the Board is necessary to establish or acquire a new generating station or to extend or replace any major unit of plant or works pertaining to the generating of electricity in a generating station. Some of the terms and conditions stated in this letter are:
1) The mini micro hydel plant to be established by the petitioner shall be worked to generate power for bona fide use only and the power so generated shall not be sold to anybody.
2) (Clause 5) The permission was valid only for a period of 11/2 years within which the generator set shall be commissioned.
'3) (CM 4) The captive plant energy fed into the K.E.B. grid will be metered at a location as may be decided by the Board (the meter being calibrated and scaled by the Board) and the quantum of energy recorded in the meter less 10% towards wheeling and T & D losses will be delivered to the entrepreneur at his H.T. terminals at the point of supply in his H.T. installation. The wheeling charges cover the service charges for making use of Board's transmission line.
4) (Cl. 18) Allowing captive energy fed into the grid to be utilised by a H.T. installation, shall entail a rebate in demand charges only when the power from the captive unit is fed into the system during peak hours throughout the month.
5) (Cl. 20) The percentage of 10% for wheeling charges/loss factor will be liable for review by Tariff Committees set up by the Board to go into the question of fixing electricity tariffs periodically.
6) (Clause 22) Your request for full power supply during period of maintenance shut down of your plant will be considered on a case to case basis and in any case such plant shutdown will not normally be permitted during period of Energy/Demand shortage in the system'.
Clause 18 quoted above is highlighted by the petitioner in support of its contention.
3. Though the Writ Petition thereafter refers to the Agreement executed between the petitioner and the Board on 25.11.92, it is advantageous to refer to a few correspondence between the parties chronologically. On 25.10.1991 petitioner wrote to the Board stating that the installation of the turbines and generators were commenced and the switch yard is nearing completion. The letter refers to certain points requiring close co-ordination between the parties. Therefore it requested the Board to convene a meeting to discuss the points. On 30.11.91 the Board proposed to have a joint meeting during December 91/January 1992. This letter stated that the meeting was to sort out all the modalities of banking and wheeling. The petitioner wrote again on 4th March 1992 pointing out that the Joint Meeting should be arranged to sort out all the modalities, since the project was scheduled for commissioning during April/May 1992. On 2.7.92 petitioner again wrote stating that the project was ready for commissioning by the end of the month and the petitioner would be generating full power and the lines would be synchronised with the grid under the supervision of the Board. Thereafter the letter says:
'As per the agreement entered between the company and the Government on 3.2.1986, the banking and wheeling matter is to be decided between the Board and the Company. Therefore, 'we request your goodself to kindly call for an immediate meeting and finalise this matter'.
On 28.7.1992 the petitioner sent a message to the Chairman of the Board stating that the synchronisation with the grid could be done by 7/8th of August 1992 but the petitioner will not be able to use/sell the power for want of proper agreement between the petitioner and the Board regarding banking and wheeling of the power generated. Therefore the Chairman was requested to expedite the matter. Obviously a draft Agreement was sent to the petitioner on 15.9.1992. The petitioner responded as per the letter of the same date (Annexure-R7). The petitioner's letter refers to the draft copy of Agreement as the one regarding banking and wheeling arrangement. The letter further states; 'We find the draft to be generally in order except for a few minor points enumerated below'. Eight points were referred thereafter. Point No. 3 stated that the percentage of 10% towards wheeling charges and line losses should not be altered during the lease period of 30 years and therefore Clause (4b) in the draft Agreement was sought to be deleted. Point No. 5 referred to the supplying of needs of the users during the period of shutdown of plant under certain circumstances. Point No. 8 is relevant, which reads as follows:
'Clause No. 18 as appearing in KEB permission letter No. T/EEG/AE- 4/36092-36403 dated 16.2.87 of the Chief Engineer Electricity (General) regarding rebate in demand charges may please be incorporated in the agreement'.
A copy of the letter sent by the Board along with its draft Agreement on 15.9.92 is also presented to the Court by the Board as Annexure-R11.
4. Annexure-R10 is the copy of the draft Agreement prepared by the petitioner where there is a reference to the demand charges payable to K.E.B. in respect of contract demand by the User Industries subject to the limitation stated therein. However, the fact remains that the Agreement was ultimately executed on 25.11,92 (Annexure-C) which is identical to the above referred draft Agreement sent by the Board to the petitioner with some variations. While the draft Agreement sent by the Board provided for the revision of 10% towards wheeling charges and line losses once in 3 years by the Board, it is not found in the final Agreement Annexure-C. There is no reference in the Agreement to any 'demand charges'.
5. After the Agreement came into force the petitioner wrote to the Chairman of the Board on 7.12.92 (Annexure-R9). In this the petitioner stated that:
'.....One of the important issue of rebate in demand charges as already agreed to in the permission letter of Chief Engineer, Elecy. (Genl.), KEB has been excluded in the final agreement.
Due to the urgency in executing the agreement so that power generation at Shivapur, which was delayed for a long time could commence, the agreement was executed without any further discussion.
We wish to once again submit that the rebate in demand charges as per clause 18 of KEB permission letter No. T/EEG/AE-4.36092-36103 dated 16.2.1987 (letter copy enclosed) may please be given effect to. The installed demand of Shivapur being 22.5 MVA an equivalent rebate in demand charges for atleast Bhoruka Steel Limited whose Contract Demand is 18.75 MVA may please be permitted from 1st January 1993. Both the units of Shivapur would have been commissioned by then'.
On 28.6.93 petitioner again sought for rebate in demand charges. This letter refers to the letter of the Board dated 16.2.1987 according permission for installing the generating plant by the petitioner, which permitted a rebate in demand charges for captive consumption. The letter states that in great urgency agreement was signed between the parties and at that time there was an assurance that whatever pending items could be discussed later. Therefore, the petitioner sought for rebate in demand charges at least to the extent of energy consumed by the group of Companies of the petitioner as was contemplated in the sanctioned letter, Calculations for rebate were given (in an Annexure) to this letter. On 29.7.1993 as per the impugned letter the Board held that it was not possible to grant any rebate in demand charges.
6. According to the petitioner there was an assurance held out to the petitioner that rebate would be granted in demand charges at least when the power from the captive unit is fed into the system during the peak hours throughout the manufacture. The final Agreement dated 25.11.92 has to be read along with the earlier letter dated 16,2.1987 under which the Board accorded sanction for installing and operating generating plant by the petitioner.
7. The Board contended that the demand charge is part of the tariff and it shall have to be uniform and the Board has no power to alter the same in view of Section 49(6) of the Electricity Supply Act, 1948. The demand charge is correlated to the electricity to be supplied by the Board to any consumer and only because the consumer has his own generating plant and avails of the electricity produced by the consumer along with the electricity supplied by the Board, the demand charge cannot be reduced. The Board pointed out the difference between a demand charge and the charge levied for the actual consumption of electricity; the latter is based on the unit of consumption while the former is based on the energy to be produced. At the time of arguments it was pointed out by the learned Counsel for Board that the demand charge is worked out with reference to the capital cost of the Board proportionately to the units of electricity produced. It represents the maximum power, as against the unit of consumption produced by the Board and therefore when there is a reduced production of energy/power the regulation provides for a particular percentage of reduction of the demand charges. In view of the agreements entered into between the parties, it was contended, that the petitioner cannot travel beyond the terms of the said agreement. The petitioner has the benefit of banking its electricity with the Board and the lines of the Board are permitted to be used for wheeling the electricity and thus the electricity produced by the petitioner is stored and transported through the installations of the Board 'for which separate banking and wheeling charges are levied as agreed. The terms of the sanction letter were modified by liberalising some of the conditions such as the period of the agreement from 25 years to 30 years; permission to the petitioner to supply and sell electricity not only to its sister concerns but also to others without any restriction as to the rate to be charged by the petitioner. The Board further pointed out that the Board also has to supply electricity to the petitioner and other consumers including the sister concerns of the petitioner and others who purchase electricity from the petitioner and therefore the demand charge is fixed with reference to the factum, of the petitioner and others, to have the electricity supplied to them by the Board.
8. The question raised by the petitioner could be answered only by understanding the nature of the demand charges. In Electric Power Tariff 1992 framed by the Board, Part-l refers to High Tension supply (applicable to bulk power supply at High voltage). 'Demand charges' is referred as 'Billing Demand' in condition No. 1. The three clauses (a), (b) and (c) apart-from others indicate the basis for this demand, they are:
'(a) The billing demand shall, during unrestricted period, be the maximum demand recorded during the month or 75% of the contract demand, whichever is higher.
(b) When the Board has imposed demand cut of 25% or below conditions stipulated in (a) above shall apply.
(c) When the demand cut is in excess of 25%, the billing demand shall be the maximum demand recorded or 75% of the restricted demand, whichever is higher'.
This indicates that 'power' reflects the maximum demand and it is independent of the supply of electricity that may be supplied by the petitioner to itself or to others, even in the case of consumption-of electricity by the petitioner.
9. In the Tariff Schedule'- HT-2 (part of the above Electric Power Tariff 1992) the rate schedule is referred as follows:
'Demand charges: Rs.75% - per KVA per month PLUS Energy charges: of Billing Demand135 Paise per unit upto 1lakh units consumed in themonth.150 parse per unit above 1lakh units and upto 2 lakhsunits consumed in the month.160 paise per unit forbalance of units consumed inthe month'.
10. In the Karnataka Electricity Supply Regulations, 1988 ('the Supply Regulations' for short), Regulation 2.17 defines the term 'maximum demand' thus:
''Maximum Demand' shall mean the average amount of Kilowatts or Kilovolt amperes, as the case may be delivered at the point of supply of the Consumer and recorded during a thirty minutes period of maximum use in the month, the Board, however, reserving the right to shorten this period in special cases, if necessary'.
The above indicates that demand charge is nothing but part of the tariff and it shall have to be uniform as per Section 49 of the Electricity Supply Act, 1948. It also shows that demand charge has nothing to do with the actual consumption of electrical units by the consumer but is independent of it and is referable to the 'maximum power' to be availed of by the consumer.
11. With the above background the contentions raised by Mr. Murthy, learned Counsel for the petitioners, shall have to be considered as to whether the petitioner is entitled to invoke the Doctrine of Promissory Estoppel and enforce the alleged assurance for a rebate in demand charges as stated in the sanction letter dated 16.2.87 (Annexure-B). The said letter no way fixed the mode of computing the rebate. Further, clause 18 of the letter contemplates entailment of rebate only when the power from the captive unit is fed into the system during peak hours throughout the month. The terms stated in this letter of sanction were not adhered to in all respects while executing the Agreement on 25.11.92. For example, term/ condition No. 20 providing revision of 10% for wheeling charges by the Tariff Committee set up by the Board periodically was given up in the final Agreement resulting in the said percentage to be available to the petitioner during the entire period of Agreement of 30 years. The restriction as to the sale of electricity produced by the petitioner to others referred in the sanction letter was given up in the final Agreement. The petitioner is permitted to sell the electricity produced by it to anyone else for which the petitioner is permitted to use the installations of the Board. These substantially depart from the terms stated in the sanction letter, and confer a larger benefit on the petitioner. The Doctrine of Promissory Estoppel is not a 'one way street'. It is a Doctrine based on equity. A person who expects equitable treatment should be entitled to the said treatment bearing in mind the entire set of circumstances. When a person sets up a letter as holding out an assurance in his favour, he should be in a position to point out that the said assurance is not subject to any other conditions. The assurance held out could be enforced only under the circumstances set out while the assurance was held out. The entire set of facts and circumstances should be read together while considering whether the alleged assurance could be insisted upon without reference to other facts and circumstances. In UNION OF INDIA AND ORS. ETC. ETC. v. GODFREY PHILIPS INDIA LTD. ETC. 1. : [1986]158ITR574(SC) , inter alia the Court observed at page 816 thus;
'.....We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires, if it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the Court would not raise an equity in favour of the person to whom the promise or representation is made and enforce the promise or representation against the Government or Public authority. The doctrine of promissory estoppel would be displaced in such a case, because on the facts, equity would not require that the Government or public authority should be held bound by the promise or representation made by it'.
12. Since the demand charge is part of the tariff rate governed by Section 49 of the Electricity Supply Act, it is also not possible to hold that exercise of the said power can be defeated or nullified by applying the Doctrine of Promissory Estoppel. The overriding power of the Board under Section 49 has been highlighted in several Decisions.
In INDIAN ALUMINIUM CO. LTD. v. STATE OF KARNATAKA 2. : ILR1991KAR3789 , this aspect has been elaborately considered by a learned Judge of this Court and several other Decisions have been considered and it was held that there can be no promissory estoppel against the Legislature in the exercise of its legislative function nor can the Government or public authority be debarred from enforcing a statutory prohibition and such instrumentality cannot be compelled to carry out a representation or promise which is contrary to law.
13. Therefore when the Board is expected to adhere to uniformity in tariff rate, in the absence of special features requiring a special treatment, the Board shall have to treat all consumers alike.
14. When the assurance held out, ultimately stood merged in a contract, there is no scope to apply the Doctrine of Promissory Estoppel. If any particular assurance was held out earlier but the same was not incorporated in the written agreement, it cannot be held that the said assurance could be enforced independently of the terms of the written agreement or independently of all the terms and conditions under which the earlier assurance was held out. The normal rule is that the agreement incorporates 'all the terms and conditions governing the relationship between the parties.
15. The above principle finds support in the observations of the Supreme Court in INDIAN ALUMINIUM CO. LTD. v. KARNATAKA ELECTRICITY BOARD AND ORS 3. : [1992]3SCR213 . The Supreme Court observed at para 35 thus:
'After giving our anxious consideration to the respective contentions of the learned Counsel for the parties, it appears to us that the agreement of 1966 and 1976 were not the outcome of any unilateral promise or assurance held out by the State or the Board to the petitioner-Company. Such agreement was the result of negotiations between the parties and on such negotiations, the terms and conditions were agreed upon between the parties. Accordingly the foundation of promissory estoppel is absent and the case of promissory estoppel as sought to be made out by the petitioner-Company cannot be accepted'.
16. In NAGAPPA & ORS, v. STATE OF KARNATAKA and Ors. 4. W.P.No. 1 0895 of 1 993 DD 23.3.93 had an occasion to consider almost a similar contention, and negatived the same.
17. In view of the above it is unnecessary for me to refer to a large number of Decisions cited by Mr. Mutiny wherein the Doctrine of Promissory Estoppel were considered and applied.
18. The learned Counsel for the Board also brought to my notice that a substantial part of the petitioner's production of electricity is supplied to third parties and the petitioner is tree to charge any rate for the said supply and the petitioner in no way would suffer any injury or loss by paying the demand charges, demanded by the Board. There is considerable force in this submission. The figures found in the various documents placed before me along with a Memo dated 7.10.93 speak for themselves and it is seen that several industries and big hotels avail of the electricity produced by the petitioner and their consumption of this electricity is far in excess of the electricity consumed by the petitioner and its sister concerns.
19. Therefore, I am of the view that:
(1) The power of the respondent Board under Section 49 to fix the tariff rate uniformly, cannot be defeated by the application of the Doctrine of Promissory Estoppel.
(2) The fact situation in the instant case does not invite the application of the promissory estoppel.
(3) The terms and conditions governing the parties are the terms and conditions incorporated in the written Agreement On 25.11.92.
(4) The subject of demand charges was in the mind of the parties before the Agreement was executed and since no provision is made providing for any rebate to the petitioner in the ultimate Agreement, it cannot be said that the petitioner can seek any rebate in that regard.
Consequently, Writ Petitions are dismissed, without any order as to costs. Rule discharged.