Highland Produce Co. Ltd. v. Kerala State Electricity Board

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **THURSDAY, THE 11TH DAY OF APRIL 2019 / 21ST CHAITHRA, 1941** **WA.No. 1354 of 2017** **AGAINST THE ORDER/JUDGMENT IN WPC 31507/2004 of HIGH COURT OF KERALA DATED 13-10-2016** ## **APPELLANTS/RESPONDENTS:** **1 KERALA STATE ELECTRICITY BOARD REPRESENTED BY IT'S SECRETARY, KERALA STATE ELECTRICITY BOARD LTD.,VYDHUTHI BHAVAN, THIRUVANANTHAPURAM - 695 001.** **2 THE SPECIAL OFFICER (REVENUE) KERALA STATE ELECTRICITY BOARD LTD., VYDHUTHI BHAVAN, THIRUVANANTHAPURAM - 695 001. 3 THE ASSISTANT ENGINEER KERALA STATE ELECTRICITY BOARD LTD., PEERUMEDU, IDUKKI DISTRICT. 4 THE DEPUTY CHIEF ENGINEER (APTS), KERALA STATE ELECTRICITY BOARD LTD., VYDHUTHI BHAVAN, THIRUVANANTHAPURAM - 695 001.** **BY ADVS. SRI.RAJU JOSEPH (SR.) SRI.GEORGEKUTTY MATHEW, SC, KSEB** SRI.JOSEPH ANTONY ## **RESPONDENT/PETITIONER:** **THE HIGHLAND PRODUCE CO.LTD., PASSUPARAI ESTATE, PASSUPARAI P.O., IDUKKI DISTRICT - 685 554, REPRESENTED BY ITS GENERAL MANAGER (HUMAN RESOURCES), MR.GILBERT D'SOUZA. BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR SRI.JOSON MANAVALAN SRI.K.JOHN MATHAI SRI.KURYAN THOMAS SRI.PAULOSE C. ABRAHAM SRI.P.GOPINATH (SR.)** ## **OTHER PRESENT:** **SRI RAJU JOSEPH SR, SRI JOSEPH ANTONY, SRI GOPIKRISHNAN NAMBIAR SR, SRI JAI MOHAN** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 11.04.2019, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** WA 1354/17 -2- ## **J U D G M E N T** ## Ashok Menon, J. The premises of the petitioner-company (respondent herein), a high tension consumer of electricity running a tea processing unit with an approved contract demand of 400 KVA and a connected load of 758.04 KW from the Kerala State Electricity Board (“Board” for brevity) as per Ext.P1 agreement, was subjected to inspection by the Anti Power Theft Squad (APTS) of the Board on 01.04.2003, which revealed that additional equipments with a connected load of 42 KVA were added to the existing load without first obtaining permission of the Board. Ext.P3 mahazar was prepared and demand issued to the petitioner directing them to remove the unauthorised additional connections or to get it regularised, and a penal bill as contemplated under Clause 42(d) of the Conditions of Supply of Electricity Energy, 1990, ('Regulations' for brevity) was served on the WA 1354/17 -3- Company. On steps being taken to realise the penalty charges calculated for the consumption of power for the preceding six months, the petitioner challenged it by filing WP(C) No.15789/2003 before this Court and vide judgment at Ext.P4 dated 23.05.2003, the petitioner was given liberty to file statutory appeal after depositing a sum of Rs.25,000/- towards the charges demanded and further proceedings were ordered to be kept in abeyance. The petitioner filed Ext.P5 appeal before the Deputy Chief Engineer, APTS on 30.05.2003. 2. Before the appeal was disposed of, a bill for Rs.5,78,767/- was issued on 07.07.2003 being the amount incurred for the use of electricity for the subsequent months, which included Rs.61,560/- for the period April to June, 2003. The petitioner was thus constrained to approach this Court again with WP(C) No.24573/2003, and vide Ext.P6 judgment dated 04.08.2003, further proceedings were stayed till the disposal of Ext.P5 appeal. WA 1354/17 -4- 3. Ext.P5 appeal was disposed of vide Ext.P10 order dated 05.10.2004 reducing the penalty charges from six months to five months. The petitioner impugns Ext.P10. 4. The petitioner contends that as per Ext.P1 agreement with the Board, the contract demand of 400 KVA has never exceeded despite the installation of additional equipments. It is contended that the installation of additional load alone cannot result in action to impose penalty under the Conditions of Supply, particularly in view of clauses 14(a), (b) and (c) of Ext.P1 agreement. 5. In Ext.P10, the appellate authority observed that 23.43 KW (28 KVA) additional load was found to be connected unauthorisedly for which the petitioner did not apply for either permission or regularisation before the Board and that as per clause 24, the approval of the Board was a condition precedent to the installation of the additional equipments enhancing the load of consumption. It WA 1354/17 -5- was also observed that Clauses 24 and 42 of the Regulations form part of Ext.P1 agreement and therefore, the petitioner was rightly found to be liable for penalty on account of unauthorised use of electricity as per clause 42(d). In view of the sanction that was accorded by the Electrical Inspector to connect the additional load of 69 KW on 25.10.2002, it was decided that though the detected unauthorised load was from November, 2002, the petitioner was liable to penal charges only for five months prior to the date of inspection with a further direction that the levy should continue till realisation/removal of the aforesaid unauthorised load. 6. Ext.P2 is the order of the Electrical Inspector dated 25.10.2002 wherein the petitioner was granted sanction to connect the additional equipment in tune with Rule 63 of the Indian Electricity Rules, 1956. The petitioner argued that energisation of equipments was subjected to WA 1354/17 -6- conditions stated in the Rules, and the only condition was that the alteration/addition shall be carried out only with the prior approval of the Electrical Inspector and that the date of energisation shall be informed promptly. Ext.P3 notice which was issued subsequent to the inspection, does not mention that the petitioner has exceeded the contract demand of 400 KVA. It is also submitted that the only consequence of not notifying the Board about the intended alteration, additions, substitutions or transfers without the prior approval of the Board under clause 14(c) of Ext.P1 agreement is of disconnection of electric supply, and not imposition of penalty. That apart, it is submitted that clause 14 of the agreement only refers to increase or decrease in the contract demand during the currency of the agreement. It is submitted that as per clause 20 of the agreement, the Conditions of Supply of Electrical Energy are applicable only to the extent it is not WA 1354/17 -7- contradictory to the provisions contained in the agreement. The petitioner has not violated any conditions whatsoever, warranting action under clause 42(d) of the Regulations for penalty. 7. Per contra, the Board and the other respondents would contend that in view of the fact that the petitioner had obtained sanction of the Electrical Inspector seeking energisation of an additional load of 69.07 KW without getting prior sanction of the Board, which is essential under Clause 24 of Regulations, and so, it amounts to violation sufficient to attract penal consequences under clause 42(d) of the Regulations. 8. The learned Single Judge relying on the decision of this Court in _**2014(1) KLT 307 [Alwaye Rubex (P) Ltd. v. Kerala State Electricity Board]**_ , observed that despite the additional installations being made, the contract demand was never exceeded and that imposition of penalty can only be in excess of “unauthorised usage of electricity connected”, WA 1354/17 -8- and therefore, the Writ Petition was allowed. 9. The learned Single Judge's judgment is impugned before us. The learned Senior Counsel Sri.Raju Joseph appearing for the appellant-Board contends that the learned Single Judge had relied only on the decision of _**Alwaye Rubex (P) Ltd.**_ in which it was held that the approval of the Electrical Inspector was sufficient and no approval of the Board was essential and therefore, the penalty could not have been imposed for the unauthorised additional load. The learned Senior counsel argues that inspection in the case of _**Alwaye Rubex (P) Ltd.**_ was on 17.02.2005 on which date, the Electricity Act of 2003 was holding the field and the application of Section 126(6)(b) of the Electricity Act was under consideration. In the instant case, the inspection by the APTS was on 01.04.2003, when the Indian Electricity Act, 1910 was applicable. Hence, the dictum could not have been applied here. Moreover, it is also submitted WA 1354/17 -9- by the learned Senior Counsel that the decision in _**Alwaye Rubex (P) Ltd.**_ stands challenged by the Board before this Court in Writ Appeal No.803/2014, and the appeal has been allowed by us, overruling the decision. Any additional load without permission of the Board would become unauthorised and would attract penalty under clause 42(d), is the argument of the learned Senior Counsel. 10. Sri.Raju Joseph, would further argue that clauses 14(a) and (b) of the agreement clearly prohibit the consumer from making any alteration or addition without first obtaining sanction of the Board. Hence, even if more electricity was not consumed, the mere fact that additional load was connected without prior permission, would attract the penal consequences of clause 42(d) of the Regulations. 11. Clause 14 (a) and (b) of Ext.P1 agreement reads thus:- “should the consumer desire an WA 1354/17 -10- increase or decrease in the contract demand provided in or under this agreement, the consumer shall give six months previous notice in writing to the Board specifying the increased/reduced quantity required and the Board shall upon execution of a fresh agreement for the whole supply on terms and conditions mutually agreed upon, supply such requirement, provided that the Board is satisfied about the bonafides and technical feasibilty of such a change in contract demand and provided also that sufficient surplus power is available at the corresponding point of supply at the specified time. (b) The consumer shall not make any alteration on the machinery/equipment either by way of substitution or transfer which is liable to increase the obligation of the Board to supply electrical energy in excess of the agreed contract demand and/or which may affect the supply system of the Board to its detriment. In any event the consumer shall notify the Board of the intended alteration,addition, substitutions or transfers and obtain the prior approval of the Board writing before execution of any such action.” 12. It is an admitted case that the petitioner did not first obtain approval of the Board for enhancing the connected load. Clause 24 of the Regulations would also provide that approval of the Board is necessary for making any alteration, WA 1354/17 -11- whatsoever. The sanction of the Electrical Inspector under Rule 63 of the Indian Electricity Rules, 1956 alone would not suffice, is the argument of the learned Senior Counsel. 13. In reply, the learned counsel appearing for the respondent would submit that even as per the original application, the consumer had sought for permission to connect a higher load and the usage would indicate that the full capacity had never been reached and therefore imposition of penalty in such a case is not contemplated even as per the provisions of clause 42(d) of the Regulations. 14. In the decision in _**AIR 1998 SC 1715**_ _**[M/s.Hyderabad Vanaspathi Ltd. v. Andhra Pradesh State Electricity Board and Others]**_ , the Honourable Supreme Court interpreted the nature of the agreement entered into between the Board and the consumer as to whether it was statutory or contractual and it was held as follows:- **==> picture [306 x 13] intentionally omitted <==** WA 1354/17 -12- Section 49 of the Supply Act empowers the Board to prescribe such terms and conditions as it thinks fit for supplying electricity to any person other than a licensee. The section empowers the Board also to frame uniform tariffs for such supply. Under Section 79(j) the Board could have made regulation therefor but admittedly no regulation has so far been made by the Board. The Terms and Conditions of Supply were notified in B.P.Ms.No.690 dated 17.09.1975 in exercise of the powers conferred by Section 49 of the Supply Act. They came into effect from 20.10.1975. They were made applicable to all consumers availing supply of Electricity from the Board. The section in the Act does not require the Board to enter into a contract with individual consumer. Even in the absence of an individual contract, the terms and Conditions of Supply notified by the Board will be applicable to the consumer and he will be bound by them. Probably in order to avoid any possible plea by the consumer that he had no knowledge of the terms and Conditions of Supply, agreements in writing are entered with each consumer. That will not make the terms purely contractual. The Board in performance of a statutory duty supplied energy on certain specific terms and conditions framed in exercise of a statutory power. Undoubtedly the terms and conditions are statutory in character and they cannot be said to be purely contractual.” WA 1354/17 -13- The learned Counsel for the consumer submits that clauses 14(c) and 20 of the agreement can be read along with clause 42(d) of the Regulations only if the provisions in the Conditions of Supply is not in contradiction with Ext.P1. We cannot agree going by the dictum in _**M/s.Hyderabad Vanaspathi Ltd.**_ which declared the statutory nature of the provisions in the Conditions of Supply. Further there is nothing contrary in the provisions permitting levy of penal charges for the unauthorised load insofar as there being no prohibition on that count in the agreement. The argument is raised on the ground that by Clause 14(c) of the agreement the only consequence provided for an unauthorised load with or without exceeding the contract demand is to cut off the supply, which admittedly the Board has not resorted to. We cannot agree with that argument too since the provision, in the stated contingencies, is one enabling the Board to cut off the supply and this is not in derogation of the statutory terms stipulated by the Conditions WA 1354/17 -14- of Supply. The provision to cut off supply as provided in the agreement is in addition to the statutory terms and there cannot be a finding of the one measure being contrary to the other. 15. The question of additional load without sanction came up for consideration before this Division Bench and this Court in _**2019 (1) KHC 129**_ _**(DB) [Varghese P.M. And others v. State of Kerala and Others]**_ considering the scope of 'misuse of energy' under clause 42(d) of the Regulations held as follows:- “11.According to the Board, Clause 42(d) empowers the Board to bill the misuse of energy at three times the rate applicable to the respective tariff for the previous six months from the date of detection of misuse. The learned Senior Counsel submits that a reading of Clause 42(d) would indicate that power supplied under a particular tariff if used for different purpose not contemplated in the contract for supply and for which higher tariff is applicable coming under misuse of energy within the meaning of the Act of 1910, specifically sub-section (2) of Section 23, alone would attract the WA 1354/17 -15- penal provisions under Clause 42(d). Hence, there must be a misuse to the extent that the consumer is liable to pay at a higher tariff and it must be necessarily a misuse as contemplated under the provisions of the Act of 1910. We cannot accept that view since even if there is a connected load in excess of that permitted in Section 42(d) has application. But, we agree that the same would apply only if it is categorised as a misuse of energy under the Act of 1910. 12. xxx xxx xxx Hence, a combined reading of the provisions of the Act of 1910 with Clause 42(d) of the Supply Conditions, it would be adequately clear that to invoke the provisions of Clause 42(d) there must necessarily be use in excess of contracted load or a misuse by the consumer for which a higher tariff is applicable and it must necessarily come under the definition of misuse of energy within the meaning of the Act of 1910. If it is not so, the penalty prescribed under Clause 42(d) cannot be imposed. The Board does not have a case that the tariff of the consumer has been altered because of the unauthorised additional load and hence we are of the opinion that the action taken by the Board imposing the penalty as prescribed under Clause 42(d) is unsustainable.” 16. The respondent is an HT consumer having WA 1354/17 -16- demand of 400 KVA and connected load of 758.04 KW. The inspection revealed that the respondent had increased the connected load by adding several equipments having an additional load of 42 KVA. It is an undisputed fact that no sanction of the Board as required under the statute and the agreement was obtained. 17. The learned Single Judge, relying on clauses 14(a) and (b) of Ext.P1 agreement and clause 24 of the Regulations found that action of the respondent did attract the penal provisions of Clause 42(d) of the Regulations. However, finding the binding precedent in _**Alwaye Rubex (P) Ltd.**_ concluded that penalty could not be imposed. 18. We agree with the learned Senior Counsel Sri.Raju Joseph that inspection in the case of _**Alwaye Rubex (P) Ltd.**_ was on 17.02.2005 on which date, the Electricity Act of 2003 was holding the field and the application of Section 126(6)(b) of the said Act was under consideration. The learned WA 1354/17 -17- Senior Counsel also points to BO PB 46/2003 dated 15.01.2003, produced as Ext.R1(a), an Order of the KSEB published in exercise of powers conferred by Section 79(j) of the Electricity (Supply) Act, 1948 (Central Act 54 of 1948) and other enabling provisions of the statutes, para 5 of which reads thus:- “5. In case of HT and EHT consumers the unauthorised additional load shall be got disconnected by the consumer within twenty four hours of detection of the unauthorised load by the Board's officer. A notice to this effect shall be issued to the consumer by the Board's officer immediately on detection of the unauthorised load. If the consumer fails to disconnect the unauthorised load within the time stipulated, the power supply to the premise shall be disconnected after the expiry of 24 hours. Unauthorised additional load shall be charged at the rate twice the demand charges per KVA for the additional load till the said unauthorised additional load is removed or regularised as per Rules. No penalty will be charged on the energy charges on account of unauthorised additional load. The penalty shall be for a period of previous six months if there are not convincing reasons to adopt a different date. The tariff applicable for charging the penalty shall be the HT/EHT tariff that would have been applicable for the unauthorised WA 1354/17 -18- load depending upon the purpose for which the connection was utilized. If the consumer fails to pay the bill amount the service shall be disconnected without further notice. It shall be reconnected only after payment of penalty and other charges, if any as per rules and removal or regularisation of the of the unauthorised additional load by the consumer on application before the competent authority within a period of three months from the date of detection of the unauthorised load.” This order, in amendment of clause 42(d) of the Regulations, came into effect from 18.09.2002. In view of the amendment to Clause 42(d), penalty could be imposed also for unauthorised use and the dictum in _**Varghese P.M. And others**_ would not apply. The argument of the learned counsel for the petitioner that the amendment is in contradiction with Ext.P1 agreement, is not acceptable. It is well within the powers conferred under Section 79(j) of the Supply Act empowering the Board to make Clauses or amend them, consistent with the Act and Rules. 19. Normally, a transformer can be loaded upto 120% of the rated capacity without affecting the WA 1354/17 -19- transformer, states the learned Senior Counsel. The 'contract demand' fixed in the HT agreement is for billing purpose and to ensure the minimum revenue receivable to the KSEB monthly/annually. 'Connected load' is the sum total of all the load of all the equipments connected on the consumer installation, whereas, 'contract load' is the maximum KVA demand for supply as per agreement conditions. Whether the contract demand has not exceeded/changed is irrelevant on deciding the matter of unauthorised addition of connected load. 'Contract demand' is fixed for billing purpose while 'connected load' is fixed based on the completion report submitted by the consumer along with the agreement. 20. The decision of _**Alwaye Rubex (P) Ltd.**_ relied upon by the learned Single Judge is not applicable, to the case in hand for the reasons stated above. In any event, the decision of the learned Single Judge has been reversed by a Division Bench. Our decision in _**Varghese P.M. And others**_ WA 1354/17 -20- will also not apply to the instant case because, the inspection in that case was on 05.08.2000, prior to Ext.R1(a) G.O in amendment of Clause 42(d) came into force. There is no doubt that the connected load has been exceeded by the connection of additional equipments, for which, no sanction of the Board was obtained. The approval by the Electrical Inspector alone would not be sufficient. The penalty as per Ext.P10 is therefore, upheld. The appeal is allowed and the impugned judgment allowing the writ petition is set aside. The Writ Petition is dismissed. No costs. ## **Sd/-** ## **K.VINOD CHANDRAN** ## **JUDGE** ## **Sd/-** ## **ASHOK MENON** **JUDGE** jg