J K Tyre And Industries Ltd vs State Of Karnataka on 18 December, 2024

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Karnataka High Court

J K Tyre And Industries Ltd vs State Of Karnataka on 18 December, 2024

NC: 2024:KHC:52393 WP No. 9969 of 2021 SRI.S.SRIRANGA., SENIOR COUNSEL., FOR SMT. PADMA.S.UTTUR., ADVOCATE FOR R-2) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO DIRECT THE RESPONDENTS TO RELAX THE PAYMENT OF DEMAND CHARGE/FIXED CHARGES DURING THE LOCKDOWN PERIOD AND RESULTED THE PAYMENTS MADE BY THE PETITIONER ANNEXURE (J AND K) TOWARDS DEMAND CHARGE/FIXED CHARGES ANNEXURES (G AND H) DURING THE LOCKDOWN PERIOD.

THIS PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 15.11.2024, COMING ON FOR PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:

CORAM: THE HON'BLE MR JUSTICE N S SANJAY GOWDA CAV ORDER

1. This Writ Petition has been filed seeking a direction to the respondents to relax the payment of demand charges / fixed charges during the period of lockdown, and to refund such amounts paid by the petitioner towards demand charges / fixed charges during the period of lockdown.

2. The case of the petitioner is that it had entered into a contract for supply of electricity with the erstwhile -3- NC: 2024:KHC:52393 WP No. 9969 of 2021 Mangalore Electricity Supply Company Limited ("MESCOM") for supply of electricity and there was a contracted demand under said agreement. It is their case that clause 3 of the contract provided for a reduction of minimum charges and this would come into operation when the petitioner was unable to use the electrical energy supplied under the agreement owing to causes like war, mutiny, riot, earthquake, hurricane, strike, tempest and accident to machinery.

3. It is contended that the entire Nation was ordered to be locked down by the Union of India on 24.03.2020, as a consequence of which the entire Nation came to a standstill and the movement of every citizen was curtailed completely.

4. It is therefore contended that due to the lockdown declared by the Union Government, the petitioner could not obviously run the Unit and as a consequence, use the electricity supplied.

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NC: 2024:KHC:52393 WP No. 9969 of 2021

5. The petitioner, therefore, seeks to place reliance on clause 3 of the Agreement and demands that the minimum charges that would be collected is required to be refunded.

6. The petitioner also seeks to contend that for this period of lockdown, the Government had in fact issued a Circular in respect of MSMEs and this also indicated that industries could not at all function during the period of lockdown and consequently, the petitioners were entitled to invoke the contractual clause and claim the benefit thereunder.

7. The respondent, on the other hand, contends that the petitioner was not entitled to any waiver of the demand charges since the same was only given to MSMEs. It is contended that the petitioner was bound to pay the minimum charges as prescribed under the Tariff Schedule and the reliance placed on the contractual clause, in light of the Tariff Holder, would have no bearing on the matter.

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NC: 2024:KHC:52393 WP No. 9969 of 2021

8. Reliance was placed on the judgment rendered by the Apex Court in the case of Indian Oil Corporation Ltd.1, a judgment rendered by the Gujarat High Court in M/s. K. B. Ispat Private Ltd.2, a judgment rendered by the High Court of Telangana in M/s. Sarwottam Ispat Ltd.3 and also a judgment rendered by this Court in M/s. Shree Renuka Sugars Ltd.4

9. It is not in dispute that there was an agreement entered into between the petitioner and the erstwhile 1 Indian Oil Corporation Limited and Another v. Kerala State Road Trading Corporation and Others, (2018) 12 SCC 518. 2 M/s. K. B. Ispat Private Limited v. State of Gujarat, R/Special Civil Application No.7251 of 2020.

3 The Southern Power Distribution Company of Telangana Limited and others v. M/s. Sarwottam Ispat Limited and Others., W.A.120/2021 4 M/s. Shree Renuka Sugars Ltd. & Anr. v. State of Karnataka & Ors., W.P. No.1509/2024dd. 23.07.2024 at Bengaluru. -6-

NC: 2024:KHC:52393 WP No. 9969 of 2021 MESCOM for permanent high tension power supply. In fact, two agreements were entered into one in respect of installation bearing RR. No.HT 57 and another registered RR. No.HT 138.

10. In both these agreements, Clause 2 stipulates that MESCOM should supply electricity and the consumer should receive the contracted demand. Clause 3, however, contemplates a reduction of minimum charges and the said clause reads as under -

"3. Reduction of Minimum Charges : If at any time Consumer is prevented from receiving and using electrical energy supplied under this agreement either in whole or in part owing to causes like war, mutiny, riot, earthquake, hurricane, strike, tempest and accident to machinery or if the supplier is unable to supply power for the reasons stated above, the contracted demand for such period shall be altered accordingly, provided, due notice of such causes and extent of such reduction sought for its for the full billing month(s)."

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NC: 2024:KHC:52393 WP No. 9969 of 2021

11. A reading of the said clause would clearly indicate that if the petitioner was prevented from receiving and using electrical energy in respect of the force majeure cause i.e., for acts of God which were not under the control of any person, the petitioner would be entitled for reduction in the minimum charges.

12. A dispute arose as to whether minimum charges had been levied at all and, as a consequence, an order was passed on 23.08.2024 directing an affidavit to be filed by Chamundeshwari Electricity Supply Corporation ("CESCOM") and in response, the Managing Director-respondent No.2 has filed an affidavit stating that the petitioner had consumed the following units of energy and wheeled energy for the month of February, March and April in respect of both installations:

"7. I state that as per the electricity bill for the month of February 2020, for the connection no.HT-57 petitioner had consumed respondent's energy to the tune -8- NC: 2024:KHC:52393 WP No. 9969 of 2021 of 44,098 units and has wheeled energy to the tune of 29,25,000 units. As per electricity bill for the month of March 2020, petitioner had consumed respondent's energy to the tune of 11,641 units and has wheeled energy to the tune of 25,00,000 units. As per the electricity bill for the month of April 2020, petitioner had consumed respondent's energy to the tune of 12,436 units and wheeled 70,000 units of energy.

8. I state that as per the electricity bill for the month of February 2020, for the connection no.HT 138 petitioner had consumed respondent's energy to the tune of 74,470 units and has wheeled energy to the tune of 33,25,000 units. As per electricity bill for the month of March 2020, petitioner had consumed respondent's energy to the tune of 29,801 units and has wheeled energy to the tune of 29,75,000 units. As per the electricity bill for the month of April 2020, petitioner had consumed respondent's energy to the tune of 14,400 units and wheeled 1,65,000 units of energy."

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NC: 2024:KHC:52393 WP No. 9969 of 2021

13. In response to said affidavit, a counter affidavit was filed by the Chief General Manager Commercial and Accounts of the petitioner-Company stating that for the month of April, in respect of HT-57, the units consumed was only 3.1%, and in respect of HT-138, the units consumed was only 5.1% of the units as compared to the average consumption for the earlier months.

14. It is also stated in the affidavit that the Company was required to consume the bare minimum electricity for the purposes of lights, security, CCTV and for equipment which could not be shut down. But the fact that they had consumed only 3.1% and 5.1% of the average consumption itself indicated that the Company had shut down its plant due to the lockdown.

15. The tabular column stated in the affidavit is reproduced in order to have a better understanding of the factual context:

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                                                           NC: 2024:KHC:52393
                                                          WP No. 9969 of 2021




RR       Month          Total           Wheeled            CHESCOM        Demand
No.                     energy          energy             energy         Charges
                        consumed        consumed           consumed
                        in units        in units
HT-57    December         30,99,879       28,50,000              43,257   16,95,750
         2019
         January         31,10,435        29,50,000              27,863   16,95,750
         2020
         February        30,89,030        29,25,000              44,098   17,36,280
         2020
         March 2020      25,11,641        25,00,000              11,641   16,95,750
         April 2020         91,800              70,000           12,436   16,95,750
         May 2020        15,92,496        11,40,000          4,52,496     16,95,750
         June 2020       32,56,718        28,25,000              51,893   16,95,750
HT-      December        38,79,521        36,00,000              34,414   18,74,250
138      2019
         January         36,69,603        35,00,000              31,008   18,74,250
         2020
         February        35,29,800        33,25,000              74,470   18,74,250
         2020
         March 2020      30,04,801        29,75,000              29,801   18,74,250
         April 2020       1,79,400             1,65,000          14,400   18,74,250
         May 2020        14,87,401        11,30,000          3,57,401     18,74,250
         June 2020       34,23,000        28,50,000          1,32,648     18,74,250

16. As could be seen from the tabular column, as against the average consumption of the 29,52,746 units for HT-57 and 35,20,931 units for HT-138, the consumption of energy for the month of April, 2020 was only 91,800 and 1,79,400 units.

17. This affidavit is not disputed by MESCOM. It is therefore clear that the petitioner-Company utilized

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NC: 2024:KHC:52393 WP No. 9969 of 2021 only 3.1% in respect of HT-57 and 5.1% in respect of HT-138. If a large company which was consuming electricity in terms of lakhs of units consumes only a fraction of said electricity, it is obvious that the factory was indeed shut down.

18. It cannot be in dispute that there was a lockdown in force in the month of April, 2020 and consequently, even if the petitioner-Company wanted to run its unit by virtue of the lockdown, it would not be able to secure the presence of any of its employees to run the unit.

19. In my view, therefore, the pandemic which gripped the entire country leading to a total shut down, would fall within the force majeure clause which, in turn, led to the petitioner being unable to use the electricity supplied to it.

20. An argument is sought to be advanced that a 'minimum charge' and a 'demand charge' are two separate concepts and, therefore, the petitioner

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NC: 2024:KHC:52393 WP No. 9969 of 2021 cannot seek reduction in the minimum charges when, in essence, a demand charge was made.

21. A definition of the 'demand charge', as reproduced in the affidavit, would indicate that it is a charge levied to a consumer which is based on a contracted demand or maximum demand recorded. 'Minimum charges', as per the definition indicated in the affidavit, means the minimum charges payable under the tariff schedule.

22. It is to be noticed here that the demand charges, as stated in the affidavit, is the sum of money that is to be paid by the consumer per KVA of the contracted demand every month and this would mean that whether a consumer consumes power or not, he is required to pay the minimum demand charges on the basis of the contracted demand.

23. The argument advanced by CESCOM -- that demand charges and minimum charges are two different concepts -- are only arguments being put forward to

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NC: 2024:KHC:52393 WP No. 9969 of 2021 get over their contractual liability. If, at the end of the day, a consumer is required to pay a minimum amount of money whether he uses electricity or not, that would be the 'minimum charge' as contemplated under the agreement and since it is clear that the unit of the petitioner was forcibly shut down due to the lockdown, Clause 3 of the contract would come into operation and consequently, there should be a reduction in the minimum charge.

24. It is to be noticed here that the occurrence of a pandemic -- which is stated to be a once in a century event, and which literally brought the country to a standstill -- would definitely amount to an event which was beyond the control of anyone and in such a situation, the petitioner would be justified in invoking its contractual right to seek a reduction in the minimum charges.

25. Consequently, the respondent - CESCOM is directed to retain only 3.1% and 5.1% of the demand charges

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NC: 2024:KHC:52393 WP No. 9969 of 2021 of Rs.16,95,750/- for HT-57 and Rs.18,74,250/- for HT-138 respectively for the month of April, 2020 and refund the remaining to the petitioner or adjust the same in the future bills.

26. It is, however, clarified that nothing said in this order shall be construed as laying down a precedent that the CESCOM would have to refund or adjust the demand charges in respect of other consumers as this judgment is rendered in the context of a contractual clause which existed between the parties in this case.

27. This Writ Petition is partly allowed in the above terms.

Sd/-

(N S SANJAY GOWDA) JUDGE HNM List No.: 1 Sl No.: 75

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