Madhya Pradesh High Court
Jindal Strips Limited And Anr. vs Madhya Pradesh Electricity Board And ... on 25 September, 1997
Equivalent citations: AIR1998MP122, AIR 1998 MADHYA PRADESH 122
Author: A.K. Mathur
Bench: A.K. Mathur, Dipak Misra
JUDGMENT A.K. Mathur, C.J.
1. This is a Letters Patent Appeal directed against judgment and order dated 7-2-1997 passed by learned single Judge in W.P. No. 2826 of 1996.
2. Brief facts giving rise to this appeal are that the appellant No. 1 M/s. Jindal Straips Limited is a Company incorporated under the Indian Companies Act, 1956 and the appellant No. 2 is its share-holder. Appellant M/s. Jindal Straips Limited (for short hereinafter referred to as the Company) has a plant in which sponge iron, steel-slabs and blooms are manufactured. The appellant Company made a request to the respondent Madhya Pradesh Electricity Board (for short 'the Board') for permission for installation and running of a generating set in parallel with the Board, grid and supply of excess energy to the Board. In response to the said letter of the appellant Company, the respondent Board wrote on 26th May, 1993 that permission under Section 44 of the Electricity (Supply) Act, 1948 (for short Act of 1948) is accorded to established run 15 M.W. turbo generator set in parallel with the Board's system. The appellant-Company further made a request for extension of said permission and by letter dated 23rd April, 1994 (Annex-A1), the Executive Director (Commercial) of the Board wrote to the Company that it has been decided to permit the Company to run 2 numbers D.G. sets of 4375 KVA each in parallel with Board's system for which permission for standby use was earlier accorded. The said letter further stated that the request of the Company to accord permission to feed energy generated by it in excess of its requirement into Board's system has been accepted subject to certain terms and conditions enumerated in the letter. Letter dated 23-4-1994 Annex.-A1 which is of great significance reads as under :
No. 5/CG/115/1928 Jabalpur/dated 23-3-94 To, M/s. Jindal Strips Limited, Kharsia Road, Post Box No. 16, Raigarh-496 001 (M.P.)
Sub : Permission for installation and running of Generating sets in parallel with MPEB grid and supply of excess energy generated by you to Board's system.
Ref. : Your letter No. JSL : 94 dated 5-2-1994 addressed to Hon'ble Minister of Energy, Govt. of M.P. Bhopal.
Dear Sirs, Please refer to this office letter No. 5/CG/ 1115/2273, dated 26-5-1993 vide which permission under Section 44 of the Electricity (Supply) Act, 1948 to instal and run one No. 15 M.W. Turbo-Generating Set in parallel with Board's system was accorded subject to the terms and conditions contained therein.
2A. On the request made vide your letter cited under reference, the matter has been further considered by the Board and it has been decided to extend the aforesaid permission. It has also been decided to permit you to run 2 Nos. D.G. sets of 4375 KVA each, in parallel with Board's system; for which permission for standby use was earlier accorded. The aforesaid permission is subject to the conditions contained in this letter hereafter.
3. Your request to accord permission to feed energy generated by you in excess of your requirement into Board's system has also been considered by the Board and it has been decided that parallel operation of your sets with the Board's system would be subject to the terms and conditions contained hereunder :
(i) You shall be required to fulfill all the technical conditions such as protection, metering, meter-reading etc. as may be specified by our C.E. (T & P), MPEB, Jabalpur.
(ii) You will be required to guarantee a minimum consumption of 27 lacs units per month for the period from April to October and 18 lacs units per month from November to March, each year. The aforesaid minimum guaranteed consumption would be subject to review whenever the tariff minimum under the relevant tariff is revised in future. The conditions of minimum guaranteed consumption, as aforesaid shall come into force w.e.f. 1-12-1993 i.e. the date of commissioning of T.G. set of 15 MW by you.
(iii) The energy supplied from Board's system to your installation and that supplied back from your captive generating sets into Board's system would be accounted for separately for the periods 10 p.m. to 6 a.m. and 6 a.m. to 10 p.m. and would be on net basis for the aforesaid two periods. For determining the energy supplied back from your system to the Board's system. 10% of the energy exported would be deducted towards wheeling and losses.
(iv) Determination of net supply from the Board to you during the period 10 p.m. to 6 p.m. would be as per illustration given below :
Let, energy of the Board fed into your system 'A' units Energy from your system fed into Board's system 'B' units Then, the net supply from the Board to you would be :
A-C.9 B = X units.
(v) Determination of net supply from the Board to you during the period 6 a.m. to 10 a.m. would be as per illustration given below :
Let, energy of the Board fed into your system 'C' units Energy from your system fed into Board's system 'D' units Then, the net supply from the Board to you would be :
C-O.9 D = Y units.
(vi) During any month you would be required to pay for X + Y units provided, however, that negative values of X and Y would be ingored. In other words, you would be required to pay for sum of positive values of X and Y at Board's tariff applicable to you. This is also subject to the condition that if sum of A and C units is less than the guaranteed minimum consumption as in para 3(ii) above, you would also be required to pay for the difference of (A+C) units and the guaranteed minimum consumption. Accounting would be done on month to month basis only.
(vii) If the value of X units is negative, the same shall be paid for by the Board @ 80 paise per unit. In case of increase in fuel cost adjustment charges (applicable to you) from the present level of 15 paise per unit, the same increase will be applicable to the aforesaid rate of 80 paise per unit. Similarly, in case of increase in HT tariff applicable to you, proportional increase shall also be applied to the rate at which payment is made by the Board to you during 10 p.m. to 6 a.m. for supply made by you. For example, if increase in tariff (overall including the PCA) is N%, the rate for supply made by you would be 80 (1+N)/100 paise per unit.
(viii) The modalities of accounting, in the event of value of Y being negative, would be decided separately.
Please acknowledge receipt of this letter and convey your acceptance to all the above mentioned terms and conditions within a period of two months from the date of receipt of this letter failing which it will be presumed that you have not agreed to the aforesaid terms and conditions and in that event, the above permission would automatically stand withdrawn.
Yours faithfully, (P. N. Pandey) Executive Director (Commercial) By this letter dated 23-4-1994 (Annexure-A1) the Executive Director (Commercial) of the Board asked the appellant Company to acknowledge receipt and convey its acceptance about the terms and conditions within a period of two months. Thereafter, the appellant Company again wrote to the Chairman of the Board vide letter dated 23rd May, 1994 accepting the terms and conditions but made certain suggestions and modifications by the said communication. This was examined by the Board and the Board by its communication dated 5th August, 1994 (Annex-A3) wrote back dealing with the points raised by the Company and mentioning the views of the Boards.
3A. The above communication of the Board was replied to by the appellant Company by letter dated 26-12-1994 agreeing in principle the terms and conditions contained in communication dated 23-4-1994 (Annex-A1) and subsequent communication dated 5th August, 1994 (Annex-A3). Letter of the Board dated 5-8-1994 is reproduced as under :--
MADHYA PRADESH ELECTRICITY BOARD P. B. No. 34 Jabalpur.
No. 5/G.C./115/4317 Jabalpur. D/- 5-8-1994 To, M/s. Jindal Strips Ltd., Kharsia Road, Post Box No. 16, Raigarh-496001 (M. P.).
Sub : Permission for installation and running of generating sets in parallel with M. P. E. B. and supply of excess energy generated by you to Board's system.
Ref. : This office letter No. 5/GC/115/1928 dated 23-4-94.
Dear Sirs, Please refer to your letter No. JSL/94 dated 25-5-1994 addressed to the Chairman M. P. E. B., in response to this office letter under reference. The issues raised in your abovesaid have been considered. The Board's views thereon are as hereunder:
Issue raised by M/s Jindal strips Ltd.
Board's views thereon.
1. In condition No. (ii) on page-2, following phrase be added after the words from November to March each year.
1. M/s. Jindal Strips Ltd. are required to guarantee a minimum consumption of 27 lacs units per month from the period from April to October and 18 lacs units per month for the period from November to March each year. The aforesaid minimum guaranteed consumption would be subject to review whenever the tariff minimum under the relevant tariff is revised in future.
"except for the period when the power cut is imposed by the Board, for the period during which power cut remains in force, minimum units will be proportionately reduced.
The condition of minimum monthly guaranteed consumption to the extent of 27 lacs (from April to October) and 18 lacs (from November to March) has been incorporated after having taken into consideration all the relevant factory such as pattern of your consumption in the past, powers regulatory measures etc. as such, no change in what has already been conveyed is felt necessary.
2. Incondition No. (iii) on page-2, in the last line word 'Banking' may please be added after the word 'wheeling'.
2. Banking is acceptable for accounting within month. In fact, this is inherent in system of accounting conveyed to you.
3. In the event of excess supply of units from , Jindal Strips Ltd. to M.P.E.B., the condition of 10% deduction in energy exported to M.P.E.B. may not be applied. Thus, in case when the values of X and Y are negative, M.P.E.B. may please pay for X/0.9 units and Y/0.9 units to us as the case may be.
3. This request has not been found feasible to accept.
4. We agree in principle, to the applicability of the tariff minimum, but the deficit units in the tariff minimum and A + C should be adjusted against negative values of X & Y and only for balance units bills should be raised.
4. This request has not been found feasible to accept.
5. In clause No. 7, the words 'and will be credited in the HT bill' may please be inserted after 'if the value of X units is negative, same shall be paid by the Board at 80 paise per Unit.
5. The condition at serial No. (vii) of convey letter dt. 23-4-1994 is hereby: modified to the extent that 'if the value of 'X' units is negative the same shall be paid for by the Board @ 80 paise per unit and will be credited in the corresponding monthly energy bill.'
6. The Board has agreed toincrease the rate of 80 paise per unit for power to-be supplied to M.P.E.B. from 10 p.m. to 6 a.m. by actual increase in F.C.A. from the present level of 15 paise and by proportionate increase in the event of any increase in H.T. tariff. It is requested that for making calculation of proportionate increase in rate F.C.A. should not be included.
6. Your request on this point is not very clear. It is requested to please clarify it by giving an illustration.
7. In Clause No. 7, there seems to be some typographical errors. The new tariff at which the
7. Yes, this is a typographical error. It may please be read as 80 (??) paise per unit, instead of 80(??) paise per unit.
In brief as per terms of conditions, the arrangement was that the Company shall generate power for its consumption and excess power shall be supplied to the Board by way of barter system and in case power supplied to the Board is excess than power received by the Company, then the Company shall be paid at the rate of 80 paise per unit. Thereafter, on 21st July 1995 (Annex-A8), permission granted by the Board vide letters dated 23rd April 1994 and dated 5-8-1994 was substantially modified altering the terms and conditions, which gave rise to this litigation, which reads as under :
"Further to this office letter No. 5/CG/115/ 1982 dated 23-4-1994, read with letter No. 5/CG/ 115/4317 dated 5-8-1994, Board has further considered the matter and have decided that M. P. E. B. shall bill the electric power consumed by you at prevalent M. P. E. B. tariff. It has also been decided that M. P. E. B. shall pay for power received from M/s. Jindal Strips Ltd. @ 40 paise/ unit for power supply at any time during 24 hours period. The letter issued earlier vide this office letter dated 23-4-1994 and 5-8-1994 cited above shall stand amended to the aforesaid effect."
4. When the appellant Company found that the Board has taken complete turn about and has not abided by the terms and conditions laid down earlier and has taken a decision to bill the power consumed by the Board at prevalent rate and to pay at the rate of 40 paise per unit for supply of power made by the Company to the Board, it was considered to be totally unfair. Therefore, the appellant Company made a representation to the Chairman of the Board on 2nd August, 1995 (Annexure-A11). Thereafter the appellant Company was billed by the Board as per Annexure-A16 raising demand thereby. Hence, the appellant Company approached this Court by filing the present writ petition and prayed that by a writ in the nature of certiorari, letter dated 21st July 1995 may be quashed and also the demand raised by the respondent No. 3 and also prayed that the respondents be prohibited from amending the terms and conditions between the petitioner/ appellant and the respondent Board as contained in Board's letter dated 23-4-1994 and 5-8-1994. It was further prayed that the respondent Board be directed to refund excess amount paid by the appellant/Company on the illegal demand made by the respondent Board.
5. The respondent Board filed its reply and contested the matter. The stand of the respondent Board was that the communication dated 23rd April, 1994 was not authorised by the Board, no resolution was passed by the Board approving the terms and conditions contained in the letter dated 23-4-1994 i.e. it was totally unauthorised act. It was further contended that no concluded contract has come into existence and therefore, the Board is not bound by those terms and conditions; It was pointed out that the Executive Director (Commercial) was not the Board and this matter pertains to the competence of the Board. Therefore, the respondent Board is not bound by the unauthorised act of the Executive Director (Commercial) of the Board. It was also contended that the rate of 40 paise per unit fixed by the Board for payment of electricity supply made by the Company to the Board is justified.
6. The writ petition was heard by the learned single Judge. Learned Single Judge dismissed the petition on the ground that no concluded contract has come into existence. It also held that the Executive Director (Comm.) was not authorised to sign contract on behalf of the Board and there was no question of indoor management. Learned Single Judge also declined to reimburse the bill for electricity supplied by the Company to the Board at a rate higher than 40 paise per unit. Aggrieved by the order passed by the learned single Judge dated 7-2-1997, the present appeal has been filed by the Company.
7. We have heard learned counsel for the parties and perused the record. The first and foremost question which the learned counsel for the appellants has raised for our consideration is that by virtue of aforesaid communications dated 23rd April, 1994 and 5th August, 1994 (Annexures-A1 and A3) and also dated 26th Dec., 1994 (Annexure-A4), a concluded contract had come into existence and the Board is bound to abide by the same and that it cannot withdraw from the same. It was also submitted that the Executive Director (Commercial) of the Board was competent to act on behalf of the Board and therefore, the Board is bound by the communication of the Executive Director (Commercial). It was also contended that the arrangement made by the Board by communication dated 23-4-1994 (Annex-A1) and 5-8-1994 (Annex-A3) was fair, reasonable and according to the policy of the State Govt. and Govt. of India. In the alternative, it was submitted that if it is not accepted that the Executive Director was competent to enter into the agreement on behalf of the Board, then by virtue of Section 70 of the Indian Contract Act, the respondents are obliged to either return the electricity or to pay for it at the market rate on the principle of quantum meruit. It was submitted that the unilateral decision of the Board to pay 40 paise per unit of electricity as against Rs. 3 per unit charged by them is completely arbitrary, unreasonable and violative of Article 14 of the Constitution. It was also submitted that retrospective operation of the decision to pay 40 paise is totally illegal.
8. As against this, Shri P. S. Nair, learned counsel for the respondents strongly opposed petition and submitted that no concluded contract has come into force as the Executive Director (Commercial) had no authority to act on his own without the permission of the Board. It was pointed out that the Board did not accord any such permission to enter into an agreement with the Company and bind the Board. It was also submitted by referring io various powers delegated by the Board to various authorities that the Board had not delegated this power to Executive Director (Commercial) to enter into the present agreement. It was, therefore, submitted that since the Board has not agreed in principle for entering into the aforesaid agreement and no such power to enter into agreement on behalf of the Board was delegated to the Executive Director (Commercial), the Board is not bound by the terms and conditions for an unauthorised act of its officer. It was also contended that the decision to pay the company at the rate of 40 paise per unit for the power supply by the Company to the Board is a reasonable and just decision, it cannot be compared with the rates which are charged by the Board from other consumers as the Board is to undertake numerous welfare activities, it has to supply power to various sections of the society at a much lesser rates.
Hence, the rates charged by the Board cannot be decisive of the matter as it has the components of so many factors. However, it was submitted that the power generation by the appellant Company is a by-product of iis own manufacturing unit and therefore, the cost of production of energy by the appellant Company in much lesser than that of the Board. In the aboveconlext. Ihe whole controversy has to be examined.
9. The whole arrangement is technically known as wheeling and banking. It cannot be disputed that all over the company, there has been shortage of electricity power. Therefore, the Government of India as well as the States have recently taken a policy decision to encourage the power generation by Private Sectors, known as Captive Power Units for augmenting the supply of power of the Boards. In this connection, our attention was invited to various policy decisions of the Government of India as well as of the State Government. In fact the present arrangement is as a result of such policy. Our attention was also invited to Industrial Policy and Action Plan 1994 -- a policy decision issued by the Department of Commerce and Industry, Govt. of Madhya Pradesh Bhopal. Our attention was also invited to the communication dated 22nd June, 1995, letter of Govt. of M. P. issued by Officer on Special Duty and also to the similar agreements of other States like Karnataka and Haryana. We need not over burden this judgment with reference to industrial policy of the State of M. P, and other States like Karnataka and Haryana. Suffice it to say that it is the recent trend in the country to encourage the power generation in private sectors. Therefore, there is not two opinion that impursuance of the policy decision of the Government of India and of the State, the Private entrepreneurs are encouraged to generate powers from their private captive power units. But basic question in the present case is whether a concluded contract had come into existence or not.
10. In order to appreciate the aforesaid controversy, we have already reproduced communications which transpired between the Company and the Board. From this correspondence one thing is established that a permission was granted by the Board for establishment of a captive power unit by the appellant Company and an arrangement was made for supply of power by the Company to the Board.
However, the stand of the Board is that permission to establish the power unit and supply of power to the Board on the terms and conditions as laid down in the aforementioned communications was totally unauthorised and the Board had never approved the said terms and conditions. It may be relevant to mention here that the power generation is regulated by the Act called The Electricity (Supply) Act, 1948, State Electricity Board is normally constituted under Section 5 of the Act of 1948 which lays down Constitution and composition of the State Electricity Boards. As per Section 5 of the Act of 1948, the Board shall consist of not less than three and not more than seven members appointed by the State Government. Section 13 of the Act of 1948 deals with authentication of orders and other instruments of the Board. This provision will have a bearing on the subject; therefore. Section 13 is quoted hereunder :
"13. Authentication of orders and other instruments of the Board -
All orders and decisions of the Board shall be authenticated by the signature of the Chairman or any other member authorised by the Board in this behalf, and all other instruments issued by the Board shall be authenticated by the signature of such member or officer of the Board as may in like manner be authorised in this behalf."
Section 43 of the Act of 1948 empowers the Board to enter into arrangement for purchase or sale of electricity under certain conditions. Section 43 is reproduced as under:
"43. Power to Board to enter into arrangement for purchase or sale of electricity under certain conditions.
(1) The Board may enter into arrangements with any person producing electricity within the State for the purchase by the Board, on such terms as may be agreed, of any surplus electricity which that person may be able to dispose of.
(2) Where a sanctioned scheme so provides, the Board may, on such terms as may be agreed upon, enter into arrangements with any governmnet or person for the purchase or sale of electricity to be generated or used outside the State :
Provided that the Board may not enter into such arrangements with any such Government or person without the consent of the Stale Government, or into arrangements with any such person without the consent of the Government of the State within which the electricity is to be generated or used."
The above provisions of the Act go to show that the Board is competent to enter into an agreement for purchase or sale of electricity under certain terms and conditions. Section 43A of the Act of 1948 lays down that the tariff shall be fixed by the Board.
11. Learned counsel for the appellants submitted that in fact by letter Annex-A1 dated 23-4-1994, and letter dated 26th December, 1994. a concluded contract had come into existence and the Executive Director of the Board was competent to execute and authenticate the agreement. In this connection, learned counsel has placed reliance on the power of delegation made by the Board vide communication dated 20th March, 1985 and in that connection, our attention was invited to item No. 38 which says, "To execute and authenticate contract documents and all types of agreements falling within their scope of work for and on behalf of the Board under Section 13 of the Electricity (Supply) Act, 1948."
At No. (i). authority mentioned is 'All Executive Directors' with full powers up to any limit of valuation. This has made a reference to order under which powers are delegated, which is dated 31-3-1980. The communication/order dated 31-3-1980 reads as under :
"Further to this office order No. SII/1682 D/- 23-2-73, the Board is pleased to authorise All Executive Directors, and Chief Engineer (PRG), under Section 13 of the Electricity (Supply) Act, 1948 (54 of 1948) to execute and authenticate all contract documents and all types of agreements falling within their scope of work up to any limit of valuation for and on behalf of the Board."
On the basis of above, it was contended by the learned counsel for the appellants that the Executive Director(Commercial) who had issued the offer and the same had been accepted by him, was authorised person. Therefore, it is the decision of the Board and the Board is bound by it. Learned counsel contended that when a properly executed offer by the competent authority is made and the same is accepted, then a concluded contract comes into existence and if any of the limbof an institution is not authorised or acted beyond his authority, public in general cannot be asked to put to strict proof. It was submitted that since the Executive Director of the Board was competent by virtue of delegation conferred on its employees by the Board, the Executive Director (Commercial) offered the terms and conditions by communication dated 23rd April 1994 and the same was accepted. Therefore, the Board is estopped from going back from its commitment and the Board should be directed by a writ of mandamus to enforce the same.
12. Shri Nair, learned counsel for the respondents very strongly refuted the submissions of the learned counsel for the appellants and submitted that the Executive Director (Commercial) in the scheme of things is only competent to execute and authenticate the document/agreement provided the Board has resolved. He can only execute and authenticate the contract of certain valuation of any amount but by this the Board has not delegated its power to enter into an agreement of purchasing the power at the tariff pointed out in that communication and on the basis of wheeling and banking. We directed Shri Nair, learned counsel for the respondents to produce the original minutes also and he filed an affidavit to show that the power to take policy decisions in tariff matters still continues within the jurisdiction of the Board. In the affidavit of Shri D. Roybardhan, Additional Secretary, M. P. Electricity Board, Jabalpur, resolution dated 11th April 1953 has been produced as Annexure-R1 whereby the Board has laid down a procedure for conduct of day to day business of the Board and in that Schedule-I relates to distribution of subjects under certain portfolios and Schedule-II relates to list of matters reserved for the Board. Relevant matters are :
(1) Policy of the Board;
(2) Proposals involving an important change of policy or practice; and (10) fixation of new Tariffs or modification of existing ones.
A perusal of Annexure-R 1, Schedule-II shows that all policy matters, the fixation of tariff or any changes in the policies have been reserved by the Board. This document Annexure-R I was further amended by notification dated 16-6-1976 marked with the affidavit as Annexure-R2 and all these aforementioned items remained the same. Another subsequent order which has been placed on record is dated 20th March, 1985. There also, so far as power with regard to policy decisions and fixation of tariff is concerned, they have not been delegated by the Board to any other authority.
13. From the scheme of things and after giving due consideration to the contentions raised by the learned counsel for the parties, it transpires that so far as policy decisions are concerned regarding entering into agreement and fixation of tariff, they remain within the jurisdiction of the respondent Board, though in various communications, impression is sought to be given that the Board has approved this arrangement. Thereafter we directed the learned counsel for the Board to place original before the Court. After perusing the record and the original minutes which culminated in this correspondence, it becomes clear that the matter was never taken to the Board and it was dealt with only at the level of Chairman of the Board. The Board which is the highest body constituted under the Act of 1948 competent to take decisions, was not apprised nor this decision was ratified by the Board. As mentioned above, Sections 18, 43, 43A of the Act of 1948 read with delegations of power of Board, competence of the Board to decide as to in what way the Board should enter into agreement with other generating companies and what shall be the tariff of supply of power by the generating companies to the Board. In the instant case, no decision of the Board was obtained.
14. As per the Schedule of powers delegated to various authorities, no power on such policy matters relating to entering into agreement with generating companies and to determine as to what would be the tariff for supply of power to the Board has been given to any authority. The Board never accepted the terms and conditions and all action was done only by the Chairman without seeking any approval or ratification from the Board. When the matter, for the first time, came before the Board, the Board did not approve the communication dated 23-4-1994 and ultimately sent communication dated 21-7-1995 Annex-AS whereby it was directed that the Board shall bill the electricity power consumed by the Company at prevalent M. P. E. B. tariff and shall pay for power received from the Company at the rate of 40 paise per unit.
15. Learned counsel for the appellants strongly relied on Item No, 38 of the Schedule of delegation of powers, as quoted above, which says that the Executive Director shall be competent to execute and authenticate the documents. In that connection, learned counsel invited our attention to the definition of word 'Executive' in Black's Law Dictionary, which reads as under :
"Executive. To complete; to make; to sing; to perform; to do; to follow out; to carry out according to its terms; to fulfill the command or purpose of. To perform all necessary formalities, as to make and sign a contract, or sign and deliver a note."
It is true that Item 38 of the Schedule of delegation of powers only authorises the Executive Director to execute and authenticate the contract on behalf of the Board provided it has approved the Same. Therefore condition precedent is that there should be a resolution of the Board, thereafter it can execute and authenticate the agreement, otherwise not. This is almost analogous to Article 166 of the Constitution which says that the executive power of a State can be delegated by the State to its functionaries. The rules of business are framed and certain powers are conferred on various authorities to execute and authenticate documents. Therefore, that person who is authorised can alone execute and authenticate the document on behalf of Govt. It was submitted that such a system raises a presumption of authenticity, unless it is rebutted. There is no two opinions on this principle that there is a strong presumption of the validity of such document but there is only one condition that it should be followed with a proper decision of the competent authority. Normally every executive action has to be in particular form in the name of the Governor and if it is issued by a duly authenticated person, then that would be prima facie evidence of its validity. But there is a limitation and it is a rebuttable presumption and the condition precedent should have been fulfilled. If a particular authority has applied its mind and has taken a decision, then the same can be executed and authenticated by a person who is authorised to sign on that behalf. If a decision has not been taken by the competent authority, then no presumption can be attached to it. As observed by their Lordships of Supreme Court in various decisions, jurisdiction of the Court to examine the validity of the decision can be exercised and if it is found that a valid decision has been taken by the competent authority, the same can be executed and authenticated by a person duly delegated. Reference in this connection can be made to the cases of B. L. Cotton Mills v. State of West Bengal, AIR 1967 SC 1145 and Lala Balla Mal v. Ahad Shah, 23 Cal WN 233 : (AIR 1918 PC 249).
In the present case, as we have observed above, it is beyond doubt that by virtue of the provisions of the Act as well as delegation of power made by the Board under Section 13 of the Act of 1948, policy making power, power to change policy and fixation of tariff still continue with the Board and the Board alone is competent to take a decision whether to enter into an agreement with a private party or not. From the material placed before us and the original minutes produced by the respondent Board, it clearly transpires that no such authorisation was given by the Board to the Executive Director (Commercial) to enter into such agreement with the appellant Company. Therefore, communication dated 23rd April, 1994 and acceptance thereof by the respondents by communication dated 5th August, 1994 cannot constitute a valid authorisation in favour of the Executive Director (Commercial) to act on behalf of the Board. Since the Executive Director (Commercial) was not competent to act on behalf of the Board and to enter into the agreement, hence this act of the Executive Director (Commercial) in entering into an agreement and accepting the wheeling and banking system and fixation of tariff for supply of power by the Company to the Board cannot bind the Board.
16. So far as proposition of law that the agreement can come into existence by correspondence is concerned, it is not disputed. But it is a matter of evidence that such an agreement has come into existence by way of correspondence or not. In the present case, we are satisfied that the Executive Director (Commercial) of the Board was not competent to enter into any such agreement on behalf of the Board and the whole action of the Executive Director (Commercial) was unauthorised. Thus, no agreement had come into existence with the appellant on behalf of the Board. Learned Counsel for the appellant also submitted that since the agreement had come into existence, therefore the Board is estopped from going back on the principle of estoppel. As we have already observed that no valid agreement had come into existence on behalf of the Board, therefore, the principle of estoppel will not be applicable in this case.
16-A. Learned counsel, for the appellant also invited our attention to the principle of indoor management and relied on the case of Country of Gloucester Bank v. Rudry Merthyr Steam and House Coal Colliery Company (1895) 1 Ch 629 at p. 633. It was a case of Private Company which appointed its agent and certain actions were done by the agent. In this connection, their Lordships observed that -
"..... persons dealing with joint stock companies are hound to look at what one may call the outside position of the company that is to say, they must see that the acts which the company is purporting to do are acts within the general authority of the company, and if those public documents which everyone has a right to refer to, disclose an infirmity in their action, they take the consequences of dealing with a joint stock company which has apparently exceeded its authority. But the case here is exactly the other way. All the public documents with which an outside person would be acquainted in dealing with the company would only show this, that by some regulations of their own, what Lord Hathcrley described as their indoor management, they were capable if pleased; and an outside persons knowing that, and not knowing the internal regulation, when he found a document sealed with the common .seal of the company and attested and signed by two of [he directors and the Secretary, was entitled to assume that that was the mode in which the company was authorised to execute an instrument of that description."
This decision is of no avail to the appellant as from the facts mentioned above of this case, it is more than evident that the Executive Director (Commercial) who acted on behalf of the Board. was not authorised to do so. The Board is not a private company, -- it is a public sector undertaking regulated by statutory provisions i.e. Electricity (Supply) Act, 1948 and the rules made thereunder. Therefore, the position of the Board cannot be compared with that of the private companies.
17. Our attention was also invited to another decisions in the case of Hely-Hutchinson v. Braphead Ltd. (1967) 3 All ER 98. This was also a case with regard to private company. In this case also, it was held as under :
"..... It is implied when it is inferred from the conduct of the parties and the circumstances of the case, such as when the board of directors appoint one of their number to be managing director. They thereby impliedly authorise him to do all such things as fall within the usual scope of that office. Actual authority, express or implied, is binding as between the company and the agent, and also as between the company and others, whether they are within the company or outside."
General principle is that when the Managing Director acts on behalf of the company, then it is normally presumed that the Board of Directors must have appointed him to enter into agreement with the public at large. But the same position and same ratio cannot be made applicable to statutory authorities which are regulated by the statutes and they have to act and regulate their business in terms of law. If the employees of the authorities are permitted to act on their own, then that would be against the law and such unauthorised act made on behalf of the authority will not bind the statutory authorities created under the Act.
Learned counsel also invited our attention to the case of Preeman and Lockyer v. Buckhurst Part Properties (Mangal) Ltd., (1964) I All ER 630. This was also a case of a Private Company and in that case K. who carried on business as a property developer, entered into a contract to purchase an estate. He had not enough money to pay for it and obtained financial assistance from M. They formed a limited company with a share capital of 70,000, subscribed equally by K. and M., to buy the estate with a view to selling it for development. K. and H.. with a nominee of each, comprised the Board. The quorum of directors was, by the articles of association, four, H. was at all material times abroad. There was power under the articles to appoint a managing director, but the Board did not in fact do so. K. to the knolwedge of the Board acted as if he were managing director of the Company in relation to finding a purchaser for the estate and again without express authority of the'board, employed on behalf of the company a firm of architects and surveyors for the submission of an application for planning permission, preparing an appeal against a refusal of permission, preparing plans and defining estate boundaries. The firm claimed from the company their fees for work done. Therefore, it was held that the company was liable for the fees claimed as K. had acted as managing director to the knowledge of the company and therefore they cannot disown their responsibility. This is with regard to the private company and the same reasoning cannot be made applicable to the statutory bodies i.e. public undertaking like the respondent Board. The whole conduct of the business of" the respondent Board is governed by the provisions of the Act and the rules framed thereunder. Therefore, only authorised act on behalf of the Board can saddle the Board with the liability and not the unauthorised act of its limb. 18. Learned counsel for the respondent invited our atttention to the case of U. P. Rajkiya Nirman Nigam Ltd. AIR 1996 SC 1373 where their Lordships of Supreme Court have taken a view that the Government is bound only to abide by a contract which is duly executed in accordance with its articles of association, not saved by doctrine of indoor management. It was observed that only binding contract can estop and not otherwise. In this case, U. P. Rajkiya Nirman Nigam Ltd. was a public sector undertaking and there the question arose that without nominating an arbitrator, it would bind the company or not and the principle of acquiescence and estoppel and doctrine of indoor management were pressed into service. This was negatived by their Lordships and it was observed as under :
"The appellant is a government undertaking and unless contract is duly executed in accordance with the Articles of Association, the appellant is not bound by any such contract. There was no signed agreement by a duly competent officer on behalf of the appellant. The argument that it was an indoor management between the appellant and its officers has no substance in the context. The doctrine of 'indoor management' cannot be extended to formation of the contract or essential terms of the contract unless the contract with other parties is duly approved and signed on behalf of a public undertaking or the Government with its seal by an authorised or competent officer. Otherwise, it would be hazardous for public undertakings or Government or its instrumentalities to deal on contractual relations with third parties."
This recent decision of their Lordships of the Supreme Court which is a complete answer to what the learned counsel has been trying tocontend before us. From the analysis of facts, we have found that the Executive Director (Commercial) was not competent to enter into agreement on behalf of the Board, meaning thereby that illegal action done by the Executive Director (Commercial) of the Board cannot bind the Board, therefore, the Board cannot be saddled with the liabilities of the illegal action of its one of the limbs. As a result of the above discussion, we are of the opinion that the contention of the learned counsel for the appellant, so far as existence of a contract arrived at between the parties by way of correspondence is concerned, is not sustainable and the same is overruled as the Executive Director (Commercial) was not authorised by the Board to act on its behalf in the present case.
19. Learned counsel for the appellant alternatively submitted that if this submission of the appellants is not accepted, then too, the appellants are entitled to be compensated either by supply of same energy as supplied by the Company to the Board or it can be compensated in terms of money. Learned counsel invited our attention to Section 70 of the Contract Act to say that in case any person has been benefitted by the non-gratuitous act, then it should be compensated. It is true that the power was supplied to the Grid of the Board by the appellant Co. Therefore, the question is in what way the Company can be compensated. Learned counsel referred to various policy decisions and specially decisions of M. P. Government with regard to tariff to be paid for receipt of power from private captive diesel generating stations supplying power to the Board. Communication dated 22nd June, 1995 was issued by the Officer on Special Duty, Govt. of Madhya Pradesh wherein it is said that where the industrialists want to set up captive power plants from which major part of the power must be utilised by them, permission may be accorded by M.P.E.B./State Government and the tariff for the surplus power supplied to M. P. E. B. will be determined on the basis of rate obtained for diesel generating stations supplying power to M. P. E. B. Letter dated 22nd June, 1995 reads thus :
"Sub: Policy for setting up of Diesel Generating Stations up to 25 M. W. Capacity. Respected Chawlaji, In view of a number of applications received for setting up of Diesel Power Stations up to 25 M.W. capacity. State Government has approved the following policy :--
(i) For setting up Diesel Power Stations up to 25 M. W. capacity, whose cost should not exceed Rs. 100 crore, where entire or major pan of the power generation is proposed to be sold to M. P. E. B., advertisement should be issued for inviting offers from interested parties indicating the locations where such power stations are proposed. The parties will be selected on the basis of the competitive bidding i.e. they are required to indicate the net rate per unit on which they propose supply power to M. P. E. B.
(ii) Where the industrialists want to set up captive power plants from which major part of the power must be utilised by them, permission may be accorded by M. P. E. B./State Government. However, tariff for the surplus power supplied to M. P. E. B. will be determined on the basis of rate obtained for diesel generating stations supplying power to M. P. E. B.
2. The advertisement for inviting offer from interested parlies for setting up of 25 M. W. capacity Diesel Power Stations for supplying power to M. P. E. B. based on competitive bidding, are to be issued immediately. The procedure will be the same as adopted for earlier for Thermal/ Gas based projects. A draft advertisement/ indicating various terms and conditions and places where such power stations are proposed may be .sent through fax latest by 24-6-95, so that this may be issued from this Department. In the meantime, documents containing the formats in which offers are to be given, details of information required from the parties and also major terms and conditions should be prepared and submitted for State Government's approval within next three days. Immediate action may please be taken.
With best regards, Yours sincerely (Section Iqbal Hussain)"
20. Our attention was also invited to paragraphs 3.6 and 3.7 of the Industrial Policy and Action Plan, 1994 of the State of M. P. which read as under:
"3.6. If an entrepreneur, as spelt out above, establishes diesel/thermal/small-tiny hydro power generating set of more capacity than that required for his own use and wants to supply power to his own unit situated at a distance, or wants to supply surplus power to some other entrepreneur at a distance, or sets up any type of plant only with the intention of selling power to other entrepreneurs and intends to make use of the distribution network of the M. P. E. B. permission will be accorded by the Board on the condition of payment of wheeling charges/payment for transmission losses as under:
(a). 10% of the total power supplied for a distance up to 40 kms.
(b) 12% of the total power supplied for a distance up to 60 kms.
(c) 17% of the total power supplied for a distance up to 100 kms.
(d) 20% of the total power supplied if the distance is more than 100 kms.
3.7 : If an entrepreneur desires to sell surplus power to the M.P.E.B. from his captive generating set/plant, or sets up by type of generating plant to sell power to the M. P. E. B. such an entrepreneur will be accorded permission under the provisions of the Electricity (Supply) Act, 1948, the Tariff for supply of such power shall be fixed for the following time slots, under the provisions of the Electricity (Supply) Act, 1948 and rules framed from time to time by the Central/State Government, as per mutual agreement between the entrepreneur and the M. P. E. B. :
(a) from 10.00 p.m. to 6.00 a.m. of the next morning.
(b) from 6.00 a.m. to 10.00 p.m."
In another communication dated 9th October, 1995 of Government of India, it was stated that tariff which is to be worked out for the supply of power by captive power plants, may be determined on a remunerative tariff as per mutually agreed terms. It was also stated in the said communication that setting up of captive power plants would quickly add to the generating capacity in the country. Letter dated 9th October, 1995 of the Govt. of India reads as under:
"Sub : Private Power Promotion through Captive Power/Co-generation route.
Since the announcements of private power policy of the Govt. of India in 1991, a number of proposals, including a large number of proposals from foreign promoters have been received through Independent Power Producer (IPP) route. However, as the gestation period for large power projects is long we will be able to complete very few projects in the near future and, therefore, we would face huge shortage of power. At the end of 1996-97, the energy shortage is visualised at 15% and peaking shortage at 30%.
2. Therefore is need, therefore, to open an alternative route other than private Generating Company, where the industries themselves will be interested to meet their own power demand by pooling resources tegethcr. Captive power plants offers such an alternative. The captive power plants of industries may be allowed to sell their surplus power, if any, to the grid, on a remunerative tariff, as per mutually agreed terms. Setting up of captive power plants would quickly add to the generating capacity in the country. I would also like to add that co-generation and small power production is an important ingredient of private power policy in a number of countries.
3. Few developing countries, in their recent restructuring process of the electricity sector have brought out important changes, among others, open access to the transmission system of the State grid on payment of mutually agreed wheeling charges for facilitating new entrants in the power sector on the captive power/co-generation route. The States can assure such an entry to the new proposed captive/co-generation power plants.
4. You may, therefore, create ah institutional mechanism which may allow captive power units an easy and automatic entry into the power sector by quickly clearing captive power applications by State Govts. and giving them rational tariff for purchase of surplus power by the grid and third party access for direct sale of power to the other industrial units.
With best wishes, Yours sincerely, Sd/-
(P. Abraham) To all Chief Secretaries. "
In this connection our attention was also invited to the agreement which was entered into by the Haryana Electricity Board and the Karnataka Electricity Board. On this basis, learned counsel for the appellants submitted that the agreement which has been entered into by the Board is not unconscionable agreement. The agreement by taking energy by way of barter system and charging tariff for the excess supply of energy is a very rational policy of the Government of India as well asof the State. Therefore, if technically aconcluded contract had not come into existence, then too, the decision of the Board in paying for excess energy at the rate of 40 p.c. per unit and charging for the energy supplied by me Board to appellants at usual rate is unreasonable and arbitrary. It was contended that the Board should either supply the same quantity of energy received by it from the appellant company or to compensate the company on rational basis. Learned counsel referred to the aforesaid decision of the Government which says that the power received from the industries by the Board will be on remunerative and rational basis. Therefore, it was submitted that the Board should be asked to pay remuneratory price to the appellant Company and the yard-stick for that is to pay the same rate which the Board receives from its consumers or the rate which they are giving to other Diesel Generating Sets. The contention of the learned counsel is reasonable. But what rates should be given by the Board to the Company for the said power supplied by it is a debatable question. Normally a person who takes a benefit of an act has to compensate the other party either by return of the goods/services or it should remunerate to the party. However, the difficulty in the present case is whether this exercise can be done in the extra-ordinary jurisdiction.
Mr. Nair, learned counsel for the Board submitted that it is not the one way traffic. The appellant company by installing its generating sets also stood benefited, because its generating sets are not fully equipped to operate its unit effectively, it had to take power from the Board also. Learned counsel submitted that in fact the power generated by the appellant company cannot make its furnance critical and operational. Therefore, it requires the power from the Board to make the furnance critical and operational and thereafter the unit can operate on the basis of power generated by it. It was also pointed out by the learned counsel for the Board that in fact the power generated by the appellant Company is cheaper because of their process of manufacturing of sponge steel and other items as lots of steam is generated and it is fed in turbine; therefore, their overhead expenses are less. It is also pointed out by the learned counsel for the Board that tariff of the Board is fixed taking into account various variable factors. It is also pointed out that this public undertaking has so many social obligations also, for example in the State of M.P., poor farmers are given power supply to some extent free of charges, to some consumers at subsidized rate. Hence, fixation of rates of tariff by the Board is not based only on actual cost of production but all these social factors have also to be taken into account. Therefore, it cannot be easily said that the appellant company should be compensated at the same rates as the Board is supplying power to its consumer or at the same rate the Board is giving to the private captive diesel generating sets. Learned counsel submitted that it has not been pointed out as to what actual rales had been paid to the other power generating sets from whom the Board had purchased the power. All documents produced by the appellants and reproduced above only say that the rates have to be mutually agreed and no document has been pointed out by which any such rate was agreed for Diesel Power Generating sets. No mutually agreed agreement has been brought on record to show on what rates the Board agreed to purchase the power from the captive power units. Still it is a matter of evidence and this exercise cannot be undertaken in extraordinary jurisdiction. However, learned counsel for the Board has invited our attention to a fresh agreement entered into by the appellant company and the Board Annex-R-1 and rates given therein.
21. Learned counsel for the appellants invited our attention to the case of F. Dhunji Shaw v. Poona Municipality, AIR 1970 SC 1201. This was a case of Municipal Corporation of Poona wherein it was observed by their Lordships as under (para 10):
"Under Section 70, compensation would normally be the market price of the goods. By refusing to return the goods, the person (Municipal Corporation in the instant case) to whom the goods have been delivered cannot improve his position and seek to pay less than the market value of the goods. A plaintiff without an enforceable contract in his favour, supplying goods to a municipal corporation, is entitled to a money equivalent of the goods delivered assessed at the market rate prevailing on the date on which the supplies were made.
Held that the invoice price in respect of the goods delivered was the prevailing market value of the goods."
So far as general principle is concerned, there is no dispute. But dispute is in what way the party is to be compensated. This factual controversy cannot be resolved in these proceedings. This exercise can be undertaken by a competent civil Court and that cannot be gone into in extraordinary jurisdiction. The case of P. Dhunji Shaw (supra), arose by way of a suit and thereafter the matter reached to the Hon'ble Supreme Court. In what way, the appellant can be compensated is therefore a matter which is required tot be investigated by leading necessary evidence, and such matters cannot be disposed of in extraordinary jurisdiction of this Court.
22. Our attention was also invited by the learned counsel for the respondent Board to the case of Union of India v. Cynamide India Ltd. AIR 1987 SC 1802 wherein it is held :
"Price-fixation is neither the function nor the forte of the Court'. The Court is concerned neither with the policy nor with the rates. But the Court has jurisdiction to enquire into the question, in appropriate proceedings, whether relevant considerations have gone in and irrelevant considerations kept out of the determination of the price. For example, if the Legislature has decreed the pricing policy and prescribed the factors which should guide the determination of the price, the Court will, if necessary, enquire Into the question whether the policy and the factors are present to the mind of the authorities specifying the price. The assembling of the raw materials and the mechanics of price fixation are the concern of the executive. The Court will not re-valuate the considerations even if the prices are demonstrably injurious to some manufacturers or producers. The Court will, of course, examine if there is any hostile discrimination."
Hence, this exercise cannot be undertaken by this Court as to at what rate the appellants should be compensated.
Learned counsel also placed reliance on a decision of the Supreme Court in the case of Tata Cellular v. Union of India, (1996) 6 SCC 651 : (AIR 1996 SC 11) which was a case for grant of contract in a cellular phones. Their Lordships observed that the Court cannot interfere with Govt.'s freedom of contract, invitation of tender and refusal of any tender which pertains to policy matter. Whether decision is vitiated by arbitrariness, unfairness, illegality, irrationality or 'Wednesbury unreasonableness' i.e. when decision is such as no reasonable person on proper application of mind could take or procedural impropriety, can be looked into by Court. Thus, the Court can set right the decision making but cannot substitute its own opinion for that of the experts. What shall be the rational basis and in what way the private captive generating units shall be paid tariff is a matter to be decided by proper negotiation, or by some arbitrator, or by filing appropriate civil suit. But this exercise cannot be undertaken in extra-ordinary jurisdiction of this Court.
23. Learned counsel for the Board invited our attention to another decision of Hon'ble Supreme Court in the case of U. P. Financial Corporation v. Naini Oxygen & Acatylene Gas Limited, (1995) 2 SCC 754 : (1995 AIR SCW 254). This was a case of Financial Corporation and their Lordships observed that in commercial matters, decisions of the body authorised to decide should not be normally interfered by the Court unless it is arbitrary. Learned counsel also invited our attention to the case of Jiyajeerao Cotton Mills Ltd., Gwalior v. M.P. Electricity Board, Jabalpur, 1983 MPLJ 212 : (AIR 1983 Madh Pra 93) and submitted that the appellants have an alternative remedy. This was a case of Jiyajeerao Cotton Mills against the Madhya Pradesh Electricity Board and in that context, the question was that there was no valid assessment of generating capacity of the Company's generating sets so as to permit any reduction in contractual demands by virtue of Generation Order. At any rate, assessment made was never acted upon for the period effective from 11-11-1979. It was therefore contended that for the assessment made under Clause (3) of the Generation, Control and Consumption Order determining capacity of alternative source of generation, there can be no reduction in the contractual obligation under the Generating Order. The bill sent by the Board was disputed and validating Clause (3) of the Generating Order was attacked on the ground of impermissive delegation of power. The Court upheld the validity of the order and directed that the petitioner has an alternative remedy of arbitration and in that context, their Lordships observed that though there is no bar, however, failure to resort to such kind of remedy before resorting to extra-ordinary jurisdiction of this Court is a circumstance enabling the High Court to refuse the exercise of such extra-ordinary and discretionary power in a given case.
In the case of Smita Conductors Pvt. Ltd., Bombay v. M.P.SectionE. Board, AIR 1984 Madh Pra 44 which is case of private company and the Electricity Board, their Lordships of this Court declined to invoke extra-ordinary jurisdiction to compel the Board to purchase particular material from particular party at a particular price as there was no statutory obligation.
24. So far as the submission of the learned counsel for the appellants that the Company should be properly compensated for supply of power by it to the Board is concerned, it is a matter which cannot be decided in the extra-ordinary jurisdiction of this Court. It is open for the appellants to claim compensation either by way of referring the dispute to the Arbitrator or by resorting to remedy of civil suit by approaching a civil Court of competent jurisdiction so that proper evidence is led before the Court by the parties and the question of quantum of compensation can be decided. However, the same cannot be done in the extraordinary jurisdiction of this Court.
25. Learned counsel Shri Nair, appearing for the Board, submitted that the company has already entered into a fresh contract with the Board and that has been placed on record as Annex-R1 to show that the barter system has been dispensed with.
26. As a result of above discussion, we do not find any merit in this appeal. The appeal is accordingly dismissed. There shall be no order as to cost.