Bhoruka Power Corporation Limited, Bangalore and Another vs The Karnataka Power Transmission Corporation Limited, Bangalore

These two writ petitions are filed by the same person M/s. Bhoruka Power Corporation Limited who is an independent power producer and who has been availing the service of the respondent-Karnataka Power Transmission Corporation Limited, for the purpose of transmitting and distribution of power which are known as wheeling and banking of power.

Petitioner is a private generator who is generating power at one place which it requires to utilise for its own use at different places or even for selling it to others as different places. Petitioner does not have facilities either to transmit the power it generates to utilise the same nor has the facility to store and distribute the power it generates. It is for such purposes petitioner utilises the services of the respondent for which the respondent is compensated by payment of what is known as wheeling and banking charges which in fact is in kind in the form of a percentage of the power produced by the petitioner and transmitted through the facility provided by the respondent.

The respondent is the successor of the Karnataka Electricity Board with whom petitioners had entered into an agreement for such purpose as per agreement dated 11th day of April, 1997 copy at Annexure-A in W.P. No. 39622 of 2000. The agreed wheeling charges as per the agreement particularly under Article 5.03 of this agreement is at 6% of the energy wheeled and the charges for banking of energy as per Article 4.04 of this agreement is at 2% per month in respect of the energy banked at the end of month with the Board.

Petitioner has approached this Court praying for the relief inter alia for quashing the communication dated 2-9-2000, Annexure-B in W.P. No. 39622 of 2000, as also the basis of this communication namely, Annexure-J to W.P. No. 9336 of 2001 proceedings of the respondent vide Order No. KPTCL/B-28/B-13/558/85-86, Bangalore, dated 30-8-2000, whereunder the respondent has raised the rate of banking charges from the existing 6% to 20% and has appraised that the petitioner will be henceforth charged at the revised rates for wheeling the power generated by the petitioner.

The grievance of the petitioner is that the respondent has, contrary to the terms of the very agreement has revised the wheeling charges from the agreed 6% and enhanced it to 20%, that the respondent is not entitled to do so, that they have acted unilaterally and in an arbitrary manner in raising the wheeling charges to 20% which is contrary to the provisions of Article 13 of the agreement which reads as under:

"Period of agreement.-This agreement is valid for a period of 10 (ten) years from the date of execution and is extendable for further period of 30 (thirty) years in line with the agreement with the Government of Karnataka dated 10-5-1993. However the Board may review and revise/modify the wheeling and banking charges, other operational problems etc., once in every ten years".

Submission of Smt. Nalini Chidambaram, learned Senior Counsel for the petitioner is that the respondent-Corporation is "State" within the meaning of Article 12 of the Constitution, that the respondent is expected to act in a fair and non-arbitrary manner, that the respondent has without any reference or reason and in contravention of the very terms of the agreement has not only called upon the petitioner to pay the wheeling charges at the enhanced rates but also started recovering the same, that the terms of the contract had been arrived at between the parties after several rounds of meetings and discussions and after hearing the petitioner and similarly placed independent power producers, that such power producers though wanted better terms, ultimately reconciled to the terms as reflected in the agreement dated 30-8-2000, that the respondent-Corporation cannot abuse its power as a public Corporation and give a go by to the terms of its agreement and impose its unreasonable views and decision on the petitioner, that the petitioner is helpless in the matter, that unless petitioner makes use of the facilities extended by the respondent-Corporation it cannot put to use the power generated by it, that the petitioner has invested considerable amount for the purpose of producing power and that the petitioners will be put to considerable hardship and injury if the respondent-Corporation is allowed to give effect to the impugned communication at Annexures-B and J.

Writ petitions are contested. Corporation has filed its statement of objections. It is primarily contended that writ petitions are not tenable, that the petitioners cannot seek or workout it''s rights under an agreement by filing writ petition before this Court, that the petitioner should be relegated to work out such rights under an agreement before a Civil Court or any other forum. It is also contended in the alternative that the writ petitions are without substance, that there is no merit in the grounds raised and there is no merit in the contentions urged on behalf of the petitioner, that the action of the respondent-Corporation in revising the wheeling charges and refixing it to 20% as against the earlier agreed charges is well-within the power of the respondent-Corporation and in terms of the agreement itself.

Sri S. Naganand, learned Senior Counsel appearing for the respondent-Corporation apart from reiterating the contention that these writ petitions should not be entertained and petitioners should be relegated to work out it''s remedies before any other Forum, also draws my attention to Article 5.03 of the agreement and submits that this article gives unbridled power to the respondent-Corporation to change the charges from time to time. The precise words in Articles 5.03 reads as under:

"5.03. The energy generated at minihydel station will be made available to "Exclusive" and "Partly Exclusive Consumers" at their HT terminals (meeting point) after deducting wheeling charges as details below. The compensation called "Wheeling Charges" shall be in the firm of energy and shall be 6% (six percentage) of the energy wheeled".

Submission of Sri Naganand, learned Senior Counsel is that when once the respondent-Corporation has a free hand to revise the wheeling charges as contemplated under Article 5.03 no other provision can be looked into if such other provision either restrains the Corporation to revise the wheeling charges or in any way seeks to place any restriction on the exercise of such power. Learned Counsel also submits that while the Corporation was fully justified to revise the charges in the altered circumstances as it was found that retaining the wheeling charges at 6% was not practical and that it could also have an indirect bearing on the tariff rates to be fixed on the electricity supplied through the respondent-Corporation, the revision was fully justified to ensure that the tariff rate at which power is supplied to the ultimate consumer is pegged down and maintained at reasonable rates.

It is also the submission of Sri Naganand, learned Senior Counsel that the provisions of Article 13 of the agreement, on which reliance is placed by the learned Counsel for the petitioner places a restriction on the enabling provisions in Article 5.03 to review or revise wheeling charges only once in ten years and not at shorter intervals and applying the principles of interpretation that a latter inconsistent clause in an agreement should not be given effect to or held to be one not enforceable, the provisions of Article 13 allowing revision of wheeling charges only once in ten years should be held to be of no consequence. Learned Counsel has also submitted that this restriction for review/revision once in 10 years should be read as applying only in respect of the subject ".... operation problems.....". and not to wheeling and banking charges.

I am unable to accept this submission as the language in the article leaves no doubt or scope for any ambiguity that what is covered under it for review or modification of the wheeling and banking charges once in 10 years is not only to the other operational problems but also to the revise of wheeling and banking charges. The plain and simple meaning of this Article is that the wheeling and banking charges get freezed for a period of 10 years and can be revised only after 10 years.

Though Sri Naganand, learned Senior Counsel for the Corporation has placed reliance on the decision of the Supreme Court in the case of Sahebzada Mohammad Kamgarh Shah v Jagdish Chandra Deo Dhabal Deb and Others, AIR 1960 SC 953, in support of his submission I am afraid the principles laid down in this case does not further the case of the respondent. It is only in a situation where a later clause or provision in an agreement is directly in conflict with an earlier clause that the rule to give effect to the earlier clause is invoked. In the present case, I do not find any conflict or inconsistency between Article 5.03 and Article 13 of the agreement. In fact the provisions of Article 13 is supplemental to the provisions of Article 5.03, in the sense whereas Article 5.03 is an enabling clause giving the power to the Corporation to revise the wheeling charges from time to time, as to what is that interval of time is supplemented in Article 13 which says once in every 10 years. In this view of the matter the communications at Annexure-B in W.P. No. 39622 of 2000 and Annexure-J in W.P. No. 9366 of 2001 are clearly not supported under the terms of the agreement. They are in fact in contravention of the agreement entered into between the parties.

Smt. Nalini Chidambaram, learned Senior Counsel appearing for the petitioner by drawing the attention of the Court to the provisions of the Karnataka Electricity Reform Act, 1999 particularly Section 24 which requires a contract between the Board and an independent power producer so far as the tariff is concerned to be got approved by the Commission submits that as this Act had come into force the respondent-Corporation could not have unilaterally enhanced the tariff insofar as the wheeling charges are concerned. It is also submission of learned Counsel that the respondent-Corporation in fact had filed an application before the Commission for revision of the tariff and in such proceedings petitioner and similarly placed independent power producers had also participated and had inter alia pointed out before the Commission that the respondent-Corporation was not justified in seeking wheeling charges at 20% from the independent power producers as was sought to be recovered from the petitioner. Learned Counsel has also placed a copy of the order dated 10th March, 2003 passed by the Karnataka Electricity Regulatory Commission, in such proceedings which inter alia indicates that the respondent-Corporation is required to enter into a fresh contract with the independent power producers and get the contract approved from the Commission by placing a draft before the Commission and thereafter the revised rates for wheeling should be given effect to and when such procedure was contemplated the respondent-Corporation on its own could not have revised the rate at which it can collect the wheeling charges from the petitioner.

It is one of the submission of Sri Naganand, learned Senior Counsel for the respondent-Corporation that notwithstanding the provisions relating to the revision of wheeling and banking charges for a period of 10 years under the contract the Corporation is entitled to seek revision of such rates by making a suitable application before the Karnataka Electricity Regulatory Commission under the provisions of Section 27(1) and 27(2) of the Act and as such petitioner cannot contend that for a period of 10 years from the date of the agreement the respondent cannot revise the charges for wheeling.

I have examined the provisions of the Act particularly Section 27 of the Act. It is no doubt true that notwithstanding any contract to the contrary, the statutory provisions always take precedence and will prevail over the terms of any contract between the parties if any of the clause/term of the contract is inconsistent with the statutory provisions. Perhaps it could have been stated that notwithstanding the terms relating to revision of wheeling and banking charges to be once in 10 years in the agreement entered into between the parties the regulatory Commission had the power to refix the same as such charges are part of the tariff and in terms of Section 27 as there being proviso to sub-section (2) of Section 27. Section 27 reads as under:

"27. Tariffs.-(1) The holder of each licence granted under this Act shall observe the methodologies and procedures specified by the Commissioner from time to time, in calculating the expected revenue from charges which it is permitted to recover pursuant to the terms of its licence and in designing tariffs to collect such revenues.

(2) The Commission shall, subject to sub-section (3), have the power to lay down methodology and the terms and conditions for determination of revenue of the licensee under sub-section (1) of this Section and the determination of tariff, in such other manner as the Commission considers appropriate and for doing so, the Commission shall be guided by the following factors, namely.-

(a) the financial principles and their applications provided in Sections 46, 57 and 57-A of the Electricity (Supply) Act, 1948 (54 of 1948), and in the Sixth Schedule thereto;

(b) in the case of the Board or its successor entitles, the principles under Section 59 of the Electricity (Supply) Act, 1948;

(c) that the tariff progressively reflects the cost of supply of electricity at an adequate and improving level of efficiency;

(d) the factors which would encourage efficiency, economical use of the resources, good performance and optimum investments and other matters which the Commission considers appropriate for the purpose of this Act; and (e) the interest of the consumers are safeguarded and at the same time, the consumers pay for the use of electricity in a reasonable manner based on the average cost of supply of energy;

(f) the electricity generation, transmission, distribution and supply are conducted on commercial principles;

(g) national and State power plans formulated by the Central or State Governments, as the case may be:

Provided that the contracts concluded by the Government of Karnataka and/or the Board with generation and transmission companies prior to commencement of the Act shall be deemed to have been approved by the Commission under the provisions of this Act and shall be given effect by the Commission".

The proviso to sub-section (2) of Section 27 makes it clear that in respect of contracts concluded before the coming into force of this Act such contracts are deemed to have been approved by the Commission and will continue to bind the parties in terms of the contract. If this is the legal position the terms relating to revision of wheeling charges is only once in 10 years as per Article 13 and will continue to bind both the parties. If so, the respondent-Corporation could not have unilaterally revised such rates to the detriment of the petitioner. Such action on the part of the respondent being not supported by any other provisions of law cannot be sustained. On the present state of facts and the present state of affairs the provisions of the Karnataka Electricity Reform Act, 1999 has not made any difference to the terms between the parties as per agreement dated 11th April, 1997 and the order impugned in these writ petitions suffers for being in violation of the terms of the contract of the agreement.

The Regulatory Commission as also the Electricity Tariff Board neither touched upon nor adjudicated on the disputed issues between the petitioner and the respondent for the reason that this dispute is already before this Court being subject-matter of these writ petitions. Therefore, the tariff order dated 10th March, 2003 passed by the Karnataka Electricity Regulatory Commission has not made any difference to the terms and relationship between the petitioner and the respondent as it exists under the agreement dated 11th April, 1997.

It is no doubt true that this Court normally will not examine the question of enforcement of the right under a contract in a petition under Article 226 of the Constitution of India. In the instant case as it was found that the respondent-Corporation though State within the meaning of Article 12 of the Constitution of India had acted in a most unilateral and arbitrary manner, that it enhanced the wheeling charges by itself and even without putting the petitioner on notice and giving any opportunity to the petitioner before the enhancement. The action on the part of the respondent-Corporation cannot be sustained.

There is also a distinction between enforcing a right under a contract and seeking for protection from an unreasonable and arbitrary action which may also be in contravention of the terms of the agreement. In the instance case petitioner is not seeking to enforce positively and workout any of its rights under the agreement but is only seeking protection from the oppressive and unreasonable action on the part of the respondent. Petitioner is sought to be burdened with additional liability by such unreasonable action. Under such circumstances I am of the view that the petitioner is entitled to seek relief even under Article 226 of the Constitution of India and that the discretion of this Court should be exercised to issue a writ and not to decline.

In the circumstances writ petitions are allowed. Writ in the nature of certiorari is issued. Impugned communications at Annexures-B and J in Writ Petition Nos. 39622 of 2000 and 9366 of 2001 respectively are hereby quashed. Rule made absolute. No order as to costs.

The additional charges collected by the respondent-Corporation from the petitioners over and above 6% and which is now with the respondent-Corporation is hereby permitted to be adjusted against the future charges payable by the petitioner.