# M/S. NORTHERN INDIA IRON & STEEL CO ETC v. STATE OF HARYANA & ANR . November IO, 1975 ~

- **Citation:** [1976] 2 S.C.R. 677
- **Court:** Supreme Court of India
- **Decided:** 1975-07-09
- **Bench:** A. N. Ray; C.J, K. K. Mathew, N. L. Untwalia
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-northern-india-iron-steel-co-etc-v-state-of-haryana-anr-november-io-1975-6867
- **Pages:** 7

## Headnote

Electricity (Supply) Act, 1948-"Demalld Charge" and "Energy Charge"-
H ow calculatrd in terms of power cut.
The State Electricity Board bad framed, in exercise of its power under s. 49
of the Electricity (Supply) Act, 1948, certain terms and conditions and, the procedure in regard to supply of electricity to its consumers. For big consumers
C
the sysrem of tariff is the two-part tariff system comprising of (i) Demand
charge and (ii) Energy charge. A "Demand charge" means
the
amount
char~ble per month in respect of the Electricity Board's readiness to serve the
consumer irrespective of whether he consumes any cn~rgy or not a.nd is based
upon rertain factors.
"Energy charge" means the ch~ge for energy
actually
taken by Jhe consumer and i~ applicable to the units consu~ by him in any
month. This was in addition to any demand charge, if applicable.
A schedule of tariff of energy was framed by the Board. Cl. 4(b) mentions
how the monthly demand charge shall be calculated and sub-clause (f) of this
clause states that in the event of lock-out, fire or any other circumstances considered by the supplier to be beyond the control of the consumer, the consumer
shall be entitled to a proportionate reduction of demand charges/minimum
charges.
As a result of shortage of electricity the State Electricity Board considerably
restrkted the supply to large industrial concerns. Because of this the Board
allowed some reduction in th!: demand charges. The appellant, who was a bulk
consumer of. etfrtricity, could not get the full quantity as per the contract between the parties.
The appellant, therefore, filed a writ petition that there should
be either no demand charge at all. when the Board was not in a position
to supply electric energy, or there should be a propo1iionate reduction of the
deman<,! charge. The High Court noted the redlJ!Otion made by the f)oard and
held that the Board was entitled to the demand charge. It did not, however,
decide as to what should be the basis for and in what proporiion the demand
charge should be reduced. The ap~llant also contended that no duty was
leviab!e on the demand charge, under the Punjab Electricity (Duty) Act, 1958,
but only on the energy charge, for the actual amount of energy supplied but
the High Court rejected this contention.
All(!wing the a@eal in part on the first contention,
HELD : (1) The circumstance of power cut which disabled the Board to
•give th., full supply to the appellant would be a circum.tance which disabled
the coosumer from consuming electricity as per the contract and this was a
circumstance which was beyond i!,s control and could not he considered otherwise by the Board. It entitled the consumer to a proportionate reduction of
the demand charge.
In a circumstance like this the obligation of the consumer
to se.w at least 3 dayY notice on the supplier as per the later part of sub-clause
(f) was not attracted as the requirement of the notice was only in the case
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• of s!tut-Oown of not Jess than 15 days' duration [682 A, B, C]
Therefore, the inability of tbe Board to supply electric energy due to power
cut as per the demand of the consumer according to the contract will be reflected in and considered as a circumstance beyond the ccntrol of the consumer
which prevented him from cons11ming electricity as per the contract to the
extent it wanted to consume.
[682, DJ
2-LI 59SCI /76
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SUPRf.ME COURT REPORTS
[1976] 2 s.c.R.
(2) A reading of the clauses of the Schedule of tariff as a whole makes it
clear that the duty under the Punjab Act is chargeable on the price of energy
supplied in a month. Therefore, the duty is chargeable not only on the energy
charge but also on the demand charge. It is, however, chargeable on the actual
amount of demand charge realisable from the consumer.
CIVIL APPELLATE JURISDJCTION: Civil Appeal Nos. 1306, 1310,
1370-1380 and 1422 to 1424 of 1975.
Appeals by special leave from the judgment and orders dated the
9th July 1975 of the Pun

## Text

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677
M/S. NORTHERN INDIA IRON & STEEL CO ETC.
A
v.
STATE OF HARYANA & ANR .
November IO, 1975
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B
[A. N. RAY; C.J., K. K. MATHEW AND N. L. UNTWALIA, JJ.]
Electricity (Supply) Act, 1948-"Demalld Charge" and "Energy Charge"-
H ow calculatrd in terms of power cut.
The State Electricity Board bad framed, in exercise of its power under s. 49
of the Electricity (Supply) Act, 1948, certain terms and conditions and, the procedure in regard to supply of electricity to its consumers. For big consumers
C
the sysrem of tariff is the two-part tariff system comprising of (i) Demand
charge and (ii) Energy charge. A "Demand charge" means
the
amount
char~ble per month in respect of the Electricity Board's readiness to serve the
consumer irrespective of whether he consumes any cn~rgy or not a.nd is based
upon rertain factors.
"Energy charge" means the ch~ge for energy
actually
taken by Jhe consumer and i~ applicable to the units consu~ by him in any
month. This was in addition to any demand charge, if applicable.
A schedule of tariff of energy was framed by the Board. Cl. 4(b) mentions
how the monthly demand charge shall be calculated and sub-clause (f) of this
clause states that in the event of lock-out, fire or any other circumstances considered by the supplier to be beyond the control of the consumer, the consumer
shall be entitled to a proportionate reduction of demand charges/minimum
charges.
As a result of shortage of electricity the State Electricity Board considerably
restrkted the supply to large industrial concerns. Because of this the Board
allowed some reduction in th!: demand charges. The appellant, who was a bulk
consumer of. etfrtricity, could not get the full quantity as per the contract between the parties.
The appellant, therefore, filed a writ petition that there should
be either no demand charge at all. when the Board was not in a position
to supply electric energy, or there should be a propo1iionate reduction of the
deman<,! charge. The High Court noted the redlJ!Otion made by the f)oard and
held that the Board was entitled to the demand charge. It did not, however,
decide as to what should be the basis for and in what proporiion the demand
charge should be reduced. The ap~llant also contended that no duty was
leviab!e on the demand charge, under the Punjab Electricity (Duty) Act, 1958,
but only on the energy charge, for the actual amount of energy supplied but
the High Court rejected this contention.
All(!wing the a@eal in part on the first contention,
HELD : (1) The circumstance of power cut which disabled the Board to
•give th., full supply to the appellant would be a circum.tance which disabled
the coosumer from consuming electricity as per the contract and this was a
circumstance which was beyond i!,s control and could not he considered otherwise by the Board. It entitled the consumer to a proportionate reduction of
the demand charge.
In a circumstance like this the obligation of the consumer
to se.w at least 3 dayY notice on the supplier as per the later part of sub-clause
(f) was not attracted as the requirement of the notice was only in the case
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• of s!tut-Oown of not Jess than 15 days' duration [682 A, B, C]
Therefore, the inability of tbe Board to supply electric energy due to power
cut as per the demand of the consumer according to the contract will be reflected in and considered as a circumstance beyond the ccntrol of the consumer
which prevented him from cons11ming electricity as per the contract to the
extent it wanted to consume.
[682, DJ
2-LI 59SCI /76
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678
SUPRf.ME COURT REPORTS
[1976] 2 s.c.R.
(2) A reading of the clauses of the Schedule of tariff as a whole makes it
clear that the duty under the Punjab Act is chargeable on the price of energy
supplied in a month. Therefore, the duty is chargeable not only on the energy
charge but also on the demand charge. It is, however, chargeable on the actual
amount of demand charge realisable from the consumer.
CIVIL APPELLATE JURISDJCTION: Civil Appeal Nos. 1306, 1310,
1370-1380 and 1422 to 1424 of 1975.
Appeals by special leave from the judgment and orders dated the
9th July 1975 of the Punjab & Haryana High Court at Chandi_garh
in Civil Writ Petitions Nos. 733, 595, 725, 681, 720, 723, 726, 728,
777, 780, 781, 833, 892, 884, 885 and 887 of 1975 re&pectivcly.
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M. C. Bhandare, (In 1306) and Mrs. S. Bhandare for the appel-· •
lants in C.As. 1306, 1370-1980 and 1422-1424 of 1975.
F. S. Nariman, A. K. Srivastava and B. P. Singh for the appd~ ·
!ants in C.A. 1310.
A. K. Sen, (In CA 1306), Dr. L. M. Singhvi, (In 1310), K. K.
Jain, Bishamber Lal, S. K. Gupta and P. Dayal for the Respondent
No. 2 in all the appeals.
L. N. Sinha, Sol. General (In CAs. 1306 and 1310) and R. N.
Sachthey for Respondent No. 1 in all the appeals.
The Judgment of the Court was delivered by
UNTWALIA, J-In these appeals by special leave the common
question for determination is whether the Haryana State Electricity
Board (briefly, the Board), respondent no. 2, is entitled to claim any
demand charge from the appellants in respect of the supply of electric
energy to them and whether the State of Haryana, respondent no. 1
is entitled to charge any duty under the Punjab Electricity
(Duty)
Act, 1958 on the demand charge. Several connected Writ Petitions
were disposed of by the High Court of Punjab & Haryana ·by a
common Judgment and this judgment will govern all the cases which
had been heard together by us.
Civil Appeal No. 1306/1975 is by M/s Northern India Iron &
Steel Co. Ltd. and arises out 0£ Writ Petition No. 733/1975. We
may state a few necessary facts of this case; those of the other cases
being more or less similar.
The appellant owns
a
factory
and
manufactures alloy steel and steel castings. It is a large consumer of
electricity supplied by the Board.
As per the contract between the
appellant and the board the total connected load of the installation
in question is 8687, 649 Kilowatts and its contract demand is the
same.
At the ratio of one K.V. to 0.85 KW, the corresponding K.V.
of the contract demand works to 10,221 K.V. .The appellant was
allotted 1,06,590 units on daily basis as its power quota by the Board.
There was shortage of electric energy in the State of Haryana.
The
State Government, therefore, issued orders and directions for maintaining the supply and securing the equitable distribution of
the
energy.
Orders were issued by the State Government under section
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NORTHERN lNDIA lRON & STEEL v. HARYANA (Untwalia, J.)
679
228 of the Indian Electricity Act, 1910-hereinafter called the 1910
Act, restricting considerably the supply of electric energy by the Board
to the large industrial consumers as a result of which power cut was
introduced. It is not necessary to give the facts and figures of the
amount of power cut, sutlice it to say that at the relevant time there
were substantial power cuts and the appellant was not able to get
supply of energy according to· its demand as per the quantity mentioned in the contract. ln these circnmstances a dispute arose between the parties as to whether the Board was entitled to get any
demand charge, if so to what extent, and whether the State could
demand any duty on such charge. Under Section 49 of the ElectriJ city (Supply) Act, 1948 herein.after called the 1948 Act, the Board
may supply electricity to any person not being a licensee upon such
terms and conditions as the Board thinks fit and may for the purposes
of such supply frame u~1iform tariffs of course, the power of the Beard
is subject to the other provisions of the Act and regulations, if any,
made in this behalf.
There are two well-known systems· of tariffs-one is the .fiat rate
system and the other is known as the two-part tariff system.
Under
the former a fiat rate is charged on unit 01' energy consumed.
The
latter system is meant for big consumers of electricity and it comprised of ( 1) demand charges to cover investment, installation and
the standing charges to some extent a1nd (2) energy charges for the
actual amount of energy consumed. The Board has framed in
exercise of its power under section 49 of the 1948 Act certain terms
and conditions and procedure in regard to supply of electricity to its
consumers.
They are applicable in the cases of the appellants also.
Demand Charge has been defined in clause 1 (h) thus :
"Demand charge" shall mean the amount
chargeable
per month in respect of B_oard's readiness to serve the consumer irrespective of. whether he consumes any energy or
not, and is based upon the connected load, the maximum
demand or the contract demand, as the case may be and as
prescribed in the relevant schedule of tariff.
And in _sub-clause (i) "Energy Charge" has been defined thus :
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energy
actually taken by the consumer and is applicable to the units
consumed by him \n any month.
This is in addition to any
demand charge, if applicable.
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A schedule of tariff for supply of energy which is amended from time
to time has been framed by the Board.
Such schedule of tariff for
steel furnace power supply mentions in item 2 the character of service.
Clause 3 provides for tariff and clause 4 deals with the demaud
assessment. The two part tariff mentioned in clause 3 in case of
the appellant was "Demand Charges Rs. 12/- per KVA per month
PLUS Energy charges Rs. 7.00 paise per Kwh".
There was some
surcharge on the above rates.
The relevant Sub-clauses of clause
4 i.e., Demand Assessment may now be quoted here :
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"(a)
(b)
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SUPREME COURT REPORTS
[1976j 2 S.C.R.
The demand for any month shall be defined as the
highest average loa_d_ measured in Kilovolt amperes
during any consecu_tive minutes period of the month.
The monthly demand charges shall be
based
on
(i) the actual maximum demand during the month
or (ii) 65% of the contract demand or (iii) 75%
of the highest maximum demand during the preceding eleven months or (iv) 100 KVA whichever is
the highest.
For the first 11 months from the commencement of Supply alternative (iii) shaii not be
applicable.
The contract demand means the maximum
K.W I
kV A for the supply of which the Board undertakes
to provide facilities from time to time.
NOTE-In case the consumer
exceeds
his
contract
demand in any month by more than n% a surcharge of
25 % will be
levied
on
the
SOP /Monthly
minimum
charges (industrial. Factory lighting a:ad colony supply).
(d) If in any case the maximum demand is being measured in KW the same shall be converted into KV A
by the use of actual power factor and KV A tadff
applied for working out the demand charges.
( e) In case the supply has been given
on
restricted
hours basis then a reduction of 30%
in
demand
charges will be given if supply is for 12 hours or
less, occasional break downs or shut downs if any,
on the part of the supplier,
shall,
however,
not
entitle a consumer to any reductions.
(f) Force Majeurc : In the event of lock out, fire
or
any other circumstances considered by t11e supplier
to be beyond the control of the consumer, the consumer shall be entitled to a proportionate reduction
of demand
charges/minimum
charges.
provided
he serves at least 3 days notice on the supplier for
shut down of not Jess than 15 days duration.
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It appears from the juqgment of the High Court that some reduction (perhaps upto 60%) was given by the Board in the demand •
charges because of the inability of the Board to supply energy as per
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the requirement of the appellant consumers due to power cuts im_
posed by the Govcrn1nent.
Hut the appellant seems to have taken
~
the stand that either there should be no demand charge at all when •
the Board was not in a position to supply electric energy
as
per
its requirement or there shQJild be a proportionate reduction of the
demand charge.
Hence it filed a Writ petition. The High Court
has noted the reduction made by the Board and has held that the
Board is entitled to the demand charge. It has, however, not been
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'NORTHERN INDIA IRON & STEEL v. HARYANA (Untwalia, I.)
681
.decided •as to what should be the basis tor and in what proportion the
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demand charges be reduced.
The stand of the appellant as respects the charge of duty by the
State Government under the Punjab Electricity (Duty) Act, 1958hereinafter called the Duty Act, was that no duty could be levied on
the demand charge.
The High Court has. repelled this contention.
The two questions which fall our determination in these appc:als
are:
(1) Whether on the facts and in the circumstances of
the cases the Board is entitled to ciaim any demand
charge; if so, to what extent ?
(2) Whether uny duty is leviable on the demand charge;
if so, to what extent ?
An argument was advanced before us in the first
instance
by
counsel for the appellants with reference to the definition of the
demand cha~ge in clause 1 (h) of the terms and conditions of supply
framed by the. Board that since the Board was not ready to serve
the consumer and the consumer was ready to consume maximum
electric energy the former was not entitled to ask for any demand
charge.
This argument, in the beginning was combated with equal
force, if not more, on behalf of the Board ::rnd it wa5 asserted that the
Board was entitled to assess and claim the full demand charge as per
clause 4 of the tariff irrespective of the fact _whether it was in a position to supply the energy according to the demand of the consumer
or not. · Such an extreme stand on either side appeared to us a bit
puzzling and leading to inequitable .results.
The difficulty was not
easy to solve.
If we were to hold that for the Board's inability to
supply a fraction of the consumer's demand as per the contract it
could claim only the energy charge and not the demand charge, it
would have been very hard and injurious to the Board and the consumer would have unjustifiably got the supply at a very cheap rate
If on the other hand, we were to say that the consumer was liable to
pay the entire demand charge as per the method of assessment provided in clause 4 of the tariff even when for no fault of it, it could
get only a fraction of its demand fulfilled, resulting in its not being
able to run the industry to its full capacity, it would be liable to pay
a huge amount per month, and this will not only be uneconomical but
would seriously affect its economic structure. But we were happy
to find that a just, equitable and legal solution of the difficulty was
provided during the course of the argument on either side and that
is with reference to sub-clause ( f) of clause 4 of the tariff. It is,
therefore, not necessary to resolve the extreme stand taken on either
side.
Under clause 4(f) the consumer is entitled to a proportionate red~ction of demand charges in the event of lock-out, fire or any other
Clfcumstances considered by the supplier beyond the control of the
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SUPREME COURT REPORTS
[19761 2 ·s.c.R.
consumer; that is to say, if the consumer is not able to consume any
part of the electric energy due to any circumstance beyond its control
and which is considered by the Board tQ be so, then it shall get a proportionate reduction in the demand charge.
The circumstance
of
power cut which disabled the Board to give the full supply to the appellant because of the Govemment Order under section 228 of the 19 fO
Act, undoubtedly would be a circumstance which disabled the consumer from consuming electricity as per the contract.
And this was
circums.tance which was beyond its control and could not be considered otherwise by the Board. lt entitled the consumer to a
proportionate reduction of the demand charges.
This interpretation of subclause (f) of clause 4 of the tariff was accepted to be the correct,
legal and equitable interpretation on all hands.
In our opinion it i&
so.
In a circumstance like this, it is plain, the obligation of
the
consumer to serve at least 3 days notice on the supplier as per the
latter part of sub-clause (f) was not attracted, as the requirement of
notice was only in the case of shut down of not less than 15
days
duration.
We are, therefore, of the view that the inability of the Board to.
supply electric energy due to power cut or any other circumstance
beyond its control as per the demand of the consumer according to
the contract will be reflected in and considered as
a
circumstance
beyond the control of the cons11mer which prevented it from consuming electricity as per the contract and to the extent it wanted to consume. .The monthly demand charge for a particular month will have
to be assessed in accordance with sub-clause (b) of clause 4 of the
tariff and therefore from a proportionate reduction will have to
be
made as per sub-clause (f). We hope, in the light of the judgment,
there will be no difficulty in \Y,Orking out the figures of the proportionate reduction in any of the cases and for any period. In case of
any difference or dispute as to the quantum of the demand charge or
the proportionate reduction, parties will be at liberty to pursue their
remedy as may be available to them in accordance with law.
Coming to the question of duty, we have no hesitation in an outright rejection of the extreme c_ontention put forward on behalf of the
appellants that no duty is leviaple at all on the demand charge. But
it is clear, and this was fairly conceded to by the Solicitor General
appearing for the State of Haryana, that the amount of duty payabk
will be on the actual amount of demand charge realisable from the
consumer after the proportionate reduction under clause 4(f) of the
tariff.
Section 3 of the Duty Act says that there shall be levied and paid
to the State Government on the energy supplied by the Board to a
consumer a duty to be called the "electricity duty'', computed at the
rates indicated in the various clauses of sub-section ( 1) of section 3.
The expression used in the various clauses is "where the energy is
supplied" to a particular type of consumer, then the rate of duty will
be as specified therein.
On the basis of the said expression the argument put forward on behalf of the appellant was that the duty could
be levied only on tl1e energy charges for the actual amount of energy
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NORTHERN INDIA IRON 1& STEEL v. HARYANA (Untwalia, J.) 683
supplied.
Such an argument is too obviously wrong to be accepted.
Reading· the clauses as a whole it would be seen that the duty is
chargeable on the price of energy supplied in a month. The price
of energy in a two-part tariff system would mean and include the
energy charge as also the demand charge.
This is made further,
clear by the manner of calculation provided in Rule 3 of the Punjab
Electricity (Duty) Rules, 1958. Sub-rule (1) says:
"The duty under clause (iii) and (iv) of sub-section
( 1) of section 3 of the Act shall be calculated on the price
of the energy recoverable at the net rate of the Board which
will include the demand charge when the Supply is governed by a two-part tariff."
·
It is therefore, manifest that the duty under the Duty
Act
is
chargeable not only on the energy charge but also on the demand
charge when the supply is governed by two-part tariff and it is chargeable on the actual amount of demand charge realisable from the consumer.
For the reasons stated above, we allow these appeals in part to
the extent indicated above.
ln the circumstances we shall make no
order as to costs in any of the appeals.
P.B.R.
Appeals partly allowed.
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