IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 1836of 1997 Etc.

Decided On: 10.03.1997

Appellants: Kanoria Chemicals and Industries Ltd. and Ors.

Hon'ble Judges:
B.P. Jeevan Reddy Reddy and K. S. Paripoornan, JJ.

Counsels:
For Appellant/Petitioner/Plaintiff: H.N. Salve, C.S. Vaidyanathan and D.A. Dave, Kiran
Budhiraja, Nina Gupta, Adv. for Vineet Kumar, Prag Tripathi, A.T. Patra, Gautam Khaitan, P.P.
Tripathi, Rajesh Kumar Singh, Shahid Rizvi, Suman J. Khaitan, Raj Kumar Gupta, H.V.P.
Sharma, Rajesh, Anil Kumar Jha (NP), R.B. Misra (NP), Sunil Kumar Jain, Vijay Hansaria,
Pradeep Misra and T. Mahipal, Advs

Subject: Electricity

Catch Words

Mentioned IN

Acts/Rules/Orders:
Electricity (Supply) Act, 1948 - Section 49

Cases Referred:
Shree Chamundi Mopeds Ltd. v. Church of South India Trust Assn. MANU/SC/0501/1992;
Adoni Ginning Factory v. Secy., A.P. Electricity Board MANU/SC/0581/1979; Hindalco
Industries Ltd. v. State of U.P. Special Leave Petition (C) No. 9087-88 of 1996

Prior History:
Appeal From the Judgment and Order dated 9-7-1993 of the Allahabad High Court in C.M.W.P.
No. 10755 of 1993

Citing Reference:

Dissented

1
Distinguished

Case Note:

Electricity - surcharge - Articles 32, 136 and 226 of Constitution of India, Section 49 of
Electricity (Supply) Act, 1948 and Order 39 of CPC, 1908 - appeal by special leave
entertaining question of legality of surcharge claimed by respondent for period of pendency
of appeal in Supreme Court - respondent right in claiming surcharge for period during
which appeals were pending in Supreme Court and not claiming for period during which
writ petitions and writ appeals were pending in High Court - such claim justified in view
that Supreme Court did not stay operation of notification - but only restrained Board from
collecting arrears - Supreme Court never intended to grant stay Order - rate of late
payment surcharge reduced but to be confined only for period of stay - appeal dismissed.

JUDGMENT

B.P. Jeevan Reddy, J.

1. Civil Appeals (Arising out of SLP (C) Nos. 6588/94, 21905-06/93, 21913-14/93, 6479/94 &
23250/94.

2. Leave granted in Special Leave Petitions.

3. These appeals are preferred against the judgment of a Division Bench of the Allahabad High
Court dismissing the writ petitions filed by the appellants. The appellants are large consumers of
electricity.

4. By a Notification dated April 21, 1990, the Uttar Pradesh State Electricity Board had revised
the electricity rates/tariffs under Section 49 of the Electricity (Supply) Act, 1948. The
Notification inter alia provided for payment of interest in case the bill amount is not paid within
the specified period. Clause 7(b) read as follows:

7(b) For delayed payment:

In the event of any bill of whatever nature it may be not being paid by the due date specified
therein, the consumer shall pay an additional charge per day of seven paise per hundred rupees or
part thereof on the unpaid amount of the bill for the period by which the payment is delayed,
beyond the due date specified in the bill, without prejudice to the right of the Board to disconnect
the supply.
5. The validity of the aforesaid Notification was questioned in the Allahabad High Court by way
of a writ petition filed by the Eastern U.P. Chamber of Commerce and Industry, Allahabad and
certain individual consumers. On the Interlocutory Application filed in the said writ petition, the
High Court passed the following Order on July 25, 1990:

In this case S/Sri Sudhir Agarwal and S.C. Budhwar have filed appearance on behalf of
Respondents. They pray for and are granted two weeks' time for filing rejoinder affidavit. List
this petition for disposal, if possible at the admission stage, on 16th August, 1990. This is
necessary in view of recurrence of this matter in large number of cases and revenue in large scale
being affected for electricity charges. Meanwhile till 23-8- 1990 unless recalled earlier, the
operation of the notification dated 21.4.1990 shall remain stayed. The respondents are
restrained from realising the additional amount of electricity charges from petitioners in
pursuance of the said notification. However, the petitioners shall continue to pay at the old rate.

(Emphasis added)

6. The said order was continued by subsequent Orders dated August 30, 1990 and September 7,
1990.

7. It appears that besides the above writ petition, several other writ petitions were filed
questioning the aforesaid Notification. In every writ petition, there was an Interlocutory
Application praying for stay of operation of the said Notification but there does not appear to be
any uniformity in the interim orders made by the High Court in those writ petitions. For example,
in Writ Petition No. 30097 of 1.990 filed by the Employers Association of Northern India, the
interim order was to the following effect:

Meanwhile effect shall not be given to the notification dated 21st April, 1990 as against the
petitioners. However, it is made clear that in the event of failure of the writ petition the
petitioners shall deposit with the relevant authority within a period of one month from the date
of dismissal of the writ petition the difference between the amount of electricity dues, which will
be paid hereinafter by the petitioners under our order and the sum which may be calculated on
the basis of the impugned notification.

(Emphasis added)

8. All the said writ petitions challenging the said Notification were ultimately dismissed by a
Division Bench on March 1, 1993.

9. From this stage onwards, we will refer to the facts and contentions in civil appeal arising from
Special Leave Petition (C) No. 6588 of 1990 (preferred by M/s. Kanoria Chemicals and
Industries Limited), as representative of the facts and contentions in all the matters being
disposed of under this judgment. Though the individual facts vary, the questions arising in these
appeals are common.

10. After the dismissal of the writ petitions on March 1, 1993 as aforesaid, Kanoria says, it
deposited the difference amount between pre-revised and the revised electricity rates. It did not,
however, deposit the "additional charges" leviable under Clause 7(b), referred to above, which
are generally referred to - and referred to hereinafter - as "late payment surcharge". Thereupon,
the Board issued a notice of demand calling upon Kanoria to pay the late payment surcharge in a
sum of Rs. 3,27,01,408.88. (calculated upto February 28, 1993). Similar demand notices were
served upon other appellants also. A fresh batch of writ petitions were filed by several consumers
including the appellants herein questioning the notices demanding late payment surcharge under
Clause 7(b). The main contention of the appellants before the High Court was that inasmuch as
the High Court had stayed the operation of the Notification dated April 21, 1990 (by its Order
dated July 25, 1990 as continued from time to time), Clause 7(b) remained inoperative during the
period July 25,1990 to March 1,1993 and, therefore, no late payment surcharge can be levied on
the amount withheld by the appellants under the orders of the court, even though their writ
petitions were dismissed ultimately. According to the appellants, it was not a case where the
court injuncted the Board from collecting the dues according to the aforesaid Notification, nor
was it a case where the collection of bill amount was stayed simplicitor. It was a case, they
submitted, Where the operation of the very Notification was stayed which meant that from the
date of the stay order, Clause 7(b) did not operate and was not effective till the dismissal of the
writ petitions. Strong reliance was placed upon the decision of this Court in Adoni Ginning
Factory v. Secretary, Andhra Pradesh State Electricity Board MANU/SC/0581/1979 :
AIR1979SC1511 . The said contention has been rejected by the Division Bench. R.A. Sharma,
J., speaking for the Division Bench, first examined the nature and effect of the interim orders
passed by courts pending disposal of substantive matters and then opined that in Adoni Ginning,
this Court cannot be said to have held that in the case of stay of operation of the Notification,
interest does not accrue at all. Sharma, J. pointed out that the said decision was concerned only
with the period during which an order of injunction restraining the Board from collecting the
revised charges was in operation and this Court opined that an order of injunction does not
prevent the accrual of interest provided by the relevant tariffs/rules. Sharma, J. pointed out that
the recoverability of the interest amount for the period covered by an order of stay of the
Notification was not at all in issue in Adoni Ginning and, therefore, it cannot be said that there is
any decision on the said question. Affirming the opt-repeated principle that a decision is an
authority only for what it actually decides, the learned Judge opined that the consumers are liable
to pay the late payment surcharge under Clause 7(b) of the said Notification even for the period
covered by the aforementioned order dated July 25, 1990 (as extended from time to time). The
learned Judge also pointed out that the interim orders passed in various writ petitions were not
uniform and by way of illustration set out in the interim order in Writ petition No. 30097 of 1990
(quoted by us hereinabove). The correctness of the judgment is called in question in this batch of
appeals.

11. Sri R. Vaidyananthan, who led the arguments on behalf of the appellants, submitted that the
impugned decision of the High Court is clearly contrary to the principles enunciated by this
Court in Adoni Ginning and cannot, therefore, stand. Counsel relied upon another order of this
Court dated April 23, 1996 in Special Leave Petition (C) No. 9087-88 of 1996 (Hindalco
Industries limited v. State of Uttar Pradesh), Learned Counsel submitted that Clause 7(b) of the
Notification dated April 21, 1990 was penal in nature inasmuch as the late payment surcharge
provided by it works out to 25.5 interest per annum. Such high rate of interest, learned Counsel
submitted, cannot but be characterized as penal.
12. Inasmuch as the decision in Adoni Ginning constitutes the sheet-anchor of the appellant's
case, it is necessary to closely examine the facts and ratio of the said decision. Electricity charges
were enhanced by the Government of Andhra Pradesh under an Order dated 30th January, 1995.
The enhancement was questioned by certain consumers by way of writ petitions in the Andhra
Pradesh High Court. The High Court stayed the operation of the Government Order enhancing
the rates. The writ petitions came up for hearing before a learned Single Judge on February 22,
1957 and were allowed. The Government of Andhra Pradesh preferred writ appeals which were
allowed by a Division Bench of that court on 19th December, 1958 upholding the validity of the
enhancement. Thereafter, the Andhra Pradesh State Electricity Board to whom the government
had transferred the Electricity Undertakings with effect from 1st April, 1959 issued bills to
several consumers calling upon them to pay the arrears of enhanced charges. No demand was
made under these notices for surcharge (for delayed payment of Bill amount) on the arrears.
Meanwhile several consumers approached this Court and obtained orders of injunction
restraining the Government/Board from realising from them the "amount of arrears occasioned
by the enhancement of rates". Injunction was granted by this Court subject to certain conditions
including the condition that in the event of the dismissal of their appeals, the appellants shall pay
the arrears with interest calculated @ one percent per annum. All the appeals were dismissed by
this Court on 25th March 1964. Thereafter, the Electricity Board issued demand notices calling
upon the consumers to pay surcharge @ twelve percent per annum on the arrears in respect of
which they had obtained orders of injunction pending their appeals before this Court. On receipt
of these demand notices, the consumers again approached the High Court by way of writ
petitions questioning the demand. Their writ petitions were allowed by a learned Single Judge
observing that no surcharge was leviable during the period when the order of injunction granted
by this Court was in operation. The writ appeals preferred by the Board were, however, allowed
by a Division Bench against which decision some of the consumers approached this Court again.
It is, therefore, clear that the only dispute in Adoni Ginning pertained to the liability of the
consumers to pay surcharge @ twelve percent per annum on the amount not collected from them
under the orders of injunction granted by this Court pending their appeals, It is significant to
notice that the dispute in the said case did not pertain to the liability of the consumers to pay the
surcharge amount for the period covered by the order of stay granted by the High Court; the
Board did not choose to demand any surcharge for that period. The contention of the appellants
in Adoni Ginning was that by virtue of the injunction order granted by this Court, the consumers
cannot be said to be in default in paying the electricity charges and, therefore, no surcharge was
leviable. The contention was rejected by this Court (D.A. Desai and O. Chinnappa Reddy, JJ.).
The Court pointed out that according to Clause (9), a consumer was liable to pay the bill amount
within thirty days, in default of which he was liable to pay "an additional charge of one percent
on the amount of the bill for every month of delay or part thereof. The contention urged by the
appellant therein was repelled in the following words:

The injunction granted by this Court restrained the governed from realising the arrears of
enhanced charges.... All that the injunction did was to restrain the Board from realising the
arrears which meant that the Board was restrained from taking any coercive action such as
disconnection of supply of electricity etc. for the realisation of the arrears. The operation of G.O.
No. 187 dated 30th January, 1955, as such was not stayed. Thus the obligation of the consumers
to pay charges at the enhanced rates was not suspended though the Electricity Board was
prevented from realising the arrears. It was up to the consumes to pay or not to pay the arrears. If
they paid the arrears they relieved themselves against the liability to pay surcharge. If they did
not pay the arrears they were bound to pay the surcharge if they failed in the appeals before the
Supreme Court. This was precisely what was pointed out by the Electricity Board in the Bills
issued to the consumes after the Supreme Court granted the injunction. We may mentioned here
that the Electricity Board is not demanding any surcharge on the arrears for the period during
which the Andhra Pradesh High Court had granted stay. It was explained by the learned Counsel
for the Electricity Board that no surcharge was claimed for that period as the operation of G. O.
No. 187 dated 30th January 1955 had itself been stayed at that time. Surcharge was claimed for
the period during which the appeals were pending in the Supreme Court since the Supreme Court
did not stay the operation of G.O. No. 187 but only restrained the Board from collecting the
arrears. That no stay of G.O. No. 187 was ever intended to be granted by the Supreme Court is
also clear from the circumstance that there was no injunction restraining the Electricity Board
from collecting future charges at the enhanced rates. The Electricity Board was, therefore, right
in claiming surcharge for the period during which the appeals were pending in the Supreme
Court and not claiming surcharge for the period during which the Writ Petition and Writ
appeals were pending in the High Court.

Emphasis added)

13. The learned Counsel for the appellants in the appeals before us rely upon the portions
underlined in the above passage as a decision supporting their contention that where the
operation of Government order is stayed, no surcharge can be demanded upon the amount
withheld. We find it difficult to agree. In our respectful opinion, the underlined portions do not
constitute the decision of the court. They merely refer to the fact that the Board itself did not
make a demand for surcharge amount in respect of the period covered by stay under its own
understanding of the effect of the stay order granted by the High Court and that it was justified in
its opinion. The demand was, the court pointed out, in respect of the period covered by the order
of injunction granted by this Court. This Court held expressly that the grant of an injunction does
not relieve the consumes of their obligation to pay the charges at the enhanced rates and,
therefore, the demand for surcharge/interest for such period is not illegal. The portions
underlined cannot be understood as laying down the proposition that in respect of the period
covered by stay, no demand can be made. No such proposition can be deduced from the said
passage for the reason that the liability for the said period was not at all in issue in the said
decision. Unless put in issue and pronounced upon, it cannot be said that there was a decision on
the said issue. There was no lis between the parties with respect to the period covered by the stay
order of the High Court. If so, it cannot be said that any decision was rendered by this Court on
the said issue or aspect, as it may be called. We, therefore, agree with the High Court that Adoni
Ginning cannot be read as laying down the proposition that the grant of stay of a Notification
revising the electricity charges has the. effect of relieving the consumers/petitioners of their
obligation to pay late payment surcharge/interest on the amount withheld by them even when
their writ petitions are dismissed ultimately. Holding otherwise would mean that even though the
Electricity Board, which was the respondent in the writ petitions succeeded therein, is yet
deprived of the late payment surcharge which is due to it under the tariff rules/regulations. It
would be a case where the Board suffers prejudice on account of the orders of the court and for
no fault of its. It succeeds in the writ petition and yet loses. The consumer files the writ petition,
obtains stay of operation of the Notification revising the rates and fails in his attack upon the
validity of the Notification and yet he is relieved of the obligation to pay the late payment
surcharge for the period of stay, which he is liable to pay according to the statutory terms and
conditions of supply - which terms and conditions indeed form part of the contract of supply
entered into by him with the Board. We do not think that any such unfair and inequitable
proposition can be sustained in law. No such proposition flows from Adoni Ginning. It is a
matter of common knowledge that several petitioners (their counsel) word the stay petition
differently. One petitioner may ask for injunction, another may ask for stay of demand notice, the
third one may ask for stay of collection of the amount demanded and the fourth one may ask for
the stay of the very Notification. Such distinctions are bound to occur where a large number of
writ petitions are filed challenging the Same Notification. The interim orders made by the Court
may also vary in their phraseology in such a situation. Take this very case: while the consumers
had asked for stay of operation of the Government Order revising the rates, those very consumers
asked for an injunction when they came to Supreme Court. Furthermore, as pointed out rightly
by the High Court, the order of stay granted by the High Court in writ petitions questioning the
validity of the Notification dated April 21, 1990 were not uniform. In the case of writ petition
filed by the Eastern U.P. Chamber of Commerce and Industry, Allahabad, the operation of the
Notification was stayed while in the case of the writ petition filed by the Employers Association
of Northern India, it was directed that "effect shall not be given to the notification dated 21st
April, 1990 as against the petitioner", while clarifying at the same time that "in the event of
failure of the writ petition, the petitioner shall deposit with the relevant authority within a period
of one month from the date of dismissal of the writ petition the difference between the amount of
electricity dues to be paid hereinafter by the petitioners under our orders and the sum which may
be calculated on the basis of the impugned notification". The words "sum which may be
calculated on the basis of the impugned notification" in the later order clearly mean and include
the late payment surcharge as well. The acceptance of the appellants' argument would thus bring
about a discrimination between a petitioner and a petitioner just because of the variation of the
language employed by the court while granting the interim order though in substance and in all
relevant aspects, they are similarly situated. It is equally well settled that an order of stay granted
pending disposal of a writ petition/suit or other proceeding comes to an end with the dismissal of
the substantive proceeding and that it is the duty of the court in such a case to put the parties in
the same position they would have been but for the interim orders of the court. Any other view
would result in the act or order of the court prejudicing a party (Board in this case) for no fault of
its and would also mean rewarding a writ petitioner inspite of his failure. We do not think that
any such unjust consequence can be countenanced by the courts. As a matter of fact, the
contention of the consumers herein, extended logically should mean that even the enhanced rates
are also not payable for the period covered by the order of stay because the operation of the very
Notification revising/enhancing the tariff rates was stayed. Mercifully, no such argument was
urged by the appellants. It is ununderstandable how the enhanced rates can be said to be payable
but not the late payment surcharge thereon, when both the enhancement and the late payment
surcharge are provided by the same Notification - the operation of which was stayed.

14. As has been pointed out by S.C. Agrawal, J., speaking for a three-Judge Bench in Shree
Chamundi Mopeds Ltd. v. Church of South India Trust Association, Madras
MANU/SC/0501/1992 : [1992]2SCR999 , "while considering the effect of an interim order
staying the operation of the order under challenge, a distinction has to be made between quashing
of an order and stay of operation of an order. Quashing of an order results in the restoration of
the position as it stood on the date of the passing of the order which has been quashed. The stay
of operation of an order does not, however, lead to such a result, it only means that the order
which has been stayed would not be operative from the date of the passing of the stay order and
it does not mean that the said order has been wiped out from existence."

15. Sri vaidyanathan relied upon an unreported order dated April 23, 1996 in Special Leave
Petition (C) Nos. 9087-88 of 1996 (Hindalco Industries v. State of U.P.). We have seen the order
but we do not find anything in the said order supporting the contention of the learned Counsel.

16. Sri Vaidyanathan than contended that the rate of 'late payment surcharge' provided by Clause
7(b) is really penal in nature inasmuch as it works out to 25.5 percent per annum. Learned
Counsel also submitted that the petitioners understood the decision in Adoni Ginning as relieving
them of their obligation to pay interest for the period covered by the interim order and that since
they were acting bonafide they should not be mulcted with such high rate of interest. We cannot
agree that the rate of late payment surcharge provided by Clause 7(b) is penal, but having regard
to the particular facts and circumstances of this case and having regard to the fact that petitioners
could possibly have understood the decision in Adoni Ginning as relieving them of their
obligation to pay interest/late payment surcharge for the period of stay, we reduce the rate of late
payment surcharge payable under Clause 7(b) to eighteen percent. But this direction is confined
only to the period covered by the stay orders in writ petitions filed challenging the Notification
dated April 21,1990 and limited to March 1, 1993, the date on which those writ petitions were
dismissed.

17. For the above reasons, the appeals fail and are dismissed subject to the above mentioned
direction with respect to the rate of levy of late payment surcharge under Clause 7(b) of the
Notification dated April 21, 1990.

18. Writ Petition (C) No. 761 of 1993:

19. Writ Petition (C) 761 of 1993 too is dismissed for the same reasons.

20. No costs.

© Manupatra Information Solutions Pvt. Ltd.