Holding

Consumers are not entitled to remission of maximum demand charges for interrupted supply; the Board may lawfully levy the agreed maximum demand charges.

Summary

The appellants, large industrial consumers, entered into standard supply agreements with the West Bengal State Electricity Board that imposed both minimum guaranteed charges and maximum demand charges. The agreements provided for remission of minimum charges when supply was interrupted, but were silent on remission of maximum demand charges. After the Board stopped granting remission for maximum demand charges, the consumers argued that the interruption of supply should also reduce these charges, invoking the principle of continuous supply. The High Court’s single judge allowed the claim, but the Division Bench reversed it. The Supreme Court held that maximum demand charges, which are intended to recover capital costs, are distinct from minimum charges and the contract terms do not permit any remission for interrupted supply. Consequently, the appeals were dismissed and the Board’s demand upheld.

Issues considered

Whether the contract terms and statutory provisions allow remission of maximum demand charges in case of interrupted or irregular electricity supply.

Legislation cited

Electricity Act, 1910s. 22-B
Electricity (Supply) Act, 1948s. 2(8)

Subjects

electricity supplymaximum demand chargesminimum guaranteed chargessupply agreementremissioninterrupted supplyIndian Electricity ActWest Bengal Electricity Boardtariff

Judgment

NIPHA STEELS LTD. AND ANR. A
v.
WEST BENGAL STATE ELECTRICITY BOARD AND ORS.

MAY 7, 2003

[SHIVARAJ V. PATIL AND ARIJIT PASAYAT, JJ.] B

Electricity (Supply) Act, 1948-Section 2(8)-Electric power supply-
Agreement for maximum demand charges-Interrupted supply of electricity-
No provision for remission of charges in case of maximum demand charges- C
Such remission provided in case of minimum guaranteed charges-Plea that
in view of interrupted supply remission required by analogy of minimum
guaranteed charges-Held: Consumers not entitled for remission of charges
in case of interrupted supply-Parties are bound by the terms of agreement-
What is applicable to minimum guaranteed charges cannot be applied to
maximum demand charges as both operate in different areas-Indian Electricity D
Act, 1910-West Bengal Electricity Energy (Maintenance of Supply) Order,
1977.

Words and Phrases:

"Maximum demand"-Meaning of, in the context of Section 2(8) of E
Electricity (Supply) Act, 1948.

Appellant-consumers entered into agreement with respondent-Board
for supply of power on the basis of maximum demand charges, in terms
of Indian Electricity Act, 1910, West Bengal Electricity Energy
(Maintenance of Supply) Order, 1977 and Electricity (Supply) Act, 1948. F
The agreement provided for remission of charges for interrupted supply
of electricity in respect of minimum guaranteed charges but there was no
such provision in respect of maximum demand charges. Previously, Board
used to grant remission even in respect of maximum demand charges and
the practice was later abandoned. In exercise of power under Section 22- G
Hof the Indian Electricity Act, 1910 Board was prevented from supplying
electrical energy during certain specified hours of each day of each month.
Appellants, on receipt of bills, took the stand that in view of interrupted
supply of electricity, the demand of maximum demand charges at the rate
fixed in the agreement was not proper. Board rejected the plea of the
41 H
42 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.

A consumers. Single Judge of High Court accepted the view of the consumers
but the Division Bench rejected the view.

In appeal to this Court appellants contended that when a contract
is for continuous supply there is an inbuilt intention that there should be
abatement of charges in ease of ineontinuous supply; and that maximum
B demand charge is relatable to electrical energy supply.

Respondent-Board contended that the minimum guaranteed charges
and maximum demand charges stand on different footing and logic
applicable to one cannot be applied to the other.

C Dismissing the appeals, the Court

HELD: I. So far as the applicable clauses of the agreement are
concerned, the terms are clear and unambiguous. In view of the purpose
for which the maximum demand is levied, it is crystal clear that there is
no scope for granting any remission in the manner claimed by the
D appellants. [53-H; 54-Al

2. Maximum demand and minimum charges are levied for different
purposes. The former is charged to defray capital costs and the latter to
meet running charges. The various Boards require huge capital outlay for
machinery, plants, equipments, transmission lines etc. Provision has to be
E made for depreciation of machineries and other depreciable assets. In
addition, maintenance of plants, transmission lines etc. has to be done
requiring deployment of huge staff. Demand charges are levied and
collected to meet the capital outlay, while running charges are met by levy
and collection of consumption charges. These distinctive features make I.he
F levies conceptually different. The two do not in any way overlap and the
provisions therefor do not contradict each other or create identical base
for their operation. Though the agreements contained conditions fixed by
the Boards in advance and are open to acceptance by the prospective
customers, the patties are bound by the terms if they have been entered
by the parties with their eyes open. [53-D, E, F, G]
G Orissa State Electricity Board and Anr. v. /Pl Steel Ltd. and Ors., (1995[
4 SCC 320 and Ferro Alloys Corporation Ltd. v. A.P. State Electricity Board
and Anr., AIR (1993) SC 2005, relied on.

3. The contract for supply of electrical energy cannot be treated on
H par with any other contracts of mutual rights and obligations. The terms
NIPHA STEELS LTD. r. WEST BENGAL STATE ELECTRICITY BOARD [PASAYAT . .I] 43

and conditions of supply as envisaged in the contract and the statutory A
provisions and general conditions have been standardized for uniform
application among consumers with variations merely necessitated by the
different classes or categories of consumers and there is no scope otherwise
for expecting any individual or free bargaining right in this regard by each
consumer with the Board. 151-H; 52-AI
B
Raymond Ltd and Anr. v. MP. Electricity Board and Ors., 12001] 1
sec 534, relied on.
Bihar State Electricity Board, Patna and Ors. v. !.1/s. Green Rubber
Industries and Ors., 11990] I SCC 731 and Andhra Steel Corporation ltd C
and Ors. v. Andhra Pradesh Steel Corporation Ltd and Ors., 11991] 3 SCC
263, distinguished.

Mis. Northern India Iron and Steel Co. v. State of Haryana and Anr.,
11976] 2 sec 877, referred to.
D
CIVIL APPELLATE JURISDICTION : Civ.il Appeal No. 5550 of 1997.

From the Judgment and Order dated 29.1.1997 of the Kolkata High
Court in F.M.A. No. 337 of 1988.

WITH E
C.A. Nos. 5551-5554 of 1997.

S. Ganesh, V.R. Reddy, Pratik Dhar, U.A. Rana, Ms. Anuradha
Priyadarshini, Parijat Sinha, H.K. Puri, S.K. Puri and Ujjwal Banerjee for the
appearing parties. F
The Judgment of the Court was delivered by

ARIJIT PASA YAT, J. All these appeals involve identical disputes
and, therefore, are taken together for disposal. The only issue involved is
whether the monthly maximum demand charges for the supply of power was G
rightly demanded by the West Bengal State Electricity Board (hereinafter
referred to as 'the Board') notwithstanding disruption and irregular supply of
electricity by it.

According to the appellants (hereinafter referred to as 'the consumers')
when the true essence of the agreement made between them and the Board H
44 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.

A was un-interrupte and/or regular power of supply, analogy can be drawn
from the deductions granted in respect of the minimum charges in case of
disruption/interrupted supply. The plea found favour with a learned Single
Judge of the Calcutta High Court, but in appeal filed by the Board the view
was reversed.

B Factual background is almost undisputed and, therefore, a brief reference
thereto would suffice.

Consumers entered into the agreements with the Board for supply of
power. The agreement in the standard fonn is common for all the appellants
C who are large industrial consumers. The agreements were in terms of the
Indian Electricity Act, 1910 (in short 'the Act'), West Bengal Electricity
Energy (Maintenance of Supply) Order, 1977 (in short 'the Order') and the
Electricity (Supply) Act, 1948 (in short 'the Supply Act'). The appellants on
receipt of bills from the Board took the stand that in view of interrupted
supply of electricity, the demand of maximum demand charges at the rate
D fixed in the agreement was not proper. The agreement itself provided for
remission under identical circumstances in respect of minimum charges under
certain circumstances. There was no reason as to why the departure should
be made in the case of maximum demand charges. It was pointed out that
under certain circumstances notwithstanding the Board's inability to supply
E power without interruption, minimum charges were specifically provided to
be payable. There was no such provision so far as maximum demand charges
are concerned. Previously, Board used to grant remission even in respect of
maximum demand charges and without any logic and/or basis the same was
abandoned. Intention of the parties to the agreement can be clearly discerr.ed
from the fact that even in the absence of any specific prescription in the
F agreement, remissions were being granted. That is how the parties interpreted
the agreement and to crystalise this understanding into a concrete fonn, the
subsequent agreements contain clauses similar to those in respect of minimum
charges. When the plea was not accepted by the Board, the High Court was
approached and as noted supra the learned Single Judge accepted the view
G but the Division Bench took a contrary view.

Mr. S. Ganesh, learned senior counsel appearing for the appellants in
C.A. No. 5551/1997 with reference to various clauses of the agreement
submitted that learned Single Judge was justified in his view. Whenever
intention was that levies are to be made in respect of irregular supply position,
H specific provision was made in the agreement. When the Board itself had
NIPHA STEELS LTD. Y. WEST BENGAL STATEELECTRICITY BOARD [PASAYAT,l] 45
understood that way as evident from the past practice, it was not open to take A·
an opposite view.

In the clause relating to maximum demand charges, the stress is on the
expression 'per month' and that itself is indicative of the fact that the parties
to the agreement intended that there should be uninterrupted supply and the
charges were to suffer abatement in case of interruption/part supply. When B
a contract is for continuous supply then there is an inbuilt intention that there
should be abatement of the charges when continuous supply is not there. The
interpretation by learned Single Judge of various clauses cannot be said to be
unreasonable and the Division Bench ought not to have interfered with the
same. Though there is no specific provision for varying the rate, the same has C
to be read into the agreement, and both in Jaw and equity was to be granted.
It is not that the appellants were seeking total waiver; what was really called
for related to remission for interrupted/non-supply. Strong reliance was placed
on several decisions to buttress their arguments. Specific reference was made
to Orissa State Electricity Board and Anr. v. /Pl Steel ltd. and Ors., [1995)
4 SCC 320, Mis. Northern India Ircn and Steel Co. v. State of Haryana and D
Anr., [I 976) 2 SCC 877, Bihar State Electricity Board, Patna and Ors. v.
~ Mis. Green Rubber Industries and Ors., [ 1990) I SCC 731 and Raymond Ltd.
and Anr. v. M.P. Electricity Board and Ors., [2001) I SCC 534. Mr. Pratik
Dhar, learned counsel appearing for the appellants in C.A. Nos. 5550-53/97
adopted the arguments of Mr. Ganesh; but added that the maximum demand E
charge is relatable to electrical energy supply. When for a major portion of
a month there is no supply, question of levy at the stipulated rate does not
arise. Mr. Parijat Sinha, learned counsel appearing for the appellants in C.A.
No. 5554/97 adopted the arguments of Mr. Ganesh. Mr. H.K. Puri, learned
counsel for the respondent-Board submitted that the minimum guaranteed
charges and the maximum demand charges stand on different footings and F
logic applicable to one cannot be applied to the other. In case of minimum
guaranteed charges, the basis is consumption; if power could not be supplied
up to the agreed quantum, except in certain circumstances, the rebate when
specifically provided for could be granted. But where the foundation is
different, as in the case of maximum demand charges, the rate agreed is G
applied for the purpose of computation of the charges. Therefore, the Division
Bench was justified in reversing views of learned Single Judge.

Before we cogitate and analyse the rival contentions in detail, it would
be proper to pore over several clauses in the agreement to which reference
has been made by learned counsel for the parties. H
46 SUPREME COURT REPORTS (2003) SUPP. I S.C.R.

A "2. The electrical energy so supplied shall be of three phase, alternating
current at a declared pressure of volts between phases and frequency
of fifty complete cycles per second at the Consumer's/Consumers'
terminals.

3. Subject to the provisions of clause 21 hereinafter contained the
B Consumer/s shall be entitled for the said purposes to such supply
upto but not exceeding maximum number of kilovolt ampere for each
of the first five years of supply as mentioned in Schedule I hereto
(hereinafter referred to as the 'Contract Demand') which shall be
deemed to be part of this agreement.
c 4. (i) The Consumer shall begin to take electrical energy from the
Board under the conditions of this Agreement from the date (hereinafter
referred to as the date of commencement of supply) to be mutually
agreed upon but not exceeding two months from the date on which
intimation is sent in writing to the Consumer/s by the Board that the
D supply of electrical energy to the full extent of the Contract Demand
is available under this Agreement.

(ii) If the Consumer/s fail/s and or neglect/s to obtain the supply of
electrical energy as from the date when the same is available for
supply the consumer/s shall be liable to pay to the Board from the
E date when the consumer should have taken the supply in terms of
clause 4(i) the minimum charges which are provided hereinafter to be
payable by the consumer/s irrespective of the fact that the Consumer/
s has/have not consumed any electrical energy.

11. The Board shall not in any way be held responsible nor shall be
F liable to pay compensation for any loss suffered by the consumer as
a result of and failure interruption, defect or diminution in the supply
due to the breakdown, breakage or damage of any plant, machinery,
service or distributing lines or any accessories in connection therewith
or due to the development of faults in any part or the system for
G transmission of energy or due to acts of God, War, Riot, Civil
Commotiop, Strikes, Lockouts, Labour troubles, Pestilence, Fire,
Storm, Tempest, Floods, Earthquakes, Lightning, Theft, Larceny or
other force or accident or due to any cause whatsoever beyond the
reasonable control of the Board.

H
NIPHA STEELS LTD. 1·. WEST BENGAL STATE ELECTRICITY BOARD [PASA YAT, .I] 47

13. (I) The metering equipment shall generally include instrument A
transformers, polyphase integrating kilowathour meter, KW/KVA
maximum demand indicator and RKV AH/KV AH meter. The
integrating period of the maximum demand indicator shall be
controlled by time switch of a suitable type.

(2) The readings of the said meters shall be taken by the representative B
of the Board once in a calendar month on or as near as practicable
the same day of each calendar month. The readings so taken shall be
binding and conclusive between the consumer/s and the Board as to
the amount of demand and electrical energy supplied to the consumer/
s. The consumer/s may send his/their/its representative at the time of C
the reading of meters but in case the consumer/s does/do not arrange
for his/their/its representative to be present for the reading of the
meters, the readings of the meters taken by the representative of the
Board shall be coilclusive and consumer/s shall not have the right to
raise any objection regarding the correctness or accuracy of such
re~inp. D
(3) In the event of any meter being found defective and check meter
not having been installed, the power and energy consumption during
the period when the meter was deemed to be defective shall be
determined by taking an average consumption and other parameters
for the preceding three months or during any previous or subsequent E
period that may be reasonably comparable .
.j (4) Monthly maximum demand of the consumer/s for the supply of
power in each month shall be the largest average kilovoltamperes
delivered to the consumer/s at the point of supply during any F
consecutive thirty minutes in the month. In the case where KVA
demand indicator is not installed, monthly maximum demand in KVA
for tariff purpose will be estimated by dividing the reading in kilowatts
of the maximum demand indicator by the monthly average power
factor calculated from the number of units of kilowatthours and
reactive kilovoltamperehours as recorded in the meters during the G
same month. Fraction of KV A less than 0.5 will be discarded and that
of 0.5 and above will be taken as I KVA.

15. (I) The consumer/s shall pay to the Board for electrical energy
supplied under Agreement in accordance with the tariff under Rates
H
48 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.

A E(b) or F(b) as set forth in the Schedule II hereto which shall be
deemed to be part of this Agreement.

(2) If the Board by a notification makes any alteration in the aforesaid
rates for energy, tariff and its associated stipulations, such altered
rates, tariff and the associated stipulations shall be treated as if the
B same were part of this Agreement in supersession of the tariff set
forth in the Schedule II hereto with effect from the date fixed in the
notification.

(3) If energy used for domestic purposes (vide general conditions of
supply) in a month exceeds I 0% of the total monthly energy
c consumption, then instead of Rate E(a) the scale of rates under Rate
F set forth in Schedule II, shall be applicable.

16 (I) Subject to the provision of the clause 16(3) so long as the
agreement is not determined the consumer/consumers shall pay
D minimum charges provided in Schedule I hereto irrespective of the
fact that the consumer/consumers could not consume electricity to
cover such minimum charge during respective years due to
disconnection of supply for any !aches or default on the part of the
consumer.

E (2) For calculation of annual minimum charge, one year period shall
be taken from April to the following March. When connection is
given in any intermediate month, the minimum charge shall be
calculated from the month of connection to the following March on
monthly pro-rata basis,

F Provided when connection is given after the 15th day of any month,
that month shall not be counted in calculating the year of minimum
charge.

(3) If at any time the consumer/s is/are prevented from receiving or
using the electrical energy to be supplied under this Agreement either
G in whole or in pa1t owing to any strike, riots, insurrections, command
of a civil or military authority, fire, explosions, act of God or any
other causes beyond his/their/its control or if the Board is prevented
from supplying or is unable to supply such electrical energy owing
to all or any of the causes mentioned, then the minimum charge or
H guarantee payable by the consumer shall be reduced in proportion to
NIPHA STEELS LTD. v. WEST BENGAL STATE ELECTRICITY BOARD [PASA YAT, J.] 49

the ability of the consumer/s to take or the Board to supply such A
power provided the consumer/s notifies/notify the Board in writing
within fifteen days of occurrence of any event as noted above with
necessary detail to prove that the occurrence is preventing/has
prevented the consumer/s from receiving or using the full amount of
contractual demand. The consumer/s shall also keep the Board
informed once in every fortnight of further developments regarding B
the event. No remission in the agreed minimum charge as mentioned
in Schedule I hereof, will be considered if no such notice is received
by the Board. Subject as aforesaid the consumer/s shall in any event
be liable to pay the minimum charge every year as mentioned in
Schedule I hereof. C
21. (I) In the event of the consumer/s desiring to increase his/its/their
contract demand in any year during the continuance of the Agreement,
the Board may require the consumer/s to give the Board one year's
notice in writing stating the quantity of power required.
D
(2) The consumer/s shall pay to the Board any expense incurred by
reason of alteration and/or extension in respect of any service,
switchgear meters and other equipment necessitated to meet such
altered Contract Demand.

(3) The minimum charge as provided in Schedule I may be increased E
to take into account the altered contract demand."

The rate applicable for the purpose of levying maximum demand charges
is indicated in Schedule II. In Schedule I, it is stated that the consumer/(s)
during the continuance of the agreement shall be entitled to consume electrical
power upto but not exceeding the contract demand. The relevant portions in F
Schedules I and II in one of the agreements (taken as sample) read as follows:

SCHEDULE-I

xxxxxx
G
"The consumer/s during the continuance of the Agreement shall be
entitled to consume electrical power upto but not exceeding the contract
demand.

Where the actual Maximum Demand in any month of a year of H
50 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.

A operation will exceed the corresponding contract demand such
Maximum demand will be deemed to be the contract demand for that
particular year based on which Minimum amount payable by the
consumer per annum will be charged.

The c;onsumer/s during the continuance of the Agreement guarantee
B to pay for such amount of electrical energy as well in aggregate
(excluding fuel surcharge) at the current rates produce annually the
above minimum guaranteed amounts.

SCHEDULE - II

c Rate E(b) Industrial Purposes

(i) Demand Charge ... Rs.33.00 per KVA per month

PLUS

(II) energy ... Rs.12.8 per KWh."
D
It is to be noted that in exercise of power under Section 22-B of the
Act, the Board was prevented from supplying electrical energy during certain
specified hours of each day of each month. Definition of"maximum demand"
in terms of Section 2(8) of the Supply Act is as follows:

E "2(8 )- maximum demand in relation to any period shall, unless
otherwise provided in any general or special order of the State
Government, mean twice the largest number of kilowatt hours or
kilo-volt-ampere-hours supplied and taken during any consecutive
thirty minutes in that period."

F While Section 22 is enacted to protect interests of individuals as well as
licensees, Section 22-B deals with States' power to control the distribution
and consumption of energy. Under sub-section (I) thereof, if the State
Government is of opinion that it is necessary or expedient so to do, for
maintaining the supply and securing the equitable distribution of energy it
G may by order provide for regulating the supply, distribution, consumption or
use thereof.

It is necessary to elaborate what does the expression "maximum demand"
mean and signify? In the case of bulk consumers and large-scale consumers,
the Electricity Boards all over the country generally adopt a two-part level
H system. One part is called "the maximum demand charges" and the other part
NIPHA STEELS LTD. v. WEST BENGAL STATE ELECTRICITY BOARD [PASAYAT,.I.] 5]

"consumption charges". Every such consumer is provided with two meters. A
One is called the "trivector meter" and the other is the normal meter which
records the total quantity of energy consumed over a given period - which
is ordinarily a month. The meter which records the total consumption requires
no explanation or elaboration. It is the other meter which requires some
explanation. Every large-scale consumer knows the amount of energy required B
by him and requests for it from the Board. If the Board agrees to supply that
or any other particular amount of energy, it makes necessary arrangements
therefor by laying the lines to the extent necessary and installing other requisite
equipments. It is obvious that if a factory uses energy at a particular level/
load and for a particular period, it consumes a particular quantity of energy.
The trivector meter records the highest level/load at which the energy is C
drawn over any thirty minute period in a month while the other meter records
the total consumption of energy in units in the month. The position was
highlighted by this Court in Orissa State Electricity Boa.rd's case (supra).

The importance and significance of maximum demand is that the
consumption of a given plant and machinery determines the type of lines to D
be laid and power of transformers and other equipments to be installed for
the purpose.

It is to be noted that minimum charges and maximum charges operate
in different areas. While consumption and the ability to supply can be reckoned
for the purpose of fixing minimum charges, the same is really not of E
significance for the purpose of maximum demand. What may be applicable
to the case of minimum charges do not per se become applicable to maximum
demand. As was noted in Raymond Ltd case (supra), minimum guaranteed
charges relate to consumer's obligation to pay under specific agreement with
the Board. It operates irrespective of actual quantum of consumption by p
consumer which may be lower than the minimum agreed extent and
irrespective of the required or agreed quantum of supply by the Board which
may fall below even the minimum level of the contract demanded; but when
the minimum guaranteed charge is not any fixed amount and is in terms of
electrical energy to be consumed, consumer's obligation to pay the same
would. depend upon the implied corresponding obligation of the Board to G
supply energy at least to the minimum extent. The actual supply made by the
J Board in individual cases has to be worked out for determining consumer's
liability. The demand would obviously be in terms of the agreement. In
Raymond Ltd's case (supra), it was observed that the contract for supply of
electrical energy cannot be treated on a par with any other contracts qf. H
52 SUPREME COURT REPORTS (2003] SUPP. I S.C.R.

A mutual rights and obligations. The terms and conditions of supply as envisaged
in the contract and the statutory provisions and general conditions have been
standardized for uniform application among consumers with variations merely
necessitated by the different class or categories of consumers and there is no
scope otherwise for expecting any individual or free bargaining right in this
B regard by each consumer with the Board.

In Orissa State Electricity Board's case (supra) this Court explained the
meaning of the expressions 'maximum demand charges', 'consumption
charges' and dealt with the rate as well as the purpose of the two meters. The
normal meter as noted in the decision is made for recording the total quantum
C of energy consumed for a given period -invariably a month and the trivector
meter is made for recording the highest level/load at which the energy is
drawn over any thirty minutes period in a month. This is a part of two-part
tariff. The levy is inextricably linked highest reading recorded and the
foundation is "thirty minutes period in a month". It nowhere mandates or
even by implication refers to uninterrupted or regular supply for the whole
D month.
Even a bare reading of the relevant clause relating to maximum demand
shows that there was no scope for any remission in case of interrupted or
irregular supply. It deals with computation on the basis of reading recorded
by the meter installed for the purpose. If the contention of the learned counsel
E for the appellants is accepted it would mean that the prescription ofa particular
rate in the Schedule JI would become meaningless as it would become a
variable figure.

Learned counsel for the appellants emphasized that whenever there was
F an intention that irrespective of the supply position a particular levy is to be
made, specific provision was made therefor as in the case of minimum charges.
Even if that logic is applied the reverse position can operate. Since there was
no such specific provision made in the agreement it can be spelt out that the
intention was not to grant any such remission.

G The agreements of the Board in various cases contain different
stipulations regarding minimum charges. In some cases prescriptions are there
for remission in case of disruption/irregularity/non-supply. In other cases
they provide for full levy notwithstanding any of the aforesaid situations.
Appellants rely on those cases differently to buttress their stand. For the first
category it is submitted as noted above, that remission is logical; while for
H the latter it is indicated that specific provision is necessary for the levy. It is
NIPHA STEELS LTD."· WEST BENGAL STATE ELECTRICITY BOARD [PASAYAT,l] 53
trite law, so far the second category is concerned that the prescription is A
valid. (See Bihar State Electricity Board's case (supra), Andhna Steel
Corporation Ltd. and Ors. v. Andhra Pradesh State Electricity Board and
Ors., [ 1991] 3 SCC 263. In Andhra Steel's case (supra) it was held that
decision of the State Government under Section 78-A of the Supply Act, to
fix concessional tariff is not sufficient to absolve the consumer from the
liability undertaken to pay the minimum guaranteed charges. The liability
B
flows from the agreement. As noted in Raymond Ltd. 's case (supra), the
parties have agreed that the maximum demand of the supply is to be measured
with reference to the month at the point of supply of the consumer and will
be determined on the basis of the supply during any consecutive thirty minutes
in that month as recorded by the trivector meter. C
Strong reliance was placed by learned counsel for the appellants on
certain observations made in the cases noted supra. They were made in
different factual backdrops. None of them directly dealt with the issue of
remission of maximum demand. Therefore, no support is available to the
appellants from those cases. D
Maximum demand and minimum charges are levied for different
purposes. The former is charged to defray capital costs and latter to meet
running charges. The various Boards require huge capital outlay for machinecy,
plants, equipments, transmission lines etc. As noted in Orissa State Electricity
Board's case (supra) provision has to be made for depreciation of machineries E
and other depreciable assets. In addition, maintenance of plants, transmission
lines etc. has to be done requiring deployment of huge staff. At the cost of
repetition, it has to be stated that demand charges are levied and collected to
meet the capital outlay, while running charges are met by levy and collection
of consumption charges. These distinctive features make the levies F
conceptually different.

The two do not in any way overlap and the provisions therefor do not
contradict each other or create identical base for their operation. In Ferro
Alloys Corporation Ltd. v. A.P. State Electricity Board and Anr., AIR (1993)
SC 2005, it was noted that though the agreements contained conditions fixed G
by the Boards in advance and are open to acceptance by the prospective
customers, the parties are bound by the terms if they have been entered by
the parties with their eyes open.

So far as the applicable clauses are concerned in the present appeals,
the terms are clear and unambiguous. In view of the purpose for which the H
54 SUPREME COURT REPORTS [2003) SUPP. I S.C.R.

A maximum demand is levied, it is crystal clear that there is no scope for
granting any remission in the manner claimed by the appellants. The appeals
are without any merit; deserve dismissal, which we direct. Parties to bear '5
their respective costs.

K.K.T. Appeals dismissed.
B