UPPCL Cannot Recover 15% Electricity Surcharge After Promising Exemption: Supreme Court

Uttar Pradesh Power Corporation Ltd. Vs Bhushan Steels and Strips Ltd. (Supreme Court of India)

Summary: The Supreme Court of India considered a group of connected civil appeals and interlocutory applications filed by Uttar Pradesh Power Corporation Limited (UPPCL) concerning the levy of an additional 15% electricity surcharge on industrial consumers receiving supply through independent feeders. The dispute originated from the first tariff order issued by the Uttar Pradesh Electricity Regulatory Commission (UPERC) on 27 July 2000, effective from 9 August 2000, which prescribed an additional 15% surcharge for industrial consumers opting for electricity supply during restricted or peak hours or seeking a minimum assured supply of 500 hours per month through independent feeders. Subsequently, UPPCL issued a circular dated 8 September 2000 permitting industrial consumers who did not require the guaranteed supply of 500 hours to submit an undertaking and obtain exemption from the additional surcharge. Several industrial consumers exercised this option. However, the Allahabad High Court, by its judgment dated 25 April 2001, declared the circular legally invalid because UPPCL lacked authority to modify the tariff determined by UPERC. Consequently, UPPCL withdrew the circular on 31 August 2001 and raised demands for the additional surcharge against consumers who had earlier opted out of the assured supply arrangement.

The controversy had previously reached the Supreme Court in LML Ltd. v. State of U.P., (2008) 3 SCC 128, wherein the Court held that UPPCL was bound by the assurances contained in its circular dated 8 September 2000 under the doctrine of promissory estoppel. The Court recognised that consumers who had acted upon UPPCL’s representation by declining the assured electricity supply should not suffer because the Corporation subsequently withdrew its circular. Relying on this decision, the Allahabad High Court quashed surcharge demands in proceedings involving industrial consumers, including M/s Jagannath Steels Pvt. Ltd., M/s Bharat Udyog Ltd. and M/s Mool Chand Steel (Pvt.) Ltd., and directed refunds of amounts deposited pursuant to interim judicial orders. UPPCL challenged these decisions through Civil Appeal Nos. 8517 of 2011, 1361 of 2013 and 1368 of 2013. A connected dispute involved M/s Diamond Cements, which had similarly opted out of the assured supply arrangement through a letter dated 11 September 2000. Diamond Cements sought clarification and refund of amounts deposited in Civil Appeal No. 1622 of 2007, but its application had been lodged by the Supreme Court Registry on procedural grounds. It therefore filed interlocutory applications seeking reconsideration and appropriate directions.

Before the Supreme Court, UPPCL argued that the doctrine of promissory estoppel could not be invoked to enforce a representation contrary to statutory provisions or a tariff order issued by the competent regulatory authority. It relied upon Uttaranchal Power Corporation v. Kashi Vishwanath Steels Ltd., (2010) 6 SCC 738 and Shree Sidhbali Steels Ltd. v. State of U.P., (2011) 3 SCC 193 to contend that a statutory authority could not be compelled to act contrary to law and that the applicability of promissory estoppel depended upon proof of a specific promise and reliance upon it. UPPCL further submitted that Section 24 of the Uttar Pradesh Electricity Reforms Act, 1999, did not permit a licensee to modify a tariff determined by UPERC. It also contended that certain consumers had received more than 500 hours of electricity in a month despite opting out of the assured supply arrangement. In the proceedings involving Diamond Cements, UPPCL argued that the consumer had utilised electricity during restricted or peak hours and could consequently be liable to additional surcharge. The industrial consumers opposed these submissions, maintaining that they had expressly declined the guaranteed supply and acted upon UPPCL’s representation. They contended that their actual electricity consumption did not justify retrospectively imposing the surcharge associated with an assured supply arrangement they had never requested.

After examining the rival contentions and earlier judgments, the Supreme Court distinguished the decision in Kashi Vishwanath Steels Ltd. on its particular facts. In that case, the party seeking relief had failed to plead or establish that a specific promise had been made by the electricity corporation or that it had altered its position in reliance upon such a promise. The Court observed that the absence of appropriate pleadings and supporting material had been decisive in denying relief under promissory estoppel. In contrast, the present matters involved consumers who had expressly opted out of the guaranteed electricity supply pursuant to UPPCL’s circular dated 8 September 2000. The Supreme Court reiterated the reasoning in LML Ltd. that consumers should not be prejudiced because of an error committed by the electricity corporation when they had acted upon its assurance. The Court particularly noted that, in Civil Appeal No. 8517 of 2011, the Allahabad High Court had recorded that the consumer was not interested in guaranteed electricity supply and had furnished an express undertaking to that effect. Consequently, the additional 15% surcharge was not payable in those circumstances. The Court found that the High Court had correctly applied the earlier Supreme Court ruling while quashing the demands and directing refunds.

Accordingly, the Supreme Court dismissed Civil Appeal Nos. 8517 of 2011, 1361 of 2013 and 1368 of 2013 filed by UPPCL, thereby sustaining the Allahabad High Court’s orders quashing the disputed surcharge demands. The Court also vacated the interim stay and directed the appellants to refund the amounts deposited by the industrial consumers within six weeks from the date the judgment became available, without compelling the consumers to initiate coercive proceedings for recovery. In the connected matter concerning M/s Diamond Cements, the Supreme Court allowed I.A. Nos. 1–4 of 2011 in Civil Appeal No. 1622 of 2007 and directed refund of the deposited amount within the same six-week period. No order as to costs was passed. The decision reinforces the application of promissory estoppel where consumers have demonstrably acted upon a specific representation made by a public utility, while recognising the importance of factual pleadings and evidence in determining whether such protection is available. The ruling also clarifies that the earlier decision in Kashi Vishwanath Steels Ltd. did not automatically defeat the claims of consumers who had expressly relied upon UPPCL’s assurance and declined the guaranteed electricity supply arrangement.

Cases Discussed

• LML Ltd. v. State of U.P., (2008) 3 SCC 128 – Supreme Court decision applying promissory estoppel to UPPCL’s assurance regarding exemption from additional electricity surcharge.
• Uttaranchal Power Corporation v. Kashi Vishwanath Steels Ltd., (2010) 6 SCC 738 – Distinguished on facts because the party seeking relief had not established a specific promise or reliance upon it.
• Shree Sidhbali Steels Ltd. v. State of U.P., (2011) 3 SCC 193 – Cited by UPPCL for the principle that promissory estoppel cannot compel a public authority to act contrary to law.

FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER

The U.P. Power Corporation Limited (UPPCL) and others, who are the appellants herein, are aggrieved by the directions issued by the Allahabad High Court in the impugned orders passed in the respective Writ Petitions/First Appeals directing 1 that the appellants had no authority to demand a 15% surcharge, or retain the amounts deposited by the respondents herein towards the same, in view of the circular issued by UPPCL dated 08.09.2000. Consequently, the demands for surcharge were quashed and directions were issued to refund the amounts to the respondents herein. The correctness of the said orders are assailed by the appellants in these appeals. The applications filed in C.A. No. 1622/2007, assailing a lodgement order passed by the Registrar of this Court and also seeking directions with respect to the judgment of this Court in LML Ltd. vs. State of U.P., (2008) 3 SCC 128 (“LML Ltd.”), are also heard along with these appeals.

2.Since common questions of facts and law arise in these appeals and applications, we dispose of these appeals and applications by this common judgment.

3.For the sake of convenience, the details of the appeals and applications are formulated in the form of the following table:

4. The brief facts of this set of related appeals are that the ‘First Tariff order’ under the Uttar Pradesh Electricity Reforms Act, 1999 was issued by the Uttar Pradesh Electricity Regulatory Commission (UPERC) on 27.07.2000, which came into force on 09.08.2000. The order pertained to ‘heavy industry consumers’, and it stipulated that if electrical consumers opted for electrical supply during restricted/peak hours, they would be charged an additional surcharge of 15% on their electricity bills. The order also stated that if industrial consumers take electricity from an ‘independent feeder’ and want a minimum assured supply of 500 Hrs. electricity in a month then they would be liable to pay an 3 additional surcharge of 15% on their bills.

5. On 08.09.2000, UPPCL issued a circular that stated that if such industrial consumers taking electricity from independent feeders do not want the above assured supply of electricity, then they could submit an undertaking to UPPCL and be exempted from the 15% additional surcharge.

6. However, the High Court of Judicature at Allahabad, by judgment dated 25.04.2001 in CMWP No. 40692/2000, ruled that the above circular was not legal, since UPPCL had no jurisdiction to modify the tariff order issued by UPERC. Therefore, UPPCL, by circular dated 31.08.2001, withdrew the earlier circular dated 08.09.2000. Thereafter, it raised a demand for the 15% surcharge from the consumer industries herein.

7. The above judgment of the Allahabad High Court was challenged before this Court in several Special Leave Petitions and the main appeal was registered as C.A. No. 5789/2002 – LML Ltd. Vs. State of U.P. & Ors. By interim orders of this Court in C.A. Nos. 8517/2011 and 1622/2007, the respondent and applicant industries herein were made to deposit 50% of the 4 surcharge amount demanded. On 13.12.2007, a two-judge bench of this Court (S.B. Sinha and H.S. Bedi, JJ.) passed its judgment in the case of LML Ltd. This Court allowed the appeals to the extent that UPPCL was bound by all assurances that it had made in its circular dated 08.09.2000, by virtue of the principle of ‘promissory estoppel’. Therefore, notwithstanding the subsequent repeal of the circular dated 08.09.2000, UPPCL was bound to the extent that it had made promises to consumers who had opted out of the minimum assured supply expecting to be relieved of the additional surcharge.

8. Three of the present appeals – C.A. No. 8517/2011, C.A. No. 1361/2013 and C.A. No. 1368/2013 – arise out of different orders of the Allahabad High Court, all of which relied upon the above decision of this Court in LML Ltd. in order to quash UPPCL’s demand for independent feeder surcharge against the consumers therein, and direct refund of deposits made where necessary.

9. In the other matter, i.e., I.A. Nos. 1-4 in C.A. No. 1622/2007, the applicant consumer (M/s Diamond Cements) had 5 similarly opted out of the assured supply of 500 Hrs. by a letter dated 11.09.2000. However, the same dispute arose once the UPPCL circular was declared illegal by the High Court and UPPCL subsequently demanded the surcharge amount. Aggrieved, the applicant approached the Allahabad High Court. However, by judgment dated 19.10.2006, the High Court held itself bound by its earlier judgment dated 25.04.2001 in CMWP No. 40692/2000 (referred to above) and permitted the demand for surcharge raised by UPPCL.

10. Aggrieved, the applicant approached this Court through SLP (C) No. 1742/2007, which was converted to C.A. No. 1622/2007 and tagged with the main appeal in LML Ltd.

11. However, the subsequent controversy between the parties is regarding whether the judgment of this Court in LML Ltd. conclusively settled the matter in C.A. No. 1622/2007 or not. The UPPCL relied on the following observations made by this Court in LML Ltd.

“53. In view of the fact that several matters are pending before the Commission on question of independent feeder we need not express any opinion thereupon. If any appeal is pending before the Commission on the said question it 6 would decide the same independent of the same irrespective of the result of this decision.. We, therefore, without expressing any opinion on the said question, permit the appellants to agitate the same point before the Commission.

54. We, therefore, allow these appeals only to the extent mentioned hereinbefore in terms of the promise made by the U.P. Power Corporation and allow the appeals on question of independent feeder to be withdrawn subject to the observations made by us hereinabove.”

12. Therefore, after the judgment in LML Ltd., while the applicant industry sought refunds of the surcharge amounts paid, UPPCL did not immediately refund the same on the ground that C.A. No. 1622/2007 was an appeal on the question of independent feeder and was hence withdrawn. Thereafter, both parties filed ‘clarification applications’ before this Court to determine the true import of the judgment in LML Ltd. This culminated in the applicant industry filing an application for clarification and specific directions for the amount paid by them to be refunded. However, this application was ‘lodged’ by the Registrar of this Court by order dated 18.11.2010 under Order XVIII, Rule 5 and Order X, Rules 6(3) and 6(4) of the Supreme Court Rules, 1966 on the ground that the applicant had not cured the defects indicated by the Registry. Therefore, the 7 applicant has preferred the present I.A. Nos. 1-4/2011 in C.A. No. 1622/2007, praying for the above order of the Registrar to be set aside and for its application for clarifications and directions to be considered on merits. Submissions:

13. We have heard learned counsel for the appellants and learned senior counsel and counsel for the respective respondents, at length. We have perused the material on record. Submissions in C.A. Nos. 8517/2011, 1361/2013 and 1368/2013:

14. In C.A. Nos. 8517/2011, 1361/2013 and 1368/2013, learned counsel for the appellant UPPCL submitted that this Court in Uttaranchal Power Corpn. vs. Kashi Vishwanath Steels Ltd., (2010) 6 SCC 738 (“Kashi Vishwanath Steels”) clarified the judgment in LML Ltd. and held that for the application of the principle of promissory estoppel, a party has to demonstrate its applicability in the facts of the case. It was also submitted that in the case of Shree Sidhbali Steels Ltd. vs. State of U.P., (2011) 3 SCC 193 (“Shree Sidhbali Steels”), a 8 three-judge bench of this Court held that the doctrine of promissory estoppel “cannot be invoked for enforcement of a promise made contrary to law, because none can be compelled to act against the statute. Thus, the Government or public authority cannot be compelled to make a provision which is contrary to law”. Therefore, the appellant submitted that the judgment of the High Court dated 25.04.2001 is legally correct, and that promissory estoppel cannot be used to reach a conclusion contrary to the same.

15. Learned counsel for the appellant UPPCL submitted that the High Court, in all the impugned orders, had disposed of the matters without assessing the merits of the cases. Rather, it had only relied on the judgment in LML Ltd. It was also submitted that under Section 24 of the U.P. Electricity Reforms Act, 1999, the order passed by the UPERC cannot be modified by a licensee. Therefore, the circular dated 08.09.2000 had no basis in law, and could not be used as the foundation for a claim based on promissory estoppel. Further, with regard to C.A. Nos. 8517/2011 and 1368/2013, it was submitted that during the relevant period, the respondent industries got more than 500 Hrs. 9 of supply in a month, despite opting out of the assured supply arrangement. Hence, these appeals may be allowed by setting aside the impugned orders.

16. Per contra, learned counsel for the respondents submitted that they did not opt for a guaranteed supply of 500 Hrs. of electricity. On the other hand, even in the absence of such a guarantee, if they had exceeded 500 Hrs. of consumption, they have paid appropriately for the said consumption of electricity. Therefore, the issue regarding the guarantee of 500 Hrs. insofar as these respondents are concerned is irrelevant. It is therefore, their contention that the demand for 15% surcharge was not in accordance with law. Hence, the High Court was justified in quashing the demand and directing refund of the amount, which they had deposited in terms of the interim order of this Court as the appellant/UPPCL had no legal authority to retain the said amount on the premise that the respondents had an obligation to pay 15% additional surcharge in view of circular dated 08.09.2000. Therefore, the High Court rightly quashed the demand and directed refund to the respondents herein. Learned counsel for the respondents further submitted that the rescinding 10 of circular dated 08.09.2000 by virtue of circular dated 31.08.2001 in effect, resulted in the withdrawal of the option granted to the respondents herein. Consequently, they had to compulsorily pay the 15% surcharge. Therefore, the controversy arose as to whether they were really liable to pay the 15% surcharge in these cases.

17. Learned counsel for the respondents further submitted that the fact that the respondents had the benefit under circular dated 08.09.2000 had been endorsed by this Court in LML Ltd. by holding that the appellants were bound by that circular on the principle of promissory estoppel. In LML Ltd., the appellants therein were bound to provide the benefit of circular dated 08.09.2000 on the principle of promissory estoppel. Therefore, the High Court has rightly followed the judgment of this Court in LML Ltd. and granted the relief to the respondents herein by quashing the demand and directing refund/release of the amount which they had deposited, i.e., 50% of the surcharge demanded, pursuant to an interim order passed by this Court. Submissions in I.A. Nos. 1-4/2011 in C.A. No. 1622/2017:

18. In I.A. Nos. 1-4/2011 in C.A. No. 1622/2017, learned counsel for the applicant-industry (M/s Diamond Cements) submitted that the impugned order of the Registrar fails to consider that the only possible sequitur to the judgment in LML Ltd. is that those consumers who had deposited amounts with UPPCL pursuant to the demand for the impugned additional surcharge were entitled to a refund. Further, since the respondent-UPPCL failed to comply with the above spirit of the judgment, the applicant industry had no choice but to approach this Court for directions/clarifications with respect to the judgment in LML Ltd.

19. Per contra, learned counsel for the UPPCL submitted that the applicant-industry consumed more than 500 Hrs. of electricity in every month during the relevant period, and even during restricted/peak hours. Therefore, according to the circular dated 08.09.2000, they should be charged with a 30% surcharge (15% + 15%). This Court in LML Ltd. was conscious of the same and deliberately did not direct that the amount be refunded. Therefore, the applicant is not entitled to a refund of the amount simply on the basis of the judgment in LML Ltd. It was also 12 submitted that the judgment of this Court in Shree Sidhbali Steels holds the field.

Analysis:

20.Having heard learned counsel for the respective parties and bearing in mind the facts which arise in these appeals and the applications, we find that the High Court has passed consequential orders pursuant to the judgment of this Court in LML Ltd. For ease of reference paragraphs 50 to 58 of the said judgment are extracted as under:

“50. The proximity of issuance of the circular vis-a-vis notification must also be noticed. The tariff was framed on 7-8-2000 which came into force from 9-8-2000 whereas the Circular was issued on 8-9-2000. The consumers exercised their option on 31-10-2000. The judgment in LML! was delivered on 25-4-2001. The Circular dated 31-8-2001 undoubtedly was issued in view of the said judgment. The said judgment did not deal with the questions raised before us. In any event if the licensee violates the tariff approved by the Commission appropriate legal action can be taken against it. But it would be too much to contend that for a mistake on the part of the Corporation, the consumers would suffer. In this view of the matter, we are of the considered view that the doctrine of estoppel shall apply in the cases where the promise was made. However, the principle of said doctrine would, however, not be applicable where no such promise was made.

51. The respondent Kanpur Electricity Supply Company would not be bound thereby. Tariff is fixed for 13 providing a service. Supply of electrical energy is a public utility service. While carrying out a function of this nature, the court of law must keep in mind the equitable principles also. Equity does not postulate that although the supplier did not fulfil its obligation, still it would be entitled to the benefits envisaged under the law.

52. Similarly, Uttaranchal Power Corporation also does not appear to have made such a promise. The doctrine of promissory estoppel in those cases also will have no application.

53. In view of the fact that several matters are pending before the Commission on question of independent feeder we need not express any opinion thereupon. If any appeal is pending before the Commission on the said question it would decide the same independent of the same irrespective of the result of this decision. We, therefore, without expressing any opinion on the said question, permit the appellants to agitate the same point before the Commission.

54. We, therefore, allow these appeals only to the extent mentioned hereinbefore in terms of the promise made by U.P. Power Corporation and allow the appeals on question of independent feeder to be withdrawn subject to the observations made by us hereinabove.

55. Civil Appeal No. 5789 of 2002 which relates to Kanpur Electricity Supply Company is dismissed.

56. Civil Appeal No. 1106 of 2007 filed on behalf of Uttaranchal Power Corporation is allowed.

57. There shall, however, be no order as to costs.

SLP (C) No. 6721 of 2007

58. The only issue involved in this petition is the question of independent feeder and the appeal being pending before the Commission, this special leave petition is permitted to be withdrawn.”

21. However, learned counsel for the appellants brought to our notice the judgment of this Court in Kashi Vishwanath Steels. Paragraphs 24-27 of the said judgment read as follows:

“24. In Writ Petition No.942 of 2001 filed by the respondent-KVSL the material facts were not disputed. It was unequivocally admitted that the respondent- company was a consumer getting supply from an independent feeder emanating from 400/220/132 KV sub station. It was also not in dispute that with the coming into existence of State of Uttarakhand w.e.f. 9th November, 2000 a new Power Corporation for the said State was established on 1st April, 2001. The respondent-company’s further case is that Uttarakhand Power Corporation did not charge 15% surcharge on monthly demand and energy charges for the period April 2001 to October, 2001 and that it is only on 7th December, 2001 that the applicant received an intimation that circular dated 8th September had been revoked and letter dated 24th October cancelled. That the U.P. Electricity Regulatory Commission had approved a new tariff by order dated 1st September, 2000 and U.P. State Power Corporation had issued a consequential Notification dated 10th July, 2001 is also not in dispute. The said notification, it is noteworthy, does not any longer provide for 15% surcharge from consumers getting supply of energy from independent feeders.

25. Suffice it to say that while according to the applicant- KVSL circular issued by the U.P. Power Corporation dated 8th September, 2001 giving an option to the consumers was valid and in accordance with law, there is not even a murmur in the writ petition filed by the respondent-company to the effect that either the U.P. Power Corporation or its successor had at any point of 15 time made any promise to the company that supply of energy would be without any surcharge notwithstanding the fact that the tariff prescribed by the Regulatory Commission envisaged the levy of surcharge on electricity supplied directly from an independent feeder. There is similarly no averment whatsoever in the writ petition to the effect that the respondent-KVSL had altered its position acting upon any such promise. Not only that the agreements executed between the parties, namely, KVSL on the one hand and Power Corporation on the other also did not contain any unequivocal promise for supply of energy, no matter the supply was made from an independent feeder.

26. In the absence of even an averment to the effect that there was a promise made by the U.P. State Power Corporation regarding supply of energy without payment of surcharge and in the absence of any material to show that the respondent-KVSL had indeed acted upon any such promise it is difficult to see how the said company can insist upon any such non-existent promise being made good.

27. It is trite that before a party can rely upon on the doctrine of promissory estoppel it must make a specific averments and place material on record to demonstrate that a promise was indeed made to it. There is neither any averment nor any material to support the plea of promissory estoppel in the case at hand.”

22.We have gone through the aforesaid judgment in detail. The above paragraphs clearly indicate that this Court considered the peculiar facts in the said case inasmuch as the absence of averments and pleadings for a claim on the principle of 16 promissory estoppel was significant, and this Court consequently allowed the appeal and denied relief to the respondent – Kashi Vishwanath Steels Ltd. therein.

23.A close reading of the above paragraphs would indicate that this Court observed that there was no categorical pleading as to the nature of the respondent-company therein insofar as whether it came within the scope of the independent feeder category or not. We therefore find that not much assistance can be derived by the appellants from the judgment of this Court in Kashi Vishwanath Steels.

24.We revert to the impugned order in Civil Appeal No.8517 of 2011 which arises from W.P. No. 9676 (M/B) of 2010. It has been categorically recorded by the High Court that the said respondent-entity was not interested in the guaranteed supply of electricity and an express undertaking to that effect was given by the said respondent. Consequently, the requirement of 15% surcharge did not arise at all.

25.However, since UPPCL issued demand notices for the surcharge, and the respondents in C.A. No. 8517/2011 as well as 17 the applicant M/s Diamond Cements had deposited 50% of the amount demanded bearing in mind the interim dictum of this Court in LML Ltd., the need to file the Writ Petitions/First Appeals seeking quashing of the demands and refunds of the deposits arose. In our view, the High Court has rightly quashed the demands, and directed refunds of the amounts deposited where necessary. We find no reason to interfere with the impugned directions issued by the High Court.

26.Hence, Civil Appeal Nos.8517 of 2011, 1361 of 2013 and 1368 of 2013 stand dismissed.

27.Consequently, the order of interim stay stands vacated.

28.The appellants are directed to refund the amount within a period of six weeks from the day this judgment is made available, without driving the respondents to take coercive action against the appellants herein.

29.In view of the above, I.A. Nos.1-4 of 2011 in Civil Appeal No. 1622/2007 filed by M/s Diamond Cements are allowed. The respondents are directed to refund the amount within a period of six weeks from the day this judgment is made available, without 18 driving the applicant to take coercive action against the respondents herein.

No costs.