Summary
The Electricity Board’s unexplained delay of over two and a half years in reducing contracted demand from 23,000 to 10,000 KVA was arbitrary. Its contractual entitlement to maximum-demand charges did not excuse prolonged inaction. The Court ordered refund of the excess demand charges for 23 June 2002 to 1 July 2004, with six per cent simple interest, within two months.
Issues
- Whether unexplained delay in deciding a request to reduce contracted electricity demand was arbitrary despite contractual maximum-demand obligations.
- Whether excess charges paid under protest during that delay were refundable.
Provisions considered
- Articles 14 and 226, Constitution of IndiaThe Board remained bound by fairness and reasonableness in its contractual dealings. Its unexplained delay was amenable to public-law scrutiny notwithstanding the contractual setting. (¶¶ 3, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 38)
Held
- State instrumentalities must act fairly and reasonably even during performance of contracts. Contractual provisions requiring payment for sanctioned maximum demand and barring unilateral reduction did not permit the Board to leave a reduction request undecided indefinitely while continuing to levy higher charges. (¶¶ 21, 27, 28, 30, 31, 32, 33, 36)
- Reasonable time depends on the circumstances. Here repeated follow-up, the eventual acceptance of the reduction, prompt processing of other applications, the company’s financial circumstances and the absence of any explanation made the delay arbitrary. A decision ought to have been taken within six months in this case. (¶¶ 23, 26, 27, 29, 34, 35, 36, 38)
- The company had neither sought nor consumed demand above 10,000 KVA during the relevant period. The verified amount collected under protest for the excess 13,000 KVA was refundable for the expressly specified period, 23 June 2002 to 1 July 2004 inclusive, with six per cent simple annual interest and payment within two months. (¶¶ 37, 39, 40, 41, 42)
Result
Appeals allowed; High Court judgment set aside. Verified excess demand charges for 23 June 2002–1 July 2004 inclusive to be refunded with 6% simple annual interest within two months; pending applications disposed of.