AMALGAMATED ELECTRICITY CO. LTD. versus JALGAON BOROUGH MUNICLPALITY

Citation: [1976] 1 S.C.R. 636 · Decided: 03-09-1975 · Supreme Court of India · Bench: V.R. KRISHNA IYER · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

636 
AMALGAMATED ELECTRlCITY CO. LTD. 
v. 
JALGAON BOROUGH MUNIClPALITY 
September 3, 1975 
(V. R. KRISHNA IYER, A. C. GUPTA ANDS. MURTAZA FAzAL ALI, JJ.] 
Indian Electricity Act, 1910, Provisv Iv section 22-Agreenient to supply 
electrical energy-Pravl"sion for guarantee of minimuni consun1ption of electri-
city, if in consonance with the proriso. 
The plaintiff.appellant entered into an agre\:ment with the respondent 
to 
supply electrical energy to the respondent ill 1944. Thig agreement expired 
tow~s the end of January, 1951, and which was to commence from February, 
1951, was executed between- the parties. This agreement was to enure for a 
period of five· years. Clause 3 of the agr-eernent first of all, stipulated that in 
normal times, the Municipality was bound to take supply of electrical energy 
for a minimum period of 16 hours a day and in view of 1his minin1um guarantee 
Company would supply electricity for a maximun1 period or 20 hours a day. 
Jn doing -this, however, four hours, namely, frOm 6 p.m. to 10 p.m. would be 
excluded. The plaintiff averred that under the agreement ihe defendant was 
bound to consume electrical energy for 16 hours a day and pay the minimum 
charges even if no actual consumption was rn<ide. 
This claim,_ was put fonvard 
by the plaintiff in December. 1953 on the basis a[ clause 3 of the agreement. 
Consequent upon its claim the plaintiff sent -a nun1ber of bills to the defendanl 
which it refused to pay and hence the. present suit was instituted on February 27. 
1956. 
Before the Trial Court the defendant MunicipaJity denied the allega-
tions of the plaintiff and averred that under the terms of the agrcen1ent the 
Municipality w"as not bound_ to pay to the plaintiff Company any minimun1 
charges even if the electrical energy wa<; not con~umed. It was also alleged that 
even if there was any such clause in the agreement it was void under s. 23 
of the Indian Electricity Act, 1910. The Trial Court accepted the defendant'-.. 
plea and dismissed the. suit. The plaintiff thereupon preferred an appeal to the 
High Court of Bombay. The High Cou1i dismis~d the appeal holding: that 
the minimum charges were given only in clause 2 of the agreement and that 
clause 3 could be of no assistance to the appellant. 
Allowing the appeal by special leave, 
HELD : ( i) An analysis of claus·.'.'.S 2 and 3 of the agreement clearly shows 
that these clauses. are Independent and separate provisions dealing with differ-
B 
c 
D 
E 
ent contingencies. The terms of clause 3 are absolutely clear and unambi-
F 
guous and it was not at all necessaxy for the High Court to have gone into 
' 
a plethora of extraneous circumstanc_es when the terms of that docunlent dt) 
not admit of any ambiguity. The High Court seems to have completely over~ 
looked the· fact that clause 3 of the agreen1ent en1bodied what is known in 
common parlance as the· doctrine of minimum guarantee i.e. the Company 
was assured of a minimum consun1ption of electrical energy by the ~funicip:.i.lity 
and for the payment of the same whether it was consumed or not. That was 
the reason why the. C"Ompany was prepared to charge a minimum rate of 
0.5 anna per unit over and above the first 50 units. 
The minimu1n charge 
G 
of 0.5 anna J>Cf' unit, therefore. was actually the consideration for the 1ninirnum 
guarantee allowed to the plaintiff under clause 3 of the agreement. {638 H, 
639 C-Dl 
(ii) Clauses 2 and 3 of .the agreement. are in 
c.o~sonanc-e with the sp!rit 
i 
and letter of the proviso to s.22 of the Indian Electnc1ty Act. A bare read1ng 
of clause· 3 is sufficient to indicate that this particular term of the contract 
was in direct compliance, with the provisions of the proviso to s.22 of the 
Act which ensures a provision for minin1um guarantee for the supply 
of 
H 
electricity. 
[639 E & G] 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 748 of 1968. 
, 
• 
.. 
;. 
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AMALGAMATED ELEC. 'co. v. JALGAON MUNICIPALITY 
637 
(Fazal Ali, J.) 
A 
Appeal by Special Leave from the Judgment and Decree dated the 
14th February, 1967 of he Bombay High Court in Civil First Appeal 
No. 888 of 1959. 
B 
D. 
E 
F 
H 
F. S. Nariman and /. N. Shroff, for the Appellant. 
K. S. Ramamurthi and K. Rajendra Choudhury, for the Respon-
dent. 
The Judgment of the Court was delivered by 
FA.zAL ALI, J. This appeal by special leave against the judgment 
dated February 14, 1967, of the High Court of Bombay turns upon the 
interpretation of clause 3 of the

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