Madras HC Restrains TANGEDCO From Charging Compensation Towards Low PF During Lockdown; Directs Levy Of Only Minimum Charges [Read Order]

"The maximum demand charges and the compensation charges levied by TANGEDCO against the petitioners who are HT consumers, is illegal, unsustainable and in violation of the statutory regulations. Accordingly, the Maximum Demand Charges and the compensation towards low PF that have been questioned in the impugned bills raised by the TANGEDCO for each of the consumers who are parties in these batch of writ petitions, is hereby quashed," the Court ordered.

The order has been passed by a Single Bench of Justice N. Anand Venkatesh who noted that the companies had been caught between the "devil and deep sea" inasmuch as, on the one hand the government asked them to shut down their establishment and on the other hand TANGEDCO was levying the Maximum Demand from them.

The Court observed that if this is allowed to be continued, it will virtually lead to "permanent shutting down" of the industries, which will ultimately be detrimental to TANGEDCO itself. The Court observed,

"The financial crunch that is being faced by almost all industries due to the lockdown and the huge challenge they are going to face post the pandemic is now made worse by TANGEDCO by levying the Maximum Demand Charges. TANGEDCO must understand that its attitude will kill the industries and closing down of industries will ultimately have a financial implication on TANGEDCO also. And TANGEDCO was virtually killing the goose that was laying the golden eggs."

The Court was hearing a batch of writ petitions filed by various individual industries/ their Associations, aggrieved by the decision of the TANGEDCO to levy Demand Charges and Compensation Charges.

They had sought enforcement of first proviso of Regulation 6(b) of the Tamil Nadu Electricity Supply Code, 2006, which provides that in cases where the consumer is prevented from consuming electricity due to "reasons beyond his control", the Licensee, i.e. TANGEDCO in the present case, shall recover from the consumer, Minimum Charges at 20% of the Billable Demand or Recorded Demand, whichever is higher, besides charges for the actual consumption of electricity.

Noting that there was no question of opening any establishment during the Lockdown period, the Court asserted that the present case clearly fell within the ambit of the first proviso, and the consumers must be given the benefit of Minimum Charges.

Opposing this finding, the Additional Advocate General had contended that the discretion is left with the TANGEDCO for deciding the applicability of the Minimum Charges even in a case which fulfils the requirements of the proviso to Regulation 6(b) of the Supply Code.

Finding itself at odds with this argument the bench proceeded to observe,

"If such wide discretion is allowed in the hands of the TANGEDCO, it will only lead to arbitrariness. Therefore, once a case fits in to the first proviso to Regulation 6(b) of Supply Code, the provision becomes operational without leaving any discretion to the Licensee/ TANGEDCO."

The Court further noted that an attempt had been made by TANGEDCO to portray as if it will suffer a huge revenue loss if it is made to collect the Minimum Charges.

"This claim made by the TANGEDCO is without any substance. The TANGEDCO is aware of the fact that the Minimum Charges are paid as a part of fixed cost and the actual charges are paid with respect to energy charges. Therefore, TANGEDCO is not actually losing any revenue towards consumption of electricity," the bench held.

However, it has been clarified that the minimum monthly charges are payable "even when no electricity is consumed" or even where supply has been disconnected or even when the electricity supplied is less than the Minimum Charges.

"For every HT consumer, there is an infrastructure that is created by the Licensee and that has to be maintained and therefore, irrespective of the fact as to whether electricity is consumed or not, these Minimum Charges provided under Regulation 6 has to be paid by a consumer," the bench explained.

The Court was also faced with the issue of compensation levied against the consumers towards low PF.

The low PF compensation is a penalty imposed on the consumers where the average power factor of the consumers installation falls less than 0.90 lag. This PF is fixed to ensure that the consumer consumes the optimum power without interruptions or impediments.

In the case at hand, since the establishments had been shut down due to the pandemic, there was no effective utilization of power at the consumer's end, and therefore, TANGEDCO had levied compensation.

Finding this move to be "mechanical", the bench quashed the compensation charge bills and observed,

"It is hard to think that the optimum PF can be maintained when a consumer has been asked to completely shut down his establishments. It is illogical that the TANGEDCO mechanically levied compensation for low PF even without understanding the basic fact that the establishments were completely shut down and there is no way they can utilize the optimum PF. In any event, the compensation levied is in the nature of penalty and it is now a settled law that penalty cannot be imposed without affording an opportunity since it involves civil consequences."

Virtual Hearings

The order also records that the present case, involving a batch of writ petitions, was "conveniently conducted" through video conferencing.

The order discloses that the entire arguments were heard by the Court through video conferencing. Every counsel had the opportunity to make their submissions to their fill. Throughout the proceedings, there were atleast twenty-five to thirty counsels who were participating in the proceedings, and the Court was also able to listen to them patiently without any interruption. The citations and other relevant documents were exchanged through e-mails and the hearing was made very effective by every counsel who presented their case before the Court.

In this backdrop the bench remarked,

"Virtual hearing has now come here to stay and this institution must take full advantage of it…

This case in an indicator that video conferencing is going to open up new vistas in the justice delivery system even during normal court functioning. Cases which can be conveniently conducted through video conferencing must be identified and it can be heard in a relaxed manner even on a holiday when everyone is sitting at their own residence or office, provided that all the counsels involved in the case consent for such a hearing."

Case Details:

Case Title: The South India Spinners Association v. e Chairman, TANGEDCO & Ors. (and other similar petitions)

Case No.: WP. No. 7678/2020 (and other similar petitions)

Quorum: Justice N. Anand Venkatesh

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