A contractual provision for a minimum charge in an electricity supply agreement is valid and enforceable as a fair return on the company's capital expenditure, considering factors like load factor, power factor, and total consumption.

Kapur, J.

1. This is a defendants appeal against an appellate decree of the Additional District Judge, Jullunder, dated 22-7-1948, varying the decree of the trial Court which had decreed the plaintiffs suit but had awarded damages of only Rs. 333/3/9 against the claim of the plaintiff of Rs. 2,921/7/9.

2. On 4-5-1940, an agreement was entered into between the plaintiff, the Jullundur Electric Supply Company Limited (hereinafter termed the Company), and the defendants, Messers. Watkins Mayor and Company, Jullundur (hereinafter called the consumers), for the supply of electric energy. The relevant conditions of this contract were that the consumers required a maximum load of 100 kilowatts and they guaranteed a minimum consumption of 1,20,000 units in two years and the Company was to charge in that case at the rate of Re. 0-1-3 per unit of energy consumed and if the consumption exceeded 3,00,000 units in two years, the rate was to be Re. 0-1-0 per unit subject to certain conditions. Clause 4 of the agreement was as follows:

"4. In case the consumer fails to consume the guaranteed 1,20,000 units as in Clause (3) in the period of two years from the date of agreement, he shall pay to the Company the cost of 1,20,000 (one lac and twenty thousand) units at the stipulated rate of Re. 0-1-3 per unit."

3. As the defendants did not consume the minimum amount of energy guaranteed by the agreement, the plaintiff brought a suit on 4-5-1945, claiming a sum of Rs. 2,921/7/9, alleging that there was a contract between the parties by which the consumers had given a guarantee to consume 1,20,000 units in two years and as they had only consumed 82,605 units, they were liable to pay for the balance of the units unconsumed out of the guaranteed units, i. e. 37,395 units. The defendants pleaded that the plaintiff Company did not put up a transformer of sufficient power, it being only of 88 Kilowatts although according to the con-tract, they had to erect a transformer of 100 Kilowatts or over, that they were unable to supply sufficient amount of energy as a result of which the pole fuses were constantly being burnt out and in spite of the complaint made they took no action, that the plaintiff could not therefore sue on the basis of the contract which was never acted upon and the minimum guarantee clause was therefore unenforceable. They also pleaded that they had deposited the money claimed by the plaintiff with the Electrical Inspector but he had returned the money to them on the ground that he had no jurisdiction to go into the matter of compensation. In their replication, the plaintiff Company denied the statements made by the defendants and stated that the transformer which they had put up was of sufficient power, that according to the contract they had only agreed to give the stipulated amount of energy, that there was no breach of contract on their part and that the burning out of the fuses was due to the unbalanced load which the defendants had put on the mains of the Company.

4. Mohan Lal, Chief Engineer of the plaintiff Company, was examined Before issues and he stat ed that the agreement was that the defendants were to take the maximum load of 100 kilowatts but there was no possibility of their taking this load at any time, that at no time could there be a diversity factor of more than 50 per cent, and even if 90 kilowatts load was taken, the fuses would not burn. out because there was an overload capacity of the transformer. Upon this the Court struck the fol lowing issues:

"1. What was the effect of the plaintiff Company fixing a transformer of 88 kilowatt on the agreement between the parties when the plaintiff Company had contracted to meet a maximum load of 100 kilowatt?

2. What was the effect of the giving of energy from the above transformer to others on the rights of the parties?

3. Could the defendants take advantage of the reduction of rates by the Punjab Government and how?

4. Relief.

5. Mr. Y. L. Taneja who tried the suit