Factual Background 

In the case of  Madras Aluminium Co. Ltd. v. T.N. Electricity Board, a number of civil appeals were filed in opposition to the Madras High Court’s judgement and order. The Madras Aluminium Co. Ltd. was founded to produce aluminium, a process that requires a lot of electricity and power. In accordance with Section 3(1)(O) of the Sick Industrial Companies Act of 1985, it was designated a sick industrial unit in 1987. The management presented the Board with a recovery strategy in 1994, which prompted the discussion of more concessions. The maximum power consumption for the appellant was originally 67000 KVA but was later decreased to 23000 KVA in 1994. The Appellant offered to pay a one-time fee in 2001 in exchange for a decrease of 10000 KVA. The Appellant was forced to pay the contracted demand of 23000 KVA at 320 Rupees per KVA since the Tamil Nadu Electricity Board did not take any action to execute the request. The appellant submitted appeals to several fora, but the court determined that the Appellant could not pay less than the stipulated demand without receiving a board censure. The court further noted that the appeals board did not act arbitrarily or unfairly in considering the appellant’s application and that writ jurisdiction could not be used to interpret such an agreement.

Argument Advance 

The Appellant allegedly unilaterally changed the contract to lower the maximum demand to 10,000 KVA, according to the Respondents, even though they haven’t made any such choice.

Contrarily, the Appellant argued that they had been negatively impacted by the board’s unilateral decision not to consider the application they had submitted.

Analysis of Court order 

The Supreme Court’s bench of Justices B.R. Gavai, Sanjay Karol, and Aravind Kumar ruled that the State must uphold Article 14 of the Indian Constitution even if its conduct fell outside the purview of a contract.

The agreement stipulates that the customer is obligated to pay the maximum demand amount regardless of utilisation, and the court determined that it will be in force for five years. Although the corporation may incur significant expenditures during the decision-making process, the Board may seek protection in these terms. The Court referenced case law to support its position that actions must adhere to Article 14 of the Indian Constitution. After a long time that shouldn’t have lasted more than six months, the appellant was unfairly forced to provide power fees that had not been used. The court further held that considering the Appellant’s financial situation, the Respondent ought to have decided on the Appellant’s request within a reasonable time frame and on acceptable conditions rather than delaying a judgement for two and a half years.

As a result, the Court upheld the appeal and annulled the High Court’s judgement. The Court further ordered the Respondent to repay, within two months of the date of the judgement, the sum that may be estimated and proved to have been paid by the Appellant to it for 13000 KVA more than its request for the maximum sanctioned demand of 10000 KVA.

CASE NAME – Madras Aluminium Co. Ltd. v. T.N. Electricity Board, 2023 SCC OnLine SC 7839.