Karnataka Power Transmission Corporation v. Ashok Iron Works Private Limited

In the Hon’ble Supreme Court of India

Name of the Case Karnataka Power Transmission Corporation v. Ashok Iron Works Private Limited
Citation (2009) 3 SCC 240
Year of the Case 9 February 2009
Appellant Karnataka Power Transmission Corporation
Respondent Ashok Iron Works Private Limited
Bench/Judges Justice Markandey Katju and Justice R.M. Lodha
Acts Involved Consumer Protection Act, 1986

Abstract

Consumer Protection Act, 1986 is a social welfare legislation aiming to provide speedy and simple redressal mechanisms to consumer disputes. The main objective of this Act is to protect the interest and safeguard the rights of the customers. 

Ashok Iron Works Private Limited (‘the company’ for short) engages in the manufacturing of iron products. It applied to Karnataka Power Transmission Corporation (‘KPTC’ for short) for the supply of electrical energy and paid the amount demanded by KPTC for such supply. KPTC failed to provide the supply of power, so the company filed a complaint with the Karnataka High Court. The case proceeded further and was taken to the Supreme Court of India and the company got justice.

Introduction 

Consumer Protection Act, 1986 creates consumer forums for giving quick remedy to the consumers. The Act also creates new rights for the consumers. Only consumers, as defined by the Act, can come before a consumer’s forum. The Act deals with promoting and protecting consumer rights, providing for the establishment of a consumer council and other authorities, providing speedy and simple redressal machinery at the district, state and central level for settling consumer disputes and related matters.

According to the Consumer Protection Act, 1986, a consumer is a person who buys or avails any goods or service for a consideration which has been paid or promised (or) partly paid and partly promised or under scheme of deferred payment and includes other user of such goods/service with the approval of the buyer. 

Ashok Iron Works Private Limited is a private listed company established in 1981 mainly dealing in the manufacture of iron made products. The company operates in many states. One of the plants located in Bangalore, Karnataka, had trouble with the Karnataka Power Transmission Corporation (A Government operated Electricity Department). According to the case, KPTC failed to provide its service to the company (customer).

Background

M/s Arun Iron Works Private limited (Respondent) was a company engaged in the manufacturing of iron products and applied for supply of electricity (2500KVA) from Karnataka Power Transmission Corporation (Appellants). The respondent’s application was cleared and the supply of electricity 1500 KVA was sanctioned. The dispute unfolded in the following chronological order:

  • 01.02.1991: The Respondent submitted the required amount of Rs. 8,40,000 but the Appellants did not commence the sanctioned electricity supply.
  • 16.04.1992: The Karnataka High Court, which was approached by the Respondent, directed the Appellants to supply the sanctioned electricity and the time for the supply was extended to 21.07.1992.
  • The Appellants demanded an additional sum of Rs. 8, 38,000 along with further Rs. 1, 34,000. The Respondent paid the said amount but the actual supply commenced in November, 1992.
  • The Respondent filed a complaint under the Consumer Protection Act (CPA), 1986 claiming damages of Rs. 99,900 as losses for delay in supply of electricity in Consumer Disputes Redressal Forum. The Appellants contended that the complaint was not maintainable as the Respondent was engaged in commercial activity and electricity being a good, the sale of it for commercial purposes is outside the purview of CPA 1986. 
  • 10.09.1993: The District Forum agreed with the Appellants and held that the complaint was not maintainable.
  • 15.06. 1995: The Respondent challenged the decision in the Karnataka State Consumer Disputes Redressal Commission which set aside the decision of the District Forum and held that the respondents were covered under the definition of consumers under CPA, 1986.
  • 23.11.2001: The Appellants challenged this decision in National Commission which was later dismissed.

Facts

As per the principal argument, Ashok Iron Works Private Limited is a private limited company established in 1981 dealing in the manufacturing of iron products. It operates in the state of Karnataka. The company applied for the supply of electrical energy (2500 KVA) to the Karnataka Power Transmission Corporation (KPTC). The company was sanctioned 1500KVA of electrical energy for which it deposited Rs. 8, 40,000/- on the 1st of February 1991 on demand. KPTC failed to supply the electricity for which the company approached Karnataka High Court for a direction to KPTC to supply the sanctioned electricity.

On 16th April of 1992, The High Court gave its decision and directed KPTC to supply electrical energy as per sanction forthwith and subsequently, time for supply of electricity was extended by the High Court up to 21st July of 1992. 

KPTC demanded an additional sum of Rs. 8,38,000/- from the company and further demand in the sum of Rs. 1,34,000/- and the company said to have paid that amount. The actual supply of power started in November of 1992. 

The company accordingly filed a complaint under the Consumer Protection Act, 1986 before the Consumer Disputes Redressal Forum, Belgaum claiming damages in the sum of Rs. 99,900/- for the delay in the supply of electricity. The complaint was contested by KPTC, and, inter alia, a preliminary objection was raised that complaint was not maintainable as the complainant was involved in commercial activity and electricity being goods; sale of goods to a commercial consumer for a commercial purpose was outside the scope of the Act, 1986. The judgement was in the favour of KPTC and it held that the complaints were not maintainable.

The company re-appealed before Karnataka State Consumer Disputes Redressal Commission. This time the decision was in the favour of the company. The state commission held that complaints were maintainable according to the definition of “Consumer” under the provisions of the Act, 1986. 

KPTC challenged the order of the State Commission by filing a revision petition before the National Consumer Disputes Redressal which was later dismissed.

Appellants then moved their appeal to the Supreme Court. It is argued that:

  • Ashok Iron Works was not a person under Section 2(1)(m) of the Act.
  • Ashok Iron Works was not a consumer under Section 2(1)(d) of the Act.
  • A dispute relating to the sale and supply of electricity does not come within the ambit of service under Section 2(1)(o) of the Act.

In arriving at this conclusion, the court was guided by its previous decision in Southern Petrochemical Industries Co Ltd V. Electricity Inspector & ETIO.

Issues 

  1. Whether a private company purchasing a service for commercial use can be included within the ambit of term consumer?
  2. Whether the complaint regarding delay or deficiency in services is raised before consumer dispute redressal forums established under the acts?
  3. Whether the private company is a person within the meaning of section 2 (1)(d) and section 2(1)(m) of the Act?
  4. Whether services under section 2 (1)(o) comprises dispute related to sale and supply of electricity?

Related Provisions

Consumer Protection Act, 1986

  • Section 2:
  1. (d): Definition of ‘consumer’
  2. (m): Defines the term ‘person’
  3. (o): Definition of ‘service’

Related Case

Petrochemical Industries Co Ltd V. Electricity Inspector & ETIO

Judgement

The judgement was given in the favour of Ashok Iron Works Private Limited against Karnataka Power Transmission Corporation. The financial claim made by the Company for the delay in supply of electricity by KPTC was reinforced by judgement based on following interpretations by judges on specific words consumer, defect in service.

The company is considered as a consumer within the definition of Section 2(1)(d)(i) of the Act, 1986 even though it purchased electrical energy from the KPTC for commercial production not for personal consumption. The definition of consumer relates only to “person”, whereas the definition of person includes the following four categories under Section 2(1)(m).

  1. A firm whether registered or not;
  2. A Hindu undivided family;
  3. A co-operative society;
  4. Every other association of persons whether registered.

But the word “include” is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute. This provision is used to consider the company as a consumer.

Concept Highlighted

The decision means that private corporations are now classified as ‘persons’ and the electricity supply is a service under the Act. Complaints about defects can then be referred to as a customer redress forum for this kind of service. But the effect of the provision on the act on future court decisions also needs to be seen.

References:

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