Electricity fee amid COVID: Kerala High Court gives PAN cinemas interim relief

The Kerala High Court recently stayed electricity disconnection notices served on Maradu-based movie theatre, PAN Cinemas, on the condition that they deposit 20 per cent of the fee demanded for "fixed" electricity charges by the Kerala State Electricity Board (KSEB) for the month of September (Pallickamalil Cinema Company Private Limited v. State of Kerala and ors).Taking note of the importance of the points raised in the case, Justice Bechu Kurian Thomas also directed the State of Kerala and the KSEB to file their response to the petition moved by the proprietors of PAN Cinemas (petitioners) as expeditiously as possible.."In the meantime, the electric connections to the petitioners shall not be disconnected, on condition that the petitioners deposit 20% of the amounts covered by Exhibitsts P6 and P8 (electricity bills for September 2021) within a period of 15 days from today," the High Court's October 12 order further stated..The matter was posted for further hearing on October 25. .PAN Cinemas challenged two disconnection notices as well as electricity fees demanded as fixed charges by the KSEB for the period when the theatre remained shut on account of the COVID-19 pandemic. ."To demand fixed charges from the Petitioners for the period of time when the business of the Petitioners were rendered suspended, on the pain on prosecution on account of governmental actions, and thereafter levy and collect charges from the Petitioners from State entities is unconscionable," the petition stated. .Following Government Orders (GOs) passed on account of the pandemic, theatres, including PAN Cinemas, have been completely non-operational, save for a brief period of four months between January 2021 and April 2021, the petition highlighted. ."The demand of fixed charges for the period of the pandemic declared as force majeure by the Central Government is arbitrary, illegal, violates Articles 14, 19(1)(g) and 300A of the Constitution of India ... The 2nd Respondent Board (KSEB), being a state actor is duty bound to demonstrate ‘fairplay in action’ in its contractual dealings. The insistence on payment of ‘fixed charges’ compulsorily during the period which the theatres were remained closed and non-operational and without any revenue is arbitrary, illegal, violates Articles 14, 19(1)(g) and 300A of the Constitution of India," the petition further said. .The Court was also told that the petitioners are being pushed to the brink of financial ruin due to KSEB's demand to repay amounts relating to fixed charges despite movie theatres remaining shut during the pandemic..Advocates A Kumar, Job Abraham, Ajay V Anand and PS Sree Prasad appeared for the petitioners..Other highlights of the petitioners' submissions include.While the theatre remained closed during the pandemic, the petitioners were precluded from drawing any electrical energy in terms of the contract with KSEB for which the fee is fixed. The realization of fees, therefore, is unreasonable and illegal. The insistence on payment of ‘fixed charges’ compulsorily for a period when theatres remained closed, non-operational and without any revenue is arbitrary, illegal, and violates Articles 14, 19(1)(g) and 300A of the Constitution of India. The provisions of the Electricity Act, 2003 and the Kerala Electricity Supply Code, 2014 also takes into account ‘force majeure’ events to provide the KSEB insulation from liabilities or obligations arising from any event classified as force majeure. The KSEB itself, through the Kerala government's intervention, has been taking advantage of force majeure clauses in its power purchase agreements. While so it cannot demand that the petitioners discharge its obligations under the contract of supply "as thought there is no force majeure". This is illegal and violates Articles 14, 19(1)(g) and 300A of the Constitution of India. The KSEB itself having reconciled to treating electricity supply as being hit by force majeure is estopped from contending otherwise when it comes to its customers. This is especially so, when the affected category of customers is an identified class under national disaster management notifications. Prior to the COVID-19 lockdown, the petitioners had been paying on time the electricity bills raised, until March 2020. The petitioners were later forced to opt for an installment scheme to repay fixed charges for March-September 2020, totalling to Rs 1,92,037 in eight installments, charging a total surcharge (at the rate of 18 percent per annum) of Rs 12,614. The same was duly cleared by the petitioners, the last installment having been paid on June 14, 2021, the petitioners submitted. Reference was made to GOs issues for a waiver of 50% of fixed charges when it comes to theatre operators. As per a January 28, 2021 notification, the petitioners said that the balance 50% was allowed to be paid in 6 equal monthly installments. As per another June 28 notification, the balance payment was allowed in three equal monthly installments. While so, the disconnection notices served on the petitioners demanding Rs 45,847 shows that prima facie, the GOs referred to have not been complied with. The operation of cinema theatres, as a class, were suspended on account of the COVID-19 pandemic. The KSEB ought to have reasonably foreseen a drop in demand that could be mitigated by invoking the force majeure in its power purchase agreements with power generators. It was also highlighted that in Kerala, the KSEB holds a monopoly when it comes to distributing electricity. As such, the petitioners had no choice other than to contract with the KSEB when it came to electricity supply. This shows that there is a disparity in stature as well between KSEB and the petitioner theatre. When the State (KSEB) has the privilege of citing terms, including force majeure, the non-availability of the same to the consumer (PAN Cinemas, in this case) reflects gross inequalities in the bargaining power and the absolute dominance of KSEB in electricity distribution. Allowing of the realization of ‘fixed charges’ would result in unjust enrichment of the KSEB. The fact that the Board did not recuse/abstain itself from supplying electrical energy is a non-event as it is fait accompli that when there is supply also there no theatre shows. Fee is a consideration for the services/supply of electrical energy to be rendered by the KSEB. Quid pro quo forms the basis for the fee. In the absence of services being rendered, the collection of the consideration is without rendering of services and the basis for realizing the fee fails..Prayers made by the Petitioners.The petitioners urged the High Court:To declare the period of March 2020-December 2020, when the theatres remained closed due to the COVID-19 pandemic, as a situation to which force majeure applies. This way, the KSEB would be disentitled to collect any electricity tariff by way of fixed charges, usage charges or any other rates, charges or duties, including interest or penal / surcharges for that period. To declare the 18 per cent interest collected during the period March 2020-September 2020, when theatre owners were allowed to pay in installments, as illegal, arbitrary and unreasonable since the said period was a pandemic affected period. As such, the respondent-authorities should be directed to refund or adjust the said amounts against future bills. To quash the electricity bills raised by KSEB on PAN Cinemas for the month of September 2021 as well as the discontinuation of electricity notices sent to the theatre in September citing failure to pay the bill for September. .[Read Order]