Sri Venkata Seetaramanjaneya Rice and oil
Mills & Ors Vs. State of Andhra Pradesh  INSC 96 (25 March 1964)
25/03/1964 GAJENDRAGADKAR, P.B. (CJ)
GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N.
AYYANGAR, N. RAJAGOPALA SIKRI, S.M.
CITATION: 1964 AIR 1781 1964 SCR (7) 456
RF 1967 SC 997 (22,34,45,51) R 1989 SC2105
Madras Essential Articles Control and
Requisitioning (Temporary) Powers Act, 1949 (Mad. 29 of 1949), ss. 3(1)
(2)Applicability of the Act to electricity supplied by State-Intention of
Legislature, consideration of-Notified orders enhancing agreed rate by
State-Whether valid under s. 3-Regulate, meaning of-Increase of tariff-If
reasonable and in interest of general public-Whether contravenes Arts. 14 and
19(1)-Constitution of India, Arts. 14 and 19(1)(g) and (f).
Electricity was supplied to the appellants by
the respondent-state for many years past, and several individual agreements
were passed between them prescribing the terms and conditions for the supply.
One of these terms stipulated the rate at which the supply had to be charged.
These agreements did not contain any
provision authorising the State to increase the rates during their operation.
The respondent-state issued two notified orders enhancing the agreed rates. The
orders indicated that the main reason which inspired the increase was that the
existing electricity tariffs which were formulated several years before, had
become completely uneconomic and meant continuously growing loss to the State.
A large number of consumers challenged the validity of the two orders in the
High Court under Art. 226. The writ petitions were allowed and the respondent
was restrained from enforcing the revised rates. These decisions were
challenged by the respondent by appeals in the High Court, which took a
different view and dismissed the writ petitions. On appeals to this Court, it
was contended, inter alia that the respondent had no authority to increase the
rate changing this important term of the contract by taking recourse to s. 3(1)
of the Madras Essential Articles Control and Requisitioning (Temporary) Powers
Act, that the power to regulate the supply of essential articles had to be
applied in regard to transactions between citizens and citizens and could not
be applied to an essential article which the State itself supplied; that the
power to regulate conferred on the respondent by s. 3(1) could not include the
power to increase the tariff rate, that the notified orders were invalid as
they contravened the provisions of Art. 19(1)(f) and (g) and that of Art. 14 of
Held: (i) The challenge to the validity of
the notified orders on the ground that they were outside the purview of s. 3(1)
of the Act could not be sustained.
The State is not bound by a statute unless it
is so provided in express terms or by necessary implication. In applying this
rule, the court must attempt to ascertain the intention of the Legislature by
considering all the relevant provisions of the statute together and not
concentrating its attention on a particular provision which may be in dispute.
Where the question is not so much as to
whether the State is bound by the statute, but whether it can claim the benefit
of the provision of a statute, the same rule of construction 457 may have to be
applied' Where the statute may be for the public good and by claiming the
benefit conferred on it by its provisions the State may allege that it is
serving the public good, it would still be necessary to ascertain whether the
intention of the legislature Was to make the relevant provisions applicable.
Director of Rationing and Distribution v.
Corporation of Calcutta,  1 S.C.R. 158 and Province of Bombay v. Municipal
Corporation of the City of Bombay, [1945-46] L.R. 73 I.A. 271, applied.
(ii) In construing s. 3 of the Act of the
usual rule of construction must be adopted, s. 3 must not be read in isolation,
but must be considered in its proper setting and due regard must be had for the
other provisions of the Act and its general scheme and purpose.
(iii) The purpose of the Act is to secure the
supply of essential articles at fair prices, it would be irrelevant as to who
makes the supply; what is relevant is to regulate the supply at a fair price.
(iv) It is well-settled that the function of
a clause like cl. (2) of s. 3 is merely illustrative. In other words the proper
approach to adopt in construing cls. (1), and (2) of s. 3 is to assume that
whatever is included in cl. (2) is also included in cl. (1).
King Emperor v. Sibnath Banerjee, 72 I.A. 241
and Santosh Kumar Jain v. State,  S.C.R. 303, applied.
(v) The word 'regulate' is wide enough to
confer power on the State to regulate either by increasing the rate or decreasing
the rate, the test being what is it that is necessary or expedient to be done
to maintain, increase or secure supply of the essential articles in question
and to arrange for its equitable distribution and its availability at fair
(vi) Having regard to all the circumstances
in this case, the change made in the tariff were reasonable and in the interests
of the general public.
(vii) There was absolute no material on the
record of the appeals on which a plea under Art. 14 of the Constitution could
even be raised.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 429 439, 591, 592, 597, 689, 694, 724, 725 and 727 of 1962 and 15, 139,
140, 159, 267 to 269, 331, 334, 337, 340, 342, 343, 347, 352, 389, 746 and 748
of 1963. Appeals from the judgments and order dated December 19, 1958, March 7,
1959, March 11, 1959, April 22, 1959, April 24, 1959 in Writ Appeals Nos. 135,
122 of 1957 etc.
T. V. R. Tatachari, for the appellants (in
C.A. Nos. 429 to 434 and 694 of 1962 and C.A. No. 269/63).
M. C. Setalvad, P. Kodandaramayya, E. V.
Bhagarathi Rao and T. V. R. Tatachari, for the appellants (in C.A. Nos. 438 and
M. C. Setalvad, and R. Ganapathi Iyer, for
the appellants (in C. A. Nos. 436, 437, 724, 725 and 727/62).
458 K. Srinivasamurthy and Naunit Lal, for
the appellants (in C. As. Nos. 591, 582, 597, and 689/62 and 140, 267 and
K. Jayaram and R. Thiagarajan, for the
appellants (in C.A. Nos. 139, 159, 330, 334, 337, 340, 342, 343, 347 and
K. R. Chaudhuri, for the appellants (in C.A.
Nos. 15 and 389 of 63).
A. Vedavalli and A. V. Rangam, for the
appellant (in C. As. Nos. 746, and 748 of 63).
D. Narsaraju, T. Anantha Babu, M. V. Goswami
and B. R. G. K. Achar, for the respondents (in C. As. Nos. 435437, 724, 725 and
D. Narsaraju, T. Anantha Babu, Yogeshwar
Prasad and B. R. G. K. Achar, for the respondents (in C. As. Nos. 429434, 438,
439 and 694/62 and 269 of 63).
D. Narsaraju, T. Anantha Babu, M. S. K.
Sastri and B. R. G. K. Achar, for the respondents (in C.A. Nos. 591, 597 and
689/62 and 140, 267 and 268/63) and respondent No. 1 (in C.A. No. 592/62).
J.V.K. Sharma and T.Satyanarayana, for
respondent No. 2 (in C.A. No. 592/62).
D. Narsaraju, T. Anantha Babu, R.
Gopalakrishnan and BR. G. K. Achar, for the respondents (in C. As. Nos. 15,
139, 331, 334, 337, 340, 342, 343, 347, 352, 159, 389 and 746-748 /63).
March 25, 1964. The judgment of the Court was
delivered by GAJENDRAGADKAR, C. J.-The principal question of law which arises
in this group of 37 civil appeals relates to the construction of section 3 of
the Madras Essential Articles Control and Requisitioning (Temporary Powers)
Act, 1949 (No. 29 of 1949) (hereinafter called 'the Act'). The dispute which
has given rise to these appeals centers round the validity of two notified
orders issued by the respondent, State of Andhra Pradesh on the 28th January,
1955, and 30th January, 1955 respectively, and it is the contention of the
appellants that the said notified orders are outside the purview of s. 3. The
appellants in all these appeals are supplied electricity by the respondent for
many years past, and several individual agreements have been passed between
them and the respondent during the period 1946 to 1952 prescribing the terms
and conditions on which the said supply would be made to them. One of these
terms stipulated the rate at which the supply of electricity had to be charged
459 against the consumers. The impugned orders have purported to increase this
rate, and the appellants contend that the respondent had no authority to change
this important term of the contract to their prejudice by taking recourse to s.
3(1) and issuing notified orders in that behalf. That, in substance, is the
nature of the controversy between the parties before us.
It appears that the Government of Madras, and
subsequently, its successor, the respondent, had a single power grid system for
the whole State comprising Tungabhadra and Machkund Hydro Electric System and
the Thermal System of Nellore. The entire energy was integrated into one power
system. The Government of Madras entered into agreements with several consumers
in the State, including the appellants, for the supply of energy in bulk at the
specified rates which were called tariffs, for the years 1951 and 1952. These
agreements were to be in operation for ten years. It is common ground that
these agreements did not contain any provision authorising the Government to
increase the rates during their operation. The charges fixed were calculated at
graded regressive rates according to increasing slabs of consumption units, and
the overall unit rates including the demand charge were not to exceed 66 annas
without prejudice to the monthly minimum payment and the guaranteed
consumption. The Government of Andhra then issued the two impugned orders
relating to Machkund and Nellore, and Tungabhadra and Chittoore District areas
respectively, enhancing the agreed rates. These enhanced rates were specified
in Schedules A and B attached to the said orders. According to these orders,
these increased tariffs were to take effect from the date on which meter
readings were to be taken in the month of February, 1955 and were to operate
for the future. The increase in the rates effected by these orders was thus to
operate not retrospectively, but prospectively. The impugned orders indicate
that the main reason which inspired the said orders was the knowledge that the
existing electricity tariffs which were formulated nearly 15 years before, had
become completely uneconomic; the charges of labour and the price level of all
material had enormously increased; and that inevitably meant continuously
growing loss to the Government.
The Accountant-General made queries in
respect of this recurring loss and drew pointed attention of the State
Government to the deficits in the working of the Power System. Accordingly, the
question of revision of tariffs was considered in the State of Madras, but was
not decided because reorganisation of the States was then in contemplation.
After the respondent State wits born, its Chief Engineer submitted proposals
for 460 revisions of tariffs in all the areas covered by the relevant schemes.
That is how the impugned notified orders came to be issued by the respondent.
The appellants were naturally aggrieved by
these orders, because they added to their liability to pay the rates for the
supply of electricity by the respondent to them.
Accordingly, a large number of consumers
moved the Andhra Pradesh High Court under Art. 226 of the Constitution, and
challenged the validity of the two impugned orders. The learned single Judge
who heard these writ petitions upheld the appellants' plea and came to the
conclusion that the impugned orders were not justified by the authority
conferred on the respondent by s. 3 of the Act, and were unauthorised, illegal
and inoperative. In the result, the writ petition filed by some of the
appellants before us were allowed and an appropriate order was issued against
the respondent restraining it from enforcing the revised tariff rates.
These decisions were challenged by the
respondent by preferring several Letters Patent Appeals. The Division Bench
which heard these Letters Patent Appeals took a different view; it held that on
its fair and reasonable construction, s. 3 did confer authority on the
respondent to issue the impugned orders, and so, the challenge made to the
validity of the said orders could not be sustained. That is why the Letters
Patent Appeals preferred by the respondent were allowed and the writ petitions
filed by the appellants were dismissed. It is against these orders that the
appellants have come to this Court with a certificate issued by the said High
After the Division Bench had pronounced its
decision on this point, several other writ petitions were filed by other
consumers, and naturally the single Judge who heard them followed the decision
of the Division Bench and dismissed the said writ petitions. The consumers who
were aggrieved by the decision of the learned single Judge were then allowed to
come to this Court directly by special leave, because the points which they
wanted to raise were exactly the same as were raised by the other consumers who
had come to this Court against the principal decision of the Division Bench.
The present group of appeals thus consists of
matters which have been decided by a Division Bench of the Andhra Pradesh High
Court, as well as those which have been decided by a learned single Judge, and
they all raise the same common question about the construction of s. 3 of the
Act, and the validity of the impugned notified orders.
Before addressing ourselves to the question
of construing s. 3, it is necessary to recapitulate the legislative history of
the Act. It will be recalled that during the Second World 461 War, the
Government of India passed the Defence of India Act (No. 35 of 1939) on the
29th of September, 1939. By virtue of the powers conferred on the Central
Government by s. 2 of the said Act, several Rules came to be framed by Central
Government known as the Defence of India Rules. Amongst these Rules was Rule
81(2) which clothed the Central Government with power to issue orders which may
appear to the Central Government to be necessary or expedient for securing
"the defence of British India, or the efficient prosecution of the war, or
for maintaining supplies and services essential to the life of the
community". These Rules were in operation during the continuance of the
After the war came to an end, it was realised
that the economic situation in the country continued to be serious, and for the
proper regulation of economic affairs, it was thought necessary to continue the
orders issued under the Defence of India Rule 81(2), because shortage of supply
of essential articles was very much in evidence then. The purpose of continuing
the orders was to ensure the supply of essential articles to the community at
large at reasonable prices and to secure their equitable distribution. In due
course, the Defence of India Act came to an end in 1946, but the Central
Legislature thought it necessary to pass another Act to take its place and that
was the Essential Supplies (Temporary Powers) Act, 1946 (No. 24 of 1946). On
the same lines, the Madras Legislature passed an Act in 1946 (No. 14 of 1946).
Later, it was replaced by Act No. 29 of 1949 with which we are concerned in the
present appeals. After the respondent State was created under the Scheme of
Reorganisation of States, it passed Act No. 1 of 1955 and this Act received the
assent of the President on the 21st of January, 1955. By this Act, the
Legislature of the respondent State virtually adopted the Madras Act. As a
result, the impugned orders are, in substance, referable to s. 3 of the Madras
Before we part with this topic, it may be
mentioned that when the Madras Act was passed, its Schedule gave a list of the
essential articles as defined by s. 2(a) and these articles were 12 in number.
When the Andhra Legislature passed Act No. 1 of 1955 and adopted the Schedule
of essential articles for its purpose, the number of these articles was reduced
to two; they are charcoal and electrical energy.
The Andhra Act was originally intended to be
in operation until the 25th January, 1956, but it was later continued from time
to time. It is common ground that when the impugned orders were passed, section
3 of be Act was in operation and the present appeals have been argued on the
basis that the said section is constitutionally valid, so that the main point
which calls for our decision is the construction of the said section.
462 Mr. Setalvad for the appellants contends
that in construing s. 3, we ought not to concentrate on the words used in s. 3
in isolation, but must look at the said section along with the other provisions
of the Act. The rule of harmonious construction, he urges, requires that we
must so construe all the provisions of the Act as to avoid any conflict or
repugnancy between them. So construed, section 3, according to him, cannot be
said to confer power on the respondent to enhance the tariff rate chargeable
against the appellants in respect of the supply of energy made by the
respondent to them. The whole scheme of the Act indicates clearly that the
power to regulate the supply of an essential article which has been conferred
on the State Government has to be applied in regard to transaction between
citizens and citizens and cannot be applied to an essential article:
which the State itself supplies. It would be
odd, he suggests, if the State Government is given the power to issue a
notified order regulating the rates at which it should supply energy which it
itself produces. Therefore, the dealings by the State Government in the matter
of supply of energy to the consumers should be deemed to be outside the
provisions of s. 3, and that would make the impugned orders invalid.
The question as to whether the State Government
would be bound by the provisions of legislative enactments passed by the State
Legislature has sometimes led to difference in judicial opinion; but the
decision of this Court in the Director of Rationing and Distribution v. The
Corporation of Calcutta and Ors.(1) must be taken to have settled this
question. The effect of the majority decision rendered in that case is to
recognise the validity of the rule of interpretation of statutes enunciated by
the Privy Council in Province of Bombay v. Municipal Corporation of the City of
Bombay (2) and that rule is that the State is not bound by a statute unless it
is so provided in express terms or by necessary implication. In applying this
rule, it is obviously necessary that the Court must attempt to ascertain the
intention of the Legislature by considering all the relevant provisions of the
statute together and not concentrating its attention on a particular provision
which may be in dispute between the parties. If, after reading all the relevant
provisions of the statute, the Court is satisfied that by necessary implication
the obligation imposed by the statute should be enforced against the State,
that conclusion must be adopted. If there are express terms to that effect,
there is, of course, no difficulty. In dealing with this vexed question,
sometimes it is necessary also to enquire whether the conclusion that the State
is not bound by the specific provision of a given statute, (1)  1 S.C.R.
(2)73 I.A. 271.
463 would hamper the working of the statute,
or would lead to the anomalous position that the statute may lose its efficacy,
and if the answer to either of these two questions indicates that the
obligation imposed by the statute should be enforced against the State, the
Court would be inclined to infer by necessary implication that the State, in
fact, is bound by the statute.
Where, however, the question is not so much
as to whether the State is bound by the statute, but whether it can claim the
benefit of the provision of a statute, the same rule of construction may have
to be applied. Where the statute may be for the public good, and by claiming
the benefit conferred on it by its provisions the State may allege that it is
serving the public good, it would still be necessary to ascertain whether the
intention of the legislature was to make the relevant provisions applicable to
the State. This position is also established by the decision of the Privy
Council in Province of Bomboy(1) and it still continues to be a law in this
Incidentally, we may add that where the Crown
seeks to take advantage of a statute and urges that though it is not bound by
the statute, it is at liberty to take advantage of it, English Law does not
easily entertain such a plea, though there are observations made in some
judicial pronouncements to the contrary. As Halsbury points out, "it has
been said that, unless it is expressly or impliedly prohibited from doing so,
the Crown may take advantage of a statute notwithstanding that it is not bound
thereby." Having made this statement, Halsbury has added a note of caution
by ,,saying that "there is only slender authority for this rule, and since
both the rule and such authority as does exist have also been doubted, the rule
cannot, perhaps, be regarded as settled law(2)".
To the same effect is the comment made by
Maxwell when he quotes with approval the view expressed by Sir John Simon that
the decisions which recognise the right of the Crown to take advantage of a
statutory provision "start with a passage in an unsuccessful argument of a
law officer which was not even relevant to the case before the court, but which
has been taken out by a text-writer and repeated for centuries until it was
believed that it must have some foundation(3)".
Therefore, in construing s. 3 of the Act, we
cannot permit the respondent to rely upon the artificial rule that since (1) 73
(2)", Halsbury's Laws of England, Vol.
36, p. 432, para 654.
(3) Maxwell on Interpretation of Statutes,
11th Ed. p. 136 464 the respondent claims a benefit under s. 3, that construction
should be adopted which supports such a claim. Thus, the position is that when
we construe s. 3, we must adopt the usual rule of construction; we must not
read s. 3 in isolation, but must consider it in its proper setting and must
have due regard for the other provisions of the Act, and its general scheme and
Reverting then to Mr. Setalvad's main
argument, it may be conceded that when the Act was passed in 1949, mainly and
primarily the power conferred by s. 3 on the State Government must have been
intended to regulate the supply of essential articles made by one citizen to
another. The State had not then entered commercial activities on a large scale
and when s. 3(1) contemplated notified orders issued for the purpose of
securing equitable distribution and availability at fair prices of essential
articles, the legislature could not have in its mind supply of essential
articles made by the State itself. That is one point in favour of Mr.
Setalvad's construction. If we examine the scheme of the Act, it may also have
to be conceded that some of the provisions may not be applicable to the State.
Take, for instance, the provision of s. 4 which relate to the powers of
requisitioning and acquisition of properties, and the subsequent two sections
that deal with payment of compensation and release from requisition
these provisions may not be applicable to the
State. Take, again, the control of agriculture which is contemplated by s. 7;
it would not be applicable to the State. Section 12 which deals with penalties
may also be inapplicable to the State, and so, would s. 13 be inapplicable,
because it deals with abetment and assistance of contravention of the
provisions of the Act. Therefore, the general scheme of the Act and some of its
provisions seem to suggest that the State may not have been within the
contemplation of the Act.
But it is obvious that the rule of harmonious
construction on which Mr. Setalvad has solely rested his case, can be invoked
successfully by him only if the words used in s. 3 are capable of the
construction which he suggests. If the said words are capable of two
constructions one of which supports the appellants' case and the other that of
the respondent, it would be legitimate to adopt the first construction, because
it has the merit of harmonising the provisions of s. 3 with the general scheme
and purpose of the Act. On the other hand, if the words used in s. 3(1) are not
reasonably capable of the construction for which the appellants contend, then
it would be unreasonable and illegitimate for the Court to limit the scope of
those words arbitrarily solely for the purpose of establishing harmony between
the 465 assumed object and the scheme of the Act. Therefore, it is necessary to
examine the words used in s. 3 very carefully.
Let us first read s. 3(1):"The State
Government so far as it appears to them to be necessary or expedient for
maintaining, increasing or securing supplies of essential articles or for
arranging for their equitable distribution and availability at fair prices may,
by notified order, provide for regulating or prohibiting the supply,
distribution and transport of essential articles and trade and commerce
Sub-section (2) provides that without
prejudice to the generality of the powers conferred by sub-section (1), an
order made there under may provide for objects specified in clauses (a) to (k).
The majority of these objects may not be applicable to the State, while,
conceivably, some may be applicable to it.
Section 3(1) is obviously intended to secure
supplies of essential articles and to arrange for their equitable distribution
and availability at fair prices. If electrical energy is one of the essential
articles mentioned in the Schedule, there can be no difficulty in holding that
a notified order can be issued under s. 3(1) for regulating the supply of the
said energy and making it available at a fair price. Indeed, it is not disputed
and cannot be disputed that if electrical energy is produced by a private
licensee and is then supplied to the consumers, such a supply would fall within
the mischief of s. 3(1), and the terms on which it can and should be made to
the consumers can be regulated by a notified order. There can also be no
serious dispute that the terms of a contract entered into between a private
supplier of electrical energy and the consumer could be modified by a notified
order. Section 3(1) undoubtedly confers power on the State Government to vary
and modify contractual terms in respect of the supply or distribution of
essential articles. If that be so, on a plain reading of s. 3(1) it seems very
difficult to accept the argument that the supply of electrical energy which is
included in s. 3(1) if it is made, by a private producer should go outside the
said section as soon as it is produced by the State Government. The emphasis is
not on who produces and supplies, but on the continuance of the equitable
distribution and supply of essential articles at fair prices. If the object
which s. 3(1) has in mind is such equitable distribution and availability at
fair prices of essential articles, then that object would still continue to
attract the provisions of s. 3(1) even though the essential article may be
produced by the State and may be supplied by it to the consumers.
466 The words used in s. 3(1) are so clear,
unambiguous and wide that it would be unreasonable to limit their scope artificially
on the ground that by giving effect to the wide language of the section, we might
reach a result which is not completely harmonious or consistent with the
assumed object and purpose of the Act. Indeed, as we have just indicated, if
the purpose of the Act is to secure the supply of essential articles at fair
prices, it would be irrelevant as to who makes the supply; what is relevant is
to regulate the supply at a fair price. Therefore, we are not prepared to
accede to Mr. Setalvad's argument that s. 3(1) does not confer on the
respondent the power to modify the terms of agreements between it and the
Mr. Setalvad, no doubt, contended that in
construing s. 3(1), we may have regard to the fact that most of the clauses
under s. 3(2) would be inapplicable to the respondent State, and so, he
virtually suggests that even though the words in s. 3(1) may be wide, their
width should be controlled by the limited scope of the clauses prescribed by
subsection (2). We are not prepared to accept this argument. After the decision
of the Privy Council in King Emperor v. Sibnath Banerjee(1), it is well-settled
that the function of a clause like clause (2) of s. 3 merely illustrative (vide
also Santosh Kumar Jain v. The State(3)).
In other words, the proper approach to adopt
in construing clauses (1) and (2) of s. 3 is to assume that whatever is
included in clause (2) is also included in clause (1). That is not to say that
if the words of clause (1) are wide enough to include cases not included in
clause (2), they must, for that reason, receive a narrower construction.
Therefore, we must ultimately go back to
clause (1) to decide whether the supply of electrical energy made by the
respondent to the appellants can be regulated by a notified order issued under
it or not, and the answer to that question must, in our opinion, be in the
In this connection, it may be pertinent to
refer to s. 3(2)(b) which provides for controlling the prices at which any
essential article may be bought or sold. It is not easy to see why this clause
cannot take in articles which may be purchased or sold by the State. The clause
is so worded that the transactions of sale and purchase of all essential
articles would be included in it. It is true that where the State wants to sell
its essential articles, it may be able to regulate the prices and control them
by means of an executive order; but that is not relevant and material in
construing the effect (1) 72 I.A. 241 at p. 248.
(2) 1951 S.C.R. 303.
467 of the words; if the words take within
their sweep essential articles sold by the State, there is no reason why it
should not be competent to the State to issue a notified order controlling the
prices in that behalf.
In regard to the purchase of essential
articles by the State, the position is still clearer. If the State wants to
purchase essential articles, power to regulate the prices of such, articles
would seem to be clearly included in s. 3(2)(b). In-' deed, during the course
of his arguments, Mr. Setalvad did not seriously dispute this position.
Therefore, when the State wants to purchase
essential articles, it can regulate the price in that behalf by means of a
notified order issued under s. 3(1) and that shows that in the cases of both
sale and purchase of essential articles by the State, s. 3(2)(b) read with s.
3(1) would clothe the State with the power to issue the relevant notified
Then, it was faintly argued by Mr. Setalvad
that the power to regulate conferred on the respondent by s. 3(1) cannot
include the power to increase the tariff rate; it would include the power to
reduce the rates. This argument is entirely misconceived. The word
"regulate" is wide enough to confer power on the respondent to
regulate either by increasing the rate, or decreasing the rate, the test being
what is it that is necessary or expedient to be done to maintain, increase, or
secure supply of the essential articles in question and to arrange for its
equitable distribution and its availability at fair prices. The concept of fair
prices to which s. 3(1) expressly refers does not mean that the price once fixed
must either remain stationary, or must be reduced in order to attract the power
to regulate. The power to regulate can be exercised for ensuring the payment of
a fair price, and the fixation of a fair price would inevitably depend upon a
consideration of all relevant and economic factors which contribute to the
determination of such a fair price. If the fair price indicated on a
dispassionate consideration of all relevant factors turns out to be higher than
the price fixed and prevailing, then the power to regulate the price must
necessarily include the power to increase the price so as to make it fair. That
is why we do not think Mr. Setalvad is right in contending that even though the
respondent may have the power to regulate the prices at which electrical energy
should be supplied by it to the appellants, it had no power to enhance the said
price. We must, therefore, hold that the challenge to the validity of the
impugned notified orders on the ground that they are outside the purview of s. 3(1)
cannot be sustained.
That takes us to the next question as to
whether the impugned notified orders are invalid, because they contravene 468
the provisions of Art. 19(1)(f) and (g) of the Constitution.
The impugned orders have been notified by
virtue of the fore, be treated as law for the purpose of Art. 19. We may also
assume in favour of the appellants that the right to receive the supply of
electricity at the rates specified in the agreements is a right which falls
within Art. 19(1)(f) or (g). Even so, can it be said that the impugned notified
orders are not reasonable and in the interests of the general public'? That is
the question which calls for an answer in dealing with the present contention.
It is true that by issuing the impugned notified orders, the respondent has
successfully altered the rates agreed between the parties for their respective
contracts and that, prima facie, does appear to be unreasonable. But, on the
other hand, the evidence shows that the tariff which was fixed several years
ago had become completely out of date and he reports made by the
Accountant-General from time to time clearly indicate that the respondent was
supplying electricity to the appellants at the agreed rates even though it was
incurring loss from year to year. Therefore, it cannot be said that the
impugned notified orders were not justified on the merits. The prices of all
commodities and labour charges having very much increased meanwhile, a case
had. certainly been made out for increasing the tariff for the supply of electrical
energy. But it could not be possible to hold that the restriction imposed on
the appellants' right by the increase made in the rates is reasonable and in
the interests of the general public solely because the impugned orders have
saved the recurring loss incurred by the respondent under the contracts. If
such a broad and general. argument were accepted, it may lead to unreasonable
and even anomalous consequences in some cases.
This question, however, has to be considered
from the point of view of the community at large; and thus considered, the
point which appears to support the validity of the impugned orders is that
these orders were passed solely for the purpose of assuring the supply of
electrical energy and that would clearly be for the good of the community at
Unless prices were increased, there was risk
that the supply of electrical energy may itself have come to an end. If the
respondent thought that the agreements made with the appellants were resulting
in a heavy loss to the public treasury from year to year, it may have had to
consider whether the supply should not be cut down or completely stopped. It
may well be that the respondent recognised its obligation to the public at
large and thought that supplying electrical energy to the consumers who were
using it for profit-making purposes, at a loss to the public exchequer would
not be reasonable and legitimate, and it apprehended that the legislature may
well question the propriety or wisdom of such 469 a course; and so, instead of
terminating the contracts, decided to assure the supply of electrical energy at
a fair price and that is why the impugned notified orders were issued. We ought
to make it clear that there has been no suggestion before us that the prices
fixed by the impugned notified orders are, in any sense, unreasonable or
excessive, and it is significant that even the revised tariff has to come into
operation prospectively and not retrospectively. Therefore,( having regard to
all the circumstances in this case, we are disposed to hold that the change
made in the tariff by the notified orders must be held to be reasonable and in
the interests of the general public.
Mr. Setalvad also attempted to challenge the
validity of the impugned orders on the ground that they contravene Art. 14 of
the Constitution. In support of this contention, he invited our attention to
the allegation made in Writ Petition No. 923 of 1956. In that writ petition,
one of the petitioners stated that the rate prescribed under the agreements had
not changed and had remained stationary as far as consumers under the State
Government's licensees were concerned. The affidavit appears to concede that
certain ,other licensees had increased their rates, but that increase, it is
claimed, was negligible or nominal; and so, the argument was that the rates
which are widely divergent between consumer and consumer constitute a
contravention of Art. 14. Mr. Setalvad fairly conceded that these allegations
are vague and indefinite and no other material has been produced either by the
petitioner who has made this affidavit, or by any of the other petitioners who
moved the High Court for challenging the validity of the impugned orders. In
fact, we do not know what the rates charged by other licensees are and have been,
and how they compare with the rates prescribed by the original contracts as
well as the rates enhanced by the impugned notified orders. We ought to add
that the Division Bench of the High Court appears to be in error when it
assumed that the respondent was the sole supplier of electrical energy in the
State of Andhra. It is true that the bulk of the energy is supplied by the
respondent; but there are some other private licensees which are licensed to
supply electrical energy to the consumers and in that sense, at the relevant
time the respondent was not a monopolist in the matter of supply of
electricity. This Court has repeatedly pointed out that when a citizen wants to
challenge the validity of any statute on the ground that it contravenes Art. 14,
specific, clear and unambiguous allegations must be made in that behalf and it
must be shown that the impugned statute is based on discrimination and that
such discrimination is not referable to any classification 470 which is
rational and which has nexus with the object intended to be achieved by the
said statute. Judged from that point of view, there is absolulety no material
on the record of any of the appeals forming the present group on which a plea
under Art. 14 can even be raised. Therefore, we do not think it is necessary to
pursue this point any further.
The result is the appeals fail and are
dismissed with costs.
One set of hearing fees.