Gopisetti Venkataratnam & Ors Vs.
The Vijayawada Municipality & Ors  INSC 58 (5 March 1965)
05/03/1965 SUBBARAO, K.
CITATION: 1966 AIR 353 1965 SCR (3) 276
Indian Electricity Act, 1910 (Act 9 of 1910),
21(2)--Agreement between Licensee and
Consumers--Supply of energy at "current official scale of
rates"--Meaning of--Enhancement of rate--Sanction of State Government if
The Government of Madras issued a licence to
the respondent Municipality, under s.3(1) of the Indian Electricity Act, 1910,
for the supply of electric energy within its municipal limits at rates not
exceeding the maximum charges given in the licence. The appellants, some
consumers of the electric energy, entered into agreements with the Municipality
for the supply and agreed to pay the "current official scale of rates".
The rates were increased by resolutions of the Municipality twice and on the
second occasion the appellants filed a representative suit for a declaration
that the later resolution was illegal, and for an injunction restraining the
Municipality from collecting charges at the new rates. The trial court
dismissed the suit and the dismissal was confirmed on appeal by the High
Court..In appeal by special leave the appellants contended that (i) the rates
agreed between the consumers and the Municipality could not be unilaterally
altered and increased by the Municipality to the prejudice of the consumers
and, therefore, the impugned resolution was invalid and unenforceable; and (ii)
as the impugned resolution was passed without obtaining the previous sanction
of the State Government under s. 21(2) of the Act, it was void.
HELD: (i) The consumers were under a
contractual liability to pay the enhanced rates covered by the impugned
Under ss. 22 and 23 of the Act the
Municipality cannot discriminate between consumers in the matter of rates
chargeable for the energy supplied. Unless the Municipality enters into
agreement with the consumer enabling it to charge him at a rate fixed from time
to time, it would be difficult for the Municipality to maintain equality of
treatment between the consumers. That difficulty can be avoided if there is a
term in the agreement executed by every consumer that he will pay the official
rate fixed by the Municipality from time to time subject to the maximum fixed
by the licence. Further, a public body in supplying electric energy to
different consumers cannot run the risk of incurring loss by agreeing to fixed
rates, for the Government may increase the licence fee as had been done in the
instant case, or there may be a rise in the cost of distribution. [280 A-D]
Therefore, having regard to the entire document and the surrounding
circumstances, the words "current official scale of rates" in the
agreement mean the official scale of rates current or prevalent from time to
time during the currency of the agreement. [281 C] (ii) No sanction of the
State Government was necessary for enhancing the rates.
There was no alteration of any condition of
the agreement within the meaning of s. 21(2) of the Act. The consumers had
agreed to .pay the rates that would be fixed from time to time. and if that
term was a condition within the meaning of that section, there was no change at
all in that condition, for the change in the rates was not in derogation of the
condition but in terms of it. [282 A-B] 277
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 69 of 1964.
Appeal by special leave from the judgment and
decree dated October 10, 1961, of the Andhra Pradesh High Court in Second
Appeal No. 872 of 1958.
A.V. Viswanatha Sastri, K. Rajendra Chaudhuri
and K. R. Chaudhuri, for the appellants.
S.V. Gupte, Solicitor-General, and T.
Satyanarayana. for respondent No. 1.
T.V.R. Tatachari and B.R.G.K. Achar, for
respondent No. 2.
The Judgment of the Court was delivered by
Subba Rao, J. On November 22, 1927, the Government of Madras, in exercise of
its powers under s. 3(1) of the Indian Electricity Act, 1910 (IX of 1910),
hereinafter called the Act, issued a licence to the Bezwada (now Vijayawada)
Municipal Council for the supply of electric energy within the municipal limits
of Bezwada at rates not exceeding the maximum charges given in 'the third
annexure to the said licence. The appellants, who are some of the consumers of
electric energy for domestic and industrial purposes, entered into agreements
with the licensee for the supply of electric energy to them for domestic,
industrial and other purposes, agreeing to pay the current official scale of
rates. On December 13, 1940, the Municipality passed a resolution bringing into
force new rates for the supply of electric energy from April 1, 1940. The
consumers paid the rates so fixed' till the year 1956. On April 30, 1956, the
Municipal Council passed another resolution enhancing the rates from 1-4-1956.
The appellants filed a representative suit against the Vijayawada Municipality
in the Court of the District Munsif, Vijayawada, for a declaration that the
said resolution dated April 30, 1956, passed by the Municipal Council was
illegal, invalid and unenforceable and for an injunction restraining the said
Municipality from collecting charges from the consumers of electric energy in
the licensee's area at the new revised rates in pursuance of the impugned'
resolution. The learned District Munsif held that the demand of enhanced rate
was legal and valid and dismissed the suit. On appeal, the learned Subordinate
Judge held that the levy from the date of the said resolution was good, but it
could' not be given retrospective operation. He further held that the claim for
duty at half an anna per unit was invalid. In the result he modified the decree
of the District Munsif. On a further appeal, a Division Bench of the Andhra
Pradesh High Court confirmed the decree of the Subordinate Judge. By special
leave the present appeal has been filed in this Court.
Mr. A.V. Viswanatha Sastri, learned counsel
for the appellants raised before us the following two contentions:
(1) The rates agreed upon between the
consumers and the Municipality cannot be unilaterally altered and increased by
the Municipality to the prejudice of the consumers and, therefore, the said
resolution dated 278 April 30, 1956, was invalid and unenforceable; and (2) as
the said resolution was passed without obtaining the previous sanction of the
State Government under s. 21(2) of the Act, it was void for that reason also.
The first contention turns upon the relevant
clauses of the agreement entered into between the Municipal Council and the
consumers. Ex. B-4 is one such agreement dated May 27, 1932, between the
Municipality and one of the appellants herein. The material clauses of the
Para, IV. The consumer shall pay to the
licensee for all electrical energy so supplied at the rates and in accordance
with the terms, given in the licensee's Current Official Scale of rates and'
the signing of this Agreement is held to imply concurrence in the terms of the
said Scales of rates.
Provided that the minimum rates as specified
therein shall be paid irrespective of whether energy to the extent has been
consumed or not.
Para, V. A consumer under this Agreement is
required to state (see Schedule) under which of the rates set out in the
licensee's Official Scale of energy Rates, he desires to be charged.
Para, X. This Agreement shall be read and
construed as subject in all respects to the provisions of the Bezwada Municipal
Electric Licence, 1927, and to the provisions of the Indian Electricity Act
1910, and of any modification or re-enactment thereof for the time being in
force thereunder so far as the same respectively may be applicable. The supply
of electrical energy under this agreement is subject to following among other
provisions of law, namely:-- The schedule above referred to.
(2) Purposes to which the supply is to be
given, and in the case of domestic supply under which rate to be charged, as
referred to in paragraph V: (a) (Supply) Domestic Purposes.
(b) (Rate) Rs. 0--6--0 per unit.
(3) Maximum electrical power required by the
(4) Minimum monthly charge: Rs. 2---8--0 in
accordance with (a) class rate in the Schedule of Rates.
The Schedule of Rates mentioned in this
agreement presumably refers to scale of rates fixed by the resolution of the
Municipality. The conflicting arguments centre on the question whether the
words "current official scale of rates" in para. IV relate to the
scale of rates current on the date when the agreement was entered into 279 or
refer to the scale of rates current from time to time in accordance with the
resolution passed by the Municipality.
The expression "current" means
"vogue or prevalent"; and "current rate" may mean the rate
obtaining at a particular time or at a future time or from time to time. The
term goes well with the present, future and recurrent. It is capable of different
meanings depending upon the context or setting in which it appears. As the
meaning of the word is ambiguous, it is legitimate, in order to ascertain its
true meaning, not only to study the document as a whole but also to ascertain
its meaning from the circumstances where under the said agreement came into
existence. Under para. X of the agreement the said agreement shall be subject
to the provisions of the licensee and the provision of the Indian Electricity
Act, 1940, that is to say the said provisions are incorporated by reference
into this agreement. Under the licence the licensee is precluded from charging
rates higher than those prescribed there under. On April 1, 1940, the
Electricity Department of the Vijayawada Municipality prepared a document
styled as "Conditions and Rates of Supply". It does not contain any
statutory rules, but only administrative directions in regard to providing,
inter alia. for the method of entering into agreements and for charging rates
for the energy supplied. This embodies the administrative practice of the
Municipality in the matter of charging rates for the energy supplied. Paragraph
is thereof, under the heading "Method of charging for current".
"The price and method of charging for
current supplied shall be such as may from time to time be fixed by the
licensee in accordance with the provisions of the Act and of his licence, or
such as may be made subject of Special agreement between the consumers and the
licensee." This makes a distinction between the official rate and the
contractual rate. The official rate is that fixed by the licensee from time to
time and the contractual rate is that fixed by special agreement between the
parties. It may be assumed that this dual method is followed by the
Municipality in the matter of entering into agreements. The form of application
prescribed for the supply of electric energy contains the following clause:
"I agree to pay for the said' energy,
service connection and other dues including the deposit of such security as may
be demanded in accordance with the scale of rates and the rules of the
licence." The scale of rates in the context means the official scale of
rates that may be fixed by the Municipality. When an application is filed an
obligation is imposed trader s.22 of the Act on the licensee to supply energy,
except in so far as is otherwise provided by the terms and' conditions of the
licence, on the same terms as those on which any other person i.n the same area
is entitled in similar 280 circumstances to corresponding supply. Section 23 of
the Act says that a licensee shall not, in making any agreement for the supply
of energy, show undue preference to any person.
The combined operation of these provisions is
that the licensee cannot discriminate between the applicants in the matter,
among others, of rates chargeable for the energy supplied. Unless the
Municipality enters into an agreement with a consumer enabling it to charge him
at a rate fixed by it from time to time, it would be very difficult for the
Municipality to maintain equality of treatment between the consumers in the
matter of rates. To illustrate, if under certain agreement a rate obtaining at
a particular date is agreed upon and the rate is binding on the Municipality
even if it is raised later on, the Municipality may be guilty of discrimination
which it is asked to avoid by statute if it charges other consumers at a higher
rate. 'this difficulty can be avoided if there is a term in the agreement
executed by every consumer that he will pay the official rate fixed by the
Municipality from time to time subject to the maximum fixed by the licence.
That apart, a public body like the Municipality in supplying energy to
different consumers cannot run the risk of incurring loss by agreeing to fixed
rates, for the Government may increase the licence fee, as it has done in the
present case, or there may be a rise in the cost of distribution. On the other
hand, if the term in the agreement is flexible to meet the said' eventualities,
'the maintenance of continuous supply of electric energy may be assured without
any loss to the public body. The circumstances obtaining at the time when the
agreements between the consumers and the Municipality were entered into were
these: The licensee had power to fix the rates subject to the maximum
prescribed by the Government. The administrative directions provided for
charging for the current supplied at rates that may be fixed from time to time.
The Municipality was in practice fixing the rates from time to time having regard
to the relevant circumstances.
The said rates fixed by the Municipality from
time to time were the "Official Scale of Rates". The consumers
applied to the Municipality for supply of energy, agreeing to pay for the
energy supplied at the scale of rates fixed by the Municipality.
With this background if we look at paragraphs
IV and V of Ex.B-4 the meaning of the expression "current official scale
of rates" will be clear. Paragraph IV speaks of "current official
scale of rates" whereas para. V mentions "official scale of energy
rates". These two paragraphs bring out the distinction between the
official scale of rates and the official scale of energy rates: the former
refers to the scale of rates maintained by the Municipality as modified from
time to t;me by appropriate resolutions, and the latter refers to the different
rates payable in respect of energy supplied for different purposes. Under para.
IV the consumer specifically agreed to abide by the official scale of rates.
If the intention of the parties is that the
consumer shall pay only the scale of energy rates obtaining at the time the
agreement is entered into, there is no necessity for this 281 specific
agreement, for para. V serves that purpose. On the other hand, the said express
condition and the use of the word "current" make it clear that the
consumer agrees to pay at the official scale of rates current from time to
The adjective "current" will become
a surplusage, if the intention is to pay the rates obtaining at the time the
agreement is entered into, for the agreement itself gives the existing rates.
The use of the adjective "current" emphasizes the fact that the
official scale of rates is not the existing rates, but the scale of rates
current from time to time. We have. therefore, on a reasonable construction of
the ambiguous expression "current" having regard to the entire
document and the surrounding circumstances, come to the conclusion that the
words "current official scale of rates" in para. IV of the agreement
mean the official scale of rates current or prevalent from time to time during
the currency of the agreement. If so, it follows that the appellants were under
a contractual liability to pay the enhanced rates covered by the impugned
The next question turns upon s. 21(2) of the
Act, which, as it then stood read:
"Subject to the provisions of sub-
section (1), a licensee may, with the previous sanction of the State Government
given after consulting the local authority, make conditions not inconsistent
with this Act or with his licenee or with any rules made under this Act, to
regulate his .relations with persons who are or intend to become consumers, and
may with the like sanction given after the like consultation add to or alter or
amend any such conditions; and any conditions made by a licensee without such
sanction shall be null and void." Under this sub-section the licensee
cannot make conditions to regulate his relations with the consumers or amend
any such conditions without the sanction of the State Government. Mr.
Viswanatha Sastri argued that to enhance the rates was to alter a condition
within the meaning of sub-s. (2) of s. 21 of the Act and as admittedly the
sanction of the State Government was not obtained before such alteration, the
said resolution was void. The learned Solicitor General contended that s. 21
(2) of the Act was a general provision relating to conditions, whereas s. 23
thereof was a specific provision in regard to fixing of rates and that s. 23
would, therefore, prevail over s. 21 and that s. 23 did not prescribe the
sanction of the Government as a condition precedent for fixing the rates, Mr.
Tatachari, while supporting this argument, added that on the interpretation of
para. IV of the agreement suggested by the respondents there was no alteration
in the conditions at a11 and', therefore, there was no scope for invoking s. 21
of the Act. It is not necessary to express our opinion in this case on the
question whether s. 23 excludes the operation of s. 21(2) of the Act in the
matter of fixation of rates, for we are satisfied that there is no alteration
of any condition of 282 the agreement within the meaning of s. 21(2) thereof.
We have held that under para. IV of the agreement that was entered into between
the consumers and the licensee, the consumers agreed to pay the rates that were
fixed by the Municipality from time to time. If the said term was a condition
within the meaning of s. 21(2) of the Act, there was no change at all in that
condition, for the change in the rates was not in derogation of the condition
but in terms of it. To state it differently, the same condition embodied in
para. IV of the agreement continued to operate between the parties even after
the rates were enhanced under the impugned resolution. Therefore, no sanction of
the State Government was necessary for enhancing the rates.
No other point was raised before us. In the
result, the appeal fails and is dismissed with one set of costs.