Bisra Stone Lime Company Ltd. & ANR
Vs. Orissa State Electricity Board & ANR  INSC 266 (21 October 1975)
CITATION: 1976 AIR 127 1976 SCR (2) 307 1976
SCC (2) 167
CITATOR INFO :
F 1983 SC1296 (7,8) RF 1986 SC1126 (45) RF
1988 SC 985 (8) R 1988 SC1989 (22) R 1992 SC1264 (10)
Electricity (Supply) Act, 1948-S.
49-Surcharge on electricity-Whether Electricity Board could levy.
Dispute between parties referred to
arbitrator-If court could withdraw and deal with it.
Under cl. 13 of the agreement between the
parties the tariff and conditions of supply of electricity were subject to any
revision that may be made by the supplier from time to time. Clause 23 states
that any dispute or difference arising between the consumer and the supplier
shall be referred to an arbitrator. The respondent issued a press note deciding
to levy a surchage of 10 per cent on certain categories of customers, which
included the appellants. The appellants challenged the levy but the High Court
dismissed their writ petitions.
On appeal to this Court it was contended that
(1) the Board had no power under the Act to levy a surcharge, (2) cl. 13 of the
Agreement could not take in the levy of surcharge and as such it is not a
matter for reference to arbitration under cl. 23 of the agreement and (3) in
exempting certain categories and imposing surcharge upon the appellants the
Board was guilty of discrimination, which is impermissible under s. 49 of the
Act and cl. 2 of Schedule I to the Agreement.
Dismissing the appeals,
HELD: (1) Enhancement of the rates by way of
surcharge is well within the power of the Board to fix or revise the rates of
tariff under the provisions of the Act. The word "surcharge" is not
defined in the Act. Etymologically it stands for an additional or extra charge
or payment, and in the present case it is in substance an addition to the
stipulated rate of tariff. [311 A-B; 310H] (2) (i) It is only where there is
nothing in a special agreement with regard to revision of rates during the
subsistence of the agreement that the existence of the special agreements
prevents any increase of the rates stipulated in the special agreements by
adding the surcharge. In the present case cl. 13 of the agreement provides for
revision of rates and the surcharge is not absolutely different from rates of
tariff because the effect of the levy of surcharge would be to enhance the rate
of supply of electricity stipulated under the agreement. [312 A-B] M/s.
Titagarh Paper Mills Ltd. v. Orissa State Electricity Board and Another, 
2 S.C.C. 436, followed.
Indian Aluminium Company v. Kerala State
Electricity Board,  2 S.C.C. 414, explained.
Therefore, the matter in dispute is covered
by the arbitration clause of the Agreement. [313 B] (ii) Although the press
note did not recite any provision of the Act, mere omission to do so did not
disentitle the Board to rely upon clause 13 for a claim to revision of the
rates. [314 C] (iii) This is not a fit case for the Court in its discretion, to
withhold the matter from arbitration and itself deal with it merely because the
Court has discretion to do so under s. 34 of the Arbitration Act or under Art.
226 of the 308 Constitution and that the
Court is better posted to decide such questions. The arbitration clause is of
wide amplitude, taking in its sweep even interpretation of the agreement and
necessarily, therefore, of cl. 13. [314 F] (3) The totality of the provisions
under s. 49 does not give any scope for the plea of discrimination raised in
this case and in view of cl. 13 of the agreement itself. As regards the various
industries which have not been subjected to the charge, it is not known whether
there is a similar provision like cl. 13 in the agreements. [313 G-H] When the law
makes it obligatory for certain special agreements to continue in full force
during their currency stultifying the power of the Board to revise the rates
during the period, no ground of discrimination can be made out on the score of
exempting such industries as are governed by special agreements.
[314 B] M/s. Titagarh Paper Mills Ltd. v.
Orissa State Electricity Board and Another,  2 S.C.C. 436, applied.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 106 and 107 of 1975.
Appeals by Special Leave from the Judgment
and Order dated 18-10-74 of the Orissa High Court in O.J.C. Nos. 851 and 850 of
S. V. Gupte (In CA 107/75) and Vinoo Bhagat
for the Appellant.
G. Rath, Advocate General, and B.
Parthasarthi for Respondent No. 1 (In CA 106/75 and Respondent in CA 107/75).
The Judgment of the Court was delivered by
GOSWAMI, J. This judgment will govern both the above mentioned appeals.
We may take the facts briefly from Civil
Appeal No. 107 of 1975.
The Orissa Textile Mills Limited is a public
limited company (briefly the company) and is engaged in manufacture of textile
articles. It is located at Choudwar in the District of Cuttack (Orissa). On May
12, 1960, the company (described in the agreement as Consumer) entered into an
agreement with the State of Orissa (described in the agreement as the Supplier)
for supply of electric power. The contract was for a period of five years from
the date of supply of electric power, namely, February 1, 1963 and it was
thereafter to so continue unless and until the same was determined by either
party giving to the other six calendar months' notice in writing of the
intention to terminate the agreement. It is common ground that the agreement
has not been terminated.
It may be appropriate at this stage to refer
to a few clauses in the agreement. Clause 12 provides for charges to be paid by
the consumer as well as about maximum demand.
Clause 13 reads as follows:- "The tariff
and conditions of supply mentioned in this Agreement shall be subject to any
revision that may be made by the Supplier from time to time".
309 Clause 22 deals with extra charge
regarding domestic lighting, fans, domestic power and street lighting, etc. in
the colony of the Mills. Clause 23 reads as follows:- "Any dispute or difference
arising between the Consumer and the Supplier or their respective Electrical
Engineers as to the supply of electrical energy hereunder or the pressure
thereof or as to the interpretation of this Agreement or the right of the
Supplier or the consumer respectively to determine the same or any other
question, matter or thing arising hereunder shall be referred to a single
arbitrator who shall be mutually agreed upon by both parties. The arbitrator's
decision thereon shall be final and the provisions of the Arbitration Act of
1940 (X of 1940) or of any other statutory modification thereof for the time
being in force shall apply to any such reference".
On April 1, 1962, the Orissa State Electricty
Board (briefly the Board) was constituted by the State Government under section
5 of the Electricity (Supply) Act, 1948 (briefly the Act). Under section 60(1)
of the Act "all debts and obligations incurred, all contracts entered into
and all matters and things engaged to be done by, with or for the State Government
for any of the purposes of this Act before the first constitution of the Board
shall be deemed to have been incurred, entered into or engaged to be done by,
with or for the Board...." By this section, therefore, the Board assumed
all obligations of the State Government in respect of matters to which the Act
applied. It is common ground that the contract entered between the company and
the State Government is binding on both.
The Board decided to levy a surcharge of 10
per cent on the power tariff then in force with effect from July 1, 1972, and a
Press Note was issued accordingly. The material portion of the Press Note may
"The Orissa State Electricity Board has
decided to levy a general and uniform surcharge of 10 per cent on the power tariff
now in force except on the following categories of consumers who will pay the
existing tariff:- (1) Power Intensive Industries which are governed by Special
(2) Domestic power and lighting.
In respect of irrigation loads (pumping and
agriculture) the power tariff will be Re. 0.16p (sixteen paise) per unit (Kwh)
with a rebate of Re.
0.01p (one paise) per unit 'KwhP' for timely
The above levy of surcharge of 10 per cent is
also applicable to the power supply to the Hindustan Steel Ltd., Rourkela and
Kalinga Iron Works, Barbil.
310 The levy of 10 per cent surcharge will be
on demand charges, unit charges, maximum and minimum charges and reservation
* * * * The levy of surcharge and revised
tariff for irrigation loads has become necessary for improving the Board's
overall financial return and enabling it to undertake larger developmental
programmes like rural electrification.
* * * * It appears that the second purpose in
the above Press Note with reference to "larger developmental programmes
like rural electrification" was omitted by a revised Press Note.
The company unsuccessfully challenged the
levy of the surcharge by an application under article 226 of the Constitution
in the Orissa High Court. Several contentions were raised in the petition
before the High Court. The surcharge was, inter alia, challenged as being
violative of article 14 of the Constitution. This objection was repelled by the
High Court and the learned counsel appearing on behalf of the company was
unable to press the same before us in view of the Presidential suspension of
that article during the emergency.
Some other grounds, including that clause 13
is ultra vires the Act, were taken before the High Court but have not been
pressed before us.
Mr. Gupte, the learned counsel appearing on
behalf of the appellants, submits as follows:- (1) The Board has no power to
levy a surcharge under the provisions of the Act.
(2) Clause 13 of the agreement cannot take in
the levy of surcharge. It is, therefore, not a matter for reference to
arbitration under clause 23 of the agreement.
(3) Assuming it has power under the Act or
under clause 13 to levy a surcharge, the Board in exempting certain categories
and imposing surcharge upon the appellants is guilty of discrimination which is
impermissible under section 49 of the Act and clause (2) of Schedule I to the
With regard to his first contention Mr. Gupte
submits that surcharge is unknown to the provisions in the Act and the Board
has no power under the Act to levy a surcharge. It is not possible to accede to
the submission that the demand of surcharge cannot be included in the revision
of rates of tariff.
The word surcharge is not defined in the Act,
but etymologically, inter alia, surcharge stands for an additional or extra
charge or payment (see Shorter Oxford English Dictionary). Surcharge is thus a
311 superadded charge, a charge over and above the usual or current dues.
Although, therefore, in the present case it is in the form of a surcharge, it
is in substance an addition to the stipulated rates of tariff. The
nomenclature, therefore, does not alter the position. Enhancement of the rates
by way of surcharge is well within the power of the Board to fix or revise the
rates of tariff under the provisions of the Act. The first submission of
counsel is, therefore, of no avail.
Before we deal with the second submission of
counsel, we may refer to a recent decision of this Court in M/s Titagarh Paper
Mills Ltd. v. Orissa State Electricity Board and Another(1) (briefly the
Titagarh's case) to which one of us was a party. This Court following the
decision in the Indian Aluminium Company v. Kerala State Electricity Board(2)
with regard to the scope of sections 49 and 59 of the Act held in the
Titagarh's case (supra) as follows:- "....neither section 49 nor section
59 confers any authority on the Board to enhance the rates for supply of
electricity where they are fixed under a stipulation made in an agreement. The
Board has no authority under either of these two sections to override a
contractual stipulation and enhance unilaterally the rates for the supply of
It is clear from the above decision that an
agreement entered in exercise of the power conferred by the statute, such as
under section 49(3) of the Act, cannot be set at naught by unilateral exercise
of power by the Board under the Act to enhance the rates agreed upon between
the parties in the absence of any provision in that behalf in the agreement
itself. In the Indian Aluminium Company's case (supra) there was no provision
in the agreement with regard to the revision of tariff, such as we find in
clause 13 of the present agreement. This Court, therefore, had not to consider
in that case about the effect of a clause like clause 13. In the Titagarh's
case (supra), however, this Court had to take into consideration clause 13 of
the agreement therein which is the identical clause in the present case.
Sub-sections (1) and (2) of section 49
empower the Board to fix uniform rates of tariff. Sub-section (3) of section 49
on the other hand reserves to the Board the power of fixing different tariffs
having regard to certain factors mentioned therein. Section 49(3) contemplates
what are known as 'special agreements'. Power under section 49(1) and (2)
cannot be invoked during the subsistence of special agreements providing for
stipulation of rates of tariff in absence of any reservation therein. Exercise
of power under section 49(1) and (2) as also under section 59 will remain
suspended during the currency of the special agreements between the parties and
no unilateral enhancement of rates is permissible under law. There is only a
pro tempore ban on revision of rates during the subsistence of statutory
special agreements entered in conformity with section 49(3) of the Act.
312 Mr. Gupte, however, submits that since
there have been special agreements between the parties the stipulated rates
could not be increased by adding the surcharge in question.
This argument proceeds on a wrong assumption
that surcharge is absolutely different from rates of tariff. Besides the
submission fails to take count of clause 13 of the agreement with regard to
revision of rates. The ratio of the Indian Aluminium Company's case (supra)
will be available on all fours only where there is nothing in the special
agreement with regard to revision of rates during the subsistence of the
With regard to the second submission, which
overlaps to some extent with the first, Mr. Gupte points out that revision of
tariff under clause 13 cannot include levy of surcharge which is distinct from
tariff. He also draws our attention to the various clauses in the Press Note
where both the expressions 'surcharge and tariff' are freely used.
On the other hand, the learned Advocate General
submits that the import of surcharge depends upon the nature of the original
charge. If the surcharge is appended to a tariff it partakes of the character
When the Press Note introduces the surcharge
in addition to tariff rates, not much can be made of for use of the two words
separately. We have already noted the meaning of the word 'surcharge' while
dealing with the first submission of the learned counsel. We may only add that
this Court in Titagarh's case (supra) put the matter beyond controversy in the
following words:- "Now, the effect of the levy of coal surcharge would be
to enhance the rates for the supply of electricity stipulated under the
Besides in the Titagarh's case (supra) this
Court further observed as follows:- "Questions such as: whether the Board
has power under clause (13) of the agreement to levy any coal surcharge at all
when no such power was conferred on it by the Act, whether the action of the
Board in levying the coal surcharge on the appellant under clause (13) of the
agreement was arbitrary and unreasonable or whether it was based on extraneous
and irrelevant considerations and whether, on the facts and circumstances of
the case, the Board was justified under clause (13) of the agreement to levy
the coal surcharge on the appellant, are plainly questions arising under the
agreement and they are covered by the arbitration provision contained in clause
(23) of the agreement. All the contentions raised by the appellant against the
claim to justify the levy of the coal surcharge by reference to clause (13) of
the agreement would, therefore, seem to be covered by the arbitration agreement
and there is no reason why the appellant should not pursue the remedy of
arbitration which it has solemnly accepted under clause (23) of the agreement
and instead invoke the extraordinary 313 jurisdiction of the High Court under
Article 226 of the Constitution to determine questions which really form the
subject matter of the arbitration agreement." Although this Court was
dealing with the coal surcharge in the above decision, there is no distinction
in principle between the coal surcharge or a surcharge simpliciter and the
ratio of the above decision will be applicable in this case. The second
submission of the learned counsel, therefore, fails and the point is squarely
covered by the above decision. The matter is, therefore, covered by the
arbitration clause 23 of the agreement.
With regard to the last submission regarding
discrimination founded upon section 49 of the Act and clause (2) of the
Schedule I to the agreement, Mr. Gupte relied upon sub-section (4) of section
49 which provides that in fixing the tariff and terms and conditions for the
supply of electricity, the Board shall not show undue preference to any person.
He also draws our attention to clause (2) of the conditions of supply in the
First Schedule to the agreement to the effect that "the Department shall
not be entitled to discriminate between different consumers in fixing the
charges for the supply of energy". The agreement is entered under the
provisions of section 49(3) of the Act. If we read section 49 as a whole we
find that under sub-section (1) of that section, the Board in supplying
electricity to any person not being a licensee "may for the purposes of such
supply frame uniform tariffs". However, under sub-section (2) of that
section in fixing the uniform tariffs the Board shall have regard to the
various factors under four heads (a), (b), (c) and (d). Then comes sub-section
(3) which preserves the power of the Board, "if it considers it necessary
or expedient to fix different tariffs for the supply of electricity to any
person not being a licensee having regard to the geographical position of any
area, the nature of the supply and purpose for which supply is required and any
other relevant factors".
Mr. Gupte submits that there is no reason why
the power-intensive industries, which are governed by special agreements,
should have been exempted from the levy of surcharge in the Press Note. He
further points out that there are eight industries referred to in paragraph 20
of the Special Leave Petition which have not been subjected to the aforesaid 10
per cent surcharge even though the rates of electricity charged per unit in
their case are less than those of the Orissa Textile Mills.
It is enough to point out that the industries
referred to in the Special Leave Petition were covered by special agreements
and we are not even told whether these special agreements had a similar clause
like clause 13 in the present case. This Court has held that special agreements
entered under section 49(3) cannot be given a go-by while exercising the power
of revision of rates under section 49 read with section 59. That being the
position, the objection on the score of discrimination loses all importance.
The totality of the provisions under section 49 does not give any scope for the
plea of discrimination raised in this case and in view of clause 13 in the
314 We can appreciate the handicap of counsel
in advancing his arguments under the head of discrimination having lost the
protective amulet of article 14 of the Constitution under the Presidential
embargo during the emergency. A plea of discrimination which is available when
article 14 is in free play is not at par with the interdict of 'undue favour'
under section 49 of the Act. Apart from this, when law makes it obligatory for
certain special agreements to continue in full force during their currency
stultifying the power of the Board to revise the rates during the period, no
ground of discrimination can be made out on the score of exempting such
industries as are governed by special agreements.
Although the Press Note in the instant case
did not recite any provisions of the Act under which the same was issued, mere
omission to do so does not disentitle the Board to reply upon clause 13 of the
agreement for a claim to revision of the rates, although in the form of a
surcharge in this case. We, therefore, do not give any significance to the
omission in the Press Note to refer to clause 13 or to any other provision of
the Act. The matter is, therefore, covered by the arbitration clause 23 of the
agreement. It is not for this Court to speculate what answers the Arbitrator
will enter with regard to the disputed questions that may be raised before him.
We are not to be understood as expressing any opinion on the merits of the
dispute or difference between the parties with regard to the surcharge.
It is then submitted that this Court should
not use its discretion in favour of arbitration in a matter where it is a pure
question of law as to the power of the Board to levy a surcharge. This
submission would have great force if the sole question involved were the scope
and ambit of the power of the Board under sections 49 and 59 of the Act to levy
a surcharge, as it was sought to be initially argued. The question in that
event may not have been within the content of clause 23 of the agreement. But
all questions of law, one of which may be interpretation of the agreement, need
not necessarily be withdrawn from the domestic forum because the court has
discretion under section 34 of the Arbitration Act or under article 226 of the
Constitution and that the court is better posted to decide such questions. The
arbitration clause 23 is a clause of wide amplitude taking in its sweep even
interpretation of the agreement and necessarily, therefore, of clause 13
therein. We are, therefore, unable to accede to the submission that we should
exercise our discretion to withhold the matter from arbitration and deal with
We, therefore, find no justification in
interfering with the conclusion of the High Court in dismising the writ
application. In the result the appeals fail and are dismissed. We will,
however, make no order as to costs.
P.B.R. Appeals dismissed.