Delhi Cloth & General Mills
Company Ltd. & ANR Vs. Rajasthan State Electricity Board & ANR [1986] INSC
35 (12 March 1986)
SEN, A.P. (J) SEN, A.P. (J) MADON, D.P.
CITATION: 1986 AIR 1126 1986 SCR (1) 633 1986
SCC (3) 431 1986 SCALE (1)416
CITATOR INFO:
RF 1986 SC1999 (6) RF 1988 SC1989 (9) RF 1992
SC2169 (12)
ACT:
Electricity Supply Act, 1948 - SS. 49A and
49B (as introduced by Electricity (supply) (Rajasthan Amendment) Act, 1976) -
Scope of - Electricity Board - Power of - To frame uniform tariffs unilaterally
- Raise demands for payment of difference between uniform tariffs plus
surcharge and agreed tariffs with retrospective effect - Whether permissible -
Whether s.49 of the Act is violative of Arts.
14, 19(1)(f) & (g) and 31 (2) of the
Constitution - Whether doctrine of Promissory estoppel attracted.
Words and Phrases - 'Escalation clause',
'Review', and 'Surcharge' - Meaning of.
HEADNOTE:
By an agreement dated July 28, 1961, the
Respondent- State Electricity Board agreed to supply the appellants with bulk
electrical energy for their power oriented industry at a concessional rate for
a period of 20 years. Under cl. 18 of the agreement, it was provided that the
rate of supply was reviewable by the Board every five years after January,
1971, and the revision of rate was to be effected if to rise in the cost of
generation out of the total cost varied by 25% or more from the cost last
fixed. It was further envisaged by cl.34(b) that the mutual rights and
obligations of the parties would be subject to alteration by further
legislation relating to supply and consumption of electricity enacted during
the period of the agreement. The Board commenced supplying electrical energy to
the appellants with effect from March 1, 1963. The Board issued various notifications
from time to time bringing into effect the revised tariffs for the supply of
electricity to its different classes of consumers at different rates. By
Notification dated July 26, 1966, the Board imposed general surcharge on the
appellants at the rate of 15% on the normal tariff.
634 The appellants filed a petition under
Article 226 challenging the power of the Board to levy the general sur- charge
of 15%. The High Court allowed the petition and held that the levy of general
surcharge of 15% on the appellants was ultra vires the Board insofar as the
appellants were concerned because the parties having entered into a statutory
agreement dated July 28, 1961, there was a fetter created on the power of the
Board to unilaterally increase the tariff under s. 49 of the Electricity
(Supply) Act, 1948 and there-fore the appellants could not be subjected to
payment of the general surcharge of 15%. The Board preferred an appeal against
the judgment of the Single Judge.
From January 1, 1971, the Board intimated its
intention to the appellants to revise the concessional rate of supply and
charge them the uniform rate of tariff under Schedule HS/LP/HT-1 as applicable
to all large industrial consumers and the general surcharge of 15% thereon in
exercise of its powers under cl. 18 of the agreement. Accordingly, the Board by
its letter dated February 1, 1971 forwarded a bill for the billing month
January 1971, raising a demand on that basis.
The appellants thereupon filed a writ
petition under Article 226. A Single Judge of the High Court quashed the
impugned bill and held: (i) that the Board was entitled under the first part of
cl.18 to review the rate of supply 'every fifth year starting from the first
date of supply', but in view of the restrictive clause contained in the second
part of cl.18 it was impermisible for the Board to make any such upward
revision in the rate of supply till January 1, 1971; (ii) that in the
circumstances it can be inferred that the rise in the cost of generation was at
least 25% and accordingly the Board was entitled to revise the rate of supply
by 25% and (iii) that if the Board claimed a further rise, it would have to
establish that the rise in the cost of generation was more than 25% and it had
to for that purposes get the percentage in the cost of generation determined
either by mutual dialogue or by reference to arbitration.
During the pendency of the appeals preferred
both by the appellants and the Board, on February 7, 1976 the Governor of
Rajasthan promulgated the Electricity (supply) (Rajasthan Amendment) Ordinance,
1976, by which new sections 49-A and 635 49-B were introduced into the Act with
retrospective effect to overcome the difficulty created by the judgment of the
High Court in this case, and more particularly by the judgment of this court in
Indian Aluminium Co. v. Kerala State Electricity Board, [1976] 1 S.C.R. 70. By
the use of a non obstante clause in sub-s.(1) of s. 49A the Legislature made it
lawful for the Board to revise, from time to time, the tariffs fixed for the
supply of electricity to persons other than licensees and to frame uniform
tariffs for the purpose of such supply. Sub-s.(2) thereof provided that in
revising or framing tariffs under sub-s.(1), the Board shall be guided by the
principles set out in s. 59 and as respects any period commencing on and from
September 16, 1966 i.e.
the date on which the new s. 49 of the Act
was brought into force, by the provisions laid down in sub-ss. (2), (3) and (4)
of s. 49-A notwithstanding anything contained in the Act or in any agreement,
undertaking, commitment or concession made before the first day of April, 1964
i.e. the date when the uniform tariffs were first framed by the Board. Sub-
s.(3) of s. 49A provided that all such agreements, undertakings, commitments or
concessions as are referred to in sub-s.(1), shall, insofar as they are
inconsistent with the provisions of sub-ss.(1) and (2) and to the extent of the
tariffs fixed or provisions made therein for such fixation, be void and shall
be deemed always to have been void. Section 49A (3) thus had the effect of
nullifying the agreement entered into by the appellants with the Board under
s.49 for supply of electricity at concessional rate.
Similarly by use of a non obstante clause, s.
49B provided that any amount realised or demand made or created by the Board or
the Government, etc. according to the uniform tariffs in force from time to
time or against any person claiming any special tariffs under any such
agreement, undertaking or concession made before February 7, 1976, the date of
promulgation of the Ordinance, shall be deemed to have been validly realised,
made or created under the Act as amended by the Ordinance.
Immediately thereafter on March 12, 1976, the
Board furnished the appellants with a bill for the billing month of February
1976 at uniform rate, under Schedule LP/HT-1 framed by the Board's tariff
Notification dated May 28, 1974 together with the general surcharge of 15%.
The appellants, therefore, filed petition
under Art.
226 636 challenging the constitutional
validity of ss. 49A and 49B of the Act, as introduced by the Amending Ordinance
as also the impugned bill sent by the Board for the billing month of February,
1976.
On November 4, 1976 the Board issued another
Notification under s.49(1) framing revised uniform tariffs to be applicable for
the billing month of December, 1976.
But unlike the earlier notifications, this
notification did not contain any exclusionary clause granting exemption for
specially negotiated loads. On November 3, 1977 the Board furnished another
bill to the appellants claiming arrears amounting to Rs. 5.57 crores on account
of the difference between the normal rate of tariff and the agreed rate for the
supply of electrical energy for the period from January 1, 1971 to January 31,
1976.
The appellants filed another petition under
Article 226 questioning their liability to pay the said amount.
The High Court upheld the constitutional
validity of ss. 49A and 49B of the Act as introduced by the Electricity
(Supply) (Rajasthan Amendment) Act, 1976 and also the right of the Board to
revise the rate of supply as agreed upon for the period commencing from January
1, 1971 onwards and enforce a demand for payment of the difference between the
uniform tariffs as fixed from time to time and the agreed rate.
In the appeals to the Court, the questions
for consideration were : (i) Interpretation of the terms of agreement between
the parties dated July 28, 1961, particularly cl. 18 and 34(b) thereof; (ii)
Interpretation of ss. 49A and 49B of the Act; and (iii) whether the demands
raised by the Board for payment of the difference by the impugned bills dated
February 1, 1971 and March 12, 1976 which involved the imposition of a
liability on the appellants by the retrospective conferment of a prospective
power under s.49A and the validation of such power under s.49B was wholly
arbitrary and irrational, confiscatory in nature and amounted to deprivation of
property without payment of compensation and was thus violative of Arts. 14,
19(1)(f) and (g) and 31(2) of the Constitution.
637 On behalf of the appellants it was
contended : (i) that cl.18 was an escalation clause and therefore the Board was
not entitled to unilaterally frame uniform tariffs as due and payable by the
appellants but the rate of increase must be in proportion to, or correlated
with, the actual rise in the cost of generation; (ii) that the stipulation in
cl.34(b) cannot be regarded as a contractual stipulation at all and that in no
case cl.34(b) can possibly be made applicable to any purported alteration of
contracting parties' right for a past period by means of retrospective
legislation; all that the parties contemplated was that the mutual rights and
obligations would be subject to future legislations on supply and consumption
of electricity but such legislations necessarily had to be valid legislations
and if cl.34(b) was to be treated as a contractual stipulation providing that
the rights stipulated in the agreement were subject to any modification by any
legislation, valid or invalid, cl.34(b) will have to be struck down as a
totally uncertain clause which cannot find place in any contract; (iii) that
while the concessions stipulated by the agreement under s.49(1) could have been
altered in proportion to the rise in the cost of generation, such concession
could not have been altogether eliminated as that would amount to a total
disregard of the guiding principles contained in section 49(3) and thus
contrary to the mandate of s.49(2) of the Act; (iv) that ss.49A and 49B were
integrally connected and were intended and meant to achieve a joint purpose
which was merely to validate such of the past actions of the Board as would
have been valid if s.49A had already been in force at the relevant time and the
demand to be validated had to be raised prior to February 7, 1976 and not on a
date subsequent thereto; since the bill dated March 12, 1976 was subsequent to
the date of promulgation of the Ordinance, the same was not validated under
s.49B; it was not open to the Board to make a demand from the appellants for
payment of charges for the period commencing from June 1, 1974 and ending with
February 6, 1976 according to the uniform tariff of 1974; and (v) that the demand
raised by the Board against the appellants for payment of the difference
between the uniform tariffs and the agreed rate for the period subsequent to
January 1, 1971 was violative of Arts. 14, 19(1)(f) and (g), and 31(2) of the
Constitution.
On behalf of the Respondent-Board it was
contended: (i) that cl. 18 is not an escalation clause; (ii) that cl.34(b) 638
makes the contract subject to any legislation; that the rights which the
parties derived under the agreement for supply of electricity at a concessional
rate under s.49 of the Act was defeasible; and that being so, ss.49A and 49B
had to be read into the contract and therefore became a contractual term; that
the appellants derived a right to get electricity at a concessional rate only
for a limited period till January 1, 1971 and thereafter the Board derived the
power to revise the rate of supply under cl.18 and it was, therefore competent
for the Legislature to enact a law providing for application of uniform tariffs
notwithstanding any such commitment, undertaking or concession to the contrary
made during any period prior to April 1, 1964.
^
HELD : 1. By virtue of ss. 49A and 49B of the
Electricity (Supply) Act, 1948 as introduced by the Electricity (Supply)
(Rajasthan Amendment) Act, 1976, it was lawful for the Respondent-Board to
revise the special rate of tariff agreed upon and to raise a demand against the
appellants by its letter dated February 1, 1971 for payment of the difference
between the uniform tariff under Schedule HS/LP/HT-I applicable to all large
industrial consumers under the Board's tariff notification dated April 26, 1969
and the concessional rate in terms of cl.18 of the agreement between the
parties dated July 28, 1961 for the period from January 1, 1971 upto February
6, 1976, i.e. the date of promulgation of the Electricity (Supply) (Rajasthan
Amendment) Ordinance, 1976, as also the general surcharge of 15% thereon levied
by the Board by its tariff notification dated April 26, 1969 as from September
16, 1966 onwards.
[689 C-E]
2. The Board's letter dated March 12, 1976
being subsequent to the date of promulgation of the ordinance the demand raised
by the Board for payment of the revised uniform tariff under Schedule LP/HT-I
applicable to all such large industrial consumers under the Board's tariff
notification dated May 28, 1974 purporting to act under ss.
49A and 49B of the Act read with cl.18 of the
agreement, was not validated by s.49B and, therefore, the Board was only
entitled to recover uniform tariff at the same rate i.e.
under Schedule HS/LP/HT-1 of 1969 for the
period from July 1, 1974 to February 6, 1976, that is, prior to the
promulgation of the Ordinance. [689 E-G] 639
3. The Board was entitled by the terms of
s.49A to raise a demand for payment of the revised uniform tariff under
Schedule LP/HT-I of 1974 w.e.f. February 7, 1976 and thereafter as per the
revised uniform tariffs framed from time to time as applicable to all large
industrial consumers in terms of c1.18 of the agreement. [689 G-H; 690 A]
4. An "escalation clause" according
to its accepted legal connotation means a clause which takes care of the rise
and fall of prices in the market, whereas the right to review confers the power
to revise the rate of supply. [666 D-E]
5. The word 'review' in c1.18 necessarily
implies the power of the Board to have a second look and to so adjust from time
to time its charges as to carry on its operations under the Act without
sustaining a loss. The parties clearly contemplated by c1.18 for a fresh
revision of the rate once in a block of five years. The only fetter on the
power of the review is that contained in the proviso to c1.18, according to
which power of review shall be exercisable if the component of cost of
generation out of the total cost varies by 25% or more and that such power
shall not be exercisable by the Board till January 1, 1971. Therefore, c1.18
cannot be regarded to be an escalation clause. [666 F- H] Butterworths'
Encyclopadeia of Forms and Precedents, 4th Edn., Vol.3, p.148; Hudson's
Building and Engineering Contracts, 10th Edn., Keating's Buiding Contracts, 4th
Edn., p.498;
Black's Law Dictionary, 4th Edn., p.639;
American Jurisprudence, 2nd Edn., Vol.17, p.786 and Corpus Juris Secundum,
Vol.17, p.806, referred to.
6. The true object and purpose of the
enactment should not be ignored and due effect should be given to the
provisions of ss.49A and 49B of the Act with a retrospective effect which
clothed the Board with power to make the uniform tariffs applicable to bulk
consumers like the appellants who under agreements entered into with the Board
on July 28, 1961, that is, before April 1, 1964, the cut-out date mentioned in
sub-s.(1) of s.49A had been, to the great financial detriment of the Board,
enjoying a concessional rate of supply which had no relation to the existing
cost of generation, with the 640 result that the burden of this cost had to be
passed over to other consumers. As is clear from the Statement of Objects and
Reasons of the Bill, the Legislature thought it expedient to amend the Act so
as to cover the rising cost of generation from time to time, notwithstanding
any special contract, undertaking or concession to the contrary. The
legislative mandate contained in ss.49A and 49B of the Act as introduced by the
Rajasthan Electricity (Supply) Amendment Act, 1976, sub serves the public
interest to ensure that the Board shall not, as far as practicable, after
taking credit for any subvention from the State Government under s.63, carry on
its operations under the Act at a loss.
[672 A-E]
7.1 It is not uncommon for statutory
contracts to contain a term like c1.34(b) which makes the contract subject to
future legislation. Such a clause can usually be found in forest or excise
contracts relating to the grant of a privilege which subjects the mutual rights
and obligations flowing from such a contract to be liable to be altered or
modified by subsequent legislations. [669 A-B]
7.2 In the instant case, the rights which the
appellants derived under the agreement for supply of electricity at a
concessional rate under s.49 was defeasible inasmuch as on a fair construction
of the terms of c1.34(b) taken in conjunction with the conduct of the parties,
it is clear that the parties had contemplated that the mutual rights and
obligations under the contract would be subject to alteration by future
legislation. That being so, ss.49A and 49B have to be read into the contract
and these provisions by virtue of c1.34(b) became a contractual stipulation.
[668 E-F; 670 H; 671 A-B]
8. The State Legislature under Entry 38 of
the Concurrent List was competent to enact the Rajasthan Electricity (Supply)
Amendment Act, 1976 and introduced the impugned ss.49A and 49B with
retrospective effect to overcome the difficulty created by the decision of this
Court in Indian Aluminium Company's case (Supra). There being a change in the
law brought about by the introduction of ss.49A and 49B of the Amending Act,
the Court is bound to give effect to these provisions notwithstanding anything
contained in the Act or in any agreement, undertaking, commitment or concession
to the contrary made by the Board before the first day of April, 641 1964, or
the decision of this Court in Indian Aluminium Company's case (supra). [673 D-D]
Indian Aluminium Company v. Kerala State Electricity Board, [1976] 1 S.C.R. 70
referred to.
9. A combined reading of the provisions
contained in ss.49A and 49B shows that the Board is relieved of the shackles of
the contractual obligations flowing from the agreements relatable to s.49(3),
and the Board is empowered in terms of s.49A to revise the tariffs or frame
uniform tariffs with respect to consumers enjoying special benefits as from
September 16, 1966. However, the Board could not on the strength of s.49A alone
recover the difference between the uniform tariffs fixed from time to time and
the agreed rate of supply from the appellants for the period from January 1,
1971 to February 6, 1976 without the aid of s.49B. [677 F-H; 678 A]
10. Section 49B on its terms has no
application unless there was a demand raised or created prior to February 7,
1976, the date of promulgation of the ordinance. There is, therefore,
insuperable barrier in applying the uniform tariff under Schedule LP/HT-I
framed by the Board's tariff notification dated May 28, 1974 from the billing
month of July 1974 i.e. from June 1, 1974 to February 6, 1976. The Board never
intimated the appellants that they would have to pay charges for the supply of
electricity to them at that rate. Therefore, the appellants would be liable for
that period to pay charges at the uniform tariff as per Schedule HS/LP/HT-I
framed by Board's tariff notification dated April 26, 1969. [678 A-D] 11. The
word "surcharge" is not defined in the Act.
Plainly, it means an additional or extra
charge of payment.
A surcharge is in substance an addition to
the stipulated rates of tariff. The general surcharge of 15% as also that the
uniform tariff were part of the general burden borne by all consumers alike.
Whatever may have been the position under the old s.49, the new section as
substituted by the Amendment Act 30 of 1976, makes it plain that the Board can
fix uniform tariffs. The power to fix uniform tariffs must necessarily include
power to make uniform increase in tariffs. Section 49A had the effect of
removing the Board from the shackles of the agreement to supply electricity as
a concessional rate entered 642 into under s.49. The effect of the non/obstante
clause in sub-s.(1) of s.49A was to nullify the agreement. [678 E-F;
679 G-H; 680 A-B] Bisra Stone Lime Co. Ltd.
v. Orissa State Electricity Board, [1976] 2 S.C.R. 307; and Shorter Oxford
English Dictionary, p. 2199 relied upon.
Indian Aluminium Co. v. Kerala State
Electricity Board, [1976] 1 S.C.R. 70; and Titagarh Papers Mills Ltd. v. Orissa
State Electricity Board & Anr., [1975] 2 S.C.R. 436 referred to.
12. Where a law does not, in reality, affect
a transfer of ownership or possession, Art. 31(2) cannot be attracted.
In order to constitute acquisition within the
meaning of Art. 31(2), there must be transfer of ownership of property to the
State or to a Corporation owned or controlled by the State. [683 F-G]
13. Unless the taking of property had taken
place in either of the two way i.e. "acquisition or requisitioning",
there was no obligation to pay compensation under the Constitution. The
extinction of the right of the appellants under the contract with the Board to
get electric supply at a concessional rate under cl.18 of the agreement for the
period after January 1, 1971 when revision of tariff was due under cl. 18
thereof, had not amounted to acquisition of property under Art. 31(2). Further,
there was no question of any transfer of money representing any debt owned by
the Board from the appellants which stood extinguished by reason of ss.49A and
49B of the Act. All that the appellants had under their contracts with the
Board was a defeasible right by reason of cl. 34(b) of the agreement. The
appellants had contracted themselves by cl. 34(b) to be subject to any
subsequent legislation, and s. 49A of the Act struck at the agreement. It is an
enabling provision and empowers the Board to revise the tariffs for supply of
electricity to a class of consumers enjoying special benefit under agreement
entered into under s. 49(3). The Board was competent to review the tariff in
terms of cl. 18 of the agreement as from January 1, 1971. Section 49A liberates
the Board from the constraints of the agreed rate under the agreement entered
into by the Board with the appellants under s.49 of the Act and empowers the
643 raising of demand according to the uniform tariffs. Here, there was no debt
due or owing to the State or a Corporation owned or controlled by the State.
Article 31(2) was thus not attracted. [683 G-H; 684 A-B; 683 C-F]
14. The concept of "property" in
Art. 31 is not a narrow concept and is used in a comprehensive sense. Any legal
right which can be enforced through a Court is a right in the nature of
property within the meaning of Art. 31.
[682 G-H; 683 A] Indian Aluminium Co. v.
Kerala State Electricity Board, [1976] 1 S.C.R. 70; Madan Mohan Pathak v. Union
of India, [1978] 3 S.C.R. 334; H.H. Maharajadhiraja Madhav Rao Jiwaji Rao
Scindia Bahadur v. Union of India, [1971] 3 S.C.R. 9;
and State of M.P. v. Rajojirao Shindi, [1968]
3 S.C.R. 489 distinguished.
15. The contention based on Art. 19(1)(f) and
(g) cannot prevail. The present case concerns only with sale of goods i.e.
electricity and price to be paid therefor, for "tariff" is nothing
but the price. The contract itself provided for revision of the rate under
c1.18 of the agreement after January 1, 1971. The Board was within its powers
in applying the uniform tariffs to the appellants after the period stipulated
for had expired. There was nothing unreasonable for the Board to have enforced
the uniform tariffs as against the appellants as from January 1, 1971.
Reasonableness of the increase in tariff is established by the fact that the
Board was not bound to supply electricity to the appellants at a concessional
rate by incurring operational losses beyond that date. [687 D-F]
16. The appellants have not shown nor
produced any material to show that they have suffered any loss on account of
the increase in tariff. There is nothing to show that the appellants had not
the capacity to bear the burden of uniform tariffs. It cannot be said that the
impugned demand made by the Board as against the appellants were confiscatory
in nature. When all the large industrial undertakings including the public
sector undertakings of the Government of India and the State Government were
paying for the supply of electricity at uniform tariffs fixed from time to
time, the appellants had no right to claim immunity. [687 F; 688 D-E] 644
17. It is evident that the cost of generation
in the grid was far higher than the concessional rate at which the appellants
were getting the supply. As a result the Board was incurring very heavy losses
on account of this low rate for a large bulk consumption. It would have been
unreasonable for the Board not to have applied the uniform tariffs to the
appellants as from January 1, 1971 when the Board derived the power to revise
the rate under c1.18 of the agreement. The component of cost of generation
worked out by the Board shows that the appellants were getting their
electricity free of all charge. Even the uniform tariff under HS/LP/HT-I was
very much less than the price at which the Board was getting its supply.
Therefore, there was no reason why the appellants should not be treated alike
wit all other large industrial undertakings which were all subjected to payment
of uniform tariffs fixed from time to time. The contention based on Art.14
must, therefore fail.
[686 D-F; H; 687 A-C]
18. There was no question of any estoppel
against the Board inasmuch as the appellants did not open their PVC plant on
account of any assurance or promise by the Board.
The appellants approached the Board for
supply of high tension ower for their industrial complex and the Board complied
with the request. Even otherwise, the appellants have not made out that but for
the statutory contract for supply of electricity at a concessional rate under
s.49 they would not have established their industry. There were number of
incentives offered by the State Government to enterpreneurs to set up their
industries in the State. The Board is not the Government and the appellants
cannot rely on promissory estoppel for the incentive offered by the Government.
[688 F-H; 689 A-B]
19. All the appeals, except CA. No. 2675/80
are dismissed. Civil Appeal No. 2675/80 arising out of the judgment and order
of the Division Bench of the High Court dated September 12, 1980 dismissing
S.B. Writ Petition No.
8579/80 filed by the appellants challenging
the validity of the bill dated March 12, 1976, for payment of Rs. 21,35,
506.70p. for the billing month of February 1976, is partly allowed to the
extent that the said bill is quashed with the declaration that the Respondent
Board is empowered in terms of s.49A of the Electricity (Supply) Act, 1948 as
introduced by the Electricity (Supply) (Rajasthan Amendment) Act, 1976 to 645
raise a fresh demand for payment under Schedule HS/LP/HT-1 of 1969 for the
period from July 1, 1974 to February 6, 1976 and further that the Board is
entitled to recover from the appellants charges under Schedule LP/HT/1 of 1974
as from February 6, 1976 and thereafter as per the revised uniform tariffs,
framed from time to time as applicable to all large industrial consumers
together with general surcharge of 15% thereon in terms of c1. 18 of the
agreement. [690 E-H; 691 A-B]
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos.
2675- 2679 of 1980.
From the Judgment and Order dated 12th
September, 1980 of the Rajasthan High Court in Writ Petitions Nos. 628/76,
525/77, 114, 121 and 152 of 1973.
Shanti Bhushan and P.H. Parekh for the
Appellants.
Dr. Y.S. Chitale, S.N. Kakkar, V.M. Tarkunde,
B.D. Sharma, Sushil Kumar Jain, Sudhanshu Atreye, Badri Das Sharma, R.K. Mehta
and H.P. Gupta for the Respondents.
The Judgment of the Court was delivered by
SEN, J. These five consolidated appeals by special leave from the common
judgment and orders of a Division Bench of the Rajasthan High Court dated
September 12, 1980 raise questions of far-reaching importance. By the judgment
under appeal, the Division Bench has upheld the constitutional validity of ss.
49A and 49B of the Electricity (Supply) Act, 1948, as introduced by the
Electricity (Supply) (Rajasthan Amendment) Act, 1976, with retrospective
effect, making it lawful for the Rajasthan State Electricity Board to revise
from time to time the tariffs fixed for the supply of electricity in respect of
any period commencing from September 16, 1966 i.e. the date of introduction of
the new s. 49 by the Electricity (Supply) (Amendment) Act, 1966, and for the
validation of amount realized, demand made or created by the Board according to
the uniform tariffs in force from time to time before the publication in the
official Gazette of the Electricity (Supply) (Rajasthan Amendment) Ordinance,
1976, i.e. prior to February 7, 1976, the date of promulgation of the
Ordinance.
646 Upon that view, the Division Bench has
reversed the judgment and order of Tyagi, J. dated October 17, 1969 and upheld
the impugned notification dated July 26, 1966 issued by the Board for the levy
of a general surcharge of 15% of the normal tariff as also the judgment and
order of J.P.
Jain, J. dated April 13, 1973 holding that
the Board was entitled to recover from the appellants the difference between
the normal rate of tariff and the special rate of tariff agreed upon between
the parties in terms of a statutory agreement dated July 28, 1961 under s.49 of
the Act as it then stood, by virtue of ss. 49A and 49B of the Act read with
cl.18 of the agreement as from January 1971 onwards for the supply of
electrical energy to the appellants for the electro-chemical, electro-thermal
and poli-vinyl chloride industry known as Messrs Shriram Vinyl & Chemical
Industries, Kota, formerly known as Rajasthan Vinyl & Chemical Industries,
and to levy the general surcharge of 15% thereon contrary to the terms and
conditions of the aforesaid agreement for the supply of such electrical energy
to the appellants at a concessional rate for a periot of 20 years. Pursuant
thereto, the Division Bench has upheld the demand raised by the Board by its
letter dated February 1, 1971 for payment of Rs.11,67,959.95p. for the billing month
January 1971 onwards at normal tariffs together with general surcharge of 15%
thereon under Schedule HS/LP/HT-1, applicable to all large industrial consumers
under the Board's tariff notification dated April 26, 1969, under c1.18 of the
agreement i.e. prior to the promulgation of the Ordinance. It has also upheld
the demand raised by the Board's letter dated March 12, 1976 for payment of
Rs.21,35,506.72p. for the billing month February 1976 at normal tariff plus the
general surcharge of 15% thereon under Schedule LP/HT-1 applicable to all large
industrial consumers under the Board's tariff notification dated May 28, 1974
purporting to act under ss. 49A and 49B of the Act read with c1.18 of the
agreement for the period subsequent to the promulgation of the Ordinance.
The principal question in controversy is
whether ss. 49A and 49B of the Act were integrally connected with each other;
and if so, the retrospective conferment of a prospective power validated any
amount realized, or demand made or created by the Board, according to the
uniform tariffs from time to time, 647 from or against any person claiming any
special tariffs under any agreement, undertaking, commitment or concessions
made, before the first day of April 1964 i.e. the date when the uniform tariffs
were first framed by the Board at different rates for different clasess of
consumers by its notification dated March 18, 1964, notwithstanding anything
contained in the Act or in any such agreement, undertaking, commitment or
concessions so made. This question turns on a construction of the provisions
contained in ss. 49A and 49B of the Act, the constitutionality of which has not
been challenged before us.
Sub-s. (1) of s. 49A of the Act by the use of
a non-obstante clause has the effect of nullifying all such agreements,
undertakings or commitments made before the first day of April 1964 by the
Board or the Government of Rajasthan or the Government of any covenanting State
of Rajasthan or in any judgment and order of any court, and provides that it
shall be lawful for the Board to revise, from time to time, the tariffs fixed
for the supply of electricity to persons other than licensees and to frame
uniform tariffs for the purpose of such supply in respect of any period
commencing on and from September 16, 1966, the date when new s. 49 had come in
force. Sub- s.(2) thereof provides that in revising the tariffs or framing
uniform tariffs under sub-s.(1), the Board shall be guided by the principles
set out in s.59 and as respects any period commencing on and from September 16,
1966 i.e. after the introduction of the new s. 49 of the Act, by the principles
laid down in sub-ss. (2), (3) and (4) of s. 49. Sub- s. (3) of s. 49A provides
that all such agreements, undertaking, commitment or concessions as are
referred to in sub-s.(1), shall, insofar as they are inconsistent with the
provisions of sub-ss.(1) and (2) and to the extent of the tariffs fixed or
provisions made therein for such fixation, be void and shall be deemed always
to have been void. One of the crucial questions is whether the demand to be
validated in terms of s. 49B of the Act, had to be raised prior to February 7,
1976 and not on a date subsequent thereto and therefore the appellants were
liable to pay the revised uniform tariff under Schedule LP/HT-1 of the Board's
tariff notification dated May 28, 1974 w.e.f. July 1, 1974. The contention on
behalf of the appellants is that s. 49B of the Act in terms does not have the
effect of validating the demand raised by the Board by its letter dated March
12, 1976 for payment of charges for the 648 supply of electrical energy to them
at uniform tariff framed by the aforesaid Board's notification dated May 28,
1974, such a demand having been made after the promulgation of the Ordinance
i.e. after February 7, 1976; and if that be so, whether the Board was only
entitled to recover from the appellants uniform tariff under Schedule
HS/LP/HT-1 framed by the Board's tariff notification dated April 26, 1969 as
from January 1971 onwards. Various subsidiary questions also arise, viz.
whether the demands so raised are violative of Art.14, Art.19(1)(f) and (g) and
Art.31(2) of the Constitution.
The Facts Facts giving rise to these appeals
are these. By an agreement dated July 28, 1961 the Rajasthan State Electricity
Board, Jaipur agreed to apply the appellants with bulk electrical energy upto
maximum of 25,000 KW per year for their Rajasthan Vinyl & Chemical
Industries situate at Kota for electro-chemical, electro-thermal and PVC and
allied industrial products at a concessional rate for a period of 20 years upon
the terms and conditions contained therein. Cl.17 of the agreement provides for
a special rate of tariff as negotiated between the parties and is in these
terms :
"17. The consumer shall pay to the Board
every month charges for the electrical demand made by the consumer during the
preceding month at the rate of 201.04/12 = Rs. 16.753 per KVA of the demand
assessed which shall be calculated as defined in clause 19." We are
informed that this works out roughly to 3p. per unit.
Under c1.18 of the agreement, the rate of
supply was reviewable by the Board every five years after January 1, 1971.
Proviso thereto was in the nature of a rider and it provided that the revision
of rate shall be effected provided the component of cost of generation out of
the total cost varied by 25% or more from the cost last fixed.
The relevant part of c1.18 may be reproduced
:
"18.........The rate of supply as
determined in clause 17 above shall be reviewed every fifth year 649 starting
from the date of first supply provided the component of cost of generation out
of total cost varies by 25% or more from the cost last fixed. Further the rate
fixed by this Agreement shall be reviewed only on or after 1st January,
1971." It is not necessary to set out c1.31 which is the arbitration
clause. C1.34(b) of the agreement which has a material bearing upon these
appeals reads as follows :
"34(b) Nothing contained in this
Agreement or any amendment thereof shall restrict any rights, obligations and
discretions which the Board or the Consumer has derived under any legislation
relating to supply and consumption of Electricity enacted during the period of
this Agreement." It is necessary to mention that Messrs Rajasthan Vinyl
& Chemical Industries was set up by the appellants at Kota for
electro-chemical, electro-thermal and PVC and allied industrial products with a
capital investment of Rs.10 crores as a result of the Board agreeing to supply
electrical energy at a concessional rate which came to be known later as Messrs
Shriram Vinyl & Chemical Industries.
It is a power oriented industry and
electricity is the basic raw material. The only other industry of this kind in
the country was the one set up by Messrs Calico Mills Ltd. which has since been
closed.
It is common ground that the Board commenced
supplying electrical energy to the appellants with effect from March 1, 1963.
The Board in pursuance of its powers under s. 49 of the Act, with the prior
concurrence of the State Government, has been issuing various notifications
from time to time bringing into effect the revised tariffs for the supply of
electricity to its different classes of consumers at different rates. The first
of these was notification dated March 18, 1964 which brought into effect the
revised tariffs for the supply of electricity to its consumers and they became
applicable for the consumption recorded for the billing month May 1964 onwards.
C1.3 of the said notification provided that the revised tariffs shall replace
all existing tariffs and shall supersede all the existing orders of the Board
and the State Government in that behalf with effect from the date of
introduction of the revised tariffs, except for the following, namely :
650 "(i) Special contracts for Large or
Special loads separately negotiated or to be negotiated; and (ii) Special loads
for which concessional tariffs have been already given under the orders of the
Government/Board." The second of these notifications was the one dated
July 26, 1966 by which the Board purported to levy different rates of surcharge
on different classes of consumers with effect from the billing month of
September 1966. The general surcharge imposed on the appellants was 15% on the
normal tariff. The third notification dated April 26, 1969 brought into effect
the revised tariffs for supply of electricity to consumers falling under the
category 'large industrial loads' viz. schedule HS/LP/HT-1 with effect from the
billing month June 1969, and the fourth dated May 28, 1974 making effective revised
tariffs for the supply of electricity to its consumers from the billing month
of July 1974. The third and fourth notifications contained similar exclusionary
clause. According to the appellants, the uniform tariffs as revised from time
to time under the aforesaid notifications were not applicable to them in view
of the said exclusionary clause.
The appellants filed a petition in the High
Court under Art.226 of the Constitution assailing the power of the Board to
levy the general surcharge of 15% under the impugned notification dated July
26, 1966. The aforesaid writ petition was allowed by Tyagi, J. by his judgment
dated October 17, 1969 by which the leared Judge held that the impugned
notification levying general surcharge of 15% was ultra vires the powers of the
Board insofar as the appellants were concerned. The decision was based on the
ground that the parties having entered into a statutory agreement dated July
28, 1961 for a concessional rate of tariff for the supply of electrical energy
to the appellants, there was a fetter created on the power of the Board to
unilaterally increase the tariff under s.49 of the Act and therefore the
appellants could not be subjected to payment of the general surcharge of 15%.
Feeling aggrieved, the Board preferred an appeal against the judgment of the
learned single Judge.
As from January 1, 1971, the Board manifested
its 651 intention to the appellants to revise the concessional rate of supply
and charge them the uniform rate of tariff under Schedule HS/LP/HT-1 as applicable
to all large industrial consumers and the general surcharge of 15% thereon in
exercise of its powers under cl.18 of the agreement. There followed several
meetings between the officers of the Board and the representatives of the
appellants and they were informed that they would have to pay for the
consumption of electricity at the normal rate of tariff prevalent plus the
general surcharge of 15%. It is quite evident from the appellants' letter dated
September 5, 1970 addressed to the Chairman of the Board that the Board had the
power to review the tariff insofar as they were concerned as and from January
1, 1971. In their letter they adverted to cl.18 of the agreement which
conferred power on the Board to review the tariff on or after January 1, 1971
and referred to the discussion they had with the Chairman and other officials
of the Board, making a request that the Board should furnish the necessary
details with regard to the total cost and the component of cost of generation
at the time of the supply under the agreement as well as the relevant time, if
any review of tariff was being contemplated. In response thereto, the Board by
its letter dated December 22/24, 1970 drew the attention of the appellants to
cl.18 and stated that the cost of generation had been worked out in the office
of the Board and it had been found that the present cost was higher than 25% of
the cost of the time of executing the agreement as detailed below :
"Component of cost of generation at the
time of agreement : 2.089 P/Kwh.
Component of cost of generation during the
year 1969-70 : 5.17 P/Kwh." It went on to say :
"In view of this, the Board is entitled
to review the rates of supply to you and intends to charge from 1st January,
1971, at the normal tariff Schedule HS/LP/HT-1 (copy enclosed) plus 15% general
surcharge." Accordingly, the Board by its letter dated February 1, 652
1971 enclosed a bill for the billing month January 1971 for a sum of
Rs.12,18,740.60p. at the normal tariff with a rebate of Rs.50,780.65p. which worked
out to Rs.11,67,959.95p. It was stated that the rate of supply had been
reviewed by the Board under cl.18 of the agreement w.e.f. January 1, 1971 and
the rate charged was under Schedule HS/LP/HT-1 applicable to all large
industrial consumers. We are informed that this works out to 7.67 p.
per unit exclusive of the general surcharge
of 15% and to 8.73p. inclusive thereof and this more or less represented the
actual cost of generation.
On a petition filed by the appellants under
Art.226 of the Constitution assailing the validity of the demand raised by the
Board by its letter dated February 1, 1971 and the enclosed bill for
Rs.11,67,959.95p. on the ground that the Board was not entitled to revise the
tariffs applicable to them under cl.18 as from January 1, 1971, J.P. Jain, J.
by his order dated April 13, 1973 quashed the impugned bill issued by the
Board. He repelled the construction sought to be placed by the appellants on
the terms of cl.18 of the agreement and held that the Board was entitled under
the first part of cl.18 to review the rate of supply 'every fifth year starting
from the first date of supply', but in view of the restrictive clause contained
in the second part of cl.18 it was impermissible for the Board to make any such
upward revision in the rate of supply till January 1, 1971.
He further rejected the contention of the
appellants that the Board was not competent to review the tariff under cl.18
prior to March 1, 1973. He also held that it was not open for them to contend
that the cost of generation had not varied by 25% or more, they having by their
letter dated January 18, 1971 addressed to the Board declined to go into the
question of cost of generation as on the date last fixed and at the relevant
time i.e. in the year 1969-70 on the pretext that they were advised that the
rate revision was in no case due till March 1, 1973. The learned Judge next
held that in the circumstances he would infer that the rise in the cost of
generation was at least 25% and accordingly the Board was entitled to revise
the rate of supply by 25% of the rate specified in cl.17 upon the basis that
the upward revision in the rate of supply under cl.18 must be in proportion to,
or correlated with, the actual rise in the cost of generation. In that view, he
held that the Board could not unilaterally impose the normal tariff in
disregard of the agreement, and added :
653 "Sub-s.(3) of s.49 of the Electric
Supply Act, 1948 clearly empowers the Board to fix different tariffs if it
considers it necessary or expedient for the supply of electricity to any
non-licensee having regard to the geographical position of the area, the nature
of the supply is required and any other relevant factor. The petitioner company
is admittedly the biggest consumer in the State and the Board at one time under
the agreement agreed to give it an exceptional rate. Sub-s.(3) is an exception
to sub-s.(1) which lays down that the Board shall frame uniform tariff.
Sub-s.(4) again prescribes a limitation to sub-s.(3) that the Board shall not
give undue preference. It has not been the case of the Board that by executing
the agreement any undue preference was shown to the petitioner company."
In conclusion, the learned Judge held that if the Board claimed a further rise,
it would have to establish that the rise in the cost of generation was more
than 25% and it had to for that purpose get the percentage in the cost of
generation determined either by mutual dialogue or reference to arbitration.
Promulgation of the Electricity (Supply)
(Rajasthan Amendment) Ordinance, 1976 :
Introduction of Sections 49A And 49B into the
Act.
Both the appellants and the Board preferred
appeals.
While the aforesaid appeals were pending in
the High Court, on February 7, 1976 the Governor of Rajasthan promulgated the
Electricity (Supply) (Rajasthan Amendment) Ordinance, 1976 by which new ss.49A
and 49B were introduced into the Act with retrospective effect to overcome the
difficulty created by the judgment of the High Court in this case, and more
particularly by the judgment of this Court in Indian Aluminium Company v.Kerala
State Electricity Board [1976] 1 S.C.R. 70. By the use of a non-obstante clause
in sub-s.(1) of s.49A the Legislature made it lawful for the Board to revise,
from time to time, the tariffs fixed for the supply of electricity to persons
other 654 than licensees and to frame uniform tariffs for the purpose of such
supply. Sub-s. (2) thereof provided that in revising or framing tariffs under
sub-s.(1) the Board shall be guided by the principles set out in s.59 and as
respects any period commencing on and from September 16, 1966 i.e. the date on
which the new s.49 of the Act was brought into force, by the provisions laid
down in sub-ss.(2), (3) and (4) of s.49A notwithstanding anything contained in
the Act or in any agreement, undertaking, commitment or concession made before
the first day of April 1964, i.e. the date when the uniform tariffs were first
framed by the Board by its tariff notification dated March 18, 1964. Sub-s. (3)
of s.49A provides that all such agreements, undertakings, commitments or
concessions as are referred to in sub-s. (1), shall, insofar as they are
inconsistent with the provisions of sub- ss.(1) and (2) and to the extent of
the tariffs fixed or provisions made therein for such fixation, be void and
shall be deemed always to have been void. The agreement between the parties
thus had the effect of nullifying the agreement between the parties entered
into by the Board with the appellants under s.49 of the Act for the supply of
electricity at a concessional rate for their industrial undertaking. Similarly,
by the use of a non obstante clause s.49B provided that notwithstanding
anything contained in the Act or in any agreement, undertaking or concession as
are referred to in sub-s.(1) of s.49A, any amount realized or demand made or
created by the Board or the Government etc. according to the uniform tariffs in
force from time to time from or against any person claiming any special tariffs
under any such agreement, undertaking or concession made before February 7,
1976, the date of promulgation of the Ordinance, shall be deemed to have been
validly realized, made or created under the Act as amended by the Ordinance.
It is necessary to reproduce s.49A in its
entirety and s.49B insofar as relevant, which read:
"49A. Power of the Board to revise
certain tariffs :- (1) Notwithstanding anything contained in this Act or in any
agreement, undertaking, commitment or concessions made, before the first day of
April, 1964 by the Rajasthan State Electricity Board or the Government of
Rajasthan or by the ruler or 655 Government of any covenanting State of
Rajasthan, or in any judgment or order of any court, it shall be lawful for the
said Board to revise, from time to time, the tariffs fixed for the supply of
electricity to persons other than licensees and to frame uniform tariffs for
the purpose of such supply.
(2) In revising the tariffs or framing
uniform tariffs under sub-section (1), the said Board shall be guided by the
principles set out in section 59 and as respects any period commencing on and
from the 16th day of September, 1966, by the principles laid down in
sub-sections (2), (3) and (4) of section 49.
(3) All such agreements, undertakings,
commitments or concessions as are referred to in sub-section (1), shall, in so
far as they are inconsistent with the provisions of sub-sections (1) and (2)
and to the extent of the tariffs fixed or provisions made therein for such
fixation, be void and shall be deemed always to have been void.
49B. Validation of certain tariffs etc. -
Notwithstanding anything contained in this Act or in any agreement, undertaking
or concession referred to in sub-section (1) of secton 49A, or in any judgment
or order of any Court - (a) any amount realized, or demand made or created, by
the Rajasthan State Electricity Board, or the Government of Rajasthan or the
ruler or Government of any covenanting State of Rajasthan, according to the
uniform tariffs in force from time to time, from or against any person claiming
any special tariffs under any such agreement, undertaking or concession before
the publications in the official Gazette of the Electricity Supply (Rajasthan
Amendment) Ordinance, 1976, shall be deemed to have been validly realised, made
or created under this Act as amended by the said Ordinance." 656
Immediately thereafter on March 12, 1976 the Board furnished the appellants
with a bill for payment of an amount of Rs.21,35,506.72p. for the billing month
of February 1976 at uniform rate, under Schedule LP/HT-1 framed by the Board's
tariff notification dated May 28, 1974 together with the general surcharge of
15%.
The appellants were therefore constrained to
move the High Court under Art.226 of the Constitution challenging the
constitutional validity of ss.49A and 49B of the Act, as introduced by the
aforesaid Ordinance as also the impugned bill sent by the Board for the billing
month of February 1976 for Rs.21,35,506.72p. On November 4, 1976 the Board
issued another notification under s.49(1) framing revised uniform tariffs at
different rates for different class of consumers which became applicable from
the billing month of December 1976. But unlike the earlier notifications
prescribing uniform tariffs under s.49(1) of the Act, this notification did not
contain any exclusionary clause granting exemption for specially negotiated
loads. While the matters were pending before the High Court, on November 3,
1977 the Board furnished another bill to the appellants claiming arrears
amounting to Rs.5.57 crores on account of the difference between the normal
rate of tariff and the agreed rate for the supply of electrical energy to them
for the period from January 1, 1971 to January 31, 1976.
Again, the appellants filed another petition
in the High Court under Art.226 of the Constitution questioning their liability
to pay the said amounts. Both the aforesaid writ petitions, namely, the one
challenging the vires of ss.49A and 49B of the Act as well as the legality of
the impugned bill sent by the Board claiming Rs.21,35,506.72p.
for the billing month of February 1976, and
the other questioning the legality and propriety of the bill dated November 3,
1977 raising a demand for payment of Rs.5.57 crores on account of the
difference between the uniform rates of tariffs and the agreed rate of supply
for the period from January 1, 1971 to January 31, 1976 were referred to a
Division Bench.
By the judgment under appeal, a Division
Bench speaking through Fudal, J. allowed the appeal preferred by the Board 657
and dismissed that of the appellants as well as the writ petitions filed by
them. The learned Judge disallowed the contention raised on behalf of the
appellants as to the constitutional validity of ss.49A and 49B of the Act as
introduced by the Electricity (Supply) (Rajasthan Amendment) Act, 1976 and
upheld the right of the Board to revise the rate of supply as agreed upon for
the period commencing from January 1, 1971 onwards and enforced a demand for
payment of the difference between the uniform tariffs as fixed from time to
time and the agreed rate. Learned counsel for the parties have placed no
reliance on the judgment of the Division Bench which, according to them, does
not deal with the points raised.
Extent of the Appellants liability We find it
convenient at this stage to indicate the extent of the appellants' liability
involved in these appeals. From the abstract statement filed by the Board, the
net amount due with interest as per the uniform tariffs under Schedule
HS/LP/HT-1 framed by the Board's tariff notification dated April 26, 1969 for
the period from January 1, 1971 to June 30, 1974 and the uniform tariff
Schedule LP/HT-1 framed by the Board's tariff notification dated May 28, 1974
for the period from July 1, 1974 to February 6, 1976 together with the general
surcharge of 15% on the tariff from September 16, 1966 and the interest thereon
comes to Rs.14,50,99,654-47p. On the other hand, if the appellants contention
regarding the in applicability of the uniform tariffs under Schedule LP/HT-1 of
1974 were to prevail on the ground that the Board had failed to raise a demand
for payment of electricity charges at that rate prior to February 7, 1976, the
date of promulgation of the Ordinance, the net amount due on account of this
difference for the aforesaid period applying the uniform tariff Schedule
HS/LP/HT-1 of 1969 comes to Rs.12,10,51,510-46p.
The resultant sums have been arrived at after
making adjustment of various payments made by the appellants from time to time
towards the bills submitted by the Board as per the interim orders passed by
the High Court from time to time together with interest, as also under the
interim order of this Court dated October 6, 1980 while granting special leave
and stay of the operation of the judgment of the High Court. We may state that
the figures given in the abstract statement filed by the 658 Board more or less
correspond with those in the statement filed by the appellants. The difference
between the two amounts with interest thereon at 9% works out to
Rs.2,41,58,937. That is the magnitude of the claim in these appeals.
We had the benefit of hearing Shri Shanti
Bhushan appearing for the appellants and Dr. Y.S. Chitale, on behalf of the
Board. At the very outset Shri Shanti Bhushan, learned counsel for the
appellants with all fairness stated that he does not challenge the
constitutional validity of ss.49A and 49B of the Act.
The nature of controversy.
The controversy in these appeals can be
viewed from three aspects. First rests on the interpretation of the terms of
the agreement between the parties dated July 28, 1961 and the various clauses
thereof, particularly clauses 18 and 34(b) which both have a material bearing.
The second on the construction of ss.49A and 49B of the Act, the scope and
effect of s.49A which by the non-obstante clause nullifies the agreement for
the supply of electrical energy at a concessional rate to the appellants and
makes it lawful for the Board to charge the uniform tariff with retrospective
effect from September 16, 1966 i.e. the date on which the new s.49 was introduced,
and s.49B which validates the making of such demand with retrospective effect.
As also the validity of the demands created by the Board by its letter dated
February 1, 1971 for the billing month January 1971 for Rs.11,67,959. 95p.
under Schedule HS/LP/HT-1 to the Board's tariff notification dated April 26,
1969 applicable to all large industrial consumers, and the bill sent by the
Board on March 12, 1976 for the billing month February 1976 for payment of
Rs.21,35,506-72p. under Schedule LP/HT-1 to the Board's tariff notification
dated May 28, 1974. The third comprises of various subsidiary issues as to
whether the Board is precluded by the doctrine of promissory estoppel from
raising these demands, as also whether such demands are violative of Arts. 14,
19(1)(f) and (g) and 31(2) of the Constitution. We shall deal with these
contentions in seriatim.
659 In order to appreciate the issues
involved, it is necessary to deal with the legislative changes. Under s.49 of
the Act as it stood at the relevant time i.e. on July 28, 1961, the date of
agreement, a general power was conferred on the Board to supply electricity
upon such terms and conditions as it may, from time to time, fix having regard
to the matters referred to in that section and the proviso thereto directed the
Board not to show undue preference to any person in fixing the tariffs. The
section was in the following terms :
"49. Provision for the sale of
electricity by the Board to persons other than licensees :
Subject to the provisions of this Act and of
any regulations made in this behalf, the Board may supply electricity to any
person not being a licensee upon such terms and conditions as the Board may
from time to time fix having regard to the nature and geographical position of
the supply and the purposes for which it is required :
Provided that in fixing any such terms and
conditions the Board shall not show undue preference to any person." It
appears that a view was taken by the Bombay High Court in a case relating to
the Kalyan Borough Municipality that s.49 of the Act as it then stood, did not
permit the Board to frame uniform tariffs for consumers in compact areas as
well as consumers in sparse areas, so as to require the former to pay a part of
the cost involved in the supply of electricity to the latter i.e. so as to cast
a higher burden on the consumer in a compact area, where the cost of supply was
less. An appeal was brought by the Maharashtra Electricity Board to this Court.
During the pendency of the appeal, Parliament enacted the Electricity (Supply)
Amendment Act, 1966 by which the Act was amended in various particulars. It is
only necessary to refer to two sections of the Amendment Act viz. ss.11 and 24.
Section 11 substituted, with retrospective effect, new s. 49 in the place of old
s.49, and s.24 of the amending Act validated the imposition and collection of
charges for the supply of electricity, preventing any person from claiming
refund of any amount paid by him in excess of 660 the amount due under the Act.
The new s.49 of the Act runs as follows :
"49. Provision for the sale of
electricity by the Board to persons other than Licensees :
(1) Subject to the provisions of this Act and
of regulations, if any, made in this behalf, the Board may supply electricity
to any person not being a licensee upon such terms and conditions as the Board
thinks fit and may for the purposes of such supply frame uniform tariffs.
(2) In fixing the uniform tariffs, the Board
shall have regard to all or any of the following factors, namely :- (a) the
nature of the supply and the purposes for which it is required;
(b) the coordinated development of the supply
and distribution of electricity within the State in the most efficient and
economical manner, with particular reference to such development in areas not
for the time being served or adequately served by the licensee;
(c) the extension and cheapening of supplies
of electricity to sparsely developed areas.
(3) Nothing in the foregoing provisions of
this section shall derogate from the power of 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 purposes for which supply is required
and any other relevant factors.
(4) In fixing the tariff and terms and
conditions for the supply of electricity, the Board shall not show undue
preference to any person." 661 In Maharashtra State Electricity Board v.
Kalyan Borough Municipality & Anr. [1968] 3 S.C.R. 137, this Court reversed
the decision of the Bombay High Court and it was held that the levying of
uniform tariff on the consumers irrespective of whether they were in sparse
areas or in compact areas, which was not directly related to the cost of
supply, did not amount to a colourable exercise of taxing power by Parliament.
The Electricity (Supply) (Rajasthan
Amendment) Ordinance was first promulgated on February 7, 1976, later replaced
by the Electricity (Supply) (Rajasthan Amendment) Act, 1976 introducing ss.49A
and 49B to the Act, to obviate the difficulty created by the judgment of the
High Court in this case as also by the decision of this Court in the case of
the Indian Aluminium Company v. Kerala State Electricity Board [1976] 1 S.C.R.
70. In the Indian Aluminium Company's case, the Court speaking through
Bhagwati, J. held that agreements for supply of electricity to the consumers
for a specified period at a special tariff are the result of negotiations
between the Board and the consumers and hence a matter of agreement between
them. Such agreements for the supply of electricity to the consumers must
therefore be regarded as having been entered into by the Board in exercise of
the statutory powers conferred under s.49(3) and thus there could be no
question of such stipulation being void as fettering the exercise of the
statutory powers of the Board under s.49(1). The learned Judge observed that in
fact such agreements under s.49(3) represented the exercise of the statutory
powers and the Board could not unilaterally frame uniform tariffs under s.49(1)
of the Act in derogation of such agreements entered into under s.49(3). Upon
that basis, the learned Judge further observed that the Board was not competent
to enhance the charges under the guise of fixing uniform tariffs because,
sub-s.(1) of s.49 is subject to sub-s. (3); and once special tariffs were fixed
under sub-s.(3) there could be no question of fixing uniform tariffs applicable
to such consumers under sub-s.(1). Such a power could not be exercised in
violation of the stipulation fixing special tariffs under sub-s.(3).
According to s.59 of the Act, the Board is
required to carry on its operations without incurring any loss. In the Indian
Aluminium Company's case, however, the learned Judge repelled the contention of
the Board that since it was operat- 662 ing at a loss it was bound under s.59
to readjust its charges to avoid the loss. It was said that s.59 does not give
a charter to the Board to enhance its charges in breach of a contractual
obligation. The view taken by the Court in that case would have had a
disasterous effect in some of the States if new ss.49A and 49B were not
introduced by the Ordinance. In the State of Rajasthan, not only special
agreements or concessions in tariffs were made several years ago by the
covenanting States, but also by the old State of Rajasthan after its formation
as a Part B State; and if they were allowed to continue, they would not cover
the existing cost of generation with the result that the burden of this cost
would have to be passed on to other consumers who do not, in any way, benefit
from such special contracts providing concessional tariffs. It would have been
manifestly unjust and discriminatory that one consumer should benefit at the cost
of other consumers or general tax-payers. It was therefore thought expedient to
amend the Act with retrospective effect so as to enable the Board to revise the
contractual rates in order to cover the cost of generation from time to time,
nothwithstanding any special contract, undertaking or concession to the
contrary. See Statement of Objects & Reasons for the Electricity (Supply)
(Rajasthan Amendment) Bill, 1976. Purport and effect of ss. 49A and 49B of the
Act.
It is a well-known principle that for the
validation of an invalid act done under an Act, it is essential that the
subsequent validating statute must confer power for the doing of the Act at the
time it was done, and that the power should also be exercised. In the absence
of such authorisation for the doing of the Act, the validation would be futile
as that would only amount to attempt to exercise a power which exhypothesi did
not exist. This has been achieved by the Legislature by enacting s.49A of the
Act.
The purport and effect of s.49A of the Act is
to nullify the judgment of the High Court and more particularly the decision of
this Court in Indian Aluminium Company's case laying down that sub-s.(1) of
s.49 was subject to sub-s.(3) and therefore the Board could not unilaterally
frame uniform tariffs under s.49(1) with respect to the class of consumers who
were entitled to the supply of electricity at a special rate by virtue of
agreements entered into by the Board with them under sub-s.(3) of s.49. By the
663 use of the non-obstante clause in s.49A(1), the Legislature has removed the
hurdle placed on the Board against framing of uniform tariffs with respect to
such class of consumers and by the retrospective conferment of a prospective
power empowered the Board to raise a demand for payment of the difference
between the uniform tariffs in force from time to time and the special rates as
respects any period commencing on and from September 16, 1966 i.e. the date
when the new s.49 of the Act was brought into force. On its plain construction,
s.49A makes it lawful for the Board to revise, from time to time, the tariffs
fixed for the supply of electricity to all such consumers who were enjoying
special benefits by virtue of the agreements entered into with the Board under
s.49(3) of the Act, and also to frame uniform tariffs for the purpose of such
supply, notwithstanding anything contained in any agreement, undertaking,
commitment or concession to the contrary made by the Board before the first day
of April 1964. The non-obstante clause contained in s.49(1) has clearly the
effect of overriding the agreement between the parties.
Section 49B of the Act by the non-obstante
clause provides that notwithstanding anything contained in the Act or in any
agreement, undertaking or concession referred to in sub-s.(1) of s.49A, or in
any judgment or order of any Court, any amount realized, or demand made or
created by the Board, according to the uniform tariffs in force from time to
time, from or against any person claiming any special tariffs under any such agreement,
undertaking or concessions, before the publication in the official Gazette of
the Ordinance i.e. before February 7, 1976, shall be deemed to have been
validly realized, made or created under the Act, as amended by the Ordinance. A
combined reading of ss.49A and 49B seeks to achieve a two-fold object. S.49B in
terms validates the demands raised by the Board by virtue of its powers under
s.49A against the appellants prior to the promulgation of the Ordinance on
February 7, 1976 for payment of the difference between the uniform tariffs in
force from time to time and the special rates as from January 1, 1971. The
other legal consequence is that the appellants who were entitled to supply of
electricity at a concessional rate under the agreement between the parties,
became subject to payment of uniform tariffs in force from time to time and it
became lawful for the Board to raise a demand upon that basis subsequent to the
promulgation 664 of the Ordinance and also to revise the tariffs fixed for the
supply of electricity to them. The appellants do not dispute their liability to
pay for the supply of electricity according to the uniform tariffs fixed for
all large industrial consumers as from February 7, 1976 and the dispute only
relates to the power of the Board to raise a demand for payment of the
difference for the past period.
Contentions of the parties.
It is in this setting and the factual
background that we are required to consider the submissions addressed to us.
As already stated, the controversy in these
appeals can be viewed from three aspects, namely, (i) Interpretation of the
terms of the agreement between the parties dated July 28, 1961, particularly
cls. 18 and 34(b) thereof; (ii) Interpretation of ss.49A and 49B of the Act;
and (iii) Whether the demands raised by the Board for payment of the difference
by the impugned bills dated February 1, 1971 and March 12, 1976 which involved
the imposition of a liability on the appellants by the retrospective conferment
of a prospective power under s.49A and the validation of such power under s.49B
was wholly arbitrary and irrational, confiscatory in nature and amounted to
deprivation of property without payment of compensation and was thus violative
of Arts.14, 19(1)(f) and (g) and 31(2) of the Constitution. It would be
convenient to deal with the first and third aspects together.
Interpretation of the agreement between the
parties :
Clause 18 of the agreement.
As to the construction of the terms of the
agreement between the parties we may first deal with cl.18. The appellant's
submission is that on a true construction of the agreement, cl.18 is nothing
but an escalation clause and therefore the Board was not entitled to
unilaterally frame uniform tariffs as due and payable by the appellants but the
rate of increase must be in proportion to, or correlated with, the actual rise
in the cost of generation. It is said that in every case, the function of the
Court is to find the contractual intention by placing a construction of what is
just and reasonable. The agreement was for the sale and 665 purchase of
electricity and the prices had been specifically stipulated by the parties in
cl.17. A perusal of cl.17 of the agreement which fixes the rate of supply at
the rate of 201.04/12 = Rs. 16.753 per KVA of the demand assessed shows that
the rate had been worked out by the parties jointly on the basis of some
calculation with reference to the cost of generation. The only reasonable
construction should be that clear co-relation between the cost of generation
and increase in the rate of supply had been stipulated, as was the view
expressed by Jain, J. On re-determination the rate of supply could be increased
only to the extent that the cost of generation had gone up and not to any
arbitrary extent. C1.18 is not susceptible of a construction which could make
the price of the goods totally uncertain and dependent on the arbitrary
volition of one party to the contract. In this connection, the appellants
placed reliance on the following passages from Anson's Law of Contract, 25th
Edn., p.61:
"On the other hand, a transaction which
at first sight seems to have some essential term of the bargain undetermined
may, by implication, if not expressly, provide some method of determination
other than a future agreement between the parties.
In that event, since it is a maxim of the law
that id certum estquod certum reddi potest, there will be a good contract. In
every case the function of the Court is to put a fair construction on what the
parties have said and done, though the task is often a difficult one when an
instrument has attempted to record some complicated business bargain. The
parties making such a bargain naturally assume that it will be carried out and
therefore do not always express it with the exactness of terminology that
lawyers, whose profession leads them to contemplate the possibility of future
disputes, might have employed." It is accordingly urged that cl.18 was an
escalation clause and therefore the-power of the Board to revise the rate of
supply arises as and when the cost of generation goes up, and therefore the
rate must be in proportion to, or correlated with, the actual rise in the cost
of generation.
Learned 666 counsel for the appellants tried
to draw sustenance from the following extract from the Statement of Objects
& Reasons of the Rajasthan Electricity (Supply) Amendment Bill, 1976 :
"Such special agreement or concessions
in tariff were made several years ago by covenanting States and if they were
allowed to continue, they would not cover the existing cost of generation, with
the result that the burden of this cost would have to be passed over to other
consumers....... " "It was, therefore, expedient to amend the Act....
so as to enable the Board to revise the
contractual rates in order to cover the rising cost of generation from time to
time, notwithstanding any special contract, undertaking or concession to the
contrary." We find it difficult to subscribe to the contention advanced by
learned counsel for the appellants that c1.18 is an escalation clause and
therefore the Board's power to revise the rate of supply must be restricted to
the actual rise in the component of cost of generation. As rightly pointed out
by learned counsel appearing on behalf of the Board, an 'escalation clause'
according to its accepted legal connotation means a clause which takes care of
the rise and fall of prices in the market, whereas the right to review confers
the power to revise the rate of supply. It is submitted that c1.18 in terms
provides that the rate of supply as determined in c1.17 shall be 'reviewed
every fifth year starting from the date of first supply'. The word 'review' in
c1.18 necessarily implies the power of the Board to have a second look and to
so adjust from time to time its charges as to carry on its operations under the
Act without sustaining a loss. The parties clearly contemplated by c1.18 for a
fresh revision of the rate once in a block of five years. The only fetter on
the power of review is that contained in the proviso of c1.18. The limitations placed
on such power are two-fold in nature. The first of these is that such power of
review shall be exercisable if the component of cost of generation out of the
total cost varies by 25% or more. The second is that such power shall not be
exercisable by the Board till January 1, 1971. If the parties intended c1.18 to
be in the nature of an escalation clause, 667 the language would have been
different. In that event, the rate of supply being linked with the component of
cost of generation would keep on progressively increasing. In support of his
submissions, learned counsel for the Board referred to us Butterworths'
Encyclopaedia of Forms & Precedents, 4th edn.,Vol.3, p.148, Hudson's
Building & Engineering Contracts, 10th edn., Keating's Building Contracts,
4th edn., p.498 and Black's Law Dictionary, 4th edn., p.639 giving different
forms of 'rise and fall' or escalator clause in building or commercial
contracts, and the accepted meaning thereof. The expression 'escalation clause'
has a well defined meaning. This is brought out succinctly in American
Jurisprudence, 2nd edn., vol.17, p.786 in these terms :
"In some contracts, there is what is
known as an escalator or fluctuation clause, which is defined as one in which
the contract fixes a base price but contains a provision that in the event of
specified cost increases, the seller or contractor may raise the price upto a
fixed percentage of the base, and such escalator clauses are generally held to
be sufficiently definite for enforcement." In Corpus Juris Secundum,
vol.17, p.806, the law on the subject is stated thus :
"(A) contract giving one of the parties
the right to vary the price is not unenforceable for lack of mutuality where
the right is not an unlimited one, as where its exercise is subject to express
or implied limitation, such as that the variation must be in proportion to some
objectively determined base, or must be reasonable; and this rule has been
applied to contracts containing so- called "escalator" clauses."
These considerations however do not apply as on its true construction. Cl.18
cannot be regarded to be an escalation clause. There is therefore no basis for
the submission that there could only be proportionate increase keeping in view
the increase in the component of cost of generation.
The effect of cl.34(b) of the Agreement 668
Turning next to cl.34(b), the rival contentions may be set out. The appellants'
contention is that firstly, the stipulation in cl.34(b) cannot be regarded as a
contractual stipulation at all and secondly, that in no case cl.34(b) can
possibly be made applicable to any purported alteration of contracting parties'
rights for a past period by means of retrospective legislation. It was said
that cl.34(b) cannot be construed in a manner favourable to the Board; all that
the parties contemplated was that the mutual rights and obligations would be
subject to future legislations on supply and consumption of electricity but
such legislations necessarily had to be valid legislations and if cl.34(b) was
to be treated as a contractual stipulation providing that the rights stipulated
in the agreement were subject to any modification by any legislation, valid or
invalid, cl.34(b) will have to be struck down as a totally uncertain clause
which cannot find place in any contract and such clauses have been described as
meaningless terms in Anson's Law of Contract, 25th edn., p.63 :
"Finally, we should note that if the
contract contains an indefinite, but subsidiary provision, the courts have felt
at liberty to strike it out as being without significance, and to give effect
to the rest of the contract without the meaningless term." The contention
to the contrary on behalf of the Board is that a plain reading of cl.34(b)
makes the contract subject to any legislation. The right which the parties
derived under the agreement for supply of electricity at a concessional rate
under s.49 of the Act was therefore defeasible. That being so, it would be as
if ss.49A and 49B of the Act had to be read into the contract and therefore
became a contractual term. The submission is that the appellants derived a
right to get electricity at a concessional rate only for a limited period till
January 1, 1971 and thereafter the Board derived the power to revise the rate
of supply under cl.18. It was competent for the Legislature to enact a law
providing for application of uniform tariffs notwithstanding any such
commitment, undertaking or concession to the contrary made during any period
prior to April 1, 1964. There is, in our opinion, considerable force in the
submissions advanced on behalf of the Board.
669 It is not uncommon for statutory
contracts to contain a term like cl.34(b) which makes the contracts subject to
future legislations. Such a clause can usually be found in forest or excise
contracts relating to the grant of a privilege which subjects the mutual rights
and obligations flowing from such a contract to be liable to be altered or
modified by subsequent legislations. Although there was no such term in the
Indian Aluminium Company's case, even so, the Court speaking through Bhagwati,
J. observed :
"(A) case may conceivably arise where
there may be an overriding statutory provision which expressly or by necessary
implication authorizes the public authority to set at naught, in certain given
circumstances, a stipulation though made in exercise of a statutory power.
Where there is such a statutory provision, the stipulation would certainly be
binding..." On a plain construction of the terms of the agreement, the
appellants were no doubt guaranteed the supply of electricity for a period of
20 years but the right to get the supply at the concessional rate was subject
to the power of the Board to effect a revision of the rate of supply every
fifth year starting from the date of first supply subject to the only
restriction that such revision could not be effected before January 1, 1971.
The Board's contention that the right of the appellants to the supply of
electricity at a concessional rate under the agreement entered into by the
Board with them under s.49 of the Act was defeasible, is clearly well-founded
and must be given effect to. It follows that the rights derived by the
appellants under the contract were subject to the stipulation contained in
cl.34(b) which made the mutual rights and obligations of the parties subject to
any legislation relating to supply and consumption of electricity enacted
during the period of the agreement.
It was rightly contended on behalf of the
Board that while the Board under the agreement had undertaken to supply the
appellants 25MW power for a period of 20 years, the concessional rate of supply
was assured to them only till January 1, 1971 and could not be had for ever.
The scheme of the Act is that the Board is required to function without loss
670 and to achieve the said purpose, the Board is vested with power to adjust
its charges from time to time. There was no justification for the Board to give
preferential treatment any longer to the appellants who were bulk consumers
beyond January 1, 1971 as against all other large industrial consumers who were
subjected to uniform tariffs under schedule HS/LP/HT-1 under the Board's tariff
notification dated April 26, 1969. Once it was found by the High Court that the
component of cost of generation out of the total cost as on the date of Board's
tariff notification of April 26, 1969 had increased at least by 25%, the fetter
on that power was removed and the Board was entitled to demand payment
according to the uniform tariff under schedule HS/LP/HT-1 applicable to all
large industrial consumers but for the agreement.
Under the restrictive covenant contained in
cl.18, such revision of rate could not be effected by the Board till January 1,
1971. Once the period was over, the Board was entitled to have a second look
and taking an overall view when it found that it was no longer possible to
supply electricity at the concessional rate which had no reasonable relation to
the uniform tariff under HS/LP/HT-1 applicable to all large industrial
consumers, it manifested its intention to review the rate of supply from
January 1, 1971.
The appellants knew that the review of rate
was due on January 1, 1971 as is clear from their letter dated December 5, 1970
by which they wanted to know the extent of increase and the basis therefor. In
response thereto, the Board by its letter dated December 22/24, 1970 left them
in no doubt.
It was made clear to them by the Board that
the uniform tariff under HS/LP/HT-1 framed by the Board's tariff notification
dated April 26, 1969 would be applicable to them as to all other large
industrial consumers. The Board by its subsequent letter dated February 1, 1971
intimated its decision to charge uniform tariff at that rate from the billing
month of January 1971 onwards, and the general surcharge of 15% thereon from July
1966 upon December 1970.
At no stage, did the appellants contend that
c1.18 was an escalation clause and the rate should be increased in proportion
to the rise in the cost of generation. They only asserted that it should be
'reasonable' and the extent of increase determined.
On a fair construction of the terms of
c1.34(b) taken in conjunction with the conduct of the parties, the conclusion
is 671 irresistible that the parties had contemplated that the mutual rights
and obligations under the contract would be subject to alteration by future
legislation. That being so, ss.49A and 49B of the Act have to be read into the
contract and these provisions by virtue of c1.34(b) became a contractual
stipulation.
Whether the raising of demand for payment of
the difference between the uniform tariffs and the agreed rate was in disregard
of the guiding principles contained in s.49(3) contrary to the mandate of
s.49A(2) of the Act.
Faced with the difficulty, learned counsel
for the appellants contended that the Board in raising the impugned demands
against the appellants for payment of charges according to the uniform tariffs
framed under s.49(1) of the Act from time to time, as per its letter of demand
dated February 1, 1971 for payment of Rs.11,67,959.95p. for the billing month
of January 1971 onwards under schedule HS/LP/HT-1 under the Board's tariff
notification dated April 26, 1969 and its subsequent letter of demand dated
March 12, 1976 for payment of Rs.21,35,506.72p. for the billing month of
February 1976 under schedule LP/HT-1 under the Board's tariff notification
dated May 28, 1974 purporting to act under ss.49A and 49B of the Act read with
c1.18 of the agreement, had not any regard to the special circumstances on the
basis of which the appellant's set up its industry which required electricity
at very reasonable rate in order to be able to sustain its operations. It is
further urged that while s.49A of the Act might have enabled the Board to
increase the special tariff applicable to the appellants even in disregard of
the limitations imposed on such revision by c1.18 of the agreement, the special
position of the appellants' industry could not be totally disregarded.
In other words, while the concessions
stipulated by the agreement under s.49(1) of the Act could have been altered in
proportion to the rise in the cost of generation, such concession could not
have been altogether eliminated as that would amount to a total disregard of
the guiding principles contained in s.49(3) and thus contrary to the mandate of
s.49A(2) of the Act. Sub-s.(2) of s.49A further provides that in revising such
tariffs or framing uniform tariffs as respects any period commencing on and
from September 16, 1966 672 the Board shall be guided by the principles laid
down in sub-ss. (2), (3) and (4) of s.49A of the Act. At first blush, this
argument plausible though it appears, is on closer scrutiny not well-founded.
It ignores the true object and purpose of the enactment and fails to give due
effect to the provisions of ss.49A and 49B of the Act with a retrospective
effect which clothed the Board with power to make the uniform tariffs
applicable to bulk consumers like the appellants who under agreements entered
into with the Board on July 28, 1961 i.e. before April 1, 1964, the cut out date
mentioned in sub-s.(1) of s.49A had been to the great financial detriment of
the Board enjoying a concessional rate of supply which had no relation to the
existing cost of generation, with the result that the burden of this cost had
to be passed over to other consumers. As is clear from the Statement of Objects
and Reasons of the Bill, the Legislature thought it expedient to amend the Act
so as to cover the rising cost of generation from time to time, notwithstanding
any special contract, undertaking or concession to the contrary. The
legislative mandate contained in ss.49A and 49B of the Act as introduced by the
Rajasthan Electricity (Supply) Amendment Act, 1976 subserves the public
interest to ensure that the Board shall not, as far as practicable, after taking
credit for any subvention from the State Government under s.63, carry on its
operations under the Act at a loss.
Power of the Board to unilaterally frame
uniform tariffs under sub-s.(1) of s.49 of the Act in derogation of the
agreement under s.49(3):
Placing strong reliance on the decision of
this Court in the Indian Aluminium Company's case, learned counsel for the
appellants drew our attention to various observations made by Bhagwati, J.
during the course of his judgment laying down that under the scheme of the Act
the Board could not unilaterally frame uniform tariffs under s.49(1) of the Act
in derogation of such agreements entered into under s.49(3) and therefore was
not competent to enhance the charges under the guise of fixing uniform tariffs because
sub-s.(1) of s.49 is subject to sub-s.(3) and, once special tariffs were fixed
under sub-s.(3), there could be no question of fixing uniform tariffs
applicable to such consumers under sub-s.(1) and that 673 such a power could
not be exercised in violation of the stipulation fixing special tariffs under
sub-s.(3). Emphasis was particularly laid on the observations of Bhagwati, J.
in the Indian Aluminium Company's case where after referring to the earlier
decision of this Court in Kalyan Borough Municipality's case, supra, the
learned Judge observed that : (i) the cost was not the sole criterion in fixing
tariffs under s.49(1) and (ii) where the Board was under a contractual
obligation not to charge under a stipulation validly made under s.49(3) anything
more than a specified tariff for a specified period, it would not be
practicable for it to enhance its rates of charges even if it finds that it is
incurring operational loss. That view expressed by the learned Judge proceeded
on the hypothesis, to use his own words, that 'Section 59 does not give a
charter to the Board to enhance its charges in breach of its contractual
stipulation'. We are afraid, the contention cannot prevail.
Nor are the appellants entitled to any relief
on the basis of the decision of this Court in Indian Aluminium Company's case.
The State Legislature under Entry 38 of the Concurrent List was competent to
enact the Rajasthan Electricity (Supply) Amendment Act, 1976 and introduce the
impugned provisions contained in ss.49A and 49B with retrospective effect to
overcome the difficulty created by the decision of this Court in Indian
Aluminium Company's case. These provisions so enacted confer an enabling power
on the Board to revise the tariffs from time to time notwithstanding any provision
of the Act or any agreement, undertaking or concession to the contrary, and
also to frame uniform tariffs with respect to the class of consumers enjoying
special benefits under agreements entered into with the Board under s.49 of the
Act. There being a change in the law brought about by the introduction of ss.
49A and 49B of the Act by the Electricity (Supply) (Rajasthan Amendment) Act,
1976, the Court is bound to give effect to these provisions notwithstanding
anything contained in the Act or in any agreement, undertaking, commitment or
concession to the contrary made by the Board before the first day of April
1964, or the decision of this Court in Indian Aluminium Company's case.
Scope and effect of Sections 49A and 49B of
the Act: Power of the Board to raise demands for payment of the difference
between the uniform tariffs and the agreed rate with retrospective effect and
the validation thereof 674 Turning next to the second aspect, question is
whether the Board was entitled to recover from the appellants the difference
between the uniform tariffs and the agreed rate for the supply of electricity
to them with retrospective effect by virtue of the powers derived under ss.49A
and 49B of the Act read with c1.18 of the agreement. That depends on the construction
of ss.49A and 49B of the Act. The question pertains to two periods : (i) from
January 1, 1971 to May 31, 1974 and (ii) from June 1, 1974 to February 6, 1976.
According to its plain terms, s.49A has been
structured in a manner to attain a two-fold object. In the first place, the
non-obstante caluse in sub-s.(1) of s.49A has the effect of overriding the
provisions of the Act and nullifying the judgment of the High Court and more
particularly of this Court in Indian Aluminium Company's case which invalidated
the framing of uniform tariffs by the Board under s.49(1) with respect to
consumers who were entitled to the supply of electricity at a special rate by
virtue of the agreements entered into by the Board with them under sub-s.(3) of
s.49 of the Act. Sub-s.(1) of s.49A is clearly an enabling provision and makes
it lawful for the Board not only to revise from time to time the tariffs
applicable to such class of consumers but also to frame uniform tariffs
applicable to them as respects any period commencing on and from September 16,
1966 i.e. the date when the new s.49 was brought into force. Sub-s.(2) thereof
provides that in revising the tariffs or framing uniform tariffs, the Board
shall be guided by the principles set out in s.59. It further provides that as
respects any period commencing on and from September 16, 1966, it shall also be
guided by the principles laid down in sub-ss. (2), (3) and (4) of s.49.
Such powers of revising the tariffs or
framing uniform tariffs were exercisable notwithstanding anything contained in
the Act or in any agreement, undertaking or concession to the contrary made by
the Board before the first day of April 1964 or the judgment and order of any
Court. Sub-s. (3) of s.49A provides that all such agreements, undertakings,
commitments or concessions as are referred to in sub-s.(1), shall, insofar as
they are inconsistent with the provisions of sub-ss.(1) and (2) and to the
extent of the tariffs fixed or provisions made therein for such fixation be
void and shall be deemed always to have been void. Secondly, sub- s.(1) of
s.49A as construed prospectively makes it lawful for the Board to revise the
tariffs from time to time and to 675 frame uniform tariffs with respect to such
class of consumers on or after February 7, 1976, the date on which it was
brought into force.
According to its plain language, the
non-obstante clause in sub-s.(1) of s.49B has the effect of overriding the
provisions of the Act or any agreement, undertaking or concession referred to
in sub-s.(1) of s.49A. The consequence that ensues is this. Sub-s.(2) of s.49B
provides that any amount realized or demand made or created by the Board,
according to the uniform tariffs in force from time to time, under s.49 from or
against any person claiming any special tariffs under any such agreement,
undertaking, commitment or concession made before February 7, 1976, the date of
promulgation of the Ordinance, contrary to the decision of this Court in Indian
Aluminium Company's case or of the High Court, shall be deemed to have been
validly realized, made or created under the Act. The appellants do not dispute
their liability to pay uniform tariffs fixed from time to time as from February
7, 1976. The controversy is only with regard to their liability to pay uniform
tariffs fixed from time to time for the past period and the extent of their
liability.
Liability of the appellants to pay uniform
tariffs framed by the Board from time to time under s.49A read with s.49B for
the period prior to February 7, 1976 and the corresponding right of the Board
to raise such demands.
Shri Shanti Bhushan contends that ss.49A and
49B were integrally connected and were intended and meant to achieve a joint
purpose which was merely to validate such of the past actions of the Board as
would have been valid if s.49A had already been in force at the relevant time.
He contends that if the Board's uniform tariff notifications dated May 18,
1964, April 26, 1969 and May 28, 1974 had not contained an exclusionary clause
(3) set out above, for the exclusion of all consumers who were governed by
specially negotiated tariff, any demand raised under s.49A of the Act on the
basis of such uniform tariffs fixed from time to time prior to February 7, 1976
would have been validated under s.49B notwithstanding that the said demands
when made were not authorized in view of the stipulations contained in the
agree- 676 ment. As to the claim for the period from January 1, 1971 to May 31,
1974, the learned counsel urges that the Board is seeking to recover from the appellants
charges for the supply of electricity as per normal tariff prescribed under the
Board's notification dated April 26, 1969. As to this he mainly relies on the
exclusionary clause (3) of the said tariff notification. As to the period from
June 1, 1974 to February 7, 1976 for which the Board raised a demand for
payment of the charges for the supply of electricity at normal tariff framed by
the Board's notification dated May 28, 1974, apart from relying on similar
exclusionary clause contained therein, he submits that the Board never made a
demand on the appellants that they would have to pay for the supply of
electrical energy at normal tariff as framed by the Board's tariff notification
dated May 28, 1974. In fact, he submits that there was no letter sent by the
Board to the appellants like the one dated December 22/24, 1970 by which it
made a demand for payment of charges at uniform tariffs framed by the Board's
tariff notification dated April 26, 1969. The learned counsel urges that as is
clear from the terms of s.49B of the Act, the demand to be validated had to be
raised prior to February 7, 1976 and not on a date subsequent thereto. He
submits that it was therefore not open to the Board to make a demand from the
appellants for payment of charges for the period commencing from June 1, 1974
and ending with February 6, 1976 according to the uniform tariff of 1974. There
is, in our opinion, considerable force in the argument.
Dr. Chitale tried to impress upon us that
s.49A of the Act must after February 7, 1976, the date of promulgation of the
Ordinance, operate on its own force and therefore the Board was entitled to
raise demands at uniform tariffs under schedule LP/HT-1 under the Board's
tariff notification dated May 28, 1974 from that date till November 4, 1976 and
thereafter as per the revised uniform tariffs as framed by the Board's
notification dated November 4, 1976. As regards the past period i.e. as from
January 1, 1971 to February 6, 1976 he contends that s.49A could still be had
recourse to by the Board without the aid of s.49B. The submssion proceeds upon
the basis that the power of the State Legislature to make a law under Entry 38
of List III of the Seventh Schedule carries with it the ancillary power to make
a law with retrospective 677 effect. It could therefore enact a provision like
s. 49A prescribing a rate of uniform tariff under s.49(1) with retrospective
effect as from January 1, 1971, notwithstanding anything contained in the Act
or in any agreement, undertaking, commitment or concession to the contrary
entered into by the Board after the first day of April 1964. We find it rather
difficult to uphold the contention. The question does not really arise because
the Legislature has not framed a law for the imposition of uniform tariffs on
consumers with retrospective effect.
S.49A is primarily enacted to override the
provisions of the Act or of any agreement, undertaking, commitment or
concession to the contrary made by the Board or the Government prior to the
first day of April 1964 for the supply of electricity to consumers at a
concessional rate relatable to s.49(3) of the Act. That is the clear effect of
the non-obstante clause which removes the legal hurdle placed in the way of the
Board framing uniform tariffs under s.49(1) of the Act for such class of
consumers. Sub-s.(1) of s.49A provides that it shall be lawful for the Board to
revise the tariffs from time to time and to frame uniform tariffs for the
supply of electrical energy. The words 'it shall be lawful' used in s.49A (1) are
essentially in the nature of conferment of a prospective power. Sub-s.(2)
thereof however further states that in revising or framing such tariffs under
sub-s.(1), the Board shall be guided by the principles set out in s.59 of the
Act. It then goes on to say that as respects any period commencing on and from
September 16, 1966 the Board shall also be governed by the principles laid down
in sub-ss.(2), (3) and (4) of s.49A.
Sub-s.(3) makes all such agreements,
undertakings, commitments or concessions as are referred to in sub-s.(1),
insofar as they are inconsistent with the provisions of sub- ss.(1) and (2) and
to the extent of the tariffs fixed or provisions made therein for such
fixation, be void and shall always be deemed to have been void. A combined reading
of these provisions shows that the Board is relieved of the shackles of the
contractual obligations flowing from the agreements relatable to s.49(3), and
the Board is empowered in terms of s.49A to revise the tariffs or frame uniform
tariffs with respect to consumers enjoying special benefits as from September
16, 1966.
As already stated, the Board could not on the
strength of s.49A alone recover the difference between the uniform 678 tariffs
fixed from time to time and the agreed rate of supply from the appellants for
the period from January 1, 1971 to February 6, 1976 without the aid of s.49B.
S.49B on its terms has no application unless there was a demand raised or
created prior to February 7, 1976, the date of promulgation of the Ordinance.
There is therefore insuperable barrier in applying the uniform tariff under
schdule LP/HT-1 framed by the Board's tariff notification dated May 28, 1974
from the billing month of July 1974 i.e.
from June 1, 1974 to February 6, 1976.
Although the uniform tariff under schedule LP/HT-1 of 1974 was brought into
force from the billing month of July 1974 i.e. with effect from June 1, 1974
the Board never intimated the appellants that they would have to pay charges
for the supply of electricity to them at that rate. Undoubtedly, no letter like
the one dated December 22/24, 1970 demanding payment of charges for the supply
of electricity was however written by the Board to the appellants intimating
them that they would be governed by the schedule LP/HT-1 framed by the Board's
tariff notification dated May 28, 1974. That being so, the appellants would now
be liable for the period in question to pay charges at the uniform tariff as
per schedule HS/LP/-HT- 1 framed by the Board's earlier tariff notification
dated April 26, 1969.
Liability to pay the general surcharge.
That takes us to the question whether the
Board had no power under the Act to levy a surcharge. The word 'surcharge' is
not defined in the Act. Plainly, the word 'surcharge' means an additional or
extra charge or payment:
Shorter Oxford English Dictionary, p.2199. As
held by this Court in Bisra Stone Lime Company Ltd. & Anr. v. Orissa State
Electricity Board & Anr. [1976] 2 S.C.R. 307 a surcharge is in substance an
addition to the stipulated rates of tariff and 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.
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 cl.18 of the agreement. We must however refer to the
decision of this Court in M/s. Titagarh Paper Mills Ltd. v. Orissa State
Electricity Board & Anr.
[1975] 2 S.C.R. 436 where the Court taking
into consideration cl.13 of the agreement therein which was in 679 term similar
to cl.18, had to consider the scope and effect of ss.49 and 59 of the Act and
following the decision in the Indian Aluminium Company's case stated:
"Neither s. 49 nor s. 59 confers any
authority on the Board to enhance the rates of 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 electricity." The Court
accordingly in Bisra Stone Lime Company's case held that the power of revision
of rates of the Board under s.49(1) and (2) as also under s.59 of the Act
remained under suspended animation during the subsistence of a statutory
agreement entered into in conformity with s.49(3) of the Act. But this pro
tempore ban on revision of rates could only last till the legislature
introduced ss.49A and 49B of the Act empowering the Board to revise the rates
and frame uniform tariffs with retrospective effect. This was constitutionally
permissible as indicated by Bhagwati, J. in the Indian Aluminium Company's case
in these words :
"(A) case may conceivably arise where
there may be an overriding statutory provision which expressly or by necessary
implication authorises the public authority to set at naught, in given
circumstances, a stipulation though made in exercise of a statutory
power." The Board was therefore well within its rights in raising a demand
by its letter dated February 1, 1971 that the appellants would be subject not
only to uniform tariffs under Schedule HS/LP/HT-1 applicable to all large
industrial consumers as from January 1, 1971 in terms of cl.18 of the agreement
but also be subject to the general surcharge of 15% for the period commencing
on and from September 16, 1966, the date mentioned in sub-s.(2) of s.49A. The
general surcharge of 15% as also the uniform tariff were part of the general
burden borne by all consumers alike. Whatever may have been the position under
the old s.49, the new section as substituted by 680 the Amendment Act 30 of
1966, makes it plain that the Board can fix uniform tariffs. The power to fix
uniform tariffs must necessarily include power to make uniform increase in
tariffs. S.49A had the effect of removing the Board from the shackles of the
agreement to supply electricity at concessional rate entered into under s.49.
The effect of the non-obstante clause in sub-s.(1) of s.49A was to nullify the
agreement.
Subsidiary issues : Article 31(2) Finally,
there still remains the third aspect. Various subsidiary issues were raised,
namely, whether the demand raised by the Board against the appellants for
payment of the difference between the uniform tariffs and the agreed rate for
the period subsequent to January 1, 1971 was violative of Art.14, Art.19(1)(f)
and (g) and Art.31(2) of the Constitution. Of these, the main contention put
forth by Shri Shanti Bhushan, is that the extinguishment of the right which the
appellants had to get electricity at concessional rate for a period of 20 years
which was enforceable against the Board as held in the Indian Aluminium
Company's case by s.49A, and the conferral of a corresponding benefit to the
Board to revise the tariffs from time to time and to frame uniform tariffs for
supply of electricity to them as respects any period subsequent to September
16, 1966 (here we are concerned with the period subsequent to January 1, 1971),
amounted to deprivation of property without payment of compensation and in contravention
of Art.31(2). He goes to the extent of contending that the matter is concluded
by the seven-Judges' decision of this Court in the case of Madan Mohan Pathak
v. Union of India [1978] 3 S.C.R. 334 where the majority held that the concept
of property in Art.31 is not a narrow concept and at p.359 of the Report
accepted the view expressed by Hegde, J. in the Privy Purse case [1971] 3
S.C.R. 9 that any right which was enforceable through courts was property. We
were referred to several passages in the judgment delivered by Bhagwati, J. to
derive home the point that it was not necessary for the law to provide in so
many words that property was transferred to the State or to a Corporation owned
or controlled by the State for attracting the provisions of Art.31(2) and
particularly emphasis was laid on the following observations :
"Where by reason of extinguishment of a
right or 681 interest of a person, detriment is suffered by him, and a
corresponding benefit accrues to the State, there would be transfer of
ownership of such right or interest to the State. The question would always be
: who is the beneficiary of the extinguishment of the right or interest
effectuated by the law ? If it is the State, then there would be transfer of
ownership of the right or interest to the State, because what the owner of the
right or interest would have lost by reason of the extinguishment would be the
benefit accrued to the State." The Court observed in M.M. Pathak's case
that the direct effect of the impugned Act was to extinguish or put an end to
the debts due from the Life Insurance Corporation to class III and Class IV
employees. This was not disputed on behalf of the Life Insurance Corporation
and the controversy was whether the extinguishment of these debts involved any
transfer of ownership of property to the Life Insurance Corporation. It was
conceded by the learned Attorney-General on behalf of the Life Insurance
Corporation as a proposition of law that an illegal deprivation of a pecuniary
benefit to which any person is entitled under any law amounts to deprivation of
property within the meaning of Art.31(2). He however sought to make a
distinction between extinguishment and transfer of ownership of a debt and
contended that when ownership of a debt is transferred, it continues to exist
as a debt in the hands of the transferee, but when a debt is extinguished it
ceases to exist as a debt and it is not possible to say that the debtor has
become the owner of the debt. In dealing with the contention, the Court observed
at p.368 of the Report, that where by reason of extinguishment of a right or
interest of a person, detriment is suffered by him, and a corresponding benefit
accrues to the State, there would be transfer of ownership of such right or
interest to the State. The Court stated that the question would always be : who
is the beneficiary of the extinguishment of the right or interest effectuated
by the law ? If it is the State, then there would be transfer of ownership of
the right or interest to the State, because what the owner of the right or
interest would have lost by reason of the extinguishment would be benefit
accrued to the State. It referred to the view expressed by Hegde, J. in State
of Madhya Pradesh v. Ranojirao Shinde, 682 [1968] 3 S.C.R. 489, that it was
possible to view the abolition of cash grants under the Madhya Pradesh law
impugned in that case as a statutory transfer of rights of the grantees to the
State and extended the same principle in judging the validity of s.3 of the
impugned Act, and added :
"When a debt due and owing by the State
or a corporation owned or controlled by the State is extinguished by law, there
is transfer of ownership of the money representing the debt from the creditor
to the State or the State owned/controlled corporation.
*** *** *** *** *** The extinguishment of the
debt of the creditor with corresponding benefit to the State or State
owned/controlled corporation would plainly and indubitably involve transfer or
ownership of the amount representing the debt from the former to the latter.
This is the real effect of extinguishment of the debt and by garbing it in the
form of extinguishment, the State or State owned/controlled corporation cannot
obtain benefit at the cost of the creditor and yet avoid the applicability of
Art.31, clause(2)." The Court also observed that the verbal veil
constructed by employing the device of extinguishment of debt cannot be
permitted to conceal or hide the real nature of the transaction.
We fail to appreciate the relevance of the
decision in M.M. Pathak's case to the instant case. The fallacy underlying the
agreement is that it proceeds on the assumption that there is by reason of
ss.49A and 49B of the Act an illegal deprivation of any pecuniary benefit to
which the appellants were entitled and the extinguishment of the right they had
to the supply of electricity at concessional rate for a period of 20 years in
accordance with the agreement amounted to a deprivation of property withing the
meaning of Art.31(2) of the Constitution. While it is true that the concept of
'property' in Art.31 is not a narrow concept and is used in a comprehensive 683
sense, any legal right which can be enforced through a court is a right in the
nature of property within the meaning of Art.31. According to the Court in M.M.
Pathak's case, 'Even an actionable claim is 'property' in Art.31 and can be
compulsorily acquired under cl.2 thereof'. But it is not necessary to enter
upon the controversy whether the State's power of acquisition of property under
Art.31(2) extends to choses of action for purposes of this case. All that we
need notice is that the majority in M.M. Pathak's case, accepted the view of
Hegde, J. in the Privy Purse case that any right which was enforceable through
courts was 'property', but it does not logically follow that the extinguishment
of the right to get electricity at concessional rate by reason of ss.49A and
49B of the Act for the period subsequent to January 1, 1971 necessarily
attracted Art.31(2). All that the appellants had under their contract with the
Board was a defeasible right by reason of cl.34(b) of the agreement as pointed
out by us above. The appellants had contracted themselves by cl.34(b) to be
subject to any subsequent legislation. All that s.49A of the Act does is to
strike at the agreement between the parties. It is an enabling provision and
empowers the Board to revise the tariffs from time to time and to frame uniform
tariffs for supply of electricity to a class of consumers enjoying special
benefit under agreement entered into under s.49(3). The Board undoubtedly was
competent to review the tariff in terms of cl.18 of the agreement as from
January 1, 1971. S.49A liberates the Board from the constraints of the agreed
rate under the agreement entered into by the Board with the appellants under
s.49 of the Act and empowers the raising of demand according to the uniform
tariffs. Here, there was no debt due or owing to the State or a Corporation
owned or controlled by the State.
Where a law does not, in reality, affect a
transfer of ownership or possession, Art.31(2) cannot be attracted. In order to
constitute acquisition within the meaning of Art.31(2), there must be transfer
of ownership of property to the State or to a Corporation owned or controlled
by the State. Cl.2(A) to Art.31 introduced by the Constitution (Fourth
Amendment) Act, 1955 made clear what was meant by 'acquisition or
requisitioning' within the meaning of cl.(2). Unless the taking of property had
taken place in either of the two ways, there was no obligation to pay
compensation under 684 the Constitution. It can hardly be suggested that the
extinction of the right the appellants had under the contract with the Board to
get electric supply at a concessional rate under c1.18 of the agreement for the
period after January 1, 1971 when revision of tariff was due under c1.18
thereof, amounted to acquisition of property under c1.31(2). Further, there was
no question of any transfer of money representing any debt owed by the Board
from the appellants which stood extinguished by reason of ss.49A and 49B of the
Act. We are clearly of the opinion that the principles laid down in M.M.
Pathak's case are in no way attracted to the present case.
Article 14 The contention based on Art.14 and
Art.19(1)(f) and (g) need not detain us for long. Taking up the contention that
the raising of demand by the Board by its letter dated February 1, 1971 for
Rs.11,67,959.95p. at normal tarrif for the billing month January 1971 under
Schedule HS/LP/HT-1 applicable to all large industrial consumers as per the
Board's tariff notification dated April 26, 1969 together with general
surcharge of 15% thereon, and by its letter dated March 12, 1976 for
Rs.21,35,506.72 p. at normal tariff for the billing month February 1976 under
Schedule LP/HT-1 applicable to such large inddustrial consumers framed by the
Board's tariff notificition dated May 28, 1974 together with general surcharge
of 15% thereon, was violative of Art.14 and therefore constitutionally
impermissible inasmuch as the public sector undertakings in the State like the
Hindustan Zinc Limited and Hindustan Copper Limited which were similarly
circumstanced were not subjected to any such liability and such differential
treatment was without any reasonable classification. The contention must be rejected
at the very threshold. There is no averment made by the appellants in any of
the petitions filed before the High Court that while the Board purported to
raise or create demands as against the appellants for payment of the difference
between the uniform tariffs and the agreed rate as respects the period
beginning from January 1, 1971 by making the uniform tariffs of 1969 and 1974
applicable to them together with the general surcharge of 15% thereon, the
large public sector undertakings viz. the Hindustan Zinc Limited and the
Hindustan Copper Limited were allowed the privilege of a concessional rate for
the supply of 685 electricity to them by virtue of agreements entered into
under s.49. On the contrary, the Board in its counter- affidavits specifically pleaded
that all large industrial undertakings with capital investments several times
more than that of the appellants were paying for the supply of electricity at
the normal tariff. The Board particularly gave the instances of the two public
sector undertakings Hindustan Copper Ltd. and Hindustan Zinc Ltd., which were
both industries controlled by the Government of India and were taking heavy
loads with huge investments, were paying at the normal tariff. For instance,
Hindustan Copper Ltd.
whose investments were to the tune of over
Rs.100 crores were paying for the consumption at the normal tariff although the
load of that industry was 31,000 KVA comparable with the load of the industry
set up by the appellants which was 29,412 KVA. The same was the case with
Hindustan Zinc Ltd. We may set out the relevant averment which goes thus :
"It is wrong to say that 1.4.64 has been
appointed as the date to give any benefit to any Corporation owned or
controlled by the Central Government. So far as the Corporations controlled by
the Central Government are concerned, it is submitted that Hindustan Copper,
which is equally a large consumer as the petitioner company, did not get any
supply of electricity at a rate different from what is fixed by the uniform
tariff. As for the other concern namely Hindustan Zinc, it was commissioned in
January 1968 and ever since it was charged at the uniform tariff framed in 1964
plus general surcharge of 15% imposed in 1966. No concession was given to it at
the time when it started functioning. The only concession given was that in
1969 when the rates were revised, the revised rates were not applied to
Hindustan Zinc and it was continued to be charged at the uniform tariff of 1964
plus 15% surcharge till April, 1974. Since May 1974 the increased tariff of
1969 was applied to Hindustan Zinc also and the new tariff of 1974 ever since
its coming into force is applied to it. It is, therefore, absolutely incorrect
to say that 1.4.64 is fixed in order to give any benefit to the Corporations controlled
by the Central Government because 686 Hindustan Zinc started production
sometime in 1968 and Hindustan Copper much later. The date 1.4.64 is therefore
more reasonable being the date on which the uniform tariffs were framed by the
Board." The Board further averred that apart from these two Corporations
there are several other industries controlled by the Central Government or the
State Government commissioned after April 1, 1964, and all these industries
were paying at the normal tariffs fixed by the Board from time to time.
The argument of differential treatment is an
argument of despair. The Board has averred that there is one grid which is fed
from supplies from different sources whether thermal, hydel or atomic and it
was impossible to say what power came from which source. In 1971 the Atomic
Power Project started to supply power and the Board was being built at the rate
of about 14p. per unit. Later on, due to the breakdown of this source the Board
had to purchase large quantum of electricity from various other sources at a
cost falling between 18 to 19p. per unit. This was done in order to maintain
the supply of electricity to the consumers in the State, including the
appellants. It is evident that the cost of generation in the grid was far higher
than the concessional rate of 3p. per unit at which the appellants were getting
the supply. As a result the Board was incurring very heavy losses on account of
this low rate for a large bulk consumption. It would have been unreasonable for
the Board not to have applied the uniform tariffs to the appellants as from
January 1, 1971 when the Board derived the power to revise the rate under c1.18
of the agreement.
The Board by its letter dated December 24,
1970 after drawing the attention of the appellants to c1.18 of the agreement.
The Board by its letter dated December 22/24, 1970 after drawing the attention
of the appellants to c1. 18 of the agreement, intimated that they would be
charged as from January 1, 1971 at the normal tariff schedule HS/LP/HT- 1 fram
ed by the Board's tariff notification dated April 26, 1969 plus 15% general
surcharge thereon. It was stated that the component of cost of generation had
been worked out in the office of the Board and it was higher than 25% of the
cost fixed at the time of the execution of the agreement, as detailed therein.
The component of cost of generation during the year 1969-70 was 5.17p./Kwh.
This, we are informed, works 687 out to 7.67 p. per unit without the general
surcharge of 15% and to 8.73p. per unit including the surcharge. The
concessional rate as stipulated in c1. 17 of the agreement was more or less 3p.
per unit. The uniform tariff of 1969 works out approximately to 7.67p. per
unit, the uniform tariff of 1974 at 14.64p. per unit, the uniform tariff of 1976
at 16.01p. and the uniform tariff of 1978 at 18.83p.
The appellants were thus practically getting
their electricity free of all charge. Even the uniform tariff under HS/LP/HT-1
was very much less than the price at which the Board was getting its supply. In
the premises, there was no reason why the appellants should not be treated
alike with all other large industrial undertakings which were all subjected to
payment of the uniform tarrifs fixed from time to time. The contention based on
Art.14 must therefore fail.
Article 19(1)(g) and (g).
The next contention based on Art.19(1)(f) and
(g) cannot obviously prevail. The present case concerns only with sale of goods
i.e. electricity and the price to be paid therefor, for 'tariff' is nothing but
the price. The contract itself provided for revision of the rate under c1.18 of
the agreement after January 1, 1971. The Board was within its powers in
applying the uniform tariffs to the appellants after the period stipulated for
had expired.
There was nothing unreasonable for the Board
to have enforced the uniform tariffs as against the appellants as from January
1, 1971. Reasonableness of the increase in tariff is established by the fact
that the Board was not bound to supply electricity to the appellants at a concessional
rate by incurring operational losses beyond that date. The appellants have not
shown nor produced any material to show that they have suffered any loss on
account of the increase in tariff. A grievance was made on behalf of the Board
that the appellants had not despite repeated requests produced the
balance-sheets to show how the increase in tariff made serious in-roads on
their business.
At the hearing before us, learned counsel for
the appellants placed the annual reports of the Delhi Cloth & General Mills
Ltd. for the years 1978-79 to 1983-84, and the profit and loss account of
Messrs Shriram Vinyl & Chemical Industries from the years 1965-66 to
1982-83. In these reports it is stated that the claim of the Board for payment
of the difference between 688 the uniform tariffs and the agreed rate had been
upheld by the High Court and that the Company had preferred appeals before this
Court. It is further stated that in compliance with this Court's interim order
directing them to pay Rs.3 crores on account of the difference in five
quarterly instalments commencing from December 1980, it had paid the
instalments as directed which were debited to the Profit & Loss Account and
treated as allowable deduction for computing the provision for taxation in the respective
earlier years. It is also stated that as at June 30, 1984 there was an
unprovided liability on this account of 12 crores 16.44 lakhs which includes
interest of 5.09 crores. A memorandum of hypothecation had been executed
creating a charge on the whole of the movable plant, machinery and equipment of
the PVC plant at Kota in favour of the Board for an amount of Rs.4.57 crores
for which Rs.60.92 lakhs in fixed deposit accounts with the banks had been
given as security. The Profit & Loss Account of the PVC plant at Kota, it
is stated in foot note 4 : From the year 1980-81, 100% payment to RSEB has been
made on the basis of uniform tariff, under orders of the Supreme Court. There
is nothing to show that the appellants had not the capacity to bear the burden
of uniform tariffs. It cannot be said that the impugned demands made by the
Board as against the appellants were confiscatory in nature. When all the large
industrial undertakings including the public sector undertakings of the
Government of India and the State Government were paying for the supply of
electricity at uniform tariffs fixed from time to time, the appellants had no
right to claim immunity from it.
Promissory estoppel.
Question of promissory estoppel does not
really arise and, in our opinion, rightly not pressed. The appellants have laid
no foundation in the pleadings for application of the doctrine of promissory
estoppel. There is no question of any estoppel against the Board inasmuch as
the appellants did not open their PVC plant on account of any assurance or
promise by the Board. The opening part of the agreement itself shows that the
appellants approached the Board for supply of high tension power for their
industrial complex and the Board complied with the request. There was thus no
question of any promise. Even otherwise, the appellants have not made out that
but for the 689 statutory contract for supply of electricity at a concessional
rate under s.49 they would not have established their industry. It is
significant to note that there were number of incentives offered by the State
Government to enterpreneurs to set up their industries in the State, such as,
land at concessional rates, reduced development charges, facilities of railway
siding free of cost and free of rent, reduced charges for industrial water,
special arrangement regarding disposal of affluence, loan for subsidiary
housing schemes, etc. In any event, the Board is not the Government and the
appellants cannot rely on promissory estoppel for the incentives offered by the
Government.
To sum up : (1) By virtue of the provisions
contained in ss.49A and 49B of the Electricity (Supply) Act, 1948 as introduced
by the Electricity (Supply) (Rajasthan Amendment) Act, 1976, it was lawful for
the Rajasthan State Electricity Board to revise the special rate of tariff
agreed upon and to raise a demand against the appellants by its letter dated
February 1, 1971 for payment of the difference between the uniform tariff under
schedule HS/LP/HT-1 applicable to all large industrial consumers under the
Board's tariff notification dated April 26, 1969, and the concessional rate in
terms of c1.18 of the agreement between the parties dated July 28, 1961 for the
period from January 1, 1971 upto February 6, 1976 i.e. the date of promulgation
of the Electricity (Supply) (Rajasthan Amendment) Ordinance, 1976, as also the
general surcharge of 15% thereon levied by the Board by its tariff notification
dated April 26, 1969 as from September 16, 1966 onwards. (2) The Board's letter
dated March 12, 1976 being subsequent to the date of promulgation of the
Ordinance, the demand raised by the Board for payment of the revised uniform
tariff under schedule LP/HT-1 applicable to all such large industrial consumers
under the Board's tariff notification dated May 28, 1974 purporting to act
under ss.49A and 49B of the Act read with c1.18 of the agreement, was not
validated by s.49B and therefore the Board was only entitled to recover uniform
tariff at the same rate i.e. under schedule HS/LP/HT-1 of 1969 for the period
from July 1, 1974 to February 6, 1976, that is, prior to the date of
promulgation of the Ordinance.
(3) The Board was entitled by the terms of
s.49A to raise a demand for payment of the revised uniform tariff under
schedule LP/HT-1 of 1974 w.e.f. February 7, 1976 690 and thereafter as per the
revised uniform tariffs framed from time to time as applicable to all large
industrial consumers in terms of c1.18 of the agreement. All other contentions
viz. that the impugned demands were violative of Art.14, Art.19(1)(f) and (g)
and Art.31(2) of the Constitution stand rejected.
In that view of the matter, the bill
furnished by the Rajasthan State Electricity Board dated March 12, 1976
requiring the appellants to pay an amount of Rs.21,35,506.72p. for the billing
month of February 1976 at the revised uniform tariff under schedule LP/HT-1
framed by the Board's tariff notification dated May 28, 1974 together with the
general surcharge of 15% must be quashed, and the Board shall instead raise a
fresh demand on the appellants to pay uniform tariff under schedule HS/LP/HT-1
framed under the Board's tariff notification dated April 26, 1969 for the
period from July 1, 1974 to February 6, 1976 together with 15% general
surcharge thereon. It is declared that the Board was entitled under s.49A of
the Act to raise a demand against the appellants for payment of the revised
uniform tariff under schedule LP/HT-1 of 1974 w.e.f. February 7, 1976 and
thereafter as per the revised uniform tariffs, framed from time to time, as
applicable to all large industrial consumers together with the general
surcharge of 15% thereon in terms of c1.18 of the agreement.
The result therefore is that all the appeals,
except C.A.No. 2675/80, must fail and are dismissed. Civil Appeal No.2675/80
arising out of the judgment and order of the Division Bench of the High Court
dated September 12, 1980 dismissing S.B. Writ Petition No.8579/80 filed by the
appellants challenging the validity of the aforesaid bill dated March 12, 1976 sent by the Rajasthan State Electricity Board for payment of
Rs.21,35,506.72p. for the billing month of February 1976 is partly allowed. The
said Writ Petition is allowed to the extent that the bill for payment of
Rs.21,35,506.72p. for the billing month of February 1976 at the revised uniform
tariff under schedule LP/HT-1 of 1974 is quashed for the reasons stated above.
It is, however, declared that the Rajasthan State Electricity Board is
empowered in terms of s.49A of the Electricity (Supply) Act, 1948, as
introduced by the Electricity (Supply) (Rajasthan Amendment) Act, 1976 to 691
raise a fresh demand for payment under schedule HS/LP/HT-1 of 1969 for the
period from July 1, 1974 to February 6, 1976. It is further declared that the
Board is entitled to recover from the appellants charges under schedule LP/HT-1
of 1974 as from February 6, 1976 and thereafter as per the revised uniform
tariffs, framed from time to time, as applicable to all large industrial
consumers together with the general surcharge of 15% thereon in terms of c1.18
of the agreement.
The appellants having substantially failed
must pay two-thirds of the costs of these appeals to the Rajasthan State
Electricity Board. The State of Rajasthan will bear its own costs.
A.P.J. Civil Appeals Nos. 2676 to 2679/80
dismissed.
Civil Appeal No. 2675 of 1980 partly allowed.
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