Ashok
Soap Factory & Anr Vs. Municipal Corporation of Delhi & Ors [1993] INSC
18 (12 January 1993)
Yogeshwar
Dayal (J) Yogeshwar Dayal (J) Verma, Jagdish Saran (J) Venkatachala N. (J)
CITATION:
1993 SCR (1) 124 1993 SCC (2) 37 JT 1993 (1) 128 1993 SCALE (1)98
ACT:
Delhi
Municipal Corporation Act, 1957:
Section
283--Levy of charges for supply of electricity--Minimum consumption guarantee
charges for 'large industrial powers' consumers--Increase in rate in respect of
Arc/induction furnaces--Validity of.
Electricity
Act, 1910:
Section
21--Applicability to local authorities--Delhi Municipal Corporation, being a
licensee by virtue of provisions of the Delhi Municipal Corporation Act, and
not one licensed under Part II to supply energy, Section not applicable.
Section
22, proviso--Proviso does not deal with the minimum consumption charges.
Constitution
of India, 1950:
Article
14--Price fixation--Fixation of tariff, a legislative function--Hence, fixation
of higher rate not open to challenge on ground of non-disclosure of reasons in
the absence of any unreasonableness or arbitrariness--Since arc/induction
furnaces constitute a class by themselves, question of discrimination does not
arise.
HEAD NOTE:
Section
283 of the Delhi Municipal Corporation Act, 1957 em- powered respondent No.1
Delhi Municipal Corporation to levy charges for the supply of electricity on
such rates as may be fixed from time to time by it. For the purpose of charging
the consumers, the Corporation had divided the consumers into different
categories/classes providing for different tariffs for each category. One of
the categories was 'large industrial powers' (LIP) consumers. The consumers who
had a sanctioned load of 100 KWs fell in the category of large industrial
powers.
125
For the levy of charges for the supply of electricity there were two systems of
tariff, namely, the flat rate system and the other two-part tariff system.
Under the former a flat rate was charged on the units of energy consumed while
the latter system was meant for big consumers of electricity i.e. industrial
power, and it was comprised of two charges (1) minimum consumption guarantee
charges (called demand charges) and (2) energy charges for the actual amount of
energy consumed.
Under
the two-part system an LIP consumer would pay minimum guarantee consumption
charges at the rate fixed by the respondents. If the LIP consumer did not
consume the specified minimum quantity of electricity or no energy at all even
then he had to pay the minimum guarantee charges.
But in
case the consumer consumed more electricity then what was prescribed by the
minimum guarantee charges, then the consumer paid the minimum guarantee charges
and also paid the electricity charges for the actual consumption of
electricity, beyond the minimum guarantee charges, in such a manner that the
minimum guarantee charges were merged in the total bill of electricity consumed
and a rebate was given to the consumer. In other words, if a consumer consumed
more than the specified minimum quantity of electricity then, in effect, he
would pay for electricity which was actually consumed by him.
For
the period from 1985-86 to 1988-89, the respondents had fixed rates of minimum
consumption guarantee charges at the rate of Rs. 40 per KVA for 1000 KVA and
Rs38 per KVA above 1000 KVA. However, pursuant to a Resolution passed by the
respondent Corporation approving the resolution passed by the D.E.S.C., there
was an upward revision of rates of minimum consumption guarantee charges in
respect of arc/induction furnaces.
As a
result, for demand charges for the first 1000 K-VA of billing demand for the
month, instead of tariff being Rs. 40 per or part thereof, it was enhanced to Rs.
340 per KVA- or part thereof.
The
appellants had set up/installed arc/induction furnaces for the manufacture of
castings in their factories.
Electricity
was one of the important raw materials for the appellants and had obtained
electricity from the respondents. The sanctioned load was more than 100 KWS
and, therefore, they fell into the LIP category and the two-part tariff was
applicable to them. 'The appellants filed writ petitions before the High 126
Court challenging the enhancement of the minimum guarantee charges.
It was
contended that the provisions of Section 21 of the Indian Electricity Act, 1910
applied and the decision to increase minimum charges was contrary to Section
21(2) of the Act, that changing the rates at which minimum charges were to be realised
amounted to altering or amending the conditions of supply and this could not be
done without the previous sanction of the State Government, and therefore, the
proposed increase was in violation of Section 21(2) of the 1910 Act, that the
minimum guarantee charges could only be levied under the proviso to Section 22
of the 1910 Act, that under the proviso to Section 22 the licensee could only
charge that amount which would give it a reasonable return on the capital
expenditure and cover standing charges incurred by it in order to meet the
possible maximum demand, that the respondents had to satisfy the Court that the
minimum demand charges had been raised to Rs. 340 from Rs.40 and that the
additional capital expenditure had been incurred, which would justify Rs. 340
being charged as a reasonable return on the said capital expenditure, and that
the tariff vis-a-vis a consumer owning are furnaces was violative of Article 14
of the Constitution inasmuch as the other bulk consumers in the category of LIP
consumers had not been so treated.
The
High Court dismissed the writ petitions holding that in case the local
authority was the licensee, no prior approval of the State Government was
required in law for changing the rates, and that apart from proviso to Section
22, the agreement between the parties justified the claim of the respondent- Corporation
for minimum consumption guarantee charges.
Dismissing
the appeals preferred by the consumers- appellants, this Court
HELD:1.1.
Section 21(2) of the Act was applicable to the licensees other than the local
authorities. 'Licensee' as defined in the 1910 Act in Section 2(h) means any
person licensed under Part 11 to supply energy'. The D.M.C., which is the
licensee in the present case is not a licensee licensed under Part 11 to supply
energy. D.M.C. is licensee by virtue of the provisions contained in the Delhi
Municipal Corporation Act, 1957. [136G-H, 137A] 1.2.The proviso to Section 22,
talks about a separate supply unless 127 he had agreed with the licensee to pay
him such minimum annual sum'. In the present case, there is no question of any
separate supply or any agreement in relation to minimum annual sum. Section 22
deals with totally different situation and has nothing to do with the minimum
consumption guarantee charges provided as part of the tariff which in turn was
part of the agreement between the parties. [137E-F] 1.3.The reasons for the
revision of minimum consumption charges, in respect of arc/induction furnaces,
were that in many instances it was noticed that the meters where bulk supply
was made were found to be defective and the consumption recorded was found to
be extremely low causing loss of huge revenue. The arc/induction furnaces
normally run continuously and, therefore, the D.E.S.C. was justified to
increase the rate of minimum consumption guarantee charges. The variation in the
electricity consumed by different consumers indicated that the charge of
pilferage of electricity and gross under-utilisation or consumption of
electricity compared to the sanctioned load was not without foundation. The
tabulated statement of the consumers using induction furnaces placed on record
by the respondents deals with 52 consumers including most of the appellants.
This statement shows large variation of the electricity consumed.
It is
surprising that the units are still surviving by working for a short period. On
the assumption that the electricity consumed is as per the sanctioned load, the
approximate number of hours for which the induction furnaces have been worked
in a month has been stated in the said statement. There was thus a reasonable basis
to assume theft by substantial number of arc/induction furnaces consumers. The
consumer contracts for a minimum supply of electricity of certain dimensions
and the D.M.C. which is licensee in the present case, has to buy energy by way
of bulk supply from outside sources and has to keep it readily available for
the consumer for the whole year round. Surely the consumer, who contracts for
such high quantity of energy, does so because of its need and not for keeping
it as stand by, without paying for, it. No licensee can possibly keep such
enormous quantity of electricity in reserve for a consumer, month after month,
without its consumption. That is why in the tariff, which was part of the
agreement, for LIP consumers there was two part tariff system partly minimum
consumption guarantee charges and partly for actual energy consumed. [138F-H,
139A-B-D] 1.4.It was also stipulated that the minimum consumption guarantee 128
charges would not be payable if a consumer utilises or consumes 60% of the
sanctioned load. The rate per unit had not been changed. It was only the
minimum guarantee charges which has been revised. If a consumer consumes more
than 60% of the sanctioned load, then he is not adversely affected by the
revision of the minimum demand charges from Rs. 40 per KVA per month to Rs. 340
per KVA per month. It is difficult to appreciate or understand how the
manufacturers using arc/induction furnaces could have such variation in the
consumption of electricity, as indicated in the tabulated statement, except to
suggest that there was large scale pilferage of electricity. It is not easy to
accept that induction furnaces having sanctioned loads of more than 1000 KW
consuming electricity, if converted into approximate number of hours worked in
a month at the maximum load, being as little as 18.1 hours especially when
there were instances of other induction furnaces consuming far more number of
units per month. The respondents had to keep in readiness the supply of energy
as per the sanctioned load of various consumers and were incurring expenditure
for the generation, supply or purchase of the same. When the consumers were not
paying for it, the respondents obviously had no option but to revise the
minimum demand charges so as to cover up and make good the generating and
supply costs.
[139E-H,
140A] 1.5.In the present case, the respondents themselves have placed figures
to demonstrate the formula on the basis of which the rate of Rs. 340 per KVA
has been fixed. Ile formula shows that if 60% of the load sanctioned is utillsed
then there is no unreasonableness or excessiveness in the tariff. [140D]
1.6.The recommendations of the D.E.S.C. were justified on facts and were
rightly accepted by the D.M.C. in raising the minimum consumption guarantee
charges to Rs. 340 per K-VA per month for the first 1000 K-VA which are neither
unreasonable nor arbitrary. [140F] 1.7.The tariff was fixed by D.E.S.C. with
the approval of the D.M.C. in view of the power conferred under Section 283 of
the Corporation Act [140H,141A] 2.1.The fixation of tariff is a legislative
function and the only challenge to the fixation of such levy can be on the
ground of unreasonableness or arbitrariness and not on demonstrative grounds in
the sense that the reasons for the levy of charge must be disclosed in the
order 129 imposing the levy or disclosed to the court, so long as it is based
on objective criteria. [140B] 2.2.As bulk consumers belonging to LIP category,
the consumers of arc/induction furnaces are a class by themselves and, in any
case, the revision is as per the agreement between the licensee and the
consumers which is neither unreasonable nor arbitrary and therefore, there Is
no discrimination. All the appellants had entered into agreements with the
respondent-Corporation and clause 15(a) thereof provided that the consumer
shall be liable to pay for whatever surcharge or increase in these rates as may
from time to time be levied or made by the Undertaking. Any other method of
charging decided by the Undertaking shall also be applicable. [140G, 134G,
135B]
CIVIL
APPELLATE JURISDICTION : Civil Appeal No. 1478 of 1990.
From
the Judgment and Order dated 1.3.90 of the Delhi High Court in Civil Writ
Petition No. 1744 of 1989.
WITH CA.
Nos. 1474-1476, 1473, 1479-1483, 1477, 1484-1511, 1518, 1543 of 1990 and 4206
of 1991.
R.K
Jain, Harish N. Salve, P.P. Tripathi, Tripurari Ray, Mukul Mudgal Vineet Kumar,
Ms. Kamini Jaiswal, Ashok Mathur and Ranjit Kumar for the appearing parties.
The
Judgment of the Court was delivered by YOGESHWAR DAYAL, J. These are batch of
appeals against the judgment of Delhi High Court dated 1st March, 1990 whereby
the High Court by a common judgment disposed of a bunch of writ petitions,
inter alia, filed by Gulab Rai against the Municipal Corporation of Delhi and
others.
The
challenge in the writ petitions was to the Resolution of the Municipal
Corporation of Delhi (hereinafter referred to as M.C.D.) whereby it approved
the proposal of the Delhi Electricity Supply Committee (in short D.E.S.C.) to
enhance minimum consumption guarantee charges from Rs. 40 per KVA to Rs. 340
per KVA in respect of arc/induction 130 furnaces.
The
petitioners in the writ petitions had set up/installed arc/induction furnaces
for the manufacture of castings and have their factories in Delhi.
One of
the important raw-materials for the writ petitioners is electricity. Each of
the petitioners had obtained electricity from the respondents and the
sanctioned load is more than 100 KWS. The exact sanctioned load, among the
various writ petitioners, varies, depending upon the size and capacity of the
furnaces set up by them but each one of them has a sanctioned load of more than
100 KWS.
The
case of the petitioners before the High Court was that Section 283 of the Delhi
Municipal Corporation Act, 1957 (hereinafter referred to as 'the Corporation
Act') empowers respondent No.1 (D.M.C.) to levy charges for the supply of
electricity on such rates as may be fixed from time to time by the D.M.C. in
accordance with law. For the purpose of charging the consumer, the D.M.C. has
divided the consumers in different categories/classes providing for different
tariffs for each category. One of the categories is 'large industrial power'
(LIP) consumers. The consumers who have a sanctioned load of 100 KWS fall in
the category of large industrial powers. The writ petitioners fall under this
category as each one of them has a sanctioned load of more than 100 KWS. For
the levy of charges for the supply of electricity there are two systems of
tariff which are followed, namely the flat rate system and the other two- part
tariff system. Under the former, a flat rate is charged on the units of energy
consumed while the latter system is meant for big consumers of electricity i.e.
industrial power, and it is comprised of two charges (1) minimum consumption
guarantee charges (called demand charges) and (2) energy charges for the actual
amount of energy consumed.
It was
the case of the petitioners that two-part tariff system was applicable to them.
Under this system an LIP consumer pays minimum guarantee consumption charges at
the rate fixed by the respondents. If the LIP consumer does not consume the
specified minimum quantity of electricity or no energy at all even then he has
to pay the minimum guarantee charges. But in case the consumer consumes more
electricity that what is prescribed by the minimum guarantee charges then the
consumer pays the minimum guarantee charges and also pays the electricity
charges for the actual consumption of electricity beyond the minimum 131
guarantee charges, in such a manner that the minimum guarantee charges are
merged in the total bill of electricity consumed and a rebate is given to the
consumer.
In
other words, if a consumer consumes more than the specified minimum quantity of
electricity then, in effect, he win pay for electricity which is actually
consumed by him.
For
the period from 1985-86 to 1988-89 the respondents had fixed rates of minimum
consumption guarantee charges at the rate of Rs. 40 per KVA for 1000 KVA and Rs.
38/per KVA above 1000 KVA. The tariff for the LIP consumers in respect of the
aforesaid period, including the minimum guarantee charges, as fixed by the
respondents was as follows (d) Tariff Demand charges First 1000 KVA of billing
demand for the month Rs. 40.00 per KVA or part thereof.
All
above 1000 KVA of billing demand for the month. Rs. 38.00 per KVA or part
thereof.
First
5,00,000 units per month at 15 paise per unit.
All
above 5,00,000 units per month at 84 paise per unit.
Subject
to:
a
maximum overall rate of Rs. 1.10 per KVA without prejudice to the minimum
payment as laid down in item (g) below and adjustment clause at (xvii) above
under General Conditions of applications.
Item
(g) of the said tariff prescribes that the minimum bill would be the amount of
the demand charges based upon the KVA of billing demand. Item (g) reads as
under:- "(g) Minimum Bill The amount of the demand charges based upon the
KVA of billing demand.' 132 The billing as per the aforesaid tariff had been
explained by the petitioners before the High Court with the following
illustration '(a) If a consumer with a sanctioned load of 1000 KVA does not
consume any energy in a given month, he would be liable to pay the minimum
guarantee charge of Rs. 40,000 i.e. 1000 KVA (sanctioned load/contracts demand)
x 40 (minimum guarantee charge) = Rs. 40,000 Even if he consumes electricity,
but the value of the units actually consumed by him works out to less than Rs.
40,000 which is the minimum consumption guarantee charges, even then he will
have to pay the minimum consumption guarantee charges of Rs. 40,000.
(b)In
the event one consumer consumes energy of the value of more than Rs. 40,000,
then the billing would be done in the following manner :- Assuming that the
consumer consumes 80,000 units of electricity :- 1000 KVA (sanctioned load)= Rs.
40,000 X 40 (rate of minimum guarantee charges). 80,000 (units consumed) 0.85 paise
(energy charge)= Rs. 68,000 per unit. ------------------------ TotalRs. 1,08,000
---------------------- In terms of the tariff, the maximum charge cannot be
more than the over all rate of Rs. 1.10 per unit consumed.
Therefore,
80,000 units consumed would be chargeable at the maximum rate of Rs. 1.10 per
unit which works out to Rs.
88,000.
Since the amount of Rs. 1,08,000 is higher than Rs. 88,000 i.e. by Rs. 20,000 a
rebate of Rs. 20,000 would be given to the consumer and the consumer would be
billed only for Rs. 88,000.
It
would be thus evident from the above illustration that the consumer, in any
event, has to pay the minimum guarantee 133 charge even if the value/price of
the energy actually consumed is more than the minimum consumption guarantee
charges, the amount of the minimum consumption guarantee gets merged into/with
the energy charges." It was then submitted on behalf of the writ
petitioners that the General Manager of respondent No.2 wrote a letter dated 24th January, 1989 to DE.S.C. inter alia, proposing
revision of rates of minimum consumption guarantee charges in respect of arc/
induction furnaces. In this letter the General Manager gave the figures of the
fixed expenditure per KW per month. It was stated that the rates of minimum
consumption guarantee were fixed in 1985 and the increase in fixed expenditure
per KW per month necessitated the revision of rates of minimum consumption
guarantee charges. It was also mentioned that the transmission and distribution
losses were quite high and they fell into two categories, namely, technical
losses and commercial losses. The cause for commercial losses was explained by
the General Manager in the following words :- "The Commercial losses are
also attributed to pilferage/ fraudulent abstraction of energy etc. The minimum
consumption guarantee being quite low also attributes to the tendency of
fraudulent abstraction of energy. After giving a serious thought to reduce the
pilferage/fraudulent abstraction of energy, it has been felt desirable to
revise the rate of minimum consumption guarantee to a reasonable level so that
consumers are not attracted for such unfair means and the rates are
commensurate with the fixed expenditure being measured by the
undertaking." In the proposal contained in this letter, there was no
suggestion for increase of minimum consumption charge for domestic category but
for other categories increase was recommended and in respect of aec/induction
furnaces the increase for minimum consumption guarantee charge was to be Rs.
340 instead of Rs. 40 per KVA.
This
proposal contained in the letter dated 24th January, 1989 was discussed by the
D.E.S.C. in its metting held on 9th March, 1989 and the case was referred back
to the General Manager to inform the D.E.S.C. whether the respondent was
recovering its dues from the bulk supply consumers based on their actual
consumption. Pursuant thereto, the 134 General Manager wrote another letter
dated 23rd March, 1989 to D.E.S.C. and inter alia, stated that the billing is
normally done on the basis of consumption recorded in the meters but in many
instances it has been noticed that meters were found to be defective. The
consumption recorded was found to be much less than the consumption which was
recorded in the previous year and when compared to the connected load, the
consumption was found to be extremely less in many cases causing loss of huge
amount to the Undertaking. It was also stated in this letter that for the
aforesaid reason "the proposal was put up to D.E.S.C. for levy of higher
minimum consumption charges in the case of arc/induction furnaces on basis of
their load. It is worth mentioning that these furnaces normally run
continuously and, therefore, levy of minimum charges is considered jus- tified."
The aforesaid proposal of the General Manager was accepted by D.E.S.C. by
Resolution dated 30th March, 1989 and it recommended to the D.M.C. that the
proposed revised rates of minimum consumption guarantee charges be approved
only in respect of plastic and arc/induction furnaces in their respective
categories.
Pursuant
to the aforesaid Resolution of the D.E.S.C., the D.M.C. also vide its
Resolution dated 1st May, 1989 approved the enhancement of the minimum
consumption guarantee charges only in respect of arc/induction furnaces to Rs.
340 per KVA or part thereof instead of Rs. 40/ per KVA.
The
writ petitions, out of which the present appeals arise, were filed by the
owners of arc/induction furnaces challenging the aforesaid enhancement of the
minimum consumption guarantee charges.
The
result of the enhancement by the aforesaid Resolution of the D.M.C. was that
for demand charges for the first 1000 KVA of billing demand for the month,
instead of tariff being Rs. 40 per KVA or part thereof it was enhanced to Rs.
340 per KVA or part thereof.
It is
common case that all the writ petitioners had entered into agreements with the
D.M.C and clause 15(a) thereof provided as follows:- "15(a) The consumer
shall pay each month to the Undertaking for electrical energy supplied during
the preceding month such amount as shall be calculated and ascertained in
accordance 135 with the Rate-Schedule L.I.P. attached hereto.
The
rates contained in the schedule are those in force at the time of executing
this agreement. The consumer shall be eligible for whatever reduction or rebate
as may be granted on the rates and shall be liable to pay for whatever
surcharge or increase in these rates as may from time to time be levied or made
by the Undertaking. Any other method of charging decided by the Undertaking
shall also be applicable.' The rate schedule of the L.I.P. consumers, which was
part of the agreement, for the year 1988-89 has already been reproduced above.
Various
contentions were urged by the appellants before the High Court. One of the main
contentions raised was that the provisions of section 21 of the Indian
Electricity Act, 1910 (hereinafter referred to as 'the 1910 Act') apply and the
decision to increase minimum charges is contrary to section 21(2) of the said
Act.
it was
submitted that changing the rates at which minimum charges are to be realised
amounts to altering or amending the conditions of supply and this could not be
done without the previous sanction of the State Government. Adraittedly the
State Government had not, in the present case, granted the approval for the
change in the rates and, therefore, the proposed increase was in violation of
section 21(2) of the 1910 Act. The High Court rejected this submission and held
that in case the local authority was the licensee, no prior approval of the
Government for changing the rates is required in law.
It was
next submitted before the High Court that the minimum guarantee charges can only
be levied under the proviso to section 22 of the 1910 Act. It was submitted
that under the proviso to section 22 the licensee can only charge that amount
which will give it a reasonable return on the capital expenditure and cover
standing charges incurred by it in order to meet the possible maximum demand.
According to the learned counsel the respondents have to satisfy the Court that
the minimum demand charges have been raised to Rs. 340 from Rs. 40 and that the
additional capital expenditure had been incurred which would justify Rs. 340
being charged as a reasonable return on the said capital expenditure.
The
High Court rejected this submission and took the view that apart 136 from
proviso to section 22, the agreement between the parties justified the claim of
the D.M.C. for minimum consumption guarantee charges.
The
next submission of the appellants was that the tariff viz-a-viz a consumer
owning arc furnace was violative of Article 14 of the Constitution in as much
as the other bulk consumers in the category of LIP consumers have not been so
treated. The High Court rejected this contention also and dismissed the writ
petitions.
Before
us also the arguments have been uged by the various counsel who appeared during
the hearing of the batch of the appeals on similar lines.
Before
considering the first submission based on the provisions of section 21(2) of
the 1910 Act it would be useful to notice the provisions thereof. Section 21(2)
reads as follows :- "21(2) A licensee may. with the previous sanction of
the State Government, given after consulting the State Electricity Board and
also the local authority, where the licensee is not the local authority, make
conditions not inconsistent with this Act or with his licence or with any rules
made under this Act to regulate his relations with persons who are or intend to
become consumers, and may, with the like sanction given after the like
consultation, add to or alter or amend any such conditions; and any conditions
made by a licensee without such sanction shall be null and void :
Provided
that any such conditions made before that 23rd day of January, 1922 shall, if
sanctioned by the State Government on application made by the licensee before
such date; as the State Government may, by general or special order, fix in
this behalf, be deemed to have been made in accordance with the provisions of
this Sub-section." It will be noticed that this provision is applicable to
the licensees other than the local authorities. "Licensee" as defined
in the 1910 Act in section 2(h) means 'any person licensed under part II to
supply energy'. The D.M.C., which is the licensee in the present case is not a
licensee licensed under part 11 to supply energy. D.M.C. is licensee by virtue
of the 137 provisions contained in the Delhi Municipal Corporation Act, 1957.
Coming
to the second submission urged before the High Court the provisions of section
22 of the 1910 Act may be noticed :
"22.
Obligation on licensee to supply energy where energy is supplied by a licensee,
every person within the area of supply shall, except insofar as is otherwise
provided by the terms and conditions of the licence, be entitled, on
application, to a supply on the same terms as those on which another person in
the same area is entitled in similar circumstances to a corresponding supply :
Provided
that no person shall be entitled to demand, or to continue to receive, from a
licensee a supply of energy for any premises having a separate supply unless he
has agreed with the licensee to pay to him such minimum annual sum as will give
him a reasonable return on the capital expenditure, and will cover other
standing charges incurred by him in order to meet the possible maximum demand
for those premises, the sum payable to be determined in case of difference or dispute
by arbitration." The reliance before us was placed by the learned counsel
for the appellants on the proviso to section 22. It will be noticed that the
proviso talks about 'a separate supply unless he has agreed with the licensee
to pay him such minimum annual sum'. In the present case there is no question
of any separate supply or any agreement in relation to minimum annual sum.
Section 22 deals with totally different situation and has nothing to do with
the minimum consumption guarantee charges provided as part of the tariff which
intern was part of the agreement between the parties.
In the
present case, on facts, the challenge is to the tariff. As stated above, the
tariff is the two part tariff system. The two part tariff system is comprised
of two charges (i) minimum consumption guarantee charges called demand charges
and (ii) energy charges for the actual amount of energy consumed. Under this
system an LIP consumer pays a minimum guarantee consumption charges at the rate
fixed by the D.M.C. If the LIP consumer does not consume the specified minimum
quantity of electricity or no energy at all even then he has to pay minimum
consumption guaran- 138 tee charges. But in case the consumer consumes more
electricity than the minimum, then the consumer pays the electricity charges
for the actual consumption of electricity beyond the minimum consumption
guarantee charges, in such a manner that minimum consumption guarantee charges
are merged in the total bill for electricity consumed. In other words, if a consumer
consumes more than the specified minimum quantity of electricity then, in
effect, he will pay for electricity which is actually consumed by him. As
stated earlier the appellants have obtained licenses for the supply of
electricity to a sanctioned load of more than 100 KW and they fall in the
category of LIP and the two part tariff is applicable to them. For the period
1985-86 to 1988-89 the respondents had fixed rates of minimum consumption
guarantee charges at the rate of Rs. 40 per KVA for 1000 KVA and Rs. 38 per KVA
for consumption above 1000 KVA.
We had
already noticed the reasons which persuaded the D.E.S.C. to justify &
recommend the increase in minimum consumption guarantee charges to the D.M.C.
The commercial losses mentioned in the letter of the General Manager were
attributed to pilferage/fraudulent abstraction of energy etc. The minimum
consumption guarantee charges being quite low also attributed to the tendency
of fraudulent abstraction of energy and it was after giving a serious thought to
reduce the pilferage/fraudulent abstraction of energy, the D.M.C. felt
desirable to revise the rate of minimum consumption guarantee charges to a
reasonable level so that consumers are not tempted to adopt such unfair means
and the rates are commensurate with the fixed expenditure being measured by the
undertaking. The reasons for the revision of minimum consumption charges, in
respect of arc/induction furnaces, were that in many instances it was noticed
that meters where bulk supply were made were found to be defective and the
consumption recorded was found to be extremely low causing loss of huge
revenue. The arc/induction furnaces normally run continuously and, therefore,
it was justified to increase the rate of consumption guarantee charges. The variation
in the electricity consumed by different consumers indicated that the charge of
pilferage of electricity and gross under- utilisation or consumption of
electricity compared to the sanctioned load was not without foundation. The
respondents had placed on record a tabulated statement of the consumers using
induction furnaces before the High Court. If we look at the said chart
reproduced in the judgment of the High Court under appeal it deals with 52
consumers including most of the appellants. This statement shows large
variation of 139 the electricity consumed, particularly at serial Nos. 2, 13,
15, 26 & 44. If. we look at consumer at serial No. 14 it shows that the
unit worked only for 29 hours in the whole month as per the consumption per
unit per month. Whereas the unit at serial No. 26, had a sanctioned load of
1573.11 KWS, the approximate number of hours worked by it in a month were 106
i.e. little more than 4 days in month. It is surprising that the units are
still surviving by working for a short period. On the assumption that the
electricity consumed is as per the sanctioned load the approximate number of
hours for which the induction furnaces have been worked in a month has been
stated in the said statement. There was thus a reasonable basis to assume theft
by substantial number of arc/induction, furnaces consumers It will be noticed
that consumer contracts for a minimum supply of electricity of certain
dimensions and the D.M.C. which is licensee in the resent case, has to buy
energy by way of bulk supply from outside sources and has to keep it readily
available for the consumer for the whole year round. Surely the consumer, who
contracts for such high quantity of energy, does so, because of its need and
not for keeping it as stand by, without paying for it. No licensee can possibly
keep such enormous quantity of electricity in reserve for a consumer, month
after month, without its consumption. That is why in the tariff, which was part
of the agreement, for LIP consumers there was two part tariff system partly
minimum consumption guarantee charges and partly for actual energy consumed.
It was
also stipulated that the minimum consumption guarantee charges would not be
payable if a consumer utilises or consumes 60% of the sanctioned load. The rate
per unit had not been changed. It was only the minimum guarantee charges which
has been revised. If a consumer consumes more than 60% of the sanctioned load,
then he is not adversely affected by the revision of the minimum demand charges
from Rs. 40/- per KVA per month to Rs. 340/- per KVA per month. it is difficult
to appreciate or understand how the manufacturers using arc/induction furnaces
could have such variation in the consumption of electricity, as indicated in
the tabulated statement, except to suggest that there was large scale pilferage
of electricity. It is not easy to accept that induction furnaces having
sanctioned loads of more than 1000 KW consuming electricity, if converted into
approximate number of hours worked in a month at the maximum load, being as
little as 18.1 hours especially when there were instances of other induction
furnaces consuming far more number of units per month. The respondents had to
keep in readiness the supply of energy 140 as per the sanctioned load of
various consumers and were incurring expenditure for the generation, supply or
purchase of the same. When the consumers were not paying for it, the
respondents obviously had no option but to revise the minimum demand charges so
as to cover up and make good the generating and supply costs.
Apart
from that the fixation of tariff is a legislative function and the only
challenge to the fixation of such levy can be on the ground of unreasonableness
or arbitrariness and not on demonstrative grounds in the sense that the reasons
for the levy of charge must be disclosed in the order imposing the levy or
disclosed to the court, so long as it is based on objective criteria.
In the
present case the respondents themselves have placed figures to demonstrate the
formula on the basis of which the rate of Rs. 340 per KVA has been fixed. The
formula shows that if 60% of the load sanctioned is utilised then there is no
unreasonableness or excessiveness in the tariff. It was explained that if the
furnaces in question work for 24 hours a day for 25 days in a month at a load
factor of 60% the consumption against 1 KW would be equal to 1 x 24 x 25 x .60
= 360 units. Over all energy consumption rate (demand charges proportionate to
one unit + per unit energy rate) is Rs. 1.10 per unit. The total amount per KW
per month 360 x 1.10 = Rs. 396. Again the consumption per KVA at the rate of
0.85 (power factor) would come to 306 units and a total amount per KVA per
month at the rate of Rs. 1.10 per unit would come to Rs. 336.60 ps. i.e.
rounded to Rs. 340 for the purpose of minimum consumption guarantee charges.
We are
thus satisfied that the recommendations of the D.E.S.C. were justified on facts
and were rightly accepted by the D.M.C. in raising the minimum consumption
guarantee charges to Rs. 340 per KVA per month for the first 1000 KVA which are
neither unreasonable nor arbitrary.
Coming
to the plea of discrimination it will be noticed that as bulk consumers
belonging to LIP category the consumers of arc/induction furnaces are of a
class by themselves and in any case the revision is as per the agreement
between the licensee and the consumers which is neither unreasonable nor
arbitrary and thus the plea of discrimination has no merit.
The
tariff was fixed by D.E.S.C. with the approval of the D.M.C. in 141 view of the
power conferred under section 283 of the Corporation Act. Again in view the
proviso to Section 277 of the Corporation Act no arguments were addressed on
various clauses of the Schedule to the Indian Electricity Act, 1910.
There
is thus no merit in these appeals and the same are accordingly dismissed with
costs.
N.P.V.
Appeals dismissed.
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