Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 13
PETITIONER:
NADIAD ELECTRIC CO. LTD.
Vs.
RESPONDENT:
NADIAD BOROUGH MUNICIPALITY & ANR.
DATE OF JUDGMENT12/12/1979
BENCH:
VENKATARAMIAH, E.S. (J)
BENCH:
VENKATARAMIAH, E.S. (J)
SHINGAL, P.N.
CITATION:
1980 AIR 579 1980 SCR (2) 476
1980 SCC (2) 182
ACT:
Indian Electricity Act, 1910 (9 of 1910)-S. 22-A(3)-
Scope of-Municipality entering into an agreement with
company for supply of electrical energy-Obligation to
continue supply after expiry of agreement-When arises-State
Government to notify the establishment entitled to claim
benefit-Whether necessary.
HEADNOTE:
Section 22-A of the Indian Electricity Act, 1910 was
inserted in the Act by the Electricity (Amendment) Act, 1959
(32 of 1959). Sub-section 1 of section 22-A authorised the
State Government to issue direction to a licensee to supply
energy to an establishment in preference to any other
consumer, if in its opinion it is necessary in the public
interest to give such direction and (ii) if the
establishment in question is in the opinion of the State
Government as establishment used or intended to be used for
maintaining supplies and services essential to the community
and the decision of the State Government that in its opinion
the establishment is used or intended to be used for
maintaining supplies and services essential to the community
is notified by that Government in the Official Gazette. Sub-
section (3) of Section 22-A provides that where in any
agreement by a licensee, whether made before or after the
commencement of the Electricity (Amendment) Act, 1959 for
the supply of energy with any establishment referred to in
sub-section (1) expires, the licensee shall continue to
supply energy to such establishment on the same terms and
conditions as are specified in the agreement until receipt
of a notice in writing from the establishment requiring
discontinuance of the supply.
The Respondent-Municipality which was under an
obligation to make reasonable and adequate provision for
lighting of public streets, places and buildings situated
within its limit, entered into an agreement on August 14,
1940 with the Appellant-Company which was licensee under the
Electricity Act, 1910. The period during which the supply of
electrical energy was to be made under the said agreement
was 20 years from the date on which it was executed. On May
10, 1960 the Company wrote a letter to the municipality that
the said agreement was to come to an end and on its expiry,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 13
the Company was not under any obligation to continue to
supply energy to the Municipality as per the rates, terms
and conditions stated in the agreement. The company also
informed that if the municipality was not willing to
purchase energy at the revised rates the supply would be
discontinued on the expiry of the period of the agreement.
The municipality thereafter wrote a letter on August 6, 1960
requesting the Company to renew the agreement on the same
terms and conditions. The Company by its reply informed the
municipality that it would not supply electrical energy on
the same terms and conditions and insisted on payment being
made at the revised rates as stated in its letter dated May
10, 1960. The municipality thereafter filed a suit relying
upon the provisions of sub-section (3) of section 22-A
477
of the Act, for a declaration that it was entitled to the
supply of electrical energy from the Company on the same
terms and conditions as were specified in the agreement,
until the Company received a notice in writing from the
municipality requiring it to discontinue the supply. The
company contested the suit on the ground that the
municipality was not entitled to the benefit of sub-section
(3) of section 22-A of the Act as it was not an
establishment to which the said provision was applicable.
The Trial Court held that in the absence of a notification
as required by sub-section (1) of Section 22-A of the Act
the municipality was not entitled to claim the benefit of
the provision and therefore no relief could be granted in
the suit and accordingly dismissed the suit.
The municipality’s appeal to the District Court was
dismissed, but the second appeal was partly allowed by a
Single Judge of the High Court, and a decree was passed
granting relief in favour of the municipality declaring that
the company was bound under sub-section (3) of section 22-A
of the Act to continue to supply electrical energy to the
municipality at the same rates and on the same terms and
conditions as were specified in the agreement, dated August
14, 1960. The Letters Patent Appeal filed by the company was
dismissed by the Division Bench of the High Court, which
however certified the case as a fit one for appeal under
Article 133(1)(c) of the Constitution.
In the appeal to this Court, on the question whether
the municipality was an establishment which can claim the
benefit of sub-section (3) of section 22-A of the Act.
^
HELD: 1. The High Court was in error in ignoring the
requirements which an establishment had to satisfy before
claiming the benefit of sub-section (3) and in holding that
if in the opinion of the Court, the establishment satisfied
that it was being used or intended to be used for
maintaining supplies and services essential to the
community, it could claim the benefit of sub-section (3)
even though no notification had been issued by the State
Government under sub-section (1) of Section 22-A of the Act.
[489H-490B]
2. If the agreement referred to in sub-section (3) of
section 22-A of the Act is an agreement entered into by a
licensee with an establishment which is at the time of the
agreement, an establishment referred to in sub-section (1)
of section 22-A of the Act, then the provision in sub-
section (3) making it applicable to agreements made before
the commencement of the Electricity (Amendment) Act, 1959 by
which section 22-A was introduced becomes meaningless
because the formation of the two opinions of the State
Government that an establishment is being used or intended
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 13
to be used for maintaining supplies and services essential
to the community and that it is necessary to issue a
direction in respect of it under sub-section (1) can only be
done after section 22-A of the Act was introduced in the Act
and there would be no establishment satisfying the
requirements of section 22-A(1) before section 22-A(1) was
introduced.
[486 G-487 A]
3. Sub-section (1) of section 22-A of the Act was
enacted by the Parliament for the purpose of enabling the
State Government to issue a direction and subsection (3) was
enacted for the purpose of providing for the continuance of
an agreement entered into by a licensee with an
establishment referred to in sub-section (1) of section 22-
A. What, is however, common to the two sub-sections is that
the establishment referred to in sub-section (1) and an
establishment
478
referred to in sub-section (3) of section 22-A should be of
the same kind that is it should be an establishment which is
in the opinion of the State Government used or intended to
be used for maintaining supplies and services essential to
the community and the fact of formation of such opinion is
notified in the Official Gazette. It should satisfy the test
laid down in sub-section 22-A(1) of the Act. [487 C-E]
4. There is no impediment for the State Government
issuing a notification under sub-section (1) of section 22-A
in order that an establishment notified therein gets the
benefit of sub-section (3) of section 22-A of the Act. [487
H-488 A]
5. The words ’referred to in sub-section (1) appearing
in sub-section (1) of section 22-A of the Act are
descriptive of and define the establishment to which sub-
section (3) of section 22-A applies and in order to identify
such establishment, recourse should be had to the latter
part of sub-section (1) which lays down the criteria which
such establishment should satisfy. [488 B]
6. A statutory definition or abbreviation should be
read subject to all the qualifications expressed in the
Statute and unless the context in which the word defined
appears otherwise requires, it should be given the same
meaning given by the words defining it. [488 C]
7. The power to issue a notification under section 22-
A(1) of the Act involves an element of selection and the
said process of selection cannot be construed as an empty
formality which can be dispensed with. Nor can that power of
selection which is entrusted to the State Government by the
Parliament be claimed by the Courts. It is for the State
Government to notify the establishment which should be the
beneficiary of a direction to be issued under section 22-
A(1) or which is entitled under section 22-A(3) of the Act
to the supply of electrical energy on the same terms and
conditions as are specified in the agreement entered into by
it with the licensee even after the expiry of the agreement
until such establishment serves a notice in writing on the
licensee asking the licensee to discontinue the supply. [488
H-489 B]
8. Section 22-A of the Act, suggests that the intention
of Parliament appears to be that the State Government can
issue a direction only in the case of an establishment which
in its opinion satisfies the qualifications mentioned
therein and that sub-section (3) should be applicable only
to an establishment which in the opinion of the State
Government satisfies the said qualifications. [488 E]
9. Sub-section (3) of section 22-A of the Act makes a
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 13
serious inroad into the rights of the licensee flowing from
a contract stipulating a specific period during which it
should subsist and compels the licensee to supply energy to
the establishment even after the expiry of the agreement
until a notice is issued in writing by the establishment
requiring the licensee to discontinue the supply. [489 D]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 358 of
1970.
From the Judgment and Order dated 14-10-1969 of the
Gujarat High Court in L.P. Appeal No. 11/63.
R.P. Bhatt, K.J. John and D.N. Misra for the Appellant.
479
Y.S. Chitale, V.B. Joshi, P.C. Kapoor, Mrs. V.D. Khanna
and Miss Geeta Sharma for Respondent No. 1.
I.N. Shroff for Respondent No. 2.
The Judgment of the Court was delivered by
VENKATARAMIAH, J.-The question which arises for
consideration in this appeal by certificate is whether the
plaintiff in the suit out of which this appeal arises i.e.
Nadiad Borough Municipality Nadiad is an establishment which
can claim the benefit of sub-section (3) of section 22-A of
the Indian Electricity Act, 1910 (Act No. 9 of 1910)
(hereinafter referred to as ’the Act’). The plaintiff
instituted the said suit on August 12, 1960 against the
defendant, Nadiad Electric Supply Co. Ltd., Nadiad on the
file of the Civil Judge (Senior Division), Nadiad for a
declaration that it was entitled to the supply of electrical
energy from the defendant on the same terms and conditions
as were specified in the agreement dated August 14, 1940
entered into between it and the defendant until the
defendant received a notice in writing from the plaintiff
requiring it to discontinue the supply and for an injunction
restraining the defendant from discontinuing the supply till
such notice was served on the defendant. The facts set out
in the plaint were briefly these: The plaintiff was a
Municipality which was under an obligation to make
reasonable and adequate provision for lighting of public
streets, places and buildings situated within its limits and
for that purpose, the plaintiff had entered into an
agreement on August 14, 1940 with the defendant which was a
licensee under the Act. The period during which the supply
of electrical energy was to be made under the agreement was
20 years from the date on which the agreement was executed.
On May 10, 1960, the defendant wrote a letter to the
plaintiff that the suit agreement was to come to an end on
the expiry of August 13, 1960 and the defendant was not
under any obligation to continue to supply energy to the
plaintiff as per rates, terms and conditions stated in the
agreement after its expiry and that it was willing to supply
energy thereafter provided the plaintiff was willing to pay
the charges for the supply at the new rates demanded by it.
The defendant also informed the plaintiff that if the
plaintiff was not willing to purchase energy at the revised
rates, it would discontinue the supply on the expiry of the
period of the agreement. The plaintiff thereafter wrote a
letter on August 6, 1960 requesting the defendant to renew
the agreement on the same terms and conditions as were
mentioned in the agreement dated August 14, 1940. By its
reply dated August 9, 1960, the defendant informed the
plaintiff that it was not willing to supply electrical
energy on the same terms and conditions men-
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 13
480
tioned in the agreement after its expiry and insisted upon
payment being made at the revised rates as stated in its
letter dated May 10, 1960. The plaintiff thereafter filed
the above suit on August 12, 1960 for the reliefs referred
to above principally relying upon the provisions of sub-
section (3) of section 22-A of the Act. The defendant, in
the course of its written statement, inter alia contended
that the plaintiff was not entitled to the benefit of sub-
section (3) of section 22-A of the Act as it was not an
establishment to which the said provision was applicable. In
the course of the trial, it was not disputed that the State
Government had not issued any notification stating that in
its opinion the plaintiff was an establishment used or
intended to be used for maintaining supplies and services
essential to the community as required by sub-section (1) of
section 22-A of the Act. The trial court held that in the
absence of such a notification, the plaintiff was not
entitled to claim the benefit of sub-section (3) of section
22-A of the Act and, therefore, no relief could be granted
in the suit. The suit was accordingly dismissed.
Aggrieved by the decree of the trial court, the
plaintiff filed an appeal before the District Judge of Kaira
at Naidad. The said appeal was transferred to the file of
the 2nd Extra Assistant Judge at Ahmedabad. After hearing
the parties, the 2nd Extra Assistant Judge dismissed the
appeal. Against the decree of the first appellate court, the
plaintiff filed a second appeal before the High Court of
Gujarat. The second appeal was allowed in part by a single
Judge of the High Court of Gujarat and a decree was passed
granting a declaration in favour of the plaintiff declaring
that the defendant was bound under sub-section (3) of
section 22-A of the Act to continue to supply electrical
energy to the plaintiff at the same rates and on the same
terms and conditions as were specified in the agreement
dated August 14, 1940 so long as the plaintiff continued to
be an establishment used or intended to be used for
maintaining supplies and services essential to the community
and until the defendant received a notice in writing from
the plaintiff requiring the defendant to discontinue the
supply, such obligation, however, being subject to the other
provisions of the Act and the provisions of the Electricity
(Supply) Act, 1948, including sections 57 and 57A and the
Sixth and Seventh Schedules to that Act. The relief of
permanent injunction prayed for in the suit was, however,
refused on the ground that the defendant had never refused
to supply electrical energy to the plaintiff at the same
rates and on the same terms and conditions as were specified
in the agreement dated August 14, 1940 if it was held either
that there was a covenant for renewal contained in the
agreement dated August 14, 1940 or that sub-section (3) of
section 22-A of the Act applied to the facts of the case.
481
Against the decree passed in the second appeal, the
defendant filed Letters Patent Appeal No. 11 of 1963 on the
file of the High Court. That appeal was dismissed by a
Division Bench of the High Court, Thereafter the Division
Bench issued a certificate under Article 133(1) (c) of the
Constitution certifying that the case was a fit one for
appeal to this Court. On the basis of the above certificate,
the defendant has filed this appeal before this Court. In
the course of this appeal on an application made by the
plaintiff, the Gujarat State Electricity Board has also been
impleaded as a respondent.
We shall now make a brief survey of the relevant
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 13
provisions of the Act. Sub-section (2) of section 21 of the
Act provides that a licensee who is authorised to supply
energy under Part II thereof may, with the previous sanction
of the State Government given after consulting the local
authority where the licensee is not the local authority,
enter into an agreement with a person who is or intends to
become a consumer, with conditions not inconsistent with the
Act or with his licence or with any rules made under the Act
and may, with the like sanction given after like
consultation, add to or alter or amend any such condition;
and that any conditions introduced in the agreement by the
licensee without such sanction shall be null and void. The
State Government may also under sub-section (3) of section
21 of the Act after like consultation add any new condition
or cancel or amend any condition or part of a condition
previously sanctioned after giving to the licensee not less
than one month’s notice in writing of its intention so to
do. Section 22 of the Act provides that where energy is
supplied by a licensee, every person within the area of
supply shall, except in so far 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
any other person in the same area is entitled in similar
circumstances to a corresponding supply.
Section 23(1) of the Act prohibits a licensee from
making any agreement for the supply of energy showing undue
preference to any person. Sub-section (3) of section 23 of
the Act provides that in the absence of an agreement to the
contrary, a licensee may charge for energy supplied by him
to any consumer by the actual amount of energy so supplied,
or by the electrical quantity contained in the supply, or by
such other methods as may be approved by the State
Government, Section 24 of the Act authorises the licensee to
discontinue the supply of energy to any consumer neglecting
to pay the charges payable by him.
A combined reading of these provisions shows that it is
open to a licensee to enter into an agreement with the
previous sanction of the
482
State Government with any consumer to supply electrical
energy at the agreed rate subject to the other provisions of
the Act and that he cannot show undue preference to any
person in the matter of supply of electrical energy. The
above provisions like the other provisions of the Act are
subject to section 70 of the Electricity (Supply) Act, 1948
(Act No. 54 of 1948) which provides that no provision of the
Act or of any rules made thereunder or of any instrument
having effect by virtue of such law or rule shall, so far as
it is inconsistent with any of the provisions of the
Electricity (Supply) Act, 1948, have any effect and that
save as otherwise provided in that Act, the provisions of
that Act shall be in addition to, and not in derogation of
the Act. Section 22A of the Act which arises for
consideration in this case was inserted in the Act by the
Electricity (Amendment) Act, 1959 (Act No. 32 of 1959). It
reads thus:
"22-A. (1) The State Government may, if in its
opinion it is necessary in the public interest so to
do, direct any licensee to supply, in preference to any
other consumer, energy required by any establishment
which being in the opinion of the State Government an
establishment used or intended to be used for
maintaining supplies and services essential to the
community, is notified by that Government in the
Official Gazette in this behalf.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 13
(2) Where any direction is issued under sub-
section (1) requiring a licensee to supply energy to
any establishment and any difference or dispute arises
as to the price or other terms and conditions relating
to the supply of energy, the licensee shall not by
reason only of such difference or dispute be entitled
to refuse to supply energy but such difference or
dispute shall be determined by arbitration.
(3) Where any agreement by a licensee, whether
made before or after the commencement of the Indian
Electricity (Amendment) Act, 1959, for the supply of
energy with any establishment referred to in sub-
section (1) expires, the licensee shall continue to
supply energy to such establishment on the same terms
and conditions as are specified in the agreement until
he receives a notice in writing from the establishment
requiring him to discontinue the supply.
(4) Notwithstanding anything contained in this
Act, or in the Electricity (Supply) Act, 1948, or in
his licence or in any agreement entered into by him for
the supply of energy, a licensee shall be bound to
comply with any direction given to him under sub-
section (1) and any action taken by him in
483
pursuance of any such direction shall not be deemed to
be a contravention of section 23."
Even though the licensee has no right to show undue
preference to any person in the matter of supply of
electrical energy and it is open to the licensee with the
previous sanction of the Government to enter into an
agreement with a consumer containing conditions including
the stipulation regarding the charges payable by the
consumer for a specified period subject to the other
provision of the Act, section 22-A of the Act authorises the
State Government to give directions to a licensee in regard
to the supply of energy to an establishment referred to in
sub-section (1) in preference to any other consumer and it
also provides that in the case of any establishment referred
to in sub-section (1) if an agreement has been entered into
by a licensee whether made before or after the commencement
of the Electricity (Amendment) Act, 1959 for the supply of
energy, the licensee shall continue to supply energy to such
establishment on the same terms and conditions as are
specified in the agreement even after the expiry of the
agreement until he receives a notice in writing from the
establishment requiring him to discontinue the supply. In
order to understand the contentions urged by the parties, it
is necessary to deal with the provisions of section 22-A of
the Act in some detail. Sub-section (1) of section 22-A of
the Act authorises the State Government to issue direction
to a licensee to supply energy to an establishment in
preference to any other consumer (i) If in its opinion it is
necessary in the public interest to give such direction and
(ii) if the establishment in question is in the opinion of
the State Government an establishment used or intended to be
used for maintaining supplies and services essential to the
community and the decision of the State Government that in
its opinion the establishment is used or intended to be used
for maintaining supplies and services essential to the
community is notified by that Government in the Official
Gazette. Sub-section (1) of section 22-A of the Act speaks
of the State Government forming two opinions-one regarding
the question whether it is necessary in the public interest
to issue a direction to supply energy to an establishment in
preference to any other consumer and the other regarding the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 13
character of the establishment i.e. regarding the question
whether the establishment is one used or intended to be used
for maintaining supplies and services essential to the
community. In other words, the decision on the question
whether an establishment is used or intended to be used for
maintaining supplies and services essential to the community
has to be taken by the State Government either before or at
the time of issuing a direction under section 22-A(1). Sub-
sections (2) and (4) of section 22-A of the Act are
ancillary to the
484
power of the State Government to issue a direction under
sub-section (1) thereof.
The material provision with which we are concerned in
this appeal is sub-section (3) of section 22-A of the Act
which provides that where any agreement by a licensee,
whether made before or after the commencement of the
Electricity (Amendment) Act, 1959, for the supply of energy
with any establishment referred to in sub-section (1)
expires, the licensee shall continue to supply energy to
such establishment on the same terms and conditions as are
specified in the agreement until he receives a notice in
writing from the establishment requiring him to discontinue
the supply. The argument urged on behalf of the plaintiff
which was rejected by the trial court and the first
appellate court but was accepted by the learned Single Judge
of the High Court in second appeal and by the Division Bench
of the High Court in the Letters Patent Appeal was that the
agreement entered into by it with the defendant on August
14, 1940 would continue to remain in operation by virtue of
sub-section (3) of section 22-A of the Act even after its
expiry because the plaintiff was an establishment which was
’used or intended to be used for maintaining supplies and
services essential to the community’ and that there was no
necessity of the publication of a notification in the
Official Gazette stating that the State Government was of
the opinion that it was an establishment used or intended to
be used for maintaining supplies and services essential to
the community. The contention urged on behalf of the
plaintiff in regard the above proposition was that the words
"any establishment referred to in subsection (1)" in sub-
section (3) of section 22-A of the Act meant ’an
establishment used or intended to be used for maintaining
supplies and services essential to the community’ and not
any establishment which was notified by the State Government
in the Official Gazette as an establishment which in the
opinion of the State Government was being used or intended
to be used for maintaining supplies and services essential
to the community. The very same contention is urged before
us in this appeal on behalf of the plaintiff. It is argued
on behalf of the defendant that sub-section (3) of section
22-A of the Act is applicable only in the case of an
establishment which in the opinion of the State Government
is an establishment used or intended to be used for
maintaining supplies and services essential to the community
in respect of which a direction is issued to the licensee
under sub-section (1) and a notification is issued by that
Government in the Official Gazette in that behalf. The
judgment delivered in the Letters Patent Appeal, which is an
affirming one, appears to be a summary of the judgment of
the learned Single Judge of the High Court. The learned
Single Judge in his judgment to which our attention was
drawn by the learned counsel for
485
the parties while dealing with sub-section (1) of section
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 13
22-A of the Act observed:
"Which is the establishment referred to in sub-
section (1) of section 22-A?’ and if that question is
asked, it is obvious that the establishment referred to
in sub-section (1) of section 22-A is an establishment
used or intended to be used for maintaining supplies
and services essential to the community. Of course, the
determination of the question whether a particular
establishment is an establishment used or intended to
be used for maintaining supplies and services essential
to the community, is as I have pointed out above left
to the subjective satisfaction of the State Government;
but the establishment referred to in sub-section (1) of
section 22-A is indubitably an establishment used or
intended to be used for maintaining supplies and
services essential to the community and it is only when
a particular establishment is, in the opinion of the
State Government, such an establishment that it can be
notified by the State Government under sub-section (1)
of section 22-A. The establishment in favour of which a
direction can be given under sub-section (1) of section
22-A must be an establishment used or intended to be
used for maintaining supplies and services essential to
the community but someone must have the power to
determine whether a particular establishment is such an
establishment. That power is entrusted by the
legislature to the State Government and the
determination of the State Government in its subjective
satisfaction is made final and conclusive; but it is
clear that what the State Government has to find in its
subjective satisfaction is the fact as to the
establishment being used or intended to be used for
maintaining supplies and services essential to the
community and it is because a particular establishment
is such an establishment as determined by the State
Government, that the State Government can notify it for
the purpose of giving it preferential treatment in the
matter of supply of electrical energy. It is,
therefore, obvious that the establishment referred to
in sub-section (1) of section 22-A is an establishment
used or intended to be used for maintaining supplies
and services essential to the community and it is not
the same thing as an establishment notified under
subsection (1) of section 22-A."
Having stated so, the learned Judge proceeded to
observe that the words ’any establishment referred to in
sub-section (1)’ in sub-section
486
(3) of section 22-A of the Act referred to any establishment
used or intended to be used for maintaining supplies and
services essential to the community and were not limited to
an establishment which being in the opinion of the State
Government an establishment used or intended to be used for
maintaining supplies and services essential to the community
was notified by the State Government in the Official
Gazette, as required by sub-section (1) of section 22-A of
the Act. One of the reasons given by the learned Judge in
support of the above conclusion was as follows:-
"The provisions of sub-section (3) of section 22-A
become applicable only an agreement by a licensee,
whether made before or after the commencement of the
Indian Electricity (Amendment) Act, 1959, for the
supply of electrical energy with any establishment
referred to in sub-section (1) of section 22-A expires
after the coming into force of the Indian Electricity
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 13
(Amendment) Act, 1959. The agreement on the expiration
of which the provisions of sub-section (3) of section
22-A are attracted must therefore be an agreement made
by a licensee with an establishment referred to in
subsection (1) of section 22-A for the supply of
electrical energy, whether before or after the
commencement of the Indian Electricity (Amendment) Act,
1959. The establishment with whom the agreement has
been made by the licensee must, therefore, evidently be
an establishment referred to in subsection (1) of
section 22-A at the date when the agreement was made
between the parties. It is at the date of the agreement
that the establishment must satisfy the description
given in the words "any establishment referred to in
sub-section (1)" for it is only then that it can be
said that the agreement was made by the licensee with
an establishment referred to in sub-section (1) of
section 22-A."
It is difficult to agree with the proposition set forth
in the above extract of the judgment of the learned Single
Judge because if the agreement referred to in sub-section
(3) of section 22-A of the Act is an agreement entered into
by a licensee with an establishment which is, at the time of
the agreement, an establishment referred to in sub-section
(1) of section 22-A of the Act, then the provision in sub-
section (3) making it applicable to agreements made before
the commencement of the Electricity (Amendment) Act, 1959 by
which section 22-A was introduced becomes meaningless
because the formation of the two opinions of the State
Government that an establishment is being used or intended
to be used for maintaining supplies and services essential
487
to the community and that it is necessary to issue of
direction in respect of it under sub-section (1), can only
be done after section 22-A of the Act was introduced in the
Act and there would be no establishment satisfying the
requirements of section 22-A(1) before section 22-A was
introduced.
The next ground relied on by the learned Single Judge
to hold that the establishment referred to in sub-section
(3) of section 22-A of the Act need not satisfy all the
requirements of an establishment referred to in sub-section
(1) of section 22-A which again is untenable was that the
object of enacting sub-section (1) was different from the
object of enacting sub-section (3) and therefore, there was
no need to treat an establishment referred to in sub-section
(1) on par with an establishment in sub-section (3). It may
be that sub-section (1) of section 22-A of the Act was
enacted by the Parliament for the purpose of enabling the
State Government to issue a direction and sub-section (3)
was enacted for the purpose of providing for the continuance
of an agreement entered into by a licensee with an
establishment referred to in sub-section (1) of section 22-
A, but what is, however, common to the two sub-sections is
that the establishment referred to in sub-section (1) and an
establishment referred to in sub-section (3) of section 22-A
should be of the same kind i.e. it should be an
establishment which is in the opinion of the State
Government used or intended to be used for maintaining
supplies and services essential to the community and the
fact of formation of such opinion is notified in the
Official Gazette. It should satisfy the tests laid down in
section 22-A(1) of the Act.
The third reason given by the learned Single Judge for
holding that the establishment referred to in sub-section
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 13
(3) of section 22-A of the Act could not be an establishment
notified by the State Government as one which in its opinion
was being used or intended to be used for maintaining
supplies and services essential to the community was that
the issue of a notification by the State Government under
sub-section (1) of section 22-A would be unjustified except
when the Government was of opinion that a direction should
be issued. In other words, the learned Single Judge was of
the view that when the State Government felt that there was
no necessity to issue any direction, it could not issue any
notification under that provision stating that an
establishment was in its opinion an establishment which was
being used or intended to be used for maintaining supplies
and services essential to the community. We do not think
that the above observation of the learned Single Judge is
correct since there is no impediment for the State
Government issuing a notification under sub-section (1) of
section 22-A in order
488
that an establishment notified therein gets the benefit of
sub-section (3) of section 22-A of the Act.
The Division Bench in its judgment in the Letters
Patent Appeal has adopted more or less the same reasoning
adopted by the learned Single Judge in upholding the
contention of the plaintiff.
The words ’referred to in sub-section (1)’ appearing in
sub-section (3) of section 22-A of the Act are descriptive
of and define the establishment to which sub-section (3) of
section 22-A applies and in order to identify such
establishment we must have recourse to the latter part of
sub-section (1) which lays down the criteria which such
establishment should satisfy.’ A statutory definition or
abbreviation should be read subject to all the
qualifications expressed in the statute and unless the
context in which the word defined appears otherwise
requires, it should be given the same meaning given by the
words defining it.’
A fair reading of section 22-A of the Act suggests that
the Parliament did not intend to empower the State
Government to issue a direction under sub-section (1) of
section 22-A or to provide for the continuance of the
agreement entered into by a licensee with an establishment
in every case where the establishment was one which was
being used or intended to be used for maintaining supplies
and services essential to the community. The intention of
the Parliament appears to be that the State Government can
issue a direction only in the case of an establishment which
in its opinion satisfies the qualifications mentioned
therein and that sub-section (3) should be applicable only
to an establishment which in the opinion of the State
Government satisfies the said qualifications. The
determination of the question whether an establishment
satisfies the objective test mentioned in section 22-A(1) of
the Act is left to the State Government. The law also
prescribes that such determination should be made known to
all concerned by a formal publication in the official
Gazette. Instead of providing separately in section 22-A of
the Act that an establishment referred to in any of the sub-
sections of that section was an establishment which in the
opinion of the State Government was one used or intended to
be used for maintaining supplies and services essential to
the community, the Parliament defined the establishment to
which section 22-A was applicable in sub-section (1) and
instead of repeating the same definition in sub-section (3)
provided that an establishment to which sub-section (3)
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 13
thereof was applicable was an establishment referred to in
sub-section (1).
We are of the view that the power to issue a
notification under section 22-A(1) of the Act involves an
element of selection and that the said process of selection
cannot be considered as an empty formality which can be
dispensed with. Nor can that power of selection which is
489
entrusted to the State Government by the Parliament be
claimed by the courts. It is for the State Government to
notify the establishment which should be the beneficiary of
a direction to be issued under section 22-A(1) or which is
entitled under section 22-A(3) of the Act to the supply of
electrical energy on the same terms and conditions as are
specified in the agreement entered into by it with the
licensee even after the expiry of the agreement until such
establishment serves a notice in writing on the licensee
asking the licensee to discontinue the supply.
Having regard to the context in which section 22-A of
the Act appears and in particular to the language used in
sub-sections (1) and (3) of section 22-A, we are of the view
that it is not possible to hold that section 22-A(3) is
applicable to every establishment used or intended to be
used for maintaining supplies and services essential to the
community even though the State Government has not declared
in a notification published in the Official Gazette that it
is of the opinion that the establishment satisfied the
qualification referred to in subsection (1). We have to bear
in mind that sub-section (3) of section 22-A of the Act
makes a serious inroad into the rights of the licensee
flowing from a contract stipulating a specific period during
which it should subsist and compels the licensee to supply
energy to an establishment referred to therein on the same
terms and conditions as are specified in the agreement
already entered into even beyond the period of its expiry
until a notice is issued in writing by the establishment
requiring the licensee to discontinue the supply. If a
liberal construction is placed on the words "any
establishment referred to in sub-section (1)" appearing in
sub-section (3) of section 22-A as referring to every
establishment which is being used or intended to be used for
maintaining supplies and services essential to the community
irrespective of the issue of a notification by the State
Government that it is in its opinion such an establishment,
it is bound to impose a greater restraint on the rights of
the licensee than the restraint that will be imposed on it
if it is held that the establishment referred to in sub-
section (3) of section 22-A is one notified by the State
Government as required by sub-section (1) of section 22-A.
If the State Government does not issue such a notification
in the case of an establishment then such establishment
would not be eligible to claim the benefit of section 22-
A(3). We may also observe here that any establishment whose
interests are required to be protected by the extension of
the benefit of section 22-A(3), the State Government can
always issue a notification under sub-section (1) stating
that in its opinion the said establishment satisfies the
qualification mentioned therein.
In the circumstances, we are constrained to say that
the High Court was in error in ignoring the requirements
which an establishment had
490
to satisfy before claiming the benefit of sub-section (3)
and in holding that if in the opinion of the Court, the
establishment satisfied that it was being used or intended
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 13
to be used for maintaining supplies and services essential
to the community, it could claim the benefit of sub-section
(3) even though no notification had been issued by the State
Government under sub-section (1) of section 22-A of the Act.
In the result, we allow the appeal, set aside the
judgments and decrees passed by the High Court in the second
appeal and in the Letters Patent Appeal and restore the
decree of the trial court as affirmed by the first appellate
court dismissing the suit. Having regard to the
circumstances of the case, we direct the parties to bear
their own costs throughout.
N.V.K. Appeal allowed.
491