Full Judgment Text
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PETITIONER:
FERTILIZERS & CHEMICALS TRAVANCORE LTD.
Vs.
RESPONDENT:
KERALA STATE ELECTRICITY BOARD & ANOTHER
DATE OF JUDGMENT05/05/1988
BENCH:
VENKATACHALLIAH, M.N. (J)
BENCH:
VENKATACHALLIAH, M.N. (J)
NATRAJAN, S. (J)
CITATION:
1988 AIR 1989 1988 SCR (3) 925
1988 SCC (3) 382 JT 1988 (2) 540
1988 SCALE (1)1023
ACT:
Electricity Supply Act, 1948: Sections 49(1), 49(3), 60
and 79(j)-Electricity Tariff-Protection from unilateral
increas-’Period factor’ in agreement-Enhancement of tariff-
When permissible.
Kerala State Electricity Board (General Tariffs)
Regulations, 1965: Regulation 11-Enhancement of rate or
tariff for supply of power-Validity of.
Constitution of India, 1950: Article 14-Allegations of
discriminatory treatment-To be specific-Action of
Governmental authorities-Presumed to be reasonable and in
public interest-Person assailing-To plead and prove
contrary.
HEADNOTE:
The Appellant, a company registered under the Companies
Act, had its registered office at Eloor in the erstwhile
State of Travancore. On October 21, 1948 the company entered
into an agreement (Exhibit-P1) with the erstwhile princely
State of Travancore for the supply of electrical-energy
under the terms and conditions particularised in the
agreement. The price was fixed at Rs. 110 per K.W. per
annum. Subsequently, the State of Tranvancore merged in, and
became part of, the Kerala State, and the Electricity Board
was constituted for the State. On May 10, 1965 a
supplementary agreement was entered into between the
appellant and the Electricity Board for supply of additional
power for a period of 10 years at the rate of Rs.140 per
K.W. per year.
On October 28, 1966 the Electricity Board in exercise
of the powers under Section 79(j) of the Electricity Supply
Act, 1948 framed and promulgated the Kerala State
Electricity Board (General Tariff) Regulations, 1966 by
which the Board empowered itself to prescribe higher tariffs
for different classes of consumers. Regulation 11 thereof
empowered the Board to amend the terms and conditions of
supply from time to time.
926
The Board issued a Notification dated July 16, 1968
(Exhibit P-2) providing that the rates for supply of power
at 66 K.V. to the appellant company availed of by them as
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per the agreement dated October 21, 1948 be revised to
Rs.200 per K.W. per year. The supplemental agreement with
the appellant dated May 10, 1965 which pertained to the
additional supply of power for a period of ten years at
Rs.140 per K.W. per year was, however, left undisturbed.
The appellant in a writ petition before the High Court
assailed the enhancement in the electricity tariff,
contending that the terms for the supply of electricity to
the appellant’s industrial unit were governed by the
agreement dated October 21, 1948 entered into by the company
with the erstwhile Travancore State; that the agreement, in
terms of Section 60 of the Electricity Supply Act, should be
deemed to have been entered into by the Electricity Board
and that during the subsistence of the said agreement the
rates fixed therein were immune from any unilateral upward
revision even if the purported enhancement was pursuant to
the statutory regulations made under Section 49(2). It was
further contended that the enhancement being selective and
discriminatory, was violative of Article 14 of the
Constitution.
The writ petition having been dismissed by a Single
Judge of the High Court, and the Division Bench having
confirmed the order of dismissal in appeal, the appellant
appealed to this Court by Special Leave.
In the appeal it was contended on behalf of the
appellant that the agreement, Exhibit P-I, though one
entered into prior to the constitution of the ’Board’ was,
by virtue of Section 60 of the Act, one which should be
deemed to have been entered into by or with the Board, and
must also be held to be referable to Section 49(3) of the
Act. Relying on the decision of this Court in Indian
Aluminium Co. v. Kerala Electricity Board, [1976] 1 SCR 701,
it was contended that the agreement must be regarded as
having been entered into by the Board in exercise of its
statutory powers under Section 49(3) of the Act, and
therefore, immune from the operation of the Kerala State
Electricity Board (General Tariffs) Regulations, 1966. It
was also submitted that power under Section 49(1) would be
available to the statutory-authority enabling an unilateral
upward revision of the tariff only if the agreement itself
enabled such revision, that as long as the agreement did
subsist and was not terminated a unilateral change was
impermissible and that the appellant was subjected to a
steep revision in the tariffs while other similarly
circumstanced high tension consumers were left unaffected.
927
On behalf of the respondent-Board it was urged that
Exhibit P-1 could not be held to fall under, and be
protected by, Section 49(3) of the Act; that the agreement
having been anterior to the commencement of the ’Act’ itself
could not be held to have been entered into for "purposes of
the Act" within the meaning of Section 60; that the
agreement could not be deemed to be one entered into by the
Board under Section 60(1), because it did not satisfy the
essential requirement of having been entered into by the
State Government; that the Board had not done anything with
reference to the agreement which could attract Section 60 to
it and though the obligations of the State Government became
the obligations of the Board, the agreement itself did not
qualify for recognition under Section 60 of the Act; that
there was not fixity of tenure with reference to and in the
context of which alone any immunity from unilateral
alteration under Section 49(1) and (2) could be conceived
and measured. It was further contended that the additional
agreement dated May 10, 1965 was for an independent purpose
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and that the action of the Board in entering into this
agreement did not constitute any such Act in relation to the
original agreement as would constitute a conscious adoption
by the Board of the original agreement, so as to attract
Section 60(1); that the essential quality of the agreement
which qualified for recognition and protection as one made
in exercise of the Board’s power under Section 49(3) was its
distinctiveness as to the period of operation and that the
protection and immunity from unilateral increase of tariff
could only be with reference to the period of the agreement.
Two questions arose for consideration: (1) Whether the
agreement datecd October 21, 1948 (Exhibit P-1) should be
held to be one which was deemed to have been entered into by
the Board under Section 60 of the Act and whether it is
required to be considered as one entered into by the Board
in exercise of its powers under Section 49(3) of the Act,
and (2) Whether the enhancement under the Notification dated
July 16, 1968 (Exhibit P-2) brings about a hostile
discrimination against the appellant, because for similarly
situated and circumstanced High Tension Consumers there was
no such revision of the tariff.
Dismissing the Appeal,
^
HELD:1(i) The Board’s power to enter into an agreement
fixing a special tariff for a ’specified period’ is
relatable to Section 49(3). [938H]
(ii)One of the tests whether an agreement is entered
into in exercise of the power under Section 49(3) is that
such agreement has the effect of excluding the other
statutory power under Section 49(1). [939A]
928
(iii) The main consideration for protection from
unilateral increase under Section 49(1) is the ’period-
factor’ in an agreement. [939A-B]
(iv) A contract which does not provide for, an
obligation to supply electricity at a specific-rate for a
specific-period and does not, therefore, have the effect of
excluding Section 49(1) cannot be said to fall under Section
49(3). [939G]
(v) If by an unilateral, volitional act on the part of
the Board the assurance of a fixed-rate to the consumer
could be denuded that circumstances, in itself, would be
such as to detract from the agreement being considered as
one entered into in exercise of power under Section 49(3).
[939G-H]
In the instant case, the agreement was precarious in
regard to the period of its operation and was susceptible to
termination at the volition of the Board. It cannot,
therefore, be construed as one which was intended to give a
statutory protection for the tariff by means of a special
agreement by the exercise of the statutory power of the
Board under Section 49(3). [940D]
Indian Aluminium Co. v. Kerala Electricity Board,
[1976] 1 SCR 70 and Delhi Cloth & General Mills Co. Ltd. v.
Rajasthan State Electricity Board, [1986] AIR SC 1126,
referred to.
(vi) In a long term contract of indefinite duration it
is not unusual to find provisions for cancellation with
reasonable notice and for payment of compensation in the
event of termination. It is also not unusual to infer, under
certain circumstances, terminability by notice even in the
absence of an express provision in that behalf, upon a
construction of the contract. A contract which contains no
express provision for its termination may well be terminated
by reasonable notice by one or the other party depending
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upon the implication of a term or upon a true construction
of the agreement. This principle has no application in the
instant case. [941C-D]
Staffordshire Area Health Authority v. South
Staffordshire Water Works Co., [1978] 3 AII E.R. p. 769,
referred to.
(vii) The agreement dated October 21, 1948 Exhibit P-I,
therefore, does not qualify to be recognised and protected
under Section 49(3) of the Act. [941E]
929
2(i) The Board while denying that there was any hostile
discrimination, averred that no similarly situate consumer
had been left out of the tariff revision and only cases that
had been left-out were those where the Board, owing to the
subsistence of the agreements protected under Section 49(3),
was under the legal inhibition from making an unilateral
enhancement. [943E-F]
2(ii) The charge of discrimination against the
respondent Board could not be said to have been established.
Indeed the appellant had not laid a proper foundation for
examination of a case of discrimination under Article 14.
[944C]
(iii) The allegations of discrimination ought to be
specific. Action of Governmental authorities must be
presumed to be reasonable and in public interest. It is for
the person assailing that presumption to plead and prove the
contrary. But in the instant case the allegations are in
general terms. [944D]
State of Maharashtra and Anr. v. Basantilal Mohanlal
Khetan and Ors., AIR 1986 SC 1466 para 12 and Kasturi Lal
Lakshmi Reddy v. State of J & K, [1980] 3 SCR 1338 at 1357,
referred to.
In the instant case, the respondent-Board while denying
that there was any hostile discrimination, averred that no
similarly situate consumer had been left out of the tariff
revision, and only cases where the consumer had the
protection of an agreement under Section 49(3) which
prevented the unilateral increase, had been left out. [944D-
E]
Bisra Stone Lime Co, v. Orissa State Electricity Board,
[1976] 2 SCR 307, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 880 (N)
of 1974.
From the Judgment and Order dated 13.6.1973 of the
Kerala High Court in Writ Appeal No. 103 of 1971.
G.L. Sanghi, V.C. Mathur and A.M. Dittia for the
Appellant.
P.S. Potti, K.M.K. Nair and Ms. Malini Poduval for the
Respondents.
930
The Judgment of the Court was delivered by
VENKATACHALIAH, J. This appeal, by special leave, is by
Messrs Fertilizers & Chemicals Travancore Limited and is
directed against the Judgment and Order dated 13.6.1973 of
the Division Bench of the Kerala High Court in Writ Appeal
No. 103 of 1971 affirming the order dated 26.11.1970 of the
learned Single Judge in O.P. No. 3772 of 1968.
The High Court dismissed the appellant’s writ-petition
challenging the enhancement, of the electricity tariff from
Rs.110 per K.W. per annum to Rs.200 per K.W. per annum. The
enhancement was made by the Kerala State Electricity Board
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(’Board’ for short) pursuant to the power reserved to it
under Regulation 11 of the Kerala State Electricity Board
(General Tariffs) Regulation, 1966 ("Regulation") framed
under Section 79(j) read with Sec. 49(1) of the Electricity
(Supply) Act, 1948, (’Act’). The enhancement was to take
effect from 16.8.1968. The period to which the challenge
pertains is between 16.8.1968 and 1.1.1970.
The appellant assailed this enhancement before the High
Court on grounds, inter alia, that the terms for the supply
of electricity to appellant’s industrial unit manufacturing
fertilizers were governed by an agreement dated 21.10.48
entered into with the erstwhile Trivancore State; that the
agreement, in terms of Section 60 of the Act, should be
deemed to have been entered into by the Board referable to
statutory powers under Section 49(3) of the Act; that during
the subsistence of the agreement the rates fixed therein
were immune from any unilateral upward revision even if the
purported enhancement was pursuant to the statutory
regulations under Section 49(2) and that, at all events, the
enhancement, being selective and discriminatory, was
violative of Article 14 of the Constitution.
2. We may refer, briefly, to the factual antecedents:
Appellant is a company registered under the Companies
Act with its Registered Office at Eloor, Udyogamandal P.O.
in the erstwhile State of Trivancore, now part of Kerala. On
21.10.1948 an agreement was entered into between the
appellant and the erstwhile princely State of Travancore for
the supply of electrical energy by the latter to the former
under terms and on conditions particularised in the
agreement. The price was fixed at Rs.110 per K.W. per annum.
Subsequently the State merged in and became part of the
Kerala State and
931
the Electricity Board was constituted for the State. On
10.5.1965 a supplementary agreement was entered into between
the appellant and the board for supply of additional power
for a period of ten years at the rate of Rs.140 per K.W. per
year. On 28.10.1966 the Board, in exercise of the powers
under Section 79(j) of the Act, framed and promulgated what
were called "Kerala State Electricity Board (General
Tariffs) Regulations, 1966", by which, inter alia, power was
reserved to the Board to amend, from time to time, the terms
and conditions of supply after issue of the prescribed
notice to the consumer of the Board’s intention so to do in
that behalf. Regulation 11 provided:
"The Board may amend the terms and conditions
of supply from time to time, provided that any
amendment having the effect of enhancement of
charges payable by the consumer shall come into
force from such date as notified in the Gazette
provided that there shall be at least 30 days
between the date of publication and coming into
force."
In exercise of the power so reserved to it, the Board
issued a notification dated 16.7.1968 (Exhibit P/2) which
provided:
"In accordance with the provisions contained
in clause 11 of the Kerala State Electricity Board
(General Tariffs) Regulations issued in Kerala
Gazette No. 47 dated 29.11.1966, it is hereby
notified that the rates for the supply of 4200
K.W. of power at 66 K.V. to messrs F.A.C.T.
availed by them as per the agreement dated
21.10.1948 executed with the erstwhile Travancore
Government, is hereby revised to Rs. 200 per
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K.V.A. per year. This revision will take effect 30
days soon after the publication of this
notification in the Gazette."
The supplemental agreement dated 10.5.1965 which
pertained to the additional supply of power for a period of
ten years at Rs.140 per K.W. per year was however, left
undisturbed. The case of the Board is that while the
agreement, Exhibit P-1, as, one under Section 49(3) of the
Act, the supplemental agreement dated 10.5.1965, however,
was entered into by the Board in exercise of the Statutory
powers under Section 49(3) and was, therefore, immune from
any alteration during its tenure.
932
The principal controversy in this appeal is whether the
agreement dated 21.10.1948 could be said to be one within
the contemplation of Section 49(3) of the Act; and whether
the enhancement of the tariff under Exhibit P-2 was
impermissible.
Another contention which was not urged before the
learned Single Judge of the High Court, but which was
permitted to be raised in appeal before the Division Bench
was whether by the said enhancement appellant was subjected
to a hostile and invidious discrimination.
Both contentions have been repelled by the High Court.
Appellant has come up by special leave.
3. We have heard Shri G.L. Sanghi, learned Senior
Advocate for the appellant and Shri P.S. Potti, learned
Senior Advocate for the Board. The submissions of counsel
spread over a much wider field than was covered before the
High Court. On the contentions urged at the hearing, the
points that fall for consideration in the appeal are:
(a)(i): Whether the agreement dated
21.10.1948 (Exhibit P-1) should be held to be one
which was deemed to have been entered into by the
Board under Section 60 of the Act.
(ii) If so, whether the said agreement
requires to be considered as one entered into by
the Board in exercise of its power under Section
49(3) of the Act with the attendant consequence
that during its subsistence, the tariff does not
admit of being raised even pursuant to the
Regulations made under Section 49(1) of the Act.
(b) Whether, at all events, the enhancement
under Exhibit P-2 brings about a hostile
discrimination against the appellant, in that,
while in the case of other similarly situated and
circumstanced High Tension Consumers there was no
such revision of the tariff.
Re;contentions a (i) and (ii):
Shri Sanghi submitted that the agreement Exhibit P-1
though one entered into prior to the constitution of the
’Board’ was yet, by virtue of Section 60 of the Act one
which should be deemed to have been entered into by or with
the Board, and must also be held to be
933
referable to Section 49(3) of the Act. Shri Sanghi, placing
reliance on the pronouncement of this Court in Indian
Aluminium Co. v. Kerala Electricity Board, [1976] 1 SCR 70
contended that the agreement must be regarded as having been
entered into by the Board in Exercise of its Statutory
powers conferred under Section 49(3) of the Act, and
therefore, immune from the operation of the Regulations. The
contract under Section 49(3), it was submitted, substitutes
for the power under Section 49(1) and that where, as here,
even there is in subsistence an agreement under Section
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49(3) the power under Section 49(1) would be available to
the statutory-authority enabling an unilateral upward
revision of the tariff, only if the agreement itself enables
such a revision.
Shri Potti for the Board urged that Exhibit P-1 could
not be held to fall under, and be protected by, Section
49(3) of the Act. Shri Potti urged a number of
considerations, which according to him, militate Exhibit P-1
being accorded such a status.
5. It is appropriate, at this stage, that some of the
statutory provisions which have a bearing on the matter are
noticed.
Sections 49, 59 and 79 of the Act (as they then stood)
read:
"Section 49(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 licencee upon such terms and
conditions as the Board thinks fit and may for the
purpose of such supply frame uniform tariffs.
(2) .........................................
(3) Nothing in the foregoing provisions of
this section shall derogate from the power of the
Board if it considers it necessary or expedient to
fix different tariffs for the supply of
electricity to any person not being a licencee,
having regard to the geographical position of any
area, the nature of the supply and purpose for
which supply is required and any other relevant
factors.
(4)..........................................
"Section 59: The Board shall not, as for as
practicable and after taking credit for and
subventions from the
934
State Government under Section 63, carry on its
operation under this Act at a loss, and shall
adjust its charges accordingly from time to time."
"Section 79: The Board may make regulations
not inconsistent with this Act and the rules made
thereunder to provide for all or any of the
following matters, namely:
(a) ]
to ]
(i) ] Omitted as irrelevant
(j) principles governing the supply of
electricity by the Board to persons other than
licensees under Section 49.
(k)..........................................
We may also notice Section 60:
"60(1): All debts and obligations incurred,
all contracts entered into and all matters and
things engaged to be done by, with or for the
State Government for any of the purposes of this
Act before the first constitution of the Board
shall be deemed to have been incurred, entered
into or engaged to be done by, with or for the
Board; and all suits or other legal proceedings
instituted or which might but for the issue of the
notification under sub-section (4) of Section have
been instituted by or against the Board."
In the Indian Aluminium Company’s case this Court was
examining the effect of an agreement entered into between
the then native State of Trivancore on the one hand and the
Indian Aluminium Company Limited on the other for the supply
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of electrical energy for an industrial enterprise of the
company for reduction of alumina into aluminium by a process
of electrolysis in which electrical-energy was itself a
primary raw material. Certain rates were agreed upon for a
period of 24 years from 1.7.1941 with a franchise to the
company for renewal of the agreement for a further period of
20 years. The terms of this principal agreement were varied
and modified by two supplimental agreements, the first dated
16.8.1955 and the second dated 4.4.1963. Two other
agreements were also entered into between the
935
parties on 30.3.1963 and 18.9.1965 respectively for supply
of additional electricity. In 1966 the Kerala State
Electricity Board promulgated regulations by which the Board
empowered itself to prescribe higher tariffs for different
classes of consumers. These regulations were amended in
1969. In exercise of powers thus assumed, the Board
purported to fix higher rates of tariffs to all extra high
tension consumers, including the said company. The relevant
tariff was declared applicable to all extra high tension
consumers notwithstanding anything contained in the
agreement entered into with the consumers either by the
Government or by the Board. This purported unilateral
enhancement was challenged by the company. This Court, in
substance, held that the agreement dated 1.7.1941 must be
deemed, by virtue of Section 60 of the Act, to have been
made by the Board itself; that Section 49(3) enabled such
specially negotiated loads as part of the statutorily
permitted scheme; that since the special stipulations in the
agreement were made in exertion of the statutory power under
Section 49(3), they could not, during the subsistence of the
agreement, be varied unilaterally by exertion of another
statutory power under the same Statute. It was observed:
"Now, fixation of special tariffs can be
unilateral act on the part of the Board, but more
often than not, it would be the result of
negotiation between the Board and the consumer and
hence a matter of agreement between them. It
would, therefore, seem clear that the Board can,
in exercise of the power conferred under sub-
section (3) of Section 49, enter into an agreement
with a consumer stipulating for a special tariff
for supply of electricity for a specific period of
time. Such a stipulation would amount to fixing of
special tariff and it would clearly be in exercise
of the power to fix special tariff granted under
sub-section (3) of Section 49."
"To put it differently, where a stipulation
in a contract is entered into by a public
authority in exercise of a statutory power, then,
even though such stipulation fetters subsequent
exercise of the same statutory power or future
exercise of another statutory power, it would be
valid and the exercise of such statutory power
would protanto stand restricted. That would follow
on the principle of harmonious construction."
"If the statutory power is to have any
meaning and
936
content, the stipulation made in exercise of the
statutory power must be valid and binding and it
would, as pointed out by Pennycuick V.C., in
Dowsty Boulton v. Wolverhamption Corporation,
’exclude the exercise of other statutory powers in
respect of the same subject matter’."
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Shri Sanghi relies upon the analogy of this case to
support the appellant’s claim that here also the agreement
Ext. P-1 has a similar status.
Section 49(1) and (2) of the Act delegates to the State
Electricity Board the powers of subordinate legislation to
frame uniform tariffs, setting out the factors and criteria
to be taken into account in fixing such uniform tariffs.
Section 79(j) enables the Board to frame and promulgate
regulations touching the matters envisaged by Section 49(1)
and (2). Sub-section (3) of Section 49 enables the Board to
fix different rates of tariffs having regard to the special
circumstances and particularities of individual cases.
Section 49(4), however mandates that the Board, in
exercising its discretion under Sub-section (3), shall not
show undue preference to any person. Section 59 says that
the Board shall so carry on its operations as not to incur a
loss.
6. Enumerating the considerations which according to
him, detract from the acceptability of the claim that the
agreement in this case qualifies for recognition as one
referable to the statutory power under Section 49(3) of the
Act, Shri Potti said that first, the agreement cannot be
deemed to be one entered into by the Board under Section
60(1) because it does not satisfy the essential requirement
of having been entered into by the State Government; that
secondly, the Board had not done anything with reference to
the agreement which could attract Section 60 to it; and,
accordingly, though the obligations of the State Government
became the obligations of the Board, the agreement itself
did not qualify for recognition under Section 60 of the Act;
that, thirdly there was no fixity of tenure with reference
to and in the context of which alone any immunity from
unilateral-alteration under Section 49(1) and (2) could be
conceived and measured, and that, fourthly the agreement
having been anterior to the commencement of the ’Act’
itself, it could not be held to have been entered into for
"purposes of the Act" within the meaning of Section 60.
The point that Shri Potti particularly emphasised was
that the element of recognition of the agreement under and
for purposes of Section 60(1)-which in the case of the
Indian Aluminium Company
937
consisted in the Board, after the commencement of the Act,
having treated and adopted the agreement by conscious overt
acts which comprised of the subsequent modifications of its
terms,- were lacking in the present case. The additional
agreement dated 10.5.1965 in the present case was for an
independent purpose and that the action of the Board in
entering into this agreement did not constitute any such
act, in relation to the original agreement, as would
constitute a conscious adoption by the Board of the original
agreement, so as to attract Section 60(1).
7. On a consideration of the matter, we are of the view
that it is unnecessary to examine the merits of these
contentions as we think that the point could be decided with
reference to an aspect which goes to the root of the matter.
That is, whether the agreement, even if attracts Section
60(1), qualifies itself to be recognised as one under
Section 49(3). We may here notice some provisions of the
agreement (Exhibit P-1):
Clause 1 stipulates:
(1) The Government shall furnish to the
Consumer and the Consumer shall take from the
Government all the energy required by the Consumer
for operating and lighting the Consumer Fertilizer
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Factory located at Eloor, Alwaye upto a total
amount of 4000 K.W.
Clause 12 provides:
12. The consumer shall not be at liberty,
save with the consent of the Electrical Engineer
to Government to determine this agreement before
the expiration of twelve calendar months from the
date of commencement of supply. The consumer may
determine this agreement after any time after the
said period on giving the Electrical Engineer one
clear month’s notice in writing. If within twelve
months from the date of commencement of supply the
consumer should without giving previous intimation
in writing to the Electrical Engineer to
Government cease to consume energy under the
agreement continuously for three months, his
agreement shall be determined.
There is, in the agreement, no specific stipulation as
to the duration, or term, of the agreement. The appellant is
enabled after expira-
938
tion of 12 calendar months from the date of commencement, to
terminate it by notice in writing. Shri Potti’s contention
is that the essential quality of the agreement which
qualifies for recognition and protection as one made in
exercise of the Board’s power under Section 49(3) is its
distinctiveness as to the period of operation; that the
protection and immunity from unilateral increase of tariff
can only be with reference to the period of the agreement
and that without reference to any period the idea of such
protection would be unmeaning and inconceivable; as the
benefit of Section 49(3) is to enure during the period
respecting which there is a commitment on the part of the
Board to supply electrical energy at a fixed rate.
8. Shri Sanghi, however, submitted, that it was not the
specificity of the period of operation of the agreement, but
its very existence that brings it within the protective
umbrella of Section 49(3). Learned counsel said that what
keeps an agreement outside Sec. 49(3) was the existence in
of specific stipulation in it enabling such unilateral
increases of the rates. Shri Sanghi submitted that the
period factor was not the decisive criterion, but the very
existence of a special agreement, however precarious its
tenure, that excludes the power under Section 49(1) of the
Act. According to Shri Sanghi even an agreement which is not
in terms bound for a fixed period and which is terminable by
either side by notice, is eligible for recognition as one
under Section 49(3) and that till the Board puts an end to
the agreement in a manner provided by the agreement, the
agreement qualifies itself for such protection under Section
49(3).
9. If an agreement, entered into by the Board does not
contain any stipulation as to the specific period for which
a particular rate should apply or, after so providing, also
contains a specific stipulation that the rates agreed upon
under it could unilaterally, be altered at the instance of
the Board, then it becomes merely academic whether such an
agreement does not qualify itself to be considered as one
entered into by the Board in exercise of its statutory power
under Sec. 49(3) or even if so qualified, yet, it does not
have the effect of excluding the exertion of the other
statutory powers under Sec. 49(1). The real question is
whether a unilateral increase could be effected or not. In
such a case, from the point of view of practical
consequences, it is immaterial whether the importance of the
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absence of the period-factor lies in taking the agreement
out of Sec. 49(3) or whether, being within 49(3), yet it
does not exclude the exercise of the statutory power under
Sec. 49(1). It has been held that the Board’s power to enter
into an agreement fixing a special tariff for a ’specified
period’ is relatable to
939
Sec. 49(3), or conversely, one of the tests whether an
agreement is entered into in exercise of the power under
Sec. 49(3) is that such agreement has the effect of
excluding the other statutory power under Sec. 49(1). The
main consideration for protection from unilateral increase
under Sec. 49(1) is the ’period-factor’ in an agreement. In
the Indian Aluminium Company’s case, it was observed:
"......It would, therefore, seem clear that the
Board can, in exercise of the power conferred
under sub-section (3) of Sec. 49, enter into an
agreement with a consumer stipulating for a
special tariff for supply of electricity for a
specific period of time. Such a stipulation would
amount to fixing of special tariff and it would
clearly be in exercise of the power to fix special
tariff granted under sub-section (3) of sec. 49
......
"....... The power to enter into an agreement
fixing a special tariff for supply of electricity
for a specified period of time is, therefore,
relatable to sub-section (3) of sec. 49 and such
an agreement entered into by the Board would be in
exercise of the power under that sub-section
....."
(emphasis supplied)
"....... To hold that the Board could unilaterally
revise the charges notwithstanding these
stipulations, would negate the existence of
statutory power in the Board under words, the
Board had no power to enter into such
stipulations. That would negate the existence of
statutory power in the Board under sub-section (3)
of Section 49 to fix the charges for a specified
period of time which would be contrary to the
plain meaning and intendment of the section."
(emphasis supplied)
The above excerpts would suggest that a contract which
does not have, and provide for an obligation to supply
electricity at a specific rate for a specific period and
does not, therefore, have the effect of excluding Section
49(1) cannot be said to fall under Section 49(3). If by an
unilateral, volitional act on the part of the Board the
assurance of a fixed-rate to the consumer could be denuded,
that circumstance, in itself, would be such as to detract
from the agreement being considered as one entered into in
exercise of power under Section 49(3). The importance of the
period-factor was again referred to in Delhi Cloth & General
Mills Co. Ltd. v. Rajasthan State Electricity Board,
940
[1986] AIR SC 1126. It was observed:
"....... 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
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therefore be regarded as having been entered into
by the Board in exercise of the statutory powers
conferred under Sec. 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 sec. 49(1)......."
The agreement in this case was precarious in regard to
the period of its operation and was susceptible to
termination at the volition of the Board. It cannot,
therefore, be construed as one which was intended to give a
statutory protection for the tariff by means of a special
agreement by the exercise of the statutory power of the
Board under Section 49(3).
10. Shri Sanghi, however, contended that as long as the
agreement did subsist and was not terminated, a unilateral
change was impermissible. To this, two answers could be
posited. First is, as already held, that if there is no
statutory-protection and immunity from unilateral change in
view of the precariousness of the tenure and its
susceptibility to defeasance at the mere volition of the
Board, the act did not furnish it with the status of one
under Section 49(3). The second, is that at all events, even
if the agreement was one under Section 49(3), the giving of
30 days notice-though issued in compliance with the
requirement of the regulation-puts an end to the agreement.
Looked at from either angle, the enhancement is not rendered
infirm.
11. Shri Sanghi referred to certain observations of
Lord Denning MR in Staffordshire Area Health Authority v.
South Staffordshire Water Works Co., [1978] 3 All England
Reports 769. In that case a water-company and the
authorities of a hospital entered into agreement in the year
1929 whereby the hospital was to receive 5,000 gallons of
water every day free and all the additional water required
at 7d. for 1000 gallons ’at all times hereafter’. In 1975,
the water-company gave a six months notice to the hospital
intending to terminate the 1929
941
agreement. The hospital contested the right of the company
to terminate the agreement, relying upon the ‘at all times
hereafter’ clause. The trial court upheld the hospital’s
claim and held that the company could not resile from the
contract. But the Court of Appeal held that having regard to
the fall in the value of money since the agreement was made,
circumstances had arisen which the parties had not foreseen
and that the agreement was not intended to hold good in the
altered state of circumstances. The agreement was held
terminable with reasonable notice. This case holds out its
own features of interest for the schoolmen. In a long term
contract of indefinite duration it is not unusual to find
provisions for cancellation with reasonable notice and for
payment of compensation in the event of termination. It is
also not unusual to infer, under certain circumstances,
terminability by notice even in the absence of an express
provision in that behalf, upon a construction of the
contract. In the case cited by Shri Sanghi, Lord Denning
invoked the doctrine of frustration. Learned authors in
Cheshire and Fifoot’s Law of Contract, 10th Edition, call
that case ‘a difficult case’ and that the learned Judge
Master of Rolls ‘reached an interesting and controversial
decision’. A contract which contains no express provision
for its termination may well be terminated by reasonable
notice by one or the other party depending upon the
implication of a term or upon a true construction of the
agreement. That principle has no application to the present
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case.
Accordingly, on contentions a (i) and (ii) we hold that
Exhibit P-1 did not qualify to be recognised and protected
under Section 49(3) of the Act.
12. Re: Contention (b):
Appellant raised the contention of a hostile
discrimination before the Division Bench in appeal. In the
course of the additional grounds raised on 31.5.1971 the
appellant averred:
"I respectfully submit that the 1st respondent
being committed to supply Indian Aluminium Company
Limited quantities of electrical energy of 16,000
KWY at the rate of Rs.100-105 per KWY for a period
upto 1995 and having further agreed to supply
electrical energy to the said company at the rate
of Rs.130 KWY for a period upto 50 years as from
1st April, 1965, has in enhancing the tariff rate
for supply of electrical energy to the appellant
as per Ext. P-2 to Rs.200 per KVA per year clearly
violated section 49 of
942
the Act. The 1st respondent, as for as I am
aware,had not increased tariff rates in the case
of other extra high tension consumers similarly
placed as the appellants who are referred to in
paragraph 11 of the counter-affidavit of the 1st
respondent in July, 1968, by virtue of its powers
under Ext. P-3 by notification like Ext. P-2 .....
The effect of Ext. P-2 order is that extra high
tension consumers who are similarly placed as the
appellant, have been given undue preference as
compared to the appellant in that, while the
tariff applicable to the appellant was increased
as per Ext. P-2, there was no similar upward
revision in the case of the other extra high
tension consumers who are referred to in paragraph
11 of the counter-affidavit of the 1st respo
ndent."
Again, in the reply affidavit dated 16.3.1973 the
appellant said:
"6. With respect to the averment in paragraph 3, I
submit that the petitioner has been discriminated.
Not only Indian Aluminium Company Ltd., but also
companies like Travancore Cochin Chemicals Ltd.,
Premier Tyres Ltd., Cominco Binani Zinc Limited,
Travancore Rayons Limited etc., have been given
the benefit of the contractual rates and the
existing contracts with those companies have not
been superseded till 1.1.1970 when uniform rate is
prescribed for all. The averment that the
appellant company and the Indian Aluminium Company
Limited are not similarly situated is made without
any basis, for at any rate, for the purpose of
Article 14, it cannot be denied that they are
comparable concerns."
Shri Sanghi contended that while the appellant was
subjected to a steep revision in the tariffs other similarly
circumstanced high tension consumers were left unaffected.
Learned counsel also contended that under Regulation 6 of
Ext. P-3 one of the classifications was "High tension
consumers" which included the appellant, and that any
further sub-classification purported by the Board between
"high tension consumers" and "extra high tension consumers"
to support a further classification, not contemplated by the
Regulation itself was impermissible. Shri Sanghi relied upon
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the case of Messrs Indian Metal & Ferro Alloys Ltd. v. State
of Orissa, AIR 1987 SC 1727 where a further purported
classification in the matter of the benefit of clubbing of
the allotments of electricity based on considerations which
were not
943
recognised for purposes of the statutory classification of
the consumers was held impermissible. In that case amongst
similarly circumstanced consumers who fell under the same
classification of power intensive units, a further
classification for the denial of the benefit of clubbing on
the ground that the particular consumer, being an export
oriented unit had failed to furnish the required export
performance, was held impermissible. This Court held:
".......... When all other power intensive units
termed as ‘domestic units’ are being allowed the
benefit of clubbing, it would not be legally
proper to deny the same facility to an industry
classified as ‘power intensive unit’ merely on the
ground that being an export oriented unit, it has
failed to fulfil the conditions pre-requisite for
allocation of additional power. Such differential
treatment would amount to arbitrary
discrimination, violative of Article 14 of the
Constitution and it cannot be permitted ..........
So long as the benefit of clubbing is allowed to
domestic power intensive units, such benefit
cannot be denied to an export oriented unit which
has not been allocated any additional power on the
basis of its export performance.
In the present case, the Board while denying that there
was any hostile discrimination, averred that no similarly
situate consumer had been left out of the tariff revision
and only cases where the Board, owing to the subsistence of
the agreements protected under Sec. 49(3) was under a legal
inhibition from making an unilateral enhancement, had been
left-out. In addition, the Board set out two other criteria
which, according to it, placed the appellant in a different
class distinguishing the case of the Indian Aluminium Co.
with which appellant pleaded similarity. These, as set out
in the counter-affidavit dated 5.3.1973 filed before the
Division Bench, are:
(i) that the appellant was not a ‘power intensive’
industry operating at very high load factor
whereas the Indian Aluminium Company is a ‘power
intensive industry’ operating at a very high load-
factor which required them to be classified
differently. The two consumers were not on the
same footing in the matter of consumption and the
purpose for which the energy was supplied.
(ii) that considerations like the power-factor were
taken into
944
account in fixing the tariff. So far as the Indian
Aluminium Company is concerned the power factor
was 0.9 and they were bound to maintain that rate
whereas the appellant-company was required to
maintain the same at 0.85 as per the agreement and
it could go down to 0.80 which was advantageous to
the appellant-company.
On a consideration of the matter, it appears to us that
the charge of discrimination against the respondent-Board
cannot be said to be established. Indeed in the present
case, the appellant has not laid a proper foundation for
examination of a case of discrimination under Article 14.
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The allegations of discrimination must be specific. (See AIR
1986 SC 1466 para 12-State of Maharashtra and Anr. v.
Basantilal Mohanlal Khetan and Ors.) It is also trite that
action of Governmental authorities must be presumed to be
reasonable and in public interest. It is for the person
assailing it to plead and prove the contrary. (See Kasturi
Lal Lakshmi Reddy v. State of J & K, [1980] 3 SCR 1338 at
1357). But here allegations are in general terms. Even so,
the respondent-board has made categorical statement that in
all those cases referred to in para 6 of the appellant’s
reply affidavit, tariff had been increased except where the
consumer had the protection of an agreement under Sec. 49(3)
which prevented an unilateral increase.
That apart the circumstance that respondent Board was
rendered, by virtue of the subsistence of an agreement under
Sec. 49(3), powerless to make an unilateral increase, can
form a valid ground for differential treatment as between
cases covered by Section 49(3) on the one hand and those in
which the Board was competent and was at liberty to give
effect to the increase, on the other. In Bisra Stone Lime
Co. v. Orissa State Electricity Board, [1976] 2 SCR 307 at
314, this Court, in similar context, held:
".......... A plea of discrimination which is
available when Article 14 is in free play is not
at par with the interdict of ‘undue favour’ under
section 49 of the Act. Apart from this, when law
makes it abligatory for certain special agreements
to continue in full force during their currency
stultifying the power of the Board to revise the
rates during the period, no ground of
discrimination can be made out on the score of
exempting such industries as are goverened by
special agreements."
945
Accordingly, contention (b) also fails.
In the result, for the foregoing reasons, this appeal
fails and is dismissed, but without an order as to costs.
N.V.K. Appeal dismissed.
946