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PETITIONER:

GRAPHITE INDIA LTD. AND ANOTHER

Vs.

RESPONDENT:

DURGAPUR PROJECTS LTD. AND OTHERS

DATE OF JUDGMENT: 27/08/1999

BENCH:

M.B.Shah, D.P.Wadhwa

JUDGMENT:

D.P. Wadhwa, J.

Leave granted.

The appellant Graphite India Ltd. ('Graphite' for

short) was getting electricity supply for its project from

respondent Durgapur Projects Ltd. ('DPL' for short).

Graphite challenged the increase in tariff by filing three

successive writ petitions in the Calcutta High Court. The

learned single Judge of the High Court allowed the writ

petitions holding that the enhancement of tariff and the

notices of enhancement issued by DPL for fixation of

electricity tariff were contrary to the provisions of

Section 57 of the Electricity (Supply) Act, 1948 ('Supply

Act' for short) read with the statutory requirements of

Schedule VI of that Act. Against that judgment of the

learned single Judge DPL filed an appeal before the Division

Bench of the High Court which was allowed by the impugned

judgment dated June 3, 1998. Writ petitions filed by

Graphite were dismissed. Aggrieved Graphite has come to

this Court.

Facts are not much in dispute. DPL was granted

sanction by the State of West Bengal under Section 28(1) of

the Indian Electricity Act, 1910 ('Electricity Act' for

short) by order dated August 28, 1964 to engage in the

business of supplying energy to the public in accordance

with the conditions specified therein. Conditions 5, 6 and

9 are relevant and are as under:-

"NOW THEREFORE, in exercise of the power concerned by

sub-section (1) of section 28 of the Indian Electricity Act,

1910 (Act 9 of 1910), the Government is pleased, after

consulting the West Bengal State Electricity Board, and with

the consent of the local authorities concerned namely, the

Faridpur Union Board, Durgapur Union Board, Gopalpur Union

Board and Jomua Union Board, to give the said Durgapur

Projects Limited (hereafter referred to as the

sanction-holder), sanction to engage in the business of

supplying energy within the said area, subject to the

following conditions:-

5) that the provisions of section 11, section 17,

section 18 sub-section (1) and (4) of section 21, section 24

and section 26 of the Indian Electricity Act, 1910 (Act 9 of

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1910) and the provisions of the Indian Electricity Rules,

1956, shall apply as if the sanction- holders were

licensees;

6) that the rates per unit for supply of energy shall

be fixed and adjusted from time to time in conformity with

the provisions laid down to the Sixth Schedule to the

Electricity (Supply) Act, 1948, and with the approval of the

State Government;

9) that the sanction hereby given shall be liable to

be rescinded or revoked in case the sanction-holders fail to

supply energy efficiently and satisfactorily or fail to

comply with any of the conditions on which this sanction is

granted;"

DPL entered into agreement with Graphite for supply of

energy to it which agreement was renewed from time to time,

the last on record being effective from January 21, 1984.

Clause 30 of the Agreement is relevant for our purpose,

which is as under:-

"30. This agreement shall be read and construed as

subject in all respects to the provisions of the Indian

Electricity Act, 1910 and the Electricity (Supply) Act, 1948

and of the Rules for the time being in force thereunder, so

far as the same respectively may be applicable."

On February 9, 1991 DPL wrote to the State Government

to accord the necessary approval to the revision in the

rates and charges, details of which were given in the

statement annexed with the letter for supply of power to

certain categories of consumers w.e.f. April 8, 1991.

However, to the Graphite a letter was addressed on February

7, 1991 informing it of the increase in the tariff to

certain categories of consumers w.e.f. April 8, 1991.

Graphite was told that all consumption of electricity

commencing from the date of first meter reading taken on

April 8, 1991 or thereafter shall be charged in accordance

with the revised rates and charges in supersession of the

existing rates and charges. Graphite fell in the category

(Rate 'A' for industrial consumers) where increase in tariff

was applicable. Graphite protested and when DPL threatened

to disconnect the supply of electricity Graphite filed a

writ petition on October 10, 1991 in the High Court. While

the writ petition was pending DPL again revised its tariff

in 1993 (w.e.f. November 1, 1993) and 1995 (w.e.f.

February 10, 1995). This led the Graphite to file two more

writ petitions in the High Court challenging further

revision in tariff. All these three writ petitions were

allowed by a common order of learned Single Judge on October

3, 1997. As noted above on appeal filed by DPL the Division

Bench of the High Court set aside the order of the learned

single Judge and dismissed the writ petitions.

In the present appeal filed by Graphite there are four

respondents, namely, (1) Durgapur Projects Ltd., (2) State

of West Bengal, (3) The Secretary and Controller of Finance

and Accounts, Durgapur Projects Ltd. and (4) Damodar Vally

Corporation. DPL and the State of West Bengal are the

contesting respondents.

Before we consider the rival contentions of the

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parties it may be appropriate to set out the relevant

provisions of the Acts which bear upon the controversy in

the appeal :-

The Indian Electricity Act, 1910

Part I

"2. Definitions - In this Act, expressions defined in

the Indian Telegraph Act, 1885 (13 of 1885) or in the

Electricity (Supply) Act, 1948 (54 of 1948), have the

meanings assigned to them in either of those Acts, and

unless there is anything repugnant in the subject or

context, -

(h) "licensee" means any person licensed under Part II

to supply energy;"

Part II

"3. Grant of licenses - (1) The State Government may,

on application made in the prescribed form and on payment of

the prescribed fee (if any) grant after consulting the State

Electricity Board, a license to any person to supply energy

in any specified area, and also to lay down or place

electric supply-lines for the conveyance and transmission of

energy, -

(a) where the energy to be supplied is to be generated

outside such area, from a generating station situated

outside such area to the boundary of such area, or

(b) where energy is to be conveyed or transmitted from

any place in such area to any other place therein, across an

intervening area not included therein, across such area.

(2) In respect of every such license and the grant

thereof the following provisions shall have effect, namely:-

(a) ........ (b) ........ (c) ........ (d) ........

(e) the grant of a license under this Part for any

purpose shall not in any way hinder or restrict the grant of

license to another person within the same area of supply for

a like purpose;

(f) the provisions contained in the Schedule shall be

deemed to be incorporated with and to form part of, every

license granted under this Part, save in so far as they are

expressly added to, varied or excepted by the license, and

shall, subject to any such additions, variations or

exceptions which the State Government is hereby empowered to

make, apply to the undertaking authorised by the license:

Provided that where a license is granted in accordance

with the provisions of clause IX of the Schedule for the

supply of energy to other licensees for distribution by

them, then, in so far as such license relates to such

supply, the provisions of clauses IV, V, VI, VII, VIII and

XII of the Schedule shall not be deemed to be incorporated

with the license."

Part III

"28. Sanction required by non-licensees in certain

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cases - (1) No person, other than a licensee, shall engage

in the business of supplying energy to the public except

with the previous sanction of the State Government and in

accordance with such conditions as the State Government may

fix in this behalf, and any agreement to the contrary shall

be void.

(1A) The State Government shall not give any sanction

under sub-section (1)-

(a) except after consulting the State Electricity

Board; and

(b) except with the consent -

(i) in any case where energy is to be supplied in any

area for which a local authority is constituted, of that

local authority;

(ii) in any case where energy is to be supplied in any

area forming part of any cantonment, aerodrome, fortress,

arsenal, dockyard or camp or of any building or place in the

occupation of the Government for defence purposes, of the

Central Government;

(iii) in any area falling within the area of supply of

a licensee, of that licensee:

Provided that except in a case falling under

sub-clause (ii), no such consent shall be necessary if the

State Government is satisfied that such consent has been

unreasonably withheld.

(2) ........."

The Electricity (Supply) Act, 1948

"2. Interpretation

In this Act, unless there is anything repugnant in the

subject or context,

(6) "licensee" means a person licensed under Part II

of the Indian Electricity Act, 1910, (9 of 1910) to supply

energy or a person who has obtained sanction under section

28 of that Act to engage in the business of supplying energy

but the provisions of section 26 or 26A of this Act

notwithstanding, does not include the Board or a generating

company;"

"57. Licensee's charges to consumers

The provisions of the Sixth Schedule shall be deemed

to be incorporated in the license of every licensee, not

being a local authority -

(a) in the case of a license granted before the

commencement of this Act, from the date of the commencement

of the licensee's next succeeding year of account; and

(b) in the case of a license granted after the

commencement of this Act, from the date of the commencement

of supply,

and as from said date, the licensee shall comply with

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the provisions of the said schedule accordingly, and any

provisions of the Indian Electricity Act, 1910 (9 of 1910)

and the license granted to him thereunder and of any other

law, agreement or instrument applicable to the licensee

shall, in relation to the licensee, be void and of no effect

in so far as they are inconsistent with the provisions of

section 57A and the said Schedule.

57A. Rating Committees

(1) Where the provisions of the Sixth Schedule are

under section 57 deemed to be incorporated in the license of

any licensee, the following provisions shall have effect in

relation to the said licensee, namely -

(a) the Board or where no Board is constituted under

this Act, the State Government, -

(i) may, if satisfied, that the licensee has failed to

comply with any of the provisions of the Sixth schedule;

and

(ii) shall, when so requested by the licensee in

writing, constitute a rating committee to examine the

licensee's charges for the supply or electricity and to make

recommendations in that behalf to the State Government:"

SCHEDULE VI

FINANCIAL PRINCIPLES AND THEIR APPLICATION

"1. Notwithstanding anything contained in the Indian

Electricity Act, 1910 (9 of 1910), except sub-section (2) of

section 22A, and the provisions in the license of a

licensee, the licensee shall so adjust his charges for the

sale of electricity whether by enhancing or reducing them

that his clear profit in any year of account shall not, as

far as possible, exceed the amount of reasonable return:

PROVIDED that such charges shall not be enhanced more

than once in any year of account:

PROVIDED FURTHER that the licensee shall not be deemed

to have failed so to adjust his charges if the clear profit

in any year of account has not exceeded the amount of

reasonable return by twenty per centum of the amount of

reasonable return:

PROVIDED FURTHER that the licensee shall not enhance

the charges for the supply of electricity until after the

expiry of a notice in writing of not less than sixty clear

days of his intention to so enhance the charges, given by

him to the State Government and to the Board:

PROVIDED ALSO that if the charges of supply fixed in

pursuance of the recommendations of a rating committee

constituted under section 57A are lower than those notified

by the licensee under and in accordance with the preceding

proviso, the licensee shall refund to the consumers the

excess amount recovered by him from them:

PROVIDED ALSO that nothing in this schedule shall be

deemed to prevent a licensee from levying, with the previous

approval of the State Government, minimum charges for supply

of electricity for any purpose.

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1A. The notice referred to in the third proviso to

paragraph I shall be accompanied by such financial and

technical date in support of the proposed enhancement of

charges the as State Government may, by general or special

order, specify."

There are various clauses in this Schedule defining

capital base, clear profit, debenture capital, intangible

assets, ordinary capital, original cost, preference capital,

reasonable return, standard rate, etc. all for adjusting

the charges for sale of electricity to match with reasonable

return.

There is an earlier letter dated August 29, 1986 from

State Government to DPL whereby approval for enhancement of

tariff in 1986 was granted and it was suggested that DPL

tariff should be fixed in the lines of West Bengal State

Electricity Board (WBSEB) rates. This letter we reproduce

as under:-

"Sir

I am directed to refer to your letter No.

COM/Tafiff/1-2025 dated 24.4.86 on the above subject and to

say that the matter was taken up with the Power Deptt. of

this Govt. for concurrence to the enhancement of DPL's

tariff from 1.7.86. The Deptt. has since suggested that

for the sake of uniformity DPL's tariff should be fixed in

the lines of WBSEB's rates which have been revised from

July, 1986. Power Deptt.'s original letter No.

404-Power/III dated 22.5.86 to the Secretary, WBSEB

containing the revised tariff rates of WBSEB has been made

over to you which may be returned along with the reply. An

extract of the Power Deptt's note in this regard is

enclosed. I am now to request you kindly to let this Deptt.

have your views as to whether the proposed revision will

meet the requirement of DPL."

Mr. Dipankar Gupta, learned counsel for the Graphite

made the following submissions:-

1. DPL is a sanction-holder under Section 28 of the

Electricity Act. DPL is thus permitted to engage in the

business of supplying energy to the public "in accordance

with such conditions as the State Government may fix in this

behalf". Reference may be made to condition No. 6 imposed

by the State Government granting sanction to DPL by order

dated August 28, 1964. Rates of electricity have thus to be

fixed in conformity with the provisions of the Sixth

Schedule to the Supply Act and with the approval of the

State Government. DPL in revising the tariff has

contravened condition No. 6.

2. Language of Sixth Schedule to Supply Act casts an

obligation upon the "licensee" to adjust his charges in a

particular manner but shall not "exceed the amount of

reasonable return". "Licensee" would include

sanction-holder in view of the definition given in Section

2(6) of the Supply Act. Alternatively, even otherwise the

Sixth Schedule of the Supply Act is incorporated in the

"license of every licensee" by virtue of Section 57 of that

Act and since the definition "licensee" includes a

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sanction-holder the phrase "license of every licensee" would

make the terms and conditions of the Sixth Schedule

applicable to sanction as well. Compliance with the Sixth

Schedule is thus by force of law an obligation of the

sanction-holder. Sixth Schedule has been devised to be a

financial discipline of the supplier of energy and a

protective provision for the consumer. A consumer whether

falling within the area of a "licensee" or of a

sanction-holder should not be exposed to different

considerations so far as tariff fixation is concerned. It

is the obligation of the sanction-holder before revising the

tariff to comply with the provisions of the Sixth Schedule

and to obtain approval of the State Government.

3. 60 days clear notice to the State Government

before tariff revision is effected, is mandatory. This

provision, which is conceived for the benefit of the

consumer and in the public interest, has to be held as

mandatory and cannot be waived. This provision is not for

the "benefit" of the State Government. It is to enable the

State Government to examine the issue of tariff revision.

State Government can complete its examination in a shorter

period than 60 days and grant approval but it cannot waive

that notice can be for a period less than 60 days.

Admittedly while effecting first revision in tariff 60 days

notice was not given to the State Government. A question

also arises whether there was any approval of the State

Government to the proposed increase sought by the notice

dated February 9, 1991.

4. Communication of the State Government dated April

27, 1992 though it grants approval to the increase with

effect from April 8, 1991 is of no effect. Approval could

not be given retrospectively more than a year after the

increase. This letter dated April 27, 1992 of the State

Government merely states that rate 'A' (for industrial

consumer) had already been increased with effect from April

8, 1991 and the approval was with regard to other categories

which had been left out during April 8, 1991 revision of

tariff. There is nothing to indicate that the State

Government ever applied its mind to the revision effective

from April 8, 1991 and granted its approval. Letter dated

April 27, 1992 is not an approval of the increase in tariff

with effect from April 8, 1991. In any case DPL could not

have effected tariff revision without prior approval which

came only on April 27, 1992.

5. When DPL wrote letter dated February 9, 1991

seeking approval of the State Government the only reason for

the revision indicated was that there was a direction of the

State Government that DPL's power tariff should be fixed in

the line with WBSEB for the purpose of uniformity. This is

an extraneous consideration and contrary to requirements of

Sixth Schedule of the Supply Act. Sixth Schedule provides

certain accounting procedure, which, on the face of it, must

relate to the individual supply company whose tariffs are

under consideration. The accounting inputs can never be the

same for two suppliers. Since the relevant conditions have

been ignored and extraneous considerations have been relied

upon the tariff revision with effect from April 8, 1991 is

vitiated.

6. The word "shall" in the third proviso to Sixth

Schedule is mandatory and it is wrong to contend that it is

not mandatory and the mere use of the word "shall" is not

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decisive factor in deciding whether a provision is mandatory

or directory. The provisions contained in the Sixth

Schedule are for the benefit of the consumers and the

Government is to act as a watch dog for their benefit in

order to ensure that the enhancement of tariff is made

within the parameters as laid down in the Sixth Schedule and

that it is not framed in a manner which is arbitrary and

unreasonable. Provisions contained in Sixth Schedule are

made for public good and cannot be waived by the person

proceeded against. It has been held that in case of failure

to observe procedural provision which is of mandatory

character it has to be ascertained whether the provision is

conceived in the interest of the person proceeded against or

in public interest. In these circumstances the third

proviso to Sixth Schedule is a provision of mandatory nature

and the State Government cannot waive the requirement of the

notice. It has been rightly observed by the learned single

Judge that the notice dated April 9, 1991 by DPL to the

State Government is also not in conformity with para (1A) of

the Sixth Schedule. Reliance has been placed to two

decisions of this Court in State Bank of Patiala and others

vs. S.K. Sharma (1996 (3) SCC 364) and Rajendra Singh vs.

State of M.P. (1996 (5) SCC 460).

7. Object of Section 57 of the Sixth Schedule is to

protect the consumer from arbitrary enhancement of rate for

supply of electricity. Reliance has been placed on a

decision of this Court in Poona Electric Supply Co. Ltd.,

Bombay vs. Commissioner of Income-tax, Bombay City I,

Bombay (AIR 1966 SC 30). Any objection to the legality of

the price and rate fixation is not beyond challenge as court

is always entitled to go into the question and ascertain

whether the price or rate fixation is valid or not.

Reference has been made to a decision of this Court in Shri

Malaprabha Coop. Sugar Factory Ltd. vs. Union of India

and another (1994 (1) SCC 648), which was a case of price

fixation under the Essential Commodity Act.

All these objections have been to the revision in

tariff in 1991. In respect of tariff revisions in 1993 and

1995 Mr. Gupta submitted that though for both these

enhancement and revision notices were given by DPL to the

State Government and approval obtained, the enhancement was

ex-facie illegal and without jurisdiction and arbitrary

inasmuch as revision was not in accordance with the

provisions contained in the Sixth Schedule to the Supply

Act. He said there has been no consideration of relevant

material and reliance was placed upon extraneous

considerations as in the case of first revision in 1991. He

said second and third revisions in 1993 and 1995 are

consequently also vitiated.

Mr. A.K. Mitra, learned counsel appearing for DPL in

reply referred to a decision of this Court in U.P. Avas

Evam Vikas Parishad and another vs. Friends Coop. Housing

Society Ltd. and another (1995 Supp. (3) SCC 456). This

he said was an authority for the proposition that approval

subsequently given can date back to the date of the request.

He also said that in the first writ petition there was no

challenge to the tariff revision on the ground of

non-application of mind and it was only when the counter

affidavit of the State Government dated January 10, 1992

mentioned that the approval had not been given that this

ground of non- application of mind was advanced in two

subsequent writ petitions.

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Mr. V.R. Reddy, appearing for the State of West

Bengal supported the impugned judgment of the Division Bench

of the High Court. His submissions are summarised as under

:-

1. DPL is a wholly owned Government company of the

State of West Bengal. It has been granted sanction under

Section 28 of the Electricity Act. DPL is not a license

holder under clause (h) of Section 2 of Electricity Act. It

has no licence under Part II of that Act. Section 28 under

which sanction has been accorded to DPL falls under Part III

of the Act which applies to non-licensees. Although under

Section 2(6) of the Supply Act DPL becomes a licensee for

the purpose of said Act but that Act does not define the

term "license" nor does it prescribe that sanction under

Section 28 of the Electricity Act shall be treated as

license. Definition of the "license" as given in Section

2(6) of the Supply Act has to be read as such unless there

is anything repugnant in the subject or context. By virtue

of Section 57 of the Supply Act Sixth Schedule is

incorporated in the license of a licensee. Since DPL is not

a holder of license the question of incorporation into the

license of Sixth Schedule does not arise. Provisions of

Section 57 and the Sixth Schedule do not apply to a

sanction-holder under Section 28 of the Electricity Act.

These will not, therefore, apply to DPL.

2. Clause (5) of the sanction order dated August 28,

1964 incorporates certain sections of the Electricity Act

and Indian Electricity Rules, 1956 to the sanction-holders

as if they were licensees. Section 57 of the Supply Act and

the Sixth Schedule thereto are not even made applicable to

DPL. However, clause (6) of the sanction order directs that

DPL shall fix the tariff on the principles enumerated in the

Sixth Schedule. Applicability of Sixth Schedule is not by

virtue of any statute but is contractual. Sanction order

itself provides for consequences of breach of the provisions

contained in the Sixth Schedule. Notice which was given to

the State Government for tariff revision in 1991 was short

by two days. Notices are to be given by the licensee to the

State Government and to the Board under Sixth Schedule.

Revision of tariff becomes automatically effective on expiry

of 60 days. There is no provision for subsequent refund of

excess if the Rating Committee reduces the tariff as

proposed by licensee. Fourth proviso of the Sixth Schedule

giving 60 days notice is procedural and not mandatory.

State Government accepted the short notice without objection

and waived the shortness of two days. It gave its approval

to the first revision though retrospectively. Consumer has

no right to object that notice is short. It is a matter for

the State Government. The period of notice is for the

benefit of State Government and the Board. 60 days notice

is not a condition precedent for revision of tariff becoming

effective. Short term notice does not invalidate the

revision. 60 days notice was given to Graphite. Tariff

revision was not effected before the expiry of 60 days

period. That provision for notice is directory and not

mandatory and that substantial compliance would be enough

and further mandatory provisions can be waived by the party

concerned. Reference was made to a decision of this Court

in State Bank of Patiala and others vs. S.K. Sharma (1996

(3) SCC 364).

3. Under the sanction order dated August 28, 1964

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prior approval of the State Government is not required for

tariff revision. The expression of the approval of the

State Government as appearing in clause (6) of the sanction

order does not mean that approval should be taken before

hand. There is difference between the expressions

"approval" and "permission" as held by this Court in U.P.

Avas Evam Vikas Parishad & Anr. vs. Friends Coop. Housing

Society Ltd. & Anr. [1995 Suppl. (3) SCC 456]. In that

case this Court construed the expression "with the approval"

and held that once approval is given, all the previous acts

done or action taken in anticipation of the approval get

validated.

4. Under the Sixth Schedule of the Supply Act no

approval of the State Government is necessary at all.

Approval of the first revision granted by the State

Government may be at a subsequent stage but that ratified

all actions taken by the DPL in contemplation of the

approval.

5. Letter of the State Government dated August 29,

1986 contains guidelines of the State Government that for

uniformity DPL's tariff should be fixed in the line of

tariff of WBSEB. There is no allegation that DPL is

exceeding tariff rate of the WBSEB or that DPL is making a

clear profit in excess of 20% of the reasonable profit. DPL

has been regularly suffering losses since 1989. It has been

pointed out in the affidavit of DPL in the High Court filed

in opposition in the second writ petition that DPL has been

meeting losses and there has been no denial of the said

factual statements. Relevant considerations were taken into

account and this has been explained in the counter affidavit

filed by DPL.

6. State Government has power to amend or add to the

conditions of sanction order.

7. Consideration of WBSEB's tafiff is not an

extraneous matter. WBSEB is the main supplier of the

electricity in the State of West Bengal. It is the

undertaking of the State Government. Tariff of WBSEB is

comparable unit to decide upon responsibleness of tariff of

DPL as the other similar supplier of electricity in the

State of West Bengal.

8. It is wrong to allege that there was

non-application of mind by the State in approving the

tariff. There is no particulars alleged by the Graphite to

show that there was non-application of mind by the State

Government. That there was application of mind by the State

Government as well as by DPL would appear from the counter

affidavit of the State Government and from the letter dated

April 27, 1992 approving the enhancement of the tariff by

State Government and by DPL by its letter dated February 9,

1991 and 405th meeting of the Board of Directors of DPL held

on December 13, 1991. The very fact that the State

Government reduced the tariff proposed by DPL to L.T.

consumers showed application of mind by the State

Government.

9. There is no allegation that the tariff of DPL

exceeds that of WBSEB at the relevant times. In fact it was

less at various times.

10. In the second and third writ petitions admittedly

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for tariff revision notices were duly served and approval

obtained. There is no allegation in the writ petitions that

on account of tariff revisions DPL was making clear profits

on electricity account or more than 20% of the reasonable

return. Rather fact remains that DPL was suffering losses

on electricity account during the relevant times. From the

year-wise losses of DPL it would appear that DPL was

continuously suffering losses in the years 1992 to 1996.

There is no denial of the said factual statement. From the

affidavits filed by the State Government as well as by DPL

it is apparent that the revision of tariff was made in

accordance with law.

11. Burden of proof that the revision in tariff was

not in accordance with law was on the Graphite, which it has

failed to discharge [see The Amalgamated Electricity Co.

Ltd. vs. N.S. Bhathena & Anr. (1964 (7) SCR 503)].

12. Scope of judicial review in tariff revision

matter is very limited. It has been held that fixation of

tariff is a matter of legislative policy [Hindustan Zinc

Ltd. etc. etc. vs. Andhra Pradesh State Electricity

Board & Ors. (1991 (3) SCC 299)].

Concluding his arguments Mr. Reddy said that the

Graphite be directed to pay to DPL the amount of electricity

charges which DPL could not collect due to interim order of

injunction obtained by Graphite in the writ proceedings in

the High Court. These charges, he said, amount to

Rs.11,02,90,654.83 with delayed payment surcharge at the

agreed rate as stipulated in the existing agreement of

supply dated January 21, 1984.

Arguments have been in somewhat detail but the issues

are not so complex. Broadly the contentions of the

appellants are: Statutory requirements of Section 57 of the

Supply Act read with Sixth Schedule have not been fulfilled

inasmuch as relevant considerations required for the

revision in tariff have not been kept in view and extraneous

consideration has been taken into account. Relevant

consideration is that for revision in tariff there should be

reasonable profit and extraneous consideration is that the

tariff fixed by WBSEB has been kept in view. For the first

writ petition where revision in tariff was effected in 1991,

contentions are (a) 60 days clear notice, which is

mandatory, was not given, (b) there was no approval of the

State Government before the increase was effected, and (c)

subsequent approval at later date cannot be of any

consequence.

Respondents on the other hand contend that

applicability of Sixth Schedule to a sanction-holder under

Section 28 of the Electricity Act is merely contractual and

when approval is given it relates back to the date of

increase in the tariff. All these points are basic around

which arguments revolve.

That approval can date back we have been referred to a

decision of this Court in U.P. Avas Evam Vikas Parishan and

another vs. Friends Coop. Housing Society Ltd. and

another (1995 Supp. (3) SCC 456). In this case

notification under Section 28 of the U.P. Avas Evam Vikas

Parishan Adhiniyam, 1965 was published on June 7, 1982.

Immediately the appellant had sought for approval of the

State Government through its letter dated July 27, 1982.

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The Government approved the scheme on August 24, 1982

(Section 28 is equivalent to Section 4(1) of the Land

Acquisition Act, 1890). Thereafter declaration under

Section 32 of the Adhibiyam (equivalent to Section 6 of the

Land Acquisition Act) was published on February 28, 1987.

Allahabad High Court in a writ petition set aside the

declaration holding that since prior approval of the State

Government was not obtained the notification under Section

28 and declaration under Section 32 of the Adhiniyam were

invalid and inoperative. Question before this Court was

whether it would be prior approval or approval given

subsequent to the notification under Section 28 or

declaration under Section 32 of the Adhiniyam was valid in

law. This Court observed that if prior approval would have

been a pre-condition for further steps, the Act would have

said so and this not having been done what is material is to

obtain the approval of the State Government. This Court

said that the reason for this appeared to have been that

when a scheme has been framed the land suitably required for

effective implementation of the scheme should alone be

acquired and not in excess in the guise of framing the

scheme. Relying on its two earlier decisions in Life

Insurance Corpn. of India vs. Escorts Ltd. (1986 (1) SCC

264) and The Lord Krishna Textile Mills Ltd. vs. Workmen

(AIR 1961 SC 860) this Court held:-

"This Court in Life Insurance Corpn. of India vs.

Escorts Ltd. considering the distinction between "special

permission" and "general permission", "previous approval" or

"prior approval" in para 63 held that: "We are conscious

that the word 'prior' or 'previous' may be implied if the

contextual situation or the object and design of the

legislation demands it, we find no such compelling

circumstances justifying reading any such implication into

Section 29(1) of the Act." Ordinarily, the difference

between approval and permission is that in the first case

the action holds good until it is disapproved, while in the

other case it does not become effective until permission is

obtained. But permission subsequently granted may validate

the previous Act. As to the word 'approval' in Section

33(2)(b) of the Industrial Disputes Act, it was stated in

Lord Krishna Textiles Mills Ltd. vs. Workmen that the

Management need not obtain the previous consent before

taking any action. The requirement that the Management must

obtain approval was distinguished from the requirement that

it must obtain permission, of which mention is made in

Section 33(1)."

This Court then said that approval envisaged is to

enable the Parishad, the appellant, to proceed further in

implementation of the scheme framed. Unless approval is

given by the Government the scheme may not be effectively

implemented. This Court then said "nevertheless, once the

approval is given, all the previous acts done or actions

taken in anticipation of the approval get validated and the

publications made under the Act thereby become valid".

It would thus appear that in the present case when

approval was granted by the State Government by its letter

dated April 27, 1992 the approval relates back and the

revision would be effective from April 8, 1991. It is

difficult to accept the argument of Graphite that the letter

dated April 27, 1992 is not an approval of the increase in

tariff effective from April 8, 1991. On December 23, 1991,

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DPL wrote to the State Government on the subject of general

revision in power tariff by it and referred to its letter

dated February 9, 1991. It said that the Board of Directors

of DPL at 405th meeting held on December 13, 1991 approved

the proposal for general revision of power tariff of DPL to

all its consumers. DPL sought approval of the State

Government to effect the tariff revision from March 3, 1992.

It also pointed out that "the company (DPL) should have a

benefit of revision in rate of supply to WBSEB as a whole

for which Government should be moved". In its letter dated

April 27, 1992 to DPL the State Government granted approval

for revision of tariff for different categories of consumers

and as regards rate applicable to Graphite the letter said

"as existing w.e.f. 8.4.91". We do not think any argument

is needed for us not to hold that ex post facto approval was

granted for tariff revision as regards the supply to

Graphite from April 8, 1991. It is also difficult to accept

the argument of the Graphite that unless approval is granted

there cannot be any revision in tariff. It is not the

requirement of law even if Sixth Schedule of Supply Act is

held to be applicable that approval has to be granted within

60 days of the notice given to the State Government. That

revision can certainly become applicable after the expiry of

the period of 60 days. If approval is not granted, the

increased charges paid by the consumer are liable to be

adjusted/refunded. In this connection reference may be made

to the constitution of the Rating Committee under Section

57A of the Supply Act. Under fourth proviso to clause (1)

of the Sixth Schedule it is provided that if charges of

supply fixed in pursuance of the recommendations of a Rating

Committee are lower than those notified by the licensee, the

licensee shall refund to the consumers the excess amount

recovered by him from them.

Under Section 28 of the Electricity Act for a person

other than a licensee to engage in the business of supplying

energy to the public two conditions are required: (1)

sanction of the State Government and (2) in accordance with

such conditions as the State Government may fix in that

behalf. State Government is not free to give sanction

except (A) after consulting State Electricity Board, (B)

with the consent of local authority the licensee in their

respective areas and (C) in case the energy is to be

supplied in any area forming part of cantonment, aerodrome,

etc. of the Central Government. The Central Government,

however, cannot withhold its consent unreasonably. A

question arises if the conditions imposed by the State

Government while granting sanction are statutory or

contractual.

Supply of electric energy is governed by two statutes,

i.e., The Electricity Act and the Supply Act. A license is

the requirement under the Electricity Act for a person to

supply electric energy in any area. Supply Act provides for

the rationalization of the production and supply of

electricity and generally for taking measures conducive to

electrical development. One of its main objects is to

prevent such licensees from charging unreasonable rates to

the detriment of the consumers. Under Section 57(1) of the

Supply Act the provisions of the Sixth Schedule and the

table appended to the Seventh Schedule thereto are deemed to

be incorporated in the license of every licensee. The

question involved depends on the provisions of the two Acts.

While the Electricity Act deals with the supply and use of

electrical energy and the rights and obligations of licensee

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and the sanction-holder under Part III of the Act, the

Supply Act deals with the statutory powers and functions of

the Central Electricity Authority, State Electricity Boards

and generating companies and also provides for fixing of

charges to the consumers of energy by the licensee. Section

2(6) of the Supply Act thus defines licensee to mean a

person licensed under Part II of the Electricity Act and

also a person who has obtained sanction under Section 28 of

that Act. But then the term 'license' and 'sanction' have

not been defined. Section 2 also starts with the expression

that "in this Act, unless there is anything repugnant in the

subject or context" and, therefore, what licensee means

under Section 2(6) can be different if there is anything

repugnant in the subject or context. Had the term

'licensee' defined to mean a person licensed under Part II

of the Electricity Act to supply energy or a person who had

obtained sanction under Section 28 of that Act and the

expression 'license' and 'sanction' to be construed

accordingly things would have been much simpler. However,

it is not that whenever the word 'licensee' has been used in

the Supply Act it would also include the sanction-holder.

In this connection we may refer to Section 41 of the Supply

Act which provides for use by the State Electricity Board or

the generating company to use for any of its purposes any

transmission lines or main transmission lines of a licensee.

Here 'licensee' would certainly mean a person who has been

granted licensee under Part II of the Electricity Act as

well who has been granted sanction under Section 28 of that

Act. The question which falls for consideration is if the

word 'licensee' in Section 57 of the Supply Act would

include a sanction-holder. This Section provides that Sixth

Schedule shall be deemed to be incorporated in the license

of every licensee, not being a local authority and that

would be notwithstanding anything contained in any provision

of the Electricity Act or terms of the license granted to

him under that Act or under any other law. Sixth Schedule

of the Supply Act has thus over-riding effect. Sixth

Schedule uses the expression 'license' in its various

clauses. It would be difficult for us to hold that

'license' would mean 'sanction' as well. We have to see in

what context the term 'license' had been used. When

sanction was granted to DPL in the year 1964, much after the

coming into force of the Supply Act, it was specifically

mentioned that certain provisions of the Electricity Act

would apply (clause 5) and clause 6 of the conditions

provided that the rates for supply of energy shall be fixed

and adjusted from time to time in conformity with the

provisions of the Sixth Schedule to the Supply Act and with

the approval of the State Government. If Sixth Schedule was

applicable to a sanction-holder under Section 28 of the

Electricity Act there was no occasion for the State

Government to mention that rates would be fixed and adjusted

in conformity with the Sixth Schedule. Moreover, when a

licensee under Part II fixes and adjusts the rates in terms

of the Sixth Schedule he is not required to obtain any

approval by the State Government. Rather power under

paragraph (1) of the Sixth Schedule would justify

enhancement of the rate beyond that fixed earlier by the

licensee or by any order of the State Government. Though a

sanction-holder is bound to seek approval of the rates from

the State Government there is no such limitation on a

licensee. This term would show that conditions imposed by

the State Government to a sanction-holder under Section 28

of the Electricity Act are contractual in nature and are not

statutory.

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In The Amalgamated Electricity Co. Ltd. vs. N.S.

Bhathena and another (1964 (7) SCR 503) one of the questions

raised was the effect of the Supply Act on the maximum of

rates fixed by the Government under Section 3(2) of the

Electricity Act which could be charged by the licensee.

This Court held that under provisions of Sixth Schedule the

limit imposed by the maximum rates, if any, prescribed by

the State Government has no application and that licensee is

free to adjust the rates in terms of Sixth Schedule. This

Court further held that unless it is established that the

rates charged by the licensee resulted in a profit to it

over the "reasonable return", the licensee would be held to

have adjusted these rates in conformity with the

requirements of the relevant provisions of the Supply Act.

Court observed:-

"There is no presumption that the rate charged by a

licensee contravenes the statutory prohibition. It is for

the party who alleges his right to relief to establish the

facts upon which such relief could be obtained. It was,

therefore, for the plaintiffs to prove by facts placed

before the court that the rate charged offended the

statutory provision. This they admittedly failed to do and

we, therefore, hold that they were not entitled to the

declaration and injunction which the learned Judge of the

High Court granted."

Graphite has been unable to show that increase in

tariff by DPL has contravened the provisions of the Sixth

Schedule

In State Bank of Patiala & Ors. vs. S.K. Sharma

[(1996) 3 SCC 364] this Court observed that even a mandatory

requirement can be waived by the person concerned if such

requirement is in his interest and not in public interest.

This is how the court said :

"In the case of violation of a procedural provision,

which is of a mandatory character, it has to be ascertained

whether the provision is conceived in the interest of the

person proceeded against or in public interest. If it is

found to be the former, then it must be seen whether the

delinquent officer has waived the said requirement, either

expressly or by his conduct. If he is found to have waived

it, then the order of punishment cannot be set aside on the

ground of the said violation. If, on the other hand, it is

found that the delinquent officer/employee has not waived it

or that the provision could not be waived by him, then the

Court or Tribunal should make appropriate directions

(include the setting aside of the order of punishment),

keeping in mind the approach adopted by the Constitution

bench in Managing Director, ECIL vs. B. Karunakar [(1993)

4 SCC 727]. The ultimate test is always the same, viz.,

test of prejudice or the test of fair hearing, as it may be

called."

In Rajendra Singh vs. State of M.P. & Ors. [(1996)

5 SCC 460] this Court again affirmed that even a mandatory

provision which is in the interest of the party can be

waived by the party himself but if it is in public interest,

it cannot be waived.

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A person to whom sanction has been granted under

Section 28 of the Electricity Act cannot exercise all the

powers of a licensee under that Act. The powers to be

exercised by holder of sanction are specifically mentioned

under the Act. Reference may be made to Section 29 of the

Electricity Act. Under that Act, the local authority may,

by order in writing, confer and impose upon any person, who

has obtained the sanction of the State Government under

Section 28 to engage in the business of supplying energy, to

the public, all or any of the powers and liabilities of a

licensee under Sections 12 to 19, and the provisions of the

said sections shall thereupon apply as if such person were a

licensee under Part II of the Act. It is, thus, apparent

that a sanction holder under Section 28 of the Electricity

Act cannot be equated with a licensee under Part II of that

Act.

Under Section 57 of the Supply Act the Sixth Schedule

is applicable to a licensee. This Schedule has been made

applicable to a sanction holder under the terms of the

sanction. Third proviso to the Sixth Schedule provides that

the licensee shall not enhance the charges for the supply of

electricity until after the expiry of a notice in writing of

not less than sixty clear days of his intention to so

enhance the charges, given by him to the State Government

and to the State Electricity Board. In the present case,

when we are considering the applicability of the Sixth

Schedule to the sanction holder, it is not the case that any

notice was required to be given to the WBSEB. Why notice is

required to be given to the State Government can be seen

from the fact that the State Government or the State

Electricity Board could constitute a rating committee to

examine the licensee's charges for the supply of electricity

and to make recommendations in that behalf to the State

Government. What are the consequences of the

recommendations of the rating committee find mention in

Section 57A and in the Sixth Schedule. There is no question

of any approval to be given by the State Government to the

licensee. When notice of enhancement of charges is given in

the case of sanction holder under the terms of the sanction.

approval of the State Government is required. We have seen

above, approval from the State Government can be

retrospective. The bar in the proviso is only to the extent

that enhanced charges may not be levied till after the

expiry of sixty days notice to the Government. It is not

that the State Government is required to grant its approval

within 60 days period. As far as sanction holder is

concerned, requirement of notice and approval by the State

Government are not statutory conditions. These are

contractual and could be varied or waived by the State

Government. Conditions have been imposed by the State

Government and not by virtue of any statute. It would,

therefore, appear to us that the requirement of sixty days

notice to the State Government is not mandatory. In its

counter affidavit dated January 10, 1992 filed in the first

writ petition, the State Government took the stand that the

DPL before enhancing the tariff with effect from April 8,

1991 did not comply with the necessary formalities as

required under the Supply Act read with the Government Order

No.4520 (Power) dated August 28, 1964. Graphite was not

informed of the said hike which came into force w.e.f.

April 8, 1991. However, in the supplementary affidavit

filed by the DPL subsequently it was stated that the

Government of West Bengal by their letter dated April 27,

1992 duly approved the enhancement of tariff w.e.f. April

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8, 1991. In the letter dated February 9, 1991 to the State

Government, the DPL mentioned that the tariff was last

revised for all categories of consumers w.e.f. August 1,

1988 and thereafter the cost of operation of maintenance of

power plant has increased considerably. The revenue derived

by the company from the existing tariff has been found to be

quite inadequate to absorb spiraling cost and expenses. The

State Government is also informed that by its order dated

January 31, 1991, it had approved revision in tariff by the

WBSEB w.e.f. March 1, 1991 and WBSEB has published a

notification in the press announcing revision in their rates

and charges. It was further pointed out that the State

Government by its letter dated August 29, 1986 had directed

the DPL's power tariff should be fixed in line with that of

the WBSEB for the purpose of uniformity. In the letter

seeking tariff revision for the year 1993-94, details were

given as to how revision in tariff has been necessitated.

As noted above Graphite has failed to show as to how it

could be said that charges enhanced by the DPL exceed the

amount of reasonable return as required under clause (1) of

the Sixth Schedule. It is certainly a relevant

consideration for the DPL to fix its tariff in line with the

WBSEB for the purpose of uniformity and as Mr. Reddy put it

for capping unless it is shown that tariff revision has

contravened the provisions of the Sixth Schedule. State

Government has not insisted of notice being less than 60

days. No prejudice is shown to have been caused to Graphite

on the ground that notice period fell short by two days. In

the circumstances of the case requirement of 60 days notice

does not appear to us to be mandatory.

We do not find merit in these appeals. These are

dismissed with costs.

It has been pointed out that during the pendency of

the writ petitions in the High Court, the Graphite has not

been paying electricity charges on the basis of revised

rates which was the subject matter of the challenge in the

High Court. We have upheld the validity of the revised

tariff from April 8, 1991. Graphite is, therefore, bound to

pay the differential amount with such charges for delayed

payment as per agreement dated January 21, 1984. Respondent

Durgapur Projects Ltd. has pointed out that on that account

an amount of Rs.11,02,90,654.83 with delayed payment

surcharge at the agreed rate as per clause (23) of the

agreement dated January 21, 1984 is due from Graphite to it.

If there is any dispute regarding the amount claimed by the

respondent the same shall be considered by the High Court

and for that the party shall move the High Court which may

pass appropriate orders. The amount which is not disputed

by the Graphite shall be paid by it to the respondent within

four weeks with charges for delayed payment.