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PETITIONER:

KANORIA CHEMICALS AND INDUSTRIES LTD. AND ANR.

Vs.

RESPONDENT:

STATE OF U.P. AND ORS. AND VICE VERSA

DATE OF JUDGMENT16/01/1992

BENCH:

RANGNATHAN, S.

BENCH:

RANGNATHAN, S.

FATHIMA BEEVI, M. (J)

OJHA, N.D. (J)

REDDY, K. JAYACHANDRA (J)

AGRAWAL, S.C. (J)

SAHAI, R.M. (J)

SAHAI, R.M. (J)

CITATION:

1992 SCR (1) 151 1992 SCC (2) 124

JT 1992 (1) 199 1992 SCALE (1)107

ACT:

: Electricity (Supply) Act, 1948: Section 60 (As

introduced by section 7 of Electricity Laws (U.P. Amendment)

Act, 1983.

: Company-Electricity Board-Contract for supply

of electricity at concessional rates on special

considerations-Power of Electricity Board to revise rates-

U.P. Gazette Notification dated 29.10.82-Schedule-Levy of

HV-2 rates i.e. uniform tariff applicable to "bulk power"

consumers in substitution of contracted rates-Validity of-

Held fixation of rates was not vitiated-Revision of rates

can be given retrospective effect-Failure to specify the

precise manner in which the rates were arrived at does not

vitiate the rates fixed-Power or revise tariff can be

exercised more than once-Electricity Board can fix rates

higher than HV-2 rates-But levy of rates higher than HV-2

rates on the Company held not justified under the

circumstances.

Section 49-Electricity Board-Revision of rates-Factors

to be taken into account-Distinction between section 49 and

60 explained.

Electricity Laws (U.P. Amendment) Act, 1983 (Act 12 of

1982) : Section 7-Difference in English and Hindi version of

Act, Absence of words "for this first time" in Hindi version

of Act-Effect of.

HEADNOTE:

The appellant-company set up a caustic soda industry at

Renukoot involving the use of electricity as the main raw

material. On 30.9.63 it entered into a contract with the

State of Uttar Pradesh for supply of electricity for the

period of 25 years from 1.4.64, to the extent of 6.5 NW from

the Rihand Hydel station at a fixed rate of 2.5 paise per

unit and an additional supply of 1.5 NW from an inter-

connection at the rate of 5 NP per unit. The terms of the

contract provided that the transmission and distribution

losses were to be borne by the company and that the rates

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could be raised after sixteen years but any enhancement in

rates was not to exceed 10 per cent of the rates agreed

upon.

Subsequently, the UP Government enacted the Electricity

Laws (Uttar Pradesh Amendment) Act, 1983 which came into

force from

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20.5.1983. Section 7 of the said Act amended section 60 of

the Electricity Supply Act, 1948 by inserting sub-section

(3) to (5) with retrospective effect from April 1, 1965.

The Amended Act enabled the State and the Board to modify

the rates of supply of Electricity to appellant under the

contract of 30.9.63. Simultaneously the Parliament also

amended Section 59 of the Electricity Supply Act by the Act

18 of 1983 enabling the Electricity Board to fix the tariff

in such a way so as to build up a statutory surplus fixed by

the State Government.

On the passing of the Amendment Act, the Electricity

Board informed the appellant-company that the rates were

proposed to be revised and later it informed the appellant-

company that on 28.9.83 the State Government, by its Gazette

Notification dated 29th October, 1982, had approved the levy

of HV-2 rates (i.e. uniform tariff applicable to `Bulk

power' consumers) in substitution of the rates mentioned in

the agreement of 30th September, 1963. The effect of the

revision was to oblige the appellant-company to pay 57.71

paise per unit for 1983-84 and 61.60 paise per unit for

1984-85. Accordingly, supplementary bills were raised

demanding Rs. 3.07 crores from the appellant-company. The

appellant filed a writ petition in the High Court of

Allahabad assailing the Validity of section 7 of the

amending Act and the right of the Board to enhance the

rates.

By its order dated 2.4.87 the High Court allowed the

writ petition and quashed the approval dated 28.9.83 given

by the State Government to the new rates and the

consequential demands of the Electricity Board but left it

to the Board and State to fix revised rates afresh by

directing the respondents (1) not to charge the uniform

tariff rate for the period beginning from 20th May, 1983

till the rates were fixed in accordance with section 60(5)

(a); and (ii) that the rates applicable to the appellants

should be determined having regard to the individual

circumstances of the appellant.

The Electricity Board and the State Government

preferred an appeal to this Court. Aggrieved by the fact

that in applying the HV-2 rates the Board and the State had

not taken into account the special factors relevant to the

supplies made to it, the appellant also filed an appeal in

this Court.

In the meantime, pursuant to the directions of the High

Court the Board fixed the revised rates on 28.3.88 for the

supply from 20th May, 1983 which were much higher than the

HV-2 rates fixed earlier and

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quashed by the High Court.

The appeals came to be heard by this Court on April 10,

1991 when this Court directed that the appellant should make

a representation to the State Electricity Board setting out

the individual factors which should be taken into account in

fixing the rates applicable to them within the meaning of

section 60(5) (a) of the 1948 Act and that the State

Government should reconsider the fixation after considering

the recommendations made by the Board as well as the

representations of the appellant.

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Accordingly the State reconsidered the matter and by

its order dated 31.8.92 approved the rates fixed by the

State Government on 28.3.88.

The appellant challenged the validity of the rates

fixed contending that (i) the fixation of rates as on

31.8.1992 was not valid because (a) the respondents have not

complied with this court's directions dated 10.4.1991 as

they have neither disclosed the factors based on which the

rates were revised in March 1988 nor indicated the monetary

incidence or impact of the factors taken into account; (b)

in the process of refixation of the rates there was no

genuine exercise to consider relevant factors in determining

the rate under section 60 (5) (a); (c) that the Board had

not set out anywhere the precise manner in which the rates

recommended by them were arrived at; (ii) Section 60 cannot

be interpreted so as to give power to the Board to fix rates

retrospectively because (a) such an interpretation precludes

the Board and the State from revising the rates

prospectively; (b) if the power is held exercisable more

than once, it will permit successive revisions each

superseding the earlier one, a position that could lead to

harassment; (c) that the Hindi version of the Amendment Act

is differently worded and does not contain the words "for

the first time" found in the English version and in case of

a conflicting version between Hindi and English version the

Hindi text should be the key to find out the true intention

of the Legislature; and (iii) in view of a facts (a) that

the company established its industry in a backward area at

the request of the State and in public interest; (b) the

transmission and distribution losses are borne by the

appellant and (c) electricity is one of the raw materials

needed for its industry the appellant should be charged less

than the HV-2 rates.

On behalf of the Electricity Board it was contended

that the

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demand of rates higher than HV-2 rates was justified because

(a) the Company has been getting substantial supplies of

electricity at nominal rates from 1963 to 1983; (b) The

Board has incurred heavy losses over the years by supplying

electricity at concessional rates; and (c) there was a

necessity to build up a statutory surplus prescribed by

section 59.

Allowing the Company's appeal in part and dismissing

the Electricity Board's appeal, this Court,

HELD: 1.The fixation of revised rates is not vitiated.

[173-E]

2. Section 60 does not require the Board or the State

Government to explain each and every step in its

calculation. All that the Electricity Board has to do is to

take into consideration the factors relevant under section

60(5) and propose rates for fixation to the State

Government. It is in order to ensure that these

recommendations take into account all relevant factors that

an opportunity has been provided to the consumer to satisfy

the Board as well as the State Government that the fixation

has taken into account certain relevant factors. Therefore,

the rate revision proceedings were not vitiated for the

reason that the Board has not set out the precise manner in

which the rates recommended by them were arrived at. [172 D-

E, 172-C]

2.1 Apart from the general factors which have been

taken into account in fixing the general tariff rates, the

Board has, in making its recommendations, taken into account

the purpose for which supply was required by the appellant

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along with the factor of recurring losses incurred by the

Board year after year and its statutory requirements to

maintain a minimum surplus of 3 per cent as required under

section 59 of the Supply Act, 1948. [173-D]

2.2 The rates recommended by the State Electricity

Board and approved by the State Government were within the

knowledge of the appellant-company. The appellant-company

filed its representation. After considering the

representation, the Board made its recommendations to the

State Government and a copy of the recommendations were also

available to the appellant. The appellant had full

opportunity to meet the various points set out in the

recommendations of the Board. The comments of both the

Board and the Appellant were taken into account by the State

Government before finally approving of the rates proposed by

the Board. Therefore, the appellant-company had full

opportunity to place all its special feature before the

Board and the

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State Government. [171H, 172A,B, 173E]

2.3 If one compares the two provisions viz. sections 49

and 60 one will find that most of the elements are common to

the two provisions. Both under section 49 and section 60 the

authorities have to take into account the geographical

position of any area, the nature of supply and purpose for

which supply is required and any other relevant factor. The

only difference between the two provisions is that since

section 49 deals with a general fixation while section 60(5)

deals with a fixation for a particular individual case,

there may be some special factors to be taken into account

which may or may not be germane while fixing the general

tariff under section 49. [172H, 173-A]

Indian Aluminium Company Ltd. v. Kerala State

Electricity Board, [1976] 1 S.C.R. 70; cited.

3. A retrospective effect to the revision of rates is

clearly envisaged by section 60. One can easily conceive a

weighty reason for saying so. If the section were

interpreted as conferring a power of revision only

prospectively, a consumer affected can easily frustrate the

effect of the provision by initiating proceedings seeking an

injunction restraining the Board and thus getting the

revision deferred indefinitely. Or, again, the revision of

rates, even if effected promptly by the Board and State, may

prove infructuous for one reason or another. Therefore, it

would be a very impractical interpretation of the section to

say that the revision of rates can only be prospective.

[174E-G]

3.1 The mandate of section 60 is only that the rates to

be charged on supplies for which payment becomes due after

20.8.83 shall be as fixed by the Board. The powers of the

Board in fixing the rates-including the dates from which

they will be operative are not restricted in any manner.

The Board is at complete liberty to fix different rates from

different dates and that scheme of fixation will be read

with the contract. Only the Board cannot revise the rates

in respect of supplies for which payment under the contract

fell due before the Amendment Act came into force. [175-B-C]

3.2 The power under section 60 is exercisable more than

once. However, while making a subsequent revision, the

authorities will not normally tamper with an earlier

revision or alter the dates of effectiveness fixed for the

earlier revision without a valid reason to do so. If this

is done, it will be open to a court to examine the basis

thereof and

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sustain it only where the earlier fixation was based on an

error or misconception or the like and called for

modification. [175D-E]

3.3 Although the Hindi version of the Amendment Act is

differently worded and does not contain the words "for the

first time" found in the English version, the Hindi version

does not really alter the position; actually it is the

presence of the words "for the first time" in the English

version that create ambiguity. Without these words, the

clause clearly provides that all supply of electricity, for

which payment is to be made after 20.5.83, i.e. coming into

force of the Amendment Act, will be charged at the rates to

be fixed by the Board. Therefore, the fixation by the Board

of rates from 20.5.83, and, at different rates for different

period of time, is unexceptionable. [175F-H, 176-A]

Mata Badal Pandey v. Board of Revenue, (1974) U.P.T.C.

570; referred to.

4. There are no obstacles, statutory or theoretical,

standing in the way of the Board fixing rates for the

company which will be higher than the rates applicable to

bulk consumers. The provision in s. 60(5)(a) is intended to

enable the Board and State to cut off the shackles cast by

an ancient contract entered into at a time when conditions

were totally different. It confers an absolute and

unrestricted enabling power to revise the rates in an

appropriate manner. [174-A]

While revising rates, the only limitation which the

statute requires the authorities to keep in mind are the

factors mentioned in the section. Whether the revised rates

for the consumer governed earlier by the contract should be

higher or lower than, or equal to, the tariff rates would

depend on a large number of considerations, in particular,

the basis on which, and the point of time at which, those

general rates were fixed. In principle, it is quite

conceivable that, in an appropriate case, a consideration of

the relevant factors may justify even a rate higher than the

general tariff rates intended for the particular category of

consumers. [174B-D]

4.1 However, there is no material to justify any

departure from the HV-2 rates in the case of the appellant.

The special circumstances pleaded by the appellant-company

have lost their importance with the passage of time. The

conditions that prevailed in 1963 are not valid and the

appellant has had the benefit of concessional rates for

twenty years. The consideration that electricity is a "raw

material" in the assesee's

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business is, again irrelevant for it can mean nothing more

than that the appellant needs substantial quantities of the

energy and there is no reason why it should not pay for it

at the normal market rates. Therefore, the appellant has no

valid justification for staking a claim to less than the HV-

2 rates. [177B-D]

4.2 Equally, the authorities have no case to raise the

rates beyond the HV-2 rates. The huge losses that the Board

has been incurring and the statutory justification for

escalation in the rates keeping in view the necessity to

build up a surplus is an aspect of working which should

affect all the consumers equally. May be the Board can, in

appropriate circumstances, seek to make up for a part of the

losses by hiking up the rates to one particular category of

consumers but that would not be justified here as the

transmission and distribution losses in respect of the

supply to the appellant are borne by it and, in the absence

of some special vital reason, it would not be equitable to

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fix the rates of supply to the appellant above the rates

applicable to other HV-2 consumers. Therefore, there is no

justification to charge more than HV-2 rates from the

appellant. [177EG, 178-B]

4.3 The determination of 1988 and 1991 are quashed.

The State Electricity Board is directed to charge the

appellant-Company from 20.5.83 to 31.3.89 at the HV-2 rates

applicable to other consumers. [178-B]

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1306 of

1988.

From the Judgment and Order dated 2.4.1987 of the

Allahabad High Court in Writ Petition No. 1818 of 1984.

H.N. Salve, P.P.Tripathi, Manoj Swarup and K.J. Johan

for the Appellants.

B.Sen, Gopal Subramaniam, Prashant Kumar and Mrs. S.

Dikshit for the Respondents.

The Judgment of the Court was delivered by

RANGANATHAN, J. There was a time when, in almost every

State in India, people were invited to avail of the supply

of the electric energy produced in the State and offered

special concessions when they agreed to

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do so in bulk under long-term contracts. A situation,

however, has since developed when the demand for the energy

increased so rapidly that, despite the quantity of available

electric energy also having gone up tremendously the rates

of supply agreed upon became uneconomical. The State and

its instrumentalities, who were supplying the energy, found

themselves without power to revise the rates to meet the

altered situation until the legislature came to the rescue.

It is this situation in the case of Kanoria Chemicals and

Industries Ltd. (hereinafter referred to a `the appellant')

which has given rise to these appeals.

The Electricity (Supply) Act, 1948, (hereinafter

referred to as `the 1948 Act') entrusted the control over

the generation and distribution of electric energy to

Electricity Boards constituted under the Act. In the State

of Uttar Pradesh, the U.P. State Electricity Board

(hereinafter referred to as `the Board,) was constituted on

1.4.1959. At that time, the State Government (hereinafter

referred to as `the State') was in the process of

establishing the Rihand Hydro-Electric Generating Plant,

which become operational w.e.f. 1.2.62, and attained an

ultimate installed capacity of 300 M.W. The control of this

remained with the State till 31.3.1965. Since the supply of

electrical energy was then available in abundance and only

the eastern area of the State was served by the plant, the

State considered it expedient to enter into contracts with

bulk purchasers both with a view to ensure maximum

utilisation of the electricity available and with a view to

the industrialisation of the eastern areas of the State. In

particular the State was keen on the industrial development

of the district of Mirzapur, which was considered to be an

extremely backward area. The State was keen that power

intensive units be set up in close proximity of Rihand so

that electricity could be supplied to these units from the

Rihand power plant. One feature of the supply of

electricity from Rihand was that the metering was done at

the point of generation so that transmission and

distribution losses and costs could be borne by the

consumers of electricity.

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The appellant set up an industry for manufacture of

caustic soda at Renukoot sometime in 1964. According to the

appellant, this industry involved the use of electricity as

the main raw material, the other raw material needed being

salt. It is said that there were considerable disadvantages

in setting up the proposed caustic soda unit in the district

of Mirzapur, principally due to its distant location from

areas from which salt had to be transported. The appellant,

it is said, could easily have set up its factory in some

other State with greater facilities and advantages but it

was induced to set up the caustic soda plant at Pipri in the

district of Mirzapur on account of the assurance given by

the State that it will supply hydro electric

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power to the assessee from the Rihand power plant on a long

term basis at a cheap rate. It is claimed that, but for

this promise, the appellant would never have chosen Pipri or

the district of Mirzapur for the location of this plant.

After elaborate discussions between the State

Government and the promoters of the appellant company, the

plant was set up at Pipri and a contract was entered into

between the State Government and the appellant on 30.9.1963

ensuring the supply of electricity from the point of

generation to the appellant for a period of 25 years from

1.4.64. The supply, to the extent of 6.5 MW. was to be from

Rihand hydel station at a fixed rates of 2.5 paise per unit.

An additional supply of 1.5 MW was also promised from an

inter-connection at the rate of 5 N.P. per unit. The rates

could be revised after the first sixteen years but any

enhancement in rates was not to exceed 10 per cent of the

rates agreed upon.

The State agreed further to supply 4.5 MW to the

appellant from the Obra Hydro-Electric Project on such rates

as would be fixed subsequently. It may be mentioned that

this clause gave rise to disputes which were referred to

arbitration. An award was made by justice D.P. Madan, a

retired judge of this Court, which was made a decree of this

Court by an order dated 1.4.1987. Under the award, the rate

of supply was fixed at 8.69 paise per unit. The State's

grievance is that it incurred a loss of Rs. 10.55 crores by

supplying electricity from Rihand between 1.4.64 and 19.5.83

at concessional rates instead of applying the uniform tariff

applicable to other "bulk power" consumers, briefly referred

to as "HV-2 rates." It says also that it likewise suffered

a loss of 12.4 crores due to the supply at 8.69 paise

instead of normal rates, from Obra between 1.4.71 and

31.3.89, when the agreement, came to an end by efflux of

time.

Obviously, it was not economical to continue supplying

energy at the preposterously low rates to which the State

had committed itself in 1963 on account of the conditions

that prevailed at the time of the agreement. The powers of

the State or the Boards to revise contractual rates

unilaterally were examined by this Court in Indian Aluminium

Company Ltd. v. Kerala State Electricity Board [1976] 1 SCR

70. It is sufficient to say that, after considering the

provisions of section 49 and 59 of the Supply Act, the Court

held that the Electricity Board were not entitled to enhance

charges in derogation of stipulations contained in agreement

entered into between parties. This decision led to the

provisions of the Supply Act being amended by various

States. The State of Karnataka, Orissa and Rajasthan

brought in amendments enabling the Electricity Board to

supersede contracts and

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revise the rates contained in earlier agreements. The U.P.

Government, also enacted the Electricity Laws (Uttar Pradesh

Amendment), Act, 1983, to vest the State's agreement with

the Board and to enable the Board to revise the contractual

rates. The Act came into force from 20.5.1983. Section 7 of

the said Act amended Section 60 of the Supply Act, 1948 by

inserting the following sub-sections (3) to (5) with

retrospective effect from April 1, 1965 :

(3) All expenditure which the State Government may,

not later than two months from the commencement of

the Electricity Laws (Uttar Pradesh Amendment) Act,

1983, declare to have been incurred by it on

capital account in connection with the purposes of

this Act in respect of the Rihand Hydro Power

System shall also be deemed to be a loan advanced

to the Board under section 64 on the date of

commencement of this sub-section and all assets

acquired by such expenditure shall vest in the

Board with effect from such commencement.

(4) The provisions of the sub-sections (1) and (1-

A) shall, subject to the provisions of sub-section

(5) apply in relation to the debts and obligations

incurred, contracts entered into and matters and

things obliged to be done by, with or for the State

Government in respect of the Rihand Hydro Power

system after the first constitution of the Board

and before the commencement of this sub-section as

they apply in relation to debts and obligations

incurred, contracts entered into, 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.

(5) All such contracts entered into by the State

Government for supply of electrical energy based on

or connected with the generation of electricity

from the Rihand Hydro Electric Generating Station

to any consumer and any contract entered into by

the Board on or after April 1, 1965 for the supply

of electrical energy to such consumer shall operate

subject to the modifications specified in the

following clauses, which shall have effect from the

date of the commencement of the Electricity Laws

(Uttar Pradesh Amendment) Act, 1983 (hereinafter

referred to as the said date):-

161

(a) the rates to be charged by the Board for the

energy supplied by it to any consumer under any

contract for which the payment will be due for the

first time on or after the said date shall be such

as may with the previous approval of the State

Government be fixed by the Board, having due regard

to the geographical position of the area of supply,

the nature of the supply and purpose for which

supply is required and any other relevant factor.

(b) If the State Government directs the Board

under Section 22-B of Indian Electricity Act, 1910

or under any other law for the time being in force

to reduce the supply of energy to a consumer and

thereupon the Board reduces the supply of energy to

such consumer accordingly, the consumer concerned

shall not be entitled to any compensation for such

reduction, and if the consumer consumes energy in

excess of the reduced limit fixed under the said

section 22-B or any other law for the time being in

force as the case may be, then the Board shall have

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the right to discountinue the supply to the

consumers without notice ,and without prejudice to

the said right of the Board, the consumer shall be

liable to pay for such excess consumption at double

the normal rate fixed under clause (a);

(c) Any arbitration agreement contained in such

contract shall be subjects to the provisions of

this sub-section.

Parliament also, at about the same time, amended s. 59

of the Act by Act 18 of 1983. The amended s. 59(1), which

is sufficient for our purpose reads thus :

59. General principles for Board's finance - (1)

The Board shall, after taking credit for any

subvention from the State Government under Section

63, carry on its operation under this Act and

adjust its tariffs so as to ensure that the total

revenues in any year of account shall, after

meeting all expenses properly chargeable to

revenues, including operating, maintenance and

management expenses, taxes (if any) on income and

profits depreciation and interest payable on all

debentures, bonds and loan, leave such surplus as

is not less than three per cent, or such higher

percentage, as the State Government may, by

notification in the official Gazette, specify in

this behalf, of the value of the fixed assets of

the Board in service at the

162

beginning of such year.

Explanation - For the purposes of this sub-section.

"value of the fixed assets of the Board in service

at the beginning of the year" means the original

cost of such fixed assets as reduced by the

aggregate of the cumulative depreciation in respect

of such assets calculated in accordance with the

provisions of this Act and consumer's contributions

for service lines.

It has been pointed out to us that the U.P. State

amendment is somewhat different from those of the other

States. The Karnataka legislature amended s. 49 of the

1948 Act and the Orissa and Rajasthan legislatures inserted

s. 49A in the said Act. These provisions enabled the Boards'

to prescribe tariffs and these rates were to prevail over

those specified in the agreement. The latter two amendments

actually declare the relevant clauses in the agreement void

from inception. The U.P. amendment. however, retains the

effectiveness of the earlier contracts and only reads into

them the rates that may be prescribed by the Board. This is

the first difference. The second is that while the other

legislations affect all agreements entered into before a

specified date, the U.P. amendment is restricted to

contracts for supply of electricity from the Rihand Hydro-

Electric Generating Station. We are informed that, when the

above amendment was sought to be effected, the only

outstanding contract of the State for the supply of

electricity from the Rihand Hydro-Electric Generating

Station was the contract with the appellant on the 30th of

September, 1963. There had been two agreements entered into

for supply of electricity from this power station but the

other one with Hindustan Aluminium Company had become

ineffective since that company gave up its claim to supply

from the above power plant in 1975-76 having been successful

in putting up a power plant for its captive use. Thus,

though the Act purports to be one of general application, it

was really intended to enable the State and the Board to

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modify the rates of supply of electricity to appellant under

the contract of 30.9.1963.

At this stage it may be useful to refer also to the

terms of s. 49 of the Act. It reads thus :

(1) Subject to the provisions of this Act and or

regulations, if any, made in this behalf, the Board

may supply electricity to any person not being a

licensee upon such terms and conditions as the

Board thinks fit and may for the purposes of such

supply frame uniform tariffs.

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(2) In fixing the uniform tariffs the Board shall

have regard to all or any of the following factors,

namely :-

(a) the nature of the supply and the purposes for

which it is required :

(b) the co-ordinated development of the supply and

distribution of electricity within the State in the

most efficient and economical manner, with

particular reference to such development in areas

not for the time being served or adequately served

by the licensee:

(c) the simplification and standardisation of

methods and rates of charges for such supplies :

(d) the extension and cheapening of supplies of

electricity to sparsely developed areas.

(3) Nothing in the foregoing provisions of this

section shall derogate from the power of the

Board, if it considers it necessary or expedient to

fix different tariffs for the supply of electricity

to any person not being a licensee, having regard

to the geographical position of any area, the

nature of the supply and purpose for which supply

is required and any other relevant factors.

(4) In fixing the tariff and conditions for the

supply of electricity, the Board shall not show

undue preference to any person.

After the statute was thus amended, the Additional

Chief Engineer of the Board wrote to the appellant on

6.2.1984 stating that, though the bills were being drawn on

the basis of the agreement, the rates were subject to

revision with effect from May 20, 1983 with the approval of

the State Government and that a supplementary bill would be

sent for the arrears as and when the rates were revised in

pursuance of section 60(5) (a). On 5th April, 1984, the

appellant filed Writ Petition No. 1818 of 1984 in the High

Court of Allahabad assailing the validity of section 7 of

the amending Act and the right of the Board to enhance the

rates. While admitting the writ petition, the High Court

passed an interim order to the effect that the State

Government should provide an opportunity of hearing to the

appellant before bringing about any change in the terms and

conditions of the Agreement or tariff rates and that no

revised rates shall be charged from the

164

appellant till it is heard, and the matter decided, by the

State Government. On June 11, 1984, the Law Officer of the

Board wrote to the appellant requesting it to give in

writing the points which they wanted to urge before the

rates were approved by the State Government. According to

the appellant, this was not sufficient compliance with the

court's order and it moved the High Court for amending its

petition and made further applications to the Court. It may

be mentioned that the stand taken up by the Board in the

writ petition was that the writ petition was premature as

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the State's approval had not been obtained and no injury had

been caused to the appellant. But, suddenly, on 31.1.85,

the Board wrote to the appellant informing it that the

State Government had approved the levy of rates as per

Schedule HV-2 (as defined in the U.P. Gazette Notification

dated 29th October, 1982) applicable to heavy power

consumers in substitution of the rates mentioned in the

agreement of 20th September, 1963. It was stated-curiously

enough-that the approval of the State Government had been

given on 28.9.1983. The effect of the revision was to

oblige the petitioner to pay 57.71 paise per unit for 1983-

84 and 61.60 paise per unit for 1984-85. An idea of the

magnitude of the revision can be had by pointing out that

supplementary bills raised on the basis of the revision for

the period 20.5.83 to 31.12.1984 were to the tune of Rs.

3.07 crores. The appellant's allegation is that no such

approval had been given and it is asserted that the internal

correspondence between Board and State would show that the

legal Department of the Board had raised certain objections

to the levy of HV-2 rates on the appellant, and that

consequently Board had sent a fresh proposal in December

1983 seeking approval of the State Government for imposing a

flat rate in respect of supplies to the appellant in place

of earlier proposal. It is also stated no proposal was

made, or approval sought, for imposing the revised rates

w.e.f. 20.5.1983.

The Board, however, proceeded to make demands against

the appellant on the basis of the revised rates. According

to the Board, reference was made to a resolution dated

30.1.85 to the withdrawal on that date of the proposal for a

flat rate in place of HV-2 rates. Thus, demands on the

basis of HV-2 rates were sought to be sustained. The

demands amounted to several crores of rupees and

disconnection was threatened in case of nonpayment. The

appellant obtained certain interim orders from High Court

(which have been subsequently considered and modified from

time to time by this court during the pendency of these

appeals). It is, however, not necessary to refer to these

interim orders as the final liability of the appellant will

have to be decided on the basis of the orders of this Court

on the appeals.

165

The writ petition was heard by a Bench of two judges.

Both judges repelled the challenge to the validity of the

Amendment Act but differed on some of the points which came

up for their consideration. Srivastava, J. was of the

opinion that the intention and purpose of the Amendment Act

was to revise the existing contractual rate of energy

charges and charge higher rates upto the extent of uniform

tariff rates for the supply of electricity to the consumers

whose contract stood modified by the said statute. The

rates so fixed had to be dependent upon the factors

enumerated in section 60(5). According to him, the material

on record showed that the factors enumerated in section

60(5) had not been taken into account by the Board before

fixing the rates or by the State Government in according its

approval to the same. The Board and the Government appeared

to have acted upon a consideration of the factors mentioned

in section 49(2) of the Act of 1948 while framing a uniform

tariff but this was not sufficient compliance with the

provisions of section 60(5). On the other hand, Mathur. J.

was of the opinion that the move for amendment of the Act

and enforcement of HV-2 tariff was initiated by the Board

and that the notings contained a detailed justification for

enforcing the said tariff. It also appeared from the

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statement of objects and reasons of the amending bill that

the supply of electricity at concessional rates despite

losses and the desirability of replacing the said rate by

uniform tariff came up for discussion in the State

Legislature and that the Board did not act wrongly or

illegally if it felt that it had no option but to apply

uniform rates in view of the statement contained in the

objects and reasons of the bill and the discussion in the

State Legislature. He was also of the opinion that the

factors contemplated by section 60(5) (a) were similar to

those envisaged by section 49(2), and since consideration

had been given to the latter factors while farming the

uniform tariff, no consideration of factors relevant to

individual consumers was called for. The two learned judges

thus differed on the following two points :

(a) Whether the language of section 60 (5) (a) of

U.P. Act No. 12 of 1983 required consideration of

factors prescribed in section 60 (5) (a) viz.,

geographical position of the area of supply, the

nature of supply and purpose for which supply is

required and other relevant factors with reference

to petitioner company for revising the existing

contractual rate of H.C. tariff?

(b) Whether the factors mentioned in section 49(2)

of Electricity (Supply) Act, 1948, having already

been considered at the time of farming uniform

tariff no fresh consideration of any factors

mentioned in section 60(5)(a) of U.P. Act No. 12 of

1983 was required when the uniform tariff itself

was being fixed while

166

revising the rate ?

The difference of opinion was, therefore, referred to a

third Judge, Mehrotra, J. This learned Judge answered that

question referred to him as follows :

(a) The language of section 60(5)(a) of U.P. Act

12 of 1983 requires consideration of factors

prescribed in it with reference to the petitioner

company for revising the existing contractual rate;

and

(b) Fresh consideration of the factors mentioned

in section 60(5)(a) was required irrespective of

the fact that factors mentioned in section 49(2) of

the Electricity (Supply) Act, 1948 had already been

considered at the time of framing of the uniform

tariff which was being fixed for the petitioner

company while revising the rates.

Consequent on the opinion of this learned Judge the

writ petition was allowed and a writ of certiorari was

issued quashing the approval dated 28.9.1983 given by the

State Government to the new rates and the consequent

resolutions, sanctions, bills and demands of the Board and

the State Government. A writ of mandamus was also issued

commanding the respondents not to charge the uniform tariff

rate for the period beginning from 20th May, 1983 till the

rates were fixed in accordance with section 60(5) (a) of

U.P. Act no. 12 of 1983. The Order disposing of the Writ

petition finally is dated 2.4.1987.

Immediately the judgement was pronounced the State

Electricity Board and the State Government sought a

certificate of fitness for preferring an appeal to this

Court and the High Court granted the certificate, as prayed

for. This appeal has not been numbered on account of delay.

Though the High Court had quashed the revision of the rates,

it had left it to the board and State to fix revised rates

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afresh. That apart, the appellant had also a grievance

that, in applying the HV-2 rates which were applicable to

other consumers, the Board and the State had not taken into

account the special factors relevant to the supplies made to

it. The appellant also, therefore, filed S.L.P. No. 13967

of 1987 for leave to appeal from the judgement dated

2.4.1987. Leave has been granted by this Court on 8.4.1988

and the appeal of the company had been registered as C.A.

1306 of 1988.

In the meantime the Board and State were, apparently

carrying on an

167

exercise for the revision of the rates afresh as directed

by the High Court and, on 28.3.1988, the Board purported to

fix the following revised rates for the supply from 20th

May, 1983.

Period Rate (Paise per unit)

20.5.1983 to 31.3.1984 70.21

1.4.1984 to 31.3.1985 74.93

1.4.1985 to 31.3.1986 85.14

1.4.1986 to 31.3.1987 88.60

It will be observed that rates thus fixed, and said to

have been approved by the State Government, were much higher

than the HV-2 rates fixed earlier, objected to by the

appellant and quashed by the High Court. Having done this,

this Board sought leave to withdraw the appeal preferred by

it. So far the appellant's appeal was concerned, it was

contended that the appellant's remedy was to challenge the

revision of 28.3.1988, if so advised, in fresh proceedings.

This was the position when these appeals came to be heard by

us on April 10, 1991.

We heard the appeals at length and reserved orders. In

doing so we passed the following order :

"The appeals pertain to the fixation of tariff

rates for supply of electricity to the appellants

caustic soda plant at Renukoot. The appellants

originally came to court challenging the levy of

the electricity charges on the basis of HV-II

rates applicable generally to consumers drawing

supply from the U.P. State Electricity Board.

However, the High Court held that the rates

applicable to the appellants should be determined

having regard to the individual circumstances of

the appellants. This was by a majority judgement

in the High Court. Subsequently, the Electricity

Board had proposed, and the State Government has

approved, certain rates for the period from

20.5.1983 to 31.3.1987 which are somewhat higher

than the HV-II rates originally approved. This is

the bone of controversy between the parties.

We find that the State Government and Board have

filed no counter affidavits in regard to the

challenge by the appellants to the revision of

rates effected subsequent to the High Court

168

judgment. In the circumstances, before we

pronounce our judgment we think that, in the

interests of justice, it would be proper to direct

the State Board and the State Government to

reconsider the fixation effected by them on the

basis of the following directions :

1. Within a period of three weeks from today, the

appellants will file before the State Electricity

Board (with a copy to the State Government) a

representation setting out what, according to them,

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are the individual factors which should be taken

into account in fixing the rates applicable to

them within the meaning of section 60(5)(a), 1948

as amended in 1983.

2. The State Electricity Board will consider this

representation and make appropriate recommendations

to the State Government. However, before doing so,

and particularly if the Board intends to take into

account any factors other than those mentioned in

the appellants' representation, they should

indicate the factors which they so wish to take

into account, in their recommendations to the State

Government. A copy of the recommendations should

be forwarded to the appellants within seven weeks

from today.

3. On receipt of the recommendations made by the

Board, the appellants may submit to the State

Government, if they so desire, any representation

which they wish to make regarding the

recommendations within a period of three weeks

thereafter.

4. The State Government will consider the

recommendations of the State Board as well as the

representations made by the appellants to the Board

as well as to themselves and approve of the rates

which they consider proper in the circumstances of

the case by a reasoned order, giving a board

indication of the factors which they have taken

into account in fixing the rates. This decision

should be arrived at within a period of four weeks

from the date of the receipt of the representation

of the appellants.

5. As indicated above, since the High Court has

decided that in fixing the rates the individual

circumstances of the appellants should be taken

into account, the State Board as well as the State

Government should take into consideration the

special

169

circumstances of the appellants in fixing the

rates.

6. The Government's order may also, in case

different rates for different periods are fixed,

indicate the respective dates from which the

several rates will come into operation. The rates

and dates so fixed by the Government, will

naturally be subject to the decision on these

appeals."

Subsequent to our order, the appellant made a

representation to the Board on 29.4.91. The Board made its

recommendations thereon to the State Government on 26.6.91.

Thereafter the appellant made its representation to the

State Government on 22.7.91. The State Government has

subsequently passed an order on 31.8.91 and submitted the

same to us. It is perhaps sufficient to extract the

concluding paragraphs of the order.

"After analysing the contentions of Kanoria

Chemicals and the State Electricity Board, the

State Govt. comes to the conclusion that M/s.

Kanoria Chemicals and Industries Ltd. has taken

benefit of establishing this unit in a backward

area for the last 19 years and there is no

justification in giving this benefit in

continuously future also because this area has been

developed in comparison to earlier years. The

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request of M/s. Kanoria Chemicals and Industries

Ltd. that the factors shown by State Electricity

Board should be limited to Rihand Hydel Power

Station, is without justification since at present,

they are getting supply from U.P. Grid and not from

Rihand Power Station. Hence, the point of view of

the State Electricity Board is justifiable.

8. After due consideration of representation dated

24.2.91 and 22.7.91 of M/s. Kanoria Chemicals and

Industries Ltd. and the recommendations of the

State Electricity Board dated 26.6.91, the State

Govt. comes to the conclusion that M/s. Kanoria

Chemicals and Industries Ltd. has failed to

indicate any fact which comes under the provisions

of Sec. 60(5)(a) of the Electricity (Supply) Act,

1948 and which has not been considered by the State

Electricity Board while fixing the rates in March

88 has kept in mind the decision of Hon. High

Court of Allahabad and

170

complied with the provisions of sec. 60(5)(a) of

the Electricity (Supply) Act, 1948. Since keeping

in view the factors enumerated in sec. 60(5)(a) of

the Electricity (Supply) Act, 1948, the Rules were

revised in March, 1988 in the following manner,

hence there appears no necessity to change these

rates :-

S.No. Period Rate

1. 20.5.83 to 31.3.84 70.21 paise/unit

2. 1.4.84 to 31.3.85 74.93 paise/unit

3. 1.4.85 to 31.3.86 85.14 paise/unit

4. 1.4.86 to 31.3.87 88.60 paise/unit

In other words, the State and Board adhere to the rates

fixed on 28.3.88.

It may be interesting to set out a comparative table of

the revisions effected by the Board originally (which was

quashed by the High Court) and the rates now approved :

Period HV-2 rate Revised rate

Paise/unit paise/unit

20.5.83 to 31.3.84 55.71 70.21

1984-85 59.86 74.93

1985-86 63.89 85.14

1986-87 80.88 88.60

*1987-88 84.64 88.60

*1988-89 93.39 88.60

* The revised rates for 1987-88 and 1988-89 are

stated to be provisional but so far till today no

fresh rates have been fixed in respect of these

periods.

171

The resultant position is that the appellant is now

facing huge demands in respect of the period since 20.5.1983

and till 31.3.1989 when the agreement expires, at rates

which will be higher than the HV-2 rates which had been

sought to be applied in the first instance. The appellant

vehemently challenges the fixation of rates on 28.3.88 and

31.8.91.

A good part of the argument before us in these appeals,

in the first instance, was addressed on the question whether

the State Government was obliged to give a hearing to the

consumer before revising the rates under section 60(5) and

whether the factors relevant under s.60(5) can be said to

have been taken into account on the ground that they had

already been taken into account while fixing uniform rates

under s.49. In this context, reference was made to several

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decisions and contentions where canvassed in regard to the

nature of the process of fixation of rates of charges for

supply of electricity. It is, however, unnecessary to go

into all these aspects because, in pursuance of the

directions of this Court dated 10.4.1991, the matter has

been re-considered by the Board and the State Government and

fresh rates have been fixed along with the respective dates

of operation after hearing the appellant's representatives.

Broadly two principal submissions have been addressed

before us at this stage on behalf of the appellants. The

first is that the fixation of rates as on 31.8.1991 is not

valid as the respondents have not complied with the

directions given by this Court in the order dated 10.4.1991.

It is argued that the respondents have neither disclosed the

factors based on which the rates were revised in March 1988

nor have they indicated the monetary incidence or impact of

the factors taken into account, though a specific request

was made in this regard by the appellant to the Board and

to the State Government. The appellant, it is said, has

been gravely prejudiced and handicapped, in the absence of

any such disclosure, in making any effective representation.

Further in the final order dated 31.8.91, the State

Government has stated that the fixation of rate by the State

Government was based upon the consideration of facts and

data communicated by the Board to the State Government in

March 1988 but, admittedly, no facts, data or basis had been

placed before this court at the time of the original writ

petition on the basis of which the State Government had

fixed the rates in March, 1988 compelling this Court to

remand the matter for fresh consideration. Suddenly the

Board, while concluding its recommendation to the State

Government on 26.9.91 reminded the State Government that

prior approval of the State Government for the rates had

already been obtained in March 88 and persuaded the State

Government to mechanically uphold the pre-determined rates.

Finally, it is contended that even in this process of re-

fixation of the

172

rates there was no genuine exercise to consider relevant

factors in determining the rate under section 60(5)(a).

We do not think that there is any force in these

contentions. By the time the matter came up before us for

hearing in the first instance the State Government had

already passed its order of revision dated March 28, 1988.

The rates which had been recommended by the State

Electricity Board and approved by the State Government were

within the knowledge of the appellant. It was of course

necessary and equitable that, before giving effect to these

rates (if not even before they were recommended), the

consumer should have had no opportunity of placing before

the Electricity Board and the State Government its side of

the picture. This opportunity has, however, been provided

by to the appellant. The appellant has also filed its

representation. After considering the representation, the

Board made its recommendations to the State Government and a

copy of these recommendations were also available to the

appellant. The appellant also had full opportunity to meet

the various points set out in the recommendations of the

Board. The comments of both the Board and the appellant

have been taken into account by the State Government before

finally approving of the rates proposed by the Board. The

grievance of the appellant seems to be that the Board has

not set out anywhere the precise manner in which the rates

recommended by them were arrived at and that this has

considerably handicapped any effective representation being

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made by it to the Board and to the State Government. We do

not think the proceedings are vitiated for this reason. It

is true that the actual computations of the rates were not

set out by the Board in its recommendations made in 1983 or

1985 or 1988 but the proper approach to the issue is not the

one adopted by the petitioner. The section does not require

the Board or the State Government to explain each and every

step in its calculation. All that the State Government has

to do is to take into consideration the factors relevant

under section 60(5) and propose rates for fixation to the

State Government. It is in order to ensure that these

recommendations take into account all relevant factors that

an opportunity has been provided to the consumer to satisfy

the Board as well as the State Government that the fixation

has not taken into account certain relevant factors. We,

therefore, think the appellant must be held to have been

given a fair opportunity under s. 60(5)(a) so long as it had

an opportunity to explain to the Board and the State

Government the factors individual to its case and also as to

how and why the rates recommended by the Board need

modification. Moreover, the issue here was in a narrow

compass for the following reason. On the passing of the

Amendment Act, the Board decided to substitute the contract

rates by the HV-2 rates. But this was rendered infructuous

because of the terms of section 60(5)(a) which, it was said,

were

173

different from those of s. 49. If the factors under section

49 were alone to be taken into account then the consumers,

one and all, would have been liable to pay for the

electricity at the tariff rates. The claim of the appellant

was that in applying these rates certain factors individual

to it had not been taken into account. If one compares the

two provisions, one will find that most of the elements are

common to the two provisions. Both under section 49 and

section 60 the authorities have to take into account the

geographical position of any area, the nature of supply and

purpose for which supply is required and any other relevant

factor. The only difference between the two provisions is

that since section 49 deals with a general fixation while

section 60(5) deals with a fixation for a particular

individual case, there may be some special factors to be

taken into account which may or may not be germane while

fixing the general tariff under section 49. Hence the only

point which needed to be considered, when the matter was

reexamined pursuant to our directions, was whether, having

regard to the factors prevailing in the case of the

appellant the rates to be fixed should be higher or lower

than the HV-2 rates or whether they should be the same. It

was open to the petitioner to contend, as it in fact did,

that there are special features in its case which make it

legitimate to fix some concessional rates as compared to

other consumers. On the other hand, it is equally open to

the State Electricity Board to contend that having regard to

the prevalence of certain circumstances, the rates to be

fixed should be higher than the tariff rates applicable

generally. This is a short aspect on which both parties

have made their positions clear. Apart from the general

factors which have been taken into account in fixing the

general tariff rates, the Board has, in making its

recommendations, taken into account the purpose for which

supply was required by the petitioner along with the factor

of recurring losses incurred by the Board year after year

and its statutory requirements to maintain a minimum surplus

of 3 per cent as required under section 59 of the Supply

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Act, 1948. We are, therefore, satisfied that the appellant

had full opportunity to place all its special features

before the Board and the State Government and that all

aspects have been fully considered by the authorities. The

fixation of rates on 31.8.1991 is not, therefore, vitiated

for the reasons urged by the appellant.

The only other aspect that requires consideration is

regarding the maintainability of the rates as now fixed by

the Board and the State. Three questions arise in regard to

this :

(i) Can the Board fix rates higher than HV-2

rates in respect of bulk consumers like the

company for whom a concessional rate had been

granted on special considerations ?

174

(ii) Can the Board determine rates in 1991 and make

them retrospective w.e.f. 1983?

(iii)Was there material for the Board to fix rates

which they have eventually fixed?

We find that the answer to the first two questions

posed only be in the affirmative. On the first issue, there

are no obstacles, statutory or theoretical, standing in the

way of the Board fixing rates for the company which will be

higher than the rates applicable to bulk consumers. The

provision in s.60(5)(a) is intended to enable the Board and

State to cut off the shackles cast by an ancient contract

entered into at a time when conditions were totally

different. It confers an absolute and unrestricted enabling

power to revise the rates in an appropriate manner and

contains no restriction of the nature suggested for the

appellant. In doing this, the only limitation which the

statute requires the authorities to keep in mind are the

factors mentioned in the section. Whether the revised rates

for the consumer governed earlier by the contract should be

higher or lower than, or equal to, the tariff rates would

depend on a large number of considerations, in particular,

the basis on which, and the point of time at which, those

general rates were fixed. In principle, it is quite

conceivable that, in an appropriate case, a consideration of

the relevant factors may justify even a rate higher than the

general tariff rates intended for the particular category of

consumers. We shall examine later whether this was

justified in the present case. At the moment, all we are

concerned with is the legality of fixing such higher rates

and we see no difficulty in this either on the language of

the Statute or on other considerations.

A retrospective effect to the revision also seems to be

clearly envisaged by the section. One can easily conceive a

weighty reason for saying so. If the section were

interpreted as conferring a power of revision only

prospectively, a consumer affected can easily frustrate the

effect of the provision by initiating proceedings seeking an

injunction restraining the Board and State from revising the

rates, on one ground or other, and thus getting the revision

deferred indefinitely. Or, again, the revision of rates,

even if effected promptly by the Board and State, may prove

infructuous for one reason or another. Indeed, even in the

present case, the Board and State were fairly prompt in

taking steps. Even in January 1984, they warned the

appellant that they were proposing to revise the rates and

they did this too as early as in 1985. For reasons for

which they cannot be blamed this proved ineffective. They

revised the rates again in March 1988 and August 1991 and,

till today, the validity of their action is under challenge.

In this

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175

state of affairs, it would be a very impractical

interpretation of the section to say that the revision of

rates can only be prospective.

The language of the section also supports this view.

Slightly rearranging the syntax of the clause to facilitate

easier understanding, what it provides is that the revised

rates fixed by the Board shall be the rates to be charged by

the Board for the energy supplied by it to any consumer for

which the payment will be due for the first time on or after

the 20th May, 1983. In other words, the rates eventually

fixed will, by force of statute, apply to all supply of

electricity for which the charges become payable in terms

of the contract, after 20.5.1983. There are three

objections suggested against this interpretation. The first

is that it precludes the Board and State, where they choose

to do so, from revising the rates prospectively or with

effect from such dates, after 20.5.1983, which they may

consider appropriate. We think this consequence does not

flow from the language of the provision. The mandate is

only that the rates to be charged on supplies for which

payment becomes due after 20.8.83 shall be as fixed by the

Board. The powers of the Board in fixing the rates-

including the dates from which they will be operative-are

not restricted in any manner. The Board is at complete

liberty to fix different rates from different dates and that

scheme of fixation will be read with the contract. Only the

Board cannot revise the rates in respect of supplies for

which payment under the contract, fell due before 20.5.83.

The second objection, which is a follow up of the first, is

that if the power u/s 60 is held exercisable more than once,

the interpretation will permit successive revisions, each

superseding the earlier one, a position that could lead to

immense harassment. We have no doubt the power u/s 60 is

exercisable more than once. All the same, the answer to the

appellant's objection is that, while this could be a basis

of substantial harassment if repeated revisions are

automatically dated back to 20.5.83 (as argued, on the first

point, for the assessee), it loses all force on our

interpretation leaving it open to the Board and State to fix

the dates with effect from which revisions will be

effective. In view of this, one can take in that, while

making a subsequent revision, the authorities will not

normally tamper with an earlier revision (s) or alter the

dates of effectiveness fixed for the earlier revision (s)

without a valid reason to do so. If this is done, it will

be open to a court to examine the basis thereof and sustain

it only where the earlier fixation was based on an error or

misconception or the like and called for modification. The

third objection is that the Hindi version of the Amendment

Act is differently worded and does not contain the words

"for the first time" found in the English version. Reliance

is placed on the decision of a Bench of seven judges of the

Allahabad High Court in Mata Badal Pandey v. Board of

Revenue, (1974) U.P.T.C. 570 to

176

the effect that, where there appears a doubt or ambiguity

on a plain reading of the English words as to the true

intention of the legislature and the Hindi version is

conflicting or different. the Hindi text will be the key for

finding the answer. We do not think the Hindi version

really alters the position; actually it is the presence of

the words "for the first time" in the English version that

create an ambiguity. Without these words, the clause

clearly provides that all supply of electricity, for which

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payment is to be made after 20.5.83, will be charged at the

rates to be fixed by the Board. We, therefore, reject the

appellant's contention and hold that the fixation by the

Board of rates from 20.5.83 and, at different rates for

different periods of time, is unexceptionable.

This takes us to the real and crucial question in the

case as to whether rates to be fixed in the present case

should, on proper consideration, be less than, equal to or

higher than the general HV-2 rates. The appellant contends

that it should be charged at the cost of generation plus a

reasonable margin of profit or at the rate at which the

supply is made to the Madhya Pradesh State Electricity

Board. At any rate, it is said, the rates charged to the

appellant should be less than HV-2 rates. For this it

relies on: (a) the special circumstance that the appellant,

at great detriment to itself, agreed to set up a caustic

soda plant in a backward area at the request of the State

Government and in public interest only because of a promised

concession in rates of electricity supply; (b) the fact that

the supply to the appellant is metered at the point of

generation with the result that the transmission and

distribution losses, in so far as the appellant is

concerned, are borne by the appellant and not by the Board

as in the case of other consumers and (c) the important fact

that electricity, in the case of the appellant, is one of

the only two raw materials needed for its business. On the

other hand, for the Electricity Board, it is contended that

the appellant should be called upon to pay higher than HV-2

rates for the following reasons :

(i) The appellant has been having substantial

supplies of electricity at nominal rates of 2.5

paise and 2.75 paise per unit between 1963 and

1983.

(ii) The supply to the assessee is being made only

from the State Grid and there is no reason why it

should draw the supply at lower rates than others :

(iii) The Board had been incurring heavy losses

over the years. This is to a considerable extent

due to the spiraling demand for electricity, the

Board's responsibilities under the statute to co-

177

ordinate development of the supply of energy

throughout the State and the necessity to supply

energy at concessional rates to certain sectors

such as the agricultural sector.

(iv) The Board is also entitled, under s.59 of the

1948 Act, to take into account the necessity of

building up a surplus, statutorily fixed, in the

fixation of rates of supply to all or any of its

consumers.

We have given careful thought to the considerations

urged before us and we are of opinion that there is no

material to justify any departure from the HV-2 rates in the

case of the appellant. We find no force in the contentions

put forward on behalf of the appellant to reduce the rates

applicable to the appellant below HV-2 level. The special

circumstances pleaded have lost their importance with the

passage of time. It is obvious that the conditions that

prevailed in 1963 are not valid and the appellant has had

the benefit of concessional rates for twenty years. No

doubt the benefits would have continued for five more years

but for statutory intervention. But the statute permits a

reconsideration of the situation as in May 1983 and it is

unarguable, it seems to us, that the rate of 2.75 p. should

continue even after 1983 or that the appellant should be

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entitled to any special concession. The consideration that

electricity is a "raw material" in the assessee's business

is, again, irrelevant for it can mean nothing more than that

the appellant needs substantial quantities of the energy and

there is no reason why it should not pay for it at the

normal market rates. The point regarding take off of supply

at the generating point will no doubt have some relevance on

the question of rates and we shall refer to this aspect

later in the context of the pleas put forward by the Board.

We are, therefore, of the view that the appellant has no

valid justification for staking a claim to less than the HV-

2 rates.

Equally, it seems to us, the authorities have no case

for seeking to raise the rates beyond the HV-2 rates. They

are supplying energy to the appellant from the grid since

1968 and they cannot justifiably seek to demand higher rates

from the appellant than from the HV-2 consumers. This is

sought to be justified on the basis of the huge losses that

the Board has been incurring and the statutory justification

for escalation in the rates keeping in view the necessity to

build up a surplus. This, however, is an aspect of working

which should affect all the consumers equally. May be the

Board can, in appropriate circumstances, seek to make up for

a part of the losses by hiking up the rates to one

particular category of consumers but that would not be

justified here as the transmission and distribution losses

178

in respect of the supply to the appellant are borne by it

and, in the absence of some special vital reason, it would

not be equitable to fix the rates of supply to the appellant

above the rates applicable to other HV-2 consumers. Some

reference was made to the difficulties in completely fitting

the scheme of computations for determining the HV_2 rates

into the scheme under the appellant's contract. It is,

however, unnecessary to go into that aspect as we are only

on the question of rates and holding that there is no

justification for charging more than HV-2 rates from the

appellant. Moreover, the appellant has been paying for the

Obra supply at HV-2 rates since 1989. We have also been

informed that in 1972 the appellant took a further

additional supply of 8 MW and agreed to pay therefor at HV-

2B rates as applicable to other Bulk Power Consumers in the

State.

In these circumstances, we have reached to the

conclusion that there is no justification to charge more

than HV-2 rates from the appellant. We, therefore, allow

this appeal in part, quash the determinations of 1988 and

1991 and direct that the appellants should be charged from

20.5.83 to 31.3.89 at the HV-2 rates applicable to other

consumers. The appeal of the appellant is partly allowed to

the above extent. The Board's appeal has not yet been

numbered as it is delayed by a few days. It was, however,

stated that the Board wishes to withdraw its appeal because

of the subsequent developments. For these reasons and also

in view of our above conclusion the Board's appeal also

stands dismissed. In the circumstances, we direct each

party to bear its own costs.

T.N.A. C.A. 1306/88 Partly allowed.

C.A. 128/92 dismissed.

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