http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 21  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 21  

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                                                        152 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                                                        153 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.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 21  

    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                                                        154 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 21  

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                                                        155 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                                                        156

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 21  

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                                                        157 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 21  

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                                                        158 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.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 21  

    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                                                        159 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                                                        160

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 21  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 21  

        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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 21  

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.                                                        163          (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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 21  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 21  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 21  

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,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 21  

        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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 21  

        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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 21  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 21  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 21  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 21  

                                                      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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 21  

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 21  

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.                                                        179