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PETITIONER: GOPISETTI VENKATARATNAM AND OTHERS

       Vs.

RESPONDENT: THE VIJAYAWADA MUNICIPALITY AND OTHERS

DATE OF JUDGMENT: 05/03/1965

BENCH: SUBBARAO, K. BENCH: SUBBARAO, K. SHAH, J.C. BACHAWAT, R.S.

CITATION:  1966 AIR  353            1965 SCR  (3) 276

ACT: Indian   Electricity  Act,  1910  (Act  9  of   1910),   ss. 21(2)--Agreement  between Licensee and Consumers--Supply  of energy   at  "current  official  scale  of   rates"--Meaning of--Enhancement  of  rate--Sanction of  State  Government,if necessary.

HEADNOTE:     The  Government  of  Madras  issued  a  licence  to  the respondentMunicipality,   under   s.3(1)   of   the   Indian Electricity  Act,  1910, for the supply of  electric  energy within  its  municipal  limits at rates  not  exceeding  the maximum  charges given in the licence. The appellants,  some consumers  of the electric energy, entered  into  agreements with  the Municipality for the supply and agreed to pay  the "current official scale of rates". The rates were  increased by resolutions  of the Municipality twice and on the  second occasion  the appellants filed a representative suit  for  a declaration  that the later resolution was illegal, and  for an  injunction restraining the Municipality from  collecting charges at the new rates. The trial court dismissed the suit and  the  dismissal  was confirmed on  appeal  by  the  High Court..In  appeal by special leave the appellants  contended that  (i)  the rates agreed between the  consumers  and  the Municipality  could  not   be  unilaterally   altered    and increased   by   the  Municipality to the prejudice  of  the consumers  and,  therefore,  the  impugned  resolution   was invalid   and  unenforceable;  and  (ii)  as  the   impugned resolution   was  passed  without  obtaining  the   previous sanction of the State Government under s. 21(2) of the  Act, it was void.    HELD:   (i)  The  consumers  were  under  a   contractual liability to pay the enhanced rates covered by the  impugned resolution.     Under  ss. 22 and 23 of the Act the Municipality  cannot discriminate  between  consumers  in  the  matter  of  rates chargeable for the energy supplied. Unless the  Municipality enters  into  agreement  with the consumer  enabling  it  to charge  him at a rate fixed from time to time, it  would  be difficult  for  the  Municipality to  maintain  equality  of treatment  between  the consumers. That  difficulty  can  be

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avoided  if  there is a term in the  agreement  executed  by every  consumer that he will pay the official rate fixed  by the  Municipality from time to time subject to  the  maximum fixed  by the licence. Further, a public body  in  supplying electric  energy to different consumers cannot run the  risk of  incurring  loss  by agreeing to  fixed  rates,  for  the Government may increase the licence fee as had been done  in the  instant  case, or there may be a rise in  the  cost  of distribution. [280 A-D]     Therefore, having regard to the entire  document and the surrounding circumstances, the words "current official scale of rates" in the agreement mean the official scale of  rates current  or prevalent from time to time during the  currency of the agreement. [281 C]     (ii)   No  sanction  of  the  State    Government    was necessary for enhancing the rates.     There  was  no  alteration  of  any  condition  of   the agreement  within  the meaning of s. 21(2) of the  Act.  The consumers  had agreed to .pay the rates that would be  fixed from  time to time. and if that term was a condition  within the  meaning of that section, there was no change at all  in that  condition,  for  the change in the rates  was  not  in derogation of the condition but in terms of it. [282 A-B]         277

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 69 of 1964.     Appeal  by  special leave from the judgment  and  decree dated October 10, 1961, of the Andhra Pradesh High Court  in Second Appeal No. 872 of 1958.     A.V. Viswanatha Sastri, K. Rajendra Chaudhuri and K.  R. Chaudhuri, for the appellants.     S.V. Gupte, Solicitor-General, and T. Satyanarayana. for respondent No. 1. T.V.R. Tatachari and B.R.G.K. Achar, for respondent No. 2. The Judgment of the Court was delivered by     Subba  Rao, J. On November 22, 1927, the  Government  of Madras,  in  exercise  of its powers under s.  3(1)  of  the Indian  Electricity  Act,  1910 (IX  of  1910),  hereinafter called  the  Act,  issued  a licence  to  the  Bezwada  (now Vijayawada)  Municipal  Council for the supply  of  electric energy  within the municipal limits of Bezwada at rates  not exceeding  the maximum charges given in ’the third  annexure to  the  said licence. The appellants, who are some  of  the consumers  of  electric energy for domestic  and  industrial purposes, entered into agreements with the licensee for  the supply  of electric energy to them for domestic,  industrial and  other  purposes, agreeing to pay the  current  official scale  of  rates.  On December 13,  1940,  the  Municipality passed  a resolution bringing into force new rates  for  the supply of electric energy from April 1, 1940. The  consumers paid  the rates so fixed’ till the year 1956. On  April  30, 1956,  the  Municipal  Council  passed  another   resolution enhancing  the rates from 1-4-1956. The appellants  filed  a representative  suit against the Vijayawada Municipality  in the  Court  of  the   District  Munsif,  Vijayawada,  for  a declaration  that the said resolution dated April 30,  1956, passed  by  the Municipal Council was illegal,  invalid  and unenforceable  and  for an injunction restraining  the  said Municipality  from collecting charges from the consumers  of electric  energy in the licensee’s area at the  new  revised rates in pursuance of the impugned’ resolution. The  learned District  Munsif held that the demand of enhanced  rate  was

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legal  and  valid  and dismissed the suit.  On  appeal,  the learned  Subordinate Judge held that the levy from the  date of the said resolution was good, but it could’ not be  given retrospective operation. He further held that the claim  for duty at half an anna per unit was invalid. In the result  he modified  the  decree of the District Munsif. On  a  further appeal,  a Division Bench of the Andhra Pradesh  High  Court confirmed  the decree of the Subordinate Judge.  By  special leave the present appeal has been filed in this Court.     Mr.  A.V.  Viswanatha Sastri, learned counsel   for  the appellants  raised before us the following two  contentions: (1)  The  rates agreed upon between the  consumers  and  the Municipality cannot be unilaterally altered and increased by the   Municipality  to the prejudice of the  consumers  and, therefore, the said resolution dated 278 April  30, 1956, was invalid and unenforceable; and  (2)  as the  said  resolution  was  passed  without  obtaining   the previous sanction of the State Government under s. 21(2)  of the Act, it was void for that reason also.     The first contention turns upon the relevant  clauses of the  agreement entered into between the  Municipal   Council and  the consumers. Ex. B-4 is one such agreement dated  May 27,   1932,  between  the  Municipality  and  one   of   the appellants  herein.  The material clauses of  the  agreement read:                     Para, IV. The consumer shall pay to  the               licensee for all electrical energy so supplied               at the rates and in accordance with the terms,               given  in  the licensee’s   Current   Official               Scale  of  rates  and’  the  signing  of  this               Agreement is held to imply concurrence in  the               terms of the said  Scales of rates.                     Provided  that  the  minimum  rates   as               specified  therein shall be paid  irrespective               of  whether  energy  to the  extent  has  been               consumed or not.                      Para,   V.   A  consumer   under   this               Agreement is required to state (see  Schedule)               under  which  of  the rates  set  out  in  the               licensee’s Official Scale of energy Rates,  he               desires to be charged.                      Para,  X. This Agreement shall be  read               and  construed as subject in all  respects  to               the   provisions  of  the  Bezwada   Municipal               Electric Licence, 1927, and to the  provisions               of the Indian Electricity Act 1910, and of any               modification  or re-enactment thereof for  the               time  being in force thereunder so far as  the               same  respectively  may  be  applicable.   The               supply   of  electrical  energy  under    this               agreement is subject to following among  other               provisions of law, namely:--                The schedule above referred to.                  (2)  Purposes to which the supply is to  be               given,  and  in the case  of  domestic  supply               under which rate to be charged, as referred to               in paragraph V:               (a) (Supply) Domestic Purposes.                (b) (Rate) Rs. 0--6--0 per unit.               (3)  Maximum electrical power required by  the               consumer:0--54 K.W.               (4)  Minimum monthly charge: Rs.  2---8--0  in               accordance               with (a) class rate in the Schedule of Rates.

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The Schedule of Rates mentioned in this agreement presumably refers  to  scale of rates fixed by the  resolution  of  the Municipality.  The  conflicting  arguments  centre  on   the question   whether  the  words "current  official  scale  of rates"  in para. IV relate to the scale of rates current  on the date when the agreement was entered into 279 or refer to the scale of rates current from time to time  in accordance  with the resolution passed by the  Municipality. The  expression "current" means "vogue or  prevalent";   and "current  rate" may mean the rate obtaining at a  particular time or at a future time or from time to time. The term goes well  with the present, future and recurrent. It is  capable of different meanings depending upon the context or  setting in  which  it  appears.  As  the  meaning  of  the  word  is ambiguous, it is legitimate, in order to ascertain its  true meaning, not only to study the document as a whole but  also to  ascertain its meaning from the circumstances  whereunder the said agreement came into existence. Under para. X of the agreement  the  said  agreement  shall  be  subject  to  the provisions  of the licensee and the provision of the  Indian Electricity  Act, 1940, that is to say the  said  provisions are incorporated by reference into this agreement. Under the licence the licensee is precluded from charging rates higher than  those  prescribed thereunder. On April  1,  1940,  the Electricity   Department  of  the  Vijayawada   Municipality prepared  a  document  styled as "Conditions  and  Rates  of Supply".  It does not contain any statutory rules, but  only administrative  directions  in regard  to  providing,  inter alia.  for the method of entering  into agreements  and  for charging  rates for the energy  supplied. This embodies  the administrative  practice of the  Municipality in the  matter of  charging rates for the energy supplied.   Paragraph   is thereof,  under   the  heading  "Method  of   charging   for current". reads:               "The price and method of charging for  current               supplied  shall  be such as may from  time  to               time  be fixed by the licensee  in  accordance               with  the  provisions of the Act  and  of  his               licence,  or  such as may be made  subject  of               Special  agreement between the  consumers  and               the licensee." This  makes a distinction between the official rate and  the contractual  rate.  The official rate is that fixed  by  the licensee from time to time and the contractual rate is  that fixed  by special  agreement between the parties. It may  be assumed   that   this  dual  method  is  followed   by   the Municipality in the matter of entering into agreements.  The form  of application prescribed for the supply  of  electric energy contains the following clause:                     "I  agree to pay for the  said’  energy,               service  connection and other  dues  including               the  deposit  of  such  security  as  may   be               demanded in accordance with the scale of rates               and the rules of the licence." The  scale of rates in the context means the official  scale of  rates  that may be fixed by the  Municipality.  When  an application is filed an obligation is imposed trader s.22 of the  Act on the licensee to supply energy, except in so  far as is otherwise provided by the terms and’ conditions of the licence,  on  the  same terms as those on  which  any  other person i.n the same area is entitled in similar 280 circumstances to corresponding supply. Section 23 of the Act says that a licensee shall not, in making any agreement  for

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the  supply of energy, show undue preference to any  person. The  combined  operation  of these provisions  is  that  the licensee cannot  discriminate between the applicants in  the matter,  among  others, of rates chargeable for  the  energy supplied.  Unless the Municipality enters into an  agreement with a consumer enabling it to charge him at a rate fixed by it  from  time to time, it would be very difficult  for  the Municipality  to maintain equality of treatment between  the consumers  in the matter of rates. To illustrate,  if  under certain  agreement a rate obtaining at a particular date  is agreed upon and the rate is binding on the Municipality even if it is raised later on, the Municipality may be guilty  of discrimination  which it is asked to avoid by statute if  it charges  other consumers at a higher rate. ’this  difficulty can be avoided if there is a term in the agreement  executed by  every consumer that he will pay the official rate  fixed by the Municipality from time to time subject to the maximum fixed  by the licence. That apart, a public body  like   the Municipality  in  supplying energy  to  different  consumers cannot run the risk  of incurring loss by agreeing to  fixed rates,  for the Government may increase the licence fee,  as it  has done in the present case, or there may be a rise  in the cost of distribution. On the other hand, if the term  in the  agreement is flexible to meet the said’  eventualities, ’the maintenance of continuous supply of electric energy may be  assured  without  any  loss  to  the  public  body.  The circumstances  obtaining  at the time  when  the  agreements between the consumers and the Municipality were entered into were these: The licensee had power to fix the rates  subject to   the   maximum  prescribed  by   the   Government.   The administrative  directions  provided for  charging  for  the current  supplied  at rates that may be fixed from  time  to time. The Municipality was in practice fixing the rates from time  to time having regard to the  relevant  circumstances. The  said rates fixed by the Municipality from time to  time were the "Official Scale of Rates". The consumers applied to the  Municipality for supply of energy, agreeing to pay  for the  energy  supplied  at the scale of rates  fixed  by  the Municipality.     With  this background if we look at paragraphs IV and  V of  Ex.B-4 the meaning of the expression  "current  official scale  of  rates"  will be clear.  Paragraph  IV  speaks  of "current  official scale of rates" whereas para. V  mentions "official scale of energy rates". These two paragraphs bring out the distinction between the official scale of rates  and the official scale of energy rates: the former refers to the scale  of rates maintained by the Municipality  as  modified from time to t;me by appropriate resolutions, and the latter refers  to the different rates payable in respect of  energy supplied for different purposes. Under para. IV the consumer specifically agreed to abide by the official scale of rates. If  the intention of the parties is that the consumer  shall pay only the scale of energy rates obtaining at the time the agreement is entered into, there is no necessity for this         281 specific agreement, for para. V serves that purpose. On  the other  hand, the said express condition and the use  of  the word "current" make it clear that the consumer agrees to pay at  the official scale of rates current from time  to  time. The  adjective  "current" will become a surplusage,  if  the intention  is  to pay the rates obtaining at  the  time  the agreement  is entered into, for the agreement  itself  gives the  existing rates.  The  use of the   adjective  "current" emphasizes the fact that the official scale of rates is  not the existing rates, but the scale of rates current from time

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to time. We have. therefore, on a reasonable construction of the  ambiguous  expression "current" having  regard  to  the entire  document and the surrounding circumstances, come  to the  conclusion  that the  words "current official scale  of rates" in para. IV of the agreement mean the official  scale of  rates current or prevalent from time to time during  the currency  of  the  agreement. If so,  it  follows  that  the appellants  were  under a contractual liability to  pay  the enhanced rates covered by the impugned resolution.     The next question turns upon s. 21(2) of the Act, which, as it then stood read:                     "Subject  to  the  provisions  of   sub-               section (1), a licensee may, with the previous               sanction  of the State Government given  after               consulting    the   local   authority,    make               conditions  not inconsistent with this Act  or               with his licenee or with any rules made  under               this  Act,  to regulate  his  .relations  with               persons who are or intend to become consumers,               and may with the like sanction given after the               like consultation add to or alter or amend any               such conditions;  and any conditions made by a               licensee  without such sanction shall be  null               and void." Under  this sub-section the licensee cannot make  conditions to  regulate his relations with the consumers or  amend  any such   conditions   without  the  sanction  of   the   State Government. Mr. Viswanatha Sastri argued that to enhance the rates was to  alter a condition within the meaning of sub-s. (2)  of s. 21 of the Act and as admittedly the  sanction  of the   State   Government  was  not  obtained   before   such alteration,  the  said  resolution  was  void.  The  learned Solicitor General contended that s. 21 (2) of the Act was  a general  provision  relating to conditions,  whereas  s.  23 thereof  was  a specific provision in regard  to  fixing  of rates  and that s. 23 would, therefore, prevail over  s.  21 and  that  s.  23  did not prescribe  the  sanction  of  the Government  as a condition precedent for fixing  the  rates, Mr. Tatachari, while supporting this argument, added that on the interpretation of para. IV of the agreement suggested by the respondents there was no alteration in the conditions at a11  and’, therefore, there was no scope for invoking s.  21 of  the Act. It is not necessary to express our  opinion  in this  case  on  the  question whether  s.  23  excludes  the operation  of s. 21(2) of the Act in the matter of  fixation of  rates, for we are satisfied that there is no  alteration of any condition of 282 the  agreement  within the meaning of s. 21(2)  thereof.  We have  held  that under para. IV of the  agreement  that  was entered  into  between the consumers and the  licensee,  the consumers  agreed  to pay the rates that were fixed  by  the Municipality  from  time  to time. If the said  term  was  a condition  within the meaning of s. 21(2) of the Act,  there was  no change at all in that condition, for the  change  in the  rates  was not in derogation of the  condition  but  in terms  of  it. To state it differently, the  same  condition embodied  in para. IV of the agreement continued to  operate between the parties even after the rates were enhanced under the impugned resolution. Therefore, no sanction of the State Government was necessary for enhancing the rates.     No other point was raised before us. In the result,  the appeal fails and is dismissed with one set of costs.                                         Appeal dismissed. 283

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