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PETITIONER: HINDUSTAN ZINC LTD. ETC. ETC.

       Vs.

RESPONDENT: ANDHRA PRADESH STATE ELECTRICITY BOARDS & ORS.

DATE OF JUDGMENT02/05/1991

BENCH: VERMA, JAGDISH SARAN (J) BENCH: VERMA, JAGDISH SARAN (J) VENKATACHALLIAH, M.N. (J) OJHA, N.D. (J)

CITATION:  1991 AIR 1473            1991 SCR  (2) 643  1991 SCC  (3) 299        JT 1991 (2)   403  1991 SCALE  (1)869

ACT:      Electricity (Supply) Act, 1948: Ss. 4A, 16, 49, 59, 61, 63,   67,   67A,   68,  78-A-Orders   No.   1014   and   No. DE/COML/IV/2250/83/1 dated 13.12.1983 and Memo dated 18.11.1975.      S.   49-Tariffs-Power   of   fixation-No   Unreasonable preference shall be shown to any person.      S.  16-Electricity  Tariff-Revision-State   Electricity Consultative  Council-Non-consultation by State  Electricity Board-Validity of.      S. 59-State Electricity Board-Finance-Tariff-Generation of surplus-Non-specification of quantum by State Government- Whether   board  can  adjust  its  tariffs  to  generate   a reasonable surplus.      Whether   the   surplus  generated  could   be   called extravagant.      Whether  revision of tariffs fall within the  scope  of judicial review.      Fuel  cost  adjustment-Charged  only  from   particular category of consumers-Whether reasonable.      S.  78A-Tariffs-Directions by State  Government-Whether binding on the Board.      Administrative   Law:   Delegated   legislation-’Laying procedure’-Placing  Electricity  Board’s  annual   financial statement u/s 61 of the Electricity (Supply) Act before  the Legislature-Whether effectively controls exercise of Board’s delegated power.

HEADNOTE:      The  appellants  are  H.T.  electricity  consumers   of various  categories  in the State of  Andhra  Pradesh.   The respondent-State  Electricity  Board  (the  Board),  by  its orders  B.P. Ms. No. 1014 dated 13.12.1983  revised  upwards the  tariffs for various categories of  consumers  including H.T. categories 1 (Industrial) and II (Non-Industrial);  and by Memo No. DE/COML/IV/2250/83/I of the same date it revised upwards  the electricity tariffs for highly power  intensive industries falling under                                                   644 H.T.  Category III. Tariffs consisted of three  parts.   The

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said three categories of H.T. consumers fell in Part A. H.T. consumers availing supply of electricity for irrigation  and agricultural  purposes  were  included in  part  B.  Part  C provided  for  miscellaneous and general  charges.   Tariffs were  not  revised for consumers availing  H.T.  supply  for purposes of irrigation and agriculture falling in part B  or L.T. supply for domestic cottage industries, public lighting and small poultry farms units.      Besides the energy charges, the H.T. consumers included in  Part  A  were also required to pay  at  different  rates effective from 1.9.1982 an additional charge levied as ‘fuel adjustment charges’; and some amount as ‘voltage surcharged’ in  accordance with the terms of the agreement entered  into by the individual consumers with the Board.      The writ petitions filed by the appellants  challenging the  said  upward revision of the Electricity  Tariffs  were dismissed  by  the  High Court  upholding  the  revision  of tariffs   made  by  the  respondent-Board.   Aggrieved   the appellants preferred appeals by special leave to this Court.      It was contended on behalf of the appellants that:  (1) the  upward  revision of tariffs by  the  State  Electricity Board was invalid being made without prior consultation with the  State Electricity Consultative Council as envisaged  by s.  16  of the Electricity (supply) Act, 1948;  (2)  without specification  of  any surplus by the State  Government  the Board  had no power to adjust its tariffs in a manner  which resulted   in   generating  any  surplus;   (3)   there   is discrimination   in  recovery  of  the  entire   full   cost adjustment  from  the H.T. consumers alone; (4)  the  upward hike  of the tariffs for the H.T. consumers including  power intensive   consumers  was  arbitrary   and   discriminatory inasmuch as it was not related to the cost of generation and was  based on irrelevant factors; and (5) and the Board  had acted   with  profit  motive  losing  its   public   utility character.  Learned counsel representing the power intensive consumers  also  contended that in the absence of  a  clause relating  to  fuel cost adjustment in the  G.Os.  issued  in respect  of  the power intensive units, they  could  not  be governed  by  the  clause  of  fuel  cost  adjustment   made applicable to the H.T.tariffs.      Dismissing the appeals, this Court,      HELD: 1.1 The power of fixation of tariffs in the Board is  provided by s. 49 of this Supply Act which requires  the fixation of uniform                                                        645 tariffs   ordinarily  having  regard  particularly  to   the specified  factors and enables fixation of such tariffs  for any person having regard to the factors expressly stated and any  other  relevant  factors  providing  further  that   no unreasonable  or  undue  preference shall be  shown  to  any person by the Board in exercise of its powers of fixing  the tariffs.   S. 59, requiring the Board to adjust the  tariffs for  the purpose of its finance is to be read along with  s. 49. [667B-C; 668B-C]      1.2. The common premise for the purpose of the  instant case  that the revision of tariffs by the State  Electricity Board is a question of policy may indicate that it would  be open to the Consultative Council to advise the Board also on the  question of revision of tariffs, and if such advice  is given,  then the Board must consider the same before  taking the  final  decision.  That, however, does  not  necessarily mean   that  where  no  such  advice  was  taken  from   the Consultative  Council  or  was rendered on  account  of  the absence of any meeting during the relevant period, it  would necessarily  render invalid the revision of tariffs made  by

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the Board. [664A-B]      Though   it  is  advisable  to  seek  advice   of   the Consultative  Council  before revision of  the  tariffs  yet failure  to  do so does not result in  invalidation  of  the revised tariffs.  This consequence appears to be the logical and  reasonable  view to take of the requirement  of  s.  16 alongwith other provisions of the Act. [666A-B]      1.3  The consequence of non-compliance of s. 16 is  not provided,  and  the nature of function of  the  Consultative Council  and the force of its advice being at the best  only persuasive,  it  cannot  be said that  revision  of  tariffs without  seeking  the  advice of  the  Consultative  Council renders the revisions of tariffs invalid. [664B-C]      1.4  It is also significant that the  annual  financial statement containing all particulars relating to revision of tariffs is required to be submitted to the State  Government in  February each year and the State Government is  required after  receipt of such statement to cause it to be  laid  on the  table of the House or Houses of the  State  Legislature and  the said statement is open to discussion therein.   The Board is bound to take into consideration any comments  made on the said statement in the State Legislature.  The ’laying procedure’  before the legislature effectively controls  the exercise of the delegated power of the Board.  Thus there is ample provision for discussion on the revised tariffs in the State  Legislature with the Board being bound to  take  into consideration any comments made thereon. [664C-D; 666A]                                                        646      Kerala  State  Electricity Board v. M/s.  S.N.  Govinda Prabhu & Bros. & Ors., [1986] 4 S.C.C. 198, relied on.      2.1 Mere generation of surplus by the Board as a result of adjusting its tariffs when the quantum of surplus has not been  specified  by  the State  Government  after  the  1978 amendment  of s. 59 of the Act, cannot invite any  criticism unless  it is further shown that the surplus generated as  a result  of  the  adjustment  of tariffs  by  the  Board  has resulted  in the Board acting as a private  trader  shedding off its public utility character.  If the profit is made not merely for the sake of profit, but for the purpose of better discharge of its obligations by the Board, it cannot be said that  the public enterprise has acted beyond its  authority. [669C-E]      2.2  The  general  principle  for  the  Boards  finance indicated  by  s. 59 is that prior to  the  1978  amendment, tariffs could be adjusted to avoid any loss, but as a result of  the shift made by the 1978 amendment the power could  be exercised   to  generate  a  surplus  and  when  the   State Government  specified the amount of surplus then  the  Board was bound to adjust the tariffs to ensure generation of  the specified  surplus.   However, generation  of  a  reasonable surplus in any year of account without specification of  the surplus  amount  by  the State Government  was  not  contra- indicated in the provision inasmuch as the duty to  generate a  surplus was implicit with the added obligation to  ensure generating  surplus  to the extent specified  by  the  State Government  when  it was so specified by it.  It  cannot  be accepted  as  a  reasonable  view that  in  the  absence  of specification  of the surplus by the State  Government,  the Board  could  not  adjust its tariffs  to  generate  even  a reasonable surplus in any year of account. [668E-G]      2.3  In  the  instant case the Board  showed  that  the surplus resulting from upward revision of tariffs applicable to  the  H.T.  consumers  was  for  the  purpose  of  better discharge of its other obligations under the Supply Act  and in  effect  the  same  has  merely  resulted  in  a  gradual

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withdrawal  of the concessional tariffs provided earlier  to the  power intensive consumers which did not in its  opinion require continuance of the concessional tariffs any  longer. It  was  not  proved that this assertion of  the  Board  was incorrect or there was any reasonable basis to hold that the upward revision of tariffs applicable to H.T. consumers  was merely  with  a desire to earn more profits like  a  private trader  and not to generate surplus for utiliasation of  the funds  to discharge other obligations of the  Board  towards more needy consumers, such as agriculturists, or to meet the needs of expansion of the supply to deserving areas.  [669E- G]                                                        647      3.1  The H.T. consumers, including the power  intensive consumers,  are known power guzzlers and in power  intensive industries,  electricity  is really a  raw  material.   This category  of  consumers, therefore, forms a  distinct  class separate  from other consumers like L.T. consumers  who  are much smaller consumers.   There is also a rational nexus  of this  classification with the object sought to be  achieved. Moreover,  the power intensive consumers have been  enjoying the  benefit of a concessional tariff for quite  some  time, which   too   is   a  relevant  factor   to   justify   this classification.  Placing the burden of fuel cost  adjustment on these power guzzlers, who had the benefit of concessional tariffs, for quite some time and have also a better capacity to pay, cannot, therefore, be faulted since the  consumption in  the  power  intensive industries accounts  for  a  large quantity. [670B-C]      3.2  It is not unreasonable to take the view  that  the thermal power has become costlier on account of the increase in  fuel  cost  and could notionally  be  allocated  to  the consumption  by  H.T.  and power  intensive  consumers  and, therefore,  the fuel cost adjustment is made  applicable  to them alone. [671E-F]      4.1  The  Court would not strike down the  revision  of tariffs  as arbitrary unless the resulting surplus   reaches such a height as to lead to the inevitable decision that the Board has shed its public utility character and is  obsessed by  the  profit motive of private entrepreneur in  order  to generate a surplus which is extravagant. [672A-B]      4.2  The surplus generated by the Board as a result  of revision  of  tariffs during the relevant period  cannot  be called  extravagant by any standard to render  it  arbitrary permitting  the striking down of the revision of tariffs  on the  ground of arbitrariness nor is it  discriminatory.   It was  pointed out on behalf of the Board that its action  was based  on  the opinion of  Rajadhyaksha  Committee’s  report submitted  in 1980 and the formula of fuel  cost  adjustment was on a scientific basis linked to the increase in the fuel cost.   This is a possible view to take and, therefore,  the revision  of tariffs by the Board does not fall  within  the available scope of judicial review. [672C-D]      Kerala  State  Electricity Board v. M/s.  S.N.  Govinda Prabhu and Bros. & Ors., [1986] 4 S.C.C. 198, relied on.      Shri  Sitaram Sugar Company Limited & Anr. v. Union  of India & Ors., [1990] 3 S.C.C. 223, followed.                                                        648      5.  It  cannot be said that the term relating  to  fuel cost  adjustment had no application to the  power  intensive consumers  during  the  relevant period.    The  Memo  dated 18.11.1975  did not merely extend the  non-specified  ’terms and   conditions  of  supply’  applicable  to  normal   H.T. consumers  to the power intensive consumers but also  "other charges"  which were merely illustrated by the words,  "such

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as Misc. charges, terms and conditions of supply not mention herein".   This express provision in the said  Memo  clearly provided that except for the provision specifically made for power   intensive  consumers,  in  respect  of   all   other provisions the power intensive consumers were to be governed by  the provisions, by whatever name called,  applicable  to the  normal H.T. consumers.  However in the bills issued  to the  power  intensive consumers the terms relating  to  fuel cost adjustment was specifically indicated. [673D-H; 674A]      Nav   Bharat  Ferro  Alloys  Ltd.  v.  A.P.S.E.   Board Hyderabad, AIR 1985 A.P. 299, approved.

JUDGMENT:      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2567-70 of 1985.      From  the  Judgment  and Order dated  3.4.1985  of  the Hyderabad High Court in Writ Petition No. 9403 of 1984.      Kapil Sibal, Additional Solicitor General, G.L. Sanghi, Anil  B.  Diwan,  G.  Ramaswamy,  P.A.  Choudhary,   Kailash Vasudev,  Naunit  Lal, M.J. Paul,  C.S.  Vaidyanathan,  U.K. Khaitan,  Praveen Kumar, S. Murlidhar, Vineet  Kumar,  Vinod Bhagat and Mukul Mudgal for the Appellants.      Shanti  Bhushan,  V.R. Reddy,  Rajendra  Choudhary,  S. Thananjayan, K. Ram Kumar for the Respondents.      V.B. Sharya for the Intervenor.      The Judgement of the Court was delivered by      VERMA, J. These appeals by special leave are by several industrial   concerns  against  the  Andhra  Pradesh   State Electricity   Board   (hereinafter   called   ’the   Board’) challenging  the common judgment of the Andhra Pradesh  High Court in writ petitions filed by these concerns  challenging the revision of the electricity tariffs by the Board by  its proceedings  contained  in B.P. Ms.  No.  1014  (Commercial) dated                                                        649 13.12.1983  which came in to force on 15.1.1984.   Prior  to this revision, the tariffs were governed by B.P. Ms. No. 418 (Commercial)  dated 12.1.1981.  On 13.12.1983, two  separate orders  were  issued  by  the  Board  revising  the  various tariffs.   By  one of them, namely, B.P. Ms. No.  1014,  the tariffs  for various categories of consumers including  H.T. categories I and II were revised.  By the other order of the same  date,  namely,  Memo  No.  DE/COML/IV/2250/83/I,   the tariffs  for  highly power intensive  industries  were  also revised upwards.  Out of the appellants it was applicable to five  units, namely, (1) Nav Bharat Ferro Alloys  Ltd.,  (2) Andhra  Sugars Ltd., (3) Ferro Alloys Corporation Ltd.,  (4) Grindwell  Norton  Ltd.,  and (5) A.P.  Carbides  Ltd.  This upward  revision  of tariffs made by the Board  by  its  two orders  dated  13.12.1983  which were  made  effective  from 15.1.1984,   was  challenged  by  the  appellants  in   writ petitions filed in the Andhra Pradesh High Court on  various grounds.   The  High  court rejected  all  the  grounds  and dismissed  the  writ petitions by its  common  judgment  now reported in A.I.R. 1985 A.P. 299.  These appeals by  special leave are against the High Court Judgment.      The  appellants  are all H.T. power  consumers  of  one category  or  other.  The tariffs consist  of  three  parts: Part-A,  Part-B  and  Part-C.   Part-A  provides  for   H.T. tariffs; Part-B for L.T. supply;  and Part-C provides, inter alia, for miscellaneous and general charges.  H.T. consumers in  Part-A are broadly classified into three categories:  H. T.   Category-I   (Industrial);   H.T.   Category-II   (Non-

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Industrial);  and  H.T.  Category-III  comprising  of  power intensive consumers and some others.  The Board retained the power  to  decide in accordance with the  guidelines  as  to which  industries were power intensive and which  were  not. This was the position in the tariffs of 1975.  Subsequently, the Board began to deal with the power intensive  industries by notifying tariffs for them separately from time to  time. In  effect,  there were four classes of  consumers  availing H.T. supply; (1) H.T. consumers falling under H.T. Category- I  (Industrial);  (2)  H.T.  consumers  falling  under  H.T. Category-II (Non-Industrial);  (3)  H.T.  consumers  falling under  the  category ’power intensive industries’;  and  (4) H.T. consumers availing supply of electricity for irrigation and  agricultural purposes included in Part-B.  The  tariffs for  these  different  categories  of  H.T.  consumers  were enhanced   from   time  to  time.    For   H.T.   Category-I (Industrial), it was 21 paise in 1975, increased to 30 paise in 1979, 33 paise in 1980, 40 paise in 1981 and 48 paise  in 1984.   Likewise,  there was corresponding increase  in  the energy rates for H.T. Category-II (Non-Industrial), being 28 paise,  37  paise,  40 paise, 47 paise and  56  paise.   The tariffs for power intensive industries were, however,                                                        650 increased by separate notifications issued by the Board from time to time.  It was 11 paise prior to 1975, raised to 12.2 paise  in  1977, 16 paise in 1978, 18.5 paise  in  September 1979, 21 paise in November 1979, 25 paise in 1980, 32  paise in 1981 and 45 paise in 1984.  The H.T. consumers grouped in Part-B were required to pay 15 paise under the 1975  tariffs and  16  paise thereafter.  Besides the  energy  charges  as stated  above, the H.T. consumers were also required to  pay at  different  rates effective from 1.9.1982  an  additional charge  levied as ’fuel cost adjustment charges’.  The  H.T. consumers were also required to pay some amount as  ’voltage surcharge’  in  accordance with the terms of  the  agreement entered into by the individual consumers with the Board.      The comparison of the aforesaid tariffs shows that  the tariffs  for power intensive industries to begin  with  were much less than the tariffs for H.T. Category-I  (Industrial) and  H.T. Category-II (Non-Industrial).  In course of  time, the concession in tariffs for the power intensive industries was progressively withdrawn.  The concessions were, however, continued  in  respect of consumers availing  H.T.  or  L.T. supply  for purposes of irrigation and agriculture  or  L.T. supply for domestic, cottage industries, public lighting and small  poultry farming units.  It is the  admitted  position that the power generation in the State of Andhra Pradesh  is both  hydro  and thermal, each  source  contributing  almost equally  to  the total power generation in the  State.   The H.T.  categories have been consuming more than  one-half  of the  total  power generated in the State  against  the  much larger  number  of individual L.T.  consumers  availing  the remaining power.      The main attacks to the upward revision of the  tariffs for  H.T.  consumers in the writ petitions before  the  High Court were: (1) The Board, as a public utility  undertaking, is expected to function in the most efficient and economical manner;  (2)  It cannot plan its activities with a  view  to drive  any  sizeable profits on its  undertaking  except  in accordance with Section 59 of the Electricity (Supply)  Act, 1948 (hereinafter referred to as ’the Supply Act’); (3)  The Board  Could  not  generate  a surplus  in  excess  of  that specified  under Section 59 of the Supply Act which  it  had been  doing;  (4)  The Board  was  preparing  its  financial statement  incorrectly in a manner contray to section 59  of

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the  Supply Act by improperly taking into  account  expenses chargeable to capital by showing such expenses as charged to revenues; (5) The steep upward revision to tariffs from 1980 made  by  the  Board  is invalid,  being  arbitrary  and  in contravention  of Section 49 and 59 of the Supply  Act;  and (6) There was no justification for the Board to have revised the tariffs either in 1981 or in 1984 or to have levied any                                                        651 fuel  surcharge in terms of Section 49 and 59 of the  Supply Act.   It was also contended that the tariffs  revision  was made  without prior consultation with the State  Electricity Consultative  Council  as required by Section 16(5)  of  the Supply Act which also rendered it invalid.      Prior to 30.7.1982, it was usual for the Board to  take into   account  various  escalation  charges  such  as   pay revisions  and increases in the cost of fuel and revise  its tariffs from time to time.  This was done in 1975 and  1981. Thereafter,  the  Board took the view that to  avoid  making frequent   tariff   revisions   necessitated   by   frequent escalations  in the cost of fuels like coal and diesel  oil, the  formula  known as "fuel cost  adjustment"  be  evolved. Accordingly, the Board in its proceedings contained in  B.P. Ms.  No. 589 dated 30.7.1982, set out the formula  known  as "fuel  cost  adjustment".  This formula  was  introduced  as condition  No.   11  in H.T.  tariffs  Part-A.   Ever  since September  1982, all categories of H.T. consumers in  Part-A including the power intensive consumers are subject to  this condition.   Immediately  after  30.7.1982,  the  fuel  cost adjustment  was  fixed  as 2.74 paise per  unit,  which  was increased  gradually  to 2.95 paise, 3.79  paise  and  11.68 paise.   Thereafter, 3.79 paise was absorbed as part of  the tariffs applicable to these H.T. consumers and the remaining increase of 7.89 paise alone was indicated as the fuel  cost adjustment   charges.   The  grievance  made  by  all   H.T. consumers before the High Court was that: (1) the fuel  cost adjustment  could not be recovered as part of  the  tariffs; (2)  there is discrimination in recovering the  entire  fuel cost  adjustment  from H.T. consumers  alone;  (3)  fairness demands that a reasonable proportion of the burden should be shared  also  by Part-B consumers; and (4)  that  fuel  cost adjustment charge is excessively computed.      The High Court rejected all these contentions.  It held that this was a matter of policy which could be changed from time  to time and it was permissible to  gradually  withdraw the  pre-existing  concessional tariffs given to  the  power intensive industries for which the tariffs earlier were much lower as compared to the other consumers and even after  the increase  ,  they  were not excessive.   It  was  held  that electricity   was  a  raw  material  for   power   intensive industries  and  no  grievance could  be  made  against  the increase of its cost just as such a grievance was  untenable against increase in the cost of any other raw material.  The challenge  on the ground of discrimination was  rejected  on the  ground  that H.T. consumers including  power  intensive industries  formed  a separate class and  the  reason  which justified grant of concession to them earlier also justified the gradual withdrawal of that                                                        652 concession.  It held that prior consultation with the  State Electricity Consultative Council according to Section  16(5) of  the  Supply Act was not obligatory before  revising  the tariffs.   The High Court held that the Board was  justified in adjusting its tariffs to ensure progressive minimizing of losses  and the failure of the State Government  to  specify the surplus it could generate in accordance with Section  59

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of the Supply Act, did not detract from the Board’s power to adjust  its tariffs and generate a surplus on principles  of commercial   expediency  applicable  to  a  public   utility undertaking.  Fixation of tariffs was held to be a matter of major  policy  in  respect  of  which  the  Government   can effectively issue directions under Section 78-A of the  Act. It  was  held  that  the  H.T.  consumers  including   power intensive  industries  were bound to pay  according  to  the revised  higher  tariffs fixed from time to time  under  the agreement  as contemplated by Section 49 of the Supply  Act. The  condition  of  fuel  cost  adjustment,  introduced   as condition No. 11 in H.T. tariffs Part-A, was held applicable to  power intensive consumers also.  An additional  argument that  this  added  burden became unbearable  for  the  power intensive  consumers  was rejected on the ground  that  such inability  of  the industry to survive is not  a  compelling consideration for deciding the Board’s power in adjusting it  tariffs.   Accordingly, the High Court dismissed  the  writ petitions  and  upheld the revision of tariffs made  by  the Board  by the impugned B.P. Ms. No. 1014 (Commercial)  dated 13.12.1983 w.e.f. 15.1.1984.  The High Court having  refused to  grant a certificate of fitness to appeal to this  Court, the  appellants  have  preferred these  appeals  by  special leave.      It may be mentioned at this stage that the  controversy raised in these appeals was also the controversy in  another bunch  of  civil appeals arising out of a  judgment  of  the Kerala  High  Court  wherein a similar  challenge  had  been upheld and the Kerala State Electricity Board had come in an appeal  to this Court.  In those matters, the contention  of the  Kerala State Electricity Board which would be the  same as that of the Andhra Pradesh State Electricity Board before us,  was accepted and the judgment of the Kerala High  Court taking the view contrary to that of the Andhra Pradesh  High Court  was reversed (Kerala State Electricity Board v.  M/s. S.N.  Govinda Prabhu and Bros. and Others., [1986] 4  S.C.C. 198.)      All  the  hearing before us, it was contended  by  Shri Shanti Bhushan, learned counsel for the Andhra Pradesh State Electricity  Board that the Kerala decision concludes  these points  against the present appellants.  On the other  hand, Shri  G. Ramaswamy and other learned counsel, appearing  for the appellants, made an attempt to                                                        653 distinguish the decision in the Kerala case.  The  question, therefore,  is: Whether any ground has been made out by  the present  appellants to persuade us to take a view  different from the one taken by this Court in the Kerala case?  Before considering  the arguments in these appeals, we would  refer to  the controversies in the Kerala case and the view  taken therein.      The decision in Kerala State Electricity Board v.  M/s. Govinda  Prabhu  and Bros. and Others, [1986] 4  S.C.C.  198 arose  out  of the decision of the Kerala High  Court  in  a similar  situation.  The Kerala High Court struck  down  the upward  revision  of  tariffs  made  by  the  Kerala   State Electricity Board unlike the Andhra Pradesh High Court which has  upheld  the upward revision of tariffs in  the  present appeals.  The main question in the Kerala case also  related to  the extent of authority of the Kerala Board to  increase the  electricity tariffs under the Electricity (Supply)  Act 1948.  The principal ground of challenge which was  accepted by  the  Kerala  High  Court  was  that  the  Kerala   State Electricity  Board acted outside its statutory authority  by formulating a price structure intended to yield  substantial

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revenue  to  offset  not  merely  the  expenditure  properly chargeable   to  the  revenue  account  for  the   year   as contemplated  by  Section  59 of the  Supply  Act  but  also expenditure  not  so properly chargeable.  The  Kerala  High Court had held that in the absence of a specification by the Government, the Board was not entitled to generate a surplus at  all  and  it acted entirely outside  its  authority   in generating  a  surplus  to  be  adjusted  against  items  of expenditure not authorised to be met from revenue  receipts. this  view of the Kerala High Court  was based primarily  on the  construction  made  of section 59  of  the  Electricity (Supply)  Act,  1948.  Accordingly, the  Kerala  High  Court struck  down  the  upward revision of tariffs  made  by  the Kerala  State Electricity (Supply) Act, 1948.   Accordingly, the  Kerala  High Court struck down the upward  revision  of tariffs  made by the Kerala State Electricity Board  in  the years  1980, 1982 and 1984.  It may here be  mentioned  that Section 59 of the Supply Act, as it stood prior to 1978, was amended by Act No. 23 of 1978 and thereafter, by Act No.  16 of  1983,  which came into effect from April 1,  1985  only. The Kerala case also was decided on the basis of Section  59 as  it stood amended by the 1978 (Amendment) Act,  prior  to its  amendment w.e.f. April 1, 1985 by Act No. 16  of  1983. For our purposes also, Section 59 as it stood amended by the 1978 Act, prior to  the 1983  amendment, is relevant.      This Court expressly rejected the submission which  had found favour with the Kerala High Court that in the  absence of  a  specification by the State Government,  the  position would  be as it was before the 1978 amendment, that is,  the Board was to carry on its affairs and                                                        654 adjust  the tariffs in such a manner as not to incur a  loss and  no  more.  While rejecting the submission,  this  Court held as under:          "We  are  of  the  view that  the  failure  of  the          government  to  specify the surplus  which  may  be          generated  by  the Board cannot prevent  the  Board          from   generating  a  surplus  after  meeting   the          expenses required to be met.  Perhaps, the  quantum          of  surplus  may not exceed that a  prudent  public          service  undertaking  may be expected  to  generate          without sacrificing the interests it is expected to          serve and without being obsessed by the pure profit          motive of the private entrepreneur.  The Board  may          not  allow  its  character  as  a  public   utility          undertaking  to  be changed into that of  a  profit          motivated  private trading or manufacturing  house.          Neither  the tariffs nor the resulting surplus  may          reach  such  heights as to lead to  the  inevitable          conclusion  that  the  Board has  shed  its  public          utility character.  When that happens the court may          strike  down  the revision of  tariffs  as  plainly          arbitrary.   But  not  until  then.   Not,   merely          because  a  surplus has been generated,  a  surplus          which  can by no means be said to  be  extravagant.          The  court  will  then refrain  from  touching  the          tariffs.  After all, as has been said by this Court          often enough ’price fixation’ is neither the  forte          nor the function of the court." Further, it said:          "Turning  back to Section 59 and reading  it  along          with Section 49, 67, 67-A etc.  We notice that  the          Electricity  Supply  Act requires  the  Electricity          Board  to follow a particular method of  accounting          and it is on the basis of that method of accounting

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        that  the Board is required to generate a  surplus.          Broadly, Section 59 requires that a surplus  should          be  left  from the total revenues, in any  year  of          account,   after  meeting  all  expenses   properly          chargeable  to revenues.  It has to  be  remembered          that  apart from subventions which may be  received          from the State Government, which depend entirely on          the  bounty  of the government, the  only  revenues          available to the Board are the charges leviable  by          it  from consumers.  Bearing this in mind,  we  may          now consider what expenses are properly  chargeable          to revenues under the Electricity Supply Act.   For          this  purpose,  we may not be justified  in  having          recourse to the principles of corporate                                                        655          accounting  or  the rules which determine  what  is          revenue  expenditure under the Income Tax Act.   It          appears  to  us  that the  Electricity  Supply  Act          prescribes its own special principles of accounting          to be followed by the Board...."      This Court also held that the prescribing of  different tariffs for high and low tension consumers and for different classes  of  consumers,  such  as  industrial,   commercial, agricultural and domestic, appears to be reasonable and  far from   arbitrary  and  is  based  on  an   intelligent   and intelligible differentia.  Accordingly, the judgment of  the Kerala High Court upholding challenge to the validity of the upward revision of tariffs was set aside.      Broadly  speaking, the substance of the main  arguments advanced  before  us in these matters was repelled  by  this Court in the Kerala case.  However, learned counsel for  the appellants attempted to distinguish the Kerala decision  and also  tried to advance some additional arguments.  We  shall refer to those arguments presently.      It  would  be appropriate at this stage  to  quote  the relevant  provisions of the Electricity (Supply) Act,  1948, with  reference to which the arguments advanced have  to  be considered.  Section 2 of the act relates to  interpretation and  give  the meaning of the expressions  defined  therein. Section  3  deals  with  the  constitution  of  the  Central Electricity Authority.  Section 4-B contains the rule-making power of the Central Government.  Section 5 provides for the constitution  and composition of State  Electricity  Boards. Section  12  provides for the incorporation  of  the  Board. Section 12-A relates to the capital structure of the  Board. Section  78  contains  the rule-making power  of  the  State Government.   Section 79 contains the power of the Board  to make  regulations.  Some of the provisions of the Act  which may be quoted in extenso are as under:          "4A.  Directions  by  Central  Government  to   the          Authority.  (1) In the discharge of its  functions,          the Authority shall be guided by such directions in          matter  of policy involving public interest as  the          Central Government may give to it in writing.                (2) If any question arises as to whether  any          such  direction  relates  to  a  matter  of  policy          involving  public  interest, the  decision  of  the          Central Government thereon shall be final."          xxx                    xxx                      xxx                                                        656                 "16. State Electricity Consultative Council.          (1)  The State Government shall constitute a  State          Electricity Consultative Council for the State, and          in cases to which Section 6 and 7 apply, the  State          Government  concerned shall constitute such one  or

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        more  State  Electricity  Cousultative  Council  or          Councils  and  for  such  areas  as  they  may   by          agreement determine.                (2)   The  State   Electricity   Consultative          Council  shall consist of the members of the  Board          and,  if  there  are  any  Generating  Company   or          Generating  Companies operating in the  State,  one          representative of the Generating Company or each of          the  Generating Companies, to be nominated by  the          Generating   Company  concerned,  and  such   other          persons being not less than eight and not more than          fifteen  as  the  State  Government  or  the  State          Governments    concerned    may    appoint    after          consultation with such representatives or bodies of          representative  of the following interests  as  the          State Government or the State Governments concerned          thinks  or think fit, that is to say,  local  self-          government, electricity supply industry,  commerce,          industry,  transport, agriculture, labour  employed          in the electricity supply industry and consumers of          electricity,  but so that there shall be  at  least          one member  representing each such interest in  the          Council.                (3)  The  Chairman of the Board shall  be  ex          officio   Chairman   of   the   State   Electricity          Consultative Council.                (4)   The  State   Electricity   Consultative          Council  shall  meet at least once in  every  three          months.                (5)  The functions of the  State  Electricity          Consultative Council shall be as follows:-               (i)  To  advise the Board and  the  Generating               Company  or  Generating  Companies,  if   any,               operating  in the State on major  questions of               policy and major schemes;               (ii)  to review the progress and the  work  of               the  Board  and  the  Generating  Company   or               Generating Companies, if any, operating in the               State from time to time;                                                        657               (iii)  To consider such other matters  as  the               Board or the Generating Company or  Generating               Companies, if any, operating in the State  may               place before it; and               (iv)  To  consider such matters as  the  State               Government may by rules prescribe.               (6)  The  Board shall place before  the  State          Electricity   Consultative   Council   the   annual          financial statement and supplementary statement, if          any, and shall take into consideration any comments          made  on such statement in the said Council  before          submitting  the same to the State Government  under          Section 61."          xxx                    xxx                     xxx               "49. Provision for the sale of electricity  by          the  Board  to persons other  than  licensees.  (1)          Subject  to  the  provisions of  this  Act  and  of          regulations, if any, made in this behalf, the Board          may  supply electricity to any person not  being  a          licensee  upon  such terms and  conditions  as  the          Board  thinks fit and may for the purposes of  such          supply frame uniform tariffs.              (2)In  fixing  the uniform tariffs,  the  Board          shall  have regard to all or any of  the  following          factors, namely:-

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             (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.                                                        658               (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  terms  and          conditions for the supply of electricity, the Board          shall not show undue preference to any person."          xxx                   xxx                       xxx Section 59 prior to 1978                "General principles for Board’s finance.  The          Board  shall not, as far as practicable  and  after          taking  credit for any subventions from  the  State          Government   under   Section  63,  carry   on   its          operations  under  this Act at a  loss,  and  shall          adjust its charges accordingly from time to time:                Provided that where necessary any amounts due          for   meeting   the  operating,   maintenance   and          management  expenses  of  the  Board  or  for   the          purposes of clauses (i) and (ii) of Section 67 may,          to  such extent as may be sanctioned by  the  State          Government, be paid out of capital." Section 59 as amended by Act No. 23 of 1978          "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  operations 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          loans, leave such surplus, as the State  Government          may, from time to time, specify.                (2)  In  specifying the  surplus  under  sub-          section (1),                                                        659          the  State Government shall have due regard to  the          availability   of   amounts  accrued  by   way   of          depreciation    and   the   liability   for    loan          amortization and leave.               (a) a reasonable sum to contribute towards the               cost of capital works; and               (b)   where  in  respect  of  the   Board,   a               notification has been issued under sub-section               (1)  of Section 12-A, a reasonable sum by  way               of return on the capital provided by the State

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             Government  under  sub-section  (3)  of   that               section  and the amount of the loans (if  any)               converted by the State Government into capital               under sub-section (1) of Section 66A." Section 59 as further amended by Act No. 16 of 1983               "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 operations 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 loans, 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 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  consumers’          contribution for service lines.                (2) In specifying any higher percentage under          sub-section  (1), the State Government  shall  have          due regard to                                                        660          the  availability  of  amounts accrued  by  way  of          depreciation    and   the   liability   for    loan          amortization and leave-               (a) a reasonable sum to contribute towards the               cost of capital works; and               (b)   where  in  respect  of  the   Board,   a               notification has been issued under sub-section               (1)  of Section 12-A, a reasonable sum by  way               of return on the capital provided by the State               Government  under  sub-section  (3)  of   that               section  and the amount of the loans (if  any)               converted by the State Government into capital               under sub-section (1) of Section 66-A."          xxx                      xxx                    xxx               "61.  Annual  financial  statement.  -(1)   In          February of each year the Board shall submit to the          State Government a statement in the prescribed form          of  the estimated capital and revenue receipts  and          expenditure for the ensuing year.                (2)  The  said  statement  shall  include   a          statement  of the salaries of members and  officers          and other employees of the Board and of such  other          particulars as may be prescribed.                (3) The State Government shall as soon as may          be after the receipt of the said statement cause it          to  be  laid on the table of the House, or  as  the          case  may be, Houses of the State Legislature;  and          the  said  statement shall be  open  to  discussion          therein, but shall not be subject to vote.                (4)  The Board shall take into  consideration          any  comments  made on the said  statement  in  the          State Legislature.

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              (5) The Board may at any time during the year          in  respect of which a statement under  sub-section          (1)  has  been  submitted,  submit,  to  the  State          Government  a supplementary statement, and all  the          provisions  of  this section shall  apply  to  such          statement as they apply to the statement under  the          said sub-section."          xxx                     xxx                     xxx                                                        661          "63. Subventions to the Board.-The State Government          may,  with the approval of the  State  Legislature,          from  time  to time make subventions to  the  Board          for  the  purposes of this Act on  such  terms  and          conditions as the State Government may determine."          XXX                    XXX                      XXX          "65.  Power of Board to borrow.-(1) The Board  may,          from  time to time, with  the previous sanction  of          the State Government and subject to the  provisions          of  this  Act and to such  conditions,  as  may  be          prescribed in this behalf, borrow any sum  required          for the purposes of this Act.          (2)  Rules  made by the State  Government  for  the          purposes  of this section may empower the Board  to          borrow  by  the  issue of debentures  or  bonds  or          otherwise  and to make arrangements  with  bankers,          and may apply to the Board with such  modifications          as may be necessary to be consistent with this Act,          the provisions of the Local Authorities Loans  Act,          1914 (9 of 1914), and the rules made thereunder  as          if the Board were a local authority.           (3) The maximum amount  which the Board may at any          time  have on loan  under sub-section (1) shall  be          ten crores of rupees, unless the State  Government,          with   the  approval  of  the   State   Legislative          Assembly, fixes a higher, maximum amount.           (4) Debentures or bonds issued by the Board  under          this  section shall be issued,  transferred,  dealt          with  and  redeemed  in  such  manner  as  may   be          prescribed."          XXX                     XX                     XXX          "67.  Priority  of liabilities  of  the  Board.-The          Board  shall  distribute the  surplus  referred  to          in  sub-section  (1) of section 59  to  the  extent          available  in  a particular year in  the  following          order, namely:-                (i) repayment of principal of any loan raised                (including redemption of debentures or  bonds                issued)  under Section 65 which  becomes  due                for payment in the                                                        662                year  or which became due for payment in  any                previous year and has remained unpaid;                (ii)  repayment  of  principal  of  any  loan                advanced to the Board by the State Government                under  Section   64  which  becomes  due  for                payment  in the year or which became due  for                payment in any previous year and has remained                unpaid;                (iii) payment for purposes specified in  sub-                section  (2) of Section 59 in such manner  as                the Board may decide.                67-A.  Interest  on loans advanced  by  State                Government  to  be  paid  only  after   other                expenses.-  Any interest which is payable  on                loans advanced under Section 64 or deemed  to

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              have  been advanced under Section 60  to  the                Board  by the State Government and  which  is                charged to revenues in any year may be   paid                only  out of the balance of the revenues,  if                any, of that year which is left after meeting                all  the other expenses referred to  in  sub-                section (1) of Section 59 and so much of such                interest as is not paid in any year by reason                of  the provisions of this section  shall  be                deemed to be deferred liability and shall  be          discharged   it, accordance  with  the   provisions          of   this  section  in  the  subsequent   year   or          year, as the case may be.                68. Charging of depreciation by Board-(1) The                Board    shall   provide   each   year    for                depreciation    such   sum   calculated    in                accordance   with  such  principles  as   the                Central  Government may,  after  consultation                with  the Authority, by notification  in  the                Official Gazette, lay down  from time to time.                (2) Omitted                (3)  The  provisions of  this  section  shall                apply  to the charging of   depreciation  for                the  year in which the  Electricity  (Supply)                Amendment Act, 1978, comes into force."                XXX XXX XXX                "68-A.  Directions by the State  Government.-          (1) In                                                        663          the discharge of its functions, the Board shall  be          guided by such directions on questions of policy as          may be given to it by the State Government.              (2) If any dispute arises between the Board and          the State Government as to whether a question is or          is  not a question of policy, it shall be  referred          to  the Authority whose decision thereon  shall  be          final.’’     We shall first consider the common arguments advanced by the learned counsel for the appellants in all these  matters before taking up some additional arguments advanced in  some of these matters.     The   first   argument  is  that  the   requirement   of consultation with the State Electricity Consultative Council before the revision of tariffs in accordance with Section 16 of  the  Electricity (Supply) Act, 1948,   not  having  been made,  the upward revision of tariffs is invalid on  account of  non-compliance of Section 16 of the Supply Act.  It  was urged  that  revision of tariffs being a major  question  of policy  as  envisaged by clause (i) of Sub-section  (5)   of Section  16, it is one of the functions of the  Consultative Council  to  advise the Board on this question  and  without such  advice  of the Consultative Council, the  revision  in tariffs could not be made. It was argued that the consumers’ interest is also represented on the Consultative Council  as indicated by Sub-section (2) of Section 16 providing for its constitution,  and therefore, it was necessary to  know  the viewpoint  of the consumers through their representative  in the  Consultative  Council before deciding  upon  an  upward revision of the tariffs for H.T. consumers. Though the Board may not be bound by the advice  of the Consultative Council, yet  it was urged, such consultation with the Council was  a condition  precedent. It was suggested that Section 16  must be read with Section 61 of the Supply Act which requires the Board to submit to the State Government the annual financial statement in February each year.

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   It is unnecessary in the present case to decide  whether the  revision  of tariffs falls within the ambit  of  ‘major questions  of policy’ occurring in Section 16(5)(i)  of  the Supply Act since the arguments from both sides proceeded  on the  basis that revision of tariffs for the purpose of  this case  may  be  treated  as  a  ‘question  of  policy’  which expression  finds place also in Section 78-A of  the  Supply Act.  The  question,  therefore,  reduces  itself  to  this: Whether the  failure of the Board to place the matter before and  seek  the advice of the Consultative  Council  on  this question renders the revision of tariffs made by it                                                        664 invalid?  The  common premise for the purpose of  this  case that  revision  of  tariffs by the Board is  a  question  of policy   may  indicate  that  it  would  be  open   to   the Consultative  Council  to  advise the   Board  also  on  the question  of  revision  of tariffs, and if  such  advice  is given,  then the Board must consider the same before  taking the final decision. That, however, does not necessarily mean that  where no such advice was taken from  the  Consultative Council  or was rendered on account  of the absence  of  any meeting  of  the Consultative Council  during  the  relevant period, it would necessarily render invalid the revision  of tariffs made by the Board. The consequence of non-compliance of Section 16 is not provided and the nature of function  of the  Consultative Council and the force of its advice  being at the best only persuasive. it cannot be said that revision of  tariffs without seeking the advice of  the  Consultative Council renders the revision of tariffs invalid. It is  also significant  that the annual financial statement  containing all particulars relating to revision of tariffs is  required to  be  submitted to the State Government in  February  each year  and the State Government is required after receipt  of such  statement to cause it to be laid on the table  of  the House  or  Houses  of the State  Legislature  and  the  said statement is open to discussion therein. The Board is  bound to  take  into consideration any comments made on  the  said statement  in  the State Legislature. Thus, there  is  ample provision for discussion on the revised tariffs in the State Legislature  with  the  Board  being  bound  to  take   into consideration any comments made thereon.     Shri Shanti Bhushan sought to make a distinction between the  provisions of sub-section (5) of section 16  pertaining to the functions of the ‘Consultative Council’ empowering or enabling the Council to advice the Board on ‘major questions of  policy’ and the provision in sub-section (6) as  to  the obligation of the Board to place certain matters before  the ‘Council’  to emphasise his point that sub-section (6)  does not  envisage any obligation on the part of the  ‘Board’  to place  before  the  Council the  proposal  for  revision  of tariffs.  He sought to distinguish between the functions  of the  ‘Council’  to tender advice and the obligation  of  the Board  to  specifically seek and invite  such  advice.  Shri Shanti  Bhushan said that the very concept  of  consultation does  imply mandatory obligation or duty attaching the  pain of nullity to the transaction.     Provisions  of  the  Electricity  Act  1947  in  England contain  certain  express statutory stipulations as  to  the scope of the Consultative Council’s functions which do  not, in  terms,  obtain  in the  Indian  statute.  For  instance, Section 7 of the English Act which contemplates                                                        665 the  establishment  of ‘Consultative  Council’  specifically provides in Section 7(4) :          ‘‘(4)  Each of the said Councils shall  be  charged

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        with the duties-          (a)   of  considering  any  matter  affecting   the          distribution of electricity in the area,  including          the  variation of tariffs and the provision of  new          or  improved  services and  facilities  within  the          area, .............          (b) xxx        xxx       xxx          (c)   of  considering  any  matter  affecting   the          variation of any tariff regulating the charges  for          the  provision of bulk supplies of  electricity  by          the Generating Board for distribution in the  area,          being  a  matter which is either the subject  of  a          representation  made to them by consumers or  other          persons  requiring supplies of electricity  in  the          area,  or which appears to them to be a  matter  to          which  consideration ought to be given  apart  from          any   such   representation,   and,   where   after          consultation with the Area Board action appears  to          them  to  be requisite as to any  such  matter,  of          notifying  their  conclusions  to  the   Generating          Board;          (d) xxx        xxx        xxx          (rest of the Section omitted as unnecessary)     Section 37(1) of the English statute again provides:          ‘‘37 Fixing and variation tariffs          (1)  The  prices to be charged  by  the  Generating          Board for the supply of electricity by them to Area          Boards shall be in accordance with such tariffs  as          may  be fixed from time to time by  the  Generating          Board  after  consultation  with  the   Electricity          Council;  the  different tariffs may be  fixed  for          different Area Boards.’’          (rest of the Section omitted as unnecessary) The pattern of the provisions in the Indian statute is quite different.                                                        666 The  ‘laying procedure’ before the  legislature  effectively controls  the exercise of the delegated power of the  Board. We  are of the opinion that though advisable yet failure  to seek  advice of the Consultative Council before revision  of the  tariffs does not result in invalidation of the  revised tariffs.  This consequence appears to us to be  the  logical and reasonable view to take of the requirement of Section 16 along with other provisions of the Supply Act.     One  of  the  arguments addressed at  length  before  us relates  to Section 78-A of the Supply Act. It was urged  on behalf  of  the appellant that any direction  of  the  State Government  relating to tariffs was on a question of  policy within  the meaning of Sub-section (1), and, therefore,  the Board  is  bound  by  such direction  subject  only  to  the adjudication, if any, in accordance with Sub-section (2), if any  dispute is raised by the Board in that behalf.  It  was urged  that  in the present case the Board  was,  therefore, bound by the directions of the State Government granting the concession  to  the  power  intensive  consumers  since   no dispute   was  raised by the Board in accordance  with  Sub- section (2), of Section 78-A. Learned counsel for the  Board did not for the purpose of this case, dispute this position, but  contended that all directions of the  State  Government were obeyed by the Board and, therefore,  the  question does not  really  arise. The Board’s contention is  that  it  has acted  according to the directions of the  State  Government and, therefore, the question of non-compliance with any such directions giving rise to the argument based on Section 78-A does not arise.

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   For  consideration  of  the  main  controversy,  it   is advisable  at this stage to deal with Sections 49 and 59  of the  Supply Act. Section 49 makes provision for the sale  of electricity  by the Board to persons other  than  licensees. Sub-section  (1)  starts  with the  words  ‘Subject  to  the provisions  of this Act and of regulations, if any, made  in this behalf’. This means that the provision made therein  is subject  to  other  provisions of the  Supply  Act  and  the regulations.  It  then proceeds to say that  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  supply  frame  ‘uniform tariffs’.  Sub-section  (2) then enumerates several  factors which  the Board is required to ‘have regard to’  in  fixing the  uniform  tariffs. The meaning of the  expression  ‘have regard  to’  is  well-settled. It  means  that  the  factors specifically  enumerated shall be taken into  account  while performing  the exercise which in this case is the  fixation of  uniform tariffs. Ordinarily, therefore, uniform  tariffs are  required  to  be framed by the Board  for  making  such supply. Sub-section (3) then proceeds to                                                        667 say  that  nothing in the earlier enacted  provisions  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’, 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’. Sub-section (4) then says that in  fixing the  tariffs  and  terms and conditions for  the  supply  of electricity,  ‘the Board shall not show undue preference  to any  person’.  In  other  words,  Sub-section  (4)  provides against  any  unreasonable  discrimination  in  fixing   the tariffs and terms and conditions for supply of  electricity. The power of fixation of tariffs in the Board is provided in this  manner by Section 49 of the Supply Act which  requires the  fixation  of uniform tariffs ordinarily  having  regard particularly  to the specified factors and enables  fixation of such tariffs for any person having regard to the  factors expressly  stated and any other relevant factors,  providing further  that no unreasonable or undue preference  shall  be shown  to any person by the Board in exercise of its  powers of fixing the tariffs.     The next important provision is Section 59 of the Supply Act.  For appreciating the argument based on Section 59,  it is  necessary to bear in mind the distinction in Section  59 as it stood prior to 1978, as amended by Act No. 23 of  1978 and  finally  as  amended  by Act No.  16  of  1983,  quoted earlier.     Prior to 1978, Section 59 required the Board, as far  as practicable and after taking credit for any subventions from the  State Government under Section 63, not to carry on  its operations under this ACt at a loss and for this purpose, it was  empowered to adjust its charges accordingly from   time to  time. Under the  provision as it then existed, the  main thrust  was to avoid the Board incurring  any loss  and  for that  purpose, it could adjust its charges accordingly  from time  to time. Section 59 as amended by Act No. 23  of  1978 required the Board, after taking credit for any  subventions from the State Government under Section 63, to carry on  its operations under this Act and to adjust its tariffs so as to ensure  that  the  total revenues in any  year  meeting  all expenses  properly  chargeable to  revenue  including  those specified,  left  such  surplus  as  the  State   Government specified  from  time to time.  The  shift  was,  therefore,

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towards  having a surplus as the State Government  specified from   time   to  time.  Sub-section   (2)   then   provided guidelines   for  the  State Government  in  specifying  the surplus under Sub-section  (1) and mentioned the factors  to which regard was to  be had for this  purpose. The effect of the  amendment  made in Section 59 by Act No.  16  of  1983, which came into effect from 1.4.1985, was to provide for a                                                        668 minimum surplus of three per cent or such higher  percentage as  the  State Government is to specify in this  behalf.  In other  words, prior to 1978 amendment, the requirement  from the  Board was to avoid incurring any loss, after  the  1978 amendment  the  shift  was towards  ensuring  a  surplus  as specified  by  the  State Government, and  after   the  1983 amendment  the Board is required to ensure a surplus  of  at least three per cent unless the State Government specifies a higher  surplus. This is the scheme of Section 59 and it  is Section 59 as amended by 1978 Act but prior to its amendment by the 1983 Act, with which we are concerned in the  present case.     It cannot be doubted that Section 59 requiring the Board to adjust its tariffs for the purpose of Board’s finance  is to be read along with Section 49 which provides specifically for  fixation  of  tariffs  and the  manner  in  which  that exercise has to be performed while dealing with any question relating to the revision of tariffs.     It  was argued on behalf of the appellants that  Section 59  as amended by the 1978 Act did not empower the Board  to adjust  its  tariffs  to generate  any  surplus  unless  the surplus had been specified by the State Government and  when specified,  the  surplus  generated  could  not  exceed  the specified  surplus. In other words, it was argued that  when the State Government did not specify any surplus, the  Board had  no  power  to  adjust its tariffs  in  a  manner  which resulted  in  generating  any  surplus.  We  are  unable  to construe  Section 59 in this manner. The  general  principle for  the  Board’s finance indicated by Section  59  is  that prior  to the 1978 amendment, tariffs could be  adjusted  to avoid  any  loss, but as a result of the shift made  by  the 1978  amendment, the power could be exercised to generate  a surplus  and when the State Government specified the  amount of surplus then the Board was bound to adjust the tariffs to ensure   generation  of  the  specified  surplus.   However, generation  of a reasonable surplus in any year  of  account without  specification  of the surplus amount by  the  State Government   was  not  contra-indicated  in  the   provision inasmuch as the duty to generate a surplus was implicit with the  added  obligation to ensure generating surplus  to  the extent  specified  by the State Government when  it  was  so specified by the State Government. It cannot be accepted  as a  reasonable view that in the absence of  specification  of the  surplus  by the State Government, the Board  could  not adjust its tariffs to generate even a reasonable surplus  in any  year of account.  The effect of 1983  amendment,  which came into force from 1.4.1985, is that the Board is entitled to adjust its tariffs to ensure generating a surplus of  not less than three per cent even without such specification                                                        669 by  the  State  Government and  when  the  State  Government specifies   a  higher surplus, then the  Board  must  ensure generating the higher specified surplus. This is, of course, subject  to  the  accepted  norm  of  the  Board  acting  in consonance  with  its  public  utility  character  and   not entirely with a profit motive like that of a private trader. The  pre-1978 concept of the Board’s functioning  to  merely

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avoid any loss is replaced by the shift after 1978 amendment towards  the positive approach of requiring a surplus to  be generated,  the  quantum of surplus being specified  by  the State  Government, with a minimum of three per cent  surplus in  the absence of the specification by the Government of  a higher surplus, after the 1983 amendment. This  construction made  of  Section  59, as it stood  at  different  times  in Govinda  Prabhu’s case (supra) indicated earlier, cannot  be faulted in any manner. In Govinda Prabhu’s case (supra)  the same  argument  which is advanced before  us  was  expressly rejected. We are of the  same view.     It  is  ,  therefore, obvious that  mere  generation  of surplus  by the Board as a result of adjusting  its  tariffs when  the quantum of surplus has not been specified  by  the State  Government after the 1978 amendment of Section 59  of the  Supply  Act, cannot invite any criticism unless  it  is further shown that the surplus generated as a result of  the adjustment  of  tariffs  by the Board has  resulted  in  the Board  acting  as a private trader shedding off  its  public utility character. In other words, if the profit is made not merely for the sake of profit, but for the purpose of better discharge of its obligations by the Board, it cannot be said that  the public enterprise has acted beyond  it  authority. The  Board  in the present case has shown that  the  surplus resulting from upward revision of tariffs applicable to  the H.T. consumers made in the present case, was for the purpose of  better  discharge  of its other  obligations  under  the Supply  Act  and  in effect, it has  merely  resulted  in  a gradual  withdrawal  of the  concessional  tariffs  provided earlier to the power intensive consumers which do not in its opinion require continuance  of the concessional tariffs any longer.  In fact, no material has been placed before  us  to indicate  that this assertion of the Board is  incorrect  or there  is  any  reasonable basis to  hold  that  the  upward revision  of tariffs applicable to H.T. consumers is  merely with  a desire  to earn more profits like a  private  trader and not to generate surplus for utilisation  of the funds to discharge other obligations of the Board towards more  needy consumers,  such  as agriculturists or to meet the  need  of expansion  of  the supply to deserving areas.  The  argument with  reference  to statistics that the upward  revision  of tariffs  for the H.T. consumers  results in earning  amounts in  excess  of the cost of generation does  not,  therefore, merit a more detailed consideration.                                                        670     It  was  also  contended on  behalf  of  the  appellants that  the  generation of electricity by the  Andhra  Pradesh Electricity   Board  is both thermal as well as  hydro,  the quantity from each source being nearly equal and the  entire electricity generated is fed into a common grid, from  which is  supplied to all categories of consumers. On this  basis, it  was argued that the rise in the  fuel cost which led  to the  fuel  cost  adjustment  applicable  only  to  the  H.T. consumers  was  unreasonable  and discriminatory  since  the burden  of  rise in fuel cost was placed only  on  the  H.T. consumers.  In our opinion, this argument has no merit.  The H.T. consumers, including the power intensive consumers, are known  power  guzzlers and in  power  intensive  industries, electricity  is  really  a raw material.  This  category  of consumers,  therefore, forms a distinct class separate  from other  consumers  like L.T. consumers who are  much  smaller consumers.   There  is  also  a  rational  nexus   of   this classification  with  the  object  sought  to  be  achieved. Moreover,  the power intensive consumers have been  enjoying the  benefit of a concessional tariff for quite  some  time,

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which   too   is   a  relevant  factor   to   justify   this classification.  Placing the burden of fuel cost  adjustment on these power guzzlers, who had the benefit of concessional tariff  for quite some time and have also a better  capacity to pay, cannot, therefore, be faulted since the  consumption in  the  power  intensive industries accounts  for  a  large quantity.      Shri   Sibal  submitted  that  the   prescription   and imposition of disparate tariffs, unrelated to the production cost,  on a particular section of consumers would be a  case of  misplaced  philanthrophy on the part  of  the  statutory authority.   The  Board,  Shri Sibal says,  cannot  use  its powers  in order to confer  "social or economic benefits  on particular  sections  of the community" at the cost  of  the other  sections.  Shri Sibal contended that while it may  be permissible  for  the  Board to supply  electricity  to  the weaker  and  under-privileged  sections of  the  society  at prices  which  may  even be  lower  than  the  costs  of generation  and  distribution, however  subsidies  for  such social objectives must come from subventions from Government and should not be made good by unjustifiable higher  charges on other sections of electricity consumers. Shri Sibal  read to  us  the following passage in Wade’s  Administrative  Law (6th Edn.):          "Statutory  authorities have sometimes made use  of          their wide general powers in order to confer social          or economic benefits on particular sections of  the          community.   In several such cases they  have  gone          beyond the true limits of their powers.  The policy          of the courts is in general hostile to the                                                        671          use of public funds, such as rates, for new  social          experiments.   Local authorities are subject  to  a          fiduciary  duty  to  use their  revenues  with  due          restraint."                                            (at     p. 424) After  referring to decided cases on the point, the  learned author says:          "... The idea that runs through these cases is that          public    money   must   be    administered    with          responsibility  and  without  extravagance.    This          appears to mean it is not available for charity.           The   generosity   of   local   authorities,    in          particular, is restrained by the doctrine that they          owe a fiduciary duty to their ratepayers  analogous          to that of trustees.  This means that, in  deciding          upon  their expenditure, they must hold  a  balance          fairly  between the recipients of the  benefit  and          the ratepayers who have to bear the cost."                                                   (at p.426) Shri  Sibal contends that in the case of class of  consumers respecting which the tariff is enhanced, the enhancement  is not  justified  on  the ground of making good  the  loss  on supply  to  others  at  cheaper  rates.   The  increase   is attributable to higher costs of generation of thermal power.  It  is not unreasonable to take the view that  the  thermal power has become costlier on account of the increase in fuel cost and could nationally be allocated to the consumption by H.T. and power intensive consumers, and, therefore, the fuel cost  adjustment is made applicable to them alone.   In  our opinion, the argument on behalf of the Board in this  behalf is not unreasonable.      It  was  argued  on  behalf  of  the  appellants   with considerable  force that the upward hike of tariff  for  the H.T.  consumers including power intensive was arbitrary  and

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discriminatory  inasmuch as it was not  related to the  cost of  generation and was based on irrelevant factors.  It  was argued that the L.T. tariffs and agricultural  tariffs  were relieved  of  this burden and the liabilities of  the  Board even  of  a  capital  nature were  taken  into  account  for increasing  the tariff applicable to power intensive  units. The  contention is that these factors are irrelevant and  do not  permit exercise of the power to increase  the  tariffs. This arguments was considered at length in Govinda  Prabhu’s case before it was                                                        672 negatived.  We agree with the reasons given in that decision to repel this contention.  In Govinda Prabhu, it was pointed out  that  the Court would not strike down the  revision  of tariff  as  arbitrary unless the resulting  surplus  reaches such a height as to lead to the inevitable decision that the Board has shed its public utility character and is  obsessed by  the  profit motive of private entrepreneur in  order  to generate a surplus which is extravagant.  The limited  power of  judicial review in the field of price fixation was  also indicated.   This  limited  scope  of  judicial  review   in striking down revision of tariffs resulting in generation of surplus applied in Govinda Prabhu cannot be faulted in  view of the long line of decisions of this Court on the point and reiteration of the same principle by a Constitution Bench in Shri Sitaram Sugar Company Limited and Another. v. Union  of India  and  Others,  [1990]  3  S.C.C.  223.   The   surplus generated  by the Board as a result of revision  of  tariffs during  the relevant period cannot be called extravagant  by any standard to render it arbitrary permitting the  striking down   of  the  revision  of  tariffs  on  the   ground   of arbitrariness. We have already indicated that it is not also discriminatory as was the view taken in Govinda Prabhu.   It has been pointed out on behalf of the Board that the Board’s action  is based on the opinion of Rajadhyaksha  Committee’s Report  submitted  in  1980 and the  formula  of  fuel  cost adjustment  is on a scientific basis linked to the  increase in  the  fuel cost.  This is a possible view  to  take  and, therefore,  the  revision of tariffs by the Board  does  not fall within the available scope of judicial review.      One of the contentions of Shri G. Ramaswamy, on  behalf of the appellant was that the G.Os. issued in respect of the power intensive units amounted to a special tariff for  them resulting  in  their  exclusion from the  category  of  H.T. consumers  and, therefore, the clause relating to fuel  cost adjustment inserted by amendment to the H.T. tariffs did not apply to the power intensive consumers without insertion  of a  similar clause in the special tariff applicable to  them. It  was  urged  that for this  reason  the  power  intensive consumers  could not be governed by the clause of fuel  cost adjustment made applicable to H.T. tariffs.  Shri  Ramaswamy advanced  elaborate  arguments  to  distinguish  "terms  and conditions of supply" from "terms and conditions of tariff". According  to  the learned counsel, B.P. Ms. No.  778  dated 18.10.1975   excluded   the  power  intensive   units   from applicability of the Notification date 17.9.1975 to it.   It is unnecessary to repeat the history of the H.T. tariffs  by which  power intensive tariffs were separated.  It would  be sufficient in this context to quote the relevant portion  of Memo. dated 18.11.1975 which, in our opinion, negatives this argument.   It  was provided in this Memo.,  inter  alia  as under:                                                        673          "With   regard   to   other   charges,   such    as          Miscellaneous  charges,  terms  and  conditions  of

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        supply,  not mentioned specifically  herein,  those          applicable to normal  H.T. consumers will apply".      The  expression  "other  charges"  is  wide  enough  to include within its ambit the fuel cost adjustment admittedly made  applicable  to all H. T.consumers as a result  of  the escalation  in  fuel  prices.  The  method  adopted  was  to prescribe a formula linking it to the increase in fuel  cost so that it was not necessary to revise the tariffs each time as a result of increase in fuel prices, the same being taken care of by the relevant factors in the formula for fuel cost adjustment.   It  was in this context  that  Shri  Ramaswamy contended  that  the ‘terms and conditions  of  supply’  are different from the ‘terms and conditions of tariff’ and fuel cost adjustment being a term or condition of tariff and  not a  term or condition of supply, the above provision  in  the Memo  dated 18.11.1975 did not have the effect  of  applying the  term  relating  to fuel cost adjustment  to  the  power intensive  tariff.  It is sufficient to state that the  Memo dated  18.11.1975 did not merely extend  the   non-specified ‘terms  and conditions of supply’ applicable to normal  H.T. consumers  to the power intensive consumers but also  "other charges"   which  were  merely  illustrated  by  the   words following,  namely,  "such  as  Misc.  charges,  terms   and conditions of supply not mentioned herein".  In other words, this express provision in the Memo, dated 18.11.1975 clearly provided  that except for the provisions  specifically  made for  power  intensive  consumers, in respect  of  all  other provisions the power intensive consumers were to be governed by  the provisions, by whatever name called,  applicable  to the  normal  H.T. consumers.  A further discussion  of  this distinction  sought to be made by Shri G. Ramaswamy  of  the ‘terms  and conditions of supply’ and ‘terms and  conditions of tariff’ is, therefore, unnecessary.  Shri Ramaswamy  also urged  that there was no communication to the  appellant  of the  applicability  of  the  term  relating  to  fuel   cost adjustment  during the relevant period which  also  relieves the  power  intensive consumers of this liability.   On  the view  we have already taken about the applicability  of  the term relating to fuel cost adjustment to the power intensive tariffs  this point is not material.  However, it  has  also been  shown that in the bills issued to the power  intensive consumers  the  same  was specifically  indicated.   If  any communication  was  needed,  this indication  in  the  bills issued  to  the  power intensive  consumers  satisfied  that requirement.    We  are,  therefore, unable  to  accept  the contention  that the term relating to fuel  cost  adjustment made applicable to H.T. consumers                                                        674 had  no application to the power intensive consumers  during the relevant period.      Shri  Kapil  Sibal appearing on behalf of some  of  the appellants  confined the  challenge to the mode of  exercise of power by the Board.  He laid great emphasis on the effect of  absence of consultation with the Consultative  Committee under Section 16 of the Electricity (Supply) Act, 1948.   He also  claimed that the quantum of increase could at best  be justified  only to the extent of one-half and no more.  Shri Sibal claimed that certain extraneous factors had been taken into  account for the purpose of revising the tariffs.   The irrelevant  considerations, according to Shri  Sibal,  taken into account are the capital sums owed by the Board and  the overall losses incurred by the Board which according to  him is  impermissible  under  Section  59  of  the   Electricity (Supply)  Act.  He also argued that the upward  revision  of H.T.  tariffs  is intended to  subsidise  another  class  of

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consumers  which  is  not permissible.   His  arguments  are already  covered by our earlier discussion.  Similarly,  the arguments  of Shri K.N. Bhat, for the appellant in C.A.  No. 5379 of 1985 to the same effect, need to further discussion. The  details of the several factors taken into  account  for the  revision in tariffs, to the limited extent they can  be gone into within the permissible scope of judicial review in such a matter also do not require any further consideration.      Shri Anil Divan, on behalf of the appellant in C.A  No. 2569 of 1985, submitted that the increase in tariffs for the power intensive unit in his case was 47 per cent as  against 15 per cent for ordinary H.T. consumers.  According to  him, even  ignoring the FCA, the increase is 40 per cent from  32 paise  to  45   paise.  This is disputed on  behalf  of  the Board.   In our opinion, it is unnecessary to go  into  this question  any further for the reasons already given  by  us. Shri Divan also contended that the Electricity Board’s stand has  been conflicting at different stages.  In our  opinion, any detailed decision on this aspect also is unnecessary  on the  view  taken  by us about the Board’s  power  to  revise tariffs, no case for striking down the same as arbitrary and discriminatory having been made out.  In view of the earlier decision   of  this  Court  in  Govinda  Prabhu,  with   the conclusion  as  well as reasoning of which  we  respectfully concur  and  reiteration  of the Court’s  limited  power  of judicial  review  in  Shri  Sitaram  Sugar  Company  Limited recently decided by a Constitution Bench, we do not find any reason to accept any of the arguments advanced on behalf  of the  appellants  by their learned counsel.   In  fact,  the decision in Govinda Prabhu con-                                                        675 cludes  the  controversy  against the  appellants  and  some detailed  discussion  by  us has become  necessary  only  on account  of  an  attempt  on behalf  of  the  appellants  to distinguish  the  decision and the emphasis  placed  on  the requirements  of Sections 16, 49 and 59 of  the  Electricity (Supply) Act.      We  find  no  merit  in  these  appeals/special   leave petition and the same are dismissed.  All interim orders  in favour of the appellants/petitioner stand vacated. No costs. R.P.                                      Appeals dismissed.                                                        676