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PETITIONER: INDIAN ALUMINUM COMPANY ETC.

       Vs.

RESPONDENT: KERALA STATE ELECTRICITY BOARD

DATE OF JUDGMENT23/07/1975

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. ALAGIRISWAMI, A. GOSWAMI, P.K.

CITATION:  1975 AIR 1967            1976 SCR  (1)  70  1975 SCC  (2) 414  CITATOR INFO :  R          1976 SC 127  (12,14,16,17)  R          1976 SC2414  (33)  R          1982 SC 149  (1095)  D          1986 SC1126  (13,24,25,26,33,34,40,41,45,47  D          1988 SC1989  (12)  R          1989 SC 268  (12, TO, 17,27,28)  RF         1992 SC1033  (15)  RF         1992 SC2169  (12)

ACT:      Electrieity Supply  Act (54 of 1948) Ss. 49, 57, 59 and 79(j)-Scope of.      Power of  public authority   to  fetter its discretion- scope of      Delegated legislation  -No power  to enhance charges in Act-If delegate  can d by . framing regulation      Interpretation of statutes-Marginal Note use of

HEADNOTE:      Under s.  49(1) and  (2) of the Electricity Supply Act, 1948, the  legislature has  empowered the  State Electricity Board to  frame uniform  tariffs and  has also Indicated the factors to  be taken  into account in fixing uniform tariffs Under.  sub-s.   (3),  the   Board  may,   in  the   special circumstances mentioned  therein, fix  different tariffs for the supply  of electricity,  but, in  doing so,  sub-s.  (4) directs that  the Board  is not  to show undue preference to any person.  Under s.  59 the  Board shall  not, as  far  as practicable carry  on its  operations at  a loss  and  shall adjust its charges accordingly from time to time.      Certain  consumers  of  electricity  had  entered  into agreements  for   the  supply   of  electricity   for  their manufacturing purposes  at  specified  rates  for  specified periods .  Some of the agreements were entered into with the State Governments  and the others with the State Electricity Boards. In  one of  the agreements  there was an arbitration clause. On  account of  the increase  in the  operation  and maintenance cost, due to various causes which caused loss to the State  Electricity Boards, the Boards wanted to increase the charges  in all  the cases. the consumers challenged the competency of  the Boards  to do  so by   petitions  in  the

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respective High  Courts. The High Court sustained the Boards claim, in  some cases,  under Ss.  49 and 59, and in others, held that the Board was incompetent to do so. In the case of the consumer  where there  was the  arbitration clause,  the High Court refused to entertain the petition on account   of the clause.      In appeals   to  this Court  by the aggrieved consumers and the Boards ^      HELD: (1)  The agreements  with the  State  Governments must also  be treated  as agreements  entered into with ’the Boards. Section  60 of  the Act  provides that all contracts entered into  by or with the State Government for any of the purposes of  the Act,  shall be  deemed to have been entered into by  or with  the Board.  One of the primary purposes of the Supply  Act is to provide For the supply of electricity. An agreement  for supply  of electricity  to a  consumer is. therefore, an  agreement for  one of  the  purposes  of  the Supply Act  and s.  60 has application to such an agreement. [78G-H]       2(a)  Fixation of special tariffs under s 49(3) can be a unilateral  Act on the part of the Board but more often it would be  the result  of negotiations  between the Board and the consumer  and hence  a matter of agreement between them. Therefore, the Board can, in exercise of the power conferred under the  sub-section,  enter  into  an  agreement  with  a consumer  stipulating  for  special  tariff  for  supply  of electricity for  a specific  period of  time. The agreements for supply of electricity to the consumers must therefore be regarded as  having been  entered  into  by  the  Boards  in exercise of  the statutory  power conferred under  s. 49(3). [81E-F. H-82B] 71      (b) When  a public  authority is entrusted by a statute with a  discretionary power  to be  exercised for the public good, it  cannot, when  making a private contract in general terms, fetter  itself in  the use  of that  power or  in the exercise of  such discretion.  This principle  is  attracted when an  attempt is  made to  fetter in  advance the  future exercise of  statutory powers  otherwise than  by ’the valid exercise of  a statutory  power. Where  a statutory power is exercised to  enter in  o a  stipulation with  a third party which fetters the future exercise of other statutory powers, where such  stipulation is  made, not  as part  of a private contract in  general terms,  but in  exercise of a statutory power. he  exercise of the statutory power would not be held to be  invalid as  a fetter  on the future exercise of other statutory powers.  If it  were so  held, it would render the statutory power  meaningless and  futile. Therefore, where a stipulation in  a contract  is  entered  into  by  a  public authority in  exercise of  a  statutory  power,  then,  even though such  stipulation fetters  the subsequent exercise of the same  statutory power  or  future  exercise  of  another statutory power  it would  he valid and the exercise of such statutory power, would protanto stand restricted. The public authority would not, in such a case. be free to denounce the stipulation    as  a  nullity  and  claim  to  exercise  its statutory power  in disregard  of it. except, where there is an overriding  statutory provision  which, expressly  or  by necessary implication,  authorises the  public authority  to set at naught in certain circumstances, a stipulation though made in  exercise of :1 statutory power. [82E-F; 83F-G; 84F- G; 85A-C, E]      Ayer Harbour  Trustees     Oswald,  8  A.C.  623,  York Corporation   v. Henry  Leetham and  Sons, [1924] 1 Ch. 557,

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Straffordshire  &   Warcestershire   Canal   Navigation   v. Birmingham  Canal   Navigation,  1866   L.R.  I   H.L.  254, Southendon-Sen Corporation  ,  v.  Hodgson  (Wickford)  Ltd. [1961] 2  All. E.R.  46, Southport  Corporation  v. Birkdale District Electric  Supply Co. [1925] 1 Ch. 794 Commissioners of Crown  Lands v.  Page [1960]  2 All. E.R. 726 and Dowty . Boulton   v. Wolverhempton,  Corporation, [1971] 2 All. E.R. 277, referred to.      (c) In  the present  ease, ‘the agreements were entered into with  the consumers  in exercise of the statutory power to fix  special tariffs  under s.  49(3) and therefore there could be  no question  of such  stipulation  being  void  as fettering or  hindering the  exercise of the statutory power under that  provision These  stipulations did not divest the Board of  its  statutory  power  or  fetter  or  hinder  its exercise. In  fact, they  represented ’he  exercise  of  the statutory power Once the agreements were made containing the stipulations they  were binding  as having been validly made in exercise of the statutory power, and it was not competent to the  Board to  override them. The Board could not enhance the charges  in breach of these stipulations, for that would negate the  existence of  the statutory  power in  the Board under s.  49(3 )  to fix the charges   for a specific period of time. [85E-86B]      (d) The  Board was  also not  competent to  enhance the charges under  the guise  of fixing uniform tariffs because, sub-s. (1) of s. 49 is subject to sub-s (3) and once special tariffs were  fixed under  sub-s.  (3)  there  could  be  no question  of   fixing  uniform  tariffs  applicable  to  the consumer under  sub-s. (1)  . Such  .. power   could  not be exercised in  derogation of  the stipulation  fixing special tariffs under sub-s (3). [86B-C]      (e) If  the stipulations as to charges were not binding and the  Board could  enhance the  charges  unilaterally  in disregard of  them  the  consumer  would  also  be  free  to repudiate the  stipulations. ’the stipulations as to charges are inseverable  from the  rest of  the  agreements  and  if "these  stipulations  are  disturbed  and  the  charges  are revised unilaterally  by the Board  the agreements could no. bind the consumer. [86C-E]      (f) Further,  on the contention of the Board i would be impossible for  a consumer  to enter  into an agreement with the Board  for supply  of electricity at a certain specified rate.  But  ’that  could  not  have  been  intended  by  the legislature  because,  far  from  promoting  the  object  of electric development  and industrial  growth in the State it would act as a regressive factor. [86E-F]      3 (a)  A marginal  note to  a section cannot afford any legitimate aid to the construction of the section but it can be relied upon as indicating the drift 72 of the  section to  show what  the section was dealing with. The marginal  note to  s. 59  reads ’General  Principles for Board’s finance’. This shows that the section is intended to do no  more than  to lay  down general  principles  for  the finance  of   the  Board.   It  merely   enunciates  certain guidelines which  the Board  must  follow  in  managing  its finance. [86H-87B]      (b) Under  the section  the Board is directed as far as practicable not  to carry on its operations at a loss and to adjust its  charges  accordingly  from  time  to  time.  The legislature has  deliberately and advisedly used the word as far as practicable," because, since the Board is a statutory authority  charged   with  the  general  duty  of  promoting coordinated   development   of   general   on   supply   and

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distribution  of   electricity  within   the   State,   with particular reference  to such  development in  areas not for ’the time being served or adequately served by any licensee, it might  suffer loss  in carrying  on its operations, as it might  have   to  give   special  tariffs  to  consumers  in undeveloped or  sparsely developed  areas, and  sometimes to industrial consumers  for accelerating  the to of industrial growth, even  though  such  special  tariffs  might  not  be sufficient to  meet  the  cost  of  generation,  supply  and distribution of electricity. [87B-E]      (c) Where, by a stipulation validly made under s. 49(3) the Board   under  a contractual  obligation not  to  charge anything more  then a  specified  tariff  it  would  not  be practicable for  it to  enhance its charges if it finds that is is  incurring operational  loss. To do something contrary to law  in violation  of a contractual obligation, can never be regarded  as ’practicable’.  the  Board  can  adjust  its charges under  s. 59 only in so far as the law permits it to do so,  that. is,  where it is not fettered by a contractual stipulation from  doing      (4)  (a)  Under  s.  57  of  the  Act  a  Iciness  can, notwithstanding  any   agreement  entered   into  with   the consumer, enhance  the charges  for sale  of electricity  in order to  earn a  reasonable return  by way  of profit.  The difference in language between s. 59 and s. 57 shows that s. 59 does  not confer  any power  on the  Board to enhance the charges  for   supply  of  electric  y  in  disregard  of  a contractual stipulation  entered into  under s. 49(3). [87G- 88C]      (b) The  6th Schedule  of the  Act  is,  by  a  fiction enacted in s. 57, deemed to be incorporated in the licence e of every  licensee and it enables the Licensee to adjust its charges for the sale of the electricity by enhancing them so that it  earns  a  reasonable  return  as  profit;  but  the definition of  ’licensee’ in  s. 2(6)  does not  include the State Electricity  Board. it has been expressly taken out of the category  of licensee for the purpose of the Supply Act. [99C-E]      (5) (a)  The cost is not the sole or only criterion for fixing tariff. [87E-F]       Maharashtra  State Electricity Board v. Kalyan Borough Municipality [1968] 3 S.C.R. 137, followed.      (b) There  may be  certain consumers who may have to be supplied electricity  at special  tariff less than the cost, having regard  to the  geographical area  or the  nature  or purpose of  the supply.  That is  why the  adjustment of the charges would have to be left to the discretion of the Board to be  made in  such manner as it thinks fit, and since cost is not  the sole  or only  criterion for  fixing tariff, the Board would  be free  not to  enhance the charges in case of some consumers  even though  such charges  may be  less than their costs.  If that  be so,  it must follow, a fortiorari, that there  is nothing in s. 59 which requires the Board ’to enhance the charges in a case where it has bound itself by a contractual stipulation  not to  claim  anything  more  than certain specified charges. [88C-E]      (6) If  the power  to enhance the rates unilaterally in derogation of the contractual stipulation does not reside in any provision  of the  Supply Act  it cannot  be created  by regulations under s. 79(j) of the Act. Either this power can be found  in some  provisions of the Supply Act or it is not there at  all. Regulations,  in the  nature  of  subordinate legislation,  cannot   confer  authority  on  the  Board  to interfere with contractual rights and obligations unless the 73

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power to  make such  regulations is  vested in  the Board by some provision  of the  statute expressly  or  by  necessary implication. Therefore,  it would  not make  any  difference whether or  not the  Board has  made any regulations under . 79(j). [92H-93B]      (7) The  arbitration clause  provided that "any dispute or difference  arising between the consumer and the supplier o, their  respective electric engineers, as to the supply of electrical energy  hereunder or  the pressure  thereof as as to the  supplier or  the consumer  respectively to determine the same  or any  question, matter  thing arising  hereunder shall be  referred to  a  single  arbitrator  who  shall  be mutually agreed upon by both parties".      The claim  of the  Electricity  Board  to  enhance  the charges under  ss. 49  and 59  and the  6th Schedule  to the Supply Act,  is not a question matter or thing arising under the agreement  is a  claim founded  on the provisions of the Supply Act  and such  a claim falls outside the ambit of the arbitration  provision. [98E-H]      (8) (a)  But since  the Board  also claimed that it has the power  to claim the additional levy under another clause of the  agreement,  which  provided  that  the.  tariff  and conditions of  supply mentioned  in the  agreement shall  be subject to  any revision  that may  be made by the supplier. The question  whether the Board  had power under that clause to enhance  the charges  is a  question  arising  under  the agreement.  All  the  contentions  raised  by  the  consumer against the  claim of  the Board  are also  covered  by  the arbitration agreement, and therefore, there is no reason why the consumer  should not pursue he remedy of arbitration and instead invoke  the extraordinary  jurisdiction of  the High Court  under t. 226. [99F-100E]      (b) When  an authority takes action which is within its compence, it  cannot be held to be invalid merely because it purports to  be made  under a. wrong provision, if it can be shown to  be within its power under any other provision. The Board claimed originally power under ss. 49 and 59 and the 6 h Schedule  of the  Supply Act, but  if it has power under a clause of  the agreement, the enhancement could be justified by reference to that power.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION : Civil Appeals Nos. 1457 & 1642 of 1971.      From the  judgment and order dated 19th August, 1971 of the Kerala  High Court  in O.P.  Nos. 2827  & 1288  of  1970 respectively.      CIVIL APPEALS Nos. 1652-1654 of 1974.      Appeals by  special leave  from the  judgment and order dated the  27th March,  1974 of  the Orissa  High  Court  in O.J.C. Nos. 357, 605 and 527 of 1971.      S. V.  Gupte (In  C.A. No.  1457/71) G. B. Pai (In C.A. No. 1642/  71) Ajay  Ray and P. Mathai, (In C.A. No 1457/71) O.C.  Mathur  K.J.  John  and  J.  B.  DadachanJi,  for  the appellants (In C.As. Nos. 1457 & 1642/71).      Lal  Narain  Sinha,  Solicitor  General  (In  C.A.  No. 1457/71) A.  G. Pudissery,  for the  respondents (In  C. As. Nos. 1457 & 1642/71).      Sumitra  Chakravarty   (In   C.A.   No.   1652/74)   B. Parthasarthy, for the appellants (In C.A. Nos. 1652/74).      A. K.  Sen, B.  Sen, Ranjit  Mehanty, Ajay  Ray, O.  C. Mathur, K  J; John  and J. B. Dadachanji, for the respondent (In C.A. Nb.

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74      K. R.  Chowdhary and  K.  Rajendra  Chowdhry,  for  the intervener. Andhra Pradesh Electricity Board.      G. L.  Sanghi ,  P. V. Kapur and U. K. Khaitau, for the applicatintervener-Ferro Alloys Corporation.      S. V. Gupte (In C.A. No. 1654174) and Vinoo Bhagal, for the appellant (In C.As. Nos. 1653-1654/74).      The Judgment of the Court was delivered by      BHAGWATI, J.-The  short but  important  question  which arises for  determination in  this appeal is whether a State Electricity Board  has power to enhance the rates for supply of electricity  notwithstanding an  agreement binding  it to supply electricity  at certain rates where it finds that the contractual rates  arc less  than the  cost  of  generation, distribution and  supply of  electricity and  in the  result there  is  loss  to  the  State  Electricity  Board  in  its operations? In  order to appreciate how the question arises, it is  necessary to  state a  few facts  giving rise  to the appeal.      The petitioner  is a  limited liability  company  which carries  on   business  of   manufacturing  aluminium.   The manufacture of  aluminium involves  three  processes,  viz., mining of  bauxite ore,  dressing it  and converting it into alumina  and   reduction  of  alumina  into  aluminium.  The petitioner carried  on bauxite  mining at  the  quarries  in Bihar and  also set  up its  factory in  Bihar for  dressing Bauxite ore  and converting  it into  alumina. So far as the process of  reducing alumina into aluminium is concerned, it involves the  application of  the method of electrolysis ill which electrical  energy is  a  primary  raw  material  and, therefore, the  petitioner was  anxious to  set up a factory for this  purpose at  a place where electric power would, be cheap. The Government of the then native State of Travancore offered to  supply  electric  power  to  the  petitioner  at reasonable rates for a long period of time if the petitioner established its  factory for reducing alumina into aluminium within  its   territory.  An  agreement  dated  30-7-41  was accordingly entered  into between  the  petitioner  and  the Government  of   the  State  of  Travancore  for  supply  of electrical energy  at certain  rates for  period of 34 years from  1-7-41   with  an  option  of  renewal  in  favour  he petitioner for a further period of 20 years. In view of this agreement, the  petitioner established a factory at Alupuram near Alwaye  fol. reducing  alumina and  converting it  into aluminium, though alumina for this purpose had to be brought all the  way from  Bihar and  the aluminium  produced at the factory  had   to  be   transported  outside  the  State  of Travancore for the purpose of sale.      On the  integration of  the States  of  Travancore  and Cochin, a  new state of Travancorc-Cochin was formed in 1948 and the  agreement 30-7-41  (hereinafter referred  to as the Principal Agreement)  was  accepted  by  the  new  State  as binding upon  it. The  terms and  conditions  of  supply  of electrical energy  laid down  in,  the  Principal  Agreement were,  however,   varied  and  modified  by  a  supplemental agreement  (hereinafter     referred   to   as   the   first Supplemental Agreement) dated 75 16-8-1955 entered  into between the petitioner and the State of Travancore-Cochin  on 1-1-1956  a new State of Kerala was formed comprising inter alia the territories of the existing State  of   Travancore  Cochin,   barring  a  small  portion transferred  to   the  State  of  Madras  under  the  States Reorganisation Act 1956, and by reason of section 87 of that Act, the  Principal  Agreement  as  modified  by  the  First

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Supplemental Agreement  was deemed  to have been made in the exercise of  executive power  of the State of Kerala and all rights and  obligations  under  it  became  the  rights  and obligations of  the State  of Kerala.  The Kerala Government thereafter by  a Notification  issued urbder section 5, sub- section (1) of the Electricity Supply Act, 1948 (hereinafter referred to as the Supply Act), constituted the Kerala State Electricil. Board  (hereinafter referred  to as  the  Board) with effect  from 1-4-57.  Section  60  of  thc  Supply  Act provides, inter  alia that all the contracts entered into by or with  the State Government for any of the purposes ot the Act before  the firsl  constitutionl of  the Board  shall be deemed to  have been  entered into by or with the Board. The Principal Agreeement  as modified  by the First Supplemental Agreement was,  therefore. deemed  to have been entered into with the  petitioner by  the Board. The terms and conditions of  agreement   were  subsequently  modified  under  another supplemental  agreement  (hereinafter  referred  to  as  the Second Supplemental  Agreement) dated  4-4-1963 entered into between the  petitioner and the Board. This modification did not affect either the rates or the duration of the Principal Agreement.      It appears  that  the  petitioner  required  additional electric power  for  expansion  of  the  operations  of  its alumina reducing  factory and  an agreement  dated 30-3-1963 (hereinafter referred  to  as  the  Second  Agreement)  was, therefore, entered into between the petitioner and the Board whereby the  Board agreed  to supply  to the petitioner from 1965 a  total of  12500 Killowatts  of electric power at the rates and  on the  terms  and  conditions  set  out  in  the agreement. The  duration of this agreement was 25 years from 1-1-1965 with  an option to the petitioner to renew it for a further period  of 25  years. Another agreement (hereinafter referred to as the Third Agreement) was entered into between the petitioner  and the  Board on  18-9-1965 for  supply  of further 12500  k.w. Of electric power at certain rates for a period of  25 years  from 1-1-1966 with an option of renewal in favour of the petitioner for a further period of 25 years on the same terms and conditions.      Whilst these agreements were in force, the Board framed the  Kerala   State  Electricity   Board  (General  Tariffs) Regulations 1966  in exercise  of the powers conferred under section 79  (j) read  with sections  49 and 59 of the Supply Act. Regulation 4 empowered the Board to prescribe different terms and  conditions for different classes of consumers and Regulation 6  provided that  the  Board  may  fix  different tariffs for  different classes  of  services  under  various heads. The  Board was conferred power under Regulation 10 by Notification  or   otherwise  to   fix  special   terms  and conditions fol.  supply  for  special  purposes  and‘  under Regulation 11 the Board could amend the terms and conditions of supply  from time to time. These Regulations were amended by 76 the Board  by making  the Kerala  Electricity Board (General Tariffs)   (Amendment) Regulations,  1969. By  the amendment Regulations 6  and 8  were substituted by a new Regulation 6 which empowered  the Board  to  fix  different  tariffs  for different classes  of services  under the  broad heads,  low tension supply,  high tension  supply and extra high tension supply. Now  it appears  that since September 1965, when the last revision  of tariffs was made by the Board, there was a steep rise in "prices of all commodities including plant and equipment, construction  materials, etc. salary and wages of employees" thereby  increasing the operation and maintenance

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cost of  the Board  with the  result that  the  Board  found itself in a position where it was working at a loss. Section 59 of  the Supply  Act enjoins the Board that "it shall not, as far  as possible,  carry on its operations under this Act at a  loss and  shall adjust its rates accordingly from time to time".  The Board,  therefore, in  exercise of  the power conferred under  section  49  of  the  Supply  Act  and  the Regulations, "and other enabling provisions in the Statute", issued  an  order  dated  28-11-1969  called  "Kerala  State Electricity Board  Extra High  Tension  Tariff  order  1969" fixing the  rates Or tariffs for supply of electric power to all extra  high tension  consumers-a category which included the petitioner.  Clause (6)  of this order provided that the rates or  tariffs fixed by it shall apply "to all extra high tension consumers"  notwithstanding anything to the contrary contained in  any agreement entered into with any extra high tension consumer either by the Government or by the Board or anything the tariff Regulations or Rules previously issued". The result  was that  despite the  Principal Agreement,  the Second Agreement  and the  Third Agreement,  which  were  in force, the  Board claimed to be entitled to recover from the petitioner the  rates or tariffs fixed by this order. though they  were  manifestly  higher  than  the  rates  or  tariff stipulated in  these respective  agreements. The  petitioner thereupon filed  a writ petition in the High Court of Kerala challenging the  validity of  this order  but the  challenge failed. The  High Court  sustained the  order on  the ground that it  was  within  the  competence  of  the  Board  under sections 49  and 59 of the Supply Act. This view is assailed in the present appeal brought with certificate obtained from the High Court. F      Before we proceed to consider the question which arises for determination  in this  appeal, it will be convenient at this stage  to refer  to a  few relevant  provisions of  the Supply Act  for this  is  the  statute  with  which  we  are concerned in  this appeal.  The Supply  Act, as its preamble and  long  title  show,  is  enacted  "to  provide  for  the rationalisation of  the production and supply of electricity and generally  for taking   measures conducive to electrical development". That  is the object and purpose of the Statute and this  object and purpose is sought to be achieved by the establishment of the Central Electricity Authority and State Electricity Boards  charted with  certain functions,  powers and duties. Section 5 (1) provides that the State Government shall, as soon as may he after the issue of the notification under  section   1(4)  bringing   into  force   the  various provisions of  the Act,  "constitute by notification in, the official Gazette  a State  Electricity Board under such name as shall ba specified in the notification". Chapter TV sets 77 out the  powers and  duties of  the State Electricity Board. Section 18,  which is  the first  section  in  that  chapter enumerates duties,  which also)  represent the  function, of the State  Electricity Board. It Says, to quote the words of the section:  "Subject to  the provisions  of this  Act  the Board shall  be charged with the general duty of promote the coordinated  development   of  the  generation,  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 any licensee, and without prejudice to the  generality of  the foregoing  provisions it shall be the duty  of the  Board-(a) to prepare and carry out schemes sanctioned under  Chapter V;  (b) to  supply electricity  to owners  of   controlled  stations  and  to  licensees  whose

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stations are  closed down  under this  Act;  (c)  to  supply electricity as soon as practicable to any other licensees or persons requiring  such supply  and whom  the Board  may  be competent under  this Act  so to  supply." Then follow other sections in  that Chapter  which deal with the powers of the State Electricity  Board. They  are not material and we need not refer  to them.  Chapter V  is headed "The Board’s Works and  Trading  Procedure".  It  contains  the  fasciculus  of sections dealing  with making of a scheme for all area "with a  view  to  rationalising  the  production  and  supply  of electricity‘’ in  that area.  Then there are other sections, not relevant  for our  purpose, which  speak  of  controlled stations and  generating stations,  provide  for  supply  of electricity by the State Electricity Board to a licensee and lay down  the mode  of fixation  of grid  tariff. Section 49 enacts a  provision for  sale of  electricity by  the  State Electricity Board  to a  person other  than a  licensee.  It reads:           "(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-           (a)  the nature of the supply and the purposes for                which it is required;           (b)  the co-ordinated  development of  the  supply                and distribution  of electricity  within  the                State in  the most  efficient and  economical                manner, with  particular  reference  to  such                development in  areas not  for the time being                served or adequately served by the licensee:           (c)  the  simplification  and  standardisation  of                methods  and   rates  of   charges  for  such                supplies;           (d)  the extension  and cheapening  of supplies of                electricity to sparsely developed areas.           (3) Nothing  in the  foregoing provisions  of this      section shall  derogate from the power of the Board, if      it considers 78      it necessary or expedient to fix difference tariffs for      the supply   of  electricity to  any person not being a      licensee, having regard to the geographical position of      any area,  the nature  or 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      under preference to any person." Chapter VI  deals with  "The Board’s  Finance  Accounts  and Audit’.  the   first  section  in  this  Chapter,  which  is material, is section 59 which is in the following terms:           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."      Then comes  section 63  which provides  inter alia that "all contracts" contracts into by, with the State Government for any  of the  purposes  of  this  Act  before  the  first constitution of  the Board  shall be  deemed  to  have  been

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entered  into  by,  with  the  Board".  Lastly,  section  63 empowers the State Government with the approval of the State Legislature, from  time to  time to ’make subventions to the Board for  the purposes  of  this  Act  on  such  terms  and conditions as the State Government may determine".      Now, in  the present  case, as  we have  already  seen, there  are   three  main  agreements  entered  into  by  the appellant for  purchase of  electricity. True, the Principal Agreement, as  modified by the First Supplemental Agreement, was not  entered into  with the  Board, but  as pointed  out above, by reason of section 60 of the Supply Act, it must be deemed to  have been  entered into by the appellant with the Board and in view of the legal fiction, all the consequences and incident  must follow  as if  it were  an agreement made with the  Board. The learned Solicitor General, appearing on behalf of  the Board. contested the applicability of section 60 on  the ground  that the Principal Agreement, as modified by the  First Supplemental  Agreement, was  not an agreement entered into  by  the  State  Government  "for  any  of  the purposes of  this Act".  but we do not think this contention is sound.  One of  the primary purposes of the Supply Act is to provide  inter alia  for the  supply of  electricity:  in fact,  the   Supply  Act   empowers  the   Board  to  supply electricity  to   any  person  other  than  a  licensee.  An agreement for  supply  of  electricity  to  a  consumer  is. therefore. plainly  and indubitably  an agreement for one of the Purposes  of the  Supply Act  and section 60 has clearly application to  such an  agreement. The Principal Agreement, as modified by the First Supplemental Agreement. must, there fore, for  all the purposes of the Supply Act  be treated as an agreement  entered into  with the  Board. So  far as  the second and  the third  agreements are concerned, there is no question of invoking section 79 60, as they have been entered into by the appellant with the Board   from the very beginning. The question is whether the Board is  entire to  override the  supulation as  to charges contained in  these agreements  and enhance  the charges  by unilateral action as it has purported to do.      The Board  relied principally  on two provisions of the Supply Act,  namely, section  49 and  59, in  support of its claim  to  increase  the  charges  unnaterally  despite  the stipulation as to charges contained in the three agreements. Taking firstly  its stand on section 49, the Board contended that under  this section the Legislature has entrusted to it the  power  to  fix  charges-described  in  the  section  as tariffs-for supply of electricity to any person other than a licensee. Now  this power  is exercisable  not once  and for all,  but   from  Lime   to  time   as  action  requires  or circumstances justify.  It was  urged that  the exercise  of this power  is conditioned  by the  statutory obligation  of "promoting the  coordinated development  of the  generation, supply and  distribution of  electricity within the State in the most  efficient and  economical manner"  and in order to run its  undertaking economically,  that is without Joss the Board is  entitled to  refix the charges in exercise of this power indeed,  it is  statutorily bound  to do  so.  In  any event, contended  the Board, the powers and duties duties by the Supply  Act, the  power to  fix charges under section 49 being one of them, are for public good and they are intended to further the object of promoting the production and supply of electricity which is a matter of public utility and hence in public  interest. It  is, therefore, not competent to the Board to  enter into a stipulation with the consumer binding it not  to charge  anything more  than a  specific rate  and

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thereby divest  itself of the power to fix and refix charges entrusted to  it under  section 49,  or fetter or hinder its future exercise. Such a stipulation is void and it does not, ran the  argument, stand  in the  way of the Board enhancing unilaterally the  charges for  supply of  electricity.  This argument was  sought to be supported by the Board by relying on two  decisions of  English courts,  namely, Ayer  Harbour Trustees v. Oswald(1) and York Corporation) v. Henry Leetham & Sons(2) Simulataneously section 59 was also invoked in aid by the  Board. It  was pointed out that the opening words of section 49(1) made the power to fix charges conferred on the Board subject  to section  59, and therefore, the mandate of the Legislature  contained in  section 59  must prevail over anything that  is done  by the  Board in  exercise  of  this power. Section  59 enjoins  that the Board shall not, as far as practicable,  carry on  its operations  at a  S loss  and shall adjust  its charges  accordingly from  time  to  time. Notwithstanding the  fixation of  charges under  section 49, therefore, the  Board is  entitled to enhance the charges if it finds  that it  is necessary  to do  so in order to avoid operating at  a loss.  In any  event, the  Board  cannot  by stipulation in  a  contract  bind  itself  to  refrain  from exercising the  statutory power  which  it  possesses  under section 59  to enhance  the charges  in case  of operational loss. The  statutory power  cannot be  bartered  away  by  a contractual stimulation.  If it were held permissible to the Board to bind itself by a contractual stipulation not 80 to enhance  the charges  even though  such charges result in operational loss,  public interest  would suffer  since  the production, distribution  and supply of electricity would be prejudicially affected  and electrical  development  in  the State would receive a serious set back. On these two grounds the Board  urged that,  since it  was incurring  loss in its operations, it  was  entitled  unilaterally  to  revise  the charges so as to avoid such loss, notwithstanding that under the stipulation  contained in  the K three agreements it was bound to  supply electricity  to the  appellant  at  certain fixed charges.  Let us  examine whether  either of these two grounds is well-founded.      Turning first  to section  49, we  may point  out  that prior to its amendment by the Electricity (Supply) Amendment Act, 1966,  this section  was in  a different  form.  On  an interpretation of  the unamended  section the  High Court of Bombay took  the view,  in a  case relating  to  the  Kalyan Municipality, that it did not give power to the Board to fix uniform tariffs  as to  cast a higher burden on the consumer in a  compact area where the cost of supply was less than on the consumers  in a sparse area where the cost of supply was more owing  to higher distribution cost. This case was taken in appeal  by the  Maharashtra State  Electricity Board, but before the  appeal could  be decided  by this  1 Court,  the Parliament enacted the Amending Act substituting the present section 49  for the  old one  with retrospective effect. The appeal had,  therefore, to  be decided  by reference  to the amended section  49 and  having regard  to that  section, as amended, this  Court held  that the  Board had  power to fix uniform tariffs  both for consumers in compact areas as well as consumers  in sparse  areas. This Court, interpreting the amended section 49, pointed out:-           "In s.  49 as  it now  stands, the Legislature has      empowered the Board to frame uniform tariffs and it has      also indicated  the factors to be taken into account in      fixing uniform tariffs. These two aspects are contained      in sub-ss.  (1) and  (2). The Legislature has also made

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    it clear  in sub-s.  (3) that the Board, in the special      circumstances mentioned  therein, has  got power to fix      different tariffs for the supply of electricity. Sub-s.      (4) directs  the Board  not to show undue preference to      any person  for fixing  the tariffs  and the  term  and      conditions for  the supply of electricity. Though prima      facie it  would appear that sub-s. (4) will govern sub-      ss. (1)  to (3)  in s.  49. the proper way to interpret      sub-s. (4) will be to read it along with sub-s. (3).           The question of the Board showing undue preference      to any  Person in  fixing the  tariffs  and  terms  and      conditions for  supply of  electricity will  not  arise      when the Board frames uniform tariffs under sub-ss. (1)      and (2).  When the  entire tariff  is uniform for every      consumer, there  is no question of any undue preference      as every customer will pay the same amount for the same      benefit received  by him. Sub-s (3) of s. 49 recognises      the power of the Board to fix different 81      tariffs for  the supply of electricity and it is really      here, if  at  all,  that  an  occasion  for  any  undue      preference being  shown, may  arise. Therefore,  in our      opinion, sub-s.  (4) will  control the  action  of  the      Board under sub-s. (3) of s. 49." It would be seen that sub-s. (1) of s. 49 empowers the Board to fix uniform tariffs. the fixation of uniform tariffs need not necessarily  be regionwise  or areawise,  nor need it be only in respect of particular classes of consumers. There is no limitation  on  the  exercise  of  the  power  of  fixing uniforms tariffs  save that certain factors are laid down in sub-s. (2)  of s.  49 which have to be taken into account by the Board in fixing uniform tariffs. These factors guide and control the  exercise of  the power  of the Board. But, even where uniform tariffs are fixed for a particular category of consumers,  the   application  of  uniform  tariffs  to  all consumers falling  within the category irrespective of their distinctive features,  may sometime  defeat  the  object  of promotion of  electrical development  and industrial  growth and progress.  There may arise individual cases there, there regarded to special circumstances, it may be found necessary to take  departure from  the  uniform  tariffs  and  to  fix special tariffs  for them.  Sub-s. (3)  of s. 49, therefore, provides that  the  Board  shall  have  the  power,.  if  it considers it necessary or expedient to fix different tariffs for the  supply of  electricity to any. person not being", ; 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".  This  sub- section confers power on the Board to fix special tariff for a consumer  if the  geographical position  of the  area, the nature of  the supply,  the  purpose  for  which  supply  is required  and   other  relevant  factors  so  warrant.  Now, fixation of  special tariffs  can be a unilateral act on the part of  the Board,  but more often than not it would be the result of negotiation between the Board and the consumer and hence  a   matter  of  agreement  between  them.  It  would, therefore, seem clear that the Board can, in exercise of the power conferred  under sub-s.  (3) of  s. 49,  enter into an agreement with  a consumer  stipulating for a special tariff for supply  of electricity  for a  specific period  of time. Such a  stipulation would amount to fixing of special tariff and it  would clearly  be in  exercise of  the power  to fix special tariff  granted under subs. (3) of s. 49. Indeed, if the power  to fix  special tariff through the modality of an agreement with  the consumer were not there in sub-s. (3) of

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s. 49.  it cannot  be found  in any  other provision  of the Supply Act and in such a case it would be impossible for the Board to  enter into any agreement with the consumer binding itself to supply electricity at a special rate for a certain period of  time. Such an agreement would be wholly ultra the power of the Board and the would cause considerable mischief and inconvenience as no industry would be able to enter into an agreement  ensuring supply  of electricity which would be binding on  the Board.  Tariff is the most important element in such  agreement and if no binding stipulation can be made in  regard   to  tariff,   the  agreement  itself  would  be meaningless and  would b  no more than a mere rope of sand.. The power  to enter  into an  agreement  fixing.  a  special tariff for  supply of  electricity for a specified period of time is, therefore, relatable to sub-s. (3) of s. 49 82 and such  an agreement entered into by the Board would b. in exercise   of the  power under  that sub-section.  The three agreements for  supply of electricity to the appellant must, in the circumstances be regarded as having been entered into by the  Board in  exercise of  the statutory power conferred under sub-s.  (3) of  s. 49.  Now, when  the  power  to  fix special tariff  for a  consumer is  given to  the Board, the possibility cannot  be ruled  out  that  the  Board  may  in exercising this  power show undue preference to one consumer as against  the other.  Sub-section (4)  of s. 49 therefore, provides a  safeguard by  enacting that in fixing tariff and terms and  conditions for  the supply  of  electricity,  the Board shall  not show  any undue  preference to  any person. This safeguard  is obviously  necessary only  in cases where special tariff  is filed by the Board under sub-s. (3) of s. 49. When  uniform tariffs  are filed by the Board under sub- ss. (1)  and (2) of s. 49, there could be no question of the Board showing  undue preference  to any one consumer against another because  every consumer  falling within the category would have  to pay  the same  tariff for  the  same  benefit received by  him. It  is, therefore, obvious that sub-s. (4) of s.  49 controls  the action of the Board in fixing tariff under sub-s.  (3) of  s. 49 and it has, no application where uniform tariffs  are fixed  under sub-ss.  (1) and (2) of s. 49.      Having analysed  the provisions  of s.  49, we  may now turn to  consider the  argument advanced  on behalf  of  the Board that  a stipulation  binding the  Board not  to charge anything more than a specific rate would be void as it would have the  effect of  divesting the Board of the power to fix and refix  charges entrusted to it under s. 49, or hindering or fettering  is future  exercise.  Now,  if  there  is  one principle more  well settled than any other, it is that when a  public   authority  is   entrusted  by   statute  with  a discretionary power  to be exercised for the public good, it cannot, when  making a  private contract  in general  terms, fetter itself in the use of that power or in the exercise of such discretion. There are a number of decisions which would establish this principle beyond doubt. We may refer to a few of them  in order  to appreciate the true scope and ambit of this principle-what  is its  area of  operation and what are its limitation.      The first  case where  this principle was enunciated is Ayr Harbour  Trustees v.  Oswald (supra).  In this  case the Harbour Trustees,  whose statutory  power and  duty were  to acquire land,  to be  used  as  need  might  arise  for  the construction of  works on  the coast  line of  the  Harbour, sought  to  save  money  in  respect  of  severence  on  the compulsory acquisition  of  a  particular  owner’s  land  by

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offering him  a perpetual  covenant not  to construct  their works on  the land acquired, so as to cut off from access to the waters  of the  Harbour,  or  otherwise  to  affect  him injuriously in  respect of the land not taken but from which the acquired   land  was severed.  It was  held that  such a covenant was ultra vires Lord Blackburn stated the principle in these terms:           "I think  that where the legislature confer powers      on any body to take lands compulsorily for a particular      purpose, it 83      is on  the ground  that the using of that land for that      purpose will  be for the public good. Whether that body      be  one   which  is   seeking  to  make  a  profit  for      shareholders, or,  as in  the present  case, a  body of      trustees acting  solely for the public good, I think in      either case  the powers conferred on the body empowered      to take  the land  compulsorily are  intrusted to them,      and their successors, to be used for the furtherance of      that  object   which  the   legislature   has   thought      sufficiently for  the public  good  to  justify  it  in      intrusting them  with such  powers;  and,  consequently      that a  contract purporting  to  bind  them  and  their      successors not to use those powers is void."      This  case   was  followed  by  Russell,  J.,  in  York Corporation v. Henry Leetham & Sons Ltd. (supra). There, the plaintiff-Corporation was  entrusted  by  statute  with  the control of  navigation in  part of  the rivers ouse and Foss with power  to charge  such  tolls  within  limits,  as  the Corporation deemed necessary to carry on the two navigations in which  the public  had an  interest. The Corporation made two contracts with the defendants under which they agreed to accept, in consideration of the right to nevigate the ouse a regular annual payment of Rs.600/- per annum in place of the authorised tolls.  The contract  in regard  to navigation of the Foss  was on  similar lines. It was held by Russell, J., that the  contracts were  ultra vires and void because under them the Corporation had disabled itself, whatever emergency might  arise,   from  exercising  its  statutory  powers  to increase tolls  as from time to time might be necessary. The learned Judge,  after citing  Ayr Harbour’s case (supra) and another case(1) observed: "the same principle underlies many other cases which show the incapacity of a body charged with statutory powers  for public  purposes to  divest itself  of such powers or to fetter itself in the use of such powers".      Finally Lord  Parker, C.  J., said  in  Southendon  Sea Corporation v.  Hodgson (Wickford) Ltd.(2): "There is a long line of  cases  to  which  we  have  not  been  specifically referred which  lay down  that a  public authority cannot by contract fetter the exercise of its discretion."      The   principle   laid   down   in   these   cases   is unexceptionable and can not be doubted. But the question is: does it  apply in  the present  case We do not think so. The principle is  attracted when an attempt is made to fetter in advance the  future exercise  of statutory  powers otherwise than by  the  valid  exercise  of  a  statutory  power.  The covenant in Ayr Harbour’s case (supra) tied the hands of the Harbour Trustees  and prevented them from constructing works on the  land acquired,  however necessary  they might become for the  proper  management  of  the  undertaking  and  thus fettered  the  Harbour  Trustees  in  the  exercise  of  the statutory power entrusted to them by the Legislature for the purpose of  the undertaking.  But this  covenant was entered into by  the Harbour  Trustees as  a ’private contract’ with the owner  of the  land acquired  in order  to save money in

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respect of 84 severence and not in exercise of a statutory power and hence the principle was invoked to invalidate the covenant. So far as York Corporation case (supra) is concerned, it came to be severely  criticised   by  Sargant,   L.J.,   in   Southport Corporation v. Birkdale District Electric Supply Co. (1) and the learned  Lord Justice  pointed out  that the decision in York Corporation’s  case (supra) could hardly stand with the judgment  of  the  Court  in  Southport  Corporation’s  case (supra).  This   criticism   of   the   decision   in   York Corporation’s case (supra) was adopted by Earl of Berkenhead when the  Southport Corporation  case (supra)  was taken  in appeal to  the House  of Lords. Lord Sumner also observed in that case  that he  did not  think that  there  was  a  true analogy  between   Ayr  Harbour’s   case  (supra)  and  York Corporation’s case  (supra). The  House of  Lords as well as the Court  of Appeal  in the  Southport  Corporation’s  case (supra) seemed to be of the view that the York Corporation’s case (supra)  was wrongly  decided. Of  course, they did not doubt the  validity of  the principle enunciated by Russell, J., but  questioned its  applicability to  the facts  of the York Corporation’s case (supra). They appeared to think that the discharge  of their  statutory  duties  by  the  Harbour Trustees would  be facilitated  rather than  fettered  by  a reasonable latitude  of discretion  in fixing tolls and both ouse and  Foss agreements  must, therefore,  be regarded  as having been entered into by the Harbour Trustees in exercise of the  statutory power of fixing tolls and hence they would be valid.  But they  pointed out  that  there  were  certain peculiar features  in the York Corporation’s case (supra) on which the  actual decision  of Russell, J., holding ouse and Foss  agreements   to  be  void,  could  be  sustained.  The discussion of  these two cases shows that the principle that a public authority cannot by contract fetter the exercise of the statutory  power, which  is conferred  upon it  for  the public good,  is limited  in its  application to those cases where the  attempt to  do so  is otherwise than by the valid exercise of a statutory power.      The position  is different  where a statutory power, is exercised to  enter into  a stipulation  with a  third party which fetters  the future  l. exercise  of  other  statutory powers-where  such  stipulation  is  made  not  us  part  of ’private contract  in general  terms as Devlin L.J. calls it in Commissioner  of Crown  Lands v. Page(2), but in exercise of a  statutory power. In such a case it is difficult to see how the  exercise of the statutory power could be held to be invalid  as  a  fetter  on  the  future  exercise  of  other strututory powers.  If it  were so  held it would render the statutory power meaningless and futile. It would nullify the existence of  the statutory power and that would be contrary to all  canons of construction. If the statutory power is to have any  meaning. and  content.  the  stipulation  made  in exercise of  the statutory  power must  be valid and binding and it  would, as  pointed out  by Pennycuick, VC.  in Dowty Boulton  v.   Wolverhampton  Corporation(3),   "exclude  the exercise of other statutory powers in respect 85 of the  same subject-matter". To put it differently, where a stipulation in  a contract  is  entered  into  by  a  public authority in  exercise of  a  statutory  power,  then,  even though such  stipulation fetters  subsequent exercise of the same statutory power or future exercise of another statutory power, it  would be valid and the exercise of such statutory power would  protanto stand restricted. That would follow on

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the  principle   of  harmonious   construction.  The  public authority would not, in such a case, be free to denounce the stipulation as a nullity and claim to exercise its statutory power in disregard of it. If that were permissible, it would mean that  the stipulation  has no  binding  force  and  the public authority  has no  statutory power to enter into such stipulation. But  that would be plainly contradictory of the premise on which the argument is based.      The distinction  must always,  therefore, be  borne  in mind whether  the stipulation  by which the public authority is alleged  to have  fettered in advance the future exercise of the statutory power, is one which is entered into as part of ’private  contract in general terms’, or in exercise of a statutory power.  If it is the former, the stipulation would he bad  on the  principle that  a public authority cannot by contract fetter  the exercise  of a statutory power which is conferred upon  it for  the public  good. But  if it  is the latter, the  stipulation being  in exercise  of a  statutory power would  be valid and it would not be open to the public authority to  disregard the  stipulation  and  exercise  the statutory power  initiated or  fettered  by  it.  This  last statement, must,  however, be  qualified by  making it clear that a  case may  conceivably arise  where there.  may be an overriding  statutory   provision  which   expressly  or  by necessary implication authorises the public authority to set at naught,  in certain  given circumstances,  a  stipulation though made in exercise of a statutory power. Where there is such a  statutory provision, the stipulation would certainly be bindings  but. when the specified circumstances rise, the public authority,  would have  the  power  to  override  the stipulation and  act in  derogation of  it. But  that  again would be a matte of construction      Now, in  the present  case, as  we have already pointed out above,  the stipulations  as to charges contained in the agreements entered  into with  the appellant  were  made  in exercise of  the statutory  power  to  fix  special  tariffs conferred under  sub-s. (3)  of s.  49, and, therefore there could be  no question  of such  stipulations being  void  as fettering or  hindering the  exercise of the statutory power under that  provision. These stipulations did not divest the Board of  this statutory  power  or  fetter  or  hinder  its exercise in  fact, they  represented the  exercise  of  this statutory power.  Once the  agreements were  made containing these stipulations,  it was  not competent  to the  Board to override these  stipulations which  were binding  as  having been validly  made in exercise of statutory power. The Board could  not   enhance  the   charges  in   breach  of   these stipulations. To  hold that  the  Board  could  unilaterally revise the charges notwithstanding these stipulations, would negate the existence of statutory power in the Board under 86 words,  the   Board  had   no  power   to  enter  into  such stipulations. That  would negate  the existence of statutory power in  the Board  under sub-s.  (3) of  s. 49  to fix the charges for  a specific  period  ox  time,  which  would  be contrary to the plain meaning and intendment of the section. The Board  was also  not competent  to enhance  the  charges under the  guise of  fixing uniform  tariffs  for  all  high tension consumers,  including the  appellant, under subs (1) of s.  49, because  sub-s. (1)  is, on  its plain  language, subject to sub-s. (3) of s. 49 and once special tariffs were fixed for  the appellant  under sub-s.  (3) of  s. 49, there could be no question of fixing uniform tariffs applicable to the appellant  under sub-s.  (1) of  s. 49. The power to fix uniform tariffs  under Sub-s  (1) of  s.  49  could  not  be

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exercised in  derogation of  the stipulations fixing special tariffs made  under sub-s.  (3) of  s. 49  Moreover, if  the stipulations as  to charges  were not  binding and the Board could enhance the charges unilaterally in disregard of them, it is  difficult to  see how  the agreements,  of which  the stipulations formed  a term  as well as consideration, could be sustained.  We can  understand an argument that the whole of the  agreements were void But strangely, the claim of the Board  was   that  the  appellant  should  be  held  to  the agreements, though,  at the  same time  the Board  should be free  to   repudiate  the   stipulations  which  formed  the consideration or  part of the consideration. That is a claim which is  highly illogical  and  we  find  it  difficult  to appreciate  it.   The  stipulations   as  to   charges   are inseverable from  the rest  of the  agreements and  if these stipulations are  disturbed  and  the  charges  are  revised unilaterally by the Board, how could the agreements continue to bind  the appellant  ? on the view contended on behalf of the Board,  it would  be impossible  for a consumer to enter into an  agreement with  the Board for supply of electricity at a  certain specified  tariff. That  surely could not have been intended  by the  Legislature. " Far from promoting the object of  electrical development  and industrial  growth in the State  it would  act as  a regressive  factor. It may be pointed out  that the  Board also  did not  contend that the agreements entered into with the appellant were wholly void. The attack was only against the validity of the stipulations as to  charges and  that attack  must. for  reasons which we have given, fail in so far as it is based on s. 49.      We then  turn to  consider the argument based on s. 59. That section  provides that  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  the Act  at a  loss and  shall adjust  its charges accordingly from time to time. The contention of the Board was  that since  it was  operating at  a loss,  it was bound under  s. 59 to readjust its charges in order to avoid the loss  and hence  it was  within its power to enhance the charges notwithstanding  the stipulations  contained in  the agreements. This contention, plausible though it may seem at first blush‘  is‘ on  closer scrutiny  not well  founded. It ignores the  true object  and purpose of the enactment of s. 59 and  fails to  give due  effect to  the words  "as far as practicable". The  marginal note  to s.  59  reads  "General Principles for  Board’s Finance".  It is  true the  marginal note cannot 87 afford any  legitimate aid  to a  construction of a section, but it  can certainly be relied upon as indicating the drift of the  section, or,  to use  the words  of Collins M. R. in Bushell v.  Hammond(1) "to  show  I  what  the  section  was dealing with’. It is apparent from the marginal note that s. 59  is  intended  to  do  no  more  than  lay  down  general principles  for   the  finance   of  the  Board.  It  merely enunciates certain guidelines which the Board must follow in managing its  finance. The  Board is  directed,  as  far  as practicable, not to carry on its operations at a loss and to adjust its  charges  accordingly  from  time  to  time.  The Legislature has  deliberately and  advisedly used  the words "as far  as practicable"  as the  Legislature was well aware that since  the Board  is a statutory authority charged with the general duty of promoting the coordinated development of generation, supply  and distribution  of electricity  within the State  with particular  reference to such development in areas not  for the time being served or adequately served by

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any licensee,  it might  run into  loss in  carrying on  its operations and  it might  not always  be possible  for it to avoid carrying  on its  operations at  a loss. Sometimes the Board might  have to  give special  tariffs to  consumers in undeveloped  or   sparsely  developed  areas  and  sometimes special  tariffs  might  have  to  be  given  to  industrial consumers with a view to accelerating the rate of industrial growth and  development,  in  the  State  even  though  such special tariffs  might not be sufficient to meet the cost of generation, supply  and  distribution  of  electricity.  The Legislature, therefore,  did not  issue a rigid directive to the  Board  that  it  shall  on  no  account  carry  on  its operations at  a loss, and if there is a loss for any reason whatsoever, it  shall adjust  its charges  so as to wipe off such loss. But it merely administered a caution to the Board that ’as  far as  practicable’ it  shall not  carry  on  its operations at a loss, that is, if it is ’practicable’ for it to avoid  operating at  a loss  by adjusting its charges, it should try  to do  so. That is why this Court pointed out in Maharashtra  State   Electricity  Board  v.  Kalyan  Borough Municipality (2) that cost is not the sole or only criterion for  fixing   the  tariff".   Now  obviously   where,  by  a stipulation validly  made under  sub-s. (3)  of s.  49,  the Board is  under a  contractual obligation  not to charge any thing  more  than  a  specified  tariff,  it  would  not  be ’practicable’ for  it to  enhance its  charges, even  if  it finds that it is incurring operational loss. To do something contrary to  law-in violation of a contractual obligation an never be regarded as ’practicable’. Section 59 does not give a charter  to the: Board to enhance its charges in breach of a contractual  stipulation. The  Board can adust its charges under the section only in so far as the law permits it to do so. If  there is  a contractual  obligation which  binds the Board not to charge anything more than a certain tariff, the Board cannot  claim to  override  it  under  s.  59.  It  is significant to note the difference in language between s. 59 on the  one hand  and s.  57 read  with cl. (1) of the Sixth Schedule on  the other.  Section 57  clearly and  in so many terms provides  that  the  provisions  of  "any  other  law. agreement or  instrument applicable  to the licensee" shall, in relation  to the  licensee"., be void and of no effect in so far as they are inconsistent with the 88 provisions of  the Sixth  Schedule and  cl. (1) of the Sixth Schedule   provides that  the licensee  shall so  adjust its charges for the sale of electricity, whether by enhancing or reducing them,  that its clear profit in any year of account shall  not   so  far  as  possible,  exceed  the  amount  of reasonable   return.    The   licensee    can,    therefore, notwithstanding  any   agreement  entered   into  with   the consumer, enhance  the charges  for sale  of electricity  in order to  earn the  amount of  reasonable return  by way  of clear profit.  But no  such language is to be found in s. 59 and, on  the contrary,  the words  there used are "so far as practicable". We do not, therefore, think that s. 59 confers any power  on the Board to enhance the charges for supply of electricity  in   disregard  of  a  contractual  stipulation entered into by it under sub-s. (3) of s. 49.      There is  also one  other circumstance  which  supports this view.  If under  s. 59, charges have to be adjusted for the purpose  of avoiding operational loss, what is the basis on which such adjustment would be made ? obviously it cannot be on  the basis  of cost  of production,  distribution  and supply  of   electricity  to   each  consumer  or  class  of consumers, for  there may be certain consumers or classes of

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consumers who may have to be supplied electricity at special tariff less than the cost, having regard to the geographical area or the nature or purpose of the supply. That means that the adjustment  of the  charges would have to he left to the discretion of  the Board  to be  made in such a manner as it thinks fit and proper in the light of relevant circumstances and since "cost is not the sole or only criterion for fixing tariff", the  Board would be free not to enhance the charges in case  of some  consumers or  classes  of  consumers  even though such charges may be less than the cost and in case of others, enhance  them even  beyond the  cost,  provided,  of course, the  relevant factors  are taken  into  account  and there is  no undue  preference of  one consumer  as  against another. If  that be  so, it  must follow  a fortiorari that there is  nothing in  s. 59  which  requires  the  Board  to enhance the charges in a case where it has bound itself by a contractual stipulation  not to  claim anything  more than a certain specified charges.      We are,  therefore, of  the view that the Board was not entitled  to  enhance  the  charges  in  derogation  of  the stipulation as  to charges  contained in the agreements with the appellant and the notification dated 28th November, 1969 fixing tariff  s for  extra high  tension consumers  was not enforceable against  the          appellant.  We accordingly issue a  writ quashing  and setting  aside the  notification dated 28th  November, 1969 in so far as it seeks to make the tariffs specified  in it  applicable to  the  appellant  and declare that  the Board  is not  entitled to  claim from the appellant anything  more than  the charges  specified in the agreements. We  also issue a writ restraining the Board from enforcing the notification dated 28th November, 1969 against the appellant  or claiming  from the appellant anything more than the 89 charges  specified   in  the   agreements.  The   appeal  is accordingly allowed.  The 1st  respondent will pay the costs of the appeal to the appellant. Civil Appeal No. 1642 of 1971      The facts  and circumstances giving rise to the present appeal are  in material  respects identical  with  those  in Indian Aluminum  Company v. KeraIa Stat Electricity Board(1) which we  have disposed  of by  a  judgment  delivered  this morning The  judgment in  Indian Aluminum  Company v. Kerala State Electricity  Board (supra) will, therefore. govern the decision of the present appeal as well.      We accordingly  issue a writ quashing and setting aside the notification  dated 28th  November, 1969 in so far as it seeks to  make the tariffs specified in it applicable to the appellant and  declare that  the Board  is not  entitled  to claim from  the appellant  anything more  than  the  charges specified in the agreement dated 26th October, 1964. We also issue a  writ  restraining  the  Board  from  enforcing  the notification dated 28th November, 1969 against the appellant or claiming  from  the  appellant  anything  more  than  the charges specified in the agreement dated 26th October, 1964. The appeal  is accordingly  allowed. The 1st respondent will pay the costs of the appeal to the appellant Civil Appeal No. 1652 of 1974      This appeal,  by special leave, is directed against the order of  the High  Court of orissa allowing a writ petition filed by  the first  respondent for  quashing a  Press  note dated 1st February, 1971 levying a coal surcharge at 0.62 p. per  unit  of  electricity  supplied  by  the  orissa  State Electricity Board  to the  1st respondent. The writ petition came to  be filed  by the  1st respondent  in the  following

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circumstances      The 1st  respondent  is  a  limited  liability  company carrying on  business  of  manufacturing  aluminum.  It  has several factories  at different  places in the country where it carries  on one  or the  other processes  involved in the manufacture of  aluminum. It  was  desirous  of  setting  up another factory  and for  that purpose  it was looking for a place where  it would  be able to secure at reasonable rates electrical energy  which is  a primary  raw  material in the method  of   electrolysis  employed   for  the   purpose  of converting alumina  into aluminum.  The State of orissa had, about this  time, commissioned hydro electric station at the site of Hirakud Dam with a view to step up the production of electricity and making it available for industrial purposes. It offered  to supply  electricity to  the 1st respondent at reasonable rates  if the  respondent set  up its  factory at Hirakud in the District of Sambhalpur within the territories of the State. A. contract dated 3rd 90 June, 1957  was accordingly  entered into  between  the  1st respondent     and  the   state  of  orissa  for  supply  of electricity at certain mutually agreed rates for a period of 25 years  with an  option or  renewal In  favour of  the 1st respondent for a further period of 25 years. In view of this contract,  the  1st  respondent  established  a  factory  at Hirakud for  the manufacture  of aluminum  and the  State of orissa supplied  electricity to  the 1st respondent from the Hirakud Hydro  Power Station  at the rates stipulated in the contract. Some  time after the factory of the 1st respondent had  been  in  production,  it  was  found  that  additional electric  power   was  necessary   for  expansion   of   its operations. Another  contract dated 11th February, 1960 was, therefore, entered  into between  the 1st respondent and the State of  orissa whereby  the State  agreed to supply to the 1st respondent additional electric power at the rates and on the terms  and conditions  set out  in  this  contract.  The duration of  this contract was also coextensive with that of the earlier  contract. Thus there were two contracts between the 1st  respondent and  the State of orissa under which the State supplied electricity to the 1st respondent.      In or  about 1962,  the  State  Government,  had  by  a notification  issued   under  s.   5,  sub-s.   (1)  of  the Electricity (Supply)  Act, 1948  (hereinafter referred to as the Supply  Act) constituted  orissa State Electricity Board (for shortness  called the  Board). Section 60 of the Supply Act provides inter alia that "all contracts entered into by, with the  State Government  for any  of the purposes of this Act before  the first  constitution of  the Board  shall  be deemed to  have been  entered  into  by,  with  the  Board". Therefore, as  soon as  the Board  was constituted,  the two contracts, dated 3rd June, 1957 and 11th February, 1960 were deemed to  have been entered into by the 1st respondent with the Board  and for  all the purposes of the Supply Act, they were to be treated as contracts entered into with the Board. The Board  in its  turn  supplied  electricity  to  the  1st respondent from the Hirakud Hydro Power Station at the rates and in  accordance with  the terms and conditions set out in these contracts.      In 1968,  the State  Government set  up a Thermal Power Station at  Talcher and  the transmission  lines  from  the, Hirakud Hydro  Power Station were integrated with those from the Talcher  Thermal Power  Station. The Thermal Project was thereafter  in   June  1970,   transferred  from  the  State Government to  the Board. Both the Hirakud Hydel Project and the Thermal project were then operated by the Board. Now, in

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a thermal  project, coal  is an essential raw material as it constitutes the fuel necessary for generation of electricity and the  cost of  generation of  electricity is,  therefore, directly linked  with the price of coal. The Board, after it had taken over the Talcher Thermal Project found that, owing to steep  rise in  price of  coal, the cost of generation of electricity at  Talcher Thermal  Power Station  had gone  up considerably and  in order  to off-set this rise in the cost of generation,  it was necessary to levy a coal surcharge on consumers receiving  electricity  from  the  Talcher-Hirakud Grid. The  Board accordingly after obtaining the approval of the Government decided 91 to levy  a coal surcharge at the rate of 0.62 p. per unit of the electricity supplied from the Talcher-Hirakud , Grid and notified  its  decision  in  a  Press  note  issued  on  1st February, 1971.  The relevant  part of Press note was in the following terms:           Owing to  steep rise in the price of coal which is      necessary for  generation of  thermal power at Talcher,      the cost of generation has gone up considerably and the      Board felt  that the  additional cost could be set only      by the  levy of a coal surcharge on consumers receiving      power supply from Talcher-Hirakud Grid, as is levied by      other Electricity  Boards who  have Thermal Generation.      As per  the pro  visions of  sections 49 and 59 and the      6th schedule  of the  Indian Electricity  (Supply) Act,      1948, the  levy of  coal surcharge is permissible under      the aforesaid circumstances.           The  quantum   of  coal   surcharge  is,  however,      dependant on  the rise  or fall  in the  cost  of  coal      delivered at  the Talcher  Thermal Power Station and on      the basis  of the  present cost of coal supplied to the      Power Station the Board proposes to levy coal surcharge      at  0.62   paise  per  unit  provisionally.  This  coal      surcharge will  be in addition to the present tariff at      which the  power is  being supplied to the consumer fed      from the  Talcher-Hirakud Grid and is also exclusive of      the Electricity  Duty and  other charges, if any levied      by Government  from time  to time.  The coal  surcharge      will, however,  not  apply  to  the  consumers  getting      supply of  power from  Diesel Power Stations run by the      Board.           The coal  surcharge at the above mentioned rate of      0.62 paise  per unit  will be levied on all supplies of      energy from  the Talcher-Hirakud  Grid with effect from      1-2-1971.  As   the  Machkund   Power  System   is  not      integrated with  the  Hirakud-Talcher  Grid,  consumers      receiving power from Machkund Power System are exempted      from the above levy for the present." It would  be seen that the Press Note excluded from the coal surcharge  consumers  of  electricity-supplied  from  diesel power stations  as also  Machkund Power  Station.  The  only consumers  subjected   to  the  coal  surcharge  were  those receiving electricity from the Talcher Hirakud Grid. Relying on the  Press Note,  the Board  claimed to  recover the coal surcharge from  the 1st  respondent, but  the 1st respondent disputed this  liability and  filed writ petition No. 357 of 1971 in the High Court of Orissa challenging the validity of the Press  Note and praying for quashing the demand for coal surcharge. The  High Court  allowed the  writ  petition  and quashed the decision of the Board to levy the coal surcharge so far  as  the  1st  respondent  is  concerned.  The  Board thereupon brought  the present  appeal with.  special  leave obtained from this Court.

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92      There were  in the main three grounds on which the High Court declared  the levy  of  the  coal  surcharge  invalid. Firstly, the  High Court  held that  since electricity to be supplied to  the 1st  respondent under the two contracts was to be  from the  Hirakud Hydro  Power Station,  rise ill the price of coal, which is not an essential raw material in the generation of  hydro electric power, was irrelevant and that the Board  could not  furnish any valid or legitimate reason for applying coal surcharge to the 1st respondent. Secondly, the High  Court said  that the  levy of  the coal  surcharge could not  be justified  under s. 49, as it was imposed only on consumers  of electricity  from  Grid  and  consumers  of electricity from  diesel power  station and  Machkund  Hydro Power Station were not touched and it did not form part of a measure to  fix uniform  tariffs. Section 59 also, according to the  High Court,  did not  help the  Board. In  the first place, no positive material was placed before the High Court by the  Board which would show that the Board was running at a loss  and the  coal surcharge  had  been  levied  for  the purpose of  avoiding such  loss and  secondly, to  quote the words of  the High Court, if the coal surcharge were imposed to meet the purposes of section 59, there could have been no "justification to exempt the consumers of energy from diesel stations and  Machkund Hydro  Project" for ‘section 59 makes provision for  a comprehensive  view of  the matter  and not with reference  to a  particular undertaking  of the  Board" Lastly, the  High Court felt that no regulations having been made under  section 79(j)  conferring power  on the Board to unilaterally revise the charges, it was not competent to the Board  to  ignore  the  stipulation  contained  in  the  two contracts and  enhance the  charges  in  violation  of  such contractual stipulation.  The High  Court observed  that  if regulations made under s. 79(j). conferred "unilateral power on the  Board of revising the tariffs, the position would be very different":  in such a case, "since regulations are law and such law would provide for unilateral exercise of power, agreements cannot  stand in  the way and deter the authority of the  law enabling unilateral exercise of power from being so  exercised’.  The  High  Court  accordingly  quashed  the decision to  levy the  coal surcharge contained in the Press Note and  declared that  the 1st  respondent  shall  not  be subject to  the coal  surcharge on  the basis  of the  Press Note. the  question is  whether the  view taken  by the High Court is correct.      We will  take up  the  second  and  the  third  grounds together for  consideration. We  do not  think that the High Court was  right in  saying that by making regulations under section 79(j)  the Board  could confer  upon itself power to unilaterally revise  the rate‘s  for supply  of  electricity Section 79(j)  empowers the  Board to  make regulations  not inconsistent with  the Supply  Act to provide for principles governing the  supply of electricity by the Board to persons other than  the licenses  under section  49". This  power to make regulations  must obviously  be exercised  consistently with the  provisions of  the Supply  Act and the regulations made in  exercise of  this power cannot go beyond the Supply Act. If  the power  to enhance  the  rates  unilaterally  in derogation of the contractual stipulation 93 does not  reside in  any provision  of the  Supply  Act,  it cannot be  created by regulations made under the Supply Act. Either this  power can  be found  in some  provision of  the supply Act  or it  is not  there at  all. Regulations in the nature of subordinate legislation cannot confer authority on

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the Board  to interfere  with  the  contractual  rights  and obligations unless  specific power  to make such regulations is vested  in the  Board by  some provision  in the  Statute expressly or  by necessary  implication. No such power is to be found  in section  79(j) or in any other provision of the Supply Act.  It does  not, therefore,  make  any  difference whether regulations under section 79(j) were made or not, at the date  when the  coal surcharge  was levied. Even if they were made,  they could  not have  conferred authority on the Board to  unilaterally exonerate itself from the stipulation con lined  in  the  two  contracts  and  enhance  the  rates notwithstanding  such   contractual  stipulation.  The  only question could  be whether  the Board had any such authority under ss.  49 and  59, these  being the  only  two  sections relied on  for the purpose of spelling out such authority in the Board.  This question stands concluded against the Board by the decision given by us this morning in Indian Aluminium Company  v.  Kerala  State  Electricity  Board(1).  We  have analysed the  provisions of ss. 49 and 59 and held that on a true interpretation,  neither of  these two sections confers any  authority  on  the  Board  to  override  a  contractual stipulation  as  to  rates  and  to  enhance  the  rates  in derogation of such contractual stipulation, even if it finds that the rates stipulated in the contract are not sufficient to meet the cost of production and supply of electricity and it is  incurring operational  loss.  This  decision  clearly negatives the claim of the Board to enhance the rates by the levy of  coal surcharge under s. 49 or s. 59. The Board must be held  bound by  the stipulation  as to rates contained in the two  contracts solemnly  entered into  by the  State  of orissa with  the first  respondent. On t his view it becomes unnecessary  to  consider  whether  the  levy  of  the  coal surcharge could  not be justified under s. 49 because it was imposed only  on  consumers  of  electricity  from  Talcher- Hirakud Grid  and not on the other consumers, and it did not form part  of a  measure to  fix uniform tariffs, or whether there was  any material  before the  High Court showing that the Board  was running  its operations  at a  loss so  as to justify readjustment  of the  charges under  s.  59.  It  is immaterial to consider these questions because whatever view be taken  in regard  to them.  it is clear from our decision that neither under s. 49 nor under s. 59 can the Board. even if it  is running  at a  loss, interfere  with a contractual stipulation as  to  rates  solemnly  agreed  upon  with  the consumer. It  may readjust  the rates  in order to avoid the operational loss,  where it is not fettered by a contractual stipulation from  doing so.  The High  Court was  therefore. right in taking, the view that the Board was not entitled to levy coal  surcharge on the 1st respondent in enhancement of the rates  for supply  of electricity  stipulated in the two contracts between  the parties.  We need  not. On this view. consider the  first ground on which also the High Court held the levy  of coal  surcharge to  be  invalid,  namely,  that electricity to be supplied to the 1st 94 respondent under  the two  contracts was  to be from Hirakud Hydro   Power Station  and, therefore,  rise in the price of coal  was   irrelevant  and   it  could   not  furnish   any justification  for   imposing  coal  surcharge  on  the  1st respondent. We  do not  express any opinion on this point as it is unnecessary to do so.      There is  in the  circumstances, no reason to interfere with the  decision of the High Court. We accordingly dismiss the appeal with costs. Civil Appeal No. 1653 of 1974

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    This appeal,  by special  leave, is  brought against an order of the High Court of orissa dismissing a writ petition filed by  the appellant  for quashing a Press Note dated 1st February, 1971  levying a coal surcharge at the rate of 0.62 p. per  unit on  electricity supplied  by the  orissa  state Electricity Board  from the  Talcher-Hirakud Grid.  The writ petition came  to be filed by the appellant in the following circumstances.      The appellant  is a  limited liability company carrying on business of manufacture of board and paper. The appellant wanted to  set .  up its  factory at  a place which would be convenient  from  the  point  of  view  of  availability  of facilities such  as electric  power The State of orissa had, about this  time commissioned  Hydro Electric Station at the site  of  Hirakud  Dam  with  a  view  to  stepping  up  the production  of  electricity  and  making  it  available  for industrial purposes. It offered to supply electricity to the appellant  at   reasonable  rates  as  also  to  make  other facilities available  to the  appellant if the appellant set up  its   factory  at  Chouadwar  in  Cuttack  district.  An agreement dated  3rd December,  1960 was accordingly entered into between  the appellant  and the  State  of  orissa  for supply of  electricity at  certain mutually agreed rates and on the terms and conditions set out in the agreement. Clause (1) of  the agreement provided that it shall be deemed to be in force  , for  a period  of five  years from  the date  of supply  of   Hydro  Power,   i.e.  1st  February,  1958  and thereafter shall so continue unless and until the same shall be determined  by either  party  giving  to  the  other  six calendar months’  notice in  writing  of  his  intention  to terminate the  agreement. It  was common  ground between the parties  that  neither  had  given  notice  terminating  the agreement  as   contemplated  in   cl.  (1)   and   in   the circumstances, the  agreement  continued  to  be  in  force. Clauses (7),  (14) and (22) specified the charges payable by the appellant  for the  electricity supplied  by  the  State Electricity Board  under the  agreement Clause (13) provided that "the  tariff and conditions of supply mentioned in this agreement  shall be subject to any revision that may be made by the  supplier from  time to  time". Clause (23) laid down the machinery of 95 arbitration. It  said: "any  dispute or  difference  arising between the  consumer and  the supplier  or their respective Electrical Engineers  IS to  the supply of electrical energy hereunder or  the pressure  thereof or as to the Supplier or the Consumer  respectively to  determine  the  same  or  any question,  matter   or  thing  arising  hereunder  shall  be referred to a single arbitrator who shall be mutually agreed upon by both parties". And lastly, Clause (24) declared that "the supply  of electrical energy under this agreement shall be subject  to the  provisions of  all  Acts  of  the  Union Parliament and  the rules  made thereunder  and the  special orders of  the Government  of orissa  for the  time being in force with reference to the supply of electrical energy from the Hirakud  Hydro Electric  Station and  the provisions  of such Acts  of  the  Union  Parliament  and  the  rules  made thereunder and  Special orders  of the  Government of Orissa shall be  deemed to  be incorporated  with and  form part of this  agreement   so  far   as  they  are  not  inconsistent therewith". This  last mentioned clause clearly posited that under the  agreement electricity  was to  be supplied by the State from  the Hirakud  Hydro Electric  Station a  position reinforced by the use of the words "Hydro Power" in cl. (1). In view  of this agreement, the appellant set up its factory

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for manufacture  of board  and paper at Choudwar, a backward area, even  though it is situated far from the source of raw materials and  the consumer  market and  the State  supplied electricity to  the appellant at the rates stipulated in the agreement.      In  or   about  1962   the  State   Government,  by   a notification issued  under section 5, sub-section (1) of the Electricity (Supply)  Act, 1948  (hereinafter referred to as the Supply  Act) constituted  the orissa  State  Electricity Board (for  shortness caned  the Board).  Section 60  of the Supply Act  provides inter  alia that  all contracts entered into by,  with the  State Government for any of the purposes of this Act before the first constitution of the Board shall be deemed  to have  been entered  into by,  with the Board". Therefore,  as  soon  as  the  Board  was  constituted,  the agreement dated  3rd December,  1960 was deemed to have been entered into by the appellant with the Board and for all the purposes of  the Supply  Act it  was to  be  treated  as  an agreement entered into with the Board. The Board in its turn supplied electricity to the appellant from the Hirakud Hydro Power Station  at the rates and in accordance with the terms and conditions set out in the said agreement.      In 1968,  the State  Government set  up a Thermal Power Station at  Talcher and  the  transmission  lines  from  the Hirakud Hydro  Power Station were integrated with those from the Talcher  Thermal Power  Station.  The  Thermal  project, thereafter in  June 1970,  was transferred  from  the  State Government to  the  Board.  With  the  Hirakud  Hydro  Hydel Project and  the Talcher  Thermal Project were then operated by the Board. Now, in a thermal project coal is an essential raw material  as  it  constitutes  the  fuel  necessary  for generation of  electricity and  the cost  of  generation  of electricity is, therefore, directly linked with the price of coal. The  Board, after  it had  taken over  Talcher Thermal Project, found  that, owing  to steep  rise in  the price of coal, 96 the cost  of generation  of electricity  at Talcher  Thermal Power Station  had gone up considerably and in order to off- set this  rise in the cost of generation it was necessary to levy a  coal surcharge  on consumers  receiving  electricity from the  Talcher-Hirakud Grid. The Board accordingly, after obtaining the  approval of the Government, decided to levy a coal surcharge  at the  rate of  0.62 p.  per  unit  of  the electricity  supplied  from  the  Talcher-Hirakud  Grid  and notified  its  decision  in  a  Press  Note  issued  on  1st February, 1971. The relevant part of the Press   Note was in the following terms:           "Owing to steep rise in the price of coal which is      necessary for  generation of  thermal power at Talcher,      the cost  of generation has one up considerably and the      Board felt  that the  additional cost could be set only      by the  levy of a coal surcharge on consumers receiving      power supply  from Talcher-  Hirakud Grid, as is levied      by  other   Electricity   Boards   who   have   Thermal      Generation. As per the provisions of Sections 49 and 59      and the 6th Schedule of the Indian Electricity (Supply)      Act, 1948,  the levy  of coal  surcharge is permissible      under the aforesaid circumstances.           The  quantum   of  coal   surcharge  is,  however,      dependent on  the rise  or fall  in the  cost  of  coal      delivered at  the Talcher  Thermal Power Station and on      the basis  of the  present cost of coal supplied to the      Power Station the Board proposed to levy coal surcharge      at  0.62  paise  per  unit  provisionally.  ’This  coal

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    surcharge will  be in addition to the present tariff at      which the  power is  being supplied to the consumer fed      from the  Talcher-Hirakud Grid and is also exclusive of      the Electricity  Duty and other charges, if any, levied      by Government  from time  to time.  The coal  surcharge      will, however.  not  apply  to  the  consumers  getting      supply of  power from  Diesel Power Stations run by the      Board.           The coal  surcharge at the above mentioned rate of      0.62 paise  per unit  will be levied on all supplies of      energy fro the Talcher-Hirakud Grid with effect from 1-      2-1971. As  the Machkund Power System is not integrated      with  the  Hirakud-Talcher  Grid,  consumers  receiving      power from  Machkund Power System are exempted from the      above levy for the present." It would  be seen that the Press Note excluded from the coal surcharge consumers  of  electricity  supplied  from  Diesel power stations  as also  Machkund Power  Station.  The  only consumers  subjected   to  the  coal  surcharge  were  these receiving electricity from the Talcher-Hirakud Grid. Relying on the  Press Note,  the Board  claimed to  recover the coal surcharge from the appellant, but the appellant disputed its liability  and   filed  Writ   Petition  No.   605  of  1971 challenging the  validity of  the Press note and praying for quashing the demand for coal surcharge. H      There were  various contentions raised on behalf of the appellant in supports of the writ petition. Since, according to the Press Note, 97 the coal  surcharge was  sought to  be imposed  by the Board under sections  49 and  59 and  the Sixth  Schedule  to  the Supply Act,  the principal  contention of  the appellant was directed  towards  showing  that  none  of  these  provision authorised the  Board to levy the coal surcharge and thereby enhance the rates for supply of electricity unilaterally, in derogation of  the stipulation  as to rates contained in the agreement. It was also urged on behalf of the appellant that in any  event the  coal surcharge could not be levied on the appellant, since electricity to be supplied to the appellant under the  agreement was to be, from the Hirakud Hydro Power Station as  clearly. indicated  in cls.  (1) and  (2) of the agreement and  rise in  the price  of coal  was, there fore, irrelevant so  far as  the cost  of supply of electricity to the appellant  was concerned.  Even if  the electric, supply from the  Talcher Thermal  Power Station was integrated with that  from   the  Hirakud  Hydro  Power  Station-a  position seriously disputed  by the  appellant  it did not, according to the  appellant,  make  any  difference  to  the  position because, in  the first  place,  the  Talcher  Thermal  Power Station was   not  established and  inter connected with the Hirakud Hydro Power Station pursuant to any scheme under the Supply Act,  and secondly,  there was sufficient electricity generated in  the Hirakud  Hydro Power  Station which  would meet the  requirements of  the appellant under the agreement and it  was not  necessary for  the Board  to draw  upon the electricity generated  at the  Talcher Thermal Power Station for the  purpose of  discharging its  obligations under  the agreement. ’though  the Press Note referred only to sections 49 and  59 and  the Sixth  Schedule to the Supply Act as the source of  the power  to levy  the coal surcharge, the Board also sought to justify its claim by reference to cl. (13) of the agreement  and it,  therefore became  necessary for  the appellant  to  repel  this  contention  of  the  Board.  The appellant urged  that cl.  (13) of  the agreement  could not clothe the  Board  with  the  authority  to  levy  the  coal

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surcharge,  when   it  had   no  such  authority  under  the provisions of  the Supply  Act. It  was  also  contented  on behalf of  the appellant  that,  in  any  event,  the  power conferred under  cl. (13)  of the  agreement  could  not  be exercised by the Board arbitrarily or unreasonably, or on an extraneous or irrelevant ground, and since electricity to be supplied to  the appellant  under the  agreement was to be T from the Hirakud Hydro Power Station, levy of coal surcharge on the  appellant on the ground that there was steep rise in the price  of coal,  when coal is not at all a necessary raw material in  the generation   of  Hydro electric  power, was arbitrary and unreasonable and, to say the least, founded on a wholly  irrelevant ground.  The appellant  also  contended that there  was nothing  to show that the cost of generation of electricity  at the  Hirakud Hydro Power Station was more than the  f rates  for the supply of electricity. stipulated in the agreement. Even if the combined cost of generation of electricity at  the Hirakud  Hydro  Power  Station  and  the Talcher Thermal Power Station were taken into account, there was no  material said  the appellant, to show that the rates for the supply of electricity provided in the agreement were not sufficient  to meet  the cost  of generation  so  as  to justify revision  of  such  rates  under  cl.  (13)  of  the agreement. 98      Though these  contentions were pressed on behalf of the appellant at  the hearing of the Writ Petition, the Division Bench of  the High  Court of  orissa, which  heard the  writ petition,  declined   to  entertain   the  merits  of  these contentions and  dismissed the  writ  petition  on  a  short preliminary ground.  That ground may be stated as follows in the words  of the  Division Bench Clause 23 of the agreement provides for arbitration in the event of any dispute arising out of it. We are of the view that the petitioner must avail of the  specific remedy  provided in  the agreement,  is  so advised, to  resolve its  dispute with  the Board  as in our opinion,  even   if  on   an  examination   of  the  several contentions advanced  before us  it turns  out that adequate power under  the statute  is  wanting,  the  Board  may  yet justify its  action relying  upon the  contractual provision Whether the  levy is  justified under  the  agreement  is  a matter well  within the scope of the arbitration proceeding. If the  petitioner disputed  the levy  in  a  civil  action, section 24  of the  Arbitration Act,  1940, could  have been relied upon  by   the Board  to divert  the  action  to  the private forum  chosen by  the parties. The petitioner should not be  permitted to invoke our extraordinary jurisdiction", and on  this view  the Division  Bench  dismissed  the  writ petition without  examination of  the merits  of the several contentions". The  appellant applied  to the  High Court for leave to  appeal to  this Court,  but  the  application  was refused and  hence the  appellant brought the present appeal with special leave obtained from this Court.      It is  apparent from the Press Note that when the Board decided  to   levy  the  coal  surcharge  on  the  consumers receiving electricity   from  the Talcher  Hirakud Grid,  it claimed to  do so under ss. 49 and 59 and the Sixth Schedule to the Supply Act. We must, therefore, first examine whether any of  these provisions  of the  Supply Act  empowered  the Board to  levy the  coal surcharge.  We fail  to see how the machinery  of  arbitration  contained  in  cl  (23)  of  the agreement  can   possibly  cover   such  a   question.   The arbitration agreement  in that  clause  applies  only  in  a dispute or difference "as to the supply of electrical energy hereunder  or   the  pressure   thereof   or   as   to   the

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interpretation  of  this  Agreement  or  the  right  of  the supplier or  the consumer respectively to determine the same or any  other question  matter or  thing arising hereunder‘. The question  as to  whether the  Board had  the power under sections 49  and 59 and the Sixth Schedule to the Supply Act to levy  the coal  surcharge is  not a  question, matter  or thing arising  under the  agreement It is a claim founded on the  provisions  of  the  Supply  Act  to  impose  the  coal surcharge in  addition to the rates payable by the appellant to the Board under the agreement. Such a claim clearly falls outside the  ambit and coverage of the arbitration provision contained in  cl. (23)  of the  agreement.  The  arbitration agreement cannot therefore, be regarded as a relevant factor which should  legitimately influence  the discretion  of the Court in declining to entertain the writ petition on merits. So we proceed to consider how far sections 49 and 59 and the Sixth Schedule  to the  Supply  Act  could  be  regarded  as providing statutory  authority to  the Board  to  levy  coal surcharge on the appellant.      We have already had occasion to consider the true scope and ambit  of sections 49 and 59 of the Supply Act in Indian Aluminium 99 Company v.  Kerala State  Electricity Board(1)  in which  we have pronounced  our judgment this morning. It is clear from our judgment  in that  case  that  neither  section  49  nor section 59 confers any authority on the Board to enhance the rates for  supply of  electricity where they are fixed under stipulation made in an agreement. The Board has no authority under either of these two sections to override a contractual stipulation and  enhance  unilaterally  the  rates  for  the supply of  electricity. Now,  the effect of the levy of coal surcharge would  be to  enhance the  rates for the supply of electricity  stipulated   under  the  agreement.  It  would, therefore, appear to be clear that the Board cannot claim to justify the  levy of  coal surcharge  on  the  appellant  by resort to  sections 49 and 59. It is futile for the Board to rely on  either of these two sections. Equally futile is the reliance placed  by the  Board on  the Sixth Schedule to the Supply Act.  The Sixth  Schedule is, by a fiction enacted in section 57 deemed to be incorporated in the licence of every licensee and if the Board were a licensee for the Purpose of this section,  the provisions  of the  Sixth Schedule  would also apply  to it  and it would be entitled under cl. (1) of the Sixth  Schedule to so adjust its charges for the sale of electricity by  enhancing them  that its clear profit in any year of  account does  not, as  far as  possible, exceed the amount  of   reasonable  return.   But  the   definition  of ’licensee’ given  in section  2, sub  section (6) says  that the  provisions   of  section   26   of   the   Supply   Act notwithstanding, ’licensee’  does not include the Board. The Board is  therefore, by  express enactment  taken out of the category of  licensee for  the purpose  of the  Supply  Act. Section  57   cannot,  in   the  circumstances,   have   any application to the Board and if that be so, the provision of the Sixth Schedule cannot be invoked by the Board in support of its  claim to  enhance the  rates by  the addition of the coal surcharge.      But that does not put an end to the controversy between the parties.  It is  true that  in the  Press Note the Board relied only  on sections 49 and 59 and the Sixth Schedule of the Supply  Act as  the source  of the  power under which it claimed to levy the coal surcharge and these provisions have been found  not to contain the power sought in them. But, if there is  one principle more well settled than any other, it

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is that,  when an authority takes action which is within its competence, it  cannot be held to be invalid, merely because it purports to be made under a wrong provision, if it can be shown to  be within  its power  under any other provision. A mere wrong  description of  the source of power a mere wrong label cannot invalidate the action of an authority, if it is otherwise within  its power.  The Board claimed that, in any event, even  if sections 49 and 59 and the Sixth Schedule to the Supply  Act could  not be  construed as  authorising the Board to  enhance  unilaterally  the  rates  for  supply  of electricity, the  Board had  the power under cl. (13) of the agreement to  levy the  coal surcharge  on the appellant and the decision  to levy  the coal surcharge could be justified by reference to this power. Now,  if this claim of the Board were well  founded. it would afford a complete answer to the challenge made on behalf of the appellant. But 100 the appellant  raised various  contentions in answer to this plea based   on  cl, (13)  of the  agreement.  We  may  have referred to  some of these contentions in an earlier part of the judgment.  It is  here that  the case  of the  appellant founders on  the rock  of the  preliminary objection. Clause (23)  of   the  agreement   provides  that  any  dispute  or difference relating  to a  question, thing or matter arising under the  agreement shall be referred to the arbitration of a single  arbitrator. Questions  such as:  whether the Board had power  under cl.  (13) of the agreement to levy any coal surcharge at  all when  no such power was conferred on it by the Act, whether the action of the Board in levying the coal surcharge on  the appellant  under cl. (13) of the agreement was arbitrary  and unreasonable  or whether  it was based on extraneous and irrelevant considerations and whether, on the facts and circumstances of the case, the Board was justified under cl.  (13) of  the agreement to levy the coal surcharge on the  appellant, are  plainly questions  arising under the agreement and  they are covered by the arbitration provision contained in  cl. (23) of the agreement. All the contentions raised by  the appellant  against the  claim to  justify the levy of  the coal  surcharge by reference to cl. (13) of the agreement would,  therefore,  seem  to  be  covered  by  the arbitration  agreement  and  there  is  no  reason  why  the appellant should  not pursue the remedy of arbitration which it has solemnly accepted under cl. (23) of the agreement and instead invoke  the extraordinary  jurisdiction of  the High Court under  Art.  226  of  the  Constitution  to  determine questions which  really  form  the  subject  matter  of  the arbitration agreement.  We are,  therefore, of the view that the High  Court  was  right  in  exercising  its  discretion against entertaining  the writ petition on merits, in so far as it  was directed  against the validity of the levy of the coat surcharge  under cl.  (13) of the agreement. The merits of the  contentions raised by the appellant would have to be decided by  arbitration as  provided  in  cl.  (23)  of  the agreement.      We, therefore, dismiss the appeal, but, in the peculiar circumstances of the case, make no order as to costs. Civil Appeal No, 1654 of 1954.      This appeal,  by special leave, is directed against the order of  the High  Court of orissa dismissing Writ Petition No. 527  of 1971  filed by  the appellant against the orissa State Electricity  Board (hereinafter  referred  to  as  the Board) Writ Petition No. 527 of 1971 challenged the vapidity of the  same Press  Note dated 1st February, 1971 which also formed the  subject matter of challenge in Writ Petition No. 605 of  1971 leading  to Civil  Appeal No. 1653 of 1974. The

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facts giving  rise to  Writ Petition  No. 527  of  1971  are identical with  those of  Writ  Petition  No.  605  of  1971 barring only  the difference  that whereas  the appellant in Writ Petition  No. 605  of 1971  carried on  the business of manufacture of  board  and  paper,  the  appellant  in  Writ Petition No.  527 of 1971 carried on the business of running a textile mill and while the agreement between the appellant and the  State of  orissa for  supply of electricity in Writ Petition No. 605 of 1971 was 101 dated 8th December, 1960, the agreement in Writ Petition No. 527 of 1971 was dated 12th May, 1960. The material terms and conditions of  both the  agreements were, however, the same. The judgment  given by  us in Titagarh Paper Mills Co., Ltd. v. Orissa  State Electricity  Board and  Anr. (Civil  Appeal 1653 of  1974) must  also, therefore, govern the decision of this appeal  and whatever  we have  said in  Titagarh  Paper Mills Co.  Ltd. v.  Orissa State  Electricity Board and Anr. (Civil Appeal  1653 of  1974)  must  apply  equally  in  the present case.      We, therefore,  dismiss the  appeal with no order as to costs. V.P.S.                                    Appeals dismissed. 102