23 February 1968
Supreme Court
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WESTERN U.P. ELECTRIC POWER AND SUPPLY CO. LTD. Vs STATE OF U.P. & ORS.

Bench: WANCHOO, K.N. (CJ),SIKRI, S.M.,SHELAT, J.M.,BHARGAVA, VISHISHTHA,VAIDYIALINGAM, C.A.
Case number: Writ Petition (Civil) 151 of 1967


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PETITIONER: WESTERN U.P. ELECTRIC POWER AND SUPPLY CO.  LTD.

       Vs.

RESPONDENT: STATE OF U.P. & ORS.

DATE OF JUDGMENT: 23/02/1968

BENCH: SHELAT, J.M. BENCH: SHELAT, J.M. WANCHOO, K.N. (CJ) SIKRI, S.M. BHARGAVA, VISHISHTHA VAIDYIALINGAM, C.A.

CITATION:  1968 AIR 1099            1968 SCR  (3) 312  CITATOR INFO :  R          1970 SC  21  (6,9)

ACT: Indian  Electricity  Act  (9  of  1910),  s.   3(2)(e)-Board supplying energy to consumer at lower rate than to licensee, whether  discriminatory-Notification  directing  supply   to consumer, requirements.

HEADNOTE: The- petitioner company a licensee was supplying  electrical energy  to the 3rd respondent.  By the Electric  Supply  Act 1948  the  Electricity Board was constituted and  by  Indian Electricity  (U.P.) Amendment Act, 1961, the  disability  of the Board to supply directly electrical energy to  consumers such   as  the  3rd  respondent  was  removed.   The   State Government  issued  a notification directing  the  Board  to directly  supply  energy to the 3rd respondent.   The  rates chargeable  by  the Board for energy supplied  to  licensees were  higher than the rates the direct consumers.   The  3rd respondent  terminated  the agreement  with  the  petitioner company.  The petitioner company filed a petition under Art. 32 of the Constitution. HELD  :  (Per Full Court) : The notification  could  not  be sustained as a valid notification as it was  discriminatory. If  the  Board  were to supply energy directly  to  the  3rd respondent it had to do so at rates lower than the rates  at which  electricity  was  supplied by it  to  the  petitioner company’ The petitioner-company being thus charged at higher rates  must  as a distributor charge higher rates  from  its other  consumers  with the result that  the  3rd  respondent would  get  energy at substantially lower rates  than  other Consumers  including other industrial establishments in  the area.   The  notification thus  resulted  in  discrimination between  the  3rd  respondent  on the  one  hand  the  other consumers  on the other as also between the, 3rd  respondent and the petitioner company. [319 B-D] (Per Wanchoo C.J., Sikri, Shelat and Vaidialingam, JJ.). The Board  ,could not have distributed energy to  the  consumers though it was a licensee under 1910 Act unless (a) there was

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a  scheme or (b) that it was authorised in  public  interest under  the  amended  s.  3(2)(e).   Neither  of  these   two ,conditions having been fulffilled the notification and  the direction contained therein to the Board to supply energy to the  3rd  respondent  were  in  breach  of  the  petitioner- company’s rights under its licences and the, requirements of the amended s. 3 (2) (a). [3 1 8 H] The   allegation  that  the-  3rd  respondent  suffered   in production  and  losses as a result of  short  or  defective supply  by the petitioner-company was not borne out  by  the record in this case. if there was any justification for  the allegation  now made by the respondents it is  inconceivable that  for all these years the 3rd respondent would not  have made  any complaint for such defective supply either to  the Board or to the State Government. (Per  Bhargava, J.) The notification cannot be held  to  be- invalid  on the ground that it was issued in breach  of  the amended s. 3 (e) of the Act. If the State Government was competent under the original  s. 3  (2)  (e)  of the Act of 1910 to grant a  licence  to  any person for supply of electricity 313 in  the  areas  covered  by  the,  licences  issued  to  the petitioner-company , it cannot be seen why a similar  result could  not  be validly brought about by legislation  by  the appropriate  legislatures creating a statutory licensee  for purposes of the Act of 1910.  Consequently the power granted to  the  Electricity  Board by the  notification  to  supply electricity to a consumer in the area covered by one of  the licences  of the petitioner-company could not be held to  be in violation of the conditions of the licence. In  view of the language of the provisions contained in  the amended  3 (2) (e) of the Act of 1910, it was not  competent for  this  Court  in this writ  petition,  on  the  material available, to declare that the notification was invalid  for the reason that the direction contained therein was not made by  the State Government in public interests As long as  the State  Government  based its order on an opinion  formed  on relevant material, it was not open to the courts to  examine and take a different view on the, basis of other  materials. [320 G-321 B]

JUDGMENT: ORIGINAL JURISDICTION: Writ Petition No. 151 of 1967. Petition under Art. 32 of the Constitution of India for  the enforcement of fundamental rights. M.   C. Chagla and Mohan Behari Lal, for the petitioner. S.   T. Desai and O. P. Rana, for respondent No. 1. C.   B. Agarwala and O. P. Rana, for respondent No. 2. O.   P. Rana, for respondent No. 3. P.   M.  Mukhi,  Bishamber  Lal  and H.  K.  Puri,  for  the intervener. The   Judgment   of  WANCHOO,  C.J.,   SIKRI,   SHELAT   and VAIDIALINGAM, JJ. was delivered by SHELAT, J. BHARGAVA,  J., delivered a separate opinion. Shelat, J. On August 17, 1934 the Governor-in-Council of the then United Provinces, in exercise of powers under s. 3  (1) of  the  Indian  Electricity Act, IX of  1910  issued  three licences  to M/s.  Alopi Parshad & Sons Ltd. for the  supply of electrical energy within the tahsil areas of Firozabad in the  district of Agra Shikohabad in the district of  Manipur and  Etawah in the district of Etawah.  The  licences  inter alia provided that the licensee would be supplied electrical

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energy in bulk by the Public Works Department, U.P. and  the licensee  in  its-turn should transmit the same on  its  own high  tension mains within the areas of the  licences.   The licences  also  provided  that the  responsibility  for  the maintenance   of   supply  of  electrical  energy   in   the licensee’s,  plant  shall be borne entirely  by  the  Public Works  Department and thereafter by the licensee.   In  1937 the  licences were assigned by the said M/s.  Alopi  Parshad and Sons Ltd. to the petitioner company with the consent  of the Government.  The petitioner company has since then  been supplying  under the said licences electricity to  consumers within the said areas of the licences.  It is an admitted 314 position  that  though the petitioner company had  the  said licences assigned to it it did not acquire any exclusive  or monopolistic right of supplying electrical energy within the said  areas.   Clause  (e) of sec. 3(2) of  1910  Act  which governed  the  said licences provides that the  grant  of  a licence  thereunder shall not in any way hinder or  restrict the  grant  of a licence to another person within  the  same area of supply for a like purpose. The  Electricity  (Supply)  Act, LIV  of  1948  (hereinafter referred to as 1948 Act) by sec. 5(1) enjoins upon the State Government  to constitute a State Electricity  Board.   Sec. 19(1) provides that the Board may, subject to the provisions of  this Act, supply electricity to any licensee  or  person requiring  such  supply  in  any  area  in  which  a  scheme sanctioned under Chapter V is in force.  The proviso to Sec. 19(1), however, lays down that the Board shall not :-               "(b) supply electricity for any purpose to any               person,  not being a licensee for use  in  any               part  of  the  area of  supply  of  a  licence               without  the consent of the  licensee,  unless               the  maximum demand of the licensee,  being  a               distributing  licensee and taking a supply  of               energy in bulk is, at the time of the request,               less  than twice the maximum demand asked  for               by any such person; or the licensee is  unable               or  unwilling to supply electricity  for  such               purpose  in  the  said part of  such  area  on               reasonable  terms and conditions and within  a               reasonable time."               Section 26 provides that               "Subject  to the provisions of this  Act,  the               Board  shall, in respect of the  whole  State,               have  all  the  powers and  obligations  of  a               licenses,  under the Indian  Electricity  Act,               1910,  and this Act shall-be deemed to be  the               licence of the Board for the purposes of  that               Act." The  definition  of  a  licensee in s.  2(6)  of  1948  Act, however, states that it would not include the Board.  Though the Board is not a licensee for the purposes of the 1948 Act the  Act being deemed to be the licence for the Board  under Sec.  26  it  is a licensee under the  1910  Act.   Sec.  26 however is subject to the provisions of the Act which  means that it is inter alia subject to the provisions of sec.  19. Therefore,  in the absence of a scheme under Chapter V,  the Board,  though  a  licensee  under the  1910  Act,  was  not competent to supply directly electrical energy to  consumers such  as  the 3rd respondent.  This was the  position  until 1961, When the U.P. legislature to remove this disability of the  Board, passed the Indian Electricity  (U.P.)  Amendment Act,   XXX  of  1961.   Section  2  of  the  Amendment   Act substituted  the following, for cl. (e) of sec. 3(2) of  the

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1910 Act: 315               "(e)  grant of a licence under this  Part  for               any  purpose  shall not in any way  hinder  or               restrict-               (i)   the  grant of licence to another  person               within  the  same area of supply  for  a  like               purpose; or               (ii)  the  supply  of  energy  by  the   State               Government  or  the  State  Electricity  Board               wihin   the   same  area,  where   the   State               Government  deems  such  supply  necessary  in               public interest."               It also added after sub-sec. 2, the  following               sub-sec. 3:               "(3) Where the supply of energy in any area of               the   State   Electricity  Board   is   deemed               necessary  under subclause (ii) of clause  (e)               of sub-section (2), the Board may, subject  to               any terms and conditions that may be laid down               by the State Government, supply energy in that               area notwithstanding anything to the  contrary               contained  in  this  Act  or  the  Electricity               Supply Act, 1948."               Sec.  3 of the Amendment Act also added a  new               sub-sec.  (1-B)  in sec. 28 of the  1910  Act.               The new sub-section reads as under:--               "(1-B).     The    State    Government     may               notwithstanding that sanction for engaging  in               the  business  of  supplying  energy  to   the               consumer  in  an area has been  given  to  any               person  under sub-section (1), whether  before               or  after  coming  into force  of  the  Indian               Electricity (U.P. Sanshodhan) Adhiniyam, 1961,               give  direct  supply, or authorise  the  State               Electricity  Board to give direct  supply,  in               the same area." This sub-section has no application to the licensees for, it empowers  the State Government either to supply directly  or authorise  the  Board to directly supply energy even  in  an area for which it has given sanction to a person other  than a licensee to engage in the business of supplying energy  to the public in such area. A perusal of these provisions makes it clear that the  Board can  directly  supply electricity to the consumers  and  the State  Government  also  can authorise the Board  to  do  so provided  the State Government deems it necessary in  public interest that it should be so done.  The condition precedent for  the direct supply by the Board to the consumers in  the area where a licence has been granted to a licensee is  that such  supply  by the Board must be deemed necessary  by  the State Government in public interest. In pursuance of the powers under sees. 46 and 49 of the 1948 Act, the Board by a notification dated April 24, 1962  fixed the  rates and tariffs for electrical energy for the  Ganga- Sarda 316 Grid.   These were to apply to both the licensees  obtaining bulk  supply  from  the  Board  and  to  consumers  to  whom electrical energy was being supplied direct by the Board  in the  area  covered  by the said Grid.   According  to  these rates,  consumers  to  whom  electrical  energy  was   being supplied  direct by the Board would pay a demand  charge  at the rate of Rs. 8/- per KVA and on energy charge at the rate of 4.5nP per KWH for the first 170 KWH per KVA, at the  rate

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of 3.5nP for the next 170 KWH per KVA and at the rate of 3.0 nP per KWH for the remaining KVA consumed during the  month. For the licensees, the rates were Rs. 12.75 per KVA for  the demand charge for the first 500 KVA, Rs. 10 per KVA for  the next 1500 KVA and Rs. 8.50 per KVA for above 2000 KVA of the chargeable demand during the month.  For energy charge,  the rates  were 5 nP per KWH for the first 170 KVM per KVA,  4nP per KWH for the next 170 KWH per KVA and 3nP per KWH for the remaining  KWH per KVA of chargeable demand consumed  during the  month.  The rates chargeable from licensees  were  thus higher  than  those  applicable to  the  consumers  both  in respect  of demand and energy charges even though  licensees would be larger customs who in the normal course of business would  be  charged  lower rates  than  the  consumers.   The notification is not under challenge before us and- therefore it is not necessary for us to consider its validity. As the Board was not yet authorised by the State  Government to  supply electricity directly to the consumers within  the areas   of  the  petitioner  company’s  licences   the   3rd respondent entered into an agreement in 1964 for a period of 3  years  under which the petitioner company was  to  supply electricity  to  it.   On  September  21,  1966  the   State Government  issued  a  notification which  stated  that  the Governor  deemed  it necessary in public interest  that  the State  should  supply energy to the 3rd  respondent  and  in exercise  of the power under sec. 3 (2) (e) of the 1910  Act as  amended  by Act XXX of 1961 directed the Board  to  give direct  supply of energy to the 3rd respondent on the-  same terms and conditions on which the Board was supplying energy I  to other consumers.  Thereupon the 3rd respondent by  its notice dated January 19, 1967 terminated the said agreement. It seems that the Board was still not ready to supply energy direct  to  the 3rd respondent and therefore  on  April  18, 1967,  only  one day before the said  agreement  would  have ended, the 3rd respondent withdrew the said notice.  On June 23  1967, the 3rd respondent, however, gave a  fresh  notice terminating  the said agreement as from September 23,  1967. The result of the notification dated September 21, 1966  was two-fold  : (1) that notwithstanding the subsistence of  the petitioner  company’s licences and its right  thereunder  to supply energy to consumers within the areas of its licences, the Board 317 was directed to supply energy to the 3rd respondent and  (2) that  the  Board was directed to supply energy  to  the  3rd respondent at rates lower than the rate charged by the Board from the petitioner company as the licensee. Mr.  Chagla appearing for the petitioner company raised  the following three contentions : (  1  ) that the amended sec. 3 (2) (e) was invalid  on  the ground  that  it amounted to acquisition of  the  petitioner company’s property and as no compensation has been  provided for such acquisition cl. (e) of s. 3 (2) was in violation of Art. 31(2) of the Constitution; (2)  that  the  notification dated September  21,  1966  was ultra  vires  sec. 3 (2) (e) as the direction by  the  State Government  to the Board to supply electricity  directly  to the 3rd respondent was not founded on public interest; and (3)  that the said direction to supply electricity at rates- chargeable   from  the  consumers  as  against   the   rates chargeable to the licensees was discriminatory. The  respondents, on the other hand, contended that the  3rd respondent  was  a concern in which the  Government  has  an interest  to the extent of 51 % of its share  capital,  that therefore,  it  was almost a public  utility  concern,  that

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supply  by the petitioner company to the 3rd respondent  was found  to  be defective resulting in lay off  of  labour  on several occasions and consequent loss in production and that therefore the Government was justified in public interest to issue   the   said  notification.   In  support   of   these allegations  the  respondents  filed an  annexure  to  their counter  affidavit  showing  low voltage  and  high  tension trippings during the months of April, May and June 1966.  It was alleged that owing to defective and short supply by  the petitioner  company  there Were high  tension  trappings  on numerous occasions resulting in low voltage, the consequence Whereof was that the 3rd respondent was obliged to stop  the working  of  the  Mills sometimes for  several  hours.   The petitioner   company’s   case,  however,  was   that   these allegations were an afterthought and that the real object in issuing  the  notification dated September 21, 1966  was  to subvert  the  petitioner  company’s rights  under  the  said licences. We are inclined to think that there is considerable force in the  contention  of  the  petitioner  company.   Though  the allegation  was  that  supply of energy  by  the  petitioner company  to  the 3rd respondent suffered from  shortage  and other  defects the 3rd respondent does not seem to  have  at any  time made any complaint about such shortage or  defects either  to the petitioner company or to the Board or to  the State Government.  Similarly, the Board also does 318 not  seem to have at any time complained to  the  petitioner company   about  such  defective  supply.   Even  when   the petitioner company, after the said notification was  issued, made a representation to the State Government to  reconsider its  decision  the Government did not, while  rejecting  it, rely upon the fact that the petitioner company was not in  a position to give full and proper supply of energy to the 3rd respondent  or that supply by it was, as now alleged,  short or defective.  It is an undisputed fact that the  petitioner company  has been throughout all these years supplying  high tension energy to the 3rd respondent and the 3rd  respondent has  been  converting  such high  tension  energy  into  low tension energy through its own transformers.  The  aforesaid annexure  shows that though the high tension trippings  were only for a few minutes except on three or four occasions low voltage  was for several hours.  In some cases though  there was no tripping at all there was low voltage for as long  as sixteen hours.  It is clear, therefore, that the  petitioner company  had  no difficulty in maintaining  supply  of  high tension  electrical energy to the 3rd respondent  and  there must  have been some defect in the stepping down system  of. the  3rd  respondent  resulting  in  low  voltage.   It   is impossible   thus  to  find  from  the  annexure  that   the petitioner  company was guilty in any manner of shortage  or defective   supply  of  high  tension  energy  to  the   3rd respondent.    The   allegation  therefore  that   the   3rd respondent suffered in production and losses as a result  of short  or defective supply by the petitioner company is  not borne  out  by the record in this case.  If  there  was  any justification for the allegation now made by the respondents it  is  inconceivable  that  for all  these  years  the  3rd respondent  would  not  have made  any  complaint  for  such defective  supply  either  to  the Board  or  to  the  State Government. It  is certain that but for the amendment of sec. 3 (2)  (e) of  1910 Act, the Board, though a licensee under  that  Act, could   not  have  supplied  energy  directly  to  the   3rd respondent in the absence of a scheme under sec. 19 of  1948

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Act.  Under the proviso to that section the Board would  not have  been entitled to supply energy for any purpose to  any person not being a licensee for use in any part of the  area of  supply  of  a  licensee  without  the  consent  of  such licensee.  It is true that under its licences the petitioner company  was  not conferred monopolistic  rights  to  supply energy  to  the  consumers and  the  Government  could  have granted  another  licence  to  another  licensee.   But  the Government has not granted such licence to any other person. But  it was said that the Board was another  such  licensee. As  already  stated  the Board could  not  have  distributed energy  to the consumers though it is a licensee under  1910 Act  unless  (a)  there  was a scheme or  (b)  that  it  was authorised  in public interest under the amended sec. 3  (2) (e).  Neither of these two conditions having been  fulfilled it 319 is clear that the notification of September 21, 1966 and the direction contained therein to the Board to supply energy to the  3rd  respondent  were  in  breach  of  the   petitioner company’s rights under its licences and the requirements  of the amended sec. 3 (2) (e). Apart from its being in breach of the amended sec. 3 (2) (e) and the petitioner company’s rights under its licences,  the notification  and  the Government’s direct on to  the  Board therein results in clear discrimination.  If the Board  were to supply energy directly to the 3rd respondent it has to do so  at  rates lower than the rates at which  electricity  is supplied  by it to the petitioner company.   The  petitioner company  being  thus  charged  at higher  rates  must  as  a distributor  charge  hi-her rates from its  other  consumers with the result that the 3rd respondent would get energy  at substantially  lower  rates than other  consumers  including other   industrial   establishments  in   the   area.    The notification thus results in discrimination between the  3rd respondent  on the one hand and the other consumers  on  the other as also between the 3rd respondent and the  petitioner company. It follows therefore that the notification of September  21, 1966  cannot be sustained as a valid notification as  it  is discriminatory  and is also in breach of the amended sec.  3 (2) (e) of 1910 Act.  In that view the Board is not entitled to supply directly electricity to the 3rd respondent as  the direction  contained in the said notification which  is  the only authority under which it could so supply is invalid  in law.  In this view, it is not necessary for us to decide the question  whether  the  amended sec. 3 (2)  (e)  amounts  to acquisition and whether such acquisition is in violation  of Art.  31 of the Constitution.  The said  notification  being thus invalid respondents 1 and 2 are directed not to, supply electrical  energy  directly  to the  3rd  respondent.   The respondents will pay to the petitioner company the costs  of this petition. Bhargava,  J.  I agree with my brother Shelat  J.  that  the notification of September 21, 1966 cannot be sustained as  a valid   notification  because  it  is   discriminatory   and consequently  I concur in the order proposed by him.  I  am, however, not prepared to hold that that notification is also invalid,   on  the  other  two  grounds,  viz.,   that   the notification  and  the directions contained  therein  to  he Electricity  Board to supply energy to the third  respondent were in breach of the petitioner Company’s rights under  its licence and of The requirements of the amended section 3 (a) (e).  I may briefly indicate the reasons for my view. It  is  admitted on all hands that under its  licences,  the

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petitioner company was not conferred monopolistic rights  to supply energy 320 to  the  consumers in the area covered by the  licences  and that  Government  could  have  granted  another  licence  to another licensee to supply energy in the same areas  without violating any provision of the Electricity Act of 1910 or of the  conditions  or  which  licences  were  granted  to  the petitioner Company.  It in true that the Government has  not granted  any  such licences to any other person but,  in  my opinion the effect of the subsequent legislation is to bring into   existence  another  statutory  licencee   viz.,   the Electricity  Board and any directions permitting  the  Elec- tricity Board to supply electricity in the areas covered  by the  petitioner Company’s licences cannot be held to  be  in violation  of  the  conditions of those  licences.   By  the Electric  Supply  Act  1948, the Board  ’was  constituted  a licensee for purposes of the Electricity Act of 1910, though section  26, which brought about this result, provided  that in that capacity, the Board was subject to other  provisions of  the  Electric Supply Act 1948.  One  such  provision  is contained  in  s.  19(1)  of the  Act  of  1948.   The  U.P. Electricity  Amendment Act 1961, however, introduced  provi- sions  in the Act of 1910 the result of which was  that  the Board, in acting as a licensee under the Act of 1910, was no longer  subject to the limitation laid down in s.  19(1)  of the Act of 1948.  It has not been contended that either  the Supply Act of 1948 or ’the U.P. Electricity Amendment Act of 1961   was  not  competently  enacted  by  the   appropriate legislature.  The Supply Act of 1948 was no doubt passed  by the  Central Legislature in respect of a concurrent  subject but the U.P. Electricity Amendment Act of 1961 was  reserved for  the  assent of the President and, having  received  the assent  of the President, the provisions of that  Act  would prevail to the extent to which they may be inconsistent with the,  Central Act of 1948.  The result of  that  legislation was  that the Electricity Board became a licensee under  the Electricity  Act  of 1910 and was no longer subject  to  the limitation  laid down in s. 19(1) of the Electricity  Supply Act of 1948.  The only limitation after the enactment of the U.P.  Electricity Amendment Act 1961 that remained was  that the  Board  could supply electricity only after  the  Stat-- Government  issued a valid notification under clause (e)  of section  3(2) of the Act of 1910.  If the  State  Government was competent under the original section 3(2) (e) of the Act of  1910  to  grant a licence to any person  for  supply  of electricity  in the areas covered by the licences issued  to the  petitioner Company, I do not see why v  similar  result could  not be validly brought about by legislation,  by  the appropriate  legislatures creating a statutory licensee  for purposes  of  the  Act of  1910.   Consequently,  the  power granted  to  the Electricity Board by  the  notification  of September  21, 1966 to supply electricity to a  consumer  in the  area covered by one of the licences of  "he  petitioner Company cannot be, held to be in violation of the conditions of the licence. 321 I  further considered that, in view of the language  of  the provisions contained in the amended section 3(2) (e) of  the Act of 1910, it is not competent for this Court in this writ petition,  on  the material available, to declare  that  the notification  of September 21, 1966 is invalid  because  the direction  contained  therein  was not  made  by  the  State Government in public interest.  The power under the  amended section  3 (2) (e) is to be exercised when Government  deems

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it  necessary in public interest.  The notification, on  the face  of it, shows that the State Government did  apply  its mind  before issuing that notification and form the  opinion that  in  this particular case it was  necessary  in  public interest  that  the  Board  should  be  directed  to  supply electricity  to respondent No. 3 in the area covered by  one of the licences of the petitioner Company.  The opinion  was formed by the.  State Government on material which I do  not think  can be said to be totally irrelevant for the  purpose of  forming such opinion.  As long as the  State  Government based  its order on an opinion formed on relevant  material, it is not open to the courts to examine and take a different view-  on  the  basis  of other material  such  as  want  of complaints  by respondent No. 3 to the Government  that  the supply   of  energy  by  the  petitioner  Company  was   not satisfactory.  It is not for courts to sit in judgment  over the view of the State Government which the State  Government is  required  to form in order to make an  order  under  the amended section 3 (2) (e).  Consequently, I cannot hold that the  notification of September 21, 1966 was invalid  on  the ground  that it was issued in breach of the amended  section 3(2) (e) of the Act of 1910. Y.P.                  Petition allowed., 322