9911796707
TMI Blog1975 (7) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. 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 in 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 30-7-1941 was accordingly entered into between the petitioner and the Government of the State of Travancore for supply of electrical energy at certain rates for a period of 34 years from 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered into between the petitioner and the Board. This modification did not affect either the rates or the duration of the Principal Agreement. 4. 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 1-1-1965 a total of 12500 Kilowatts 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 18-9-65 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. 5. Whilst these agreements were in force, the Board framed the Kerala State Electricity Boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 tariffs 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. 6. 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.&quo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 it necessary or expedient to fix different tariffs for the supply of electricity to any person not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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, therefore, 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 60, as they have been entered into by the appellant with the Board from the very beginning. The Question is whether the Board is entitled to override the stipulation as to charges contained in these agreements and enhance the charges by unilateral action as it has purported to do. 8. The Board relied principally on two provisions of the Supply Act namely Sections 49 and 59 in support of its claim to increase the charges unilaterally 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. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 59 to enhance the charges in case of operational loss. The statutory power cannot be bartered away by a contractual stipulation. If it were held permissible to the Board to bind itself by a contractual stipulation not 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 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. 9. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (1) of Section 49 empowers the Board to fix uniform tariffs. The fixation of uniform tariffs need not necessarily be regionwise or area wise , nor need it be only in respect of particular classes of consumers. There is no limitation on the exercise of the power of fixing uniform tariffs save that certain factors are laid down in Sub-section (2) of Section 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 where, having regard to special circumstances, it may be found necessary to make departure from the uniform tariffs and to fix special tariffs for them. Sub-section (3) of Section 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 electric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conferred under Sub-section (3) of Section 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 Section 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 fixed by the Board under Sub-section (3) of Section 49. When uniform tariffs are fixed by the Board under Sub-sections (1) and (3) of Section 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-section (4) of Section 49 controls the action of the Board in fixing tariff under Sub-section (3) of Section 49 and it has no application where uniform tariffs are fixed under Sub-sections (1) and (2) of Section 49. 10. Having analysed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m and their successors not to use those powers is void. 12. This case was followed by Russell. J. in 1924 1 Ch 557. 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 navigate the Ouse, a regular annual payment of £. 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 (1883) 8 App 623 (supra) and another case Staffordshire and Worcestershire Canal Navigation v. Birmingham Canal Navigation 1866 LR 1 HL 254 observed: "the same principle underlies many othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion'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. 15. The position is different where a statutory pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 inhibited 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 should certainly be binding, but when the specified circumstances arise, the public authority would have the Power to override the stipulation and act in derogation of it. But that again would be a matter of construction. 17. 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-section (3) of Section 49 and, therefore, there could be no Question of such stipulations being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements 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 Section 49. 18. We then turn to consider the argument based on Section 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 [1968]3SCR137 that "cost...is not the sole or only Criterion for fixing the tariff". Now, obviously where, by a stipulation validly made under Sub-section (3) of Section 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-can never be regarded as 'practicable'. Section 59 does not give a charter to the Board to enhance its charges in breach of contractual stipulation. The Board can adjust its charges under the section only in so far as the law permits it to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 fortiori that there is nothing in Section 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. 20. We are, therefore, of the view that the Board was not entitled to enhance the charges in derogation of the stipulations as to charges contained in the agreements with the appellant and the notification dated 28th November 1969 fixing tariffs 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 enforci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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