# [1992] 1 S.C.R. 151

- **Citation:** [1992] 1 S.C.R. 151
- **Court:** Supreme Court of India
- **Decided:** 1992-01-16
- **Case number:** Writ Petition No. 1818 of 1984
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1992-1-s-c-r-151-11434
- **Pages:** 28

## Headnote

y
KANORIA CHEMICALS AND INDUS1RIES LTD. AND ANR.
A
v ..
STAIB OF U. P. AND ORS. AND VICE VERSA
JANUARY 16, 1992
[S. RANGANATHAN, FATHIMA BEEVI AND N. D. OJHA, JJ.] B
Electricity (Supply) Act, 1948: Section 60 (As introduced by section
7 of Electricity Laws (U.P. Amendment) Act, 1983.
Company-Electricity Board-Contract for supply of electricity at
concessional rates on special considerations-Power of Electricity Board to C
revise rates-V.P. Gazette Notification dated 29.10.82--Schedule-Levy of
HV-2 rates i.e. uniform tariff applicable to "bulk power" consumers in
substitution of contracted rates-Validity of-Held fixation of rates was not
vitiated-Revision of rates can be given retrospective eff ecl-F ailure to
specify the precise manner in which the rates were arrived at does not
vitiate the rates fixed-Power to revise tariff can be exercised more than D
once-Electricity Board can fix rates higher than HV-2 rates-But levy of
rates higher than HV-2 rates on the Company held not justified under the
circumstances.
)·.
Section 49-Electricity Board-Revision of rates-Factors to be taken
into account-Di.,·tinction between section 49 and 60 explained.
E
Electricity Laws (U.P. Amendment) Act, 1983 (Act 12 of 1982):
Section 7-Difference in English and Hindi version of Act, Absence of
words "for the first time" in Hindi version of Act-Effect of.
The appellant-company set up a caustic soda industry at Renukoot F
involving the use of electricity as the main raw material. On 30.9.63 it
entered into a contract with the State of Uttar Pradesh for supply of
electricity for a period of 25 years from 1.4.64, to the extent of 6.5 NW
from the Rihand Hydel station at a fixed rate of 2.5 paise per unit and
an additional supply of 1.5 NW from an inter-connection at the rate of G
5 NP per unit. The terms of the contract provided that the transmission
and distribution losses were to be borne by the company and that the
rates could be raised after sixteen years but any enhancement in rates
was not to exceed 10 per cent of the rates agreed upon.
Subsequently, the UP Government enacted the Electricity Laws H
(Uttar Pradesh Amendment) Act, 1983 which came into force from
151
152
SUPREME COURT REPORTS
(1992] 1 ~. c. R.
20.5.1983. Section 7 of the said Act amended section 60 of the Eleetricity
A Supply Act, 1948 by inserting sub-sections (3) to (5) with retrospective
effect from April 1, 1965. The Amended Act enabled the State and the
Board to modify the rates of supply of Electricity to appellant under the
contract of 30.9.63. Simultaneously the Parliament also amended Section 59 of the Electricity Supply Act by the Act 18 of 1983 enabling the
Electricity Board to fix the tariff in such a way so as to build up a
B statutory surplus fixed by the State Government.
On the passing of the Amendment Act, the Electricity Board informed the appellant-company that the rates were proposed to be
revised and later it informed the appellant-company that on 28.9.83 the
State Government, by its Gazette Notification dated 29th October, 1982,
C had approved the levy of HV -2 rates (i.e. uniform tariff applicable to
'Bulk power' consumers) in substitution of the rates mentioned in the
·agreement of 30th September, 1963. The effect of the revision was to
oblige the appellant-company to pay 57.71 paise per unit for 1983-84
and 61.60 paise per unit for 1984-85. Accordingly, supplementary bills
were raised demanding Rs. 3.07 crores from the appellant-company.
-,,
D The appellant filed a writ petition in the High Court of Allahabad
assailing the Validity of section 7 of the amending Act and the right of
the Board to enhance the rates.
By its order dated 2.4.87 the High Court allowed the writ petition
and quashed the approval dated 28.9.83 given by the State Government
E to the new rates and the consequential demands of the Electricity Board
but left it to the Board and State to fix revised rates afresh by directing
the respondents (1) not to charge the uniform tariff rate for the

## Text

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y
KANORIA CHEMICALS AND INDUS1RIES LTD. AND ANR.
A
v ..
STAIB OF U. P. AND ORS. AND VICE VERSA
JANUARY 16, 1992
[S. RANGANATHAN, FATHIMA BEEVI AND N. D. OJHA, JJ.] B
Electricity (Supply) Act, 1948: Section 60 (As introduced by section
7 of Electricity Laws (U.P. Amendment) Act, 1983.
Company-Electricity Board-Contract for supply of electricity at
concessional rates on special considerations-Power of Electricity Board to C
revise rates-V.P. Gazette Notification dated 29.10.82--Schedule-Levy of
HV-2 rates i.e. uniform tariff applicable to "bulk power" consumers in
substitution of contracted rates-Validity of-Held fixation of rates was not
vitiated-Revision of rates can be given retrospective eff ecl-F ailure to
specify the precise manner in which the rates were arrived at does not
vitiate the rates fixed-Power to revise tariff can be exercised more than D
once-Electricity Board can fix rates higher than HV-2 rates-But levy of
rates higher than HV-2 rates on the Company held not justified under the
circumstances.
)·.
Section 49-Electricity Board-Revision of rates-Factors to be taken
into account-Di.,·tinction between section 49 and 60 explained.
E
Electricity Laws (U.P. Amendment) Act, 1983 (Act 12 of 1982):
Section 7-Difference in English and Hindi version of Act, Absence of
words "for the first time" in Hindi version of Act-Effect of.
The appellant-company set up a caustic soda industry at Renukoot F
involving the use of electricity as the main raw material. On 30.9.63 it
entered into a contract with the State of Uttar Pradesh for supply of
electricity for a period of 25 years from 1.4.64, to the extent of 6.5 NW
from the Rihand Hydel station at a fixed rate of 2.5 paise per unit and
an additional supply of 1.5 NW from an inter-connection at the rate of G
5 NP per unit. The terms of the contract provided that the transmission
and distribution losses were to be borne by the company and that the
rates could be raised after sixteen years but any enhancement in rates
was not to exceed 10 per cent of the rates agreed upon.
Subsequently, the UP Government enacted the Electricity Laws H
(Uttar Pradesh Amendment) Act, 1983 which came into force from
151
152
SUPREME COURT REPORTS
(1992] 1 ~. c. R.
20.5.1983. Section 7 of the said Act amended section 60 of the Eleetricity
A Supply Act, 1948 by inserting sub-sections (3) to (5) with retrospective
effect from April 1, 1965. The Amended Act enabled the State and the
Board to modify the rates of supply of Electricity to appellant under the
contract of 30.9.63. Simultaneously the Parliament also amended Section 59 of the Electricity Supply Act by the Act 18 of 1983 enabling the
Electricity Board to fix the tariff in such a way so as to build up a
B statutory surplus fixed by the State Government.
On the passing of the Amendment Act, the Electricity Board informed the appellant-company that the rates were proposed to be
revised and later it informed the appellant-company that on 28.9.83 the
State Government, by its Gazette Notification dated 29th October, 1982,
C had approved the levy of HV -2 rates (i.e. uniform tariff applicable to
'Bulk power' consumers) in substitution of the rates mentioned in the
·agreement of 30th September, 1963. The effect of the revision was to
oblige the appellant-company to pay 57.71 paise per unit for 1983-84
and 61.60 paise per unit for 1984-85. Accordingly, supplementary bills
were raised demanding Rs. 3.07 crores from the appellant-company.
-,,
D The appellant filed a writ petition in the High Court of Allahabad
assailing the Validity of section 7 of the amending Act and the right of
the Board to enhance the rates.
By its order dated 2.4.87 the High Court allowed the writ petition
and quashed the approval dated 28.9.83 given by the State Government
E to the new rates and the consequential demands of the Electricity Board
but left it to the Board and State to fix revised rates afresh by directing
the respondents (1) not to charge the uniform tariff rate for the period
beginning from 20th May, 1983 till the rates were fixed in accordance
with section 60(5) (a); and (ii) that the rates applicable to the appellants
F should be determined having regard to the individual circumstances of
the appellant.
The Electricity Board and the State Government preferred an
appeal to this Court. Aggrieved by the fact that in applying the HV -2
rates the Board and the ·State had not taken into account the special
G factors relevant to the supplies made to it, the appellant also filed an
appeal in this Court.
In the meantime, pursuant to the directions of the High Court the
Board fixed the revised rates on 28.3.88 for the supply from 20th May,
H 1983 which were much higher than the HV-2 rates fixed earlier and
y
KANORIA CHEMICALS v. STATE
153
quashed by the High Court.
A
The appeals came to be heard by this Court on April 10, 1991
when this Court directed that the appellant should make a representa·
tion to the State Electricity Board setting out the individual factors
which should be taken into account in fixing the rates applicable to
them within the meaning of section 60(5) (a) of the 1948 Act and that
the State Government should reconsider the fixation after considering B
the recommendations made by the Board as well as the representations
of the appellant.
Accordingly the State reconsidered the matter and by its order
dated 31.8.92 approved the rates fixed by the State Government on C
28.3.88.
The appellant challenged the validity of the rates fixed contend·
ing that (i) the fixation of rates as on 31.8.1992 was not valid because
(a) the respondents have not complied with this court's directions dated
10.4.1991 as they have neither disclosed the factors based on which the
rates were revised in March 1988 nor indicated ·the monetary incidence D
or impact of the factors taken into account; (b) in the process of re·
fixation of the rates there was no genuine exercise .to consider relevant
factors in determining the rate under section 60 (5) (a); (c) that the
Board had not set out anywhere the precise manner in which the rates
recommended by them were arrived at; (ii) Section 60 cannot be
interpreted so as to give power to the Board to fix rates retrospectively E
because (a) such an interpretation precludes the Board and the State
from revising the rates prospectively; (b) if the power is held exercisable more than once, it will permit successive revisions each superseding the earlier one, a position that could lead to harrassment; (c) that
the Hindi version of the Amendment Act is differently worded and does F
not contain the words "for the first time" found in the English version
and in case of a conflicting version between Hindi and English version
the Hindi text should be the key to find out the true intention of the
Legislature; and (iii) in view of the facts (a) that the company established its industry in a backward area at the request of the State and
in public interest; (b) the transmission and distribution losses are borne G
by the appellant and (c) electricity is one of the raw materials needed
for its industry the appellant should be charged less than the HV-2
rates.
On behalf of the Electricity Board it was contended that the H
154
SUPREME COURT REPORTS
[1992] l S. C.R.
A demand or rates higher than HV ·2 rates was justified because (a) the
Company has been getting substantial supplies or electricity at nominal
rates from 1963 to.1983; (b) The Board has incurred heavy losses over
the years by supplying electricity at concessional rates; and (c) there
was a necessity to build up a statu.ory surplus prescribed by section 59.
B
Allowing the Company's appeal in part and dismissing the Elec·
tricity Board's appeal, this Court,
HELD: I. The fixation or revised rates is not vitiated. [173-E]
2. Section 60 does not require the Board or the State Government
C to explain each and every step in its calculation. All that the Electricity
Board has to do is to take into consideration the ractors relevant under
section 60(5) and propose rates for fixation to the State Government. It
is in order to ensure that these recommendations take into account all
relevant ractors that an opportunity has been provided to the consumer
to satisry the Board as well as the State Government that the rixation
D has taken into account certain relevant factors. Therefore, the rate
revision proceedings were not vitiated for the reason that the Board has
not set out the precise manner in which the rates recommended by them
were arrived at. [172 D-E, 172-C]
2.1 Apart from the general factors which have been taken into·
E
account in fixing the general tariff rates, the Board has, in making its
recommendations, taken into account the purpose ror which supply was
required by the appellant along with the factor of recurring losses
incurred by the Board year after year and its statutory requirements to
maintain a minimum surplus or 3 per cent as required under section 59
or the Supply Act, 1948. [173-D]
F
2.2 The rates recommended by the State Electricity Board and
approved by the State Government were within the knowledge or the
appellant-company. The appellant-company filed its representation.
After considering the representation, the Board made its recommendaG lions to the State Government and a copy or the recommendations were
also available to the appellant. The appellant bad run opportunity to
meet the various points set out in the recommendations of the Board.
The comments or both the Board and the Appellant were taken into
account by the State Government before finally. approving or the rates
proposed by the Board. Therefore, the appellant-company bad full
H opportunity to place all its special reature before the Board and the
y
KANO RIA CliEMICALS v. STA TE
155
State Government. [171H, 172A,B, 173E)
A
2.3 If one compares the two provisions viz. sections 49 and 60 one
will find that most of the elements are common to the two provisions.
Both under section 49 and section 60 the authorities have to take into
account the geographical position or any area, the nature or supply and
purpose for which supply is required and any other relevant factor.
The only difference between the two provisions is that since section 49 B
deals with a general fixation while section 60(5) deals with a rixation for
a particular individual case, there may be some special factors to be
taken into account which may or may not be germane while rixing the
general lllriff under section 49. [172H, 173-A)
Indian Aluminium Company Ltd. v. Kera/a State Electricity Board, C
(1976) 1 S.C.R. 70; cited.
3. A retrospective effect to the revision or rates is clearly envisaged by section 60. One can easily conceive a weighty reason for saying
so. If the section were interpreted as conferring a power or revision only
prospectively, a consumer affected can easily frustrate the effect or the D
provision by initiating proceedings seeking an injunction restraining the
Board and thus getting the revision deferred indefinitely. Or, again, the
revision or rates, even if effected promptly by the Board and State, may
prove infructuous for one reason or another. Therefore, it would be a
very impractical interpretation or the section to say that the revision or
rates can only be prospective. [174E-G]
E
\
3.1 The mandate or section 60 is only that the rates to be charged
on supplies for which payment becomes due after 20.8.83 shall be as
rixed by the Board. The powers of the Board in rixing the ratesincluding the dates from which they will be operative are not restricted F
in any manner. The Board is at complete liberty to rix different rates
from different dates and that scheme or rixation will be read with the
contract. Only the Board cannot revise the rates in respect or supplies
for which payment under the contract fell due before the Amendment
Act came into force. (175-B-C]
3.2 The power under section 60 is exercisable more than once.
However, while making a subsequent revision, the authorities will not
normally tamper with an earlier revision or alter the dates of effectiveness rixed for the earlier revision without a valid reason to do· so. If this
G
is done, it will be open to a court to examine the basis thereof and H
156
SUPREME COURT REPORTS
[1992] 1 S. C.R.
sustain it only where the earlier rJXation was based on an error or
A misconception or the like and called for modification. [175D-F]
3.3 Although the Hindi version of the Amendment Act is differently worded and does not contain the words ''for the first time" found
in the English version, the Hindi version does not really alter the
position; actually it is the presence of the words "for the first time" in
B the English version that create ambiguity. Without these words, the
clause clearly provides that all supply of electricity, for which payment
is to be made after 20.5.83, i.e. coming into force of the Amendment
Act, will be charged at the rates to be rlXed by the Board. Therefore,
the rJXation by the Boa.rd of rates from 20.5.83, and, at different rates
C for different period of time, is unexceptionable. [175F-H, 176-A]
Maia Badal Pandey v. Board of Revenue, (1974) U.P.T.C. 570; referred to.
4. There are no obstacles, statutory or theoretical, standing in the
way or the Board fixing rates for the company which will be higher than
D the rates applicable to bulk consumers. The provision in s. 60(5)(a) is
intended to enable the Board and State to cut off the shackles cast by
an ancient contract entered into at a time when conditions were totally
different. It confers an absolute and unrestricted enabling power to
revise the rates· in an appropriate mallner. [174-A]
E
F
While revising rates, the only limitation which the statute requires
the authorities to keep in mind are the factors mentioned in the section.
Whether the revised rates for the consumer governed earlier by the
contract should be higher or lower than, or equal to, the tariff rates
would depend on a large number or considerations, in particular, the
basis on which, and the point of time at which, those general rates were
rJXed. In principle , it is quite conceivable that, in an appropriate case,
a consideration of the relevant factors may justify even a rate higher
than the general tariff rates intended fer the particular category or
consumers. [174B-D]
G
4.1 However, there is no material to justify any departure from
the HV -2 rates in the case or the appellant. The special circumstances
pleaded by the appellant-company have Jost their importance with the
passage or time. The conditions that prevailed in 1963 are not valid and
the appellant has had the benefit or concessional rates for twenty years.
H The consideration that electricity is a ''raw material" in the assesee's
KANORIA CHEMICALS v. STATE [RANGANATHAN, J.J
157
business is, again irrelevant for it can mean nothing more than that the A
appellant needs substantial quantities of the energy and there is no
reason why it should not pay for it at the normal market rates.
Therefore, the appellant has no valid justification for staking a claim to
less than the HV-2 rates. [177-B-DJ
4.2 Equally, the authorities have no case to raise the rates beyond
the HV-2 rates. The huge losses that the Board has been incurring and B
the statutory justification for escalation in the rates keeping in view the
necessity to build up a surplus is an aspect of working which should
affect all the consumers equally. May be the Board can, in appropriate
circumstances, seek to make up for a part of the losses by hiking up the
rates to one particular category of consumers but that would not be
justified here as the transmission and distribution losses in respect of C
the supply to the appellant are borne by it and, in the absence of some
special vital reason, it would not be equitable to fJX the rates of supply
to the appellant above the rates applicable to other HV-2 consumers.
Therefore, there is no justification to charge more than HV-2 rates
from the appellant. [177EG, 178-B]
4.3 The determination of 1988 and 1991 are quashed. The State
Electricity Board is directed to charge the appellant-Company from
20.5.83 to 31.3.89 al the HV-2 rates applicable to other consumers.
[178-B]
D
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1306 of E
1988.
From the Judgment and Order dated 2.4.1987 of the Allahabad High
Court in Writ Petition No. 1818 of 1984.
F
H.N. Salve, P.P.Tripathi, Manoj Swarup and KJ. Johan for the Appellants.
B.Sen, Gopal Subramaniam, Prashant Kumar and Mrs. S. Dikshit for
the Respondents.
The Judgment of the Court was delivered by
RANGANATHAN, J. There was a time when, in ahnost every State
G
in India, people were invited to avail of the supply of the electric energy
produced in the State and offered special concessions when they agreed to H
158
SUPREME COURT REPORTS
[1992] I S. C.R.
A do so in bulk under long-tenn contracts. A situation, however, has since
developed when the demand for the energy increased so rapidly that, despite
the quantity of available electric energy also having gone up tremendously
the rates of supply agreed upon became uneconomical. The State and its
instrumentalities, who were supplying the energy, found themselves without
power to revise the rates to meet the altered situation until the legislature
came to the rescue. It is this situation in the case of Kanoria Chemicals and
B Industries Ltd. (hereinafter referred to as 'the appellant') which has given
rise to these appeals.
The Electricity (Supply) Act, 1948, (hereinafter referred to as 'the
1948 Act') entrusted the control over the generation and distribution of
electric energy to -Electricity Boards constituted under the Act. In the State
C of Uttar Pradesh, the U.P. State Electricity Board (hereinafter referred to as
'the Board,) was constituted on 1.4.1959. At that time, the State Government (hereinafter referred to as 'the State') was in the process of establishing the Rihand Hydro-Electric Genecating Plant, which become operational
w.e.f. 1.2.62, and attained an ultimate installed capacity of 300 M.W. The
control of this remained with the State till 31.3.1965. Since the supply of
D
electrical energy was then available in abundance and only the eastern area
of the State was served by the plant, the State considered it expedient to
enter into contracts with bulk purchasers both with a view to ensure
maximum utilisation of the electricity available and with a view to the
industrialisation of the eastern areas of the State. In particular the State was
keen on the industrial development of the district of Mirzapur, which was
E considered to be an extremely backward area. The State was keen that
power intensive units be set up in close proximity of Rihand so that
electricity could be supplied to these units from the Rihand power plant.
One feature of the supply of electricity from Rihand was that the metering
was done at the point of generation so that transmission and distribution
F losses and costs could be borne by the consumers of electricity.
The appellant set up an industry for manufacture of caustic soda at
Renukoot sometime in 1964. According to the appellant, this industry
involved the use of electricity as the main raw material, the other raw
material needed being salt. It is said that there were considerable disadvanG tages in setting up the proposed caustic soda unit in the district of Mirzapur,
principally due to its distant location from areas from which salt had to be
transported. The appellant, it is said, could easily have set up its factory in
some other State with greater facilities and advantages but it was induced
to set up the caustic soda plant ai Pipri in the district of Mirzapur on
H account of the assurance given by the State that it will supply hydro electric
KANORIA CHEMICALS v. STATE [RANGANATHAN, J.]
159
power to the assessee from the Rihand power plant on a long term basis at A
a cheap rate. It is claimed that, but for this promise, the appellant would
never have chosen Pipri or the district of Mirzapur for the location of this
plant.
After elaborate discussions between the State Government and the
I
promoters of the appellant company, the plant was set up at Pipri and a B
contract was entered into between the State Government and the appellant
on 30.9.1963 ensuring the supply of electricity from the point of generation
to the appellant for a period of 25 years from 1.4.1964. The supply, to the
extent of 6.5 MW. was to be from Rihand hydel station at a fixed rates of
2.5 paise ier unit. An additional supply of 1.5 MW was also promised from
.-L
an inter-connection at the rate of 5 N.P. per unit. The rates could be revised c
after the first sixteen years but any enhancement in rates was not· to exceed
10 per cent of the rates agreed upon.
~~t,
<\
The State agreed further to supply 4.5 MW to the appellant from the
\;ii
Obra Hydro-Electric Project on such rates as would be fixed subsequently.
It may be mentioned that this clause gave rise to disputes which were D
referred to arbitration. An award was made by justice D.P. Madan, a retired
judge of this Court, which was made a decree of this Coun by an order
dated 1.4.1987. Under the award, the rate of supply was fixed at 8.69 paise
per unit. The State's grievance is that it incurred a loss of Rs. 10.55 crores
by supplying electricity from Rihand between 1.4.64
and 19.5.83 at
concessional rates instead of applying the uniform tariff applicable to other E
"bulk power" consumers, briefly referred to as "HV-2 rates." It says also
H
that it likewise suffered a loss of 12.4 crores due to the supply at 8.69 paise
I
instead of normal rates, from Obra between 1.4.71 and 31.3.89, when the
'
agreement, came to an end by efflux of time.
~
Obviously, it was not economical to continue supplying energy at the F
;
preposterously low rates to which the State had committed itself in 1963 on
. _
_,.----;
\
account of the conditions that prevailed at the time of the agreement. The
powers of the State or the Boards to revise contractual rates unilaterally
were examined by this Coun in Indian Aluminium Company Ltd. v. Kera/a
State Electricity Board [1976] 1 SCR 70. It is sufficient to say that, after
G
considering the provisions of section 49 and 59 of the Supply Act, the Coun
held that the Electricity Boards were not entitled to enhance charges in
derogation of stipulations contained in agr,eements enfered into between
parties. This decision led to the provisions of iRe•Supply Act being amended
by various States. The States of Karnataka, Orissa and Rajasthan brought
in amendments enabling the Electricity Board to supersede contracts and H
"'"
•
160
SUPREME COURT REPORTS
[1992] I S. C.R.
A
revise the rates contained in earlier agreements. The U.P. Government, also
enacted the Electricity Laws (Uttar Pradesh Amendment), Act, 1983, to vest
the State's agreement with the Board and to enable the Board to revise the
contractual rates. The Act came into force from 20.5.1983. Section 7 of the
said Act amended Section 60 of the Supply Act, 1948 by inserting the
following sub-sections (3) to (5) with retrospective effect from April I,
B 1965 :
c
D
E
F
G
H
(3) All expenditure which the State Government may, not later
than two months from the commencement of the Electricity
Laws (Uttar Pradesh Amendment) Act, 1983, declare to have
been incurred by it on capital account in connection with the
purposes of this Act in respect of the Rihand Hydro Power
System shall also be deemed to be a loan advanced to the Board
under section 64 on the date of commencement of this subsection and all the assets acquired by such expenditure shall vest
in the Board with effect from such commencement.
(4) The provisions of the sub-sections (I) and (I-A) shall,
subject to the provisions of sub-section (5) apply in relation to
the debts and obligations incurred, contracts entered into and
matters and things obliged to be done by, with or for the State
Government in respect of the Rhinand
Hydro Power system
after the first constitution of the Board and before the commencment of this sub-section as they apply in relation to debts
and obligations incurred, contracts entered into, matters and
things engaged to be done by, with or for the State Govemement
for any of the purposes of this Act before the first constitution
of the Board.
(5) All such contracts entered into by the State Govemement for
supply of electrical energy based on or connected with the generation of electricity from the Rihand Hydro Electric Generating Station to any consumer and any contract entered into by the
Board on or after April I, 1965 for the supply of electrical
energy to such consumer shall operate subject to the modifications specified in the following clauses, which shall have effect
from the date of the commencement of the Electricity Laws
(Uttar Pradesh Amendment) Act, 1983 (hereinafter referred to
as the· said date):-
-·
-(
' ' ...
1 :\
"';' -_,
(• .;,:
KANORIA CHEMICALS v. STATE [RANGANATHAN, J.)
161
A
(a)
the rates to be charged by the Board for the energy
supplied by it to any consumer under any contract for which the
payment will be due for the first time on or after the said date
shall be such as may with the previous approval of the State
Government be fixed by the Board, having due regard to the
geographical position of the area of supply, the nature of the
supply and purpose for which supply is required and any other B
relevant factor.
(b)
If the State Government directs the Board under Section
22-B of the Indian Electricity Act, 1910 or under any other law
for the time being in force to reduce the supply of energy to a
consumer and thereupon the Board reduces the supply of energy · C
to such consumer accordingly, the consumer concerned shall
not be entitled to any compensation for such reduction, and if
the consumer consumes energy in excess of the reduced limit
fixed under the said section 22-B or any other law for the time
being in force as the case may be, then the Board shall have the
right to discontinue the supply to the consumers without notice,
and without prejudice to the said right of the Board, the D
consumer shall be liable to pay for such excess consumption at
double the normal rate fixed under clause (a);
(c)
Any arbitration agreement
contained in such contract
shall be subjects to the provisions of this sub-section.
Parliament also, at about the same time, amended s. 59 of the Act by
Act 18 of 1983. The amended s. 59(1), which is sufficient for our purpose
reads thus :
59. General principles for Board's finance - (1) The Board shall, F
after taking credit for any subvention from the State Government under Section 63, carry on its operation under this Act and
adjust its tariffs so as to ensure that the total revenues in any
year of account shall, after meeting
all expenses properly
chargeable to revenues, including operating, maintenance and
management expenses, taxes (if any) on income and profits de- G "
predation and. interest payable on all debentures, bonds and
loans, leave such surplus as is not less than three per cent, or
such higher percentage, as the State Government
may, by
notification in the official ·Gazette, specify in this behalf, of the
value of the fixed assests of the Board in service at the H
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[1992] 1 S. C.R.
beginning of such year.
Explanation - For the purposes of this sub-section, "value of the
fixed assets of the Board in service at the beginning of the year"
means the original cost of such fixed assets as reduced by the
aggregate of the cumulative depreciation in respect of such
assets calculated in accordance with the provisions of this Act
and consumers' contributipns for service lines.
It has been pointed out to us that the U.P. Slate amendment is
somewhat different from those of the other Slates. The Kamataka legislature amended s. 49 of the 1948 Act and the Orissa and Rajasthan
legislatures inserted s. 49A in the said Act These provisions enabled the
C Boards to prescribe lariffs and these rates were to prevail over those
specified in the agreement. The latter two amendments actually declare the
relevant clauses in the agree.ment void from inception. The U.P. amendment however, retains the effectiveness of the earlier conlracts and only
reads into them the rates that may be prescribed by the Board. This is the
first difference. The second is that while the other legislations affect all
D agreements entered into before a specified date, the U.P. amendment is
restricted to contracts for supply of electricity from the Rihand HydroElectric Generating Station.
We are informed that, when the above
amendment was sought to be effected, the only outstanding conaact of the
State for the supply of electricity from the Rihand Hydro-Electric Generating Station was the conaact with the appellant on the 301h of September,
E 1963. There had been two agreements entered into for supply of electricity
from !his power station but !he olher one wilh Hindustan Aluminium
Company had become ineffective since !hat company gave up its claim to
supply from the above power plant in 1975-76 having been successful in
putting up a power plant for its captive use. Thus, though lhe Act purports
F
to be one of general application, it was r~ally intended to enable lhe State
and lhc Board to modify the rates of supply cf dectricity to appellant under
the contract of 30.9.1963.
G
H
At !his stage it may be useful to refer also to the terms of s. 49 of
the Act It reads lhus :
(1) Subject to the provisions of !his Act and or regulations, if
any, made in !his behalf, !he Board may supply electricity to
any person not being a licensee upon such terms and conditions
as lhe Board thinks fit and may for !he purposes of such supply
frame uniform tariffs.
-
-
KANORIA CHEMICALS v. STATE [RANGANATHAN, J.]
163
(2) In fixing the uniform tariffs the Board shall have regard to A
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 B
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 :
C
(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 necesD
sary or expediant to fix different tariffs :or the supply of
electricity to any person not being a licensee, having regard to
the geographical position of any area, the nature of the supply
and purpose for which supply is required and any other relevant
factors.
(4) In fixing the tariff and conditions for the supply of electricity, the Board shall not show undue preference to any person.
After the statute was thus amended, the Additional Chief Engineer of
E
the Board wrote to the appellant on 6.2.1984 stating that, though the bills F
were being drawn on the basis of the agreement, the rates were subject to
revision with effect from May 20, 1983 with the approval of the State
Government and that a supplementary bill would be sent for the arrears as
and when the rates were revised in pursuance of section 60(5) (a). On 5th
April, 1984, the appellant filed Writ Petition No. 1818 of 1984 in the High
Court of Allahabad assailing the validity of section 7 of the amending Act G
and the right of the Board to enhance the rates. While admitting the writ
petition, the High Court passed.an interim order to the effect that the StJtte
Government should provide and opportunity of hearing to the appellant
before bringing about any cliange in the terms and conditions of the
Agreement or tariff rates and that no revised rates shall be charged from the H ··
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[1992] 1 S. C.R.
A appellant till it is heard, and the matter decided, by the Slate Government.
On June 11, 1984, the Law Officer of the Board wrote to the appellant
requesting it to give in writing the points which they wanted to urge before
the rates were approved by the Slate Government. According to the
appellant, this was not sufficient compliance with the court's order and it
moved the High Court for amending its petition and made further applications to the Court. It may be mentioned that the sland taken up by the Board
B in the writ petition was that the writ petition was premature as the Slate's
approval had not been obtained and no injury had been caused to the
appellant. But, suddenly, on 31.1.85, the Board wrote to the appellant
informing it that the Slate Government had approved the levy of rates as
per Schedule HV-2 (as defined in the U.P. Gazettee Notification dated 29th
October, 1982) applicable to heavy power consumers in substitution of the
C rates mentioned in the agreement of 20th September, 1963. It was slaledcuriously enough-that the approval of the Slate Government had been
given on 28.9.1983.The effect of the revision was to oblige the petitioner
to pay 57.71 paise per unit for 1983-84 and 61.60 paise per unit for 198485 . An idea of the magnitude of the revision can be had by pointing out
that supplementary bills raised on the basis of the revision for the period
D
20.5.83 to 31.12.1984 were to the tune of Rs. 3.07 crores. The appellant's
allegation is that no such approval had been given and it is asserted that the
internal correspondence between Board and Slate would show that the legal
Department of the Board had raised certain objections to the levy of HV2 rates on the appellan~ and that consequently Board had sent a fresh
proposal in December 1983 seeking approval of the Slate Government for
E imposing a flat rate in respect of supplies to the appellant in place of earlier .
proposal. It is also Slated no proposal was made, or approval sough~ for
imposing the revised rates w.e.f. 20.5.1983.
The Board, however, proceeded to make demands against the appelF lant on the basis of the revised rates. According to the Board, reference was
made to a resolution dated 30.1.85 to the withdrawal on that date of the
proposal for a flat rate in place of HV-2 rates. Thus, demands on the basis
of HV-2 rates were sought to be sustained. The demands amounted to
several crores of rupees and disconnection was threatened in case of nonpayment. The appellant oblained certain interim orders from High Court
G (which have been subsequently considered and modified from time to time
by this court during the pendency of these appeals). It is, however, not
necessary to refer to these interim orders as the final liability of the
appellant will have to be decided on the basis of the orders of this Court
on the appeals.
H
J
KANORIA CHEMICALS v. STATE [RANOANATHAN, J.]
165
The writ petition was heard by a Bench of two judges. Both judges
repelled the challenge to the validity of the Amendment Act but differed on A
some of the points which came up for their consideration. Srivastava, J. was
of the opinion that the intention and purpose of the Amendment Act was
to revise the existing contractual rate of energy charges and charge higher
rates upto the extent of uniform tariff rates for the supply of electricity to
the consumers whose contract stood modified by the said statute. The rates
so fixed had to be dependant upon the factors enumerated in section 60(5). B
According to him, the material on record showed that the factors enumerated in section ~60(5) had not been taken into account by the Board before
fixing the rates or by the State Government in according its approval to the
same. The Board and the Government appeared to have acted upon a
consideration of the factors mentioned in section 49(2) of the Act of 1948
while framing a uniform tariff but this was not sufficient compliance with C
the provisions of section 60(5). On the other hand, Mathur. J. was of the
opinion that the move for amendment of the Act and enforcement of HV2 tariff was initiated by the Board and that the notings contained a detailed
justification for enforcing the said tariff. It also appeared from the statement
of objects and reasons of the amending bill that the supply of electricity at
concessional rates despite losses and the desirability of replacing the said D
rate by uniform tariff came up for discussion in the State Legislature and
that the Board did not act wrongly or illegally if it felt that it had no option
but to apply uniform rates in view of the statement contained in the objects
and reasons of the bill and the discussion in the State Legislature. He was
also of the opinion that the factors contemplated by section 60(5) (a) were
similar to those envisaged by section 49(2), and since consideration had E
been given to the latter factors while framing the uniform tariff, no consideration of factors relevant to individual consumers was called for. The two
learned judges thus differed on the following two points :
(a)
Whether the language of section 60 (5) (a) of U.P. Act No. 12 F
of 1983 required consideration of factors prescribed in section
60 (5) (a) viz., geographical position of the area of supply, the
nature of supply and purpose for which supply is required and
other relevant factors with reference to petitioner company for
revising the existing contractual rate of H.C. tariff?
G
(b)
Whether the factors mentioned in section 49(2) of Electricity
(Supply) Act, 1948, having already been considered at the time
of framing uniform tariff no fresh consideration of any factors
mentioned in section 60(5Xa) of U.P. Aci No. 12 of 1983 was
required when the uniform tariff itself was being fixed while H
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(1992] 1 S. C.R.
revising the rate ?
The difference of opinion was, therefore, referred to a third Judge,
Mehrotra, J. This learned Judge answered the question referred to him as
follows :
(a)
The language of section 60(5)(a) of U.P. Act 12 of 1983
requires considertation of factors prescribed in it with reference
to the petitioner company for revising the existing contractual
rate; and
(b)
Fresh consideration of the factors mentioned in section
60(5)(a) was required irrespective of the fact that factors mentioned
in section 49(2) of the Electricity (Supply) Act, 1948 had
already been considered at the time of framing of the unifonn
tariff which was being fixed for the petitioner company while
revising the rates.
Consequent on the opinion of this learned Judge the writ petition was
D
allowed and a writ of certiorari was issued quashing the approval dated
28.9.1983 given by the State Government to the new rates and the
consequent resolutions, sanctions, bills and demands of the Board and the
State Government. A writ of mandamus was also issued commanding the
respondents not to charge the unifonn tariff rate for the period begining
from 20th May, 1983 till the rates were fixed in accordance with section
E
60(5) (a) of U.P. Act no. 12 of 1983. The Order disposing of the Writ
Petition finally is dated 2.4.1987.
Immediately the judgement was pronounced the State Electricity
Board and the State Government sought a certificate of fitness for preferring
F
an appeal to this Court and the High Court granted the certificate, as prayed
for. \his appeal has not been numbered on account of delay. Though the
High Court had quashed the revision of the rates, it had left it to the Board
and State to fix revised rates afresh. That apart, the appellant had also a
grievance that, in applying the HV-2 rates which were applicable to other
consumers, the Board and the State had not taken into account the special
G factors relevant to the supplies made to it. The appellant also, therefore,
filed S.L.P. No. 13967 of 1987 for leave to appeal from the judgment dated
2.4.1987.