# BIHAR STATE ELECTRICITY BOARD v. MIS PULAK ENTERPRISES & ORS

- **Citation:** [2009] 6 S.C.R. 292
- **Court:** Supreme Court of India
- **Decided:** 2009-04-15
- **Case number:** Civil Appeal Nos.7220-7239 of 2000
- **Bench:** Dr. Arijit Pasayat, Tarun Chatterjee
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bihar-state-electricity-board-v-mis-pulak-enterprises-ors-25848
- **Pages:** 35

## Headnote

Electricity (Supply) Act, 1948 :
~ -
s.49 - Fixing of tariff - Bihar State Electricily Board
c Notification dated 21.6.1993- Clauses 16.10.3, 16.10.3.1 and
17 - Amendment to - Levy of 'Fuel surcharge' - Formula -
Held : Though fuel surcharge is a part of tariff, fixin} rate of
fuel surcharge under Clause 16.10 of Tariff Notifil:ation is
different from fixing tariff u/s 49 of the Act - Where fidng rate
D of fuel surcharge is just an arithmetical exercise, giving
opportunity of hearing would not serve any pu"pose -
Electricity Board is entitled to levy fuel surcharge on the
consumers receiving high Tension supply leaving out the
consumers coming in other categories -
Validit:r of the
E formula has already been upheld - Fuel surcharge h=is to be
calculated strictly within the framework of the formula -
...
Administrative Law - Subordinate Legislation - Principle of
natural justice - Opportunity of hearing - Constitution of India,
1950 - Article 14.
F
The instant appeals were filed against the juctgment
of the High Court in writ petitions filed by the consumers
challenging the levy and collection of fuel surcharge by
the Bihar State Electricity Board.
G
Dismissing the appeals of the Board and a lowing
>.-
those of the consumers, the Court
HELD: 1.1. The significance of the question as to
whether fixing the rate of fuel surcharge is a legislative
function or a non-legislative function is that if the function
H
292
BIHAR STATE ELECTRICITY BOARD v. PULAK
293
ENTERPRISES & ORS .
•
-t
is held to be legislative, in the absence of any provision A
~
in that regard the principles of natural justice would not
be applicable and the scope of judicial review would also
be limited to the plea of discrimination i.e. violation of
Article 14 of the Constitution of India, 1950. [Para 21J [311C, DJ
B
Prag Ice and Oil Mills v. Union of India AIR 1978 SC
-i
1296; Rohtas Industries v. Bihar State Electricity Board
AIR 1984 SC 657 and Kera/a State Electricity Board v. Mis
S.N. Govind Prabhu & Brothers AIR 1986 Supreme Court
1999, relied on.
c
Saraswati Industrial Syndicate Limited v. Union of India
AIR 1975 SC 460; Union of India v. Cynamide India Ltd. AIR
1987 SC 1802 and Shri Sitaram Sugar Company L_td. v.
Union of India 1990 (3) SCC 223, referred to.
D
~
1.2. In a sense, fixing rate of fuel surcharge under
clause 16.10 of the Tariff notification is different from
fixing the tariff u/s 49 of the Electricity (Supply) Act. Fuel
surcharge is undoubtedly a part of tariff. But fixing rates
of consumption charges or the guaranteed charges or E
the fixed charges or the delayed payment surcharge etc.
and fixing rates of fuel surcharge do not stand on par.
Though rates of consumption charges etc. are based on
....
objective materials, there is enough scope for flexibility .
in fixing the rates. It also involves policy to fix different F
rates for different categories of consumers. Such is not
the position with the fuel surcharge. [Para 26J [313-B, CJ
1.3. Clause 16.10.1 specifies the categories coming
in the net of the levy and clause 16.10.3 provides the
formula. The formula envisages addition of units G
~
generated or purchased and increased average cost of
fuel and average unit rate of purchase rates and division
of the total by the quotient is the average fuel surcharge
per unit (expressed in terms of paise) described by
denominator 51 in the formula. The whole exercise, it H
294
SUPREME COURT REPORTS
[20m1] 6 S.C.R.
•
would appear, involves arithmetical accounting. There is -
~
A
no scope for exercise of any discretion or flexibility. If
fixing rate of fuel surcharge is just an arithmetical
exercise, giving opportunity of hearing would hardly
serve any useful purpose. [Para 26) [311-D, E]
B
1.4. Where the fixation of rate or determination of the
amount is made individually, depending on the context
in which this is to be done, there may be justification or
J. -
necessity to give opportunity of hearing to the person(s)
concerned; But where the rate is fix

## Text

_Characters 0–39,332 of 67,263. This is a partial read: ask again with offset=39332 for what follows._

[2009] 6 S.C.R. 292
'
""!-
A
BIHAR STATE ELECTRICITY BOARD
v.
MIS PULAK ENTERPRISES & ORS.
(Civil Appeal Nos.7220-7239 of 2000)
APRIL 15, 2009
B
[DR. ARIJIT PASAYAT AND TARUN CHATTERJEE, JJ.]
Electricity (Supply) Act, 1948 :
~ -
s.49 - Fixing of tariff - Bihar State Electricily Board
c Notification dated 21.6.1993- Clauses 16.10.3, 16.10.3.1 and
17 - Amendment to - Levy of 'Fuel surcharge' - Formula -
Held : Though fuel surcharge is a part of tariff, fixin} rate of
fuel surcharge under Clause 16.10 of Tariff Notifil:ation is
different from fixing tariff u/s 49 of the Act - Where fidng rate
D of fuel surcharge is just an arithmetical exercise, giving
opportunity of hearing would not serve any pu"pose -
Electricity Board is entitled to levy fuel surcharge on the
consumers receiving high Tension supply leaving out the
consumers coming in other categories -
Validit:r of the
E formula has already been upheld - Fuel surcharge h=is to be
calculated strictly within the framework of the formula -
...
Administrative Law - Subordinate Legislation - Principle of
natural justice - Opportunity of hearing - Constitution of India,
1950 - Article 14.
F
The instant appeals were filed against the juctgment
of the High Court in writ petitions filed by the consumers
challenging the levy and collection of fuel surcharge by
the Bihar State Electricity Board.
G
Dismissing the appeals of the Board and a lowing
>.-
those of the consumers, the Court
HELD: 1.1. The significance of the question as to
whether fixing the rate of fuel surcharge is a legislative
function or a non-legislative function is that if the function
H
292
BIHAR STATE ELECTRICITY BOARD v. PULAK
293
ENTERPRISES & ORS .
•
-t
is held to be legislative, in the absence of any provision A
~
in that regard the principles of natural justice would not
be applicable and the scope of judicial review would also
be limited to the plea of discrimination i.e. violation of
Article 14 of the Constitution of India, 1950. [Para 21J [311C, DJ
B
Prag Ice and Oil Mills v. Union of India AIR 1978 SC
-i
1296; Rohtas Industries v. Bihar State Electricity Board
AIR 1984 SC 657 and Kera/a State Electricity Board v. Mis
S.N. Govind Prabhu & Brothers AIR 1986 Supreme Court
1999, relied on.
c
Saraswati Industrial Syndicate Limited v. Union of India
AIR 1975 SC 460; Union of India v. Cynamide India Ltd. AIR
1987 SC 1802 and Shri Sitaram Sugar Company L_td. v.
Union of India 1990 (3) SCC 223, referred to.
D
~
1.2. In a sense, fixing rate of fuel surcharge under
clause 16.10 of the Tariff notification is different from
fixing the tariff u/s 49 of the Electricity (Supply) Act. Fuel
surcharge is undoubtedly a part of tariff. But fixing rates
of consumption charges or the guaranteed charges or E
the fixed charges or the delayed payment surcharge etc.
and fixing rates of fuel surcharge do not stand on par.
Though rates of consumption charges etc. are based on
....
objective materials, there is enough scope for flexibility .
in fixing the rates. It also involves policy to fix different F
rates for different categories of consumers. Such is not
the position with the fuel surcharge. [Para 26J [313-B, CJ
1.3. Clause 16.10.1 specifies the categories coming
in the net of the levy and clause 16.10.3 provides the
formula. The formula envisages addition of units G
~
generated or purchased and increased average cost of
fuel and average unit rate of purchase rates and division
of the total by the quotient is the average fuel surcharge
per unit (expressed in terms of paise) described by
denominator 51 in the formula. The whole exercise, it H
294
SUPREME COURT REPORTS
[20m1] 6 S.C.R.
•
would appear, involves arithmetical accounting. There is -
~
A
no scope for exercise of any discretion or flexibility. If
fixing rate of fuel surcharge is just an arithmetical
exercise, giving opportunity of hearing would hardly
serve any useful purpose. [Para 26) [311-D, E]
B
1.4. Where the fixation of rate or determination of the
amount is made individually, depending on the context
in which this is to be done, there may be justification or
J. -
necessity to give opportunity of hearing to the person(s)
concerned; But where the rate is fixed for pmsons at
c large the only way by which such opportunity can be
given is to notify the rates and then invite ohjections.
There is no such provision. In the absence of any
mechanism provided in the Tariff notification, it would not
be feasible at all. [Para 27) [315-F, G]
D
2.1. The validity of the formula had bee11 upheld
earlier. High Court noted that though by the impugned
circular dated 31.5.1999 the rates of fuel surcharge have
been fixed for the years 1993-94 (July 1993 to March 1994)
E
to 1997-98, the correctness of the rates fixed for the y.)ars
1993-94 (July 1994 to March 1994) to 1995-96 1111ere not
challenged and correctness of the rates for the
,,
subsequent years only was under challenge. !Para 29)
[317-C, DJ
F
Bihar State Electricity Board and anr. v. Bihar 440 Volt
Vidyut Upbhokta Sangh and Ors. 1997 (11) sec 380 and
Kera/a State Electricity Board v. S.N. Govind Prabhu &
Brothers AIR 1986 SC 1999, referred to.
2.2. The Electricity Board is entitled to levy fuel
G surcharge on the consumers receiving high tension
supply leaving out the consumers coming n other
.___
categories. [Para 30) [317-F]
Maharashtra State Electricity Board v. Kalyan Borough
H Municipality AIR 1968 SC 991; Mis Rohtas Industries Limited
BIHAR STATE ELECTRICITY BOARD v. PULAK
295
ENTERPRISES & ORS.
' :.,
v. Chairman, Bihar State Electricity Board AIR 1984 SC 657,
A
relied on.
3.1. It is not in dispute that TVNL came into existence
in 1996-97 whereas while calculating the electricity 199192 is to be treated as the base year. As a matter of fact, it
B
was on that ground, namely, that a different base year i.e.
1992-93 was provided for computing the increase in the
-J,
average unit rate of purchase of electricity from external
sources, that the High Court directed the Board to
consider amending clause 16.10.3 so as to provide for the
same base year i.e. 1991-92 with respect to both the c
increase in the average cost of generation and increase
in the rates of purchase, and accepting the verdict of the
:
High Court the Board amended the last part of clause
16.10.3. Purchase of electricity from TVNL which
admittedly came into existence in the year 1996-97, D
,.
therefore, cannot be treated as component of H3 i.e.
increase in the average unit rate of purchase of electricity
llJ'
from "any other source". As a matter of fact, the case of
writ petitioners was that the TVNL is nothing but a unit
of the Board in disguise of a subsidiary company and,
E
therefore, could not be treated as a, component of H3. It
may not be necessary to go behind the veil of the
separate legal character of the TVNL. The fact that TVNL
"
did not exist in the year 1991-92 and came into existence
only in the year 1996-97 is sufficient to justify its deletion
F
as component of H3. [Para 33] [319-F, G, H; 320-A, B, C]
3.2. The relevant clause of the formula, after
amendment, reads, "the said increase to be calculated
with respect to the year 1991-92" ( last para of clause
<
16.10.3). The amendment has been made in the light of G
~
the decision of the High Court which rightly held that it
is not possible to allow the Board to include purchase of
electricity as a component of H3 without suitably
amending the formula in accordance with law. [Para 33]
[320-F, G, H; 321-A]
H
296
SUPREME COURT REPORTS
[20C9J 6 S.C.R.
A
3.3. As regard "deemed supply" by thE! Board to
TISCO, the High Court noticed that under a tripartite
agreement between the Board, the DVC and the TISCO,
with the consent of the State Government, the electricity
is being supplied directly by the DVC to the TISCO but
B such supply is treated as made by the Bo.ud to the
TISCO. High Court held that the Board cannc t treat the
sale of electricity by the DVC to the TISCO as a separate
class or category for the purpose of computing D3. The
computation of D3 to this extent, was rightly held to be
c not correct. [Para 34] (321-A, B; 322-D]
4.1. The computation of the rates of fuel surcharge
by the impugned circular for the years 19!16-97 and
onwards so far as it relates to the purchase of electricity
from TVNL and "deemed supply" by the Board to TISCO
D thus does not appear to be in accordance with the
formula. Fuel surcharge has to be calculated stri c:tly within
"
the framework of the formula. If any extraneous element
has crept in, the computation to that extent mu:;t be held
?
to be not in accordance with law and accordingly
E modified .. (Para 35] (322-E, F]
4.2. The fact that the Board has had to 1>ay large
amounts as delayed payment surcharge (DPS) to the
external agencies from which it has been purchasing
electricity is· more or less an admitted position. The case
F of the Board, however, is that the default in payment was
mainly on account of defaults committee! by the
consumers themselves. High Court found subi;tance in
the stand of the Board. The fact that the consumers at
large have not been paying the dues on time and many
G of .them have been making only part payment on the
strength of interim orders of Courts are facts which are
not disputed. If the consumers do not pay the dues to the
Board, they cannot be heard to make any complaint
against payment of DPS by the Board to the external
H agencies. [Para 37] (323-E, F, G, H]
BIHAR STATE ELECTRICITY BOARD v. PULAK
297
ENTERPRISES & ORS.
I
.<("
5.As regards the non-accounting of Rs.100 Crores
A
paid by Coal Companies to the Board, the High Court
observed that payment of the amount would be relevant
consideration while calculating the rate of fuel surcharge
for the year 1998-99 and not 1997-98. It is directed that
adjustment of Rs.100 crores be worked out accordingly.
B
[Para 45] [326-A, C, D]
-~
6. Nothing material could be highlighted as to how
the reasons of the High Court suffer from any infirmity.
[Para 44) [325-G]
c
Case Law Reference:
1997 (11) sec 380
referred to
para 2
AIR 1978 SC 1296
relied on
para 21
AIR 1984 SC 657
relied on
para 22
D
•
AIR 1986 Supreme
Court 1999
relied on
para 22
AIR 1975 SC 460
referred to
para 23
AIR 1987 SC 1802
referred to
para 24
E
- 1990 (3) sec 223
referred to
para 25
AIR 1968 SC 991
relied on
para 30
>'."
AIR 1984 SC 657
relied on
para 30
AIR 1986 SC 1999
referred to
para 31
F
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
7220-7239 of 2000.
From the Judgment & Order dated 26.06.2000 of the High
G
Court of Judicature at Patna in CWJC No. 5542, 2009, 2087,
,.-..i
1655, 1807, 1971, 1861,5592,5624,5728, 5819,5861,5993,
6054, 6079, 6248, 6249, 6275, 6358 and 6490/1999.
WITH
C.A. Nos. 2560/2009, 2561/2009, 2555-2559/2009.
H
298
SUPREME COURT REPORTS
[2009] 6 S.C.R.
A
V.R. Reddy, Mir Jha, Sunil Kumar, Harish N. Salve, D.A.
Dave, Navin Prakash, Sumant Bhardwaj, An ta Kanungo,
Mridula Ray Bharadwaj, L.K. Bajla, Praveen I< umar, Gopal
Prasad, R.N. Karanjawala, Nandini Gore, Debmalya Banerjee,
Bharat Singh, Manik Karanjawala, Jayant Mohan, Pragya Singh
B Baghel, Ajit Kumar Sinha, Shree Prakash Sinha, Sunita
Sharma, Manjula Gupta, Gopal Prasad, S. Chandra Shekhar,
Himanshu Shekhar, Gopal Singh, Vivek Singh for 1he appearing
parties.
c
The Judgment of the Court was delivered b\'
DR. ARIJIT PASAYAT, J. 1. Leave granted in Special
Leave Petitions.
2. These appeals are directed against tl1e common
judgment of the Patna High Court allowing the batch of writ
D petitions. The dispute relates to fuel surcharge. Tl1e validity of
levy has been upheld by this Court in Bihar Sta;'e E/eetricity
Board and Anr. v. Bihar 440 Volt Vidyut Upbhoktet Sangh and
Ors. (1997 (11) SCC 380). Therefore, the dispute before the
High Court related to method of calculation and i11 substance
E the rate of fuel surcharge.
3. The Board has its own power generation u11its namely,
Patratu Thermal Power Station, Barauni Thermal Power Station
and Muzaffarpur Thermal Power Station. The powe ·generating
from these units is not sufficient and, therefore the Board
F purchased from other sources in order to meet the
requirements of power supply to its consumers. The sources
from which the Board purchases power are Dami)dar Valley
Corporation, National Thermal Power Corporatior, Tenughat
Vidyut Nigam Ltd., Uttar Pradesh Electricity Boetrd, Orissa
G State Electricity Board, Power Grid Corporation of India Ltd.
According to the Board, the power purchased from outside
sources_ forms the bulk of the total power supplied by the Board.
In other words, power generated by the generating units of the
Board is much less in comparison to the purchased power from
H outside sources.
BIHAR STATE ELECTRICITY BOARD v. PULAK
299
•
ENTERPRISES & ORS. [DR. ARIJIT PASAYAT, J.]
-T
4. The Tariff framed by the Board in exercise of its powers
A
conferred upon it under the provisions of Section 49 of the
Electricity (Supply) Act, 1948 (in short the 'Act') vide Tariff
Notification dated 21.6.1993 published in the Bihar Gazette on
23.6.1993 which came into effect from 1. 7.1993 prescribes
rates for supply of power to the consumers of the Board.
B
Because of infrequent revision of tariffs and in order to
"'
neutralize increase in the cost of generation and purchase of
-:.;.
power, the 1993 Tariff provides for levy and collection of fuel
surcharge from the consumers of the Board.
5. It is submitted that fuel surcharge is a part of tariff and, c
in reality, a surcharge levied to meet the increased cost of
generation and purchase of electricity. This Court in a number
of decisions has upheld levy of fuel surcharge.
6. The 1993 Tariff provides for a formula for levy and
D
collection of fuel surcharge from the consumers of the Board
from time to time. The validity of the formula for levy of fuel
surcharge has been upheld by this Court in Bihar State
Electricity Board's case (supra).
7. Section 49 of the Act empowers the Electricity Board
E
to frame tariff and lay down the terms and conditions of supply
of electricity as it thinks fit. In exercise of the said power the
Bihar State Electricity Board (hereinafter referred to as the
'Board') framed tariff vi de notification dated 21.6.1993,
F
published in the Bihar Gazette on 23.6.1993 superseding the
earlier tariff notifications dated 26.8.1991 and 3.7.1992. The
tariff notification dated 21.6.1993 is effective from 1.7.1993.
Under clause 16.10.1 of the said tariff the consumers of the
categories specified therein are required to pay operational
~ .!
surcharge at a rate to be determined every year in accordance G
with the formula prescribed, in addition to other charges as laid
down in the tariff schedule. In terms of clause 16.10.2 the
operational surcharge consists of two elements (i) fuel
surcharge and (ii) other operational surcharge. Clause 16.10.3
lays down the formula for determining fuel surcharge applicable
H
300
SUPREME COURT REPORTS
[2009) 6 S.C.R.
A during the financial year in terms of paise per unit. Clause
16.10.4 prescribes the formula for determine: tion of 'other
operational surcharge'. It may be mentioned hem itself that the
provision regarding 'other operational surcharge' has been held
to be arbitrary and struck down. Clause 16.10.5 provides that
B the operational surcharge for a financial year shal be calculated
by the Board after the expiry of the financial yHar. Till actual
calculation of the operational surcharge for a fir ancial year is
made, operational surcharge during the financial year may be
levied at a rate provisionally C!llculated on monthly or quarterly
C or half-yearly basis as the Board may decide. In case of short
or excess realisation the amount is to be adjusted in the next
bill be served on the consumers. Clause 17 lays :iown that the
existing rate of fuel surcharge notified in letter no.JVCS/Costing44/92-93/397 dated 29.3.1993 amounting to 32 paise per unit
0 has been merged in the tariff. Any increase in the operational
surcharge thereafter only shall be levied.
E
F
G
8. In order to appreciate the facts to be stated hereinafter
it would be appropriate to notice the formula for computation
of the fuel surcharge laid down in clause 16.10.3 as under:
S1 = A1xA3+B1xB3+C1xC3+D1xD3+ E1xE3xF1xF3+G1
xG3+H1xH3 (A2+B2+C2+D2+E2+F2 +G2+H2) ....
Whereas,
S1
A1 , 81 ,C1
= Average Fuel Surcharge, per unit in
paise applicable during the financial
year.
= Unit generated from PTP~i, BTPS &
MTPS respectively.
01,E1,r1,G1 ,H1 = Unit
purchased
frC1m
DVC,
UPSEB,OSEB,NTPS,PGCL and any
other source respectively.
H A2,B2,C2
= Unit sold out of sent out from PTPS,
..
BIHAR STATE ELECTRICITY BOARD v. PULAK
301
ENTERPRISES & ORS. [DR. ARIJIT PASAYAT, J.]
BTPS & MTPS on which fuel surcharge
A
is leviable.
02,E2,F2,G2,H2 = Unit sold, out of purchased from OVC,
UPSEB, OSEB, NTPC, PGCL and any
other source respectively during the
B
year on which Fuel Surcharge is
leviable.
A~,B3,C3
= Increase in average cost qt Fuel
Surcharge in paise per unit computed
C
for Board's Generation at PTPS, BTPS
and MTPS
03, E3,F3,G3,H3 = Increase in average unit rate of
purchase of energy from DVC, UPSEB,
0
OSEB, NTPC, PGCL & any other
source respectively during the year for
which the surcharge is to be calculated.
The said increase to be calculated with
respect to the year 1992-93 (after
E
amendment, read 1991-92)
(In the above, PTPS stands for Patratu Thermal Power Station,
.~
BTPS for Barauni Thermal Power Station, MTPS for
Muzaffarpur Thermal Power Station. They are Board's own
F
generating stations. Likewise, DVC stands for Damodar Valley
Corporation, UPSEB for Uttar Pradesh State Electricity Board,
OSEB for Orissa State Electricity Board, NTPC for National
Thermal Power Station and PGCL for Power Grid Corporation
of India Limited. They are external sources of supply of G
- ..
electricity to the Board.)
9. The manner of calculation of increase in average cost
of fuel in Board's own generating stations i.e. A3, B3 and C3,
and increase in average unit rate of purchase from outside
sources Le. 03; E3 etc. is laid down in clause 16.10.3.1. As
H
302
SUPREME COURT REPORTS
[2Q,J9] 6 S.C.R.
A regards the fonner, the calculation is to be made in the following
manner.
B
c
D
F
,.,
H
"(a) Patratu Thermal Power Station:- The rate in paise per
unit shall be based on the average cosi of 9270.08 paise
per 10,00,000 K.Cal. of fuel delivered at the bL nkers of the
Board's generating station at Patratu. In the E!Vent of rise
or fall in the aforesaid cost, at any time, the rate per unit
will be increased or decreased as the case may be, by
0.3537 paise for each one per cent variation in the cost
of fuel per 10;00,000 K.Cal. In the cost 1)f fuel per
10,00,000 K.Cal. In calculating the above variation,
percentage variation of 0.5 and above will be treated as
next higher percentage and percentage variation, below
0.5 will be ignored.
(b) Barauni Thermal Power Station:- The rate i11 paise per
unit shall be based on an average cost of 174C7.97 paise ·
per 10,00,000 K.Cal. of fuei delivered at the bunkers of the
'Board's generating station at Barauni. In the event of rise
or fall in the aforesaid cost, at any time, the rate per unit
will be increased or decreased, as the case rnay be by
0.8539 paise for each one per cent variation i 1 the cost
of fuel per 10,00,000 K.Cal. In calculating the above
variation, percentage variation of 0.5 and above will be
treated as next higher percentage and percentage
variation below 0.5 will be ignored.
(c) Muzaffarpur Thermal Power Station:- The rat;) in paise
per unit shall be based on an average cost of 18166.04
paise per 10,00,000 K.Cal. of fuel delivered at: the bunkers
of the Board's generating station at Muzaffarpur. In the
event of rise or fall in the aforesaid cost , at airy time, the
rate per unit will be increased or decreased, as the case
may be by 0.7368 paise for each one percent variation in
the cost of fuel per 10,00,000 K.Cal. In calculating the
above variation, percentage variation of 0.5 and above, will
be treated as next higher percentage and percentage
I
Yj. •
BIHAR STATE ELECTRICITY BOARD v. PULAK
303
·-
ENTERPRISES l/.. ORS. [DR. ARIJIT PASAYAT, J.]
\
variation below
A
0.5 will be ignored."
As, regards the latter :i.e. electricity purchased from
external sources the clause says that the actual increase in the
B
average unit rate of purchase will apply, that is to say, will be
the basis.
~1
10. On 4.4.1994 the Board issued circular stating that on
final calculation the fuel surcharge for the period 1992-1993 had
been determined as 26.14 paise per Kwh. On 5.1.95 the Board c
issued another circular calculating the fuel surcharge for the
period July 1993 (i.e. after coming into force of the new tariff)
to March 1994 to be 25.98 paise per Kwh. I am not referring
to the rate of other operational surcharge under clause 16.10.4
which was also notified by the same circular because that has
D
.~
already been struck down. The consumers were billed
accordingly. Writ Petitions were filed challenging the rates in
CWJC No.2771 of 1995(R) and analogous cases. During the
pendency of the said writ petitions the Board proposed certain
amendments in clauses 16.10.3, 16.10.3.1and17, vide letter
E
no.135 dated 28.12.1995. I shall refer to the salient features of
'·.
the proposed amendment later. The implementation of the_
circular dated 5.1.1995 was kept pending vide circular dated
8.2.1995 in the meantime. On 8.3.1995 and 17.4.1995 circulars
were issued directing payment@ 15 paise/Kwh from 1.7.1993
F
to 31.3.1995 instead of 25.98 paise per Kwh as fuel surcharge
as stipulated in circular dated 5.1.1995. However, by circular
dated 20.9.1995 the said circulars dated 8.3.1995 and
17.4.1995 were withdrawn and the earlier circular dated
5.1.1995 by which fuel surcharge @ 25.98 paise/Kwh had been
G
• -4
fixed was restored
11. The writ petitions, CWJC No.2771 of 1995(R) and
analogous came up for hearing in October 1996. With the
consent of the Board, on 17.10.1996 the High Court constituted
a High Level Committee consisting of two nominees each of
H
304
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[2009] 6 S.C.R.
A the consumers and the Board and two independent members.
The Committee was directed to calculate the fuel surcharge in
terms of 1993 tariff, particularly taking into accounl clause 17,
and submit report by 31.1.1997 to the Chairman of the Board,
The writ petitions, were thus disposed of. The High Court made
B it clear that after submission of such report, anybJdy feeling
aggrieved may move the appropriate forum or cciurt of law.
From the records of the case it appears that an irterlocutory
application was made by the concerned petitioners 1)f the case
making a gr!evance that certain vital documents ha:l not been ·
c made available by the Board to the Committee 11ide order
dated 29.1.1997 the High Court recorded the submission of the
counsel for the Board that the documents required shall be
furnished within two weeks. Time for submission of the report
was accordingly extended to 31.3.1997 and the ec:1rlier order
0 dated 17.10.1997 was modified to this extent.
12. At this stage the Board issued circular dated 5.2.1997
notifying the provisional rates of fuel surcharge as 42 .89 paise/
Kwh for 1994-95, 72.12 paise/Kwh for 1995-96 and ·102 paise/
Kwh from 1.4.1996 onwards. This led to fresh wrii petitions
E being CWJC Nos.1632 of 1997 and analogous cases. On
12.3.1997 when the cases came up for preliminary hearing
. ,
dispute again arose as to circumstances in which the aforesaid
Committee had not finalised the report. After hearin!l counsel
for the parties, however, a consent order was passed to the
>'·
F effect that the Committee shall finalise its report on '4.3.1997
when it was scheduled to meet next, on the basis of documents
already on record and submit the report to the High Court on
17.3.1997. On 16.3.1997 the Committee submitted its report.
On 21.3.1997 when the matter came up for further hearing the
G High Court noted that the findings reached by the members of
the committee were not unanimous. While four membHrs of the
.._ •
Committee had worked out the fuel surcharge@ 12.:18 paise/
Kwh for the period from July 1993 to March 1994, 21.:;3 Paise/
Kwh for the period 1994-95 and 44.00 paise/Kwh (prcvisional)
H for the period 1995-96, the other two members w1o were
BIHAR STATE ELECTRICITY BOARD v. PULAK
305
•
ENTERPRISES & ORS. [DR. ARIJIT PASAYAT, J.]
'>/
Board's nominees, had worked out the same@ 25.98 paise,
A
43.98 paise and 72.12 (provisional) paise per Kwh for the
aforesaid periods respectively. As an interim measure the High
Court directed the petitioners to pay fuel surcharge for the
periods July 1993 to March 1994 and 1994-95 at the rates
worked out by four members of the committee, which were in
B
their favour, and for the periods-1995-96 and 1996-97 @ 46.37
paise/Kwh and 56.37 paise/kwh offered by them. CWJC Nos.
J
1632 of 1997 and analogous cases were finally heard and
decided by judgment dated 30.6.1998.
13. At this stage it may be relevant to advert to the Board's c
letter dated 28.12.95, referred to above, suggesting certain
amendments in clauses 16.10.3, 16.10.3.1 and 17. The
substance of the proposed amendment was that instead of
calculating the increase in the average unit rate of purchase of
energy from DVC, UPSEB, OSEB, NTPC, PGCL and any other
D
---
.
.
source with respect to the year _1992-93, as prescribed in
clause 16.10.3 the same should be calculated with respect to
the year 1991-92, and similarly with respect to the year 199192, and similarly in clause 16.10.3.1 the average cost of fuel
in respect of energy generated at Board's own generating
E
stations be computed on the base rate of 1991-92 and not
1992-93. In other words, the base year with respect to these
two sets of components was sought to be changed from 199293 to 1991-92. Clause 17 was also proposed to be amended
by that in accordance with the instructions issued by the
F
Government of Bihar to the Board, the increase in the rate of
fuel surcharge between January 1992 and June 1993 which
came to 20 paise (12 paise as in January 1992 and 32 paise
as in June 1993) had been merged in the tariff and thus any
increase in the fuel surcharge thereafter only shall be levied
G
~-
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after accounting for the increase already merged in the tariff.
. 14. From the judgment dated 30.6.1998 disposing of
CWJC Nos.1632 of 1997 and analogous case, it appears that
the validity of the rates of fuel surcharge was challenged mainly
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[2009] 6 S.C.R.
A on two grounds:- (a) the cost of: generation at the Board's own
generating stations, namely, Patratu, Barauni and Muzaffarpur
Thermal Power Stations had been worked out treating 199192 as the base year but the cost of the unit purchc: sed from
DVC, NTPC etc. had been calculated on the basis o' 1992-93
B rates. According to the writ petitioners in working out the rate
the values to be taken into account must correspond to the
same year lest determination could become irrational and
.._arbitrary: (b) the merger of fuel surcharge as on 1. 7 .9:1 in terms
of ~1 a use 17 of the tariff was not correct. The High CC1u~ noted
c that the objections of the petitioners were in consonance with
the Board's own decision vide letter dated 28.12.1995 (supra)
by which the Board had suggested certain amendme'1ts in the
relevant clauses of the tariff to the State Government. The High
Court, however, took the view that in terms of the order dated
D 17.10.1996 passed in CWJC No.2771 of 199!i(R) the
Committee was required to submit its report to the Chairman
of the Board and not to the High Court. Observing that the
report of the committee would assist the Board in c:>ming to
fair and just decision, and if the Board was satisfied that the
E
tariff modification requires any modification it was opnn to it to
modify the tariff in accordance with law, the High Cowt instead
of finally deciding the. issues itself directed the Board to
consider the report of the committee submitted before the High
Court on 16.3.1997, and in consultation with tr e State
Government, take a final decision, by reasoned order, on the
F points:-
(i)
Whether any modification of clause 16.10.3 of the
tariff notification published on 23.6.93 is required
so that the increase in the average uni: rate of
G
purchase of energy from DVC, NTPC etc. should
)-.
be calculated with respect to the year 1991-92
instead of the year 1992-93.
(ii)
Whether in terms of clause 17 of the aforeE aid tariff
H
notification, 20 paise per Kwh the increasa in fuel
BIHAR STATE ELECTRICITY BOARD v. PULAK
307
ENTERPRISES & ORS. [DR. ARIJIT PASAYAT, J.]
\
surcharge which has been merged in the basis tariff
A
should be considered for adjustment, instead of 32
paise, in terms of clause 17 of the aforesaid
notification. If so, whether the impugned circular
dated 5.2.97 be not withdrawn and the consumers
be given the benefit of discredit to the period July
B
1993 to March 1994 and thereafter, and clause 17
of the tariff notification under section 93 be
--:J
amended appropriately.
15. The High Court diretted that till the Board takes a final c
decision in the matter, the interim order passed by the Court
on 21.3.1997, referred to above, shall operate. Thereafter, the
petitioners shall be liable to pay fuel surcharge in accordance
with the decision that may be taken by the Board. Any person
aggrieved by the decision of the Board will be at liberty to
challenge the same in accordance with law .
D
. .
16. The submission of the writ petitioners that the Board
has not passed a 'reasoned order'. or otherwise failed to
implement the direction of the High Court was rejected. It was
observed that the High Court had directed the Board to decide
E
whether any modification in clause 16.10.3 of the tariff
notification was required so as to make the base year with
respect to average unit rate of purchase of energy from DVC,
...
NTPC etc. at par with the increase in cost of generation at
Board's own generating stations and to adjust the merger of
F
the existing fuel surcharge of 20 paise/Kwh, by a reasoned
order. A favourable ·decision having been taken and the
aforesaid clauses suitably amended, the High Court felt that
there is no scope for further argument in this regard. As far as
the requirement of passing a "reasoned order" is concerned,
G
... .-J.
the facts and figures contained in the agenda notes dated
26.11.1998 and 6.1.1999 which were the basis of the proposed
amendments and revision in the rates, can be treated as
reasons for the same. The direction of the High Court to pass
a reasoned order cannot be interpreted as a direction to set
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[2009] 6 S.C.R.
A out reasons for fixing the particular rates of fuel surchcirge which
J
is merely an arithmetical exercise to be workod out in
accordance with the prescribed formula. The Board is a body
corporate and it takes its decision on the basis of the facts and
figures furnished to it in the agenda notes supported by
B materials. It is apparent that after the decision of the High Court
the matter was examined at different levels and finall f the said
agenda notes dated 26.11.1998 and 6.1.1999 were put up for
consideration which were approved respectively on 1'L12.1998
~---
and 21.1.1999. High Court did not find ~ny substance
c whatsoever in the contention that the Board failed to implement
the direction of the High Court, by not passing a reaso 1ed order
or otherwise.
17. The submission that the dispute should be mferred to
a Committee of experts was rejected by the Hinh Court
D considering the nature of the dispute. It was of the 1iew that
such a course should be taken only when the Cou i cannot
).
decide the dispute. There may be justification to constitute a
committee and refer the dispute to it when the relevant data
have to be gathered or facts have to be ascertained without
E which the dispute cannot be resolved. This normally i:; done in
public interest litigation. In adversary litigation it is for tre parties
to produce materials in support of their respective cl.~im. The
Court is not supposed to make a roving enquiry for allowing or
disallowing the claim of one or the other party. It is tru :l that on
F the previous occasion in CWJC No.2771 of 1995 ®,the High
Court did constitute a Committee but that was with the consent
of the Board. Counsel for the Board pointed out in course of
his submission that the Board wanted to be assured i:self that
the stand taken by it in letter dated 28.12.95 to the State
G Government suggesting amendments in clauses 16." 0.3 and
17 was correct.
>- •
18. As the aforesaid pleas were taken for the first time in
course of argument, the Board was allowed opportun ty to file
written submission. In its written submission the Board took the
H
BIHAR STATE ELECTRICITY BOARD v. PULAK
309
ENTERPRISES & ORS. [DR. ARIJIT PASAYAT, J.]
stand that T & D losses do not form part of calculation of fuel
A
surcharge and the reason for the difference of 8655.78 MU is
the existence of large number of defective meters and
meterless supply of electricity to consumers belonging to
different categories, particularly, agriculture and domestic
categories. The statement in paragraph 3.7 of Chapter Ill of the
B
GAG report actually represents the T&D losses based on units
actually metered and does not include power sold to the
consumers having unmetered supply or the consumers having
defective or burnt n:ieters. That is why in the accounts, the units
sold were worked out by dividing the assessed revenue by the c
tariff rates including fuel surcharge. It has been stated that in
the case of defective meters and meterless consumers, though
bills are raised, the corresponding quantum of power sold
cannot be determined. Hence the assessed revenue (in
accordance with the Board's tariff) is treated as the basis for D
computation of power sold. The GAG, it has been stated, has
approved this procedure and granted its statutory certificate to
the effect that the accounts of the Board give a "true and fair
view of the state of affairs of the Board".
19. The Board further took the stand that if the rates of fuel
E
surcharge were to be determined only on the basis of metered
sales the rates would be considerably higher than already
determined by the Board. This would be evident from the
following chart:
SI. Particulars
July 93
1994-95
1995-96
1996-97
March 94
1. Amount recove9536.09
16328.20
28431.10 53385.22
rable as fuel
surcharge
(Rs.in lakhs)
2. Units on which
Fuel surcharge
2645.76 3437.95
3822.96
3834.04
F
G
is leviable
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SUPREME COURT REPORTS
A
B
(in MKwh)
3. Rate of fuel
surcharge
(in P/Kwh)
4. Less (20 P/Kwh)
As per the
36.04
Hon'ble High Court's
Order dated 30.6.98
Passed in CWJC
C
No.1632of99
20.00
D
E
5. Net rate (P/Kwh)
If T&D losses as
Per serial No.6
Of table at para 3.7
Of CAG report at page
80 is taken into
account (3-4)
16.04
6. Present rates of fuel
Surcharge as per the
Impugned notification
Dated 31.5.1999 23.38
47.49
20.00
27.49
21.33
[2009] 6 S.C.R.
74.37
139.24
20.00
20.00
54.37
119.24
48.54
99.34
20. The above calculation has been explained by pointing
F out that while A 1, B 1, C 1 etc. and A3, B3, C3 etc. ::omponents
of the Formula indicating the power pumped into the Board's
system for transmission or distribution to different points in the
State and the incremental fise in the average cost ::if fuel at the
Board's Therm.al Power Stations or power pure hased from
G NTPC, DVC etc. are not affected by the T&D los;es, A2, 82,
C2 etc. component of the Formula representing 1he quantum
of power sold to categories from whom fuel surcharge is
leviable would be reduced if power supplied to the1 consumers
having defective meters etc. is excluded from the total quantum
H of power sold. Thus, while the numerators would remain
BIHAR STATE ELECTRICITY BOARD v. PULAK
311
ENTERPRISES & ORS. [DR. ARIJIT PASAYAT, J.]
.....
~
unchanged, the denominators would get reduced resulting in
A
higher rates of fuel surcharge. In the above view of the matter,
it was stated that keeping in view the meterless and defective
meter supply of the electricity the Board has made its own
realistic calculation of T&D losses as reflected in the table in
para 3. 7 of the CAG report which has been accepted by the
B
_J
CAG. The Board has accordingly asserted that the table shown
~··
in para 3.7 of the report regarding "percentage of actual loss
of energy available for sale" has no nexus with the computation
-....,
of rates of.fuel surcharge under the formula in clause 16.10.3 ..
21. The significance of the question as to whether fixing c
the rate of fuel surcharge is a legislative function or a nonlegislative function is that if the function is held to be legislative,
in the absence of any provision in that regard the principles of
natural justice would not be applicable and the scope of judicial
D
review would also be limited to plea of discrimination i.e.
..
violation of Article 14 of the Constitution of India, 1950 (in short
the 'Constitution'). As a general proposition, the law on the point
is settled. In Prag Ice and Oil Mills v. Union of India (AIR 1978
SC 1296), a Seven-Judge Bench of this Court by majority
E
observed:
~
"In the ultimate analysis the mechanics of price
fixation has necessarily to be left to the Judgment of the
;
executive and unless it is patent that there is hostile
. .,;,
discrimination against a class of persons, the processural
F
basis of price fixation has to be accepted in the generality
of cases as valid."
'
22. The legal position was reiterated in Rohtas Industries
-l'
v. Bihar State Electricity Board, (AIR 1984 SC 657) and Kera/a
G
State Electricity Board v. Mis S.N. Govind Prabhu & Brothers
..-•
(AIR 1986 Supreme Court 1999), wherein it was observed,
"Price fixation is neither the forte nor the function of the Court".
23. As regards the nature of the function, in Saraswati
Industrial Syndicate Limited v. Union of India (AIR 1975 SC
H
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SUPREME COURT REPORTS
[2009] 6 S.C.R.
A 460), the Court had observed that the price fixation is more in
!.
the nature of a legislative measure even though it may be based
upon objective criteria found in a report or other material. It
should not, therefore, give rise to a complaint that rule of
natural justice has not been followed in fixing the price. In Prag
B Ice and Oil Mills v. Union of India (supra) the Court observed:
c
'We think that unless by the terms of particular statute
or order, price fixation is made a quasi judicial function for
specified purposes or c2ses it is really legislative in
character .... .the legislative measure does not concern
itself to the facts of an individual case. It is meant to lay
down a general rule applicable to all persons or objects
or transactions of a particular kind of class."
24. In Union of India v. Cynamide India Ltd. (AiR 1987
D sc· 1 ao2) this Court held that except in cases where it becomes
necessary to fix the price separately in relation to individuals,
price fixation is generally a legislative act, the performance of
which does not require giving opportunity of hearing. Following
E
F
G
H
passage from the judgment may usefully be noticed:
"Legislative action, plenary or subordinate, is not
subject to rules of natural justice. In the case of
Parliamentary legislation the proposition is self-evident.