# GOPISETTI VENKATARATNAM AND OTHERS v. THE VIJAYAWADA MUNICIPALITY AND OTHERS

- **Citation:** [1965] 3 S.C.R. 276
- **Court:** Supreme Court of India
- **Decided:** 1965-03-05
- **Case number:** Civil Appeal No. 69 of 1964
- **Bench:** K. SUBBA RAo, J. C. Shah, R. S. Bachawat
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/gopisetti-venkataratnam-and-others-v-the-vijayawada-municipality-and-others-3482
- **Pages:** 7

## Headnote

Indian _Electricity Act, 1910 (A~t 9 of 1910), ss. 21 (2)-Agreement
betu:een Li'censee an~ Co!lS'U;mers-Supply of
energy at "current
official scale of rates' -Meaning of-Enhancement of rate-Sanction
of State Government, if necessary.
The Government of Madras issued a licence to the respondentMunicipality, under s.3(1) of the Indian Electricity Act, 1910, for the
supply of ele.ctric energy within its municipal limits at rates not
exceeding the maximum charges given in the licence. The appellants,
some consumers of the electric energy, entered into agreements with
the Municipality for the supply and agreed to pay the "current official scale of rates". The rates were increased by resolutions of the
Municipality twice and on the second occasion the appellants filed
a representative suit for a declaration that the later resolution was
illegal, and for an injunction restraining the Municipality from collecting charges at the new rates. The trial court dismissed the suit
and the dismissal was confirmed on ~ppeal by the High Court. In
appeal by special leave the appellants contended that (i) the rates
agreed between the consumers and the Municipality could not be
unilaterally altered and increased by the Municipality to the
prejudice of the consumers· and, therefore, the impugned resolution
was invalid and unenforceable; and (ii) as the impugned resolution
was passed without obtaining the previous sanction of the State Gov-
·ernment under s.'21 (2)-' of the Act, it was void.
HELD: (i) The consumers were under a contractual liability to
pay the enhanced rates covered by the impugned resolution.
Under ss. 22 and 23 of the Act the Municipality cannot discriminate tetween consumers in the matter of rates chargeable for the
energy supplied. Unless the Municipality enters into agreement with
the consumer. enabling it to charge him at a rate fixed from time to
time, it would be difficult for the Municipality to maintain equality
of treatment between the consumers. Tkat difficulty can be avoided
if there is a term in the agreement executed by every consumer that
he will pay the official rate fixed by the Municipality from time to
time subject to the maximum fixed by the licence. Further, a public
body in supplying electric energy to different consumeTs cannot run
the risk of incurring loss by agreeing to fixed rates, for the Government may increase the licence fee as had been done in the instant
case, or there may be a rise in the cost of distribution. [280 A-DJ
Therefore, having regard to the entire document and the surrounding· circumstances, the words "current official scale of rates" ~n
the agreement mean the official scale of rates current or prevalent
from time to time during the currency of the agreement. [281 CJ
(ii) No sanction of the State Government was necessary for
enhancing the rates.
There was no alteration of any condition of the agreement within
the meaning of s. 21(2) of the Act. The consumers had agreed to pay
the rates that would be fixed from time to time, and if that term
was a condition within the meaning of that section, there was no
change at all in that condition, for the change in the rates was not
in derogation of the condition but in terms of it. [282 A-Bl
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VENKATARATNAM v. MUNICIPALITY (Subba Rao, J.)
277.
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## Text

276
GOPISETTI VENKATARATNAM AND OTHERS
A
v.
THE VIJAYAWADA MUNICIPALITY AND OTHERS
March 5, 1965
[K. SUBBA RAo, J. C. SHAH AND R. S. BACHAWAT, JJ.J
Indian _Electricity Act, 1910 (A~t 9 of 1910), ss. 21 (2)-Agreement
betu:een Li'censee an~ Co!lS'U;mers-Supply of
energy at "current
official scale of rates' -Meaning of-Enhancement of rate-Sanction
of State Government, if necessary.
The Government of Madras issued a licence to the respondentMunicipality, under s.3(1) of the Indian Electricity Act, 1910, for the
supply of ele.ctric energy within its municipal limits at rates not
exceeding the maximum charges given in the licence. The appellants,
some consumers of the electric energy, entered into agreements with
the Municipality for the supply and agreed to pay the "current official scale of rates". The rates were increased by resolutions of the
Municipality twice and on the second occasion the appellants filed
a representative suit for a declaration that the later resolution was
illegal, and for an injunction restraining the Municipality from collecting charges at the new rates. The trial court dismissed the suit
and the dismissal was confirmed on ~ppeal by the High Court. In
appeal by special leave the appellants contended that (i) the rates
agreed between the consumers and the Municipality could not be
unilaterally altered and increased by the Municipality to the
prejudice of the consumers· and, therefore, the impugned resolution
was invalid and unenforceable; and (ii) as the impugned resolution
was passed without obtaining the previous sanction of the State Gov-
·ernment under s.'21 (2)-' of the Act, it was void.
HELD: (i) The consumers were under a contractual liability to
pay the enhanced rates covered by the impugned resolution.
Under ss. 22 and 23 of the Act the Municipality cannot discriminate tetween consumers in the matter of rates chargeable for the
energy supplied. Unless the Municipality enters into agreement with
the consumer. enabling it to charge him at a rate fixed from time to
time, it would be difficult for the Municipality to maintain equality
of treatment between the consumers. Tkat difficulty can be avoided
if there is a term in the agreement executed by every consumer that
he will pay the official rate fixed by the Municipality from time to
time subject to the maximum fixed by the licence. Further, a public
body in supplying electric energy to different consumeTs cannot run
the risk of incurring loss by agreeing to fixed rates, for the Government may increase the licence fee as had been done in the instant
case, or there may be a rise in the cost of distribution. [280 A-DJ
Therefore, having regard to the entire document and the surrounding· circumstances, the words "current official scale of rates" ~n
the agreement mean the official scale of rates current or prevalent
from time to time during the currency of the agreement. [281 CJ
(ii) No sanction of the State Government was necessary for
enhancing the rates.
There was no alteration of any condition of the agreement within
the meaning of s. 21(2) of the Act. The consumers had agreed to pay
the rates that would be fixed from time to time, and if that term
was a condition within the meaning of that section, there was no
change at all in that condition, for the change in the rates was not
in derogation of the condition but in terms of it. [282 A-Bl
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VENKATARATNAM v. MUNICIPALITY (Subba Rao, J.)
277.
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CIVIL APPELLATE JuRiSDICTION: Civil Appeal No. 69 of 1964.
Appeal by special leave from the judgment and decree dated
October 10, 1961, of the Andhra Pradesh High Court in Second
Appeal No. 872 of 1958.
A. V. Viswanatha Sastri, K. Rajendra Chaudhuri and K.
R.
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Chaudhuri, for the appellants.
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S. V. Gupte, Solicitor-General, and T. Satyanarayana, for respondent No. I.
T.V.R. Tatachari and B.R.G.K. Achar, for respondent No. 2.
The Judgment of the Court was delivered by
Sobba Rao, J. On November 22, 1927, the Government of
Madras, in exercise of its powers under s. 3(1) of the Indian Electricity Act, 1910 (IX of 1910), here'nafter called the Act, issued a
licence to the Bezwada (now Vijayawada) Municipal Council for
the supply of electric energy within the municipal limits of Bezwada at rates not exceeding the maximum charges given in the
third annexure to the said licence. The appellants, who are some
of the consumers of electric energy for domestic and industrial purposes, entered into agreements with the licensee for the supply of
electric energy to them for domestic, industrial and other purposes,
agreeing to pay the current official scale of rates. On December 13,
1940, the Municipality passed a resolution bringing into force new
rates for the supply of electric energy from April 1, 1940. The consumers paid the rates so fixed till the year 1956. On April 30, 1956,
the Municipal Council passed another resolution enhancing the rates
fro'Il 1-4-1956. The appellants filed a representative suit against the
Vijayawada Municipality in the Court of the District Munsif,
Vijayawada, for a declaration that the sa.id resolution dated April
30, 1956, passed by the Municipal Council was illegal, invalid and
unenforceable and for an injunction restraining the said Mun'cipality from collecting charges from the consumers of electric energy
in the licensee's area at the new revised rates in ,pursuance of the
l,m.pugned resolution. The learned District Munsif held that the
demand of enhanced rate was legal and valid and dismissed the
su;t. On appeal, the learned Subordinate Judge held that the levy
from the date of the said resolution was good, but it could not be
given retrospective operatioq. He further held that the claim for
duty at half an anna per unit was invalid. In the result he modified
the decree of the District Munsif. On a further appeal, a Division
Bench of the Andhra Pradesh High Comt confirmed the decree of
the Subordinate Judge. By special leave the present appeal has
been filed in this Court.
Mr. A.V. Viswanatha Sastri, learned counsel for the appellants raised before us the following two cuntentions: (1) The rates
~reed upon between the c~nsumers and the Muni~ipali~y cannot
be unilaterally altered and mcreased by the Mumc1pahty to the
prejudice of the consumers and, therefore, the said. resolution qatec1
ll78
SUPREME COURT REPORTS
(1965) 3 S.C.R.
April 30, 1956, was invalid and unenforceable; and (2) as the said
resolution was passed without obtaining the previous sanction of
the State Government under s. 21(2) of the Act, it was void for
that reason also.
The first contention turns upon the relevant clauses of the
agreement entered into between the Municipal Council and the
consumers. Ex. B-4 is one such agreement dated May 27, 1932,
between the Municipality and one of the appellants herein. The
material clauses of the agreement read:
Para, IV. The consumer shall pay to the licensee for all
electrical energy so supplied at the rates and in accordance
with the terms, given in the l;censee's Current Official
Scale of rates and the signing of this Agreement is held
to imply. con,currence in the terms of the said . Scales of
rates.
Provided that the minimum rates as specified therein
shall be paid irrespective of whether energy to the extent
has been consumed or not.
Para, V. A consumer under this Agreement is required
to state (see Schedule) under which of the rates set out in
the licensee's Official Scale of energy Rates, he desires to
be charged.
Para, X. This Agreement shall be read and construed
as subject in all respects to the provisions of the Bezwada
Municipal Electric Licence, 1927, and to the provisions
of the Indian Electricity Act 1910, and of any modification or re-enactment thereof for the time being in force
thereunder so far as the same respectively may be applicable. The supply of electrical energy under this agree·
ment is subject to following among other provisions of
law, namely: -
•
•
•
•
The schedule above referred to.
(2) Purposes to which the supply is to be given, and in the
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case of domestic supply under which rate to be chargG
ed, as referred to in paragraph V:
(a) (Supply) Domestic Purposes.
(b) (Rate) Rs. 0-6-0 per ,μnit.
(3) Maximum electrical power required by the consumer:
0--54 K.W.
(4) Minimum monthly charge: Rs. 2-8-0 in accordance
with (a) class rate in the Schedule of Rates.
The Schedule of Rates mentioned in this agreement presumably
refers to scale of rates fixed by the resolution of the Municipality.
The conflicting arguments centre on the question whether the
words "current official scale of rates" in para. IV relate to the scale
of rates current on the date when the agreement was en~red into
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VENKATARATNAM v. MUNICIPALITY (Subba Jlao, J.)
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or refer to the scale of rates current from time to time in accordance with the resolution passed by the Municipality. The expres·
sion "current" means "vogue or prevalent": and "current rate"
may mean the rate obtaining at a particular time or at a future time
or from time to time. The term goes well with the present, future
and recurrent. It is capable of different meanings depending upon
!he context or setting in which it appears. As the meaning of the
word is ambiguous, it is legitimate, iJ1 order to ascertain its true
mean;ng, not only to study the document as a whole but also to
ascertain its meaning from the circumstances whereunder the said
agreement came into existence. Under para. X of the agreement
the said agreement shall be subject to the provisions of the licence
and the provision of the Indian Electricity Act, 1940, that is to say
the said provisions are incorporated by reference into this agreement. Under the licence the licensee is precluded from charging
rates higher than those prescribed thereunder. On April 1, 1940,
the Electricity Department of the Vijayawada Municipality prepared a document styled as "Conditions and Rates of Supply". It does
not contain any statutory rules, but only administrative directions
in regard to providing, inter alia. for the method of entering into
agreements and for charging rates for the energy supplied. This
embodies the administrative practice of the Municipality in the
matter of charging rates for the energy supplied. Paragraph 15
thereof, under the heading "Method of charging for
current''.
reads:
"The price and method of charging for current supplied
shall be such as may from time to time be fixed by the
licensee in accordance with the prov;sions of the Act and
of his licence, ·or such as may be made subject of special
agreement between the consumers and the licensee."
This makes a distinction between the official rate and the contrac·
tual rate. The official rate is that fixed by the licersee from time to
time and the contractual rate is that fixed by special agreement
between the parties. It may be assumed that th's dual method is
followed by the Municipality in the matter of entering into agree·
ments. The form of application prescribed for the supply of electric
energy contains the following clause:
"I agree to pay for the said energy, service connection
and other dues including the deposit of such security as
may be demanded in accordance w'th the scale of rates
and the rules of the licence."
The scale of rates in the context 1!1eans the official .sca~e o~ rate~
that may be fixed by the Municipality. When an apphcatl?n 1s filed
an obligation is imposed under s.22 ?f the A~t on th~ licensee to
supply energy, except in so far as 1s otherwise provided by the
terms and condit'ons of the licence, on the s.ame ~erms. as . th?Se
on which any other person in the same area 1s en!Itled m sllllilar
280
SUPREME COURT REPORTS
(1965] 3 S.C.R.
circumstances to corresponding supply. Section 23 of the Act says
that a licensee shall not, in making any agreement for the supply of
e!lergy, show undue preference to any person. The combined operat10n of these prov1s10ns 1s that the licensee cannot discriminate
between the applicants in the matter, among others, of rates chargeable for the energy supplied. Unless the Municipality enters into
an agreement with a consumer enabling it tq charge him at a rate
fixed by it from time to time, it would be very difficult for the
Municipality to maintain equality of treatment between the consumers in the matter of rates. To illustrate, if under certain agreement a rate obtaining at a particular date is agreed upon and the
tate is binding on the Mun'cipality even if it is raised later on, the
Municipality may be guilty of discrimination which it is asked to
avoid by statute if it charges other consumers at a higher rate. This
difficulty can be avo'ded if there is a term in the agreement executed
by every consumer that he wi.11 pay the official rate fixed by the
Municipality from time to time subject to the maximum fixed by
the licence. That apart, a public body like the Municipality in
supplying energy to different consumers cannot run the risk of
incurring loss by agreeing to fixed rates, for the Government may
increase the licence fee, as it has done in the present case, or there
may be a rise in the cost of distribution. On the other hand, if the
term in the agreement is flexible to meet the said eventualities, the
maintenance of continuous supply of electric energy may be assured
without any loss to the public body. The circumstances obtaining
at the time when the agreements between the consumers and the
Municipality were entered into were these: The licensee had power
to fix the rates subject to the maximum prescribed by the Government. The administrative' directions provided for charging for the
current supplied at rates that may be fixed from time to time. The
Municipality was in practice fixing the rates from time to time
having regard to the relevant circumstances. The said rates fixed
by the Municipality from time to time were the "Official Scale of
Rates". The consumers applied to the Municipality for supply of
energy, agreeing to pay for the energy supplied at the scale of rates
fixed by the Municipality.
With this· background if we look at paragraphs IV and V of
Ex.B-4 the meaning of the expression "current official scale of rates"
will be clear. Paragraph IV speaks of "current official scale of rates"
whereas para. V mentions "official scale of energy rates". These
two paragraphs bring out the distinction between the official scale
of rates and the official scale of energy rates: the former refers to
the scale of rates maintained by the Municipality as modified from
time to t'me by appropriate resolutions, and the latter refers to the
different rates payable in respect of energy supplied for different
purposes. Under para. IV the consumer specifically agreed to abide
by the official scale of rates. If the intention of the parties is tha.t
the consumer shall pay only the scale of energy rates obtaining at
the time the agreement is entered into, there is no necessity for this
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VENK.A.TARATNAM v. MUNICIPALITY (Subba Rao, J.)
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specific agreemeent, for para. V serves that purpose. On the other
hand, the said express condition and the use of the word "current"
make it clear that the consumer agrees to pay at the official scale
of rates current from time to time. The adjective "current" will
become a surplusage, if the intention is to pay the rates obtaining
at the time the agreement is entered into, for the agreement itself
gives the ex;sting rates. The use of the adjective "current"
emphasizes the fact that the official scale of rates is not the existing
rates, but the scale of rates current from time to time. We have,
therefore, on a reasonable construction of the ambiguous expression "current" having regard to the entire document" and the surrounding circumstances, come to the conclusion that the words
"current official scale of rates" in para. IV of the agreement mean
the official scale of rates current or prevalent from time to time
during the currency of the agreement. If so, it follows that the appellants were under a contractual liability to pay the enhanced rates
covered by the impugned resolution.
The next question turns upon s. 21(2) of the Act, which, as
it then stood read:
"Subject to the provisions of sub-section (!), a licensee
may, with the previous sanction of the State Government
given after consulting the local authority, make conditions
not inconsistent with this Act or with his licence or with
any rules made under this Act, to regulate his relations
with persons who are or intend to become consumers, and
may with the like sanction given after the like consultation add to or alter or amend any such cond'tions; and
any conditions made by a licensee without such sanction
shall be null and void."
Under this sub-section the licensee cannot make conditions to regulate his relations with the consumers or amend any such conditions without the sanction of the State Government. Mr. Viswanatha
Sastri argued that to enhance the rates was to alter a condition
within the meaning of sub-s. (2) of s. 21 of the Act and as admittedly the sanction of the State Government was not obtained before
such alteration, the said resolution was void. The learned Solicitor
General contended that s. 21 (2) of the Act was a general provision
relating to conditions, whereas s. 23 thereof was a specific provision
in regard to fixing of rates and that s. 23 would, therefore, prevail
over s. 21 and that s. 23 did not prescribe the sanction of the Government as a condition precedent for fixing the rates, Mr. Tatachari,
while supporting this argument, added that on the interpretation of
para. IV of the agreement suggested by the respondents there was
no alteration in the conditions at all and, therefore, there was no
scope for invoking s. 21 of the Act It is not necessary to express
our opin'on in this case on the q~estion whether s .. 23 ~xcludes the
operation of s. 21(2) of the Ac_t m the matter of fixation ~f.rates,
for we are satisfied that there 1s no alteration of any cond1Uon of
282
SUPREME COURT REPORTS
(1965) 3 S;C,R
the agreement within the meaning of s. 21(2) thereof. We have held
that under para. IV of the agreement that was enteroo into bel\".·een
the consumers and the licensee, the consumers agreed to pay the
rates that were fixed by the Mun;cipality from time to time. If the
said term was a condition within the meaning of s. 21(2) of the Act,
there was no change at all in that condition, for the change.in the
rates was not in derogation of the condition but in terms of _it. To
state it differently, the same condition embod'ed in para: IV of the
agreement continued· to operate between the parties even after the
rates were enhanced under the impugned resolution. Therefore, no
sanction of the State Government was necessary for enhancing the
rates.
No other point was raised before us. In the result, the appeal
fails and is dismissed with one set of costs.
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Appeal dismissed.
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