# So11th of Scotlcnd Electricity Board & Ors v. British Oxygen Co. Ltd

- **Citation:** [1968] 3 S.C.R. 137
- **Court:** Supreme Court of India
- **Decided:** 1968-02-08
- **Case number:** Civil Appeals Nos. 335 and 336 of 1967
- **Bench:** K. N. Wanchoo, S. M. Snoo, J.M. Shelat, V. Bhargava, C. A. VAIDlALlNGAM
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/so11th-of-scotlcnd-electricity-board-ors-v-british-oxygen-co-ltd-4270
- **Pages:** 21

## Headnote

Electricity (Supp(v) Act 54 of 1948; s. 49 as amended by the Electricity (S11pply) Amendment Act 30 of 1966, s. 24-Pow.er of Electricity
Board to /ev,v uniform tariffs for different consumers-Valulity of s. 49
-Whether colourable exercise of taxing power-Whetf1er gives unguided
po,.-er to Board--Ej/ect of s. 24 of Amendment Act.
The appellant the Maharashtra State Electricity Board which took over
tho supply of electrical energy from the original linc<,nsec, increased the
tariff and fixed a 11niform tariff for all its consumers. The respondentsconsume;s filed petitions under Art. 226 of the Constitution. contending
that (a) s. 49 of the Electricity (supply) Act 1948 .did not permit the
Board to frame uniform tariffs for consumers in compact areas as well
as consumers in sparse areas. so as to require the former to pay a part of
the oost involved in the supply of electricity to the latter: and (b) if s.
49 gave such power to the Board it was ultra vii"es and void, as it offended
the provisions of the Constitution. The High Court allowed
the
writ
J>Zlitions. The Board filed appeals to this Court and during its pcndency
s. 49 was amended 1cb:ospectively by the Electricity (Supply) Amendment
Act 1966 and by s. 24 of the Amendment Act tho imposition and cotlcc·
tion of cha1ges undeJ s. 49 was validated.
HEID : The appeals must be allowed.
(i) "Ibc appellate-Board had ample powers to frame uniform tariffs
and the levy was valid.
In the old s . .,.'> .. there was no such policy or direction indicated by the
Legislature that ~·Board is to frame uniform tariffs. Under that section,
the Board had the po\\-er to supply electricity on such terms and conditions
as it may from time to time fix, having regard to t!n matters referred to
in the said section.' "Ihe only restriction upon the Board's power was that
it shall not show undue preferenee to any person in fixinR any such tef1n.;.
and conditions. In s. 49 as it now stands tm Legislature hns empowered
the Board to frame uniform tariffs and it has also indicated the. factor~
to 00 taken into account in fixing uniform tariffs. These two aspects arc
contained in sn~. (1) and (2). The Legislature has also made it clear
in sub-s. (3) that the Boan! in the special circumstances mentioned thcn:--
iii, has got power to fix different tariffs for the supply of electricity. Subsection (4) directs the Board not to show undue preference to any person
f01 fixing the tariffs and the terms and conditions for the supply of electricity.
Though prima fade it would appear that sub-s. ( 4) will govern
sub-ss. (1) to (3) in s. 49 the proper way to interpret sub-s. ( 4) will be
to read it along with snb-s.. (7). When the e'ntire tariff is uniform for
every consumer. there is no question of any undue preference as every
customer will pay the same amount for the same benefit received b~r him.
(153 CE]
H
So11th of Scotlcnd Electricity Board & Ors. v. British Oxygen Co. Ltd.
(195~ 2 All E.R. 225 and Attorney-Gene/"11 for
Victoria v.
Mayor,
Aldermen. Councillors and Citizens of Melbourne,
[19071 A.C. 469, re··
ferred' to.
L4SUp.Cl./6S-10
138
SUPREME COURT REPORTS
(1963] 3 S.C.R.
(ii) In the counter-affidavit filed on behalf of the Board, it has been
stated that ever sinoe its constitution, it has been carrying an its opuatiQlia
at a loss and there has been no occas:on when any part of its revenues
has bc,on passed to the consolidated fund of the State, as provided by the
proviso to sub-<:l. (b) of cl. 10 of s. 67. Even otherwise, before the proviSo can come into operation, there are several other items in respect of
which adjustments will have to be made, and there will be n9 occasion at
an for th-e proviso to come in~o effect. There is no force in ffie contention
of the respondents that with a view to give effect to the proviso. the Board
will so. fix <he tariffs as to enable them to have huge surplus, after meeting
the various adjustments.
In case such a thing happens in future. the
proviso, which is clearly sev

## Text

_Characters 0–39,738 of 58,183. This is a partial read: ask again with offset=39738 for what follows._

137
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MAHARASHTRA STATE ELECTRICITY BOARD
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v.
KALYAN BOROUGH MUNICIPALITY & ANR.
February 8, 1968
[K. N. WANCHOO, C.J., S. M. Snoo, J.M. SHELAT, V. BHARGAVA
AND C. A. VAIDlALlNGAM, JJ.]
Electricity (Supp(v) Act 54 of 1948; s. 49 as amended by the Electricity (S11pply) Amendment Act 30 of 1966, s. 24-Pow.er of Electricity
Board to /ev,v uniform tariffs for different consumers-Valulity of s. 49
-Whether colourable exercise of taxing power-Whetf1er gives unguided
po,.-er to Board--Ej/ect of s. 24 of Amendment Act.
The appellant the Maharashtra State Electricity Board which took over
tho supply of electrical energy from the original linc<,nsec, increased the
tariff and fixed a 11niform tariff for all its consumers. The respondentsconsume;s filed petitions under Art. 226 of the Constitution. contending
that (a) s. 49 of the Electricity (supply) Act 1948 .did not permit the
Board to frame uniform tariffs for consumers in compact areas as well
as consumers in sparse areas. so as to require the former to pay a part of
the oost involved in the supply of electricity to the latter: and (b) if s.
49 gave such power to the Board it was ultra vii"es and void, as it offended
the provisions of the Constitution. The High Court allowed
the
writ
J>Zlitions. The Board filed appeals to this Court and during its pcndency
s. 49 was amended 1cb:ospectively by the Electricity (Supply) Amendment
Act 1966 and by s. 24 of the Amendment Act tho imposition and cotlcc·
tion of cha1ges undeJ s. 49 was validated.
HEID : The appeals must be allowed.
(i) "Ibc appellate-Board had ample powers to frame uniform tariffs
and the levy was valid.
In the old s . .,.'> .. there was no such policy or direction indicated by the
Legislature that ~·Board is to frame uniform tariffs. Under that section,
the Board had the po\\-er to supply electricity on such terms and conditions
as it may from time to time fix, having regard to t!n matters referred to
in the said section.' "Ihe only restriction upon the Board's power was that
it shall not show undue preferenee to any person in fixinR any such tef1n.;.
and conditions. In s. 49 as it now stands tm Legislature hns empowered
the Board to frame uniform tariffs and it has also indicated the. factor~
to 00 taken into account in fixing uniform tariffs. These two aspects arc
contained in sn~. (1) and (2). The Legislature has also made it clear
in sub-s. (3) that the Boan! in the special circumstances mentioned thcn:--
iii, has got power to fix different tariffs for the supply of electricity. Subsection (4) directs the Board not to show undue preference to any person
f01 fixing the tariffs and the terms and conditions for the supply of electricity.
Though prima fade it would appear that sub-s. ( 4) will govern
sub-ss. (1) to (3) in s. 49 the proper way to interpret sub-s. ( 4) will be
to read it along with snb-s.. (7). When the e'ntire tariff is uniform for
every consumer. there is no question of any undue preference as every
customer will pay the same amount for the same benefit received b~r him.
(153 CE]
H
So11th of Scotlcnd Electricity Board & Ors. v. British Oxygen Co. Ltd.
(195~ 2 All E.R. 225 and Attorney-Gene/"11 for
Victoria v.
Mayor,
Aldermen. Councillors and Citizens of Melbourne,
[19071 A.C. 469, re··
ferred' to.
L4SUp.Cl./6S-10
138
SUPREME COURT REPORTS
(1963] 3 S.C.R.
(ii) In the counter-affidavit filed on behalf of the Board, it has been
stated that ever sinoe its constitution, it has been carrying an its opuatiQlia
at a loss and there has been no occas:on when any part of its revenues
has bc,on passed to the consolidated fund of the State, as provided by the
proviso to sub-<:l. (b) of cl. 10 of s. 67. Even otherwise, before the proviSo can come into operation, there are several other items in respect of
which adjustments will have to be made, and there will be n9 occasion at
an for th-e proviso to come in~o effect. There is no force in ffie contention
of the respondents that with a view to give effect to the proviso. the Board
will so. fix <he tariffs as to enable them to have huge surplus, after meeting
the various adjustments.
In case such a thing happens in future. the
proviso, which is clearly severable, may have to be struck down. Therefore, this ground of attack, that there is a colourable exercise of taxing
power, cannot be accepted.
f.154 H-155 CJ
·
(iii) Section 49 is not, in any way, bad on the ground that it gives
an unguic!ed and arbitrary power to the Board to fix its tariffs as it likes.
The prm·isions of the Act have the effect of properly guiding the activities
of the Board, in its dealings with the consumers including the levy of
tariffs. Section 49 itself is hedged in by various restrictions lllld directions
which the Board will have •o comply in thp, matter of frattling uniform
tariffs or in the matter of fixing different tariffs, and that section also provides a proper guide-line for framing uniform tariffs and different tariffs.
Therefore, in particular, it may be noted that the extension and cJieapcning of supplies of electricity to sparsely developed areas undeF cl. (d) of__s.
49(2) of the Act can only be complied with by keeping the uniform rate
at a minimum, consistently \vith the requirement of s. 59, of not mnning
at a Joss. [156 B-DJ
(iv) The contention, that while restrictions have been placed on the
licensees no such restriction has been placed on the Board in as much as
·that the licensee shall so adjust his charges for the sale of .electrici•y,
whether by enhancing or reducing them that his dear profit in any year.
of account shall not, as far as possible, exceed an amount of reasonable
return, has no substance.
The lio~nsiees are persons who must· have in~
vested considerable caoital in the matter of their business. and obviously.
the Legislature thought that some directions will have to be given so as to
enable them to have a reasonable return. [156 E-GJ
( v) Section 24 of the Amendment Act, deals with all rates, as a matter
of fact fixed under s. 49 of the Act. In this case, the Board has fixed
tariffs under s. 49 of the Act. Therefore, s. 24 of the Amendment ·Act
has full effect and force. [157 BJ
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 335 and
336 of 1967.
Appeals from the judgment and order dated April 26, 27 and
28, 1965 of the Bombay High Court in Special Civil Applications
Nos. 1570 and 1571 of 1962.
L. M. Slnghvi, B. Dutta and RavinJer Narain, for the appellant (in both the appeals) .
Poras A. Mehta, G. L. Sanghi, R. A. Gagrat and B. R. Agarwa?a, for the respondents (in both the.appeals).
V. A. Seyid Muhammad and S. P. Nayar, for intervener No.
1 (in both the appellls).
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MAHARASHTRA ELEC. v. KALYAN MUNIC. (Vaidlalingam, !.) 139
A. K. Sen and B. R. Agarwala, for intervener No. 2 (in both
the appeals).
The Judgment of the Court was delivered by
Vaidialingam, J. These two appeals, by certificate, are
directed against the common judgment of the. Bombay High
B' Court, rendered in Special Civil Applications, Nos. 1570 & 157 i
of 1962.
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The circumstances, under which t.he two writ petitions were
filed, by the respondent, in each of these two appeals, may be
brielly stated. Till January 14, 1959, a company called the
Kalyan Electricity Company (Private) Ltd., held a licence for
supplying electrical energy to the town of Kalyan · and the surrounding areas.
The licence of the said company was revoked
hy the Government ·of Maharashtra, and, on option being given
to purchase the undertaking of the said company, the appellant
purchased the same, on January 15, 1959. The appellant, hereinafter to be referred to as the Board, continued to supply elecD
trical energy to the residents of Kalyan, according to the rates
prescribed by the former Kalyan licensee, pending notification oE
its standard rates of supply. In March 1962, a public notice
was given by the Board, to the effect that in the Western Maharashtra area (which includes 'Kalyan) revised tariff would be
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applicable from the first day of the month next ·following the
month .in which supply of Koyna power became available.
As
the electrical energy from the Koyna Project became available
from the month of June 1962, the Board caused another public
notice to be issued, informing the public that the Board's revised
tariffs would come into force from July 1962, and that bills, in
respect of the power consum_ption, during that month, would be
issued at the revised tariffs, in August 1962.
The Kalyan Borough Municipality, which is the respondent,
in Civil Appeal No. 335 of 1967, was being supplied by the
appellant, electrical energy for street lighting, till June 1962, on
the same terms on which the ol,d Kalyan licensee was supplying.
The Board submitted a draft of the new agreement to the said
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Municipality, in respect of the supply of electrical energy for
street lighting, under which the charge which the Municipality
had to pay, per unit of electricity, was slightly less than before,
but the Municipality was required to pay several fixed charges,
with the result that the total amount payable was greater tlian
before. The Municipality, however, intimated its desire to enter
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into the new agreement, only for a period of .one year, instead
of seven years, as suggested by the Board. Tne Board was not
prepared to accede to this request, of the Municipality, and, on
the latter's ·failure. to pay bills for street lighting, according to the
140
SUPREME COURT ).lll'Or.TS
(196S} 3 S.C.R.
draft agreement, an intimation 'l"lllS sent, by the appellant, on
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October 12, 1962, that the supply of electricity, for stteet lighting, would be cut off, from October 22, 1962. The Municipality
filed a writ petition, under Art. 226, being Special Civil Application No. 1570 of 1962, in the High Court, against the Board,
seeking a writ of mandamus, prohibiting the appellant from enforcing the directions, contained in its notioe, dated October 12,
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1962.
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One Dattatraya Pandurang Pimpale and other COllSUlllCIS of
electricity formed an association called 'Kalyu-Dombivali-Vij
Grahak Manda!', to protest against the steps taken, by the appellant, to levy increased charges, for the supply of electrical energy.
As the request of the Association, for not increasing the charges,
was not heeded to, by the appellant, which threatened to stop
supply of electricity to consumers, if the bills were not paid,
according to the revised tariffs, the said Dattatraya filed, in the
Higli Court, a writ petition, under Art. 226, being Special Civil
Application No. 1571 of 1962, seeking directions to restrain the
Board from disconnecting supply of electrical energy.
DIn both these writ petitions, the action of the Board, in increasing the tariffs, over and above the rate which was charged
by the original Kalyan licensee, and fixing a unifOilll tariff, was
challenged. Two contentions appear to have been raised, in the
writ petitions, before the High Court, viz., (a) thats. 49, of the
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Electricity (Supply) Act, 1948 (Act LIV of 1948) (hereinafter
referred to as the Supply Act), did not permit the Board to frame
uniform tariffs for consumers in compact areas as well as consumers in sparse areas, so as to require the former to pay a part
of the cost involved in the supply of electricity to the latter; and
(b) that, if s. 49 gave such power to the Board, it was ultra vires
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and void, as it offended the provisions of the Constitntion.
The Board, by reference to the scheme and the provisions of
the Supply Act, contended that the levy of a unifOilll tariff was
valid and within its power and that s. 49 did not offend any
provisions of the Constitution. At this stage, it may be mentioned that ·the High Court considered the contentions of the
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parties, on the basis of s. 49, as it was, prior to the amendment
of the Supply Act in 1966. Before the High Court, it appears
to have been common ground that distn1mtion costs involved in
the supply of electricity, per unit of consumption, to sparse areas.
was higher than the distribution costs, involved in the supply of
electricity, per unit of consumption, to compact areas. The High
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Court has taken the view that one of the factors which the Board
has to take into account, under s. 49, in framing its tariffs, is the
location, where the consumer wants electrical ~
to be sup-
~· ,.
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MAHARASHTRA BLBC. v. XALYAN MUNIC, (Vaidialingam, 1.) 141
plied to him, and' that this iinplies that if, on a consideration of
this factor, the Board finds that the cost of supply of electricity
to different areas, are widely divergent, different tariffs could be
framed, in respect of such areas.
On this line of reasoning, the
learned Judges of the High Court, came to the conclusion that,
in framing the impugned tariffs, the Board did not have due regard to the provisions, contained in s 49, and therefore, the Board
was not entitled to enforce the demand, made by it.
The leiimed
Judges also seem to have been impressed with the objections.
raised by the respondents, that the Board had assumed that s. 49
permitted it to frame its tariffs, in such a way that a part of the
higher cost, involved in the supply of electrical energy, to undeveloped areas, may be borne, by consumers, in compact areas.
As the High Court accepted the contention of the respondents,
that the Board had no power to fix uniform tariffs, so as to cast
a higher burden, on the consumers, in a compact area, where
the cost of supply was less, it did not express any opinion, regarding the constitutional validity of s. 49, though, there again, the
High Court appears to have been inclined to hold that unguided
and unfettered power had been given, to the Board, to fix its
charges as high as it liked. Ultimately, the High Court allowed
the writ petitions and prohibited the appellant, from enforcing
its claim to recover the revised tariff, and disconnecting electric
supply.
Civil Appeal No. 335 of 1967 is against the order in
Special Civil Application No. 1570 of 1962, in which the respondent is the KaJyan Borough Municipality; and Civil Appeal No.
336 of 1967 is against the order in Special Civil Application No.
1571 of 1962, in which the respondent is Dattatraya Pandurang
Pim pale.
During the pendency of the above appeals, Parliament enacted
the Electricity (Supply) Amendment Act, 1966 (Act XXX of
1966) (hereinafter called the Amendment Act), by which the
Supply Act was amended, in various particulars. It is
only
necessary to refer to two sections of the Amendment Act, viz ..
ss. 11. and 24. Section 11, substituted, witli retrospective effect
new s. 49, in the place of old s. 49.
The new s. 49, runs as
follows:
"49. Provision for the sale of electricity by the
Board to persons other than licensees.-
( 1) Subject to me provisions of this Act and of
regulations, if any, made in this behalf the Board
may supply electricity to any person not being
a licensee upon such terms and conditions as
the Board thinks fit and may for the purposes
of such suuply frame uniform tariffs.
1'2
SUPUMI ClOU&T d!Ot.TS
(1968] 3 s.c.R.
( 2) In fixing the uniform tariffs, tho Bolll'd shall
have regard to all or any of the following factors, namely :-
(a) the nature of the supply and the purposes
for which it is required;
(b) the coordinated development of the supply
and distribution of electricity within the
State in the most efficient and economieal
manner, with particular reference to such
development in areas not for the time
being served or adequately served by the
licensee;
( c) the simplification and standardisation of
methods and rates of charges for such supplies;
( d) the extension and cheapening of supplies
of electricity to sparsely developed areas.
(3) Nothing in the foregoing provisions of this section shall derogate from the power of the Board,
if it considers it necessary or expedient to fix
different tariffs for the supply of electricity to
any person not being a licensee, having regard
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to the geographical position of any area, the
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nature of the supply and purpose for which
supply is required and any other relevant factors.
( 4) In fixing the tariff and terms and conditions for
the supply of electricity, the Board shall not
show undue preference to any person."
Section 24, of the Amendment Act, validating the imposition
and collection of charges for the supply of electricity, under s. 49.
is, as· follows :
"(1) Notwithstanding any judgment, decree or
order of any Court, all rates fixed under section 49 of
the Electricity (Supply) Act, 1948, for the sale of
electricity to any person, other than a licensee before
the commencement of this Act shall be deemed to
have been v~lidly fixed as if the provisions of the said
section, as amended by this Act, had been in force at
all material times when such rates were fixed and
accordingly,-
(a) no suit or other proceeding shall be maintained
"r continued in any Court fQI: the refund of any
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MAHARASHTf.A ELEC. r. KALYAN MUNIC. (Vaidia/ingam, /.) 143
(b)
(c)
amount collected from any person on the basis
of such rates;
no Court shall enforce a decree or order directing the refund of any amount collected from
such person on the basis of such rates;
any amount due from any person on the basis
of such rates before the commencement of this
Act but not recovered before such commencement may be recovered in the manner provided
under the Electricity (Supply) Act, 1948.
(2) For the removal of doubts, it is hereby declared that nothing contained in sub-section (I) shall be
construed as preventing any
person
from claiming
refund of any amount paid by him in excess of. the
amount due from him under the said Act, as amended
by this Act and the rules or regulations made thereunder."
In view of the Atμendment Act, this Court permitted the
parties to file affidavits, stating their case, wi~h respect to the
amended section 49, and gave an opportunity to them, to raise
their respective contentions.
The respondents have raised the
contention that s. 24, of the Amendment Act, on a proper interpretation, does not validate the impugned rates of electricity
supply, imposed on them, by the appellant.
According to them,
on a proper interpretation of s. 49, as amended, the Board is not
empowered to fix uniform tariffs, in such a way tl!at a great part
of the higher costs involved in the supply of electricity to sparse
areas, is to be borne by consumers in developed or compact areas.
It is their further contention that, under the amended section,
uniform tariffs can, if at all, be levied by the Board, with particular reference to the development in areas which are not. for the
time being served at all, or adequately served, and it does not
·authorise the appellant to secure development of electricity in the
sparse areas, at the cost of the consumers in areas which are
already developed and adequately served, and hence the levy of
the tariffs at the amended rate, is unauthorised and illegal. The
respondents further contend that levy of uniform tariffs, as contemplated by s. 49(2), as amended, can be done only when the
Board fixes uniform tariffs, for the whole State of Maharashtra.
In this connection, they point out, that the appellant has not fixed
uniform tariffs for the entire State of Maharashtra, but, on the
other hand, has fixed different tadffs, for different areas,
for
supply of electricity.
As an instance of the Board itself levyin)!
different rates in different areas, the respondents have referred
to the case of Poona City, which was formerly served by the
144
SUPREME COURT REPORTS
[1968] 3 S.C.R.
Poona Electricity Supply Company Ltd. In Poona City, the
respondents point out, the Board has fixed a lower rate of tariff,
viz., 13 paise per unit of electricity, whereas it has fixed 31 paisa
per unit in other areas, including the Kalyan Municipality area.
It is the claim of the respondents that the appellant should have
fixed tariffs for the Kalyan Municipality area also, in the same
manner as it has done for the Poona City area.
The Board
according to them, is not entitled to charge higher rate from
consumers in the Kalyan Municipality area,
in order to give
cheaper supplies to other areas, in the western region. It is their
further contention, that, under s. 49(2), as amended, the appellant may charge lesser rate than the cost of supply for the
sparsely developed areas, but, in no case is it entitled to charge
the compact areas, rates higher than warranted by the. cost of
supply to such areas.
They point out that by charging consumers
in compact areas more than the cost of supply, the Board has
shown undue preference. The consumers, in the compact areas,
are being made to pay more than what is due by them, i.e., more
than the cost of supply, in order to charge less from consumers
in undeveloped areas, i.e., less than what is due by them, and
this offends sub-s. ( 4) of s. 49.
The respondents also co11tend that if s. 49, as amended, empowers the Board to levy and co!Iect, at the rate of the revised
tariff, s. 49 is unconstitutional and void. They point out that
by the Board charging consumers in compact areas more than
what is due by them, i.e., more than the cost of supply, it was,
in effect, taxing a class of consumers, which it had no power or
authority to do, P,nder the Supply Act, as amended.
No maximum
limit has been fixed, under the Supply Act, beyond which the
Board cannot charge, for electricity supplied by it. They also
point out that the consumers, to whom electricity is supplied by
the Board, are treated differentially from the consumers who are
supplied electricity, by licensees.
In respect of the latter class,
they point out, that the Supply Act has placed several restrictions,
regarding the manner in which the rate has to be fixed, whereas
there is no such restriction, placed on the powers of the Board.
This amounts to discrimination, resulting in Art. 14, of the Constitution, being violated.
On these grounds, both the respondents
ur~e that the levy of uniform tariff, by the Board, is illegal and
VOid.
The appellant Board has controverted the stand, taken by
the respondents.
According to it, the levy and collection at
the revised uniform tariff, is perfectly legal and valid, and
s. 24, of the Amendment Act, in any event, has validated such
levy. The appellant points out that the fixing of uniform tariff
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MAHARASHTRA ELEC. v. XALYAN MUNIC. (Vaidialingam, J;) 145
is authorised by s. 49, as amended; and such uniform rates are
fixed, not with the intention of making the developed areas bear
the incidence of higher costs of supply to undeveloped areas, but
really with a view to achieve the co-ordinated development of
generation, distribution and supply of eJectrical energy, in the
most efficient and economical manner, as required by the Supply
Act. According to the Board, it is not necessary to fix one
single uniform tariff for the whole State of Maharashtra, and
that, on the other hand, it is empowered to fix region-wise uniform tariffs, having due regard to the provisions, contained in
s. 49(2). In this connection, the Board a:so points out that
both the respondents are consumers of electricity, at low tension,
and that they are concerned only with tariffs for supply of electricity at low tension. The Board further avers that since April
1962, it has prescribed and applied, uniform tariffs for supply of
electricity at low tension, in all the areas in the State of Maharashtra, which are served by it, except Poona area. With reference to Poona area, the Board has referred to the circumstances.
under which a lower rate of tariff is -levied. Even in respect of
Poona area, it is stated by the Board that it has intrduced uniform
tariffs for. low tension electricity, with effect from
January 1,
1966 except in regard to consumers of electricity for lights and
fans and small power in residential buildings.
Regarding the attack, on the constitutional validity of s. 49,
as amended, the Board points out that there is no question of any
taxing power being entrusted to it, under the said section. The
Board points out that in view of the special circumstances under
which a licensee is operating, certain provisions have been made
in the Supply Act; but the special position occupied by the
Board, which has been entrusted with various duties and functions has been recognised by the Supply Act. But no discrimination as alleged by the respondents has h'!en made by the statute between consumers who are supplied by the licensee and the
consumers who are supplied by the Board. The Board fmther
states that the Supply Act does not cast any duty on the Board
to fix the tariff, in accordance with the cost of supply; and it
points out that what is necessary, under s. 49, is the taking into
account of the over-all economy of the Board's system of generatfon and supply of electricity.
Tue Board seeks to sustain the
levy of uniform tariff, on the basis of the various provisions of
the Supply Act, with particular reference to s. 49, as amended.
In view of the Amendment Act, it has becom; really unnecessary to consider the correctness or otherwise of the views, expressed by the High Court, regarding s. 49, as it stood prior to its
amendment; and these appeals will have to be disposed of, on a
consideration of the Supply Act, as · amended in 1966, with
special reference to s. 49, as it now stands.
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Two questions arise for consideration, in these appeals, viz.,
(i) the proper interpretation to be placed, on s. 49, as amended,
and the power of the Board to levy a unifoon taritf, as in this
case; and (ii) the validity of s. 49, as amended.
It is necessary to state at this stage that both the respondents
are consumers of electricity at low tension and that the Board
bas fixed uniform tariff for the whole of the State of Maharashtra
for supply of electricity at low tension, except in Poona city in
respect of certain types of consumers. Even in respect of such
cqnsumers, the Board bas stated. that it is taldng steps to levy a
uniform tariff. It is on this basis that the contentions of the
parties are being considered and dealt with in these appeals.
It is necessary now to refer to some of the relevant provisions
of the Supply Act as that will indicate the scheme underlying the
Act.
The Supply Act, as the preamble shows, is an Act to pro·
vide for the rationalisation of the production and supply of electricity, for taking measures conducive to electrical development.
Chapter II deals with the Central Electricity Authority.
Section
3<1) provides for the constitution by the Central
Governm~nt
of a body cal!ed the Central Electricity Authority to exercise
such functions and perform such duties under the Supply Act and
· in such manner as the Central Government may prescribe· and
direct. Chapter m deals with the constitution and composition
of the State Electricity Board and certain other incidental matters.
Section 5 provides for the State Government . constituting a State
Electricity Board, hereinafter referred to as the Board.
Section
16 deals with the constitution by the State Government of a State
Electricity Consultative
Council
for
the
State.
Subsec. (2) deals with the composition of the State Elec!ricity
Consultative Council. It provides for inclusicin, in the said
Council of representatives of cons11mers of elec•ricity also. Subsection ( 6) casts a duty on the State E'ectricity Board to place
before the State Electricity Consultatitve Council
the
annual
financial statement and supplementary statement if any. A duty
is also cast upon the Boar<! to take into consideration any comments made on such stateme11t by the said Council before it is
submitted to the State Government under s. 16 (1).
Chapter IV deals with the powers and ,duties. of State Electricity Boards .. Section 18 cha•ges the Board with the ~neral
duty of promoting the co-ordinated development of the generation supply and distribution of electricity within the State in the
mosi efficient and economical manner. with particular reference
to such development in areas not for the time
~ing served or
adeauately served by any licensee.
Section 49 as incorporated
by the Amendment Act of 1966 retrospectively, makes provision
for the sale of electricity by the Board to persons other than
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MAHARASHTRA ELEC. v. KALYAN MUNIC. (Vaidialingam, J.) 147'
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licensees. As, in these appeals, the proper interpretation to be
placed on that section arises for consideration, that section will
be dealt with by us more exhaustively, in the latter part of the
judgment. It is enough to note at this stage that the said section
deals with the framing of uniforms tariffs and also offixing difierent
tariffs as the case may be, in accordance with the principles.
B laid down therein.
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Chapter VI ·deals with the Board's finance, accounts and
audit. Section 59, leaving out the proviso, states that the Board
shall not, as far as. practicable, and after taking credit for any
subventions from the State Government under s. 63, carry on
its operations under the Supply Act at a loss, and that it shall
adjust its charges accordingly from time to time.
Section 61
directs the Board to submit in February of each year to the State
Government a statement in the prescribed form of_ the estimated
capital and revenue receipts and expenditure for the ensuing. year,
Sub-section (3) thereof makes it obligatory on the State Govern·
ment to place the said statement before the House or Houses, M.
the case may be, of the State Legislature and it also provides that
the said statement shall be open to discussion by the Legislature,
but it is not subject to vote.
Sub-section ( 4) casts a dufy on
the Board to take into consideration any comments that may be·
made on the said statement in the State Legislature. It may be
noted that s. 61 realiy deals with the Board's preparing its budget
for the succeeding year and making it available for discussion
by the State Legislature.
Section 63 gives power. to· the State
Government, with the approval of the State Legislature, to make
subventions from time to time to the BOll)'d for the purposes of
the Act on such term.s aitd conditions as the State Government
may determine. Section 67 deals with the priorify and .discharge
of liabilities by the Board and how the balance amount, i~ any,
is to be utilised.
Section· 70(2) provides that save as otherwiseprovided, the provisions of the Supply Act shall be in addition
to, and not in derogation C)f, the . Indian Electricity Act, 1910
(Central Act X of 1910). Section 7 5 ( 1 ) deals with the preparation and submission to ihe State Government by the Board
soon after the end of each financial year a report giving aii
account of its activities during the previous financial year. The
report should also give an account of the activities, if any, which
are likely to be undertaken by ihe Board in the next financial
year. It also makes it obligatory on· ihe !State Government to
plaee the said r~port before the State Legislature. Here again,
it may be notetl, that the Board has to give a report ofits activities for the past year.
Section 78 gives power to the State Government to make rules to give effect to the provisions of the Act.
One of the items in respect of which rules could be framed is that
referred ti:i in cl. (g) of s. 7.8(2) namely the form in which, and·
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SUPREME COURT REPORTS
£196SJ 3 s.c.R.
.the date by which, the annual report of the Board shall be submitted under s. 75; The State Government in this case has
framed the Maharashtra Electricity (Supply) Rules, 1963. Rule
Si thereof relates to the submission of annual reports under
s. 7 5 (1 ) by the Board. Sub-s. ( 2) indicates the various matters
that are to be included in the annual report that is sent by the
Board.
Item (q) of sub-r. (2) relates to details of the tariffs of
the Board during the year.
Therefore, it will be seen, that in the
.annual report that is sent under s. 75 (1) by the Board to the
State Government and which report, as already referred, is placed
before the State Legislature, the Board, among various other
matters, will have alsci to give details of the tariffs imposed by it
during the year.
Under s. 78A(l), the Board is to be· guided in
the discharge of its functions by such directions on questions of
policy, as may be given to it by the State Government. Section 79
·enables the Board to make regulations not inconsistent with the
Act and the Rules made thereunder.
One of the matters which
may be covered by regulations made by the Board and to which
reference is necessary to be made, is dealt with under cl. (j) to
the effect, 'principles governing the supply of electricity by the
Board to persons other than licensees under section 49'.
Now taking up the first question arising for consideration,
namely, the power of the Board to levy uniform tariffs under
s, 49 of the Supply Act as amended, Mr. Poras A. Mehta, learned
counsel for the respondents, whose contentions have been also
reiterated by Mr. A. K. Sen, learned counsel for the interveners,
'urges that in fixing the ratt of tariff, one of the essential matters
to be taken into account by the Board is the cost of supply to
particular areas concerned.
That is in other words, according
to the respondents. the tariff must be based upon the cost of ~up
ply. It is their fu•ther contention that in fixin~ the tariff<, the
cost incurred by the Board for supply of electricity to different
areas must be given due consideration and importance. Extension of electricity to soarse areas or to areas which are not adequately supolied, should not be made at the cost of, and to the
detriment of, consumers of electricity in already developed or
compact areas.
It is also their contention that the Board may
have, if at all, power to levy a lesser uniform rate of tariff in
undeveloped or spa•se areas, and any loss that may be incurred by the Board in that regard will have to be compensated
by the subventions that may be received by the Board from the
State Government under s. 63 of the Supplv Act.
In no case,
the counsel points out. can that burden be shifted to the consumers in the already well-Oeveloped a•eas.
By levying uniform
tariffs in tlli< case on consumers whose area is already welldeveloped. they are being made to pay for the development
schemes that are being carried out in sparse areas. That, accordA
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MAHARASHTRA ELEC. v. KALYAN MUNIC. (Valdia1i11gam, J.) 14 9
ing to them, is violative of sub-s. ( 4) of s. 49 by the Board, in as.
much as, the consumers of spaise aieas to whom the cost of supply is more, are enabled to pay at the same rate as those in compact areas. In effect, they point out that there has been undue
preference to the consumers in the sparse aieas in as much as
they pay much less than the cost of supply.
The further stand taken on behalf of the respondents is that
in this case, the question of imposing different tariffs ~hould have
been considered by the Board under sub-s. (3) of s. 49 in view
of the fact that the compact aiea is geographically different from
sparse area.
According to them, the rates should have been
fixed more favourably in favour of the consumers in the compact
area.
They also urge that sub-s. ( 4) of s. 49 which directs the
Board not to show undue preference to any person in fixing the.
tariffs and terms and conditions for the supply of electricity,
governs sub-ss. ( 1) to (J) of s. 49 and the Board, by fixing the
same tariff in the sparse areas as in the compact areas, has shown
undue preference to the fonner which is not pennissible in law.
On the .other hand, Dr. L. M. Singhvi, learned . co.unsel
appearing for the Board pointed out that there is absolutely no
indication in the Supply Act that the Board should fix its tariff,
having regard to the cost of supply.
Counsel points out that the
Board is charged, under s. 18 of the Act, with the duty of promoting the co-ordinated development of generation, supply and
distribution of electricity within the State in a most efficient and·
economical manner.
Nonnally, the Board which is deemed to·
be a company, under s. 80 of the Act, would be entitled to fix
its· own tariff for electricity supplied by it. Under the old s. 49·
of the Act, a general power was conferred on the Board to supply
electricity upon such terms and conditions as jt may, from time
to time, fix, having regard to the matters referred to in that section.
The proviso tO the said section directed the Board not to show
undue preference to any person in fixing the tariffs. Except this
limitation in the exercise of its power, the Board was not placed
under any further restriction. Section 49; as it now stands; has
been incorporated with retrospective effect.
Under that section,
the Board has been directed to frame uniform tariffs. The factors
which are to be taken into account by the Board for tilting unifonn tariffs have also been indicated 'therein.
In particular
circumstances ,indicated therein, the Board has .been given the
power to fix different tariffs.
What was ~riginally the subjectmatter of the proviso in the old s. 49 has now been incorporated
in sub-s. (4) of s. 49. Counsel points out that the question of
showing undue preference cannot arise when the Board fixes
uniform tariffs.
Therefore, sub-s. ( 4) can govern only sub-s.
( 3) in the matter of fixing different tariffs.
Sub-s. ( 4) cannot
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SUPREME COURT REPORTS
[1968] 3 S.C.R.
cut down the power given to the Board in the matter of fixing
uniform tariffs.
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Counsel also points out that going by the phraseology of
sub-ss. ( 1) and (2) of s. 49, it is open to the Board to frame
.uniform tariffs having regar<;l to the matters mentioned in sub-s.
(2) of s. 49.
Counsel also points out that there is no question
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of any development in sparse area be;ng made at the expense of
the compact area. Under cl. (d) of s. 49(2), one of the factors
to be taken into account for fixing uniform tariffs relates to the
extension and cheapening of supplies of electricity to sparsely
developed areas.
If the· Board supplies electricity at cheaper
rates to sparsely developed areas, the compact areas also will
stand to benefit, because the cheap rate> applicable to the former
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area will be a uniform tariff governing the compact area consumers also.
There is no question of any undue preference being
shown by the Board.
We have already referred to the material provisions of the
Act which wi!l show the nature of the duties cast upon the Board.
Section 59 Jays down that the Board, after taking subventions
from the State Government shall not, as far as practicable, carry
on its operations under the Act at a loss, and that the Board is
to adjust its charges acc:ordingly from time to time.
That means
that cost .has to be taken into account, though that is not the sole
or only criterion for fixin,I! the tariff. There is also no indication
in the Act that uniform tariffs can be fixed Qnly in respect of
particular regions or areas.
We are not impressed with the
contention of the respondent that by uniform tariffs being levied
by the Board, it is making more profits in compact areas than in
Sj>arse areas, nor with the further contention that development
of sparse areas is being done at the expense of compact areas.
On behalf of the respondents, certain English decisions have
been brought to our notice ·wherein the expression 'undue preference' or 'discrimination' found in the corresponding Electricity
Act have come up for consideration. One of the decisions is
that of the House of Lords reported as South of Scotland Electrl·
-city Board and others v. British Oxygen Co. Ltd.(1).