JUDGMENT
D.P. Wadhwa. J.
(1) This judgment will dispose of four Letters Patent Appeals and fifteen writ petitions. All these raise common questions relating to the validity of the levy of tax by the Municipal Corporation of Delhi (M.C.D.) payable by the consumers of electricity on energy generated by themselves within the area of the M.C.D. The petitioners, the Delhi Cloth and General Mills Company Ltd. and another earlier filed two writ petitions in this Court challenging such a levy. These were decided by a learned Single Judge by his judgment dated 28 September 1979 [I.L.R. 1981(2) Delhi 8461 which is impugned. He partly allowed the petitions. M.C.D. had fixed the tax payable ion the consumption, sale and supply of electricity at the rate of 3 paise per Kwhr by the consumers of electricity on energy obtained from the M.C.D., the licensee and fixed 5 paise per Kwhr payable by consumers of electricity on energy generated by themselves. The resolution fixing the rates also specified the date from which the tax would be payable. The learned Single Judge while upholding the validity of the levy held that the classification of more taxation on the consumers of self generated electricity did not seem to be based on any intelligible differentia, and he, therefore, struck down the excessive taxation. Result was that the consumers of electricity on energy generated by themselves were also to pay tax at the rate of 3 paise per KWHR. While the petitioners in those petitions filed two appeals (L.P.As. 243/79 and 244/79) against the judgment of the learned Single Judge praying that the same be set aside and that the impugned tax be quashed, the M.C.D. also filed two appeals (L.P.As-257/79 and 258/79) praying that the levy on the consumers of electricity on energy generated by themselves was valid and to that extent the impugned judgment was sought to be set aside. Since the levy was continued for subsequent years more writ petitions came to be filed which were admitted, Rule D.B. issued and directed to be heard along with the L.P. As. Various interim orders were passed in the L.P.As. as well as in writ petitions to safeguard the interest of the respondent M.C.D. in case the petitioners failed, but for this judgment it is unnecessary to refer to those orders
(2) At this stage we may note that during the pendency of these proceedings there has been reconstitution/bifurcation of the petitioner into four different companies and on bifurcation the unit concerned has been given to M/s. Shriram Industrial Enterprises Ltd. An application (C.M.No. 4642/92) for amendment of memorandum .of parties names was filed which was allowed and petitioners and appellants for all purposes will be known as M/s. Shriram Industrial Enterprises Ltd. Wherever the word ‘petitioner’ has been used that will also include the appellant in L.PAs-243 and 244/79.
(3) This in fact is the third round of litigation between the parties, if we may say so. To understand as to how the questions raised in these petitions have arisen we may refer to some relevant provisions of the Delhi Municipal Corporation Act, 1957 (‘the Act’ for short). Section 2(2): “Budget-grant” means the total sum entered on the expenditure side of a budget estimate under a major head and adopted by the Corporation and includes any sum by which such budget-grant may be increased or reduced by transfer from or to other heads in accordance with the provisions of this Act and the regulations made there under. Section 2(67): “Year” means a year commencing on the 1st day of April. Section 109.. Adoption of budget estimates. (1) The Corporation shall, on of before the 31st day of March of every year, adopt for the ensuing year the following budget estimates, namely:- xx xx xx xx (b) budget estimate (electric supply) which shall be an estimate of the income and expenditure of the Corporation to be received and incurred on account of the Delhi Electric Supply Undertaking;. xx xx xx xx (2) On or before the 15th day of February of each year the .Corporation shall determine the .rates at which various municipal taxes,, rates and cesses shall be levied in the next following ..year and save as otherwise provided in this Act the rates so fixed shall not be subsequently altered for the year for which they have been fixed. (3) Budget estimates shall be prepared in such form .as may be approved by the Standing Committee and presented and adopted in such manner and shall provide for all such matters as are prescribed by regulations made in this behalf. Sec-111. Power of Corporation to re-adjust income and expenditure during the year. (1) If at any time during the year it appears to the Corporation that, notwithstanding any reduction of budget-grant that has been made under section 110 the income of the Municipal Fund during the same year will not suffice to meet the expenditure sanctioned in the budget estimates of that year and to leave at the close of the year the cash balance specified in or determined under the proviso to sub-section (1) of section 110, then, it shall be incumbent on the Corporation to sanction forthwith any measures which it may consider necessary for adjusting the year’s income to the expenditure. (2) For the purposes of sub-section (1), the Corporation may either diminish the sanctioned expenditure of the year so far as it may be possible so to do with regard to all the requirements of this Act, or have recourse to supplementary taxation under section 151 or to an increase of the rates of cesses, fares and other charges leviable under this Act, or to adopt all or any of those methods. Section 113. Taxes to be imposed by the Corporation under this Act. (1) The Corporation shall, for the purposes of this Act, levy the following taxes, namely.- (a) a property taxes; (b) a tax on vehicles and animals; (c) a theatre-tax; (d) a tax on advertisements other than advertisements published in the newspapers; (e) a duty on the transfer of property; and (f) a tax on buildings payable along with the application for sanction of the building plan. (2) In addition to the taxes specified in subjection (1), the Corporation may, for the purposes of this Act, levy any of the following taxes, namely :- xx xx xx (d) a tax on the consumption, sale or supply of electricity; xx xx xX (3) The taxes specified in sub-section (1) and sub-section (2) shall be levied, assessed and collected in accordance with the provisions of this Act and the byelaws made there under. Section 150. Imposition of other taxes. (1) The Corporation may, at a meeting, pass are solution for the levy of any of the taxes specified in sub-section (2) of section 113, defining the maximum rate of the tax to be levied, the class or classes of persons or the description or descriptions of articles and properties to be taxed, the system of assessment to be adopted and the exemptions, if any, to be granted. (2) Any resolution passed under sub-section (1) shall be submitted to the Central Government for its sanction, and if Sanctioned by that Government, shall come into force on and from such date as may be specified in the order of sanction. (3) After a resolution has come into force under sub-section (2), the Corporation may, subject to the maximum rate, pass a second resolution determining the actual rates at which the tax shall be leviable; and the tax shall come into force on the first day of the quarter of the year next following the date on which second resolution is passed. (4) After a tax has been levied inaccordance with the foregoing provisions of this section, the provisions of sub-section (2) of section 109, shall apply in relation to such tax as they apply in relation to any tax imposed under sub-section (1) of section 113. Section 151. Supplementary taxation. Whenever the Corporation decides to have recourse to supplementary taxation under sub-section (2) of section 111 in any year, it shall do so by increasing from such date as the Corporation may determine, the rates at which any tax leviable under this Act is being levied, but every such increase shall be-made subject to the, maximum rate and any other limitation specified in respect of such tax. Section 275. Functions in relation to electricity supply. (1) it shall be the duty of the Delhi Electric Supply Committee to develop and maintain an efficient, co-ordinated and economical system of electricity supply for the whole of the Union Territory of Delhi and ‘for that purpose to take steps from time to time- (a) for generating or acquiring supplies of electricity; (b) for providing supplies of electricity for licenses and persons other than licensees for whom immediately before the establishment of the Corporation the Delhi State Electricity Board constituted under the Electricity (Supply) Act, 1948 (54 of 1948); was providing, or competent to provide, such supplies under that Act; and (c) for preparing and carrying out in accordance with rules made in this behalf schemes for the generation and supply of electricity, Provided that without the previous permission of the. Central Government the Corporation or- the Delhi Electric Supply Committee, or the General Manner (Electricity), shall not- (i) give up any scheme prepared and sanctioned by the Delhi State Electricity Board; or (ii) give up or slow down execution of any work undertaking in pursuance of any such scheme. (2) In the discharge of its functions in relation to electricity supply, the Delhi Electric Supply Committee shall, as far as practicable – (a) promote the use of all economical methods of generating, transmitting and distributing electricity; (b) secure the development of supplies of electricity, (c) secure the extension of supplies of electricity to areas without supplies; (d) promote the standardisation of systems of supply and types of electrical fittings; (e) promote the simplification and standardisation of methods of charge for supplies of electricity. Section 277. Corporation to have powers and obligations of licensee under Act 9 of 1910. Subject to the provisions of this Act, the Corporation shall in respect of the whole of the Union Territory of Delhi, have all the powers and obligations of a license under the Indian Electricity Act, 1910, and this Chapter shall be deemed to be the license of the Corporation ‘for the purposes of that Act: Provided that nothing in sections 3 toll of, or in clauses in I to Ix of the Schedule to, that Act relating to the duties and obligations of a licensee shall apply to the Corporation.
(4) We may also note that under section 110, the M.C.D. is authorised on the recommendation of the appropriate committee to increase the amount of any budget grant under any head and every increase in the budget-grant so made in any year shall be deemed to be included in the budget estimates finally adopted for that year. Then under this section the Standing Committee of theM.C.D. is also authorised to reduce the amount of a budget-grant.
(5) Since the questions raised in all these appeals and writ petitions are common and are questions of law, it will be appropriate to refer to the resolution of the M.C.D. which led. to filing of the two writ petitions arid out of which appeals have arisen. Before, however, the impugned resolution was passed the maximum rate of tax payable by the consumers of electricity on energy obtained from a licensee (M.C.D.’beinga licensee) within the area of the M.C.D. was one paisa per Kwhr and the tax payable by the consumer of electricity on energy generated by themselves within “that area was also one paisa per KWHR. Then the Commissioner, M.C.D., in his letter dated 24 November 1977 suggested an increase in the maximum rates. He proposed 3 paise per Kwhr for both the aforesaid categories of consumers. M.C.D. by resolution No. 294 dated 2 January 1978 resolved that the maximum rate on the consumption, sale or supply of electricity be 3 paise per Kwhr by the consumers of electricity on energy obtained from a licensee and 5 paise per Kwhr by the consumers of electricity on energy generated by themselves. The Central Government was requested to accord its sanction as required under subsection (2) of section 150 of the Act. This resolution was sanctioned with immediate effect by the Lieutenant Governer, Delhi, by notification dated 14 March 1978 and: in exercise of powers conferred by sub-section (2) of section 150 of the Act read with the Government of India, Ministry of Home Affairs notification No.F.3/6/66-Delhi dated 19 October 1966. The Standing Committee of the M.C.D. by resolution No. 822 dated 23 March 1978 resolved that it will be recommended to the M.C.D. that the tax on consumption, sale or supply of electricity w.e.f. 1 April-1978 be fixed at the-rates specified in the resolution. Then the M.C.D. as per resolution No. 554 dated 31 March 1978 resolved that the tax on consumption, sale or supply of electricity w.e.f. 1 April 1978 be fixed at the rate Of 5 paise per Kwhr by the consumers of electricity on energy generated by themselves and it laid down 3 paise per Kwhr on commercial and industrial power (low, medium and higher voltage) by others. This is in so far as it is relevant for our purposes. There is, however, no challenge to the charge at the rate of one paisa per KWHR. The petitioner is in the category where it has now to pay tax at the rate of five paise per KWHR.
(6) The petitioner had raised four contentions before the learned Single Judge which have been repeated before us. These are: (1) In accordance with the mandatory provision of section 109(2) of the Act, on or before the 15th day of February of each year the M.C.D. is enjoined upon to fix rates of taxes leviable in the next following year. These rates cannot be subsequently altered for the year and it is specifically prohibited under section 109(2) of the Act. (2) Under the scheme of the Act and in particular the provisions contained in section 109 of the Act, the actual levy of tax must be prior to the adoption of the budget for the ensuing year and income estimated for the ensuing year to be included in the budget estimates can only be determined after fixing, the actual rate of taxes, and must necessarily precede the adaptation of the budget. Since the budget estimates indicate the need for taxation in order to enable the M.C.D. to discharge its obligatory and discretionary functions, an amount of tax not provided for in the budget estimates can never represent the need of M.C.D. and such a tax not provided for, and included in the budget estimates cannot be levied and recovered as it is not for the purposes of discharging the obligatory and discretionary functions of the, M.C.D. under the Act. (3) There is five fold increase in the rate of tax payable by the consumers of electricity on energy generated by themselves which rate is more than the rate of tax, payable by the consumers of electricity on energy obtained and supplied by the Delhi Electric Supply Undertaking (DESU) which is 3 paise per KWHR. This levy of 5 paise per Kwhr is patently and manifestly discriminatory being violative of Article 14 of the Constitution and is also unreasonable and arbitrary. (4)th Power to grant sanction under section 150(2) of the Act is conferred expressly on the Central Government alone and on no other authority and this power to grant sanction cannot be delegated and must be exercised by the Central Government itself. This sanction not having been accorded by the Central Government itself, the notification dated 14 March 1978 made in the name of the Lt. Governor is illegal and without jurisdiction.
(7) Yet one more contention was raised before us that what is purported to be taxed is “generation of electricity by the petitioner” ‘and not consumption, sale or supply of electricity, and that on the true interpretation of the impugned resolution the M.C.D. had no legal authority to levy such a tax which is itself ultra vires the provisions of the Act. We need not consider this last contention as it has already been negatived by the Supreme Court in The Municipal Corporation of Delhi v. Birla Cotton, Spinning and Weaving Mills, Delhi, and another, (Birla Cotton Mills case).
(8) As noted above, the learned Single Judge negatived all the contentions raised by the petitioner except that he held that petitioner could not be asked to pay tax at a rate more than 3 paise per Kwhr which was payable by the consumers of electricity: supplied by the Mcd (DESU).
(9) Before we discuss these contentions we must now revert to an earlier statement made by us in the judgment that this was the third round of litigation. The first round of litigation Started when on 9 February 1959 the M.C.D. passed a resolution purporting to be under sub-section (1) of section 150 of the Act for levy of three taxes, including a tax on the consumption or sale of electricity. The M.C.D. forwarded the resolution which was some what defective inasmuch as it did not specify the maximum rates but merely the rates which were to enforced for ensuing year. to’ the Central Government for sanction. The Central Government on 20 June 1959 sanctioned the tax on consumption or sale of electricity w.e-f. 1 July. 1959. In giving the sanction the Central Government, however, notified the rates. On 23 June 1959 the Standing Committee of the M.C.D. took the Government sanction into consideration and recommended to the M.C.D. the rates Of tax as sanctioned by the Central Government be determined under sub-section (3) of section 150 as the actual, rates at which the tax would be leviable for the year 1959-60. On 24 June 1959 the M.C.,D. resolved that the recommendations of the Standing Committee regarding tax On consumption or sale of electricity be’ approved. M.C.D., thus, raised the demands on the basis of the imposition of the tax from 1 July 1959. When the tax was demanded from the petitioner it filed a writ petition in the Circuit Bench of Punjab High Court at New Delhi challenging the levy -of tax. The writ petition was dismissed by a learned Single Judge but in appeal the Court allowed the writ petition holding inter alia (1) that the Central Government could not modify the rates specified in the resolution under section 150(1) but could only either withhold sanction thereto or sanction them, and (2) that the liability to pay tax could not commence earlier than 1 April 1960m view of the provisions contained in section 109(2) read with section 150(4) of the Act. This ended the first round.
(10) But then the Parliament on 3 December 1966 passed the Delhi Municipal Corporation (Validation of Electricity Tax) Act, 1966 (‘the Validation Act’) and by this Act it purported to validate the levy of electricity tax from 1 ‘July 1959 to 31 March 1966. Therefore, fresh demand was raised by the M.C.D. on the petitioner on the basis of the Validation Act. Then on 17 February 1965 the M.C.D. approved another resolution in pursuance of section 150(1) and this time provided maximum rates for levy of tax on the consumption or sale of clectricity. These rates were higher than the rates fixed by the resolution of 9 February 1959. The resolution was submitted to the Central Government under section 150(2) and the same was sanctioned on 8 December 1965. Thereafter, the M.C.D. passed the second resolution under section 150(3) resolving that the maximum rates should be adopted as the actual rates for levy of tax. This resolution was passed on 27 December1965. Here second round of litigation started and two writ petitions were filed by the petitioner. By the first petition it challenged of tax by resolutions of 17 February and 27 December 1965 and by the second writ petition it challenged the vires of the Validation Act. One of the grounds of challenge was that section 150 of the Act was unconstitutional inasmuch as it suffered from the vice of excessive delegation of legislative power and was, therefore, ultra vires and no tax could be levied by the M.C.D. there under. A Bench of this Court held that section 150 suffered from the vice of excessive delegation of legislative power and was, therefore, ultra vires . The two writ petitions, therefore, were allowed [Delhi Cloth & General Mills Ltd’s case ]. The M.C.D. applied for and obtained certificate for leave to appeal to the Supreme Court and the Supreme Court judgment is known as Birla Cotton Mills case (supra). The Supreme Court allowed the appeal, of the M.C.D. and dismissed writ petitions filed by the petitioner holding by majority judgment that the Validation Act validated the levy all through and that section 150 of the Act did not suffer from the vice of excessive delegation.
(11) This is now the third round of litigation. A great deal of arguments have been based on the judgment of Birla Cotton Mills case and it will be useful at this stage to note what the Supreme Court has decided in so far as it is relevant for our purposes.
(12) In the Supreme Court the Bench was constituted of seven judges and by 5:2 the court held that the power conferred by section 150 of the Act on the M.C.D. was not unguided and could not be said to amount to excessive delegation. The five judges who constituted the majority gave three separate judgments on this aspect of the matter. Wanchoo, C.J., who spoke for himself and Shelat, J. traced the objects of the Act and other provisions as to how the M.C.D. is constituted, its powers and functions including duties both obligatory and optional. In this context he examined the limits of permissible delegation of legislative power by a legislature to a subordinate authority and referred to various decisions of the Supreme Court and held that sufficient guidance was available in the matter of delegation in the present case. He enumerated five circumstances or guidelines or controls on the limit of taxation to be found for the purposes of the Act and one of these being the necessity of adopting budget estimates each year as laid. down in section 109 of the Act. Wanchoo, CJ., also observed that the resolution passed under section 150(1) has to be submitted to the Central Government for its sanction and that legislature had nude the Central Government the watch-dog to control the actions of the M.C.D. in the matter of fixing rates and other incidents of the taxes and that is p73 also a check to see that reasonable rates are fixed by the M.C.D. when it proceeds to impose taxes under section 150. He also observed that “we have a parliamentary system of government in which, the Government is responsible to the legislature. That is also a circumstance which may betaken into account in considering the check imposed by the Act upon the taxing power of the Corporation (MCD), namely, that the rates fixed by it have to be sanctioned by Government which in its turn is responsible to Parliament”. He also observed that it is true to reason that the Central Government which was responsible to the legislature would act with care and circumspection when exercising its function as the watch- dog on behalf of the legislature on the taxing power conferred by the legislature on the’ M.C.D. He also noticed in this context that the Act provided that “such rates shall besubmitted to Government for approval and the Government in its turn is responsible to the legislature is a factor which has to be taken into account when considering whether the delegation by section 150 of the Act is excessive or not.” Hidayatullah, J.,who spoke for himself and Ramaswami, J., agreed with the conclusions of Wanchoo, CJ., that section 156 was not invalid but said that “the learned Chief Justice has upheld section 150 by pointing out certain inbuilt safeguards in the Act which, in his view, save it from being characterised as a piece of excessive delegation. We all due respect we think this is not the only approach to the, problem.” He then said “while .the provisions which have been characterised as safeguards (where found necessary) are desirable the proper test to apply is not the existence of safeguards but whether the legislative will to impose the tax is adequately expressed so as to bind those who have to pay the tax. This requires anexamination, of the policy and provisions of the Act with a view to determining whether the legislative will is fully expressed to invest the Municipal Committee with the power to levy the tax subject, of course, to a proper procedure being evolved.” Hidayatullah, J” then observed that the doctrine that Parliament could not delegate its powers, therefore, must be understood in a limited way. He said it only meant that legislature must not efface itself but must give the legislative sanction to the imposition of the tax and must keep the control in its own hands, and that there was no specific provision in.the Constitution .which said that Parliment.oould not delegate to certain specified instrumentalities the power to effectuate its own will. In the present case, he said, in addition to prescribing the mode, the Parliament kept a check by making Government, answerable to itself, the supervising authority. This, according to Hidayatullah, J.,was not a safeguard in the sense in which the matter bad been accepted in the opinion of Wanchoo, CJ., but was indicative of the exercise of the legislative will by the legislature itself, and that the details of the tax were to be considered by the supervising authority and if the tax was not what the legislature intended should be imposed, the tax could not be imposed. Sikri, J., agreed with Wanchoo, CJ.,that appeals be allowed and further agreed with him for holding that the tax was imposed on.consumption of electricity and that the sanction by the Government was in accordance with the provision of the Constitution. He, however, said that beheld different views as to the powers of the legislature in India which he briefly indicated in his judgment. He said in his view there was sufficient guidance specially to a self-governing body like The M.C.D. and it was not necessary to rely on the safeguards mentioned by Wanchoo, C.J, to sustain the delegation. In all these three judgments Wanchoo, C.J, Hidayatullah, J., and Sikri,J., were of the opinion that in suitable cases taxation in pursuance of delegated powers by the M.C.D. could be struck down as unreasonable by Courts. Reliance in this respect was placed on a decision in Kruse V. Johnson, 1898-2 Qb 91. Dissenting judgment was given by Shah, J. with whom Vaidialingam, J. agreed who held that section 150(1) of the Act was void as permitting excessive delegation of legislative authority to the M.C.D.
(13) To us it appears after examining in detail the judgment in Birla Cotton Mills case that for our purposes it is relevant only to the extent that in cases where the exercise of power by subordinate public representative bodies such as Municipal Boards in,the exercise of power conferred on it by the law is unreasonable, the courts can hold that such exercise is void for unreasonableness.
(14) We may also note that a Division Bench of this Court in Delhi and General Mills Company Ltd: case referred to the first case decided by the Punjab High Court which bad held that having regard to the provisions of sub-Section (2) of section 109 read with sub-section (4) of section 150 the liability to pay tax could not commence earlier than first of April 1960 having regard to the dates of the Government sanction and the second resolution of the M.C.D. The Bench observed that this conclusion of the Punjab High Court was arrived at on the ground that In view of sub-section (2) of section 109 and sub-section (4) of section 150 all the Steps required under sob-sections (1), (2) and (3) of section 150 had to be completed on or before 15 February 1959, if the desire was to impose tax during the succeeding financial year, i.e., 1959-60. It however, held: “SUB-SECTION(3) of section 150 is in two parts. The first part deals with the determination of actual rates at which the tax shall be leviable within the maximum rates defined by a resolution under sub-section (1) of section 150 and sanctioned by the Government. By the second part the tax comes into force on the’ 1st day of the quarter of the year next following the date on which ‘the second revolution is passed. Once, therefore, the actual rates are determined by a resolution under sub-section (3) of section 150, the tax automatically comes into force. Sub-section (1)of section 150 has also two requirements-(i) the determination to levy a tax which is optional under sub-section (2) of Section 113; and (ii) prescription’ of the maximum rates of the tax to be levied and other particulars. The steps provided in sub-section (2) and sub-section (1) are .the steps anterior to the passing and’ validity of the resolution under sub-section (3) of section 150 arid the resolution under the last-mentioned provision is required to be confined only to the determination of the rates.”
On this Mr. Anil Divan, learned counsel for the petitioner said that it was in the nature? of obiter dicta and that in any case these observations in this judgment could not be relied upon as this judgment had been set aside by the Supreme Court in Birla Cotton Mills case. We do not think, however, this is to be a correct approach. The point was squarely raised before this court when it had partly held the validity of the Validation Act. This point did not “arise in the Supreme Court as whole of the Validation Act was Upheld: We, therefore, in the circumstances of the present case, feel bound by these observations made by a Bench “of this Court earlier and on which the Supreme Court did not make any comment.. Even otherwise, we see no reasons to differ from these observations.
(15) Under section: 277 of the Act, M.C.D. has all the powers and obligations of licensee under the Indian Electricity Act .1908, and Chapter Xll of the Act dealing with electricity supply . shall be deemed to be the license of the M.C.D. for the purposes of the Electricity Act. Section 275 of the Act prescribes functions of the M.C.D. and it says it shall be the duty of the M.C.D. to develop and maintain an efficient, co-ordinated and economical system of electricity supply for whole of the Union Territory of Delhi and for that purpose to take various steps from time to time as mentioned therein. Section 282 of the Act creates a monopoly in the M.C.D. for generation of electricity. Under section 22 of the Electricity Act it is the litigation imposed on the licensee to supply energy. This section is as follows:- “22.Where energy is supplied by a licensee, every person within the area of supply, except in so far as is otherwise provided by the terms arid conditions of the license, be entitled, on application, to a supply on the same terms as those on which any other person in the same area is entitled in similar circumstances to a corresponding supply: Provided that no person Shall be entitled to demand, or to continue to receive, from a licensee a supply of energy for any premises having a separate supply unless he has agreed with the licensee to pay to him such minimum annual sum as will give him a reasonable return on the capital expenditure, and will cover other standing charges incurred by him in order to meet the possible maximum demand for those premises, the sum payable to be determined in case of difference or dispute by arbitration.”
(16) Section 23 of this Act says that charges for energy are to be made without undue preference. Sub-section (1) of section 23 says that a licensee shall not, in making any agreement for the supply of energy, show undue preference to any person. Reading provisions of the Act and the Electricity Act it is the duty of the M.C.D. as a licensee to supply electricity. It is a matter of common knowledge that electricity is an essential commodity in Delhi and the M.C.D. is unable to meet all the requirements. It is an admitted case that the M.C.D. has been unable to supply electricity to the petitioner as per its requirement. It has, therefore, angularly failed in its duty which is cast upon it under the provisions of the law. Per force the petitioner is generating electricity by installing its own turbo generators at a cost of over RS.10 crores. It is stated that present day cost of these generators would be over RS.100 crores. Then the petitioner is incurring expenses for maintenance of these generators. In some writ petitions the petitioner has also brought on record a letter dated 28/29 May 1981 of the M.C.D. expressing its inability to release any further load of, electricity as requested by the .petitioner. We have been unable to decipher any reason as to why the M.C.D. first proposed to increase the tax on consumption of electricity in a case like that of the petitioner who is generating energy of his own on account of inability of the M.C.D. to meet the requirement of the petitioner, and then why petitioner is required to pay tax at the rate of 5 paise per KWHR and consumer who is to be supplied electricity by the M.C.D. is to pay tax at the rate of 3 paise per KWHR. No argument worth noticing on this aspect of the matter has been addressed before us by the M.C.D.
(17) The learned Single Judge has noticed some justification in the affidavit in opposition filed by the M.C.D. as to why flat rate of 3 paise per Kwhr was payable by the consumers of electricity on energy obtained from Desu and why Mcd imposed tax at the rate of 5 paise per Kwhr on consumers of electricity who generated the same from their own sources. This is what the learned Single Judge records:- “THE factual justification in the affidavit in opposition to the writ. petition is that the Corporation has imposed a tax at the flat rate of , paise per Kwhr payable by the consumers of electricity on energy obtained from Desu within the area of the corporation for industrial units which includes units ranging from small to medium and that in case the Corporation imposes the rate of 5 paise on every consumer, it would be too onerous for the small and medium units whereas it is not so in the case of big units like the petitioner. According to the averments of the Corporation the petitioner and other such units form a class by themselves as units generating electricity themselves as against the other .class of units consuming electricity generated by D.E.S.U. It is further deposed that not only the impugned tax is intra-vires Article 14 but it in fact furthers the aims and aspirations of our people as provided under the Constitution of achieving an egalitarian society and that the Corporation has been formed to discharge various social functions and for that it has to harness all its resources keeping in mind the various-.conflicting social interests and uphill task of balancing the same. The affidavit further is that any increase in the tax payable by the consumers of the electricity generated by Desu affects all and sundry and pinch may be felt by all whether richer poor while on levy of tax on consumers on self-generated electricity only that dass of consumers is affected which can afford to have their own generators and are comparatively better of.”
This justification given in the affidavit in opposition has no meaning unless it is supported by some discussions in the minutes or otherwise from the records of the M.C.D. Such a justification does not stand amoment’s scrutiny. It is not the case of the M.C.D. that it is not supplying electricity to major units as well. Nothing has been said as to why when the M.C.D. as a licensee itself defaults in its statutory duty in supplying electricity, then why those very persons should be subjected to higher rate of taxation. To us it appears that ‘the grounds given by the M.C.D. justifying different rates of tax are an after thought just to support its stand which is not based on any reason. The learned Single Judge also does not appear to have accepted the stand taken by the M.C.D. on this ground.
(18) Mr. Nandrajog for the M.C.D. drew our attention to certain decisions of the Supreme Court in (1) Ganga Sugar Corporation v. State of U.P. , (2) Kerala Hotel & Restaurant Association v. State of Kerala , and (3) D.S. Nakara and other v. Union of India , to contend that in order to tax something it was not necessary to tax everything and that the principles of determining validity of taxing statutes were different and that different rates could be prescribed for different items, and that court need not strike down the entire tax and would read it down. He said decision of the Supreme Court in Kerala Hotel & Restaurant Association case fully applied to the facts of the present case. In that case different rate of tax was prescribed on sale of food in different categories of hotels and-restaurants. One of the arguments raised was that taxable commodity being food, differentiation with reference to place of sale was not permitted as it would amount to taxing die place Of sale and not sale. On this the court held that people who visited luxury eating places had a greater capacity to pay and hence levy of more tax on them was valid. We do not think any of these judgments referred to by Mr. Nandrajog is applicable in the present case. We have noted above, it is a case of subordinate legislation which has to be reasonable. We find that imposition of tax at the rate of 5 paise per Kwhr on the consumers of electricity on energy generated by themselves vis-a-vis those consumers who get energy from M.sC.D. is per se unreasonable, arbitrary and discriminatory. In fact the M.C.D. appears to be taxing the consumers of electricity generated by themselves at the impugned rate for its failure to perform its statutory duties. The learned Single Judge was right in holding that the levy was discriminatory. Since we have held that the levy is also unreasonable arid arbitrary, we have to Set aside what is over and above one paisa per KWHR. It is no function of the court to say that the levy at the rate of 3 paise per Kwhr would be reasonable and not arbitrary. The court is not the M.C.D. which is the body enjoined under the law to fix a reasonable amount of levy and it is no part of court’s duty as well. If it was only the question of discriminatory nature of levy vis-a-vis two types of consumers, perhaps the learned Single Judge was right in ordering that petitioner should also pay tax at the rate of 3 paise per KWHR. But that is not so. At that time the learned Single Judge did not have the advantage of the decision of the Supreme Court in Ajay Hasia case and other such decisions where the Supreme Court spelled out the requirement of reasonableness of provisions of an enactment as flowing from Article 14. The impugned resolution of the M.C.D. enhancing the levy of tax on the consumption of electricity generated by the consumers themselves from one paisa to five paise per Kwhr has, therefore, to be set aside.
(19) We may now examine the legality of the notification issued by the Lt.Govefnor under section 150(2) of the Act. The argument is that power under section 150(2) of the Act conferred upon the Central Government is a legislative power and (Now Shriam Industrial EnterprisesLtd.) & Another Vs. The Municipal Corporation of Delhi and Others could not be delegated to the -Lt. Governor. The approval granted by the Lt. Governor in the purported exercise of powers conferred by sub-section (2) of section. 150 of the Act is dated 14 March 1978. This notification has been issued under, the authorisation of the notification of the Government of India in the Ministry of Home Affairs No. F.3/6/66-Delhi dated 19 October 1966. The notification dated 19 October 1966 of the Government of India has been issued in pursuance to clause (1) to Article 239 of the Constitution. It states that the President hereby directs that the powers of the Central Government under the provisions of the Delhi Municipal Corporation Act, 1957, mentioned-in the Schedule hereto annexed shall, subject to the control of the President, and on further orders, be exercised by the Lt. Governor of the Union Territory of Delhi. One of such provisions mentioned is sub-section (2) of section 150 of the Act. Part Xiii of .the Constitution in winch Article 239 falls deals with the Union Territories. Clause (1) of Article 239 is as under :- “SAVE as otherwise provided by Parliament by law, every Union territory shall be administered by the President acting, to such extent as he thinks fit, through an administrator to be appointed by him with such designation as he may specify.”
(20) It is, therefore, apparent from reading of this clause that Article 239 does not embrace legislative power which with respect to Union Territory of Delhi vests with the Parliament (Clause (4) of Article 246. It will also be seen that the Lt. Governor of Delhi has no power to promulgate ordinances as Administrator of the Union Territory of Pandichery has where there is a legislature and a Council of Ministers (Articles 239A and 239B). ln Sagli Ram v. Union) of India and others, 1975(2) S.L.R.379, a Bench of the Himachal Pradesh High Court headed by by R.S. Pathak, C.J. (as his Lordship then was) said as under (para 13):- “ARTICLE239(1) provides that every Union Territory shall be administered by the President acting, to such extent as he thinks fit, through an Administrator to be appointed by him. The power conferred is plainly executive in character. It does not include legislative, power. Legislation in respect of Union Territories is enacted by Parliament by virtue of Article 246(4) of the Constitution, or by a body created by .Parliament, under Article 239-A to function as a legislature for the Union Territory. In the absence of a body created under Article 239-A, it is open to the President under Article 240 to make regulations the peace, progress and good government of specified Union Territories. The legislative power having been vested in Parliament under. Article 246(4), in; the body created under Article 239-A for functioning as a Legislature or in. the President under Article 240, the only conclusion can be that Article 239(1) does not include the grant of legislative power but it is concerned merely with the grant of executive power. Under Article 239(1) the President exercises the executive power involved in the administration of a Union Territory even as under Article 53(1) the President is vested with the executive power of the Union.”
(21) In .India Tourism .Development Corporation v. Delhi Administration. 1982 Labour Industrial Cases 1309, a Full Bench of this Court dilated on what was implied by the term "exercise of power". The Bench said that the functions under Article 239 were of the administration of Union territories and these functions were governmental functions and were affairs of the Union. It further said " ".....in the Union Territory of Delhi, the over-riding legislative power vests in the Parliament in respect of all subjects enumerated in Lists I, Ii and III. Under the scheme of the Constitution the executives power is made co-extensive with the legislative power. There is no demarcation in Chapter Viii of the Constitution in the discharge of the executive functions in respect of the subject matter of Lists I, and III. Article 239 in its amplitude enables the President to exercise the executive power in the Union territory of Delhi embracing all the subject matters." Finally the Bench observed that the term administration or the exercise of executive powers were synonymous; just as the business of the Government would include all executive business, and that the executive power of the Union was vested in the President, and. the implementation of the laws made by the Parliament was one of the executive functions of the Union. (22) SUB-SECTION (81) of section 3 of the General Clauses Act, 1897, defines "Central Government" and in relation to the administration of the Union Territory it means the administrator thereof acting within the scope of the authority given to him under Article 239 of the Constitution.
(23) There is no dispute that power to tax under section 150 of the Act is a legislative power. The question is if all the sub-sections of section 150 relate to exercise of legislative power. Under Article 79 of the Constitution, Parliament shall consist of the President and two. Houses to -be known respectively as Council of States and the House of the People. The legislative procedure is described in Articles 107 to III. The Parliament passes an effective law. It makes the law and enforces it on a particular date and either for whole or for part of the territory of the country and again either from one date or from different dates as it might specify. At times it delegates to the Central Government the date when the law passed by it would, come into force and also, similarly delegates to the Central Government whether whole or part of the Act will come into force in any particular part of the country or whole of the country. These will all be, therefore, legislative functions. We do not think it can be even argued that Parliament has no power to permit the executive to determine the time when a given statute shall come into force but then executive will be exercising delegated legislative function. And when the Parliament says as to how and who is to exercise that function; it; has to be exercised in that manner and no other. One may, however, say legislative power has already been exercised when Parliament enacted the law but that would not be a wholly correct .statement to. make. Process of legislation ends when levy comes into force.
(24) Section 150(2)oftheActisintwoparts: (1) that any resolution passed under sub-section (1) shall be submitted to the Central Government for its sanction, and (2) resolution shall come into force on and from such date as may be specified in the order of sanction by the Central Government. If this sub-section confined itself only to the sanction to be given by the Central Government, it could perhaps have been argued that the Central Government for that purpose acted merely as a watch-dog as both Wanchoo, C.J, and Hidayatullah,J. had said so in their respective judgments in Birla Cotton Mills case. But the sub-section does not stop at that and the Central Government has to specify the date from which the resolution levying tax has to come into force Sanction here is, thus, not mere grant of approval or acceptance or concurrence. Sub-section (2) of Section 150 is a part or a link in the chain in the process of legislative functions for un posing the tax or levy in question.
(25) In Tharoo Mal v. Puran Chand Pandey and others, , Beg, Cj, referred to his earlier judgment in Niranjan Lal Bhargava v. State of U.P” 1969 Allahabad- Law Journal 295, and approved his observations made therein. In Allhabad judgment Beg, C.J., had said as under:-
“THE proposals as finally settled, have to be submitted by the Mahapalika under S. 200(4) to the State Government together with objections (if any) made in connection therewith. Under S. 201, the State Government may either refuse to sanction the proposals or return them to the Mahapalika for further consideration, or, sanction them with or without modifications subject to the condition that a modification shall not involve an increase in the proposed tax…..”.
Thereafter, the judgment goes to say – ” The procedure indicated above is clearly a rule making or legislative procedure. It is not quasi judicial……”
(26) From this judgment, it can also be said that a mere power to sanction or not to sanction a tax is a legislative power. But as seen above sub-section (2) of section 150 goes further and casts a duty on the Central Government to specify a date when the resolution, if sanctioned, shall come into force.
(27) Reference was also made to another decision of the Supreme Court in M/s. Narender Chand Hem Raj & others v. Lt. Governor, Administrator, Union Territory, Himachal Pradesh and others, , where the court observed as under :- "THE power to impose tax is undoubtedly a legislative power. That power can be exercised by the legislature directly or subject to certain conditions the legislature may delegate that power to some other authority. But the exercise of that power, whether by legislature or by its delegate is an exercise of the legislative power. The fact that the power was delegated to the executive does not convert that power into an executive or administrative power." (28) There can certainly be no dispute for the proposition as laid by the Supreme Court, but then as noted above we have already held that second part of section 150(2) of the Act certainly confers legislative power even if it could be said the first part standing alone does not deal with any legislative power for the first part .requires the Central Government only to see that a resolution passed by the M.C.D. under sub-section (1) of section 150 is in accordance with the provisions of the Act. If section 150(2) contains legislative power it has to be exercised in the manner it was delegated by the Parliament and as such only by the Central Government. It could not be delegated to the Lt. Governor under Article 239 of the Constitution where only executive powers could be delegated. The notification issued by the Lt. Governor dated 14 March 1978 granting his approval under subsection (2) of section 150 of the Act is, therefore, invalid and has to beset aside. It is difficult to severe two parts of sub-section (2) of section 150 as sanctioning and fixing of dates go together. (29) Reference by Mr. Nandrajog to a decision of the Supreme Court in Samsher Singh v. State of Punjab and another, , we find lo be of no relevance in the context of the present case. That judgment deals with an altogether different point.
(30) Mr. Nandrajog is, however, right in his submission that though Wanchoo, C.J, did say to uphold the Validity of section 150(1) as not suffering from the vice of excessive delegation that one of the safeguards was (he budget estimate and the determination of rates by 15th February (section 109), its violation did not detract from the validity of the delegation as three other judges who (agreed that there was no excessive delegation) did not share the view of Wanchoo, C.J, that all the guidelines mentioned there in must be there though they said these could be relevant. The contention of the petitioner, therefore, that amendatory check or control regarding preparation of budget estimate was not observed making the impugned levy illegal cannot stand. Nevertheless, we have seen above, the Commissioner, M.C.D. on 24 November 1977 proposed to the M.C.D. to enhance the electricity tax from one paisa to three paise per Kwhr for consumption of electricity for industrial purposes, the M.C.D. passed a resolution on 2 January1978 defining the maximum rate of tax for consumers of self generated electricity at 5 paise per Kwhr and for consumers of electricity supplied by M.C.D. (DESU) at 3 paise per KWHR. This resolution was under section 150(1) of the Act. in The Standing Committee of the M.C.D. on 7 January 1978 scrutinised the budget estimate forwarded by the Commissioner and while recommending the budget estimate for 1978-79 increased the head of account “Discretionary Taxes – Tax on consumption and sale of electricity” by rupees one crore. This modified budget was approved by the M.C.D. in its meeting on 9 February 1978. This budget estimate was brought on record by the M.C.D, during the course of arguments before the learned Single Judge. He held that the taxation as proposed was within the budget estimates prepared by the M.C.D. to meet the needs of the M.C.D, He, therefore, negatived the argument of the petitioner that there was breach of the provisions of sections 102 or 109 of the Act. Section 102 prohibits making payments unless covered by a budget-grant. A great deal of criticism was levied by the petitioner on this finding of the learned Single Judge and it was contended that estimates by the Standing on Committee could have increased because of the increase in consumption by diverse consumers or increase in generation and supply of electricity and not necessarily for from the proposed enhanced levy. On this the petitioner is more in the field of ice conjectures. There is nothing on the record to suggest what the petitioner says. On the other hand, there is force in the contention of the M.C.D. that increase like in revenue was expected to be generated for 1978-79 by an additional tax on the consumption and sale of electricity by one crore rupees, and accordingly it was put in the budget estimate and there was nothing illegal about it. The income and (Now Shriam Industrial EnterprisesLtd.) & Another Vs. The Municipal Corporation of Delhi and Others expenditure matched in the budget estimates. The learned Single Judge has taken a view which to one is reasonable and we would not, therefore, like to interfere. Standing Committee could certainly have assumed that the resolution of the Mcd passed under section 150(1) will be sanctioned by the Central Govt effective from 1 April 1978. In fact it did so happen. Of course, as a fact the Government did sanction the resolution of the M.C.D. proposing enhancing of the lax which at least supports the view of the Standing Committee that Government would ultimately sanction the proposed enhancement of the tax and so the acceptance of proposal of increase in revenue by rupees one crore under the head “Discretionary taxes tax on consumption and sale of electricity”. According to sub-section (4) of section 150, provisions of section 109(2) shall apply after tax has been levied under sub- section (3). Sub-section (2) of section 109 shall apply in relation to tax levied under sub-section (3) of section 150 for the subsequent year. In the present case, therefore, by virtue of sub-section (3) of section 150 proposed enhanced levy would come into force w.e.f. 1 April 1978-79 irrespective of provisions of sub-section (2) of section 109, but in view of sub-section (4) of section 150 provisions of section 109(2) shall apply effective from 1 April 1979. We also find that after the resolution under section 150(1) is passed the proposal can be considered while preparing the budget estimate and if the resolution is not ultimately sanctioned under sub-section (2) of section 150 the M.C.D. can always resort to the provisions of supplemental taxation.
(31) The result of above discussion is that the appeals filed by the petitioner (L.P.As. 243 and 244 of 1979) and the writ petitions are allowed. Ail resolutions of the respondent M.C.D. enhancing the levy of tax from one paisa per Kwhr to five paise per Kwhr on the consumers of electricity generated by themselves are set aside. Letters Patent Appeals filed by the M.C.D. (L.P.As. 257 and 25Sof 1979) are dismissed.
(32) But then that certainly is not the end of the matter and we are of the opinion that certain directions are needed in the exercise of our extraordinary jurisdiction under Article 226 of the Constitution to do complete justice in the matter. The impugned resolution is of February 1978 and challenge to its validity is pending determination in this Court since then. It is over 14 years now. If we were to decide the question within a reasonable time the M.C.D. could have mended the resolution and imposed a valid levy. It could not do so because of the pendency of these matters. If we say no more, M.C.D. will suffer a great deal of loss at the cost of public revenue for no fault of it. We, therefore, set the clock back for M.C.D. up to the time the impugned resolution was passed. We permit the M.C.D. to impose a levy of valid tax on the consumption, sale or supply of electricity keeping in view the provisions of section 150 of the Act and the law as interpreted in the judgment aforementioned effective from 1 April 1979 and then raise a demand within a period of three months from today. Bank guarantee furnished by the petitioners in terms of various interim orders shall be kept alive till then. Thus, the resolution so passed will stand substituted in place of the impugned part of the resolution.
(33) Rule is made absolute to the extent above mentioned. In the circumstances, however, there will be no order as to costs.