{"id":199659,"date":"1991-05-02T00:00:00","date_gmt":"1991-05-01T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/hindustan-zinc-ltd-etc-etc-vs-andhra-pradesh-state-electricity-on-2-may-1991"},"modified":"2017-09-27T05:18:17","modified_gmt":"2017-09-26T23:48:17","slug":"hindustan-zinc-ltd-etc-etc-vs-andhra-pradesh-state-electricity-on-2-may-1991","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/hindustan-zinc-ltd-etc-etc-vs-andhra-pradesh-state-electricity-on-2-may-1991","title":{"rendered":"Hindustan Zinc Ltd. Etc. Etc vs Andhra Pradesh State Electricity … on 2 May, 1991"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Hindustan Zinc Ltd. Etc. Etc vs Andhra Pradesh State Electricity … on 2 May, 1991<\/div>\n
Equivalent citations: 1991 AIR 1473, \t\t 1991 SCR (2) 643<\/div>\n
Author: J S Verma<\/div>\n
Bench: Verma, Jagdish Saran (J)<\/div>\n
           PETITIONER:\nHINDUSTAN ZINC LTD. ETC. ETC.\n\n\tVs.\n\nRESPONDENT:\nANDHRA PRADESH STATE ELECTRICITY BOARDS & ORS.\n\nDATE OF JUDGMENT02\/05\/1991\n\nBENCH:\nVERMA, JAGDISH SARAN (J)\nBENCH:\nVERMA, JAGDISH SARAN (J)\nVENKATACHALLIAH, M.N. (J)\nOJHA, N.D. (J)\n\nCITATION:\n 1991 AIR 1473\t\t  1991 SCR  (2) 643\n 1991 SCC  (3) 299\t  JT 1991 (2)\t403\n 1991 SCALE  (1)869\n\n\nACT:\n     Electricity (Supply) Act, 1948: Ss. 4A, 16, 49, 59, 61,\n63,   67,   67A,   68,\t78-A-Orders   No.   1014   and\t No.\nDE\/COML\/IV\/2250\/83\/1\ndated 13.12.1983 and Memo dated 18.11.1975.\n     S.\t  49-Tariffs-Power   of\t  fixation-No\tUnreasonable\npreference shall be shown to any person.\n     S.\t 16-Electricity\t Tariff-Revision-State\t Electricity\nConsultative  Council-Non-consultation by State\t Electricity\nBoard-Validity of.\n     S. 59-State Electricity Board-Finance-Tariff-Generation\nof surplus-Non-specification of quantum by State Government-\nWhether\t  board\t can  adjust  its  tariffs  to\tgenerate   a\nreasonable surplus.\n     Whether   the   surplus  generated\t could\t be   called\nextravagant.\n     Whether  revision of tariffs fall within the  scope  of\njudicial review.\n     Fuel  cost\t adjustment-Charged  only  from\t  particular\ncategory of consumers-Whether reasonable.\n     S.\t 78A-Tariffs-Directions by State  Government-Whether\nbinding on the Board.\n     Administrative   Law:   Delegated\t legislation-'Laying\nprocedure'-Placing  Electricity\t Board's  annual   financial\nstatement u\/s 61 of the Electricity (Supply) Act before\t the\nLegislature-Whether effectively controls exercise of Board's\ndelegated power.\n\n\n\nHEADNOTE:\n     The  appellants  are  H.T.\t electricity  consumers\t  of\nvarious\t categories  in the State of  Andhra  Pradesh.\t The\nrespondent-State  Electricity  Board  (the  Board),  by\t its\norders\tB.P. Ms. No. 1014 dated 13.12.1983  revised  upwards\nthe  tariffs for various categories of\tconsumers  including\nH.T. categories 1 (Industrial) and II (Non-Industrial);\t and\nby Memo No. DE\/COML\/IV\/2250\/83\/I of the same date it revised\nupwards\t the electricity tariffs for highly power  intensive\nindustries falling under\n\t\t\t\t\t\t  644\nH.T.  Category III. Tariffs consisted of three\tparts.\t The\nsaid three categories of H.T. consumers fell in Part A. H.T.\nconsumers availing supply of electricity for irrigation\t and\nagricultural  purposes\twere  included in  part\t B.  Part  C\nprovided  for  miscellaneous and general  charges.   Tariffs\nwere  not  revised for consumers availing  H.T.\t supply\t for\npurposes of irrigation and agriculture falling in part B  or\nL.T. supply for domestic cottage industries, public lighting\nand small poultry farms units.\n     Besides the energy charges, the H.T. consumers included\nin  Part  A  were also required to pay\tat  different  rates\neffective from 1.9.1982 an additional charge levied as `fuel\nadjustment charges'; and some amount as `voltage surcharged'\nin  accordance with the terms of the agreement entered\tinto\nby the individual consumers with the Board.\n     The writ petitions filed by the appellants\t challenging\nthe  said  upward revision of the Electricity  Tariffs\twere\ndismissed  by  the  High Court\tupholding  the\trevision  of\ntariffs\t  made\tby  the\t respondent-Board.   Aggrieved\t the\nappellants preferred appeals by special leave to this Court.\n     It was contended on behalf of the appellants that:\t (1)\nthe  upward  revision of tariffs by  the  State\t Electricity\nBoard was invalid being made without prior consultation with\nthe  State Electricity Consultative Council as envisaged  by\ns.  16\tof the Electricity (supply) Act, 1948;\t(2)  without\nspecification  of  any surplus by the State  Government\t the\nBoard  had no power to adjust its tariffs in a manner  which\nresulted   in\tgenerating  any\t surplus;   (3)\t  there\t  is\ndiscrimination\t in  recovery  of  the\tentire\t full\tcost\nadjustment  from  the H.T. consumers alone; (4)\t the  upward\nhike  of the tariffs for the H.T. consumers including  power\nintensive   consumers  was  arbitrary\tand   discriminatory\ninasmuch as it was not related to the cost of generation and\nwas  based on irrelevant factors; and (5) and the Board\t had\nacted\twith  profit  motive  losing  its   public   utility\ncharacter.  Learned counsel representing the power intensive\nconsumers  also\t contended that in the absence of  a  clause\nrelating  to  fuel cost adjustment in the  G.Os.  issued  in\nrespect\t of  the power intensive units, they  could  not  be\ngoverned  by  the  clause  of  fuel  cost  adjustment\tmade\napplicable to the H.T.tariffs.\n     Dismissing the appeals, this Court,\n     HELD: 1.1 The power of fixation of tariffs in the Board\nis  provided by s. 49 of this Supply Act which requires\t the\nfixation of uniform\n\t\t\t\t\t\t       645\ntariffs\t  ordinarily  having  regard  particularly  to\t the\nspecified  factors and enables fixation of such tariffs\t for\nany person having regard to the factors expressly stated and\nany  other  relevant  factors  providing  further  that\t  no\nunreasonable  or  undue\t preference shall be  shown  to\t any\nperson by the Board in exercise of its powers of fixing\t the\ntariffs.   S. 59, requiring the Board to adjust the  tariffs\nfor  the purpose of its finance is to be read along with  s.\n49. [667B-C; 668B-C]\n     1.2. The common premise for the purpose of the  instant\ncase  that the revision of tariffs by the State\t Electricity\nBoard is a question of policy may indicate that it would  be\nopen to the Consultative Council to advise the Board also on\nthe  question of revision of tariffs, and if such advice  is\ngiven,\tthen the Board must consider the same before  taking\nthe  final  decision.  That, however, does  not\t necessarily\nmean   that  where  no\tsuch  advice  was  taken  from\t the\nConsultative  Council  or  was rendered on  account  of\t the\nabsence of any meeting during the relevant period, it  would\nnecessarily  render invalid the revision of tariffs made  by\nthe Board. [664A-B]\n     Though   it  is  advisable\t to  seek  advice   of\t the\nConsultative  Council  before revision of  the\ttariffs\t yet\nfailure\t to  do so does not result in  invalidation  of\t the\nrevised tariffs.  This consequence appears to be the logical\nand  reasonable\t view to take of the requirement  of  s.  16\nalongwith other provisions of the Act. [666A-B]\n     1.3  The consequence of non-compliance of s. 16 is\t not\nprovided,  and\tthe nature of function of  the\tConsultative\nCouncil\t and the force of its advice being at the best\tonly\npersuasive,  it\t cannot\t be said that  revision\t of  tariffs\nwithout\t seeking  the  advice of  the  Consultative  Council\nrenders the revisions of tariffs invalid. [664B-C]\n     1.4  It is also significant that the  annual  financial\nstatement containing all particulars relating to revision of\ntariffs is required to be submitted to the State  Government\nin  February each year and the State Government is  required\nafter  receipt of such statement to cause it to be  laid  on\nthe  table of the House or Houses of the  State\t Legislature\nand  the said statement is open to discussion therein.\t The\nBoard is bound to take into consideration any comments\tmade\non the said statement in the State Legislature.\t The 'laying\nprocedure'  before the legislature effectively controls\t the\nexercise of the delegated power of the Board.  Thus there is\nample provision for discussion on the revised tariffs in the\nState  Legislature with the Board being bound to  take\tinto\nconsideration any comments made thereon. [664C-D; 666A]\n\t\t\t\t\t\t       646\n     Kerala  State  Electricity Board v. M\/s.  S.N.  Govinda\nPrabhu & Bros. & Ors.,<\/a> [1986] 4 S.C.C. 198, relied on.\n     2.1 Mere generation of surplus by the Board as a result\nof adjusting its tariffs when the quantum of surplus has not\nbeen  specified\t by  the State\tGovernment  after  the\t1978\namendment  of s. 59 of the Act, cannot invite any  criticism\nunless\tit is further shown that the surplus generated as  a\nresult\tof  the\t adjustment  of tariffs\t by  the  Board\t has\nresulted  in the Board acting as a private  trader  shedding\noff its public utility character.  If the profit is made not\nmerely for the sake of profit, but for the purpose of better\ndischarge of its obligations by the Board, it cannot be said\nthat  the public enterprise has acted beyond its  authority.\n[669C-E]\n     2.2  The  general\tprinciple  for\tthe  Boards  finance\nindicated  by  s. 59 is that prior to  the  1978  amendment,\ntariffs could be adjusted to avoid any loss, but as a result\nof  the shift made by the 1978 amendment the power could  be\nexercised   to\tgenerate  a  surplus  and  when\t the   State\nGovernment  specified the amount of surplus then  the  Board\nwas bound to adjust the tariffs to ensure generation of\t the\nspecified  surplus.   However, generation  of  a  reasonable\nsurplus in any year of account without specification of\t the\nsurplus\t amount\t by  the State Government  was\tnot  contra-\nindicated in the provision inasmuch as the duty to  generate\na  surplus was implicit with the added obligation to  ensure\ngenerating  surplus  to the extent specified  by  the  State\nGovernment  when  it was so specified by it.  It  cannot  be\naccepted  as  a\t reasonable  view that\tin  the\t absence  of\nspecification  of the surplus by the State  Government,\t the\nBoard  could  not  adjust its tariffs  to  generate  even  a\nreasonable surplus in any year of account. [668E-G]\n     2.3  In  the  instant case the Board  showed  that\t the\nsurplus resulting from upward revision of tariffs applicable\nto  the\t H.T.  consumers  was  for  the\t purpose  of  better\ndischarge of its other obligations under the Supply Act\t and\nin  effect  the\t same  has  merely  resulted  in  a  gradual\nwithdrawal  of the concessional tariffs provided earlier  to\nthe  power intensive consumers which did not in its  opinion\nrequire continuance of the concessional tariffs any  longer.\nIt  was\t not  proved that this assertion of  the  Board\t was\nincorrect or there was any reasonable basis to hold that the\nupward revision of tariffs applicable to H.T. consumers\t was\nmerely\twith  a desire to earn more profits like  a  private\ntrader\tand not to generate surplus for utiliasation of\t the\nfunds  to discharge other obligations of the  Board  towards\nmore needy consumers, such as agriculturists, or to meet the\nneeds of expansion of the supply to deserving areas.  [669E-\nG]\n\t\t\t\t\t\t       647\n     3.1  The H.T. consumers, including the power  intensive\nconsumers,  are known power guzzlers and in power  intensive\nindustries,  electricity  is really a  raw  material.\tThis\ncategory  of  consumers, therefore, forms a  distinct  class\nseparate  from other consumers like L.T. consumers  who\t are\nmuch smaller consumers.\t  There is also a rational nexus  of\nthis  classification with the object sought to be  achieved.\nMoreover,  the power intensive consumers have been  enjoying\nthe  benefit of a concessional tariff for quite\t some  time,\nwhich\ttoo   is   a  relevant\tfactor\t to   justify\tthis\nclassification.\t Placing the burden of fuel cost  adjustment\non these power guzzlers, who had the benefit of concessional\ntariffs, for quite some time and have also a better capacity\nto pay, cannot, therefore, be faulted since the\t consumption\nin  the\t power\tintensive industries accounts  for  a  large\nquantity. [670B-C]\n     3.2  It is not unreasonable to take the view  that\t the\nthermal power has become costlier on account of the increase\nin  fuel  cost\tand could notionally  be  allocated  to\t the\nconsumption  by\t H.T.  and power  intensive  consumers\tand,\ntherefore,  the fuel cost adjustment is made  applicable  to\nthem alone. [671E-F]\n     4.1  The  Court would not strike down the\trevision  of\ntariffs\t as arbitrary unless the resulting surplus   reaches\nsuch a height as to lead to the inevitable decision that the\nBoard has shed its public utility character and is  obsessed\nby  the\t profit motive of private entrepreneur in  order  to\ngenerate a surplus which is extravagant. [672A-B]\n     4.2  The surplus generated by the Board as a result  of\nrevision  of  tariffs during the relevant period  cannot  be\ncalled\textravagant by any standard to render  it  arbitrary\npermitting  the striking down of the revision of tariffs  on\nthe  ground of arbitrariness nor is it\tdiscriminatory.\t  It\nwas  pointed out on behalf of the Board that its action\t was\nbased  on  the opinion of  Rajadhyaksha\t Committee's  report\nsubmitted  in 1980 and the formula of fuel  cost  adjustment\nwas on a scientific basis linked to the increase in the fuel\ncost.\tThis is a possible view to take and, therefore,\t the\nrevision  of tariffs by the Board does not fall\t within\t the\navailable scope of judicial review. [672C-D]\n     Kerala  State  Electricity Board v. M\/s.  S.N.  Govinda\nPrabhu and Bros. & Ors.,<\/a> [1986] 4 S.C.C. 198, relied on.\n     Shri  Sitaram Sugar Company Limited & Anr. v. Union  of\nIndia & Ors.,<\/a> [1990] 3 S.C.C. 223, followed.\n\t\t\t\t\t\t       648\n     5.\t It  cannot be said that the term relating  to\tfuel\ncost  adjustment had no application to the  power  intensive\nconsumers  during  the\trelevant period.    The\t Memo  dated\n18.11.1975  did not merely extend the  non-specified  'terms\nand   conditions  of  supply'  applicable  to  normal\tH.T.\nconsumers  to the power intensive consumers but also  \"other\ncharges\"  which were merely illustrated by the words,  \"such\nas Misc. charges, terms and conditions of supply not mention\nherein\".   This express provision in the said  Memo  clearly\nprovided that except for the provision specifically made for\npower\tintensive  consumers,  in  respect  of\t all   other\nprovisions the power intensive consumers were to be governed\nby  the provisions, by whatever name called,  applicable  to\nthe  normal H.T. consumers.  However in the bills issued  to\nthe  power  intensive consumers the terms relating  to\tfuel\ncost adjustment was specifically indicated. [673D-H; 674A]\n     Nav   Bharat  Ferro  Alloys  Ltd.\tv.  A.P.S.E.   Board\nHyderabad, AIR 1985 A.P. 299, approved.\n\n\n\nJUDGMENT:\n<\/pre>\n
     CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2567-70
\nof 1985.\n<\/p>\n
     From  the\tJudgment  and Order dated  3.4.1985  of\t the
\nHyderabad High Court in Writ Petition No. 9403 of 1984.\n<\/p>\n
     Kapil Sibal, Additional Solicitor General, G.L. Sanghi,
\nAnil  B.  Diwan,  G.  Ramaswamy,  P.A.\tChoudhary,   Kailash
\nVasudev,  Naunit  Lal, M.J. Paul,  C.S.\t Vaidyanathan,\tU.K.
\nKhaitan,  Praveen Kumar, S. Murlidhar, Vineet  Kumar,  Vinod
\nBhagat and Mukul Mudgal for the Appellants.\n<\/p>\n
     Shanti  Bhushan,  V.R. Reddy,  Rajendra  Choudhary,  S.
\nThananjayan, K. Ram Kumar for the Respondents.\n<\/p>\n
     V.B. Sharya for the Intervenor.\n<\/p>\n
     The Judgement of the Court was delivered by
\n     VERMA, J. These appeals by special leave are by several
\nindustrial   concerns  against\tthe  Andhra  Pradesh   State
\nElectricity   Board   (hereinafter   called   ‘the   Board’)
\nchallenging  the common judgment of the Andhra Pradesh\tHigh
\nCourt in writ petitions filed by these concerns\t challenging
\nthe revision of the electricity tariffs by the Board by\t its
\nproceedings  contained\tin B.P. Ms.  No.  1014\t(Commercial)
\ndated
\n\t\t\t\t\t\t       649<\/span>
\n13.12.1983  which came in to force on 15.1.1984.   Prior  to
\nthis revision, the tariffs were governed by B.P. Ms. No. 418
\n(Commercial)  dated 12.1.1981.\tOn 13.12.1983, two  separate
\norders\twere  issued  by  the  Board  revising\tthe  various
\ntariffs.   By  one of them, namely, B.P. Ms. No.  1014,\t the
\ntariffs\t for various categories of consumers including\tH.T.
\ncategories I and II were revised.  By the other order of the
\nsame  date,  namely,  Memo  No.\t DE\/COML\/IV\/2250\/83\/I,\t the
\ntariffs\t for  highly power intensive  industries  were\talso
\nrevised upwards.  Out of the appellants it was applicable to
\nfive  units, namely, (1) Nav Bharat Ferro Alloys  Ltd.,\t (2)
\nAndhra\tSugars Ltd., (3) Ferro Alloys Corporation Ltd.,\t (4)
\nGrindwell  Norton  Ltd.,  and (5) A.P.\tCarbides  Ltd.\tThis
\nupward\trevision  of tariffs made by the Board\tby  its\t two
\norders\tdated  13.12.1983  which were  made  effective\tfrom
\n15.1.1984,   was  challenged  by  the  appellants  in\twrit
\npetitions filed in the Andhra Pradesh High Court on  various
\ngrounds.   The\tHigh  court rejected  all  the\tgrounds\t and
\ndismissed  the\twrit petitions by its  common  judgment\t now
\nreported in A.I.R. 1985 A.P. 299.  These appeals by  special
\nleave are against the High Court Judgment.\n<\/p>\n
     The  appellants  are all H.T. power  consumers  of\t one
\ncategory  or  other.  The tariffs consist  of  three  parts:
\nPart-A,\t Part-B\t and  Part-C.\tPart-A\tprovides  for\tH.T.
\ntariffs; Part-B for L.T. supply;  and Part-C provides, inter
\nalia, for miscellaneous and general charges.  H.T. consumers
\nin  Part-A are broadly classified into three categories:  H.
\nT.   Category-I\t  (Industrial);\t  H.T.\t Category-II   (Non-
\nIndustrial);  and  H.T.\t Category-III  comprising  of  power
\nintensive consumers and some others.  The Board retained the
\npower  to  decide in accordance with the  guidelines  as  to
\nwhich  industries were power intensive and which  were\tnot.
\nThis was the position in the tariffs of 1975.  Subsequently,
\nthe Board began to deal with the power intensive  industries
\nby notifying tariffs for them separately from time to  time.
\nIn  effect,  there were four classes of\t consumers  availing
\nH.T. supply; (1) H.T. consumers falling under H.T. Category-
\nI  (Industrial);  (2)  H.T.  consumers\tfalling\t under\tH.T.
\nCategory-II (Non-Industrial);  (3)  H.T.  consumers  falling
\nunder  the  category ‘power intensive industries’;  and\t (4)
\nH.T. consumers availing supply of electricity for irrigation
\nand  agricultural purposes included in Part-B.\tThe  tariffs
\nfor  these  different  categories  of  H.T.  consumers\twere
\nenhanced   from\t  time\tto  time.    For   H.T.\t  Category-I
\n(Industrial), it was 21 paise in 1975, increased to 30 paise
\nin 1979, 33 paise in 1980, 40 paise in 1981 and 48 paise  in
\n1984.\tLikewise,  there was corresponding increase  in\t the
\nenergy rates for H.T. Category-II (Non-Industrial), being 28
\npaise,\t37  paise,  40 paise, 47 paise and  56\tpaise.\t The
\ntariffs for power intensive industries were, however,
\n\t\t\t\t\t\t       650<\/span>
\nincreased by separate notifications issued by the Board from
\ntime to time.  It was 11 paise prior to 1975, raised to 12.2
\npaise  in  1977, 16 paise in 1978, 18.5 paise  in  September
\n1979, 21 paise in November 1979, 25 paise in 1980, 32  paise
\nin 1981 and 45 paise in 1984.  The H.T. consumers grouped in
\nPart-B were required to pay 15 paise under the 1975  tariffs
\nand  16\t paise thereafter.  Besides the\t energy\t charges  as
\nstated\tabove, the H.T. consumers were also required to\t pay
\nat  different  rates effective from 1.9.1982  an  additional
\ncharge\tlevied as ‘fuel cost adjustment charges’.  The\tH.T.
\nconsumers were also required to pay some amount as  ‘voltage
\nsurcharge’  in\taccordance with the terms of  the  agreement
\nentered into by the individual consumers with the Board.\n<\/p>\n
     The comparison of the aforesaid tariffs shows that\t the
\ntariffs\t for power intensive industries to begin  with\twere
\nmuch less than the tariffs for H.T. Category-I\t(Industrial)
\nand  H.T. Category-II (Non-Industrial).\t In course of  time,
\nthe concession in tariffs for the power intensive industries
\nwas progressively withdrawn.  The concessions were, however,
\ncontinued  in  respect of consumers availing  H.T.  or\tL.T.
\nsupply\tfor purposes of irrigation and agriculture  or\tL.T.
\nsupply for domestic, cottage industries, public lighting and
\nsmall  poultry farming units.  It is the  admitted  position
\nthat the power generation in the State of Andhra Pradesh  is
\nboth  hydro  and thermal, each\tsource\tcontributing  almost
\nequally\t to  the total power generation in the\tState.\t The
\nH.T.  categories have been consuming more than\tone-half  of
\nthe  total  power generated in the State  against  the\tmuch
\nlarger\tnumber\tof individual L.T.  consumers  availing\t the
\nremaining power.\n<\/p>\n
     The main attacks to the upward revision of the  tariffs
\nfor  H.T.  consumers in the writ petitions before  the\tHigh
\nCourt were: (1) The Board, as a public utility\tundertaking,
\nis expected to function in the most efficient and economical
\nmanner;\t (2)  It cannot plan its activities with a  view  to
\ndrive  any  sizeable profits on its  undertaking  except  in
\naccordance with Section 59 of the Electricity (Supply)\tAct,
\n1948 (hereinafter referred to as ‘the Supply Act’); (3)\t The
\nBoard  Could  not  generate  a surplus\tin  excess  of\tthat
\nspecified  under Section 59 of the Supply Act which  it\t had
\nbeen  doing;  (4)  The Board  was  preparing  its  financial
\nstatement  incorrectly in a manner contray to section 59  of
\nthe  Supply Act by improperly taking into  account  expenses
\nchargeable to capital by showing such expenses as charged to
\nrevenues; (5) The steep upward revision to tariffs from 1980
\nmade  by  the  Board  is invalid,  being  arbitrary  and  in
\ncontravention  of Section 49 and 59 of the Supply  Act;\t and
\n(6) There was no justification for the Board to have revised
\nthe tariffs either in 1981 or in 1984 or to have levied any
\n\t\t\t\t\t\t       651<\/span>
\nfuel  surcharge in terms of Section 49 and 59 of the  Supply
\nAct.   It was also contended that the tariffs  revision\t was
\nmade  without prior consultation with the State\t Electricity
\nConsultative  Council  as required by Section 16(5)  of\t the
\nSupply Act which also rendered it invalid.\n<\/p>\n
     Prior to 30.7.1982, it was usual for the Board to\ttake
\ninto   account\tvarious\t escalation  charges  such  as\t pay
\nrevisions  and increases in the cost of fuel and revise\t its
\ntariffs from time to time.  This was done in 1975 and  1981.
\nThereafter,  the  Board took the view that to  avoid  making
\nfrequent   tariff   revisions\tnecessitated   by   frequent
\nescalations  in the cost of fuels like coal and diesel\toil,
\nthe  formula  known as “fuel cost  adjustment”\tbe  evolved.
\nAccordingly, the Board in its proceedings contained in\tB.P.
\nMs.  No. 589 dated 30.7.1982, set out the formula  known  as
\n“fuel  cost  adjustment”.  This formula\t was  introduced  as
\ncondition  No.\t 11  in H.T.  tariffs  Part-A.\t Ever  since
\nSeptember  1982, all categories of H.T. consumers in  Part-A
\nincluding the power intensive consumers are subject to\tthis
\ncondition.   Immediately  after\t 30.7.1982,  the  fuel\tcost
\nadjustment  was\t fixed\tas 2.74 paise per  unit,  which\t was
\nincreased  gradually  to 2.95 paise, 3.79  paise  and  11.68
\npaise.\t Thereafter, 3.79 paise was absorbed as part of\t the
\ntariffs applicable to these H.T. consumers and the remaining
\nincrease of 7.89 paise alone was indicated as the fuel\tcost
\nadjustment   charges.\tThe  grievance\tmade  by  all\tH.T.
\nconsumers before the High Court was that: (1) the fuel\tcost
\nadjustment  could not be recovered as part of  the  tariffs;
\n(2)  there is discrimination in recovering the\tentire\tfuel
\ncost  adjustment  from H.T. consumers  alone;  (3)  fairness
\ndemands that a reasonable proportion of the burden should be
\nshared\talso  by Part-B consumers; and (4)  that  fuel\tcost
\nadjustment charge is excessively computed.\n<\/p>\n
     The High Court rejected all these contentions.  It held
\nthat this was a matter of policy which could be changed from
\ntime  to time and it was permissible to\t gradually  withdraw
\nthe  pre-existing  concessional tariffs given to  the  power
\nintensive industries for which the tariffs earlier were much
\nlower as compared to the other consumers and even after\t the
\nincrease  ,  they  were not excessive.\t It  was  held\tthat
\nelectricity   was  a  raw  material  for   power   intensive
\nindustries  and\t no  grievance could  be  made\tagainst\t the
\nincrease of its cost just as such a grievance was  untenable
\nagainst increase in the cost of any other raw material.\t The
\nchallenge  on the ground of discrimination was\trejected  on
\nthe  ground  that H.T. consumers including  power  intensive
\nindustries  formed  a separate class and  the  reason  which
\njustified grant of concession to them earlier also justified
\nthe gradual withdrawal of that
\n\t\t\t\t\t\t       652<\/span>
\nconcession.  It held that prior consultation with the  State
\nElectricity Consultative Council according to Section  16(5)
\nof  the\t Supply Act was not obligatory before  revising\t the
\ntariffs.   The High Court held that the Board was  justified
\nin adjusting its tariffs to ensure progressive minimizing of
\nlosses\tand the failure of the State Government\t to  specify
\nthe surplus it could generate in accordance with Section  59
\nof the Supply Act, did not detract from the Board’s power to
\nadjust\tits tariffs and generate a surplus on principles  of
\ncommercial   expediency\t applicable  to\t a  public   utility
\nundertaking.  Fixation of tariffs was held to be a matter of
\nmajor  policy  in  respect  of\twhich  the  Government\t can
\neffectively issue directions under Section 78-A of the\tAct.
\nIt  was\t held  that  the  H.T.\tconsumers  including   power
\nintensive  industries  were bound to pay  according  to\t the
\nrevised\t higher\t tariffs fixed from time to time  under\t the
\nagreement  as contemplated by Section 49 of the Supply\tAct.
\nThe  condition\tof  fuel  cost\tadjustment,  introduced\t  as
\ncondition No. 11 in H.T. tariffs Part-A, was held applicable
\nto  power intensive consumers also.  An additional  argument
\nthat  this  added  burden became unbearable  for  the  power
\nintensive  consumers  was rejected on the ground  that\tsuch
\ninability  of  the industry to survive is not  a  compelling
\nconsideration for deciding the Board’s power in adjusting it
\n tariffs.   Accordingly, the High Court dismissed  the\twrit
\npetitions  and\tupheld the revision of tariffs made  by\t the
\nBoard  by the impugned B.P. Ms. No. 1014 (Commercial)  dated
\n13.12.1983 w.e.f. 15.1.1984.  The High Court having  refused
\nto  grant a certificate of fitness to appeal to this  Court,
\nthe  appellants\t have  preferred these\tappeals\t by  special
\nleave.\n<\/p>\n
     It may be mentioned at this stage that the\t controversy
\nraised in these appeals was also the controversy in  another
\nbunch  of  civil appeals arising out of a  judgment  of\t the
\nKerala\tHigh  Court  wherein a similar\tchallenge  had\tbeen
\nupheld and the Kerala State Electricity Board had come in an
\nappeal\tto this Court.\tIn those matters, the contention  of
\nthe  Kerala State Electricity Board which would be the\tsame
\nas that of the Andhra Pradesh State Electricity Board before
\nus,  was accepted and the judgment of the Kerala High  Court
\ntaking the view contrary to that of the Andhra Pradesh\tHigh
\nCourt  was reversed (Kerala State Electricity Board v.\tM\/s.
\nS.N.  Govinda Prabhu and Bros. and Others.,<\/a> [1986] 4  S.C.C.\n<\/p>\n
198.)
\n     All  the  hearing before us, it was contended  by\tShri
\nShanti Bhushan, learned counsel for the Andhra Pradesh State
\nElectricity  Board that the Kerala decision concludes  these
\npoints\tagainst the present appellants.\t On the other  hand,
\nShri  G. Ramaswamy and other learned counsel, appearing\t for
\nthe appellants, made an attempt to
\n\t\t\t\t\t\t       653<\/span>
\ndistinguish the decision in the Kerala case.  The  question,
\ntherefore,  is: Whether any ground has been made out by\t the
\npresent\t appellants to persuade us to take a view  different
\nfrom the one taken by this Court in the Kerala case?  Before
\nconsidering  the arguments in these appeals, we would  refer
\nto  the controversies in the Kerala case and the view  taken
\ntherein.\n<\/p>\n
     The decision in Kerala State Electricity Board v.\tM\/s.
\nGovinda\t Prabhu\t and Bros. and Others,<\/a> [1986] 4\t S.C.C.\t 198
\narose  out  of the decision of the Kerala High\tCourt  in  a
\nsimilar\t situation.  The Kerala High Court struck  down\t the
\nupward\trevision  of  tariffs  made  by\t the  Kerala   State
\nElectricity Board unlike the Andhra Pradesh High Court which
\nhas  upheld  the upward revision of tariffs in\tthe  present
\nappeals.  The main question in the Kerala case also  related
\nto  the extent of authority of the Kerala Board to  increase
\nthe  electricity tariffs under the Electricity (Supply)\t Act
\n1948.  The principal ground of challenge which was  accepted
\nby  the\t Kerala\t High  Court  was  that\t the  Kerala   State
\nElectricity  Board acted outside its statutory authority  by
\nformulating a price structure intended to yield\t substantial
\nrevenue\t to  offset  not  merely  the  expenditure  properly
\nchargeable   to\t the  revenue  account\tfor  the   year\t  as
\ncontemplated  by  Section  59 of the  Supply  Act  but\talso
\nexpenditure  not  so properly chargeable.  The\tKerala\tHigh
\nCourt had held that in the absence of a specification by the
\nGovernment, the Board was not entitled to generate a surplus
\nat  all\t and  it acted entirely outside\t its  authority\t  in
\ngenerating  a  surplus\tto  be\tadjusted  against  items  of
\nexpenditure not authorised to be met from revenue  receipts.
\nthis  view of the Kerala High Court  was based primarily  on
\nthe  construction  made\t of section 59\tof  the\t Electricity
\n(Supply)  Act,\t1948.  Accordingly, the\t Kerala\t High  Court
\nstruck\tdown  the  upward revision of tariffs  made  by\t the
\nKerala\tState Electricity (Supply) Act, 1948.\tAccordingly,
\nthe  Kerala  High Court struck down the upward\trevision  of
\ntariffs\t made by the Kerala State Electricity Board  in\t the
\nyears  1980, 1982 and 1984.  It may here be  mentioned\tthat
\nSection 59 of the Supply Act, as it stood prior to 1978, was
\namended by Act No. 23 of 1978 and thereafter, by Act No.  16
\nof  1983,  which came into effect from April 1,\t 1985  only.
\nThe Kerala case also was decided on the basis of Section  59
\nas  it stood amended by the 1978 (Amendment) Act,  prior  to
\nits  amendment w.e.f. April 1, 1985 by Act No. 16  of  1983.
\nFor our purposes also, Section 59 as it stood amended by the
\n1978 Act, prior to  the 1983  amendment, is relevant.\n<\/p>\n
     This Court expressly rejected the submission which\t had
\nfound favour with the Kerala High Court that in the  absence
\nof  a  specification by the State Government,  the  position
\nwould  be as it was before the 1978 amendment, that is,\t the
\nBoard was to carry on its affairs and
\n\t\t\t\t\t\t       654<\/span>
\nadjust\tthe tariffs in such a manner as not to incur a\tloss
\nand  no\t more.\tWhile rejecting the submission,\t this  Court
\nheld as under:\n<\/p>\n
\t “We  are  of  the  view that  the  failure  of\t the
\n\t government  to\t specify the surplus  which  may  be
\n\t generated  by\tthe Board cannot prevent  the  Board
\n\t from\tgenerating  a  surplus\tafter  meeting\t the
\n\t expenses required to be met.  Perhaps, the  quantum
\n\t of  surplus  may not exceed that a  prudent  public
\n\t service  undertaking  may be expected\tto  generate
\n\t without sacrificing the interests it is expected to
\n\t serve and without being obsessed by the pure profit
\n\t motive of the private entrepreneur.  The Board\t may
\n\t not  allow  its  character  as\t a  public   utility
\n\t undertaking  to  be changed into that of  a  profit
\n\t motivated  private trading or manufacturing  house.
\n\t Neither  the tariffs nor the resulting surplus\t may
\n\t reach\tsuch  heights as to lead to  the  inevitable
\n\t conclusion  that  the\tBoard has  shed\t its  public
\n\t utility character.  When that happens the court may
\n\t strike\t down  the revision of\ttariffs\t as  plainly
\n\t arbitrary.   But  not\tuntil  then.   Not,   merely
\n\t because  a  surplus has been generated,  a  surplus
\n\t which\tcan by no means be said to  be\textravagant.
\n\t The  court  will  then refrain\t from  touching\t the
\n\t tariffs.  After all, as has been said by this Court
\n\t often enough ‘price fixation’ is neither the  forte
\n\t nor the function of the court.”\n<\/p>\n
Further, it said:\n<\/p>\n
\t “Turning  back to Section 59 and reading  it  along
\n\t with Section 49, 67, 67-A etc.\t We notice that\t the
\n\t Electricity  Supply  Act requires  the\t Electricity
\n\t Board\tto follow a particular method of  accounting
\n\t and it is on the basis of that method of accounting
\n\t that  the Board is required to generate a  surplus.
\n\t Broadly, Section 59 requires that a surplus  should
\n\t be  left  from the total revenues, in any  year  of
\n\t account,   after  meeting  all\t expenses   properly
\n\t chargeable  to revenues.  It has to  be  remembered
\n\t that  apart from subventions which may be  received
\n\t from the State Government, which depend entirely on
\n\t the  bounty  of the government, the  only  revenues
\n\t available to the Board are the charges leviable  by
\n\t it  from consumers.  Bearing this in mind,  we\t may
\n\t now consider what expenses are properly  chargeable
\n\t to revenues under the Electricity Supply Act.\t For
\n\t this  purpose,\t we may not be justified  in  having
\n\t recourse to the principles of corporate
\n\t\t\t\t\t\t       655<\/span>
\n\t accounting  or\t the rules which determine  what  is
\n\t revenue  expenditure under the Income Tax Act.\t  It
\n\t appears  to  us  that the  Electricity\t Supply\t Act
\n\t prescribes its own special principles of accounting
\n\t to be followed by the Board….”\n<\/p>\n
     This Court also held that the prescribing of  different
\ntariffs for high and low tension consumers and for different
\nclasses\t of  consumers,\t such  as  industrial,\t commercial,
\nagricultural and domestic, appears to be reasonable and\t far
\nfrom   arbitrary  and  is  based  on  an   intelligent\t and
\nintelligible differentia.  Accordingly, the judgment of\t the
\nKerala High Court upholding challenge to the validity of the
\nupward revision of tariffs was set aside.\n<\/p>\n
     Broadly  speaking, the substance of the main  arguments
\nadvanced  before  us in these matters was repelled  by\tthis
\nCourt in the Kerala case.  However, learned counsel for\t the
\nappellants attempted to distinguish the Kerala decision\t and
\nalso  tried to advance some additional arguments.  We  shall
\nrefer to those arguments presently.\n<\/p>\n
     It\t would\tbe appropriate at this stage  to  quote\t the
\nrelevant  provisions of the Electricity (Supply) Act,  1948,
\nwith  reference to which the arguments advanced have  to  be
\nconsidered.  Section 2 of the act relates to  interpretation
\nand  give  the meaning of the expressions  defined  therein.
\nSection\t 3  deals  with\t the  constitution  of\tthe  Central
\nElectricity Authority.\tSection 4-B contains the rule-making
\npower of the Central Government.  Section 5 provides for the
\nconstitution  and composition of State\tElectricity  Boards.
\nSection\t 12  provides for the incorporation  of\t the  Board.
\nSection 12-A relates to the capital structure of the  Board.
\nSection\t 78  contains  the rule-making power  of  the  State
\nGovernment.   Section 79 contains the power of the Board  to
\nmake  regulations.  Some of the provisions of the Act  which
\nmay be quoted in extenso are as under:\n<\/p>\n
\t “4A.  Directions  by  Central\tGovernment  to\t the
\n\t Authority.  (1) In the discharge of its  functions,
\n\t the Authority shall be guided by such directions in
\n\t matter\t of policy involving public interest as\t the
\n\t Central Government may give to it in writing.\n<\/p>\n
\t       (2) If any question arises as to whether\t any
\n\t such  direction  relates  to  a  matter  of  policy
\n\t involving  public  interest, the  decision  of\t the
\n\t Central Government thereon shall be final.”\n<\/p>\n
\t xxx\t\t\txxx\t\t\t xxx
\n\t\t\t\t\t\t       656<\/span>
\n\t\t“16. State Electricity Consultative Council.
\n\t (1)  The State Government shall constitute a  State
\n\t Electricity Consultative Council for the State, and
\n\t in cases to which Section 6 and 7 apply, the  State
\n\t Government  concerned shall constitute such one  or
\n\t more  State  Electricity  Cousultative\t Council  or
\n\t Councils  and\tfor  such  areas  as  they  may\t  by
\n\t agreement determine.\n<\/p>\n
\t       (2)   The  State\t  Electricity\tConsultative
\n\t Council  shall consist of the members of the  Board
\n\t and,  if  there  are  any  Generating\tCompany\t  or
\n\t Generating  Companies operating in the\t State,\t one
\n\t representative of the Generating Company or each of
\n\t the  Generating Companies, to be nominated by\tthe
\n\t Generating   Company  concerned,  and\tsuch   other
\n\t persons being not less than eight and not more than
\n\t fifteen  as  the  State  Government  or  the  State
\n\t Governments\tconcerned    may    appoint    after
\n\t consultation with such representatives or bodies of
\n\t representative\t of the following interests  as\t the
\n\t State Government or the State Governments concerned
\n\t thinks\t or think fit, that is to say,\tlocal  self-
\n\t government, electricity supply industry,  commerce,
\n\t industry,  transport, agriculture, labour  employed
\n\t in the electricity supply industry and consumers of
\n\t electricity,  but so that there shall be  at  least
\n\t one member  representing each such interest in\t the
\n\t Council.\n<\/p>\n
\t       (3)  The\t Chairman of the Board shall  be  ex
\n\t officio   Chairman   of   the\t State\t Electricity
\n\t Consultative Council.\n<\/p>\n
\t       (4)   The  State\t  Electricity\tConsultative
\n\t Council  shall\t meet at least once in\tevery  three
\n\t months.\n<\/p>\n
\t       (5)  The functions of the  State\t Electricity
\n\t Consultative Council shall be as follows:-\n<\/p>\n
\t      (i)  To  advise the Board and  the  Generating
\n\t      Company  or  Generating  Companies,  if\tany,
\n\t      operating\t in the State on major\tquestions of
\n\t      policy and major schemes;\n<\/p><\/blockquote>\n
\t      (ii)  to review the progress and the  work  of
\n\t      the  Board  and  the  Generating\tCompany\t  or
\n\t      Generating Companies, if any, operating in the
\n\t      State from time to time;\n<\/p><\/blockquote>\n
\t\t\t\t\t\t       657<\/span><\/p>\n
\t      (iii)  To consider such other matters  as\t the
\n\t      Board or the Generating Company or  Generating
\n\t      Companies, if any, operating in the State\t may
\n\t      place before it; and\n<\/p><\/blockquote>\n
\t      (iv)  To\tconsider such matters as  the  State
\n\t      Government may by rules prescribe.<\/p><\/blockquote>\n
\t      (6)  The\tBoard shall place before  the  State
\n\t Electricity   Consultative   Council\tthe   annual
\n\t financial statement and supplementary statement, if
\n\t any, and shall take into consideration any comments
\n\t made  on such statement in the said Council  before
\n\t submitting  the same to the State Government  under
\n\t Section 61.”\n<\/p>\n
\t xxx\t\t\txxx\t\t\txxx
\n\t      “49. Provision for the sale of electricity  by
\n\t the  Board  to persons other  than  licensees.\t (1)
\n\t Subject  to  the  provisions of  this\tAct  and  of
\n\t regulations, if any, made in this behalf, the Board
\n\t may  supply electricity to any person not  being  a
\n\t licensee  upon\t such terms and\t conditions  as\t the
\n\t Board\tthinks fit and may for the purposes of\tsuch
\n\t supply frame uniform tariffs.\n<\/p>\n
\t     (2)In  fixing  the uniform tariffs,  the  Board
\n\t shall\thave regard to all or any of  the  following
\n\t factors, namely:-\n<\/p>\n
\t      (a) The nature of the supply and the  purposes
\n\t      for which it is required;\n<\/p><\/blockquote>\n
\t      (b) The co-ordinated development of the Supply
\n\t      and  distribution\t of electricity\t within\t the
\n\t      State  in\t the most efficient  and  economical
\n\t      manner,  with  particular\t reference  to\tsuch
\n\t      development  in areas not for the\t time  being
\n\t      served or adequately served by the licensee;\n<\/p><\/blockquote>\n
\t      (c) the simplification and standardisation  of
\n\t      methods\tand  rates  of\tcharges\t  for\tsuch
\n\t      supplies;\n<\/p><\/blockquote>\n
\t      (d)  The extension and cheapening of  supplies
\n\t      of electricity to sparsely developed areas.<\/p><\/blockquote>\n
\t\t\t\t\t\t       658<\/span><\/p>\n
\t      (3)  Nothing  in the foregoing  provisions  of
\n\t this  section shall derogate from the power of\t the
\n\t Board, if it considers it necessary or expedient to
\n\t fix different tariffs for the supply of electricity
\n\t to  any person not being a licensee, having  regard
\n\t to  the  geographical\tposition of  any  area,\t the
\n\t nature\t of the supply and purpose for which  supply
\n\t is required and any other relevant factors.\n<\/p>\n
\t       (4)  In\tfixing\tthe  tariff  and  terms\t and
\n\t conditions for the supply of electricity, the Board
\n\t shall not show undue preference to any person.”\n<\/p>\n
\t xxx\t\t       xxx\t\t\t xxx\nSection 59 prior to 1978\n<\/pre>\n
\t       “General principles for Board’s finance.\t The
\n\t Board\tshall not, as far as practicable  and  after
\n\t taking\t credit for any subventions from  the  State
\n\t Government   under   Section  63,  carry   on\t its
\n\t operations  under  this Act at a  loss,  and  shall
\n\t adjust its charges accordingly from time to time:\n<\/p>\n
\t       Provided that where necessary any amounts due
\n\t for   meeting\t the  operating,   maintenance\t and
\n\t management  expenses  of  the\tBoard  or  for\t the
\n\t purposes of clauses (i) and (ii) of Section 67 may,
\n\t to  such extent as may be sanctioned by  the  State
\n\t Government, be paid out of capital.”\n<\/p>\n
Section 59 as amended by Act No. 23 of 1978
\n\t “General  principles for Board’s finance.  (1)\t The
\n\t Board shall, after taking credit for any subvention
\n\t from  the State Government under Section 63,  carry
\n\t on  its  operations under this Act and\t adjust\t its
\n\t tariffs so as to ensure that the total revenues  in
\n\t any  year  of\taccount\t shall,\t after\tmeeting\t all
\n\t expenses properly chargeable to revenues, including
\n\t operating,  maintenance  and  management  expenses,
\n\t taxes (if any) on income and profits,\tdepreciation
\n\t and  interest payable on all debentures, bonds\t and
\n\t loans, leave such surplus, as the State  Government
\n\t may, from time to time, specify.\n<\/p>\n
\t       (2)  In\tspecifying the\tsurplus\t under\tsub-\n<\/p>\n
\t section (1),
\n\t\t\t\t\t\t       659<\/span>
\n\t the  State Government shall have due regard to\t the
\n\t availability\tof   amounts  accrued  by   way\t  of
\n\t depreciation\t and   the   liability\t for\tloan
\n\t amortization and leave.\n<\/p>\n
\t      (a) a reasonable sum to contribute towards the
\n\t      cost of capital works; and\n<\/p>\n
\t      (b)   where  in  respect\tof  the\t  Board,   a
\n\t      notification has been issued under sub-section
\n\t      (1)  of Section 12-A, a reasonable sum by\t way
\n\t      of return on the capital provided by the State
\n\t      Government  under\t sub-section  (3)  of\tthat
\n\t      section  and the amount of the loans (if\tany)
\n\t      converted by the State Government into capital
\n\t      under sub-section (1) of Section 66A.”\n<\/p>\n
Section 59 as further amended by Act No. 16 of 1983
\n\t      “General principles for Board’s finance.\t (1)
\n\t The  Board  shall,  after  taking  credit  for\t any
\n\t subvention from the State Government under  Section
\n\t 63,  carry  on its operations under  this  Act\t and
\n\t adjust\t its tariffs so as to ensure that the  total
\n\t revenues  in  any  year  of  account  shall,  after
\n\t meeting   all\texpenses  properly   chargeable\t  to
\n\t revenues,  including  operating,  maintenance\t and
\n\t management expenses,  taxes (if any) on income\t and
\n\t profits,  depreciation and interest payable on\t all
\n\t debentures, bonds and loans, leave such surplus  as
\n\t is  not  less than three per cent, or\tsuch  higher
\n\t percentage,   as  the\tState  Government  may,\t  by
\n\t notification  in the Official Gazette,\t specify  in
\n\t this  behalf, of the value of the fixed  assets  of
\n\t the Board in service at the beginning of such year.\n<\/p>\n
\t      Explanation.  – For the purposes of this\tsub-
\n\t section, “value of the fixed assets of the Board in
\n\t service  at  the beginning of the year”  means\t the
\n\t original  cost of such fixed assets as\t reduced  by
\n\t the  aggregate\t of the cumulative  depreciation  in
\n\t respect  of  such assets calculated  in  accordance
\n\t with  the  provisions of this\tAct  and  consumers’
\n\t contribution for service lines.\n<\/p>\n
\t       (2) In specifying any higher percentage under
\n\t sub-section  (1), the State Government\t shall\thave
\n\t due regard to
\n\t\t\t\t\t\t       660<\/span>
\n\t the  availability  of\tamounts accrued\t by  way  of
\n\t depreciation\t and   the   liability\t for\tloan
\n\t amortization and leave-\n<\/p>\n
\t      (a) a reasonable sum to contribute towards the
\n\t      cost of capital works; and\n<\/p><\/blockquote>\n
\t      (b)   where  in  respect\tof  the\t  Board,   a
\n\t      notification has been issued under sub-section
\n\t      (1)  of Section 12-A, a reasonable sum by\t way
\n\t      of return on the capital provided by the State
\n\t      Government  under\t sub-section  (3)  of\tthat
\n\t      section  and the amount of the loans (if\tany)
\n\t      converted by the State Government into capital
\n\t      under sub-section (1) of Section 66-A.”\n<\/p><\/blockquote>\n
\t xxx\t\t\t  xxx\t\t\t xxx
\n\t      “61.  Annual  financial  statement.  -(1)\t  In
\n\t February of each year the Board shall submit to the
\n\t State Government a statement in the prescribed form
\n\t of  the estimated capital and revenue receipts\t and
\n\t expenditure for the ensuing year.<\/p><\/blockquote>\n
\t       (2)  The\t said  statement  shall\t include   a
\n\t statement  of the salaries of members and  officers
\n\t and other employees of the Board and of such  other
\n\t particulars as may be prescribed.\n<\/p>\n
\t       (3) The State Government shall as soon as may
\n\t be after the receipt of the said statement cause it
\n\t to  be\t laid on the table of the House, or  as\t the
\n\t case  may be, Houses of the State Legislature;\t and
\n\t the  said  statement shall be\topen  to  discussion
\n\t therein, but shall not be subject to vote.\n<\/p>\n
\t       (4)  The Board shall take into  consideration
\n\t any  comments\tmade on the said  statement  in\t the
\n\t State Legislature.\n<\/p>\n
\t       (5) The Board may at any time during the year
\n\t in  respect of which a statement under\t sub-section
\n\t (1)  has  been\t submitted,  submit,  to  the  State
\n\t Government  a supplementary statement, and all\t the
\n\t provisions  of\t this section shall  apply  to\tsuch
\n\t statement as they apply to the statement under\t the
\n\t said sub-section.”\n<\/p>\n
\t xxx\t\t\t xxx\t\t\t xxx
\n\t\t\t\t\t\t       661<\/span>
\n\t “63. Subventions to the Board.-The State Government
\n\t may,  with the approval of the\t State\tLegislature,
\n\t from  time  to time make subventions to  the  Board
\n\t for  the  purposes of this Act on  such  terms\t and
\n\t conditions as the State Government may determine.”\n<\/p>\n
\t XXX\t\t\tXXX\t\t\t XXX
\n\t “65.  Power of Board to borrow.-(1) The Board\tmay,
\n\t from  time to time, with  the previous sanction  of
\n\t the State Government and subject to the  provisions
\n\t of  this  Act and to such  conditions,\t as  may  be
\n\t prescribed in this behalf, borrow any sum  required
\n\t for the purposes of this Act.\n<\/p>\n
\t (2)  Rules  made by the State\tGovernment  for\t the
\n\t purposes  of this section may empower the Board  to
\n\t borrow\t by  the  issue of debentures  or  bonds  or
\n\t otherwise  and to make arrangements  with  bankers,
\n\t and may apply to the Board with such  modifications
\n\t as may be necessary to be consistent with this Act,
\n\t the provisions of the Local Authorities Loans\tAct,
\n\t 1914 (9 of 1914), and the rules made thereunder  as
\n\t if the Board were a local authority.\n<\/p>\n
\t  (3) The maximum amount  which the Board may at any
\n\t time  have on loan  under sub-section (1) shall  be
\n\t ten crores of rupees, unless the State\t Government,
\n\t with\tthe  approval  of  the\t State\t Legislative
\n\t Assembly, fixes a higher, maximum amount.
\n\t  (4) Debentures or bonds issued by the Board  under
\n\t this  section shall be issued,\t transferred,  dealt
\n\t with  and  redeemed  in  such\tmanner\tas  may\t  be
\n\t prescribed.”\n<\/p>\n
\t XXX\t\t\t XX\t\t\tXXX
\n\t “67.  Priority\t of liabilities\t of  the  Board.-The
\n\t Board\tshall  distribute the  surplus\treferred  to
\n\t in  sub-section  (1) of section 59  to\t the  extent
\n\t available  in\ta particular year in  the  following
\n\t order, namely:-\n<\/p>\n
\t       (i) repayment of principal of any loan raised
\n\t       (including redemption of debentures or  bonds
\n\t       issued)\tunder Section 65 which\tbecomes\t due
\n\t       for payment in the
\n\t\t\t\t\t\t       662<\/span>
\n\t       year  or which became due for payment in\t any
\n\t       previous year and has remained unpaid;\n<\/p><\/blockquote>\n
\t       (ii)  repayment\tof  principal  of  any\tloan
\n\t       advanced to the Board by the State Government
\n\t       under  Section\t64  which  becomes  due\t for
\n\t       payment\tin the year or which became due\t for
\n\t       payment in any previous year and has remained
\n\t       unpaid;\n<\/p><\/blockquote>\n
\t       (iii) payment for purposes specified in\tsub-
\n\t       section\t(2) of Section 59 in such manner  as
\n\t       the Board may decide.\n<\/p><\/blockquote>\n
\t       67-A.  Interest\ton loans advanced  by  State
\n\t       Government  to  be  paid\t only  after   other
\n\t       expenses.-  Any interest which is payable  on
\n\t       loans advanced under Section 64 or deemed  to
\n\t       have  been advanced under Section 60  to\t the
\n\t       Board  by the State Government and  which  is
\n\t       charged to revenues in any year may be\tpaid
\n\t       only  out of the balance of the revenues,  if
\n\t       any, of that year which is left after meeting
\n\t       all  the other expenses referred to  in\tsub-<\/p><\/blockquote>\n
\t       section (1) of Section 59 and so much of such
\n\t       interest as is not paid in any year by reason
\n\t       of  the provisions of this section  shall  be
\n\t       deemed to be deferred liability and shall  be
\n\t discharged   it, accordance  with  the\t  provisions
\n\t of   this  section  in\t the  subsequent   year\t  or
\n\t year, as the case may be.\n<\/p>\n
\t       68. Charging of depreciation by Board-(1) The
\n\t       Board\tshall\tprovide\t  each\t year\t for
\n\t       depreciation    such   sum   calculated\t  in
\n\t       accordance   with  such\tprinciples  as\t the
\n\t       Central\tGovernment may,\t after\tconsultation
\n\t       with  the Authority, by notification  in\t the
\n\t       Official Gazette, lay down  from time to time.
\n\t       (2) Omitted
\n\t       (3)  The\t provisions of\tthis  section  shall
\n\t       apply  to the charging of   depreciation\t for
\n\t       the  year in which the  Electricity  (Supply)
\n\t       Amendment Act, 1978, comes into force.”\n<\/p>\n
\t       XXX XXX XXX
\n\t       “68-A.  Directions by the State\tGovernment.-
\n\t (1) In
\n\t\t\t\t\t\t       663<\/span>
\n\t the discharge of its functions, the Board shall  be
\n\t guided by such directions on questions of policy as
\n\t may be given to it by the State Government.
\n\t     (2) If any dispute arises between the Board and
\n\t the State Government as to whether a question is or
\n\t is  not a question of policy, it shall be  referred
\n\t to  the Authority whose decision thereon  shall  be
\n\t final.”
\n    We shall first consider the common arguments advanced by
\nthe learned counsel for the appellants in all these  matters
\nbefore taking up some additional arguments advanced in\tsome
\nof these matters.\n<\/p>\n
    The\t  first\t  argument  is\tthat  the   requirement\t  of
\nconsultation with the State Electricity Consultative Council
\nbefore the revision of tariffs in accordance with Section 16
\nof  the\t Electricity (Supply) Act, 1948,   not\thaving\tbeen
\nmade,  the upward revision of tariffs is invalid on  account
\nof  non-compliance of Section 16 of the Supply Act.  It\t was
\nurged  that  revision of tariffs being a major\tquestion  of
\npolicy\tas  envisaged by clause (i) of Sub-section  (5)\t  of
\nSection\t 16, it is one of the functions of the\tConsultative
\nCouncil\t to  advise the Board on this question\tand  without
\nsuch  advice  of the Consultative Council, the\trevision  in
\ntariffs could not be made. It was argued that the consumers’
\ninterest is also represented on the Consultative Council  as
\nindicated by Sub-section (2) of Section 16 providing for its
\nconstitution,  and therefore, it was necessary to  know\t the
\nviewpoint  of the consumers through their representative  in
\nthe  Consultative  Council before deciding  upon  an  upward
\nrevision of the tariffs for H.T. consumers. Though the Board
\nmay not be bound by the advice\tof the Consultative Council,
\nyet  it was urged, such consultation with the Council was  a
\ncondition  precedent. It was suggested that Section 16\tmust
\nbe read with Section 61 of the Supply Act which requires the
\nBoard to submit to the State Government the annual financial
\nstatement in February each year.\n<\/p>\n
    It is unnecessary in the present case to decide  whether
\nthe  revision  of tariffs falls within the ambit  of  `major
\nquestions  of policy’ occurring in Section 16(5)(i)  of\t the
\nSupply Act since the arguments from both sides proceeded  on
\nthe  basis that revision of tariffs for the purpose of\tthis
\ncase  may  be  treated\tas  a  `question  of  policy’  which
\nexpression  finds place also in Section 78-A of\t the  Supply
\nAct.  The  question,  therefore,  reduces  itself  to  this:
\nWhether the  failure of the Board to place the matter before
\nand  seek  the advice of the Consultative  Council  on\tthis
\nquestion renders the revision of tariffs made by it
\n\t\t\t\t\t\t       664<\/span>
\ninvalid?  The  common premise for the purpose of  this\tcase
\nthat  revision\tof  tariffs by the Board is  a\tquestion  of
\npolicy\t may  indicate\tthat  it  would\t be  open   to\t the
\nConsultative  Council  to  advise the\tBoard  also  on\t the
\nquestion  of  revision\tof tariffs, and if  such  advice  is
\ngiven,\tthen the Board must consider the same before  taking
\nthe final decision. That, however, does not necessarily mean
\nthat  where no such advice was taken from  the\tConsultative
\nCouncil\t or was rendered on account  of the absence  of\t any
\nmeeting\t of  the Consultative Council  during  the  relevant
\nperiod, it would necessarily render invalid the revision  of
\ntariffs made by the Board. The consequence of non-compliance
\nof Section 16 is not provided and the nature of function  of
\nthe  Consultative Council and the force of its advice  being
\nat the best only persuasive. it cannot be said that revision
\nof  tariffs without seeking the advice of  the\tConsultative
\nCouncil renders the revision of tariffs invalid. It is\talso
\nsignificant  that the annual financial statement  containing
\nall particulars relating to revision of tariffs is  required
\nto  be\tsubmitted to the State Government in  February\teach
\nyear  and the State Government is required after receipt  of
\nsuch  statement to cause it to be laid on the table  of\t the
\nHouse  or  Houses  of the State\t Legislature  and  the\tsaid
\nstatement is open to discussion therein. The Board is  bound
\nto  take  into consideration any comments made on  the\tsaid
\nstatement  in  the State Legislature. Thus, there  is  ample
\nprovision for discussion on the revised tariffs in the State
\nLegislature  with  the\tBoard  being  bound  to\t take\tinto
\nconsideration any comments made thereon.
\n    Shri Shanti Bhushan sought to make a distinction between
\nthe  provisions of sub-section (5) of section 16  pertaining
\nto the functions of the `Consultative Council’ empowering or
\nenabling the Council to advice the Board on `major questions
\nof  policy’ and the provision in sub-section (6) as  to\t the
\nobligation of the Board to place certain matters before\t the
\n`Council’  to emphasise his point that sub-section (6)\tdoes
\nnot  envisage any obligation on the part of the\t `Board’  to
\nplace  before  the  Council the\t proposal  for\trevision  of
\ntariffs.  He sought to distinguish between the functions  of
\nthe  `Council’\tto tender advice and the obligation  of\t the
\nBoard  to  specifically seek and invite\t such  advice.\tShri
\nShanti\tBhushan said that the very concept  of\tconsultation
\ndoes  imply mandatory obligation or duty attaching the\tpain
\nof nullity to the transaction.\n<\/p>\n
    Provisions\tof  the\t Electricity  Act  1947\t in  England
\ncontain\t certain  express statutory stipulations as  to\t the
\nscope of the Consultative Council’s functions which do\tnot,
\nin  terms,  obtain  in the  Indian  statute.  For  instance,
\nSection 7 of the English Act which contemplates
\n\t\t\t\t\t\t       665<\/span>
\nthe  establishment  of `Consultative  Council’\tspecifically
\nprovides in Section 7(4) :\n<\/p>\n
\t “(4)\tEach of the said Councils shall\t be  charged
\n\t with the duties-\n<\/p>\n
\t (a)   of  considering\tany  matter  affecting\t the
\n\t distribution of electricity in the area,  including
\n\t the  variation of tariffs and the provision of\t new
\n\t or  improved  services and  facilities\t within\t the
\n\t area, ………….\n<\/p>\n
\t (b) xxx\txxx\t  xxx\n<\/p>\n
\t (c)   of  considering\tany  matter  affecting\t the
\n\t variation of any tariff regulating the charges\t for
\n\t the  provision of bulk supplies of  electricity  by
\n\t the Generating Board for distribution in the  area,
\n\t being\ta  matter which is either the subject  of  a
\n\t representation\t made to them by consumers or  other
\n\t persons  requiring supplies of electricity  in\t the
\n\t area,\tor which appears to them to be a  matter  to
\n\t which\tconsideration ought to be given\t apart\tfrom
\n\t any   such   representation,\tand,   where   after
\n\t consultation with the Area Board action appears  to
\n\t them  to  be requisite as to any  such\t matter,  of
\n\t notifying  their  conclusions\tto  the\t  Generating
\n\t Board;\n<\/p>\n
\t (d) xxx\txxx\t   xxx
\n\t (rest of the Section omitted as unnecessary)
\n    Section 37(1) of the English statute again provides:
\n\t “37 Fixing and variation tariffs
\n\t (1)  The  prices to be charged\t by  the  Generating
\n\t Board for the supply of electricity by them to Area
\n\t Boards shall be in accordance with such tariffs  as
\n\t may  be fixed from time to time by  the  Generating
\n\t Board\tafter  consultation  with  the\t Electricity
\n\t Council;  the\tdifferent tariffs may be  fixed\t for
\n\t different Area Boards.”
\n\t (rest of the Section omitted as unnecessary)
\nThe pattern of the provisions in the Indian statute is quite
\ndifferent.\n<\/p>\n
\t\t\t\t\t\t       666<\/span><\/p>\n
The  `laying procedure’ before the  legislature\t effectively
\ncontrols  the exercise of the delegated power of the  Board.
\nWe  are of the opinion that though advisable yet failure  to
\nseek  advice of the Consultative Council before revision  of
\nthe  tariffs does not result in invalidation of the  revised
\ntariffs.  This consequence appears to us to be\tthe  logical
\nand reasonable view to take of the requirement of Section 16
\nalong with other provisions of the Supply Act.
\n    One\t of  the  arguments addressed at  length  before  us
\nrelates\t to Section 78-A of the Supply Act. It was urged  on
\nbehalf\tof  the appellant that any direction  of  the  State
\nGovernment  relating to tariffs was on a question of  policy
\nwithin\tthe meaning of Sub-section (1), and, therefore,\t the
\nBoard  is  bound  by  such direction  subject  only  to\t the
\nadjudication, if any, in accordance with Sub-section (2), if
\nany  dispute is raised by the Board in that behalf.  It\t was
\nurged  that  in the present case the Board  was,  therefore,
\nbound by the directions of the State Government granting the
\nconcession  to\tthe  power  intensive  consumers  since\t  no
\ndispute\t  was  raised by the Board in accordance  with\tSub-
\nsection (2), of Section 78-A. Learned counsel for the  Board
\ndid not for the purpose of this case, dispute this position,
\nbut  contended that all directions of the  State  Government
\nwere obeyed by the Board and, therefore,  the  question does
\nnot  really  arise. The Board’s contention is  that  it\t has
\nacted  according to the directions of the  State  Government
\nand, therefore, the question of non-compliance with any such
\ndirections giving rise to the argument based on Section 78-A
\ndoes not arise.\n<\/p>\n
    For\t consideration\tof  the\t main  controversy,  it\t  is
\nadvisable  at this stage to deal with Sections 49 and 59  of
\nthe  Supply Act. Section 49 makes provision for the sale  of
\nelectricity  by the Board to persons other  than  licensees.
\nSub-section  (1)  starts  with the  words  `Subject  to\t the
\nprovisions  of this Act and of regulations, if any, made  in
\nthis behalf’. This means that the provision made therein  is
\nsubject\t to  other  provisions of the  Supply  Act  and\t the
\nregulations.  It  then proceeds to say that  the  Board\t may
\nsupply\telectricity to any person not being a licensee\tupon
\n`such terms and conditions as the Board thinks fit’ and\t may
\nfor  the  purposes  of such  supply  supply  frame  `uniform
\ntariffs’.  Sub-section\t(2) then enumerates several  factors
\nwhich  the Board is required to `have regard to’  in  fixing
\nthe  uniform  tariffs. The meaning of the  expression  `have
\nregard\tto’  is\t well-settled. It  means  that\tthe  factors
\nspecifically  enumerated shall be taken into  account  while
\nperforming  the exercise which in this case is the  fixation
\nof  uniform tariffs. Ordinarily, therefore, uniform  tariffs
\nare  required  to  be framed by the Board  for\tmaking\tsuch
\nsupply. Sub-section (3) then proceeds to
\n\t\t\t\t\t\t       667<\/span>
\nsay  that  nothing in the earlier enacted  provisions  shall
\nderogate  from the power of the Board, `if it  considers  it
\nnecessary  or  expedient to fix different  tariffs  for\t the
\nsupply\tof electricity to any person’, having regard to\t the
\ngeographical position of any area, the nature of the  supply
\nand  purpose  for which supply is required  and\t `any  other
\nrelevant factors’. Sub-section (4) then says that in  fixing
\nthe  tariffs  and  terms and conditions for  the  supply  of
\nelectricity,  `the Board shall not show undue preference  to
\nany  person’.  In  other  words,  Sub-section  (4)  provides
\nagainst\t any  unreasonable  discrimination  in\tfixing\t the
\ntariffs and terms and conditions for supply of\telectricity.
\nThe power of fixation of tariffs in the Board is provided in
\nthis  manner by Section 49 of the Supply Act which  requires
\nthe  fixation  of uniform tariffs ordinarily  having  regard
\nparticularly  to the specified factors and enables  fixation
\nof such tariffs for any person having regard to the  factors
\nexpressly  stated and any other relevant factors,  providing
\nfurther\t that no unreasonable or undue preference  shall  be
\nshown  to any person by the Board in exercise of its  powers
\nof fixing the tariffs.\n<\/p>\n
    The next important provision is Section 59 of the Supply
\nAct.  For appreciating the argument based on Section 59,  it
\nis  necessary to bear in mind the distinction in Section  59
\nas it stood prior to 1978, as amended by Act No. 23 of\t1978
\nand  finally  as  amended  by Act No.  16  of  1983,  quoted
\nearlier.\n<\/p>\n
    Prior to 1978, Section 59 required the Board, as far  as
\npracticable and after taking credit for any subventions from
\nthe  State Government under Section 63, not to carry on\t its
\noperations under this ACt at a loss and for this purpose, it
\nwas  empowered to adjust its charges accordingly from\ttime
\nto  time. Under the  provision as it then existed, the\tmain
\nthrust\twas to avoid the Board incurring  any loss  and\t for
\nthat  purpose, it could adjust its charges accordingly\tfrom
\ntime  to time. Section 59 as amended by Act No. 23  of\t1978
\nrequired the Board, after taking credit for any\t subventions
\nfrom the State Government under Section 63, to carry on\t its
\noperations under this Act and to adjust its tariffs so as to
\nensure\tthat  the  total revenues in any  year\tmeeting\t all
\nexpenses  properly  chargeable to  revenue  including  those
\nspecified,  left  such\tsurplus\t as  the  State\t  Government
\nspecified  from\t time to time.\tThe  shift  was,  therefore,
\ntowards\t having a surplus as the State Government  specified
\nfrom   time   to  time.\t Sub-section   (2)   then   provided
\nguidelines   for  the  State Government\t in  specifying\t the
\nsurplus under Sub-section  (1) and mentioned the factors  to
\nwhich regard was to  be had for this  purpose. The effect of
\nthe  amendment\tmade in Section 59 by Act No.  16  of  1983,
\nwhich came into effect from 1.4.1985, was to provide for a
\n\t\t\t\t\t\t       668<\/span>
\nminimum surplus of three per cent or such higher  percentage
\nas  the\t State Government is to specify in this\t behalf.  In
\nother  words, prior to 1978 amendment, the requirement\tfrom
\nthe  Board was to avoid incurring any loss, after  the\t1978
\namendment  the\tshift  was towards  ensuring  a\t surplus  as
\nspecified  by  the  State Government, and  after   the\t1983
\namendment  the Board is required to ensure a surplus  of  at
\nleast three per cent unless the State Government specifies a
\nhigher\tsurplus. This is the scheme of Section 59 and it  is
\nSection 59 as amended by 1978 Act but prior to its amendment
\nby the 1983 Act, with which we are concerned in the  present
\ncase.\n<\/p>\n
    It cannot be doubted that Section 59 requiring the Board
\nto adjust its tariffs for the purpose of Board’s finance  is
\nto be read along with Section 49 which provides specifically
\nfor  fixation  of  tariffs  and the  manner  in\t which\tthat
\nexercise has to be performed while dealing with any question
\nrelating to the revision of tariffs.\n<\/p>\n
    It\twas argued on behalf of the appellants that  Section
\n59  as amended by the 1978 Act did not empower the Board  to
\nadjust\tits  tariffs  to generate  any\tsurplus\t unless\t the
\nsurplus had been specified by the State Government and\twhen
\nspecified,  the\t surplus  generated  could  not\t exceed\t the
\nspecified  surplus. In other words, it was argued that\twhen
\nthe State Government did not specify any surplus, the  Board
\nhad  no\t power\tto  adjust its tariffs\tin  a  manner  which
\nresulted  in  generating  any  surplus.\t We  are  unable  to
\nconstrue  Section 59 in this manner. The  general  principle
\nfor  the  Board’s finance indicated by Section\t59  is\tthat
\nprior  to the 1978 amendment, tariffs could be\tadjusted  to
\navoid  any  loss, but as a result of the shift made  by\t the
\n1978  amendment, the power could be exercised to generate  a
\nsurplus\t and when the State Government specified the  amount
\nof surplus then the Board was bound to adjust the tariffs to
\nensure\t generation  of\t the  specified\t surplus.   However,
\ngeneration  of a reasonable surplus in any year\t of  account
\nwithout\t specification\tof the surplus amount by  the  State
\nGovernment   was  not  contra-indicated\t in  the   provision
\ninasmuch as the duty to generate a surplus was implicit with
\nthe  added  obligation to ensure generating surplus  to\t the
\nextent\tspecified  by the State Government when\t it  was  so
\nspecified by the State Government. It cannot be accepted  as
\na  reasonable view that in the absence of  specification  of
\nthe  surplus  by the State Government, the Board  could\t not
\nadjust its tariffs to generate even a reasonable surplus  in
\nany  year of account.  The effect of 1983  amendment,  which
\ncame into force from 1.4.1985, is that the Board is entitled
\nto adjust its tariffs to ensure generating a surplus of\t not
\nless than three per cent even without such specification
\n\t\t\t\t\t\t       669<\/span>
\nby  the\t State\tGovernment and\twhen  the  State  Government
\nspecifies   a  higher surplus, then the\t Board\tmust  ensure
\ngenerating the higher specified surplus. This is, of course,
\nsubject\t to  the  accepted  norm  of  the  Board  acting  in
\nconsonance  with  its  public  utility\tcharacter  and\t not
\nentirely with a profit motive like that of a private trader.
\nThe  pre-1978 concept of the Board’s functioning  to  merely
\navoid any loss is replaced by the shift after 1978 amendment
\ntowards\t the positive approach of requiring a surplus to  be
\ngenerated,  the\t quantum of surplus being specified  by\t the
\nState  Government, with a minimum of three per cent  surplus
\nin  the absence of the specification by the Government of  a
\nhigher surplus, after the 1983 amendment. This\tconstruction
\nmade  of  Section  59, as it stood  at\tdifferent  times  in
\nGovinda\t Prabhu’s case (supra) indicated earlier, cannot  be
\nfaulted in any manner. In Govinda Prabhu’s case (supra)\t the
\nsame  argument\twhich is advanced before  us  was  expressly
\nrejected. We are of the\t same view.\n<\/p>\n
    It\tis  ,  therefore, obvious that\tmere  generation  of
\nsurplus\t by the Board as a result of adjusting\tits  tariffs
\nwhen  the quantum of surplus has not been specified  by\t the
\nState  Government after the 1978 amendment of Section 59  of
\nthe  Supply  Act, cannot invite any criticism unless  it  is
\nfurther shown that the surplus generated as a result of\t the
\nadjustment  of\ttariffs\t by the Board has  resulted  in\t the
\nBoard  acting  as a private trader shedding off\t its  public
\nutility character. In other words, if the profit is made not
\nmerely for the sake of profit, but for the purpose of better
\ndischarge of its obligations by the Board, it cannot be said
\nthat  the public enterprise has acted beyond  it  authority.
\nThe  Board  in the present case has shown that\tthe  surplus
\nresulting from upward revision of tariffs applicable to\t the
\nH.T. consumers made in the present case, was for the purpose
\nof  better  discharge  of its other  obligations  under\t the
\nSupply\tAct  and  in effect, it has  merely  resulted  in  a
\ngradual\t withdrawal  of the  concessional  tariffs  provided
\nearlier to the power intensive consumers which do not in its
\nopinion require continuance  of the concessional tariffs any
\nlonger.\t In fact, no material has been placed before  us  to
\nindicate  that this assertion of the Board is  incorrect  or
\nthere  is  any\treasonable basis to  hold  that\t the  upward
\nrevision  of tariffs applicable to H.T. consumers is  merely
\nwith  a desire\tto earn more profits like a  private  trader
\nand not to generate surplus for utilisation  of the funds to
\ndischarge other obligations of the Board towards more  needy
\nconsumers,  such  as agriculturists or to meet the  need  of
\nexpansion  of  the supply to deserving areas.  The  argument
\nwith  reference\t to statistics that the upward\trevision  of
\ntariffs\t for the H.T. consumers\t results in earning  amounts
\nin  excess  of the cost of generation does  not,  therefore,
\nmerit a more detailed consideration.\n<\/p>\n
\t\t\t\t\t\t       670<\/span><\/p>\n
    It\twas  also  contended on\t behalf\t of  the  appellants
\nthat  the  generation of electricity by the  Andhra  Pradesh
\nElectricity   Board  is both thermal as well as\t hydro,\t the
\nquantity from each source being nearly equal and the  entire
\nelectricity generated is fed into a common grid, from  which
\nis  supplied to all categories of consumers. On this  basis,
\nit  was argued that the rise in the  fuel cost which led  to
\nthe  fuel  cost\t adjustment  applicable\t only  to  the\tH.T.
\nconsumers  was\tunreasonable  and discriminatory  since\t the
\nburden\tof  rise in fuel cost was placed only  on  the\tH.T.
\nconsumers.  In our opinion, this argument has no merit.\t The
\nH.T. consumers, including the power intensive consumers, are
\nknown  power  guzzlers and in  power  intensive\t industries,
\nelectricity  is\t really\t a raw material.  This\tcategory  of
\nconsumers,  therefore, forms a distinct class separate\tfrom
\nother  consumers  like L.T. consumers who are  much  smaller
\nconsumers.   There  is\talso  a\t rational  nexus   of\tthis
\nclassification\twith  the  object  sought  to  be  achieved.
\nMoreover,  the power intensive consumers have been  enjoying
\nthe  benefit of a concessional tariff for quite\t some  time,
\nwhich\ttoo   is   a  relevant\tfactor\t to   justify\tthis
\nclassification.\t Placing the burden of fuel cost  adjustment
\non these power guzzlers, who had the benefit of concessional
\ntariff\tfor quite some time and have also a better  capacity
\nto pay, cannot, therefore, be faulted since the\t consumption
\nin  the\t power\tintensive industries accounts  for  a  large
\nquantity.\n<\/p>\n
     Shri   Sibal  submitted  that  the\t  prescription\t and
\nimposition of disparate tariffs, unrelated to the production
\ncost,  on a particular section of consumers would be a\tcase
\nof  misplaced  philanthrophy on the part  of  the  statutory
\nauthority.   The  Board,  Shri Sibal says,  cannot  use\t its
\npowers\tin order to confer  “social or economic benefits  on
\nparticular  sections  of the community” at the cost  of\t the
\nother  sections.  Shri Sibal contended that while it may  be
\npermissible  for  the  Board to supply\telectricity  to\t the
\nweaker\tand  under-privileged  sections of  the\t society  at
\nprices\twhich  may  even be  lower  than  the  costs  of
\ngeneration  and\t distribution, however\tsubsidies  for\tsuch
\nsocial objectives must come from subventions from Government
\nand should not be made good by unjustifiable higher  charges
\non other sections of electricity consumers. Shri Sibal\tread
\nto  us\tthe following passage in Wade’s\t Administrative\t Law
\n(6th Edn.):\n<\/p>\n
\t “Statutory  authorities have sometimes made use  of
\n\t their wide general powers in order to confer social
\n\t or economic benefits on particular sections of\t the
\n\t community.   In several such cases they  have\tgone
\n\t beyond the true limits of their powers.  The policy
\n\t of the courts is in general hostile to the
\n\t\t\t\t\t\t       671<\/span>
\n\t use of public funds, such as rates, for new  social
\n\t experiments.\tLocal authorities are subject  to  a
\n\t fiduciary  duty  to  use their\t revenues  with\t due
\n\t restraint.”\n<\/p>\n
\t\t\t\t\t   (at\t   p. 424)
\nAfter  referring to decided cases on the point, the  learned
\nauthor says:\n<\/p>\n
\t “… The idea that runs through these cases is that
\n\t public\t   money   must\t  be\tadministered\twith
\n\t responsibility\t and  without  extravagance.\tThis
\n\t appears to mean it is not available for charity.
\n\t  The\tgenerosity   of\t  local\t  authorities,\t  in
\n\t particular, is restrained by the doctrine that they
\n\t owe a fiduciary duty to their ratepayers  analogous
\n\t to that of trustees.  This means that, in  deciding
\n\t upon  their expenditure, they must hold  a  balance
\n\t fairly\t between the recipients of the\tbenefit\t and
\n\t the ratepayers who have to bear the cost.”\n<\/p>\n
\t\t\t\t\t\t  (at p.426)
\nShri  Sibal contends that in the case of class of  consumers
\nrespecting which the tariff is enhanced, the enhancement  is
\nnot  justified\ton  the ground of making good  the  loss  on
\nsupply\tto  others  at\tcheaper\t rates.\t  The  increase\t  is
\nattributable to higher costs of generation of thermal power.
\n It  is not unreasonable to take the view that\tthe  thermal
\npower has become costlier on account of the increase in fuel
\ncost and could nationally be allocated to the consumption by
\nH.T. and power intensive consumers, and, therefore, the fuel
\ncost  adjustment is made applicable to them alone.   In\t our
\nopinion, the argument on behalf of the Board in this  behalf
\nis not unreasonable.\n<\/p>\n
     It\t was  argued  on  behalf  of  the  appellants\twith
\nconsiderable  force that the upward hike of tariff  for\t the
\nH.T.  consumers including power intensive was arbitrary\t and
\ndiscriminatory\tinasmuch as it was not\trelated to the\tcost
\nof  generation and was based on irrelevant factors.  It\t was
\nargued that the L.T. tariffs and agricultural  tariffs\twere
\nrelieved  of  this burden and the liabilities of  the  Board
\neven  of  a  capital  nature were  taken  into\taccount\t for
\nincreasing  the tariff applicable to power intensive  units.
\nThe  contention is that these factors are irrelevant and  do
\nnot  permit exercise of the power to increase  the  tariffs.
\nThis arguments was considered at length in Govinda  Prabhu’s
\ncase before it was
\n\t\t\t\t\t\t       672<\/span>
\nnegatived.  We agree with the reasons given in that decision
\nto repel this contention.  In Govinda Prabhu, it was pointed
\nout  that  the Court would not strike down the\trevision  of
\ntariff\tas  arbitrary unless the resulting  surplus  reaches
\nsuch a height as to lead to the inevitable decision that the
\nBoard has shed its public utility character and is  obsessed
\nby  the\t profit motive of private entrepreneur in  order  to
\ngenerate a surplus which is extravagant.  The limited  power
\nof  judicial review in the field of price fixation was\talso
\nindicated.   This  limited  scope  of  judicial\t review\t  in
\nstriking down revision of tariffs resulting in generation of
\nsurplus applied in Govinda Prabhu cannot be faulted in\tview
\nof the long line of decisions of this Court on the point and
\nreiteration of the same principle by a Constitution Bench in
\nShri Sitaram Sugar Company Limited and Another. v. Union  of
\nIndia  and  Others,<\/a>  [1990]  3\tS.C.C.\t223.   The   surplus
\ngenerated  by the Board as a result of revision\t of  tariffs
\nduring\tthe relevant period cannot be called extravagant  by
\nany standard to render it arbitrary permitting the  striking
\ndown   of  the\trevision  of  tariffs  on  the\t ground\t  of
\narbitrariness. We have already indicated that it is not also
\ndiscriminatory as was the view taken in Govinda Prabhu.\t  It
\nhas been pointed out on behalf of the Board that the Board’s
\naction\tis based on the opinion of Rajadhyaksha\t Committee’s
\nReport\tsubmitted  in  1980 and the  formula  of  fuel\tcost
\nadjustment  is on a scientific basis linked to the  increase
\nin  the\t fuel cost.  This is a possible view  to  take\tand,
\ntherefore,  the\t revision of tariffs by the Board  does\t not
\nfall within the available scope of judicial review.\n<\/p>\n
     One of the contentions of Shri G. Ramaswamy, on  behalf
\nof the appellant was that the G.Os. issued in respect of the
\npower intensive units amounted to a special tariff for\tthem
\nresulting  in  their  exclusion from the  category  of\tH.T.
\nconsumers  and, therefore, the clause relating to fuel\tcost
\nadjustment inserted by amendment to the H.T. tariffs did not
\napply to the power intensive consumers without insertion  of
\na  similar clause in the special tariff applicable to  them.
\nIt  was\t urged\tthat for this  reason  the  power  intensive
\nconsumers  could not be governed by the clause of fuel\tcost
\nadjustment made applicable to H.T. tariffs.  Shri  Ramaswamy
\nadvanced  elaborate  arguments\tto  distinguish\t “terms\t and
\nconditions of supply” from “terms and conditions of tariff”.
\nAccording  to  the learned counsel, B.P. Ms. No.  778  dated
\n18.10.1975   excluded\tthe  power  intensive\tunits\tfrom
\napplicability of the Notification date 17.9.1975 to it.\t  It
\nis unnecessary to repeat the history of the H.T. tariffs  by
\nwhich  power intensive tariffs were separated.\tIt would  be
\nsufficient in this context to quote the relevant portion  of
\nMemo. dated 18.11.1975 which, in our opinion, negatives this
\nargument.   It\twas provided in this Memo.,  inter  alia  as
\nunder:\n<\/p>\n
\t\t\t\t\t\t       673<\/span><\/p>\n
\t “With\t regard\t  to   other   charges,\t  such\t  as
\n\t Miscellaneous\tcharges,  terms\t and  conditions  of
\n\t supply,  not mentioned specifically  herein,  those
\n\t applicable to normal  H.T. consumers will apply”.
\n     The  expression  “other  charges”\tis  wide  enough  to
\ninclude within its ambit the fuel cost adjustment admittedly
\nmade  applicable  to all H. T.consumers as a result  of\t the
\nescalation  in\tfuel  prices.  The  method  adopted  was  to
\nprescribe a formula linking it to the increase in fuel\tcost
\nso that it was not necessary to revise the tariffs each time
\nas a result of increase in fuel prices, the same being taken
\ncare of by the relevant factors in the formula for fuel cost
\nadjustment.   It  was in this context  that  Shri  Ramaswamy
\ncontended  that\t the `terms and conditions  of\tsupply’\t are
\ndifferent from the `terms and conditions of tariff’ and fuel
\ncost adjustment being a term or condition of tariff and\t not
\na  term or condition of supply, the above provision  in\t the
\nMemo  dated 18.11.1975 did not have the effect\tof  applying
\nthe  term  relating  to fuel cost adjustment  to  the  power
\nintensive  tariff.  It is sufficient to state that the\tMemo
\ndated  18.11.1975 did not merely extend\t the   non-specified
\n`terms\tand conditions of supply’ applicable to normal\tH.T.
\nconsumers  to the power intensive consumers but also  “other
\ncharges”   which  were\tmerely\tillustrated  by\t the   words
\nfollowing,  namely,  “such  as\tMisc.  charges,\t terms\t and
\nconditions of supply not mentioned herein”.  In other words,
\nthis express provision in the Memo, dated 18.11.1975 clearly
\nprovided  that except for the provisions  specifically\tmade
\nfor  power  intensive  consumers, in respect  of  all  other
\nprovisions the power intensive consumers were to be governed
\nby  the provisions, by whatever name called,  applicable  to
\nthe  normal  H.T. consumers.  A further discussion  of\tthis
\ndistinction  sought to be made by Shri G. Ramaswamy  of\t the
\n`terms\tand conditions of supply’ and `terms and  conditions
\nof tariff’ is, therefore, unnecessary.\tShri Ramaswamy\talso
\nurged  that there was no communication to the  appellant  of
\nthe  applicability  of\tthe  term  relating  to\t fuel\tcost
\nadjustment  during the relevant period which  also  relieves
\nthe  power  intensive consumers of this liability.   On\t the
\nview  we have already taken about the applicability  of\t the
\nterm relating to fuel cost adjustment to the power intensive
\ntariffs\t this point is not material.  However, it  has\talso
\nbeen  shown that in the bills issued to the power  intensive
\nconsumers  the\tsame  was specifically\tindicated.   If\t any
\ncommunication  was  needed,  this indication  in  the  bills
\nissued\tto  the\t power intensive  consumers  satisfied\tthat
\nrequirement.\tWe  are,  therefore, unable  to\t accept\t the
\ncontention  that the term relating to fuel  cost  adjustment
\nmade applicable to H.T. consumers
\n\t\t\t\t\t\t       674<\/span>
\nhad  no application to the power intensive consumers  during
\nthe relevant period.\n<\/p>\n
     Shri  Kapil  Sibal appearing on behalf of some  of\t the
\nappellants  confined the  challenge to the mode of  exercise
\nof power by the Board.\tHe laid great emphasis on the effect
\nof  absence of consultation with the Consultative  Committee
\nunder Section 16 of the Electricity (Supply) Act, 1948.\t  He
\nalso  claimed that the quantum of increase could at best  be
\njustified  only to the extent of one-half and no more.\tShri
\nSibal claimed that certain extraneous factors had been taken
\ninto  account for the purpose of revising the tariffs.\t The
\nirrelevant  considerations, according to Shri  Sibal,  taken
\ninto account are the capital sums owed by the Board and\t the
\noverall losses incurred by the Board which according to\t him
\nis  impermissible  under  Section  59  of  the\t Electricity
\n(Supply)  Act.\tHe also argued that the upward\trevision  of
\nH.T.  tariffs  is intended to  subsidise  another  class  of
\nconsumers  which  is  not permissible.\t His  arguments\t are
\nalready\t covered by our earlier discussion.  Similarly,\t the
\narguments  of Shri K.N. Bhat, for the appellant in C.A.\t No.
\n5379 of 1985 to the same effect, need to further discussion.
\nThe  details of the several factors taken into\taccount\t for
\nthe  revision in tariffs, to the limited extent they can  be
\ngone into within the permissible scope of judicial review in
\nsuch a matter also do not require any further consideration.\n<\/p>\n
     Shri Anil Divan, on behalf of the appellant in C.A\t No.
\n2569 of 1985, submitted that the increase in tariffs for the
\npower intensive unit in his case was 47 per cent as  against
\n15 per cent for ordinary H.T. consumers.  According to\thim,
\neven  ignoring the FCA, the increase is 40 per cent from  32
\npaise  to  45\tpaise.\tThis is disputed on  behalf  of\t the
\nBoard.\t In our opinion, it is unnecessary to go  into\tthis
\nquestion  any further for the reasons already given  by\t us.
\nShri Divan also contended that the Electricity Board’s stand
\nhas  been conflicting at different stages.  In our  opinion,
\nany detailed decision on this aspect also is unnecessary  on
\nthe  view  taken  by us about the Board’s  power  to  revise
\ntariffs, no case for striking down the same as arbitrary and
\ndiscriminatory having been made out.  In view of the earlier
\ndecision   of  this  Court  in\tGovinda\t Prabhu,  with\t the
\nconclusion  as\twell as reasoning of which  we\trespectfully
\nconcur\tand  reiteration  of the Court’s  limited  power  of
\njudicial  review  in  Shri  Sitaram  Sugar  Company  Limited
\nrecently decided by a Constitution Bench, we do not find any
\nreason to accept any of the arguments advanced on behalf  of
\nthe  appellants\t by their learned counsel.   In\t fact,\tthe
\ndecision in Govinda Prabhu con-\n<\/p>\n
\t\t\t\t\t\t       675<\/span><\/p>\n
cludes\tthe  controversy  against the  appellants  and\tsome
\ndetailed  discussion  by  us has become\t necessary  only  on
\naccount\t of  an\t attempt  on behalf  of\t the  appellants  to
\ndistinguish  the  decision and the emphasis  placed  on\t the
\nrequirements  of Sections 16, 49 and 59 of  the\t Electricity
\n(Supply) Act.\n<\/p>\n
     We\t find  no  merit  in  these  appeals\/special   leave
\npetition and the same are dismissed.  All interim orders  in
\nfavour of the appellants\/petitioner stand vacated. No costs.\n<\/p>\n
R.P.\t\t\t\t\t  Appeals dismissed.\n\t\t\t\t\t\t       676<\/span>\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Hindustan Zinc Ltd. Etc. Etc vs Andhra Pradesh State Electricity … on 2 May, 1991 Equivalent citations: 1991 AIR 1473, 1991 SCR (2) 643 Author: J S Verma Bench: Verma, Jagdish Saran (J) PETITIONER: HINDUSTAN ZINC LTD. ETC. ETC. Vs. RESPONDENT: ANDHRA PRADESH STATE ELECTRICITY BOARDS & ORS. DATE OF JUDGMENT02\/05\/1991 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-199659","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nHindustan Zinc Ltd. Etc. 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