{"id":54688,"date":"1993-01-12T00:00:00","date_gmt":"1993-01-11T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/ashok-soap-factory-and-anr-vs-municipal-corporation-of-delhi-on-12-january-1993"},"modified":"2017-02-04T12:12:33","modified_gmt":"2017-02-04T06:42:33","slug":"ashok-soap-factory-and-anr-vs-municipal-corporation-of-delhi-on-12-january-1993","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/ashok-soap-factory-and-anr-vs-municipal-corporation-of-delhi-on-12-january-1993","title":{"rendered":"Ashok Soap Factory And Anr vs Municipal Corporation Of Delhi … on 12 January, 1993"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Ashok Soap Factory And Anr vs Municipal Corporation Of Delhi … on 12 January, 1993<\/div>\n
Equivalent citations: 1993 SCR (1) 124, \t 1993 SCC (2)\t 37<\/div>\n
Author: Y Dayal<\/div>\n
Bench: Yogeshwar Dayal (J)<\/div>\n
           PETITIONER:\nASHOK SOAP FACTORY AND ANR.\n\n\tVs.\n\nRESPONDENT:\nMUNICIPAL CORPORATION OF DELHI AND ORS.\n\nDATE OF JUDGMENT12\/01\/1993\n\nBENCH:\nYOGESHWAR DAYAL (J)\nBENCH:\nYOGESHWAR DAYAL (J)\nVERMA, JAGDISH SARAN (J)\nVENKATACHALA N. (J)\n\nCITATION:\n 1993 SCR  (1) 124\t  1993 SCC  (2)\t 37\n JT 1993 (1)   128\t  1993 SCALE  (1)98\n\n\nACT:\nDelhi Municipal Corporation Act, 1957:\nSection\t   283--Levy\tof    charges\t for\tsupply\t  of\nelectricity--Minimum   consumption  guarantee  charges\t for\n'large\tindustrial  powers' consumers--Increase in  rate  in\nrespect of Arc\/induction furnaces--Validity of.\nElectricity Act, 1910:\nSection\t  21--Applicability  to\t  local\t  authorities--Delhi\nMunicipal  Corporation,\t being\ta  licensee  by\t virtue\t  of\nprovisions  of the Delhi Municipal Corporation Act, and\t not\none  licensed  under Part II to supply energy,\tSection\t not\napplicable.\nSection 22, proviso--Proviso does not deal with the  minimum\nconsumption charges.\nConstitution of India, 1950:\nArticle\t  14--Price   fixation--Fixation   of\ttariff,\t   a\nlegislative  function--Hence,  fixation of higher  rate\t not\nopen to challenge on ground of non-disclosure of reasons  in\nthe absence of any unreasonableness or\tarbitrariness--Since\narc\/induction  furnaces\t constitute a class  by\t themselves,\nquestion of discrimination does not arise.\n\n\n\nHEADNOTE:\nSection 283 of the Delhi Municipal Corporation Act, 1957 em-\npowered respondent No.1\t Delhi Municipal Corporation to levy\ncharges\t for the supply of electricity on such rates as\t may\nbe  fixed  from\t time to time by it.   For  the\t purpose  of\ncharging  the  consumers, the Corporation  had\tdivided\t the\nconsumers  into different categories\/classes  providing\t for\ndifferent tariffs for each category.  One of the  categories\nwas   'large  industrial  powers'  (LIP)   consumers.\t The\nconsumers  who had a sanctioned load of 100 KWs fell in\t the\ncategory of large industrial powers.\n125\nFor the levy of charges for the supply of electricity  there\nwere two systems of tariff, namely, the flat rate system and\nthe  other two-part tariff system.  Under the former a\tflat\nrate  was charged on the units of energy consumed while\t the\nlatter\tsystem\twas meant for big consumers  of\t electricity\ni.e.  industrial power, and it was comprised of two  charges\n(1)  minimum  consumption guarantee charges  (called  demand\ncharges) and (2)    energy charges for the actual amount  of\nenergy consumed.\nUnder the two-part system an LIP consumer would pay  minimum\nguarantee  consumption\tcharges\t at the rate  fixed  by\t the\nrespondents.   If  the\tLIP consumer  did  not\tconsume\t the\nspecified  minimum quantity of electricity or no  energy  at\nall  even then he had to pay the minimum guarantee  charges.\nBut in case the consumer consumed more electricity then what\nwas  prescribed by the minimum guarantee charges,  then\t the\nconsumer  paid the minimum guarantee charges and  also\tpaid\nthe  electricity  charges  for\tthe  actual  consumption  of\nelectricity, beyond the minimum guarantee charges, in such a\nmanner that the minimum guarantee charges were merged in the\ntotal bill of electricity consumed and a rebate was given to\nthe  consumer.\tIn other words, if a consumer consumed\tmore\nthan the specified minimum quantity of electricity then,  in\neffect,\t he  would pay for electricity\twhich  was  actually\nconsumed by him.\nFor the period from 1985-86 to 1988-89, the respondents\t had\nfixed rates of minimum consumption guarantee charges at\t the\nrate  of Rs. 40 per KVA for 1000 KVA and Rs38 per KVA  above\n1000  KVA.  However, pursuant to a Resolution passed by\t the\nrespondent  Corporation approving the resolution  passed  by\nthe  D.E.S.C.,\tthere  was an upward revision  of  rates  of\nminimum\t  consumption  guarantee  charges  in\trespect\t  of\narc\/induction furnaces.\nAs  a result, for demand charges for the first 1000 K-VA  of\nbilling demand for the month, instead of tariff being Rs. 40\nper or part thereof, it was enhanced to Rs. 340 per KVA-  or\npart thereof.\nThe  appellants had set up\/installed arc\/induction  furnaces\nfor   the  manufacture\tof  castings  in  their\t  factories.\nElectricity  was one of the important raw materials for\t the\nappellants   and   had\t obtained   electricity\t  from\t the\nrespondents.  The sanctioned load was more than 100 KWS and,\ntherefore, they fell into the LIP category and the  two-part\ntariff\twas applicable to them.\t 'The appellants filed\twrit\npetitions before the High\n126\nCourt  challenging the enhancement of the minimum  guarantee\ncharges.\nIt  was contended that the provisions of Section 21  of\t the\nIndian\tElectricity  Act, 1910 applied and the\tdecision  to\nincrease  minimum charges was contrary to Section  21(2)  of\nthe  Act, that changing the rates at which  minimum  charges\nwere  to  be realised amounted to altering or  amending\t the\nconditions of supply and this could not be done without\t the\nprevious  sanction of the State Government,  and  therefore,\nthe  proposed increase was in violation of Section 21(2)  of\nthe 1910 Act, that the minimum guarantee charges could\tonly\nbe  levied under the proviso to Section 22 of the 1910\tAct,\nthat under the proviso to Section 22 the licensee could only\ncharge\tthat amount which would give it a reasonable  return\non  the\t capital  expenditure  and  cover  standing  charges\nincurred by it in order to meet the possible maximum demand,\nthat  the  respondents\thad to satisfy the  Court  that\t the\nminimum\t demand charges had been raised to Rs. 340 from\t Rs.\n40  and\t that the additional capital  expenditure  had\tbeen\nincurred,  which  would justify Rs. 340 being charged  as  a\nreasonable return on the said capital expenditure, and\tthat\nthe  tariff  vis-a-vis a consumer owning  are  furnaces\t was\nviolative of Article 14 of the Constitution inasmuch as\t the\nother  bulk consumers in the category of LIP  consumers\t had\nnot been so treated.\nThe High Court dismissed the writ petitions holding that  in\ncase the local authority was the licensee, no prior approval\nof the State Government was required in law for changing the\nrates,\tand  that  apart from proviso  to  Section  22,\t the\nagreement  between  the parties justified the claim  of\t the\nrespondent-  Corporation for minimum  consumption  guarantee\ncharges.\nDismissing   the   appeals  preferred  by   the\t  consumers-\nappellants, this Court\nHELD:1.1.  Section 21(2) of the Act was\t applicable  to\nthe licensees other than the local authorities.\t  'Licensee'\nas defined in the 1910 Act in Section 2(h) means any  person\nlicensed under Part 11 to supply energy'.  The D.M.C., which\nis  the\t licensee  in the present case\tis  not\t a  licensee\nlicensed under Part 11 to supply energy.  D.M.C. is licensee\nby virtue of the provisions contained in the Delhi Municipal\nCorporation Act, 1957. [136G-H, 137A]\n1.2.The\t proviso  to Section 22, talks\tabout\ta  separate\nsupply unless\n127\nhe  had\t agreed with the licensee to pay  him  such  minimum\nannual\tsum'.  In the present case, there is no question  of\nany separate supply or any agreement in relation to  minimum\nannual\tsum.   Section\t22  deals  with\t totally   different\nsituation and has nothing to do with the minimum consumption\nguarantee  charges provided as part of the tariff  which  in\nturn was part of the agreement between the parties. [137E-F]\n1.3.The\t reasons  for the revision of  minimum\tconsumption\ncharges, in respect of arc\/induction furnaces, were that  in\nmany  instances\t it was noticed that the meters\t where\tbulk\nsupply\twas  made  were\t found\tto  be\tdefective  and\t the\nconsumption  recorded was found to be extremely low  causing\nloss  of huge revenue.\tThe arc\/induction furnaces  normally\nrun continuously and, therefore, the D.E.S.C. was  justified\nto  increase  the  rate\t of  minimum  consumption  guarantee\ncharges.   The\tvariation  in the  electricity\tconsumed  by\ndifferent  consumers indicated that the charge of  pilferage\nof electricity and gross under-utilisation or consumption of\nelectricity compared to the sanctioned load was not  without\nfoundation.  The tabulated statement of the consumers  using\ninduction furnaces placed on record by the respondents deals\nwith  52 consumers including most of the  appellants.\tThis\nstatement shows large variation of the electricity consumed.\nIt  is\tsurprising  that the units are\tstill  surviving  by\nworking\t for  a short period.  On the  assumption  that\t the\nelectricity  consumed  is as per the  sanctioned  load,\t the\napproximate number of hours for which the induction furnaces\nhave  been  worked in a month has been stated  in  the\tsaid\nstatement.   There  was thus a reasonable  basis  to  assume\ntheft  by  substantial\tnumber\tof  arc\/induction   furnaces\nconsumers.   The consumer contracts for a minimum supply  of\nelectricity  of certain dimensions and the D.M.C.  which  is\nlicensee  in the present case, has to buy energy by  way  of\nbulk supply from outside sources and has to keep it  readily\navailable for the consumer for the whole year round.  Surely\nthe  consumer,\twho  contracts for  such  high\tquantity  of\nenergy,\t does so because of its need and not for keeping  it\nas  stand  by,\twithout paying for,  it.   No  licensee\t can\npossibly  keep\tsuch  enormous quantity\t of  electricity  in\nreserve\t for  a\t consumer, month after\tmonth,\twithout\t its\nconsumption.   That is why in the tariff, which was part  of\nthe  agreement, for LIP consumers there was two part  tariff\nsystem\t partly\t minimum consumption guarantee\tcharges\t and\npartly for actual energy consumed. [138F-H, 139A-B-D]\n1.4.It\twas  also stipulated that  the\tminimum\t consumption\nguarantee\n128\ncharges\t would\tnot  be payable if a  consumer\tutilises  or\nconsumes 60% of the sanctioned load.  The rate per unit\t had\nnot been changed.  It was only the minimum guarantee charges\nwhich  has been revised.  If a consumer consumes  more\tthan\n60%  of\t the  sanctioned  load, then  he  is  not  adversely\naffected by the revision of the minimum demand charges\tfrom\nRs.  40 per KVA per month to Rs. 340 per KVA per month.\t  It\nis   difficult\t to  appreciate\t or   understand   how\t the\nmanufacturers  using arc\/induction furnaces could have\tsuch\nvariation in the consumption of electricity, as indicated in\nthe  tabulated statement, except to suggest that  there\t was\nlarge  scale  pilferage of electricity.\t It is not  easy  to\naccept\tthat induction furnaces having sanctioned  loads  of\nmore  than 1000 KW consuming electricity, if converted\tinto\napproximate number of hours worked in a month at the maximum\nload,  being as little as 18.1 hours especially\t when  there\nwere  instances\t of other induction furnaces  consuming\t far\nmore number of units per month.\t The respondents had to keep\nin readiness the supply of energy as per the sanctioned load\nof various consumers and were incurring expenditure for\t the\ngeneration,  supply  or\t purchase of  the  same.   When\t the\nconsumers were not paying for it, the respondents  obviously\nhad no option but to revise the minimum demand charges so as\nto  cover up and make good the generating and supply  costs.\n[139E-H, 140A]\n1.5.In\tthe present case, the respondents  themselves  have\nplaced\tfigures to demonstrate the formula on the  basis  of\nwhich  the  rate  of Rs. 340 per KVA has  been\tfixed.\t Ile\nformula shows that if 60% of the load sanctioned is utillsed\nthen  there is no unreasonableness or excessiveness  in\t the\ntariff. [140D]\n1.6.The\t recommendations of the D.E.S.C. were justified\t on\nfacts and were rightly accepted by the D.M.C. in raising the\nminimum\t consumption guarantee charges to Rs. 340  per\tK-VA\nper  month  for\t the  first  1000  K-VA\t which\tare  neither\nunreasonable nor arbitrary. [140F]\n1.7.The\t tariff was fixed by D.E.S.C. with the approval\t of\nthe D.M.C. in view of the power conferred under Section\t 283\nof the Corporation Act [140H,141A]\n2.1.The\t fixation of tariff is a legislative  function\tand\nthe  only challenge to the fixation of such levy can  be  on\nthe  ground of unreasonableness or arbitrariness and not  on\ndemonstrative grounds in the sense that the reasons for\t the\nlevy of charge must be disclosed in the order\n129\nimposing  the levy or disclosed to the court, so long as  it\nis based on objective criteria. [140B]\n2.2.As\tbulk  consumers\t belonging  to\tLIP  category,\tthe\nconsumers   of\tarc\/induction  furnaces\t are  a\t  class\t  by\nthemselves  and,  in any case, the revision is\tas  per\t the\nagreement  between the licensee and the consumers  which  is\nneither\t unreasonable nor arbitrary and therefore, there  Is\nno  discrimination.   All the appellants  had  entered\tinto\nagreements with the respondent-Corporation and clause  15(a)\nthereof\t provided that the consumer shall be liable  to\t pay\nfor  whatever  surcharge or increase in these rates  as\t may\nfrom time to time be levied or made by the Undertaking.\t Any\nother  method of charging decided by the  Undertaking  shall\nalso be applicable. [140G, 134G, 135B]\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1478  of
\n1990.\n<\/p>\n
From  the Judgment and Order dated 1.3.90 of the Delhi\tHigh
\nCourt in Civil Writ Petition No. 1744 of 1989.\n<\/p>\n
\t\t\t WITH
\nCA. Nos. 1474-1476, 1473, 1479-1483, 1477, 1484-1511,  1518,
\n1543 of 1990 and 4206 of 1991.\n<\/p>\n
R.K  Jain,  Harish N. Salve, P.P. Tripathi,  Tripurari\tRay,
\nMukul Mudgal Vineet Kumar, Ms. Kamini Jaiswal, Ashok  Mathur
\nand Ranjit Kumar for the appearing parties.
\nThe Judgment of the Court was delivered by
\nYOGESHWAR  DAYAL, J. These are batch of appeals against\t the
\njudgment  of Delhi High Court dated 1st March, 1990  whereby
\nthe  High Court by a common judgment disposed of a bunch  of
\nwrit  petitions, inter alia, filed by Gulab Rai against\t the
\nMunicipal Corporation of Delhi and others.
\nThe challenge in the writ petitions was to the Resolution of
\nthe Municipal Corporation of Delhi (hereinafter referred  to
\nas  M.C.D.)  whereby it approved the proposal of  the  Delhi
\nElectricity Supply Committee (in short D.E.S.C.) to  enhance
\nminimum consumption guarantee charges from Rs. 40 per KVA to
\nRs. 340 per KVA in respect of arc\/induction
\n130<\/span>
\nfurnaces.\n<\/p>\n
The  petitioners in the writ petitions had set\tup\/installed
\narc\/induction  furnaces for the manufacture of castings\t and
\nhave their factories in Delhi.\n<\/p>\n
One of the important raw-materials for the writ\t petitioners
\nis  electricity.   Each\t of  the  petitioners  had  obtained
\nelectricity from the respondents and the sanctioned load  is
\nmore  than  100 KWS.  The exact sanctioned load,  among\t the
\nvarious\t writ petitioners, varies, depending upon  the\tsize
\nand capacity of the furnaces set up by them but each one  of
\nthem has a sanctioned load of more than 100 KWS.
\nThe  case of the petitioners before the High Court was\tthat
\nSection\t 283  of the Delhi Municipal Corporation  Act,\t1957
\n(hereinafter referred to as ‘the Corporation Act’)  empowers
\nrespondent  No.1 (D.M.C.) to levy charges for the supply  of
\nelectricity on such rates as may be fixed from time to\ttime
\nby  the D.M.C. in accordance with law.\tFor the\t purpose  of
\ncharging the consumer, the D.M.C. has divided the  consumers
\nin  different  categories\/classes  providing  for  different
\ntariffs for each category.  One of the categories is  ‘large
\nindustrial power’ (LIP) consumers.  The consumers who have a
\nsanctioned  load  of 100 KWS fall in the category  of  large
\nindustrial  powers.   The writ petitioners fall\t under\tthis
\ncategory  as each one of them has a sanctioned load of\tmore
\nthan  100  KWS.\t For the levy of charges for the  supply  of
\nelectricity  there  are\t two systems  of  tariff  which\t are
\nfollowed,  namely  the flat rate system and the\t other\ttwo-
\npart  tariff  system.\tUnder the former,  a  flat  rate  is
\ncharged\t on  the units of energy consumed while\t the  latter
\nsystem\tis  meant  for big  consumers  of  electricity\ti.e.
\nindustrial  power,  and it is comprised of two\tcharges\t (1)
\nminimum\t  consumption  guarantee  charges   (called   demand
\ncharges)  and  (2) energy charges for the actual  amount  of
\nenergy consumed.\n<\/p>\n
It  was\t the case of the petitioners  that  two-part  tariff
\nsystem\twas  applicable to them.  Under this system  an\t LIP
\nconsumer  pays minimum guarantee consumption charges at\t the
\nrate fixed by the respondents.\tIf the LIP consumer does not
\nconsume the specified minimum quantity of electricity or  no
\nenergy at all even then he has to pay the minimum  guarantee
\ncharges.  But in case the consumer consumes more electricity
\nthat  what  is prescribed by the minimum  guarantee  charges
\nthen  the  consumer pays the minimum guarantee\tcharges\t and
\nalso pays the electricity charges for the actual consumption
\nof electricity beyond the minimum
\n131<\/span>
\nguarantee  charges,  in\t such  a  manner  that\tthe  minimum
\nguarantee   charges  are  merged  in  the  total   bill\t  of
\nelectricity consumed and a rebate is given to the  consumer.
\nIn  other  words,  if  a consumer  consumes  more  than\t the
\nspecified  minimum quantity of electricity then, in  effect,
\nhe  win\t pay for electricity which is actually\tconsumed  by
\nhim.\n<\/p>\n
For  the period from 1985-86 to 1988-89 the respondents\t had
\nfixed rates of minimum consumption guarantee charges at\t the
\nrate of Rs. 40 per KVA for 1000 KVA and Rs. 38\/per KVA above
\n1000  KVA.  The tariff for the LIP consumers in\t respect  of
\nthe  aforesaid\tperiod,\t including  the\t minimum   guarantee
\ncharges, as fixed by the respondents was as follows\n<\/p>\n
(d) Tariff
\nDemand charges
\nFirst 1000 KVA of billing demand for the month
\nRs. 40.00 per KVA or part thereof.\n<\/p>\n
All above 1000 KVA of billing demand for the month.
\nRs. 38.00 per KVA or part thereof.\n<\/p>\n
First 5,00,000 units per month at 15 paise per unit.
\nAll above 5,00,000 units per month at 84 paise per unit.
\nSubject to:\n<\/p>\n
a maximum overall rate of Rs. 1.10 per KVA without prejudice
\nto  the minimum payment as laid down in item (g)  below\t and
\nadjustment  clause at (xvii) above under General  Conditions
\nof applications.\n<\/p>\n
Item (g) of the said tariff prescribes that the minimum bill
\nwould be the amount of the demand charges based upon the KVA
\nof billing demand.  Item (g) reads as under:-
\n“(g) Minimum Bill
\nThe amount of the demand charges based upon the KVA
\nof billing demand.’
\n132<\/span>
\nThe  billing as per the aforesaid tariff had been  explained
\nby the petitioners before the High Court with the  following
\nillustration
\n‘(a)  If a consumer with a sanctioned load of 1000 KVA\tdoes
\nnot consume any energy in a given month, he would be  liable
\nto pay the minimum guarantee charge of Rs. 40,000 i.e.\t1000
\nKVA (sanctioned load\/contracts demand) x 40 (minimum
\nguarantee charge)\t\t    = Rs. 40,000
\nEven if he consumes electricity, but the value of the  units
\nactually  consumed by him works out to less than Rs.  40,000
\nwhich  is  the minimum consumption guarantee  charges,\teven
\nthen  he will have to pay the minimum consumption  guarantee
\ncharges of Rs. 40,000.\n<\/p>\n
(b)In the event one consumer consumes energy of the  value
\nof  more than Rs. 40,000, then the billing would be done  in
\nthe following manner :-\n<\/p>\n
Assuming   that\t the  consumer\tconsumes  80,000  units\t  of
\nelectricity :-\n<\/p>\n
     1000 KVA (sanctioned load)= Rs. 40,000
\n     X 40 (rate of minimum
\n     guarantee charges).<\/p><\/blockquote>\n
\n     80,000 (units consumed)\n     0.85 paise (energy charge)= Rs. 68,000\nper unit.\t    ------------------------\n\t\t     TotalRs. 1,08,000\n\t\t     ----------------------\n<\/pre>\n
In  terms of the tariff, the maximum charge cannot  be\tmore
\nthan  the  over\t all rate of Rs.  1.10\tper  unit  consumed.\n<\/p><\/blockquote>\n
Therefore, 80,000 units consumed would be chargeable at\t the
\nmaximum\t rate  of Rs. 1.10 per unit which works out  to\t Rs.
\n88,000.\t Since the amount of Rs. 1,08,000 is higher than Rs.
\n88,000\ti.e. by Rs. 20,000 a rebate of Rs. 20,000  would  be
\ngiven to the consumer and the consumer would be billed\tonly
\nfor Rs. 88,000.\n<\/p>\n
It  would be thus evident from the above  illustration\tthat
\nthe consumer, in any event, has to pay the minimum guarantee
\n133<\/span>
\n\t      charge  even if the value\/price of the  energy
\n\t      actually\tconsumed  is more than\tthe  minimum
\n\t      consumption  guarantee charges, the amount  of
\n\t      the minimum consumption guarantee gets  merged
\n\t      into\/with the energy charges.”\n<\/p>\n
It was then submitted on behalf of the writ petitioners that
\nthe General Manager of respondent No.2 wrote a letter  dated
\n24th January, 1989 to DE.S.C. inter alia, proposing revision
\nof rates of minimum consumption guarantee charges in respect
\nof  arc\/  induction furnaces.  In this\tletter\tthe  General
\nManager gave the figures of the fixed expenditure per KW per
\nmonth.\tIt was stated that the rates of minimum\t consumption
\nguarantee  were\t fixed\tin 1985 and the\t increase  in  fixed
\nexpenditure  per KW per month necessitated the\trevision  of
\nrates of minimum consumption guarantee charges.\t It was also
\nmentioned that the transmission and distribution losses were
\nquite  high  and  they fell  into  two\tcategories,  namely,
\ntechnical  losses  and\tcommercial losses.   The  cause\t for
\ncommercial  losses was explained by the General\t Manager  in
\nthe following words :-\n<\/p>\n
\t      “The Commercial losses are also attributed  to
\n\t      pilferage\/  fraudulent abstraction  of  energy
\n\t      etc.  The minimum consumption guarantee  being
\n\t      quite  low also attributes to the tendency  of
\n\t      fraudulent   abstraction\tof  energy.    After
\n\t      giving   a  serious  thought  to\treduce\t the
\n\t      pilferage\/fraudulent abstraction of energy, it
\n\t      has been felt desirable to revise the rate  of
\n\t      minimum consumption guarantee to a  reasonable
\n\t      level so that consumers are not attracted\t for
\n\t      such   unfair   means  and   the\t rates\t are
\n\t      commensurate with the fixed expenditure  being
\n\t      measured by the undertaking.”\n<\/p><\/blockquote>\n
In  the\t proposal  contained in this letter,  there  was  no
\nsuggestion  for increase of minimum consumption\t charge\t for
\ndomestic  category  but for other  categories  increase\t was
\nrecommended  and  in respect of aec\/induction  furnaces\t the
\nincrease for minimum consumption guarantee charge was to  be
\nRs. 340 instead of Rs. 40 per KVA.\n<\/p>\n
This  proposal contained in the letter dated  24th  January,
\n1989  was discussed by the D.E.S.C. in its metting  held  on
\n9th  March,  1989  and the case was  referred  back  to\t the
\nGeneral\t  Manager  to  inform  the  D.E.S.C.   whether\t the
\nrespondent  was\t recovering its dues from  the\tbulk  supply
\nconsumers  based  on  their  actual  consumption.   Pursuant
\nthereto, the
\n134<\/span>
\nGeneral Manager wrote another letter dated 23rd March,\t1989
\nto  D.E.S.C.  and  inter alia, stated that  the\t billing  is
\nnormally  done on the basis of consumption recorded  in\t the
\nmeters but in many instances it has been noticed that meters
\nwere  found to be defective.  The consumption  recorded\t was
\nfound  to  be  much  less than\tthe  consumption  which\t was
\nrecorded  in  the  previous year and when  compared  to\t the
\nconnected  load, the consumption was found to  be  extremely
\nless  in  many\tcases causing loss of  huge  amount  to\t the
\nUndertaking.  It was also stated in this letter that for the
\naforesaid  reason “the proposal was put up to  D.E.S.C.\t for
\nlevy  of higher minimum consumption charges in the  case  of
\narc\/induction furnaces on basis of their load.\tIt is  worth
\nmentioning  that  these furnaces normally  run\tcontinuously
\nand,  therefore, levy of minimum charges is considered\tjus-
\ntified.”\n<\/p>\n
The  aforesaid proposal of the General Manager was  accepted
\nby  D.E.S.C.  by Resolution dated 30th March,  1989  and  it
\nrecommended to the D.M.C. that the proposed revised rates of
\nminimum\t consumption guarantee charges be approved  only  in
\nrespect\t of  plastic  and arc\/induction\t furnaces  in  their
\nrespective categories.\n<\/p>\n
Pursuant  to the aforesaid Resolution of the  D.E.S.C.,\t the
\nD.M.C. also vide its Resolution dated 1st May, 1989 approved
\nthe enhancement of the minimum consumption guarantee charges
\nonly in respect of arc\/induction furnaces to Rs. 340 per KVA
\nor part thereof instead of Rs. 40\/ per KVA.
\nThe writ petitions, out of which the present appeals  arise,
\nwere   filed  by  the  owners  of   arc\/induction   furnaces
\nchallenging   the  aforesaid  enhancement  of  the   minimum
\nconsumption guarantee charges.\n<\/p>\n
The result of the enhancement by the aforesaid Resolution of
\nthe  D.M.C. was that for demand charges for the\t first\t1000
\nKVA of billing demand for the month, instead of tariff being
\nRs.  40 per KVA or part thereof it was enhanced to  Rs.\t 340
\nper KVA or part thereof.\n<\/p>\n
It is common case that all the writ petitioners had  entered
\ninto  agreements  with the D.M.C and  clause  15(a)  thereof
\nprovided as follows:-\n<\/p>\n
\t      “15(a)  The consumer shall pay each  month  to
\n\t      the Undertaking for electrical energy supplied
\n\t      during  the  preceding month  such  amount  as
\n\t      shall   be  calculated  and   ascertained\t  in
\n\t      accordance
\n\t      135<\/span>
\n\t      with the Rate-Schedule L.I.P. attached hereto.<\/p><\/blockquote>\n
\t      The rates contained in the schedule are  those
\n\t      in  force\t at  the  time\tof  executing\tthis
\n\t      agreement.  The consumer shall be eligible for
\n\t      whatever reduction or rebate as may be granted
\n\t      on  the rates and shall be liable to  pay\t for
\n\t      whatever surcharge or increase in these  rates
\n\t      as may from time to time be levied or made  by
\n\t      the Undertaking. Any other method of  charging
\n\t      decided  by  the\tUndertaking  shall  also  be
\n\t      applicable.’
\nThe rate schedule of the L.I.P. consumers, which was part of
\nthe  agreement,\t for  the  year\t 1988-89  has  already\tbeen
\nreproduced above.\n<\/p>\n
Various contentions were urged by the appellants before\t the
\nHigh Court.  One of the main contentions raised was that the
\nprovisions of section 21 of the Indian Electricity Act, 1910
\n(hereinafter  referred to as ‘the 1910 Act’) apply  and\t the
\ndecision to increase minimum charges is contrary to  section
\n21(2) of the said Act.\n<\/p>\n
it  was submitted that changing the rates at  which  minimum
\ncharges\t are to be realised amounts to altering or  amending
\nthe conditions of supply and this could not be done  without
\nthe previous sanction of the State Government.\t Adraittedly
\nthe  State Government had not, in the present case,  granted
\nthe approval for the change in the rates and, therefore, the
\nproposed  increase was in violation of section 21(2) of\t the
\n1910 Act.  The High Court rejected this submission and\theld
\nthat in case the local authority was the licensee, no  prior
\napproval  of  the  Government  for  changing  the  rates  is
\nrequired in law.\n<\/p>\n
It was next submitted before the High Court that the minimum
\nguarantee  charges can only be levied under the\t proviso  to
\nsection 22 of the 1910 Act.  It was submitted that under the
\nproviso\t to  section 22 the licensee can  only\tcharge\tthat
\namount which will give it a reasonable return on the capital
\nexpenditure  and  cover standing charges incurred by  it  in
\norder to meet the possible maximum demand.  According to the
\nlearned\t counsel the respondents have to satisfy  the  Court
\nthat the minimum demand charges have been raised to Rs.\t 340
\nfrom Rs. 40 and that the additional capital expenditure\t had
\nbeen incurred which would justify Rs. 340 being charged as a
\nreasonable return on the said capital expenditure.
\nThe  High Court rejected this submission and took  the\tview
\nthat apart
\n136<\/span>
\nfrom  proviso  to  section 22,\tthe  agreement\tbetween\t the
\nparties\t justified  the\t claim of  the\tD.M.C.\tfor  minimum
\nconsumption guarantee charges.\n<\/p>\n
The  next submission of the appellants was that\t the  tariff
\nviz-a-viz  a  consumer owning arc furnace was  violative  of
\nArticle 14 of the Constitution in as much as the other\tbulk
\nconsumers in the category of LIP consumers have not been  so
\ntreated.   The High Court rejected this contention also\t and
\ndismissed the writ petitions.\n<\/p>\n
Before\tus also the arguments have been uged by the  various
\ncounsel who appeared during the hearing of the batch of\t the
\nappeals on similar lines.\n<\/p>\n
Before\tconsidering  the  first\t submission  based  on\t the
\nprovisions  of\tsection 21(2) of the 1910 Act  it  would  be
\nuseful\tto  notice the provisions  thereof.   Section  21(2)
\nreads as follows :-\n<\/p>\n
\t      “21(2)  A\t licensee  may.\t with  the  previous
\n\t      sanction of the State Government, given  after
\n\t      consulting  the  State Electricity  Board\t and
\n\t      also  the local authority, where the  licensee
\n\t      is  not the local authority,  make  conditions
\n\t      not  inconsistent\t with this Act or  with\t his
\n\t      licence or with any rules made under this\t Act
\n\t      to regulate his relations with persons who are
\n\t      or  intend to become consumers, and may,\twith
\n\t      the   like  sanction  given  after  the\tlike
\n\t      consultation,  add  to or alter or  amend\t any
\n\t      such conditions; and any conditions made by  a
\n\t      licensee\twithout such sanction shall be\tnull
\n\t      and void :\n<\/p><\/blockquote>\n
\t      Provided that any such conditions made  before
\n\t      that  23rd  day  of January,  1922  shall,  if
\n\t      sanctioned   by\tthe  State   Government\t  on
\n\t      application  made by the licensee before\tsuch
\n\t      date; as the State Government may, by  general
\n\t      or  special  order,  fix in  this\t behalf,  be
\n\t      deemed  to have been made in  accordance\twith
\n\t      the provisions of this Sub-section.”\n<\/p><\/blockquote>\n
It will be noticed that this provision is applicable to\t the
\nlicensees  other than the local authorities.  “Licensee”  as
\ndefined\t in the 1910 Act in section 2(h) means\t‘any  person
\nlicensed under part II to supply energy’.  The D.M.C., which
\nis  the\t licensee  in the present case\tis  not\t a  licensee
\nlicensed under part 11 to supply energy.  D.M.C. is licensee
\nby virtue of the
\n137<\/span>
\nprovisions contained in the Delhi Municipal Corporation Act,
\n1957.\n<\/p>\n
Coming to the second submission urged before the High  Court
\nthe provisions of section 22 of the 1910 Act may be  noticed
\n:\n<\/p>\n
\t      “22.  Obligation on licensee to supply  energy
\n\t      where energy is supplied by a licensee,  every
\n\t      person within the area of supply shall, except
\n\t      insofar as is otherwise provided by the  terms
\n\t      and conditions of the licence, be entitled, on
\n\t      application, to a supply on the same terms  as
\n\t      those on which another person in the same area
\n\t      is  entitled  in similar\tcircumstances  to  a
\n\t      corresponding supply :\n<\/p><\/blockquote>\n
\t      Provided\tthat no person shall be entitled  to
\n\t      demand,  or  to continue to  receive,  from  a
\n\t      licensee\ta supply of energy for any  premises
\n\t      having a separate supply unless he has  agreed
\n\t      with  the licensee to pay to him such  minimum
\n\t      annual  sum  as  will give  him  a  reasonable
\n\t      return  on the capital expenditure,  and\twill
\n\t      cover  other standing charges incurred by\t him
\n\t      in  order to meet the possible maximum  demand
\n\t      for  those  premises, the sum  payable  to  be
\n\t      determined in case of difference or dispute by
\n\t      arbitration.”\n<\/p><\/blockquote>\n
The reliance before us was placed by the learned counsel for
\nthe  appellants\t on the proviso to section 22.\tIt  will  be
\nnoticed\t that  the proviso talks about\t‘a  separate  supply
\nunless\the  has\t agreed with the licensee to  pay  him\tsuch
\nminimum\t annual\t sum’.\t In the present\t case  there  is  no
\nquestion of any separate supply or any agreement in relation
\nto  minimum  annual  sum.  Section  22\tdeals  with  totally
\ndifferent  situation and has nothing to do with the  minimum
\nconsumption guarantee charges provided as part of the tariff
\nwhich intern was part of the agreement between the parties.
\nIn  the\t present  case, on facts, the challenge\t is  to\t the
\ntariff.\t As stated above, the tariff is the two part  tariff
\nsystem.\t  The  two part tariff system is  comprised  of\t two
\ncharges\t  (i) minimum consumption guarantee  charges  called
\ndemand charges and (ii) energy charges for the actual amount
\nof energy consumed.  Under this system an LIP consumer\tpays
\na minimum guarantee consumption charges at the rate fixed by
\nthe  D.M.C.  If\t the  LIP  consumer  does  not\tconsume\t the
\nspecified  minimum quantity of electricity or no  energy  at
\nall even then he has to pay minimum consumption guaran-\n<\/p>\n
138<\/span><\/p>\n
tee  charges.\tBut  in\t case  the  consumer  consumes\tmore
\nelectricity  than  the minimum, then the consumer  pays\t the
\nelectricity   charges\tfor  the   actual   consumption\t  of
\nelectricity   beyond  the  minimum   consumption   guarantee
\ncharges, in such a manner that minimum consumption guarantee
\ncharges\t are  merged  in  the  total  bill  for\t electricity
\nconsumed.  In other words, if a consumer consumes more\tthan
\nthe  specified\tminimum\t quantity of  electricity  then,  in
\neffect,\t he  will  pay for  electricity\t which\tis  actually
\nconsumed  by  him.  As stated earlier  the  appellants\thave
\nobtained  licenses  for\t the  supply  of  electricity  to  a
\nsanctioned  load  of more than 100 KW and they fall  in\t the
\ncategory  of  LIP and the two part tariff is  applicable  to
\nthem.  For the period 1985-86 to 1988-89 the respondents had
\nfixed rates of minimum consumption guarantee charges at\t the
\nrate  of Rs. 40 per KVA for 1000 KVA and Rs. 38 per KVA\t for
\nconsumption above 1000 KVA.\n<\/p>\n
We  had\t already  noticed the reasons  which  persuaded\t the
\nD.E.S.C.  to  justify & recommend the  increase\t in  minimum
\nconsumption  guarantee charges to the D.M.C. The  commercial
\nlosses\tmentioned in the letter of the General Manager\twere
\nattributed  to\tpilferage\/fraudulent abstraction  of  energy
\netc.  The minimum consumption guarantee charges being  quite
\nlow   also   attributed\t to  the  tendency   of\t  fraudulent
\nabstraction  of\t energy and it was after  giving  a  serious
\nthought\t to reduce the pilferage\/fraudulent  abstraction  of
\nenergy,\t the  D.M.C. felt desirable to revise  the  rate  of
\nminimum consumption guarantee charges to a reasonable  level
\nso that consumers are not tempted to adopt such unfair means
\nand  the rates are commensurate with the  fixed\t expenditure
\nbeing  measured\t by the undertaking.  The  reasons  for\t the
\nrevision  of  minimum  consumption charges,  in\t respect  of
\narc\/induction  furnaces, were that in many instances it\t was
\nnoticed\t that meters where bulk supply were made were  found
\nto be defective and the consumption recorded was found to be
\nextremely   low\t  causing  loss\t of   huge   revenue.\t The
\narc\/induction\tfurnaces  normally  run\t continuously\tand,
\ntherefore,  it\twas  justified\tto  increase  the  rate\t  of
\nconsumption   guarantee\t charges.   The\t variation  in\t the
\nelectricity  consumed by different consumers indicated\tthat
\nthe  charge  of pilferage of electricity  and  gross  under-
\nutilisation  or consumption of electricity compared  to\t the
\nsanctioned load was not without foundation.  The respondents
\nhad placed on record a tabulated statement of the  consumers
\nusing induction furnaces before the High Court.\t If we\tlook
\nat  the\t said chart reproduced in the judgment of  the\tHigh
\nCourt under appeal it deals with 52 consumers including most
\nof the appellants.  This statement shows large variation of
\n139<\/span>
\nthe electricity consumed, particularly at serial Nos. 2, 13,
\n15,  26\t & 44. If. we look at consumer at serial No.  14  it
\nshows  that the unit worked only for 29 hours in  the  whole
\nmonth as per the consumption per unit per month. Whereas the
\nunit at serial No. 26, had a sanctioned load of 1573.11 KWS,
\nthe approximate number of hours worked by it in a month were
\n106 i.e. little more than 4 days in month. It is  surprising
\nthat  the units are still surviving by working for  a  short
\nperiod.\t On the assumption that the electricity consumed  is
\nas  per the sanctioned load the approximate number of  hours
\nfor which the induction furnaces have been worked in a month
\nhas  been  stated in the said statement. There\twas  thus  a
\nreasonable  basis to assume theft by substantial  number  of
\narc\/induction,\tfurnaces consumers It will be  noticed\tthat
\nconsumer  contracts for a minimum supply of  electricity  of
\ncertain\t dimensions and the D.M.C. which is licensee in\t the
\nresent\tcase, has to buy energy by way of bulk\tsupply\tfrom
\noutside sources and has to keep it readily available for the
\nconsumer for the whole year round. Surely the consumer,\t who
\ncontracts for such high quantity of energy, does so, because
\nof  its\t need and not for keeping it as\t stand\tby,  without
\npaying\tfor it. No licensee can possibly keep such  enormous
\nquantity  of  electricity in reserve for a  consumer,  month
\nafter  month,  without its consumption. That is why  in\t the
\ntariff,\t which was part of the agreement, for LIP  consumers
\nthere was two part tariff system  partly minimum consumption
\nguarantee charges and partly for actual energy consumed.
\nIt  was\t also stipulated that the  minimum  consumption
\nguarantee  charges  would  not\tbe  payable  if\t a  consumer
\nutilises  or consumes 60% of the sanctioned load.  The\trate
\nper  unit  had\tnot been changed. It was  only\tthe  minimum
\nguarantee  charges  which has been revised.  If\t a  consumer
\nconsumes  more than 60% of the sanctioned load, then  he  is
\nnot adversely affected by the revision of the minimum demand
\ncharges from Rs. 40\/- per KVA per month to Rs. 340\/- per KVA
\nper  month. it is difficult to appreciate or understand\t how
\nthe  manufacturers using arc\/induction furnaces\t could\thave
\nsuch  variation\t in  the  consumption  of  electricity,\t  as
\nindicated in the tabulated statement, except to suggest that
\nthere  was large scale pilferage of electricity. It  is\t not
\neasy  to  accept that induction furnaces  having  sanctioned
\nloads  of  more\t than  1000  KW\t consuming  electricity,  if
\nconverted into approximate number of hours worked in a month
\nat  the\t maximum  load,\t being\tas  little  as\t18.1   hours
\nespecially  when  there were instances\tof  other  induction
\nfurnaces  consuming far more number of units per month.\t The
\nrespondents had to keep in readiness the supply of energy
\n140<\/span>
\nas  per\t the sanctioned load of various consumers  and\twere
\nincurring expenditure for the generation, supply or purchase
\nof the same.  When the consumers were not paying for it, the
\nrespondents  obviously\thad  no option\tbut  to\t revise\t the
\nminimum\t demand charges so as to cover up and make good\t the
\ngenerating and supply costs.\n<\/p>\n
Apart  from  that the fixation of tariff  is  a\t legislative
\nfunction and the only challenge to the fixation of such levy
\ncan  be on the ground of unreasonableness  or  arbitrariness
\nand  not  on  demonstrative grounds in the  sense  that\t the
\nreasons\t for  the levy of charge must be  disclosed  in\t the
\norder  imposing the levy or disclosed to the court, so\tlong
\nas it is based on objective criteria.\n<\/p>\n
In  the present case the respondents themselves have  placed
\nfigures to demonstrate the formula on the basis of which the
\nrate  of Rs. 340 per KVA has been fixed.  The formula  shows
\nthat if 60% of the load sanctioned is utilised then there is
\nno unreasonableness or excessiveness in the tariff.  It\t was
\nexplained that if the furnaces in question work for 24 hours
\na  day\tfor 25 days in a month at a load factor of  60%\t the
\nconsumption against 1 KW would be equal to 1 x 24 x 25 x .60
\n=  360\tunits.\t Over all energy  consumption  rate  (demand
\ncharges proportionate to one unit + per unit energy rate) is
\nRs. 1.10 per unit.  The total amount per KW per month 360  x
\n1.10  = Rs. 396.  Again the consumption per KVA at the\trate
\nof  0.85 (power factor) would come to 306 units and a  total
\namount\tper KVA per month at the rate of Rs. 1.10  per\tunit
\nwould come to Rs. 336.60 ps. i.e. rounded to Rs. 340 for the
\npurpose of minimum consumption guarantee charges.
\nWe  are\t thus  satisfied that  the  recommendations  of\t the
\nD.E.S.C.  were justified on facts and were rightly  accepted
\nby  the D.M.C. in raising the minimum consumption  guarantee
\ncharges to Rs. 340 per KVA per month for the first 1000\t KVA
\nwhich are neither unreasonable nor arbitrary.
\nComing to the plea of discrimination it will be noticed that
\nas bulk consumers belonging to LIP category the consumers of
\narc\/induction  furnaces are of a class by themselves and  in
\nany  case the revision is as per the agreement\tbetween\t the
\nlicensee and the consumers which is neither unreasonable nor
\narbitrary and thus the plea of discrimination has no merit.
\nThe  tariff was fixed by D.E.S.C. with the approval  of\t the
\nD.M.C. in
\n141<\/span>
\nview  of  the  power  conferred under  section\t283  of\t the
\nCorporation  Act.  Again in view the proviso to Section\t 277
\nof  the\t Corporation  Act no  arguments\t were  addressed  on
\nvarious\t clauses of the Schedule to the\t Indian\t Electricity
\nAct, 1910.\n<\/p>\n
There  is  thus no merit in these appeals and the  same\t are
\naccordingly  dismissed with costs.\n<\/p>\n
N.P.V.\t\t\t\t\tAppeals dismissed.\n142<\/span>\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Ashok Soap Factory And Anr vs Municipal Corporation Of Delhi … on 12 January, 1993 Equivalent citations: 1993 SCR (1) 124, 1993 SCC (2) 37 Author: Y Dayal Bench: Yogeshwar Dayal (J) PETITIONER: ASHOK SOAP FACTORY AND ANR. Vs. RESPONDENT: MUNICIPAL CORPORATION OF DELHI AND ORS. DATE OF JUDGMENT12\/01\/1993 BENCH: YOGESHWAR […]<\/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-54688","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nAshok Soap Factory And Anr vs Municipal Corporation Of Delhi ... on 12 January, 1993 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/ashok-soap-factory-and-anr-vs-municipal-corporation-of-delhi-on-12-january-1993\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Ashok Soap Factory And Anr vs Municipal Corporation Of Delhi ... on 12 January, 1993 - 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