Travancore-Cochin Chemicals Limited, And Others v. Kerala State Electricity Board And Others

Gopalan Nambiyar, C.J:— These Writ Appeals raise the same question in regard to the validity of the revision of tariffs effected by the Kerala State Electricity Board. By way of example, it would be enough to refer to the facts in W.A No. 466 of 1976. The facts in the remaining cases are, it was admitted, practically the same, and need not be repeated.

W.A No. 466 of 1976

2. The appellant in this Writ Appeal is the Travancore-Cochin Chemicals Limited, Eloor. Udyogamandal. The agreement executed by it with the Electricity Board is Ext. P2 dated 26-3-1974. Clause 9 of the agreement is as follows:

“9. The cosumer shall pay for all electrical energy supplied to him by the Board and ascertained as hereinbefore provided an amount calculated at the rate and in accordance with the terms given in the Schedule.

The rates, shown in the Schedule, are liable to revision by the Board from time to time in which case the revised rate/rates shall be binding on the consumer and the levy of charges for electricity consumed shall be at the revised rate or rates.”

3. By cl. 12, the agreement was to be in force for a period of 10 years from 25-11-1970, which was the date on which the previous agreement dated 7-9-1967 expired. After the said period of 10 years, the agreement may be renewed on such terms and conditions as the parties may mutually agree upon. The Schedule to the agreement is as follows:

SCHEDULE 1. Description of the premises at which the supply is to be given. The Travancore-Cochin Chemicals, Ltd., Udyogamandal. 2. Purpose for which the supply is to be given. Power and lighting. 3. Rate for supply. Rs. 100 per KW/year of maximum demand, exclusive of electricity duty leviable by Government and surcharges if any imposed from time to time. 4. Maximum Electrical Power required by the consumer. 10000 KW at 66,000 Volt 5. 5. Minimum revenue per year guaranteed by the consumer. Rs. 6,33,340/-

4. Ext. P3 dated 21-12-1974 was another agreement between the Board and the Company. Clause 9 is identically worded. The Board promulgated Ext. P8 notification on 27-5-1975 revising tax for the supply of electricity effected from 1-1-1970. The revision was under the powers conferred by Section 49 of the Electricity (Supply) Act, 1948, and also by the Kerala State Electricity Board (General Tariff) Regulations, 1976, and the Kerala State Electricity Board (General Tariff) (Amendment) Regulation, 1969 and other enabling provisions in the statutes. Ext. P8 is a copy of the notification issued by the Board. Clause 7 of the notification dealt with the revision of the rates of tariffs applicable to extra high tension consumers and provided that it shall be according to the “Two part tariff” given below. The details of the Two part tariff were indicated in the clause at some length. The question debated in the appeal is whether in the face of Exts. P2 and P3 noticed, the Board had power to revise tax as under Ext. P8.

5. For the appellant reliance was placed on Indian Aluminium Co. v. K.S.E Board ((1975) 2 SCC 414 : AIR 1975 SC 1967). In the said decision, explaining the scope of Section 49 of the Electricity (Supply) Act, it was pointed out by the Supreme Court: (at P. 1973).

“It would, therefore, seem clear that the Board can, in exercise of the power conferred under sub-sec. (3) of S. 49, enter into an agreement with a consumer stipulating for a special tariff for supply of electricity for a specific period of time. Such a stipulation would amount to fixing of special tariff and it would clearly be in exercise of the power to fix special tariff granted under sub-sec. (3) of 5. 49. Indeed, if the power to fix special tariff through the modality of an agreement with the consumer were not there in sub-sec. (3) of S. 49, it cannot be found in any other provision of the Supply Act and in such a case it would be impossible for the Board to enter into any agreement with a consumer binding itself to supply electricity at a special rate for a certain period of time. Such an agreement would be wholly ultra vires the power of the Board and that would cause considerable mischief and inconvenience as no industry would be able to enter into an agreement ensuring supply of electricity which would be binding on the Board. Tariff is the most important element in such an agreement and if no binding stipulation can be made in regard to tariff, the agreement itself would be meaningless and would be no more than a mere rope of sand. The power to enter into an agreement fixing a special tariff for supply of electricity for a special period of time is, therefore, relatable to sub-sec. (3) of S. 49 and such an agreement entered into by the Board would be in exercise of the power under that sub-section. The three agreements for supply of electricity to the appellant must, in the circumstances, be regarded as having been entered into by the Board in exercise of the statutory power conferred under sub-section (3) of S. 49. Now when the power to fix special tariff for a consumer is given to the Board, the possibility cannot be ruled out that the Board may in exercising this power show undue preference to one consumer as against the other. Sub-sec. (4) of S. 49 therefore, provides a safeguard by enacting that in fixing tariff and terms and conditions for the supply of electricity, the Board shall not show any undue preference to any person. This safeguard is obviously necessary only in cases where special tariff is fixed by the Board under sub-sec. (3) of S. 49. When uniform tariffs are fixed by the Board under sub-secs. (1) and (3) of S. 49, there could be no question of the Board showing undue preference to any one consumer against another because every consumer falling within the category would have to pay the same tariff for the same benefit received by him. It is, therefore, obvious that sub-sec. (4) of S. 49 controls the action of the Board in fixing tariff under sub-sec. (3) of S. 49 and it has no application where uniform tariffs are fixed under sub-secs. (1) and (2) of S. 49.” (Para 9)

6. But as rightly pointed out by the learned Judge himself, and as noticed in a subsequent decision of the Supreme Court to be referred to presently, the fundamental distinction between the Indian Aluminium Company's case ((1975) 2 SCC 414 : AIR 1975 SC 1967) and the present case is that cl. 9 of the agreement which we have extracted earlier itself confers on the Board the right of revising tariffs and making such revision binding on the appellant.

7. This aspect of the matter was clearly pointed out by the Supreme Court in a more recent decision in Bisra Stone Lime Co. v. O.S.E Board ((1976) 2 SCC 167 : AIR 1976 SC 127). After referring to the Indian Aluminium Company's case ((1975) 2 SCC 414 : AIR 1975 SC 1967) and the Titagarh Paper Mills Ltd.'s case, ((1975) 2 SCC 414 : AIR 1975 SC 1967), the Supreme Court observed with respect to the latter decision (at p. 130 of AIR 1976 SC):

“It is clear from the above decision that an agreement entered in exercise of the power conferred by the statute such as under Section 49(3) of the Act, cannot be set at naught by unilateral exercise of power by the Board under the Act to enhance the rates agreed upon between the parties in the absence of any provision in that behalf in the agreement itself. In the Indian Aluminium Company's case (supra) there was no provision in the agreement with regard to the revision of tariff, such as we find in cl. 13 of the present agreement. This Court, therefore, had not to consider in that case about the effect of a clause like Cl. 13. In the Titagarh's case (supra), however, this Court had to take into consideration Cl. 13 of the agreement therein which is the identical clause in the present case. “(para 12)” Cl. 13 which the Supreme Court considered in the above case and which according to them made all the difference was extracted in para 4 of the Supreme Court judgment, and was as follows:

“The tariff and conditions of supply mentioned in this agreement shall be subject to any revision that may be made by the supplier from time to time.”

8. Clause 9 of the agreement here considered is more specific and more pointed, and definitely more in favour of the Electricity Board. We are of the opinion, that the learned Judge was right in holding that the principle of the Supreme Court decision in Bisra Stone Lime Co. v. O.S.E Board ((1976) 2 SCC 167 : AIR 1976 SC 127) is attracted to the case and that the earlier decisions in the Aluminium Company's case ((1975) 2 SCC 414 : AIR 1975 SC 1967) and the Titagarh Paper Mills Ltd.'s case, ((1975) 2 SCC 414 : AIR 1975 SC 1967) have no application.

9. We dismiss the appeal with no order as to costs.

W.A Nos. 493 and 494 of 1976

10. It is agreed that these Writ Appeals may abide and follow the fate of W.A No. 466 of 1976. These appeals are accordingly dismissed with no order as to costs.

11. Appeals dismissed.