Civil Appeal No 1639 of 1985 etc
From the Judgment and Order 1511985 of the Kerala High Court in OP 760 of 1981 M M Abdul Khader G Viswa Natha Iyer MA Firoz CS Vaidyanathan P Chowdhary SR Setia and KD Namboodiry for the Appellant
P Subramanium Poti FS Nariman SB Saharya VB Saharya Vijay Bahuguna ML Lahoty SP Singh Rakesh Dwivedi Raj Kumar Singh Miss Helen Marc VB Joshi KR Nambiar Vinoo Bhagat BR Kurup K Dileep Kumar Ramesh C Kohli GN Rao AS Nambiar P Kesava Pillai T Sridharan N Sudhakaran EMS Anam and TGN Nair for the Respondents
The Judgment of the Court was delivered by CHINNAPPA REDDY J
These appeals preferred by the Kerala State Electricity Board raise the question of the extent of the authority of the Board to increase the Electricity Tariff under the Electricity Supply Act
The upward revision of tariff made by the Board in 1980 1982 and 1984 was successfully challenged in the Kerala High Court
The first two revisions were struck down by a Full Bench of three judges by a majority of two to one and later all three revisions were struck down by a Full Bench of Five judges by majority of four to one
The principal ground of challenge and that which was accepted by the High Court was that the Kerala State Electricity Board acted outside its statutory authority by formulating a price structure intended to yield sufficient revenue to off set not merely the expenditure properly chargeable to the revenue account for the year as contemplated by section 59 of the Act but also expenditure not so properly chargeable
Had section 636 59 been strictly followed and had items of expenditure not chargeable to the revenue account for the year been excluded the revised tariff would have resulted in the generation of a surplus far beyond the contemplation of section 59 of the Act
According to the High Court in the absence of a specification by the Government the Board was not entitled to generate a surplus at all and it acted entirely outside its authority in generating a surplus to be adjusted against items of expenditure not authorised to be met from the revenue receipts
The notifications prescribing revised tariffs were therefore struck down
The view of the High Court as might be seen was based primarily on their construction of s59 of the Electricity Supply Act
In order to understand the questions at issue it is necessary to set out section 59 as it stood prior to 1978 as amended by Act No 23 of 1978 and finally as amended by Act No 16 of 1983 ____________________________________________________________ Section 59 prior Section 59 as Section 59 as further to 1978 amended by Act amended by Act No 23 of 1978 No 16 of 1983 1 2 3 ____________________________________________________________ General principles General principles General Principles for Board s for Board s for Board s finance finance finance The Board shall not 1 The Board shall 1 The Board as far as practicable after taking credit shall after taking and after taking for any subvention credit for any credit for any from the State subvention from subventions from the government under section the State Govern State Government 63 carry on its ment under s63 under s63 carry on operations under carry on its oper its operations under this Act and adjust ations under this this Act at a loss its tariffs so as Act and adjust its and shall adjust its to ensure that the its tarrifs so as charges accordingly total revenues in to ensure that the from time to time
any year of account total revenues provided that shall after meeting in any year of where necessary any all expenses prope account shall amounts due for mee rly chargeable to after meeting all ting the operating revenues including expences properly maintenance and operating maintena chargeable to nance and manageme revenuesincluding nt expences taxes operating mainte if any on in nance and 637 management expenses come and profits management ex of the Board or for depreciation and penses
taxes if the purposes of interest payable on any on income and clauses i and ii debentures bonds profits deprecia of s67 may to such and loans leave tion and interest extent as may be san such surplus as the payable on all ctioned by the State State Government debentures bonds Government be paid may from time to and loans leave out of capital
time specify
such surplus as is 2 In specifying not less than the surplus under three per cent or sub section 1 such higher perce the State Governmentntage as the shall have due reg State Government ard to the may be notifica availibility of tion in the offi amounts accrued by cial Gazette way of depreciation specify in this and the liability behalf of the for loan amortiza value of the fixed tion and leave assets of the a a reasonable Board in service sum to contribute at the beginning towards the cost of of such years
capital works and Explanation For b where in res the purposes of pect of the Board this sub section a notification has Value of the fix been issued under ed assets of the sub section1 of Boardin service section 12Aa reasonable at the begining sum by way return of the year mean on the capital pro the original cost vided by the state of such fixed as Goverment under sub sets as reduced section3 of that by the aggregate section and the am of the cumulative ount of the loans depreciation in if any converted respect of such by the state Govern assets calculated ment into capital in accordance with under sub section1the provisions of of section 66A this Act and consumers contributions for service lines
2 In specifying any higher percentage 638 under sub section1 the State Government shall have due regard to the availability of mounts accrued by way of depreciation and the liability for loan amortiza ation and leave a a reasonable sum to contribute towards the cost of capital works and b where in respect of the Board a notification has been issued under sub sec1 of section 12A a reasonable sum by way of return on the capital pro vided by the State Government under sub sec3 of that section and the amount of the loans if any converted by the State Government into capital under sub section1 of section 66A We may mention here that we are not really concerned with section 59 as amended by Act No 16 of 1983 since that came into effect from April 1 1985 only
We have however extracted that provision also for a better understanding of section 59 as it stood before the 1983 amendment
We consider that for the purpose of understanding and construing section 59 as it stood before the 1983 amendment we are entitled to take into consideration the Parliamentary exposition contained in the 1983 amendment
See we will come back to the question of proper construction of s59 later
639 We think that it is necessary at this stage itself to refer to some of the other important provisions of the Electricity Supply Act
Section 18 prescribes the general duties of the Board and it is as follows 18
General Duties of the Board Subject to the provisions of this Act the Board shall be charged with the following general duties namely a to arrange in co ordination with the Generating Company or Generating Companies if any operating in the State for the supply of electricity that may be required within the State and for the transmission and distribution of the same in the most efficient and economical manner with particular reference to those areas which are not for the time being supplied or adequately supplied with electricity b to supply electricity as soon as practicable to a lincensee or other person requiring such supply if the Board is competent under this Act so to do c to exercise such control in relation to the generation distribution and utilisation of electricity within the State as is provided for by or under this Act d to collect data on the demand for and the use of electricity and to formulate perspective plans in co ordination with the Generating Company or Generating Companies if any operating in the State for the generation transmission and supply of electricity within the State e to prepare and carry out schemes for transmission distribution and generally for promoting the use of electricity within the State and f to operate the generating stations under its control in co ordination with the Generating Company or Generating Companies if any operating in the State and with the Government or any other Board or agency having control over a power system
 Section 49 was not amended either in 1978 or in 1983 and it is as follows 640 49
Provision for the sale of electricity by the Board to persons other than licensees 1 Subject to the provisions of this Act and of regulation if any made in this behalf the Board may supply electricity to any person not being a licensee upon such terms and conditions as the Board thinks fit and may for the purposes of such supply frame uniform tariffs
2 In fixing the uniform tariffs the Board shall have regard to all or any of the following factors namely a the nature of the supply and the purposes for which it is required b the co ordinated development of the supply and distribution of electricity within the State in the most efficient and economical manner with particular reference to such development in areas not for the time being served or adequately served by the licensee c the simplification and standardization of methods and rates of charges for such supplies d the extension and cheapening of supplies of electricity to sparsely developed areas
3 Nothing in the foregoing provisions of this section shall derogate from the power of the Board if it considers it necessary or expedient to fix different tariffs for the supply of electricity to any person not being a licensee having regard to the geographical position of any area the nature of the supply and purpose for which supply is required and any other relevant factors
4 In fixing the tariff and terms and conditions for the supply of electricity the Board shall not show undue preference to any person
 Section 63 enables the State Government with the approval of the State legislature to make subventions to the Board for the purposes of the act
Section 64 empowers the State Government to advance loans to the Board and Section 65 empowers the Board with the 641 previous sanction of the State Government
to borrow any sum required for the purposes of the Act by the issue of debentures or bonds or otherwise
Section 66 empowers the government to guarantee the loans proposed to be raised by the Board Section 66A authorises the State Government to convert any loan obtained from the Government by the Board capital provided by the Board
Section 67 was amended in 1978 and again 1983
It is useful to set out the section as it stood originally and as amended by the two amendments of 1978 and 1983 Section 67 prior Section 67 as amen Section 67 as to 1978 ded by Act No 23 further amended of 1978 by Act No 16 of 1983 1 2 3 Priority of Priority of liabi Priority of liab liabilities of the lities of Board ilities of the Board The revenues 1If in any year Board The Board of the Board shall the revenue receipt shall distribute the after meeting its are not adequate to surplus reffered to operating mainte to enable complianc in sub section1 of nance and manage with the requirment s59 to the extent ment expenses and of section 59 the Board extent available in after provision shallafter meeting a particular year in has been made for its operating mai in the following or the payment of tenance and manage der namely taxes on its income ment expences and i repayment of and profits be dis after provision has principal of any as far as they are been made for the loan raised available in the payment of taxesif including following order any on income and redemption of deb namely profits distribute entures or bonds i interest on the revenue receipt issued under s65 bonds not guranteed as far as they are whichs becomes due under s66 available in the for payment in the ii interest on following order year or which became stock not so guara namely due for payment in nteed i payment of int any previous year iii credits to erest on loans not and has remaind un guaranteed under paid ii repayment of principal of any loan advanced to the 642 depreciation s66 Board by the State reserve under section 68 ii repayment of Government under iv interest on principal of any section 64 which becomes bond guaranteed un loan raised incl due for payment in der s66 uding redemption of the year or which v interest on st debentures or bonds became due for pay ock so guaranteed issued under section 65 ment in any previous viinterest on sum which become due for year and remained paid by the State payment in the year iii payment for Government under iii payment of purposes specified guarantees under interest on loans in sub section 2 section 66 guaranteed under of section 59 in such viithe write down s66 manner as the Board amounts paid from ivpayment of in may decide
 capital under the terest on sums paid proviso to section by the State Govern 59 ment in pursuance of viia the write guarantees under down of amounts in s66 respect of intangi ble assets to the v payment of in to which they are terest on loans actually appropria advanced to the ted in any year for the Board by the State for the purpose in Government under the books of the section 64 or deemed to be Board advanced under sub viii contribution section 2 of to general reserve section 60 of an amount not vi repayment of exceeding one half principal of any loan of one percentum guaranteed by the per annum of the State Government original cost of under section 66 which be fixed assets empl come due for payment oyed by the Board in the year or which be so however that the come due for payment total standing to in any previous year the credit such and has remained reserve shall not unpaid exceed fifteen per centum of the orig inal cost of such vii repayment of fixed assets principal of any loan ix interest on advanced to the Board loans 643 advanced or deemed under section 64 which be to be advanced to comes due for payment the Board under section in the year or which be 64 including arrear came due for payment of such interest in any previous year x the balance to and has remained be appropriated to unpaid and if any fund be called the balance amount is left Development Fund thereafter the same to be utilised for shall be utilised for a purposes bene the other purposes ficial in the opi specified in section 59 nion of the Board in such manner as the to electrical deve Board may decide
lopment in the 2 If for any reason State beyond the control of b repayment of the Board the revenue loans advanced to receipts in any year the Board under section are not adequate to 64 and required to meet its operating be repaid maintenance and Provided that where management expenses no such loan is out taxes if any on in standing one half comes and profits and of the balance the liabilities referred aforesaid shall be to in clauses i and credited to the iiof sub section1 Consolidated Fund the shortfall shall of the State
with the previous sanction of the State Government be paid out of its capital receipts
Section 67B which was introduced by Act 16 of 1983 defers payment of interest on loans advanced by the State Government until after all other expenses are met
It is in the following terms 67A Interest on loans advanced by State Govt
to be paid only after other Expenses
Any interest which is payable on loans advanced under section 64 or deemed to have been advanced under section 60 to the Board by the State Government and which is charged to revenues in any year may 644 be paid only out of the balance of the revenues if any of that year which is left after meeting all the other expenses referred to in sub section 1 of section 59 and so much of such interest as is not paid in any year by reason of the provisions of this section shall be deemed to be deferred liability and shall be discharged in accordance with the provisions of this section in the subsequent year or years as the case may be
 Now a State Electricity Board created under the provisions of the Electricity Supply Act is an instrumentality of the State subject to the same constitutional and public law limitations as are applicable to the government including the Principle of law which inhibits arbitrary action by the Government
see Rohtas Industries vs Bihar State Electricity Board  It is a public utility monopoly undertaking which may not be driven by pure profit motive not that profit is to be shunned but that service and not profit should inform its actions
It is not the function of the Board to so manage its affairs as to earn the maximum profit even as a private corporate body may be inspired to earn huge profits with a view to paying large dividends to its shareholders
But it does not follow that the Board may not and need not earn profits for the purpose of performing its duties and discharging its obligations under the statute
It stands to common sense that the Board must manage its affairs on sound economic principles
Having ventured into the field of Commerce no public service undertaking can afford to say it will ignore business principles which are as essential to public service undertakings as to Commercial ventures
see Lord Scarman in Bromely vs Greater London Council  If the Board borrows sums either from the Government or from other sources or by the issue of debentures and bonds surely the Board must of necessity make provision year after year for the payment of interest on the loans taken by it and for the repayment of the capital amounts of the loans
If the Board is unable to pay interest in any year for want of sufficient revenue receipts the Board must make provision for payment of such arrear of interest in succeeding years
The Board is not expected to run on a bare year to year survival basis
It must have its feet firmly planted on the earth
It must be able to pay the interest on the loans taken by it it must be able to discharge its debts it must be able to give efficient and economic service it must be able to continue the due performance of its services by providing for depreciation etc it must provide for the expansion of its services for no one can pretend the country is already well supplied with electricity
Sufficient surplus has to be generated for this purpose
That we 645 take it is what the Board would necessarily do it was an ordinary commercial undertaking properly and prudently managed on sound commercial lines
Is the position any different because the Board is the public utility undertaking or because of the provisions of the Electricity Supply Act We do not think that either the character of Electricity Board as a Public Utility Undertaking or the provisions of the Electricity Supply Act preclude the Board from managing its affairs on sound commercial lines though not with a profit thirst
It may be noticed here that section 18a prescribes it as one of the duties of the Board to arrange for the supply of electricity that may be required within the State and for the transmission and distribution of the same in the most efficient and economical manner and section 492 b requires the Board to have regard in fixing uniform tariffs the coordinated development of the supply and distribution of electricity within the State in the most efficient and economical manner both with particular reference to those areas which are not for the time being served or adequately supplied with electricity
The principles of efficiency and economy are therefore not forsaken but resolutely emphasised
Now if we turn to section 59 what do we find Though at one time it appears to have been thought that it was enough if the Board did not carry on its operations at a loss it was realised that the statutory admonition to the Board should be positive and not negative and that the Board should be given an affirmative and self assuring direction
So section 59 was amended in 1978
The Statement of Objects and Reasons says
Section 59 of the Electricity Supply Act is proposed to be amended by clause 8 of the Bill to give a positive direction to the Electricity Boards that after meeting all their expenses there should be provision for a surplus for contribution towards immediate investment needs
A similar amendment is also proposed to be made in regard to the Generating Companies by inserting a new sub section 3A in section 75A by clause 18 of the Bill
 It was found that the 1978 amendment did not effectively improve matters as many State Government did not specify the quantum of surplus
Parliament had therefore to intervene once again to fix a statutory minimum surplus
The Statement of Objects and Reasons relating to the 1983 amendment may also be extracted and it is as follows Though section 59 of the Act as amended in 1978 casts an obligation on the State Government has so far specied the quantum of any surplus
At present there is no uni 646 formity in the manner of classification and presentation of accounts of the Boards and this renders inter Board comparison of financial performance difficult
It is also considered necessary to re arrange the priorities with regard to distribution revenues of the Boards
It is therefore proposed to amend the Act a to provide that each Board shall have a surplus which shall not be less than three per cent or such higher percentage as the State Government may specify of the value of the fixed assets of the Board in service at the beginning of the year b to re arrange the priorities for distribution of revenues of the Boards c to bring the financial reporting system of the Boards in line with commercial accounting practice and d to empower with a view to securing uniformity in the manner of classification and presentation of accounts the Central Government to prescribe the forms in which the accounts of the Board and other records in relation thereto may be maintained A plain reading of sec
59 as amended in 1978 plainly indicates that it is the mandate of Parliament that the Board should adjust its tariffs so that after meeting the various expenses properly required to be met a surplus is left
The original negative approach of functioning so as not to suffer a loss is replaced by the positive approach of requiring a surplus to be created
The quantum of surplus is to be specified by the State Government
What the State Government is to specify is the minimum surplus
This is made clear by the 1983 amendment which stipulates a minimum of 3 per cent surplus in the absence of specification by the State Government which has the liberty to specify a higher percentage than three
That section 59 as it stood before 1983 contemplated a minimum surplus was also the view expressed by this court in Rohtas Industries vs Bihar State Electricity Board supra where it was said Under the above provisions the Board is under a statutory obligation to carry on its operations and adjust its 647 tariffs in such a way to ensure that the total revenues earned in any year of account shall after meeting all expenses chargeable to revenue leave such surplus as the State Government may from time to time specify
The tariff fixation has therefore to be so made as to raise sufficient revenue which will not merely avoid any net loss being incurred during the financial year but will ensure a profit being earned the rate of minimum profit to be earned being such as may be specified by the State Government Shri Potti learned Counsel for the consumers placed great reliance on the observations of this Court in Kerala State Electricity Board vs Indian Aluminium Co 1976 1 SCR 552 Bihar State Electricity Board vs Workmen  and Dr P Nalla Thamby Thera vs Union of India  Ors  to contend that the Electricity Board was barred from conducting its operations on commercial lines so as to earn a profit
In the first case the observations relied upon were Furthermore Electricity Boards are not trading corporations
They are public service corporations
They have to function without any profit motive
Their duty is to promote co ordinated development of the generation supply and distribution of electricity in the most efficient and economical manner with particular reference to such development in areas not for the time being served or adequately served by any licensee section 18
The only injunction is that as far as practicable they shall not carry on their operations at a loss section 59
They get subventions from the State Governments Section 63
In the discharge of their functions they are guided by directions on questions of policy given by the State Governments Section 78A
There are no shareholders and there is no distribution of profits
 In the second case the court observed The Electricity Board is not an ordinary commercial concern
It is a public service institution
It is not expected to make any profit
It is expected to extend the supply of electricity to unserved areas without reference to considerations of loss that might be incurred as a result of such extension
 648 In the third case where the court was considering the position of the Indian Railways it was observed The Indian Railways are a socialised public utility under taking
There is at present a general agreement among writers of repute that the price policy of such a Public Corporation should neither make a loss nor a profit after meeting all capital charges and this is expressed by covering all costs or breaking even and secondly the price it charges for the services should correspond to relative costs
Keeping the history of the growth of the Railways and their functioning in view the commendable view to accept may be that the rates and fares should cover the total cost of service which would be equal to operational expenses interest on investment depreciation and payment of public obligations if any
We need not however express any opinion about it                  We have said earlier that the Railways are a public utility service run on monopoly basis
Since it is a public utility there is no justification to run it merely as a commercial venture with a view to making profits
We do not know at any rate it does not fall for consideration here if a monopoly based public utility should ever be a commercial venture geared to support the general revenue of the State but there is not an iota of hestitation in us to say that the common man s mode of transport closely connected with the free play of this fundamental right should not be
We agree that the Union Government should be free to collect the entire operational cost which would include the interest on the capital outlay out of the national exchequer
Small marginal profits cannot be ruled out
The massive operation will require a margin of adjustment and therefore marginal profits should be admissible
 We do not think that any of these observations is in conflict with what we have said
Pure profit motive unjustifiable according to us even in the case of a private trading concern can never be the sole guiding factor in the case of a public enterprise
If profit is made not for 649 profit s sake but for the purpose of fulfilling better and more extensively the obligation of the services expected of it it cannot be said that the public enterprise acted beyond its authority
The observations in the first case which were referred to us merely emphasised the fact that the Electricity Board is not an ordinary trading Corporation and that as a public utility undertaking its emphasis should be on service and not profit
In the second case for example the court said that it is not expected to make any profit and proceeded to explain why it is not expected to make a profit by saying that it is expected to extend the supply of Electricity to unserved areas without reference to considerations of loss
It is of interest that in the second case dealing with the question whether interest cannot be taken into account in working out profits the court observed The facile assumption by the Tribunal that the interest should not be taken into account in working out the profits is not borne out by the provisions of the statute
 In the third case the court appeared to take the view that the railway rates and fares should cover operational expenses interest on investment depreciation and payment of public obligations
It was stated more than once that the total operational cost would include the interest on the capital outlay out of the national exchequer
While the court expressed the view that there was no justification to run a public utility monopoly service undertaking merely as a commercial venture with a view to make profits the court did not rule out but refrained from expressing any opinion on the question whether a public utility monopoly service undertaking should ever be geared to earn profits to support the general revenue of the State
One of the submissions which found favour with the High Court and which was seriously pressed before us was that in the absence of specification by the State Government the position would be as it was before the 1978 amendment that is the Board was carry on its affairs and adjust the tariffs in such a manner as not to incur a loss and no more
We do not agree with the submission for the reasons already mentioned
We may also refer here to the decision of the Privy Council in Madras and Southern Mahratta Railway Company Ltd vs Bezwada Municipality which affirmed the Judgment of the Madras High Court in Madras and Southern Maharatta Railway Com 650 pany Limited vs The Municipal Council Bezwada ILR 1941 Madras 897
One of the questions there raised was whether in the absence of rules made by the State Government the Municipal Council was entitled to determine the capital value of property in the face of a provision which stated Provided that such percentage or rates shall not exceed the maxima if any fixed by the Local Government and that the capital value of such lands shall be determined in such manner as may be prescribed The High Court in that case had observed and we agree with what had been said We cannot accept the contention of the appellant that merely because the Local Government has not prescribed the manner in which the capital value should be determined the municipal council is deprived of the power of levying the tax under section 813  the omission of the rule making authority to frame rules cannot take away the right of the municipal council to levy tax at the rate mentioned in the notification issued under clause 3
If for instance the Local Government refrained from prescribing the manner in which the value of such lands should be determined it cannot we think be said that the municipal council has no power at all to levy the tax at a percentage of the capital value merely because the method of determining the capital value has not been prescribed by the Local Government
If the Local Government does not prescribe it then the municipal authority is free in our opinion to fix it in any manner it chooses
 We are of the view that the failure of the Government to specify the surplus which may be generated by the Board cannot prevent the Board from generating a surplus after meeting the expenses required to be met
Perhaps the quantum of surplus may not exceed what a prudent public service undertaking may be expected to generate with out sacrificing the interests it is expected to serve and without being obsessed by the pure profit motive of the private enterpreneur
The Board may not allow its character as a public utility undertaking to be changed into that of a profit motivated private trading or manufacturing house
Neither the tariffs nor the resulting surplus may reach such 651 heights as to lead to the inevitable conclusion that the Board has shed A its public utility character
When that happens the Court may strike down the revision of tariffs as plainly arbitrary
But not until then
Not merely because a surplus has been generated a surplus which can by no means be said to be extravagant
The court will then refrain from touching the tariffs
After all as has been said by this court often enough price fixation  is neither the forte nor the function of the court
The occasional excursions that have been made into that field were at the request and by the agreement of the parties
This was made clear by a Constitution Bench of seven judges of this Court in Prag Ice and oil Mills vs Union of India  where it was said It is customary in price fixation cases to cite the oft quoted decision in Premier Automobiles Ltd  Anr
vs Union of India which concerned the fixation of price of motor cars
It is time that it was realized that the decision constitutes no precedent in matters of price fixation and was rendered for reasons peculiar to the particular case
At page 535 of the Report Grover J who spoke for the  Court stated at the outset of the judgment Counsel for all the parties and the learned Attorney General are agreed that irrespective of the technical or legal points that may be involved we should base our judgment on examination of correct and rational principles and should direct deviation from the report of the Commission which was an expert t body presided over by a former judge of a High Court only when it is shown that there has been a departure from established principles or the conclusions of the Commission are shown to be demonstrably wrong or erroneous
 By an agreement of parties the court was thus converted into a Tribunal for considering every minute detail relating to price fixation of motor cars
Secondly as regards the escalation clause the Court recorded at page 543 that it was not  disputed on behalf of the Government and the Attorney General accepted the position that a proper method should be devised for escalation or de escalation
Thirdly it is clear from page 544 of the Report that the Learned Attorney General also agreed that a reasonable return must be allowed to the manufacturers on their investment
The decision thus proceeded partly on an agreement bet 652 ween the parties and partly on concessions made at the Bar
That is the person why the judgment in Premier Auto mobiles supra cannot be treated as a precedent and can not afford any appreciable assistance in the decision of price fixation cases
 The position was again clarified in Rohtas Industries vs Bihar State Electricity Board supra As pointed out by this Court in Prag Ice  oil Mills and another vs Union of India in the ultimate analysis the mechanics of price fixation is necessarily to be left to the judgment of the executive and unless it is patent that there is hostile discrimination against a class of person the processual basis of price fixation is to be accepted in the generality of cases as valid
 On the question of appropriate pricing policy we may conveniently refer at this juncture to what the Planning Commission had to say in the Seventh Five Year Plan
At page 128 of Vol
II in para 631 it was said 631 The Sixth Plan had emphasised the need to give high priority to the evolution of a structure of energy prices which reflect true costs curb excessive energy use and pro mote conservation of scarce fuels
Except in the case of oil timely adjustments have not been made in the prices of coal and electricity to reflect the real costs
Energy pricing has not promoted to the desired extent inter fuel substitution
Energy users have generally not adopted conservation measures already identified
While action is being taken to L promote technologically energy efficient equipment and processes on the one hand appropriate energy pricing policy would have to be followed on the other hand in order to induce economics in the use of energy in all sectors and encourage desired forms of inter fuel substitution including renewable energy wherever viable
The pricing of energy should not only reflect the true costs to the economy but also help to ensure the financial viability of the energy industries
This is particularly relevant in respect of coal and power industry
As we have said in the past it is wrong to think that an adjustment in the prices of 653 a basic input like energy would aggrevate the inflationary A situation the costs to the economy are not reduced by not reflecting them in proper pricing
Indeed the continuance of wrong pricing policy has a far more deleterious effect on the health of the economy than is often realised
The formulation of an integrated energy pricing structure on the above lines should receive the highest priority in the beginning of the Plan period
 Turning back to sec
59 and reading it along with sections 49 67 67A etc
we notice that the Electricity Supply Act requires the Electricity Board to follow a particular method of accounting and it is on the basis of that method of accounting that the Board is required to gene rate a surplus
Broadly sec
59 requires that a surplus should be left from the total revenues in any year of account after meeting all expenses properly chargeable to revenues
It has to be remembered that apart from subventions which may be received from the State Government which depend entirely on the bounty of the Government the only revenues available to the Board are the charges leviable by it from consumers
Bearing this in mind we may now consider what expenses are properly chargeable to revenues under the Electricity Supply Act
For this purpose we may not be justified in having recourse to the principles of corporate accounting or the rules which determine what is revenue expenditure under the Indian Income tax Act
It appears to us that the Electricity Supply Act prescribes its own special principles of accounting to be followed by the Board
To begin with section 591 specifies operating maintenance and management expenses  taxes if any on income and profits  depreciation and interest payable on all debentures bonds and loans  as included in expenses properly chargeable to revenues 
Section 592 further stipulates that in specifying the surplus the Government shall have due regard to the availability of amounts accrued by way of depreciation and the liability for loan amortization
It also stipulates that a reasonable sum to contribute towards the cost of capital works and a reasonable sum by way of return on the capital provided by the State Government should be left in the surplus
This sub section therefore makes it clear that the Board is to provide for 1 loan amortization 2 contribution towards the cost of capital works 3 return on the capital
We may now turn to section 67 which prescribes the priority to be observed by the Board in the matter of discharging the liabilities enumerated therein out of its revenues
First the operating maintenance and management expenses have to be met next provision has to be 654 made for payment of taxes on Income and Profits and thereafter various items of expenditure are mentioned in order of priority
If any amount is left after the discharge of the liabilities enumerated in section 67 it is further provided that the balance shall be utilised for the other purposes specified in section 59 in such manner as the Board may decide
Payment of interest is expressely mentioned among the liabilities to be discharged as also repayment of principal of loans becoming due for payment in the year
Clause vi of sub section 1 of sec
67 makes it clear that repayment of principal of any loan guaranteed by the State Government will include loans which became due for payment in the year as well as loans which became due for payment in any previous year and had remained unpaid
The submission strenuously urged on behalf of the consumers before the High Court and before us was that while interest which accrued during the year might be properly considered to be revenue expenditure arrears of interest which accrued during the previous years and had not been paid could not be so considered
We fail to see why that should be so
Under the scheme of the Act principal amount falling due in any year has to be met from the revenue receipts of the year
It is difficult to understand how any payment towards principal could be made or accepted
If interest of previous years continued to be outstanding
The very provision for repayment of capital necessarily implies payment of all interest accrued upto the date of repayment of the capital
If as argued on behalf of the consumers arrears of interest cannot be paid from revenue receipts how then may such arrears be paid Not from the capital receipts
What may be paid out of capital receipts and the circumstances under which the payment may be made are expressly provided in s672 which says that if for any reason beyond the control of the Board the revenue receipts in any year are not adequate to meet the operating maintenance and management expenses taxes on income and profits and the liabilities referred to in clauses i and ii of section 671 then the shortfall shall be paid out of its capital receipts with the sanction of the State Government
We do not therefore have any doubt that arrears of interest are under the scheme of accounting contemplated by the Act required to be paid out of revenue receipts of the Board and are expense properly chargeable to revenues within the meaning of that expression in section 59 of the Act
The Legislature has presently clarified the position by the amending Act 16 of 1983 which came into force from April 1 1985
By this Act a separate section section 67A has been introduced along with a consequential amendment of section 67 providing that interest on loans advanced under section 64 or deemed to have been advanced under section 60 which is charged to revenues in any 655 year may be paid out of revenue receipts of a year only after all other A expenses referred to in section 591 are met and further providing that so much of interest as is not paid in any year by reason of the priority mentioned in section 67A shall be deemed to be a deferred liability to be discharged in accordance with provision of section 67A in the subsequent year or years
In our view these provisions show beyond doubt that payment of arrears of interest is an expense properly chargeable to the revenues under the scheme of the Act
We may now assess the factual situation Shri Abdul Khader learned counsel for the Kerala State Electricity Board has placed before us statements containing details of interest payable in each year of accounting the arrears of interest due and payable the total revenue receipts and some other relevant particulars
The statements have been prepared taking the figures from the published annual accounts of the Kerala State Electricity Board
In the year of account 1978 79 the total revenue receipts were Rs842175 lakhs out of which the revenue earned by sale of energy to neighbouring States was Rs292673 lakhs
After meeting operation and maintenance expenses and depreciation the balance of revenue receipts was Rs4161 60 lakhs
The amount of interest payable in the year of account was Rs194637 lakhs
The revenue surplus left after payment of interest in the year of account was therefore Rs221523 lakhs
The arrears of interest accrued in previous years and not paid was Rs427058 lakhs since the revenue surplus available after meeting the current interest was Rs221523 lakhs only there was a deficit of Rs205535 lakhs
In the year of account 1979 80 the total revenue receipts were Rs912490 lakhs which included revenue of Rs385615 lakhs from sale of energy to neighbouring States
After meeting operation and maintenance expenses and depreciation the revenue surplus left was Rs325394 lakhs
The interest which became payable in the year of account was Rs210785 lakhs and after meeting it the revenue surplus left was Rsl14609 lakhs
The old arrears of interest which could not be met fully in the previous year was Rs205535 lakhs
Thus in the year of account year 1979 80 there was a deficit of Rs90927 lakhs
In the year of account 1980 81 the total revenue receipts were Rs1068654 lakhs and this included a sum of Rs432692 lakhs earned by sale of energy to neighbouring States
After meeting the operation and maintenance expenses and depreciation the revenue surplus left was Rs361590 lakhs and after meeting interest of Rs236942 lakhs which had become payable in the year of account a revenue surplus of Rs124648 lakhs was left
The unpaid interest of previous years was Rs90927 lakhs 656 and after meeting it we find for the first time a net surplus of RS33721 lakhs
In the year of account 1981 82 the total revenue receipts were RS1214402 lakhs which included revenue of RS453242 lakhs from sale of energy to neighbouring States
After meeting operation and maintenance expenses and depreciation there was a revenue surplus of RS318377 lakhs
The total interest payable in the year of account was RS310515 lakhs this left a revenue surplus of RS7862 lakhs and since there was no arrears of interest what was payable the net revenue surplus was 7862 lakhs
In the year of account 1982 83 the total revenue receipts were RS1122840 lakhs which included revenue of RS194863 lakhs from sale of energy to neighbouring States
After meeting operation and maintenance expenses and depreciation the revenue surplus left was RS281060 lakhs
The interest which was payable in the year of account was RS318762 lakhs and thus left a net revenue deficit of RS37676 lakhs
In the year of account 1983 84 the total revenue receipts were RS1051835 lakhs including revenue of RS17576 lakhs from sale of energy to neighbouring States
The revenue surplus after meeting operation maintenance expenses and depreciation was RS224630 lakhs
The amount of interest which had become payable was RS342653 lakhs the arrears of interest was RS37676 lakhs leaving a total deficit of RS155699 lakhs
We may mention here that the annual account for the year 1978 79 to 1983 84 have been certified by the Accountant General and the annual accounts for the year 1984 85 are awaiting certification
The accounts awaiting certification show that in the year of account 1984 85 the revenue receipts after meeting operation and maintenance expenses and depreciation were 469292 lakhs while the interest which had become payable during the year was RS3719 and the interest of the previous year Rs 155699 lakhs this left a deficit of RS584OO lakhs
The revised estimates for the year 1985 86 show a revenue surplus of RS556700 lakhs after meeting operation and maintenance expenses and depreciation
The interest payable during the year was RS457480 lakhs and the interest of previous year was RS584 lakhs
The left a surplus of RS40900 lakhs
These figures show that 1978 791979 80 1980 81  1981 82 were extraordinary years when there was a boom in the sale of energy to neighbouring States consequent on the conditions prevailing there
In those years also it would be seen from the accounts that but for the boom in the sale of energy to neighbouring States there would have been a serious deficit in every one of those years
It is clear that the Electricity Board has not been earning huge profits and generating large surpluses as suggested by the consumers
Once we arrive at this position that there is hardly any revenue surplus left after 657 meeting the expenses required to be met by section 59 the complaint of the A consumers that there was no justification for the tariff increase because of large surpluses earned by the Board loses all force
We have examined the two reports of the Tariff Committees of the years 1980 and 1982 and the revised tariffs based on those reports in the light of the legal and factual position explained by us
Before the 1980 revision the prevailing rates were Extra High Tension 881 ps per unit High Tension Industrial 1498 ps per unit Low Tension Domestic 38 ps per unit Low Tension Industrial 1415 ps per unit Low Tension Commercial 38 ps per unit Low Tension Agricultural 1415 ps per unit Low Tension Commercial worked out the cost per unit at 109 186 575 435 565 and 535 ps per unit respectively in that order but recommended in the same order 1155 214 38275 74 and 18 ps per unit respectively
However the actual tariff rates as introduced in 1980 were l08 1824 38 245 66 and 15 ps per unit
The 1982 Tariff Committee recommended rates of 245 373 475 48 55 70 and 34 ps per unit
The actual tariff introduced in 1982 was 1765 2724 425 245 50 70 and 15 ps per unit
We notice that in the case of Low Tension Domestic and Agricultural consumers the change is minimal
In the case of Extra High Tension and High Tension Industrial Consumers the change effected by the 1980 revision was minimal but on the higher side in 1982
In the case of Low Tension Industrial and Commercial Consumers the change effected in 1980 was very steep but tended to come down in 1982
On the whole it cannot possibly be said that the rates have been so fixed by the Electricity Board as to throw a heavy burden on any section of the consumers without regard to their ability to pay without regard to the nature of the supply and purpose for which the supply is required
Now do we find that the principle of uniformity of tariffs has in any way been l sacrificed
But as we mentioned a little earlier the Low Tension Industrial and Commercial Tariff was subjected to a very steep rise in 1980 and brought down again in 1982 apparently in recognition of the fact that the raise had been too steep in regard to them in 1980
In the case of Low Tension Industrial Consumers the tariff was increased from 145 ps per unit to 245 ps per unit in 1980 and maintained at the rate of 245 ps per unit in 1982
In the case of Low Tension Commercial Consumers the tariff was increased from 38 ps per unit to 66 ps per unit in 1980 but brought down again considerably in 1982 to 5070 ps per unit
The very circumstance that the tariff was either brought down or maintained at the same level in 1982 when compared with the 1980 tariff appears to be an indication that the increase in 1980 was 658 thought by the Board itself to be rather steep
We have already noticed that 1980 81 and 1981 82 were the years when the accounts of the Electricity Board recorded a net surplus after meeting all expenses including interest charges
In the circumstances we think that it is desirable that the Board may re consider the 1980 tariff for Low Tension Commercial and Low Tension Industrial Consumers
Shri Potti submitted that the 1980 Committee took place consideration the anticipated augmentation of the generating capacity from the proposed new power stations of Idukki Saharigiri and Idamalyar whereas these projects were not commissioned till 1984 and thus the cost structure arrived at by the Committee was vitiated
We do not think so
From the figures supplied to us we find that notwithstanding the failure to commission the new projects there was no shortfall in the production of energy
A large part of expenditure involved in the setting up of the new projects had to be met in the several years preceding the actual commissioning of the projects
Therefore it is not correct to say that the cost structure arrived at by the Committee was in any way affected by the non commissioning of the new projects between 1980 and 1982
Another submission made by Shri Potti was that the Committee erred in not taking into account the financial position of the Board as brought out by the year 1978 79 which showed that the Board had already turned the corner and that there was therefore no need for enhancing the rates
This submission is again without substance
As we mentioned earlier the rise in revenue receipts in the year 1978 79 due to the unprecedented sale of energy to neighbouring states a special situation which was the result of peculiar circumstances which prevailed that year and continued to prevail for a few years thereafter
The sale of energy to neighbouring States was not to l be taken as a permanent phenomenon to every year
Yet another submission of Shri Potti was that the 1980 Committee having taken as the basis the 1982 projected cost so as to maintain price stability for a period of five years it was not proper to revise the tariff again in 1982 But we find that the actual cost of producing energy in 1981 82 and 1982 83 had risen much above the projected 1982 cost and therefore the 1982 Committee has no option but to again consider further revision of the tariff
We are not delving into more details as we are satisfied that it is not within our province to examine the price structure in minute detail if we are satisfied that the revision of tariff is not arbitrary and is not the result of the application of any wrong principle
Relying upon the observation It would have been manifestly unjust and discriminatory that one consumer should benefit at 659 the cost of other consumers or general tax payers made in DCM vs Rajasthan State Electricity Board 19862 SCC 431 it was argued by Shri Potti that it was not open to the Board to give favoured treatment to Low Tension Domestic and Agricultural Consumers at the cost of the rest of the consumers
We do not find any force in this submission
Section 49 3 expressly reserves the power of the Board if it considers it necessary or expedient to fix different tariff for the supply of electricity to any person having regard to the geographical l position of any area the nature of the supply and purpose for which supply is required and other relevant factor
Different tariffs for High and Low Tension Consumers and for different classes of consumers such as Industrial Commercial Agricultural and Domestic have been prescribed and the differention appears to us to be reasonable and far from arbitrary and to be based on intelligent and intelligible criteria
In the result we allow the appeals filed by the Kerala State Electricity Board set aside the judgments of the High Court uphold the validity of the notifications revising the tariffs and dismiss the writ petitions filed in the High Court subject to direction that the Kerala State Electricity Board will reconsider the revised tariff introduced in 1980 in regard to Low Tension Industrial and Low Tension Commercial Consumers only with liberty to fix separate rates if necessary for the years 1980 and 1981
This direction will not affect the 1982 and 1984 tariff revisions
There will be no order regarding costs
APJ Appeals allowed


Summary:
The upward revision of Electricity Tariff made by the appellant Board in 1980 1982 and 1984 was challenged in the High Court by the respondents on the ground that the Electricity Board acted outside its statutory authority by formulating a price structure intended to yield sufficient revenue to offset not merely the expenditure properly chargeable to the revenue account for the year as contemplated by section 59 of the Electricity Supply Act 1948 but also expenditure not so properly chargeable and that had section 59 been strictly followed and had items of expenditure not chargeable to the revenue account for the year been excluded the revised tariff would have resulted in the generation of a surplus far beyond the contemplation of section 59 of the Act
The Full Bench of the High Court struck down the tariff revisions holding that in the absence of specification by the Government a Board was not entitled to generate a surplus at all and it had acted entirely outside its authority in generating a surplus to be adjusted against items of expenditure not authorised to be met from revenue receipts
The notifications prescribing revised tariffs were therefore struck down
In appeal to this Court on behalf of the appellant it was contended that the 1978 Amendment of the Electricity Supply Act 1948 did not effectively improve matters as many State Governments did not specify the quantum of surplus
Parliament had therefore to intervene once again and that was in 1983 to fix the statutory minimum surplus which was made clear by the 1983 Amendment which stipulated a minimum of 3 per cent surplus in the absence of specification by the 629 State Government which had the liberty to specify a higher percentage than three
It was further contended by submitting statements that in the years 1978 79 to 1981 82 which were extraordinary years but for the boom in the sale of energy to neighbouring States there would have been a serious deficit in every one of these years and that it is clear that the Electricity Board has not been earning huge profits and generating large surpluses as suggested by the consumers and consequently the upward revision of the electricity tariff was justified
On behalf of respondent consumers it was contended 1 that the Electricity Board was barred from conducting its operations on commercial lines so as to earn a profit 2 that in the absence of specifications by the State Government the position would be as it was before the 1978 Amendment ie the Board was to carry on its affairs and adjust the tariffs in such a manner as not to incur a loss 3 that while interest which accrued to be revenue expenditure arrears of interest which accrued during the previous years and had not been paid could not be so considered 4 that the 1980 Committee took into consideration the anticipated augmentation of the generating capacity from the proposed new power stations whereas these projects were not commissioned till 1984 and thus the cost structure arrived at by the Committee was vitiated 5 that the Committee did not take into account the financial position of the Board as brought out by the year 1978 79 which showed that the Board had no need for enhancing the rates 6 that the 1980 Committee having taken as the basis the 1982 projected cost so as to maintain price stability for a period of five years it was not proper to revise the tariff again in 1982 and 7 that it was not open to the Board to give favoured treatment to Low Tension Domestic and Agricultural Consumers at the cost of the rest of the consumers
Allowing the appeals of the Electricity Board  HELD 1
The judgments of the High Court are set aside and the validity of the notifications revising the tariffs upheld
The Board will reconsider the revised tariff introduced in 1980 in regard to Low Tension Industrial and Low Tension Commercial Consumers only with liberty to fix separate rates if necessary for the years 1980 and 1981
659D E 2
A State Electricity Board created under the Electricity Supply Act is an instrumentality of the State subject to the same constitutional and public law limitations as are applicable to the Government including the principle of law which inhibits arbitrary action by the Government
It is a public utility monopoly undertaking
Service and not profit 630 should inform its actions and it must manage its affairs on sound economic principles
No public service undertaking can afford to ignore business principles which are as essential to public service undertakings as to Commercial ventures
If the Board borrows sums either from the Government or from other sources or by the issue of debentures and bonds the Board must of necessity make provision year after year for the payment of interest on the loans taken by it and for the repayment of the capital amounts of the loans
If the Board is unable to pay interest in any year for want of sufficient revenue receipts the Board must make provision for payment of such arrear of interest in succeeding years
The Board is not expected to run on a bare year to year survival basis
644B G Rohtas Industries vs Bihar State Electricity Board  and Bromely vs Greater London Council   followed
Section 18a prescribes that it is the duty of the Board to arrange for the supply of electricity that may be required within the State and for the transmission and distribution of the same in the most efficient and economical manner and section 492 b requires the Board to have regard in fixing uniform tariffs the coordinated development of the supply and distribution of electricity within the State in the most efficient and economical manner both with particular reference to those areas which are not for the time being served or adequately supplied with electricity
The principles of efficiency and economy are therefore not foresaken but resolutely emphasised
645B D 4
Pure profit motive unjustifiable even in the case of a private trading concern can never be the sole guiding factor in the case of public enterprise
If profit is made not for profit s sake but for the purpose of fulfilling better and more extensively the obligation of the services expected of it it cannot be said that the public enterprise acted beyond its authority
648G H 649A 5
The total operational cost would include the interest on the capital outlay out of the national exchequer and that there was no justification to run a public utility monopoly service undertaking merely as a commercial venture with a view to make profits
649D E 6
A reading of section 59 as amended in 1978 plainly indicates that it is the mandate of Parliament that the Board should adjust its tariffs so that after meeting the various expenses properly required to be met a 631 surplus is left
The original negative approach of functioning so as not to suffer a loss is replaced by the positive approach of requiring a surplus to be created
The quantum of minimum surplus is to be specified by the State Government
Since many State Governments did not specify the quantum of surplus section 59 was again amended in 1983 which stipulates a minimum of 3 per cent surplus in the absence of specification by the State Government which has the liberty to specify a higher percentage than three
646E G Rohtas Industries vs Bihar State Electricity Board  followed Kerala State Electricity Board vs Indian Aluminium Co 1976 I SCR 552 Bihar State Electricity Board vs Workmen  and Dr
P Nalla Thamby Thera vs Union of India  Ors 1984 I SCR 709 referred to
The failure of the Government to specify the surplus which may be generated by the Board cannot prevent the Board from generating a surplus after meeting the expenses required to be met
The Board may not allow its character as a public utility undertaking to be changed into that of a profit motivated private trading or manufacturing house
Neither the tariffs nor the resulting surplus may reach such heights as to lead to the inevitable conclusion that the Board has shed its public utility character
When that happens the Court may strike down the revision of tariffs as plainly arbitrary
But not until then
Not merely because a surplus has been generated a surplus which can by no means be said to be extravagant
The Court will then refrain from touching the tariffs
650G H651A Madras and Southern Maharatta Railway Company Ltd vs Bezwada Municipality and Madras and Southern Maharatta Railway Company Limited vs The Municipal Council Bezwada ILR 1941 Madras 897 followed
8 Price fixation  is neither the forte nor the function of the Court
The occasional excursions into this field were made at the request and by the agreement of the parties
651B Rohtas Industries vs Bihar State Electricity Board  and Prag Ice and Oil Mills vs Union of India  followed
Reading section 59 alongwith sections 49 67 67A etc
it is noticed that 632 the Electricity Supply Act 1948 requires the Electricity Board to follow a particular method of accounting and it is on the basis of that method of accounting that the Board is required to generate a surplus
Broadly section 59 requires that a surplus should be left from the total revenues in any year of account after meeting all expenses properly chargeable to revenues
Apart from subventions which may be received from the State Government which depend entirely on the bounty of the Government the only revenue available to the Board are the charges leviable by it from consumers
653B D 10
Section 59 1 specifies operating maintenance and management expenses  taxes if any on income and profits  depreciation and interest payable on all debenture bonds and loans  as in cluded in expenses properly chargeable to revenues 
Section 59 2 stipulates that in specifying the surplus the Government shall have due regard to the availability of amounts accrued by way of depreciation and the liability for loan amortization
It also stipulates that a reasonable sum to contribute towards the cost of capital works and a reasonable sum by way of return on the capital provided by the State Government should be left in the surplus
This sub section therefore makes it clear that the Board is to provide for 1 loan amortization 2 contribution towards the cost of capital works and 3 return on the capital
Section 67 prescribes the priority to be observed by the Board in the matter of discharging the liabilities enumerated therein out of its revenues
First the operating maintenance and management expenses have to be met next provision has to be made for payment of taxes on Income and Profits and thereafter various items of expenditure are mentioned in order of priority
If any amount is left after the discharge of the liabilities enumerated in section 67 the balance shall be utilised for the other purposes specified in section 59 in such manner as the Board may decide
653E H 654A B 11
Payment of interest is expressly mentioned among the liabilities to be discharged as also repayment of principal of loans becoming due for payment in the year
Clause vi of sub section
1 of section 67 makes it clear that repayment of principal of any loan guaranteed by the State Government will include loans which became due for payment in the year as well as loans which became due for payment in any previous year and had remained unpaid
654B C 12
Under the scheme of the Act principal amount falling due in any year has to be met from the revenue receipts of the year
No payment towards principal could be made or accepted if interest of previ 633 ous years continued to be outstanding
The very provision for repayment of capital necessarily implies payment of all interest accrued upto the date of repayment of the capital
If arrears of interest cannot be paid from revenue receipts such arrears cannot be paid from the capital receipts
What may be paid out of capital receipts and the circumstances under which the payment may be made are expressly provided in section 67 2 which says that if for any reasons beyond the control of the Board the revenue receipts in any year are not adequate to meet the operating maintenance and management expenses taxes on income and profits and the liabilities referred to in clauses i and ii of section 67 1 then the shortfall shall be paid out of its capital receipts with the sanction of the State Government
There is no doubt that arrears of interest are under the scheme of accounting contemplated by the Act required to be paid out of revenue receipts of the Board and are expenses properly chargeable to revenues within the meaning of that expression in section 59 of the Act
654D G 13
The Legislature has clarified the aforesaid position by the Amending Act 16 of 1983 which came into force from April 1 1985
A separate section section 67A has been introduced alongwith a consequential amendment of section 67 providing that interest of loans advanced under section 64 or deemed to have been advanced under section 60 which is charged to revenues in any year may be paid out of revenue receipts of a year only after all other expenses referred to in section 59 1 are met and further providing that so much of interest as is not paid in any year by reason of the priority mentioned in section 67 A shall be deemed to be a deferred liability to be discharged in accordance with provision of section 67A in the subsequent year or years
These provisions show beyond doubt that payment of arrears of interest is an expense properly chargeable to the revenues under the scheme of the Act
654G H 655A B 14
Statements containing details of interest payable in each year of accounting the arrears of interest due and payable the total revenue receipts and some other relevant particulars in the present case show that the Electricity Board has not been earning huge profits and generating large surpluses as suggested by the consumers
Once it is established there is hardly any revenue surplus left after meeting the expenses required to be met by section 59 the complaint of the consumers that there was no justification for the tariff increase because of large surpluses earned by the Board loses all force
655G 656H 657A 15
As regards the rates of tariff for the relevant years in the case of Extra High Tension and High Tension Industrial Consumers the 634 change effected by the 1980 revision was minimal but on the higher side in 1982
In the case of Low Tension Industrial and Commercial Consumers the change effected in 1980 was very steep but tended to come down in 1982
657D E 16
On the whole it cannot possibly be said that the rates have been so fixed by the Electricity Board as to throw a heavy burden on any section of the consumers without regard to their ability to pay without regard to the nature of the supply and purpose for which the supply is required
1980 81 and 1981 82 were the years when accounts of the Electricity Board recorded a net surplus after meeting all expenses including interest charges
It is therefore desirable that the Board may reconsider the 1980 tariff for Low Tension Commercial and Low Tension Industrial Consumers
658A B 17
A large part of expenditure involved in the setting up of the new projects had to be met in the several years preceding the actual commissioning of the projects
Therefore it is not correct to say that the cost structure arrived at by the Tariff Committee was in any way affected by the non commissioning of the new projects between 1980 and 1982
658C D 18
The rise in revenue receipts in the year 1978 79 due to the unprecedented sale of energy to neighbouring States a special situation which was the result of peculiar circumstances which prevailed that year and continued to prevail for a few years thereafter cannot be taken as a permanent phenomenon to every year
658E F 19
The actual cost of producing energy in 1981 82 and 1982 83 had risen much above the projected 1982 costs and therefore the 1982 Committee had no option but to again consider further revision of the tariff
It is not within the province of this Court to examine the price structure in minute detail if it is established that the revision of tariff is not arbitrary and is not the result of the application of any wrong principle
658G H 20
Section 49 3 expressly reserves the power of the Board if it considers it necessary or expedient to fix different tariff for the supply of electricity to any person having regard to the geographical position of any area the nature of the supply and purpose for which supply is required and other relevant factors
659B C 635 DCM vs Rajasthan State Electricity Board 1986 2 SCC 431 referred to
Different tariffs for High and Low Tension Consumers and for different classes of consumers such as Industrial Commercial Agricultural and Domestic have been prescribed and the differention appears to be reasonable and far from arbitrary and based on intelligent and intelligible criteria
659C