ivil Appeal Nos
2567 70 of 1985
From the Judgment and Order dated 341985 of the Hyderabad High Court in Writ Petition No 9403 of 1984
Kapil Sibal Additional Solicitor General GL Sanghi Anil B Diwan G Ramaswamy PA Choudhary Kailash Vasudev Naunit Lal MJ Paul CS Vaidyanathan UK Khaitan Praveen Kumar section Murlidhar Vineet Kumar Vinod Bhagat and Mukul Mudgal for the Appellants
Shanti Bhushan VR Reddy Rajendra Choudhary section Thananjayan K Ram Kumar for the Respondents
VB Sharya for the Intervenor
The Judgement of the Court was delivered by VERMA J
These appeals by special leave are by several industrial concerns against the Andhra Pradesh State Electricity Board hereinafter called the Board  challenging the common judgment of the Andhra Pradesh High Court in writ petitions filed by these concerns challenging the revision of the electricity tariffs by the Board by its proceedings contained in BP Ms No 1014 Commercial dated 649 13121983 which came in to force on 1511984
Prior to this revision the tariffs were governed by BP Ms No 418 Commercial dated 1211981
On 13121983 two separate orders were issued by the Board revising the various tariffs
By one of them namely BP Ms No 1014 the tariffs for various categories of consumers including HT categories I and II were revised
By the other order of the same date namely Memo No DECOMLIV225083I the tariffs for highly power intensive industries were also revised upwards
Out of the appellants it was applicable to five units namely 1 Nav Bharat Ferro Alloys Ltd 2 Andhra Sugars Ltd 3 Ferro Alloys Corporation Ltd 4 Grindwell Norton Ltd and 5 AP Carbides Ltd This upward revision of tariffs made by the Board by its two orders dated 13121983 which were made effective from 1511984 was challenged by the appellants in writ petitions filed in the Andhra Pradesh High Court on various grounds
The High court rejected all the grounds and dismissed the writ petitions by its common judgment now reported in AIR 1985 AP 299
These appeals by special leave are against the High Court Judgment
The appellants are all HT power consumers of one category or other
The tariffs consist of three parts Part A Part B and Part C Part A provides for HT tariffs Part B for LT supply and Part C provides inter alia for miscellaneous and general charges
HT consumers in Part A are broadly classified into three categories H T Category I Industrial HT Category II Non Industrial and HT Category III comprising of power intensive consumers and some others
The Board retained the power to decide in accordance with the guidelines as to which industries were power intensive and which were not
This was the position in the tariffs of 1975
Subsequently the Board began to deal with the power intensive industries by notifying tariffs for them separately from time to time
In effect there were four classes of consumers availing HT supply 1 HT consumers falling under HT Category I Industrial 2 HT consumers falling under HT Category II Non Industrial 3 HT consumers falling under the category power intensive industries  and 4 HT consumers availing supply of electricity for irrigation and agricultural purposes included in Part B
The tariffs for these different categories of HT consumers were enhanced from time to time
For HT Category I Industrial it was 21 paise in 1975 increased to 30 paise in 1979 33 paise in 1980 40 paise in 1981 and 48 paise in 1984
Likewise there was corresponding increase in the energy rates for HT Category II Non Industrial being 28 paise 37 paise 40 paise 47 paise and 56 paise
The tariffs for power intensive industries were however 650 increased by separate notifications issued by the Board from time to time
It was 11 paise prior to 1975 raised to 122 paise in 1977 16 paise in 1978 185 paise in September 1979 21 paise in November 1979 25 paise in 1980 32 paise in 1981 and 45 paise in 1984
The HT consumers grouped in Part B were required to pay 15 paise under the 1975 tariffs and 16 paise thereafter
Besides the energy charges as stated above the HT consumers were also required to pay at different rates effective from 191982 an additional charge levied as fuel cost adjustment charges 
The HT consumers were also required to pay some amount as voltage surcharge  in accordance with the terms of the agreement entered into by the individual consumers with the Board
The comparison of the aforesaid tariffs shows that the tariffs for power intensive industries to begin with were much less than the tariffs for HT Category I Industrial and HT Category II Non Industrial
In course of time the concession in tariffs for the power intensive industries was progressively withdrawn
The concessions were however continued in respect of consumers availing HT or LT supply for purposes of irrigation and agriculture or LT supply for domestic cottage industries public lighting and small poultry farming units
It is the admitted position that the power generation in the State of Andhra Pradesh is both hydro and thermal each source contributing almost equally to the total power generation in the State
The HT categories have been consuming more than one half of the total power generated in the State against the much larger number of individual LT consumers availing the remaining power
The main attacks to the upward revision of the tariffs for HT consumers in the writ petitions before the High Court were 1 The Board as a public utility undertaking is expected to function in the most efficient and economical manner 2 It cannot plan its activities with a view to drive any sizeable profits on its undertaking except in accordance with Section 59 of the hereinafter referred to as the Supply Act  3 The Board Could not generate a surplus in excess of that specified under Section 59 of the Supply Act which it had been doing 4 The Board was preparing its financial statement incorrectly in a manner contray to section 59 of the Supply Act by improperly taking into account expenses chargeable to capital by showing such expenses as charged to revenues 5 The steep upward revision to tariffs from 1980 made by the Board is invalid being arbitrary and in contravention of Section 49 and 59 of the Supply Act and 6 There was no justification for the Board to have revised the tariffs either in 1981 or in 1984 or to have levied any 651 fuel surcharge in terms of Section 49 and 59 of the Supply Act
It was also contended that the tariffs revision was made without prior consultation with the State Electricity Consultative Council as required by Section 165 of the Supply Act which also rendered it invalid
Prior to 3071982 it was usual for the Board to take into account various escalation charges such as pay revisions and increases in the cost of fuel and revise its tariffs from time to time
This was done in 1975 and 1981
Thereafter the Board took the view that to avoid making frequent tariff revisions necessitated by frequent escalations in the cost of fuels like coal and diesel oil the formula known as fuel cost adjustment be evolved
Accordingly the Board in its proceedings contained in BP Ms No 589 dated 3071982 set out the formula known as fuel cost adjustment
This formula was introduced as condition No 11 in HT tariffs Part A
Ever since September 1982 all categories of HT consumers in Part A including the power intensive consumers are subject to this condition
Immediately after 3071982 the fuel cost adjustment was fixed as 274 paise per unit which was increased gradually to 295 paise 379 paise and 1168 paise
Thereafter 379 paise was absorbed as part of the tariffs applicable to these HT consumers and the remaining increase of 789 paise alone was indicated as the fuel cost adjustment charges
The grievance made by all HT consumers before the High Court was that 1 the fuel cost adjustment could not be recovered as part of the tariffs 2 there is discrimination in recovering the entire fuel cost adjustment from HT consumers alone 3 fairness demands that a reasonable proportion of the burden should be shared also by Part B consumers and 4 that fuel cost adjustment charge is excessively computed
The High Court rejected all these contentions
It held that this was a matter of policy which could be changed from time to time and it was permissible to gradually withdraw the pre existing concessional tariffs given to the power intensive industries for which the tariffs earlier were much lower as compared to the other consumers and even after the increase  they were not excessive
It was held that electricity was a raw material for power intensive industries and no grievance could be made against the increase of its cost just as such a grievance was untenable against increase in the cost of any other raw material
The challenge on the ground of discrimination was rejected on the ground that HT consumers including power intensive industries formed a separate class and the reason which justified grant of concession to them earlier also justified the gradual withdrawal of that 652 concession
It held that prior consultation with the State Electricity Consultative Council according to Section 165 of the Supply Act was not obligatory before revising the tariffs
The High Court held that the Board was justified in adjusting its tariffs to ensure progressive minimizing of losses and the failure of the State Government to specify the surplus it could generate in accordance with Section 59 of the Supply Act did not detract from the Board s power to adjust its tariffs and generate a surplus on principles of commercial expediency applicable to a public utility undertaking
Fixation of tariffs was held to be a matter of major policy in respect of which the Government can effectively issue directions under Section 78 A of the Act
It was held that the HT consumers including power intensive industries were bound to pay according to the revised higher tariffs fixed from time to time under the agreement as contemplated by Section 49 of the Supply Act
The condition of fuel cost adjustment introduced as condition No 11 in HT tariffs Part A was held applicable to power intensive consumers also
An additional argument that this added burden became unbearable for the power intensive consumers was rejected on the ground that such inability of the industry to survive is not a compelling consideration for deciding the Board s power in adjusting it tariffs
Accordingly the High Court dismissed the writ petitions and upheld the revision of tariffs made by the Board by the impugned BP Ms No 1014 Commercial dated 13121983 wef 1511984
The High Court having refused to grant a certificate of fitness to appeal to this Court the appellants have preferred these appeals by special leave
It may be mentioned at this stage that the controversy raised in these appeals was also the controversy in another bunch of civil appeals arising out of a judgment of the Kerala High Court wherein a similar challenge had been upheld and the Kerala State Electricity Board had come in an appeal to this Court
In those matters the contention of the Kerala State Electricity Board which would be the same as that of the Andhra Pradesh State Electricity Board before us was accepted and the judgment of the Kerala High Court taking the view contrary to that of the Andhra Pradesh High Court was reversed Kerala State Electricity Board vs Ms SN Govinda Prabhu and Bros and Others
 1986 4 SCC 198 All the hearing before us it was contended by Shri Shanti Bhushan learned counsel for the Andhra Pradesh State Electricity Board that the Kerala decision concludes these points against the present appellants
On the other hand Shri G Ramaswamy and other learned counsel appearing for the appellants made an attempt to 653 distinguish the decision in the Kerala case
The question therefore is Whether any ground has been made out by the present appellants to persuade us to take a view different from the one taken by this Court in the Kerala case Before considering the arguments in these appeals we would refer to the controversies in the Kerala case and the view taken therein
The decision in Kerala State Electricity Board vs Ms Govinda Prabhu and Bros and Others  arose out of the decision of the Kerala High Court in a similar situation
The Kerala High Court struck down the upward revision of tariffs made by the Kerala State Electricity Board unlike the Andhra Pradesh High Court which has upheld the upward revision of tariffs in the present appeals
The main question in the Kerala case also related to the extent of authority of the Kerala Board to increase the electricity tariffs under the 
The principal ground of challenge which was accepted by the Kerala High Court was that the Kerala State Electricity Board acted outside its statutory authority by formulating a price structure intended to yield substantial revenue to offset not merely the expenditure properly chargeable to the revenue account for the year as contemplated by Section 59 of the Supply Act but also expenditure not so properly chargeable
The Kerala High Court had held that 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 revenue receipts
this view of the Kerala High Court was based primarily on the construction made of section 59 of the 
Accordingly the Kerala High Court struck down the upward revision of tariffs made by the Kerala State 
Accordingly the Kerala High Court struck down the upward revision of tariffs made by the Kerala State Electricity Board in the years 1980 1982 and 1984
It may here be mentioned that Section 59 of the Supply Act as it stood prior to 1978 was amended by Act No 23 of 1978 and thereafter by Act No 16 of 1983 which came into effect from April 1 1985 only
The Kerala case also was decided on the basis of Section 59 as it stood amended by the 1978 Amendment Act prior to its amendment wef
April 1 1985 by Act No 16 of 1983
For our purposes also Section 59 as it stood amended by the 1978 Act prior to the 1983 amendment is relevant
This Court expressly rejected the submission which had found favour with the Kerala High Court that in the absence of a specification by the State Government the position would be as it was before the 1978 amendment that is the Board was to carry on its affairs and 654 adjust the tariffs in such a manner as not to incur a loss and no more
While rejecting the submission this Court held as under 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 that a prudent public service undertaking may be expected to generate without sacrificing the interests it is expected to serve and without being obsessed by the pure profit motive of the private entrepreneur
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
After all as has been said by this Court often enough price fixation  is neither the forte nor the function of the court
 Further it said Turning back to Section 59 and reading it along with Section 49 67 67 A 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 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
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 655 accounting or the rules which determine what is revenue expenditure under the 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  This Court also held that the prescribing of different tariffs for high and low tension consumers and for different classes of consumers such as industrial commercial agricultural and domestic appears to be reasonable and far from arbitrary and is based on an intelligent and intelligible differentia
Accordingly the judgment of the Kerala High Court upholding challenge to the validity of the upward revision of tariffs was set aside
Broadly speaking the substance of the main arguments advanced before us in these matters was repelled by this Court in the Kerala case
However learned counsel for the appellants attempted to distinguish the Kerala decision and also tried to advance some additional arguments
We shall refer to those arguments presently
It would be appropriate at this stage to quote the relevant provisions of the  with reference to which the arguments advanced have to be considered
Section 2 of the act relates to interpretation and give the meaning of the expressions defined therein
Section 3 deals with the constitution of the Central Electricity Authority
Section 4 B contains the rule making power of the Central Government
Section 5 provides for the constitution and composition of State Electricity Boards
Section 12 provides for the incorporation of the Board
Section 12 A relates to the capital structure of the Board
Section 78 contains the rule making power of the State Government
Section 79 contains the power of the Board to make regulations
Some of the provisions of the Act which may be quoted in extenso are as under 4A Directions by Central Government to the Authority
1 In the discharge of its functions the Authority shall be guided by such directions in matter of policy involving public interest as the Central Government may give to it in writing
2 If any question arises as to whether any such direction relates to a matter of policy involving public interest the decision of the Central Government thereon shall be final xxx xxx xxx 656 16
State Electricity Consultative Council
1 The State Government shall constitute a State Electricity Consultative Council for the State and in cases to which Section 6 and 7 apply the State Government concerned shall constitute such one or more State Electricity Cousultative Council or Councils and for such areas as they may by agreement determine
2 The State Electricity Consultative Council shall consist of the members of the Board and if there are any Generating Company or Generating Companies operating in the State one representative of the Generating Company or each of the Generating Companies to be nominated by the Generating Company concerned and such other persons being not less than eight and not more than fifteen as the State Government or the State Governments concerned may appoint after consultation with such representatives or bodies of representative of the following interests as the State Government or the State Governments concerned thinks or think fit that is to say local self government electricity supply industry commerce industry transport agriculture labour employed in the electricity supply industry and consumers of electricity but so that there shall be at least one member representing each such interest in the Council
3 The Chairman of the Board shall be ex officio Chairman of the State Electricity Consultative Council
4 The State Electricity Consultative Council shall meet at least once in every three months
5 The functions of the State Electricity Consultative Council shall be as follows i To advise the Board and the Generating Company or Generating Companies if any operating in the State on major questions of policy and major schemes ii to review the progress and the work of the Board and the Generating Company or Generating Companies if any operating in the State from time to time 657 iii To consider such other matters as the Board or the Generating Company or Generating Companies if any operating in the State may place before it and iv To consider such matters as the State Government may by rules prescribe
6 The Board shall place before the State Electricity Consultative Council the annual financial statement and supplementary statement if any and shall take into consideration any comments made on such statement in the said Council before submitting the same to the State Government under Section 61 xxx xxx xxx 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 regulations 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
2In 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 standardisation of methods and rates of charges for such supplies d The extension and cheapening of supplies of electricity to sparsely developed areas
658 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 xxx xxx xxx Section 59 prior to 1978 General principles for Board s finance
The Board shall not as far as practicable and after taking credit for any subventions from the State Government under Section 63 carry on its operations under this Act at a loss and shall adjust its charges accordingly from time to time Provided that where necessary any amounts due for meeting the operating maintenance and management expenses of the Board or for the purposes of clauses i and ii of Section 67 may to such extent as may be sanctioned by the State Government be paid out of capital
 Section 59 as amended by Act No 23 of 1978 General principles for Board s finance
1 The Board shall after taking credit for any subvention from the State Government under Section 63 carry on its operations under this Act and adjust its tariffs so as to ensure that the total revenues in any year of account shall after meeting all expenses properly chargeable to revenues including operating maintenance and management expenses taxes if any on income and profits depreciation and interest payable on all debentures bonds and loans leave such surplus as the State Government may from time to time specify
2 In specifying the surplus under sub section 1 659 the State Government shall have due regard to the availability of amounts accrued by way of depreciation and the liability for loan amortization 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 section 1 of Section 12 A a reasonable sum by way of return on the capital provided by the State Government under sub section 3 of that section and the amount of the loans if any converted by the State Government into capital under sub section 1 of Section 66A Section 59 as further amended by Act No 16 of 1983 General principles for Board s finance
1 The Board shall after taking credit for any subvention from the State Government under Section 63 carry on its operations under this Act and adjust its tariffs so as to ensure that the total revenues in any year of account shall after meeting all expenses properly chargeable to revenues including operating maintenance and management expenses taxes if any on income and profits depreciation and interest payable on all debentures bonds and loans leave such surplus as is not less than three per cent or such higher percentage as the State Government may by notification in the Official Gazette specify in this behalf of the value of the fixed assets of the Board in service at the beginning of such year
Explanation
For the purposes of this sub section value of the fixed assets of the Board in service at the beginning of the year means the original cost of such fixed assets as reduced by the aggregate of the cumulative depreciation in respect of such assets calculated in accordance with the provisions of this Act and consumers  contribution for service lines
2 In specifying any higher percentage under sub section 1 the State Government shall have due regard to 660 the availability of amounts accrued by way of depreciation and the liability for loan amortization 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 section 1 of Section 12 A a reasonable sum by way of return on the capital provided by the State Government under sub section 3 of that section and the amount of the loans if any converted by the State Government into capital under sub section 1 of Section 66 A xxx xxx xxx 61
Annual financial statement
1 In February of each year the Board shall submit to the State Government a statement in the prescribed form of the estimated capital and revenue receipts and expenditure for the ensuing year
2 The said statement shall include a statement of the salaries of members and officers and other employees of the Board and of such other particulars as may be prescribed
3 The State Government shall as soon as may be after the receipt of the said statement cause it to be laid on the table of the House or as the case may be Houses of the State Legislature and the said statement shall be open to discussion therein but shall not be subject to vote
4 The Board shall take into consideration any comments made on the said statement in the State Legislature
5 The Board may at any time during the year in respect of which a statement under sub section 1 has been submitted submit to the State Government a supplementary statement and all the provisions of this section shall apply to such statement as they apply to the statement under the said sub section
 xxx xxx xxx 661 63
Subventions to the Board
The State Government may with the approval of the State Legislature from time to time make subventions to the Board for the purposes of this Act on such terms and conditions as the State Government may determine XXX XXX XXX 65
Power of Board to borrow 1 The Board may from time to time with the previous sanction of the State Government and subject to the provisions of this Act and to such conditions as may be prescribed in this behalf borrow any sum required for the purposes of this Act
2 Rules made by the State Government for the purposes of this section may empower the Board to borrow by the issue of debentures or bonds or otherwise and to make arrangements with bankers and may apply to the Board with such modifications as may be necessary to be consistent with this Act the provisions of the 9 of 1914 and the rules made thereunder as if the Board were a local authority
3 The maximum amount which the Board may at any time have on loan under sub section 1 shall be ten crores of rupees unless the State Government with the approval of the State Legislative Assembly fixes a higher maximum amount
4 Debentures or bonds issued by the Board under this section shall be issued transferred dealt with and redeemed in such manner as may be prescribed XXX XX XXX 67
Priority of liabilities of the Board
The Board shall distribute the surplus referred to in sub section 1 of section 59 to the extent available in a particular year in the following order namely i repayment of principal of any loan raised including redemption of debentures or bonds issued under Section 65 which becomes due for payment in the 662 year or which became due for payment in any previous year and has remained unpaid ii repayment of principal of any loan advanced to the Board by the State Government under Section 64 which becomes due for payment in the year or which became due for payment in any previous year and has remained unpaid iii payment for purposes specified in sub section 2 of Section 59 in such manner as the Board may decide
67 A Interest on loans advanced by State Government 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 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 it accordance with the provisions of this section in the subsequent year or year as the case may be
Charging of depreciation by Board 1 The Board shall provide each year for depreciation such sum calculated in accordance with such principles as the Central Government may after consultation with the Authority by notification in the Official Gazette lay down from time to time
2 Omitted 3 The provisions of this section shall apply to the charging of depreciation for the year in which the Electricity Supply Amendment Act 1978 comes into force XXX XXX XXX 68 A Directions by the State Government 1 In 663 the discharge of its functions the Board shall be guided by such directions on questions of policy as may be given to it by the State Government
2 If any dispute arises between the Board and the State Government as to whether a question is or is not a question of policy it shall be referred to the Authority whose decision thereon shall be final   We shall first consider the common arguments advanced by the learned counsel for the appellants in all these matters before taking up some additional arguments advanced in some of these matters
The first argument is that the requirement of consultation with the State Electricity Consultative Council before the revision of tariffs in accordance with Section 16 of the  not having been made the upward revision of tariffs is invalid on account of non compliance of Section 16 of the Supply Act
It was urged that revision of tariffs being a major question of policy as envisaged by clause i of Sub section 5 of Section 16 it is one of the functions of the Consultative Council to advise the Board on this question and without such advice of the Consultative Council the revision in tariffs could not be made
It was argued that the consumers  interest is also represented on the Consultative Council as indicated by Sub section 2 of Section 16 providing for its constitution and therefore it was necessary to know the viewpoint of the consumers through their representative in the Consultative Council before deciding upon an upward revision of the tariffs for HT consumers
Though the Board may not be bound by the advice of the Consultative Council yet it was urged such consultation with the Council was a condition precedent
It was suggested that Section 16 must be read with Section 61 of the Supply Act which requires the Board to submit to the State Government the annual financial statement in February each year
It is unnecessary in the present case to decide whether the revision of tariffs falls within the ambit of major questions of policy  occurring in Section 165i of the Supply Act since the arguments from both sides proceeded on the basis that revision of tariffs for the purpose of this case may be treated as a question of policy  which expression finds place also in Section 78 A of the Supply Act
The question therefore reduces itself to this Whether the failure of the Board to place the matter before and seek the advice of the Consultative Council on this question renders the revision of tariffs made by it 664 invalid The common premise for the purpose of this case that revision of tariffs by the Board is a question of policy may indicate that it would be open to the Consultative Council to advise the Board also on the question of revision of tariffs and if such advice is given then the Board must consider the same before taking the final decision
That however does not necessarily mean that where no such advice was taken from the Consultative Council or was rendered on account of the absence of any meeting of the Consultative Council during the relevant period it would necessarily render invalid the revision of tariffs made by the Board
The consequence of non compliance of Section 16 is not provided and the nature of function of the Consultative Council and the force of its advice being at the best only persuasive
it cannot be said that revision of tariffs without seeking the advice of the Consultative Council renders the revision of tariffs invalid
It is also significant that the annual financial statement containing all particulars relating to revision of tariffs is required to be submitted to the State Government in February each year and the State Government is required after receipt of such statement to cause it to be laid on the table of the House or Houses of the State Legislature and the said statement is open to discussion therein
The Board is bound to take into consideration any comments made on the said statement in the State Legislature
Thus there is ample provision for discussion on the revised tariffs in the State Legislature with the Board being bound to take into consideration any comments made thereon
Shri Shanti Bhushan sought to make a distinction between the provisions of sub section 5 of section 16 pertaining to the functions of the Consultative Council  empowering or enabling the Council to advice the Board on major questions of policy  and the provision in sub section 6 as to the obligation of the Board to place certain matters before the Council  to emphasise his point that sub section 6 does not envisage any obligation on the part of the Board  to place before the Council the proposal for revision of tariffs
He sought to distinguish between the functions of the Council  to tender advice and the obligation of the Board to specifically seek and invite such advice
Shri Shanti Bhushan said that the very concept of consultation does imply mandatory obligation or duty attaching the pain of nullity to the transaction
Provisions of the Electricity Act 1947 in England contain certain express statutory stipulations as to the scope of the Consultative Council s functions which do not in terms obtain in the Indian statute
For instance Section 7 of the English Act which contemplates 665 the establishment of Consultative Council  specifically provides in Section 74  4 Each of the said Councils shall be charged with the duties a of considering any matter affecting the distribution of electricity in the area including the variation of tariffs and the provision of new or improved services and facilities within the area    b xxx xxx xxx c of considering any matter affecting the variation of any tariff regulating the charges for the provision of bulk supplies of electricity by the Generating Board for distribution in the area being a matter which is either the subject of a representation made to them by consumers or other persons requiring supplies of electricity in the area or which appears to them to be a matter to which consideration ought to be given apart from any such representation and where after consultation with the Area Board action appears to them to be requisite as to any such matter of notifying their conclusions to the Generating Board d xxx xxx xxx rest of the Section omitted as unnecessary Section 371 of the English statute again provides 37 Fixing and variation tariffs 1 The prices to be charged by the Generating Board for the supply of electricity by them to Area Boards shall be in accordance with such tariffs as may be fixed from time to time by the Generating Board after consultation with the Electricity Council the different tariffs may be fixed for different Area Boards   rest of the Section omitted as unnecessary The pattern of the provisions in the Indian statute is quite different
666 The laying procedure  before the legislature effectively controls the exercise of the delegated power of the Board
We are of the opinion that though advisable yet failure to seek advice of the Consultative Council before revision of the tariffs does not result in invalidation of the revised tariffs
This consequence appears to us to be the logical and reasonable view to take of the requirement of Section 16 along with other provisions of the Supply Act
One of the arguments addressed at length before us relates to Section 78 A of the Supply Act
It was urged on behalf of the appellant that any direction of the State Government relating to tariffs was on a question of policy within the meaning of Sub section 1 and therefore the Board is bound by such direction subject only to the adjudication if any in accordance with Sub section 2 if any dispute is raised by the Board in that behalf
It was urged that in the present case the Board was therefore bound by the directions of the State Government granting the concession to the power intensive consumers since no dispute was raised by the Board in accordance with Sub section 2 of Section 78 A Learned counsel for the Board did not for the purpose of this case dispute this position but contended that all directions of the State Government were obeyed by the Board and therefore the question does not really arise
The Board s contention is that it has acted according to the directions of the State Government and therefore the question of non compliance with any such directions giving rise to the argument based on Section 78 A does not arise
For consideration of the main controversy it is advisable at this stage to deal with Sections 49 and 59 of the Supply Act
Section 49 makes provision for the sale of electricity by the Board to persons other than licensees
Sub section 1 starts with the words Subject to the provisions of this Act and of regulations if any made in this behalf 
This means that the provision made therein is subject to other provisions of the Supply Act and the regulations
It then proceeds to say that 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 supply frame uniform tariffs 
Sub section 2 then enumerates several factors which the Board is required to have regard to  in fixing the uniform tariffs
The meaning of the expression have regard to  is well settled
It means that the factors specifically enumerated shall be taken into account while performing the exercise which in this case is the fixation of uniform tariffs
Ordinarily therefore uniform tariffs are required to be framed by the Board for making such supply
Sub section 3 then proceeds to 667 say that nothing in the earlier enacted provisions 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  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 
Sub section 4 then says that in fixing the tariffs and terms and conditions for the supply of electricity the Board shall not show undue preference to any person 
In other words Sub section 4 provides against any unreasonable discrimination in fixing the tariffs and terms and conditions for supply of electricity
The power of fixation of tariffs in the Board is provided in this manner by Section 49 of the Supply Act which requires the fixation of uniform tariffs ordinarily having regard particularly to the specified factors and enables fixation of such tariffs for any person having regard to the factors expressly stated and any other relevant factors providing further that no unreasonable or undue preference shall be shown to any person by the Board in exercise of its powers of fixing the tariffs
The next important provision is Section 59 of the Supply Act
For appreciating the argument based on Section 59 it is necessary to bear in mind the distinction in 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 quoted earlier
Prior to 1978 Section 59 required the Board as far as practicable and after taking credit for any subventions from the State Government under Section 63 not to carry on its operations under this ACt at a loss and for this purpose it was empowered to adjust its charges accordingly from time to time
Under the provision as it then existed the main thrust was to avoid the Board incurring any loss and for that purpose it could adjust its charges accordingly from time to time
Section 59 as amended by Act No 23 of 1978 required the Board after taking credit for any subventions from the State Government under Section 63 to carry on its operations under this Act and to adjust its tariffs so as to ensure that the total revenues in any year meeting all expenses properly chargeable to revenue including those specified left such surplus as the State Government specified from time to time
The shift was therefore towards having a surplus as the State Government specified from time to time
Sub section 2 then provided guidelines for the State Government in specifying the surplus under Sub section 1 and mentioned the factors to which regard was to be had for this purpose
The effect of the amendment made in Section 59 by Act No 16 of 1983 which came into effect from 141985 was to provide for a 668 minimum surplus of three per cent or such higher percentage as the State Government is to specify in this behalf
In other words prior to 1978 amendment the requirement from the Board was to avoid incurring any loss after the 1978 amendment the shift was towards ensuring a surplus as specified by the State Government and after the 1983 amendment the Board is required to ensure a surplus of at least three per cent unless the State Government specifies a higher surplus
This is the scheme of Section 59 and it is Section 59 as amended by 1978 Act but prior to its amendment by the 1983 Act with which we are concerned in the present case
It cannot be doubted that Section 59 requiring the Board to adjust its tariffs for the purpose of Board s finance is to be read along with Section 49 which provides specifically for fixation of tariffs and the manner in which that exercise has to be performed while dealing with any question relating to the revision of tariffs
It was argued on behalf of the appellants that Section 59 as amended by the 1978 Act did not empower the Board to adjust its tariffs to generate any surplus unless the surplus had been specified by the State Government and when specified the surplus generated could not exceed the specified surplus
In other words it was argued that when the State Government did not specify any surplus the Board had no power to adjust its tariffs in a manner which resulted in generating any surplus
We are unable to construe Section 59 in this manner
The general principle for the Board s finance indicated by Section 59 is that prior to the 1978 amendment tariffs could be adjusted to avoid any loss but as a result of the shift made by the 1978 amendment the power could be exercised to generate a surplus and when the State Government specified the amount of surplus then the Board was bound to adjust the tariffs to ensure generation of the specified surplus
However generation of a reasonable surplus in any year of account without specification of the surplus amount by the State Government was not contra indicated in the provision inasmuch as the duty to generate a surplus was implicit with the added obligation to ensure generating surplus to the extent specified by the State Government when it was so specified by the State Government
It cannot be accepted as a reasonable view that in the absence of specification of the surplus by the State Government the Board could not adjust its tariffs to generate even a reasonable surplus in any year of account
The effect of 1983 amendment which came into force from 141985 is that the Board is entitled to adjust its tariffs to ensure generating a surplus of not less than three per cent even without such specification 669 by the State Government and when the State Government specifies a higher surplus then the Board must ensure generating the higher specified surplus
This is of course subject to the accepted norm of the Board acting in consonance with its public utility character and not entirely with a profit motive like that of a private trader
The pre 1978 concept of the Board s functioning to merely avoid any loss is replaced by the shift after 1978 amendment towards the positive approach of requiring a surplus to be generated the quantum of surplus being specified by the State Government with a minimum of three per cent surplus in the absence of the specification by the Government of a higher surplus after the 1983 amendment
This construction made of Section 59 as it stood at different times in Govinda Prabhu s case supra indicated earlier cannot be faulted in any manner
In Govinda Prabhu s case supra the same argument which is advanced before us was expressly rejected
We are of the same view
It is  therefore obvious that mere generation of surplus by the Board as a result of adjusting its tariffs when the quantum of surplus has not been specified by the State Government after the 1978 amendment of Section 59 of the Supply Act cannot invite any criticism unless it is further shown that the surplus generated as a result of the adjustment of tariffs by the Board has resulted in the Board acting as a private trader shedding off its public utility character
In other words if the profit is made not merely for the sake of profit but for the purpose of better discharge of its obligations by the Board it cannot be said that the public enterprise has acted beyond it authority
The Board in the present case has shown that the surplus resulting from upward revision of tariffs applicable to the HT consumers made in the present case was for the purpose of better discharge of its other obligations under the Supply Act and in effect it has merely resulted in a gradual withdrawal of the concessional tariffs provided earlier to the power intensive consumers which do not in its opinion require continuance of the concessional tariffs any longer
In fact no material has been placed before us to indicate that this assertion of the Board is incorrect or there is any reasonable basis to hold that the upward revision of tariffs applicable to HT consumers is merely with a desire to earn more profits like a private trader and not to generate surplus for utilisation of the funds to discharge other obligations of the Board towards more needy consumers such as agriculturists or to meet the need of expansion of the supply to deserving areas
The argument with reference to statistics that the upward revision of tariffs for the HT consumers results in earning amounts in excess of the cost of generation does not therefore merit a more detailed consideration
670 It was also contended on behalf of the appellants that the generation of electricity by the Andhra Pradesh Electricity Board is both thermal as well as hydro the quantity from each source being nearly equal and the entire electricity generated is fed into a common grid from which is supplied to all categories of consumers
On this basis it was argued that the rise in the fuel cost which led to the fuel cost adjustment applicable only to the HT consumers was unreasonable and discriminatory since the burden of rise in fuel cost was placed only on the HT consumers
In our opinion this argument has no merit
The HT consumers including the power intensive consumers are known power guzzlers and in power intensive industries electricity is really a raw material
This category of consumers therefore forms a distinct class separate from other consumers like LT consumers who are much smaller consumers
There is also a rational nexus of this classification with the object sought to be achieved
Moreover the power intensive consumers have been enjoying the benefit of a concessional tariff for quite some time which too is a relevant factor to justify this classification
Placing the burden of fuel cost adjustment on these power guzzlers who had the benefit of concessional tariff for quite some time and have also a better capacity to pay cannot therefore be faulted since the consumption in the power intensive industries accounts for a large quantity
Shri Sibal submitted that the prescription and imposition of disparate tariffs unrelated to the production cost on a particular section of consumers would be a case of misplaced philanthrophy on the part of the statutory authority
The Board Shri Sibal says cannot use its powers in order to confer social or economic benefits on particular sections of the community at the cost of the other sections
Shri Sibal contended that while it may be permissible for the Board to supply electricity to the weaker and under privileged sections of the society at prices which may even be lower than the costs of generation and distribution however subsidies for such social objectives must come from subventions from Government and should not be made good by unjustifiable higher charges on other sections of electricity consumers
Shri Sibal read to us the following passage in Wade s Administrative Law 6th Edn Statutory authorities have sometimes made use of their wide general powers in order to confer social or economic benefits on particular sections of the community
In several such cases they have gone beyond the true limits of their powers
The policy of the courts is in general hostile to the 671 use of public funds such as rates for new social experiments
Local authorities are subject to a fiduciary duty to use their revenues with due restraint
 at p 424 After referring to decided cases on the point the learned author says 
The idea that runs through these cases is that public money must be administered with responsibility and without extravagance
This appears to mean it is not available for charity
The generosity of local authorities in particular is restrained by the doctrine that they owe a fiduciary duty to their ratepayers analogous to that of trustees
This means that in deciding upon their expenditure they must hold a balance fairly between the recipients of the benefit and the ratepayers who have to bear the cost at p426 Shri Sibal contends that in the case of class of consumers respecting which the tariff is enhanced the enhancement is not justified on the ground of making good the loss on supply to others at cheaper rates
The increase is attributable to higher costs of generation of thermal power
It is not unreasonable to take the view that the thermal power has become costlier on account of the increase in fuel cost and could nationally be allocated to the consumption by HT and power intensive consumers and therefore the fuel cost adjustment is made applicable to them alone
In our opinion the argument on behalf of the Board in this behalf is not unreasonable
It was argued on behalf of the appellants with considerable force that the upward hike of tariff for the HT consumers including power intensive was arbitrary and discriminatory inasmuch as it was not related to the cost of generation and was based on irrelevant factors
It was argued that the LT tariffs and agricultural tariffs were relieved of this burden and the liabilities of the Board even of a capital nature were taken into account for increasing the tariff applicable to power intensive units
The contention is that these factors are irrelevant and do not permit exercise of the power to increase the tariffs
This arguments was considered at length in Govinda Prabhu s case before it was 672 negatived
We agree with the reasons given in that decision to repel this contention
In Govinda Prabhu it was pointed out that the Court would not strike down the revision of tariff as arbitrary unless the resulting surplus reaches such a height as to lead to the inevitable decision that the Board has shed its public utility character and is obsessed by the profit motive of private entrepreneur in order to generate a surplus which is extravagant
The limited power of judicial review in the field of price fixation was also indicated
This limited scope of judicial review in striking down revision of tariffs resulting in generation of surplus applied in Govinda Prabhu cannot be faulted in view of the long line of decisions of this Court on the point and reiteration of the same principle by a Constitution Bench in Shri Sitaram Sugar Company Limited and Another
vs Union of India and Others  The surplus generated by the Board as a result of revision of tariffs during the relevant period cannot be called extravagant by any standard to render it arbitrary permitting the striking down of the revision of tariffs on the ground of arbitrariness
We have already indicated that it is not also discriminatory as was the view taken in Govinda Prabhu
It has been pointed out on behalf of the Board that the Board s action is based on the opinion of Rajadhyaksha Committee s Report submitted in 1980 and the formula of fuel cost adjustment is on a scientific basis linked to the increase in the fuel cost
This is a possible view to take and therefore the revision of tariffs by the Board does not fall within the available scope of judicial review
One of the contentions of Shri G Ramaswamy on behalf of the appellant was that the GOs issued in respect of the power intensive units amounted to a special tariff for them resulting in their exclusion from the category of HT consumers and therefore the clause relating to fuel cost adjustment inserted by amendment to the HT tariffs did not apply to the power intensive consumers without insertion of a similar clause in the special tariff applicable to them
It was urged that for this reason the power intensive consumers could not be governed by the clause of fuel cost adjustment made applicable to HT tariffs
Shri Ramaswamy advanced elaborate arguments to distinguish terms and conditions of supply from terms and conditions of tariff
According to the learned counsel BP Ms No 778 dated 18101975 excluded the power intensive units from applicability of the Notification date 1791975 to it
It is unnecessary to repeat the history of the HT tariffs by which power intensive tariffs were separated
It would be sufficient in this context to quote the relevant portion of Memo
dated 18111975 which in our opinion negatives this argument
It was provided in this Memo
 inter alia as under 673 With regard to other charges such as Miscellaneous charges terms and conditions of supply not mentioned specifically herein those applicable to normal HT consumers will apply
The expression other charges is wide enough to include within its ambit the fuel cost adjustment admittedly made applicable to all H Tconsumers as a result of the escalation in fuel prices
The method adopted was to prescribe a formula linking it to the increase in fuel cost so that it was not necessary to revise the tariffs each time as a result of increase in fuel prices the same being taken care of by the relevant factors in the formula for fuel cost adjustment
It was in this context that Shri Ramaswamy contended that the terms and conditions of supply  are different from the terms and conditions of tariff  and fuel cost adjustment being a term or condition of tariff and not a term or condition of supply the above provision in the Memo dated 18111975 did not have the effect of applying the term relating to fuel cost adjustment to the power intensive tariff
It is sufficient to state that the Memo dated 18111975 did not merely extend the non specified terms and conditions of supply  applicable to normal HT consumers to the power intensive consumers but also other charges which were merely illustrated by the words following namely such as Misc
charges terms and conditions of supply not mentioned herein
In other words this express provision in the Memo dated 18111975 clearly provided that except for the provisions specifically made for power intensive consumers in respect of all other provisions the power intensive consumers were to be governed by the provisions by whatever name called applicable to the normal HT consumers
A further discussion of this distinction sought to be made by Shri G Ramaswamy of the terms and conditions of supply  and terms and conditions of tariff  is therefore unnecessary
Shri Ramaswamy also urged that there was no communication to the appellant of the applicability of the term relating to fuel cost adjustment during the relevant period which also relieves the power intensive consumers of this liability
On the view we have already taken about the applicability of the term relating to fuel cost adjustment to the power intensive tariffs this point is not material
However it has also been shown that in the bills issued to the power intensive consumers the same was specifically indicated
If any communication was needed this indication in the bills issued to the power intensive consumers satisfied that requirement
We are therefore unable to accept the contention that the term relating to fuel cost adjustment made applicable to HT consumers 674 had no application to the power intensive consumers during the relevant period
Shri Kapil Sibal appearing on behalf of some of the appellants confined the challenge to the mode of exercise of power by the Board
He laid great emphasis on the effect of absence of consultation with the Consultative Committee under Section 16 of the 
He also claimed that the quantum of increase could at best be justified only to the extent of one half and no more
Shri Sibal claimed that certain extraneous factors had been taken into account for the purpose of revising the tariffs
The irrelevant considerations according to Shri Sibal taken into account are the capital sums owed by the Board and the overall losses incurred by the Board which according to him is impermissible under Section 59 of the 
He also argued that the upward revision of HT tariffs is intended to subsidise another class of consumers which is not permissible
His arguments are already covered by our earlier discussion
Similarly the arguments of Shri KN Bhat for the appellant in CA No 5379 of 1985 to the same effect need to further discussion
The details of the several factors taken into account for the revision in tariffs to the limited extent they can be gone into within the permissible scope of judicial review in such a matter also do not require any further consideration
Shri Anil Divan on behalf of the appellant in CA No 2569 of 1985 submitted that the increase in tariffs for the power intensive unit in his case was 47 per cent as against 15 per cent for ordinary HT consumers
According to him even ignoring the FCA the increase is 40 per cent from 32 paise to 45 paise
This is disputed on behalf of the Board
In our opinion it is unnecessary to go into this question any further for the reasons already given by us
Shri Divan also contended that the Electricity Board s stand has been conflicting at different stages
In our opinion any detailed decision on this aspect also is unnecessary on the view taken by us about the Board s power to revise tariffs no case for striking down the same as arbitrary and discriminatory having been made out
In view of the earlier decision of this Court in Govinda Prabhu with the conclusion as well as reasoning of which we respectfully concur and reiteration of the Court s limited power of judicial review in Shri Sitaram Sugar Company Limited recently decided by a Constitution Bench we do not find any reason to accept any of the arguments advanced on behalf of the appellants by their learned counsel
In fact the decision in Govinda Prabhu con 675 cludes the controversy against the appellants and some detailed discussion by us has become necessary only on account of an attempt on behalf of the appellants to distinguish the decision and the emphasis placed on the requirements of Sections 16 49 and 59 of the 
We find no merit in these appealsspecial leave petition and the same are dismissed
All interim orders in favour of the appellantspetitioner stand vacated
No costs
RP Appeals dismissed


Summary:
A charge sheet was issued to the petitioner a directly recruited Accountant in the respondent Corporation alleging that while working in the Transport Wing of the Corporation he facilitated and abetted the embezzlement of Rs100 by not ensuring that the amount found was in excess and thus he failed to serve the Corporation honestly and faithfully that he made some fictitious entries in the Cash Book and that he made certain information public without the permission of the Managing Director
The petitioner replied that all the charges were fake and false
the leave sanctioned to the petitioner earlier for prosecuting legal study was canceled and the petitioner challenged the same in the High Court but the case was adjourned
Meanwhile the petitioner s services were terminated on the ground that he was no longer required and that one month s pay in lieu of notice would be paid in terms and conditions of his appointment letter and provisions of Staff Regulations of the Corporation
The petitioner challenged the same before the High Court but the Writ Petition was dismissed in limine
702 In the appeal before this Court it was contended that the termination was only a camouflage and that though the petitioner was still a temporary servant yet the termination amounted to punishment because of the manner in which it was passed and the background behind it
It was also contended that though the termination order stated that the petitioner s services were no longer required his juniors were retained and were continuing in service in violation of Articles 14 and 16 of the Constitution
Disposing of the Special Leave Petition this Court HELD 11 In a case of an order of termination even that of a temporary employee the Court has to see whether the order was made on the ground of misconduct if such a complaint was made and in that process the Court would examine the real circumstances as well as the basis and foundation of the order complained of and if the Court is satisfied that the termination of services is not so innocuous as claimed to be and if the circumstances further disclose that it is only a camouflage with a view to avoid an enquiry as warranted by Article 3112 of the Constitution then such a termination is liable to be quashed
706E F Annop Jaiswal vs Government of India  Anr   Nepal Singh vs State of UP  Ors  and Jarnail Singh  Ors
vs State of Punjab  Ors
   relied on 12 In the instant case the termination order though appears to be innocuous was only intended to punish the petitioner for the misconduct in respect of the allegations which are mentioned in the charges that were served on him
As a matter of fact the enquiry was conducted but before the conclusion of the enquiry the termination order was passed
Therefore it is not difficult to see that the form of the termination order is only a clock for an order of punishment
707C D 13 Besides the termination is also liable to be quashed on the ground that it is violative of Articles 14 and 16 of the Constitution as it is clear from the records that while the petitioner s juniors are retained in service the petitioner s services are terminated as no longer required
708F 709A B Jarnail Singh  Ors
vs State of Punjab  Ors 19862 SCR 1022 and KC Joshi vs Union of India and Ors 19853 SCR 869 relied on
703 14 In the circumstances the termination order is quashed and the petitioner is directed to be reinstated in service
However it shall be open to the respondent Corporation to proceed with the disciplinary enquiry if it so chooses
709H 15 As regards the backwages admittedly the petitioner has been practising as a lawyer since his termination
But this Court has not refused to grant background that the employee has been practicing as lawyer during the relevant period but has taken into consideration the probable income that would have been earned him while granting backwages
However a roving enquiry cannot be made by this Court nor would it be possible for the respondent Corporation to unearth the income which the petitioner would have derived as practising advocate
Undoubtedly the petitioner would have been entitled to subsistence allowance till his reinstatement even if the relevant period is treated as one of suspension pending enquiry
Therefore the petitioner shall be entitled to the full back wages upto the date of his enrollment as a lawyer and from that date upto the date of reinstatement at the rate of half of the subsistence allowance per month
Out of the total income the income admittedly earned by him as a practising lawyer shall be deducted and the balance paid to the petitioner
The amount so paid shall for the purpose of income tax be spread over as if derived during those financial years from the date of his dismissal till date of reinstatement
708B 709D G 710A B SM Saiyad vs Baroda Municipal Corporation relied on