No 151 of 1967
Petition under article 32 of the Constitution of India for the enforcement of fundamental rights
M C Chagla and Mohan Behari Lal for the petitioner
section T Desai and O P Rana for respondent No 1
C B Agarwala and O P Rana for respondent No 2
O P Rana for respondent No 3
P M Mukhi Bishamber Lal and H K Puri for the intervener
The Judgment of WANCHOO CJ SIKRI SHELAT and VAIDIALINGAM JJ was delivered by SHELAT J BHARGAVA J delivered a separate opinion
Shelat J
On August 17 1934 the Governor in Council of the then United Provinces in exercise of powers under section 3 1 of the Indian Electricity Act IX of 1910 issued three licences to Ms Alopi Parshad  Sons Ltd for the supply of electrical energy within the tahsil areas of Firozabad in the district of Agra Shikohabad in the district of Manipur and Etawah in the district of Etawah
The licences inter alia provided that the licensee would be supplied electrical energy in bulk by the Public Works Department UP and the licensee in its turn should transmit the same on its own high tension mains within the areas of the licences
The licences also provided that the responsibility for the maintenance of supply of electrical energy in the licensee s plant shall be borne entirely by the Public Works Department and thereafter by the licensee
In 1937 the licences were assigned by the said Ms Alopi Parshad and Sons Ltd to the petitioner company with the consent of the Government
The petitioner company has since then been supplying under the said licences electricity to consumers within the said areas of the licences
It is an admitted 314 position that though the petitioner company had the said licences assigned to it it did not acquire any exclusive or monopolistic right of supplying electrical energy within the said areas
Clause e of sec
32 of 1910 Act which governed the said licences provides that the grant of a licence thereunder shall not in any way hinder or restrict the grant of a licence to another person within the same area of supply for a like purpose
The Electricity Supply Act LIV of 1948 hereinafter referred to as 1948 Act by sec
51 enjoins upon the State Government to constitute a State Electricity Board
191 provides that the Board may subject to the provisions of this Act supply electricity to any licensee or person requiring such supply in any area in which a scheme sanctioned under Chapter V is in force
The proviso to Sec
191 however lays down that the Board shall not  b supply electricity for any purpose to any person not being a licensee for use in any part of the area of supply of a licence without the consent of the licensee unless the maximum demand of the licensee being a distributing licensee and taking a supply of energy in bulk is at the time of the request less than twice the maximum demand asked for by any such person or the licensee is unable or unwilling to supply electricity for such purpose in the said part of such area on reasonable terms and conditions and within a reasonable time
 Section 26 provides that Subject to the provisions of this Act the Board shall in respect of the whole State have all the powers and obligations of a licenses under the  and this Act shall be deemed to be the licence of the Board for the purposes of that Act
 The definition of a licensee in section 26 of 1948 Act however states that it would not include the Board
Though the Board is not a licensee for the purposes of the 1948 Act the Act being deemed to be the licence for the Board under Sec
26 it is a licensee under the 1910 Act
26 however is subject to the provisions of the Act which means that it is inter alia subject to the provisions of sec
Therefore in the absence of a scheme under Chapter V the Board though a licensee under the 1910 Act was not competent to supply directly electrical energy to consumers such as the 3rd respondent
This was the position until 1961 When the UP legislature to remove this disability of the Board passed the Indian Electricity UP Amendment Act XXX of 1961
Section 2 of the Amendment Act substituted the following for cl
e of sec
32 of the 1910 Act 315 e grant of a licence under this Part for any purpose shall not in any way hinder or restrict i the grant of licence to another person within the same area of supply for a like purpose or ii the supply of energy by the State Government or the State Electricity Board wihin the same area where the State Government deems such supply necessary in public interest
 It also added after sub sec
2 the following sub sec
3 3 Where the supply of energy in any area of the State Electricity Board is deemed necessary under subclause ii of clause e of sub section 2 the Board may subject to any terms and conditions that may be laid down by the State Government supply energy in that area notwithstanding anything to the contrary contained in this Act or the Electricity Supply Act 1948
 Sec 3 of the Amendment Act also added a new sub sec
1 B in sec
28 of the 1910 Act
The new sub section reads as under 1 B
The State Government may notwithstanding that sanction for engaging in the business of supplying energy to the consumer in an area has been given to any person under sub section 1 whether before or after coming into force of the Indian Electricity UP Sanshodhan Adhiniyam 1961 give direct supply or authorise the State Electricity Board to give direct supply in the same area
 This sub section has no application to the licensees for it empowers the State Government either to supply directly or authorise the Board to directly supply energy even in an area for which it has given sanction to a person other than a licensee to engage in the business of supplying energy to the public in such area
A perusal of these provisions makes it clear that the Board can directly supply electricity to the consumers and the State Government also can authorise the Board to do so provided the State Government deems it necessary in public interest that it should be so done
The condition precedent for the direct supply by the Board to the consumers in the area where a licence has been granted to a licensee is that such supply by the Board must be deemed necessary by the State Government in public interest
In pursuance of the powers under sees
46 and 49 of the 1948 Act the Board by a notification dated April 24 1962 fixed the rates and tariffs for electrical energy for the Ganga Sarda 316 Grid
These were to apply to both the licensees obtaining bulk supply from the Board and to consumers to whom electrical energy was being supplied direct by the Board in the area covered by the said Grid
According to these rates consumers to whom electrical energy was being supplied direct by the Board would pay a demand charge at the rate of Rs 8 per KVA and on energy charge at the rate of 45nP per KWH for the first 170 KWH per KVA at the rate of 35nP for the next 170 KWH per KVA and at the rate of 30 nP per KWH for the remaining KVA consumed during the month
For the licensees the rates were Rs 1275 per KVA for the demand charge for the first 500 KVA Rs 10 per KVA for the next 1500 KVA and Rs 850 per KVA for above 2000 KVA of the chargeable demand during the month
For energy charge the rates were 5 nP per KWH for the first 170 KVM per KVA 4nP per KWH for the next 170 KWH per KVA and 3nP per KWH for the remaining KWH per KVA of chargeable demand consumed during the month
The rates chargeable from licensees were thus higher than those applicable to the consumers both in respect of demand and energy charges even though licensees would be larger customs who in the normal course of business would be charged lower rates than the consumers
The notification is not under challenge before us and therefore it is not necessary for us to consider its validity
As the Board was not yet authorised by the State Government to supply electricity directly to the consumers within the areas of the petitioner company s licences the 3rd respondent entered into an agreement in 1964 for a period of 3 years under which the petitioner company was to supply electricity to it
On September 21 1966 the State Government issued a notification which stated that the Governor deemed it necessary in public interest that the State should supply energy to the 3rd respondent and in exercise of the power under sec
3 2 e of the 1910 Act as amended by Act XXX of 1961 directed the Board to give direct supply of energy to the 3rd respondent on the same terms and conditions on which the Board was supplying energy I to other consumers
Thereupon the 3rd respondent by its notice dated January 19 1967 terminated the said agreement
It seems that the Board was still not ready to supply energy direct to the 3rd respondent and therefore on April 18 1967 only one day before the said agreement would have ended the 3rd respondent withdrew the said notice
On June 23 1967 the 3rd respondent however gave a fresh notice terminating the said agreement as from September 23 1967
The result of the notification dated September 21 1966 was two fold  1 that notwithstanding the subsistence of the petitioner company s licences and its right thereunder to supply energy to consumers within the areas of its licences the Board 317 was directed to supply energy to the 3rd respondent and 2 that the Board was directed to supply energy to the 3rd respondent at rates lower than the rate charged by the Board from the petitioner company as the licensee
Mr Chagla appearing for the petitioner company raised the following three contentions   1  that the amended sec
3 2 e was invalid on the ground that it amounted to acquisition of the petitioner company s property and as no compensation has been provided for such acquisition cl
e of section 3 2 was in violation of article 312 of the Constitution 2 that the notification dated September 21 1966 was ultra vires sec
3 2 e as the direction by the State Government to the Board to supply electricity directly to the 3rd respondent was not founded on public interest and 3 that the said direction to supply electricity at rates chargeable from the consumers as against the rates chargeable to the licensees was discriminatory
The respondents on the other hand contended that the 3rd respondent was a concern in which the Government has an interest to the extent of 51  of its share capital that therefore it was almost a public utility concern that supply by the petitioner company to the 3rd respondent was found to be defective resulting in lay off of labour on several occasions and consequent loss in production and that therefore the Government was justified in public interest to issue the said notification
In support of these allegations the respondents filed an annexure to their counter affidavit showing low voltage and high tension trippings during the months of April May and June 1966
It was alleged that owing to defective and short supply by the petitioner company there Were high tension trappings on numerous occasions resulting in low voltage the consequence Whereof was that the 3rd respondent was obliged to stop the working of the Mills sometimes for several hours
The petitioner company s case however was that these allegations were an afterthought and that the real object in issuing the notification dated September 21 1966 was to subvert the petitioner company s rights under the said licences
We are inclined to think that there is considerable force in the contention of the petitioner company
Though the allegation was that supply of energy by the petitioner company to the 3rd respondent suffered from shortage and other defects the 3rd respondent does not seem to have at any time made any complaint about such shortage or defects either to the petitioner company or to the Board or to the State Government
Similarly the Board also does 318 not seem to have at any time complained to the petitioner company about such defective supply
Even when the petitioner company after the said notification was issued made a representation to the State Government to reconsider its decision the Government did not while rejecting it rely upon the fact that the petitioner company was not in a position to give full and proper supply of energy to the 3rd respondent or that supply by it was as now alleged short or defective
It is an undisputed fact that the petitioner company has been throughout all these years supplying high tension energy to the 3rd respondent and the 3rd respondent has been converting such high tension energy into low tension energy through its own transformers
The aforesaid annexure shows that though the high tension trippings were only for a few minutes except on three or four occasions low voltage was for several hours
In some cases though there was no tripping at all there was low voltage for as long as sixteen hours
It is clear therefore that the petitioner company had no difficulty in maintaining supply of high tension electrical energy to the 3rd respondent and there must have been some defect in the stepping down system of
the 3rd respondent resulting in low voltage
It is impossible thus to find from the annexure that the petitioner company was guilty in any manner of shortage or defective supply of high tension energy to the 3rd respondent
The allegation therefore that the 3rd respondent suffered in production and losses as a result of short or defective supply by the petitioner company is not borne out by the record in this case
If there was any justification for the allegation now made by the respondents it is inconceivable that for all these years the 3rd respondent would not have made any complaint for such defective supply either to the Board or to the State Government
It is certain that but for the amendment of sec
3 2 e of 1910 Act the Board though a licensee under that Act could not have supplied energy directly to the 3rd respondent in the absence of a scheme under sec
19 of 1948 Act
Under the proviso to that section the Board would not have been entitled to supply energy for any purpose to any person not being a licensee for use in any part of the area of supply of a licensee without the consent of such licensee
It is true that under its licences the petitioner company was not conferred monopolistic rights to supply energy to the consumers and the Government could have granted another licence to another licensee
But the Government has not granted such licence to any other person
But it was said that the Board was another such licensee
As already stated the Board could not have distributed energy to the consumers though it is a licensee under 1910 Act unless a there was a scheme or b that it was authorised in public interest under the amended sec
3 2 e
Neither of these two conditions having been fulfilled it 319 is clear that the notification of September 21 1966 and the direction contained therein to the Board to supply energy to the 3rd respondent were in breach of the petitioner company s rights under its licences and the requirements of the amended sec
3 2 e
Apart from its being in breach of the amended sec
3 2 e and the petitioner company s rights under its licences the notification and the Government s direct on to the Board therein results in clear discrimination
If the Board were to supply energy directly to the 3rd respondent it has to do so at rates lower than the rates at which electricity is supplied by it to the petitioner company
The petitioner company being thus charged at higher rates must as a distributor charge hi her rates from its other consumers with the result that the 3rd respondent would get energy at substantially lower rates than other consumers including other industrial establishments in the area
The notification thus results in discrimination between the 3rd respondent on the one hand and the other consumers on the other as also between the 3rd respondent and the petitioner company
It follows therefore that the notification of September 21 1966 cannot be sustained as a valid notification as it is discriminatory and is also in breach of the amended sec
3 2 e of 1910 Act
In that view the Board is not entitled to supply directly electricity to the 3rd respondent as the direction contained in the said notification which is the only authority under which it could so supply is invalid in law
In this view it is not necessary for us to decide the question whether the amended sec
3 2 e amounts to acquisition and whether such acquisition is in violation of article 31 of the Constitution
The said notification being thus invalid respondents 1 and 2 are directed not to supply electrical energy directly to the 3rd respondent
The respondents will pay to the petitioner company the costs of this petition
Bhargava J I agree with my brother Shelat J that the notification of September 21 1966 cannot be sustained as a valid notification because it is discriminatory and consequently I concur in the order proposed by him
I am however not prepared to hold that that notification is also invalid on the other two grounds viz that the notification and the directions contained therein to he Electricity Board to supply energy to the third respondent were in breach of the petitioner Company s rights under its licence and of The requirements of the amended section 3 a e
I may briefly indicate the reasons for my view
It is admitted on all hands that under its licences the petitioner company was not conferred monopolistic rights to supply energy 320 to the consumers in the area covered by the licences and that Government could have granted another licence to another licensee to supply energy in the same areas without violating any provision of the Electricity Act of 1910 or of the conditions or which licences were granted to the petitioner Company
It in true that the Government has not granted any such licences to any other person but in my opinion the effect of the subsequent legislation is to bring into existence another statutory licencee viz the Electricity Board and any directions permitting the Elec tricity Board to supply electricity in the areas covered by the petitioner Company s licences cannot be held to be in violation of the conditions of those licences
By the Electric Supply Act 1948 the Board was constituted a licensee for purposes of the Electricity Act of 1910 though section 26 which brought about this result provided that in that capacity the Board was subject to other provisions of the Electric Supply Act 1948
One such provision is contained in section 191 of the Act of 1948
The UP Electricity Amendment Act 1961 however introduced provi sions in the Act of 1910 the result of which was that the Board in acting as a licensee under the Act of 1910 was no longer subject to the limitation laid down in section 191 of the Act of 1948
It has not been contended that either the Supply Act of 1948 or the UP Electricity Amendment Act of 1961 was not competently enacted by the appropriate legislature
The Supply Act of 1948 was no doubt passed by the Central Legislature in respect of a concurrent subject but the UP Electricity Amendment Act of 1961 was reserved for the assent of the President and having received the assent of the President the provisions of that Act would prevail to the extent to which they may be inconsistent with the Central Act of 1948
The result of that legislation was that the Electricity Board became a licensee under the Electricity Act of 1910 and was no longer subject to the limitation laid down in section 191 of the Electricity Supply Act of 1948
The only limitation after the enactment of the UP Electricity Amendment Act 1961 that remained was that the Board could supply electricity only after the Stat Government issued a valid notification under clause e of section 32 of the Act of 1910
If the State Government was competent under the original section 32 e of the Act of 1910 to grant a licence to any person for supply of electricity in the areas covered by the licences issued to the petitioner Company I do not see why v similar result could not be validly brought about by legislation by the appropriate legislatures creating a statutory licensee for purposes of the Act of 1910
Consequently the power granted to the Electricity Board by the notification of September 21 1966 to supply electricity to a consumer in the area covered by one of the licences of he petitioner Company cannot be held to be in violation of the conditions of the licence
321 I further considered that in view of the language of the provisions contained in the amended section 32 e of the Act of 1910 it is not competent for this Court in this writ petition on the material available to declare that the notification of September 21 1966 is invalid because the direction contained therein was not made by the State Government in public interest
The power under the amended section 3 2 e is to be exercised when Government deems it necessary in public interest
The notification on the face of it shows that the State Government did apply its mind before issuing that notification and form the opinion that in this particular case it was necessary in public interest that the Board should be directed to supply electricity to respondent No 3 in the area covered by one of the licences of the petitioner Company
The opinion was formed by the
State Government on material which I do not think can be said to be totally irrelevant for the purpose of forming such opinion
As long as the State Government based its order on an opinion formed on relevant material it is not open to the courts to examine and take a different view on the basis of other material such as want of complaints by respondent No 3 to the Government that the supply of energy by the petitioner Company was not satisfactory
It is not for courts to sit in judgment over the view of the State Government which the State Government is required to form in order to make an order under the amended section 3 2 e
Consequently I cannot hold that the notification of September 21 1966 was invalid on the ground that it was issued in breach of the amended section 32 e of the Act of 1910


Summary:
The petitioner company a licensee was supplying electrical energy to the 3rd respondent
By the Electric Supply Act 1948 the Electricity Board was constituted and by Indian Electricity UP Amendment Act 1961 the disability of the Board to supply directly electrical energy to consumers such as the 3rd respondent was removed
The State Government issued a notification directing the Board to directly supply energy to the 3rd respondent
The rates chargeable by the Board for energy supplied to licensees were higher than the rates the direct consumers
The 3rd respondent terminated the agreement with the petitioner company
The petitioner company filed a petition under article 32 of the Constitution
HELD  Per Full Court  The notification could not be sustained as a valid notification as it was discriminatory
If the Board were to supply energy directly to the 3rd respondent it had to do so at rates lower than the rates at which electricity was supplied by it to the petitioner company  The petitioner company being thus charged at higher rates must as a distributor charge higher rates from its other consumers with the result that the 3rd respondent would get energy at substantially lower rates than other Consumers including other industrial establishments in the area
The notification thus resulted in discrimination between the 3rd respondent on the one hand the other consumers on the other as also between the 3rd respondent and the petitioner company
319 B D Per Wanchoo CJ Sikri Shelat and Vaidialingam JJ
The Board could not have distributed energy to the consumers though it was a licensee under 1910 Act unless a there was a scheme or b that it was authorised in public interest under the amended section 32e
Neither of these two conditions having been fulffilled the notification and the direction contained therein to the Board to supply energy to the 3rd respondent were in breach of the petitioner company s rights under its licences and the requirements of the amended section 3 2 a
3 1 8 H The allegation that the 3rd respondent suffered in production and losses as a result of short or defective supply by the petitioner company was not borne out by the record in this case
if there was any justification for the allegation now made by the respondents it is inconceivable that for all these years the 3rd respondent would not have made any complaint for such defective supply either to the Board or to the State Government
Per Bhargava J The notification cannot be held to be invalid on the ground that it was issued in breach of the amended section 3 e of the Act
If the State Government was competent under the original section 3 2 e of the Act of 1910 to grant a licence to any person for supply of electricity 313 in the areas covered by the licences issued to the petitioner company  it cannot be seen why a similar result could not be validly brought about by legislation by the appropriate legislatures creating a statutory licensee for purposes of the Act of 1910
Consequently the power granted to the Electricity Board by the notification to supply electricity to a consumer in the area covered by one of the licences of the petitioner company could not be held to be in violation of the conditions of the licence
In view of the language of the provisions contained in the amended 3 2 e of the Act of 1910 it was not competent for this Court in this writ petition on the material available to declare that the notification was invalid for the reason that the direction contained therein was not made by the State Government in public interests As long as the State Government based its order on an opinion formed on relevant material it was not open to the courts to examine and take a different view on the basis of other materials
320 G 321 B