Civil Appeal No 880 N of 1974
From the Judgment and Order dated 1361973 of the Kerala High Court in Writ Appeal No 103 of 1971
GL Sanghi VC Mathur and AM Dittia for the Appellant
PS Potti KMK Nair and Ms Malini Poduval for the Respondents
930 The Judgment of the Court was delivered by VENKATACHALIAH J
This appeal by special leave is by Messrs Fertilizers  Chemicals Travancore Limited and is directed against the Judgment and Order dated 1361973 of the Division Bench of the Kerala High Court in Writ Appeal No 103 of 1971 affirming the order dated 26111970 of the learned Single Judge in OP No 3772 of 1968
The High Court dismissed the appellant s writ petition challenging the enhancement of the electricity tariff from Rs110 per KW per annum to Rs200 per KW per annum
The enhancement was made by the Kerala State Electricity Board  Board  for short pursuant to the power reserved to it under Regulation 11 of the Kerala State Electricity Board General Tariffs Regulation 1966 Regulation framed under Section 79j read with Sec
491 of the   Act 
The enhancement was to take effect from 1681968
The period to which the challenge pertains is between 1681968 and 111970
The appellant assailed this enhancement before the High Court on grounds inter alia that the terms for the supply of electricity to appellant s industrial unit manufacturing fertilizers were governed by an agreement dated 211048 entered into with the erstwhile Trivancore State that the agreement in terms of Section 60 of the Act should be deemed to have been entered into by the Board referable to statutory powers under Section 493 of the Act that during the subsistence of the agreement the rates fixed therein were immune from any unilateral upward revision even if the purported enhancement was pursuant to the statutory regulations under Section 492 and that at all events the enhancement being selective and discriminatory was violative of Article 14 of the Constitution
We may refer briefly to the factual antecedents Appellant is a company registered under the Companies Act with its Registered Office at Eloor Udyogamandal PO in the erstwhile State of Trivancore now part of Kerala
On 21101948 an agreement was entered into between the appellant and the erstwhile princely State of Travancore for the supply of electrical energy by the latter to the former under terms and on conditions particularised in the agreement
The price was fixed at Rs110 per KW per annum
Subsequently the State merged in and became part of the Kerala State and 931 the Electricity Board was constituted for the State
On 1051965 a supplementary agreement was entered into between the appellant and the board for supply of additional power for a period of ten years at the rate of Rs140 per KW per year
On 28101966 the Board in exercise of the powers under Section 79j of the Act framed and promulgated what were called Kerala State Electricity Board General Tariffs Regulations 1966 by which inter alia power was reserved to the Board to amend from time to time the terms and conditions of supply after issue of the prescribed notice to the consumer of the Board s intention so to do in that behalf
Regulation 11 provided The Board may amend the terms and conditions of supply from time to time provided that any amendment having the effect of enhancement of charges payable by the consumer shall come into force from such date as notified in the Gazette provided that there shall be at least 30 days between the date of publication and coming into force In exercise of the power so reserved to it the Board issued a notification dated 1671968 Exhibit P2 which provided In accordance with the provisions contained in clause 11 of the Kerala State Electricity Board General Tariffs Regulations issued in Kerala Gazette No 47 dated 29111966 it is hereby notified that the rates for the supply of 4200 KW of power at 66 KV to messrs FACT availed by them as per the agreement dated 21101948 executed with the erstwhile Travancore Government is hereby revised to Rs 200 per KVA per year
This revision will take effect 30 days soon after the publication of this notification in the Gazette
 The supplemental agreement dated 1051965 which pertained to the additional supply of power for a period of ten years at Rs140 per KW per year was however left undisturbed
The case of the Board is that while the agreement Exhibit P 1 as one under Section 493 of the Act the supplemental agreement dated 1051965 however was entered into by the Board in exercise of the Statutory powers under Section 493 and was therefore immune from any alteration during its tenure
932 The principal controversy in this appeal is whether the agreement dated 21101948 could be said to be one within the contemplation of Section 493 of the Act and whether the enhancement of the tariff under Exhibit P 2 was impermissible
Another contention which was not urged before the learned Single Judge of the High Court but which was permitted to be raised in appeal before the Division Bench was whether by the said enhancement appellant was subjected to a hostile and invidious discrimination
Both contentions have been repelled by the High Court
Appellant has come up by special leave
We have heard Shri GL Sanghi learned Senior Advocate for the appellant and Shri PS Potti learned Senior Advocate for the Board
The submissions of counsel spread over a much wider field than was covered before the High Court
On the contentions urged at the hearing the points that fall for consideration in the appeal are ai Whether the agreement dated 21101948 Exhibit P 1 should be held to be one which was deemed to have been entered into by the Board under Section 60 of the Act
ii If so whether the said agreement requires to be considered as one entered into by the Board in exercise of its power under Section 493 of the Act with the attendant consequence that during its subsistence the tariff does not admit of being raised even pursuant to the Regulations made under Section 491 of the Act
b Whether at all events the enhancement under Exhibit P 2 brings about a hostile discrimination against the appellant in that while in the case of other similarly situated and circumstanced High Tension Consumers there was no such revision of the tariff
Recontentions a i and ii Shri Sanghi submitted that the agreement Exhibit P 1 though one entered into prior to the constitution of the Board  was yet by virtue of Section 60 of the Act one which should be deemed to have been entered into by or with the Board and must also be held to be 933 referable to Section 493 of the Act
Shri Sanghi placing reliance on the pronouncement of this Court in Indian Aluminium Co vs Kerala Electricity Board  contended that the agreement must be regarded as having been entered into by the Board in Exercise of its Statutory powers conferred under Section 493 of the Act and therefore immune from the operation of the Regulations
The contract under Section 493 it was submitted substitutes for the power under Section 491 and that where as here even there is in subsistence an agreement under Section 493 the power under Section 491 would be available to the statutory authority enabling an unilateral upward revision of the tariff only if the agreement itself enables such a revision
Shri Potti for the Board urged that Exhibit P 1 could not be held to fall under and be protected by Section 493 of the Act
Shri Potti urged a number of considerations which according to him militate Exhibit P 1 being accorded such a status
It is appropriate at this stage that some of the statutory provisions which have a bearing on the matter are noticed
Sections 49 59 and 79 of the Act as they then stood read Section 491 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 licencee upon such terms and conditions as the Board thinks fit and may for the purpose of such supply frame uniform tariffs
2         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 licencee 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       Section 59 The Board shall not as for as practicable and after taking credit for and subventions from the 934 State Government under Section 63 carry on its operation under this Act at a loss and shall adjust its charges accordingly from time to time Section 79 The Board may make regulations not inconsistent with this Act and the rules made thereunder to provide for all or any of the following matters namely a  to  i  Omitted as irrelevant j principles governing the supply of electricity by the Board to persons other than licensees under Section 49
k      
We may also notice Section 60 601 All debts and obligations incurred all contracts entered into and all matters and things engaged to be done by with or for the State Government for any of the purposes of this Act before the first constitution of the Board shall be deemed to have been incurred entered into or engaged to be done by with or for the Board and all suits or other legal proceedings instituted or which might but for the issue of the notification under sub section 4 of Section have been instituted by or against the Board
 In the Indian Aluminium Company s case this Court was examining the effect of an agreement entered into between the then native State of Trivancore on the one hand and the Indian Aluminium Company Limited on the other for the supply of electrical energy for an industrial enterprise of the company for reduction of alumina into aluminium by a process of electrolysis in which electrical energy was itself a primary raw material
Certain rates were agreed upon for a period of 24 years from 171941 with a franchise to the company for renewal of the agreement for a further period of 20 years
The terms of this principal agreement were varied and modified by two supplimental agreements the first dated 1681955 and the second dated 441963
Two other agreements were also entered into between the 935 parties on 3031963 and 1891965 respectively for supply of additional electricity
In 1966 the Kerala State Electricity Board promulgated regulations by which the Board empowered itself to prescribe higher tariffs for different classes of consumers
These regulations were amended in 1969
In exercise of powers thus assumed the Board purported to fix higher rates of tariffs to all extra high tension consumers including the said company
The relevant tariff was declared applicable to all extra high tension consumers notwithstanding anything contained in the agreement entered into with the consumers either by the Government or by the Board
This purported unilateral enhancement was challenged by the company
This Court in substance held that the agreement dated 171941 must be deemed by virtue of Section 60 of the Act to have been made by the Board itself that Section 493 enabled such specially negotiated loads as part of the statutorily permitted scheme that since the special stipulations in the agreement were made in exertion of the statutory power under Section 493 they could not during the subsistence of the agreement be varied unilaterally by exertion of another statutory power under the same Statute
It was observed Now fixation of special tariffs can be unilateral act on the part of the Board but more often than not it would be the result of negotiation between the Board and the consumer and hence a matter of agreement between them
It would therefore seem clear that the Board can in exercise of the power conferred under sub section 3 of Section 49 enter into an agreement with a consumer stipulating for a special tariff for supply of electricity for a specific period of time
Such a stipulation would amount to fixing of special tariff and it would clearly be in exercise of the power to fix special tariff granted under sub section 3 of Section 49 To put it differently where a stipulation in a contract is entered into by a public authority in exercise of a statutory power then even though such stipulation fetters subsequent exercise of the same statutory power or future exercise of another statutory power it would be valid and the exercise of such statutory power would protanto stand restricted
That would follow on the principle of harmonious construction If the statutory power is to have any meaning and 936 content the stipulation made in exercise of the statutory power must be valid and binding and it would as pointed out by Pennycuick VC in Dowsty Boulton vs Wolverhamption Corporation exclude the exercise of other statutory powers in respect of the same subject matter 
 Shri Sanghi relies upon the analogy of this case to support the appellant s claim that here also the agreement Ext
P 1 has a similar status
Section 491 and 2 of the Act delegates to the State Electricity Board the powers of subordinate legislation to frame uniform tariffs setting out the factors and criteria to be taken into account in fixing such uniform tariffs
Section 79j enables the Board to frame and promulgate regulations touching the matters envisaged by Section 491 and 2
Sub section 3 of Section 49 enables the Board to fix different rates of tariffs having regard to the special circumstances and particularities of individual cases
Section 494 however mandates that the Board in exercising its discretion under Sub section 3 shall not show undue preference to any person
Section 59 says that the Board shall so carry on its operations as not to incur a loss
Enumerating the considerations which according to him detract from the acceptability of the claim that the agreement in this case qualifies for recognition as one referable to the statutory power under Section 493 of the Act Shri Potti said that first the agreement cannot be deemed to be one entered into by the Board under Section 601 because it does not satisfy the essential requirement of having been entered into by the State Government that secondly the Board had not done anything with reference to the agreement which could attract Section 60 to it and accordingly though the obligations of the State Government became the obligations of the Board the agreement itself did not qualify for recognition under Section 60 of the Act that thirdly there was no fixity of tenure with reference to and in the context of which alone any immunity from unilateral alteration under Section 491 and 2 could be conceived and measured and that fourthly the agreement having been anterior to the commencement of the Act  itself it could not be held to have been entered into for purposes of the Act within the meaning of Section 60
The point that Shri Potti particularly emphasised was that the element of recognition of the agreement under and for purposes of Section 601 which in the case of the Indian Aluminium Company 937 consisted in the Board after the commencement of the Act having treated and adopted the agreement by conscious overt acts which comprised of the subsequent modifications of its terms were lacking in the present case
The additional agreement dated 1051965 in the present case was for an independent purpose and that the action of the Board in entering into this agreement did not constitute any such act in relation to the original agreement as would constitute a conscious adoption by the Board of the original agreement so as to attract Section 601
On a consideration of the matter we are of the view that it is unnecessary to examine the merits of these contentions as we think that the point could be decided with reference to an aspect which goes to the root of the matter
That is whether the agreement even if attracts Section 601 qualifies itself to be recognised as one under Section 493
We may here notice some provisions of the agreement Exhibit P 1 Clause 1 stipulates 1 The Government shall furnish to the Consumer and the Consumer shall take from the Government all the energy required by the Consumer for operating and lighting the Consumer Fertilizer Factory located at Eloor Alwaye upto a total amount of 4000 KW Clause 12 provides 12
The consumer shall not be at liberty save with the consent of the Electrical Engineer to Government to determine this agreement before the expiration of twelve calendar months from the date of commencement of supply
The consumer may determine this agreement after any time after the said period on giving the Electrical Engineer one clear month s notice in writing
If within twelve months from the date of commencement of supply the consumer should without giving previous intimation in writing to the Electrical Engineer to Government cease to consume energy under the agreement continuously for three months his agreement shall be determined
There is in the agreement no specific stipulation as to the duration or term of the agreement
The appellant is enabled after expira 938 tion of 12 calendar months from the date of commencement to terminate it by notice in writing
Shri Potti s contention is that the essential quality of the agreement which qualifies for recognition and protection as one made in exercise of the Board s power under Section 493 is its distinctiveness as to the period of operation that the protection and immunity from unilateral increase of tariff can only be with reference to the period of the agreement and that without reference to any period the idea of such protection would be unmeaning and inconceivable as the benefit of Section 493 is to enure during the period respecting which there is a commitment on the part of the Board to supply electrical energy at a fixed rate
Shri Sanghi however submitted that it was not the specificity of the period of operation of the agreement but its very existence that brings it within the protective umbrella of Section 493
Learned counsel said that what keeps an agreement outside Sec
493 was the existence in of specific stipulation in it enabling such unilateral increases of the rates
Shri Sanghi submitted that the period factor was not the decisive criterion but the very existence of a special agreement however precarious its tenure that excludes the power under Section 491 of the Act
According to Shri Sanghi even an agreement which is not in terms bound for a fixed period and which is terminable by either side by notice is eligible for recognition as one under Section 493 and that till the Board puts an end to the agreement in a manner provided by the agreement the agreement qualifies itself for such protection under Section 493
If an agreement entered into by the Board does not contain any stipulation as to the specific period for which a particular rate should apply or after so providing also contains a specific stipulation that the rates agreed upon under it could unilaterally be altered at the instance of the Board then it becomes merely academic whether such an agreement does not qualify itself to be considered as one entered into by the Board in exercise of its statutory power under Sec
493 or even if so qualified yet it does not have the effect of excluding the exertion of the other statutory powers under Sec
491
The real question is whether a unilateral increase could be effected or not
In such a case from the point of view of practical consequences it is immaterial whether the importance of the absence of the period factor lies in taking the agreement out of Sec
493 or whether being within 493 yet it does not exclude the exercise of the statutory power under Sec
491
It has been held that the Board s power to enter into an agreement fixing a special tariff for a specified period  is relatable to  or conversely one of the tests whether an agreement is entered into in exercise of the power under Sec
493 is that such agreement has the effect of excluding the other statutory power under Sec
491
The main consideration for protection from unilateral increase under Sec
491 is the period factor  in an agreement
In the Indian Aluminium Company s case it was observed 
It would therefore seem clear that the Board can in exercise of the power conferred under sub section 3 of Sec 49 enter into an agreement with a consumer stipulating for a special tariff for supply of electricity for a specific period of time
Such a stipulation would amount to fixing of special tariff and it would clearly be in exercise of the power to fix special tariff granted under sub section 3 of sec 49   
The power to enter into an agreement fixing a special tariff for supply of electricity for a specified period of time is therefore relatable to sub section 3 of sec
49 and such an agreement entered into by the Board would be in exercise of the power under that sub section   emphasis supplied  
To hold that the Board could unilaterally revise the charges notwithstanding these stipulations would negate the existence of statutory power in the Board under words the Board had no power to enter into such stipulations
That would negate the existence of statutory power in the Board under sub section 3 of Section 49 to fix the charges for a specified period of time which would be contrary to the plain meaning and intendment of the section emphasis supplied The above excerpts would suggest that a contract which does not have and provide for an obligation to supply electricity at a specific rate for a specific period and does not therefore have the effect of excluding Section 491 cannot be said to fall under Section 493
If by an unilateral volitional act on the part of the Board the assurance of a fixed rate to the consumer could be denuded that circumstance in itself would be such as to detract from the agreement being considered as one entered into in exercise of power under Section 493
The importance of the period factor was again referred to in Delhi Cloth  General Mills Co Ltd vs Rajasthan State Electricity Board 940 It was observed  
In the Indian Aluminium Company s case the Court speaking through Bhagwati J held that agreements for supply of electricity to the consumers for a specified period at a special tariff are the result of negotiations between the Board and the consumers and hence a matter of agreement between them
Such agreements for the supply of electricity to the consumers must therefore be regarded as having been entered into by the Board in exercise of the statutory powers conferred under Sec
493 and thus there could be no question of such stipulation being void as fettering the exercise of the statutory powers of the Board under sec
491  The agreement in this case was precarious in regard to the period of its operation and was susceptible to termination at the volition of the Board
It cannot therefore be construed as one which was intended to give a statutory protection for the tariff by means of a special agreement by the exercise of the statutory power of the Board under Section 493
Shri Sanghi however contended that as long as the agreement did subsist and was not terminated a unilateral change was impermissible
To this two answers could be posited
First is as already held that if there is no statutory protection and immunity from unilateral change in view of the precariousness of the tenure and its susceptibility to defeasance at the mere volition of the Board the act did not furnish it with the status of one under Section 493
The second is that at all events even if the agreement was one under Section 493 the giving of 30 days notice though issued in compliance with the requirement of the regulation puts an end to the agreement
Looked at from either angle the enhancement is not rendered infirm
Shri Sanghi referred to certain observations of Lord Denning MR in Staffordshire Area Health Authority vs South Staffordshire Water Works Co 1978 3 All England Reports 769
In that case a water company and the authorities of a hospital entered into agreement in the year 1929 whereby the hospital was to receive 5000 gallons of water every day free and all the additional water required at 7d
for 1000 gallons at all times hereafter 
In 1975 the water company gave a six months notice to the hospital intending to terminate the 1929 941 agreement
The hospital contested the right of the company to terminate the agreement relying upon the at all times hereafter  clause
The trial court upheld the hospital s claim and held that the company could not resile from the contract
But the Court of Appeal held that having regard to the fall in the value of money since the agreement was made circumstances had arisen which the parties had not foreseen and that the agreement was not intended to hold good in the altered state of circumstances
The agreement was held terminable with reasonable notice
This case holds out its own features of interest for the schoolmen
In a long term contract of indefinite duration it is not unusual to find provisions for cancellation with reasonable notice and for payment of compensation in the event of termination
It is also not unusual to infer under certain circumstances terminability by notice even in the absence of an express provision in that behalf upon a construction of the contract
In the case cited by Shri Sanghi Lord Denning invoked the doctrine of frustration
Learned authors in Cheshire and Fifoot s Law of Contract 10th Edition call that case a difficult case  and that the learned Judge Master of Rolls reached an interesting and controversial decision 
A contract which contains no express provision for its termination may well be terminated by reasonable notice by one or the other party depending upon the implication of a term or upon a true construction of the agreement
That principle has no application to the present case
Accordingly on contentions a i and ii we hold that Exhibit P 1 did not qualify to be recognised and protected under Section 493 of the Act
Re Contention b Appellant raised the contention of a hostile discrimination before the Division Bench in appeal
In the course of the additional grounds raised on 3151971 the appellant averred I respectfully submit that the 1st respondent being committed to supply Indian Aluminium Company Limited quantities of electrical energy of 16000 KWY at the rate of Rs100 105 per KWY for a period upto 1995 and having further agreed to supply electrical energy to the said company at the rate of Rs130 KWY for a period upto 50 years as from 1st April 1965 has in enhancing the tariff rate for supply of electrical energy to the appellant as per Ext
P 2 to Rs200 per KVA per year clearly violated section 49 of 942 the Act
The 1st respondent as for as I am awarehad not increased tariff rates in the case of other extra high tension consumers similarly placed as the appellants who are referred to in paragraph 11 of the counter affidavit of the 1st respondent in July 1968 by virtue of its powers under Ext
P 3 by notification like Ext
P 2  
The effect of Ext
P 2 order is that extra high tension consumers who are similarly placed as the appellant have been given undue preference as compared to the appellant in that while the tariff applicable to the appellant was increased as per Ext
P 2 there was no similar upward revision in the case of the other extra high tension consumers who are referred to in paragraph 11 of the counter affidavit of the 1st respo ndent
 Again in the reply affidavit dated 1631973 the appellant said 6
With respect to the averment in paragraph 3 I submit that the petitioner has been discriminated
Not only Indian Aluminium Company Ltd but also companies like Travancore Cochin Chemicals Ltd Premier Tyres Ltd Cominco Binani Zinc Limited Travancore Rayons Limited etc have been given the benefit of the contractual rates and the existing contracts with those companies have not been superseded till 111970 when uniform rate is prescribed for all
The averment that the appellant company and the Indian Aluminium Company Limited are not similarly situated is made without any basis for at any rate for the purpose of Article 14 it cannot be denied that they are comparable concerns
 Shri Sanghi contended that while the appellant was subjected to a steep revision in the tariffs other similarly circumstanced high tension consumers were left unaffected
Learned counsel also contended that under Regulation 6 of Ext
P 3 one of the classifications was High tension consumers which included the appellant and that any further sub classification purported by the Board between high tension consumers and extra high tension consumers to support a further classification not contemplated by the Regulation itself was impermissible
Shri Sanghi relied upon the case of Messrs Indian Metal  Ferro Alloys Ltd vs State of Orissa  where a further purported classification in the matter of the benefit of clubbing of the allotments of electricity based on considerations which were not 943 recognised for purposes of the statutory classification of the consumers was held impermissible
In that case amongst similarly circumstanced consumers who fell under the same classification of power intensive units a further classification for the denial of the benefit of clubbing on the ground that the particular consumer being an export oriented unit had failed to furnish the required export performance was held impermissible
This Court held  
When all other power intensive units termed as domestic units  are being allowed the benefit of clubbing it would not be legally proper to deny the same facility to an industry classified as power intensive unit  merely on the ground that being an export oriented unit it has failed to fulfil the conditions pre requisite for allocation of additional power
Such differential treatment would amount to arbitrary discrimination violative of Article 14 of the Constitution and it cannot be permitted  
So long as the benefit of clubbing is allowed to domestic power intensive units such benefit cannot be denied to an export oriented unit which has not been allocated any additional power on the basis of its export performance
In the present case the Board while denying that there was any hostile discrimination averred that no similarly situate consumer had been left out of the tariff revision and only cases where the Board owing to the subsistence of the agreements protected under Sec
493 was under a legal inhibition from making an unilateral enhancement had been left out
In addition the Board set out two other criteria which according to it placed the appellant in a different class distinguishing the case of the Indian Aluminium Co with which appellant pleaded similarity
These as set out in the counter affidavit dated 531973 filed before the Division Bench are i that the appellant was not a power intensive  industry operating at very high load factor whereas the Indian Aluminium Company is a power intensive industry  operating at a very high load factor which required them to be classified differently
The two consumers were not on the same footing in the matter of consumption and the purpose for which the energy was supplied
ii that considerations like the power factor were taken into 944 account in fixing the tariff
So far as the Indian Aluminium Company is concerned the power factor was 09 and they were bound to maintain that rate whereas the appellant company was required to maintain the same at 085 as per the agreement and it could go down to 080 which was advantageous to the appellant company
On a consideration of the matter it appears to us that the charge of discrimination against the respondent Board cannot be said to be established
Indeed in the present case the appellant has not laid a proper foundation for examination of a case of discrimination under Article 14
The allegations of discrimination must be specific
See  para 12 State of Maharashtra and Anr
vs Basantilal Mohanlal Khetan and Ors It is also trite that action of Governmental authorities must be presumed to be reasonable and in public interest
It is for the person assailing it to plead and prove the contrary
See Kasturi Lal Lakshmi Reddy vs State of J  K  at 1357
But here allegations are in general terms
Even so the respondent board has made categorical statement that in all those cases referred to in para 6 of the appellant s reply affidavit tariff had been increased except where the consumer had the protection of an agreement under Sec
493 which prevented an unilateral increase
That apart the circumstance that respondent Board was rendered by virtue of the subsistence of an agreement under Sec
493 powerless to make an unilateral increase can form a valid ground for differential treatment as between cases covered by Section 493 on the one hand and those in which the Board was competent and was at liberty to give effect to the increase on the other
In Bisra Stone Lime Co vs Orissa State Electricity Board  at 314 this Court in similar context held  
A plea of discrimination which is available when Article 14 is in free play is not at par with the interdict of undue favour  under section 49 of the Act
Apart from this when law makes it abligatory for certain special agreements to continue in full force during their currency stultifying the power of the Board to revise the rates during the period no ground of discrimination can be made out on the score of exempting such industries as are goverened by special agreements
 945 Accordingly contention b also fails
In the result for the foregoing reasons this appeal fails and is dismissed but without an order as to costs
NVK Appeal dismissed


Summary:
These two appeals Civil Appeal No 3446 of 1987 and Civil Appeal No 3447 of 1987 were filed in this Court against the judgment of the High Court in the Writ Petition No 6789 of 1982
Ratan Prakash Mangal and Kuldip Singh respondents Nos 1 and 2 in the Civil Appeal No 3446 of 1987 and the appellants in Civil Appeal No 3447 of 1987 had filed the said writ petition challenging a notification dated 20th May 1982 issued under section 41 read with section 174 of the Land Acquisition Act 1894 the Act and also the consequential notification dated 21st May 1982 issued under section 6 of the Act with regard to a plot No 289
The notification under section 41 of the Act was quashed in part in so far as it invoked Section 174 of the Act and the notification under section 6 was quashed as a whole with regard to the said plotNo
The Civil Appeal No 3446 of 1987 was preferred by Krishi Utpadan Mandi Samiti Muzaffar Nagar for which the said plot had been acquired for setting aside the judgment of the High Court
Civil Appeal No 3447 of 1987 was preferred by Ratan Prakash Mangal and Kuldip Singh afore mentioned hereinafter referred to as respondents Nos 1  2 asserting that the notification under section 41 should have been quashed by the High Court in its entirety and not only in so far it invoked section 174 of the Act
Initially a Notification dated 20th March 1975 was issued under section 41 of the Act for acquiring land including the plot No 289 for construction of a market yard for the appellant Krishi Utpadan Mandi Samiti
Later this Notification was superseded by another Notification dated 30th August 1975 issued under section 41 with regard to land which did not include the said plot
Subsequently another Notification dated 26th October 1978 was issued under section 41 read with Section 174 of the Act with regard to land including the plot abovementioned
The Notification dated 26th October 1978 was followed by 183 a Notification dated 27th October under section 6
Prior to the issue of these Notifications respondents Nos 1 and 2 had purchased the said plot No 289
The said respondents Nos 1 and 2 had challenged the Notifications dated 26th October 1978 and 27th October 1978 by a writ petition in the High Court
The High Court had quashed the two Notifications in so far as Plot No 289 was concerned
This Judgment of the High Court had been challenged by Krishi Utpadan Mandi Samiti before this Court in Civil Appeal No 2970 of 1979
This Court had held that even though the quashing of the Notification under Section 6 had been justified the High Court had not been right in quashing the Notification under section 41 in its entirety and had set aside the Judgment of the High Court in so far as it had quashed the Notification under section 41 in its entirety while maintaining the rest of the Judgment with a direction regarding inquiry under Section 5A into the objections of the respondents Nos 1 and 2 to the proposed acquisition etc
In pursuance of the said direction inquiry under section 5A had been made and the Land Acquisition Officer had submitted a report on 20th January 1981 after about 15 months of the direction above said of this Court to the effect that the Plot No 289 might be exempted from acquisition
The Government did not agree with the said report and issued the Notifications impugned in present appeals
Allowing Civil Appeal No 3446 of 1987 and dismissing Civil Appeal No 3447 of 1987 the Court  HELD There was no doubt with regard to the legal position that the Report dated 20th January 1981 of the Land Acquisition Officer was not binding on the State Government and it was still open to it to continue the proceedings for the acquisition of the Plot No 289 notwithstanding the said report
The Government had its reason why in place of issuing a Notification under section 61 of the Act in continuation of the Notification dated 26th October 1978 under section 41 fresh notifications under section 4 and 6 had to be issued as also the reason for the delay in issuing the fresh Notifications as was apparent from the record
As regards the submission that section 174 of the Act had been erroneously invoked in fresh Notification under section 41 dated 20th May 1982 also and that inquiry under Section 5A had again to be made before issuing this Notification it was enough to point out that once an inquiry under the said section had already been made and the parties had been given full opportunity to substantiate their case in the enquiry and the State Government had not been inclined to agree with the 184 report of the Land Acquisition Officer submitted in pursuance of that inquiry it would have been a futile exercise to repeat the whole performance again
After the issue of the earlier Notification dated 26th October 1978 a period of nearly 3 12 years had expired when the fresh Notification dated 20th May 1982 above said was issued and apparently the necessity to acquire the plot No 289 during this period became more acute due to this delay
Further as stated in the said Notification itself the urgency had become more imminent on account of the direction issued by this Court on 2nd March 1982 in Writ Petition No 1318 of 1982 filed by the traders in gur khandseri and foodgrains Muzaffar Nagar challenging the Notification under Section 72b of the UP Act No 25 of 1964
Consequently it was diffcult to hold that the opinion of the State Government that it was a fit case to invoke section 174 of the Act was invalid on the ground that there was no basis or material in support of the opinion
On the facts of the case it was not possible to hold that the Notification dated 20th May 1982 had been issued by the State Government in colourable exercise of its power
194A F The Notification dated 20th May 1982 and 21st May 1982 had not been challenged by respondents Nos 1 and 2 on the basis of mala fides of any particular officer of the State Government
What was urged was that it was a case of legal mala fides inasmuch as in issuing the said fresh Notification dated 20th May 1982 an attempt had been made by the State Government to circumvent the direction of this Court issued in the Civil Appeal No 2970 of 1979 to make inquiry under Section 5A of the Act and to proceed thereafter in accordance with law the State Government did make an inquiry under Section 5A of the Act in pursuance of the direction of this Court after giving full opportunity to the concerned parties to substantiate their case
It was difficult to agree with the submission of respondents 1 and 2 that the government attempted to circumvent the direction of this Court
A case of legal mala fide was not made out
194G H 195B The Government all through was of the opinion that Plot No 289 did not deserve to be released from acquisition
Also this plea lost significance and became almost of academic value inasmuch as the State Government had not issued a notification under section 61 of the Act in continuation of the Notification dated 26th October 1978 under Section 41
After the issue of the fresh Notification what was really to be seen was whether there was justification for invoking section 174 of Act or not
There was such a justification
There had been a material change in the circumstances after the report of the Land Acquisition 185 Officer dated 20th January 1981 to justify Section 174 of the Act being invoked and to dispense with a further inquiry under section 5A of the Act
196D E 198C The submission of the respondents 1 and 2 about the lack of application of mind before issuing the Notification dated 20th May 1982 with regard to plot No 289 had no substance as indicated by the original record produced by counsel for the State Government
The effect of issuing a fresh Notification under Section 41 and the delay in issuing it had benefited the respondents 1 and 2 inasmuch as now they would be entitled to compensation not on the basis of market value of plot No 289 as on 261078 when the earlier Notification under Section 41 was issued but as on 20th May 1982 when the fresh Notification under the said section was issued
200G H 201A Civil Appeal No 3446 of 1987 was allowed and the judgment of the High Court in the Writ Petition No 6789 of 1982 was set aside and as a consequence Civil Appeal No 3447 of 1987 was dismissed
201B State of Punjab vs Gurdial Singh  Ors   The Collector District Magistrate Allahabad and Anr
vs Raja Ram Jaiswal etc
   PL Lakhanpal vs Union of India  Ors  Siemens Engineering  Manufacturing Co of India Limited vs Union of India  Anr  Narayan Govind Gavate vs State of Maharashtra  and State of UP vs Pista Devi   referred to