IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NOS.1038/2004 With SPECIAL CIVIL APPLICATION NOS.5663, 2933, 4469, 4471, 2830, 2912, 4049, 8408, 5823, 6330, 9073, 9090, 11648, 13599, 13600, 13601 AND 13602 OF 2004 HON'BLE MR.JUSTICE K.S.JHAVERI ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- HINDUSTAN PETROLEUM CORPN. LTD Versus GUJARAT ELECTRICITY BOARD -------------------------------------------------------------- Appearance: Mr. G.N. Shah, Mr. M.I. Hava, Mr. Manish R. Bhatt, Mr. K.B. Naik and Mr.G.M. Joshi for the petitioners. Ms Lilu Bhaya for the respondent Board. -------------------------------------------------------------- CORAM : HON'BLE MR.JUSTICE K.S.JHAVERI Date of decision: 17/12/2004 CAV JUDGEMENT 1.0 A common question of law and facts is involved in all these petitions and therefore all the petitions are considered together and decided by this common judgement. 2.0 The petitioners herein are consumers of Gujarat Electricity Board. They are High Tension Consumers and they have been charged on the basis of tariff applicable to them as HT consumers. 2.1 According to the petitioners, the respondent Board issued exhorbitant supplementary bills to the petitioners being differential amount due to revision of tariff on account of change of classification from HTP-I to HTP-II(A). The petitioners were also informed that although original connection was released under HTP-I category, considering the activities carried out by the petitioners in their units, their units would fall under HTP-II(A) category. It appears that the new tariff was introduced with effect from 10.10.2000 and the special bill has been calculated on the basis of new tariff. Therefore, the petitioners herein have challenged the special bills issued to them, the action of arbitrarily changing the classification from HTP-I to HTP-II(A) and the demand of new tariff with retrospective effect. 3.0 Mr. G.N. Shah, learned counsel for some of the petitioners advanced the following arguments: 3.1 The Electricity Act, 2003 (hereinafter referred to as the Act) was brought into force by Central Government Notification dated 10th June 2003. Section 172(d) of the said Act authorizes a State Government to declare that the said Act shall not apply in the State for such period not exceeding six months from the appointed day i.e. 10th June 2003. The Gujarat Government, by its notification dated 4th July 2003, declared that the provisions of the Act shall not apply to the State for a period of six months and therefore the provisions of the Act became applicable in the State of Gujarat from 10th June 2003. By separate notification dated 10th June 2004 the State Government authorized the respondent Board to continue to function as a licensee for a further period of six months from 9th June 2004. He submitted that under section 172(a), the Board has to function from 10th December 2003 as a licensee in accordance with the provisions of 2003 Act because under the proviso to section 172 it is merely the extension of the period for the Board to continue as a licensee. The proviso does not exempt the Board from the provisions of the Act which became applicable to the State on 10th December 2003. In that view of the matter from 10th December 2003 the provisions and the limitation from the date from which the demand is made by the Board of two years contained in section 56 of the Act became applicable to the respondent Board. 3.2 Section 56 provides that if a person neglects to pay any charge for electricity or any sum other than a charge for electricity, then 15 clear days' notice has to be given and only thereafter the supply of electricity could be disconnected. As far as the present case is concerned, the amount claimed by the respondent Board is for differential amount in respect of electricity charge supplied from October 2000 to October 2003. The demand notice is issued in the year 2004. The petitioners have been making payment of regular electricity bill. Therefore, the contention on behalf of the petitioners is that Section 56 cannot be invoked for disconnection of electricity after 10.12.2003 as the limitation of 2 years applies in the present case to GEB. 3.3 The counsel for the petitioners submitted that an agreement has been signed between the petitioners and the Board after 3.3.1989 after the Board's Resolution dated 3.3.1989 of HPC on 3.3.1989 for the supply of electricity of 150 KVA (contract demand). This contract has been implemented by the Board and the petitioners, without any dispute, have paid all the charges to GEB as per their bills for the amounts charged. He further submitted that the respondent Board had never contended for 15 years during the currency of the Agreement that there was a mistake in entering into the contract with the petitioners. The respondent Board has not even pleaded in the reply that there was a mistake in the contract. 3.4 The counsel for the petitioners contended that the Board had not given any opportunity of hearing to the petitioners and the demand for differential duty is in violation of principles of natural justice and fair play. 3.5 According to learned counsel, the Indian Electricity Act, 1910 stood repealed from 10.12.2003 when the 2003 Act was brought into force by the State of Gujarat. Therefore notice issued by the Board under section 24 of the repealed Act is illegal and unsustainable. 3.6 Mr. Shah lastly contended that Section 86 of the 2003 Act defines the functions of the State Commission and it does not permit State Commission to consider disputes between a consumer and the respondent Board. He further submitted that the present term of the State Commission will expire on 9.12.2004 and in the meantime the State Commission is expected to discharge the functions provided in Section 86. 4.0 Mr. M.I. Hava, learned counsel for some of the petitioners submitted that the Board has no power to classify or re-classify the tariff schedule and the power is vested only in the State Commission under section 22 and section 29 of the Electricity Regulatory Commission Act,1998 read with section 86 of Electricity Act, 2003 and Regulation 78 of the Regulation framed by the Commission. 4.1 He submitted that as held in the case of Mardia Chemicals Ltd. Vs. Gujarat Electricity Board, reported in 2002(2) GLR 1947, once the Tariff order is made by the Commission, the Board is bound by such tariff order and it remains in force unless it is amended by the Commission. He contended that the Board cannot charge its customers any tariff for supply of electricity in a manner different from the tariff approved by the Commission under its tariff order. 4.2 Mr. Hava further submitted that under Commission's order dated October 2000 the petitioners squarely fall under HTP-I and were all along charged Tariff thereunder. The Board has not approached the Commission under section 64 for modification, amendment or revision of the classification and the Commission has not passed any order, and therefore the the action of the Board in suo motu revising or changing the classification is bad and illegal. 5.0 Mr. M.R. Bhatt, learned counsel for some of the petitioners contended that the petitioner has been billed as per HTP-I tariff upto August 2003 in view of the agreement between the petitioner and the respondent Board and the impugned bill is raised for the first time demanding revised tariff from the date of initial energy connection which cannot be done by respondent Board. According to him even as per the Commission's order the petitioner would be an Industrial Undertaking carrying out manufacturing activity. This view is taken by the Commission in its decision in the case of Sabic Laboratory, wherein it is held that HTP II is for hotels, amusement park, etc. and similar consumers. The petitioner establishment is registered under the Factories Act and as per section 2(k), manufacturing process means any process for pumping oil. 5.1 In support of his contention Mr. Bhatt has relied upon decisions (a) in the case of M/s Andhra Steel Corpn. Ltd. Vs.A.P.S.E. Board, reported in AIR 1991 SC 2222 wherein it is held that pumping is part of entire process and integral part of manufacturing activity, (b) in the case of Empire Industries Ltd. Vs. Union of India, reported in AIR 1986 SC 662, wherein it is held that the process of bleaching amounts to manufacturing activity, (c) in the case of Gramophone Co. of India Ltd. Vs. Collector of Customs, Calcutta, reported in (2000)1 SCC 549 wherein it is held that making of Blank audiocassette vis-`-vis recorded cassette amounts to manufacturing activity, and (d) in the case of G.L. Hotels Limited Vs. T.C. Sarin, reported in (1993)4 SCC 363 the view taken is that even kitchen in a hotel has to be treated as factory since connected activity has to be seen as a whole. 5.2 Mr. Bhatt has also contented that GEB, being the licensee, cannot determine tariff and that in view of the language used in section 24 of the old Act the amount "due" has to refer to the period of filing suit and therefore notice was issued beyond the period of limitation. 6.0 Mr. K.B. Naik, for M/s Trivedi & Gupta learned counsel for the petitioners advanced the following submissions: 6.1 The action of the respondent Board unilaterally changing the classification from HTP-I to HTP-II(A) has been taken without notice and hearing and therefore the same is against the principles of natural justice. In this context he has relied upon the decisions reported in the case of Haji Abdul Shakoor & Co. Vs. Union of India reported in AIR 2002 SC 2423, and in the case of Mohinder Singh Vs. Chief Election Commr reported in AIR 1978 SC 851. 6.2 Learned counsel for the petitioners contended that the respondent Board has sought to effect the change in classification retrospectively against the well-settled legal principles of law that no action or an order can be given retrospective effect in any circumstance. To support this contention he has relied upon the decision in the case of State of Orissa Vs. Mangalam Timber Products Ltd., reported in (2004)1 SCC 139 wherein it is held that when the Government seeking to revise the terms of the contract, effective from a back date, to the detriment of the respondent, promissory estoppel is applicable. 6.3 According to the learned counsel the respondent Board has not communicated at any point of time that they propose to effect the change in classification and directly an order was communicated to the petitioners effecting the change in the classification. According to him the respondents have relied upon directives of its Head Office at Baroda, but such direction was neither supplied to the petitioners nor it is produced on the record of the petitions. 6.4 Learned counsel for the petitioners submitted that the respondent has neither terminated nor even amended the contract after following the procedure and in accordance with law, which clearly provided that the units in question would be charged as per the applicable tariff for HTP-I class. Therefore, without change in the agreement the respondents are not entitled to charge the tariff for HTP-II(A). 7.0 Mr. Gautam Joshi appearing for some of the petitioners submitted that no opportunity of hearing to the petitioners is given and no decision of the Head Office is placed on record. He submitted that he adopts the submissions already made by Advocates for petitioners to avoid repetition. 8.0 In support of his contentions, leanred counsel for the petitioners relied upon the following decisions: 8.1 In the case of Mardia Chemicals Ltd. Vs. Gujarat Electricity Board, reported in 2002(2) GLR 1947 this Court has held that the Gujarat Electricity Regulatory Commission has no jurisdiction to adjudicate upon the dispute. In para 10.2 this Court held as under: "10.2 Section 29 again emphasizes the nature of the function of the State Commission, which is determination of tariff, inter alia, for supply of electricity including retail supply. It enjoins a duty on the State Commission to determine the tariff in accordance with the provisions of the Act. Sub-section (2) of Sec.29 lays down the guidelines on the basis of which the Commission shall determine by regulations the terms and conditions for the fixation of tariff. These guidelines for making regulations laying down terms and conditions for the fixation of tariff require factors mentioned therein to be taken into account by the Commission while determining the tariff. The general guidelines that the factors which would encourage efficiency, economical use of resources, good performance as well as interest, of consumers should be taken into account, as provided in clauses (d) and (e), cannot be read to spell out any power of the Commission to adjudicate upon the disputes between the consumer and the Board. Even if the Commission may have power under section 29(3), which expects it not to show any undue preference to any consumer of electricity, but enables the Commission to differentiate according to the consumers' load factor, power factor, total consumption of electricity during any specified period, etc., those are the matters having bearing on fixation of tariff and they have nothing to do with the adjudication of any dispute that may arise between the consumer and the Board, when on the basis of the revised tariffs, the dues are sought to be recovered and action taken for their non-payment, as contemplated by Sec.24(1) of the Electricity Act, 1910." Para 14 of the said decision reads as under: "14. As per Regulation 78 of the Regulations of 1999, as noted above, the Board cannot charge its customers any tariff for supply of electricity without the general or specific approval of such tariff by the Commission, and that the Board has to evolve tariff proposals as envisaged by Regulation 84 and the tariff determined by the Commission and published as per the Rules would remain in force until any amendment is approved by the Commission and published as provided under Regulation 88 of the Regulations." 8.2 In the case of M.S.E. Board Vs. M/s Madhusudandas, reported in AIR 1966 Bombay 160 it is held as under: "The defendant had entered into an agreement to take the supply and the plaintiff had agreed to supply the electrical energy for a period of five years. No doubt, the agreement which prescribed the rates showed that the rates were flexible in the sense that they were payable according to the tariff fixed by the licensee from time to time. Even so, when the system of charging was changed by the new tariff, the defendant could honestly believe that the plaintiff would not be entitled to charge according to the new tariffs. In view of the bona fide dispute between the parties the plaintiff was not justified in cutting off the electric supply." 8.3 In the case of Orissa Fibre Vs.Orissa State Electricity Board, reported in AIR 1973 Orissa 104 it is held that when there is a bona fide dispute raised by the consumer as to the amount payable, it cannot be said that he has neglected to pay the dues. In such a case action under section 24(1) cannot be taken. 8.4 In the case of Hindustan Aluminium Corporation Ltd. Vs. The U.P. State Electricity Board, reported in AIR 1973 Allahabad 263, it is held as under: "Applying this principle to Section 24 of the Electricity Act, no reasonable consumer would be expected to pay an amount which he bona fide disputes with the supplying company. In the present case, the petitioner has disputed the demands made by the Board. It has not been shown that the disputes raised are not bona fide and are not reasonable, and that being so it cannot be said that the petitioner has neglected to pay the demands. Moreover in case the disputes raised by the petitioner were frivolous or baseless, the Board would be the last person willing to make the proposal to refer the disputes to the arbitration of successive Ex Chief Justices of India." 8.5 In the case of Bajrang Tea Mfg. Company (Pvt) Ltd. Vs. Assam S.E.B., reported in AIR 1991 Gauhati 42 it is held that for retrospective revision in electricity tariff can be done only with proper and cogent reasons. In Para 42A and 42B it is held as under: "...In each case when taxes are imposed retrospectively proper and cogent grounds as held by the apex court must be given and the levy with retrospectively must be justified. 42B. We see in the facts the Government nor the Board in their counters in opposition gave no reasons as to why with retrospective effect tariff revision is enforced instead the two have been contending there was no retrospectively when tariff is enforced from July 1, 1986. 8.6 In the case of Sehjiv Kumar Tandon Vs. Delhi Electric Supply Undertaking, reported in AIR 1994 Delhi 202 it is held as under: "... Since the respondent has not complied with statutory requirement of serving show cause notice before disconnecting the electricity, to my mind, this is a clear violation of law, coupled with the fact that theft and misuse have yet not been proved, the court below could not have imposed any condition while directing the respondent or restore the electricity 1 KW. As regard the revised demand raised the same on the face of it is doubtful and yet to be determined, hence for this reason also no condition could be imposed." 8.7 In the case of Dumraon Textiles Limited Vs. Bihar State Electricity Board, reported in AIR 1995 Patna 43 it is held as under: "19. The Board being a public authority discharge Governmental function. A consumer depends upon the authorities of the Board for its day to day amenities which are essential for human existence. It is the State within the meaning of Article 12 of the Constitution of India. It thus require to act principles of natural justice. Its act thus must be fair and conform to the standards of public morality. Its officers cannot act arbitrarily or raise demand for substantial amount of money without affording opportunity of hearing to the consumer." 9.0 Ms Lilu Bhaya, learned counsel for the respondent Board has made the following submissions: 9.1 That right from the year 1987 i.e. from the date of connection the petitioners are required to be charged as per the tariff rate HTP-II(A). She placed reliance upon the tariff booklet published by the respondent Board in the year 1987 wherein the rate HTP-II(A) has been classified wherein it is shown that H.T.Consumers having contracted load of 500 KVA and above are requiring power supply for the purposes mentioned therein and will be classified in HTP-II(A). She submitted that even in the booklet published in the year 1990 also, the same rate has been mentioned. 9.2 That after coming into force of the Electricity Regulatory Commissions Act, 1998, the powers to frame tariff and to decide tariff is with the Commission under section 29 of the said Act. Accordingly the Commission has decided the tariff vide its orders dated 10.10.2000 and 22.12.2000. According to the learned counsel, the Commission has, while passing the said orders, also confirmed the classification which was done earlier by the respondent Board keeping in HTP-I, only those H.T. consumers who have contracted load of 100 KVA and less and who are engaged in manufacturing activities and classifying all other H.T. consumers with contract load of 100 KVA and above in HTP-II(A). She submitted that pursuant to the aforesaid orders of fixing tariff the respondent Board has published tariff booklet in the year 2001 and in the said booklet vide Clause 11 the rate of HTP-II(A) has been mentioned. The classification of tariff HTP-I and HTP-II is the same since the year 1987. Only the tariff rates have been revised from time to time either by the Board or by the Commission as the case may be. 9.3 That the Government of Gujarat has extended the application of the Electricity Act, 2003 by issuing a notification declaring that the provisions of the Electricity Act, 2003 shall not apply to State of Gujarat for a period of six months and therefore the Act did not commence till 10.12.2003. She further submitted that the respondent Board would be licensee governed by the repealed laws for a period of one year from 10.12.2003 and the provisions of the Electricity Act, 2003 are not applicable in the present case. 9.4 That as per the provisions of the Regulatory Commissions Act and the Electricity Act, 2003 it becomes clear that power to determine tariff was with the State Commission. It is the State Commission which determines what tariff should be charged by the licensee to the consumers. Determination of tariff and classes of consumers to which tariff applied had to be determined by the State Commission and its decision in that regard was final. In other words, respondent no.1 who is a licensee is bound by the decision of the State Commission in regard to the tariff. Any modification or change in the tariff determined by the State Commission can be made only by the State Commission and not by the Board or any other Authority. Therefore if a question is raised as to whether the tariff applied by the respondent no.1 is correct or not, a consumer had to approach the State Commission. 9.5 According to her, the provisions of Regulatory Commission's Act and Gujarat Electricity Industry (Reorganisation and Regulation) make it clear that the decisions and orders rendered by the State Commission shall be valid and binding to all concerned including respondent no.1 and the petitioners. Therefore all the decisions of the State Commission relating to tariff including HTP-I and HTP-II(A) and HTP-II(B) would continue to hold the field and they would be binding to all concerned including petitioners who are consumers. She submitted that so far as power of State Commission to determine tariff is concerned, there is no difference after coming into force of the Reorganization Act. This power continues to vest in the State Commission. Therefore, if any variation or modification with regard to tariff is sought to be made, the consumer has to approach the State Commission. 9.6 Ms Bhaya submitted that even under the New Act section 172(b) empowers the Board to Act whatever action has been taken by the Board under the Old Act any approval, clearance, permission granted under the old Act for one year will continue to operate as if repealed law was in force. Therefore the decision taken by the Board on 6.1.2004 is as per the tariff and the aforesaid action is having the force of law. 9.7 According to Ms Bhaya the correct tariff applicable to the petitioners was for HTP-II(A) with effect from 10.10.2000. However, the bills which were issued to the petitioners were incorrectly issued on the basis of HTP-I. Therefore it was a mistake of law committed by the Board and it is open for the Board to correct such mistake. She submitted that for correction of such mistake, limitation will not come in the way of the respondent Board. She further submitted that during the application of powers under section 49 the Board has determined the tariff from time to time and the petitioners, from the date of getting the connection, were classified in HTP-II. They were never classified as HTP-I but inadvertently it has been shown in the agreement as HTP-I. She submitted that the correct tariff was HTP-II from the date of agreement for the petitioners. Subsequent classification is made from HTP-II to HTP-IIA and HTP-IIB in 2000. 9.8 Ms Bhaya submitted that under section 24 of the Indian