Case: Fertilizers &amp; Chemicals Travancore Ltd Vs. Kerala State Electricity Board &amp; Another

This appeal, by special leave, is by Messrs Fertilizers and Chemicals Travancore Limited and is directed against the judgment and order dated June 13, 1973 of the Division Bench of the Kerala High Court in Writ Appeal No. 103 of 1971 affirming the order dated November 26, 1970 of the learned Single Judge in O. P. No. 3772 of 19682. The High Court dismissed the appellants writ petition challenging the enhancement of the electricity tariff from Rs. 110 per K. W. per annum to Rs. 200 per K. W. 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 79(j) read with Section 49(1) ofthe Electricity (Supply) Act, 1948, (Act). The enhancement was to take effect from August 16, 1968. The period to which the challenge pertains is between August 16, 1968 and January 1, 19703. The appellant assailed this enhancement before the High Court on grounds, inter alia, that the terms for the supply of electricity to appellants industrial unit manufacturing fertilizers were governed by an agreement dated October 21, 1948 entered into with the erstwhile Travancore 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 49(3) 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 49(2) and that, at all events, the enhancement, being selective and discriminatory, was violative of Article 14 of the Constitution4. We may refer, briefly, to the factual antecedents : Appellant is a company registered under the Companies Act with its Registered Office at Eloor, Udyogamandal P. O. in the erstwhile State of Travancore, now part of Kerala. On October 21, 1948 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 Rs. 110 per KW per annum. Subsequently the State merged in and became part of the Kerala State and the Electricity Board was constituted for the State. On May 10, 1965 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 Rs. 140 per KW per year. On October 28, 1966 the Board, in exercise of the powers under Section 79(j) of the Act, framed and promulgated what were called "Kerala State Electricity Board (Central 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 Boards intention so do in that behalf. Regulation 11 providedThe 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 force5. In exercise of the power so reserved to it, the Board issued a notification dated July 16, 1968 (Ex. P-2) which providedIn accordance with the provisions contained in Clause 11 of the Kerala State Electricity Board (General Tariffs) Regulations issued in Kerala Gazette No. 47 dated November 29, 1966, it is hereby notified that the rates for the supply of 4200 K. W. of power at 66 K. V. to Messrs FACT availed by them as per the agreement dated October 21, 1949 executed with the erstwhile Travancore Government, is hereby revised to Rs. 200 per K. V. A. per year. This revision will take effect 30 days soon after the publication of this notification in the gazette6. The supplement agreement dated May 10, 1965 which pertained to the additional supply of power for a period of ten years at Rs. 140 per K. W. per year was, however, left undisturbed. The case of the Board is that while the agreement, Ex. P-1, was not an agreement which enjoyed the status of and protection as one under Section 49(3) of the Act, supplemental agreement dated May 10, 1965, however, was entered into by the Board in exercise of the statutory powers under Section 49(3) and was, therefore, immune from any alternation during its tenure7. The principal controversy in this appeal is whether the agreement dated October 21, 1948 could be said to be one within the contemplation of Section 49(3) of the Act; and whether the enhancement of the tariff under Ex. P-2 was impermissible8. 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 discrimination9. Both contentions have been repelled by the High Court. Appellant has come up by special leave

Court's reasoning:
20. The point that Shri Poti particularly emphasised was that the element of recognition of the agreement under and for purposes of Section 60(1) - which in the case of the Indian Aluminium Company 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 it terms, - were lacking in the present case. The additional agreement dated May 10, 1965 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 60(1)21. 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 matter26. 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 special agreement by the exercise of the statutory power of the Board under Section 49(3)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 principal has no application to the present case29. Accordingly, on contentions (a)(i) and (ii) we hold that Ex. P-1 did not qualify to be recognised and protected under Section 49(3) of the ActRe Contention (b)34. 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 State of Maharashtra v. Basantibai Mohanlal Khetan [(1986) 2 SCC 516,  para 12 : AIR 1986 SC 1466 , para 12].) 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 v. State of J & K [(1980) 4 SCC 1, 13 : (1980) 3 SCR 1338 , 1357 : AIR 1980 SC 1992 ].) 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 appellants reply affidavit, tariff had been increased except where the consumer had the protection of an agreement under Section 49(3) which prevented an unilateral increase35. That apart the circumstance that respondent-Board was rendered, by virtue of the subsistence of an agreement under Section 49(3), powerless to make an unilateral increase, can form a valid ground for differential treatment as between cases covered by Section 49(3) 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. It Bisra Stone Lime Co. v. Orissa State Electricity Board [(1976) 2 SCC 167 : (1976) 2 SCR 307 : AIR 1976 SC 127 ] at 314, this Court, in similar context, held : (SCC p. 173, para 22)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 obligatory 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 governed by special agreementsAccordingly, contention (b) also fails