Case: State Of Kerala Vs. Indian Aluminium Co.Ltd.&amp; Anr

ny is engaged in the business of manufacturing aliminium, having its head office at Calcutta. The company after having been assured of supply of electricity which is raw material for manufacture of alminium at concessional rates decided to set up its factory at Alumpram in the then State of Travancore. It was in this context that on 30.7.1941 an agreement was entered into between the company and the then State of Travancore for supply of electricity at fixed rate for a period of 35 years w.e.f. 1.7.1941. It was alleged that on the basis of assurance and undertaking given by the erstwhile State of Travancore for supply of regular electricity of cheaper rate, the company had set up its aliminium factory at Alupuram, although aluming required for manufacture of aluminium was brought from far off places, like Bihar incurring heavy freight and other expenses. In the year 1948, the State of Travancore was integrated with the Cochin State and the agreement entered into in the year 1941 was treated as binding. The agreement of 1941 was subsequently modified by another agreement dated 15.8.1955 and continued to be in force when the State of Kerala was formed under the State Reorganization Act, 1956. On 1.4.1957 the Board was constituted and the earlier agreement entered into was treated as agreement under(3) of Section 49 of the Act.Again, in the year 1963, a fresh agreement was entered into which was to be in force for a period of 25 years from 1.1.1965. Subsequently, again on 18.9.1965, another agreement was entered into for supply of 12.500 KWs for another period of 25 years from 1.1.1996 with an option for renewal in favour of the company for a further period of 25 years. In these agreements, it was stipulated that the Board would supply electricity at concessional rates to the company. In the year 1969 the Board in exercise of its power under Section 79 read with Sections 49 and 59 of Electricity (Supply) Act issued an Order dated 28.11.1969 known as "The Kerala State Electricity Board Extra High Tension Tariff Order 1969" fixing the rate of tariff for supply of electricity to Extra High Tension consumers. On the basis of the said Order the Board demanded from the Company High Tension Consumption charges at higher rates fixed by the Tariff Order ignoring the terms of agreement entered into under(3) of Section 49 of the Act.The said demand was challenged by the Company and ultimately this Court struck down the said demand holding that the Board was not entitled to claim more than the charges specified in the special tariff agreement entered into between the parties. Thereafter, the Government of Kerala issued on ordinance which was subsequently replaced by an Act known as Electricity (Supply) Amendment Act, 1983, whereby a new(5) was inserted in Section 49 of the Electricity (Supply) Act. Based on this new provision, the Board issued demands claiming electricity charges at rates notified for Extra High Tension consumers prescribed by the Kerala Electricity Board Extra High Tension Tariff Revision Order 1982. The Board also demanded duty at higher rates other than the concessional ratesa rate of which the duty was being paid by the company. It is in this way the company challenged the validity of(5) of Section 49 of the Electricity (Supply) Act, whereby the electricity supply to the company at concessional rates was rescinded and the company was brought under the uniform tariff.As stated above, the High Court by its judgment and order under appeal, upheld the validity of(5) of the Act, (sic) rates. It is in this way the State of Kerala being aggrieved, is in appeal before us.

Court's reasoning:
On a perusal of(5) it is clear that by this amendment the agreement entered into between the company and the Board was not rescinded. What was rescinded, was the concessional rates at which the company was receiving electricity. The agreement, as a whole, was not rescinded. For other purposes it remained intact. It is also clear from the fact that, on insertion of(5) in Section 49 of the Act in the year 1983, no fresh agreement was entered into between the Board and the company and the old agreement continued. Had there been an abrogation of the entire agreement, the Board would not have supplied electricity to the company. At no point of time, the Board after passing of the Amendment Act stopped supplying electricity to the company or entered into any fresh agreement for supply ofare, therefore, of the view that by virtue of insertion of(5) in Section 49 of the Act the special agreement entered into between the Board and company as a whole was not annulled and only thing that was annulled was the agreement relating to rates of electricity payable by the company under the agreement and further the said Amendment Act did not in any manner affect the payment of duty by the Company at the concessionalIn C.A. No.find the argument of learned counsel is totally misplaced. We have seen in the earlier part of the judgment that thewas the only consumer with whom the Board had a special agreement when(5) was inserted in Section 49 of the Act, and, therefore, it was that agreement which was to be dealt with to enable the Board to collect the normal tariff under section (1) of Section 49 of the Act. This was done only to bring theunder the umbrella of uniform tariff. Thus, there was a reasonable basis for classification deducible from the objects and reasons to make the uniform tariff rate applicable to theand to rescind the concessional rate which thewas enjoying. By the said provision thewas brought at par with the other similarly situated consumers. Thehas been treated alike and the said amendment has made the Company liable to pay the electricity charges at normal tariff applicable to other similar situated consumers. By the Amendment Act,(3) of Section 49 has not been affected. It still exists in the Act and it is always open to the Board to enter into a special agreement under(3) of Section 49 of the Act with any consumer, including theSo long as Section 49(3) remains in force, there is nothing to prevent the Board to exercise that power in favour of the consumers, including theHowever, this power under Section 49(3) is subject to(4) of Section 49 of the Act, whereby the said power has to be exercised without showing any undue influence to any consumer. Neitherion (5) of Section 49 places any restriction on exercise of power of the Board to enter into a fresh agreement with thein case themakes out a case for supplying electricity at a concessional rates. Had the legislature intended that in future no special agreement was to be entered into under(3) of Section 49, the legislature could have very well omitted(3) of Section 49 of the Act, but has deliberately retained it with the result that, if in future circumstances demand, the Board can enter into a special agreement subject to the provisions of(4) of Section 49 of the Act.(5) has been enacted only to rescind the agreement for supply of electricity at concessional rates incorporated in the special agreement prior to the Act of 1983 and it did not create any bar in future to enter into an agreement under Section 49(3) of the Act. Theas well as other similarly situated consumers, are entitled to enter into an agreement with the Board if circumstances so demand, so long as(3) of Section 49 is in force. Before the High Court, as well as here in this appeal, it was stated on behalf of the State that(5) of Section 49 has not taken away the right of the Board to exercise its power to enter into an agreement with theif the circumstances so demand. Under such circumstances we do not find any merit in the contention that by the Amendment Act that it is open to the Board to enter into special agreement with other consumers while denying such benefit to theWe, therefore, hold that(5) of Section 49 is not violative of Article 14 of the Constitution.