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• ROHTAS INDUSTRIES LTD. &, ANR. ETC.

v •

. THE CHAIRMAN; BIHAR-STATE ELECTRICITY

' .

BOARD AND OTHERS -

March 2, 1984

- [D. A. DESAI AND V. BALAKRISHNA ERADi, JJ]

,, Efectricity (SU]Jply) Ac1,-·-194a2s. -49-Electricity .Board divided corisume; s into various cateiories-_CosunzerS of only those cafliories ~/ready enjoying conces-- sion in general tari..tr as incentive to esrab/is/;·; ndl; Strjes in the State asked io pay fuel surchatge-;-Whether classification of consun1ers and levy_ of fuel suchar; e o, n -

some consumers only qrbitrary and violqtive of Art . . 14 of the Constittion. ,

Section 49 of tlie. Electricity (Supply) Act, 1948 provided for the .sale of" electricity by the electricity. Board lto anypefson not being a

liceflsee and to fr.ime. uniform. tariffs . for the purposes of such . supply " having. egafd~ .. inter alia to - the_': ii.atre of the.··. supply,. ·. the purPose1.for which the. supply_ is required and other_. relevant factprs, In exercise ofthc po_wef-s conferrCd

0 by s. 49.'.'ofthe Act, "the responden~ Bihar State ElcciriCity Board bad classified the Consumers irito ten categoics and had . ,_been, from timt;. to time, issuing notifiC.ltiOns :fixing the tariff 'and the tefms and

conditions for the uppJy of-- electricity) .rothose consulners. With a vieW to -encouraging the tstblishment of industrieS in the State, the general tariff r3:te f applicable in respeCt of high tension supply to industries and factories had been fixed at rates which were muc; h lower ~'hen comparea: to thoSe applicable to other . __ -tyPes of consumers. On 6.4. 1979 the_ respop.d_en_t Board, in. sui)ers_ession of ts

earlier notification fixing the tariff, isSUed a notifiCation revising the tariff for all categories of consumers served by it. Para 16.7 of the .-said Tariff Notification provided that the consumers of low tension indu-stiial service~ high tetision ser vice, eXtra high tension service, and. railway traction Service shall be liable to pay , fuel surcharge'. at a rate to be determined.every year J~ acCordance with lthc fc;:>r• -. mula set out in sub-para 2 of that paragraph. The appelJants who had entei-ed into agreements with the respondent Board for the supply of high tension electric . current fcrr their factories. arid \vere admittedly nOt lice"nsees, filed writ petitions

in the High Cou;'.t thaIIenging the levy. of fuel surchafge on the grouned that it \ ; was arbitrary and devoid of legal sanction.· A Division Bench of the High Court

.di!missed' the writ petitions. '-Hence these, appCals -and- special leaVe petitions.· : The appCnanucharge of discrimination was_ based On the_groulld that only . nsumers of low tension industrial service high tension service~ extra high ten-·

~ s1on serviCe, and railway traction service had been singled out for being subjected

':to a Jevy of surcharge, '?'.'bile consumers of -elec-tricity for. dome'stic, commercial -- and irrigation purposes were left unaffected by any such burden:

 .... 'Dismissing the appeals.and special leave petitions,.- .. _ - . - . - - . - . -

HELD; It Is ;, ell-established tba; where a corporation is an . instr;,,;, eniallty H . or an agecy of Government it would, in the exorcise of Its powers and function,

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60 . SUPREME COURT JlFPORrS

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R. [1984] 3 s.c .. •

be subject to the same c.Onstitutlonal or public law &Hmittioa~ as apply -to the Government and the principle of law inhibitin& arbitrary Action by Government would apply equally where such a corporation is dealing with the public, Whether by way of giving jobs or entering into relationship with any person in any manner.it likes according to its sv.1eet will. The acts of such a. coiporation must be in conformity with soe principle which ineets the test of reaso.nableness and relevence. (71 F-H]

- ' ·

-The-contention that the imposition or fuel surcharge under paragraph :16.7 of the 1979 tariff notification is arbirary and violative of Art. 14 of the Cons ti tu~

- tion has no fofce. -The BOard was Perfectly within its rightsin deciding to ---r.estrici _the levy of fuel suriJiai&-e to those categories of consumers who were enjoying the-benefit of.a concession in the general rate and ill sparing Smaller \type of consumers such as tile agricultural irrigation and commercial consumers

frdm being subjected to that burdny in view of the fact that they were already . being subjected to a basic _levy at.s-Obstantially higher rates. The true consequence /

of the action taken by the Board is only to effect a reduction in the quantum of concessionthat was being enjoyed by the consumers b'elonging to the industrial - -and railway tractiqn categories. The appeltantS: had no case that any illegality , was involved in treating the industrial consumers, as a separate cla:Ss 'and grant .. ·

ing them the benefit of a preferential treatment for -the purpose of fiXing the , basic rate of levy for supply of electricityJ _ A classification. which is legally . ·-valid and permissible for the grant of a concession in the basic rates will equally

~-bold good for the purpose of a subsequent scheme of distribution of the. burden

in the forrri of fuel surcharge. A-clasification of "these bulk . consumers has a ·-rational nexus with the_ object and purposes of the levy of surcharge.

[65 G, '67 B-D, 66-G, 67 DF]

. .

The arg\lment that" levy of fuel surcharge can only be" for the purpose of ·:recouping the" amounts actually aid by the Board by way of 'fuel surcharge• to the D.V.C. and the U.P. S_tate Electricity Board for the quantities of energy •purchased by the Board fro~ these sources and the extra cost that the Board had

actually to incur on fuel consumed in those - two generating stations at Patratli 'a.Iid Barauni has Ilo force. From the counter affidavit filed on behalf of the :-Board, it is sceii that in respe_ct of the. increase in the Cost of production of :eleCtricity in the two generating _stations of the Boards the fuel surcharge has

taken intoaccount only that part of the increase in cost which is relatable to.'the 1tiCieased price of the coal and oil i.e. fuel aloD.e. In rspect of the energies

pUrchased by the Board from outside sources, narr.ely, ¢.e Damodar Valle}'

~COti}oration and .the U.P. State Electricity" Board, the increase in cost per unit

'incurred by the' Board has been included in the contPutation of the fuel surcharge. ·.Though the nomenclature giv, en to the levy is "fuel surcharse 0 it is really. a

~ufcharge levied to meet the increased cost of genetatiOn 3.nd purchase of electri

'city and this is made absolutely clearly in the formula given in para 16.7.2. ·• . ' . [67 H," 68 A-Fj

There is no forc.e in the cOntention that the words "lncreise in the average unit rate of purchase of energy•' used in Ct below paragraph 16. 1.i should be

i"tefpreted as 'taking.their colour froin the cOntents of parapraph 16.7.3. From

- , a_ reading of these proviSions it is abundantly clear that the entire increase in

costs incurred in the purchase of energy. froin the D.V.C. an.d the U.P. State : \,... -

'I ', ..

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I •

ROITTAS INDUSTRiES v. BiHAR sr. ELEC. BOAAD 6J

El.ectricity Board has ._-to go into the computation of the surcharge leviable under A paragraph 16.7. Thece is no ambiguity whatever in thf: , words used in Cl so as ·-to require the court __ to. take_ light from par3graph .16.7.3 for the purposeo~ understanding their scope and meaning. [69 B-D] .. .... .

The contention that the financil capacity of individual industrial COnsumers. bad not been taken into account while fixing the revised tariff is devoid of forCe. - It is not contemplated by section 49 or. any of the other p.rovisions of the Act: that as amongst consumers talling within' a specified category.different rates are to be charged depending upon the financial capacity of the paticular consumer to!·

Pay~ On the other band, the.very core of the .scheme of section _49 is that the _tariff should be uniform in r:espect of each class or Categor~. {70 H,,7~ A~B] ,

- It is found.i-hat notwithsta.nding the mandaio!y provision contained in s.59 of the Act obliging the Board to carry its operations and adjust its tariffs in such a; w, iy as to nsure that the total revenues e3!ned in an,, year of amount shaU, after mting all expenses properly chargeable to revenue leave. such surplus as. the State Government may,- frOm time to time, specify. the Board has-been selling-. ener&y at rates which are lower than the actual post insurred by it per unit of production. Such being the factual situation, there is absolutely -no basis fof . . the contention that the tariff fuaion .effected by the .Board sUffers from the vice

of arbitrariness and is liable to be jnterfered with by the Court on that ground. .. ' . .. . , (73 B,.72 AC, '73 q •

:_ CiVIL APPELLATE JURISDICTION : Civil Appeals Nos .. 2855-56: of 1982. ·

Appeals by special leave from the Judgment and Order dated ' the 9th April, 1982 ofthePatna High Court in C.W.J.C. No; 3503/" 81 & 504 "of 1982. - · •

WITH . ; Civil Appeals Nos; 2857-58 & 2859-60 ?f 1982

Appeals by Special leave from the.Judgment and .Order dated the 9th/10th February, 1982 of the Patna High Court in C.W.J. c.,

Nos. 1026/82; 1855/81, 1516/81 (R), 1355/81 (R)., . , . .

~ . , . .

AND ,

' Special Leave Petition (Civil) No. 2904. of 1982. ·

From the. Judgment and Ordr: dated the'8th• December,1981 ··· of the Patna High Court in Civil Writ . Jurisdiction Case No .. 1237 of 1981.

Dr. Shankar Ghosh, Parveen Kumar, Padam Khaitan, C.A. . Vaidyanarhan' N.R: Khaitan for the Appellants in. C.A. 28?$-

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SUPREME COURT REPORTS [1984) 3 s.c.R.

A.K. Sen, Padam Khaitan, Parveen Kumar and N.R. Khaitan for the Appellants in C.A. Nos. 2857~58/82,

C.S. Vaidyanathan, Anil Kumar Sharma, and Mr.. Parvee11 Kumar for the Appellants in CA. Nos. 2859-60/82. ·

K.K. Venugopal, C.S. Vaidyanathan fof the Petitioner in SLP Nos. 2904/82.

L.N. ?inha, Att. General, Rqm Balak Mehto, Pramod Swaru"' and P.P. Singh for the Respondents in all the appeals & SLP.

The Judgment of the Court was delivered by

BALAKRISHNA ERADJ, J. These appeals (by special leave) and the Special Leave Petition involve common questions concerning the . validity. of the supplementary bills issued to the appellants by the ·

!st respondent-Bihar State Electricity Board-r "fuel suichllrge" as per the revised tariff dated 1st April, 1979, and hence they were heard together. Having regard to the fact that by reason of interlocutqry orders passed by this Court, the realisation of large amounts demanded from the appellants by the respondent by way of charges for electric energy supplied by it stood stayed and the consequent urgency in passing final orders in these cases, as soon as the hearing was completed we. passed the ollowing order announcing the conclusion reached by us :

"All these Civil Appeals and Special Leave Petition are dismissed wfth costs in each case. All interim orders made in each of these matters at various staj!es ar~ vacated.

Reasons wlll follow".

We now proceed to state the f' reasons in support of the said conclusion .

.The Bihar State Electricity Board hereinafter called 'the Board') is incorporated under Section 12 of the Electricity (Supply) Mt 1948 (hereinafter referred to as 'the Act'). The general powers and duties of.the Board are set out in Sec•iou 18. Thereunder the Board has the duty, inter alia, to arrange for the supply of electricity that may be required within the State and for the transmission and dfstribution of the same in the most efficient and economic manner, with particular reference to those areas which are not, for the time being, supplied or adequately supplied with electricity.

Se91ion 49 of the Act makes provision for the sale of electricity by the Board to peI&onl!J_()the~ than the licen&ees an\! to fra!lle unif9rm ,

ROIITA.S iNDUSTRiES v. BIHAR ST. ELEC. BOARD (B. Eradi, J.)

triffs for the purposes of such supply. That section is in the follow Al Ing a terms:

"49. .(!) 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 licensee upon 'iiuch terins 'and conditions as the Board thinks fit, and.may for the purposes of such supply flame uniform tariffs.

(2) In fixing the uniform tariffs, the Board shaU have

regard to all or any of the following factors, namely:-

(a) the natufe of the supply and the purposes for which it is required ;

(b) the co-ordinated development of the supply and distribution ortelectricity within the State in the most, efficient and economical manner, with particular reference to such development . in areas not for the time being served or adequately served by the licensee ;

(c) the simplification and standardisation of methods and rates of charges for such supplies ;

(d) the extension and cheapening of supplies or electricity to sparsely developed ateas.

(3) Nothing in the foregoing provisions of this section shall derogate from the power-of the Board, . if it considers it necessary or . {lXpedient to fix different tariffs for the supply of electricity to any person not belng a licensee, having regard to the geographical position of any area, the nature of the supply and purpose for which such supply is required and any other relevant factors.

(~) In fixing the tariff and terms and cciditlons for the supply of electricity, the Board shall not show undue prefe1ence to any person."

In exercise of the powep conferred by the above section, the D9afd ~S been, ffO!ll 'ime to tjrne, jssUin¥ UOtifiations jixing the

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SUPREME COURT REPORTS [1J84j :f S\C.R.

tariff and the terms and conditions for the supply of electricity _to: the various classes of consumers. In supersession of the tariff rates till then obtaining under -an earlier notification, tJ:te Board by its

"tariff notification 1979" published in the Bihar Gazette Extraordi nary No. 3'$11 dated 6.4.1979, iSsued a revised tariff for all categories of consumers served by it. The said tariff was to take effect from

1st April, 1979.

The appellants are companies having factories in different parts of the State to Bihar and they have entered into agreemepts with the Board for supply of high tension electric current. The agree

ment~ so executed are in a standard forl'.1 containing substantially Identical terms. Annexnre I in the Writ Petition C.W.J.C. No. 1855/ 81 out of which -C.A. 28 58/82 arises in a copy of the agreement entered into by M/s Usha Martin Black (Wire Rods)- Ltd. with the Board on 18.8:1961. In clause 4 of _th¥gteement, it is _stipulated that the consumers shall pay to the supplier (Board for) the energy supplied and registered by the meters "at the rates from time to time in force and paid-by similar consumers". It has been further provided in clause 11 .that the agreement should be read and construed as subject in all respects to the provisions of the Indian Electricity Act 1910 and the rules for the time being in force thereunder. After the introduction of the revised tariffs, 1979, all the appellants continued io draw and consume high tension electric energy in their factories.

Para 16.7 of the Tariff Notification, 1979, provides that the consumers of low tensfon indutrial service, high tension service, extra high tensioh service, and railway traction service shall be liable to pay 'fuel surcharge' at a rate to be determined every year in accordance with the formula set ,_out iµ sub-para (2) of the said paragraph (16.7.2). This levy of fuel surcharge was in addition to the other charges specifiecl in the tariff schedule. J?uring the

cour~ of the year 1979, fuel surcharge a a provisional rate of one paise per unit was initially levied and that was_ subsequently increased to three paise per unit, again on a provisional ba~'s. In the final bills issued for the financial year 1979-80 the fuel surcharge was levied at 6.242 paise per unit. Along with the -finaJ bill of fuel

surcharge for .the year 1979-80, a provisional Qjll of fuel surcharge for the year 1980-81 was also issued to theappellant companies !icmanding paymeqt Qf qrcharge at the vate of ei$ht -paise per unit

...

ROITTAs iNDusrRiEs v. BIHAR sr. ELEC. soARD (B. Eradi, J.)

• thereupon the appellants filed Writ Petitions in the High Court of Patna contending that the provision contained in Paragraph

16. 7 in the Tariff Notification of 1979 for the levy fuel surcharge is devoid of legal sanction and is arbitrary and void. The charge of arbitrariqess leveUed against the .imposition of fuel surcharge was based on the ground that only consumers of low tension industrial service, high tension service, extra high tension service, and railway traction service had been singled out for being subjected to a levy of surcharge, while consumers of e\eccity for domestic, commercial and irrigation purposes were left unaffected by any. such burden.

A futher contention was also ralse.d that the bills issued to the. peti• . tioners were not even' in accordance. with the provisions of the

tariff notification and the demands made against thei!ppellants were, in excess of what was warranted even by the impugned notification.

Eight writ petitions, of which C.W.J.C. 1237 of 1981, filed by M/s.

Shriram Bearings Ltd., Ranchi (Petitioner in SLP No: 2904/1982) was apparently treated by. common con.sent as the main case, and were heard together as one single batch by a Division Bench of the High Court. By a detailed and well-considered judgment, the Division Bench rejected all the contentions ra.ised by the petitioners and dismissed the Writ Petitions after recording an undertaking given by the poard that certain small amounts which were found to have been charged in the bi Us In excess of what was payable by the appellantspn a correct computation of the surcharge would be adjusted in the next bills to be issued to them. Writ. Petitions subsequently filed in the High Court by the appellants in the other appeals were lafer dismissed in limine by separate' short judgments, following the decision of the Divisional Bench in C.W.J.C. 1237 of

1981. Hence these appeals and special leave petitions by the appellant companies.

At the outset, we may dispose of the contention urged on behalf of some of the appellants that the.levy of fuel surcharge under the impugned tariff notification (parapraph 16.7) is discriminatory . and hence violative of Articl~ 14 of the Col).stitution. Sub-section 3 of Section 49 xpressly authorises the Board to fix different tariffs for the supply of electricity to any "petson not being a licensee, having regard, inter alia, to the nature of the.supply, the purpose for . which the supply is requfred and other relevant factors. The power to classify. the c<>nsumers into di!l'erent categories and to fix diffren-

SUPREME COURT REPORTS

[I 984] 3 S.C.R,

tial tariffs has thus been conferred on the Board by the Section itself. The Constitutional -validity of this Section has been upheld by this Court in Maharashtra State Electricity Board v. Kalyan Borough Municipality & Another(').

The expression "licensee" means a person licensed under Part II of the Indian Electricity Act, 1910, to supply energy or a person who has obtained licence under Section 28-of that Act to engage in the business. of supplying eitergy through definition in Section 2 (6).

Admittedly, the appellants before us are not licensees. They are c_O'!lsumers receiving high tension supply to their factories. For the purpose of tariff fixation, the Board hrrs classified the consumers into 10 categories, viz., "domestic", "commercial (i)", commercial (ii)", "street light", "irrigation",- "light tension industrial" (small scale industrial upto 100 h.p.), "11 k.v. h.t:s.", "33 k.v.h.t.s.", "132 k.v. h.t.s." and "railway tractiol) (25 k.v.)". It is seen from the materials on record for us that the industries between themselves consume nearly 65% of the total quantity of energy supplie<l by the Board. Apparently with a view to encouraging the establishment of industries in the State, the generl tariff rate applicable in respect of high tension supply to industries and factories has been fixed at rates _which are much lpwer when compared to those applicable to other types of consumers. While the general rate applicable for supply of high tension electric energy for industries of the class to which the appellants belong was 22 paise per unit, consumers belonging to "commercial" categories were charged at rates ranging bet ween 48 paise to 58 pais_e per unit, "agricultural" consumers at 29 paise per unit, "low tension" consumers at 34 to 38 paise per unit and "domestic" consumers at rates ranging between 38 to 43 paise per unit. Thus, in the fixation of th~ general tariff rate, a substantial concession has been shown in favour of .industria 1 low tension and high tension consumers. The appellants have no case that any illegality was involved in treating the industrial consumers, as a separate class and granting them the benefit of a preferential treatment for the p1irpose of fixing the basic rate of levy for supply of . electricity. The stand taken by the Board is that it was found absolutely neessary at the time of the revised traiff fixation effected in 1979 to augment its revenue by levying of the additional fuel surcharge in order to offset the heavy increase in expen<liture and after taking into account all relevant facts and circumstances, it wasdecided to distribute that burden amongst the privile$ed class of

(I) l1968]}_S C.R.. 137.

ROTHAS iNDUSTRiES. v. BiHAR ST. ELEC. BOARD (B. Eradi, J.) 67

consumers; namely those belonging to categories of low tension industrial service, high tension service, extra high tension service and railway traction service. Even after taking into account the fuel s.urcharge so levied under 1979 tariff, the rates applicable to 'high tension consumers like the petitioners range between 40.31 paise al), d 58.80 paise per unit only, while the coi; imercial (ii) consnmer has to pay 71.33 paise per unit and even the domestic coil.sumer has to pay

48pise per unit. The position that obtains under the 1981 tariff which also has been challenged by some of the appe!lants is substantially similar. In our opinion, the Board was perfectly within its rights in deciding to. restrict the levy of fuel surcharge to those categories of consumers.who were enjoying the benefit of a concession in the general rate and in sparing smaller type of consumers such as the agricultural, irrigation and commercial consumers from being subjected to that burden, in view of the fact that they were already being subjected to a basic levy at substantially higher rates.

The true consequence of the action so taken by the Board is only to effect a reduction in the quantum of concession that was being enjoyed by the consumers belonging to the industrial an.d railway traction. categories. A classification which is legally valid and permissible for the grant' of a concession in the basic rates wBI

equally hold good for the purpose of a subsequent scheme of distribution of the burden in.the form of fuel surcharge. In this context, .it is also relevant to remember that thdevy of surcharge was necessitated by reason of the extra expenditure which the Board had to incur in the generation of electricity in the two power stations run by the Board and in the. purchase of power from the two outside sources, namely, the D.V.C. and the U.P. State Electricity Board and 65% of the total quantity of energy supplied by the Boatd is consumed by the industrial and railway traction consumers. A classification, of these bulk consumers has a rational nexus with the object and purposes of the levy of surcharge. Having regard to all these facts and circumstances, we find 'no substance in the contentfon adanced by some of the appellants that the imposition of fuel surchargt under paragraph 16.7 of the 1979 tariff is arbitrry and violative of.Art. 14 of the Constitution.

The next atgument advanced ori behalf of the appellants wag that even if the Board is legally entitled to levy the fuel surcharge, that can only be for the purp()se of recouping the amounts actuaily

paid by the Board by Way of 'fuel surcltarge' to the Damodar Valley n Corporation and the U.P. State Electricity Board for the quantities of energy purchased by the Board from these sources and the_ el\tra cost

63 SVJ>REMn COURT°RllfORTS

[1984] 3 S.C.R.

that the Board had actually to incur on fuel consumed i~ those two generating stations at Patratu and Barauni. From the counter affidavit filed on behalf of the Board, it is seen that in respect of the increase lnthe cost of productfon of electricity in the two generating statiOJ)S of the Board, the fuel surcharge has taken into account only that part of the increase in cost which is relatable to the increased price of the coal and oil i.e. fuel alone. The increase Jn expenditure

refemble to the enhancement in cost of the energy generated on other accounts such as wages, maintenance, etc. has not been taken into account in the foe! surcharge. Such increase iii. cost of production on account of those other factors has been offset by a revision of the basic general tariff by 16.5. per cent payable. not on!~ by the industries but by all classes except the agriculturist class. In respect of the energies purchased by the Board from outside sources, namely, the Damodar Valley Corporation and the U.P. State Electricity Board, the increase in cost per unit incurred by the Board has .been included in the computation of the fuel surcharge. We see no substance whatsoever in the contention advanced by the appellants that o.nly such amounts, if any, as might have been paid by the Board to the D.V.C. and the U.P. State Electricity Board as and by way. of fuel surcharge ca:n go into the computation of the fuel surcharged levied by iM Board under paragraph 16.1 of the 1979 tariff. Though the nomenclature given to the levy is "fuel surcharge" it is really a surcharge levied to meet the increased cost of genera•ion and purchase of electri city anq this is made absolutely clear in the formula given in para 16.7.2.

The formula for deterinining the fuel. surcharge set out in

pataraph 16. 7. 2 reads :

[Al XA3+Bl XB3+Cl XC3+Dl X D3+El xE3

"S=

 [A2+B2+C2+D2+E2]". • This is followed by detailed explanation as to what the di!!- . erent alphabets used in the numerator and denominate or signify ..

The explanation given in respect of Cl is "Increase in the average unit rate of. purchase of energy from D.V.C. during the year for which the surcharge is to be ca1culated. The said increase to be calculated with respect to the base year 1977-78." C3 stands for "units purchased from D.V.C. duriµg the year". Likewise, El and IP hav<; beeµ explaiµe4 a, s "lµcrease ill: h~ avera~? wii! rate 9f

itoHfAS INIJUSTRES v. Bl!!AR, St. ELEC. BOARD (B.:Eradi, J,) 69

purchase of energy from Uttar Pradesh State Electricity Board during the Year for which surcharge is to be calculated, the. said in'crease, to be calculated with respect to the'base Year 1977-78" and "units

purchased from Uttar Pradesh State Electricity Board" re'spectively.

We see no force in the i; ontention put forward on behalf of some of the appellants that the words" increase in the •average unit rate or'purchase of energy" used iu Cl below paragraph 16.7.2 should be interpreted as taking their _colour from the contents of paragraph 16.7.3. From a reading of these provisions it is abundantly clear that the entire increase in cost incurred in the purchase of energy from the D.V.C. a:nd the U.P. State Electricity Board has to go into the computation of the sui:charge leviable under paragraph 16.7.

The contention to the contrary advanced by the appellants is there

fore, onty'to be rejected. There is no am, biguity whatever in the words used in Ct so as to require us to take light from paragraph

f6.7 .1 for the purpose of under.standing their scope and meaning.

It was strongly urged on behalf of the appellants that tlfe provision in Cl for increase in the average rate of price of energy from the D.V.C. to be calculated with respect to the. base year 1977-78 is arbitrary.in as much as in fixing the basic tariff as per ihe 'impugned notification' of 1919, the <lifference in cost between Year 1977-78 and the current.year 1979-80 ohas already been -taken foto account. From the counter -affidavit and the statements filed in the High Court on behalf of the respondent Board which form part of the record before us in these appeals, it is seen that only· the fuel surcharge accrued duringthe Year 1977-78 had been merged while fixing the revised rates for energy and it wµs specifically mentioned in paragraph J.5 of the resolution of the Boai:d containing the proposals for the tariff revision, 1979, which the Board forwarded to the State Government that only the fuel surcharge that had accrued

uring 1977-78 ':as being merged in the rev\sed tariff rates and that

. the subsequent increase or decrease in the. cost of fuel or ihe cost of

'll!Prted energy will, therefor~, reflect in the fuel surcharge hereafter".

Similar is the position with respect to the tariff revision effected in J981. Hence th_ere is rto factual foundation for the argument. that there has ben a double neutralisation of the incre.ase in the fuel s_urc?arge_ m respect of.the energy purchased by the Board from outside sources. ~

Paragraph 16.7.4 of the tariff notification states that the fuel Surcharge for a financial year shall be calculated by the Board after

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[19S4] 3 S.C.R.

the expiry ot the financial year and until such calculation is actually made, fuel surcharge may be levied during each financial year at a rate provisionally calculated on monthly or quarterly or half-yarly basis as decided by the Board, and .in case of short or excess realisation, the sameis to be adjusted in the next bill to be served on the 0 consumer. Based on these provis'ioris, it was falntly argued on behalf of some of the appellants that the Board was under an obligation to issue provisional bills in respect of fuel surcharge 'during the course of.each financial Year and on account of its failure. to do.so, the appellants w.ere unable to include the saiq elemenf in their price structure in respect of ceme.n~, paper and vanaspati produced in the factories of some of theappellants, This contention has to be rejected for two reasons : firstly, the provision contained in the afore said pargraph of the notification is purely an enabling one and it dose not cast any mandatory obligation on the Board to issue any • provisional bills for fuel surcharge, monthly, quarterly, or half-yearly during the course of each financial yeor; secondly apart from merely

putting forward such a plea in the course of arguments before us the appellants have not furnished any'factual data as to how arid in what manner .they had fixed the prfce structure for the different pro.' ducts produced in.ihe appellants' factories .

• Yet another point urged on behalf.of the appellants was that under Section 49 of the Act, while exercising the power of framing uniform tariffs, the Board was under a duty to apply its mind to all relevant factors but there had been an omission to discharge the said mandatory duty inasmuch as the capacity of the concerned industry to pay for the energy at the rate proposed . to be fixed, which is a highly relevant .factor, had not beeen taken into account at all.

Clauses (a) to (d) of sub-section 2 of Section 49 enumerated the various matters whfoh the Board shall have regard to in fixing the uuiform tariffs and the capacity of any particular mdustry to bear the energy charge at the proposed rate of levy is not included in the said enumeration. Under the scheme of the tariff flxation incorporated in the section, the tariff is to be uniform subject to the classification of consumers into different <:ategories. . Under sub-section 3 of the said section, the classification of the consumers into such different cattegories<>is1to he made only with reference to the nature of the supply, the purpose {or which supply is required the geographical . position of any area and other like relevant factors. It is not contemplated by the said

ection or any ot:. the other provisions of the Act that as amongst

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R.OltTAS INDUSTRIES v. BIHAR ST. ELEC. BOARD (B. Eradi, J.) 71

consumers fallin5 within a specified category. different rtes are to be charged depending upon the financial capacity of the particular consumer to pay. \:)n the other hand, the very core of the scheme of Section 49 is that the tariff should be uniform in respect of each class or category. Hence the attack levelled against the tariff fixation on ihe aforesaid ground, that a. relevant factor, namely, that

the financial capacity of individual industrial consumers had not been taken into account, is devoid of force.

The appellants in some of the appeals have challenged the sub sequent tariff fixation of 1981 also on gro11nds that are substantially the same as those which we have dealt with above. For the reasons

already indicated by us, none of those grounds can be accepted as C correct or tenable.

It was urged on behalf of the appellants that the supply of electricity being a monopoly service conducted by an agency of the State, namely, the Board, it must be carried out reasonably and not arbitrarily, that such reasonableness should be reflected in the price fixation and if the prices fixed are .arbitraty, they are liable to be called in qu.es!ion before the Courts o"n lhe said ground. In support of the above contention, reliance was placed by counsel for the ap. pellants on the decisions of this Court in Akadasi Padhan v. State ofOrissa(1), f.ashbihari Panda,. etc. v: State of Orissa,(') Vraj/al Mani/al & Co. & Ors. v. State of Madhya Pradesh & Ors.,(') Ramana Dayaram Shetty v. The international Airport Authroity of India and Ors.('). It is wellestablished that where a corporation is an instrumantality or an agency of Government it would, in the . exercise of its powers and function, e subject to the same Constitutional or Public Law .limitations as apply to the Government and the principle of law inhibiting arbitrary action.by. Government would apply equally where such a corporation is dealing with the public, whether by way of giving jobs or entering into ontracts or otherwise and it cannot act arbitraily and enter into relationship with any person in any manner it likes according to its sweet will.

The aets of such a corporation must be in conformity with some principle which meets the test of reasonableness and relevance. In the case before us, the appellants have totally faiied to establish that the rates specified in the impugned tariff notifications of 1979 and 1981 are arbitrary and unreasonable.

(I) [1963] Supp. 2 s.<;.R. 691

(2) [1969) 3 S.C.R. 374 ··

(3) [1970] l S, C.R. 400


(;/

72 SUPREME toU!lt R.EPOJ!.TS [1984] 3 s.c.Ji..

l Sec.ti on 59 of the Act as it now stands after the amendment of 1978 is in t'he following terms :

"59. (I) The Board shall, after taking credit for any subvention. from the State Government under section 63, carry on its operations urtder this Act and adjust its tariffs so as to ensure that the total revenues in any year of account shall, after meeting ~II expenses properly chargeable to reve . nues including operating, maintenance and management expenses, taxes (if any) on income and 'profits, . depreciation and interest payable on all debentures, bonds and loans, leave . such surplus, as 'i:he State Government may, from time to .

time, specify.

(2) In specifying the surplus undersub-section (1), the State Government shall have due regarding to the availability of amounts accrued by way of depreciation and the liability for loan amortization and leave;

,,. (a). reasonable sum to contribute towards the cost of capital works; and

(b) where in respect or the Board, a notification has been issued under sub-section (1) or section 12A, a reasonable sum by way of return on the capital provided by the State Government under Sub-section (3) of that section and the amount of the loans (if' any) converted b, y tlte State Govern-' ment into capital under sub-section (I) of section 66A,." Under the above provision, the Board is under a statutory obligation to carry on its operations and adjust its tariffs in such a way-as to ensure that the total revenues earned in any year of 'account shall, after neet1ng all expenses poperly chargeable to revenue; leave such surplus as the State Government may, from time to time, specify.

The tariff fixation has, therefore, to be so made as to raise sufficient revenue which will not mer, ely avoid any net loss being incurred during the financial year but will.ensure a profit being earned, the rate of minimum profit to be earned being such as may be specified by the State Government. The learned Attorney General appearing on behalf of the Board has placed before us tabulatedstateml'nts showing the workingresults (financial) of the Board in the years subsequent to 1977-78. Jt is found therefrom that the net

": ..

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ROiiTAS INDUSTRiES "iliHAR 'sT. U.EC. BOARD(B. Eradi, J.J . 73 ·

result"fthe Board; s working ir. each of the year .1978-79 to 1981- 82 was a substantial deficit or ioss. The deficit in 1978-79 was Rs: 15.31 crores, in 1979-80 Rs. 10.27 crores, in 1980-81 Rs. 32.69 crores and in 198i-82 Rs. 18.60 rores. The statemen_t. also shows that th~ reucnue earned per unit of electric energy sold was much lower than the actual cost of production incurred by the Board per . unit. The cost. of prodµction. per unit in the four . years afore~ . mentioned was 51.IO p., 65.10 p., 73.86 p., and 87.16 p. respectively,. whereas the revenue .per unit was only 38.48 p., 47.17 p., 53.07 p., and 66.39 p. respectively:It is thus found that notwithstanding has the mandatory provision contained in Section 69 the Act, the Board . been selling energy at rates which are lower than of the actual cost . incurred by it per unit of.production. Such being the factual .siimi-

. tion, there is absolutely no basis for the. contention urged on behalf. of the appellants that the tariff fixation effected by the Board si.iffers from the voice of arbitrariness and is liable to be interfered with by,

the Court on the. ground .. , As . pointed. out by this Court. in Prag Ice & Oil Mills and another v. Union of India,' in the ultimate '. D analysis, the mechanics of price fixation -is . necessarily. to be left to the judgment of the executive and unless it is patent that there is . hostile discrimination agairist a class of persons, the processual basis of price fixation is to be accepted in the generality of cases as valid. ·, .,· . . some of the appellants have en.deavoured to persuade us to go into the minutest 'details of the mechanism of the tariff fixation effected.by the Board in an endeavour to demonstrate in relation thereto that a factor here or a' factr th'Cre which_ , ought to - have p_een taken into account has been ignored. .We have declind to go into thos~ factors which are really in the nature of matters of price fixation policy and the Court will be exceeding its jurisdction if it to embark pon a scrutiny of matters of this kind which are

essentially in the. domain of the executive to determine, subject, of. course, to the Constitutional limitations. ,

. . The conchisi.on that.emerges from the foregoing discussion is that the High Court was perfectly right in upholding the validity of the impugned tariff notifications of 1979 and 1981, and these appe'ats . and the S.L.P, have only to be dismissed. · . ,,- ~- - -

H.S.K. Petition's & Appeal.J Disn:lssed. ·

(1) 1197) 3 SCR 293. . .

,!', \ ll J•

. .