Karnataka High Court
The Sandur Manganese And Iron Ores ... vs The Karnataka Electricity Board, ... on 31 March, 1998
Equivalent citations: ILR1998KAR2108, 1998(4)KARLJ199
ORDER
1. The 1st petitioner is a consumer of electrical energy supplied by the 1st respondent herein. There are two undertakings of the 1st petitioner, one engaged in the manufacture of Ferro Silicon, while the other in the manufacture of Pig Iron. The 1st respondent supplies 110 KV electrical energy for both through different meters VHT-2 and VHT-3. As per Annexure-C dated 10-9-1984, in exercise of its power under Section 22-B of the Indian Electricity Act, 1910, the 2nd respondent herein, with effect from 15-9-1984 directed that the industries named in the notification may not consume or use electrical energy for any month in excess of the entitlement worked out on the basis of the specified cut. As far as the 1st petitioner is concerned, it was fixed at 60% for energy cut and 40% for Demand Cut. This power cut introduced in exercise of the power under Section 22-B of the Electricity Act is not challenged in these proceedings.
2. On the introduction of the power cut and allegedly in implementation thereof, the 1st respondent issued orders dated 14-9-1984, Annexures-A and B revising the tariff payable. Annexure-A relating to VHT-2 stated as follows:
"Out of this 1307059 units will be billed on First Charge basis at a rate of 66 Paise per unit for the month of September 1984 and 80 paise per unit from October 1984 onwards, as this quantum of energy has to be imported from the neighbouring system at a high cost. The balance energy consumed by you will be charged at normal rates. As regards the energy consumed upto 15-9-1984 the energy entitlement and billing will be on the same lines as for the month of August, 1984.
The demand entitlement of your installation with effect from 15-9-1984 is 9792 KVA which is equivalent to 60 percentage of your 100 percent entitlement".
Except to the extent of unit of consumption stipulated, there is no other difference between Annexures-A and B orders.
3. These orders Annexures-A and B are challenged before this Court by the petitioners on various contentions. The principle contention of the petitioners is that they have entered into an agreement with the 1st respondent for supply of electrical energy at the stipulated rate and during the subsistence of the said contract, the 1st respondent is not entitled to vary the contract unilaterally and enhance the same. It is contended that such fixation/alteration of the charges is clearly opposed to Section 49 of the Electricity (Supply) Act, 1948 (hereinafter referred to as "the Supply Act"). It is contended that under Section 49(1), the 1st respondent may frame uniform tariff for supply of electrical energy taking note of the guidelines laid down in Section 49(2) of the Act. It is further pointed out that Section 49(4) enjoins that in fixing such tariff, the Board shall not show undue preference to any person. It is further pointed out that by incorporation of sub-sections (5) and (6) in Karnataka State to Section 49 of the Supply Act, any agreement to pay in excess of the uniform tariff is unenforceable. Besides, the levy of High Cost Energy deeming it as fixation of tariff under Section 49(1) contravenes Section 49(2) of the Supply Act and hence is arbitrary, discriminatory and is violative of Article 14 of the Constitution of India. It is further alleged that out of 1000 HT consumers, only 300 are the power cut consumers and that they alone have been inflicted with the differential price fixation. This is again discriminatory and arbitrary. It is contended that it is irrational to assume that the above said 300 High Tension consumers alone consume 40% of the High Cost Energy. Such fixation, it is contended, is based more on fiction than reality. It is argued- that under the tariff notification of the Board, issued under Section 49 of the Act, the petitioner is classified in the category "HT 1 -Industrial, non-industrial and commercial purposes" and tariff to the said category fixed as at 30 paise per unit consumed. This, it is averred to be the prevailing rate till 30-9-1994 and thereafter 28 paise. If so, according to the learned Counsel for the petitioners, this would be the uniform tariff applicable under Section 49(5) and (6) of the Supply Act. Hence, no other rate can be stipulated by the 1st respondent in exercise of its power under Section 49(1) of the Supply Act. Such levy would be based on fictional consumption of energy, impermissible for being enforced under Section 49(5) and (6) of the Supply Act. It is further urged that, even if the petitioners accept the High Cost Energy, they cannot be made liable to pay anything in excess of the uniform rate stipulated. The petitioners thus challenge Annexures-A and B on various grounds.
4. A detailed statement of objections has been filed by the 1st respondent. The principal contention urged by the 1st respondent is inter alia that:
(i) When the petitioners in effect accept the power cut effected as per Annexure-C, they cannot challenge the consequential orders issued, namely, Annexures-A and B, which is only to work out the power cut order in terms of tariff;
(ii) That the fixation of quota of normal energy and a High Cost Energy is not illegal and not arbitrary or discriminatory;
(iii) The fixation of price for the High Cost Energy at 66 paise for the month of September 1984 and 80 paise for the month of October 1984 onwards is legal and unobjectionable. It does not infringe the guarantee of equality enshrined in Article 14 of the Constitution;
(iv) The 1st respondent has power under Section 49 of the Supply Act to levy differential rates of prices;
(v)By introducing sub-sections (5) and (6) to Section 49 of the Supply Act, the power of the 1st respondent to fix different tariffs to different consumers after grouping them separately is not taken away. The classification is reasonable and there is nexus to the objective to be achieved. The 1st respondent has power to classify the consumers into different categories and fix different prices. There is no arbitrariness or discrimination in exercise of such power;
(vi)Price fixation is not justiciable and open to judicial review in a proceeding under Article 226 of the Constitution of India; and
(vii) Even if a judicial review is found competent, then the sale of electricity which is a merchandise, by the seller the 1st respondent is in the realm of contract, and this Court cannot intervene to pronounce on the legality or otherwise on the contract entered into by the seller and the buyer who is the consumer.
5. These are briefly the rival contentions raised by the petitioners and the 1st respondent. As per the interim order dated 20-12-1984, the petitioner was permitted to discharge the arrears due to the 1st respondent in three monthly equal instalments and the current bills to be paid as and when it fell due.
6. I have heard Mr. Jayaram, learned Counsel for the petitioners, as also Mr. Narasimha Murthy on behalf of the 1st respondent at length. The Counsel briefly addressed the question raised.
7. To begin with, Mr. Jayaram urged his contention with respect to the discriminatory treatment meted out to the petitioners. He pointed out that the 1st respondent as on the date of Annexures-A and B was supplying electrical energy to as many as 1549 H.T. consumers. Of them, only 296 including the petitioners are under energy cut as per Annexure-C. To them alone the High Cost Energy tariff fixed, as disclosed from Annexures-A and B, is made applicable. By these orders, the indirect effect is that there is a further cut in the electrical energy. It is contended that under Section 22-B of the Electricity Act, it is only the 2nd respondent who can effect power cut and the 1st respondent cannot usurp the said power indirectly. Therefore, in effect, it is contended that the 1st respondent is attempting to achieve what it cannot do directly.
8. This contention of the petitioner is untenable. There is no dispute that at the relevant time there was shortage in generation of power and necessarily the deficit had to be made-good by importing the same from neighbouring States. When the 1st respondent becomes the buyer of electrical energy, it has to pay the higher price being stipulated by the seller. Necessarily, this cost has to be and is being passed on to the consumers. In this behalf, we may advert to Annexure-O which is the minutes of the 554th meeting of the Karnataka Electricity Board held on 11-1-1984. Thereat, the following resolution was adopted:
(i) It would be possible to sell 427 MUs of energy as high cost energy during October 1984 - March 1985.
(j)It was decided that rate for high cost energy sold from 1-10-1984 should be at 80 paise per unit and additional demand in proportion to additional energy should be given. With the above revisions in assumption, it is noted that the revenue surplus would be Rs. 15.52 crores as compared to Rs. 7.30 crores in the earlier estimate and the gap between the budgeted figure of Rs. 60.76 crores and the resource would be Rs. 30.27 crores as compared to Rs. 38.49 crores initially estimated and Rs. 22.60 crores as indicated in the plan resource discussions".
This discloses the decision taken by the 1st respondent to fix higher tariffs. Now, as explained by the 1st respondent in the statement of objections, such fixation became necessary for the following reasons: The demand for electrical energy in the State exceeded the energy generated within the State. In order to cope up with the demand, the 1st respondent had been importing energy from the neighbouring States mainly from Maharashtra and Andhra Pradesh. The 1st respondent secures 20.89 Million Units per day from the internal generation and it imports 2.5 Million Units per day from Maharashtra and 2 to 3 Million Units per day from Andhra Pradesh. There are several institutions to which power cut has not been effected, as can be seen from Annexure-C. To them, their full entitlement has to be met. The balance alone is available to be supplied to "power cut" industries. Maharashtra had fixed 44.25 paise per unit as the price, whereas Andhra Pradesh has stipulated 64 paise per unit. Internally also, the cost of generation was increasing. Further, the 1st respondent has to meet the wheeling charges for transmission of the energy to the Receiving Station as also the cost of transmission to the consumers point. The transmission loss while transmitting the energy, the loss due to stepping down of the energy to different voltages and loss suffered during distribution have also to be absorbed while working out the cost of the unit. The price thus has to be fixed taking into account these factors. These circumstances do explain fixing the high cost energy at the price indicated in Annexures-A and B.
9. There is yet another aspect also to be borne in mind while considering the challenge to Annexures-A and B. The normal requirement of the energy by consumers falling under the category to whom the power cut applies is 16 million units per day. (As stated earlier, there are certain categories of consumers to whom power cut cannot be effected i.e., H.T. Installation with contract demand upto 250 KVA). By means of power cut to others, the requirement stands reduced at 6 million units per day. To meet this demand, it is pointed out, that only 3.5 million units is available from State generation. The balance 2.5 million unit has to be met by using the imported power. In other words, 40% of the units of electricity supplied to such consumers is met from out of the imported energy. Therefore, the 1st respondent has fixed as per Annexures-A and B the quota of High Cost Energy as at 40% of the total energy availed by the petitioners. As such, that part of the energy of the total is obviously liable to be levied at higher rate; and Annexures-A and B merely declares no.
10. It cannot be denied the entitlement of the 1st respondent to recover the cost of the price paid by them for purchasing the electricity from other States, from the person who purchases the energy from them. While fixing that sale price, the 1st respondent can also take into account the cost it incurs for transmission of electricity to its purchasers.
If a price is fixed by the 1st respondent taking into account all these factors, then, such fixation can hardly be described as arbitrary or illegal. If so, the fixation of price made by the 1st respondent at its 554th Meeting held on 11-1-1984 has to be upheld.
11. We will now advert to the legal contention urged by the petitioners assailing the impugned orders.
12. The first contention urged is based on Section 49(4) of the Supply Act. The said provision reads as follows:
"(4) In fixing the tariff and terms and conditions for the supply of electricity, the Board shall not show undue preference to any person".
The contention is that by means of fixation of different tariffs to a section of consumers, an "undue preference" is being shown to other class of consumers. I am afraid that this contention really misses to advert to the factual basis upon which the different tariff is fixed. When it is to be considered as to whether any "undue preference" is shown, it has to be established that the preference shown is not what is legally due to others and that all are equally placed. But, if the factual matrix adverted to in the preceding paragraphs are kept in mind, it can be seen that the 296 consumers like the petitioners are a different class by themselves and it is difficult to say that the 1st respondent has shown any undue preference to any person. Besides, in this behalf we may advert to the following passage from the decision in Indian Aluminium Company v Kerala State Electricity Board.
". . . Sub-section (4) of Section 49 therefore, provides a safeguard by enacting that in fixing tariff and terms and conditions for the supply of electricity, the Board shall not show any undue preference to any person. This safeguard is obviously necessary only in cases where special tariff is fixed by the Board under sub-section (3) of Section 49. When uniform tariffs are fixed by the Board under sub-sections (1) and (3) of Section 49, there could be no question of the Board showing undue preference to any one consumer against another because every consumer falling within the category, would have to pay the same tariff for the same benefit received by him. It is, therefore, obvious that sub-section (4) of Section 49 controls the action of the Board in fixing tariff under sub-section (3) of Section 49 and it has no application where uniform tariffs are fixed under sub-sections (1) and (2) of Section 49".
This is an instance where uniform tariff has been fixed under Section 49(1). In such cases, sub-section (4) do not stand attracted.
13. The next attack was relying on Section 49(1) read with Section 49(3) and Section 49(5) and (6) of the Supply Act. The contention is that in view of Section 49(5) and (6) of the SupplyAct as applicable to Karnataka, there is no scope to invoke Section 49(3) and fix special tariff to the consumers like the petitioners. But, similar contention advanced before the Supreme Court was repelled by the Court in the decision in Jiyajeerao Cotton Mills Limited and Another v The Madhya Pradesh Electricity Board and Another.
"... In the circumstances, the Board was justified in invoking the power under Section 49(3) of the 1948 Act which authorised it to supply electricity by charging different tariff having regard to certain conditions and "any other relevant factors". Section 49(3) was interpreted to be wide enough to cover a situation where electricity in excess of the quantum is drawn in disregard of the ban imposed under Section 22-B of the 1910 Act. We do not consider it necessary to multiply the decision as there does not appear to be any doubt that either under Section 49(1) of the 1948 Act read with the agreement or under Section 49(3) or under both the provisions the respondent Board is fully authorised to levy and to make a demand at a higher rate than the usual tariff. It is also clear that it is not essential for the Board to make regulations indicating the basis for such levy before making the demand.. . ".
Earlier, while considering similar arguments, the Supreme Court had already indicated in Kerala State Electricity Board v M/s. S.N. Govinda Prabhu and Brothers and Others, as follows:
". . . Relying upon the observation, "It would have been manifestly unjust and discriminatory that one consumer should benefit at the cost of other consumers or general tax payers", made in D.C.M. v Rajasthan State Electricity Board, it was argued by Shri Potti that it was not open to the Board to give favoured treatment to Low Tension Domestic and Agricultural Consumers at the cost of the rest of the consumers. We do not find any force in this submission. Section 49(3) expressly reserves the power to the Board, if it considers it necessary or expedient, to fix different tariff for the supply of electricity to any person having regard to the geographical position of any area, the nature of the supply and purpose for which supply is required and other relevant factors. Different tariffs for High and Low Tension consumers and for different classes of Consumers, such as, Industrial, Commercial, Agricultural and Domestic have been prescribed and the differentiation appears to us to be reasonable and far from arbitrary and to be based on intelligent and intelligible criteria".
This principle has been earlier laid down by the Supreme Court in The Adoni Cotton Mills Limited v Andhra Pradesh State Electricity Board and Others. Therein, it is stated thus with reference to Section 49(3) of the Supply Act:
". . . The expression "any other relevant factors" is not to be construed ejusdem generis because there is no genus of the relevant factors. The combined effect of Section 49 of the 1948 Act and the terms and conditions of supply is that having regard to the nature of supply and other relevant factors particularly when there is shortage of electricity, the Board has power to enhance the rates. If there is shortage of electricity there is to be restriction on supply. The Board can disconnect supply if the quota is exceeded. The Board can also impose higher rates if the quota is exceeded. The imposition of higher rates is only to sanction the rigour of ration by making persons who exceed the quota liable to pay higher rates".
Similar contention was rejected by the Supreme Court in M/s. Hindustan Zinc Limited v Andhra Pradesh State Electricity Board and Others, stating thus:
"24. It was also contended on behalf of the appellants that the generation of electricity by the Andhra Pradesh Electricity Board is both thermal as well as hydro, the quantity from each source being nearly equal and the entire electricity generated is fed into a common grid, from which it is supplied to all categories of consumers. On this basis, it was argued that the rise in the fuel cost which led to the fuel cost adjustment applicable only to the H.T. consumers was unreasonable and discriminatory since the burden of rise in fuel cost was placed only on the H.T. consumers. In our opinion, this argument has no merit. The H.T. consumers, including the power intensive consumers, are known power guzzlers and in power intensive industries, electricity is really a raw-material. This category of consumers, therefore, forms a distinct class separate from other consumers like L.T. consumers who are much smaller consumers. There is also a rational nexus of this classification with the object sought to be achieved. Moreover, the power intensive consumers have been enjoying the benefit of a concessional tariff for quite some time, which too is a relevant factor to justify this classification. Placing the burden of fuel cost adjustment on these power guzzlers, who had the benefit of concessional tariff for quite some time and have also a better capacity to pay cannot, therefore, be faulted since the consumption in the power intensive industries accounts for a large quantity".
That would take care the claim of the petitioners that the Board lacks power to fix separate tariff to different class of consumers. When once we accept that the consumers fall under different classes, it can certainly presuppose, separate different treatment to these classes of consumers. Such a classification is reasonable and has nexus to the object being achieved.
14. Now we will examine the grievance that the rate adopted as the price is high. Here, in the words of the Supreme Court, it is not in the province of this Court to examine the price structure in minute detail if it is satisfied that the revision of tariff is not arbitrary and is not the result of application of any wrong principle the observation in Kerala State Electricity Board's case, supra.
15. To conclude, we may advert to the following passage from the decision in Bihar State Electricity Board v Usha Martin Industries Limited, in regard to fixation of tariff under Section 49 of the Act. Their Lordships stated as hereunder:
"17. Moreover, the tariff is fixed by exercise of statutory power. It is not fixed as a result of any bargaining by and between the Board and the consumers. It is a uniform tariff which every consumer will have to pay for the electricity consumed by him. In fact, the consumer has no option but to pay the tariff fixed by the Board in exercise of power conferred by Section 49".
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20. The general principle of law to be applied in cases like this wa's stated by Lord Goddard, L.J. in Love v Norman Wright (Builders) Limited, as under:
"So far as the purchaser is concerned, he pays for goods what the seller demands, namely, the price even though it may include taxes. That is the whole consideration for the sale and there is no reason why the whole amount paid to the seller by the purchaser should not be treated as the consideration for the sale and included in the turnover".
The fixation of tariff, if found to be reasonable and is neither arbitrary nor result of wrong application of law, then, it is beyond the pale of judicial auditing and scrutiny. That it is so, has been established in this case. As such, there is no scope for interference with the impugned orders. The writ petition is accordingly dismissed but without costs.