1999 Supreme(SC) 936

1999(7) Supreme 417
Supreme Court of India
(From Calcutta High Court)
D.P. Wadhwa & M.B. Shah, JJ.
Graphite India Ltd. & Anr. —Appellants
versus
Durgapur Projects Ltd. & Anr. —Respondents
Civil Appeal Nos. 4750-52 of 1999
(Arising out of SLP (C) Nos. 15116-15118 of 1998)
Decided on 27-8-1999
Counsel for the Parties :
For the Appellants : Dipankar P. Gupta, Sr. Advocate, Mrs. Roopa Seth Mitra, Ms. Gouri Rasgotra, Suman J. Khaitan, Advocates.
For the Respondent for State of W.B. : V.R. Reddy, Sr. Advocate, H.K. Puri, S.K. Puri, Rajesh Srivastava, Ujjwal Banerjee, Joydeep Kar, Advocates.
For the W.B.S.E.B. Respondent : Anand A. Mitra, Sr. Advocate Bhaskar Mitra, H.K. Puri, S.K. Puri, Rajesh Srivastava, Ujjwal Banerjee, Advocates.
For the Respondent No. 4. : Rana Mukherjee, Ms. Sumita Mukherjee, Advocates.
For the Respondent in D.P.L. : A.K. Mitra, Sr. Advocate, B. Mitra, H.K. Puri, Advocates.

Important Point
As far as sanction-holder u/s 28 of Electricity Act is concerned, requirement of 60 days notice and approval of the State Government for enhancement of electricity tariff are not statutory conditions; re­quirement of 60 days notice to the State Government is not mandatory. Approval can be retrospective and as such mere absence of prior approval of State Government cannot invalidate enhancement of electri­city tariff.

Headnote:Electricity Supply Act, 1948—Section 57, Schedule VI—Indian Elec­tricity Act, 1910—Section 28—Enhancement of tariff—Sanction-holder u/s 28 of Electricity Act—Sanction-holder u/s 28 of Electri­city Act cannot be equated with licensee under Part II—Requirement of 60 days notice and approval before enhancement, as regards san­ction-holder is contractual in nature and not statutory—60 days notice to Government is not mandatory—Approval from State Government can be retrospective.

       Held : It is difficult to accept the argu­ment that unless approval is granted there cannot be any revision in tariff. It is not the requirement of law even if Sixth Schedule of Supply Act is held to be applicable that approval has to be granted within 60 days of the notice given to the State Government. That revision can certainly become applicable after the expiry of the period of 60 days. If ap­proval is not granted, the increased charges paid by the consumer are liable to be adjusted/refunded. In this connection reference may be made to the constitution of the Rating Committee under Section 57A of the Supply Act. Under fourth proviso to clause (1) of the Sixth Sched­ule it is provided that if charges of supply fixed in pursuance of the recommendations of a Rating Committee are lower than those notified by the licensee, the licensee shall refund to the consumers the excess amount recovered by him from them. (Para 15)

       Under Section 28 of the Electricity Act for a person other than a licensee to engage in the business of supplying energy to the public two conditions are required : (1) sanction of the State Government and (2) in accordance with such conditions as the State Government may fix in that behalf. State Government is not free to give sanction except (A) after consulting State Electricity Board, (B) with the consent of local authority the licensee in their respective areas and (C) in case the energy is to be supplied in any area forming part of cantonment, aerodrome, etc. of the Central Government. The Central Government, however, cannot withhold its consent unreasonably. A question arises if the conditions imposed by the State Government while granting sanction are statutory or contractual. (Para 16)

       Supply of electric energy is governed by two statutes, i.e. The Electricity Act and the Supply Act. A license is the requirement under the Electricity Act for a person to supply electric energy in any area. Supply Act provides for the rationalization of the produc­tion and supply of electricity and generally for taking measures conducive to electrical development. One of its main objects is to prevent such licensees from charging unreasonable rates to the detri­ment of the consumers. Under Section 57(1) of the Supply Act the provisions of the Sixth Schedule and the table appended to the Seventh Schedule thereto are deemed to be incorporated in the license of every licensee. The question involved depends on the provisions of the two Acts. While the Electricity Act deals with the supply and use of electrical energy and the rights and obligations of licensee and the sanction-holder under Part III of the Act, the Supply Act deals with the statutory powers and functions of the Central Electricity Authori­ty, State Electricity Boards and generating companies and also pro­vides for fixing of charges to the consumers of energy by the licen­see. Section 2(6) of the Supply Act thus defines licensee to mean a person licensed under Part II of the Electricity Act and also a person who has obtained sanction under Section 28 of that Act. But then the term ‘license’ and ‘sanction’ have not been defined. Section 2 also starts with the expression that “in this Act, unless there is anything repugnant in the subject or context” and, therefore, what licensee means under Section 2(6) can be different if there is anything repug­nant in the subject or context. Had the term ‘licensee’ defined to mean a person licen­sed under Part II of the Electricity Act to supply energy or a person who had obtained sanction under Section 28 of that Act and the expression ‘license’ and ‘sanction’ to be construed ac­cordingly things would have been much simpler. However, it is not that whenever the word ‘licensee’ has been used in the Supply Act it would also include the sanction-holder. In this connection we may refer to Section 41 of the Supply Act which provides for use by the State Electricity Board or the generating company to use for any of its purposes any transmission lines or main transmission lines of a licen­see. Here ‘licensee’ would certainly mean a person who has been gran­ted licensee under Part II of the Electricity Act as well who has been granted sanction under Section 28 of that Act. The question which falls for consideration is if the word ‘licensee’ in Section 57 of the Supply Act would include a sanction-holder. This section provides that Sixth Schedule shall be deemed to be incorporated in the license of every licensee, not being a local authority and that would be notwith­standing anything contained in any provision of the Electricity Act or terms of the license granted to him under that Act or under any other law. Sixth Schedule of the Supply Act has thus over-riding effect. Sixth Schedule uses the expression ‘license’ in its various clauses. It would be difficult for us to hold that ‘license’ would mean ‘sanction’ as well. We have to see in what context the term ‘license’ had been used. When sanction was granted to DPL in the year 1964, much after the coming into force of the Supply Act, it was specifically mentioned that certain provisions of the Electricity Act would apply (clause 5) and clause 6 of the conditions provided that the rates for supply of energy shall be fixed and adjusted from time to time in conformity with the provisions of the Sixth Schedule to the Supply Act and with the approval of the State Government. If Sixth Schedule was applicable to a sanction-holder under Section 28 of the Electricity Act there was no occasion for the State Government to mention that rates would be fixed and adjusted in conformity with the Sixth Schedule. Moreover, when a licensee under Part II fixes and adjusts the rates in terms of the Sixth Schedule he is not required to obtain any approval by the State Government. Rather power under para­graph (1) of the Sixth Schedule would justify enhancement of the rate beyond that fixed earlier by the licensee or by any order of the State Government. Though a sanction-holder is bound to seek approval of the rates from the State Government there is no such limitation on a licensee. This term would show that conditions imposed by the State Government to a sanction-holder under Section 28 of the Electricity Act are contractual in nature and are not statutory. (Para 17)

       A person to whom sanction has been granted under Section 28 of the Electricity Act cannot exercise all the powers of a licensee under that Act. The powers to be exercised by holder of sanction are specif­ically mentioned under the Act. Reference may be made to Section 29 of the Electricity Act. Under that Act, the local authority may, by order in writing, confer and impose upon any person, who has obtained the sanction of the State Government under Section 28 to engage in the business of supplying energy, to the public, all or any of the powers and liabilities of a licensee under Sections 12 to 19, and the provi­sions of the said sections shall thereupon apply as if such person were a licensee under Part II of the Act. It is, thus, apparent that a sanction holder under Section 28 of the Electricity Act cannot be equated with a licensee under Part II of that Act. (Para 21)

       Under Section 57 of the Supply Act the Sixth Schedule is applica­ble to a licensee. This Schedule has been made applicable to a sanc­tion holder under the terms of the sanction. Third proviso to the Sixth Schedule provides that the licensee shall not enhance the charges for the supply of electricity until after the expiry of a notice in writing of not less than sixty clear days of his intention to so enhance the charges, given by him to the State Government and to the State Electricity Board. In the present case, when we are considering the applicability of the Sixth Schedule to the sanction holder, it is not the case that any notice was required to be given to the WBSEB. Why notice is re­quired to be given to the State Government can be seen from the fact that the State Government or the State Electricity Board could consti­tute a rating committee to examine the licensee’s charges for the supply of electricity and to make recommendations in that behalf to the State Government. What are the consequences of the recommendations of the rating committee find mention in Section 57A and in the Sixth Schedule. There is no question of any approval to be given by the State Government to the licensee. When notice of enhancement of charges is given in the case of sanction holder under the terms of the sanction approval of the State Government is required. We have seen above, approval from the State Government can be retrospective. The bar in the proviso is only to the extent that enhanced charges may not be levied till after the expiry of sixty days notice to the Govern­ment. It is not that the State Government is required to grant its approval within 60 days period. As far as sanction holder is con­cerned, requirement of notice and approval by the State Government are not statutory conditions. These are contractual and could be varied or waived by the State Government. Conditions have been imposed by the State Government and not by virtue of any statute. It would, there­fore, appear to us that the requirement of sixty days notice to the State Government is not mandatory. (Para 22)

       In the present case when approval was granted by the State Government by its letter dated April 27, 1992 the approval relates back and the revision would be effective from April 8, 1991. It is difficult to accept the argument of Graphite (consumer of power) that the letter dated April 27, 1992 is not an approval of the increase in tariff effective from April 8, 1991. On December 23, 1991, DPL wrote to the State Government on the subject of general revision in power tariff by it and referred to its letter dated February 9, 1991. It said that the Board of Directors of DPL at 405th meeting held on December 13, 1991 approved the proposal for general revision of power tariff of DPL to all its consumers. DPL sought approval of the State Government to effect the tariff revision from March 3, 1992. It also pointed out that “the company (DPL) should have a benefit of revision in rate of supply to WBSEB as a whole for which Government should be moved”. In its letter dated April 27, 1992 to DPL the State Government granted approval for revision of tariff for different categories of consumers and as regards rate applicable to Graphite the letter said “as existing w.e.f. 8.4.91”. We do not think any argument is needed for us not to hold that ex post facto approval was granted for tariff revision as regards the supply to Graphite from April 8, 1991. In its counter affidavit dated January 10, 1992 filed in the first writ petition, the State Govern­ment took the stand that the DPL before enhancing the tariff with effect from April 8, 1991 did not comply with the necessary formali­ties as required under the Supply Act read with the Government Order No. 4520 (Power) dated August 28, 1964. Graphite was not informed of the said hike which came into force w.e.f. April 8, 1991. However, in the supplementary affidavit filed by the DPL subsequently it was stated that the Government of West Bengal by their letter dated April 27, 1992 duly approved the enhancement of tariff w.e.f. April 8, 1991. In the letter dated February 9, 1991 to the State Government, the DPL mentioned that the tariff was last revised for all categories of consumers w.e.f. August 1, 1988 and thereafter the cost of operation of maintenance of power plant has increased considerably. The revenue derived by the company from the existing tariff has been found to be quite inadequate to absorb spiraling cost and expenses. The State Government is also informed that by its order dated January 31, 1991, it had approved revision in tariff by the WBSEB w.e.f. March 1, 1991 and WBSEB has published a notification in the press announcing revi­sion in their rates and charges. It was further pointed out that the State Government by its letter dated August 29, 1986 had directed the DPL’s power tariff should be fixed in line with that of the WBSEB for the purpose of uniformity. In the letter seeking tariff revision for the year 1993-94, details were given as to how revision in tariff has been necessitated. As noted above Graphite has failed to show as to how it could be said that charges enhanced by the DPL exceed the amount of reasonable return as required under clause (1) of the Sixth Schedule. It is certainly a relevant consideration for the DPL to fix its tariff in line with the WBSEB for the purpose of uniformity and as Mr. Reddy put it for capping unless it is shown that tariff revision has contravened the provisions of the Sixth Schedule. State Government has not insisted of notice being less than 60 days. No prejudice is shown to have been caused to Graphite on the ground that notice period fell short by two days. In the circumstances of the case requirement of 60 days notice does not appear to us to be mandatory. (Paras 15 & 22)