2000 Supreme(SC) 1783

2000(7) Supreme 407
Supreme Court of India
(From Andhra Pradesh High Court)
A.P. Misra & N. Santosh Hegde, JJ.
Chittoor Zilla Vyavasayadarula Sangham etc. etc. —Appellant
versus
A.P. State Electricity Board & Ors. —Respondents
Civil Appeal No. 6182 of 2000
(Arising out of SLP (C) No. 6648 of 1999)
With
Civil Appeal Nos. 6183-6187 of 2000
(Arising out of SLP (C) Nos. 9436-9440 of 1999)
With
Civil Appeal No. 6188 of 2000
(Arising out of SLP (C) No. 16029 of 1999
With
Civil Appeal Nos. 6189-6191 of 2000
(Arising out of SLP (C) Nos. 11667-11669 of 2000)
Decided on 3-11-2000
Counsel for the Parties :
For the Appearing Parties : P.P. Rao, Shanti Bhushan and Ashok Grover, Sr. Advocates, P.S. Narsimha, P. Sridhar, K.N. Jha, V.G. Pragasam, B. Kanta Rao, Ms. Sudha Gupta, Dilip Tandon, Rakesh K. Sharma, Advocates.

Headnote:Electricity (Supply) Act, 1948—Sections 49, 59 and 78-A—Tariff based on slab system for supply of electricity to farmers—Legality of—A.P. Government’s policy direction by letter dated 27.5.1995 to Supply at Rs. 50 per H.P. per annum—Tariff fixed accordingly by Board—Subsequent revision of tariff from uniform flat rate into multi different tariff rate—Challenge to on ground new tariff run contrary to uniform tariff contemplated under Section 49 and contrary to Government policy issued under Section 78-A—Not tenable—Board not bound to follow every policy directions—Supply of electricity at rate of Rs. 50 per H.P. per annum would result in loss violating Section 59—Letter of Government dated 27.5.1995 and binding directions under Section 78-A except to the extent of supply electricity to Ryots at subsidised and concessional rate—Imposition of tariff neither illegal nor discriminatory but has rational behind it in interest of small farmers.

       Board supplies electricity and fixes tariff from time to time under Section 49. In doing so, it has classified the consumers into low tension consumers and high tension consumers. Under low tension consumers among the 7 categories the agriculturists is category No. 5 (to which we are concerned) and under high tension consumers fall factories, industries and also agriculture of high tension consumers. Different tariff rates are being fixed from the very inception by the Board for each class or category. The impugned tariff revision was undertaken by the Board keeping in view its statutory responsibility it has to undertake in terms of Section 59. In doing so, it has to ensure that the total revenue in any year, after meeting all expenses properly chargeable including operation, 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 is not less than 3 , or such high percentage as State Government may, by notification in the official Gazette, specify. It is one of the statutory obligation cast on the Board. (Para 11)

       Section 78A empowers the State Government to issue directions to the Board on question of policy, on the other hand the Board has to perform its statutory obligations under the said Act and with reference to the fixation of tariff it has to act in term of what is contained in Sections 49 and 50. But this field of policy direction is not unlimited. There cannot be any policy direction which pushes the Board to perform its obligations beyond the limits of the said two sections. Any policy direction, which in its due performance keep the Board within its permissible statutory limitations would be binding on the Board. So, both State and the Board have to maintain its cordiality and co-ordination in terms of the statutory sanctions. If any policy direction pushes the Board in its compliance beyond statutory limitations, it cannot be a direction within the meaning of Section 78A. It is significant that opening words of Section 78A is, “in the discharge of its functions, the Board shall be guided by such directions". So, the direction of the State is for the guidance to the Board, in the discharge of its functions. Thus this direction has also limitation to give such direction which will subserve in performing its statutory obligation. (Para 18)

       Board would not be bound to follow every policy directions. According to the Board, if tariff was charged at the rate of Rs. 50/- per H.P. per annum, as per the direction in question, loss to the Board would have been to the extent of Rs. 1,553 crores for the year 1996-97. This would have gone contrary to the obligation cast on the Board under Section 59. Section 59 mandates the Board to leave such surplus not less than 3 of the revenue, after meeting all its expenses referred to therein. This Board has not to supply electricity at such rate to be in deficit, leaving no hope for its extensions for the benefit of persons living in an uncovered area. It is for this and other reason statute mandates Board to maintain this surplus in every year. If it has to perform this statutory obligation, how can it do so, if it follows any such direction which takes it away from it. It is true government can cater to the popular demand in order to earn its legitimate favour, give any such policy direction, but it should have to be within permissible limit. (Para 21)

       It seems Board initially, in order to maintain cordiality and cohesion in functioning did honour the said assurance by issuing B.P. Ms. No. 110 dated 5.6.1995 and reducing the tariff to Rs. 50/- per H.P. with effect from 1.4.1995. However, subsequently, in view of the aforesaid facts, the Board it seems did bring it to the notice of the State by consulting it and thereafter issued the aforesaid impugned increased tariff B.P. No. 40 dated 3rd September, 1995. On the facts of this case the policy decision by the State Government, for the year in question, can only be construed to mean to supply the electricity to ryots at the subsidised and confessional tariff rates. The other part of the assurance, namely, to supply electricity at the rate of Rs. 50/- per H.P. per annum which results into the aforesaid loss to the Board cannot be construed to be part of the policy direction under Section 78A. (Para 22)

       The imposition, on the facts of this case, of the slab system is in keeping the interest of small farmer to pay less for consuming less electricity hence is reasonable and cannot be faulted. In doing so, it also does not violate Section 49 as submitted, by not framing uniform tariff. Firstly, the pattern of tariff fixed is uniform, even otherwise in terms of sub-section (3) of Section 49, Board could make departure from it, for any relevant factor. Hence we do not find any illegality. So, we may conclude, on the facts of this case, the aforesaid letter of the Government following assurance of the Chief Minister, could not be construed to be a binding direction under Section 78 A, except to the extent which is implicit, to supply electricity to the Ryots at the subsidised and concessional rate, which the Board has followed. (Paras 23 and 24)

       Held consequently, the Board has not put an end to any policy decision of the State. In fact, it has followed such direction falling under Section 78A, by supplying electricity to the Ryots at subsidized and concessional rate, and imposition of tariff based on slab system cannot be said to be illegal. To the second question (b), we hold, this slab system applied by the Board on the facts and circumstances of this case is not discriminatory but has rationale behind it in the interest of smaller farmers. (Para 27)