1. Dispute concerning legality of electricity charges exceeding limits fixed under the Electricity Act, 1910, following the enactment of the Electricity (Supply) Act, 1948. (Para 1 , 2 , 3 , 4 , 5 , 6 , 28 , 29 , 31 , 32 )
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1964 Supreme(SC) 111
SUPREME COURT OF INDIA
30th March 1964
A.K. SARKAR, K.C. DAS GUPTA AND N. RAJAGOPALA AYYANGAR, JJ.
Amalgamated Electricity Co. Ltd. (in both Appeals), Appellant
Versus
N. S. Bathena and others (in both appeals), Respondents.
Civil Appeals Nos. 590 to 591 of 1963.
Advocates Appeared
In C. A. No. 590 of 1963 :
Mr. H. N. Sanyal, Solicitor-General of India (M/s. M. M. Gharekhan and I. N. Shroff, Advocates with him), for Appellant.
In C. A. No. 591 of 1963:
Mr. H. N. Sanyal, Solicitor-General of India and Mr. M. C. Setalvad, Senior Advocate, (M/s. M. M. Gharekhan and I. N. Shroff, Advocates, with them), for Appellant.
Mr. Naraindas C. Malkani, Advocate and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., for Respondents (In both the Appeals).
Advocates:
H.N.SANYAL, I.N.SHROFF, J.B.DADACHAN, M.C.SETALVAD, M.M.Gharekhan, Naraindas C.Malkani, O.C.MATHUR, Ravindra Narayan
H.N.SANYAL, I.N.SHROFF, J.B.DADACHAN, M.C.SETALVAD, M.M.Gharekhan, Naraindas C.Malkani, O.C.MATHUR, Ravindra Narayan
The Electricity (Supply) Act, 1948 supersedes the price limits of the Indian Electricity Act, 1910. Licensees may unilaterally adjust rates for reasonable return. Civil courts cannot determine if rates exceed reasonable return, as the Act provides a specific administrative mechanism via rating committees.
Headnote:(A) Electricity (Supply) Act, 1948 - Sections 57, 57A, 70 and Schedule VI, Paragraphs I and II; Indian Electricity Act, 1910 - Section 3 and Schedule, Paragraph XI - Legality of electricity charges - Supersession of price limits - The provisions of the 1948 Act, specifically Section 57 and Schedule VI, override any inconsistent limits on prices fixed under the 1910 Act or the original license. Where there is inconsistency between the two Acts, the 1948 Act prevails. (Paras 10, 12, 42, 44)
(B) Electricity (Supply) Act, 1948 - Schedule VI, Paragraph I - Unilateral adjustment of rates - A licensee has a statutory right to unilaterally adjust rates to ensure clear profit does not exceed a reasonable return, provided procedural requirements such as notice are met. The constitution of a rating committee under Section 57A is an optional mechanism and not a prerequisite for the licensee to enhance rates on its own. (Paras 11, 43, 53)
(C) Jurisdiction of Civil Court - Determination of reasonable return - Civil courts lack jurisdiction to declare rates illegal solely on the ground that they result in profits exceeding a reasonable return, as the Act provides a specific administrative mechanism via rating committees for such determinations. Such a power in civil courts would destroy the uniformity of rates. However, civil courts retain jurisdiction over specific statutory breaches, such as violating the prohibition on enhancing rates more than once a year or failing to provide requisite notice. (Paras 18, 58, 59)
(D) Burden of Proof - Onus on the party alleging that the rates charged by a licensee contravene statutory prohibitions regarding reasonable return; there is no presumption that the rate charged by a licensee is illegal. (Paras 17, 61)
Facts of the case:
A licensee of electricity supply continued to charge rates exceeding the maximum limits fixed by the government under a 1910 Act, justifying the same under a 1948 Act. The licensee further revised unit charges via notice. Consumers filed representative suits seeking declarations that these charges were illegal and seeking injunctions against their recovery, contending that the charges exceeded the limits fixed by the government and the reasonable return permitted by law.
Findings of Court:
The 1948 Act supersedes the price limits of the 1910 Act. The licensee's unilateral revision of rates was permissible under the statutory scheme. The consumers failed to prove that the rates resulted in profits exceeding the statutory limit of reasonable return plus the permissible percentage.
Issues: Whether the maximum rates fixed under the 1910 Act continued to bind the licensee after the 1948 Act; whether a licensee could unilaterally enhance rates without a rating committee; and whether a civil court has jurisdiction to determine if rates exceed a reasonable return.
Ratio Decidendi: The 1948 Act's scheme for "reasonable return" overrides the 1910 Act's fixed maxima. The statutory remedy for excessive profits is the appointment of a rating committee, not a civil suit for declaration. The burden of proving excessive profit lies with the plaintiff.
Result: Appeals allowed.
Legal Category Hierarchy
Table of Contents
2. Whether licensees may unilaterally enhance rates under the Electricity (Supply) Act, 1948, or must first obtain approval via a rating committee. (Para 11 , 12 , 13 , 31 , 32 , 41 )
3. The 1948 Act overrides the 1910 Act; licensees may unilaterally adjust rates for reasonable return; civil courts cannot adjudicate the reasonable return limit. (Para 10 , 11 , 12 , 13 , 17 , 18 , 42 , 43 , 44 , 46 , 48 , 49 , 54 , 55 , 56 , 58 , 59 )
4. The Electricity (Supply) Act, 1948, overrides inconsistent licence limits; civil courts lack jurisdiction to determine if rates exceed the statutory reasonable return limit. (Para 10 , 12 , 18 , 42 , 44 , 59 )
5. Appeals allowed and suits dismissed. (Para 24 , 25 , 26 , 62 )
6. Does the Electricity (Supply) Act, 1948, override rate limits fixed under the Indian Electricity Act, 1910?
Yes. Section 57 and Section 70 of the 1948 Act provide that its provisions, including the Sixth Schedule, override any inconsistent provisions of the 1910 Act or the licensee's licence. (Para 10 , 12 , 42 , 44 )
7. Can a licensee unilaterally enhance electricity rates under the Electricity (Supply) Act, 1948?
Yes. Paragraph I of the Sixth Schedule empowers licensees to adjust rates to ensure clear profit does not exceed a reasonable return, notwithstanding the 1910 Act or licence limits. (Para 10 , 11 , 43 , 46 )
8. Can a civil court declare electricity rates illegal for exceeding the reasonable return limit?
No. The Act provides a specific administrative mechanism via rating committees and government-directed rebates. Civil courts cannot adjudicate the reasonable return limit to avoid inconsistent rate determinations. (Para 18 , 54 , 55 , 56 , 59 )
9. Who bears the burden of proving that electricity rates exceed the statutory limit of reasonable return?
The burden lies on the consumer who alleges that the rates are excessive and contravene the statutory prohibition against exceeding the reasonable return limit. (Para 17 , 61 )
10. Is the constitution of a rating committee a mandatory prerequisite for a licensee to increase rates?
No. Section 57A allows a licensee to request a rating committee to avoid the risk of future refunds, but it is not a mandatory requirement for unilateral rate adjustment. (Para 11 , 54 )
Judgment
SARKAR, J. - The appellant is a company carrying on business as supplier of electricity in a certain area in the State of Bombay. The respondents Bathena and Tendulkar were consumers of electrical energy supplied by the appellant. The present appeals arise out of disputes between these consumers and the appellant concerning the legality of the charges made by the appellant for electricity supplied by it.
2. The supply of electrical energy is controlled by two statutes and the questions involved in the present cases will turn on them. These statutes are Electricity Act, 1910 and the Electricity (Supply) Act, 1948. I will first consider the Act of 1910. Section 3 of this Act gives power to the Government to grant a licence to a party to supply electrical energy in any specified area and to prescribe in the licence the limits of price to be charged by it for the supply. This section further provides that the provisions in the Schedule to the Act would, unless otherwise directed, be deemed, to be incorporated in the licence. Paragraph XI of that Schedule states that a licensee would not be entitled to exceed the limits of price fixed in his licence. This paragraph, however, gives power to the Government to alter these limits on the recommendation of an Advisory Board appointed under S. 35 of the Act. It is not necessary to refer to the other provisions of this Act.
3. The appellant had been supplying electricity under a licence issued in 1932 by the Government of Bombay under the Act of 1910. The licence fixed the limits of the prices which the appellant could charge but these limits were altered by an order made by the Government on December 30, 1942 under paragraph XI of the Schedule and stood thereafter as follows:
A. For lights and fans annas -/5/- (31 nP.) per unit and,
B. For motive power. (i) upto 4 B.H.P. anna -/1/- (0.06 nP.) per unit in addition to a standing charge of rs. 2/- per month per B.H.P. connected, (ii) over 4. B. H.P.-/-/9 pies (0.05nP.) per suit in addition to the standing charge at the same rate of Rs. 2/- per B.H.P. per month.
4. Due to the conditions brought abut by the Second World War, certain orders were made from time to time permitting the licensees to add a surcharge not exceeding -33 1/2 per cent to the existing charges. Lastly, on September 30, 1946 an Act was passed by the Bombay legislature called the Bombay Electricity (Surcharge) Act. 1946, hereinafter referred to as the Surcharge Act, which continued the surcharges specified therein for a period of three years. This Act expired on September 30, 1949. It is said that even thereafter the appellant continued charging the consumers at rates which included the surcharge under the Surcharge Act, and, therefore, at rates in excess of those fixed by the Order of December 30, 1942 and that was illegal. The appellant on its part claims that its charges after the expiry of the Surcharge Act were all justified under the Act of 1948 the relevant provisions of which came into force on September 10, 1948. This Act will be referred to later.
5. The respondent Bathena commenced taking electricity from the appellant sometime in 1954. Soon thereafter he started disputes about the legality of the charges realised from him by the appellant in respect of energy supplied for purposes of motive power of over 4 B.H.P. and in 1955 filed a suit against the appellant for refund of amounts alleged to have been illegally collected from him in excess of the limits fixed by the Order of December 30, 1942, namely, an excess standing charge of 0-69 nP. per B.H.P. per month over that fixed by the Order of December 30, 1942 and a similar excess unit charge of 0-01 nP. per unit. That suit is still pending and with the disputes involved in it I am not concerned in this judgment.
6. On September 25, 1958, the appellant gave notice to its customers that with effect from November 1, 1958 it would charge for motive power 0-09 nP. per unit plus a standing charge of Rs. 2.69 per B.H.P
