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SUPREME COURT OF INDIA
A.Alagiriswami : P.K.Goswami : P.N.Bhagwati
Orissa State Electricity Board
Versus
Indian Aluminium Company Limited
Case No. : 1652 of 1974
Date of Decision : 7/23/75
Advocates Appeared: Chakravarty Sumitra : Dadachanji : Dadachanji J.B. : John K.J. : Mathur O.C. : Mohanty Ranjit : Parthasarathi B. : Parthasarathy B. : Rath C. : Sen A.K. : Sen B. : Sharma Ajay
Electricity Act, 1948 - Section 5(1) , 60 and 79(j) - Indian Electricity Act, 1948 – Section 49 and 59 - Business - Manufacturing Aluminium - Levy of Coal Surcharge - First respondent is a limited liability company carrying on business of manufacturing aluminium - It has several factories at different places in country where it carries on one or other processes involved in manufacture of aluminium - It was desirous of setting up another factory and for that purpose it was looking for a place where it would be able to secure at reasonable rates electrical energy which is a primary raw material in method of electrolysis employed for purpose of converting alumina into aluminium - State had, about this time, commissioned hydroelectric station at site of Hirakud Dam with a view to step up production of electricity and making it available for industrial purposes whether view taken by High court is correct - Whether regulations under S. 79(j) were made or not, at date when coal surcharge - Whether Board had any such authority under S. 49 and 59, these being only two S. relied on for purpose of spelling out such authority in Board - Whether levy of coal surcharge could not be justified - Whether there was any material before High court showing that Board was running its operations at a loss so as to justify readjustment of charges – Held, It is immaterial to consider these questions because, whatever view be taken in regard to them. it is clear from Court decision that neither, under S. 49 nor under S. 59 can Board, even if it is running at a loss, interfere with a contractual stipulation as to rates solemnly agreed upon with consumer - It may readjust rates in order to avoid operational loss where it is not fettered by a contractual stipulation from doing so - High court was therefore, right in taking view that Board was not entitled to levy coal surcharge on first respondent in enhancement of rates for supply of electricity stipulated in two contracts between parties – Court need not, on this view, consider first ground on which also High court held levy of coal surcharge to be invalid, namely, that electricity to be supplied to first respondent under two contracts was to be from Hirakud hydro-power station and, therefore, rise in price of coal was irrelevant and it could not furnish any justification for imposing coal surcharge on first respondent – Court do not express any opinion on this point as it is unnecessary to do so - Appeal dismissed.
P.N.BHAGWATI, J.
(1) -THIS appeal, by special leave, is directed against the order of the High court of orissa allowing a writ petition filed by the first respondent for quashing a press note dated 1/02/1971 levying a coal surcharge at 0-62 p. per unit of electricity supplied by the orissa State Electricity Board to the first respondent. The writ petition came to be filed by the first respondent in the following circumstances.
(2) THE first respondent is a limited liability company carrying on business of manufacturing aluminium. It has several factories at different places in the country where it carries on one or the other processes involved in the manufacture of aluminium. It was desirous of setting up another factory and for that purpose it was looking for a place where it would be able to secure at reasonable rates electrical energy which is a primary raw material in the method of electrolysis employed for the purpose of converting alumina into aluminium. The State of orissa had, about this time, commissioned hydroelectric station at the site of Hirakud Dam with a view to step up the production of electricity and making it available for industrial purposes. It offered to supply electricity to the first respondent at reasonable rates if the first respondent set up its factory at Hirakud in the district of Sambhalpur within the territories of the State. A contract dated 3/06/1957 was accordingly entered into between the first respondent and the State of orissa for supply of electricity at certain mutually agreed rates for a period of 25 years with an option of renewal in favour of the first respondent for a further period of 25 years. In view of this contract, the first respondent established a factory at Hirakud for the manufacture of aluminium and the State of orissa supplied electricity to the first respondent from the Hirakud hydro-power station at the rates stipulated in the contract. Some time after the factory of the first respondent had been in production, it was found that additional electric power was necessary for expansion of its operations. Another contract dated 11/02/1960 was, therefore, entered into between the first respondent and the State of orissa whereby the State agreed to supply to the first respondent additional electric power at the rates and on the terms and conditions set out in this contract. The duration of this contract was also co-extensive with that of the earlier contract. Thus there were two contracts between the first respondent and the State of orissa under which the State supplied electricity to the first respondent.
(3) IN or about 1962, the State government, by a notification issued under S. 5, Ss. (1) of the Electricity (Supply) Act, 1948 (hereinafter referred to as the Supply Act) constituted orissa State Electricity Board (for shortness called the Board). S. 60 of the Supply Act provides inter alia that
ALL contracts entered into by, with . . . the State government tor any of the purposes of this Act before the first constitution of the Board shall be deemed to have been . . . entered into . . . by, with . . . the Board.
Therefore, as soon as the Board was constituted, the two contracts, dated 3/06/1957 and February II. 1960 were deemed to have been entered into by the first respondent with the Board and for all the purposes of the Supply Act, they were to be treated as contracts entered into with the Board. The Board in its turn supplied electricity to the first respondent from the Hirakud hydro-power station at the rates and in accordance with the terms and conditions set out in these contracts.
(4) IN 1968, the State government set up a thermal power station at Talcher and the transmission lines from the Hirakud hydro-power station were integrated with those from the Talcher thermal power station. The thermal project was thereafter in June 1970. transferred from the State government to the Board. Both the Hirakud hydel project and the
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