JUDGMENT

RANGANATHAN. J. - There was a time when, in almost every State in India, people were invited to avail of the supply of the electric energy produced in the State and offered special concessions when they agreed to do so in bulk under long term contracts. A situation, however, has since developed when the demand for the energy increased so rapidly that quantity of available electric energy also having gone up tremendously the rates of supply agreed upon uneconomical. The State and its instrumentalities, who were supplying the energy, found themselves without power to revise the rates to meet the altered situation until the legislature came to the rescue. It is this situation in the case of Kanoria Chemicals and Industries Ltd. (hereinafter referred to as the appellant) which has given rise to these appeals.

2. The Electricity (Supply) Act, 1948 (hereinafter referred to as the 1948 Act) entrusted the control over the generation and distribution of electric energy to electricity Boards constituted under the Act. In the State of Uttar Pradesh, the U.P. State Electricity Board (hereinafter referred to as the Board) was constituted on April 1, 1959. At that time, the State Government hereinafter referred to as the State) was in the process of establishing the Rihand Hydro-Electric Generating Plant, which became operational w.e.f. February 1, 1962, and attained an ultimate installed capacity of 300 MW. The control of this remained with the State till March 31, 1965. Since the supply of electrical energy was then available in abundance and only the eastern area of the State was served by the plant, the State considered it expedient to enter into contracts with bulk purchasers both with a view to ensure maximum utilisation of the electricity available and with a view to the industrialisation of eastern areas of the State. In particular the State was keen on the industrial development of the district of Mirzapur, which was considered to be an extremely backward area. The State was keen that power intensive units be set up in close proximity of Rihand so that electricity could be supplied to these units from the Rihand power plant. One feature of the supply of electricity from Rihand was that the metering was done at the point of generation so that transmission and distribution losses and costs could be borne by the consumers of electricity.

3. The appellant set up an industry for manufacture of caustic soda at Renukoot sometime in 1964. According to the appellant, this industry involved the use of electricity as the main taw material, the other raw material needed being salt. It is said that there were considerable disadvantages in setting up the proposed caustic soda unit in the district of Mirzapur, principally due to its distant location from areas from which salt had to be transported. The appellant, it is said, could easily have set up its factory in some other State with greater facilities and advantages but it was induced to set up the caustic soda plant at Pipri in the district of Mirzapur on account of the assurance given by the State that it will supply hydroelectric power to the assessee from the Rihand power plant on a long term basis at a cheap rate. It is claimed that, but for this promise, the appellant would never have chosen Pipri or the district of Mirzapur for the location of this plant.

4. After elaborate discussions between the State Government and the promoters of the appellant company, the plant was set up at Pipri and a contract was entered into between the State Government and the appellant on September 30, 1963 ensuring the supply of Electricity from the point of generation to the appellant for a period of 25 years from April 1, 1964. The supply, to the extent of 6.5 MW, was to from Rihand hydel station at a fixed rate of 2.5 paise per unit. An additional supply of 1.5 MW was also promised from an inter-connection at the rate of 5 np per unit. The rates could be revised after the first sixteen years but