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The Municipal Council, Tiruchirapalli Vs. the South Madras Electric Supply Corporation Ltd. - Court Judgment

LegalCrystal Citation
SubjectElectricity;Contract
CourtChennai High Court
Decided On
Case NumberAppeal Nos. 392 and 509 of 1964
Judge
Reported inAIR1972Mad439
ActsIndian Electricity Act, 1910 - Sections 3(1), 9, 22, 22-A(2), 23 and 24; Electricity (Supply) Act, 1948 - Sections 57, 57-A and 70; Indian Electricity Supply (Amendment) Act, 1959
AppellantThe Municipal Council, Tiruchirapalli
RespondentThe South Madras Electric Supply Corporation Ltd.
Cases ReferredBabulal Chhaganlal Gujarathi v. Chopda Electric Supply Co. Ltd.
Excerpt:
madras electricity supply act (liv of 1948), section 57--scope. original agreement between licensee and consumer fixing certain rates for supply of electric energy--licencee has right to adjust and revise rates unilaterally in accordance with and adjust in conformity with provisions of act--revision of rates cannot be challenged. ;the agreement referred to in section 57 of the madras electricity (supply) act (liv of 1948) has to be understood in the context of the main provision made therein, namely, that the provisions of the sixth schedule and the seventh schedule shall be deemed to be incorporated in the licence of every licencee, not being a local authority and, therefore, the agreement contemplated by the section must be correlated and relatable to the matters dealt with in the sixth.....1. on 7th july 1925, the government of madras granted to the tiruchirapalli-srirangam electricity supply corporation ltd., tiruchirapalli, a licence under section 3(1) of the indian electricity act, 1910 (hereinafter referred to as " the 1910 act") for supply of electrical energy to the towns of tiruchirapalli and srirangam. this licence with its conditions has been marked as ex. a.94 in these proceedings. the tiruchirapalli municipality had its head water works and sub-pumping station run on electricity. under ex. a.1 dated 31st october 1934, the said tiruchirapalli-srirangam electricity supply corporation ltd., tiruchirapalli, entered into an agreement with the tiruchirapalli municipality for supply of electricity for the purpose of running the head water works sub-water works and other.....
Judgment:
1. On 7th July 1925, the Government of Madras granted to the Tiruchirapalli-Srirangam Electricity Supply Corporation Ltd., Tiruchirapalli, a licence under Section 3(1) of the Indian Electricity Act, 1910 (hereinafter referred to as " the 1910 Act") for supply of electrical energy to the towns of Tiruchirapalli and Srirangam. This licence with its conditions has been marked as Ex. A.94 in these proceedings. The Tiruchirapalli Municipality had its Head Water works and sub-pumping station run on electricity. Under Ex. A.1 dated 31st October 1934, the said Tiruchirapalli-Srirangam Electricity Supply Corporation Ltd., Tiruchirapalli, entered into an agreement with the Tiruchirapalli Municipality for supply of electricity for the purpose of running the Head Water works sub-water works and other electric power driven installations within the Municipal limits. Clause 10 of this agreement dealt with the charge payable by the Municipality for the electrical energy supplied to it and the said clause is as follows:

"For each calendar month during the term of this agreement, the consumer shall pay to the licencee a charge calculated at the rate of ten pies per unit (kwh) for all energy consumed and registered through each meter, other than the meter for lights and fans, fitted at either the Head Water works or sub-water works, vide schedule "A" and at the rate of one anna six pie per unit (kwh) for all energy consumed by any moto and registered through each meter other than the meter for lights and fans mentioned in schedule B".

Clause 15 of this agreement dealt with the duration of the agreement and it provided:

"This agreement shall, subject as herein before provided be and remain in force for a period of seven year from the date hereof. Either party shall be at liberty to determine this agreement after the expiration of such seven years on giving to the other two years notice in writing of such intention and (on the expiration of such notice), this agreement shall absolutely cease to be in effect and determine, but without prejudice to the rights or remedies, if any of either party, which may have accrued or arisen hereunder in the meantime".

During the currency of this agreement on 25 the March 1939, the company wrote to the Municipality suggesting a new schedule of rates and also contemplating the renewal of the agreement. This communication marked as Ex. A.2 pointed out :--

"Though the power agreement for the water works supply expires only in 1941, we agree with you that it may be renewed now as some of its clauses are out of date and relate to thermal generation of power by us. Rates for these. when in order that they may compare favourably with the rate your incurred on your own plant then in operation. Still we shall be glad to charge at the enclosed rates with effect from 1st March 1939 and in this connection. We are shortly sending you a revised draft agreement for your acceptance. The rates now proposed benefit you to the tune of Rs. 9,000/- per annum, which we have no doubt, you will agree, is not inconsiderable. We enclose a tabulated sheet explaining how the sum of Rs. 9,000/- is arrived at".

The proposed rate were enclosed and they were:--

First 1000 Units per month - 1.25 annas per unit

Next 4000 Units Per month - 0.80 anna per unit; and all in excess per month - 0.60 anna per unit

Minimum monthly Charge. Rs. 100/-

2. By its resolution dated 24-6-39, the Municipal council agreed to the rates proposed by the company for supply of power to main pumping station, sub-pumping station and other electrical installations within the Municipal limits. Even after the expiration of the period of seven years from the date of the agreement Ex. A.1. neither party gave notice of termination and no revised agreement was actually entered into in writing as contemplated in Ex. A.2. It is the common case of the parties that the original agreement continued to subsist with the revised rates as agreed to between the parties as referred to above. Meanwhile the Tiruchirapalli-Srirangam Electricity Supply Corporation Ltd., Tiruchirapalli, and two other electricity supply undertaking were merged in the South Madras Electric Supply Corporation Ltd., the respondent in these appeals and the licence Ex. A.94 had been assigned to the respondent as per G.O.P. No. 1805 dated 26th August 1940. Subsequently, the Electricity (Supply) Act. 1948 (hereinafter referred to as the '1948 Act') was passed. Purporting to exercise it powers conferred on it by the provisions of the said Act, the respondent herein proposed to revise its charges for the supply of electrical energy with effect from 1st December 1956 and Ex. A.34 is a copy of the printed notice giving the proposed revised rates. This communication pointed out that the revision had be found necessary to enable the respondent to recoup partially the 30 per cent increase in surcharge levied on its bills by the Government Electricity Department from 1st August 1956. It has to be mentioned at this stage that at the time when Ex. A.1 agreement was entered into power was generated by the company itself by means of generating sets, but from 1939 the Government started supplying power in bulk to the company and the company had to discontinue generating electricity and it is the surcharge which the government levied on the bills for the supply of energy to the company that was referred to in this communication. Part B of Ex. A.34 dealt with the General Industrial tariff and paragraph 4 therein was applicable for the supply of electrical energy to the Municipality and the rate provided for in paragraph 4(a) are;

"For mixed loads of lighting, fan, heating and power where lighting and fan load not to exceed 15 per cent, of the total load--

First 1000 units in a month at 1.5 annas per unit; Next 4000 units in a month at 1 anna per unit; and all the rest units in a month at 0-75 annas per unit. Monthly minimum charge Rs. 100".

Under Ex. A.35, dated 26th October 1956, the respondent sent a copy of the notice, Ex. A.34, to all its consumers intimating that the energy consumption on and from 1st December 1956 that is consumption bills for December 1956 to be issued in January 1957 would be billed for by applying these revised tariffs. A copy of this communication, Ex. A.35. was sent to the Commissioner, Tiruchirapalli Municipality and the Municipal Engineer. Tiruchirapalli municipality. Pursuant to this communication and in terms of the revised tariffs, the supply of energy made to the Municipality was billed for by the respondent. However, the Municipality continued to pay at the pre-existing rates, notwithstanding the demand of the respondent to pay at the revised rate. When the respondent threatened to cut of connection and stop supply in exercise of its powers under Section 24 of the 1910 Act, the appellant-Municipality paid under protest the difference between the old rate and the revised rate as provided in Ex. A.34, amounting to a sum of Rupees 32,360-72 for the period from 1st December 1956 to 28th February 1959.

3. The respondent again proposed to revise the tariff with effect from 1st March 1959. Under Ex. A.51 dated 21/24-1-1959, the respondent sent two printed notices to the appellant herein. (1) relating to the revision to tariff for low tension supply of energy effective from 1st March 1959; and (2) an appeal explaining the reasons for increase in tariff and pointing out that the energy consumption on and from 1st March 1959, that is, consumption bill for March 1959 to be issued in April 1959 would be billed for on the basis of the revised tariff. Here again. the particular paragraph of the revised tariff that was applicable to the appellant was paragraph 4 of part B of Ex. A.51. The rate provided therein are:

"For mixed loads of lighting, fan, heating and power where lighting and fan load is below 50 per cent, of the total load:

First 2000 units in a month at 12.5 np. per unit and all the rest units in a month at 10 np. per unit. Minimum Rs. 200 per month."

The respondent explained the reasons for the increase in the rates as the increased working costs of the company, heavier tax burdens and certain other statutory obligations like the creation of a development reserve. The respondent also pointed out that in revising the tariff it had taken care to see that the burden was distributed as equitably as possible. Notwithstanding the upward revision of the rates, the appellant continued to pay at the pre-1st December 1956 rates. It is under these circumstances the respondent instituted O.S. 121 of 1962 on the file of the Court of the Subordinate Judge, Tiruchirapalli, for recovery of a sum of Rs. 56,730-79 being the arrears of energy charges from 1-3-1959 to 30-9-1959 being the difference between the charges at the old rate and the revised rate. The appellant in turn instituted O.S. 150 of 1963 on the file of the same Court for refund of Rs. 32,360-72 paid under protest, being the difference between the rates agreed to between the parties and the rates revised by the respondent with effect from 1-12-1956 for the period from 1-12-1956 to 28-2-1959, on the ground that the respondent had no power to revise the tariffs so as to call upon the appellant to pay anything in excess of the agreed rates. Both the suits were tried together by consent of parties and the learned II Additional Subordinate Judge, Tiruchirapalli, by his judgment and decree dated 31-3-1964 decreed the suit instituted by the respondent and dismissed the suit instituted by the appellant. Hence the present two appeals by the Municipality, the appellant.

4. Though several points had been raised by the parties before the trial court such as the revision of the tariffs not having been in accordance with law the appellant not having been given any notice of such revision of the tariffs and the appellant being estopped from challenging the revision of the tariffs made by the respondent and the trail Court had considered the same, having regard to the limited scope of the argument advanced before us in these appeals, it is unnecessary for us to refer to and deal with those points. The only question that was argued before us related to the power of the respondent to increase the charges payable by the appellant unilaterally, when there was an agreement between the parties in existence fixing the rate of charges payable by the appellant for the electrical energy supplied by the respondent and we propose to consider only this question in the appeals.

5. For the purpose of considering this question, it is necessary to refer to certain provisions of the 1910 Act as well as the 1948 Act and certain clauses in Ex. A.94, the licence granted by the government under Section 3(1) of the 1910 Act and the agreement entered into between the parties, namely, Ex. A.1.

6. Section 3(1) of the 1910 Act provides that the State Government may on application made in the prescribed form and on payment of the prescribed fee (if any) grant a licence to any person to supply energy in any specified areA.Sub-section (2) of this section contains certain provision which shall have effect in respect of every such licence and the grant thereof, Clause (f) of this sub-section says--

"The provisions contained in the schedule shall be deemed to be incorporated with, and to form part of, every licence granted under this part, save in so far as they are expressly added to, varied or expected by the licence, and shall, subject to any such additions, variations and exceptions which the State government is hereby empowered to make apply to the undertaking authorised by the licence".

(There is a proviso to this clause which is immaterial for the purpose of this case). The schedule to the Act deals with several matters and clause X dealt with the methods of charging. Clause XI dealt with the maximum charges and Cl. XI-A dealt with the minimum charges. Clauses XI and XI-A have been omitted by the Indian Electricity Supply (Amendment) Act 1959 (Central Act 32 of 1959). It is pursuant to these statutory provisions that the licence Ex. A.94 was granted by the Government. Clause 6 of the terms and conditions of the licence is important and the same is as follows:

"Subject to the provisions of this licence and the Act and the rules thereunder, the licensees shall be entitled during the continuance of this licence to supply energy within the area of supply for all purposes except in bulk to a distributing licencee;

Provided that the licencees shall not be under any obligation under Section 22 of the Act to supply more energy than inconsistent with their obligation to maintain a constant supply to consumers due regard being had to the licencees load factor;

Provided also that no supply of energy shall be commenced to be given by the licencees to any owner or occupier of private premises until the government of Madras have approved the form of requisition to be made by such owner or occupier for such supply of energy and also the form of written contract or agreement with the licencees to take a supply of energy, which is to be executed or entered into by such owner or occupier and until the Government of Madras have also approved the amounts of all miscellaneous charges incidental to or in connection with such supply and which the licensees propose to make against such owner or occupier".

Another clause which is relevant for the discussion in question is clause 11 which states--

"Limits of prices to be charged in respect of the supply of energy: The prices to be charged by the licensees for energy supplied by them shall not exceed those stated in that behalf in the second annexure, or in the case of a method of charge approved by the Government of Madras in accordance with clause X of the schedule to the Act, such maximum as the Government of Madras may fix on approving the method; nevertheless, the licensees may enter into special contracts, subject to Section 23 and 22 of the Act for the supply of energy".

The relevant provisions of the 1948 Act as amended by the Central Act 101 of 1956, which have a bearing on the question under consideration are Section 57, 57A and 70 and the Sixth Schedule. Section 57 is:--

"The provisions of the sixth Schedule and the Seventh Schedule shall be deemed to be incorporated in the licence of every licencee, not being a local authority--

(a) in the case of a licence granted before the commencement of this Act, from the date of the commencement of the licencee's next succeeding year of account; and

(b) in the case of a licence granted after the commencement of this Act, from the date of the commencement of supply and as from the said date, the licensee shall comply with the provisions of the said Schedules accordingly, and the any provisions of the Indian Electricity Act, 1910, and the licence granted to him thereunder and of any other law agreement or instrument applicable to the licensee shall, in relation to the licensee, be void and of no effect and in so far as they are inconsistent with the provisions of S. 57A and the said schedules".

Section 57A deals with Rating Committees and provides for the circumstances under which such a committee has to be constituted. Sub-section (1) of that section states that where the provisions of the sixth Schedule and the seventh Schedule are under Section 57 deemed to be incorporated in the licence of any licensee, the Electricity Board, or where no Board is constituted under the Act, the State Government (i) may, if satisfied that the licensee has failed to comply with any of the provisions of the Sixth Schedule; and (ii) shall, when so requested by the licensee in writing, constitute a rating committee to examine the licencee's charges for the supply of electricity and to make recommendation in that behalf to the State Government. The other provisions in that section deal with the constitution of the rating committee, its functions. the procedure it has to follow and the effect of its recommendations. Section 70 of the 1948 Act states--

"70(1) No provision of the Indian Electricity Act, 1910, or of any rules made thereunder or of any instrument having effect by virtue of such law or rule shall, as far as it is inconsistent with any of the provisions of this Act, have any effect;

Provided that nothing in this Act shall be deemed to prevent that State Government from granting, after consultation with the Board, a licence not inconsistent with the provisions of the Indian Electricity Act, 1910, to any person in respect of such area and on such terms and conditions as the State Government may think fit.

(2) Save as otherwise provided in this Act, the provisions of this Act, shall be in addition to, and not in derogation of, the Indian Electricity Act, 1910".

The Sixth Schedule to the 1948 Act deals with financial principles and their application. To determine what is clear profit, what is reasonable return and cognate matters, elaborate provisions have been made in this schedule itself and in view of the limited scope of the arguments advanced before us, it is unnecessary to refer to them in detail. It is paragraph 1 of this schedule which is important for the present appeals. That paragraph prior to its amendment by Central Act 101 of 1956 was as follows--

"The licencee shall so adjust his rates for the sale of electricity by periodical revision that his clear profit in any year shall not as far as possible exceed the amount of reasonable return;

Provided that the licensee shall not be considered to have failed so to adjust his rates if the clear profit in any year of account has not exceeded the amount of the reasonable return by more than thirty per cent of the amount of reasonable return".

The said paragraph after its amendment by the Central Act 101 of 1956 is:--

"Notwithstanding anything contained in the Indian Electricity Act, 1910, Except sub-section (2) of S. 22-A, and the provisions in the licence of a licensee, the licensee shall so adjust his rates for the sale of electricity whether by enhancing or reducing them that his clear profit in any year of account shall not, as far as possible, exceed the amount of reasonable return:

Provided that such rates shall not be enhanced more than once in any year of account;

Provided further that the licencee shall not be deemed to have failed as to adjust his rates if the clear profit in any year of account has not exceeded the amount of reasonable return by 15 percentum of the amount of reasonable return;

Provided further that the licensee shall not enhance the rates 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 rates given by him to the State government and to the Board;

Provided further that if the rates of supply fixed in pursuance of the recommendations of a rating committee constituted under Section 57-A are lower than those notified by the licensee under and in accordance with the preceding proviso, the licensee shall refund to the consumers the excess amount recovered by him from them".

This paragraph had been amended by Central Act 30 of 1966 by substituting the word 'charges' for the word 'rates' wherever it occurred and increasing the fifteen percentum occurring in the second proviso to twenty percentum and adding a new proviso to the effect--

"Provided also that nothing in this schedule shall be deemed to prevent a licensee from levying, with the previous approval of the State Government, minimum charges for supply of electricity for any purpose".

A further paragraph as paragraph 1-A has been introduced by Central Act 30 of 1966 requiring that the notice referred to in the third proviso to paragraph 1 shall be accompanied by such financial and technical data in support of the proposed enhancement of the charges as the State Government may by general or special order specify.

7. The Seventh Schedule deals with the prescribed period for different assets for the purpose of creating a depreciation reserve and the same is not relevant for the purpose of these appeals.

8. The controversy raised in these appeals has to be resolved against the background of the above statutory provisions and the provisions contained in the licence Ex. A.94 and the terms of the agreement, Ex. A.1. The argument of Mr. V. K. Thiruvenkatachari, learned counsel for the appellant in these appeals, is that the agreement entered into between the appellant and the respondent is a special contract contemplated by clause 11 of the licence. Ex. A.94. and such a contract is not affected by S. 57 of the 1948 Act, since the expression "agreement or instrument" occurring in that section will not take in such special contract entered into between a licensee and a consumer. In support of this argument, the learned counsel relies upon the following features present in Section 57 itself. The first is, the section states that any provision of any other agreement or instrument shall be "void" and this expression is inappropriate to a contract or agreement. The second is, the section refers to an agreement or instrument "applicable to the licensee" and therefore it cannot cover an "agreement or contract entered into by the licensee" with a consumer. Thirdly, the section states that any provisions of any other agreement or instrument shall "in relation to the licensee" be void and this language again is inappropriate to denote the agreement entered into between the licensee and the consumer. We have very carefully considered this argument and we are unable to accept the same. In our opinion, the use of the word 'void' may not be of any significance and such an expression in a statute cannot be said to be inappropriate in referring to an agreement. As a matter of fact, there is one specific provision in Section 9 of the 1910 Act itself using the word 'void' with reference to an agreement between a licensee and a third party. Section 9(1) of that Act states that the licencee shall not, at any time without the previous consent in writing of the State Government, acquire by purchase or otherwise, the licence or the undertaking of, or associate himself so far so the business of supplying energy is concerned with any person supply, or intending to supply energy under any other licence. Sub-section (2) of that section provides that the licensee shall not at any time assign his licence or transfer his undertaking, or any part thereof, by sale, mortgage, lease, exchange or otherwise without the previous consent in writing of the State Government. Therefore occurs sub-sec. (3) which is as follows--

"Any agreement relating to any transaction of the nature described in sub-section (1) or sub-section (2), unless made with or subject to, such consent as aforesaid, shall be void".

Then, there remains the contention based upon the expressions. "applicable to the licensee" and "in relation to the licencee." These expressions may not be felicitous or happy in referring, to an agreement entered into by the licensee himself or itself, and if they stood by themselves may lead to an argument that they are inappropriate to refer to such an agreement and therefore such an agreement is outside the section. Yet the question is, if the expression "agreement" occurring in Section 57 is not to take in an agreement into between a licensee and a consumer, what other agreements will fall within the scope of that expression? The agreement referred to in Section 57 has to be understood in the context of the main provision made therein, namely, that the provisions of the Sixth Schedule and the seventh schedule shall be deemed to be incorporated in the licence of every licensee, not being a local authority and therefore the agreement contemplated by the section must be correlated and relatable to the matters dealt with in the Sixth and Seventh Schedules. Consequently any agreement applicable to the licensee, whether entered into by the licensee with the Government or with he consumer or anybody else, but dealing with the matters covered by Schedules VI & VII will fall within the scope of the Section. We are not able to conceive of any other agreement satisfying this requirement falling within the scope of the expression agreement or instrument occurring in Section 57. It is the well-established principles of construction of statutes that the legislature is deemed not to waste its words or to say anything in vain and the presumption is always against superfluity in a statute. Every part of a statute should be given as far as possible its full meaning and effect and no word or clause should ordinarily be rejected as superfluous. It is true that courts will when necessary, take cognisance of the fact that the legislature does some times repeat itself and does not always convey its meaning in the style of literary perfection and it may not always be possible to give a meaning to every word used in an Act of Parliament and many instances may be found of provisions put into statutes and words used therein being merely by way of precaution or ex major cautela. However, as far as the present case is concerned, for the reasons indicated above we are of the opinion that notwithstanding the infelicity of the expression relied on, the agreement, entered into between the licensee and the consumer touching any matter dealt with in Sixth Schedule and Seventh Schedule will fall within Section 57.

9. We are also unable to agree with the contention of the learned counsel that Ex. A-1 agreement is a special contract contemplated by clause 11 of Ex. A-94, licence, and therefore, the same is outside the scope of Section 57. In our opinion, there is no warrant for making a distinction between a special contract or any other agreement entered into between a licensee and a consumer for the purpose of charges or rates for the electrical energy supplied by the licencee to the consumer. Clause 6 of the licence, which we have extract already, actually contemplates a written contract or agreement by the licencee with every owner or occupier of a private premises for supply of electrical energy to that owner or occupier. The special contract referred to in clause 11 of the licence has to be understood only against the background of clause 6 and the main part of clause 11 itself. The main part of clause 11 deals with the prices to be charged in respect of electrical energy to be supplied by the licensee and states that the same shall not exceed those stated in that behalf in the second annexure to the licence or in the case of method of charge approved by the Government of Madras in accordance with clause X of the schedule to the Act, such maximum as the Government of Madras may fix on approving the method. It is after making this provision, the provision regarding special contract occurs and it is as follows:

"Nevertheless, the licensees may enter into special contracts, subject to Sections 23 and 22 of the Act for the supply of energy."

In the context in which this provision occurs, the special contract can have reference only to the rates in excess of the maximum. Section 22 of the 1910 Act states that where energy is supplied by a licensee, every person within the area of supply shall, except in so far as is otherwise provided by the terms and conditions of the licence, be entitled, on application, to a supply on the same terms as those on which any other person in the same area is entitled in similar circumstances to a corresponding supply. There is a proviso to this section and that states that no person shall be entitled to demand or to continue to receive, from a licensee a supply of energy for any premises having a separate supply unless he has agreed with the licensee to pay to him such minimum annual sum as will give him a reasonable return on the special expenditure, and will cover other standing charges incurred by him in order to meet the possible maximum demand for those premises, the sum payable to be determined in case of difference or dispute by arbitration. Section 23(1) states that a licensee shall not, in making any agreement for the supply of energy, show undue preference to any person. Sub-section (2) of Section 23 states that no consumer shall, except with the consent in writing of the licensee, use energy supplied to him under one method of charging in a manner for which a higher method of charging is in force. Sub-section (3) and (4) deal with the mode of charge.

10. Again, the word 'nevertheless' occurring in clause 11 of the licence is significant. The word 'nevertheless" means "notwithstanding; nonetheless" (Shorter Oxford English Dictionary). In Rex v. Tristram., 1902-1 KB 827. it was held that this word (nevertheless) at the beginning of a clause following general authorising words, points to an exclusion. Therefore, in our opinion, the special contract referred to in clause 11 of the licence. Ex. A-94, deals only with an arrangement between the licensee and the consumer for charging at a rate higher than the maximum provided for in the main part of clause 11 of the licence, subject to Sections 23 and 22 of the 1910 Act, referred to already. Therefore, we are clearly of the opinion that Section 57 of the 1948 Act overrides the provisions in clause 10 of Ex. A-1. the agreement dealing with the rates chargeable for the electrical energy supplied by the respondent to the appellant and consequently in exercise of the rights conferred on the respondent by Schedule VI of the 1948 Act, the respondent had power to vary the rates agreed between the parties for the supply of electrical energy to the appellant herein.

11. The only decision dealing with this question which has been brought to our notice is that of the Gujarat High court in Jhalwar Electric Power Supply Co. Ltd. V. Wadhwan City Municipality, . The learned Judge held in that case:

"Provisions of Section 57 and first clause to Schedule 6 of the Electricity (Supply) Act. 1948, read together clearly indicate that the terms of he agreements have to give way to the power of revision of rate given under the first clause of Schedule 6. Section 57 of the Electricity (Supply) Act, 1948, clearly provides that if a term of an agreement was inconsistent with the provisions of Schedule 6, such a term is void and of no effect. In the case before us by agreements, the Electricity Company and the Municipality fixed the rates to be charged for the supply of the electrical energy but it did not provide for its revision during the period of the contract. In short it prohibited unilateral variations in the rates during the continuance of the contract. This term of the contract was in direct conflict with the first clause of the 6th Schedule which provides that the licencee shall so adjust its rates for sale of electricity by periodical revision that his clear profit in any year shall not as far as possible exceed the amount of reasonable return. This being the true position the clauses in the agreements which fixed the rates for the consumption of the electricity are void and of no effect and the appellant company has the power to revise the rates in accordance with the sixth Schedule."

The criticism of Mr. V. K. Thiruvenkatachari on this decision is that this decision assumed that he agreement like the one involved in the present case fell within the scope of S. 57 and that it has no considered the points relied on by him. We have considered these points and after such consideration we have come to the conclusion that the agreement as the one in the present case falls within the scope of Section 57 of the 1948 Act.

12. Even assuming for the sake of argument that an agreement entered into between a licensee and a consumer like the one in the present case will not be comprehended by the expression "agreement or instrument" occurring in Section 57, still in our opinion, the other provisions of Section 57, Section 70 and paragraph 1 of the sixth Schedule will lead to the same conclusion namely, that the licensee (the respondent herein) had the power to revise the rates agreed to between it and the appellant, in accordance with Schedule VI to the 1948 Act. Even if the agreement is left out of Section 57, still the section states that any provisions of the Indian Electricity Act. 1910 and the licence granted to a licensee thereunder and of any other law shall be void and of no effect in so far as they are inconsistent with the provisions of Section 57-A and the sixth and seventh Schedules. Section 70 of the 1948 Act again states that no provision of the Indian Electricity Act, 1910, or of any rules made thereunder or of any instrument having effect by virtue of such law or rule shall, so far as it is inconsistent with any of the provisions of the 1948 Act, have any effect. Paragraph 1 of Schedule VI itself repeats that notwithstanding anything contained in the Indian Electricity Act, 1910, except subsection (2) of Section 22-A and the provisions in the licence of a licensee, the licensee shall so adjust his charges for the sale of Electricity. These provisions only emphasise the overriding effect of the provisions contained in Schedule VI and Sch. VII in the 1948 Act. It cannot be disputed that a statue can affect the terms of a contract entered into between any to parties and the rights and liabilities arising therefrom. In our opinion, for the purpose of affecting the terms of a contract entered into between any two parties, it is not necessary that the statutory provisions must expressly refer to such a contract. If the language is otherwise sufficiently comprehensive, it can certainly affect the terms of a contract, and the rights and liabilities arising therefrom. With reference to clause 6 of Ex. A.-94 licence, the licencee has to enter into a contract with every owner or occupier of a private premises. Paragraph 1 of Schedule IV, when it refers to the charges for the sale of electricity, does not make any distinction between the charges agreed to between the parties in special contracts as contemplated by clause 11 of the licence and any other contract or agreement as contemplated by clause 6 of the licence and the expression "charges for the sale of electricity" in paragraph 1 Schedule VI is perfectly general, as capable of applying to all charges for supply of electricity. It has to be noticed that the Parliament not being content with the use of the expression. "so adjust his charges for the sale of electricity" went a step further and provided that the adjustment should be made either by enhancement or reduction as the case may be. Another significant thing is that the provision contained in paragraph 1 of Schedule VI to the 1948 Act is not simply an enabling provision but is mandatory and this is apparent from the use of the expression that the licensee 'shall so adjust his charges for the sale of electricity'. Such a provision has been made because the Legislature had decided that the licensee should not be permitted to earn more than what was necessary to provide him with a reasonable return and enable him to raise funds in the market necessary for the proper continuity of his public duties. It is only because of this the licensee is under an obligation to reduce the charges if the price which he was previously charging enabled him to earn a clear profit in any year of account exceeding the amount of reasonable return. Similarly, if by maintaining the existing charge, he was not able to make a clear profit not exceeding the amount of reasonable return, he was given a right to enhance the charge. The only limitation on this power of enhancement is that which is found in the first proviso, namely, that such enhancement shall not be made more than once in any year of account, though no such restriction is imposed on the duty of the licensee to reduce the rate when the clear profit already realised by him exceeds the amount of reasonable return. This coupled with the provisions contained in Section 57A of the 1948 Act empowering the Government or the Board to constitute a rating committee, when it is satisfied that the licensee has failed to comply with any of the provisions of the sixth schedule, clearly shows that for the purpose of exercising the power of adjustment conferred by paragraph 1 of the sixth Schedule to the 1948 Act by the licensee the only criterion is, realisation of clear profit not exceeding the reasonable return and not the fact that the existing price charged was under an ordinary contract or an agreement as contemplated by clause 6 of the licence are a special contract referred to in clause 11 of the licence.

13. This conclusion of ours derives support from certain observations of the Supreme Court inAmalgamated Electricity Co. Ltd. v. N. S. Bathena, . In that case the question that came to be considered was, whether any changes that might be effected by a licensee acting under the provisions of Section 57 of the 1948 Act read with paragraph 1 of Schedule VI, in revising his rates so as to derive the reasonable return permitted by those provisions, have still to be within the maxims prescribed by the Government under the 1910 Act. While answering that question in the negative, the Supreme Court pointed out-

"Section 57 of the Supply Act, 1948--both as originally enacted and as amended in 1956 expressly provided that the provisions of the VI schedule shall be deemed to be incorporated in the licence of the every licensee and that the provisions of the Indian Electricity Act, 1910 and the licence granted thereunder and any other law, agreement or instrument applicable to the licensee shall be void and of no effect in so far as they are inconsistent with the provisions of the Section and the said schedule. Read in the light of Section 70 of the Supply Act it would follow that if any restriction incorporated in the licence granted under the Electricity Act, 1910 is inconsistent with the rate which a licensee might charge under para. 1 of Schedule VI of the Supply Act, 1948. the former would, to that extent, he superseded and the latter would prevail.

Part X of Schedule VI. both as it originally stood and as amended as seen already empowered the licensee "to adjust his rates, so that his clear profit in any year shall not, as far as possible, exceed the amount of reasonable return." We shall reserve for later consideration the meaning of the expression 'so adjust his rates'. But one thing is clear and that is that the adjustment in unilateral and that the licensee has a statutory right to adjust his rates provided he conforms to the requirements of that paragraph, viz., the rate charged does not yield a profit exceeding the amount of reasonable return. The conclusion is therefore irresistible that the maximum prescribed by the State Government which bound the licensees under the Electricity Act of 1910 no longer limited the amount which a licensee could charge after the Supply Act. 1948 came into force, since the 'clear profit' and 'reasonable return' which determined the rate to be charged was to be computed on the basis of very different criteria and factors than what obtained under the Electricity Act."

14. After referring to the decision of the Bombay High Court in Babulal Chhaganlal Gujarathi v. Chopda Electric Supply Co. Ltd., . the Supreme Court pointed out--

"With great respect to the learned Judge we are unable to agree with this decision, for, in our opinion, the provisions of the Supply Act, 1948 to which we have adverted are too strong to permit the construction, that the maxim prescribed under the Electricity Act of 1910 survives as a fetter on the rights of the licencee under paragraph I of the VI schedule. It there was any room for any argument of this kind on the terms of paragraph 1 of Schedule VI as originally enacted, the matter is placed beyond possibility of dispute by the amendment effected by Act 101 of 1956 to the VI schedule where the opening paragraph commences with the words 'notwithstanding anything contained in the Indian Electricity Act and the provisions in the licence of a licensee."

Finally, the Supreme Court concluded--

"We thus reach the position that there could be a unilateral adjustment of the rates by a licensee but that such an adjustment must not leave him with more than the reasonable return plus another 30 per cent".

15. In our opinion, for the reasons indicated already. the affirmation of the right of the licensee to unilaterally adjust the rates for supply of electrical energy in conformity with the provisions contained in the Sixth Schedule to the 1948 Act, by the Supreme Court in the above decision, supports the conclusion we have reached on the construction of the relevant statutory provisions, the conditions of the licence and the terms of the agreement. Therefore, we hold that the conclusion of the trial court that the appellant herein was liable to pay the charges for electrical energy consumed by it at the revised rates is correct. Hence, the appeals fail and are dismissed. However, having regard to the fact that the appellant is a local authority, we are not making any order as to costs in these appeals.

16. Appeals dismissed.


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