DEUII CLO'l1I & GENERAL MILLS <n!PANY LTD. & ANR. v. RAJASTllAN STATE ELECTRICITY BOARD· & ANR.

The Judgment of the Court was delivered by

SEN, J, These five consolidated appeals by special leave E from the common judgment and orders of a Division Bench of the Rajasthan High Court dated September 12, 1980 raise questions of far-reaching importance. By the judgment under appeal, the Division Bench has upheld the constitutional validity of ss. 49A and 49B of the Electricity (Supply) Act, 1948, as intro- duced by the Electricity (Supply) (Rajasthan Amendment) Act, F 1976, with retrospective effect, making it lawful for the Rajasthan State Electricity Board to revise from time to time the tariffs fixed for the supply of- electricity in respect of any period commencing from September 16, 1966 i.e. the date of introduction of the new s. 49 by the Electricity (Supply) (Amendment) Act, 1966, and for the validation of amount G ~· realized, demand made or created by the Board according to the uniform tariffs in force from time to time before the publi- cation in the official Gazette of the Electricity (Supply) (Rajasthan Amendment) Ordinance, 1976, i.e. prior to February 7, 1976, the date of promulgation of the Ordinance. H

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A Upon that view, the Division Bench has reversed the judgmemt and order of Tyagi, J. dated October 17, 1969 and upheld the impugned notification dated July 26, 1966 issued by the Board for the levy of a general surcharge of 15% of the normal tariff as also the judgment and order of J,P. Jain, J, dated April 13, 1973 holding that the Board was entitled to B recover from the appellants the difference between the normal rate of tariff and the special rate of tariff agreed upon between the parties in terms of a statutory agreement dated July 28, 1961 under s.49 of the Act as it then stood, by virtue of ss. 49A and 49B of the Act read with cl.18 of the agreement as from January 1971 onwards for the supply of c electrical energy to the appellants for the electro-chemical, electro-thermal and poli--vinyl chloride industry known as Messrs Shriram Vinyl & Chemical Industries, Kota, formerly known as Rajas than Vinyl & Chemical Industries, and to levy the general surcharge of 15% thereon contrary to the terms and conditions of the aforesaid agreement for the supply of such D electrical energy to the appellants at a concessional rate for a period of 20 years. Pursuant thereto, the Division Bench has upheld the demand raised by the Board by its letter dated February 1, 1971 for payment of Rs,ll,67,959.95p. for the billing month January 1971 onwards at normal tariffs together with general surcharge of 15% thereon under Schedule E HS/LP/HT-1 applicable to all large industrial consumers under the Board's tariff notification dated April 26, 1969, under cl.18 of the agreement i.e. prior to the proU11lgation of the Ordinance. It has also upheld the demand raised by the Board's letter dated March 12, 1976 for payment of Rs.21,35,506.72p. for the billing month February 1976 at normal tariff plus the F general surcharge of 15% thereon under Schedule LP/HT-1 appli- cable to all large industrial consumers under the Board's tariff notification dated May 28, 1974 purporting to act under ss. 49A and 49B of the Act read with cl.18 of the agreement for the period subsequent to the proU11lgation of the Ordinance. G The principal question in controversy is whether ss. 49A and 49B of the Act were integrally connected with each other; and if so, the retrospective conferment of a prospective power validated any amount realized, or demand made or created by the Board, according to the uniform tartffs from time to time, H

. DELHI CLOTH MILLS v, STATE ELECT. BOARD [SEN, J. ] 64 7

~from or against any person claiming any special tariffs under any agreement, undertaking, commitment or concessions made, before the first day· of April 1964 i.e. the date when the uni-form tariffs were first framed by the Board at different rates for different classes of consumers by its notification dated March 18, 1964, notwithstanding anything contained in the Act or ~n any such agreement, undertaking, commitment or concessions so made. This question turns on a construction of ~ the provisions contained in ss. 49A and 49B of the Act, the constitutionality of which has not been challenged before us.

Sub-s. (1) of s. 49A of the Act by the use of a~ obstante clause has the effect of nullifying all such agree- ments, undertakings or commitments made before the first day c of April 1964 by the Board or the Government of Rajasthan or the Government of any covenanting State of Rajasthan or in any judgment and order of any court, and provides that it shall be lawful for the Board to revise, from time to time, the tariffs fixed for the supply of electricity to persons other than licensees and to frame uniform tariffs for the purpose of such supply in respect of any period counnencing on and from September 16, 1966, the date when new s. 49 had come in force. Sub-s. (2) thereof provides that in revising the tariffs or framing uniform tariffs under sub-s,(l), the Board shall be· guided by the principles set out in s,59 and as respects any period commencing on and from September 16, 1966 i.e. after the introduction of the new s. 49 of the Act, by the princi- ples laid down in sub-ss. (2), (3) and (4) of s. 49. Sub- s. l (3) of s. 49A provides that all such agreements, undertaking, ·commitment or concessions as are referred to in sub-s.(l), shall, insofar as they are inconsistent with the provisions of sub-ss.(l) and (2) and to the extent of the tariffs fixed or provisions made therein for such fixation, be void and shall be deemed always to have been void. One of the crucial I questions is whether the demand to be validated in terms of s. 49B of the Act, had to be raised prior to February 7, 1976 and not on a date subsequent thereto and therefore the appellants __,were liable to pay the revised uniform tariff under Schedule G · LP/HT-1 of the Board's tariff notification dated May 28, 1974 w.e.f, July· 1, 1974. The contention on behalf of the appel- lants is that s. 49B of the Act in terms does not have the effect of validating the demand raised by the Board by its letter dated March 12, 1976 for payment of charges for the H

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A supply of electrical energy to them at uniform tariff framed y by the aforesaid Board's notification dated May 28, 1974, such a demand having been made after the pronulgation of the Ordinance i.e. after February 7, 1976; and if that be so, whether the Board was only entitled to recover from the appellants uniform tariff under Schedule HS/LP/HT-1 framed by the Board's tariff notification dated April 26, 1969 as from B January 1971 onwards. Various subsidiary questions also arise, viz. whether the demands so raised are violative of Art.14, "- Art,19(l)(f) and (g) and Art.31(2) of the Constitution.

The Facts c Facts giving rise to these appeals are these. By an agreement dated July 28, 1961 the Rajasthan State Electricity Board, Jaipur agreed to apply the appellants with bulk electrical energy upto maximum of 25,000 KW per year for their Rajasthan Vinyl & Chemical Industries situate at Kota for ..-- -- electro-chemical, electro-thermal and PVC and allied industrial products at a concessional rate for a period of 20 years upon the terms and conditions contained therein. Cl.17 of the agreement provides for a special rate of tariff as negotiated between the parties and is in these terms :

"17. The consumer shall pay to the Board every month charges for the electrical demand made by the consumer during the preceding month at the rate of 201.04/12 = Rs. 16.753 per KVA of the demand assessed which shall be calculated as defined in 1 clause 19." F We are informed that this works out roughly to 3p. per unit.

Under cl.18 of the agreement, the rate of supply was reviewable by the Board every five years after January 1,

1971. Proviso thereto was in the nature of a rider and it provided that the revision of rate shall be effected provided G the component of cost of generation out of the total cost 'r varied by 25% or more from the cost last fixed. The relevant part of cl.18 may be reproduced

"18 ........ The rate of supply as determined in clause 17 above shall be reviewed every fifth year H

DELHI CLOTH MILLS v. STATE ELECT, BOARD [ SEN, J. ] 64 9

A starting from the date of first supply provided the component of cost of generation out of total cost varies by 25% or more from the cost last fixed. Further the rate fixed by this Agreement shall be reviewed only on or after 1st January, 1971." B It is not necessary to set out cl.31 which is the arbitration clause. Cl.34(b) of the agreement which has a material bearing _.. upon these appeals reads as follows : 11 34(b) Nothing contained in this Agreement or any amendment thereof shall restrict any rights, obligations and discretions which the Board or the Consumer has derived under any legislation relating c to supply and consumption of Electricity enacted during the period of this Agreement,"

It is necessary to mention that Messrs Rajasthan Vinyl & Chemical Industries was set up by the appellants at Kata for electro-chemical, electro-thermal and PVC and allied industrial products with a capital investment of Rs,10 crores as a result of the Board agreeing to supply electrical energy at a concessional rate which came to be known later as Messrs Shriram Vinyl & Chemical Industries. It is a power oriented industry and electricity is the basic raw material. The only other industry of this kind in the country was the one set up by Messrs Calico Mi1ls Ltd. which has since been closed.

It is common ground that the Board commenced supplying 1 electrical energy to the appellants with effect from March 1,

1963. The Board in pursuance of its powers under s. 49 of the F Act, with the prior concurrence of the State Government, has been issuing various notifications from time to time bringing into effect the revised tariffs for the supply of electricity to its different classes of consumers at different rates. The first of these was notification dated March 18, 1964 which brought into effect the revised tariffs for the supply of electricity to its consumers and they became applicable for G -r the consumption recorded for the billing month May 1964 on- wards. Cl,3 of the said notification provided that the revised ~.- tariffs shall replace all existing tariffs and shall supersede all the existing orders of the Board and the State Government in that behalf with effect from the date of introduction of the,revised tariffs, except for the following, namely : H

650 SUPREME COURT .REPORTS (1986] 1 S.C.R,

A "(i) Special contracts for Large or Special loads,... separately negotiated or to be negotiated; and

(ii) Special loads for which concessional tariffs have been already given under the orders of the Goverrurent/Board." B The second of these notifications was the one dated July 26, 1966 by which the Board purported to levy different rates ~ of surcharge on different classes of consumers with effect from the billing month of September 1966, The general surcharge imposed on the appellants was 15% on the normal tariff, The third notification dated April 26, 1969 brought c into effect the revised tariffs for supply of electricity to consumers falling under the category 'large industrial loads' viz. schedule HS/LP/HT-1 with effect from the billing month June 1969, and the fourth dated May 28, 197 4 making effective revised tariffs for the supply of electricity to its consumers from the billing month of July 1974. The third and •~ D fourth notifications contained similar exclusionary clause. According to the appellants, the uniform tariffs as revised from time to time under the aforesaid notifications were not applicable to them in view of the said exclusionary clause.

The appellants filed a petition in the High Court under E Art.226 of the Constitution assailing the power of the Board to levy the general surcharge of 15% under the impugned noti- fication dated July 26, 1966, The aforesaid writ petition was allowed by Tyagi, J, by his judgment dated October 17, 1969 by which the leared Judge held that the impugned notification' levying general surcharge of 15% was ultra vires the powers of the Board insofar as the appellants were concerned. The deci- sion was based on the ground that the parties having entered into a statutory agreement dated July 28, 1961 for a conces- sional rate of tariff for the supply of electrical energy to the appellants, there was a fetter created on the power of the Board to unilaterally increase the tariff under s.49 of the G Act and therefore the appellants could not be subjected to payment of the general surcharge of 15%. Feeling aggrieved, \.. the Board preferred an appeal against the judgment of the learned single Judge.

As from January 1, 1971, the Board manifested its H

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A ~ intention to the appellants to revise the concessional rate of supply and charge them the uniform rate of tariff under Schedule HS/LP/HT-1 as applicable to all large industrial consumers and the general surcharge of 15% thereon .in exercise of its powers under cl.18 of the agreement. There followed several meetings between the, off ice rs of the Board and the B representatives of the appellants and they were informed that they would have to pay for the consumption of electricity at the normal rate of tariff prevalent plus the general surcharge of 15%. It is quite evident from the appellants' letter dated September 5, 1970 addressed to the Chairman of the Board that the Board had the power to review the tariff insofar as they were concerned as and from January 1, 1971. In their letter they adverted to cl.18 of the agreement which conferred power c on the Board to review the tariff on or after January 1, 1971 and referred to the discussion they had with the Chairman and other officials of the Board, making a request that the Board should furnish the necessary details with regard ta the total cost and the component of cost of generation at the time of the· supply under the agreement as well as the relevant time, if any review of tariff was being contemplated. In response thereto, the Board by its letter· dated December 22/24, 1970 drew the attention of the appellants to cl.18 and stated that the cost of generation had been worked out in the office of the Board and it had been found that the present cost was higher than 25% of the cost of the time of executing the agreement as detailed below :

"Component of cost of generation at the time of agreement 2.089 P/Kwh. F .Component of cost of generation during the year 1969-70 5.17 P/Kwh."

It went on to say :

"In view of this, the Board is entitled to review G the rates of supply to you and intends to charge from 1st January, 1971, at the normal tariff Schedule HS/LP/HT-1 (copy enclosed) plus 15% general surcharge."

Accordingly, the Board by its letter dated February 1, H

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A 1971 enclosed a bill for the billing month January 1971 for a ,_ sum of Rs.12,18,740.60p. at the normal tariff with a rebate of Rs.50,780.65p. which worked out to Rs.ll,67,959.95p. It was stated that the rate of supply had been reviewed by the Board under cl,18 of the agreement w.e,f. January 1, 1971 and the rate charged was under Schedule HS/LP /HT-1 applicable to all large industrial consumers. We are informed that this works B out to 7.67 P• per unit exclusive of the general surcharge of 15% and to 8. 73p. inclusive thereof and this more or less .1.. represented the actual cost of generation.

On a petition filed by the appellants under Art. 226 of the Constitution assailing the validity of the demand raised c by the Board by its letter dated February 1, 1971 and the enclosed bill for Rs.U,67,959.95p. on the ground that the Board was not entitled to revise the tariffs applicable to them under cl.18 as from January 1, 1971, J.P. Jain, J, by his order dated April 13, 1973 quashed the impugned bill issued by the Board. He repelled the construction sought to be placed by the appellants on the terms of cl.18 of the agreement and held that the Board was entitled under the first part of cl.18 to review the rate of supply 'every fifth year starting from the first date of supply', but in view of the restrictive clause contained in the second part of cl.18 it was impermissible for the Board to make any such upward revision in the rate of supply till January 1, 1971. He further rejected the contention of the appellants that the Board was not competent to review the tariff under cl.18 prior to March 1, 1973. He also held that it was not open for them to contend that the j cost of genaration had not va~ied by 25% or more, they having by their letter dated January 18, 1971 'addressed to the Board F declined to go into the question of cost of generation as on the date last fixed and at the relevant time i.e. in the year 1969-70 on the pretext that they were advised that the rate revision was in no case due till March 1, 1973. The learned Judge next held that in the circumstances he would infer that the rise in the cost of generation was at least 25% and accordingly the Board was entitled to revise the rate of .,_ supply by 25% of the rate specified in cl.17 upon the basis that the upward revision in the rate of supply under cl.18 must be in proportion to, .or correlated with, the actual rise in the cost of generation. In that view, he held that the Board could not unilaterally impose the normal tariff in disregard of the agreement, and added :

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"Sub-s.(3) of s.49 of the Electric Supply Act, 1948 A clearly empowers the Board to fix different tariffs if it considers it necessary or expedient for the supply of electricity to any non-licensee having regard to the geographical position of the area, the nature of the supply is required and any other relevant factor. The petitioner company is B ·admittedly the biggest consumer in the State and the Board at one time under the agreement agreed to give it an exceptional rate. Sub-s.(3) is an exception to sub-s.(l) which lays down that the Board shall frame uniform tariff. Sub-s. (4) again prescribes a limitation to sub-s.(3) that the Board shall not give undue preference. It has not been the case of the Board that by executing the agreement any undue preference was shown to the petitioner company."

---.', In conclusion, the learned Judge held that if the Board claim- ed a further rise, it would.have to establish that the rise in the cost of generation was more than 25% and it had to for that purpose get the percentage in the cost of generation determined either by nutual dialogue or reference to arbitra- tion.

Pronulgation of the Electricity E (Supply) (Rajasthan Amendment) Ordinance, 1976 : Introduction of Sections 49A And 49B into the Act.

Both the appellants and the Board preferred appeals. F While the aforesaid appeals were pending in the High Court, on February 7, 1976 the Governor of Rajasthan pronulgated the Electricity (Supply) (Rajasthan Amendment) Ordinance, 1976 by which new ss. 49A and 49B were introduced into. the Act with retrospective effect to overcome the difficulty created by the ._Judgment of the High Court in this case, and more particularly G ·by the judgment of this Court in Indian Aluminium Company v. Kerala State Electricity Board [1976] 1 S.C.R. 70. By the use of a non-obstante clause in sub-s.(l) of s.49A the Legislature made it lawful for the Board to revise, from time to time, the tariffs fixed for the supply of electricity to persons other H

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A than licensees and to frame uniform tariffs for the purpose of..- such supply. Sub-s. (2) thereof provided that in revising or framing tariffs under sub-s.(1) the Board shall be guided by the principles set out in s. 59 and as respects any period commencing on and from September 16, 1966 i.e. the date on which the new s.49 of the Act was brought into force, by the provisions laid down in sub-ss.(2), (3) and (4) of s.49A B notwithstanding anything contained in the Act or in any agreement, undertaking, commitment or concession made beforek the first day of April 1964, i.e. the date when the uniform tariffs were first framed by the Board by its tariff notification dated March 18, 1964. Sub-s. (3) of s.49A provides that all such agreements, undertakings, commitments c or concessions as are referred to in sub-s. (1), shall, inso- far as they are inconsistent with the provisions of sub-ss.(1) and (2) and to the extent of the tariffs fixed or provisions made therein for such fixation, be void and shall be deemed always to have been void. The agreement between the parties\. __ thus had the effect of nullifying the agreement between the· D parties entered into by the Board with the appellants under s.49 of the Act for the supply of electricity at a concession- al rate for their industrial undertaking. Similarly, by the use of a ~ obstante clause s.49B provided that notwith- standing anything contained in the Act or in any agreement, uruh!rtaking or concession as are referred to in sub-a. (1) of E s. 49A, any amount realized or demand made or created by the Board or the Government etc. according to the uniform tariffs in force from time to time from or against any person claiming any special tariffs under any such agreement, undertaking O\ concession made before February 7, 1976, the date of proDlll~ gation of the Ordinance, shall be deemed to have been validly F realized, made or created under the Act as amended by the Ordinance. It is necessary to reproduce s.49A in its entirety and s.49B insofar as relevant, which read:

"49A. Power of the Board to revise certain tariffs :- G . y (1) Notwithstanding anything contained in this Act or in any agreement, undertaking, commitment or concessions made, before the first day of April, 1964 by the Rajasthan State Electricity Board or the Government of Raj as than or by the ruler or

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A Government of any covenanting State of Rajasthan, or in any judgment or order of any court, it shall be lawful for the said Board to revise, from time to time, the tariffs fixed for the supply of electricity to persons other than licensees and to frame uniform tariffs for the purpose of such B supply •

. (2) In revising the tariffs or framing uniform tariffs under sub-section (1), the said Board shall be guided by the principles set out in section 59 and as respects any period commencing on and from the 16th day of September, 1966, by the principles laid down in sub-sections (2), (3) and (4) of c section 49.

(3) All such agreements, undertakings, commitments or concessions as are ref erred to in sub-section (1), shall, in so far as they are inconsistent with D the provisions of sub-sections ( 1) and (2) and to the extent of the tariffs fixed or provisions made therein for such fixation, be void and shall be deemed always to have been void.

49B. Valldat:ion of certain tariffs etc. - E Notwithstanding anything contained in this Act or in any agreement, undertaking or concession referred to in sub-section (1) of secton 49A, or in any judgment or order of anY. Court -

(a) any amount realized, or demand made or created, by the Rajasthan State Electricity Board, or the Government of Rajasthan or the ruier or Government of any covenanting State of Rajasthan, according to the uniform tariffs in force from time to time, from or against any person claiming any special tariffs under any such agreement, undertiiking or concession before the publications in the official Gazette of the Electricity Supply (Rajasthan Amendment) Ordinance, 1976, shall be deemed to have been validly realised, made or created under this Act as amended by the said Ordinance." H

656 SUPREME COURT REPORTS [19861 1 s.c.R.

A Immediately thereafter on March 12, 1976 the Board,. furnished the appellants with a bill for payment of an am:>unt of Rs.21,35,506.72p. for the billing m:>nth of February 1976 at uniform rate, under Schedule LP /HT-1 framed by the Board's tariff notification dated May 28, 1974 together with the general surcharge of 15%. B The appellants were therefore constrained to move the High Court under Art.226 of the Constitution challenging the ~ constitutional validity of ss.49A and 49B of the Act, as introduced by the aforesaid Ordinance .as also the impugned bill sent by the Board for the billing m:>nth of February 1976 C for Rs.21,35,506.72p. On November 4, 1976 the Board issued another notification under s.49(1) framing revised uniform tariffs at different rates for different class of consumers which became applicable from the billing month of December

1976. But unlike the earlier notifications prescribing uniform tariffs under s.49(1) of the Act, this notification did not contain any exclusionary clause granting exemption for '.-~­ specially negotiated loads. While the matters were pending before the High Court, on November 3, 1977 the Board furnished another bill to the appellants claiming arrears am:>unting to Rs.5.57 crores on account of the difference between the normal rate of tariff and the agreed rate for the supply of electrical energy to them for the period from January 1, 1971 to January 31, 1976.

Again, the appellants filed another petition in the High Court under Art. 226 of the Constitution questioning their' liability to pay the said am:>unts. Both the aforesaid writ • F petitions, namely, the one challenging the vires of ss.49A and 49B of the Act as well as the legality of the impugned bill sent by the Board claiming Rs.21,35,506.72p. for the billing month of February 1976, and the other questioning the legality and propriety of the bill dated November 3, 1977 raising a demand for payment of Rs.5.57 crores on account of the G difference between the uniform rates of tariffs and the agreed rate of supply for the period from January 1, 1971 to January 31, 1976 were referred to a Division Bench. "'

By the judgment under appeal, a Division Bench speaking through Fudal, J. allowed the appeal preferred by the Board H

DELHI CLOTH MILLS v. STATE ELECT. BOARD [SEN, J. ] 65 7

'i and dismissed that of the appellants as well as the writ A petitions filed by them. The learned Judge disallowed the contention raised on behalf of the appellants as to the c.onstitutional validity of ss.49A and 49B of the Act as introduced by the Electricity (Supply) (Rajasthan Amendment) Act, ·1976 and upheld the right of the Board to revise the rate of supply as agreed upon for the period commencing from B January l, 1971 onwards and enforced a demand for payment of --'the difference between the uniform tariffs as fixed from time to time and the agreed rate. Learned counsel for the parties have placed no reliance on the judgment of the Division Bench which, according to them, does not deal with the points raised.

Extent of the Appellants' liability c We find it convenient at this stage to indicate the extent of the appellants' liability involved in these appeals.

r From the abstract statement filed by the Board, the net amount due with interest as per the uniform tariffs under Schedule HS/LP/HT-1 framed by the Board's tariff notification dated D April 26, 1969 for the period from January l, 1971 to June 30, r 1974 and the uniform tariff Schedule LP/HT-1 framed by the Board's tariff notification dated May 28, 1974 for the period from July 1, 1974 to February 6, 197 6 together with the. general surcharge of 15% on the tariff from September 16, 1966 and the interest thereon comes to Rs.14,50,99,654-47p. On the E other hand, if the appellants contention regarding the in- applicability of the uniform tariffs under Schedule LP/HT-1 of ~1974 were to prevail on the ground that the Board had failed 'to raise a demand for payment of electricity charges at that rate prior to February 7, 1976, the date of prolllllgation of the Ordinance, the net amount due on account of this differ- F ence for the aforesaid period applying the uniform tariff Schedule HS/LP/HT-1 of 1969 comes to Rs.12,10,51,510-46p. The resultant sums have. been arrived at after making adjustment of various payments made by the appellants from time to time towards the bills submitted by the Board as per the interim ._,,orders passed by the High Court from time to time together G with interest, as also under the interim order of this Court dated October 6, 1980 while granting special leave and stay of the operation of the judgment of the High Court. We may state that the figures given in the abstract statement filed by the _Ii

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Board more or less correspond with those in the statement,.. filed by the appellants. The difference between the two amounts with interest thereon at 9% works out to Rs.2,41, 58,937. That is the magnitude of the claim in these appeals.

B We had the benefit of hearing Shri Shanti Bhushan appearing for the appellants and Dr. Y.S. Chitale, on behalf of the Board. At the very outset Shri Shanti Bhushan, learned counsel for the appellants with all fairness stated that he'- does not challenge the constitutional validity of ss.49A and 49B of the Act. c The nature of controversy.

The controversy in these appeals can be viewed fr~:. three aspects. First rests on the interpretation of the terms of the agreement between the parties dated July 28, 1961 and the various clauses thereof, particularly clauses 18 and 34(b) ,~ which both have a material bearing. The second on the construction of ss.49A and 49B of the Act, the scope and effect of s.49A which by the non-obstante clause nullifies the agreement for the supply of electrical energy at a concession- \ al r~te to the appellants and makes it lawful for the Board to charge the uniform tariff with retrospective effect from September 16, 1966 Le. the date on whi.ch the new s.49 was introduced, and s.49B which validates the making of such demand with retrospective effect. As also the validity of the demands created by the Board by its letter dated February 1, 1971 for the billing month January 1971 for Rs.11,67,959. 95p.~ under Schedule HS/LP/HT-1 to the Board's tariff notification dated April 26, 1969 applicable to all large industrial con- sumers, and the bill sent by the Board on March 12, 1976 for the billing month February 1976 for payment of Rs.21,35,506- 72p. under Schedule LP/HT-1 to the Board's tariff notification dated May 28, 1974. The third comprises of various subsidiary issues as to whether the Board is precluded by the doctrine of promissory estoppel from raising these demands, as also whether sdch demands are violative of Arts. 14, 19(l)(f) an<\, (g) and 31(2) of the Constitution. We shall deal with these contentions in seriatim.

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A 'i In order to appreciate the issues involved, it is necessary to deal with the legislative changes. Under s.49 of the Act as it stood at the relevant time i.e. on July 28, 1961, the date of agreement, a general power was conferred on the Board to supply electricity upon such terms and condition& as it may, from time to time, fix having regard to the matters B referred to in that section and the proviso thereto directed the Board not to show undue preference to any person in fixing ~.the tariffs. The section was in the following terms :

"49. Provision for the sale of electricity by the Board to persons other than licensees : c Subject to the provisions of this Act and of any regulations made in this· behalf, the Board may supply electricity to any person not being a

, licensee upon such terms and conditions as the Board may from time to time 'fix having regard to the nature and geographical position of the supply D and the purposes for which it is required :

Provided that in fixing any such terms and conditions the Board shall not show undue preference to any person." E It appears that a view was taken by the Bombay High Court in a case relating to the Kalyan Borough Municipality that s.49 of the Act a~ it then stood, did not permit the Board to frame uniform tariffs for consumers in compact areas as well •as consumers in sparse "reas, so as to require the former to pay a part of the cost involved in the supply of electricity to the latter i.e. so as to ::ast a higher burden on the consumer in a compact area, where the cost of supply was less. An appeal was brought by the Maharashtra Electricity Board to this Court. During the pendency of the appeal, Parliament enacted the Electricity (Supply) Amendment Act, 1966 •by which the Act was amended in various particulars. It is only necessary to refer to two sections of the Amendment Act viz. "'ss. ll and 24. Section ll substituted, with retrospective effect, new s. 49 in the place of old s.49, and s.24 of the amending Act validated the imposition and collection of charges for the supply of electricity, preventing any person from claiming refund of any amount paid ITf him in excess of Jl

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A the amount due under the Act. The new s.49 of the Act runs as v follows :

"49. Provision for the sale of electricity by the Board to persons other than Lf.ceneees : B (1) Subject to the provisions of this Act and of regulations, if any, made in this behalf, the Board may supply electricity to any person not being a •. licensee upon such terms and conditions as the Board thinks fit and may for the purposes of such c supply frame uniform tariffs.

(2) In fixing the uniform tariffs, the Board shall have regard to all or any of the following factors, namely :-

(a) the nature of the supply and the purposes

::~ D which it is required;

(b) the coordinated development of tl:ie supply distribution of electricity within the State in the most efficient and economical manner, with particular reference to such development in areas E not for the time being served or adequately served by the licensee;

(c) the extension and cheapening of supplies of electricity to sparsely developed areas. F (3) Nothing in the ·foregoing provisions of this section shall derogate from the power of Board, if it considers it necessary or expedient to fix different tariffs for the supply of electricity to any person not being a licensee, having regard to the geographical position of any area, the nature of the supply and purposes for which supply is required and any other relevant factors.

(4) In fixing the tariff and terms and conditions for the supply of electricity, the Board shall not show undue preference to any person."

DELHI CLOTH MILLS v. STATE ELECT. BOARD [SEN, J •. ] 661 A '< In Maharashtra State Electricity Board v. Kalyan Borough Municipality & Aor. [1968] 3 S.C.R. 137, this Court reversed the decision of the Bombay High Court and it was held that the levying of uniform tariff on the const11Ders irrespective of whether they were in sparse areas or in ~ompact areas, which was not directly related to the cost of supply, did not amount B to a colourable exercise of trucing power by Parliament.

The Electricity (Supply) (Rajasthan Amendment) Ordinance was first pronulgated on February 7, 1976, later replaced by the Electricity (Supply) (Rajasthan Amendment) Act, 1976 introducing ss.49A and 49B to the Act, to obviate the difficulty created by the judgment of the High Court in this c case as also by the decision of this Court in the case of the Indian Aluminium Coq>any v •. Kerala State Electricity Board [1976] l S.C.R. 70. In the. Indian Aluminium Company's case, the Court speaking through Bhagwati, J. held that agreements for supply of electricity to the consumers for a specified ~ period at a special tariff are the result of negotiations between the Board and the consumers and hence a matter of agreement between them. Such agreements for the supply of electricity to the consumers 1111st therefore be regarded as having been entered into by the Board in exercise of the statutory powers conferred under s.49(3) and thus the-re could be no question of such stipulation being void as fettering the exercise of the statutory powers of the Board under s.49(1). The learned Judge observed that in fact such agreements under s.49(3) represented the exercise of the statutory powers and the Board could not unilaterally frame uniform tariffs under ~- s.49(1) of the Act in derogation of such agreements entered into under s.49(3). Upon that basis, the learned Judge further observed that the Board was not competent to enhance the charges under the guise of fixing uniform tariffs because, sub-s.(l) of s.49 is subject to sub-s. (3); and once special tariffs were fixed under sub-s.(3) there could be no question of fixing uniform tariffs applicable to such consumers under sub-s. ( 1). Such a power could not be exercised in violation of the stipulation fixing special tariffs under sub-s.(3).

According to s. 59 of the Act, the Board is required to carry on its operations without incurring any loss. In the Indian Aluminium Coq>any's case, however, the learned Judge repelled the contention of the Board that since it was operat- H

662 SUPREME COURT REPORTS [1986] i s.c.R. · A ing at a loss it was bound under s.59 to readjust its charges ,_ to avoid the loss. It was said that s,59 does not give a charter to the Board to enhance its charges in breach of a. contractual obligation. The view taken by the Court in that case would have had a disasterous effect in some of the States if new ss.49A and 49B were not introduced by the Ordinance. In B the State of Rajasthan, not only special agreements or con- cessions in tariffs were made several years ago by the covenanting States, but also by the old State of Rajasthan ~ after its formation as a Part B State; and if they were allow- ed to continue, they would not cover the existing cost of generation with the result that the burden of this cost would c have to be passed on to other consumers who do not, in any way, benefit from such special contracts providing concession- al tariffs. It would have been manifestly unjust and discri- minatory that one consumer should benefit at the cost of other consumers or general tax-payers. It was therefore thought expedient to amend the Act with retrospective effect so as to D enable the Board to revise the contractual rates in order to ':- cover. the cost of generation from time to time, nothwithstand- ing any special contract, undertaking or concession to the contrary. See Statement of Objects & Reasons for the Electri- city (Supply) (Rajasthan Amendment) Bill, 1976,

E Purport and effect of es. 49A and 498 of the Act.

It is a well-known principle that for the validation of an invalid act done under an Act, it is essential that the subsequent validating statute nnst confer power for the doing . of the Act at the time it was done, and that the power should • F also be exercised. In the absence of such authorisation for the doing of the Act, the validation would be futile as that would only amount to attempt to exercise a power which ~ hypothesi did not exist. This has been achieved by the Legis- lature by enacting s.49A of the Act. The purport and effect of s.49A of the Act is to nullify the judgment of the High Court G and more particularly the decision of this Court in Indi1111 Allllld.niUll Coqlany's case laying down that sub-s. (l) of s~49 was subject to sub-s. (3) and therefore the Board could not " unilaterally frame uniform tariffs under s.49(1) with respect to the class of consumers who were entitled to the supply of electricity at a special rate by virtue of agreements entered H into by· the Board with them under sub-a. (3) of s,49, By the

p. 663 Copy page pinpoint

'i use of the non-obstante clause in s.49A(l), the Legislature A has removed the hurdle placed on the Board against framing of uniform tariffs with respect to such class of consumers and by the retrospective conferment of a prospective power empowered the Board to raise a demand for payment of the difference between the uniform tariffs in force from time to time and the special rates as respects any period commencing on and from· B September 16, 1966 i.e. the date when the new s.49 of the Act ~ was brought into force. On its plain construction, s.49A makes it lawful for the Board to revise, from time to time, the tariffs fixed for the supply of electricity to all such consumers who were enjoying special benefits by virtue of the agreements entered into with the Board under s.49(3) of the Act, and also to frame uniform tariffs for the purpose of such c supply, notwithstanding anything contained in any agreement, undertaking, commitment or concession to the contrary made by the Board before the first day of April 1964. The non-obstante --..;' clause contained in s.49(1) has clearly the effect of over- riding the agreement between the parties. D Section 49B of the Act by the non-obstante clause pro- vides that notwithstanding anything contained in the Act or in any agreement, undertaking or concession referred to in sub- s. (l) of s.49A, or in any judgment or order of any Court, any amount realized, or demand made or created by the Board, according to the uniform tariffs in force from time to time, from or against any person claiming any special tariffs under any such agreement, unde.rtaking or concessions, before the ..f publication in the official Gazette of the Ordinance i.e. before February 7, 1976, shall be deemed to have been validly realized, made or created under the Act, as amended by the Ordinance. A combined reading of ss.49A and 49B seeks to achieve a two-fold object. S.49B in terms validates the demands raised by the Board by virtue of its powers under .,. s.49A against the appellants prior to the proillllgation of the Ordinance on February 7, 1976 for payment of the difference between the uniform tariffs in force from time to time and the "' special rates as from January 1, 1971. The other legal conse- G quence is that the appellants who were entitled to supply of electricity at a concessional rate under the agreement between the parties, became subject to payment of uniform tariffs in force from time to time and it became lawful for the Board to raise a demand upon that basis subsequent to the proillllgation H

p. 664 Copy page pinpoint

A ' of the Ordinance and also to revise the tariffs fixed for the v supply of electricity to them, The appellants do not dispute • their liability to pay for the supply of electricity according to the uniform tariffs fixed for all large industrial consumers as from February 7, 1976 and the dispute only 'elates to the power of the Board to raise a demand for·pay- B · ment of the difference for the past period.

Contentions of the parties.

It is in this setting and the factual background that we are required to consider the submissions addressed to us, As c already stated, the controversy in these appeals can be viewed from three aspects, namely, (1) Interpretation of the terms of the agreement between the parties dated July 28, 1961, particularly els. 18 and 34(b) thereof; (ii) Interpretation of ss.49A and 49B of the Act; and (iii) Whether the demands raised by the Board for payment of the difference by the D imPugned bills dated February 1, 1971 and Ma-rch 12, 1976 which involved the imposition of a liability on the appellants by the retrospective conferment of a prospective power under s.49A and the validation of such power under s.49B was wholly arbitrary and irrational, confiscatory in nature and amounted. to deprivation of property without payment of compensation and E was thus violative of Arts.14, 19(l)(f) and (g) and 31(2) of the Constitution. It would be convenient to deal with the first and third aspects together.

Interpretation·of the agreement between the parties : F Clause 18 of the agreement.

As to the construction of the terms of the agreement between the parties we may first deal with cl.18. The appellant's submission is that on a true construction of the agreement, cl.18 is nothing but an escalation clause and ... G therefore the Board was not entitled to unilaterally frame uniform tariffs as due and payable by the appellants but the rate of increase rust be in proportion to, or correlated with, " the actual rise in the cost of generation. It is said that in every case, the function of the Court is to find the contractual intention by plf!.cing a construction of what is H just and reasonable. The agreement was for the sale and

p. 665 Copy page pinpoint

'1 purchase of electricity and the prices had been specifically stipulated by the parties in cl.17. A perusal of cl.17 of the agreement which fixes the rate of supply at the rate of 201.04/12 = Rs. 16. 753 per ¥!/A of the demand assessed shows that the rate had been worked out by the parties jointly on the basis of some calculation with reference to the cost of generation. The only reasonable construction should be that clear co-relation between the cost of generation and increase _.. in the rate of supply had been stipulated, as was the view expressed by Jain, J. On re-determination the rate of supply could be increased only to the extent that the cost of generation had gone up and not to any arbitrary extent. Cl.18 is not susceptible of a construction which could make the price of the goods totally uncertain and dependent on the c arbitrary volition of one party to the contract. In this connection, the appellants placed reliance on the following passages from Anson's Law of Contract, 25th Edn. , p.61:

"On the other hand, a transaction which at first sight seems to have some essential term of the bargain undetermined may, by implication, if not expressly, provide some method of determination other than a future agreement between the parties. In that event, since it is a maxim of the law that id certum estquod certum reddi potest, there will be a good contract. In every case the function of the Court is to put a fair construction on what the parties have said and done, though the task is often a difficult one when an instrument has attempted to record some complicated business bargain. The parties making such a bargain naturally assume that it will be carried out and therefore do not always express it with the exact- ness of terminology that lawyers, whose profession leads them to contemplate the possibility of future disputes, might have employed."

It is accordingly urged that cl.18 was an escalation clause G -' and therefore the power of the Board to revise the rate of supply arises as and when the cost of generation goes up, and therefore the rate must be in proportion to, or correlated with, the actual rise in the cost of generation. Learned

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A counsel for the appellants tried to draw sustenance from they following extract from the Statement of Objects & Reasons of the Rajasthan Electricity (Supply) Amendment Bill, 1976

"Such special agreement or concessions in tariff were made several years ago by covenanting States and if they were allowed to continue, they would B not cover the existing cost of generation, with the result that the burden of this. cost would have to ~ be passed over to other consumers ••••••• "

"It was, therefore, expedient to amend the Act •••• so as to enable the Board to revise the contractual c rates in order to cover the rising cost of generation from time to time, notwithstanding any special contract, undertaking or concession to the contrary."

We find it difficult to subscribe to the contention 'r. D advanced by learned counsel for the appellants that cl.18 is an escalation clause and therefore the Board's power to revise the rate of supply must be restricted to the actual rise in the component of cost of generation. As rightly pointed out by learned counsel appearing on behalf of the Board, an 'escala- tion clause' according to its accepted legal connotation means E a clause which takes care of the rise and fall of prices in the market, whereas the right to review confers the power to revise the rate of supply. It is submitted that cl.18 in terms provides that the rate of supply as determined in cl.17 shall be 'reviewed every fifth year starting from the date of first~ supply'. The word 'review' in cl.18 necessarily implies the power of the Board to have a second look and to so adjust from time to time its charges as to carry on its operations under the Act without sustaining a loss. The parties clearly contemplated by cl.18 for a fresh revision of the rate once in a block of five years. The only fetter on the power of review is that contained in the proviso of cl.18. The limitations placed on such power are two-fold in nature. The first of these is that such power of review shall be exercisable if theY component of cost of generation out of the total cost varies by 25% or more. The second is that such power shall not be exercisable by the Board till January 1, 1971. If the parties intended cl.18 to be in the nature of an escalation clause, H

DELHI CLOTH MILLS v. STATE ELECT, BOARD [SEN, J,] 667

A '1 the language would have been different. In that event, the rate of supply being linked with the component of cost of generation would keep on progressively increasing. In support of his submissions, learned counsel for the Board referred to us Butterworths' Encyclopaedia of Forms & Precedents, 4th edn.,Vol.3, p.148, Hudson's Building &Engineering Contracts, B 10th edn., Keating's Building Contracts, 4th edn., p.498 and Black's Law Dictionary, 4th edn., p.639 giving different forms _ of 'rise and fall' or escalator clause in building or commer- cial contracts, and the accepted meaning thereof. The expres- sion 'escalation clause' has a well defined meaning. This is brought out succinctly in American Jurisprudence, 2nd edn. , vol.17, p.786 in these terms : c "In some contracts, there is what is known as an escalator or fluctuation clause, which is de~ined as one in which the contract fixes a base price but contains a provision tha~ in the event of specified cost increases, the seller or contractor may raise D the price upto a fixed percentage of the base, and such escalator clauses are generally held to be sufficiently definite for enforcement."

In Corpus Juris Secundum, vol.17, p.806, the law on the subject is stated thus : E "(A) contract giving one of the parties the right to vary the price is not unenforceable for lack of 1llltuality where the right is not an unlimited one, as where its exercise is subject to express or implied limitation, such as that the variation 1lllst F be in proportion to some objectively determined base, or 1l11St be reasonable; and this rule has been applied to contracts containing so-called "escala- tor" clauses."

These considerations however do not apply as on its true construction. Cl,18 cannot be regarded to be an escalation " clause. There is therefore no basis for the. submission that there could only be proportionate increase keeping in view the increase in the component of cost of generation.

The effect of cl.34(b) of the Agniement H

p. 668 Copy page pinpoint

A • Turning next to cl.34(b), the rival contentions may be ,., set out. The appellants' contention is that firstly, the sti- pulation in cl.34(b) cannot be regarded as a contractual stipulation at all and secondly, that in no case cl,34(b) can possibly be made applicable to any purported alteration of I contracting parties' rights for a past period by means of B retrospective legislation. It was said that cl.34(b) cannot be construed in a manner favourable to the Board; all that the parties contemplated was that the llB.ltual rights and obliga- ~ tions would be subject to future legislations on supply and consumption of electricity but such legislations necessarily had to be valid legislations and if cl.34(b) was to be treated c as a contractual stipulation providing that the rights stipu- lated in the agreement were subject to any modification by any legislation, valid or invalid, cl.34(b) will have to be struck down as a totally uncertain clause which cannot find place in any contract and such clauses have been described ~s meaning- less terms in Anson's Law of Contract, 25th edn., p.63: D "Finally, we should note that if the contract f· contains an indefinite, but subsidiary provision, the courts have felt at liberty to strike it out·as being without significance, and to give effect to the rest of the contract without the meaningless term." E

The contention to the contrary on behalf of the Board is that a plain reading of cl.34(b) makes the contract subject to any legislation. The right which the parties derived under the agreement for supply of electricity at a concessional rate ~ under s.49 of the Act was therefore defeasible. That being so, it would be as if ss.49A and 49B of the Act had to be read into the contract and therefore became a contractual term. The submission is that the appellants derived a right to get electricity at a concessional rate only for a limited period till January l, 1971 and thereafter the Board derived the power to revise the rate of supply under · cl.18, It was competent for the Legislature to enact a law provicj.ing for application of . uniform tariffs notwithstanding any such " commitment, undertaking or concession to the contrary made during any period prior to April 1, 1964. There is, in our opinion, considerable force in the submissions advanced on behalf of the Board. H

DELHI CLOTH MILLS v, STATE ELECT. BOARD [SEN, J, ] 669

'i It is not uncommon for statutory contracts to contain a A term like cl.34(b) which makes the contracts subject to future legislations. Such a clause can usually be found in forest or excise contracts relating to the grant of a privilege which subjects the D11tual rights and obligations flowing from.such a contract to ,be liable to be altered or modified by subsequent legislations. Although there was no such term in the Indian B Al.Ulll.niua Company's case, even so, the Court speaking through ~ Bhagwati, J, observed :

"(A) case may conceivably arise where there may be an overriding statutory provision which expressly or by necessary implication authorizes tho public authority to set at naught, in certain given c circumstances, a stipulation though made in exercise of a statutory power. Where there is such a statutory provision, the stipulation would certainly be binding .. ,"

On a plain construction of the terms of the agreement, D the appellants were no doubt guaranteed the supply of electri- city for a period of 20 years but the right to get the supply at the concessional rate was subject t.o the power of the Board to effect a revision of the rate of supply every fifth year starting from the date of first supply subject to the only restriction that such revision could not be effected before E January 1, 1971. The Board's contention that the right of the appellants to the supply of electricity at a concessional rate _.under the agreement entered into by the Board with them under s.49 of the Act was defeasible, is clearly well-founded and DllSt be given effect to. It follows that the rights derived by the appellants under the contract were subject to the stipula- F tion contained in cl.34(b) which made the mutual rights and obligations of the parties subject to any legislation relating to supply anil consumption of electricity enacted during the period of the agreement.

~· It was rightly contended on behalf of the Board that G while the Board under the agreement had undertaken to supply the· appellants 25MW power for a period of 20 years, the concessions! rate of supply was assured to them only till January l, 1971 and could not be had for.ever. The scheme of the Act is that the Board is required to function without loss H

670 SUPREME COUR'f REPORTS [1986] l s.c.R.

A and t9 achieve the said purpose, the Board is vested with)-' power to adjust its charges from time to time. There was no justification for the Board to give preferential treatment any longer to the appellants who were bulk consumers beyond January 1, 1971 as against all other large industrial consumers who were subjected to uniform tariffs under schedule HS/LP/HT-1 under the Board's tariff notification dated April B 26, 1969. Once it was found by the High Court that the component of cost of generation out of the total cost as on ~ the date of Board's tariff notification of April 26, 1969 had increased at least by 25%, the fetter on that power was removed and the Board was entitled to demand payment according to the uniform tariff under schedule HS/LP/HT-1 appll.cable to c all large industrial consumers but for the agreement.

Under the restrictive covenant contained in cl.18, such~ revision of rate could not be effected by the Board till January 1, 1971. Once the period was over, the Board was entitled to have a second look and taking an overall view when ' D it found that it was no longer possible to supply electricity at the concessional rate which had no reasonable relation to the uniform tariff under HS/LP /HT-1 applicable to all large industrial consumers, it manifested its intention to review the rate of supply from January 1, 1971. The appellants knew that the review of rate was due on January 1, 1971 as is clear from their letter dated December 5, 1970 by which they wanted to know the extent of increase and the basis therefor. In response thereto, the Board by its letter dated December 22/24, 1970 left them in no doubt. It was made clear to them.._ by the Board that the uniform tariff under HS/LP/RT-1 framed' by the Board's tariff notification dated April 26, 1969 would be applicable to them as to all other large industrial consumers. The Board by its subsequent letter dated February 1, 1971 intimated its decision to charge uniform tariff at that rate from the billing month of January 1971 onwards, and the general surcharge of 15% thereon from July 1966 upto December 1970. At no stage, did the appellants contend that cl.18 was an escalation clause and the rate should be increased in proportion to the rise in the cost of generation. " They only asserted that it should be 'reasonable' and the extent of increase determined.

On a fair construction of the terms of cl.34(b) taken in conjunction with the conduct of the parties, the conclusion is

p. 671 Copy page pinpoint

'i irresistible that the parties had contemplated that the ID.ltual A rights and obligations under the contract would be subject to alteration by future legislation. That being so, ss.49A and 49B of the Act have to be read into the contract and these • provisions by virtue of cl.34(b) became a contractual stipulation.

Whether the raising of demand for payment of the difference between the uniform tariffs and the agreed rate was in disregard of the guiding princi- ples contained in s,49(3) contrary to the mandate of s.49A(2) of the Act.

Faced with the difficulty, learned counsel for the appel- c lants contended that the Board in raising the impugned demands against the appellants for payment of charges according to the uniform tariffs framed under s.49(1) of the Act from time to { time, as per its letter of demand dated February 1, 1971 for ~ payment of Rs.ll,67,959.95p. for the billing month of January 1971 onwards under schedule HS/LP/HT-1 under the Board's D tariff notification dated April 26, 1969 and its subsequent letter of demand dated March 12, 1976 for payment of Rs.21,35,506,72p. for the billing DX>nth of February 1976 under schedule LP/HT-1 under the Board's tariff notification dated May 28, i974 purporting to act under ss.49A and 49B of the Act read with cl.18 of the agreement, had not any regard to the special circumstances on the basis of which the appellant's set up its industry which required electricity at very reason- ~ able rate. fa order to be able to sustain its operations. It is further urged that While s.49A of the Act might have enabled the Board to increase t-he special tariff applicable to the appellants even in disregard of the limitations imposed on such revision by cl.18 of the agreement, the special position of the appellants' industry could not be totally disregarded. In other words, while the concessions stipulated by the agree- ment under s.49(1) of the Act could have been altered in proportion to the rise in the cost of generation, such con- cession could not have been altogether eliminated as that G - would amount to a total disregard of the guiding principles contained in s.49(3) and thus contrary to the mandate of s.49A(2) of the Act. Sub-s.(2) of s.49A further provides that in revising such tariffs or framing uniform tariffs as respects any period commencing on and from September 16, 1966 H

p. 672 Copy page pinpoint

A the Board shall be guided by the principles laid down .in Y sub-ss, (2), (3) and (4) of s.49A of the Act. At first blush, this argument plausible though it appears, is on closer scrutiny not well-founded. It ignores the true object and purpose of the enactment and fails to give due effect to the provisions of ss.49A and 49B of the Act with a retrospective B effect which clothed the Board with power to make the uniform tariffs applicable to bulk consumers like the appellants who under agreements entered into with the Board on July 28, 1961 ~ i.e. before April 1, 1964, the cut out date mentioned in sub-s.(l) of s.49A had been to the great financial detriment of the Board enjoying a concessional rate of supply which had c no relation to the existing cost of generation, with the result that the burden of this cost had to be passed over to other consumers. As is clear from the Statement of Objects and Reasons of the Bill, the Legislature thought it expedient to amend the Act so as to cover the rising cost of generation from time to time, notwithstanding any special contract, r-' D undertaking or concession to the contrary. The legislative mandate contained in ss.49A and 49B of the Act as introduced by the Rajasthan Electricity (Supply) Amendment Act, 1976 subserves the public interest to ensure that the Board shall not, as far as practicable, after taking credit for any subvention from the State Government under s.63, carry on its E operations under the Act.at a loss.

Power of the Board to unilaterally frame uniform tariffs under sub-s.(l) of s.49 of the Act in derogation of the agreement under s.49(3):

F Placing strong reliance on the decision of this Court in the Indian Alumlniua Coq>any's case, learned counsel for the appellants drew our attention to various observations made by Bhagwati, J. during the course of his judgment laying down that under the scheme of the Act the Board could not unilater- ally frame uniform tariffs under s.49(1) of the Ac~ in deroga- tion of such agreements entered into under s.49(3) and there- G fore was not competent to enhance the charges under the guise >- of fixing uniform tariffs because sub-s.(l) of s.49 is subject to sub-s. (3) . and, once special tariffs were fixed under sub-s.(3), there could be no question of fixing uniform tariffs applicable to such consumers under sub-s.(l) and that H

p. 673 Copy page pinpoint

A 'i such a power could not be exercised in violation of the sti- pulation fixing special tariffs under sub-s.(3). Emphasis was p<lrticularly laid on the observations of Bhagwati, J. in the Indian .Alnndnfum QJmpany's case where after referring to the earlier decision of this Court in ICalyan Borough Municipa- lity's case, supra, the learned Judge observed that : (i) the B cost was not the sole criterion in fixing tariffs under s.49(1) and (ii) where the Board was under a.contractual obli- ,. gation not to charge under a stipulation validly made under s.49(3) ·anything more than a specified tariff for a specified period, it would not be practicable for it to enhance its rates of charges even if it finds that it is incurring operational loss. That view expressed by the learned Judge C proceeded on the hypothesis, to use his own words, that 'Section 59 does not give a charter to the Board to enhance its charges in breach of its contractual stipulation'. We are afraid, the contention cahnot prevail, Nor are the appellants entitled to any relief on the basis of the decision of this --< Court in Tndfan Aluminium Company's case. The State Legis- D lature under Entry 38 of the Concurrent List was competent to enact the Rajasthan Electricity (Supply) Amendment Act, 1976 and introduce the impugned provisions contained in ss.49A and 49B with retrospective effect to overcome the difficulty created. by the decision of this Court in Indian AJg.tnfum Coapany's case. These provisions so enacted confer an enabling power on the Board to revise the tariffs from time to time notwithstanding any provision of the Act or any agreement, undertaking or concession to the contrary, and also to frame uniform tariffs with respect to the class of consumers enjoy- .,. ing special benefits under agreements entered into with the Board under s.49 of the Act. There being a change in the law brought about by the introduction of ss. 49A and 49B of the Act by the Electricity (Supply). (Rajasthan Amendment) Act, 1976, the Court is bound to give effect to these provisions notwithstanding anything contained in the Act or in any agree- ment, undertaking, commitment or concession to the contrary made by the Board before the first day of April 1964, or the decision of this Court in TncH..,, AluminiUJl Collpany's .case. -- Scope and effect of Sections 49A and 49B of the Act: Power of the Board to raise demands for pay- ment of the difference between the unlf orm tariffs and the agreed rate with retrospective effect and the validation thereof

p. 674 Copy page pinpoint

A Turning next to the second aspect, question is whether /" the Board was entitled to recover from the appellants the difference between the uniform tariffs and the agreed rate for the supply of electricity to them with retrospective effect by virtue of the powers derived under ss.49A and 49B of the Act read with cl.18 of the agreement. That depends on the B construction of ss.49A and 49B of the Act. The question pertains to two periods : (i) from January 1, 1971 to May 31, 1974 and (ii) from June 1, 1974 to February 6, 1976, According ,_ to its plain terms, s.49A has been structured in a manner to attain a two-fold object. In the first place, the non-obstante caluse in sub-s.(l) of s.49A has the effect of overriding the c provisions of the Act and nullifying the judgment of the High Court and more particularly of this Court in Indian Aluminilllll Company's case which invalidated the framing of uniform tariffs by the Board under s.49(1) with respect to consumers who were entitled to the supply of electricity at a special rate by virtue of the agreements entered into by the Board D with them under sub-s.(3) of s.49 of the Act. Sub-s.(l) oi )~· s.49A is clearly an enabling provision and makes it lawful for the Board not only to revise from time to time the tariffs applicable to such class of consumers but also to frame uniform' tariffs applicable to them as respects any period commencing on and from September 16, 1966 i,e. the date when E the new s.49 was brought into force. Sub-s.(2) thereof provides that in revising the tariffs or framing uniform tariffs, the Board shall be guided by the principles set out in s. 59. It further provides that as respects any period commencing on and from September 16, 1966, it shall also be guided by the principles laid down in sub-ss. (2), (3) and (4) ~ F of s.49. Such powers of revising the tariffs or framing uniform tariffs were exercisable notwithstanding anything contained in the Act or in any agreement, undertaking or concession to the contrary made by the Board before the first day of April 1964 or the judgment and order of any Court. Sub-s. (3) of s.49A provides that all such agreements, under- G takings, commitments or concessions as are referred to in sub-s. (1), shall, insofar as they are inconsistent with the provisions of sub-ss. (1) and (2) and to the extent of the \, tariffs fixed or provisions made therein for such fixation be void and shall be deemed always to have been void. Secondly, sub-s.(l) of s.49A as construed prospectively makes it lawful H for the Board to revise the tariff.a from time to time and to

DELHI CLOTH MILLS v, STATE ELECT. BOARD [SEN, J. ] 675

A '<·frame uniform tariffs with respect to such class of. consumers 'on or after February 7, 1976, the date on which it was brought into force~ ·

According to its plain language, the non-obstante clause in sub-s.(l) of s.49B has the effect of overriding the B provisions of the Act or any agreement, undertaking or concession referred to in sub-s.(l) of s,49A, The consequence .,, that ensues is this. Sub-s.(2) of s,49B provides that any amount realized or demand made or created by the Board, according to the uniform tariffs fn force from time to time, under s.49 from or against any person claiming any special tariffs under any such agreement, undertaking, commitment or , c concession made before February 7, 1976, 'the date of pro- lUUlgation of the Ordinance, contrary to the decision of this Court in Inc!fan Aluwlnfllll Company's case or of the High Court, shall be deemed to have been validly realized, made or created under the Act. The appellants do not dispute their liability to pay uniform tariffs fixed from time to time as from D February 7, 1976. The controversy is only with regard to their liability to pay uniform tariffs fixed from time to time for the past period and the extent of their liability.

Liability of the appellants to pay uniform tariffs framed by the Board from time to time under s.49A E read with s.49B for the period prior .to February 7, 1976 and the corresponding right of the Board to raise such demands.

,_. Shri Shanti Bhushan contends that ss.49A and 49B were integrally connected and were intended and meant to achieve a F joint purpose which was merely to validate such of the past actions of the Board as would have been valid if s.49A had already been in force at the relevant time. He contends that if the Board's uniform tariff notifications dated May 18, 1964, April 26, 1969 and May 28, 1974 had not containecl an exclusionary clause (3) set out above, for the exclusion of G ' aJi consumers who were governed by specially negotiated j tariff, any demand raised under s.49A of the Act on the basis of such uniform tariffs fixed from time to time prior to I February 7, 1976 would have been validated under s.49B . notwithstanding that the said demands when made . were not ,al,lthorized in view ~f the stipulations contained in the agree- H