Holding

The Board's notification was ultra vires as it could not override the agreement's terms or statutory provisions, and therefore the appeals were dismissed.

Summary

The Bihar State Electricity Board, facing losses from electricity theft and defective meters, issued a notification under Sections 46 and 49 of the Electricity (Supply) Act, 1948 to bill industrial consumers at prescribed load factors. Consumers challenged the notification, arguing it conflicted with the terms of their supply agreement (clauses 3(c), 6 and 14) and statutory provisions. The Supreme Court examined whether clause 14 could override clauses 3(c) and 6, whether Section 70 of the 1948 Act could give the Board supremacy over the 1910 Act, and whether the Board could issue supplementary bills under Section 26(6) of the 1910 Act. The Court held that a harmonious reading of the agreement did not allow clause 14 to supersede clauses 3(c) and 6, that Section 70 could not protect the notification, and that the Board lacked authority to issue supplementary bills. Consequently, the Board's notification was deemed ultra vires and the appeals were dismissed.

Issues considered

The Board's notification altering the mode of charging is inconsistent with the supply agreement's clauses 3(c) and 6.
Whether clause 14 of the agreement empowers the Board to vary the conditions in clauses 3(c) and 6.
Whether Section 70 of the Electricity (Supply) Act, 1948 gives the Board's notification precedence over the Indian Electricity Act, 1910.
Whether the Board can issue supplementary bills during the pendency of a meter dispute under Section 26(6) of the Indian Electricity Act, 1910.
Whether Section 26 of the Electricity (Supply) Act, 1948 confers any shield to sustain the notification.

Legislation cited

Electricity Act, 1910s. 26, s. 26(6)
Electricity (Supply) Act, 1948s. 26, s. 46, s. 49, s. 70

Subjects

electricity supplytariff alterationultra viresmeter theftstatutory interpretationElectricity (Supply) Act 1948Indian Electricity Act 1910supplementary bills

Judgment

,,

BIHAR STATE ELECTRICITY BOARD AND ORS. A
v.
PARMESHWAR KUMAR AGARWALA ETC. ETC.

MAY 27, 1996

[A.M. AHMADI AND B.L. HANSARIA, J.T.] B

Electlicity (Supply) Act, 1948-Sections 46 and 49-Agreement between
electricity Board and consumers-Clause 14 r/w Clause 3(c) & 6--Board em-
powered to alter rates of charges under agreement-Notification introducing
mode of charging energy-Held, hannonious reading of the clauses would not C
pemzit to say that Clause 14 has ovenidden Clause 3(C) & 6.

Agreement between Electricity Board and consunie1:l'-Clau:-e 11 r/w
clause 3(C) and 6-0veniding effect of Indian Elec(licity Act, 1910 & the
1948 Act over the agreement in case of conflict or inconsistency-Issuance of
notification---Clause 11 does not mention anything about notification-Held, D
notification cannot ovenide the ten11s and conditions nientioned in Clause
3(c) & 6.

Section-70-0verriding effect of 1948 Act over Indian Electricity Act,
.... 191()---!ssuance of notification in exercise of power u/s 49 of 1948 Act-Held, E
the section cannot protect the no,tification, since it is not a }Jart of the
provisions of 1948 Act.

Section-26---Power of the Electricity Board-To have all the powers of
a licensee under Indian Electricity Act, 191(}-Dispute with consumers with
regard to mode of charging energy-Held, Section not applicable to the dispute F
with consu1ners, hence notification cannot be sustained on the basis of its
powers.

Indian Electricity Act, 191(}-Section 26(6}-Board not authorised to
issue supplementary bills during pendency of the dispute---Supplementmy bills G
• issued pursuant to notification-Held, it is in conflict with the provision.

The appellant Electricity Board, in order to meet the financial loss
due to theft of electrici!)', decided in a meeting of General Managers-cum-
Chief Engineers, that the consumers whose meters remained defective,
their reading would be made at 30% load factor for low tension industrial H
29
30 SUPREME COURT REPORTS [1996] SUPP. 3 S.C.R.

A consumers and at 45o/o for high tension industrial consumers.

The consumers challenged the decision of the Board in the High
Court and it was c1uashed on the ground that the decision of' the-mode of
charging was not by the Board itself' and the power to amend the llariff is
only "ith the Board under Sections 46 & 49 of Electricity (Supply) Act,
B 1948. Thereafter, the Board issued notification invoking its powers under
Sections 46 and 49 of Electricity (Supply) Act, 1948 deciding to bill the
industrial consu111ers in the line of' earlit!r decision. Pursuant to the ·
notification, supplementary bills were also sent to the consumers.

C Consumers filed \\Tit petition, challenging the notification. The "'
notification was C(Uashed by the High Court, taking the view that the board
had no p<nver to issue the same as it was inconsistent 'vith the terms and

D
conditions of the agreen1ent entered into beh\.'een the Board and the
consumers.

In appeal, to this Court, the appellant Board contended that the
-
notification could not have been quashed in its entirety by regarding the
same as ultravires, because clause 11 of the . agreement read \\ith clause
14 permits the Board to vary the conditions which find place in clauses
3(c) and 6, said to have been violated by the notification and because
E Section 70 of the Electricity (Supply) Act, 1948 provides that iTII case of
conflict between Indian Electricity Act, 1910 and Electricity (Supply) Act,
1948, the latter shall prevail because the Board had wlde powers conferred
by Section 49 of Electricity (Supply) Act, 1948.

Dismissing the appeal, this Court
F
HELD: 1.1. A harmonious reading uf clauses 3(c), 6 & 14 would not
permit to say that clause 14 has overridden what has been provided in
clauses 3(c) & 6. Clause 14 has empowered the Board to alter rates of
charges. This clause cannot be pressed into service to sustain the notifica-
G tion, as in the instant case, it is not one of alteration of charges Illentioned
in the clause; it really seeks to introduce and unknown mode of ~arging
for energy, which is not visualised by the agreement entered into betweelil
the parties. [38-F-G]

As/wk Soap Facto0> v. Municipal Cmporation of Delhi, [199'3) 2 SCC
H 37, distinguished.
•
BIHARSTATEELECfRICITYBD. v_ PKAGARWALA 31

1.2. The stipulations made in the notification cannot override the A
terms and conditions mentioned in clauses 3(c) and 6. Clause 11 of the
agreement provides that the provisions of 1910 and 1948 Acts, together
with the rules and regulations, if any, shall prevail in case of any conflict
or inconsistency between them and the terms and conditions of the agree-
ment. Nothing has been mentioned in this clause about any notification
B
issued by the Board, the agreement at hand being earlier in point of time
to the impugned notification. [38-A, 37-H]

1.3. The legal position as provided in Section 70 of 1948 Act, that no

...,
_
provision of the Indian Electricity Act, 1910 or of any rules made there-
under, shall have any effect, so far as it is inconsistent with any of the C
provisions of 1948 Act, cannot assist the Board, as what has been provided
in Section 70 cannot protect the notification, because the same is not a
part of the provision of the 1948 Act, but has been issued with the aid of
the provisions of this Act. [34-D-E)

1.4. The Provisions of Section-26 of Electricity Supply Act, 1948 D
canriot assist the appellant-Board in any way to sustain the notification,
as that section has only provided that the Board shall have, in respect of
whole of any State, all the powers and obligations of a licensee under the
1910 Act. This section thus, provides no shield to the Board in so far as
its present disputed with the respondents is concerned. [39-C]
E
New Central Jute Mills Co. Ltd. v. U.P. State Electricity Board, [1986]
Suppl. SCC 581 and Ferro Alloys C01poration Ltd. v. A.P. State Electlicity
Board, [1993) Suppl. 4 SCC 136, distinguished.

2. The act of the Board in issuing supplementary bills to respon- F
dents/consumers was in conflict with the statutory provisions contained in
Section 26(6) of 1910 Act. The section does not authorise the Electricity
Boards to issue any supplementary bill in respect of the energy consumed
during the pendency of the dispute. [38-H, 39-A)

M.P. Elect1icity Board v. Basantibai, [1988) 1 SCC. 23, relied on. G
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1944 of
1989 Etc.

From the Judgment and Order dated 5.10.88 of the Patna High Court
in C.W.J.C. Nu. 1513 of 1988 (R). H
32 SUPREME COURT REPORTS [1996J SUPP. 3 S.C.R.

A Kapil Sibal, S.B. Sanyal, Pawan Kumar, A.K. Ganguli, Uclay Sinha,
H.L. Agrawal, Harish N. Salve, R.F. Nariman, A.K. Ganguli, Ranjit Kumar,
Ms. Binu Tamta, Shambhu Prasad Singh, R.D. Upadhyay, K.V. Sreckumar,
A.K. Sinha, M.P. Jha, M.S. Mittal, Anil K. Chopra, Ms. Naresh, Bakshi,
Ejaz Maqbool, Gopal Prasad, K. N. Rai, D.B. Gupta, Kirpal Singh, M.A.
Krishnamoorthy, Ranjan Mukherjee, A.K. Dutta, N.S. Bisht, S.B. Upad-
B hyay, Balraj Dewan, H.K. Puri, K.K. Gupta, Suman Khaitan, Ajay K .Jain,
Darshan Singh, A.K. Pandey, R.P. Singh, Mrs. Sumita Mukherjee, R.
Mukherje, G. Indecver and D.P. Mukherjee for the appearing parties.

c
The Judgment of the Court was delivered by

HANSARIA, J. Theft of electricity has become so chronic a disease
·-
that there can be no doubt that all efforts must be made to curb the same;
not only lo make the State Electricity Board viable, but also to ensure
regular supply of electricity to the lawful consumers al reasonable tariff.

D 2. The facet of theft of electricity with which these appeals arc
concerned relates to the mischief of consumers to tamper with the meters,
·first to slow it down and then to make the same defective. The basic idea
behind this is that the general terms and conditions governing the agree-
ment between Electricity Boards and the consumers require that in such a
case reading of the meter shall be based on the average reading of previous
E
three months, in which the meter ran correctly and reading was duly
recorded. Section 26 of the Indian Electricity Act, 1910, herein:±fter the
1910 Act, is on the subject of "Meters" and sub-section (1) of thi:; section
requires that the amount of energy supplied to the consumer shall be
ascertained by means of a correct meter. Sub-section (6) has provided that
F where any difference or dispute arises as to whether any meter is or is not
correct, the matter shall be decided, upon the application of either party,
by an Electrical l_nspcctor. Further steps are required to be taken as per
the opinion of such Inspector.

3. Confronted with the aforesaid position, the Bihar State Electricity
G Board (for short, the Board) found itself suffering heavy financial loss to
the tune of several crores. It, therefore, arranged a meeting of the General
Managers-cum-Chief Engineers on 12.6.1982 and decided, inter alia, that
the assessment of the aforesaid type of consumers, should be made, in the
case of low tension industrial consumers at 30% load factor and in case of
H high tension industrial consumers at 45% load factor, during the period
BJHARSTATEELECTil!CITYBD. v. P.K.AGARWALA[HANSARIA,.T.J 33

their meters remained defective. A
4. On the aforesaid decision put to implementation, some consumers
approached the High Court of Judicature at Patna by filing a writ petition
(CWJC No. 2250 of 1984) in which it was held that the decision dated
12.6.82 having far reaching consequences and having not been taken by the
Board itself, could not be sustained. It wus also pointed out that the pO\Ver B
lo amend tariff lay with the Board in exercise of powers under sections 46
and 49 of the Electricity (Supply) Act, 1948 to be referred hereinafter as
the 1948 Act. The High Court, therefore, quashed the decision dated
12.6.1982.

5. The Board thereafter issued a Notification on 16.2.1987 invoking
c
its power under sections 46 and 49 of 1948 Act and decided to bill
industrial consumers in the line of the decision taken earlier. The Notifica-
tion reads as below :

"In view of the observations of the Hon'ble High Court in its D
order dated 25.8.86 passed in C.W.J .C. No. 2250/84 filed hy Sri
Vishnu Re-Rolling Mills against the Bihar State Electricity Board
and others, the B.S.E. Board, in its resolution No. 5873 taken in
the 388th meeting of the Board held on 23.1.1987, after taking into
consideration all the aspects of the matter, has decided and E
resolved to bill L.T.l.S. (meaning, Low Tension Industrial Sector)
consumers at 30% load factor, H.T. (meaning, High Tension)
consumers at 45% load factor, for the period the meter remained
defective or non-working, with effect from 12.6.92.

Accordingly, it is hereby notified that by virtue of the power F
conferred under sec. 46 and 49 of the Electric Supply Act, 1948,
the Bihar State Electricity Board, has decided to bill LTIS con-
sun1ers at 30rfo load factors) H.T. consumers at 45% load factors
and commercial consumers at 30% load factors for the period
meter remained defective or non-working with effect from 12.6.82." G

6. This notification came to be challenged by a number of consumers
and the judgments impugned in these appeals relate to the view taken by
the High Court qua this notification. The High Court has quashed the
notification, not only the retrospective part of it, but the whole of it, being
of the view that the Board had no power to issue the same. In these appeals H
34 SUPREME COURT REPORTS (1996] SUPP. 3 S.C.R.

A by special leave, the Board has challenged the legality of the view taken by
the High Court.

7. Shri Sibal, appearing for the appellant-Board, made a submission,
when the appeals were taken for hearing, that he was not in a position 'to
!ind fault with that part of the judgment of the High Court by .which
B retrospective operation of the notification has been set aside. H~, ho\vever,
strenuously contended that the notification could not have been quashed
in its entirety by regarding the same as ultra vires. We would, therefore,
address ourselves to this stand only of Shri Sibal.

c sections8. The notification having been issued in exercise of powers under
46 a,nd 49 of the 1948 Act, the learned counsel first referred us to
section 70 of this Act, which is on the subject of "Effect of other laws". In
sub-section (1) of the this section, it has been stated that no provisions of
the Indian Electricity Act, 1910 or of any rules made thereunder, shall have
any effect, so far as it is inconsistent with any of the provisions of 1948 Act.
D It was, therefore, urged that in case of conflict bet\veen the t\VO statutes,
namely, 1910 and 1948 Acts, the provision contained in the latter shall
prevail. This legal position cannot assist the Board, as what has been
provided in section 70 cannot protect the notification, because the same is
not a part of the provision of the 1948 Act, but has been issued with the
E aid of the provision of this Act.

9. It is because of this that the learned counsel referred us to section
49 of the 1948 Act and we were addressed on the width of the power given
to the Board by various sub-sections of this section. The one which was
specifically mentioned is sub-section (3), which has laid down that nothing
F in the foregoing provisions of the section shall derogate from the power of
the Board to fix different tariffs for the supply of electricity to any person
not being a licensee, having regard to some objects mentioned in the
sub-section and "any other relevant factors".

10. Shri Sibal referred to certain decisions of this Court in which the
G width of the power of the Board conferred by section 49 had come to be
examined. These decisions are: (J) New Central Jute Mills Co. Ltd. v. U.P.
State Electlicity Board, (1986] Supp. SCC 581 and (2) Fe1roA/loys Corpora-
tion Ltd. v. A.P. State Electlicity Board, [1993] supp. 4 SCC 136.ln the frrst
of these decision the view taken by a two-Judge Bench of this Court was
H that the expression "any other relevant factors" appQaring in section 49(3)
BIHARSTATE ELECfRICITYBD. v. P.K.AGARWAl.A[HANSARIA.J.] 35

was not to be construed ejusdem geneiis; and that the combined effect of A
section 49 and the terms and conditions of supply was that having regard
to the nature of supply and other relevant factors, the Board had the power
to enhance the tariff rates. What had happened in New Central Jute Mill's
case was that the U.P. Electricity Board had levied a surcharge of 5.5. paise
per unit of electricity drawn in excess of the permissible 70% authorised
B
by the State Government. As the State Government had imposed a ban on
drawing electricity in excess of 70rfo in exercise of po\vers under section
22-B of the 1910 Act, it was contended that the Board had no legal
authority to levy the surcharge. This contention was not accepted by
pointing out the agreement with the Board being silent on this aspect, the
Board was justified in invoking its power under section 49(3). C

11. In the second of the aforesaid decision, this Court, while uphold-
ing the validity of section 49 approved the condition imposed by the
regulations framed by the Board, which required a consumer to make
security deposit, as under clause VI of the Schedule to the 1948 Act, supply D
of energy by the Board is to be made after a written contract is executed
with sufficient security. Another provisions of the Act noted hy the Court
also permitted Board to require any consumer to deposit security for
payment of the monthly energy bills. The non-payment of interest by the
Board on the deposit made was approved as none of the concerned statutes
created such an obligation. E

12. Thus, these two decisions do not advance the case of the Board
qua the validity of the notification (except that different tariffs could have
been charged from different industrial concerns, which, as per the High
Court, however, could not have been done) because in those cases the F
Board had done nothing against the terms and conditions on which it had
agreed to supply energy, which the Board is said to be doing hereby force
of the notification.

13. This takes us to the main objection of the High Court to the
notification which is that it is inconsistent \Vith the terms and conditions of G
the agreement entered into between the Board and the consumers. The
submission of Shri Sibal on this facet of the case was that clause 11 of the
agreement, read \Vith clause 14, permits the Board to vary the conditions
which find place in clauses 3(c) and 6, which are the two clauses said to
have been violated by the notification. H
36 SUPREME COURT REPORTS [1996] SUPP.3 S.C.R.

A 14. To appreciate this submission, let the aforesaid four clauses be
noted. These read as below :

"3. (a) xxxxx xxxxx xxxxx

(b) xxxxx xxxxx xxxxx
B
( c) Subject lo clause 6 appearing hereinafter in the agreement,
in tl1e event of any meter ceasing to register or found to be
defective or the Board's employee having been unable to read
meter, the reading during the period of such cessation or defective
registra.tion or non-reading shall be based on the average reading
c of the previous three months, in which the meter ran correctly and
reading was duly recorded. In taking such average due regard shall
be given to the conditions of working during the month under
dispute and during the previous three months. In case of failure
to take reading by the Board's employee, proper adjustment shall
D be made when actual reading is taken next.

6. Should the consumer dispute the accuracy of any meter not
being his own property, the consumer may upon giving notice and
paying the prescribed fee have the meter officially tested by the
Electric Inspector, Government of Bihar, in accordance with sub-
E section (6) of Section 26 of the Indian Electricity Act, 1910. In the
event of the meter being tested by the Electric Inspector, Govern-
ment of Bihar, and found to be beyond the limits of accuracy as
prescribed in the Indian Electricity Rules, 1956, or any other
statutory modification thereof as may be in force from time to time
F the testing fee will be refunded and the amount in respect of the
meter readings of three months prior to the month in which the
dispute has arisen or of three months as provided in clause 3( c)
above, as the case may be, will be adjusted in accordance with the
result of the test taken, due regard being paid to the conditions of
working during the month under dispute and during the previ.ous
G
three months.

11. This agreement shall be read and construed as subject in all
respects to the provisions of the Indian Electricity Act, 1910, mies
framed thereunder and the Electricity (Supply) Act, 1948 together
H with rules, regulations (if any) tariffs and terms and conditions for
BIHARSTATEELECIBICITYBD. v. PKAGARWALA[HANSARIA,J.] 37

supply of electricity framed and issued thereunder and for the time A
being in force as far as the same may respectively be applicable
and all such provisions shall prevail in case of any conflict or
inconsistency between them and the terms and conditions of this
agreen1ent.

14. The Board shall be at liberty at any time to alter the demand B
charges, energy charges including fuel-surcharge and minimum
guarantee charges as set out in the Schedule appended hereto and
this Schedule shall be deemed as having been automatically revised
with effect from the date of Board enforces new tariff for the
consumers.ti c
15. Shri Ganguli, who addressed us on behalf some of the respon-
dents, urged orally, as well as in written submissions, that the aforesaid
clauses have to be read and construed harmoniously. To this, it was added
by Shri Sanyal, appearing for other respondents, that clause 11 has not
n1entioned about any !Tnotification 11 • D

16. Before we advert to the effect produced by a combined reading
of the four clauses, it deserves to be pointed out that the terms and
conditions have sacrosanctity, in that Rule 27 of the Indian Electricity
Rules, 1956, framed by the Central Electricity Board in exercise of power
E
under section 37 of 1910 Act has, read with Annexure VI thereof, provided
the model conditions of supply which are required to be adopted by the
State Boards. It is on the basis of this statutorily prescribed model, with
suitable variations, that energy had been supplied by the Board to the
consumers. The model conditions can be said to be akin to the model
Standing Orders prescribed by Industrial Employment (Standing Orders) F
Act, 1946, which, when certified, become part of the statutory terms and
conditions of service between the employer and employees and they govern
the relationship between the parties, as held in Workmen v. Firestone Tyre
& Rubber Co. Ltd., [1973] 1 SCC 813 (832). We are inclined to think that
similar is the effect of terms and conditions, on which a State Board G
supplies energy to the consumers.

17. We may now see what clause ll has provided. It has stated that
the provision 1910 and 1948 Acts together with the rules and regulations,
if any, shall prevail, in case of any conflict or inconsistency bet,veen them
and the terms and conditions of the agreement. Nothing has been men- H
38 SUPREME COURT REPORTS (1996] SUPP. 3 S.C.R.

A tioned in this clause about any notification issued by the Board; and the
.. ,
agreements at hand being earlier in point of time to the impugned notifica-
tion, we are of the view that the stipulation made in the notification cannot
override the terms and conditions mentioned in clauses 3(c) and 6.

18. Clause 14 deals with alteration of various energy charges and
B states that on the charges being altered the tariff shall become realisable
accordingly. This clause has dealt with : (1) demand charges; (2) energy
charges; and (3) minimum guarantee charges. The expression 'demand
charges 1 means minin1um consun1ption guarantee charges, (See para 5 of
As/wk Soap Factmy v. Municipal Co1poration of Delhi, [1993] 2 SCC 37. A
c perusal of this para also shows that for big consumers of electricity, there
is two part tariff system, i.e., it is comprised of two charges : (1) minimum
consumption guarantee charges (called demand charges); and (2) energy
charges for actual amount of energy consumed. In the Schedule lo this
present agreement also, para 5(a) deals with demand charge and 5(b) with
energy charge. Rates of each has also been mentioned. Clause 14 has
D empowered the Board to alter rates of these charges.

19. In As/wk Soap Facto1y case, this Court dealt with the power of
the Board to alter the rate of demand charges (which has been enhanced
from Rs. 40 per KVA to Rs. 340) and the same was sustained, because
E valid reasons existed for the enhancment (theft of electricity and defective
meters recording extremely low consumption causing loss of huge revenue)
and the particular clause in the agreement (quoted in para 15) permitted
increase in the rates.

20. Though in the case al hand, the motivating factor for the issuance
F of the notification is similar to the one as \Vas in the aforementioned case.,
\Ve don't think if clause 14 can be pressed into service to sustain the
notification, as present not a case of alteration of charges mentioned in the
clause; it really seeks to introduce an unknown mode of charging for
energy, which is not visualised by the agreement entered into between the
parties. This apart, a harmonious reading of clauses 3(c), 6 and 14 would
G
not permit us to say that clause 14 has overridden what h1s been provided
in clauses 3(c) and 6.

21. This is not all, as it has been held hy this Court in M.P. Elec/licity
Board v. Basantibai, [1988] l SCC 23, that section 26(6) of the 1910 Act
H does not authorise the Electricity Boards to issue any supplementary bill
BIHARSTATEELEcrn.ICITYBD. v. P.K.AGARWALA[HANSARIA,J.] 39

in respect of the energy consumed during the pendency of the dispute with A
an Electrical Inspector. We have mentioned about this decision because
pursuant to the notification, the Board did submit supplementary bills to
the respondent-consumers. It seems to us that this action was really in
conflict with the statutory provision contained in section 26(6) of 1910 Act,
as interpreted by this Court in Basantibai's case.
B
22. The only other point urged by Shri Sibal, which needs to be dealt
with, is relatable to the power of the Board under section 26 of the 1948
Act. We do not think the provisions of this section can assist the appellant-
Board in any way to sustain the notification, as that section has only
.. provided that the Board shall have, in respect of the whole of any State,
all the powers and obligations of a license<; under the 1910 Act. This
C·

section thus provides no shield to the Board insofar as its present dispute
with the respondents is concerned.

23. For the reasons aforesaid, we are constrained to dismiss the
appeals, much though we would have liked to lend our support to the D
Board in its effort to effectively deal with theft of electricity caused by
manipulation of meters, which is a known evil. Despite the laudable object
which the Board sought to achieve by issuing the notification, we are of the
view that the same has not been done in accordance with law.

24. The appeals are, therefore, dismissed, leaving the parties to bear E
their own costs throughout.

KK.T. Appeals dismissed.

'