Holding

The exemption under the Industrial Policy and Section 78‑A applies to both low‑tension and high‑tension industrial connections; the Board’s refusal to grant it to low‑tension connections is illegal.

Summary

The Bihar Government’s 1995 Industrial Policy, under Section 78‑A of the Electricity Supply Act, 1948, granted exemption from minimum guarantee charges to new industrial units with a connected load up to 500 kVA. The Bihar State Electricity Board (BSEB) issued a resolution to implement this exemption but later refused to extend it to units with low‑tension (LT) connections, forcing the appellants—K.D. Industries and others—to pay the charges. The High Court dismissed the writ petition challenging this refusal. On appeal, the Supreme Court examined whether the policy’s exemption covered LT connections and whether the Board was bound by the Government’s direction. The Court held that the Government had clarified that the policy made no distinction between LT and high‑tension (HT) connections, and a conjoint reading of policy paragraphs 9.4 and 9.6 confirms the exemption applies to both. Consequently, the Board’s refusal to grant exemption to LT connections was illegal, and the appeals were allowed, directing the Board to refund the excess charges.

Issues considered

Whether the exemption from minimum guarantee charges under the Bihar Industrial Policy applies to low‑tension industrial connections.
Whether the State Electricity Board is bound to implement the Government’s direction under Section 78‑A of the Electricity Supply Act, 1948.
Whether the Board can lawfully limit the exemption to high‑tension connections despite the policy clarification.

Legislation cited

Electricity (Supply) Act, 1948s. 78-A

Subjects

Electricity Supply ActSection 78-Aminimum guarantee chargelow tension connectionhigh tension connectionindustrial policyexemptionBihar State Electricity BoardSupreme Court

Judgment

......
A K.D. INDUSTRIES
v.
!
BIHAR STATE ELECTRICITY BOARD AND ORS.

MARCH 21, 2001

B [S. RAJENDRABABU AND S.N. VARIAVA, JJ.]

Electricity Supply Act, 1948 : Section 78-A.

Electricity Tariff-New industrial units-Minimum Guarantee Charges-
Exemption from payment of-State Governmellt in its Industrial Policy granted
c exemption to new industrial units from payment ofminimum guarantee charges-
State Electricity Board passed a resolution granting such exemption-Jn an
earlier writ petition State Government clar~fied that there was no distinction
between low-tension and high-tension connection in the matter of exemption-
Accordingly, new industrial units set up and low-tension connection given-But
.
D Board refused to grant exemption-Validity of-Held: In view of the Govern-
ment's clarification it is not open to contend that exemption did not apply to
low-tension connections-Whilst granting exemption the Government has not
specifically excluded low-tension connections-Board having accepted Gov-
ernment's direction is bound to grant exemption to both low and high-tension
E connections-Hence, refusal to grant exemption from payment of minimum +
guarantee charges to low-tension connections, illegal.

The State Government in its Industrial Policy issued a direction
under Section 78-A of the Electricity Supply Act, 1948 granting exemption
to new industrial units from payment of minimum guarantee charges.
F Accordingly, the respondent-Board passed a resolution granting exemp·
tion from payment of Minimum Guarantee (Minimum Base Charge) in +-
respect of new industrial units,

During the hearing of an earlier writ petition the State Government
had clarified that the Industrial Policy did not make any distinction be-
G
tween high-tension and low-tension connections, The appellants, therefore,
had set np new industrial units and were given low-tension connections.
However, the appellants were forced to pay minimum guarantee charges. ~-

The writ petition filed by the appellants was dismissed by the High Court.

H On behalf of the appellants it was contended that a conjoint reading
560
.> K.D. INDUSTRIES v. BIHAR STATE ELECTRICITY BOARD 561
A of paragraphs 9.4 and 9.6 of the Industrial Policy showed that the exemp- A
tion was for high-tension as well as low-tension connections and, therefore,
denial of exemption to the appellants was illegal.

On behalf of the respondents it was contended that the Govern-
ment's Industrial Policy did not grant exemption to low-tension connec-
!ions. B

Allowing the appeal, the Court

HELD 1.1. The Government had clarified that the lndnstrial Policy
did not make any distinction between high-tension and low-tension con-
nections. Therefore, it is now not open to contend that the Government's c
Policy did not grant exemption to low-tension connections. [564-E-F]

1.2. Even otherwise the provisions of paragraphs 9.4 and 9.6 of the
Industrial Policy have to be read together. A conjoint reading makes it
clear that the Government is aware that there are low-tension connections
D
and high-tension connections. Whilst granting exemption the Government
is not specifically excluding low-tension connections. Even in Paragraph
9.6, when the Government wants to refer to low-tension connections it
specifically does so. Thus the only conclusion can be that if the Govern-
ment wanted to exclude low-tension connections they would have specifi·
cally done so. [564-G-H] E

2. The State Electricity Board is accepting the Government's direc-
!ions given to it under Section 78-A of the Electricity Supply Act, 1948. In

... . its Resolution it is granting exemption from payment of minimnm guaran-
tee (minimum base charge). The respondent is well aware of the difference
between low-tension connections and high-tension connections. If, as is
claimed, the term "minimum guarantee charge'' were not used for high-
F

tension connections, then they wmdd not have used that term at all in the
Resolution if they wanted to restrict the exemption to high-tension connec-
ti.ons. Advisedly they have used both the terms "Minimum Guarantee"
and "Minimum Base Charge". This itself shows that the exemption ap- G
plied to both types of connections. The respondent has not stated that such
-"' an exemption would not be granted to low-tension connections. The re-
spondent having adopted the direction of the Government is bound to
comply with those directions. So long as the other conditions of the Policy
decision are complied with the exemption has to be for both high-tension H
1

562 SUPREME COURT REPORTS [2001] 2 S.C.R.
A connection as well as low-tension connections. [566-C-E]

Ester Industries Ltd. v. U.P. Stale Electricity Boani, [1996] 11 SCC 199,
referred to.

CIVIL APPELLXI'E JURISDICTION: Civil Appeal No. 2247 of2001.
B
From the Judgment and Order dated 10.5.2000 of the Patna High Court
in L.P.A. No. 1631 of 1999.
WITII

Civil Appeal No. 2248 of 200 I.
c Ajit Kumar Sinha and S.D. Sanjay for the Appellant.

V.R. Reddy and Navin Prakash for the Respondents.

The judgment of the Court was delivered by

D S.N. VARIAVA, J. Leave granted.

In these Appeals the only question utged before us is whether low
tension industrial users are entitled to exemption from payment of minimum
guarantee charges as per the Industrial Policy framed by the Government of
Bihar in 1995. In the Appeal arising from SLP 17210 of2000 other questions t
E are also raised. However, they are not pressed before us.

The relevant portions of the Industrial Policy read as follows:

"9.4 PRJORITY TO INDUSTRJAL CONNECTION

F With a view to facilitating timely start up of an industrial project,
over-riding time bound priority would be given to L.T./H.T. In-
dustrial connection.

9.5 POWER TARJFF

G Power tariff would be reviewed and simplified to provide power
at tariff comparable with neighbouring states to industrial units.

9.6 POWER INCENTIVE

exemption from payment of minimum guarantee charge for new
H industrial units having connected load upto 500 KVA"
K.D. INDUS1RIES v. BIHAR STATE ELECIRICITY BOARD [S.N. VARIAVA, I.] 563
exemption from Electricity Duty for 5 years on captive power A
generation upto 25 MW for own consumption to new industrial
units.

loads upto 99 H.P. to be made available on L.T. for new
connection to industrial units.
E
special arrangements for expeditious clearance for rebate for
non supply of power to industrial undertakings."

Pursuant to this Policy the Respondents passed a Resolution dated 11th
October, 1996. The relevant portion reads as follows: C

"The Board in its 443rd meeting, vide Resolution No. 6917, has
decided to implement the directive issued by the State Government
under Section 78A of the Electricity Supply Ac~ 1948 by Resolution
No. 3493 dated 3.9.1996 of the Department of Energy. Accordingly,
the following benefits will be given to the consumers: D

I. Units which come into production during 1.4.1993 to 31.8.2000
and the defined. units undertaking expansion/diversification,
whose coil'lected load is upto 500 (five hundred) KVA, are
exempted from payment of Minimum Guarantee (Minimum
E
Base Charge) for five years from the date of connection."

The Appellants in both these Appeals have ~t up industrial units in
the State of Bihar. They have been given low tension coimections. However,
in spite of ~e policy decision granting exemption froni payment of minimum
guarantee charges they were forced to pay minimll.'Il guarantee charges. F
Therefore, they challenged the levy of minimum guarantee charges. Their
Petitions came to be dismissed by the single Judge of the High Court.
Mis. K.D. Industries also filed an Appeal which has been dismissed by the
Division Bench of the High Court at Patna. The Appellants have thus filed
these Appeals. G

Mr. Sinha submitted that Para 9.4 shows that the Policy applies both
to low tension as well as high tension industrial connections. He submitted
that Para 9.6 had to be read with Para 9.4. He submitted that a joint reading
of the two paragraphs shows that the exemption is not just for high tension
connections but also for low tension connections. H
t

564 SUPREME COURT REPORTS [2001] 2 S.C.R.
A

-
On the other hand, Mr. Reddy submitted that low tension connections
are always referred to in terms of Horse Power (H.P.), whereas high tension
connections are always referred to in terms of KVA basis. He submitted that ·
the Govermnent' s Policy granted exemption, from payment of minimum
guarantee charges, only to connections having load upto 500 KVA. He
submitted that this itself made it clear that it was only iu respect of high
B
tension connections. He submitted that this was further clear from fact that
Para 9.6 itself provides that load upto 99 H.P. was to be made available on
low tension for new connections. He relied upon the Tariff Notification issued
by the Bihar State Electricity Board. From this he pointed out that in respect
of high tension connections "minimum base charge" is collected, whereas
C from low tension connections a "minimum guarantee charge" is collected.

We have considered the submissions of the parties. The question which
arises for consideration is whether the State Govermnent, in its policy
direction, was granting exemption from payment of minimum guarantee
charges only to high ·tension connections or it was granting exemption even
D to low tension connections. The Govermnent would be the best party to
answer this question. We have been shown an Order dated 10th September,
1997 in C.W.J.C. No. 3241 of 1997. 1n this case also the question was whether
uoder the policy the low tension connections were exempted from payment
of minimum guarantee charges. The Court called upon the Additional Ad-
E vocate General to seek clarification from the Govermnent. The Govermnent
then clarified that the Industrial Policy did not make any distinction between
high tension and low tension connections. The Govermnent clarified that
subject to other conditions of the Policy all uoits having connected loads upto
500 KVA were covered by the exemption. The Govermnent having so
clarified it is now not open to contend that the Govermnent's Policy did not
F grant exemption to low tension connections.

Even otherwise, in our view, the provisions of Paras. 9.4 and 9.6 have
to be read together. A conjoint reading makes it clear that the Govermnent
is aware that there are low tension connections and high tension connections.
Whilst granting exemption the Govermnent is not specifically excluding low
G
tension connections. Even in Para 9.6, when the Govermnent wants to refer
to low tension connections it specifically does so. Thus the only conclusion
can be that if the Govermnent wanted to exclude low tension connections they
would have specifically done so. The words used in the policy direction are
"minimum guarantee charges". Thus, even on basis of Mr. Reddy' s submis-
H sion this must apply to low tension connections. We see no substance in the
K.D. INDUSTRIES v. BIHAR STATE ELEC1RICITY BOARD [S.N. VAR.JAVA, J.] 565
argument that low tension connections are only referred to io terms of HP. A
We have seen the Tariff Notification issued by the Respondents. The Tariff
Notification contains conversion tables for converting Kilowatts into Kilo-
volts, Kilovolts ioto Horse Power, Horse Power ioto Kilovolts etc. Therefore,
these are convertible terms. This is clear from the Tariff Notification which
inter alia provides as follows:
B
"WW TENSION INDUSTRIAL AND MEDIUM POWER

(SYMBOL: LT1S)

I. Applicability:
c
(i) For use of Electrical motors and other industrial appliances
and medium power of less than 80 HP. If consumer desires to take
more than one LT connection in the same premises the total installed
load shall be below 80 HP. The use of Arc Welding Set, Electric
Motors in Public Water Works, Flour Mills, Oil Mills, Dal Mills, Rice
Mills, Atta Chaki Hullers, Spellars, etc. will also be covered under this D
category.

(ii) Existing consumer having load of 80 HP and above will be
charged at rates applicable to HTS-I." (Emphasis supplied)

Thus it is to be seen that low tension conoections haviog loads upto 80 Horse E
Power and above remaio low tension conoections but would then pay charge
at rates applicable to high tension conoections. It is this 80 Horse Power
which has, io the Policy, been increased now to 99 Horse Power. Even though
they pay rates applicable to high tension connection, they are referred to in
terms of HP. F
Faced with this situation Mr. Reddy submitted that the Respondents had
not fully accepted the Government Policy and had by their Resolution dated
• t
11th October, 1996 only granted exemption to high tension conoections. He
submitted that this is made clear by the fact that io the Resolution the words
used are "minimum base charge" and "for conoected load upto 500 KVA". G

Mr. Reddy relied upon Section 78A of the Electricity Supply Act, 1948
and submitted that Government directions were not necessarily biodiog on the
Respondents. He submitted that the Respondents could dispute the direction
-~. issued by the Government. He relied upon the case of Ester Industries Ltd.
H
566 SUPREME COURT REPORTS [2001] 2 S.C.R.
A v. U.P Stale Electricity Board, reported in (1996) 11 SCC 199, wherein it
is held that the State Government's policy direction for grant of developmen-
tal rebate at a specified rate to newly set up industries was not binding on
the State Electricity Board and that the High Court could not in exercise of
powers under Article 226 direct the Board to implement such direction. He
submitted that in this case the Respondents had chosen not to fully accept
B
the policy direction of the State Government and had accepted it only in
respect of high tension connections. He submitted that the High Court was
right in refusing to grant any relief to the Appellants.

We see no substance in this submission. The Board is accepting the
c Government's directions given to it under Section 78A of the Electricity
Supply Act. In its Resolution it is granting exemption from payment of
rllinimum guarantee (minimum base charge). The Respondents are well aware
of the difference between low tension connections and high tension connec-
tions. If, as is claimed, the term "minimum guarantee charge" is not used for
high tension connections, then they would not have used that term at all in
D the Resolution if they wanted to restrict the exemption to high tension
connections. Advisedly they have used both the terms "Minimum Guarantee"
and "Minimum Base Charge". This itself shows that the exemption applied
to both types of connections. Respondents have not stated that such exemp-
tion would not be granted to low tension connections. In our view, the
E Respondents having adopted the direction of the Government are bound to
comply with those directions. So long as the other conditions of the Police
decision are complied with the exemption has to be for both high tension
connections as well as low tension connections.

In this view of the matter, we set aside the Orders of the High Court
F and allow the Appeals on this point. It is not disputed that Appellants are
otherwise entitled to exemption. Thus Respondents must now repay to the
Appellants amounts received as Minimum Guarantee Charges, which are in
excess of payments due for actual consumption. Such refund to be made
within six weeks from today. In the circumstances of the case, there will be
*
G no Order as to costs.

v.s.s. Appeals allowed.