Holding

The levy of fuel surcharge on the specified consumer categories is within the statutory authority of the Bihar State Electricity Board under Section 49 of the Electricity (Supply) Act, 1948 and does not contravene Article 14.

Summary

The Bihar State Electricity Board, exercising its power under Section 49 of the Electricity (Supply) Act, 1948, issued a 1979 tariff notification that imposed a fuel surcharge on certain categories of industrial and railway traction consumers while exempting domestic, commercial and irrigation users. The appellants, industrial consumers, challenged the surcharge as arbitrary, discriminatory and violative of Article 14 of the Constitution, arguing that the Board’s classification was unjustified and that the surcharge should only recoup actual fuel costs. The Supreme Court held that the Board’s classification of consumers and the levy of a fuel surcharge are expressly authorized by Section 49, and that the surcharge serves a legitimate purpose of offsetting increased generation and purchase costs, thus satisfying the test of reasonableness. The Court rejected the contention that the Board must consider the financial capacity of each consumer, noting that uniform tariffs are to be applied within each class. It also dismissed the claim that the Board was required to issue provisional surcharge bills, finding no statutory mandate. Consequently, the Court affirmed the validity of the 1979 and 1981 tariff notifications and dismissed the appeals and special leave petitions.

Issues considered

The legality of the fuel surcharge imposed under Paragraph 16.7 of the 1979 tariff notification.
Whether the classification of consumers for surcharge purposes violates Article 14 of the Constitution.
Whether Section 49 of the Electricity (Supply) Act, 1948 authorises differential tariffs and surcharges.
Whether the Board must consider the financial capacity of individual industrial consumers in tariff fixation.
Whether the Board is obligated to issue provisional surcharge bills during the financial year.

Legislation cited

Electricity (Supply) Act, 1948s. 49, s. 59, s. 63, s. 66A
Indian Electricity Act, 1910

Subjects

electricity tarifffuel surchargeconsumer classificationArticle 14public utilitySection 49price fixationarbitrariness

Judgment

• ROHTAS INDUSTRIES LTD. &,ANR. ETC.

v• ·A

. THE CHAIRMAN; BIHAR-STATE ELECTRICITY·
' .
BOARD AND OTHERS -

March 2, 1984

'-. - [D. A. DESAI AND V. BALAKRISHNA ERADi, JJ]

,,Efectricity (SU]Jply) Ac1,-·-194a2s. -49-Electricity .Board divided corisume;s
• into various cateiories-_Co~sunzerS of only those cafliories ~/ready enjoying conces--
sion in general tari..tr as incentive to esrab/is/;·;ndl;Strjes in the State asked io pay
fuel surchatge-;-Whether classification of consun1ers and levy_ of fuel ~su~char;e o,n - .a
some consumers only qrbitrary and violqtive of Art . . 14 of the Constit~tion. ,

. -... Section 49 of tlie. Electricity (Supply) Act, 1948 provided for the
.sale of" electricity by the electricity. Board lto any- pefson · not being· a
liceflsee · and to fr.ime. uniform. tariffs . for the purposes of such . supply "
having. ~egafd~ ·.. inter alia ~ to - the_': ii.at~re of the.··. supply,. ·. the
purPose1.for which the. supply_ is required· and other_. relevant factprs,
In exercise ofthc po_wef-s conferrCd ·by s. 49.'.'ofthe Act, "the responden~ Bihar
0

State ElcciriCity Board bad classified the Consumers irito ten· catego~ics and had
. ,_been, from timt;. to time, issuing notifiC.ltiOns· :fixing the tariff 'and the tefms and
conditions· for the ~uppJy of-- electricity) .ro~those consulners. With a· vieW to
-encouraging the tst~blishment of industrieS in the State, the general tariff r3:te f

applicable in respeCt of high tension supply to industries and factories had been
fixed at rates which were muc;h lower ~'hen ·comparea: to thoSe applicable to other E
.·__ -tyPes of consumers. On 6.4. 1979 the_· respop.d_en_t Board, in. sui)ers_ession of ~ts
earlier notification fixing the tariff, isSUed a notifiCation revising the tariff for all
categories of consumers served by it. Para 16.7 ·of the .-said Tariff Notification
provided that the consumers of low tension indu-stiial service~ high tetision ser·
vice, eXtra high tension service, and. railway traction Service shall be liable to pay
,fuel surcharge'. at a rate to be determined.every year J~ acCordance with lthc fc;:>r• -.
mula set out in sub-para 2 of that paragraph. The appelJants who had entei-ed F
into agreements with the respondent Board for the supply of high tension electric
. current fcrr their factories. arid \vere admittedly nOt lice"nsees, filed writ petitions
in the High Cou;'.t thaIIenging the levy. of fuel surchafge on the grouned that it \
; was arbitrary and devoid of legal sanction.· A Division Bench of the High Court
.di!missed' the writ petitions·. '-Hence these, appCals -and- ·special leaVe petitions.·
: The appCnanu~·charge of discrimination was_ based On the_- groulld that only
. ~nsumers of low tension industrial service high tension service~ extra high ten-·
G:
~ s1on serviCe, and railway traction service had been singled out for being subjected
·':to a Jevy of surcharge, '?'.'bile consumers of -elec-tricity for. dome'stic, commercial
-- and irrigation purposes were left unaffected by any such burden:
· .... 'Dismissing the appeals.and special leave petitions,.- · .. _
- . - .- - . - . -

HELD;It Is ;,ell-established tba; where a corporation is an . instr;,,;,eniallty H
. or an age~cy of Government it would, in the exorcise of Its powers and function,
- ~- . ;"
.. •

. . R.
60 . SUPREME COURT JlFPORrS [1984] 3 s.c ..•

be
subject to the same c.Onstitutlonal or public law &Hmit~tioa~ ·as apply -to the
Government and the principle of law inhibitin& arbitrary ·Action by Government ·
would apply equally where such a corporation is dealing with the public, Whether
by way of giving jobs or entering into relationship with any person in any
manner.it likes according to its sv. eet will. The acts of such a. coiporation must
1

be in conformity with so~e principle which · ineets the test of reaso.nableness
· and relevence. (71 F-H] - ' ·
B
•
-The-contention that the imposition ·or fuel surcharge under paragraph :16.7
of the 1979 tariff notification is arbirary and violative of Art. 14 of the Cons ti tu~
- tion has no fofce. -The BOard was Perfectly within its rights- in deciding to
---r.estrici _the levy of fuel suriJiai&-e to those categories of consumers who were
enjoying the-benefit of.a concession in the general rate and ill sparing Smaller
'c. \type of consumers such as tile agricultural irrigation and commercial consumers
frdm being subjected to that burd~ny in view of the fact that they were already
. being subjected to a basic _levy at.s-Obstantially higher rates. The true consequence /
of the action taken by the Board is only to effect a reduction in the quantum of
· concession·that was being enjoyed by· the consumers b'elonging ·to the industrial -
-and railway tractiqn categories. · The appeltantS: had no case that any illegality .r
, was involved in treating the industrial consumers, as a separate cla:Ss 'and grant.. ·
··ing them the benefit of a preferential treatment for -the purpose of fiXing the
, basic rate of levy for supply of electricityJ _ A ·classification. which is legally .
·-valid and permissible for the grant of a concession in the basic rates will equally
~-~bold good for the purpose of a subsequent scheme of distribution of the. burden
~in the forrri of fuel surcharge. A- clasification of "these bulk . consumers has a
·-rational nexus with the_ object and purposes of the levy of surcharge.
[65 G, '67 B-D, 66-G, 67 D·F]

.. The arg\lment that" levy of fuel surcharge can only be" for ·the purpose of
·:recouping the" amounts actually ~aid by the Board by way of 'fuel surcharge• to
the D.V.C. and the U.P. S_tate Electricity Board for the quantities of energy
•p·urchased by the Board fro~ these sources and the extra cost that the Board had
~actually to incur on fuel consumed in those - two generating stations at Patratli
'a.Iid Barauni has Ilo force. · From the counter affidavit filed on behalf of the
:-Board, it is sceii that in respe_ct of the. increase in the Cost of production of
· :eleCtricity in the two generating _stations of the Boards the fuel surcharge has
~taken into- account only that part of the increase in cost which is relatable to.'the
1tiCieased price of the· coal and oil i.e. fuel aloD.e. ·In r~spect of the energies
~pUrchased by the Board from outside sources, narr.ely, ¢.e Damodar Valle}'
~COti}oration and .the U.P. State Electricity" Board, the increase in cost per unit
·'incurred by the' Board has been included in the contPutation of the fuel surcharge.
·.Though the nomenclature giv,en to the levy is "fuel surcharse0 it is really. a
~~ufcharge levied to meet the increased cost of genetatiOn 3.nd purchase of electri·
'city and this is made absolutely clearly in the formula given in para 16.7.2. ·• . '
. [67 H," 68 A-Fj

There is no forc.e in the cOntention that the words "lncreise in the average
unit rate of purchase of energy•' used in Ct below paragraph 16. 1.i should be
i"~tefpreted as 'taking.their colour froin the cOntents of ·parapraph 16.7.3. From
I - ,a_ reading of these proviSions it· is abundantly clear that the entire increase in
I ·costs incurred in the purchase of energy. froin the D.V.C. an.d the U.P. State
' : \,... -
I
I
'I
..
',
ROITTAS INDUSTRiES v. BiHAR ·sr. ELEC. BOAAD 6J
El.ectricity Board has ._-to go into the computation of the surcharge leviable under A
paragraph 16.7. Thece is no ambiguity whatever in thf: ,words used in Cl so as
·-to require the court__to. take_ light from par3graph .16.7.3 for the purpose·o~
understanding their scope and meaning. [69 B-D] .. ·
.... ~ .
The contention that the financi~l capacity of individual industrial COnsumers.
bad not been taken into account while fixing the revised tariff is devoid of forCe. -
It is not contemplated by section 49 or. any of the other p.rovisions· of the Act: B
that as amongst consumers talling within' a specified category.different rates are to . ~-...
be charged depending upon the financial capacity of the· pa~ticular consumer to!·
Pay~ On the other band, the.very core of the .scheme of section _49 is that the
_tariff should be uniform in r:espect of each class or Categor~. {70 H,,7~ A~B] ,
·- It
is found.i-hat notwithsta.nding the mandaio!y· provision contained in s.59
of the Act obliging the Board to carry its operations and adjust its tariffs in such
a;w,iy as to ~nsure that the total revenues e3!ned in an,, year of amount shaU,
after m~ting all expenses properly chargeable to revenue leave. such surplus as.
the State Government may,- frOm time to time, specify. the Board has-been selling-.
ener&y at rates which are lower than the actual post insurred by it per unit of
production. Such being the factual situation, there is absolutely -no basis fof .
. the contention that the tariff fua~ion .effected by the .Board ·sUffers from the ·vice
of arbitrariness and is liable to be jnterfered with by the Court on that ground. ·
.. ' . .. . , (73 B,.72 A·C, '73 q • : ~J
"'
:_ CiVIL APPELLATE JURISDICTION : Civil Appeals Nos.. 2855-56:
of 1982. ·

; -\. Appeals by special leave from the Judgment · and Order dated '
I •
the 9th April, 1982 ofthePatna High Court in C.W.J.C. No; 3503/« E
81 & 504 "of 1982. - ·· •

·WITH
. ;
Civil Appeals Nos; 2857-58 & 2859-60 ?f 1982
·Appeals by Special leave from the.Judgment and .Order dated F
''1
the ·9th/10th February, 1982 of the Patna High Court in C.W.J. ·c.,
Nos. 1026/82; 1855/81, .1516/81 (R),
~ , .
1355/81
.
(R)., ., . .

( AND ,
' 1982. ·
Special Leave Petition (Civil) No. 2904. of
/

G
t}•
·From the. Judgment and Ord~r: dated the'8th• December,·1981 ···
· of the Patna High Court in Civil· Writ . Jurisdiction Case No .. 1237 ·
of 1981.
Dr. Shankar Ghosh, Parveen Kumar, · Padam Khaitan, C.A. H
.Vaidyanarhan' N.R: Khaitan for the Appellants in. C.A. 28?$-
56/8~.
. .
6Z SUPREME COURT REPORTS [1984) 3 s.c.R.
A.K. Sen, Padam Khaitan, Parveen Kumar and N.R. Khaitan
for the Appellants in C.A. Nos. 2857~58/82,

C.S. Vaidyanathan, Anil Kumar Sharma, and Mr.. Parvee11
Kumar for the Appellants in CA. Nos. 2859-60/82. ·
B K.K. Venugopal, C.S. Vaidyanathan fof the Petitioner in SLP
Nos. 2904/82.
. L.N. ?inha, Att. General, Rqm Balak Mehto, Pramod Swaru"'
and P.P. Singh for the Respondents in all the appeals & SLP.
The Judgment of the Court was delivered by
c
BALAKRISHNA ERADJ, J. These appeals (by special leave) and
the Special Leave Petition involve common questions concerning the .
validity. of the supplementary bills issued to the appellants by the ·
!st respondent-Bihar State Electricity Board-~r "fuel suichllrge"
as per the revised tariff dated 1st April, 1979, and hence they were
.D' heard together. Having regard to the fact that by reason of inter-
locutqry orders passed by this Court, the realisation of large
amounts demanded from the appellants by the respondent by way
of charges for electric energy supplied by it stood stayed and the
consequent urgency in passing final orders in these cases, as soon as
the hearing was completed we. passed the ~ollowing order announcing
the conclusion reached by us :

"All these Civil Appeals and Special Leave Petition are
dismissed wfth costs in each case. All interim orders made
in each of these matters at various staj!es ar~ ·vacated.
Reasons wlll follow".
We now proceed to state the f' reasons in support of the· said con-
clusion .
•
.The Bihar State Electricity Board hereinafter called 'the
Board') is incorporated under Section 12 of the Electricity (Supply)
G Mt 1948 (hereinafter referred to as 'the Act'). The general powers
and duties of.the Board are set out in Sec•iou 18. Thereunder the
Board has the duty, inter alia, to arrange for the supply of electri-
city that may be required within the State and for the transmission
and dfstribution of the same in the most efficient and · economic
manner, with particular reference to those areas which are not, for
B the time being, supplied or adequately supplied with electricity.
Se91ion 49 of the Act makes provision for the sale of electricity by
the Board to peI&onl!J_()the~ than the licen&ees an\! to fra!lle unif9rm
,
•

.. ROIITA.S iNDUSTRiES v. BIHAR ST. ELEC. BOARD (B. Eradi, J.)

triffs for the purposes of such supply. That section is in the follow· Al
Ing a terms:
"49. .(!) 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 'iiuch terins
'and conditions as the Board thinks fit, and.may for the pur-
poses of such supply flame uniform tariffs.

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

(a) the natufe of the supply and the purposes for
which it is required ;

(b) the co-ordinated development of the supply and
distribution ortelectricity within the State in the
most, efficient and economical manner, with
particular reference to such development . in areas
not for the time being served or· adequately
served by the licensee ;

(c) the simplification and standardisation of methods E•
and rates of charges for such supplies ;
(d) the extension and cheapening of supplies or
· electricity to sparsely developed ateas.

(3) Nothing in the foregoing provisions of this
section shall derogate from the power-of the Board, .
if it considers it necessary or . {lXpedient to fix
different tariffs for the supply of electricity to any
person not belng a licensee, having regard to the
geographical position of any area, the nature of the
supply and purpose for which such supply is required
and any other relevant factors.

(~) In fixing the tariff and terms and cci~ditlons for
the supply of electricity, the Board shall not show
••
undue prefe1ence to ·any person."
ff;
In exercise of the powep conferred by the above section, the ·
D9afd ~S been, ffO!ll 'ime to tjrne, jssUin¥ UOtifi~ations jixing the
•

64 SUPREME COURT REPORTS [1J84j :f S\C.R.

tariff and the terms and conditions for the supply of electricity _to:
the various classes of consumers. In supersession of the tariff rates
till then obtaining under -an earlier notification, tJ:te Board by its
"tariff notification 1979" published in the Bihar Gazette Extraordi·
nary No. 3'$11 dated 6.4.1979, iSsued a revised tariff for all categories
of consumers served by it. The said tariff was to take effect from
1st April, 1979.

The appellants are companies having factories in different parts
of the State to Bihar and they have entered into agreemepts with
O· the Board for supply of high tension electric current. The agree·
ment~ so executed are in a standard forl'.1 containing substantially
Identical terms. Annexnre I in the Writ Petition C.W.J.C. No. 1855/
81 out of which -C.A. 28 58/82 arises in a copy of the agreement
entered into by M/s Usha Martin Black (Wire Rods)- Ltd. with the •
Board on 18.8:1961. In clause 4 of _th¥gteement, it is _stipulated
I>' that the consumers shall pay to the supplier (Board for) the energy
supplied· and registered· by the meters "at the rates from time to
time in force and paid-by similar consumers". It has been further
provided in clause 11 .that the agreement should be read and cons-
trued as subject in all· respects to the provisions of the Indian
Electricity Act 1910 and the rules for the time being in force there-
under. After the introduction of the revised tariffs, 1979, all the
appellants continued io ·draw and consume high tension electric
energy in their factories.

Para 16.7 of the Tariff Notification, 1979, provides that the
consumers of low tensfon indu~trial service, high tension service,
extra high tensioh service, and railway traction service shall be
liable to pay 'fuel surcharge' at a rate to be determined every year
in accordance with the formula set ,_out iµ sub-para (2) of the
said paragraph (16.7.2). This levy of fuel surcharge was in addition
to the other charges specifiecl in the tariff schedule. J?uring the
cour~ of the year 1979, fuel surcharge a a provisional rate of one

• paise per unit was initially levied and that was_ subsequently increa-
sed to three paise per unit, again on a provisional ba~'s. In the
final bills issued for the financial year 1979-80 the fuel surcharge was
levied at 6.242 paise per unit. Along with the -finaJ bill of fuel
,
H surcharge for .the year 1979-80, a provisional Qjll of fuel surcharge
for the year 1980-81 was also issued to the- appellant companies
!icmanding paymeqt Qf ~qrcharge at the vate of ei$ht -paise per unit
'

ROITTAs iNDusrRiEs v. BIHAR sr. ELEC. soARD (B. Eradi, J.)

• A
thereupon· the appellants filed Writ Petitions in the High
Court of Patna contending that the provision contained in Paragraph
16. 7 in the Tariff Notification of 1979 for the levy fuel surcharge
is devoid of legal sanction and is arbitrary and void. The charge of
arbitrariqess leveUed against the .imposition of fuel surcharge was
based on the ground that only consumers of low tension industrial B
service, high tension service, extra high tension service, and railway
traction service had been singled out for being subjected to a levy
of surcharge, while consumers of e\ec~city for domestic, commer-
cial and irrigation purposes were left unaffected by any. such burden.
A futher contention was also ralse.d that the bills issued to the. peti•
. tioners were not even' in accordance. with the provisions of the
tariff notification and the demands made against thei!ppellants were,
in excess of what was warranted even by the impugned· notification.
... Eight writ petitions, of which C.W.J.C. 1237 of 1981, filed by M/s.
Shriram Bearings Ltd., Ranchi (Petitioner in SLP No: 2904/1982)
was apparently treated by. common con.sent as the main case, and
were heard together as one single batch by a Division Bench of the D
High Court. By a detailed and well-considered judgment, the Divi-
sion Bench rejected all the contentions ra.ised by the petitioners and
dismissed the Writ Petitions after recording an undertaking given
by the poard that certain small amounts which were found to have
been charged in the bi Us In excess of what was payable by the
E
appellants- pn a correct computation of the surcharge would be
adjusted in the next bills to be issued to them. Writ. Petitions sub-
sequently filed in the High Court by the appellants in the other
appeals were lafer dismissed in limine by separate' short judgments,
following the decision of the Divisional Bench in C.W.J.C. 1237 of
1981. Hence these appeals and special leave petitions by the F
appellant companies.

At the outset, we may dispose of the contention urged on
behalf of some of the appellants that the.levy of fuel surcharge under
the impugned tariff notification· (parapraph 16.7) is discriminatory
G
. and hence violative of Articl~ 14 of the Col).stitution. Sub-section
3 of Section 49 ~xpressly authorises the Board to fix different tariffs
for the supply of electricity to any "petson not being a licensee,
having regard, inter alia, to the nature of the.supply, the purpose for
. which the supply is requfred and other relevant factors. The power
to classify. the c<>nsumers into di!l'erent categories and to fix diffren- ,H

•
SUPREME COURT REPORTS [I 984] 3 S.C.R,
A
tial tariffs has thus been conferred on the Board by the Section
itself. The Constitutional -validity of this Section has been upheld
by this Court in Maharashtra State Electricity Board v. Kalyan
Borough Municipality & Another(').

B The expression "licensee" means a person licensed under Part
II of the Indian Electricity Act, 1910, to supply energy or a person
who has obtained licence under Section 28-of that Act to engage in
the business. of supplying eitergy through definition in Section 2 (6).
Admittedly, the appellants before us are not licensees. They are
c_O'!lsumers receiving high tension supply to their factories. For the
purpose of tariff fixation, the Board hrrs classified the consumers
into 10 categories, viz., "domestic", "commercial (i)", commercial
(ii)", "street light", "irrigation",- "light tension industrial" (small
scale industrial upto 100 h.p.), "11 k.v. h.t:s.", "33 k.v.h.t.s.", "132
k.v. h.t.s." and "railway tractiol) (25 k.v.)". It is seen from the
materials on record for us that the industries between themselves
D consume nearly 65% of the total quantity of energy supplie<l by the
·Board. Apparently with a view to encouraging the establishment of
industries in the State, the gener~l tariff rate applicable in respect
of high tension supply to industries and factories has ·been fixed at
rates _which are much lpwer when compared to those applicable to
other types of consumers. While the general rate applicable for·
E supply of high tension electric energy for industries of the class to
· which the appellants belong was 22 paise per unit, consumers belong-
ing to "commercial" categories were charged at rates ranging bet·
ween 48 paise to 58 pais_e per unit, "agricultural" consumers at 29
paise per unit, "low tension" consumers at 34 to 38 paise per unit
and "domestic" consumers at rates ranging between 38 to 43 paise
F
per unit. Thus, in the fixation of th~ general tariff rate, a substan-
tial concession has been shown in favour of .industria 1 low tension
and high tension consumers. The appellants· have no case that any
illegality was involved in treating the industrial consumers, as a
separate class and granting them the benefit of a preferential treat-
G. ment for the p1irpose of fixing the basic rate of levy for supply of .
electricity. The stand taken by the Board is that it was found
absolutely ne~essary at the time of the revised traiff fixation effected
in 1979 to augment its revenue by levying of the additional fuel
surcharge in order to offset the heavy increase in expen<liture and
after taking into account all relevant facts and circumstances, it was-
H decided to distribute that burden amongst the privile$ed class of

(I) l1968]}_S C.R.. 137.

•
'
ROTHAS iNDUSTRiES. v. BiHAR ST. ELEC. BOARD (B. Eradi, J.) 67

consumers; namely those belonging to categories of low tension A
industrial service, high tension service, extra high tension service
and railway traction service. Even after taking into account the fuel
s.urcharge so levied under 1979 tariff, the rates applicable to 'high
tension consumers like the petitioners range between 40.31 paise al),d
58.80 paise per unit only, while the coi;imercial (ii) consnmer has to B
pay 71.33 paise per· unit and even the domestic coil.sumer has to pay
48·p~ise per unit. The position that obtains under the 1981· tariff
which also has been challenged by some of the appe!lants is sub-
stantially similar. In our opinion, the Board was perfectly within its
rights in deciding to. restrict the ·levy of fuel surcharge to those
categories of consumers.who were enjoying the benefit of a conces-
sion in the general rate and in sparing smaller type of consumers
such as the agricultural, irrigation and commercial consumers from
being subjected to that burden, in view of the fact that they were
already being subjected to a basic levy at substantially higher rates.
The true consequence of the action so taken by the Board is only to
effect a reduction in the quantum of concession that was being D
enjoyed by the consumers belonging to the industrial an.d railway
traction. categories. A classification which is legally valid and
permissible for the grant' of a concession in the basic rates wBI
equally hold good for the purpose of a subsequent scheme of dis-
tribution of the burden in.the form of fuel surcharge. In this con-
text, .it is also relevant to remember that thdevy of surcharge was
necessitated by reason of the extra expenditure which the Board had
to incur in the generation of electricity in the two power stations run
by the Board and in the. purchase of power from the two outside
sources, namely, the D.V.C. and the U.P. State Electricity Board
and 65% of the total quantity of energy supplied by the Boatd is
F
consumed by the industrial and railway traction consumers. A
classification, of these bulk consumers has a rational nexus with the
object and purposes of the levy of surcharge. Having regard to all
these facts and circumstances, we find 'no substance in the conten-
tfon ad~anced by some of the appellants that the imposition of fuel
surchargt under paragraph 16.7 of the 1979 tariff is arbitr~ry and
violative of.Art. 14 of the Constitution.

The next atgument advanced ori behalf of the appellants wag
that even if the Board is legally entitled to levy the fuel surcharge,
that can only be for the purp()se of recouping the amounts actuaily
paid by the Board by Way of 'fuel surcltarge' to the Damodar Valley n
Corporation and the U.P. State Electricity Board for the quantities of
energy purchased by the Board from these sources and the_ el\tra cost
•

63 SVJ>REMn COURT°RllfORTS [1984] 3 S.C.R.
A
that the Board had actually to incur on fuel consumed i~ those two
generating stations at Patratu and Barauni. From the counter affidavit
filed on behalf of the Board, it is seen that in respect of the increase
lnthe cost of productfon of electricity in the two generating statiOJ)S
of the Board, the fuel surcharge has taken into account only that
B part of the increase in cost which is relatable to the increased price
of the coal and oil i.e. fuel alone. The increase Jn expenditure
refem~ble to the enhancement in cost of the energy generated on
other accounts such as wages, maintenance, etc. has not been taken
into account in the foe! surcharge. Such increase iii. cost· of produc-
tion on account of those other factors has been offset by a revision
c of the basic general tariff by 16.5. per cent payable. not on!~ by the
industries but by all classes except the agriculturist class. In respect
of the energies purchased by the Board from outside sources,
namely, the Damodar Valley Corporation and the U.P. State Electri-
city Board, the increase in cost per unit incurred by the
Board has .been included in the computation of the fuel
D surcharge. We see no substance whatsoever in the contention
advanced by the appellants that o.nly such amounts, if any, as might
have been paid by the Board to the D.V.C. and the U.P. State
·. Electricity Board as and by way. of fuel surcharge ca:n go into the·
computation of the fuel surcharged levied by iM Board under
paragraph 16.1 of the 1979 tariff. ·Though the nomenclature
E
given to the levy is "fuel surcharge" it is really a surcharge levied
to meet the increased cost of genera•ion and purchase of electri·
city anq this is made absolutely clear in the formula given in para
16.7.2.

The formula for deterinining the fuel. surcharge set out in
pata~raph 16. 7. 2 reads :

[Al XA3+Bl XB3+Cl XC3+Dl XD3+El xE3
"S= · [A2+B2+C2+D2+E2]". ·
G •
This is followed by detailed explanation as to what the di!!- .
erent alphabets used in the numerator and denominate or signify..
The explanation given in respect of Cl is "Increase in the average
unit rate of. purchase of energy from D.V.C. during the year for ·
which the surcharge is to be ca1culated. The said increase to be
calculated with respect to the base year 1977-78." C3 stands for
"units purchased from D.V.C. duriµg the year". ·Likewise, El and
IP hav<; beeµ explaiµe4 a,s "lµcrease ill: ~h~ avera~? wii! rate 9f
itoHfAS INIJUSTRES v. Bl!!AR,St. ELEC. BOARD (B.:Eradi, J,) 69

purchase of energy from Uttar Pradesh State Electricity Board during A
the Year for which surcharge is to be calculated, the. said in'crease,
to be calculated with respect to the'base Year 1977-78" and "units
purchased from Uttar Pradesh State Electricity Board" re'spectively.

We see no force in the i;ontention put forward on behalf of
some· of the appellants that the words" increase in the •average unit
rate or'purchase of energy" used iu Cl below paragraph 16.7.2 should
be interpreted as taking their _colour from the contents of paragraph
16.7.3. From a reading of these provisions it is abundantly clear
that the entire increase in cost incurred in the purchase of energy
from the D.V.C. a:nd the U.P. State Electricity Board has to go
into the computation of the sui:charge leviable under paragraph 16.7. c
The contention to the contrary advanced by the appellants is there·
fore, onty'to be rejected. There is no am,biguity whatever in the
words· used in Ct so as to require us to take light from paragraph
f6.7 .1 for the purpose of under.standing their scope and meaning.
D
It was strongly urged on behalf of the appellants that tlfe
provision in Cl for increase in the average rate of price of energy
from the D.V.C. to be calculated with respect to the. base year
1977-78 is arbitrary.in as much as in fixing the basic tariff as per ihe
'impugned notification' of 1919, the <lifference in cost between Year
1977-78 and the current.year 1979-80 ohas already been -taken foto E
account. From the counter -affidavit and the statements filed in the
High Court on behalf of the respondent Board which form part of
the record before us in these appeals, it is seen that only·· the fuel
• surcharge accrued during·the Year 1977-78 had been merged while
fixing the revised rates for energy and it wµs specifically mentioned
in paragraph J.5 of the resolution of the Boai:d containing the
proposals for the tariff revision, 1979, which the Board forwarded to
the State Government that only the fuel surcharge that had accrued
~uring 1977-78 ':as being merged in the rev\sed tariff rates and that
. the subsequent increase or decrease in the. cost of fuel or ihe cost of
'll!P~rted energy will, therefor~, reflect in the fuel surcharge hereafter".
Similar is the position with respect to the tariff revision effected in G
· J981. Hence th_ere is rto factual foundation for the argument. that
there has ·b~en a double neutralisation of the incre.ase in the fuel
s_urc?arge_ m respect of.the energy purchased by the Board from
outside sources. ~

Paragraph 16.7.4 of the tariff notification states that the fuel
Surcharge for a financial year shall be calculated by the Board after
7o SUPREME cotrn.t REPORTS [19S4] 3 S.C.R.
A
the expiry ot the financial year and until such calculation is actually
· made, fuel surcharge may be levied during each financial year at a·
rate provisionally calculated on monthly or quarterly or half-y~arly
basis as decided by the Board, and .in case of short or excess realisa-
0
tion, the sameis to be adjusted in the next bill to be served on the
.ji consumer. Based on these provis'ioris, it was falntly argued on behalf
of some of the appellants that the Board was under an obligation to
issue provisional bills in respect of fuel surcharge 'during the course
of.each financial Year and on account of its failure. to do.so, the
appellants w.ere unable to include the saiq elemenf in their price
structure in respect of ceme.n~, paper and vanaspati produced in the
c factories of some of the- appellants, This contention has to be
rejected for two reasons : firstly, the provision contained in the afore
said par~graph of the notification is purely an enabling one and it
dose not cast any mandatory obligation on the Board to issue any •
provisional bills for fuel surcharge, monthly, quarterly, or half-yearly
during the course of each financial yeor; secondly apart from merely
D· putting forward such a plea in the course of arguments before us
the appellants have not furnished any'factual data as to how arid in
what manner .they had fixed the prfce structure for the different pro.'
ducts produced in.ihe appellants' factories .
•
Yet another point urged on behalf.of the appellants was that
under Section 49 of the Act, while exercising the power of framing
uniform tariffs, the Board was under a duty to apply its mind to all
relevant factors but there had been an omission to discharge the said
mandatory duty inasmuch as the capacity of the concerned industry
to pay for the energy at the rate proposed .to be fixed, which is a
highly relevant .factor, had not beeen taken into account at all.
Clauses (a) to (d) of sub-section 2 of Section 49 enumerated the
various matters whfoh the Board shall have regard to in fixing the
uuiform tariffs and the capacity of any particular mdustry to bear the
energy charge at the proposed rate of levy is not included in the
said enumeration. Under the scheme of the tariff flxation incorpo-
rated in the section, the tariff is to be uniform subject to the
classification of consumers into different <:ategories. . Under
sub-section 3 of the said section, the classification of the
consumers into such different cattegories<>is 1 to he made only
with reference to the nature of the supply, the purpose {or
which supply is required the geographical . position of any area and
·other like relevant factors. It is not ·contemplated by the said
~ection or any ot:. the other provisions of the Act that as amongst
R.OltTAS INDUSTRIES v. BIHAR ·ST. ELEC. BOARD (B. Eradi, J.) 71
consumers fallin5 within a specified category. different r~tes are to be A
charged depending upon the financial capacity of the particular
consumer to pay. \:)n the other hand, the very core of the scheme
of Section 49 is that the tariff should be uniform in respect of each
class or category. Hence the attack levelled against the tariff fixa-
tion on ihe aforesaid ground, that a. relevant factor, namely, that
the financial capacity of individual industrial consumers had not B·
been taken into account, is devoid of force.

The appellants in some of the appeals have challenged the sub·
sequent tariff fixation of 1981 also on gro11nds that are substantially
the same as those which we have dealt with above. For the reasons
already indicated by us, none of those grounds can be accepted as C
correct or tenable.
It was ·urged on behalf of the appellants that the supply of elec-
tricity being a monopoly service conducted by an agency of the
+ State, namely, the Board, it must be carried out reasonably and not
arbitrarily, that such reasonableness should be reflected in the price D
fixation and if the prices fixed are .arbitraty, they are liable to be
called in qu.es!ion before the Courts o"n lhe said ground. In support
of the above contention, reliance was placed by counsel for the ap.
pellants on the decisions of this Court in Akadasi Padhan v. State
ofOrissa( 1), f.ashbihari Panda,. etc. v: State of Orissa,(') Vraj/al
Mani/al & Co. & Ors. v. State of Madhya Pradesh & Ors.,(') E
Ramana Dayaram Shetty v. The international Airport Authroity
of India and Ors.('). It is wellestablished that where a corporation
·is an instrumantality or an agency of Government it would, in
the . exercise of its powers and function, ~e subject to the same
Constitutional or Public Law .limitations as apply to the Govern-
ment and the principle of law inhibiting arbitrary action.by. Govern-
ment would apply equally where such a corporation is dealing with
the public, whether by way of giving jobs or entering into ~ontracts
"j • or otherwise and it cannot act arbitra~ily and enter into relationship
with any person in any manner it likes according to its sweet will.
The aets of such a corporation must be in conformity with some (;/
principle which meets the test of reasonableness and relevance. In
the case before us, the appellants have totally faiied to establish
that the rates specified in the impugned tariff notifications of 1979
and 1981 are arbitrary and unreasonable.
(I) [1963] Supp. 2 s.<;.R. 691
(2) [1969) 3 S.C.R. 374 ·
(3) [1970] l S,C.R. 400
(4) [1979] 3 S.C.R. 101.4

•
72 SUPREME toU!lt R.EPOJ!.TS [1984] 3 s.c.Ji..
l
A Sec.ti on 59 of the Act as it now stands after the amendment of
1978 is in t'he following terms :

"59. (I) The Board shall, after taking credit for any
subvention. from the State Government under section 63,
B carry on its operations urtder this Act and adjust its ·tariffs so
as to ensure that the total revenues in any year of account
shall, after meeting ~II expenses properly chargeable to reve· .
nues including operating, maintenance and management
expenses, taxes (if any) on income and 'profits, . depreciation
and interest payable on all debentures, bonds and loans, leave
c . such surplus, as 'i:he State Government may, from time to .
time, specify.

(2) In specifying the surplus under- sub-section (1), the
State Government shall have due regarding to the availability
D of amounts accrued by way of depreciation and the liability
for loan amortization and leave;
,,.
(a). reasonable sum to contribute towards the cost of
capital works; and
E
(b) where in respect or the Board, a notification has
been issued under sub-section (1) or section 12A, a reasonable
sum by way of return on the capital provided by the State
Government under Sub-section (3) of that section and the
amount of the loans (if' any) converted b,y tlte State Govern-'
F ment into capital under sub-section (I) of section 66A,."
Under the above provision, the Board is under a statutory obligation
to carry on its operations and adjust its tariffs in such a way-as to
ensure that the total revenues earned in any year of 'account shall,
after ~neet1ng all expenses p~operly chargeable to revenue; leave such
surplus as the State Government may, from time to time, specify.
G The tariff fixation has, therefore, to be so· made as to raise sufficient·
revenue which will not mer,ely avoid any net loss being incurred
during the financial year but will.ensure a profit being earned, the
·rate of minimum profit to be earned being such as may be specified
by the State Government. The learned Attorney General appear-
H ing on behalf of the Board has placed before us tabulated·state-
ml'nts showing the working- results (financial) of the ·Board in the
years subsequent to 1977-78. Jt is found therefrom that the net

•
r

•

ROiiTAS INDUSTRiES "iliHAR 'sT. U.EC. BOARD(B. Eradi, J.J · . 73 ·

result"~fthe Board;s working ir. each of the year .1978-79 to 1981- A
82 was a substantial deficit or ioss. The deficit in 1978-79 was
Rs: 15.31 crores, in 1979-80 Rs. 10.27 crores, in 1980-81 · Rs. 32.69
crores and in 198i-82 Rs. 18.60 ~rores. ·The statemen_t. also shows
that th~ reucnue earned per unit of electric energy sold was much
lower than the actual cost of production incurred by the Board per B
•. . unit. The cost. of prodµction. per unit in the four . years afore~ .
mentioned was 51.IO p., 65.10 p., 73.86 p., and 87.16 p. respectively,.
..
whereas the revenue .per unit was only 38.48 p., 47.17 p., 53.07 p.,
and 66.39 p. respectively:It is thus found that notwithstanding has
• the mandatory provision contained in Section 69 the Act, the Board .
been selling energy at rates which are lower than of the actual cost
. incurred by it per unit of.production. · Such being the factual .siimi-
.tion, there is absolutely no basis for the. contention urged on behalf. •
of the appellants that the tariff fixation effected by the Board si.iffers
from the voice of arbitrariness and is liable to be interfered with by·,
the Court on the. ground .. ,As . pointed. out by ·this· Court. in·
v.
Prag Ice· & Oil Mills and another ·Union of India,' in the ultimate · '. D
analysis, the mechanics of price fixation -is .necessarily. to be left to
the judgment of the executive and unless it is patent that there is
. hostile discrimination agairist a class of persons, the processual
": .. basis of price fixation is to be accepted in the generality of cases
as valid. ·
·, .,·
.
·some of the appellants have en.deavoured to persuade us to go
.

· into the minutest 'details of the mechanism of the tariff fixation
effected.by the Board in an endeavour· to demonstrate in relation ·
thereto that a factor here or a' fact~r th'Cre · which_ ,·ought to - have
p_een taken into account has been ignored. .We have declin~d to
F.
go into thos~ factors which are really· in the nature of matters of
price fixation policy and the Court will be exceeding its jurisd~ction
if it to embark ~pon a ·scrutiny of matters of this kind which are
essentially in the. domain of the executive to determine, subject, of.
course, to the Constitutional limitations. , ·
G
. . The conchisi.on that.emerges from the foregoing discussion is
that the High Court was perfectly right in upholding the validity of
the impugned tariff notifications of 1979 and 1981, and these appe'ats
... ..and the S.L.P, have- only to be dismissed. · ·
> ,,-~- -
,!', \
·H.S.K. · Petition's & Appeal.J Disn:lssed. · ll
J•

(1) 1197) 3 SCR 293. . .