Holding

The Supreme Court held that the grid tariff can be fixed without prior regulations, is not arbitrary, a common tariff is permissible, and the City Board cannot obtain relief for the period before the writ petition was filed.

Summary

The Uttar Pradesh Electricity Board fixed a grid tariff for licensees in the Ganga‑Sarda Grid by a notification dated 24 April 1962 under s.46 of the Electricity (Supply) Act, 1948 and enhanced it by 20 % on 30 September 1967. The City Board, a licensee, sought state permission to raise its rates in 1966, received it only in 1968, and then challenged the validity of both the original tariff and its enhancement under Art. 226, arguing that the Board had no regulations under s.79(h) to guide tariff fixing and that the additional 7.1 % charge was illegal. The High Court dismissed the petition; the Division Bench partially allowed it, holding that regulations were not a condition precedent, a common grid tariff was permissible, and the 7.1 % charge was unlawful. On appeal, the Supreme Court affirmed that the absence of regulations does not invalidate the tariff, that a uniform grid tariff is consistent with the Act’s purpose, and that the City Board could not claim relief for the period before filing the writ petition, limiting any relief to the short interval between 23 March 1968 and 1 July 1968. The appeals were dismissed with no order as to costs.

Issues considered

Whether the lack of regulations under s.79(h) makes the notifications fixing the grid tariff void as arbitrary.
Whether a common grid tariff for all licensees in a grid area is permissible under the Electricity (Supply) Act, 1948.
Whether the additional 7.1 % charge levied under the 1962 notification is valid.
Whether the City Board can seek relief under Art. 226 for the period prior to the filing of the writ petition.
Whether the 20 % enhancement notification of 1967 is valid.

Legislation cited

Electricity (Supply) Act, 1948s. 46, s. 58, s. 79(h)

Subjects

Electricity (Supply) Actgrid tariffarbitrarinesscommon tariffadditional chargeArticle 226tariff regulationlicenseemunicipal authority

Judgment

U.P. STATE ELECTRICITY BOARD. LUCKNOW & ORS. A
•
v.
CITY BOARD, MUSSOORIE & ORS. ETC.
(AND VICE VERSA)
B
February 8, 1985
[0. CHINNAPPA REDDY, E.S. VBNKATARAMIAH AND SABYASACHI
MUKHARJI, JJ.]

E/ectriclty (Supply) Act, 1948, sections 46 and 56-Grid tariif-Flxa1ion
of-Framing of Regulations under section 79(h)--Whether condition precedent-
A common tariff for all licensees in an area servtd by the grid-Whether
c
permlssibl•.
Section 46 of the Electricity (Supply) Act 1948 prov id•s that a '"if 'r
be known as the Grid Tariff shall, in accordance with any-regulations made,
be fixed from time to time by the Electricity Board. Section 58 enables a local
authority to implement th~ directions issued by the Electricity Board or the D
Government with regard to amortisation and tariffs policies.

The U .P. Electricity Board under a notification dated 24 April 1962,
fixed the tariff payable by licensees who used to get bulk supply of electric
tnergy. The tariff so fixed was enhanced by another notification dated
September 30, 1967 by 20% which came into force on December, l, 1967. The
City Board, a licensee, moved the State Government on September 13, 1966 E
for permission to enhance the rates for supply; but no such sanction was given
till March 23, 1968.

The City Board questioned the validity of the tariff fixed and its
subsequent enhancement under Art. 226 on the grounds: (I) that the notifica·
lion dated April 24, 1962 was not in conformity Y'ilh s. 46, and (2) that it had
not been permitted to enhance correspondin@'ly the rates chargeable by it. The F
> petition was, however,_ dismissed.
On appeal the Division Bench partly allowed the app.al, holding : (i)
1-rt1t ample guidance is available in the Act, and that the rates fixed are subject
to the control of the State Government : (ii) that the levy of an additional
7.1/2 % as an aC.diticnal charge and subsequent enhancement under the two
notifications was illegal; (iii) that it was open to the Electricity Board to make G
an additional charge to the e:ii:tent of the actual expenditure incurred by
supplying energy at 6600 volts, and (iv) that the Electricity Board should
consider afresh rates at which electric energy could be supplied,

Both the City Board and the Electricity Board filed appeals to this
Court. It was contended on behalf of the City Board that in the absence of
any re'ulations layin$ down the principles for fixins the tariff under s. 79, the H
816 SUPREME COURT REPORTS (1985] 2 S.C.R.
A two Notifications issued under s. 46 of the Act were void as they had been
issued without any guidance and were, therefore, arbitrary. I
'r
On the question whether the grid tariff fixed suffered from vice of
arbitrariness,
•
HELD: (1) Whiles. 79(h) of the Act authorises the Electricity Board
to make regulations laying down the principles governing the fixirg of Grid
B
Tariffs, s. 46(1) of the Act does not say that no Grid Tariff can be fixed until
such regulations are made. It only provid~s that the Grid Tariffs shall be fixed Y--
in accordance with any regulations made in this behalf. The framing of
regulation under s. 79(h) of the N:t cannot, therefore, be a condition prece-
dent for fixing the Grid Tariff. In the instant case, the Grid Tariff fixed did not
suffer from the vice of arbitrariness. [82JE-G; 822E]
c
Mysore State Road Transport CorPQration v. Gopinath Gundachar Char
(1968] 1 S.C.R. 767, followed.

(2) Th• Electricity (Supply) Act 1948 had been enaoted to provide for
the rationalisation of the production of supply of electricity and generallyfor
taking measures conducive to electrical development. It is, therefore, •
D permissible for the Electricity Board to fix a common Grid Tariff for an area
so that there may be a reasonably uniform development of the area by the
supply of electric energy to all licensees or consumers in the area at a uniform
rate with such reasonable variations as may be permissible in law subject to
the condition that no undue preference is shown to any of them. The Act
also furnishes ample guidance regardina: the determintioo of tariffs by an
Electricity Board. [823A-CJ

Maharashtra Stal• El•ctricity Board v. Ka/ya11 Boro•gh MU11icipa/ity alld
Anr.. [1968] 3 S.C.R. 137, followed.
(3) The validity of the levy of additional char11es could not be question-
ed by the City Board under Article 226 of the Constitution in respect of the
period prior to the filing of the writ petition. The additional charec of 7.1/2%
F was levied in 1962,and the City Board did not questicn it before tho Court till
March 23, 1968 when it filed the Writ Petition. Moreover, the City Board had
not stated that it had not collected charges from the consumers of electric
energy supplied by it at the rates which would cover the additional 7.1/2%.and
had not recouped itself by collecting the charges from the consumers. The
presun1ption in this situation would be that the City Board had not suffered
any loss by the levy of 7.1/2% by way of additional charges. [823 G-H 824 A-Bl
G
In the instant case, the City Board has been given directions from time
to time by the Government regarding the charges it may collect from the
consumers in the light of the charges it has to pay to the Electricity Board and
its own investment expenditure on the undertakina:. The City Board cannot
question the Grid Tariff only without at the same time questioning the
directions pursuant to which it has been collecting charges from its consumers.
H No satisfactory material has been placed before the Court showing that the
charges which were being collected by the City Board from the consumers were
µneconomic•I and di4 not satisfy th~ r~asoqable standards which should
U.P. . ELECTlUCITY BOARD v. CITY BOARD (Venkataramiah, J.) 817

govern the directions issued by the Electricity Board or the Government from A
time to time regarding the tariff's policies of the City Board. Therefore. it
would not be proper to reopen the claims of the City Board in regard to the

• period prior to the filing of the writ petition arising on the.basis of the alleged ,
invalidity of the notification dated April 24, 1962. The deci1ion of the High
Court on the above point is allowed to remain only for the period between
March 23, 1968 and July 1, 1968. No opinion on its correctness is expressed
bccallse the period is sman one and the Electricity Board has not in~isted B
upon a decision on thi1 question. The relief granted by the High Court with
regard to the levy of additional charge of 20% with effect from December!,
!967 till July I, 1968 i1 also not disturbed for the same reason1; [824D·H; 825Al.

The matter may be reconsidered by the Electricity Board as directed by
the High Court on the other points in regard to the above specified periods.
[824B] c
C1viL APPELLATE JURISDICTION : Civil Appeal Nos. 814 and
815 of 19.74.
From the Judgment and Order dated 13. 8. 1970 of the High
Court of Allahabad in Special Appeal No. 34 of 1969. D
s. N. Kackar, Gopa/ Subramaniam and Mrs. Shobha Dikshit
for the Appellant in CA. No. 814 and respondent in CA. No. 815.

U. R. La/it and B. S. Chauhan for the Respondent in CA. No.
814 and Appellant in CA. No. 815. E

· The Judgment of the Court was delivered by

VENKATARAMIAH, J. These two appeals by special leave are filed
against the judgment dated August 13, 1970 of the High Court of
Allahabad in Special Appeal No. 34 of 1969 (City Board, Mussoorle F
v State Electricity B-Oard & Ors.)(') by the Uttar Pradesh Electricity
Board (hereinafter referred to as 'the Electricity Board') constituted
under the Electricity (Supply) Act, 1948 (hereinafter referred to as
'theAct')and the CityBoard,Mussoorie, a local authority (hereinafter
referred to as 'the City Board') respectively.
G
') The City Board as a licensee under the Indian Electricity Act,
1910 used to get bulk supply of electric energy from the Electricity
Board from the Ganga·Sarda Grid and in its turn was distributing it
to the consumers within its jurisdiction. In the year 1962, under a

(I) A.J.R. 1911 Allahabad 2j9,
318 SUPREMB COURT REPORTS (1985] 2 S.C.R

A notification dated April 24, 1962 issued under section 46 of the Act,
the tariff payable by the City Board and other licensees in the Ganga- I
Sarda Grid was fixed by the Electricity Board. The relevant portion
of the Tariff was as follows:
""
•
"I. Applicability-This rate schedule is applicable to
all licensees situated in Ganga Sarda Grid area and taking
B
supply in bulk from the Board. y- ,.

2. Character of service-A. C., 3, Phase, 50 cycles,
11,000 volts, Alternatively, the supply can be given at a ·•
voltage lower than 11 KV in which case an additional charge
c at 7. 1/2 per cent on the total amount of the bill will be
levied.

If the consumer takes supply at a standard voltage
above 11 KV, a rebate of 5% will be allowed to him by the
Board on the total amount of the bill calculated at the rates
D prescribed for supply at KV.

3. Rate:-

(a) Demand Charges-

First 500 KVA of Chargeable
demand during the month
at the rate of...... ... Rs. 12.75 per KVA

Ne:i:t 1500 KVA of the charge-
demand during the month at
F ... Rs. 10.00per KVA
the rate of· ......

All above 2000 KV A of the
chargeable demand during
the month at the rate of...... ... Rs. 8.50 per KVA

G
PLUS
\'
(b) Energy Charges-

First 170 Kwh, per KVA of Charge·
able demand consumed during the
month at the rat~ of... ·•"., .. ·•·· SP· per Kwh
H
U.P. ELECTRICITY BOARD v. CITY BOARD (Venkataramiah, J.) 819

Next 170 Kwh. per KVA of charge- A
able demand consumed during the
month at the rate of.............................. ..4P. per Kwh .

• Remaining Kwh. per KVA of the
chargeable demand consumed during the month B

-
at the rate of....................................... 3P. per KWh

4. (i) Chargeable Demand-The chargeable demand
for the month shall be defined as the actual demand during
the month or 60 per cent of the contracted demand or 75
per cent of the highest demand which occurred during the c
preceding 11 months, whichever is the highest.

-
(ii) Coal-Clause-The above rates shall be subject to
a coal price adjustment at the rate of 0.001 per Kwh.
increase or decrease for every one P. of variation .above or D
below Rs. 40 per tonne of coal delivered at the bunkers in
the Harduaganj Generating Station ........................ ..

5. Determination of Demand:-Demand measurement
shall be made by suitable instruments at the point of deli-
very. The demand for any month shall be defined at the E
highest average load measured in Kilovolt-amperes during
any 30 consecutive n;iinutes period of the month."

The tariff so fixed was enhanced by another notification dated
September 30, 1967 by twenty per cent and the enhanced rate come
into force on December I, 1967. Under section 58 of the Act, the F
Electricity Board or where no snch Board was constituted, the State
Government had the power to direct the amortisation and tariffs
policies of any licensee, being a local authority, with respect to its
licensed undertaking in such manner as the Electricity Board or the
State Government, as the case may be, after giving the local autho-
rity a reasonable opportunity of being heard, considered expedient
for the purposes of the Act. The licensee, being a local authority, G
the provisions of any other law or of any rules made or dir.:ctions
given thereunder notwithstanding, was bound to give effect to any
such directions of the Electricity Board, or the State Government,
as the case may be. The Electricity Board however, could not issue
any directions under section 58 of the Act except after obtaining
the prior approval of the State Government. The City Board had H
820 SUPl.BJA! CQUl.T,ll~O&TS (1985) 2 s.c.1..

A moved the State Government on September 13, lt66 for permission
to enhance the rates for aupply of electric energy to Consumera, No I
llUch san.ction was aiven till March 23, IP68. The City Board, there- ""
fore, filed a petition under Article 226 of the Constitution questio·
ning the validity of the tariff ~ed under the notification dated
•
April 24, 1962 a,nd the enh1111cemc11t made under the notification
B
da.. ted
' ' .- . . 30, 1967. It may,
September
' . ho.wever, be stated here that
subsequently on April 20, 1P68, the City Board was permitted to
raise tJle c~rg~~ for light aµd f11n by two paise per unit which came
to 6% \l.r 7% of~he origi11al ra~es aJ)d bY 10% for el,ectric energy
supplied for otl!cr purposes.
c
The City Board challenged the notification issued on April
24, 1962 on the ground that it was not in conformity with aection
46 ofth.e A,ct. ~qi,uest.ion~d the enhanceiµent ma.de on September
30, 1967 on th,e ·around t~t it !l~d Q9t been penn\\ted to. ephance
correspondingly th~ rat~s chargeabl,e by it to tile coµsuw.~rs even
D though in i~s vid.ni,ty t~e Electri,city Board. itself was suRplying
electric energy to consumers at a much higher rate. The petition
was contested by the Electriciiy Board. ·

The Writ Petition was heard by a Single Judge of the High
Court. He dismissed the petition. The City Board, thereafter filed
an appeal before ihe Division Bench of the High Court. The Divi·
E
sion Bench allowed the appeal in part. Aggrieved by th~ judgment
of the Division ·Bench, the City Board and the Electricity Board
have filed the above appeals by special leave.

The m.aterial part or aection 46 of the Act reads thus:

"46. (I) A tariff to be ~nown as the Grid Tariff shall
in accordance with any regulations made in this b~half, be
fixed from time to time by the Board in respect of each. ar~a
for which a scheme is in force, and tariffs fixed under this
section !)lay, fr th.e Board thinks fit, differ for different
G .
ax:eu.
"' .

..
(2) WitJlout prejudice to the provisions o( se~~ion 47,
tile tjrid Tariff shall &J?ply ~o s11le"s. of el~~tnc1ty by.the
Board to. licensees wberQ .~o ~eq\lir~d \l!ld.er a?y of the F1~~t,
Seco'nd and Third Schedul~s, !l)ld slulll, subJect ~s he~em •
u.P. ELBCTl.iCITY BOARD v. CITY IIOUD (Venkataramlalt, J.) 821

after provided, also be applicable to sales of electricity by
)
the Board to licensees in other cases:
'"
Provided that if in any such other case it appean to
the Board that, having regard to the extent of the supply
required, the transmission expenses involved in affording
the supply are higher than those allowed in fixing the Grid
Tariff, the Board may make such additional charges as it
considers appropriate,. ................................................ "

The first contention urged before us by the City Board is that
in the absen~e of any regulations framed by the Electri~ity Board c
under section 79 of the Act regarding the principles go\'erniiig tb,e
fixing of Grid Tariffs, it was not open to the Electricity Board to
issue, the ill)pq~ed notjficat.ions. T~.is contentiq17 is ba~ed on sub-
section (1) of sectio.n 46 of the Act which provides that a t!lrilf to be
known as the Grid Tariff shall in accordance with any regulationJ.
made In this behalf, be fixed from tiD1e to time by th.c Electricity D
Board. It is urged that in the absence of any regulationt laying
down the principles for fixing the tariaff, the impugned notifications
were void as they had been issued without any guidelines and were,.
therefore, arbitrary. It i.s admitted that no such regulations hadt
been made by the Electricity Board by the time the impugd
ned notifications were issued. The Division Bench b..s nega
lived the above plea and according to u_s, rightly. It is. ti:ue tha
section 79 (h) of the Act authorises the Electricity Board to ~-ke
regulations laying down the principks Emerning the fixing of Ori
Tariffs. But section 46 (I) of the Act does not say tha.t nQ Grid
Tar ff can be fixed until such regulations are made. It only provi·
des that the Grid Tariff shall be in accordance with any regulations
. .
made in this behalf. That means that if there were any regulations
. F
',,> the Grid Tariff should be fixed in accordance with such regulations
and nothing more. We are of the view that the framing of regu-
lations under section 79 (h) of the Act cannot be a condition prece-
dent for fixing the Grid Tariff. A similar contention was rejected ·by
this Court in Mysore State Road Transport Corporation v. G_opilJa!h
G
Gwzdachar Char( 1) which was a case arising under the Road Tra11~port
Corporation Act, 1950. Under section 14 of that Act a Road Trans·
port Corporation was entitled to appoint officers and servants cit as
considered necessary for the efficient performance of its sa~ctions.
Under section 34 (I) of the Road Transport Corporation Act, 1950

(1l [1968) 1 S.C.R. 767,
822 SUPREMB COURT REPORTS (1985) 2 S.C.R.

A the Slate Government had been empowered inter alia to issue direc-
tions to the Road Transport Corporation regarding recruitment,
conditions of service and training of its employees.. Under section
45 (2) (c) of that Act, the Road Transport Corporation was empo-
wered to make regulations regarding the conditions of appointment
B
and service and the scales of pay of officers and servants of the
Corporation other than the Chief Executive Officer, General Mana-
ger and the Chief Accounts Officer. Admittedly no regulations had
been framed under section 45 (2) (c) of that Act. It was contended
that the Corporation could not appoint officers and servants referred
to therein or make any provision regarding their conditions of
c service until such regulations were made. This Court rejected the
said plea with the following observation at page 770:

"The conjoint effect ofss. 14 (3) (b), 34 and 45 (2) (c)
is that the appointment of officers and servants and their
conditions of service must conform to the directions, if any
D given by the State Government under s. 34 and the regula-
tions, if any, framed under s. 45 (2) (c). But until such
regulations are framed or directions are given, the Corpo-
ration may appoint such officers or servants as may be neces-
sary for the efficient performance of its c;luties on such
terms and conditions as it thinks fit."
E
We do not also find any merit in the submission that the Grid
TariJf lixed in this case suffered from the vice of arbitrariness.
'.
As observed by the Division Bench of the High Court, there
is ample guidance available in the various provisions of the Act and
F that the rates fixed are subject to the col)tr9l of the State Govern-
ment. We do not find it necessary to repeat what is stated by the
Division Bench except observing that we respectfully agree with the
....•
reasons given by it for rejecting the said plea. In Maharashtra
State Electricity Board v. Ka/yan Borough Municipality & Anr.,\ ') this
Court has. discussed the relevant' provisions of the Act while dealing
G with section 49 thereof which show that the Act furnishes ample
guidance generally regarding the. determination of tariffs by an Elec- '
tricity Board functioning under the Act. There is also no merit in
the submission that there cannot be a common tariff for all licensees
in an area served· by a Grid and.that there should be a separate rate

ll (I) [1968] 3 s.c.R. 137.
tJ.P. ELllCtRICtTY llOAllD v. CITY BOARD We11kataramiah, J.) 823
of charge for each licensee. While it.may not be objectionable to A
have a reasonable tariff fixed in the case of a particular licensee
without offending the rule of non-discrimination, fixation of a
common Grid Tariff is in consonance with the spirit of the Act.
The preamble to the Act says that it had been enacted to provide
for the rationalisation of th> production and supply of electricity
and generally for taking measures conducive to electrical develop- B
ment. Looked at against this background, it is permissible for the
Electricity Board to fix a common Grid Tariff for an area so that
there may be a reasonably uniform development of the area by the
supply of electric energy to all licensees or consumers in the area at a
uniform rate with such reasonable variations as may be permissible
c
in law subject to the condition. that no undue preference is shown
to any of them.

The Division Bench, however, held that the levy of an additio-
nal 7. I !2 % as an additional charge- made by the Electricity Board
under the first para of clause (2) of the impugned notifications dated D
April 24, 1962 and September 30, 1967 was illegal and therefore
liable to be quashed because according to it the adpitional charge of
7.1/2% could be imposed under the proviso to section 46 (2) of the
Act to cover extra expenses only and not for supplying electric
energy at a lower voltage of 6600 volts when the Grid Tariff had
fixed rates for supplying electric energy at 11000 volts. It however,
held that it was open to the Electricity Board to make an additional E
charge only to the extent of the actual expenditure incurred by supp-
lying electric energy at 6600 volts. It also quashed the Government
order dated April 20, 1968 by which the City Board was permitted
to increase the charges payable by the consumers in some respects
and the subsequent action taken on the above basis. The Division
Bench directed the respondents to consider afresh the question of the F
_,>·
• rates at which electric energy could be supplied. We do not propose
to go into the correctness of this part of the decision of the Division
Bench because we are of the view that this case can be dispesed of
in a different way. The contention relating to the validity of the
levy of additional charges could not be raised by the City Board
' under Article 226 of the Constitution in respect of the period prior G
to the filing of the writ petition. The above additional charge of
7. t /2 % was levied in 1962 and the City Board did not question it
before the Court till March 23, 1968 when it filed the writ petition.
It is further seen that it has not stated that it had not collected
charges from the consumers cf electric energy supplied by it at th~
H
(l98S} :! s.c.R.
rates Wnich w6uld cover the additional 7.1/2%. The learned counsel .,.,I
for the City Board was not able to state that the City Board bad
nt>t recouped itself by collecting the charges from the consumers. In
thi~ sitliation we have to presume that the City Board had not
suffered any loss by the levy of 7. I /2 % by way of additional charges.
We are of the view that in cases of this nature where there is little
or 110 pOssilillity of refunding the excess amount collected from the
ultifuate consumer to him and the granting of the relief to the peti-
tioiler would result in his unjust enrichment, the Court should not
otl!inarily direct any refund in exercise of its discretion under
Artie!~ 226 of the Constitution. Moreover in this case the City
c Board woke up nearly 6 years after the issue of the first notification
attd ibat too only after an enhancement by 20% was made under
. the second nohfication. In the case of the City Board, which is a
local authority, there is an additional reason. Under section 58 of
tlib A'ct whicb is already referred to above a local anthority is bound
t<i implement the directions Issued by the Electricity Board or the
D' Gove'tinileiit, as !he case may be, with regard to the amortisation
an'd tariffs policies. The City Board bas been given directions from
time to time by the Government regarding the charges it may collect
fr'6nl the consumers in the light of the charges it bas to pay to the
ElectriCity Board and its own investment and expenditure on the
umfortaking. The City Board cannot question the Grid Tariff only
E withnul .at the same time questioning the directions pursuant to
which it bas been collecting charges from its consumers. No satis-
factory material is placed before the Court showing that the charges
which Were being collected by the City Board from the consumers
were uneconomical and did not satisfy the reasonable standards
w'blch should govern the directions issued by the Electricity Board
F or t'tie Government from time to time regarding the tariffs policies·
of the City Board. In this situation, we feel that it would not be
proper to reopen the claims of the City Board in regard to the period
prior to to the filing of the writ petition arising on the basis of the
alleged invalidity of the notification dated April 24, 1962. Hence
we refuse to grant any relief in this regard to the City Board for the
periOd. up to the date of the writ petition, that is, till March 23, 1968.
,
G
The Grid Tariff was revised in this case on July I, 1968. The deci-
sion or tlie High Court on the above point is, however, allowed to
remain only for the period between March 23, 1968 and July I, 1968
without expressing any opinion on its correctness because the period
is a small one and the Electricity Board does not insist upon a
deCisioii on this question in this case. The question is left open by
H
tl.P. ELl!CTRiCITY BOAIID v. CITY BOARD (Penkataramiah, J.) ru
I
>- us. Similarly, the relief granted by the High Court with regard to A
the levy of additional charge of 2 % with effect from December I,
I, 1967 till July I, 1968 is not disturbed by us for the same reason
without expressing any opinion on its correctness. This judgment
shall not be construed as affirming the decision of the High Court in
so far as the above points are concerned. The matter may be re-
considered - by the Electricity Board as directed by the Division B
'•' .' ~ --
Bench of the High Court but with regard to the periods specified
• above .

The appeals are accordingly disposed of. There shall be no
order as to costs.
c

A.P.J.