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Judgment
A.D. Desai, J.—The dispute in this appeal relates to the rate at which the electricity was to be supplied to the respondent in respect of the
street lights and water works motors. The facts according to the plaintiffs are that formerly there was a company which was known as Wadhwan
State Electric Power Distributing Company, and it held a licence under Indian Electricity Act for supplying electric energy within the limits of
Wadhwan City. The respondent Municipality entered into agreements with the said Company for the supply of electric energy to its water works
motors as well as street lights. The agreements with respect to supply of electric energy to water works and the street lights were entered on
September 28, 1943. The said Company was a partnership firm of which the former Wadhwan State and one Natvarlal Dhanjibhai Mehta were
partners, On the integration of the former Wadhwan State and the formation of United State of Saurashtra, the State of Saurashtra became a
partner in the said Company. The Zalawad Electric Power Supply Company who is the appellant in this case purchased the said Wadhwan State
Electric Power Distributing Company in the year 1950. According to the plaintiff, the appellant company had purchased all the rights and
obligations of Wadhwan State Electric Power Distributing Company. After the date of the purchase, the Wadhwan State Electric Power
Distributing Company ceased functioning and the appellant company continued to supply electric energy to consumers including the respondent
municipality. Some time in the month of May 1952, the appellant company published revised charges for the supply of energy and thereby
increasing the rate at which the energy was sup- plied to the consumers. The respondent Municipality objected to the proposed revised charges.
There was correspondence between the parties and the appellant company assured the respondent Municipality that the agreements under which
the electricity was supplied to the respondent Municipality were not affected by fixation of revised charges and the energy would be supplied to the
respondent Municipality according to the terms and conditions of the said agreements. It seems that there was some dispute between consumers
and the appellant company with regard to the revised rates and the dispute was referred to arbitrators. The arbitrators did not agree and, therefore,
the dispute was referred to the sarpanch or umpire for settlement. The umpire fixed the rates of the supply of the electric energy by his award
dated September 3, 1952. Thereafter the appellant company issued a public notice informing the consumers, of the rates at which the electric
energy was to be supplied by them to the consumers. The rates mentioned in the public notice were the rates fixed by the umpire in his award
dated September 3, 1952. The appellant company forwarded a copy of the award to the Municipality by their letter dated October 8, 1952. From
August 1952 the appellant company started tendering bills to the Municipality for the energy supplied for running the water work motors at the rate
fixed by the arbitrator. The appellant company addressed a letter dated August 30, 1956, informing the respondent Municipality that from
November 1, 1956 the rates of supply of the electricity for the street lights would be at the revised rates i.e. as. 5 per unit. The appellant company
started tendering to the Municipality the bills at this revised rate from November 1, 1956. The respondent Municipality refused to pay the higher
rates for the electrical energy and, therefore, the appellant company made frequently demands for the payment. The respondent Municipality
rejected those demands and continued to pay at the rates fixed under the agreements. The appellant company, therefore, gave the notice to the
Municipality dated April 9, 1957 u/s 24 of the Electricity Act, 1910 to cut off the supply of electricity from April 26th, 1957 as the Municipality
had committed a default in payment of the bills preferred by the company for the consumption of the energy. The appellant company had preferred
bills at the revised rates. The respondent Municipality therefore filed a Civil Suit No. 50 of 1957 in the Court of Civil Judge, Junior Division,
Wadhwan City, alleging that appellant Company was bound to supply electric energy to the respondent Municipality at the rates fixed under the
agreements and that the demands made in respect of the consumption of the energy at the revised rates were illegal and contrary to the
agreements. The respondent Municipality claimed the relief restraining the appellant company from discontinuing the supply of the electric energy to
the Municipality, restraining the defendant company from interfering with the supply of electrical energy directly or indirectly and restraining the
appellant company from making demands at the revised rates.
The appellant company filed its written statement and contended that they had not purchased the liabilities of Wadhwan State Electric Power
Distributing Company. The contention was that they had purchased only the assets of the company and, therefore, the agreements between the
Municipality and the Wadhwan State Electric Power Distributing Company were not binding to them. It also contended that the company was
within its rights in preferring bills at the revised rates for the consumption of the energy by the Municipality. According to the defendant the umpire
was appointed by the consumers including the Municipality, and the company and the award given by the umpire was binding on the Municipality.
As the Municipality did not pay up the arrears, the company had the right to take action u/s 24 of the Indian Electricity Act and cut off the supply
of the energy.
The learned trial Judge held that the appellant company had purchased rights and liabilities of Wadhwan State Electric Power Distributing
Company and, therefore, agreements entered into by the said company were binding on the appellant company. It also held that the appellant
company was not entitled to raise the rates of the water work motors and street lights by its unilateral act. The learned Judge also came to the
conclusion that the appellant company had given an assurance to the Municipality that it would not charge the revised rates for the supply or energy
to the Municipality and on the basis of the aforesaid findings the learned trial Judge decreed the suit of the plaintiff. Being aggrieved by the said
decision, the appellant company filed a Regular Civil Appeal No. 97 of 1959 in the Court of the District Judge, Surendranagar. The said appeal
was heard by the Extra Assistant Judge, Surendranagar who held that the appellant company had purchased the assets and liabilities of the
Wadhwan State Electric Power Distributing Company. The learned Judge also held that agreements entered into between the said company and
the Municipality were binding on the appellant company. The learned Judge held that the appellant Company had no right to revise the rates
unilaterally and to charge the enhanced rates from the Municipality.
The learned Judge also held that the Municipality was entitled to the relief of injunction based on the agreement in view of the provisions of Section
56(f) read with Section 21(1) of the Specific Relief Act. The Court also held that the action of the appellant company in revising the rates so as to
enhance the electrical charges was contrary to the provisions of law, and therefore, illegal. The learned Judge, therefore, granted the injunction
asked for by the Municipality and thus confirmed the decree passed by the trial Court. It is against this judgment and decree that this second
appeal has been filed by the appellant company.
The Extra Assistant Judge, Surendranagar came to the conclusion that the appellant company was not entitled to revise the rates of electrical
energy unilaterally and was bound by the contracts between the parties. For this proposition of law the learned Judge mainly relied on the decision
in Babulal Chhaganlal Gujerathi Vs. Chopda Electric Supply Co. Ltd., . Mr. Daru appearing for the appellant relied on the decision of the
Supreme Court in The Amalgamated Electricity Co. Ltd. Vs. N.S. Bhathena and Another, , and contended that the decision in Babulal Chhaganlal
Gujerathi Vs. Chopda Electric Supply Co. Ltd., has now been overruled by the Supreme Court and, therefore, the judgment and decree passed
by the Extra Assistant Judge, Surendranagar were erroneous.
In order to appreciate the argument of Mr. Daru, it is necessary to refer to certain provisions of the Indian Electricity Act, 1910 and the
Electricity (Supply) Act, 1948, By Sub-section (1) of Section 3 of the Indian Electricity Act, 1910, it is provided that the State Government may
grant to any person a licence to supply electrical energy in any specified area. In respect of every licence granted under Sub-section (1) of Section
3, certain provisions made in Sub-section (2) are necessary to be noticed. Two out of these provisions are that a license granted under Sub-
section (1) of Section 3 may prescribe such terms as to the limits within which and the conditions under which, the supply of energy is to be
compulsory or permissive and as to the limits of price to be charged in respect of the supply of energy. The other relevant provision of the Act is
that the provisions contained in the Schedule to the Act shall be deemed to be incorporated in, and to form part of, every license granted under
part I save in so far as they are expressly added to, varied or excepted by the license. u/s 21 Clause (2) a licensee may with the previous sanction
of the State Government given after consulting the local authority, make conditions not inconsistent with the Act or with his license or with any rules
made under the Act, to regulate his relations with the persons who are or intend to become consumers, and may, with the like sanction given after
the like consultation, add to or alter or amend any such conditions and any conditions made by a licensee without such sanction shall be null and
void. The relevant part of Section 57 of the Electricity (Supply) Act, 1948 as it stood before its amendment was as under:--
Section 57: Licensees'' charges to consumers: Sub-section (1): The provisions of the Sixth Schedule and the Table appended to the Seventh
Schedule shall be deemed to be incorporated in the licence of every licensee, not being a local authority, from the date of the commencement of
the licensee''s next succeeding year of account, and from such date the licensee shall comply therewith accordingly and any provisions of such
license or of the Indian Electricity Act, 1910 (IX of 1910), or any other law, agreement or instrument applicable to the licensee shall. In relation to
the licensee, be void and of no effect in so far as they are inconsistent with the provisions of this section and the said Schedule and Table.
The first clause of the Sixth Schedule to the Electricity Supply Act, provided that ""the licensee shall so adjust his rates for the sale of electricity by
periodical revision that his clear profit in any year shall not as far as possible exceed the amount of reasonable return"". There is a proviso to this
clause with which we are not concerned.
We will now go to the facts of the case of Babulal Chhaganlal Gujerathi Vs. Chopda Electric Supply Co. Ltd., . In that case the Clause 9 (A) of
the license issued under the Electricity Act provided as under:--
The rates to be charged by the licensee for energy supplied by him shall not exceed the maxima set out below: (A) Where energy is supplied by
meter --(1) for general supply purpose, namely (a) for lights and fans not provided for in item (b) below -- a rate of Annas 6 per unit; . . . . (c) for
heating and refrigerating purposes -- a rate of Annas 2 per unit.
The defendant company assuming that by the Electricity (Supply) Act, 1948, restrictions which were placed under the license and by the Electricity
Act, 1910 upon the right of the licensee to levy rates and charges from consumers of electrical energy were abrogated, issued a notice to the
consumers informing them of revised charges for the supply of electrical energy at increased rates, Babulal Gujarathi, who was one of the
consumers, challenged this right of the electric company of revising the rates and ultimately filed a Civil Suit for a declaration that the revised rates
fix- ed by the Electric Supply Company were contrary to law and for injunction restraining the electric supplying Company from discontinuing the
supply of electricity for non-payment of the charges. The plaintiff succeeded in his suit but lost in the appeal in the District Court. A second appeal
was filed in the High Court and the High Court took the view that the Electricity Company had no power to revise the rates so as to exceed the
maxima fixed by the Government while granting license under the Indian Electricity Act, 1910. The High Court held that provisions of Sub-section
(1) of the Section 57 impose an obligation upon the licensees and did not create any new rights in favour of the licensees. By the said provisions, a
further obligation was imposed on the licensees to so adjust the rates by making periodical revisions so that their clear profits in any year shall not
so far as possible exceed the amount of reasonable return.
Now we come to the facts of the case in The Amalgamated Electricity Co. Ltd. Vs. N.S. Bhathena and Another, . In that case also the
Government while issuing the license for the supply of electricity fixed the rates which the licensee could charge for supply of the electrical energy
to the consumers. Due to the conditions brought about by the Second World War, certain orders were made by the Government permitting the
licensees to add a surcharge not exceeding 33 1/2 per cent to the existing charges. Ultimately an Act was passed by the Bombay Legislature called
the Bombay Electricity (Surcharge) Act, 1946, which continued the surcharge specified therein for a period of three years. That Act expired on
September 30, 1949. Even after the expiry of the said Act, the Electricity Company continued charging the consumers at the rates which included
the surcharge, under the Surcharge Act. One of the consumers, therefore, filed a suit against the Electricity Company for the refund of the amount
illegally collected from him in excess of the limits fixed by the Government. The Supreme Court while considering the question as to whether the
Electricity Company had a right to revise the rates and charge the rates higher than fixed by the Government, had construed the provisions of the
Indian Electricity Act and also the Indian Electricity (Supply) Act, 1948. The question which was raised before the Court in that case was with
regard to effect of the Electricity (Supply) Act 1948 on the maxima of rates fixed by the Government u/s 3(2) of the Electricity Act, 1910, which
could be charged by a licensee. While considering this question the Supreme Court observed thus:--
So far as the 1st point is concerned viz., whether the maxima prescribed by Government under the Electricity Act, 1910 still continue to bind the
licensee after the coming into force of the Supply Act, we feel no hesitation in agreeing with the submission of the Appellant which found favour
with the High Court. Section 57 of the Supply Act, 1948 --both as originally enacted and as amended in 1956 expressly provided that the
provisions of the VIth Schedule shall be deemed to be incorporated in the license of every licensee and ''that the provisions of the Indian Electricity
Act 1910 and the license granted thereunder and any other law, agreement or instrument applicable to the licensee shall be void and of no effect in
so far they are inconsistent with the provisions of the section and the said Schedule''. Read in the light of Section 70 of the Supply Act it would
follow that if any restriction incorporated in the licence granted under the Electricity Act, 1910 is inconsistent with the rate which a licensee might
charge under Para 1 of Schedule VI of the Supply, Act, 1948, the former would, to that extent, be superseded and the latter would prevail.
Para I of Schedule VI both as it originally stood and as amended, as seen already empowered the licensee to adjust his rates so that his clear profit
in any year shall not, as far as possible, exceed the amount of reasonable return. We shall reserve for later consideration the meaning of the
expression ''so adjust his rates.'' But one thing is clear and that is that the adjustment is unilateral and that the licensee has a statutory right to adjust
his rates provided he conforms to the requirements of that paragraph viz., the rate charged does not yield a profit exceeding the amount of
reasonable return. The conclusion is therefore irresistible that the maxima prescribed by the State Government which bound the licensee under the
Electricity Act of 1910 no longer limited the amount which a licensee could charge after the Supply Act, 1948 came into force, since the ''clear
profit'' and ''reasonable return'' which determined the rate to be charged was to be computed on the basis of very different criteria and factors than
what obtained under the Electricity Act. In support of the submission that notwithstanding the Supply Act the maxima fixed by the State
Government was still binding on the licensee and that any adjustment within 1st paragraph of Schedule VI should be within the limits of this maxima
we were referred to a decision of the Bombay High Court reported as Babulal Chhaganlal Gujerathi Vs. Chopda Electric Supply Co. Ltd., . It is
sufficient to extract the head-note to understand the point of the decisions
Section 57(1) of the Electricity (Supply) Act, 1948, or Clause 1 of the Sixth Schedule to the Act, does not confer a right upon a licensee
unilaterally to alter the terms and conditions on which supply may be made by a licensee of electrical energy to consumers in the area of supply
irrespective of the restrictions contained in the license and the Indian Electricity Act, 1910.
Not only does Section 57(1) of the Electricity (Supply) Act, 1948, impose an obligation upon the licensee to conform to the provisions of the Sixth
Schedule and the table appended to the Seventh Schedule to the Act, but the first clause of the Sixth Schedule imposes a further obligation to
make periodical revisions and to adjust the profits so that his profits in any year do not as far as possible exceed a reasonable return on his
investment. There is nothing in Section 57 or in the first clause of the Sixth Schedule which either expressly or by implication amends the provisions
of the Indian Electricity Act, 1910, contained in Section 3(2)(d) or in Section 21(2) of that Act or the rates and methods of charging the same as
fixed by the license. The provision contained in Section 3(2)(d) of Indian Electricity Act, 1910, which requires the State Government to prescribe
the terms and conditions under which the supply of energy is to be made is not affected by the Electricity (Supply) Act, 1948. The right to amend
the license is conferred by the Indian Electricity Act, 1910, upon the State Government and that right is not affected by the Electricity (Supply)
Act, 1948.
With great respect to the learned Judge we are unable to agree with this decision, for, in our opinion, the provisions of the Supply Act, 1948 to
which we have adverted are too strong to permit the construction, that the maxima prescribed under the Electricity Act of 1910 serve as a fetter on
the right of the licensee under paragraph I of the VIth Schedule. If there was any room for any argument of this kind on the terms of para I of
Schedule VI as originally enacted, the matter is placed beyond possibility of dispute by the amendment effected by Act 101 of 1956 to the VIth
Schedule where the opening paragraph commences with the words ''notwithstanding anything contained in the Indian Electricity Act and the
provisions in the licence of a licensee''.
Mr. Nanavati faintly argued that the decision in Babulal Chhaganlal Gujerathi (Supra), was not overruled by the latter decision of the Supreme
Court in The Amalgamated Electricity Co. Ltd. Vs. N.S. Bhathena and Another, . The observations cited above from the judgment of the
Supreme Court clearly show that the decision given in Babulal Gujerathi was not approved by their Lordships of the Supreme Court. The Supreme
Court in that case considered Section 57 as it was originally enacted and held that the Electricity Company had the power to adjustment of rates
under the provisions of first clause of Schedule 6 of the Electricity (Supply) Act, 1948. It is, therefore, clear that when the appellant company
revised the rates of supply of the electric energy it exercised the power conferred by first clause of Schedule 6 of the Electricity (Supply) Act,
1948. Mr. Nanavati contended that in the instant case the rates for the supply of the energy were fixed by agreements and not by statute as was
the case in Babulal Gujerathi and Amalgamated Electricity Company Ltd., and therefore the company had no unilateral right of revision of rate. Mr.
Nanavati is right in his contention that in this case there were agreements between the parties fixing the rates of supply of energy, but in my opinion
this circumstance does not make any difference. Provisions of section 57 and first clause to Schedule 6 of the Electricity (Supply) Act, 1948, read
together clearly indicate that the terms of the agreements have to give way to the power of revision of rates given under the first clause of Schedule
Section 57 of the Electricity (Supply) Act, 1948 clearly provides that if a term of an agreement was inconsistent with the provisions of Schedule
6, such a term is void and of no effect. In the case before us, by agreements, the Electricity Company and the Municipality, fixed the rates to be
charged for the supply of the electrical energy and it did not provide for its revision during the period of the contract. In short it prohibited unilateral
variations in the rates during the continuance of the contract. This term of the contract was in direct conflict with the first clause of the 6th Schedule
which provides that the licensee shall so adjust its rates for sale of electricity by periodical revision that his clear profit in any year shall not as far as
possible exceed the amount of reasonable return. This being the true position, the clauses in the agreements which fixed the rates for the
consumption of the electricity are void and of no effect and the appellant company has the power to revise the rates in accordance with the 6th
Schedule. The appellant company in this case exercised the said authority under the said Schedule and has fixed the rates to be charged from
August 1, 1952 in respect of the water work motor and from August 30, 1958 in respect of the street lights. This action of the appellant company
cannot be said to be illegal as the company had the power to charge the rates unilaterally.
Mr. Nanavati then contended that there is difference between the terms of the contract being inconsistent with the provisions of the Schedule
and the agreement being inconsistent with the action taken by a party under the Schedule. It is difficult to appreciate this argument. What Section
57 of the Electricity (Supply) Act, 1948 provides is that if a term of a contract is inconsistent with the provi- sions of the first clause of Schedule 6
then the provisions of Schedule 6 must prevail. In exercise of the powers conferred on the appellant company by the first clause of Schedule 6, the
company charged the consumers the revised rates for the supply of energy. The terms of the contract fixing the rates at a particular amount were
inconsistent with the provisions of revision of rates as provided in the first Clause of Schedule 6 and that being so the company had the right to
revise the rates.
Mr. Nanavati next argued that before the appellant company revised the rates of the energy it was bound to show that its return of profits as a
result of the agreed rates was less than the reasonable return as contemplated by Schedule 6 and it was only then that the company could say that
the agreement was not binding to the parties. It is difficult to accept this contention. First clause to Schedule 6 empowers the company to revise the
rates and the Company in this case acted under the said provisions and revised the rates. It had not been challenged in this case that the revised
rates fixed by the company were not in consonance with the provisions of 6th Schedule. The only question that was agitated in the suit and the
lower appellate Court was whether the company had a power to revise the rates under the provisions of the first clause of Schedule 6 in spite of
the agreement between the parties. I have already come to the conclusion that the company had such a power and that being so the company had
the power to revise the rates.
It was next contended by Mr. Nanavati that in this case the electricity company had given an assurance that they would not charge the
Municipality at the revised rates and for this purpose Mr. Nanavati relied on the correspondence which ensued between the appellant company
and the Municipality. Mr. Nanavati first drew my attention to Ex. 92 dated May, 12, 1952 which was a public notice issued by the appellant
company for revising the rates in respect of supply of the electric energy from 1st June 1952. In response to this notice the President of the
respondent Municipality addressed a letter, Ex. 70, to the appellant company informing the company that there were specific agreements between
the parties with regard to the charges for the supply of the electricity and, therefore, revised rates notified by the company were not applicable to
the Municipality. By Ex. 71, the Municipality again put forward the said contention. Ex. 73 dated June 4, 1952, was the letter of the appellant
company addressed to the respondent Municipality wherein they stated that a separate agreement for supply of electricity was in respect of water
works motors only and other motors installed by the Municipality temporarily or permanently were to be charged as per the rates in force from
time to time. The appellant company also addressed another letter. Ex. 72, dated June 5, 1952 to the Secretary of the respondent Municipality in
reply to the letters Ex. 70 and Ex. 71 and informed the Municipality that the Municipality was their consumer for connections such as Gangavav
and Madhavav to which the revised rates were applicable as per notice already given. The respondent Municipality addressed a letter Ex. 74
dated June 26. 1952 to the appellant company inquiring from the Company as to whether the revised rates were applicable to the street lights and
water work motors. The appellant company by their letter, Ex. 75 dated July 15, 1952 informed the Municipality that revised rates which were to
come in force from August, 1, 1952 were not applicable to the energy supplied under the special agreements. It must be noted that aforesaid
correspondence except Ex. 74 related only to the revisions of rates in respect of the supply of electric energy to the water work motors. On the
basis of this correspondence the argument advanced by Mr. Nanavati was that the appellant company had specifically agreed that the revised rates
were not applicable to the municipality with regard to the supply of electric energy for water work motors and street-lights and the action of the
Company charging revised rates was contrary to the agreements and therefore illegal. Mr. Daru, appearing for the company argued that it was not
the case of the Municipality in the plaint that the appellant company had agreed not to charge the enhanced rates after the copy of the revised rates
was sent to the Municipality with Ex. 85 dated October 8, 1952 and Mr. Nanavati did not raise any dispute on this point. The argument of Mr.
Daru was that no doubt an assurance was given by the company not to charge the revised rates as were set out in Ex. 69 but subsequently an
award was given by the umpire and the appellant company decided to charge the revised rates in respect of the consumption of the electrical
energy by the Municipality. For this purpose Mr. Daru relied on the fact that the umpire by his award fixed the revised rates which the company
had to charge for the supply of the electrical energy to its consumers. The public notice, Ex. 83, in respect of these rates was given to all the
consumers in this respect. The said public notice refers to the notice Ex. 69. The reference was to the operative part of the said notice Ex. 69
which informed the consumers that the company was revising the charges for the supply of the electrical energy under the provisions of Section 57
of the Electricity (Supply) Act, 1948 read with first clause of the 6th Schedule thereof. The public notice Ex. 83 also gave the revised rates which
were fixed by the umpire and which the company had decided to charge under the provisions of Section 57 of the Electricity (Supply) Act read
with Clause 1 of the Schedule 6 of the Electricity (Supply) Act. The revised rates were fixed also for the consumption of the electrical energy of
water work motors. A copy of this was forwarded to the Municipality by letter, Ex. 85, dated October 8, 1952. Thereafter some correspondence
ensued between the appellant company and the Municipality and by letter. Ex. 85, the appellate company informed the Municipality that an
agreement pertaining to the electric supply automatically terminated and they had the right to make and issue the bills as per revised rates fixed by
the umpire. The argument of Mr. Daru was that this correspondence clearly indicated that the company intended to charge revised rates from the
Municipality in respect of the consumption for water work motors and street lights after the revised rates were fixed by the umpire. The assurance
given by the company in Ex. 75, was only in respect of rates notified in Ex. 69 and in respect of revised rates mentioned in Ex. 83. Under the
circumstances the company was justified in making a demand for the consumption of the electrical energy at the rates, fixed by the umpire and
adopted by the company under the provisions of Section 57 read with Clause 1 of the Schedule 6. The correspondence referred to above clearly
indicates that the company at a latter stage i.e. after the rates were fixed by the umpire, had decided to charge the Municipality with the revised
rates as fixed by the umpire. The assurance which was given by the appellant company not to charge revised rates was in in respect of the rates
fixed in Ex. 69. There is nothing on the record to show that the company continued the said assurance in respect of the rates fixed by the umpire on
September 3, 1952. Ex. 72 clearly shows the intention of the appellant company because it was stated therein in categorically terms that the
company had the right to make a demand as per rates mentioned in the notice Ex. 83. Thus the argument of Mr. Nanavati that the appellant
company was not entitled to charge the revised rates from the Municipality of consumption for electrical energy for water works as well as for the
street lights because of the assurance given by the company cannot be accepted. The result is that the lower Courts erred in decreeing the suit of
the Municipality and granting injunctions against the appellant company.
For the reasons stated above the suit of the plaintiff is dismissed and the appeal is allowed with costs throughout.