PASCHIMANCHAL VIDYUT VITRAN NIGAM LD.&OR Vs. M/S ADARSH TEXTILES & ANR : Supreme Court - Electricity Act, 2003, Uttar Pradesh Electricity Reform Act, 1999
Supreme Court of India
CIVIL APPEAL NO.10707 OF 2014 Judgment Date: Dec 03, 2014
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.10707 OF 2014
(ARISING OUT OF SLP (CIVIL) NO.29322 OF 2010)
PASCHIMANCHAL VIDYUT VITRAN NIGAM LTD.
& ORS. ... APPELLANTS
VERSUS
M/S ADARSH TEXTILES & ANR. ...RESPONDENTS
WITH
CIVIL APPEAL NO.10708 OF 2014
(ARISING OUT OF SLP (CIVIL) NO.9869 OF 2008)
WITH
CIVIL APPEAL NO.10709 OF 2014
(ARISING OUT OF SLP (CIVIL) NO.30528 OF 2009)
WITH
CIVIL APPEAL NO.10710 OF 2014
(ARISING OUT OF SLP (CIVIL) NO.29320 OF 2010)
AND
CIVIL APPEAL NO.10711 OF 2014
(ARISING OUT OF SLP (CIVIL) NO.29324 OF 2010)
J U D G M E N T
Arun Mishra, J.
1. Leave granted in all the special leave petitions.
2. The question involved in the appeals is whether policy decision dated
14.6.2006 issued by the Government of Uttar Pradesh regarding supply of the
electricity to power loom bunkers on the flat rate could have been applied
by the U.P. Electricity Regulatory Commission (hereinafter referred to as
"the Commission") to the industries availing HV-2 category connection.
3. To dispose of the appeals, we notice facts from civil appeal arising
out of SLP (Civil) No.9869 of 2008. The backdrop facts indicate that the
Commission fixed tariff for the year 2004-2005, whereby rebate of Rs.5,000/-
per consumer was granted to power loom bunkers availing LMV-2 and LMV-6
connections in accordance with policy of the U.P. Government.
4. LMV-2 is a non domestic light, power and electricity connection, LMV-
6 electricity connection is of small and medium power having connected load
up to 100 HP for industrial/processing or agro-industrial purposes, power
loom, etc. HV-2 connection is provided for utilising large and heavy power
for industrial and other purposes having contracted load of above 100 HP.
Industries which are having load more than 100 HP are covered by tariff HV-
2.
5. The State Government had issued order dated 14.6.2006 to Managing
Director, U.P. Power Corporation Ltd. (hereinafter referred to as
'Corporation'). The Commission opined that it has the effect of altering
the rate schedule approved by it. The Commission, in turn, issued order
dated 3.7.2006 restraining all electricity supply undertakings in the State
of U.P. from implementing the provisions of State Government order dated
14.6.2006.
6. The Commission took up the matter to work out modalities as per the
Government order. Chairman of the U.P. Power Corporation Limited filed an
affidavit before the Commission providing a new scheme compatible with
legal framework along with a directive from the State Government issued
under Section 108 of the Electricity Act, 2008. The scheme as proposed in
the affidavit states that despite the aforesaid order, the normal billing
as per applicable tariff shall be made but payment shall be collected as
per the directions of the Government at normal billing cycle and that the
advance subsidy shall be collected from the Government in one instalment or
maximum two half yearly instalments. Pursuant thereto the Commission on
11.7.2006 passed order in which it had prescribed the rate for LMV-2 and
LMV-6 consumers only. However, Commission also opined that the State
Government has permitted realization on flat rate depending upon reed
space, number of looms, etc. It appeared to be the case of altering the
rate schedule of the tariff order fixed by it which is not permissible
within the legal framework to be attempted by the State Government. The
State Government also did not spell out compliance of the advance subsidy
payment as envisaged under Section 65 of the Electricity Act, 2003. While
dealing with the matter, the Commission observed that billing of the power
loom be done strictly in accordance with prevalent schedule.
7. It is pertinent to mention that tariff order 2004-2005 was issued by
the Commission for providing benefit to LMV-2 and LMV-6 consumers, it
admittedly did not cover HV-2 consumers. The Commission ultimately
directed that billing of the power loom consumers shall be done strictly in
accordance with prevalent rate schedule of tariff order 2004-2005 on
monthly basis. It issued further directions with respect to the collection
of the subsidy. It also directed that payment from the power loom
consumers shall be collected as per the policy direction of the Government
on monthly basis. It also directed that Government should earmark capital
subsidy for providing free of cost meters to power loom consumers in case
of new connections.
8. Later on, industries enjoying HV-2 connection approached the
Electricity Regulatory Commission to clarify that whether the order of the
Commission dated 11.7.2006 in the matter of subsidized electricity rates
for power loom consumers shall be applicable to them also, as the benefit
of the said order was not extended to them by the concerned authorities.
9. The Commission passed an order on 14-15/9/2006 that the order dated
11.7.2006 shall apply mutatis mutandis for even HV-2 power loom consumers
irrespective of their load. It also directed that subsidy provision shall
accordingly apply to them also.
10. The Secretary, Government of U.P. wrote to the Chairman, U.P. State
Electricity Regulatory Commission on 6.10.2006 drawing their attention to
the Commission's letter dated 14th/15th September, 2006 clarifying that
only those consumers to whom the State Government was giving subsidy under
Section 65 of Electricity Act, 2003 were entitled for benefit of Government
order dated 14.6.2006. The scheme to supply electricity on flat rate to
the power loom bunkars has been made for LMV-2 and LMV-6 consumers for whom
earlier also provisions of subsidy had been made. The U.P. Government has
not made provisions of any subsidy for industries availing HV-2 category
connection. Therefore, distributing companies of U.P. could not give
facility of flat rate tariff to HV-2 consumers.
11. The aforesaid communication was not dealt with by the Commission but
Secretary of the Commission vide letter dated 18.10.2006 advised the
Principal Secretary, Energy, Government of U.P. to amend the Government
order dated 14.6.2006 so as to confine subsidy to LMV-2 and LMV-6 consumers
only.
12. On 24.2.2007 Chief Engineer (Commercial), U.P. Power Corporation
Ltd., Commercial Cell wrote to Chief Engineer (Distribution) Purvanchal
Vidyut Vitran Nigam Ltd., Varanasi Region, Varanasi that present tariff is
applicable to LMV-2 and LMV-6 consumers and subsidy is not admissible to HV-
2 consumers.
13. On 1.5.2007 the Secretary of the Government of U.P. wrote to the
Managing Director of U.P. Power Corporation Ltd. that only the weaver-
consumers falling under rate schedule LMV-2 and LMV-6 would be covered by
the flat rate for the supply of electricity to bunkars.
14. One of the industry, namely M/s Hiltrex Industrial Fabrics Pvt. Ltd.,
Sahjani, Magarwara, District Unnao, availing HV-2 connection, filed W.P.
No.2204 (M/B) of 2007 before the High Court of Judicature at Allahabad,
Lucknow Bench, Lucknow. The writ petition was dismissed. It was held by
the Division Bench that subsidy paid by the Government was to help person
or class of persons by keeping the prices down. The earlier decision dated
14.6.2006 was intended to give benefit to weavers, who were members of the
weaker section of the society, not to consumers like the petitioners.
15. Thereafter, the U.P. Electricity Regulatory Commission issued a
letter dated 10.10.2007 in the matter of extension of rebate/subsidized
power loom flat rate tariff to HV-2 category consumers, duly noticing the
decision of the Lucknow Bench in order dated 16.8.2007 rendered in the
aforesaid writ petition, it clarified that the provision of tariff for 2006-
2007 shall not be attracted in case of HV-2 power loom consumers in
consonance with the findings of the High Court.
16. Thereafter, in the instant matters the writ petitions were filed by
the industries seeking extension of benefit for HV-2 power loom consumers
questioning the aforesaid adverse decisions. A Division Bench of the High
Court of Allahabad in CMWP No.32401 of 2007 M/s. Maa Vind Vasini
Industries Gorakhpur and Another v. Purvanchal Vidyut Vitran Nigam Ltd.
and others, allowed the writ petition vide order dated 12.12.2007. The
said order has been followed in CMWP No. 8765 of 2008 M/s. Adarsh Textiles
v. Paschimanchal Vidyut Vitran Nigam Ltd. & Ors., and CMWP No. 8763 of 2008
M/s Amit Textiles v. Paschimanchal Vidyut Vitran Nigam Ltd.
17. In CMWP No.63293 of 2007, M/s. Vikas Textile Company and another v.
State of U.P. and others, though following the decision in M/s Maa Vind
Vasini Industries and another v. Purvanchal Vidyut Vitran Nigam Limited
Varanasi and others, it has been ordered by the High Court on 13.8.2009
that the Corporation shall charge petitioners in accordance with the
Government order dated 11.7.2007. The petitioner shall not be entitled to
the relief provided by the Government orders dated 14.6.2006 and 31.3.2007.
18. Aggrieved by the order dated 13.8.2009, Vikas Textile has filed SLP
(Civil) No.30528 of 2009 and prayed for enforcement of the Government Order
dated 14.6.2006 and question of demand raised by respondent No.6 (Executive
Engineer (Distribution), Electricity Distribution Division - I, Hathras, of
Rs.4,43,904/- for the period from April 2007 to December 2007. The said
amount had been deposited 'under protest' on 23.9.2009 and a direction is
sought to refund the aforesaid amount with interest.
19. We have heard learned counsel for the parties. It was submitted on
behalf of the appellants that policy decision reflected in the order of the
State Government dated 14.6.2006 was not applicable to HV-2 consumers. The
State Government intended to grant benefit to the weavers alike to farmers.
It has extended the benefit in the previous years to LMV-2 and LMV-6
consumers and not to HV-2 category industries and no provision for subsidy
had been made by the State Government for HV-2 consumers. Thus, it was not
open to the Commission to fix the tariff for HV-2 industries and compel the
State Government to release the subsidy. The Government had clarified its
stand on 6.10.2006. It was also apparent from the communication dated
24.2.2007 of Chief Engineer (Commercial) of the Corporation to one of the
distributors. The Commission has acted beyond the powers while fixing the
tariff for HV-2 category consumers and based thereupon in directing the
State Government to release subsidy. The decision of the Lucknow Bench
could not have been ignored and was binding on the Coordinate Bench of the
same High Court. The decision of the Lucknow Bench could not be said to be
per incuriam. It was not open to Commission to pass ex parte clarification
on 14/15th September, 2006 without hearing the interested parties and also
State Government.
20. It was contended on behalf of the industries availing HV-2 connection
that benefit of the order dated 14.6.2006 had rightly been extended by the
Commission to such industries. The view taken by the High Court of
Allahabad in the subsequent impugned decisions is in accordance with law.
21. Prior to 14.1.2000 electricity was being generated, distributed and
transmitted in the State of U.P. by the erstwhile Uttar Pradesh State
Electricity Board constituted under Section 5 of the Electricity (Supply)
Act, 1948.
22. The Uttar Pradesh Electricity Reforms Act, 1999 (hereinafter referred
to as "the Reforms Act, 1999") came to be enacted which
authorised/empowered the State Government, time to time issue directions on
a policy matter in regard to the electricity and subsidy as per the
provisions contained in Section 12 of the Reforms Act, 1999. Same is
reproduced hereunder :
"12 Power of the State Government. (1) The State Government may, from time
to time, issue directions not inconsistent with this Act, on a policy
matter in regard to electricity and if any dispute arises between the
Commission and the State Government as to whether a question is or is not a
policy matter it shall, be referred to the Central Electricity Regulatory
Commission whose decision thereon shall be final and binding.
(2)(a) The State Government shall be entitled to issue policy directions
with respect to the subsidies to be granted for supply of electricity to
any class or classes of persons or in respect of any area in addition to
the subsidies adjusted by the Commission while regulating and approving the
tariff structure:
Provided that the State Government shall contribute the amount to
compensate the licensee or person affected by the grant of the subsidies to
the extent of the subsidies granted.
(b) the amount of the subsidy to be paid under clause (a) and the method
and manner of payment and the time within which such amount is to be paid
by the state Government shall be determined by the Commission and the
Commission will calculate such amount in accordance with the procedure
provide in the regulations."
23. The Electricity Act, 2003 was enacted by the Parliament. Section 62
whereof confers the power upon Commission to determine the tariff. Section
65 of the Electricity Act, 2003 enables the State Government to grant
subsidy to any consumer or class of consumers in the tariff determined by
the State Commission under Section 62.
24. Section 108 of the Act of 2003 deals with the power to issue
directions by the State Government. The Commission shall be guided by such
directions in the matter of policy involving public interest as the State
Government may give to it in writing.
Sections 62, 65 and 108 of the Electricity Act, 2003 are reproduced
hereunder :
"Section 62. (1) The Appropriate Commission shall determine the tariff in
accordance with provisions of this Act for -
Supply of electricity by a generating company to a distribution licensee:
Provided that the Appropriate Commission may, in case of shortage of supply
of electricity, fix the minimum and maximum ceiling of tariff for sale or
purchase of electricity in pursuance of an agreement, entered into between
a generating company and a licensee or between licensees, for a period not
exceeding one year to ensure reasonable prices of electricity;
transmission of electricity;
wheeling of electricity;
retail sale of electricity.
Provided that in case of distribution of electricity in the same area by
two or more distribution licensees, the Appropriate Commission may, for
promoting competition among distribution licensees, fix only maximum
ceiling of tariff for retail sale of electricity.
(2) The Appropriate Commission may require a licensee or a generating
company to furnish separate details, as may be specified in respect of
generation, transmission and distribution for determination of tariff.
(3) The Appropriate Commission shall not, while determining the tariff
under this Act, show undue preference to any consumer of electricity but
may differentiate according to the consumer's load factor, power factor,
voltage, total consumption of electricity during any specified period or
the time at which the supply is required or the geographical position of
any area, the nature of supply and the purpose for which the supply is
required.
(4) No tariff or part of any tariff may ordinarily be amended more
frequently than once in any financial year, except in respect of any
changes expressly permitted under the terms of any fuel surcharge formula
as may be specified.
(5) The commission may require a licensee or a generating company to comply
with such procedures as may be specified for calculating the expected
revenues from the tariff and charges which he or it is permitted to
recover.
(6) If any licensee or a generating company recovers a price or charge
exceeding the tariff determined under this section, the excess amount shall
be recoverable by the person who has paid such price or charge along with
interest equivalent to the bank rate without prejudice to any other
liability incurred by the licensee."
"Section 65. If the State Government requires the grant of any subsidy to
any consumer or class of consumers in the tariff determined by the State
Commission under section 62, the State Government shall, notwithstanding
any direction which may be given under section 108, pay, within in advance
in the manner as may be specified, by the State Commission the amount to
compensate the person affected by the grant of subsidy in the manner the
State Commission may direct, as a condition for the licence or any other
person concerned to implement the subsidy provided for by the State
Government:
Provided that no such direction of the State Government shall be operative
if the payment is not made in accordance with the provisions contained in
this section and the tariff fixed by State Commission shall be applicable
from the date of issue of orders by the Commission in this regard."
"Section 108 (1) In the discharge of its functions, the State Commission
shall be guided by such directions in matters of policy involving public
interest as the State Government may give to it in writing.
(2) If any question arises as to whether any such direction relates to a
matter of policy involving public interest, the decision of the State
Government thereon shall be final."
25. It is apparent from a bare reading of the aforesaid provisions of
Electricity Act, 2003 and Reforms Act 1999 that in discharge of its
functions, the State Commission shall be guided by such directions in
matters of policy involving public interest as the State Government may
give to it in writing. Such decision/direction of the State Government in
the matter of policy, subsidy and public interest shall be final. Under
Section 65 it is a prerogative of the State Government to grant any subsidy
to any consumer or class of consumers in the tariff determined by the
Commission under Section 62. It is apparent from the provisions contained
in Sections 65 and 108 of Act of 2003 that to grant subsidy to any consumer
or class of consumers is the prerogative of the State Government and such
other direction issued in the public interest shall be binding upon the
Commission.
26. When we consider the policy decision of the State Government dated
14.6.2006 read with communications dated 6.10.2006, dated 24.2.2007 and
lastly dated 1.5.2007, the State Government never intended to extend the
benefit of the subsidy to HV-2 category consumers. It had not made any
provision for extending subsidy to HV-2 consumers. The Commission in order
dated 11.7.2006 itself has confined the tariff respite to LMV-2 and LMV-6
consumers. It was not open to the Commission to issue clarification dated
14-15/9/2006, as the matter of providing subsidy was clearly prerogative of
the State Government under the provisions of Section 65 read with Section
108 of the Act of 2003 and Section 12 of Reforms Act, 1999 hence Commission
could not have accepted on its own, or directed the State Government to
release the subsidy to HV-2 consumers and that too unilaterally.
27. When we read the order dated 14.6.2006 it becomes clear that the
State Government has granted approval for supply of electricity to "power
loom bunkers on flat rate as extended to farmers". It has fixed the tariff
for the loom having 60 inches reed space, Rs.65/- per loom and it will be
presumed that load of loom is 0.5 H.P. and for looms having reed space of
more than 60 inches, Rs.130/- per month will be charged and it will be
presumed that load of the loom is 1 H.P. In additional machines in urban
areas, Rs.130/HP/month would be charged and in rural area 75/HP/month would
be charged. It also provided that the expenses for new meter will not be
taken from consumers.
28. It can be culled out from order dated 14.6.2006 that the State
Government intended the benefit to be extended to power loom 'weavers'
alike farmers. The activity of manufacturing textile is generally
understood as the weaving of such textile and man who is engaged in such
power loom activity is known as weaver. Weaving means: to form a fabric by
interlacing yarn on a loom. It also means the method of pattern of weaving
or the structure of a woven fabric, as observed by this Court in Ess Dee
Carpet Enterprises v. Union of India (UOI) and Others (1990) 1 SCC 461. The
State Government thus, never intended the benefit to be given to big
industries like HV-2 industries. In the circumstances, it was incumbent
upon the Commission to consult the State Government before passing
clarification order dated 14-15/9/2006 while applying its order dated
11.7.2006 to HV-2 consumers. When the State Government has written to the
Commission on 6.10.2006, thereafter there was no justification for the
Commission not to recall the clarification issued on 14-15/9/2006 as it was
the prerogative of the State Government to extend the benefit of subsidy to
a class or particular class of consumers and subsidy being a concession
could not have been enforced as a matter of right. The Commission was
bound to act as per such directives of State Government.
29. The submission that the State is bound by the principle of promissory
estoppel to extend the benefit of subsidy to HV-2 consumers is also devoid
of merit. This Court in Gujarat State Financial Corporation vs. M/s. Lotus
Hotels Pvt. Ltd. [1983 (3) SCC 379] had referred to Motilal Padampat Sugar
Mills Co. Ltd. vs. State of U.P. & Ors. [1979 (2) SCC 409] and observed as
under :
"The true principle of promissory estoppel, therefore, seems to
be that where one party has by his words or conduct made to the other a
clear and unequivocal promise which is intended to create legal relations
or affect a legal relationship to arise in the future, knowing or intending
that it would be acted upon by the other party to whom the promise is made
and it is in fact so acted upon by the other party, the promise would be
binding on the party making it and he would not be entitled to go back upon
it, if it would be inequitable to allow him to do so having regard to the
dealings which have taken place between the parties, and this would be so
irrespective of whether there is any pre-existing relationship between the
parties or not."
The aforesaid principle is not attracted in the instant case as
the State Government has not extended any assurance by its conduct much
less unequivocal one, thus there was no question of the industries acting
upon it. The State Government had not extended any assurance to extend the
subsidy and, on the other hand, it had made its stand clear and objected to
the Commission's clarification by writing a letter on 6.10.2006.
30. Equally futile is the reliance upon the agreements which have been
entered into for supply of electrical energy after the clarification was
issued by the Commission. It was on the basis of the directive issued by
the Commission that the said agreements have been entered into by the
consumers with the Corporation. However, a perusal of the agreement makes
it clear there is no mention as to the subsidy to be extended by the State
Government. The only stipulation is that the supply would be made at the
rate specified by the Commission. Thus, the agreement does not deal with
the question of subsidy at all. Even otherwise the agreements can also not
be said to be binding upon the State Government as the
Commission/Corporation had no authority to burden the State with the
subsidy when it had made no such provision for HV-2 consumers. It is a
settled proposition that the assurance to form promissory estoppel must
come from the person in authority having competence to extend it. The
Commission and the Corporation had no jurisdiction in the matter of subsidy
which is the domain of the State Government.
31. For the foregoing reasons, we find that the view taken by the High
Court of Allahabad cannot be said to be sustainable while extending the
benefit of order dated 14.6.2006 to the HV-2 consumers. The demand raised
in Vikas Textiles' case for the period from April, 2007 to December, 2007
was also appropriate. In view of the aforesaid decision, the appeals
arising from SLP (C) Nos.29322/10, 9869/2008, 29320/2010 and 29324/2010 are
allowed and the appeal arising from SLP(C) No. 30528/2009 is dismissed.
Parties to bear their own costs.
..................................J.
(Jagdish Singh Khehar)
..................................J.
(Arun Mishra)
New Delhi;
December 3, 2014.
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