NADIAD ELECTRIC CO Vs. NADIAD BOROUGH MUNICIPALITY NADIAD

JUDGEMENT

(1.) This appeal raises a short question as to whether under Section 22-A(3) of the Indian Electricity Act, 1910, hereinafter referred to as 'the Act', a local authority is entitled to continuance of supply of electrical energy on the same terms and conditions even when its agreement expires. After the earlier agreement, dated April 3, 1937, was declared by the Civil Court as per the decree, date November 17, 1939, to be null and void in a suit filed by the ratepayer, the present agreement between the licensee company and the plaintiff municipality, the local authority, was entered into on August 14, 1940 for a period of 20 years for supply of electrical energy to this local authority on terms specified therein. The said agreement was to expire on August 13, 1960. The licensee company by the letter, dated May 10, 1960, intimated the local authority that on the expiry of the said agreement the company would have no obligation to supply electrical energy on the same terms, but that they would charge increased rates. The Municipal Board passed a resolution on August 6, 1960 to file a suit as they were of the view that they were entitled to renewal of the agreement, or in any event, to have the supply continued to them on the same terms by the licensee company. The plaintiff Municipality, therefore, filed the present suit. Both the trial Court as well as the first appellate Court dismissed the plaintiff's suit on the ground that there was no covenant providing for any implied renewal of the agreement in question, and that Section 22-A(3) could not help the plaintiff in the present case. When the matter came up before our learned brother Bhagwati, J., (as he then was) in Second Appeal, our learned brother also took the same view that the relevant Cls. 14 and 15 could not be pressed in aid to spell out any implied renewal of the agreement in question. As regards the applicability of Section 22-A(3), however, our learned brother revered the decision of the two lower Courts as he came to the conclusion that Section 22-A(3) created an obligation on the licensee to continue the supply of electrical energy on the same terms even after the expiry of the said agreement. On that footing our learned brothers allowed the appeal and granted a declaration to the plaintiff-Municipality that the defendant company was bound under Section 22-A(3) to continue to supply electrical energy to the plaintiff on the same rates and on the same terms and conditions as specified in the agreement, dated August 14, 1940, so long as the plaintiff continued their establishment used or intended to be used for maintaining supplies and services essential to the community until the defendant received a notice in writing from the plaintiff requiring them to discontinue the supply. Our learned brother made it clear that this obligation was subject to the other provisions of the Act and also the Electricity (supply) Act, 1948 including Sections 57, 57A and VI and VII Schedules of that Act. No injunction was granted by him as the defendant company raised only the contention that the agreement was not automatically renewed and they were not bound to continue the supply on the same terms and conditions as envisaged under Section 22-A(3) of the Act and they had not refused to supply electrical energy to the plaintiff on any other grounds. The question regarding the automatic renewal is not raised in this appeal. This apwal is only confined to the question as regards the true interpretation of Section 22-A(3) of the Act. The licensee company has come in this appeal on the certificate being issued by our learned brother.

(2.) For a proper interpretation of Section 22-A(3), it would be proper to consider its entire setting and background especially as both Section 22-A and Section 22-B were introduced in that Act by the Amending Act 32 of 1959 which came into force, on September 5, 1959. Section 22 of the Act provides that where energy is supplies by a licensee, every person within the area of supply shall except in so far as is otherwise provided by the terms and conditions of the license, be entitled on application, to a supply on the same terms as those on which any other person in the same area is entitled in similar circumstances to a corresponding supply. The proviso is not material for our purpose. Section 23(1) provides that a licensee shall not, in making any agreement for the supply of energy, show undue preference to any person. Thus before the amended Section 22-A and Section 22-B were inserted, the scheme of Sections 22 and 23 made it clear that every consumer was entitled to a supply without any discrimination with any other person similarly situated on the same terms and without any discrimination and the licensee company on the making any agreement for the supply of electric energy could not show any undue preference to any person. It is, therefore, by way of an exception to the scheme of Sections 22 and 23 that preferential supply could be permitted and that is why Section 22-A(1) has been now introduced. The two newly inserted provisions Sections 22-A and 22-B are as under:-

(3.) On a perusal of these two newly introduced Section 22-A and 22-B, it is obvious that there are three different concepts introduced in these two relevant provisions. Section 22-A(1) deals with preferential supply in case of a certain class of consumers who could be preferred to any other consumer in the supply by the licensee. Section 22-A(3), however, had nothing to do with any preferential supply. It only provides for continuance of supply on the same terms and conditions when the previous agreement expires. The last Section 22-B, however, enables the State to pass orders in general for maintaining supply and securing equitable distribution of energy, and in particular, the said order could direct any licensee, even not to comply except with the permission of the State Government, with its existing contracts and agreements for supply to another consumer. Thus, the scheme of the newly introduced sections 22-A and 22-B is an integrated scheme even though its different provisions operate in three different fields. The preferential treatment which could be given under direction under Section 22-A(1), as well as the continuance of supply on the same terms even after the expiry of the contractual agreement by reason of the statutory obligation enacted under Section 22-A(3) have reference to establishments used or intended to be used for maintaining supplies and services essential to the community. As regards Section 22-B, however, it deals with a different problem of controlled distribution and consumption of electrical energy being to secure an equitable distribution and maintain the supply when it becomes necessary or expedient. Therefore, all these three provisions show an important nexus or interdependence as they are all intended to achieve the contemplated end in their wider public interest. Of course, all the three operate in the different perspective or the fields. But they all form part of an integrated scheme as aforesaid. In this context, Mr. Shah rightly pointed out that the legislature must be conscious of the fact that especially in case of a local authority which formed a large bulk of such establishments used or intended to be used for maintaining supplies and services essential to the community, the Legislature knew that their agreements were not on the usual pattern, which were applicable to other consumers, where the agreement for supply of energy would not get terminated on the expiry of the period specified. In this connection, Mr. Shah drew our attention to Section 3(2)(f) which provides that the provisions contained in the Schedule to the Act shall be deemed to be incorporated with, and to form part of every license granted under this Part. In the Schedule to the Act, Part V (1) provides that where ........ a requisition is made by two or more owners or occupiers of premises in or upon any street within the are of supply or by the State Government or a local authority, charged with the public lighting thereof, requiring the licensee to provide distributing mains throughout such street or part thereof, the licensee shall comply within six months with the requisition unless:-