THE UNION OF INDIA (UOI) REPRESENTED BY THE SECRETARY, MINISTRY OF COMMUNICATIONS AND ANR. Vs. S. NARAYANA IYER

JUDGEMENT

(1.) THIS appeal is instituted by the Union of India, represented by the Secretary, Ministry of Communications, New Delhi, and the General Manager, Telephones, Madras from the judgment of our learned brother Venkatadri, J., in W.P. No. 2122 of 1966, striking down the recently enhanced Telephone tariff. I might immediately state that the entire Judgment proceeds upon two bases, or comprehensive considerations, both of which have now become academic, or inapplicable. Firstly, in striking down this enhancement of the tariff the learned Judge was largely influenced by the fact that the increased revenue, thereby secured, was sought to be utilised to cover the deficits in the Posts and Telegraph Department. The learned Judge thought that this was illegitimate and inadmissible. To quote: The Posts and Telegraphs Department consists of various units, such as postal, telegraph, radio and telephone units. Each department or wing is a separate unit by itself, with regard to personal or service conditions, or management or supervision. The units are not interconnected, intervened or interlaced with each other.

(2.) FOR this reason, the learned Judge considered that there was no nexus of integration, following D.C.M. Chemical Works v. Its workmen (1962) 1 I.L.J. 385, between the sections of the Posts and Telegraphs Department and Telephones, and hence that this vitiated the levy altogether. This matter has now become strictly academic, in the light of the developments before us in the arguments of both learned Counsel, particularly of Sri Kumaramangalam for the appellant. Sri Kumaramangalam has contended that this perspective of approach is redundant, even if it be conceded as not erroneous. He contends that the Department of Telephones (appellant) is a public Utility Undertaking, which, in this country, is a State -owned monopoly under Article 19(6)(ii) of the Constitution of India. The regulation of its Tariff is or ought to be governed by principles, which are evident in the various decisions of American Courts, where this branch of the law has reached fullest development. Both on these very principles, and on the principles on which judicial Review of subordinate legislation is permissible, since it is conceded that the Rule embodying the enhancement is made under a Statute and placed on the table of the Houses of Parliament, in terms of the Rules itself, the enhancement is perfectly justified, and not liable to be struck down. When he can show this, according to the argument and show that the rates of return on the ' Rate Base' are very reasonable, and within limits ranging from 3 and 4 per cent up to 8 per cent, on the Mid -term Capital Investment, the further argument of the learned Counsel is that, whether the amount is to be utilised ultimately to cover deficits in the Posts and Telegraphs Department, or to reduce the burden on the taxpayer, by crediting to General Revenues is quite academic.

(3.) THE other base or foundation of the judgment of the learned Judge (Venkatadri, J.) is a related one, that this tariff is a ' fee ' and not a tax, governed by the principle of the levy of ' fee ' to be deduced from such authorities, as The Commissioner, Hindu Religious and Charitable Endowments v. L.T. Swamiar : [1954]1SCR1005 , Hingir Rampur Coal Co. v. State of Orissa : [1961]2SCR537 and India Sugars and Refineries Ltd. v. Municipal Council, Hospet : AIR1943Mad191 . But it is now clear beyond doubt, from a careful study of the record and from the very arguments submitted in the appeal, that what we have here is a Rate or Tariff of Rates, imposed by a State -owned Public Utility Corporation ; it is certainly not a 'fee', in the restricted sense, for the element of quid pro quo cannot exhaust its content. Such a Corporation, according to the authorities, is entitled to charge a tariff, which would include a reasonable return on the 'Rate base', or the Mid -term Capital Investment. Such a Corporation is equally entitled to make provision for; expansion of capital or ' self -financing ', as it has been termed in the treatises, it is entitled to appropriate sums towards dividends for subsidies by Government, from General Revenues, if made, before the return is determined. We have permitted an amendment of the pleadings, in the formal sense, to enable these arguments to be pressed before us. The consequence has inevitably been, that the entire appeal has been argued upon a somewhat different level by learned Counsel on both sides.