State of U.P. & Ors Vs. Hindustan Aluminium Corpn. Ltd. & Ors [1979] INSC 87 (17 April 1979)

SHINGAL, P.N.

DESAI, D.A.

CITATION: 1979 AIR 1459 1979 SCR (3) 709 1979 SCC (3) 229

CITATOR INFO:

R 1981 SC 711 (10) RF 1988 SC1737 (30) R 1989 SC 788 (32)

ACT:

Electricity Act (9 of 1910), s. 2(h) & Electricity (Supply) Act 1948 (64 of 1948) S. 2(b)-State Electricity Board if a licensee.

Electricity Act 1910 (9 of 1910), S. 22-B (as inserted in 1959)-Scope and object of-Order under section-Factors to be taken into consideration & Electricity (Supply) Act 1948 (54 of 1948), S. 26 Proviso 2-Scope of.

U.P. Electricity (Regulation of Supply, Distribution, Consumption and Use) Order 1977- Cl. 6(a) (i) Proviso- Validity of.

Words & Phrases-'Regulation', 'restriction', 'prohibition'-Distinction between.

HEADNOTE:

At the time of granting licence to the company for the establishment of a new Aluminium factory the Government of India obtained the consent of the Government of U.P. To make available to the company in bulk cheap electricity from the Rihand Hydro-Electric Scheme. An agreement was entered into between the Company and the State Government for the bulk supply of electricity on a firm, continuous and uninterrupted basis at 1.99 odd paise per unit for a period of 25 years.

The company set up and commissioned its aluminium plant at Renukoot in April, 1962. It was granted a further licence for the expansion of its installed capacity. As the State was unable to meet the extra requirement of energy, sanction under s. 28 of the Electricity Act 1910 was granted to the Company, at its request, on November 12, 1964, to set up a generating station at Renusagar, near Renukoot. It set up two generating units of 67.5 mw each. The first unit started generating power in 1967 and the other in 1968.

In the meantime, permission was granted to increase the Company's installed capacity from 40,000 metric tonnes to 60,000 metric tonnes. The Company thought of setting up a plant for the production of 60,000 metric tonnes of aluminium in the State of Gujarat. But the Government of U.P. entered into negotiations with the Company and in its letter dated November 20, 1968, it stated that there could be no difficulty in meeting the interim requirements of energy for 2 to 3 years from the U.P. State Electricity Board and also for arranging for parallel running of their new power stations. The Company was granted sanction to expand the Renu Sagar Generation by 250 mw, and after negotiations with the State Government it was agreed that the U.P.S.E.B. would meet the additional energy under a phased programme. The U.P.S.E.B. stated in its letter dated September 2, 1972, that the supply would be without prejudice to the power of the State Government to control the 710 distribution and consumption of energy under s. 22B of the Act. The additional energy was not made available to the Company during 1972-75 although the rate was substantially increased with retrospective effect.

An agreement was however entered into between the Company and the U.P.S.E.B. on November 30, 1976, in supersession of the earlier agreements, and it was stipulated that it would be read and construed in all respects in conformity with the provisions of the Electricity (Supply) Act, 1948 and its rules and the regulations and the amendments thereto.

The State Government took a decision in December 1976 to reconnect some agricultural pumping sets which had been disconnected and this placed an additional load on the grid system of the State. On the note of the UPSEB that there was acute shortage of energy, and its suggestion for the imposition of some restrictions, the U.P. Electricity (Regulation of Distribution and Consumption) order 1977, was issued by the Government on April 7, 1977. Under cl. 6(a)(i) of the Order, the Company could draw energy only to the extent of 50 per cent of its monthly consumption.

As the shortage of energy became more acute the Secretary of the Power Department sent a note to the Governor dated May 3, 1977 stating that there was a large gap between demand and availability of energy and that overriding public interest, particularly the need to maintain food supply, required that units which were heavy consumers of energy should be subjected to further cut in the consumption of energy. It was particularly pointed out that as the Company was itself generating energy at Renusagar, it will have more than 50 per cent of energy even if the Board's supply was completely withdrawn. The Governor approved that proposal on June 1, 1977. A proviso was inserted in cl. 6(a) (i) of the U.P. Electricity (Regulation of Distribution and Consumption) Order, 1977 in June 2, 1977 according to which an industrial consumer having its own source of generation of energy from which it obtained 50 per cent or more of its consumption would suffer a cut of 100 per cent in the energy supplied by the UPSEB. The company was given time to bring about the total cut.

Fresh elections were held to the State Legislature Assembly, and the new Cabinet was sworn in on June 23, 1977.

It decided to reduce the supply of energy to the company to zero, in pursuance of the amendment dated June 2, 1977 and called for a fresh note on the position regarding the generation and distribution of energy. The Chairman of the UPSEB prepared a note on August 26, 1977, in which he pointed out the shortage of energy, including substantial fall in the generation of thermal energy, and in the "import" of energy. The State Government made an order on September 19, 1977 called the U.P. Electricity (Regulation of Supply Distribution, Consumption and Use) Order, 1977.

That order was made for maintaining the supply and securing equitable distribution of electrical energy, and to provide for regulating the supply, distribution, consumption and use thereof. Clause 6 of the order which provided for compulsory cut in consumption of energy and demand, affected the company.

711 The clause provided as follows:

"6(a)(i): In respect of electrical energy consumed by all large and heavy power industrial consumers receiving power at 33 kv. and above excepting fertilizers, from the U.P.S.E.B. a cut of 50 per cent in their monthly consumption of electricity both in respect of energy and demand shall be exercised:

Provided that where any such industrial consumer has his own source of generation of energy which alone enables him to obtain 50 per cent or more of his total consumption, then a cut of 100 per cent in the energy supplied by the UPSEB shall be exercised." Being aggrieved by the compulsory cut imposed by the Government the company filed its third writ petition against the order. The company's earlier writ petitions were dismissed as withdrawn.

The High Court took the view:- (a) that it was the statutory obligation of the UPSEB to supply electrical energy to a consumer and held that the Pipri Bus Bar was a "distributing Main" under s.2(o) and was an electricity supply line as defined in s.2(f) of the Act;

(b) s. 22B of the Act did not confer power on the State Governments to cut off supply of energy to existing consumers or to issue an order that certain preferences will be followed in supplying energy, (c) though the company deserved the writ, it could not be said that UPSEB had deliberately under utilised its generation capacity, and held the first proviso to Clause 6(a)(i) of the order ultra vires, quashed it and directed the UPSEB to supply electrical energy to the company in accordance with law, without taking into consideration, the provisions of the said proviso.

Appeals were filed in this Court by the State and the Company, the State being aggrieved because the High Court had interfered with the U.P. Electricity (Regulation of Supply, Distribution, Consumption and Use) Order, 1977 dated September 19, 1977 made under s. 22B of the Electricity Supply Act, 1910 and the Company felt aggrieved on the ground that the High Court had not granted all the reliefs which it had claimed in its petition under Art. 226 of the Constitution.

In the appeals it was contended:

(a) Only the energy which was generated by the Board could be the subject-matter of an order under s. 22B of the Act and it was not permissible for the State to take into account the energy generated by the Company for its own use.

(b) Sub-s. (1) of s. 22B of the Act was confined to a licensee and would not be applicable to the energy supplied by a sanction-holder under s. 28.

(c) The only permissible preference was that under s.22A in favour of an establishment mentioned in it and the preference shown to individual consumers was illegal.

(d) The validity of the Order, which was by way of subordinate legislation, was open to judicial scrutiny; the subjective satisfaction of the State Government in making it was open to challenge in a court of law, the order suffered from the vice of malice in law; it had been made in the colourable exercise of 712 the power under s. 22B of the Act simply to compel the company to agree to the payment of a higher rate for the supply of energy to it. While making the order the State Government failed to take into consideration the facts that the production of aluminium was of considerable importance to the national economy and that the Board was capable of generating more energy but was not doing so. The issue of the Order was really a colourable exercise of the State Government's power under s. 22B of the Act as power was supplied indiscriminately to new consumers after imposing a cut on the Company's consumption of energy.

(e) The Board had deliberately reduced its thermal generation.

HELD: 1. The High Court erred in taking the view that the Pipri Bus Bar, which was composed of a set of conductors which were made up of thick aluminium core steel reinforced cables, was a 'distributing main' under s. 2(e) of the Act and was an electric supply line as defined in s. 2(f) and that cl. VI of the Schedule to the Act would be fully applicable to the Board in so far as its obligation to the Company was concerned. In view of the second proviso of s. 26 of the Act of 1948, the provisions of cl. VI of the Schedule to the Act could apply to the U.P.S.E.B. in respect of that area only where distribution mains had been laid by the Board and the supply of energy through any of them had commenced. [724B-F] The High Court, therefore, erred in taking the view that the Board was bound by the term of cl. VI of the Schedule to the Act to supply energy to the Company within one month of the making of a requisition or within such longer period as the Electrical Inspector might allow. But even if the Board was under an obligation to supply energy to every person, the fact nevertheless remained that the State Government had the over-riding power to provide, by order made under s. 22B of the Act, for regulating the supply, distribution, consumption or use thereof. Sub-s. (2) of that section categorically states that, without prejudice to the generality of the power under sub-s. (1), the order may direct the Board not to comply with any contract, agreement or requisition for the supply of energy. [725B-D]

2. Sub-s. (1) of s. 28 of the Act in terms refers to and deals with, engaging by a non-licensee, in the business of supplying energy to the "public". It was, therefore, futile to contend that what was generated by the Renusagar Power Company was not meant for supply to the public, but was the Company's own energy. It is true that generation became, in the circumstances, the "captive" generation for the use of the Company, but that was far from saying that, in the eye of law, it was not energy meant for supply to the public or that it was not amenable to control under s. 22B.

It was therefore also liable to equitable distribution by an order under s. 22B of the Act. [725G-726A]

3. The expression "energy" had been defined by cl. (g) of s. 2 of the Act to mean electrical energy, generated, transmitted or supplied for any purpose or used for any purpose except the transmission of a message. It was therefore a pervading definition and there was no reason why energy generated and supplied under s. 28 of the Act should not fall within its sweep. [726B-C]

4. Though the use of the article "the" in sub-s. (2) was not quite appropriate, there was no justification for the argument that section 22B was applicable only to licensees and not to a sanction holder under s. 28. [727C] 713

5. What s. 22B of the Act authorised the State Government to do, was to make an order providing for 'regulating" the supply, distribution, consumption or use of energy. [727D]

6. A distinction between 'regulation' and 'restriction' or 'prohibition' had always been drawn. 'Regulation' promotes the freedom or the facility which is required to be regulated in the interest of all concerned, whereas 'prohibition' obstructs or shuts off, or denies it to those to whom it is applied. The High Court went wrong in thinking that the order had the effect of prohibiting the supply of energy to the Company, which was an 'exciting consumer'.

[727G-728C] Municipal Corporation of the City of Toronto v. Virgo, 1896 AC 88; Attorney General for Ontario v. Attorney-General for the Dominion and the Distillers and Brewers' Association of Ontario, 1896 AC 348; Birmingham and Midland Motor Omnibus Co. Ltd. v. Worcestershire County Council, [1967] 1 WLR 409. Tarr v. Tarr. [1972] 2 WLR 1068; The Automobile Transport (Rajasthan) Ltd. v. The State of Rajasthan & Ors., [1963] 1 SCR 491; State of Mysore v. H. Sanjeeviah, [1967] 2 SCR 361; Fatehchand Himmatlal & Ors. v. State of Maharashtra etc. [1977] 2 SCR 828 at p. 851.

7. What had been ordered was no more than a cut of 50 per cent in the monthly consumption of electricity and not a total prohibition of consumption of energy. That was a step in the direction of regulating the consumption of energy, and not a total prohibition as envisaged in the proviso to cl. 6(a) (i) of the Order. [728E]

8. The proviso operates in a special or particular field and for a particular purpose where it was considered necessary for regulating the supply etc., of the energy in the interest of the other consumers, for s. 22B was mean to maintain the supply and secure the equitable distribution of energy to all concerned. The High Court did not properly appreciate that aspect of the matter. [728F]

9. Large and heavy industrial consumers of the category in cl. 6(a)(i) are a class by themselves and it is hardly permissible for them to complain that the small preference shown to agriculturists in supplying energy for their water pumps or tube-wells, or in energising State tube-wells, supplying water to them, or the supply of energy to small scale industries had really created a privileged class of consumers or brought into existence any such concept of priorities as to run counter to or defeat the objective of bringing about the equitable distribution of energy by an order under s. 22B. The High Court had no real justification for recording an adverse finding against the State on the question of the so-called preference or priorities. [729G-H, 730B]

10. There was no doubt that the State Government formed its opinion about the necessity and expediency of making the Order for the purpose of maintaining the supply and securing the equitable distribution of energy at a time when that was called for and this Court cannot sit as a Court of appeal to examine any and every argument in an attempt to show that the opinion of the State Government was vitiated for one fanciful reason or the other. [731 G-H]

11. Although the U.P. Electricity (Regulation of Supply, Distribution, Consumption and Use) Order, 1977, had been made on the ground that the State Government was of the opinion that it was necessary and expedient for main- 714 taining the supply and securing the equitable distribution of electrical energy, to provide for regulating the supply, distribution, consumption and use thereof, it did not deal with all those matters in detail. In fact it may well be said to be an order relating essentially to compulsory cut in the consumption of energy. But that cannot detract from the basic fact that the order had the sanction of s. 22B of the Act and subserved the main purpose thereof. Therefore its validity was not open to challenge as a piece of subordinate legislation. [732G-733B]

12. Malice in law is another aspect of the doctrine of ultra vires. An offending Act can be condemned simply, for the reason that it is unauthorised. Bad faith has often been treated as interchangeable with unreasonableness and taking a decision on extraneous considerations. In that sense, it is not really a distinct ground of invalidity. It is well settled that if a discretionary power has been exercised for an 'unauthorised purpose' that is enough to invite the Court's review. [733-D] Roncarelli v. Duplessis, [1959] SCR 121 p. 141 (Canada Law Reports); referred to.

In the instant case, the Company had not been able to establish malice in law, merely because of what the Chief Secretary said in his press statement dated July 8, 1977, or what the Minister informed the Assemble. It may well be that the new State Government was dissatisfied with the new agreement which had been entered into at the instance of the political party which was then in power, but it could not be said that the new Minister's desire to examining the validity or propriety of that agreement arose out of any extraneous or improper consideration so as to amount to malice in law. [734H-735A]

13. Although the High Court arrived at the conclusion that the company deserved the writ which it granted, it did not find it possible to hold that the UPSEB, had deliberately under utilised its generation capacity. That was a finding of fact which did not call for interference.

14. As long as the dominant motive was proper and reasonable, and was not sullied by a mere pretext, the Order based on it would be valid when it was well within the due scope and policy of the Act and was an honest attempt to deal with the situation for which the power to make the order had been granted by the Act. There was thus no justification for the argument that there was malice in law on the part of the State Government in making the order.

15. That distribution can be said to be "equitable" which is "just and right under all the circumstances of the particular case". The High Court had recorded a finding that there was shortage in the generation of energy when the order was made. The fact remains that the demand for energy was far in excess of the supply from all sources available to the UPSEB. It had also been well established that a situation had arisen when it became necessary to obtain an order from the State Government about the course of action to be adopted by the Board. Self-contained notes were therefore drawn up in March, 1977 and on May 24, 1977. June 28, 1977 and August 26, 1977, which were quite detailed and objective and led to the making of the Order. The Order was a genuine attempt to secure equitable distribution of energy. It was true that the Company was the worst sufferer under cl. 6 (a)(i) of the Order, but then it was also the greatest consumer. [737C-F] 715

16. From the Chief Secretary's letter dated November 20, 1968 it appeared that the State Government had assured the Company that it would meet the interim requirement of the Company for 2 or 3 years from the UPSEB and facilitate the parallel running of the Company's new power station in addition to the station which had been set up at Renusagar.

But the State was not a party to the agreement dated November 30, 1976 for the supply of additional 30mw. because the agreement was made between the Company and the UPSEB. It was expressly stated in that agreement that it would be subject to the provisions of the Electricity Acts of 1910 and 1948 and the rules and regulations thereunder, including the amendments thereto. Care was also taken to provide that the UPSEB shall not be responsible for damages or diminutions in the supply of energy according to the orders issued by the State Government. A similar provision was made in the earlier agreement of 1959. In the Board's letter to the Company dated September 2, 1972 reference was specifically made to the State Government's power to "control the distribution and consumption of energy under s. 22B of the Indian Electricity Act, 1910." [739A-D]

17. Decisions in the matter of restrictions to be imposed on the consumption of energy on account of acute shortage of energy in the State, were taken by the different State Governments, including the Governor's Advisors, and it cannot be said that the cuts were imposed suddenly, or without due regard to the company's difficulties in reducing its consumption of energy in the manner directed by the order. It cannot therefore, be said that the State wantonly disregarded its contractual obligation to the company.

18. Sub-section (2) of s. 22B of the Act specifically provided that it was permissible for the State Government to direct by the order that the UPSEB shall not comply with the provisions inter alia of any contract made by it. A direction to that effect was expressly made in cl. 11 of the Order, and so it is not permissible for the company to complain on that account. [739G]

19. Craics on Statute Law (7th Edn.) pages 357-58 has mentioned six different classes of enactments which are considered as having ceased to be in force. These six have been mentioned as the enactments which are selected for inclusion in the Statute Law Revision Acts of England as having ceased to be in force otherwise than by express repeal, or having by lapse of time or otherwise become unnecessary. [740G, 741D] The question is whether the order could be said to have "spent" itself or become "obsolete". Whether a piece of legislation has spent itself or exhausted in operation by the accomplishment of the purpose for which it was passed, or whether the state of things contemplated by the enactment has ceased to exist are essentially questions of fact for the legislature to examine, and no vested right exists in a citizen to ask for a declaration that the law has been impliedly repealed on any such ground. [741E-F]

20. The power to legislate is both positive in the sense of making a law, and negative in the sense of repealing a law or making it imperative. In either case it is the power of the legislature, and should lie where it belongs. In an extreme and a clear case, no doubt, an antiquated law may be said to have become obsolete-the more so if it is a penal law and has become incapable of user by a drastic change in the circumstances. But the judge of the change should be the legislature, and courts are not expected to undertake 716 that duty unless that becomes unavoidable and the circumstances are so apparent as to lead to one and only one conclusion. This is equally so in regard to the delegated or subordinate legislation. [741G-742A] Elwood Hamilton v. Kentucky Distilleries & Warehouse Co., 64 L.ed. 194; Chastleton Corporation v. A. Leftwich Sinclair, 68 L.ed. 841; Nashville, Chattanooga & St. Louis Railway v. Herbert S. Walters, 79 L.ed. 949; The Union of India v. Ram Kanwar & Ors., [1962] 3 SCR 313; referred to.

The Petition of the Earl of Antrim & 11 Other Irish Peers, [1967] AC 691; distinguished.

21. The High Court found three facts (i) the shortage in the reservoirs for generation of hydel energy had ceased, (ii) further supply of energy was available from newly commissioned units, and (iii) fresh power connection had been given by the UPSEB, but lost sight of the important fact that it was all along the case of the State that hydel energy was only one-third of the total generation, and that generation of thermal energy which met two third of the total requirement had declined for reasons beyond the control of U.P.S.E.B. The High court did not therefore undertake a careful examination of the facts, and took some new connections into consideration without attempting to examine their magnitude and effect on the overall generation and availability of energy from all the sources. The High Court therefore erred in taking the view that the continuance of the Order was no longer justified. Even so, the High Court abstained from striking down the whole of the Order and merely declared that the provision of the first proviso to cl. 6(a) (i) was ultra vires, and quashed it.

22. Even though the proviso is valid and has wrongly been quashed by the High Court, it is not necessary to restore it in view of the statement of the Solicitor General, so that it shall not be deemed to form part of cl.

6(a)(i) of the Order. But it there is deterioration in the generation of energy again, or there are other sufficient reasons, within the purview of s. 22B of the Act to reinsert the proviso, in the present or modified form, it would be permissible for the State Government to do so accordingly to the law. [743G-H, 744C]

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 921/78 and 425/79 Appeals by Special Leave from the Judgment and Order dated 27-4-1978 of the Allahabad High Court in Writ Petition No. 3732/77.

M. V. Goswami for the Appellant (In CA 921/78) S. S. Ray, D. Gupta, Shiv Dayal, N. R. Khaitan, U. K. Khaitan and G. Mitra for the Respondent in CA 921/78 and Appellant in CA 425/79.

S. N. Kacker, Sol. Genl. of India, G. C. Dwivedi, S. C. Bhudhwar, S. Markendaya and K. Madan Mohan Reddy for U. P. State Electricity Board (Appellant No. 2 in CA 921/78).

717 The Judgment of the Court was delivered by SHINGHAL J.-These appeals by special leave arise from the judgment of the Allahabad High Court dated April 27, 1978. While Civil Appeal No. 921 of 1978 has been filed by the State of Uttar Pradesh, the U.P. State Electricity Board and the Executive Engineer of the Rihand Power Station, hereinafter collectively referred to as the State, Civil Appeal No. 425 of 1979 has been filed by the Hindustan Aluminium Corporation Ltd., its Vice President and Chief Accountant, hereinafter referred to as the Company. We have heard the two appeals together and will dispose them of by a common judgment.

The controversy relates to the supply of electrical energy (for short "energy") for the production of aluminium, which is the most modern of the common metals. Unlike the other common industrial metals like iron, copper, zinc and lead, pure aluminium is not produced by the direct smelting of its ores. The metal is now produced by the modern electrolytic method under the influence of direct current.

It takes about 10 kilo watt-hours of electricity to produce a pound of aluminium, and the supply of cheap electric power is therefore an essential requisite or raw material for its production. The metal has many advantages and uses and has gained such importance that it is an essential commodity under the Essential Commodities Act and its production is one of the scheduled industries under the Industries (Development and Regulation) Act. While the State feels aggrieved because the High Court has interfered with the Uttar Pradesh Electricity (Regulation of Supply, Distribution, Consumption and Use) Order, 1977, dated September 19, 1977, hereinafter referred to as the Order, which it made under section 22B of the Electricity Act, 1910, (for short the Act), the Company's grievance is that the High Court has not granted all the reliefs which it had claimed in its petition under article 226 of the Constitution. The Court's record is much too voluminous, but it appears to us that the appeals can be adequately disposed of on the basis of the important averments in the lists of dates drawn up by counsel for the parties about which there is no dispute before us.

When the question of establishing a new aluminium factory arose for consideration by the Government of India, it took into consideration the consent of the Government of Uttar Pradesh to make energy available for the factory from the Rihand Hydro-electric Scheme which was expected to go into operation by the end of 1960, and granted an industrial licence to the Company on September 26, 1959, for the manufacture of 20,000 metric tonnes of aluminium ingots per year at Rihand. An agreement was also entered into between the State of 718 Uttar Pradesh and the Company on October 29, 1959 for the supply of 55 m w of power on a firm, continuous and uninterrupted basis at a rate of 1.997717 paise per unit for a period of 25 years from the date of commencement of the supply.

The Company set up and commissioned its aluminium plant at Renukoot (near Rihand Dam) with an installed capacity of 20,000 metric tonnes per annum in April 1962. It was granted a further licence for the expansion of its installed capacity by 40,000 metric tonnes per annum. As the State was unable to meet the extra requirement of energy, sanction under section 28 of the Act was granted to the Company, at its request, on November 12, 1964, to set up a generating station at Renusagar, near Renukoot, through its subsidiary the Renusagar Power Company Ltd. It had two generating units of 67.5 m w each. The first unit started generating power in 1967 and the other in 1968. The 40,000 metric tonnes expansion unit was commissioned in 1968. In the meantime the Company was granted a licence in December 1966 for effecting a further expansion of 60,000 metric tonnes per annum in its installed capacity for the production of aluminium.

The Company thought of setting up the plant for the production of 60,000 metric tonnes of aluminium in Gujarat State as it was informed by the Gujarat State Electricity Board that it would be able to meet the requirement of energy there at a rate of Rs. 320/- per kilowatt year, which was much higher than the rate at which it was receiving energy from U.P. State Electricity Board (U.P.S.E.B.). The Government of U.P. held negotiations with the Company, and it was decided that the Company would produce the additional 60,000 metric tonnes of aluminium also in Uttar Pradesh. The Chief Secretary to the government of U.P. wrote a detailed letter to the Company on November 20, 1968, in which the position regarding the supply of energy was stated as follows,- "Regarding the power plant, I can see no difficulty in meeting the interim requirements for 2 to 3 years from the U.P. State Electricity Board, nor do I see any difficulty in arranging for parallel running of your new power station, with the U.P. State Electricity Board." The Company then addressed a letter to the State Government on September 26, 1969 stating the position regarding the supply and generation of increased energy for the expansion of aluminum production as follows,- "5(a) The Scheme of power supply for our expansion by UPSEB is interlinked with the question of expansion of 719 Our Renusagar power plant and its parallel operation with your system. The application for the expansion of our Renusagar Power Plant has already been submitted to your office, a copy of which is enclosed herewith for your ready reference. The necessary permission for the same is requested as early as possible.

(b) The emergency assistance under parallel operation would be required for about 100 m w and the terms and conditions for the same would have to be decided simultaneously with the permission for expansion of our Power Plant." It may be mentioned that the Company was granted sanction to expand Renusagar generation by 250 m w.

In 1972 the Company expanded its installed capacity for the production of aluminium by 35,000 metric tonnes per year. On its part, the U.P.S.E.B. sanctioned 110 m w additional energy under a phased programme to be compelled by June 1, 1975. It was clearly stated in the letter of the U.P.S.E.B. dated September 2, 1972, that the supply would be without prejudice to the power of the State Government to control the distribution and consumption of energy under section 22B of the Act. Reference in the letter was made to the acute shortage of power because of scanty rainfall in the catchment area.

It so happened that additional energy was not made available to the Company during 1972-75 although the rate was substantially increased (to 11 paise instead of 1.997717 paise) with retrospective effect from June 30, 1975, under the new aluminium policy of the Government of India. An agreement was however entered into between the Company and the U.P.S.E.B. on November 30, 1976 for the supply of 85 m w of energy on a continuous basis, for a period of 5 years, in supersession of the earlier agreements, and it was stipulated that it would be read and construed in all respects in conformity with the provisions of the Act, the Electricity (Supply) Act, 1948, and the rules and the regulations and the amendments thereto The Company received that supply and was even promised an additional supply of 35 m w over a phased period from July 1977, but did not get it.

The Company was all the same able to raise its production of aluminium to 95,000 metric tonnes by April 7, 1977, because of the supply of 85 m w of energy.

In the meantime, the State Government took a decision by the end of December 1976 to reconnect some 70,000 pumping sets which had 720 been disconnected for non-payment of the electricity dues.

That placed an additional load of about 400 m w on the grid system of the State. The Chairman of U.P.S.E.B. submitted a note on the power situation which was likely to obtain from April to July 1977. He pointed out that there was acute shortage of energy and suggested the imposition of some restrictions upto the end of July 1977 by when the demand for agriculture was expected to decrease and the Rihand and Matatila reservoirs would be filled up. That was proposed to meet the needs of agriculture and related industries and to meet the industrial demand to the extent possible. One of the proposals was for a 50 per cent cut in the demand of the Company and some other industrial units including Kanoria Chemicals and Industries Ltd. That note came up for consideration in the State Cabinet on April 1, 1977, and was partially approved. The U.P. Electricity (Regulation of Distribution and Consumption) Order, 1977, was therefore issued on April 7, 1977. Under clause 6(a) (i) of the Order, the Company could draw energy only to the extent of 42.5 m w i.e. 50 per cent of its monthly consumption; but it was allowed to draw 55 m w for the time being.

Uttar Pradesh came under the President's rule on April 30, 1977, and the Company was allowed to draw 55 m w until further orders. It is the case of the State that the shortage of energy became more acute in the third week of May. The Company, in the meantime, filed its first writ petition [No. 1790(c) of 1977] on receipt of a letter of the Executive Engineer (O.&M.), Rihand, that the power supply to the Company should be cut off completely with immediate effect. The writ petition was dismissed on May 20, 1977, because of a subsequent letter by the Government requiring the U.P.S.E.B. to continue the supply of 42.5 m w energy instead of 55 m w in accordance with the aforesaid Order of April 7, 1977.

The Secretary of the Power Department of the State government sent a note to the Governor on May 24, 1977, proposing some additional cuts in the supply of energy.

Decision thereon was deferred until information was obtained from other States in regard to availability of energy to aluminium plants. A fresh note was thereafter prepared for orders. In that note dated May 31, 1977, it was stated that there was a large gap between demand and availability of energy and that was creating a serious imbalance requiring load shedding on a large scale, and that had given rise to discontent in all sectors of the economy and, in particular, in the rural sector. It was also pointed out that overriding public interest, particularly the need to maintain 721 food supply and the industrial production, required that units which were heavy consumers of energy should be subjected to further cut in the consumption of energy. It was particularly pointed out that as the Company was itself generating energy at Renusagar, it will have more than 50 per cent of energy even if the Board's supply of 42.5 m w was completely withdrawn, and that will service some 8500 pumping sets. It was, all the same, stated that the Company would continue to have 60 m w from the U.P.S.E.B. as stand by supply as in the past. The Governor approved that proposal on June 1, 1977. A proviso was, inter alia, inserted in clause 6(a)(i) of the U.P. Electricity (Regulation of Distribution and Consumption) Order, 1977, on June 2, 1977, according to which the industrial consumer which had its own source of generation of energy from which it obtained 50 per cent or more of its total consumption would suffer a cut of 100 per cent in the energy supplied by the U.P.S.E.B. The Company was accordingly given time to bring about the total cut.

In the meantime, the Company filed its second writ petition [No. 2160(c) of 1977] along with an application for stay. The High Court admitted the writ petition, but rejected the application for stay. The Company then moved this Court for special leave. The Hon'ble Vacation Judge made an observation that the matter may be discussed by the parties concerned, and the State agreed to give 20 m w of energy to the Company for the time being.

Fresh elections were held to the State Legislative Assembly, and the new Cabinet was sworn in on June 23, 1977.

It decided to reduce the supply of energy to the Company to zero, in pursuance of the amendment dated June 2, 1977, and called for a fresh note on the position regarding the generation and distribution of energy. The Executive Engineer, Rihand, accordingly asked the Company to reduce the consumption to zero.

A detailed note was prepared by the Secretary concerned on June 28, 1977, and it came up for consideration in the Cabinet on June 30, 1977, but no decision was taken and the note was kept pending. It appears that the Chairman of the U.P.S.E.B. prepared a note on August 26, 1977, in which he pointed out the shortage of energy, including a substantial fall in the generation of thermal energy and in the "import" of energy. It appears that the Minister concerned made some statements in regard to the generation of energy in the State and the position of the Company, but we shall refer to them later when we deal with the allegation regarding malice in law. It will be sufficient to say that the State Government made the Order 722 on September 19, 1977, called the Uttar Pradesh Electricity (Regulation of Supply, Distribution, Consumption and Use) Order, 1977. It has undergone some amendments, but learned counsel are in agreement that they have no bearing on the controversy before us.

The Company filed its third writ petition (No. 3732 of 1977), against the Order, on September 26, 1977. It was admitted the same day and the earlier writ petition (No.

2160 of 1977) was dismissed as withdrawn. The High Court directed the Company to make an application under clause 10 of the Order, for exemption, but it was rejected all December 9, 1977 when made. The High Court ultimately heard and decided the writ petition by the impugned judgment dated April 27, 1978 against which these appeals by special leave have been directed as aforesaid. This Court made an order on May 4, 1978 for the supply of 20 m w of energy to the Company as a purely interim arrangement. That was raised to 35 m w by an order dated August 29, 1978, and the State is now supplying 42.5 m w to the Company as an interim arrangement.

These basic facts are not in dispute before us. We shall examine the arguments of the learned counsel for the parties with reference to them, after taking into consideration the other well settled facts on which reliance has been placed by learned counsel, and with due regard to the relevant averments of the parties.

The High Court has recorded a number of findings. We shall have occasion to refer to those of the findings which have been challenged before us. It may be sufficient to say here that the High Court has worded the operative part of its judgment as follows,- "In view of the aforesaid discussion the provisions of the first proviso to clause VI (a)(i) of the Uttar Pradesh Electricity (Regulation of Supply, Distribution, Consumption and Use) Order, 1977 dated September 19, 1977 are declared ultra vires and are quashed. The U. P. State Electricity Board is directed to supply electrical energy to the petitioner in accordance with law without taking into consideration the provisions of the said proviso".

In order to examine the findings of the High Court about the invalidity of the proviso to clause 6(a) (i) of the order, it will be convenient to examine the relevant findings of the High Court on the various points of law.

The High Court has taken the view that it is the statutory obligation of the U.P.S.E.B. because of the obligation of a licensee under 723 sections 18 and 26 of the Electricity (Supply) Act, 1948 to supply electrical energy to a consumer. Reference in this connection has also been made to clause VI of the Schedule to the Act.

Clause (h) of section 2 of the Act defines a "Licensee" to mean any person licensed under Part II to supply energy.

Section 26 of the Act of 1948 provides, inter alia, that, subject to the provisions of that Act, the Electricity Board shall in respect of the whole State, have all the powers and obligations of a licensee under the Indian Electricity Act, 1910, and the Act of 1948 "shall be deemed to be the licence of the Board" for purposes of the Act (of 1910). The first proviso to the section excludes the application of some sections, including section 22, of the Act, and the second proviso states that the provisions of clause VI of the Schedule to the Act shall apply to the Board in respect of that area only where distribution mains have been laid by the Board and the supply of the energy through any of them has commenced.

While, therefore, the U.P.S.E.B. is a licensee under the Act, it will be sufficient, for purpose of the controversy before us, to say that section 22 of the Act is not applicable to it, and clause VI of the Schedule is applicable to it subject to the restriction contained in the second proviso to section 26 of the Act of 1948. So even though the Board is a licensee, the obligation under section 22 of the Act to supply energy to every person within the area of its supply is not fastened on it.

The provisions of the Schedule to the Act are deemed to be incorporated in, and to form part of, every licence granted under Part II. Clause VI of that Schedule states that where after distributing mains have been laid down and the supply of energy through them has commenced, a requisition is made by the owner or occupier of any premises situate within the area of supply requiring the licensee to supply energy for such premises, the licensee shall make the supply and shall continue to do so in accordance with the requisition. But, as has been pointed out, the second proviso to section 26 of the Act of 1948 places a restriction on that obligation for it says that the provisions of clause VI shall apply to the Board in respect of that area only "where distribution mains have been laid by the Board and the supply of energy through any of them has commenced".

Clause (i) of section 2 of the Act defines a "main" to mean any electric supply-line through which energy is or is intended to be, supplied to the public. A "distribution mail" has been defined by clause (e) of the same section to mean the portion of any main with which a service line is, or is intended to be, immediately connected. We 724 have also gone through the definitions of "electric supply- line" and "service-line". They leave no doubt that a "distributing main" is different from an electric supply- line, for to it a service-line is immediately connected.

The High Court has stated that the Company gets its supply from the Pipri Bus Bar, which is composed of a set of conductors which are made up of thick aluminium core steel reinforced cables, and has taken the view that the Pipri Bus Bar is a "distributing main" under section 2(e) of the Act and is an electric supply-line as defined in section 2(f) so that clause VI of the Schedule to the Act would be fully applicable to the Board in so far as its obligation to the Company is concerned.

But as has been stated in the second proviso of section 26 of the Act of 1948, the provisions of clause VI of the Schedule to the Act could apply to the U.P.S.E.B. in respect of that area where distribution mains had been "laid by the Board". It was therefore a question of fact whether that was so, and had to be examined on the basis of the averments of the parties to that effect. It is however not disputed before us that the Company did not plead that distributing mains had been laid by the Board for supply of energy to the Company, or to anyone else, from the Pipri Sub-station. The State had therefore no occasion to controvert any such allegation. This has in fact been admitted to be so by Mr.

Ray in his arguments, and the High Court went wrong in recording a finding of fact against the State without any basis for it in the pleadings. We have also gone through section 18 of the Act of 1948 to which reference has been made in the judgment of the High Court, but it is also of no avail to the Company. The section makes a mention of the general duties of the Board, but it does not make it obligatory for it to supply energy to every person irrespective of its practical difficulties.

The High Court has in fact quoted extensively from its earlier judgment in Civil Miscellaneous Writ Petition No.

618 of 1972 to which one of the two Judges was a party. It is not disputed, however, that when an appeal was taken against that judgment, the writ petition was itself withdrawn and was dismissed, so that judgment of the High Court may not be said to have subsisted thereafter, and need not have formed the basis of the finding of the High Court against the Board in regard to its duty to supply the energy asked for by the Company-the more so when the decision on the point should have turned on the facts pleaded and established on the record.

725 Mr. Ray for the Company has however invited our attention to a decision of the Rajasthan High Court in firm Sadul Cotton Ginning and Pressing Factory v. Rajasthan State Electricity Board.(1) But that was a different case where it was not pleased by the Electricity Board that clause VI of the Schedule to the Act was not applicable to it as the distributing mains had not been laid by it. The High Court therefore erred in taking the view in the present case that the Board was bound by the terms of clause VI of the Schedule to the Act to supply energy to the Company within one month of the making of the requisition or within such longer period as the Electrical Inspector may allow. But even if it were assumed that the Board was under an obligation to supply energy to every person, the fact nonetheless remains that the State Government had the overriding power to provide, by order made under section 22B of the Act, for regulating the supply, distribution, consumption or use thereof. In fact sub-section (2) of that section categorically states that, without prejudice to the generality of the power under sub-section (1), the order, may direct the Board not to comply with any contract, agreement or requisition for the supply of energy etc. The High Court erred in taking a contrary view.

It has next been argued that only the energy which was generated by the Board could be the subject-matter of an order under section 22B of the Act and it was not permissible for the State to take into account the energy generated by the Company for its own use.

It may be recalled that the Company applied for the grant of sanction under section 28(1) of the Act to generate 120 m w of energy for the additional production of aluminium. That was allowed and a notification was issued on November 12, 1964, granting sanction to the Renusagar Power Company Limited (a wholly owned subsidiary of the Company) to engage in the business of supplying energy to the Company. It has two generating units and 135 m w power is being generated by the Renusagar Station for the exclusive use of the Company, and it is this energy for which it has been argued that it cannot be the subject-matter of an order under section 22B.

But sub-section (1) of section 28 of the Act in terms refers to, and deals with, engaging by a non-licensee, in the business of supplying energy to the "public". It is therefore futile to contend that what was generated by the Renusagar Power Company was not meant for supply to the public but was the Company's own energy. It is true that that generation became, in the circumstances, the "captive" generation for the use of the Company, but that is far from saying that, in 726 the eye of law, it was not energy meant for supply to the public or that it was not amenable to control under section 22B. It must therefore be held that it was not amenable to control under section 22B. It must therefore be held that it was also liable to equitable distribution by an order under section 22B of the Act.

The expression "energy" has been defined by clause (g) of section 2 of the Act as follows,- "(g) "energy" means electrical energy- (i) generated, transmitted or supplied for any purpose, or (ii) used for any purpose except the transmission of a message".

It is therefore a pervading definition, and there is no reason why energy generated and supplied under section 28 of the Act should not fall within its sweep.

We are mindful of the fact that while section 22B of the Act occurs in Part II, the aforesaid section 28 is in Part III, but that will not really take the supply of energy under section 28 out of the control of section 22B. Part II deals with "supply of energy" by licensee, while Part III deals with "supply, transmission and use of energy by non- licensees". But when it was thought necessary to vest the State Government with the power to give directions to licensees (under section 22A), and to control the distribution and consumption of energy (under section 22B), it became necessary to insert sections 22A and 22B by Act 32 of 1959. The Legislature therefore inserted both the sections in Part II which occurred earlier than Part III, and under the broad fabric "Supply of Energy". As is obvious, insertion of sections 22A and 22B would not have been appropriate in Part III, and the Legislature cannot be blamed if it preferred the inclusion of the two sections together in Part II rather than in the residuary Part IV.

Moreover it is by now well settled that the true meaning of a provision of law should be determined on the basis of what it provides by its clear language, and with due regard to the scheme of the law as a whole, and not merely by the place it finds in the formation of its Parts or Chapters.

An ancillary argument has been advanced that if sub- section (1) of section 22B of the Act is read with due regard to sub-section (2), it will appear that, like sub- section (2), sub-section (1) is also confined to a licensee and will not be applicable to the energy supplied by a sanction-holder under section 28. Our attention in this connection has been invited to the use of the article "the" in sub-section (2) while stating that the order made under sub-section (1) may direct 727 "the licensee' not to comply with the matters stated in clauses (i) to (iii). The argument is untenable for two reasons. Firstly, subsection(1) of section 22B refers to the State Government's power to control the distribution of energy as a whole and not merely the energy generated by a licensee, and there is no rule of construction by which the restricted scope of sub-section (2), which deals only with the licensees should govern the scope of sub-section (1) and confine it to licensees. Secondly, the purpose of sub- section (2) is to provide exceptions of the nature which are peculiar to licensees and are necessary to save them from the statutory obligations mentioned in the three clauses of the sub-section. It appears that the use of the article "the" in sub-section (2) is not quite appropriate, but we have no doubt that there is no justification for the argument that section 22B is applicable only to licensees and not to a sanction holder under section 28.

What section 22B of the Act authorises the State Government to do, is to make an order providing for "regulating" the supply, distribution, consumption or use of energy, and it has been held by the High Court that the section does not confer the power to prohibit the supply of energy to any consumer. The High Court has gone on to hold that Parliament did not confer on the State Governments the power to cut off supply to existing consumers. Mr. Ray has supported the view of the High Court and has invited our attention to the decisions in Municipal Corporation of the City of Toronto v. Virgo,(1) Attorney General for Ontario v.

Attorney-General for the Dominion and the Distillers and Brewers' Association of Ontario,(2) Birmingham and Midland Motor Omnibus Co. Ltd. v. Worcestershire County Council(3), Tarr v. Tarr(4), The Automobile Transport (Rajasthan) Ltd.

v. The State of Rajasthan and others(5) and State of Mysore v. H. Sanjeeviah(6). As against that the learned Solicitor General has placed reliance on the view taken in Fatechand Himmatlal and others v. State of Maharashtra etc.(7) that 'regulation', if the situation is necessitous, may reach the limit of prohibition.

It appears that a distinction between 'regulation' and 'restriction' or 'prohibition' has always been drawn, ever since Municipal Corporation of the City of Toronto v. Virgo (supra). 'Regulation' promotes the freedom or the facility which is required to be regulated in the interest of all concerned, whereas 'prohibition' obstructs or shuts off, or denies it to those to whom it is applied. The Oxford English Dictionary does not define "regulate" to include prohibition so that if it had been the intention to prohibit the supply, distribution, consumption or use of energy, the Legislature would not have contented itself with the use of the word "regulating" without using the word "prohibiting" or some such word, to bring out that effect.

But where the High Court went wrong was in thinking that the Order had the effect of prohibiting the supply of energy to the Company, which was an "existing consumer". The proviso to clause 6(a) (i) of the Order to which exception has been taken, states as follows,- "Provided that where any such industrial consumer has his [own source of generation of energy which alone enables him to obtain] 50 per cent or more of his total consumption, then a cut of 100 per cent in the energy supplied by the Uttar Pradesh State Electricity Board shall be exercised." What has therefore been ordered is no more than a cut of 50 per cent in the monthly consumption of electricity and not a total prohibition of consumption of energy. That is a step in the direction of regulating the consumption of energy as far as it goes, and it is overridden with the further regulation contained in the proviso in the case of an industrial consumer having its own source of generation of energy "which alone" enabled him to obtain 50 per cent or more of his total consumption so as to ensure even to him a consumption of 50 per cent of energy and not a total prohibition. The proviso therefore operates in a special or particular field and for a particular purpose where it is considered necessary for regulating the supply etc. of the energy in the interest of the other consumers, for section 22B is meant to maintain the supply and secure the equitable distribution of energy to all concerned. We are constrained to say that the High Court did not properly appreciate this aspect of the matter.

The High Court has gone on to hold that no power was vested in the State Government under section 22B of the Act to issue an order that certain preferences will be followed in supplying energy. The High Court has found it established that after power supply was totally "disconnected" by the Board to the Company, "power supply connections were given to the agricultural sector and agro-based industries." This appears to be the High Court's finding in regard to the argument that the Order was bad as it was not permissible to adjust the priorities 729 by an order under section 22B. Learned counsel for the Company have argued that the only permissible preference was that under section 22A in favour of an establishment mentioned in it and that the preference shown to individual consumers was illegal.

Now so far as clause 6(a) (i) of the Order is concerned, it does not, by itself, provide for any preferences or priorities, beyond excluding "fertilizers" from the cut of 50 per cent on all large and heavy industrial power consumers receiving power at 33 k v and more. Clause 7 of the Order deals with "exemptions", and "fertilizers manufacturing establishments" have been included there amongst the consumers to whom the cut referred to in clause 6 of the Order shall not be applicable. It has not been argued before us that it was not permissible for the State Government to provide for exemptions in an order under section 22B, and we have not been referred to any such data or material on the basis of which it may be possible to examine whether the exemptions in question were in derogation of the concept of "maintaining and securing the equitable distribution of energy" under section 22B.

It may be that the State Government was of the opinion that supply of energy to the agricultural sector and agro- based industries was more necessary and would benefit the state more substantially than the supply made to heavy industrial consumers, but merely because any such preference has been entertained by the State Government, it cannot be said that it necessarily runs counter to the concept of equitable distribution of energy stated in section 22B. In fact counsel for the Company have repeatedly urged before us that the cut of 50 per cent referred to in clause 6(a) (i) was meant to deprive only a few consumers of energy, and that the cut of 100 per cent under the proviso operated exclusively against the Company. And it has to be appreciated that clause 6(a) (i) deals only with large and heavy industrial power consumers receiving power at 33 kv and above, and it is hardly permissible for such a heavy consumer as the Company to complain of any preference that may have been shown to small consumers in the field of agriculture, or agro-based or other small industries. The fact remains that large and heavy industrial consumers of the category mentioned in clause 6(a) (i) are a class by themselves and it is hardly permissible for them to complain that the small preference shown to agriculturists in supplying energy for their water pumps or tube-well, or in energising State tube-wells supplying water to them, or the supply of energy to small scale industries has really created a privileged class of consumers or brought into existence any such concept of priorities as to run counter to or defeat the objective of bringing about the equitable distribution of energy by an order 730 under section 22B. No glaring instance of any preference has been brought to our notice so as to raise in us a desire to examine the question whether it was necessary or proper for the State Government to provide guidelines for the small preferences shown by it to the aforesaid consumers. In fact it has been admitted in the written arguments which have been filed and received in Court that, in the present case, the company is "not sure as to what exactly has happened".

In such a situation, we are not persuaded that the High Court had any real justification for recording an adverse finding against the State on the question of the so-called preferences or priorities. Learned counsel for the Company were not able to refer us to any plea in the writ petition about illegal priorities or preferences. Nor could they refer to a plea that any preference or priority shown by the State was the very antithesis of the concept of equitable distribution which, for the purpose of maintaining the supply of energy, was the very object of the Order. If any such plea had been taken, it would have been permissible for the State to take any defence that may have been open to them. But merely because the word preference or priority has been used by the State for the purpose of comparing the grantees of energy in preference to the Company, or as a matter of priority over the consumption of energy by a giant consumer like the Company, it will not be fair and reasonable for us to hold that the State has established a class of privileged consumers, and to set aside the grant of energy to them in their absence and without examining the facts and circumstances of their respective cases. The purpose of the Order is to maintain the supply of energy and to secure its equitable distribution. One such method was to conserve energy by virtue of the provisions of clause 6(a) (i). If that has been done according to law; and if the resultant saving of energy is frittered away by showing unlawful preferences or creating unlawful priorities by other orders of an administrative nature, there is nothing to prevent the aggrieved party, including the Company, from challenging it according to the law, in an appropriate proceeding, if so advised. But any such grievance cannot be examined in these proceedings for the Order has the avowed object of bringing about equitable distribution of the conserved energy in an honest and forthright manner and there is nothing on the record for us to hold otherwise.

It has next been argued that the validity of the Order, which is by way of a piece of subordinate legislation, is open to judicial scrutiny and that the subjective satisfaction of the State Government in making it is open to challenge in a court of law.

It will be enough for us to say that subordinate legislation is by now a well-recognised form of legislation for practical reasons. The modern 731 administrative machinery is quite complex and it is often found difficult to pass complicated legislative measures through the full parliamentary procedure and on a permanent or durable bas