DELHI CLOTH & GENERAL MILLS COMPANY LTD. & ANR. versus RAJASTHAN STATE ELECTRICITY BOARD & ANR.

Citation: [1986] 1 S.C.R. 633 · Decided: 12-03-1986 · Supreme Court of India · Bench: A.P. SEN · Disposal: Disposed off

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Judgment (excerpt)

633 
DEUII CLO'l1I & GENERAL MILLS <n!PANY LTD. & ANR. 
v. 
RAJASTllAN STATE ELECTRICITY BOARD· & ANR. 
MARCH 12, 1986 
[A.P. SEN AND D.P. MADON, JJ.] 
Electricity Supply Act, 1948 -
SS. 
49A and 49B (as 
introduced by Electricity (supply) (Rajasthan Amendment) Act, 
1976) - Scope of - Electricity Board - Power of - To frame 
uniform tariffs unilaterally - Raise demands for payment of 
difference between uniform tariffs plus surcharge and agreed 
tariffs with retrospective effect -
Whether permissible -
Whether s.49 of the Act is violative of Arts. 14, 19(l)(f) & 
(g) and 31 (2) of the Constitution -
Whether doctrine of 
Promissory estoppel attracted. 
Words and Phrases -
'Escalation clause', 'Review', and 'Surcharge' - Meaning 
of. 
By an agreement dated July 28, 1961, the Respondent-
State Electricity Board agreed to supply the appellants with 
bulk electrical energy for their power oriented industry at a 
concessional rate for a period of 20 years. Under cl. 18 of 
the agreement, it was provided that the rate of supply was 
~reviewable by the Bo~rd every five years after January, 1971, 
and the revision of rate was to be effected if to rise in the 
cost of generation out of the total cost varied by 25% or more 
from the cost last fixed. It was further envisaged by cl. 
34(b) that the nutual rights and obligations of the parties 
would be subject to alteration by further legislation relating 
to supply and consumption of electricity enacted during the 
period of 
the agreement. 
The 
Board commenced 
supplying 
electrical energy to the appellants with effect from March 1, 
"1'1963. The Board issued various not'ffications from time to time 
bringing into effect the revised tariffs for the supply of 
electricity to its different classes of consumers at different 
·rates. By Notification dated July 26, 1966, the Board imposed 
general surcharge on the appellants at the rate of 15% on the 
normal tariff. 
A 
B 
c 
D 
E 
F 
G 
H 
A 
634 
SUPREME COURT REPORTS 
[1986] I S,C,R, 
The appellants filed a petition under Article 226 r-
' 
challenging the power of the Board to levy the general sur-
charge of 15%, The High Court allowed the petition and held 
that the levy of general surcharge of 
15% on the appellants 
was ultra vires the Board insofar as the appellants were con-
B 
cerned because the parties having entered into a statutory 
agreement dated July 28, 1961, there was a fetter created on 
the power of the Board to unilaterally increase the tariff 
under s. 49 of the Electricity (Supply) Act, 1948 and there-
~ 
fore the appellants could not be subjected to payment of the 
general surcharge of 15%. 
The Board preferred an appeal 
C 
against the judgment of the Single Judge. 
D 
E 
F 
G 
H 
From January l, 1971, the Board intimated its intention 
to the appellants to revise the concessional rate of supply 
and charge them the uniform rate of tariff under Schedule 
HS/LP/HT-1 as applicable to all large industrial consumers and 
the general surcharge of !5% thereon in exercise of its powers 
under cl. 18 of the agreement. Accordingly, the Board by its 
letter dated February l, 1971 forwarded a bill for the billing 
month January 1971, raising a demand on that basis. 
The appellants thereupon filed a writ petition under 
Article 226. A Single Judge of the High Court quashed the 
impugned bill and held: (i) that the Board was entitled under 
the first part of cl.18 to review the rate of supply 'every 
fifth year starting from the first date of supply', but in 
view of the restrictive clause contained in the second part of 
cl.18 it was impermisible for the Board to make any 
such~ 
upward revision in the rate of supply till January l, 1971; 
(ii) that in the circumstances it can be inferred that the 
rise in the cost of generation was at least 
25% and 
accordingly the Board was entitled to revise the rate of 
supply by 25% and (iii) that if the Board claimed a further 
rise, it would have to establish that the rise in the cost of 
generation was more than 25% and it had to for that purposes 
get the percentage in the cost of generation determined either 
by mutual dialogue or by reference to arbitration. 
During the pendency of the appeals preferred both by the 
appellants and the Board, on February 7, 1976 the Governor of 
Rajasthan promulgated the Electricity (supply) 
(Rajasthan 
.Amendment) Ordinance, 1976, by 
which new ·sections 49-A. and 
DELHI CLOTH MILLS v. STATE ELECT. BOARD 
63 5 
A 
• .._, 49-B were introduc

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