NADIAD ELECTRIC CO. LTD. versus NADIAD BOROUGH MUNICIPALITY & ANR.

Citation: [1980] 2 S.C.R. 476 · Decided: 12-12-1979 · Supreme Court of India · Bench: P.N. SHINGAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

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476 
NADIAD ELECTRIC CO. LTD. 
v. 
NADIAD BOROUGH MUNICIPALITY & ANR. 
December 12, 1979 
[P. N. SHINGHAL AND E. S. VENKATARAMIAH, JJ.J 
Jnc/ian Electricity Act, 1910 (9 of 1910)-S. 22-A(3)-Scope of-Munici-
pality entering into an agreement with company for supply of electrical energy-
Obligation to continue sitpply after expiry of agreement-When arises-State 
Governn1ent to notify the establishment entitled to claim benefit-Whether 
necessary. 
Section 22-A of the Indian Electricity Act, 1910 was inserted in the Act by 
tho Electricity (Amendment) Act, 1959 (32 of 1959). Sub-section 1 of section 
.22-A authorised the State Government to issue direction to a licensee to supply 
energy to an establishment in preference to any other consumer, if in its opinion 
it is necessary in the public interest to give such direction and (ii) if the estB-
blisbment in question is in the opinion of the State Government aD establish-
ment used or intended to be used for maintaining supplies and services essential 
to the con1n1unity and the decision of the State Government that in its opinion 
the establishment is used or intended to be used for maintaining supplies and 
services essential to the community is notified by that Government in the Official 
Gazette. Sub-section (3) of Section 22-A provides that where in any agree· 
ment by a licensee, whether made before or after the commencement of the 
Electricity (Amendment) Act, 1959 for the supply of energy with any establish-
ment 1eferred to in sub-section (1) expires, the licensee shall continue to supply 
energy to such establishment on the same terms and conditions as are specified 
in the agreement until receipt of a notice in writing from the establishment 
requiring discontinuance of the supply. 
The Respondent-Municipality which was under an obligation to make rea-
flOnable and adequate provision for lighting of public streets, places and build-
ings situated within its limit, entered into an agreement on August 14, 1949' 
with the Appellant-Company Which was licensee under the Electricity Act, 1910. 
The period during which the supply of electrical energy was to be made under 
the said agreement was 20 years from the date on which it was executed. 
On 
May 10, 1960 the Company wrote a letter to the municipality that the said 
agreement was to come to an end and on its expiry, the Company was not under 
any obligation to continue to supply energy to the Municipality as per the rates, 
termc; and conditions stated in the agreement. The company also informed that 
if the municipality was not willing to purchase energy at the revised rates the 
supply \vould be discontinued on the expiry of the period of the agreement. The 
municipality thereafter wrote a letter on August 6, 1960 requesting the Company 
to renew the agreement on the same terms and conditions. The Company by 
its reply informed the municipality that it would not suoplv el.,.ctrical 
energy 
on the· same terms and conditions and insisted on payment being made at the 
revised rates as stated in its letter dated May 10, 1960. The municipality there~ 
after filed a suit relying upon the provisions of sub-section (3) of section 22-A 
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NADIAD ELECTRIC CO. V. NADIAD' MUNICIPALITY 
4 77 
of the Act, for a declaration that it was entitled to the supply of electrical 
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energy from the Company on the same· terms and conditions as \Vere specified 
· in the agreernent, until the Company received a notice in writing from the 
municipality requiring it to di.scontinue the supply. 
The company contested 
the suit on the ground that the municipality was not entitled to the benefit of 
sub-section (3) of section 22-A of the Act as it was not an establishment to 
which the said provision \Va,'\ applicable, The Trial Court held that in the 
absence of n notification as required by sub-section ( 1) of Section 22-A of 
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the Act the n1unicipality was not entitled to claim the benefit of the provision 
and therefore no relief could be granted in the suit and accordingly dismissed 
the suit. 
The municipality's appeal to the District Court was dismissed, but the second 
appeal was partly allowed by a Single Judge of the High Court, and a decree 
was passed granting relief in favour of the mqnicipality declaring that the com-
pany was bound under sub-section (3) of section 22-A of the Act to continue 
to supply electrical energy to the municipality at the same rates and on the 
same terms and c

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