Case Note & Summary
The dispute arose from a policy sanction by the Government of Uttar Pradesh dated July 16, 1986, granting a 10% developmental rebate in electricity supply to newly set up industries, which was to remain in vogue till 1990. The petitioner, M/s Ester Industries Ltd., claimed that it set up its industry in Nainital District in reliance on this policy. When the Uttar Pradesh State Electricity Board issued bills imposing tariff rates contrary to the rebate, the petitioner filed a writ petition before the Allahabad High Court. The High Court, in its judgment dated May 8, 1996 in Writ Petition No.10195/89, held that Section 78A of the Indian Electricity (Supply) Act, 1948 embodies a legislative policy, and the Board was not automatically bound by the directions issued by the State Government. The High Court concluded that the Board is entitled to revise tariff in accordance with its procedure and that no writ could be issued compelling the Board to follow the State directions. Aggrieved, the petitioner filed a special leave petition before the Supreme Court. The petitioner contended that the High Court's view was incorrect in law, relying on the Supreme Court's decision in Real Food Products Ltd. & Ors. vs. A.P. State Electricity Board & Ors. [AIR 1995 SC 2234], particularly paragraph 8, which stated that the Board is bound by directions issued by the State Government on questions of policy. The Supreme Court examined the nature of tariff fixation and held that it is well settled that fixation of tariff is a legislative policy, and the Board is entitled to revise tariffs unilaterally from time to time. The consumer is bound by the revision of tariff duly notified in accordance with the procedure prescribed under the Act. The Court then considered whether contrary to tariff conditions, the policy direction issued by the State would be interposed and revised by the Board. Quoting paragraph 8 of Real Food Products, the Court observed that while the Board shall be guided by directions on questions of policy under Section 78A(1), if the State Government's direction indicates a specific rate which the Board finds unacceptable, the Board may not be obliged to be bound by it. The Board may accept the suggested rate if it appears appropriate on its own view. The Court further held that policy directions issued by the Government may be taken into consideration by the Board, which has a statutory duty to perform, but so long as the direction is consistent with the Act and tariff policy, the Board may either accept it or may not accept the directions as such. The Court cannot issue a direction under Article 226 to compel the Board to implement the State Government's directions. The Court also noted that promissory estoppel would apply only in a case where there was no contract executed between the parties; here, since a contract existed, that question did not arise. Consequently, the Supreme Court found no manifest error of law in the High Court's judgment and dismissed the special leave petition.
Headnote
A) Electricity Law - Tariff Fixation - Legislative Policy - Indian Electricity (Supply) Act, 1984 (Act 54 of 1948), Sections 49, 59, 78A - Fixation of tariff is legislative policy and the Board is entitled to revise tariffs unilaterally from time to time; consumers are bound by duly notified tariff revisions. State Government policy directions under Section 78A(1) are to be taken into consideration by the Board in discharge of its statutory functions, but the Board is not automatically bound by them, especially if they exceed the scope of policy; the Court cannot issue a writ under Article 226 to compel the Board to implement such directions. Held that the High Court did not commit any manifest error of law. (Para 8) B) Constitutional Law - Promissory Estoppel - Existing Contract - Indian Electricity (Supply) Act, 1984 (Act 54 of 1948), Section 49 - Promissory estoppel would apply only in a case where there was no contract executed between the parties. Since there exists a contract duly executed by law between the petitioner and the Board which binds them unless revised, the question of promissory estoppel did not arise. Held that the special leave petition was dismissed. (Para 8) C) Writ Jurisdiction - Mandamus - Article 226 Constitution - The Court cannot give a direction to the Board to exercise its power under Section 78A(1) of the Act to implement the directions issued by the State Government. It is for the State Government to consider whether the Board has laid down the policy or whether the direction has been properly implemented. Held that the High Court's view was correct in law. (Para 8)
Issue of Consideration
Whether the Electricity Board is bound by policy directions of the State Government under Section 78A of the Indian Electricity (Supply) Act, 1948; whether the High Court erred in holding that the Board was not automatically bound and that no writ could be issued; whether promissory estoppel applies when a contract exists between the parties
Final Decision
The special leave petition was dismissed. The Supreme Court held that the High Court did not commit any manifest error of law warranting interference. The Board is not automatically bound by State Government policy directions under Section 78A; the Court cannot issue a direction under Article 226 to compel the Board to implement such directions. Promissory estoppel did not arise due to existence of a contract.
Law Points
- Fixation of tariff is a legislative policy
- Electricity Board entitled to unilaterally revise tariff
- Consumer bound by notified tariff revision
- State Government policy directions under Section 78A are not automatically binding on Board
- Court cannot issue writ under Article 226 to compel Board to implement State directions
- Promissory estoppel not applicable when contract exists between parties
