Case Note & Summary
The appellant, Sihor Electricity Works Ltd., held a licence under the Indian Electricity Act, 1910 for generation and distribution of electrical energy within a specified area. The first respondent, Gujarat Electricity Board, entered into an agreement to give direct supply of electricity to the second respondent’s factory situated within the appellant’s area of operation. The appellant filed a civil suit seeking a declaration that the agreement was illegal and ultra vires the powers of the Board under Section 19(1)(b)(ii) of the Electricity (Supply) Act, 1948, and an injunction restraining the Board from implementing the decision. The appellant claimed that its maximum demand between September and December 1959 ranged from 262 to 349 KVA, which was more than twice the second respondent’s demand that had never exceeded 40 to 45 KVA, and therefore the Board could not supply directly. The Board contended that the appellant’s maximum demand at the time of request was less than twice the 398 KVA demand sought by the second respondent. The trial court held in favour of the appellant, declaring the Board’s action ultra vires. On first appeal, the appellate court reversed the decision and allowed the Board’s appeal. The High Court dismissed a further appeal, holding that the phrase ‘maximum demand’ in Section 19(1)(b)(ii) requires a comparison between the maximum demand of the licensee on the Board and the maximum demand asked for by the consumer, and that the appellant’s demand was less than twice the consumer’s requested demand. The Supreme Court, in a bench consisting of Justice V. Ramaswami, Justice J.C. Shah, and Justice A.N. Grover, upheld the High Court’s interpretation. The court analyzed the statutory scheme under the Electricity (Supply) Act, 1948 and concluded that the expression ‘maximum demand’ as defined in Section 2(8) and used in Section 19(1)(b)(ii) refers to the actual demand made by the licensee on the Board at the relevant time, not the peak demand the licensee may have recorded in its own system. Consequently, the Board’s direct supply was valid and the appeal was dismissed.
Headnote
A) Electricity Law - Direct Supply by Electricity Board - Conditions Precedent under Section 19(1)(b)(ii) of the Electricity (Supply) Act, 1948 - The Board may supply directly to a consumer in a licensee’s area only if the maximum demand of the licensee is less than twice the maximum demand of the consumer; the comparison must be based on actual demand supplied by the Board, not the generating capacity of the licensee. Held that the Board’s decision to supply directly was intra vires. B) Statutory Interpretation - Definition of Maximum Demand - Section 2(8) of the Electricity (Supply) Act, 1948 - The statute defines maximum demand in terms of the demand made on the Board; the court rejected the appellant’s contention that its own peak demand exceeded twice the consumer’s demand, holding that the relevant comparison is with the demand actually made by the licensee on the Board at the time of request.
Issue of Consideration
Whether the Gujarat Electricity Board could give direct supply to a consumer within the area of the appellant licensee under Section 19(1)(b)(ii) of the Electricity (Supply) Act, 1948, based on the interpretation of 'maximum demand'
Final Decision
The Supreme Court dismissed the appeal, affirming the High Court’s finding that the Board’s direct supply was valid under Section 19(1)(b)(ii). The interpretation of ‘maximum demand’ adopted by the High Court was correct.
Law Points
- interpretation of maximum demand
- conditions precedent for direct supply by Electricity Board under Section 19(1)(b)(ii)
- comparison of demands based on actual supply
- ultra vires analysis of Board's decision
