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Reportable

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.10707  OF 2014 (ARISING OUT OF SLP (CIVIL) NO.29322 OF 2010)

PASCHIMANCHAL VIDYUT VITRAN NIGAM LTD.  & ORS. ... APPELLANTS

VERSUS M/S ADARSH TEXTILES & ANR.       ...RESPONDENTS

WITH

CIVIL APPEAL NO.10708 OF 2014 (ARISING OUT OF SLP (CIVIL) NO.9869 OF 2008)

WITH CIVIL APPEAL NO.10709  OF 2014

(ARISING OUT OF SLP (CIVIL) NO.30528 OF 2009)

WITH CIVIL APPEAL NO.10710  OF 2014

(ARISING OUT OF SLP (CIVIL) NO.29320 OF 2010)

AND

CIVIL APPEAL NO.10711 OF 2014 (ARISING OUT OF SLP (CIVIL) NO.29324 OF 2010)

J U D G M E N T

Arun Mishra, J.

1. Leave granted in all the special leave petitions.

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2. The  question  involved  in  the  appeals  is  whether  policy  

decision  dated  14.6.2006  issued  by  the  Government  of  Uttar  

Pradesh  regarding  supply  of  the  electricity  to  power  loom  

bunkers on the flat  rate could have been applied by the U.P.  

Electricity  Regulatory  Commission  (hereinafter  referred  to  as  

“the  Commission”)  to  the  industries  availing  HV-2  category  

connection.  

3. To dispose of the appeals, we notice facts from civil appeal  

arising out of SLP (Civil) No.9869 of 2008. The backdrop facts  

indicate that the Commission fixed tariff for the year 2004-2005,  

whereby  rebate  of  Rs.5,000/-  per  consumer  was  granted  to  

power loom bunkers availing  LMV-2 and LMV-6 connections in  

accordance with policy of the U.P. Government.   

4. LMV-2  is  a  non  domestic  light,  power  and  electricity  

connection, LMV-6 electricity connection is of small and medium  

power  having  connected  load  up  to  100  HP  for  

industrial/processing  or  agro-industrial  purposes,  power  loom,  

etc.  HV-2 connection is provided for utilising large and heavy  

power for industrial and other purposes having contracted load  

of above 100 HP.  Industries which are having load more than  

100 HP are covered by tariff HV-2.

5. The State Government had issued order dated 14.6.2006

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to  Managing Director,  U.P.  Power Corporation Ltd.  (hereinafter  

referred to as ‘Corporation’).  The Commission opined that it has  

the  effect  of  altering  the  rate  schedule  approved  by  it.  The  

Commission, in turn, issued order dated 3.7.2006 restraining all  

electricity  supply  undertakings  in  the  State  of  U.P.  from  

implementing the provisions of State Government order dated  

14.6.2006.  

6. The Commission took up the matter to work out modalities  

as  per  the  Government  order.  Chairman  of  the  U.P.  Power  

Corporation  Limited  filed  an  affidavit  before  the  Commission  

providing a new scheme compatible with legal framework along  

with a directive from the State Government issued under Section  

108 of the Electricity Act, 2008.  The scheme as proposed in the  

affidavit  states  that  despite  the  aforesaid  order,  the  normal  

billing as per applicable tariff shall be made but payment shall  

be collected as per the directions of the Government at normal  

billing  cycle  and  that  the  advance  subsidy  shall  be  collected  

from the Government in one instalment or maximum two half  

yearly  instalments.   Pursuant  thereto  the  Commission  on  

11.7.2006 passed order in which it had prescribed the rate for  

LMV-2 and LMV-6 consumers only.  However, Commission also  

opined that the State Government has permitted realization on

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flat rate depending upon reed space, number of looms, etc. It  

appeared to be the case of  altering the rate schedule of  the  

tariff order fixed by it which is not permissible within the legal  

framework to be attempted by the State Government. The State  

Government also did not spell  out compliance of the advance  

subsidy  payment  as  envisaged  under  Section  65  of  the  

Electricity  Act,  2003.  While  dealing  with  the  matter,  the  

Commission observed that billing of the power loom be done  

strictly in accordance with prevalent schedule.   

7. It is pertinent to mention that tariff order 2004-2005 was  

issued by the Commission for  providing benefit  to  LMV-2 and  

LMV-6 consumers, it admittedly did not cover HV-2 consumers.  

The  Commission  ultimately  directed  that  billing  of  the  power  

loom  consumers  shall  be  done  strictly  in  accordance  with  

prevalent  rate schedule of  tariff  order  2004-2005 on monthly  

basis.  It issued further directions with respect to the collection  

of the subsidy.  It also directed that payment from the power  

loom consumers shall be collected as per the policy direction of  

the  Government  on  monthly  basis.   It  also  directed  that  

Government should earmark capital subsidy for providing free of  

cost  meters  to  power  loom  consumers  in  case  of  new  

connections.

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8. Later on, industries enjoying HV-2 connection approached  

the Electricity Regulatory Commission to clarify that whether the  

order  of  the  Commission  dated  11.7.2006  in  the  matter  of  

subsidized electricity rates for power loom consumers shall be  

applicable to them also, as the benefit of the said order was not  

extended to them by the concerned authorities.

9. The Commission passed an order on 14-15/9/2006 that the  

order dated 11.7.2006 shall apply mutatis mutandis for even HV-

2  power  loom  consumers  irrespective  of  their  load.  It  also  

directed that subsidy provision shall accordingly apply to them  

also.  

10. The Secretary, Government of U.P. wrote to the Chairman,  

U.P.  State  Electricity  Regulatory  Commission  on  6.10.2006  

drawing  their  attention  to  the  Commission’s  letter  dated  

14th/15th September, 2006 clarifying that only those consumers  

to  whom  the  State  Government  was  giving  subsidy  under  

Section 65 of Electricity Act, 2003 were entitled for benefit of  

Government  order  dated  14.6.2006.   The  scheme  to  supply  

electricity on flat rate to the power loom bunkars has been made  

for LMV-2 and LMV-6 consumers for whom earlier also provisions  

of subsidy had been made.  The U.P. Government has not made  

provisions of any subsidy for industries availing HV-2 category

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connection.  Therefore, distributing companies of U.P. could not  

give facility of flat rate tariff to HV-2 consumers.   

11. The aforesaid communication was not dealt  with by the  

Commission but Secretary of the Commission  vide letter dated  

18.10.2006 advised the Principal Secretary, Energy, Government  

of U.P. to amend the Government order dated 14.6.2006 so as to  

confine subsidy to LMV-2 and LMV-6 consumers only.  

12. On  24.2.2007  Chief  Engineer  (Commercial),  U.P.  Power  

Corporation  Ltd.,  Commercial  Cell  wrote  to  Chief  Engineer  

(Distribution)  Purvanchal  Vidyut  Vitran  Nigam  Ltd.,  Varanasi  

Region, Varanasi that present tariff is applicable to LMV-2 and  

LMV-6  consumers  and  subsidy  is  not  admissible  to  HV-2  

consumers.   

13. On 1.5.2007 the Secretary of the Government of U.P. wrote  

to the Managing Director of U.P. Power Corporation Ltd. that only  

the  weaver-consumers  falling  under  rate  schedule  LMV-2 and  

LMV-6  would  be  covered  by  the  flat  rate  for  the  supply  of  

electricity to bunkars.   

14. One of the industry, namely M/s Hiltrex Industrial Fabrics  

Pvt.  Ltd.,  Sahjani,  Magarwara,  District  Unnao,  availing  HV-2  

connection,  filed W.P.  No.2204 (M/B)  of  2007 before the  High  

Court of Judicature at Allahabad, Lucknow Bench, Lucknow.  The

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writ petition was dismissed.   It was held by the Division Bench  

that subsidy paid by the Government was to help person or class  

of  persons by keeping the prices  down.   The earlier  decision  

dated 14.6.2006 was intended to give benefit to weavers, who  

were  members  of  the  weaker  section  of  the  society,  not  to  

consumers like the petitioners.  

15. Thereafter,  the  U.P.  Electricity  Regulatory  Commission  

issued a letter dated 10.10.2007 in the matter of extension of  

rebate/subsidized power loom flat  rate tariff  to HV-2 category  

consumers, duly noticing the decision of the Lucknow Bench in  

order dated 16.8.2007 rendered in the aforesaid writ petition, it  

clarified that the provision of tariff for 2006-2007 shall not be  

attracted in case of HV-2 power loom consumers in consonance  

with the findings of the High Court.  

16. Thereafter, in the instant matters the writ petitions were  

filed  by  the  industries  seeking  extension  of  benefit  for  HV-2  

power  loom  consumers  questioning  the  aforesaid  adverse  

decisions.  A Division Bench of the High Court of Allahabad in  

CMWP No.32401 of 2007  M/s. Maa Vind Vasini Industries  

Gorakhpur  and  Another v.  Purvanchal  Vidyut  Vitran  

Nigam Ltd.  and others, allowed the writ petition  vide order  

dated 12.12.2007.  The said order has been followed in CMWP

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No.  8765  of  2008  M/s.  Adarsh  Textiles v.  Paschimanchal  

Vidyut Vitran Nigam Ltd.  & Ors.,  and CMWP No.  8763 of  

2008  M/s  Amit  Textiles v.  Paschimanchal  Vidyut  Vitran  

Nigam Ltd.   

17. In  CMWP  No.63293  of  2007,  M/s.  Vikas  Textile  

Company and another v.  State of U.P. and others, though  

following the decision in M/s Maa Vind Vasini Industries and  

another v.  Purvanchal  Vidyut  Vitran  Nigam  Limited  

Varanasi and others, it has been ordered by the High Court on  

13.8.2009  that  the  Corporation  shall  charge  petitioners  in  

accordance with the Government order dated 11.7.2007.   The  

petitioner  shall  not  be  entitled  to  the  relief  provided  by  the  

Government orders dated 14.6.2006 and 31.3.2007.  

18. Aggrieved by the order dated 13.8.2009, Vikas Textile has  

filed SLP (Civil) No.30528 of 2009 and prayed for enforcement of  

the Government Order dated 14.6.2006 and question of demand  

raised  by  respondent  No.6  (Executive  Engineer  (Distribution),  

Electricity Distribution Division – I, Hathras, of Rs.4,43,904/- for  

the period from April 2007 to December 2007.  The said amount  

had been deposited ‘under protest’ on 23.9.2009 and a direction  

is sought to refund the aforesaid amount with interest.  

19. We have heard learned counsel  for  the parties.   It  was

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submitted  on  behalf  of  the  appellants  that  policy  decision  

reflected in the order of the State Government dated 14.6.2006  

was not applicable to HV-2 consumers. The State Government  

intended to grant benefit to the weavers alike to farmers.  It has  

extended the benefit in the previous years to LMV-2 and LMV-6  

consumers and not to HV-2 category industries and no provision  

for subsidy had been made by the State Government for HV-2  

consumers.  Thus, it was not open to the Commission to fix the  

tariff for HV-2 industries and compel the State Government to  

release the subsidy.  The Government had clarified its stand on  

6.10.2006.   It was also apparent from the communication dated  

24.2.2007 of Chief Engineer (Commercial) of the Corporation to  

one of the distributors.  The Commission has acted beyond the  

powers while fixing the tariff for HV-2 category consumers and  

based thereupon in directing the State Government to release  

subsidy.   The decision  of  the  Lucknow Bench could  not  have  

been ignored and was binding on the Coordinate Bench of the  

same High Court.  The decision of the Lucknow Bench could not  

be said to be  per incuriam.  It was not open to Commission to  

pass ex parte clarification on 14/15th September, 2006 without  

hearing the interested parties and also State Government.  

20. It was contended on behalf of the industries availing HV-2

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connection that benefit of the order dated 14.6.2006 had rightly  

been extended by the Commission to such industries. The view  

taken  by  the  High  Court  of  Allahabad  in  the  subsequent  

impugned decisions is in accordance with law.  

21. Prior  to  14.1.2000  electricity  was  being  generated,  

distributed and transmitted in the State of U.P. by the erstwhile  

Uttar Pradesh State Electricity Board constituted under Section 5  

of the Electricity (Supply) Act, 1948.

22. The  Uttar  Pradesh  Electricity  Reforms  Act,  1999  

(hereinafter referred to as “the Reforms Act, 1999”) came to be  

enacted  which  authorised/empowered  the  State  Government,  

time to time issue directions on a policy matter in regard to the  

electricity and subsidy as per the provisions contained in Section  

12 of the Reforms Act, 1999. Same is reproduced hereunder :  

“12 Power of the State Government. (1) The State  Government may, from time to time, issue directions  not  inconsistent  with  this  Act,  on a policy  matter  in  regard to electricity and if any dispute arises between  the  Commission  and  the  State  Government  as  to  whether a question is or is not a policy matter it shall,  be  referred  to  the  Central  Electricity  Regulatory  Commission whose decision thereon shall be final and  binding.  

(2)(a) The State Government shall be entitled to  issue policy directions with respect to the subsidies to  be  granted  for  supply  of  electricity  to  any  class  or  classes of persons or in respect of any area in addition  to  the  subsidies  adjusted  by  the  Commission  while  regulating and approving the tariff structure:

Provided  that  the  State  Government  shall

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contribute the amount to compensate the licensee or  person affected by the grant of the subsidies to the  extent of the subsidies granted.  

(b) the amount of the subsidy to be paid under  clause (a)  and the method and manner  of  payment  and the time within which such amount is to be paid  by the state Government shall be determined by the  Commission  and the  Commission  will  calculate  such  amount in accordance with the procedure provide in  the regulations.”  

23. The Electricity Act, 2003 was enacted by the Parliament.  

Section  62  whereof  confers  the  power  upon  Commission  to  

determine  the  tariff.   Section  65  of  the  Electricity  Act,  2003  

enables the State Government to grant subsidy to any consumer  

or  class  of  consumers  in  the  tariff  determined  by  the  State  

Commission under Section 62.

24. Section 108 of the Act of 2003 deals with the power to  

issue directions by the State Government.  The Commission shall  

be guided by such directions in the matter of policy involving  

public interest as the State Government may give to it in writing.  

  Sections  62,  65 and 108 of  the  Electricity  Act,  2003 are  

reproduced hereunder :

“Section 62. (1) The Appropriate Commission shall  determine the tariff in accordance with provisions of this  Act for –  

(a) Supply of electricity by a generating company to  a distribution licensee:

Provided  that  the  Appropriate  Commission  may,  in  case of shortage of supply of electricity, fix the minimum

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and maximum ceiling of  tariff  for  sale  or  purchase of  electricity in pursuance of  an agreement,  entered into  between  a  generating  company  and  a  licensee  or  between licensees, for a period not exceeding one year  to ensure reasonable prices of electricity;

(b) transmission of electricity;

(c) wheeling of electricity;

(d) retail sale of electricity.  Provided that in case of distribution of electricity in the  

same area  by  two  or  more  distribution  licensees,  the  Appropriate Commission may, for promoting competition  among distribution licensees, fix only maximum ceiling  of tariff for retail sale of electricity.  (2) The Appropriate Commission may require a licensee  or a generating company to furnish separate details, as  may be specified in respect of generation, transmission  and distribution for determination of tariff.  (3)  The  Appropriate  Commission  shall  not,  while  determining  the  tariff  under  this  Act,  show  undue  preference  to  any  consumer  of  electricity  but  may  differentiate  according  to  the  consumer’s  load  factor,  power  factor,  voltage,  total  consumption  of  electricity  during  any  specified  period  or  the  time  at  which  the  supply  is  required or  the geographical  position of  any  area, the nature of supply and the purpose for which the  supply is required.  (4)  No  tariff  or  part  of  any  tariff  may  ordinarily  be  amended  more  frequently  than  once  in  any  financial  year,  except  in  respect  of  any  changes  expressly  permitted under the terms of any fuel surcharge formula  as may be specified.  (5)  The  commission  may  require  a  licensee  or  a  generating company to comply with such procedures as  may be specified for calculating the expected revenues  from the tariff and charges which he or it is permitted to  recover.  (6) If any licensee or a generating company recovers a  price or  charge exceeding the tariff  determined under

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this section, the excess amount shall be recoverable by  the person who has paid such price or charge along with  interest equivalent to the bank rate without prejudice to  any other liability incurred by the licensee.”  

“Section 65. If the State Government requires the grant  of any subsidy to any consumer or class of consumers in  the  tariff  determined  by  the  State  Commission  under  section 62, the State Government shall, notwithstanding  any  direction  which  may be given  under  section  108,  pay,  within  in  advance  in  the  manner  as  may  be  specified,  by  the  State  Commission  the  amount  to  compensate the person affected by the grant of subsidy  in the manner the State Commission may direct,  as a  condition for the licence or any other person concerned  to  implement  the  subsidy  provided  for  by  the  State  Government:  

Provided  that  no  such  direction  of  the  State  Government  shall  be  operative  if  the  payment  is  not  made in accordance with the provisions contained in this  section and the tariff fixed by State Commission shall be  applicable  from  the  date  of  issue  of  orders  by  the  Commission in this regard.”

“Section 108 (1) In the discharge of its functions,  the State  Commission shall be guided by such directions  in matters of policy involving public interest as the State  Government may give to it in writing.

(2) If any question arises as to whether any such  direction relates to  a  matter  of  policy involving public  interest, the decision of the State Government thereon  shall be final.”  

25. It  is  apparent  from  a  bare  reading  of  the  aforesaid  

provisions of Electricity Act, 2003 and Reforms Act 1999 that in  

discharge of its functions, the State Commission shall be guided  

by such directions in matters of policy involving public interest  

as  the  State  Government  may  give  to  it  in  writing.   Such

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decision/direction  of  the  State  Government  in  the  matter  of  

policy, subsidy and public interest shall be final.  Under Section  

65 it  is  a  prerogative  of  the  State  Government  to  grant  any  

subsidy  to  any  consumer  or  class  of  consumers  in  the  tariff  

determined by the Commission under Section 62.  It is apparent  

from the provisions contained in Sections 65 and 108 of Act of  

2003  that  to  grant  subsidy  to  any  consumer  or  class  of  

consumers is the prerogative of the State Government and such  

other direction issued in the public interest shall be binding upon  

the Commission.   

26. When  we  consider  the  policy  decision  of  the  State  

Government dated 14.6.2006 read with communications dated  

6.10.2006, dated 24.2.2007 and lastly dated 1.5.2007, the State  

Government never intended to extend the benefit of the subsidy  

to HV-2 category consumers. It had not made any provision for  

extending subsidy to HV-2 consumers.  The Commission in order  

dated 11.7.2006 itself has confined the tariff respite to LMV-2  

and LMV-6 consumers.  It was not open to the Commission to  

issue  clarification  dated  14-15/9/2006,  as  the  matter  of  

providing  subsidy  was  clearly  prerogative  of  the  State  

Government  under  the  provisions  of  Section  65  read  with  

Section 108 of the Act of 2003 and Section 12 of Reforms Act,

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1999 hence Commission could not have accepted on its own, or  

directed the State Government to release the subsidy to HV-2  

consumers and that too unilaterally.   

27. When we read the order dated 14.6.2006 it becomes clear  

that the State Government has granted approval for supply of  

electricity to “power loom bunkers on flat rate as extended to  

farmers”.  It has fixed the tariff for the loom having 60 inches  

reed space, Rs.65/- per loom and it will be presumed that load of  

loom is 0.5 H.P. and for looms having reed space of more than  

60 inches,  Rs.130/-  per  month will  be charged and it  will  be  

presumed that load of the loom is 1 H.P. In additional machines  

in urban areas, Rs.130/HP/month would be charged and in rural  

area 75/HP/month would be charged.  It also provided that the  

expenses for new meter will not be taken from consumers.  

28. It can be culled out from order dated 14.6.2006 that the  

State Government intended the benefit to be extended to power  

loom ‘weavers’  alike  farmers.   The  activity  of  manufacturing  

textile is  generally understood as the weaving of such textile  

and man who is engaged in such power loom activity is known  

as weaver. Weaving means: to form a fabric by interlacing yarn  

on a loom.  It also means the method of pattern of weaving or  

the structure of a woven fabric, as observed by this Court in Ess

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Dee Carpet Enterprises v. Union of India (UOI) and Others  

(1990) 1 SCC 461. The State Government thus, never intended  

the benefit to be given to big industries like HV-2 industries.  In  

the circumstances, it  was incumbent upon the Commission to  

consult the State Government before passing clarification order  

dated 14-15/9/2006 while applying its order dated 11.7.2006 to  

HV-2 consumers.  When the State Government has written to the  

Commission on 6.10.2006, thereafter there was no justification  

for the Commission not to recall the clarification issued on 14-

15/9/2006 as it was the prerogative of the State Government to  

extend the benefit  of subsidy to a class or particular class of  

consumers and subsidy being a concession could not have been  

enforced as a matter of right.  The Commission was bound to act  

as per such directives of State Government.

29. The submission that the State is bound by the principle of  

promissory estoppel  to  extend the benefit  of  subsidy to HV-2  

consumers is also devoid of merit. This Court in Gujarat State  

Financial Corporation vs. M/s. Lotus Hotels Pvt. Ltd. [1983  

(3) SCC 379] had referred to  Motilal Padampat Sugar Mills  

Co. Ltd. vs. State of U.P. & Ors. [1979 (2) SCC  409] and  

observed as under :

“The true principle  of  promissory estoppel,  therefore, seems to be that where one party has by his

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words  or  conduct  made  to  the  other  a  clear  and  unequivocal promise which is intended to create legal  relations or affect a legal relationship to arise in the  future,  knowing  or  intending  that  it  would  be  acted  upon by the other party to whom the promise is made  and it is in fact so acted upon by the other party, the  promise would be binding on the party making it and  he would not be entitled to go back upon it, if it would  be inequitable to allow him to do so having regard to  the  dealings  which  have  taken  place  between  the  parties, and this would be so irrespective of whether  there  is  any  pre-existing  relationship  between  the  parties or not.”

The aforesaid principle is not attracted in the instant case  

as the State Government has not extended any assurance by its  

conduct much less unequivocal one, thus there was no question  

of the industries acting upon it. The State Government had not  

extended any assurance to extend the subsidy and, on the other  

hand,  it  had  made  its  stand  clear  and  objected  to  the  

Commission’s clarification by writing a letter on 6.10.2006.  

30. Equally futile is the reliance upon the agreements which  

have been entered into for supply of electrical energy after the  

clarification was issued by the Commission. It was on the basis  

of  the  directive  issued  by  the  Commission  that  the  said  

agreements have been entered into by the consumers with the  

Corporation.   However,  a  perusal  of  the  agreement  makes  it  

clear there is no mention as to the subsidy to be extended by  

the State Government.  The only stipulation is that the supply

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would be made at the rate specified by the Commission. Thus,  

the agreement does not deal with the question of subsidy at all.  

Even  otherwise  the  agreements  can  also  not  be  said  to  be  

binding  upon  the  State  Government  as  the  

Commission/Corporation had no authority to burden the State  

with the subsidy when it had made no such provision for HV-2  

consumers. It is a settled proposition that the assurance to form  

promissory  estoppel  must  come from the person  in  authority  

having  competence  to  extend  it.  The  Commission  and  the  

Corporation had no jurisdiction in the matter of subsidy which is  

the domain of the State Government.  

31. For the foregoing reasons, we find that the view taken by  

the High Court of Allahabad cannot be said to be sustainable  

while extending the benefit of order dated 14.6.2006 to the HV-2  

consumers.  The demand raised in  Vikas Textiles’  case for  the  

period from April, 2007 to December, 2007 was also appropriate.  

In view of the aforesaid decision, the appeals arising from SLP  

(C) Nos.29322/10, 9869/2008, 29320/2010 and 29324/2010 are  

allowed and the appeal arising from SLP(C) No. 30528/2009 is  

dismissed. Parties to bear their own costs.  

     ..................................J. (Jagdish Singh Khehar)

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      ..................................J. (Arun Mishra)

New Delhi; December 3, 2014.