JUDGMENT

1. We think that Section 575 of the Civil Procedure Code does not take away the right of appeal which is given by Clause 15 of the Letters Patent.

2. We agree in the view taken by <ORG> in the case of <NAME> v. Shivlal Khubchand I.L.R. 3 Bom. 204 that the effect of Section 575 of the Code is to supersede the provision in Clause 36 of the Letters Patent; that in the event of any disagreement between two Judges of a Division Bench, the judgment of the senior Judge shall prevail; but (sic), and still that notwithstanding that section, Clause 15 of the Letters Patent remains in full force.

3. One very cogent reason, which has induced us to take this view, and which seems almost conclusive upon the point is, that if the appeal under Clause 15 of the Charter were taken away, a judgment in this <ORG> of a Judge in a Division Bench, who agreed with the <ORG> below upon a question of fact, would be absolutely final. However important the case might be, no appeal would lie to <ORG> from that judgment. This is clear from Section 597 of the Civil Procedure Code, which enacts that "no appeal shall lie to Her Majesty in Council from the judgment of one Judge of the High <ORG>, or of one Judge of a Division <ORG>, or of two or more Judges of the High <ORG>, where they are equally divided in opinion."

4. It is, therefore, we think, obviously intended that in any such case an appeal should be had in the first instance to <ORG> of <ORG>, before an appeal can be preferred to Her 'Majesty in Council, and such an appeal can only be had under Clause 15 of the Charter.

5. We are of opinion, therefore, that the question referred to us should be answered in the affirmative.


JUDGMENT <NAME>, J.

1. The material facts on record and the proceedings leading up to this reference are, inter alia, that <ORG>, the assessee, is a trust founded in 1920. It is not in dispute that the income of the assessee is spent for charitable purposes. Between 1956 and 1963, the assessee received from time to time ordinary shares of <ORG> ("the company"), from various parties aggregating 96,490 shares.

2. In the assessment year 1971-72, the relevant accounting year ending on March 31, 1971, the assessee received dividends on the said shares amounting to Rs. 1,44,735. In its return of income as well as in its assessment, the assessee claimed that the said amount of Rs. 1,44,735 was not exigible to income-tax under the provisions of Section 13(1)(c)(ii) of the Income-tax Act, 1961 ("the Act"), read with the second proviso to the said section. The Income-tax Officer rejected the contentions of the assessee and held that the funds of the assessee remained invested in a concern in which the persons referred to in Sub-section (3) of Section 13 of the Act, viz., the settlor of the trust, the persons who had made a substantial contribution to the trust and/or their relatives had substantial interest in the company and, therefore, the income of the assessee by way of dividends from the said shares was not entitled to exemption under Section 11 of the Act.

3. Being aggrieved, the assessee preferred an appeal from the assessment to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner accepted the contentions of the assessee and held that the investment in the instant case had been made by the donors and the donations were received by the assessee by 1963. It was held that as no funds of the assessee had been invested in the said shares and that as the assessee had received the shares themselves by way of donation, the provisions of Section 13(2)(h) read with Section 13(1)(c) had no application and that the dividend received by the assessee from the said shares was exempt from income-tax.

4. Being aggrieved, the <ORG> preferred an appeal to the Tribunal against the order of the Appellate Assistant Commissioner. It was contended on behalf of the <ORG> before the Tribunal that as the assessee continued to hold the said shares even after April 1, 1971, the assessee ceased to be entitled to claim exemption from income-tax in respect of the dividends received from the said shares under Section 11 by reason of the provisions of Section 13(2)(h) . It was submitted that the expression "fund" referred to in Section 13(2)(h) would cover the said shares held by the assessee and, therefore, the Income-tax Officer was justified in holding that the said dividend was not exempt from income-tax under Section 11 . At best, the assessee would be entitled to claim a benefit of exemption under Section 11 in respect of such dividend from the said shares received during the period prior to June 1, 1970, and not thereafter. It was submitted further that the assessee ought to have reinvested the amount represented by the said shares in some other concern to which the provisions of Section 13(3) were not applicable.

5. It was contended on behalf of the assessee before the <ORG> that the expressions "fund" and "invest" which were not defined in the Income-tax Act had to be construed with reference to their dictionary meaning. The meaning of the said words as given in the Chambers, Twentieth Century Dictionary, 1972 edition, the Concise Oxford Dictionary, 5th edn. and the Webster's New Collegiate Dictionary, 7th edition, were referred to and relied on.

6. It was contended on behalf of the assessee that the assessee had received the said shares qua shares by way of donation. The shares were neither funds nor did they continue to remain invested in the company within the meaning of Section 13(2)(h) . It was submitted that no fund, property or income of the assessee had been utilised to purchase or for making any investment in the said shares. It was contended that only where there was a positive action by an assessee to make an investment out of funds already in its possession, the provision of Section 13(2)(a) would be attracted. The receipt of bounty could not be held to be an investment. An investment implied and necessarily meant a conscious and positive act on the part of the assessee which was not present in the instant case. On the facts, the assessee was entitled to claim exemption from income-tax under Section 11 in respect of the dividend received from the said shares.

7. It was submitted further that the provisions of the second proviso to Section 13(1)(c) were prospective and not retrospective and would entitle an assessee to claim full exemption. Section 13(2)(h) , it was submitted, would become operative only in cases where the funds of the assessee were invested by it in any concern in which the persons referred to in Section 13(3) had a substantial interest and the investment was continued beyond June 1, 1970.

8. The <ORG> accepted the contentions of the assessee and held that under the provisions of the second proviso to Section 13(1)(c) , the assessee was entitled to claim exemption in respect of the dividend received from the said shares in the assessment year involved. The <ORG> held further that in view of the meaning of the expressions "fund" and "invest" as found in the dictionaries, it was necessary for the <ORG> to establish that the investment had been made by the assessee out of its funds in a concern in which the persons referred to in Section 13(3) had a substantial interest and that such investments continued beyond June 1, 1970. The <ORG> found that it was admitted that the shares involved in the instant case had been received by the assessee by way of donation and had not changed their character since the receipt thereof by the assessee. The <ORG> held that on the facts, the provisions of Section 13(2)(h) had no application and the assessee was entitled to claim exemption from income-tax in respect of the dividend received from the said shares. The <ORG> affirmed the order of the Appellate Assistant Commissioner and dismissed the appeal of the <ORG>.

9. On an application of the <ORG> under Section 256(1) , the <ORG> has referred the following question as a question of law arising out of its order for the opinion of this court :

"Whether, on the facts and in the circumstances of the case and on a proper interpretation of Sections 11 and 13 of the Income-tax Act, 1961, the <ORG> was justified in holding that the assessee would be entitled to claim exemption in respect of dividend income of Rs. 1,44,735 received in the accounting year relevant to the assessment year under reference ?"

10. It is convenient to refer to the relevant provisions at this stage :

" Section 11 . Income from property held for charitable or religious purposes.--(1) Subject to the provisions of Sections 60 to 63 , the following income shall not be included in the total income of the previous year of the person in receipt of the income-

(a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India ; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of twenty-five per cent. of the income from such property."

" Section 13 . Section 11 not to apply in certain cases.--(1) Nothing contained in Section 11 or Section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof--...

(c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof--...

(ii) if any part of such income or any property of the trust or institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in Subsection (3) : .....

Provided further that in the case of.....or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of Sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in Sub-section (3) in so far as such use or application relates to any period before the 1st day of June, 1970 ;

(d) subject to the provisions of Clause (bb), in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof assessable for any assessment year commencing on or after the 1st day of April, 1979, if any funds of the trust or institution are invested or deposited or continue to remain invested or deposited for any period during any previous year commencing on or after the 1st day of April, 1978, otherwise than in any of the forms or modes specified in Sub-section (5); .....

(2) Without prejudice to the generality of the provisions of Clause (c) of Sub-section (1), the income or the property of the trust or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in Sub-section (3),--.....

(h) if any funds of the trust or institution are, or continue to remain, invested for any period during the previous year (not being a period before the 1st day of January, 1971) in any concern in which any person referred to in Sub-section (3) has a substantial interest.

(3) The persons referred to in Clause (c) of Sub-section (1) and subsection (2) are the following, namely :--

(a) the author of the trust or the founder of the institution ;

(b) any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds five thousand rupees ;

(c) where such author, founder or person is a Hindu undivided family, a member of the family ;

(cc) any trustee of the trust or manager (by whatever name called) of the institution ;

(d) any relative of any such author, founder, person, member, trustee or manager as aforesaid ;

(e) any concern in which any of the persons referred to in Clauses (a), (b), (c), (cc) and (d) has a substantial interest."

8. At the hearing before us, the learned advocate for the <ORG> submitted that the meaning of the expressions "fund" and "invest" as occurring in Section 13(2)(h) should be construed not only with reference to dictionaries but also taking into account the meaning of the said expressions as understood commercially and by accountants. It was submitted that in the instant case, the said shares after being donated to the assessee constituted funds in the hands of the assessee. As the assessee held on to the said shares, the funds of the assessee continued to remain invested in the company in which the persons specified in Section 13(3) had a substantial interest. Therefore, the assessee was not entitled to claim exemption under Section 11 by itself or read with the second proviso to Section 13(1)(c) .

9. In support of his contentions, the learned advocate for the <ORG> relied on and cited the following :

(a) Black's Law Dictionary, 5th edition : "Fund ".....An asset or group of assets set aside for a specific purpose.....

A generic term and all-embracing as compared with term "money", etc., which is specific. A sum of money or other liquid assets set apart for a specific purpose or available for the payment of debts or claims.

In the plural, this word has a variety of slightly different meanings, as follows : "moneys and much more, such as notes, bills, cheques, drafts, stocks and bonds, and in broader meaning may include property of every kind...Money in hand, assets, cash, money available for the payment of a debt, legacy, etc. Corporate stocks or government securities ; in this sense usually spoken of as the 'funds'. Assets, securities, bonds or revenue of a <ORG> or Government appropriated for the discharge of its debts. Generally, working capital ; sometimes used to refer to cash or to cash and marketable securities." (p. 606)

(b) Dictionary for Accountants, 4th edn., by <NAME> :

"1. An asset or group of assets within any organization, separated physically or in the accounts or both from other assets and limited to specific uses. Examples : a petty cash or working fund ; a replacement and renewal fund ; an accident fund ; a contingent fund ; a pension fund.

2. Cash, securities, or other assets placed in the hands of a trustee, principal or income or both being expended in accordance with the terms of a formal agreement.

Example : a trust fund created by a will ; an endowment fund ; a sinking fund.....

4. pl. : Current assets less current liabilities (on an accrual basis) ; working capital ; a term used in cash flow statements.

5. pl. : cash." (pp. 204-208)

10. The learned advocate for the <NAME> also cited a decision of <ORG> in <ORG> (P.) <CITATION>  106 ITR 45, 50, where <ORG> quoted with approval an observation of <ORG> in IRC v. <ORG>, [I949J 29 TC 352, 373 as follows :

"The meaning of ' investment' is not its meaning in the vernacular of the man in the street but in the vernacular of the businessman. It is a form of income-yielding property which the businessman looking at the total assets of the company would single out as an investment..... The businessman would not limit income from investments to income from the kinds of securities which are quoted on the stock exchange, and he. would, I think, regard as income from investment a profitable rent from a sublease of office premises, or the like... "

11. The learned advocate for the <ORG> also cited another English decision in <NAME> v. Corporation of South Shields [1942] 25 TC 445, where <ORG> also construed the meaning of the expression "fund" as follows (p. 456) :

"The word 'fund' may mean actual cash resources of a particular kind (e.g., money in a drawer or at a bank) or it may be a mere accountancy expression used to describe a particular category which a person uses in making up his accounts. The words 'payment out of' when used in connection with the word 'fund' in its first meaning connote actual payment, e.g., by taking the money out of the drawer or drawing a cheque on the bank. When used in connection with the word 'fund' in its second meaning, they connote that, for the purposes of the account in which the fund finds a place, the payment is debited to that fund, an operation which, of course, has no relation to the actual method of payment or the particular cash resources out of which the payment is made... "

12. A fund in the second sense is merely an accountancy category ; it has a real existence in that sense, but not in the sense that a real payment can be made out of it as distinct from being debited to it.

13. The learned advocate for the <ORG> also cited <CITATION> . In this case, four partners of a firm donated to the assessee, a trust, Rs. 10,000 cash by debiting their respective accounts with the firm and crediting the same in the account of the asses-see by the end of March, 1971. The amounts so donated were hantled over to the trust in two equal instalments on April 10, 1971/April 15, 1971. In the assessment year involved, the accounting year ending on March 31, 1971, the question arose whether the assessee was entitled to exemption from income-tax in respect of the said amounts donated under Section 13(2)(h) . The claim of the assessee for exemption was rejected by the Income-tax Officer but was allowed by the Appellate Assistant Commissioner. On further appeal, the <ORG> set aside the decision of the Appellate Assistant Commissioner and upheld the decision of the Income-tax Officer.

14. On a further reference before <ORG>, it was held that as soon as credit entries were made in favour of the assessee, the latter would be deemed to have been put in possession of the said amounts. The firm would thereafter be holding the amounts as a debtor of or on behalf of and for the benefit of the assessee. It was found that the assessee had shown the amounts as recoverable from the firm in its balance-sheet indicating that the amount was allowed to remain in the firm till the same was demanded and paid. It was held that Section 13(2)(h) applied in the facts and the assessee was not entitled to exemption under Section 11 .

15. The learned advocate for the assessee reiterated the submissions made on behalf of the assessee before the <ORG>. He submitted that the expressions "fund" and "invest" should be construed according to their dictionary meanings. The expression "fund" in the context of Section 13(2)(h) was a noun and the meaning of the said expression in the standard dictionaries was as follows :

Chambers' Twentieth Century Dictionary, New edn., 1972 (p. 526) : "Fund n. a sum of money on which some enterprise is founded or expense supported : a supply or source of money :"

16. The Concise Oxford Dictionary, 5th edn., 1964 (p. 494) :

"Fund n. 1. Permanent stock of something ready to be drawn upon--stock of money--pecuniary resources."

17. Webster's Seventh New Collegiate Dictionary--based on Webster's Third New International Dictionary (p. 538) :

"Fund. 1. an available quantity or material or intangible resources ; supply ; 2. a sum of money or other resources the principal or interest of which is set apart for a specific objective."

18. The expression "invest" in the said Section 13(2)(h) was a verb and the meaning of the said expression as in the standard dictionaries was as follows :

Chambers' Twentieth Century Dictionary, New <ORG>., 1972 (p. 691) :

"...to lay out for profit as by buying property, shares, etc. The Concise Oxford Dictionary, 5th edn., 1964 (p. 640) :

" ...lay out money on as--in a car."

19. Webster's Seventh New Collegiate Dictionary : "vb. vt. 1 : to commit (money) in order to earn a financial return ; 2. to make use of for future beenefits or advantages--vt. to make an investment."

20. It was submitted that the assessee having received the said shares by way of donation, the same could not be deemed to be funds in his hands nor could it be held that the assessee had invested its funds in the said shares within the meaning of the said Section 13(2)(h) . No fund, property or income belonging to the assessee and in its possession had been utilised to obtain or invest in the said shares. The said shares had been received by the assessee as a gift or bounty and the same could not be held to be an investment which could only be made by a positive and conscious act of the assessee.

21. The learned advocate for the assessee contended further that, in any event, the said shares had been received by the assessee by way of donations prior to June 1, 1970, and, therefore, the assessee was entitled to the benefit conferred by the second proviso to Section 13(1)(c)(ii) as the user or applicr tion of the property of the trust related to a period prior to June 1, 1970.

22. In support of his contentions, the learned advocate for the assessee cited the following decisions :

(a) <ORG> & <CITATION> . In this case, <ORG> of this court considered and construed the meaning of the expression "fund" as appearing in Rule 1 of the Second Schedule to the Super Profits Tax Act, 1963, and Rule 2 of the Second Schedule to the Companies (Profits) Surtax Act , 1964. In the judgment to which I was a party, the observations of Lord <NAME> in his judgment in <NAME>'s case  25 TC 445 (HL) were quoted.

(b) Duncan Bros. & <CITATION> : In this case, <ORG> of this court had to consider and construe the meaning of the expression "fund" in Rule 2 of the Second Schedule to the Companies (Profits) Surtax Act , 1964. In the judgment to which I was party, it was noted that in a circular issued by the <ORG>, being Circular No. I. P. (XV-5) of 1968 dated January 23, 1968, it was laid down thatas the expression "fund" had not been defined in the Companies (Profits) Surtax Act , the same had to be given its ordinary meaning as understood in common parlance. It was further noted in the said circular that etymologically, "fund" meant a sum of money available for the payment or discharge of liabilities. The meaning of the expression "fund" in Jowitt's Dictionary of English Law, 2nd edn., Vol. 1, was quoted as follows (p. 840) :

"Fund, a sum of money available for the payment or discharge of liabilities. Thus, the assets of a testator form a fund for the payment of his debts."

(c) <CITATION> . In this case, the assessee was a private limited company incorporated for promoting charitable objects. Some time in 1958, the assessee settled the income from all its properties as also income derived from business carried on by it in trust for carrying out charitable objects as set out in the trust deed. The assessee was a partner in seven firms holding defined shares. The assessee retired from the said partnerships prior to December 31, 1970. On the date of the retirement of the assessee, the said firms did not have adequate resources to pay the amounts due to the assessee on account of capital or share of profits. The amounts due to the assessee were transferred to the current account of the firm as outstanding. In the assessment year involved, the assessee claimed exemption under Section 11 which was rejected by the Income-tax Officer. The decision of the Income-tax Officer was set aside by the Appellate Assistant Commissioner and the <ORG> affirmed the order of the Appellate Assistant Commissioner.

23. On a reference before <ORG>, the question mooted was whether the amounts due from the said partnership firms to the assessee could be said to have been lent or invested within the meaning of Section 13(2)(a) . <ORG> construed Section 13(2)(h) and considered the interpretation of the expression "investment" in English and Indian decisions. It was held that in order to constitute an investment, money must be laid out in such a manner as to acquire some species of property which would bring an income to the investor. On the facts, it was held that there was no investment of any moneys by the assessee with the firms which were bound to return the moneys due and owing to the assessee as and when demanded. It was held that there had been no investment by the assessee as understood in business parlance.

24. The learned advocate for the assessee also contended that mere holding of the shares donated to the assessee could not be deemed to be an investment of the funds of the assessee. In this connection, he drew our attention to Section 13 , as amended by the Finance Act , 1983, with effect from April 1, 1983. The said amended section reads as follows :

"13. (1) Nothing contained in Section 11 or Section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof--.....

(d) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof, if for any period during the previous year-

(i) any funds of the trust or institution are invested or deposited after the 28th day of February, 1983, otherwise than in any one or more of the forms or modes specified in Sub-section (5) of Section 11 ; or

(ii) any funds of the trust or institution invested or deposited before the 1st day of March, 1983, otherwise than in any one or more of the forms or modes specified in Sub-section (5) of Section 11 continue to remain so invested or deposited after the 30th day of November, 1983 ; or

(iii) any shares in a company (not being a Government company as defined in Section 617 of the Companies Act, 1956 , or a corporation established by or under a Central, State or Provincial Act ) are held by the trust or institution after the 30th day of November, 1983 ;"

25. It was submitted that in the aforesaid amended section, a distinction had been made between investment of funds of a trust and holding by the trust of any shares in a company. If Section 13(2)(h) as suggested on behalf of the <ORG> was accepted, it would not have been necessary to make a specific provision in the amended Clause (d) of Sub-section (1) of Section 13 for shares held by a trust in a company other than the <ORG> companies or statutory corporations.

26. It appears to us that in construing Section 13(2)(h) , the meaning of the expression "fund" will have to be determined not only with reference to dictionaries or to commercial parlance or to the principles of accountancy but also in the context of the said section itself. The expression in the said section is "funds" and not "fund". One of the meanings of the said expression "funds" in the dictionaries is money in hand or cash. In our view, in the context of the said section, this is the meaning which should be attributed to the expression "funds" in construing the said section. The section contemplates that there will be investment of funds of a trust. If any other meaning is given to the expression "funds", the same will not be available for investment or capable of being invested. If the funds of the trust are construed to include assets other than money in hand or cash or a credit balance in a bank account, the same are not capable of being invested as such. Other assets of the trust apart from money in hand or cash will have to be converted into money or cash before the same can be in vested.

27. The expression "invest" in Section 13(2)(h) , in our view, connotes a positive act on the part of the trust whereby the funds of the trust are laid out or committed in any particular property or business or transaction with the object of earning profit or financial advantage or return.

28. It has to be established that a trust having assets in the form of money or cash or a credit balance in a bank account or in any other form capable of being invested was by a positive act and pursuant to a decision of the trust laid out or committed in a concern of a nature specified, before it can be held that such an investment comes within the mischief of Section 13(2)(h) .

29. It appears from the facts as found that the assessee in the instant case received the shares of the company by way of donation. The assessee did not deal with or commit or lay out any part of its existing assets to acquire the said shares. Apart from the acceptance by the assessee of the said shares, there was no decision or action on the part of the assessee. All that the assessee has done is to hold on to the shares which it received by way of gifts.

30. Some light is thrown on the point by the amendment incorporated in Section 13 by the Finance Act , 1983, noted hereinbefore. Under the said amended section, the benefit conferred by Section 11 stands withdrawn not only where the funds of the trust are invested or remain invested in a manner other than that prescribed but also where the trust holds any shares in a company other than a <ORG> company or a statutory corporation after a specified date. A positive distinction has been made between a case where the funds of the trust are, or remain, invested in a manner other than that prescribed and a case where the trust continues to hold shares in companies other than those excepted.

31. We also note that the assessee is a trust which was founded in 1920 long before the commencement of the Act and that the assessee received the said shares of the company prior to June 1, 1970. Therefore, the user or the application of any property of the assessee for the benefit of persons referred to in Section 13(3) , if any, occurred prior to June 1, 1970. It can well be contended that the proviso to Section 13(1)(d)(iii) is applicable in the case of the assessee in the instant case and the assessee was entitled to claim exemption in respect of dividends received from the said shares. This has been found by the <ORG>. On this point, no submission was made before us on behalf of the <ORG>.

32. For the reasons as stated above, we are unable to accept the contentions of the <ORG>. We answer the question referred in the affirmative and in favour of the assessee. There will be no order as to costs.

<NAME>, J.

33. I agree.


PETITIONER: U.P. STATE ELECTRICITY BOARD. LUCKNOW & ORS. Vs. RESPONDENT: CITY BOARD, MUSSOORIE & ORS. ETC. (AND VICE VERSA) DATE OF JUDGMENT08/02/1985 BENCH: <NAME>, E.S. (J) BENCH: <NAME>, E.S. (J) REDDY, O. CHINNAPPA (J) MUKHARJI, <NAME> (J) CITATION: 1985 AIR 883 1985 SCR (2) 815 1985 SCC (2) 16 1985 SCALE (1)196 CITATOR INFO : RF 1986 SC2166 (6) RF 1990 SC 313 (16) RF 1991 SC1676 (65) ACT: Electricity (Supply) Act 1948 sections 46 and 56 Grid tariff-Fixation of-Framing of Regulations under section 79(h) -Whether condition precedent- A common tariff for all licenses in an area served by the grid-Whether permissible. HEADNOTE: Section 46 of the Electricity (Supply) act 1948 provides that a tariff to be known as the Grid Tariff shall, in accordance with any regulations made, be fixed from time to time by <ORG>. Section 58 enables a local authority to implement the directions issued by <ORG> or the <ORG> with regard to amortisation and tariffs policies. <ORG> under a notification dated 24 April 1962, fixed the tariff payable by licensees who used to get bulk supply of electric energy. The tariff so fixed was enhanced by another notification dated September 30, 1967 by 20% which came into force on December, 1,1967. <ORG>, a licensee, moved the State <ORG> on September 13,1966 for permission to enhance the rates for supply, but no such sanction was given till March 23, 1968. <ORG> questioned the validity of the tariff fixed and its subsequent enhancement under Art. 226 on the grounds: (1) that the notification dated April 24, 1962 was not in conformity with s. 46 , and (2) that it had not been Permitted to enhance correspondingly the rates chargeable by it. The petition was, however, dismissed. On appeal <ORG> partly allowed the appeal, holding: (i) that ample guidance is available in the Act, and that the rates fixed are subject to the control of the State <ORG>: (ii) that the levy of an additional 7.112 % as an additional charge and subsequent enhancement under the two notifications was illegal; (iii) that it was open to <ORG> to make an additional charge to the extent of the actual expenditure incurred by supplying energy at 6600 volts, and (iv) that <ORG> should consider afresh rates at which electric energy could be supplied. Both <ORG> and <ORG> filed appeals to this Court. It was contended on behalf of <ORG> that in the absence of any regulations laying down the principles for fixing the tariff under s, 79, the 816 two Notifications issued under s. 46 of the Act were void as they had been issued without any guidance and were, therefore, arbitrary. On the question whether the grid tariff fixed suffered from vice of arbitrariness, ^ HELD: (1) While s. 79(h) of the Act authorises <ORG> to make regulations laying down the principles governing the fixing of Grid Tariffs, s. 46(1) of the Act does not say that no Grid Tariff can be fixed until such regulations are made. It only provides that the Grid Tariffs shall be fixed in accordance with any regulations made in this behalf. The framing of regulation under s. 79(h) of the Act cannot, therefore, be a condition precedent for fixing the Grid Tariff. In the instant case, the Grid Tariff fixed did not suffer from the vice of arbitrariness. [821E-G; 822E] <CITATION>  1 S.C.R. 767, followed. (2) The Electricity (Supply) Act 1948 had been enacted to provide for the rationalisation of the production of supply of electricity and generally for taking measures conducive to electrical development. It is, therefore, permissible for <ORG> to fix a common Grid Tariff for an area so that there may be a reasonably uniform development of the area by the supply of electric energy to all licensees or consumers in the area at a uniform rate with such reasonable variations as may be permissible in law subject to the condition that no undue preference is shown to any of them. The Act also furnishes ample guidance regarding the determination of tariffs by <ORG>. [823A- <CITATION> .  3 S.C.R. 137, followed. (3) The validity of the levy of additional charges could not be questioned by <ORG> under Article 226 of the Constitution in respect of the period prior to the filing of the writ petition. The additional charge of 7.1/2% was levied in 1962 and <ORG> did not question it before the Court till March 23, 1968 when it filed the Writ Petition. Moreover, <ORG> had not stated that it had not collected charges from the consumers of electric energy supplied by it at the rates which would cover the additional 7.1/2% and had not recouped itself by collecting the charges from the consumers. The presumption in this situation would be that <ORG> had not suffered any loss by the levy of 7.1/2% by way of additional charges. [823 G-H 824 A-B] In the instant case, <ORG> has been given directions from time to time by the <ORG> regarding the charges it may collect from the consumers in the light of the charges it has to pay to <ORG> and its own investment expenditure on the undertaking. <ORG> cannot question the Grid Tariff only without at the same time questioning the directions pursuant to which- it has been collecting charges from its consumers. No satisfactory material has been placed before the Court showing that the charges which were being collected by <ORG> from the consumers were uneconomical and did not satisfy the reasonable standards which should 817 govern the directions issued by <ORG> or the <ORG> from A time to time regarding the tariffs policies of <ORG>. Therefore, it would not be proper to reopen the claims of <ORG> in regard to the period prior to the filing of the writ petition arising on the basis of the alleged invalidity of the notification dated April 24,1962. The decision of <ORG> on the above point is allowed to remain only for the period between March 23, 1968 and July 1, 1968. No opinion on its correctness is expressed because the period is small one and <ORG> has not insisted upon a decision on this question. The relief granted by <ORG> with regard to the levy of additional charge of 20% with effect from December 1, 1967 till July 1, 1968 is also not disturbed for the same reasons [824D-H; 825A] The matter may be reconsidered by <ORG> as directed by <ORG> on the other points in regard to the above specified periods JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 814 and 815 of 1974-

From the Judgment and Order dated 13. 8. 1970 of <ORG> in Special Appeal No. 34 of 1969 <NAME>, <NAME> and Mrs. <NAME> for the Appellant in CA. No. 814 and respondent in CA No. 815.

<NAME> and <NAME> for the Respondent in CA. No. 814 and Appellant in CA. No. 815. E The Judgment of the Court was delivered by <NAME>, J. These two appeals by special leave are filed against the judgment dated August 13, 1970 of <ORG> in Special Appeal No. 34 of 1964 (<ORG> v <ORG>) by <ORG> (hereinafter referred to as <ORG>') Constituted under the Electricity (Supply) Act , 1948 (hereinafter referred to as 'the Act') and the <ORG>, a local authority (hereinafter referred to as '<ORG>') respectively.

<ORG> as a licensee under the Indian Electricity Act , 1910 used to get bulk supply of electric energy from <ORG> from <ORG> and in its turn was distributing it to the consumers within its jurisdiction. In the year 1962, under a (1) A.l.R. 1971 Allahabad 219.

<NAME>

notification dated April 24, 1962 issued under section 46 of the Act, the tariff payable by <ORG> and other licensees in <ORG> was fixed by <ORG>. The relevant portion of the Tariff was as follows:

"1. Applicability-This rate schedule is applicable to all licensees situated in Ganga Sarda Grid area and taking supply in bulk from the Board.

2. Character of service-A. C., 3, Phase, 50 cycles, 11,000 volts, Alternatively, the supply can be given at a voltage lower than 11 KV in which case an additional charge at 7. 1/2 per cent on the total amount of the bill will be levied.

If the consumer takes supply at a standard voltage above 11 KV, a rebate of 5% will be allowed to him by the <ORG> on the total amount of the bill calculated at the rates prescribed for supply at KV.

3. Rate;-

(a) Demand Charges-

First 500 KVA of Chargeable demand during the month at the rate of................ ... Rs. 12.75 per KVA Neat 1500 KVA of the charge- demand during the month at the rate of .................. ... Rs. 10.00 per KVa All above 2000 KVA of the chargeable demand during the month at the rate of...... ... Rs. 8.50 per KVA PLUS

(b) Energy Charges-

First 170 Kwh, per KVA of Chargeable demand consumed during the month at the rate of.. "..... 5P. per Kwh Next 170 Kwh. per KVA of chargeable demand consumed during the month at the rate of... -.. - .. .4P. per Kwh.

Remaining Kwh. per KVA of the chargeable demand consumed during the month at the rate of................ 3P. per KWh

4. (i)Chargeable Demand-The chargeable demand for the month shall be defined as the actual demand during the month or 60 per cent of the contracted demand or 75 per cent of the highest demand which occurred during the preceding 11 months, whichever is the highest.

(ii) Coal-Clause-The above rates shall be subject to a coal price adjustment at the rate of 0.001 per Kwh. increase or decrease for every one P. Of variation above or below Rs. 40 per tonne of coal delivered at the bunkers in the Harduaganj Generating Station

5. Determination of Demand:-Demand measurement shall be made by suitable instruments at the point of deli very. The demand for any month shall be defined at the highest average load measured in Kilovolt-amperes during any 30 consecutive minutes period of the month." The tariff so fixed was enhanced by another notification dated September 30, 1967 by twenty per cent and the enhanced rate come into force on December 1, 1967. Under section 58 of the Act, <ORG> or where no such Board was constituted, <ORG> had the power to direct the amortisation and tariffs policies of any licensee, being a local authority, with respect to its licensed undertaking in such manner as <ORG> or <ORG>, as the case may be, after giving the local authority a reasonable opportunity of being heard, considered expedient for the purposes of the Act. The licensee, being a local authority, the provisions of any other law or of any rules made or directions given thereunder notwithstanding, was bound to give effect to any such directions of <ORG>, or <ORG>, as the case may be. <ORG> however, could not issue any directions under section 58 of the Act except after obtaining the prior approval of <ORG>. <ORG> had H moved <ORG> on September 13, 1966 for permission to enhance the rates for supply of electric energy to Consumers. No such sanction was given till March 23, 1968. <ORG>, therefore, filed a petition under Article 226 of the Constitution questioning the validity of the tariff fixed under the notification dated April 24, 1962 and the enhancement made under the notification dated September 30, 1967- It may, however, be stated here that subsequently on April 20, 1968, <ORG> was permitted to raise the charges for light and fan by two paise per unit which came to 6% or 7% of the original rates and by 10% for electric energy supplied for other purposes.

<ORG> challenged the notification issued on April 24, 1962 on the ground that it was not in conformity with section 46 of the Act. It questioned the enhancement made on September 30, 1967 on the ground that it had not been permitted to enhance correspondingly the rates chargeable by it to the consumers even though in its vicinity <ORG> itself was supplying electric energy to consumers at a much higher rate. The petition was contested by <ORG>. The Writ Petition was heard by a Single Judge of <ORG>. He dismissed the petition. <ORG>, thereafter filed an appeal before <ORG> of <ORG>. <ORG> allowed the appeal in part. Aggrieved by the judgment of <ORG>, <ORG> and <ORG> have filed the above appeals by special leave.

The material part of section 46 of the Act reads thus: "46. (1) A tariff to be known as the Grid Tariff shall in accordance with any regulations made in this behalf, be fixed from time to time by the <ORG> in respect of each area for which a scheme is in force, and tariffs fixed under this section may, if the <ORG> thinks fit, differ for different areas.

(2) Without prejudice to the provisions of section 47 , the Grid Tariff shall apply to sales of electricity by the <ORG> to licensees where so required under any of the First, Second and Third Schedules, and shall, subject as herein-

after provided, also be applicable to sales of electricity by the <ORG> to licensees in other cases:

Provided that if in any such other case it appears to the <ORG> that, having regard to the extent of the supply required, the transmission expenses involved in affording the supply are higher than those allowed in fixing the Grid Tariff, the <ORG> may make such additional charges as it considers appropriate,............. "

The first contention urged before us by <ORG> is that in the absence of any regulations framed by <ORG> under section 79 of the Act regarding the principles governing the fixing of Grid Tariffs, it was not open to <ORG> to issue the impugned notifications. This contention is based on subsection (1) of section 46 of the Act which provides that a tariff to be known as the Grid Tariff shall in accordance with any regulations made in this behalf, be fixed from time to time by <ORG>. It is urged that in the absence of any regulations laying down the principles for fixing the tariff, the impugned notifications were void as they had been issued without any guidelines and were,. therefore, arbitrary. It is admitted that no such regulations had been made by <ORG> by the time the impugned notifications were issued. <ORG> has negatived the above plea and according to us, rightly. It is true that section 79 (h) of the Act authorises <ORG> to make regulations laying down the principles governing the fixing of Grid Tariffs. But section 46 (1) of the Act does not say that no Grid Tariff can be fixed until such regulations are made. It only provides that the Grid Tariff shall be in accordance with any regulations, made in this behalf. That means that if there were any regulations the Grid Tariff should be fixed in accordance with such regulations and nothing more. We are of the view that the framing of regulations under section 79 (h) of the Act cannot be a condition precedent for fixing the Grid Tariff. A similar contention was rejected by this Court in <CITATION> (l) which was a case arising under <ORG> Act , 1950. Under section 14 of that Act <ORG> was entitled to appoint officers and servants as it considered necessary for the efficient performance of its sanctions. Under section 34 (1) of <ORG> Act , 1950 (1) [19681 1 S.C.R. 767, the State Government had been empowered inter alia to issue directions to <ORG> regarding recruitment, conditions of service and training of its employees. Under section 45 (2) (c) of that Act, <ORG> was empowered to make regulations regarding the conditions of appointment and service and the scales of pay of officers and servants of the <ORG> other than the Chief Executive Officer, General manager and the Chief Accounts Officer. Admittedly no regulations had been framed under section 45 (2) (c) of that Act. It was contended that the <ORG> could not appoint officers and servants referred to therein or make any provision regarding their conditions of service until such regulations were made. This Court rejected the said plea with the following observation at page 770:

"The conjoint effect. Of ss. 14 (3) (b), 34 and 45 (2) (c) is that the appointment of officers and servants and their conditions of service must conform to the directions, if any given by <ORG> under s. 34 and the regulations, if any, framed under s. 45 (2) (c). But until such regulations are framed or directions are given, the <ORG> may appoint such officers or servants as may be necessary for the efficient performance of its duties on such terms and conditions as it thinks fit."

We do not also find any merit in the submission that the Grid Tariff fixed in this case suffered from the vice of arbitrariness.

As observed by <ORG> of <ORG>, there is ample guidance available in the various provisions of the Act and that the rates fixed are subject to the control of <ORG>. We do not find it necessary to repeat what is stated by <ORG> except observing that we respectfully agree with the reasons given by it for rejecting the said plea. <CITATION> .,(l) this Court has discussed the relevant provisions of the Act while dealing with section 49 thereof which show that the Act furnishes ample guidance generally regarding the determination of tariffs by an <ORG> functioning under the Act. There is also no merit in the submission that there cannot be a common tariff for all licensees in an area served by a <ORG> and that there should be a separate rate (1)  3 S.C.R, 137.

of charge for each licensee. While it may not be objectionable to have a reasonable tariff fixed in the case of a particular licensee without offending the rule of non- discrimination, fixation of a common Grid Tariff is in consonance with the spirit of the Act. The preamble to the Act says that it had been enacted to provide for the rationalisation of the production and supply of electricity and generally for taking measures conducive to electrical development. Looked at against this background, it is permissible for <ORG> to fix a common Grid Tariff for an area so that there may be a reasonably uniform development of the area by the supply of electric energy to all licensees or consumers in the area at a uniform rate with such reasonable variations as may be permissible in law subject to the condition that no undue preference is shown to any of them.

<ORG>, however, held that the levy of an additional 7.1/2% as an additional charge made by <ORG> under the first para of clause (2) of the impugned notifications dated April 24, 1962 and September 30, ]967 was illegal and therefore liable to be quashed because according to it the additional charge of 7.1/2% could be imposed under the proviso to section 46 (2) of the Act to cover extra expenses only and not for supplying electric ENERGY at a lower voltage of 6600 volts when the Grid Tariff had fixed rates for supplying electric energy at 11000 volts. It however, held that it was open to <ORG> to make an additional charge only to the extent of the actual expenditure incurred by supplying electric energy at 6600 volts. It also quashed the <ORG> order dated April 20, 1968 by which <ORG> was permitted to increase the charges payable by the consumers in some respects and the subsequent action taken on the above basis. <ORG> directed the respondents to consider afresh the question of the rates at which electric energy could be supplied. We do not propose to go into the correctness of this part of the decision of <ORG> because we are of the view that this case can be dispensed of in a different way. The contention relating to the validity of the levy of additional charges could not be raised by <ORG> under Article 226 of the Constitution in respect of the period prior to the filing of the writ petition. The above additional charge of 7.1/2% was levied in 1962 and <ORG> did not question it before the <ORG> till March 23, 1968 when it filed the writ petition. It is further seen that it has not stated that it had not collected charges from the consumers of electric energy supplied by it at the rates which would cover the additional 7.112%. The learned counsel for <ORG> was not able to state that <ORG> had not recouped itself by collecting the charges from the consumers. In this situation we have to presume that <ORG> had not suffered any loss by the levy of 7.1/2 % by way of additional charges. We are of the view that in cases of this nature where there is little or no possibility of refunding the excess amount collected from the ultimate consumer to him and the granting of the relief to the petitioner would result in his unjust enrichment, the <ORG> should not ordinarily direct any refund in exercise of its discretion under Article 226 of the Constitution Moreover in this case <ORG> woke up nearly 6 years after the issue of the first notification and that too only after an enhancement by 20% was made under the second notification. In the case of <ORG>, which is a local authority, there is an additional reason. Under section 58 of the Act which is already referred to above a local authority is bound to implement the directions issued by <ORG> or the <ORG>, as the case may be, with regard to the amortisation and tariffs policies. <ORG> has been given directions from time to time by the <ORG> regarding the charges it may collect from the consumers in the light of the charges it has to pay to <ORG> and its own investment and expenditure on the undertaking. <ORG> cannot question the Grid Tariff only without at the same time questioning the directions pursuant to which it has been collecting charges from its consumers. No satisfactory material is placed before the <ORG> showing that the charges which were being collected by <ORG> from the consumers were uneconomical and did not satisfy the reasonable standards which should govern the directions issued by <ORG> or the <ORG> from time to time regarding the tariffs policies of <ORG>. In this situation, we feel that it would not be proper to reopen the claims of <ORG> in regard to the period prior to the filing of the writ petition arising on the basis of the alleged invalidity of the notification dated April 24, 1962. Hence we refuse to grant any relief in this regard to <ORG> for the period up to the date of the writ petition, that is, till March 23, 1968. The Grid Tariff was revised in this case on July 1, 1968. The decision of the High <ORG> on the above point is, however, allowed to re[remain only for the period between March 23, 1968 and July 1, 1968 without expressing any opinion on its correctness because the period is a small one and <ORG> does not insist upon a decision on this question in this case. The question is left open by us. Similarly, the relief granted by the High <ORG> with regard to A the levy of additional charge of 2 % with effect from December 1, 1967 till July 1, 1968 is not disturbed by us for the same reason without expressing any opinion on its correctness. This judgment shall not be construed as affirming the decision of the High <ORG> in so far as the above points are concerned. The matter may be reconsidered by <ORG> as directed by <ORG> of the High <ORG> but with regard to the periods specified above.

The appeals are accordingly disposed of. There shall be no order as to costs.

A.P.J.