1. MUSHTAQ HUSSAIN, J.-The petitioners are consumers of electricity supplied by WAPDA and used by them for running tubewells to irrigate their agricultural lands. They entered into separate agreements with WAPDA on sterotyped forms at the time of installation of the transmission lines to their premises. Under the agreements the consumers guaranteed payment of a minimum charge per annum for a period of 10 years. If the Current actually consumed was worth less than the guaranteed minimum charge, the consumers had to pay the aforesaid guaranteed amount ; in case the actual consumption was more than the guaranteed minimum charge the consumers were not required to make any additional payment for the electricity consumed by them. It is stated that the reason for the guaranteed minimum charge was the anxiety of WAPDA to ensure the recovery of the cost incurred by it on the installation of transmission lines etc. for the consumers.
2. It was further agreed that if the consumer went away before the expiry of this period of 10 years and his successor did not agree to keep the contract in operation for the unexpired period, the consumer would pay the entire cost of the service line plus 24 % departmental charges.
3. By Notification No, 27842-A/COM/T-86 dated 15th July 1969 WAPDA unilaterally varied the existing conditions to the disadvantage of the petitioners. Fourteen different tariff were introduced by this notification, out of which tariff 'D' is applicable to the petitioners. This notification was amended with effect from 1st February 1970.
4. The petitioners are aggrieved by these changes in the tariff and have presented Petitions Nos, 33/70, 199/70, 215/70, 287/70, 404/70, 432/70, 448/70, 1681/60, 579/70, 517/70, 518/70, 1876/69, 458/70, 459/70, 236/70, 252/70, 330/70, 231/70, 331/70, 413/70, 420/70, 333/70, 260/70, 374/70, 498/70, 449/70, 500/70, 671/70, 706/70, 644/70, 531/70, 553/70, 532/70, 570/70, 523/70, 1570/69 and 1547/69 under Article 98 of the Constitution on the following grounds :-
(i) The change brought about by all these Notification amounts to a novation of the original contracts and could not have been made by W,APDA unilaterally and without the consent of the consumers (ii)The charge to which people situated i n similar circumstances in the N.-W. F. P. have been subjected is admittedly less and sections 22 and 23(3) of the Electricity Act do not permit discrimination between consumer and consumer ; (iii)Sections 23(b) and (c) are a bar to any change in the contract ; (iv)The imposition of the fixed charges per K. W. of connected load per month is in the nature of a tax and, WAPDA, which is a Corporation engaged in Commercial activity, has no authority under the law to enforce such a measure ; (v)The Notification was issued on 15th July 1969 but was made effective from 1st July 1969. A Notification could not be retrospectively enforced and the same was to this extent ultra vires.
2. (vi)The Notification makes the tariffs applicable notwithstanding sections 21(2), (3), 22, 23 and 27 clauses (1) to (xii) of the Electricity Act. In other words the Notifications seeks to override the law for the time being in force which, no Notification can lawfully do and in any case no Corporation has the authority to do.
(vii) The Notification offends against the principles of natural justice because not even a notice was issued to the consumers calling upon them to show cause why the proposed action be not taken.
3. All these petitions shall be disposed of by this order as common points of law and facts are involved in them.
5. The supply of electricity in this Province is governed by the Electricity Act (IX of 1910). This Act was promulgated "to amend the law relating to the supply and use of electrical energy". Section 2 of this Act, which contains the interpretation clauses, defines 'area of supply' as the area "within which alone a licensee is for the time being authorised by his licence to supply energy". 'Consumer' means"any person who is supplied with energy by a licensee, or whose premises are for the time being connected for the purposes of supply of energy with the works of the licensee". `Licensee' means "any person licensed under Part II to supply energy". Section 3 of this Act empowers the Government to issue a licence to any person to supply energy in any specified area. It also lays down that the provisions contained in the Schedule shall be deemed to form part of every licence so granted. It however clarifies that where a licence is granted under clause (ix) of the Schedule for the supply of energy to other licensees for distribution by them, clauses (iv) to (vii) and (xii) of the Schedule shall not be a part of it. Under section 22 every person within the area of supply served by a particular licensee is entitled on application, "to a supply on the same terms as those on which any other person in the same area is entitled in similar circumstances to a corresponding supply".
4. The following proviso to section 22 is worthy of note : - "Provided that no person shall be entitled to demand, or to continue to receive, from a licensee a supply of energy for any premises having a separate supply unless he has agreed with the licensee to pay to him such minimum annual sum as will give him a reasonable return on the capital expenditure, and will cover other standing charges incurred by him in order to meet the possible maximum demand for those premises, the sum payable to be determined in case of difference or dispute by arbitration."
5. Section 23 debars a licensee from showing "undue preference to any person" in making any agreement for the supply of energy. Subject to this he can charge such amount for the supply of energy as agreed upon provided that it does not exceed the limits imposed by his licence.
6. Subsections (3) and (4) of this section runs thus :- "(3) In the absence of the agreement to the contrary, empowers a licensee to charge for energy supplied by him to any consumer-- (a)by the actual amount of energy so supplied, or (b)by the electrical quantity contained in the supply, or (c)by such other method as may be approved by the (Provincial Government).
(4) Any charges made by a licensee under clause (c) of subsection (3) may be based upon, and vary in accordance with, any one or more of the following considerations, namely :- (a)the consumer's load factor, or (b)the power factor of his load, or (c)his total consumption of energy during any stated period, Or (d)the hours at which the supply of energy is required."
6. Clause (ix) of the Schedule contains the speciall provisions applying to supply by bulk-licensee, Clause (x) prescribes the method of charging. Clause (xi) lays down the maximum charges.
7. Clause (xi-a) permits the levying by the licensee of minimum charges.
7. With a view to providing for the unified and co-ordinated development of the water and power recources of West Pakistan, the Government of West Pakistan promulgated the West Pakistan Water and Power Development Authority Act (No, XXXI of 1958). By section 3 of this Act an Authority to be known as the Water and Power Development Authority was established. It was to be a body corporate with the usual concomitants. Chapter III of the Act lays down the general powers and duties of the Authority. In framing all schemes under section 12 "the Authority shall, for the purposes of the Electricity Act, 1910 be deemed to be a licensee and shall have all the powers and discharge all the obligations of a licensee under the said Act : "Provided that nothing in sections 3 to 11, subsections (2) and (3) of section 21 and sections 22, 23 and 27 or in clauses (i) to (xii) of the Schedule of the said Act relating to the duties and obligations of a licensee shall apply to the Authority". (The underlining is ours).
8. Section 13 empowers the Authority to take such measures in exercise of such powers as it considers necessary or expedient for the carrying out of the purposes of this Act.
8. Section 25 runs as follows :-- "(1) The authority shall ordinarily sell power in bulk ;
(ii) The rates at which the authority shall sell power shall be so fixed as to provide for making the operating costs, interest, charges and depreciation of assets, the redemption at due time of loans other than those covered by depreciation, the payment of any taxes and a reasonable return on investment,"
9. As has already been seen above the impugned Notifications have inter alia been attacked on the grounds that the following provisions of the Electricity Act have been trans-gressed-- Sections 21(2), (3), 22, 23, 27 and Clauses (i) to (xii) of the Schedule.
9. 10.These objections are contained in the grounds enumerated above as numbers (ii), (iii) and (iv). In view of the proviso to section 12 of Act XXXI reproduced above these provisions of the Electricity Act are inapplicable to WAPDA and, therefore, to performing its functions it is not required to conform to them.' These grounds of attack are, thus not available to the petitioners and are hereby repelled. They are now left with the remaining four grounds.
10. 11.Before embarking upon an examination of the grievances contained in these petitions it would be in the fitness of things to reproduce the history of the impugned charges in the tariff as described in Volume 9, No, 28 of the Journal "WAPDA Weekly" published on 9-7-1969.
11. In pursuance of the decision of Government of West Pakistan that WAPDA should achieve a return of 8 per cent. on its average net assets, the power tariffs were examined and reviewed in a series of meetings. A revised tariff schedule has emerged as a result of this examination. It has been approved by the Martial Law Administrator Zone "A", and it will come into effect from 1st of July this year. It is intended to review this tariff structure after about two years when it is expected that the position of implementation of major power projects in hand will become clearer and more definite.
12. It may be recalled that a power Commission was set up by Government of Pakistan in 1961. As a result of consideration of its recommendations, it was decided by the Government of West Pakistan to constitute an Advisory Board for power rates in March 1967. It consisted of Secretary to Government in the Irrigation Department. The Engineering Adviser to the Ministry of Industries, Deputy Secretary, Finance Director of Agriculture, a Member of WAPDA and some others. It presented its report in May 1969.
13. The Board decided that the tariff should be rationalized. It has also considered that the rate of return obtained by WAPDA was inadequate inasmuch as the actual net profit after clearing interest liabilities amounted to about one per cent only in the year 1965-66, and in 1966-67 there was no profit at all, the accounts being closed with a deficit due to general power shortage and breakdown of the Multan Power House. The rates recommended by the Tariff Sub-Committee and approved by the Advisory Board were further considered by the Economic Co-ordination Committee, and were finalized after a series of meetings and sent up to the Martial Law Administrator and Governor for his approval.
14. The main feature of the new tariff is that it is a uniform tariff for the whole of West Pakistan (except for small isolated generating units) which replaces the existing four different tariffs in the various areas of West Pakistan. Previously, different tariffs were in force in : (1)Main Northern Grid Area (former Punjab and N.-W.F.P. areas) ; (2)Hyderabad (Lower Sind) Thermal Grid area ; (3)Sukkur (Upper Sind) Thermal Grid area ; and (4)Quetta Thermal Power Scheme area.
15. The uniform tariff removes the disparity prevalent in the power rates in different areas of the Province.
16. The new tariff raises the existing average rate per unit sold from 11.1 Paisa to 13 Paisa, i,e,, the average increase comes to 1.9 Paisa per unit.
17. This increase has been distributed over various categories of consumers in such a manner that its incidence on the general body of consumers in the lower income bracket is least felt. The area served by the Quetta Grid will not be affected by the increase in the tariff rates. On the other hand, this area will benefit from the new rates because they are generally lower than the rates which are at present prevailing in that area.
18. Another special feature of the new tariff is that the surcharge, leviable in case of delay in payment of bills by due dates, has been reduced from 25 per cent. to 10 per cent. of charges for consumption of electricity.
19. The new power rates are analysed below for different categories of consumers: The Agricultural consumers though constituting 3.5 per cent. of the total consumers, consume 23 per cent. of the energy sold. They fall into two categories (a) Public Tubewells (SCARP areas) ; and
(b) Private Tubewells.
20. Public Tubewells were charged under the current tariff from 7 to 10.50 Paisa per unit in different grid areas. Under the new schedule, they will be charged at a flat rate of 9 Paisa per unit.
21. Private Tubewells and Lift Irrigation Pumps were charged from 8 to 10.50 Paisa per unit, except in the case of former N.-W.F.P. area where the rate was 3.125 Paisa per unit. These will now be required to pay a two part tariff, i e. a fixed charge of Rs, 8 per K. W. per month and 4 Paisa per unit for actual consumption. The concession available to former N.-W.F.P. area, will, however, continue, and the rates there will be 50 per cent. less than in the other areas. The fixed charge will be Rs, 4 per K. W. per month and the unit charge will be 2 Paisa per unit on actual consumption.
22. The fixed charge in the case of private tubewells has been provided for particularly in view of large pilferage which has been taking place in this sector. The fixed charge on connected load basis will ensure a stable minimum return to the Authority.
23. On the basis of 5 hours average daily working, the increase in the case of private tubewells will be 1.3 Paisa per unit in the Northern Grid area, and 1.487 Paisa per unit in the Hyderabad and Sukkur Grid areas, and a decrease of 1.2 Paisa per unit in the Quetta Grid area. The current rates for private tubewells at 8 Paisa per unit involved a subsidy of 25 per cent. to 30 per cent. With the increases mentioned above, the element of subsidy will still remain at roughly 16 per cent.
24. With the introduction of the new tariff for this category of consumers, the Minimum Consumption Guarantee (MCG) has been abolished.
25. Furthermore, no line rental or installation charges will be levied on tubewell connections where expenditure on supply of power does not exceed Rs, 7,500, that is, the Authority will forgo these charges in return for payment at a fixed minimum charges. Where, however, the expenditure is more than Rs, 7,500 but does not exceed Rs, 10,000, the amount of difference between these two figures will be paid by the consumer by instalments over a period of five years, together with interest at the prevalent market rate. Where the expenditure is more than Rs, 10,000 the consumer will pay the difference up to Rs, 2,500 as indicated above, and the balance in a lump sum.
26. The rate of return, inclusive of interest, for the last few years from 1964-65 onwards has varied between 3.5 to 5.5 per cent. On the basis of the new tariff, it is expected that the rate of return, inclusive of interest, other factors remaining constant, will go up to 7.5 per cent. Therefore, even with the new rate structure, it might not be possible to reach the desired rate of return of 8 per cent.
27. The rate of return may also be affected on account of the increase in prices, taxes and duties, etc. The reported increase in the price of gas which is used in 5 major power stations would further add to the fuel cost. There would also be an increase in the overheads due to increase in wages and salaries, which is also to be taken into account.
28. The revenue earnings durings the past few years have ranged from Rs, 22.67 crores to Rs, 31.87 crores, and the revenue for the last year, that is, 1968-69, is estimated at Rs, 34.5 crores. The new power rates are expected to yield a revenue of nearly Rs, 42 crores. The Additional revenue will, however, be largely consumed by the existing liabilities in the shape or repayment of loans, liquidation of debentures, etc. WAPDA's power system, at present, does not generate enough internal surplus for re-investment.
29. Without an upward revision of the rates, WAPDA's contribution to power development would have become negative. The losses, i,e,, difference between units generated and units sold, are, at present, fairly high. A substantial portion is due to mechanical reasons. There is, however, a good deal of loss through thefts and leakage. The imposition of fixed charges and adoption of certain devices will reduce this element. Steps are also being taken to increase the operating efficiency of the power system, and a number of grid stations, together with necessary equipment, have already been ordered to provide for better and wider transmission and distribution.
30. It may be made clear at the outset that the revised tariff has not been subjected to any attack before us on the ground of its being unreasonable and therefore if it could be demonstrated that the Authority has the power to prescribe the rates of the sale of power it would knock the bottom out of the petitioner's case.
31. 12.Section 25 of the WAPDA Act which has been reproduced above gives WAPDA the Authority to fix the rates at which it shall sell power. It also lays down the criteria on which the rates shall be based. It can therefore not be denied that statutory power vests in WAPDA to prescribe the rates on which g it will supply power.
32. 13.Section 13 of the West Pakistan General Clauses Act provides that whenever any Provincial Act confers any power on any Authority it may be exercised from time to time as occasion requires.
33. The power under section 25 of Act XXXI of 1958 is thus exerciseable from time to time as occasion requires. The supply of electricity to the petitioners is being specially subsidised by Government.
34. 14.It was urged before us by the learned Advocate-General, without contradiction from the other side, that a two part tariff is the universally recognized method of electricity charges. Seventy to eighty per cent. of the tariff consists of a fixed charge which is used for the purpose of defraying the costs of depreciation, establishment, over heads and return on investment. Twenty-five to twenty per cent, represents the "variable charge" which caters for the cost of fuel, chemicals, spare parts, consumable materials and stores. Reference in this connection could be made to Chapter 10 of the U. N. publication 'Public Electricity Supply--A Manual on Management' and 'Electrical Engineering Economics, Volume II by Bolton. In the peculiar circumstances obtaining in this part of the World and to reduce the burden on the consumer the Advisory Board reduced the fixed charge to 33% and raised the variable charge to 66% of the total rate for the supply of electricity.
35. 15.It is, therefore, quite clear that there was occasion to exercise the power under section 25, and the amended Notification was, therefore, rightly issued. It is also clear that the petitioners are not being required to pay the full cost of the supply of energy consumed by them.
36. 16.Clause 26 of the Conditions of Supply which have to be signed by the consumer clearly provides that the "conditions shall be subject to the Act and nothing in these conditions shall abridge or prejudice the right of the Department under Act of the Government of Pakistan or West Pakistan or any rule thereunder".
37. 17.Clause 27 goes a step further and lays down that subject to clause 26 "the Department reserves the right at any time to amend, cancel or add to any of these Schedules and Conditions".
38. 18.There is, therefore, no bar in the contract to a unilateral amendment of the rate, and the consent of the consumer is not required for such a change. In fact the contract positively empowers the supplier to amend the rates. The consumer is, in any case, not under any obligation to continue to purchase energy from WAPDA and can discontinue the arrangement at his sweet will.
39. 19.Concluding his book 'The Contracts of Public Authorities' J. D. B. Mitchell arrives at the following among other, interesting conclusions:-- "Above all however the survey demonstrates that in this field the obligatory force of contract may be weaker than in the case of private contracts. The special purpose for which Governmental Agencies exist, the service of the community, requires, that on occasion those Agencies must be released from or may be able to override, their obligations. So strong is this requirement that it will override constitutional provisions which would apparently deny the possibility of release. The developments in the United States sufficiently demonstrate that. Although they may be unsupported by references to earlier authorities, and although they may perhaps be too widely phrased, the statements of Rowllatt, J. in the Amphitrite may therefore be accepted as containing a sound general principle of law. This limitation of the obligation of contract depends not upon the acceptance of any particular theory of political philosophy but upon on practical necessity The only justification that can be found lies in the fact that Government exists to govern and that to discharge their functions effectively governmental agencies require special privileges. It is upon this basis that the well-recognized powers of eminent domain have long restedIt should be noticed that this right of a public authority to override its contracts is something more than the ability which any Contractor has to disregard his contract and pay damages save where specific performance will be granted. It is a right which it seems recognized by law and does not amount to a wrongful interference with legal rights. Because therefore an interference with contractual obligations under this right and an ordinary breach of contract have different origins, their consequences also should differ, particularly in the matter of damages or compensation."
40. 20.Even if it were to be accepted for the sake of argument that the contract between the consumers and WAPDA stipulated that there will be no change in the tariff and that WAPDA would be bound to supply energy without making such a change, that part of the contract which so provides would be void under section 23 of the Contract Act which lays down that the consideration or object of an agreement is lawful unless inter alia it is of such nature that, if permitted, it would defeat the provisions of law. One of the objections is that the contract is a bar to WAPOA raising the rates it would tantamount to defeating the provisions of section 25 of Act XXXI of 1958 and the contract itself would be void to the extent that it is so provided. In his book 'Administrative Law', H. W. R. Wade observes at page 54:-- "Just as a statutory authority has no power to abdicate the discretion entrusted to it by Parliament, so it has no power to fetter its discretion by contract. The leading case concerned the trustees of Ary Harbour, who had power under their Act to acquire land and build upon it. The House of Lords decided that the trustees had no power on acquiring land, to undertake not to obstruct the former owner's use of it for access to the harbour (Ary Harbour Trustees v. Oswald (1883) 8 A C 623). This would have been to fetter the power of building on the land in the future, so that the trustees would have been able to prevent their successors from exercising the power to build which the Act conferred for the public good."
41. To the same effect are the observations in Birkdale Distt. Electric Supply Co. Ltd. v. Corporation of Southport.
42. "If a person or public body is entrusted by the Legislature with certain powers and duties expressly or impliedly for public purposes, those persons or bodies cannot divest themselves of these powers and duties. They cannot enter into any contract or take any action incompatible with the due exercise of their powers or the discharge of their duties."
43. 21.The Privy Council kept up this refrain in Antonio Buttigieg v. Captain Stephen H. Cross etc. when it observed that : "Sir Roland Burrows, on behalf of the appellant, mindful of such cases as (Adams v. London Improved Motor Coach Builders) (1921) 1 K B 495 and (Rederiaktiebolaget Amphitrite v. The King)
44. (1921) 3 K B 500, properly conceded that it was not open to the Crown to bind itself not to close the Club if that course became necessary in the public interest and, further, that the order placing the Club out of bounds was justified in the circumstances which existed. In the latter of the two cases above-mentioned Rowlatt, J., at page 503 said : "It is not competent for the Government to fetter its future executive action, which must necessarily be determined by the needs of the community when the question arises. It cannot by contract hamper its freedom of action in matters which concern the welfare of the State. These words appear to their Lordships to cover that aspect West Pak. of the present case."
45. 22.It is also clear from the discussion made above that the imposition of the fixed charge per K.
46. W. of connected load per month is not in the nature of a tax but the result of a splitting up of the tariff into a standing charge and a unit charge which is a universally accepted method of computing charges for the supply of energy. Such an action is not barred by any law either.
47. 23.The first Notification was issued on 15th July 1969 with effect from 1st July 1969. It has been submitted that it could not be made retrospective. The point does not need any consideration for the simple reason that the Authority has categorically stated that the revised tariff issued under the impugned notification of July 1969 does not relate to readings received in July 1969. It has already issued Circular Letter No, 11786 95-C. A. E/R. IV/G. R-1, dated 21-7-1969 from the Chief Accountant (Electricity) WAPDA, Lahore to all Revenue Officers informing them that the new tariff is to be made applicable to readings received in August 1969 covering energy consumed partly in July and August 1969. The tariff has, therefore, not been applied retrospectively.
48. 24.The new Schedule of Tariffs was also attacked on the grounds that it was not applicable to the petitioners unless they are given due notice of termination, or amendment of the agreement1 2 according to the stipulation thereof. Reliance in this behalf was placed upon paragraph 9 of the Notification of the 15th of July 196') which so provides in respect of consumers with whom the Authority has entered into a Special Agreement.
49. 25.The Authority has rightly pointed out and the same has not been effectively contradicted by the petitioners that at all relevant times the petitioners were ordinary consumers governed by the Authority's Standard Agreement for Supply of Energy. The Authority's Special Agreement only relates to Special large scale consumers. Since no Special Agreements were executed by the petitioners with the Authority the question of any notice of termination or amendment of any Special Agreement in terms of paragraph 9 of the Notification did never arise.
50. 26.The last point is that the Notification offends against the principles of natural justice because no notice to show cause was given. There is no provision in the law which requires the serving of such a notice before amendment of the rates. Moreover, the rates have to be fixed in accordance with the principles laid down in section 25 subsection (2) which relate to the meeting of operating costs, interest charges and depreciation of Assets, the redemption at due time of loans other than those covered by depreciation, the payment of any taxes and a reasonable return on investment.
51. 27.These are all matters which pertain to the domestic field of company accounting and no individual, not being a share-holder in the Corporation, can have or be given any hand in it. In these circumstances the question of disclosing all this information to the consumers, inviting their objections and giving them a hearing does simply not arise. Even otherwise the exercise of refixing the rates on the basis contained in this subsection does not constitute a lis or at least a lis inter partes. There was therefore no occasion for show-cause notice.
52. 28.The petitions have no merit and dismissed with no order as to costs. 1926 A C 355 AIR 1947 P C 29