Sri Venkata Seetaramanjaneya Rice... vs State Of Andhra Pradesh Etc

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 25 March, 1964

Coram: P.B. Gajendragadkar, K.N. Wanchoo, J.C. Shah, N. Rajagopala Ayyangar, S.M. Sikri

In the matter titled Sri Venkata Seetaramanjaneya Rice … versus State of Andhra Pradesh Etc., the Supreme Court of India delivered its judgment on 25 March 1964. The opinion was authored by Chief Justice P. B. Gajendragadkar and was pronounced by a bench comprising Justices P. B. Gajendragadkar, K. N. Wanchoo, J. C. Shah, N. Rajagopala Ayyangar and S. M. Sikri. The case is reported in the 1964 volume of the All India Reporter at page 1781 and also appears in the 1964 Supreme Court Reporter (7) 456, with subsequent citations in the 1967 Supreme Court Reports (22, 34, 45, 51) and the 1989 Supreme Court Reports (7). The statutory provision under consideration was the Madras Essential Articles Control and Requisitioning (Temporary) Powers Act, 1949 (Mad. 29 of 1949), specifically sections 3(1) and 3(2). The central issues presented to the Court involved the applicability of that Act to electricity supplied by the State, the legislative intent behind the Act, the validity of two notified orders issued by the State that raised the tariff rates previously fixed by contract, the meaning of the term “regulate” in the statute, whether a reasonable increase in tariff served the general public interest, and whether the notified orders infringed Articles 14 and 19(1) of the Constitution of India, including the sub‑clauses 19(1)(f) and 19(1)(g).

The factual backdrop revealed that the appellants, operating as rice and oil mills, had received electricity from the respondent State for many years, during which several individual supply agreements were executed. Each agreement specified the rate at which electricity would be charged, and none of the contracts contained a clause permitting the State to alter the rate during the term of the agreement. Subsequently, the State issued two separate notified orders that increased the agreed rates, explaining that the earlier tariffs, which had been fixed several years earlier, had become uneconomic and were causing continuous losses to the State. A large number of consumers, including the appellants, challenged the validity of those orders before the High Court under Article 226, alleging that the orders were ultra vires. The High Court granted the writ petitions, restraining the State from enforcing the revised rates. The State appealed those decisions, and the High Court, sitting as an appellate bench, reversed its earlier judgment and dismissed the writ petitions, allowing the notified orders to stand. On further appeal to this Supreme Court, the respondents contended, inter alia, that the State possessed no authority to raise the tariff by invoking section 3(1) of the Madras Essential Articles Control and Requisitioning (Temporary) Powers Act, that the regulatory power conferred by the statute applied only to transactions between private citizens and could not be used where the State itself was the supplier, that section 3(1) did not encompass the power to increase tariff rates, and that the notified orders were invalid because they violated Articles 14, 19(1)(f) and 19(1)(g) of the Constitution. The Court held that the challenge to the validity of the notified orders on the ground that they fell outside the scope of section 3(1) could not be sustained, observing that the State is not bound by a statute unless the statute expressly or necessarily implies such a limitation, and that the legislative intent must be ascertained by considering the statute as a whole rather than focusing narrowly on the disputed provision.

In interpreting a statutory provision, a State is bound by that provision only when the statute expressly states the obligation or when the duty follows inevitably from the language of the enactment. To apply this principle, the Court must seek to discover the Legislature’s intention by examining every relevant part of the statute in its entirety, rather than focusing narrowly on the single clause that is contested. When the issue is not whether the State is subject to the statute but whether the State may invoke the benefit conferred by a statutory provision, the same rule of construction is applicable. Even where a statute is enacted for the public welfare and the State claims that invoking its benefit advances that welfare, the Court must still determine whether the Legislature intended the particular provision to be applicable to the State. The authorities Director of Rationing and Distribution v. Corporation of Calcutta, [1961] 1 S.C.R. 158 and Province of Bombay v. Municipal Corporation of the City of Bombay, [1945‑46] L.R. 73 I.A. 271 were cited in support of this approach.

In construing section 3 of the Act, the Court applied the ordinary rules of statutory construction, emphasizing that the section cannot be read in isolation. Instead, it must be placed within the proper context of the whole Act, giving due consideration to the remaining provisions, the overall scheme and the purpose of the legislation. The purpose of the Act, as identified by the Court, is to ensure the supply of essential articles at fair prices; consequently, it is irrelevant who the supplier is. What matters is that the supply is regulated so that the price remains fair.

The Court further observed that a clause such as sub‑section (2) of section 3 is merely illustrative. Accordingly, the proper method of interpreting sub‑sections (1) and (2) together is to presume that everything covered by sub‑section (2) is also intended to fall within sub‑section (1). This principle was supported by the judgments King Emperor v. Sibnath Banerjee, 72 I.A. 241 and Santosh Kumar Jain v. State, [1951] S.C.R. 303.

The term “regulate” was held to be broad enough to empower the State to adjust rates upward or downward. The test for exercising this power is whether such adjustment is necessary or expedient to maintain, increase or secure the supply of the essential articles, to ensure their equitable distribution and to keep them available at fair prices.

Considering all the circumstances of the present case, the Court found that the alteration of the tariff was reasonable and served the interests of the general public. Moreover, the Court noted that the record of the appeals contained no material on which a claim invoking Article 14 of the Constitution could be based.

The judgment was delivered in the Civil Appellate Jurisdiction concerning Civil Appeals Nos. 429‑439, 591‑592, 597, 689, 694, 724‑725 and 727 of 1962 and Nos. 15, 139, 140, 159, 267‑269, 331, 334, 337, 340, 342, 343, 347, 352, 389, 746 and 748 of 1963, all of which were appeals from the earlier orders.

The Court noted that the judgments and orders dated 19 December 1958, 7 March 1959, 11 March 1959, 22 April 1959 and 24 April 1959 were issued in Writ Appeals Nos. 135 and 122 of 1957 and related matters. Counsel for the appellants included T. V. R. Tatachari appearing in Civil Appeals Nos. 429 to 434 and 694 of 1962 and Civil Appeal No. 269 of 1963; M. C. Setalvad together with P. Kodandaramayya, E. V. Bhagarathi Rao and T. V. R. Tatachari for the appellants in Civil Appeals Nos. 438 and 439 of 1962; M. C. Setalvad and R. Ganapathi Iyer for the appellants in Civil Appeals Nos. 436, 437, 724, 725 and 727 of 1962; K. Srinivasamurthy and Naunit Lal for the appellants in Civil Appeals Nos. 591, 582, 597 and 689 of 1962 and Nos. 140, 267 and 268 of 1963; K. Jayaram and R. Thiagarajan for the appellants in Civil Appeals Nos. 139, 159, 330, 334, 337, 340, 342, 343, 347 and 352 of 1963; K. R. Chaudhuri for the appellants in Civil Appeals Nos. 15 and 389 of 1963; A. Vedavalli and A. V. Rangam for the appellant in Civil Appeals Nos. 746 and 748 of 1963. Counsel for the respondents comprised D. Narsaraju, T. Anantha Babu, M. V. Goswami and B. R. G. K. Achar in Civil Appeals Nos. 435, 437, 724, 725 and 727 of 1962; the same team together with Yogeshwar Prasad in Civil Appeals Nos. 429, 434, 438, 439 and 694 of 1962 and No. 269 of 1963; D. Narsaraju, T. Anantha Babu, M. S. K. Sastri and B. R. G. K. Achar in Civil Appeals Nos. 591, 597 and 689 of 1962 and Nos. 140, 267 and 268 of 1963 and for respondent No. 1 in Civil Appeal No. 592 of 1962; J. V. K. Sharma and T. Satyanarayana for respondent No. 2 in Civil Appeal No. 592 of 1962; and D. Narsaraju, T. Anantha Babu, R. Gopalakrishnan and B. R. G. K. Achar for the respondents in Civil Appeals Nos. 15, 139, 331, 334, 337, 340, 342, 343, 347, 352, 159, 389 and 746‑748 of 1963. The judgment was delivered on 25 March 1964 by Chief Justice Gajendragadkar. He observed that the principal question of law arising in the group of thirty‑seven civil appeals concerned the construction of section 3 of the Madras Essential Articles Control and Requisitioning (Temporary Powers) Act, 1949 (No. 29 of 1949), hereinafter referred to as the Act. The dispute before the Court centered on the validity of two notified orders issued by the State of Andhra Pradesh on 28 January 1955 and 30 January 1955 respectively. The appellants contended that those orders fell outside the scope of section 3. The appellants, having received electricity from the respondent for many years, relied upon a series of individual agreements executed between 1946 and 1952 which set out the terms and conditions of supply, including the rate at which electricity was to be charged. The impugned orders purported to increase that rate, and the appellants argued that such a increase was beyond the authority of the respondent under the Act.

The Court observed that the dispute turned on whether the respondent possessed any authority to alter a pivotal term of the contracts with the appellants by invoking section 3(1) of the Act and by issuing the notified orders. In substance, the controversy involved the claim that the respondent had no power to change the agreed tariff rates to the detriment of the appellants. The Court noted that the Government of Madras, and thereafter its successor, the State of Andhra Pradesh, operated a single integrated power grid for the whole of the State. This grid comprised the Tungabhadra and Machkund hydro‑electric systems together with the thermal system of Nellore, and all generated electricity was supplied through this unified system. The Government of Madras had entered into bulk‑supply agreements with a number of consumers in the State, including the appellants, for the years 1951 and 1952. These agreements stipulated that electricity would be supplied at rates described as tariffs and were intended to remain in force for a period of ten years. It was agreed by all parties that the agreements contained no clause granting the Government the power to raise the rates during their ten‑year term. The tariffs were calculated on a graded, regressive scale based on increasing consumption slabs, and the total unit rate, inclusive of demand charges, was capped at sixty‑six annas, subject only to the monthly minimum payment and the guaranteed consumption. The Court then turned to the two orders that had been issued by the Government of Andhra Pradesh, one affecting the Machkund and Nellore areas and the other covering Tungabhadra and Chittoor districts. These orders, attached with Schedules A and B, raised the rates that had previously been fixed under the agreements.

The Court explained that the increased tariffs specified in the orders were to become effective from the date on which meter readings were taken in February 1955, and that the higher rates were to apply prospectively and not retrospectively. According to the orders, the purpose of the revision was the recognition that the electricity tariffs, originally formulated nearly fifteen years earlier, had become wholly uneconomic because of a dramatic rise in labour costs and the price of all materials, which was causing a continual loss to the Government. The Accountant‑General had raised queries about this recurring loss and had drawn the State Government’s attention to the deficits in the operation of the power system. The question of tariff revision had been considered in the former State of Madras, but a decision had not been reached because the reorganisation of the States was then under discussion. After the formation of the respondent State, its Chief Engineer submitted proposals for tariff revisions covering all the relevant schemes, and on that basis the notified orders were issued. The appellants were naturally displeased because the orders increased their liability for electricity supplied by the respondent. Consequently, a large number of consumers filed writ petitions before the Andhra Pradesh High Court under article 226 of the Constitution, challenging the validity of the two notified orders. The learned judge who heard those petitions upheld the appellants’ contention, holding that the orders were unauthorised, illegal and inoperative.

A single judge who had heard the writ petitions in this matter upheld the petitioners’ request and found that the relief sought was justified. He concluded that the challenged orders were not supported by the authority given to the respondent by section three of the Act, and therefore were unauthorised, illegal and inoperative. Consequently, the writ petitions filed by some of the petitioners were allowed, and an order was issued restraining the respondent from enforcing the revised tariff rates. The respondent challenged these decisions by filing several appeals under the Letters Patent and sought reversal of the orders on the ground that the lower court had misinterpreted the statutory provision. A Division Bench hearing the Letters Patent appeals adopted a different approach and held, after a fair and reasonable construction, that section three did confer authority on the respondent to issue the contested orders. Accordingly, it concluded that the challenge to the validity of those orders could not succeed, and therefore the appeals by the respondent should be allowed. As a result, the Letters Patent appeals were allowed and the writ petitions filed by the petitioners were dismissed. The petitioners then approached this Court with a certificate issued by the High Court, seeking relief from those dismissals. After the Division Bench delivered its decision, additional writ petitions were filed by other consumers, and the single judge hearing them followed the Division Bench’s view, dismissing those petitions as well. Consumers dissatisfied with the single judge’s dismissal were subsequently permitted to approach this Court directly by special leave because the issues they raised were identical to those previously presented.

The present group of appeals therefore comprises matters decided either by a Division Bench of the Andhra Pradesh High Court or by a single judge. All of these decisions raise the same central question concerning the construction of section three of the Act and the validity of the notified orders. Before addressing the issue of interpreting section three, the Court found it necessary to summarise the legislative background of the Act. The history began during the Second World War when the Government of India enacted the Defence of India Act, numbered 35 of 1939, on 29 September 1939. Section two of that Act gave the Central Government power to frame rules known as the Defence of India Rules. Among those rules, Rule 81(2) authorized the Central Government to issue orders it considered necessary or expedient for defending British India, prosecuting the war efficiently, or maintaining essential supplies and services for the community. These rules remained in force throughout the duration of the war and were applied to regulate the supply of essential commodities. After the war ended, it became apparent that the country’s economic situation remained serious, prompting continuation of orders under Rule 81(2) to ensure essential articles were supplied at reasonable prices and distributed equitably. The Defence of India Act ceased to operate in 1946, and the Central Legislature subsequently enacted the Essential Supplies (Temporary Powers) Act, 1946, numbered 24 of 1946, as its replacement. In the same year, the Madras Legislature passed a similar act, which was later superseded by Act number 29 of 1949, the legislation now under consideration in these appeals. Following the reorganisation of states, the newly created respondent State enacted Act number 1, which forms the statutory basis for the contested tariff orders. The continuation of these provisions after 1946 laid the groundwork for the present statutory framework governing electricity tariffs. Thus, the Act now examined originated from a series of wartime measures that were adapted to address peacetime economic challenges.

In this case, the Court observed that when the Second World War ended, the country’s economy remained in a serious condition. The Government therefore considered it necessary to keep in force the orders that had been issued under Defence of India Rule 81(2), because there was a marked shortage of essential articles at that time. The purpose of maintaining those orders was to ensure that essential articles were supplied to the public at reasonable prices and that they were distributed fairly. The Defence of India Act itself ceased to operate in 1946, but the Central Legislature subsequently enacted the Essential Supplies (Temporary Powers) Act, 1946 (No 24 of 1946) as a replacement. In the same year, the Madras Legislature passed its own Essential Supplies Act (No 14 of 1946), which was later superseded by Act No 29 of 1949, the legislation that is the subject of the present appeals. After the respondent State was created under the Scheme of Reorganisation of States, it enacted Act No 1 of 1955, which received the President’s assent on 21 January 1955. By passing this Act, the State Legislature virtually adopted the Madras Act, so that the impugned orders are essentially based on section 3 of the Madras Act. When the Madras Act was originally enacted, its Schedule listed twelve essential articles as defined in section 2(a). When the Andhra Legislature adopted the Schedule for its own Act No 1 of 1955, the list was reduced to two articles—charcoal and electrical energy. The Andhra Act was initially intended to remain in force only until 25 January 1956, but it has been extended repeatedly. It is undisputed that section 3 of the Act was operative when the impugned orders were made, and the appeals were argued on the premise that this section is constitutionally valid; consequently, the principal issue for determination was the proper construction of that section.

Counsel for the appellants argued that section 3 should not be interpreted in isolation. Instead, they insisted that the provision must be read together with the remaining provisions of the Act, applying the rule of harmonious construction so as to avoid any conflict or repugnancy among the provisions. According to this approach, section 3 cannot be understood as granting the respondent the authority to increase the tariff charged to the appellants for energy supplied by the respondent. The overall scheme of the Act, they contended, makes clear that the power to regulate the supply of an essential article is intended to apply to transactions between private citizens and not to a situation where the State itself supplies the essential article. Therefore, they submitted that the State’s dealings in supplying energy to consumers fall outside the scope of section 3, rendering the impugned orders invalid.

The power given to the State Government to supply an essential article is intended to regulate transactions that occur between private citizens, not to apply to an essential article that the State itself provides. It would be unreasonable, according to the argument, for the State to be authorized to issue a notification fixing the rates at which it must sell energy that it generates itself. Consequently, the Court reasoned that the State’s activities in supplying energy to consumers fall outside the scope of section 3, rendering the contested orders void. The question of whether the State Government is bound by statutes enacted by the State Legislature has produced divergent judgments in the past. However, the decision of this Court in Director of Rationing and Distribution v. The Corporation of Calcutta and Ors. (1) is regarded as settling that issue. The majority opinion in that case adopted the rule of statutory interpretation laid down by the Privy Council in Province of Bombay v. Municipal Corporation of the City of Bombay (2), which holds that the State is not bound by a statute unless the statute expressly states so or it is necessarily implied. Applying that rule requires the Court to determine the Legislature’s intention by examining all relevant provisions of the statute collectively, rather than focusing narrowly on a single disputed provision. If, after a comprehensive reading, the Court is convinced that necessary implication imposes the statutory obligation on the State, that conclusion must be followed. Where the statute contains express language to that effect, the matter is straightforward and no difficulty arises. In addressing this difficult issue, the Court may also consider whether a finding that the State is not bound would impede the operation of the statute or create an anomalous situation in which the statute loses effectiveness. If answering either of those questions indicates that the statutory duty should apply to the State, the Court will be inclined to infer, by necessary implication, that the State is indeed bound by the statute. When the enquiry is not whether the State is bound but whether it may claim the benefit of a statutory provision, the same interpretative approach applies, especially where the statute serves the public good and the State seeks to rely on the benefit conferred by it.

In matters where the State claims to act for the public good, the Court must first determine whether the legislature intended the statutory provisions in question to apply to the State. The authority for this approach is found in the decision of the Privy Council in Province of Bombay (1), which remains a binding principle in this country. It is also relevant to note that, under English law, the Crown cannot simply argue that, although it is not bound by a statute, it is nevertheless free to take advantage of the statute’s benefits. While some judicial pronouncements have suggested otherwise, the general rule is that such a plea is not readily accepted. Halsbury’s Laws of England observes that “it has been said that, unless it is expressly or impliedly prohibited from doing so, the Crown may take advantage of a statute notwithstanding that it is not bound thereby.” However, Halsbury qualifies this observation by warning that “there is only slender authority for this rule, and since both the rule and such authority as does exist have also been doubted, the rule cannot, perhaps, be regarded as settled law” (2). A similar caution is expressed by Maxwell, who, quoting Sir John Simon, remarks that the decisions recognizing the Crown’s right to benefit from a statutory provision “start with a passage in an unsuccessful argument of a law officer which was not even relevant to the case before the court, but which has been taken out by a text‑writer and repeated for centuries until it was believed that it must have some foundation” (3). Consequently, when interpreting section 3 of the Act, the respondent cannot rely on an artificial rule that permits a benefit merely because the Crown is not bound by the statute. The Court must apply the ordinary rules of construction and avoid reading section 3 in isolation.

Accordingly, the construction of section 3 must be carried out in its full context, giving due regard to the other provisions of the Act, its overall scheme, and its purpose. Returning to the argument advanced by Mr Setalvad, it can be acknowledged that when the Act was enacted in 1949, the power conferred by section 3 on the State Government was primarily intended to regulate the distribution of essential articles between private citizens. At that time the State had not engaged in large‑scale commercial activity, and the language of section 3(1), which authorises the issuance of notified orders to secure equitable distribution and fair pricing of essential articles, was conceived with the expectation that the State would not itself be a supplier of those articles. This historical understanding suggests that the legislature did not envisage the State taking advantage of the provision for its own commercial supply, and therefore the provision should not be interpreted to grant the State a benefit that was never intended.

In evaluating Mr. Setalvad’s proposed construction, the Court observed that the overall scheme of the Act indicated that certain provisions might not apply to the State. For example, the provision of section 4 dealing with powers of requisitioning and acquisition of property, together with the two subsequent sections concerning payment of compensation and release from requisition, appeared to be intended for private persons rather than for the State. Likewise, the control of agriculture contemplated by section 7 would not be applicable to the State, and the penalty regime set out in section 12, as well as section 13 which addresses abetment and assistance of contravention of the Act, were also seen as unlikely to bind the State. Consequently, the general structure of the legislation suggested that the State might not have been within the legislature’s contemplation when the Act was enacted. The Court noted, however, that the rule of harmonious construction advanced by Mr Setalvad could succeed only if the language of section 3 was capable of the meaning he proposed. If the words of section 3 permitted two reasonable constructions—one favoring the appellant and another favoring the respondent—then the Court could adopt the construction that best harmonised the wording of section 3 with the Act’s overall scheme and purpose. Conversely, if the wording of section 3(1) could not reasonably support the appellant’s interpretation, it would be improper for the Court to restrict the scope of those words merely to achieve artificial harmony with the presumed object of the statute. Accordingly, the Court determined that a careful examination of the language of section 3 was required. The Court read section 3(1) as follows: “The State Government so far as it appears to them to be necessary or expedient for maintaining, increasing or securing supplies of essential articles or for arranging for their equitable distribution and availability at fair prices may, by notified order, provide for regulating or prohibiting the supply, distribution and transport of essential articles and trade and commerce therein.” Sub‑section (2) clarified that, without prejudice to the generality of the powers in sub‑section (1), an order made under that provision could address the objects listed in clauses (a) to (k). The Court observed that most of those objects were unlikely to be applicable to the State, although a few might conceivably apply. Section 3(1) was plainly intended to secure supplies of essential articles and to arrange for their equitable distribution and fair pricing. Therefore, if electrical energy were listed among the essential articles in the Schedule, there would be no difficulty in holding that a notified order could be issued under section 3 to regulate its supply and to make it available at a fair price.

In this case, the Court observed that section 3(1) authorised the regulation of the supply of electrical energy and required that such supply be made available at a fair price. The Court noted that it was not disputed that when electrical energy was produced by a private licence holder and then supplied to consumers, that supply fell within the mischief that section 3(1) sought to address, and that the terms on which the supply could be made to consumers could be regulated by a notified order. The Court further stated that there could be no serious dispute that the terms of a contract entered into between a private supplier of electrical energy and a consumer could be altered by a notified order. Section 3(1) therefore conferred on the State Government the power to vary and modify contractual terms relating to the supply or distribution of essential articles. On that plain reading, the Court found it difficult to accept the argument that the supply of electrical energy, which was included in section 3(1), should fall outside the scope of the provision simply because it was produced by the State Government. The emphasis, the Court explained, was not on who produced and supplied the energy but on the continued equitable distribution and supply of essential articles at fair prices. Consequently, even when the essential article was produced by the State and supplied to consumers by the State, the object of section 3(1)—to ensure equitable distribution and availability at fair prices—remained applicable. The Court described the language of section 3(1) as clear, unambiguous and wide, and held that it would be unreasonable to limit its scope artificially on the ground that a broad construction might produce a result that was not entirely harmonious with the assumed purpose of the Act. As the purpose of the Act was to secure supply of essential articles at fair prices, the Court held that the identity of the supplier was irrelevant; what mattered was the regulation of the supply at a fair price. Accordingly, the Court declined to accept Mr Setalvad’s argument that section 3(1) did not confer on the respondent the power to modify the terms of agreements between it and the appellants.

The Court noted that Mr Setalvad had contended that, in construing section 3(1), one might consider the fact that many of the clauses listed in section 3(2) would not be applicable to the respondent State, and therefore he suggested that the wide language of section 3(1) should be narrowed by the limited scope of the clauses prescribed in subsection (2). The Court rejected this position, stating that after the Privy Council decision in King Emperor v. Sibnath Banerjee, it was well settled that a clause such as clause (2) of section 3 was merely illustrative. The Court reiterated that the proper approach to construing clauses (1) and (2) was to assume that whatever was included in clause (2) was also included in clause (1). This did not mean that a broader wording in clause (1) required a narrower construction merely because clause (2) was limited. Consequently, the Court returned to clause (1) to decide whether the supply of electrical energy made by the respondent to the appellants could be regulated by a notified order issued under it, and concluded affirmatively. In this connection, the Court found it pertinent to refer to section 3(2)(b), which provided for controlling the prices at which any essential article might be bought or sold, and observed that there was no obvious reason why this clause could not encompass articles purchased or sold by the State.

In interpreting clause (2) of section 3 as merely illustrative, the Court noted the authority in Santosh Kumar Jain v. The State (3). Accordingly, the proper method for construing clauses (1) and (2) of section 3 is to presume that everything covered by clause (2) is also covered by clause (1). This does not mean that a broader wording in clause (1) that could encompass situations not mentioned in clause (2) should be given a narrower construction simply because clause (2) is limited. Consequently, the analysis must return to clause (1) to determine whether the supply of electrical energy by the respondent to the appellants falls within the scope of regulation by a notified order issued under that provision, and the Court concluded that it does. In this regard, section 3(2)(b) was examined, which authorises control of the prices at which any essential article may be bought or sold. The Court found no reason to exclude articles purchased or sold by the State from that provision. The wording of the clause is such that the transactions of sale and purchase of all essential articles are encompassed. While it is true that when the State sells its essential articles it may regulate prices through an executive order, that consideration is not material to the construction of the language, because if the language includes essential articles sold by the State, there is no reason why the State could not issue a notified order to control those prices. Regarding the purchase of essential articles by the State, the Court observed that the position is even clearer; the power to regulate the price of such purchases is clearly included in section 3(2)(b). During the arguments, the counsel for the State did not seriously dispute this view. Thus, when the State intends to purchase essential articles, it may regulate the price by a notified order issued under section 3(1), demonstrating that for both sale and purchase of essential articles by the State, section 3(2)(b) read with section 3(1) furnishes the State with the authority to issue the appropriate notified order. The Court then addressed the contention that the power conferred by section 3(1) could not include the authority to increase tariff rates, but only to reduce them. This argument was held to be wholly misconceived, as the term “regulate” is sufficiently wide to allow the respondent either to raise or lower rates, the appropriate measure being determined by what is necessary or expedient to maintain the supply of the essential articles in question and to ensure their equitable distribution at fair prices. The Court cited the earlier authorities (1) 72 I.A. 241 at p. 248 and (2) 1951 S.C.R. 303 in support of this reasoning.

In the present case the Court observed that the purpose of the statutory power under section 3(1) is to increase, or otherwise secure, the supply of the essential articles involved, to arrange for their equitable distribution and to make them available at fair prices. The Court explained that the expression “fair prices” in section 3(1) does not require a price that has once been fixed to remain unchanged or to be reduced in order to satisfy the power to regulate. Rather, the power to regulate may be exercised in order to ensure that a fair price is paid, and the determination of what constitutes a fair price must inevitably take into account all relevant economic factors. The Court further held that if, after an impartial assessment of those factors, the fair price is found to be higher than the price that is presently fixed and prevailing, the authority’s power to regulate necessarily includes the power to raise the price so that it becomes fair. Consequently, the Court rejected the submission that, although the respondent could regulate the price of electrical energy supplied to the appellants, it lacked the authority to increase that price. On that basis, the Court concluded that the challenge to the validity of the notified orders on the ground that they lie outside the scope of section 3(1) could not be sustained.

The Court then turned to the question of whether the same notified orders were invalid because they allegedly contravened articles 19(1)(f) and 19(1)(g) of the Constitution. It noted that the orders had been issued under the authority of the statute and therefore must be treated as law for the purposes of article 19. Assuming, for the sake of argument, that the appellants’ right to receive electricity at the rates specified in their contracts fell within the ambit of article 19(1)(f) or 19(1)(g), the Court examined whether the notified orders could be said to be unreasonable or not in the public interest. The Court acknowledged that the orders altered the contractual rates, which at first glance might appear unreasonable. However, the evidence revealed that the tariff fixed many years earlier had become wholly outdated and that the Accountant‑General’s periodic reports showed the respondent supplying electricity to the appellants at the agreed rates while incurring a loss each year. Because of this, the Court held that the orders could not be said to lack justification on their merits. The Court observed that the prices of all commodities and labour charges had risen substantially, establishing a clear case for increasing the tariff for the supply of electrical energy. Nonetheless, the Court cautioned that it could not be said that the restriction imposed on the appellants’ rights by the increase in rates was automatically reasonable merely because it eliminated the recurring loss suffered by the respondent.

The Court observed that the increase in rates imposed on the appellants could be considered reasonable and in the public interest only because the impugned orders had prevented the respondent from suffering recurring losses under the original contracts. The Court warned that accepting such a sweeping justification could produce unreasonable or even anomalous results in certain situations. It stressed that the issue must be examined from the perspective of the community as a whole. In that light, the Court noted that the principal factor supporting the validity of the impugned orders was that they were issued solely to ensure the continued supply of electrical energy, a purpose that clearly served the welfare of the general public. The Court explained that without raising the prices, there existed a real danger that the supply of electricity might have been discontinued. It further observed that if the respondent believed that the agreements with the appellants were causing a substantial loss to the public treasury year after year, the respondent would have been compelled to consider whether to reduce or terminate the supply altogether. The Court inferred that the respondent likely recognized its duty to the public and concluded that providing electricity to profit‑making consumers at a loss to the public exchequer would be neither reasonable nor legitimate. Moreover, the respondent may have anticipated that the Legislature could question the propriety or wisdom of such a course; consequently, rather than terminating the contracts, the respondent chose to maintain the supply of electricity at a fair price, which explained the issuance of the impugned notified orders.

The Court clarified that nothing before it suggested that the rates fixed by the impugned notified orders were unreasonable or excessive. It also pointed out that the revised tariff was intended to operate prospectively, not retrospectively. Accordingly, after considering all the circumstances, the Court was disposed to hold that the tariff change effected by the notified orders was reasonable and served the general public’s interests. The Court then turned to the challenge raised by Mr. Setalvad, who argued that the impugned orders violated Article 14 of the Constitution. To support this contention, Mr. Setalvad referred to an allegation made in Writ Petition No. 923 of 1956, in which one petitioner claimed that the rates prescribed under the original agreements had remained unchanged for consumers served by State Government licensees. The affidavit in that petition admitted that some other licensees had raised their rates, but contended that such increases were negligible or merely nominal. On that basis, the argument was advanced that the wide disparity in rates between different consumers amounted to a breach of Article 14. Mr. Setalvad conceded that these allegations were vague and indefinite and that no further material had been produced to substantiate them.

The Court observed that no material had been produced either by the petitioner who filed the affidavit or by any of the other petitioners who approached the High Court to challenge the validity of the impugned orders. It further noted that the record did not contain any evidence showing the rates charged by other licensees, nor any comparison between those rates and the rates fixed under the original contracts or the rates increased by the notified orders. The Court added that the Division Bench of the High Court erred in assuming that the respondent was the exclusive supplier of electrical energy in the State of Andhra Pradesh. While acknowledging that the respondent supplied the majority of electricity, the Court pointed out that certain private licensees also held licences to supply electricity to consumers, and therefore, at the relevant time, the respondent could not be regarded as a monopolist in the supply of electricity. The Court reiterated its earlier pronouncements that a citizen who seeks to invalidate a statute on the ground of violation of Article 14 must set out specific, clear and unambiguous allegations of discrimination, and must demonstrate that the impugned provision is based on a classification that lacks rationality or a nexus with the statute’s intended objective. In view of the material placed before it, the Court found that none of the appeals in the present group contained any such allegation or evidence that would sustain a claim under Article 14. Consequently, the Court held that there was no basis to pursue the Article 14 argument further. Accordingly, the Court dismissed the appeals, ordered costs against the petitioners, and directed that one set of hearing fees be paid. Appeals dismissed.