HIGH COURT OF ORISSA : CUTTACK.

W.P.(C) NO.10928 of 2007

In the matter of an application under Articles 226 and 227 of the

Constitution of India.

-------
Dwaraka Resorts Pvt. Ltd. …… Petitioner

- Versus-

State of Orissa and others …… Opposite Parties

For Petitioner : M/s. Milan Kanungo, D.Pradhan,

Y.Mohanty, S.K.Mishra and
S.N.Das

For Opp. Parties : Mr. S.K.Patnaik

(Special Counsel), U.C.Mohanty,
P.K.Patnaik, N.Satpathy,
D.P.Das ( for O.P.No.1),

Shri B.K.Nayak ( for O.P.Nos.2 to 4)

M/s Biswajit Mohapatra and S.K.Sahoo

( for O.P.No.5)

THE HONOURABLE SHRI JUSTICE B.K. PATEL

Date of Hearing: 1.8.2014 :: Date of Judgment – 23.12.2014

B.K. PATEL,J. The petitioner has filed this writ petition praying to :-

(i) quash disconnection notice No.8332 dated

7/8/2007 issued by the Manager(Electrical) City

Dist. Division No.I Ranihat, Cuttack/opposite party

no.4 under Annexure-1;

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(ii) direct the opposite parties to bill the petitioner hotel at

Medium Industrial Tariff as per the Industrial Policy

2001;

(iii) quash the order of the O.E.R.C. dated 22.3.2005

(Annexure-7) and direct opposite party no.2(CESU) to

supply power to the petitioner-hotel under

Industrial Tariff.”

2. Petitioner is a hotel and registered under the Companies Act,

1956.

3. Petitioner’s case is that dispute between the petitioner and

electricity distribution licensee CESU represented by opposite party nos. 2

to 4 with regard to consumption of electricity by the petitioner exceeding

contract demand compelled the petitioner to institute O.J.C.No.6772 of

1999 which was disposed of by this Court by order dated 18.5.2006

directing opposite party no.4-Executive Engineer-cum-

Manager(Electrical), CESU to look into the petitioner’s grievances upon

filing of representation. Pursuant to such direction, an enquiry

committee was constituted by opposite party no.4. Upon enquiry the

committee passed resolution at Annexure-2 containing the following

order:-

“Hence, it is ordered that:

1. A domestic connection of 22KW will immediately be
provided to the consumer by upgrading existing single-
phase consumer.
 3
2. The consumer is also directed to execute a fresh agreement
for 95KW of load, with retrospective effect from Jan’99 if not
executed earlier observing the Departmental formalities with
the Executive Engineer(El.), City Distribution Division No.1
Cuttack within 15(fifteen) days of issue of the Order.

3. The billed amount up to 12/96 may be paid by the

consumer for which there is no dispute. After 01/99 the bill
may be re-casted basing on the Maximum Demand recorded
taking 95KW to be the CD.

4. The consumer may clear any electricity dues pending on

single-phase connection before availing the new service
connection. This may be given effect from 15 days of issue
of this order.

5. The penalty charges for the months, the MD exceeded than

the CD may be billed in the appropriate tariff. Overdrawal
penalty (beyond 95KW) may be re-casted with retrospective
effect from 01/99.

6. The total amount due after revision of the bill may be paid
by the party within one month from receipt of the revised
bill.

7. The Executive Engineer may observe other Departmental

formalities as per Rule.”

In accordance with the above directions, opposite party no.3-

Superintending Engineer issued to the opposite party no.4 letter dated

21.8.2006, copies of which are at Annexure-3 to the writ petition and

Annexure-B/4 to the counter affidavit filed on behalf of opposite party

nos.2 to 4, to impress upon the petitioner to execute fresh agreement for

95 KW of load with retrospective effect from the month of January, 1999

and for recasting the bills accordingly. It was also mentioned in the letter

that tariff of Medium Industries category would be applicable and

continue after execution of fresh agreement with retrospective effect from

January,1999. In accordance with the directions contained in the letter

at Annexure-3 the petitioner sent standard agreement duly signed by the

 4
petitioner with a request to the Executive Engineer to execute agreement

and to send the duplicate copy to the petitioner. It is further averred that

opposite party no.4-Executive Engineer-cum-Manager (Electrical) having

insisted the petitioner to execute fresh agreement for contract load of 100

KW contrary to the specific direction in the resolution at Annexure-2 as

well as letter of the opposite party no.3 at Annexure-3, petitioner

preferred W.P.(C) No.16467 of 2006 before this Court with a prayer to

quash the order passed by opposite party no.4-Executive Engineer-cum-

Manager(Electrical). The writ petition was disposed of by order dated

11.5.2007 allowing the prayer of the petitioner to quash the order of

opposite party no.4-Executive Engineer-cum-Manager(Electrical) and

directing the CESU authorities to implement the orders contained in the

resolution at Annexure-2. The concluding paragraph of the order passed

by this Court in W.P.(C) No.16467 of 2006 reads as follows:

“Accordingly, we have no hesitation to quash

Annexure-18 i.e., order dated 27.11.2006 passed by the
Manager(Electrical)-cum-Executive Engineer, City
Distribution Division No.1,Cuttack, O.P.No.3 and direct the
O.Ps. to implement the orders contained in the resolution
dated 3.6.2006 in Annexure-14. So far as the prayer of the
petitioner to charge it under Medium Industrial Tariff is
concerned, it is open to the petitioner to approach the
appropriate authority in this regard.
The writ petition is disposed of accordingly.”

In response to the representation filed by the petitioner to

implement the order of this Court, opposite party no.4 issued letter dated

10.7.2007, copies of which are at Annexure-4 to the writ petition and

Annexure-A/4 to the counter affidavit filed on behalf of opposite party

nos.2 to 4, and intimated the petitioner that agreement would be executed

for contract load of 95 KW in the General Purpose Tariff Category and not
 5
in the Medium Industrial Tariff Category. Thereafter, opposite party no.4

issued notice dated 7.8.2007 at Annexure-1 calling upon the petitioner to

pay differential amount of the current dues for the months of May, 2007

and June, 2007 within 15 days specifically indicating therein that the

petitioner was liable to pay electricity dues at General Purpose Tariff

Category and not at Medium Industrial Tariff Category under threat of

disconnection of electricity supply. It is contended that action of opposite

party no.4 applying General Purpose Tariff to the petitioner hotel is

arbitrary, illegal and contrary to Industrial Policy Resolution, 2001 ( IPR-

2001) as well as OERC Code, 2004, Electricity Act, 2003 and Orissa

Electricity Reform Act, 1995. Such action is contrary also to the

directions of opposite party no.3 in the letter at Annexure-3. The

petitioner was enjoying benefit as per IPR-1996 and is entitled to benefit

under the IPR-2001 under which the petitioner hotel comes under the

existing tourism related activities and has been identified as priority

sector. The petitioner has also been certified by the District Industries

Centre, Cuttack in their letter dated 5.9.2006 at Annexure-5 as an Unit

which has availed Industrial Tariff concessions and to be entitled to avail

the same as per provision made under IPR-1996. It is further averred

that observation made by the OERC at paragraph 5.5.1 of the order

dated 22.3.2005 at Annexure-7 to the effect that plea of categorization for

electricity tariff should match the criteria fixed by the Industries

Department of Government for classification of industries is not possible,

is illegal, arbitrary and without jurisdiction. General Purpose Tariff

Category is not applicable to the petitioner.

 6
4. Three separate counter affidavits have been filed on behalf of

the opposite party no.1 the State of Orissa in the Industries Department,

the opposite party nos.2 to 4 on behalf of CESU and the opposite party

no.5 OERC.

5. In the counter affidavit filed on behalf of opposite party no.1 it

is admitted that the petitioner’s unit comes under “Other Small Scale

Industry (OSI)” category as per PMT Registration No.15/04/00001 dated

16.4.1993 issued by the District Industries Centre, Cuttack. It is also

averred that the unit started commercial production with effect from

23.4.1992 with approval of Tourism Department. The State Government

issued IPR-2001 on 3.12.2001, paragraph 18.11 of which provides as

follows:

“18.11- Information Technology, Bio Technology and

Tourism related activities (existing and new) which are
treated as industrial activity will be entitled to have power
at industrial and not commercial rate of tariff subject to
O.E.R.C. approval.”

It is specifically provided in the above clause that benefit under the

provision was to be given effect to subject to the OERC approval. As the

hotels were not treated as industrial units, the matter was raised before

the OERC which by order dated 22.3.2005 refused to consider the matter.

Paragraphs 5.5.1 and 5.5.2 of the order of the OERC dated 22.3.2005 at

Annexure-7 read as follows:

“5.5.1 Some of the objectors submitted that categorization

for electricity tariff should match the criteria fixed by the
Industries Department of Govt. for classifying industries. It
is not possible for us to agree with this suggestion. Firstly,
price of electricity should progressively reflect the cost of
supply in accordance with Section 61(g) of the Electricity
Act, 2003. The cost of supply can be fairly determined with
 7
reference to the investment made, quantum of connected
load, timing of supply and voltage at which it is supplied.
Hence, electricity price has to be in relation to these factors.
Secondly, the purpose of classification by Industries
Department and other departments of Govt. are for different
purposes like preferential treatment in financing, taxes, etc.
which have no relevance for determining price of electricity.
Thirdly, electricity charges are to be non-discriminatory
from economic point of view. As such, it may not be
possible to synchronize the pricing of electricity in keeping
with classification decided by the Industries Department.

5.5.2 (a) The representative from Govt. of Orissa pleaded

that, hotels should be classified under the industrial
category. Since the Dept. of Industry allows them the
benefits due to an industry, there is no justification for them
to be billed at General Purpose tariff. It needs to be noted
that for the purpose of applicability of electricity tariff the
classification of an electricity consumers as prescribed in
OERC Distribution (Condition of Supply) Code, 2004 is only
applicable.
(b) xx xx xxx xx xx xx
(c) xx xx xx xx xx xx xx xx xx xx xx xx xx xx”

IPR-2001 provides that hotels are treated as industries so as to be entitled

to have power at the industrial rate of tariff and not at commercial rate of

tariff. However, it is further pleaded that Electricity Act, 2003, repealing

earlier Acts, provides under Section 185(3) that the provisions of the

enactments specified in the Schedule to the Act, which includes Orissa

Electricity Reform Act, 1995, not inconsistent with the provisions of the

Electricity Act, 2003, shall apply to the State in which such enactments

are applicable. Section 12 of Orissa Electricity Reform Act, 1995 as well

as Section 65 of the Electricity Act, 2003 provide that in case State

Government desires to give any subsidy to any class of consumers, then

the amount of loss has to be deposited with licensing companies in

advance by the Government. In IPR-1996 as well as IPR-2001 the State

Government did not make any provision for bearing the differential
 8
amount between industrial and commercial rate of tariff if the hotels are

to be treated as industrial units. It is pleaded that it is not possible for the

State Government to pay the differential tariff to the distribution licensees

with a view to ensure power supply to the hotels at industrial rates

considering the present economic condition of the State. Since the OERC

is not ready to apply power tariff at industrial rate to hotels, the petitioner

cannot claim the said benefit. Decision of the OERC dated 22.3.2005 at

Annexure-7, having not been challenged by anyone, has become final and

binding. In such circumstances, the petitioner’s prayer to avail industrial

rate of tariff is untenable.

6. In the joint counter affidavit filed by opposite party no.4, on

behalf of opposite party nos.2 to 4, it is stated that opposite party no.4

after joining as the Executive Engineer on 16.6.2006, received the letter of

the Superintending Engineer dated 21.8.2006 at Annexure-3. It is further

stated that another communication was also received from the General

Manager, Commerce for disposal of the matter by the Executive Engineer.

It is averred that after going through the records, opposite party no.4

disposed of the matter and communicated the order to the petitioner on

27.11.2006 which was challenged by the petitioner in W.P.(C) No.16467 of

2006 before this Court. W.P.(C) No.16467 of 2006 was disposed of by

order dated 11.5.2007 with the directions extracted at paragraph 3 above.

Thereafter, the petitioner submitted a standard draft agreement in

duplicate for execution of agreement under Medium Industrial Tariff

Category. Opposite party no.4 returned back the draft agreement

intimating the petitioner under letter dated 10.7.2007 at Annexure-4 to

 9
modify the draft agreement to General Purpose Tariff Category. In the

letter at Annexure-4 it was pointed out that in view of the directions in

W.P.(C) No.16467 of 2006 to the petitioner to approach the appropriate

authority for application of Medium Industrial Tariff, till a decision on

application of tariff is taken by the appropriate authority, such a decision

to change the billing on Medium Industrial Tariff in respect of the

petitioner is not possible. Though the petitioner was billed on General

Purpose Category Tariff from May, 2007, the petitioner went on making

payment calculating on its own way on Medium Industrial Tariff Category

for the months of May and June, 2007. In such circumstances,

disconnection notice dated 7.8.2007 at Annexure-1 was issued to the

petitioner with intimation to make payment of differential amount. It is

contended that though by letter dated 21.8.2006 at Annexure-3 direction

was given to the petitioner to execute agreement on Medium Industrial

Tariff Category, subsequently, by letter dated 31.8.2006 at Annexure-C/4,

direction at Annexure-3 was modified to the extent that the petitioner was

to go on paying commercial tariff pending adjudication of the matter by

the High Court. It is stated at paragraph 7 of the counter affidavit that

the letter dated 31.8.2006 at Annexure-C/4 also was a communication of

opposite party no.3-Superintending Engineer. Since the petitioner failed

to pay the energy bill as directed, disconnection notice at Annexure-1 was

issued. In the meanwhile, energy bills for the period from January, 1999

till September, 2007 has been revised and revised bill after adjustment of

all payment has been presented to the consumer by communication dated

2.11.2007 at Annexure-D/4. It is categorically pleaded that as per

 10
paragraph 18.11 of IPR-2001 and letter of the District Industries Center,

Cuttack at Annexure-5, the petitioner’s unit is entitled to avail the

industrial tariff concession as per provisions made under IPR-1996

subject to OERC approval. Section 65 of the Electricity Act, 2003 dealing

with the provisions for subsidy by the State Government lays down that

grant of subsidy to the consumers is to be regulated by the OERC.

Clause-7(g) of the OERC (Terms and Conditions for Determination of

Tariff) Regulations, 2004 as well as IPR-2001 and the OERC Code also

provide for the matter relating to extension of subsidy by the State

Government. In the present case, no communication has been received by

CESU either from the State Government or from the OERC for extension

of subsidy. No notification of the State Government has been

communicated to the CESU declaring the petitioner to be subsidized so as

to enable the CESU to make an estimate of subsidy and submit the same

before the OERC as provided under Clause-7(g) of the OERC (Terms and

Conditions for Determination of Tariff) Regulations, 2004. By letter dated

31.8.2006 at Annexure-C/4 opposite party no.3-Superintending Engineer

modified the earlier communication at Annexure-3 and directed for

raising the petitioner’s bill under Commercial/General Purpose Category

pending final decision in the matter. It is reiterated that in absence of any

notification by the State Government and the OERC indicating the

petitioner’s entitlement to avail subsidy, notice at Annexure-1 has rightly

been issued directing the petitioner to pay electricity dues under General

Purpose Tariff Category.

 11
7. In the counter affidavit filed by opposite party no.5 it has

been averred that no illegality or irregularity has been committed by the

CESU in categorizing the petitioner hotel under General Purpose Tariff

Category in view of the provision under Clause-2 of Regulation 80 of the

OERC Code. It is categorically pleaded that industrial policy resolution

formulated by the State Government has no application to the provisions

under the Electricity Act, 2003 in view of provision under Section 174 of

the Electricity Act, 2003. At the same time it is pleaded that Section 108

of the Electricity Act, 2003 provides that in discharge of its functions the

State Electricity Commission shall be guided by such directions in the

matter of policy involving public interest as the State Government may

give to it in writing. If any question arises as to whether any such

direction relates to a matter of policy involving public interest, the

decision of the State Government thereon shall be final. Opposite party

no.5 also has reiterated the provisions under Section 65 of the Electricity

Act, 2003 with regard to the manner and modalities of grant of subsidy by

the State Government. Placing reliance on the order of the OERC dated

22.3.2005 at Annexure-7 extracted above as well as judgment dated

28.6.2013 passed by this Court in W.P.(C) No.266 of 2008 and batch of

other writ petitions filed by some other hotels, it is averred that the

petitioner hotel is not entitled to any benefit in electricity tariff. It is also

pleaded that the petitioner ought to have assailed the order of the OERC

dated 22.3.2005 at Annexure-7 by filing appeal. Opposite party no.5

further pleads that the petitioner is liable to pay electricity dues under

General Purpose Tariff Category under Clause-2 of Regulation 80 of the

 12
OERC Code. State Government having refused to extend any subsidy,

there has been no violation of provisions under Section 108 of the

Electricity Act, 2003 or Section 12 of the Orissa Electricity Reform Act,

1995. More or less opposite party no.5 has, in its counter affidavit, taken

stands similar to that of opposite party nos.2 to 4.

In the additional affidavit filed on behalf of opposite party

no.5 the OERC, it has been averred that the OERC has approved fifteen

categories of consumers under Regulation 80 of the OERC Code.

Regulation 82 of the OERC Code empowers the concerned engineer of the

licensee to reclassify a consumer under the appropriate category after

giving notice to such consumer to execute a fresh agreement in case it is

found that the consumer was erroneously classified or the purpose of

supply has changed or the consumption of power has exceeded the limit

of that category or the contract demand has been enhanced or reduced. It

is contended that in the present case “classification/reclassification” of

the petitioner hotel under “industrial” or “commercial/general purpose”

category has been made by the engineer of the licensee under Regulation

82 of the OERC Code, as premises of the petitioner is used for the

purpose of business, without there being any sort of industrial activity. It

is averred that order dated 22.3.2005 at Annexure-7 was passed after

hearing the parties concerned who appeared pursuant to public notice

and it was held at paragraph 5.5.2 that for the purpose of applicability of

electricity tariff the classification of an electricity consumer as prescribed

in the OERC Code is only applicable. Paragraph 5.5.1 of the order at

Annexure-7 is also relied upon to aver that classification of hotels for the
 13
purpose of determination of tariff has attained finality. The OERC having

not approved the concession granted to the hotels under IPR-2001, the

petitioner is not entitled to avail power supply at the industrial rate of

tariff, more so when the State Government has not made any provision to

bear the differential amount between concessional rate of tariff and

commercial rate of tariff.

8.1 Learned counsel for the petitioner submitted that it has not been

disputed that the petitioner hotel was being billed under Medium

Industrial Tariff Category pursuant to IPR-1996. Tourism related

activities including hotels were treated as industrial activities by the State

Government since 1986, and IPR-1996 specifically provided that hotels

also would be entitled to have power at industrial and not at commercial

rate of tariff. Similarly, IPR-2001 provided at Clause 18.11 that tourism

related activities including hotels which are treated as industrial activity

will be entitled to have power at industrial and not commercial rate of

tariff subject to the OERC approval. Industrial Policy Resolutions of the

State issued from time to time contains policy decisions and directives of

the State. Hotels were billed on Industrial Tariff Category even after

coming into force of the Orissa Electricity Reform Act, 1995. The

Electricity Act, 2003 provides under Section 174 that provisions of the Act

shall have overriding effect. Provisions in the IPR with regard to

applicability of Industrial Tariff rate to the hotels is in consonance with

letter dated 5.9.2006 at Annexure-5 of the District Industry Center,

Cuttack to opposite party no.4 pointing out that the petitioner’s unit has

availed Industrial Tariff concession and is entitled to avail the same as per
 14
the provision made under IPR-1996. Even after consideration of the

petitioner’s grievance by the committee formed by CESU pursuant to the

order of this Court in OJC No.6772 of 1999, by letter dated 25.8.2006 at

Annexure-3 opposite party no.3-the Superintending Engineer

categorically held that the petitioner is entitled to the IPR benefit as per

order of the Government of Orissa applicable for Medium Industries.

However, all in a sudden, the CESU took an unilateral decision to

withhold from the petitioner the concession of payment of electricity

charges at Medium Industrial Tariff rate by letter dated 10.7.2007 at

Annexure-4. The petitioner approached the authority to act in accordance

with the policy of the State Government to boost tourism related activities.

Learned counsel for the petitioner vehemently submitted that not only the

OERC but also the CESU, being entrusted with the power to regulate the

matters relating to electricity supply, are discharging State functions.

Provisions under OERC Code cannot be construed to be in supersession

of policy direction of the State Government. Neither of the IPRs of the

year 1996 or 2001 refers to provision for subsidy to hotels as a condition

for grant of concession of payment of electricity charges in the Industrial

Tariff Category. It has been categorically admitted by the State that there

was no policy by the State to reimburse/subsidize the differential cost of

tariff between the commercial rate and industrial rate to the hotels or

distribution licensees. Section 108 of the Electricity Act, 2003 providing

that in the discharge of its functions, the State Commission shall be

guided by such directions in matters of policy involving public interest as

the State Government give, has also no reference to payment of any

 15
subsidy. Sub-Section (2) of Section 108 of the Electricity Act, 2003

provides that decision of the State Government in the matter of policy

involving public interest is final. Section 65 of the Electricity Act, 2003

refers to a situation where State Government requires the grant of any

subsidy to any consumer or class of consumers in the tariff determined

by the State Commission. In the present case, State Government has not

required grant of any subsidy. On the other hand, in unequivocal terms,

IPR-1996 and IPR-2001 provide for application of industrial tariff rate to

the tourism related activities including hotels in the State. Section 12 of

the Orissa Electricity Reform Act, 1995 also provides under Sub-Section

(1) that the State Government shall have the power to issue policy

directives on matters concerning electricity in the State. However, Sub-

Section (2) of Section 12 provides that if any dispute arises between the

Commission and the State Government as to whether a question is or is

not a question of policy, it shall be referred to the Central Electricity

Authority for decision whereas Sub-Section (2) of Section 108 of the

Electricity Act, 2003 provides that decision of the State Government in the

matter of policy is final. Provision to issue policy directives concerning

subsidy to be allowed for supply of electricity to any class or classes or

persons or in respect of any area in addition to subsidies permitted by the

Commission while regulating and approving the tariff structure is there in

Sub-Section (3) of Section 12 itself of the Orissa Electricity Reform Act,

1995. However, in the Electricity Act, 2003, separate provisions under

Section 65 have been made in the matter of grant of subsidy by the State.

There is no provision either in the Orissa Electricity Reform Act, 1995 or

 16
in the Electricity Act, 2003 that tariff concession granted to any consumer

or class of consumers as a matter of Industrial Policy directive by the

State has to be compensated by grant of subsidy. Rather, the Government

policy as contained in the IPR is unconditional. It was argued that any

other conclusion would be inconsistent with the provisions under Clause

18.11 of the IPR-2001 as well as the provisions under the Central Act and

the State Act. No provision can be inconsistent with the provision of the

Electricity Act, 2003, in view of provision under Section 174 as well as

Section 185 (3) of the Electricity Act, 2003. Moreover, it is well settled

principle that the State cannot be allowed to speak in different voices.

8.2 It was further argued that there is no scope for the CESU to

deny to the petitioner the benefit of payment of electricity charges at

industrial rate of tariff as envisaged at paragraph 18.11 of IPR-2001 by

placing reliance on paragraph 5.5.1 or 5.5.2 of the order dated 22.3.2005

of the OERC at Annexure-7. It is obvious from a bare reading of

paragraph 5.5.1 that the OERC did not consider the industrial policy of

the State to treat hotels as industrial activities so as to be entitled to have

power at industrial rate of tariff. The specific observation of the OERC is

that ‘the purpose of classification by Industries Department and other

departments of Government are for different purposes like preferential

treatment in financing, taxes, etc. which have no relevance for

determining price of electricity’. The OERC has made it clear that while

making its observation the OERC did not take any view regarding policy of

the Government to classify tourism related activities as industrial

 17
activities for the purpose of payment of price of electricity at industrial

tariff rate. At paragraph 5.5.2(a) having noted the pleading of

representative of the Government of Orissa, the OERC has simply

observed that for the purpose of applicability of electricity tariff the

classification of an electricity consumer as prescribed in the OERC Code

is only applicable. It was argued by the learned counsel for the petitioner

that Regulation 80 of the OERC Code makes separate classifications

according to quantum of contract demand for industries in the matter of

fixation of rate of tariff. The State Government having, as a matter of

policy, directed to treat the hotels as industrial activities for the specific

purpose of payment of price of electricity at industrial tariff rate, and the

same having been accepted by the CESU till 2006, when letter at

Annexure-3 was issued, opposite parties are estopped from taking a

different stand to the disadvantage of the petitioner by demanding

electricity charges as a General Purpose Tariff Category consumer with

retrospective effect from the year 1999.

8.3 Learned counsel for the petitioner also submitted that

Regulation 80 of the OERC Code provides that licensee may classify or

reclassify the consumer into various categories from time to time as may

be approved by the Commission and fix different tariffs and conditions of

supply for different class of consumers. In the present case, CESU, the

licensee had classified the petitioner as Industrial Tariff Category

consumer with a contract demand of 95 KW. Having so classified, the

CESU could have reclassified the petitioner as a General Purpose Tariff

 18
Category consumer only in accordance with Regulation 82 read with

Regulation 80 of the Code upon approval of the OERC. In the present

case, neither the CESU nor the OERC has asserted that approval for

reclassification of the petitioner from Industrial Tariff Category consumer

to General Purpose Tariff Category consumer was obtained from the

OERC. The petitioner is also not aware of any such approval by the OERC

inasmuch as the petitioner was never given an opportunity of being heard

in the matter of approval by the OERC of the change of classification of

the petitioner by CESU at any point of time.

8.4 As regards the contention of opposite party nos.2 to 4 with

regard to decision dated 28.6.2013 of this Court in W.P.(C) No.266 of

2008 and a batch of other writ petitions is concerned, it was contended by

the learned counsel for the petitioner that the petitioner was not a party

to any of the writ petitions. Moreover, the writ petitions were not

disposed of on merit. On the contrary, having specific reference to

paragraph 14.2 and paragraph 20 of IPR-2007 as well as definition and

interpretation provided in Annexure-1 thereto at paragraph 10, it was

observed that no concession was extended to tourism sector. On the

basis of such observation and upon reference to provisions under Section

108(1) and Section 65 of the Electricity Act, 2003 the writ petitions were

disposed of granting liberty to the petitioners to file appeal or to make

representations to the State Government to provide them incentive. It

was argued that in the present case there being no dispute that the

petitioner was being treated as an industry so as to be entitled to pay

 19
electricity charges at Industrial Tariff Category consumer by the CESU

till 2007, and the petitioner having repeatedly approached the authority,

till all in a sudden the CESU reclassified the petitioner as a General

Purpose Tariff Category consumer, observation of this Court in the said

decision is not applicable to the case of the petitioner.

9.1 Learned Special Counsel for the State in course of his

argument did not dispute that Industrial Policy Resolutions of the State

contain directions in the matter of policy of the State involving public

interest and IPR-2001 envisages concessional rate of tariff to be paid at

industrial rate by hotels.

9.2 It was further pointed out that though hotel is not an

industry as understood in its ordinary sense, in order to boost the growth

of tourism in Odisha, tourism related activities including hotels were

extended certain incentives under the IPRs issued by the State

Government since 1986. Such incentives were revised/expanded/abridges

in different IPRs. Under paragraph-16 of IPR-1996 it was provided, inter

alia, as follows:

“Para-16.1 – The following tourism related activities will be

treated as industrial activity and will be entitled to
incentives applicable to new industrial units, except for
exemption/deferment of sales tax and exemption of octroi
on raw materials and packing materials.

(i) Hotels/motels/golf courses/ropeways and wayside

amenity centres satisfying the norms/conditions stipulated
by the State Government.
Xxx xxx xxx

16.2- Such tourism related activities(existing and new),

will be entitled to have power at industrial and not
commercial rates of tariff.”
 20
That apart, IPR-1996 also provided at paragraphs 22.2 and 23.1

as follows:
“Para-22.2 – Industrial units, hotels, cinema halls etc.
covered under earlier Industrial Policy Resolution shall
continue to enjoy the incentives admissible under the said
Policy except to the extent abridged/modified/enlarged in
this Policy
Para-23.1- No right or claim for any incentive under this
Policy shall be deemed to have been conferred merely on the
ground of provision in this Policy. The State Government
may issue operational guidelines/instructions for
administration of incentives contained in this Policy. An
industrial unit which considers itself eligible for any
incentive, shall apply for the same in accordance with the
operational guidelines/instructions and the same shall be
considered and disposed of on merit.”

9.3 Referring to the above directives, it was argued that

incentives allowed in the IPR were subject to specific orders to be passed

by the concerned departments of the Government. In the present case,

such an order under Annexure-5 was passed by the District Industries

Centre,Cuttack in the Department of Industries. It was categorically

contended that though tariff for industrial sector was lesser than the tariff

for commercial consumers like hotels, there was no policy by the State to

reimburse or subsidies differential cost of tariff either to the consumer or

to the electricity supply agency.

9.4 It was further submitted that when IPR-1996 was issued the

electricity sector was under the exclusive control and domain of the State

Government which fixed tariff rates applicable to different types of

consumers. The Orissa State Electricity Board, a State public sector

undertaking, was responsible for generation, transmission and

distribution of electricity in accordance with the directives of the State

Government. However, State of Orissa brought in reforms in the

 21
electricity sector and enacted Orissa Electricity Reform Act,1995 with

effect from 1.4.1996 as a result of which electricity sector was privatized

and OERC came into existence to regulate electricity sector.

Subsequently, State Government denuded itself of power to regulate tariff

structure and classifying the consumers. The incentives allowed in IPR-

1996 was no more operational and became subject to the regulatory

power of the OERC Nevertheless, till framing of OERC Regulations, Grid

Corporation of Orissa Limited applied the tariff rate fixed earlier

including the tariff for the hotels at industrial rate by issuing specific

order dated 14.5.1996 to that effect.

9.5 It was pointed out that Section 12 of the Orissa Electricity

Reform Act,1995 conferred power on the State Government to issue policy

directives on matters concerning electricity. The OERC Code, 1998 was

framed on 7.9.1998 in exercise of power conferred under Section 54 of the

Orissa Electricity Reform Act,1995. Under Regulation 80 of the O.E.R.C.

Code, 1998 providing for classification of consumers, hotels were not kept

under the industrial category of consumers. When the matter stood thus,

IPR-2001 was issued on 3.12.2001 specifically providing therein at

paragraph 13.2 and 18.11 that hotels, existing or new, shall continue to

be entitled to have power at industrial and not commercial rate of tariff

subject to OERC approval. Thereafter, Electricity Act, 2003 came into

force. Section 108(1) of the Electricity Act did contain provision similar to

the provision under Section 12 (1) of the Orissa Electricity Reform Act,

1995 to the effect that in discharge of its functions, the Regulatory

 22
Commission shall be guided by such directions in matters of policy

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

Section 65 of the Central Act separately provided for subsidy by the State

Government. In exercise of powers under Section 181(2) of the Electricity

Act, 2003, the OERC by notification dated 21.5.2004 framed OERC Code,

2004 and repealed OERC Code, 1998. Regulation 80 of the OERC Code,

2004, providing for classification/re-classification of consumers, also does

not include hotel under any of the industrial categories.

9.6 In the written submission submitted on behalf of the State in

para-10 it has been unequivocally conceded that under IPR-

2001 hotels are to be charged tariff at the rate applicable to industries.

Paragraph-10 of the written submission reads as follows:

“ That as per the IPR-1996 followed by IPR-2001, the Hotels

are to be treated as ‘Industrial Activity” and to be charged @
tariff applicable to Industries.”

9.7 It was contended that while classifying the consumers in the

OERC Code, 2004, tourism related activities including hotels should have

been either classified under Industries group or separate provision should

have been made implementing the policy decision under Clause 18.11 of

IPR-2001 for charging tourism related activities at the Industrial rate of

tariff. In case OERC was not inclined to accept the directives in the

IPR-2001 as a policy of the State Government in public interest, the

matter should have been referred to the State Government for its final

decision as per Section 108(2) of the Electricity Act,2003. However, as it

appears from paragraphs 5.5.1 and 5.5.2 of the order of OERC at

 23
Annexure-7, the OERC simply did not accept the proposal of the

Government to allow hotels to be charged at the industrial rate of tariff.

It was reiterated by the learned Special Counsel for the State that State

Government has not provided for grant of any subsidy to the hotels or any

tourism related activities to the extent of differential tariff in any of the

IPRs. It was also contended that fiscal condition of the State does not

permit allowance of such subsidy to the hotels for all time to come.

9.8 In course of his argument learned Special Counsel made

reference to the judgment of this Court in W.P.(C) No.266 of 2008 and

batch of other writ petitions to urge that the writ petitions were not

disposed of on merit with regard to the claim of the petitioners therein for

availing concessions in the electricity tariff under IPR-2001.

9.9. Referring to the decision of the Hon’ble Supreme Court in

Kusumam Hotels(P) Ltd. –v- Kerala State Electricity Board and

others): (2008) 13 SCC 213 it was urged by the learned Special Counsel

that concessions allowed to hotels to be charged as industrial can be

withdrawn by the State Government at any time. However, learned

Special counsel did not take the stand that in the present case State

Government has withdrawn the concessions under the IPR-2001.

Concluding his argument, learned Special Counsel for the State urged

that the writ petition should be disposed of with direction to the State

Government to decide the dispute in exercise of power under section

108(2) of the Electricity Act, 2003.

 24
10. Learned counsel for opposite party nos.2 to 4 contended that

the petitioner falls under General Purpose Category Consumers under

Regulation 80 (2) of the OERC Code, 2004. Upon execution of agreement

by the petitioner, CESU had provided electricity supply. The agreement

itself provides that the petitioner shall observe and abide by all the terms

and conditions stipulated in the OERC Code. The petitioner executed the

agreement under the Commercial Tariff Category and was being charged

as per the tariff determined by the OERC under the said category.

Subsequently, with the commencement of OERC Code, 2004, the

petitioner has been categorized under the General Purpose Tariff

Category. Hence, there is no scope for the petitioner to allege illegality on

the part of the CESU in billing the petitioner under the General Purpose

Tariff Category. It was urged by the learned counsel for the CESU that

IPRs formulated by the State Government provide for extending

concession to different types of industries as mentioned therein and has

no application to the Electricity Act, 2003 as well as the rate of tariff

determined by the OERC. In course of argument, learned counsel for the

CESU referred to Sections 65, 174 and 108 of the Electricity Act, 2003 as

well as Section 12 of the Orissa Electricity Reform Act, 1995 to contend

that if the State Government requires the grant of any subsidy to any

consumer or class of consumers in the tariff determined by the OERC, the

State Government is required to deposit the amount in advance to

compensate the distribution licensee. Learned counsel for the CESU also

referred to Regulation 7 (g) of the OERC (Terms and Conditions for

Determination of Tariff) Regulations, 2004 laying down modalities of grant

 25
of subsidy by the State Government. It was argued that order dated

22.3.2005 at Annexure-7 was passed by the OERC holding at paragraph

5.5.2 that for the purpose of applicability of electricity tariff, classification

of an electricity consumer as prescribed in the OERC Code, 2004 is only

applicable. It was contended that State Government having not made

provision for grant of subsidy towards concessional rate of tariff for the

hotels, the petitioner has to be charged tariff at the rate applicable to

General Purpose Category consumer. In case the petitioner was aggrieved

by the order of the OERC, it was open for the petitioner to file appeal in

accordance with Section 111 of the Electricity Act, 2003. Having referred

to the judgments of this Court passed in W.P.(C) No.266 of 2008 and a

batch of other writ petitions as well as in W.P.(C) No.16467 of 2006 it was

contended that though in the former judgment the petitioner hotels

therein were granted liberty to file representations before the State

Government and in the later judgment the petitioner was granted liberty

to approach the appropriate authority, CESU has not received any

communication from any authority to categorize the petitioner under

Industrial Tariff Category Consumers. It was specifically contended that

the State Government has also not issued any direction to the CESU to

take further action for extending the benefit of IPR-2001 and to bill the

petitioner at Industrial Tariff Category rate. So far as letter of opposite

party no.3-Superintending Engineer, Electrical Circle, Cuttack dated

21.8.2006 at Annexure-3 is concerned, it was contended on behalf of the

CESU that not only the said letter was internal official correspondence

between opposite party no.3-Superintending Engineer, Electrical Circle,

 26
Cuttack and opposite party no.4-Executive Engineer-Cum-Manager

(Electrical), City Distribution Division No.1, Ranihat, Cuttack and not

communicated to the petitioner, but also opposite party no.3-

Superintending Engineer, Electrical Circle, Cuttack modified the order by

communication dated 31.8.2006 at Annexure-C/4. Learned counsel for

the CESU in course of his argument reiterated and elaborated the

averments made in the counter affidavit filed on behalf of opposite party

nos.2 to 4.

11. Learned counsel for opposite party no.5 also reiterated the

averments made in the counter affidavit filed by the OERC. In course of

hearing, it was categorically submitted by the learned counsel for opposite

party no.5 that so far as the present petitioner is or hotels generally are

concerned, the OERC has not passed any order for classification or

reclassification under Regulation 80 of the OERC Code, 2004.

12. Before considering issues raised in the case, it is necessary to

bear in mind that petitioner has approached this Court upon receipt of

disconnection notice dated 7.8.2007 at Annexure-1. Petitioner’s claim is

confined to concessions as per IPR-2001. It has been specifically averred

by opposite parties 2 to 4 in the counter-affidavit that in the meanwhile

energy bills for the period from January,1999 till September,2007 has

also been revised raising demand from the petitioner at the rate

applicable to General Purpose Tariff Category. Therefore, controversy in

the writ petition is confined to entitlement of the petitioner to the benefit

 27
of concessional rate of tariff till IPR-2001 was in force and substituted by

IPR-2007.

13. As has been pointed out by the Hon’ble Supreme Court in

Kusumam Hotels(P) Ltd. –v- Kerala State Electricity Board and

others(supra) liability to pay electricity charges is a statutory liability and

its consequences are provided in the statute.

14. Legal issue involves in Kusumam Hotels(P) Ltd. –v- Kerala

State Electricity Board and others(supra) was whether Kerala

Government could withdraw concessions in electricity tariff already

granted, and that too, retrospectively. Facts in brief in the case has been

summarized in the report as follows:

“When the Central Government declared tourism as an

industry, the Kerala Government extended certain
concessions to the tourism industry, including concessions
in electricity tariffs. The respondent Electricity Board was
not in a position to afford these concessions, and therefore
took a decision on 11.10.1999 that institutions which were
already enjoying industrial tariffs prior to 15.5.1999 on the
basis of certificate issued by Director of Tourism would
continue to enjoy this concession until further orders,
subject to decision of the Government on payment of
subsidy. However, from 15.5.1999 onwards, fresh
applications for grant of industrial tariff would not be
sanctioned. Thereafter, the Kerala Government issued G.O.
dated 26.9.2000 restricting the period of tariff concession to
five years only including the period for which the
concession had already been availed prior to 15.5.1999.”

15. While allowing the appeal, Hon’ble Supreme Court held, inter

alia, as follows:

“Tourism was declared to be an industry. The wide

range of concessions as noticed hereinbefore, inter alia,
covered electricity and water charges. It is not a case where
some exemptions or concessions were to be given for a
specific period or as a one-time measure. No time-limit was
 28
fixed for applicability in respect of the policy decisions.
Pursuant thereto long-term investments might have been
made. It is not based on a principle of giving benefit with a
view to facilitate the initial growth of the industry. It was
not based on any formula or criteria to evaluate the
realization of the object of grant of such concession over a
period. It was an open-ended offer. It must, therefore, be
held that the Government was satisfied that the need was
to grant concession if not permanently, at least for a long
time.”(para-18)

“There cannot be any doubt whatsoever that a policy

decision can be reviewed from time to time. It is also
beyond any doubt that the concessions granted can be
withdrawn in public interest.”(para-19)

“Indisputably, the State is also entitled to change or

alter the economic policies. The appellants do not have any
vested right to enjoy the concessions granted to them
forever, particularly when the Board is constituted and
incorporated under the provisions of the Electricity(Supply)
Act,1948. Any policy decision adopted by the State would
not be binding on the Board save and except provided for in
the Act. The Board being an independent entity, the duties
and functions of the Board vis-à-vis the State are
enumerated in the Act. The Board, however, would be
bound by any direction issued by the State Government on
the questions of policy. A dispute which may arise as to
whether a question is or is not a question of policy involving
public interest, the Central Government is the final arbiter.
The policy decision adopted by the State on the basis
whereof the Board felt obliged to grant electrical connection
in favour of the appellants on the basis of industrial tariff
must, therefore, be understood in the context of Section 78-
A of the 1948 Act. What is binding on the Board is the
policy of the State. The direction of the State was to apply a
particular category of tariff to the appellants. Such
directions could have been withdrawn while making
another tariff. The State indisputably has the power to
grant subsidy from its own coffers instead of directing the
Board to grant concession.”(para-20)

“It is now a well-settled principle of law that the

doctrine of promissory estoppel applies to the State. It is
also not in dispute that all administrative orders ordinarily
are to be considered prospective in nature. When a policy
decision is required to be given a retrospective operation, it
must be stated so expressly or by necessary implication.
The authority issuing such direction must have power to do
so. The Board, having acted pursuant to the decision of the
State, could not have taken a decision which would be
violative of such statutory directions.”(para-21)
 29
“15.5.1999 was fixed as the cut-off date by the
Board. It, by itself, could not have done so. But the State
for issuing the G.O. dated 26.9.2000 could have fixed the
said cut-off date on its own. Although we do not agree that
by granting retrospectivity to the said order, the entirety of
the government order should be set aside, or the same per
se would be held to be unreasonable, but what we mean to
say is that it could be given effect to only from the date of
the order i.e. prospectively and not from an anterior date
i.e. retrospectively.”(para-22)

“We are not concerned with the exercise of a

statutory power in this case. We are concerned with
issuance of a direction by the State which is binding on the
Board as also how and to what extent it can be
rescinded.”(para-30)

Upon reference to a plethora of earlier decisions, it was further

held :-

“The law which emerges from the above discussion is

that the doctrine of promissory estoppel would not be
applicable as no foundational fact therefore has been laid
down in a case of this nature. The State, however, would
be entitled to alter, amend or rescind its policy decision.
Such a policy decision, if taken in public interest, should be
given effect to. In certain situations, it may have an impact
from a retrospective effect but the same by itself would not
be sufficient to be struck down on the ground of
unreasonableness if the source of power is referable to a
statute or statutory provisions. In our constitutional
scheme, however, the statute and/or any direction issued
thereunder must be presumed to be prospective unless the
retrospectivity is indicated either expressly or by necessary
implication. It is a principle of the rule of law. A
presumption can be raised that a statute or statutory rule
has prospective operation only.”(para-36)

“The State of Kerala in this case did not grant any

concession by itself. The Central Government took a larger
policy of treating tourism as an industry. A wide range of
concessions were to be granted by way of one-time
measure; some of them, however, had a recurring effect. So
far as grant of benefits which were to be recurring in nature
is concerned, the State exercises its statutory power in the
case of grant of exemption from payment of building tax
wherefor it amended the statute. It issued directions which
were binding upon the Board having regard to the
provisions contained in Section 78-A of the 1948 Act. The
Board was bound thereby. The Board, having regard to its
financial constraints, could have brought its financial
stringency to the notice of the State. It did so. But the
 30
State could not have taken a unilateral decision to take
away the accrued or vested right. The Board’s order dated
11.10.1999 in law could not have been given effect to. The
Board itself kept the said notification in abeyance by reason
of the order dated 8.11.1999.”(para-37)

“The appellants, indisputably, continued to derive

the benefits in terms of the original order. They obtained
certificates of classification. It is in the aforementioned
context, the question as regards construction of the
impugned Notification dated 26.9.2000 arises. Ex facie, the
said policy decision could not be given a retrospective effect
or retroactive operation. The State was not exercising the
power under any statutory to grant or withdraw the
concession. It was exercising its statutory power of issuing
direction. It is, therefore, a statutory authority(sic). The
1948 Act does not authorize the state to issue direction
with retrospective effect. The Board, therefore, could only
give prospective effect to such directions in absence of any
clear indication contained therein. By reason of withdrawal
of concession with retrospective effect, the accrued right of
the appellants had been affected.”(para-38)

“We, therefore, are of the opinion that the impugned

G.O. dated 26.9.2000 must be held to have a prospective
operation and not a retrospective operation. That view
would save it from being vulnerable to the challenge of
being hit by Article 14 of the Constitution of India.”(para-
40)

16. Thus, upon reference to Section 78-A of the

Electricity(Supply) Act,1948, it has been laid down by the Hon’ble

Supreme Court that the State is entitled to change or alter economic

policies. The beneficiaries do not have any vested right to enjoy the

concessions granted to them forever, particularly when the Electricity

Board is constituted and incorporated under the provisions of the

Electricity(Supply) Act,1948. The Board being an independent entity, the

duties and functions of the Board vis-à-vis the State are enumerated in

the said Act. The Board would be bound by any direction issued by the

State Government on the questions of policy. With regard to the dispute

which may arise as to whether a question is or is not a question of policy

 31
involving public interest, the Central Government is the final arbiter. The

policy decision adopted by the State on the basis whereof the Board felt

obligated to supply electricity in favour of the consumer at industrial

tariff rate must, therefore, be understood in the context of Section 78-A of

the 1948 Act. What is binding on the Board is the policy of the State. The

direction of the State was to apply a particular category of tariff to the

consumer. Such directions could have been withdrawn while making

another tariff. The State indisputably has the power to grant subsidy from

its own coffers instead of directing the Board to grant concession.

17. In Pepsico India Holdings Private Limited –vs- State of

Kerala and others: (2009)13 SCC 55, Kusumam Hotels(P) Ltd. –v-

Kerala State Electricity Board and others (supra) has been referred to

and it has been reiterated that it is now well settled principle of law that

doctrine of promissory estoppels applied to the State. In this case, the

dispute between the State authorities and the appellant was with regard

to the meaning and import of the term “effective steps” for acquiring or

placing firm orders for the purchase of the necessary plant and machinery

for being entitled to exemption under notification dated 3.11.1993 issued

under industrial policy of State of Kerala. In allowing the appeal, it was

held by the Hon’ble Supreme Court that the exemption notification was

issued for the purpose of achieving the economic growth in the State, and

the circumstances indicating taking of ‘effective steps’ by the appellant

including commencement of commercial production prior to stipulated

cutoff date were elaborately taken note of. Hon’ble Supreme Court also
 32
referred to some of its earlier decisions dealing with construction of

exemption notifications. It was pointed out:-

“53. An exemption notification and a notification withdrawing

the benefit granted stand on different footings. For the said
purpose, the industrial policy is required to be kept in mind. It
must also be taken into consideration for the purpose of
construing the exemption notification. In A.P.Steel Re-Rolling
Mill Ltd. v. State of Kerala : (2007) 2 SCC 725 this Court held:

“32. The general principles with regard to construction of

exemption notification are not of much dispute. Generally,
an exemption notification is to be construed strictly, but
once it is found that the entrepreneur fulfils the
conditions laid down therein, liberal construction would
be made.

34. A question as to whether, in a given situation, an

entrepreneur was entitled to the benefit under an
exemption notification or not, thus would depend upon
the facts of each case. A bare perusal of the Notification
dated 6.2.1992 issued by the first respondent would show
that the purport and object thereof was to grant benefit of
a concessional power tariff which came into force on and
from 1.1.1992. The phraseology used in the said
notification postulates that the benefit was to be granted
in regard to the ‘enhanced power tariff’. Thus, where the
new units had started production between 1.1.1992 and
31.12.1996, such exemption was available to the
entrepreneurs.”

54. Yet again in U.P.Power Corpn. Ltd. v.Sant Steels & Alloys(P)
Ltd: (2008) 2 SCC 777 it was opined:

“24. Learned Senior Counsel invited our attention to a

decision of this Court in State of Punjab v. Nestle India
Ltd.: (2004) 6 SCC 465 in which a representation was
made by the Government in the manner dehors the Rules
but a statement was made by the Finance Minister in his
Budget speech for 1996-1997 making representation to
the effect that the State Government had abolished
purchase tax on milk. The manufacturers of milk
products, therefore, were not paying the purchase tax on
milk for Assessment Year 1996-1997 and mentioned this
fact in their returns. The taxing authority entertained
such returns. The manufacturers passed on the benefit of
exemption to the dairy farmers and mill producers.
However, after expiry of the said assessment year, the
Government took a decision not to abolish purchase tax
on milk and the taxing authority therefore raised a
demand for Assessment Year 1996-1997. On these facts,
the Court held that in absence of proof of any overriding
public interest rendering the enforcement of estoppel
against the Government was inequitable, notwithstanding
that no exemption notification as required by the statute
 33
was issued. It was held that the State Government cannot
resile from its decision to exempt milk and raise a demand
for the aforesaid assessment year. However, the same
principle of estoppel was not invoked after Assessment
Year 1996-1997. The Court enforced the principle of
estoppel. All the earlier cases on the subject were
reviewed by the Court and ultimately it was concluded as
follows:

‘47. The appellant has been unable to establish any

overriding public interest which would make it inequitable
to enforce the estoppel against the State Government. The
representation was made by the highest authorities
including the Finance Minister in his Budget Speech after
considering the financial implications of the grant of the
exemption to milk. It was found that the overall benefit to
the State’s economy and the public would be greater if the
exemption were allowed. The respondents have passed on
the benefit that exemption by providing various facilities
and concessions for the upliftment of the milk produces.
This has not been denied. It would, in the circumstances,
be equitable to allow the State Government now to resile
from its decision to exempt milk and demand the
purchase tax with retrospective effect from 1.4.1996 so
that the respondents cannot in any event readjust the
expenditure already made. The High Court was also right
when it held that the operation of the estoppel would come
to an end with the 1997 decision of the Cabinet. ”

55. It was furthermore observed in Sant Steels Case:

“35. In this 21st century, when there is global economy,

the question of faith is very important. The Government
offers certain benefits to attract the entrepreneurs and the
entrepreneurs act on those beneficial offers. Thereafter,
the Government withdraws those benefits. This will
seriously affect the credibility of the Government and
would show the short-sightedness of governance.
Therefore, in order to keep the faith of the people, the
Government or its instrumentality should abide by their
commitments. In this context, the action taken by the
appellant Corporation in revoking the benefits given to the
entrepreneurs in the hill areas will sadly reflect their
credibility and people will not take the word of the
government. That will shake the faith of the people in the
governance. Therefore, in order to keep the faith and
maintain good governance it is necessary that whatever
representation is made by the Government or its
instrumentality which induces the other party to act, the
Government should not be permitted to withdraw from
that. This is a matter of faith.””

18. In order to appreciate the law laid down in Kusumam

Hotels(P) Ltd. –v- Kerala State Electricity Board and others(supra), it

 34
is necessary to refer to the provisions under Section 78-A of the

Electricity(Supply) Act,1948 which reads as follows:

“Directions by the State Government – (1) In the discharge of

its functions, the Board shall be guided by such directions on
questions of policy as may be given to it by the State
Government.

(2) If any dispute arises between the Board and the State
Government as to whether a question is or is not a question of
policy, it shall be referred to the Authority whose decision
thereon shall be final.”

19. Legal position with regard to obligation cast on a State

Regulatory Commission to abide by directions on question of policy as

may be given by the State Government has not changed even after

provisions under Section 78-A of the Electricity (Supply) Act,1948 ceased

to remain in force. Provisions similar to Section 78-A of the 1948 Act

were incorporated in the Orissa Electricity Reform Act,1995 as well as

Electricity Act,2003.

20. Section 12 of the Orissa Electricity Reform Act, 1995 reads as

follows:

“General Powers of the State Government- (1) The State

Government shall have the power to issue policy directives
on matters concerning electricity in the State including the
overall planning and coordination and all such policy
directives shall be consistent with the objects sought to be
achieved by this Act.
(2) If any dispute arises between the Commission
and the State Government as to whether a question is or is
not a question of policy, it shall be referred to the Central
Electricity Authority whose decision thereon shall be final
and binding and for this purpose the Central Electricity
Authority may appoint one or more of its members to act on
behalf of the said authority.
(3) The State Government shall be entitled to issue
policy directives, concerning the subsidies to be allowed for
supply of electricity to any class or classes or persons or in
respect of any area in addition to the subsidies permitted
 35
by the Commission while regulating and approving the tariff
structure.
Provided that the State Government shall pay the
amount to compensate any concerned body or unit affected
by the grant of subsidies by the State Government to the
extent the subsidies granted.”

Thus, the above provisions make a distinction between policy directives in

general under Sub-section(1) and policy directives concerning subsidies

under Sub-section (3). Dispute between OERC and State Government as

to whether a question is or is not a question of policy was provided to be

decided by Central Electricity Authority.

21. Section 108 of the Electricity Act,2003 provides in

unequivocal terms that Electricity Regulatory Commission is bound to be

guided by directions in matters of policy involving public interest as the

State Government may give and in case of dispute decision of the State

Government shall be final. Section 108 of the Electricity Act, 2003 does

not contain any provision with regard to grant of subsidy. Section 108 of

the Electricity Act,2003 reads as follows:

“Directions by the State Government.- (1) In the discharge

of its functions, the State Commission shall be guided by
such directions in matters of policy involving public interest
as the State Government may give to it in writing.
(2) If any question arises as to whether any such
direction relates to a matter of policy involving public
interest, the decision of the State Government thereon shall
be final.”

22. Separate provision has been made in the Electricity Act, 2003

with regard to grant of subsidy by the State Government. Section 65 of

the Electricity Act, 2003 reads as follows:

“Provision of subsidy by State Government.- If the State

Government requires the grant of any subsidy to any
consumer or class of consumers in the tariff determined by
 36
the State Commission under section 62, the State
Government shall, notwithstanding any direction which may
be given under section 108, pay, in advance and in such
manner as may be specified, the amount to compensate the
person affected by the grant of subsidy in the manner the
State Commission may direct, as a condition for the licence
or any other person concerned to implement the subsidy
provided for by the State Government.
Provided that no such direction of the State
Government shall be operative if the payment is not made in
accordance with the provisions contained in this section and
the tariff fixed by the State Commission shall be applicable
from the date of issue of orders by the Commission in this
regard.”

23. Distribution licensees also perform statutory functions and,

therefore, cannot do anything which it cannot do under the provisions of

law. This Court has held in Ajay Kumar Agrawal –vs- OSFC & Ors: AIR

2007 Orissa 37:

“xxxx electricity, being a public property, its supply is

controlled by the statute. Therefore, elements of public law
govern the situation at the stage of supply. Under such
circumstances, WESCO as a distribution licensee is clothed
with the status of a State under Art.12 of the Constitution of
India since it is to discharge preeminently governmental
function, namely, supply of power to industries. In such a
situation, the WESCO cannot act like a “public giver”. It
cannot act its caprice, whims or fancy nor can it, taking
advantage of its monopoly status, exact an amount which it
cannot do under the provision of law. If the Court, ignoring
the provision of the said Act, permits WESCO to realise the
amount which is contemplated under Clause 9 of its
purported agreement dated 28.11.2001 then the Court would
be permitting WESCO, a State under Art.12 to flout the
provisions of the said Act and to enrich itself by virtue of its
superior bargaining position through a method, not
contemplated under law and therefore prohibited by law.
Here, the silence of the statute would amount to a
prohibition, otherwise it amounts to an exaction of a sum
from a consumer who is under no legal obligation to pay the
same. That would amount to deprivation of one’s property
without authority of law. Thus the Constitution’s mandate
under Art.300A would be breached. Article 300A runs as
follows:
 37
“300A. Persons not to be deprived of property save by
authority of law.- No person shall be deprived of his property
save by authority of law.”

24. Section 108 of the Electricity Act, 2003 not only mandates

that in the discharge of its functions, the State Electricity Commission is

to be guided by directions issued by the State in matters of policy

involving public interest, but also recognizes the dominant position of the

State Government in deciding as to whether any direction issued by the

State Government relates to a matter of policy involving public interest.

In other words, in the matter of policy involving public interest, decision

of the State Government is final. All the instrumentalities of the State are

required to speak with one voice. In Vadilal Chemicals Ltd. –vrs.- State

of Andhra Pradesh and others : (2005) 142 STC 76 SC which also dealt

with the issue relating to incentive by way of deferment/ tax holiday on

sales tax to new industrial units, the Hon’ble Supreme Court held that

the State, which is represented by the departments, can only speak with

one voice.

25. In the present case, it is not disputed that the petitioner as a

hotel was entitled to avail power at industrial rate of tariff as a matter of

industrial policy of the State as provided under IPR-1996 and IPR-2001.

Paragraph-1 of the written note of submissions filed on behalf of opposite

party no.1-State of Odisha reads as follows:

“Hotel is not an Industry as understood in its ordinary

sense. However, to boost the growth of Tourism in Orissa
Hotels, Motels, Transport services, Aero sports, Water sports,
Health Resorts, Tourism Camps etc. are extended certain
incentives under the Industrial Policy Resolutions issued by
the State Govt. since 1986. Such incentives are revised/
expanded/ abridges in different IPRs. In the IPR of 1996,
 38
made effective from 1.3.1996, also certain incentives were
extended for the Tourism related activities.”

Nature of concession granted to the hotels under IPR-1996 in Paragraphs

16, 22.2 and 23.1 have already been extracted above at paragraph 9.2.

26. It is also not disputed that Orissa State Electricity Board as

well as Grid Corporation of Orissa Limited, the entities which regulated

electricity supply earlier, allowed the petitioner hotel to avail power at the

industrial rate of tariff. Learned Special Counsel for the State has placed

on record the order dated 14.5.1996 of Grid Corporation of Orissa

Limited, which is at Annexure-4 to the written note of submissions filed

by the learned Special Counsel for the State, with regard to

implementation of IPR-1996 wherein paragraphs 16.2 and 22.2 of IPR-

1996 have been reiterated. The CESU itself by letter dated 21.8.2006 at

Annexure-3 to the writ petition issued by oppoiste party no.3

Superintending Engineer, Electrical Circle, Cuttack to the Manager, City

Distribution Division No.1, Ranihat, Cuttack has given out that Medium

Industries rate of tariff shall be applicable to the petitioner and continue

after execution of fresh agreement with retrospective effect from January,

1999. As late as in the year 2006, District Industries Center, Cuttach,

which is an organ of the Department of Industries of the State

Government, has issued letter dated 5.9.2006 at Annexure-5 to the

distribution licensee stating that the petitioner is entitled to avail

Industrial Tariff concession. The letter at Annexure-5 reads as follows:

“To
The Executive Engineer (Elec.),
CESCO, Cuttack Distribution Division,
No.(I), Ranihat, Cuttack.
 39
Sub:- Grant of Industrial Tariff concession in
favour of M/s Dwaraka Resorts(P) Ltd.,
Bajrakabati Road, Cuttack-1.
Sir,
On the above subject, I am to say that, M/s.
Dwaraka Resorts (P) Ltd., Bajrakabati Road, Cuttack is a
registered unit under this D.I.C. The captioned unit has
availed Industrial Tariff concession and entitled to avail
same as per provision made under IPR-1996, even if
enhancement of existing load.
This is for your information and needful action.
Yours faithfully,
Sd/-
General Manager,
D.I.C., Cuttack.

xx xx xx xx xx xx xx xx xx xx xx xx xx xx”

27. Concession in the tariff rate granted to the hotels under IPR-

1996 and IPR-2001 has, thus, not been withdrawn by the State

Government till IPR-2001 was in force. Obviously, in the present case, the

question before the Court is not a case of withdrawal of exemption or

concession by the State Government. State Government has made it clear

that concession granted to Hotels under IPR-2001 has not been abridged,

modified or altered. As has been pointed out in Kusumam Hotels(P) Ltd.

–v- Kerala State Electricity Board and others (supra), therefore, the

policy decision adopted by the State on the basis of which the electricity

licensee is obliged to grant tariff concession in favour of the petitioner on

industrial rate must be understood in the context of Section 108 of the

Electricity Act, 2003. There being no doubt that the petitioner was

entitled to concessional rate of tariff as a matter of policy of the State

involving public interest, even the State Government has no authority to

deny the petitioner to such concession in an arbitrary manner or

retrospectively.
 40
28. Reliance is being placed on the observations of the OERC at

paragraphs 5.5.1 and 5.5.2 of the tariff order dated 22.3.2005 at

Annexure-7 to the writ petition by the CESU to justify denial of

concession contemplated in the IPR to the petitioner. A close look on

such observation, extracted at paragraph 5 above, does not support the

contention. The very observation at paragraph 5.5.1 to the effect that ‘the

purpose of classification by Industries Department and other departments

of Govt. are for different purposes like preferential treatment in financing,

taxes, etc. which have no relevance for determining price of electricity”

shows that while making observation at paragraph 5.5.1 of the order at

Annexure-7, the OERC did not consider the policy direction of the State

for treating the hotels as industrial activities so as to be entitled to power

at industrial rate.

29. So far as observation at paragraph 5.5.2 (a) is concerned

having referred to the request of the representative of the Government of

Orissa that hotels should be classified under the industrial category, it

has simply been observed by the OERC that for the purpose of

applicability of electricity tariff the classification of an electricity consumer

as prescribed in OERC Code, 2004 is only applicable. Such observation

can neither be construed to be an observation negating the entitlement of

hotels to avail electricity at industrial rate of tariff nor can such

observation be construed to be contrary to the policy direction of the State

issued under Section 108 of the Electricity Act, 2003. Observation at

paragraph 5.5.2 (a) of the OERC at Annexure-7 reveals that a request was
 41
made to classify hotels under the industrial category. The OERC felt that

such reclassification is not necessary. There is no reference to the

industrial policy of the State containing direction to the effect that hotels

are entitled to have power at the industrial rate of tariff. The policy was

not to classify the hotels as industries. But, the hotels were to be treated

as industrial activities for the purpose of availing the concessional rate of

tariff at the industrial rate. At paragraph 10 of the written submissions

filed by the learned Special Counsel the stand of the State Government

has been categorically stated as follows:

“That as per the IPR-1996 followed by IPR-2001, the Hotels

are to be treated as ‘Industrial Activity’ and to be charged @
tariff applicable to Industries.”

30. Not only in case of dispute between the OERC and the State

as to whether any direction of the State relates to a matter of policy

involving public interest, decision of the State is final, but also provisions

under the OERC Code, 2004 as well as provisions of any other Act or

Rules or Regulations will have no effect in so far as it is inconsistent with

the provisions of the Electricity Act, 2003. Section 174 of the

Electricity Act, 2003 provides that the Act shall have overriding effect. It

reads:

“Act to have overriding effect.- Save as otherwise provided

in section 173, the provisions of this Act shall have effect
notwithstanding anything inconsistent therewith contained
in any other law for the time being in force or in any
instrument having effect by virtue of any law other than this
Act.”

31. In spite of coming into force of Electricity Act, 2003, in view of

provision under Section 185 (3) of the Electricity Act, 2003, the provisions
 42
of the Orissa Electricity Reform Act, 1995, not inconsistent with the

provisions of the Electricity Act, 2003 shall apply to the State of Orissa.

Also, all directives issued by the State Government under the Orissa

Electricity Reform Act, 1995 shall continue to apply for the period for

which such directions were issued by the State Government. Provisions

under Section 185 of the Electricity Act, 2003, inter alia, read as follows:

“Repeal and saving.- (1) Save as otherwise provided in this

Act, the Indian Electricity Act, 1910 (9 of 1910), the
Electricity (Supply) Act, 1948 (54 of 1948) and the Electricity
Regulatory Commissions Act, 1998 (14 of 1998) are hereby
repealed.
(2) Notwithstanding such repeal,-
(a) xx xx xx xx xx xx xx xx xx xx xx xx xx
(b) xx xx xx xx xx xx xx xx xx xx xx xx xx
(c) xx xx xx xx xx xx xx xx xx xx xx xx xx
(d) xx xx xx xx xx xx xx xx xx xx xx xx xx
(e) all directives issued, before the
commencement of this Act, by a State Government under the
enactments specified in the Schedule shall continue to apply
for the period for which such directions were issued by the
State Government.
(3) xx xx xx xx xx xx xx xx xx xx xx xx xx xx xx xx xx
(4) xx xx xx xx xx xx xx xx xx xx xx xx xx xx xx xx xx
(5) xx xx xx xx xx xx xx xx xx xx xx xx xx xx xx xx xx”

It has already been pointed out that enactments under the Schedule to

the Electricity Act, 2003 specifies the Orissa Electricity Reform Act, 1995

at serial no.1. It is needless to observe that directives under IPR-1996 and

IPR-2001 with regard to concessional tariff to the Tourism related

activities at the industrial rate were issued as policy directives in exercise

of power under Section 12 (1) of the Orissa Electricity Reform Act, 1995.

32. Decisions of this Court in W.P.(C) No.266 of 2008 and batch

of other writ petitions as well as in W.P.(C) No.16467 of 2006 also in no

manner affect the right of the petitioner to claim benefit of concession to

 43
have power at industrial rate of tariff. The petitioner was not a party to

W.P.(C) No.266 of 2008 or any of the batch of writ petitions in which

common judgment dated 28.6.2013 was passed. In the said judgment

referring to directives under IPR-2007 it was observed that since the

hotels shall not be eligible for any fiscal incentive other than land at

concessional industrial rate, no such concession was extended to the

tourism sectors as per the said IPR. Be that as it may, the writ petitions

were disposed of, not on merit, but with an observation that the

petitioners therein may file appeal challenging the order passed by the

OERC or may make representation(s) to the State Government to provide

them incentives taking into consideration the development of tourism

sectors of the State. Similarly, while disposing of W.P.(C) No.16467 of

2006 by order dated 11.5.2007 petitioner’s claim of entitlement to have

power at industrial rate was not decided on merit and liberty was granted

to the petitioner to approach the appropriate authority to charge it under

Medium Industrial Tariff Category. Disconnection notice dated 7.8.2007

at Annexure-1 having been issued soon thereafter the petitioner has filed

this writ petition on 31.8.2007. While issuing notices in the present writ

petition by order dated 6.9.2007, this Court has passed interim order

directing maintenance of status quo with regard to electric power supply

to the petitioner. The petitioner has approached this Court assailing

demand of electricity tariff under General Purpose Category as arbitrary

and without jurisdiction. The matter is pending in Court since 2007.

Specific stand has been taken by the State that the petitioner is entitled

to concessional rate of electricity tariff under IPR-1996 and IPR-2001 as a

 44
matter of policy directives of the State Government involving public

interest in exercise of power under Section 12 of the Orissa Electricity

Reform Act, 1995 and Section 108 of the Electricity Act, 2003. In such

view of the matter, there appears no cogent reason to direct the petitioner

to approach the authorities or to exhaust the alternative statutory

remedies at this stage.

33. Learned Special Counsel appearing for the State in course of

his argument urged that in case the OERC disputed that IPR-2001 is a

policy decision not in public interest, the dispute should have been

referred to the State Government for final decision as contemplated under

Section 108(2) of the Electricity Act, 2003 and the present case may be

disposed of giving direction to the State Government to decide the

dispute. However, reference of the dispute to the State at this stage when

IPR-2001 is no longer in force shall be absolutely of no purpose in view of

settled legal position. As has been laid down in Kusumam Hotels(P)

Ltd. –v- Kerala State Electricity Board and others (supra) concession

granted subsequent upon the policy directives of the State either under

Section 12(1) of the Orissa Electricity Reform Act, 1995 or under Section

108(1) of the Electricity Act, 2003 cannot be withdrawn with retrospective

effect. That is another reason why there is no scope for directing the

petitioner to approach the authorities or the State Government for

allowing continuance of benefit which the petitioner used to avail under

the prevailing IPRs.

 45
34. By setting up the plea of non-granting of subsidy by the State

Government as a ground to deny the benefit of having power at

concessional rate to the petitioner, the CESU and OERC appear to have

made malfusion between the provisions under sub-Section (1) of Section

12 of the Orissa Electricity Reform Act, 1995 and Section 108 of the

Electricity Act, 2003 on the one hand and sub-Section (3) of Section 12 of

the Orissa Electricity Reform Act, 1995 and Section 65 of the Electricity

Act, 2003 on the other. The State Government has made its stand clear

that the policy decision of the State was to provide power to the Tourism

related activities at the rate of industrial tariff. At paragraph 6 of the

counter affidavit filed on behalf of opposite party no.1 the State

Government it has been averred:

“That in IPR-96, or in IPR-2001, the State Government had

not made any provision for bearing the differential amount
between industrial and commercial rate of tariff if the hotels
are to be treated as industrial activity. Now also it is not
possible for the State Government to pay the differential
tariff to the licensing companies with a view to ensure power
supply to the hotels at industrial rates in view of the present
economic condition of the State. Xx xx xx xx xx”.

At paragraph 2 of the written note of submissions submitted by the

learned Special counsel appearing for the State Government it has been

contended:

“xx xx xx xx xx xx xx there was no policy that the State

Government shall reimburse/subsidize the differential cost
of tariff between the Commercial rate and Industrial rate to
the Hotels or to the authority supplying electricity.”

35. Such being the stand of the State Government, as provided

under sub-Section (2) of Section 108 of the Electricity Act, 2003, decision

of the State Government is undoubtedly final. The State Government has

 46
taken stand that policy decision for grant of concessional rate of tariff to

hotels issued in exercise of power under Section 12(1) of the Orissa

Electricity Reform Act,1995 has not been altered, amended or rescinded

during the period in which IPR-2001 was in force. As has been observed

in Kusumam Hotels(P) Ltd. –v- Kerala State Electricity Board and

others (supra) direction of the State was to apply a particular category of

tariff to the petitioner. Such direction could have been withdrawn by the

State. The State indisputably has the power to grant subsidy from its own

coffers instead of directing to grant concession (paragraph 20). The

licensee (i.e. CESU in this case) having regard to its financial constraints,

could have brought its financial stringency to the notice of the State

(paragraph 37). The CESU could have moved the State for grant of

subsidy. Denial of entitlement of having power at concessional rate of

industrial tariff to the petitioner, without withdrawal of the directive of the

State Government under the IPR, that too at a belated stage on the eve of

coming into force of IPR-2007, is not sustainable.

36. For the reasons stated above, notice at Annexure-1 issued by

the CESU is held to be without jurisdiction and illegal. Accordingly,

notice at Annexure-1 is quashed. It is held that the petitioner is entitled

to have power at industrial rate for the entire period till IPR-2001 was in

force.

37. The writ petition is, accordingly, disposed of.

…………………..
B.K. Patel, J.
Orissa High Court, Cuttack
Dated 23rd December,,2014/Palai