IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 7818 of 2008(E)
1. SR.ANNIE,MANAGER.ST.CHARLES CONVENT
2. SR.JESSY MARIA,MANAGER
1. KERALA STATE ELECTRICITY BOARD
2. THE ASSISTANT ENGINEER
3. THE ASSISTANT ENGINEER
4. THE ASSISTANT ENGINEER
5. THE PRINCIPAL SECRETARY TO GOVERNMENT
6. THE KERALA STATE ELECTRICITY
For Petitioner :SRI.WILSON URMESE
For Respondent :SRI.T.K.KUNHABDULLA
The Hon'ble MR. Justice K.M.JOSEPH
O R D E R
K. M. JOSEPH, J.
-------------------------------------------------------------- WRIT PETITIONS (CIVIL) NOS.
7818/2008-E, 16488/2008-K, 19622/2008-J, 7781/2008-B, 7777/2008-A, 7137/2008-Y, 7138/2008-Y, 10267/2008-V, 10372/2008-I, 10474/2008-V, 10545/2008-E, 10492/2008-Y 10618/2008-L, 7255/2008-L, 7167/2008-C, 7166/2008-C, 8005/2008-C, 8008/2008-C, 4802/2008-V, 6692/2008-V, 6341/2008-E, 6016/2008-N, 6032/2008-R, 6181/2008-J 6182/2008-J, 5370/2008-L, 6524/2008-B, 6495/2008-W, 6530/2008-B, 6659/2008-P, 6547/2008-D, 6492/2008-W, 6678/2008-T, 6852/2008-N, 5035/2008-Y, 7695/2008-N 7286/2008-P, 7377/2008-C, 5077/2008-D, 5098/2008-F, 7226/2008-I, 7428/2008-H, 6860/2008-Y, 6902/2008-V, 6980/2008-E, 7004/2008-H, 7008/2008-H, 7067/2008-N 7602/2008-E, 7598/2008-D, 8354/2008-T, 8375/2008-V, 8404/2008-A, 8432/2007-D, 8452/2008-F, 8467/2008-G, 8087/2008-K, 8196/2008-A, 9993/2008-M, 9066/2008-D 9067/2008-D, 9118/2008-I, 9809/2008-P, 9810/2008-P, 8758/2008-P, 8769/2008-R, 8718/2008-K, 9136/2008-K, 9101/2008-H, 8940/2008-L, 9149/2008-L, 9096/2008-G 9929/2008-F, 8604/2008-Y, 8498/2008-J, 9104/2008-H, 9261/2008-C, 9685/2008-C, 9950/2008-H, 10226/2008-P, 10037/2008-T, 10036/2008-T, 10038/2008-T, 10436/2008-P, 10403/2008-L, 10266/2008-V, 14066/2008-Y, 14053/2008-W, 14961/2008-F, 15125/2008-A, 15167/2008-E, 15211/2008-J, 15476/2008-P, 15493/2008-T, 15506/2008-U, 15083/2008-U 10919/2008-Y, 10948/2008-C, 10949/2008-C, 13926/2008-G, WPC.7818/08E & CON.CASES 2
15681/2008-P, 15740/2008-W, 15884/2008-N, 16139/2008-U, 16137/2008-U, 16138/2008-U, 16458/2008-H, 15755/2008-A 17449/2008-B, 15089/2008-U, 14872/2008-U, 7599/2008-D, 5603/2008-P, 3558/2008-W, 12726/2008-M, 17633/2008-Y, 17818/2008-U, 17949/2008-J, 17888/2008-D, 18080/2008-B, 12400/2008-A, 12424/2008-D, 13563/2008-M, 13564/2008-M, 18339/2008-G, 18498/2008-B, 18777/2008-I, 18943/2008-E, 19113/2008-A, 19224/2008-L, 19653/2008-M, 19753/2008-B, 19991/2008-E, 20020/2008-G, 20297/2008-N, 20355/2008-W, 20597/2008-B, 18842/2008-Y, 18843/2008-R, 20728/2008-P, 21400/2008-V, 11823/2008-G, 16557/2008-U, 14887/2008-V, 18840/2008-P, 29531/2008-N, 11402/2008-G, 17812/2008-U, 22224/2008-U, 17810/2008-T, 22097/2008-E, 22919/2008-C, 22597/2008-M, 22403/2008-P, 22409/2008-P, 22456/2008-W, 23145//2008-E, 23409/2008-J, 23250/2008-P, 23487/2008-U, 23686/2008-T, 23740/2008-A, 23807/2008-H, 23983/2008-E, 24008/2008-G, 24187/2008-D, 24266/2008-L, 24058/2008-L, 24425/2008-G, 24733/2008-T, 25610/2008-W, 25699/2008-H, 25446/2008-D, 25548/2008-N, 26217/2008-U, 25976/2008-P, 26453/2008-Y, 26394/2008-P, 26353/2008-K, 26980/2008-J, 26984/2008-K, 27113/2008-C, 27135/2008-E, 27143/2008-F, 27187/2008-J, 27200/2008-K, 27660/2008-P, 28000/2008-G, 28542/2008-W, 29417/2008-B, 29812/2008-Y, 30044/2008-B 30121/2008-J, 28775/2008-A, 29478/2008-H, 29487/2008-I, 29929/2008-K, 29433/2008-D, 29225/2008-D, 29890/2008-G, 28713/2008-R, 29917/2008-J, 28782/2008-B, 23991/2008-F, WPC.7818/08E & CON.CASES 3
30476/2008-C, 30781/2008-M, 20245/2008-I, 25377/2008-U, 14771/2008-H, 29860/2008-D, 28174/2008-D, 18877/2008-V, 1865/2009-V, 33502/2008-L, 33519/2008-M, 33551/2008-T, 33085/2008-L, 32963/2008-Y, 31701/2008-Y, 32157/2008-C, 31062/2008-W, 32148/2008-B, 33564/2008-U, 33893/2008-I, 34612/2008-U, 35012/2008-R, 34516/2008-H, 35319/2008-D, 35493/2008-A, 36292/2008-U, 37436/2008-F, 36758/2008-A, 8/2009-A, 502/2009-I, 546/2009-M, 13440/2008-Y, 1106/2009F, 1567/2009-J, 2153/2009-F, 2256/2009-R, 2651/2009-N, 2641/2009-M, 2642/2009-M, 2944/2009-A, 146/2009-P, 1232/2009-V, 3056/2009-L, 3456/2009-J, 3830/2009-E, 4641/2009-C, 5288/2009 & 4925/09 ------------------------------------------------------------- Dated this the 6th April, 2009
Since common questions arise in these Writ Petitions, they are disposed of by a common Judgment.
2. All the petitioners are running Self-financing Educational Institutions. Some of them are affiliated to the CBSE, some are following the State Syllabus, yet others are Industrial Training Institutions. There are Colleges also. All the petitioners are aggrieved by the classification of "Self-financing WPC.7818/08E & CON.CASES 4
Educational Institutions" under LT VIIA tariff as commercial institutions. The classification has been done by the Kerala State Electricity Regulatory Commission with effect from 1.12.2007. Under this classification, Aided Private Educational Institutions and Government Schools are classified under LT VIA category, while Self-financing Educational Institutions/Hostels fall under LT VII A tariff.
3. I heard the learned counsel appearing on behalf of all the petitioners, led by Shri Kurian George Kannanthanam, (senior counsel), Shri Wilson Urmese, Shri Rajit, Shri Ashik K. Mohammed Ali, Shri Nagaresh, Shri Tom Jose P. and Shri M.A. Thomaskutty, Shri Gangesh, Shri T.P.Ibrahim Khan and Shri Paul K. George. The other counsel appearing for the petitioners have adopted the arguments. I also heard Shri K.P. Dandapani, learned senior counsel appearing on behalf of the Kerala State Electricity Regulatory Commission (hereinafter referred to as the Commission) and Shri C. K. Karunakaran, learned senior standing counsel appearing on behalf of the Kerala State WPC.7818/08E & CON.CASES 5
Electricity Board (hereinafter referred to as the Board).
4. Contentions of the petitioners:
(I) Shri Kurian George Kannanthanam:
The source of revenue cannot be the basis of discrimination between Educational Institutions. In other words, while the source of revenue for a Government School or an Aided Private Educational Institution may be governmental funds and the source of revenue for a Self-financing Educational Institution may be the students, the difference in the source of revenue cannot be a legal and valid basis for discrimination between the two categories. Both Institutions are engaged in imparting of education. Secondly, he contended that this is a case where, even if there may be an alternate remedy under Section 110 of the Electricity Act, 2003 (hereinafter referred to as the Act), in view of the fact that the tariff has been brought into force without affording an opportunity to the petitioners to object to the introduction of the tariff, the tariff order in question is violative of the principles of natural justice. Thirdly, it is WPC.7818/08E & CON.CASES 6
contended that there was no material to decide the matter as was done. He further took me through Section 61 of the Act. Section 61 provides that the Commission shall, subject to the Act, specify the terms and conditions for the determination of the tariff and in doing so, shall be guided by certain principles which are as follows:
"Sec.61. Tariff Regulations.- The Appropriate Commission shall, subject to the provisions of this Act, specify the terms and conditions for the determination of tariff, and in doing so, shall be guided by the following, namely:-
(a) the principles and methodologies specified by the Central Commission for determination of the tariff applicable to generating companies and transmission licensees;
(b) the generation, transmission, distribution and supply of electricity are conducted on commercial principles;
(c) the factors which would encourage
competition, efficiency, economical use of the resources, good performance and optimum investments;
WPC.7818/08E & CON.CASES 7
(d) safeguarding of consumers' interest and at the same time, recovery of the cost of electricity in a reasonable manner;
(e) the principles rewarding efficiency in performance;
(f) multi-year tariff principles;
(g) that the tariff progressively reflects the cost of supply of electricity and also reduces cross- subsidies in the manner specified by the Appropriate Commission;
(h) the promotion of co-generation and generation of electricity from renewable sources of energy;
(i) the National Electricity policy and tariff policy."
He also relied on Section 62(3) of the Act which reads as follows:
"Section 62: Determination of tariff.-
(3) The Appropriate Commission shall not, while determining the tariff under this Act, show undue preference to any consumer of electricity but may differentiate according to the consumer's load factor, power factor, voltage, total consumption of WPC.7818/08E & CON.CASES 8
electricity during any specified period or the time at which the supply is required or the geographical position of any area, the nature of supply and the purpose for which the supply is required." He further contended that even in Self-financing Educational Institutions profiteering is expressly prohibited both by the relevant Statute and also by the decisions of the superior Courts. What is more, he contended, there was no material available to show that there was profiteering by the Self-financing Educational Institutions. He would also contend that the Appellate Tribunal constituted under Section 110 of the Act is located in New Delhi and it may not be characterised as an effective alternate remedy. He has also pointed out that in fact fifty per cent of the students admitted to the Self-financing Educational Institutions were allotted by the Government. He also submitted that all Self-Financing Educational Institutions are treated as one class. (This does not appear to be specifically pleaded.) He relied on the following decisions: 1) Sanjeevi v. State of Kerala (1994 (2) KLT 127 (FB). WPC.7818/08E & CON.CASES 9
2) Padmanabhan v. Kerala State Handloom Development Corpn. (1991 (2) KLT SN 55 Case No.66).
3) Sunny Mathew v. Union of India (1993 (1) KLT SN 17 Case No.23).
4) Agrl. Income Tax & Sales Tax Officer v. Tata Tea Ltd. (2002 (2) KLT 433).
5) Padmanabhan v. Commissioner, HRCE (2007 (3) KLT 617).
(II) Contentions of Shri Wilson Urmese:
He also referred to Sections 61 and 62(3). He contended that there was non-application of mind by the Commission. It is pointed out that the true scope of an Educational Institution was not borne in mind by the Commission. He submitted that the impugned tariff order was irrational. He emphasised that by no stretch of imagination, can an Educational Institution be characterised as a commercial establishment. In this connection, he referred to the decision in M.P. Electricity Board and Others v. Shiv Narayan And Another (2005 (7) SCC 283). "Education", he contended, means essentially imparting of knowledge. It cannot be treated as a trade or as commerce. He WPC.7818/08E & CON.CASES 10
pointed out that he represented also petitioners who were ITI. He pointed out that students coming under the ITI category were generally drawn from the poorer sections. It is further pointed out that the fact that the Educational Institutions were self- financing, should not have led the Commission to take the view that they are doing commercial activities. There is no difference between an Aided Private Educational institution and an Unaided self-financing Educational Institution from the point of view of the energy consumed. He also relied on the following decisions:
1) State of Kerala v. Manoranjan Chakraborty And Others (2001 (10) SCC 740).
2) Pambra Coffee Plantations v. Tahsildar (1991 (2) KLT 833).
3) Alicekutty v. Kadambazhippuram Grama Panchayat (1996 (2) KLT 203).
The decisions which I have referred to, as relied on by Shri Kurian George Kannanthanam and Shri Wilson Urmese, are for establishing the circumstances in which a Writ Petition will lie, WPC.7818/08E & CON.CASES 11
even if alternate remedies exist. They are violation of the principles of natural justice, absence of jurisdiction, violation of fundamental rights, patent illegality, pendency of Writ Petition for a long time, and gross injustice in appropriate cases. (III) Shri N. Nagaresh pointed out that he represented a national Open School, a Vocational ITI, besides a School affiliated to the CBSE. He also relied on Section 62(3) of the Act and posed the question as to whether there could be discrimination between a tax payer and a person who does not pay tax.
(IV) Shri T.P.M. Ibrahim Khan contended that undue preference is shown to the Aided Private Schools and this is violative of Article 14 of the Constitution of India. (V) Shri Thomaskutty pointed out the clause in the sanction given by the CBSE to contend that there could not be any profit making.
(VI) Shri Paul K. George has pointed out that there is no power for the Commission to act suo motu and the exercise was WPC.7818/08E & CON.CASES 12
done without jurisdiction. In this connection, he relied on Sections 61 to 64 of the Act besides the Regulations. He relied on the decisions in Ramachandran Master v. Kerala Lok Ayukta (2006 (4) KLT 166).
5. Per contra, Shri K.P. Dandapani, learned senior counsel appearing for the Commission made the following submissions: Section 111 of the Act provides for an effective alternate remedy by way of Appeal to the Appellate Tribunal. He pointed out that the Chairperson is to be a person who is/has been a Judge of the Supreme Court/the Chief justice of a High Court. As far as the member is concerned also, he is a person who is/has been/is qualified to be a judge of the High Court/a person who is/has been a Secretary for at least one year. It is further pointed out that the Statute in Section 125 of the Act provides for a further Appeal to the Supreme Court from the decision of the Appellate Tribunal on any one or more of the grounds specified under Section 100 of the Code of Civil Procedure. In this connection, he also relied on the decisions of the Supreme WPC.7818/08E & CON.CASES 13
Court in Orissa Electricity Regulatory Commission v. L.I. Parija And Others (2006 (1) SCC 637) and Maharashtra Electricity Regulatory Commission v. Reliance Energy Ltd. And Others (2007 (8) SCC 381). Regarding the complaint of violation of natural justice, it is pointed out that the Commission had issued Ext.R3(a) notice inviting objections/suggestions from the public consumers and other stake holders in various newspapers. In the notice, it was mentioned that the details were available in the web site of the Commission and the same was available on request. Ext.R3(c) is produced as a detailed draft. Ext.R3(d) is produced as the press release on the publication of the draft schedule. Ext.R3(e) was another press release which came to be issued on requests of consumers extending the time for receiving objections. It is pointed out that the draft schedule was discussed in the meeting of the State Advisory Committee as Ext.R3(f) Minutes revealed. Ext.R3(g) is the Notification of the constitution of the State Advisory Committee. Public hearing was held, it was contended, on the draft schedule of tariff and WPC.7818/08E & CON.CASES 14
Ext.R3(h) is produced as the list of persons who have attended the public hearing. It is the case of the Commission that there were no objections filed by the petitioners and they have not appeared in the public hearing. It is stated that on 23.5.2007, the Board forwarded proposals on the draft schedule to be effective from 1.6.2007, praying that the draft tariff schedule notified by the Commission may be modified incorporating the changes in the tariff and classification and other proposals furnished by the KSEB. It is stated that the Commission accepted the proposal and notice was issued inviting salient features of the proposal published as a Notification dated 7.9.2007 informing that the detailed tariff proposal is available in the Commission's web site inviting objections before 5 PM on 1.10.2007. Public hearings were held at three places, namely, Palakkad, Alwaye and Thiruvananthapuram on 16.10.2007, 17.10.2007 and 18.10.2007. Fortyeight written objections were received. It is the Commission's case that Self-financing Educational Institutions have not filed any objections to the proposal or WPC.7818/08E & CON.CASES 15
appeared in the public hearings. It is stated that in the draft schedule published by the Commission, rationalisation principle was extended. The draft schedule was essentially extension of the rationalisation principle to the Educational Sector by separating the Self-financing Educational Institutions from the Government/Aided Private Institutions. In the tariff existing prior to 1.12.2007 under the High Tension Category, the Technical and Educational Institutions and Hostels run by or affiliated to Universities or Government Departments and Government Hospitals were included as HT - II Non-industrial and Non-commercial categories whereas commercially oriented institutions, like private hospitals, they are included in HT - IV commercial category. Educational Institutions were included as part of non-domestic LT - VI B and many commercial institutions were also included in this category. Though a separate commercial category was present, this was found to be against the principle of tariff rationalisation. It is the case of the Commission that Self-financing Educational Institutions have WPC.7818/08E & CON.CASES 16
their own fee structure, wage structure, student and employee welfare measures which are totally absent in a Government/Aided Private School, and that Self-financing Educational Institutions are operating on business prospects. `
6. Shri C.K. Karunakaran, learned senior standing counsel for the Electricity Board raised the following contentions: There is an alternate remedy available and the petitioners are to be relegated to the pursuit of the said remedy. The Court cannot sit in appeal over the tariff, and that the limited role the Court can assume is that of judicial review. He referred to the reasons which led to the Electricity Act, 2003. He pointed out that there is indeed power to the Commission to act even suo motu. But, he pointed out that, at any rate, this was a case where, though the Commission had started out suo motu, there was subsequently a petition by the Board and, therefore, the Commission was, at any rate, within legal limits in issuing the tariff order. He relied on Section 61 as also Section 86 of the Act. He further pointed out the Kerala State Electricity WPC.7818/08E & CON.CASES 17
Regulatory Commission (Conduct of Business) Regulations, 2003 (hereinafter referred to as the Conduct of Business Regulations). He pointed out that regulation 27 provides for service of notices and processes issued by the Commission. It included service by hand delivery/courier/certificate of posting/registered post with acknowledgment due/E mail or Fax/publication in newspapers or any other manner as considered appropriate by the Commission. Regulation 27(8) reads as follows:
"27. Service of notices and processes
issued by the Commission.-
(8) No service or publication required to be done shall be deemed invalid by reason of any defect in the name or description of a person provided that the Commission is satisfied that such service is in other respects sufficient and no proceedings shall be invalidated by reason of a defect or irregularity in the service or publication unless the Commission, on an objection taken, is of the opinion that substantial injustice has been caused by such defect or irregularity or there are WPC.7818/08E & CON.CASES 18
otherwise sufficient reasons for doing so." Regulation 28 provides for filing of reply and other documents. Regulation 29 speaks of filing of objections by the public. Regulation 31 provides power with the Commission to permit any Association/Forum or other Body Corporate or any group of electricity consumers to participate in any proceedings before the Commission. Regulation 32 provides for hearing of the matter. Regulation 40 on which considerable importance was placed, reads as follows:
"40. Publication of petition.- (1) Where
any application, petition, or other matter is required to be published under the Act or these Regulations or as per the directions of the Commission, it shall unless the Commission otherwise orders or the act or Regulations otherwise provide, be published not less than 15 days before the date fixed for hearing.
(2) Except as otherwise provided, such
publication shall give a heading describing the subject matter in brief."
He pointed out that there is no challenge to the validity of WPC.7818/08E & CON.CASES 19
regulation 40(2) and the publication by the Commission in this case is in full conformity with the requirement and there is no merit in the complaint of violation of the principles of natural justice. He submitted that, in fact, the burden on the categories mentioned in the LT VII A has been reduced by 20 Paise. He has pointed out that what has been done is nothing new and he further pointed out that Section 62(3) of the Act is on the same lines as Section 49 of the Electricity Supply Act, 1948. He submits that Self-financing Educational Institutions are also a class. He referred to Section 62(3) of the Act and emphasised that difference in tariff can be justified on the basis of nature of supply and also purposes of supply. He submitted that even under the earlier regime, there was such classification. He has also pointed out that Self-financing Educational Institutions have higher fee structure, the facilities offered were incomparable with the facilities offered in Aided Private/Government Educational Institutions. He further contended that much cannot be made of the word "commercial" WPC.7818/08E & CON.CASES 20
and the concept of "commercial" should be that any institution which is free to charge such amounts as would make it financially feasible and the Self-financing Educational Institutions fall in such a category and they are commercial. He would submit that in these matters, the Court should not be concerned with the facts of individual Institutions, at any rate. He also relied on the following decisions: (1) Association of Industrial Electricity Users v. State of A.P. and Others (2002 (3) SCC 711).
(2) Kerala Hotel And Restaurant Association and Others v. State of Kerala And Others (1990 (2) SCC 502). (3) State of Karnataka And Others v. D.P. Sharma And Others (1975 (1) SCC 391) besides also relying on the decisions of the Apex Court in Orissa Electricity Regulatory Commission v. L.I. Parija And Others (2006 (1) SCC 637) and Maharashtra Electricity Regulatory Commission v. Reliance Energy Ltd. And Others (2007 (8) SCC 381) for the proposition that Section 111 creates an alternate forum rendering the Writ Petitions not maintainable.
WPC.7818/08E & CON.CASES 21
7. Issues which arise for decision:
(1) Whether the Court should consider the matter under Article 226 of the Constitution in the light of the provisions contained in Sections 111 and 127 of the Act ?
(2) Whether the impugned tariff order is vitiated on account of non-observance of the principles of natural justice ?
(3) Whether the tariff order is issued beyond jurisdiction and whether the Commission has power to determine tariff suo motu ?
(4) Whether the Self-financing Educational Institutions can be treated as "commercial"? (5) Whether there is violation of Section 62(3) of the Act and whether there is valid classification ?
8. The first question to be considered, of course, is whether the Writ Petitions can be maintained under Article 226 of the Constitution of India. Respondents draw support from the WPC.7818/08E & CON.CASES 22
alternate forum provided under Section 111 of the Act and Section 127 of the Act, to contend that the Act contained the code for redressal of grievances. Violation of principles of natural justice is one of the grounds justifying resort to Article
226. I note that the plea of violation of principles of natural justice is actually not seen taken in many of the Writ Petitions. It is settled law that Article 226 provides the Court with an extraordinary, though discretionary jurisdiction. Existence of an alternate forum can never be a total bar or a matter of jurisdiction. But, the Courts have evolved self-imposed restraints in the matter of interference where alternate forums are provided. The exceptions to the Rule which have been evolved are three in number: Firstly, it has been held that violation of principles of natural justice offers a reason to bypass the alternate forum. Absence of jurisdiction is another ground. Thirdly, violation of fundamental rights can also be pleaded by a writ petitioner to bypass an alternate remedy.
9. It is important to notice the decision of the Apex Court WPC.7818/08E & CON.CASES 23
in Orissa Electricity Regulatory Commission v. L.I. Parija And Others (2006 (1) SCC 637) relied on by the respondents. That was a case where the Orissa Electricity Regulatory Commission took steps in the matter of fixation of tariff. The Court took the view that the interim orders passed by the High Court restraining the Commission from exercising its functions were indefensible. Thereafter, the Court noted that the High Court had permitted the Commission to take the necessary decision and the Commission had taken the decision and fixed the tariff for the periods in question. The Apex Court further proceeded to hold that the levy was being made on the basis of the tariff fixed and it was not in dispute that the correctness of the tariff fixed could be questioned before the prescribed Forum as provided in the Orissa Electricity Reforms Act, 1995 and the Apex Court took the view that the matters being so, there was no need to keep the Writ Petitions pending.
10. The respondents also draw support from the decision of the Apex Court in Maharashtra Electricity Regulatory WPC.7818/08E & CON.CASES 24
Commission v. Reliance Energy Ltd. And Others (2007 (8) SCC 381). That was an appeal filed under Section 125 of the Act against the decision of the Tribunal. The Maharashtra Electricity Regulatory Commission had addressed notices to the licensees/distribution companies in Maharashtra and made an enquiry from them with regard to raising of bills. The licensees made their submissions. The Commission directed withdrawal of the supplementary/amended bills if meter had not been run and refund to the consumers the amount collected without interest among other directions issued. The matter was taken up before the Appellate authority which set aside the order and directed that each consumer should approach the Forum created under Section 42 (5) of the Act. The Commission contended before the Apex Court that it had power to give general directions to all its licensees/distribution companies. The Apex Court took the view that the Commission had the power to issue general directions to the licensees, but opined that the blanket direction given by the Commission for refunding the entire WPC.7818/08E & CON.CASES 25
amount without a proper investigation was without jurisdiction. The Court took the view that the commission could not adjudicate disputes relating to grievances to individual consumers and its adjudicatory functions were limited to the manner prescribed under Section 86(1)(f) of the Act. Keeping in view the equity of both the parties, the Apex Court directed the licensees/distribution companies to publish notice in the newspapers stating that any aggrieved person can approach the licensee in regard to the supplementary/amended bills. The licensees/distribution companies were to decide the individual cases after giving opportunity of hearing to the consumers and the consumers who were not satisfied with the orders, were to approach the appropriate forum under Section 42(5) of the Act and if they still not satisfied, the Apex Court took the view that they were to approach the Ombudsman under Section 42(6) of the Act. The Court held further as follows: " Therefore, now by virtue of sub-section (5) of Section 42 of the Act, all the individual grievances of consumers have to be raised before WPC.7818/08E & CON.CASES 26
this forum only. In the face of this statutory provision we fail to understand how could the Commission acquire jurisdiction to decide the matter when a forum has been created under the Act for this purpose. The matter should have been left to the said forum. This question has already been considered and decided by a Division Bench of the Delhi High Court in Suresh Jindal v. BSES Radhani Power Ltd. and Dheeraj Singh v. BSES Yamuna Power Ltd. and we approve of these decisions. It has been held in these decisions that the forum and ombudsman have power to grant interim orders. Thus a complete machinery has been provided in Sections 42(5) and 42(6) for redressal of grievances of individual consumers. Hence wherever a forum/ombudsman have been created the consumers can only resort to these bodies for redressal of their grievances."
11. The question arises is whether even in the face of the alternate remedy available, undoubtedly, the petitioners can claim the right to bypass the same on the ground of violation of the principles of natural justice ? It is pointed out that Exts.R3 WPC.7818/08E & CON.CASES 27
(a), R3(b) and R3(c) which have been issued by the Commission do not give any indication about the proposed inclusion of Self- Financing Educational Institutions among the categories liable to pay at commercial rate. Exts.R3(a), R3(b) and R3(c) were issued by Commission, when it decided to act suo motu. Subsequently, it is submitted that the Electricity Board made certain proposals, praying that the draft tariff schedule notified by the Commission may be modified incorporating the changes in tariff and classification and the other proposals. It is the case of the Commission that the Commission, thereafter, accepted the said tariff proposal of the Electricity Board vide KSERC/III TP- 30/2007 and notice was issued on the proposal of the Board. Learned counsel produced the said notice before me. In the same, it is pointed out on behalf of the petitioners that specific reference was made in the extract of the proposals, including the proposed subjecting of certain categories to the charges in the commercial category. Of course, it is the case of Shri C.K. Karunakaran that the changes which were notified in the notice WPC.7818/08E & CON.CASES 28
were relatable to the proposals of the Board for the modification of the proposals contained in the draft schedule proposed by the Commission acting suo motu. It is true that the notice issued on the basis of the proposal of the Board is more specific and brings home to a consumer the fact that a proposal is under contemplation which may affect his interests. Undoubtedly, the issuance of notice as done on the proposal of the Board is a much better way of doing things. But, the question would arise whether even the notice issued by the Commission on the suo motu proposal would suffice. As already noted, the plea of violation of the principles of natural justice, is not a ground pleaded in many of the Writ Petitions. Violation of the principles of natural justice, in the context of these cases, is indeed a matter which must be pleaded. This is for the reason that admittedly Ext.R3(a) was issued as follows: "Kerala State Electricity Regulatory Commission under Section 62(1)(d) and 86(a) of Electricity Act, 2003 hereby publishes the extract of the draft Tariff Schedule effective from June 1, 2007 WPC.7818/08E & CON.CASES 29
based on the ARR and ERC submitted by the Kerala State Electricity Board Draft Tariff Schedule is available in the website of the Commission www.erckerala.org. and also at the office of the Commission, which can be obtained on request: The Commission invites objections/suggestions on the draft tariff Schedule from the consumers, general public and stakeholders to be received at its office on or before 15.05.2007. A public hearing on the above subject is proposed to be held on the 17th May 2007 at 10.30 AM at the Court Room of the Commission's Office."
The extract is also published. Thereafter, it is stated that the present tariff rates are to continue for certain categories. Further, it is stated that in respect of HT & EHT power intensive industries, the tariff will be 100% extra over the normal rates for consumption during peak time. There is also mention regarding the demand charge and energy charge for Railway Traction. Without pleading that despite the notice issued, they were unaware of the consequences which would follow or that there WPC.7818/08E & CON.CASES 30
was no need for them to object, it is clearly not open to those petitioners to contend that there was violation of the principles of natural justice.
12. Now, let me deal with the cases where there is pleading. No doubt, Counter Affidavits are not seen filed in many cases. Going by the documents produced by the Commission, it is indicated that the draft tariff schedule is available with the Commission on the web site and also in the office of the Commission. The extract was also, no doubt, published. Undoubtedly, the extract would not give any impression about the proposal to include Self-Financing Educational Institutions in the commercial tariff. But, at the same time, it cannot be overlooked that objections were invited to the draft tariff schedule and not to the extract of the draft tariff schedule. The draft tariff schedule was also made available on the web site as also in the office of the Commission. It was readily available on request. The draft tariff clearly indicated the proposal to include Self-Financing WPC.7818/08E & CON.CASES 31
Educational Institutions in the category "Commercial". In such circumstances, it was incumbent on those petitioners who allege violation of principles of natural justice, to have pursued the matter before the Commission, to peruse the draft tariff schedule either from the web site or from the office of the Commission in which case, they would have, undoubtedly, become aware of the inclusion of Self-Financing Institutions in Schedule VII A. What is mentioned in Regulation 40(2) is that there is to be a "heading" describing the subject matter in "brief"`. I reject the contention based on violation of principles of natural justice.
13. Power to act suo motu:
The further question to be considered is the contention taken that there is no power for the Commission to suo motu determine the tariff. Reliance is placed in this regard on the opening words of Section 62 of the Electricity Act. Section 62 opens with the following words:
"The appropriate Commission shall determine the tariff in accordance with the provisions of this Act."
WPC.7818/08E & CON.CASES 32
14. It is pointed out that Section 64 prescribes for the procedure for tariff order. It provides that an application for determination of the tariff under Section 62 shall be made by a generating Company or the licensee in such manner and accompanied by such fee as may be determined by the Regulations. Sub-section (2) provides for publication of the application. Sub-section (3) provides for the issuance of the tariff order accepting the application with or without modifications or rejection of the same. It is, therefore, contended that since Section 62 provides that the appropriate Commission is to determine the tariff in accordance with the provisions of the Act and Section 64 provides for the procedure which contemplates an application for the determination of the tariff under Section 62, it is not open to the Commission to fix the tariff suo motu. In this context, reliance is placed on the decision of this Court in Ramachandran Master v. Kerala Lok Ayukta (2006 (4) KLT 166).
15. Per contra, the respondents would point out that there WPC.7818/08E & CON.CASES 33
is no merit in the contention of the petitioners in this regard. It is contended that the Electricity Act, 2003 marks a departure from the earlier tariff regime in so far as unlike in the past when the tariff was virtually dictated to by the State Government and what is more, there were essentially no private players, the present Act contemplates private participation and also an independent Expert Body like the Commission to determine the tariff. The power to fix tariff which is vested with the Commission, particularly in the context of private participation would be rendered illusory, if a revision of tariff is contemplated only if the power could be exercised on an application by the licensees. It is pointed out that it would be against the interest of the consumers themselves, if the Commission is not to be endowed with the power to act suo motu. Amplifying the same, it is contended that in a situation where a tariff structure is in place, if it is inequitable from the point of view of the consumers, but advantageous to the licensees and if the licensees do not file any application to say that the Commission WPC.7818/08E & CON.CASES 34
is bereft of power to rectify the anomaly in the tariff in regard to the changed circumstances, would be to place an interpretation on the Statute which is both anomalous and likely to produce unjust results. It is further pointed out that power indeed vests with the Commission under Section 61, for specifying the terms and conditions for determining the tariff. It is further pointed out that a perusal of Regulations also contemplate the power of the Commission to act suo motu. More importantly, it is pointed out that, at any rate, in the facts of these cases, it is unnecessary to decide the issue for the reason that while it is true that initially the Commission was proceeding suo motu, thereafter the Board had indeed filed a petition which included the proposal to modify the proposal, and the tariff order was passed on the basis of the suo motu petition and the petition filed by the Board.
16. I am not impressed by the contention that there is no suo motu power. Undoubtedly, Section 62 of the Act provides that the appropriate commission shall determine the tariff in WPC.7818/08E & CON.CASES 35
accordance with the provisions of this Act and thereafter Section 64 provides for the filing of an application for determination to be made by the generating company or the licensee. Section 86 (4) which deals with the functions of the State Commission reads as follows:
"86 (4) In discharge of its functions, the State Commission shall be guided by the National Electricity Policy, National Electricity Plan and tariff policy published under Section 3." It is also noted that the statutory regulation made under the Act clearly provides power for the Commission to initiate suo motu action. No doubt, it is contended by Shri Paul Jacob that the power to initiate suo motu proceeding is limited to proceedings under Section 128 of the Act. Regulation 22 of the Kerala State Electricity Regulatory Commission (Conduct of Business) Regulations, 2003 inter alia reads as follows: "22. Initiation of proceedings.- Proceedings may be initiated under these Regulations in one of the following manners:-
(a) Suo motu by the Commission;
WPC.7818/08E & CON.CASES 36
(b) Upon a petition filed by the Board or a licensee;
(c) Upon a petition filed by the Government of Kerala;
(d) Upon a petition filed by an affected party: Provided that the Commission shall have the right to decide or order that any party is not an affected party for the purpose of these Regulations. Provided further that the proceedings under (a), (b), (c) or (d) above shall pertain to matters relating to the powers and functions of the Commission as assigned to it under Section 86 and other provisions of the Act."
Regulations provide for the procedure when suo motu proceedings are taken. It is already noted that having regard to the object of the Act and the function of the commission, there is clear possibility that the private players occupying the field, may not file any application in a situation where they have an unfair advantage over the consumers. If the view canvassed by the petitioners is accepted, it would result in an absurd position in so far as it would result in deprivation of the power with the WPC.7818/08E & CON.CASES 37
Commission to determine the tariff. In short, the purport of the Act creating an impartial agency to determine the tariff would stand frustrated, if power is not made available to the Commission to determine the tariff, no doubt after following such procedure as is prescribed as per law. In this context, it is apposite to refer to the following observations of the Apex Court in BSES Ltd. v. Tata Power Co. Ltd. And Others ((2004) 1 SCC 195):
"The object and reasons of the Act show that the main functions of the State Electricity Regulatory Commission shall be: (i) to determine the tariff for electricity - wholesale, bulk, grid and retail; (ii) to determine the tariff payable for use of the transmission facilities; and (iii) to regulate power purchase and procurement process of the transmission utilities etc. The changed scenario may give rise to problems of highly complex and technical nature between the generator, supplier and distributor of energy, which can be better resolved by technically qualified people who may constitute the aforesaid Regulatory Commission. They will have the additional advantage of taking WPC.7818/08E & CON.CASES 38
assistance from consultants, experts and professional persons. Therefore, it will be proper to interpret the Act in a broad manner and not in a narrow or restrictive sense in so far as the jurisdiction of the Commission is concerned, so that the purpose for which the Act has been enacted may be achieved."
17. I would think that in the context of the decision of this court in Ramachandran Master v. Kerala Lok Ayukta(2006(4) KLT 166) renders the dicta inapplicable to the facts of the instant cases. There, the question was whether under the Lok Ayukta Act, 1999 (Kerala), the Lok Ayukta had suo motu powers to conduct any investigation. The provisions provided for dealing with the complaint in the form and manner which was prescribed. The complaint was to be accompanied by an Affidavit and a defective complaint, if the defect was not cured, was to be rejected. The Court took the view that the Lok Ayukta has no jurisdiction to investigate the grievance projected WPC.7818/08E & CON.CASES 39
in anonymous or pseudonymous letter, newspaper reports or a letter of complaint as well. The Court also took the view that the legislative intent was to eradicate corruption and also mal- administration in public life and the faith of the people in the administration is not lost. It was stated that there is no dearth of persons actuated because of enmity, jealousy and other human evil propensities in lodging false complaints. It is clear that the context and the setting of the Lok Ayukta, cannot be compared with the Electricity Act, 2003. I have already referred to the circumstances arising under the Electricity Act and the purpose of constituting an impartial Expert Body, like the Commission.
18. When Section 62 speaks about the power of the Commission to fix the tariff in accordance with the provisions of the Act, it is to be noted that Section 61 provides for specification of terms and conditions for the determination of the tariff. They include the principles and methodologies specified by the Central Commission, commercial principles, the factors which would encourage competition, efficiency, WPC.7818/08E & CON.CASES 40
economical use of the resources, good performance and optimum investments, safeguarding of consumers' interest and at the same time recovery of the cost of electricity in a reasonable manner, the principles rewarding efficiency in performance, multi year tariff principles, the National Electricity Policy and tariff policy etc.
19. In such circumstances, going by the indications available in the Act read with the regulations and the scope and ambit of the provisions, I would think that the Commission must be ceded suo motu power to determine tariff.
20. Whether Sec.62(3) of the Act is breached and whether the tariff order is bad for including Self-Financing Educational Institutions under the category "Commercial"? Is there valid classification ?
The further contention raised on behalf of the petitioners is that the discrimination between the Government and Aided Private Educational Institutions and in the Self-Financing Educational Institutions is not one which is sanctioned by the WPC.7818/08E & CON.CASES 41
provisions of Section 62(3) of the Electricity Act. Section 62(3) of the Act, no doubt, provides that an undue preference should not be shown to any consumer, but differentiation is permitted based on load factor, power factor, voltage, total consumption of electricity during any specified period or the time at which the supply is required or the geographical position of any area, the nature of supply and the purpose for which supply is required. I do not think, it could be open to the Board or the Commission to contend that the discrimination between Aided Private Schools and Government Schools on the one hand and the Self- Financing Educational Institutions on the other hand, could be premised on the following factors:
a) Load factor.
b) Power factor.
d) The time at which the supply is required. e) The geographical position of any area. The remaining factors which are mentioned are as follows: WPC.7818/08E & CON.CASES 42
a) The total consumption of electricity during any specified period.
b) Nature of supply.
c) The purpose for which the supply is required.
21. It is necessary, in this context, to refer to the stand of the Commission. In the Counter Affidavit filed by the Commission, it is, inter alia, stated as follows: "It is submitted that the contention of the petitioner that there is unreasonableness and violation of Article 14 of the Constitution of India etc. is wrong and untenable. The petitioner is a self financing institution with its own fee structure, wage structure, student and employee welfare measures etc, which is totally absent in a government school or in an aided school. The self-financing institutions are operating on business prospects, running on non-objective of social uplift. The present tariff is not against the students and there is no differential treatment or discrimination towards the students in the self- financing institutions. The self-financing educational institutions accommodate only WPC.7818/08E & CON.CASES 43
students belonging to the class, having paying capacity.
The government has no control over the
fixation of fees by self-financing institutions, which are fixing up their own fees and establishment charges. It is a naked fact that the motive of the self-financing institutions is only business under the guise of service.
The classification of self-financing educational institutions into a separate category is based on rational considerations and is not arbitrary or in violation of Article 14 of the Constitution of India. The Apex Court in a catena of decisions has upheld such classification." Further, in the Additional Counter Affidavit of the Commission dated 15.7.2008, it is stated that the tariff order was passed strictly based on the principles and objectives laid down in Sections 61 to 64 of the Electricity Act, 2003. It is stated that the Commission considered all the aspects of the nature and purpose of the consumption of energy before determining the tariff. It is pointed out that the cross subsidy levels in Kerala is WPC.7818/08E & CON.CASES 44
very high. The figures are given and it is contended that sizable number of consumers are paying below the cost of supply of Rs.3.19 per unit. It is stated that a rationalisation of the tariff is essential to correct the situation. KSEB, it is stated, has to function in commercial lines as provided under Section 61(b) of the Electricity Act, 2003. It is stated that some consumers necessarily have to bear the burden of cross subsidy in the transition period which requires delicate balancing action on the part of the Commission and towards reducing the cross subsidy, the Commission has reduced the tariff for LT VII A and LT VII B consumers to the tune of 20 Paise per unit. It is further stated that since the revision of tariff in 2002, there are a new generation of consumers emerged, such as, call centers, software development units, palliative care centers, HIV rehabilitation centers, self financing institutions, etc. which are to be classified properly and the Commission has initiated tariff rationalisation process effective from 01.12.2007. In the transition period, within the framework provided by Electricity WPC.7818/08E & CON.CASES 45
Act, 2003, National Electricity Policy and Tariff Policy and the directions of Government of Kerala under Section 108 of the Act, it is stated that the Commission follows a policy of gradualism by introducing new customer groups and re- categorising the existing consumer groups taking into account the changes taking place in the sector. In paragraph 7 of the Additional Counter Affidavit, it is stated as follows: "7. It is respectfully submitted that as per Section 62(3), tariff of any consumer may be differentiated according to consumer's total consumption of electricity during any specific period or nature of supply and purpose for which supply is required. The Commission has differentiated self-financing educational institutions under Section 62(3). Only for the purpose of determining tariff, Self Financing Educational Institutions are classified as LT VII (A) category considering the high usage of the electricity and this respondent never branded them as "Commercial". Hence, there is a
rationale of grouping such institutions as separate category to share the cross subsidy burden during WPC.7818/08E & CON.CASES 46
transition period. Further, the specific consumption during any specific period say, a day or a month would be much higher than a similarly placed government institution. Hence, based on total consumption of electricity during a specified time, such consumers may also be distinguished as separate category. Based on these premises, a separate category "self financing institutions" was created. Such distinction in intra class and inter class categorization is already present in the existing tariff structure. For example, in the domestic category, slab wise tariff is provided to differentiate high usage consumers with low usage consumers. Similarly in LT VII category, small consumers (connected load less than 1000W, shops, bunks, hotels, restaurants, telephone booths etc.) are separately categorized LT VII(B) to segregate from high usage consumers in LT VII (A)."
22. In the Argument Note submitted on behalf of the Commission also, it is stated that the consumers were classified WPC.7818/08E & CON.CASES 47
in different categories according to nature and purpose for which electricity is used. It is pointed out that in the tariff prior to 1.12.2007, in the High Tension Category, technical and educational institutions and hostels run by or affiliated to Universities or Government Departments and Government Hospitals were included as HT-II Non-Industrial and Non- Commercial Category. Whereas the institutions having commercial orientation, like private hospitals are included in HT-IV Commercial category. Educational Institutions, it is stated, were included as part of Non-Domestic Category LT-VI (B). Further, many commercial institutions are also included in the category, though a separate commercial category (LT-VIII) was present. It is further stated that in the existing tariff, there was no category of tariff for Self-financing Institutions and the Commission in its Order dated 26.11.2007 included Self- Financing Educational Institutions under LT VII A considering them as a separate category. It is the case of the Commission that the Commission did so on account of the fact that electricity WPC.7818/08E & CON.CASES 48
is being consumed by the Self-Financing Educational Institutions not only for the purpose of education, but also for providing luxurious amenities, like high powered lights, lifts, air conditioned class rooms, hostels, canteens, etc. whereas the Government Institutions have only few lights and fans in the class rooms and that is why the huge variation in the consumption of Government or Private Aided Institutions when compared to Self-Financing Educational Institutions and the same is well revealed by the table which provides for per student consumption. It is stated that there is huge difference in the consumption by the Self-Financing Institutions. In the table appended, reference is made to certain Self-Financing Institutions and certain Government Institutions. Of course, there is no reference to any Aided School as such. But, Shri K.P. Dandapani, learned senior counsel appearing on behalf of the Commission would submit that reference to Government Institutions must be the same as Aided Institutions. In other words, it is the case of the Commission that in treating Self- WPC.7818/08E & CON.CASES 49
Financing Institutions as different from Government Institutions or as Aided Institutions, there is no transgression of the limits set by Section 62(3) of the Act.
23. Undoubtedly, Shri Gangesh referred to the decision of the Supreme Court in M/s. Rohtas Industries Ltd. and another, etc. v. The Chairman, Bihar State Electricity Board and Others (AIR 1984 SC 657), to contend that capacity to pay cannot be the basis for differentiation. In the said case, the appellants were Companies having factories in Bihar availing High Tension electric current. The issue related to payment of fuel surcharge. One of the contentions taken by the appellants would appear to be that in exercising powers under Section 49 of the Electricity Supply Act, 1948, (wherein there are some similar elements as contained in Section 62(3) of the Act), the Board was under a duty to apply its mind to all relevant factors and there is a failure in as much as capacity to pay for the energy at the rate proposed to be fixed, which is a highly relevant factor was not taken into account at all. Answering this, the Court WPC.7818/08E & CON.CASES 50
held as follows:
"Clauses (a) to (d) of sub-sec.(2) of Section 49 enumerated the various matters which the Board shall have regard to in fixing the uniform tariffs and the capacity of any particular industry to bear the energy charge at the proposed rate of levy is not included in the said enumeration. Under the scheme of the tariff fixation incorporated in the section, the tariff is to be uniform subject to the classification of consumers into different categories. Under sub-section 3 of the said Section, the classification of the consumers into such different categories is to be made only with reference to the nature of the supply, the purpose for which supply is required, the geographical position of any area and other like relevant factors. It is not contemplated by the said section or any of the other provisions of the Act that as amongst consumers falling within a specified category different rates are to be charged depending upon the financial capacity of the particular consumer to pay. On the other hand, the very core of the scheme of Sec.49 is that the tariff should be uniform in respect of each class or WPC.7818/08E & CON.CASES 51
category. Hence the attack levelled against the tariff fixation on the aforesaid ground, that a relevant factor, namely, that the financial capacity of individual industrial consumers had not been taken into account, is devoid of force."
24. No doubt, Shri C.K. Karunakaran, learned senior standing counsel appearing for the Electricity Board would submit that what the Court has laid down is that there cannot be differentiation between consumers falling in the same category based on the capacity to pay and nothing more. Therefore, the question would arise whether Government Educational Institutions, Aided Private Educational Institutions and Self- Financing Educational Institutions can be treated as falling in the same category ? It is to be noted that Section 49(3) of the Electricity Supply Act permitted differentiation, inter alia, on the ground of nature of the supply, purpose for which supply was given and such other relevant factors. The words "such other relevant factors" are conspicuous by their absence in section 62(3) of the act. Even with the words "such other WPC.7818/08E & CON.CASES 52
relevant factors", the Apex Court appears to have taken the view that as between persons falling in one category, there cannot be any further differentiation based on the capacity to pay. Therefore, there cannot be any quarrel with the proposition that once it is found that they fall into the same category, there cannot be any any differentiation based on the capacity to pay. "Capacity to pay" is not indicated as one of the factors to be the premise for distinction in Section 62(3) of the Act.
25. Article 14 of the Constitution is an injunction against treating equals unequally, just as much as it frowns upon treating unequals equally. Section 62(3) of the Act is essentially to be understood in the context of the doctrine of reasonable classification. There is no challenge to the Act and the different criteria which are laid down in Section 62(3) appear to be rational criteria for departing from the principle of absolute uniformity of tariff.
26. I find that a Division Bench of this Court in the decision in Social S.G. of Assisi Sisters v. KSEB (1988 (1) KLT WPC.7818/08E & CON.CASES 53
727), has squarely dealt with the issue whether Educational Institutions can be treated as commercial consumers. In the said case also, the Division Bench was called upon to decide the question as to whether Educational Institutions as also Hostels could be described as "commercial consumers" justifying levy of enhanced electrical charges. It held as follows: "16. We are satisfied that when the
Government described "commercial consumers" as a class for levying enhanced electrical charges, the expression was used as it was understood in common parlance, by the common man. The consumer of electricity in a commercial establishment is a commercial consumer for the purpose of electricity levy in these cases. Commercial establishments invariably undertake an economic activity, not casual, but systematically or habitually conducted for the production or distribution of goods or for rendering material service to the community, and organising or arranging in a manner in which trade or business is generally organised or arranged. It envisages a co- operative endeavour between the employer and WPC.7818/08E & CON.CASES 54
employee and it may be a charitable organisation or purely a profit making business enterprise.
23. Educational Institutions and Nursing Schools. The educational Institutions run by the petitioners are either Aided or recognised by the State. Those petitioners function as Managers, appoint Headmasters, Teachers and the non- teaching staff of their Institutions, admit students, collect fees from them, conduct classes according to the curriculam prescribed by the Government and prepare the students to appear for the annual examinations and eventually the public examinations conducted by the State. Nursing schools are also Institutions teaching and training Nurses. There is thus an organised, systematic economic activity and rendering of material service to the community. The success of the Institution depends on the wholehearted co-operation of the management, the Headmaster, the Teachers, the Staff and the students. The Board was, therefore, not wrong in classifying the Educational Institutions as "commercial consumers" for levying additional rates.
26. Hostel is a house of residence for students WPC.7818/08E & CON.CASES 55
and is thus part of an educational institution taking its colour as a commercial consumer."
27. When confronted with the decision of the Division Bench in Social S.G. of Assisi Sisters v. KSEB (1988 (1) KLT 727), Shri Kurian George Kannanthanam reiterated his argument based on source of revenue. It was contended that even proceeding on the basis of the said decision, there was no basis for including only the Self-Financing Educational Institutions under "commercial category" and there is no basis for the classification. It was also contended that there is no notice. He also referred to the decision in T.M.A. Pai Foundation And Others v. State of Karnataka And Others (2002 (8) SCC 481). Shri Wilson Urmese would submit that the Division Bench decision may not hold good after T.M.A.Pai's case. Shri George Poonthottam and Shri Bechu Kurian Thomas would also submit that there is no basis for the classification. Shri Bechu Kurian Thomas also reiterated that Section 62(3) of the Electricity Act would not permit such a classification. Shri C.P. Kunhikannan would also submit that there is no basis and WPC.7818/08E & CON.CASES 56
he pointed out the steep increase in the tariff which the Self- Financing Educational Institutions alone are called upon to pay. Shri C.K. Karunakaran, learned senior standing counsel for the Electricity Board would contend that the differences between Government Educational Institutions and Aided Educational Institutions on the one hand and Self-Financing Educational Institutions on the other hand, are clear as daylight and there is absolutely nothing wrong in the classification. There is also a case that there is a process of rationalisation of the rates involved. He would submit that undoubtedly, as held by the Division Bench of this Court, while all Educational Institutions could be treated as commercial, in view of the substantial difference between Government and Aided Educational Institutions on the one hand and Self-Financing Educational Institutions on the other hand, keeping in view of the object of the Act and issuance of a tariff order and the process of rationalisation which is an evolving process, there is no basis for the complaint based on either Section 62(3) of the Electricity WPC.7818/08E & CON.CASES 57
Act or violation of Article 14 of the Constitution. He also pointed out that this distinction has been present historically. By way of illustration, he pointed out that Government Hospitals and Private Hospitals have been treated differently, though both are Hospitals.
28. I notice that the Court in the Division Bench had occasion to consider the decision of the Apex Court in Sasidharan v. Peter & Karunakaran AIR 1984 SC 1700), wherein the Apex Court took the view that the Office of a Lawyer or a Firm of Lawyers is not a Shop within the meaning of the Kerala Shops and Commercial Establishments Act, as traditionally Lawyers do not carry on trade or business, nor do they render service to customers.
29. It is to be noted that the stand taken by the Commission is based on the factors: nature of supply, purpose of supply and the consumption pattern. Going by the figures produced in the Additional Counter Affidavit (not filed in many cases), there appears to be substantial difference in the WPC.7818/08E & CON.CASES 58
consumption pattern of Self-Financing Educational Institutions and Government Educational Institutions. But, it does not appear to contain the consumption pattern of Aided Educational Institutions. Further, under the head "purpose of supply", it is to be noted that the respondent has a case that Self-Financing Educational Institutions have their own fees structure, wage structure, student and employee welfare measures and they operate on business prospects.
30. One way of looking at the premise relating to "purpose of supply" is to consider whether if a question is posed as to whether the purpose of supply to Government Educational Institutions/Aided Educational Institutions on the one hand and Self-Financing Educational Institutions on the other hand is the same, it could be said that the purpose is to supply connection to Educational Institutions which are providing education. However, it is also possible to consider whether, having regard to the differences between Government Educational Institutions and Aided Educational Institutions on WPC.7818/08E & CON.CASES 59
the one hand and Self-Financing Educational Institutions on the other hand, it could be said that there is a difference in the purpose for which the supply is sought. In other words, if it could be found that there are substantially distinguishing features, they could be treated as falling in two different categories.
31. Shri C.K. Karunakaran, learned senior standing counsel would point out that there can be classification which need not be done with mathematical precision and in matters of economic classification, it is not for the superior court to interfere. In this context, reference is placed on the decision of the Apex Court in State of Karnataka and Others v. D.P. Sharma And Others ((1975) 1 SCC 391). Therein, the Apex Court held as follows:
"In the context of economic and tax matters, a classification made by the Legislature is almost always sustained because the Court lacks both the expertise and the familiarity with the local problem so necessary for making a wise decision, with respect to raising and disposing public WPC.7818/08E & CON.CASES 60
revenues. So, the classification made by the Legislature based on its knowledge and information that the contract carriages in the State use the roads more and cause greater damage to them as they are free from many of the restrictions placed on the running of stage carriages cannot be interfered with."
Learned senior standing counsel also relies on the decision of the Apex Court in Kerala Hotel and Restaurant Association And Others v. State of Kerala and Others ((1990) 2 SCC 502). Tax was imposed on the sale of cooked food only in costly or luxury hotels while exempting such sale in other hotels or eating houses. The Court took the view that the classification based on a status of the hotel is valid. Also the Court felt that the existence of a better mode of classification is not a ground for challenging the validity of a classification. It was the realities of life and the substance and not the form alone which were crucial for determining the reasonableness of the classification, it was held. The Court further held as follows:
"Reasonableness of the classification has to WPC.7818/08E & CON.CASES 61
be decided with reference to the realities of life and not in the abstract. A discernible dissimilarity between those grouped together and those excluded is a pragmatic test, if there be a rational nexus of such classification with the object to be achieved. In the abstract all cooked food may be the same since its efficacy is to appease the hunger of the consumer. But, when the object is to raise only limited revenue by taxing only some category of cooked food sold in eating houses and not all cooked food sold anywhere, it is undoubtedly reasonable to tax only the more costly cooked food. The taxed cooked food being the more costly variety constitutes a distinct class with a discernible difference from the remaining tax free cooked food. A blinkered perception of stark reality alone can equate caviar served with champagne in a luxury hotel with the gruel and buttermilk in a village hamlet on the unrealistic abstract hypothesis that both the meals have the equal efficacy to appease the hunger and quench the thirst of the consumer. Validity of a classification under our Constitution does not require such a blurred perception." Learned senior standing counsel also relied on the decision of WPC.7818/08E & CON.CASES 62
the Apex Court in Indian Express Newspapers (Bombay) Private Ltd. and Others v. Union of India and Others ((1985) 1 SCC 641). Therein, the Court held as follows: "We do not, however, see much substance in the contention of some of the petitioners that the classification of the newspapers into small, medium and big newspapers for purposes of levying customs duty is violative of Article 14 of the Constitution. The object of exempting small newspapers from the payment of customs duty and levying 5% ad valorem (now Rs.275 per MT) on medium newspapers while levying full customs duty on big newspapers is to assist the small and medium newspapers in bringing down their cost of production. Such papers do not command large advertisement revenue. Their area of circulation is limited and majority of them are in Indian languages catering to rural sector. We do not find anything sinister in the object nor can it be said that the classification has no nexus with the object to be achieved. As observed by Mathew, J. in the Bennett Coleman case, it is the duty of the State to encourage education of the masses through the WPC.7818/08E & CON.CASES 63
medium of the press under Article 41 of the Constitution. We, therefore, reject this contention."
He also points out that there was no pleading whatsoever or materials produced in any of the cases to show that the petitioners do not have the capacity to pay the amounts. In Kerala State Electricity Board v. M/s. S.N. Govinda Prabhu And Bros. And Others ((1986) 4 SCC 198), the Apex Court took the view that the fixation of a higher rate of tariff with a view to generate surplus was justified, even though there was no surplus specified by the State Government. The Court took the view that the Board must arrange its affairs on sound economic principles and it must be able to pay interest on the loans taken by it,discharge its debts, give efficient and economic service. Going by the pleading of the Commission, there is difference in the consumption pattern of Government and Aided Private Educational Institutions on the one hand and Self-Financing Educational Institutions on the other hand. I have also predicated that if there are substantive distinguishing features WPC.7818/08E & CON.CASES 64
between the Government Educational Institutions and Aided Educational Institutions on the one hand and Self-Financing Educational Institutions on the other, it is possible to find that they fall in different categories justifying a differential rate. No tuition fees can be collected in Government and Aided Schools as per Chapter XII of the Kerala Education Rules. It is to be further noted that the total fees, going by the provisions in the Kerala Education Rules in relation to special fees of a student studying upto Xth Standard in an Aided and Government School is less than Rs.15/= per year which works out to less than Rs.2/= per month. This fees is to be made over to the Government by the Aided School. Based on the availability of fairly larger sums by way of fees which they are free to fix and under which they can even earn a surplus/profit, I would think that they can be classified as a separate category. It is not the source of funds, but the extent of the funds available that makes a difference. This disparity in the funds also leads to difference in the facilities available to the students and teachers which naturally WPC.7818/08E & CON.CASES 65
would reflect even in the quality of teaching.
32. In this regard, it is apposite to consider the decision of the Apex Court in State of West Bengal and Another v. Rash Behari Sarkar And Another (1993) 1 SCC 479). Therein, the Apex Court was considering a challenge based on Article 14 against a classification between a bonafide group Theatre, Amateur Theatre or Amateur Jatra formed exclusively for the purpose of cultural activities and not for monetary gains, who are paid any regular or contractual fees and professional group in the matter of grant of exemption from payment of entertainment tax. The Writ Petition was filed by one of the professional theatres. The High Court took the view that the classification made on the basis of engagement of paid Artists was not reasonable. The High Court took the view that a dramatic performance for social, educational or scientific purposes form a class by themselves and, therefore, any further classification or profit motive and engagement of Artists on contractual or regular basis was impermissible. The Apex WPC.7818/08E & CON.CASES 66
Court held as follows:
"4. Equality means equality in similar circumstances between same class of persons for same purpose and objective. It cannot operate amongst unequals. Only likes can be treated alike. But, even amongst likes, the legislature or executive may classify on distinction which are real. A classification amongst groups performing shows for monetary gains and cultural activities cannot be said to be arbitrary. May be that, both the groups carry out the legislative objective of promoting social and educational activities and, therefore, they are likes but the distinction between the two on monetary gains and otherwise is real and intelligible. So long the classification is reasonable, it cannot be struck down as arbitrary. Likes can be treated differently for good and valid reasons. The State in treating the group performing theatrical shows for advancement of social and educational purpose, differently, on the basis of profit-making from those formed exclusively for cultural activities cannot be said to have acted in violation of Article
WPC.7818/08E & CON.CASES 67
6. Dramatic performance for monetary
gains and otherwise are different and stand on different footing. The test is not if, even, the professional group by its performance is serving social or educational purpose but if the two groups can reasonably stand on their own. If the classification is valid, of which there appears no doubt, then the executive action of exempting one and not the other does not violate Article 14. The High Court erroneously understood that distinction between professional and amateur group has been made only on engagement of a paid artiste. The basic distinction is on the nature and purpose of activities performed by the two. A commercial or profit-making venture has always been considered to be a class different than the one engaged in non-commercial activities. Classification based on such distinction is well recognised and is accepted as valid for purposes of revenue. Under the impugned notification a group giving amateur performance is first to be registered as such and then granted a certificate that it was giving amateur performances. Whereas a professional theatre is not required to WPC.7818/08E & CON.CASES 68
do so. The distinction between two groups being rational and in keeping with the objective of Section 8, the High Court was not justified in striking down the notification as being ultra vires."
33. I would think that the said principle enunciated by the Apex Court can safely be applied to the facts of these cases to repel the contention based on violation of Article 14. I think it can be safely stated that a Government Educational Institution as also the Educational Institutions in the Aided Sector, going by the fees structure prevailing therein and the restrictions which exist, can be distinguished from the Self-Financing Educational Institutions. While it can be held, going by the nature of the activities, that all Educational Institutions are commercial institutions, as held in Social S.G. of Assisi Sisters v. KSEB (1988 (1) KLT 727 (DB)), I would think that nothing can prevent a classification between the groups. It is also to be noted that the availability of better financial resources in Self- Financing Educational Institutions would have telling influence WPC.7818/08E & CON.CASES 69
both in the facilities available to the students and the teachers as also on the quality of teaching itself. It is not a question of the source of funding alone. It is the effect of the source of funding in conjunction with the presence or absence of restrictions in regard to the quantum of funds and also the reflection of the same in the manner in which the Educational Institutions are run including the services provided therein. There is a definite case also that the power consumption in Self-Financing Educational Institutions is far greater than in the Aided and Government Educational Institutions. Article 14 does not predicate mathematical equality. It does not require the Court to be oblivious to the realities of life. Distinctions that distinguish, persons apparently similarly situated can be ignored at the peril of essentially dissimilarly persons being treated equally which again would violate Article 14. Therefore, I would think that no case is made out for interference in Article 226.
34. The next question to be considered is whether the Commission has acted illegally in treating the Self Financing WPC.7818/08E & CON.CASES 70
Educational Institutions as falling in the category of "Commercial Institution". It is contended that education involves the imparting of knowledge and it is acknowledged as being a charitable act. It is also contended that there is no basis to think that the Self-Financing Educational Institutions are set up with an eye of profiteering. My attention was drawn to the decision of the Apex Court in T.M.A. Pai Foundation And Others v. State of Karnataka And Others (2002 (8) SCC 481). Therein, The Chief Justice, Justice B.N. Kirpal, speaking for the majority, held as follows:
"56. One also cannot lose sight of the fact that we live in a competitive world today, where professional education is in demand. We have been given to understand that a large number of professional and other institutions have been started by private parties who do not seek any governmental aid. In a sense, a prospective student has various options open to him/her where, therefore, normally economic forces have a role to play. The decision on the fee to be charged must necessarily be left to the private educational WPC.7818/08E & CON.CASES 71
institution that does not seek or is not dependent upon any funds from the Government.
57. We, however, wish to emphasize one
point, and that is that in as much as the occupation of education is, in a sense, regarded as charitable, the Government can provide regulations that will ensure excellence in education, while forbidding the charging of capitation fee and profiteering by the institution. Since the object of setting up an educational institution is by definition "charitable", it is clear that an educational institution cannot charge such a fee as is not required for the purpose of fulfilling that object. To put it differently, in the establishment of an educational institution, the object should not be to make a profit, in as much as education is essentially charitable in nature. There can, however, be a reasonable revenue surplus, which may be generated by the educational institution for the purpose of development of education and expansion of the institution."
It is therefore contended that in this state of the judicial understanding of the nature of an Educational Institution, it was WPC.7818/08E & CON.CASES 72
entirely illegal and arbitrary on the part of the Commission to have treated the Self-Financing Educational Institutions as falling among the category of "Commercial Institutions". It is also contended that there are indeed restrictions imposed by law on the amount of fees which a Self-Financing Educational Institution can collect. Educational Institutions coming under the CBSE are prohibited from indulging in profiteering, it is submitted. In fact, this embargo against profiteering, it is pointed out, is applicable to all the Institutions under Orders and Statutes. Shri Gangesh would submit that fees itself to be charged in Unaided but recognized Educational Institutions is stipulated in Chapter XII of the Kerala Education Rules. Support is sought to be drawn from the decision of the Apex Court in M.P. Electricity Board And Others v. Shiv Narayan And Another ((2005) 7 SCC 283). Therein, the Apex Court had to deal with the question as to whether the Office of an Advocate will fall within the ambit of "Commercial Establishment". Therein, after referring to the definitions of the WPC.7818/08E & CON.CASES 73
words "Commercial" and "Profession", the Court took the following view:
"14. A professional activity must be an activity carried on by an individual by his personal skill and intelligence. There is a fundamental distinction, therefore, between a professional activity and an activity of a commercial character. Considering a similar question in the background of Section 2(4) of the Bombay Shops and Establishments Act, 1948 (79 of 1948), it was held by this Court in Devendra M. Suri (Dr.) v. State of Gujarat that a doctor's establishment is not covered by the expression "commercial establishment".
The Court also referred to the decision in L.M. Chitale v. Commr. of Labour (AIR 1964 Madras 131), wherein the Court took the view that a "profession" or "occupation" is carried on for the purpose of earning a livelihood and a profit motive does not underlie such carrying of profession or occupation. The Court further referred to an earlier decision of the Apex Court. Paragraphs 12 and 13 also being relevant, are extracted WPC.7818/08E & CON.CASES 74
"12. In Harendra H. Mehta v. Mukesh H.
Mehta ((1999) 5 SCC 108), it was noted as follows:
"19. 1. of, engaged in, or concerned with, commerce. 2. having profit as a primary airm rather than artistic etc. value; philistine." (Concise Oxford Dictionary).
20. In the Black's Law Dictionary,
"commercial" is defined as:
"Relates to or is connected with trade and traffic or commerce in general; is occupied with business and commerce. Anderson v. Humble Oil & Refining Co." (SCC p.121, paras 19-20). "(A) broad and not a restricted construction should be given to the word "commercial"
appearing in Section 2 of the Foreign Awards Act. In R.M. Investment and Trading Co.(P) Ltd. case, the terms of the agreement required the petitioner to play an active role in promoting the sale and to provide "commercial and managerial assistance and information" which may be helpful in the respondents' sales efforts. It was held that the relationship between the appellant and the WPC.7818/08E & CON.CASES 75
respondents was of a commercial nature. The Court said that the word "Commercial" under Section 2 of the Foreign Awards Act should be liberally construed." (SCC p. 120, para 18).
13. In Stroud's Judicial Dictionary (5th Edn.) the term "commercial" is defined as "traffic, trade or merchandise in buying and selling of goods."
It was to be noticed that, however, the Apex Court took note of the decision in New Delhi Municipal Council v. Sohanlal Sachadev ((2000) 2 SCC 494) and held as follows: "15. In the above background, we would
have dismissed the appeal. But, we notice that in New Delhi Municipal Council v. Sohan Lal
Sachdev, certain observations are made, with which we do not agree. In para 12, it was observed as follows: (SCC p.497):
"12. The two terms "domestic" and
"commercial" are not defined in the Act or the Rules. Therefore, the expressions are to be given the common parlance meaning and must be
understood in their natural, ordinary and popular sense. In interpreting the phrases the context in WPC.7818/08E & CON.CASES 76
which they are used is also to be kept in mind. in Stroud's Judicial Dictionary (5th Edn.) the term "commercial" is defined as "traffic, trade or merchandise in buying and selling of goods". In the said dictionary, the phrase "domestic purpose" is stated to mean use for personal residential purposes. In essence, the question is, what the character of the purpose of user of the premises by the owner or landlord is and not the character of the place of user. For example, running a boarding house is a business, but persons in a boarding house may use water for "domestic" purposes. As noted earlier, the classification made for the purpose of charging electricity duty by NDMC sets out the categories "domestic" user as contradistinguished from "commercial" user or to put it differently "non- domestic user". The intent and purpose of the classification, as we see it, is to make a distinction between purely "private residential purpose" as against "commercial purpose". In the case of a "guest house", the building is used for providing accommodation to "guests" who may be travellers, passengers, or such persons who may WPC.7818/08E & CON.CASES 77
use the premises temporarily for the purpose of their stay on payment of the charges. The use for which the building is put by the keeper of the guest house, in the context cannot be said to be for purely residential purpose. Then the question is, can the use of the premises be said to be for "commercial purpose" ? Keeping in mind the context in which the phrases are used and the purpose for which the classification is made, it is our considered view that the question must be answered in the affirmative. It is the user of the premises by the owner (not necessarily absolute owner) which is relevant for determination of the question and not the purpose for which the guest or occupant of the guest house uses electric energy. In the broad classification as is made in the Rules, different types of user which can reasonably be grouped together for the purpose of understanding the two phrases "domestic" and "commercial" is to be made. To a certain degree, there might be overlapping, but that has to be accepted in the context of things.
16. Even if it is accepted that the user was not domestic, it may be non-domestic. But, it does WPC.7818/08E & CON.CASES 78
not automatically become "commercial". The words "non-domestic" and "commercial" are not interchangeable. The entry is "commercial". It is not a residual entry, unless the user is commercial the rate applicable to the commercial user cannot be charged merely because it is not considered to be domestic user, as has been held in New Delhi Municipal Council case.
17. The view expressed in the said case does not appear to be correct. We, therefore, refer the matter to a larger Bench. Place the records before The Honourable Chief Justice of India for necessary orders."
In fact, Shri C.K. Karunakaran relied on the decision of the Apex Court in New Delhi Municipal Council v. Sohan Lal Sachdev (Dead) representation. by Mrs. Hirinder Sachdev (2000 (2) SCC 494) which is referred to. That was a case where the respondent landlord had let out the first floor and the barsati floor to a party for running a guest house. The appellant Council contended that the guest house was appropriately WPC.7818/08E & CON.CASES 79
classified as "commercial" and not a "domestic user".
35. I notice that the Apex Court in the decision in Municipal Corporation of Delhi v. Children Book Trust (AIR 1992 1456) had occasion to consider the concept of a Commercial Institution and that too an Educational Institution being commercial. This decision was in the context of the Delhi Municipal Corporation Act(66 of 1957). In Section 115 thereof, providing for levy of property tax, exemption was granted in respect of lands and buildings or portions thereof, inter alia, exclusively occupied and used for a charitable purpose. The provision read as follows:
"Provided that such society or body is
supported wholly or in part by voluntary
contributions, applies its profits, if any, or other income in promoting its objects and does not pay any dividend or bonus to is members."
The explanation defined "Charitable Purpose" again, inter alia, as including "education". Paragraphs 64 to 66 being relevant are extracted hereunder:
WPC.7818/08E & CON.CASES 80
"64. In this background, we will consider whether education per se is a charitable purpose and its application to the appellant society. The case relied on strongly is Pemsel (1891) (3) Tax Cases 53) (supra). The dictum of Lord Macnaghten at page 96 is as follows:-
""Charity" in its legal sense comprises four principal divisions: trusts for the relief of poverty, trusts for the advancement of education, trusts for the advancement of religion, and trusts for other purposes beneficial to the community not falling under any of the preceding heads. The trusts last referred to are not the less charitable in the eye of the law because incidentally they benefit the rich as well as the poor, as indeed every charity that deserves the name must do, either directly or indirectly."
65. One thing that is clear is that each of the Law Lords emphasised the underlying ideas of charity involving as element of philanthropy or something derived from pity of early times as being the fundamental of the concept of charity. Lord Bramwell at page 83 states:
"I think a "charitable purpose" is where
WPC.7818/08E & CON.CASES 81
assistance is given to the bringing up, feeding, clothing, lodging, education of those who, from poverty or comparative poverty, stand in need of such assistance."
Again, Lord Herschell at page 88 observed: "It is the helplessness of those who are the objects of its care which evokes the assistance of the benevolent. I think, then, that the popular conception of a charitable purpose covers the relief of any form of necessity, destitution, or helplessness which excites the compassion or sympathy of men, and so appeals to their
benevolence for relief."
66. Therefore, an element of public benefit or philanthropy has to be present. The reason why we stress on this aspect of the matter as if education is run on commercial lines, merely because it is a school, it does not mean it would be entitled to the exemption under Section 115(4) of the Act."
36. In Modern School v. Union of India And Others ((2004) 5 SCC 583), a Bench of three Judges of the Apex Court had to consider the question whether the Unaided recognized WPC.7818/08E & CON.CASES 82
Schools were indulging in commercialisation of education. The majority, speaking through Justice S.H. Kapadia, held as follows:
"14. At the outset, before analysing the provisions of the 1973 Act, we may state that it is now well settled by a catena of decisions of this Court that in the matter of determination of the fee structure, unaided educational institutions exercise a great autonomy as they, like any other citizen carrying on an occupation, are entitled to a reasonable surplus for development of education and expansion of the institution. Such institutions, it has been held, have to plan their investment and expenditure so as to generate profit. What is, however, prohibited is commercialisation of education. Hence, we have to strike a balance between autonomy of such institutions and measures to be taken to prevent commercialisation of education. However, in none of the earlier cases, this Court has defined the concept of reasonable surplus, profit, income and yield, which are the terms used in the various provisions of the 1973 Act."
WPC.7818/08E & CON.CASES 83
It was further held as follows:
"However, the right to establish an
institution under Article 19(1)(g) is subject to reasonable restriction in terms of clause (6) thereof. Similarly, the right conferred on minorities, religious or linguistic, to establish and administer educational institution of their own choice under Article 30(1) is held to be subject to reasonable regulations which, inter alia, may be framed having regard to public interest and national interest. In the said Judgment, it was observed (vide para 56) that economic forces have a role to play in the matter of fee fixation. The institutions should be permitted to make reasonable profits after providing for investment and expenditure. However, capitation fee and profiteering were held to be forbidden. Subject to the above two prohibitory parameters, this Court in T.M.A. Pai Foundation case held that fees to be charged by the unaided educational institutions cannot be regulated."
37. Still later, in P.A. Inamdar And Others v. State of WPC.7818/08E & CON.CASES 84
Maharashtra And Others ((2005) 6 SCC 537), a Bench of seven Judges were called upon to deal with questions which had to be dealt with in the wake of the decisions in T.M.A. Pai Foundation And Others v. State of Karnataka And Others ((2002) 8 SCC 481) and Islamic Academy of Education v. State of Karnataka ((2003) 6 SCC 697). Therein, the Court reiterated the right of Self-Financing Educational Institution to devise its own fee structure, subject to the limitation that there can be no profiteering or capitation fee charged directly or indirectly or in any other form. Paragraph 140 of the said Judgment being relevant, is extracted hereunder:
"140. Capitation fee cannot be permitted
to be charged and no seat can be permitted to be appropriated by payment of capitation fee. "Profession" has to be distinguished from "business" or a mere "occupation". While in business, and to a certain extent in occupation, there is a profit motive, profession is primarily a service to society wherein earning is
secondary or incidental. A student who gets a professional degree by payment of capitation WPC.7818/08E & CON.CASES 85
fee, once qualified as a professional, is likely to aim more at earning rather than serving and that becomes a bane to society. The charging of capitation fee by unaided minority and non- minority institutions for professional courses is just not permissible. Similarly, profiteering is also not permissible. Despite the legal position, this Court cannot shut its eyes to the hard realities of commercialisation of education and evil practices being adopted by many institutions to earn large amounts for their private or selfish ends. If capitation fee and profiteering is to be checked, the method of admission has to be regulated so that the admissions are based on merit and transparency and the students are not exploited. It is permissible to regulate admission and fee structure for achieving the purpose just stated."
38. The decision of the Apex Court in Cochin University v. Thomas P. John ((2008) 8 SCC 82) also is an authority for the proposition that subject to there being no profiteering or capitation fee, there is freedom in the matter of fee structure. In Lisie Medical & Educational Institutions v. State of Kerala WPC.7818/08E & CON.CASES 86
(2007 (1) KLT 409) also, a Division Bench of this Court reiterated that a Self-Financing Professional College has a right to fix its own fee structure, subject to the right of the Committee to find out whether there is profiteering or charging of capitation fee. It, therefore, becomes necessary to ascertain as to what is the meaning of the words "Profiteering". In Black's Law Dictionary (7th Edn.), "Profiteering" is defined as follows: "Profiteering: The taking advantage of
unusual or exceptional circumstances to make excessive profits, as in the selling of scarce goods at inflated prices during war."
In Advanced Law Lexicon (3rd Edn.) by Shri P. Ramanatha Iyer also, it is stated as follows:
"Profiteering: Making an exorbitant and unjustifiable profit, taking undue advantage of short supply of necessary commodities. S.8(3), Expln.(a), Representation of the People Act (43 of 1951)."
"Taking advantage of unusual or exceptional circumstances to make excessive profits (Black's Law Dictionary, 5th Edn. as WPC.7818/08E & CON.CASES 87
referred in Modern School v. Union of India III (2004) SLT 364, 384, para 31)"
"A customary right of tenants in the locality, to cut wood for fuel, plough-handles, door-posts etc. is a right of customary easement attaching to the locality and not to any collection of individuals; such a right is known in this country, in this case of free pasturage or a fishery as what in English law is called a profit a prendre. 6 CLJ 218 (222)."
39. Thus, making of a reasonable profit cannot amount to profiteering. Undoubtedly, Self-Financing Educational Institutions are permitted to devise fee structure which will entitle them to earn a surplus. I find that in respect of CBSE Schools, the relevant clause actually reads as follows: "12. The rate of tuition fee and other fees charged should be commensurate with the
There is no specific limit to the amount of fees that can be collected. In the case of Modern School which I have already referred to, in fact, the Supreme Court itself has expressly WPC.7818/08E & CON.CASES 88
permitted the right to earn profit and what was prohibited is profiteering which, as already noted, is entirely distinct from earning a reasonable profit. No doubt, it may be that the surplus or the profit is to be used for the purpose of the Educational Institution. The Commission has taken the stand that the motive of the Self-Financing Educational Institutions is only business in the guise of service and that Self-Financing Educational Institutions accommodate only students belonging to the class having paying capacity. I am not considering the issue as an Appellate Authority, but only in judicial review. It is to be noted that this is not an issue relating to violation of any fundamental right. It is not as if this relates to jurisdiction. Nor, is it a matter relatable to violation of the principles of natural justice. It may not amount to a palpable illegality.
40. As far as Unaided Recognized Schools coming under the Kerala Education Rules are concerned, Shri Gangesh points out Rule 29 of Chapter XII of the Kerala Education Rules and he contends that they cannot be treated as Self-Financing Educational Institutions. Rule 29 reads as follows: WPC.7818/08E & CON.CASES 89
"29. Fees in recognised Schools:- The tuition fees realised from pupils in a recognised School shall not exceed the following rates:- Standard I to VII - Rs.1,000/= per pupil per year.
Standard VIII to X - Rs.1,500/= per pupil per year.
The special fees which can be collected from pupils in recognised schools shall not exceed one- third of the rates specified above."
At first blush, there appears to be some merit in the case of recognised Schools under the Kerala Education Rules. There are no Counter Affidavits or Additional Counter Affidavits filed in many of these cases. Rule 30 of Chapter XII of the Kerala Education Rules reads as under:
"30. Nothing in this Chapter shall apply to Minority Schools, the management or teachers of which do not receive any kind of aid or grant or other financial help directly or indirectly from Government."
But, there is no case that the Educational Institutions in question are minority Institutions. It is to be noted that the tuition fees WPC.7818/08E & CON.CASES 90
per year for Standards from I to X is nil in Government and Government Aided Educational Institutions. Further, no special fee shall be collected where there are no facilities for the utilisation of the fee for the purpose in Government and Aided Schools. Rule 1 of Chapter XII KER relates to the fees to be collected in Government and Aided Schools. Sub-rule (2) of Rule 1 of Chapter XII KER specifically prohibits collection of any fee other than those prescribed in sub-rule (1) and the admission fee mentioned in Rule 2 except with the sanction of the Government in an Aided School and government School. But, as far as recognised Educational Institutions are concerned, apart from the fact that tuition fee can be collected as also special fees, there is no embargo against collection of any other fee other than the tuition fee and special fee. As far as the Government Order dated 23.7.2002 referred by Shri Gangesh is concerned, going by the Government Order, both in the Aided and Unaided Sectors, there is reference to tuition fee and all other fees besides refundable caution deposit. The tuition fee is WPC.7818/08E & CON.CASES 91
Rs.500/= per month and all other fees is Rs.1,000/= per year. Refundable caution deposit is Rs.1,000/=. It is no doubt ordered that the management is to ensure that no other fees are collected and violation would result in cancellation of Plus II. But, I note that there is no pleading whatsoever for the petitioners about the Government Order. There is no case in the Writ Petitions based on the Order. Further, the Higher Secondary Schools are attached to Schools having Standards upto High School Section, where as I have already noted, there is no restriction as contained in relation to Government and Aided Schools. Also, what has been fixed is the minimum salary of teachers and others. It appears to be low. What is important is the capability to raise revenue and its ramifications, and not whether any particular Self-Financing Educational Institution is actually making use of its power to raise revenue, as ordinarily a Self-Financing Educational Institution may raise.
41. It is necessary to consider whether the decision of this Court in Social S.G. of Assisi Sisters v. KSEB (1988 (1) KLT WPC.7818/08E & CON.CASES 92
727) is to be treated as no longer good law in the light of the decision of the Apex Court in T.M.A.Pai Foundation And Others v. State of Karnataka And Others ((2002) 8 SCC 481). In this context, it is apposite to refer to the decision of B.N. Kirpal, CJ, for himself and five other learned Judges which, inter alia, reads as follows:
"20. Article 19(1)(g) employs four
expressions viz. profession, occupation, trade and business. Their fields may overlap, but each of them does have a content of its own.
Education is per se regarded as an activity that is charitable in nature (see State of Bombay v. R.M.D. Chamarbaugwala). Education has so far not been regarded as a trade or business where profit is the motive. Even if there is any doubt about whether education is a profession or not, it does appear that education will fall within the meaning of the expression "occupation". Article 19(1)(g) uses the four expressions so as to cover all activities of a citizen in respect of which income or profit is generated, and which can consequently be regulated under Article 19(6). WPC.7818/08E & CON.CASES 93
In Webster's Third New International Dictionary, at p.1650, "occupation" is, inter alia, defined as "an activity in which one engages" or "a craft, trade, profession or other means of earning a living".
21. In Corpus Juris Secundum, Vol. 67, the word "occupation" is defined as under:
"The word "occupation" also is employed
as referring to that which occupies time and attention; a calling; or a trade; and it is only as employed in this sense that the word is discussed in the following paragraphs:
There is nothing ambiguous about the word "occupation" as it is used in the sense of employing one's time. It is a relative term, in common use with a well-understood meaning, and very broad in its scope and significance. It is described as a generic and very comprehensive term, which includes every species of the genus, and encompasses the incidental, as well as the main, requirements of one's vocation, calling, or business. The word "occupation" is variously defined as meaning the principal business of one's life; the principal or usual business in WPC.7818/08E & CON.CASES 94
which a man engages; that which principally takes up one's time, thought, and energies; that which occupies or engages the time and
attention; that particular business, profession, trade, or calling which engages the time and efforts of an individual; the employment in which one engages, or the vocation of one's life; the state of being occupied or employed in any way; that activity in which a person, natural or artificial, is engaged with the element of a degree of permanency attached."
23. In Unni Krishnan case at p.687, para
63, while referring to education, it was observed as follows:
"It may perhaps fall under the category of occupation provided no recognition is sought from the State or affiliation from the University is asked on the basis that it is a fundamental right."
24. While the conclusion that "occupation" comprehends the establishment of educational institutions is correct, the proviso in the aforesaid observation to the effect that this is so provided no recognition is sought from the State or affiliation from the University concerned WPC.7818/08E & CON.CASES 95
is, with utmost respect, erroneous. The fundamental right to establish an educational institution cannot be confused with the right to ask for recognition or affiliation. The exercise of a fundamental right may be controlled in a variety of ways. For example, the right to carry on a business does not entail the right to carry on a business at a particular place. The right to carry on a business may be subject to licensing laws so that a denial of the licence prevents a person from carrying on that particular business. The question of whether there is a fundamental right or not cannot be dependent upon whether it can be made the subject-matter of controls.
25. The establishment and running of an
educational institution where a large number of persons are employed as teachers or administrative staff, and n activity is carried on that results in the imparting of knowledge to the students, must necessarily be regarded as an occupation, even if there is no element of profit generation. It is difficult to comprehend that education, per se, will not fall under any of the four expressions in Article 19(1)(g). WPC.7818/08E & CON.CASES 96
"Occupation" would be an activity of a person undertaken as a means of livelihood or a mission in life. The above quoted observations in Sodan Singh case correctly interpret the expression "occupation" in Article 19(1)(g)."
42. I have also already referred to paragraphs 56 and 57. I do not see how it could be said, particularly in the context of the question as to the determination of the tariff, that the Educational Institutions could not be treated as commercial, going even by the test employed in Social S.G. of Assisi Sisters v. KSEB (1988 (1) KLT 727) and the decision in T.M.A. Pai Foundation And Others v. State of Karnataka And Others (2002 (8) SCC 481) does not affect it.
43. I must remind myself that the Kerala State Electricity Regulatory Commission is an Expert Body and it is settled law that the Court will not lightly interfere with the fixation of tariff by such a Body. I also see no merit in the case based on absence of materials and non-application of mind, in the light of the discussions which I have already made and the state of the WPC.7818/08E & CON.CASES 97
law which I have referred to. Petitioners have not made out a case for interference under Article 226. Accordingly, the Writ Petitions fail and they are dismissed.
K. M. JOSEPH, JUDGE
kbk. // True Copy //
PS to Judge