Hyderabad Vanaspathi Limited Vs. Andhra Pradesh State Electricity Board & Ors  INSC 201 (1 April 1998)
Agrawal, S.Saghir Ahmad, M. Srinivasan Srinivasan, J.
J U D
G E M E N T
Relevant facts, The appellant in the earlier appeal of 1988 is a public limited
company engaged in the manufacture of Vanaspathi. It entered into two
agreements with Andhra Pradesh State Electricity Board hereinafter referred to
as `Board' on 1.9.1970 and 27.8.1973 for supply of High tension power. In
January, 1976 the officers of the Board inspected the factory premises and
noticed pilferage of energy. The power supply was immediately disconnected and
a provisional assessment of the loss was made at Rs. 61,28,535/-. A prosecution
was launched under Section 379 I.P.C. read with Section 39 of the Indian
Electricity Act, 1910, hereinafter referred to as the Electricity Act in the
court of the Chief Metropolitan Magistrate, Hyderabad. The Board also initiated proceedings calling upon the appellant to
file its objections to the provisional assessment. The appellant denied the
allegations made by the Board. After enquiry, the final assessment was made
fixing the lost at Rs. 55,511.81 Ps. The order was challenged by the appellant
in appeal but in vain. The appellant filed a suit in the court of Additional
Chief Judge, City Civil Court (Temp), Hyderabad for a declaration that it was
not liable to pay any amount as penal damages and prayed for a direction for
refund of the amount of Rs. 22.50 lakhs collected by the Board during the pendency
of the assessment proceedings and for perpetual injunction restraining the
defendants therein from disconnecting the power supply.
suit was contested by the Board. Several issues were raised including one
relating to the jurisdiction of the civil court. The trial court held that it
had jurisdiction to try the suit but negatived all the contentions of the
plaintiff and dismissed the suit. On appeal, a Division Bench of Andhra Pradesh
High Court rejected the pleas of the appellant and dismissed the same.
High Court held that the terms and conditions of supply on the basis of which
the agreements were entered between the appellant and the Board did not in any
way contravene the provisions of either the " Electricity Act or the
Electricity (Supply) Act. It was also found that ample opportunity was given to
the appellant before the final order of assessment was made and that the
enquiry held by the officers of the Board was in no way vitiated. Aggrieved by
the said decision of the High Court the appellant preferred the said appeal on
obtaining Special Leave of this court.
questions which were decided by the High Court in the aforesaid proceedings
were raised again in Writ Petitions under Article 226 of the Constitution of
India by some industrial undertakings which had also entered into agreements
with the Board for supply of electricity. When proceedings were initiated by
the Board against those industrial undertakings on the ground of pilferage of
electrical energy and supply was disconnected pending enquiry, those
undertakings filed Writ Petitions challenging the validity of such proceedings.
In one of the writ petitions, an appeal was filed against an Interlocutory
Order refusing to grant interim relief to the petitioner therein. When that
appeal was admitted by a Division Bench the matter was placed before a Full
Bench for disposal as the Division Bench opined that the view taken by the
Division Bench in the Civil Appeal referred to earlier was likely to be in conflict
with the "possible view that the contractual obligation upon the consumer
of electricity that in case of a dispute as to the consumption, the
adjudication shall be by the officers of the Board shall be deviative of
Article 14 of the Constitution of India". Thus all the writ petitions and
the writ appeals against interlocutory orders were heard by a Full Bench of
three Judges and disposed of by a common judgment dated 12.9.1997.
Full Bench opined that the creation of the adjudicatory process by a contractual
obligation in condition no. 39 of the `Terms and Conditions of Supply' of
electricity was wholly vitiated" The Full Bench observed that though there
is no bar against the Board to recover compensation for the loss caused to it
even when a consumer is prosecuted for the same offence under the Act, the
enquiry into the estimate of the loss should be made by an independent and
properly constituted body. Ultimately the Full Bench concluded its order as
view of the above discussion, we have no hesitation to hold that condition 39
of the conditions framed by the Board, to the extent it prescribes the
procedure for adjudication of the dispute relating to pilferage or malpractice
of energy and for final assessment of the additional charges, is ultravires of
Section 24, 26 (6) and C1.IV(3) of schedule of the Act of 1910 and Sect. 49 of
Act of 1948, and is wholly vitiated as being arbitrary and violative of Article
14 of the Constitution and is accordingly struck down.
the contention of the learned Advocate General that the Board is empowered to
regulate the supply of energy including the power of disconnection, on a prima
facie satisfaction or suspicion of a conduct amounting to malpractice or energy
on ground of including malpractice of pilferage of energy.
conditions in the agreements in Appendix III & IV also contain stipulation
of disconnection of supply on suspicion of violation of conditions. Thus, if an
allegation is made of malpractice or pilferage against the consumer an d if the
consumer denied the allegation and makes an application to the Electrical
Inspector, holds on preliminary facts, that he has no jurisdiction in the
matter, then the Board is empowered to take such step as it may deem proper and
appropriate including disconnection of supply on certain conditions.
action of the Board, is however, subject to the scrutiny by a court of
is against the said judgment of the Full Bench the Board has filed the Civil
Appeals Nos. 7139-7144 of 1997.
the appeals have been heard together as the contentions are common. For the
sake of convenience, the parties will be hereafter referred to as the Board on
the one hand and the consumers on the other.
chief argument advanced on behalf of the consumers is that condition number 39
in the `Terms and Conditions of Supply' of electricity which are purely
contractual is ultravires the provisions of the Indian Electricity Act, 1910
hereinafter referred to as the `Electricity Act' and Electricity (Supply) Act,
1948 hereinafter referred to as the `Supply Act'. Alternatively, it is
contended that even if the terms are statutory in nature, the condition is not
valid. Thirdly, it is argued that the said condition is violative of Article 14
of the Construction of India. Per contra, it is contended on behalf of the
Board that it is performing a statutory obligation to supply electricity and
has been empowered by the provisions of Section 49 of the Supply Act to impose
such terms and conditions as it thinks fit. The conditions which have been so
imposed including condition number 39 are statutory in character and are in no
way contrary to the provisions of either of the enactments.
conditions are also quite reasonable and cannot in any sense be termed
arbitrary and violative of the provisions of Article 14 of the Constitution of
RELEVANT STATUTORY PROVISIONS
Before adverting to the rival contentions, it is necessary to refer to certain
provisions in the two enactments namely Electricity Act and the Supply Act. An
Electricity Act was passed originally in 1903 but it was repealed by the
Electricity Act which amended the law relating to the supply and use of
electrical energy. The said Act was not a complete Code on the subject. It was
apparently found to be inadequate for coordinating development of electricity
on regional basis. Hence, the Supply Act was enacted in 1948 to provide for rationalisation
of the production and supply of electricity and generally for taking measures
conducive to electricity and generally for taking measures conducive to
electricity development. While the earlier Act deals with the supply and use of
electric energy and the rights an d obligations of the licensees, the later Act
deals with statutory power and functions of the Central Electricity Authority,
State Electricity Boards and Generating companies. Section 70(1) of the later
Act provisions in so far as there is any inconsistency therewith in the
provisions of the earlier Act or any Rules made there under or any instrument
having effect by virtue of the said Act or Rules. The proviso to sub- section
(1) clarifies that nothing in the later Act shall be doemed to prevent the
State Government from granting, after consultation with the Board, a licence
not inconsistent with the provisions of the earlier Act to any person in
respect of such area and on such terms and conditions as the State Government
may think fit. Sub-s.(2) makes it clear that save as otherwise provided in the
later Act, the provisions of the Act shall be in addition to and not in
derogation of the earlier Act.
Section 26 of the Supply Act is to the offer that the Board shall in respect of
the whole State have all the powers and obligations of the licensee under the
Electricity Act and the later Act shall be deemed to be the licence of the
Board for the purpose of the earlier Act. The first proviso to the Section 3 to
11, sub-ss. (2) and (3) of Section 21, Section 22, sub-section (i) to (v),
clause (vii) and clauses (ix) to (xii) of the Schedule to the Electricity Act
relating to the duties and obligations of a licensee.
second proviso states that the provisions of clause (vi) to the Schedule to the
earlier Act shall apply to the Board in respect of that area only where
distribution mains have been laid by the Board and the supply of energy through
any of them had commenced.
view of the provisions of Section 26 of the Supply Act our attention has been
drawn by the learned counsel for the consumers to some only of the provisions
of the Electricity Act. Section 20 sets out the power of the licensee or any
person duly authorised by the licensee to enter the premises to which energy
has been supplied and remove fittings, etc. in certain circumstances and the
procedure therefore. Sub-sections (1) and (4) of Section 21 are in the
following terms :
21(1). A licensee shall not be entitled to prescribe any special form of
appliance for utilizing energy supplied by him or save as provided (in any
conditions made under sub-s. (2) or) by Section 23, sub-s. (2), or by Section
26, sub-s.(7), in any way to control or interfere with the use of such energy :
that no person may adopt any form of appliance, or use the energy supplied to
him so as to unduly or improperly to (interfere with –
safety or efficient working of licensee electric supply lines or other works ;
supply of energy by the licensee to any other person).....
Where any difference or dispute arises as to whether a licensee has prescribed
any applicance or controlled or interfered any applicance or controlled or
interfered with the use of energy in contravention of sub-section (1), the
matter shall be either referred to an Electrical Inspector and decided by him,
or, if the licensee or consumer so desires, determined by arbitration."
Section 24(1) and (2) read as follows :- "(1) Where any person neglects to
pay any charge for energy or any (sum, other than a charge for energy,) due
from him to a energy to him, the licensee may, after giving not less than seven
clear days notice in writing to such person and without prejudice to his right
to recover such charge or other sub my suit, cut off the supply and for that
purpose cut or disconnect any electric supply-line or other works, being the
property of the licensee, through which energy may be supplied, and may
discontinue the supply until such charge or other sum, together with any
expenses incurred by him in cutting off and re-connecting the supply, are paid,
but no longer.
Where any difference or dispute (which by or under this Act is required to be
determined by an Electrical Inspector, has been referred to the Inspector)
before as aforesaid has been given by the licenses, the licensee shall not
exercise the powers conferred by this section until the Inspector has given his
that the prohibition contained in this sub-section shall not apply in any case
in which the licensee has made a request in writing to the consumer for a
deposit with the (Electrical Inspector) of the amount of the licensee's charges
or other sums in dispute the deposit of the licensee's further charges for or
for energy as they accrue, and t he consumer has failed to comply with such
request.) Section 26(6) is in the following terms :
any difference or dispute arises as to whether any meter referred to in
sub-section (1) is or is not correct, the matter shall be decided, upon t he
application of either party, by an Electrical Inspector; an d where the meter
has, in the opinion of such Inspector shall estimate the amount of the energy
supplied to the consumer or the electrical quantity contained in the supply,
during such time, not exceeding six months, as the meter shall not, in the
opinion of such Inspector, have been correct; but save as aforesaid, the
register of the meter shall, in the absence of fraud, be conclusive proof of
such amount or quantity :
that before either a licensee or a consumer applies to the Electrical Inspector
applies to the Electrical Inspector under this sub-section, he shall give to
the other party not less than seven days, notice of his intention so to
Learned counsel has also draw our attention to Section 35 and 36 of the said
Act as well as Rules 4 to 6 of the Indian Electricity Rules framed under the
Act. Section 35 deals with the constitution of the Advisory Board and Section
36 deals with the appointment of Electrical Inspector. Rules 4 to 6 provide for
the qualifications of Inspectors etc. We are not extracting those provisions as
they are unnecessary in this case. In the course of arguments our attention has
also been drawn to Rule 27 which provides for Model conditions or supply as
contained in Annexure VI.
Apart from the above, strong reliance is placed on Clause VI of the Schedule to
the Act which deals with requisition for supply to owners or occupiers of any
premises situate within the area of supply of a licensee.
(1) and sub-clause (3) of Clause VI read as follows :- VI. Requisition for
supply to owners or occupiers in vicinity (1) Where, (after distribution mains
have been laid down under the provisions of Clause IV or Clause V and the
supply of energy through those mains or any of them has commenced.) a
requisition is made by the owner or occupier of any premises situate within
(the area of supply) requiring the licensee to supply the energy for such
premises the licensee shall, within one month from the making of the
requisition, (or within such longer period as the (Electrical Inspector) may
allow) supply, and, save in so far as he is prevented from doing so by cyclones,
floods, storms or other occurrence beyond his control continue to supply,
energy in accordance with the requisition.
Where any difference or dispute arises as to the amount of energy to be taken
or guaranteed as aforesaid, or as to the cost of any service-line or as to the
sufficiency of the security offered by any owner of occupier, (or as to the
position of the meter board) or as to the improper uses of energy, or as to any
alleged defect in any wires, fittings, works or apparatus, or as to the amount
of the expenses incurred under the third proviso to sub-cl.(1), the matter
shall be referred to and (Electrical Inspector) and decided by him.
Turning to the provisions of the Supply Act, apart from the Sections which we
have referred to earlier, reference may be made to Sections 18 and 19. While
Section 18 sets out the general duties of t he Board, Section 19 sets out the
powers of the Board. Section 49 is the most relevant provision in this case and
it reads as follows :
49. Provision for the sale of electricity by the Board to persons other than
Subject to the provisions of this Act and or regulations, if any, made in this
behalf, the Board may supply electricity to any person not being a licensee
upon such terms and conditions as the Board thinks fit and may for the purposes
of such supply frame uniform tariffs.
fixing the uniform tariffs, the Board shall have regard to all or any or the
following factors, namely-
nature of the supply and the purposes for which it is required;
the co-ordinated development of the supply and distribution of electricity
within the State in the most afficient and economical manner, with particular
reference to such development in areas not for the time being served or
adequately served by the licensee;
simplification and standardisation of methods and rates of charges for such
extension and cheapening of supplies of electricity of sparsely developed
Nothing in the foregoing provisions of this section shall derogate from the
power of the Board, if it considers it necessary or expendient to fix different
tariffs for the supply of electricity of any person not being a licensee,
having regard to the geographical position of any area, the nature of the
supply and purpose for which supply is required and any other relevant factors.
fixing the tariff and terms and conditions for the supply of electricity, the
Board shall not show undue preference to any person".
Section 78 enables the Government to frame Rules to give effect to the
provisions of the Act. Section 79 empowers the Board to make regulation not
inconsistent with the Act and the Rules made thereunder to provide for all or
any of the matters set out therein. On of them is "(i) principles
governing the supply to electricity by the Board to persons other than
licensees under Section 49". Section 79A provides that every rule made by
the State Government under Section 78 and every regulation made by the Board
under Section 79 shall be laid as soon as may be before the State Legislature.
RELEVANT CLAUSES OF THE TERMS AND CONDITIONS OF SUPPLY
Clause 39 which is the main target of attack defines various malpractices
provides for enquiries by designated officials. Clauses 39.4, 39.5., 39.6 read
as follows :- Clause 39.4 Officers authorised to inspect and deal with cases of
malpractice and pilferage of energy are as indicated below :
Particulars Officer or officers authorised To inspect the To disconnect and
issue To make premises and provisional assessment final ass.
provision notice to the consumer appellate -al assessment authority
------------------------------------------------------------ 2. H.T. Service
ADE.DE ADE S.E. C.E. including & S.E. incharge temporary supply
------------------------------------------------------------ "Clause 39.5
Where on the inspection of consumer's installations or premises or on the basis
of other information or data there is scope for suspecting that a consumer is
guilty of "supply of electricity to any service, which, is disconnected by
the Board" of "pilferage of energy", the officer authorised in
this benefit by the Board may without prejudice of Board's other rights, casue
consumer to be forthwith disconnected without any notice and report the mattera
to the Final assessing authority. In the case of the malpractices other than
the one mentioned above, supply shall be disconnected only in the event of
failure on the part of the consumer to pay half of the estimated amount within
the period stipulated in the previsional assessment notice." "Clause
39.6 Provisional assessment on the loss sustained by the Board and payment:
inspecting officer shall make a provisional estimate of the loss incurred by
the Board by the reason of the malpractice or pilferage of energy committed by
the consumer which shall be assessed as mentioned herein below and intimated to
the Assistant Divisional Engineer concerned. The A.D.E. concerned shall ensure
disconnection of such services forthwith in the case of malpractice with
reference to supply of electricity to any disconnected service or pilferage of
energy. The Assistant Divisional Engineer shall then serve the consumer with a
notice of provisional assessment in the prescribed form. Such notice shall
matters noticed during the inspection of he consumer's premises and
reasons for disconnection already effected or propose to be effected and
provisional estimate of the losss sustained by the Board computed in the
shall inform the consumer to pay half of the provisionally assessed amount,
pending the enquiry to be conducted by the concerned authority into the case,
to secure restoration of supply where supply has been disconnected or to avoid
discontinuance of supply where such payment is made the consumer's service
shall not b e disconnected on this ground pending the enquiry".
The provisional assessment of the loss referred to in Clause 39.6 shall made on
the principles set out in clause 39.7.1 and 39.7.2. It is provided that
assessment shall be made for the estimated period of malpractice subject to a
maximum of one year prior to the date of inspection. Clause 39.8.1 and 39.8.2
provide for provisional assessment notice in the case of malpractices other
than supply of electricity to disconnected premises and disconnection of
service on the consumer's failure to pay the provisionally assessed amount.
Clause 39.9 is in the following terms :
39.9.1 After the provisional assessment notice is servaed upon the consumer as
mentioned in clause
thereof the officer authorised in this behalf by the Board (see statement
referred to in clause
above) shall issue a show cause notice in the forms prescribed therefore
advising the consumer to file his representation if any, within 30 days from
the receipt of the notice.
39.9.2 The said officer of the Board shall, after the expiry of the aforesaid
notice period, enquire into the matter and after giving reasonable opportunity
to the consumer and taking into account all relevant facts and circumstances
shall decide whether the consumer has committed malpractice or pilferage of
energy and if so satisfied proceed to assess to the best of his judgment, the
loss sustained by the Board on account of such malpractice or pilferage of
energy by the consumer. The consumer may be represented by an advocate at the
time of personal hearing provided the consumer files proper vakalatnama.
39.9.3 The final assessing authority shall then pass an order setting out his
conclusions and the reasons thereof and communicate a copy of the order to the
consumer and demand the amount if any due from the consumer on the basis of
such order after giving credit to the amounts paid by him.
39.9.4 Payment of amount of final assessment. The consumer shall pay to the
Board within 30 days of the receipt of final assessment order, the amounts
Against the order of final assessment an appeal lies to the designated
authority. The appellant may be represented by an advocate before the appellate
authority at the hearing. The appellate authority shall give his reasons for
his conclusion except in cases where the appeal is allowed in toto. Clause
39.10.6 provides that the order on appeal shall be final subject to clause
39.11 and be not liable to be questioned in any court of law clause 39.11 is in
the following terms:
39.11 The Chairman or his nomince (the nominee being any member of the Board)
may suo moto at any time call for and examine the record of any order passed or
proceedings recorded by the final) assessment authority or appellate authority
for the purpose of satisfying himself regarding the propriety of legality of
such order of proceeding and may pass such order in reference thereto, as he
may think fit. No orders adverse to the consumer shall be passed without giving
notice and opportunity for making a written representation to the consumer. The
order passed by the Chairman or his nominee shall be final and not liable to be
questioned in any court of law. The consumer shall have no right to invoke this
Clause 46 reads thus :- "Interpretation: These conditions shall be read
and construed as being subject in all respects to the provisions of the Indian
Electricity Act, 1910, Indian Electricity Rules, 1956 and the Electricity
(Supply) Act, 1948 in force and as amended from time to time and to the
provisions of any other law relating to the supply of electricity for the time
being in force and nothing herein above contained in these conditions shall
abridge or prejudice the rights of the Board and the consumer under any Central
Act or State Act or rules made there under".
Appendix-III contains the form of H.T. agreement. The relevant clauses read as follows
- III Form of H.T.
"Agreement executed this day of .......19 by..........for
themselves/himself/itself and for their/his/her assigns and successors in favour
of the Andhra Pradesh State Electricity Board a statutory corporation
constituted under section 5 of the Electricity (Supply) Act, 1948 and its
successors and assigns herein after called the Board.
SUPPLY OF POWER I/We the above mentioned have requested the Board to Supply
Electricity at High Tension for the purpose of ..........and the Andhra Pradesh
State Electricity Board agreed to afford such conditions notified by them from
time to time under section 49 of the Electricity (Supply) Act, 1943 and those
herein after mentioned.
LOAD/MAXIMUM DEMAND I/We agree to take from the Andhra Pradesh State
Electricity Board Electric Power for a maximum load not exceeding......KVA
which shall b e taken to be my/our contracted demand for our exclusive use for
the purposes above mentioned, at our Mills/Factory/premises situated
at..................My/our contracted load shall be..............Hp not effect
any change in the maximum demand or contracted load.
RE-SALE OF ELECTRIC POWER I/We undertake that; I/We shall not sell electrical
energy obtained under this agreement without the sanction in writing of the
OBLIGATION TO COMPLY WITH REQUIREMENT OF ACTS AND TERMS AND CONDITIONS OF
further undertake to comply with all the requirements of the Indian Electricity
Act, 1910, the Electricity (Supply) Act, 1948 the Rules thereunder, provisions
of the tariffs scale of Miscellaneous and General charges and the Mascellaneous
and General charges and the terms and conditions of supply prescribed by the
Board from time to time and agree ................
hereby agree that if I/We am/are found indulging in their of energy or any
malpractice in respect of use of electrical energy I/We shall pay additional
charges as may be levied by the Board. I/We also agree that in such an event
the Board shall in addition to levy of the additional charge have right to
disconnect supply of electricity to my/our premises for such period as may be
decided by the Board.
NATURE OF AGREEMENT - STATUTORY OF CONTRACTUAL
have already seen that Section 49 of the Supply Act empowers the Board to
prescribe such terms and conditions as it thinks fit for supplying electricity
to any person other than a licensee. The section empowers the Board also to
frame uniform tariffs for such supply. Under Section 79(j) the Board could have
made regulation therefore but admittedly no regulation has so far been made by
Terms and Conditions of Supply were notified in H.P. Ms. No. 690 dated
17.9.1975 in exercise of the powers conferred by Section 49 of the Supply Act.
They came into effect from 20.10.1975. They were made applicable to all
consumers availing supply of Electricity from the Board. The section in the Act
does not require the Board to enter into a contract with individual consumer.
Even in the absence of an individual contract, the Terms and Conditions of
Supply notified by the Board will be applicable to the consumer and he will be
bound by them. Probably in order to avoid any possible plea by the consumer
that he had no knowledge of the Terms and Conditions of Supply, agreements in
writing are entered with each consumer. That will not make the terms purely
contractual. The Board in performance of a statutory duty supplied energy on
certain specific terms and conditions framed in exercise of a statutory power.
the terms and conditions are statutory in character and they cannot be said to
be purely contractual.
Punjab State Electricity Board Versus Bassi Cold Storage, Kharar and Another
1994 Supp (2) S.C.C. 124, this court held that the conditions of supply are
akin to subordinate legislation.
Bihar State Electricity Board and Others
Versus Parmeshwar Kumar Agarwala and Others (1996) 4 S.C.C. 686, the court held
that they are part of statutory terms and conditions. In para 16 of the
judgment the court said :
we advert to the effect produced by a combined reading of the four clauses, it
deserves to be pointed out that the terms and conditions have sacrosanctity, in
that Rule 27 of the Indian Electricity Rules, 1956, framed by the Central
Electricity Board in exercise of power under Section 37 of 1910 Act has, read
with Annexure VI thereof, provided the model conditions of supply which are
required to be adopted by the State Boards. It is on the basis of this
statutorily prescribed model, with suitable variations, that energy had been
supplied by the Board to the consumers. The model conditions can be said to be
akin to the model Standing Orders prescribed by Industrial Employment (Standing
Orders) Act, 1947, which, when terms and conditions of service between the
employer and employees and they govern the relationship between the parties, as
held in Workmen V. Firestone Tyre & Rubber Co. of India (P) Ltd., SCC at p.832
(1973) 1 S.C.C. 813. We are inclined to think that similar is the effect of
terms and conditions, on which a State Board supplies energy to the
Learned counsel for the consumers has referred to Shri Vidya Ram Misra Versus
Managing Committee, Shri Jai Narain College (1972) 1 SCC 623. In that case Statute 151 framed under the
Lucknow University Act, 1920 provided that the terms and conditions of service
of a teacher must be incorporated in the contract to be entered into between
the teacher concerned and t he college. Hence the court held that the terms and
conditions mentioned in Statute 151 had proprio vigore no force of law. That
decision has no relevance here.
The ruling in Executive Committee of Vaish Degree College. Shamli and others
Versus Lakshmi Narain and others (1976) 2 SCC 58 cited by learned counsel has
no applicability as the court found on the facts that the Executive Committee
was not a statutory body.
are unable to uphold the view expressed by the Full Bench in the judgment under
appeal that the terms and conditions of supply are purely contractual. In our
opinion the Terms and Conditions of Supply are statutory in character.
The Supply Act
is contended that Clause 39 of the Terms and Conditions of Supply falls outside
the power conferred on the Board in Sec. 49 of the Supply Act. According to
learned counsel the power of the Board to impose such terms and conditions as
it thinks fit, is expressly made subject to the other provisions of the Act
which means that the Board can impose only such conditions as may be found in
an agreement between other ordinary licensees and consumers.
contention is that the Board can neither define `malpractices' nor prescribe an
adjudicatory machinery for assessing and levying penal damages. Such matters
are, according to counsel, essential legislative functions. Which cannot be
delegated to the Board.
are unable to accept the contention. Section 49 empowers the Board to supply
electricity on `such terms and conditions as it thinks fit'. It may also frame
uniform tariffs. We have found that the terms and conditions of supply are
statutory in character. They can be invalidated only if they are in conflict
with any provision of the Act or the Constitution. Learned counsel have not
shown to us any provision in the Supply Act with which Clause 39 is in
conflict. In so far as the Supply Act is concerned, argument hovers around
Section 49 only. The only limitation in that Section is that the terms and
conditions of supply should b e subject to the provisions of the Act. Clause 39
does not violate any provision in the Supply Act. It is the statutory duty of
the Board to arrange for the supply of electricity throughout the State and for
transmission and distribution of the same in the most efficient and economical
manner. For that purpose it has necessarily got to prevent unauthorised user,
pilferage or malpractices by the consumers. Hence the necessary safeguards have
to be provided as part of the conditions of supply so that the consumers will
be bound by them. While on the one hand, the Board has to recoup the loss
suffered by such pilferage or other malpractices., it has also on the other got
to stop immediately the continuation thereof. Hence the terms and conditions of
supply have to provide for compensation as well as immediate disconnection. For
ascertaining the loss and fixing the compensation, uniform procedure has to be
framed and a machinery constituted. Clause 39 is only doing that. Every
consumer is made fully aware of the said terms and he signs the contract only
on that basis. He gives an undertaking in that contract that if he is found
indulging in any malpractice etc. he shall pay additional charges as may be
levied by the Board and that t he Board have the right to disconnect supply of
electricity to his premises for such period as may be decided by the Board.
Learned counsel for the consumers has drawn our attention to Powell Versus May
(1946) All E.R. 444 wherein a bye-law made by the local country council was
struck down as ultra vires the powers of the council as it was repugnant to the
provisions of certain statutes. The ruling has no application here.
Strong reliance is placed on the decision of the Queen's Bench Division in
Commissioners of Customs and Excise Versus Cure & Deeley Ltd. (1961) 3 All
E.R. 641. The Commissioners of Customs and Excise were empowered by Section 33
(1) of Finance Act 1940 to make regulations providing for any matter for which
provision 'appears to them necessary" for the purpose of "giving
effect to" the statutory provisions relating to purchase tax "and of
enabling them to discharge their functions thereunder". The Commissioners
made the Purchase Tax Regulations 1945.
12 provided that if any person failed to furnish a return as required by the
regulation the Commissioners might determine the amount of tax appearing to
them to b e due and demand payment thereof which shall be deemed to be the
proper tax. The Court held that the said Regulation 12 was ultra vires on three
grounds :(i) It was no part of the functions assigned to the Commissioners to
take on themselves the powers of a High Court Judge and decide issues of fact
and law as between the Crown and the subject;
It renders the subject liable to pay such tax as the Commissioners believed to
be due, whereas the charging section impose a liability to pay such tax as in
law is due" (iii) It was capable of excluding the subject from access to
the courts and of defeating pending proceedings.
The ruling does not help the consumers in this case.
impugned Clause 39 does not suffer from the vices mentioned above. No doubt,
Clause 39.10.6 provides that the order on appeal shall be final subject to
Clause 39.11 and not liable to be questioned in any Court of Law. But learned
senior counsel for the Board, Mr. Shanti Bhushan, has fairly conceded that the
orders are subject to judicial review and the jurisdiction of Courts cannot be
taken away by that Clause. It is to be noted that the trial court and the High
Court and the High Court have in this case upheld the jurisdiction of the civil
court to entertain the suit an d consider the validity of the orders passed by
he Board against the consumers.
Reliance is placed on the decision in Indian Express Newspaper (Bombay) pvt.
Ltd. and others etc. etc. versus Union of India & others etc.etc. (1985) 1
S.C.C. 641 to support the argument that Clause 39 is in breach of the principle
of delegated Legislation. According to learned counsel the terms and conditions
of supply may tantamount to a subordinate legislation but it must yield to the
plenary legislation and that the Supply Act never intended to confer powers on
the Board to frame such terms and conditions of supply including the power to
adjudicate a dispute between itself and the consumer and assess the damages. We
have already adverted to the provisions of Section 49 of the Supply Act and
pointed out that the power conferred on the Board is not circumscribed by any
limitation other than that it should not contravene the provisions of the Act.
We are of the opinion that Section 39 is not violative of any provisions of the
Jiyajeerao Cotton Mills Ltd. & Anr, Versus Madhya Pradesh Electricity Board
& Another 1989 Supp. (2) S.C.C. 52 the court held that the Board has powers
under Section 49(1) and (3) to levy higher charges for excess consumption of
electricity and it is not essential for the Board to make regulations
indicating the basis for such levy before making the demand.
Our attention has been drawn to Agricultural Market Committee Versus Shalimar
Chemicals Works Ltd. (1977) 5 Supp. S.C.C. 516 in which it has been held that a
delegate while making subsidiary rules or regulations cannot widen or restrict
the scope or t he Act or the policy or principle.
proposition has no application in the present case as we have found that the
Board has not in any way violated any of the provisions of the Act by framing
the terms and conditions of supply including Clause 39. Hence we reject the
contention that Clause 39 is ultra vires the provisions of the Supply Act.
The Electricity Act
is vehemently argued that provisions in Clause 39 run counter to the relevant
provisions of the Electricity Act. In particular, it is said that Clause 39.1
covers the same field as that of ss.21 (4) and 26 (6)(b) and Clause VI(3) of
the Schedule in the said Act. According to learned counsel malpractice and
pilferage defined in CI.39 would be covered by the aforesaid provisions of that
Act and the authority to decide the same is the Electrical Inspector appointed
by the Government and not he officers of the Board. It is also argued that
Clause 39.2 and 39.3 are contrary to Sec.20 of the Act and Clause 39.4 is
contrary to Sec. 36 of the Act read with Rules 4 to 6 of the Indian Electricity
Rules. According to learned counsel, the entire clause 39 is violative of the
provisions of Clause VI(I) in the Schedule to the Electricity Act as the latter
enjoins on the Board to continue the supply of electricity `save in so far as
prevented by cyclone, floods, storms and other occurrences beyond its control.
In short, the contention of the learned counsel for the consumers is that the
procedure prescribed in the Electricity Act and the Rules would apply to all
situations arising between he Board and the consumer and the same should be
followed. According to him Clause 39 is invalid and unenforceable in as much as
it deviated from the provisions of the Electricity Act and the Rules.
are unable to accept any of the aforesaid contentions. We have carefully
perused the provisions of the Electricity Act and we find that those provisons
provide for a different situation. Clause 39 will come into play whenever there
is malpractice or pilferage on the part of the consumer or a fraud played by
the consumer. The Electrical Inspector has no jurisdiction to deal with those
matters. He can be approached only w hen there is a defective meter or any
defect in wries, fittings, works or apparatus. As regards, CI. (VI) of the
Schedule to the Electricity Act, it is not applicable unless distribution mains
have been laid down under the provisions of Clause (IV) or Clause (V) and the
supply of energy through those mains of any of them has commenced. The
provisions of Section 26 of the Supply Act exclude the applicability of Clauses
(1) to (V) of the schedule tot he Board. Hence CI.
of the schedule cannot by itself apply and that is why the second proviso to
Section 26 clarifies the position that the provisions of Clause (VI) of the
Schedule shall apply to the Board in respect of that area only where
distribution mains have been laid by the Board and the supply of energy through
any of them has commenced. The records before us do not disclose any pleading
on the part of the consumers that the requirement of the second proviso to
Section 26 have been satisfied. No question has been raised in that regard
before the trial court. No doubt, the Full Bench of the High Court has placed
reliance on Clause (VI) of the Schedule and the grounds raised in the Special
Leave Petition filed by the Board do not refer to the same. But in the absence
of a specific pleading to t hat effect it cannot be presumed that Clause (VI)
of the Schedule would apply. Even assuming that clause applied, it will not
alter the situation. The difference or dispute referred to in sub-cl.(3) of
CI.(VI) will not cover fraudulent malpractice or pilferage. A perusal of the
said sub/clause makes it evident that the matter shall be referred to an
Electrical Inspector only in cases of defects mentioned therein and not
otherwise. We have no hesitation to reject the contention of learned counsel
for the consumers and hold t hat he provisions in clause 39 do not contravene
the provisions of the Electricity Act.
State of U.P. and others Versus Hindustan Aluminium Corpn. and others (1979) 3
S.C.C. 229 the Court considered the expression "regulating" in
Section 22 (b) of the Electricity Act and observed that the word
"regulate" does not include prohibition. The ruling has no relevance
whatever in the present case. In Andhra Pradesh Carbides Ltd. and another
versus Andhra Pradesh State Electricity Board, Hyderabad and others AIR 1986
Andhra Pradesh 37 a Single Judge of the Andhra Pradesh High Court held t hat
regulations made under the Supply Act shall not be covered by Section 70
thereof and that Section 49 read with Section 70 of the said Act does not
empower the provisions of Section 24 of the Electricity Act. The ruling has no
bearing in the present case as we have found that Clause 39 of the Terms and
Conditions of Supply do not contravene the provisions of either Act.
M.P.E.B. and others versus Smt. Basantibai 1988 (1) S.C.R 890 this Court held
that a dispute regarding the commission of fraud in tampering with the meter
and breaking the body-seal is one outside the ambit of Section (26(6) of the
Electricity Act an Electrical Inspector has no jurisdiction to decide such
cases of fraud. This Court has clearly pointed out that under Section 26(6) if
the dispute is as to whether the meter is or is not correct, it is to be
decided by the Electrical Inspector. We are entirely in agreement with that
Municipal Corporation of Delhi versus Ajanta Iron & Steel Company (Pvt.)
Ltd. (1990) 2 S.C.C. 659 this court found that there was a provision in the
agreement between he Delhi Electric Supply Undertaking and the consumer for
service of notice as a pre-requisite for disconnection.
this Court upheld the decree for mandatory injunction directing restoration of
supply of electricity discontinued during the pendency of the suit without
issue of such notice.
M.P. Electricity Board, Jabalpur and others Versus Harsh Wood Products and
Another (1996) 4 S.C.C. 522 the Court held that Section 24 of the Electricity
Act would apply to a case of regular supply made and prior demand of payment of
electricity charges and it does not apply to demand to detection of pilferage.
The court upheld the validity of similar conditions of supply of electricity
and held that on a prima facie conclusion of power-theft reached by the
authorities, it was not necessary to give further hearing to the consumer and
the action taken by the Board disconnecting the supply was not violative of
Article 20 (1) and 14 of the Constitution and the principles of natural
justice. We are in agreement with the view expressed therein.
Belwal Spinning Mills & Ors, Versus U.P. State Electricity Board and
another (1977) 6 S.C.C. 740 the Court dealt with the provisions of Sections
26(6) and 26(7) of the Electricity Act alongwith Section 20 thereof. A perusal
of the judgment shows that the Bench was of the view that the provisions of
Section 26 would apply only when the dispute related to the correctness of the
meter. That ruling also supports the contention of the Board in this case.
Article 14, Constitution of India.
What remains to be considered is whether Clause 3 is violative of Article 14 of
the Constitution of India. Under this head, the argument of learned counsel for
consumers is that the provisions in the clause are wholly unreasonable and
against the principles of Natural Justice. According to them, the clause
enables the officers to disconnect the service on a suspicion of malpractice
and the consumer has to pay 50% of the provisional assessment amount before
getting it restored. It is also contended that the officials of the Board are
enabled to judge its own cause and the doctrine of bias will apply. In support
of these contentions, our attention is drawn to:
1. J. Mohapatra
and Co. and Another versus State of Orissa and Another (1984) 4 S.C.C. 103.
State of Karnataka versus Shree Rameshwara Rice Mills, Thirthahalli, (1987( 2
Krishna Bus Service Pvt. Ltd. versus State of Haryana and Others, (1985) 3
Rattan Lal Sharma versus Managing Committee, Dr. Hari Ram (CO-education) Higher
Secondary School and Others, (1993) 4 S.C.C 10.
of India and Another versus Consumer Education & Research Centre and
Others, (1995) 5 S.C.C. 482.
of the ruling will apply in this case. We have already referred to the judgment
of this court in M.P.
Board, Jabalpur and others versus Harshwood Products Case (1996) 4 S.C.C. 522
wherein it was held that when power theft was found by the officials, immediate
disconnection of the supply was not violative of Article 14 of the Constitution
and principles of Natural Justice would not apply.
Petal Parshottamdas Vanmalidas, versus Gujarat Electricity Board and another,
AIR 1987 Gujarat 188, a Division Bench of Gujarat High Court considered similar
conditions and upheld their validity. The Bench said :
it is clear that the Board has formulated such a condition in order to
safeguard its interest.
condition is there for the purpose of checking, apart from other things, the
theft of electricity. It is not a case of any defective meter, but it is a case
of theft of electricity by the consumer concerned. As a matter of fact, in this
case it is alleged that the petitioner, by inserting a plastic strip, was able
to stop the running of the meter and thereby, committed theft of electricity.
The condition clearly states as to the procedure that has to be adopted for the
purpose of questioning the departmental action in levying penal charges. It has
also been made clear in the condition as tot he limit to which the Department
can go for the purpose of assessing the theft of electricity. In no case the
Department can go beyond a period of six months, according to this condition.
In Condition No.34, we are able to see that manner of assessment also has been
specified. It all these steps are taken by the Department, the condition itself
states that the consumer has a remedy by filing an appeal to the appropriate
authority within a specified time. Thus, a conjoint reading of this Condition
and the purpose for which it is intended, clearly makes out that such a
condition is not arbitrary or unreasonable, but within the powers of the Board
and, in our opinion, it does not offend any of the Articles of the
argument as if the imposition of penal assessment before filing an appeal is
harsh and makes the appeal illusory cannot be appreciated. The penal
assessment, as we have stated already, is restricted to a limited period.
an assessment was made after the Department itself was satisfied with regard to
the theft or electricity committed by the consumer concerned. Hence, it cannot
be said that the appeal provided under Condition No. 34 is an illusory
agree with the above opinion.
The principle `Nemo Judex in Cause Sua' will not apply in this case as the
officers have no personal its with the consumers. A s pointed out by learned
senior counsel for the Board, they are similar to Income Tax or Sales Tax
Officials. There is nothing wrong in their adjudicating the matter especially
when the consumers many be represented by an advocate and the formula for
making provisional assessment is fixed in the clause itself. As argument has
been advanced that the Board has recently deleted the provision enabling the
consumer to be represented by a power of attorney agent. it is contended that
the consumer is thereby deprived of the assistance of an expect which may be
required in technical matters. We do not agree. When the consumer is
represented by a lawyer, he can certainly get such assistance as may be needed
from a technical expert. It is stated by the Board's learned counsel that the
provision was deleted as there was frequent misuse of the same.
may be the reason for deleting the provision, the existing part of the clause
enables the consumer to be represented by an advocate. That is sufficient
safeguard for the consumer.
Learned counsel for the consumer contends that the agreement with the Board is
in the standard form and signing of the same by the consumer will not prevent
him from questioning it. He places reliance on certain observations in Pawan
Alloys & Casting Pvt. Ltd., Meerut versus U.P. State Electricity Board and
Others (1997) 7 S.C.C. 251. The question in that case arose on the withdrawal
of development rebate to the new industries for a period of three years.
court held that the principle of promissory estoppel applied on the facts and
circumstances of the case and by entering into the standard agreement
containing provision for revision of "rate schedule" from time to
time, the consumer had not given up his claim for the rebate for a period of
three years as per the promise held out by the Board. That case has no bearing
the result, we uphold the judgment and decree of the High Court in C.C.C.A.No.
38 of 1982 and dismiss Civil Appeal No. 2558 of 1988. We allow Civil Appeal
Nos. 7139 to 7144 of 1997 and set aside the judgment of the Full Bench of the
High Court. The Writ Petitions and Writ Appeals shall be disposed by the High
Court in the light of this judgment.
parties will bear their respective costs.