State Electricity Board & Anr Vs. Grasim Industries Ltd  Insc 1128 (12 November 2007)
Arijit Pasayat & R.V. Raveendran
APPEAL NO. 1019 OF 2006 [With Civil Appeal Nos.1026/2006, 1027/2006, 1028/2006,
1031/2006, 1029/2006, 1030/2006, 1032/2006, 1033/2006, 1034/2006 and 3223 of
2006] Dr. ARIJIT PASAYAT, J.
each of the appeals challenge is to the order passed by a Division Bench of the
Madhya Pradesh High Court, Indore Bench, in Letters Patent Appeals/writ
petitions filed by the respondents in each case. CA nos.1033 and 1034 of 2006
have been filed with leave to file special leave petition. It is to be noted
that while allowing the writ petitions filed, the High Court placed reliance on
the judgment rendered in the Letters Patent Appeal filed under clause 10 of the
Letters Patent by Grasim Cement, Raipur, i.e. LPA 20207 of 1997. In the cases where the Letters Patent Appeals
were filed, learned Single Judge had decided in favour of the appellant-Board.
Challenge in the writ petitions filed, which were decided related to the
illegality of action taken by the appellant-Board in deleting Clauses 21(f)
& 21(g) of the Board's General Conditions for Supply of Electrical Energy
and The Sale of Miscellaneous and General Charges. These related to agreement
for payment of interest on security deposits. The notification is dated
24.1.1996. Learned Single Judge in the cases which were subject matter of the
Letters Patent Appeal held that such a course was permissible. Reliance for the
purpose was placed on a decision of this Court in Ferro Alloys Corpn. Ltd. V. A.P. State
Electricity Board and Anr. (1993 Supp (4) SCC 136). While deciding the appeals
and the writ petitions, the Division Bench held that the view of the learned
Single Judge is not correct and for the purpose relied on paragraph 158 of the
judgment in Ferro Alloys case (supra).
C.S. Vaidyanathan, learned senior counsel for the appellant-Board submitted
that the Division Bench read only a part of paragraph 158 of the judgment and
not the relevant part which empowers the Board to delete such a condition.
is submitted that notification dated 24/1/1996 was issued in exercise of powers
conferred under Section 49 of the Electricity (Supply) Act, 1948 (in short the
Learned counsel for the respondent, on the other hand, observed that this Court
categorically in paragraph 158 noted the lack of power to delete the condition
relating to payability of interest on security deposits.
is to be noticed that in Ferroy Alloys case (supra), this Court was dealing
with two categories of consumers in different States. One category related to
Boards' regulations for the States of Andhra Pradesh, Uttar Pradesh and Bihar, where there was provision for payment of interest.
In respect of some other States such as, Rajasthan and Orissa, there was no
such provision. This Court in paragraphs 143 and 145 held that where there is
no provision for payment of interest, the same is not illegal. We are not
concerned with that category of cases.
Since the fate of these appeals primarily depends upon the view expressed by
this Court in Ferro Alloys case (supra) at paragraph 158, this paragraph needs
to be noticed. The same reads as follows:
view of the above finding, upholding the clause relating to non-payment of
interest, for example, Rajasthan and Orissa, what is to happen to such of those
cases where interest is provided like Andhra Pradesh, Uttar Pradesh and Bihar? In all those cases wherever the Electricity Boards
have framed a provision for payment of interest after adjusting its finances at
a stated rate they cannot be allowed to delete such a clause. The provision for
interest has been made by the various Boards having regard to the overall
budgetary and financial position and further, keeping in view the quantum and
mode of security deposit and billing and recovery practice. Nor again, could
the Board withhold payment of interest on the basis of this judgment. However,
if there is any change in the circumstances affecting the budgetary and
financial position, the Board can examine the case and decide the future course
of action. But any change resulting in non-payment or reduction of interest
will have to be justified by cogent reasons and materials having a bearing on the
financial position of each Board and facts and circumstances of each
Indisputably a bare reading of paragraph 158 quoted above shows that it is
permissible for the Board to take a decision relating to the desirability for
payment of interest on security deposits or otherwise.
Each of the Electricity Boards before us is a State within the meaning of
Article 12 of the Constitution of India. The Boards are different from
licensees. Each of the Boards has framed its own terms and conditions of
supply. One such condition relates to security deposits. Such a deposit varies
from Board to Board. For example, under the terms and conditions notified by
Andhra Pradesh Electricity Board under Condition No. 28.1.1, the consumer is
required to deposit with the Board a sum in cash equivalent to estimated three
months consumption charges. In the case of Rajasthan, the security is in the
form of cash for one month and bank or insurance guarantee for two months.
The legislative sanction behind the power of the Board to direct a consumer to
furnish security may be examined. It has already been seen that the Supply Act
is complementary to the Electricity Act, 1910. Section 26 of the Supply Act
states that the Board shall have all the powers and obligations of a licensee
under the Electricity Act. And this shall be deemed to be a licence of the
Board for the purpose of the Act. Under the regulations framed by the Board in
exercise of powers of Section 49 read with Section 79(j) the consumer is only
entitled and the Board has an obligation to supply energy to the consumer upon
such terms and conditions as laid down in the regulations. If, therefore, the
regulations prescribed a security deposit that will have to be complied with.
It also requires to be noticed under Clause (6) of Schedule II of the
Electricity Act that the requisition for supply of energy by the Board is to be
made under proviso (a) after a written contract is duly executed with
sufficient security. This, together with the regulations stated above, would be
enough to clothe it with legal sanction. In cases where regulations have not
been made Rule 27 of the Rules made under the Electricity Act enables the
adoption of model form of draft conditions of supply.
VI in Clause 14 states that the licensee may require any consumer to deposit
security for the payment of his monthly bills for energy supplied and for the
value of the meter and other apparatus installed in his premises. Thus, the
Board has the power to make regulations to demand security from the consumers.
The next question will be: what is the object in demanding security? The
deposit though called security deposit is really an adjustable advance payment
of consumption charges. The payment is in terms of the agreement interpreting
the conditions of supply. This security deposit is revisable from time to time
on the basis of average consumption charges depending upon the actual
consumption over a period. This is the position under the terms of supply of
energy with reference to all the Boards.
For supply of electricity the Board needs finance for production, supply and
other charges necessary for supply of electricity. For this purpose, it takes
loans from various financial institutions. This is best illustrated if one
looks at the transactions of Punjab Electricity Board where electric energy is
generated through hydro as well as thermal plants for ultimate sale to the
consumers. Of the total power generated about 50 per cent is through hydro plants.
The remaining energy is generated through thermal power plants which are
operated on coal/oil. Due to limited hydro resources within the State of Punjab the dependency on power on thermal
plants is on the increase. The present requirement for working of thermal
plants is more than 52 lakh tonnes of coal per annum. In addition, 60 thousand
kilo litre of furnace oil is required. The coal companies/Coal India Limited together with major
suppliers or power plant like M/s. BHEL demand cost of coal/spares/ projects in
advance for the supply of material. The Board is also required to purchase
power from Central projects N.T.P.C., N.H.P.C. in order to meet the demand for
power by the consumers. For purchase of such power again advance payments are
made by the Board. On such advances the Board is not paid interest. The effect
is, the Board is obliged to bear the liability of hundreds of crores of rupees
per annum. It has no option but to pay the charges and deposits in order to
keep the power available at a level to meet with the demand of the consumers.
It is the case of the Board that it has opened letters of credit by making
advance deposits in favour of National Thermal Power Corporation and the
suppliers. Coal India Limited has also asked the Board to open revolving
letters of credit in favour of coal companies/Coal India Limited. Despatch of coal is only
against the letter of credit.
the above premises, it follows that there is nothing to indicate under the
scheme of the Electricity Act or Schedule VI of the Supply Act that interest
must be paid on the security deposit.
These aspects have been highlighted in Ferro Alloys case (supra).
Obviously, the Division Bench of the High Court has not considered the effect
of the underlined observations of this Court regarding the permissibility to
delete provisions for payment on security deposits, as noted in the said
paragraph 158. This has to be decided on the factual position of each case. We
find that in the order of the learned Single Judge which formed the subject
matter of challenge in the LPAs, there are certain factual conclusions arrived
at by learned Single Judge. The Division Bench has not dealt with the
acceptability or otherwise of the view and has only referred to paragraph 158
to hold that it cannot be done, overlooking the underlined portion relating to
the permissibility for such a course to be adopted.
the aforesaid circumstances, we deem it proper to set aside the impugned
judgment in each case and remit the matter to the High Court for a fresh
consideration in the light of what has been stated in paragraph 158 so far as
it relates to the Boards' powers to delete provision relating to payment of
interest on security deposits on the factual scenario. We make it clear that we
have not expressed any opinion on the merits of the case.
The appeals are disposed of accordingly with no orders as to costs.