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CASE NO.: Appeal (civil)  1019 of 2006

PETITIONER: M.P. State Electricity Board & Anr

RESPONDENT: Grasim Industries Ltd

DATE OF JUDGMENT: 12/11/2007

BENCH: Dr. ARIJIT PASAYAT & R.V. RAVEENDRAN

JUDGMENT: J U D G M E N T

CIVIL 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.

 1.      In 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.

2.      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).    3.      Mr. 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.  4.      It 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 ’Supply Act’).

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5.      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.

6.      It 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.  

7.      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:

"In 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 case."            (Underlined for emphasis) 8.  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. 9.      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.

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10.     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.  Annexure 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. 11.     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. 12.   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

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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. 13.    In 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. 14.  These aspects have been highlighted in Ferro Alloys case  (supra). 15.     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.

16.     In 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. 17.    The appeals are disposed of accordingly with no orders  as to costs.