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CASE NO.: Appeal (civil)  4910-4981 of 2005

PETITIONER: Punjab State Electricity Board Ltd.                              

RESPONDENT: Zora Singh & Ors.        

DATE OF JUDGMENT: 11/08/2005

BENCH: Ashok Bhan & S.B. Sinha

JUDGMENT: J U D G M E N T [@ S.L.P. (C) No. 22352-22423 of 2003] W I T H

CIVIL APPEAL NOS.  4983-4984   OF 2005 [@ SLP (C) Nos. 14960 and 16202 of 2004]  

S.B. SINHA, J :

       Leave granted in S.L.Ps.

       Punjab State Electricity Board (for short ’the Board’) is a statutory  authority created in terms of Section 5 of the Electricity (Supply) Act, 1948  inter alia for the purpose of rationalization of the production and supply of  electricity to the consumers.  Supply and distribution of electricity  indisputably are public utility services.  The Respondents herein are  agriculturists.   

       Section 22 of the Indian Electricity Act, 1910 imposes a statutory  obligation on the licensee to supply the electrical energy in the following  term :

"Where energy is supplied by a licensee, every  person within the area of supply shall, except in so  far as is otherwise provided by the terms and  conditions of the licence be entitled, on  application, to a supply on the same terms as those  on which any other person in the same area is  entitled in similar circumstances to a  corresponding supply."

       Electrical undertakings acquire the character of public utilities by  reason of their virtually monopolistic position and their profession to serve  the public.  The State in exercise of its legislative power had a right to  compel the licensees to render service efficiently, promptly and impartially  to the members of the public, as has been done by enacting Section 22 of the  said Act.  Even in common law such public utilities having obtained a  licence under a statute are under an automatic obligation by reason of the  fact that the property of a public utility is dedicated to public service and  impressed with public interest to serve the public and any such statutory  obligation is in effect and substance a declaration of the common law.

       Upon the dedication of public utility to public use and in return for the  grant to it of a public franchise, the public utility is under a legal obligation  to render adequate and reasonably efficient service, without unjust

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discrimination and at reasonably rates to all the members of the public to  whom its use and scope of operation extend and who apply for such service  and comply with reasonable rules and regulations of the public utility.   Although Section 22 of the Indian Electricity Act, 1910 per se does not  apply to Board in view of the provisions of the Electricity (Supply) Act,  1948, the provisions contained therein indicate that the Board has also a duty  to render such services.  

       The right of a prospective consumer is meticulously and minutely  regulated under the Electricity (Supply) Act, 1948 and/ or the Indian  Electricity Act, 1910 and Indian Electricity Rules.  The grounds upon which  a licensee can refuse to supply electrical energy is also governed by the  statute.

       The licensee, thus, has a statutory liability to supply electrical energy  to any prospective consumer on the same terms as those on which any other  person in the same area is entitled in similar circumstances to a  corresponding supply.  Such a statutory obligation on the part of the licensee  is also reinforced in terms of Clause VI of the Schedule appended to the Act.

       The Respondents herein with a view to obtain supply of electricity  energy filed applications and the Board asked them to deposit the security  amount.  As despite deposit of such security amount and compliance of other  formalities electrical energy was not supplied to the Respondents,  complaints were filed before various District Forums alleging deficiency in  service on the part of the Board.

       The Respondents had also spent a huge amount on construction of  Kotha and making other arrangements for obtaining supply of electrical  energy.  The District Forums found the Board guilty of deficiency in service  and directed the Board to give the connections to the complainants within  the period(s) specified therein and also awarded compensation.  The Board  preferred appeals thereagainst inter alia on the ground that it was obligated  to supply electrical energy to the applicants maintaining the order of  seniority, in view of Regulation 24 of the Sales Manual. The said appeals  were dismissed.  Aggrieved by and dissatisfied therewith Revision Petitions  were filed by the Board and by reason of the impugned judgment dated  4.8.2003, the National Commission while upholding the claim of the Board  that the order of seniority should be maintained in the matter of supply of  electrical energy, directed it to release connections to all applicants by  31.3.2004.  It also directed payment of interest at the rate of 12% per annum  on the amounts deposited by  the complainants and awarded compensation  of Rs. 10,000/- each to them.  Cost of Rs. 2000/- was also directed to be  paid.   

       Aggrieved the Board is before us.

       In these appeals, an additional affidavit has been filed annexing  therewith the regulations purported to have been framed under Section 79(j)  of the Electricity (Supply) Act, 1948.

       Mr. Ashwani Kumar, learned senior counsel appearing on behalf of  the Board would contend that the National Commission acted illegally and  without jurisdiction in passing the impugned judgments and orders without  taking into consideration that the Board at the relevant time did not act only  in terms of the circulars issued by the State but also acted under the  regulations framed under Section 79(j) of the said Act in terms whereof no  interest was payable.

       The learned counsel submitted that  this Court should  take judicial  notice of the fact that the Government of Punjab at one point of time  directed supply of free electrical energy to the agriculturists resulting in  drainage of huge fund and on that account the Board was not in a position to  purchase materials required for supply of electrical energy.

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       The learned counsel would contend that if the order of the  Commission is to be given effect to, the Board would have to bear a huge  financial liability as during the relevant period 15000 applications for supply  of electrical energy were received.

       It is not in dispute that prior to framing of the regulations, the Board  by way of executive instructions issued  circulars known as Sales Manual  and Abridged Conditions of Supply.  The said executive instructions were  restricted for internal circulation only.  However, allegedly with a view to  provide transparency in the functioning of the Board, Sales Regulations were  issued in 1999 incorporating and amending certain provisions contained in  Commercial Circular No. 2/97 dated 3.1.1997, including Instruction No. 26.   The said Regulations were also placed before the State Legislature on  28.3.2000 as is required in terms of Section 79-A of the Electricity (Supply)  Act.  The relevant provisions of Commercial Circular No. 2/97 which  allegedly formed a part of Regulation framed under Section 49 and Sub- section (j) of Section 79 of the Electricity (Supply) Act read, thus:

"Subject: Time limit for grant of connections \026 SMI26 The matter regarding time limit for release of connections to  various categories of consumers has been reconsidered and it  has been decided as under:

After the compliance of demand notice, the connection to  various categories of prospective consumers should be given  within the time schedule specified below:-

i)      Large Industrial Power Supply and         Bulk Supply above 100 KW                        :3 months ii)     Medium Industrial Power Supply and         Bulk Supply upto 100 KW                 :2 months iii)    Small Industrial Power Supply category:         a) Where no augmentation is involved            :2 weeks         b) Where augmentation is involved               :6 weeks iv)     Domestic and Non-residential Supply         category                                                :2 weeks v)      Agricultural Pumping Supply category    :2 months

Note: The above specified period shall be subject to availability  of requisite material like poles, conductors, transformers,  insulators and other allied material.  It will further be subject to  any court case/ dispute or other bottlenecks such as damage of  power transformer etc.

However, where connections cannot be released within the  above time schedule, reasons for delay shall be displayed on the  Notice Board but individual intimation would also be given, in  case of small power, medium supply and large supply  applicants, indicating the probable date.  Where the connection  cannot be released within 2 months of compliance of requisite  formalities/ compliance of demand notice then the same with  the detailed reasons would be brought to the notice of C.E./  Operation concerned.

2.      ***     ***     ***

3. In view of the time limits specified above, it should be  ensured that the demand notices are issued carefully taking all  the circumstances viz. availability of the funds, materials and  also power position into consideration.  The release of  connections will also be subject to restrictions imposed due to  power shortage and loading conditions of the system etc.

The provisions of SMI-26 may be considered as amended

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above."

       Clause 24 of the Sales Regulations also specifies the period during  which electrical connections are to be granted.  Clauses 24.6 and 24.8 read  as under:

"24.6 Above time frame shall be subject to  availability of requisite material particularly poles,  conductors, transformers and insulators.  It will  further be subject to any court case/ dispute or  other bottlenecks such as damage to power  transformer, etc.

24.8 In view of the time limits specified above, it  should be ensured that the demand notices are  issued carefully taking all the circumstances viz.  availability of funds, materials and also power  position into consideration.  Release of  connections will also be subject to restrictions  imposed due to power shortage and loading  conditions of the System etc."

       On or about 11.7.2001, a Commercial Circular No. 57/2001 was also  issued wherein it was stated:

"8.1 Before commencing supply to a prospective  consumer or resuming supply / allowing additional  load to an existing consumer or any time during  the existence of an agreement executed by the  consmer with Board, the Board may require the  consumer to lodge with it an Advance  Consumption Deposit (ACD) and / or Additional  Advance Consumption Deposit (AACD), against  advance energy charges on which no interest shall  be payable.  This advance consumption deposit  shall not be transferable.  Normally, the Advance  Consumption deposit will be equivalent to three  months electricity bill on the prevalent tariff.

8.4 The ACD/ AACD/ security shall be deposited  in cash.  No interest is payable on ACD/ AACD  deposit against energy consumption.  However,  interest @ 6% per annum shall be payable on  security deposit of Rs. 100/- and above against  meters/ metering equipment.  However, no interest  will be payable, if a connection is disconnected  within a year of giving supply."

       Before adverting to the rival contentions raised before us, we may  notice that keeping in view the fact that the Board had failed and/ or  neglected to supply electrical energy to a large number of agriculturists, the  National Commission secured the presence of the Chief Engineer  (Commercial) of the Board who gave an assurance and undertaking that  while maintaining the seniority list electrical connections would be given to  all the complainants/ Respondents by 31.3.2004.   

       Although a contention was raised  that the Board is bound to supply  electrical energy in terms of the seniority of the applications, no factual  dispute was raised that electrical connections  were required to be granted  within two months of issue of demand notice, the same had not been done  for years.   

       Section 79(j) of the Electricity (Supply) Act, 1948 confers power  upon the Board to make regulations laying down principles governing the  supply of electricity by the Board.  Although it is doubtful as to whether the

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Board in exercise of its regulation making power under Section 79(j) can  direct that no interest shall be payable at all or limit the rate of interest, it  may not be necessary for us to go into the said question in this case  as the  said regulations are not applicable in the instant case having been brought  into force only in 1999 in view of the fact that all the applications had been  filed prior to 1999 and demands were raised in 1999.

       The administrative circulars as thence existed as also the regulations  indisputably require supply of electrical energy to the agriculturists within a  period of two months from the date of receipt of the amount asked for in  terms of the demand notice.  It may be true that the note appended thereto  provides that the period specified therein shall be subject to availability of  requisite material but the same does not absolve the Appellant from  performing its statutory duties.    

       In Andhra Pradesh State Road Transport Corporation v. The State  Transport Appellate Tribunal & Ors., [ILR (2001) AP 1], a Full Bench of the  Andhra Pradesh High Court has noticed thus:

"24.    The meaning of "note" as per P. Ramanatha  Aiyar’s Law Lexicon, 1997 Edition is ’a brief  statement of particulars of some fact’, a passage or  explanation\005"                  The note, therefore, was merely an explanatory in nature and thereby  the rigor of the main provision was not diluted.

       The Board in terms of the Regulations was obligated to display the  reasons for delay on the Notice Board.  They were also required to indicate  the probable date of supply therefor.  Furthermore, such cases were also  required to be brought to the notice of Chief Engineer (Operation).   Compliance of the  said statutory requirements had not been brought on  record.   Clause 2 of the said Circular reads as under:

"2. It may, however, be pointed out that the period  specified above is the maximum to give  connections in much shorter period."

       Clause 3 of the said Circular mandates the authorities to ensure that  prior to issuance  of demand notice, care is taken to take into consideration  all circumstances, viz., availability of funds, materials and also power  position.

       Commercial Circular No. 57/2001 provides for advance consumption  deposit or meter security deposit.  Clause 8.4 thereof which puts a restriction  in the matter of payment of interest relates to only ACD/AACD.  6%,  however, is payable on security deposit of Rs. 100/- and above against  meters/ metering equipment.

       Consumer Protection Act was enacted to provide for better protection  of the interests of consumers and for that purpose to make provision for the  establishment of consumer councils and other authorities for the settlement  of consumers’ dispute and for matters connected therewith.  No dispute has  been raised before us that the provisions of the said Act are not applicable.   

       "Deficiency" has been defined in Section 2(g) to mean "any fault,  imperfection or shortcoming in the quality, quantity, potency, purity or  standard which is required to be maintained by or under any law for the time  being in force or under any contract, express or implied or as is claimed by  the trader in any manner whatsoever in relation to any goods".  "Service" is  defined in Section 2(o) to mean "service of any description which is made  available to potential users and includes provision of facilities in connection  with banking, financing, insurance, transport, processing, supply of electrical  or other energy, board or lodging or both, housing construction,

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entertainment, amusement or the pureveying of news or other information,  but does not include the rendering of any service free of charge or under a  contract of personal service".

       The Board is a statutory authority.  It is a ’State’ within the meaning  of Article 12 of the Constitution of India.  As a State, the Board is expected  to discharge its statutory functions within a reasonable time having regard to  the fact that it undertakes an important public utility service.  Its actions  besides being governed by the Electricity (Supply) Act and the regulations  framed thereunder, it must also fulfill the test of reasonableness as  envisioned under Article 14 of the Constitution of India.

       What would be a reasonable period for supply of electrical energy to   different categories of consumers has been specified in the administrative  circulars issued as well as the regulations made by the Board itself.  We find  from the records that  the persons had applied for grant of electrical  connection as far back in 1986 and the Board had asked then to deposit the  security amount only sometimes in the year 1999.  The complaints were  filed as despite expiry of the prescribed period, no electrical connection was  given.  If the Board was serious to implement its own circular, it was  obligatory on its part to draw a blue-print so as to enable it to make supply  of electrical energy to the consumers in order of seniority of application  upon procuring the requisite materials therefor.  It failed and/ or neglected to  do so.  It was also under an obligation to notify the persons concerned  stating the reasons why such supply could not be made during the period  specified in the administrative circular and/ or regulations.  The Board does  not say that the said requirements were complied with.   

       It is also idle to contend that the Board was cash-starved owing to any  faulty decision on the part of the State.  If  it suffered losses owing to any  direction issued  by the State pursuant to any policy decision adopted by it,  the same being an internal matter between the State and the Board, the  prospective consumers cannot suffer therefor.         Furthermore, it is evident from the orders passed by the District  Forums, State Commission and the National Commission that no reason was  assigned by the Board as to why it could not comply with its administrative  circulars/ regulations.

       Section 24 of the Indian Electricity Act, 1910 mandates a licensee to  grant electrical connection to an applicant.  Although the said provision is  not applicable so far as the Board is concerned, as has been noticed  hereinbefore, it is bound to supply electrical energy.  The provisions  contained therein also envisage supply of electrical energy within a  reasonable time.  The Board being a deemed licensee under the Indian  Electricity Act having been constituted in terms of Section 5 of the Act  ordinarily cannot be heard to say that it was not in a position to supply  electricity to a class of consumers, having invited applications therefor from  them.  

       In this case, apparently, the Board was not in a position to supply  electrical energy to the consumers within a reasonable time from the date of  issuance of the demand notice.  It not only failed to supply electrical energy  to the 71 complainants who were before the National Commission but even  failed to supply electrical energy to those who had applied much prior  thereto.  Before the State Commission and the National Commission, the  primal contention of the Board was that the claimants-Respondents could  not have been given a march over others who had filed applications prior to  them.  The National Commission rightly did not find fault with such  contention but secured the presence of the Chief Engineer of the Board only  for the purpose of ascertaining as to how soon supply of electrical energy  could be ensured to all concerned including the claimants \026 Respondents.   

       Faced with the orders passed by the District Forums and State  Commission and having regard to its own stand taken before the National  Commission, the Chief Engineer gave an undertaking that all such

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connections would be given by 31st March, 2004.  From the aforementioned  conduct of the authorities of the Board, we have no doubt in our mind had  the claimants \026 Respondents not knocked the doors of the forum under the  Consumer Protection Act, they might not have even obtained electrical  connection for years to come.

       In the premises aforementioned, the Commission, in our opinion,  has  rightly found that the Board having not made itself ready to supply electrical  energy to the agriculturists unjustly enriched itself with the money deposited  by the complainants without rendering any service in return.  It is evident  that the Board wanted to fill its coffer with the amount of the security  deposits and other deposits made by the prospective buyers of electricity.  It  has also not been denied that relying on or on the basis of the representations  made by the Board in terms of its circular letters and / or regulations, the  prospective consumers also spent a huge amount on construction of kotha  and making themselves ready for getting the electrical connection.   

       We are not oblivious of the fact that when public functionary is asked  to perform a statutory duty within a specified time, the provisions of the  statutes are normally held to be directory in nature.  [See P.T. Rajan Vs.  T.P.M. Sahir and Others, (2003) 8 SCC 498]  But the said principle would  not apply in cases when injustice or inconvenience to others would be  caused who have no control over those exercising the duty if such  requirements are not essential or imperative. [See Karnal Improvement  Trust, Karnal Vs. Parkash Wanti (Smt.) (Dead) and Another [(1995) 5 SCC  159]

       In Chandrika Prasad Yadav Vs. State of Bihar and Others [(2004) 6  SCC 331], this Court held:

"31. The question as to whether a statute is  directory or mandatory would not depend upon the  phraseology used therein. The principle as regards  the nature of the statute must be determined having  regard to the purpose and object the statute seeks  to achieve."

       [See also U.P. State Electricity Board Vs. Shiv Mohan Singh and  Another, (2004) 8 SCC 402]

       Furthermore, there cannot be any doubt whatsoever that even if an  order is found to be not vitiated by reason of malice on fact but still can be  held to be invalid if the same has been passed for unauthorized purposes, as  it would amount to malice in law.

       In Smt. S.R. Venkataraman Vs. Union of India, [AIR 1979 SC 49 :  (1979) 2 SCC 491] this Court observed:

"It is not therefore the case of the appellant that  there was actual malicious intention on the part of  the Government in making the alleged wrongful  order of her premature retirement so as to amount  to malice in fact. Malice in law is however, quite  different. Viscount Haldane described it as follows  in Shearer v. Shields: "A person who inflicts an injury upon another  person in contravention of the law is not  allowed to say that he did so with an innocent  mind; he is taken to know the law, and he must  act within the law. He may, therefore, be guilty  of malice in law, although, so far the state of his  mind is concerned, he acts ignorantly, and in  that sense innocently." Thus malice in its legal sense means malice such  as may be assumed from the doing of a wrongful

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act intentionally but without just cause or excuse,  or for want of reasonable or probable cause."

       In State of A.P. and Others Vs. Goverdhanlal Pitti [(2003) 4 SCC  739], this Court observed:

"12. The legal meaning of malice is "ill-will or  spite towards a party and any indirect or  improper motive in taking an action". This is  sometimes described as "malice in fact". "Legal  malice" or "malice in law" means "something  done without lawful excuse". In other words, "it  is an act done wrongfully and wilfully without  reasonable or probable cause, and not necessarily  an act done from ill feeling and spite. It is a  deliberate act in disregard of the rights of others".  (See Words and Phrases Legally Defined, 3rd  Edn., London Butterworths, 1989.)

13. Where malice is attributed to the State, it  can never be a case of personal ill-will or spite on  the part of the State. If at all it is malice in legal  sense, it can be described as an act which is taken  with an oblique or indirect object. Prof. Wade in  his authoritative work on Administrative Law  (8th Edn., at p.        414) based on English  decisions and in the context of alleged illegal  acquisition proceedings, explains that an action  by the State can be described mala fide if it seeks  to "acquire land" "for a purpose not authorised  by the Act\005"  [See also Chairman & MD, BPL Ltd. Vs. S.P. Gururaja and Others,  (2003) 8 SCC 567 and P. Anjaneyulu vs. Chief Manager, A.P. Circle, Bharat  Sanchar Nigam Ltd., Govt. of India, Hyderabad and Another - 2001 (3)  ALD 313].

       A ’State’ within Article 12 of the Constitution of India must act fairly  and bona fide.  It cannot act for a purpose which is wholly unauthorized and  not germane for achieving the object it professes whether under a statute or  otherwise.   

       We do not, therefore, find any fault in the judgments of the National  Commission.  However, before us a statement has been made that all  connections have been given to the claimants \026 Respondents within the  period of aforementioned 31.3.2004.   

       Keeping in view the said fact as also the peculiar facts and  circumstances of this case, we are of the opinion that the interest of justice  shall be sub-served if the directions issued by the National Commission is  modified to the extent that in stead and  place of interest at the rate of 12%  per annum, the Appellants are directed to pay interest at the rate of 9% per  annum and in stead of compensation at the rate of Rs. 10,000/- in each,  compensation of Rs. 5000/- in each is directed to be awarded.  These appeals  are dismissed subject to the aforementioned modifications.  No costs.