Ferro Alloys Corpn. Ltd. & Ors Vs. A.P. State Electricity Board & Ors [1993] INSC 221 (15 April 1993)
Mohan, S. (J) Mohan, S. (J) Reddy, K. Jayachandra (J)
CITATION: 1993 AIR 2005 1993 SCR (3) 199 1993 SCC Supl. (4) 136 JT 1993 (3) 82 1993 SCALE (2)593
ACT:
Electricity Supply Act, 1948: Sections 2(b) (v), 49, 59, 79, Schedule VI-Clause 14.
Section 49-Whether unconstitutional for want of guidelines for terms and conditions of supply of electricity.
Indian Electricity Act, 1910:
Indian Electricity Rules, 1956: Rule 27.
Interest Act, 1978: Section 4(2).
Electricity Boards-General terms and conditions of supply of electricity-Condition of Consumption Deposit-Whether arbitrary-Whether Board has power to make Regulations to demand security deposit-Nature and object of consumption deposit-What is Electricity Board-Whether liable to pay interest on Consumer Deposit-Rate of Interest on Consumption Deposit-Whether should be same as paid by Scheduled Bank- Clause in General Terms and Conditions providing for non payment of interest on Consumption Deposit-Whether unconstitutional and arbitray-Demand for additional Consumer Deposit-Reasonableness of-Electricity Board-Whether should give reasons for additional demand.
Indian Trusts Act, 1882: Section 90.
Relationship between Electricity Board and Consumers-Whether of Trustee and Beneficiary.
Practice and Procedure-Interlocutory order passed by a Bench of 3 Judges-Whether binding on a Bench of 2 Judges.
200 Constitution of India, 1950: Article 12.
Electricity Boards are State.
Words and Phrases:
'Unconscionability'-'Deposit'-'Interest'-Meaning of.
HEAD NOTE:
Under the General Terms and Conditions for supply of electricity notified by the Andhra Pradesh State Electricity Board, under Section 49(1) of the Electricity (Supply) Act, 1948, the consumers were obliged to keep with the Electricity Board an amount equivalent to three month's demand and energy charges as consumption deposit on which Interest at the rate of 3% per annum was payable by the Board. In the event of delay in payment of consumption deposit within the stipulated period not only surcharge was payable by consumer but also the supply was liable to be disconnected. Various petitions were riled before Andhra Pradesh High Court challenging the validity of terms and conditions contending that the consumption deposit should In no event exceed two months average consumption charges and that In view of the judgment of Supreme Court In M/s. Jagdamba Paper Industries v. H.S.E.B. Board, [1983] 4 S.C.C. 508, the Board was liable to pay Interest at the game rate as Is paid by a Scheduled Bank on fixed deposit. The High Court dismissed the petitions.
In appeals to this Court, It was contended on behalf of the consumers that:
(1) Section 49 of the Electricity (Supply) Act is ,unconstitutional since there are no guidelines for framing the terms and conditions of supply of electricity;
(2) in view of the fact that in case of power intensive consumers the cost of Electricity is very high the condition requiring 3 months' security deposit is arbitrary and illegal for power intensive consumers; and
(3) there is no power under the Electricity Supply Act to enable the Board to raise revenue or to cover its capital cost etc. except by way of adjusting tariffs as seen from under Section 59 of the Supply Act, 1948. Therefore, consumption deposit cannot be used for the purpose of revenue or raising revenue.
On behalf of the Electricity Board it was contended that:
(1) In view of the fact that the object of consumption deposit (which is In the nature of advance payment and not a security deposit) Is to ensure prompt payment of electricity supply, It cannot be contended that 3 201 month's consumption deposit Is arbitrary; (2)the fact that some of the consumers pay large amounts by way of electricity charges has nothing to do with the nature of deposit. Merely because a unit Is power based it cannot be treated separately for the terms of supply relating to consumer deposit must be uniform.
In the case of Rajasthan Electricity Board the General Conditions expressly provided that no Interest will be paid by the Electricity Board on security deposit. Futher, the Electricity Board issued notices requiring the consumers to deposit the enhanced amount of cash security as well as bank guarantee on the basis of maximum power consumption. The consumers flied petitions In the Rajasthan High Court contending that provision for no Interest was bad In law and that the enhanced security deposit must he calculated not on three months maximum consumption but on the basis of minimum power consumption. A Single Judge of the High Court allowed the petitions. On appeal, the Division Bench held that the clause relating to nonpayment of interest was not reasonable. Relying on Section 4 of the Interest Act as well as on the Model Form of draft conditions contained In Schedule VI of the 1948 Act, the Division Bench held that interest was payable on the security deposit.
In appeals to this Court, it was contended on behalf of the Rajasthan State Electricity Board that:
(1) there is no statutory provision which casts an obligation on the Board to pay Interest on the security deposit; nor even Interest is payable under common law or in equity;
(2) the High Court erred In relying on the Model Form conditions as well as on the Interest Act;
(3) the security deposit for three months is neither unreasonable nor arbitrary;
(4) even if the contract between the Board and consumer is adhesion contract, it is not necessarily unconsciable;
(5) in Jagdamba Paper Industries case the right of Interest was based on the concession of parties and the Court had no occasion to decide the rate or interest.
On behalf of the consumers it was contended that:
(1)the scheme of the Electricity Act and Supply Act together with the Rules suggest the payment of interest;
(2) since the money is deposited but the consumers with the Board to secure the Board against default In payment of bills, the Board Is in the position of a trustee in respect of 202 this money;
(3) even under English Law, interest was payable on security for electricity.
For the intervenor on behalf of the Electricity Board of Orissa, it was submitted that Regulation 7 of the Orissa State Electricity Board General Conditions of Supply Regulations 1981 providing that no interest would be payable on security deposit is just and reasonable and is not arbitrary or violative of Article 14 of the Constitution.
The Uttar Pradesh State Electricity Board was also paving 3% interest on consumption deposit. The consumers preferred writ petitions before the Allahabad High Court claiming 12% interest ,but the same were dismissed.
In appeals to this Court it was contended on behalf of the consumers that in a number of matters this Court has also ordered interest at the rate of 12% on security deposit and the same principle should apply to this case; (2) if interest is not paid, security deposit cannot be demanded as this will amount to unconscionable bargain; and (3) the security deposit does not contemplate appropriation.
On behalf of the Electricity Board it was contended that:
(1) in cases where 12 per cent interest was awarded it was only by way of ad interim measure. Therefore, orders are not conclusive on this aspect; (2) under Article 226 of the Constitution, the court is to conduct a limited scrutiny whether by imposing a condition the Board has not acted as a private trader and thereby shed off its public utility character. If the Court comes to the conclusion that the Board has not acted as a private trader and the nature of deposit has a rational relationship, the issue will fall outside the scope of judicial purview.
The Bihar State Electricity Board was paying 5 % interest on the security deposit. The consumers claimed interest at the rate payable on fixed deposit by a nationalised bank and the High Court allowed the same. The Electricity Board filed petition in this court contending that the High Court erred in awarding a higher rate of interest.
On behalf of the consumers it was contended that the increase in security deposit without assigning any reason was had in law.
203 In the connected writ petition, the challenge is to the validity of Sections 49 and 79 of the Supply Act.
According to the Punjab State Electricity Board, while the Electricity Board is required to make colossal advances to generate electricity and supply to consumers the consumers also use and consume electricity on credit ranging from 2 to 3 months depending upon the category of consumers. To off- set part of the amount that the consumer owes to the Board constantly and also to ensure timely payment of advances by the Board to its suppliers an advance consumption deposit is insisted upon before commencing supply to the consumer. If this is not so taken the Board will be left with no other option than to increase the tariff. Thus advance deposit cannot be termed as a fixed deposit as the amount cannot be utilised against nonpayment of dues from consumers.
Besides, the consumers can also ask for the refund.
Therefore, Sections 49(1) and 79 (j) cannot be termed as arbitrary.
It was also contended on behalf of the Punjab State Electricity Board that the amendment to clause 23 of abridged conditions of supply requiring consumers to pay advance consumption deposits is perfectly reasonable.
For the intervenor on behalf of Calcutta Electricity Supply Corporation, it was submitted that the deposit though called security deposit is really an adjustable advance payment of consumption charges. The amount is revisable from time to time depending upon the average consumption charges on the basis of actual consumption over a period. In short, it is in the nature of a running account. The security deposit does not remain in tact like a fixed deposit but gets depleted day after day depending on the extent of consumption. More often than not. the consumption charges and other dues exceed the security deposit. That necessitates calling for additional advance to make up a shortfall. In the absence of any usage or contract or an,*, provision of law requiring payment of interest is not payable for wrongful detention of money. In this case, there is no wrongful detention [of even.] Section 4(2) of the Interest Act has no application to this deposit.
204 Disposing the petitions, this Court,
HELD:1. Section 49 of the Electricity (Supply) Act, 1948 is valid Sub-section(1) of the said section starts with the words "Subject to the provisions of the Act and all regulations, if any, made in this behalf". Therefore, the Board has to conform to the various provisions of the Act and the regulations. Section 49 contains two powers; (1) to prescribe terms and conditions of supply; and (2) fix the tariff. No guidelines are required in this regard. [278A- 248CE] Hindustan Zinc Ltd. v. A.P.S.E.B., 1991 (3) S.C.C. 299; Mysore State Electricity-Bought v. Bangalore Woolen Cotton and Sill Mills Ltd. A.I.R. 1963S.C. 1128, Jagdamba Paper Industries Pvt. Ltd. v. Haryana State Electricity Board, 1983 (4) S.C.C. 508, referred to.
Roberts v. Hopwood, 1925 A.C. 578; Pyx Granite v. Minister of Housing and Local Government, 1958 (1) All E.R. 625, cited.
1.1.Where regulations are made under Section 49 read with Section 79 (j), the validity of the regulations could be examined by the court, whether they are reasonable or not.
[249-D] Southern Steel Ltd., Hyderabad v. The Andhra, Pradesh State Electricity Board, A.I.R. 1990 Andhra Pradesh 58, and M/s. B.R. Oil Mills. Bharatpur v. Assistant Engineer (D) R.S.E.B.. Bharatpur, A.I.R 1981 Rajasthan 108, referred to.
1.2The terms and conditions notified under Section 49 must relate to the object and purpose for which they are issued.
Certainly, that power cannot be exercised for a collateral purpose. In this Section 49 is valid. [251-C]
2.The nature of consumption deposit is to secure prompt payment and is intended for appropriation. 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 205 terms of supply of energy with reference to all the Boards. [278 A, 252 D-E]
2.1The cycle of Billing by the Board demonstrates that in the very nature of things, the consumer is supplied energy on credit. The compulsory deposit in the context of billing cycle is hardly adequate to secure payments to the Board by the time the formal hill by the Board is raised on the consumer. In one sense, the consumption security deposit represents only a part of the money which is payable to the Board on the bill being raised against the consumer. Thus, the Board secures itself by resorting to such deposit to cover part of the liability. [253 F-G]
2.2The deposit made cannot be equated to a fixed deposit.
In the case of daily supply of electricity, there is a consequential liability to pay for each day's consumption of electricity. To ensure that payment the security deposit is furnished. Hence, it cannot he equated to a deposit at all.
It is in the nature of a running current account. [262-A] 2.3The argument that the deposit does not contemplate appro- priation is not correct because in the nature of contract it is liable to be appropriated for the satisfaction of any amount liable to be paid by the consumer to the Board for violation of an), conditions of supply in the context of wide scale theft of energy tempering with the meters and such other methods adopted by the consumers. Therefore, the said consumption security deposit serves not only too secure the interest of the Board for any such violation but should serve as a deterrent on the consumer in discharging his obligations towards the Board. [264 F-6) Union of India v. A.L. Rallia Ram, [1964] 3 S.C.R. 164;
Riches v. West minister Bank Ltd. 1947 Appeal Cases 390, held inapplicable.
2.4While the Electricity Board is required to make colossal advances to generate electricity and supply to consumers, the consumers use and consume electricity on credit ranging from 2 to 3 months depending upon the category of consumers.
To off-set part of the amount the consumer owes to the Board continually to ensure 206 timely payment of bills by the Board to its suppliers, the advance consumption deposit is required to he kept with the Board before commencing supply to the consumer. The clauses in the contract in relation to conditions of supply of electric energy enable the Board to adjust the bill against such deposits. Therefore, this is not a case of mere deposit of money as in commercial transaction. In demanding security deposit, it is open to the court to take note of pilferage. [254 F-H] Ashok Soap Factory v. Municipal Corporation of Delhi, J.T. 1993 (1) S.C. 128, referred to.
Corpus Juris Secundum, Vol.26A,p.194,Davidson v. U.S., C.C.A. Pa., 292 F. 750, 752, referred to.
2.5Three month's security deposit cannot be characterised either unreasonable or arbitrary. 1255-F] Jagdama Paper Industries P. Ltd. v. Haryana State Electricity Board, [1993] 4S.C.C.508; K.C. Works v. Secretary A.P.S.E.B., Vidyut Soudha, A.I.R. 1979 Andhra Pradesh 291; Municipal Corporation for Greater Bombay v. M/s D.M. Industries, A.I.R. 1984 Bombay 242; Haryana Ice Factory v. Municipal Corporation of Delhi, A.I.R. 1986 Delhi 78, referred to.
Southern Steel Ltd., Hyderabad v. The A.P. State Electricity Board, A.I.R. 1990 Andhra Pradesh 58, approved.
Indian Aluminium Company v. Karnataka Electricity Board 1992 (3) S.C.C. 580, cited.
2.6Under 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. 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.
207 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. [251F-H, 252A-B] 2.7Under Section 59 the Board is obligated to carry on its operation as to ensure that it generates a surplus of 3 per cent or as specified by the State Government. The Board is obligated to adjust its tariffs for ensuring such surplus.
The condition of supply requiring a consumption security deposit has a direct bearing on the operations of the Board which are to be conducted in such a manner as to ensure a surplus. The language in Section 59 of the Supply Act is "carry on its operations under this Act and adjust its tariffs." The language of the said Section is not by adjusting tariff. Therefore, the argument that the only manner in which the Board can achieve a surplus is to adjust its tariffs does not flow from the language of Section 59.
So read, in the context of the insistence of a security deposit which has direct bearing on the operations of the Board is per se reasonable and constitutional. [266 E-6] Kerla State Electricity Boaed v. S.N. Govinda Prabhu & Bros.
3.There is no liability on the Electricity Board either under the statute or common law or equity to pay interest on security deposit. [278-B] 3.1There is no statutory provision which casts an obligation on the Board to pay interest on security deposit.
Model form of draft conditions of supply containing Clause 14 relating to interest on security deposit) as found in Annexure VI. traceable to Rule 27 of Indian Electricity Rules, 1956, is applicable only to a licensee as defined in Section 2 (4) of the Electricity Act. Even for a licensee it is not compulsory to adopt the model condition of supply.
These is an option available to adopt the model conditions of supply with such modifications as the circumstances of each case require. [259G-H, 260 A-C] 208 3.2Schedule VI has been framed in exercise of powers under Sections 57 and 57A. In defining "clear profit" paragraph (2)of clause XVII, Item (v) makes a reference, as interest on security deposits which is a part of expenditure properly incurred by the licensee.From this, it is impossible to hold that this clause imposes an obligation on the licensee to pay interest on security deposits, All that would when is, if interest, is paid then it qualifies as an item of expenditure properly incurred. This is the position with regard to licensee. But this cannot apply to the Board, which is not a licensee. For the same reason Item L 1 (c) of Form IV of the Electricity Rules relating to interest paid and accrued on consumers' security deposits is of no avail because that relates to the manner of keeping accounts by the licensee, not being applicable to a Board.
Therefore, 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. Accordingly the Division Bench of Rajasthan High Court has erred in holding that Interest Act is applicable. [260 F-H, 261-A-B] 3.3Section 4(2) of the Interest Act, 1978 has no application to a case where on account of a contractual term or a statutory provision payment of interest is not permitted. A careful reading of Section 4(2) would disclose that it merely enlarges the category of cases mentioned in Section 4(1). Even otherwise, there is nothing to indicate that Section 4(2) could override other statutory provisions or a contract between the parties. No doubt, Section 4(2) contains a non-obstante clause. But, such a clause is restricted to the provisions of Interest Act and cannot extend to other laws or a contract between the parties. [261 F-6] Civil Special Appeal No. 83 of 1987, decided on 30th July, 1991 by a Division Bench of the Rajasthan High Court, overruled.
3.4The word 'interest' would apply only to cases where there is a relationship of debtor and creditor. A lender of money who allows the borrower to use certain funds deprives himself of the use of those funds. He does so because he charges interest which may be described as a kind of rent for the use of the funds.
For example, a bank or a lender lending out money on payment of interest. In this case, there is no relationship of debtor and creditor.
Accordingly, the claim for 209 interest cannot be legally founded either on common law or equity. [262-G, 265-A] Halshury's Vol. 32 para 108: (Discussing cases where interest is payable under common law) para 109 (Discussing cases where there is equitable rights to interest), held inapplicable.
Bengal Nogpur Railway v. Ruttanji Ramji, A.I.R. 1939 P.C. 67, referred to.
3.5The object of the deposit is to secure the payment of consumption charges. These charges may vary depending upon the daily consumption, depending on the level of supply .The amount due by way of consumption charges would also be liable to he appropriated. Therefore, it is incorrect to state that the Board is a trustee. The relationship between the Board and consumer is not that of a trustee and a beneficiary but a depositor and deposits. This is not event case of a constructive trust under Section 90 of the Indian Trust Act, since no advantage is gained by the Electricity Board in derogation of the rights of the consumer. 1262 D-F] 4.The clause not providing for interest on security deposit is neither arbitrary nor palpably unreasonable not even unconscionable for the following reasons:
(a)The consumer made the security deposit in consideration of the performance of his obligation for obtaining the service which is essential to him.
(b The electricity supply is made to the consumers on credit.
(c)The billing time taken by the Board is to the advantage of the consumer.
(d)Public revenues are blocked in generation, transmission and distribution of electricity for the purpose of supply. The Board pays interest on the loans borrowed by the Board.
This is in order to perform 210 public service. On those payments made by the Board it gets no interest from the consumers.
(e) The Board needs back its blocked money to carry out public service with reasonable recompense.
(f) The Board is not essentially a commercial organisation to which the consumer has furnished the secu- rity to earn interest thereon. [269 F-H, 270 A-C] 4.1The argument that the Board is monopolistic in character and therefore, the consumers have no other option but to enter contract appears to be misconceived. The consumption security deposit whether or not it carries interest is a condition precedent for the supply of electric energy. The scrutiny by the Court In determining the uncon- stitutionality of a provision not providing for interest must be tested on the touchstone whether in imposing such a condition the Board has acted as a private trader and thereby shed off Its public utility character? In imposing such a condition the Board has not acted as a private trader. The nature of deposit has a rational relationship to the object which is Incorporated a condition of supply.
[266 A-D,] Jagdamba Paper Industries (Pvt. ) Ltd. v. Haryana State Electric in Board, [1983] 4 S.C.C. 508, referred to.
4.2Assuming that the contract Is an adhesion contract, still it is not unconscionable. Conditions and the terms of supply providing for non-payment of interest is not so unconscionable as to shock the conscience of the Court.
[266-H] Central Inland Water Transport Corporation v. Brojo Nath Ganguly [1986] 3 S.C.C. 156; Bihar State Electricity Board v. Green Rubber Industries, [1990] 1 S.C.C. 731, referred to.
Farmsworth on Contracts, 2nd Edn. 319.320, para 4.27, referred to.
Gillespie Brothers Ltd. v. Roy Bowles Ltd. (1973) 1 A. E. R. 193;
211 G.B Mahajan and Ors. v. Jalalgaon Municipal Council and Ors. [1991] 3 S.C.C. 91 cited.
4.3In Jagdamba Papers the question of Interest on security was not raised before the Court. Therefore, the Court had no occasion to decide this issue of interest.That part of the judgment is sub-silentio. [271-E, 272 A-C] Jagdamba Paper Industries (Pvt.) Ltd. v. Haryana State Electricity. Board, [1983] 4 S.C.C 508, explained and held inapplicable.
4.4This Court never Intended to adjudicate upon the rate of interest or render a decision on that question.
Therefore, it cannot be contended that the disposal of the Writ Petition though by a Bench of 3- Judges would be binding on a Bench of two Judges because it was entirely based on interlocutory order. Therefore, this Court is free to decide the question on Its merits. [273 F-6] 4.5The Division Bench of the Rajasthan High Court erred in striking down condition No. 20 of the General Conditions of the Rajasthan Electricity Board as violative of Article 14 of the Constitution of India. [271-D] 4.6The rate of interest on security deposit cannot be equated with the rate of interest on the fixed deposit.
Firstly, if the consumption charges are to be appropriated the moneys accrued by way of deposits cannot be held in fixed deposits. Nor all deposits need carry Interest In every transaction. Secondly, the nature and character of the security deposit is essentially different from fixed deposit. [270 D-E] 5.It may be that the consumers of electricity, where it is raw material, would be prompt in their payment in their own interest. On that basis, it cannot be contended that they cannot be treated in the same way as defaulters. The test, in Court's considered opinion, is whether in the general application of law there is any discrimination.
Merely because some of the consumers are prompt those isolated cases cannot render the provision unconstitutional.
[273 H, 274-Al 212 The Collector of Customs Madras v, Nathella Sampathu Chetty, [1962] 3 S.C.R. 786; Vivian Joseph v. Municipal Corporation.
Bonmbay [1972] 2 S.C.R. 257, Fatehchand Himmatlal v. State of Maharashtra, [1977]2 S.C.R. 828 and; B. Banerjee v. Anita Pam, [1975]2 S.C.R. 774, referred to.
6.No reason need be given for enhancement of additional security deposit. It stands to reason that if there is a revision in the rate of tariff there must he an upward revision in the consumption security deposit since it has direct hearing to the level of supply in consumption of electricityThis being a condition of supply no reason need be given at the timeof upward revision. [278-C, 277 A-C] & CIVILAPPELLATE JURISDICTION: Civil Appeal Nos. 2117 to 2122 of 1993 etc. etc.
From the Judgment and Order dated 28.4.1989 of the Andhra Pradesh High Court in W. P. Nos. 11162/84, 18968/87, 12007/84, 15131/87, 5050/82 and 15746/87.
Altaf Ahmed, V.R. Reddy, Addl. Solicitor General, Narasimha murthy, K. Parasaran, Anil B. Divan, Harish N. Salve, Soli j. Sorabjee, G. Ramaswamy, P.P. Rao, Gobind Mukhoty, Dr.
Shanker Ghosh, Shanti Bhushan, G.L. Sanghi, Pawan Kumar, P.S. Poti, B.M. Patnaik. Sanjay Parikh, P. Niriop, Kailash Vasdev, S. Khaitan, K. K. Khaitan, Darshan Singh, Sushi] Kumar Jain, A.P. Dhamija, S. Atreya. E.C. Agarwal, A. V. Palli. Atul Sharma, Ms Reena Aggarwal, A. K. Mehta, R. K. Gupta, P.C Kapur, T.V.S.N Chari, B. Reddy, Ms. Pramila, Anil K. Sangal, Ajay K. Tayal. Koka Raghava. B. Kanta Rao, Shiv Prakash Pandey, Ms Rekha Pandey. R.K. Priyokumar Singh, T.V. Ratlinain, K.R. Chowdhary, K. Ram Kumar, Ashok Kr. Gupta, R.B. Misra , Pradeep Misra, Mrs. Sheil Mohini Seth, Jain Hansaria & Co, R.P. Gupta, Ms. Sarla Chandra, M/s Mitter Mitter & Co. Ms Abha Jain, Ranjit Kumar, M.P. Jha, S.K. Jain, Vinoo Bhagat, Surva Kant, Aruneshwar Gupta, Badridas Sharma, Prabhu Dayal, Sudarshan La] Aneja, R. Venkataramani, Y.P. Rao, D.K Garg, K.C. Agarwals, O.P Khaitan, P.B. Agarwala, Mohinder Rupal, Mrs. Kamakshi Mehllwal, Ms Archna Kau] (For Gagrat & Co. ), Vijay Hansaria, R. S. Sodhi , D.A. Dave, Raian Karanjwala, Mrs. Manik Karanjawala, Rajesh mar, Ms. Suruchi Aggarwal, K.J. John, Ms. Deepa Dixit (For 213 Swarup John & Co.), A. T. Patra, S.R. Agarwal, Ms. Bina Gupta, Prashant Bhushan, K. Rajendra Choudhary, Rakesh K. Sharma, Shivi Shamia, Anil K. Chopra, Pallav Sisodia, Ravinder Narain (For JBD & Co. ) Praveen Kumar, Virender Kaushal, Bimal Rao Jad, Ms Malini Poduval, K.K. Lahri and S. Sukumaran for the appearing parties.
The judgment of the Court was delivered by MOHAN,J. Leave granted.
These civil appeals are directed against the judgment of the Division Bench of Andhra Pradesh High Court reported in Southern Steel Ltd. v. A. P. State Electricity Board, Hydrabad AIR 1990 Andhra Pradesh 58. The facts briefly are as under:
The Andhra Pradesh State Electricity Board is constituted under Section 5 of the Electricity Supply Act, 1948 (hereinafter referred to as the Act). The said board is engaged in generation, distribution and supply of electricity in the State of Andhra Pradesh. Electric energy is supplied for industrial, commercial, agricultural and domestic purposes. To such of these industries, using energy about a particular level, it is supplied at a higher voltage. They are classified as high tension consumers (H.T. consumers). All the appellants herein belong to that category.
Section 49 of the Act empowers the Board to notify the terms and conditions upon which it will supply electricity to a person. It is also empowered to frame uniform tariffs in that behalf. Sub-section 2 specifies in fixing the uniform tariff, the Board shall have regard to all or any or the following factors, namely-
a) the nature of the supply and the purposes for which it is required;
b) the coordinated development of the supply and distribution of electricity within the State in the most efficient and economical manner, with particular reference to such development in areas not for the time 214 being served or adequately served by the licensee;
c) the simplification and standardisation of methods and rates of charges for such supplies;
d) the extension and cheapening of supplies of electricity to sparsely developed areas.
Sub-section 3 empowers the Board to enter into a special agreement with any consumer any prescribe different tariffs for Wm. Under Section 4, an obligation is cast on the Board not to show undue preference to any person while fixing the tarrif and terms and conditions for the supply of electricity. In all these cases, the appellants are covered by the general terms and conditions notified under Section 49 (1) of the Act. The terms and conditions were notified by the Board and the B.P.M.S. No. 690 dated 17th of September, 1975. It is not necessary to refer in detail to the various terms and conditions. However, what requires to be noticed is the terms and conditions oblige every consumer executing an agreement in the prescribed form, undertaking to abide by the term and conditions prevailing on the date of agreement and also agreed to be bound by the terms and conditions as may be notified from time to time. It is important to note under Section 25, the Board has unilateral right to vary the term from time to time under clause 25.1.
The terms and conditions for supply of electricity by special or general proceedings.
Condition 32. 1. provides "the Board shall as far as possible within 15 days after the expiration of each calendar month cause to be delivered to every consumer a bill of charges stating the amounts payable by the consumer towards charges for energy supplied and any other sum in connection with supply of energy by the Board." Conditions 32.2. 1. obliges the consumers to pay the amount shown in the bill, within 15 days of the date of the bill in, default 'whereof they are liable to pay "an additional charge of 2% per month or part thereof for the period of delay" in paying the bill. Condition 32.3 empowers the Board to disconnect the supply in case of default in paying the bill, without prejudice to its right to recover the amount due. Condition 24.3 also lays down that the consumer shall pay to the Board 215 every month the charges for electrical energy supplied to him during the preceding month at the tariff in force from time to time. Condition 28 obliges the consumers to deposit an amount equivalent to three months consumption charges with the Board. It would be appropriate to set out condition No. 28 as far as it is necessary for our purposes, committing what is not relevant as under:
28.Consumption deposits:- 28.1 Initial consumption deposit. 28. 1. 1. The consumer shall deposit with the Board a sum in cash equivalent to estimated three month's consumption charges. The consumer coming under the L.T. category 'domestic' shall however pay at Rs. 30.00 per Kilowatt or part thereof connected load.
"Provided that the Board may, in the case of industrial consumers, accept by way of consumption deposit a sum equivalent to two months consumption charges during a period of three years from the date of first release of supply of electricity".
28.1.2In the event of the consumer failing to pay to the Board any sum that may become due for payment to the Board on the dates fixed for payment thereof, the Board may, in addition to and without prejudice to the other rights of the Board, appropriate a part or whole of such deposit towards the sum due from the consumer.
28.2Additional Consumption Deposit-All consumers other than those L.T. Domestic consumers whose monthly bills are less than Rs. 500 for a continuous period of six months, shall keep with the Board an amount equivalent to charges for three months demand and energy charges as consumption deposit. The aduacy of the consumption deposit shall be reviewed by.
the Board usually once in every year and/ or at any time during the year if so warranted dur to upward revision of tariffs, enhancement of the con- 216 tracted demand by the consumer charges in the pattern of consumption by the consumer relaxation of power restrictions or such other factors which in the opinion of the Board, warrant review of the, adequacy of the existing consumption deposit. The review shall take into account the following factors:- (i)In the case of consumers where there is no change in the contracted demand, the average consumption for the preceeding twelve months after taking into consideration the quantum and nature of restrictions imposed, if any, during that period shall be the basis.
(ii)in the case of consumers who were sanctioned additional demand and availed it during a part of the period, average recorded consumption for the period of review shall be from the date of utilisation of increased demand to the date of review after taking into consideration the nature and quantum of restrictions imposed, if any during that period.
(iii)The demand shall be contracted demand of the consumer at the time of review.
(iv)The rates, at which the demand or energy charges shall be calculated, will be tariff rates prevailing as on the date of review.
Based on such review, if the consumption deposit of the consumer is found inadequate or has fallen short on account of adjustments made as indicated in clause 28.1.2hereof the consumer shall deposit within 30 days of receipt of notice in this regard such additional amountas may be required by the Board or replenish the required amount as the case may be.
28.3 Interest on consumption deposit:- Interest shall be paid by the Board on deposits of more than Rs. 60 made in cash at the rate of 3% per annum or such other 217 rate as may be fixed by the Board from time to time. Full calender months only shall be taken into account for the purpose of calculating interest and interest shall be calculated to nearest five paisa. The interest accruing to the credit of the consumer shall be adjusted every year in the month of April in the Electricity Supply bills.
28.4 Disconnection or non-payment of consumption deposit:- If the consumer does not make payment of amount of consumption deposit or additional consumption deposit or where the deposit is given in Government security or National Saving Certificate Bank guarantee etc., he fails to replace them by deposit in cash when so demanded by Board within the notice period of 30 days supply of consumer shall be liable for disconnection.
28.5 "The Consumption Deposit so calculated as per the Clause 28.1 and /or 28.2 above shall not be less than three times the monthly minimum charges, applicable to the consumer under the category to which he belongs".
28.6 "All consumers shall pay the Consumption Deposit or additional consumer deposit within thirty days from the date the demand notice if there be any delay in payment, the consumer shall pay surcharge thereon equal to 1 1/2% per month or such other percentage to be fixed by the Board from time to time, of the demanded amount for each month of delay or part thereof. This will be without prejudice to the Board's right to disconnected supply of electricity".
Clause (1) of condition 28 is general in nature. It applies to all consumers. Cl. (1.2) enables the Board to appropriate a part or whole of the said deposit towards any amount due to the Board and not paid within the prescribed period. Cl. (2) applies to all consumers, except those L.T. Domestic consumers whose monthly bills are less than Rs. 218 . 500 per month for a continuous period of six months. Such consumers are obliged to keep with the Board an amount equivalent to three months' demand and energy charges, as consumption deposit. The deposit is liable to be reviewed by the Board from time to time, having regard to the factors mentioned in the said clause. Cl. (3) prescribes interest which the Board has, to pay on such deposit. It is 3% per annum. Clause (4) empowers the Board to disconnect the supply if consumption deposit/ additional consumption deposit is not made, or is not replaced whenever called upon to do so. Clause (5) prescribes a certain floor below which consumption deposit shall not go. Clause (6) says that the consumption deposit or additional deposit shall be paid within thirty days of the notice demanding such deposit. In default, not only interest is payable but the supply also is liable to be disconnected.
The attack before the High Court was that according to Condition No. 32. 1, the bill is served within 15 days of the expiration of each calendar month. The amount covered by the bill is payable within 15 days of the date of the bill. The period of 15 days for payment is calculated not from the date of service of the bill but from the date of the bill. A bill could be served even on the very first day of the succeeding month in which event it will become payable within 15 day of the date of the bill. In such a situation, it is not correct to say that a consumer goes on availing and enjoying energy for a period of three months without paying for it. Invariably it does not exceed six weeks or at any rate, two months. In the event of non- payment under Condition No. 32.3, supply of energy can be disconnected without seven days notice as contemplated under Section 24 of the Indian Electricity Act, 1910. Therefore:
(1)It was urged that the consumption deposit should in no event exceed two months average consumption charges.
(2)The second attack was the payment of 3% interest by the Board on such consumption deposit is no longer good law in view of the judgment of Supreme Court rendered in M/s Jagdamba Paper Industries (p) Ltd. v. H.S. E. Board, [1983] 4 SCC 508, since this Court had taken the 'view that the interest on such deposit should be paid at the same rate as is paid by the schedule bank on fixed deposit.
219 It was generally urged that the Electricity Board being a State; within the meaning of Article 12, it has to act fairly. Any term of condition will have to answer the test of reasonableness. On the contrary, if it is arbitrary, it would be violative of Article 14.
The High Court after analysing the object behind Condition No,. 28 relating to the consumption deposit held: The condition requiring the consumer to pay the charges within 15 days from `the date of the bill and on such failure, a right is conferred on the Board to disconnect the supply.
The condition merely refer to the power of the Board.
Existence of power is distinct from exercise of power. The Board cannot blindly act upon Condition 32.3 and disconnect the supply the moment 15 days time (from the date of the bill) expires. It has to take a realistic view of the situation. After all, these industries are engaged in production of goods essential to the community. A blind and mechanical adherence to Condition 32.3 (instant disconnection) may indeed prove counter-productive in larger sense. It was also not possible for the Board to notice the non payment immediately in view of the large number of consumers and the extensive nature of organisation.
Besides, huge sums are required by the Electricity Board as rotating capital. It borrows large amounts from organisations like L.I.C. and Banks, on which it pays interest to them. Hence, it is well entitled to require the consumer to co-operate by paying their bills regularly, by furnishing security deposits and by conforming to the terms and conditions of supply. Under these circumstances, the requirement of three months deposit could not be said to be unreasonable and unjustified.
As regards, the payment of 3 % interest, the High Court was of the view that the decision of this Court in Jagdamba Paper Industries (P) Ltd. (supra) could not be read as a decision of the Supreme Court on the basis of which it could be declared that the earlier Bench decisions of the High Court were no longer binding, Accordingly, it dismissed the writ petitions.
Aggrieved by this decision, the present S.L.Ps. have come to be preferred.
Mr. R.N. Narasimha nmurthy, learned counsel for the appellant 220 after drawing our attention to clauses 28 and 32 would submit that if there is any laxity on the part of the Board in preparing the bill that cannot be a ground to make a consumer to pay three months deposit.
The tariffs of 1974 provided for the payment of bills within 14 days from the date of the bill while the quantum of deposit is three months consumption charges. Originally, the time for payment was 30 days from the date of the bill.
That has been reduced to 15 days which is a drastic change.
The security deposit is a provision for continued default of the consumer. The quantum of such a deposit is reckoned on the basis of the lapse of time between the consumption charges that become due after expiry of time required for reading of meter, billing, delivery of the bill to the consumer; grace time allowed and the reasonable time required for disconnecting the consumer's service connection. The reduction to 15 days has great relevance on the quantum of deposit as the deposit is intended to cover the defaulted amount by the time of disconnection. However, considering that the bills of power intensive industries are prepared within 3 days of meter reading and also considering the close monitoring that is feasible in verification of payments of bills of these consumers and the small number of these consumers distributed among the several Circle Offices of the Board, any default is detectable within 20 days of the bill for appropriate action to be taken immediately.
The purpose of consumption deposit is only to safeguard the actual consumption charges that become payable by the time penal action could be initiated. Even the judgment of the High Court indicates that a time lapse of 37 days from the date of the meter reading without considering the 7 days notice prescribed under Section 24 of the Indian Electricity Act. The balance time of 23 days to make up for 90 days is provided for the laxity in the Board administrative system which justifiably cannot be passed on to the consumer by way of consumption deposit.
In view of the high stakes involved in the case of power intensive consumers, the Board should evolve a suitable system of payments and must keep the security deposit to the minimum instead of three months.
It is further submitted that the security deposit could be in the form of bank guarantee. There is no justification to require cash deposit. As a matter of fact, as noted in M/s Haryana Ice Factory v. Municipal 221 Corporation of Delhi and Another AIR 1986 Delhi 78, the security in the form of Government Bond is permissible.
In Jagdamba Paper Industries Case (supra), paragraph 11 of the judgment deals with rate of interest. That is a case where 8% was increased to 10% by consent. If really, it is in the nature of a deposit, there is no Justification as to why bank rate should not be awarded. It seen from The Chairman Karnataka Electricity Board and Others v. Gadag Mining Co. & Ors. etc. AIR 1986 Karnataka 252, 10% interest had been awarded.
Mr. Anil B. Divan, learned counsel for the appellant in S.L.P. (c) No. 2564/92 would submit is under:
Power intensive units like the appellant's form a distinct class of consumers. The Ferro Silicon plant of petitioner No. 1 is a power intensive one where the cost of electricity constitutes about 55% of the price of the ferro silicon produced. Electricity, thus is the basic raw 'material for this industry. On an average, the appellant is consuming electricity worth Rs. 1.6 crores per month. If there was full supply of electricity (without there being a power cut), the monthly bill would be approximately Rs. 4 crores at a present tariff.
The power intensive plant of the appellant maintains a very high load factor of 0.9%. Ordinary H.T. consumers work at a load factor of only 60% and the units consumed at only 50 per KVA demand. The HT-111 tariff for power intensive consumers requires a minimum consumption of 403.3 units per KVA demand. This means more than 8 times that of H.T. consumers. The Electricity Board has always classified power intensive units as a separate category. At present, there is a special tariff called HT-III tariff with a fist of power intensive industries specified in the tariff notification.
The appellant No. 1 had deposited Rs. 1.07 crores in cash towards the security deposit. A bank guarantee for Rs. 53.64 lacs had also been furnished. A further demand of Rs. 96.5 lacs prompted the filing of the writ petition in the High Court. As per the order of this Court in S.L.P. No. 12077/84 it was directed on 6.2.1987 that a sum of Rs. 1 crore be paid by the 3rd of every month and the balance within 7 days of the 222 presentation of the bill-This order came to be modified that Rs.1 Crore was to be paid on the 30th of the month and the balance within one week of the receipt of the bill. The said arrangement has been working satisfactorily. There has not been any default in payment of electricity bills.
Therefore, the entire dispute is a theoretical one as to what the quantum of the security deposit can, or ought to be. A deposit in cash of an amount equal to three months average bills at full supply at the present tariff without any power cut will amount to Rs. 12 cores on the basis of tariff revised in October 1992. With ever increasing tariffs, the deposit demanded will also keep increasing.
Under these circumstances, the condition requiring three months security deposit is arbitrary and illegal for power intensive consumers. The paid up share capital of appellant No. 1 is Rs. 3.8 crores. The gross value of the plant and machinery of the power intensive unit is Rs. 7.94 crores.
The total advances made by the consortium of bankers for working capital is Rs. 4.25 crores. The total net worth of all the divisions of appellant No. 1 that is Merine products, Sugar & Engineering, Machine Building and the power intensive Ferro Silicon Plant is Rs. 14.6 crores. The security already furnished namely Rs. 5.7 crores is crippling the Ferro Silicon Plant division. A demand of three months cash deposit would be in the range of Rs. 12 crores. It is arbitrary and unjustifiable to require appellant No. 1 to deposit several times its share capital by way of security. If this demand is enforced strictly, the plant of the appellant will become sick and ultimately, will have to be wound up. In other States, the provision is not so harsh.
If the security deposit is 'consumption deposit' and it is for meeting the cost of supply in advance, then the Electricity Board cannot charge penal interest at 2% per month for non-payment of bills within the stipulated period.
The deposit, first must be appropriated against the dues and the interest charged only if there is balance due. The Stand of the Electricity Board is perverse and illegal.
Equally, there can be no question of 'supply on credit' if deposit is adjusted against consumption all the time.
The consumer has got a right to negotiate. In The Indian Aluminum Co. v. Karnataka Electricity Board [1921] 3 SCC 580, this Court directed the Electricity Board to adopt a realistic policy. Here also Condition No. 28 must be altered.
223 There is no power under the Electricity Supply Act to enable the Board to raise revenue or to cover its capital cost etc.
except by way of adjusting tariffs as seen from under Section 59 of the Supply Act, 1948. Therefore, consumption deposit cannot be used for the purpose of revenue or raising revenue. In this case, the Electricity Board had not placed any material to give interest only at 3%.
Mr. K. Parasaran, learned counsel appearing in S.L.P. No. 13004/ 89 after referring to the passage occurring at page 66 of Haryana Ice Factory case (supra) submits that the security deposit cannot go to buildup the capital or fixation or tariff. Under Sections 49 and 59 of the Supply Act, finance is required to be adjusted including the payment of interest. Demand of three months consumption deposit cannot be resorted to. In support of his submission, reliance is placed on Hindustan Zinc Ltd. etc. etc. v. Andhra Pradesh State Electricity Board & Ors. [1991] 3 SCC 299.
Mr. Kailash Vasudev. learned counsel for appellant in S.L.P. 13004/89 submits that under Section 49 of the Supply Act, it is enjoined upon the Board to adjust its tariffs by keeping the factors detailed in the said Supply Act. Therefore, the Board cannot have recourse methods not provided under the said Act. The demand for a deposit to ensure the due payment of the bills for electrical energy consumed amounts to framing an additional tariff. The Board cannot do indirectly what it cannot do directly.
The Board being 'a state monopoly' has to act reasonably and not arbitrarily. The terms and conditions of supply cannot be unfair and oppressive.
Mr. R. Venkataramani, learned counsel in his written submis- sions in Writ Petition Nos. 1293/89 & 1353/89 and S.L.P. (c) Nos. 4791-92/90 & 4793-94/90 would urge that Section 49 of the Supply Act is unconstitutional since there are no guidelines for framing the terms and conditions of supply of electricity. The said Section does not specifically spell out fairness of action. Clause 28 of the terms and conditions of supply is a clear illustration of arbitrariness and subordinate legislation.
224 The words as the Board thinks fit ought to be interpreted so as to be consistent with the fairness of State action. They are to be construed as "reasonably thinks fit" as held in Roberts v. Hopwood, 1925 AC 578 and Granite v. Minister of Housing and Local Government, (1958) 1 All ER 625.
Clause 28 of the terms and conditions of supply relation to fixation of 3% interest and additional charges are vitiated due to non-application of mind. Under clause 28.6 of the terms and conditions, in the event of delay in payment of consumption deposit or additional consumption deposit within the stipulated period, the consumer is obliged to pay surcharge at 18%. The obligation to pay surcharge and the power of the Board to vary the percentage from time to time would constitute draconian provision.
Money, wherever it is held in deposit could only be used to earn some interest. Therefore, paying 3% interest on the consumer deposit is not at all justified. A public institution cannot be allowed to get excessive interest.
In meeting these arguments, the learned Additional Solicitor General submits that under Electricity Supply Act, the finances of the Board are controlled to the minutest detail.
Originally, prior to 1978, Section 59 required the Board as far as practicable and after taking credit for any subvention from the State Government not to carry on its operation on loss. For this purpose, it was empowered to adjust its charges accordingly from time to time. Section 59 was amended by Act 23 of 1978. After the amendment, the Board after taking credit for any subvention from the State Government was required to carry on its operations and to adjust its tariffs so as to ensure that the total revenues in any year after meeting of the expenses left such surplus as state government may specify from time to time. This Court has taken the view in Kerala State Electricity Board v. S.N. Govinda Prabhu & Bros. & Ors [1986] 4 SCC 198 that even if the Government had, not prescribed surplus, the Electricity Board could generate surplus.
After the amendment by Act 16 of 1983 which came into force on 225 1.4.1985, the Board was to create a minimum surplus of 3% or such higher percentage as the State Government would specify in this behalf. It is in this background., the matter will have to adjuged.
The reason why three months security deposit is demanded is, for two months, the consumer gets free electricity. For supply of such electricity, the Board has to borrow and make payment of interest. If there are no consumer deposits, the tariff shall have to be increased. That will effect all the consumers. Interest at 2% is charged in case of default only in order to ensure proper payment. It is penal in character. In the judgment under appeal, the High Court held that the burden relating to interest can be reflected either in the tariff or could be set off by calling upon the consumer to make deposit. In fact, this Court has upheld the tariff revision effected by Andhra Pradesh Electricity Board as seen from Hindustan Zink Ltd. Etc. Etc. v, Andhra Pradesh State Electricity Board & Others [1991] 3 SCC 299.
It cannot be contended that the three months consumption deposit is arbitrary. This argument ignores the following important factors:
i)This is not a security deposit but a consumption deposit.
ii) It in the nature of an advance payment.
iii)In the event of failure to pay, it could be proceeded against as seen from clause 28.1.2.
(iv) Consumption deposit is variable as per clause 28.2 (iv) If therefore, the object of consumption deposit is to ensure proper payment with reference to electricity supply, there is nothing arbitrary or unjustifiable. The fact that some of the appellants pay large amounts by way of electricity charges will have nothing to do with the nature of deposit.
Merely because it is a power based unit, it cannot be treated separately. Nor can the appellant make a virtue out of necessity. The terms of supply relating to consumer deposit must be uniform, therefore, it is not correct to contend that the power based unit must be treated separately.
As regards payment of interest at 3%, electricity supply is made on 226 credit basis. Therefore, it is a matter of adjustment of Board finances. Strictly speaking, the consumer deposit is in the nature of fidelity guarantee to ensure proper payment by consumer. The consumer may not be entitled to interest at all. However, where the Board has so adjusted finances and pay 3% interest, the Board cannot be defaulted.
Jagdamba Paper Industries case (supra) cannot be said to be a decision as to the rate of interest payable by the Electricity Board. Upon reading paragraph 11 of the judgment, it will be clear that it proceeded on the consent of the counsel.
RAJASTHAN
The writ petitioners applied to appellant Board for the supply of high tention power for their factories. After the execution of the necessary agreement and furnishing of security deposit, power connections were given.
Subsequently, the Board issued notice requiring the consumers to deposit the enhanced amount of cash security as well as the bank guarantee on the basis of maximum power consumption of three months.
With regard to security deposit, Part 11 of the General Conditions of Supply and Scale of Miscellaneous Charges in Note-II stated that no interest will be paid by the Board on the security deposit. Two contentions were raised in the petitions, (i) Note II providing for no interest was bad in law, (ii) the enhanced security must be calculated not on three months maximum consumption but on the basis of minimum power consumption. These two contentions found favour with the learned Single Judge. The Rajasthan Electricity Board filed special appeals while the consumers filed cross appeals. The Division Bench held as under:
i)The Board has power to demand additional security but the average consumption of three months should be taken as the basis for calculating the amount of such security.
ii)The clause relating to non-payment of interest was not reasonable. Interest must be allowed on the entire amount of cash security from the date of the writ petition. The appeals by the Board were dismissed while cross-appeals by the consumers were allowed. Ag- 227 grieved by this judgment, the present S.L.Ps. have come to be preferred by the Rajsthan Electricity Supply Board.
Mr. Soli J. Sorabjee, learned counsel appearing for the appellant argued as follows:
There is no legal obligation to pay interest on a deposit made by the consumer with the Board in terms of Clause 20 (a) & (c) of the General Conditions of Supply. Nor even interest is payable under common law or in equity. In this connection, the learned counsel draws our attention to Halsbury's 4th Edition, volume 32 pages 54-55. There is no legal or equitable obligation to pay interest for detention of monies. In support of this argument, learned counsel relies on Bengal Nagpur Railway-company Ltd. v. RuttanjiRamji, (1937) L.R. 65 I.A. 66 and Union of India v. A.L. Rallia Ram [1964] 3 SCR 164, pages 187, 189-190.
There is no contract or agreement which provides for payment of interest. On the contrary, Clause 9 (b) (ii) of the General Conditions expressly provides that no interest will be paid by the Board on security deposit. There is no statutory provision which casts an obligation on the Board to pay interest on the security deposit. The High Court erred in relying on the model form of draft conditions of supply because the said model form is applicable to only licensee as defined under Section 2 (h) of Electricity Act.
It is not applicable to a Board which is not a licencee.
Further, it is not necessary on the part of the Board to adopt model form. Schedule VI of 1948 Act again cannot be pressed into service as the Board is not a licencee clause 2 (b) (v) of Schedule VI merely specifies interest on security deposit as properly incurred item of expenditure for the purpose of determining the 'clear profit' of the licencee.
The said clause does not and cannot by itself impose an obligation on the licencee to pay interest on security deposit. Should interest be paid, then it qualifies as an item of expenditure properly incurred.
The High Court also erred in relying on Section 4 (2) of the Interest Act, 1978. Section 4 (2) has no application where on account of contractual term or a statutory provision, payment of interest is not permitted. Section 4 (2) of the Interest Act, 1978 merely enlarges the 228 categories of cases mentioned under Section 4 (1). The said Section cannot override other statutory provisions or a contract between the parties. The non-obstante clause under Section 4 (2) is restricted only to the provisions of Interest Act, 1948. It is submitted that under the billing practice prevalent with the Rajasthan Electricity Board the consumer has free use of electricity during the period between consumption of electricity and expiry of period after notice. During this period which varies from 2 to 2 1/2 months, the consumer in effect enjoys a credit facility.
Therefore, if security deposit is demanded for three months, it is neither unreasonable nor arbitrary. As a matter of fact, the security demanded by the appellant Board is in the form of cash for one month and bank or insurance guarantee for two months. Therefore, it is all the more reasonable.
In support of this, reliance is placed on Kistna Cement Works Tadepalli v. The Secretary APSEB, Vidyut Soudha AIR 1979 A.P. 291, B.R. Oil Mills, Bharatpur v. Assistant Engineer (D) R.S.E.B., Bharatpur, AIR 1981 Rajasthan 108, .Municipal Corporation for Greater Bombay v. M/s Devidayal Metal Industries, AIR 1984 Bombay 242, Haryana Ice Factory v. Municipal Corporation of Delhi, AIR 1986 Delhi 78 and Southern Steel Ltd. v. The A.P. State Electricity Board, Hyderabad, AIR 1990 A.P. 58.
On the question of the constitutionality of the provisions regarding non-payment of interest and whether it is violative of Article 14, it is submitted:
i)Article 14 does not mandate mathematical exactitude or scientific precision;
ii)The mode and period of security should be related to the billing practice prevailing in Rajasthan Electricity Board.
iii)The consumer with open eyes has entered into the agreement and has solemnly undertaken to abide by the condition regarding nonpayment of interest. He cannot resile from that condition. There is nothing inherently objectionable, nor is the condition illegal or void as opposed to public policy. Even assuming, the contract between the consumer and the Board
