M.P. STATE ELECTRICITY BOARD AND ANR. versus GRASIM INDUSTRIES LTD.

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. I 033 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. LP A 20207 of 1997. In the cases where the Letters Patent Appeals were filed, learned Single Judge had decided in favour of the appellant-Board.

p. 1063, margin B

Challenge in the writ petitions filed, which were decided related to the illegality of action taken by the appellant-Board in deleting Clauses 21(±) & 21(g) of the Board's General Conditions for Supply of Electrical Energy and The Sale oflvfiscellaneous 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 C01pn. 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).

p. 1063, margin D

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.

p. 1063, margin G

It is submitted that notification dated 241111996 was issued in exercise of powers conferred under Section 49 of the Electricity (Supply) Act, 1948 (in short the 'Supply Act').

pp. 1063–1064, margin H

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.

p. 1064, margin A

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.

p. 1064, margin B

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 variou5 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 (Underlined for

pp. 1064–1065, margin C

Indisputably a bare reading of paragraph 158 quoted shows that it is permissible for the Board to take a decision the desirability. for payment of interest on security deposits or

p. 1065, margin A

Each of the Electricity Boards before us is a State meaning of Article 12 of the Constitution of India The Boards from licensees. Each of the Boards has framed its own terms and of supply. One such condition relates to security deposits. Such varies from Board to Board. For example, under the terms and notified by Andhra Pradesh Electricity Board under Condition the consumer is required to deposit with the Board a sum equivalent to estimated three months consumption charges. of Raj asthan, the security is in the form of cash for one month or insurance guarantee for two months.

p. 1065, margin B

The legislative sanction behind the power of the Board a consumer to furnish security may be examined. It has already that the Supply Act is complementary to the Electricity Act, 1910. 26 of the Supply Act states that the Board shall have all the obligations of a licensee under the Electricity Act. And deemed to be a licence of the Board for the purpose of the the regulations framed by the Board in exercise of powers of read with Section 790) the consumer is only entitled and the an obligation to supply energy to the consumer upon such conditions as laid down in the regulations. If, therefore, the prescribed a security deposit that will have to be complied requires to be noticed under Clause ( 6) of Schedule II of the Act that the requisition for supply of energy by the Board is under proviso (a) after a written contract is duly executed with security. This, together with the regulation-;; stated above, would to clothe it with legal sanction. In cases where regulations have made Rule 27 of the Rules made under the Electricity Act adoption of model form of draft conditions of supply. Annexure Clause 14 states that the licensee may require any consumer 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.

pp. 1065–1066, margin D

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.

p. 1066, margin A

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 Iakh 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 Mis. BHEL demand cost of coal/spares/ projects in advance for the supply of material. The Board is also required to purchase power from Central projects N.T.P.C., N.H.P.C. in order to meet the demand for power by the consumers. For purchase of such power again advance payments are made by the Board. On such advances the Board is not paid interest. The effect is, the Board is obliged to bear the liability of hundreds of crores of rupees per annum. It has no option but to pay the charges and deposits in order to keep the power available at a level to meet with the demand of the consumers. It is the case of the Board that it has opened letters of credit by making advance deposits in favour of National Thermal Power Corporation and the suppliers. Coal India Limited has also asked the Board M.P. STA TE ELECTRICITY BOARDv. INDUSTRIES LTD. [P ASAY AT, to open revolving letters of credit in favour of coal Limited. Despatch of coal is only against the letter

pp. 1066–1067, margin C

In the above premises, it follows that there under the scheme of the Electricity Act or Schedule that interest must be paid on the security deposit.

p. 1067, margin A

These aspects have been highlighted in (supra).

p. 1067, margin B

Obviously, the Division Bench of the considered the effect of the underlined observations the permissibility to delete provisions for payment as noted in the said paragraph 158. This has to be decided position of each case. We find that in the order of the which formed the subject matter of challenge in the LP factual conclusions arrived at by learned Single Judge. has not dealt with the acceptability or otherwise of referred to paragraph 158 to hold that it cannot be the underlined portion relating to the permissibility be adopted.

p. 1067, margin B

In the aforesaid circumstances, we deem the impugned judgment in each case and remit the matter for a fresh consideration in the light of what has been 158 so far as it relates to the Boards' powers to delete to payment of interest on security deposits on the make it clear that we have not expressed any opinion the case.

p. 1067, margin A

The appeals are disposed of accordingly costs. D.G. Appeals

p. 1067, margin F