Full Judgment Text
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PETITIONER:
JAGADAMBA PAPER INDUSTRIES (PVT.) LTD. ETC. ETC.
Vs.
RESPONDENT:
HARYANA STATE ELECTRICITY BOARD & ORS. ETC.
DATE OF JUDGMENT29/09/1983
BENCH:
MISRA RANGNATH
BENCH:
MISRA RANGNATH
SEN, AMARENDRA NATH (J)
CITATION:
1983 AIR 1296 1984 SCR (1) 165
1983 SCC (4) 508 1983 SCALE (2)1008
CITATOR INFO :
R 1988 SC 985 (8)
R 1990 SC1851 (36)
ACT:
Indian Electricity (Supply) Act, 1948, Sections 39(1)
read with clauses 22 and 31 of the Standard Contract
Agreement to supply electricity-Power of the Board to amend,
revise and change schedule of tariff and charges and
conditions of supply of electricity-Whether the power can be
assailed so long it is not exercised arbitrarily or
unreasonably-Sub-para (a) of the first proviso to clause VI
of the Indian Electricity Act, 1910, scope of.
HEADNOTE:
From 1968, the Haryana State Electricity Board has been
collecting security from every consumer to ensure timely
clearance of energy bills and in the case of industrial
consumers the security was worked out at Rs. 30 per KW. With
effect from 1st April 1981, the amount was changed to Rs.
100 per KW. Similarly in regard to the industrial meter a
different basis has been adopted and from April 1, 1981 the
security deposit now varies between Rs. 5,000 and Rs. 10,000
in regard to industrial consumers. The petitioners have
therefore, challenged the said unilateral increase on the
ground that the enhancement is without any justification.
Dismissing the petitions, the Court
HELD: 1. To contend that the Electricity (Supply) Act,
1948 and the Rules made thereunder do not contemplate any
provision for security for the timely payment of energy
charges is not correct. Sub-para (a) of the first proviso to
clause VI of the schedule to the Indian Electricity Act,
1910 would be applicable and what would be sufficient
security should be left to the Electricity Board to decide.
[171 E-F]
Krishna Cement Works v. The Secretary APSEB, AIR 1979
AP 291 approved. M/s. B. R. Oil Mills v. Assistant Engineer
(D) (RSEB), Bharatpur & Anr., AIR 1981 Raj. 108; and M/s.
Goodyear India Ltd. v. H.S.E.B. & Ors. CW. 4765/81 dated
9.4.82 Pb. & Haryana H.C. referred to Modi Industries Ltd.
(Steel Section) v. U.P. State Electricity Board AIR 1979
All. 375; M/s. Devidayal Metal Industries v. The Municipal
Corporation for Greater Bombay & Anr. AIR 1980 Bom. 154
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distinguished.
2:1 Section 49(1) of the Indian Electricity (Supply)
Act, 1948 clearly indicates that the Board may supply
electricity to any person upon such terms and conditions as
the Board thinks fit. In exercise of this power the Board
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had initially introduced the condition regarding security
and each of the petitioners had accepted the term. The Board
has been conferred statutory power under s. 49(1) of the Act
to determine the conditions on the basis of which supply is
to be made. This Court in Bisra Stone Lime Company Ltd. &
Anr. Etc. v. Orissa State Electricity Board & Anr., [1976] 2
SCR 307., took the view that enhancement of rates by way of
surcharge was well within the power of the Board to fix or
revise the rates of tariff under the provisions of the Act.
What applied to the tariff would equally apply to the
security, that being a condition in the contract of supply.
Each of the petitioning consumers had agreed to furnish
security in cash for payment of energy bills at the time of
entering into their respective supply agreements. There was
no challenge in these writ petitions that the demand of
security at the time of entering into supply agreements has
to be struck down as being without jurisdiction.
[172 G-H; E-F]
2:2 Under clause 31 of the Agreement the Board reserved
to itself the right to amend, cancel or add to any of the
schedules and conditions at any time. The provisions of this
clause are similar to clause 13 of the agreement which came
to be considered in Bisra Lime Stone Company’s case (supra).
Therefore, the Board had authority under the agreement
itself to amend the conditions. In exercise of that power
the Board has now raised the additional demand. [173 A-B]
2:3. It is true that the affairs of the Boards in the
different States of the country are not upto the expectation
of the consumers and there have been instances which give
rise to genuine anguish and dissatisfaction. The scheme of
the Act clearly indicates a legislative mandate that the
Board should manage its commercial activities in such a way
that it does not make any loss. It is also clear that the
Board being a public utility organisation is not expected to
make any undue profit by abusing its monopoly position. An
inbuilt system of control and supervision has been set up
and the State Governments have been given power to give
policy directions. Situation seems to have arisen when
stricter control and supervision are called for and if
organisational changes and provision for greater control
appear necessary, to improve the functioning of the Boards,
steps should be taken without delay in this regard. The
Board should always remember that it is a public utility
service and not a governmental agency enjoying wide powers
and expected to have a share in the governance of the
country. On the facts placed that the stand of the Board
that a demand equal to the energy bill of two months or a
little more is not unreasonable,) when the Board has the
power to unilaterally revise the conditions of supply, it
must follow that the demand of higher additional security
for payment of energy bills is unassailable, provided that
the power is not exercised arbitrarily or unreasonably.
[173 E-H; 174 A-B]
3:1. The argument that the security should be in the
shape of Bank guarantee does not call for consideration, in
view of the acceptance of the court’s, suggestion to
increase the interest @ 10% per annum on per with the
interest payable by the Scheduled Banks. 174 E; C]
3:2. In regard to the enhanced security for the meter
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the explanation advanced by the Board is that the meters are
required to be replaced or many
167
costly parts have to be substituted by way of repair. In
view of the High cost of the meters the Board is justified
in enhancing the security. Petitioners have not disputed
their obligation to furnish security for the meter. But the
challenge is to the enhancement. Indisputably all the meters
to the petitioning consumers have been supplied prior to the
decision to enhance the security. Keeping in view the
likelihood of replacement or substantial repair, the court
suggested that the escalation may be reduced by 50% to which
the Board has accepted. The Board under took to evolve a new
formula accordingly and introduce it from 1-10-83 and not to
enforce the rates impugned.
[174 E-G; H; 175 A]
JUDGMENT:
ORIGINAL JURISDICTION: Writ Petition No. 4167-68, 7346-
53, 7689-97, 8638, 8640-41, 9899 of 1982, 910-912 of 1983,
7987-91 of 1982 and 29, 1642 of 1983.
(Under article 32 of the Constitution)
AND
Civil Appeals Nos. 2464-65 of 1982.
Appeals by Special leave from the Judgment and Order
dated the 9th April, 1982 of the Punjab and Haryana High
Court in C.P. Nos. 4805 and 5184 of 1981.
For the appearing Petitioners/Appellants:
S.B. Bhasme, B.R. Kapur, S.R. Srivastava, C.P. Mittal,
D.B. Vohra, K.G. Bhagat, Vimal Dave, Ms. Kailash Mehta, A.K.
Goel and Sarva Mitter.
For Respondent:
Parmod Dayal, K.K. Jain and A.D. Sanger.
The Judgment of the Court was delivered by
RANGANATH MISRA, J.: Each of these writ petitions is by
a consumer of electric energy which has entered into a
contract with the Haryana State Electricity Board (’Board’
for short), and challenge in these petitions under Article
32 of the Constitution is to the enhancement of security
unilaterally made by the Board both in respect of meter as
also for the payment of the energy dues. Clause 22 of the
standard contract stipulates:
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"22. Security Deposit:
(a) Before commencing or resuming supply to a
consumer the Board may require the consumer to lodge
with the Board as security for the payment by the
consumer of his monthly bills and for the value of the
meters and/or other apparatus belonging to the Board
and installed at the consumer’s premises a deposit,
which may not be transferable, calculated as follows:-
Rs. 10.00 per KW of connected load or part thereof
in the case of domestic; Rs. 20 per KW of connected
load or part thereof in case of commercial and Rs. 30
per KW of connected load or part thereof in case of
industrial/agricultural/bulk supply/street lighting
consumers plus the following amount per meter:-
(1) ... ...
(2) ... ...
(3) ... ...
(4) For medium industrial supply
and bulk supply above 20 KW
and up to 100 KW. Rs. 100.00
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(5) For industrial and bulk supply
above 100 KW. Rs. 200.00
The security is obtainable in cash and an interest
at the rate of 4% per annum shall be payable on
security deposits of Rs. 50.00 and above. No interest
will be payable if a connection is disconnected within
a year of giving supply.
(b) The Board will be at liberty at any time to
demand further security deposit from consumers who have
habitually defaulted in making payments of their
monthly dues."
Clause 31 provides:
"31. Rights of Board to revise schedules of
tariffs and charges and conditions of supply: Subject
to clause
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30 above (relating to interpretation) the Board
reserves the right at any time to amend, cancel, or add
to, any of these schedules and conditions."
Each of the contracts contains detailed provisions for
security deposit as provided under clause 22. The Board
enhanced the tariff by almost four times but the enhancement
of tariff has not been challenged by the consumers, who have
filed these writ petitions. Thereafter the Board decided in
October 1980 that with effect from April 1, 1981, the
security contemplated under clause 22 both in regard to the
meter as also for due payment of the energy bills should be
enhanced and fixed a new schedule. Challenge in these
petitions is to the enhancement in regard to both the meter
as also security for due payment of energy bills made
unilaterally by the Board. As this is the common question
arising in all these writ petitions, they are being disposed
of by a common judgment.
The petitioning consumers have contended that the
enhancement made in the security amount towards the meter is
without any justification. It is all the more so where
meters have been installed several years before and there is
no change in the circumstances justifying an enhancement in
the security deposit for it. Challenge is also advanced
against the enhancement of the security deposit in the
matter of payment of energy bills. From 1968 the Board had
introduced the condition of taking a security from every
consumer to ensure timely clearance of energy bills and in
the case of industrial consumers the security was worked out
at Rs. 30 per KW. With effect from April 1, 1981, in place
of Rs. 30 per KW Rs. 100 per KW has been substituted. It is
contended that on account of this enhancement most of the
petitioning consumers have been called upon to furnish
additional security to the tune of several lakhs of rupees.
Similarly in regard to the meter a different basis has been
adopted and from April 1, 1981, the security deposit now
varies between Rs. 5000 and Rs. 10,000 in regard to
industrial consumers. After the enhancement came into force
the Board through its prescribed officers called upon the
petitioning consumers to make additional security deposits
on both counts, within a time indicated.
According to the petitioners the Electricity (Supply)
Act, 1948 (’Act’ for short) and the Rules made thereunder do
not contemplate any provision of security for the timely
payment of energy charges. The Board has not framed any
Regulations under s. 79 of the Act
170
for demanding security of the type in issue. According to
the petitioners as the supply is controlled under an
agreement entered into between the Board and the petitioning
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consumers, unilateral escalation would be contrary to any
acceptable notion of contract. Reliance is placed on behalf
of the petitioners on the decision of the Allahabad High
Court in Modi Industries Ltd. (Steel Section) v. U.P. State
Electricity Board, and that of the Bombay High Court in M/s.
Devidayal Metal Industries v. The Municipal Corporation for
Greater Bombay and Anr. Before the Allahabad High Court it
was contended by the consumer that the Board contracted with
it to supply 9500 KW electrical energy. The rate schedule
applicable to the consumer was HV-2. Under the agreement of
December 31, 1970, the consumer had deposited with the Board
a sum of Rs. 3,44,135 as security. The Board demanded a
further security of Rs. 9,00,000. The consumer took the plea
before the High Court that neither under the Indian
Electricity Act, 1910 (’1910 Act’ for short), nor the Act
and the agreement for supply between the parties was the
Board authorised to demand additional security. The Board
took the plea that the tariff had gone up from time to time
and the then existing rate schedule was of 1974. Normally
the meter reading was done after every 30 days or once in 30
days and it took about 15 to 20 days thereafter to prepare
the bill and to send it to the consumer. A further period of
15 days was allowed to the consumer to make the payment.
Seven days’ disconnection notice after expiry of the due
period was to be given to the consumer. It took 2 or 3 days
thereafter to verify the accounts and take steps for
disconnection on the ground of non-payment, of the energy
bill. Thus a period of about 3 months was necessary to
collect the energy bills from the date of consumption. In
order to safeguard the financial interest of the Board a sum
equal to energy bill for three months on the average was
demanded as security. Reliance was placed on clause VI of
the Schedule to the 1910 Act for authorising the Board to
rise the additional demand of security. The Court took the
view a that clause VI of the Schedule to the 1910 Act had no
application and came to the conclusion:
"The Board is a statutory authority and has to act
within the framework of the statutory provisions
applicable to it. If the act of the Board is found to
be not
171
in consonance with or in breach of some statutory
provisions of law, rule or regulation, it is open to
challenge in a petition under Art. 226 of the
Constitution. In these petitions no contractual rights
are sought to be enforced which may more suitably be
agitated in a competent Civil Court as contended by the
learned counsel for the Board".
A learned single Judge of the Bombay High Court without
referring to the Allahabad decision came to the conclusion
that the scheme of the Act made it clear that it was not
open to the licenser to impose any financial burden in
addition to what was provided for in the Act itself. If this
were not so, the whole object of the Act, which is to ensure
the supply of electricity to the consumers in a controlled
manner at rates which have to be controlled and approved by
the State Government would be destroyed. Because, in
addition to the electricity charges, the licenser may, by
contract, provide for other charges and thus impose a
greater financial burden on the consumer than contemplated
in the Act itself. As against these decisions, reliance has
been placed on a Bench decision of the Andhra Pradesh High
Court in Krishna Cement Works v. The Secretary, APSEB
and a single Judge decision of the Rajasthan High Court in
M/s. B.R. Oil Mills v. Assistant Engineer (D), RSEB,
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Bharatpur and Anr., on behalf of the Board in support of the
demand of security. The Andhra Pradesh High Court has taken
the view that sub-para (a) of the first proviso to clause VI
of the Schedule to the 1910 Act would be applicable and what
would be sufficient security should be left to the Board to
decide. The Andhra Pradesh Electricity Board had adopted
similar justification as placed by the Board before us to
justify demand of enhanced security and dealing with such
stand the learned Judge observed:
"To our mind, this is a quite satisfactory
explanation of the reasons behind insistence on cash
security. Certainly a public utility service like
Electricity Board cannot launch itself on litigation to
recover consumption charges on a large scale. Power
generation, which it does is an essential service and
that shall never be allowed to suffer on account of
improper security. We
172
have already referred to the fact that it is reasonable
on the part of the Board to require security for three
months’ consumption charges. Now to require that amount
to be deposited in the form of cash is eminently
reasonable..."
The Rajasthan High Court has accepted the view of the Andhra
Pradesh High Court. We accept the view of the Andhra Pradesh
High Court.
Counsel for the Board has also placed before us a
Division Bench decision of the Punjab and Haryana High Court
in M/s. Goodyear India Ltd. v. Haryana State Electricity
Board and Others, where the decision of the Andhra Pradesh
and Rajasthan High Courts have been followed. We have been
told that against that decision of the Punjab and Haryana
High Court appeals have been preferred to this Court.
We are of the view that the Board has been conferred
statutory power under s. 49(1) of the Act to determine the
conditions on the basis of which supply is to be made. This
Court in Bisra Stone Lime Company Ltd. & Anr. etc. v. Orissa
State Electricity Board & Anr., took the view that
enhancement of rates by way of surcharge was well within the
power of the Board to fix or revise the rates of tariff
under the provisions of the Act. What applied to the tariff
would equally apply to the security, that being a condition
in the contract of supply. Each of the petitioning consumers
had agreed to furnish security in cash for payment of energy
bills at the time of entering into their respective supply
agreements. There was no challenge in these writ petitions
that the demand of security at the time of entering into
supply agreements has to be struck down as being without
jurisdiction. Section 49(1) of the Act clearly indicates
that the Board may supply electricity to any person upon
such terms and conditions as the Board thinks fit. In
exercise of this power the Board had initially introduced
the condition regarding security and each of the petitioners
had accepted the term.
173
Under clause 31 of the agreement the Board reserved to
itself the right to amend, cancel or add to any of the
schedules and conditions at any time. The provisions of this
clause are similar to clause 13 of the agreement which came
to be considered in Bisra Lime Stone Company’s case (supra).
We are, therefore, inclined to take the view that the Board
had authority under the agreement itself to amend the
conditions. In exercise of that power the Board has now
raised the additional demand. We have already taken note of
the fact that there has been a steep escalation in the
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tariff. Counsel for the Board placed before us a statement
which indicates that while tariff has gone up almost four
times, the demand for security raised by the Board is much
less-it is a little more than two times of the original
security.
On behalf of some of the petitioners it was contended
that the security should represent the average energy bill
for one month. It was claimed that the Legislature has set
up the Board as an autonomous body with large powers and
providing scope to act purely with a view to creating an
effective public utility service. The Board should not be
permitted to act either arbitrarily or capriciously; nor
should it manage its affairs in a disorderly way and taking
advantage of its monopoly status pass on the incidence of
such vice to be shared by the consumers. We share the
concern of the petitioners and their counsel that the
affairs of the Boards in the different States of the country
are not upto the expectation of the consumers and there have
been instances which give rise to genuine anguish and
dissatisfaction. The scheme of the Act clearly indicates a
legislative mandate that the Board should manage its
commercial activities in such a way that it does not make
any loss. It is also clear that the Board being a public
utility organisation is not expected to make any undue
profit by abusing its monopoly position. An inbuilt system
of control and supervision has been set up and the State
Governments have been given power to give policy directions.
Situation seems to have arisen when stricter control and
supervision are called for and if organisational changes and
provision for greater control appear necessary, to improve
the functioning of the Boards, steps should be taken without
delay in this regard. The Board should always remember that
it is a public utility service and not a governmental agency
enjoying wide powers and expected to have a share in the
governance of the country.
174
We agree, however, on the facts placed that the stand
of the Board that a demand equal to the energy bill of two
months or a little more is not unreasonable. Once we reach
the conclusion that the Board has power to unilaterally
revise the conditions of supply, it must follow that the
demand of higher additional security for payment of energy
bills is unassailable, provided that the power is not
exercised arbitrarily or unreasonably.
On the security amount interest at the rate of 4% was
initially payable. The same has already been enhanced to 8%
per annum. Since the amount is held as security, we
indicated to the counsel for the Board that security amount
should bear the same interest as admissible on fixed
deposits of Scheduled Banks for a term of years and we
suggested keeping the present rate of interest in view that
it should be enhanced to 10%. Board’s counsel has now agreed
that steps would be taken to enhance the present rate of
interest of 8% to 10% with effect from October 1, 1983.
Once that is done, the argument that the security
should be in the shape of Bank Guarantee does not call for
consideration.
In regard to the enhanced security for the meter the
explanation advanced by the Board is that the meters are
required to be replaced or many costly parts have to be
substituted by way of repair. In view of the high cost of
the meters the Board is justified in enhancing the security.
Petitioners have not disputed their obligation to furnish
security for the meter. But the challenge is to the
enhancement. Indisputably all the meters to the petitioning
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consumers have been supplied prior to the decision to
enhance the security. Keeping in view the likelihood of
replacement or substantial repair, we suggested to learned
counsel for the Board that the escalation may be reduced by
50%, i.e. in place of the enhanced demand varying between
Rs. 5,000 and Rs. 10,000, it should be limited to Rs. 2,500
and Rs. 5,000. Learned counsel has agreed that steps would
be taken by the Board to evolve a formula by which the
demand for security for the meter would be revised being
limited to Rs. 2,500 at the minimum and Rs. 5,000 at the
maximum in regard to industrial meters in respect of which
the demand now is between Rs. 5,000 and Rs. 10,000. It
would, therefore, follow that the Board would not enforce
its decision in regard to escalation of
175
the meter security until the new formula is evolved and it
will be open for the Board to ask for additional security
effective from October 1, 1983, in accordance with the new
formula towards security for the meter.
We make no Order as to costs.
S.R. Petitions dismissed.
176