9911796707
TMI Blog1993 (4) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Lal 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 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 JUDGMENT S. 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 Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 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 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 N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um 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 ₹ 60 made in cash at the rate of 3% per annum or such other rate as may be fixed by the Board from time to time. Full calendar 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the appellant 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 readi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here being a power cut) , the monthly bill would be approximately ₹ 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 ₹ 1. 07 crores in cash towards the security deposit. A bank guarantee for ₹ 53. 64 lacs had also been furnished. A further demand of ₹ 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 ₹ 1 crore be paid by the 3rd of every month and the balance within 7 days of the presentation of the bill-This order came to be modified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city Board to adopt a realistic policy. Here also Condition No. 28 must be altered. 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 enjoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 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 adjudged. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nishing 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 fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, Hary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid within the due date. The submissions based on Sections 57 59 of the Supply Act in relation to security deposit proceed on a misconception of the nature and character of payment as a security deposit. The object of security deposit is to secure prompt payment of electricity bills. They are not intended to finance the Board's transaction. Section 57 read with sixth Schedule is meant to ensure a reasonable return. expression 'charges' in the Sixth Schedule clearly shows that security deposits are not included within the expression 'charges'. There is no mutual exclusivity between increase of tariffs and earning interest on security deposits, It is also incorrect to contend that prompt payees of electricity bills are treated on par with the defaulters and thus an equals are treated alike. The real test is, whether in the general application of law there is any discrimination. In support of this submission, the learned counsel placed his reliance on: The Collector of Customs, Madras v. Nathella Sampathu Chetty [1962] 3 SCR 786, Vivian Joseph Ferreira v. Municipal Corporation of Greater Bombay [1992] 2 SCR 257, B. Banerjee v. Anita Pan [975] 2 774 and Fate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sthan Electricity Board. The High Court had failed to appreciate the following factors while quashing the impugned clause of the regulations. Electricity is an item which cannot be sold and supplied immediately after generation. For the sale of electricity one has to take meter reading meant for the said purpose and, therefore, the Board sends the bill for particular duration. It is obvious that the reading of the meter could not be taken at every point of time but only for duration/period. In the process 2-1/2 months elapse. The Board does not charge any interest at least for 2-1/2 month from its consumers. At the same time, the Board needs finance for production, supply and other charges necessary for supply of electricity. The Board is thus obliged to take loans from various financial institutions. The consumers who are utilising electricity for 2-1/2 months without making any payment will be unjustifiably enriched at the cost of general public in the absence of security deposit. Further taking of advance money without interest for Providing other services in the market is a general practice. Therefore, a similar provision in the general conditions for supply of the Board cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Jagdamba Paper Industries (Pvt. ) Ltd. v. Haryana State Electricity Board [1983] 4 SCC 508 this Court has indicated that the security amount should bear the same interest as admissible on fixed deposit of scheduled banks. The interest rate on 10 per cent was decided not really on the basis of admission but on a positive finding. Apart from this, this Court has in several other writ petitions ordered interest at 12 per cent. It is submitted that the scheme of Indian Electricity Rules of 1956 and the scheme of the Electricity Supply Act also show that the interest on security deposit is supposed to be payable. The Board is not entitled to use the deposits to augment its finances. They are meant only to secure the default in payment of the bills. Section 59 of the Supply Act indicates that the only condition in which the Board could raise the revenue is by adjustment of its tariff. Section 49 of the Act makes provision for the sale of electricity by the Board to persons other then licensees under the terms and conditions as the Board thinks fit. It can be seen from the definitions of the Sixth Schedule to the Supply Act that the scheme was meant to be applicable to licensees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for electricity as seen from Halsbury's Volume 16 paragraph 129: 129. Giving of security. Security required under the Schedule to be Electric Lighting (Clauses) Act 1899 to be given to an electricity board (See the Electric Lighting (Clauses) Act 1899, Schedule, ss. 25 (2) , 27 (2) , (3) , and paras. 115, 118, ante. ) may be by deposit or otherwise, and of an amount agreed or, failing agreement, determined by a magistrates' court, and that court may deal with the caused of the proceedings and its decision is final and binding on all parties, (bid. , Schedule, S. 71; Electricity Act 1947, s. 57 (2) , 1 Sch 4, Part 111) Where security is given by way of deposit the party to whom it is given must pay interest at the rate of 4 per annum an every sop for each period of Six months during which it remains so deposited. (Electric Lighting (Clauses) Act 1899, Schedule, S. 71 proviso; Decimal Currency Act 1969, S. 10 (I) . UTTAR PRADESH STATE ELECTRICITY BOARD The question raised before the High Court was as to the rate of interest. The respondent (U. P. State Electricity Board ) amended the rate of security deposit as ₹ 2 per K. V. A. On such deposit it paid o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or case, clauses involved are so one-sided as to oppressor unfairly surprise party. Division of Triple 7. Service, Inc. v. Mobil oil Corp. , 60 Misc. 2d 720, 304 N. Y. S. 2d 191, 201. Unconscionability is generally recognized to include an absence of meaningful choice on the part of one of the parties. to a contract together with contract terms which are unreasonably favorable to the other party. Gordon v. Crown Central Petroleum Corn. , D. C. Ga. , 423F. Supp. 58, 61. Typically the cases in which unconsionablity is found involve gross overall one-sidedness or gross one sidedness of a term disclaiming a warranty, limiting damages. or granting procedural advantages. In these cases one - sidedness is often coupled with the fact that the imbalance is buried in small print and often couched in language unintelligible to even a person of moderate education. Often the seller deals with a particularly susceptible clientele. Kugler- v. Romain, 58, N. J. 522, 279 A. 2d 640. As to the meaning of reasonableness it is stated in G. B Mahajan and Ors. v. Jalgaon Municipal Council and Ors. [1991] 3 SCC 91 at 109. Under English Law relating to electricity supply as seen from Halsbur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el of supply and consumption. Therefore, the amounts due are liable to be appropriated forthwith. That is not possible where moneys are placed either on fixed deposit or a savings bank account. It is incorrect to contend that the amount is lying in trust with the Board. The amount lying with the Board could also be appropriated for satisfaction of any amount liable to he paid by the consumer for violation of any conditions of supply in the context of wide scale theft of energy and tempering with meters. Therefore, the security deposit serves not only to secure the interest of the Board but also serves as a deterrent on the consumer in discharging his obligation towards the Board. Under section 49 the Board is enabled to supply electricity upon such terms and conditions, as it thinks fit under Article 226 of the constitution, the Court is to conduct a limited scrutiny whether by imposing such a condition the Board has not acted as a private trader and there by shd off its public utility character. Should the Coust come to the conclusion that the Board has not acted as a private trader and tile nature of' deposit has a rational relationship, the issue will fall outside the sco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonable and directed the Board to examine the question of enhancement of the rate of interest. Similar directions were issued in another case. The appellant-Board after examining the matter issued a Notification on 27th of May, 1988 and enhanced the rate of simple interest to 5 per cent per annum. This was because the amount of security deposit was kept in the savings account which earned 5 per cent interest which was passed on the consumer. The said notification was questioned before the High Court by seeking a writ of mandamus claiming interest at the rate payable on fixed deposit by a nationalised bank in view of the decision by this court in Jagdamba's case (supra) . By the impugned judgment the High Court directed payment of interest on security deposit at the rate payable on fixed deposit by nationalised banks. Aggrieved by this judgment the Bihar State Electricity Board has preferred the special leave petition. Mr. G. L. Sanghi learned counsel appearing for the Bihar Board draws our attention to clause 15. 3 of the tariff notification and submits that the consumption security deposit is not only for the supply of energy on credit but also for satisfaction of any money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it for L and H power consumers above 100 B. H. P. It has been increased from ₹ 170 to ₹ 200. No reason whatever has been assigned for such an increase of security deposit. That will he bad in law as laid down in Central Inland Water Transport Corporation Limited (supra) . This is the argument of Mr. Gobind Mukhoty. 'This is countered saying that when there is an increase in tariff the security deposit also is liable to be increased. PUNJAB W. P. NO. 1317 of 1990 In this writ petition, the challenge is to the validity of Sections 49 and 79 of the Supply Act. According to the respondent (Punjab State, Electricity Board) , the writ petition is not maintainable. A challenge to the imposition of advance consumption of deposit does not involve any fundamental right. The Punjab State Electricity Board is a licensee of the State of Punjab. The electrical energy is generated through hydro as well as thermal plants for ultimate sale to consumers. 50% of powers generated through hydro while the remaining through thermal plants which consume coal/oil. The coal companies and those major suppliers of power plants are demanding cost of coal in advance. On these advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 any 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. When electricity supply is duly made with a consequential liability to pay for each day's consumption, the so-called security deposit is not a deposit in the real sense for the consumers to claim the benefit of Interest Act. We will now proceed to consider the correctness of the above submissions with reference to the following aspects: (i) Whether Section 49 is bad for want of guidelines. (ii) The nature of consumption deposit, irrespective of the nomenclature by which it is called. (iii) (a) The liability of the Electricity Board to pay interest. (b) Whether the clause in the terms of supply providing for nonpayment of interest is unconstitutional or arbitrary. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations, if any, made in this behalf'. This means that the provision made therein is subject to other provisions of the Supply Act and the regulations. It then proceeds to say that the Board may supply electricity to any person not being a licensee upon 'such terms and conditions as the Board thinks fit and may for the purposes of such supply frame 'uniform tariffs'. Sub-section (2) then enumerates several factors which the Board is required to 'have regard to' in fixing the uniform tariffs. The meaning of the expression have regard to is well settled, it means that the factors specifically enumerated shall be taken into account while performing the exercise which in this case is fixation of the uniform tariffs. Ordinarily, therefore, uniform tariffs are required to be framed by the Board for making such supply. Sub-section (3) then proceeds to say that nothing in the earlier enacted provisions shall derogate from the power of the Board, if it considers it necessary or expedient to fix different tariffs for the supply of electricity to any person , having regard to the geographical position of any area, the nature-of the supply and purpose for which supply i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in Section 59 by Act 16 of 1983, which came into effect from April 1, 1985, was to provide for a minimum surplus, of three per cent or such higher percentage as the State Government is to specify in this behalf. In other words, prior to 1978 amendment, the requirement from the Board was towards ensuring a surplus as specified by the State Government, and after the 1983 amendment the Board is required to ensure a surplus of at least three per cent unless the State Government specifies a higher. surplus. This is the scheme of Section 59 and it is Section 59 as amended by 1978 Act but prior to its amendment by the 1983 Act, with which we are concerned in the present case. It cannot be doubted that Section 59 requiring the Board to adjust its tariffs for the purpose of Board's finance is to be read along with Section 49 which provides specifically for fixation of tariffs and the manner in which that exercise has to be performed while dealing with any question relating the revision of tariffs. into force from April 1, 1985, is that the Board entitled to adjust its tariffs to ensure generating a surplus of not less than three per cent even without such specification by the State Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. In Jagdamba Paper Industries Pvt. Ltd. v. Haryana State Electricity Board [1983] 4 SCC 508 at 513-14 it was pointed out as follows: We are of the view that the Board has been conferred statutory power under Section 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. v. Orissa State Electricity Board [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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tricity Board from a consumer of high tension electricity, the demand could not be said to be unreasonable and the consumer would not be entitled to continuation of the energy under Sec. 24 of the Electricity Act on his failure to deposit such security, even if no agreement had been entered. into between the consumer and the Board after the commencement of high tension supply. Once the supply for electricity had commenced the consumer was bound by the terms and conditions of supply contained in the Regulations. Further, in such a case, merely because the Board did not encase or could not encash a small portion of the security deposited in the form of National Saving Certificates before coming into force of the Regulations, it could not be said that the demand of cash security in the form of Bank guarantee by the Board under the Regulations was unreasonable. Furthermore, the demand of security from the consumer which was in accordance with the Regulations framed by the Board could not be said to be unreasonable merely because no interest is paid on the cash security deposited by the consumer. In other words, the terms and conditions notified under Section 49 must relate to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us installed in his premises. Thus, the Board has the power to make regulations to demand security from the consumers. 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. As a matter of fact, electricity is supplied in anticipation of payment. In almost every case it takes nearly 2-1/2 months for the recovery of the amount before action for disconnection could be taken. We will give one illustration as is in the case of Rajasthan. The following is the billing cycle: (a) Consumption period 30 days (b) Period consumed after taking the meter readings to issue bills. 10 days (c) Period allowed for payment 17 days (d) -Notice for disconnecting supply if consumer fails to deposit energy bill in 7 days time. (e) Period taken in ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent requirement for working of thermal plants is more than 52 lakh tonnes of coal per annum. In addition, 60 thousand kolo litre of furnace oil is required. The coal companies/Coal India Limited together with major suppliers of power plant like M/s. BHEL demand cost of coal/ spares/projects in advance for the supply of material. The Board is also required to purchase power from Central projects N. T. P. C. , N. H. P. C. in order to meet the demand for power by the consumers. For purchase of such power again advance payment are made by the Board. On such advances the Board is not paid any 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 to open revolving letters of credit in favour of Coal companies/Coal India Limited. Despatch of coal is only against the letter of credit. From t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 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. Several High Court decisions also had taken this view as seen from K. C Works v. Secretary APSEB. Vidyut Soudha AIR 1979 Andhra Pradesh 291 at 294: The reasonableness of such a requirement is explained by the Board in its counter in W. P. No. 2359/ 75 out of which W. A. No. 156 of 1977 arises. In the counter it was stated as follows:- The consumer is billed for such month separately. The consumers electricity consumption during the month is billed at the end of the succeeding month and 30 days time is given to him for payment of the bill. If he does not pay the bill his supply is liable to be disconnected after giving one week's notice under Section 24 of the Indian Electricity Act, 1910. Meanwhile he will be consuming the power. So by the time the supply is disconnec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired should not exceed two months and, therefore, the determination of three months is arbitrary. In Haryana Ice Factory v. Municipal Corporation of Delhi AIR 1986 Delhi 78, It was held thus: Also, the demand of the security was correlated to the consumption Pattern of the consumers and to cover the energy charges from the date of its consumption till the date of ultimate disconnection as a result of non-payment of the changes due. The court cannot enter into mathematical calculations to come to a conclusion that instead of three months it should be 21/2 months. The fixing of the period of security equal to energy consumption of three months is reasonable. It may be that the Haryana Electricity Board has fixed the period of security deposit equal to the amount of energy consumed for a period of two months but that would depend upon the billing cycle adopted by the Haryana State Electricity Board. In Southern Steel Ltd. Hyderabad V. The A. P. State Electricity Board AIR 1 990 Andhra Pradesh 58 at pages 68-69 it was observed: It is also stated by the Board that huge sums are required by it as rotating capital; that it borrows large amounts from organisations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uggest the payment of interest. The Board is 'not entitled to utilize the security deposits for augmenting its finances as they are meant to secure the Board against default in payment of the bills. The correctness of this argument may now be seen: There is no statutory provision which casts an obligation on the Board to pay interest on security deposit. However, reliance is placed on model form of draft conditions of supply as is found in Annexure VI, traceable to Role 27 of Indian Electricity Rules, 1956. Clause 14 relating to security deposit of the said Annexure reads: . . . . . . Interest at the rate of per cent per annum will be paid by the licensee on deposits exceeding ₹ 251/- . (Emphasis supplied) The model form is applicable only to a licensee as defined in Section 2 (4) of the Electricity Act. Though Rule 27 prescribes a model form it is not compulsory, even for a lincesee to adopt the model condition of supply. This is because Rule 27 itself Stipulates the model conditions of supply contained in Annexure VI, may with such variations as the circumstances of each case require, be adopted by the licensee. Therefore, there is an option available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed namely: (a) Where money or other property has been deposited as security for the performance of an obligation imposed by law or contract from the date of the deposit. This section 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) of the Interest Act 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. Accordingly we overrule the judgment of Rajasthan High Court which holds the Interest Act is applicable. The deposit made cannot be equated to a fixed deposit. It has already bee In seen that 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. Hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges for breach of a contract (other than a contract merely to pay money) where the contract, if performed, would to the knowledge of the parties have entitled the plaintiff to receive interest. Except in the cases mentioned, debts do not carry interest at common law. Consumption security deposit does not fall under any of categories mentioned above. Para 109 says: Equitable right to interest. In equity interest may be recovered in certain cases where a particular relationship exists between the creditor and the debtor, such a mortgagor and mortgagee, obligor and obliged on a bond, personal representative and beneficiary, principal and surety, vendor and purchaser, principal and agent, solicitor and client, trustee and beneficiary, or where the debtor is in a fiduciary position to the creditor, Interest is also allowed on pecuniary legacies not paid within a certain time, on the dissolution of a partnership, on the arrears of an annuity where there has been misconduct or improper delay in payment, or in the case of money obtained or retained by fraud. It may also be allowed where the defendant ought to have done something which would have entitled the plaintiff to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended by Mr. Kapil Sibal, learned counsel and the other learned counsel appearing for the various Boards, it is the Board which should be entitled to receive interest on energy supplied to the consumers on credit as the consumers enjoy a credit facility as noted already. We are also unable to accept the argument advanced on behalf of consumers that because the Electricity Boards charge interest on belated payments, interest must be paid on security deposit. Interest on belated payments is by way of penalty. That has no bearing, Clause providing for non-payment of interest: Whether unreasonable? While the terms and conditions of supply of Andhra Pradesh, Uttar Pradesh and Bihar provide for payment of interest at certain rate, in the case of Rajasthan and Orissa the Boards have clearly stipulated that no interest shall be payable on the securities furnished to the Board. Whether that clause could be considered unconstitutional or arbitrary? In examining the constitutionality of this provision, in that it is violative of Article 14 of the Constitution of India, the following factors have to be borne in mind: 1. Article 14 does not mandate mathematical exactitude or scientific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. We will assume, for a moment, that the contract is an adhesion contract. But still, it is not unconscionable. In Central Inland Water Transport Corporation v. Brojo Nath Ganguly [1986] 3 SCC 156 at 208 adhesion contract is defined quoting Black's Law Dictionary, Fifth Edition, at page 38, as follows: Adhesion contract. Standardized contract form offered to consumers of goods and services on essentially 'take it or leave it' basis without affording consumer realistic opportunity to bargain and under such condition that consumer cannot obtain desired product or services except by acquiescing in forth contract. Distinctive feature of adhesion contract is that weaker party has no realistic choice as to its terms is. Not every such contract is unconscionable. With reference to these contracts the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquired property worth over $ 750,000, the promises sought specific Performance. The court refused to grant it. Though the fairness of the bargain was to be judged as of the time that the bargain was made, in equity as at common law, here the inadequacy of consideration for the promise sought to be enforced was so gross as to render the contrast unconscionable. In dealing with the validity of the agreement containing a clause relating to minimum guarantee this Court had occasion to observed in Bihar State Electricity, Board v. Green Rubber Industries [1990] 1 SCC 731 at page 740 as follows: It is true that the agreement is in a standard form of contract. The standard clauses of this contract have been settled over the years and have been widely adopted because experience shows that they facilitate the supply of electric energy. Lord Diplock has observed: If fairness or reasonableness were relevant to their enforceability the fact that they are widely used by parties whose bargaining power is fairly matched would arise a strong presumption. That their terms are fair and reasonable. Schroeder(A. ) Music Publishing Co. Ltd. v. Macaulayr [1974] 3 All ER 616,624. in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncludes any amount borrowed by, a company, but does not include- (i) (ii) (iii) (iv) . . . . . . . . . . . . . (v) any amount received from an employee of the company by way of security deposit; (vi) any amount received by way of security or as an advance from any purchasing agent, selling agent, or other agents in the course of or for the purposes of the business of the company or any advance received against orders for the supply of goods or properties or for the rendering of any service;. . . . . . . . . We may add that merely because the English Acts provide for interest, it is not necessary the same should be adopted here as well. Thus, we hold that the 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. Has this Court decided the question of rate of interest in jagdamba Paper Industries (Pvt. ) Ltd. v. Haryana State Electricity Board [1983] 4 SCC 508? In that case the following two points were raised as seen from paragraph 3 at page 51 1: 1. The enhancement made in the security am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be deposited in two equal quarterly instalments, the first being due by 15. 10. 89. The application for directions is disposed of accordingly. Based on this, in Writ Petition No. 613 of 1990 it was stated thus: In view of the order made by this Court in the connected matters on September 7, 1989, after hearing parties in Writ Petition No. 578/87 on the amount deposited by the consumer as security, interest at the rate of 12% would be admissible. The Writ petition is disposed of accordingly. Two other orders remain to be seen. One rendered in W. P. 5582 of 1989 which was disposed of by consent and the other in W. P. No. 576 of 1990 where the writ petition was disposed of in the following manner: If the Electricity Board has been directed to allow interest at the rate of 12% per annum on the security deposited with the Board by the petitioners similarly situated, the claims of the petitioners should similarly be dealt with by the Board. The Writ Petition is disposed of. On careful examination of the above orders, we do not think the Court ever intended to adjudicate upon the rate of interest or render a decision on that question. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat structural repairs to buildings in dangerous or ruinous conditions can be carried out. The finances for these objects are provided from a fund from the impugned cess and contributions by the State and the Corporation. The contention that some of the buildings falling in categories B and C would not need structural repairs throughout the life of the Act or that such repairs would carried out in buildings not cared for by defaulting landlords, takes no notice of the fact that the primary object of the Act is not to repair all buildings subject to cess but to prevent the annually recurrent mischief of house collages and the human tragedy and deprivations they cause. The cess being thus levied to prevent such disasters, there is no question of unequal treatment between one class of owners and another. The classification of buildings into three categories is based, as already stated, on their age and the construction current during the periods of their erection. It is, therefore, based on an intelligible differentia and is closely related to the objects of the legislation. There is, therefore no question of unequals being treated as equals, as each building of the Board and has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suit every kindly creditor is beyond the law making process, we have to uphold the grouping as reasonable and the restrictions as justified in the circumstances of, the case. In this branch, there are no finalities. The attack on additional consumer deposit is that no reasons have been adduced for additional demand. It stands to reason that if there is a revision in the rate of tariff there must be an upward revision in the consumption security deposit since it has direct bearing to the level of supply in consumption of electricity. For example, in the State of Uttar Pradesh, the tariffs were adjusted upwards in October 1986. The revision in the form of an additional security deposit with interest at the rate of 3 per cent was made in January 1987. These facts indicate the rationale in the demand of additional security deposit. As stated above, this being a condition of supply, no reason need be given at the time of upward revision. Therefore. we reject the argument of Mr. Govind Mukhoty, learned counsel in this regard. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, 17679/91, 17865- 66/91, 20125/91, 19532/91, 18043/91, 19586-93/91, 19597-600, 20076/91, 21/92, 649/92, 2564/92,5782-83/92,8336/92,9124- 25/92,9488/92,12318/92,12506/ 92, 12610/92, 12805/92, 12804/92, 12814/92, 14439/92, 14449/92, 14555/92, 1739- 43 43A/92, 13593/92, C. A. No. 2409/92, W. P. (c) Nos. 603/92,455/92, 3558/83, 566/92, 1353/89, 48/92, 362/92, 1293/ 89, 6770/90. The Transfer Petition (c) No. 366/92 filed by the Andhra Pradesh Electricity Board is allowed. The following cases filled by Rajasthan State Electricity Board are allowed: C. A. Nos. 4714/91 4028-43/91,S1,P(c) Nos. 446/92. 703/92, 12941/90. 433-36/92, 439-42/92, ('. A. Nos. 5342/92. 1187- 88/92, 4512/92, 45 10/92. 4511/92, 2800/92. 1204/92, 406- 436/92, S. L. P. (c) No. 20/92,46/02. 47/92,50/92,53/02,449- 452/92,494/02,516/92,48/92. 49/92. 51/02. 52/92,54/92,55/92,43- 45/92,56-72/92,428-432/92, 443-444/92,453-457/92,503-08/92. 512-14/92. 530-33/92,14450/92. The following cases filed by the Bihar Electricity Board are allowed: SLP(c) Nos. 11799/89, 1856/90, 8318/92, 16028/92. The following, cases against Uttar Pradesh Electricity Board are dismissed. W. P. (c) Nos. 513/87, 804/87, 1144 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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