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Judgment
E. Padmanabhan, J.—The petitioner, Federation of Consumer Organisations, Tamil Nadu and Pondicherry, a registered society, has filed
the present writ petition praying this Court to issue a writ of certiorari to call for the records of the second respondent culminating in B.P. (F.B)
No. 13 ( Accounts Branch) dated 12.9.2000 and quash the same. The petitioner is a Federation of Consumer Organisations registered under the
provisions of the Societies Registration Act. The petitioner has 350 Consumer Organisations Operating in Tamil Nadu and Pondicherry. The
petitioners has been taking up the cause of the consumers of electricity. The petitioner has received representation from its Member-Organisations
and in particular with reference to the impugned proceedings which deal with the so called simplified procedure for the revenue of additional
current consumption deposit for LT service and disbursing the payment of interest of current consumption deposit both for HT service and LT
service,
According to the petitioner in terms of Clause 15.05 of the Terms and Conditions of supply of electricity the adequacy of current consumption
deposit is being reviewed once in two years during April/May and in case of short fall the consumers were called upon to pay the difference.
According to the present circular the adequacy of current consumption deposit in respect of LT service is to be fixed or revised once in five years
in the month of April/May. The reason given for such change is that there are more than 100 Crores of L.T services and that the revenue involves
calculation of average current consumption charges for the preceding 12 months calculation of interest, preparing demand and serving demand
card and collection of money which requires substantial funding and more man hours and the Board is finding it difficult to do so. Such a reason
cannot be accepted at all. The denial of interest on deposit and changing the mode and method of such revenue are against the object and spirit of
Electricity Regulatory Commissions Act and the objects of the Act are to remove the deficiency caused due to poor planning and operation in
adequate capacity and neglect of the consumer.
The change in conditions, the current consumption deposit is not in the interest of the consumer and it is motivated. Merely because there are
100 lakhs of L.T Services, it is not open to the respondents to change the Terms and Conditions of Service, the impugned proceedings is illegal.
The petitioner also stated that it has filed an application before the third respondent, Statutory body, but it has not been taken up, nor there is any
progress. It is contended that the unilateral modification for reviewing the adequacy of current consumption deposit from once in two years to once
in five years and to deny interest on the security deposit is violative of Art. 14 of the Constitution and it is against the principles of natural justice.
There is a failure on the part of the third respondent to exercise the powers conferred under the statutory provisions of the Electricity Regulatory
Commissions Act 1998. The unilateral change effected by the second respondent in the terms and conditions of service existing between the
second respondent and the consumer or Consumer Organisations like the petitioner is illegal, arbitrary. There is neither a reason, nor justification to
change the current consumption deposit by the second respondent and it is abusive of consumer interest by the second respondent, an
Instrumentality of the State. While raising the above contentions the present writ petition has been filed.
Heard Mr. T. Mohan, learned counsel appearing for the petitioner and Mr. N. Muthusamy, learned standing counsel taking notice for the
respondents 2 and 3.
Before considering the contentions, it is essential to refer to the material portion of the Board''s proceedings.
In order to streamline the existing procedure a proposal has been placed before the Board in its 834th meeting and the Board has approved the
proposal and accordingly the following instructions are issued for implementation:
(i) The adequacy of current consumption deposit in respect of L.T. Services may be reviewed and refixed once in five years in the months of
April/May.
(ii) For L.T. Consumers, the following slab rate of current consumption deposit may be fixed at the time of review:
Category Average Current consumption Quantum of CCD both for single
charges per month based on phase and Three phase
latest two assessments
All L.T consumers except Hut (LT IB),Upto Rs. 200 Rs. 500
Publishing & Waters Supply (LT IIA)
and Agriculture (Free Supply) (LT IV) Rs. 201 to Rs. 400 Rs. 1000
and consumers availing supply under
Rs. 401 to Rs. 1000 Rs. 2500
Alternative Two Part Tariff under LT
IIIB.
Rs. 1001 to Rs. 2000 Rs. 5000
Rs. 2001 to Rs. 4000 Rs. 10000
Rs. 4001 & above Rs. 10000 pl us Rs. 3000 for
every Rs. 1000 or part thereof
increase.
(iii) The minimum current consumption deposit to be held or the quantum prescribed as per (ii) above, whichever is higher is to be taken into
account at the time of review.
(iv) No change is proposed in the minimum rate of current consumption deposit (initial CCD) now in vogue as per B.P. (FB) No. 189 dated
16.10.1999.
(v) The payment off interest on current consumption deposit for all consumers both under H.T and L.T shall be dispensed with and no interest on
current consumption deposit shall be paid from 1.10.2000 onwards.
(vi) The first review of adequacy of current consumption deposit in respect of new services shall be done after 12 months from the month of
service connection.
(vii) Under the existing procedure, the next review of adequacy of current consumption deposit for L.T Service is due during April/May 2001,
which is to be done during April/May and thereafter, the subsequent review shall be done once in five years. While reviewing adequacy of current
consumption deposit during April/May 2001 and also for the subsequent review once in five years, the adequacy is to be calculated based on the
methods and rates indicated under item (ii) above.
(viii) As and when the adequacy of current consumption deposit is reviewed the consumer may be informed of the amount available at credit in his
account towards current consumption deposit.
No change is proposed for High Tension consumers excepting dispensing with payment of interest with effect from 1.10.2000.
Necessary amendment, to Terms and Conditions of Supply incorporating the above provisions will be issued separately by Superintending
Engineer/IEMC.
As seen from the circular a policy decision has been taken and terms and Conditions of Supply of Electricity has already been amended in this
respect. The Terms and Conditions has not been challenged, but the Order by which the Board has resolved to change, amend or alter the terms
and conditions or supply has been challenged. As already pointed out the amendment has already been notified and is being given effect to. Mr. T.
Mohan, learned counsel contended that the impugned Board''s proceedings in changing the current consumption deposit and review thereafter is
arbitrary and violative of Art. 14. It is also contended that it is a unilateral alteration by the respondent Board which is illegal and arbitrary.
Nextly it is contended that the decision not to pay interest on current consumption deposit for all consumers both under the H.T and L.T is also
illegal, arbitrary and violative of Art. 14. It is also contended that unilateral change in the terms and conditions of supply of electricity is uncalled for,
arbitrary and violative of Art. 14, besides it is shocking and in terrorem.
Per contra, Mr. N. Muthusamy, learned Standing Counsel contended that the contentions advanced by the learned counsel for the petitioner do
not deserve examination by this Court. According to Mr. N. Muthusamy, learned Standing Counsel the Board has got the power to alter or amend
the terms and conditions of supply and which change has been effected in terms of power interfered by Section 49 of the Electricity Supply Act.
The Board also has got the authority to dispense with the payment of interest on current consumption deposit and it is a valid condition. The
revision of current consumption deposit and the procedure connected thereof is also one of the terms and conditions of supply which the Board
could always revise and such revision is in conformity with the provisions of the Electricity Supply Act.
The following points arise for consideration:
A. Whether the revision of current consumption deposit as resolved and notified by the Board is violative of Art. 14 or illegal or in excess of the
Board''s power?
B. Whether the amendment altering the conditions with respect to the payment of interest on current consumption deposit is illegal and liable to be
quashed?
C. Whether the Board has the authority to change or alter the Terms and Conditions of Supply?
All these contentions have already been repelled and the legal position is well settled. All that Mr. T. Mohan, learned counsel for the petitioner
contends is that after the coming into force of the Electricity Regulatory Commissions Act, 1998, till the Commission decides, there shall be no
change or alteration in the conditions of supply and the amendment is liable to be declared illegal. This contention''s though attractive deserves to
be rejected as all these points have already been decided by the pronouncements of the Supreme Court and even after coming into force of the
Electricity Regulatory Commissions Act, 1998, it will not make any difference or change. If this Court comes to the conclusion in the light of the
earlier binding pronouncements that the Board has got the authority to change the Terms and Conditions, then all the contentions advanced by Mr.
T. Mohan have to necessarily to fail and it makes no difference even coming into force of the Electricity Regulatory Commissions Act.
The power to frame, amend or alter the terms and conditions of supply is provided in Section 49 of the Electricity (Supply) Act. 1948. While
considering the scope of Section 49 of the Electricity (Supply) Act, in Jagdamba Paper Industries (Pvt.) Ltd. and Others Vs. Haryana State
Electricity Board and Others, the Apex Court held thus:-
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 Stone Lime Co. Ltd. and
Another Vs. Orissa State Electricity Board and Another, 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 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.
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 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.
Therefore it is dear that Section 49 of the Electricity (Supply) Act, 1948 provides ample power to change or alter the conditions, unless it is
demonstrated that such change is arbitrary or unreasonable. The learned counsel for the petitioner is unable to point out any arbitrariness or
unreasonableness in the amendment of the Terms and Conditions. I do not find any arbitrariness or unreasonable in the amended Terms and
Conditions.
On a perusal of the reasons assigned by the Board, it cannot be held that the proposed amendment is arbitrary or unreasonable. The Board,
admittedly has to cater the needs of each and every consumer which exceeds more than 100 lakhs of customers throughout the State and it cannot
be stated that instead of reviewing the security deposit once in two years, the Board could very well undertake review once in five years to avoid
additional expenditure, besides review once in two years for which huge sum has to be spent is also a relevant consideration. Not to speak of
human labour man hours and the expenditure involved in it. As the Board is sustaining continuous loss, to avoid expenditure, there is every
justification for the Board to amend the terms and conditions with respect to review of security of deposit and make it once in five years. At any
rate by such review once in five years neither prejudice nor loss is caused to a consumer, nor such a plea had been advanced, nor there could be a
loss in this respect.
The security deposit rate has been revised also depending upon the consumption rate of each consumer, a relevant criterion. This again, it
cannot be held an arbitrary procedure or method as the current consumption deposit has been stipulated to safeguard the financial interest of the
Board so that it shall have an amount equal to energy bill for three months and the average is being demanded as security. The insistence of cash
security for current consumption charges and a requisite security is called for, lest the Board will not be in a position to manage its affairs and a
public utility service like the Board will suffer and the interest of the public also will ultimately be affected. Further electricity is allowed to be drawn
in advance and after consumption only the consumption charge is demanded. It is not as if the consumption charges are being paid in advance. This
again is a valid factor to be taken into consideration.
In Ferro Alloys Corpn. Ltd. Vs. A.P. State Electricity Board and another, , the Apex Court held that Section 49 and 79(j) of the Electricity
Supply Act, 1948 is valid and the Electricity Board has the Authority to frame conditions of supply which has to confirm to the various provisions
of the Act and regulations. While relying upon the earlier decision of the Apex Court in M/s. Jagadamba Paper Industry v. H.S.E, Board, reported
in 1983 (4) SCC 538, in Ferro Alloys Corporation Ltd., V.A.P.S.E.B, the Apex Court held thus:-
The attack against Section 49 is that it does not contain any norm or guideline with regard to framing of terms and conditions for the supply of
electricity and in particular, the demand of payment of interest on the amounts due to the Board. Further, the principle of fairness of action has not
been explicitly set out so as to make it a visible guide. The words occurring in the section "" as the Board thinks fit"" must be construed as
reasonably thinks fit"". We are unable to countenance this argument. A careful reading of Section 49 clearly discloses as was noted in Hindustan
Zinc Ltd. v. A.P.S.E.B. sub-section (1) of the said Section starts with the words "" Subject to the provisions of the Act and 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:
To prescribe terms and conditions of supply: and
fix the tariff. No guidelines are required in this regard.
In Jagadambal Paper Industries Pvt. Ltd., v. Haryana State Electricity Board it was pointed out as follows: (SCC PP.513-514, para 7)
We are of the view that the Board has been conferred statutory power u/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 Co. Ltd., v. Orissa State Electricity Board 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 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 petitioner had accepted the term.
(emphasis supplied)
Where, therefore, u/s 49 read with Section 79(j) regulations are made, the validity of the regulations could be examined by the Court, whether they
are reasonable or not.
In Bisra Stone Lime Co. Ltd. and Another Vs. Orissa State Electricity Board and Another, , it was observed:
Before we proceed to deal with the rival contentions, it would be appropriate to notice the scope of judicial scrutiny by this Court in such matters.
Acting under Article 226 of the Constitution, this Court does not sit as an Appellate Authority over the Electricity Board. Indeed, the Act has not
chosen to provide an appeal against the terms and conditions u/s 46. The jurisdiction exercised by this Court under Article 226 is supervisory in
nature. It is to ensure the observance of fundamental right the rule of law, and to keep the authorities within their bounds. Undoubtedly, the
Electricity Board is a State within the meaning of Article 12, and hence it is subject to Parts III and IV of the Constitution. The scope of enquiry,
therefore, would be to examine whether the power conferred upon the Board by Section 49 of the Act has been exercised so unreasonably and
arbitrarily that interference by this Court is called for.
As seen from the pronouncement in Ferro Alloys Corporation case not only Section 49 of the Act has been held to be valid, but also the
impugned conditions or regulations even as per the pronouncement of the Apex Court, cannot be held to be unreasonable or arbitrary.
While examining the nature of current consumption, security required to be deposited by the consumers, in Ferro Alloys Corporation
V.A.P.S.E.B. the Apex Court held thus:-
The legislative sanction behind the power of the Board to direct a consumer to furnish security may be examined. It has already been seen
that the Supply Act is complementary to the Electricity Act. 1910. Section 26 of the Supply Act states that the Board shall have all the powers and
obligations of a licensee under the Electricity Act. And this shall be deemed to be a licence of the Board for the purpose of the Act. Under 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. It also requires to be noticed under Clause VI of the Schedule to the Electricity Act that the
requisition for supply of energy by the Board is to be made under proviso(a) after a written contract is duly executed with sufficient security. This,
together with the regulations stated alcove, could be enough to clothe it with legal sanction. 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. Annexure VI in Clause 14 states that
the license 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.
Hence it is clear that the Board has got the power to change or alter the conditions of supply including the security deposit towards current
consumption charges. It cannot be stated that the said revision is arbitrary or unreasonable. It is a matter of fact that tariff rates have been
increased from time to time as cost of generation, distribution and maintenance etc., have increased day by day, and therefore the consumption
charge, which depends upon the units consumed and naturally the increase in security deposit is an essential ingredient to secure the interest of the
Board.
Instead of revision once in two years, the Board had introduced a provision to revise once in five years and this cannot be held to be arbitrary
and the learned counsel for the petitioner did not advance any arguments stating that such a revision once in 5 years is arbitrary or unreasonable or
prejudicial.
As regards the payment of interest, the contention advanced here is also covered by the said Judgement of the Supreme Court. In Ferro Alloys
Corporation case, cited supra, the Apex Court considered an identical question with respect to payment of interest on security deposits. In the said
pronouncement, their Lordships while examining the provisions of the Electricity (Supply) Act, the provisions of the Interest Act, 1978 and Equity
as well as the Common Law, held that Clause provided for non payment of interest is not unconstitutional and not arbitrary. The Apex Court also
took note of the practice of various Electricity Boards in not paying the interest on such deposits. In that context, the Apex Court held thus:-
145, thus, we hold that the Division Bench of the Rajasthan High Court erred in striking down Condition 20 of the General Conditions of the
Rajasthan Electricity Board as violative of Article 14 of the Constitution of India.
On the question of interest in paragraph 11 at page 515 in Jagadambal case it is states thus:
On the security amount interest at the rate of 4 per cent was initially payable. The same has already been enhanced to 8 per cent per annum. Since
the amount is held as security, we indicated to the counsel for the Board that security amount should bear the same of 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 per cent. Board''s counsel has now agreed that steps would be taken to enhance the present rate of interest of 8 per cent to 10 per cent with
effect from October 1, 1983.
In conclusion, we hold:
(1) Section 49 of the Supply Act is valid,
(2) The nature of consumption deposit is to secure prompt payment and is intended for appropriation.
(3) There is no liability on the- Electricity Board either under the statute or common law or equity to pay interest.
(4) Conditions and the terms of supply providing for non- payment of interest is not so unconscionable as to shock the conscience of the Court.
(5) No reason need be given for enhancement of additional security deposit.
(Emphasis supplied)
In the light of the said pronouncement of the Apex Court in Ferro Alloys Corporation v. A.P.S.E.B and another, the contention that denial of
interest is arbitrary and violative of Art. 14 or that it is so unconscionable as to shock the conscience of the Court cannot be sustained.
In a letter pronouncement in Kaushalya Rani v. M.C.D. and Ors., 1995 Supp. (3) SCC 145 , the decision of the Apex Court in Ferro Alloys
Corporation v. A.P.S.E.B has been explained and the Apex Court held thus:-
What was noticed in the Ferro Alloys (Corporation Ltd., case was based on the pleadings of the parties, which cannot be held to be a rule
absolute. It cannot be forgotten that the nature of the transaction relating to the security deposit is an adjustable advance payment of consumption
charges approximately estimated for a period of three months. The concept cannot be uniform in all situations. Additionally the matter as such was
not raised before the High Court. The argument raised is thus rejected. Consequently, these appeals and special leave petitions are dismissed but
without any order as to costs. We may record that by interim orders of this Court in each respective case, deposit of a certain percentage of the
security deposit as demanded was stayed. We now direct that the entire payment, whatever in due, shall be paid by the appellants/petitioners to
the Delhi Electricity Supply Undertaking in three equal installments payable in each succeeding calendar month commencing from August 1993.
In fact, a Division Bench of this Court in Tamil Nadu Electricity Board and Another Vs. Sumathi Process Industries (P) Ltd., , while following
the decision of the Apex Court in Ferro Alloys Corporation v. A.P.S.E.B and after analysing the entire case law, Raju, J., as he then was,
speaking for the Bench held thus:-
If the contentions of the parties are to be considered in the light of the above settled provision of law and as principles declared by the Apex
Court, there need be no specific or special reason for the demand of additional security deposit, except perhaps that such deposits are uniformly
demanded from every one of the consumers similarly placed. There can be no effective reason for the writ petitioner to deny payment of additional
security deposit. Consequently, the demand for the additional security deposit made in this case must be held to be well within the power and
authority of the Electricity Board. The proceedings of the Board dated 26.3.1984 is relied upon by the Board more as a justification for the
demand of additional security deposit rather than as the source of power of authority to make such demand and insist on the payment of such
additional security deposit. That right to demand inheres in the Board by virtue of Section 49(1) and 79(g) of the Act, the statutory terms and
conditions notified in B.P.Ms (FB) No. 61,Adm. Br. dated 24.12.1988 u/s 49 of Central Act 54 of 1948 as also the terms of the agreement dated
15.9.1980 entered into between parties.
Even that apart, we are of the view that undue emphasis cannot be made on the words used that the resolution of the Board which culminated in
the proceedings dated 26.3.1984 was for laying down the standards of or the rights of initial security deposit from prospective HT/LT consumers.
The word ""prospective"" used there has to be considered in the context of the preceding words"" initial security deposit"". If the revised rates are the
rates for the Initial security deposit for prospective HT/LT consumers, it is beyond reason as to why the Board cannot avail of it to revise the rates
for the persons who have already availed of the supply also by way of additional security, deposit availing of its powers under the Act as also the
Clause contained in the agreement, to which a reference has already been made. Consequently, we see no error of law in the demand made by the
Board upon the writ petitioner for the payment of additional security deposit.
If the demand made for the additional security deposit was well within the powers of the Board, it goes without saying that the non-compliance
of the same constitutes default and the disconnection thereafter also is a legal one. Even that apart, as we have noticed while narrating the facts, the
writ petitioner committed default initially in the payment of consumption charges for November, 1984 and thereafter of the consumption charges
for December, 1984 and such default persisted till December, 1985. Viewed thus, the default in availing of the supply by complying with the
conditions both by paying the additional security deposit as also clearing the arrears, as noticed supra, squarely lays with the writ petitioner-
consumer and consequently, the Board is entitled to insist upon the payment of the minimum guaranteed charges for the reason that the non-supply
could not be attributed to any fault or error on the part of the Board- Consequently, the respondent-consumer cannot wriggle out of its liability to
secure the payment of guaranteed minimum charges, as undertaken by it under the terms'' and conditions of supply.
The said pronouncement of the Division Bench is binding on this Court. Identical views have also been taken by various other High Courts and
the latter pronouncement of the Apex Court also do not support any one of the contentions advanced by the learned counsel for the petitioner. It is
not necessary to multiply the authorities as already the Division Bench of this Court has been referred to. No pronouncement to the contra has
been cited by the counsel for the petitioner.
Today by a separate order passed in a batch of writ petition No. 20970 of 2001, & etc., this Court considered the present financial condition
of the Board, which justify the withdrawal of interest and it is unnecessary to repeat the same here as had been pointed out by the Supreme Court
in Ferro Alloys Corpn. Ltd. Vs. A.P. State Electricity Board and another,
In the light of the above pronouncements, all the three contentions advanced by Mr. T. Mohan, the learned counsel for the petitioner deserve
to be rejected and in the light of the legal position, this Court holds that there are no merits and the writ petition is dismissed. The writ petition fails
and it is dismissed. Consequently, connected W.M.Ps are also dismissed. No costs.