ition 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 CP Nos 4805 and 5184 of 1981
For the appearing PetitionersAppellants SB Bhasme BR Kapur SR Srivastava CP Mittal DB Vohra KG Bhagat Vimal Dave Ms Kailash Mehta AK Goel and Sarva Mitter
For Respondent Parmod Dayal KK Jain and AD 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 168 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 andor other apparatus belonging to the Board and installed at the consumer s premises a deposit which may not be transferable calculated as follows Rs 1000 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 industrialagriculturalbulk supplystreet 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 10000 5 For industrial and bulk supply above 100 KW
Rs 20000 The security is obtainable in cash and an interest at the rate of 4 per annum shall be payable on security deposits of Rs 5000 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 169 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 10000 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  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 section 79 of the 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 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 vs UP State Electricity Board and that of the Bombay High Court in Ms Devidayal Metal Industries vs 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 344135 as security
The Board demanded a further security of Rs 900000
The consumer took the plea before the High Court that neither under the  1910  for short nor the 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 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 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 article 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 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 itself
If this were not so the whole object of the  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 itself
As against these decisions reliance has been placed on a Bench decision of the Andhra Pradesh High Court in Krishna Cement Works vs The Secretary APSEB and a single Judge decision of the Rajasthan High Court in Ms BR Oil Mills vs Assistant Engineer D RSEB 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 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 Ms Goodyear India Ltd vs 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 section 491 of the to determine the conditions on the basis of which supply is to be made
This Court in Bisra Stone Lime Company Ltd  Anr
vs 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 
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 491 of the 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 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 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 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 ie in place of the enhanced demand varying between Rs 5000 and Rs 10000 it should be limited to Rs 2500 and Rs 5000
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 2500 at the minimum and Rs 5000 at the maximum in regard to industrial meters in respect of which the demand now is between Rs 5000 and Rs 10000
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
SR Petitions dismissed


Summary:
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 5000 and Rs 10000 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 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 would be applicable and what would be sufficient security should be left to the Electricity Board to decide
171 E F Krishna Cement Works vs The Secretary APSEB AIR 1979 AP 291 approved
Ms B R Oil Mills vs Assistant Engineer D RSEB Bharatpur  Anr  and Ms Goodyear India Ltd vs HSEB  Ors
476581 dated 9482 Pb  Haryana HC referred to Modi Industries Ltd Steel Section vs UP State Electricity Board AIR 1979 All 375 Ms Devidayal Metal Industries vs The Municipal Corporation for Greater Bombay  Anr
distinguished
21 Section 491 of the Indian 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 166 had initially introduced the condition regarding security and each of the petitioners had accepted the term
The Board has been conferred statutory power under section 491 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
vs 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
172 G H E F 22 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 23
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 31
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 32
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 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