THE HON’BLE SRI JUSTICE V.V.S. RAO AND THE HON’BLE SRI JUSTICE K.G.SHANKAR WRIT APPEAL No.1904 of 2002 18.11.2011 Between: M/s.Chitavalasah Jute Mills, represented by its Director-Jute, Shri H.S.Singh, Visakhapatnam District … Appellant AND Andhra Pradesh State Electricity Board, Vidyut Soudha, Somajiguda, Hyderabad represented by its Member Secretary And others …Respondents THE HON’BLE SRI JUSTICE V.V.S. RAO AND THE HON’BLE SRI JUSTICE K.G.SHANKAR WRIT APPEAL No.1904 of 2002 JUDGMENT: (Per Hon,ble Sri Justice V.V.S.Rao) The appellant filed W.P.No.4000 of 1995 seeking a declaration that clause 28.6 of the Andhra Pradesh State Electricity Board (the Board) Terms and Conditions of Supply entered into between the appellant and the first respondent is arbitrary, illegal, unreasonable, expropriatory and violative of Articles 19(1)(g) and 300A of the Constitution of India. A consequential direction is also sought restraining the respondents from enforcing the demand towards late payment charges for five bank guarantees executed by the appellant in lieu of cash towards consumption deposit. By an order dated 23.9.2002 the learned Single Judge dismissed the writ petition granting three months’ time to the appellant as sought by their Counsel for payment of the demanded amount to the Transmission Corporation of Andhra Pradesh, the successor of the first respondent. The appellant is a public limited company established in 1926, and is engaged in the manufacture of jute and its products. They entered into High Tension (HT) agreement with the Board for availing electrical energy. Under clause 28 the appellant is required to deposit in cash consumption charges for three months (consumption deposit). The appellant by reason of an order of this Court deposited consumption charges for two months in cash and for the third month they furnished bank guarantee. This has been in practice as and when new demand was raised. Clause 28 was challenged in a batch of writ petitions by various HT consumers including the appellant before this Court in Southern Steel Limited v APSEB[1]. The Division Bench of this Court upheld its validity and held that the consumers are required to deposit three months consumption charges. In the appeals arising therefrom including the one filed by the appellant in SLP (c) No.6370 of 1990, the Supreme Court in Ferro Alloys Corporation Limited v APSEB[2] confirmed the judgment of the High Court. Thereafter the second respondent issued a letter dated 16.2.1995 requesting the petitioner to arrange late payment charges to the bank guarantee executed by them in lieu of cash. The appellant, therefore, filed the writ petition challenging the said clause. The learned Single Judge dismissed the writ petition following Southern Steel. The Counsel for the appellant would submit that the demand of interest on the amount paid to the Board as advance for securing payments for energy supplied has no basis and is arbitrary; the shortfall of deposit money is consumers money and any payment of interest thereon is without any right; and it is always open to adjust the consumption deposit for non-payment of monthly electricity bills and, therefore, there cannot be any interest on the shortfall of deposit. The point that would arise for consideration in the background facts is whether clause 28.6 of APSEB Terms and Conditions of Supply, is arbitrary, illegal and unreasonable? The Indian Electricity Act, 1910 (the Electricity Act) and the Indian Electricity (Supply) Act, 1948 (the Electricity Supply Act) in pith and substance, deal with the production, supply, use of electrical energy and for taking measures to conducive electrical development. The Board is deemed to have been constituted under Section 5 of the Electricity Supply Act. Under Section 49 thereof the Board is empowered to supply electricity upon such terms and conditions as the Board thinks fit for the purpose of supply. In exercise of the said power conferred under the Board Proceedings being BP No.690, dated 17.9.1975 the Board notified the Terms and Conditions for supply of electrical energy. Clause 3 enables an owner or occupier of a premises to requisition for supply or additional supply of electrical energy subject to fulfilling certain requirements. As per clause 26 Low Tension (LT) consumers or HT consumers shall execute agreement governing supply of energy in the form prescribed by the Board. The form of HT agreement is given in Appendix-III. Clause 5 thereof speaks of the obligation to comply with requirements of the Electricity Act and the Electricity Supply Act, provisions of tariffs and the terms and conditions of supply prescribed by the Board from time to time. Therefore, indisputably every HT consumer is bound inter alia by all the terms and conditions of supply which form part of the HT agreement. Clause 28 of the Terms and Conditions deals with consumption deposit/additional consumption deposit. The sub- clauses relevant for this case are quoted below. 28. Consumption deposits: 28.1 Initial consumption deposit:- 28.1.1 The consumer shall deposit with the Board a sum in cash equivalent to estimated three months' consumption charges. The consumer coming under the L.T. Category 'domestic' shall however pay at Rs. 30.00 per Kilowatt on part thereof connected load. Provided that the Board may, in the case of industrial; consumers, accept by way of consumption deposit a sum equivalent to two months' consumption charges during a period of three years from the date of first release of supply of electricity. 28.1.2 In the event of the consumer failing to pay to the Board any sum that may become due for payment to the Board on the dates fixed for payment thereof, the Board may, in addition to and without prejudice to the other rights of the Board, appropriate a part or whole of such deposit towards the sum due from the consumer. 28.2 Additional consumption Deposit: 28.2.1 (a) All consumers other than these L.T. Domestic consumer whose monthly bills are less than Rs.500/- for a continuous period of six months, shall keep with the Board an amount equivalent to charges for three months demand and energy charges as consumption deposit. 28.2.1 (b) The adequacy of the Consumption Deposit shall be reviewed by the Board usually once in every year and/or at any time during the year if so warranted due to upward revision of tarriffs, enhancement of the contracted demand by the consumer, changes in the pattern of consumption by the consumer, relaxation of power restrictions or such other factors which in the opinion of the Board, warrant review of the adequacy of the existing consumption deposit. 28.2.1 (c) In the case of new consumers of all categories, other than LT domestic consumers, the adequacy of the consumption deposit shall be reviewed based on the average consumption for the period of 12 (twelve) months starting from the month of April next following the date of release of service, irrespective of expiry of 12 months period from the date of release of supply before such general review. However, the Board may review the consumption deposit at any time after release of service, if so warranted, due to revision of tariffs, enhancement of contracted maximum demand by the consumer, changes in pattern of consumption by the consumer, relaxation of power restrictions, completion period of tariff rebate if any, or such other factors which in the opinion of the Board warrant review of adequacy of the existing consumption deposit. 28.3 Interest on consumption Deposit: Interest shall be paid by the Board on deposits of more than Rs.60.00 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 for non-payment of Consumption Deposit: If the consumer does not make payment of amount of consumption deposit or additional consumption deposit or where the deposit is given in Government Security or National Saving Certificate Bank Guarantee etc., he fails to replace them by deposit in cash when so demanded by Board within the notice period of 30 days, supply of the consumer shall be liable for disconnection. 28.5 The Consumption Deposit so calculated as per the Cl. 28.1 and/or 28.2 above shall not be less than three times the monthly minimum charges, applicable to the consumer under the category to which he belongs. 28.6 All consumers shall pay the Consumption Deposit or additional consumption deposit within thirty days from the date of the demand notice. If there be any delay in payment, the consumer shall pay surcharge thereon equal to 1½% per month or such other percentage to be fixed by the Board from time to time, of the demanded amount for each month of delay or part thereof. This will be without prejudice to the Board's right to disconnect supply of electricity. In Southern Steel this Court considered the validity of clause 28. The purport of clause 28.1 to 28.6 as analysed therein is as follows. Clause (1) of condition 28 is general in nature. It applies to all consumers. Cl. (1,2) enables the Board to appropriate a part or whole of the said deposit towards any amount due to the Board and not paid within the prescribed period. Cl.(2) applies to all consumers, except those L.T. Domestic consumers whose monthly bills are less than Rs. 500/- per month for a continuous period of six months. Such consumers are obliged to keep with the Board an amount equivalent to three months' demand and energy charges, as consumption-deposit. This deposit is liable to be reviewed by the Board from time to time, having regard to the factors mentioned in the said clause. Cl (3) prescribes interest which the Board has to pay on such deposit. It is 3% per annum. Cl. (4) empowers the Board to disconnect the supply if consumption deposit/additional consumption deposit, is not made, or is not replaced whenever called upon to do so. Cl. (5) prescribes a certain 'floor' below which consumption deposit shall not go. Cl. (6) says that the consumption- deposit, or additional consumption deposit shall be paid within thirty days of the notice demanding such deposit. In default, not only interest is payable but the supply also is liable to be disconnected. As noticed in Southern Steel the challenge to clause 28 (or its precursor clause in the earlier terms and conditions) was unsuccessful in W.P.No.3468 of 1968 dated 18.7.1969. The appellant herein itself filed W.P.No.2122 of 1971 assailing similar clause. A learned Single Judge of this Court dismissed the said writ petition on 12.12.1972. In W.A.No.346 of 1973 a Division Bench confirmed the same wherein it was held that, “the consumer is bound to accept such terms and conditions as the Board may impose subject to his right to get supply of electricity … …”. Another industry filed W.P.No.2359 of 1975 challenging the same clause. The learned Single Judge dismissed the writ petition and the writ appeal filed against the same was also dismissed. Yet again attack was revived in Southern Steel wherein clause 28 was held reasonable and the Division Bench directed HT consumers to furnish consumption deposit in cash only, in a sum equivalent to two months average monthly consumption charges, and extra one month’s deposit in the form of bank guarantee effective for a period of one year from 01.5.1989 to 30.4.1990. Explaining the object of clause 28, the Division Bench observed. A reading of condition No. 28 shows that the primary purpose behind the said condition is prompt realisation of the amounts due to the Board. The amounts due to the Board normally include the monthly consumption charges. Whenever any amount falls due to the Board and is not paid within the period prescribed therefor, an equivalent amount out of the consumption deposit is appropriated towards that amount. The consumer will thereafter be called upon to make good the deficit in the consumption deposit. Consumption deposit is calculated on the basis of, and is tacked on to the average monthly consumption. This amount is subject to revision from time to time and, at any rate, once every year, having regard to the revision in tariffs, enhancement of the contracted demand by the consumer, changes in the pattern of consumption by the consumer, "relaxation of the power restrictions, or such other factors as may, in the opinion of the Board, warrant review of the adequacy of the existing consumption deposit. It also provides that where the consumer fails to make the consumption deposit, or the additional consumption deposit, or fails to make up the deficit when so demanded by the Board, supply of energy shall be stopped. The previous condition, corresponding to condition No. 28, was condition 6.7. It also appears-from the Judgment of this Court referred to above that, at an earlier point of time, it was clause/condition 16. At all points of time thus, the requirement was deposit of three months' average consumption charges. At any rate, from 1968, it appears the requirement was that the deposit should be in the form of cash. A combined reading of clauses 28.1.1, 28.1.2 and 28.6 would show that the consumption deposit is not only in the nature of security deposit. In the event of his failure to pay monthly consumption charges by the due date fixed therefor, the Board can appropriate the consumption deposit to that extent. In such an event as observed by the Division Bench in Southern Steel if the consumption deposit falls short of the required amount equivalent to three months consumption charges, the consumer will be called upon to make good the consumption deposit. In a case where there is an increase in the demand by the consumer and the consumption deposit already made is less than the one already made in compliance with clauses 28.1.1, necessarily a consumer is required to make good the shortfall within thirty days and if there is a default, the Board is entitled to levy and collect surcharge at 18% per annum. We do not find any unreasonableness in the clause which has been agreed to by the consumer at the time of availing HT power supply. The rationale behind the requirement of paying in cash consumption deposit under clause 28.6 (or clause 6.17 of the repealed Terms and Conditions) was explained in K.C. Works v Secretary, APSEB[3]. The consumer’s electricity consumption during the month is billed in the succeeding month. The consumer has to pay the bill within thirty days. If the amount is not paid, the electricity supply can be disconnected after giving one week notice under Section 24 of the Electricity Act. Mean while there will be consumption of electricity by the consumer till it is disconnected and by the time this happens the consumer would have consumed energy for three months. So as to protect the interest of the Board during issuance of bill, default in payment and action for disconnection, sufficient safeguards are in place by way of requiring cash deposit towards three months consumption charges. Therefore the plea of the Counsel before us that there cannot be any interest for non-payment of any security deposit amount by the consumer cannot be accepted. Further the amount of consumption deposit payable by all the consumers is certainly security given to the Board if the consumption bill is not paid within thirty days or the amount falls short, by reason of enforcing clause 28.1.2 or when the demand goes up, the Board would be put to loss of interest. To make good this loss clause 28.6 requires levy and collection of surcharge at 18% per annum. This has a rationale basis and cannot be characterized as unreasonable. Clause 28.1 as it exists or its precursor (clause 6.17) was challenged on various grounds four times before this Court. The challenge was negatived every time the issue was brought up before this Court. Ultimately Southern Steel received approval of the Supreme Court in Ferro Alloys. One of the submissions made was that clause 28.6 is a draconian provision. The Supreme Court considered three aspects viz., validity of Section 49 of the Electricity Supply Act; nature of consumption deposit; and the liability of the Board to pay interest. The Supreme Court accepted the view in Haryana Ice Factory v Municipal Corporation of Delhi[4] wherein it was held that the payment 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 consumption charges due and that the fixing of the period of security equal to energy consumption of three months is reasonable. While confirming the judgment of this Court in Southern Steel the Supreme Court concluded as follows. 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 tinder 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. In view of the above, we are convinced that it is not open to the appellant to challenge clause 28.6 as unreasonable. The Supreme Court has already held that the conditions and terms of supply are reasonable and do not in any manner impinge the law. We, therefore, do not find any reason to interfere with the order and judgment of the learned Single Judge. In the result, for the above reasons, the writ appeal is dismissed with costs. ______________ (V.V.S.RAO,J) __________________ (K.G.SHANKAR,J) November , 2011. YS [1] AIR 1990 AP 58 [2] AIR 1993 SC 2005 [3] AIR 1979 AP 291 [4] AIR 1986 Del 78