Title not extracted — [1993] 3 S.C.R. 199

section (1) starts with the words "Subject to the A ~- provisions of this Act and ofregulations, ifany, 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 B 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 re- quired to 'have regard to' in fixing the uniform tariffs. The meaning of the expression 'have regard to' is well c settled, it means that the factors specifically enumer- ated shall be taken into account while performing the exercise which in this case is fixation of the uniform tariffs. Ordinarily, therefore, uniform tariffs are re- ..... quired to be framed by the Board f<;>r making such supply. Sub-section (3) then proceeds to say that nothing in the earlier enacted provisions shall dero- gate 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 is required and ·any other relevant factors'. Sub-section<4) then says that in fixing the tariffs and terms and conditions for ;,__ the supply of electricity, 'the Board shall not show undue preference to any person., In other word, sub- F section (4) ·provides against any unreasonable dis- crimination in fixing the tariffs and terms and condi- tions for supply of electricity. The power of fixation ---- of tariffs in the Board is provided in this manner by Section 49 of the Supply Act which requires the fixation of uniform tariffs ordinarily having regard G particularly to the specified factors and enables fixa- ti on of such tariffs for any person having regard to the factors expressly· stated and any other relevant fac- tors, providing further that no unreasonable or undue· preference shall be shown to any "Person by the Board H in exercise of.its powers of fixing the tariffs.

246 SUPREME COURT REPORTS [1993) 3 S.C.R. . 7' A The next important provision is Section 59 of the Supply Act. For appreciating the argument based on Section 59, it is f.!ecessary to bear in mind the distinc- ti on in Section 59 as it stood prior to 1978, as amended by .Act 23 of 1978 and finally as amended by Act 16 -- of 1983, quoted earlier. B

~ Prior to 1978, Section 59 required the Board, as far as .practicable and after taking credit for any subventions from the State Government under Sec- . tion 63, not to carry-0n its operations under this Act at - c a loss and for this purposs, it was empowered to adjust its charg~s accordingly from time to time: Under the provision as it then existed, the µlain thrust was to avoid the Board incurring any loss and for that pur- pose, it could adjust its charges accorpingly from time to time. Section 59 as amended by Act 23 of 1978 D required the Board, after taking credit for any ~

subventions from the State Government under Sec- \. ti on 63, to carry on its operations under this Act and to adjust its tariffs so as to ensure that the total revenues in any year aftermeeting all expenses properly.charge- E able to revenue including those specified,left ·such surplus as the State Government specified from time to time. The shift was, therefore, towards having a silrplus as the State Government specified from time ·to time. Sub-section (2) then provided guidelines for. ~

the State Government in specifying the surplus under F sub-section (1) and mentioned the factors to which regard was to be had for this purpose. The effect of the amendment made 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 --- G such higher percentage as the State Government is to specify in this behalf. In other words, prior to 1978 amendment, the requiremen~ from the Board was towards ensuring a surplus as specified by the State qovernment, and after the 1983 amendment the Board H is required to ensure a surplus of at least three per cent -, unless the State Government specifies a higher. sur,

FERRO ALLOYS CORPN. v. A.P.S.E.B. [MOHAN, J.] 247

plus. This is the scheme of Section 59 and itis Section A 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 B 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. c .......... The effect of 1983 amendment, which came into force from April I, 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 specifica- D tion by ·the State Governrrtent and when ·the State Government specifies a higher surplus, then the Board · must ensure generating the higher specified surplus. This is, of course, subject to the accepted norm of the Board acting in consonance with its public utility character and not entirely with a profit motive like that E of a private trader. The pre-1978 concept of the Board's functioning to merely avoid any loss is re- placed by the shift after 1978 amendment towards the positive approa<?h of requiring a surplus to be gener- ated, the quantum of Surplus being specified by the F State Government; with a minimum of three per cent

-- surplus in the absence of the specification by the government of a higher surplus, after the 1983 amend- ment. This construction made of Section 59, as it stood at different times in Govinda prabhu case [1986] 4 sec 19& indicated earlier cannot be faulted in any manner. In Govinda Prabhu case the same argument which is advanced before us was expressly rejected. We are of the same view."

The next Section is Section 79 which talks of power to make H

248 SUPREME COURT REPORTS [1993} 3 S.C.R.

A .regulations. Clause (j) deals with the principles governing the supply of electricity by the Board to persons other than the licensees under Section 49. In accordance with this, each of the Boards has framed regulations. All consumers are required to execute agreements gov- erning the supply of energy.

B . ·.The attack against Section 49 is that it does not contain any norm orgm)leline with regard to framing of terms and conditions for the sup_p.l'y Of electricity and in particular, the demand of paym~nt 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 C 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 descloses as was noted in Hindustan Zinc Ltd. v. A.P.S.E.B. [1991} 3 SCC 299 at 317 sub-section (I) of the said section starts with the words D "Subject to the provisions of the Act and all regulations, if any, made in this behalf'. Therefore, the Board has to conform to the various provision.s of the Act and the regulations. Section 49 contains two powers:

1. To prescribe terms and conditions of supply; and E

2. fix the tariff.

No guidelines are required in this regard. In Jagdamba Paper Industries Pvt. Ltd. v. Haryana State Electricity Board [1983} 4 SCC F 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 (I) of the Act to determine the conditions on the basis of which supply is to be made. This Court in Bisra Stone Lime G Company Ltd. v. Orissa State Electricity Board [ 197 6] 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 wider the provisions of the Act. What applied to the tarijfwould H equally apply to the security, that' being a condition in

FERRO ALLOYS CORPN. v. A.P.S.E.B. [MOHAN, J.] 249

the contract of supply. Each of the petitioning con- A sumers 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 e_ntering into supply agreements has to be struck down as being without jurisdiction. B 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 exer- cise of this power the Board had initially introduced the condition regarding security and each of the c petitioners had accepted the term."

(Emphasis supplied)

Where, therefore, under Section 49 read with Section 79 (j) D regulations are made, the validity of the regulations could be examined by the Court, whether they are reasonable or not.

In Southern Steel Ltd. Hyderabad v. The Andhra Pradesh State Electricity Board AIR 1990 Andhra Pradesh 58 at 66-67, it was E ' observed:

- "Before we proceed to de_al with the rival conten- tions, it would be appropriate to notice the scope of judicial scrutiny by this Court in such matters. Acting under Art. 226 of the Constitution, this Court does not sit as an appellate authority over the Electricify Board. Indeed, the Act has not chosen to provide an appeal against the terms and conditions under S.49. The jurisdiction exercised by this Court under Art. 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 Art. 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

250 SUPREME COURT REPOllTS (1993) 3 S~C.R.

A upon the Board by S.49 of the Act has been .exercised so unreasonably and· arbitraril'y that interference by this Court is called for.

For the purpose of this enquir/ it is not necessary for ·. us to go into the question Wh,~ther the tenns and B. conditions notified under S.49 are statutory in nature or not. We shall proceed on the assumption that they are not statutory. We shall also proceed on the as- sumption that the tenns and conditions notified under S. 49 ought to t>e reasonable, in the sense that they c must be related to the object and purpose for which they are issued. We are equally aware that the power under S. 49 cannot be allowed to be used for oblique purposes, or for purposes unrelated to the one sought to be achieved by a given condition." D In Mis B.R. Oil Mills, Bllaratpurv. Assistant Engineer(D} R.S.E.B., Bharatpur AIR 1981Rajasthan108 at 109, it was obersved:

"Where demand for deposit of cash security for one month's estimated consumption charges and bank E security equal to two months. estjmated charges as contemplated by Regulation 20 read with the Sched- ule thereto was made by the Electricity 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 -- F 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 con- G sumer was bound by the tenns and conditions of supply contained in the Regulations. Further, in such . a case, merely because the Board did not encash 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 - H

FERRO ALLOYS CORPN. v. A.P.S.E.B. [MOHAN, J.] 251

not be said that the demand of cash security in the form A of Bank guarantee by the Board under the Regulations was unreasonable. furthermore, the demand of secu- rity 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." B

In other words, the terms and conditions notified under Section 49 must relate to the object and purpose for .which they are issued. Certainly, that power cannot be exercised for a collateral purpose. In this view, we hold Section 49 as valid. C

NATURE OF CONSUMPTION SECURITY DEPOSIT

Each of the Electricity Boards before us is a State within the mening the meaning of Article·12 the Constitutionoflndia. The Boards D are differentfrom licensees. (Emphasis supplied) Each of the Board has framed the terms and conditions of supply. One such condition relates to security deposits. Such a deposit varies from Board to Board. For example, under the terms and conditions notified by Andhra Pradesh Electricity Board under Condition No. 28.1.1 the consumer is required to deposit with the Board a sum in cash equivalent to estimated three E months consumption charges. ~n the case or Rajasthan, the security is in the form of cash for one month and bank or insurance guarantee for two months.

The legislative Sanction behing the power of the Board to direct F a consumer to furnish security may be exan\ined. 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 forthe purpose of the Act. G Under the regulations framed by the Board in exercise of po.wers of Section 49 read with Section 79 (j) the consumer is only entitled and the Board has an obligation to supply energy to the consumerupon 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 (6) of Schedule JI of H

252 SUPREME COURT REPORTS [1993) 3 S.C.R~

A the Electricity Act that the requisition for supply of energy by the Board is to be made under proviso (a) after a written co~tract is duly executed with sufficient security. lllis, together with the regulations stated above, 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 B conditions of supply. Annexure VI in clause 14 states that the licensee 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. ; c 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 avera~e consump- tion charges depending upon the actual consumption over a period. lllis 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. F We will give one illustration as is in the c~se of Rajasthan. The following .is the billing cycle:

(a) Consumption period 30 days

G (b) Period consumed after taking the meter readings to issue bills. 10 days

(c) Period allowed for payment 17 days

H (d) _Notice for disconnecting

FERRO ALLOYS CORPN. v. A.P.S.E.B. [MOHAN, J.] 253

supply if consumer fails A to deposit energy bill in 7 days time. (e) Period t:alcen in actual disconnection after expiry of notice .. todays

--- B Total: 74 days

In.practice, some time is also taken between the period allowed for payment and the notice of disconnection. At the same time, there .. is no obligation that the consumer rriust use only a particular quantum C of electricity. He could even consume more than the average consump.:. ·ti on. The Board after 2-1/2 months recovers amount for the electricity 1 supplied by it. It could charge late surcharge in case of high tension tariff after the expiry of ihe said period. D Thus, it will be clear that the true nature of the transaction in these cases is one of advance payment of charges for consumption of electricity estimated for a period of approximately three months. Such an advance is liable to be made good and kept at the stipulated level from month to month. It is open to the consumer to permit adjustment of the advance in the first instance. Thereafter, he could make good the shortfall in consumption charges and the security deposit before actual disconnection. Actually speaking, it is only after three months the disconnection takes place. Hence, it is like a running current account. .

· The cycle of billing by the Board demonstrates that in the very nature of things, the consumer is supplied energy on credit. The compulsory deposit in the context of billing cycle is hardly adequate ·to secure payments to the Board by the time the formal bill by the Board is raised on the consumer. In one sense, the consumption security deposit represents only a part of the money which is payable to the Board on the bill being raised againstt the consumer. Thus, the Board G secures itself by resorting to such deposit to cover part of the liability.

For supply of electricity the Board needs finance for production, supply and other charges necessary for supply of electricity. For this · purpose, it takes loans from various financial instiutions. This is best H

254 SUPREME COURT REPORTS [l 993] 3 s.c:R.

A illustrated if one looks at the transactions of Punjab Electricity Board where electric energy is generated through hydro as well as thermal plants for ultimate sale to the consumers of the total power generated about 50 per cent is through hydro plants. The remaining energy is generated through thermal power plants which are operated on coal/

-- oil. Due to limited hydro resources within the State of Punjab the B dependency on power on thermal plants is on the increase. The present requirement for working of thermal plants is more than 52 lakh tonnes of coal per annum. In addition, 60 thousand kolo litre of fumance oil is required. The coal companies/Coal India Limited together with major suppliers of power plant like Mis. BHEL demand cost of coal/ c 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. D It has no option bt:it 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 mak!ng advance deposits in favour of National Thermal Power Corporation and the suppliers. Coal India Limited has also asked the Board to opon E revolving letters of credit in favour of Coal companies/Coal India Limited. Despatch of coal is only against the letter of credit.

From the above, it is clear that while the Electricity Board is required to make colossal advances to generate electricity and supply - F to consumers, the consumers use and consume electricity on credit ranging from 2 to 3 months depending upon the category of consumers. To off-set part of the amount the consumer owes to the Board continually to ensure timely payment of bills by the Board t~ its suppliers, the advance consumption deposit is required to be kept with. the Board before commencing supply to the consumer. The clauses in G the contract in relation to conditions of supply of electric energy enable the Board to adjust the bill against such deposits. Therefore, this is not a case of mere deposit of money as in commercial transaction. In demanding security deposit it is open to the Court to take note of pilferageaslaiddowninAs/10kSoapFactoryv.Mu11icipalCorporation H of Delhi J.T. (1993) 1 S.C. 128 at page 137:

FERRO ALLOYS CORPN. v. A.P.S.E.B. [MOHAN. J.] 255

" ......... The variation in the electricity consumed by A different consumers indicated that the charge of pil- ferage of electricity and gross under-utilisation or consumption of electricity compared to the sanc- tioned load was not without foundation ........ "

B The meaning of he term "deposit" is given in Corpus Juris Secundum, Vol. 26A,P. l94quotedinDavidsonv. U.S., C.C.A.Pa., 292 F. 750, 752 as follows:

"In the sense of an Act. A deposit has been described _.._ ( as a mere incident of custody, and, in its ordinary c signification, implies something more than mere pos- session, negatives all idea ofloan with contemplation of use for profit, and has been defined as an ac:t by which a person recieves the property of another, binding himself to preserve it and return it in kind; the D act of one person giving to another, with-his consent the possession of personal property to keep for the use and benefit of the first or of a third party. It may mean a permanent disposition of the thing placed or depos-. ited, or a mere temporary disposition or placing of the thing." E

In these circumstances, we conclude that the object of security deposit is to ensure proper payment of bills.

Three months' security deposit cannot ~ characterised either unreasonable or arbitrary. This Court had occasion to point out in Jagdamba Paper industries Pvt. (supra) at paragraph IO which reads as under:

"We agree~ however, on the facts placed that the stand of the Board that a demand equaLto the energy bill of two months or a little more is not unreasonable. Once we reach the conslusion 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 H

256 SUPREME COURT REPORTS (1993] 3 S.C.R.

A that the power is not exercised arbitrarily or unreason- -:_ ably."

Several High Court decisions also had taken this view as seen from K.C. Works v. Secreatary APSEB. Vidyut Soudlla AIR 1979 Andhra Pradesh 291 at 294: B

"The reasonableness of such a requirement is ex- plained 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:- c "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 D 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. Mean- while he will be consuming the power. So by the time the supply is disconnected to a defaulting consumer he would have consumer energy for 3 months. The E Board's interest requires that there should be some protection by way of security of advance payment in respect of the consumption of this three months pe- riod."

F This is how the Board sought to explain the reason- ableness of the requirement of security representing three months average consumption charges. Nobody can say that this is unreasonable. For three months a consumer can go on consuming electrical power without paying any charges. It is therefore, eminently· G reasonable for the Board to require the consumer to furnish security for three months charges. Therefore, we are satisfied that the requirement of security for three months consumption charges is reasonable."

H At page 295 it was observed thus:

FERRO ALLOYS CORPN. v. A.P.S.E.B. [MOHAN, J.] 257

"As a matter of fact it may be that the writ appellant and the writ petitioner before us are prompt in paying their electrical dues. but the Board alees with lakhs and lakhs of consumers and it should have a uniform policy in demanding security. It cannot make a dis- tinction or discrimination from one consumer to an- other. That is why a uniform policy has been laid down by incorporating it in the conditions aforesaid. For these reasons we are satisfied that the requirement of security for three months average consumption charges by way of cash deposit is reasonable." c -r- In Municipal CorporationforGreater Bombay v. Mis D.M. lndus- ' tries AIR 1984 Bombay 242 at 256 it was observed thus:

"This brings us to the last argument advanced by Mr. Hidayatullah that Clause 12 of the draft agreement is 0 arbitrary and unreasonable. The argument was that the power to impose conditions cannot be exercised to impose unreasonable conditions and it must also be ascertained whether the condition achieves the object for which it is imposed. On principle, the proposition is undisputable. Clause 12 which can be described as E unreasonable and whether this Clause has no nexus with the object of the Act and the Rules. The argument appears to be that if the object of security is to secure payment of bills, then insistence on cash deposits would be unreasonable because the object could also . F be served by furnishing of any security and it is said that the consumer was willing to furnish a bank _guarantee. In addition, it is ur 0 ed that the period of. consumption for which the security is required should

- not exceed two months and, therefore, the determina- tion of three months is arbitrary."

In Haryana Ice Factory v. Municipal Corporation of Delhi AIR 1986 Delhi 78, It was held thus: G

"Also, the demand of the security was corelated to the H

258 SUPREME COURT REPORTS [1993) 3 S.C.R.

A 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

B conclusion that instead of three months, it should be 2- . 1/2 months. The fixing of the period of security equal ' to eriergy 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 c would depend upon the billing c'ycle adopted by the Haryana State Electricity Board." _.,. J In Southern Steel Lid. Hyderabad v. The A.P. State Electrici~· Board AIR l 990 Andhra Pradesh 58 at pages 68-69. i~ was observed:

D "It is also stated by the Board that huge sums are required by it as rotating capital; that it borrows large amounts from organisations like L.l.C. and Banlcs; that it pays interest to them, and that in such circumstances it is well entitled to require the consumer to co-operate by paying their bills regularlt, by giving security deposits, and by conforming to the terms and conditions of supply. It is argued that this consideration was also one of the bases of condition No. 28. We do not think it necessary to express any opinion on this question, though the truth of the matter ccµinot be denied. There are two views upon the matter. The petitioners say that the interest burden should be reflected in the tariffs, wihle the Board says that interest burden can be reflected in ' consumption deposits, and not necessarily in tariffs. All that can say is that there no hard and fast rule in this behalf. The interest burden can be reflected either in tariffs,.or can be · sought to be set off by calling upon the consumers to make · G deposits. In this case, however. It is unnecessary to go into this aspect, since the requirement of three monf.ll~ deposit, in our opinion, cannot be said to be unreasonable and unjustified having regard to the facts mentioned above. It cannot be said that the said condition is s0 unreasonable and.· arbitrary as to call for interference by this Court under Art. H

FERRO ALLOYS CORPN. v. A.P.S.E.B. [MJ,HAN, J.) 259

226 of the Constitution. We reiterate that even if this court comes to the conclusion that the deposit should not be 3 months, but 2 months 7 days, or 2-1/2 months, it would not be entitled to interfere in the matter, not being an appellate authority. It cannot substitute its own opinion for the opinion of the Board. It can interfere only when the exercise of power is shown to be arbitrary, and unrelated to the object sought to be achieved."

We are in agreement with the above extracts.

The liability of Electricity Board to pa); interest on . Secu,rity Deposit: c .Now, we come to the crucial question as to whether interest is payable on security deposit o~advance consumption deposit.We ~ill examine from the following angle:- D (a} The scheme of Electricity Acts. I

(b) ·schedule VI of the Supply Act. (c) Intet:est Act, 1978

: (d) Equity or Common Law. I E (a & b) Scheme of Electricity Acts & Schedule VI of Supply Act:

It is the submission of Mr. Shanti Bhushan, learned counsel appear- ing for the respondent against Rajasthan Electricity Board that the scheme of the Electricity Act and Supply Act togther with the rules suggest the payment F . 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 G to pay interest on security dep0sit.Uowever, reliance is placed on model fomi of draft conditions of supply as is found in Annexure VI, tra_ceable to Rµle 27 . · of Indian Electricity Rules, 1956. Clause 14 relating to security deposit of the said Annexure reads: ·

260. SUPREME COURT REPORTS [1993) 3 S.C.R.

A "..... Interest at the rate of; ..... per cent per annum will be paid by the licensee on deposits exceeding Rs. 25/-. 1' (Emphasis supplied)

The model form is applicable ony to a licensee as defined in B Section 2 (4) of the Electricity Act.

Though Rule 27 prescribes a model form it is not compulsory even for a lincesee tp 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 circU1!1Stances of each case require, be adopted by the lencesee." Therefore, there is an option available to adopt with such modifications. In such a case, the adoption of the model form becomes permissive. In this connection, Section 26 of the Supply Act, to which we have made a reference earlier, must be looked at. Though the Board is to have powers and obligations of a D licensee under the Electricity Act, the second proviso to this Section assumes importance. It reads: .

"Provided further that the provisions of Clause VI of the Schedule to that Act shall apply to the Board in respect of that area only where .distribution mains E have been laid by the Board and the supply of energy through any of them has commenced."

Second proviso of the Supply Act leads us to Schedule VI. This Schedule has been framed in exercise of powers under Sections· 57 and F 57A In defining "clear profit" paragraph (2) of clause XVII, Item (v) makes a reference, as interest of security deposits which is a part of expenditure properly incurred by the licensee. From this it is impos- sible to hold tht this clause imposes an abligation on the licensee to pay interest on security deposits. All that would mean is, if interest is paid G then it qualifies as an item of expenditure properly incurred. This is the position with regard to licensee. But this cannot apply to the Board, whic;hasstatedabove, is not a licensee. Forthesame reasonltemL I (c) of Forin IV of the Electricity Rules relating to interest paid and accrued on consumers' security deposits is of no avail because that relates to the manner of keeping accounts by the licensee, not being applicable to H aBoard.

FERRO ALLOYS CORPN. v.A.P.S.E.B. [MOHAN, J.] 261

In the above premises, it follows that there is nothing to indicate A under the scheme of the Electricty Act or Schedule VI of the Supply Act that interest must be paid on the security deposit.

- (c) Interest Act: applicability. B As regards the applicability of Interest _Act, we find that the Division Bench of Rajasthan High Court has erred in holding that it is applicable. Section 4(2) (g) of the Interest Act of 1978 reads as under:

"Notwithstanding the aforesaid and without prejudice

·- to the generelity of the provisions of sub-section (1 ), the Court shall in each of the following cases allow c

interest from the dates specified below to the date of institution of the proceedings at such rate as the Court may consider reasonable, unless the court is satisfied that there are special reasons why interest should not be allowed namely:

(a) Where money orotherproperty has been deposited as security for the performance of an obligation imposed _by law or contract from the date of the deposit." E

This section has no application to a case where on account of a contractual term or a statutof5' provision payment of interest is not permitted. F 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, G 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 applicaple. • H

262 SUPREME COURT REPORTS (1993] 3.S.C.R.

A l)le deposit 1111de cannot be equated to a fixed deposit. It has ,.... already been seen Afat 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.

B Hence, it cannot be equated to a deposit at all. It is in the nature of a running current account.

(d) Position in Equity or Common Law - If this be the position, could interest be claimed either on equity

C or common law? The argument on behalf of the consumers is, if money belonging to any person is used by someone else he is oblilsed to pay interest for the period of its user. Halsbury' s Volume 32 (page 53 para 106) defines "interest" as •+the return or compensation for the use or - retention by Ohc person of a sum of money belonging or owed to another". Therefore, it is contended that the Board is clearly in the 0 position of a trustee in respect of this money since the money is deposited by the consumer in trust with the Board to secure the Board against defult in pay.ment of interest. The object of the deposit is to secure the payment of consumption charges. These charges may very depending upon the daily consumption, depending on the level of supply. The amount due by way of consumption charge.~ would also tie liable to be appropriated. Therefore, it is incorrect to state that the Board is a trustee. The relationship between the Board and consumer is not that of a trustee and a beneficiary but a depositor and depositee. This is not even a case of a constructive trust under Section 90 of the Indian Trust Act, since no advantage is gained by the Electricity Board F if 'derogation of the rights of the consumer iff view of what we have observed above.

Strictly speaking, the· word "interest" would apply only to two cases where there is a relationship of debtor and creditor. A lender of money who allows the borrower to use certain funds deprives hililSelf G of the use of those funds. He does so because he chargt:s interest which may be described as a kindofrentforthe use of the funds. For example, a bank ·or a .lender lending out money on payment of interest. In this case, as already noted, there is no relationship of debtor and creditor.

H We may now refer to Halsbury's Vol. 32 para 108:

FERRO ALLOYS CORPN. '" A.P.S.E.B. [MOHAN. J.] 'l.o:

"108. When interest is payable at common law. At A common l~w interest is payable (I) where there is an express agreement to pay interest; (2) where an agree- ment to pay interest can be implied from the course of dealing between the parties or from the nature .of the transaction or a custom or usage of the trade or profession concerried; (3) in certain cases by way of B damages for breach of a contract (other than a contract merely to pay money) where the contract, if per- formed, would to the knowledge of the parties have entitled the plaintiff to receive interest. c · Except in the cases mentioned, debts do not carry interest at common law."

Consumption security deposit does not fall under any of tl" categories mentioned above. Para 109 says: D

"Equitable right to interest. In equity interest may be recovered in certain cases where a particular relation- ship exists between the creditor and the debtor, such a mortgagor and mortagagee, obligor and obligee on a bond, personal representative and beneficiary, prin- E cipal and surety, vendor and purchaser, principal and agent, solidtor and client, trustee and beneficiary, or where the debtor is in a fiduciary position to the creditor. Interest is also allowed on pecuniary lega- cies'llot paid within a certain time, on the dissolution F of a partnership, on the arrears of an annuity where there has been misconduct or improper delay in pay- ment, or in the ca~e 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 plai miff to interest at common law, or tias G Wrongfully prevented the plainti(ffrom doing seme- thing which have so entitled him." \

This paragraph is also inapQlicable to the present case. H

264 SUPREME COURT REPORTS (1993) 3 S.C.R.

A Even a case of wrongful detention of money cannot arise. In Bengal Nagpur Railway v. Ruttanji Ramji AIR 1938 PC 67 the question arose whether interest was payable on damages on account of wrong- ful detention of money. It was held:

·'The Interest Act however contains a proviso that "interest shall be payable in all cases in which it is now payable by law." This proviso applies to cases in which the Court of equity exercises jurisdiction to allow interest.' As observe? by Lord Tomlin in Maine and New Brunswick Electrical Power Co. Ltd. v. Hart, c 1929 AC 631:

"In order fo invoke a rule of equity, it is necessary in the first instance to establish the existence of a state of circumstances which attracts the equitable jurisdic- D tion, as for example, non-performance of a contract of which equity can give specific performance."

"The present case does not however attract the equi- table jurisdiction of the Court and cannot come within the purview of the proviso." E The very passage was noted by this Court in Union ofIndia v. A.L. Rallia Ram [1964) 3 SCR 164 at 188-189.

The argument of Mr. G., Ramaswami, learned counsel, that the deposit does not contemplate appropriation is not correct because in -- the nature of contract it is liable to be appropriated for the satisfaction of any amount liable to be paid by the consumer to the Board for violation of any conditions of supply in the context of wide scale theft of energy, tempering with the meters and such other methods adopted by the consumers. Therefore, the said consumption security deposit serves not only to secure the interest of the Board for any such violation but should serve as a deterrent on the consumer in discharging his obligations towards the Board.

Mr. G. Ramaswami would rely on Riches v. Westminister Bank· H Limited 1947 Appeal Cases 390 at 400.

FERRO ALLOYS CORPN. '" A.P.S.E.B. (MOHAN, J.] 265

That is a case which arose under Income Tax Act. That has no A application to this case. What came up for consideration in AL. Ra/lia Ram's case (supra) was the power of the Board to award interest. Hence, that case has no application. Accordingly, it is held that the claim for interest cannot be legally founded either on common law or equity. As is rightly contend.ed by Mr. Kapil Sibal, learned counsel and the other learned counsel appearing for the various Boards, it is the B 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 c on belated payments is by way of penalty. That has no bearing.

Clause providi11g.for 11011-payment of interest: Whether 1mrea- so11able? ' ' D; 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 ofRajasthan and Orissa the Boards have clearly stipulated that no interest shall be payble 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 E 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 precision. F

2. The mode and the period of security vis-a-vis the billing practice must fonn the consideration.

3. The consumer with open eyes has entered into the agreement G and solemnly undertaken to abide by the i::onditions regarding non-· payment of interest. He cannot resile from the condition because there is nothing inherently objectionable about such a condition nor is such a condition per se i11egal or void as opposed to public policy. It is not uncommon in commercial transaction, such a provision is entered into. H

266 SUPREME COURT REPORTS [1993] 3 S.C.R.

A The argument that the Board is monopolistic in character and therefore, the consumers have no other option but to enter into contract appears to be misconceived. The Board under Section 49 of the Supply Act is entitled, apart from fr~n.ling uniform tariff, to insist upon such terms and conditions as the Board thinks fit. This has also been so stated in .Tagdamba case (Supra). The consumption security deposit B whether or not it carries interest is a condition precedent for the supply of electric energy. We are clearly of the view that the scrutiny by the • . Court in determining the unconstitutionality of a provision not provid- ing for interest must be tested on the following. touchstone:

C In imposing such a condition has the Board acted as a private trader and thereby shed off its public utility character? By referring to Hindustan Zinc Ltd. (supra) we have earlier pointed out the inter- relationship between Sections 49 and :S9 as noted by this Court. We are therefore, of the view that in imposing such a condition the Board has not acted as a private trader. The nature of deposit has a rational 0 relationship to the object which is incorporated as a condition of supply.

Some of the learned counsel appearing for the consumers would draw our attention to Section 59 of the Supply Act as well. Under the E said section the Board is obligated to carry on its operation as to ensure that it generates a surplus of 3 per cent or as specified by the State . Government. The Board is obligated to adjust its tariffs for ensuring such surplus. TI1e condition of supply requirii1g a consumption security deposit has a direct bearing on the operations of the Board which ar~ F to be conducted in such a manner as to ensure a surplus. The language in Sec~on 59 of the Supply Act is "carry on its operations under this Act and adjust its traiffs." The language of the said section is not by adjusting tariff Therefore, the argument that the only manner in which .... I I 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 G 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. H

FERRO ALLOYS CORPN. v. A.P.S.E.B. [MOHAN, J.] 261

In Central Inland Water Transport Corporation v. Brojo Nath A 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 sevices on essen- B tially 'take it or leave it' basis without affording consumer realistic' opprotunity to bargain and under such condition that consumer cannot obtain desired product or services except by acquiescing in fon'i.t contract. Distinctive feature of adhesion contract is that weaker party has no realistic choice as to its C terms. Not every such contract is unconscionable."

With reference to these contracts the Court offered relief to the parties against such a clause if it is so unreasonable as to be unconscio- nable. As a matter of fact at page 211, paragraph 83 of Cemral Inland D Water Transport C01poration v. Brojo Nath Ganguly {1986] 3 SCC 15 it stated thus:

"Yet another theory which had made its emergance in recent years iil the sphere of the law of contracts is the test of reasonableness or fairness· of a clause in a E contract where there is inequality of bargaining power. Lord Denning, MR, appears to have been the pro- pounder, and parhaps the originator at least in En- gland, of this theory. In Gillespie Brothers & Co. Ltd. v. Roy Bowled Transport Ltd. [1973] QB 400, 416 F where the question was whether an indemnity clause in a contract, on its true construction, relieved the indemnifier from liability'arising to the indemnified from his own negligence, Lord Denning said (at pages 415-416): G The time may come when this process of •construing' the contract can be pursued no further. The words are too clear to permit of it. Are the courts then power- less? Are they to permit the party to enforce· his unreasonable clause, even when it is so unreasonable, H

268 SUPREME COURT REPORTS [1993] 3 S.C.R.

A or applied so unreasonably. as to be unconscionable? When it gets to this point, I would say, as I said many year ago:.

'there is the vigilance of the common law which, while allowing freedom of contract, watches to see B that it is not abused' :·John Lee & Son(Grantllam) Ltd. v. Railway Executive [1949] 2 All ER 581, 584.

It will not allow a party to exempt himself from his liability at common law when it would be quite c unconscionable for him to do so. (emphasis sup~ plied.)"

Farmsworth on Contracts, 2nd Edn. 319. 320 para 4.27 states: D "4.27 Precursors of Unconscionability. Courts of eq- uity did not share the reluctance of common law courts to police bargains for substantive unfairness. Though mere "inadequacy of consideration" alone was not a ground for witholding equitable relief, a E contract that was "inequitable" or "unconscionable" --0ne that was so unfair as to "shock the conscience of the court"-would not be enforced in equity. In one such case, a man promised to give a 20 percent interest in all property that he might later acquire in Alaska in return for the Promisee' s payment of $1,000 and his cancellation of an .$11,225 debt of questionable coBectability. Whe~ the promisor acquired property worth over$ 750,000, the promisee sought specific Per onnance. 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 prnmise sought to be enforced was "so gross as to ; / render the contract unconscionable."

·H In dealing with the validity of the agreement containing a clause

FERRO ALLOYS CORPN. v. A.P.S.E.B. [MOHAN, J.] 269

relating to minimum guarantee this Court had occasion to observed in A Bilzar State Electricity Board v. Green Rubber Industries[ 1990] I 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 B been settled over the years and have been widely adopted because experience shows that they facilitate the supply of electric energy. Lord Diplock has ob- served: "If fairness or reasonableness were relevant to their enforceability the fact that they are widely used by parties whose bargaining power is fairly matched c would arise a strong presumption." That their terms are fair and reasonable. Schroeder(A.) Mitsic Publish-

- ing Co. Ltd. v. Macaulay [1974] 3 AUER 616, 624. in such contracts a standard form enables the supplier to say: "lf you want these goods or services at all, these are the only terms on which they are available. Take D it or leave it."It is a type of contract on which the conditions are fixed by one of the parties in advance and are open to acceptance by anyone. The contract, which frequently contains many conditions is pre- sented for acceptance and is not open to discussi9n. It E is settled law that a person who signs a document which contains contractual terms is normally bound by them even though he has not read them, even though he is ignorant of the pricise legal effect." F In the light of the above discussion, we hold that the clause. not ==--,. providing for interest i_s neither arbitrary nor palpably unreasonable, nor even unconscionable. In holding so we have regard to the follow- ing:

1. The consumer made the security deposit in consideration of the G performance of his obligation for obtaining the service which is essential to him.

-- 2. The electricity supply is made to the consumers on credit as has been noted above. H

270 SUPREME COURT REPORTS [1993) 3 S.C.R.

A 3. The billing time taken by the Board is to the advantage of the consumer.

4. Public revenues are blocked _in generation, transmission and distribution of electricity for the purpose of supply. The Board pays interest on the loans borrowed by the Board. This is in order to perform B public service. On those payment made by the Board it gets no interest from the consumers.

5. The Board needs back its blocked money to carry out public sevice with reasonable recompense. c

6. The Board is not essentially a commercial organisation to which the consumer has furnished the security to earn interest thereon.

We should also observe that the rate of interest on security deposit D cannot be equated with the rate of interest on the fixed deposit. First of all, if the consumption charges are to be appropriated the moneys accrued by way of deposits cannot be held in fixed deposits. Nor all deposits need carry interest in every transaction. Secondly, the nature and character of the secur!tY deposit is essentially different from fixed deposit. It is worthwhile, in this connection, to refer to Companies E (Acceptance of Deposits) Rules, 1975. In Rule 2 it is stated:-

"2. Definitions. - In these Rules, unless the context otherwise requires.-

(b) "deposit" means any deposit of money with, and includes any amount borrowed by, a company, but does not include- G (i) ......... ..

(iii) .......... .. H

FERRO ALLOYS CORPN. l'. A.P.S.E.B. [MOHAN, J.) 271

(iv) .......... . A

(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 B 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; ....... " c 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 Condi- D tions 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 inlagdamba Paper Industries (Pvt.) Ltd. v. Haryana State Electricity Board [19831 E 4 SCC 508? In that case the following two points were raised as seen from paragraph 3 at page 511 : .• -- I. The enahancement made in the security amount towards the meter is without any justification. F

2. The enhancement of security deposit was not warranted.

On the question of interest in paragraph I I at page 515 in Jagdamba ·s .case (supra) it is stated thus:- G "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 H

272 SUPREME COURT REPORTS [1993] 3 S.C.R.

A interest as admissible on fixed dep9sits 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 lOper cent \Vi th effect from October l, 1983."

It requires to l:!e carefulJy noted that the question of interest on security was not raised before the Court. Therefore, the Court had no occasion to decide this issue of interest. That part of the judgment, as rightly contended by Mr. Soli J. Sorabeejee, learned counsel, is sub- silentio. However, the learned counsel for the consumers pressed into service the various orders passed by this Court in relation to interest and urged that it is concluded by those orders. We are unable to accept this argument. All the orders have their root in Interlocutory Applica- D tion No. 1 Cjf 1989 in Writ petition No. 578 of 1987. That order is extracted in fuIJ:

"We have heard counsel for the parties. Mr. Gopal Subramaniam; counsel for the State Electricity Board on instructions states that the initial deposit which has E been made by the consumer petitioner, to the tune of Rs. 10,07,378.81 was intended as security for pay- ment of energy dues. In terms of our order of 5t/J May.

1988. the petitioner would be entitled to the interest on that amount from the date of the deposit at the rate of F 12% per annum. Mr. Gobind Mukhoty, counsel for the petitioner now agrees to deposit the balance amount of Rs. 6,91,621 minus the interest which is said to be the additional security and while making the deposit of the additional amount, the petitioner is entitled to deduct the interest already accrued on the deposit of G Rs. 10,07,378.81 from the date of the deposit at the rate of 12% per annum. The balance amount after deduction of the interest. shall be ·deposited in two equal quarterly instalments, the first being due by 15.10.89. H

FERRO ALLOYS CORPN. '" A.P.S.E.B. [MOHAN. J.) 273

The application for directions is disposed of accord- A ingly."

Based on this, in Writ Petition No. 613 of 1990 it was stated thus: B "In view of the order made by this Court in the connected matters on September 7, 1989, after hear- ing 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. c The Writ petition is disposed of accordingly."

Two other orders remain to be seen. One rendered in W.P. 5582 of l 989which was disposed of by consent and the other in W.P.No. 576 of I 990 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 F decision on that question. Therefore, it cannot be contended that the disposal of Writ Petition No. 613 of 1990, though by a Bench of 3 judges would be binding on us because, as pointed out above. It was entirely based on Interlocutory order. We are of the view that we are free to decide the q~estion on its merits. G

The argument of Mr. Anil Divan, learned counsel that unequals are treated equals has no basis. It may be that the consumers of electricity, where it is raw material, would be prompt in their payment ,in their own interest. On that basis, it cannot be contended that they H

274 SUPREME COURT REPORTS (199313 S.C.R.

A cannot be treated in the same way as defaulters. The test, in our considered opinion, is whether in the general application of law there is any discrimination. Merely because some of the consumers are prompt those related cases cannot render the provision constitutional. We may usefolly refer to the following ca~es:

B The Collector of Customs, Madras v.Nathelfa (1962] 3 SCR 786 at 829-30 it was observed?

"The deleterious effects of smuggling, as pointed out in the extract from the Report, are real and it is not in c dispute that the prevention and eradication of smug- gling is a proper and legally attainable objective and that this is sought to be achieved by the relevant law. If therefore for the purpose of achieving th desired objective and to ensure that the intentions of Parlia- D ment shall not be defeated a law is enacted which operates somewhat harshly on a small section of the public, taken in c"njunction with the position that without a law in that form and with that amplitude smuggling might not be possible of being effectively checked, the question arises whether the law could be E held to be violative of the freedom guaranteed by Art. 19 ( l) (f) & (g) as imposing an unreasonable restrain. That the restrictions are in the "interest of the general public" is beyond controversy."

F /11 Vivian .losepl! v. Municipal Corporation, Bombay, [1972] 2 SCR 257 at 276-77 it was observed:

"The levy of the cess under s. 27 of the Act is not based on the principle of quid pro quo. Its object is not to repair all residential premises, but to preserve and G -prolong their lives in order to avert the dilema caused by the acute shortage of residential accommodation on the one hand, and the reluctance and/or inability of

H the owners to carry out repairs resulting from the Rent Act, on the oth1.:r and to establish an agency so that structural repairs to buildings in dangerous or ruinous -

FERRO ALLOYS CORPN. v. A.P.S.E.B. [MOHAN, J.] 275

conditions can be carried out. The finances for these A / objects are provided from a fund from the impugned cess and contributions by the State and the Corpora- tion.

The contention that some of the buildings falling in B categories and would not need structural repairs throughout the life of the Act or that such repairs would carried out in buildings not cared for by de- faulting 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 collapes 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 construc- __, tion 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 be structurally repaired if the need were to arise."

-- In B. Banerjee v. Anita Pan, [1975] 2 SCR 774 at 787-88 it was observed: F ..Moreover, what is the evil corrected by the Amend- ment Act? The influx of a transferee class of evictors of tenants and. institution of litigation to eject and rack-rent or re-build to make larger profits. Appar- ently, the inflow of such suits must have been swelling slowly over the years and when the stream became a G flood the Legislature rushed with an amending bill. Had it made the law merely prospective these who had -- in numbers, already gone to Court and induced legis- - lative intention would have escaped the inhibition. This would defeat the object and so the application of

276 SUPREME COURT REPORTS [1993) 3 S.C.R.

A the additional than to pending actions could not be called unreasonable. To omit to do so would have been unreasonable . folly. The question is whether those cases which were filed several years ago should have been carved out of the category of transferees hit by the act? Where do you draw the line? When did the B evil assume proportions? These are best left to legis- lative wisdom and not court's commensense although there may be grievances for some innocent transfer- ees.

c If this be the paradigm of judicial review of constitu- tionality, we have to ignore exceptional cases which suffer misfortune unwittingly. The law is made for the bulk of the community to produce social justice and isolated instances of unintended injury are inevitable martyre for the conunon good since God Himself has D failed to make perfect laws and perfect justice, Freaks have to be accepted by the victims rightly or wrongly as froensic fate!"

In Fatellclzand Himmatlal v. State ofMaharashtra, [1977] 2 SCR E 828 at 851 it was observed:

"May be, some stray money-lenders may be good souls and to stigmatize the lovely and unlovely is simplistic betise. But the legislature cannot easily make meticulous exceptions and has to proceed on broad categorisations, not singular individualisations . . So viewed pragmatics overrule punctilious and un- conscionable money-lenders fall into a defined group. Nor have the creditors placed material before the Court to contradict the presumption which must be made in favour of the legislative judgment. After all, the law-makers representatives of the people, are expected .to know the socio-economic conditions and c~,stomers. Since nice distinctions to suit every kindly creditor is beyond the law-rn1lking process, we have to uphold the grouping as reasonable andJhe restrictions as justified in the circumstances of the case. In this

FERRO ALLOYS CORP'.'. v. A.P~S.E.B. [MOHAl\'.. J.) 277

branch, there are no finalities." A

The attack on additional consumer deposit is that no reasons have been adduced for additional demand. It stands to reason that ifthere 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 B 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 additiona'l security deposit with interest at the rate of 3 per cent was 1'nade 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 c upward revision. Therefore. we reject the argument of Mr. Govind Mukhoty, learned cou~sel 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 D happen to such of those cases where interest is provided like Andhra Pradesh. Utter Pradesh and Bihar? In all those cases wherever the electricity boards have framed a provision for payment of interest after adjusting its finances at a stated rate they cannot be allowed to delete such a clause. The provision for interest has been made by the various Boards having regard to the overall budgetary and financial position. E Further, keeping in view the quantum and made of security deposit and billing and recovery practice. Nor again, could the Board withold payment.of interest on the basis of this judgment. Ho\vever, if there is any change in the circumstances affecting the budgetary and finacial position, the Board can examine the case and decide the future course of action. But any change resulting in non-payment or reduction of interest will have to be justified by cogent reasons and materials having a bearing on the financial position of each Board and facts and circumstances of each case.

We also add that notwithstanding .lagdamba 's case (supra) as on today, Haryana Electriciry Board has dispensed with payment of interest. We make it clear by this judgment that we are not deciding the validity of such provision since the matter is stated to be pending.

,.._ Inconclusion, we hold: H

278 SUPREME COURT REPORTS (199~!3 S.CR. " ·f- .

A ( l) 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 oo the Electricity Board either under the 8 statute or conunon law or equity to pay interest.

(4) Conditions and the terms of supply providing fornon-paymcnt of interest is not so unconscionable as to shock the conscience of the Court. c (5) No reason need he given for. enhancement of ,additional security deposit. .. - Accordingly we uphold the judgment of Andhra Pradesh High D Court and reverse the judgment of Rajasthan High Court. T

In the result, the following cased filed against Andhra Pradesh Electricity Board are dismissed:

E S.L.P. (C) Nos. 13004/89, 14995/89, 14629/89, 14899/89, 15739/ 89, 15817/89, 7475/90, 6374/90, 9661-65/90, 5461/90, 6371/90. 5294/ 90, 6779/90, 5492/90, 5921/90, 5559/90, 4793-94/90. 4791°-91/90, 6375/90. 6570/90, 12270/90, 9926/90, 11548/90, 2600/90, 6372.- 73/90, 6035-44/90, 6505/90, 6374/90, 6094/90, 6765-68/90. 6462/90, 5306-08/90, 9132/90, 12424/90, 6370/90, C.A. No. 1779/90, S.L.P. F (C) Nos. 17465/91, 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, l 739-43&43A/92, 13593/92, C.A. No. 2409/92, W.P. (c) G Nos. 603/92, 455/92, 3558/83, 566/92, 1353/89. 48/92, 362/92, 1293/ 89, 6770/90. ,.

The TransferPetition(c) No. 366/92 filed by the Andhra Pradesh

H Electricity Board is allowed. --

FERRO ALLOYS CORP!\.'" A.P.S.E.B. IMOllAN. J.) 279

The following cases fill!d by Rajasthan State Electricity Rnard are A allowed:

C.A. Nos. 4714/91 & 4928-43/<Jl, SLP (c) Nos. 446/92."703/92, 12941/90. 433-36192. 439-42/92, C.A. Nos. 5342/92. I 187-88/IJ2. 4512192. 4510192. 4511 /1)2, 2800/92. 1204/92, 406-436/~2, S.L. P. (c) B No. 20192. 46/92, 47 /92, 50/IJ2, 53/92, 44'>-452/92, 494/92. 516/92, 48/

92. 41)/<)2. 51/92.52192. 54/92, 55192, 43-45/CJ2, 56-72/92, 428-432/92, 4-B-4441'>2.453-457192, 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, 1144/87. 743/87. 531/87, 729X7. 739/87, 526/91, 576/87, 577/87, 801/87, 833/87. 769/87. 676/87, 578/

87. 728/87, 762/87. 818/87, 526/87, 744/87. 742/87. 540/87, 1238/87, E 738/87. 684/87. S.L.P. (c) Nos. 2952-56/1987, 15885/91. & 12902/9 l.

The W.P. (c) No. 1317/90 filed against Punjab Electricity Board

-- is dismissed.

All the I.A.s are allowed. F

However, there shall he no order as to costs.

T.N.A. . Petitions disposed of. G