FERRO ALLOYS CORPN. LTD. AND ORS. versus A.P. STATE ELECTRICITY BOARD AND ORS

Citation: [1993] 3 S.C.R. 199 · Decided: 15-04-1993 · Supreme Court of India · Bench: K. JAYACHANDRA REDDY · Disposal: Disposed off
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Judgment (excerpt)

FERRO ALLOYS CORPN. LTD. AND ORS. ETC. ETC. 
"· 
A.P. STATE ELECTRICITY BOARD AND ORS ETC. ETC. 
APRIL 15, 1993 
[K. JAY A CHANDRA REDDY ANDS. MOHAN, JJ.] 
Elecricity Supply Act, 1948: Sections 2(b) (v), 49, 59, 79, Schedule 
· VI-Clause 14. 
A 
B 
Section 49-Whether unconstitutional for want of guidelines for c 
terms and conditions of supply of electricity. 
Indian Electricity Act, 1910: 
Indian Electricity Rules, 1956: Rule 27. 
Interest Act, 1978: Section 4(2). 
Electricity Boards-General terms and conditions of supply of 
electricity-Condition of Consumption Deposit-Whether arbitrary-
Whether Board has power to make Regulations to demand security . 
deposit-Nature and object of consumption deposit-What is Electric-
ity Board-Whether liable to pay interest on Consumer Deposit-Rate 
of Interest on Consumption Deposit-Whether should be same as pai4 
by Scheduled Bank-Clause in General Terms and Conditions provid-
ing for 11011 payment of interest on Consumption Deposit-Wflether 
unconstitutional and arbitrary-Demand for additional Consumer 
Deposit-Reasonableness of-Electricity Board-Whether should give 
reas01is for additional demand. 
lndianJfusts Act, 1882: Section 90. 
D 
E 
F 
Relationship b.etween Electricity Board.and Consumers-Whether 
G 
of Trustee and Benejtciary• .. 
Practice and Procedure-Interlocutory order passed by a Bench of 
.---
3 Judges-Whether binding on a Bench of 2 Jr.dges. 
H 
199 
200 
SUPREME COURT REPORTS 
(1993] 3 S.C.R. 
A 
Consititution of India, 1950 : Article 12. 
B 
Electricity Boards are State. 
Words and Phrases: 
'Unconscionability'-'Deposit'-'Interest'-Meaning of 
Under the General Terms and Conditions for supply of electric-
ity notified by the Andhra Pradesh State· Electricity Board, under 
Section 49(1) of the Electricity (Supply) Act, 1948, the consumers 
were obliged to keep with the Electricity Board an amount equivalent 
to three month's demand and energy charges as consumption deposit 
c on which interest at the rate of 3% per annum was payable by the 
Board. In the event of delay in payment of consumption deposit within 
the stipulated period not only surcharge was payable by consumer but . 
also the supply was liable to be disconnected. Various petitions were 
filed before Andhra Pradesh High Court challenging the validity of 
terms and conditions con tending that the consumption depositshou Id 
D in no event exceed two months average consumption charges and that 
in view of the judgment of Supreme Court in Mis. Jagdamba Paper 
Industries v. H.S.E.B. Board, [1983] 4 S.C.C. 508, the Board was liable 
to pay interest at the same rate as is paid by a Scheduled Bank on fixed 
deposit. The High Court dismissed the petitions. 
E 
F 
In appeals to this Court, it was contended on behalf of the 
consumers that: (l) Section 49 of the Electricity (Supply) Act is 
~nconstitutional since there are no guidelines for framing the terms 
and conditions of supply of electricity; (2) in view of the fact that in 
case of power intensive consumers the cost of Electricity is very high, · 
the condition requiring 3 months' security deposit is arbitrary and 
illegal for power intensive consumers; and (3) there is no power under 
the Electricity Supply Act to enable the Board to raise "revenue or to 
cover its capital cost etc. except by way of adjustingtaritis as seen from 
under Section 59 of the Suppl~· Act, 1948. Therefore, consumption 
G deposit cannot be used for the purpose of revenue or raising revenue. 
On behalf of the Electricity Board it was contended that: (1) in 
view of the fact that the object of consumption deposit (which is in the 
nature of advance payment and not a security deposit) is to ensure 
H prompt payment of electricity supply, it cannot be contended that 3 
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FERRO ALLOYS CORPN. v. A.P.S.E.B. 
201 
month's consumption deposit is arbitrary; (2) the fact that some of the 
A 
consumers pay large amounts by way of electricity charges has 
nothing to do with the nature of deposit. Merely because a unit is 
power based it cannot be treated separately for the terms of supply 
relating to consumer deposit must be uniform. 
In the case of Rajasthan Electricity Board the General Condi-
tions expressly provided that no interest will be paid by the Electricity 
Board on security deposit. Futher, the El~tricity Board· issued 
notices requiring the consumers to deposit the enhanced amount of 
cash security as well as bank guarantee on the basis of maximum 
power consumption. Th
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