M.P. STATE ELECTRICITY BOARD AND ANR. versus GRASIM INDUSTRIES LTD.

Citation: [2007] 11 S.C.R. 1060 · Decided: 12-11-2007 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Dismissed

Judgment (excerpt)

A 
M.P. STATEELECTRICITYBOARDANDANR. 
v. 
GRASIM INDUSTRIES LTD. 
NOVEMBER 12, 2007 
B 
[DR. ARIJIT PASAYAT AND R.V. RA VEENDRAN, JJ.] 
Electricity Supply Act, 1948: ss.26, 49, 79(/) 
C 
Deletion of provision for payment of interest on security deposits 
by electricity Board-Permissibility-Single Judge held that it was 
permissible-Division Bench of High Court held that view of Single 
Judge was not correct based en paragraph 158 of the Judgment in 
Ferro Alloys case-On appeal, held, Division Bench read only part 
D of the paragraph 158 of the judgment and not the relevantpart which 
empowers the Board to delete such condition-Matter remitted to High 
Court for fresh consideration-Electricity Act, 1910-Schedule II 
Clause (6), Clause 21(/) and 21(g). 
The respondents filed the writ petitions challenging the action 
E of.appellant-Board in deleting Clauses 21(t) and 21(g) of the Board's 
General conditions for supply of Electrical energy and the Sale of 
Miscellaneous and General Charges which pertained to the 
agreement for payment of interest on security deposits. The Single 
Judge ofHigh Court held that such a course was permissible. Division 
F Bench of the High Court held that the view of the siqgle Judge was 
not correct based on paragraph 158 of the judgment in *Ferro Alloys 
case. 
In appeals to this Court, appellant-Board contended that the 
Division Bench read only part of paragraph 158 of the judgment and 
G not the relevant part which empowers the Board to delete such a 
condition. 
Disposing of the appeals and remitting the matter to the High 
H 
1060 
j 
M.P. ST A TE ELECTRICITY BOARD v. GRASIM 
·1061 
INDUSTRIES LTD. 
.... 
r 
Court, the Court 
A 
HELD: 1. A bare reading of paragraph 158 of the Judgmen~ in 
*Ferro Alloys case shows that it is permissible for the Board to t$ke 
a decision relating to the desirability for payment of interest.on 
security deposits or otherwise. [Para 8) [1065-A, BJ 
B 
--t 
2. Each of the appellants-Electricity Boards is a State witI;iin 
f 
the meaning of Article 12 of the Constitution oflndia. The Boa~ds 
are different from licensees. Each of the Boards has framed its own 
terms and conditions of supply. One such condition relates to security 
deposits. Such a deposit varies from Board to Board. 
c 
[Para 9) [1065-B, CJ 
3. The Electricity (Supply) Act, 1948 is complementary to t'1.e 
Electricity Act, 1910. S.26 of the Supply Act states that the Board 
shall have all the powers and obligations of a licensee under the 
D 
Electricity Act. Under the regulations framed by the Board in 
exercise of powers of s.49 read with i. 79(j) of Supply Act, the Boa11d 
has an obligation to supply energy to the consumer upon such terms 
and conditions as laid down in the regulations. If, therefore, the 
regulations prescribed a security deposit that will have to be 
complied with. Under Clause (6) of Schedule II of the Electricity Act, E 
the requisition for supply of energy by the Board is to be made under 
proviso (a) after a written contract is duly executed with sufficient 
security. This, together with the regulations would be enough to 
clothe it with legal sanction. In cases where regulatfons have not 
been made, Rule 27 of the Rules made under the Electricity Act F 
,._, 
~ 
enables the adoption of model form of draft 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 G 
to make regulations to demand security from the consumers. 
... ....( 
[Para 10] [1065-D, E, F, G; 1066-A] 
• 
4. The deposit though called security deposit is really an 
adjustable advance payment of consumption charges. The payment 
H 
-1 
1062 
SUPREME COURT REPORTS 
[2007] 11 S.C.R. 
A is in terms of the agreement interpreting the conditions of supply. 
i 
h 
This security deposit is revisable from time to time on the basis of 
average consumption charges depending upon the actual 
consumption over a period. This is the position under the terms of 
supply of energy with reference to all the Boards. For the supply of 
B electricity, the Board needs fmance for production, supply and other 
charges necessary for supply of electricity. For this purpose, it takes 
t--
loans from various financial institutions. 
~ 
[Paras 11, 12 and 13] [1066-B, C] 
c 
5. Obviously, the Division Ben

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