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Allahbad High Court
G.C.MATEUR,M.L.SINHA
The Mirzapur Electric Supply Company Limited - Appellant
Versus
The State of U.P. - Respondent
Decided On : 03/28/1974
ELECTRICITY - Security - Demand by State Electricity Board - Validity of Section 47-A of the Electricity (Supply) Act, 1948 - Guidelines for exercise of power - Violation of Article 14 and 19(1)(g) of the Constitution - Interpretation of the word "requisition" - Hearing before determination of security - Applicability of Section 47-A to licensee whose generating station was closed down by the Board - Effect of agreement between licensee and Board - Recoverability of security as arrears of land revenue.
Fact of the Case:
Five writ petitions were filed by licensees who had been granted licenses under the Indian Electricity Act, 1910, for generation and distribution of electrical energy, challenging notices served by the U. P. State Electricity Board demanding various sums of money as security under Section 47-A of the Electricity (Supply) Act, 1948, introduced by the U. P. Amendment Act, 1972.
Finding of the Court:
1. Section 47-A of the Electricity (Supply) Act, 1948, is valid and has been validly introduced in the Act. It does not offend Articles 14 and 19(1)(g) of the Constitution. 2. The word "requisition" in Section 47-A means any requisition made in the past or the present or which may be made in future. It is not confined to requisitions made after the commencement of Section 47-A. 3. The Board cannot demand security from a licensee without giving it an opportunity of being heard. 4. Section 47-A is applicable to a licensee whose generating station was closed down by the Board under Section 36 of the Act. 5. An agreement between a licensee and the Board does not bar the application of Section 47-A. 6. The amount of security demanded by the Board cannot be recovered as arrears of land revenue under the U. P. Government Electrical Undertakings (Dues Recovery) Act, 1958.
Issues: 1. Whether Section 47-A of the Electricity (Supply) Act, 1948, is repugnant to the provisions of the Electricity (Supply) Act, 1948, and is, therefore, void on account of the provisions of Article 254 of the Constitution? 2. Whether Section 47-A confers a naked and arbitrary power to demand security upon the State Electricity Board without laying down any guideline and as such offends Article 14 of the Constitution? 3. Whether Section 47-A violates the provisions of Article 19 (1) (g) of the Constitution? 4. Whether Section 47-A is applicable to licensees who were receiving bulk supply of electricity from the Board before the enactment of Section 47-A and who made no requisition for the supply of electricity after the coming into force of Section 47-A? 5. Whether the Board can demand security from a licensee without giving it an opportunity of being heard? 6. Whether Section 47-A is applicable to a licensee whose generating station was closed down by the Board under Section 36 of the Act? 7. Whether an agreement between a licensee and the Board bars the application of Section 47-A? 8. Whether the amount of security demanded by the Board can be recovered as arrears of land revenue under the U. P. Government Electrical Undertakings (Dues Recovery) Act, 1958?
Ratio Decidendi: 1. Section 47-A of the Electricity (Supply) Act, 1948, is not repugnant to the provisions of the Electricity (Supply) Act, 1948, as it has been enacted under the same entry in the concurrent list and has received the assent of the President. 2. Section 47-A does not confer a naked and arbitrary power to demand security upon the State Electricity Board as there are guidelines for the exercise of that power. The security is to be taken to secure the price of electricity supplied by the Board to the licensees. The amount of security demanded has to be such as is sufficient to cover the risk involved and has to be correlated to the amount which generally remains in arrears. 3. Section 47-A does not violate the provisions of Article 19 (1) (g) of the Constitution in view of the proclamation of emergency which is still in force. 4. Section 47-A is applicable to licensees who were receiving bulk supply of electricity from the Board before the enactment of Section 47-A and who made no requisition for the supply of electricity after the coming into force of Section 47-A. The word "requisition" in Section 47-A means any requisition made in the past or the present or which may be made in future. 5. The Board cannot demand security from a licensee without giving it an opportunity of being heard. The exercise of the power of demanding security seriously affects the rights of the licensee and the determination by the Board has to be objective and based on objective facts. 6. Section 47-A is applicable to a licensee whose generating station was closed down by the Board under Section 36 of the Act. The licensee is bound to take the supply from the Board and the Board is bound to make the supply. 7. An agreement between a licensee and the Board does not bar the application of Section 47-A. The non obstante clause in Section 47-A means that even if no agreement under Section 47 has been entered into, the Board shall have the power to demand security. 8. The amount of security demanded by the Board cannot be recovered as arrears of land revenue under the U. P. Government Electrical Undertakings (Dues Recovery) Act, 1958, as the amount of security demanded is not "dues" payable by the licensee to the Board.
Final Decision: The writ petitions were allowed to the extent that the notices issued to each one of the petitioners without first affording it an opportunity of being heard were invalid and were quashed. In Writ Petition No. 4814 of 1973 the notice dated May 25, 1973, threatening to recover the security demanded as arrears of land revenue, was also quashed. In the circumstances of these petitions, parties were directed to bear their own costs.
G. C. MATHUR, J.:- These five writ petitions have been filed by five licensees who had been granted licences under the Indian Electricity Act, 1910, for generation and distribution of electrical energy. The U. P. State Electricity Board has served notices upon each one of the licensees to deposit various sums of money as security. These notices have been challenged in these writ petitions. Since several common questions arise in these writ petitions, it will be convenient to dispose them of by one judgment.
2. The Electricity (Supply) Act, 1948, was enacted by the Central Legislature for the rationalisation of the production and supply of electricity and generally for taking measures conducive to electrical development. It, inter alia, provides for the setting up of State Electricity Boards, for the generation of electrical energy by the Boards and for the supply of electrical energy by the Boards to the licensees. All the petitioners are being supplied electrical energy in bulk by the U. P. State Electricity Board. The Uttar Pradesh Legislature enacted the Electricity (Supply) (Uttar Pradesh Amendment) Act, 1972, whereby it introduced the following Section 47-A in the Electricity (Supply) Act, 1948 :-
"47-A. Security - Notwithstanding anything in this Act and notwithstanding that no arrangements have been mutually agreed under Section 47 or that no regulations have been made in that behalf -
(a) the Board shall not be bound to comply with any requisition to supply electricity to a licensee unless the licensee, within fourteen days after the service on him by the Board of a notice in writing in that behalf, tenders to the Board such security as the Board deems sufficient;
(b) the Board shall be entitled to discontinue such supply if the licensee has not already given security, or if any security given by him has become invalid or insufficient, and such licensee fails to furnish security or to make up the original security to a sufficient amount, as the case may be, within seven days after the service upon him of notice from the Board requiring him so to do." It is under the provisions of Section 47-A introduced by the U. P. Amendment that the security amounts have been demanded from the petitioner-licensees.
3. In Writ Petn. No. 3808 of 1973, the Banaras Electric Light and Power Company Ltd. is the main petitioner. It had obtained a licence under the Indian Electricity Act, 1910, for generating and disdistribution of electrical energy and the licence is still continuing and this company is generating its own power and is also purchasing electrical energy in bulk from the Board. It first received a notice dated January 17, 1973, demanding a security amounting to Rs. 13,50,000 at the rate of Rs. 60 per K.V.A. This notice was superseded by another notice dated May 16, 1973. Under this later notice a sum of Rs. 20,02,000 was demanded as security. The notice stated that the amount of security was equal to two months' average consumption charges.
4. In Writ Petitions Nos. 3806 and 3807 of 1973, M/s. Martin Burn Limited is the main petitioner. By certain assignments the company became the licensee for the generation and distribution of electrical power for Jaunpur and Faizabad. In respect of the Jaunpur electric licence a notice dated April 2, 1973, was served on the petitioner, demanding a security of Rs. 1,50,000. In respect of the Faizabad licence a sum of Rs. 1,80,000 was demanded as security by a notice dated January 1, 1973. By a subsequent notice dated March 6, 1973, the Board demanded additional security deposit of Rs. 1,60,000. By a third notice dated May 18, 1973, the licensee was asked to deposit a sum of Rs. 2,50,000 as additional security.
5. In Writ Petition No. 4814 of 1973, the Bareilly Electricity Supply Company Limited is the main petitioner. It holds a generating and distributing licence under the Indian Electricity Act, 1910. The Board, in 1961, declared a scheme in respect of the area of the petitioner company.
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