INDIA BUSINESS WORLD - OCTOBER 21st - NOVEMBER 15th
- 2007
ELECTRICITY BOARDS NOT BOUND TO PAY INTEREST ON SECURITY DEPOSITS: SUPREME COURT
The Supreme Court has said that state electricity boards (SEBs) are not bound to pay interest on security deposits collected from large industrial customers.
Setting aside an order passed by the Bhopal High Court, the apex court said that there is nothing in the Electricity Act or Schedule VI of the Supply Act that mandates interest payment on such security deposits.
Earlier, the high court had said that SEBs were not empowered to delete the provision of payment on such deposits.
This decision of a division bench was challenged by the MP State Electricity Board. SEBs take security deposits as advance payment for consumption charges from large industrial consumers.
This deposit is revisable from time to time on the basis of average consumption over a period. In some cases SEBs pay interest on these deposits, but in most cases this amount is just treated as advance payment.
"It is permissible for the Board to take a decision relating to the desirability for payment of interest on security deposits or otherwise," Supreme Court bench comprising justice Arijit Pasayat and justice R V Raveendran said.
The court said that electricity boards are a state within the meaning of Article 12 of the Constitution of India. The boards are different from licensees. Each of the boards has framed its own terms and conditions of supply. One such condition relates to security deposits. For purchase and supply of electricity, the board needs finances. It takes loans from various financial institutions and often makes advance payments without it being paid any interest.
"Boards are obliged to bear the liability of hundreds of crores of rupees per annum and it has no option but to pay the charges and deposits in order to keep power available at a level, to meet with the demand of the consumers," the court observed in its ruling. The verdict came on a bunch of appeals over similar issues.
The MP State Electricity Board had challenged the order passed by a division bench of the high court. The high court had, on a petition of Grasim Industries, said that deletion of Clauses 21(f) & 21(g) of the Board's General Conditions for Supply of Electrical Energy and The Sale of Miscellaneous and General Charges, relating to agreement for payment of interest on security deposits, was illegal.
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