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The judgment of the Court was delivered by MOHAN,J. Leave granted.

These civil appeals are directed against the judgment of the Division Bench of Andhra Pradesh High Court reported in Southern Steel Ltd. v. A. P. State Electricity Board, Hydrabad AIR 1990 Andhra Pradesh 58. The facts briefly are as under:

The Andhra Pradesh State Electricity Board is constituted under Section 5 of the Electricity Supply Act, 1948 (hereinafter referred to as the Act). The said board is engaged in generation, distribution and supply of electricity in the State of Andhra Pradesh. Electric energy is supplied for industrial, commercial, agricultural and domestic purposes. To such of these industries, using energy about a particular level, it is supplied at a higher voltage. They are classified as high tension consumers (H.T. consumers). All the appellants herein belong to that category.

(b) (v) of Schedule VI merely specifies interest on security deposit as properly incurred item of expenditure for the purpose of determining the 'clear profit' of the licencee. The said clause does not and cannot by itself impose an obligation on the licencee to pay interest on security deposit. Should interest be paid, then it qualifies as an item of expenditure properly incurred.

The High Court also erred in relying on Section 4 (2) of the Interest Act, 1978. Section 4 (2) has no application where on account of contractual term or a statutory provision, payment of interest is not permitted. Section 4 (2) of the Interest Act, 1978 merely enlarges the categories of cases mentioned under Section 4 (1). The said Section cannot override other statutory provisions or a contract between the parties. The non-obstante clause under Section 4 (2) is restricted only to the provisions of Interest Act, 1948. It is submitted that under the billing practice prevalent with the Rajasthan Electricity Board the consumer has free use of electricity during the period between consumption of electricity and expiry of period after notice. During this period which varies from 2 to 2 1/2 months, the consumer in effect enjoys a credit facility. Therefore, if security deposit is demanded for three months, it is neither unreasonable nor arbitrary. As a matter of fact, the security demanded by the appellant Board is in the form of cash for one month and bank or insurance guarantee for two months. Therefore, it is all the more reasonable. In support of this, reliance is placed on Kistna Cement Works Tadepalli v. The Secretary APSEB, Vidyut Soudha AIR 1979 A.P. 291, B.R. Oil Mills, Bharatpur v. Assistant Engineer (D) R.S.E.B., Bharatpur, AIR 1981 Rajasthan 108, .Municipal Corporation for Greater Bombay v. M/s Devidayal Metal Industries, AIR 1984 Bombay 242, Haryana Ice Factory v. Municipal Corporation of Delhi, AIR 1986 Delhi 78 and Southern Steel Ltd. v. The A.P. State Electricity Board, Hyderabad, AIR 1990 A.P. 58.

(Emphasis supplied) Where, therefore, under Section 49 read with Section 79 (j) 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 observed:

"Before we proceed to deal with the rival contentions, 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 Electricity 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 upon the Board by S.49 of the Act has been exercised so unreasonably and arbitrarily that interference by this Court is called for. For the purpose of this enquiry it is not necessary for us to go into the question whether the terms and 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 assumption that the terms and conditions notified under S. 49 ought to be reasonable, in the sense that they 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."

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

"The reasonableness of such a requirement is explained 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:-

"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 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. Meanwhile he will be consuming the power. So by the time the supply is disconnected to a defaulting consumer the would have consumer energy for 3 months. The 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 period."