Binani Zinc Ltd. Vs.
Kerala State Electricity Board & Ors.  INSC 560 (19 March 2009)
IN THE SUPREME COURT
OF INDIA CIVIL APPELALTE JURISDICTION CIVIL APPEAL NO. 3492 OF 2006 Binani Zinc
Limited ....Appellant Versus Kerala State Electricity Board and others
S.B. SINHA, J.
or otherwise of an observation made by a two Judge Bench of this Court in BSES
Ltd. and others v. Tata Power Company Ltd., [ (2004) 1 SCC 195 ] having been
doubted, this matter has been referred to a Larger Bench.
State Electricity Board (KSEB), respondent No.2 is constituted and incorporated
under the provisions of the Electricity (Supply) Act, 1948 (for short `the 1948
Act'). Indisputably the first respondent is entitled to frame and revise tariff
for electrical energy in exercise of the powers conferred upon it by Sections 49,
59 and clause (j) of Section 79 of the 1948 Act.
Parliament enacted Electricity Regulatory Commissions Act, 1998 (for short 1998
Act) which received the assent of the President of India on or about 2nd July,
1998. It was, however, deemed to have come into force with effect from 25th
order dated 13th May, 1999, KSEB revised its tariff with effect from 15th May,
1999. A writ petition was filed by an Association questioning the said order.
on 3rd May, 2001 the Government of Kerela effected an increase of tariff for
all categories of consumers except old age homes, schools and hostels of
mentally retarded persons etc. The revised tariff was made effective from
August 10, 2001. According to the governmental order, KSEB was incurring a
deficit of Rs. 160.44 crores per month and in order to make up for the said
deficiency the tariff hike was necessitated. Pursuant to the said policy
decision the KSEB later on issued a detailed tariff order.
Power Department of the Government of Kerala issued G.O. (MS) No. 23/2001/PD on
17th August, 2001 inter alia declaring that the Government of Kerela had
tentatively decided to enter into a MOU with the Government of India with a
view to affirm the joint commitment of the two parties to reform the power
sector in Kerela in a time bound manner. The said MOU in the relevant para
stated :- "8. Kerala will constitute an independent State Electricity
Regulatory Commission by October, 2001 and file tariff petitions by March 2002.
Tariff orders issued
by SERC will be implemented fully unless stayed or set aside by Court
or about 11th October, 2001 a Government Order was issued by the Government of
Kerala further enhancing the tariff by 50 paise per unit for all industrial
revised tariff under Sections 49, 59 and sub-section (j) of Section 79 of the
1948 Act by issuing an order known as `The Kerala State Electricity Board Extra
High Tension Tariff Revision Order 2002"
(for the sake of
brevity `2002 Order'). The said order came into force with effect from 1st
October, 2002 in terms whereof revision in the tariff for extra high tension
industrial units was effected.
Kerala State Electricity Commission (KSERC) was constituted by the State of Kerala
on 14th November, 2002 in exercise of its power conferred by Section 17 of the
questioning the validity of the said 2002 Order filed a writ petition before
the Kerala High Court which was marked as OP 9798 of 2003. As in the meanwhile
the KSERC came into force, the High Court permitted the appellant to approach
the Commission within 30 days noting that it would be entitled to examine
whether the revision conforms to Section 29 of the 1998 Act or not.
Parliament enacted the Electricity Act, 2003 which came into force with effect
from 10th June, 2003.
KSERC in terms of its order dated 30th April, 2004 inter alia held :- a) On the
day the notification dated 24.10.2002 was issued, the Board was empowered to determine
the tariff since the Electricity (Supply) Act, 1948 was still applicable.
b) No ground for
re-determining tariff for HT and EHT consumers.
c) Cross subsidy for
tariff for HT and EHT categories was around 43%."
appeal was preferred thereagainst before the High Court in terms of Section 27
of the 1998 Act whereupon by an order dated 2nd July, 2004 it was directed :-
"(a) Though the Tariff Revision Order, 2002 was issued on 24th October,
2002, i.e. subsequent to coming into force of the ERC Act, 1998, the Board was
empowered to issue the notification as the Regulatory Commission had not been
(b) With respect to
issue of cross subsidy, matter remanded to the Commission for fresh
special leave petition was filed thereagainst. This court by an order dated
13th September, 2004 passed an interim order directing the KSEB not to
disconnect appellant's electricity supply subject to its paying the demand as
per the tariff before its revision on 24.10.2002.
Appellant was also
asked to deposit Rs.1 crore with the KSEB.
the court it was contended by the appellant that the Electricity Act, 2003
having come into force with effect from June 10, 2003, the KSERC functioning as
such prior thereto continues to function as the State Commission under the 2003
Act and thus it must be held to have considered the appellants' petition in
terms of the provisions thereof. It was furthermore argued that the 1998 Act
having been repealed by the 2003 Act, the appeal preferred by the appellant
before the Kerela High Court was not maintainable.
This Court, however,
while disposing of the appeal held that the issues raised by the appellant
could be more effectively considered and disposed of by the appellate tribunal
under the 2003 Act, being an expert body.
to or in furtherance of the said order the Appellate Tribunal upon hearing the
parties has passed the impugned judgment inter alia opining that the
respondent-KSEB had the jurisdiction to revise the tariff framed on 24th July,
2006, stating :- "26. ....Therefore, till the Commission was constituted
by the State of Kerala the power remained vested in the Board to determine the
K.K. Venugopal, learned counsel appearing on behalf of the appellant would
urge:- (i) Upon coming into force of 1998 Act the State was obligated to
constitute the Electricity Commission within a reasonable period.
(ii) On coming into
force of the 1998 Act Respondent-Board and/or the State of Kerala had no
authority to revise the 7 tariff in terms of the provisions of the 1948 Act or
(iii) In any event
the principles laid down in 1998 Act should have been kept in mind while
revising the tariff, particularly in respect of the cross subsidy, which had
specially been dealt with in the Statement of Objects and Reasons of 1998 Act.
M.T. George, learned counsel appearing on behalf of the Board, on the other
hand, would urge :- (i) Section 17 of the 1998 Act does not impose any legal
obligation upon the State to constitute the Commission ;
(ii) So long the
Commission is not constituted, the Board would have jurisdiction to frame
and/or revise tariff as the statute does not contemplate a vacuum ;
(iii) The 1998Act
having not repealed the 1948 Act, the power to frame tariff in terms of Section
49 of the 1948 Act continued to remain in the Board ;
8 (iv) The High
Court in exercise of its jurisdiction under Article 226 of the Constitution of
India could not have issued a writ or order in the nature of mandamus directing
the State to constitute the Commission.
may at this stage notice the relevant provisions of the 1998 Act. Section 2(c)
of the 1998 defines `Commission' to mean the Central Commission or the State
Commission or the Joint Electricity Regulatory Commission, as the case may be.
Section 2(j) of the 1998 defines `State Commission' to mean the State
Electricity Regulatory Commission established under sub-section (1) of Section
17. Section 3 provides for establishment and incorporation of Central
Commission, sub-section (1) whereof read thus :- "3. (1) The Central
Government shall, within three months from the date of the commencement of this
Act by notification in the Official Gazette, establish a body to be known as
the Central Electricity Regulatory Commission to exercise the 9 powers
conferred on, and the functions assigned to, it under this Act."
Section 17 of the Act provides for establishment and incorporation of State
Commission, sub-section (1) whereof reads as under :- "(1) The State
Government may, if it deems fit, by notification in the Official Gazette,
establish, for the purposes of this Act, a Commission for the State to be known
as the (name of the State) Electricity Regulatory Commission.
Section 22 deals with the functions of State Commission.
Section 28 provides
for determination of tariff by the Central Commission.
Section 29 provides
for determination of tariff by the State Commission, relevant part of
sub-sections (1) and (2) whereof read as under :-
anything contained in any other law, the tariff for intra-State transmission of
electricity and the tariff for supply of electricity, grid, wholesale, bulk or
retail, as the case may be, in a State (hereinafter referred to as the tariff),
shall be subject to the provisions of this Act and the tariff shall be
determined by the State Commission of that State in accordance with the
provisions of this Act.
Provided that in
States or Union territories where Joint Electricity Regulatory Commission has
been constituted, such Joint Electricity Regulatory Commission shall determine
different tariff for each of the participating States or Union territories.
(2) The State
Commission shall determine by regulations the terms and conditions for the
fixation to tariff, and in doing so, shall be guided by the following,
namely:-- ... ...
(c) that the tariff
progressively reflects the cost of supply of electricity at an adequate and
improving level of efficiency;
(d) the factors which
would encourage efficiency, economical use of the resources, good performance,
optimum investments, and other matters which the State Commission considers
appropriate for the purpose of this Act;
1 1 (e) the
interests of the consumers are safeguarded and at the same time, the consumers
pay for the use of electricity in a reasonable manner based on the average cost
of supply of energy;
(f) the electricity
generation, transmission, distribution and supply are conducted on commercial
(g) national power
plans formulated by the Central Government;
Sections 51 and 52
read as under :- "Section 51 - Amendment of Act 54 of 1948 - With effect
from such date as the Central Government may, by notification, in the Official
Gazette appoint, sub-section (2) of section 43A of the Electricity (Supply)
Act, 1948 shall be omitted:
different dates may be appointed for different States.
Section 52 -
Overriding effect Save as otherwise provided in section 49, the provisions of
this Act shall have effect notwithstanding anything inconsistent therewith
contained in any enactment other than this Act."
1998 Act indisputably was enacted inter alia for the purpose of implementing
reforms pertaining to fundamental issues facing the power sector, namely, lack
of rational retail tariff, high level cross subsidies, poor planning and
operation, inadequate capacity and for safeguarding the interest of the
consumers Jurisdiction of the Commission vis-`-vis the Board in the context of
the provisions of the 1998 Act and 1948 Act must be determined having regard to
a large number of factors.
3 of the 1998 Act mandates the Central Government to establish Central
Electricity Regulatory Commission. If the said provision is contrasted with
Section 17 of the 1998 Act, it would be evident that no such mandate has been
imposed on the State Government to constitute such a Commission. The Parliament
advisedly used the words `may' and `if it deems fit' in Section 17 of the Act
while using the word `shall' in Section 3 thereof. Establishment of a State
Commission by the State Government, therefore, is directory. It confers some
discretionary power on the State Government to constitute a State Commission.
The State, for sufficient and cogent reasons, may refuse to constitute such a
Commission or fail or neglect to do so within a reasonable time. For the aforementioned
purpose the Central Government can take recourse to certain measures but the
same would not mean that the court can in exercise of its power of judicial
review, issue a writ or order in the nature of mandamus directing the State to
constitute such a Commission.
fact in this case itself the Central Government was able to persuade the State
Government to establish a Commission by entering into a Memorandum of
Understanding on 17th August, 2001 in terms whereof the State of Kerala made
itself bound to constitute the Commission by October, 2001.
If the contention of
Mr. Venugopal is accepted and taken to its logical conclusion, the superior
courts would be entitled to direct to Government to implement even conditional
legislations. We, therefore, are of the opinion that the same is not legally
provisions of 1998 Act vis-`-vis 1948 Act are required to be construed
harmoniously. For the said purpose it is required to bear in mind that the law
does not contemplate a vacuum in its operation. The 1948 Act has not been
repealed or replaced by the 1998 Act. Section 61 merely replaced the Ordinance.
it would be one thing to say that upon coming into force of the 1998 Act the
provisions contained in 1948 Act which are found to be inconsistent with the
former shall give way thereto but it is another thing to say that although no
Commission is constituted, the Board would have no jurisdiction at all to frame
State Electricity Board is a `State' within the meaning of Article 12 of the
Constitution of India. It is a statutory authority. If the Board has the power
to frame or revise the tariff as contained in Section 49 and other provisions
of the 1948 Act which is plenary in nature, unless a statutory provision is
brought into force interdicting exercise of such power, it cannot be held to
become denuded thereof.
power to make tariff would bring within its folds the power to revise the same.
Exercise of such powers from time to time would depend upon the exigencies
powers/guidelines under the provisions of 1998 Act were to be exercised by the
Central Commission or the State Commission. It must come into existence for the
said purpose.. A non obstante clause contained in Section 29 or Section 52 of
the 1998 Act would be attracted only when the Commission comes into force and
not prior thereto. The provisions of the said Act are to be exercised by the
Commission for the purposes of the Act. It must, therefore, come into existence
before it can exercise its power.
is, therefore, difficult for us to persuade ourselves that that the factors
enumerated in clauses (c) to (g) contained in sub-section (2) of Section 29 of
1998 Act providing for the principles required to be followed by the Commission
were binding on the State Electricity Boards also.
The State Electricity
Boards are entitled to frame tariff in terms of the provisions contained in the
1948 Act. The tariff so framed is legislative in character. The Board as a
statutory authority is bound to exercise its jurisdiction within the
four-corners of the statute. It must act in all fields including the field of
framing tariff by adopting the provisions laid down in 1948 Act or the Rules
and the Regulations framed there under. It is one thing to say that while
framing tariff it can only take into consideration the provisions laid down in
the Schedule appended the Act and/or the directions contained in the policy
decisions issued by the State as also other statutory principles governing the
same but then a tariff framed by it cannot be held to be ultra vires only
because it did not take into consideration certain principles laid down in
clauses (c) to (g) of sub-section (2) of Section 29 of the 1998 Act. It is of
some significance to note that the Commission in terms of clauses (a) and (b)
of sub-section (2) of Section 29 of the 1998 Act are required to follow the
principles provided for under Sections 46, 56 and 57 of the 1998 Act as also
the Sixth Schedule appended thereto. The 1998 Act, therefore, recognises the
principles contained in the 1948 Act also.
provisions of Section 52 of 1998 Act, therefore, are required to be read in the
light of the other provisions contained therein. It is also a well settled principle
of law that a statute does not envisage doing anything which is impossible to
be done. Lex non cogit ad impossibilia Gausa ommiss Gausa ommiss is a well
It would be absurd to
suggest that the principles required to be adopted by the Commission were per
force required to be adopted by the Electricity Boards despite the fact that
the Commission did not come into existence.
Commission has been empowered to frame tariff. It is, however, not been
empowered to frame tariff with retrospective effect so as to cover a period
before its constitution. The matter might have been different if such a power
has been conferred on the Commission. It is now a well settled principle of law
that the rule of law inter alia postulates that all laws would be prospective
subject of course to enactment an express provision or intendment to the
the aforementioned factual backdrop we may notice that in the case of BSES
(supra) the Electricity Commission was constituted on 5th August, 1999. A
dispute arose in regard to payment of standby charges by and between the
licensee (Tata Power) and the appellant therein (BSES) for the period 1st
December, 1998 to 31st March, 1999. We may notice the fact of the said case :-
of the notice given by TPC for increasing the charges of standby supply of 275
MVA, a dispute arose and a meeting was convened on 4-3-1999, wherein the Deputy
Chief Minister, Government of Maharashtra and representatives of both the sides
were present. The Deputy Chief Minister, though advised both the parties to
settle the issue amicably between themselves without referring to the
Government, at the same time issued certain directions, namely, that BSES
should share Rs 9 crores out of Rs 22 crores additional standby charges levied
by MSEB upon TPC for the period 1-12-1998 to 31-3-1999 and the issue regarding
sharing of standby charges for the period 1-4-1999 onwards be referred to a
Committee to be constituted by the State Government. The Government of
Maharashtra thereafter constituted a Committee on 27-5-1999 to study certain
issues including that of standby charges to be paid by BSES to TPC and to
submit a report. Shortly thereafter, a notification was issued on 5-8-1999
constituting the Maharashtra Electricity Regulatory Commission (for short
"the Commission"). The Committee constituted by the Government of
Maharashtra on 27-5-1999 in its meeting held on 2-5-2000 resolved that in view
of the constitution of the Commission, the question of payment of standby
charges could only be determined by the Commission and accordingly resolved
that the said issue be referred to the Commission for determination. An
intimation in this regard was also sent to the respective parties. However, the
Government of Maharashtra passed an order on 22-3-2000 whereby BSES was
directed to pay standby charges to TPC at the rate of 50 per cent of the amount
of standby charges payable by TPC to MSEB. This was done on the basis that MSEB
was providing standby facility of 550 MVA to TPC and as TPC was providing
standby facility of 275 MVA to BSES, it should pay half of the said amount. The
order further provided that for the period 1-12-1998 to 31-3-1999 BSES should
pay Rs 9 crores as standby charges to TPC. BSES was not satisfied with the
aforesaid order of the Government and made repeated requests for review of the
same and lastly on 6-10-2000, it sent a detailed letter to the Government
requesting for reconsideration of the matter."
In the aforementioned
fact situation obtaining the Division Bench held as under:- "19. Shri
Nariman has submitted that TPC gave a notice on 30-9-1998 of their intention to
enhance the charges of standby facility provided to BSES from Rs 3.5 crores to
Rs 15.125 crores per month and this notice having been given under the Sixth
Schedule (para I, third proviso) of the Electricity (Supply) Act, 1948, the
enhanced charges became effective and operative after the expiry of 60 days of
notice i.e. with effect from 1- 2-1998. The submission is that by operation of
law the charges for standby facility stood revised and enhanced with effect
from 1-12-1998. In our opinion, the contention raised has no substance.
The legal position
has undergone a complete change with the enforcement of the Electricity
Regulatory Commissions Act, 1998. In view of Section 29 of the Act, the tariff
for intra-State transmission of electricity and tariff for supply of
electricity in wholesale, bulk or retail has to be determined by the
Electricity Regulatory Commission of the State and a licensee cannot by its
unilateral action enhance the charges. The provisions of the Act have an
overriding effect by virtue of Section 52 of the Act and, therefore, any
provisions of the Electricity (Supply) Act, 1948,
which are inconsistent with the Act would cease to apply and consequently, the
provisions of the Sixth Schedule of the said Act can have no application now.
The Sixth Schedule has been made by virtue of Sections 57 and 57-A of the Electricity
(Supply) Act, 1948 and Section 57-A contemplates constitution of a Rating
Committee by the State Government to examine the licensee's charges for the
supply of electricity. Section 29(6) of the Act specifically lays down that
notwithstanding anything contained in Sections 57-A and 57-B of the Electricity
(Supply) Act, 1948, no Rating Committee shall be constituted after the date of
the commencement of the Act.
The effect of Section
29 and the Regulations framed thereunder is that it is no longer open to a licensee
or utility to unilaterally increase the tariff.
The tariff can be
enhanced only after approval of the Commission and charging of an enhanced
tariff which has not been approved by the Commission will amount to commission
of an offence. Therefore, the notice to enhance the charges given by TPC, which
was subsequent to the enforcement of the Act, can have no legal effect."
(supra) must be held to have been determined on its own facts. Sub-section (6)
of Section 29 of the 1998 Act bars constitution of a rating committee. In
`BSES' a Committee was constituted by the State of Maharashtra. In that case
when the Regulatory Commissions had been set up by the State government under
the ERC Act, no other authority including the Board, would obviously have the
power to determine the tariff. It is presumably on that premise the that the
provisions of the 1998 Act must be given effect to even for the period during
which it had not come into force, must be understood.
must also notice that the Electricity (Supply) Act, 1998 was not repealed by
the ERC Act, 1998. It was only under Section 185 of the Electricity Act of 2003
that the provisions of the Indian Electricity Act 1010, Electricity (Supply Act
1948 and the ERC Act 1998 were repealed.
But at the same time
anything done or any action taken under the Acts of 1910 or 1948 or 1998 Act
have been saved in so far as they are not inconsistent with provisions of the
have, however, no hesitation in finding that the State Electricity Board had
the requisite jurisdiction to revise a tariff till such time as the Commission
was constituted and the purposes of the 1998 Act could be achieved through it.
Till the time the Regulatory Commission was not constituted by the state of
Kerela, the power to determine tariff remained with the Board under the
Electricity (Supply ) Act 1948 as it was not repealed by the Electricity
Regulatory Commission Act 1998. The Parliament could not have intended to bring
about a situation where no authority would be empowered to determine the tariff
between the date of coming into force of the ERC Act, 1998 and the constitution
of the commission. It is only after the Regulatory commission is constituted
that it will be the sole authority to determine the tariff.
are, therefore, of the considered opinion that this clarification in regard to
the decision rendered by a two Judge Bench of this Court in BSES (supra) would
be sufficient to answer the reference.
Venugopal would, however, submit that other contentions/substantial questions
of law have been raised in the appeal.
Such questions may be
determined by an appropriate 2 Judge Bench.
reference is answered accordingly.
matter may now be placed before an appropriate Bench.
[ S.B. Sinha ]
[ Asok Kumar Ganguly]