BSES
Limited Vs. M/S Tata Power Co. Ltd. & Ors [2003] Insc 529 (17 October 2003)
R.C.
Lahoti & G.P. Mathur
Appeal (civil) 8362-8363 of 2003
(Arising
out of Special Leave Petition (Civil) Nos.10877-10878 of 2003) (Arising out of
SLP(C) Nos.11461-11462 of 2003) G.P. Mathur, J.
Leave
granted.
These
appeals, by special leave, have been preferred against the judgment and order
dated 3.6.2003 of Bombay High Court in MERC Appeal No.1 of 2002 (The Tata Power
Company v. BSES Ltd. & Ors.) and MERC Appeal No.2 of 2002 (BSES Ltd. &
Ors. v. The Tata Power Company) which had been preferred under Section 27 of
the Electricity Regulatory Commissions Act, 1998 (hereinafter called "the
Act") challenging the order dated 7.12.2001 of Maharashtra Electricity
Regulatory Commission (for short 'the Commission').
2. The
Tata Power Company Ltd. (for short 'TPC') is a generating company within the
meaning of Sub-section 4A of Section 2 and a bulk licensee within the meaning
of Sub-section (3) of Section 2 of the Electricity (Supply) Act, 1948. An
agreement was arrived at between Maharashtra State Electricity Board (for short
'MSEB') and TPC in or about March, 1985, whereby TPC was provided 300 MVA
standby facility from MSEB and it was further agreed that in view of the
growing requirement of the city of Bombay, the said standby facility would
stand enhanced by a quantum of 50 MVA per year. This standby facility increased
to 550 MVA by the year 1990 and payment for the same was to be made
irrespective of the fact whether electricity was drawn or not and if
electricity was drawn, actual payment for the same was to be made over and
above the standby charges. In the year 1990, it was agreed that the annual
increase in the standby facility would no longer be operational and henceforth
TPC would be entitled to avail of and pay for the standby facility of only 550
MVA. This agreement was reduced in writing by way of letter dated 6.7.1990
addressed by MSEB to TPC.
3. The
Bombay Suburban Electric Supply Company (for short 'BSES') had been granted a
distribution licence in the year 1926 which was amended in the year 1976 to
enable it to become a generator of electricity in order to take care of
enhanced demand in the city of Bombay. The licence was further amended on
30.5.1992 and it contained a clause requiring BSES to execute suitable
interconnection with the system of TPC with the approval of Central Electricity
Authority, New Delhi. A meeting was held between TPC and
BSES on 29.6.1992 regarding technical/commercial aspect of said interconnection.
It was agreed that as TPC already had an arrangement with MSEB whereby standby
facility was provided to it, similar standby facility may be provided to BSES
from the standby capacity reserved by TPC with MSEB and appropriate sharing of
charges could be worked out. The power plant established by BSES at Dahanu
became operational in 1995 and with effect from August 1995 it started
supplying power to the city of Bombay as per
the conditions of the licence.
4. Due
to dispute on commercial terms between TPC and BSES the interconnection was not
established for a long time though technical arrangements had been made. The Maharashtra
Government appointed a Committee under the chairmanship of Principal Secretary,
Energy, of which representatives of MSEB, TPC and BSES were members. After
taking into account the recommendation of the Committee the Government of Maharashtra
on 19.1.1998 directed TPC and BSES to interconnect with one another and further
directed TPC to provide to BSES standby supply of 275 MVA. It was further
directed that BSES would pay Rs.3.5 crores per month to TPC for such standby
facility. It was also mentioned in the order that standby charges were based
upon existing tariffs of TPC and BSES and the same may be reviewed during
tariff revision in future. An agreement in that regard was thereafter executed
between TPC and BSES on 31.1.1998 and the interconnection between the two
systems was established on 14.2.1998.
5. The
MSEB was charging an amount of Rs.24.75 crores per month from TPC for providing
the standby facility of 550 MVA. On 31.8.1998 MSEB served a notice on TPC
intimating its intention to enhance the charges for this standby facility from
Rs.24.75 crores to Rs.30 crores per month with effect from 1.12.1998. The TPC
then gave a notice dated 30.9.1998 to BSES of its intention to enhance the
charges for the standby facility of 275 MVA provided by it from Rs.3.5 crores
per month to Rs.15.125 crores per month with effect from 1.12.1998. The notices
were given under the third proviso to para 1 of Sixth Schedule to Electricity
(Supply) Act, 1948, which lays down that licensee shall not enhance the charges
for the supply of electricity until after the expiry of a notice in writing of
not less than sixty clear days of its intention to so enhance the charges. On
account of the notice given by TPC for increasing 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 but at the same time issued certain directions, namely, 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 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.
6. The
Government of Maharashtra issued a notification on 27.10.2000
conferring upon the Commission powers to adjudicate upon the disputes and
differences between licensees and utilities and to refer the matter for
arbitration as provided in clause (n) of Sub-section (2) of Section 22 of the
Electricity Regulatory Commissions Act, 1998. The Government wrote a letter to
TPC on 30.10.2000 informing that in view of conferment of power under Section
22(2)(n) of the Act upon the Commission the dispute regarding the standby
charges between TPC and BSES has to be submitted to the said Commission.
Thereafter, BSES filed a petition before the Commission for resolution of
dispute regarding the charges for standby facility of 275 MVA provided to it by
TPC and the petition was registered as Case No.7 of 2000.
On 5.12.2000,
the Government of Maharashtra informed TPC and BSES that its earlier order
dated 22.3.2000 is being put on hold till the decision of the Commission is
given.
7.
After considering the submissions made by the representatives for the parties,
the Commission decided the petition filed by BSES by the order dated 7.12.2001.
The main part of the order was written by two Members of the Commission who
directed as under :
1.
BSES shall make payment of Rs.77.06 crores together with interest thereon at
the rate then applicable with effect from 1.4.2000 to TPC within four weeks
from the date of the order for the year 1999-2000. While making payments due
credit shall be made for the amounts paid by them.
2. The
TPC shall, in turn, pay the balance amount remaining out of Rs.363 crores due
as standby charges together with interest due thereon at the rate then
applicable to MSEB for the year 1999-2000 within a week thereafter and close
the matter so far as the year 1999-2000 is concerned.
3.
Based on the principles outlined in the order, calculations for the year
2000-2001 should also be made and payments effected suitably by BSES and TPC so
that the dues to the MSEB in respect of standby charges are settled for the
past period within three months from the date of the order.
4. For
the current financial year 2001-2002 such calculations will not be possible
till the close of the year, whereafter only the cost and other relevant
accounting details will become available. In terms of the minutes of the order
passed by Bombay High Court on 19.3.2001 in Writ Petition No.31 of 2001 filed
by TPC against BSES, it had undertaken to deposit Rs.8.25 crores per month with
the Commission on the 15th day of each month until the Commission disposed of
the petition finally and subject to such adjustments, as may be necessary, as a
result thereof.
On the
same analogy for the year 2001-2002, BSES should pay to TPC Rs.10 crores per
month (Rs.119.06 crores divided by 12) as their share of standby charges till
such time the calculations are made and consequential adjustment is made.
8. The
Chairman of the Commission gave a separate and dissenting order and he arrived
at a different amount.
9.
Both BSES and TPC were not satisfied with the order passed by the Commission
and accordingly preferred separate appeals before the Bombay High Court which
have been decided by a common judgment and order dated 3.6.2003 which is the
subject matter of challenge in the present appeals. The High Court allowed both
the appeals and set aside the orders passed by the Commission and the
proceedings have been remitted back to the Commission for de novo consideration
and decision in accordance with law in the light of the observations made in
the order. It has been directed that during the pendency of the proceedings
before the Commission for the period from 1.7.2003, BSES shall pay to TPC 50
per cent of the standby charges that are payable by TPC to MSEB for the standby
facility provided to it. It has also been directed that TPC shall pay to MSEB
50 per cent of the standby charges payable by it to MSEB for standby facility
of 550 MVA and shall also promptly make over to MSEB the amount paid to it by
BSES pursuant to the order. So far as the arrears of standby charges are
concerned, it has been directed that 80 per cent of the said amount shall be
paid by BSES to TPC and the TPC shall immediately pay that amount to MSEB. The
remaining 20 per cent of amount of arrears shall be paid by TPC to MSEB. The
question of interest on the amount of arrears has been left open to be
considered by the Commission.
10.
The TPC in its appeal has assailed the order of the High Court in remitting the
matter back to the Commission for de novo consideration. Shri F.S. Nariman,
learned senior counsel for TPC has submitted that the dispute regarding sharing
of standby charges for providing 275 MVA standby facility to BSES by TPC is not
an issue of tariff, but is a dispute relating to sharing or apportionment of
the charges being paid by TPC to MSEB for providing the former with a standby
facility of 550 MVA and, therefore, it does not come within the purview of the
Commission under sub-section (1) of Section 22 of the Act. It has been urged
that under the terms of the licence granted by the Government to BSES and as
amended in 1992, the Government continues to have the jurisdiction to decide
any kind of dispute. The Maharashtra Government had decided the dispute vide
order dated 22.3.2000 and when the powers under Section 22(2)(n) of the Act
were conferred upon the Commission on 27.10.2000, there was no existing dispute
between the parties regarding the share of the parties as the same had already
been decided and consequently, the Commission had no jurisdiction to entertain
the petition filed by BSES. It has further been contended that the standby
facility is essential for every generator of electricity and since TPC was
providing standby facility of 275 MVA to BSES out of the standby facility of
550 MVA being provided by MSEB to TPC, then logically BSES should pay half of
the said amount. Lastly, it has been urged that the order passed by the State
Government on 5.12.2000, whereby it was communicated to the parties that the
order of the Government dated 22.3.2000 is being put on hold till the
Commission's decision is given, would cease to be operative after the decision
of the Commission and consequently the order dated 22.3.2000 would revive and
would bind the parties. It has also been urged that the BSES having not
challenged the order of the State Government dated 22.3.2000 by taking
appropriate proceedings, it was fully bound by it and consequently it should
pay standby charges to TPC on the same rate on which TPC pays standby charges
to MSEB for 550 MVA standby facility to it.
11. Shri
Kapil Sibal, learned senior counsel for BSES, has submitted that the dispute
between the parties was essentially relating to determination of tariff which
squarely falls within the jurisdiction of the Commission under Section 22 of
the Act. The Electricity Regulatory Commissions Act had come into force on
25.4.1998 and Maharashtra Regulatory Commission had been constituted on
5.8.1999 and after constitution of the Commission, it was the said body alone
which had the jurisdiction to decide the dispute and the State Government had
no authority to pass the order dated 22.3.2000 and, therefore, said order was
wholly without jurisdiction and was not binding upon BSES. Learned counsel has
also submitted that the order dated 5.12.2000 passed by the State Government by
which its earlier order dated 22.3.2000 was put on hold till the decision of
the Commission, cannot be interpreted to mean that the said order will stand
revived and become operative after the dispute had been decided by the
Commission as it will lead to a very queer situation. Learned counsel has also
urged that in the facts and circumstances of the case, the order passed by the
High Court in so far as it has remitted the proceedings back to the Commission
for de novo consideration is perfectly justified and calls for no interference.
12. In
order to appreciate the contention raised by the learned counsel for the
parties, it is necessary to briefly examine the provisions of the Act. The
rapidly growing demand for energy brought about by economic liberalization has
created enormous problems. To overcome these problems and other issues facing
the power sector, the Government of India organized two Conferences of Chief
Ministers to discuss the whole gamut of issues in the power sector and the
outcome of these meetings was the adoption of the Common Minimum National
Action Plan for Power. Under this action plan it was considered necessary to
create a Regulatory Commission as a step to arrest deteriorating condition of
the State Electricity Boards and to make plans for the future developments. The
Administrative Staff College, Hyderabad to whom the Ministry of Power assigned the task of studying
the restructuring needs of the system, strongly recommended the creation of
independent Electricity Commissions, both at the Centre and the States to give
effect to the aforesaid recommendations. The Electricity Regulatory Commissions
Bill was thereafter introduced in the Parliament. The Objects and Reasons of
the Act show that the main function of the State Electricity Regulatory
Commission shall be
(i) to
determine the tariff for electricity, wholesale, bulk, grid and retail;
(ii) to
determine the tariff payable for use of the transmission facilities; and
(iii) to
regulate power purchase and procurement process of the transmission utilities,
etc.
The
changed scenario may give rise to problems of highly complex and technical
nature between the generator, supplier and distributor of energy, which can be
better resolved by technically qualified people who may constitute the
aforesaid Regulatory Commission. They will have the additional advantage of
taking assistance from consultants, experts and professional persons Therefore,
it will be proper to interpret the Act in a broad manner and not in a narrow or
restrictive sense in so far as the jurisdiction of the Commission is concerned,
so that the purpose for which the Act has been enacted may be achieved.
Chapter
V of the Act deals with Powers And Functions of the State Commission and
Sub-section (1) of Section 22 therein reads as under :
Section
22. Functions of State Commission (1) Subject to the provisions of Chapter III,
the State Commission shall discharge the following functions, namely:-
(a) to
determine the tariff for electricity, wholesale, bulk, grid or retail, as the
case may be, in the manner provided in Section 29;
(b) to
determine the tariff payable for the use of the transmission facilities in the
manner provided in Section 29;
(c) to
regulate power purchase and procurement process of the transmission utilities
and distribution utilities including the price at which the power shall be
procured from the generating companies, generating stations or from other
sources for transmission, sale, distribution and supply in the State;
(d) to
promote competition, efficiency and economy in the activities of the
electricity industry to achieve the objects and purposes of this Act."
Sub-sections (1) and (2) of Section 29 read as under :
Section
29 Determination of tariff by State Commission (1) Notwithstanding 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 State 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:- (a) the principles and their applications provided in
sections 46, 57 and 57A of the Electricity (Supply) Act, 1948 (54 of 1948) and
the Sixth Schedule thereto;
(b) in
the case of the Board or its successor entities, the principles under section
59 of the Electricity (Supply) Act, 1948 (54 of 1948);
(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;
(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 principles;
(g) national
power plans formulated by the Central Government.
13.
Sub-section (2) of Section 22 empowers the State Government to confer by
notification in the Official Gazette various functions upon the State
Commission which are enumerated from clauses (a) to (p) in the said sub-
section. One of the function which can be conferred under clause (n) is to
adjudicate upon the dispute and differences between the licensees and utilities
and to refer the matter for arbitration.
14.
Section 58 of the Act empowers the State Commission to make Regulations
consistent with the Act and the Rules made thereunder to carry out the purposes
of the Act. Clause (d) of Sub-section (2) of this Section lays down that
Regulation may provide the manner in which charges for energy may be determined
under Sub-section (2) of Section 29.
15. Maharashtra
Electricity Regulatory Commission ( Conduct of Business) Regulations, 1999
framed under the aforesaid provision also have a bearing on the controversy in
dispute and Regulations 72, 73, 78, 79, 80, 82 and 83 which are relevant are
being reproduced below :
72.
(1) No generating Company, except that which has entered into or otherwise has
a composite scheme for generation and sale of electricity in more than one
State, shall charge their customers any tariff for supply of electricity
without the general or specific approval of such tariff by the Commission.
(2) No
utility shall fix any tariff for intra-state transmission, distribution or
supply of electricity and terms and conditions for the supply of electricity,
without the general or specific approval of the Commission:
Provided
that the existing tariff being charged by generating companies shall continue
to be charged after the date of effect of these regulations for such period as
may be specified by a notification, without prejudice to the powers of the
Commission to take up any matter relating to tariff falling within the scope of
Section 22 of the Act.
73.
Any generating company proposing to enter into any agreement for supply of
electricity between the generating company and any buying party shall get the
approval of the Commission for the tariff before entering into such contracts.
78.
Utilities, who are required to get their tariff approved by the Commission,
shall evolve tariff proposals based on the terms and conditions as may be
notified by the Commission and shall submit the same for approval, in
accordance with the procedure prescribed by the Commission.
79.
All petitions for approval of tariff (generation, transmission, distribution
and supply) and terms and conditions of supply shall be made strictly in
accordance with regulations and procedures as may be prescribed by the
Commission and shall also be in conformity with the requirements relating to
petitions as prescribed in Chapter II of these Regulations.
80.
The Commission may approve the proposed tariff on such stipulations as may be
considered appropriate and as may be specified in the Order.
82.
The utilities concerned shall publish the tariff as approved by the Commission
in the manner as may be prescribed. The tariff so published shall be in force
from the date specified in the said publication not being earlier than the date
of such publication and shall be in force until any amendment is approved by
the Commission and published.
83.
Any utility found to be charging a tariff different from the one approved by the
Commission shall be deemed to have not complied with the directions of the
Commission and shall be liable to penalties under Section 45 of the Act,
without prejudice to any other penalty to which it may be liable under any
other Act.
Any
excess charge of tariff by any utility in any year shall be dealt with as per
the directions of the Commission.
16.
The word "tariff" has not been defined in the Act. "Tariff"
is a cartel of commerce and normally it is a book of rates. It will mean a
schedule of standard prices or charges provided to the category or categories
of customers specified in the tariff. Sub-section (1) of Section 22 clearly
lays down that the State Commission shall determine the tariff for electricity
(wholesale, bulk, grid or retail) and also for use of transmission facilities.
It has also the power to regulate power purchase of the distribution utilities
including the price at which the power shall be procured from the generating
companies for transmission, sale, distribution and supply in the State.
'Utility' has been defined in Section 2(l) of the Act and it means any person
or entity engaged in the generation, transmission, sale, distribution or
supply, as the case may be, of energy. Section 29 lays down that the tariff for
intra-State transmission of electricity and tariff for supply of electricity,
wholesale, bulk or retail in a State shall be subject to the provisions of the
Act and the tariff shall be determined by the State Commission. Sub-section (2)
of Section 29 shows that terms and conditions for fixation of tariff shall be
determined by Regulations and while doing so, the Commission shall be guided by
the factors enumerated in clauses (a) to (g) thereof. The Regulations referred
to earlier show that generating companies and utilities have to first approach
the Commission for approval of their tariff whether for generation,
transmission, distribution or supply and also for terms and conditions of
supply. They can charge from their customers only such tariff which has been
approved by the Commission. Charging of a tariff which has not been approved by
the Commission is an offence which is punishable under Section 45 of the Act.
The
provisions of the Act and Regulations show that the Commission has the
exclusive power to determine the tariff. The tariff approved by the Commission
is final and binding and it is not permissible for the licensee, utility or any
one else to charge a different tariff.
17.
There is a sound logic for conferment of such a power on the Electricity
Regulatory Commission. Hitherto the supply of electricity was being made by
only one body, namely, State Electricity Boards which being an instrumentality
of the State and functioning under the control of the State Government were not
likely to enhance the tariff in an exorbitant or arbitrary manner. In fact,
Electricity Boards of many States in the country were running on huge losses.
The Electricity Regulatory Commissions Act, 1998 has been enacted to enhance
the generation of electricity and improve efficiency by bringing in private
operators. If a licensee (who may be private operator) after getting the licence
for supply of electricity in a particular area increases the tariff
arbitrarily, the consumers will have no option but to pay the same. In order to
guard against such an eventuality, provision has been made that while granting
a licence conditions may be imposed and further no tariff can be implemented
unless the same has been approved by the Commission.
18.
Electricity is not a commodity which may be stored or kept in reserve.
It has
to be continuously generated and it is so continuously generated electricity
which is made available to consumers. Any generator of electricity has to have
some alternate arrangement to fall back upon in the event of its generating machinery
coming to a halt. The standby arrangement for 550 MVA made by TPC was for the
purpose that in the event its generation fell short for any reason, it will be
able to immediately draw the aforesaid quantity of power from MSEB. Similarly,
the arrangement entered into by BSES with TPC ensured the former of immediate
availability of 275 MVA power in the event of any breakdown or stoppage of
generation in its Dahanu generation facility. Heavy investment is required for
generation of power. For this kind of a guarantee and availability of power,
TPC had to pay charges for the same to MSEB. This payment was in addition to
the charges or price which the TPC had to pay to MSEB for the actual drawal of
electrical energy. The same is the case with BSES qua TPC. The charges paid for
this kind of an arrangement whereby a fixed quantity of electrical energy was
guaranteed to TPC and BSES at their desire, is bound to constitute a component
of the price which they (BSES and TPC) would be charging from their consumers towards
the cost of the electrical energy actually consumed by them. The determination
or quantification of the amount which is payable for this kind of standby
arrangement made in favour of TPC and BSES would in reality mean determination
of the price or charges for wholesale or bulk supply of electricity. It will,
therefore, clearly fall within the expression "determine the tariff for
electricity, wholesale, bulk, grid or retail" as used in sub-clause (a) of
Sub-section (1) of Section 22 and also in the expression "regulate power
purchase .. including the price at which the power shall be procured from the
generating companies." as used in sub-clause (c) of sub-section (1) of
Section 22. Therefore, the determination or quantification of the amount which BSES
has to pay to TPC falls within the jurisdiction of the State Commission under
Section 22 of the Act. This legal position is also reflected by Section 29 of
the Act which confers an overriding power and clearly lays down that
notwithstanding anything contained in any other law the tariff for supply of
electricity, wholesale, bulk or retail shall be subject to the provisions of
the Act and shall be determined by the State Commission. This clearly ousts the
jurisdiction of any other authority to determine the tariff. It may be noted
here that the Act came into force on 25.4.1998 and Maharashtra Electricity
Regulatory Commission was formed on 5.8.1999. Therefore, it is not possible to
accept the contention of Shri Nariman that the State Government had the authority
or jurisdiction on 22.3.2000 to determine or quantify the charges which BSES
had to pay to TPC under the terms of the license granted to the former as this
was subsequent to the formation of the Maharashtra Electricity Regulatory
Commission.
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 Sixth
Schedule (paragraph 1, 3rd proviso) of the Electricity (Supply) Act, 1948, the
enhanced charges became effective and operative after 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 Electricity (Supply) Act, 1948, which are inconsistent with the Act
would cease to apply and consequently the provisions of Sixth Schedule of the
said Act can have no application now. The Sixth Schedule has been made by
virtue of Section 57 and 57A of the Electricity (Supply) Act, 1948 and Section
57A contemplates constitution of a Rating Committee by the State Government to
examine licensee's charges for the supply of electricity. Section 29 (6) of the
Act specifically lays down that notwithstanding anything contained in Section
57A and 57B 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.
20. Shri
Nariman has also submitted that even assuming that the standby charges are a
matter relating to tariff as the same are passed on to the consumers, but the
sharing of standby charges between TPC and BSES is not a matter relating to
determination of tariff and, therefore, the Commission can have no jurisdiction
to enter into such an exercise under Section 22 of the Act.
The
submission proceeds on an assumption that the dispute relates to sharing of
standby charges. In fact, the whole case of BSES is that they are under no
obligation to share the charges which are being paid by TPC to MSEB for
providing them with standby facility. It may be noted that the standby facility
of 300 MVA was provided to TPC in the year 1985 which gradually rose to 550 MVA
in the year 1990. The licence of BSES was amended in 1992 whereunder for the
first time it was provided that they should interlink with the system of TPC
and ultimately their systems were interlinked on 14.2.1998 in pursuance of the
order passed by the Government of Maharashtra on 19.1.1998. The question of
payment of standby charges by BSES to TPC has, therefore, arisen for the first
time in 1998 which is almost 13 years after TPC started paying standby charges
to MSEB. In substance, the dispute is what should be paid by BSES to TPC for
the standby facility provided by it.
The
strict and narrow interpretation sought to be placed by the learned counsel so
as to oust the jurisdiction of the Commission cannot be accepted as it will
defeat the very object of enacting the Electricity Regulatory Commissions Act.
21. It
may be mentioned here that both TPC and MSEB always treated the charges for
standby facility as a matter relating to tariff. TPC gave a notice to
Government of Maharashtra and MSEB on 30.7.1996 for revision of tariff, where
they themselves described the enhancement of demand charges made by MSEB for
standby facility as "revision of tariff". The charges for standby
facility given by them to BSES were also described as "tariff". MSEB
gave a notice to TPC on 31.8.1998 where the demand charges for 550 MVA were
described as "tariff for bulk supply". Again the notice given by TPC
on 30.8.1998 of their intention to increase the charges for standby facility
given to BSES from Rs.3.5 crores to Rs.15.125 crores was described by them as
"revision of tariffs". In the correspondence exchanged amongst TPC,
MSEB and BSES the charges for standby facility have been described as a matter
relating to "tariff". TPC filed a petition before the Commission on
18.10.1999 regarding their dispute of standby charges with BSES and the subject
of application/petition was described as "Revision in Tariff". The
relevant part thereof is being extracted below :
"..We
are advised that the matter be submitted to Maharashtra Electricity Regulatory
Commission (MERC) since the tariff and inter-connected issue of quantum of
standby and charges is now to be determined by the MERC. We are accordingly,
referring this matter to you by submitting a copy of the notice of Tariff
Revision.
The 60
days Notice of tariff revision commences from 1st October 1999 and ends on 30th
November, 1999. The new tariff is applicable only for 4 months in the current
financial year, i.e.
from
1st December 1999 to 30th March 2000. Hence, is the urgency to obtain a timely
decision to ensure that the Companies earn reasonable return for the current year.
The
tariff has been formulated after considering available date on necessary
expenses listed in the Sixth Schedule to earn Reasonable Return by the
Licensee. A major item of this expenditure pertains to the quantum of standby
required by TEC and the connected charges payable to MSEB. The issue of standby
charges is vitally inter-connected with the tariff revision process. Hence,
making such realistic assumptions as possible, the proposal for tariff revision
has been worked out."
22.
The contention of Shri Nariman that in view of the language used in the order
dated 5.12.2000, the Government's earlier order dated 22.3.2000 stood revived
after the decision of the Commission, has hardly any merit. If such a
contention is accepted, it would lead to queer results as after the decision of
the Commission two conflicting and contrary orders viz., the order of the State
Government dated 22.3.2000 and the order of the Commission would come into
force. This can never be the intention of the State Government.
The
effect of the order dated 5.12.2000 was that the earlier order dated 22.3.2000
would no longer be operative and the decision of the Commission would govern
the situation. Even otherwise as discussed earlier, after the enforcement of
the Act it is the Commission which has the jurisdiction to decide the
controversy and not the State Government.
23.
Several reasons have been given by the High Court for remitting the matter to
the Commission for a de novo consideration. The Commission devised a formula
for determination of the charges for standby facility which was to be paid by
BSES to TPC. Both the sides complained before the High Court that before
adopting the formula they were not given an opportunity to place their point of
view before the Commission for arriving at a just formula and they were not
informed about the exact nature of the formula which was being adopted. The
order of the Commission shows that for working out the formula it had appointed
consultants. Two members of the Commission had several meetings with the
consultants and thereafter the formula was worked out. But the Chairman of the
Commission was not present in these meetings.
In his
dissenting order the Chairman has recorded as under :
Para 60. I have had the opportunity to
peruse in detail the draft of an order approved and circulated by my colleagues
in the Commission, and I am appending a separate dissenting note, in view of my
disagreement with them in regard to their calculations.
Para
63. As is reflected in paragraph 50 of the order of my colleagues, the order
itself is based on the report of the Consultants and the calculations shown in
their report.
In
this behalf, I understand that my colleagues have had several meetings with the
consultants and it is on the basis of the working that has been provided by my
colleagues that the report has been compiled.
Para
64. I am afraid that I was not informed of any of the meetings that my
colleagues had with the Consultants, nor was I advised of any minutes of the
said meetings till the draft order was circulated. In the circumstances, since
the BSES' share that was purported to have been communicated by the Commission,
it cannot be deemed to be or considered to be a communication made by the
Commission, unless the communication was considered by all the Members of the
Commission. It would tantamount to only two of the Members taking upon
themselves the liberty to communicate the same."
24.
The facts mentioned above clearly show that the procedure adopted by the
Commission was not fair and proper inasmuch as the Chairman did not participate
in the meetings which other two members had with the Consultants, whereunder a
formula was devised. Under Regulation 21, the quorum for proceedings before the
Commission shall be three. In these circumstances, the High Court was perfectly
justified in remitting the matter to the Commission for de novo consideration
and no exception can be taken to such a course of action.
25.
BSES is aggrieved only against the interim arrangement made by the High Court,
whereby it has been directed to pay 50 per cent of the standby charges that are
payable by TPC to MSEB for its standby facility of 550 MVA. Shri Kapil Sibal,
learned senior counsel for BSES, has submitted that the State Government had,
on the basis of the recommendation made by the Committee, passed an order on
19.1.1998 directing BSES to pay Rs.3.5 crores per month to TPC when the
liability of TPC to MSEB was Rs.24.75 crores per month. This shows that the
State Government did not apportion the liability of BSES as half of that of
TPC. He has also submitted that TPC sells 35 per cent of the power generated by
it to BSES and consequently a portion of this burden of Rs.24,75 crores which
TPC is liable to pay to MSEB is passed on by it to the consumers of BSES.
Therefore, BSES cannot be saddled with liability to pay half of the amount only
on the ground that it has been provided with a standby facility of 275 MVA
which is half of the standby facility provided by MSEB to TPC. Learned counsel
has also submitted that at best there can be some kind of a sharing on the
amount which TPC has to pay to MSEB over and above Rs.24.75 crores but up to
the extent of the aforesaid amount the liability of BSES cannot exceed Rs.3.5 crores.
Shri Sibal has also assailed the order of the High Court on the ground that
while making the interim arrangement for equal sharing of standby charges,
reliance has been placed on the order of the State Government dated 22.3.2000,
though the High Court itself has, in the earlier part of the judgment, held the
said order to be without jurisdiction. Shri Chidambaram, learned senior counsel
appearing for TPC, has, on the other hand, submitted that the order passed by
the State Government on 19.1.1998, whereby BSES was directed to pay Rs.3.5 crores
out of the liability of Rs.24.75 crores of TPC towards MSEB, was only a pro tem
arrangement, as the order itself mentioned that this was subject to revision in
tariff. Therefore, the said order has no legal sanctity and cannot bind TPC in
any manner. He has also submitted that with effect from 1.4.1999 TPC has only
paid half of the standby charges to MSEB and, therefore, the burden of the
entire amount has not been passed on to the consumers. Shri Altaf Ahmad, Addl.
Solicitor General, appearing for MSEB has submitted that the TPC owes a huge
amount to MSEB and the interim arrangement made by the High Court should not be
changed or altered in a manner which may prejudicially affect the interest of
MSEB.
26. An
interim arrangement is normally made on a prima facie consideration of the
matter and on broad principles without examining the matter in depth. The
matter has been remitted to the Commission by the High Court by the judgment
and order dated 3.6.2003 and a period of nearly three and a half months has
already elapsed. Regulation 101 of the Central Electricity Regulatory
Commission provides that the Commission may normally dispose of the petitions
finally within six months of admission. The State Commissions are also expected
to follow this time limit for disposal of petitions. Since the order made by
the High Court is only by way of interim arrangement and the Commission is
expected to decide the disputes finally within a short period, we do not
consider it proper to interfere with the order made by the High Court in this
regard. After the decision of the Commission, the equities can be adjusted and
the excess amount paid by any party can be refunded to it along with appropriate
interest or can be adjusted in future bills.
27.
The Appeals are accordingly dismissed with costs. The Maharashtra Electricity
Regulatory Commission is directed to decide the dispute expeditiously,
preferably within three months of presentation of a certified copy of this
order before it. While passing the final order, the Commission will also make a
direction regarding the liability of the parties keeping in view the deposits
made by them as a result of the interim arrangement made by the High Court.
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