Corporation Ltd. Vs. National Thermal Power Corp.Ltd.& Ors.  INSC 476
(3 March 2009)
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 1110 OF
2007 U.P. Power Corporation Ltd. ...Appellant Versus National Thermal Power
Corporation Ltd. and others ...Respondents WITH CIVIL APPEAL NOS. 1138 OF 2007
U.P. Power Corporation Ltd. ...Appellant Versus National Thermal Power
Corporation Ltd. and others ...Respondents WITH CIVIL APPEAL NOS. 1152 OF 2007
U.P. Power Corporation Ltd. ...Appellant Versus National Thermal Power
Corporation Ltd. and others ...Respondents WITH CIVIL APPEAL NOS. 1327 OF 2007
U.P. Power Corporation Ltd. ...Appellant Versus National Thermal Power
Corporation Ltd. and others ...Respondents AND CIVIL APPEAL NOS. 1112 OF 2007
U.P. Power Corporation Ltd. ...Appellant Versus National Thermal Power Corporation
Ltd. and others ...Respondents
SINHA, J :
These appeals involving similar questions of law and fact were
taken up for hearing together and are being disposed of by this common
We may, however, notice the fact of the matter from Civil Appeal
No.1110 of 2007.
The question which arises for consideration herein is as to
whether the amount required to be paid by the first respondent National Thermal
Power Corporation (for short `the Corporation') towards revision of scales of
pay of its employees in terms of the recommendations made by the High Level
Committee constituted under the Chairmanship of Justice S. Mohan with
retrospective effect from 1st January, 1997 can be a subject matter of revision
in tariff for the tariff years 1997-1998 ; 1998 - 1999 and 1999 - 2000.
The Parliament with a view to provide for establishment of a
Central Electricity Regulatory Commission and State Electricity Regulatory
Commissions, rationalization of electricity tariff, transparent policies
regarding subsidies, promotion of efficient and environmentally benign policies
and for matters connected therewith or incidental thereto, enacted the
Electricity Regulation Commissions Act, 1998 (for short `the 1998 Act'). It
came into force with effect from 9th June, 1998.
to or in furtherance of the provisions thereof the Central Electricity
Regulatory Commission (in short the Central Commission) was established in
terms of sub-section (1) of Section 3 of the 1998 Act.
Indisputably the powers and functions of the Commission are extensive being
contained in Section 13 of 1998 Act i.e. :
to regulate the tariff of generating companies owned or controlled by the
regulate the tariff of generating companies, other than those owned or
controlled by the Central Government specified in clause (a), if such
generating companies enter into or otherwise have a composite scheme for
generation and sale of electricity in more than one State;
regulate the inter-State transmission of energy including tariff of the
promote competition, efficiency and economy in the activities of the
aid and advise the Central Government in the formulation of tariff policy which
shall be-- (i) fair to the consumers; and (ii) facilitate mobilisation of
adequate resources for the power sector;
associate with the environmental regulatory agencies to develop appropriate
policies and procedures for environmental regulation of the power sector;
4 (g) to
frame guidelines in matters relating to electricity tariff;
arbitrate or adjudicate upon disputes involving generating companies or
transmission utilities in regard to matters connected with clauses (a) to (c)
aid and advise the Central Government on any other matter referred to the
Central Commission by that Government."
A regulatory Commission not only makes Regulations but in view of
its extensive powers BUT ALSO in-charge of implementation thereof. It
furthermore in the event of any dispute or difference arising between several
players involved in the framing of tariff for the consumers of electrical
energy has also an adjudicatory role to play.
We are in this batch of appeals are concerned with the power of
the Central Commission to make tariff and to revise the same at the instance of
a generating company. Before, however, adverting to the said questions, we may
notice certain undisputed facts.
National Thermal Power Corporation Ltd. is a public sector
undertaking employed in generation of electrical energy at different parts of 5
India. It has a Thermal Power Station at Korba in the State of Chhatisgarh and
Gas Power Station in Dadri in the State of Uttar Pradesh.
U.P. Power Corporation Ltd. is also a public sector undertaking
constituted upon bifurcation of U.P. Electricity Board in terms of the
provisions of the U.P. Electricity Regulatory Commission Act, 1998.
Indisputably the Central Commission only had, at the relevant
time, jurisdiction to make tariff for the generating companies.
The matter relating to generation, transmission, supply and
distribution of electrical energy in different States used to be governed by
(Supply) Act, 1948. With a view to bring reforms in
the power sector and to meet shortages in the power supply, the Central
Government as also the various State Governments, adopted liberalisation
policies for industrial economy so as to enable them to attract investment from
various parts of the country as also from abroad.
The Parliament, with a view to give effect to the aforesaid policy
decision, as noticed hereinabove, enacted 1998 Act. Parliament, we may place on
record, with a view to consolidate the laws relating to generation,
transmission, distribution , trading and use of electricity and generally for 6
taking measures conducive to development of electricity industry, promoting
competition therein, protecting interest of consumers and supply of electricity
to all areas, rationalization of electricity tariff, ensuring transparent
polices, regarding subsidies, promotion of efficient and environmentally benign
polices, constitution of Central Electricity Authority, Regulatory Commission
and establishment of Appellate Tribunal and for matters connected therewith or
incidental thereto, enacted the Electricity Act, 2003. It came into force with
effect from 10th June, 2003.
On or about 25th September, 1999 the Government of India issued
guidelines for revision of salary to the employees of the Public Sector
Undertakings with effect from 1st July, 1997, where for, as noticed earlier, a
High Powered Committee headed by Justice Mohan was constituted.
It is stated that the Corporation made provisions in its budget
for the relevant years and paid arrears of revised salary with effect from 1st
January, 1997 to the Executive in July, 2000 and to the Supervisor and Workmen
from April, 2001 and March, 2001 respectively.
The Corporation had asked the Central Commission to frame tariff
in respect of the electricity generated by it wherefor it filed Petition
Nos.30/2001 and 44/2001 for determination of tariff for its stations at Korba 7
and Dadri. The Central Commission, upon consideration of the factors placed
before it and upon hearing all concerned, including the parties hereto,
determined the operational and financial norms applicable, inter alia, for the
generating stations of the NTPC which was inclusive of employee's costs. In the
said order the Central Regulatory Commission dealt with all aspects of the
operation and maintenance expenses after setting up the norms for such
As stated earlier the revision of salary of NTPC employees was
revised in terms of the recommendations of the High Level Committee. The said
revision was given effect to on and from w.e.f. 1st January, 1997 but was
implemented during the period 2000-2001.
The tariff order was made by Central Regulatory Commission for
Korba and Dadri on 6th August, 2003 wherefor the data provided by NTPC were
taken into consideration in terms of Regulation 2.7(d)(i) including the
provisions made during three years 1997-1998 to 1999-2000 towards anticipated
revised costs therefor.
Indisputably alongwith the said data, datas for the year 2000-2001
were also produced.
It filed a review petition before the Central Regulatory
Commission during various periods in respect of its Korba and Dadra projects on
1st October, 2003. However, it did not lay any claim in respect of actual
revised costs for the years 1997-1998, 1998-1999 and 1999-2000.
Central Regulatory Commission in exercise of its suo motu
jurisdiction passed an order in proceeding being No.196 of 20045 to inquire
into the actual escalation factor which was found to be less than 6%. Before
the Commission certain other issues were also raised.
However, on or about 25th April, 2005 and 26th July, 2005 revision
applications were filed in respect of Korba and Dadri Power Stations claiming
allowance of actual revised costs incurred by the Corporation on account of
arrears of paid in 2000-2001.
The Commission dismissed the said applications by orders dated
11th August 2005 and 19th October, 2005 inter alia, opining :
"It needs to be noted that in terms of the Commission's order dated
21.12.2000 fresh revision of O&M base charges after determination of tariff
is not warranted based on the actual expenses".
"From the details extracted at Para 10 above, it can be seen that revision
of salary of the employee, executives, supervisors and other workmen was notified
during July 2000 to April 2001 and the arrears on that account were also paid
during the same period.
the complete employee cost data on account of revision of pay and allowances
was available with the petitioner during April, 2001. When the application for
determination of tariff were filed on 8.6.2001, the data in this regard could
be placed before the Commission by the petitioner. Further, the petitioner had
filed amended petitions during January/ February 2002 in all these cases. The
Petitioner did not incorporate the actual data of employee cost in the amended
petitions as well".
"Under Order 2 Rule 2 of the Code of Civil Procedure (the Code) every suit
is to include the whole of the claim to which the party is entitled to make in
respect of the cause of action but a party may relinquish any portion of his
claim. However, where the party omits to sue in respect of any claim or
intentionally relinquishes any portion of his claim, he cannot afterwards sue
in respect of the portion so omitted or relinquished".
"After deciding the tariff, the Commission cannot revisit the matter
covered in the tariff orders, which have acquired finality".
"...On consideration of this, the employee cost indicated by the
petitioner for the years 1997-98 and 1998-99 (excluding incentive and
ex-gratia), even though beyond the admissible limit of 20% was considered for
"...the question of exclusion of these expenses cannot be re- agitated in
the present proceedings as they are barred by the principle of
"...the tariff approved is the complete package."
It, however, appears that an application of the electricity
generating station of the Corporation at Rihand was filed for revision of the
tariff being Petition No. 38 of 2001 in respect of the tariff period 2001-2004
having regard to the fact that further amount was to be paid by the NTPC to its
employees for the purpose of implementation of the recommendations of Justice
Mohan Committee, relying on or on the basis of the leave granted, the
Corporation filed I.A. No. 9 of 2006 to place on record the impact of revision
of wages w.e.f. 1st January, 1997 on the employee costs for the generating
station and the Corporate office expenses for the years 1995- 1996 to
2000-2001, which was allowed.
Appellant before us contends that Rihand decision is not
applicable in the instant case as therein the original tariff order was yet to
come into force. And the said application was filed for revision of tariff and
considered in view of the statements made by the Corporation itself in the
earlier round of the proceeding. .
The Corporation aggrieved by and dissatisfied with the orders of
the Commission dated 11th August, 2005 and 19th October, 2005 filed appeals before
the Appellate Tribunal. By reason of the impugned judgment and 11 order dated
7th September, 2006 the said appeals have been allowed, directing :-
"amounts of arrears paid by the appellant in the year 2000-2001 on account
of employees cost, incurred in the respective years, be considered in the
tariff fixation for re-imbursement, as admissible by the Regulations in the
forthcoming tariff period in a manner that tariff shock, if any, to the
respondents is minimized."
Appellant is, thus, before us.
Mr. Sunil Gupta, learned senior counsel appearing on behalf of the
appellant would urge :- (i) The Central Regulatory Commission had no
jurisdiction in terms of 1998 Act or 2003 Act or the Regulations made
thereunder to entertain and carry out revision in the tariff order on the basis
of purported subsequent events or otherwise.
view of 2001 Regulations framed under Section 28 of 1998 Act even while
undertaking the original tariff determination proceedings the Commissioner had
no jurisdiction to consider 12 any data of 2000-2001 for narrative operation
and maintenance expenses beyond the statutorily stipulated 5 years, viz., 1995-
1996 to 1999-2000.
Keeping in view the fact that the Corporation were supposed to have filed all
materials in respect of its case for framing tarrif and failure, if any, on its
part to bring some materials showing the financial impact arising out of the
implementation of the 6th Pay Commission vis-`-vis the recommendation of the
High Powered Committee could not have been the basis for a review,
particularly, having regard to the fact that the claim was barred by
operational and financial norms fixed in terms of circular dated 21st December,
2000 are not relevant or enforceable in the wake of enforcement of the
statutory Regulations, 2001 framed under Section 28 of the Act which had come
into force on 26th March, 2001.
Assuming the Central Regulatory Commission's order dated 21st December, 2008
i.e. the Operational & Financial Norms, to be relevant and enforceable, as
thereby the said order permitted that `more than normal' Operational and
Maintenance expenses 13 should be sought as compensation on a case by case
basis by means of a separate petition and hearing of all concerned, without
reflecting it in the norms founded on the five years, 1995-1996 to 1999-2000,
the impugned judgment cannot be sustained. Such petition/plea could be filed
before the Tariff order could be issued. The permission would not mean that
separate petition could be filed after the passing of the Tariff Order.
any event the delay caused in filing the application should have been taken
into consideration by the Tribunal for the purpose of exercising its
Provisional expenses having already been considered by the Central Commission
while framing tariff, no actual expenses for the year 2000-2001 could have been
taken into consideration as thereby a duplication would be caused, which is not
contemplated in law.
The Tariff Order being a complete package and which having not been challenged
or appealed against, any application for review or revision was not
(ix) The Appellate
Tribunal had committed a serious error in so far as it took into consideration
the Rihand case where Interlocutory Application was entertained in a case of
Original Tariff Order itself and thus could not have been relied upon.
Tribunal's order providing for relief by way of reimbursement in the
forthcoming tariff period is contrary to the scheme of the Act.
Appellate Tribunal although has wide jurisdiction but it, without sufficient or
cogent reasons, should not have interfered with the order of the Central
Mr. Ramachandran, learned counsel appearing on behalf of
respondent No.2, on the other hand, urged :
Central Regulatory Commission had the requisite jurisdiction to review the
tariff, having regard to the powers contained in the Regulations.
Sufficient and cogent reasons for revision of the costs in the first instance,
having been assigned and all material facts having been 15 taken into
consideration by the Appelalte Tribunal, no exception can be taken to the
is incorrect to contend that the Appellate Authority had made inconsistent
observations in the impugned order.
in the case of Rihand the actual costs paid by respondent No.1 for meeting its
obligations was granted, there was no reason as to why the same principle
should not have been applied in the case of Korba and Dadri, particularly when
it was not denied or disputed that the Corporation had to incur a sum of Rs.55
crores towards arrears of salary.
delay might have been caused in filing the application but the same by itself
should not have been a ground for rejecting the application in toto as the
Tribunal had not granted any interest on the actual amount and merely granted
the carrying costs.
Power and/ or jurisdiction of the Central Commission to frame
tariff and/ or carry out revision thereof is not in dispute. It is in fact a
well-settled that the Central Commission has the exclusive jurisdiction to
frame not only tariff but also any amendment, alterations and additions in
The Central Commission in terms of the 1998 Act as also the
Regulations framed thereunder exercise diverse powers. It exercises legislative
power, power of enforcement of the Regulations as also the adjudicatory power.
Each of its functions although are separate and distinct but may be
overlapping. The power of the Central Commission is extensive.
The Central Commission in exercise of its jurisdiction under
Section 55 of the 1998 Act framed regulations known as the Central Electricity
Regulatory Commission (Conduct of Business) Regulations, 1999 (for short
"the 1999 Regulations").
of the 1999 Regulations deals with tariff regulations.
92, 93, 94 read as under:
The Commission on its own on being satisfied that there is need to review the
tariff of any utility shall initiate the process of revision in accordance with
the procedure as may be prescribed. The proceedings for suo moto review of the
tariff shall be the same as set out in Chapter II of these Regulations.
Review of orders of the Commission on tariff will be entertained strictly in
accordance with the 17 relevant regulations governing review as contained in
the relevant regulation herein.
utilities shall submit periodic returns as may be prescribed containing
operational and cost data to enable the Commission to monitor the
implementation of its order and reassess the bases on which Tariff was
VII of the 1999 Regulations deals with Miscellaneous Matters. The 1999
Regulations expressly confer a power of review on the Central Commission in
terms of Regulation 103 thereof. For the aforementioned purpose, the Central
Commission may not only exercise its jurisdiction suo motu but it may review a
decision even if an application is filed within a period of sixty days of
making of any decision, direction or order.
110 empowers the Central Commission to issue orders and practice directions in
regard to the implementation of the Regulations and procedure to be followed
and various matters which the Commission has been empowered by these
regulations to specify or direct. Regulations 111 and 112 read as under:
Nothing in these Regulations shall be deemed to limit or otherwise affect the
inherent 18 power of the Commission to make such orders as may be necessary for
ends of justice or to prevent the abuse of the process of the Commission.
Nothing in these Regulations shall bar the Commission from adopting in
conformity with the provisions of the Act,. a procedure, which is at variance
with any of the provisions of these Regulations, if the Commission, in view of
the special circumstances of a matter or class of matters and for reasons to be
recorded in writing, deems it necessary or expedient for dealing with such a
matter or class of matters."
The Central Commission also in exercise of its power conferred
upon it by Section 28 of the 1998 Act framed regulations known as the Central
Electricity Regulatory Commission (Terms & Conditions of Tariff)
Regulations, 2001 (for short "the 2001 Regulations").
Regulations came into force with effect from 1.04.2001. It was to remain in force
for a period of three years, unless reviewed or extended by the Central
Commission. Regulation 1.11 of the 2001 Regulations was framed for removal of
doubts. It was clarified that the norms prescribed therein were the ceiling
norms only and the same shall not preclude the generating company and other
beneficiaries from agreeing to improved norms.
Regulation 1.4 of the 2001 Regulations reads as under:
The generation tariff under these Regilations shall be determined station-wise
and transmission tariff shall be determined line-wise, sub-station-wise, as the
case may be, and aggregated to regional tariff.
that a utility may file a petition for fixation of tariff in respect of the
II of the 2001 Regulations provides for thermal power generating stations.
"Operation and Maintenance Expenses" has been defined as under:
`Operation and Maintenance Expenses' or `O&M' - In relation to a period
means the expenditure incurred in operation and maintenance of the generating
station including manpower, spares, consumables, insurance and overheads."
2.4 of the 2001 Regulations provides for the norms of operation. Regulation
2.4(viii) provides for the period of stabilization and explanations in the following
Stabilization period 20 Stabilization period commencing from the date of
commercial operation shall be reckoned as follows :
Thermal (coal/lignite) station - 180 days.
cycle gas and Naphtha based station - 90 days.
Combined cycle gas and Naphtha based station - 90 days Explanations:-
the purpose of calculating the tariff, the operating parameters, i.e. `Station
Heat Rate', `Secondary Fuel Oil Consumption' and `Auxiliary Consumption' shall
be determined on the basis of actuals or norms, whichever is lower."
2.7 of the 2001 Regulations provides for payment of capacity (fixed) charges;
Clause (c) whereof deals with return on equity in the following terms:
Return on Equity :
equity shall be computed on the paid up and subscribed capital and shall be 16
per cent of such capital.
Premium raised by the Generating Company while issuing share capital and
investment or internal resources created out of free reserve of the existing
utility, if any, for the funding of the project, shall also be reckoned as paid
up capital 21 for the purpose of computing the return on equity, provided such
premium amount and internal resources are actually utilized for meeting the
capital expenditure of the generating station and forms part of the approved
financial package as set out in the techno-economic clearance accorded by the
Authority or approved by an appropriate independent agency, as the case may
and Maintenance expenses including insurance" is dealt with in Clause (d)
of Regulation 2,7 of the 2001 Regulations; Clauses (i) and (iv) whereof reads
Operation and Maintenance expenses including insurance (i) Operation and
Maintenance expenses including insurance (hereinafter referred to as O&M
expenses) for the existing stations of NTPC and NLC which have been in
operation for 5 years or more in the base year of 1999-2000, shall be derived
on the basis of actual O & M expenses, excluding abnormal O&M expenses,
if any, for the years 1995-96 to 1999-2000 duly certified by the statutory
average of actual O&M expenses for the year 1995-96 to 1999-2000 considered
as O&M expenses for the base year 1997-98 shall be escalated twice at the
rate of 10 percent per annum to arrive at O&M expenses for the base year
1999-2000i as given below:
= AVO&M x (1.10)2 22 Where BO&Mi2000 = Base level O&M expenses for
1999-2000 for ith generating station.
O&M expenses for the year 1999- 2000 shall be further escalated at the rate
of 6 per cent per annum to arrive at permissible O&M expenses for the
XXX (iv) The escalation factor of 6 per cent per annum shall be used to revise
the base figure of O&M expenses. A deviation of the escalation factor
computed from the actual inflation data that lies within 20 per cent of the
above notified escalation factor of 6 per cent (which works out to be 1.2
percentage points on either side of 6 per cent) shall be absorbed by the
utilities/beneficiaries. In other words if the escalation factor computed from
the observed data lies in the range of 4.8 to 7.2 per cent, this variation
should be absorbed by the utilities. Any deviations beyond this limit shall be
adjusted on the basis of the actual escalation factor arrived at by applying a
weighted price index of CPI for industrial workers (CPI_IW) and an index of
select components of WPI (WPIOM) as per formula given in note below clause (v)
herein below, for which the utility shall approach the Commission with a
While exercising its power of review so far as alterations or
amendment of a tariff is concerned, the Central Commission stricto sensu 23
does not exercise a power akin to Section 114 of the Code of Civil Procedure or
Order XLVII, Rule 1 thereof. Its jurisdiction, in that sense, as submitted by
Mr. Gupta, for the aforementioned purposes would not be barred in terms of
Order II, Rule 2 of the Code of Civil Procedure or the principles analogous
Revision of a tariff must be distinguished from a review of a
tariff order. Whereas Regulation 92 of the 1999 Regulations provides for
revision of tariff, Regulations 110 to 117 also provide for extensive power to
be exercised by the Central Commission in regard to the proceedings before it.
Having regard to the nature of jurisdiction of the Central Commission in a case
of this nature, we are of the opinion that even principles of res judicata will
have no application.
There cannot be any doubt whatsoever that while a tribunal or a
court exercises adjudicatory power, although provisions of Section 11 of the
Code of Civil Procedure are not applicable but the general principles of res
judicata may be applicable as has been held by this Court in a consolidation 24
matter in Sri Bhavanarayanaswamivari Temple v. Vadapalli Venkata Bhavanarayana
Charyulu [(1970) 1 SCC 673, para 8], in a labour matter in Bharat Barrel and
Drum Manufacturing Co. Pvt. Ltd. v. Bharat Barrel Employees Union [(1987) 2 SCC
591, paras 9 to 11], in a rent control matter in Vijayabai and Others v.
Shriram Tukaram and Others [(1999) 1 SCC 693, para 14], in a writ petition in
Forward Construction Co. and Others v.
Mandal (Regd.), Andheri and Others [(1986) 1 SCC 100, para 20], and in an
arbitration proceeding in K.V. George v. Secretary to Government, Water and
Power Department, Trivandrum and Another (1989) 4 SCC 595, para 16], whereupon
strong reliance has been placed by Mr. Gupta, but such a question does not
such a point having never been raised before the Central Commission or the
appellate tribunal, we are of the opinion that even otherwise the said argument
should not be permitted to be raised before us for the first time.
The Central Commission, as indicated hereinbefore, has a plenary
power. Its inherent jurisdiction is saved. Having regard to the diverse nature
of jurisdiction, it may for one purpose entertain an application so as 25 to
correct its own mistake but in relation to another function its jurisdiction
may be limited. The provisions of the 1998 Act do not put any restriction on
the Central Commission in the matter of exercise of such a jurisdiction.
empowered to lay down its own procedure.
Regulations 92, 94, 103 and 110 of the 1999 Regulations confer a
wide power upon the Central Commission. They are to be exercised in different
circumstances. Whereas Regulations 92 and 94 are to be exercised in regard to
Chapter V, Regulations 103 and 110 apply in regard to cases where Regulations
92 and 94 would not have any application.
92 and 94, in our opinion, do not restrict the power of the Central Commission
to make additions or alterations in the tariff. Making of a tariff is a
continuous process. It can be amended or altered by the Central Commission, if
any occasion arises therefor. The said power can be exercised not only on an
application filed by the generating companies but by the Commission also on its
Assuming that Regulation 103 of the 1999 Regulations would be
applicable in a case of this nature, the same also confers a wide jurisdiction.
Commission, apart from entertaining an application for review on an 26
application filed by a party, may exercise its suo motu jurisdiction. While the
Central Commission exercises a suo motu jurisdiction, the period of limitation
prescribed in Regulation 103 shall not apply. There cannot, however, by any
doubt whatsoever that while exercising such jurisdiction, the Central
Commission must act within a reasonable time. Furthermore, the statute does not
provide for the manner in which a petition is to be filed before the Central
Commission or the manner in which the tariff order is to be passed or revision
or non-revision thereof.
Section 28 of the 1998 Act empowers the Central Commission to
determine the terms and conditions for fixation of tariff.
We are unable to accept the contention of Mr. Gupta that the
operational and financial norms dated 21.12.2000 were not relevant. The Central
Government itself recognized the need to adjust the Operation and Maintenance
Expenses based on normative expenses after the actual are available in its
order dated 21.12.2000 which was the principal order laying down norms therefor
holding inter alia as under:
The Commission is convinced that linking the base level O&M expenses to the
capital cost is not appropriate as there are unresolved issues of measurement
of the capital cost itself. Thus, the 27 efficacy of the base on the basis of
capital cost is questionable. The approach adopted in this order is based on
following tenets :
base level of O&M should not be computed as a given proportion of capital
cost but should be derived on the basis of actual O&M expenses in the last
five years after ironing out the spikes and abnormalities in the yearwise data.
abnormal expenses incurred by utilities in operating and maintaining their
plants should not get reflected in the norms but should be dealt with
separately on a case by case basis through separate petitions. This will
provide an opportunity to all the stakeholders to assess the merit of claims on
the basis of these expenses in a transparent way."
in para 4.3.12 of the aforesaid order, the Central Commission held as under:
regulated entities shall include in their Tariff petition details of yearwise
actual O&M cost data for the last five years duly certified by Statutory
aforementioned provisions must be read together and not in isolation.
The order dated 21.12.2000 passed by the Central Commission formed
the basis of the 2001 Regulations, which is clear from the following
observations made in the said order:
"1.1.2 As per Section 28 of the ERC Act the Commission is required to
determine by regulations the terms and conditions for fixation of tariff under
clauses (a), (b) and (c) of Section 13.
37 of the ERC Act stipulates that the Commission shall ensure transparency
while exercising its powers and discharging its functions.
XXX XXX XXX
1.1.3 The Commission assumed the jurisdiction under Section 13(a) and (b) as
referred to above w.e.f. 15th May, 1999. This was the date from which, as per
the provisions of Section 51 of the ERC Act, the Central Government notified
the deletion of Section 43A(2) of the Electricity (Supply) Act, 1948 (ES Act),
in respect of tariff of companies falling under Sections 13(as) and (b) of the
ERC Act. Section 43A(2) which deals with the terms and conditions for sale of
power by generating companies to State Electricity Boards was in force until
that date. Consequent to the deletion of Section 43A(2) new sets of terms and
conditions were required to be notified under the provisions of Section 28 of
the ERC Act, as they now fall under the tariff jurisdiction of the Commission.
XXX 1.4 Applicability and effective date :
terms and conditions as will be notified, shall, apply to all utilities covered
under Section 13(a) (b) and (c) of the ERC Act unless specifically stated
XXX XXX XXX
order has to be read along with our orders on petitions 85/2000 and 86/2000 on
operational norms for hydro power stations and for inter state transmission
respectively. This order along with the order dated 4th January, 2000 on
Availability Based Tariff read with our order on review petition No.13/2000 on
availability based tariff will constitute the frame work for notifications on
terms and conditions of tariff to be regulated under Section 13(a)(b) and (c)
of the ERC Act. Separate notifications shall be issued by the Commission
incorporating the findings in accordance with section 28 of the ERC Act,
It was contended by Mr. Ramachandran that actual expenses for
2001-2002 were not available and the normative expenses for the last five years
were only available and there was an unexpected abnormal increase.
was, thus, in our opinion, enough justification for filing the application for
review of the tariff.
While considering the question of jurisdiction vis-`-vis the
applicability of the operational and financial norms, it is not for us to
consider as to whether such separate petition should have been filed. We would,
however, consider the question as to whether such an application for 30
permission should have been filed within a reasonable time or not a little
The concept of regulatory jurisdiction provides for revisit of the
It is now
a well-settled principle of law that a subordinate legislation validly made
becomes a part of the Act and should be read as such.
There cannot be any doubt whatsoever that the word `regulation' in
some quarters is considered to be unruly horse.
of New South Wales v. Commonwealth [(1948) 76 CLR 1] Dixon, J. observed that
the word "control" is an unfortunate word of such wide and ambiguous
import that it has been taken to mean something weaker than
"restraint", something equivalent to "regulation".
But, indisputably, the regulatory provisions are required to be
applied having regard to the nature, textual context and situational context of
each statute and case concerned. The power to regulate may include the power to
grant or refuse to grant the licence or to require taking out a licence and may
also include the power to tax or exempt from taxation. It implies a power to
prescribe and enforce all such proper and reasonable rules and regulations as
may be deemed necessary to conduct the business in a proper and orderly 31
manner. It also includes the authority to prescribe the reasonable rules,
regulations or conditions subject to which the business may be permitted or may
be conducted. [See Deepak Theatre v. State of Punjab 1992 Supp (1) SCC 684 at
687]. Even otherwise the power of regulation conferred upon an authority with
the obligations and functions that go with it and are incidental to it are not
spent or exhausted with the grant of permission. [See State of U.P. v. Maharaja
Dharmander Prasad Singh (1989) 2 SCC 505] In that sense, the power of Central
Commission stricto sensu is not a judicial power.
Court in V.S. Rice and Oil Mills v. State of A.P. [(1964) 7 SCR 456] held:
it was faintly argued by Mr Setalvad that the power to regulate conferred on
the respondent by Section 3(1) cannot include the power to increase the tariff
rate; it would include the power to reduce the rates. This argument is entirely
misconceived. The word "regulate" is wide enough to confer power on
the respondent to regulate either by increasing the rate, or decreasing the
rate, the test being what is it that is necessary or expedient to be done to
maintain, increase, or secure supply of the essential articles in question and
to arrange for its equitable distribution and its availability at fair
Recently, this Court in T.N. State Electricity Board v. Central Electricity
Regulatory Commission and Others [(2007) 7 SCC 636], whereupon counsels for
both the parties relied upon, upon consideration of the provisions of Section
28 of the 1998 Act, opined as under:
bare glance of the above quoted section suggests that CERC would formulate
regulations for providing terms and conditions for fixation of tariff under
Clauses (a), (b) and (c) of Section 13.
for making the regulations is to be found in Section 55 of the 1998 Act.
Accordingly, CERC has formulated the Regulations which are called the Central
Electricity Regulatory Commission (Conduct of Business) Regulations,
The appellate authority has clearly erred in giving a literal interpretation to
the said provision, namely, Clause 2.7(d)(iv). Learned counsel urged that the
appellate authority was bound to discern the true intendment of the provision
and should have given it a meaningful interpretation, in that, the escalation
factor should have been calculated keeping 6% as the base and it should not
have been limited to the difference alone. Learned counsel Shri Sunil Gupta
further argued that the rule was manifestly neutral rule founded on purely
neutral considerations and while interpreting the same, the appellate court has
divested itself with the logic thereof. Learned counsel buttressed his
arguments by suggesting that the rule was meant for the convenience of all
concerned which included both administrative as well as financial 33
convenience. According to both the counsel the intention behind the rule was
that CERC should not be exposed to the tedious exercise of review and
readjustment of tariff already fixed so long as the deviation was within 20%
which was perceived to be the reasonable tolerance limit and that being the
only objective behind the peculiar language of the rule, by adopting the
literal interpretation, the utilities could not have been deprived of the full
benefits if the O&M factor went below 20% of the escalation factor of 6%.
counsel very fairly submitted that in case the O&M factor went beyond the
20% by way of an upswing then the generating unit like NTPC was always
justified to charge on the basis of the full difference between the actual
upswing point and the 6%. According to the learned counsel this was the only
intendment of the rule."
& Restaurant Assn. and Another v. Star India (P) Ltd. and Others [(2006) 13
SCC 753], in regard to the role of TRAI as a regulator, this Court said:
TRAI exercises a broad jurisdiction. Its jurisdiction is not only to fix tariff
but also laying down terms and conditions for providing services.
facie, it can fix norms and the mode and manner in which a consumer would get
role of a regulator may be varied. A regulation may provide for cost, supply of
service on non-discriminatory basis, the mode and manner of supply making
provisions for fair competition providing for a level playing field, protection
of 34 consumers' interest, prevention of monopoly. The services to be provided
for through the cable operators are also recognised. While making the
regulations, several factors are, thus required to be taken into account. The
interest of one of the players in the field would not be taken into
consideration throwing the interest of others to the wind."
Ramanathan v. State of Tamil Nadu [(1985) 2 SCC 116], this Court held:
The word "regulation" cannot have any rigid or inflexible meaning as
to exclude "prohibition".
"regulate" is difficult to define as having any precise meaning. It
is a word of broad import, having a broad meaning, and is very comprehensive in
scope. There is a diversity of opinion as to its meaning and its application to
a particular state of facts, some courts giving to the term a somewhat
restricted, and others giving to it a liberal, construction. The different
shades of meaning are brought out in Corpus Juris Secundum, Vol. 76 at p. 611:
`Regulate'is variously defined as meaning to adjust; to adjust, order, or
govern by rule, method, or established mode; to adjust or control by rule,
method, or established mode, or governing principles or laws; to govern; to
govern by rule; to govern by, or subject to, certain rules or restrictions; to
govern or direct according to rule;
control, govern, or direct by rule or regulations.
is also defined as meaning to direct; to direct by rule or restriction; to
direct or manage according to certain standards, laws, or rules; to 35 rule; to
conduct; to fix or establish; to restrain; to restrict."
Webster's Third New International Dictionary, Vol. II, p. 1913 and Shorter
Oxford Dictionary, Vol. II, 3rd Edn., p. 1784."
Central Power Distribution Co. and Others v. Central Electricity Regulatory
Commission [(2007) 8 SCC 197], this Court held:
As already noticed, the Central Commission has the power and function to evolve
commercial mechanism such as imposition of UI charges to regulate and
discipline. It is well settled that a power to regulate includes within it the
power to enforce..."
State Electricity Board, Lucknow v. City Board, Mussoorie and Others [(1985) 2
SCC 16], this Court held:
only provides that the Grid Tariff shall be in accordance with any regulations
made in this behalf. That means that if there were any regulations, the Grid
Tariff should be fixed in accordance with such regulations and nothing more. We
are of the view that the framing of regulations under Section 79 (h) of the Act
cannot be a condition precedent for fixing the Grid Tariff..."
2001 Regulations, however, show that it had a limited duration, viz., three
The Government of India issued guidelines for revision for the
employees of the Central Public Sector undertakings as far back on 25.09.1999
with effect from 1.04.1997. It has not been denied or disputed that the
respondent No. 1 implemented the revision and paid arrears of salaries with
effect from 1.04.1997 to executives, workmen and supervisors, respectively
during the years 2000-2001 by orders dated 6.07.2000, 2.03.2000 and 19.04.2001,
already aware of the impending revision of scale of pay and had implemented in
part, albeit, on a provisional basis. We fail to understand as to why it had
filed applications for tariff determination for its generating stations at
Korba and Dadri on 28.05.2001 and 8.06.2001, respectively. Not only that the
amended applications did not contain the details of the prescribed data, a
sheet with data of year 2000-2001, which was not a part of Form 16, was
inserted at a later stage. Amended applications were filed only on 30.01.2002
and 7.02.2002. The year 2000- 01 was not the relevant year for the
There cannot be any doubt whatsoever that for the purpose of
making tariff the actual costs required for payment to the employees being a
part of the operation and maintenance cost including a sum of Rs. 55 crores,
which were to be paid by way of extra amount, could fall for determination by
the Central Commission. But, such an application ordinarily could have been
filed within the period during which the tariff order was in force.
It is difficult to agree with the opinion of the appellate
tribunal that increase in the salary with retrospective effect could have been
a subject matter for determination of tariff in another period. In a fact
situation obtaining herein, we are of the opinion that the claim of the
respondent - corporation was not justified as the Central Commission should not
have been asked to revisit the tariff after five years and when everybody had
arranged its affairs.
Regulation 2.7 (d)(iv) of the 2001 Regulations clearly provides
that applications must be entertained only in the event any situation arose
within the purview thereof and not at any point of time. If the respondent No. 1
was aware that they were to incur an additional expenditure of Rs. 55/- 38
crores, they could have preferred an appeal before the Central Commission.
been informed at the bar that the appeals were preferred on other issues but
not on this one.
Framing of tariff is made in several stages. The generating
companies get enough opportunity not only at the stage of making of tariff but
may be at a later stage also to put forth its case including the amount it has
to spend on operation and maintenance expenses as also escalation at the rate
of 10% in each of the base year. It cannot, in our opinion, be permitted to
re-agitate the said question after passing of many stages.
the direction of the tribunal that the additional costs may be absorbed in the
new tariff, in our opinion, was not correct. Some persons who are consumers
during the tariff year in question may not continue to be the consumers of the
appellant. Some new consumers might have come in.
no reason as to why they should bear the brunt. Such quick-fix attitude, in our
opinion, is not contemplated as framing of forthcoming tariff was put subject
to fresh regulations and not the old regulations.
We are not oblivious of the fact that in the Rihand Case, the
Central Commission allowed the application of the respondent, but, therein a 39
provision was made therefor in the original tariff order itself. Respondent No.
1 had filed a separate I.A. claiming the impact of arrears paid by it in
2000-2001 towards the years 1997-1998 to 1999-2000.
We, therefore, on the aforementioned ground alone are of the
opinion that it was not a fit case where the appellate tribunal should have
interfered with the order of the Central Commission.
Although on the question of jurisdiction the Central Commission
might not have been correct, before parting with this case, we may, however,
also notice a submission of Mr. Gupta that the appellate tribunal should not
ordinarily interfere with an order of the Central Commission.
We do not
agree. The jurisdiction of the appellate tribunal is wide. It is also an expert
tribunal and, thus, it can interfere with the finding of the Central Commission
both on fact as also on law. Both the Central Commission as also the appellate
tribunal being expert, we do not see how the decisions of this Court in Union
of India and Another v. Cynamide India Ltd. and Another [(1987) 2 SCC 720] and
Shri Sitaram Sugar Company Limited and Another v. Union of India and Others
[(1990) 3 SCC 223] would be applicable.
Cellular Operators Association of India and Others v. Union of India and Others
[(2004) 8 SCC 524], this Court held:
was required to exercise its jurisdiction in terms of Section 14-A of the Act.
itself is an expert body and its jurisdiction is wide having regard to
sub-section (7) of Section 14-A thereof. Its jurisdiction extends to examining
the legality, propriety or correctness of a direction/order or decision of the
authority in terms of sub-section (2) of Section 14 as also the dispute made in
an application under sub-section (1) thereof. The approach of the learned
TDSAT, being on the premise that its jurisdiction is limited or akin to the
power of judicial review is, therefore, wholly unsustainable. The extent of
jurisdiction of a court or a tribunal depends upon the relevant statute. TDSAT
is a creature of a statute. Its jurisdiction is also conferred by a statute.
The purpose of creation of TDSAT has expressly been stated by Parliament in the
amending Act of 2000. TDSAT, thus, failed to take into consideration the
amplitude of its jurisdiction and thus misdirected itself in law."
For the reasons aforementioned, the appeals are allowed with
fee assessed at Rs. 50,000/- in each case.
...............................J. [S.B. Sinha]
................................J. [Lokeshwar Singh Panta]
................................J. [B. Sudershan Reddy]
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