# BHASKAR SHRACHI ALLOYS LTD. ETC.ETC v. DAMODAR VALLEY CORPORATION & ORS. ETC

- **Citation:** [2018] 10 S.C.R. 773
- **Court:** Supreme Court of India
- **Decided:** 2018-07-23
- **Case number:** Civil Appeal Nos. 971-973 of 2008
- **Bench:** Ranjan Gogoi, R. Banumathi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bhaskar-shrachi-alloys-ltd-etc-etc-v-damodar-valley-corporation-ors-etc-32249
- **Pages:** 37

## Headnote

Electricity - Supply/distribution of electricity generated by
Damodar Valley Corporation - Determination of tariff for -
Interplay between the provisions of 1948 Act and the 2003 Act -
Corporation notified its own tariff order in 2000 - 2003 Act came
into force - Despite coming into force of the 2003 Act, the
Corporation did not approach the Central Electricity Regulatory
Commission (CERC) for determination of the tariff chargeable by it
- CERC issued tariff order - Challenged by Corporation before
Appellate Tribunal - Tribunal inter alia held that provisions of the
1948 Act which are not inconsistent with the 2003 Act will continue
to hold the field so far as the determination of tariff is concerned -
Propriety of - Held: Part IV of the 1948 Act not being inconsistent
with the provisions of the 2003 Act can be taken into account for
determination of tariff - Such provisions of the 1948 Act will also
have an overriding effect over the inconsistent provisions of the
2004 Tariff Regulations - View taken by the Tribunal affirmed -
Central Electricity Regulatory Commission (Terms and Conditions
of Tariff) Regulations, 2004 - Damodar Valley Corporation Act,
1948 - Electricity Act, 2003 - ss.61, 62 and 125.
Electricity Act, 2003 - Fourth proviso to s.14 - Purport and
effect of - Plea of appellants that the application of a proviso must
always be confined and understood within the parameters of the
provisions of the main section of which it is a part - Held: Fourth
proviso to s.14 is clearly a substantive provision to lay down
something more than what a proviso generally deals with - It need
not be understood to be confined only to the question of licensing
which is dealt with by the main part of s.14 - Damodar Valley
Corporation Act, 1948 - ss.18 and 19.
Electricity - CERC issued tariff order determining the tariff
for generation and transmission for the period from 1st April, 2006
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[2018] 10 S.C.R. 773
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to 31st March, 2009 by allowing a two-year transition period to the
Damodar Valley Corporation i.e. from 1st April, 2004 to 31st March,
2006 - Upheld by the Appellate Tribunal - Propriety of - Held:
Corporation in addition to generation, transmission and distribution
of electricity is statutorily required to undertake certain social
security/beneficial measures like flood control, control of soil erosion,
afforestation, navigation, promotion of public health etc. - Grant
of transitory period can not be faulted with - Said part of the order
of the Tribunal not interfered with.
Electricity Act, 2003 -s.79 - Held: Having regard to the
provisions of s.79 it is the Central Electricity Regulatory Commission
(CERC) which would be the "Appropriate Commission" for
determination of tariff inasmuch as the Damodar Valley Corporation
is a Corporation owned and controlled by the Central Government
- Said conclusion recorded by the Appellate Tribunal not interfered
with.
Damodar Valley Corporation Act, 1948 - Incorporation of
Damodar Valley Corporation under - Objects and reasons for -
Discussed.
Central Electricity Regulatory Commission (Terms and
Conditions of Tariff) Regulations, 2004 - If have overriding effect
over the parallel provisions in the 1948 Act - Plea of appellant that
2004 Regulations must override the provisions of the 1948 Act as
the said regulations are statutory in character - Held: Not accepted -
2004 Regulations though statutory in character are a species of
subordinate delegated legislation - Damodar Valley Corporation
Act, 1948.
Interpretation of Statutes - External aids - Reports submitted
by Parliamentary Standing Committee - Discussed.
Electricity - 'Depreciation rate' and 'sinking fund' - Heads
of tariff fixation - Determination of u/s.40 of the 1948 Act -
Propriety of - Discussed - Damodar Valley Corporation Act, 1948 -
s.40 - Central Electricity Regulatory Commission (Terms and
Conditions of Tariff) Regulations, 2004 - Regulation 20.
Electricity - Tariff

## Text

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BHASKAR SHRACHI ALLOYS LTD. ETC.ETC.
v.
DAMODAR VALLEY CORPORATION & ORS. ETC.
(Civil Appeal Nos. 971-973 of 2008)
JULY 23, 2018
[RANJAN GOGOI AND R. BANUMATHI, JJ.]
Electricity - Supply/distribution of electricity generated by
Damodar Valley Corporation - Determination of tariff for -
Interplay between the provisions of 1948 Act and the 2003 Act -
Corporation notified its own tariff order in 2000 - 2003 Act came
into force - Despite coming into force of the 2003 Act, the
Corporation did not approach the Central Electricity Regulatory
Commission (CERC) for determination of the tariff chargeable by it
- CERC issued tariff order - Challenged by Corporation before
Appellate Tribunal - Tribunal inter alia held that provisions of the
1948 Act which are not inconsistent with the 2003 Act will continue
to hold the field so far as the determination of tariff is concerned -
Propriety of - Held: Part IV of the 1948 Act not being inconsistent
with the provisions of the 2003 Act can be taken into account for
determination of tariff - Such provisions of the 1948 Act will also
have an overriding effect over the inconsistent provisions of the
2004 Tariff Regulations - View taken by the Tribunal affirmed -
Central Electricity Regulatory Commission (Terms and Conditions
of Tariff) Regulations, 2004 - Damodar Valley Corporation Act,
1948 - Electricity Act, 2003 - ss.61, 62 and 125.
Electricity Act, 2003 - Fourth proviso to s.14 - Purport and
effect of - Plea of appellants that the application of a proviso must
always be confined and understood within the parameters of the
provisions of the main section of which it is a part - Held: Fourth
proviso to s.14 is clearly a substantive provision to lay down
something more than what a proviso generally deals with - It need
not be understood to be confined only to the question of licensing
which is dealt with by the main part of s.14 - Damodar Valley
Corporation Act, 1948 - ss.18 and 19.
Electricity - CERC issued tariff order determining the tariff
for generation and transmission for the period from 1st April, 2006
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[2018] 10 S.C.R. 773
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to 31st March, 2009 by allowing a two-year transition period to the
Damodar Valley Corporation i.e. from 1st April, 2004 to 31st March,
2006 - Upheld by the Appellate Tribunal - Propriety of - Held:
Corporation in addition to generation, transmission and distribution
of electricity is statutorily required to undertake certain social
security/beneficial measures like flood control, control of soil erosion,
afforestation, navigation, promotion of public health etc. - Grant
of transitory period can not be faulted with - Said part of the order
of the Tribunal not interfered with.
Electricity Act, 2003 -s.79 - Held: Having regard to the
provisions of s.79 it is the Central Electricity Regulatory Commission
(CERC) which would be the "Appropriate Commission" for
determination of tariff inasmuch as the Damodar Valley Corporation
is a Corporation owned and controlled by the Central Government
- Said conclusion recorded by the Appellate Tribunal not interfered
with.
Damodar Valley Corporation Act, 1948 - Incorporation of
Damodar Valley Corporation under - Objects and reasons for -
Discussed.
Central Electricity Regulatory Commission (Terms and
Conditions of Tariff) Regulations, 2004 - If have overriding effect
over the parallel provisions in the 1948 Act - Plea of appellant that
2004 Regulations must override the provisions of the 1948 Act as
the said regulations are statutory in character - Held: Not accepted -
2004 Regulations though statutory in character are a species of
subordinate delegated legislation - Damodar Valley Corporation
Act, 1948.
Interpretation of Statutes - External aids - Reports submitted
by Parliamentary Standing Committee - Discussed.
Electricity - 'Depreciation rate' and 'sinking fund' - Heads
of tariff fixation - Determination of u/s.40 of the 1948 Act -
Propriety of - Discussed - Damodar Valley Corporation Act, 1948 -
s.40 - Central Electricity Regulatory Commission (Terms and
Conditions of Tariff) Regulations, 2004 - Regulation 20.
Electricity - Tariff - Recovery towards Pension and Gratuity
Fund - In reversal of the decision of the Central Electricity
Regulatory Commission permitting recovery from consumers to the
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extent of 60% and contribution of the balance 40% by the Damodar
Valley Corporation, Appellate Tribunal allowed entire fund to be
recovered by way of tariff from the consumers - Propriety of - Held:
Ex facie, there is no error in the reasoning adopted by the Tribunal
in coming to the aforesaid conclusion so as to justify interference -
Electricity Act, 2003 - s.125.
Electricity - Cost relating to "other activities" of the Damodar
Valley Corporation to be recovered through tariff - Allowed by
Appellate Tribunal - Propriety of - Plea of appellants that ss. 32
and 33 of the 1948 Act are in direct conflict with ss. 41 and 51 of
the 2003 Act and, therefore, recovery of cost incurred in "other
works" undertaken by the Corporation through power tariff is
wholly untenable - Held: "Other activities" of the Corporation are
not optional as contemplated u/ss.41/51 of the 2003 Act but are
mandatorily cast by the 1948 Act which, being in the nature of
socially beneficial measures, per se, do not entail earning of any
revenue so as to require maintenance of separate accounts -
Allowance of recovery of cost incurred in connection with "other
activities" of the Corporation from the common fund generated by
tariff chargeable from the consumers/customers of electricity as
contemplated by the provisions of the Act of 1948, therefore, do not
collide or is inconsistent with the provisions of the 2003 Act -
Findings of Tribunal not interfered with - Electricity Act, 2003 -
ss.41 and 51 - Damodar Valley Corporation Act, 1948 - ss.32
and 33.
Dismissing the appeals, the Court
HELD: 1.1 The transitory period has been granted having
due regard to the statutory functions/social responsibilities that
the Damodar Valley Corporation (DVC/Corporation) is mandated
to undertake in terms of the Damodar Valley Corporation Act,
1948. The tariff fixed is also lower than the tariff that has been
fixed by the Jharkhand and West Bengal Electricity Regulatory
Commission for the general/domestic classes of consumers. While
it is correct that the classes of consumers served by the
Corporation are HT-Industrial consumers like Steel, Coal,
Railways, etc. beside bulk supply to main beneficiaries of State
Electricity Boards of West Bengal and Jharkhand, the said fact,
itself, is another peculiar feature which distinguishes the
BHASKAR SHRACHI ALLOYS LTD. ETC. ETC. v. DAMODAR
VALLEY CORPORATION & ORS. ETC.
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Corporation from other licenses. If in a situation where the
Corporation in addition to generation, transmission and
distribution of electricity is statutorily required to undertake
certain social security/beneficial measures like flood control,
control of soil erosion, afforestation, navigation, promotion of
public health, etc. the grant of transitory period cannot be faulted
with. Therefore, the said part of the order of the Appellate
Tribunal is declined to be interfered with. The Appellate Tribunal
also took the view that having regard to the provisions of Section
79 of the Electricity Act, 2003 it is the CERC which would be the
"Appropriate Commission" for determination of tariff inasmuch
as the Damodar Valley Corporation is a Corporation owned and
controlled by the Central Government. The said conclusion
recorded by the Appellate Tribunal is neither unreasonable nor
irrelevant so as to warrant interference, particularly, in exercise
of the limited jurisdiction under Section 125 of the 2003 Act.
[Paras 27, 28] [792-G-H; 793-A-D]
1.2 The Damodar Valley Corporation had been incorporated
under the provisions of the Damodar Valley Corporation Act,
1948. Sometime in the year 1943, the Damodar River Valley had
been affected by severe floods leading to wide-scale destruction
of life and property. The Provincial Government of Bengal had
constituted an Enquiry Committee to suggest ways and means to
avoid such catastrophes in the future. The Enquiry Committee
had, inter alia, recommended that a statutory corporation, on the
lines of the Tennessee Valley Authority of the USA, be
incorporated to command and control the Damodar River. The
then British Government accepted this proposal of the Committee
and had called a senior Engineer working for the Tennessee Valley
Authority to make recommendations and suggestions in this
regard. [Para 30] [793-F-H]
1.3 The Central Electricity Regulatory Commission (Terms
and Conditions of Tariff) Regulations, 2004 though statutory in
character are a species of subordinate delegated legislation.
Further, it may be wholly unnecessary to detract from the
fundamental principles of law laid down in The Presidential
Reference case which would be an inevitable consequence, if the
contentions advanced on behalf of the appellants to the effect
that the Tariff Regulations must override the provisions of the
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Act of 1948 as the said regulations are statutory in character is
to be accepted. This is also what has been subsequently
emphasised by Supreme Court in Bharathidasan University & Anr.
and Samsthanan Chethu Thozhilali Union cases. No error,
therefore, can also be found in the implicit reliance placed on the
ratio of the above decisions by the Appellate Tribunal. [Paras
35, 37] [795-F-G; 798-D-E]
The Presidential Reference, Delhi Laws Act, 1912 AIR
1951 SC 332 : [1951] SCR 747 - followed.
Bharathidasan University & Anr. v. AICTE & Ors.
(2001) 8 SCC 676 : [2001] 3 Suppl. SCR 253;
Samsthanan Chethu Thozhilali Union v. State of Kerala
& Ors. (2006) 4 SCC 327 : [2006] 3 SCR 420 -
referred to.
1.4 The fourth proviso to Section 14 of Electricity Act, 2003
uses the expression "....and the provisions of the Damodar Valley
Corporation Act, 1948 in so far as they are not inconsistent with
the provisions of the Act, shall continue to apply to that
Corporation...". The fourth proviso to Section 14 is clearly a
substantive provision to lay down something more than what a
proviso generally deals with. If the intention of the proviso was
to exclude DVC only from the main part of Section 14 dealing
with the requirement of obtaining licence for transmission/
distribution/trade in electricity, the purpose is fully achieved by
the first part recognising DVC as a 'deemed licensee' and not
requiring to apply for and obtain licence. The Legislature could
have simply stopped there. There was no necessity to incorporate
the second part. The second part of the fourth proviso is to bring
in the continued application of some of the provisions of the
Damodar Valley Corporation Act, 1948 which are not inconsistent
with the provisions of the Electricity Act, 2003. The third proviso
to Section 14 which provides "that in case an appropriate
Government transmits electricity or distributes electricity or
undertakes trading in electricity whether before or after the
commencement of the Act, such Government shall be deemed to
be a licensee under the Act but shall not be required to obtain
licence under the Act". In so far as DVC is concerned, if the
fourth proviso is to be confined only to licensing as in the case of
BHASKAR SHRACHI ALLOYS LTD. ETC. ETC. v. DAMODAR
VALLEY CORPORATION & ORS. ETC.
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third proviso, the fourth proviso also would have stopped with
the first part of the proviso. There would have been no necessity
to incorporate the second part of the proviso. The legislature
does not incorporate any words which are irrelevant or redundant
and every expression used in a statutory provision has some
purpose. A careful comparative reading of the third and the fourth
provisos to Section 14 clearly indicates the intention of the
legislature that the second part of the fourth proviso is to bring
in the continued application of some of the provisions of the Act
of 1948 which are not inconsistent with the provisions of the
Electricity Act, 2003. There are no licensing provisions in the
Damodar Valley Corporation Act, 1948 to be saved. The obvious
reference in the second part of proviso is to provide for the
continued application of the provisions of the 1948 Act insofar as
they are not inconsistent with the provisions of the Electricity
Act, 2003. [Paras 41, 42] [802-A-H]
1.5 The appellants made reference to Sections 18 and 19 of
the Damodar Valley Corporation Act, 1948 as being the provisions
relating to licensing which could be said to be considered as saved
by virtue of second part of the fourth proviso to Section 14 of the
Act of 2003. A perusal of Sections 18 and 19 of the 1948 Act show
that they deal with the supply and generation of electrical energy
and distribution of electricity within the Damodar Valley area.
The provisions of the Electricity Act, 2003 which authorise the
Regulatory Commissions to grant licence to persons (other than
DVC) fully govern the field and there is no question of continued
application of the 1948 Act in that respect. Sections 18 and 19 of
the 1948 Act do not deal with licence to DVC. These provisions
only deal with activities of other entities to distribute electricity
within the Damodar Valley area. Further, the provisions of
Electricity Act, 2003 authorizes the Regulatory Commissions to
grant licence to persons other than DVC. Therefore, there can
be no question of continued application of the 1948 Act over those
provisions. The fourth proviso to Section 14, Electricity Act, 2003
which uses the expression "....and the provisions of the Damodar
Valley Corporation Act, 1948 in so far as they are not inconsistent
with the provisions of the Act, shall continue to apply to that
Corporation..." is a positive provision enabling continued
application of certain provisions of the 1948 Act which are not
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inconsistent with the provisions of the Electricity Act, 2003. The
intention behind both the provisions needs to be appreciated and
given effect to. [Paras 43, 44] [803-A-E]
1.6 The Parliamentary Standing Committee had
recommended that the Corporation should be exempted from
the operation of the provisions of the proposed Electricity Act,
2003 in view of the special status and responsibilities of the
Corporation as envisaged under the Parliamentary enactment
constituting it (i.e the Act of 1948). However, it appears that
Parliament was not inclined to provide a blanket/total exemption
in favour of the Corporation and the 2003 Act did not include the
Corporation as one of the entities in Section 173 of the 2003 Act
which provides exemption in so far as the provisions of the
Consumer Protection Act, 1986, the Atomic Energy Act, 1962
and the Railways Act, 1989 clearly excluding the provisions of
the 1948 Act therefrom. Instead, the fourth proviso to Section
14 of the 2003 Act was specifically incorporated. Having regard
to the legislative history behind the enactment of the provision
of Section 173 and the provisions of Section 14 including the fourth
proviso thereto, it may be more in consonance with the
Parliamentary intention to hold that the fourth proviso to Section
14 need not be understood to be confined only to the question of
licensing which is dealt with by the main part of the Section 14.
Rather, the Parliament had intended to provide partial exemption
to the Corporation by mandating that such provisions of the 1948
Act which are not inconsistent with the 2003 Act will continue to
hold the field. Viewed thus, the fourth proviso to Section 14 of
the Electricity Act 2003 has to be understood to be a legislative
exercise in the nature of a substantial provision of law. Part IV of
the Act of 1948 not being inconsistent with the provisions of the
2003 Act can, therefore, be taken into account for determination
of tariff. Such provisions of the 1948 Act will also have an
overriding effect over the inconsistent provisions of the Central
Electricity Regulatory Commission (Terms and Conditions of
Tariff) Regulations, 2004. Said view, as above, will also effectuate
the provisions of the 1948 Act in so far as the activities of the
Corporation, other than generation and transmission of electricity,
is concerned. Therefore, the above view taken by the Appellate
Tribunal is affirmed. [Paras 47, 48] [804-H; 805-A-H]
BHASKAR SHRACHI ALLOYS LTD. ETC. ETC. v. DAMODAR
VALLEY CORPORATION & ORS. ETC.
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1.7 So far as the 'depreciation rate' and 'sinking fund' is
concerned it is the provisions of Section 40 of the Damodar Valley
Corporation Act, 1948 which have been held to be determinative.
Having clarified the manner in which the fourth proviso to Section
14 of the Electricity Act, 2003 has to be understood, one does
not find the reasoning adopted by the Appellate Tribunal on the
issues relating to 'depreciation' and 'sinking fund' to be
fundamentally flawed in any manner so as to give rise to a
substantial question of law requiring intervention/interference
under Section 125 of the 2003 Act. Insofar as the debt-equity
ratio is concerned, it is found that except for the projects which
have been completed prior to 1992 in which case the ratio has
been worked out at par with other public-sector organisation at
50:50, the ratio of 70:30 has been adopted following the
prescription under Regulation 20 of the Central Electricity
Regulatory Commission (Terms and Conditions of Tariff)
Regulations, 2004 in the absence of any specific rate under the
Act of 1948. [Paras 50, 51] [806-E-H]
1.8 So far as the pension and gratuity fund is concerned,
the only issue arising is whether the fund worked out on Actuary
basis at Rs.1534.49 crores should be apportioned between the
Corporation and the consumers as held by the CERC in the ratio
of 40:60 or the entire fund should be allowed to be recovered by
way of tariff from the consumers as held by the Appellate Tribunal.
A careful consideration of the reasoning adopted by the Appellate
Tribunal would not disclose any such error so as to warrant
interference of this Court. No error or fallacy, ex facie, is disclosed
in the reasoning adopted so as to justify interference under
Section 125 of the Electricity Act, 2003. [Paras 52, 53] [807-A-B,
E-F]
1.9 Sections 41 and 51 of the Electricity Act, 2003 inter alia,
require maintenance of separate accounts of the other business
undertaken by transmission/distribution licensees so as to ensure
that the returns from the transmission/distribution business of
electricity do not subsidize any other such business. Not only
Sections 41 and 51 of the 2003 Act contemplate prior approval of
the Appropriate Commission before a licensee can engage in any
other business other than that of a licensee under the 2003 Act,
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what is contemplated by the aforesaid provisions of the 2003 Act
is some return or earning of revenue from such business. In the
instant case, the "other activities" of the Corporation are not
optional as contemplated under Sections 41/51 of the 2003 Act
but are mandatorily cast by the statute i.e. Act of 1948 which,
being in the nature of socially beneficial measures, per se, do not
entail earning of any revenue so as to require maintenance of
separate accounts. The allowance of recovery of cost incurred in
connection with "other activities" of the Corporation from the
common fund generated by tariff chargeable from the consumers/
customers of electricity as contemplated by the provisions of the
Damodar Valley Corporation Act of 1948, therefore, do not collide
or is, in any manner, inconsistent with the provisions of the 2003
Act. Therefore, there is no occasion to interfere with the findings
recorded by the Appellate Tribunal on the above score. [Para
55] [808-D-H]
Shah Bhojraj Kuvarji Oil Mills & Ginning Factory v.
Subhash Chandra Yograj Sinha [1962] 2 SCR 159 -
followed.
S. Sundaram Pillai & Others v. V.R. Pattabhiraman &
Others (1985) 1 SCC 591 : [1985] 2 SCR 643;
Kalpana Mehta & Ors. v. Union of India & Ors. 2018
(7) SCALE 106 - relied on.
Dwaraka Prasad v. Dwarka Das Saraf (1976) 1 SCC
128 : [1976] 1 SCR 277; Union of India & Ors. v.
Dileep Kumar Singh (2015) 4 SCC 421 : [2015] 2 SCR
882; PTC India Ltd. v. Central Electricity Regulatory
Commission (2010) 4 SCC 603 : [2010] 3 SCR 609 ;
State of Rajasthan v. Leela Jain [1965] 1 SCR 276 ;
Motiram Ghelabhai v. Jagan Nagar (1985) 2 SCC
279 : [1985] 2 SCR 1051 - referred to.
Case Law Reference
[1976] 1 SCR 277
referred to
Para 12
[2015] 2 SCR 882
referred to
Para 12
[2001] 3 Suppl. SCR 253
referred to
Para 13
[2006] 3 SCR 420
referred to
Para 13
BHASKAR SHRACHI ALLOYS LTD. ETC. ETC. v. DAMODAR
VALLEY CORPORATION & ORS. ETC.
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[2010] 3 SCR 609
referred to
Para 14
[1965] 1 SCR 276
referred to
Para 22
[1985] 2 SCR 643
relied on
Para 22
[1962] 2 SCR 159
followed
Para 22
[1985] 2 SCR 1051
referred to
Para 22
[1951] SCR 747
followed
Para 36
2018 (7) SCALE 106
relied on
Para 45
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 971-973
of 2008
From the Judgment and Order dated 23.11.2007 of the Appellate
Tribunal for Electricity, New Delhi in Appeal Nos. 271, 272 and 273 of
2006
WITH
C.A. Nos. 1914, 4504-4508 and 4289 of 2008.
Sandeep Sethi, ASG, Jaideep Gupta, Sr. Adv., Nikhil Nayyar, N. Sai
Vinod, Dhananjay Baijal, Ms. Smriti Shah, Divyanshu Rai, Rajiv Shankar
Dvivedi, S. K. Sarkar, Ms. Arti Dvivedi, Praveen Kumar Singh,
Md. Ziauddin Ahmad, Mohan Prasad Gupta, Ms. Liz Mathew, Sachin
Sharma, Arvind Kumar Sharma, Shibashish Misra, M. G. Ramachandran,
K. V. Mohan, Ms. Anushree Bardhan, Ms.Poorva Saigal, Shubham Arya,
Amit Kapur, Rajesh Gupta, Sidharth Sharma, Jishnu Chowdhury,
Pukhrambam Ramesh Kumar, Ms. Priyanka Tibrewal, Akshat Jain,
Ms. Radika Seth, Abhinav Lilothia, Devashish Bharuka, Rajiv Yadav.
Mohaq Siddiqi, Anil Kumar Jha, Hiren Dasan, Harish Dasan, Chand
Qureshi, Mrs. Sarla Chandra, Anupam Lal Das, Saurabh Mishra, Sunil
Kumar Jain, Abhijit Sengupta, Ms. Sharmila Upadhyay, Partha Sil, Advs.
for the appearing parties.
The Judgment of the Court was delivered by
RANJAN GOGOI, J. 1. This group of appeals arise out of a
common judgment and order dated 23rd November, 2007 passed by the
learned Appellate Tribunal for Electricity at New Delhi (hereinafter
referred to as "learned Appellate Tribunal"). The challenge in the appeals
before the learned Appellate Tribunal was against the order of the Central
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Electricity Regulatory Commission (hereinafter referred to as "CERC")
dated 3rd October, 2006 determining the tariff chargeable by the Damodar
Valley Corporation (hereinafter referred to as "Corporation") from the
consumers of electricity generated and transmitted by the Corporation.
The tariff has been determined under the provisions of Section 61 and
62 of the Electricity Act, 2003 (hereinafter referred to as "2003 Act")
read with such other provisions of the Damodar Valley Corporation Act,
1948 (hereinafter referred to as "Act of 1948") which have been found
to be not inconsistent with the provisions of the 2003 Act.The appeals
being under Section 125 of the 2003 Act are required to be answered
only on such substantial questions of law that may arise for determination
by this Court.
2. First, the facts.
The Corporation has been established under the Act of 1948 for
the development of the Damodar Valley area falling within the States of
West Bengal and Jharkhand. As evident from the provisions of Section
12 of the Act of 1948, three (03) major areas of activity undertaken by
the Corporation under the Act of 1948 are: (i) power generation,
transmission and distribution; (ii) flood control; and (iii) irrigation and
some connected activities like soil conservation, afforestation, etc.
3. Under Section 20 of the Act of 1948, the Corporation was
empowered and authorised to determine the tariff chargeable by it from
its consumers. Part IV of the Act of 1948 under the heading "Finance,
Accounts and Audit" though, superficially, may appear to be dealing
with the indoor management of the Corporation contain provisions which
could have a relevant bearing to tariff fixation under Section 20 of the
Act of 1948. Some of the said provisions are to be found in Sections 32,
37, 38, 39 and 40 of the Act of 1948 which deals with facets of expenditure,
depreciation, allowances, payment of interest, etc. all of which would
have a reasonable bearing on working out the tariff that the Corporation
would be entitled to charge from its consumers after taking into account
the said items of expenditure or allowances/disallowances, as may be.
4. Acting under the provisions of Section 20 of the Act of 1948,
the Corporation had notified its own tariff order on 1st September, 2000.
The 2003 Act came into force with effect from 10th June, 2003. Despite
coming into force of the 2003 Act the Corporation had not approached
the CERC for determination of the tariff chargeable by it. Consequently,
BHASKAR SHRACHI ALLOYS LTD. ETC. ETC. v. DAMODAR
VALLEY CORPORATION & ORS. ETC. [RANJAN GOGOI, J.]
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the CERC initiated suo motu proceedings by order dated 29th March,
2005 and directed the Corporation to submit an application for
determination of tariff for the period from 1st April, 2004 to 31st March,
2009. In terms of the said order passed by the CERC, the Corporation
made an application dated 8th June, 2005 before the CERC (i.e. Petition
No.66 of 2005) for determination of tariff for the period in question. It
appears that in view of the "complexity" of the issues involved, the CERC
had requested one of its members to go into the necessary fact-finding
exercise and to submit a report of the detailed facts that would be relevant
for determination of tariff by the CERC. On the basis of the available
inputs received from the aforesaid single member Bench of the CERC,
the CERC issued a tariff order dated 3rd October 2006 determining the
tariff for generation and transmission for the period from 1st April, 2006
to 31st March, 2009 by allowing a two-year transition period to the
Corporation i.e. from 1st April, 2004 to 31st March, 2006.
5. At this stage, it may be appropriate to take note of the contents
of the tariff order dated 3rd October, 2006 passed by the CERC so as to
appreciate and understand the grievances entertained by the respective
appellants before this Court who were also the appellants before the
learned Appellate Tribunal challenging the order of the CERC dated 3rd
October, 2006.
6. The CERC by its order dated 3rd October, 2006 took the view
that the matter of determination of tariff chargeable by the Corporation
would be governed by the provisions of the 2003 Act and the Central
Electricity Regulatory Commission (Terms and Conditions of Tariff)
Regulations, 2004 (hereinafter referred to as "Tariff Regulations")
framed thereunder. Accordingly, the CERC proceeded to determine the
tariff after giving due weightage to the various relevant factors which
are required to be considered for such determination as spelt out by the
Regulations in force. A reading of the order of the CERC would go to
show that in determining the tariff due consideration of the following
issues was made by the CERC.
(i)
Choice between GFA and NFA Method;
(ii)
Capital Cost;
(iii) Extra Rupee Liability;
(iv) Additional Capitalisation;
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(v)
Debt-Equity Ratio;
(vi) Return on equity;
(vii) Interest on loan;
(viii) Depreciation including Advance against Depreciation;
(ix) O & M expenses;
(x)
Pension and gratuity fund;
(xi) Interest on working capital;
(xii) Operational Norms;
(xiii) Energy charges and the fuel component for the thermal
generating stations;
(xiv) Fuel Price Adjustment
7. Aggrieved by the aforesaid order dated 3rd October, 2006, the
Corporation, insofar the exclusion of the provisions of the Act of 1948
while determining the tariff and refusal to grant claims of certain expenses
thereunder; the consumers, namely, Bhaskar Shrachi Alloys Ltd., Impex
Ferro Tech Ltd., Shyam Ferro Alloys Ltd., Maithan Alloys Ltd., Anjaney
Ferro Alloys Ltd., Dayal Steel Ltd. and Castrol Technologies Ltd. insofar
as transitory period is concerned and the State of Jharkhand and West
Bengal Electricity Regulatory Commission insofar as the exclusion of
the power of the State Regulatory Commission to determine the intraState transmission of electricity is concerned had approached the learned
Appellate Tribunal by way of separate appeals.
8. The learned Appellate Tribunal by the impugned judgment and
order dated 23rd November, 2007 took the view that by virtue of fourth
proviso to Section 14 of the 2003 Act, while the Corporation continued
to be a deemed licensee, the provisions of the Act of 1948, which are not
inconsistent with the provisions of the 2003 Act, shall continue to apply
to the Corporation. In other words, insofar as the inter-play between
the provisions of the Act of 1948 and the 2003 Act is concerned, according
to the learned Appellate Tribunal, it is only the provisions of the earlier
Act inconsistent with the later Act that will cease to have effect and
such provisions of the Act of 1948 that are consistent will continue to
hold the field notwithstanding the enactment of the 2003 Act. Continuing
further, the learned Appellate Tribunal held that while Section 20 of the
BHASKAR SHRACHI ALLOYS LTD. ETC. ETC. v. DAMODAR
VALLEY CORPORATION & ORS. ETC. [RANJAN GOGOI, J.]
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Act of 1948 which empowers the Corporation to fix the tariff is
inconsistent with Section 62 of the 2003 Act which authorised the
"Appropriate Commission" to determine the tariff in accordance with
the provisions of the 2003 Act, the specific provisions contained in Sections
32, 37, 38, 39 and 40 of Part IV of the Act of 1948 will continue to be
relevant in the matter of determination of tariff in as much as there are
no pari materia/parallel provisions in the 2003 Act. It was further held
that though there are provisions in the Tariff Regulations framed by the
CERC covering the same field, the said Regulations, being in the nature
of subordinate legislation, cannot override the provisions of a law duly
enacted (Act of 1948), particularly, in the absence of any legislative
intention to the said effect in any of the provisions of the 2003 Act.
Accordingly, the learned Appellate Tribunal while rejecting the following
five claims and upholding the order of the CERC on the aforesaid counts
thought it proper to remand the matter, for a de novo consideration of
the remaining five issues by the CERC in the light of the findings recorded
by it. The tabular chart, extracted below, would indicate the five issues
that have been finalized by the learned Appellate Tribunal by upholding
the order of the CERC dated 3rd October, 2006 and the other five issues
which have been remanded for re-determination by the CERC.
Issues
finalized
by
the
learned
Appellate
Tribunal by upholding the
order of the CERC dated
3
rd October, 2006
Issues remanded for
re-determination
by
the CERC
(i)
High er return on equity;
(i)
Additional
capitalization
for
the
period 2004-2005 and
2005-2006;
(ii)
Depreciation rate;
(ii)
Pension and Gratuity
contribution;
(iii)
Resetting
of
operating
norms at variance from the
operating norms prescribed
in the 2004 regulations;
(iii)
Revenue to be allowed
to the DVC under the
DVC Act;
(iv)
Return on capital investment
on Head Office, Regional
Offices, administrative and
other technical centres, etc.;
and
(iv)
Operation
and
Maintenance expenses;
(v)
Generation
projects
presently not operating.
(v)
Debt Equity Ratio
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9. Three substantial questions of law would seem to arise for
determination by this Court in exercise of its jurisdiction under Section
125 of the 2003 Act. The same are enumerated below:
(a) Whether the view taken by the learned Appellate Tribunal with regard
to the fourth proviso to Section 14 of the 2003 Act and the applicability
of the provisions of Sections 32, 37, 38, 39 and 40 contained in Part IV
of the Act of 1948 in the matter of tariff determination under the 2003
Act is correct?
(b) Whether it is the provisions of the Tariff Regulations (2004
Regulations) which alone would hold the field in the matter of
determination of tariff to the exclusion of the provisions of Sections 32,
37, 38, 39 and 40 contained in Part IV of the Act of 1948?
(c) Whether the conclusions and findings of the learned Appellate Tribunal
on any one or more of the claims made by any of the stakeholders in the
matter of determination of tariff is vitiated by grave and apparent errors?
10. It will be useful to notice, at this stage, that in terms of the
impugned order dated 23rd November, 2007 passed by the learned
Appellate Tribunal the matter has been de novo considered and redetermined by the CERC by its order dated 6th August, 2009. This has
happened due to the absence of any interim restraint. The said order of
the CERC dated 6th August, 2009 has since been affirmed by the learned
Appellate Tribunal by a separate order dated 10th May, 2010 which is
the subject matter of challenge in Civil Appeal No.4881 of 2010 presently
pending before this Court. The said appeal (Civil Appeal No.4881 of
2010) has been ordered to be heard after disposal of the present appeals.
11. The arguments advanced by the respective appellants who are
also the respondents in the connected appeals may be noted at this stage.
12. On behalf of the CERC, which is the appellant in Civil Appeal
No.4289 of 2008, it has been contended that second part of the fourth
proviso to Section 14 of the 2003 Act cannot be understood to mean, as
has been held by the learned Appellate Tribunal, that the provisions of
the Act of 1948 which are not inconsistent with the provisions of the
2003 Act so far as the determination of tariff is concerned would continue
to hold the field. Two principal basis have been urged in support of the
above. The first is that a proviso cannot be understood to go beyond the
main part of the Section which, in the present case, deals only with
'licensing' and not 'tariff determination'. Reliance in this regard has
for
by
the
and
uity
wed
the
and
es;
BHASKAR SHRACHI ALLOYS LTD. ETC. ETC. v. DAMODAR
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been placed on the decisions of this Court in Dwaraka Prasad
vs.Dwarka Das Saraf1 and Union of India & Ors. vs. Dileep Kumar
Singh2.
The second limb of the argument is based on the provisions
contained in Section 174 of the 2003 Act which gives an overriding effect
to the provisions of the 2003 Act notwithstanding any inconsistency with
any other law for the time being in force.
13.Without prejudice to the above, it has been further contended
on behalf of the CERC that the learned Appellate Tribunal was clearly
in error in holding that in case of a conflict between the Act of 1948 and
the Tariff Regulations framed under the 2003 Act the provisions of the
Regulations will require to be ignored. The decisions of this Court in
Bharathidasan University & Anr. vs. AICTE & Ors.3 and Samsthanan
Chethu Thozhilali Union vs. State of Kerala & Ors.4, relied upon,
has been misconstrued by the learned Appellate Tribunal, it is urged on
behalf of CERC. It is further contended on behalf of the CERC that
Section 61 of the 2003 Act lays down the principles for tariff
determination which finds detailed manifestation in the 2004 Regulations.
The Regulations, it is contended, embody the principles on which tariff is
required to be determined and the provisions thereof cannot be overridden
by the provisions of any other statute and, that too, enacted at an anterior
point of time i.e. the Act of 1948. The mandate of Section 174 of the
2003 Act which is subsequent in point of time will be compromised in the
event such an interpretation is accepted.
14. So far as the specific heads of tariff fixation are concerned, it
has been urged on behalf of the CERC that Section 40 of the Act of
1948 has been wrongly relied upon by the learned Appellate Tribunal in
determining the question of the extent of depreciation allowable. It is
emphasised that Section 40 leaves the question of the percentage of
depreciation to be determined by the Central Government. It is contended
that the purpose and intent behind the enactment of 2003 Act is to distance
the Central Government from the determination of tariff under the 2003
Act which is to be fixed by the Regulatory Commissions on the principles
acknowledged in the Tariff Regulations. Regulation 21(1)(ii) of the Tariff
1(1976) 1 SCC 128 [para 18]
2(2015) 4 SCC 421 [para 20]
3(2001) 8 SCC 676 [para 14]
4(2006) 4 SCC 327 [Para 17]
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Regulations, therefore, according to the CERC, should have been the
basis for the determination of the extent of depreciation. In this regard,
reliance has been placed on the decision of this Court in PTC India
Ltd. vs. Central Electricity Regulatory Commission5 .
15. It is on the same basis that the findings of the learned Appellate
Tribunal so far as the 'Sinking Fund' is concerned, which has been held
to be recoverable through the tariff, has been assailed. It is urged that
the Tariff Regulations do not make any provision for any 'Sinking Fund'
and, therefore, the recovery of such fund through tariff is abhorrent to
the provisions of Section 61 of the 2003 Act read with the Tariff
Regulations.
16. Similarly, the finding of the learned Appellate Tribunal with
regard to the allowability of charging the expenditure on projects other
than electricity from the common fund as common expenditure has been
assailed as being contrary to the spirit of the 2003 Act inasmuch as it is
opposed to the principle of allowance of cross-subsidy which the 2003
Act seeks to do away with. Reference has been made to different
provisions of the 2003 Act to contend that recovery of expenditure
unrelated to electricity generation from the electricity tariff is alien and
contrary to the provisions of the 2003 Act.
17. The conclusions of the learned Appellate Tribunal with regard
to the debt-equity ratio insofar as the projects completed prior to 1992
(which has been fixed at 50:50) has also been assailed on the ground
that the sole basis thereof is the practice followed in the case of another
PSU i.e. NTPC ignoring the fact that the Regulation 20 of the Tariff
Regulations provide for a ratio of 70:30.
18. Likewise, the findings with regard to Pension and Gratuity
Fund, particularly, the recovery of the entire fund from the consumers
(in reversal of the decision of the CERC permitting recovery from
consumers to the extent of 60% and contribution by the Corporation of
the balance 40%) has been assailed on the ground that no discernible or
rational basis is disclosed for the view taken, particularly when the
Corporation has been permitted and, in fact, collected tariff at the rate
fixed by the Corporation itself under the Act of 1948 for the years 20042005 and 2005-2006 which constitute 40% of the tariff period.
5(2010) 4 SCC 603 [Para 17]
BHASKAR SHRACHI ALLOYS LTD. ETC. ETC. v. DAMODAR
VALLEY CORPORATION & ORS. ETC. [RANJAN GOGOI, J.]
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19. The allowances of capital investment in respect of Head Office,
Regional Offices, Administrative & other Technical Centres have also
been assailed as being contrary to the provisions of the Tariff Regulations.
20. The above contentions made on behalf of the CERC has been
reiterated on behalf of the consumers who are the appellants in Civil
Appeal Nos.