# SAi BHASKAR IRON LTD v. A.P. ELECTRICITY REGULATORY COMMISSION & ORS

- **Citation:** [2016] 6 S.C.R. 995
- **Court:** Supreme Court of India
- **Decided:** 2016-07-05
- **Case number:** Civil Appeal No. 5542of2016
- **Bench:** V..Gopala Gowda, Arun Mishra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sai-bhaskar-iron-ltd-v-a-p-electricity-regulatory-commission-ors-31581
- **Pages:** 58

## Headnote

Andhra Pradesh Electricity Regulatory Commission (Conduct
of Business) Regulations, 1999:
Regn. 45-B - Constitutional validity of - Whether Regn. 45-B
is ultra vires the provisions of s.26(9) of the Act of 1998 or ss.61
and 62(4) of the Act of 2003 - Held: Regn. 45-B deals with
determination of fuel surcharge ..:. The provisions of s. 61 contain
principles 011 which the Commission has to act- Since fuel surcharge
is not defined in the Act, as such the Commission has specified in its
wisdomformulafor its calculation in Regn. 45-B-Thefuel surcharge
fOrmula in Regn. 45-B is in consonance with the factors provided
under ss.61 and 62 of the Act of 2003 and also the provisions
contained in s.26 of the Act of 1998 - Andhra Pradesh Electricity
Reform Act, 1998 - s.26 - Electricity Act, 2003 - ss.55, 61, 62.
Regn. 45-B, condition (1) - FSA formula - Exclusion of
consumption by agricultural sector till completion of metering of
agricultural services whether bad in law and contrary to the mandate
of s.55(1) of the Act of 2003 - Held: The provision made in condition
No.I of Regn.45-B cannot be said to be repugnant to s.55(1) as it
deals with the licensees obligation to supply electricity after two
years only on the basis of metered supply - In the prevailing
conditions. in particular plight of agricultural sector and purpose
of enactment, it is open to the Commission to make such a wholesome
_,_~provision carved out in condition No. I - Thus, there is no violation
of the provisions contained in s.55(1) of the Act of 2003 - The
consequence of s. 55 of the Act of 2003 cannot be that if metering is
not achieved within two years the consumption in agricultural sector
cannot be provided within the purview of FSA formula ~ Andhra
Pradesh Electricity Regulatory Commission (Transitory Provisions
for Determination of Tariff) Regulations, 2004.
995
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SUPREME COURT REPORTS
[2016] 6 S.C.R.
Regn. 45-B - FSA has been determined under Regn.45-B as
amended in 2003 for more than a decade - Regulations of 2005 do
not deal with determination of fuel surcharge - Submission that
FSA can be realised in terms of Regulations of 2005' cannot be
accepted since Regulations of 2005 do not deal with FSA and there
is a saving clause as provided in Regn.24 - Andhra Pradesh
Electricity Regulatory Commission (Terms and Conditions for
Determination of Tariff for Wheeling and Retail Sale of Electricity),
Regulation, 2005.
Electricity Act, 2003:
s. 65 - Exclusion of farmers from meeting the fuel surcharge
adjustment charges - Whether amounts to violation of s.65 - Held:
s.65 enables the State Government to make a provision for subsidy
to any consumer or class of consumers - State Government has to
pay in advance in such manner the amount to compensate the person
affected by the grant of subsidy - Considering the pathetic condition
of farmers and inability to face the burden, the State Government,
gave them certain concessions in the form of subsidy -
However,
the Commission had excluded them from meeting the fuel surcharge
adjustment charges - Provision of s.65 relating to subsidy by the
State Government is not at all attracted - The matter involved in the
present case is not of subsidy but determination of fuel surcharge
formula - Thus, the submission based upon the violation of the
provision of s.65 is wholly unwarranted and is liable to be rejected
as subsidy has not been included in the determination of fuel
surcharge.
Lapse of Regulations of 1999 - Held: Regn. 2 of Regulations
of 2004 provides that Regulations of 1999 as amended from time to
time under the Act of 1998 shall apply as regulation under the
Electricity Act, 2003 and shall remain in force or till new regulations
are notified by the Commission under the Act of 2003 - Thus
submission that the Regulations of 1999 as amended in 2003 being
the tariff regulation under the Act of 1998, ceased to have effect on
10. 6.2004 after one year from the date of coming into force of the

## Text

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[2016] 6 S.C.R. 995
SAi BHASKAR IRON LTD.
v.
A.P. ELECTRICITY REGULATORY COMMISSION & ORS.
(Civil Appeal No. 5542of2016)
JULY 05, 2016.
[V..GOPALA GOWDA AND ARUN MISHRA, JJ.]
Andhra Pradesh Electricity Regulatory Commission (Conduct
of Business) Regulations, 1999:
Regn. 45-B - Constitutional validity of - Whether Regn. 45-B
is ultra vires the provisions of s.26(9) of the Act of 1998 or ss.61
and 62(4) of the Act of 2003 - Held: Regn. 45-B deals with
determination of fuel surcharge ..:. The provisions of s. 61 contain
principles 011 which the Commission has to act- Since fuel surcharge
is not defined in the Act, as such the Commission has specified in its
wisdomformulafor its calculation in Regn. 45-B-Thefuel surcharge
fOrmula in Regn. 45-B is in consonance with the factors provided
under ss.61 and 62 of the Act of 2003 and also the provisions
contained in s.26 of the Act of 1998 - Andhra Pradesh Electricity
Reform Act, 1998 - s.26 - Electricity Act, 2003 - ss.55, 61, 62.
Regn. 45-B, condition (1) - FSA formula - Exclusion of
consumption by agricultural sector till completion of metering of
agricultural services whether bad in law and contrary to the mandate
of s.55(1) of the Act of 2003 - Held: The provision made in condition
No.I of Regn.45-B cannot be said to be repugnant to s.55(1) as it
deals with the licensees obligation to supply electricity after two
years only on the basis of metered supply - In the prevailing
conditions. in particular plight of agricultural sector and purpose
of enactment, it is open to the Commission to make such a wholesome
_,_~provision carved out in condition No. I - Thus, there is no violation
of the provisions contained in s.55(1) of the Act of 2003 - The
consequence of s. 55 of the Act of 2003 cannot be that if metering is
not achieved within two years the consumption in agricultural sector
cannot be provided within the purview of FSA formula ~ Andhra
Pradesh Electricity Regulatory Commission (Transitory Provisions
for Determination of Tariff) Regulations, 2004.
995
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996
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SUPREME COURT REPORTS
[2016] 6 S.C.R.
Regn. 45-B - FSA has been determined under Regn.45-B as
amended in 2003 for more than a decade - Regulations of 2005 do
not deal with determination of fuel surcharge - Submission that
FSA can be realised in terms of Regulations of 2005' cannot be
accepted since Regulations of 2005 do not deal with FSA and there
is a saving clause as provided in Regn.24 - Andhra Pradesh
Electricity Regulatory Commission (Terms and Conditions for
Determination of Tariff for Wheeling and Retail Sale of Electricity),
Regulation, 2005.
Electricity Act, 2003:
s. 65 - Exclusion of farmers from meeting the fuel surcharge
adjustment charges - Whether amounts to violation of s.65 - Held:
s.65 enables the State Government to make a provision for subsidy
to any consumer or class of consumers - State Government has to
pay in advance in such manner the amount to compensate the person
affected by the grant of subsidy - Considering the pathetic condition
of farmers and inability to face the burden, the State Government,
gave them certain concessions in the form of subsidy -
However,
the Commission had excluded them from meeting the fuel surcharge
adjustment charges - Provision of s.65 relating to subsidy by the
State Government is not at all attracted - The matter involved in the
present case is not of subsidy but determination of fuel surcharge
formula - Thus, the submission based upon the violation of the
provision of s.65 is wholly unwarranted and is liable to be rejected
as subsidy has not been included in the determination of fuel
surcharge.
Lapse of Regulations of 1999 - Held: Regn. 2 of Regulations
of 2004 provides that Regulations of 1999 as amended from time to
time under the Act of 1998 shall apply as regulation under the
Electricity Act, 2003 and shall remain in force or till new regulations
are notified by the Commission under the Act of 2003 - Thus
submission that the Regulations of 1999 as amended in 2003 being
the tariff regulation under the Act of 1998, ceased to have effect on
10. 6.2004 after one year from the date of coming into force of the
said Act, by reason of proviso to s.61 of the Act of 2003 is untenable
- Andhra Pradesh Electricity Regulatory Commission (Conduct of
· Business) Regulations, 1999 - Andhra Pradesh Electricity
Regulatory Commission (Transitory Provisions for Determination
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY
997
REGULATORY COMMISSION & ORS.
of Tariffj Regulations, 2004 - Andhra Pradesh Electricity Reform
A
Act, 1998.
Fuel surcharge - Determination of, taking variation in cost
of rupee in account - Held: The fuel surcharge is determined as
per the formula which takes into account the change in cost of
rupeefor a period extending in the past beyond the relevant quarter.
B
Andhra Pradesh Electricity Reform Act, 1998: s.26(2) -
A/legation of discriminatory tariffs vis-a-vis agricultural section -
Held: Differential treatment is permissible within the ken of the
provisions of s.26 - As provided in s.26(8) in case consumers are
similarly placed same tariff has to be applied - Agriculturists and
C
consumers like appellants cannot be said to be similarly placed -
Paying capacity is also one of the factors which can be used for
protective discrimination under discriminatory tariffs as provided
in s.26(7)(a).
Tax/Taxation: Surcharge - Meaning of - 'Sur<;,harge' is o
basically over and above main levy and is in the form of additional
charge - The nature of surcharge has to be considered as per
intendment in which it has been used in the enactment.
Administrative law: Judicial review - Fixing the rate of fuel
surcharge - Scope of interference - Discussed.
E
Dismissing the appeals, the Court
HELD: 1. The nature of surcharge has to be considered
as per intendment in which it has been used in the enactment.
'Surcharge' is basically over and above main levy and is in the ·
form of additional charge. It may carry different contours as per
F
provisions of an enactment and different methodology for its
determination. [Para 17)(1030-C-D]
Commissioner of Income Tax, Kera/a v. K. Sriniva~an
1972 (4) SCC 526 : 1972 (2) SCR 309; .Sarojini Tea
Co. (P) Ltd. v. Collector of Dibrugarh, Assam and Am:
G
(1992) 2 SCC 156 : 1992 (1) SCR 371; State of Orissa
& Am: v. Jayashree Chemicals & Ors. 2004 (13) SCC
594 - relied on.
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SUPREME COURT REPORTS
[2016] 6 S.C.R.
In Re : Formula of FSA and its vires :
2.1. Whether Regulation 45-B is ultra vires to the
provisions of section 26(9) of the Act of 1998 or sections 61 and
62(4) of the Act of 2003. Regulation 45-B deals with the
determination of fuel surcharge. 'Fuel surcharge' has not been
defined in the Act of 1998 or the Act of 2003. The Commission
has the power under section 26(2) to prescribe the terms and
conditions for determination of the licensee's revenue and tariffs.
Section 26(9) enables the Commission to vary fuel surcharge
which is to be determined as per the formula prescribed by
regulations. Thus, the Commission has been given the legislative
power to prescribe the fuel surcharge formula by way of making
regulation and to include such factors as it considers appropriate
for determination of fuel surcharge. Under Section 61 of the Act
of 2003 the Commission has the power to specify the terms and
conditions for determination of tariff. Under the Act of 2003,
Commission has adjudicatory, legislative as well as advisory
powers. It has to consider under section 6l(b), commercial
principles in regard to the generation, transmission, distribution
and supply of electricity. Under section 6l(d), the Commission
has to frame the conditions with regard to safeguarding of
consumers' interest and at the same time, recovery of the cost of
electricity in a reasonable manner. Section 62(4) of the Act of
2003 provides that no tariff or part of any tariff may ordinarily be
amended more frequently more than once in any financial year,
except in respect of any changes expressly permitted under the
terms of any fuel surcharge formula as may be specified. Section
62 does not deal with the matter to be provided in determination
of fuel surcharge formula. The provisions of section 61 contain
principles on which the Commission has to act, it cannot be said
to be ultra vires. The fuel surcharge formula in Regulation 45-B
is in consonance with the factors provided under sections 61 and
62 of the Act of 2003 and also the provisions contained in section
26 of the Act of 1998. [Para 18)(1030-E-H; 1031-A-C]
PTC India Ltd. v. Central Electricity Regulatory
Commission, through Secretary (2010) 4 SCC 603 :
2010 (3) SCR 609; National Thermal Power
Corporation Ltd. v. Madhya Pradesh State Electricity
SAI BHASKAR IRON LTD. v. A.P. ELECTRICITY
999
REGULATORY COMMISSION & ORS.
Board & Ors. (2011) 15 SCC 580 : 2011 (11) SCR
A
651; Transmission Corporation of Andhra Pradesh Ltd
& Am: v. Sai Renewable Power Pvt. Ltd. & Ors. (2011)
11 sec 34 : 2010 (8) SCR 636 - relied on.
2.2. It is also true that administrative instructions are
binding in the absence of statutory guidelines and any breach
B ·
thereof would be arbitrary. However, there is no violation of the
provisions of section 61 of the Act of 2003 and FSA regulations
are in compliance of the statutory direetives given in section 61.
[Para 19][1031-G-H; 1032-A]
Dr. Amarjit Singh Ahluwalia v. The State of Punjab &
C
Ors. (1975) 3 SCC 503 : 1975 (3) SCR 82; B.S. Minhas
v. Indian Statistical Institute & Ors. (1983) 4 SCC 582
: 1984 (1) SCR 395 - relied on.
Rohtas Industries Ltd & Ors. v. Chair'!ian, Bihar State
Electricity Board & Ors.1984 (Supp) SCC 161; Bihar
D
State Electricity Board v. Pulak Enterprises & Ors.
(2009) 5 sec 641 - referred to.
2.3. The determination of fuel surcharge formula is not the
function of the court. It is not defined in the Act, as such the
Commission has specified in its wisdom formula for its calculation
E
in Regulation 45B. It cannot be said to be ultra vires to the said
provisions. There is no breach of the provisions of section 26 of
the Act of 1998 and principles enumerated in section 61 and
section 62 of the Act of 2003 or any other provisions of the Act of
2003. The Regulations advance the mandate of the provisions of
the Act. [Para 22)(1037-B-C]
F
Rohtas Industries Ltd & Ors. v. Chairman, Bihar State
Electricity Board & Ors. 1984 (Supp) SCC 161 - relied
on.
2.4. As the Commission has the power to specify the fuel
surcharge formula and considering nature of levy, could have
taken into consideration the difference in total fixed cost, changes
in adjustment as contemplated in the regulation inserted in the
year 2003, the Commission .has not at all transgressed its limits
while carving out the formula. There is no violation of statutory
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SUPREME COURT REPORTS
[2016] 6 S.C.R.
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provisions while enacting Regulation 45B in the year 2003. (Para
22](1037-D-E)
B
c
Scope of interference :
3.1 The scope of interference in judicial review in such
matters reserved for expert bodies is limited. The court cannot
substitute its opinion. Price fixation is not the function of the
court. (Para 23](1037-F-G)
Association of Industrial Electricity Users v. State of
A.P. & Ors. 2002 (3) sec 711 : 2002 (2) SCR 273 -
referred to.
3.2. No doubt section 26(9) and sections 61 and 62(4) of
the Act of 2003 contain an embargo on variation of tariff more
than once in a financial year. Negative words are prohibitory and
are ordinarily used as legislative devise to make a statute
imperative. However, there is a positive mandate as to FSA
D
variation which cannot be ignored and has to be given full effect.
While doing so there is no variation of tariff as contemplated under
the said provisions. Mechanism of determination of tariff is
.different. [Para 26)(1041-B-C)
M Pentiah & Ors. v. Muddala Veerama!lappa & Ors.
E
AIR 1961 1107 : 1961 SCR 295; Manna/al Khetan &
Ors. v. Kedar Nath Khetan & Ors. 1977 (2) SCC
F
424 : 1977 (2) SCR 190 - relied on.
In Re : Disrimination vis-a-vis Agriculture Sector :..
4. A challenge has been made to Regulation 45-B submitting
that it casts additional burden without authority of law inasmuch
as the letter "Q" in the formula is subject to condition 1 and
therefore excludes the consumption by agricultural sector and
does not permit distribution of additional charge among all
consumers for the actual energy sold to them. It makes all theG . consumers not only to pay for the energy consumed by them but
also for the electricity consumed in the agricultural sector which
is arbitrary and contrary to the scheme of the Act and in particular
sections 61 and 62. The submission cannot be accepted as
differential treatment is permissible within the ken of the
H
provisions of section 26. As provided in section 26(8) in case
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY
REGULATORY COMMISSION & ORS.
consumers are similarly placed same tariff has to be applied.
Agriculturists and consumers like appellants cannot be said to
be similarly placed. It is also provided in section 26(7) that the
tariff implemented may differentiate according to the consumer's
load factor or power factor, consumer's total consumption of
energy during any specified period from the time at which supply
is required or paying capacity of category of consumers and need
for gross subsidization. Thus paying capacity inter alift is one of
the factors which can be used for protective discrimination under
discriminatory tariffs as provided in section 26(7)(a). [Para
27)(1041-D-G]
'
.
Real Food Products Ltd. & Ors. v. A.P. State Electricity
Board & Ors. 1995 (3) SCC 295 : 1995 (2) SCR 396
- relied on.
Hindustan Zinc Ltd. etc. etc. v. Andhra Pradesh State
Electricity Board & Ors. (1991) 3 SCC 299 : 1991 (2)
SCR 643; Association of Industrial Electricity Users
v. State of A.P. & Ors. 2002 (3) SCC 711 : 2002 (2)
SCR 273 - referred to.
In Re : Variation in cost of Rupee:
1001
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5. The fuel surcharge is determined as per the formula
E
which takes into account the change in cost of rupee for a period
extending in the past beyond the relevant quarter. There is
nothing wrong in it as there is change in the cost of rupees which
can be allowed by the Commission for realization of fuel surcharge
as and when it is determined. It is a method of determining the
actual value to be paid in rupees and cannot be said to be illegal
F
or arbitrary at all. It is in consonance with business norms. [Para
32)(1047-E-F]
In Re : Vagueness of Formula :
6.
It was also submitted that letter 'A' in the formula is
vague and unrealistic so as to permit the Commission to impose
additional burden unrelated to escalation of fuel cost under the
guise of FSA. The submission is too tenuous to be accepted and
proceeds on assumption that only escalation in fuel .cost can be
levied even the financial year impact of demonstrated incidents
of merit order violations on account of controllable factors and
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SUPREME COURT REPORTS
[2016] 6 S.C.R.
A
any other event which had the financial impact can be given
appropriate treatment and can also form part of FSA. (Para
331(1047-G-H; 1048-A)
B
c
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F
In Re : Meterine: of consumption :
7. Coming to the submission that as metering is mandated
on completion of two years, as such agricultural aspect cannot be
included on lapse of said period. Section 55 of the Act of 2003
deals with the use of meters and it is provided that no licensee
shall supply electricity after expiry of two years from the appointed
date except through installation of a correct meter in accordance
with the regulations. The said Commission may also extend the
period up to two years for. a class or class of persons as may be
specified in the notification. The provision made in condition No.1
of Regulation 45-B cannot be said to be repugnant to section
55(1) as it deals with the licensee's obligation to supply electricity
after two years only on the basis of metered supply. It bas not
been achieved so far. However, electricity is being consumed
and the authorities are not able to do the complete metering of
agricultural services. In the prevailing conditions, in particular
plight of agricultural sector and purpose of enactment, it is open
to the Commission to make such a wholesome provision carved
out in condition No.1. Thus there is no violation of the provisions
. contained in section 55(1) of the Act of 2003. The consequence
of section 55 of the Act of 2003 cannot be that if metering is not
achieved within two years the consumption in agricultural sector
cannot be provided within the purview of FSA formula. Thus
condition 1 did not cease to have effect after 10.6.2005 as
submitted on behalf of the appellants. [Para 34)(1048-B-F)
· In Re : Subsidy :
8. Submission as to violation of section 65. Section 65 of
the Act of 2003 enables the State Government to make a provision
G
for subsidy to any consumer or class of consumers. The State
Government b~s to pay in advance in such manner the amount to
compensate the person affected by the grant of subsidy.
Considering the condition of farmers which is pathetic and they
are unable to face the burden, it is rightly pointed out on behalf of
the Commission that the State Government bad given them certain
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SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY
REGULATORY COMMISSION & ORS.
concessions in the form of subsidy. However the Commission
had excluded them from meeting the fuel surcharge adjustment
charges. Provision of section 65 relating to subsidy by the State
Government is not at all attracted. The matter involved in the
present cases is not of subsidy but determination of fuel surcharge
formula. Thus, the submission based upon the violation of the
provision of section 65 is wholly unwarranted and is liable to be
rejected as subsidy has not been included in the determination
of fuel surcharge. It cannot be invalidated on the ground of
violation of provisions contained in section 65 of the Act of 2003.
[Paras 35, 36)1048-G; 1049-D-F)
In Re : Lapse of Regulations of 1999 :
..
9. Next submission raised on behalf of the appellants is
that the Regulations of 1999 as amended in 2003 being the tariff
regulation under the Act of 1998, ceased to have effect on
10.6.2004 after one year from the date of coming into force of the
said Act, by reason of proviso to section 61 of the Act of 2003.
The submission raised is untenable for various reasons. First is
that regulations have been framed with effect from 10.6.2004.
The proviso to section 61 of the Act of 2003 makes it clear that
the terms and conditions for determination of tariff and the
enactment specified in the Schedule as they stood before the
appointed date, shall continue to apply for a period of one year or
until the terms and conditions for tariff are specified under section
61, whichever is earlier. Thus, the tariff regulations framed under
the Act of 1998 would remain in force for maximum period of one
year and the regulations had been framed with effect from
10.6.2004 and the Transitory Regulations have been enacted vide
Regulations of 2004 by the Commission. Regulation 2 of said
Regulations of 2004 clearly provides that Regulations of 1999 as
amended from time to time under the Act of 1998 shall apply as
regulation under the Electricity Act, 2003 and shall remain in·
force or till new regulations are notified by the Commission under
the Act of 2003. Even if earlier Regulations of 1999 came to an
end on 10.6.2004 and if it is further assumed without deciding
that the Commission had no authority to enact retrospectively, it
could have adopted the Regulations of 1999 as amended, framed
under the Act of 1998 shall continue, to apply for future.
1003
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[2016] 6 S.C.R.
Considering the period in question involved in the matter, it
cannot be said to be Regulations of 1999, as amended, are
inoperative as they have been adopted vide Regulation No.9/
2004. With respect to the fuel surcharge adjustment no provision
has been made in the regulations framed in the year 2005. On
facts also, the Regulation 45-B was implemented subsequently
and had been again amended in the year 2013. It has operated
for more than a decade for determination of FSA. [Para 37)(1049F-H; 1050-A-E]
__ _,
In Re : Procedural lapse in framing Regulations :
10. The submission raised that amended Regulations were
without previous publication as envisaged under section 181(3)
of the Act of 2003, as such they are void due to non-compliance
of the said provision. It is apparent that Regulation 9/2004 was
previously notified as mentioned in the notification itself. A draft
of regulations was published seeking suggestions and comments.
No suggestions for changes/modification were submitted. As such
the regulations are in compliance with the provision of section
181 read with section 61. Thus there is no violation of the
provision of section 181(3). The contention that there was no
previous publication is factually incorrect. [Para 38)(1050-E-G]
Effect of Regulations of 2005 :
11. Submission raised that the FSA can be realized in terms
of the Regulations of 2005 cannot be accepted for the simple
reason that the Regulations of 2005 do not deal with FSA and
there is a saving clause as provided in Regulation 24. Moreover,
F
the Act of 1998 had not been repealed and there was re-adoption
of the Regulations of 1999 in the year 2004. It is also factually
incorrect submission that FSA had been realized under the
Regulations of 2005 after framing of the said regulations. In fact
FSA had been determined as rightly contended on behalf of the
G
Commission under Regulation 45-B as amended in 2003 for more
than a decade. A challenge had been raised for the first time after
10 years. It is obvious that the parties clearly understood
Regulation 45-B is in vogue and in fact it legally prevailed and
rightly followed. It was also submitted that Regulation 6(4) of
Regulations of 2005 provides that ARR shall contain power
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SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY
REGULATORY COMMISSION & ORS.
purchase cost for each year of the controlled period. It is clear
from ARR as defined in Regulations of 2005 and FSA that they
do not run counter to each other but' are supplementary. The
Regulations of 2005 do not deal with determination of fuel
surcharge. Regulation 45-B cannot be said to be invalid for the
aforesaid reason. There is a saving clause contained in Regulation
24 of Regulations of 2005. Regulation 12.4 provides that the
distribution licensee shall be entitled to recover or refund as the
case may be the charges on account of fuel surcharge adjustment
as approved by the Commission from time to time suo motu or
based on the filing made by the institution company as the
Commission may deem fit. The provisions of the Act provided
..... that the formula has to be specified by the Commission for FSA
and this has been specified only in Regulation 45-B which has
been adopted in the year 2004 for continuance by the Commission.
The Commission had adopted the said regulations and the same
continues to be in operation. [Paras 39, 40, 41)[1050-H; 1051-AF]
Case Law Reference
1972 (2) SCR 309
relied on
Para 15
1992 (1) SCR 371
relied on
Para 15
2004 (13) sec 594
relied on
Para 16
2010 (3) SCR 609
relied on
Para 18
2011 (11) SCR 651
relied on
Para 18
2010 (8) SCR 636
relied on
Para 18
1975 (3) SCR 82
relied on
Para 19
1984 (1) SCR 395
relied on
Para 19
1984 (Supp) sec 161
relied on
Para22
(2009) 5 sec 641
referred to
Para 21
1961 SCR 295
relied on
Para 26
1977 (2) SCR 190
relied on
Para26
1995 (2) SCR 396
relied on
Para28
1991 (2) SCR 643
referred to
Para30
2002 (2) SCR 273
referred to
Para 31
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5542
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of2016
From the Judgment and Order dated 11.04.2014 of the High Court
of Judicature of Andhra Pradesh at Hyderabad in Writ Petition No. 11240
of2014.
WITH
C.A. No. 8249 of2015
CA Nos.5543-5544, 5545, 5546-5571, 5572-5575, 5576-5578,
5579-5583, 5584-5586, 5587, 5588, 5589-5598, 5599, 5600-5601, 5602,
5603-5611,5612,5613-5618,5619,5620,5622,5623-5625,5626,56305631,5632-5663,5666,5667,5668,5670,5671,5672,5673,5674,5675,
5676,5677,5678-5685,$686,5687,5688,5689,5690,5692-5703,5704,
5705, 5706, 5707-5709, 5710, 5711, 5712-5731, 5732-5745, 5746, 5747,
5748, 5749, 5750, 5751, 5752, 5753, 5754-5755, 5756, 5757-5768, 5169~
5776, 5777, 5778, 5779, 5780, 5781-5786, 5787-5789, 5790, 5791, 57925793, 5794, 5795, 5796-5798, 5799-5800, 5801-5804, 5806-5809, 58105811, 5812, 5813, 5814, 5815-5818, 5819-5822, 5823, 5824, 5825-5826,
5827,5828,5829,5830,5831-5832,5833,5834-5835,5836,5837,58385839,5840,5841,5842,5843,5844,5845,5846,5847,5848,5849,5850,
5851, 5852, 5853, 5854, 5855, 5856, 5857, 5858, 5859, 5860 and 5861 of
2016.
P. P. Rao, V. Giri, Dr. A. Francis Julian, Sr. Advs., Gopal
Choudhary, Ms. Liz Mathew, (For Mis. MCLM & Co.), C. S. N. Mohan
Rao, Abhijit Sengupta, Sudhir Naagar, Prashant Khatana, Y. Raja Gopala
Rao, Nagarjuna Babu, Hitendra Nath Rath, Challa Gunaranjan, Ms. Y.
Vismai Rao, Hitendra Nath Rath, Ananga Bhattacharyya, Mukund P.
Unny, B. Ramana Murthy, M. Srinivas R. Rao, Abid Ali B., Arun Devdas,
(For Mrs. Sudha Gupta), Rakesh Dahiya, Shantanu Jugtawat, B. Rama
Krishn Rao, Sumit Nain, D. Mahesh Babu, Suchitra Hrangkhwal, Amit
K. Nain, T. V. Bhaskar Reddy, M. P. Shorawala, M. Rambabu, N. Eswara
Rao, (For Mis. M. Rambabu & Co.), Senthil Jagadeesan, Venkateswara
Rao Anumolu, Goli Rama Krishna, Shashwat Goel, G Umapathy, Roh it
K. Singh, M. A. Venkata Subramanian, Ms. R. Makhala, S. Ram
Subramai;iian, Shishir Pinaki, Rajiv Kumar sinha, Sanjay Jain, Vikas
Mehta, Rajat Sehgal, Varun Singh, UpendraGupta, Danish Zubair Khan,
Ad vs. for the Appellant.
'
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY
1007
REGULATORY COMMISSION & ORS.
B. Adinarayana Rao, Sr. Adv., Sooyuj, Ms. Sangita Chauhan, Ms.
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Surabi, Rakesh K. Sharma, K. V. Mohan, K. V. Balakrishnan, R. K.
Raghavan, Raj iv Nanda, G S. Makker, B. Krishna Prasad, G N. Reddy,
S. Udaya Kumar Sagar, Prashant Kr. Tyagi, (For Mis. Venkat Palwai
Law Ass.), Advs. for the Respondents.
The Judgment of the Court was delivered by
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ARUN MISHRA, J. I. Delay condoned in filing SLPs.
2. Leave granted. ·
3. The question involved in the present case is with respect to
levy of fuel surcharge adjustment (in short 'FSA') which is collected
from the consumers in addition to fixed tariff for consumption of power.
The concept of FSA was brought in by the Andhra Pradesh Electricity
Reform Act, 1998 (hereinafter referred to as 'the Act of 1998'). Earlier
the Electricity Board used to collect fuel cost adjustment. Under section
3( I) of the Act of 1998, Andhra Pradesh Electricity Regulatory
Commission has been established bestowed with the power to grant
I icences and fix tariff for supply of power. Section 26(9) of the Act lays
down that no tariff or part of tariff required to be determined under subsection ( 6) of section 29 may be amended more frequently than once in
any financial year ordinarily except in respect of any changes expressly
permitted under the terms of any fuel surcharge formula prescribed by
the regulations;
4. The Government of India enacted the Electricity Act, 2003
(hereinafter referred to as "the Act of 2003") to consider the laws of
trading of power for the purpose of making it consumer-friendly and to
create better environment for development of power industry, at the
same time protecting the rights of the consumers. Section 62(3) of the
Act of2003 prohibits preference to any consumer of electricity but may
differentiate according to the consumer's load factor and other aspects
permissible under the aforesaid provision. Section 62(4) of the Act of
2003 is pari materia to section 26(9) of the Act of 1998. By virtue of
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the power conferred under sections 9(2) and 54(2) of the Act of 1998, , G
the A.P. Electricity Regulatory Commission (hereinafter referred to as
"the Commission") has framed the Andhra Pradesh Electricity
Regulatory Commission (Conduct of Business) Regulations, 1999
(hereinafter referred to as "the Regulations of 1999"). The Commission
has framed Regulation No.8 dated 28.8.2000 called Andhra Pradesh
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Electricity Regulatory Commission (Conduct of Business) First
Amendment Regulations, 2000. By virtue of the aforesaid First
Amendment Regulations, provisions contained in the chapter on tariff
were incorporated by way of Regulation 45-A specifying expected
revenue from charges and tariff proposals and under Regulation 45-B
fuel surcharge adjustment formula was prescribed. Regulation 45C was
also inserted providing for subsidies as the State Government may
consider appropriate. Regulation 45-B was further amended by way of
reforms called the Andhra Pradesh Electricity Regulatory Commission ·
(Conduct ofBusiness)Amendment Regulations, 1 of2003. They came
into force w.e.f. 1.4.2003. The amended Regulation 45-B provided a
formula for working out the FSA. Condition No. I' also mentioned that
FSA will be distributed among all categories of consumers that existed
in the quarter. However the consumption by the agricultural sector will
be excluded till the Commission is satisfied that metering of agricultural
consumption is complete, as may be notified from Tariff orders from
time to time. As per section 61 of the Act of2003, the Commission has
to be guided by the aforesaid provisions. As the Central Government
had not framed the national electricity policy or interim policy, as such
Regulation No.9 of2004 was notified by theA.P. Electricity Regulatory
Commission. The Commission made the transitory Regulations in exercise
of the power conferred under section 181 read with section 61 of the
Act of2003 called theA.P. Electricity Regulatory Commission (Transitory
Provisions for Detennination of Tariff) Regulations, 2004 (in short
"Regulations of2004"). They came into force w.e.f. 10.6.2004. It was
specified that the Regulations of 1999 as amended from time to time
under the provisions of the Act of 1998 shall continue to apply as
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-regulations under the Electricity Act, 2003 and remain in force till
appropriate new regulations are notified by the Commission under the
Electricity Act, 2003.
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5. The Commission had also framed terms and conditions for
determination of tariff for wheeling and retail-sale of electricity called
the Andhra Pradesh Electricity Regulatory Commission (Terms and
Conditions for Determination of Tariff for Wheeling and Retail Sale of
Electricity), Regulation, 2005. Aggregate Revenue Requirement (in short
"ARR") was specified in Regulation 2(1)(2). Regulation 3(4) provided
ARR to be the basis for the fixation of the tariff/charges for retail sale
of electricity including surcharges. However Regulation 24(3) provided
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]
that nothing in the Regulation shall, expressly or by implication, bar the
Commission from dealing with any matter or exercising any power under
the Act for which no Regulations have been framed, and the Commission
may deal with such matters, exercise such powers and discharge such
functions in a manner it deems fit. The orders of the Commission
determining the FSA were questioned before the High Court. Writ petitions
were filed before the High Court challenging the vires of section 26(2)
of the Act of 1998, and the validity of Regulation 45-8 of Regulations of
1999 as substituted in 2003. The Commission detennined the FSA for all
the eight quarters for the period from 20 I 0 to March, 2012 vide order
dated 20.9.2012 and vide order dated 2.11.2012 for the first quarter of
financial year 2012-13. The orders were also questioned in the writ
petition. The Division Bench of the High Court vide order dated 24.2.2014
upheld the vires of the Regulations and on merits left the matter to be
agitated in the alternative remedy of appeal. However, writ petitions
which were filed were also disposed of in tenns of order dated 24.2.2014
hence the special leave petitions have been filed in this Court.
Rival Submissions :
6. It was submitted on behalf of the appellants that Regulation 45B of the Regulations of 1999 is ultra vires the provisions contained in
section 26(9) of the Act of 1998 and section 62( 4) of the Act of 2003,
insofar as it provides for inclusion of any variation other than that arising
out of fuel costs alone. It was further submitted that only fuel cost had to
be considered and no other charges other than transportation can be
included. The FSA formula in Regulation 45B provides for element other
than variable cost of all purchases even beyond variation of fuel costs
alone and the same transgresses the limits of FSA formula permitted
under the Act. Since the provision of section 26(9) of the Act of 1998
and section 62 of the Act of 2003 provide for variation of tariff more
than once in a financial year the exception provided is with respect to
FSA. Fuel has to be given natural meaning. In fact, the negative imperative
of no variation of tariff more than once is being violated. Condition Nos.5,
10 and 11 of the formula are also ultra vires to the aforesaid provisions.
It was also submitted that providing for exclusion of agricultural
consumption till metering of agricultural services are complete as
contained in Condition l of Regulation 45-8 is bad in law and contrary to
the mandate of section 55(1) of the Act of 2003; more so, after a lapse
of2 years' period. Time mandated under section 55( I) for metering the
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consumption has not been extended. Mandate of compulsory metering
·has taken effect from 10.6.2005. Consequently, condition No.I is
repugnant to the aforesaid provision as such it was submitted that all
sales of electricity including the agricultural consumption has to be
considered in computing the factor 'Qi' in the FSA formula. Regulation
45B ceased to have effect on I 0.6.2004 after one year from the date of
coming into force of the Electricity Act, 2003 by virtue of the proviso to
section 61 of the said Act. It was further submitted that on coming into
force of Tariff Regulation 4 of 2005 modified under the Act of 2003,
Regulations of 1999 containing Regulation 45-B ceased to have the effect.
The Regulations of 2003 were also attacked on the ground that there
was no previous publication of the draft. Regulation 9 of 2004 made
under the Reform Act with retrospective effect of I 0.6.2004, the
Commission has no power to make regulations with retrospective effect.
Regulation 458 casts an additional burden without authority of law.
Condition No. I is contrary to the provision contained in sections 61 and
65 of the Act of 1998. It was also submitted that it was the liability of the
State Government to compensate the supplier of electricity affected by
the grant of subsidy made to the agricultural sector. Condition No. I is
also contrary to sections 61 and 65 of the Act of 2003. Regulations of
2005 indicate that power purchase cost for each year stands included in
the ARR and FSA over and above the purchase cost. It does not provide
for adjustment in price on account of fluctuation in the cost of fuel.
Formula for determining the FSA travels beyond that.
7. It was submitted on behalf of the Commission and the State
Government that under section 85(3) of the Act of2003, the Act of 1998
is saved, in the Schedule at serial No.3. Consequently, the provisions of
the Act of 1998 which are not consistent with the provisions of the Act
of 2003 shall continue to apply to the State of Andhra Pradesh. The
saving provision in the Regulations of2005 reflects that the Regulations
of 1999 framed under the Act of 1998 are still in operation. Regulation
12.4 of Regulations of2005 provides for levy of FSA. The fuel surcharge
has not been defined under the Act of 1998 or the Act of2003 or in the
Regulations of2005 framed thereunder. The meaning and scope offuel
surcharge is given in Regulation 45-B of Regulations of 1999. The formula
contains the components to form part of FSA and had been implemented
for the last more than one decade. FSA has been determined as per the
formula prescribed under Regulation 45-B. lt is incorrect to submit that
SAi BHASKAR IRON LTD. v. A.P. ELECTRICITY
REGULATORY COMMISSION & ORS. [ARUN MISHRA, J.]
FSA should be confined to variation of fuel cost. Condition Nos. I, 5, I 0
and 11 of Regulation 45-B have been notified in the Gazette, therefore,
there is complete compliance of the provisions contained in section 55(1)
of the Act of 2003. The Commission is empowered to differentiate
according to consumer's load factor or power factor etc. as provided in
section 26(7) of the Act of 1998. Similar provisions are contained in
section 62(3) of the Act of 2003. The Commission has power to frame
the regulations under sections 26(9) and 54 of the Act of 1998 with
respect to FSA and under section 62(4) of the Act of2003. FSA is a
related surcharge levied to meet the increased cost of generation and
purchase of electricity. The vi res of section 62( 4) of the Act of 2003
have not been questioned and the challenge to the vires of the provisions
of section 26(9) of the Act of 1998 has been given up. The orders passed
by the Regulatory Commission are justified and writ petitions have been
rightly dismissed by the High Court.
Statutory Provisions :
8. For appreciating the rival contentions, we deem it appropriate
to take note of the various provisions of the Act of 1998 which have
been enacted to establish and incorporate autonomous statutory
Electricity Regulatory Commissions to balance the interest of all the
stakeholders in the electricity industry and to promote healthy growth of
power sector in the State. The State has been divested of its regulatory
functions. Section 11 deals with the functions of the Commission. It has
the power under section 11 (I )(c) to issue licences and determine the
conditions to be included in the licences. Under section 1 l(l)(e) it has
the power to regulate the purchase, distribution, supply and utilization of
electricity, the quality of service, the tariff and charges payable. Part' A'
of the Act of 1998 deals with tariff. Section 26 deals with licensee's
revenues and tariffs. The provisions contained in section 26 are extracted
hereunder:
"26.