# TATA POWER COMPANY LTD v. ADANI ELECTRICITY MUMBAI LTD. & ORS

- **Citation:** [2019] 6 S.C.R. 845
- **Court:** Supreme Court of India
- **Decided:** 2019-05-02
- **Case number:** Civil Appeal No. 415 of 2007
- **Bench:** Arun Mishra, S. Abdul Nazeer
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/tata-power-company-ltd-v-adani-electricity-mumbai-ltd-ors-33937
- **Pages:** 27

## Headnote

Electricity Regulatory Commission Act, 1998: s. 22(2)(n) and
29(3) - Standby charges - Quantum of - Appellant-TPC, distribution
licensee supplying electricity to entire Mumbai and BSES/REL,
distribution licensee supplying electricity only in suburbs of Mumbai
- From 1998 to 2006, BSES/REL used to purchase electricity from
TPC between 29% to 37% - Tariff payable by BSES to TPC included
a component of standby charge - Standby charges paid by TPC to
Maharashtra State Electricity Board-MSEB were being recovered
by TPC from its customers through its tariff - Order of Government
of Maharashtra stipulating a sum of Rs.3.5 crores per month to be
paid by BSES/REL to TPC by way of standby charges - Issue as
regards quantum of standby charges required to be paid by BSES/
REL to TPC - Order by MERC directing BSES/REL to bear
approximately 23% of the total standby charges incurred by TPC
qua MSEB - Appeal before APTEL - Case of the TPC that standby
charges should be borne in ratio of 50:50 - Chairman held that
liability to be in proportion of 2:1 tariff, whereas Judicial Member
and Technical Member differed - Decisions of MERC, as well as
the Technical and Judicial Members, working out the percentage
of standby charges as 23:77 with respect to BSES/REL and TPC
respectively for the period - On appeal, held: Electricity used to be
purchased by BSES/REL from TPC and the standby charges used to
be realised which were factored in the tariff, which liability was
ultimately passed on to the retail consumers - Ratio had been
appropriately worked out in the most equitable manner by applying
the level playing field - Considering the standby charges of Rs.24.75
crores recovered by MSEB from TPC with effect from 1.10.1996
and as per the Government order and Principles of Agreement Rs.3.5
crores was additionally being available and a difference of standby
which was made to increase the liability Rs.24.75 crore per month
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to Rs.30.25 crores per month - Thus, the decision of the Technical
and Judicial Members is appropriate and reasonable while working
out the percentage of the standby charges to be paid by BSES/REL
to TPC for the said period - Majority opinion that standby facility
provided by TPC was out of its own generating capacity and 90%
of the times energy has been drawn by BSES/REL from TPC, is
accepted - Thus, there is no justification for TPC to claim 50:50%
sharing of the standby charges -Implementation of the order of the
APTEL would mean that the determination made by it has been acted
upon and corresponding liability factored into tariff has been passed
on the customers and actual consumers and realised from them since
there was no such interim stay on implementation of the order -
Submission that order of APTEL has already been worked out even
otherwise it is found to be just and equitable is accepted - Order
passed by Technical and Judicial Members of APTEL upheld.
Dismissing the appeals, the Court
HELD: 1.1 The standby facility was made available to TPC
in the event there was a failure of power in TPC's generation of
1777 MW. BSES/REL used to purchase electricity from TPC
between 29 % to 37 % from 1998 to 2006. The standby charges
were factored into the tariff charged from its retail customers.
The standby charges to the extent of supply were borne by BSES/
REL for optimum supply from TPC when interconnectivity was
provided at Borivali point as per the Government order. The
dispute arose between TPC and BSES/REL as to whether BSES/
REL entitlement to draw 275 MVA from TPC in the case of outage
and failure of electricity supply, the charges which were required
to be paid were over and above the charges that would be paid
for energy actually drawn. TPC was paying an amount of Rs.24.75
crores per month-Rs.297 crores per annum to MSEB by way of
standby charges which was built into the tariff. The said amount
was recovered by TPC from its customers who in t

## Text

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TATA POWER COMPANY LTD.
v.
ADANI ELECTRICITY MUMBAI LTD. & ORS.
(Civil Appeal No. 415 of 2007)
MAY 02, 2019
[ARUN MISHRA AND S. ABDUL NAZEER, JJ.]
Electricity Regulatory Commission Act, 1998: s. 22(2)(n) and
29(3) - Standby charges - Quantum of - Appellant-TPC, distribution
licensee supplying electricity to entire Mumbai and BSES/REL,
distribution licensee supplying electricity only in suburbs of Mumbai
- From 1998 to 2006, BSES/REL used to purchase electricity from
TPC between 29% to 37% - Tariff payable by BSES to TPC included
a component of standby charge - Standby charges paid by TPC to
Maharashtra State Electricity Board-MSEB were being recovered
by TPC from its customers through its tariff - Order of Government
of Maharashtra stipulating a sum of Rs.3.5 crores per month to be
paid by BSES/REL to TPC by way of standby charges - Issue as
regards quantum of standby charges required to be paid by BSES/
REL to TPC - Order by MERC directing BSES/REL to bear
approximately 23% of the total standby charges incurred by TPC
qua MSEB - Appeal before APTEL - Case of the TPC that standby
charges should be borne in ratio of 50:50 - Chairman held that
liability to be in proportion of 2:1 tariff, whereas Judicial Member
and Technical Member differed - Decisions of MERC, as well as
the Technical and Judicial Members, working out the percentage
of standby charges as 23:77 with respect to BSES/REL and TPC
respectively for the period - On appeal, held: Electricity used to be
purchased by BSES/REL from TPC and the standby charges used to
be realised which were factored in the tariff, which liability was
ultimately passed on to the retail consumers - Ratio had been
appropriately worked out in the most equitable manner by applying
the level playing field - Considering the standby charges of Rs.24.75
crores recovered by MSEB from TPC with effect from 1.10.1996
and as per the Government order and Principles of Agreement Rs.3.5
crores was additionally being available and a difference of standby
which was made to increase the liability Rs.24.75 crore per month
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to Rs.30.25 crores per month - Thus, the decision of the Technical
and Judicial Members is appropriate and reasonable while working
out the percentage of the standby charges to be paid by BSES/REL
to TPC for the said period - Majority opinion that standby facility
provided by TPC was out of its own generating capacity and 90%
of the times energy has been drawn by BSES/REL from TPC, is
accepted - Thus, there is no justification for TPC to claim 50:50%
sharing of the standby charges -Implementation of the order of the
APTEL would mean that the determination made by it has been acted
upon and corresponding liability factored into tariff has been passed
on the customers and actual consumers and realised from them since
there was no such interim stay on implementation of the order -
Submission that order of APTEL has already been worked out even
otherwise it is found to be just and equitable is accepted - Order
passed by Technical and Judicial Members of APTEL upheld.
Dismissing the appeals, the Court
HELD: 1.1 The standby facility was made available to TPC
in the event there was a failure of power in TPC's generation of
1777 MW. BSES/REL used to purchase electricity from TPC
between 29 % to 37 % from 1998 to 2006. The standby charges
were factored into the tariff charged from its retail customers.
The standby charges to the extent of supply were borne by BSES/
REL for optimum supply from TPC when interconnectivity was
provided at Borivali point as per the Government order. The
dispute arose between TPC and BSES/REL as to whether BSES/
REL entitlement to draw 275 MVA from TPC in the case of outage
and failure of electricity supply, the charges which were required
to be paid were over and above the charges that would be paid
for energy actually drawn. TPC was paying an amount of Rs.24.75
crores per month-Rs.297 crores per annum to MSEB by way of
standby charges which was built into the tariff. The said amount
was recovered by TPC from its customers who in turn recovered
it from their retail consumers. [Para 25][866-E-G]
1.2 The Government of Maharashtra formed a Committee
to resolve the issue of quantum of standby charges required to
be paid by BSES/REL to TPC. The Government of Maharashtra
passed an order dated 19.1.1998 whereby stipulating a sum of
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Rs.3.5 crores per month should be paid by BSES/REL to TPC by
way of standby charges. The decision was taken by the Committee
inter alia considering the generation by TPC and MSEB. The
order was based upon six factors-generation of TPC and MSEB;
electricity supplied by TPC to BSES/REL as a consumer; TPC's
standby supply from MSEB; charges paid for said sub-standby
supply by TPC to MSEB; the financial position of TPC and BSES/
REL; and stability of better Mumbai grid. [Para 26][866-H;
867-A-B]
1.3 The main principles on the basis of which Agreement
was to be reached between TPC and BSES/REL were settled. As
per clause 2 of the Principles of Agreement, BSES/REL had to
pay to TPC for 220 KV interconnection at Borivali at Rs.3.5 crores
per month. The parties had agreed to cooperate in order to ensure
that Government order dated 19.1.1998 is implemented in the
spirit of it. A detailed power supply agreement was to be entered
into by 21.4.1998. The agreement could not be executed as
consensus with respect to several aspects could not be reached.
The order dated 22.3.2000 has been set aside by the High Court,
which order was not interfered with by this Court and the case
was remitted for the decision to MERC, which is an expert body.
The power was conferred upon the MERC vide notification dated
27.10.2000 under the provision of Section 22(2)(n) of Electricity
Regulatory Commission Act, 1998, to adjudicate upon the
disputes and differences between licensees and utilities. On
4.12.2000, BSES/REL had filed an application to MERC in respect
of sharing of standby charges between BSES/REL and TPC. The
prayers were made to regulate action and standby charges levied
by them and to fix and determine the standby charges payable by
them. [Para 27][867-C-F]
1.4 Ultimately, the APTEL by the impugned orders has
decided the matter. The Chairman held that liability to be in
proportion of 2:1 tariff, whereas Judicial Member has concurred
with the Technical Member when Technical Member differed with
the opinion of Chairman, but the fact remains that MERC, as
well as the APTEL, concurrently have not accepted the case of
the TPC that standby charges should be borne in ratio of 50:50.
TATA POWER COMPANY LTD. v. ADANI ELECTRICITY
MUMBAI LTD. & ORS.
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The decisions of MERC, as well as the Technical and Judicial
Members, are found to be correct while terming ratio as 23:77
with respect to BSES/REL and TPC respectively.[Para 28]
[867-F-G]
1.5 In view of the facts and circumstances of the case and,
in particular, several factors were required to be taken into
consideration, on that basis said figure has been worked out. It
has also been considered that electricity used to be purchased
by BSES/REL from TPC to the aforesaid extent and the standby
charges used to be realised which were factored in the tariff, which
liability was ultimately passed on to the retail consumers. Even
when the Principles of Agreement have been reached as to
standby charges though it was subject to revision basis was fixed
which could not have been departed from, it was on consideration
of several aspects. The ratio had been appropriately worked out
in the most equitable manner by applying the level playing field.
Considering the standby charges of Rs.24.75 crores recovered
by MSEB from TPC with effect from 1.10.1996 and as per the
Government order and Principles of Agreement Rs.3.5 crores
was additionally being available and a difference of standby which
was made to increase the liability Rs.24.75 crore pm to Rs.30.25
crores pm. Thus, the decision of the Technical and Judicial
Members is found to be appropriate and reasonable while working
out the percentage of the standby charges to be paid by BSES/
REL to TPC for the period in question. [Para 29][867-H;
868-A-D]
1.6 The MERC directed sharing of standby charges payable
to MSEB between TPC and BSES/REL on the basis of their
respective peak load requirements and directed TPC to pay to
BSES/REL a sum of Rs.315.30 crores within 15 days. The
quantum of standby capacity is related to the larger unit size of
the generation in either system. The majority opinion that standby
facility provided by TPC was out of its own generating capacity
and 90 percent of the times energy has been drawn by BSES/
REL from TPC, is accepted. Thus, there is no justification for
TPC to claim 50:50 percent sharing of the standby charges in the
facts of this case on consideration of various factors the decision
has been reached. [Para 31][870-G]
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1.7 There was no stay on the order passed by the APTEL
by this Court. The plea of non-implementation of the order taken
by TPC is not understandable. It was only the bank guarantee
which was submitted by TPC, in addition, to deposit of a sum of
Rs.227 crores with the Registrar General of this Court. The
implementation of the order of the APTEL would mean that the
determination made by it has been acted upon and corresponding
liability factored into tariff has been passed on the customers and
actual consumers and realised from them since there was no such
interim stay on implementation of the order. The submission that
order of APTEL has already been worked out even otherwise it
is found to be just and equitable is accepted. [Para 32][870-H;
871-A-B]
1.8 There is no question of applicability of Article 14 of the
Constitution. As a matter of fact, what was agreed in the Principles
of Agreement more amount than that has been ordered to be
paid on the basis of principles of business equilibrium and other
factors. [Para 33][871-C]
1.9 The order passed by Technical and Judicial Members
of APTEL is upheld. The amount which is payable to REL
deposited or secured by way of bank guarantee by TPC along
with interest lying with the Registrar of this Court, be paid to the
respondent company. [Para 35][871-E-F]
BSES Ltd. v. Tata Power Co. Ltd. (2004) 1 SCC
195 : [2003] 4 Suppl. SCR 932 ; Binani Zinc Ltd. v.
Kerala State Electricity Board, (2009) 11 SCC 244 :
[2009] 4 SCR 636 - referred to.
Case Law Reference
[2003] 4 Suppl. SCR 932
referred to
Para 14
[2009] 4 SCR 636
referred to
Para 22
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 415 of
2007.
From the Judgment and Order dated 20.12.2006 of the Appellate
Tribunal for Electricity at Mumbai in Appeal No. 202 of 2005.
With
Civil Appeal No. 3229 of 2007.
TATA POWER COMPANY LTD. v. ADANI ELECTRICITY
MUMBAI LTD. & ORS.
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Gopal Jain, J. J. Bhatt, Sr. Advs., R. N. Karanjawala, Ms. Ruby
Singh Ahuja, Parag Kabadi, Ms. Deepti Sarin, Sanjeet Ranjan, Saurabh
Kumar, Mrs. Manik Karanjawala, Ms. Anjali Chandurkar, Hasan
Murtaza, Ms. Divya Anand, Kartik Anand, Kumar Anurag Singh, Ms.
Ramni Taneja, Anil Shrivastav, Advs. for the appearing parties
The Judgment of the Court was delivered by
ARUN MISHRA, J.
1. The appellant - Tata Power Company (in short 'the TPC') is a
distribution licensee supplying electricity to the entire city of Mumbai,
whereas BSES/Reliance Energy Limited (in short 'REL') is a distribution
licensee supplying electricity only in the suburbs of Mumbai. Prior to
1998, the TPC was the only generator of the electricity supplying
electricity to BSES for further supply to BSES customers. The TPC
had 108 customers in the entire city of Mumbai. The tariff payable by
BSES to TPC included a component of standby charge. The entire
standby charges paid by TPC to Maharashtra State Electricity Board
(for short 'the MSEB') were being recovered by TPC from its customers
through its tariff. Due to change in shareholding pattern, the BSES was
changed to Reliance Energy Limited on 24.2.2004.
2. The brief facts indicate that TPC and MSEB met on 12.3.1985
to finalise the interconnection between representatives of TPC and
MSEB with respect to demand charges. Following decision was arrived
at:
 "A) Demand Charges:
Effective 1-2-84 a monthly firmed demand of 300 MVA would be
billed by MSEB. This would increase by 50 MVA each year
effective 1-4-1985 to take care of TEC's own load growth annually.
This is irrespective of TEC's actual net off-take recorded at the 4
interconnecting points of supply and also irrespective of MSEB's
total off-take from TEC system"
3. Prior to 1985, the TPC was supplying entire electricity generated
by it to the distributors of electricity in Mumbai. Since the quantity
generated by TPC was not sufficient to meet the entire demand, TPC
used to buy electricity from MSEB. BSES/REL was purchasing its
entire requirement of electricity from TPC in bulk to supply to its customers
in suburban Mumbai.
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4. With effect from 1985, TPC wanted to increase its generating
capacity thereby reducing its offtake of electricity from MSEB to zero
thereby causing loss of revenue to MSEB. In order to compensate
MSEB for loss of revenue caused as a result of stoppage of purchase of
electricity by TPC from MSEB, the TPC and MSEB entered into
aforesaid arrangement whereby TPC was required to pay to MSEB
standby facility initially for 300 MVA to be increased by 50 MVA every
year, charges to be paid at the rate fixed by MSEB. The quantum of
standby increased from 300 MVA to 550 MVA by the year 1990,
whereafter the MSEB and the TPC agreed not to increase the said
standby beyond 550 MVA. The standby facility was meant to enable
TPC to draw upon the energy generated by MSEB in the event there
was outage/failure of power in TPC's generation capacity of 1777 MW
consisting of multiple units of different sizes i.e., 500 MW, 180 MW, 150
MW, 72 MW, 75 MW and 300 MW, which is supplied to BSES/REL
along with its own consumers and BEST, another distribution licensee in
Mumbai. The standby facilities charges paid by TPC to MSEB were
factored into tariff charged by TPC from its customers including BSES/
REL. The BSES/REL was a purchaser of electricity from TPC to the
extent of TPC's generation between 29% to 37% from 1998 to 2006,
thus the standby charges to the extent of aforesaid varying percentages
for the respective years were borne by BSES/REL which in turn were
factored into tariff and charged by BSES/REL to its retail customers.
5. Initially, BSES was permitted to set up its generating plant at
Dahanu to generate 500 MW (550 MVA approximately). There was a
condition that it would achieve interconnection with the supply of TPC
at a point known as Borivali Interconnection Point in case there was any
outage of BSES generation. It could draw upon the power supplied by
the TPC. The charges for such interconnections were to be determined.
On 30.5.1992, a notification was issued amending the BSES license. A
new clause 7B was introduced for providing aforesaid interconnectivity.
Provisions of clause 13A were also amended to authorise the State
Government in the event of a dispute to decide the same. On 29.6.1992,
a meeting was held between TPC and BSES and it was agreed that
interconnection would be provided at Borivali GIS switching station to
take care of emergencies in BSES 220 KV system. The TPC already
have arrangements with MSEB wherein standby capacity is provided
by MSEB to TPC in case of emergencies in TPC system. Standby
TATA POWER COMPANY LTD. v. ADANI ELECTRICITY
MUMBAI LTD. & ORS. [ARUN MISHRA, J.]
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capacity to BSES may be provided from the standby capacity reserved
by TPC with MSEB and appropriate sharing of charges by BSES could
be worked out as provided in clause 12.0. The BSES prior to September
1995 was purchasing its entire requirement of power from TPC and
distributing it within its licensed area as TPC distributing licensee. After
its two Dahanu generating units were commissioned in January/March
1995, BSES started bringing the power generated by Dahanu to supply
to its consumers after September 1995 in the suburbs of Mumbai city.
As supply was started from the Dahanu, TPC surplus capacity began to
increase. The TPC after 1995 required only 275 MVA standby facility
against the standby capacity of 550 MVA.
6. The MSEB issued notice on 28.6.1996 revising its tariff to TPC
effective from 1.10.1996. The MSEB raised its maximum demand
charges per month with respect of standby facility/supply from
Rs.190/- per KVA to Rs.450/- per KVA. Consequently, MSEB gave
notice to TPC, inter alia, revising its standby charges with effect from
1.10.1996 recoverable from TPC to Rs.24.75 crores per month i.e.,
Rs.297 crores per year.
7. TPC had issued a notice on 30.7.1996 to the Government of
Maharashtra and MSEB under Schedule VI to the Electricity (Supply)
Act, 1948, showing its intention to enhance tariff charges with effect
from 1.10.1996 which included maximum demand charges and energy
charges to various consumers. It also provided for payment of maximum
demand charges and energy charges by BSES for standby facility. With
effect from 1.1.1997, TPC revised its tariff inter alia to BSES, thereby
factoring in the monthly demand charges of Rs.24.75 crores payable by
TPC to MSEB for standby supply. In order to resolve the issue of
quantum of standby charges to be paid by BSES to TPC, the Government
of Maharashtra appointed a Committee and an order dated 19.1.1998
was passed whereby the Government of Maharashtra, based on the
recommendation of the Committee, stipulated that a sum of Rs.3.5 crores
per month should be paid by BSES/REL to TPC by way of standby
facility for the period 1998-1999. This sum of Rs.3.5 crores per month
i.e., Rs.42 crores per annum was over and above the sum Rs.24.75
crores per month i.e., Rs.297 crores per annum which TPC used to
recover in the form of its tariff from its customer. In fixing the aforesaid
amount, the following factors were taken into consideration by the said
Committee:
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"(i) the generation of TPC and MSEB;
(ii) the electricity supplied by TPC on BSES/ REL as a consumer.
(iii) TPC's standby supply from MSEB;
(iv) Charges paid thereof by TPC;
(v) TPC's and BSES/REL's financial position;
(vi) That standby was being supplied for the stability of the Greater
Mumbai Grid."
8. On 17.12.1997, TPC contended that it was fully capable and
willing to supply standby to BSES for its Dahanu plant and TPC should,
therefore, be billed only for 275 MVA standby facility for their consumers
other than BSES. The Government of Maharashtra issued an order on
19.1.1998, following is the relevant portion of the said order:
"it has come to the notice of the Government that due to dispute
on commercial terms between BSES and TEC, interconnection is
not established at Borivali even though technical arrangements
are ready. Similarly, additional electricity generated at Dahanu is
being sold to the Western Regional Grid through MSEB's Biosar
Interconnection. As a result, the government's main objective
that electricity generated at Dahanu should be used within the
BSES area of supply has not been met and BSES license conditions
are violated. For this Government had appointed a Committee
under the Chairmanship of the Principal Secretary, Energy. In
this committee, representatives of MSEB, TEC, and BSES were
members. This Committee has examined the total situation and
has submitted its report to the Government.
GOM thereafter ordered as follows:
"Taking into account the recommendations of the Committee,
following are orders of the Government.
1. BSES should complete interconnection at Borivli by January
26, 1998.
2. BSES should take 275 MVA standby power supply from TEC
for Dahanu generating station.
3. For taking above standby supply, BSES should pay standby
charges to TEC.
TATA POWER COMPANY LTD. v. ADANI ELECTRICITY
MUMBAI LTD. & ORS. [ARUN MISHRA, J.]
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4. After the interconnection is commissioned, BSES should stop
selling electricity through MSEB's Boisar sub-station to
Western Regional Grid.
5. TEC may charge stand-by charges for 275 MVA supply to
BSES.
6. Whenever required during an emergency, additional electricity
may be taken for areas outside Mumbai region through
MSEB's Boisar sub-station. For this purpose, MSEB should
take proper arrangements.
7. As per Committee's recommendations and taking into account,
TEC's electricity supply to BSES, TEC's standby supply from
MSEB, charges thereof and TEC's and BSES's financial
conditions, BSES should make a payment of Rs.3.5 crores every
month for standby supply. On this basis, the rate per KVA
should be fixed and commercial arrangement finalized.
8. The above standby charges are passed on TEC's & BSES's
existing electricity supply tariff. The standby charges may be
reviewed during tariff revision in the future."
9. Since the agreement was to be finalised as per the
Government's order, the Government had no power to give directions to
generators and distributors, TPC and BSES had entered into Principles
of Agreement on 30.1.1998, the clauses 2 to 9 are extracted hereunder:
"(2) BSES shall pay to TEC for the 220 KV interconnection at
Borivali Rs.3.5 crores per month as standby charges for 275 MVA
as per Government orders.
(3) BSES offtake of energy at 220 KV Borivli interconnection
will be billed at Rs.2.09 per kWh plus F.A.C. (which is presently
at Rs.0.45) as applicable from time to time at other points of supply.
This average energy charge is based on an estimated annual flow
of 250 million units of energy through Borivli interconnection.
(5) As soon as the interconnection between TEC and BSES at
220 KV Borivli is established.
(6) The interconnection between MSEB and BSES at Boisar will
be opened out.
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(7) BSES shall use this interconnection at Borivali fully for the
standby type of service.
(8) Both the parties have agreed to cooperate in order to ensure
that the orders of the Government dated 19-01-1998 are
implemented in the spirit of it.
(9) A detailed Power Supply Agreement on a mutually agreed
basis incorporating the above will be executed by 21st of April,
1998."
(emphasis supplied)
Though the aforesaid principles of the agreement were entered
into between the parties, for one reason or the other, no agreement has
been executed between them.
10. The TPC under the Principles of Agreement dated 31.1.1998
was bound to supply standby power as and when required by BSES/
REL. Whether the TPC was drawing from MSEB or not is immaterial.
The agreement of BSES was with TPC, not with MSEB. The agreement
between TPC and BSES was independent than the agreement between
TPC and MSEB.
11. Even after providing the standby facility of 275 MVA to BSES/
REL, TPC still enjoyed the standby facility of 550 MVA from MSEB.
The TPC entitlement to avail 550 MVA standby facility from MSEB did
not change.
12. The standby facility that has been availed of by BSES/REL
through TPC since then it actually drew on about 119 occasions till May
2004, of which 57 occasions in excess of 275 MVA. It has been observed
by the Appellate Tribunal for Electricity (in short 'the APTEL') that
TPC in 90 percent of the above occurrences has supplied standby powers
from its own generation and never drawn back the power from MSEB.
The TPC has actually drawn standby from MSEB on a large number of
occasions and on several occasions far in excess of 275 MVA. The
standby drawn by TPC from MSEB is as under:
"439 MVA highest in 1998-1999
271 MVA highest in 1999-2000
358 MVA highest in 2000-2001
TATA POWER COMPANY LTD. v. ADANI ELECTRICITY
MUMBAI LTD. & ORS. [ARUN MISHRA, J.]
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325 MVA highest in 2002-2003
415 MVA highest in 2002-2003
763 MW highest in 2004"
13. It is also pertinent to mention that even after BSES/REL started
drawing power from its Dahanu generation station, BSES/REL continued
to purchase approximately 35 percent of TPC's generation from TPC to
supply energy to BSES/REL consumers. With effect from 1.2.1998, the
BSES/REL paid a sum of Rs.3.5 crores per month to TPC as charges
for standby. The TPC objected and sought the revision of standby
charges, which was fixed at Rs.3.5 crores per month, by writing a letter
to the Government of Maharashtra on 8.7.1998. With effect from
1.12.1998, the MSEB revised its tariff by issuing a notice under the
agreement between the MSEB and TPC. The charges for standby
facility were also increased from Rs.450 KVA per month to Rs.550
KVA per month i.e., Rs.363 crores per annum equal to Rs.30.250 crores
per month. These standby charges enhanced from Rs.24.75 crore per
month to Rs.30.25 crores per month with effect from 1.12.1998 i.e.,
from Rs.297 crores to Rs.363 crores annually. The TPC instead of
requiring a pro-rata share of the incremental standby charges from BSES/
REL purported to divide the amount of Rs.30.25 crores in the ratio of
50:50 and demanded a sum of Rs.15.125 crores per month i.e., Rs.181.5
crores per annum by way of standby charges from BSES/REL. The
TPC was already recovering Rs.24.75 crores per month through its tariff
as said amount was factored in tariff from its customers and additional
recovery of Rs.3.5 crores was also being made from BSES/REL under
the Principles of Agreement. Thus, the total recovery of Rs.28.25 crores
per month by way of standby charge was already made by TPC from its
customers as on September 1998. By demanding a sum of Rs.15.125
crores per month from BSES/REL, TPC was attempting to demand an
additional sum of approximately Rs.11.625 crores per month from BSES/
REL under the guise of standby charges instead of demanding a prorata amount of the incremental standby charges of Rs.2 crores.
14. TPC issued notice dated 30.9.1998 under Schedule VI to the
Electricity (Supply) Act, 1948 to the Government of Maharashtra
proposing revision of its tariff and other matters. It was indicated in the
notice that it would pay only Rs.181.5 crores per annum and remaining
should be the liability of BSES/REL. It has also been contended on
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behalf of TPC that other revision in tariff had not been proposed by
TPC which would otherwise have needed an increase of 6 percent on
all consumers in Mumbai. It served a notice on BSES/REL demanding
the aforesaid charges of 35 percent of the component which was
purchased by BSES/REL as a consumer. The standby charges used to
be paid and otherwise included in the tariff. BSES/REL has received 35
percent of the energy supplied from TPC as a consumer and for the
same, TPC was recovering an amount of Rs.24.75 crores per month
and an additional sum of Rs.3.5 crores per month. This Court in BSES
Ltd. v. Tata Power Co. Ltd., (2004) 1 SCC 195 has observed that tariff
notice as being illegal. Since the dispute between the TPC and BSES/
REL could not be sorted out, an order dated 22.3.2000 was passed by
the Government of Maharashtra endorsing the Committee's Report. Vide
aforesaid order, BSES/REL was directed to pay Rs.9 crores as observed
in BSES Ltd. v. Tata Power Co. Ltd. (supra) by this Court.
15. The Electricity Regulatory Commission Act, 1998 (in short
'the Act of 1998') came to be promulgated which conferred jurisdiction
on Maharashtra Electricity Regulatory Commission (in short 'the MERC')
to determine the tariff of supply of electricity and later on to adjudicate
the dispute between the parties. The dispute came to be referred to
MERC by the parties. The order dated 22.3.2000 passed by the State
Government has been set aside by the High Court, which decision has
been affirmed by this Court in BSES Ltd. v. Tata Power Co. Ltd. (supra).
16. The MERC passed an order on 7.12.2001 directing BSES/
REL to bear 25 percent of the standby charges. This order was
challenged by both the parties before the High Court. The High Court
remitted the matter back to MERC and directed BSES/REL to deposit
50 percent of the standby amount as an interim arrangement. The matter
had further travelled to this Court in the aforesaid decision namely BSES
Ltd. v. Tata Power Co. Ltd. (supra).
17. After the matter was remitted, MERC after hearing the parties
passed an order dated 31.5.2004 and directed the BSES/REL to bear
approximately 23 percent of the total standby charges incurred by TPC
qua MSEB. While noticing that TPC has already recovered a sum of
Rs.24.75 crores per month through its tariff and an additional sum of
Rs.3.5 crores per month as per the Principles of Agreement, it was
found that large part of standby charges has already been recovered by
TPC through tariffs and otherwise. Against the demand made on
TATA POWER COMPANY LTD. v. ADANI ELECTRICITY
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31.5.2004, both the parties filed an appeal before the APTEL. It was
heard by a Bench consisting of Chairman and Technical Member. They
delivered separate judgments, both of them rejected the contentions of
TPC claiming standby charges in the ratio of 50:50. The Chairman
opined that standby charges should be shared in the proportion of 2:1
i.e., TPC paying 2/3rd and BSES/REL paying 1/3rd, while Technical
Member held BSES/REL should bear 23 percent while TPC should bear
approximately 77 percent.
18. In view of the divergence of opinion, the matter was referred
to the third Member being Judicial Member, who agreed with the
conclusion of the Technical Member that BSES/REL should bear 23
percent of the standby charges. In view of the majority judgment, the
APTEL passed an order dated 20.12.2006, acknowledging the majority
view of the Judicial Member and the Technical Member and directed
that 23 percent of the standby charges for the period in question should
be borne by BSES/REL and balance should be borne by TPC and further
directed refund of the excess amount that was deposited by BSES/REL
pursuant to the interim orders passed. The MERC in the appeal has
acknowledged that TPC has withdrawn a sum of Rs.24.75 crores from
its customers through electricity tariff and an additional sum of Rs.3.5
crores per month by way of standby charges from BSES/REL did not
give credit for the said sum in the computation of standby charges to the
extent of 23 percent held to be payable by BSES/REL. The appeal of
BSES/REL in respect of the aforesaid was rejected by the APTEL vide
judgment and order dated 20.4.2007. TPC filed Civil Appeal No.415 of
2007 before this Court. BSES/REL has also filed Civil Appeal No.3229
of 2007 aggrieved by the judgment and order dated 20.4.2007 of APTEL.
19. Shri Gopal Jain learned senior counsel appearing on behalf of
TPC has contended that TPC has not recovered standby charges from
its customers for the facility in excess of 275 MVA out of 550 MVA
standby facility for the period April 1999 to March 2004 provided by
MSEB. Thereafter as provided by tariff order dated 11.6.2004, TPC
has recovered from its customers to the extent of 78 percent of the
standby charges. This Court has granted interim stay on 7.2.2007 and
required the appellant to furnish bank guarantee in the sum of Rs.227
crores and in addition, deposit a sum of Rs.227 crores with the Registrar
General of this Court, which may be withdrawn by respondent no.1
subject to their furnishing an undertaking to this Court that in the event
of this appeal being decided against them, the amount as may be found
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refundable by them shall be refunded without demur with interest as
may be determined by this Court. The TPC has complied with these
conditions and it is not correct to say that all concerned have complied
with the impugned order dated 20.12.2006. The amount of Rs.3.5 crores
per month was only for the year 1997-1998, though the actual liability
came to be Rs.8.25 crores per month, Rs.3.5 crores were fixed so as to
avoid disturbance in the tariff in the current year. The MSEB is not
providing standby facility of 1777 MW (TPC's total installed capacity)
nor is REL provided standby facility of 550 MVA by TPC. Therefore,
the standby charges cannot be apportioned in the ratio of the total installed
capacity of TPC and REL. The obligation to pay to MSEB for the
standby facility is independent. If the generator for some reason is not
able to recover from its customers, it will not be absolved of its obligation
to pay the standby charges to MSEB. The liability of the BSES/REL to
pay for standby charges in 50:50 ratio is absolute and cannot be linked
with the means of recovery. It would result in disturbing and distorting
level playing field conditions which are a facet of Article 14 of the
Constitution and also distort competition. It is also urged by learned
senior counsel that it would run contrary to the objects of the Act of
1998, in particular, the mandate of Section 29(3) which is extracted
hereunder:
"29. Determination of Tariff by State Commission.
(3) The State Commission, while determining the tariff under this
Act, shall not show undue preference to any consumer of
electricity, but may differentiate according to the consumer's load
factor, power factor, total consumption of energy during any
specified period or the time at which the supply is required or the
geographical position of any area, the nature of supply and the
purpose for which the supply is required."
20. It was further urged that the prayer was made by BSES/REL
before the MERC to fix the standby charges payable by BSES/REL
(complainant) to the TPC (respondents). Its liability would be more
than Rs.3.5 crores per month. TPC is paying Rs.363 crores as standby
charges to MSEB. On principles of parity and proportionality, the BSES/
REL should pay for 275 MVA as the quantum of 275 MVA standby is
out of the same block of 550 MVA standby facility given by MSEB.
The TPC and BSES/REL should share in the ratio of 50:50. The APTEL
has not followed the decision of this Court in BSES Ltd. v. Tata Power
TATA POWER COMPANY LTD. v. ADANI ELECTRICITY
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Co. Ltd. (supra). This Court in the aforesaid decision has observed as
under:
"16. The word "tariff" has not been defined in the Act. "Tariff" is
a cartel of commerce and normally it is a book of rates. It will
mean a schedule of standard prices or charges provided to the
category or categories of customers specified in the tariff. Subsection (1) of Section 22 clearly lays down that the State
Commission shall determine the tariff for electricity (wholesale,
bulk, grid or retail) and also for use of transmission facilities. It
has also the power to regulate power purchase of the distribution
utilities including the price at which the power shall be procured
from the generating companies for transmission, sale, distribution,
and supply in the State. "Utility" has been defined in Section 2(l)
of the Act and it means any person or entity engaged in the
generation, transmission, sale, distribution or supply, as the case
may be, of energy. Section 29 lays down that the tariff for the
intra-State transmission of electricity and tariff for supply of
electricity - wholesale, bulk or retail - in a State shall be subject
to the provisions of the Act and the tariff shall be determined by
the State Commission. Sub-section (2) of Section 29 shows that
the terms and conditions for fixation of the tariff shall be determined
by Regulations and while doing so, the Commission shall be guided
by the factors enumerated in clauses (a) to (g) thereof. The
Regulations referred to earlier show that generating companies
and utilities have to first approach the Commission for approval
of their tariff whether for generation, transmission, distribution or
supply and also for terms and conditions of supply. They can charge
from their customers only such tariff which has been approved
by the Commission. Charging of a tariff which has not been
approved by the Commission is an offence which is punishable
under Section 45 of the Act. The provisions of the Act and
Regulations show that the Commission has the exclusive power
to determine the tariff. The tariff approved by the Commission is
final and binding and it is not permissible for the licensee, utility or
anyone else to charge a different tariff.
***
***
***
"18. Electricity is not a commodity which may be stored or kept in
reserve. It has to be continuously generated and it is so continuously
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generated electricity which is made available to consumers. Any
generator of electricity has to have some alternate arrangement
to fall back upon in the event of its generating machinery coming
to a halt. The standby arrangement for 550 MVA made by TPC
was for the purpose that in the event its generation fell short for
any reason, it will be able to immediately draw the aforesaid
quantity of power from MSEB. Similarly, the arrangement entered
into by BSES with TPC ensured the former of immediate
availability of 275 MVA power in the event of any breakdown or
stoppage of generation in its Dahanu generation facility. Heavy
investment is required for generation of power. For this kind of a
guarantee and availability of power, TPC had to pay charges for
the same to MSEB. This payment was in addition to the charges
or price which TPC had to pay to MSEB for the actual draw of
electrical energy. The same is the case with BSES qua TPC.
The charges paid for this kind of an arrangement whereby a fixed
quantity of electrical energy was guaranteed to TPC and BSES
at their desire, is bound to constitute a component of the price
which they (BSES and TPC) would be charging from their
consumers towards the cost of the electrical energy actually
consumed by them. The determination or quantification of the
amount which is payable for this kind of standby arrangement
made in favour of TPC and BSES would, in reality, mean
determination of the price or charges for wholesale or bulk supply
of electricity. It will, therefore, clearly fall within the expression
"determine the tariff for electricity, wholesale, bulk, grid or retail"
as used in clause (a) of sub-section (1) of Section 22 and also in
the expression "regulate power purchase ... including the price at
which the power shall be procured from the generating companies
..." as used in clause (c) of sub-section (1) of Section 22.
Therefore, the determination or quantification of the amount which
BSES has to pay to TPC falls within the jurisdiction of the State
Commission under Section 22 of the Act. This legal position is
also reflected by Section 29 of the Act which confers an overriding
power and clearly lays down that notwithstanding anything
contained in any other law the tariff for supply of electricity -
wholesale, bulk or retail - shall be subject to the provisions of
the Act and shall be determined by the State Commission. This
clearly ousts the jurisdiction of any other authority to determine
the tariff. It may be noted here that the Act came into force on
TATA POWER COMPANY LTD. v. ADANI ELECTRICITY
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25-4-1998 and the Maharashtra Electricity Regulatory Commission
was formed on 5-8-1999. Therefore, it is not possible to accept
the contention of Shri Nariman that the State Government had
the authority or jurisdiction on 22-3-2000 to determine or quantify
the charges which BSES had to pay to TPC under the terms of
the licence granted to the former as this was subsequent to the
formation of the Maharashtra Electricity Regulatory Commission."
19.