http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 12  

CASE NO.: Appeal (civil)  8360-8361 of 2003 Appeal (civil)  8362-8363 of 2003

PETITIONER: BSES Limited                                             

RESPONDENT: M/s Tata Power Co. Ltd. & Ors.                   

DATE OF JUDGMENT: 17/10/2003

BENCH: R.C. Lahoti & G.P. Mathur

JUDGMENT: JUDGMENT (Arising out of Special Leave Petition (Civil) Nos.10877-10878 of 2003) (Arising out of SLP(C) Nos.11461-11462 of 2003)

G.P. Mathur, J.

       Leave granted.         These appeals, by special leave, have been preferred against the  judgment and order dated 3.6.2003 of Bombay High Court in MERC Appeal  No.1 of 2002 (The Tata Power Company v. BSES Ltd. & Ors.) and MERC  Appeal No.2 of 2002 (BSES Ltd. & Ors. v. The Tata Power Company) which  had been preferred under Section 27 of the Electricity Regulatory  Commissions Act, 1998 (hereinafter called "the Act") challenging the order  dated 7.12.2001 of Maharashtra Electricity Regulatory Commission (for short  ’the Commission’).     2.      The Tata Power Company Ltd. (for short ’TPC’) is a generating  company within the meaning of Sub-section 4A of Section 2 and a bulk  licensee within the meaning of Sub-section (3) of Section 2 of the Electricity  (Supply) Act, 1948.   An agreement was arrived at between Maharashtra State  Electricity Board (for short ’MSEB’) and TPC in or about March, 1985,  whereby TPC was provided 300 MVA standby facility from  MSEB and it  was further agreed that in view of the growing requirement of the city of  Bombay, the said standby facility would stand enhanced by a quantum of 50  MVA per year.   This standby facility increased to 550 MVA by the year 1990  and payment for the same was to be made irrespective of the fact whether   electricity was drawn or not and if  electricity was drawn,  actual payment for  the same was to be made over and above the standby charges.   In the year  1990, it was agreed that the annual increase in the standby facility would no  longer be operational and henceforth TPC would be entitled to avail of and  pay for the standby facility of only 550 MVA.   This agreement was reduced  in writing by way of letter dated 6.7.1990 addressed by MSEB to TPC.  

3.      The Bombay Suburban Electric Supply Company (for short ’BSES’)  had been granted a distribution licence in the year 1926 which   was amended  in the year 1976 to enable it to become a generator of electricity in order to  take care of enhanced demand in the city of Bombay.   The licence was further  amended on 30.5.1992  and it contained a clause requiring BSES to execute  suitable interconnection with the system of TPC with the approval of Central  Electricity Authority, New Delhi.    A meeting was held between TPC and  BSES on 29.6.1992 regarding technical/commercial aspect of said  interconnection. It was agreed that  as TPC already had an arrangement with  MSEB whereby  standby facility was provided to it, similar standby facility  may be provided to BSES from the standby capacity reserved by TPC with  MSEB and appropriate sharing of charges could be worked out.  The power  plant established by BSES at Dahanu became operational in 1995 and with  effect from August 1995 it started supplying  power  to the city of Bombay as  per the conditions of the licence.   

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 12  

4.      Due to dispute on commercial terms between TPC and BSES the  interconnection was not established for a long time though technical  arrangements had been made.  The Maharashtra Government appointed a  Committee under the chairmanship of Principal Secretary, Energy, of which  representatives of MSEB, TPC and BSES were members.  After taking into  account the recommendation of the Committee the Government of  Maharashtra on 19.1.1998 directed TPC and BSES to interconnect with one  another and further directed TPC to provide to BSES  standby supply of 275  MVA.   It was further directed that BSES would pay Rs.3.5 crores per month  to TPC for such standby facility.  It was also mentioned in the order that  standby charges were based upon existing tariffs of TPC and BSES and the  same may be reviewed during tariff revision in future.  An agreement in that  regard was thereafter executed between TPC and BSES on 31.1.1998 and the  interconnection between the two systems was established on 14.2.1998.

5.      The  MSEB was charging an amount of Rs.24.75 crores per month from  TPC for providing the standby facility of 550 MVA.   On 31.8.1998 MSEB  served a notice on TPC intimating its intention to enhance the charges for this  standby facility from Rs.24.75 crores  to Rs.30 crores per month with effect  from 1.12.1998.   The TPC then gave a notice dated 30.9.1998 to BSES of its  intention to enhance the charges for the standby facility of 275 MVA provided  by it from Rs.3.5 crores per month to Rs.15.125 crores per month with effect  from 1.12.1998.   The notices were given under the third proviso to para 1 of  Sixth  Schedule to Electricity (Supply) Act, 1948, which lays down that  licensee shall not enhance the charges for the supply of electricity until after  the expiry of a notice in writing of  not less than sixty clear days of its  intention to so enhance the charges.   On account of the notice given by TPC  for increasing charges of standby supply of 275 MVA, a dispute arose and a  meeting was convened on 4.3.1999, wherein the Deputy Chief Minister,  Government of Maharashtra and representatives of both the sides were  present.   The Deputy Chief Minister though advised both the parties to settle  the issue amicably between themselves without referring to the Government  but at the same time issued certain directions, namely, BSES should share  Rs.9 crores out of Rs.22 crores additional standby charges levied by MSEB  upon TPC for the period 1.12.1998 to 31.3.1999 and the issue regarding  sharing of standby charges for the period 1.4.1999 onwards be referred to a  Committee to be constituted by the State Government.   The Government of  Maharashtra thereafter constituted a Committee on 27.5.1999 to study certain  issues including that of standby charges to be paid by BSES to TPC and to  submit a report.   Shortly, thereafter a notification was issued on 5.8.1999  constituting the Maharashtra Electricity Regulatory Commission (for short  ’the Commission’).    The Committee constituted by the Government of  Maharashtra on 27.5.1999 in its meeting held on 2.5.2000 resolved that in  view of  constitution of the Commission the question of payment of standby  charges could only be determined by the Commission and accordingly  resolved that the said issue be referred to the Commission for determination.    An intimation in this regard was also sent to the respective parties.   However,  the Government of Maharashtra passed an order  on 22.3.2000 whereby BSES  was directed to pay standby charges to TPC at the rate of 50 per cent of the  amount of standby charges payable by TPC to MSEB.  This was done on the  basis that MSEB was providing standby facility of 550 MVA to TPC and as  TPC was providing standby facility of 275 MVA  to BSES, it should pay half  of the said amount.  The order further provided that  for the period 1.12.1998  to 31.3.1999 BSES should pay Rs.9 crores as standby charges to TPC.   BSES  was not satisfied with the aforesaid order of the Government and made  repeated requests for review of the same and lastly on 6.10.2000, it sent a  detailed letter to the Government requesting for reconsideration of the matter.   

6.      The Government of Maharashtra issued a notification on 27.10.2000  conferring upon the Commission powers to adjudicate upon the disputes and  differences between licensees and utilities and to refer the matter for  arbitration as provided in  clause (n) of Sub-section (2) of Section 22 of  the  Electricity Regulatory Commissions Act, 1998.   The Government wrote a  letter to TPC on 30.10.2000 informing that in view of conferment of power

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 12  

under Section 22(2)(n) of the Act upon the Commission the dispute regarding  the standby charges between TPC and BSES has to be submitted to the said  Commission.   Thereafter, BSES filed a petition before the Commission for  resolution of dispute regarding the charges for standby facility of 275 MVA  provided to it by TPC and the petition was registered as Case No.7 of 2000.     On 5.12.2000, the Government of Maharashtra informed  TPC and BSES that  its earlier order dated 22.3.2000 is being put on hold till the decision of the  Commission is given.  

7.      After considering the submissions made by the representatives for the  parties, the Commission decided the petition filed by BSES by the  order  dated 7.12.2001.   The main part of the order was written by two Members of  the Commission who directed as under : 1.      BSES shall make payment of Rs.77.06 crores together with  interest thereon at the rate then applicable with effect from   1.4.2000 to TPC within four weeks from the date of the  order for the year 1999-2000.   While making payments  due credit shall be made for the amounts paid by them.

2.      The TPC shall, in turn, pay the balance amount remaining   out of Rs.363 crores due as standby charges together with  interest due thereon at the rate then applicable to MSEB  for the year 1999-2000 within a week thereafter and close  the matter so far as the year 1999-2000 is concerned.    

3.      Based on the principles outlined in the order, calculations  for the year 2000-2001 should also be made and payments  effected suitably by BSES and TPC so that the dues to the  MSEB in respect of standby charges are settled for the   past period within three months from the date of the order.    

4.      For the current financial year 2001-2002 such calculations  will not be possible till the close of the year, whereafter  only the cost and other relevant accounting details will  become available.  In terms of the minutes of the order  passed by Bombay High Court on 19.3.2001 in Writ  Petition No.31 of 2001 filed by TPC against BSES, it had  undertaken to deposit Rs.8.25 crores per month with the  Commission on the 15th day of each month until the  Commission disposed of the petition finally and subject to  such adjustments, as may be necessary, as a result thereof.    On the same analogy for the year 2001-2002, BSES should  pay to TPC Rs.10 crores per month (Rs.119.06 crores  divided by 12) as their share of standby charges till such  time the calculations are made and consequential  adjustment is made.   

8.       The Chairman of the Commission gave a separate and dissenting order  and  he arrived at a different amount.  

9.      Both  BSES and TPC were not satisfied with the order passed by the  Commission and accordingly preferred separate appeals before the Bombay  High Court which have been decided by a common judgment and order dated  3.6.2003 which is the subject matter of challenge in the present appeals.   The  High Court allowed both the appeals and set aside the orders passed by the  Commission and the proceedings have been remitted back to the Commission  for de novo consideration and decision in accordance with law in the light of  the observations made in the order.   It has been directed that during the  pendency of the proceedings before the Commission for the period from  1.7.2003, BSES shall pay to TPC 50 per cent of the standby charges that are  payable by TPC to MSEB for the standby facility provided to it.   It has also  been directed that TPC shall pay to MSEB 50 per cent of the standby charges  payable by it to MSEB for standby facility of 550 MVA and shall also  promptly make over to MSEB the amount paid to it by BSES pursuant to the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 12  

order.   So far as the arrears of standby charges are concerned,  it has been  directed that 80 per cent of the said amount shall be paid by BSES to TPC and  the TPC shall immediately pay that amount to MSEB.   The remaining 20 per  cent of amount of arrears shall be paid by TPC to MSEB.   The question of  interest on the amount of arrears has been  left open to be considered by the  Commission.

10.     The TPC in its appeal has assailed the order of the High Court in  remitting the matter back to the Commission for de novo consideration.   Shri  F.S. Nariman, learned senior counsel for TPC has submitted that the dispute  regarding sharing of standby charges for providing 275 MVA standby facility  to BSES by TPC is not an issue of tariff, but is a dispute relating to sharing or  apportionment of the charges being paid by TPC to MSEB for providing the  former with a standby facility of 550 MVA and, therefore, it does not come  within the purview of the Commission under sub-section (1) of Section 22 of  the Act.   It has been urged that under the terms of the licence granted by the  Government to BSES and as amended in 1992, the Government continues to  have the jurisdiction to decide any kind of dispute. The Maharashtra   Government had decided the dispute vide order dated 22.3.2000 and when the  powers under Section 22(2)(n) of the Act were conferred upon the  Commission on 27.10.2000, there was no existing dispute between the parties  regarding the share of the parties as the same had already been decided and  consequently, the Commission had no jurisdiction to entertain the petition  filed by BSES.   It has further been contended that the standby facility is  essential for every generator of electricity and since TPC was providing  standby facility of 275 MVA to BSES out of the standby facility of 550 MVA  being provided by MSEB to TPC, then logically BSES should pay half of the  said amount.   Lastly, it has been urged that the order passed by the State  Government on 5.12.2000, whereby it was communicated to the parties that  the order of the Government dated 22.3.2000 is being put on hold till the  Commission’s decision is given, would cease to be operative after the decision  of the Commission and consequently the order dated 22.3.2000 would revive  and would bind the parties.   It has also been urged that the  BSES having not  challenged the order of the State Government dated 22.3.2000 by taking  appropriate proceedings, it was fully bound by it and consequently it should  pay standby charges to TPC on the same rate on which TPC pays standby  charges to MSEB  for 550 MVA standby facility to it.    

11.     Shri Kapil Sibal, learned senior counsel for BSES, has submitted that  the dispute between the parties was essentially relating to determination of  tariff which squarely falls within the jurisdiction of the Commission under  Section 22 of the Act.   The Electricity Regulatory Commissions Act had  come into force on 25.4.1998 and Maharashtra Regulatory Commission had  been constituted on 5.8.1999 and after constitution of the Commission, it was  the said body alone which had the jurisdiction to decide the dispute and the  State Government had no authority to pass the order dated 22.3.2000 and,  therefore,  said order was wholly without jurisdiction and was not binding  upon BSES.   Learned counsel has also submitted that the order dated  5.12.2000 passed by the State Government by which its earlier order dated  22.3.2000 was put on hold till the decision of the Commission, cannot be  interpreted to mean that the said order will stand revived and become  operative after the dispute had been decided by the Commission as it will lead  to a very queer situation.  Learned counsel has also urged that in the facts and  circumstances of the case, the order passed by the High Court in so far as it  has remitted the proceedings back to the Commission for de novo  consideration is perfectly justified and calls for no interference.

12.     In order to appreciate the contention raised by the learned counsel for  the parties, it is necessary to briefly examine the provisions of the Act.   The  rapidly growing demand for energy brought about by economic liberalization  has created enormous problems.   To overcome these problems and other  issues facing the power sector, the Government of India organized two  Conferences of Chief Ministers to discuss the whole gamut of issues in the  power sector and the outcome of these meetings was the adoption of the  Common Minimum National Action Plan for Power.   Under this action plan

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 12  

it was considered necessary to create a Regulatory Commission as a step to  arrest deteriorating condition of the State Electricity Boards and to make plans  for the future developments.   The Administrative Staff College, Hyderabad to  whom the Ministry of Power assigned the task of studying the restructuring  needs of the system, strongly recommended the creation of independent  Electricity Commissions, both at the Centre and the States to give effect to the  aforesaid recommendations.  The Electricity Regulatory Commissions Bill  was thereafter  introduced in the Parliament.   The Objects and Reasons of the  Act show that the main function of the State Electricity Regulatory  Commission shall be (i) to determine the tariff for electricity, wholesale, bulk,  grid and retail; (ii) to determine the tariff payable for use of the transmission  facilities; and (iii) to regulate power purchase and procurement process of the  transmission utilities, etc.   The changed scenario  may give rise to problems  of highly complex and technical nature between the generator, supplier and  distributor of energy, which can be better resolved by technically qualified  people who may constitute the aforesaid Regulatory Commission.  They will  have the additional advantage of taking assistance from consultants, experts  and professional persons    Therefore, it will be proper to interpret the Act in a  broad manner and not in a narrow or restrictive sense in so far as the  jurisdiction of the Commission is concerned, so that the purpose for which the  Act has been enacted may be achieved.

       Chapter V of the Act deals with Powers And Functions of the State  Commission and Sub-section (1) of Section 22 therein reads as under : Section 22.     Functions of State Commission  

(1)  Subject to the provisions of Chapter III, the State  Commission shall discharge the following functions, namely:-

(a)     to determine the tariff for electricity, wholesale, bulk, grid  or retail, as the case may be, in the manner provided in  Section 29;

(b)     to determine the tariff  payable for the use of the  transmission facilities in the manner provided in Section  29;

(c)     to regulate power purchase and procurement process of the  transmission utilities and distribution utilities including the  price at which the power shall be procured from the  generating companies, generating stations or from other  sources for transmission, sale, distribution and supply in  the State;

(d)     to promote competition, efficiency and economy in the  activities of the electricity industry to achieve the objects  and purposes of this Act."

Sub-sections (1) and (2) of Section 29 read as under : Section 29  Determination of tariff by State Commission  (1)  Notwithstanding anything contained in any other law, the  tariff for intra-State transmission of electricity and the tariff for  supply of electricity, grid, wholesale, bulk or retail, as the case  may be, in a State (hereinafter referred to as the tariff), shall be  subject to the provisions of this Act and the tariff shall be  determined by the State Commission of that State in accordance  with the provisions of this Act.

[Provided that in State or Union territories where Joint Electricity  Regulatory Commission has been constituted, such Joint  Electricity Regulatory Commission shall determine different  tariff for each of the participating States or Union territories.]

(2)     The State Commission shall determine by regulations the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 12  

terms and conditions for the fixation to tariff, and in doing so,  shall be guided by the following, namely:-

(a)     the principles and their applications provided in sections  46, 57 and 57A of the Electricity (Supply) Act, 1948 (54 of  1948) and the Sixth Schedule thereto;

(b)     in the case of the Board or its successor entities, the  principles under section 59 of the Electricity (Supply) Act,  1948 (54 of 1948);  

(c)     that the tariff progressively reflects the cost of supply of  electricity at an adequate and improving level of  efficiency;

(d)     the factors which would encourage efficiency, economical  use of the resources, good performance, optimum  investments, and other matters which the State  Commission considers appropriate for the purpose of this  Act;

(e)     the interests of the consumers are safeguarded and at the  same time, the consumers pay for the use of electricity in a  reasonable manner based on the average cost of supply of  energy;

(f)     the electricity generation, transmission, distribution and  supply are conducted on commercial principles;

(g)     national power plans formulated by the Central  Government.

13.    Sub-section (2) of Section 22 empowers the State Government to confer  by notification in the Official Gazette various functions  upon the State  Commission which are enumerated from clauses (a) to (p) in the said sub- section.  One of the function which can be conferred  under clause (n) is to  adjudicate upon the dispute and differences between the licensees and utilities  and to refer the matter for arbitration.    

14.     Section 58 of the Act empowers the State Commission to make  Regulations consistent with the Act and the Rules made thereunder to carry  out the purposes of the Act.   Clause (d) of Sub-section (2) of this Section lays  down that Regulation may provide the manner in which charges for energy  may be determined under Sub-section (2) of Section 29.

15.     Maharashtra Electricity Regulatory Commission ( Conduct of Business)  Regulations, 1999 framed under the aforesaid provision also have a bearing on  the controversy  in  dispute and Regulations 72, 73, 78, 79, 80, 82 and 83  which are relevant are being reproduced below : 72.     (1) No generating Company, except that which has  entered into or otherwise has a composite scheme for  generation and sale of electricity in more than one State,  shall charge their customers any tariff for supply of  electricity without the general or specific approval of  such tariff by the Commission.

(2)     No utility shall fix any tariff for intra-state  transmission, distribution or supply of electricity and  terms and conditions for the supply of electricity, without  the general or specific approval of the Commission:

Provided that the existing tariff being charged by  generating companies shall continue to be charged after  the date of effect of these regulations for such period as  may be specified by a notification, without prejudice to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 12  

the powers of the Commission to take up any matter  relating to tariff falling within the scope of Section 22 of  the Act.

73.     Any generating company proposing to enter into  any agreement for supply of electricity between the  generating company and any buying party shall get the  approval of the Commission for the tariff before entering  into such contracts.

78.     Utilities, who are required to get their tariff  approved by the Commission, shall evolve tariff  proposals based on the terms and conditions as may be  notified by the Commission and shall submit the same for  approval, in accordance with the procedure prescribed by  the Commission.

79.     All petitions for approval of tariff (generation,  transmission, distribution and supply) and terms and  conditions of supply shall be made strictly in accordance  with regulations and procedures as may be prescribed by  the Commission and shall also be in conformity with the  requirements relating to petitions as prescribed in  Chapter II of these Regulations.

80.     The Commission may approve the proposed tariff  on such stipulations as may be considered appropriate  and as may be specified in the Order.

82.     The utilities concerned shall publish the tariff as  approved by the Commission in the manner as may be  prescribed.  The tariff so published shall be in force from  the date specified in the said publication not being earlier  than the date of such publication and shall be in force  until any amendment is approved by the Commission and  published.

83.     Any utility found to be charging a tariff different  from the one approved by the Commission shall be  deemed to have not complied with the directions of the  Commission and shall be liable to penalties under  Section 45 of the Act, without prejudice to any other  penalty to which it may be liable under any other Act.   Any excess charge of tariff by any utility in any year  shall be dealt with as per the directions of the  Commission.   

16.     The word "tariff" has not been defined in the Act.   "Tariff" is a cartel  of commerce and normally it is a book of rates.   It will mean a schedule of  standard prices or charges provided to the category or categories of customers  specified in the tariff.   Sub-section (1) of Section 22 clearly lays down that  the State Commission shall determine the tariff for electricity (wholesale,  bulk, grid or retail) and also for use of transmission facilities.   It has also the  power to regulate power purchase of the distribution utilities including the  price at which the power shall be procured from the generating companies for  transmission, sale, distribution and supply in the State.   ’Utility’ has been  defined in Section 2(l) of the Act and it means any person or entity engaged in  the generation, transmission, sale, distribution or supply, as the case may be,  of energy.   Section 29 lays down that the tariff for intra-State transmission of  electricity and tariff for supply of electricity, wholesale, bulk or retail in a  State shall be subject to the provisions of the Act and the tariff shall be  determined by the State Commission.   Sub-section (2) of Section 29 shows  that terms and conditions for fixation of tariff shall be determined by  Regulations and while doing so, the Commission shall be guided by the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 12  

factors enumerated in clauses (a) to (g) thereof.  The Regulations referred to  earlier show that generating companies and utilities have to first approach the  Commission for approval of their tariff whether for generation, transmission,  distribution or supply and also for terms and conditions of supply. They can  charge from their customers only such tariff which has been approved by the  Commission. Charging of a tariff which  has not been approved by the  Commission is an offence which is punishable under Section 45 of the Act.    The provisions of the Act and Regulations show that the Commission has the  exclusive power to determine the tariff.   The tariff approved by the  Commission is final and binding and it is not permissible for the licensee,  utility or any one else to charge a different tariff.

17.     There is a sound logic for conferment of such a power on the Electricity  Regulatory Commission.   Hitherto the supply of electricity was being made  by only one body, namely, State Electricity Boards which being an  instrumentality of the State and functioning under the control of the State  Government were not likely to enhance the tariff in an exorbitant or arbitrary  manner.   In fact, Electricity Boards of many States in the country were  running on huge losses. The Electricity Regulatory Commissions Act, 1998  has been enacted to enhance the generation of electricity and improve  efficiency by bringing in private operators.   If a licensee (who may be private  operator) after getting the licence for supply of electricity in a particular area  increases the tariff arbitrarily, the consumers will have no option but to pay  the same. In order to guard against such an eventuality, provision has been  made that while granting a licence conditions may be imposed and further no  tariff can be implemented unless the same has been approved by the  Commission.

18.     Electricity is not a commodity which may be stored or kept in reserve.    It has to be continuously generated and it is so continuously generated  electricity which is made  available to consumers.  Any generator of  electricity has to have some alternate arrangement to fall back upon in the  event of its generating machinery coming to a halt.  The standby arrangement  for 550 MVA made by TPC was for the purpose that in the event its  generation fell short for any reason, it will be able to immediately draw the  aforesaid quantity of power from MSEB.   Similarly, the arrangement entered  into by BSES with TPC ensured the former of  immediate availability of 275  MVA power in the event of any breakdown or stoppage of generation in its  Dahanu generation facility. Heavy investment is required for generation of  power.  For this kind of a guarantee  and availability of power, TPC had to  pay charges for the same to MSEB.   This payment was in addition to the  charges or price which the TPC had to pay to MSEB for the actual drawal of  electrical energy.   The same is the case with BSES qua TPC.   The charges  paid for this kind of an arrangement whereby a fixed quantity of electrical  energy was guaranteed to TPC and BSES at their desire, is bound to constitute  a component of the price which they (BSES and TPC) would be charging  from their consumers towards the cost of the electrical energy actually  consumed by them.   The determination or quantification of the amount which  is payable for this kind of standby arrangement made in favour of TPC and  BSES would in reality mean determination of the price or charges for  wholesale or bulk supply of electricity.   It will, therefore, clearly fall within  the expression "determine the tariff for electricity, wholesale, bulk, grid or  retail " as used in sub-clause  (a) of Sub-section (1) of Section 22 and also in  the expression       "regulate power purchase \005.. including the price at which  the power shall be procured from the generating companies\005\005."  as used in  sub-clause (c) of sub-section (1) of Section 22.   Therefore, the determination  or quantification of the amount which BSES has to pay to TPC  falls within  the jurisdiction of the State Commission under Section 22 of the Act.   This  legal position is also reflected by Section 29 of the Act which confers an  overriding power and clearly lays down that notwithstanding anything  contained in any other law the tariff for supply of electricity, wholesale, bulk  or retail shall be subject to the provisions of the Act and shall be determined  by the State Commission.   This clearly ousts the jurisdiction of any other  authority to determine the tariff.   It may be noted here that the Act came into  force on 25.4.1998 and Maharashtra Electricity Regulatory Commission was

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 12  

formed on 5.8.1999.   Therefore, it is not possible to accept the contention of  Shri Nariman that the State Government had the authority or jurisdiction on  22.3.2000 to determine or quantify the charges which BSES had to pay to  TPC under the terms of the license granted to the former as this was  subsequent to the formation of the Maharashtra Electricity Regulatory  Commission.   

19.     Shri Nariman has submitted that TPC gave a notice on 30.9.1998 of  their intention to enhance the charges of standby facility provided to BSES  from Rs.3.5 crores to Rs.15.125 crores per month and this notice having been  given under Sixth  Schedule (paragraph 1, 3rd proviso) of the Electricity  (Supply) Act, 1948, the enhanced charges became effective and operative  after expiry of 60 days of notice i.e. with effect from 1.2.1998.   The  submission is that by operation of law the charges for standby facility stood  revised and enhanced with effect from 1.12.1998.   In our opinion, the  contention raised has no substance.   The legal position has undergone a  complete change with the enforcement of the Electricity Regulatory  Commissions Act, 1998.   In view of Section 29 of the Act, the tariff for intra- State transmission of electricity and tariff for supply of electricity in  wholesale, bulk or retail has to be determined by the Electricity Regulatory  Commission of the State and a licensee cannot by its unilateral action enhance  the charges. The provisions of the Act have an overriding effect by virtue of   Section 52 of the Act and, therefore, any provisions of Electricity (Supply)  Act, 1948, which are inconsistent with the Act would cease to apply and  consequently the provisions of Sixth Schedule of the said Act can have no  application now.  The  Sixth  Schedule has been made by virtue of Section 57  and 57A of the Electricity (Supply) Act, 1948 and Section 57A contemplates  constitution of a Rating Committee by the State Government to examine  licensee’s charges for the supply of electricity.   Section 29 (6) of the Act  specifically lays down that notwithstanding anything contained in Section  57A and 57B of the Electricity (Supply) Act, 1948, no Rating Committee shall  be constituted after the date of the commencement of the Act.  The effect of  Section 29 and the Regulations framed thereunder is that it is no longer open  to a licensee or utility to unilaterally increase the tariff.  The tariff can be  enhanced only after approval of the Commission and charging of an enhanced  tariff which has not been approved by the Commission will amount to  commission of an offence.   Therefore, the notice to enhance the charges  given by TPC, which was subsequent to the enforcement of the Act, can have  no legal effect.   

20.     Shri Nariman has also submitted that even assuming that the standby  charges are a matter relating to tariff as the same are passed on to the  consumers, but the sharing of standby charges between TPC and BSES is not  a matter relating to determination of tariff and, therefore, the Commission can  have no jurisdiction to enter into such an exercise under Section 22 of the Act.    The submission proceeds on an assumption that the dispute relates to sharing  of standby charges.   In fact, the whole case of BSES is that they are under no  obligation to share the charges which are being paid by TPC to MSEB for  providing them with standby facility.   It may be noted that the standby  facility of 300 MVA was provided to TPC in the year 1985 which gradually  rose to 550 MVA in the year 1990.    The licence of BSES was amended in  1992 whereunder for the first time it was provided that they should interlink  with the system of TPC and ultimately their systems were interlinked on  14.2.1998 in pursuance of the order passed by the Government of Maharashtra  on 19.1.1998.   The question of payment of standby charges by BSES to TPC  has, therefore, arisen for the first time in 1998 which is almost 13 years after  TPC started paying standby charges to MSEB.  In substance, the dispute is  what should be paid by BSES to TPC for the standby facility provided by it.    The strict and narrow interpretation sought to be placed by the learned counsel  so as to oust the jurisdiction of the Commission cannot be accepted as it will  defeat the very object of enacting the Electricity Regulatory Commissions  Act.   

21.     It may be mentioned here that both TPC and MSEB always treated the  charges for standby facility as a matter relating to tariff.  TPC gave a notice to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 12  

Government of Maharashtra and MSEB  on 30.7.1996 for revision of tariff,  where they themselves described the enhancement of demand charges made  by MSEB for standby facility as "revision of tariff".   The charges for standby  facility given by them to BSES were also described as "tariff".   MSEB gave a  notice to TPC on 31.8.1998 where the demand charges for 550 MVA were  described as "tariff for bulk supply".   Again the notice given by TPC on  30.8.1998 of their intention to increase the charges for standby facility given  to BSES from Rs.3.5 crores to Rs.15.125 crores was described by them as  "revision of tariffs".   In the correspondence exchanged amongst TPC, MSEB  and  BSES the charges for standby facility have been described as a matter  relating to "tariff".  TPC  filed a petition before the Commission on  18.10.1999 regarding their dispute of standby charges with BSES and the   subject of application/petition was described as "Revision in Tariff". The  relevant part thereof is being extracted below : "\005\005..We are advised that the matter be submitted to  Maharashtra Electricity Regulatory Commission (MERC) since  the tariff and inter-connected issue of quantum of standby  and  charges is now to be determined by the MERC.  We are  accordingly, referring this matter to you by submitting a copy  of the notice of Tariff Revision.  

The 60 days Notice of tariff revision commences from 1st  October 1999 and ends on 30th November, 1999.  The new tariff  is applicable only for 4 months in the current financial year, i.e.  from 1st December 1999 to 30th March 2000.  Hence, is the  urgency to obtain a timely decision to ensure that the  Companies earn reasonable return for the current year.

The tariff has been formulated after considering available date  on necessary expenses listed in the Sixth Schedule to earn  Reasonable Return by the Licensee.  A major item of this  expenditure pertains to  the quantum of standby required by  TEC and the connected charges payable to MSEB. The issue of  standby charges is vitally inter-connected with the tariff  revision process.  Hence, making such realistic assumptions as  possible, the proposal for tariff revision has been worked out."

22.     The contention of Shri Nariman that in view of the language used in the  order dated 5.12.2000, the Government’s earlier order dated 22.3.2000 stood   revived after the decision of the Commission, has hardly any merit.  If such a  contention is accepted,  it would lead to queer results as after the decision of  the Commission two conflicting and contrary orders  viz., the order of the  State Government dated 22.3.2000 and  the order of the Commission would  come into force.   This can never be the intention of the State Government.    The effect of the order dated 5.12.2000 was that the earlier order dated  22.3.2000 would no longer be operative and the decision of the Commission  would govern the situation.    Even otherwise as discussed earlier, after the  enforcement of the Act it is the Commission which has the jurisdiction  to  decide the controversy and not the State Government.    

23.     Several reasons have been given by the High Court for remitting the  matter to the Commission for a de novo consideration.   The Commission  devised a formula for determination of the charges for standby facility which  was to be paid by BSES to TPC.   Both the sides complained before the High  Court that before adopting the formula they were not given an opportunity to  place their point of view before the Commission for arriving at a just formula  and they were not informed about the exact nature of the formula which was  being adopted.   The order of the Commission shows that for working out the  formula it had appointed consultants.   Two members of the Commission had  several meetings with the consultants and thereafter the formula was worked  out.  But the Chairman of the Commission was not present in these meetings.    In his dissenting order the Chairman has recorded as under : Para 60.        I have had the opportunity  to peruse in detail the draft of  an order approved and circulated by my colleagues in the  Commission, and I am appending a separate dissenting

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 12  

note, in view of my disagreement with them in regard to  their calculations.

Para 63.        As is reflected in paragraph 50 of the order of my  colleagues, the order itself is based on the report of the  Consultants and the  calculations shown in their report.   In this behalf, I understand that my colleagues have had  several meetings with the consultants and it is on the  basis of the working that has been provided by my  colleagues that the report has been compiled.  

Para 64.        I am afraid that I was not informed of any of the  meetings that my colleagues had with the Consultants,  nor was I advised of any minutes of the said meetings till  the draft order was circulated.  In the circumstances,  since the BSES’ share that was purported to have been  communicated by the Commission, it cannot be deemed  to be or considered to be a communication made by the  Commission, unless the communication was considered  by all the Members of the Commission.  It would  tantamount to only two of the Members taking upon  themselves the liberty  to communicate the same."  

24.     The facts mentioned above clearly show that the procedure adopted by  the Commission was not fair  and proper inasmuch as the Chairman did not  participate in the meetings which other two members had with the  Consultants, whereunder a formula was devised.  Under Regulation 21, the  quorum for proceedings before the Commission shall be three. In these  circumstances, the High Court was perfectly justified in remitting the matter  to the Commission for de novo consideration and no exception can be taken to  such a course of action.   

25.     BSES is aggrieved only against the interim arrangement made by the  High Court, whereby it has been directed to pay 50 per cent of the standby  charges that are payable by TPC to MSEB for its standby facility of 550  MVA.  Shri Kapil Sibal, learned senior counsel for BSES, has submitted that  the State Government had, on the basis of the recommendation made by the  Committee, passed an order on 19.1.1998 directing BSES to pay Rs.3.5 crores  per month to TPC when the liability of TPC to MSEB was Rs.24.75 crores per  month.   This shows that the State Government did not apportion the liability  of BSES as half of that of TPC.   He has also submitted that TPC sells 35 per  cent of the power generated by it to BSES and consequently a portion of this  burden of Rs.24,75 crores which TPC is liable to pay to MSEB is passed on  by it to the consumers of BSES.   Therefore, BSES cannot be saddled with  liability to pay half of the amount only on the ground that it has been provided  with a standby facility of 275 MVA which is half of the standby facility  provided by MSEB to TPC.        Learned counsel has also submitted that at  best there can be some kind of a sharing on the amount which TPC has to pay  to MSEB over and above Rs.24.75 crores but up to the extent of the aforesaid  amount the liability of BSES cannot exceed Rs.3.5 crores.   Shri Sibal has also  assailed the order of the High Court on the ground that while making the  interim arrangement for equal sharing of standby charges, reliance has been  placed on the order of the State Government dated 22.3.2000, though the High  Court itself has, in the earlier part of the judgment, held the said order to be  without jurisdiction.   Shri Chidambaram, learned senior counsel appearing for  TPC, has, on the other hand, submitted that the order passed by the State  Government on 19.1.1998, whereby BSES was directed to pay Rs.3.5 crores  out of the liability of Rs.24.75 crores of TPC towards MSEB, was only a pro  tem arrangement, as the order itself mentioned that this was subject to revision  in tariff.   Therefore, the said order has no legal sanctity and cannot bind TPC  in any manner.   He has also submitted that with effect from 1.4.1999 TPC has  only paid half of the standby charges to MSEB and, therefore, the burden of  the entire amount has not been passed on to the consumers.   Shri Altaf  Ahmad, Addl. Solicitor General, appearing for MSEB has submitted that the  TPC owes a huge amount to MSEB and the interim arrangement made by the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 12  

High Court should not be changed or altered in a manner which may  prejudicially affect the interest of MSEB.

26.     An interim arrangement is normally made on a prima facie  consideration of the matter and on broad principles without examining the  matter in depth.   The matter has been remitted to the Commission by the High  Court by the judgment and order dated 3.6.2003 and a period of nearly three  and a half months has already elapsed.  Regulation 101 of the Central  Electricity Regulatory Commission provides that the Commission may  normally dispose of the petitions finally within six months of admission.   The  State Commissions are also expected to follow this time limit for disposal of  petitions.   Since the order made by the High Court is only by way of interim  arrangement and the Commission is expected to decide the disputes finally  within a short period, we do not consider it proper to interfere with the order  made by the High Court in this regard.   After the decision of the Commission,  the equities can be adjusted and the excess amount paid by any party can be  refunded to it along with appropriate interest or can be adjusted in future bills.   

27.     The Appeals are accordingly dismissed with costs.   The Maharashtra  Electricity Regulatory Commission is directed to decide the dispute  expeditiously, preferably within three months of presentation of a certified  copy of this order before it.  While passing the final order, the Commission  will also make a direction regarding the liability of the parties keeping in view  the deposits made by them as a result of the interim arrangement made by the  High Court.