REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELALTE JURISDICTION

CIVIL APPEAL NO. 3492  OF 2006

Binani Zinc Limited ….Appellant

Versus

Kerala State Electricity Board and others ….Respondents

J U D G M E N T

S.B. SINHA, J.

1. Correctness or otherwise of an observation made by a two Judge

Bench of this Court in BSES Ltd. and others v.  Tata Power Company

Ltd., [ (2004) 1 SCC 195 ] having been doubted, this matter has been

referred to a Larger Bench.

2. Kerala  State  Electricity  Board  (KSEB),  respondent  No.2  is

constituted  and  incorporated  under  the  provisions  of  the  Electricity

(Supply)  Act,  1948 (for  short  ‘the  1948  Act’).   Indisputably the  first

respondent is entitled to frame and revise tariff for electrical energy in

exercise of the powers conferred upon it by Sections 49, 59 and clause (j)

of Section 79 of the 1948 Act.   

3. The Parliament enacted Electricity Regulatory Commissions Act,

1998 (for short 1998 Act) which received the assent of the President of

India on or about 2nd July, 1998.  It was, however, deemed to have come

into force with effect from 25th April, 1998.  

4. By order dated 13th May, 1999, KSEB revised its tariff with effect

from  15th May,  1999.   A  writ  petition  was  filed  by  an  Association

questioning the said order.    

5. Subsequently on 3rd May, 2001 the Government of Kerela effected

an  increase  of  tariff  for  all  categories  of  consumers  except  old  age

homes, schools and hostels of mentally retarded persons etc. The revised

tariff  was  made  effective  from  August  10,  2001.  According  to  the

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governmental order, KSEB was incurring a deficit of Rs. 160.44 crores

per month and in order to make up for the said deficiency the tariff hike

was necessitated. Pursuant to the said policy decision the KSEB later on

issued a detailed tariff order.

6. The Power Department of the Government of Kerala issued G.O.

(MS) No. 23/2001/PD on 17th August, 2001 inter alia declaring that the

Government of Kerela had tentatively decided to enter into a MOU with

the Government of India with a view to affirm the joint commitment of

the two parties  to reform the power sector  in  Kerela in a time bound

manner. The said MOU in the relevant para stated :-

“8. Kerala will constitute an independent State Electricity  Regulatory  Commission  by  October, 2001  and  file  tariff  petitions  by  March  2002. Tariff orders issued by SERC will be implemented fully unless stayed or set aside by Court orders.”

7. On or about 11th October, 2001 a Government Order was issued by

the Government of Kerala further enhancing the tariff by 50 paise per

unit for all industrial consumers  

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8. KSEB revised tariff under Sections 49, 59 and sub-section (j) of

Section 79 of the 1948 Act by issuing an order known as ‘The Kerala

State Electricity Board Extra High Tension Tariff Revision Order 2002”

(for the sake of brevity ‘2002 Order’).  The said order came into force

with effect from 1st October, 2002 in terms whereof revision in the tariff

for extra high tension industrial units was effected.   

9. The  Kerala  State  Electricity  Commission  (KSERC)  was

constituted by the State of Kerala on 14th November, 2002 in exercise of

its power conferred by Section 17 of the 1998 Act  

10. Appellant questioning the validity of the said 2002 Order filed a

writ  petition  before  the  Kerala  High  Court  which  was  marked as  OP

9798 of 2003.  As in the meanwhile the KSERC came into force, the

High Court permitted the appellant to approach the Commission within

30 days noting that it would be entitled to examine whether the revision

conforms to Section 29 of the 1998 Act or not.   

11. The Parliament enacted the Electricity Act, 2003 which came into

force with effect from 10th June, 2003.   

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12. The KSERC in terms of its order dated 30th April, 2004 inter alia

held :-

a) On the day the notification dated 24.10.2002 was issued, the

Board  was  empowered  to  determine  the  tariff  since  the

Electricity (Supply) Act, 1948 was still applicable.     

b) No  ground  for  re-determining  tariff  for  HT  and  EHT

consumers.

c) Cross  subsidy  for  tariff  for  HT and  EHT categories  was

around 43%.”

13. The appeal  was preferred thereagainst  before  the High Court  in

terms of Section 27 of the 1998 Act whereupon by an order dated 2nd

July, 2004 it was directed :-

“(a) Though the Tariff Revision Order, 2002 was issued on 24th October, 2002, i.e. subsequent to coming into force of the ERC Act, 1998, the  Board  was  empowered  to  issue  the notification as  the Regulatory Commission had not been constituted.  

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(b) With  respect  to  issue  of  cross  subsidy, matter  remanded  to  the  Commission  for fresh determination.”  

14. A special leave petition was filed thereagainst.  This court by an

order dated 13th September, 2004 passed an interim order directing the

KSEB  not  to  disconnect  appellant’s  electricity  supply  subject  to  its

paying the demand as per the tariff  before its  revision on 24.10.2002.

Appellant was also asked to deposit Rs.1 crore with the KSEB.   

15. Before  the  court  it  was  contended  by  the  appellant  that  the

Electricity Act, 2003 having come into force with effect from June 10,

2003, the KSERC functioning as such prior thereto continues to function

as the State Commission under the 2003 Act and thus it must be held to

have  considered  the  appellants’  petition  in  terms  of  the  provisions

thereof.   It  was  furthermore  argued  that  the  1998  Act  having  been

repealed by the 2003 Act, the appeal preferred by the appellant before

the Kerela High Court was not maintainable.

This Court, however, while disposing of the appeal held that the

issues raised by the appellant could be more effectively considered and

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disposed of by the appellate tribunal under the 2003 Act, being an expert

body.

16. Pursuant  to  or  in  furtherance  of  the  said  order  the  Appellate

Tribunal  upon hearing  the  parties  has  passed  the  impugned  judgment

inter alia opining that the respondent-KSEB had the jurisdiction to revise

the tariff framed on 24th July, 2006, stating :-

“26. ….Therefore,  till  the  Commission  was constituted  by  the  State  of  Kerala  the  power remained  vested  in  the  Board  to  determine  the tariff.”

17. Mr. K.K. Venugopal, learned counsel appearing on behalf of the

appellant would urge:-

(i) Upon coming into force of 1998 Act the State was obligated

to constitute the Electricity Commission within a reasonable

period.

(ii) On coming into  force of  the  1998 Act Respondent-Board

and/or  the  State  of  Kerala  had  no  authority  to  revise  the

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tariff  in  terms  of  the  provisions  of  the  1948  Act  or

otherwise.  

(iii) In any event  the principles  laid down in 1998 Act should

have been kept in mind while revising the tariff, particularly

in  respect  of  the cross  subsidy,  which  had specially been

dealt with in the Statement of Objects and Reasons of 1998

Act.

18. Mr.  M.T.  George,  learned  counsel  appearing  on  behalf  of  the

Board, on the other hand, would urge :-  

(i) Section  17  of  the  1998  Act  does  not  impose  any  legal

obligation upon the State to constitute the Commission ;

(ii) So long the Commission is not constituted, the Board would

have jurisdiction to frame and/or revise tariff as the statute

does not contemplate a vacuum ;  

(iii) The 1998Act having not repealed the 1948 Act, the power

to  frame  tariff  in  terms  of  Section  49  of  the  1948  Act

continued to remain in the Board ;

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(iv) The High Court in exercise of its jurisdiction under Article

226 of the Constitution of India could not have issued a writ

or order in the nature of mandamus directing the State to

constitute the Commission.   

19. We may at this stage notice the relevant provisions of the 1998

Act.  

Section  2(c)  of  the  1998  defines  ‘Commission’  to  mean  the

Central  Commission  or  the  State  Commission  or  the  Joint  Electricity

Regulatory Commission, as the case may be.  Section 2(j) of the 1998

defines  ‘State  Commission’  to  mean  the  State  Electricity  Regulatory

Commission established under sub-section (1) of Section 17.   

Section 3 provides for establishment and incorporation of Central

Commission, sub-section (1) whereof read thus :-  

“3. (1) The Central Government shall, within three months from the date of the commencement of this Act  by  notification  in  the  Official  Gazette, establish  a  body  to  be  known  as  the  Central Electricity Regulatory Commission to exercise the

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powers  conferred on,  and the  functions  assigned to, it under this Act.”

    (Emphasis supplied)

Section 17 of the Act provides for establishment and incorporation

of State Commission, sub-section (1) whereof reads as under :-  

“(1) The State Government may, if it deems fit, by notification in  the Official  Gazette,  establish,  for the  purposes  of  this  Act,  a  Commission  for  the State  to  be  known  as  the  (name  of  the  State) Electricity Regulatory Commission.

    (Emphasis supplied)

Section 22 deals with the functions of State Commission.

Section  28  provides  for  determination  of  tariff  by  the  Central

Commission.  

Section  29  provides  for  determination  of  tariff  by  the  State

Commission, relevant part  of sub-sections (1) and (2) whereof read as

under :-  

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

… …

(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;

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(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;

Sections 51 and 52 read as under :-

“Section  51  -  Amendment  of  Act  54  of  1948  - With  effect  from  such  date  as  the  Central Government may, by notification,  in the Official Gazette appoint, sub-section (2) of section 43A of the  Electricity  (Supply)  Act,  1948  shall  be omitted:

Provided  that  different  dates  may  be appointed for different States.

Section 52 - Overriding effect  

Save as otherwise provided in section 49, the provisions  of  this  Act  shall  have  effect notwithstanding  anything  inconsistent therewith  contained  in  any  enactment  other than this Act.”

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20. The 1998 Act indisputably was enacted inter alia for the purpose

of  implementing  reforms  pertaining  to  fundamental  issues  facing  the

power  sector,  namely,  lack  of  rational  retail  tariff,  high  level  cross

subsidies,  poor  planning  and  operation,   inadequate  capacity  and  for

safeguarding  the  interest  of  the  consumers   Jurisdiction  of  the

Commission vis-à-vis the Board in the context of the provisions of the

1998 Act and 1948 Act  must  be determined having regard to  a large

number of factors.   

21. Section 3 of the 1998 Act mandates the Central  Government to

establish  Central  Electricity  Regulatory  Commission.   If  the  said

provision  is  contrasted with Section  17  of  the 1998 Act,  it  would  be

evident that no such mandate has been imposed on the State Government

to  constitute  such a Commission.   The Parliament  advisedly used the

words ‘may’ and ‘if it deems fit’ in Section 17 of the Act while using the

word ‘shall’ in Section 3 thereof.    Establishment of a State Commission

by  the  State  Government,  therefore,  is  directory.   It  confers  some

discretionary  power  on  the  State  Government  to  constitute  a  State

Commission.  The State, for sufficient and cogent reasons, may refuse to

constitute  such  a  Commission  or  fail  or  neglect  to  do  so  within  a

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reasonable  time.   For  the  aforementioned  purpose  the  Central

Government can take recourse to certain measures but the same would

not mean that the court can in exercise of its power of judicial review,

issue a writ  or order in the nature of mandamus directing the State to

constitute such a Commission.   

22. In  fact  in  this  case  itself  the  Central  Government  was  able  to

persuade the State Government to establish a Commission by entering

into  a  Memorandum of  Understanding on 17th August,  2001 in  terms

whereof  the  State  of  Kerala  made  itself  bound  to  constitute  the

Commission by October, 2001.   

If the contention of Mr. Venugopal  is  accepted and taken to its

logical  conclusion,  the  superior  courts  would  be  entitled  to  direct  to

Government to implement even conditional legislations.  We, therefore,

are of the opinion that the same is not legally permissible.

23. The provisions of 1998 Act vis-à-vis 1948 Act are required to be

construed harmoniously.  For the said purpose it is required to bear in

mind that the law does not contemplate a vacuum in its operation.  The

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1948 Act has not been repealed or replaced by the 1998 Act. Section 61

merely replaced the Ordinance.

24. Thus, it would be one thing to say that upon coming into force of

the 1998 Act the provisions contained in 1948 Act which are found to be

inconsistent with the former shall give way thereto but it is another thing

to say that although no Commission is constituted, the Board would have

no jurisdiction at all to frame a tariff.   

25. The  State  Electricity  Board  is  a  ‘State’  within  the  meaning  of

Article 12 of the Constitution of India.  It is a statutory authority. If the

Board has the power to frame or revise the tariff as contained in Section

49  and  other  provisions  of  the  1948  Act  which  is  plenary  in  nature,

unless a statutory provision is brought into force interdicting exercise of

such power, it cannot be held to become denuded thereof.  

26. The power to make tariff would bring within its folds the power to

revise  the  same.   Exercise  of  such  powers  from time  to  time  would

depend upon the exigencies thereof.   

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27. The powers/guidelines under the provisions of 1998 Act were to

be exercised by the Central  Commission or the State Commission.  It

must come into existence for the said purpose..  A non obstante clause

contained in Section 29 or Section 52 of the 1998 Act would be attracted

only when the Commission comes into force and not prior thereto.  The

provisions of the said Act are to be exercised by the Commission for the

purposes of the Act.  It must, therefore, come into existence before it can

exercise its power.   

28. It is, therefore, difficult for us to persuade ourselves that that the

factors enumerated in clauses (c) to  (g) contained in sub-section (2) of

Section  29  of  1998  Act  providing  for  the  principles  required  to  be

followed  by  the  Commission  were  binding  on  the  State  Electricity

Boards also.   

The State Electricity Boards are entitled to frame tariff in terms of

the  provisions  contained  in  the  1948  Act.   The  tariff  so  framed  is

legislative in character.  The Board as a statutory authority is bound to

exercise its jurisdiction within the four-corners of the statute.  It must act

in  all  fields  including  the  field  of  framing  tariff  by  adopting  the

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provisions  laid  down  in  1948  Act  or  the  Rules  and  the  Regulations

framed thereunder.  It is one thing to say that while framing tariff it can

only take into consideration the provisions  laid down in the Schedule

appended the Act and/or the directions contained in the policy decisions

issued by the State as also other statutory principles governing the same

but then a tariff framed by it cannot be held to be ultra vires only because

it did not take into consideration certain principles laid down in clauses

(c) to (g) of sub-section (2) of Section 29 of the 1998 Act.   It is of some

significance to note that the Commission in terms of clauses (a) and (b)

of sub-section (2) of Section 29 of the 1998 Act are required to follow

the principles provided for under Sections 46, 56 and 57 of the 1998 Act

as also the Sixth Schedule appended thereto.  The 1998 Act, therefore,

recognises the principles contained in the 1948 Act also.

29. The provisions of Section 52 of 1998 Act, therefore, are required

to be read in the light of the other provisions contained therein. It is also

a well  settled  principle  of  law that  a statute  does  not  envisage  doing

anything which is impossible to be done.  Lex non cogit ad impossibilia

Gausa ommiss Gausa ommiss is a well known principle.   

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It would be absurd to suggest  that  the principles  required to be

adopted by the Commission were per force required to be adopted by the

Electricity Boards despite the fact that the Commission did not come into

existence.   

30. The  Commission  has  been  empowered  to  frame  tariff.   It  is,

however, not been empowered to frame tariff with retrospective effect so

as to cover a period before its constitution.   The matter might have been

different if such a power has been conferred on the Commission.  It is

now  a  well  settled  principle  of  law  that  the  rule  of  law  inter  alia

postulates  that  all  laws  would  be  prospective  subject  of  course  to

enactment an express provision or intendment to the contrary.  

31. On the aforementioned factual backdrop we may notice that in the

case of BSES (supra) the Electricity Commission was constituted on 5th

August, 1999.  A dispute arose in regard to payment of standby charges

by  and  between  the  licensee  (Tata  Power)  and  the  appellant  therein

(BSES) for the period 1st December, 1998 to 31st March, 1999.   We may

notice the fact of the said case :-

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“….On account  of  the  notice  given  by TPC for increasing  the  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, at the same time issued certain directions, namely, that 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  the  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.”

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In the aforementioned fact situation obtaining the Division Bench

held as under:-

“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 the Sixth  Schedule  (para  I,  third  proviso)  of  the Electricity  (Supply)  Act,  1948,  the  enhanced charges  became effective  and operative  after  the 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  the  Electricity  (Supply) Act,  1948, which are inconsistent with the Act would cease to apply  and  consequently,  the  provisions  of  the Sixth  Schedule  of  the  said  Act  can  have  no application  now.  The  Sixth  Schedule  has  been made  by virtue  of  Sections  57  and  57-A of  the Electricity  (Supply) Act,  1948 and Section  57-A contemplates  constitution of a Rating Committee by the State Government to examine the licensee’s charges for the supply of electricity. Section 29(6) of  the  Act  specifically  lays  down  that notwithstanding  anything  contained  in  Sections 57-A and  57-B  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

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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.”

32. BSES (supra) must be held to have been determined on its own

facts. Sub-section (6) of Section 29 of the 1998 Act bars constitution of a

rating committee.  In ‘BSES’ a Committee was constituted by the State

of  Maharashtra.   In  that  case  when  the  Regulatory Commissions  had

been  set  up  by  the  State  government  under  the  ERC  Act,  no  other

authority  including  the  Board,  would  obviously  have  the  power  to

determine  the  tariff.   It  is  presumably  on  that  premise  the  that  the

provisions of the 1998 Act must be given effect to even for the period

during which it had not come into force, must be understood.

33. We must also notice that the Electricity (Supply) Act, 1998 was

not repealed by the ERC Act, 1998. It was only under Section 185 of the

Electricity Act of 2003 that the provisions of the Indian Electricity Act

1010, Electricity (Supply Act 1948 and the ERC Act 1998 were repealed.

But at the same time anything done or any action taken under the Acts of

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1910 or 1948 or  1998 Act have been saved in  so far as they are not

inconsistent with provisions of the 2003 Act.

34. We  have,  however,  no  hesitation  in  finding  that  the  State

Electricity Board had the requisite jurisdiction to revise a tariff till such

time as the Commission was constituted and the purposes of the 1998

Act  could  be  achieved  through  it.   Till  the  time  the  Regulatory

Commission  was  not  constituted  by the  state  of  Kerela,  the  power  to

determine tariff remained with the Board under the Electricity (Supply )

Act  1948  as  it  was  not  repealed  by  the  Electricity  Regulatory

Commission Act 1998. The Parliament could not have intended to bring

about a situation where no authority would be empowered to determine

the tariff between the date of coming into force of the ERC Act, 1998

and the constitution of the commission. It  is only after the Regulatory

commission is constituted that it will be the sole authority to determine

the tariff.

35. We are, therefore, of the considered opinion that this clarification

in regard to the decision rendered by a two Judge Bench of this Court in

BSES (supra) would be sufficient to answer the reference.

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36. Mr.  Venugopal  would,  however,  submit  that  other

contentions/substantial questions of law have been raised in the appeal.

Such questions may be determined by an appropriate 2 Judge Bench.

37. This reference is answered accordingly.

38. The matter may now be placed before an appropriate Bench.  

…………………………J.    [ S.B. Sinha ]

…………………………J.  [ Asok Kumar Ganguly]

…………………………J.   [ R.M. Lodha ]

New Delhi March 19, 2009

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