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CASE NO.: Appeal (civil)  2846 of 2006

PETITIONER: Maharashtra Electricity Regulatory Commission

RESPONDENT: Reliance Energy Ltd. & Ors.

DATE OF JUDGMENT: 14/08/2007

BENCH: A.K.MATHUR & MARKANDEY KATJU

JUDGMENT: J U D G M E N T

1.      This appeal under Section 125 of the of the Electricity Act, 2003 (hereinafter  for short "the Act") is directed against the judgment and order dated 29th March,  2006 passed by the Appellate Tribunal for Electricity whereby the Appellate Tribunal  has allowed the appeals filed by the distribution companies and set aside the orders  passed by the Maharashtra Electricity Regulatory Commission (hereinafter for short  "The Commission") dated  23.2.2005.  The Commission on 3.8.2004 addressed a notice  to all its licensees/distribution companies in Maharashtra and made an inquiry from  them with regard to raising of the bills by the said licensees/distribution companies on  the basis other than the actual meter reading for the relevant period, when large  variations in consumption were noticed,  or for other reasons.  The notice dated  3.8.2004 sent by the Commission to  all its licensees/distribution companies reads as  under :- "Several instances have come to the Commission’s notice of so- called "amendment", "supplementary" or other such bills being  raised by some licensees to consumers, often several years later,  on a basis other than the actual meter reading for the relevant  period, when large variations in consumption are noticed, or for  other reasons.  Computerised systems have sometimes been put  in place which generate such bills automatically.         Wide variations observed in recorded consumption  and other such apparent anomalies may be useful for  monitoring, checking/testing of meters and for taking corrective  action.  However, billing on a basis other than recorded  consumption, and raising amended bills accordingly (often after  several years later, and without giving reasons), is not mandated  by law.           The electricity statutes (in the past, and at present)  provide inter alia that, in case of metered consumers, energy  consumption charges have to be billed on the basis of meter  readings.  Moreover, the licensee, and not the consumer, is  responsible for maintaining, rectifying, or having such meters  replaced where necessary. Thus, no "amendment" bills of the  kind referred to above can be raised, and any additional billing  has to follow due process and the provision of law.         In the context of such "amendment" bills, I am  directed to ask that the billing practices followed be immediately  reviewed and brought into conformity with the statutory  provisions.  An affidavit stating the corrective action taken  (including withdrawal of all such pending bills, and refund,  though adjustment in energy bills or otherwise, of amounts  received from consumers on or after 10.6.2003) may be  furnished by 3rd September, 2004." 2.      In response to the said notice all the licensees/distribution companies in  Maharashtra made their respective submissions before the Commission explaining  under what circumstances the supplementary/amended bills were sent to the  consumers.  They tried to justify raising of such bills and stated that the these bills  were rightly sent as they found that some time the meters were not registering proper

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consumption and on that basis they tried to justify their action.   3.      The Commission examined the matter in detail and vide its order dated  23.2.2005 in para 46 directed as under:- "46.    After considering all these factors and the  submissions made, the Commission directs that the  supplementary/amendment bills issued in the circumstances set  out at para 42 and 43 above from 10th June, 2003 (the date of  coming into force of EA, 2003) and upto notification of the  Supply Code. a.      should be withdrawn, if due meter testing has not been  done with the results intimated to the consumer. b.      any amounts collected should be refunded to the  concerned consumers (without interest considering the  earlier lack of clarity on this meter on the part of the  licensees); c.      where meters have been found to be defective upon  subsequent due testing (and the results intimated to the  consumer), the bills may be adjusted for upto 3 months  prior to the date of testing or meter replacement,  whichever is earlier, and any amounts recovered in  excess refunded without interest (in the  case of ’stopped’  meters, the analogy of the Supply Code provisions should  be applied for assessment); d.      the above action should be completed by 30th May, 2005,  so as to give the licensees more than 3 months’ time in  view of the work likely to be involved; e.      compliance should be submitted on affidavit by 15th  June, 2005, with a list of consumers involved, and  certifying that no further action remains to be done in  terms of this Order." By another order dated 23.8.2005 in the case of M/s. Prayas (Energy Group) Pune,  the  Commission in para 45 directed as under :- "45.    Considering the foregoing, the Commission disposes  of Prayas’ petition with the following directions, which would  apply for the period from 1st June, 2004 (i.e. around 3 months  after the detailed Tariff Order dated 10th March, 2004, uptil  19th January, 2005 (following which the Supply code  Regulations were notified): (a)     no billing using past consumption or some related  ’average’ basis should be resorted to for more than a  period of 3 months.  (where average billing has been  continuing for more than that period just prior to 1st  June, 2004, then it cannot be continued from that date.   In case average billing has been resorted to for, say, 2  months prior to that, it can be continued only for upto  one month   more).  During that period 3 months, the  meter should have been tested/replaced, with the results  intimated to the consumer, and appropriate bill  adjustments carried out thereafter (where such average  billing is being done on the basis of presumed faulty  meter, and where defectiveness of the meter has  accordingly been established).  If due and timely  diligence has not been exercised by the licensee, he  cannot claim the right to continue billing on a  presumptive, average basis.  The same principle will  apply to all other situations in which such ’average’  billing has been resorted to, except in cases where the  meter is not accessible.  (However, the Commission notes  that, in the case of locked/inaccesible meters, the  licensees have recourse to the remedies provided under  Section 163 of EA, 2003, and it would be expected that  MSEB would exercise it sooner rather than later). (b)     In all cases where bills have been raised and/or  recoveries made which are not in accordance with (a)  above, the bills should be withdrawn and/or amounts

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refunded to the consumers, through energy bills or other  means, as may be relevant, by 30th November, 2005,  with interest at the same rate as payable by consumers to  MSEB for delayed payments."   4.      Aggrieved against both these orders, the matter was taken up in appeal before  the Appellate Authority.  The Appellate Authority by the impugned order dated 29th  March, 2006 set aside the orders passed by the Commission and directed that each  consumer should approach the forum created under Section 42(5) of the Act for the  individual grievances.  5.      Aggrieved against the order dated 29.3.2006 passed  by the Appellate Authority, the present appeal has been filed under Section 125 of the  Act.   6.      We have heard learned counsel for the parties and perused the record.   7.      Learned counsel for the appellant-Commission has submitted before us that  the Commission has the power to give a general direction to its licensees/distribution  companies and he also submitted that in exercise of the power under the Act, the  Commission was competent to issue the aforesaid direction.  As against this, the  learned counsel appearing for the respondent-licensees/distribution companies  submitted that the Commission has no power to issue a direction like the one issued in  the present case and entertain individual complaints and direct refund of the whole  amount by a blanket order.   8.      The question before us is : what is the power of the Commission and to what  extent the Commission can issue directions.  Suffice it to say that the Regulatory  Commission    was constituted under the Electricity Act, 2003.  The Act was a new  enactment which was promulgated by superseding the Indian Electricity Act, 1910 and  the Electricity Supply Act, 1948.  The Statement of Objects and Reasons of the Act  which have been summarized in the Preamble, reads as under:- "An Act to consolidate the laws relating to generation,  transmission, distribution, trading and use of electricity and  generally for taking measures conducive to development of  electricity industry, promoting competition therein, protecting  interest of consumers and supply of electricity to all areas,  rationalisation of electricity tariff, ensuring transparent policies  regarding subsidies, promotion of efficient and environmentally  benign policies, constitution of Central Electricity Authority,  Regulatory Commissions and establishment of Appellate  Tribunal and for matters connected therewith or incidental  thereto."         "Appropriate Commission" as defined in Section 2(4) of the Act means the  "Central Regulatory Commission referred to in sub-section (1) of Section 76 or the  State Regulatory Commission referred to in Section 82 or the Joint Commission  referred to in Section 83, as the case may be".  In exercise of its power under Section  82 of the Act, the State of Maharashtra constituted the Maharashtra Electricity  Regulatory Commission.  The Commission exercises all the powers which are  enumerated in the Act.  Though various provisions were pointed out to us by learned  counsel for the parties, but Section 82 which is relevant for our purposes reads as  under :- "82. Constitution of State Commission-(1) Every State  Government shall, within six months from the appointed date,  by notification, constitute for the purposes of this Act, a  Commission for the State to be known as the (name of the State)  Electricity Regulatory Commission :         Provided that the State Electricity   Regulatory  Commission, established by a State Government under Section  17 of the Electricity Regulatory Commissions Act, 1998 (14 of  1998) and the enactments specified in the Schedule, and  functioning as such immediately before the appointed date shall  be the State Commission for the purposes of this Act and the  Chairperson, Members, Secretary, and officers and other  employees thereof shall continue to hold office on the same  terms and conditions on which they were appointed under those  Acts :         Provided further that the Chairperson and other  Members of the State Commission, appointed, before the  commencement of this Act,  under the Electricity Regulatory  Commissions Act, 1998 (14 of 1998) or under the enactments

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specified in the Schedule, may, on the recommendations of the  Selection Committee constituted under sub-section (1) of  Section 85, be allowed to opt for the terms and conditions under  this Act by the concerned State Government. (2)     The State Commission shall be a body corporate by  the name aforesaid, having perpetual succession and a common  seal, with power to acquire, hold and dispose of property, both  movable and immovable, and to contract and shall, by the said  name, sue or be sued. (3)     The head office of the State Commission shall be at  such place as the State Government may, by notification,  specify. (4)     The State Commission shall consist of not more than  three Members, including the Chairperson. (5)     The Chairperson and Members of the State  Commission shall be appointed by the State Government on the  recommendation of a Selection Committee referred to in  Section 85."      9.      We are not concerned with the provisions of appointment of Members of the  Commission as they are dealt with by Sections 84 and 85 of the Act. Section 86 deals  with the functions of the Commission and is relevant for our purposes.  For ready  reference, the same is reproduced hereunder. "86. Functions of State Commission:- (1) The State Commission  shall discharge the following functions, namely :- (a)     determine the tariff for generation, supply, transmission  and wheeling of electricity, wholesale, bulk or retail, as  the case may be, withing the State:         Provided that where open access has been permitted to a  category of consumers under section 42, the State  Commission shall determine only the wheeling charges  and surcharge thereon, if any, for the said category of  consumers; (b)     regulate electricity purchase and procurement process of  distribution of licensees including the price at which  electricity shall be procured from the generating  companies or licensees or from other sources through  agreements for purchase of power for distribution and  supply within the State; (c)     facilitate intra-State transmission and wheeling of  electricity; (d)     issue licences to persons seeking to act as transmission  licensees, distribution licensees and electricity traders  with respect to their operations within the State; (e)     promote congeneration and generation of electricity  from renewable sources of energy by providing suitable  measures for connectivity with the grid and sale of  electricity to any person, and also specify, for purchase of  electricity from such sources, a percentage of the total  consumption of electricity in the area of a distribution  licensee; (f)     adjudicate upon the disputes between the licensees and  generating companies and to refer any dispute for  arbitration; (g)     levy fee for the purposes of the Act; (h)     specify State Grid Code consistent with the Grid Code  specified under clause (h) of sub-section (1) of Section 79; (i)     specify or enforce standards with respect to quality,  continuity and reliability of service by licensees; (j)     fix the trading margin in the intra-State trading of  electricity, if considered, necessary; (k)     discharge such other functions as may be assigned to it  under this Act. (2)     The State Commission shall advise the State Government  on all or any of the following matters, namely :- (i)     promotion of competition, efficiency and economy in

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activities of the electricity industry; (ii)    promotion of investment in electricity industry; (iii)reorganisation and restructuring of electricity industry in  the State; (iv)    matters concerning generation, transmission,  distribution and trading of electricity or any other  matter referred to the State Commission by that  Government; (3)     The State Commission shall ensure transparency while  exercising its powers and discharging its functions. (4)     In discharge of its functions, the State Commission shall  be guided by the National Electricity Policy, National  Electricity Plan and Tariff Policy published under section  3.       10.     Thus, from the above provision it is clear that the primary purpose of the  Commission is to determine tariff for generation, supply, transmission of electricity  etc. and to regulate the electricity purchase and procurement process of distribution  licensees, to facilitate intra-State transmission, to promote congeneration and  generation of electricity from renewable sources of energy, to adjudicate upon the  disputes between the licensees and generation companies and to refer any dispute for  arbitration, to levy fee for the purposes of this Act, specify State Grade Code  consistent with the Grid Code specified under clause (h) of sub-section (1) of Section  79.  Sub-Section (2) of Section 86 also empowers the State Commission to advise the  State Government on any of the matters including promotion of competition,  efficiency, matters concerning generation, transmission, distribution and trading of  electricity etc.  Sub-Section (3) provides that the Commission shall ensure  transparency while exercising its powers and discharging its functions.  Sub-section (4)  provides that in discharge of its functions the Commission shall be guided by the  National Electricity Policy, National Electricity Plan and Tariff Policy published under  Section 3.

11.     We are not going into other questions as to how licenses were granted to all  these utilities, i.e., various distribution companies.  It is not necessary for us to go int o  these questions as in the present case, we are primarily concerned to decide the powers  of the Commission and to what extent it can issue directions and whether the direction  given by the Commission in the present case is sustainable or not.   12.     It may be noted from a perusal of Section 86(1)(f) of the Act that the State  Government has only power to adjudicate upon disputes between licensees and  generating companies.  It follows that the Commission cannot adjudicate disputes  relating to grievances of individual consumers.  The adjudicatory function of the  Commission is thus limited to the matter prescribed in Section 86(1)(f).   13.     Section 14 of the Act provides for grant of licence; Section 16 provides for  conditions of licence; Section 61 lays down the tariff regulations and Section 62  provides for determination of tariff.  The Commission under Section 94 has civil  powers also and under Section 96 it has power of entry and seizure.  Under Section 126  the Commission has the power to investigate and make assessment.  Section 127  provides for an appeal to the appellate authority.  Under Section 128  the Commission  can make investigation of certain matters where it is satisfied that the licensee has  failed to comply with any of the conditions of licence or failed to comply with any of the  provisions of the Act or the rules and regulations made thereunder. Sub-Section (6) of  Section 128 empowers the Commission to take any action against the  licensee/generating company.  Sub-section (6) reads as under :- (6)     On receipt of any report under sub-section (1) or  sub-section (5), the Appropriate Commission may, after giving  such opportunity to the licensee or generating company, as the  case may be, to make a representation in connection with the  report as in the opinion of the Appropriate Commission seems  reasonable, by order in writing :- (a)     require the licensee or the generating company to  take such action in respect of any matter arising  out of the report as the Appropriate Commission  may think fit; or (b)     cancel the licence; or (c)     direct the generating company to cease to carry

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on the business of generation of electricity.    Section 142 of the Act provides for punishment for non-compliance of directions  issued by the Commission and Section 143 empowers the Commission to adjudicate  after holding an inquiry in such manner as may be prescribed by the Government.   Section 181 empowers the Commission to make regulations.    14.     A comprehensive reading of all these provisions leaves no manner of doubt  that the Commission is empowered with all powers right from granting licence and  laying down the conditions of licence and to frame regulations and to see that the same  are properly enforced and also power to enforce the conditions of licence under sub- section (6) of Section 128.   15.     Thus, insofar as the first contention of the learned counsel for the respondents  that the Commission has no power is concerned, we are of the view that the same is  wrong.  In this behalf the provisions of The Electricity Act, 2003 are quite clear and  categoric and Section 128(6) empowers the Commission to get the conditions of licence  enforced.  But the question is whether the said power under Section 128(6) has been  rightly exercised by the Commission or not.  After clearing the first hurdle, that the  Commission has power to issue directions, we shall now examine whether the direction  given by the Commission in the present case is correct or not.   16.     When the Commission received a spate of complaints from consumers against  its licensees/distribution companies that they are arbitrarily issuing  supplementary/amended bills and charging excess amounts for supply of electricity, it  felt persuaded to invoke its general power to supervise the licensees/distribution  companies and in that connection  issued notice dated 3.8.2004.  There can be no  manner of doubt that the Commission has full power to pull up any of its licensee or  distribution company to see that the rules and regulations laid down by the  Commission are properly complied with.  After all, it is the duty of the Commission  under Sections 45(5), 55(2), 57, 62, 86, 128, 129, 181 and other provisions of the Act to  ensure that the public is not harassed.  17.     In exercise of this general power notice dated 3.8.2004 was issued when mass  scale supplementary/amended bills were issued to the consumers.  When these  consumers approached the Commission, the Commission directed its licensees to  immediately review their billing policies and bring the same in conformity with the  statutory provisions of the Act.  The Commission did not get an investigation made  under Section 128(1) which it could have done, and without that, and without getting a  report under Section 128(5) it passed an order directing refund of the amounts  collected by the licensees/distribution companies,  which in our opinion was not  permissible, since such a direction could, if at all, be given after getting a report of the   investigation agency.    The Commission could have made an investigation and got a  report from the investigation agency and on that basis directions could have been  given. However, that was not done. In these circumstances, in our opinion, the view  taken by the Appellate Authority in the impugned order to that extent is correct that  the individual consumers should have approached the appropriate forum under  Section 42(5) of the Act.   18.     Thus while we hold that the Commission has power to issue a general direction  to licencees that they should abide by conditions of the licence issued by them and  charge only as per the tariff fixed under the Act so that the public at large should not  be harassed,  we are of the opinion that so far as the blanket direction given by the  Commission for refunding the entire amount without making a proper investigation  whether the issue of supplementary/amended bills was really warranted in every case  or not is unsustainable.  Here the Commission has gone beyond its jurisdiction.  After  all the distribution/ generating companies have to incur expenses for  generation/distribution of  power, and we cannot at the same time give license to the  consumers to commit theft of electricity or to be benefited by improper functioning of  the meter to the disadvantage of the distribution/generating company.  Thus, keeping  in view the equity of both the parties, we think it will be proper for us to direct that all   the licensees/distribution companies in the State of Maharashtra issue a general public  notice in two daily newspapers having wide circulation in the State, one English  newspaper and one in vernacular language.  The notice shall state that whoever feels  aggrieved by the supplementary/amended bill, he/she can approach the  licensee/distribution company for redressal of their grievance within a period of three  months from the date of publication of the notice.  In our view, that would meet the  ends of justice instead of passing a blanket order as given by the Commission for  refunding the money charged by the licensees/distribution companies by issuing

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supplementary/amended bills.  The individual consumers may  make a grievance  before the licensee/distribution company that they have not consumed the electricity  for which they are charged or that the meter reading was not proper or that they have  been excessively charged for the power which they have not actually consumed.   Therefore, we direct that all the licensees/distribution companies shall issue a public  notice in two daily newspapers having wide circulation in the State of Maharashtra,  one in English language and the other in vernacular language requiring their  respective consumers to make their representations for redressal of their grievances in  respect of the supplementary/amended bills. The licensees/distribution companies shall  decide the individual cases received by them after giving a fair opportunity of hearing  to the consumers.  The consumers who still feel not satisfied with the order passed by  the licensees/distribution companies can approach the appropriate forum constituted  under Section 42(5) of the Act and, if still not satisfied, with the order passed by the  appropriate forum to approach the Ombudsman under Section 42(6) of the Act.   Accordingly, we hold that while the Commission had a power to issue general  directions to prevent harassment to the public at large by its licensees/distribution  companies, but a blanket direction to refund the amounts collected by the  licensees/distribution companies which has been given by the Commission was not  warranted. 19.     Although, the Appellate Authority has set aside the order passed by the  Commission and issued a direction that the individual consumers may approach the  appropriate orders under Sections 42(5) and (6) we are not interfering with that  direction, but we direct that before that the licensees/distribution companies shall hear  the parties as directed hereinabove and decide whether the supplementary/amended  bills issued by them are proper or not.

20.     In view of the above discussion, this appeal stands disposed of with no order as  to costs.