REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No. 3902 OF 2006

               PTC India Ltd.  ...Appellant

Versus

Central Electricity Regulatory Commission Thr. its Secretary …Respondent  

(With Civil Appeal Nos. 4354/2006, 4355/2006, 2875/2007, Civil Appeal D.  9870/2007,  SLP  (C)  No.22080/2005,  Civil  Appeal  Nos.  7437/2005, 7438/2005, 2073/2007, 1471/2007, 2166/2007)

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1. In these appeals and special leave petition, challenge in each case is

to the order passed by the Appellate Tribunal for Electricity (in short the

‘Tribunal’). Challenge before the Tribunal was to the order/decision dated

23.1.2006 of the Central  Electricity Regulatory Commission (in short the

‘CERC’) and the Central  Electricity Regulatory Commission (Fixation of

Trading Margin) Regulations, 2006 (in short the ‘Regulations’) published in

the Gazette of India on 27.1.2006. The Tribunal by the impugned judgment

held that it has no jurisdiction to deal with the matter. For this purpose the

Tribunal placed reliance on a three-Judge Bench decision of this Court in

West Bengal  Electricity Regulatory Commission v.  CESC Ltd. (2002 (8)

SCC 715).  The conclusion in the said decision was to the effect that the

High Court sitting as an Appellate Court under Section 27 of the Electricity

Regulatory Commission Act, 1998 (in short ‘1998 Act’) has no jurisdiction

to go into the validity of the Regulations.  It was ultimately held that there is

weighty authority for the proposition that a Tribunal which is a creature of

the  statute  cannot  question  the  vires  of  the  provisions  under  which  it

functions.  

2. Questioning  correctness  of  the  said  view the  present  appeals  have

been  filed.  It  has  been  contended  that  the  decision  in  West  Bengal

Electricity  case  (supra)  has  no  application  to  the  present  case.   The

Regulations  have  been  framed under  Section  178  of  the  Electricity  Act,

2003  (in  short  ‘2003  Act’).  It  is  pointed  out  that  there  is  conceptual

difference between the provisions  which  have  relevance,  as  contained  in

1998 Act and 2003 Act. Section 121 of 2003 Act gives ample power to the

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Tribunal to deal with the matter.  The fixation of tariff is conceptually and

contextually  different  from fixation  of  trading margin.  With  reference  to

Sections 61 and 62 of 2003 Act it is pointed out that the former relates to

“tariff regulations” and later relates to “determination” of tariff.  

3. Therefore,  there  is  no  question  of  dealing  with  trading  margin.

Section 66 deals with the issue of development of market including trading.

Section  79  deals  with  functioning  of  CERC.   Section  111  deals  with

appellate Tribunal.  Section 121 confers supervisory powers on the Tribunal

of statutory functions. Section 121 has power to issue orders, instructions

and directions. It is not only in a sense revisional but also supervisory in

character.   Its  jurisdiction  encompasses  all  aspects  relating  to  statutory

functions  under  the  Act.   Section  79(1)(j)  deals  with  fixation  of  trading

margin. It is the stand of the appellants that this can be done by an order and

not by a Regulation. With reference to Section 178(2)(y) it is submitted that

power is given to prescribe the manner by which development of market in

power sector including trading can be prescribed.  Said provision has to be

read alongwith Sections 60, 61 and 62. There is  significantly no reference

to Section 79.  

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4. Learned counsel for the respondents on the other hand submitted that

the Tribunal  is  a creature of  the statute  and therefore cannot  go into the

validity  or  legality  of  the  Regulations  and,  therefore,  the  view  of  the

Tribunal is correct.  

5. At this juncture, it is to be noted that sub-section (3) of Section 79

talks  of  transparency.  Section  79  deals  with  functioning  of  CERA  and

Section 178 deals with  power to make Regulations.   In  terms of Section

179, the Regulations have to be placed before the Parliament and, therefore,

have statutory flavor.     

6. It is also to be noted that in West Bengal Electricity case (supra) in

para  102  the  need  for  having  an  expert  body  was  highlighted  and  that

appears to be the basis for enacting Section 121 in the 2003 Act.  

7. In  Clariant International  Ltd.  and  Anr.  v.  Securities  &  Exchange

Board of  India (2004 (8)  SCC 524)  certain  observations  have  relevance.

Paras 27, 33, 34, 42, 51 and 52 read as follows:

“27. In Kruger v. Commonwealth of Australia (1997)146 Aus. L.R. 126)  it is stated:

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“Moreover,  when  a  discretionary  power  is statutorily  conferred  on  a  repository,  the  power must be exercised reasonably, for the legislature is taken to intend that the discretion be so exercised. Reasonableness  can  be  determined  only  by reference to the community standards at the time of the exercise of the discretion and that must be taken to be the legislative intention....”

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33. In  Black’s Law Dictionary, the word “compensation” has been defined as under:

“money given to compensate loss or injury”.

34. In a given case where the liability arises during pendency of a  litigation,  doctrine  of  restitution  can  be  invoked.  In  South Eastern Coalfields Ltd. v.  State of M.P (2003 (8) SCC 648) it was observed: (SCC pp. 662-63, para 26)

“In  law,  the  term  ‘restitution’  is  used  in  three senses:  (i)  return  or  restoration  of  some specific thing  to  its  rightful  owner  or  status;  (ii) compensation  for  benefits  derived  from a wrong done  to  another;  and  (iii)  compensation  or reparation  for  the  loss  caused  to  another.  (See Black’s Law Dictionary, 7th Edn., p. 1315.)  The Law of Contracts by John D. Calamari & Joseph M. Perillo has been quoted by Black to  say that ‘restitution’  is  an  ambiguous  term,  sometimes referring to the disgorging of something which has been taken and at times referring to compensation for injury done:

‘Often, the result under either meaning of  the  term  would  be  the  same.  ...

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Unjust  impoverishment  as  well  as unjust  enrichment  is  a  ground  for restitution. If the defendant is guilty of a  non-tortious  misrepresentation,  the measure of recovery is not rigid but, as in  other  cases  of  restitution,  such factors  as  relative  fault,  the  agreed- upon  risks,  and  the  fairness  of alternative  risk  allocations  not  agreed upon and not attributable to the fault of either party need to be weighed.’ ”

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42. While  determining  the  cases  of  commercial  transaction also, fall in rate of interest has been taken note of by this Court in Citi Bank N.A. v. Standard Chartered Bank 2004 (1) SCC 12 (SCC para 62) and Citibank N.A. v.  Standard Chartered Bank 2004 (6) SCC 1 (SCC para 54).

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51. In Palmer’s Company Law, 23rd Edn. at p.154, para 12-07, it is stated:

“12-07.  Subscribers  as  members.—The subscribers  of  the  memorandum  are  deemed  to have agreed to become members of the company, and on its registration shall be entered as members in its register of members [1948 Act, Section 26 (1)].” It is further stated: “49.04.  Other members.—In the case of members other than the subscribers to the memorandum two

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essential  conditions  have  to  be  satisfied  to constitute a person a member: (1) an agreement to become a member; and (2) entry in the register. These two conditions are cumulative: unless they are both satisfied, the person in question has not acquired the status of member.

Thus,  an  agreement  to  become  a  member alone does not create the status of membership; it is a condition precedent to the acquisition of such status  that  the  shareholder’s  name  should  be entered in the register. Conversely, the company is not  entitled  to  place  a  person’s  name  on  the register  without  his  having  agreed  to  become  a member;  a  person  improperly  registered  without his assent is not bound thereby and may have his name removed from the register.”

52. In  Howrah Trading Co. Ltd. v.  CIT 1959 Supp (2)  SCR 448)  the law is stated thus: (SCR p.456)

“The  question  that  falls  for  consideration  is whether  the  meaning  given  to  the  expression ‘shareholder’ used in Section 18(5) of the Act by these cases is correct. No valid reason exists why ‘shareholder’  as  used  in  Section  18(5)  should mean a person other than the one denoted by the same  expression  in  the  Indian  Companies  Act, 1913. In  Wala Wynaad Indian Gold Mining Co., In re (1882) 21 Ch D 849) Chitty, J., observed:

‘I  use  now  myself  the  term  which  is common  in  the  courts,  “a  shareholder”, that  means the holder of the shares.  It  is the  common  term used,  and  only  means the person who holds the shares by having his name on the register.’ ”

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(See also  Balkrishan Gupta v.  Swadeshi Polytex Ltd 1985 (2) SCC 167))

8. Similarly  in  Cellular  Operators  Association  of  India  and  Ors. V.

Union of India and Ors. (2003 (3) SCC 186) in paras 27, 33 and 34 it has

been observed as follows:

“27. TDSAT itself is an expert body and its jurisdiction is wide having regard to sub-section (7) of Section 14-A thereof.  Its jurisdiction  extends  to  examining  the  legality,  propriety  or correctness of a direction/order or decision of the authority in terms of sub-section (2) of Section 14 as also the dispute made in an application under sub-section (1) thereof. The approach of  the  learned  TDSAT,  being  on  the  premise  that  its jurisdiction is limited or akin to the power of judicial review is, therefore, wholly unsustainable. The extent of jurisdiction of a court or a tribunal depends upon the relevant statute. TDSAT is a creature of  a statute.  Its  jurisdiction is  also conferred by a statute. The purpose of creation of TDSAT has expressly been stated  by Parliament  in  the amending  Act  of  2000.  TDSAT, thus,  failed  to  take  into  consideration  the  amplitude  of  its jurisdiction and thus misdirected itself in law.

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33. The regulatory bodies exercise wide jurisdiction. They lay down  the  law.  They  may  prosecute.  They  may  punish. Intrinsically, they act like an internal audit. They may fix the price, they may fix the area of operation and so on and so forth. While doing so, they may, as in the present case, interfere with the existing rights of the licensees. 34. Statutory  recommendations  made  by  it  are  normally accepted by the Central Government, as a result of which the rights and obligations of the parties may seriously be affected.

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It  was  in  the  aforementioned  premise  Parliament  thought  of creating an independent expert tribunal which, if an occasion arises therefor, may interfere with the finding of fact, finding of law  or  a  mixed  question  of  law  and  fact  of  the  authority. Succinctly  stated,  the  jurisdiction  of  the  Tribunal  is  not circumscribed in any manner whatsoever.”

9. There are also certain observations in  National Sewing Thread Co.

Ltd.  v.  James  Chadwick  and  Bros.  Ltd. (1953  SCR  1028)  which  have

relevance.  It was inter alia observed as follows:    

“The second error lies in the assumption that the

appellate  jurisdiction  exercised  by  the  High  Court  of

Calcutta is much more limited than that possessed by the

other  High  Court.   The  matter  has  been  discussed  at

length in an earlier part of this judgment.

We  have  also  not  been  able  to  appreciate  the

emphasis laid to negative the applicability of clause 15

of  the  Letters  Patent  by  reference  to  the  provision  of

Section 77 of the Act.  The provision of that section are

merely enabling provisions and, as already pointed out,

it is open to the High Court to make use of them or not as

it likes.  There is nothing in the provisions of that section

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which debars the High Court from hearing appeals under

Section 76 of the Trade Marks Act according to the rules

under which all other appeals are heard, or from framing

rules for the exercise of that jurisdiction under Section

108 of the Government of India Act, 1915, for hearing

those appeals by Single Judges or by Division Benches.

Even if Section 77 had not been enacted it could not be

said that the High Court  would then have no power to

make rules for the hearing of appeals under Section 76.

There are a number of legislative enactments which have

conferred  appellate  jurisdiction  on  the  High  Court

without  more  and  the  High  Court  exercises  appellate

jurisdiction conferred by these enactments by framing its

own rules under the powers it already possesses under its

different  charters  and under  the  various  statutes  which

have conferred power on it.”            

10. In the background of what has been stated above and considering the

importance of the matter we feel it necessary to refer the matter to a larger

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Bench  to  consider  whether  the  West  Bengal  Electricity  case  (supra)  can

have application to the cases coming under 2003 Act, where the parties go

before  the  Tribunal  in  terms of  Section  121 of  the 2003 Act.  The other

important question would be whether the Tribunal has jurisdiction to decide

the question as to the validity of the Regulations framed by the CERC.  The

matter  may  be  placed  before  Hon’ble  the  Chief  Justice  of  India  for

necessary orders. It is open to the parties to move the Hon’ble Chief Justice

for fixing date for taking up the interim relief prayers.   

……………….…………….J. (Dr. ARIJIT PASAYAT)

……………………..……….J. (HARJIT SINGH BEDI)

………………………………J. (ASOK KUMAR GANGULY)

New Delhi, March 06, 2009      

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