REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1110 OF 2007

U.P. Power Corporation Ltd. …Appellant

Versus

National Thermal Power Corporation Ltd. and others …Respondents

WITH

CIVIL APPEAL NOS. 1138 OF 2007

U.P. Power Corporation Ltd. …Appellant

Versus

National Thermal Power Corporation Ltd. and others …Respondents

WITH

CIVIL APPEAL NOS. 1152 OF 2007

U.P. Power Corporation Ltd. …Appellant

Versus

National Thermal Power Corporation Ltd. and others …Respondents

WITH CIVIL APPEAL NOS. 1327 OF 2007

U.P. Power Corporation Ltd. …Appellant

Versus

National Thermal Power Corporation Ltd. and others …Respondents

AND CIVIL APPEAL NOS. 1112 OF 2007

U.P. Power Corporation Ltd. …Appellant

Versus

National Thermal Power Corporation Ltd. and others …Respondents

J U D G M E N T  

S.B. SINHA, J :   

1. These appeals involving similar questions of law and fact were taken

up for hearing together and are being disposed of by this common judgment.

2. We may, however,  notice the fact of the matter  from Civil  Appeal

No.1110 of 2007.

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3. The question which arises for consideration herein is as to whether

the amount  required to be paid by the first  respondent  National  Thermal

Power Corporation (for short ‘the Corporation’) towards revision of scales

of pay of its employees in terms of the recommendations made by the High

Level Committee constituted under the Chairmanship of Justice S. Mohan

with retrospective effect from 1st January, 1997 can be a subject matter of

revision in tariff for the tariff years 1997-1998 ; 1998 – 1999 and 1999 –

2000.   

4. The Parliament with a view to provide for establishment of a Central

Electricity  Regulatory  Commission  and  State  Electricity  Regulatory

Commissions,  rationalization  of  electricity  tariff,  transparent  policies

regarding  subsidies,  promotion  of  efficient  and  environmentally  benign

policies and for matters connected therewith or incidental thereto, enacted

the  Electricity  Regulation  Commissions  Act,  1998  (for  short  ‘the  1998

Act’).  It came into force with effect from 9th June, 1998.   

Pursuant  to  or  in  furtherance  of  the provisions  thereof  the  Central

Electricity Regulatory Commission (in short the Central Commission) was

established  in  terms  of  sub-section  (1)  of  Section  3  of  the  1998  Act.

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Indisputably  the  powers  and  functions  of  the  Commission  are  extensive

being contained in Section 13 of 1998 Act i.e. :

“(a) to regulate the tariff of generating companies owned or controlled by the Central Government;

(b) to regulate the tariff of generating companies, other  than  those  owned  or  controlled  by  the Central Government specified in clause (a), if such generating companies enter into or otherwise have a  composite  scheme  for  generation  and  sale  of electricity in more than one State;

(c)  to  regulate  the  inter-State  transmission  of energy including tariff of the transmission utilities;

(d)  to  promote  competition,  efficiency  and economy  in  the  activities  of  the  electricity industry;

(e)  to  aid  and advise the Central  Government in the formulation of tariff policy which shall be--

(i) fair to the consumers; and

(ii)  facilitate  mobilisation  of  adequate  resources for the power sector;

(f) to associate with the environmental regulatory agencies  to  develop  appropriate  policies  and procedures  for  environmental  regulation  of  the power sector;

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(g)  to  frame  guidelines  in  matters  relating  to electricity tariff;

(h)  to  arbitrate  or  adjudicate  upon  disputes involving  generating  companies  or  transmission utilities  in  regard  to  matters  connected  with clauses (a) to (c) above;

(i) to  aid  and advise the Central  Government on any  other  matter  referred  to  the  Central Commission by that Government.”

5. A regulatory Commission not only makes Regulations but in view of

its extensive powers BUT ALSO  in-charge of implementation thereof.  It

furthermore in the event of any dispute or difference arising between several

players  involved  in  the  framing  of  tariff  for  the  consumers  of  electrical

energy has also an adjudicatory role to play.  

6. We are in this batch of appeals are concerned with the power of the

Central Commission to make tariff and to revise the same at the instance of

a generating company.  Before, however, adverting to the said questions, we

may notice certain undisputed facts.  

7. National  Thermal  Power  Corporation  Ltd.  is  a  public  sector

undertaking employed in generation of electrical energy at different parts of

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India.  It has a Thermal Power Station at Korba in the State of Chhatisgarh

and Gas Power Station in Dadri in the State of Uttar Pradesh.

8. U.P.  Power  Corporation  Ltd.  is  also  a  public  sector  undertaking

constituted  upon  bifurcation  of  U.P.  Electricity  Board  in  terms  of  the

provisions of the U.P. Electricity Regulatory Commission Act, 1998.     

9. Indisputably the Central Commission only had, at the relevant time,

jurisdiction to make tariff for the generating companies.

10. The  matter  relating  to  generation,  transmission,  supply  and

distribution of electrical energy in different States used to be governed by

the Electricity (Supply) Act, 1948.   With a view to bring reforms in the

power  sector  and  to  meet  shortages  in  the  power  supply,  the  Central

Government as also the various State Governments,  adopted liberalisation

policies for industrial economy so as to enable them to attract investment

from various parts of the country as also from abroad.   

11. The  Parliament,  with a  view to  give effect  to  the  aforesaid  policy

decision, as noticed hereinabove, enacted 1998 Act.  Parliament,  we may

place on record, with a view to consolidate the laws relating to generation,

transmission, distribution , trading and use of electricity and generally for

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taking  measures  conducive  to  development  of  electricity  industry,

promoting competition therein, protecting interest of consumers and supply

of  electricity  to  all  areas,  rationalization  of  electricity  tariff,  ensuring

transparent  polices,   regarding  subsidies,  promotion  of  efficient  and

environmentally  benign  polices,  constitution  of  Central  Electricity

Authority, Regulatory Commission and establishment of Appellate Tribunal

and  for  matters  connected  therewith  or  incidental  thereto,  enacted  the

Electricity Act, 2003.  It came into force with effect from 10th June, 2003.   

12. On or about  25th September,  1999 the Government  of  India  issued

guidelines  for  revision  of  salary  to  the  employees  of  the  Public  Sector

Undertakings with effect from 1st July, 1997, wherefor, as noticed earlier, a

High Powered Committee headed by Justice Mohan was constituted.

13. It is stated that the Corporation made provisions in its budget for the

relevant years and paid arrears of revised salary with effect from 1st January,

1997 to the Executive in July, 2000 and to the Supervisor and Workmen

from April, 2001 and March, 2001 respectively.   

14. The Corporation had asked the Central Commission to frame tariff in

respect  of  the  electricity  generated  by  it  wherefor  it  filed  Petition

Nos.30/2001 and 44/2001 for determination of tariff for its stations at Korba

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and  Dadri.   The  Central  Commission,  upon  consideration  of  the  factors

placed  before  it  and  upon  hearing  all  concerned,  including  the  parties

hereto, determined the operational and financial norms applicable, inter alia,

for the generating stations of the NTPC which was inclusive of employee’s

costs.  In the said order the Central Regulatory Commission dealt with all

aspects  of  the  operation  and  maintenance  expenses  after  setting  up  the

norms for such determination.   

15. As  stated  earlier  the  revision  of  salary  of  NTPC  employees  was

revised in terms of the recommendations of the High Level Committee.  The

said revision was given effect to on and from w.e.f. 1st January, 1997 but

was implemented during the period 2000-2001.

16. The  tariff  order  was  made  by Central  Regulatory  Commission  for

Korba and Dadri on 6th August, 2003 wherefor the data provided by NTPC

were taken into consideration in terms of Regulation 2.7(d)(i) including the

provisions  made  during  three  years  1997-1998  to  1999-2000  towards

anticipated revised costs therefor.   

17. Indisputably alongwith the said data,  datas  for  the  year 2000-2001

were also produced.

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18. It filed a review petition before the Central Regulatory Commission

during  various  periods  in  respect  of  its  Korba  and  Dadra  projects  on  1st

October,  2003.   However,  it  did  not  lay  any  claim in  respect  of  actual

revised costs for the years 1997-1998, 1998-1999 and 1999-2000.   

19. Central  Regulatory  Commission  in  exercise  of  its  suo  motu

jurisdiction passed an order in proceeding being No.196 of 20045 to inquire

into the actual escalation factor which was found to be less than 6%.  Before

the Commission certain other issues were also raised.  However, on or about

25th April,  2005  and  26th July,  2005  revision  applications  were  filed  in

respect  of Korba and Dadri  Power Stations  claiming allowance of  actual

revised costs incurred by the Corporation on account of arrears of paid in

2000-2001.

21. The Commission dismissed the said applications by orders dated 11th

August 2005 and 19th October, 2005 inter alia, opining :

(i) “It  needs  to  be  noted  that  in  terms  of  the  Commission’s  order dated  21.12.2000  fresh  revision  of  O&M  base  charges  after determination  of  tariff  is  not  warranted  based  on  the  actual expenses”.

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(ii) “From the details extracted at Para 10 above, it can be seen that revision  of  salary  of  the  employee,  executives,  supervisors  and other workmen was notified during July 2000 to April 2001 and the arrears on that account were also paid during the same period. Therefore, the complete employee cost data on account of revision of  pay and allowances  was  available  with  the  petitioner  during April, 2001.  When the application for determination of tariff were filed on 8.6.2001, the data in this regard could be placed before the Commission by the petitioner.  Further, the petitioner had filed amended  petitions  during  January/  February  2002  in  all  these cases.   The  Petitioner  did  not  incorporate  the  actual  data  of employee cost in the amended petitions as well”.

(iii) “Under Order 2 Rule 2 of the Code of Civil Procedure (the Code) every suit is to include the whole of the claim to which the party is entitled to make in respect of the cause of action but a party may relinquish  any portion  of  his  claim.  However,  where  the party omits to sue in respect of any claim or intentionally relinquishes any portion of his claim, he cannot afterwards sue in respect of the portion so omitted or relinquished”.

(iv) “After  deciding  the  tariff,  the  Commission  cannot  revisit  the matter covered in the tariff orders, which have acquired finality”.

(v) “…On consideration of this,  the employee cost  indicated by the petitioner for the years 1997-98 and 1998-99 (excluding incentive and ex-gratia),  even though beyond the admissible limit of 20% was considered for normalization…”

(vi) “…the  question  of  exclusion  of  these  expenses  cannot  be  re- agitated  in  the  present  proceedings  as  they  are  barred  by  the principle of res-judicata…”.

(vii) “…the tariff approved is the complete package.”

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22. It, however, appears that an application of the electricity generating

station of the Corporation at Rihand was filed for revision of the tariff being

Petition No. 38 of 2001 in respect of the  tariff period 2001-2004 having

regard to the fact that further amount was to be paid by the NTPC to its

employees for  the purpose of implementation of the recommendations of

Justice Mohan Committee, relying on or on the basis of the leave granted,

the Corporation filed I.A. No. 9 of 2006 to place on record the impact of

revision  of wages  w.e.f.  1st January,  1997 on the employee costs  for  the

generating  station  and the Corporate  office  expenses  for  the  years 1995-

1996 to 2000-2001, which was allowed.   

23. Appellant before us contends that Rihand decision is not applicable in

the instant  case  as  therein  the  original  tariff  order  was  yet  to  come into

force.   And  the  said  application  was  filed  for  revision  of  tariff  and

considered in view of the statements made by the Corporation itself in the

earlier round of the proceeding.  .   

24. The Corporation aggrieved by and dissatisfied with the orders of the

Commission dated 11th August, 2005 and 19th October, 2005 filed appeals

before the Appellate Tribunal.   By reason of the impugned judgment and

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order  dated  7th September,  2006  the  said  appeals  have  been  allowed,

directing :-

“amounts of arrears paid by the appellant in the year 2000-2001 on account of employees cost, incurred in the respective years, be considered in the  tariff  fixation  for  re-imbursement,  as admissible by the Regulations in the forthcoming tariff period in a manner that tariff shock, if any, to the respondents is minimized.”

25. Appellant is, thus, before us.

26. Mr. Sunil  Gupta, learned senior counsel appearing on behalf of the

appellant would urge :-

(i) The  Central  Regulatory  Commission  had  no  jurisdiction  in

terms  of  1998  Act  or  2003  Act  or  the  Regulations  made

thereunder to entertain and carry out revision in the tariff order

on the basis of purported subsequent events or otherwise.  

(ii) In view of 2001 Regulations framed under Section 28 of 1998

Act  even  while  undertaking  the  original  tariff  determination

proceedings the Commissioner had no jurisdiction to consider

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any data of 2000-2001 for narrative operation and maintenance

expenses beyond the statutorily stipulated 5 years, viz.,  1995-

1996 to 1999-2000.     

(iii) Keeping in view the fact that the Corporation were supposed to

have filed all materials in respect of its case for framing tarrif

and failure, if any, on its part to bring some materials showing

the financial impact arising out of the implementation of the 6th

Pay  Commission  vis-à-vis  the  recommendation  of  the  High

Powered Committee could not have been the basis for a review,

particularly, having regard to the fact that the claim was barred

by limitation.

(iv) The operational and financial norms fixed in terms of circular

dated 21st December,  2000 are not relevant  or  enforceable in

the  wake  of  enforcement  of  the  statutory  Regulations,  2001

framed under Section 28 of the Act which had come into force

on 26th March, 2001.

(v) Assuming  the  Central  Regulatory  Commission’s  order  dated

21st December, 2008 i.e. the Operational & Financial Norms, to

be relevant and enforceable, as thereby the said order permitted

that ‘more than normal’ Operational and Maintenance expenses

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should be sought as compensation on a case by case basis by

means  of  a  separate  petition  and  hearing  of  all  concerned,

without reflecting it  in the norms founded on the five years,

1995-1996  to  1999-2000,  the  impugned  judgment  cannot  be

sustained.  Such petition/plea could be filed before the Tariff

order could be issued.   The permission would not  mean that

separate petition could be filed after the passing of the Tariff

Order.   

(vi) In any event the delay caused in filing the application should

have  been  taken  into  consideration  by  the  Tribunal  for  the

purpose of exercising its discretionary jurisdiction.

(vii) Provisional  expenses  having  already been  considered  by  the

Central  Commission while  framing tariff,  no actual  expenses

for  the  year  2000-2001  could  have  been  taken  into

consideration as thereby  a duplication would be caused, which

is not contemplated in law.   

(viii) The Tariff Order being a complete package and which having

not  been challenged or  appealed  against,  any application  for

review or revision was not maintainable.

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(ix) The Appellate Tribunal had committed a serious error in so far

as  it  took  into  consideration  the  Rihand  case  where

Interlocutory Application was entertained in a case of Original

Tariff Order itself and thus could not have been relied upon.   

(x) The  Tribunal’s  order  providing  for  relief  by  way  of

reimbursement in the forthcoming tariff  period is  contrary to

the scheme of the Act.   

(xi) The Appellate Tribunal although has wide jurisdiction but it,

without sufficient or cogent reasons, should not have interfered

with the order of the Central Regulatory Commission.    

27. Mr.  Ramachandran,  learned  counsel  appearing  on  behalf  of

respondent No.2, on the other hand, urged :

(i) Central  Regulatory Commission had the requisite  jurisdiction to

review the  tariff,  having  regard  to  the  powers  contained  in  the

Regulations.

(ii) Sufficient and cogent reasons for revision of the costs in the first

instance, having been assigned and all material facts having been

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taken into consideration by the Appelalte Tribunal, no exception

can be taken to the impugned judgment.  

(iii) It is incorrect to contend that the Appellate Authority had made

inconsistent observations in the impugned order.

(iv) As in the case of Rihand the actual costs paid by respondent No.1

for meeting its obligations was granted, there was no reason as to

why the same principle should not have been applied in the case of

Korba and Dadri, particularly when it was not denied or disputed

that the Corporation had to incur a sum of Rs.55 crores towards

arrears of salary.

(v) Some delay might have been caused in filing the application but

the same by itself should not have been a ground for rejecting the

application in toto as the Tribunal had not granted any interest on

the actual amount and merely granted the carrying costs.  

28. Power and/ or jurisdiction of the Central Commission to frame tariff

and/ or carry out revision thereof is not in dispute.  It is in fact a well-settled

that the Central Commission has the exclusive jurisdiction to frame not only

tariff but also any amendment, alterations and additions in regard thereto.

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29. The  Central  Commission  in  terms  of  the  1998  Act  as  also  the

Regulations  framed  thereunder  exercise  diverse  powers.   It  exercises

legislative  power,  power  of  enforcement  of  the  Regulations  as  also  the

adjudicatory power.  Each of its functions although are separate and distinct

but  may  be  overlapping.   The  power  of  the  Central  Commission  is

extensive.

30. The Central Commission in exercise of its jurisdiction under Section

55  of  the  1998  Act  framed regulations  known as  the  Central  Electricity

Regulatory Commission (Conduct of Business) Regulations, 1999 (for short

“the 1999 Regulations”).   

Chapter  V  of  the  1999  Regulations  deals  with  tariff  regulations.

Regulations 92, 93, 94 read as under:

“92.  The  Commission  on  its  own  on  being satisfied that there is need to review the tariff of any utility shall initiate the process of revision in accordance  with  the  procedure  as  may  be prescribed. The proceedings for suo moto review of the tariff shall be the same as set out in Chapter II of these Regulations.

93. Review of orders of the Commission on tariff will be entertained strictly in accordance with the

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relevant  regulations  governing  review  as contained in the relevant regulation herein.

94.  The utilities  shall  submit  periodic  returns  as may be prescribed containing operational and cost data  to  enable  the  Commission  to  monitor  the implementation of its order and reassess the bases on which Tariff was approved.”

Chapter  VII  of  the  1999  Regulations  deals  with  Miscellaneous

Matters.  The 1999 Regulations expressly confer a power of review on the

Central  Commission  in  terms  of  Regulation  103  thereof.   For  the

aforementioned purpose, the Central Commission may not only exercise its

jurisdiction suo motu but it may review a decision even if an application is

filed within a period of sixty days of making of any decision, direction or

order.   

Regulation  110  empowers  the Central  Commission  to  issue  orders

and practice directions in regard to the implementation of the Regulations

and procedure to be followed and various matters which the Commission

has been empowered by these regulations to specify or direct.  Regulations

111 and 112 read as under:

“111.  Nothing  in  these  Regulations  shall  be deemed  to  limit  or  otherwise  affect  the  inherent

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power of the Commission to make such orders as may be necessary for ends of justice or to prevent the abuse of the process of the Commission.

112.  Nothing  in  these  Regulations  shall  bar  the Commission from adopting in conformity with the provisions  of  the  Act,.  a  procedure,  which  is  at variance  with  any  of  the  provisions  of  these Regulations,  if  the  Commission,  in  view  of  the special  circumstances  of  a  matter  or  class  of matters and for reasons to be recorded in writing, deems it  necessary or expedient  for dealing with such a matter or class of matters.”

31. The Central Commission also in exercise of its power conferred upon

it by Section 28 of the 1998 Act framed regulations known as the Central

Electricity  Regulatory  Commission  (Terms  &  Conditions  of  Tariff)

Regulations, 2001 (for short “the 2001 Regulations”).   

The 2001 Regulations came into force with effect from 1.04.2001.  It

was  to  remain  in  force  for  a  period  of  three  years,  unless  reviewed  or

extended  by  the  Central  Commission.   Regulation  1.11  of  the  2001

Regulations was framed for removal  of doubts.   It  was clarified that  the

norms prescribed therein were the ceiling norms only and the same shall not

preclude the generating company and other beneficiaries from agreeing to

improved norms.

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Regulation 1.4 of the 2001 Regulations reads as under:

“1.4 The  generation  tariff  under  these Regilations shall be determined station-wise and transmission tariff  shall  be determined line-wise, sub-station-wise, as the case may be, and aggregated to regional tariff.

Provided that a utility may file a petition for fixation of tariff in respect of the completed units/systems.”

Chapter  II  of  the  2001  Regulations  provides  for  thermal  power

generating  stations.   “Operation  and  Maintenance  Expenses”  has  been

defined as under:

“  ‘Operation  and  Maintenance  Expenses’  or ‘O&M’ –  In  relation  to  a  period  means  the expenditure incurred in operation and maintenance of  the  generating  station  including  manpower, spares, consumables, insurance and overheads.”

Regulation  2.4  of  the  2001 Regulations  provides  for  the norms of

operation.  Regulation 2.4(viii) provides for the period of stabilization and

explanations in the following terms:

“(viii) Stabilization period  

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Stabilization  period  commencing  from the date  of  commercial  operation  shall  be reckoned as follows :

(a) Thermal (coal/lignite) station – 180 days.

(b) Open cycle gas and Naphtha based station – 90 days.

(c) Combined  cycle  gas  and  Naphtha  based station – 90 days

Explanations:-

1. For the purpose of calculating the tariff, the operating  parameters,  i.e.  ‘Station  Heat Rate’,  ‘Secondary  Fuel  Oil  Consumption’ and  ‘Auxiliary  Consumption’  shall  be determined on the basis of actuals or norms, whichever is lower.”

Regulation  2.7  of  the  2001  Regulations  provides  for  payment  of

capacity (fixed) charges; Clause (c) whereof deals with return on equity in

the following terms:

“(c) Return on Equity :

Return on equity shall be computed on the paid up and subscribed capital and shall be 16 per cent of such capital.

Explanation:-

Premium raised by the Generating Company while issuing  share  capital  and  investment  or  internal resources  created  out  of  free  reserve  of  the existing  utility,  if  any,  for  the  funding  of  the project, shall also be reckoned as paid up capital

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for the purpose of computing the return on equity, provided  such  premium  amount  and  internal resources  are  actually  utilized  for  meeting  the capital  expenditure  of  the  generating  station  and forms part of the approved financial package as set out in the techno-economic clearance accorded by the  Authority  or  approved  by  an  appropriate independent agency, as the case may be.”

“Operation and Maintenance expenses including insurance” is dealt

with in Clause (d) of Regulation 2,7 of the 2001 Regulations; Clauses (i)

and (iv) whereof reads as under:

(d) Operation  and  Maintenance  expenses including insurance

(i) Operation  and  Maintenance  expenses including insurance (hereinafter referred to as O&M expenses) for the existing stations of  NTPC  and  NLC  which  have  been  in operation  for  5  years  or  more  in  the  base year of 1999-2000, shall be derived on the basis of actual O & M expenses, excluding abnormal  O&M  expenses,  if  any,  for  the years  1995-96 to  1999-2000 duly certified by the statutory auditors.

The  average  of  actual  O&M expenses  for the year  1995-96 to  1999-2000 considered as O&M expenses for the base year 1997-98 shall  be  escalated  twice  at  the  rate  of  10 percent  per  annum  to  arrive  at  O&M expenses  for  the  base  year  1999-2000i  as given below:

BO&Mi2000i = AVO&M x (1.10)2  

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Where  BO&Mi2000  =  Base  level  O&M expenses  for  1999-2000  for  ith  generating station.

The Base O&M expenses for the year 1999- 2000 shall be further escalated at the rate of 6 per cent per annum to arrive at permissible O&M expenses for the relevant year.

XXX XXX XXX

(iv) The escalation factor of 6 per cent per annum  shall  be  used  to  revise  the  base figure  of  O&M expenses.   A deviation  of the  escalation  factor  computed  from  the actual inflation data that lies within 20 per cent of the above notified escalation factor of  6  per  cent  (which  works  out  to  be  1.2 percentage  points  on  either  side  of  6  per cent)  shall  be  absorbed  by  the utilities/beneficiaries.  In other words if the escalation  factor  computed  from  the observed data lies in the range of 4.8 to 7.2 per cent,  this variation should be absorbed by the utilities.  Any deviations beyond this limit  shall  be adjusted  on the basis  of  the actual  escalation  factor  arrived  at  by applying a weighted price index of CPI for industrial  workers  (CPI_IW) and  an  index of select components of WPI (WPIOM) as per formula given in note below clause (v) herein  below,  for  which  the  utility  shall approach the Commission with a petition.”  

32. While  exercising  its  power  of  review  so  far  as  alterations  or

amendment of a tariff is concerned, the Central Commission stricto sensu

23

does  not  exercise  a  power  akin  to  Section  114  of  the  Code  of  Civil

Procedure or Order XLVII, Rule 1 thereof.  Its jurisdiction, in that sense, as

submitted  by Mr.  Gupta,  for  the  aforementioned  purposes  would  not  be

barred in terms of Order II, Rule 2 of the Code of Civil Procedure or the

principles analogous thereto.

33. Revision of a tariff must be distinguished from a review of a tariff

order.   Whereas  Regulation  92  of  the  1999  Regulations  provides  for

revision of tariff, Regulations 110 to 117 also provide for extensive power

to  be exercised  by the  Central  Commission  in  regard to  the proceedings

before it.

33. Having regard to the nature of jurisdiction of the Central Commission

in a case of this nature, we are of the opinion that even principles of res

judicata will have no application.   

34. There cannot be any doubt whatsoever that while a tribunal or a court

exercises adjudicatory power, although provisions of Section 11 of the Code

of  Civil  Procedure  are  not  applicable  but  the  general  principles  of  res

judicata may be applicable as has been held by this Court in a consolidation

24

matter  in   Sri  Bhavanarayanaswamivari  Temple v.  Vadapalli  Venkata

Bhavanarayana Charyulu  [(1970) 1 SCC 673, para 8], in a labour matter  in

Bharat  Barrel  and  Drum  Manufacturing  Co.  Pvt.  Ltd. v.  Bharat  Barrel

Employees Union [(1987) 2 SCC 591, paras 9 to 11], in a rent control matter

in Vijayabai and Others v. Shriram Tukaram and Others [(1999) 1 SCC 693,

para  14],  in  a  writ  petition  in  Forward  Construction  Co.  and  Others v.

Prabhat Mandal (Regd.), Andheri and Others [(1986) 1 SCC 100, para 20],

and  in  an  arbitration  proceeding  in  K.V.  George v.  Secretary  to

Government,  Water  and  Power  Department,  Trivandrum  and  Another

(1989) 4 SCC 595, para 16], whereupon strong reliance has been placed by

Mr. Gupta, but such a question does not arise herein.

Moreover, such a point having never been raised before the Central

Commission  or  the  appellate  tribunal,  we  are  of  the  opinion  that  even

otherwise the said argument should not be permitted to be raised before us

for the first time.

35. The  Central  Commission,  as  indicated  hereinbefore,  has  a  plenary

power.   Its  inherent  jurisdiction  is  saved.   Having  regard  to  the  diverse

nature of jurisdiction, it may for one purpose entertain an application so as

25

to correct its own mistake but in relation to another function its jurisdiction

may be limited.  The provisions of the 1998 Act do not put any restriction

on the Central Commission in the matter of exercise of such a jurisdiction.

It is empowered to lay down its own procedure.   

36. Regulations 92, 94,  103 and 110 of the 1999 Regulations confer  a

wide  power  upon the  Central  Commission.   They are  to  be exercised  in

different circumstances.  Whereas Regulations 92 and 94 are to be exercised

in regard to Chapter V, Regulations 103 and 110 apply in regard to cases

where Regulations 92 and 94 would not have any application.   

Regulations 92 and 94, in our opinion, do not restrict the power of the

Central Commission to make additions or alterations in the tariff.  Making

of a tariff  is  a continuous  process.   It  can be amended or  altered by the

Central Commission, if any occasion arises therefor.  The said power can be

exercised not only on an application filed by the generating companies but

by the Commission also on its own motion.   

37. Assuming  that  Regulation  103  of  the  1999  Regulations  would  be

applicable in a case of this nature, the same also confers a wide jurisdiction.

The Commission, apart from entertaining an application for review on an

26

application filed by a party, may exercise its suo motu jurisdiction.  While

the  Central  Commission  exercises  a  suo  motu  jurisdiction,  the  period  of

limitation  prescribed  in  Regulation  103  shall  not  apply.   There  cannot,

however, by any doubt whatsoever that while exercising such jurisdiction,

the Central Commission must act within a reasonable time.  Furthermore,

the statute does not provide for the manner in which a petition is to be filed

before the Central Commission or the manner in which the tariff order is to

be passed or revision or non-revision thereof.     

38. Section  28  of  the  1998  Act  empowers  the Central  Commission  to

determine the terms and conditions for fixation of tariff.

39. We  are  unable  to  accept  the  contention  of  Mr.  Gupta  that  the

operational and financial norms dated 21.12.2000 were not relevant.  The

Central Government itself recognized the need to adjust the Operation and

Maintenance  Expenses  based  on  normative  expenses  after  the  actual  are

available in its order dated 21.12.2000 which was the principal order laying

down norms therefor holding inter alia as under:

“4.3.6  The Commission is convinced that linking the base level O&M expenses to the capital cost is not  appropriate  as  there are unresolved issues of measurement of the capital cost itself.   Thus, the

27

efficacy of the base on the basis of capital cost is questionable.  The approach adopted in this order is based on following tenets :

• The base level of O&M should not be computed as a given proportion of capital cost but should be derived on the basis of actual O&M expenses in the last five years after ironing out the spikes and abnormalities in the yearwise data.

• Any abnormal  expenses  incurred  by  utilities  in  operating and maintaining their plants should not get reflected in the norms but should be dealt with separately on a case by case basis  through  separate  petitions.   This  will  provide  an opportunity  to  all  the  stakeholders  to  assess  the  merit  of claims on the basis of these expenses in a transparent way.”

Thereafter,  in  para  4.3.12  of  the  aforesaid  order,  the  Central

Commission held as under:

“The regulated entities shall include in their Tariff petition details of yearwise actual O&M cost data for the last  five years duly certified by Statutory Auditors.”

Both the aforementioned provisions must be read together and not in

isolation.   

40. The  order  dated  21.12.2000  passed  by  the  Central  Commission

formed the basis of the 2001 Regulations, which is clear from the following

observations made in the said order:

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“1.1.2  As  per  Section  28  of  the  ERC  Act  the Commission  is  required  to  determine  by regulations the terms and conditions for fixation of tariff under clauses (a), (b) and (c) of Section 13. Section  37  of  the  ERC  Act  stipulates  that  the Commission  shall  ensure  transparency  while exercising  its  powers  and  discharging  its functions.

XXX XXX XXX

1.1.3  The  Commission  assumed  the  jurisdiction under Section 13(a)  and (b) as referred to above w.e.f.  15th May,  1999.   This  was  the  date  from which, as per the provisions of Section 51 of the ERC  Act,  the  Central  Government  notified  the deletion  of  Section  43A(2)  of  the  Electricity (Supply) Act, 1948 (ES Act), in respect of tariff of companies falling under Sections 13(as) and (b) of the ERC Act.   Section 43A(2) which  deals  with the  terms  and  conditions  for  sale  of  power  by generating  companies  to  State  Electricity  Boards was  in  force  until  that  date.   Consequent  to  the deletion of Section 43A(2) new sets of terms and conditions were required to be notified under the provisions of Section 28 of the ERC Act, as they now  fall  under  the  tariff  jurisdiction  of  the Commission.

XXX XXX XXX

1.4 Applicability and effective date :

1.4.1 The terms and conditions as will be notified, shall,  apply to all  utilities covered under Section 13(a)  (b)  and  (c)  of  the  ERC  Act  unless specifically stated otherwise…..

XXX XXX XXX

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10.2  This  order  has  to  be  read  along  with  our orders  on  petitions  85/2000  and  86/2000  on operational norms for hydro power stations and for inter  state  transmission  respectively.   This  order along  with  the  order  dated  4th January,  2000  on Availability Based Tariff  read with our order on review petition No.13/2000 on availability based tariff  will  constitute  the  frame  work  for notifications on terms and conditions of tariff to be regulated  under  Section  13(a)(b)  and  (c)  of  the ERC Act.  Separate notifications shall be issued by the  Commission  incorporating  the  findings  in accordance  with  section  28  of  the  ERC  Act, 1998.”

41. It  was  contended  by  Mr.  Ramachandran  that  actual  expenses  for

2001-2002 were not available and the normative expenses for the last five

years were only available and there was an unexpected abnormal increase.   

There  was, thus,  in  our  opinion,  enough justification  for  filing the

application for review of the tariff.

42. While  considering  the  question  of  jurisdiction  vis-à-vis  the

applicability  of  the  operational  and  financial  norms,  it  is  not  for  us  to

consider as to whether such separate petition should have been filed.  We

would, however, consider the question as to whether such an application for

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permission should have been filed within a reasonable time or not a little

later.   

43. The concept of regulatory jurisdiction provides for revisit of the tariff.

It is now a well-settled principle of law that a subordinate legislation validly

made becomes a part of the Act and should be read as such.

44. There cannot be any doubt whatsoever that the word ‘regulation’ in

some quarters is considered to be unruly horse.

In Bank of New South Wales v.  Commonwealth [(1948) 76 CLR 1]

Dixon, J. observed that the word “control” is an unfortunate word of such

wide  and  ambiguous  import  that  it  has  been  taken  to  mean  something

weaker than “restraint”, something equivalent to “regulation”.  

45. But, indisputably, the regulatory provisions are required to be applied

having regard to the nature, textual context and situational context of each

statute and case concerned.  The power to regulate may include the power to

grant or refuse to grant the licence or to require taking out a licence and may

also include the power to tax or exempt from taxation.  It implies a power to

prescribe and enforce all such proper and reasonable rules and regulations

as may be deemed necessary to conduct the business in a proper and orderly

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manner.   It  also  includes  the  authority to  prescribe  the  reasonable  rules,

regulations or conditions subject to which the business may be permitted or

may be conducted.  [See Deepak Theatre v. State of Punjab 1992 Supp (1)

SCC 684 at 687].  Even otherwise the power of regulation conferred upon

an  authority  with  the  obligations  and  functions  that  go  with  it  and  are

incidental to it are not spent or exhausted with the grant of permission.  [See

State of U.P. v. Maharaja Dharmander Prasad Singh (1989) 2 SCC 505]  In

that sense, the power of Central Commission stricto sensu is not a judicial

power.   

This Court in V.S. Rice and Oil Mills v. State of A.P. [(1964) 7 SCR

456] held:

“Then it  was faintly argued by Mr Setalvad that the power to regulate conferred on the respondent by  Section  3(1)  cannot  include  the  power  to increase the tariff rate; it would include the power to  reduce  the  rates.  This  argument  is  entirely misconceived.  The  word  “regulate”  is  wide enough  to  confer  power  on  the  respondent  to regulate  either  by  increasing  the  rate,  or decreasing the rate, the test being what is it that is necessary  or  expedient  to  be  done  to  maintain, increase, or secure supply of the essential articles in  question  and  to  arrange  for  its  equitable distribution and its availability at fair prices…”  

32

Recently,  this  Court  in  T.N.  State  Electricity  Board v.  Central

Electricity  Regulatory  Commission  and  Others [(2007)  7  SCC  636],

whereupon counsels for both the parties relied upon, upon consideration of

the provisions of Section 28 of the 1998 Act, opined as under:

“…A  bare  glance  of  the  above  quoted  section suggests  that  CERC would formulate regulations for providing terms and conditions for fixation of tariff under Clauses (a), (b) and (c) of Section 13. The  power  for  making  the  regulations  is  to  be found in Section 55 of the 1998 Act. Accordingly, CERC has formulated the Regulations which are called  the  Central  Electricity  Regulatory Commission  (Conduct  of  Business)  Regulations, 1999…”

It was furthermore held:

“12.  The appellate  authority  has  clearly  erred  in giving a literal interpretation to the said provision, namely, Clause 2.7(d)(iv). Learned counsel urged that the appellate authority was bound to discern the  true  intendment  of  the  provision  and  should have given it a meaningful interpretation, in that, the escalation factor should have been calculated keeping  6% as  the  base  and  it  should  not  have been  limited  to  the  difference  alone.  Learned counsel  Shri  Sunil  Gupta further  argued that  the rule was manifestly neutral rule founded on purely neutral  considerations  and  while  interpreting  the same, the appellate court  has divested itself with the logic thereof.  Learned counsel  buttressed  his arguments by suggesting that the rule was meant for  the  convenience  of  all  concerned  which included both administrative  as  well  as  financial

33

convenience.  According  to  both  the  counsel  the intention behind the rule  was that  CERC should not be exposed to the tedious exercise of review and readjustment of tariff already fixed so long as the  deviation  was  within  20%  which  was perceived to be the reasonable tolerance limit and that  being the only objective behind the peculiar language  of  the  rule,  by  adopting  the  literal interpretation,  the  utilities  could  not  have  been deprived  of  the  full  benefits  if  the  O&M factor went  below 20% of the  escalation  factor  of  6%. Learned counsel very fairly submitted that in case the O&M factor went beyond the 20% by way of an  upswing  then  the  generating  unit  like  NTPC was always justified to charge on the basis of the full  difference  between the  actual  upswing point and the 6%. According to the learned counsel this was the only intendment of the rule.”

In  Hotel & Restaurant Assn. and Another v.  Star India (P) Ltd. and

Others [(2006) 13 SCC 753], in regard to the role of TRAI as a regulator,

this Court said:

“55.  TRAI  exercises  a  broad  jurisdiction.  Its jurisdiction is not only to fix tariff but also laying down terms and conditions for providing services. Prima facie,  it  can  fix  norms and the  mode and manner  in  which  a  consumer  would  get  the services. 56.  The  role  of  a  regulator  may  be  varied.  A regulation may provide for cost, supply of service on non-discriminatory basis, the mode and manner of supply making provisions for fair  competition providing for  a level  playing field,  protection  of

34

consumers’ interest, prevention of monopoly. The services  to  be  provided  for  through  the  cable operators  are  also  recognised.  While  making  the regulations, several factors are, thus required to be taken  into  account.  The  interest  of  one  of  the players  in  the  field  would  not  be  taken  into consideration throwing the interest of others to the wind.”

In  K. Ramanathan v.  State of Tamil Nadu [(1985) 2 SCC 116], this

Court held:

“18. The word “regulation” cannot have any rigid or inflexible meaning as to exclude “prohibition”. The  word  “regulate”  is  difficult  to  define  as having any precise meaning. It is a word of broad import,  having  a  broad  meaning,  and  is  very comprehensive  in  scope.  There  is  a  diversity  of opinion as to its meaning and its application to a particular state of facts, some courts giving to the term a somewhat restricted, and others giving to it a  liberal,  construction.  The  different  shades  of meaning  are  brought  out  in  Corpus  Juris Secundum, Vol. 76 at p. 611:  “  ‘Regulate’is  variously  defined  as  meaning  to adjust; to adjust, order, or govern by rule, method, or established mode; to adjust or control by rule, method,  or  established  mode,  or  governing principles or laws; to govern; to govern by rule; to govern  by,  or  subject  to,  certain  rules  or restrictions; to govern or direct according to rule; to control, govern, or direct by rule or regulations. ‘Regulate’ is also defined as meaning to direct; to direct  by rule  or  restriction;  to  direct  or  manage according to  certain  standards,  laws,  or  rules;  to

35

rule; to conduct; to fix or establish; to restrain; to restrict.” See  also:  Webster’s  Third  New  International Dictionary,  Vol.  II,  p.  1913  and  Shorter  Oxford Dictionary, Vol. II, 3rd Edn., p. 1784.”

In  Central Power Distribution Co. and Others v.  Central Electricity

Regulatory Commission [(2007) 8 SCC 197], this Court held:

“22.3. As already noticed, the Central Commission has the power and function to evolve commercial mechanism such  as  imposition  of  UI  charges  to regulate  and  discipline.  It  is  well  settled  that  a power to regulate includes within it the power to enforce…”

In  U.P. State Electricity Board, Lucknow v.  City Board, Mussoorie

and Others [(1985) 2 SCC 16], this Court held:

“…It only provides that the Grid Tariff shall be in accordance  with  any  regulations  made  in  this behalf.  That  means  that  if  there  were  any regulations,  the  Grid  Tariff  should  be  fixed  in accordance  with  such  regulations  and  nothing more.  We  are  of  the  view  that  the  framing  of regulations under Section 79 (h) of the Act cannot be  a  condition  precedent  for  fixing  the  Grid Tariff…”  

36

The 2001 Regulations, however, show that it had a limited duration,

viz., three years.

46. The  Government  of  India  issued  guidelines  for  revision  for  the

employees  of  the  Central  Public  Sector  undertakings  as  far  back  on

25.09.1999 with effect from 1.04.1997.  It has not been denied or disputed

that  the  respondent  No.  1  implemented  the  revision  and  paid  arrears  of

salaries with effect from 1.04.1997 to executives, workmen and supervisors,

respectively  during  the  years  2000-2001  by  orders  dated  6.07.2000,

2.03.2000 and 19.04.2001, respectively.

They were already aware of the impending revision of scale of pay

and had implemented  in  part,  albeit,  on  a provisional  basis.   We fail  to

understand as to why it had filed applications for tariff determination for its

generating  stations  at  Korba  and  Dadri  on  28.05.2001  and  8.06.2001,

respectively.  Not only that the amended applications did not contain the

details of the prescribed data, a sheet with data of year 2000-2001, which

was  not  a  part  of  Form  16,  was  inserted  at  a  later  stage.   Amended

applications were filed only on 30.01.2002 and 7.02.2002.  The year 2000-

01 was not the relevant year for the aforementioned purpose.

37

47. There cannot be any doubt whatsoever that for the purpose of making

tariff the actual costs required for payment to the employees being a part of

the operation and maintenance cost including a sum of Rs. 55 crores, which

were to be paid by way of extra amount, could fall for determination by the

Central Commission. But, such an application ordinarily could have been

filed within the period during which the tariff order was in force.

48. It is difficult to agree with the opinion of the appellate tribunal that

increase in the salary with retrospective effect could have been a subject

matter  for  determination  of  tariff  in  another  period.   In  a  fact  situation

obtaining herein, we are of the opinion that the claim of the respondent –

corporation was not justified as the Central Commission should not have

been asked to  revisit  the  tariff  after  five  years  and when everybody had

arranged its affairs.   

49. Regulation 2.7 (d)(iv) of the 2001 Regulations clearly provides that

applications must be entertained only in the event any situation arose within

the purview thereof and not at any point of time.  If the respondent No. 1

was  aware  that  they were  to  incur  an  additional  expenditure  of  Rs.  55/-

38

crores, they could have preferred an appeal before the Central Commission.

We have been informed at the bar that the appeals were preferred on other

issues but not on this one.   

50. Framing  of  tariff  is  made  in  several  stages.   The  generating

companies get enough opportunity not only at the stage of making of tariff

but may be at a later stage also to put forth its case including the amount it

has to spend on operation and maintenance expenses as also escalation at

the rate  of  10% in each of  the base year.   It  cannot,  in  our  opinion,  be

permitted  to  re-agitate  the  said  question  after  passing  of  many  stages.

Furthermore, the direction of the tribunal that the additional costs may be

absorbed in the new tariff, in our opinion, was not correct.  Some persons

who are consumers during the tariff year in question may not continue to be

the consumers of the appellant.  Some new consumers might have come in.

There is no reason as to why they should bear the brunt.  Such quick-fix

attitude, in our opinion, is not contemplated as framing of forthcoming tariff

was put subject to fresh regulations and not the old regulations.   

51. We are not oblivious of the fact that in the Rihand Case, the Central

Commission  allowed  the  application  of  the  respondent,  but,  therein  a

39

provision was made therefor in the original tariff order itself.  Respondent

No. 1 had filed a separate I.A. claiming the impact of arrears paid by it in

2000-2001 towards the years 1997-1998 to 1999-2000.

52. We, therefore, on the aforementioned ground alone are of the opinion

that it was not a fit case where the appellate tribunal should have interfered

with the order of the Central Commission.

53. Although  on  the  question  of  jurisdiction  the  Central  Commission

might  not  have  been  correct,  before  parting  with  this  case,  we  may,

however, also notice a submission of Mr. Gupta that the appellate tribunal

should not  ordinarily interfere with an order  of  the Central  Commission.

We do not agree.  The jurisdiction of the appellate tribunal is wide.  It is

also an expert  tribunal  and,  thus,  it  can interfere with the finding of  the

Central  Commission  both  on  fact  as  also  on  law.   Both  the  Central

Commission as also the appellate tribunal being expert, we do not see how

the decisions of this Court in Union of India and Another v. Cynamide India

Ltd.  and Another [(1987)  2 SCC 720] and  Shri  Sitaram Sugar  Company

Limited  and Another v.  Union  of  India  and Others [(1990)  3  SCC 223]

would be applicable.

40

In  Cellular  Operators  Association  of  India  and  Others  v.  Union of

India and Others [(2004) 8 SCC 524], this Court held:

“TDSAT  was  required  to  exercise  its jurisdiction in terms of Section 14-A of the Act. 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.”

54. For the reasons aforementioned, the appeals are allowed with costs.

Counsel’s fee assessed at Rs. 50,000/- in each case.

………………………….J. [S.B. Sinha]

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..…………………………J.     [Lokeshwar Singh Panta]

..…………………………J.     [B. Sudershan Reddy]

New Delhi; March 3, 2009

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