Bhaskar Shrachi Alloys Ltd. Etc.Etc. vs Damodar Valley Corporation & Ors. etc.

Electricity – CERC issued tariff order determining the tariff for generation and transmission for the period from 1st April, 2006 to 31st March, 2009 by allowing a two-year transition period to the Damodar Valley Corporation i.e. from 1st April, 2004 to 31st March, 2006 – Upheld by the Appellate Tribunal – Propriety of – Held: Corporation in addition to generation, transmission and distribution of electricity is statutorily required to undertake certain social security/beneficial measures like flood control, control of soil erosion, afforestation, navigation, promotion of public health etc. – Grant of transitory period can not be faulted with – Said part of the order of the Tribunal not interfered with.

Electricity Act, 2003 –s.79 – Held: Having regard to the provisions of s.79 it is the Central Electricity Regulatory Commission (CERC) which would be the “Appropriate Commission” for determination of tariff inasmuch as the Damodar Valley Corporation is a Corporation owned and controlled by the Central Government – Said conclusion recorded by the Appellate Tribunal not interfered with.

Damodar Valley Corporation Act, 1948 – Incorporation of Damodar Valley Corporation under – Objects and reasons for – Discussed.

Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2004 – If have overriding effect over the parallel provisions in the 1948 Act – Plea of appellant that 2004 Regulations must override the provisions of the 1948 Act as the said regulations are statutory in character – Held: Not accepted – 2004 Regulations though statutory in character are a species of subordinate delegated legislation – Damodar Valley Corporation Act, 1948.

Interpretation of Statutes – External aids – Reports submitted by Parliamentary Standing Committee – Discussed.

Electricity – ‘Depreciation rate’ and ‘sinking fund’ – Heads of tariff fixation – Determination of u/s.40 of the 1948 Act – Propriety of – Discussed – Damodar Valley Corporation Act, 1948 – s.40 – Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2004 – Regulation 20. Electricity – Tariff – Recovery towards Pension and Gratuity Fund – In reversal of the decision of the Central Electricity Regulatory Commission permitting recovery from consumers to the extent of 60% and contribution of the balance 40% by the Damodar Valley Corporation, Appellate Tribunal allowed entire fund to be recovered by way of tariff from the consumers – Propriety of – Held: Ex facie, there is no error in the reasoning adopted by the Tribunal in coming to the aforesaid conclusion so as to justify interference – Electricity Act, 2003 – s.125.

Electricity – Cost relating to “other activities” of the Damodar Valley Corporation to be recovered through tariff – Allowed by Appellate Tribunal – Propriety of – Plea of appellants that ss. 32 and 33 of the 1948 Act are in direct conflict with ss. 41 and 51 of the 2003 Act and, therefore, recovery of cost incurred in “other works” undertaken by the Corporation through power tariff is wholly untenable – Held: “Other activities” of the Corporation are not optional as contemplated u/ss.41/51 of the 2003 Act but are mandatorily cast by the 1948 Act which, being in the nature of socially beneficial measures, per se, do not entail earning of any revenue so as to require maintenance of separate accounts – Allowance of recovery of cost incurred in connection with “other activities” of the Corporation from the common fund generated by tariff chargeable from the consumers/customers of electricity as contemplated by the provisions of the Act of 1948, therefore, do not collide or is inconsistent with the provisions of the 2003 Act – Findings of Tribunal not interfered with – Electricity Act, 2003 – ss.41 and 51 – Damodar Valley Corporation Act, 1948 – ss.32 and 33.

Dismissing the appeals, the Court

HELD: 1.1 The transitory period has been granted having due regard to the statutory functions/social responsibilities that the Damodar Valley Corporation (DVC/Corporation) is mandated to undertake in terms of the Damodar Valley Corporation Act, 1948. The tariff fixed is also lower than the tariff that has been fixed by the Jharkhand and West Bengal Electricity Regulatory Commission for the general/domestic classes of consumers. While it is correct that the classes of consumers served by the Corporation are HT-Industrial consumers like Steel, Coal, Railways, etc. beside bulk supply to main beneficiaries of State Electricity Boards of West Bengal and Jharkhand, the said fact, itself, is another peculiar feature which distinguishes the Corporation from other licenses. If in a situation where the Corporation in addition to generation, transmission and distribution of electricity is statutorily required to undertake certain social security/beneficial measures like flood control, control of soil erosion, afforestation, navigation, promotion of public health, etc. the grant of transitory period cannot be faulted with. Therefore, the said part of the order of the Appellate Tribunal is declined to be interfered with. The Appellate Tribunal also took the view that having regard to the provisions of Section

79 of the Electricity Act, 2003 it is the CERC which would be the “Appropriate Commission” for determination of tariff inasmuch as the Damodar Valley Corporation is a Corporation owned and controlled by the Central Government. The said conclusion recorded by the Appellate Tribunal is neither unreasonable nor irrelevant so as to warrant interference, particularly, in exercise of the limited jurisdiction under Section 125 of the 2003 Act. [Paras 27, 28] [792-G-H; 793-A-D]

1.2 The Damodar Valley Corporation had been incorporated under the provisions of the Damodar Valley Corporation Act, 1948. Sometime in the year 1943, the Damodar River Valley had been affected by severe floods leading to wide-scale destruction of life and property. The Provincial Government of Bengal had constituted an Enquiry Committee to suggest ways and means to avoid such catastrophes in the future. The Enquiry Committee had, inter alia, recommended that a statutory corporation, on the lines of the Tennessee Valley Authority of the USA, be incorporated to command and control the Damodar River. The then British Government accepted this proposal of the Committee and had called a senior Engineer working for the Tennessee Valley Authority to make recommendations and suggestions in this regard. [Para 30] [793-F-H]

1.3 The Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2004 though statutory in character are a species of subordinate delegated legislation. Further, it may be wholly unnecessary to detract from the fundamental principles of law laid down in The Presidential Reference case which would be an inevitable consequence, if the contentions advanced on behalf of the appellants to the effect that the Tariff Regulations must override the provisions of the Act of 1948 as the said regulations are statutory in character is to be accepted. This is also what has been subsequently emphasised by Supreme Court in Bharathidasan University & Anr. and Samsthanan Chethu Thozhilali Union cases. No error, therefore, can also be found in the implicit reliance placed on the ratio of the above decisions by the Appellate Tribunal. [Paras 35, 37] [795-F-G; 798-D-E]

The Presidential Reference, Delhi Laws Act, 1912 AIR 1951 SC 332 : [1951] SCR 747 – followed.

Bharathidasan University & Anr. v. AICTE & Ors. (2001) 8 SCC 676 : [2001] 3 Suppl. SCR 253;

Samsthanan Chethu Thozhilali Union v. State of Kerala & Ors. (2006) 4 SCC 327 : [2006] 3 SCR 420 –

referred to.

1.4 The fourth proviso to Section 14 of Electricity Act, 2003 uses the expression “….and the provisions of the Damodar Valley Corporation Act, 1948 in so far as they are not inconsistent with the provisions of the Act, shall continue to apply to that Corporation…”. The fourth proviso to Section 14 is clearly a substantive provision to lay down something more than what a proviso generally deals with. If the intention of the proviso was to exclude DVC only from the main part of Section 14 dealing with the requirement of obtaining licence for transmission/distribution/trade in electricity, the purpose is fully achieved by the first part recognising DVC as a ‘deemed licensee’ and not requiring to apply for and obtain licence. The Legislature could have simply stopped there. There was no necessity to incorporate the second part. The second part of the fourth proviso is to bring in the continued application of some of the provisions of the Damodar Valley Corporation Act, 1948 which are not inconsistent with the provisions of the Electricity Act, 2003. The third proviso to Section 14 which provides “that in case an appropriate Government transmits electricity or distributes electricity or undertakes trading in electricity whether before or after the commencement of the Act, such Government shall be deemed to be a licensee under the Act but shall not be required to obtain licence under the Act”. In so far as DVC is concerned, if the fourth proviso is to be confined only to licensing as in the case of third proviso, the fourth proviso also would have stopped with the first part of the proviso. There would have been no necessity to incorporate the second part of the proviso. The legislature does not incorporate any words which are irrelevant or redundant and every expression used in a statutory provision has some purpose. A careful comparative reading of the third and the fourth provisos to Section 14 clearly indicates the intention of the legislature that the second part of the fourth proviso is to bring in the continued application of some of the provisions of the Act of 1948 which are not inconsistent with the provisions of the Electricity Act, 2003. There are no licensing provisions in the Damodar Valley Corporation Act, 1948 to be saved. The obvious reference in the second part of proviso is to provide for the continued application of the provisions of the 1948 Act insofar as they are not inconsistent with the provisions of the Electricity Act, 2003. [Paras 41, 42] [802-A-H]

1.5 The appellants made reference to Sections 18 and 19 of the Damodar Valley Corporation Act, 1948 as being the provisions relating to licensing which could be said to be considered as saved by virtue of second part of the fourth proviso to Section 14 of the Act of 2003. A perusal of Sections 18 and 19 of the 1948 Act show that they deal with the supply and generation of electrical energy and distribution of electricity within the Damodar Valley area. The provisions of the Electricity Act, 2003 which authorise the Regulatory Commissions to grant licence to persons (other than DVC) fully govern the field and there is no question of continued application of the 1948 Act in that respect. Sections 18 and 19 of the 1948 Act do not deal with licence to DVC. These provisions only deal with activities of other entities to distribute electricity within the Damodar Valley area. Further, the provisions of Electricity Act, 2003 authorizes the Regulatory Commissions to grant licence to persons other than DVC. Therefore, there can be no question of continued application of the 1948 Act over those provisions. The fourth proviso to Section 14, Electricity Act, 2003 which uses the expression “….and the provisions of the Damodar Valley Corporation Act, 1948 in so far as they are not inconsistent with the provisions of the Act, shall continue to apply to that Corporation…” is a positive provision enabling continued application of certain provisions of the 1948 Act which are not inconsistent with the provisions of the Electricity Act, 2003. The intention behind both the provisions needs to be appreciated and given effect to. [Paras 43, 44] [803-A-E]

1.6 The Parliamentary Standing Committee had

recommended that the Corporation should be exempted from the operation of the provisions of the proposed Electricity Act, 2003 in view of the special status and responsibilities of the Corporation as envisaged under the Parliamentary enactment constituting it (i.e the Act of 1948). However, it appears that Parliament was not inclined to provide a blanket/total exemption in favour of the Corporation and the 2003 Act did not include the Corporation as one of the entities in Section 173 of the 2003 Act which provides exemption in so far as the provisions of the Consumer Protection Act, 1986, the Atomic Energy Act, 1962 and the Railways Act, 1989 clearly excluding the provisions of the 1948 Act therefrom. Instead, the fourth proviso to Section

14 of the 2003 Act was specifically incorporated. Having regard to the legislative history behind the enactment of the provision of Section 173 and the provisions of Section 14 including the fourth proviso thereto, it may be more in consonance with the Parliamentary intention to hold that the fourth proviso to Section

14 need not be understood to be confined only to the question of licensing which is dealt with by the main part of the Section 14. Rather, the Parliament had intended to provide partial exemption to the Corporation by mandating that such provisions of the 1948 Act which are not inconsistent with the 2003 Act will continue to hold the field. Viewed thus, the fourth proviso to Section 14 of the Electricity Act 2003 has to be understood to be a legislative exercise in the nature of a substantial provision of law. Part IV of the Act of 1948 not being inconsistent with the provisions of the 2003 Act can, therefore, be taken into account for determination of tariff. Such provisions of the 1948 Act will also have an overriding effect over the inconsistent provisions of the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2004. Said view, as above, will also effectuate the provisions of the 1948 Act in so far as the activities of the Corporation, other than generation and transmission of electricity, is concerned. Therefore, the above view taken by the Appellate Tribunal is affirmed. [Paras 47, 48] [804-H; 805-A-H]

1.7 So far as the ‘depreciation rate’ and ‘sinking fund’ is concerned it is the provisions of Section 40 of the Damodar Valley Corporation Act, 1948 which have been held to be determinative. Having clarified the manner in which the fourth proviso to Section

14 of the Electricity Act, 2003 has to be understood, one does not find the reasoning adopted by the Appellate Tribunal on the issues relating to ‘depreciation’ and ‘sinking fund’ to be fundamentally flawed in any manner so as to give rise to a substantial question of law requiring intervention/interference under Section 125 of the 2003 Act. Insofar as the debt-equity ratio is concerned, it is found that except for the projects which have been completed prior to 1992 in which case the ratio has been worked out at par with other public-sector organisation at 50:50, the ratio of 70:30 has been adopted following the prescription under Regulation 20 of the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2004 in the absence of any specific rate under the Act of 1948. [Paras 50, 51] [806-E-H]

1.8 So far as the pension and gratuity fund is concerned, the only issue arising is whether the fund worked out on Actuary basis at Rs.1534.49 crores should be apportioned between the Corporation and the consumers as held by the CERC in the ratio of 40:60 or the entire fund should be allowed to be recovered by way of tariff from the consumers as held by the Appellate Tribunal. A careful consideration of the reasoning adopted by the Appellate Tribunal would not disclose any such error so as to warrant interference of this Court. No error or fallacy, ex facie, is disclosed in the reasoning adopted so as to justify interference under Section 125 of the Electricity Act, 2003. [Paras 52, 53] [807-A-B, E-F]

1.9 Sections 41 and 51 of the Electricity Act, 2003 inter alia, require maintenance of separate accounts of the other business undertaken by transmission/distribution licensees so as to ensure that the returns from the transmission/distribution business of electricity do not subsidize any other such business. Not only Sections 41 and 51 of the 2003 Act contemplate prior approval of the Appropriate Commission before a licensee can engage in any other business other than that of a licensee under the 2003 Act, what is contemplated by the aforesaid provisions of the 2003 Act is some return or earning of revenue from such business. In the instant case, the “other activities” of the Corporation are not optional as contemplated under Sections 41/51 of the 2003 Act but are mandatorily cast by the statute i.e. Act of 1948 which, being in the nature of socially beneficial measures, per se, do not entail earning of any revenue so as to require maintenance of separate accounts. The allowance of recovery of cost incurred in connection with “other activities” of the Corporation from the common fund generated by tariff chargeable from the consumers/customers of electricity as contemplated by the provisions of the Damodar Valley Corporation Act of 1948, therefore, do not collide or is, in any manner, inconsistent with the provisions of the 2003 Act. Therefore, there is no occasion to interfere with the findings recorded by the Appellate Tribunal on the above score. [Para 55] [808-D-H]

Shah Bhojraj Kuvarji Oil Mills & Ginning Factory v. Subhash Chandra Yograj Sinha [1962] 2 SCR 159 – followed.

S. Sundaram Pillai & Others v. V.R. Pattabhiraman & Others (1985) 1 SCC 591 : [1985] 2 SCR 643;

Kalpana Mehta & Ors. v. Union of India & Ors. 2018

(7) SCALE 106 – relied on.

Dwaraka Prasad v. Dwarka Das Saraf (1976) 1 SCC

128 : [1976] 1 SCR 277; Union of India & Ors. v. Dileep Kumar Singh (2015) 4 SCC 421 : [2015] 2 SCR 882; PTC India Ltd. v. Central Electricity Regulatory Commission (2010) 4 SCC 603 : [2010] 3 SCR 609 ; State of Rajasthan v. Leela Jain [1965] 1 SCR 276 ; Motiram Ghelabhai v. Jagan Nagar (1985) 2 SCC

279 : [1985] 2 SCR 1051 – referred to.