Maharashtra State Electricity Distribution Co. Ltd. vs Union of India and Other

602 dated 23.07.1998, Circular No. 619 dated 25.05.1999, Circular No. 627 dated 02.09.1999, Circular No. 651 dated 19.09.2000 and Circular No. 663 dated 05.10.2001, insofar as they purport to impose “take or pay” obligation and minimum off-take requirement as also of any additional tariff for captive power plant holders on the ground that there was no approval of the MERC constituted in terms of the provisions of the Electricity Regulatory Act, 1998 – The appellant-MSEDCL was directed to make refund to respondent nos. 3 to 7 – Appeal preferred by MSEDCL was dismissed by the Appellate Tribunal for Electricity (APTEL) – Before the Supreme Court, the appellant-MSEDCL contended that MERC was constituted on 05.08.1999, its approval was not required with regard to two circulars issued before the said date – Held: The circular issued before the Commission was constituted could not have been quashed on the ground that Maharashtra State Electricity Board (MSEB) had no power to issue them without the approval of the Commission – In Binani Zinc Limited, the Supreme court held that before Commission came into existence, the power was to be exercised by the State Electricity Board – Therefore, the circulars and the policy decisions issued before the establishment of the Commission were illegally set aside – Insofar as refund order is concerned, it is apparent from the additional affidavit filed by the appellant-MSEDCL that the respondents used supply of electricity to manufacture their products – The cost incurred on production has been passed on to the buyers/ consumers buying their products – In the peculiar facts of the case, as the Commission earlier opined in order dated 10.01.2002 that Captive Power Plant Policy is a policy matter and it did not decide as to the merits of subject matter as prayer for approval was made by the appellant- MSEDCL – The Commission without considering on merits the reasonableness of the demand, quashed the circulars – It would not be appropriate in the peculiar facts of the case to direct refund to be made by the appellant-MSEDCL of the amount recovered by it as it would tantamount to unjust enrichment – Consequently, the orders passed by the Commission as well as the APTEL set aside and in the peculiar facts and circumstances of the case, the order concerning a refund of amount recovered also set aside.

Allowing the appeal, the Court

HELD:1. The first question for consideration is whether the Commission could have quashed circulars issued by the appellant-MSEDCL before its formation. The Commission was constituted under the Act of 1998 on 5.8.1999. The circular issued before that could not have been quashed on the ground that MSEB had no power to issue them without the approval of the Commission. The decisions in that regard of Commission as well as of APTEL are liable to be set aside. In Binani Zinc Limited, this Court held that before Commission came into existence, the power was to be exercised by the State Electricity Board. [Para 24][1058-F-G]

Binani Zinc Limited v. Kerala State Electricity Board and Ors. (2009) 11 SCC 244 – relied on.

2. Concerning circular dated 2.9.1999, which remained in force till 28.4.2000, the Commission as well as the APTEL were required to consider impact of Commission earlier order passed on 10.1.2002 and also its observations made in the said order that CPP is a policy matter and that Commission was recently conferred with the power under Section 22(2) of the Act of 1998, it ought to have gone into the merits of the claim. It was also pointed out on behalf of appellant-MSEDCL that it had submitted circulars for approval to Commission, which has not gone into the merits of the subject matter and later quashed circulars on the ground of competence. The MSEDCL filed circulars along with tariff proposal for approval as that was an essence of the tariff. [Para 25][1059-G-H; 1060-A]

3. It has also been pointed out that in subsequent orders also, circulars as to CPP were relied upon by the Commission. It was incumbent upon the Commission to consider the effect of its orders and the prayer made by the appellant-MSEDCL to consider merits of various circulars while fixing the tariff. [Para 26] [1060-B]

4. As dispute pertains to the period from 2.9.1999 to 28.4.2000, and it is apparent from the additional affidavit filed by the appellant-MSEDCL that the respondents used supply of electricity to manufacture their products. The cost incurred on production has been passed on to the buyers/consumers buying their products. Hence, it would tantamount to unjust enrichment in case a refund is ordered. In the peculiar facts of the case, as the Commission earlier opined in order dated 10.1.2002 that CPP is a policy matter and it did not decide as to the merits of subject matter as a prayer for approval was made by the appellantMSEDCL. The Commission observed that it would consider the matter in the future, but later on, without considering on merits the reasonableness of the demand, the Commission quashed the circulars. It is apparent that the liability was passed on to the buyers/consumers by the respondent nos.3 to 7 as electricity was used to manufacture their products sold in the market, working out the price based on expenditure. It would not be appropriate in the peculiar facts of the case to direct refund to be made by the appellant-MSEDCL of the amount recovered by it as it would tantamount to unjust enrichment. Thus, in the peculiar facts and circumstances of the case, it is not considered appropriate to remit the matter to decide the dispute on merits after two decades for the period from 2.9.1999 to 28.4.2000, during which circular dated 2.9.1999 was in force. [Para 27][1060-C-F]

5. Consequently, this Court set aside the orders passed by the Commission as well as the APTEL and hold that circulars and the policy decisions issued before the establishment of the Commission were illegally set aside and in the peculiar facts and circumstances of the case this Court set aside the order concerning a refund of amount recovered by MSEB. [Para 28] [1060-G]