State of Gujarat & Ors. vs Utility Users’ Welfare Association & Ors.

HELD: 1. Section 84(2) of the Electricity Act 2003 is only an enabling provision to appoint a High Court Judge as a Chairperson of the State Commission of the said Act and it is not mandatory to do so. It is mandatory that there should be a person of law as a Member of the Commission, which requires a person, who is, or has been holding a judicial office or is a person possessing professional qualifications with substantial experience in the practice of law, who has the requisite qualifications to have been appointed as a Judge of the High Court or a District Judge. In any adjudicatory function of the State Commission, it is mandatory for a member having the said legal expertise to be a member of the Bench. The challenge to the appointment of the Chairman and Member of the Tamil Nadu State Commission is rejected as also the suo moto proceedings carried out by the Commission. The judgment would apply prospectively and would not affect the orders already passed by the Commission from time to time. In case there is no member from law as a member of the Commission as required, the next vacancy arising in every State Commission would be filled in by a Member of law in the terms stated. [Para 114] [162-D-H; 163-A]

2.1 On a plain reading of Section 84(1), it is mandated that both the Chairperson and the Members of the State Commission “shall” be persons of ability, integrity and standing who have adequate knowledge of and have shown capacity in dealing with problems relating to engineering, finance, commerce, economics, law or management. A plain grammatical reading of this Section shows that no distinction has been made qua the qualifications of a Chairperson and Member. All that is required is the mandates contained in the sub-section, which begin with the word “shall”. Thus, any person of the fields mentioned therein, having the ability, integrity and standing can be appointed as a Member or Chairperson. [Para 73] [147-G-H; 148-A-B]

2.2 Section 85 of the Act provides for constitution of a Selection Committee to select the Members of the State Commission, which in turn has to consist of the persons as set out therein and mandatorily has to have a person, who has been a Judge of the High Court as the Chairperson of the Selection Committee. This provision refers to the appointment of ‘Members’ of the State Commission but then that would also include the Chairperson of the State Commission, in view of subsection 43 of Section 2 of the said Act. Thus, the reading of subsection (1) of Section 84 read with Section 85 would leave no manner of doubt as to the fields from which a Chairperson or a Member of the State Commission can be chosen from. However, the controversy has emanated from the inclusion of sub-section

(2) of Section 84. This is so, as sub-section (2) begins with a “notwithstanding” clause providing that the State Government “may” appoint any person as Chairperson from amongst the persons, who is, or has been, a Judge of the High Court. This is to be read with the proviso that such an appointment would have to be made in consultation with the Chief Justice of that High Court. The proviso only respects and maintains the accepted position that in appointment of persons, who have been holding such senior judicial office, consultation with the judicial head, being the Chief Justice, should be mandatory. Both the golden rule and the literal rule of statutory construction are well established that a statute must be read as it is framed by the legislature. It is not the function of the Court to supplant or read into the statute something which is not provided. This is not to say that there have not been judicial views taken qua the interchangeability of the expression “may’ and “shall” in certain provisions. Thus, the use of the word “shall” raises a presumption that a particular provision is imperative. However, it has been construed as merely directory in certain cases if the context or intention of the legislature demands otherwise. The Courts may ascertain the real intention of the legislature by carefully attending to the whole scope of the statute. [Para 74-76] [148-B-C, E-H; 149-A-C] Sainik Motors v. State of Rajasthan [1962] 1 SCR 517; Chairman Canara Bank, Bangalore v. M.S. Jasra AIR 1992 SC 1100 : [1992] 2 SCR 68 – referred to.

2.3 It is well-nigh impossible to lay down a general rule for determining whether a provision is imperative or directory. In Section 84, the expression “shall” is used in sub-section (1) both in the context of the requirement of ability, integrity and standing as also in the context of adequate knowledge and capacity in dealing with problems relating to engineering, finance, commerce, economics, law or management. On the other hand, in sub-section (2) while dealing with the possibility of appointment of a Chairperson from the pool of sitting or retired Judges, the expression used is “may” indicating it to be a discretionary power. Thus, the line of reasoning that the plain reading of the section leaves no manner of doubt that the legislature only envisaged a possibility of appointment of a Chairperson from the pool of sitting or retired Judges of the High Court, in which case the method of appointment would be different from the one as envisaged u/s. 85 is accepted. [Paras 78-80] [149-H; 150-C-F]

Interpretation of Statutes by Maxwell, 12 th Edn – referred to.

2.4 The functions of the State Commission are prescribed under Section 86 of the Act. The enumerated functions are determination of tariff, regulation of electricity purchase and procurement process of distribution licencees, facilitating intrastate transmission, issuing licences to persons, promoting cogeneration and generation of electricity from renewable sources, levy fee, specify or enforce standards, fix trading margins. All these functions are regulatory in character rather than adjudicatory. The real adjudicatory function is only provided in sub-clause (f) whereupon the Commission has the option of adjudicating the disputes between the licencees and generating companies, or to refer such disputes to arbitration. There is also an advisory role to be performed by the State Commission as specified in sub-section (2). These types of functions do not necessarily mandate a Judge to be a Chairperson. [Para 81] [150G-H; 151-A-B] Tamil Nadu Generation and Distribution Corporation Limited v. PPN Power Generating Company Private Limited [2014] 4 SCR 667:2014 (11) SCC 53 – referred to.

2.5 The composition of the appellate tribunal under Section

112 mandates that there has to be a Bench of two or more persons of which at least one should be a judicial member. The Chairperson as per Section 113, mandatorily has to be a present or retired Judge of the Supreme Court or a Chief Justice of the High Court. Thus, at the appellate stage there is necessary judicial scrutiny, which takes place. Looked at from the perspective of the position prevailing prior to the said Act coming into force, the nature of functions sought to be performed by the State Commission, were to be so performed, not by person, who necessarily held a judicial office. The observations, in the context of the “tribunalisation” of judicial process and the requirement of it to be headed by a Judge have to be read in the context of shifting of the adjudicatory role from the Courts to the Tribunals. [Para 83] [151-E-G]

2.6 The fact that the Chairperson has a right to nominate the Member, who would chair meetings in his absence as per sub-section (2) of Section 92, or that the presence of a man of law would be no substitute to the requirement of a Judge who would bring a judicial thought process to the decision making as Chairman, or that the regulatory body should not be unregulated, are generalized pleas, which are difficult to accept. No doubt, the law declared by the Supreme Court is binding on all Courts within the territory of India, which would also include principles of law emanating from a judgment or interpretation of the law, but then the ratio decidendi of the judgments of the Supreme Court, makes the principle of mandatory requirement of a Judge applicable only to cases where the judicial function is sought to be shifted through the process of ‘tribunalisation’. [Para 86] [152-D-F]

2.7 Section 84(2) of the said Act begins with a non-obstante clause, i.e., Notwithstanding anything contained in sub-section (1), it does not take away what is stated in sub-section (1), which deals with the requirements that are necessary in the appointment of a Member or Chairperson. It would not cut down the clear terms of the enactment being sub-section (1). The occasion to use such a non-obstante clause really arose because the process of appointment of a Chairperson who is, or has been a Judge, is required to be different, and thus, the mandatory consultation with the Chief Justice. It is nothing more or less. Further subsection (1) of Section 85 provides for a Selection Committee to be headed by a Judge of the High Court but with the proviso that the said provision would not apply for the appointment of a person as a Chairperson who is, or has been, a Judge of the High Court. This, in fact, shows that a non-Judge can be appointed as the Chairperson by the Selection Committee constituted under Section 85 of the said Act, which in turn is chaired by a Judge of the High Court. Thus, Section 84(2) of the said Act only gives the discretionary option to the State Government to appoint a Judge as the Chairperson of the State Commission. The said provision therefore, is not mandatory in nature. [Para 87] [152-FH; 153-A-B]

3.1 In terms of Section 82(4) of the said Act, the State Commission is to consist of not more than three members including the Chairperson. In other words, there have to be two other members other than the Chairperson. Now if the Chairperson is not a Judge, the question arises whether any of the other two members has to be a person from the legal field considering the nature of functions performed by the State Commission. Section 84(1) of the said Act prescribes the requirement of knowledge and shown capacity in dealing with problems relating to six different fields, i.e., engineering, finance, commerce, economics, law or management. If the Chairperson is from a non-legal field, it would imply that he/she would be a person from any of the other five fields. That would still leave the appointment of two members from the fields specified, including law. Thus, there can be a possibility and it is so, where State Commissions have no members from the legal field at all. The moot point arises whether there can be a mandatory provision read into Section 84(1) of the Act for opining, that at least one person from the legal field is necessary as a member, although on a plain reading of the Section it is not so. [Para 88] [153-C-G]

3.2 The distinguishing feature between appointment of members to the Central Commission and the State Commission is that, with regards to the Central Commission, it is specifically provided in Section 77, how many persons from which field are to be appointed. There is a further proviso to sub-clause (c) of subsection (1) of Section 77 restricting it to not more than one member from the fields specified in the said clause, viz. economics, commerce, law or management. This is not the position for the State Commission. [Para 89] [153-G-H; 154-A]

3.3 There is no dispute that sub-clause (f) of s. 86 is clearly an adjudicatory function. It provides for adjudication of disputes between the licencees and the generating companies. There is also a power to refer the dispute to arbitration. [Para 91] [154-C-D]

3.4 A perusal of ss. 94 to 96 would show that apart from their definition, even otherwise, these are powers of a civil court under the Code of Civil Procedure, 1908. Powers such as summoning, enforcement of attendance of any person and examination on oath, discovery and production of documents, receiving affidavit of evidence, requisitioning of public records, etc., all form part of Section 94. In terms of Section 95, all such proceedings before the State Commission would be deemed to be judicial proceedings within the meaning of Sections 193 and

228 IPC and the commission would be a civil court for purposes of Sections 345 & 346 CrPC. Not only that, Section 96 confers the extreme power of entry and seizure in respect of any building and place where the Commission has reason to believe that any document relating to the subject matter of enquiry may be found and may be seized. The power is conferred on the Commission under Section 129 for securing compliances of orders and under Sections 142 & 146 for punishment for non-compliance of orders and directions. This, thus, leaves no manner of doubt that the State Commission, though defined as a ‘Commission’ has all the ‘trappings of the Court’. [Para 93] [154-H; 155-A-D] Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd. (GJ-I) [2008] 4 SCR 822 : 2008 (4) SCC 755; A.P. Power Coordination Committee & Ors. v. Lanco Kondapalli Power Ltd. & Ors. [2015] 12 SCR 447 : 2016 (3) SCC 468; Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd. (GJ-I) [2008] 4 SCR 822 : 2008 (4) SCC 755; Tamil Nadu Generation and Distribution Corporation Limited v. PPN Power Generating

Company Private Limited [2014] 4 SCR 667 : 2014 (11) SCC 53; Bharat Bank Ltd. v. Employees of the Bharat Bank Ltd. 1950 AIR 188 : [1950] SCR 45; Jaswant Sugar Mills Ltd. v. Lakshmi Chand [1963] Supp. 1 SCR 242; Engineering Mazdoor Sabha v. Hind Cycles Ltd. 1963 AIR 874 : [1963] Suppl. SCR 625; Indo-China Steam Navigation Co. Ltd. v. Jasjit Singh [1964] 6 SCR 594; Associated Cement Companies Ltd. v. P.N. Sharma [1965] 2 SCR 366; Sarojini Ramaswami v. Union of India [1992] 1 Suppl. SCR 108 : 1992 (4) SCC 506; State of Gujarat v. Gujarat Revenue Tribunal Bar Association [2012] 10 SCR 816 : 2012 (10) SCC 353 – referred to.

Shell Company of Australia, Limited v. Federal Commissioner of Taxation (1931) AC 275; R. v. London County Council (1931) 2 KB 215; Huddart, Parker & Co. v. Moorehead 8 CLR 330, 357; Cooper v. Wilson (1937) 2 KB 309 – referred to.

3.5 The ‘Wambaugh Test’ or ‘The Inversion Test’ is propounded as the means of judicial interpretation. ‘The Inversion Test’ is used to identify the ratio decidendi in any judgment. In order to test whether a particular proposition of law is to be treated as the ratio decidendi of the case, the proposition is to be inversed, i.e., to remove from the text of the judgment as if it did not exist. If the conclusion of the case would still have been the same even without examining the proposition, then it cannot be regarded as the ratio decidendi of the case. This test has been followed to imply that the ratio decidendi is what is absolutely necessary for the decision of the case. “In order that an opinion may have the weight of a precedent”, “it must be an opinion, the formation of which, is necessary for the decision of a particular case.” Applying the test to the said judgment, the proposition is reversed, i.e., “the Chairman need not be a judicial member”, the fact remains that it would have no impact on the decision in that case, which was related to inter alia the interpretation of Section 86 of the said Act. This, in fact, justifies what has been held aforesaid qua the appointment of a Chairperson from the pool of Judges. [Para 102-104] [159-A-F]

3.7 If this Court was to take the proposition as “no member having knowledge of law is required to be a member of the Commission” then there is a problem at hand. This is so because while interpreting Section 86 of the said Act, it has been expressed that the Commission has the ‘trappings of the Court’, an aspect which has been accepted. Once it has the ‘trappings of the Court’ and performs judicial functions, albeit limited ones in the context of the overall functioning of the Commission, still while performing such judicial functions which may be of far reaching effect, the presence of a member having knowledge of law would become necessary. The absence of a member having knowledge of law would make the composition of the State Commission such as would make it incapable of performing the functions under Section 86(1)(f) of the said Act. [Para 105] [159-G; 160-A-C]

Madras Bar Association v. Union of India & Anr. (MJ-II) [2014] 10 SCR 1 : 2014 (10) SCC 1 – referred to.

3.8 It is mandatory to have a person of law, as a member of the State Commission. When it is said, it does not imply that any person from the field of law can be picked up. It has to be a person, who is, or has been holding a judicial office or is a person possessing professional qualifications with substantial experience in the practice of law, who has the requisite qualifications to have been appointed as a Judge of the High Court or a District Judge. [Para 107] [160-G-H]

Brahm Dutt v. Union of India 2005 (2) SCC 431 – referred to.

3.9 It cannot be said that since there is a presence of a Judge in the Appellate Tribunal that would obviate the need of a man of law as a member of the State Commission. The original proceedings cannot be cured of its defect merely by providing a right of appeal. Thus, for all adjudicatory functions, the Bench must necessarily have at least one member, who is or has been holding a judicial office or is a person possessing professional qualifications with substantial experience in the practice of law and who has the requisite qualifications to have been appointed as a Judge of the High Court or a District Judge. [Paras 109-110] [161-D-E]

3.10 The challenge laid in Transfer Cases to the appointments made to the Tamil Nadu State Commission and the exercise of the powers suo moto by the Commission. The fundamental plea is of financial bias of the two members as they were working in their erstwhile avatars. The name of ‘GR’ was recommended when he was still working as the Director, TANGEDCO and he opted for voluntary retirement after his name had been recommended. ‘AK’ retired from the post of Managing Director of TANTRANSCO on 31.5.14 and was appointed as Chairman of the Commission on 6.6.14. The tariff hike was approved by a majority of 2:1 with these two members being part of the majority view. [Para 111] [161-E-G]

3.11 The nature of financial interest was examined in the narrower sense as well as the wider sense and in the wider sense, it was held to include the direct or indirect interest of a person in relation to a financial undertaking. The situation arose when the person concerned was holding both the posts simultaneously, which is not so in the instant case. It is also pointed out by the counsel for the State of Tamil Nadu that the orders of appointment have been exclusively assailed right till the Supreme Court. Selection Committee was presided over by a retired Judge of the High Court. Thus, no merit is found in the plea sought to be advanced assailing either the appointment or the suo moto tariff revision.[Para 112-113] [162-A-C]

Rajesh Awasthi v. Nand Lal Jaiswal [2012] 10 SCR 883 : 2013 (1) SCC 501; Mor Modern Cooperative

Transport Society Ltd. v. Financial Commissioner & Secretary to Govt. of Haryana and Anr. [2002] 1 Suppl. SCR 87 : 2002 (6) SCC 269; Kihoto Hollohan v. Zachillhu [1992] 1 SCR 686 : 1992 (2) Suppl. SCC 651; Pareena Swarup v. Union of India [2008] 13

SCR 1217 : 2008 (14) SCC 107; Union of India v. Madras Bar Association (MJ-I) [2010] 6 SCR 857 : 2010 (11) SCC 1; Uttar Pradesh Power Corporation Limited v. National Thermal Power Corporation Limited & Ors. (2011) 12 SCC 400; Natural Resources

Allocation In re Special Reference No. 1 of 2012 [2012]

9 SCR 311 : 2012 (10) SCC 1; Bachahan Devi & Anr. v. Nagar Nigam, Gorakhpur & Anr. [2008] 2 SCR 424 : 2008 (12) SCC 372; The Dominion of India & Anr. v. Shrinbai A Irani & Anr. [1955] 1 SCR 206; Chairman Canara Bank, Bangalore v. M.S. Jasra 1992 AIR 1100 : [1992] 2 SCR 68; Ajit Singh (II) v. State of Punjab (1999) 7 SCC 209; State of U.P. v. Babu Ram [1961] 2 SCR 679 – referred to.

The Study of Cases”by Eugene Wambaugh Boston : Little, Brown & Co., 1892 p 17.