Full Judgment Text
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CASE NO.:
Appeal (civil) 2149 of 2006
PETITIONER:
Tamil Nadu State Electricity Board
RESPONDENT:
Central Electricity Regulatory Commission & Ors
DATE OF JUDGMENT: 20/04/2007
BENCH:
H.K. Sema & V.S. Sirpurkar
JUDGMENT:
J U D G M E N T
WITH
CIVIL APPEAL NO.2352 OF 2006
Uttar Pradesh Power Corporation Ltd. & Anr. \005. Appellants
Versus
National Thermal Power Corporation Ltd., & Ors. \005. Respondents
WITH
CIVIL APPEAL NO.3027 OF 2006
Rajasthan Rajya Vidhyut Prasaran Nigam Ltd. \005. Appellant
Versus
National Thermal Power Corporation & Ors. \005. Respondents
V.S. SIRPURKAR, J
1. This judgment will dispose of the above three Civil Appeals
which have been filed by three Appellants, namely, Tamil Nadu State
Electricity Board, Uttar Pradesh Power Corporation Ltd. and
Rajasthan Rajya Vidhyut Prasaran Nigam Ltd. The common question
of law is involved in all the three appeals which relates to the
interpretation of Regulation 2.7(d)(iv) of the Central Electricity
Regulatory Commission (Terms & Conditions of Tariff) Regulation,
2001 (hereinafter called the "CERC Regulations, 2001"). These
appeals are filed under Section 125 of The Electricity Act, 2003 (36 of
2003) and against the orders passed by the Appellate Tribunal
allowing the appeals filed by the respondents therein. The following
factual matrix would be necessary for the proper understanding of the
controversy involved in these appeals.
2. Before the present Act came in the anvil, the Electricity Supply
Act, 1948 was occupying the field and the Central Government norms
for fixing tariff for the period 1.11.1992 to 31.10.1997 were notified
under Section 43A of the said Act. The Legislature then brought in
Electricity Regulatory Commissions Ordinance which was ultimately
converted into an Act in the year 1998. Section 3 of the Act provides
for the establishment and incorporation of Central Electricity
Regulatory Commission (hereinafter called the "CERC" for short).
Section 13 provides power to regulate the tariff of generating
companies, owned and controlled by the Central Government, sub-
section (b) thereof provides power to regulate the tariff of the other
companies amongst the other powers which are to be found upto
clauses (i) of that Section. Section 28 of the 1998 Act reads as
under:
"28. The Central Commission shall determine by
regulations the terms and conditions for fixation of tariff
under clauses (a), (b) and (c) of Section 13, and in doing
so, shall be guided by the following namely:
(a) the generating companies and transmission entities
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shall adopt such principles in order that they may earn an
adequate return and at the same time that they do not
exploit their dominant position in the generation, sale of
electricity or in the inter-State transmission of electricity;
(b) the factors which would encourage efficiency,
economical use of the resources, good performance,
optimum investments and other matters which the Central
Commission considers appropriate;
(c) national power plans formulated by the Central
Government; and
(d) such financial principles and their applications
contained in Schedule VI to the Electricity (Supply) Act,
1948 as the Commission considers appropriate."
A bare glance of the above quoted Section suggests that the CERC
would formulate regulations for providing terms and conditions for
fixation of tariff under Clauses (a), (b) & (c) of Section 13. The power
for making Regulations is to be found in Section 55 of the 1998 Act.
Accordingly, the CERC has formulated Regulations which are called
Central Electricity Regulatory Commission (Conduct of Business)
Regulations, 1999. We are concerned herein with the Regulations
called CERC Regulations, 2001 and more particularly, clause
2.7(d)(iv) thereof.
3. Before we take up the task of interpretation, we must state the
facts which necessitate the interpretation of the above clause. In all
these appeals we are concerned with the tariff for the period 1.4.2001
upto 31.3.2004. Clause 1.4 of the CERC Regulations, 2001 provides
as under:
"1.4 The generation tariff under these Regulations 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.
Clause 1.11 provides:
"For removal of doubts, it is clarified that the norms
prescribed herein are the ceiling norms only and this shall
not preclude the Generating Company and other
beneficiaries from agreeing to improved norms."
Chapter 2 relates to other power generating stations. Para 2.1 is a
definition clause and the definition of "Operation and Maintenance
Expenses" provides as under:
"Operation and Maintenance Expenses" or "O&M
Expenses" \026 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 2.2 in the same Chapter provides as under:
"2.2 The tariff for sale of electricity from Thermal
Generating Stations (including Gas and Naphtha based
stations) shall comprise of two parts, namely, the
recovery of annual capacity (fixed) charges and Energy
(variable) charges. The annual capacity (fixed) charges
shall consist of interest on loan capital, depreciation,
return on equity, advance against depreciation, operation
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and maintenance expenses, and interest on working
capital. The Energy (Variable) charges shall cover fuel
cost." (Emphasis Supplied)
Then comes Regulation 2.7 which under sub-clause (d) provides for
Operation and Maintenance expenses including insurance. We are
not concerned with sub-clauses (i), (ii) & (iii) thereof. However, the
relevant clause which has fallen for our consideration is clause (iv)
which reads as under:
"2.7 Payment of Capacity (Fixed) Charges:
The Capacity Charges shall be computed on the following
basis and its recovery shall be related to Availability.
(a) \005..
(b) \005..
(c) \005..
(d) Operation and Maintenance expenses including
insurance:
(i) \005..
(ii) \005.
(iii) \005.
(iv) The escalation factor of 6 percent 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 percent of the
above notified escalation factor of 6 percent (which works
out to be 1.2 percentage points on either side of 6
percent) 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 percent, 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."
4. National Thermal Power Corporation (hereinafter called the
NTPC) generates the electricity at its various plants and sells it to the
State utilities like appellants at the tariff fixed by CERC. We have
already pointed out that it is the CERC which has the exclusive task
of fixing the tariff. After CERC Regulations, 2001 were notified which
provide the method for working out the allowable Operation and
Maintenance expenses and escalation factors thereupon, the
Commission with a view to look into the question of revision of O&M
expenses from 2001-2002 to 2003-2004 initiated suo motu
proceedings being Petition No.196 of 2004. As per procedure the
Commission circulated its Draft Order dated 4.1.2005 dealing with
adjustment of O&M expenses based on actual escalation factor for
the deviation beyond the limit prescribed by Regulation 2.7(d)(iv). The
inflation rates for the relevant years were specified by the
Commission in this order which were based on computation arrived at
by the staff of CERC. The Draft Order was circulated to the Central
Utilities as also the State Utilities like UPCL. The UPCL did not
question the inflation rates. The stand of the NTPC throughout was
that revision of O&M expenses be undertaken on the notional 6%
escalation factor based on actual escalation between 4.8 and 7.2
since 20% was considered to normal deviation. Its further stand was
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that in case the deviation goes below 4.8 or beyond 7.2, as the case
may be, it would be required to be adjusted on the basis of the actual
escalation factor meaning thereby it would be only the deviation of
the two points, namely, below 4.8% and beyond 7.2% which would be
taken into consideration whereas the stand of the Utilities was that
the said escalation factor should be related to the standard 6%. For
example, according to the NPTC, if the escalation went to 4% which
was below 4.8% then only .8% should be taken as an escalation
factor so also if the escalation went beyond 7.2, i.e., 8%, then it would
be only .8% which would be taken as an escalation factor. On the
other hand as per the Utilities the said escalation factor should not be
limited to the deviation but it should be 2% in the first and the second
case because it was actually the deviation of 2% from the standard
6%.
5. By its order dated 28.2.2005, the CERC held that where the
escalation factor is not in the prescribed norm, O&M expenses should
be calculated by working out "the actual escalation factor" and not
"the marginal adjusted escalated factor" as explained above.
Consequently, the CERC directed that the O&M charges between
April 1, 2001 to March 31, 2004 should be worked out by applying
the actual escalation rates for the years 2001-2002 and 2003-2004
which was calculated by the staff of CERC.
6. A Review Petition was filed before the CERC by the NTPC.
However, that review petition was rejected by the CERC by its order
dated 7.6.2005. NTPC, therefore, filed an appeal before the
Appellate Authority vide Appeal No.103 of 2005 (We have taken the
facts only in the case of UPCL, i.e., CA No.2352/2006 for the sake of
convenience as there is no difference in the facts of the other two
appeals and the question is absolutely common).
7. The Appellate Authority vide its order dated 3.1.2006 allowed
the appeals filed by the NTPC and set aside the orders passed by the
CERC dated 28.2.2005 and 7.6.2005. It is against this order of the
Appellate Authority that the present appeals have been filed.
8. We would reproduce para 13 of the order of the Appellate
Tribunal which contains the findings arrived at by the Appellate
Authority:
13. The aforesaid calculations reveal that the CERC did
not attach any importance to the deviation beyond the
range of 4.8 to 7.2%. It did not work out the deviations at
all. Deviations beyond the terminal limits of 4.8% to 7.2%
were required to be adjusted on the basis of the actual
escalation factor. In Regulation 2.7(d)(iv), the words ’any
deviation beyond this limit shall be adjusted on the basis
of actual escalation factor’ are very significant and must
be given effect to. The word ’adjust’ used in the
Regulation means to accommodate. CERC has not
accommodated the deviation at all. In fact the CERC
ought to have deducted the actual deviation from the limit
of 4.8%. In order to give effect to the real meaning of the
Regulation 2.7(d)(iv), the CERC should have made the
calculations in the following manner in respect of say for
the year 2000-2001:
6x-0.35x
=x(6-0.35) = 5.65x
{where
x= signifies normalized O&M expenses for the year 2000-
2001;
4.45 is actual escalation factor;
4.8 is the terminal limit;
0.35 has been arrived at by deducting 4.45 from 4.8; and
all figures represent percentages}."
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9. Shri Sunil Gupta, Senior Advocate for UPCL and Shri
Aruneshwar Gupta addressed us on behalf of the appellants whereas
Shri G.E. Vahanvati, Solicitor General addressed us on behalf of
respondents. The contentions raised by Shri Sunil Gupta and Shri
Aruneshwar Gupta were as under.
10. 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 convenience. According to both
the counsel the intention behind the rule was that the CERC should
not be exposed to the tedious exercise of review and re-adjustment 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.
11. Learned counsel further urged that the range of 20% upswing
or downswing, i.e., between 7.2 and 4.8 was not to be viewed as a
cushion so as to keep it to be a constant factor and in fact there was
no question of the generating station being allowed to suffer in the
event of the upswing beyond 7.2%.
12. According to learned counsel the range of 20% up or down
from the presumed notional escalation factor of 6% only represented
the margin of error in its tariff fixation exercise which the Regulator,
i.e., CERC could overlook because of the considerations like
administrative and financial convenience of all concerned. For this
proposition the learned counsel sought to rely on the margin of 3% in
Rule 57(1) of the Indian Electricity Rules, 1956. Lastly, the learned
counsel urged that the literal interpretation would be illogical,
unprincipled and impractical.
13. Learned counsel Shri Suresh Tripathi appearing on behalf of
Tamil Nadu Electricity Board also filed written submissions more or
less on the same lines. According to those submissions, it is urged,
that the Appellate Authority completely missed the meaning of
"adjust" which could only mean "accommodate". The said adjustment
was concerned with the tariff setting or in simple terms readjustment
of the tariff. The submissions further suggest that the underlying
philosophy behind the Regulations in question was that the tariff
setting should not be disturbed every now and then on trivial
adjustments and, therefore, the Regulator had taken a pragmatic
view in making provision for 20% adjustment. Therefore, if the
deviation went beyond 20%, there was no scope to limit it only to the
extent of beyond the margin. The argument goes further and
suggests that the statute envisaged the interest of the consumers to
be safeguarded and, therefore, when the O&M factor dipped beyond
20% limit, the full advantage should have been given to the
beneficiaries, i.e., consumers because the dipping of the O&M factor
would certainly bring down the price required to be paid by the
consumers for the electricity.
14. Shri Aruneshwar Gupta, learned counsel also argued the
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matter more or less on the same lines explaining the actual effect of
the judgment by the Appellate Authority on the price of the electricity
payable by the consumers.
15. As against this, the learned Solicitor General urged that as per
the established legal principles no unnatural interpretation could be
given to the concerned legal provisions particularly when its plain
meaning was crystal clear. Learned counsel analysed the whole
provision taking each line of the same and urged that there was no
necessity of any interpretation to be given when provision was crystal
clear. It was urged that where the plain meaning of the provision did
not, in any manner, do harm to the objective nor could bring out any
absurdity, the golden rule of literal interpretation was the only course
to be adopted by the courts of law. Learned counsel went on to
analyse the first order of the CERC as also the review order and on
that backdrop compared the same with the Appellate Authority’s
order.
16. In the wake of these rival submissions, the only question that
falls for our consideration is whether we should adopt the literal
construction which has been given by the Appellate Authority or
should interpret the provision keeping in mind the various other
factors like the intended logic behind the rule, the benefit which is
likely to be given to the ultimate consumers, etc.
17. It will be our first task to see whether the provision as it stands
is clear in its language. It is obvious from the plain reading of the
clause that the escalation factor of 6% was to be used for revising the
base figure of O&M charges. Plainly speaking it would mean that the
O&M charges would be revised on the basis of escalation factor of
6%. The 6% would be the standard. It is further provided that each
year the escalation factor would be computed on the basis of actual
inflation data and if the said deviation factor works out to be within
20% of the standard escalation factor of 6%, such deviation shall be
ignored meaning thereby if the deviation factor goes beyond 6% upto
7.2%, still the deviation would be treated to be 6% only. So also if the
deviation goes below upto 4.8%, still deviation to this extent, as per
the clause, would not make any change. However, if the deviation
goes beyond 7.2% on upper side or below 4.8% on the lower side,
the same would be adjusted, in the sense that then the calculation
would have to be made of O&M factor on the basis of the deviation.
The objective of the provision appears to be that there does not have
to be an exercise of computation for a little or insignificant change
ranging between 1.2% and such deviations would be ignored. The
language used is that "such changes shall be absorbed by the
utilities/ beneficiaries". This appears to be with the idea that the
calculations do not have to be made on the basis of labile deviations
upto the limit of 1.2%. The meaning becomes extremely clear from
the clause which starts from "in other words" and ends with "absorbed
by the utilities". It means any deviations beyond this limit alone shall
be adjusted. It is extremely clear from the further sentence that what
is to be adjusted is "the deviations beyond the limit of 7.2% on the
upper side and 4.8% on the lower side, i.e., if the deviation goes
below 4.8%, say, upto 4% then the O&M factor would be considered
in respect of .8% deviation because that is the deviation
contemplated by the clause. If the meaning contemplated by the
appellants is to be given, it would do harm to the unambiguous
language of the clause. Plain and simple meaning of the provision, in
our opinion, admits of, no doubt, in the sense that it would be only the
deviation "beyond the limit" of 1.2% which would be available for
adjustment. In that sense there would a cushion between the two
points, namely, 7.2% on the upper side and 4.8% on the lower side.
That is precisely provided by the words "any deviation beyond this
limit". The words "beyond this limit" would, in our opinion, signify the
extent of deviation that is to be taken into consideration and that is
required to be "adjusted."
18. The Rule of literal interpretation has been explained by this
Court time and again. In Ombalika Das & Anr. Vs. Hulisa Shaw
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[(2002) 4 SCC 539], this Court unequivocally declared as under:
"Resort can be had to the legislative intent for the purpose
of interpreting a provision of law, when the language
employed by the legislature is doubtful or susceptible of
meanings more than one. However, when the language
is plain and explicit and does not admit of any doubtful
interpretation, the Supreme Court cannot, by reference to
an assumed legislative intent, expand the meaning of an
expression employed by the legislature and therein
include such category of persons as the legislature has
not chosen to do."
19. Similar note was struck by this Court in Keshavji Ravji & Co.
vs. CIT [(1990)2 SCC 231] where Three Judge Bench went on to
observe:
"As long as there is no ambiguity in the statutory
language, resort to any interpretative process to unfold
the legislative intent become impermissible. The
supposed intention of the legislature cannot then be
appealed to whittle down the statutory language which is
otherwise unambiguous. If the intendment is not in the
words used it is nowhere else. The need for
interpretation arises when the words used in the statute
are, on their own terms, ambivalent and so not manifest
the intention of the legislature."
20. Without burdening the authorities we may only refer to the
verdict by the Privy Council in Pakala Narayanasami vs. Emperor
[AIR 1939 PC 47] where Lord Atkin had declared that "when the
meaning of the words is plain, it is not the duty of courts to busy
themselves with supposed intentions". The law has been consistent
eversince then in more than half a dozen decisions.
21. Thus in our opinion, since the language of Regulation 2.7(d)(iv)
is absolutely clear so as to take into consideration only the deviations
beyond the limit, i.e., above 7.2% or below 4.8% for the purposes of
adjustment, there will be no question of adjusting the full deviation
between 6% to the percentage beyond 7.2% or below 4.8%. It is
more than clear from the language that any deviation between 4.8 to
7.2 has to be absorbed by utilities/beneficiaries. In that view we
would have to reject the argument on behalf of the learned counsel
for the appellants that we would have to search for any logic and hold
that the full difference between the actual upswing and downswing
point and 6% would be available for adjustment. It is not the task of
this Court to find out or search for the wisdom of legislature. We are
concerned with the interpretation only. For the same reasons we
cannot accept the argument that the word "adjust" should be read to
mean "accommodate". There is no reason for doing so. We do not
agree to hold that the literal interpretation would be illogical,
unprincipled and impracticable as, in our opinion, the learned counsel
have not been able to suggest so. We, therefore, fully agree with the
order passed by the Appellate Authority and confirm the same.
22. In view of the above, the appeals are dismissed without any
order as to costs.