Full Judgment Text
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.415 OF 2007
TATA POWER COMPANY LTD. …APPELLANT(S)
VERSUS
ADANI ELECTRICITY MUMBAI LTD.
& ORS. …RESPONDENT(S)
WITH
CIVIL APPEAL NO. 3229 OF 2007
J U D G M E N T
Arun Mishra, J.
1. The appellant – Tata Power Company (in short ‘the TPC’) is a
distribution licensee supplying electricity to the entire city of Mumbai,
whereas BSES/Reliance Energy Limited (in short ‘REL’) is a
distribution licensee supplying electricity only in the suburbs of
Mumbai. Prior to 1998, the TPC was the only generator of the
electricity supplying electricity to BSES for further supply to BSES
customers. The TPC had 108 customers in the entire city of Mumbai.
Signature Not Verified
The tariff payable by BSES to TPC included a component of standby
Digitally signed by
JAYANT KUMAR ARORA
Date: 2019.05.03
16:56:25 IST
Reason:
charge. The entire standby charges paid by TPC to Maharashtra State
Electricity Board (for short ‘the MSEB’) were being recovered by TPC
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from its customers through its tariff. Due to change in shareholding
pattern, the BSES was changed to Reliance Energy Limited on
24.2.2004.
2. The brief facts indicate that TPC and MSEB met on 12.3.1985 to
finalise the interconnection between representatives of TPC and MSEB
with respect to demand charges. Following decision was arrived at:
“
A) Demand Charges:
Effective 1284 a monthly firmed demand of 300 MVA would be
billed by MSEB. This would increase by 50 MVA each year
effective 141985 to take care of TEC’s own load growth
annually. This is irrespective of TEC’s actual net offtake
recorded at the 4 interconnecting points of supply and also
irrespective of MSEB’s total offtake from TEC system”
3. Prior to 1985, the TPC was supplying entire electricity generated
by it to the distributors of electricity in Mumbai. Since the quantity
generated by TPC was not sufficient to meet the entire demand, TPC
used to buy electricity from MSEB. BSES/REL was purchasing its
entire requirement of electricity from TPC in bulk to supply to its
customers in suburban Mumbai.
4. With effect from 1985, TPC wanted to increase its generating
capacity thereby reducing its offtake of electricity from MSEB to zero
thereby causing loss of revenue to MSEB. In order to compensate
MSEB for loss of revenue caused as a result of stoppage of purchase of
electricity by TPC from MSEB, the TPC and MSEB entered into
aforesaid arrangement whereby TPC was required to pay to MSEB
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standby facility initially for 300 MVA to be increased by 50 MVA every
year, charges to be paid at the rate fixed by MSEB. The quantum of
standby increased from 300 MVA to 550 MVA by the year 1990,
whereafter the MSEB and the TPC agreed not to increase the said
standby beyond 550 MVA. The standby facility was meant to enable
TPC to draw upon the energy generated by MSEB in the event there
was outage/failure of power in TPC’s generation capacity of 1777 MW
consisting of multiple units of different sizes i.e., 500 MW, 180 MW,
150 MW, 72 MW, 75 MW and 300 MW, which is supplied to
BSES/REL along with its own consumers and BEST, another
distribution licensee in Mumbai. The standby facilities charges paid
by TPC to MSEB were factored into tariff charged by TPC from its
customers including BSES/REL. The BSES/REL was a purchaser of
electricity from TPC to the extent of TPC’s generation between 29% to
37% from 1998 to 2006, thus the standby charges to the extent of
aforesaid varying percentages for the respective years were borne by
BSES/REL which in turn were factored into tariff and charged by
BSES/REL to its retail customers.
5. Initially, BSES was permitted to set up its generating plant at
Dahanu to generate 500 MW (550 MVA approximately). There was a
condition that it would achieve interconnection with the supply of TPC
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at a point known as Borivali Interconnection Point in case there was
any outage of BSES generation. It could draw upon the power
supplied by the TPC. The charges for such interconnections were to
be determined. On 30.5.1992, a notification was issued amending the
BSES license. A new clause 7B was introduced for providing aforesaid
interconnectivity. Provisions of clause 13A were also amended to
authorise the State Government in the event of a dispute to decide the
same. On 29.6.1992, a meeting was held between TPC and BSES and
it was agreed that interconnection would be provided at Borivali GIS
switching station to take care of emergencies in BSES 220 KV system.
The TPC already have arrangements with MSEB wherein standby
capacity is provided by MSEB to TPC in case of emergencies in TPC
system. Standby capacity to BSES may be provided from the standby
capacity reserved by TPC with MSEB and appropriate sharing of
charges by BSES could be worked out as provided in clause 12.0. The
BSES prior to September 1995 was purchasing its entire requirement
of power from TPC and distributing it within its licensed area as TPC
distributing licensee. After its two Dahanu generating units were
commissioned in January/March 1995, BSES started bringing the
power generated by Dahanu to supply to its consumers after
September 1995 in the suburbs of Mumbai city. As supply was
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started from the Dahanu, TPC surplus capacity began to increase.
The TPC after 1995 required only 275 MVA standby facility against the
standby capacity of 550 MVA.
6. The MSEB issued notice on 28.6.1996 revising its tariff to TPC
effective from 1.10.1996. The MSEB raised its maximum demand
charges per month with respect of standby facility/supply from
Rs.190/ per KVA to Rs.450/ per KVA. Consequently, MSEB gave
notice to TPC, inter alia , revising its standby charges with effect from
1.10.1996 recoverable from TPC to Rs.24.75 crores per month i.e.,
Rs.297 crores per year.
7. TPC had issued a notice on 30.7.1996 to the Government of
Maharashtra and MSEB under Schedule VI to the Electricity (Supply)
Act, 1948, showing its intention to enhance tariff charges with effect
from 1.10.1996 which included maximum demand charges and energy
charges to various consumers. It also provided for payment of
maximum demand charges and energy charges by BSES for standby
facility. With effect from 1.1.1997, TPC revised its tariff inter alia to
BSES, thereby factoring in the monthly demand charges of Rs.24.75
crores payable by TPC to MSEB for standby supply. In order to
resolve the issue of quantum of standby charges to be paid by BSES to
TPC, the Government of Maharashtra appointed a Committee and an
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order dated 19.1.1998 was passed whereby the Government of
Maharashtra, based on the recommendation of the Committee,
stipulated that a sum of Rs.3.5 crores per month should be paid by
BSES/REL to TPC by way of standby facility for the period 19981999.
This sum of Rs.3.5 crores per month i.e., Rs.42 crores per annum was
over and above the sum Rs.24.75 crores per month i.e., Rs.297 crores
per annum which TPC used to recover in the form of its tariff from its
customer. In fixing the aforesaid amount, the following factors were
taken into consideration by the said Committee:
“(i) the generation of TPC and MSEB;
(ii) the electricity supplied by TPC on BSES/ REL as a consumer.
(iii) TPC’s standby supply from MSEB;
(iv) Charges paid thereof by TPC;
(v) TPC’s and BSES/REL’s financial position;
(vi) That standby was being supplied for the stability of the Greater Mumbai
Grid.”
8. On 17.12.1997, TPC contended that it was fully capable and
willing to supply standby to BSES for its Dahanu plant and TPC
should, therefore, be billed only for 275 MVA standby facility for their
consumers other than BSES. The Government of Maharashtra issued
an order on 19.1.1998, following is the relevant portion of the said
order:
“it has come to the notice of the Government that due to
dispute on commercial terms between BSES and TEC,
interconnection is not established at Borivali even though
technical arrangements are ready. Similarly, additional
electricity generated at Dahanu is being sold to the Western
Regional Grid through MSEB’s Biosar Interconnection. As a
result, the government's main objective that electricity
generated at Dahanu should be used within the BSES area of
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supply has not been met and BSES license conditions are
violated. For this Government had appointed a Committee
under the Chairmanship of the Principal Secretary, Energy. In
this committee, representatives of MSEB, TEC, and BSES were
members. This Committee has examined the total situation
and has submitted its report to the Government.
GOM thereafter ordered as follows:
“Taking into account the recommendations of the Committee,
following are orders of the Government.
BSES should complete interconnection at Borivli by January
26, 1998.
BSES should take 275 MVA standby power supply from TEC
for Dahanu generating station.
For taking above standby supply, BSES should pay standby
charges to TEC.
After the interconnection is commissioned, BSES should stop
selling electricity through MSEB’s Boisar substation to
Western Regional Grid.
TEC may charge standby charges for 275 MVA supply to
BSES.
Whenever required during an emergency, additional electricity
may be taken for areas outside Mumbai region through
MSEB's Boisar substation. For this purpose, MSEB should
take proper arrangements.
As per Committee’s recommendations and taking into account,
TEC’s electricity supply to BSES, TEC’s standby supply from
MSEB, charges thereof and TEC’s and BSES’s financial
conditions, BSES should make a payment of Rs.3.5 crores
every month for standby supply. On this basis, the rate per
KVA should be fixed and commercial arrangement finalized.
The above standby charges are passed on TEC’s & BSES’s
existing electricity supply tariff. The standby charges may
be reviewed during tariff revision in the future.”
9. Since the agreement was to be finalised as per the Government’s
order, the Government had no power to give directions to generators
and distributors, TPC and BSES had entered into Principles of
Agreement on 30.1.1998, the clauses 2 to 9 are extracted hereunder:
“(2) BSES shall pay to TEC for the 220 KV interconnection at
Borivali Rs.3.5 crores per month as standby charges for 275
MVA as per Government orders.
(3) BSES offtake of energy at 220 KV Borivli interconnection
will be billed at Rs.2.09 per kWh plus F.A.C. (which is presently
at Rs.0.45) as applicable from time to time at other points of
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supply. This average energy charge is based on an estimated
annual flow of 250 million units of energy through Borivli
interconnection.
(5) As soon as the interconnection between TEC and BSES at
220 KV Borivli is established.
(6) The interconnection between MSEB and BSES at Boisar will
be opened out.
(7) BSES shall use this interconnection at Borivali fully for the
standby type of service.
(8) Both the parties have agreed to cooperate in order to ensure
that the orders of the Government dated 19011998 are
implemented in the spirit of it.
(9) A detailed Power Supply Agreement on a mutually agreed
st
basis incorporating the above will be executed by 21 of April,
1998.”
(emphasis supplied)
Though the aforesaid principles of the agreement were entered
into between the parties, for one reason or the other, no agreement
has been executed between them.
10. The TPC under the Principles of Agreement dated 31.1.1998 was
bound to supply standby power as and when required by BSES/REL.
Whether the TPC was drawing from MSEB or not is immaterial. The
agreement of BSES was with TPC, not with MSEB. The agreement
between TPC and BSES was independent than the agreement between
TPC and MSEB.
11. Even after providing the standby facility of 275 MVA to
BSES/REL, TPC still enjoyed the standby facility of 550 MVA from
MSEB. The TPC entitlement to avail 550 MVA standby facility from
MSEB did not change.
12. The standby facility that has been availed of by BSES/REL
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through TPC since then it actually drew on about 119 occasions till
May 2004, of which 57 occasions in excess of 275 MVA. It has been
observed by the Appellate Tribunal for Electricity (in short ‘the APTEL’)
that TPC in 90 percent of the above occurrences has supplied standby
powers from its own generation and never drawn back the power from
MSEB. The TPC has actually drawn standby from MSEB on a large
number of occasions and on several occasions far in excess of 275
MVA. The standby drawn by TPC from MSEB is as under:
“439 MVA highest in 19981999
271 MVA highest in 19992000
358 MVA highest in 20002001
325 MVA highest in 20022003
415 MVA highest in 20022003
763 MW highest in 2004”
13. It is also pertinent to mention that even after BSES/REL started
drawing power from its Dahanu generation station, BSES/REL
continued to purchase approximately 35 percent of TPC's generation
from TPC to supply energy to BSES/REL consumers. With effect from
1.2.1998, the BSES/REL paid a sum of Rs.3.5 crores per month to
TPC as charges for standby. The TPC objected and sought the revision
of standby charges, which was fixed at Rs.3.5 crores per month, by
writing a letter to the Government of Maharashtra on 8.7.1998. With
effect from 1.12.1998, the MSEB revised its tariff by issuing a notice
under the agreement between the MSEB and TPC. The charges for
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standby facility were also increased from Rs.450 KVA per month to
Rs.550 KVA per month i.e., Rs.363 crores per annum equal to
Rs.30.250 crores per month. These standby charges enhanced from
Rs.24.75 crore per month to Rs.30.25 crores per month with effect
from 1.12.1998 i.e., from Rs.297 crores to Rs.363 crores annually.
The TPC instead of requiring a prorata share of the incremental
standby charges from BSES/REL purported to divide the amount of
Rs.30.25 crores in the ratio of 50:50 and demanded a sum of
Rs.15.125 crores per month i.e., Rs.181.5 crores per annum by way of
standby charges from BSES/REL. The TPC was already recovering
Rs.24.75 crores per month through its tariff as said amount was
factored in tariff from its customers and additional recovery of Rs.3.5
crores was also being made from BSES/REL under the Principles of
Agreement. Thus, the total recovery of Rs.28.25 crores per month by
way of standby charge was already made by TPC from its customers as
on September 1998. By demanding a sum of Rs.15.125 crores per
month from BSES/REL, TPC was attempting to demand an additional
sum of approximately Rs.11.625 crores per month from BSES/REL
under the guise of standby charges instead of demanding a prorata
amount of the incremental standby charges of Rs.2 crores.
14. TPC issued notice dated 30.9.1998 under Schedule VI to the
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Electricity (Supply) Act, 1948 to the Government of Maharashtra
proposing revision of its tariff and other matters. It was indicated in
the notice that it would pay only Rs.181.5 crores per annum and
remaining should be the liability of BSES/REL. It has also been
contended on behalf of TPC that other revision in tariff had not been
proposed by TPC which would otherwise have needed an increase of 6
percent on all consumers in Mumbai. It served a notice on BSES/REL
demanding the aforesaid charges of 35 percent of the component
which was purchased by BSES/REL as a consumer. The standby
charges used to be paid and otherwise included in the tariff.
BSES/REL has received 35 percent of the energy supplied from TPC
as a consumer and for the same, TPC was recovering an amount of
Rs.24.75 crores per month and an additional sum of Rs.3.5 crores per
month. This Court in (2004) 1 SCC
BSES Ltd. v. Tata Power Co. Ltd.,
195 has observed that tariff notice as being illegal. Since the dispute
between the TPC and BSES/REL could not be sorted out, an order
dated 22.3.2000 was passed by the Government of Maharashtra
endorsing the Committee’s Report. Vide aforesaid order, BSES/REL
was directed to pay Rs.9 crores as observed in BSES Ltd. v. Tata
Power Co. Ltd. (supra) by this Court.
15. The Electricity Regulatory Commission Act, 1998 (in short ‘the
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Act of 1998’) came to be promulgated which conferred jurisdiction on
Maharashtra Electricity Regulatory Commission (in short ‘the MERC’)
to determine the tariff of supply of electricity and later on to adjudicate
the dispute between the parties. The dispute came to be referred to
MERC by the parties. The order dated 22.3.2000 passed by the State
Government has been set aside by the High Court, which decision has
been affirmed by this Court in BSES Ltd. v. Tata Power Co. Ltd.
(supra).
16. The MERC passed an order on 7.12.2001 directing BSES/REL to
bear 25 percent of the standby charges. This order was challenged by
both the parties before the High Court. The High Court remitted the
matter back to MERC and directed BSES/REL to deposit 50 percent of
the standby amount as an interim arrangement. The matter had
further travelled to this Court in the aforesaid decision namely BSES
Ltd. v. Tata Power Co. Ltd. (supra).
17. After the matter was remitted, MERC after hearing the parties
passed an order dated 31.5.2004 and directed the BSES/REL to bear
approximately 23 percent of the total standby charges incurred by TPC
qua MSEB. While noticing that TPC has already recovered a sum of
Rs.24.75 crores per month through its tariff and an additional sum of
Rs.3.5 crores per month as per the Principles of Agreement, it was
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found that large part of standby charges has already been recovered
by TPC through tariffs and otherwise. Against the demand made on
31.5.2004, both the parties filed an appeal before the APTEL. It was
heard by a Bench consisting of Chairman and Technical Member.
They delivered separate judgments, both of them rejected the
contentions of TPC claiming standby charges in the ratio of 50:50.
The Chairman opined that standby charges should be shared in the
rd rd
proportion of 2:1 i.e., TPC paying 2/3 and BSES/REL paying 1/3 ,
while Technical Member held BSES/REL should bear 23 percent while
TPC should bear approximately 77 percent.
18. In view of the divergence of opinion, the matter was referred to
the third Member being Judicial Member, who agreed with the
conclusion of the Technical Member that BSES/REL should bear 23
percent of the standby charges. In view of the majority judgment, the
APTEL passed an order dated 20.12.2006, acknowledging the majority
view of the Judicial Member and the Technical Member and directed
that 23 percent of the standby charges for the period in question
should be borne by BSES/REL and balance should be borne by TPC
and further directed refund of the excess amount that was deposited
by BSES/REL pursuant to the interim orders passed. The MERC in
the appeal has acknowledged that TPC has withdrawn a sum of
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Rs.24.75 crores from its customers through electricity tariff and an
additional sum of Rs.3.5 crores per month by way of standby charges
from BSES/REL did not give credit for the said sum in the
computation of standby charges to the extent of 23 percent held to be
payable by BSES/REL. The appeal of BSES/REL in respect of the
aforesaid was rejected by the APTEL vide judgment and order dated
20.4.2007. TPC filed Civil Appeal No.415 of 2007 before this Court.
BSES/REL has also filed Civil Appeal No.3229 of 2007 aggrieved by
the judgment and order dated 20.4.2007 of APTEL.
19. Shri Gopal Jain learned senior counsel appearing on behalf of
TPC has contended that TPC has not recovered standby charges from
its customers for the facility in excess of 275 MVA out of 550 MVA
standby facility for the period April 1999 to March 2004 provided by
MSEB. Thereafter as provided by tariff order dated 11.6.2004, TPC
has recovered from its customers to the extent of 78 percent of the
standby charges. This Court has granted interim stay on 7.2.2007
and required the appellant to furnish bank guarantee in the sum of
Rs.227 crores and in addition, deposit a sum of Rs.227 crores with the
Registrar General of this Court, which may be withdrawn by
respondent no.1 subject to their furnishing an undertaking to this
Court that in the event of this appeal being decided against them, the
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amount as may be found refundable by them shall be refunded
without demur with interest as may be determined by this Court. The
TPC has complied with these conditions and it is not correct to say
that all concerned have complied with the impugned order dated
20.12.2006. The amount of Rs.3.5 crores per month was only for the
year 19971998, though the actual liability came to be Rs.8.25 crores
per month, Rs.3.5 crores were fixed so as to avoid disturbance in the
tariff in the current year. The MSEB is not providing standby facility
of 1777 MW (TPC’s total installed capacity) nor is REL provided
standby facility of 550 MVA by TPC. Therefore, the standby charges
cannot be apportioned in the ratio of the total installed capacity of TPC
and REL. The obligation to pay to MSEB for the standby facility is
independent. If the generator for some reason is not able to recover
from its customers, it will not be absolved of its obligation to pay the
standby charges to MSEB. The liability of the BSES/REL to pay for
standby charges in 50:50 ratio is absolute and cannot be linked with
the means of recovery. It would result in disturbing and distorting
level playing field conditions which are a facet of Article 14 of the
Constitution and also distort competition. It is also urged by learned
senior counsel that it would run contrary to the objects of the Act of
1998, in particular, the mandate of Section 29(3) which is extracted
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hereunder:
“ 29. Determination of Tariff by State Commission.
(3) The State Commission, while determining the tariff under this
Act, shall not show undue preference to any consumer of
electricity, but may differentiate according to the consumer’s load
factor, power factor, total consumption of energy during any
specified period or the time at which the supply is required or the
geographical position of any area, the nature of supply and the
purpose for which the supply is required.”
20. It was further urged that the prayer was made by BSES/REL
before the MERC to fix the standby charges payable by BSES/REL
(complainant) to the TPC (respondents). Its liability would be more
than Rs.3.5 crores per month. TPC is paying Rs.363 crores as
standby charges to MSEB. On principles of parity and proportionality,
the BSES/REL should pay for 275 MVA as the quantum of 275 MVA
standby is out of the same block of 550 MVA standby facility given by
MSEB. The TPC and BSES/REL should share in the ratio of 50:50.
The APTEL has not followed the decision of this Court in BSES Ltd. v.
Tata Power Co. Ltd. (supra). This Court in the aforesaid decision has
observed as under:
“16. The word “tariff” has not been defined in the Act. “Tariff” is a cartel of
commerce and normally it is a book of rates. It will mean a schedule of
standard prices or charges provided to the category or categories of customers
specified in the tariff. Subsection (1) of Section 22 clearly lays down that the
State Commission shall determine the tariff for electricity (wholesale, bulk, grid
or retail) and also for use of transmission facilities. It has also the power to
regulate power purchase of the distribution utilities including the price at
which the power shall be procured from the generating companies for
transmission, sale, distribution, and supply in the State. "Utility" has been
defined in Section 2(l) of the Act and it means any person or entity engaged in
the generation, transmission, sale, distribution or supply, as the case may be,
of energy. Section 29 lays down that the tariff for the intraState transmission
of electricity and tariff for supply of electricity — wholesale, bulk or retail — in
a State shall be subject to the provisions of the Act and the tariff shall be
determined by the State Commission. Subsection (2) of Section 29 shows that
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the terms and conditions for fixation of the tariff shall be determined by
Regulations and while doing so, the Commission shall be guided by the factors
enumerated in clauses ( a ) to ( g ) thereof. The Regulations referred to earlier
show that generating companies and utilities have to first approach the
Commission for approval of their tariff whether for generation, transmission,
distribution or supply and also for terms and conditions of supply. They can
charge from their customers only such tariff which has been approved by the
Commission. Charging of a tariff which has not been approved by the
Commission is an offence which is punishable under Section 45 of the Act. The
provisions of the Act and Regulations show that the Commission has the
exclusive power to determine the tariff. The tariff approved by the Commission
is final and binding and it is not permissible for the licensee, utility or anyone
else to charge a different tariff.
*
“18. Electricity is not a commodity which may be stored or kept in
reserve. It has to be continuously generated and it is so
continuously generated electricity which is made available to
consumers. Any generator of electricity has to have some
alternate arrangement to fall back upon in the event of its
generating machinery coming to a halt. The standby arrangement
for 550 MVA made by TPC was for the purpose that in the event
its generation fell short for any reason, it will be able to
immediately draw the aforesaid quantity of power from MSEB.
Similarly, the arrangement entered into by BSES with TPC
ensured the former of immediate availability of 275 MVA power in
the event of any breakdown or stoppage of generation in its
Dahanu generation facility. Heavy investment is required for
generation of power. For this kind of a guarantee and availability
of power, TPC had to pay charges for the same to MSEB. This
payment was in addition to the charges or price which TPC had to
pay to MSEB for the actual draw of electrical energy. The same is
the case with BSES qua TPC. The charges paid for this kind of an
arrangement whereby a fixed quantity of electrical energy was
guaranteed to TPC and BSES at their desire, is bound to
constitute a component of the price which they (BSES and TPC)
would be charging from their consumers towards the cost of the
electrical energy actually consumed by them. The determination
or quantification of the amount which is payable for this kind of
standby arrangement made in favour of TPC and BSES would, in
reality, mean determination of the price or charges for wholesale
or bulk supply of electricity. It will, therefore, clearly fall within
the expression "determine the tariff for electricity, wholesale,
bulk, grid or retail" as used in clause ( a ) of subsection (1) of
Section 22 and also in the expression “regulate power purchase …
including the price at which the power shall be procured from the
generating companies …” as used in clause ( c ) of subsection (1)
of Section 22. Therefore, the determination or quantification of
the amount which BSES has to pay to TPC falls within the
jurisdiction of the State Commission under Section 22 of the Act.
This legal position is also reflected by Section 29 of the Act which
18
confers an overriding power and clearly lays down that
notwithstanding anything contained in any other law the tariff for
supply of electricity — wholesale, bulk or retail — shall be subject
to the provisions of the Act and shall be determined by the State
Commission. This clearly ousts the jurisdiction of any other
authority to determine the tariff. It may be noted here that the Act
came into force on 2541998 and the Maharashtra Electricity
Regulatory Commission was formed on 581999. Therefore, it is
not possible to accept the contention of Shri Nariman that the
State Government had the authority or jurisdiction on 2232000
to determine or quantify the charges which BSES had to pay to
TPC under the terms of the licence granted to the former as this
was subsequent to the formation of the Maharashtra Electricity
Regulatory Commission.”
19. Shri Nariman has submitted that TPC gave a notice on
3091998 of their intention to enhance the charges of standby
facility provided to BSES from Rs 3.5 crores to Rs 15.125 crores
per month and this notice having been given under the Sixth
Schedule (para I, third proviso) of the Electricity (Supply) Act,
1948, the enhanced charges became effective and operative after
the expiry of 60 days of notice i.e. with effect from 121998. The
submission is that by operation of law the charges for standby
facility stood revised and enhanced with effect from 1121998. In
our opinion, the contention raised has no substance. The legal
position has undergone a complete change with the enforcement
of the Electricity Regulatory Commissions Act, 1998. In view of
Section 29 of the Act, the tariff for intraState transmission of
electricity and tariff for supply of electricity in wholesale, bulk or
retail has to be determined by the Electricity Regulatory
Commission of the State and a licensee cannot by its unilateral
action enhance the charges. The provisions of the Act have an
overriding effect by virtue of Section 52 of the Act and, therefore,
any provisions of the Electricity (Supply) Act, 1948, which are
inconsistent with the Act would cease to apply and consequently,
the provisions of the Sixth Schedule of the said Act can have no
application now. The Sixth Schedule has been made by virtue of
Sections 57 and 57A of the Electricity (Supply) Act, 1948 and
Section 57A contemplates constitution of a Rating Committee by
the State Government to examine the licensee’s charges for the
supply of electricity. Section 29(6) of the Act specifically lays down
that notwithstanding anything contained in Sections 57A and
57B of the Electricity (Supply) Act, 1948, no Rating Committee
shall be constituted after the date of the commencement of the
Act. The effect of Section 29 and the Regulations framed
thereunder is that it is no longer open to a licensee or utility to
unilaterally increase the tariff. The tariff can be enhanced only
after approval of the Commission and charging of an enhanced
tariff which has not been approved by the Commission will
19
amount to commission of an offence. Therefore, the notice to
enhance the charges given by TPC, which was subsequent to the
enforcement of the Act, can have no legal effect.
20. Shri Nariman has also submitted that even assuming that the
standby charges are a matter relating to tariff as the same is
passed on to the consumers, but the sharing of standby charges
between TPC and BSES is not a matter relating to determination
of tariff and, therefore, the Commission can have no jurisdiction
to enter into such an exercise under Section 22 of the Act. The
submission proceeds on an assumption that the dispute relates
to the sharing of standby charges. In fact, the whole case of BSES
is that they are under no obligation to share the charges which
are being paid by TPC to MSEB for providing them with standby
facility. It may be noted that the standby facility of 300 MVA was
provided to TPC in the year 1985 which gradually rose to 550
MVA in the year 1990. The licence of BSES was amended in
1992, whereunder for the first time, it was provided that they
should interlink with the system of TPC and ultimately, their
systems were interlinked on 1421998 in pursuance of the order
passed by the Government of Maharashtra on 1911998. The
question of payment of standby charges by BSES to TPC has,
therefore, arisen for the first time in 1998 which is almost 13
years after TPC started paying standby charges to MSEB. In
substance, the dispute is what should be paid by BSES to TPC for
the standby facility provided by it. The strict and narrow
interpretation sought to be placed by the learned counsel so as to
oust the jurisdiction of the Commission cannot be accepted as it
will defeat the very object of enacting the Electricity Regulatory
Commissions Act.
*
26. An interim arrangement is normally made on a prima facie
consideration of the matter and on broad principles without
examining the matter in depth. The matter has been remitted to
the Commission by the High Court by the judgment and order
dated 362003 and a period of nearly threeandahalf months
has already elapsed. Regulation 101 of the Central Electricity
Regulatory Commission provides that the Commission may
normally dispose of the petitions finally within six months of
admission. The State Commissions are also expected to follow
this timelimit for disposal of petitions. Since the order made by
the High Court is only by way of interim arrangement and the
Commission is expected to decide the disputes finally within a
short period, we do not consider it proper to interfere with the
order made by the High Court in this regard. After the decision of
the Commission, the equities can be adjusted and the excess
amount paid by any party can be refunded to it along with
appropriate interest or can be adjusted in future bills.”
(emphasis supplied)
20
21. Learned senior counsel has also urged that actual supply of
electricity and charges paid for actual supply are completely different
from the guarantee and charges payable for providing such a
guarantee/arrangement. It is further urged that generating capacity
comes at a cost. The Technical Member therefore wrongly assigns
Zero cost for this generating capacity. This is an error apparent in the
impugned order where the spinning reserve has been treated as zero
cost.
22. Learned senior counsel has relied on the decision in
Binani Zinc
Ltd. v. Kerala State Electricity Board, (2009) 11 SCC 244, to contend
that notice dated 30.9.1998 was legal and valid. The relevant portion
of the aforesaid decision is extracted hereunder:
“28. Thus, it would be one thing to say that upon coming into force of the
1998 Act the provisions contained in the 1948 Act which are found to be
inconsistent with the former shall give way thereto but it is another thing to
say that although no Commission is constituted, the Board would have no
jurisdiction at all to frame a tariff.
*
33. It is of some significance to note that the Commission in terms of clauses
( a ) and ( b ) of subsection (2) of Section 29 of the 1998 Act are required to follow
the principles provided for under Sections 46, 56 and 57A of the 1948 Act as
also the Sixth Schedule appended thereto. The 1998 Act, therefore, recognises
the principles contained in the 1948 Act also.
*
41. We have, however, no hesitation in finding that the State Electricity Board
had the requisite jurisdiction to revise a tariff till such time as the Commission
was constituted and the purposes of the 1998 Act could be achieved through
it. Till the time the Regulatory Commission was not constituted by the State of
Kerala, the power to determine tariff remained with the Board under the
Electricity (Supply) Act, 1948 as it was not repealed by the Electricity
Regulatory Commissions Act, 1998. Parliament could not have intended to
bring about a situation where no authority would be empowered to determine
the tariff between the date of coming into force of the ERC Act, 1998 and the
constitution of the Commission. It is only after the Regulatory Commission is
constituted that it will be the sole authority to determine the tariff.”
21
No case for interference in Civil Appeal No. 3229 of 20017 is
made out which is barred by limitation.
23. Shri J.J. Bhatt learned senior counsel appearing on behalf of
BSES/REL has contended that TPC and MSEB entered into an
arrangement on 12.3.1985. There was an independent agreement
between TPC and BSES/REL entered into on 31.1.1998 and it has no
connection with the agreement between the TPC and MSEB.
Notwithstanding the fact that MSEB supplied TPC with standby power
or not, TPC was bound to supply BSES/REL from its own generation
standby power. On approximately 90 percent of the occasions,
BSES/REL has utilised standby power of TPC. It has exceeded on
some occasions more than 275 MVA and has gone up to above 400
MVA, whereas TPC has drawn standby from MSEB. The Government
passed an order on 19.1.1998, considering several factors and
determined Rs.3.5 crores per month as standby charges. The
payment of standby charges by BSES/REL to TPC was independent of
the charges to be paid by TPC to MESB. The determination has been
made on the basis of various factors. Basis of 50:50 sharing has been
rightly rejected by the MERC as well as by the APTEL. The decision of
spinning reserve by the Technical and Judicial Members at zero levels
is justified in the facts of the case. The submission made on the basis
22
of Binani Zinc Ltd. v. Kerala State Electricity Board (supra) is not
tenable. The total generating capacity of TPC was 1777 MW, whereas
that of BSES/REL is 500 MW. It is incorrect that TPC has recovered
only 50 percent of standby charges payable to MSEB. The standby
charges of Rs.24.75 crores per month i.e., Rs.297 crores per annum
were factored into TPC tariff in addition to the amount of Rs.3.5 crores
per month was paid by BSES/REL. It wanted to realise 75 percent of
the charges from BSES/REL by claiming a 50:50 ratio sharing. The
TPC has spinning reserve surplus of 317 MVA with regard to its total
capacity of 1777 MW. It was not MSEB but TPC which has provided
standby support to BSES/REL on 90 percent occasions. It is further
contended that the appeal filed by BSES/REL should be allowed and
the excess amount has been worked out by the APTEL. The same may
be suitably reduced.
24. The period in dispute is 1.4.1999 to 30.9.2004. It is apparent
that TPC has an agreement with MSEB for standby supply of 550
MVA. Initially, in 1985, TPC has increased its generating capacity
whereby reducing the offtake of electricity from MSEB to zero. In
order to compensate MSEB for loss of revenue caused as a result of
the stoppage of purchase of electricity, the MSEB entered into an
arrangement with TPC whereby TPC was required to pay to MSEB
23
initially for 300 MVA standby to be increased by 50 MVA every year.
The standby was freeze in the year 1990 when the parties agreed not
to increase the standby beyond 550 MVA.
25. The standby facility was made available to TPC in the event there
was a failure of power in TPC’s generation of 1777 MW. BSES/REL
used to purchase electricity from TPC between 29 percent to 37
percent from 1998 to 2006. The standby charges for aforesaid
purchase were factored into the tariff charged from its retail
customers. The standby charges to the extent of supply were borne by
BSES/REL for optimum supply from TPC when interconnectivity was
provided at Borivali point as per the Government order. The dispute
arose between TPC and BSES/REL as to whether BSES/REL
entitlement to draw 275 MVA from TPC in the case of outage and
failure of electricity supply, the charges which were required to be paid
were over and above the charges that would be paid for energy
actually drawn. At the relevant time, TPC was paying an amount of
Rs.24.75 crores per month i.e., Rs.297 crores per annum to MSEB by
way of standby charges which was built into the tariff. The said
amount was recovered by TPC from its customers who in turn
recovered it from their retail consumers.
24
26. The Government of Maharashtra formed a Committee to resolve
the issue of quantum of standby charges required to be paid by
BSES/REL to TPC. The Government of Maharashtra passed an order
dated 19.1.1998 whereby stipulating a sum of Rs.3.5 crores per
month should be paid by BSES/REL to TPC by way of standby
charges. The decision was taken by the Committee inter alia
considering the generation by TPC and MSEB. The order was based
upon six factors generation of TPC and MSEB; electricity supplied by
TPC to BSES/REL as a consumer; TPC’s standby supply from MSEB;
charges paid for said substandby supply by TPC to MSEB; the
financial position of TPC and BSES/REL; and stability of better
Mumbai grid.
27. The main principles on the basis of which Agreement was to be
reached between TPC and BSES/REL were settled. As per clause 2 of
the Principles of Agreement, BSES/REL had to pay to TPC for 220 KV
interconnection at Borivali at Rs.3.5 crores per month. The parties
had agreed to cooperate in order to ensure that Government order
dated 19.1.1998 is implemented in the spirit of it. A detailed power
supply agreement was to be entered into by 21.4.1998. The
agreement could not be executed as consensus with respect to several
25
aspects could not be reached. The order dated 22.3.2000 has been set
aside by the High Court, which order was not interfered with by this
Court and the case was remitted for the decision to MERC, which is
an expert body. The power was conferred upon the MERC vide
notification dated 27.10.2000 under the provision of Section 22(2)(n)
of Electricity Regulatory Commission Act, 1998, to adjudicate upon
the disputes and differences between licensees and utilities. On
4.12.2000, BSES/REL had filed an application to MERC in respect of
sharing of standby charges between BSES/REL and TPC. The prayers
were made to regulate action and standby charges levied by them and
to fix and determine the standby charges payable by them.
28. Ultimately, the APTEL by the impugned orders has decided the
matter. The Chairman has held that liability to be in proportion of 2:1
tariff, whereas Judicial Member has concurred with the Technical
Member when Technical Member differed with the opinion of
Chairman, but the fact remains that MERC, as well as the APTEL,
concurrently have not accepted the case of the TPC that standby
charges should be borne in ratio of 50:50. The decisions of MERC, as
well as the Technical and Judicial Members, are found to be correct
while terming ratio as 23:77 with respect to BSES/REL and TPC
respectively.
26
29. In view of the aforesaid facts and circumstances of the case and,
in particular, several factors were required to be taken into
consideration, on that basis aforesaid figure has been worked out. It
has also been considered that electricity used to be purchased by
BSES/REL from TPC to the aforesaid extent and the standby charges
used to be realised which were factored in the tariff, which liability
was ultimately passed on to the retail consumers. Even when the
Principles of Agreement have been reached as to standby charges
though it was subject to revision basis was fixed which could not have
been departed from, it was on consideration of several aspects. The
ratio had been appropriately worked out in the most equitable manner
by applying the level playing field. Considering the standby charges of
Rs.24.75 crores recovered by MSEB from TPC with effect from
1.10.1996 and as per the Government order and Principles of
Agreement Rs.3.5 crores was additionally being available and a
difference of standby which was made to increase the liability
Rs.24.75 crore per month to Rs.30.25 crores per month. Thus, the
decision of the Technical and Judicial Members is found to be
appropriate and reasonable while working out the percentage of the
27
standby charges to be paid by BSES/REL to TPC for the period in
question.
30. This Court in BSES Ltd. v. Tata Power Co. Ltd. (supra) held that
the tariff notice dated 30.9.1998 to be illegal and had no legal effect.
It was held that the charges paid for this kind of arrangement,
whereby a fixed quantity of electrical energy was guaranteed to TPC
and BSES/REL at their desire, is bound to constitute a component of
the price which they (BSES and TPC) would be charging from their
consumers towards the cost of the electrical energy actually consumed
by them. This Court also held that the State Government had no
authority or jurisdiction on 22.3.2000 to determine or quantify the
charges which BSES had to pay to TPC under the terms of the license
granted to the former. It was further observed that Commission to
decide the dispute early. A clarificatory order was passed by this
Court on 9.1.2004 considering the decision in Binani Zinc Limited
(supra) . The petition was filed by TPC for review. On the basis of the
decision in the same was dismissed. The
Binani Zinc Limited (supra),
MERC has passed the order on 31.5.2004, the following observations
were made by MERC:
"94. In this context, the Commission is also of the view that,
since the standby facility ensures the reliability of the Mumbai
system and thus benefits all the consumers in the Mumbai area,
they have to contribute towards the cost of standby through the
mechanism designed by the Commission. TPC has been
28
recovering the cost of standby that was applicable in January
1998 i.e., Rs.24.75 crore per month, from its consumers through
its tariff, viz. fixed charges and energy charges. This aspect has
been dealt with in detail subsequently in this Order. Now,
depending on the ratio of sharing of the standby cost determined
by the Commission, the consumers of TPC and BSES will have to
pay the cost applicable to their respective licensees, in the
manner decided by the Commission.
*
225. The Commission is, however, of the view that the issue of
whether the ratio should be applicable on the entire standby
component or only on the incremental portion above Rs.24.75
crore, and the recovery of the same from the consumers, is a
matter of tariff, which is within the Commission’s jurisdiction as
held by several Courts, including the High Court judgment on
the appeal filed by TPC and BSES on the Commission’s Order in
the matter of sharing of standby charges.
*
237. While determining the Annual Revenue Requirement (ARR)
of TPC in the separate case before it, the Commission is
considering all the payments to be made to or by the respective
Parties and the interest and delayed payment charges, and is
restating the Clear Profit of BSES and TPC to reflect the true
picture, in line with the Commission’s decision on the issue of
sharing of standby charges. This is being done from FY 199899,
as the dispute arose during that year. The Commission has
drawn from the available reserves and surpluses, wherever
required, to ensure that TPC and BSES get their due Reasonable
Return on a yearonyear basis, in line with the provisions of
Schedule VI. Having ensured that the Clear Profit matches the
Reasonable Return on a yearonyear basis, there is no
requirement for any additional recovery of any amount from the
Parties. The Utilities have to draw from their reserves, as would
be elaborated by the Commission, to make the payments as
directed by it.
*
239. Para 26 of the Supreme Court ruling states, inter alia, that
“After the decision of the Commission, the equities can be
adjusted and the excess amount paid by any party can be
refunded to it along with appropriate interest or can be adjusted
in future bills.
240. The Commission is of the view that interest should be
recovered from all parties to the dispute for the amounts paid
short visàvis the actual payments due from each party, in
accordance with the Commission’s computations. The
Commission believes that this approach is equitable to all the
Parties concerned, and is appropriate in the light of the issues
and circumstances of this matter which has been under dispute
for such a long time. Hence, the Commission has computed the
interest payable by BSES to TPC for delayed payments in FY
29
199899 and FY 199900, and the interest payable by TPC to
BSES on the excess amounts deposited by BSES with TPC for
onward payment to MSEB. The Commission has considered the
fact that the interest rate on delayed payments to MSEB is 18%
for overdue over 6 months. However, in this instance, the
payment liabilities as between TPC and BSES have been
crystallized only now through this Order of the Commission.
Moreover, the deposits made by BSES earlier were consequent to
Court Orders and were not regular payments. Hence, taking into
account the prevailing market interest rates (SBI PLR) in each of
these years, the net (simple) interest payable by BSES works out
to Rs.8.37 crore, as shown in the table below, which can be
adjusted against the refund due to BSES from TPC."
31. The MERC directed sharing of standby charges payable to MSEB
between TPC and BSES/REL on the basis of their respective peak load
requirements and directed TPC to pay to BSES/REL a sum of
Rs.315.30 crores within 15 days. It was also observed that the
quantum of standby capacity is related to the larger unit size of the
generation in either system. We have no hesitation to accept the
majority opinion that standby facility provided by TPC was out of its
own generating capacity and 90 percent of the times energy has been
drawn by BSES/REL from TPC. Thus, there is no justification for TPC
to claim 50:50 percent sharing of the standby charges in the facts of
this case on consideration of various factors the decision has been
reached.
32. It appears that there was no stay on the order passed by the
APTEL by this Court. The plea of nonimplementation of the order
taken by TPC is not understandable. It was only the bank guarantee
30
which was submitted by TPC, in addition, to deposit of a sum of
Rs.227 crores with the Registrar General of this Court. The
implementation of the order of the APTEL would mean that the
determination made by it has been acted upon and corresponding
liability factored into tariff has been passed on the customers and
actual consumers and realised from them since there was no such
interim stay on implementation of the order. We find force in the
submission raised on behalf of BSES/REL that order of APTEL has
already been worked out even otherwise it is found to be just and
equitable. No case for interference with the same is made out.
33. There is no question of applicability of Article 14 of the
Constitution. As a matter of fact, what was agreed in the Principles of
Agreement more amount than that has been ordered to be paid on the
basis of principles of business equilibrium and other factors as noted
above.
34. It may be relevant to mention here that I.A. No.59365 of 2019
and I.A. No. 59356 of 2019 have been filed for substitution of name of
Reliance Energy Limited with the agreement of learned counsel for the
parties, the name of Adani Electricity Mumbai Limited is substituted
as respondent and as appellant in C.A. No. 415/2007 and C.A.
No.3229/2007 respectively.
31
35. Resultantly, we find there is no case made out for interference in
either of the appeals filed by TPC and BSES/REL. The order passed
by Technical and Judicial Members of APTEL is hereby upheld. The
amount which is payable to Reliance Energy Limited, deposited or
secured by way of bank guarantee by TPC as per order dated
07.02.2007 along with interest lying with the Registrar of this Court as
per agreement of the Counsel for Reliance Energy Limited and Adani
Electricity Mumbai Limited be paid to Adani Electricity Mumbai
Limited. The appeals being devoid of merits are hereby dismissed.
Consequently, IA Nos.59365/2019 & 59374/2019 in CA No.415/2007
and IA Nos.59356/2019 & 59380/2019 in CA No.3229/2007 are
disposed of. Any other IA, if any, also stands disposed of. No costs.
.……......................J.
(Arun Mishra)
.……......................J.
(S. Abdul Nazeer)
New Delhi;
May 02, 2019