JHARKHAND STATE ELECT.BOARD vs. M/S LAXMI BUSINESS & CEMENT CO.P.LD.&ANR

1 [REPORTABLE] IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Jharkhand State Elect.Board & Ors. ……Appellants Vs. M/s. Laxmi Business & Cement Co.P. Ltd. & Anr. . …Respondents WITH CA. No.2910/2014 @ SLP(Civil) No.22049/2011, C.A.No.2911/2014 @SLP(Civil) No.6350/2014 @ CC 20307/2012 and CA. No.2913/2014 @ SLP(Civil) No.6351/2014 @ CC 20360/2012 J U D G M E N T A.K.SIKRI,J. 1. Delay condoned. JUDGMENT 2. Leave granted. 3. The appellant in both the cases is Jharkhand State Electricity Board (JSEB), which is aggrieved by the common judgment dated th 5 July 2011 passed by the High Court of Jharkhand in two appeals. These appeals were preferred by the appellant JSEB th against the orders dated 17 February 2010 passed by the learned Single Judge of that court in the two Writ Petitions which were filed Page 1 2 by M/s. Laxmi Business & Cement Co. Pvt. Ltd. and M/s. Laxmi Ispat Udyog (arrayed as respondent No.1 in each appeal and hereinafter referred to as the ‘consumers’). These respondents

Writ Petitions, primarily on the ground that the bills were contrary to and in excess of the tariff fixed by the Jharkhand State Electricity Regulatory Commission (hereinafter referred to as the ‘SERC”). Their contention was accepted by the learned Single Judge and the order of learned Single Judge is affirmed by the Division Bench as well. 4. To give a glimpse of the controversy involved, in the year 1994 HT Agreement was entered into between Bihar State Electricity Board (predecessor in interest of JSEB) and the JUDGMENT consumers which, inter-alia, stipulated the tariff that was to be charged by the JSEB from the consumers for supply of electricity to these consumers by the JSEB. In Clause 4(c) of the Agreement there was a provision of Minimum Guarantee Charges. In the year 2003, Electricity Act was enacted. Indubitably, power to frame tariff under this Act is given to SERC. SERC passed order dated framing the new tariff schedule (‘2004 Tariff Schedule’ for short) Page 2 3 under Section 86 of the Electricity Act (hereinafter referred to as the Act). The JSEB, however, continued to send the bills as per the Clause 4(c) referred to in the agreement which were paid by the

by the consumers for quashing of the energy bills on the ground that it had wrongly been raised as per Clause 4(c) of the Agreement which had ceased to have any effect on the framing of 2004 Tariff Schedule by the SERC. The JSEB, however, contended that the HT agreement entered into with the consumers still survived as the 2004 Tariff Schedule saves this Agreement. 5. Since the Writ Petitions of the consumers were allowed and the order of the learned Single Judge is already upheld by the Division Bench, it is JUDGMENT obvious that pleas raised by the JSEB have not found favour with the High Court. Before us as well, same very contentions were raised which were raised by the JSEB in the High Court. Additionally, it was also contended that even Section 185 (2)(a) of the Act read with Section 6(B) of the General Clauses Act categorically protects the previous operation of the earlier enactment, duly done or saved thereunder. Page 3 4 It is, thus, clear that questions which arise for consideration in these appeals are the following:

tariff order dated 27.12.2003 by Jharkhand State Electricity Regulatory Commission as per the Act of 2003 can the State Electricity Board still charge a tariff determined by itself? (ii) Whether the issue of demand charge to HTS – 1 category of consumers has been left non-considered by the State Commission in the tariff order dated 27.12.2003 so that the same may be continued in the manner existed in the State or whether the same has been considered and given affect to in the tariff order dated 27.12.2003 which came into effect from 1.1.2004? JUDGMENT (iii) What would be the effect of Section 185 (Repeal and Saving Clause) of the Electricity Act 2003 upon the HT supply Agreement entered upon the Board and the Consumer prior to Electricity Act, 2003? Page 4 5 6. While dealing with these questions, we will narrate further seminal facts and the details submissions of the learned counsel for the parties of either side.

Legal position contained in Act of 2003 is hardly in dispute. Before this Act was enacted in the year 2003, we had Indian Electricity Act, 1910 and thereafter Electricity (Supply) Act, 1948 was passed. It is the Electricity Board in the respective States which were supplying electricity to the consumers and determining the operation rates at which the electricity was to be supplied. Section 49 of the Act, 1948 empowered the Board to supply electricity to any person upon such terms and conditions as the Board thinks fit and made for the purposes of such supply from JUDGMENT time to time and were empowered to frame uniform tariffs for the purpose of such supply. This power to frame tariff under Section 49(1) of the Act 1948 included the power to fix minimum guarantee charges. In State of Bihar, such rates were fixed in the year 1993 tariff. It, inter-alia, provided for tariff for HT consumers. Three categories of HT consumers were mentioned there. HTS-I, II Page 5 6 and III. Both the consumers in the instant appeals were put in HT-I category. HT Agreement dated 26.4.1974 was entered into between the Board and the consumers. As per Clause 4 of this

energy so supplied and registered or taken to have been supplied at the appropriate rates applicable to the consumers according to the tariff framed by the Board and in force from time to time. It was subject to the minimum contract demand applicable for the category of supply category in which the consumers fell. Clause 4(b) explained that the maximum demand of the consumer for each month shall be the largest total amount of kilovolt amperes (KVA) that was delivered to the consumers at the point of supply during any consecutive 30 minutes in the months. Since the JSEB JUDGMENT has worked out the charges as per Clause 4 (c) which it is demanding, we reproduce the said clause hereinbelow: “4(c) Maximum demand charges for supply in any month will be based on the maximum KVA demand for the month or 75 per cent of the contract demand whichever is higher, subject to provision of clause 13. For the first twelve months service the maximum demand charges for any month, will however, be based on the actual monthly maximum demand for that month.” Page 6 7 Thus, as per the aforesaid clause, JSEB had been raising

enacted, power to frame tariff is given to the SERC. This power is statutorily conferred upon the SERC under the Act. However, it would be relevant to mention herein that before the passing of this Act, Electricity Regulatory Commission Act, 1998 was enacted and under Section 17 of the said Act, Jharkhand State Electricity Regulatory Commission was constituted by the Government of Jharkhand vide Notification No.1763 dated August 22, 2002. Its functions and duties were notified by the Government as per Section 22 of the Electricity Regulatory Commission Act. JUDGMENT 8. On the passing of the Electricity Act, 2003, Electricity Act 1910, Electricity (Supply) Act 1948 and Electricity Regulatory Commission Act, 1998 have been repealed. At the same time, Act 2003 recognizes the SERCs constituted under the 1998 Act. The object clause of this Act reads as under: Page 7 8

9. It is also not in dispute that 2004 Tariff Schedule framed by the SERC is in exercise of powers conferred upon it under Section 86 (a) of the Act. In PTC India Ltd. V. Central Electricity Regulatory Commission (2010) 4 SCC 603 this Court has categorically held that Act, 2003 is an exhaustive code on all matters concerning electricity which also provides for JUDGMENT “unbundling” of State Electricity Boards into separate utilities for generation, transmission and distribution. Further, Regulatory regime is entrusted to the State Electricity Regulatory Commissions which are given vide ranging responsibilities. This Act has distanced the Government from all forms of regulations, including tariff regulation which is now specifically assigned to Page 8 9 SERC. Relevant observations, outlining the scheme of this Act, are reproduced below:

The 2003 Act contains separate provisions for the performance of dual functions by the Commission. Section61 is the enabling provision for framing of regulations by the Central Commission: the determination of terms and conditions of tariff has been left to the domain of the Regulatory Commissions under Section 61 of the Act whereas actual tariff determination by the Regulatory Commissions is covered by Section 62 of the Act. This aspect is very important for deciding the present case. Specifying the terms and conditions for determination of tariff is an exercise which is different and distinct from JUDGMENT Page 9 10

JUDGMENT 10. It is, thus, beyond the pale of doubt that the State Electricity Boards have no power whatsoever to frame tariff which is under the exclusive domain of the Commission. This legal position has been judicially recognized. [See Gujarat Urja Vikas Nigam Ltd. V. Page 10 11 Essar Power Ltd., (2008) 4 SCC 755 and A.P. TRANSCO v. Sai Renewable Power (P) Ltd. (2011) 11 SCC 34.

is saved and the JSEB has right to charge the tariff as per Clause 4 (c) thereof. According to the JSEB this is the position because of the reason that Clause 1.4 of the 2004 Tariff Schedule framed by the SERC provides for such a position and further that even Section 186 of the Act 2003 saves this agreement. On these twin aspects, we have already framed question Nos. 2 and 3 above and would now proceed to deal with them. 2. Re: Whether the Agreement dated 26.4.1994 is saved by the 2004 Tariff Schedule? JUDGMENT Mr. Sinha, learned senior counsel for the JSEB submitted that in the 2004 Tariff Schedule there was no such provision which is contained in the agreement dated 26.4.19994 particularly in Clause 4(c) and in the absence thereof in the tariff schedule energy bills raised on the basis of 75 % contract demand was saved. It was submitted that the Agreement dated 26.4.1994 is a Page 11 12 statutory agreement as it was under the Act of 1948. The learned senior counsel further submitted that it had never been the case of consumers that the aforesaid provision was repealed,

purpose, Mr. Sinha sought to rely upon averments made in the Writ Petitions filed by the consumers and on the basis it was contended that even the consumers admitted that the provision of 75% of contract demand is absent and not provided in the 2004 Tariff Schedule. He also placed strong reliance on Clause 1.4 of 2004 Tariff Schedule of SERC which reads as under: “All other Terms and Conditions in respect of Meter Rent, Supply at Lower Voltage, Capacitor Charge, Electricity Duty, Rebate, Security Deposit, Surcharge for exceeding contract demand etc., shall remain the same as existing in the State.” JUDGMENT Further, the tariff order 2003-04, in Clause 5 under the heading Design of Tariff Structure and Analysis of Tariff, particularly at Clause 5.4 has dealt with the two part tariff structure and Minimum Guarantee Charges wherein it was stated that “Ideally, the fixed/demand charge should be levied in proportion to the demand placed by an individual consumer on the system. This is so because it facilitates the utility in designing an appropriate system to cater to the supply needs of a consumer Page 12 13 and is therefore a just and fair mechanism for recovering fixed costs of the system.” Mr. Sinha further argued that Clause 4 (c) of the High Tension

signed with the Board much after 1.1.2004, when the Tariff Order 2003-04 came into effect, clearly specified that after commencement of power supply, the respondent shall be liable to pay KVA/Maximum Demand Charges on actual consumption basis in the first 12 months and after that on the basis of 75% of the contract demand or recorded demand, whichever is higher. This is uniformly applied to similarly situated all the HTS-1 consumers. 12. In order to appreciate this argument, we will have to construe relevant provision of 2004 Tariff Schedule as framed by the SERC. JUDGMENT It would be pertinent to observe that the SERC fixed the tariff on the request of the JSEB itself when it approached the SERC for this purpose. We find that in the Tariff Petition filed by the JSEB before the SERC, the JSEB did not propose to continue the manner of 75% of contract demand and the SERC allowed the demand charge 140-KV-Month. On perusal of the Tariff Order, it becomes Page 13 14 apparent that this is divided in different sections viz., section 1 is the chapter containing ‘introduction’, section 2 is the chapter containing ‘ARR’ i.e. the Annual Revenue Requirement and tariff

containing ‘objections’ received from the stake holders, section 4 is the chapter containing ‘Commission’s analysis on ARR’, Section 5 is the chapter containing ‘design of tariff structure and analysis of tariff’, section 6 is the chapter containing ‘Directions to the JSEB’ and finally there is Annexure 5.1 containing the ‘Tariff Schedule’. This Tariff Schedule which is the final outcome of the tariff process is binding on the State as well. The relevant portion of the Annexure 5.1 of the tariff order wherein the State Commission has dealt with the tariff applicability upon the High JUDGMENT Tension Service (HTS) consumers i.e. category applicable to Respondent No.1 is reproduced below: “Category: High Tension Service (HTS) 1. Applicability For consumers having contract demand above 100 kVA 2. Character of service Page 14 15 50 cycles, 3 Phase at 6.6. KV/11 Kv/33 kV or 132 kV. 3. Tariff

application/reference to the SERC did not ask for fixing any JUDGMENT minimum guarantee charges. It would be relevant to mention that the JSEB in its proposal for fixation of tariff for 2003-04, submitted before the Regulatory Commission, indicated both the existing tariff and the tariff proposed by it in respect of all consumers, including all categories of HTS (High Tension Service) consumers. The SERC after undertaking the necessary exercise, fixed the tariff Page 15 16 of all categories. The tariff proposed by the Board for HTS-I consumers along with existing tariff is reproduced in Tables 5.28 and 5.29 of the 2004 Tariff Schedule which will clearly reflect that

Page 16 17

Page 17 18

charges which JSEB was charging from its consumers as per the JUDGMENT earlier agreements entered into with them. The position would become crystal clear from the following discussion in the 2004 Tariff Schedule wherein the SCRC gave specific reasons for revising and approving the tariff for HTS consumers. The SERC has filed its response to these appeals, wherein the provision in this behalf is explained in the manner noted below: “It is Page 18 19

For the current year, the Commission would not like to increase the burden on the industries on account of minimum charge and has therefore attempted to keep it at the existing level. The Commission has assumed a minimum level of supply and a minimum level of consumption. For this, the Commission has considered 10% load factor for HTS-I and HTS-II categories considering an average consumption of two (2) hours in a day. For EHTS and HT Special load factor of 20% and 30% respectively has been taken by considering an average consumption of four (4) hours and seven (7) hours in a day respectively. The Commission observes that if these categories of industries are not able to maintain this minimum load factor, than they should reduce their contracted load. The Commission would like to explicitly mention that if the consumption exceeds the mentioned load factor, no minimum charge would be applicable. JUDGMENT For encouraging consumption, the Commission has also introduced a load factor rebate for all industries consumers. For the entire consumption in excess of Page 19 20

15. We would like to reproduce the following discussion in the impugned judgment of the High Court, as we are in agreement JUDGMENT therewith the observations made in those paragraphs: “……10.We are concerned with the Demand Charge only, rather to say not concerned with the Demand Charge itself but the manner in which the Demand Charge can be calculated for the purpose of raising demand against the consumer charging of the Demand Charge “has been allowed in Tariff Order 2003-04 @ Rs.140/- as mentioned at page 141 of the Tariff Order. As we have already noticed that a formula was given in Clause 15.2 in the tariff Page 20 21

11. In view of the above reasons, we cannot hold that the Electricity Regulatory Commission has not considered the proposal of the Electricity Board with respect to their claim for Demand Charge and the manner in which it will be charged……” JUDGMENT 12.In view of the above facts, we are of the considered opinion that the appellant- Board cannot take help of Clause 5.1. wherein Electricity Regulatory Commission wherein it has been observed that some of the matters have not been dealt with and they shall continue to be the same as they were in existence in the State because of the reason that there is a specific proposal made by the Electricity Board for the Demand Charge as Page 21 22 well as the manner in which it will be charged and this proposal was considered by the Electricity Regulatory Commission and thereafter Tariff Order has been issued…”

like to highlight another fact, namely the JSEB had even filed clarification applications before the SERC contending that having regard to the Clause 4(c) of the Agreement with the HT-I consumers, the maximum demand charges would be those prescribed under Clause 4(c) of the Agreement. These applications were specifically rejected by the Commission. No appeal was preferred by the JSEB challenging those orders. It is, therefore, too late in the day for the JSEB to now argue that this aspect of minimum guarantee charge has not been dealt with by the SERC JUDGMENT in the 2004 Tariff Schedule. 3. Re.: Effect of Section 185 of the Electricity Act 2003. Submission of Mr. Sinha, learned senior counsel, predicated on Section 185 (2)(a) of the Electricity Act and Section 6 (B) of the General Clauses Act, was that by virtue of the aforesaid provision Page 22 23 the earlier Agreement of 1994, including Clause 4(c) thereof entered into between the Electricity Board and the consumers was saved. Section 185(2)(a) of the Act reads as under:

We also reproduce Section 6(B) of the General Clauses Act hereinbelow: “affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or” JUDGMENT 17. It was the submission that since all the actions deemed to have been done or taken under the corresponding provision of the earlier Act are saved, the Agreement in question which was entered into by the Electricity Board in exercise of statutory power and was having legal force, had been saved under the aforesaid Page 23 24 provisions. To prop this submission, Mr. Sinha also referred to the judgment of this Court in the case of Himachal Pradesh State Electricity Regulatory Commission & Anr. v. Himachal

plea that this very aspect had been specifically dealt with in the aforesaid judgment and therefore the issue was no longer res- integra. Mr. Sinha pointed out that in that case the courts specifically dealt with the effect of repealed provision contained in Section 185 of the Act, 2003 read with Section 6(B) of the General Clauses Act and held that the previous agreements were saved unless it could be pointed out that there was a manifest intention to destroy them. He referred to the following passage from the earlier judgment in the case of State of Punjab vs. Mohar JUDGMENT Singh 1955 (1) SCR 893 which is quoted in the aforesaid judgment and reads as under: “Whenever there is a repeal of an enactment, the consequences laid down in Section 6 of the General Clauses Act will follow unless, as the section itself says, a different intention appears. In the case of a simple repeal there is scarcely any room for expression of a contrary opinion. But when the repeal is followed by fresh legislation on the same subject we would undoubtedly have to Page 24 25 look to the provisions of the new Act, but only for the purpose of determining whether they indicate a different intention. The line of enquiry would be, not whether the new Act expressly keeps alive old rights and liabilities but whether it manifests an intention to destroy them. We cannot therefore subscribe to the broad proposition that section 6 of the General Clauses Act is ruled out when there is repeal of an enactment followed by a fresh legislation. Section 6 would be applicable in such cases also unless the new legislation manifests an intention incompatible with or contrary to the provisions of the section. Such incompatibility would have to be ascertained from a consideration of all the relevant provisions of the new law and the mere absence of a saving clause is by itself not material. It is in the light of these principles that we now proceed to examine the facts of the present case.” (underlining is ours) He also banked upon the following discussion in the said JUDGMENT judgment: “We have referred to the aforesaid paragraphs as Mr.Gupta has contended that when there is repeal of an enactment and substitution of new law, ordinarily the vested right of a forum has to perish. On reading of Section 185 of the 2003 Act in entirety, it is difficult to accept the submission that even if Section 6 of the General Clauses Act would apply, then also the same does not save the forum of appeal. We do not perceive any Page 25 26

18. In order to appreciate this argument, we will have to traverse through some salient provision of the agreement of 1994 entered into with the consumers. These are paras 4(c) and 11 of the HT agreement: “4..(c) Maximum demand charge for supply in any month will be based on the maximum KVA demand for the month of 75% of the contract demand whichever is higher, subject to provision of clause 13…….. JUDGMENT 11. This agreement shall be read and construed as subject to the provisions of the Indian Electricity Act, 1910, rules framed thereunder, the Electricity (Supply) Act 1948 together with rules, regulations (if any) tariffs and terms and conditions for supply of electricity framed and issued thereunder and for the time being in force as far as the same may respectively be applicable and all such provisions shall prevail in case of any conflict Page 26 27 or inconsistency between them and the terms and conditions of this agreement.” 19. It is also to be borne in mind that the tariff in force during the

which was having force of law under the Electricity Act 2003. Thus, what follows from the above is that even if we proceed on the basis that the statutory agreements entered into earlier were saved, the agreement in question stands replaced by 2004 Tariff Schedule. At this juncture, we would like to refer to the judgment of this Court in the case of BSES v. Tata Power Co.Ltd. (2004) 1 SCC 195 wherein following pertinent observations were made. “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. Sub-section (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( 1 ) of the Act and JUDGMENT Page 27 28

JUDGMENT 20. In view of the above, we are of the opinion that even the argument based on Section 185 of the Electricity Act, 2003 would not bring any change to the results of this case. We, thus, do not fault with the judgment of the High Court appealed against. Page 28 29 21. Before we part with, it is necessary to deal with one more argument of the appellant. It was submitted that there was delay in filing the Writ Petitions inasmuch as bills raised by the JSEB on

formulation of 2004 Tariff Schedule were being paid by the consumers and they approached the Court by filing Writ Petitions only in the year 2010. Thus, there was a delay and latches of 5 years. It is further argued that in such scenario, the High Court at least should not have directed the appellants to refund the excess amount charged under the bills raised for earlier period. Other related submission was that it would be unjust enrichment to the consumers who would have recovered the amount from the user of the electricity. JUDGMENT 22. In so far as delay in filing the Writ Petition is concerned, it appears from the chronology of events that the same has been duly explained. It is not in doubt that the consumers had paid the amount of bills raised by JSEB under protest because of the threat of disconnection. While doing so, they had raised specific plea with the JSEB that it was now supposed to raise the bills in accordance with the 2004 Tariff Schedule. The matter remained Page 29 30 under consideration at the level of JSEB which kept approaching the Court as well as SERC seeking clarification of 2004 Tariff Schedule. As already pointed out above, clarification applications

the JSEB did not judge from its stand even after the dismissal of these applications, the consumers approached the Court and filed the Writ Petitions. The Writ Petitioners have thus furnished satisfactory explanation for approach the Court. 23. The plea of unjust and enrichment will not be available to the appellants. In the first place, no such plea was raised before the High Court either before the learned Single Judge or the Division Bench. In the Special Leave Petition, this submission was made for the first time at the time of hearing of the present appeals. JUDGMENT Moreover, it is not a case of payment of tax which is a burden passed on the consumers. It is only in such cases that was held in Mafatlal Industries Ltd. vs. Union of India (1997) 5 SCC 536 that the question of unjust enrichment would arise for consideration. As far as issue like the present is concerned, such a question was left open in para 107 of the aforesaid judgment. The Court had made it clear the concept of unjust enrichment had no Page 30 31 application for refunds other than taxes, as is clear from the reading thereof.

24. As a result, we find that the appeals are bereft of any merit JUDGMENT and are accordingly dismissed. No costs. …………………………..J. (K.S.Radhakrishnan) …………………………..J. (A.K.Sikri) New Delhi, Page 31 32 Dt. February 28, 2014. JUDGMENT Page 32