Full Judgment Text
REPORTABLE
I N THE S UPREME C OURT OF I NDIA
IVIL PPELLATE URISDICTION
C A J
IVIL PPEAL O OF
C A N . 684 2007
OWER RID ORPORATION OF NDIA PPELLANT
P G C I ...A
V ERSUS
T AMIL N ADU G ENERATION AND D ISTRIBUTION ...R ESPONDENTS
O TD RS TC TC
C . L . & O . E . E
ITH
W
C IVIL A PPEAL N O . 13452 OF 2015
NTPC L IMITED ...A PPELLANT
V ERSUS
C ENTRAL E LECTRICITY R EGULATORY ...R ESPONDENTS
C OMMISSION AND O RS .
J U D G M E N T
N.V.RAMANA, J.
Civil Appeal No.684 of 2007
1. The present appeal arises out of the decisions of the Central
Electricity Regulatory Commission, New Delhi [“CERC”] wherein
Signature Not Verified
Digitally signed by
SATISH KUMAR YADAV
Date: 2019.05.09
17:08:47 IST
Reason:
an issue relating to capitalization of Foreign Exchange Rate
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Variation [“FERV”] was determined by the Commission and
thereafter affirmed in a review petition, vide orders dated
30.06.2003 and 04.12.2003 respectively. On appeal, the
Appellate Tribunal for Electricity, New Delhi vide judgment dated
04.10.2006 in Appeal Nos. 135140 of 2005, approved the
methodology for ascertaining the FERV; however, with respect to
apportionment of the FERV, the appeal was allowed and FERV
was directed to be apportioned only in respect of debt liability. It
is this judgment of the Appellate Tribunal for Electricity, New
Delhi which is in challenge before us.
The appellant is a transmission company which plans,
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executes and makes available transmission systems for
conveyance of power from one place to another. The tariff which
it charges for the conveyance is fixed by the CERC. FERV is a
pass through which is kept to ensure that any liability or gain by
virtue of fluctuation in foreign exchange rates passes to the
beneficiary in a staggered manner.
3. The limited issue before us is apportionment of FERV into
debt and equity after FERV has been calculated and added to
capital cost.
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4. The learned counsel on behalf of the appellant contended
that any foreign exchange gets added to the capital cost and not
individually to debt or equity. This capital cost is thereafter
divided into debt and equity, on the basis of a normative debt
equity ratio. As a natural corollary, even the FERV needs to be
apportioned both towards debt and equity. Further, he contends
that FERV has been apportioned as such, as a matter of practice.
5. On the other hand, the learned counsel for respondent no.1
disputed the existence of such practice. He contended that the
Electricity Regulatory Commissions Act, 1998 [“the Act”] was
enacted to do away with such practices. He referred to
Regulations 1.3 and 1.7 of Tariff Regulations, 2001 and argued
that liability accrued on account of FERV can be recovered by the
appellants directly from respondent no.1 and the question of
capitalization of FERV does not arise.
6. Having heard the counsels and from a detailed perusal of
the record, at the outset, we note that the present question
regarding the apportionment of FERV between debt and equity is
not a question of law, much less a substantial question of law.
Regulation 1.13(a) of Central Electricity Regulatory Commission
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(Terms and Conditions of Tariff) Regulations, 2001 [“Tariff
Regulations, 2001”] which has been cited before us to buttress
the argument of apportionment of FERV does not in fact provide
for apportionment of FERV and rather, is restricted only to the
methodology of calculation of FERV. This methodology of FERV
calculation is not in challenge before us and has already been
affirmed by the CERC as well as the Appellate Tribunal for
Electricity, New Delhi. No rule, regulation, statute or precedent
has been cited before us to substantiate the argument that post
calculation FERV needs to be necessarily apportioned in a debt
equity ratio, much less to substantiate what exactly this ratio is
and on what factors the same is determined. Thus, on this
ground alone, for lack of a substantial question of law, these
appeals ought to be dismissed.
7. In any case, once the FERV is calculated, in terms of
Regulations 1.3 and 1.7 of the Tariff Regulations, 2001, the same
can be recovered by the appellants from respondent no.1 without
even filing a petition before the CERC. Regulations 1.3 and 1.7 of
Tariff Regulations, 2001 provide as under:
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“ 1.3 These Regulations shall apply where the
capital costbased tariff is determined by the
Commission.
…
1.7 Recovery of Income Tax and Foreign
Exchange Rate Variation shall be done
directly by the utilities from the beneficiaries
without filing a petition before the
Commission . In case of any objections by the
beneficiaries to the amounts claimed on these
counts, they may file an appropriate petition
before the Commission.”
(emphasis supplied)
8. This has not been done in the present case, i.e., Civil Appeal
No. 684 of 2007. Further, FERV is sought to be capitalized by the
appellant in the normative debtequity ratio of 50:50 as a matter
of practice, without citing any rule, regulation, statute or
precedential law.
9. This observation becomes pertinent in light of the fact that
the Act was introduced to reform the problems in the power
sector prior to 1998, inter alia , the lack of rational retail tariffs,
poor planning and operation, the neglect of the consumer and the
absence of an independent regulatory authority. The Act also
aimed at protecting and improving the financial health of the
State Electricity Boards, which were losing heavily on account of
irrational tariffs and lack of budgetary support. Thus, noting the
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premise on which the Act was enacted and the fact that the Tariff
Regulations, 2001 prescribed under the aegis of this Act do not
provide for apportionment of FERV in a particular debtequity
ratio, this Court is not inclined to interfere in the matter.
Further, the present dispute arises with respect to tariff
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charged between 01.04.2001 and 31.03.2004 on account of
FERV calculation and apportionment. Any variation in the
apportionment of FERV now, for the abovementioned period, will
consequently be passed on to the consumers. This will be unfair
to the consumers who were not consumers for the
abovementioned period but will eventually bear the brunt of
transactions which took place 1518 years ago. This is another
ground for noninterference in the present matter [ See U.P.
, (2009) 6 SCC 235].
Power Corpn. Ltd. v. NTPC Ltd.
11. In light of the abovementioned observations, the appeal is
dismissed. No order as to costs.
Civil Appeal No. 13452 of 2015
12. This appeal is preferred against the impugned judgment and
order dated 18.08.2015 passed by the Appellate Tribunal for
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Electricity whereby the appeal preferred by the appellant was
dismissed. Further, the order of the CERC was upheld by
observing that the CERC has rightly applied the decision dated
04.10.2006, which is the same order that is impugned in Civil
Appeal No. 684 of 2007, to the instant matter and directed that
the entire FERV should be apportioned only in respect of debt
liability. Thus, the issue being the same, this appeal is also
dismissed in a sequel to the discussion set out above. No order as
to costs.
.........................J.
(N.V. RAMANA)
........................J.
(MOHAN M. SHANTANAGOUDAR)
........................J.
(INDIRA BANERJEE)
EW ELHI
N D ;
M AY 09, 2019.
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