Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELALTE JURISDICTION
CIVIL APPEAL NO. 3492 OF 2006
Binani Zinc Limited ….Appellant
Versus
Kerala State Electricity Board and others ….Respondents
J U D G M E N T
S.B. SINHA, J.
1. Correctness or otherwise of an observation made by a two Judge
Bench of this Court in BSES Ltd. and others v. Tata Power Company
Ltd., [ (2004) 1 SCC 195 ] having been doubted, this matter has been
referred to a Larger Bench.
2. Kerala State Electricity Board (KSEB), respondent No.2 is
constituted and incorporated under the provisions of the Electricity
(Supply) Act, 1948 (for short ‘the 1948 Act’). Indisputably the first
respondent is entitled to frame and revise tariff for electrical energy in
exercise of the powers conferred upon it by Sections 49, 59 and clause (j)
of Section 79 of the 1948 Act.
3. The Parliament enacted Electricity Regulatory Commissions Act,
1998 (for short 1998 Act) which received the assent of the President of
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India on or about 2 July, 1998. It was, however, deemed to have come
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into force with effect from 25 April, 1998.
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4. By order dated 13 May, 1999, KSEB revised its tariff with effect
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from 15 May, 1999. A writ petition was filed by an Association
questioning the said order.
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5. Subsequently on 3 May, 2001 the Government of Kerela effected
an increase of tariff for all categories of consumers except old age
homes, schools and hostels of mentally retarded persons etc. The revised
tariff was made effective from August 10, 2001. According to the
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governmental order, KSEB was incurring a deficit of Rs. 160.44 crores
per month and in order to make up for the said deficiency the tariff hike
was necessitated. Pursuant to the said policy decision the KSEB later on
issued a detailed tariff order.
6. The Power Department of the Government of Kerala issued G.O.
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(MS) No. 23/2001/PD on 17 August, 2001 inter alia declaring that the
Government of Kerela had tentatively decided to enter into a MOU with
the Government of India with a view to affirm the joint commitment of
the two parties to reform the power sector in Kerela in a time bound
manner. The said MOU in the relevant para stated :-
“8. Kerala will constitute an independent State
Electricity Regulatory Commission by October,
2001 and file tariff petitions by March 2002.
Tariff orders issued by SERC will be implemented
fully unless stayed or set aside by Court orders.”
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7. On or about 11 October, 2001 a Government Order was issued by
the Government of Kerala further enhancing the tariff by 50 paise per
unit for all industrial consumers
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8. KSEB revised tariff under Sections 49, 59 and sub-section (j) of
Section 79 of the 1948 Act by issuing an order known as ‘The Kerala
State Electricity Board Extra High Tension Tariff Revision Order 2002”
(for the sake of brevity ‘2002 Order’). The said order came into force
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with effect from 1 October, 2002 in terms whereof revision in the tariff
for extra high tension industrial units was effected.
9. The Kerala State Electricity Commission (KSERC) was
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constituted by the State of Kerala on 14 November, 2002 in exercise of
its power conferred by Section 17 of the 1998 Act
10. Appellant questioning the validity of the said 2002 Order filed a
writ petition before the Kerala High Court which was marked as OP
9798 of 2003. As in the meanwhile the KSERC came into force, the
High Court permitted the appellant to approach the Commission within
30 days noting that it would be entitled to examine whether the revision
conforms to Section 29 of the 1998 Act or not.
11. The Parliament enacted the Electricity Act, 2003 which came into
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force with effect from 10 June, 2003.
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12. The KSERC in terms of its order dated 30 April, 2004 inter alia
held :-
a) On the day the notification dated 24.10.2002 was issued, the
Board was empowered to determine the tariff since the
Electricity (Supply) Act, 1948 was still applicable.
b) No ground for re-determining tariff for HT and EHT
consumers.
c) Cross subsidy for tariff for HT and EHT categories was
around 43%.”
13. The appeal was preferred thereagainst before the High Court in
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terms of Section 27 of the 1998 Act whereupon by an order dated 2
July, 2004 it was directed :-
“(a) Though the Tariff Revision Order, 2002 was
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issued on 24 October, 2002, i.e. subsequent
to coming into force of the ERC Act, 1998,
the Board was empowered to issue the
notification as the Regulatory Commission
had not been constituted.
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(b) With respect to issue of cross subsidy,
matter remanded to the Commission for
fresh determination.”
14. A special leave petition was filed thereagainst. This court by an
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order dated 13 September, 2004 passed an interim order directing the
KSEB not to disconnect appellant’s electricity supply subject to its
paying the demand as per the tariff before its revision on 24.10.2002.
Appellant was also asked to deposit Rs.1 crore with the KSEB.
15. Before the court it was contended by the appellant that the
Electricity Act, 2003 having come into force with effect from June 10,
2003, the KSERC functioning as such prior thereto continues to function
as the State Commission under the 2003 Act and thus it must be held to
have considered the appellants’ petition in terms of the provisions
thereof. It was furthermore argued that the 1998 Act having been
repealed by the 2003 Act, the appeal preferred by the appellant before
the Kerela High Court was not maintainable.
This Court, however, while disposing of the appeal held that the
issues raised by the appellant could be more effectively considered and
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disposed of by the appellate tribunal under the 2003 Act, being an expert
body.
16. Pursuant to or in furtherance of the said order the Appellate
Tribunal upon hearing the parties has passed the impugned judgment
inter alia opining that the respondent-KSEB had the jurisdiction to revise
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the tariff framed on 24 July, 2006, stating :-
“26. ….Therefore, till the Commission was
constituted by the State of Kerala the power
remained vested in the Board to determine the
tariff.”
17. Mr. K.K. Venugopal, learned counsel appearing on behalf of the
appellant would urge:-
(i) Upon coming into force of 1998 Act the State was obligated
to constitute the Electricity Commission within a reasonable
period.
(ii) On coming into force of the 1998 Act Respondent-Board
and/or the State of Kerala had no authority to revise the
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tariff in terms of the provisions of the 1948 Act or
otherwise.
(iii) In any event the principles laid down in 1998 Act should
have been kept in mind while revising the tariff, particularly
in respect of the cross subsidy, which had specially been
dealt with in the Statement of Objects and Reasons of 1998
Act.
18. Mr. M.T. George, learned counsel appearing on behalf of the
Board, on the other hand, would urge :-
(i) Section 17 of the 1998 Act does not impose any legal
obligation upon the State to constitute the Commission ;
(ii) So long the Commission is not constituted, the Board would
have jurisdiction to frame and/or revise tariff as the statute
does not contemplate a vacuum ;
(iii) The 1998Act having not repealed the 1948 Act, the power
to frame tariff in terms of Section 49 of the 1948 Act
continued to remain in the Board ;
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(iv) The High Court in exercise of its jurisdiction under Article
226 of the Constitution of India could not have issued a writ
or order in the nature of mandamus directing the State to
constitute the Commission.
19. We may at this stage notice the relevant provisions of the 1998
Act.
Section 2(c) of the 1998 defines ‘Commission’ to mean the
Central Commission or the State Commission or the Joint Electricity
Regulatory Commission, as the case may be. Section 2(j) of the 1998
defines ‘State Commission’ to mean the State Electricity Regulatory
Commission established under sub-section (1) of Section 17.
Section 3 provides for establishment and incorporation of Central
Commission, sub-section (1) whereof read thus :-
“3. (1) The Central Government shall, within three
months from the date of the commencement of this
Act by notification in the Official Gazette,
establish a body to be known as the Central
Electricity Regulatory Commission to exercise the
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powers conferred on, and the functions assigned
to, it under this Act.”
(Emphasis supplied)
Section 17 of the Act provides for establishment and incorporation
of State Commission, sub-section (1) whereof reads as under :-
“(1) The State Government may, if it deems fit, by
notification in the Official Gazette, establish, for
the purposes of this Act, a Commission for the
State to be known as the (name of the State)
Electricity Regulatory Commission.
(Emphasis supplied)
Section 22 deals with the functions of State Commission.
Section 28 provides for determination of tariff by the Central
Commission.
Section 29 provides for determination of tariff by the State
Commission, relevant part of sub-sections (1) and (2) whereof read as
under :-
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(1) Notwithstanding anything contained in any
other law, the tariff for intra-State transmission of
electricity and the tariff for supply of electricity,
grid, wholesale, bulk or retail, as the case may be,
in a State (hereinafter referred to as the tariff),
shall be subject to the provisions of this Act and
the tariff shall be determined by the State
Commission of that State in accordance with the
provisions of this Act.
Provided that in States or Union territories
where Joint Electricity Regulatory
Commission has been constituted, such
Joint Electricity Regulatory Commission
shall determine different tariff for each of
the participating States or Union territories.
(2) The State Commission shall determine by
regulations the terms and conditions for the
fixation to tariff, and in doing so, shall be guided
by the following, namely:--
… …
(c) that the tariff progressively reflects the
cost of supply of electricity at an adequate
and improving level of efficiency;
(d) the factors which would encourage
efficiency, economical use of the resources,
good performance, optimum investments,
and other matters which the State
Commission considers appropriate for the
purpose of this Act;
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(e) the interests of the consumers are
safeguarded and at the same time, the
consumers pay for the use of electricity in a
reasonable manner based on the average
cost of supply of energy;
(f) the electricity generation, transmission,
distribution and supply are conducted on
commercial principles;
(g) national power plans formulated by the
Central Government;
Sections 51 and 52 read as under :-
“Section 51 - Amendment of Act 54 of 1948 -
With effect from such date as the Central
Government may, by notification, in the Official
Gazette appoint, sub-section (2) of section 43A of
the Electricity (Supply) Act, 1948 shall be
omitted:
Provided that different dates may be
appointed for different States.
Section 52 - Overriding effect
Save as otherwise provided in section 49, the
provisions of this Act shall have effect
notwithstanding anything inconsistent
therewith contained in any enactment other
than this Act.”
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20. The 1998 Act indisputably was enacted inter alia for the purpose
of implementing reforms pertaining to fundamental issues facing the
power sector, namely, lack of rational retail tariff, high level cross
subsidies, poor planning and operation, inadequate capacity and for
safeguarding the interest of the consumers Jurisdiction of the
Commission vis-à-vis the Board in the context of the provisions of the
1998 Act and 1948 Act must be determined having regard to a large
number of factors.
21. Section 3 of the 1998 Act mandates the Central Government to
establish Central Electricity Regulatory Commission. If the said
provision is contrasted with Section 17 of the 1998 Act, it would be
evident that no such mandate has been imposed on the State Government
to constitute such a Commission. The Parliament advisedly used the
words ‘may’ and ‘if it deems fit’ in Section 17 of the Act while using the
word ‘shall’ in Section 3 thereof. Establishment of a State Commission
by the State Government, therefore, is directory. It confers some
discretionary power on the State Government to constitute a State
Commission. The State, for sufficient and cogent reasons, may refuse to
constitute such a Commission or fail or neglect to do so within a
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reasonable time. For the aforementioned purpose the Central
Government can take recourse to certain measures but the same would
not mean that the court can in exercise of its power of judicial review,
issue a writ or order in the nature of mandamus directing the State to
constitute such a Commission.
22. In fact in this case itself the Central Government was able to
persuade the State Government to establish a Commission by entering
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into a Memorandum of Understanding on 17 August, 2001 in terms
whereof the State of Kerala made itself bound to constitute the
Commission by October, 2001.
If the contention of Mr. Venugopal is accepted and taken to its
logical conclusion, the superior courts would be entitled to direct to
Government to implement even conditional legislations. We, therefore,
are of the opinion that the same is not legally permissible.
23. The provisions of 1998 Act vis-à-vis 1948 Act are required to be
construed harmoniously. For the said purpose it is required to bear in
mind that the law does not contemplate a vacuum in its operation. The
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1948 Act has not been repealed or replaced by the 1998 Act. Section 61
merely replaced the Ordinance.
24. Thus, it would be one thing to say that upon coming into force of
the 1998 Act the provisions contained in 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.
25. The State Electricity Board is a ‘State’ within the meaning of
Article 12 of the Constitution of India. It is a statutory authority. If the
Board has the power to frame or revise the tariff as contained in Section
49 and other provisions of the 1948 Act which is plenary in nature,
unless a statutory provision is brought into force interdicting exercise of
such power, it cannot be held to become denuded thereof.
26. The power to make tariff would bring within its folds the power to
revise the same. Exercise of such powers from time to time would
depend upon the exigencies thereof.
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27. The powers/guidelines under the provisions of 1998 Act were to
be exercised by the Central Commission or the State Commission. It
must come into existence for the said purpose.. A non obstante clause
contained in Section 29 or Section 52 of the 1998 Act would be attracted
only when the Commission comes into force and not prior thereto. The
provisions of the said Act are to be exercised by the Commission for the
purposes of the Act. It must, therefore, come into existence before it can
exercise its power.
28. It is, therefore, difficult for us to persuade ourselves that that the
factors enumerated in clauses (c) to (g) contained in sub-section (2) of
Section 29 of 1998 Act providing for the principles required to be
followed by the Commission were binding on the State Electricity
Boards also.
The State Electricity Boards are entitled to frame tariff in terms of
the provisions contained in the 1948 Act. The tariff so framed is
legislative in character. The Board as a statutory authority is bound to
exercise its jurisdiction within the four-corners of the statute. It must act
in all fields including the field of framing tariff by adopting the
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provisions laid down in 1948 Act or the Rules and the Regulations
framed thereunder. It is one thing to say that while framing tariff it can
only take into consideration the provisions laid down in the Schedule
appended the Act and/or the directions contained in the policy decisions
issued by the State as also other statutory principles governing the same
but then a tariff framed by it cannot be held to be ultra vires only because
it did not take into consideration certain principles laid down in clauses
(c) to (g) of sub-section (2) of Section 29 of the 1998 Act. It is of some
significance to note that the Commission in terms of clauses (a) and (b)
of sub-section (2) of Section 29 of the 1998 Act are required to follow
the principles provided for under Sections 46, 56 and 57 of the 1998 Act
as also the Sixth Schedule appended thereto. The 1998 Act, therefore,
recognises the principles contained in the 1948 Act also.
29. The provisions of Section 52 of 1998 Act, therefore, are required
to be read in the light of the other provisions contained therein. It is also
a well settled principle of law that a statute does not envisage doing
anything which is impossible to be done. Lex non cogit ad impossibilia
Gausa ommiss Gausa ommiss is a well known principle.
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It would be absurd to suggest that the principles required to be
adopted by the Commission were per force required to be adopted by the
Electricity Boards despite the fact that the Commission did not come into
existence.
30. The Commission has been empowered to frame tariff. It is,
however, not been empowered to frame tariff with retrospective effect so
as to cover a period before its constitution. The matter might have been
different if such a power has been conferred on the Commission. It is
now a well settled principle of law that the rule of law inter alia
postulates that all laws would be prospective subject of course to
enactment an express provision or intendment to the contrary.
31. On the aforementioned factual backdrop we may notice that in the
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case of BSES (supra) the Electricity Commission was constituted on 5
August, 1999. A dispute arose in regard to payment of standby charges
by and between the licensee (Tata Power) and the appellant therein
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(BSES) for the period 1 December, 1998 to 31 March, 1999. We may
notice the fact of the said case :-
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“….On account of the notice given by TPC for
increasing the charges of standby supply of 275
MVA, a dispute arose and a meeting was
convened on 4-3-1999, wherein the Deputy Chief
Minister, Government of Maharashtra and
representatives of both the sides were present. The
Deputy Chief Minister, though advised both the
parties to settle the issue amicably between
themselves without referring to the Government,
at the same time issued certain directions, namely,
that BSES should share Rs 9 crores out of Rs
22 crores additional standby charges levied
by MSEB upon TPC for the period 1-12-1998 to
31-3-1999 and the issue regarding sharing of
standby charges for the period 1-4-1999 onwards
be referred to a Committee to be constituted by the
State Government. The Government of
Maharashtra thereafter constituted a Committee on
27-5-1999 to study certain issues including that of
standby charges to be paid by BSES to TPC and to
submit a report. Shortly thereafter, a notification
was issued on 5-8-1999 constituting the
Maharashtra Electricity Regulatory Commission
(for short “the Commission”). The Committee
constituted by the Government of Maharashtra on
27-5-1999 in its meeting held on 2-5-2000
resolved that in view of the constitution of the
Commission, the question of payment of standby
charges could only be determined by the
Commission and accordingly resolved that the said
issue be referred to the Commission for
determination. An intimation in this regard was
also sent to the respective parties. However, the
Government of Maharashtra passed an order on
22-3-2000 whereby BSES was directed to pay
standby charges to TPC at the rate of 50 per cent
of the amount of standby charges payable by TPC
to MSEB. This was done on the basis that MSEB
was providing standby facility of 550 MVA to
TPC and as TPC was providing standby facility of
275 MVA to BSES, it should pay half of the said
amount. The order further provided that for the
period 1-12-1998 to 31-3-1999 BSES should pay
Rs 9 crores as standby charges to TPC. BSES
was not satisfied with the aforesaid order of the
Government and made repeated requests for
review of the same and lastly on 6-10-2000, it sent
a detailed letter to the Government requesting for
reconsideration of the matter.”
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In the aforementioned fact situation obtaining the Division Bench
held as under:-
“19. Shri Nariman has submitted that TPC gave a
notice on 30-9-1998 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 1-
2-1998. The submission is that by operation of law
the charges for standby facility stood revised and
enhanced with effect from 1-12-1998. 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 intra-State
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 57-A of the
Electricity (Supply) Act, 1948 and Section 57-A
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
57-A and 57-B 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
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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 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.”
32. BSES (supra) must be held to have been determined on its own
facts. Sub-section (6) of Section 29 of the 1998 Act bars constitution of a
rating committee. In ‘BSES’ a Committee was constituted by the State
of Maharashtra. In that case when the Regulatory Commissions had
been set up by the State government under the ERC Act, no other
authority including the Board, would obviously have the power to
determine the tariff. It is presumably on that premise the that the
provisions of the 1998 Act must be given effect to even for the period
during which it had not come into force, must be understood.
33. We must also notice that the Electricity (Supply) Act, 1998 was
not repealed by the ERC Act, 1998. It was only under Section 185 of the
Electricity Act of 2003 that the provisions of the Indian Electricity Act
1010, Electricity (Supply Act 1948 and the ERC Act 1998 were repealed.
But at the same time anything done or any action taken under the Acts of
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1910 or 1948 or 1998 Act have been saved in so far as they are not
inconsistent with provisions of the 2003 Act.
34. 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 Kerela, the power to
determine tariff remained with the Board under the Electricity (Supply )
Act 1948 as it was not repealed by the Electricity Regulatory
Commission Act 1998. The 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.
35. We are, therefore, of the considered opinion that this clarification
in regard to the decision rendered by a two Judge Bench of this Court in
BSES (supra) would be sufficient to answer the reference.
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36. Mr. Venugopal would, however, submit that other
contentions/substantial questions of law have been raised in the appeal.
Such questions may be determined by an appropriate 2 Judge Bench.
37. This reference is answered accordingly.
38. The matter may now be placed before an appropriate Bench.
…………………………J.
[ S.B. Sinha ]
…………………………J.
[ Asok Kumar Ganguly]
…………………………J.
[ R.M. Lodha ]
New Delhi
March 19, 2009
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