State Government must be impleaded where an appeal challenges its funding treatment and alleges adverse conduct.

The Department of Power, Government of Punjab, sought impleadment as a respondent in the appeal filed by PSEB Engineers Association against the tariff order dated 6 March 2026 passed by the Punjab State Electricity Regulatory Commission in PSPCL’s petition concerning true-up of ARR for FY 2024–25, approval of ARR for the FY 2026–27 to FY 2028–29 control period, and determination of tariff for FY 2026–27.

The appeal challenged, inter alia, the Commission’s treatment of ₹3,581.95 crore received by PSPCL from the Government of Punjab as non-tariff income, the resulting revenue surplus, and the reduction of the Government’s subsidy obligation.

The appellant’s grounds also alleged that the tariff order had been passed to facilitate the State Budget and reflected political considerations during an election year.

The State Government contended that these allegations directly concerned it and that its funding and subsidy obligations were central to the appeal.

The appellant opposed impleadment, arguing that no relief was sought against the State Government and that the Tribunal lacked jurisdiction over it.

The Tribunal also noted that the Commission had sought the State Government’s views on subsidy and had relied on its memorandum dated 4 March 2026 while determining the subsidy payable by the State.

Whether the Department of Power, Government of Punjab, was a necessary or proper party entitled to be impleaded in the appeal because the memorandum of appeal challenged the treatment of State funding and made adverse allegations against the State Government?

Whether the Tribunal could consider or comment upon the State Government’s acts, funding, subsidy position, or stand before the Commission without affording it an opportunity of hearing?

Whether the State Government’s participation should be limited to responding to the specific grounds concerning loss funding, subsidy, and allegations made against it in the memorandum of appeal?

The Tribunal applied Section 111 of the Electricity Act, 2003, under which an aggrieved person may appeal against an order of an Appropriate Commission and the Appellate Tribunal may confirm, modify, or set aside that order.

It recognised that the Tribunal ordinarily exercises jurisdiction over orders of the Regulatory Commission and not directly over a State Government, relying on Ratnagiri Gas and Power Pvt. Ltd. v. Maharashtra State Electricity Distribution Co. Ltd. for that proposition.

However, it applied the principle in A.P. Transco v. Sai Renewable Power (P) Ltd., (2011) 11 SCC 34, that where an appellate decision refers to the acts, conduct, or consequences attributable to a State Government, the State should not be adversely affected without being impleaded and heard.

The Tribunal also relied on the principles of natural justice, fair play, and the right to respond where the court or tribunal is required to examine a party’s conduct or stand.

Although the Tribunal accepted that it had no general jurisdiction to pass orders against the State Government, it distinguished between exercising jurisdiction over the State and hearing the State on matters directly implicated in the appeal.

The Commission’s treatment of the ₹3,581.95 crore loss funding was based on, among other material, the State Government’s memorandum dated 4 March 2026, and the appellant specifically challenged the nature and tariff treatment of that funding.

Further, paragraphs I, J, and K of the memorandum directly concerned the State’s funding, while paragraphs U and V contained adverse allegations regarding the State Government’s motives and conduct in relation to the tariff order.

Since the Tribunal would necessarily have to examine the State’s actions and its stand before the Commission to adjudicate those grounds, principles of natural justice required that the State be given an opportunity to respond.

The State’s non-participation in the Commission’s public consultation process did not preclude impleadment at the appellate stage because the appeal itself placed its conduct and funding decisions in issue.

The impleadment was expressly limited: the State Government could file a reply and make submissions only concerning paragraphs I, J, K, U, and V of the memorandum of appeal, relating to the nature and treatment of loss funding, subsidy, and the allegations made against the State Government.

The appellant was directed to file an amended memo of parties within one week, and the State Government was directed to file its reply within two weeks, followed by the appellant’s rejoinder within one week thereafter.