Supreme Court Restores DVC’s Sinking-Fund Tariff Allowance, Says Tribunal’s Review Defied Binding Precedent

The Central Electricity Regulatory Commission (CERC) determined DVC’s tariff for 2009–2014 under the Electricity Act, 2003, the Damodar Valley Corporation Act, 1948 (DVC Act), and the 2009 Tariff Regulations.

The Appellate Tribunal for Electricity, by order dated 17 May 2019, upheld the tariff treatment of both depreciation and the Sinking Fund contribution, relying in part on this Court’s decision in Bhaskar Shrachi Alloys Ltd. v. Damodar Valley Corporation [(2018) 8 SCC 281].

No appeal was filed against the 2019 order.

On review sought by Maithan Alloys, the Tribunal set it aside, holding that allowing both depreciation on assets acquired with bond proceeds and recovery of Sinking Fund contributions would amount to a double benefit.

DVC appealed to the Supreme Court.

The fourth proviso to Section 14 of the Electricity Act, 2003 preserves the application of DVC Act provisions that are not inconsistent with the Electricity Act; Sections 173 and 174 govern the Act’s overriding effect, while Section 58 of the DVC Act addresses the effect of that Act in relation to other laws.

Sections 37, 38 and 40 of the DVC Act govern allocation of profits, interest, and provision for depreciation, reserves and other funds; Section 40(2) requires provision for those funds before determining net profit.

Regulation 43(2)(iii)–(iv) of the 2009 Tariff Regulations specifically provides for depreciation at the prescribed rate and treats funds established under Section 40 as expenditure recoverable through tariff.

Under State of West Bengal v. Kamal Sengupta, (2008) 8 SCC 612, a review is confined to grounds analogous to Order XLVII Rule 1 CPC: an error must be self-evident, and review cannot be used to correct an allegedly erroneous decision or sit in appeal over it.

The Court held that the statutory scheme and Regulation 43 expressly provide for both depreciation and recovery through tariff of funds established under Section 40 of the DVC Act.

In Bhaskar Shrachi, this Court had already upheld the Tribunal’s reasoning on depreciation and the Sinking Fund; the original 2019 order also addressed the alleged double allowance.

Whether those items resulted in duplication required legal and factual analysis, rather than correction of a self-evident error.

The Tribunal therefore exceeded the limited scope of review by revisiting the merits and contradicting a binding precedent under Article 141.

It imposed costs of ₹2,00,000 on Maithan Alloys and ₹1,50,000 on Steel Authority of India Limited, payable to DVC within one month, failing which interest at 18% per annum would apply.

The appeal was allowed with costs.