SC and HC Judgments Online at MyNation

Judgments of Supreme Court of India and High Courts

State Of Gujarat vs Utility Users Welfare … on 12 April, 2018

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No.14697 of 2015

STATE OF GUJARAT ORS. ….Appellants

versus

UTILITY USERS’ WELFARE
ASSOCIATION ORS. ….Respondents

With
C.A. No.13451/2015

T.C.(C) No.139/2015

T.C.(C) No.138/2015

T.C.(C) No.137/2015

T.C.(C) No.140/2015

C.A. No.3759-3760/2016

T.P.(C) No.974/2016

JUDGMENT

SANJAY KISHAN KAUL, J.

Signature Not Verified

Digitally signed by

1. The Electricity Act, 2003 (hereinafter referred to as the ‘said
DEEPAK MANSUKHANI
Date: 2018.04.13
10:51:48 IST
Reason:

Page 1 of 84
Act’) provides for Central and State Regulatory Commissions. Insofar

as the appointment of the Chairperson of these Commissions is

concerned, the relevant provisions stipulate that the Chairperson “may”

be a Judge of a High Court for the State Commission, a Judge of the

Supreme Court or the Chief Justice of a High Court for the Central

Commission. The common question, which arises for consideration in

these appeals is whether the expression “may” should be read as

“shall”, i.e., whether it is mandatory to have a judicial mind presiding

over these Commissions in the form of a Judge.

2. The Division Bench of the Madras High Court vide judgment

dated 7.2.2014 took the view in respect of the challenge laid to the

selection process of the Chairman of the Tamil Nadu State Electricity

Commission that there was no such mandatory requirement though

there was an option to appoint a Judge.

3. The Division Bench of the Gujarat High Court in a similar case

in respect of the appointment of a Chairperson of the Gujarat State

Regulatory Commission vide impugned order dated 8.10.2015 opined

that it was so mandatory.

4. The aforesaid judicial conflict being before this Court, the

Page 2 of 84
challenges laid in different States were transferred to this Court

through Transfer Petitions vide order dated 3.11.2015.

5. The Union of India, as also some of the State Commissions are

arrayed on the one side to canvas for an interpretation of the provision

as it reads, while on the other side, are consumers, activists and some

affected parties, who canvassed the importance of the State Regulatory

Commissions and the nature of functions it performs, to establish that a

Judge alone should preside over these Commissions.

6. We do not see the necessity of going into individual facts nor

were the pleas advanced on that basis before us. The submissions have

been based on the provisions of the said Act and the legal

pronouncements dealing with the issue of the mandatory requirement

of certain Commissions to be headed by a judicial mind.

The Act:

7. The said Act came into force on 10.6.2003 on publication in the

Gazette. The Act seeks to consolidate the laws relating to generation,

transmission, distribution, trading and use of electricity. The Preamble

to the said Act states as under:

“An Act to consolidate the laws relating to generation,

Page 3 of 84
transmission, distribution, trading and use of electricity and
generally for taking measures conducive to development of
electricity industry, promoting competition therein, protecting
interest of consumers and supply of electricity to all areas,
rationalisation of electricity tariff, ensuring transparent policies
regarding subsidies, promotion of efficient and
environmentally benign policies, constitution of Central
Electricity Authority, Regulatory Commissions and
establishment of Appellate Tribunal and for matters connected
therewith or incidental thereto.”

8. The detailed Statement of Objects Reasons mentions that the

Electricity Supply Industry in India was governed by the Indian

Electricity Act, 1910, the Electricity (Supply) Act, 1948 and the

Electricity Regulatory Commission Act, 1998. The State Electricity

Boards constituted under the Electricity (Supply) Act, 1948 failed to

perform on account of various factors inter alia fixation of appropriate

tariff and the cross-subsidies reached unsustainable levels. The

Electricity Regulatory Commission Act of 1998 was an endeavour to

distance the Government from determination of tariffs by having

independent regulatory commissions.

9. Part X of the said Act deals with matters relating to Regulatory

Commissions – their constitution, powers and functions, etc. Sections

76 77 of the said Act are concerned with the constitution of the

Page 4 of 84
Central Commission and the qualifications for appointment of

Members of the Central Commission. The provisions are similar to the

appointment of the Members and Chairperson of the State

Commissions except to the extent that while the relevant sub-section

provides that the Central Government “may” appoint the Chairperson

from amongst persons who is, or has been a Judge of the Supreme

Court or the Chief Justice of a High Court in the case of the Central

Commission, in the case of State Commissions, the provision states

that the State Government “may” appoint any person as the

Chairperson from amongst persons who is, or has been, a Judge of a

High Court. Section 78 of the said Act deals with the constitution of

the Selection Committee to recommend Members, while the functions

of the Central Commission are specified in Section 79 of the said Act.

Section 80 of the said Act provides for establishment of a Central

Advisory Committee with the Chairperson of the Central Commission

being the ex officio Chairperson of the Central Advisory Committee.

This Committee is to advise the Central Commission on major

questions of policy; quality, continuity and extent of service provided

by the licensees; compliance by the licensees with the conditions and

Page 5 of 84
requirements of their licence; protection of consumer interest;

electricity supply and overall standards of performance by utilities

(Section 81 of the said Act).

10. Section 82 of the said Act is in respect of constitution of State

Commission while Section 84 prescribes the qualifications for

appointment of Chairperson and Members of State Commissions.

Section 85 of the said Act provides for constitution of Selection

Committee to select Members of State Commission and Section 86

prescribes the functions of State Commission. Similar to the Central

Advisory Committee, the State Advisory Committee can be constituted

under Section 87 of the said Act with similarity of functions under

Section 88 of the said Act. The relevant provisions, which will have to

be referred to are being reproduced hereunder:

“Section 84. Qualifications for appointment of Chairperson
and Members of State Commission. – (1) The Chairperson and
the Members of the State Commission shall be persons of
ability, integrity and standing who have adequate knowledge of,
and have shown capacity in, dealing with problems relating to
engineering, finance, commerce, economics, law or
management.

(2) Notwithstanding anything contained in sub-section (1), the
State Government may appoint any person as the Chairperson
from amongst persons who is, or has been, a Judge of a High
Court:

Page 6 of 84

Provided that no appointment under this sub-section shall be
made except after consultation with the Chief Justice of that
High Court.

(3) The Chairperson or any other Member of the State
Commission shall not hold any other office.

(4) The Chairperson shall be the Chief Executive of the State
Commission.

Section 85. Constitution of Selection Committee to select
Members of State Commission. – (1) The State Government
shall, for the purposes of selecting the Members of the State
Commission, constitute a Selection Committee consisting of –

(a) a person who has been a Judge of the High Court….
Chairperson;

(b) the Chief Secretary of the concerned State ….Member;

(c) the Chairperson of the Authority or
the Chairperson of the Central Commission ……. Member:

Provided that nothing contained in this section shall apply to the
appointment of a person as the Chairperson who is or has been a
Judge of the High Court.

(2) The State Government shall, within one month from the date
of occurrence of any vacancy by reason of death, resignation or
removal of the Chairperson or a Member and six months before
the superannuation or end of tenure of the Chairperson or
Member, make a reference to the Selection Committee for filling
up of the vacancy.

(3) The Selection Committee shall finalise the selection of the
Chairperson and Members within three months from the date on
which the reference is made to it.

Page 7 of 84
(4) The Selection Committee shall recommend a panel of two
names for every vacancy referred to it.

(5) Before recommending any person for appointment as the
Chairperson or other Member of the State Commission, the
Selection Committee shall satisfy itself that such person does not
have any financial or other interest which is likely to affect
prejudicially his functions as such Chairperson or Member, as
the case may be.

(6) No appointment of Chairperson or other Member shall be
invalid merely by reason of any vacancy in the Selection
Committee

86. Functions of State Commission.- (1) The State
Commission shall discharge the following functions, namely:–

(a) determine the tariff for generation, supply, transmission and
wheeling of electricity, wholesale, bulk or retail, as the case may
be, within the State:

Provided that where open access has been permitted to a
category of consumers under section 42, the State Commission
shall determine only the wheeling charges and surcharge
thereon, if any, for the said category of consumers;

(b) regulate electricity purchase and procurement process of
distribution licensees including the price at which electricity
shall be procured from the generating companies or licensees or
from other sources through agreements for purchase of power
for distribution and supply within the State;

(c) facilitate intra-State transmission and wheeling of electricity;

(d) issue licences to persons seeking to act as transmission
licensees, distribution licensees and electricity traders with
respect to their operations within the State;

Page 8 of 84

(e) promote cogeneration and generation of electricity from
renewable sources of energy by providing suitable measures for
connectivity with the grid and sale of electricity to any person,
and also specify, for purchase of electricity from such sources, a
percentage of the total consumption of electricity in the area of a
distribution licensee;

(f) adjudicate upon the disputes between the licensees and
generating companies and to refer any dispute for arbitration;

(g) levy fee for the purposes of this Act;

(h) specify State Grid Code consistent with the Grid Code
specified under clause (h) of sub-section (1) of section 79;

(i) specify or enforce standards with respect to quality,
continuity and reliability of service by licensees;

(j) fix the trading margin in the intra-State trading of electricity,
if considered, necessary;

(k) discharge such other functions as may be assigned to it under
this Act.

(2) The State Commission shall advise the State Government on
all or any of the following matters, namely:–

(i) promotion of competition, efficiency and economy in
activities of the electricity industry;

(ii) promotion of investment in electricity industry;

(iii) reorganisation and restructuring of electricity industry in the
State;

Page 9 of 84

(iv) matters concerning generation, transmission, distribution
and trading of electricity or any other matter referred to the State
Commission by that Government:

(3) The State Commission shall ensure transparency while
exercising its powers and discharging its functions.

(4) In discharge of its functions, the State Commission shall be
guided by the National Electricity Policy, National Electricity
Plan and tariff policy published under section 3.”

11. We may note a distinction between the Members of the Central

Commission and the State Commissions inasmuch as Section 77

dealing with the appointment of Members of Central Commission

provides as under:

“77. Qualifications for appointment of Members of Central
Commission.- (1) The Chairperson and the Members of the
Central Commission shall be persons having adequate
knowledge of, or experience in, or shown capacity in, dealing
with, problems relating to engineering, law, economics,
commerce, finance or management and shall be appointed in
the following manner, namely:–

(a) one person having qualifications and experience in the field
of engineering with specialisation in generation, transmission
or distribution of electricity;

(b) one person having qualifications and experience in the field
of finance;

(c) two persons having qualifications and experience in the
field of economics, commerce, law or management:

Provided that not more than one Member shall be appointed

Page 10 of 84
under the same category under clause (c).”

12. However, for appointment of a Member for State Commission,

there is no such limitation on the number of Members from a particular

field though it does state that such Members should have adequate

knowledge and shown capacity in, dealing with problems relating to

engineering, law, economics, commerce, finance or management. Sub-

section (2) of both Sections 77 and Section 84 are similar except for

the person to be appointed. Thus, irrespective of the provisions in sub-

section (1) of Section 84 stipulating the fields from which the Members

will have to be appointed, sub-section (2) begins with a

‘notwithstanding’ clause stating that the State Government “may”

appoint any person as the Chairperson from amongst those, who have

been, or is a Judge of the High Court. The proviso to sub-section (2)

stipulates that no appointment under sub-section (2) shall be made

except after consultation with the Chief Justice of that High Court.

This, in fact, recognizes the pre-eminence and requirement of

consultation with the Chief Justice of the High Court in case of

appointment of a Judge as the Chairperson of a State Commission. For

the Central Commission, the consultation is with the Chief Justice of

Page 11 of 84
India, because the appointment envisaged is of a Judge of the Supreme

Court or the Chief Justice of a High Court.

13. The Selection Committee under Section 85 of the said Act for

selecting Members of the State Commission is to be headed by a Judge

of the High Court but once again the proviso states that this would not

be applicable to the appointment of a person as the Chairperson who is

or has been a Judge of the High Court. The effect of this is that, in

case the person to be appointed as Chairperson to the State

Commission is a Judge, necessary consultation will have to be with the

Chief Justice of the High Court as per the proviso to Section 84(2).

14. It may be noticed that under Section 78 of the said Act, insofar

as the Selection Committee to recommend Members of the Central

Commission is concerned, the Chairperson of the Selection Committee

has to be a Member of the Planning Commission in-charge of the

energy sector. Once again, the proviso to Section 78 makes an

exception to the appointment of a person as a Chairperson of the

Central Commission, who is, or has been a Judge of the Supreme Court

or the Chief Justice of the High Court, as in that eventuality, the Chief

Justice of India has to be consulted.

Page 12 of 84

15. The Appellate Tribunal for Electricity is provided in Part XI of

the said Act. Section 111 of the said Act deals with the appeal to

Appellate Tribunal from orders made by an adjudicating officer under

the said Act, or the Appropriate Commission under the said Act.

Section 112 of the said Act deals with the composition of the Appellate

Tribunal. The Tribunal sits in Benches with at least one judicial

member and one technical member. Section 113 of the said Act

provides for qualifications for appointment of Chairperson and

Member of the Appellate Tribunal. The Chairperson of the Appellate

Tribunal has to be someone, who is, or has been a Judge of the

Supreme Court or the Chief Justice of a High Court. Thus, there is no

quibble over the proposition that there is a senior judicial mind heading

the Appellate Tribunal and that every Bench of the Appellate Tribunal

mandatorily has to have at least one judicial member and one technical

member.

The Attorney General’s Argument:

16. The learned Attorney General, appearing on behalf of the Union

of India and the State of Gujarat, took us through the provisions and

Page 13 of 84
the scheme of the said Act and referred to the judicial pronouncements.

He canvassed for the reading of the statute as it stands and, thus,

pleaded that where the legislature in its wisdom had used the word

“may” consciously, there was no need to read it as “shall”. Learned

Attorney General sought to emphasise that the functions of both the

Commissions are more technical in nature and really do not have much

of an adjudicatory element requiring a legal mind. This is apart from

the fact that it is not as if a non-lawyer or non-Judge is incapable of

appreciating a legal point, as even arbitrators are appointed from these

fields when the dispute is more technical in character. The primary

function is determination of tariff, regulating electricity purchase and

procurement process of distribution licensees, facilitating intra-State

transmission, issuance of license, promotion of cogeneration and

generation of electricity from renewable sources of energy, levying fee,

etc. Out of the 11 functions enlisted of a State Commission under

Section 86 of the said Act and for the Central Commission under

Section 79 of the said Act, adjudication of disputes between licensees

and generating companies and to refer any dispute for arbitration is the

only one, which can be said to have any adjudicatory flavor. In fact,

Page 14 of 84
the argument advanced was that the nature of work would not be

something which the Judges would be comfortable with, being highly

technical in nature, nor are Judges trained for such technical matters.

In the context of the functions and duties of the authority, relevant

provisions under the said Act were referred to. Section 16 requires an

Appropriate Commission to specify conditions of license. Section 45

of the said Act makes provision for power to recover charges, Section

46 of the said Act makes provision for power to recover expenditure.

Section 50 provides for the State Commission to specify an Electricity

Supply Code for recovery, billing, etc., while Section 57 empowers the

Appropriate Commission to specify standards of performance of a

licensee. Section 61 deals with tariff regulations and Section 66 deals

with the development of a market in power, guided by the National

Electricity Policy. Looking to all these functions, it was canvassed that

a purposive interpretation should be given to the expression used, for

interpreting the provisions of appointment of the Chairperson. Mindful

of the technical nature of functions as they are, it was argued that a

Judge was not required and that this was apparent from the fact that

even at present, all State Commissions are headed by non-Judges,

Page 15 of 84
except one. The provision was stated to be only felicitous in character,

as it gives an option to appoint a Judge. It was argued that there could

be a possibility of a Judge, rarely, as it may be, being an expert in this

field who could be so appointed. However, if a Judge is to be

appointed, the process of appointment is different by reason of his/her

having held a constitutional post and thus, the Selection Committee

constituted would not be recommending the appointment, but the

consultation would have to be with the Chief Justice concerned.

17. Learned Attorney General then proceeded to refer to the

judgment of this Court in Tamil Nadu Generation and Distribution

Corporation Limited v. PPN Power Generating Company Private

Limited1 wherein this very Act was under consideration. The matter

related to inter alia the jurisdiction of the State Commission in Tamil

Nadu to either adjudicate a dispute or refer it to arbitration under

Section 86(1)(f) of the said Act, which was held to be required to be

exercised reasonably and not arbitrarily. In para 55, the Court gave its

imprimatur to the submission advanced on behalf of the appellant that

adjudicatory functions generally ought not to be conducted by the State

1 (2014) 11 SCC 53

Page 16 of 84
Commission in the absence of a judicial member, especially in relation

to disputes which are not fairly relative to tariff fixation or the advisory

and recommendatory functions of the State Commission. In the said

context, a reference was also made to the Constitution Bench judgment

of this Court in Kihoto Hollohan v. Zachillhu2 which examined the

nature of the power of the Speaker or the chairman under Para 6(1) of

the Tenth Schedule of the Constitution of India. The finding recorded

is that the State Commission in deciding a lis relating to the generating

company was discharging judicial functions and exercising the judicial

powers of a far reaching effect and must therefore have the essential

‘trappings of the Court’ for which it was said “….This can only be

achieved by the presence of one or more judicial members in the State

Commission which is called upon to decide complicated contractual or

civil issues which would normally have been decided by a civil

court…” It was also observed that the decisions of the State

Commission had far reaching consequences and were final and binding

between the parties subject, of course, to judicial review.

18. The Bench thereafter proceeds to examine Section 84(2) of the

2 1992 Supp (2) SCC 651

Page 17 of 84
said Act. It was observed that Section 84(2) “enables” the State

Government to appoint any person as the Chairperson from amongst

persons who is, or has been, a Judge of a High Court, and that such

appointment shall be made after consultation with the Chief Justice of

the High Court. Thus, where complicated legal issues have been

raised, it was observed, the presence of one or more judicial members

in the State Commission would become necessary. No judicial

member had been appointed in the Tamil Nadu State Commission and,

thus, the authorities concerned were required to look into the

desirability and feasibility for making appointments, of any person, as

the Chairperson from amongst persons, who is or has been a Judge of a

High Court.

19. The provisions of Section 113 of the said Act were referred to, to

conclude that the legislature was aware that the functions performed by

the State Commission as well as the appellate tribunal are judicial in

nature and, thus, the appellate authority has the trappings of the Court.

This essential feature had not been made mandatory under Section 84

of the said Act. In the opinion of the Bench, it would be “advisable”

for the State Government to exercise the enabling power under Section

Page 18 of 84
84(2) of the said Act to appoint a person, who is, or has been a Judge

of a High Court as Chairperson of the State Commission. The

aforesaid discussions were referred to by the learned Attorney General

to canvas that the question involved in the case really did not pertain to

Section 84(2) of the said Act but certain observations had been made,

nonetheless. The Tribunals envisaged under Part XIV A of the

Constitution would stand on a different footing and therefore cannot be

compared with the Commission in question. In any case, the

observations itself show that the Bench was conscious of the

limitations of the said Act and, thus, only rendered an advise to the

State Government, rather than issue a direction. In the alternative, at

best, the discussion was with reference to the desirability and

feasibility of at least one member having legal knowledge rather than a

mandatory requirement of a Chairman being a Judge.

20. Next, referring to the judgment in Pareena Swarup v. Union of

India3, it was emphasized that the nature of functions of a Commission

under the said Act cannot be equated to the functions being performed

by a Tribunal under the Prevention of Money Laundering Act, 2002, an

3 (2008) 14 SCC 107

Page 19 of 84
adjudicatory function. The observations were made in the context of

tribunals being created, which were seeking to exercise functions

earlier performed by regular judicial forums. The functions, now

vested with the Appropriate Commission under the said Act, were

really being performed under the Electricity Regulatory Commission

Act.

21. The aforesaid judicial pronouncements, it was, thus, canvassed,

could not have been utilized by the Gujarat High Court to come to a

conclusion that the post of the Chairperson of the State Commission

mandatorily has to be occupied by a Judge, though it could be occupied

by a Judge.

22. We may, however, note that the view adopted by the Gujarat

High Court is also based on the nature of powers vested with the

Appropriate Commission under Sections 94, 95 96 of the said Act,

which are as under:

“94. Powers of Appropriate Commission.- (1) The Appropriate
Commission shall, for the purposes of any inquiry or
proceedings under this Act, have the same powers as are vested
in a civil court under the Code of Civil Procedure, 1908 (5 of
1908) in respect of the following matters, namely:–

(a) summoning and enforcing the attendance of any person and
examining him on oath;

Page 20 of 84

(b) discovery and production of any document or other material
object producible as evidence;

(c) receiving evidence on affidavits;

(d) requisitioning of any public record;

(e) issuing commission for the examination of witnesses;

(f) reviewing its decisions, directions and orders;

(g) any other matter which may be prescribed.

(2) The Appropriate Commission shall have the powers to pass
such interim order in any proceeding, hearing or matter before
the Appropriate Commission, as that Commission may consider
appropriate.

(3) The Appropriate Commission may authorise any person, as it
deems fit, to represent the interest of the consumers in the
proceedings before it.

95. Proceedings before Commission.- All proceedings before
the Appropriate Commission shall be deemed to be judicial
proceedings within the meaning of sections 193 and 228 of the
Indian Penal Code and the Appropriate Commission shall be
deemed to be a civil court for the purposes of sections 345 and
346 of the Code of Criminal Procedure, 1973 (2 of 1974).

96. Powers of entry and seizure.- The Appropriate Commission
or any officer, not below the rank of a Gazetted Officer specially
authorised in this behalf by the Commission, may enter any
building or place where the Commission has reason to believe
that any document relating to the subject matter of the inquiry
may be found, and may seize any such document or take extracts
or copies there from subject to the provisions of section 100 of
the Code of Criminal Procedure, 1973, insofar as it may be
applicable.”

Page 21 of 84

23. The conclusion in favour of an Appropriate Commission being

headed by a Judge in the context of the Commission having the

‘trappings of a Court’ is drawn on the basis of the aforesaid provisions,

apart from the provisions relating to the appointment of Members and

the Chairperson.

C.A. No.13451/2015 (stand of the State of Tamil Nadu):

24. The State Government, having succeeded before the Madras

High Court as per the impugned judgment dated 7.2.2014, supported

the view taken by the Madras Bench and adopted the arguments of the

learned Attorney General. Mr. Shekhar Naphade, learned Senior

Advocate appearing for the State of Tamil Nadu pleaded that the whole

scheme of the said Act ought to be taken into consideration and that

disproportionate importance was being given to sub-section (2) of

Section 84 for appointment of a Judge as a Chairperson, not realizing

the variety of functions performed by the Commission, of which the

adjudicatory functions were only a small percentage.

C.A. No.14697/2015 (plea of the Gujarat State Regulatory
Commission):

Page 22 of 84

25. Mr. Jayant Bhushan, learned Senior Advocate appearing for the

Gujarat State Electricity Regulatory Commission, sought to pose a

question, i.e., where does the judgment in Tamil Nadu Generation and

Distribution Corporation Limited4 make it mandatory for a Judge to

be the Chairperson? The very wordings were said to be

recommendatory in character, which had already been read out by the

learned Attorney General. In the alternative, it was pleaded that the

observations made were really obiter dicta, as the issue of appointment

of the Chairperson of the State Commission was not the lis before the

Court in that matter.

26. He then posed a question: – when the Act and the judgment does

not make the appointment of a Judge as the Chairperson mandatory,

then is there any other material, which can be said to make the

appointment of the Chairperson as a Judge mandatory? In this behalf

he submitted that the opposite side could only fall back on Madras

Bar Association v. Union of India Anr. 5 (MJ-II). The said judgment

dealt with the creation of the National Tax Tribunal under the National

Tax Tribunal Act, 2005. The constitution of the Tribunal was held to

4 supra
5 (2014) 10 SCC 1

Page 23 of 84
be one for transfer of the appellate jurisdiction under Tax Laws vested

in the High Courts. The majority held that the Act could not pass the

test of constitutionality, on account of inter alia, the provisions relating

to the appointment of the Chairpersons and Members of the Tribunals.

In the said case, reference was made to the earlier Constitution Bench

judgment in the Union of India v. Madras Bar Association 6 (MJ-I),

crystallizing the legal position while transferring adjudicatory

functions from Courts to Tribunals. It was observed that such

Tribunals should possess the same independence, security and capacity

as the courts which the Tribunals are mandated to substitute and thus,

Members of the Tribunals discharging judicial functions could only be

drawn from sources possessed of expertise in law and competent to

discharge judicial functions. Technical members could also be

appointed where such technical expertise is essential. But where the

adjudicatory process transferred to the Tribunal did not require any

specialized skills, knowledge or expertise, the provision for

appointment of technical Member would constitute a clear case of

delusion and encroachment upon the independence of the judiciary,

and the “rule of law.” On the stature of Members, it was observed that

6 (2010) 11 SCC 1

Page 24 of 84
the same would depend on the jurisdiction transferred, i.e., if the

jurisdiction of the High Court was transferred to the Tribunals, the

stature of the members of the newly constituted tribunal, should be

possessed of qualifications akin to the Judges of the High Court. The

same would be the position qua District Judges appointment. Such a

process of judicial review, in Madras Bar Association v. Union of

India7 (MJ-II), was held to be a part of the basic structure of the

Constitution.

27. In the context of the functions to be carried out under the said

Act, it was observed that the present case was not one where the

powers of judicial review which were vested in a judicial forum was

sought to be transferred. The importance of judicial review and its

sanctity was maintained by the composition of the Appellate Tribunal,

which would hear appeals from the orders of the Commission. The

functions of the Commission were canvassed to be one of technical

nature largely, and thus, would not require a Judge to head the

Commission. In the alternative, it was stated that, at best, the

requirement of a mandatory legal Member may be read into the

7 supra

Page 25 of 84
provisions, though the explicit terms of the statute do not say so.

28. Learned counsel took us through the provisions of Section 85 of

the said Act to contend that the reference to the Chairperson under sub-

sections (2), (3), (5) (6) of Section 85 would be made otiose, as in

that eventuality, the Selection Committee would never be called upon

to appoint a Chairperson. A Judge could be appointed as the

Chairperson only through the alternative route of Section 84(2) read

with the proviso thereto.

29. Learned counsel also referred to Tamil Nadu Generation and

Distribution Corporation Limited8, more specifically to para 25, which

recorded the submission of the counsel for the appellant therein to the

effect that the State Commission cannot be an adjudicatory body as it

does not have the trappings of the Court, which would normally be

manned exclusively by the Judges. The plea was that under Section 84

of the said Act, there is no requirement for the Chairperson or the

Member of a State Commission to be a Judge of a High Court. No

such appointment had actually been made in that case nor did the

Commission have a judicial member and, thus, the same was contrary

to the Constitution Bench judgment of this Court in Madras Bar

8 supra

Page 26 of 84
Association9 (MJ-I). He, thus, submitted that it is in the context of this

argument that what was observed by the Bench in that judgment would

have to be construed and nothing more than that. It is this argument,

which has been dealt with when the observations relied upon in the

impugned order were referred to. This is stated to be quite apparent

even from para 55, which records the submissions of the then counsel

for the appellant in Tamil Nadu Generation and Distribution

Corporation Limited10 and what was accepted by the Court in para 59

of the judgment, i.e., adjudicatory functions generally ought not to be

conducted by the State Commission in the absence of a Judicial

Member, which are not fairly relative to tariff fixation or the advisory

and recommendatory functions of the State Commission.

30. Learned Senior Advocate next turned to Section 86(1)(f) of the

said Act and referred to the judgment in Gujarat Urja Vikas Nigam

Ltd. v. Essar Power Ltd.11 (GJ-I) to submit that the expression ‘and’,

used in Sub-Section 86(1)(f) has already been read as ‘or’. For clarity,

the sub-section is reproduced hereunder:

“86. Functions of State Commission.- (1) The State
Commission shall discharge the following functions, namely:–

9 supra
10 supra
11 (2008) 4 SCC 755

Page 27 of 84
xxxx xxxx xxxx xxxx xxxx

(f) adjudicate upon the disputes between the licensees and
generating companies and to refer any dispute for arbitration;”

(Emphasis supplied)

31. Therefore, the functions of the State Commission in respect of

the aforesaid clause refers to adjudication upon the disputes between

the licensees and generating companies as also to the function of

reference of any dispute for arbitration. Our attention was invited to

para 40 in Tamil Nadu Generation and Distribution Corporation

Limited12 to contend that there is no requirement that an arbitrator

should be a judicial person. A submission was also made that the data

collected in respect of the functioning of the Gujarat State Commission

showed that the adjudicatory functions were not more than 10 per cent.

A large number of functions were of tariff fixation, which was over 30

per cent, while the regulatory functions were 59 per cent and grant of

licenses were a fraction of a percentage.

32. The emphasis on the reading of the judgment in Union of India

v. Madras Bar Association13 (MJ-I), it was contended, is on the

12 supra
13 supra

Page 28 of 84
shifting of the adjudicatory functions from the High Courts to the

Tribunals but when, as in the present case, the State Commission has

not replaced the functioning of the High Court, the same would have

no application. For example, the Electricity (Supply) Act, 1948, dealt

with the issue of reference to arbitration in Section 76(2) of that Act.

There was no question of any judicial mind. The Electricity

Regulatory Commission Act, 1998 provided for an appeal to the High

Court in certain cases from the order of the State Commission.

Therefore, the appellate authority constituted as a replacement for the

appeal before the High Court is manned by a sitting or retired Supreme

Court Judge or the Chief Justice of the High Court. Learned counsel

also referred to the epilogue in Gujarat Urja Vikas Nigam Ltd. v.

Essar Power Ltd.14(GJ-II), which dealt with the vital issue of

composition and functioning of Tribunals and statutory framework

thereof. In the context of the observations in Madras Bar Association

v. Union of India Anr.15 (MJ-II), it was observed in para 33 that the

law laid down by this Court may call for review of composition of

Tribunals under the Electricity Act or other corresponding statutes.

This was so as an appeal to this Court on questions of law or
14 (2016) 9 SCC 103
15 supra

Page 29 of 84
substantial questions of law show that Tribunals deal with such

questions or substantial questions, and that the direct appeals to this

Court has the result of denial of access to the High Court. Such

Tribunals, thus, become a substitute for the High Courts, without the

manner of appointment to such Tribunals being the same as the manner

of appointment of High Court Judges.

33. Lastly, learned counsel referred to Uttar Pradesh Power

Corporation Limited v. National Thermal Power Corporation

Limited Ors.16 where observations were made qua the function of

the Central Commission constituted under Section 3 of the Electricity

Regulatory Commissions Act, 1998 as an expert body, which had been

entrusted with the task of determination of tariff, which involves highly

technical procedure requiring not only working knowledge of law but

also of engineering, finance, commerce, economics and management.

Thus, it was held that the issues with regard to determination of tariff

should be left to the expert body and ordinarily the High Court and

even this Court should not interfere with the determination of tariff.

34. Mr. Jayant Bhushan, learned Senior Advocate sought to

16 (2011) 12 SCC 400

Page 30 of 84
crystallize his interpretation of the Act and the challenge to the

impugned judgment of the Gujarat High Court on a four point basis:

i. The constitution of the Selection Committee for Members

under Section 85 is not applicable to a Judge for which there is a

separate channel under Section 84(2). Thus, to the extent that

Section 85 referred to a Chairperson, that portion would be made

otiose, if a Judge alone is to be appointed as the Chairperson.
ii. The appointment of a Chairperson under Section 84(2) of the

said Act is an enabling provision and not a mandatory provision.
iii. The observations in Tamil Nadu Generation and

Distribution Corporation Limited17, if read to give a binding

direction for the Chairman being a Judge, would then be obiter

as that was not the issue before the Court.

iv. The necessary and mandatory requirement of having a Judge

to head a Tribunal is only where the shifting of the adjudicatory

function from the High Court to the Tribunals are envisaged.

35. Now turning to the other point of view and the various entities,

which canvassed for the Chairperson to be mandatorily a Judge of the

High Court :

Stand of Interveners (National Solar Energy Federation of India) in
Civil Appeal No.13451/2015:

17 supra

Page 31 of 84

36. Mr. Sajan Poovayya, Senior Advocate appearing for the

aforesaid entity sought to support the Gujarat line of reasoning and

submitted that there should be, at least, one judicial Member in the

Commission, who should be the Chairman. He seeks to support this

view by reason of the nature of powers vested in the Chairman of the

Commission and has referred to Section 92, which reads as under:

“92. Proceedings of Appropriate Commission.- (1) The
Appropriate Commission shall meet at the head office or any
other place at such time as the Chairperson may direct, and
shall observe such rules of procedure in regard to the
transaction of business at its meetings (including the quorum at
its meetings) as it may specify.

(2) The Chairperson, or if he is unable to attend a meeting of
the Appropriate Commission, any other Member nominated by
the Chairperson in this behalf and, in the absence of such
nomination or where there is no Chairperson, any Member
chosen by the Members present from amongst themselves,
shall preside at the meeting.

(3) All questions which come up before any meeting of the
Appropriate Commission shall be decided by a majority of
votes of the Members present and voting, and in the event of
an equality of votes, the Chairperson or in his absence, the
person presiding shall have a second or casting vote.

(4) Save as otherwise provided in sub-section (3), every
Member shall have one vote.

(5) All orders and decisions of the Appropriate Commission
shall be authenticated by its Secretary or any other officer of

Page 32 of 84
the Commission duly authorised by the Chairperson in this
behalf.”

37. Thus, as per sub-section (2) of Section 92, the Chairperson has a

right to nominate a member who would chair the meeting in his

absence and as per sub-section (3), the Chairperson has a casting vote.

This, he contended was vital to the adjudicatory process, which is by

majority and, thus, the necessity of having a judicial Member as a

Chairperson apart from the aspect of power wielded by the

Commission from Sections 94 to 96 of the said Act.

Stand of Madurai Power Corporation Private Limited:

38. Mr. Mohan Parasaran, learned Senior Advocate appearing for the

aforesaid intervener referred to Section 84(1) of the said Act to contend

that where reference is made to a person of law, that cannot be a

reference to a judicial Member. It is only in Section 84(2) that there is

a specific reference to a person, who is or has been a Judge of the High

Court to be a Chairperson. Thus, the presence of a man of law would

be no substitute to the requirement of a Judge who would bring a

judicial thought process to the decision making. In this behalf he

referred to the observations in Madras Bar Association v. Union of

Page 33 of 84
India Anr.18 (MJ-II). We may, however, add at this stage itself that

these are the same observations, which relate to the ground situation

where the adjudicatory functions of the Court are shifted to the

Tribunal.

39. He also contended that para 59 of the Tamil Nadu Generation

and Distribution Corporation Limited19only records the submission of

the then counsel for the appellant while the ratio is contained in para

60. The ratio speaks of the enabling character of Section 84(2) of the

said Act to appoint a Judge and in that eventuality the appointment is

to be made after the consultation with the Chief Justice of the High

Court. In this context, he submitted that the ratio of a judgment is

something that has to be culled out on certain established principles

and not from every line of every observation. In this context he

referred to the judgment in Natural Resources Allocation In re

Special Reference No.1 of 201220. Article 141 of the Constitution laid

down that “law declared” by the Supreme Court is binding upon all

Courts within the territory of India and, thus, it was held that “ “law

declared” has to be construed as a principle of law that emanates from
18 supra
19 supra
20 (2012) 10 SCC 1

Page 34 of 84
a judgment or an interpretation of a law or judgment by the Supreme

Court, upon which, the case is decided……the “law declared” is the

principle culled out on the reading of a judgment as a whole in light of

the questions raised, upon which the case is decided.” What is binding

upon courts, “is the ratio decidendi of the judgment. It is the essence

of a decision and the principle upon which the case is decided which

has to be ascertained in relation to the subject-matter of the decision.”

Stand of the Madras Bar Association (Original Petitioner) in Civil
Appeal No.13451/2015

40. The challenge to the impugned judgment of the Madras High

Court in that matter was laid by Mr. Arvind Datar, learned Senior

Advocate. He sought to contend that the year 1991 saw a paradigm

shift in the economic functioning in the country where State functions

were opened up to private players. This was not supposed to be

unregulated and, thus, the Parliament provided a regulatory body. By

the time the said Act was enacted in 2003, the Parliament had become

wiser and the introduction of the requirement of a Judge to head the

regulatory commission was, thus, introduced in this Act.

41. Turning to the specific provisions of the Act, he referred to

Page 35 of 84
Section 82(4) of the said Act, which provides that a State Commission

would consist of not more than three members including the

Chairperson. Section 2(43), defines a Member to include a

Chairperson and reads as under:

“2. Definitions.- In this Act, unless the context otherwise
requires,–

xxxx xxxx xxxx xxxx xxxx

(43) “Member” means the Member of the Appropriate
Commission or Authority or Joint Commission, or the Appellate
Tribunal, as the case may be, and includes the Chairperson of
such Commission or Authority or Appellate Tribunal;”

42. In the sittings of the Commissions, disputes emanating from

Section 86(1)(f) of the said Act being adjudicated upon are categorized

as DRP (Dispute Resolution Petition) cases. Tariff fixation is, of

course, not adjudicatory. He submitted that Section 4 of The Telecom

Regulatory Authority of India Act, 1997 was similar to Section 84(2)

of the said Act, but there was no provision for a Judge to be appointed.

Similar was stated to be the position of Section 4 of the Securities and

Exchange Board of India Act, 1992. On the other hand, the specific

provision made in Section 84(2) of the said Act has to be read in the

context of the objects and reasons for the enactment, i.e., distancing the

regulating body from the Government.

Page 36 of 84

43. Learned Senior Counsel referred to the Electricity Regulatory

Commission Act, 1998 to submit that Section 17 of that Act was the

earlier avatar of Section 84 of the said Act, while Section 18 of that Act

was the earlier avatar of Section 85 of the said Act. A reference was

also made to The Petroleum and Natural Gas Regulatory Board Act,

2006, more specifically to Section 3(3) of that Act. The tariff

regulatory functions are determined as per Section 62 and 64 of the

said Act. On the prevalent provisions under different Acts, it was

submitted that the constitution of the Competition Commission of

India came to be examined in Brahm Dutt v. Union of India 21. The

argument was similar, i.e., the functions of the Commission being more

of a judicial body having adjudicatory powers, the right to appoint a

judicial member of the commission should rest with the Chief Justice

of India or his nominee and further the Chairman of the commission

necessarily has to be a retired Chief Justice or Judge of the Supreme

Court or the High Court. The contention was that the Chairman of the

Commission had to be a person connected with the judiciary picked for

the job by the Head of the Judiciary and should not be a bureaucrat or

21 (2005) 2 SCC 431

Page 37 of 84
other person appointed by the Executive without reference to the Head

of the Judiciary. In this context, the Supreme Court observed in para 6

that if an expert body is to be created, as submitted on behalf of the

Union of India consistent with what is said to be the international

practice, it may be appropriate to consider the creation of two separate

bodies – one with the expertise, i.e., advisory and regulatory and the

other adjudicatory. This is followed up by an appellate body as

contemplated, which could go a long way in meeting the challenge

sought to be raised in the writ petition. Insofar as the working of the

Commission was concerned, it was observed that it had a number of

adjudicatory functions as well.

44. In Gujarat Urja Vikas Nigam Ltd.22 (GJ-I), the implied conflict

between Section 86(1)(f) of the said Act and Section 11 of the

Arbitration Conciliation Act, 1996, was reconciled and applying the

harmonious construction principles (Mimansa principles) it was

observed that where there is a dispute between a licensee and the

generating company, only the State Commission or the Central

Commission or arbitrator nominated by it could resolve such disputes,

22 supra

Page 38 of 84
whereas all other disputes (unless there is some other provision in the

Electricity Act, 2003) would be decided in accordance with Section 11

of the Arbitration Conciliation Act, 1996. This was stated to be also

in consonance with Section 158 of the said Act in Part XVI dealing

with Dispute Resolution where arbitration was provided for in terms of

the Arbitration Conciliation Act,1996.

45. Learned Senior Counsel sought to point out that no Judge had

ever been appointed as the Chairperson. The mandate of Section 85(2)

of the said Act, in fact, required that six months prior to the

superannuation or end of the tenure of the Chairperson or Member, a

reference should be made to the Selection Committee to fill up the

vacancy. The expression “may”, it was submitted should be read as

“shall” in Section 84 of the said Act. The alternative submission

advanced was that when a vacancy of the Chairperson is to arise, it

should be intimated to the Chief Justice of the High Court to confirm

whether any Judge was available or not. In any case, at least, one legal

mind should be there, who has no baggage or past connection with the

special area in question directly. This was more so as apart from

Section 86(1)(f), it was submitted that Section 33(4) deals with

Page 39 of 84
compliance of directions, if any dispute arises with reference to the

quality of electricity or safe, secure and integrated operation of the

State grid and Section 9(2) proviso, which is in reference to

construction of a captive generating plant and the maintenance and

operation of the same being entitled to open access for the purpose of

carrying the electricity from the captive generating plant to the

destination of its use, with the proviso making such open access

subject to availability of adequate transmission facility to be

determined by the Central Transmission Utility or the State

Transmission Utility. As per the second proviso, any dispute regarding

the availability of transmission facility has to be referred to the

Appropriate Commission for adjudication. It is submitted that these

are two examples clearly requiring an adjudicatory bend of mind.

T.C.(C) No.139/2015

46. This petition has been filed by a Senior Advocate of the Madras

high Court against the exercise of suo moto power by the Commission

in respect of a tariff hike and in that process sought to challenge the

appointment of the Chairperson and seeks to canvass that there exists a

mandatory requirement for him to be a retired Judge of a High Court.

Page 40 of 84
T.C.(C) No.138/2015

47. This petition filed before the Madras High Court is, once again,

by an Advocate, purportedly in public interest. Apart from the

fundamental issue raised of a Judge to be appointed as the Chairman of

the State Commission, like in the previous Transfer Petition, certain

notifications have also been assailed. The Tamil Nadu Government

had published a Notification dated 26.9.2013, constituting a three

Member Selection Committee for selection of the Members of the

State Commission in terms of Section 85 of the said Act. This

selection process was required to be completed in three months and

had to recommend, at least, two names for the post of Members. The

Committee recommended the name of Mr. G. Rajagopal (respondent

No.7) on 27.12.2013. This appointment is specifically assailed on the

ground that he was still working as Director (Finance), TANGEDCO

when his name was recommended by the Selection Committee, and

that Mr. Rajagopal opted for voluntary retirement after his name had

been recommended by the Selection Committee. The Notification of

his appointment was issued on 31.12.2013 whereafter he assumed

office on 9.1.2014.

Page 41 of 84

48. The impugned decision of the Madras High Court opining that

the Chairperson need not be a High Court Judge was rendered on

7.2.2014.

49. Another Notification dated 27.2.2014 was published constituting

a Selection Committee for selecting a person for the post of the

Chairperson. Mr. S. Akshayakumar (respondent No.6) retired from the

post of the Managing Director of TANTRANSCO on 31.5.2014 and

was appointed as the Chairperson of the State Commission vide

Notification dated 6.6.2014, assuming charge on 9.6.2014.

50. On 12.12.2014, the State Commission consisting of these two

persons as Member and Chairman and Mr. S. Nagalsamy, passed a

tariff order permitting a tariff hike by TANGEDCO by a majority of

2:1 with respondent Nos.6 7 concurring on the issue of tariff hike

while the third Member (Mr. Nagalsamy) was dissenting. The dissent

was on the legality of the suo moto tariff order.

51. We have recited these facts only to bring on focus that the

grievance is only with the tariff order, but under the garb of the same,

the appointment of respondent Nos.6 7 is now sought to be assailed

on the ground that the said two persons could not be really categorized

Page 42 of 84
as not having any financial or other interest, which is likely to

prejudice their functioning as Chairperson and Member in terms of

Section 85(5) of the said Act. The two companies TANGEDCO and

TANTRANSCO were established for power generation and

transmission of power respectively by restructuring the Tamil Nadu

Electricity Board in compliance of Section 131 of the said Act and are

State owned companies.

52. The original petitioner seeks to impute bias against these two

persons because of the post they have held. Learned counsel appearing

on behalf of the petitioner referred to the judgment of this Court in

Rajesh Awasthi v. Nand Lal Jaiswal23 wherein in the process of

assailing an appointment to the Commission, Section 85(5) was

analysed. It was observed that the power under the said sub-section (5)

was to be exercised by the Selection Committee and not by the

Government. Thus, whether the persons named by the panel have any

financial or other interest, which is likely to affect their functioning as

Chairperson was a matter which depended upon the satisfaction of the

Selection Committee before recommending it to the State Government.

In the facts of the case, it was found that the concerned person was

23 (2013) 1 SCC 501

Page 43 of 84
working as Joint President of the JP Power Ventures Limited at the

time of selection, hence he had financial and other interest in the

company, which would prejudicially affect his functions as the

Chairperson of the Commission. The judgment of this Court in Mor

Modern Cooperative Transport Society Ltd. v. Financial

Commissioner Secretary to Govt. of Haryana and Anr. 24 was also

referred to. The provision in question was Section 68(2) of the Motor

Vehicles Act, 1988. Section 68 of the Motor Vehicles Act, 1988

empowered the State Government to constitute a State Transport

Authority and Regional Transport Authorities to exercise powers and

functions specified in Chapter V. Section 68(2) put a restriction that no

person who has a financial interest whether as proprietor, employee or

otherwise in any transport undertaking was to be appointed and in case

such financial interest was acquired post appointment, the person was

required to give notice in writing to the State Government of

acquisition of such interest and would vacate office. The Transport

Commissioner and Traffic Manager working in the Office of the

General Manager of the Haryana Roadways, a State Undertaking, were

held to fall within the mischief of sub-section (2) of Section 68 of that

24 (2002) 6 SCC 269

Page 44 of 84
Act. The nature of “financial interest” as contemplated by the said

sub-section was examined in the narrower sense and it was held to

imply direct personal benefit of an economic nature while in the wider

sense it would include direct or indirect interest that a person has in

relation to the finances of an undertaking. Such an interest was held to

include the interest of an official who manages the finances of the

undertaking or on whom rests the burden of financial accountability.

The intention of the legislature was deciphered from reading the statute

as a whole.

53. We may, however, note at this stage itself that the factual matrix

in the said case dealt with the situation where a person was holding

both the offices.

T.C.(C) No.140/2015 and T.C.(C) No.137/2015 IA Nos.3 4/2016

54. There was really no fresh material addressed before us so far as

the aforesaid petitions are concerned.

55. Insofar as IA Nos.3 4/2016, filed by CLP Wind Farms Private

Limited, seeking intervention in T.C.(C) No.137/2015, are concerned,

the prayer for intervention is made on the ground that the Court issues

appropriate directions to the Tamil Nadu Electricity Regulatory

Page 45 of 84
Commission for time bound hearing and expeditious adjudication of

the applicant’s petitions, being DRP Nos.62/2014 63/2014. The

Court finds no merit in the applications, as the prayers made in the

applications are outside the lis being adjudicated by the Court. The

same are accordingly disposed of.

T.P.(C) No.974/2016

56. This Transfer Petition arises from the Delhi High Court. Ms.

Sujatha Balachander on behalf of the original petitioner before the

High Court sought to plead that the word “may” should be read as

“shall” keeping in mind the intent of the legislature (Bachahan Devi

Ar. V. Nagar Nigam, Gorakhpur Anr25). Normally, it was observed,

“may” is an enabling or discretional while “shall” is obligatory the

connotation is not inelastic or inviolate. Thus, where to interpret the

word “may” as directory would render the very object of the Act as

nugatory, the word “may” must mean “shall.” The Act was actually

enacted in the interest of the public while seeking to distance the

Government from determination of tariff. Such distance from the

Government, it was contended, could be brought about by appointment

25 (2008) 12 SCC 372

Page 46 of 84
of a High Court Judge with a trained judicial mind as the Chairman of

the Commission.

57. Learned counsel referred to A.P. Power Coordination

Committee Ors. v. Lanco Kondapalli Power Ltd. Ors. 26, where it

was held that a claim coming before the Commission could not be

entertained or allowed if it is barred by limitation prescribed for an

ordinary suit before a Civil Court. This aspect was sought to be

emphasized in the context of the discussion that the Commission was

performing judicial functions. The view taken by this Court in Union

of India v. Namit Sharma27 was sought to be distinguished since no

adjudicatory functions were involved in the performance of the

functions of an Information Commissioner.

58. A reference was, once again, made to the powers of the

Commission under Section 94 to 96 of the said Act as also to Section

97, which provides for delegation of the power to any Member,

Secretary, Officer of the Commission except the powers to adjudicate

disputes under Sections 79 and 86, and the powers to make

Regulations under Section 178 or 181 as may be deemed necessary.

26 (2016) 3 SCC 468
27 (2013) 10 SCC 359

Page 47 of 84

59. Our attention was also drawn to the order of the Appellate

Authority dated 27.2.2013 in Appeal No.184/2011 where some

observations have been made on the functioning of the State

Commission. Apparently the State Commission had refused to follow

the judgment of the Tribunal on a specious plea and this attitude of the

State Commission was called ‘audacious’ and ‘most unfortunate’,

‘reflecting a lack of judicial approach, judicial knowledge and judicial

ethics’. It was, thus, pointed out that the absence of a Judge as a

Chairperson is resulting in such orders of the Commission, in

ignorance of the well-established principles of law, including that of

precedent.

Rejoinder Response:

60. We are dealing with the rejoinders of the counsel only to the

extent that they seek to add something arising from the submissions of

the counsel propagating that a Judge should be the Chairman of the

Commission. Learned Attorney General referred to the judgment in

Union of India v. Namit Sharma 28 but then we may note that the

principle advanced is based on a non-adjudicatory function. Learned

AG also referred to Part XI dealing with the Appellate Tribunal where
28 supra

Page 48 of 84
under Section 111(6), the Appellate tribunal can call for records of

proceedings and make orders and can act even on its own motion. The

provision reads as under:

“111. Appeal to Appellate Tribunal.-

xxxx xxxx xxxx xxxx xxxx

(6) The Appellate Tribunal may, for the purpose of examining
the legality, propriety or correctness of any order made by the
adjudicating officer or the Appropriate Commission under this
Act, as the case may be, in relation to any proceeding, on its
own motion or otherwise, call for the records of such
proceedings and make such order in the case as it thinks fit.”

61. Not only that, under Section 121, orders, instructions or

directions can be made by the Tribunal to the Appropriate Commission

for the purpose of performance of its statutory functions under the Act.

The provision reads as under:

“121. Power of Appellate Tribunal.- The Appellate Tribunal
may, after hearing the Appropriate Commission or other
interested party, if any, from time to time, issue such orders,
instructions or directions as it may deem fit, to any Appropriate
Commission for the performance of its statutory functions
under this Act.”

62. The contention thus advanced, is that the scheme of the Act

looks to the appellate authority as a body which is supervising the

Commission, and is chaired by a person who is, or has been the Chief

Page 49 of 84
Justice of the High Court or a Judge of the Supreme Court. Thus, there

is really no need to have a High Court Judge as the Chairperson of the

State Commission albeit an enabling provision having been made.

63. Mr. Naphade, learned Senior Advocate appearing for the State of

Tamil Nadu submitted that orders dated 11.12.2014 and 12.12.2014

had been unsuccessfully carried in appeal and even the Special Leave

Petitions were dismissed. Thus, the merits of the orders passed cannot

be questioned. He further submitted that suo moto proceedings were

initiated on 23.9.2013 while the appointment was made on 31.12.2013.

Thus, respondents Nos. 6 7 were both appointed after the suo moto

proceedings had been initiated. The Selection Committee had not been

impleaded as a party even though the selection process was being

questioned. This Selection Committee was presided over by a retired

Judge of the High Court. It was also submitted that a suo moto

revisionary power was actually conferred on the appellate tribunal

under Section 111(6) of the said Act to cure any defects in the orders

passed by the Commission.

64. Our attention was also invited to the order of the appellate

authority in OP No.1/2011 dated 11.11.2011. This arose out of a letter

Page 50 of 84
stated to be sent by the Ministry of Power dated 21.1.2011 complaining

that most of the State Distribution Utilities have failed to file annual

tariff revision petitions in time and, thus, a number of State’s tariff

revision had not taken place for a number of years. The Tribunal was

requested to take appropriate action by issuing necessary directions to

all the State Commissions to revise the tariff periodically. The State

Commission framed two questions out of which the first question was

as under:

“(i) Whether the State Regulatory Commissions have the
jurisdiction to suo moto initiate proceedings for determination of
tariff under section 62, 64 and 86 of the Electricity Act, 2003 in
the absence of the Tariff application to be filed by the Utilities
under Section 64 of the Act?”

65. The answer to this question was given by the Commission by

opining that the State Commission must initiate suo moto proceedings

for tariff determination in accordance with Section 64 of the Act read

with clause 8.1 (7) of the tariff policy in the event of the delay in filing

of the ARR, truing-up and annual performance review one month

beyond the scheduled date of submission of the petition.

66. Learned Senior Advocate, turning to the provisions of Section

84(2) of the said Act sought to emphasise that the same was a

Page 51 of 84
“notwithstanding” clause as is apparent from its bare reading and it

clearly states “notwithstanding anything contained in sub-section (1)”.

Thus, it does not take away what is stated in sub-section (1). Learned

counsel relied upon the Constitution Bench judgment of this Court in

The Dominion of India Anr. v. Shrinbai A. Irani Anr. 29 for the

proposition as to how a non-obstante clause should be dealt with. It

was observed that “While recognizing the force of this argument it is

however necessary to observe that although ordinarily there should be

a close approximation between the non obstante clause and the

operative part of the section, the non obstante clause need not

necessarily and always be co-extensive with the operative part, so as to

have the effect of cutting down the clear terms of an enactment. If the

words of the enactment are clear and are capable of only one

interpretation on a plain and grammatical construction of the words

thereof, a non obstante clause cannot cut down that construction and

restrict the scope of its operation. In such cases the non obstante clause

has to be read as clarifying the whole position and must be understood

to have been incorporated in the enactment by the Legislature by way

of abundant caution and not by way of limiting the ambit and scope of

29 (1955) 1 SCR 206

Page 52 of 84
the operative part of the enactment.”

67. For the same purpose, the reference was also made to Ajit Singh

(II) v. State of Punjab30.It was, once again, emphasized that the

appellate tribunal takes care of various concerns, more so when matters

have to be heard by a Bench with at least one judicial member. It was

also emphasized that under Section 82(2) of the Act a State

Commission has to be a body corporate having perpetual succession

and common seal and the provision reads as under:

“82. Constitution of State Commission.-

xxxx xxxx xxxx xxxx xxxx

(2) The State Commission shall be a body corporate by the name
aforesaid, having perpetual succession and a common seal, with
power to acquire, hold and dispose of property, both movable
and immovable, and to contract and shall, by the said name, sue
or be sued.”

68. As per Section 84(4) of the said Act, the Chairperson is to be the

Chief Executive of the State Commission. It was, thus, pleaded that it

may not even be advisable for a Judge to hold this nature of office.

69. It was also emphasized that the reliance placed by the opposite

side on Mor Modern Cooperative Transport Society Ltd.31 is

30 (1999) 7 SCC 209
31 supra

Page 53 of 84
misplaced as the observations made in para 14 of the judgment have to

be understood in the context of a dual charge being held by the said

person, an aspect we have already noted while referring to that

argument of the opposite side.

70. Mr. Jayant Bhushan, learned Senior Advocate, in addition,

referred to the Petroleum and Natural Gas Regulatory Board Act, 2006

to contend that the Board constituted under the Act has to have a

Chairperson and a Member (Legal) as per Section 3 of the said Act

though the functions of the Board provide for adjudicatory functions

under Chapter V, more specifically, in Section 24. Thus, it is not as if a

non-Judge cannot carry out any adjudicatory functions.

71. He also sought to emphasise the merit of the Chairperson of the

Gujarat Commission, who has a Master of Business Management in

Finance, Bachelor of Engineering (Electrical), has gone through a

software course, and a regulatory course on economic regulations from

eminent universities and has total experience of 37 years in the power

sector. This includes more than 19 years’ experience in electricity

regulation and is fully conversant with electricity laws and related

issues.

Page 54 of 84

72. Learned Senior Advocate sought to assail the impugned order of

the Gujarat High Court based on the rule of purposive construction and

contended that this principle cannot be utilized to hold something as

different from what the legislature has expressed in clear words.

Our View:

Section 84(2) of the said Act:

73. The controversy in question would have to be dealt with at two

plains. The first, is as to how the statute itself has to be read insofar as

the appointment of the Chairperson of the tribunal is concerned. The

second is, having read the statute in a particular manner, what is the

effect of the judicial pronouncements and the relevant legal literature

in terms of the remaining composition of the tribunal apart from the

Chairperson. If we turn to the first question, on a plain reading of

Section 84(1) of the said Act all that is mandated is that both the

Chairperson and the Members of the State Commission “shall” be

persons of ability, integrity and standing who have adequate

knowledge of and have shown capacity in dealing with problems

relating to engineering, finance, commerce, economics, law or

management. A plain grammatical reading of this Section shows that

no distinction has been made qua the qualifications of a Chairperson

Page 55 of 84
and Member. All that is required is the mandates contained in the sub-

section, which begin with the word “shall”. Thus, any person of the

fields mentioned therein, having the ability, integrity and standing can

be appointed as a Member or Chairperson.

74. Section 85 of the said Act provides for constitution of a

Selection Committee to select the Members of the State Commission,

which in turn has to consist of the persons as set out therein and

mandatorily has to have a person, who has been a Judge of the High

Court as the Chairperson of the Selection Committee. We may also

note that this provision refers to the appointment of ‘Members’ of the

State Commission but then that would also include the Chairperson of

the State Commission, in view of sub-section 43 of Section 2 of the

said Act, which reads as under:

“2. Definitions.

…. …. …. …. ….

(43) “Member” means the Member of the Appropriate
Commission or Authority or Joint Commission, or the Appellate
Tribunal, as the case may be, and includes the Chairperson of
such Commission or Authority or Appellate Tribunal;”

75. Thus, the reading of sub-section (1) of Section 84 read with

Section 85 of the said Act would leave no manner of doubt as to the

fields from which a Chairperson or a Member of the State Commission

Page 56 of 84
can be chosen from. However, the controversy has emanated from the

inclusion of sub-section (2) of Section 84 of the said Act. This is so, as

sub-section (2) begins with a “notwithstanding” clause providing that

the State Government “may” appoint any person as Chairperson from

amongst the persons, who is, or has been, a Judge of the High Court.

This is to be read with the proviso that such an appointment would

have to be made in consultation with the Chief Justice of that High

Court.

76. The proviso only respects and maintains the accepted position

that in appointment of persons, who have been holding such senior

judicial office, consultation with the judicial head, being the Chief

Justice, should be mandatory. The question which thus arises, is

whether sub-section (2) of Section 84 is facilitative in character for the

purposes of appointment of a retired or current Judge of the High Court

as a Chairperson, or is the said provision mandatory in character. Both

the golden rule and the literal rule of statutory construction are well

established that a statute must be read as it is framed by the legislature.

It is not the function of the Court to supplant or read into the statute

something which is not provided. This is not to say that there have not

Page 57 of 84
been judicial views taken qua the interchangeability of the expression

“may’ and “shall” in certain provisions. Thus, the use of the word

“shall” raises a presumption that a particular provision is imperative.

However, it has been construed as merely directory in certain cases if

the context or intention of the legislature demands otherwise. The

Courts may ascertain the real intention of the legislature by carefully

attending to the whole scope of the statute (Sainik Motors v. State of

Rajasthan32and State of U.P. v. Babu Ram33). We are, however, faced

with a converse situation as to whether “may” can be read as “shall”.

In this behalf we may take recourse to the judicial opinion that where

in the same section the word ‘may’ has been used at one place and

‘shall’ at another place, it would strengthen the inference that the

words have been used in the primary sense (Chairman Canara Bank,

Bangalore v. M.S. Jasra34).

77. A reference to Maxwell on The Interpretation of Statutes

(Twelfth Edition), more specifically the chapter on “Exceptional

Construction” would show that the modification of the language of a

statute is the tool used only if, in its ordinary meaning and grammatical
32 (1962) 1 SCR 517
33 (1961) 2 SCR 679
34 AIR 1992 SC 1341

Page 58 of 84
construction, there is a manifest contradiction of the apparent purpose

of the enactment, or some inconvenience or absurdity which could

hardly have been intended. It has been observed that in ordinary

usage, “may” is permissive and “must” is imperative and that the word

“may” used in a statute would not generally be held to be mandatory.

However, in some cases where “may” is used in the context of a

compulsory force, the meaning has been so modified by judicial

exposition. The heading of the Chapter itself shows what is intended:

“Modification of the language to meet the intention”.

78. It is well-nigh impossible to lay down a general rule for

determining whether a provision is imperative or directory. We extract

the relevant portion as under:

““No universal rule,” said Lord Campbell L.C., “can be laid
down for the construction of statues, as to whether mandatory
enactments shall be considered directory only or obligatory with
an implied nullification for disobedience. It is the duty of Courts
of Justice to try to get at the real intention of the Legislature by
carefully attending to the whole scope of the statute to be
construed.”35 And Lord Penzance said: “I believe, as far as any
rule is concerned, you cannot safely go further than that, in each
case you must look to the subject–matter; consider the
importance of the provision that has been disregarded, and the
relation of that provision to the general object intended to be
secured by the Act; and upon a review of the case in that aspect
decide whether the matter is what is called imperative or only
directory.”36
35 Liverpool Borough bank v. Turner (1860) 2 De G.F. J. 502 at pp.507, 508.

36 Howard v. Bodington (1877) 2 P.D. 203, at p. 211.

Page 59 of 84

79. If we turn back to the provisions of Section 84 of the said Act,

we find that the expression “shall” is used in sub-section (1) both in the

context of the requirement of ability, integrity and standing as also in

the context of adequate knowledge and capacity in dealing with

problems relating to engineering, finance, commerce, economics, law

or management. On the other hand, in sub-section (2) while dealing

with the possibility of appointment of a Chairperson from the pool of

sitting or retired Judges, the expression used is “may” indicating it to

be a discretionary power.

80. We are, thus, inclined to accept the line of reasoning advanced

by the learned counsel led by the learned Attorney General that the

plain reading of the section leaves no manner of doubt that the

legislature only envisaged a possibility of appointment of a

Chairperson from the pool of sitting or retired Judges of the High

Court, in which case the method of appointment would be different

from the one as envisaged under Section 85 of the said Act.

81. We may also look to the nature and functions performed by the

State Commission. Functions of the State Commission are prescribed

under Section 86 of the said Act. The enumerated functions are

Page 60 of 84
determination of tariff, regulation of electricity purchase and

procurement process of distribution licencees, facilitating intra-state

transmission, issuing licences to persons, promoting cogeneration and

generation of electricity from renewable sources, levy fee, specify or

enforce standards, fix trading margins. All these functions are

regulatory in character rather than adjudicatory. The real adjudicatory

function is only provided in sub-clause (f) whereupon the Commission

has the option of adjudicating the disputes between the licencees and

generating companies, or to refer such disputes to arbitration. There is

also an advisory role to be performed by the State Commission as

specified in sub-section (2). The issue, however, is not whether a

Judge would be comfortable doing this function but whether these are

types of functions which necessarily mandate a Judge to be a

Chairperson. The answer to this would also be in the negative,

supporting the view we have adopted on the plain reading of the

section.

82. We are conscious of the observations made in Tamil Nadu

Generation and Distribution Corporation Limited37 in the context of

37 supra

Page 61 of 84
Section 86(1)(f) of the said Act opining that the adjudicatory functions

generally ought not to be conducted by the State Commission in the

absence of a judicial Member, but then sub-section (1) of Section 84 of

the said Act provides for a person with knowledge in the field of law

albeit not mandatorily, on a plain reading of the section. The effect of

this will be dealt with in the latter part of our judgment.

83. We may also look at this issue from two other perspectives.

Firstly, the composition of the Appellate Tribunal under Section 112 of

the said Act which mandates that there has to be a Bench of two or

more persons of which at least one should be a judicial member. The

Chairperson as per Section 113, mandatorily has to be a present or

retired Judge of the Supreme Court or a Chief Justice of the High

Court. Thus, at the appellate stage there is necessary judicial scrutiny,

which takes place. Secondly, looked at from the perspective of the

position prevailing prior to the said Act coming into force, the nature of

functions sought to be performed by the State Commission, were to be

so performed, not by person, who necessarily held a judicial office.

The observations, thus, made in the context of the “tribunalisation” of

judicial process and the requirement of it to be headed by a Judge have

Page 62 of 84
to be read in the context of shifting of the adjudicatory role from the

Courts to the Tribunals.

84. There are undoubtedly certain powers vested in the Commission

under Sections 94, 95 96 of the said Act, which weighed with the

Gujarat High Court while taking a contrary view inasmuch as they seek

to give the ‘trappings of a court’ to the Commission, but that aspect we

will examine in the latter part of the judgment, i.e., if there are certain

judicial functions to be performed by the Commission, what then

should be the nature of composition of the Commission.

85. Mr. Jayant Bhushan, learned senior counsel also rightly

emphasized that were it to be presumed that the Chairperson had to be

mandatorily a Judge, the process of appointment would have to be in

terms of the proviso and not in terms of Section 85 of the said Act.

This would make the reference to a Chairperson under Sub-Sections

(2), (3), (5) (6) of Section 85 otiose as that eventuality would never

arise were such a plea to be accepted.

86. We are, thus, unable to accept the contention advanced on behalf

of the parties, who sought to sustain the view adopted by the Gujarat

High Court. The fact that the Chairperson has a right to nominate the

Page 63 of 84
Member, who would chair meetings in his absence as per sub-section

(2) of Section 92, or that the presence of a man of law would be no

substitute to the requirement of a Judge who would bring a judicial

thought process to the decision making as Chairman, or that the

regulatory body should not be unregulated, are generalized pleas,

which are difficult to accept. No doubt, the law declared by the

Supreme Court is binding on all Courts within the territory of India,

which would also include principles of law emanating from a judgment

or interpretation of the law, but then the ratio decidendi of the

judgments of the Supreme Court, makes the principle of mandatory

requirement of a Judge applicable only to cases where the judicial

function is sought to be shifted through the process of ‘tribunalisation’.

87. We may also note that Section 84(2) of the said Act begins with

a non-obstante clause, i.e., Notwithstanding anything contained in sub-

section (1), it does not take away what is stated in sub-section (1),

which deals with the requirements that are necessary in the

appointment of a Member or Chairperson. It would not cut down the

clear terms of the enactment being sub-section (1). The occasion to

use such a non-obstante clause really arose because the process of

Page 64 of 84
appointment of a Chairperson who is, or has been a Judge, is required

to be different, and thus, the mandatory consultation with the Chief

Justice. It is nothing more or less. Further sub-section (1) of Section

85 provides for a Selection Committee to be headed by a Judge of the

High Court but with the proviso that the said provision would not

apply for the appointment of a person as a Chairperson who is, or has

been, a Judge of the High Court. This, in fact, shows that a non-Judge

can be appointed as the Chairperson by the Selection Committee

constituted under Section 85 of the said Act, which in turn is chaired

by a Judge of the High Court. We are, thus, unequivocally of the view

that Section 84(2) of the said Act only gives the discretionary option to

the State Government to appoint a Judge as the Chairperson of the

State Commission. The said provision therefore, is not mandatory in

nature.

Composition of the State Commission:

88. Our conclusion aforesaid on the appointment of a Chairperson,

necessitates a discussion on the composition of the State Commission

as a whole. This is so in the context of Section 84(1) of the said Act.

In terms of Section 82(4) of the said Act, the State Commission is to

Page 65 of 84
consist of not more than three members including the Chairperson. In

other words, there have to be two other members other than the

Chairperson. Now if the Chairperson is not a Judge, the question

arises whether any of the other two members has to be a person from

the legal field considering the nature of functions performed by the

State Commission. Section 84(1) of the said Act prescribes the

requirement of knowledge and shown capacity in dealing with

problems relating to six different fields, i.e., engineering, finance,

commerce, economics, law or management. If the Chairperson is from

a non-legal field, it would imply that he/she would be a person from

any of the other five fields. That would still leave the appointment of

two members from the fields specified, including law. Thus, there can

be a possibility and we are informed that it is so, where State

Commissions have no members from the legal field at all. The moot

point arises whether there can be a mandatory provision read into

Section 84(1) of the said Act for opining, that at least one person from

the legal field is necessary as a member, although on a plain reading of

the Section it is not so.

89. The distinguishing feature, as pointed out aforesaid between

Page 66 of 84
appointment of members to the Central Commission and the State

Commission is that, with regards to the Central Commission, it is

specifically provided in Section 77 of the said Act, how many persons

from which field are to be appointed. There is a further proviso to sub-

clause (c) of sub-section (1) of Section 77 of the said Act restricting it

to not more than one member from the fields specified in the said

clause, viz. economics, commerce, law or management. This is not the

position insofar as the State Commission is concerned.

90. In order to appreciate any such requirement for a person from

the legal field as a member of the State Commission, it becomes

necessary to turn to the nature of functions performed by the State

Commission.

91. We have, in the context of Section 84(2) of the said Act,

discussed the various functions of the State Commission which are

specified under Section 86 of the said Act. The argument on behalf of

the learned Attorney General and the counsel supporting him was that

other than sub-clause (f) of Section 86, there are really no adjudicatory

functions. There is, however, no dispute that sub-clause (f) is clearly

an adjudicatory function. It provides for adjudication of disputes

Page 67 of 84
between the licencees and the generating companies. There is also a

power to refer the dispute to arbitration and the expression “and” in the

said clause has been read as “or” in Gujarat Urja Vikas Nigam Ltd.38

(GJ-I), implying that the option is available to the State Commission to

do either of the two.

92. Now turning to the powers of the State Commission, we may

note that the same are specified from Sections 94 to 96 of the said Act.

The reference in these Sections is to the ‘appropriate commission’, i.e.,

it can either be the Central Commission or the State Commission or the

Joint Commission. The relevant definition clause is as under:

“2. Definitions.-

In this Act, unless the context otherwise requires,–

…. …. …. …. ….

4. “Appropriate Commission” means the Central Regulatory
Commission referred to in sub-section (1) of section 76 or the
State Regulatory Commission referred to in section 82 or the
Joint Commission referred to in section 83, as the case may be;”

The powers conferred under these Sections are, thus, undisputedly

exercisable by the State Commission.

93. A perusal of these provisions would show that apart from their

definition, even otherwise, these are powers of a civil court under the

Code of Civil Procedure, 1908 (hereinafter referred to as the ‘said

38 supra

Page 68 of 84
Code’). Powers such as summoning, enforcement of attendance of any

person and examination on oath, discovery and production of

documents, receiving affidavit of evidence, requisitioning of public

records, etc., all form part of Section 94. In terms of Section 95, all

such proceedings before the State Commission would be deemed to be

judicial proceedings within the meaning of Sections 193 and 228 of the

Indian Penal Code, 1860 and the commission would be a civil court for

purposes of Sections 345 346 of the Code of Criminal Procedure,

1973. Not only that, Section 96 confers the extreme power of entry

and seizure in respect of any building and place where the Commission

has reason to believe that any document relating to the subject matter

of enquiry may be found and may be seized. The power is conferred

on the Commission under Section 129 for securing compliances of

orders and under Sections 142 146 for punishment for non-

compliance of orders and directions. This, thus, leaves no manner of

doubt that the State Commission, though defined as a ‘Commission’

has all the ‘trappings of the Court’.

94. We may also note that in terms of what has been opined in

Page 69 of 84
Gujarat Urja Vikas Nigam Ltd.39 (GJ-I), such adjudication of disputes

between the licensees and generating companies by the State

Commission or the arbitrator nominated by it under clause (f) of sub-

section (1) of Section 86 of the said Act extends to all disputes and not

merely to those pertaining to matters referred to in clauses (a) to (e)

and (g) to (k) of Section 86(1) as may arise between licensees and

generating companies. In effect, it has been observed that this is the

only process of adjudication which has to be followed as there is no

restriction in Section 86(1)(f) of the nature of the dispute that may be

adjudicated. Similarly in A.P. Power Coordination Committee

Ors.40 while referring to the judgment in Gujarat Urja Vikas Nigam

Ltd.41 (GJ-I), it has been observed that the Commission has been

elevated to the status of a civil court in respect of all disputes between

the licensees and generating companies. Such disputes need not arise

from exercise of powers under the said Act but even claims or disputes

arising purely out of contract have to be either adjudicated by the

Commission or be referred to an arbitrator nominated by the

Commission. In that context it has also been observed that the

39 supra
40 supra
41 supra

Page 70 of 84
advisability of having the State Commission presided over by a Judge

of the High Court as a Chairperson was mentioned in Tamil Nadu

Generation and Distribution Corporation Limited 42. The provisions

of the Limitation Act, 1963 like Sections 5 14 have also been

imported into the Act as observed.

95. What else can be called the ‘trappings of the court’? We are

buttressed in our conclusion by judicial pronouncements dealing with

the expression “The trappings of the court”. The expression “trappings

of the court” initially found mention in a judgment of the Judicial

Committee of The Privy Council in Shell Company of Australia,

Limited v. Federal Commissioner of Taxation43. It was observed by

Lord Chancellor Sankey that there are tribunals with many of the

“trappings of a court” but are not courts in the strict sense of exercising

judicial power. In Bharat Bank Ltd. v. Employees of the Bharat

Bank Ltd.44, while dealing with the Industrial Tribunal, it was observed

that the said Tribunal has powers vested in a civil court under the said

Code while trying a suit, discovery of documents, inspecting, granting

adjournment, reception of evidence on affidavit, enforcing attendance
42 supra
43 (1931) AC 275
44 AIR 1950 SC 188

Page 71 of 84
of witnesses, etc. The observations in R. v. London County Council45,

of Saville, L.J. giving a meaning to the word “court” or “judicial

authority” was cited with approval. Saville, L.J. observed as under:

“It is not necessary that it should be a Court in the sense that this
Court is a Court, it is enough if it is exercising, after hearing
evidence, judicial functions in the sense that it has to decide on
evidence between a proposal and an opposition; and it is not
necessary to be strictly a Court if it is a tribunal which has to
decide rights after hearing evidence and opposition.”

96. The Supreme Court also took note of the definition of “judicial

power” and “judicial decision” in Huddart, Parker Co. v.

Moorehead46 and Cooper v. Wilson47 respectively. Griffith, C.J., in the

first judgment observed as under:

“The words ‘judicial power’ as used in sec. 71 of the
Constitution mean the power which every sovereign authority
must of necessity have to decide controversies between its
subjects or between itself and its subjects, whether the rights
relate to life, liberty or property. The exercise of this power
does not begin until some tribunal which has power to give a
binding and authoritative decision (whether subject to appeal
or not) is called upon to take action.”

97. In the latter judgment, it was observed as under:

“A true judicial decision presupposes an existing dispute
between two or more parties, and then involves four requisites:

(1) The presentation (not necessarily orally) of their case by the
parties to the dispute; (2) if the dispute between them is a
question of fact, the ascertainment of the fact by means of
45 (1931) 2 KB 215
46 8 CLR 330, 357
47(1937) 2 KB 309, at p. 340

Page 72 of 84
evidence adduced by the parties to the dispute and often with
the assistance of argument by or on behalf of the parties on the
evidence; (3) if the dispute between them is a question of law,
the submission of legal argument by the parties, and (4) a
decision which disposes of the whole matter by a finding upon
the facts in dispute and an application of the law of the land to
the facts so found, including where required a ruling upon any
disputed question of law. A quasi-judicial decision equally
presupposes an existing dispute between two or more parties
and involves (1) and (2), but does not necessarily involve (3)
and never involves (4). The place of (4) is in fact taken by
administrative action, the character of which is determined by
the Minister’s free choice.”

98. The subsequence judgments in Jaswant Sugar Mills Ltd. v.

Lakshmi Chand48;Engineering Mazdoor Sabha v. Hind Cycles Ltd.49;

Indo-China Steam Navigation Co. Ltd. v. Jasjit Singh 50; Associated

Cement Companies Ltd. v. P.N. Sharma 51; Sarojini Ramaswami v.

Union of India52 and State of Gujarat v. Gujarat Revenue Tribunal

Bar Association53followed the aforesaid views in the same breath.

99. Once we find that the tribunal has the trappings of the court in

respect of its functions, we turn to the effect of the same.

100. The judgment of this Court in Tamil Nadu Generation and

48 1963 Supp (1) SCR 242
49 AIR 1963 SC 874
50 (1964) 6 SCR 594
51 (1965) 2 SCR 366
52 (1992) 4 SCC 506
53 (2012) 10 SCC 353

Page 73 of 84
Distribution Corporation Limited54 would first have to be dealt with at

some length, as it deals with the provisions of the very Act. Of course,

the context was, inter alia, in respect of the interpretation of Section

86(1) of the said Act. The Bench took note of the Gujarat Urja Vikas

Nigam Ltd.55 (GJ-I) on account of the observations made in that

judgment, that the State Commission can adjudicate all the disputes,

including the dispute on money claims between the licensees and the

generating companies. The then counsel for the appellant sought to

canvas that the exercise of such judicial powers should be either by a

civil court or a tribunal having, at least, one judicial member, as the

absence of a judicial member would be an anathema to judicial process

and would directly impinge on the impartiality and the independence

of the judiciary. It was also contended that the same would undermine

the principle of separation of powers which was sought to be strictly

maintained by the Constitution of India. The counsel, in fact, went

further that the function of the Chairman of such a commission

required only a retired Judge of the High Court to occupy that post, an

aspect, which has been negated by us hereinbefore. The Supreme

Court gave its imprimatur to the submission advanced on behalf of the
54 supra
55 supra

Page 74 of 84
appellant to the extent that the adjudicatory functions generally ought

not to be conducted by the State Commission in the absence of judicial

members. It was noticed that no judicial member had been appointed

in the Tamil Nadu State Commission, and that the feasibility for

making the appointment of a person as the Chairman from amongst

persons, who is, or has been, a Judge of the High Court should be

explored.

101. It is undoubtedly true that the question which the Court was

seized of, related to the interpretation of Section 86 of the said Act and

certain other matters, which are not connected with the controversy

herein. Thus, the issue arises, whether the observations made, albeit to

be construed as advisory or suggestive qua the appointment of a

Chairman and a Member are to be treated as ratio decidendi or obiter

dicta.

102. In order to determine this aspect, one of the well-established

tests is “The Inversion Test” propounded inter alia by Eugene

Wambaugh, a Professor at The Harvard Law School, who published a

classic text book called “The Study of Cases” 56 in the year 1892. This

56Eugene Wambaugh, The Study of Cases (Boston: Little, Brown, Co., 1892)

Page 75 of 84
text book propounded inter alia what is known as the “Wambaugh

Test” or “The Inversion Test” as the means of judicial interpretation.

“The Inversion Test” is used to identify the ratio decidendi in any

judgment. The central idea, in the words of Professor Wambaugh, is as

under:

“In order to make the test, let him first frame carefully the
supposed proposition of law. Let him then insert in the
proposition a word reversing its meaning. Let him then inquire
whether, if the court had conceived this new proposition to be
good, and had had it in mind, the decision could have been the
same. If the answer be affirmative, then, however excellent the
original proposition may be, the case is not a precedent for that
proposition, but if the answer be negative the case is a precedent
for the original proposition and possibly for other propositions
also.57”

103. In order to test whether a particular proposition of law is to be

treated as the ratio decidendi of the case, the proposition is to be

inversed, i.e., to remove from the text of the judgment as if it did not

exist. If the conclusion of the case would still have been the same even

without examining the proposition, then it cannot be regarded as the

ratio decidendi of the case. This test has been followed to imply that

the ratio decidendi is what is absolutely necessary for the decision of

the case. “In order that an opinion may have the weight of a

57Eugene Wambaugh, The Study of Cases (Boston: Little, Brown, Co., 1892)
at pg. 17

Page 76 of 84
precedent”, according to John Chipman Grey 58, “it must be an opinion,

the formation of which, is necessary for the decision of a particular

case.”

104. Now applying the test to the aforesaid judgment, the proposition

is reversed, i.e., “the Chairman need not be a judicial member”, the fact

remains that it would have no impact on the decision in that case,

which was related to inter alia the interpretation of Section 86 of the

said Act. This, in fact, justifies what we have held aforesaid qua the

appointment of a Chairperson from the pool of Judges.

105. In the context of the question which we are now dealing with, if

we were to take the proposition as “no member having knowledge of

law is required to be a member of the Commission” then we have a

problem at hand. This is so because while interpreting Section 86 of

the said Act, it has been expressed that the Commission has the

‘trappings of the Court’, an aspect we have agreed to hereinbefore.

Once it has the ‘trappings of the Court’ and performs judicial

functions, albeit limited ones in the context of the overall functioning

of the Commission, still while performing such judicial functions
58 Another distinguished jurist who served as a Professor of Law at The
Harvard Law School

Page 77 of 84
which may be of far reaching effect, the presence of a member having

knowledge of law would become necessary. The absence of a member

having knowledge of law would make the composition of the State

Commission such as would make it incapable of performing the

functions under Section 86(1)(f) of the said Act.

106. In Madras Bar Association59 (MJ-II), the Constitution Bench,

referring to the decision in Madras Bar Association60 (MJ-I) observed

that members of tribunals discharging judicial functions could only be

drawn from sources possessed of expertise in law and competent to

discharge judicial functions. We are conscious of the fact that the case

(MJ-I) dealt with a factual matrix where the powers vested in courts

were sought to be transferred to the tribunal, but what is relevant is the

aspect of judicial functions with all the ‘trappings of the court’ and

exercise of judicial power, at least, in respect of same part of the

functioning of the State Commission. Thus, if the Chairman of the

Commission is not a man of law, there should, at least, be a member

who is drawn from the legal field. The observations of the

Constitution Bench in Madras Bar Association61 (MJ-II) constitutes a

59 supra
60 supra
61 supra

Page 78 of 84
declaration on the concept of basic structure with reference to the

concepts of “separation of powers”, “rule of law” and “judicial

review”. The first question raised before the Constitution Bench as to

whether judicial review was part of the basic structure of the

Constitution was, thus, answered in the affirmative.

107. We are, thus, of the view that it is mandatory to have a person of

law, as a member of the State Commission. When we say so, it does

not imply that any person from the field of law can be picked up. It has

to be a person, who is, or has been holding a judicial office or is a

person possessing professional qualifications with substantial

experience in the practice of law, who has the requisite qualifications

to have been appointed as a Judge of the High Court or a District

Judge.

108. In Brahm Dutt v. Union of India62, it has been observed that if

there are advisory and regulatory functions as well as adjudicatory

functions to be performed, it may be appropriate to create two separate

bodies for the same. That is, however, an aspect, which is in the

wisdom of the legislature and that course is certainly open for the

future if the legislature deems it so. However, at present there is a

62 supra

Page 79 of 84
single Commission, which inter alia performs adjudicatory functions

and, thus, the presence of a man of law as a member is a necessity in

order to sustain the provision, as otherwise, it would fall foul of the

principles of separation of powers and judicial review, which have

been read to be a part of the basic structure of the Constitution.

109. We are also not in a position to accept the plea advanced by the

learned Attorney General that since there is a presence of a Judge in the

Appellate Tribunal that would obviate the need of a man of law as a

member of the State Commission. The original proceedings cannot be

cured of its defect merely by providing a right of appeal.

110. We are, thus, of the unequivocal view that for all adjudicatory

functions, the Bench must necessarily have at least one member, who

is or has been holding a judicial office or is a person possessing

professional qualifications with substantial experience in the practice

of law and who has the requisite qualifications to have been appointed

as a Judge of the High Court or a District Judge.

111. The challenge laid in TC (C) Nos.139/2015 138/2015 is to the

appointments made to the Tamil Nadu State Commission and the

exercise of the powers suo moto by the Commission. The fundamental

Page 80 of 84
plea is of financial bias of the two members as they were working in

their erstwhile avatars. The name of Mr. G. Rajagopal was

recommended when he was still working as the Director, TANGEDCO

and he opted for voluntary retirement after his name had been

recommended. Mr. Akshayakumar retired from the post of Managing

Director of TANTRANSCO on 31.5.14 and was appointed as

Chairman of the Commission on 6.6.14. The tariff hike was approved

by a majority of 2:1 with these two members being part of the majority

view.

112. In respect of the aforesaid, reliance was placed on the judgment

in Rajesh Awasthi63 and Mor Modern Cooperative Transport Society

Ltd.64. We, however, find that those judgments would not apply in the

present case. The nature of financial interest was examined in the

narrower sense as well as the wider sense and in the wider sense, it was

held to include the direct or indirect interest of a person in relation to a

financial undertaking. The situation arose when the person concerned

was holding both the posts simultaneously, which is not so in the

present case. (as noticed in para 52 above) It is also pointed out by the

learned counsel appearing for the State of Tamil Nadu that the orders
63 supra
64 supra

Page 81 of 84
of appointment have been exclusively assailed right till the Supreme

Court. It may be added that the Selection Committee was presided

over by a retired Judge of the High Court.

113. We, thus, find no merit in the plea sought to be advanced

assailing either the appointment or the suo moto tariff revision.

Conclusion:

114. In view of our observations above, we conclude as under:

i. Section 84(2) of the said Act is only an enabling provision

to appoint a High Court Judge as a Chairperson of the State

Commission of the said Act and it is not mandatory to do so.

ii. It is mandatory that there should be a person of law as a

Member of the Commission, which requires a person, who is,

or has been holding a judicial office or is a person possessing

professional qualifications with substantial experience in the

practice of law, who has the requisite qualifications to have

been appointed as a Judge of the High Court or a District

Judge.

iii. That in any adjudicatory function of the State

Page 82 of 84
Commission, it is mandatory for a member having the

aforesaid legal expertise to be a member of the Bench.

iv. The challenge to the appointment of the Chairman and

Member of the Tamil Nadu State Commission is rejected as

also the suo moto proceedings carried out by the Commission.

v. Our judgment will apply prospectively and would not

affect the orders already passed by the Commission from time

to time.

vi. In case there is no member from law as a member of the

Commission as required aforesaid in para 2 of our conclusion,

the next vacancy arising in every State Commission shall be

filled in by a Member of law in terms of clause (ii) above.

115. Transfer Petition (C) No.974/2016 is allowed and the

Transferred Case arising out of transfer petition stands disposed of.

Page 83 of 84

116. The appeals as well as the other transferred cases stand disposed

of accordingly leaving the parties to bear their own costs. Pending

application(s), if any, also stand(s) disposed of.

..….….…………………….J.

(J. Chelameswar)

………………………………J.

(Sanjay Kishan Kaul)
New Delhi.

April 12, 2018.

Page 84 of 84

Leave a Reply

Your email address will not be published. Required fields are marked *


Not found ...? HOW TO WIN 498a, DV, DIVORCE; Search in Above link

All Law documents and Judgment copies
Laws and Bare Acts of India
Landmark SC/HC Judgements
Rules and Regulations of India.

STUDY REPORTS

Copyright © 2018 SC and HC Judgments Online at MyNation