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Bhaskar Shrachi Alloys Limited vs Damodar Valley Corporation on 23 July, 2018

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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION 
CIVIL APPEAL NO(S).971­973 OF 2008

BHASKAR SHRACHI ALLOYS LTD. 
ETC.ETC. ….APPELLANT(S)
VERSUS

DAMODAR VALLEY CORPORATION 
 ORS. ETC. ….RESPONDENT(S)

WITH
CIVIL APPEAL NO(S). 1914 OF 2008
CIVIL APPEAL NO(S).4504­4508 OF 2008
CIVIL APPEAL NO(S).4289 OF 2008

J U D G M E N T

RANJAN GOGOI, J

1. This   group   of   appeals   arise   out   of   a   common

judgment and order dated 23rd November, 2007 passed by the

learned   Appellate   Tribunal   for   Electricity   at   New   Delhi

(hereinafter referred to as “learned Appellate Tribunal”).  The

challenge   in   the appeals   before the   learned   Appellate

Tribunal    was against   the order of the   Central   Electricity

Regulatory     Commission (hereinafter referred to as “CERC”)
Signature Not Verified

Digitally signed by
VINOD LAKHINA

dated       3rd  October,   2006   determining           the           tariff
Date: 2018.07.23
11:17:29 IST
Reason:

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chargeable       by       the   Damodar     Valley       Corporation

(hereinafter   referred       to       as       “Corporation”)   from   the

consumers   of   electricity   generated   and   transmitted   by   the

Corporation.   The   tariff   has   been   determined   under   the

provisions of Section 61 and 62 of the Electricity Act, 2003

(hereinafter referred to as “2003 Act”) read with such other

provisions   of   the   Damodar   Valley   Corporation   Act,   1948

(hereinafter   referred   to   as   “Act   of   1948”)   which   have   been

found to be not inconsistent with the provisions of the 2003

Act.   The appeals being under Section 125 of the 2003 Act

are   required   to   be   answered   only   on   such   substantial

questions   of   law   that   may   arise   for   determination   by   this

Court.

2. First, the facts.

The   Corporation   has   been   established   under   the

Act of 1948 for the development of the Damodar Valley area

falling within the States of West Bengal and Jharkhand.   As

evident from the provisions of Section 12 of the Act of 1948,
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three   (03)   major   areas   of   activity   undertaken   by   the

Corporation under the Act of 1948 are: (i) power generation,

transmission   and   distribution;   (ii)   flood   control;   and   (iii)

irrigation   and   some   connected   activities   like   soil

conservation,  afforestation, etc. 

3. Under   Section   20   of   the   Act   of   1948,   the

Corporation was empowered and authorised to determine the

tariff chargeable by it from its consumers.  Part IV of the Act

of   1948   under   the   heading   “Finance,   Accounts   and   Audit”

though,   superficially,   may   appear   to   be   dealing   with   the

indoor   management   of   the   Corporation   contain   provisions

which could have a relevant bearing to tariff fixation under

Section 20 of the Act of 1948.   Some of the said provisions

are to be found in Sections 32, 37, 38, 39 and 40 of the Act of

1948   which   deals   with   facets   of   expenditure,   depreciation,

allowances, payment of interest, etc. all of which would have

a   reasonable   bearing   on   working   out   the   tariff   that   the

Corporation would be entitled to charge from its consumers
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after   taking   into   account   the   said   items   of   expenditure   or

allowances/disallowances, as may be.  

4. Acting under the provisions of Section 20 of the Act

of 1948, the Corporation had notified its own tariff order on

1st  September,   2000.       The   2003   Act   came   into   force   with

effect from 10th June, 2003.  Despite coming into force of the

2003 Act the Corporation had not approached the CERC for

determination   of   the   tariff   chargeable   by   it.     Consequently,

the CERC initiated suo motu proceedings by order dated 29 th

March,   2005   and   directed   the   Corporation   to   submit   an

application for determination of tariff for the period from 1 st

April, 2004 to 31st  March, 2009.   In terms of the said order

passed   by   the   CERC,   the   Corporation   made   an   application

dated 8th  June, 2005 before the CERC (i.e. Petition No.66 of

2005) for determination of tariff for the period in question.  It

appears   that   in   view   of   the   “complexity”   of   the   issues

involved, the CERC had requested one of its members to go

into   the   necessary   fact­finding   exercise   and   to   submit   a

report   of   the   detailed   facts   that   would   be   relevant   for
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determination   of   tariff   by   the   CERC.     On   the   basis   of   the

available   inputs   received   from   the   aforesaid   single   member

Bench of the CERC, the CERC issued a tariff order dated 3 rd

October   2006   determining   the   tariff   for   generation   and

transmission for the period from 1 st April, 2006 to 31st March,

2009   by   allowing   a   two­year   transition   period   to   the

Corporation i.e. from 1st April, 2004 to 31st March, 2006.  

5. At this stage, it may be appropriate to take note of

the contents of the tariff order dated 3rd October, 2006 passed

by   the   CERC   so   as   to   appreciate   and   understand   the

grievances   entertained   by   the   respective   appellants   before

this   Court  who  were  also the appellants before the learned

Appellate Tribunal challenging the order of the CERC dated

3rd October, 2006.

6. The   CERC   by   its   order   dated   3 rd  October,   2006

took   the   view   that   the   matter   of   determination   of   tariff

chargeable   by   the   Corporation   would   be   governed   by   the

provisions   of   the   2003   Act   and   the   Central   Electricity

Regulatory   Commission   (Terms   and   Conditions   of   Tariff)
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Regulations,   2004   (hereinafter   referred   to   as   “Tariff

Regulations”)   framed   thereunder.       Accordingly,   the   CERC

proceeded to determine the tariff after giving due weightage to

the   various   relevant   factors   which   are   required   to   be

considered   for   such   determination   as   spelt   out   by   the

Regulations   in   force.     A   reading   of   the   order   of   the   CERC

would   go   to   show   that   in   determining   the   tariff   due

consideration of the following issues was made by the CERC.

(i) Choice between GFA and NFA Method;

(ii) Capital Cost;

(iii) Extra Rupee Liability;

(iv)  Additional Capitalisation;

(v)  Debt­Equity Ratio;

(vi) Return on equity;

(vii) Interest on loan;

(viii) Depreciation   including   Advance   against

Depreciation;

(ix) O  M expenses;

(x) Pension and gratuity fund;

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(xi) Interest on working capital;

(xii) Operational Norms;

(xiii) Energy   charges   and   the   fuel   component   for   the

thermal generating stations;

(xiv) Fuel Price Adjustment

7. Aggrieved by the aforesaid order dated 3rd October,

2006, the Corporation, insofar the exclusion of the provisions

of the Act of 1948 while determining the tariff and refusal to

grant claims of certain expenses thereunder; the consumers,

namely, Bhaskar Shrachi Alloys Ltd., Impex Ferro Tech Ltd.,

Shyam Ferro Alloys Ltd., Maithan Alloys Ltd., Anjaney Ferro

Alloys   Ltd.,   Dayal   Steel   Ltd.   and   Castrol   Technologies   Ltd.

insofar   as   transitory   period   is   concerned   and   the   State   of

Jharkhand   and   West   Bengal   Electricity   Regulatory

Commission insofar as the exclusion of the power of the State

Regulatory   Commission   to   determine   the   intra­State

transmission of electricity is concerned had approached the

learned Appellate Tribunal by way of separate appeals. 
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8. The   learned   Appellate   Tribunal   by   the   impugned

judgment and order dated 23rd November, 2007 took the view

that by virtue of fourth proviso to Section 14 of the 2003 Act,

while the Corporation continued to be a deemed licensee, the

provisions of the Act of 1948, which are not inconsistent with

the provisions of the 2003 Act, shall continue to apply to the

Corporation.     In   other   words,   insofar   as   the   inter­play

between the provisions of the Act of 1948 and the 2003 Act is

concerned, according to the learned Appellate Tribunal, it is

only   the   provisions   of   the   earlier   Act   inconsistent   with   the

later Act that will cease to have effect and such provisions of

the Act of 1948 that are consistent will continue to hold the

field   notwithstanding   the   enactment   of   the   2003   Act.

Continuing further, the learned Appellate Tribunal held that

while   Section   20   of   the   Act   of   1948   which   empowers   the

Corporation to fix the tariff is inconsistent with Section 62 of

the 2003 Act which authorised the “Appropriate Commission”

to  determine the  tariff  in accordance with the provisions of

the   2003   Act,   the   specific   provisions   contained   in   Sections

32,   37,   38,   39   and   40   of   Part   IV   of   the   Act   of   1948   will
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continue to be relevant in the matter of determination of tariff

in as much as there are no pari materia/parallel provisions in

the   2003   Act.   It   was   further   held   that   though   there   are

provisions   in   the   Tariff   Regulations   framed   by   the   CERC

covering   the   same   field,   the   said   Regulations,   being   in   the

nature   of   subordinate   legislation,   cannot   override   the

provisions of a law duly enacted (Act of 1948), particularly, in

the absence of any legislative intention to the said effect in

any   of   the   provisions   of   the   2003   Act.     Accordingly,   the

learned   Appellate   Tribunal   while   rejecting   the  following   five

claims and upholding the order of the CERC on the aforesaid

counts thought it proper to remand the matter, for a de novo

consideration of the remaining five issues by the CERC in the

light   of   the   findings   recorded   by   it.   The   tabular   chart,

extracted below, would indicate the five issues that have been

finalized by the learned Appellate Tribunal by upholding the

order of the CERC dated 3rd October, 2006 and the other five

issues which have been remanded for re­determination by the

CERC.

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Issues finalized by the Issues   remanded   for
learned   Appellate re­determination   by
Tribunal   by   upholding the CERC
the order of the CERC
dated   3rd  October,
2006

(i) Higher return on equity; (i) Additional   capitalization
for   the   period   2004­
2005 and 2005­2006;

(ii) Depreciation rate; (ii) Pension   and   Gratuity
contribution;

(iii) Resetting   of   operating (iii) Revenue to be allowed to
norms   at   variance   from the DVC under the DVC
the   operating   norms Act;

prescribed   in   the   2004
regulations;

(iv) Return   on   capital (iv) Operation   and
investment   on   Head Maintenance expenses;
Office,   Regional   Offices,
administrative and other
technical   centres,   etc.;

and 

(v) Generation   projects (v) Debt Equity Ratio
presently not operating.

9. Three substantial questions of law would seem to

arise   for   determination   by   this   Court   in   exercise   of   its
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jurisdiction under Section 125 of the 2003 Act.  The same are

enumerated below:

(a) Whether   the   view   taken   by   the   learned   Appellate

Tribunal with regard to the fourth proviso to Section 14 of the

2003 Act and the applicability of the provisions of Sections

32, 37, 38, 39 and 40 contained in Part IV of the Act of 1948

in  the  matter  of   tariff   determination under  the 2003 Act is

correct?

(b) Whether   it   is   the   provisions   of   the   Tariff

Regulations  (2004  Regulations) which alone would hold the

field in the matter of determination of tariff to the exclusion of

the provisions of Sections 32, 37, 38, 39 and 40 contained in

Part IV of the Act of 1948?

(c) Whether   the   conclusions   and   findings   of   the

learned Appellate Tribunal on any one or more of the claims

made   by   any   of   the   stakeholders   in   the   matter   of

determination   of   tariff   is   vitiated   by   grave   and   apparent

errors?

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10. It   will   be   useful   to   notice,   at   this   stage,   that   in

terms   of   the   impugned   order   dated   23 rd  November,   2007

passed by the learned Appellate Tribunal the matter has been

de   novo  considered   and   re­determined   by   the   CERC   by   its

order dated 6th August, 2009.  This has happened due to the

absence of any interim restraint.  The said order of the CERC

dated   6th  August,   2009   has   since   been   affirmed   by   the

learned   Appellate   Tribunal   by   a   separate   order   dated   10 th

May, 2010 which is the subject matter of challenge in Civil

Appeal No.4881 of 2010 presently pending before this Court.

The   said   appeal   (Civil   Appeal   No.4881   of   2010)   has   been

ordered to be heard after disposal of the present appeals. 

11. The   arguments   advanced   by   the   respective

appellants   who   are   also   the   respondents   in   the   connected

appeals may be noted at this stage.  

12. On behalf of the CERC, which is the appellant in

Civil   Appeal   No.4289   of   2008,   it   has   been   contended   that

second part of the fourth proviso to Section 14 of the 2003
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Act cannot be understood to mean, as has been held by the

learned Appellate Tribunal, that the provisions of the Act of

1948   which  are   not   inconsistent  with  the provisions  of the

2003   Act   so   far   as   the   determination   of   tariff   is  concerned

would continue to hold the field.   Two principal basis have

been urged in support of the above.  The first is that a proviso

cannot   be   understood   to   go   beyond   the   main   part   of   the

Section which, in the present case, deals only with ‘licensing’

and  not ‘tariff  determination’.     Reliance in this regard has

been   placed   on   the   decisions   of   this   Court   in  Dwaraka

 1 and Union of India  Ors.

Prasad vs. Dwarka Das Saraf
 

 
vs. Dileep Kumar Singh 2.

The   second   limb   of   the   argument   is   based   on   the

provisions   contained   in Section  174  of the  2003  Act which

gives   an   overriding   effect to  the  provisions of  the  2003 Act

notwithstanding any inconsistency with any other law for the

time being in force.

1 (1976) 1 SCC 128 [para 18]
2 (2015) 4 SCC 421 [para20]
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13. Without prejudice to the above, it has been further

contended on behalf of the CERC that the learned Appellate

Tribunal   was   clearly   in   error   in   holding   that   in   case   of   a

conflict between the Act of 1948 and the Tariff Regulations

framed under the 2003 Act the provisions of the Regulations

will   require   to   be   ignored.   The   decisions   of   this   Court   in

  3  and
Bharathidasan University  Anr.  vs.  AICTE  Ors.

 

Samsthanan Chethu Thozhilali Union vs. State of Kerala

  Ors.  4,  relied upon,  has been misconstrued by the learned

Appellate   Tribunal,   it   is   urged   on   behalf   of   CERC.     It   is

further contended on behalf of the CERC that Section 61 of

the 2003 Act lays down the principles for tariff determination

which finds detailed manifestation in the 2004 Regulations.

The   Regulations,   it  is   contended,  embody   the  principles  on

which tariff is required to be determined and the provisions

thereof cannot be overridden by the provisions of any other

statute and, that too, enacted at an anterior point of time i.e.

the Act of 1948.  The mandate of Section 174 of the 2003 Act

3 (2001) 8 SCC 676 [para 14]
4 (2006) 4 SCC 327 [Para 17]
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which is subsequent in point of time will be compromised in

the event such an interpretation is accepted. 

14. So   far   as   the   specific   heads   of   tariff   fixation   are

concerned,   it   has   been   urged   on   behalf   of   the   CERC   that

Section 40 of the Act of 1948 has been wrongly relied upon by

the learned Appellate Tribunal in determining the question of

the   extent   of   depreciation  allowable.   It is emphasised that

Section   40   leaves   the   question   of   the   percentage   of

depreciation to be determined by the Central Government.  It

is   contended   that   the   purpose   and   intent   behind   the

enactment of 2003 Act is to distance the Central Government

from the determination of tariff under the 2003 Act which is

to be fixed by the Regulatory Commissions on the principles

acknowledged in the Tariff Regulations. Regulation 21(1)(ii) of

the   Tariff   Regulations,   therefore,   according   to   the   CERC,

should   have   been   the   basis   for   the   determination   of   the

extent   of   depreciation.     In   this   regard,   reliance   has   been

placed on the decision of this Court in  PTC India Ltd.  vs.

 Central Electricity Regulatory Commission 5 .  
5 (2010) 4 SCC 603 [Para 17]
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15. It   is   on   the   same   basis   that   the   findings   of   the

learned   Appellate   Tribunal   so   far   as   the   ‘Sinking   Fund’   is

concerned,   which   has   been   held   to   be   recoverable   through

the   tariff,   has   been   assailed.     It   is   urged   that   the   Tariff

Regulations do not make any provision for any ‘Sinking Fund’

and,   therefore,   the   recovery   of   such   fund   through   tariff   is

abhorrent to the provisions of Section 61 of the 2003 Act read

with the Tariff Regulations. 

16. Similarly,   the   finding   of   the   learned   Appellate

Tribunal   with   regard   to   the   allowability   of   charging   the

expenditure   on   projects   other   than   electricity   from   the

common fund as common expenditure has been assailed as

being contrary to the spirit of the 2003 Act inasmuch as it is

opposed to the principle of allowance of cross­subsidy which

the   2003   Act   seeks   to   do   away   with.     Reference   has   been

made to different provisions of the 2003 Act to contend that

recovery   of   expenditure   unrelated   to   electricity   generation

from   the   electricity   tariff   is   alien   and   contrary   to   the

provisions of the 2003 Act.  

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17. The conclusions of the learned Appellate Tribunal

with   regard   to   the   debt­equity   ratio   insofar   as   the   projects

completed prior to 1992 (which has been fixed at 50:50) has

also been assailed on the ground that the sole basis thereof is

the   practice   followed   in   the   case   of   another   PSU   i.e.   NTPC

ignoring   the   fact   that   the   Regulation   20   of   the   Tariff

Regulations provide for a ratio of 70:30.

18. Likewise, the findings with regard to Pension and

Gratuity   Fund,   particularly, the  recovery  of  the entire fund

from the consumers (in reversal of the decision of the CERC

permitting recovery from consumers to the extent of 60% and

contribution by the Corporation of the balance 40%) has been

assailed on the ground that no discernible or rational basis is

disclosed   for   the   view   taken,   particularly   when   the

Corporation has been permitted and, in fact, collected tariff at

the rate fixed by the Corporation itself under the Act of 1948

for   the   years   2004­2005   and   2005­2006   which   constitute

40% of the tariff period. 

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19. The allowances of capital investment in respect of

Head   Office,   Regional   Offices,   Administrative     other

Technical Centres have also been assailed as being contrary

to the provisions of the Tariff Regulations. 

20. The above contentions made on behalf of the CERC

has been reiterated on behalf of the consumers who are the

appellants in Civil Appeal Nos. 971­973 of 2008.   So far as

the   interpretation   of   the   provisions  contained   in  the  fourth

proviso to Section 14 of the 2003 Act is concerned, learned

counsel for the said appellants (consumers) has additionally

drawn   the   attention   of   the  Court   that   in   the  course  of   the

exercise   leading   to   the   enactment   of   2003   Act,   the

Parliamentary   Standing   Committee   on   Energy   had,   in   fact,

recommended   that   the   Corporation,   having   regard   to   the

special responsibility entrusted to it under the Act of 1948,

should   be   exempted   from   the   application   of   the   2003   Act.

Parliament,   however,   decided   not   to   provide   a   blanket

exemption in favour of the Corporation. It is pointed out that

under   Section   173   of   the   2003   Act   it   is   only   such   of   the
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provisions   of   the   2003   Act  which  are inconsistent   with  the

provisions   of   the   Consumer   Protection   Act,   1986   or   the

Atomic Energy Act, 1962 or the Railways Act, 1989 that will

not  have   any  effect.     Instead, insofar  as the Corporation is

concerned what was provided for is a limited exemption, the

extent   of   which   has   been   spelt   out   by   Section   14   (fourth

proviso)   of   the   2003   Act,   which,   necessarily,   has   to   be

understood to be circumscribed by the provisions of the main

part of Section 14 of the 2003 Act which deals with licensing

as distinguished from tariff determination.  It is further urged

on behalf of the appellants – consumers that the decision to

keep in abeyance the tariff for a period of two years is ultra

vires the provisions of the 2003 Act, there being no authority

in law to order any such relaxation or to postpone the coming

into effect of the tariff fixed under the 2003 Act.     The fact

that the provisions of the Act of 1948 do not find any mention

in the proviso to Section 61 of the 2003 Act has also been

stressed upon.  

20

21. In   so   far   as   the   pension   and   gratuity   fund   is

concerned, in addition to the grounds urged in this regard on

behalf of the CERC, it is further urged that almost 99% of the

pension   and   gratuity   liability,   as   assessed   by   the   Actuary,

has been permitted to be loaded on to the electricity business

without any reference or finding with regard to the percentage

of   man­power   deployed  in the electricity  business.   Such  a

decision which has been based on the sole submission of the

Corporation is contended to be untenable in law.  

The   calculation   and   allowance   of   percentage   of

depreciation by following the provisions of Section 40 of the

Act of 1948 has also been assailed as being contrary to the

provisions   of   the   Regulations   which,   according   to   the

appellants – consumers should hold the field. 

22. The   Corporation   which   is   the   respondent   in   the

appeals   filed   by   the   Regulatory   Commissions   and   the

Consumers had filed its cross­objections in the said appeals.

Emphasis is laid on the status and peculiar characteristics of

the   Corporation   as   envisaged   by   the   statute   i.e.   the   Act   of
21

1948 constituting the said body.   Reference has been sought

to   be   made   to   the   various   social   welfare   activities   that   the

Corporation   is   statutorily   mandated   to   perform   over   and

above electricity generation and transmission. The aforesaid

peculiar   characteristics   of   the   Corporation   and   its

multifarious      duties,     according       to       the Corporation,

would   justify   continuity   of   the   due   application   of   the

provisions of the Act     of   1948   as   are   not     inconsistent

with   the   provisions    of    the 2003 Act.      It   is   only

such of the provisions of the Act of 1948 which are in clear

conflict with the provisions of the 2003 Act that will give way.

The provisions of the Act of 1948 that may be in conflict with

those of the Tariff Regulations will however not have the same

effect inasmuch as the provisions of a subsidiary legislation

cannot   have   an   overriding   effect   over   the   provisions   of   the

parent or any other statute.  It has been further urged that in

a given situation the proviso to a statutory provision may act

as a main provision itself going beyond the parameters of the

matter of which the proviso may have been enacted as a part.

In this regard, reliance has been placed on the decisions of
22

this   Court   in  State   of   Rajasthan  vs.  Leela
    Jain 6,  S.

Sundaram   Pillai     Others  vs.  V.R.   Pattabhiraman  

 Others 7,  Shah   Bhojraj   Kuvarji   Oil   Mills     Ginning

Factory  vs.  Subhash
    Chandra   Yograj   Sinha 8,  Motiram

 9.  
Ghelabhai vs. Jagan Nagar
 

23. Coming   specifically   to   the   rate   of   depreciation,

sinking fund, interest on capital, etc., it has been urged that

there being no provisions in the 2003 Act in respect of the

aforesaid   matters   which   are   dealt   with   only   by   the   Tariff

Regulations in contra­distinction to specific provisions of the

Act of 1948 covering the issue i.e. Section 40 of the Act of

1948, it is the provisions of Part IV of the Act of 1948 which

will   govern   the   matter.     So   far   as   the   debt­equity   ratio   is

concerned, it has been urged that the determination of the

ratio at 50:50 for capital assets created prior to 30 th  March,

1992 and the ratio of 70:30 for the capital assets after 30 th

March, 1992 is consistent with the principles adopted for all

6 (1965) 1 SCR 276
7 (1985) 1 SCC 591 [Para 27 to 43]
8 (1962) 2 SCR 159 [Para 9 and 10]
9 (1985) 2 SCC 279 [Para 9]
23

Central   Government   Corporations   like   NTPC   Limited,

Powergrid Corporation of India Limited, NHPC etc.  

24. Insofar   as   the   pension   and   gratuity   contribution

required   to   be   made   by   the  Corporation   is  concerned,   it  is

contended that the issue has been raised only at the stage of

arguments   by   the   HT­consumers   i.e.   appellants   in   Civil

Appeal Nos. 971­973 of 2008. The same has not been raised

by   the   Regulatory   Commission   at   all   or   even   by   the   HT­

consumers   before   the   forums   below.     That   apart,   it   is

contended that the break­up of the details of the percentage

of employees called for by the CERC in this regard was made

available   which   fact   is   borne   out   by   the   documents   placed

before   the   learned   Appellate   Tribunal   which   has   also   been

laid before this Court   (Annexure 18 to the Memo of Appeal

before the learned Appellate Tribunal). 

25. Similarly,   in   so   far   as   the   Operation   and

Maintenance expenditure is concerned, it is contended that

the   same   has   been   rightly   allowed   as   per   the   Tariff

Regulations in force. 

24

26. Before   delving   into   the   issues   arising   in   the

appeals,   two   preliminary   questions   need   to   be   answered

which we propose to do at the outset.   The first pertains to

the   grant   of   a   transitory   period   making   the   tariff   order

effective from 1st April, 2006 instead of 1st April, 2004.

27. We   have   considered   the   reasons   which   had

weighed   with   the   CERC   as   well   as   the   learned   Appellate

Tribunal   in   granting   the   aforesaid   transitory   period.     The

present  dispute,  regardless of the way  it is resolved, would

have   relevance   to   the   quantum   of   the   tariff,   depending   on

whether   the   determination   is   made   on   the   basis   of   the

provisions of Part IV of the Act of 1948 or the provisions of

the Tariff Regulations, as may be.  So far as the grant of the

transitory   period   is   concerned,   the   same,   we   have   noticed,

has   been   so   granted   having   due   regard   to   the   statutory

functions/social   responsibilities   that   the   Corporation   is

mandated   to  undertake  in terms of the Act of 1948.     The

tariff fixed is also lower than the tariff that has been fixed by

the   Jharkhand   and   West   Bengal   Electricity   Regulatory
25

Commission for the general/domestic classes of consumers.

While it is correct that the classes of consumers served by the

Corporation   are   HT­Industrial   consumers   like   Steel,   Coal,

Railways,   etc.   beside   bulk   supply   to   main   beneficiaries   of

State Electricity Boards of West Bengal and Jharkhand, the

said   fact,   itself,   is   another   peculiar   feature   which

distinguishes   the   Corporation   from   other   licenses.     If   in   a

situation   where   the   Corporation   in   addition   to   generation,

transmission   and   distribution   of   electricity   is   statutorily

required   to   undertake   certain   social   security/beneficial

measures   like   flood   control,   control   of   soil   erosion,

afforestation, navigation, promotion of public health, etc. we

do not see how the grant of transitory period can be faulted

with.     We,   therefore,   decline   to   interfere   with   the   aforesaid

part of the order of the learned Appellate Tribunal.

28. The learned Appellate Tribunal has also taken the

view that having regard to the provisions of Section 79 of the

2003   Act   it   is   the   CERC   which   would   be   the   “Appropriate

Commission”   for   determination   of   tariff   inasmuch   as   the
26

Damodar   Valley   Corporation   is   a   Corporation   owned   and

controlled by the Central Government.  The detailed inputs to

arrive at the aforesaid conclusion have been duly considered

by us.   On such consideration, we are of the view that the

above conclusion recorded by the learned Appellate Tribunal

is neither unreasonable nor irrelevant so as to warrant our

interference,   particularly,   in   exercise   of   the   limited

jurisdiction under Section 125 of the 2003 Act.

29. We may now turn to the other/larger issues arising

in the appeals.

30. The   Damodar   Valley   Corporation   had   been

incorporated  under  the   provisions of the Act of 1948.   The

facts   antecedent   to   the   incorporation   of   this   entity   would

throw   considerable   light   on  the   objects  and   reasons   for   its

incorporation.     Sometime   in   the   year   1943,   the   Damodar

River   Valley   had   been   affected  by   severe   floods   leading   to

wide­scale   destruction   of   life   and   property.   The   Provincial

Government of Bengal had constituted an Enquiry Committee

to suggest ways and means to avoid such catastrophes in the
27

future.  The Enquiry Committee had, inter alia, recommended

that   a   statutory   corporation,   on   the   lines   of   the   Tennessee

Valley Authority of the USA, be incorporated to command and

control   the   Damodar   River.     The   then   British   Government

accepted this proposal of the Committee and had called one

Mr.   W.L.   Voorduin,   a   senior   Engineer   working   for   the

Tennessee   Valley   Authority   to   make   recommendations   and

suggestions in this regard.

31. The   preamble   to   the   Tennessee   Valley   Authority

Act10, 1933, reads that the statute has been enacted by the

Congress “to improve the navigability and to provide for

the flood control of the Tennessee River; to provide for

reforestation and the proper use of marginal lands in the

Tennessee   Valley;   to   provide   for   the   agricultural   and

industrial development of said valley; to provide for the

national defence by the creation of a corporation for the

operation  of  Government  properties at and  near Muscle

Shoals in the State of Alabama, and for other purposes.”

10 16 U.S. Code § 831
28

As can be observed, the primary objective of the Tennessee

Valley Authority Act is to prevent floods across the Tennessee

River Valley and the generation of electricity is incidental to

this activity of flood­control.  

32.  The objects and reasons behind the incorporation

of the Act of 1948 may now be noticed:

“The Damodar River rises in Western Bihar and
flows generally in a south-easterly direction into
Bengal. It is a seasonal river having a large flow
of water during the rains which, apart from being
generally wasted, at times causes great damage
to life and property. It is now proposed to harness
the water of this river and some of its tributaries
and utilize it in multiple development of the
Damodar Valley and the adjoining area.

This Bill seeks to set up a Corporation,
called the Damodar Valley Corporation on
the lines of the Tennessee Valley Authority
in the USA. It will be an autonomous body
within the framework of the enactment. Its
objects, constitution and powers are laid
down in the Bill. Briefly, its main function
will be to control flood in the Damodar,
generate electric power for distribution and
provide water for irrigation and other
purposes. In addition, the Corporation will,
endeavour to promote economic
development of the Damodar Valley and
the adjoining areas. It will consist of three
members including the Chairman. These three
members and the Secretary and the treasurer
will be appointed by the Central Government.
The Corporation will have the power to acquire
land and construct or cause to be constructed
such dams, barrages, reservoirs, power-houses
and power structures, electrical transmission
29

line, irrigation and navigation works as may be
necessary. The capital required by the
Corporation will be provided by the Central
Government and the Government of Bihar and
West Bengal. The profits and losses will be
distributed between these three Governments in
certain agreed proportions.

The provisions of this Bill are designed to give
effect to the broad outlines of the agreement
reached between the three Governments
concerned.”

33. Having noticed the objects and reasons behind the

creation   of   the   incorporated   body   and   the   main   functions

assigned to it by Parliament, we may now specifically revert to

the issue of determination of tariff for supply/distribution of

the electricity generated by the Corporation. 

34. Insofar   as   the   issue   as   to   whether   the   Tariff

Regulations   would   have   an   overriding   effect   to   render   the

parallel provisions in the Act of 1948 ineffective, the reliance

placed   on   behalf   of   the   appellants   on   the   decision   of   a

Constitution   Bench   of   this   Court   in  PTC   India   Limited

(supra)  may now be considered. The primary issue that was

considered by the Constitution Bench of this Court in  PTC
30

India   Limited  (supra)  was  “whether   the   Appellate

Tribunal constituted under the Electricity Act, 2003 has

jurisdiction under Section 111 of the Act to examine the

validity   of   the   Central   Electricity   Regulatory

Commission   (Fixation   of   Trading   Margin)   Regulations,

2006   framed   in   exercise   of   power   conferred   under

Section 178 of the Electricity Act?”

35. The   observations   of   this   Court   in  PTC   India

Limited  (supra)  with   regard   to   the   efficacy   of   the   Tariff

Regulations   in   the   light   of   its   statutory   character   must

necessarily be understood in the above context.  The opinion

rendered in  PTC India Limited  (supra)  itself makes it clear

that the Tariff Regulations though statutory in character are

a species of subordinate delegated legislation, the purport of

which   has   been   described   and   dealt   with   in   the   following

manner:

“52. In Indian Express Newspapers (Bombay) (P) Ltd.
v. Union of India this Court* held that subordinate
legislation is outside the purview of administrative
31

action i.e. on the grounds of violation of rules of
natural justice or that it has not taken into account
relevant circumstances or that it is not reasonable.
However, a distinction must be made between
delegation of legislative function and investment of
discretion to exercise a particular discretionary power
by a statute. In the latter case, the impugned exercise
of discretion may be considered on all grounds on
which administrative action may be questioned such
as non-application of mind, taking irrelevant matters
into consideration, etc. The subordinate legislation is,
however, beyond the reach of administrative law.
Thus,

__
*(1985) 1 SCC 641
delegated legislation – otherwise known as secondary,
subordinate or administrative legislation – is enacted
by the administrative branch of the government,
usually under the powers conferred upon it by the
primary legislation. Delegated legislation takes a
number of forms and a number of terms – rules,
regulations, by-laws etc; however, instead of the said
labels what is of significance is the provisions in
the primary legislation which, in the first place,
confer the power to enact administrative
legislation. Such provisions are also called as
“enabling provisions”. They demarcate the
extent of the administrator’s legislative power,
the decision-making power and the policy
making power. However, any legislation enacted
outside the terms of the enabling provision will be
vulnerable to judicial review and ultra vires.”

36. The opinion of a seven Judge Bench of this Court,

though of considerable vintage, in The Presidential Reference,
32

The Delhi Laws Act, 191211  may usefully be recalled at this

stage:

“(In delegated legislation), a portion of the law-
making power of the legislature is conferred or
bestowed upon a subordinate authority and the rules
and regulations which are to be framed by the latter
constitute an integral portion of the statute itself. As
said already, it is within powers of Parliament or any
competent legislative body, when legislating within its
legislative field, to confer subordinate administrative
and legislative powers upon some other authority. The
question is: What are the limits within which such
conferment of bestowing of powers could be properly
made?

It is conceded by the learned Attorney-General that
the legislature cannot totally abdicate its functions
and invest another authority with all the powers of
legislation which it possesses. Subordinate legislation,
it is not disputed, must operate under the control of
the legislature from which it derives its authority, and
on the continuing operation of which, its capacity to
function rests. As was said by Dixton, J., (vide,
Victoria Stevedoring and General Contracting
Company v. Dignan, 46 C.L.R. 73) “a
subordinate legislation cannot have the
independent and unqualified authority which is
an attribute of true legislative power”. It is
pointed out by this learned Judge that several legal
consequences flow from this doctrine of subordinate
legislation. An offence against subordinate legislation
is regarded as an offence against the statute and on
the repeal of the statute the regulations automatically
collapse. So far, the propositions cannot, and need
not, be disputed. But, according to the learned
Attorney-General, all that is necessary in subordinate
legislation is that the legislature should not totally
abdicate its powers and that it should retain its

11 A.I.R. 1951 S.C. 332; Coram: Hon’ble the Chief Justice H.J. Kania,
Hon’ble Mr. Justice Syed Fazl Ali, Hon’ble Mr. Justice Patanjali
Sastri, Hon’ble Mr. Justice M.C. Mahajan, Hon’ble Mr. Justice B.K.
Mukherjea, Hon’ble Mr. Justice S.R. Das and Hon’ble Mr. Justice Vivian
Bose
33

control over the subordinate agency which it can
destroy later at any time it likes. If this is proved to
exist in a particular case, then the character or extent
of the powers delegated to or conferred upon such
subordinate agent is quite immaterial and into that
question the courts have no jurisdiction to enter. This
argument seems plausible at first sight, but on closer
examination, I find myself unable to accept it as
sound. In my opinion, it is not enough that the
legislature retains control over the subordinate agent
and could recall him at any time it likes, to justify its
arming the delegate with the legislative powers in
regard to a particular subject. Subordinate legislation
not only connotes the subordinate or dependent
character of the agency which is entrusted with the
power to legislate, but also implies to subordinate or
ancillary character of the legislation itself, the making
of which such agent is entrusted with. If the
legislature hands over its essential legislative powers
to an outside authority, that would, in my opinion,
amount to a virtual abdication of its powers and such
an act would be in excess of the limits of permissible
delegation.

… On a consideration of all these decisions I have no
hesitation in holding that as regards constitution of
the delegation of legislative powers the Indian
Legislature cannot be in the same position as the
prominent British Parliament and how far delegation
is permissible has got to be ascertained in India as a
matter of construction from the express provisions of
the Indian Constitution. It cannot be said that an
unlimited right of delegation is inherent in the
legislature power itself. This is not warranted
by the provisions of the Constitution and the
legitimacy of delegation depends entirely upon
its being used as an ancillary measure which
the legislature considers to be necessary for
the purpose of exercising its legislative powers
effectively and completely. The legislature must
retain in its own hands the essential legislative
functions which consist in declaring the
legislative policy and laying down the standard
which is to be enacted into a rule of law, and
what can be delegated in the task of
subordinate legislation which by its very nature
34

is ancillary to the statute which delegates the
power to make it.”

37. It may be wholly unnecessary to detract from the

fundamental principles of law laid down in The Presidential

Reference (supra), which would be an inevitable consequence,

if the contentions advanced on behalf of the appellants to the

effect that the Tariff Regulations must override the provisions

of   the   Act   of   1948   as   the   said  regulations   are   statutory   in

character   is   to   be   accepted.     This   is   also   what   has   been

subsequently  emphasised by this Court in  Bharathidasan

University     Anr.  (supra)   and  Samsthanan   Chethu

Thozhilali Union  (supra).   No error, therefore, can also be

found in the implicit reliance placed on the ratio of the above

decisions by the learned Appellate Tribunal in its order dated

23rd November, 2007.

38. This will bring us to a consideration of the purport

and effect of the fourth proviso to Section 14 of the 2003 Act

on which much debate and discussion have been generated

in the course of prolonged hearing of the case that had taken
35

place.  Section 14 of the Act may usefully be extracted below

at this stage: 

“14. Grant of Licence : “The appropriate
Commission may, on an application made to it
under Section 15, grant a licence to any person

(a) to transmit electricity as a transmission
licensee; or

(b) to distribute electricity as a distribution
licensee; or
Provided that the Developer of a Special Economic
Zone notified under sub-section (1) of Section 4 of
the Special Economic Zones Act, 2005, shall be
deemed to be a licensee for the purpose of this
clause, with effect from the date of notification of
such Special Economic Zone.

(c) to undertake trading in electricity as an
electricity trader,
In any area as may be specified in the licence:
PROVIDED that any person engaged in the business
of transmission or supply of electricity under the
provisions of the repealed laws or any Act specified
in the Schedule on or before the appointed date
shall be deemed to be a licensee under this Act for
such period as may be stipulated in the licence,
clearance or approval granted to him under the
repealed laws or such Act specified in the Schedule,
and the provisions of the repealed laws or such Act
specified in the Schedule in respect of such licence
shall apply for a period of one year from the date of
commencement of this Act or such earlier period as
may be specified, at the request of the licensee, by
the Appropriate Commission and thereafter the
provisions of this Act shall apply to such business:
PROVIDED FURTHER that the Central Transmission
Utility or the State Transmission Utility shall be
deemed to be a transmission licensee under this
Act:

PROVIDED also that in case an Appropriate
Government transmits electricity or distributes
36

electricity or undertakes trading in electricity,
whether before or after the commencement of this
Act, such Government shall be deemed to be a
licensee under this Act, but shall not be required to
obtain a licence under this Act:

PROVIDED also that the Damodar Valley
Corporation, established under sub-section
(1) of Section 3 of the Damodar Valley
Corporation Act, 1948, shall be deemed to be
a licensee under this Act but shall not be
required to obtain a licence under this Act
and the provisions of the Damodar Valley
Corporation Act, 1948, insofar as they are not
inconsistent with the provisions of this Act,
shall continue to apply to that Corporation:
PROVIDED also that the Government company or
the company referred to in sub-section (2) of
section 131 of this Act and the company or
companies created in pursuance of the Acts
specified in the Schedule, shall be deemed to be a
licensee under this Act:

PROVIDED also that the Appropriate Commission
may grant a licence to two or more persons for
distribution of electricity through their own
distribution system within the same area, subject to
the conditions that the applicant for grant of licence
within the same area shall, without prejudice to the
other conditions or requirements under this Act,
comply with the additional requirements 1 (relating
to the capital adequacy, Credit worthiness or code
of conduct) as may be prescribed by the Central
Government, and no such applicant, who complies
with all the requirements for grant of licence, shall
be refused grant of licence on the ground that there
already exists a licensee in the same area for the
same purpose:

PROVIDED also that in a case where a distribution
licensee proposes to undertake distribution of
electricity for a specified area within his area of
supply through another person, that person shall
not be required to obtain any separate licence from
the concerned State Commission and such
distribution licensee shall be responsible for
distribution of electricity in his area of supply:
37

PROVIDED also that where a person intends to
generate and distribute electricity in a rural area to
be notified by the State Government, such person
shall not require any licence for such generation
and distribution of electricity, but he shall comply
with the measures which may be specified by the
Authority under section 53:

PROVIDED also that a distribution licensee shall not
require a licence to undertake trading in electricity.”

39. It is contended on behalf of the appellants that the

application   of   a   proviso   must   always   be   confined   and

understood   within   the   parameters   of   the   provisions   of   the

main   section       of   which   the   proviso   is   a   part   and   that   a

proviso,   in   no   case,   can   be   construed   to   have   any   general

application.  This argument would require some examination.

In   this   regard   the   decision   of   this   Court  Shah   Bhojraj

Kuvarji Oil Mills  (supra)  may be usefully recapitulated and

the following observations may be specifically taken note of:

“It is contended by the learned Attorney-General
that the construction placed by the High Court
upon the first proviso to Section 50 (of Bombay
Rents, Hotel and Lodging House Rates Control Act
of 1947) is erroneous. Though he concedes that the
proviso must be read as qualifying what the
substantive part of Section 50 enacts, he urges that
the proviso goes beyond that purpose and enacts a
substantive law of its own. He relies upon the
following observations of Lord Loreburn, L.C., in
Rhondda Urban Council v. Taff Vale Railway, (1909)
A.C. 253, where a proviso to Section 51 of the
38

Railway Clauses Consolidation Act, 1845, was under
consideration:

“It is true that Section 51 is framed as a
proviso upon preceding sections. But it is also
true that the latter half of it, though in form a
proviso, is in substance a fresh enactment,
adding to and not merely qualifying that which
goes before.”,
and contends that the latter portion of the proviso,
in question, being a substantive enactment,
comprehends not only those suits which were
pending on the date of repeal but also those cases,
which came within the language of the latter part
of the proviso, whenever the Act was extended to
new areas…………..

…..…As a general rule, a proviso is added to
an enactment to qualify or create an
exception to what is in the enactment, and
ordinarily, a proviso is not interpreted as
stating a general rule. But, provisos are often
added not as exceptions or qualifications to
the main enactment but as savings clauses,
in which cases they will not be construed as
controlled by the section.”

40. Similarly in S. Sundaram Pillai (supra) this Court

has observed:

“A very apt description and extent of a proviso was
given by Lord Oreburn in Rhondda Urban District
Council v. Taff Vale Railway Co. , (1909) A.C. 253,
where it was pointed out that insertion of a proviso
by the draftsman is not always strictly adhered to
its legitimate use and at times a section worded as
a proviso may wholly or partly be in substance a
fresh enactment adding to and not merely
excepting something out of or qualifying what goes
before.”
39

41. The fourth proviso to Section 14 of 2003 uses the

expression   “….and   the   provisions   of   the   Damodar   Valley

Corporation Act, 1948 in so far as they are not inconsistent

with the provisions of the Act, shall continue to apply to that

Corporation…”.   On   a   careful   reading   of   the   aforesaid   later

part of the fourth proviso to Section 14 of the Act of 2003, it

is seen that it is clearly a substantive provision to lay down

something more than what a proviso generally deals with. If

the intention of the proviso was to exclude DVC only from the

main part of Section 14 of the Act of 2003 dealing with the

requirement   of   obtaining   licence   for

transmission/distribution/trade in electricity, the purpose is

fully achieved by the first part recognising DVC as a ‘deemed

licensee’   and   not   requiring   to   apply   for   and   obtain   licence.

The Legislature could have simply stopped there. There was

no necessity to incorporate the second part. The second part

of the fourth proviso is to bring in the continued application

of some of  the provisions of the Act of 1948 which are not

inconsistent   with   the   provisions   of   the   Act   of   2003.   To

elaborate it further, let us take the case of the third proviso to
40

Section 14 of the Act of 2003 which provides “that in case an

appropriate   Government   transmits   electricity   or   distributes

electricity or undertakes trading in electricity whether before

or   after   the   commencement   of   the   Act,   such   Government

shall be deemed to be a licensee under the Act but shall not

be required to obtain licence under the Act”. In so far as DVC

is concerned, if the fourth proviso is to be confined only to

licensing as in the case of third proviso, the fourth proviso

also   would   have   stopped   with   the   first   part   of   the   proviso.

There would have been no necessity to incorporate the second

part of the proviso. The legislature does not incorporate any

words   which   are   irrelevant   or   redundant   and   every

expression used in a statutory provision has some purpose.

42. A careful comparative reading of the third and the

fourth   provisos   to   Section   14   of   the   Act   of   2003   clearly

indicates the intention of the legislature that the second part

of the fourth proviso is to bring in the continued application

of some of  the provisions of the Act of 1948 which are not

inconsistent with the provisions of the Act of 2003. There are
41

no licensing provisions in the Act of 1948 to be saved. The

obvious reference in the second part of proviso is to provide

for the continued application of the provisions of the Act of

1948 insofar as they are not inconsistent with the provisions

of the Act of 2003.

43. In  the   course  of arguments,  the  appellants made

reference to Sections 18 and 19 of the Act of 1948 as being

the provisions relating to licensing which could be said to be

considered   as   saved   by   virtue   of   second   part   of   the   fourth

proviso to Section 14 of the Act of 2003. A perusal of Sections

18 and 19 of the Act of 1948 show that they deal with the

supply and generation of electrical energy and distribution of

electricity within the Damodar Valley area.  The provisions of

the Act of 2003 which authorise the Regulatory Commissions

to grant licence to persons (other than DVC) fully govern the

field and there is no question of continued application of the

Act of 1948 in that respect. Sections 18 and 19 of the Act of

1948 do not deal with licence to DVC. These provisions only

deal   with   activities   of   other   entities   to   distribute   electricity
42

within   the   Damodar   Valley   area.   Further,   the   provisions   of

Electricity Act, 2003 authorizes the Regulatory Commissions

to grant licence to persons other than DVC. Therefore, there

can   be   no   question   of   continued   application   of   the   Act   of

1948 over those provisions.

44. The   fourth   proviso   to   Section   14   which   uses   the

expression   “….and   the   provisions   of   the   Damodar   Valley

Corporation Act, 1948 in so far as they are not inconsistent

with the provisions of the Act, shall continue to apply to that

Corporation…”, in our view, is a positive provision enabling

continued application of certain provisions of the Act of 1948

which   are   not   inconsistent   with   the   provisions   of   the

Electricity   Act,   2003.   The   intention   behind   both   the

provisions needs to be appreciated and given effect to.  

45. There is yet another dimension of the case that has

been   urged   and,   therefore,   will   require   our   consideration.

While   dealing   with   the   question   as   to   whether   Reports

submitted   by   Parliamentary   Standing   Committee,   can   be

taken   as   permissible   external   aids   for   interpretation   of   a
43

statute, this Court in a recent decision in Kalpana Mehta 

 . 12 had occasion to observe as
 Ors.   vs. Union of India  Ors
 

follows:

“xxxx
it clear as day that the Court can take aid of
the report of the parliamentary committee for
the purpose of appreciating the historical
background of the statutory provisions and it
can also refer to committee report or the
speech of the Minister on the floor of the
House of the Parliament if there is any kind of
ambiguity or incongruity in a provision of an
enactment. Further, it is quite vivid on what
occasions and situations the Parliamentary
Standing Committee Reports or the reports of other
Parliamentary Committees can be taken note of by
the Court and for what purpose. Relying on the
same for the purpose of interpreting the meaning
of the statutory provision where it is ambiguous
and unclear or, for that matter, to appreciate the
background of the enacted law is quite different
from referring to it for the purpose of arriving at a
factual finding. That may invite a contest, a
challenge, a dispute and, if a contest arises, the
Court, in such circumstances, will be called upon to
Rule on the same.”

46. The   proceedings   of   the   Parliamentary   Standing

Committee   on   Energy   (13th  Lok   Sabha),   insofar   as   the

Electricity Bill of 2001 presented before the Lok Sabha on

19­12­2002 is concerned, would go to indicate that various

organisations like the Ministry of Railways, the Bhakra Beas

12 2018 (7) SCALE 106
44

Management Board (BBMB)   and also the Corporation had

requested for exemption from the operation of the provisions

of  2003   Act  citing   the   peculiar,   sensitive   and   specialised

nature of task that such bodies have been entrusted by the

statutory   enactments   constituting   and   governing   the   said

bodies/organizations.     Specifically,   in   this   regard,   the

peculiar   duties   and   responsibilities   cast   on   the   DVC   by

Section 12 of the Act of 1948 had been highlighted before

the Parliamentary Standing Committee.   It had been urged

before   us   that   it   was   recommended   by   the   Parliamentary

Standing Committee that exemption from the provisions of

the proposed 2003 Act should be granted to the Corporation

in view of its special statutory status which may get eroded

if the exemptions are not to be granted.   The provisions of

Section 58 of the Act of 1948 which is in the following terms

were   also   placed   before   the   Parliamentary   Standing

Committee   while   seeking   exemption   from   the   operation   of

the proposed 2003 Act:

“58. Effect of other laws : The provisions of
this Act or any rule made thereunder shall have
effect notwithstanding anything contained in any
45

enactment other than this Act or any instrument
having effect by virtue of any enactment other than
this Act.”

47. On the other hand, it would appear from the record

of the proceedings of the Parliamentary Standing Committee

that the Industry represented by Chhotanagpur Chamber of

Commerce  Industry and The Bengal Chamber of Commerce

  Industry   as   well   as   the   States   of   Jharkhand   and   West

Bengal had contested the claims made by the Corporation for

exemption   and   had   pleaded   before   the   Parliamentary

Standing   Committee   that   the   Act   of   1948   itself   be

repealed/amended insofar as all non­power related activities

are concerned which constitute only about 10% of the total

activities of the Corporation.

48. After considering the respective stands taken, the

Parliamentary   Standing   Committee   had   recommended   that

the Corporation should be exempted from the operation of the

provisions   of   the   proposed   2003   Act   in   view   of   the   special

status   and   responsibilities   of   the   Corporation   as   envisaged

under the Parliamentary enactment constituting it (i.e the Act
46

of   1948).     However,   it   appears   that   Parliament   was   not

inclined to provide a blanket/total exemption in favour of the

Corporation and the 2003 Act did not include the Corporation

as one of the entities in Section 173 of the 2003 Act which

provides   exemption   in   so   far   as   the   provisions   of   the

Consumer Protection Act, 1986, the Atomic Energy Act, 1962

and the Railways Act, 1989 clearly excluding the provisions of

the   Act   of   1948   therefrom.     Instead,   the   fourth   proviso   to

Section   14   of   the   2003   Act   was   specifically   incorporated,

details  of   which have  already  been noted. Having  regard to

the legislative history behind the enactment of the provision

of Section 173 and the provisions of Section 14 including the

fourth proviso thereto, it may be more in consonance with the

Parliamentary   intention   to   hold   that   the   fourth   proviso   to

Section 14 need not be understood to be confined only to the

question of licensing which is dealt with by the main part of

the   Section   14.     Rather,   we   are   inclined   to   hold   that

Parliament had intended to provide partial exemption to the

Corporation by mandating that such provisions of the Act of

1948   which   are   not   inconsistent   with   the   2003   Act   will
47

continue to hold the field.  Viewed thus, the fourth proviso to

Section 14 of the Electricity Act 2003 has to be understood to

be   a   legislative   exercise   in   the   nature   of   a   substantial

provision   of   law.       Part   IV   of   the   Act   of   1948   not   being

inconsistent   with   the   provisions   of   the   2003   Act   can,

therefore,   be   taken   into   account  for   determination   of  tariff.

Such   provisions   of   the   Act   of   1948   will   also   have   an

overriding effect over the inconsistent provisions of the Tariff

Regulations.   Our   view,   as   above,   will   also   effectuate   the

provisions of the Act of 1948 in so far as the activities of the

Corporation,   other   than   generation   and   transmission   of

electricity, is concerned. We, therefore, affirm the above view

taken by the Appellate Tribunal for the reasons afore­stated.

49. The   specific   heads   of   tariff   fixation   on   which

grievances have been raised by the appellants in the present

set of appeals are enumerated as hereunder:

(a) Depreciation rate;

(b) Sinking Fund;

(c) Debt Equity ratio;
48

(d) Pension  Gratuity Contribution;

(e) Return on Capital Investment on Head Office etc.;

(f) Revenue   relating   to   afforestation   etc.,   which   are

not 

relatable to power generation;

(g) Period of transition (two years) allowed for the tariff

fixed by the CERC to come into effect;

(h) The treatment of entire transmission as inter­State

transmission   lines   thereby   divesting   the

Jharkhand   and   West   Bengal   State   Electricity

Regulation Commissions of the power to fix tariff

insofar as intra­State transmission of electricity is

concerned;

50. Insofar as the questions under the last two issues

at (g) and (h) above is concerned, the same have already been

dealt with in the present order.   Of the remaining heads of

tariff fixation, it appears that so far as the ‘depreciation rate’

and ‘sinking fund’ is concerned it is the provisions of Section

40   of   the   Act   of   1948   which   have   been   held   to   be
49

determinative.  We have gone through the reasoning adopted

by   the   learned   Appellate   Tribunal   in   this   regard.   Having

clarified the manner in which the fourth proviso to Section 14

of   the   2003   Act   has   to   be   understood,   we   do   not   find   the

reasoning adopted by the learned Appellate Tribunal on the

issues   relating   to   ‘depreciation’   and   ‘sinking   fund’   to   be

fundamentally flawed in any manner so as to give rise to a

substantial   question   of   law   requiring   our

intervention/interference under Section 125 of the 2003 Act.

51. Insofar   as   the   debt­equity   ratio   is   concerned,   we

find that except for the projects which have been completed

prior to 1992 in which case the ratio has been worked out at

par with other public­sector organisation at 50:50, the ratio

of 70:30 has been adopted following the prescription under

Regulation 20 of the Tariff Regulations in the absence of any

specific rate under the Act of 1948.

52. So   far   as   the   pension   and   gratuity   fund   is

concerned, the only issue arising is whether the fund worked

out   on   Actuary   basis   at   Rs.1534.49   crores   should   be
50

apportioned between the Corporation and the consumers as

held   by   the   CERC   in   the   ratio   of   40:60   or   the   entire   fund

should be allowed to be recovered by way of tariff from the

consumers   as   held   by   the   learned   Appellate   Tribunal.   The

reasoning of the learned Appellate Tribunal in coming to the

aforesaid conclusion is as follows:

“D.3 As a general rule, once the
Commission, after prudence check, has agreed
with the need for funding the Pension and
Gratuity Contribution funds, DVC should have
been allowed to recover entire amount from the
consumers through the tariff. Asking DVC to
contribute out of its own resources would
tantamount to denying it the return on equity as
assured in terms of Tariff Regulations. However,
if we look at it from the point of view of the
consumers, the consumers, particularly the
industrial and commercial ones, have now no
option to adjust their sale price to take into
consideration the need for meeting the
accumulated liability. It is, therefore, an
accepted fact that due to postponing of the
creation of such fund, the consumers were
enjoying lesser tariff than the legitimate tariff
otherwise applicable to them.”

53. A careful consideration of the reasoning adopted by

the learned Appellate Tribunal would not disclose any such

error so as to warrant interference of this Court.  No error or

fallacy, ex facie, is disclosed in the reasoning adopted so as to

justify interference under Section 125 of the 2003 Act.
51

54. Insofar   as   the   consumers   (appellants   in   Civil

Appeal Nos.  971­973  of  2008) are concerned, an additional

issue has been struck, as noticed earlier.  This is with regard

to the number of employees engaged in the power sector by

the   Corporation   for   whom   alone   proportionate   recovery   by

way of tariff so far as the pension and gratuity is concerned,

would be justifiable.   Apart from the fact that the issue was

not raised in any of the forums below and had been so raised

before this Court for the first time and that too in the course

of the arguments advanced, the materials on record do not

justify a conclusion to be reached by us which will support

the   core   basis   of   the   contention   made,   namely,   that   the

Corporation had not laid before the CERC any materials to

show   the   extent   of   the   work­force   deployed   in   the   power

sector of the Corporation.  In fact, in the counter arguments

advanced   on   behalf   of   the   Corporation   this   contention   has

been   refuted   and   it   is   asserted   that   such   materials   were,

indeed,   laid   before   the   CERC,   a   fact   which   we   find   to   be

correct. 

52

55. Insofar as the issue of allowance of cost relating to

other   activities   of   the   Corporation   to   be   recovered   through

tariff on electricity is concerned, we have taken note of the

objection(s) raised in this regard which in sum and substance

is that Sections 32 and 33 of the Act of 1948 are in direct

conflict   with   Sections   41   and   51   of   the   2003   Act   and,

therefore,   recovery   of   cost   incurred   in   “other   works”

undertaken by the Corporation through power tariff is wholly

untenable. Apart from reiterating the basis on which we have

thought   it   proper   to   affirm   the   findings   of   the   learned

Appellate   Tribunal   on   the   purport   and   scope   of   the   fourth

proviso   to   Section   14   of   the   2003   Act   and   the   continued

operation of the provisions of the Act of 1948 which are not

inconsistent with the provisions of the 2003 Act, we have also

taken note of the specific provisions contained in Sections 41

and 51 of the 2003 Act which, inter alia, require maintenance

of   separate   accounts   of   the   other   business   undertaken   by

transmission/distribution licensees so as to ensure that the

returns   from   the   transmission/distribution   business   of

electricity   do   not   subsidize   any   other   such   business.     Not
53

only Sections 41 and 51 of the 2003 Act contemplate prior

approval of the Appropriate Commission before a licensee can

engage   in  any   other   business other  than  that of a licensee

under the 2003 Act, what is contemplated by the aforesaid

provisions   of   the   2003   Act   is   some   return   or   earning   of

revenue from such business. In the instant case, the “other

activities” of the Corporation are not optional as contemplated

under Sections  41/51 of the 2003 Act but are mandatorily

cast by the statute i.e. Act of 1948 which, being in the nature

of socially beneficial measures, per se, do not entail earning of

any   revenue   so   as   to   require   maintenance   of   separate

accounts.   The   allowance   of   recovery   of   cost   incurred   in

connection with “other activities” of the Corporation from the

common   fund   generated   by   tariff   chargeable   from   the

consumers/customers   of   electricity   as   contemplated   by   the

provisions of the Act of 1948, therefore, do not collide or is, in

any manner, inconsistent with the provisions of the 2003 Act.

We   will,   therefore,   have   no   occasion   to   interfere   with   the

findings   recorded   by   the   learned   Appellate   Tribunal   on   the

above score.

54

56. Having  dealt with all the issues raised/arising  in

the   appeals   under   consideration   in   the   manner   indicated

above, we deem it proper to dismiss all the appeals and affirm

the judgment and order dated 23rd November, 2007 passed by

the learned Appellate Tribunal.  We order accordingly. 

……………………., J.

 [RANJAN GOGOI]

……………………., J.

 [R. BANUMATHI]
NEW DELHI
JULY 23, 2018

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