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