2002 Supreme(SC) 1000

2002(7) Supreme 206
Supreme Court of India
(From Kolkata High Court)
N. Santosh Hegde, B.N. Agrawal & B.P. Singh, JJ.
West Bengal Electricity Regulatory ­Commission  —Appellant
versus
C.E.S.C. Ltd. etc. etc. —Respondent
Civil Appeal No. 4037 of 2002
With
C.A. Nos. 4045/2002, 4046/2002, 4047-49/2002, 4050-51/2002, C.A. No. 6487/2002 @ SLP (C) No. CC 6293/2002 & C.A. No. 6488/2002 @ SLP (C) No. CC 6307/2002
Decided on 3-10-2002
Counsel for the Parties :
For the Appearing Parties : Soli J. Sorabjee, Attorney General, Harish N. Salve, Solicitor General and Altaf Ahmad, Additional Solicitor General, I.M. Chagla, R.F. Nariman, Dushyant Dave, A.K. Ganguli, Shanti Bhushan, K.K. Venugopal, Dr. Abhishek M. Singhvi, Dipankar P. Gupta, P. Chidambaram, Anil B. Divan, Milon K. Banerjee, K. Parasaran, Ranjit Kumar, T.R. Andhyarijuna, Sr. Advocates, P.H. Parekh, Sameer Parekh, Amit Dhingra, Ajay Jha, Sunil Mathews, D.N. Ray, Pratik Dhar, Sanjay R. Hegde, Anil Nauriya, Ms. Hemantika Wahi, Ms. Sumita Hazarika, Sunil Dogra, Vijay Hansaria, Ashok Kumar Gupta, Pranab Kumar Mullick, Ms. Gauri Rasgotra, Ms. Shruti Chaudhury, Ms. Sumita Goel, Suman Joyti Khaitan, Dr. Samir Chakraborty, Ms. Sangeeta Mandal, Ms. Mamta Tiwari, Ms. Sushmita Kapur, Sanjiv Sen, Utpal Majumdar, Dipak Java, Ghanshyam Joshi, D.N. Ray, Ms. Sumita Mukherjee, Haigreve Khaitan, Siddhartha Chowdhury, Ms. Gayatri Goswami, Ms. Aprajita Singh, Ms. Meenakshi Sakhardande, P. Parmes­waran, Ms. Meenakshi Ghosh, E.R. Kumar, Sidharth Datta, B.L. Kanodia, Farrukh Rasheed, Mukesh Kumar, Gourab K. Banerjee, Sanjay Pathak and Deepak Kumar Jena, Advocates.

Important point
The High Court while sitting an appeal u/s 27 of W. Bengal Regulatory Commission Act, 1998 has no jurisdiction to go into the validity of Regulations framed under the Act.

Headnote:(i) The Electricity Regulatory Commission Act, 1998—Section 27—Appeal under—Locus standi of the consumers before the (W.B. Electricity Regulatory Commission in its proceedings under Regulation 18 of W.B. Electricity Regulatory Commission (Conduct of Business) Regulations, 2000—Whether they have locus standi before High Court in an appeal u/s 27 of the 1998 Act? High Court holding “No” on the ground that permitting a large number of consumers (in this case 17 lacs) would amount to an indiscriminate representation and is also against public policy of rate fixing—Whether correct? (No, High Court ought to have impleaded and heard the consumer appellants herein).

       Held : Having considered the finding of the High Court, we are of the opinion that though generally it is true that the price fixation is in the nature of a legislative action and no rule of natural justice is applicable, (See Shri Sitaram Sugar Company Ltd. & Anr. etc. vs. Union of India & Ors. [1990(3) SCC 223, para 45]), the said principle cannot be applied where the statue itself has provided a right of representation to the party concerned. Therefore, it will be our endeavour to find out whether, as contended by learned counsel for the appellants, the statute has provided such a right to the consumers or not. (Para 38)

       Held thereafter : A combined reading of these provisions of the Act, rules and regulations, clearly shows that the statute has unequivocally provided a right of hearing/representation to the consumers, though the manner of exercise of such right is to be regulated by the Commission. This right of the consumers is neither indiscriminate nor unregulated as erroneously held by the High Court. It is true that in Calcutta the respondent company supplies energy to nearly 17 lacs consumers, but the statute does not give individual rights to every one of these consumers. The same is controlled by the Regulations. Therefore, the question of indiscriminate hearing as held by the High Court will not arise. That apart, when a statute confers a right which is in conformity with the principles of natural justice, in our opinion, the same cannot be negatived by a court on an imaginary ground that there is a likelihood of an unmanageable hearing before the forum concerned. As noticed above, though normally price fixation is in the nature of a legislative function and the principles of natural justice are not normally applicable, in cases where such right is conferred under a statute, it becomes a vested right compliance of which becomes mandatory. While the requirement of the principles of natural justice can be taken away by a statute, such a right when given under the statute cannot be taken away by courts on the ground of practical convenience, even if such inconvenience does in fact exist. In our opinion, statute having conferred a right on the consumer to be heard in the matter pertaining to determination of the tariff, the High Court was in error in denying that right to the consumers. Consequently, the right of the consumer to prefer an appeal under Section 27 of the 1998 Act to the High Court is similar, if they are in any manner aggrieved by any order made by the Commission. Alternatively, if the company is an aggrieved party and if it prefers an appeal, then it has to make such of those consumers who have been heard by the Commission, as party respondent, and such consumers will have the right of audience before the appellate court. In the instant case, none of the consumers/consumer organisations who were allowed to participate in the proceedings by the Commission have been made parties to the appeal. Therefore, the High Court ought to have impleaded and heard the consumer-appellants herein. (Para 39)

       (ii) W.B. Electricity Regulatory Commission (Conduct of Business) Regulations, 2000 made u/s 58 of the Electricity Regulatory Commission Act, 1998—Regulations 25 and 31(4) permitting representation of Consumer in Tariff Fixation—High Court holding against Act and directed Commission to amend them—Whether High Court sitting in an appeal u/s 27 of the Act has the jurisdiction to go into the validity of the Regulations framed under the Act, and if so, factually the Regulations as found by the High Court are contrary to the statute? (No to both)—Case law discussed.

       Held (on case law) : From the above decision, we hold that the High Court while exercising its statutory appellate power under Section 27 of the 1998 Act could not have gone into the validity of the Regulations which are part of the statute itself. (Para 45)

       Held also : While deciding the above issue, the High Court also held that while exercising the appellate power by it under any particular statute, it also simultaneously exercises its constitutional power of writ under Articles 226 and 227 of the Constitution of India. (Para 46)

       We do not think that the High Court was correct in this view of its. (Para 47)

       Held factually on merits that the Regulations are not arbitrary and are in conformity with the provisions of the Act. (Para 43)

       (iii) W.B. Electricity Regulatory Commission Act, 1998—Sections 22 read with 29—Tariff Determination—Under the 1998 Act who determines the tariff—High Court holding it is licensee who primarily determines the tariff and role of Commission is only supervisory—Whether correct? (No) (Cross Ref: Indian Electricity Act, 1910 and Electricity (Supply) Act, 1948).

       Held : Having carefully considered the provisions of the Act as also the arguments advanced in this regard, we are of the opinion that under the 1998 Act, it is the Commission concerned and in the instant case the State Commission of West Bengal, which is the sole authority to determine the tariff, of course as per the procedure in the said Act. (Para 56)

       (iv) West Bengal Electricity Regulatory Commission Act, 1998—Section 29(2)—Procedure to be followed by the Commission to determine the tariff—High Court holding Sch. VI of 1948 Act and Section 29(2) of 1998 Act has no application—Whether correct? (No).

       Held : It is clear from the above observation of the High Court that it was of the opinion that while determining the tariff even under the 1998 Act it is only the principles found in Schedule VI to the 1948 Act which apply and the other principles found in sub-clauses (b) to (g) of Section 29(2) have no application in the process of determining the tariff. (Para 61)

       But held : In the above background, we will now decide whether the High Court was justified in coming to the conclusion that it is Schedule VI and Schedule VI alone which has to be followed in determination of the tariff. While discussing the issue as to the right of determination of tariff by the Commission, we have already negatived the argument of the respondents as also the finding of the High Court that the non obstante clause found in Schedule VI to the 1948 Act does override the provisions of the 1998 Act. If that be so, Section 29(1) which opens with the non obstante clause prevails over all other provisions. This does not, however, mean that the Commission can totally ignore the provisions of Schedule VI to the 1948 Act. That is because the Regulations framed by the Commission make the said principles applicable i.e. Section 57, 57A and Schedule VI to the 1948 Act is incorporated in the procedure of determining the tariff but along with the other principles enumerated in the guidelines found in clauses (b) to (g) of Section 29(2) of the 1998 Act. Even though the Commission had the power of departing from the applicability of Schedule VI while determining regulations under Section 30 of the 1998 Act, it has not chosen to do so. Therefore, as the statute stands, the Commission is bound to take into consideration the principles found in Section 57 and 57A and Schedule VI to the 1948 Act, to the ­extent it has become applicable. While so applying these principles of the 1948 Act, including the Sixth Schedule, it is open to the Commission to weigh these principles with other requirements which it has incorporated in the form of regulations and suitably apply the same. In this process, if it chooses to place more reliance on one or more of other principles than those found in Schedule VI to the 1948 Act, then it is open to the Commission to do so and in such an event it is not necessary for the Commission to again invoke Section 30 of the 1998 Act because the requirement of invoking Section 30 arises only at the stage of framing of regulations, thereafter, it is for the Commission to consider the various principles which it has incorporated in its regulations and then apply the same, depending upon the facts of the cases with which the Commission is concerned. There is no doubt that in this process if the Commission commits any error either contrary to law or contrary to established facts in applying these principles, then of course it is open to the High Court as an appellate authority under Section 27 to interfere and rectify the same. Thus, on a careful perusal of the various provisions of the 1998 Act, we are of the opinion that the High Court fell in error when it came to the conclusion that in determining the tariff it is Schedule VI alone which has to be applied. (Para 64)

       (v) W.B. Electricity Regulatory Commission Act, 1998—Section 27—Extent of Appellate power of High Court under—Co-extensive with that of the trial Court—But not unlimited (Cross Ref: Arbitration Act, 1940—Section 34—Customs Act, 1962—Section 150E(a)—Central Excise and Salt Act, 1944—Section 35-L—Appellate Powers).

       Held : It cannot be disputed that when the appellate power is not hedged in by any restriction, the appellate court can independently reconsider the evidence, but the line of decisions relied on by us show that the rule of prudence in law is that such appellate power is not to be exercised for the purpose of substituting one subjective satisfaction with another, without there being any specific reason for such substitution. Further, in regard to the exercise of appellate power against the orders of expert tribunals, on facts, the appellate court which is not an expert forum should be doubly careful while interfering with such expert forum’s findings on facts. That is a principle accepted by this Court with which we respectfully agree. See Reliance Silicon (I) Pvt. Ltd. (supra) as also Collector of Customs, Bombay (supra). (Para 69)

       (vi) Budge—Budge Costs—High Court holding that the finding of Central Electricity Authority under 1948 Act was binding on Commission under 1998 Act.

       Held : We are of the opinion that though the Commission was not bound by the finding of the CEA, still, it having not differed from the said finding for good reasons, the High Court was justified in accepting the figure of Rs. 2295.57 crores as the cost of Budge-Budge project. (Para 74)

       (vii) Transmission and Distribution Losses—Difference in the views of consultants, Commission and High Court.

       Held : While we agree with the Commission that it is the duty of the company to bring down the loss under this head, at the same time, we feel that the same cannot be done in its entirety forthwith because of the reasons given by the Commission itself. At the same time, we also take into consideration the fact that this loss be it transmission or distribution is not totally beyond the control of the Company, which fact is established by the admission made by the respondent Company to the Government of West Bengal as far back as in the year 1993 itself, as also the success claimed by the Company before us in bringing down this loss by 1 for the year 2001-02. If only this effort had been put in by the Company eversince the State of West Bengal directed it to do so in a progressive manner in 1993, the situation would have been different today. Therefore, the problem with which the Company is now faced in regard to this loss is very much contributed by the inaction on the part of the Company. Therefore, we are of the opinion that the Company should bear a substantial part of this loss by itself rather than seeking to transfer the entire burden on the consumers. This has also been the finding of the Commission. However, the Commission thought the loss should be pegged down to 16.8 for the year 2000-2001 as against the actuals claimed by the company at 22.36 which we think is rather on the lower side. Therefore, basing our finding on the very same principle as adopted by the Commission, we think that the T&D losses suffered by the Company for the year 2000-2001, should be something more than what is allowed by the Commission because of the consequential financial burden on the Company. In this regard, we take note of the fact that it is for the first time after coming into force of the 1998 Act that the Company has realised that it is unable to pass on this loss in its entirety to the consumers. Therefore, there is a need to see that the Company is given some latitude in this regard. We are, thus, of the opinion that for the year 2000-2001, the Company should be allowed to claim a T&D loss of 19 i.e. 2.2 more than what is allowed by the Commission, and for the year 2001-2002 the same shall be 18 because the Company’s documents itself show that for the said year they have been able to curb the loss by 1 . For future years i.e. for the year 2002 onwards, we leave it to the Commission to reconsider the above figures fixed by us based on material available before it while determining the tariff for the year 2002-2003. We do notice that there is an element of ad hocism in the fixation of T&D losses by us, but in a situation as is presented to us, an element of ad hocism cannot be escaped from. We have taken note of all factors projected by the parties in this regard as also the opinion of the ASCI and findings of the Commission, and keeping the interests of the consumers as well as the Company in mind, we have arrived at a via media to protect the interests of all concerned. In that process we might have fixed this figure in an ad hoc manner but there is no escape from the same at least for the years 2000-2001 and 2001-2002. For the future years, taking this as a guideline, the Commission can assess the efficiency or otherwise of the company in controlling these losses and refix this limit of T&D loss while fixing the tariff. (Para 84)

       (viii) Employees’ costs—High Court allowing the entire expenditure incurred by the Company under this head—Whether correct? (Yes) (See Para 86).

       (ix) Working Capital—High Court’s finding set aside and that of the Commission restored (See Paras 87 and 88).

       (x) Cross subsidy—High Court directing Commission to maintain a tariff structure which was prevailing prior to Commission’s report.

       Held : It is still open to the State Government if it so chooses to direct the Commission to fix the tariff of supply of electricity to any class of consumers at a reduced rate provided the State Government itself subsidises the same. (Para 89)

       (xi) Fixation of Tariff for 2002-03—Refused by Commission on Company’s application was belated—Whether be permitted? (Yes).

       Held : We think it appropriate that the same should be set aside and the Commission be directed to condone the delay in filing the application by the Company and fix the tariff for the year 2002-2003 by following the procedure laid down in the 1998 Act and in the light of this judgment. (Para 90)

       (xii) Auditor’s Report—Finding of High Court accounts audited by statutory auditors should be accepted by the Commission at its face value—Whether correct? (No).

       Held : We are of the opinion that the Commission is not bound by the opinion of the auditors as also the definition of the expenditure properly incurred under Schedule VI to the 1948 Act to the extent held by us hereinabove. (Para 95)

       (xiii) W.B. Electricity Regulatory Commission (Conduct of Business) Regulations 2000—Regulation 46—Commission’s power to issue interim orders—If not exercised properly—Party can approach the High Court.

       Held : If for any reason the Commission either refuses to pass any interim order/directions where it is necessary, or passes such interim order by which any party to the proceedings is aggrieved, it is always open to such aggrieved party to approach the High Court under its appellate power to seek suitable relief. (Para 96)

       (xiv) Re: Bias—Judges of Appellate Bench of High Court ought to have recused due to apprehension of bias—Question left open (See Para 97).

       (xv) Re: an effective appellate ­forum—Statutory appeal to be decided by an expert body like the Commission—Accepted (See Para 100)—Directions to Commission (See Para 61) effect—Appeal partly allowed accordingly.