Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2010 Supreme(SC) 800

Supreme Court of India
THE HONOURABLE MR. JUSTICE R.V. RAVEENDRAN & THE HONOURABLE MR. JUSTICE H.L. GOKHALE
Grid Corporation of Orissa Ltd. & Others
Versus
Eastern Metals & Ferro Alloys & Others
CIVIL APPEAL NOS.5842-5889 OF 1998 WITH CA Nos.3 to 8 of 1999, CA No.748 of 1999, CA No.7246 of 2010 (Arising out of SLP (C) No.4596 of 1999)
Decided on : 31-08-2010

Advocates appeared:
For the Appearing Parties:Jaideep Gupta, Senior Advocate, Raj Kumar Mehta, Antaryami Upadhyay, S. Lakhi Singh, Sanjay Sen, Rana S. Biswas, Mridul Chakravarty, Ms. Indra Sawhney, Mrs. Sarla Chandra, P.N. Gupta, Himanshu Shekhar, Vinoo Bhagat, Abhijat P. Medh, Mrs. Kirti Renu Mishra, Pranab Kumar Mullick, Radha Shyam Jena, Advocates.

IMPORTANT POINT
In order to maintain average increase in revenue to 17%, different categories of consumers have to be charged differently.

Headnote:(a) Legal interpretation – Interpretation of the Retail Supply and Distribution Licence issued to GRIDCO u/s 14(iv) of Orissa Electricity Reform Act, 1995 – Part III, Clause 9.1 – The expression ‘charges made by the licensee’ and ‘shall not exceed “on average” 117% of those permitted under the interim tariffs’ – Three interpretations possible – (i) increase in tariff rate in respect of any category of consumers, could not exceed 17% of the interim tariff rates – (ii) increase may exceed 17% in some categories provided average increase does not exceed 17% – (iii) increase for different categories of consumers could be of different percentages, provided the average realization per unit was not more than 17% – Commission and High Court favouring first interpretation – Explanation to section 26, Orissa Electricity Reform Act, 1995 – Provision has to be interpreted purposively – Purposive interpretation. (Para 13, 14)
       1955 (2) SCR 603; 1958 SCR 360 – Relied upon
       (b) Retail Supply and Distribution Licence – Clause 9.1 – Increase not to exceed 17% `on average’ – Different categories having different rates of tariff – If 17% ceiling is applied uniformly to all categories then ‘on average’ increase of 17% cannot be achieved – Interpretation (i) not acceptable – Secondly, allowing appellant to apply different rates of increases to different categories keeping the average increase within 17% – Not justified because actual revenue realization may exceed 17% – Not acceptable. (Para 16, 17)
       (c) Retail Supply and Distribution Licence – Clause 9.1 – ‘Charges’ and ‘tariff’ – ‘Charges made’ by appellant no to exceed ‘on average’ 117% of those permitted under the ‘interim tariffs’ – If "charges made” are interpreted as "tariff rates fixed" then, the words `on average’ would be rendered meaningless – Appellant discharging functions of State – Increase in tariff rate for agriculture, railway should be minimal – Those for residential users should be lesser – To achieve average increase in revenue of 17% increase in some categories has to be more than 17% – Appellant choosing to charge a lesser increase in percentage to some categories of consumers and higher increases to other categories of consumers – No illegality. (Para 18, 19)
       (d) Legal interpretation – External aid – Reliance on explanation to section 26 of Orissa Electricity Reform Act, 1995 for interpretation of clause 9.1 of Retail Supply and Distribution Licence – Explanation to section 26 defines tariff – Clause 9.1 deals with charges made – Reliance misconceived. (Para 21)
       Facts of the case:
       The Government of Orissa issued transmission, supply, distribution etc. licences to Grid Corpn. of India u/s 14(iv) of the Orissa Electricity Reform Act, 1995.
       A writ petition was filed challenging the vires of section 14(iv) and the licenses granted to the Grid Corpn. of India.
       The High Court upheld the vires of section 14(iv) and the licenses. However it held that the increase in tariff rates by the Corpn. was in excess of the power given to it.
       The High Court directed the Commission to redetermine the tariff as per law and further directed that any excess payments collected from the consumers shall be adjusted towards future demand/s.
       Finding of the Court;
       High Court erred in differing with interpretation of the Commission.
       Result:
       Appeals allowed.

Judgment :-

R.V. RAVEENDRAN, J.

Leave granted in SLP(C) No.4596 of 1999.

These appeals involve the interpretation of a tariff provision in the provisional supply and distribution Licence issued under the Orissa Electricity Reform Act, 1995 (`Act' for short).

2. The State of Orissa enacted the said Act, to restructure and rationalize the generation, transmission, distribution and supply of electricity in the state.

2.1) Section 3 of the Act provided for the establishment of the Orissa Electricity Regulatory Commission (`Commission' for short), to discharge functions including the issue of licences in accordance with the Act and determine the conditions of such licences.

2.2) Chapter VI of the Act deals with licensing of transmission and supply. Section 14(iv) of the said Act authorized the State Government to grant provisional licences for a period not exceeding twelve months, for carrying on the business of transmission or supply of electricity, as a transitional measure till the establishment of the Orissa Electricity Regulatory Commission (`Commission' for short).

2.3) Section 13 of the Act provided that the Grid Corporation of India Ltd. (`GRIDCO' for short, the appellant herein) incorporated with the main object of engaging in the "business powers" of the state government under section 12 of the Act, would be the principal company to undertake the planning and co-ordination in regard to transmission and to determine the electricity requirements in the state in co-ordination with various stakeholders.

2.4 Chapter VIII of the Act dealt with tariffs. It contained two sections -section 26 dealing with licencee's revenues and tariffs and section 27 dealing with finances of licencees.

3. In exercise of the power under section 14(iv) of the Act, the State Government, by notification dated 30.3.1996, issued three licences to the appellant - the Provisional Orissa Transmission Licence 1996, Provisional Orissa Supply Licence (Bulk Supply) 1966 and the Provisional Orissa Supply Licence (Retail Supply and Distribution), 1996 - authorising the appellant to engage in the business of transmission, bulk supply and retail supply and distribution of electrical energy within the State of Orissa, upon the terms and conditions mentioned in those licences. In pursuance of such licences, the appellant took over the transmission, distribution and supply of electricity from the Orissa State Electricity Board (`OSEB' for short) with effect from 1.4.1996. Part III of the Retail Supply and Distribution Licence (similar provisions were contained in the Provisional Transmission Licence and Provisional Bulk Supply Licence also) related to "Tariffs" and it is extracted below :

"9. Basis of Charges

9.1 The charges made by the licensee shall not exceed on average 117% of those permitted under the interim tariffs issued by the State Government and in force on 1st April 1996.

9.2 The authority granted in clause 9.1 expires with the expiration of this license."

The "interim tariffs in force as on 1.4.1996 issued by the state government", referred to in the said clause 9.1 were the tariffs which came into effect on 5.11.1995, contained in the Notification dated 28.10.1995 issued by the Orissa State Electricity Board, predecessor of GRIDCO.

4. By notification dated 13.5.1996, the appellant revised/prescribed the electricity charges for different categories of consumers of electricity in the State as per the tariff schedule appended to the said notification with effect from 21.5.1996, in supersession of the tariff rates prescribed in the OSEB Notification dated 28.10.1995. The tariff schedule under the Notification dated 13.5.1996, prescribed different tariff rates for (i) large industries, (ii) medium industries, (iii) small industries, (iv) irrigation pumping and agriculture, (v) public water works and sewerage pumping, (vi) commercial, (vii) domestic, (viii) railway traction supply, (ix) street lighting, (x) direct current service, (xi) power intensive industr

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2010 Supreme(SC) 800

IMPORTANT POINTIn order to maintain average increase in revenue to 17%, different categories of consumers have to be charged differently.

Cases Referred (2)

IMPORTANT POINT
In order to maintain average increase in revenue to 17%, different categories of consumers have to be charged differently.