Supreme Court Reinforces Constitutional and Regulatory Guardrails in Service and Energy Law

In a series of significant rulings at the end of August 2025, the Supreme Court of India delivered two crucial judgments that underscore the judiciary's role in upholding institutional integrity and regulatory authority. The first decision delineated the high evidentiary standard required to remove a Public Service Commission (PSC) member for 'misbehaviour' under Article 317 of the Constitution. The second clarified the non-negotiable mandate for regulatory approval of all Power Purchase Agreements (PPAs) under the Electricity Act, 2003, striking a blow against private tariff negotiations.

These decisions, while originating from disparate legal fields—constitutional service law and energy sector regulation—are thematically linked by their reinforcement of institutional checks and balances, transparency, and the primacy of public interest over arbitrary executive action and private contractual arrangements.

Misbehaviour of PSC Members: Court Demands Cogent Evidence, Not Mere Allegation

In a judgment delivered on August 28, 2025, a bench of Justices J.K. Maheshwari and Aravind Kumar set a formidable precedent on the process for removing a member of a Public Service Commission. The Court ruled that establishing 'misbehaviour' under Article 317 necessitates "specific and cogent evidence linking the alleged conduct to the individual concerned," thereby insulating constitutional functionaries from unsubstantiated and arbitrary removal proceedings.

The ruling came in the case of In Re: Mepung Tadar Bage , a member of the Arunachal Pradesh Public Service Commission (APPSC), who was exonerated of all charges related to a question paper leak scandal.

Background of the Presidential Reference

The matter reached the Supreme Court via a Presidential reference under Article 317(1), a constitutional mechanism for the removal of a Chairman or Member of a Union or State PSC. The reference sought the Court's opinion on whether Ms. Bage should be removed for alleged misbehaviour following the leakage of the question paper for the Assistant Engineer (Civil) Mains Examination held in August 2022.

An inquiry committee formed by the state had suggested a complete reconstitution of the APPSC to restore public faith. Based on this recommendation, the State Government initiated the process for Ms. Bage's removal, leading to her suspension and the subsequent reference to the apex court.

The Court's Scrutiny and the High Standard of Conduct

The Supreme Court undertook a fact-finding inquiry, meticulously examining the evidence to determine if Ms. Bage's personal culpability could be established. The bench found the allegations to be "general, unsubstantiated, and lacking any evidence of personal culpability." The Court concluded that the State's move to seek her removal was arbitrary and discriminatory.

While exonerating Ms. Bage, the judgment profoundly articulated the ethical pedestal upon which PSC members are placed. The Court observed that their conduct must be unimpeachable, reflecting the highest degree of integrity and fairness. In a powerful statement on the role of such functionaries, the Court noted:

"The standard of behaviour expected of them is thus neither ordinary nor comparable to that of other public servants; it is elevated by the very nature of the institution they represent. The removal of any such officeholder on the ground of misbehaviour, therefore, must be assessed on these anvils."

This observation establishes that while PSC members are held to an elevated standard, the process for their removal must correspondingly meet a higher evidentiary threshold. The Court stressed that the expression 'misbehaviour' must be interpreted broadly in the context of the office's constitutional stature but cannot be used as a tool for removal based on vague accusations or collective institutional failure.

Legal Implications

This judgment serves as a vital safeguard for the independence of Public Service Commissions. By demanding direct, specific, and cogent evidence of personal misconduct, the Supreme Court has fortified the security of tenure for PSC members, protecting them from politically motivated or procedurally flawed removal attempts. It clarifies that institutional shortcomings cannot be automatically translated into individual misbehaviour without a clear evidentiary link. The decision directs that Ms. Bage's suspension be revoked with all consequential benefits, fully vindicating her position.

Electricity Tariffs Not a Private Affair: SC Affirms Primacy of Regulatory Approval

A day later, on August 29, 2025, a bench of Justices Sanjay Kumar and N.V. Anjaria delivered another landmark ruling, this time clarifying the scope of regulatory power in the electricity sector. The Court held unequivocally that generating companies and distribution licensees cannot privately negotiate and fix electricity tariffs through PPAs without the explicit review and approval of the State Electricity Regulatory Commission (SERC).

This ruling in M/s KKK Hydro Power Limited Vs Himachal Pradesh State Electricity Board Limited & Ors removes any ambiguity regarding the mandatory nature of Section 86(1)(b) of the Electricity Act, 2003, which empowers SERCs to regulate the electricity purchase and procurement process.

The Dispute and APTEL's Error

The case stemmed from a long-running dispute between M/s KKK Hydro Power Limited and the Himachal Pradesh State Electricity Board (HPSEB). In 2010, the parties entered into a supplementary PPA for an additional 1.9 MW plant at a higher tariff of Rs 2.95 per kWh. However, this agreement was never submitted to the Himachal Pradesh Electricity Regulatory Commission (HPERC) for approval. When the HPERC eventually reviewed the matter, it refused to enforce the tariff in 2013.

The Appellate Tribunal for Electricity (APTEL), in 2014, partly allowed the company's claim, holding that the privately agreed tariff could be given effect. The Supreme Court found that APTEL had "misguided itself on crucial aspects" by overlooking the statutory requirement for regulatory approval. The bench stated that the HPERC was correct to ignore the 2010 supplementary PPA as it lacked the necessary regulatory sanction.

Pragmatism Amidst Precedent

Despite identifying APTEL's legal error, the Supreme Court exercised judicial pragmatism. It noted that HPSEB had not appealed the 2014 APTEL order and had subsequently complied with its directions, leading to a revised tariff of Rs 2.60 per kWh being fixed in a new PPA in 2015. This tariff had been operational for years. Declining to "upset the apple cart," the Court chose not to interfere with the existing arrangement at this late stage.

However, the Court firmly dismissed the appellant's plea to apply the higher, privately-agreed tariff of Rs 2.95 per kWh to its entire project.

Clarifying the Law for the Future

The core of the judgment lies in its unambiguous clarification of the law. The Supreme Court has now authoritatively settled that tariff fixation is not a private matter but a regulated public process. The judgment asserts that any PPA or tariff stipulation must be placed before the State Commission for approval to ensure fairness, transparency, and the protection of consumer interests from potentially inflated or arbitrary tariffs.

This precedent is designed to prevent future errors by tribunals and circumvention of the law by power companies and state boards. It solidifies the SERCs as the primary authority in tariff regulation, ensuring that all power purchase arrangements align with the statutory framework of the Electricity Act, 2003.

Conclusion: A Reaffirmation of Institutional Supremacy

Together, these two judgments from the Supreme Court paint a clear picture of a judiciary committed to reinforcing the integrity and authority of constitutional and statutory bodies. Whether it is protecting a PSC member from arbitrary executive action or mandating regulatory oversight in the energy sector, the Court has drawn firm lines in the sand. For legal professionals, these rulings provide critical clarity on the standards of evidence in constitutional service matters and the non-derogable nature of regulatory control in key infrastructure sectors, reaffirming the foundational principles of accountability and the rule of law.