Supreme Court of India
M/S NTPC LTD.versusM.P. STATE ELECTRICITY BOARD & ORS.
- Citation
- 2011 INSC 724
- Decided
- 29 September 2011
- Disposal
- Disposed off
- Bench
- M PANCHAL
Holding
Section 62(6) of the Electricity Act, 2003 does not authorize interest on the differential tariff amount, and the Tribunal erred in granting interest on equitable grounds.
Summary
NTPC Ltd., a government‑owned power generator, supplied electricity to Madhya Pradesh, Punjab and Delhi electricity boards and later sought a tariff determination from the Central Electricity Regulatory Commission (CERC). CERC fixed a final tariff lower than the provisional tariff, finding that NTPC had collected excess amounts during the interim period and ordered a refund but denied any interest on the differential. The electricity boards appealed, and the Appellate Tribunal for Electricity held that while Section 62(6) of the Electricity Act, 2003 did not apply, NTPC should pay interest on equity, justice and fair‑play grounds. The Supreme Court held that Section 62(6) cannot be stretched to award interest for the intervening period and that the Tribunal erred in invoking equitable principles, as there was no statutory or contractual basis for interest. Consequently, the Court allowed NTPC's appeals and dismissed the boards' appeals, directing each party to bear its own costs.
Issues considered
- Whether Section 62(6) of the Electricity Act, 2003 permits the electricity boards to claim interest on the differential amount between the provisional and final tariff.
- Whether the Appellate Tribunal was justified in awarding interest on the basis of justice, equity and fair‑play despite the absence of a statutory provision.
Legislation cited
- Electricity Act, 2003s. 111, s. 62(6)
Subjects
tariff determinationinterest on differential amountElectricity Act 2003Section 62(6)equity and justiceregulatory commissionpower purchase agreementcivil appeal
Judgment
[2011] 11 S.C.R. 651
M/S NTPC LTD. A
v.
M.P. STATE ELECTRICITY BOARD & ORS.
(Civil Appeal No. 2451 OF 2007)
SEPTEMBER 29, 2011
B
[J. M. PANCHAL AND H.L. GOKHALE, JJ.J
Electricity Act, 2003 - s. 62 - Determination of Tariff -
Power supplied by NTPC to Electricity Boards from its power
station - Tariff payable by the Electricity Board to NTPC - C
Determination of, by Central Electricity Regulatory
Commission - Final tariff determined at a rate lesser than the
pre-existing tariff - Collection of excess amount by NTPC
during the intervening period - Payment of interest on the
differential amount - Claim of Ele<;tricity Board - Rejected by D
the Central Commission - Appeal to Appellate Tribunal uls.
111 - Appeflate Tribunal rejected the interest on the.
differential amount to the concerned Electricity Boards uls. 62
(6), however, allowed interest on differential amount on basis
of justice, equity and fair-play - On appeal held: s. 62 (6) E
cannot be pressed into service to claim interest on the
differential amounts - It does not state that if the finally
determined tariff is less than the provisional tariff or an existing
tariff continued by a statutory notification, then interest shall
be payable on the differential amount - It is only when a F
licensee or generating company deliberately recovers or
extracts from a person a price or charge in excess of the price
determined uls. 62 (6), such person can claim the excess
price or charge paid by him alongwith interest - Instant case
was not where the beneficiaries were made to pay the excess
~tariff at the instance of NTPC through force, coercion or threat G
- NTPC was not in any way responsible for the delay in
process of determination of tariff- Once the tariff was finalized
subsequently, NTPC adjusted the excess amount which it
651 H
652 SUPREME COURT REPORTS [2011] 11 S.C.R.
A received - Tariff charged at the relevant time was as per the
previous notifications - Interest came to be provided
subsequently by a Notification under the Regulations of 2004
- Thus, the principles of equity, justice and fair-play could not
have been brought in, to award interest to the Electricity
B Boards.
Interest - Payment of interest on differential amounts -
On the ground of justice, equity and fair play - Collection of
excess amount of tariff by NTPC from Electricity Board during
C the intervening period - Appellate tribunal awarding interest
on differential amounts on the ground of justice, equity and
fair play - Justification of - Held: The"instant case was not
where the beneficiaries were made to pay the excess tariff at
the instance of NTPC through force, coercion or threat or in
an unjust way - Thus, the principles of equity, justice and fair-
D play could not have been brought in to award interest to the
Electricity Boards - More so, the terms of the supply
agreement, the governing regulation and notifications as a/so
the industry practice did not contain any provision for interest
- Thus, interest could not be claimed either on the basis of
E equity or on the basis of restitution.
Madhya Pradesh State Electricity Board (MPSEB),
Punjab State Electricity Board (PSEB) and Delhi Vidyut
Board (DVB) receive the power generated from the
F thermal power plants of NTPC situated at Kawas,
Gandhar and Rehand. NTPC filed petitions before the
Central Electricity Regulatory Commission for
determining the tariff with respect to the power supplied
by it during the period 1.4.2001 to 31.3.2004 to MPSEB,
G PSEB, Delhi Vidyut Board and others from the Power
Stations. The Central Commission by orders dated
1.4.2005, 7.4.2005 and 2.6.2005 determined the final tariff
payable by the Electricity Boards to NTPC at a rate lesser
than the pre-existing tariff, and found that NTPC had
collected excess amounts during the intervening period,
H
NTPC LTD. v. M.P. STATE ELECTRICITY BOARD & 653
ORS.
and the Electricity Boards became entitled to get the A
refund/adjustment of these differential amounts.
However, the Central Commission disallowed the claim
of the Electricity Boards for payment of interest on the
differential amounts between the tariff finally determined
by the Central Commission and the pre-existing tariff B
continued by the Central Commission until the final
determination of the tariff. Thereafter, NTPC adjusted the
excess amounts in favour of the purchaser Electricity
Boards in their subsequent bills. MPSEB, PSEB and DVB
filed appeals before the Appellate Tribunal under Section c
111 of the Electricity Act, 2003 against the orders of the
Central Commission. The Appellate Tribunal rejected the
claim of the Electricity Boards for interest as being
payable under Section 62(6) of the Electricity Act, 2003,
however, held that NTPC was liable to pay interest on the D
differential amounts on the grounds of justice, equity and
fair-play. Therefore, the instant cross appeals were filed.
Allowing the appeals filed by the NTPC and
dismissing those filed by the Electricity Board, the Court
E
HELD: 1.1 Sub-section (6) of Section 62 of the
Electricity ·Act, 2003 lays down that if a licensee or a
generating company recovers a price or charge
exceeding the tariff which is determined under this
Section, the excess amount shall be recoverable by the F
person who has paid such excess price or charge
alongwith interest at bank rate. The earlier five sub-
sections lay down the manner in which the tariff is to be
determined, and thereafter, sub-section (6) lays down that
the licensee or a generating company shall not recover G
a price or charge exceeding the tariff that is determined.
The words 'tariff determined under this Section' indicate
that the prohibition from charging excess price is
dependent on the determination of the price under the
preceding five sub-sections. It was submitted that this
H
654 SUPREME COURT REPORTS [2011] 11 S.C.R.
A sub-section should be applied even during the period
when the tariff was being determined (as in the instant
case), and if in the final determination the price fixed is
lesser than what was charged during the intervening
perlt>d, then interest should be read as recoverable for
B the excess amount collected during the intervening
period. Sub-section does not refer to the period during
which the tariff is being determined. It also does not state
that if the finally determined tariff is less than the
provisional tariff or an existing tariff continued by a
c statutory notification, then interest shall be payable on the
differential amount. This sub-section further states that
this right to claim interest is without prejudice to any other
liability incurred by the licensee. Besides what is.
prohibited is recovery of price or charge exceeding the
tariff determined under this Section and then only, the
0
generating company will have to pay the interest on the
difference. That is why the Appellate Tribunal observed
that it is only when a licensee or generating company
deliberately recovers or extracts from a person a price or
charge in excess of the price determined under Section
E 62 (6), that such person can claim the excess price or
charge paid by him alongwith interest. The view taken by
the Appellate Tribunal that Section 62 (6) ·cannot be
pressed into service to claim interest on the differential
amounts in the instant case, is accepted. [Para 15] [667-
F E-H; 668-A-D]
1.2 Prior to 1.6.2006 there was no such specific
provision for claiming interest for the intervening period.
The very fact that such a regulation was required to be
G issued, indicates the necessity for having such a
regulation, but af the same tim~ it js not possible to make
it applicable retrospectively. The provision for charging
interest is a substantive provision which has to be
specifically provided and would become operative when
H provided.1n the circumstances, the submission based on
NTPC LTD. v. M.P. STATE ELECTRICITY BOARD & 655
ORS.
the new regulation, Regulation 5A of the 'Central A
Electricity Regulatory Commission (Terms and
Conditions of Tariff) Regulation, 2004, inserted by a
Notification dated 01.06.2006 which recognized the
appropriateness of allowing interest on the differential
amount 1:-etween the provisional tariff and final tariff also B
cannot help the Electricity Boards to claim interest on the
differential amounts. [Para 18] [669-H; 670-A-B]
1.3 The Appellate Tribunal awarded interest at an
average of the prevailing lending rates (PLR) of the
Reserve Bank of India to the Banks during the relevant C
period. The Central Commission, by issuing notifications
continued the tariff existing on 31.3.2001 as an interim
measure until the final tariff was determined, and the
notifications did not provide in any way for interest. The
Appellate Tribunal commented that the notifications were D
issued mechanically without bestowing any prima facie
consideration as to what should be the tariff as an interim
arrangement. The Appellate Tribunal was of the view that
in passing an interim or provisional order, an examination
of all the pros and cons was necessary. The interim E
arrangement continued for over a period of four years
and according to the Appellate Tribunal, it resulted into
an undue monetary benefit to the NTPC. [Para 19] [670-
C-F]
1.4 In the instant case, the second proviso to F
Regulation 79(2) of 1999 permitted the generating
company to continue to charge the existing tariff for such
period as, may be specified in the notification by the
Commission, and the notifications permitted continuation
of the existing tariff as on 31.3.2011, until the final tariff G
was determined. There was no provision for payment of
interest therein. The very fact that interest came to be
provided subsequently by a notification under the
Regulations of 2004 is also indicative of a contrary
situation in the present matter, viz. that interest was not H
656 SUPREME COURT REPORTS [2011] 11 S.C.R.
A payable earlier. It is difficult to appreciate as to how the
Appellate Tribunal could bring in either the principles of
justice, equity and fair-play or that of restitution in the
instant case. What is important to note is that the
Appellate Tribunal specifically observed in terms that this
B was not a case where the beneficiaries were made to pay
the excess tariff at the instance of NTPC through force,
coercion or threat. This being the position the principles
of equity, justice and fair-play could not have been
brought in to award interest to the Electricity Boards.
C There was delay in the process of determination of the
tariff. The Commission became functional only on
15.5.1999. NTPC had filed the tariff petitions duly as
required by the Central Commission. The delay in the
case of Kawas and Gandhar Power Stations was
because of the Commission requiring them to
0
appropriately devise norms and parameters. As far as
Rihand Station is concerned, one of the beneficiaries,
namely Rajasthan Rajya Vidyut Vitaran Nigam Limited
had obtained stay of proceedings before the Commission
from the High Court of Rajasthan. NTPC was not in any
E way responsible for these factors. Ultimately, the tariff
was reduced, but the tariff charged by the NTPC in the
meanwhile was in accordance with the rates permitted
under the notifications issued by the Commission. It
cannot, therefore, be said that NTPC had held on to the
F excess amount in an unjust way to call it unjust
enrichment on the part of NTPC, so as to justify the claim
of the Electricity Boards for interest on this amount.
[Paras 22, 26 and 27) [672-B-C; 674-D-H; 675-A]
G BSES Ltd. v. Tata Powers Co. Ltd. 2004 (1) SCC 195;
South Eastern Coalfields Ltd. v. State of M.P. and Ors. 2003
(8) SCC 648; Union of India v. Rallia Ram AIR 1963 SC
1685; Bengal Nagpur Railway Co. v. Ruttanji Ramji AIR 1938
PC 67; Union of India v. Watkins Mayor and Co. AIR 1966
H SC 275; Commissioner of Sales Tax v. Hindustan Aluminum
NTPC LTD. v. M.P. STATE ELECTRICITY BOARD & 657
ORS.
Corporation 2002 (127) STC 258; Kavita Trehan and Anr. v. A
Balsara Hygiene Products Ltd. 1994 (5) SCC 380 - referred
to.
1.5 Price fixation is really legislative in character, but
since an appeal is provided under Section 111 of the Act,
8
it takes a quasi-judicial colour. That by itself cannot justify
the claim for interest during the period when the
proceedings were pending for the tariff fixation. The tariff
that was being charged at the relevant time was as per
the previous notifications. Once the tariff was finalized
subsequently, NTPC has adjusted the excess amount e
which it has received. It cannot be said that during this
period the NTPC was claiming the charges in an unjust
way, to make a case in equity. The industry practice
which also shows that on all such occasions interest has
never been either demanded or paid when the price D
fixation takes place. The claim for interest could not be
covered under Section 62 (6). The provision for interest
has been introduced by regulations subsequent to the
period which was under consideration before the
Commission. The terms· of the supply agreement, the E
governing regulation and notifications did not contain
any provision for interest. The industry practice did not
provide for it as well. In view thereof, interest could not
lie claimed either on the basis of equity or on the basis
of ~estitution. [Para 30) [677-A-E] F
West Bengal Electricity. Regulatory Commission v.
CESC 2002 (8) SCC 715; Shri Sitaram Sugar Mills v. UOI
1990 3 Sec 223; Saraswati Industrial Syndicate v. UOl 1974
(2) SCC 630; Malaprabha Sugars v. UOl 1994 (1) sec 648;
Mahalakshmi Sugar Mills v. UOl 2009 (16) SCC 569; Pallavi G
Refractories v. Singareni Collieries 2005 (2) SCC 227; ONGC
v. Assn. of Natural Gas Consuming Industries of Gujarat 1990
Supp. (1) SCC 397; Prag Ice and Oil Mills v. UOI 1978 (3)
SCC 459; PTC India Ltd. v. Central Electricity Regulatory
Commission 2010 (4) SCC 603 - referred to H
658 SUPREME COURT REPORTS (2011) 11 S.C.R.
A 1.6 In the circumstances, it cannot be said that the
Appellate Tribunal erred in any way in declining to award
interest under Section 62 (6) of the Act. There was
however, an error on its part in granting the same under
the concept of equity, justice and fair-play. [Para 31) [677-
8 F]
Case Law Reference:
2004 (1) sec 195 Referred to Para 20
2003 (8) sec 648 Referred to Para 21
c
AIR 1963 SC 1685 Referred to Para 23
AIR 1938 PC 67 Referred to Para 23
AIR 1966 SC 275 Referred to Para 24
D
2002 (127) STC 258 Referred to Para 25
1994 (5) sec 380 Referred to Para 26
2002 (8) sec 115 Referred to Para 28
E 1990 (3) sec 223 Referred to Para 28
1974 (2) sec 630 Referred to Para 28
1994 (1) sec 648 Referred to Para 28
F 2009 (16) sec 569 Referred to Para 28
2005 (2) sec 221 Referred to Para 28
1990 Supp. (1) sec 397 Referred to Para 28
1978 (3) sec 459 Referred to Para 28
G
2010 (4) sec 603 Referred to Para 29
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
2451 of 2007.
H
NTPC LTD. v. M.P. STATE ELECTRICITY BOARD & 659
ORS.
From the Judgment & Order dated 20.4.2007 of the A
Appellate Tribunal· fot Electricity in Appeal No. 64 of 2006.
WITH
Civil Appeal No. 2452, 2493, 3972 and 4231 OF 2007
B
A.K. Ganguly, Shail Kr. Dwivedi, AAG, M.G.
Ramachandran, K.V. Mohan, Anand K. Gansesan, Ranjitha
Ramachandran, Pradeep Misra, Sakesh Kumar, K.V. Bharathi
Upadhyaya, Yogmaya Agnihotri, Ashok Kumar Singh, Suraj
Singh and T. Mahipal for the appearing parties. c
The Judgment of the Court was delivered by
H.L. GOKHALE J.1, All these five appeals arise out of a
common order dated.20.4.2007 passed by Appellate Tribunal
for Electricity ('Appellate Tribunal' for short) while deciding the D
First Appeals to the Appellate Tribunal under Section 111 of
the Electricity Act, 2rJ03 against the orders of the Central
Electricity Regulatory Commission ('The Central Commission'
for short), dated 1.4.2005, 7.4.2005 and 2.6.2006 passed
under Section 62 of the Electricity Act, 2003. While admitting E
these appeals, this Court has stayed the operation of the
impugned order until further orders.
(a) First three of these three Civil Appeals are filed by M/
s NTPC Ltd. The Madhya Pradesh State Electricity Board F
('MPSEB' for short) and others are respondents to Civil
Appeal No.2451/2007. The Punjab State Electricity Board
('PSEB' for short), Delhi Vidyut Board and others are the
respondents to the other two appeals being Civil Appeal
No.2452/2007 and Civil Appeal No.2493/2007.
G
(b) Civil Appeals Nos. 3972 and 4231 of 2007 are filed
by the PSEB and Delhi Vidyut Board. The Central
Commission, M/s NTPC Ltd. and others are the
respondents to these two appeals.
H
660 SUPREME COURT REPORTS [2011] 11 S.C.R.
A 2. M/s NTPC Ltd. is a power 'generating company' within
the definition of the concept under Section 2 (28) of the
Electricity Act, 2003. The Electricity Boards concerned, receive
the power generated from the thermal power plants of NTPC
situated at Kawas, Gandhar and Rihand. The Central
B Commission had determined the tariff payable by the Electricity
Boards to NTPC by the above referred orders dated 1.4.2005,
7.4.2005 and 2.6.2006.
(i) The orders dated 1.4.2005 and 7.4.2005 were on the
Petitions No.33 of 2001 and 31 of 2001 respectively filed
c by NTPC for determining the tariff with respect to the
power supplied by it during the period 1.4.2001 to
31.3.2004 to MPSEB and others from Gandhar and
Kawas power stations.
D (ii) The order dated 2.6.2006 was on Petition No.38 of
2001 by NTPC for the determination .of tariff with respect
to power supplied during the same period from the Rihand
power station to PSEB, Delhi Vidyut Board and others.
E 3. The Central Commission while determining the tariff,
had determined the final tariff at a rate lesser than the pre-
existing tariff, as a result of which NTPC was found to have
collected excess amounts during this intervening period, and
the Electricity Boards became entitled to get the refund/
adjustment of these differential amounts. Thus, the amount
F overcharged in respect of Gandhar power station is to the tune
of Rs.460.52 crores and the one in respect of Kawas power
station is Rs.254.4 7 crores. The Central Commission had ·
however disallowed the claim of the Electricity Boards for
payment of interest on the differential amounts between {i) the
G tariff finally determined by the Central Commission and (ii) the
pre-existing tariff continued by the Central Commission until the
final determination of the tariff. There is no dispute that
thereafter NTPC has duly and immediately adjusted the excess
amounts in favour of the purchaser Electricity Boards in their
H subsequent bills.
NTPC LTD. v. M.P. STATE ELECTRICITY BOARD & 661
ORS. [H.L. GOKHALE, J.]
4. The MPSEB, PSEB and Delhi Vidyut Board, therefore, A
invoked Section 111 of the Electricity Act, 2003 and filed
appeals against the above three orders of the Central
Commission before the Appellate Tribunal which were
numbered as Appeal Nos.64, 212 and 237 of 2006. The
Appellate Tribunal rejected the claim of the Electricity Boards B
for interest as being payable under Section 62(6) of the
Electricity Act, 2003. It however, held by its impugned common
order dated 20.4.2007, that NTPC was liable to pay interest
on the differential amounts on the grounds of justice, equity and
fair-play. The NTPC has therefore, filed three Civil Appeals c
being Civil Appeal Nos. 2451/2007, 2452/2007 and 2493/2007
to challenge this order. As against that, PSEB and Delhi Vidyut
Board have filed Civil Appeal Nos. 3972/2007 and 4231/2007
to challenge the same order of the Appellate Tribunal to the
extent it rejected their claim for interest under Section 62(6) of D
the Electricity Act.
Main q4estions for determination -
5. These Civil Appeals therefore raise two. principle
questions for determination, (a) whether the Appellate Tribunal E
erred in denying the interest on the differential amounts to the
concerned Electricity Boards under Section 62 (6) of the
Electricity Act, 2003, and (b) whether the Appellate Tribunal
was justified in allowing interest on the differential amounts on
the basis of justice, equity and fair-play. F
6. Shri M.G. Ramachandran, learned counsel appeared
for NTPC Ltd .. Shri A.K. Ganguli, Senior Advocate and Mr.
Pradeep Misra, learned counsel have appeared for the
concerned Electricity Boards.
G
7. Before we deal with these issues which arise with these
appeals, we must note that the law concerning the determination
of tariff of electricity has undergone changes from time to time. ·
(i) Earlier the Electricity (Supply) Act, 1948 was governing H
662 SUPREME COURT REPORTS [2011) 11 S.C.R
A the field. The Central Governmentwas then determining
the tariff for the power supplied by NTPC under Section
43 A (2) of the Act, since NTPC is a Government of India
enterprise.
(ii) The Electricity Regulatory Commissions Act 1998 was
B
enacted for distancing of the Government from
determination of tariffs. It created the Central Commission.
The act, came into force on 25.4.1998. Tariff determination
and other Regulatory functions as far as power generation
of NTPC was concerned, no longer remained with the
c Central Government, and came to be vested in the Central
Commission.
(iii) The Electricity Act, 2003, came into force from
10.6.2003 as a comprehensive piece of legislation.
D Section 185 of this Act, repealed the Electricity Supply Act,
1948 and the Electricity Regulatory Commissions Act,
1988 as well as the Indian Electricity Act, 1910. In view of
the proviso to Section 61 of the Electricity Act, 2003,
however the act became· available fOr the determination
E of tariff of NTPC from 1.4.2004. The Central Commission
constituted under the Electricity Regulatory Commissions
Act continued to exercise its functions under the Electricity
Act, 2003 in view of Section 76 of the Electricity Act, 2003.
8. As noted above earlier, under the Electricity Supply Act,
F 1948, the Central Government was the tariff determining
authority for NTPC, since it is a wholly owned corporation of
the Central Government. This was on account of proviso of
Section 43A (2) of the Electricity Supply Act 1948, which reads
as follows:-
G
"43A. Terms, conditions and tariff for sale of
electricity by Generating Company
(1) .... .
H (2) ..... .
NTPC LTD. v. M.P. STATE ELECTRICITY BOARD & 663
ORS. [H.L. GOKHALE, J.]
Provided that the terms, conditions and tariffs for A
such sale shall, in respect of a Generating Company,
wholly or partly owned by the Central Government be such
as may be determined by the Central Government and in
respect of a Generating Company wholly or partly owned
by one or more State Governments be such as may be 8
determined, from time to time, by the Government or
Governments concerned."
9. The NTPC has been making bulk supply of power to
the concerned Electricity Boards from these Power Generating
Stations. The bulk power ·supply agreements mostly provided C
that the tariff will be as per the notification issued by the
Government of India under Section 43A of the Electricity Supply
Act, 1948. We may refer to the bulk power supply agreement
for Rihand Power Station. The power supply agreement with
respect to Rihand Station dated 2.11.1992 provided that the D
tariff as per those notifications will be applicable for a specified
period but it also added thereafter as follows:-
"ln case a new tariff for the period beyond above is not
finalized before that date, the Beneficiary (ies) shall E
continue to pay to NTPC for the power supplied from the
STPC beyond this date on adhoc basis in the manner
detailed in this notification."
Similar was the position with respect to power supply
agreements concerning Kawas and Gandhar Power F
Stations.
10. After the Central Commission was constituted with the
authority for determining the tariff fixation, the Central
Commission published Central Electricity Regulatory G
Commission (Conduct of Business) Regulation 1999. Second
proviso to Regulation 79 (2) thereof provided· as follows:-
"Provided further that the existing tariff being
charged by generating companies owned by or controlled
H
664 SUPREME COURT REPORTS (2011] 11 S.C.R
A by the Central Government shall continue to be charged
after the date of the notification as referred to in the above
regulation for such period as may be specified in the
notification without prejudice to the powers of the
Commission to take up any matter relating to tariff falling
B within the scope of the Section 13 of the Act."
Accordingly, the Central Commission issued notifications from
time to time on 12.5.1999, 4.4.2001 and 21.10.2003 continuing
the existing tariff as on 31.3.2001 until further orders to be
passed by the Commission. NTPC raised the monthly invoices
C as per the existing tariff and the Electricity Boards honoured
the same.
11. NTPC duly filed the tariff petitions as required by the
Central Commission for the tariff determination, however the
o proceedings before the Central Commission took their own
time and the petitions were ultimately decided on 1.4.2005,
7.4.2005 and 2.6.2006 .. As stated earlier when the tariff was
finalised, the rates were in fact reduced, and the Electricity
Boards became entitled to receive the excess amounts paid
E in the meanwhile. We must note at this stage that while
determining the tariff, the appropriate Commission has to
safeguard the consumer's interest as well as recovery of cost
of electricity in a reasonable manner under Section 61 (d) of the
Act which is· what is done by the Commission. Subsequently,
NTPC adjusted the excess amount which it had received in the
F intervening period in the subsequent bills to the Electricity
Boards.
12. As stated earlier, when the tariff was determined, the
Central Commission did not award any interest on the excess
G amounts which were collected by the NTPC in the meanwhile,
and therefore, the Electricity Boards filed appeals before the
Appellate Tribunal by invoking Section 111 of the Electricity Act
2003. The Appellate Tribunal has taken the view that the claim
of the Electricity Boards could not be entertained under Section
H 62 (6) of the Electricity Act though they are entitled to it on the
NTPC LTD. v. M.P. STATE ELECTRICITY BOARD & 665
ORS. [H.L. GOKHALE, J.]
basis of justice, equity and fair-play. It is this order which is A
under consideration in this matter.
Consideration of rival submissions
13. For deciding the issue of applicability of Section 62(6), B
we may refer to the relevant Section 62 of the Electricity Act,
2003, which reads as follows:-
"Section 62 - Determination of tariff
(1) The Appropriate Commission shall determine the tariff C
in accordance with the provisions of this Act for-
(a) supply of electricity by a generating company to
a distribution licensee:
PROVIDED that the Appropriate Commission may, D
in case of shortage of supply of electricity, fix the
minimum and maximum ceiling of tariff for sale or
purchase of electricity in pursuance of an
agreement, entered into between a generating
company and a licensee or between licensees, for E
a period not exceeding one year to ensure
reasonable prices of electricity;
(b) transmission of electricity;
(c) wheeling of electricity; F
(d) retail sale of electricity:
Provided that in case of distribution of electricity in the
same area by two or more distribution licensees, the
Appropriate Commission may, for the promoting G
competition among distribution licensees, fix only
maximum ceiling of tariff for retail sale of electricity.
(2) The Appropriate Commission may require a licensee
or a generating company to furnish separate details, as H
666 SUPREME COURT REPORTS [2011] 11 S.C.R
A may be specified in respect of generation, transmission
and distribution for determination of tariff.
(3) The Appropriate Commission shall not, while
determining the tariff under this Act, show undue preference
B to any consumer of electricity but may differentiate
according to the consumer's load factor, power factor,
voltage, total consumption of electricity during any specified
period or the time at which the supply is required or the
geographical position of any area, the nature of supply and
c the purpose for which the supply is required.
(4) No tariff or part of any tariff may ordinarily be amended,
more frequently than once in any financial year, except in
respect of any changes expressly permitted under the
terms of any fuel surcharge formula as may be specified.
D
(5) The Commission may require a licensee or a
generating company to comply with such procedLKe as may
be specified for calculating the expected revenues from
the tariff and charges which he or it is permitted to recover.
E
(6) If any licensee or a generating company recovers a
price or charge exceeding the tariff determined under this
section, the excess amount shall be recoverable by the
person who has paid such price or charge along with
interest equivalent to the bank rate without prejudice to any
F other liability incurred by the licensee.
14. If we look to this Section 62, sub-section (1) thereof
lays down the authority of the Appropriate Commission to
determine the tariff in accordance with the provisions of the Act
G for supply of electricity by a generating company to a distribution
licensee. It also permits the appropriate commission to fix the
minimum and maximum ceiling of tariff in certain situations.
Sub-section (2) lays down that the Appropriate Commission in
its process of determining the tariff may call upon the licensee
H or a generating company to furnish particulars with respect to
NTPC LTD. v. M.P. STATE ELECTRICITY BOARD & 667
ORS. [H.l. GOKHALE, J.]
generation, transmission and distribution of power. Sub-section A
(5) permits the commission to require the licensee or the.
generating company to comply with the procedure to be
specified by the commission for calculating the expected
revenue from the tariff which it is permitted to recover. Sub-
section (3) lays down that while determining the tariff the B
commission will take into consideration consumer's load factor,
power factor, voltage, total consumption of electricity during any
specified period, the geographical position of any area, the
nature of supply and the purpose for which it is sought. It may
differentiate in the matter of determining the tariff on such b;:isis, c
though of9ourse it is not expected to show any undue
preference to any consumer of electricity ..Sub-section (4) lays
down that the tariff once fixed will normally operate for a financial
year, and will not be amended more frequently than once in a
financial year. D
15. On this background sub-section (6) lays down that if a
licensee or a generating company recovers a price or charge
exceeding the tariff which is determined under this section, the
·excess amount shall be recoverable by the person who has
paid such excess price or charge alongwith interest at bank E
rate. We have noted that the earlier five sub-sections lay down
the manner in which the tariff is to be determined, and thereafter
sub-section (6) lays down that the licensee or a generating
company shall not recover a price or charge exceeding the tariff
that is determined. The words 'tariff determined under this F
section' indicate that the prohibition from charging excess price
is dependent on the determination of the price under the
preceding five sub-sections. The counsel for the Electricity
Boards submitted that this sub-section should be applied even
during the period when the tariff was being determined (as in G
the present case), and if in the final determination the price fixed
is lesser than. what was charged during the intervening period,
then interest should be read as recoverable for the excess
amount collected during the inter)Jening period. In this
connection, we must note that this sub-section does not refer H
668 SUPREME COURT REPORTS [2011] 11 S.C.R.
A to the period during which the tariff is being determined. It also
does not state that if the finally determined tariff is less than the
provisional tariff or an existing tariff continued by a stat4tory
notification, then interest shall be payable on the differential
amount. This sub-section further states that this right to claim
B interest is without prejudice to any other liability incurred by the
licensee. Besides what is prohibited is recovery of price or
charge exceeding the tariff determined under this section and
then only, the generating company wm have to pay the interest
on the difference. That is why the Appellate Tribunal has
c observed that it is only when a licensee or generating company
deliberately recovers or extracts from a person a price or charge
in excess of the price determined under section 6~ (6), that
such person can claim the excess price or charge paid by him
alongwith interest. For the reasons stated above we are unable
to accept the submission on behalf of the Electricity Boards,
0
and are in agreement with the view taken by the Appellate
Tribunal that Section 62 (6) cannot be pressed into service to
claim interest on the differential amounts in the present case.
16. The learned counsel for the Electricity Boards pointed
E out that the Central Commission has amended the Central
Electricity Regulatory Commission (Terms and Conditions of
Tariff) Regulations, 2004 by a notification dated 01.06.2006 and
has recognized the appropriateness of allowing interest on the
differential amount between the provisional tariff and final tariff
F by inserting Regulation SA which reads as under:-
" 5A. Provisional tariff or provisional billing of
charges, wherever allowed by the Commission based on
the application made by the generating company or the
transmission licensee of by the Commission on its own
G
motion or otherwise, shall be adjusted against the final
tariff approved by the Commission.
Provided that where the provisional tariff charged
exceeds the final tariff approved by the Commission under
H these regulations, the generating company or the
NTPC LTD. v. M.P. STATE ELECTRICITY BOARD & 669 ·
ORS. [H.L. GOKHALE, J.]
transmission licensee, as the case may be, shall pay A
simple interest at the rate of 6% per annum, comp~ted on
monthly basis, on the excess amount so charged, from the
date of payment of such excess amount and up to the date
of adjustment.
B
Provided further that where the provisional tariff
charged is less than the final tariff approved by the
Commission, the b~neficiaries shall pay simple interest at
the rate of 6% per annum, computed on monthly basis on
the deficit amount from the date on which final tariff will be C
applicable up to the date of billing of such deficit amount.
Provided also that excess/deficit amount alongwith
simple interest at the rate of 6% shall be adjusted within
three months from the date of the order failing which the
defaulting utility/beneficiary shall be liable to pay penal D
interest on excess/deficit amount at the rate as may be
decided by the Commission."
. .
It was submitted that the principle contained in this regulation
should be applied during the period covered in the present case E
also.
17. The counsel for NTPC on the other hand pointed out
that the price determined in the present case is for the period
1.4.2001 to 31.3.2004 and even the orders passed by the
Central Commission are dated 1.4.2005, 7.4.2005 and F
2.6.2006, and that this regulation of 1.6.2009 cannot have a
retrospective effect. What was prevalent at the relevant time was
regulation 79(2), the second proviso of which has been quoted
above, and it did not contain any such provision for interest
during the intervening period. G
18. We have noted the submissions of both the counsel. It
is very clear that prior to 1.6.2006 there was no such specific
provision for claiming interest for the intervening period. The
very fact that such a regulation was required to be issued, H
670 SUPREME COURT REPORTS [2011) 11 S.C.R.
A indicates the necessity for having such a regulation, but at the
same time it is not possible to make it applicable
retrospectively. The provision for charging interest is a
substantive provision which has to be specifically provided and
would become operative when provided In the circumstances,
B the submission based on this new r~gulation also cannot help
the Electricity Boards to claim interest on the differential
amounts.
19. Now, we come to the issue as to whether the Appellate
C Tribunal was right in awarding the interest on the differential
amounts on the basis of justice, equity and fair-play. The
Appellate Tribunal has awarded interest at an average of the
prevailing lending rates (PLR) of the Reserve Bank of India to
the Banks during the relevant. period. In this connection, we
must note that the Central Commission had, by issuing
D notifications continued the tariff existing on 31.3.2001 as an
interim measure until the final tariff was determined, and the
notifications did not provide in any way for interest. The
Appellate Tribunal has commented that the r:iotifications were
issued mechanically without bestowing any prima facie
E consideration as to what should be the tariff as an interim
arrangement. The Appellate Tribunal was of the view that in
passing an interim or provisional order, an examination of all
the pros and cons was necessary. The interim arrangement
continued for over a period of four years and according to the
F Appellate Tribunal, it resulted into an undue monetary benefit
to the NTPC.
20. In coming to its conclusion, the Appellate Tribunal relied
upon the judgment of this Court in BSES Ltd. Vs. Tata Powers
Co. Ltd. reported in [2004 (1) SCC 195) wherein it was
G observed that an interim arrangement is normally based on a
prima facie consideration of the matter and on broad principles
without examining the matter in depth. In this matter ~he Court
held that payment by way of interim arrangement to the
generating company would be subject to the final adjustment
H
NTPC LTD. v. M.P. STATE ELECTRICITY BOARD & 671
ORS. [H.L. GOKHALE, J.]
by awarding interest. However, it is material to note that in this A
matter the dispute regarding the standby charges was referred
for the determination of the commission, and since the same
were not paid during the pendency of various proceedings, the
payment of interest.was directed in that context.
B
21. The counsel for the Electricity Boards laid stress on
the judgment of this Court in South Eastern Coalfields Ltd. Vs.
State of M.P. and others reported in [2003 (8) sec 648]
wherein this Court had held that a party finally found to be
entitled to a relief in terms of money, would be entitled to be C
compensated by the award of int~rest which would also be
payable in equity. In this matter, the appellants were operating
coal mines in the State of Madhya Pradesh. The Central
Government enhanced the royalty payable on coal, and the
SJa.te Government was entitled to recover the same from the
appellant who would pass on the burden to their purchasers. D
The appellant, however, challenged the hike in royalty in the High
Court of M.P. Initially an interim order was passed and
subsequently the notification was quashed. On appeal, the
order of the High Court was set-aside. Subsequently, the State
Government claimed interest from the appellant at the rate of E
24% per annum in regard to the period when the enhanced
royalty was delayed. The appellant passed on this claim to their
consumers who challenged the same and succeeded in the
High Court in reducing the interest from 24% to 12%. While
dismissing the appeal filed by the appellant, this Court held that F
the interest would be payable even in equity and on the basis
of the principle of restitution which is recognized in Section 144
of Code of Civil Procedure.
22. In this connection, it is material to note that the claim G
in South Eastern Coalfields was essentially covered under
Section 61 of Sale of Goods Act 1930, and the interest by way
of damages was payable as per this statutory provision itself.
The liability had been crystallized and the interest had become
payable because of the failure to pay the amount as per the H
672 SUPREME COURT REPORTS (2011] 11 S.C.R.
A liability. Besides, there was nothing in the agreement between
the parties to the contrary on the issue of grant of interest. In
the present matter, we have the second proviso to Regulation
79(2) of 1999 (supra) which permitted the generating company
to continue to charge the existing tariff for such period as may
B be specified in the notification by the Commission, and the
notifications permitted continuation of the existing tariff as on
31.3.2011, until the final tariff was determined. There was no
provision for payment of interest therein. The very fact that
interest came to be provided subsequently by a notification
c under the Regulations of 2004 is also indicative of a contrary
situation in the present matter, viz. that interest was not payable
earlier.
23. Union of India Vs. Rallia Ram reported in AIR 1963
SC 1685 was one of the earliest cases where the principles
D concerning payment of interest by way of restitution came up
for consideration. In August 1946, the Government had entered
into a contract with the respondent for sale of a stock of
American cigarettes lying at different places. After some
deliveries were taken by the respondent, he found part of the
E stock unfit for use. The Government cancelled the contract and
asked the respondent to return the cigarettes which were unfit
for use. An arbitration followed and compensation was awarded
for the loss suffered by the supplier alongwith interest. This
Court noted that there was no provision for interest in the
F contract or in the Act, and set-aside the award to the extent it
granted interest. The Court laid down the. proposition that
interest is payable in equity only if there are circumstances
attracting equitable jurisdiction or under the Interest Act and
quoted with approval the propositions laid down in Bengal
G Nagpur Railway Co. Vs. Ruttanji Ramji reported in [AIR 1938
PC 67].
24. In Union of India Vs. Watkins Mayor and Co. reported
in [AIR 1966 SC 275], the plaintiff had entered into a contract
with the defendant Union of India for supply of drums made out
H
NTPC LTD. v. M.P. STATE ELECTRICITY BOARD & 673 .
ORS. [H.L. GOKHALE, J.]
of iron sheets to be supplied by latter. Though the iron sheets A
were initially supplied to the plaintiff, subsequently the defendant
cancelled the contract and removed the iron sheets in small
quantities from time to time for a period of nearly five years.
Plaintiff claimed the compensation under various heads,
claiming that they had acted as bailee for the defendants. This B
included (a) godown rent, (b) chowkidar's salary, (c) terminal
tax, (d) cartage, (e) unloading charges, (f) cooliage and (g)
interest. This Court accepted the claim of the plaintiff with
regards to items (a) to (f) but rejected the claim with respect to
interest. The Court relied upon the observations of Judicial c
Committee of the Privy Council in Bengal Nagpur Railway Co.
Vs. Ruttanji Ramji (supra) to the following effect :-
"As observed by Lord Tomlin in Maine and New
Brunswick Electrical Power Co. v. Hart (1929) AC 631,
at p. 640: (.4/R 1929 PC 185 at p. 188), 'In order to invoke D
a rule of equity it is necessary in the fir§f instance to
establish the existence of a state of circumstances which
attracts the equitable jurisdiction, as, for example, the
non-performance of a contract of which equity can give
specific performance." E
It also referred to the judgment and ratio in Union of India
Vs. Ral/ia Ram (supra) and then held that interest would be
claimable only if there is an agreement or when the interest is
payable by the usage of the trade having force of law or there F
is some substantive statutory provision. Thus, rule of equity
could not be brought in to justify the claim of interest.
25. In Commissioner of Sa/es Tax Vs. Hindustan
Aluminum Corporation reported in (2002 (127) STC 258), the
dispute was regarding the classification of certain products of G
a dealer for payment for sales tax. After the dispute was
resolved by this Court, the dealer made the payment of the
differential amount of tax. The department claimed interest only
from the date of filing of return. This Court held that there was
no liability on the dealer for the amount of tax unoaid which was H
674 SUPREME COURT REPORTS (2011] 11 S.C.R.
A the subject matter of dispute until the dispute was resolved.
Ideas of equity could not be brought in such manner and there
could be no liability for interest until assessment was finalised.
26. It is true that the power to make restitution is inherent
B in every Court as observed by this Court in Kavita Trehan and
Anr. Vs. Balsara Hygiene Products Ltd. reported in (1994 (5)
sec 380) which was relied upon by the council for the Electricity
Boards. Thus, restitution will apply even where the case does
not strictly fall under Section 144 of CPC . However, we must
note that Kavita Trehan was a case where the submission was
C made to the effect that termination of the contract was wrong
and an injunction was sought in a civil suit to restrain the
respondent from interfering with the disposal of goods. It was
in this context that the principle of restitution was applied. It is .
therefore, difficult to appreciate as to how the Appellate Tribunal
D could bring in either the principles of justice, equity and fair-play
or that of restitution in the presen• case. What is important to
note is that in ·paragraph 16 of its order the Appellate Tribunal
has specifically observed in terms that this was not a case
where the beneficiaries were made to pay the excess tariff at
E the instance of NTPC through force, coercion or threat. This
being the position the principles of equity, justice and fair-play
could not have been brought in to award interest to the
Electricity Boards.
F 27. It is true that there was delay in the process of
determination of the tariff. We are informed that the Commission
became functional only on 15.5.1999. NTPC had filed the tariff
petitions duly as required by the Central Commission. The delay
in the case of Kawas and Gandhar Power Stations was
G because of the Commission requiring them to appropriately
devise norms and parameters. As far as Rihand Station is
concerned, one of the beneficiaries, namely Rajasthan Rajya
Vidyut Vitaran Nigam Limited had obtained stay of proceedings
before the Commission from the High Court of Rajasthan.
NTPC was not in any way responsible for these factors.
H
NTPC LTD. v. M.P. STATE ELECTRICITY BOARD & 675
ORS. [H.L. GOKHALE, J.]
Ultimately, the tariff was reduced, but the tariff charged by the A
NTPC in the meanwhile was in accordance with the rates
permitted under the notifications issued by the Commission. It
cannot, therefore, be said that NTPC had held on to the excess
amount in an unjust way to call it unjust enrichment on the part
of NTPC, so as to justify the claim of the Electricity Boards for B
interest on this amount.
28. Submissions were advanced before us on the question
as to whether the tariff determination under Section 62 was in
any way legislative or quasi-judicial. The counsel for NTPC C
drew our attention to a number of judgments concerning price
fixation. ·
a. In West Bengal Electricity Regulatory Commission
V. CESC (2002 (8) sec 715), the court noted, in the
context of electricity tariff determination under the Electricity D
Regulatory Commissions Act, 1998, that price fixati9n is
in the nature of a legislative function, and hence, generally,
no hearing is required. However, as the statute provides
for1a hearing opportunity, the same must be provided.
,..
E
b. Similar view was taken in this context in the following
cases:
(i) Levy sugar pricing under the Essential Commodities
Act, 1955 has been held to be a legislative function in Shri
Sita ram Sugar Mills Vs. UOI ( 1990 3 SCC 223), F
Saraswati Industrial Syndicate V. UOI (1974 (2) SCC
630), Malaprabha Sugars V. UOI (1994 1 SCC 648) and
Mahalakshmi Sugar Mills V. UOI (2009 (16) SCC 569).
c. Coal price fixation has been held to be a legislative G
function under the Essential Commodities Act, 1955 in
Pallavi Refractories V. Singareni Collieries (2005 (2)
sec 227).
H
676 SUPREME COURT REPORTS [2011] 11 S.C.R.
A d. Fixation of the price of Natural Gas under the Essential
Commodities Act, 1955, is held to be legislative function
in ONGC V. Assn. of Natural Gas Consuming Industries
of Gujarat (1990 Supp. (1) SCC 397).
e. In Prag Ice and Oil Mills V. UOI (1978 (3) SCC 459),
B
the court in the context of price fixation of oil under
Essential Commodities Act, 1955, observed as under-
"We think that unless by the terms of particular
statute or order, price fixation is made a quasi judicial
c function for specified purposes or cases, it is really
legislative in character. The legislative measure does not
concern itself to the facts of an individual case. It is meant
to lay down a general rule applicable to all persons or
objects or transactions of a particular kind of class."
D
29. The counsel for the Electricity Boards, however, drew
our attention to a recent judgment of a Constitution Bench of
this Court in PTC India Ltd. Vs. Cent~a1 Electricity Regulatory
Commission reported in (2010 (4) SCC 603), wherein this
E Court has observed in para 50 as follows:-
"oO. Applying the above test, price fixation exercise is
really legislative in character, unless by the terms of a
particular statute it is made quasi-judicial as in the case
of tariff fixation under Section 62 made appealable under
F Section 111 of the 2003 Act, though Section 61 is an
enabling provision for the framing of regulations by
CERC. If one takes "tariff' as a subject-matter. one finds
that under Part VII of the 2003 Act actual determination/
fixation of tc.riff is done by the appropriate Commission
G under Section 62 whereas Section 61 is the enabling
provision for framing of regulations containing generic
propositions in accordance with which the appropriate
Commission has to fix the tariff....... "
30. In the facts of the present case, however, this
H
NTPC LTD. v. M.P. STATE ELECTRICITY BOARD & 677
ORS. [H.L. GOKHALE, J.]
controversy as to whether tariff fixation is legislative or quasi- A
judicial need not detain us any further. As held by the
Constitution Bench, price fixation is really legislative in
character, but since an appeal is provided under Section 111
of the Act, it takes a quasi-judicial colour. That by itself cannot
justify the claim for interest during the period when the B
proceedings were pending for the fariff fixation. The tariff that
was being charged at the relevant time was as per the previous
notifications. Once the tariff was finalized subsequently, NTPC
has adjusted the excess amount which it has received. It cannot
be said that during this period the NTPC was claiming the c
charges in an unjust way, to make a case in equity. Our attention
has been drawn to the industry practice which also shows that
on air such occasions interest has never been either demanded
or paid when the price fixation takes place. As held by us
hereinabove, claim for interest could not be covered under D
Section 62 (6). The provision for interest has been introduced
by regulations subsequent to the period which was under
consideration before the Commission. If we apply the
propositions in Rallia Ram (supra) and Watkins Mayor
(supra), we find that the terms of the supply agreement, the
governing regulation and notifications did not contain any · E
provision for interest. The industry practice did not provide for
it as well. In view thereof, interest could not be claimed either
on the basis of equity or on the basis of restitution.
31. In the circumstances, it is not possible to accept the F
submission that the Appellate Tribunal erred in any way in
declining to award interest under Section 62 (6) of the Act.
There was however, an error on its part in granting the same
under the concept of equity, justice and fair-play. Hence, we
allow the appeals filed by the NTPC and dismiss those which G
are filed by the Electricity Boards. Civil Appeal Nos. 2451, 2452
and 2493/2007 are allowed. Civil Appeal Nos. 3972 and 4231/
2007 are dismissed. Parties will bear their own costs.
N.J. Appeals disposed of.
H
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