POWER GRID CORPORATION OF INDIAversusTAMIL NADU GENERATION AND DISTRIBUTION CO. LTD. & ORS. ETC. ETC

724                       [2019]
               SUPREME COURT     7 S.C.R. 724
                              REPORTS                      [2019] 7 S.C.R.


A                POWER GRID CORPORATION OF INDIA
                                        V.

       TAMIL NADU GENERATION AND DISTRIBUTION CO. LTD.
                      & ORS. ETC. ETC
B                        (Civil Appeal No. 684 of 2007)
                                   MAY 09, 2019
        [N. V. RAMANA, MOHAN M. SHANTANAGOUDAR AND
                           INDIRA BANERJEE, JJ.]
             Electricity Regulatory Commission Act, 1998 – Central
C     Electricity Regulatory Commission (Terms and Conditions of Tariff)
      Regulations, 2001 – rr. 1.3 and 1.7 – Foreign Exchange Rate
      Variation (FERV) between debt and equity – Apportionment of –
      Appellant contended that any foreign exchange get added to the
      capital cost and not individually to debt or equity – It was further
D     contended that this capital cost is thereafter divided into debt and
      equity, on the basis of a normative debt-equity ratio – As a natural
      corollary, even the FERV needs to be apportioned both towards
      debt and equity – Held: The apportionment of FERV between debt
      and equity is not a question of law, much less a substantial question
      of law – Further, r.1.3(a) is restricted only to the methodology of
E     calculation of FERV – No rule, regulation, statute or precedent cited
      by the appellant to substantiate that post calculation FERV needs
      to be necessarily apportioned in a debt-equity ratio, much less to
      substantiate what exactly this ratio is and as what factors the same
      is determined – Besides, noting the premise on which the Act,
F     1998 was enacted and the fact that the Tariff Regulations, 2001
      prescribed under the aegis of this Act do not provide for
      apportionment of FERV in a particular debt-equity ratio – Thus,
      this matter requires no interference – Accordingly, appeals dismissed.
            Dismissing the appeals, the Court
G           HELD : 1. The present question regarding the
      apportionment of Foreign Exchange Rate Variation (FERV)
      between debt and equity is not a question of law, much less a
      substantial question of law. Regulation 1.13(a) of Central
      Electricity Regulatory Commission (Terms and Conditions of
      Tariff) Regulations, 2001 which has been cited before this Court
H
                                       724
POWER GRID CORPN. OF INDIA V. TAMIL NADU GEN. AND                        725
                  DIST. CO. LTD.

to buttress the argument of apportionment of FERV does not in            A
fact provide for apportionment of FERV and rather, is restricted
only to the methodology of calculation of FERV. This methodology
of FERV calculation is not in challenge and has already been
affirmed by the Central Electricity Regulatory Commission
(CERC) as well as the Appellate Tribunal for Electricity, New
                                                                         B
Delhi. No rule, regulation, statute or precedent has been cited
by the appellant to substantiate the argument that post calculation
FERV needs to be necessarily apportioned in a debt-equity ratio,
much less to substantiate what exactly this ratio is and on what
factors the same is determined. Thus, on this ground alone, for
lack of a substantial question of law, these appeals ought to be         C
dismissed. [Para 6] [727-G-H; 728-A-C]
       2. In any case, once the FERV is calculated, in terms of
Regulations 1.3 and 1.7 of the Tariff Regulations, 2001, the same
can be recovered by the appellants from respondent no.1 without
even filing a petition before the CERC. However, in the present          D
case, the FERV is sought to be capitalized by the appellant in the
normative debt-equity ratio of 50:50 as a matter of practice,
without citing any rule, regulation, statute or precedential law.
[Paras 7 and 8] [728-C-D, F]
       3. This observation becomes pertinent in light of the fact        E
that the Act was introduced to reform the problems in the power
sector prior to 1998, inter alia, the lack of rational retail tariffs,
poor planning and operation, the neglect of the consumer and
the absence of an independent regulatory authority. The Act also
aimed at protecting and improving the financial health of the State
Electricity Boards, which were losing heavily on account of              F
irrational tariffs and lack of budgetary support. Thus, noting the
premise on which the Act was enacted and the fact that the Tariff
Regulations, 2001 prescribed under the aegis of this Act do not
provide for apportionment of FERV in a particular debt-equity
ratio, this Court is not inclined to interfere in the matter.            G
[Para 9] [728-G-H; 729-A]
      4. Further, the present dispute arises with respect to tariff
charged between 01.04.2001 and 31.03.2004 on account of FERV
calculation and apportionment. Any variation in the apportionment
of FERV now, for the abovementioned period, will consequently            H
726             SUPREME COURT REPORTS                         [2019] 7 S.C.R.


A     be passed on to the consumers. This will be unfair to the
      consumers who were not consumers for the abovementioned
      period but will eventually bear the brunt of transactions which
      took place 15-18 years ago. This is another ground for non-
      interference in the present matter. [Para 10] [729-B-C]
B             U.P. Power Corpn. Ltd. v. NTPC Ltd. (2009) 6 SCC
              235:[2009] 3 SCR 1060 – relied on.
                              Case Law Reference
      [2009] 3 SCR 1060                 relied on                Para 10

C             CIVIL APPELLATE JURISDICTION : Civil Appeal No. 684 of
      2007.
            From the Judgment and Order dated 04.10.2006 of the Appellate
      Tribunal for Electricity in Appeal Nos. 135, 136, 137, 138, 139 and 140 of
      2005.
D             With
              Civil Appeal No. 13452 of 2015.
             V. Giri, Sr. Adv., M. G. Ramachandran, Ms. Swapna Seshadri,
      Pramod Dayal, Nikunj Dayal, Ms. Payal Dayal, Ms. Parichita Chowdhury,
      Manav Vohra, M. G. Ramachandran, K. V. Mohan, Shubham Arya,
E     Ms. Poorva Saigal, Ms. Tanya Sareen, Siddhartha Chowdhury, Pankaj
      Kr. Mishra, A. Bhasme, A. S. Bhasme, Gopal Prasad, Ms. Yogmaya
      Agnihotri, Ashok Kumar Singh, Pradeep Misra, Ms. Indu Misra, Suraj
      Singh, Manoj Kr. Sharma, T. Harish Kumar, Ashiesh Kumar, P. V. Dinesh,
      Ms. Sindhu T. P., Mukund P. Unny, Devashish Bharuka, Ravi Bharuka,
F     Ms. Sarvshree, Justine George, Aditya Singala, Ms. Divya Roy, Vasudha
      Sen, Sunil Fernandes, Saurabh Mishra, Abhishek Singh, Samridhi Pal,
      S. Vallinayagam, C. K. Rai, Advs. for the appearing parties..
              The Judgment of the Court was delivered by
              N. V. RAMANA, J.
G
              Civil Appeal No.684 of 2007
            1. The present appeal arises out of the decisions of the Central
      Electricity Regulatory Commission, New Delhi [“CERC”] wherein an
      issue relating to capitalization of Foreign Exchange Rate Variation
H
POWER GRID CORPN. OF INDIA V. TAMIL NADU GEN. AND                                727
         DIST. CO. LTD. [N. V. RAMANA, J.]

[“FERV”] was determined by the Commission and thereafter affirmed                A
in a review petition, vide orders dated 30.06.2003 and 04.12.2003
respectively. On appeal, the Appellate Tribunal for Electricity, New Delhi
vide judgment dated 04.10.2006 in Appeal Nos. 135-140 of 2005,
approved the methodology for ascertaining the FERV; however, with
respect to apportionment of the FERV, the appeal was allowed and FERV
                                                                                 B
was directed to be apportioned only in respect of debt liability. It is this
judgment of the Appellate Tribunal for Electricity, New Delhi which is in
challenge before us.
       2. The appellant is a transmission company which plans, executes
and makes available transmission systems for conveyance of power
from one place to another. The tariff which it charges for the conveyance        C
is fixed by the CERC. FERV is a pass through which is kept to ensure
that any liability or gain by virtue of fluctuation in foreign exchange rates
passes to the beneficiary in a staggered manner.
      3. The limited issue before us is apportionment of FERV into debt
and equity after FERV has been calculated and added to capital cost.             D

       4. The learned counsel on behalf of the appellant contended that
any foreign exchange gets added to the capital cost and not individually
to debt or equity. This capital cost is thereafter divided into debt and
equity, on the basis of a normative debt-equity ratio. As a natural corollary,
even the FERV needs to be apportioned both towards debt and equity.              E
Further, he contends that FERV has been apportioned as such, as a
matter of practice.
      5. On the other hand, the learned counsel for respondent no.1
disputed the existence of such practice. He contended that the Electricity
Regulatory Commissions Act, 1998 [“the Act”] was enacted to do away              F
with such practices. He referred to Regulations 1.3 and 1.7 of Tariff
Regulations, 2001 and argued that liability accrued on account of FERV
can be recovered by the appellants directly from respondent no.1 and
the question of capitalization of FERV does not arise.
      6. Having heard the counsels and from a detailed perusal of the            G
record, at the outset, we note that the present question regarding the
apportionment of FERV between debt and equity is not a question of
law, much less a substantial question of law. Regulation 1.13(a) of Central
Electricity Regulatory Commission (Terms and Conditions of Tariff)
Regulations, 2001 [“Tariff Regulations, 2001”] which has been cited
                                                                                 H
728             SUPREME COURT REPORTS                           [2019] 7 S.C.R.


A     before us to buttress the argument of apportionment of FERV does not
      in fact provide for apportionment of FERV and rather, is restricted only
      to the methodology of calculation of FERV. This methodology of FERV
      calculation is not in challenge before us and has already been affirmed
      by the CERC as well as the Appellate Tribunal for Electricity, New
      Delhi. No rule, regulation, statute or precedent has been cited before us
B
      to substantiate the argument that post calculation FERV needs to be
      necessarily apportioned in a debt-equity ratio, much less to substantiate
      what exactly this ratio is and on what factors the same is determined.
      Thus, on this ground alone, for lack of a substantial question of law,
      these appeals ought to be dismissed.
C            7. In any case, once the FERV is calculated, in terms of
      Regulations 1.3 and 1.7 of the Tariff Regulations, 2001, the same can be
      recovered by the appellants from respondent no.1 without even filing a
      petition before the CERC. Regulations 1.3 and 1.7 of Tariff Regulations,
      2001 provide as under:
D           “1.3 These Regulations shall apply where the capital cost-based
            tariff is determined by the Commission.
                                              …
            1.7 Recovery of Income Tax and Foreign Exchange Rate
E           Variation shall be done directly by the utilities from the
            beneficiaries without filing a petition before the
            Commission. In case of any objections by the beneficiaries to
            the amounts claimed on these counts, they may file an appropriate
            petition before the Commission.”

F                                                           (emphasis supplied)
             8. This has not been done in the present case, i.e., Civil Appeal
      No. 684 of 2007. Further, FERV is sought to be capitalized by the appellant
      in the normative debt-equity ratio of 50:50 as a matter of practice, without
      citing any rule, regulation, statute or precedential law.
G           9. This observation becomes pertinent in light of the fact that the
      Act was introduced to reform the problems in the power sector prior to
      1998, inter alia, the lack of rational retail tariffs, poor planning and
      operation, the neglect of the consumer and the absence of an independent
      regulatory authority. The Act also aimed at protecting and improving the
      financial health of the State Electricity Boards, which were losing heavily
H
POWER GRID CORPN. OF INDIA V. TAMIL NADU GEN. AND                                 729
         DIST. CO. LTD. [N. V. RAMANA, J.]

on account of irrational tariffs and lack of budgetary support. Thus, noting      A
the premise on which the Act was enacted and the fact that the Tariff
Regulations, 2001 prescribed under the aegis of this Act do not provide
for apportionment of FERV in a particular debt-equity ratio, this Court is
not inclined to interfere in the matter.
       10. Further, the present dispute arises with respect to tariff charged     B
between 01.04.2001 and 31.03.2004 on account of FERV calculation
and apportionment. Any variation in the apportionment of FERV now,
for the abovementioned period, will consequently be passed on to the
consumers. This will be unfair to the consumers who were not consumers
for the abovementioned period but will eventually bear the brunt of
transactions which took place 15-18 years ago. This is another ground             C
for non-interference in the present matter [See U.P. Power Corpn. Ltd.
v. NTPC Ltd., (2009) 6 SCC 235].
      11. In light of the abovementioned observations, the appeal is
dismissed. No order as to costs.
                                                                                  D
      Civil Appeal No. 13452 of 2015
        12. This appeal is preferred against the impugned judgment and
order dated 18.08.2015 passed by the Appellate Tribunal for Electricity
whereby the appeal preferred by the appellant was dismissed. Further,
the order of the CERC was upheld by observing that the CERC has                   E
rightly applied the decision dated 04.10.2006, which is the same order
that is impugned in Civil Appeal No. 684 of 2007, to the instant matter
and directed that the entire FERV should be apportioned only in respect
of debt liability. Thus, the issue being the same, this appeal is also
dismissed in a sequel to the discussion set out above. No order as to
costs.                                                                            F

Ankit Gyan                                                   Appeals dismissed.




                                                                                  G




                                                                                  H