Supreme Court of India
PTC INDIA LTD.versusCENTRAL ELECTRICITY REGULATORY COMMISSION THROUGH SECRETARY
- Citation
- 2010 INSC 146
- Decided
- 15 March 2010
- Disposal
- Dismissed
- Bench
- K G BALAKRISHNAN
Holding
Regulations made by CERC under Section 178 are subordinate legislation whose validity can only be challenged by judicial review in a court, and the Appellate Tribunal lacks jurisdiction under Sections 111 and 121 to review such regulations.
Summary
PTC India Ltd and other traders challenged the Central Electricity Regulatory Commission's (CERC) Fixation of Trading Margin Regulations, 2006, alleging they were ultra vires. They appealed to the Appellate Tribunal for Electricity, which dismissed the appeal, directing them to seek judicial review. The Supreme Court examined whether the Tribunal could review the validity of regulations made under Section 178 of the Electricity Act, 2003, whether CERC could cap trading margins by regulation, and whether Section 121 conferred judicial‑review powers on the Tribunal. The Court held that regulations under Section 178 are delegated legislation whose validity can only be tested by judicial review in a court, not by appeal under Section 111. CERC was found to have the authority to cap trading margins via regulation, and Section 121 does not grant the Tribunal power of judicial review. Consequently, the appeals were dismissed, and the Tribunal was held to have no jurisdiction to entertain challenges to the regulations.
Issues considered
- Whether the Appellate Tribunal for Electricity has jurisdiction under Section 111 of the Electricity Act, 2003 to examine the validity of the CERC (Fixation of Trading Margin) Regulations, 2006 made under Section 178.
- Whether Parliament conferred a power of judicial review on the Appellate Tribunal under Section 121 of the Electricity Act, 2003.
- Whether the Central Electricity Regulatory Commission can cap trading margins by making a regulation under Section 178 of the Electricity Act, 2003.
Legislation cited
- Electricity Act, 2003s. 111, s. 121, s. 178, s. 79
- Electricity (Amendment) Act, 2003 (No.57 of 2003)s. 1, s. 4
Subjects
delegated legislationsubordinate legislationAppellate Tribunal jurisdictionjudicial reviewElectricity Act 2003Section 178trading marginregulation vs ordergeneral versus enumeration principleregulatory power
Judgment
[2010] 3 S.C.R. 609
A
PTC INDIA LTD.
v.
CENTRAL ELECTRICITY REGULATORY COMMISSION
THROUGH SECRETARY
(Civil Appeal No. 3902 of 2006 etc.) B
MARCH 15, 2010
[K.G. BALAKRISHNAN, CJI., S.H. KAPADIA, R.V.
RAVEENDRAN, B. SUDERSHAN .REDDY AND P.
SATHASIVAM, JJ.) C
Electricity Act, 2003: ss. 111, 178, 121 and 79(1) -
Central Electricity Regulatory Commission (Fixation of
Trading Margin) Regulations, 2006 framed in exercise of
power uls. 178 - Vires of the Regulation challenged before D
Appellate Tribunal - Jurisdiction of Appellate Tribunal u/s. 111
to examine the validity of the Regulations - Power of judicial
review uls. 121 on the Appellate Tribunal - Power of CERC
to cap the trading margins ·by making Regulations - Held: A
regulation u/s. 178 is made under the authority of delegated E
legislation and its validity can be tested only in judicial review
and not by way of appeal before the Appellate Tribunal uls.
111 - Section 121 does not confer power of judicial review of
the validity of the Regulations made u/s. 178, on the Appellate
Tribunal - Applying the principle of "generality versus F
enumeration'; CERC empowered to cap the trading margin
under the authority of delegated legislation u/s. 178 - Central
Electricity Regulatory Commission (Fixation of Trading
Margin) Regulations, 2006.
Administrative law: G
Rules and Regulations vis-a-vis Law enacted by
legislative - Nature of - Similarity between.
609 H
610 SUPREME COURT REPORTS [2010] 3 S.C.R.
A Quasi judicial orders and judicial decisions - Similarity
between.
Order and 'Regulation' - Distinction between.
Legislation:
B
Substitution of a statutory provision - Effect of - Held:
Substitution of a provision is a combination of repeal and
fresh enactment.
c Appellants challenged thP. vires of the Central
Electricity Regulatory Commission (Fixation of Trading
Margin) Regulations, 2006 as null and void before the
Appellate Tribunal for Electricity and had prayed for
quashing of the said Regulations. The Tribunal dismissed
the appeals holding that its jurisdiction was restricted by
0
the limits imposed by the parent Statute, i.e., the
Electricity Act, 2003. The Tribunal held that the
appropriate course of action for the appellants was to
proceed by way of judicial review under the Constitution
of India. Hence the present appeals.
E
The questions for consideration before the Court
were: (i) Whether the Appella~e Tribunal constituted
under the 2003 Act has jurisdiction u/s. 111 of the Act, to
examine the validity of the 2006 Regulations (ii) Whether
F capping of trading margins could be done by the Central
Electricity Regulatory Commission (CERC) by making a
Regulation in that regard u/s. 178 of 2003 Act and (iii)
Whether Parliament has conferred power of judicial
review on the Appellate Tribunal for Electricity u/s. 121 of
G the 2003 Act.
Dismissing the appeals, the Court
HELD: 1.1. A regulation u/s. 178 is made under the
authority of delegated legislation and consequently its
H
PTC INDIA LTD. v. CENTRAL ELECTRICITY 611
REGULATORY COMM. THR. SECRY.
validity can be tested only in judicial review proceedings A
before the courts and not by way of appeal before the
Appellate Tribunal for Electricity under Section 111 of
Electricity Act, 2003. [Para 59] [684-H; 685-A]
1.2. The decision-making and regulation-making 8
functions are both assigned to CERC. Law comes into
existence not only through legislation but also by
regulation and litigation. Laws from all three sources are
binding. A statutory instrument, such as a rule or
regulation, emanates from the exercise of delegated
legislative power which is a part of administrative process C
resembling enactment of law by the legislature whereas
a quasi-judicial order comes from adjudication which is
also part of administrative process resembling a judicial
decision by a court of law. [Para 37] [664-H; 655-A-C]
D
Shri Sitaram Sugar Co. Ltd. v. Union of India and Ors.
(1990) 3 sec 223, referred to.
1.3. Price fixation exercise is actually legislative in
character, unless by the terms of a particular statute it is E
made quasi-judicial as in the case of Tariff fixation u/s. 62
made appealable u/s. 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 tariff is done by the appropriate F
Commission u/s. 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. This basic scheme
equally applies to subject-matter "trading margin" in a G
different statlltory context. [Para 38] [665-D-F]
1.4. Section 79 delineates the functions of CERC
broadly into two categories - mandatory functions and
advisory functions. Tariff regulation, licensing (Including H
612 SUPREME COURT REPORTS [2010) 3 S.C.R.
A inter-State trading licensing), adjudication upon disputes
involving generating companies or transmission
licensees fall under the head "mandatory functions"
whereas advising Central Government on formulation of
National Electricity Policy and tariff policy would fall
B under the head "advisory_ functions". In this sense, CERC
is the decision-making authority. Such decision-making
u/s. 79 (1) is not dependant upon making of regulations
u/s. 178 by CERC. Therefore, functions of CERC
enumerated in Section 79 are separate and distinct from
c function of CERC u/s. 178. The former is administrative/
adjudicatory function whereas the latter is legislative.
[Para 39) [666-H; 667-A-C)
Mis. Narinder Chand Hem Raj and Ors. v. Lt. Governor,
Administrator, Union Territory, Himachal Pradesh and Ors.
D (1971) 2 SCC 747; Indian Express Newspapers (Bombay)
Pvt. Ltd. and Ors. v. Union of India and Ors. (1985) 1 SCC
641, relied on.
1.5. On reading Sections 76(1) and 79(1) one finds
E that CERC is empowered to take measures/steps in
discharge of the functions enumerated in Section 79(1)
like to regulate the tariff of generating companies, to
regulate the inter-State transmission of electricity, to
determine tariff for inter-State transmission of electricity,
F to issue licenses, to adjudicate upon disputes, to levy
fees, to specify the Grid Code, to fix the trading margin
in inter-State trading of electricity, if considered
necessary, etc .. These measures, which CERC is
empowered to take, have got to be in conformity with the
G regulations u/s. 178, wherever such regulations are
applicable. Measures u/s. 79(1 ), therefore, laave got to be
in conformity with the regulations u/s. 178. To regulate is
an exercise which is different from making of the
regulations. However, making of a regulation u/s. 178 is
not a pre-condition to the Central Commission taking any
H
PTC INDIA LTD. v. CENTRAL ELECTRICITY 613
REGULATORY COMM. THR. SECRY.
steps/measures u/s. 79(1 ). If there is a regulation, then the A
measure u/s. 79(1) has to be in conformity with such
regulation u/s. 178. The dichotomy between the power to
make a regulation u/s. 178 on one hand and the various
enumerated areas in Section 79(1) in which CERC is
mandated to take such measures as it deems to fulfil the B
objects of 2003 Act. [Para 40] [667-F-H; 668-A-C]
1.6. In the hierarchy of regulatory powers and
functions under the 2003 Act, Section 178, which deals
with making of regulations by the Central Commission,
under the authority of subordinate legislation, is wider C
than Section 79(1) of the 2003 Act, which enumerates the
regulatory functions of the CERC, in specified areas, to
be discharged by orders (decisions). [Para 59] [684-E-F]
1.7. In the instant case, instead of fixing a trading D
margin (including capping) on a case to case basis,
CERC thought it fit to make a regulation which has a
general application to the entire trading activity which has
been recognized, for the first time, under 2003 Act.
Making of a regulation u/s. 178 became necessary E
because a regulation made u/s. 178 has the effect of
interfering and overriding the existing contractual
relationship between the regulated entities. A regulation
u/s. 178 is in the nature of a subordinate legislation. Such
subordinate legislation can even override the existing F
contracts including Power Purchase Agreements which
have got to be aligned with the regulations u/s. 178 and
which could not have been done across the board by an
order of the CERC u/s. 79(1)(j). [Para 40] [669-8-E]
National Hydro-electric Power Corporation Ltd. v. CIT G
2010 (1) SCALE 5; Mis Southern Technologies Ltd. v. Joint
Commissioner of Income Tax, Coimbatore 2010 (1) SCALE
329, relied on.
1.8. Applying the test of "general application", a H
614 SUPREME COURT REPORTS [2010] 3 S.C.R.
A regulation stands on a higher pedestal vis-ii-vis an Order
{decision) of CERC in the sense that an order has to be
in conformity with the regulations. However, that would
not mean that a regulation is a pre-condition to the order
{decision). Therefore, it cannot be said that under the
B 2003 Act, power to make regulations u/s. 178 has to be
correlated to the functions ascribed to each authority
under the 2003 Act and that CERC can enact regulations
only on topics enumerated in s. 178(2). Apart from
Section 178(1) which deals with "generality" even u/s.
c 178{2){ze), CERC could enact a regulation on any topic
which may not fall in the enumerated list provided such
power falls within the scope of the 2003 Act. Trading is
an activity recognized under the 2003 Act. While deciding
the nature of an order {decision) vis-a-vis a regulation
under the Act, one needs to apply the test of general
0
application. [Para 43) [672-E-H]
U.P. State Electricity Board, Lucknow v. City Board,
Mussoorie (1985) 2 SCC 16; Mis Jagdamba Paper Industries
(Pvt.) Ltd. and Ors. v. Haryana State Electricity Board and Ors.
E AIR 1983 SC 1296; Kera/a State Electricity Board v. S.N.
Govinda Prabhu and Bros. and Ors. (1986) 4 sec 198, relied
on.
Hindustan Zinc Ltd. etc. v. Andhra Pradesh State
F Electricity Board and Ors. (1991) 3 SCC 299; Indian Express
Newspapers (Bombay) Pvt. Ltd. and Ors. v. Union of India and
Ors. (1985) 1 SCC 641; City Board, Mussoorie v. State
Electricity Board and Ors. AIR (58) 1971 Allahabad 21·9,
referred to.
G 1.9. On the making of the impugned Regulations
2006, even the existing Power Purchase Agreements
{"PPA") had to be modified and aligned with the said
Regulations. The impugned Regulation makes an inroad
into even the existing contracts. This itself indicates the
H width of the power conferred on CERC u/s. 178 of the .
PTC INDIA LTD. v. CENTRAL ELECTRICITY 615
REGULATORY COMM. THR. SECRY.
2003 Act. All contracts coming into existence after making A
of the impugned Regulations 2006 have also to factor in
the capping of the trading margin. This itself indicates that
the impugned Regulations are in the nature of
subordinate legislation. Such regulatory intervention into
the existing contracts across-the-board could have been B
done only by making Regulations u/s. 178 and not by
passing an Order u/s. 79(1)(j) of the 2003 Act. Therefore,
it becomes clear that the word "order' in Section 111 of
the 2003 Act cannot include the impugned Regulations
2006 made u/s. 178 of the 2003 Act. [Para 43] [672-H; 673- c
A-DJ
1.10. If a dispute arises in adjudication on
interpretation of a regulation made u/s. 178, an appeal
would certainly lie before the Appellate Tribunal under
Section 111, however, no appeal to the Appellate Tribunal D
shall lie on the validity of a regulation made under Section
178. [Para 59J [685-E]
2.1. On the question of "generality versus
enumeration" principle, the enumerated factors/topics in E
a provision do not mean that the authority cannot take
any other matter into consideration which may be
relevant. The words in the enumerated provision are not
a fetter; they are not words of limitation, but they are
words for general guidance. [Para 49] [677-C-F]
F
Hindustan Zinc Ltd. etc. v. Aridhra Pradesh State
Electricity Board and Ors. (1991) 3 SCC 299; Shri Sitaram
Sugar Co. Ltd. v. Union of India and Ors. (1990) 3 SCC 223,
relied on.
G
2.2. Applying the principle of "generality versus
enumeration", it would be open to the Central
Commission to make a regulation on any residuary item
u/s. 178(1) r/w Section 178(2)(ze). The CERC was
empowered to cap the trading margin under the authority H
616 SUPREME COURT REPORTS [2010] 3 S.C.R.
A of delegated legislation u/s. 178 vide the impugned
Notification dated 23.1.2006. [Para 59] (685-F-G]
3.1. Section 121 of the 2003 Act does not confer
power of judicial review on the Appellate Tribunal. The
8 words "orders", "instructions" or "directions" in Section
121 do not confer power of judicial review in the Appellate
Tribunal for Electricity. In the 2003 Act, the power of
judicial review of the validity of the Regulations made u/
s. 178 is not conferred on the Appellate Tribunal for
C Electricity. [Para 59] (685-B-D]
Mis Raman and Raman Ltd. v. State of Madras and Ors.
AIR 1959 SC 694, relied on.
3.2. It is not correct to say thats. 121 has not yet been
o brought into force. At the outset, the material brought on
record indicates that Section 121 of the original Electricity
Act, 2003, was never brought into force because some
MPs expressed the concern that the power, under that
Section, conferred upon the Chairperson of the Appellate
E Tribunal, could lead to excessive centralization of power
and interference with the day-to-day activities of the
Commission by the Chairperson of the Tribunal.
Therefore, Section 121 was amended by Electricity
(Amendment) Act, 2003 (No.57 of 2003) and which
F amendment Act came into force from 27.1.2004. By
necessary implication of the coming into force of the
Electricity (Amendment) Act, 2003 (No.57 of 2003) all
provisions amended by it also came into force, hence
there is no requirement for a further Notification u/s. 1(3),
particularly when Section 121 in its amended form has
G come into force w.e.f. 27.1.2004. Section 121 of the
original Act stood substituted by Amendment Act No. 57
'' of 2003. Substitution of a provision results in repeal of the
earlier provision and its replacement by the new
provision. Substitution is a combination of repeal and
H fresh enactment. (Para 58] (683-D-G]
PTC INDIA LTD. v. CENTRAL ELECTRICITY 617
REGULATORY COMM. THR. SECRY.
'Principles of Statutory lnterpretat~on' by G.P. Singh 11th A
Edn., p. 638, referred to.
Case Law Reference:
(1990) 3 sec 223 Referred to. Para 37
B
Relied on Para 49
(1971) 2 sec 141 Relied on. Para 38
(1985) 1 sec 641 Relied on. Para 38
Referred to. Para 48 c
2010 (1) SCALE 5 Relied on Para 41
2010 (1) SCALE 329 Relied on. Para 42
AIR (58) 1971 Referred to Para 45 D
Allahabad 219
(1985) 2 sec 16 Relied on. Para 45
AIR 1983 SC 1296 Relied on. Para 46
(1986) 4 sec 198 Relied on. Para 47, E
(1991) 3 sec 299 Referred to Para 48
Relied on. Para 49
<1990) 3 sec 223 Relied on. Para 49 F
AIR 1959 SC 694 Relied on. Para 53
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
3902 of 2006.
G
From the Judgment & Order dated 28.4.2006 of the
Appellate Tribunal for Electricity, New Delhi, in Appeal No. 45
of 2006.
WITH
'. ,"
618 SUPREME COURT REPORTS [2010] 3 S.C.R.
A C.A. Nos. 147, 2073, 2166, 2875 of 2007 4354, 4355 of 2006,
7437, 7438 of 2005.
C.A. Nos. 2412, 2413 of 2010.
Gopal Subramanium, Sol. Genl. of India, Vikas Singh,
8 Harish N. Salve, P.S. Narasimha, Shanti Bhushan, K.V.
Viswanathan, Bhaskar Gupta, Dr. Manish Singhvi, AAG, Amit
Kapur, Mansoor Ali Shoket, Apoorva Misra, Amrita Narayana,
Shiva Lakshmi Singh, Udita Singh, Aribam Guneshwar Sharma,
Shrivenkastesh, Meenakshi Grover, K.D. Dayal, Harsh Shahu,
C Che~na N. Rai, Harsh Sahu (for Vibha Datta Makhija), Shreshta
Sharma, Anupam Varma (for Vibha Datta Makhija), Pradeep
Misra (NP), R. Chandrachud (for K.R. Sasiprabu) M.G.
Ramachandran, K.V. Mohan, K.V. Balakrishnan, Anand K.
Ganesan, Swapna Sheshadri, Ashiesh Kumar, Nikhil Nayyar,
D T.V.S. R.aghavendra Sreyas, Ambuj Agrawal, Sanjeev K.
Kapoor, Vishal Gupta, Kumar Mihir (for Khaitan & Co.),
Devenahsu Kr. Devesh (for D.K. Sinha), Amit Kumar, R.
Nedumaran, Suresh Chandra Tripathy, Shibashish Mishra (NP),
A.S. Bhasme (NP) Sharmila Upadhyay (NP), Ruchi Gaur
E Narula, Deepika Goel (NP) (for Rakesh K. Sharma), Pratik
Dhar, C.K. Rai, Sridhar Potaraju, G. Umapathy, Vibhu Tiwari
(for Rakesh K. Sharma), C.K. Rai (for Malini Poduval) for the
appearing parties.
The Judgment of the Court was delivered by
F
S.H. KAPADIA, J. 1. Delay condoned.
2. Leave granted.
3. In this batch of civil appeals, we are basically concerned
G with the doctrine and jurisprudence of delegated legislation.
QUESTIONS OF LAW:
4. The crucial points that arise for determination are: -
H
PTC INDIA LTD. v. CENTRAL ELECTRICITY 619
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
(i) Whether the Appellate Tribunal constituted under A
the Electricity Act, 2003 ("2003 Act") has jurisdiction
under Section 111 to examine the validity of Central
Electricity Regulatory Commission (Fixation of
Trading Margin) Regulations, 2006 framed in
exercise of power conferred under Section 178 of B
the 2003 Act?
(ii) Whether Parliament has conferred power of judicial
review on the Appellate Tribunal for Electricity under
Section 121 of the 2003 Act?
c
(iii) Whether capping of trading margins could be done
by the CERC ("Central Commission'') by making a
Regulation in that regard under Section 178 of the
2003 Act?
D
FACTS:
5. In this batch of civil appeals, appellants had challenged
the vires of the Central Electricity Regulatory Commission
(Fixation of Trading Margin) Regulations, 2006 as null and void
before the Appellate Tribunal for Electricity and had prayed for E
quashing of the said Regulations. The Tribunal, however,
dismissed the appeals holding that its jurisdiction was restricted
by the limits imposed by the parent Statute, i.e., the Electricity
Act, 2003. By the impugned judgment, the Tribunal held that the
appropriate course of action for the appellants is to proceed F
by way of judicial review under the Constitution.
6. In view of the importance of the question, the matter was
referred by a three-Judge Bench of this Court to the Constitution
Bench. While making reference to the Constitution Bench, the G
question formulated was - "whether the Tribunal has jurisdiction
to decide the question as to the validity of the Regulations
framed by the Central Commission?" Basically, the matters
involve interpretation of Sections 111 and 121 of the 2003 Act.
H
620 SUPREME COURT REPORTS [2010] 3 S.C.R. I
A 7. RELEVANT PROVISIONS OF THE 2003 ACT:
PART I
PRELIMINARY
B Section 1. Short title, extent and commencement.-
(3) It shall come into force on such date as the Central
Government may, by notification, appoint:
Provided that different dates may be appointed for
c different provisions of this Act and any reference in any
such provision to the commencement of this Act shall be
construed as a reference to , the coming into force of that
provision.
D Section 2 - Definitions.- In this Act, unless the context
otherwise requires,- -
(9) "Central Commission" means the Central Electricity
Regulatory Commission referred to in sub-section (1) of
section76;
E
(23) "electricity" means electrical energy-
(a) generated, transmitted, supplied or traded for
any purpose; or
F (b) used for any purpose except the transmission
of a message;
.
(26) "electricity trader'' means a person who has been
granted a licence to undertake trading in electricity under
G section 12;
(32) "grid" means the high voltage backbone system of
inter-conr.ected transmission lines, sub-station and
generating plants;
H (33) "Grid Code" means the Grid Code specified by the
PTC INDIA LTD. v. CENTRAL ELECTRICITY 621
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
Central Commission under clause (h) of su.b-section (1) of A
section 79;
(34) "Grid Standards" means the Grid Standards specified
under clause (d) of section 73 by the Authority;
(39) "licensee" means a person who has been granted a
8
licence under section 14;
(44) "National Electricity Plan" means the National
Electricity Plan notified under sub-section (4) of section 3;
c
(45) "National Load Despatch Centre" means the Centre
established under sub-section (1) of section 26;
(46) "notification" means notification published in the
Official Gazette and the expression "notify" shall be
construed accordingly; D
(47) "open access" means the non-discriminatory provision
for the use of transmission lines or distribution system or
associated facilities with such lines or system by any
licensee or consumer or a person engaged in generation E
in accordance with the regulations specified by the
Appropriate Commission;
(52) "prescribed" means prescribed by rules made by the
Appropriate Government under this Act;
F
(57) "regulations" means regulations made under this Act;
(59) "rules" means rules made under this Act;
(62) "specified" means specified by regulations made by
the Appropriate Commission or the Authority, as the case G
may be, under this Act;
(64) "State Commission" means the State Electricity
Regulatory Commission constituted under sub-section (1)
of section 82 and includes a Joint Commission constituted H
622 SUPREME COURT REPORTS [2010] 3 S.C.R.
A under sub-section (1) of section 83;
(71) "trading" means purchase of electricity for resale
thereof and the expression "trade" shall be construed
accordingly;
B (76) "wheeling" means the operation whereby the
distribution system and associated facilities of a
transmission licensee or distribution licensee, as the case
may be, are used by another person for the conveyance
of electricity on payment of charges to be determined
c under section 62;
PART II
NATIONAL ELECTRICITY POLICY AND PLAN
D Section 3 - National Electricity Policy and Plan
(1) The Central Government shall, from time-to-time,
prepare the National Electricity Policy and tariff policy, in
consultation with the State Governments and the Authority
E for development of the power system based on optimal
utilisation of resources such as coal, natural gas, nuclear
substances or materials, hydro and renewable sources of
energy.
(4) The Authority shall prepare a National Electricity Plan
F in accordance with the National Electricity Policy and notify
such plan once in five years:
P1ovided that the Authority while preparing the National
Electricity Plan shall publish the draft National Electricity
G Plan and invite suggestions and objections thereon from
licensees, generating companies and the public within
such time as may be prescribed:
Provided further that the Authority shall-
H
PTC INDIA LTD. v. CENTRAL ELECTRICITY 623
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
(a) notify the plan after obtaining the approval of the Central A
Government;
(b) revise the plan incorporating therein the directions, if
any, given by the Central Government while granting
approval under clause (a).
8
PART Ill
GENERATION OF ELECTRICITY
Section 7 - Generating company and requirement for C
setting up of generating station.-Any generating company
may establish, operate and maintain a generating station
without obtaining a licence under this Act if it complies with
the technical standards relating to connectivity with the grid
referred to in clause (b) of section 73.
D
Section 9 - Captive generation.- (1) Notwithstanding
anything contained in this Act, a person may construct,
maintain or operate a captive generating plant and
dedicated transmission lines:
E
Provided that the supply of electricity from the captive
generating plant through the grid shall be regulated in the
same manner as the generating station of a generating
company.
Provided further that no licence shall be required under this F
Act for supply of electricity generated from a captive
generating plant to any licensee in accordance with the
provisions of this Act and the rules and regulations made
thereunder and to any consumer subject to the regulations
made under sub-section (2) of section 42. G
(2) Every person, who has constructed a captive
generating plant and maintains and operates such plant,
shall have the right to open access for the purposes of
carrying electricity from his captive generating plant to the H
j
624 SUPREME COURT REPORTS [2010] 3 S.C.R.
A destination of his use:
Provided that such open access shall be subject to
availability of adequate transmission facility and such
availability of transmission facility shall be determined by
the Central Transmission Utility or the State Transmission
B
Utility, as the case may be:
Provided further that any dispute regarding the availability
of transmission facility shall be adjudicated upon by the
Appropriate Commission.
c
Section 11- Directions to generating companies.- (1) The
Appropriate Government may specify that a generating
company shall, in extraordinary circumstances operate and
maintain any generating station in accordance with the
D directions of that Government.
Explanation:-For the purposes of this section, the
expression "extraordinary circumstances" means
circumstances arising out of threat to security of the State,
public order or a natural calamity or such other
E circumstances arising in the public interest.
(2) The Appropriate Commission may offset the-adverse
financial impact of the directions referred to in sub-section
(1) on any generating company in such manner as it
F considers appropriate.
PART IV
LICENSING
Section 12 -Authorised persons to transmit, supply, etc.,
G electricity- No person shall-
(a) transmit electricity; or
(b) distribute electricity; or
H
PTC INDIA LTD. v. CENTRAL ELECTRICITY 625
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
{c) undertake trading in electricity, A
unless he is authorised to do so by a licence issued under
section 14, or is exempt under section 13.
Section 14 - Grant of licence.-
B
The Appropriate Commission may, on an application
made to it under section 15, grant a licence to any
person-
(a) to transmit electricity as a transmission licensee; or
c
(b) to distribute electricity as a distribution licensee; or
{c) to undertake trading in electricity as an electricity trader,
in any area as may be specified in the licence:
D
Section 15 - Procedure for grant of licence.-
(1) Every application under section 14 shall be made in
such form and in such manner as may be specified by the
Appropriate Commission and shall be accompanied by E
such fee as may be prescribed.
(6) Where a person makes an application under sub-
section (1) of section 14 to act as a licensee, the
Appropriate Commission shall, as far as practicable,
within ninety days after receipt of such application,- F
(a) issue a licence subject to the provisions of this Act and
the rules and regulations made thereunder; or
(b) reject the application for reasons to be recorded in G
writing if such application does not conform to the
provisions of this Act or the rules and regulations made
thereunder or the provisions of any other law for the time
being in force:
Provided that no application shall be rejecte.d unless the H
626 SUPREME COURT REPORTS [2010] 3 S.C.R.
A applicant has been given an opportunity of being heard.
Section 16 - Conditions of licence.-
The Appropriate Commission may specify any general or
specific conditions which shall apply either to a licensee
B or class of licensees and such conditions shall be deemed
to be conditions of such licence:
Provided that the Appropriate Commission shall, within one
year from the appointed date, specify any general or
c specific conditions of licence applicable to the licensees
referred to in the first, second, third, fourth and fifth provisos
to section 14 after the expiry of one year from the
commencement of this Act.
PART V
D
TRANSMISSION OF ELECTRICITY
Section 26 - National Load Despatch Centre
(1) The Central Government may establish a Centre at the
E national level, to be known as the National Load Despatch
Centre for optimum scheduling and despatch of electricity
among the Regional Load Despatch Centres.
(2) The constitution and functions of the National Load
F Despatch Centre shall be such as may be prescribed by
the Central Government:
Provided that the National Load Despatch Centre shall not
engage in the business of trading in electricity
G Section 34 - Grid Standards.-
Every transmission licensee shall comply with such
technical standards, of operation and maintenance of
transmission lines, in accordance with the Grid Standards,
H as may be specified by the Authority.
~"'"""'
PTC INDIA LTD. v. CENTRAL ELECTRICITY 627
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
Section 37 - Directions by Appropriate Government.- A
The Appropriate Government may issue directions to the
Regional Load Despatch Centres or State Load Despatch
Centres, as the case may be, to take such measures as
may be necessary for maintaining smooth and stable
8
transmission and supply of electricity to any region or State
Section 38 - Central Transmission Utility and functions.-
(1) The Central Government may notify any Government
company as the Central Transmission Utility: c
Provided that the Central Transmission Utility shall not
engage in the business of generating of electricity or
trading in electricity:
Provided further that the Central Government may transfer, D
and vest any property, interest in property, rights and
liabilities connected with, and personnel involved in
transmission of electricity of such Central Transmission
Utility, to a company or companies to be incorporated
under the Companies Act, 1956 (1 of 1956) to function as E
a transmission licensee, through a transfer scheme to be
effected in the manner specified under Part XIII and such
company or companies shall be deemed to be
transmission licensees under this Act.
F
(2) The functions of the Central Transmission Utility shall
be-
(a) to undertake transmission of electricity through inter-
state transmission system;
G
(b) to discharge all functions of planning and co-ordination
relating to inter-State transmission system with-
(i) State Transmission Utilities;
(ii) Central Government; H
628 SUPREME COURT REPORTS [2010) 3 S.C.R.
A (iii) State Governments;
(iv) generating companies;
(v) Regional Power Committees;
B (vi) Authority;
(vii) licensees;
(viii) any other person notified by the Central Government
in this behalf;
c
(c) to ensure development of an efficient, co-ordinated and
economical system of inter-State transmission lines for
smooth flow of electricity from generating stations to the
load centres;
D
(d) to provide non-discriminatory open access to its
transmission system for use by-
(i) any licensee or generating company on payment of the
transmission charges; or
E
(ii) any consumer as and when such open access is
provided by the State Commission under sub-section (2)
of section 42, on payment of the transmission charges and
a surcharge thereon as may be specified by the Central
F Commission:
Provided that such surcharge shall be utilised for the
purpose of meeting the requirement of current level cross-
subsidy:
G Provided further that such surcharge and cross subsidies
shall be progressively reduced in the manner as may be
specified by the Central Commission:
Provided also that the manner of payment and utilization
H
PTC INDIA LTD. v. CENTRAL ELECTRICITY 629
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
of the surcharge shall be specified by the Central A
Commission:
Provided also that such surcharge shall not be leviable in
case open access is provided to a person who has
established a captive generating plant for carrying the 8
electricity to the destination of his own use.
PART VI
DISTRIBUTION OF ELECTRICITY
Section 42 - Duties of distribution licensees and open C
access.-
(2) The State Commission shall introduce open access in
such phases and subject to such conditions, (including the
cross subsidies, and other operational constraints) as may
0
be specified within one year of the appointed date by it
and in specifying the extent of open access in successive
phases and in determining the charges for wheeling, it shall
have due regard to all relevant factors including such cross
subsidies, and other operational constraints:
E
Provided that such open access shall be allowed on
payment of a surcharge in addition to the charges for
wheeling as may be determined by the State Commission:
Provided further that such surcharge shall be utilised to F
meet the requirements of current level of cross subsidy
within the area of supply of the distribution licensee:
Provided also that such surcharge and cross subsidies shall
be progressively reduced in the manner as may be
specified by the State Commission: - G
Provided also that such surcharge shall not be leviable in
case open access is provided to a person who has
established a captive generating plant for carrying the
electricity to the destination of his own use: H
630 SUPREME COURT REPORTS [2010] 3 S.C.R.
A Provided also that the State Government shall, not later
than five years from the date of commencement of the
Electricity (Amendment) Act, 2003 (57 of 2003) by
regulations, provide such open access to all consumers
who require a supply of electricity where the maximum
B power to be made available at any time exceeds one
megawatt.
Section 52 - Provisions with respect to electricity trader.-
(1 J Without prejudice to the provisions contained in clause
C (c) of section 12, the Appropriate Commission may,
specify the technical requirement, capital adequacy
requirement and credit worthiness for being an electricity
trader.
0 (2) Every electricity trader shall discharge such duties, in
relation to supply and trading in electricity, as may be
specified by the Appropriate Commission.
PART VII
TARIFF
E
Section 61 - Tariff regulations.-
The Appropriate Commission shall, subject to the
provisions of this Act, specify the terms and conditions for
the determination of tariff, and in doing so, shall be guided
F
by the following, namely:-
(a) the principles and methodologies specified by the
Central Commission for determination of the tariff
applicable to generating companies and transmission
G licensees;
(b) the generation, transmission, distribution and supply of
electricity are conducted on commercial principles;
(c) the factors which would encourage competition,
H
PTC INDIA LTD. v. CENTRAL ELECTRICITY 631
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
efficiency, economical use of the resources, good A
performance and optimum investments;
(d) safeguarding of consumers' interest and at the same
time, recovery of the cost of electricity in a reasonable
manner; B
(e) the principles rewarding efficiency in performance;
(f) multi-year tariff principles;
(g) that the tariff progressively reflects the cost of supply c
of electricity and also reduces cross-subsidies in the
manner specified by the Appropriate Commission;
(h) the promotion of co-generation and generation of ·
electricity from renewable sources of energy;
D
(i) the National Electricity Policy and tariff policy:
Provided that the terms and conditions for determination
of tariff under the Electricity (SupplyrAct, 1948, the
Electricity Regulatory Commissions Act, 1998, and the E
enactments specified in the Schedule as they stood
immediately before the appointed date, shall continue to
apply for a period of one year or until the terms and
conditions for tariff are specified under this section,
whichever is earlier.
F
Section 62 - Determination of tariff
(1) The Appropriate Commission shall determine the tariff
in accordance with the provisions of this Act for-
(a) supply of electricity by a generating company to a G
distribution licensee:
Provided that the Appropriate Commission may, in case
of shortage of supply of electricity, fix the minimum and
maximum ceiling of tariff for sale or purchase of electricity H
632 SUPREME COURT REPORTS [2010) 3 S.C.R.
A in pursuance of an agreement, entered into between a
generating company and a licensee orbetween licensees,
for a period not exceeding one year to ensure reasonable
prices of electricity;
(b) transmission of electricity;
B
(c) wheeling of electricity;
(d) retail sale of electricity:
Provided that in case of distribution of electricity in the
c same area by two or more distribution licensees, the
Appropriate Commission may, for the promoting
competition among distribution licensees, fix only
maximum ceiling of tariff for retail sale of electricity.
D (2) The Appropriate Commission may require a licensee
or a generating company to furnish separate details, as
may be specified in respect of generation, transmission
and distribution for determination of tariff.
E (3) The Appropriate Commission shall not, while
determining the tariff under this Act, show undue preference
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
F
geographical position of any area, the nature of supply and
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
G respect of any changes expressly permitted under the
terms of any fuel surcharge formula as may be specified.
(5) The Commission may require a licensee or a
generating company to comply with such procedure as may
be specified for ca,culating the expected revenues from
H
PTC INDIA LTD. v. CENTRAL ELECTRICITY 633
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
the tariff and charges which he or it is permitted to recover. A
(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
8
interest equivalent to the bank rate without prejudice tci any
other liability incurred by the licensee.
Section 63 - Determination of tariff by bidding process.-
Notwithstanding anything contained in section 62, the c
Appropriate Commission shall adopt the tariff if such tariff
has been determined through transparent process of
bidding in accordance with the guidelines issued by the
Central Government.
Section 64 - Procedure for tariff order.-
(1) An application for determination of tariff under section
62 shall be made by a generating company or licensee in
such manner and accompanied by such fee, as may be
determined by regulations. E
(2) Every applicant shall publish the application, in such
abridged form and manner, as may be specified by the
Appropriate Commission.
(3) The Appropriate Commission shall, within one hundred F
and twenty days from receipt of an application under sub-
section (1) and after considering all suggestions and
objections received from the public,-
(a) issue a tariff order accepting the application with such G
modifications or such conditions as may be specified in
that order;
(b) reject the application for reasons to be recorded in
writing if such application is not in accordance with the
H
634 SUPREME COURT REPORTS [2010] 3 S.C.R.
A provisions of this Act and the rules and regulations made
thereunder or the provisions of any other law for the time
being in force:
Provided that an applicant shall be given a reasonable
opportunity of being heard before rejecting his application.
8
(4) The Appropriate Commission shall, within seven days
of making the order, send a copy of the order to the
Appropriate Government, the Authority, and the concerned
licensees and to the person concerned.
c
(5) Notwithstanding anything contained in Part X, the tariff
for any inter-State supply, transmission or wheeling of
electricity, as the case may be, involving the territories of
two States may, upon application made to it by the parties
D intending to undertake such supply, transmission or
wheeling, be determined under this section by the State
Commission having jurisdiction in respect of the licensee
who intends to distribute electricity and make payment
therefor.
E (6) A tariff order shall, unless amended or revoked, continue
· to be in force for such period as may be specified in the
tariff order.
PART IX
F CENTRAL ELECTRICITY AUTHORITY
Section 73 - Functions and duties of Authority.-
The Authority shall perform such functions and duties as
the Central Government may prescribe or direct, and in
G particular to--
(a) advise the Central Government on the matters relating
to the national electricity policy, formulate short-term and
perspective plans for development of the electricity system
and co-ordinate the activities of the planning agencies for
H
PTC INDIA LTD. v. CENTRAL ELECTRICITY 635
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
the optimal utilisation of resources to subserve the interests A
of the national economy and to provide reliable and
affordable electricity for all consumers;
(b) specify the technical standards for construction of
electrical plants, electric lines and connectivity to the grid;
8
(c) specify the safety requirements for construction,
operation and maintenance of electrical plants and electric
lines;
(d) specify the Grid Standards for operation and c
maintenance of transmission lines;
(e) specify the conditions for installation of meters for
transmission and supply of electricity;
(f) promote and assist in the timely completion of schemes D
and projects for improving and augmenting the electricity
system;
(g) promote measures for advancing the skill of persons'
engaged in the electricity industry; E
(h) advise the Central Government on any matter on which
its advice is sought or make recommendation to that
Government on any matter if, in the opinion of the Authority,
the recommendation would help in improving the
generation, transmission, trading, distribution and F
utilisation of electricity;
(i) collect and record the data concerning the generation,
transmission, trading, distribution and utilisation of
electricity and carry out studies relating to cost, efficiency, G
competitiveness and such like matters;
0) make public from time~to-time the information secured
under this Act, and provide for the publication of reports
and investigations;
H
636 SUPREME COURT REPORTS [2010] 3 S.C.R.
A (k) promote research in matters affecting the generation,
transmission, distribution and trading of electricity;
(I) carry out, or cause to be carried out, any investigation
for the purposes of generating or transmitting or distributing
electricity;
B
(m) advise any State Government, licensees or the
generating companies on such matters which shall enable
them to operate and maintain the electricity system under
their ownership or control in an im~roved manner and
c where necessary, in co-ordination with any other
Government, licensee or the generating company owning
or having the control of another electricity system;
(n) advise the Appropriate Government and the
D Appropriate Commission on all technical matters relating
to generation, transmission and distribution of electricity;
and
(o) discharge such other functions as may be provided
under this Act.
E
Section 74 - Power to require statistics and returns.,
It shall be the duty of every licensee, generating company
or person generating electricity for its or his own use to
furnish to the Authority such statistics, returns or other
F
information relating to generation, transmission,
distribution, trading and use of electricity as it may require
and at such times and in such form and manner as may
be specified by the Authority.
G Section 75 - Directions by Central Government to
Authority.-
(1) In the discharge of its functions, the Authority shall be
guided by such directions in matters of policy involving
public interest as the Central Government may give to it
H
PTC INDIA LTD. v. CENTRAL ELECTRICITY 637
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
in writing. A
(2) If any question arises as to whether any such direction
relates to a matter of policy involving public interest, the
decision of the Central Government thereon shall be final.
PART X 8
REGULATORY COMMISSIONS
Section 76 - Constitution of Central Commission.•
(1) There shall be a Commission to be known as the ..;C
Central Electricity Regulatory Commission t~ exerci~e tha;hil
powers conferred on, and discharge the functions assigned
to, it under this Act.
Section 79 - Functions of Central Commission.-
D
(1) The Central Commission shall discharge the following
functions, namely:-
(a) to regulate the tariff of generating companies owned
or controlled by the Central Government;
E
(b) to regulate the tariff of generating companies other than
those owned or controlled by the Central Government
specified in clause (a), if such generating companies enter
into or otherwise have a composite scheme for generation
and sale of electricity in more than one State; F
(c) to regulate the inter-State transmission of electricity;
(d) to determine tariff for inter-State transmission of
electricity;
G
(e) to issue licenses to persons to function as transmission
licensee and electricity trader with respect to their inter-
state operations;
(f) to adjudicate upon disputes involving generating
H
638 SUPREME COURT REPORTS (2010) 3 S.C.R.
A companies or transmission licensee in regard to matters
connected with clauses (a} to (d} above and to refer any
dispute for arbitration;
(g} to levy fees for the purpose of this Act;
B (h} to specify Grid Code having regard to Grid Standards;
(i} to specify and enforce the standards with respect to
quality, continuity and reliability of service by licensees;
0) to fix the trading margin in the inter-State trading of
c electricity, if considered, necessary;
(k} to discharge such other functions as may be assigned
under this Act. .
D (2) The Central Commission shall advise the Central
Government on all or any of the following matters,
namely:-
(i} formulation of National Electricity Policy and tariff policy;
'E (ii} promotion of competition, efficiency and economy in
activities of the electricity industry;
(iii} promotion of investment in electricity industry;
(iv} any other matter referred to the Central Commission
F by that Government.
(3) The Central Commission shall ensure transparency
while exercising its powers and discharging its functions.
G (4) In discharge of its functions, the Central Commission
shall be guided by the National Electricity Policy, National
Electricity Plan and tariff policy published under section 3.
Section 86 - Functions of State Commission.-
H (1) The State Commission shall discharge the following
PTC INDIA LTD. v. CENTRAL ELECTRICITY
- ~ 639
REGULATORY COMM. THR. SECRY'11S.H. KAPADIA, Ji
~
functions, namely:- A
(a) determine the tariff for generation, supply, transmission
and wheeling of ~lectricity, wholesale, bulk or retail, as the
case may be, within the State:
Provided that where open access has been permitted to B
a category of consumers under section 42, the State
Commission shall determine only the wheeling charges
and surcharge thereon, if any, for the said category of
consumers;
c
(b) regulate electricity purchase and procurement process
of distribution licensees including the price at, which
electricity shall be procured from the generating companies
or licensees or from other sources through agreements for
purchase of power for distribution and supply within the 0
State;
(c) facilitate intra-State transmission and wheeling of
electricity;
(d) issue licences to persons seeking to act as E
transmission licensees, distribution licensees and
electricity traders with respect to their operations within the
State;
(e) promote cogeneration and generation of electricity from F
renewable sources of energy by providing suitable
measures for connectivity with the grid and sale of
electricity to any person, and also specify, for purchase of
electricity from such sources, a percentage of the total
consumption of electricity in the area of a distribution G
licensee;
(f) adjudicate upon the disputes between the licensees and
generating companies and to refer any dispute for
arbitration;
H
640 SUPREME COURT REPORTS [2010] 3 S.C.R.
A (g) levy fee for the purposes of this Act;
(h) specify State Grid Code consistent with the Grid Code
specified under clause (h) of sub-section (1) of section 79;
(i) specify or enforce standards with respect to quality,
B continuity and reliability of service by licensees;
U) fix the trading margin in the intra-State trading of
electricity, if considered, necessary;
(k) discharge such other functions as may be assigned to
c it under this Act.
(2) The State Commission shall advise the State
Government on all or any of the following matters,
namely:-
D
(i) pro!llotion of competition, efficiency and economy in
activities of the electricity industry;
(ii) promotion of investment in' electricity industry;
E {iii) reorganisation and restructuring of electricity industry
in the State;
(iv) matters concerning generation, transmission,
distribution and trading of electricity or any other matter
F referred to the State Commission by that Government:
(3) The State Commission shall ensure transparency while
exercising its powers and discharging its functions.
(4) In discharge of its functions, the State Commission shall
G be guided by the National Electricity Policy, National
Electricity Plan and tariff policy published under section 3.
PART XI
AP PELLATE TRIBUNAL FOR ELECTRICITY
H Section 111 - Appeal to Appellate Tribunal.-
PTC INDIA LTD. v. CENTRAL ELECTRICITY 641
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
(1) Any person aggrieved by an order made by an A
adjudicating officer under this Act (except under section
127) or an order made by the Appropriate Commission
under this Act may prefer an appeal to the Appellate
Tribunal for Electricity:
B
Provided that any person appealing against the order of
the adjudicating officer levying any penalty shall, while filing
the appeal, deposit the amount of such penalty:
Provided further that where in any particular case, the
Appellate Tribunal is of the opinion that the deposit of such C
penalty would cause undue hardship to such person, it may
dispense with such deposit subject to such conditions as
it may deem fit to impose so as to safeguard the realisation
of penalty.
D
(2) Every appeal under sub-section (1) shall be filed within
a period of forty-five days from the date on which a copy
of the order made by the adjudicating officer or the
Appropriate Commission is received by the aggrieved
person and it shall be in such form, verified in such manner E
and be accompanied by such fee as may be prescribed:
Provided that the Appellate Tribunc~I may entertain an
appeal after the expiry of the said period of forty-five days
if it is satisfied that there was sufficient cause for not filing
it within that period. F
(3) On receipt of an appeal under sub-section (1), the
Appellate Tribunal may, after giving the parties to the
appeal an opportunity of being heard, pass such orders
thereon as it thinks fit, confirming, modifying or setting G
aside the order appealed against.
(4) The Appellate Tribunal shall send a copy of every order
made by it to the parties to the appeal and to the
concerned adjudicating officer or the Appropriate
H
642 SUPREME COURT REPORTS (2010] 3 S.C.R.
A Commission, as the case may be.
(5) The appeal filed before the Appellate Tribunal under
sub-section (1) shall be dealt with by it as expeditiously as
possible and endeavour shall be made by it to dispose of
the appeal finally within one hundred and eighty days from
B
the date of receipt of the appeal:
Provided that where any appeal could not be
disposed of within the said period of one hundred and
eighty days, the Appellate Tribunal shall record its reasons
c in writing for not disposing of the appeal within the said
period.
(6) The Appellate Tribunal may, for the purpose of
examining the legality, propriety or correctness of any order
D made by the adjudicating officer or the Appropriate
Commission under this Act, as the case may be, in relation
to any proceeding, on its own motion or otherwise, call for
the records of such proceedings and make such order in
the case as it thinks fit. ·
E PART XVIII
MISCELLANEOUS
Section 177 - Powers of Authority to make regu/ations.-
(1) The Authority may, by notification, make regulations
F
consistent with this Act and the rules generally to carry out
the provisions of this Act.
(2) In particular and without prejudice to the generality of
the power conferred in sub-section (1), such regulations
G may provide for all or any of the following matters,
namely:-
(a) the Grid Standards under section 34;
(b) suitable measures relating to safety and electric supply
H under section 53;
PTC INDIA LTD. v. CENTRAL ELECTRICITY 643
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
(c) the installation and. operation of meters under section A
55;
(d) the rules of procedure for transaction of business under
sub-section (9) of section 70;
(e) the technical standards for construction of electrical 8
plants and electric lines and connectivity to the grid under
clause (b) of section 73;
(f) the form and manner in which and the time at which the
State Government and licensees shall furnish statistics, C
returns or other information under section 74;
(g) any other matter which is to be, or may be, specified;
(3) All regulations made by the Authority under this Act shall
be subject to the conditions of previous publication. D
Section 178 - Powers of Central Commission to make
regulations.-
(1 J The Central Commission may, by notification make
regulations consistent with this Act and the rules generally E
to carry out the provisions of this Act.
(2) In particular and without prejudice to the generality of
the power contained in sub-section (1), such regulations
may provide for all or any of following matters, namely:- F
(a) period to be specified under the first proviso to section
14;
(b) the form and the manner of the application under sub-
section (1) of section 15; G
(c) the manner and particulars of notice under sub-section
(2) of section 15;
(d) the conditions of licence under section 16; H
644 SUPREME COURT REPORTS [2010] 3 S.C.R.
A (e) the manner and particulars of notice under clause (a)
of sub-section (2) of section 18;
(f) publication of alterations or amendments to be made
in the licence under clause (c) of sub-section (2) of section
B 18;
(g) Grid Code under sub-section (2) of section 28;
(h) levy and collection of fees and charge from generating
companies or transmission utilities or licensees under sub-
C section (4) of section 28;
(i) rates, charges and terms and conditions in respect of
intervening transmission facilities under proviso to section
36;
D G) payment of transmission charges and a surcharge under
sub-clause (ii) of clause (d) of sub-section (2) of section
38;
(k) reduction of surcharge and cross subsidies under
E second proviso to sub-clause (ii) of clause (d) of sub-
section (2) of section 38;
(I) payment of transmission charges and a surcharge under
sub-clause (ii) of clause (c) of section 40;
F (m) reduction of surcharge and cross subsidies under the
second proviso to sub-clause (ii) of clause (c) of section
40;
(n) proportion of revenues from other business to be
utilised for reducing the transmission and wheeling
G
charges under proviso to section 41 ;
(o) duties of electricity trader under sub-section (2) of
section 52;
H (p) standards of performance of a licensee or class of
PTC INDIA LTD. v. CENTRAL ELECTRICITY 645
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
licensees under sub-section (1) of section 57; A
(q) the period within whie;h information to be furnished by
the licensee under sub-section ( 1) of section 59;
(r) the manner for reduction of cross-subsidies under
clause (g) of section 61; B
(s) the terms and conditions for the determination of tariff
under section 61;
(t) details to be furnished by licensee or generating C
company under sub-section (2) of section 62;
(u) the procedures for calculating the expected revenue
from tariff and charges under sub-section (5) of section 62;
(v) the manner of making an application before the Central o
Commission and the fee payable therefor under sub-
section (1) of section 64;
(w) the manner of publication of application under sub-
section (2) of section 64;
E
(x) issue of tariff order with modifications or conditions
under sub-section (3) of section 64;
(y) the manner by which development of market in power
including trading specified under section 66; F
(z) the powers and duties of the Secretary of the Central
Commission under sub-section (1) of section 91;
(za) the terms and conditions of service of the Secretary,
officers and other employees of Central Commission under G
sub-section (3) of section 91;
(zb) the rules of procedure for transaction of business
under sub-section (1) of section 92;
(zc) minimum information to be maintained by a licensee H
646 SUPREME COURT REPORTS [2010] 3 S.C.R.
A or the generating company and the manner of such
information to be maintained under sub-section (8) of
section 128;
(zd) the manner of service and publication of notice under
section 130;
B
(ze) any other matter which is to be, or may be specified
by regulations.
(3) All regulations made by the Central Commission under
c this Act shall be subject to the conditions of previous
publication.
Section 179 - Rules and regulations to be laid before
Parliament.-
D Every rule made by the Central Government, every
regulation made by the Authority, and every regulation
made by the Central Commission shall be laid, as soon
as may be after it is made, before each House of the
Parliament, while it is in session, for a total period of thirty
E days which may be comprised in one session or in two or
more successive sessions, and if, before the expiry of the
session immediately following the session or the
successive sessions aforesaid, both Houses agree in
making any modification in the rule or regulation or agree
F that the rule or regulation should not be made, the rule or
regulation shall thereafter have effect only in such modified
form or be of no effect, as the case may be; so, however,
that any such modification or annulment shall be without
prejudice to the validity of anything previously done under
G that rule or regulation.
Section 181 - Powers of State Commissions to make
regulations. -
(1) The State Commissions may, by notification, make
H regulations consistent with this Act and the rules generally
PTC INDIA LTD. v. CENTRAL ELECTRICITY 64 7
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
to carry out the provisions of this Act. A
(2) In particular and without prejudice to the generality of
the power contained in sub-section (1), such regulations
may provide for all or any of the following matters,
namely:-
B
(a) period to be specified under the first proviso to section
14;
(b) the form and the manner of application under sub-
section (1) of section 15; c
(c) the manner and particulars of application for license to
be published under sub-section (2) of section 15;
(d) th& conditions of licence under section 16:
D
(e) the manner and particulars of notice under clause (a)
of sub-section (2) of section 18;
(f) publication of the alterations or amendments to be made
in the licence under clause (c) of sub-section (2) of section
18; E
(g) levy and collection of fees and charges from generating
companies or licensees under sub-section (3) of section
32;
F
(h) rates, charges and the term and conditions in respect
of intervening transmission facilities under proviso to
section 36;
(i) payment of the transmission charges and a surcharge
under sub-clause (ii) of clause (d) of sub-section (2) of G
section 39;
0) reduction of surcharge and cross subsidies under
second proviso to sub-clause (ii) of clause (d) of sub-
section (2) of section 39; H
648 SUPREME COURT REP1... :(TS [2010] 3 S.C.R.
A (k) manner and utilization of payment and surcharge under
the fourth proviso to sub-clause (ii) of clause (d) of sub-
section (2) of section 39;
(I) payment of the transmission charges and a surcharge
under sub-clause (ii) of clause (c) of section 40;
B
(m) reduction of surcharge and cross subsidies under
second proviso to sub-clause (ii) of clause (c) of section
40;
c (n) the manner of payment of surcharge under the fourth
proviso to sub-clause (ii) of clause (c) of section 40;
(o) proportion of revenues from other business to be
utilised for reducing the transmission and wheeling
charges under proviso to section 41 ;
D
(p) reduction of surcharge and cross subsidies under the
third proviso to sub-section (2) of section 42;
(q) payment of additional charges on charges of wheeling
E under sub-section (4) of section 42;
(r) guidelines under sub-section (5) of section 42;
(s) the time and manner for settlement of grievances under
sub-section (7) of section 42;
F
(t) the period to be specified by the State Commission for
the purposes specified under sub-section (1) of section 43;
(u) methods and principles by which charges for electricity
shall be fixed under sub-section (2) of section 45;
G
(v) reasonable security payable to the distribution licensee
under sub-section (1) of section 47;
(w) payment of interest on security under sub-section (4)
of section 47;
H
•
PTC INDIA LTD. v. CENTRAL ELECTRICITY 649
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
(x) electricity supply code under section 50; A
(y) the proportion of revenues from other busines:: tc ba
utilised for reducing wheeling (~;r;ec: under provis~ to
section 51;
(z) ~uties of electricity trader under sub-section (2) of , 8 1
section 52;
(za) standards of performance of a licensee or a class of
licensees under sub-section (1) of section 57;
(zb) the period within which information to be furnished by
c
the licensee under sub-section (1) of section 59;
(zc) the manner of reduction of cross-subsidies under
clause (g) of section 61;
D
(zd) the terms and conditions for determination of tariff
under section 61;
(ze) details to be furnished by licensee or generating
company under sub-section (2) of section 62;
E
(zf) the methodologies and procedures for calculating the
expected revenue from tariff and charges under sub-
section (5) of section 62;
(zg) the manner of making an application before the State F
Commission and the fee payable therefor under sub-
section (1) of section 64;
(zh) issue of tariff order with modifications or conditions
under sub-section (3) of section 64;
G
(zi) the manner by which development of market in power
including trading specified under section 66;
(zj) the powers and duties of the Secretary of the State
Commission under sub-section (1) of section 91; H
650 SUPREME COURT REPORTS [2010] 3 S.C.R.
A (zk) the terms and conditions of service of the secretary,
officers and other employees of the State Commission
under sub-section (2) of section 91;
(zl) rules of procedure for transaction of business undrr
sub-section (1) of section 92;
'
B
(zm) minimum information to be maintained by a licens~e
or the generating company and the manner of slich
information to be maintained under sub-section (8)\of
section 128;
c
(zn) the manner of service and publication of notice under
section 130;
(zo) the form of and preferring the appeal and the manner
in which such form shall be verified and the fee for
0 preferring the appeal under sub-section (1) of section 127;
(zp) any other matter which is to be, or may be, specified.
(3) All regulations made by the State Commission under
E this Act shail be subject to the condition of previous
publication.
Section 182 - Rules and regulations to be laid before
State Legislature.-
F Every rule made by the State Government and every
regulation made by the State Commission shall be laid,
as soon as may be after it is made, before each House
of the State Legislature where it consists of two Houses,
or where such Legislature consists of one House, before
G that House.
Section 183 - Power to remove difficulties
(1) If any difficulty arises in giving effect to the provisions
of this Act, the Central Government may, by order
H published, make such provisions not inconsistent with the
PTC INDIA LTD. v. CENTRAL ELECTRICITY 651
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
provisions of this Act, as may appear to be necessary for A
removing the difficulty:
Provided that no order shall be made under this section
after the expiry of two years from the date of
commencement of this Act.
B
(2) Every order made under this section shall be laid, as
soon as may be after it is made, before each House of
Parliament.
8. We also quote hereinbelow the impugned Notification c
dated 23.1.2006 fixing trading margin for inter-State
trading of Electricity, which reads as follows:
"CENTRAL ELECTRICITY REGULATORY COMMISSION
NOTIFICATION
New Delhi, the 23rd January, 2006 D
No. L-7/25(5)/2003-CERC.- Whereas the Central
Electricity Regulatory Commission is of the opinion that it
is necessary to fix trading margin for inter-state trading of
electricity. E
Now, therefore, in exercise of powers conferred
under Section 178 of the Electricity Act, 2003 (36 of 2003),
and all other powers enabling it in this behalf, and after
pervious publication, the Central Electricity Regulatory
F
Commission hereby makes the following regulations,
namely:-
1. Short title and commencement.-(1) These regulations
may be called the Central Electricity Regulatory
Commission (Fixation of Trading Margin) Regulations, G
2006.
(2) These regulations shall come into force from the date
of their publication in the Official Gazette.
H
652 SUPREME COURT REPORTS [2010] 3 S.C.R.
A 2. Trading Margin.- The licensee shall not charge the
trading margin exceeding four (4.0) paise/kWh on the
electricity traded, including all charges, except the charges
for scheduled energy, open access and transmission
losses.
8
Explanation:- The charges for the open access include the
transmission charge, operating charge and the application
fee.
A.K. SACHAN, Secy."
c
SCOPE AND ANALYSIS OF THE 2003 ACT
9. The 2003 Act is enacted as an exhaustive Code on all
matters concerning electricity. It provides for "unbundling" of
SEBs into separate utilities for generation, transmission and
D distribution. It repeals the Indian Electricity Act, 1910, the
Electricity (Supply) Act, 1948 and the Electricity Regulatory
Commissions Act, 1998. The 2003 Act, in furtherance of the
policy envisaged under the Electricity Regulatory Commissions
Act, 1998 ("1998 Act"), mandated the establishment of an
E independent and transparent regulatory mechanism, and has
entrusted wide ranging responsibilities with the Regulatory
Commissions. While the 1998 Act provided for independent
regulation in the area of tariff determination; the 2003 Act has
distanced the Government from all forms of regulation, namely,
F licensing, tariff regulation, specifying Grid Code, facilitating
competition through open access, etc.
10. Section 3 of the 2003 Act requires the Central
Government, in consultation with the State Governments and
G the Authority, to prepare National Electricity Policy as well as
Tariff Policy for development of the power system based on
optimum utilization of resources. The Central and the State
Governments are also vested with rule-making powers under
Sections 176 and 180 respectively, while the "Authority" has
H been defined under Section 2(6) as regulation-making power
PTC INDIA LTD. v. CENTRAL ELECTRICITY 653
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
under Section 177. On the other hand, the Regulatory A
Commissions are vested with the power to frame policy, in the
form of regulations, under various provisions of the 2003 Act.
However, the Regulatory Commissions are empowered to
frame policy, in the form of regulations, as guided by the general
policy framed by the Central Government. They are to be guided B
by the National Electricity Policy, the Tariff Policy as well as the
National Electricity Plan in terms of Sections 79(4) and 86(4)
after the 2003 Act (see also Section 66). In this connection, it
may also be noted that the Central Government has also, in
exercise of its powers under Section 3 of the 2003 Act, notified c
the Tariff Policy with effect from 6.1.2006. One of the primary
objectives of the Tariff Policy is to ensure availability of
electricity to consumers at reasonable and competitive rates.
The Tariff Policy tries to balance the interests of consumers and
the need for investments while prescribing the rate of return. It 0
also tries to promote training in electricity for making the
markets competitive. Under the Tariff Policy, there is a mandate
given to the Regulatory Commissions, namely, to monitor the
trading transactions continuously and ensure that the electricity
traders do not indulge in profiteering in cases of market failure. E
The Tariff Policy directs the Regulatory Commissions to fix the
trading margin in a manner which would reduce the costs of
electricity to the consumers and, at the same time, they should
endeavour to meet the requirement for investments.
11. An "electricity trader'' is defined under Section 2(26) F
to mean a person who has been given a licence to undertake
trading in electricity under Section 12. Section 2(32) defines a
"grid" as the high voltage backbone system of inter-connected
transmission lines, sub-station and generating plants. Under
Section 2(33), a "Grid Code" is defined as a code specified G
by the Central Commission under Section 79(1)(h), while under
Section 2(34), ·"Grid Standards" are those specified by the
Central Authority under Section 73(d). Under Section 2(47),
"open access" is defined to mean the non-discriminatory
provision for access to the transmission lines or distribution H
654 SUPREME COURT REPORTS [2010] 3 S.C.R.
A system or associated facilities given to any licensee or
consumer or a person engaged in generation of electricity in
accordance with the regulations specified. Section 2(62)
defines the term "specified" to mean specified by regulatioris
made by the Appropriate Commission or the Authority under
B the 2003 Act. Under Section 2(71 ), the word "trading" is defined
to mean purchase of electricity for resale thereof.
12. Under the 2003 Act, power generation has been de-
licensed and captive generation is freely permitted, subject to
approval as indicated in Sections 7, 8 and 9 of the Act.
C However, under Section 12, a licence has been provided as a
pre-condition for engaging in transmission or distribution or
trading of electricity. Therefore, licensees are granted by the
Appropriate Commission under Section 14 of the Act on
applications made under Section 15. Section 16 provides
D power to the Appropriate Commission to specify· any general
or specific conditions which shall apply either to a licensee or
to a class of licensees. Under Section 18, the Appropriate
Commission is also vested with the power to amend the licence
as well as to revoke it in certain stipulated circumstances, if
E public interest so requires (see Section 19). Under Section 23,
the Appropriate Commission has the power to issue directions
to licensees to regulate supply, distribution, consumption or use
of electricity, if the Appropriate Commission is of the opinion
that it is necessary or expedient so to do for maintaining the
F efficient supply and for securing the equitable distribution of
electricity and promoting competition.
13. One of the most important features of the 2003 Act is
the introduction of open access under Section 42 of the Act.
G Under the open access regime, distribution companies and
eligible consumers have the freedom to buy electricity directly
from generating comp~nies or trading licensees of their choice
and correspondingly the generating companies have the
freedom to sell.
H 14. Section 52 of tt1e 2003 Act deals with trading of
PTC INDIA LTD. v. CENTRAL ELECTRICITY 655
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
electricity activity. Under Section 52(1 ), the Appropriate A
Commission may specify the technical requirement, capital
adequacy requirement and credit worthiness for being an
electricity trader. Under Section 52(2), every trader is required
to discharge its duties, in relation to supply and trading in
electricity, as may be specified by the Appropriate B
Commission.
15. The standards of performance of licensee(s) may be
specified by the Appropriate Commission under Section 57 of
the Act.
c
16. The 2003 Act contains separate provisions for the
performance of the dual functions by the Commission. Section
61 is the enabling provision for framing of regulations by the
Central Commission; the determination of terms and conditions
of tariff has been left to the domain of the Regulatory D
Commissions under Section 61 of the Act whereas actual tariff
determination by the Regulatory Commissions is covered by
Section 62 of the Act. This aspect is very important for
deciding the present case. Specifying the terms and conditions
for determination of tariff is an exercise which is different and E
distinct from actual tariff determination in accordance with the
provisions of the Act for supply of electricity by a generating
company to a distribution licensee or for transmission of
electricity or for wheeling of electricity or for retail sale of
e~~~ F
17. The term "tariff' is not defined in the 2003 Act. The term
"tariff' includes within its ambit not only the fixation of rates but
also the rules and regulations relating to it. If one reads Section
61 with Section 62 of the 2003 Act, it becomes clear that the
Appropriate Commission shall determine the actual tariff in G
accordance with the provisions of the Act, including the terms
and conditions which may be specified by the Appropriate
Commission under Section 61 of the said Act. Under the 2003
Act, if one reads Section 62 with Section 64, it becomes clear
that although tariff fixation like price fixation is legislative in H
656 SUPREME COURT REPORTS [2010] 3 S.C.R.
A character, the same under the Act is made appealable vide
Section 111. These provisions, namely, Sections 61, 62 and
64 indicate the dual nature of functions performed by the
Regulatory Commissions, viz, decision-making and specifying
terms and conditions for tariff determination.
B
18. Section 66 confers substantial powers on the
Appropriate Commission to develop the relevant market in
accordance with the principles of competition, fair participation
as well as protection of consumers' interests.
C 19. Under Sections 111(1) and 111(6) respectively, the
Tribunal has appellate and revisional powers. In addition, there
are powers given to the Tribunal under Section 121 of the 2003
Act to issue orders, instructions or directions, as it may deem
fit, to the Appropriate Commission for the performance of
D statutory functions under the 2003 Act.
20. The 2003 Act contemplates three kinds of delegated
legislation. Firstly, under Section 176, the Central Government
is empowered to make rules to carry out the provisions of the
E Act. Correspondingly, the State Governments are also given
powers under Section 180 to make rules. Secondly, under
Section 177, the Central Authority is also empowered to make
regulations consistent with the Act and the rules to carry out the
provisions of the Act. Thirdly, under Section 178, the Central
Commission can make regulations consistent with the Act and
F the rules to carry out the provisions of the Act. SERCs have a
corresponding power under Section 181. The rules and
regulations have to be placed before Parliament and the State
Legislatures, as the case may be, under Section 179 and 182.
The Parliament has the power to modify the rules/ regulations.
G This power is not conferred upon the State Legislatures. A
holistic reading of the 2003 Act leads to the conclusion that
regulations can be made as long as two conditions are satisfied,
namely, that they are consistent with the Act and that they are
made for carrying out the provisions of the Act.
H
PTC INDIA LTD. v. CENTRAL ELECTRICITY 657
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
SUBMISSIONS: A
On behalf of M/s Tata Power Trading Co. Ltd.:
21. On the scheme of the 2003 Act it was submitted by
Shri Harish N. Salve, learned senior counsel, that, under the
said Act the Central Commission and SERCs have to frame 8
regulations as well as pass statutory orders. The Act uses the
expression "fixed" in Sections 8, 19, 45 & 79; it uses the
expression "determined" in the proviso to Section 9(2), Sections
20, 42, 47, 57, 61 and 67(2) and the word "specified" (i.e. by
way of regulations) in Sections 13, 14, 15, 16, 17, 18(2), 28(4), C
34, 36, 38, 41, 42, 45, 51, 52, 53, 57, 61 and 67(2) of the 2003
Act. Under the 2003 Act, according to the learned counsel,
there are a series of provisions which expressly require the
Commission to frame regulations on specific aspects.
According to learned counsel, each of the said three D
expressions have to be interpreted by the terms and in the
context of the scheme of the 2003 Act and not by a priori
notions of administrative law. For example, Section 61 posits
the framing of regulations by the Commission, which will subject
to the provisions of the 2003 Act, specify the terms and E
conditions for the determination of tariff. It is possible that such
regulations may be licensee-specific or generic. At the same
time, under Section 62 read with Section 64 refers to
determination of tariff in accordance with the provisions of the
Act for supply of electricity by Gencoms, transmission of F
electricity, wheeling and trading of electricity. Applying the
Cynamide principle [1987(2)SCC720] of administrative law,
such tariff Order would be characterized as delegated
legislation yet under Section 111 of the 2003 Act it is made
appealable to the Appellate Tribunal. According to the learned G
counsel, "price fixation" is ordinarily "legislative" and not
"adjudicatory" in character and yet under the 2003 Act tariff
fixation is by Order and subject to appeal under Section 111.
According to the learned counsel, use of different expressions
in the Act implies different meanings. For example, in Section H
658 SUPREME COURT REPORTS [2010] 3 S.C.R.
A 79 the expressions used are "regulate", "determine",
"adjudicate", "specify" and "fix". Where the function of the
Commission under Sections 79 and 86 require framing of
regulations, the Act has used the expression "specified" as
defined. Therefore, according to the learned counsel, the word
B "fix" in Section 79(1 )U) must mean to pass an appropriate order
fixing trading margin which is further qualified by the Act saying
"if considered necessary". In this connection, learned counsel
further submitted that fixing trading margin is same as price
fixation and as such margin must be fixed by an Order and not
c by way of regulation. Hence, according to the learned counsel,
regulations cannot be framed under Section 79(1)0) and under
Section 86(1 )ti) of the 2003 Act.
22. On the interpretation of Sections 178(1) and 181(1) of
the 2003 Act, learned counsel submitted that where rule making
D powers are enumerated and there is a general delegation of
power to make rules to carry out the provisions of the 2003 Act,
the enumeration does not detract from the generality of the
power conferred is the principle which has to be read in the
context of the scheme of the 2003 Act. In this connection it was
E submitted that under the Act the power to frame subordinate
legislation to carry out the provisions of the Act are contained
in Sections 176 and 180 on Central and State Governments;
in Sections 178 and 181 where power to frame regulations is
conferred on Regulatory Commissions and Section 177 where
F the power to frame regulations is conferred on CEA. Hence,
when the Central Government invokes the rule making power
under Section 176(1), it cannot make rules to determine tariff
since that can be done only by the appropriate Commission
by virtue of Section 61 read with Section 178(2)(s). A perusal
G of the scheme of the 2003 Act suggests that each and every
provision of the Act where framing of regulations is
contemplated has a counter-part in one of the clauses as set
out in Section 178(2). In any event, according to the learned
counsel, where the Act requires the discharge of a function by
H a specific order, then a regulation cannot be framed to achieve
PTC INDIA LTD. v. CENTRAL ELECTRICITY 659
REGULATORY CbMM. THR. SECRY. [S.H. KAPADIA, J.]
that very purpose merely because there is a power to frame A
regulations. Therefore, according to the learned counsel, trading
margin can be fixed only by an order under Section 79(1)0) and
86(1)0) and not by regulations.
23. On the powers of the Appellate Tribunal under Sections 8
111 and 121 of the 2003 Act, learned counsel urged, that, the
said Tribunal was established as an expert second tier
regulatory authority to review the actions of the Regulatory
Commissions, including regulations framed by first tier
regulatory bodies even in the absence of Section 121 of the
2003 Act. In this connection, learned counsel further submitted C
that the powers envisaged under Section 121 are distinct from
the appellate and revisional powers under Section 111 (3) and
under Section 111 (6). A plain reading of Section 121
establishes that the Tribunal has the power to issue orders,
instructions and directions to guide the Commission in the due D
performance of its statutory function; that the said power to issue
instructions, orders and directions would include the power to
frame or modify the regulations made by the first tier regulatory
authority, particularly in cases where the Tribunal is satisfied that
the regulation framed is either not consistent with the provisions E
of the Act or does not result in due performance of the duty or
functions entrusted to the Commission under the 2003 Act. In
the light of the provisions of Sections 111 and 121 of the 2003
Act, learned counsel urged, that, even in an appeal under
Section 111 if the question of validity of delegated legislation F
arises, the tribunal can consider the vires and ignore a Rule
which is ultra-vires the rule-making power. The fact that there
is no power in the tribunal to annul the regulation cannot deny
the power to statutory tribunal to ignore ultra vires subordinate
legislation. Lastly, there is no need to read down Section 121 G
on a priori notion of classical administrative law that vires of
the rules can only be challenged in the judicial review
proceedings before a constitutional court.
H
660 SUPREME COURT REPORTS [2010] 3 S.C.R.
A On behalf of PTC India Ltd.
24. Shri Vikas Singh, learned senior counsel, submitted
that fixation of trading margins under normal business
conditions is intrinsically contradictory and harmful to power
market functioning. In this connection, it was submitted that
8
capping of trading margin does not in any manner whatsoever
control the selling price of electricity sold to Discerns. Such
capping of trading margin results in relegating the electricity
traders to mere commission agents. The role of electricity
C traders is to play a dynamic role of bringing in new products in
the market which is beneficial to the consumers as well as
Gencoms. However, the entire object of having electricity
traders stand defeated by impugned capping of trading
margins. According to the learned counsel, traders in electricity
bring depth to the electricity markets. They make value
D additions and therefore interventions in trading by regulations
should not be contrary to the letter and spirit of the Act [See
Section 66]. According to the learned counsel, severe
regulatory intervention like imposition of margin in a voluntary
market should be resorted to only in cases of market failure.
E According to the learned counsel, on the basis of statistical
data, the trading margin is not a return guaranteed to a trader
and that the actual margin which the trader is getting is lower
than the prescribed cap. According to the learned counsel, none
of the above facts have been appreciated by the Central
F Commission in capping the margin as not to exceed 4.0 paise
per kWh on the electricity traded.
25. On the question of law, learned counsel submitted that
the right to appeal under Section 111 in respect of adjudicatory/
G administrative order cannot be defeated by colouring the
decision as a regulation. In this connection learned counsel
submitted that the rules/regulations framed by the executive
under an Act are the law whereas regulations made by the
statutory authority itself is not the regulation under which it
functions, but the regulation making itself is its function. In the
H
PTC INDIA LTD. v. CENTRAL ELECTRICITY 661
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
former case, it is possible to argue that the Authority which is A
the creature of the Statute cannot question the vires of the
statute, in the latter case, the Authority is not the creature of the
Regulation framed by itself, hence the sanctity given to the
former is far greater than the sanctity to the latter.
B
26. According to the learned counsel, that, the right to
appeal is a substantive right and the same cannot be taken
away by a device, i.e., by framing a regulation instead of simply
passing an order as to denude the Appellant of its right of
Appeal. In this connection, learned counsel urged that the
Appellate Tribunal can hear the appeal against the regulation C
being the function of the Commission and can examine the
sanctity of the regulation if the same is framed beyond the power
of the commission to do so. In other words, if the Commission
is entitled to adjudicate upon a matter, it does not have the
authority under the Act to give its decision the colour of a D
regulation so as to denude the Tribunal of its authority under
Section 111. According to the learned counsel, since the
impugned regulation relegates the trading licensee to a
commission agent the same is ultra vires Section 66 of the 2003
M. E
27. According to the learned counsel, under Section 79 the
Commission is authorized only to fix the trading margin and
since the impugned regulations are purportedly made under
Section 79 the said regulations are beyond the powers of the F
Central Commission and are, thus, ultra vires the 2003 Act.
28. Lastly, learned counsel for PTC adopted all the
arguments of Shri Harish N. Salve, learned counsel for M/s.
Tata Power Trading Company Ltd.
G
29. Shri Narasimha, learned counsel and Others broadly
adopted the above arguments advanced on behalf of Mis. Tata
Power Trading Company and PTC India Ltd., hence, the same
need not be reproduced.
H
662 SUPREME COURT REPORTS [2010) 3 S.C.R.
A On behalf of CERC
30. After taking us through the provisions of the 2003 Act,
the National and the Tariff Policies, learned Solicitor General
of India submitted that the 2003 Act contemplates three kinds
of delegated legislation:
8
(i) Under Section 176, the Central Government is
empowered to make rules for carrying out the
provisions of the Act. A corresponding power is
given to the State Governments under Section 180.
c
(ii) Under Section 177, the CEA is empowered to
make regulations consistent with the Act and the
rules made under Section 176.
(iii) Under Section 178, the Central Commission may
D make regulations consistent with the Act and the
rules generally to carry out the provisions of the Act.
The corresponding power under Section 181 is
conferred on SERCs.
E 31. The rules and the regulations have to be placed before
the Parliament and the State Legislatures, as the case may be,
under Sections 179 and 182 respectively. According to the
learned counsel, even if the Rules have been laid before the
Parliament and even if there is a resolution of the Parliament
F approving them, the validity of the Rules has to be declared by
the Court as ultra vires the Act and invalid. According to the
learned counsel, there is no power conferred upon the Appellate
Tribunal under Section 111 to declare the regulations framed
by the Central Commission as null and void. According to the
G learned counsel, Tribunals are creatures of the statute. They
have no inherent power that exists in civil courts. Any power
exercisable by the Tribunal has to be located in the statute
under which it is formed. There is no authority for the
proposition that under the Indian law, a statutory tribunal has
H the jurisdiction to deal with the validity of subordinate legislation
PTC INDIA LTD. v. CENTRAL ELECTRICITY 663
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
and pronounce it as ultra vires. Of course,· according to the A
learned counsel, it is open to the Parliament to e)cpressly give
to a Tribunal the power
. .
to consider. the validity o~ $ubordinate
legislation. However, such conferment has to be express and
unambiguous, which is not there in this case.
B
32. According to the learned counsel, the mere fact that
Section 79(1)0) uses the word "fix" and the mere fact that the
other provisions .use the word "specify" does npt lead tq the
conclusion that the Central Commission could not have iss\Jed
the Trading Margin Regulations 2006 as contended by the
appellants herein. The learned counsel further urged that the C
general power to frame regulations is not limited or controlled
by enumeration of topics on which regulations may be framed.
In.this connection, it was submitted that a holist\c reading of
the Act leads to the conclusion that regulations can be made
as long as they are consistent with the Act and that they are D
made for carrying out the provisions of the Act. The Act
recognizes the need to regulate trading in electri~ity [See
Sections 52(2), 53(1)(a), 57, 60, 178(2)(d), (o), (p) and (y)].
33. Learned counsel further submitted that for the reasons E
mentioned herein there is no case made out by the Appellants
to lift the veil over a fake regulation. The Central Commission
had to initiate proceedings against 14 traders for non-
compliance with licence conditions. Some traders were
operating on high margins. Trading margin being the F
component of the final price paid by the consumers required
regulation to protect the consumers. Competition among
traders to capture the surplus power for sale resulted in rising
prices. Even with a trading margin of 4 paise/unit, traders can
make handsome profits. For the above reasons, Commission G
thought it fit to make the impugned Regulations. It was further
contended that the doctrine of colourable exercise of power was
not applicable to decide the validity of subordinate legislation.
34. Learned counsel lastly submitted that the power of
judicial review cannot be located in Section 121 of the Act. The H
664 SUPREME COURT REPORTS [2010] 3 S.C.R.
A power under Section 121 is different from the power under
Section 111. According to the learned counsel, Section 121
empowers the tribunal to act only when the Commission is guilty
of inaction in carrying out its statutory functions. The power to
annul a legislative act cannot be read into Section 121. Even
B the High Court cannot direct the Legislature to enact a law and,
therefore, such power cannot be read into Section 121. In order
to entertain a challenge, directly or collaterally, the tribunal must
have jurisdiction which must be conferred by the statute anq
since in the instant case tribunal is not vested with su9h a
c jurisdiction, it is not open to the Appellants to place reliance
on some of the English Judgments. Thus, the Appellate Tribunal
is not qualified to go behind a regulation as framed by CERC
and to examine whether it acted within the bounds of the statute
while framing the regulation.
D DETERMINATIONS:
35. On the above submissions, one of the questions which
arises for determination is - whether trading margin fixation
(including capping) under the 2003 Act can only be done by
E an Order under Section 79(1)0) and not by Regulations under
Section 178? According to the appellant(s) it can only be done
by an Order under Section 79(1)0), particularly when under
Section 178(2) power to make regulations is co-relatable to the
functions ascribed to each Authority under the said 2003 Act.
F 36. In every case one needs to examine the statutory
context to determine whether a court or a tribunal hearing a
case has jurisdiction to rule on a defence based upon
arguments of invalidity of subordinate legislation or
administrative act under it. There are situations in which
·G Parliament may legislate to preclude such challenges in the
interest of pFOmoting certainty about the legitimacy of,
administrative acts on which the public may have to rely.
37. On the above analysis of various sections of the 2003
H Act, we find that the decision-making and regulation-making
PTC INDIA LTD. v. CENTRAL ELECTRICITY 665
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
functions are both assigned to CERC. Law comes into A
existence not only through legislation but also by regulation and
litigation. Laws from all three sources are binding. According
to Professor Wade', "between legislative and administrative
functions we have regulatory functions". A statutory instrument,
such as a rule or regulation, emanates from the exercise of B
delegated legislative power which is a part of administrative
process resembling enactment of law by the legislature
whereas a quasi-judicial order comes from adjudication which
is also part of administrative process resembling a judicial
decision by a court of law. [See Shri Sitaram Sugar Co. Ltd. c
v. Union of India and Ors. reported in (1990) 3 SCC 223).
38. 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 Section 111 of the D
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 tariff is done by the Appropriate
Commission under Section 62 whereas Section 61 is the E
enabling provision for framing of regulations containing generic
propositions in accordance with which the Appropriate
Commission has to fix the tariff. This basic scheme equally
applies to subject-matter "trading margin" in a different statutory
context as will be demonstrated by discussion hereinbelow. In F
the case of Mis Narinder Chand Hem Raj and Ors. v. Lt.
Governor, Administrator, Union Territory, Himachal Pradesh
and Ors. reported in (1971) 2 SCC 747, this Court has held
that power to tax is a legislative power which can be exercised
by the legislature directly or subject to certain conditions. The G
legislature can delegate that power to some other Authority. But
the exercise of that power, whether by the legislature or by the
delegate will be an exercise of legislative power. The fact tb~t
the power can be delegated will not make it an administrative
1power or adjudicatory power. In the said judgment, it has been H
666 SUPREME COURT REPORTS [2010] 3 S.C.R.
A further held that no court can direct a subordinate legislative
body or the legislature to enact a law or to modify the existing
law and if Courts cannot so direct, much less the Tribunal,
unless power to annul or modify is expressly given to it. In the
case of Indian Express Newspapers (Bombay) Pvt. Ltd. and
B Ors. v. Union of India and Ors. reported in (1985) 1 SCC 641,
this Court held that subordinate legislation is outside the
purview of administrative action, i.e., on the grounds of violation
of rules of natural justice or that it has not taken into account
relevant circumstances or that it is not reasonable. However, a
c distiAction must be made between delegation of legislative
function and investment of discretion to exercise a particular
discretionary power by a statute. In the latter case, the
impugned exercise of discretion may be considered on all
grounds on which administrative action may be questioned
such as non-application of mind, taking irrelevant matters into
0
consideration etc. The subordinate legislation is, however,
beyond the reach of administrative law. Thus, delegated
legislation - otherwise known as secondary, subordinate or
administrative legislation - is enacted by the administrative
branch of the government, usually under the powers conferred
E upon it by the primary legislation. Delegated legislation takes
a number of forms and a number of terms - rules, regulations,
by-laws etc; however, instead of the said labels what is· of
significance is the provisions in the primary legislation which,
in the first place, confer the power to enact administrative
F legislation.· Such provisions are also called as "enabling
provisions". They demarcate the extent of the administrator's
legislative power, the decision-making power and the policy
making power. However, any legislation enacted outside the
terms of the enabling provision will be vulnerable_ to judicial
G review and ultra vires.
39. Applying the above mentioned tests to the scheme of
2003 Act, we find that under the Act, the Central Commission
is a decision-making as well as regulation-making authority,
H simultaneously. Section 79 delineates the functions of the
PTC INDIA LTD. v. CENTRAL ELECTRICITY 667
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
Central Commission broadly into two categories - mandatory A
functions and advisory functions. Tariff regulation, licensing
(including inter-State trading licensing), adjudication upon
disputes involving generating companies or transmission
licensees fall under the head "mandatory functions" whereas
advising Central Government on formulation of National B
Electricity Policy and tariff policy would fall under the head
"advisory functions". In this sense, the Central Commission is
the decision-making authority. Such decision-making under
Section 79(1) is not dependant upon making of regulations
under Section 178 by the Central Commission. Therefore, c
functions of Central Commission enumerated in Section 79 are
separate and distinct from function of Central Commission
under Section 178. The former is administrative/adjudicatory
function whereas the latter is legislative. ·
40. As stated above, the 2003 Act has been enacted in D
furtherance of the policy envisaged under the Electricity
Regulatory Commissions Act, 1998 as it mandates
establishment of an independent and transparent Regulatory
Commission entrusted with wide ranging responsibilities and
objectives inter alia including protection of the consumers of E
electricity. Accordingly, the Central Commission is set up under
Section 76(1) to exercise the powers conferred on, and in
discharge of the functions assigned to, it under the Act. On
reading Sections 76(1) and 79(1) one finds that Central
Commission is empowered to take measures/steps in F
discharge of the functions enumerated in Section 79( 1) like to
regulate the tariff of generating companies, to regulate the inter-
state transmission of electricity, to determine tariff for inter-
state transmission of electricity, to issue licenses, to adjudicate
upon disputes, to levy fees, to specify the Grid Code, to fix the G
trading margin in inter-State trading of electricity, if considered
necessary, etc .. These measures, which the Central
Commission is empowered to take, have got to be in
conformity with the regulations under Section 178, wherever
such regulations are applicable. Measures under Section H
668 SUPREME COURT REPORTS (2010] 3 S.C.R.
A 79(1 ), therefore, have got to be in conformity with the
regulations under Seqtion 178. To regulate is an exercise which
is different from making of the regulations. However, making
of a regulation under Section ·178 is not a pre-condition to the
Central Commission taking any steps/measures under Sectiorr
B 79(1). As stated, if there is a regulation, then the measure under
Section 79(1) has to be in conformity with such regulation under
Section 178. This principle flows from various judgments of this
Court which we have discussed hereinafter. For example, under
Section 79(1)(g) the Central Commission is required to levy
c fees for the purpose of the 2003 Act. An Order imposing
regulatory fees could be passed even in the absence of a·
regulation under Section 178. If the levy is unreasonable, it
could be the subject matter of challenge before the Appellate
Authority under Section 111 as the levy is imposed by an Order/
decision making process. Making of a regulation under Section
0
178 is not a pre-condition to passing of an Order levying a
regulatory fee under Section 79(1)(g). However, if there is a
regulation under Section 178 in that regard then the Order
levying fees under Section 79(1)(g) has to be in consonance
with such regulation. Similarly, while exercising the power to
E frame the terms and conditions for determination of tariff under
Section 178, the Commission has to be guided by the factors
specified in Section 61. It is open to the Central Commission
to specify terms and conditions for determination of tariff even
in the absence of the regulations under Section 178. However,
F if a regulation is made under Section 178, then, in that event,
framing of terms and conditions for determination of tariff under
Section 61 has to be in consonance with the regulation under
Section 178. One must keep in mind the dichotomy between
the power to make a regulation under Section 178 on one hand
G and the various enumerated areas in Section 79(1) in which
the Central Commission is mandated to take such measures
as it deems fit to fulfil the objects of the 2003 Act. Applying this
test to the-,,resent controversy, it becomes clear that one such
area enumerated in Section 79(1) refers to fixation of trading
H margin. Making of a regulation in that regard il? not a pre-
PTC INDIA LTD. v. CENTRAL ELECTRICITY 669
REGULATORY COMM. THR. SECRY. (S.H. KAPADIA, J.]
condition to the Central Commission exercising its powers to A
fix a trading margin under Section 79(1 )0), however, if the
Central Commission in an appropriate case, as is the case
herein, makes a regulation fixing a cap on the trading margin
under Section 178 then whatever measures a Central
Commission takes under Section 79(1 )(j) has to be in B
conformity with Section 178. One must understand the reason
why a regulation has been made in the matter of capping the
trading margin under Section 178 of the Act. Instead of fixing
a trading margin (including capping) on a case to case basis,
the Central Commission thought it fit to make a regulation which C
has a general application to the entire trading activity which has
been recognized, for the first time, under the 2003 Act. Further,
it is impprtant to bear in mind that making of a regulation under
Section 178 became necessary because a regulation made
under Section 178 has the effect of interfering and overriding
the existing contractual relationship between the regulated 0
entities. A regulation under Section 178 is in the nature of a
subordinate Legislation. Such subordinate Legislation can even
override the existing contracts including Power Purchase
Agreements which have got to be aligned with the regulations
under Section 178 and which could not have been done across E
the board by an Order of the Central Commission under Section
79(1)0).
41. To elucidate, we may refer to the Central Electricity
Regulatory Commission (Terms and Conditions of Tariff) F
Regulations, 2004. The said Regulations have been made
under Section 178 of the 2003 Act. Regulation 15 deals with
various components of tariff. It includes Advance Against
Depreciation ("AAD" for short). Regulations 21 (1 )(ii) and 38(ii)
deal with computation of depreciation including AAD. Recently, G
this concept of AAD came for consideration before this Court
in the case of National Hydroelectric Power Corporation Ltd.
v. CIT reported in 2010 (1) SCALE 5. AAD was suggested by
the Central Commission as part of the tariff in order to
overcome the cash flow problems faced by Central Power H
670 SUPREMli COURT REPORTS [2010] 3 S.C.R.
A Sector Utilities for meeting loan repayment obligations. The
important point to be noted is that although under Section 61
of the 2003 Act the Central Commission is empowered to
specify AAD as a condition for determination of the tariff, the
Central Commission in its wisdom thought it fit to bring in the
8 concept of AAD by enacting a regulation under Section 178
giving the benefit of AAD across the board to all Central Power
Sector Utilities. In other words, instead of giving the benefit of
AAD on a case to case basis under Section 61, the Central
Commission decided to make a specifii; regulation giving
C benefit of AAD across the board to all Central Power Sector
Utilities. There is one more reason why a regulation under
Section 178 with regard to AAD had to be made by CERC.
Under the 2003 Act, the Central Commission is empowered
under Section 61 to include depreciation as an item in the
computation of tariff. However, if the rate of depreciation
D envisaged by the Central Commission under the 2003 Act is
different from the rate(s) of depreciation prescribed under
Schedule XIV of the Companies Act, 1956 then such differential
rate can be prescribed under the 2003 Act only by way of
regulation under Section 178 of the 2003 Act which is in the
E nature of subordinate legislation. It is important to note that the
Companies Act, 1956 constitutes a law applicable to
companies. It prescribes the format of Balance Sheet in
Schedule VI. It prescribes the requirements as to Profit and
Loss account vide Part II of Schedule VI. It also prescribes the
F rates of depreciation vide Schedule XIV. If a different rate is
required to be prescribed under the 2003 Act, then it could be
done only by way of subordinate legislation, which is
"' contemplated by Regulations framed under Section 178 of the
2003 Act. Similarly, profits earned by a trading company are
G not only required to be presented in the manner indicated under
the Companies Act but it is also required to be computed under
the Income-tax Act, 1961. If such profits/income of a trading
company is required to be capped under the 2003 Act, it can
.. only be done by a subordinate legislation made under Section
H · 178 of the 2003 Act. Accrual of income/profit under the
PTC INDIA LTD. v. CENTRAL ELECTRICITY 671
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
Companies Act, 1956 or the Income-tax Act, 1961 can only be A
curbed by a regulation made under the authority of subordinate
legislation or primary legislation. This is exactly what is sought
to be achieved by the impugned Regulation.
42.-0ne more-citation may be noticed. Reserve Bank of B
India is a Regulator under the RBI Act, 1934 ("1934 Act"). Under
the 1934 Act; RBI is empo\vered not only to regulate banks but
also financial institutions, NBFCs etc .. Chapter Ill B of the 1934
Act deals with provisions relating to financial institutiohs and
NBFCs receiving deposits from the public. Under Section 45JA C
of the 1934 Act, RBI is given the power to determine policy and
issue directions to NBFCs and financial. institutions in public ·
interest or in order to regulate the financial system of the country.
Section 45JA, however, is confined to Chapter Ill B. However,
under Section 58, which falls in Chapter IV, dealing with general
provisions, the Board of Directors of RBI are given the power D
to make regulations consistent with the 1934 Act to provide for
all matters for which provision is necessary. The principle of
"generality versus enumeration" is also applicable to Section
58 of RBI Regulations because under Section 58(2) there is a
list of topics enumerated on which regulations could be made. E
In other words, Section 58 (1), (2) of the 1934 Act is similar to
Section 178 (1), (2) of the 2003 Act. Recently, before the
Division Bench of this Court, the question arose, inter alia, as
to the' accounting treatment to be given by NBFCs accepting
deposits from the public in the context of provision to be made F
for Non Performing Assets ("NPAs"). An Order was passed by
RBI under Section 45JA of the 1934 Act stating that although
provision for doubtful debts is required to be reduced from the
assets' side of the balance sheet under the provisions of the
Companies Act, 1956, for proper disclosure under the 1934 G
Act, such a provision should be shown in the balance sheet
specifically on the liabilities' side. It is interesting to note that
the Order was passed under Section 45JA which, as stated
above, is part of Chapter Ill B of the 1934 Act, which chapter
expressly deals with provisions relating to NBFCs. There was H
672 SUPREME COURT REPORTS [2010] 3 S.C.R
A no regulation enacted under Section 58 on the topic, namely,
NPAs. The point to be noted is, that there could be an Order/
decision of a regulator under the Act even in the absence of
regulations. RBI like CERC is a regulator under the 1934 Act.
Under Section 45JA it is empowered to issue directions in
B contradistinction to its powers to enact regulations. under
Section 58 of the 1934 Act. Giving directions under Section
45JA need not be preceded by regulations made under Section
58, however, if in a given case, RBI/Board would have enacted
a regulation on making of provision for NPAs under Section 58
c then the Order of RBI under Section 45JA of the 1934 Act was
required to be in conformity with the said regulations. (See the
judgment of this Court in the case of Mis Southern
Technologies Ltd. v. Joint Commissioner of Income Tax,
Coimbatore reported in 2010 (1) SCALE 329.)
D 43. The above two citations have been given by us only to
demonstrate that under the 2003 Act, applying the test of
"general application", a Regulation stands on a higher pedestal
vis-a-vis an Order (decision) of CERC in the sense that an
Order has to be in conformity with the regulations. However, that
E would not mean that a regulation is a pre-condition to the order
(decision). Therefore, we are not in agreement with the
contention of the appellant(s) that under the 2003 Act, power
to make regulations under Section 178 has to be correlated to
the functions ascribed to each authority under the 2003 Act and
F that CERC can enact regulations only on topics enumerated
in Section 178(2). In our view, apart from Section 178(1) which
deals with "generality" even under Section 178(2)(ze) CERC
could enact a regulation on any topic which may not fall in the
enumerated list provided such powedalls within the scope of
G 2003 Act. Trading is an activity recognized under the said 2003
Act. While deciding the nature of an Order (decision) vis-a-vis
a Regulation under the Act, one needs to apply the test of
general application. On the making of the impugned
Regulations 2006, even the existing Power Purchase
H Agreements ("PPA") had to be modified and aligned with the
PTC INDIA LTD. v. CEN'rRAL ELECTRICITY 673 ' . 1
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.)
said Regulations. In other words, the impugned Regulation A
makes an inroad into even the existing contracts. This itself
indicates the width of the power conferred on CERC under
Section 178 of the 2003 Act. All contracts coming into existence
after making of the impugned Regulations 2006 have also to
factor in the capping of the trading margin. This itself indicates B
that the impugned Regulations are in the nature of subordinate
legislation. Such regulatory intervention into the existing
contracts across-the-board could have been done only by
making Regulations under Section 178 and not by passing an
Order under S~ction 79(1 )0) of the 2003 Act. Therefore, in our c
view, if we keep the above discussion in mind, it becomes clear
that the word "order'' in Section 111 of the 2003 Act cannot
include the impugned Regulations 2006 made under Section
178 .of the 2003 Act.
44. We may usefully refer to some decisions relevant in D
the context.
45. In the case of City Board, Mussoorie v. State
Electricity Board and Ors., reported in AIR (58) 1971
Allahabad 219, the matter arose under Electricity (Supply) Act, E
1948 ("1948 Act"). Under that Act, Grid Tariff had to be fixed
from time to time under Section 46(1) "in accordance with any
regulations made in that behalf'. Under Section 79 of the 1948
Act, the Board was also given the power to make regulations
not inconsistent with the Act and the Rules made thereunder F
to provide for all or any of the matters enumerated therein. It
was argued on behalf of the appellant that the regulations must
exist before a Grid Tariff can be fixed. This argument was
rejected by the High Court which held that there was nothing in
the 1948 Act to suggest that existence of a regulation was a G
pre-condition to the determination of a grid tariff. It was held
that under Section 46 of 1948 Act, the Board was given a wide
discretion to frame the grid tariff depending upon various factors
mentioned in the Act. According to the High Court, Section 46
of the Act was a standalone provision, therefore, the grid tariff
H
674 SUPREME COURT REPORTS (2010] 3 S.C.R.
A could be fixed even in the absence of the regulations provided
such fixation is not inconsistent with the 1948 Act. However, it
was further observed that if the Board had made regulations
under Section 79 then order framing the grid tariff under Section
46(1) had to conform to such regulations. This view stood
B affirmed by this Court in the case of U.P. State Electricity
Board, Lucknow v. City Board, Mussoorie, reported in (1985)
2 sec 16.
46. A similar question arose for determination by this Court
C in the case of Mis Jagdamba Paper Industries (Pvt.) Ltd. and
Ors. v. Haryana State Electricity Board and Ors., reported in
AIR 1983 SC 1296. In that case, enhancement in the security
for meters and for payment of energy bills came to be
challenged. It was argued on behalf of the appellants that the
Board had not framed any Regulations under Section 79 of the
D 1948 Act for such enhancement. According to the appellants,
the supply of electricity was controlled under an agreement
between the Board and the appellants and therefore unilateral
escalation of security charges by passing of an Order under
Section 49 would be contrary to any acceptable notion of
E contract. It was contended that under Section 49(1) of the 1948
Act, the Board was conferred with statutory powers to determine
the conditions on the basis of which supply had to be made.
Therefore, without determining the conditions under Section
49(1), it was not open to the Board to unilaterally enhance the
F security charges contrary to the existing contract between the
Board and the consumers. This argument was rejected by this
Court which held that what apply to the tariff fixation. would
equally apply to the security. Section 49(1) of the 1948 Act
clearly indicated that the Board may supply electricity to any
G person upon such terms and conditions as the Board thinks fit.
It was held that since the contract between the consumer and
the Board contemplated enhancement of security charges as
a condition of supply of electricity, it was not open to the
appellants to say that such enhancement cannot take place
H without regulations being framed under Section 79. This
PTC INDIA LTD. v. CENTRAL ELECTRICITY 675
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
judgment is important from another angle also. It indicates that A
regulations under Section 79 of 1948 Act were to be in the
nature of subordinate legislation, therefore, all contracts had to
be in terms of such regulations. In the present case also, if one
examines the terms and conditions of the licences, power to
fix trading margin is expressly contemplated by such terms. The B
said judgment further held that the Board is a statutory authority
and has to act within the framework of the 1948 Act. If the act
of the Board is not in consonance or in breach of some statutory
provisions of law, rule or regulation, it is always open to
challenge in a petition under Section 226 of the Constitution. c
47. In the case of Kera/a State Electricity-Board v. S.N.
Govinda Prabhu and Bros. and Ors., reported in (1986) 4 sec
198, the dispute was confined to the question concerning
increase in the electricity tariff by the Board under the 1948 Act.
The principal ground of challenge was that the Board had acted 0
outside its statutory authority by formulating a price structure
intended to yield sufficient revenue to offset not only the actual
expenditure as contemplated by Section 59 of the 1948 Act but
also expenditure not covered by that section. At this stage, we
may point out that, in all these cases, the Supreme Court has E
considered tariff fixation, price fixation, security charges fixation
at par. In that case, one of the submissions which found favour.
with the High Court, which accepted the submissions of the
consumer, while striking down the impugned notification, was
that in the absence of specification by the State Government, F
it was not open to the Board to adjust the tariffs. What was found
by the Supreme Court was that although the expenditure did
not fall strictly within Section 59 of the 1948 Act, the actual
expenditure stood incurred to avoid the loss. Therefore, the
Supreme Court gave a schematic interpretation to the 1948 Act G
and it held that the State Electricity Board was obliged to carry
on its business economically and efficiently and consequently
such charges were admissible even though they did not fall
strictly within the ambit of Section 59. On the question as to
absence of specification by the State Government, this Court H
676 SUPREME COURT REPORTS [2010] 3 S.C.R.
A . further held that the omission of the rule-making authority to ·
frame rules cannot takeaway the right to factor in such
expenses in the revised tariff structure. This judgment is one
more case which indicates that making of regulations is not a
pre-condition to the tariff fixation or price fixation or security
B charges fixation.
48. In the case of Hindustan Zinc Ltd. etc. v. Andhra
Pradesh State Electricity Board and Ors. reported in (1991)
3 SCC 299, the main attack was to the upward revision of the
C tariffs for HT consumers in the writ petition before the High
Court, inter alia, on the ground that the Board cannot generate
a surplus in excess of the surplus specified under Section 59
of the 1948 Act. Section 59 of that Act gave power to the Board
to lay down general principles for Board's finance. It was also
contended that the tariff revision was made without prior
D consultation with the State Electricity Consultative Council as
required by Section 16(5) of the 1948 Act. It was held by this
Court that even in the absence of general principles being
specified under Section 59 of that Act, it was open to the Board
to generate a surplus in order to carry on the business in a more
E efficient and economic manner. Following the judgment in the
case of S.N. Govinda Prabhu (supra), it was held that even in
the absence of prior consuitation with the State Electricity
Consultative Council as required by Section 16(5), it was open
to the Board which was vested with the power of tariff fixation
F to make an upward revision of tariff. In other words,
specification by. making rules or regulations was not a pre-
condition for upward revision of tariff. It was observed that, if in
a given case, it is found that such upward revision was arbitrary,
then under the judicial review jurisdiction it was open to the
G courts to strike down such upward revision as arbitrary under
Article 14. It was further observed that the "laying down
procedure" before the Legislature was meant to effectively
control the exercise of the delegated power of the Board,
however, such laying down procedure will not make the
H impugned regulation immune from judicial review. (Also see the
PTC INDIA LTD. v. CENTRAL ELECTRICITY 677
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
judgment of this Court in Indian Express Newspapers A
(Bombay) Pvt. Ltd. and Ors. v. Union of India and Ors.
reported in (1985) 1 sec 641. !)aragraphs 75 to 79).
49. On the question of "generality versus enumeration"
principle, it was further held in the case of Hindustan Zinc Ltd.
B
(supra) that under Section 49(1) of the 1948 Act a general
power was given to the Board to supply electricity to any person
not being a licensee upon such terms and conditions as the
Board thinks fit and the Board may for the purposes of such
supply frame uniform tariffs under Section 49(2). The Board was
required to fix uniform tariffs after taking into account certain C
enumerated factors. It was held that the power of fixation of
tariffs in the Board ordinarily had to be done in the light of
specified factors, however, such enumerated factors in Section
49(2) did not prevent the Board from fixing uniform tariffs on
factors other than those enumerated in Section 49(2) as long D
as they were relevant and in consonance with the Act. To the
same effect is the judgment of this Court in Shri Sitaram Sugar .
Co. Ltd. (supra). In that judgment also this Court held that the
enumerated factors/topics in a provision do not mean that the
authority cannot take any other matter into consideration which E
may- be relevant. The words in the enumerated provision are
not a fetter; they are not words of limitation, but they are words
for general guidance.
50. One more s..;pect needs to be mentioned. The F
judgment of this Court in Shri Sitaram Sugar Co. Ltd. (supra)
has laid down various tests to distinguish legislative from
·administrative functions. It further held that price fixation is a
legislative function unless the statute provides otherwise. It also
laid down the scope of judicial review in such cases.
G
51. Applying the above judgments to the present case, it
is clear that fixation of the trading margin in the inter-State
trading of electricity can be done by making of regulations
under Section 178 of 2003 Act. Power to fix the trading margin
H
678 SUPREME COURT REPORTS [2010] 3 S.C.R.
A under Section 178 is, therefore, a legislative power and the
Notification issued under that section amounts to a piece of
subordinate legislation, which has a general application in the
sense that even existing contracts are required to be modified
in terms of the impugned· Regulations. These Regulations make
B an inroad into contractual relationships between the parties.
Such is the scope and effect of the impugned Regulations
which could not have taken place by an Order fixing the trading
margin under Section 79(1)U). Consequently, the impugned
Regulations cannot fall within the ambit of the word "Order" in
c Section 111 of the 2003 Act.
52. Before concluding on this topic, we still need to
examine the scope of Section 121 of the 2003 Act. In this case,
appellant(s) have relied on Section 121 to locate the power of
judicial review in the Tribunal. For that purpose, we must notice ·
D the salient features of Section 121. Under Section 121, there
must be a failure by a Commission to perform its statutory
function in which event the Tribunal is given authority to issue
orders, instructions or directions to the Commission to perform
its statutory functions. Under Section 121 the Commission has
E to be heard before such orders, instructions or directions can
be issued.
53. The main issue which we have to decide is the nature
of the power under Section 121. lri the case of Mis Raman and
F Raman Ltd. v. State of Madras and Ors. reported in AIR 1959
SC 694, Section 43A of Motor Vehicles Act, 1939, ("1939
Act"), as amended by Madras Act 20 of 1948, came for
consideration before the Supreme Court. Section 43A
conferred power on the State Government to issue "orders" and
G "directions", as it may consider necessary in respect of any
matter relating to road transport to the State Transport Authority
or a Regional Transport Authority. The meaning of the words
"orders" and "directions" came for interpretation before the
Supreme Court in the said case. It was held, on examination
H of the Scheme of the Act, that Section 43A was placed by the
PTC INDIA LTD. v. CENTRAL ELECTRICITY 679
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
legislature before the sections conferring quasi-judicial powers A
on Tribunals which clearly indicated that the authority conferred
under Section 43A was confined to administrative functions of
the Government and the Tribunals rather than to their judicial
functions. It was further held that the legislature had used two
words in the section: (i) orders; and (ii) directions. This Court s
further noticed that under the 1939 Act there was a separate
Chapter which dealt with making of "rules" which indicated that
the words "orders" and "directions" in Section 43A were meant
to clothe the Government-with the authority to issue directions
of administrative character. It was held that the source of power c
did not affect the character of acts done in exercise of that
power. Whether it is a law or an administrative direction
depends upon the character or nature of the orders or directions
authorized to be issued in exercise of the power conferred. It
was, therefore, held that the words "orders" and "directions"
0
were not laws. They were binding only on the Authorities under
the Act. Such orders and directions were not required to be
published. They were not kept for scrutiny by legislature. It was
further held that such orders and directions did not override the
discretionary powers conferred on an authority under Section
60 of the 1939 Act. It was observed that non compliance of such E
orders, instructions and directions may result in taking
disciplinary action but they cannot affect a finding given by the
quasi-judicial authority nor can they impinge upon the rules
enacted by the rule-making authority. It was held that such
orders and directions would cover only an administrative field F
of the officers concerned and therefore such orders and
directions do not regulate the rights of the parties. Such orders
and directions cannot add to the considerations/topics
prescribed under Section 47 of the 1939 Act on the basis of
which an adjudicatir:ig authority is empowered to issue or refuse G
permits, as the case may be.
54. Applying the tests laid down in the above judgment to
the present case, we are of the view that, the words "orders",
"instructions" or "directions" in Section 121 do not confer power H
680 SUPREME COURT REPORTS [2010] 3 S.C.R.
A of judicial review in the Tribunal. It is not possible to lay down
any exhaustive list of cases in which there is failure in
performance of statutory functions by Appropriate Commission.
However, by way of illustrations, we may state that, under
Section 79(1)(h) CERC is required to specify Grid Code having
B regard to Grid Standards. Section 79 comes in Part X. Section
79 deals with functions of CERC. The word "grid" is defined in
Section 2(32) to mean high voltage backbone system of
interconnected transmission lines, sub-station and generating
plants. Basically, a grid is a network. Section 2(33) defines "grid
c code" to mean a code specified by CERC under Section
79(1 )(h). Section 2(34) defines "grid standards" to mean
standards specified under Section 73(d) by the Authority. Grid
Code is a set of rules which governs the maintenance of the
network. This maintenance is vital. In summer months grids tend
to trip. In the absence of the making of the Grid Code in
0
accordance with the Grid Standards, it is open to the Tribunal
to direct CERC to perform its statutory functions of specifying
the Grid Code having regard to the Grid Standards prescribed
by the Authority under Section 73. One can multiply these
illustrations which exercise we do not wish to undertake. Suffice
E it to state that, in the light of our analysis of the 2003 Act,
hereinabove, the words orders, instructions or directions in
Section 121 of the 2003 Act cannot confer power of judicial
review under Section 121 to the Tribunal, which, therefore,
cannot go into the validity of the impugned Regulations 2006,
F as rightly held in the impugned judgment.
55. One of the contentions raised by Shri Shanti Bhushan,
learned senior counsel appearing on behalf of Calcutta
Electricity Supply Company Ltd. needs to be considered. It was
G contended on behalf of CESC Ltd. that under Section 111 of
the 2003 Act, an appeal lies only against an Order by the
Appropriate Commission and not against Regulations framed
by CERC under Section 178 of the 2003 Act. It was contended
that Regulations under Section 178 are framed in exercise of
H delegated power in which there was an element of legislative
. i
PTC INDIA LTD. v. CENTRAL ELECTRICITY 681
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
function. That, the Regulations framed by CERC are required A
to be laid before the Parliament under Section 179 of the 2003
Act. The said Regulations could be modified by the two Houses
of the Parliament. In the circumstances, it was, therefore,
contended that neither Section 111 nor Section 121 would be
deemed to have conferred any power on the Appellate Tribunal B
for Electricity to supervise or sit in judgment over the
Regulations. To this extent, learned counsel supported the
contentions of the learned Solicitor General, appearing on
behalf of CERC (respondent no.1). Further, an interesting
argument was advanced by the learned counsel, namely, that, c
Section 121 of the 2003 Act has not yet been brought into
force. In this connection, reference was made to Section 1(3)
of the 2003 Act as well as to the notification dated 10.6.2003
issued under Section 1(3) of the 2003 Act by which the Central
Government had fixed 10.6.2003 as the date on which Sections 0
1 to 120 and Sections 122 to 185 were brought into force,
however, Section 121 was not brought into force till Notification
dated 27 .1.2004, which brought into force Electricity
(Amendment) Act 2003 (No.57 of 2003) came to be issued.
According to the learned counsel, Section 4 of the Electricity E
(Amendment) Act, 2003 (No.57 of 2003) which was brought into
force on 27.1.2004 merely provided for substitution of the
original Section 121 with new Section 121, without issuance
of a further notification under Section 1(3) of the original
Electricity Act, 2003. According to the learned counsel, there
is a differencs between substituting a dormant Section iri an F
Act and in bringing a substituted section into force which has
not been done in this case and, therefore, Section 121, although
being part of the statute, is not brought into force, till today. To
answer the above contention, we need to quote Section 1(3)
and also Section 121 of the original Electricity Act, 2003 which G
was not brought into force though, as stated above, Sections
1 to 120 and Sections 122 to 185 were brought into force vide
notification dated 10.6.2003:
H
682 SUPREME COURT REPORTS [2010] 3 S.C.R.
A "Section 1. Short title, extent and commencement. -
(3) It shall come into force on such date as the Central
Government may, by notification, appoint:
Provided that different dates may be appointed for
B different provisions of this Act and any reference in any
such provision to the commencement of this Act shall be
construed as a reference to the coming into force of that
provision."
c "Section 121. Power of Chairperson of Appellate
Tribunal.- The Chairperson of the Appellate Tribunal shall
exercise general power of superintendence and control
over the appropriate Commission."
56. We also quote hereinbelow Sections 1 and 4 of the
D Electricity (Amendment) Act, 2003 (No.57 of 2003) which was
brought into force on 27.1.2004:
"Section 1. (2) It shall come into force on such date as the
Central Government may, by notification in the Official
E Gazette, appoint.
Section 4. For Section 121 of the principal Act, the
following Section shall be substituted, namely:-
"121. Power of Appellate Tribunal
F
The Appellate Tribunal may, after hearing the Appropriate
Commission or other interested party, if any, from time to
time, issue such orders, instructions or directions as it may
deem fit, to any Appropriate Commission for the
G performance of its statutory functions under this Act."
57. As stated above, the Electricity (Amendment) Act, 2003
(No.57 of 2003) was brought into force by Notification dated
27.1.2004 which is reproduced hereinbelow:
H
PTC INDIA LTD. v. CENTRAL ELECTRICITY 683
. REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
"MINISTRY OF POWER A
Notification
New Delhi, the 27th January, 2004
S.0.119(E). In exercise of the powers conferred by
sub-section (2) of Section 1 of the Electricity (Amendment) 8
Act, 2003 (57 of 2003), the Central Government hereby
appoints the 27th January, 2004, as the date on which the
provisions of the said Act shall come into force.
[F. No.23/23/2004-R&R]
AJAY SHANKAR, Jt. Secy." C
58. In our view, there is no merit in the above contention
advanced on behalf of CESC Ltd. At the outset, we may state
that material brought on record indicates that Section 121 of
the original Electricity Act, 2003, quoted hereinabove, was D
never brought into force because some MPs expressed the
concern that the power, under that section, conferred upon the
Chairperson of the Appellate Tribunal, could lead to excessive
centralization of power and interference with the day-to-day
activities of the Commission by the Chairperson of the Tribunal. E
Therefore, Section 121 was amended by Electricity
(Amendment) Act, 2003 (No.57 of 2003) which is also quoted
hereinabove and which amendment Act came into force from
27.1.2004. In our view, by necessary implication of the coming
into force of the Electricity (Amendment) Act, 2003 (No.57 of
2003) all provisions amended by it also came into force, hence, F
there is no requirement for a further notification under Section
1(3), particularly when Section 121 in its amended form has
come into force w.e.f. 27.1.2004. In this connection, it may be
seen that Section 121 of the original Act stood substituted by
Amendment Act No.57 of 2003. Substitution of a provision G
results in repeal of the earlier provision and its replacement by
the new provision. Substitution is a combination of repeal and
fresh enactment. [See: Principles of Statutory Interpretation by
G.P. Singh, 11th Edn., p. 638]. Section 121 of the original
Electricity Act, 2003 was never brought into force. It was H
684 SUPREME COURT REPORTS [2010] 3 S.C.R.
A substituted by new Section 121 by Amendment Act No.57 of
2003 which was brought into force by a notification dated
27.1.2004. Substitution, as stated above, results in repeal of
the old provision and replacement by a new provision. Applying
these tests to the facts of the present case, we find that the
B Electricity (Amendment) Act, 2003 (No.57 of 2003) was brought
into force by notification dated 27.1.2004. That, notification was
issued under Section 1(2) of the Electricity (Amendment) Act,
2003 (No.57 of 2003). If one reads Section 1(2) of Electricity
(Amendment) Act, 2003 (No.57 of 200:.=,) with Notification dated
c 27.1.2004 issued under Section 1(2) of the amended Act,
2003, it becomes clear that on coming into force of the
Electricity (Amendment) Act, 2003 (No.57 of 2003) all provisions
amended by it also came into force. Hence, there was no
requirement for a further notification under Section 1 (3),
consequently, Section 121 in its amended form came into force
0
with effect from 27.1.2004.
59. Summary of Our Findings:
(i) In the hierarchy of regulatory powers and functions
E under the 2003 Act, Section 178, which deals with
making of regulations by the Central Commission,
under the authority of subordinate legislation, is
wider than Section 79( 1) of the 2003 Act, which
enumerates the regulatory functions of the Central
F Commission, in specified areas, to be discharged
by Orders (decisions).
(ii) A regulation under Section 178, as a part of
regulatory framework, intervenes and even
overrides the existing contracts between the
G regulated entities inasmuch as it casts a statutory
obligation on the regulated entities· to align their
existing and future contracts with the said
regulations.
H (iii) A regulation under Section 178 is made under the
PTC INDIA LTD. v. CENTRAL ELECTRICITY 685
REGULATORY COMM. THR. SECRY. [S.H. KAPADIA, J.]
authority of delegated legislation and consequently A
its validity can be tested only in judicial review
proceedings before the courts and not by way of
appeal before the Appellate Tribunal for Electricity
under Section 111 of the said Act.
B
(iv) Section 121 of the 2003 Act does not confer power
of judicial review on the Appellate Tribunal. The
words "orders", "instructions" or "directions" in
Section 121 do not confer power of judicial review
in the Appellate Tribunal for Electricity. In this C
judgment, we do not wish to analyse the English
authorities as we find from those authorities that in
certain cases in England the power of judicial
review is expressly conferred on the Tribunals
constituted under the Act. In the present 2003 Act,
the power of judicial review of the validity of the D
Regulations made under Section 178 is not
conferred on the Appellate Tribunal for Electricity.
(v) If a dispute arises in adjudication on interpretation
of a regulation made under Section 178, an appeal E
would certainly lie before the Appellate Tribunal
under Section 111, however, no appeal to the
Appellate Tribunal shall lie on the validity of a
regulation made under Section 178.
(vi) Applying the principle of "generality versus F
enumeration", it would be open to the Central
Commission to make a regulation on any residuary
item under Section 178( 1) read with Section
178(2)(ze). Accordingly, we hold that the CERC
was empowered to cap th~ trading margin under G
the authority of delegated legislation under Section
178 vide the impugned notification dated
23.1.2006.
(vii) Section 121, as amended by Electricity H
"l
~.~·~\".
686 _ SUPREME COURT REPORTS [2010] 3 S.C.R.
A (Amendment) Act 57 of 2003, came into force with
effect from 27.1.2004. Consequently, there is no
merit in the contention advanced that the said
section is not yet been brought into force.
B Conclusion:
60. For the aforesaid reasons, we answer the question
raised in the reference as follows:
The Appellate Tribunal for Electricity has no jurisdiction to
c decide the validity of the Regulations framed by the Central
Electricity Regulatory Commission under Section 178 of
the Electricity Act, 2003. The validity of the Regulations
may, however, be challenged by seeking judicial review
under Article 226 of the Constitution of India.
D Our summary of findings and answer to the reference are with
reference to the provisions of the Electricity Act, 2003. They
shall not be construed as a general principle of law to be
applied to Appellate Tribunals vis-a-vis Regulatory
Commissions under other enactments. In particular, we make
E it clear that the decision may not be taken as expression of any
view in regard to the powers of Securities Appellate Tribunal
vis-a-vis Securities and Exchange Board of India under the
Securities and Exchange Board of India Act, 1992 or with
reference to the Telecom Disputes Settlements and Appellate
F Tribunal vis-a-vis Telecom Regulatory Authority of India under
the Telecom Regulatory Authority of India Act, 1997.
61. In view of our findings, we dismiss these appeals as
having no merit with no order as to costs,
G K.K.T. Appeals dismissed.
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