Holding

Regulation 44.2(d) of the MERC (Multi Year Tariff) Regulations, 2011 does not suffer from any constitutional or statutory infirmity, and the writ petition is maintainable, but the High Court’s dismissal of the petition on its merits is affirmed.

Summary

Reliance Infrastructure Ltd (RInfra) challenged Regulation 44.2(d) of the MERC (Multi Year Tariff) Regulations, 2011, which imposed a stricter Station Heat Rate (SHR) on its Dahanu thermal power station than on other units. RInfra filed a writ petition under Article 226 of the Constitution while an appeal against MERC’s order was pending before the Appellate Tribunal for Electricity (APTEL). The Bombay High Court dismissed the petition and imposed costs, holding the writ was an abuse of process. The Supreme Court held that the validity of regulations framed by a State Electricity Regulatory Commission can be tested only before a court, not before APTEL, and therefore the High Court was wrong to deem the writ non‑maintainable and to award costs. However, the Court found no constitutional or statutory infirmity in Regulation 44.2(d) and affirmed the High Court’s dismissal of the writ on its merits.

Issues considered

The maintainability of a writ petition under Article 226 challenging the validity of MERC Regulation 44.2(d) while an appeal was pending before APTEL.
Whether Regulation 44.2(d) is ultra vires, discriminatory, or violative of the National Tariff Policy and Article 14 of the Constitution.
Whether the Appellate Tribunal for Electricity has jurisdiction to decide on the validity of regulations framed under Section 181 of the Electricity Act, 2003.
Whether the regulation suffers from manifest unreasonableness or arbitrariness warranting judicial intervention.

Legislation cited

Electricity Act, 2003s. 111, s. 121, s. 178, s. 181, s. 61, s. 82
MERC (Multi Year Tariff) Regulations, 2011s. 44.2(d)
MERC (Terms and Conditions of Tariff) Regulations, 2005
National Tariff Policy, 2006

Subjects

Regulation validityElectricity lawStation Heat RateDiscriminationArticle 226Appellate Tribunal jurisdictionMulti‑Year TariffMERCManifest unreasonablenessStatutory interpretation

Judgment

886 [2019]REPORTS
SUPREME COURT 1 S.C.R. 886 [2019] 1 S.C.R.

A RELIANCE INFRASTRUCTURE LIMITED
v.
STATE OF MAHARASHTRA AND ORS.
(Civil Appeal No. 879 of 2019)
B JANUARY 21, 2019
[DR. DHANANJAYA Y CHANDRACHUD
AND HEMANT GUPTA, JJ.]
MERC (Multi Year Tariff) Regulations, 2011 – Regn. 44.2(d) –
Jurisdiction to decide validity of regulations – The grievance of the
C appellant arises from the fact that regn. 44.2(d) prescribed a tighter
standard for its thermal generating station Dahanu TPS as compared
to other generating stations in the State – Petition filed by the
appellant before Maharashtra Electricity Regulatory Commission
(MERC) – Appellant requested for relaxation of the norms and to
D bring it in the line with the normative Station Heat Rate (SHR) –
MERC held that it had considered the norms for SHR based on the
MYT regulations and it did not find any merit in altering the MYT
norms for SHR – The appellant filed an appeal u/s.111 of the
Electricity Act 2003 before the Appellate Tribunal for Electricity
(APTEL) – Also, appellant instituted a Writ petition u/Art.226 of the
E Constitution before the Bombay High Court for the purpose of
challenging regn 44.2(d) which specifies a separate SHR for the
Dahanu TPS as compared to other generating stations in the State
– The High Court dismissed the Writ petition and imposed costs of
Rs. 1 lakh on the appellant, and held that having approached the
F Appellate Tribunal for Electricity, the appellant was not justified in
moving the High Court u/Art.226 “on the same issue” when the
Tribunal was in a position to provide adequate relief – On appeal,
held: The position in law is established by the judgment of
Constitution Bench in PTC India Limited case that while the Tribunal
may decide upon a dispute involving the interpretation of a
G regulation, for which an appeal under Section 111 of the Act would
be maintainable, no appeal can lie before the Tribunal on the validity
of a regulation – Thus, High Court was not right in holding that the
Writ petition u/Art.226 was not maintainable – Indeed, a challenge
to the validity of the regulations framed by the MERC could lie only
before the High Court – Thus, the imposition of costs for having
H
886
RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 887
MAHARASHTRA

adopted the remedy u/Art.226 was unjustified – However, there is A
no infirmity in the impugned regulation and accordingly ultimate
conclusion of the High Court to dismiss the Writ petition u/Art.226
affirmed – Electricity Act, 2003 – ss.61, 82, 111 and 181 – MERC
(Terms and Conditions of Tariff) Regulations, 2005 – National Tariff
Policy, 2006 – Constitution of India – Art.226 – Jurisdiction.
B
MERC (Multi Year Tariff) Regulations, 2011 – Regn. 44.2(d)
– Validity of – Plea of discrimination by the appellant – The grievance
of the appellant arises from the fact that a tighter standard or norm
has been prescribed for its thermal generating station Dahanu TPS
as compared to other generating stations in the State – The
discrimination, according to the appellant, lied in a statutory C
regulations determining the Station Heat Rate (SHR) – Held: The
power to frame regulations is of a legislative nature – The Central
Power Research Institute (CPRI) report was an input before the
Maharashtra Electricity Regulatory Commission (MERC) in carrying
out that exercise – MERC followed the statutory procedures laid D
down for the determination of tariffs – It took into account factors
which it is mandated by the statute to consider – The National Tariff
Policy, suggestions of stakeholders as well as the assessment carried
out by the CPRI were duly considered – Thus, the present case does
not fall in the paradigm of manifest unreasonableness or
arbitrariness to warrant the interference of the Supreme Court – E
Regulation 44.2(d) of the MERC (Multi Year Tariff) Regulations,
2011 does not suffer from any constitutional or statutory infirmity –
National Tariff Policy, 2006.
On 04.02.2011, the MERC (Multi Year Tariff) Regulations,
2011 were notified. Regulation 44 provides norms for the F
operation of thermal generating stations. Regulation 44.2
stipulates gross station heat rates for existing generating stations.
The above regulation indicated that save and except for the
excluded categories set out in clauses (b), (c) and (d), the Station
Heat Rate (SHR) for existing coal based thermal generating G
stations is pegged at a uniform level of 2450 kCal/kWh (for 200/
210/250 MW sets) and 2425 kCal/kWh (for 500 MW sets and
above). As opposed to the uniform criterion of 2450 kCal/kWh in
Regulation 44.2(a), the SHR for the Dahanu TPS was varied
between 2350 in financial year 2011-12 to 2370 in financial year
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888 SUPREME COURT REPORTS [2019] 1 S.C.R.

A 2015-16. It was this prescription of a more stringent SHR in the
case of R-Infra’s Dahanu TPS which forms the focus of dispute in
the present case.
Disposing of the appeal, the Court
HELD: 1. On the maintainability of the petition under Article
B 226 of the Constitution, the High Court, has overlooked the
position in law established by the judgment of a Constitution
Bench of this Court in PTC India Limited v Central Electricity
Regulatory Commission. The Constitution Bench considered
whether the Appellate Tribunal for Electricity has jurisdiction to
decide upon the validity of the regulations framed by the Central
C
Electricity Regulatory Commission (CERC). CERC has been
entrusted with the power to frame regulations under Section 178
of the Electricity Act 2003. The Constitution Bench held that the
validity of a regulation framed under Section 178 can be tested
only before the court exercising judicial review. While the
D Tribunal may decide upon a dispute involving the interpretation
of a regulation, for which an appeal under Section 111 of the Act
would be maintainable, no appeal can lie before the Tribunal on
the validity of a regulation. [Para 18][905-E-H]
2. In view of the legal position settled by the Constitution
E Bench, the High Court was not justified in disparaging the
appellant for taking recourse to a constitutional remedy under
Article 226. Indeed, a challenge to the validity of the regulations
framed by the Maharashtra Electricity Regulatory Commission
(MERC) could only lie before the High Court. Hence, the
imposition of costs for having adopted the remedy under Article
F 226 was unjustified. There was no suppression of fact on the
part of the appellant which had indicated the recourse it had taken
in the appeal before the Tribunal, arising from its prayer for
relaxation of the Station Heat Rate (SHR) norms before MERC.
The plea before the Appellate Tribunal was for relaxation of the
G SHR norms. The plea before the High Court was that the SHR
fixed was discriminatory and ultra vires. Undoubtedly, if the
appellant were to succeed before the Tribunal, it would perhaps
obviate the challenge in the High Court. The appellant, did not
press ahead with its plea before the Tribunal. Hence, the writ
petition could not have been held not to be maintainable.
H [Para 18][906-G-H; 907-A-B]
RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 889
MAHARASHTRA

3. The substratum of the case of the appellant is founded A
on a plea of discrimination. Simply put, the plea is founded on
the hypothesis that the Central Power Research Institute (CPRI)
report regarded the units of Dahanu TPS (DTPS) as identical to
Parli Unit 6 and Paras Unit 3 (of MSPGCL) and Trombay Unit 8
(of TPC-G). The observations contained in the Central Power
B
Research Institute (CPRI) report must be read in their entirety.
The fact that the manufacturing specifications of the units may be
similar (assuming they are so) is only one aspect of the total range
of considerations which are required to be borne in mind under
the terms of the National Tariff Policy notified u/s. 3 of the
Electricity Act 2003. The tariff policy requires that the operating C
norms should be efficient, relatable to past performance, capable
of achievement and progressively reflect increased efficiencies.
They may also take into consideration technical advancements,
fuel, vintage of equipment, nature of operations and the level of
service among other factors. Appellant laid emphasis on clause
D
5.3(f) of the National Tariff Policy where it prescribes that the
operating parameters and tariffs should be at “normative levels”
only and not at the “lower of normative and actuals” except in
the case of those units governed by para 5.3(h)(2). This
submission will not, however, carry the case of the appellant any
further. Normative levels are those which are fixed by the E
application of the standards guided by the terms of the tariff policy
while actual levels are those which have been achieved as a matter
of fact, in the past. The emphasis in the tariff policy is on creating
incentives for achieving higher efficiency in order to enable the
ultimate consumer to have the benefit of efficient operations.
F
[Para 29][915-G-H; 916-A-D]
4. MERC is an expert body which is entrusted with the
duty and function to frame regulations, including the terms and
conditions for the determination of tariff. The Court, while
exercising its power of judicial review, can step in where a case
of manifest unreasonableness or arbitrariness is made out. G
Similarly, where the delegate of the legislature has failed to follow
statutory procedures or to take into account factors which it is
mandated by the statute to consider or has founded its
determination of tariffs on extraneous considerations, the Court
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890 SUPREME COURT REPORTS [2019] 1 S.C.R.

A in the exercise of its power of judicial review will ensure that the
statute is not breached. However, it is no part of the function of
the Court to substitute its own determination for a determination
which was made by an expert body after due consideration of
material circumstances. [Para 30][917-F-G]
B 5. The power to frame regulations is of a legislative nature.
The CPRI report was an input before the MERC in carrying out
that exercise. MERC followed the statutory procedures laid down
for the determination of tariffs. It took into account factors which
it is mandated by the statute to consider. The national tariff policy,
suggestions of stakeholders as well as the assessment carried
C out by the CPRI were duly considered. Hence, the present case
does not fall in the paradigm of manifest unreasonableness or
arbitrariness to warrant the interference of this Court. It would
be rather formulaic for the Court to accept that merely because
DTPS was placed at par in the immediately previous period (2006-
D 07) and the period immediately succeeding (2016-20), that this
must necessarily be extrapolated to the intervening period
governed by the MYT Regulations 2011. A body which is
entrusted with the task of framing subordinate legislation has a
range of options including policy options. If on an appraisal of all
the guiding principles, it has chosen a particular line of logic or
E rationale, this Court ought not to interfere. [Para 31][918-D-F]
5. Thus, this Court has come to the conclusion that
regulation 44.2(d) of the MERC (Multi Year Tariff) Regulations,
2011 does not suffer from any constitutional or statutory infirmity.
However, the ultimate decision of the High Court to dismiss the
F writ petition is affirmed. The High Court was not right in holding
that the writ petition under Article 226 was not maintainable and
accordingly the direction on the imposition of costs is set aside.
However, this Court holds that there is no infirmity in the
impugned regulation and accordingly affirm the ultimate
G conclusion of the High Court to dismiss the writ petition under
Article 226. [Para 32][918-F-H]
PTC India Limited v. Central Electricity Regulatory
Commission (2010) 4 SCC 603 : [2010] 3 SCR 609 –
followed.
H
RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 891
MAHARASHTRA

Transmission Corporation of Andhra Pradesh Ltd. v. A
Sai Renewable Power Pvt. Ltd. (2011) 11 SCC 34 :
[2010] 8 SCR 636; Association of Industrial Electricity
Users v. State of Andhra Pradesh (2002) 3 SCC 711 :
[2002] 2 SCR 273 – relied on.
Case Law Reference B
[2010] 3 SCR 609 followed Para 18
[2010] 8 SCR 636 relied on Para 30
[2002] 2 SCR 273 relied on Para 30
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 879 of C
2019.
From the Judgment and Order dated 18.04.2016 of the High Court
of Judicature at Bombay in Writ Petition No. 2474 of 2013.
P. Chidambaram, S. K. Rungta, Sr. Advs., Ms. Anjali Chandurkar,
D
Hasan Murtaza, Ms. Divya Anand, Kartik Anand, Alok Kumar, Ankur
Kashyap, Rajesh Kumar, A. V. Rangam, Buddy A. Ranganadhan,
Ms. Stuti Krishn, Ms. Deepa M. Kulkarni, Nishant R. Katneshwarkar,
Advs. for the appearing parties.
The Judgment of the Court was delivered by
E
DR. DHANANJAYA Y CHANDRACHUD, J. 1. Leave
granted.
2. The validity of a tariff regulation framed by the Maharashtra
Electricity Regulatory Commission (MERC) was questioned before the
High Court of Judicature at Bombay. Bereft of jargon – both legal and F
scientific – the plea of the appellant is of discrimination. The
discrimination, according to the appellant, lies in a statutory regulation
determining the Station Heat Rate. According to the appellant, its thermal
power station at Dahanu has been subjected to a more stringent norm
than other comparable units. MERC, it is asserted, breached the National
Tariff Policy 2006. The High Court held against the appellant both on G
the maintainability of its writ petition under Article 226 of the Constitution
and on the merits of the challenge to the validity of the statutory regulation.
The case has thus travelled to this Court.

H
892 SUPREME COURT REPORTS [2019] 1 S.C.R.

A 3. The Electricity Act 2003 came into force on 10 June 2003.
Electricity Regulatory Commissions constituted under Section 82 are
empowered to frame regulations under Section 181, including the terms
and conditions for determination of tariff under Section 611. The MERC
framed the MERC (Terms and Conditions of Tariff) Regulations 20052
for a period of five years, upto financial year 2010-11. The regulations,
B
in so far as the appellant is concerned were extended for a further period
of one year upto financial year 2011-12.
4. Regulation 33.1.3 prescribed the Station Heat Rate (SHR).
The SHR is the heat energy required to generate one unit of electrical
energy. The SHR is significant because it represents the ratio between
C heat input and the energy output. SHR has a co-relationship with
efficiency: a higher SHR reflects comparative inefficiency while a
reduction in the SHR is associated with increasing levels of efficiency.
In the Tariff Regulations 2005, the gross SHR was defined in the following
terms:
D “33.1.3. Gross station heat rate
(a) Gross station heat rate for coal-based generating stations
200/210/250 MWsets 500 MWand above sets
During stabilization 2600 kCal/kWh 2550 kCal/kWh
E Period
Subsequent period 2500 kCal/kWh 2450 kCal/kWh

Note 1:
In respect of 500 MW and above units where the boiler feed
F pumps are electrically operated, the gross station heat rate shall be 40
kCal/kWh lower than the station heat rate indicated above.
Note 2:
For generating stations having combination of 200/210/250 MW
seats and 500 MW and above sets, the normative gross station heat rate
G shall be the weighted average station heat rate.”
In the above regulations, uniform norms were fixed for all coal
based thermal generating stations, without any distinction between
individual generating stations. The norm applicable to the Dahanu Thermal
1
Section 181(2)(zd)
2
H Tariff Regulations 2005
RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 893
MAHARASHTRA [DR. DHANANJAYA Y CHANDRACHUD, J.]

Power Station of the appellant was 2500 kCal/kWh. This norm also A
applied to other generating stations in the State of Maharashtra.
5. On 6 January 2006 the Union of India in the Ministry of Power
notified the National Tariff Policy under Section 3 of the Electricity Act
2003. The policy, inter alia, spelt out the general approach to be followed
for the purpose of determining tariffs including operating norms for B
generating stations. Clause 4 of the policy laid out its objectives in the
following terms:
“(a) Ensure availability of electricity to consumers at reasonable
and competitive rates;
(b) Ensure financial viability of the sector and attract investments; C
(c) Promote transparency, consistency and predictability in
regulatory approaches across jurisdictions and minimise
perceptions of regulatory risks;
(d) Promote competition, efficiency in operation and improvement
D
in quality of supply.”
Clause 5.0 spells out the “general approach to tariff”. Clause 5(f)
stipulates operating norms:
ve sets
“(f) Operating Norms
Wh
Suitable performance norms of operations together with incentives E
and dis-incentives would need be evolved along with appropriate
Wh
arrangement for sharing the gains of efficient operations with the
consumers. Except for the cases referred to in para 5.3 (h)(2),
the operating parameters in tariffs should be at “normative levels”
only and not at “lower of normative and actuals”. This is essential
F
to encourage better operating performance. The norms should be
efficient, relatable to past performance, capable of achievement
and progressively reflecting increased efficiencies and may also
take into consideration the latest technological advancements, fuel,
vintage of equipments, nature of operations, level of service to be
provided to consumers etc. Continued and proven inefficiency G
must be controlled and penalized. The Central Commission would,
in consultation with the Central Electricity Authority, notify
operating norms from time to time for generation and transmission.
The SERC would adopt these norms. In case where operations
have been much below the norms for many previous years, the
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894 SUPREME COURT REPORTS [2019] 1 S.C.R.

A SERCs may fix relaxed norms suitably and draw a transition path
over the time for achieving the norms notified by the Central
Commission.
Operating norms for distribution networks would be notified by
the concerned SERCs. For uniformity of approach in determining
B such norms for distribution, the Forum of Regulators should evolve
the approach including the guidelines for treatment of state specific
distinctive features.”
Clause 5 (h) adverts to the Multi Year Tariff:
“(h) Multi Year Tariff
C
(1) Section 61 of the Act states that the Appropriate Commission,
for determining the terms and conditions for the determination of
tariff, shall be guided inter-alia, by multi-year tariff principles. The
MYT framework is to be adopted for any tariffs to be determined
from April 1, 2006. The framework should feature a five-year
D control period. The initial control period may however be of 3
year duration for transmission and distribution if deemed necessary
by the Regulatory Commission on account of data uncertainties
and other practical considerations. In cases of lack of reliable
data, the Appropriate Commission may state assumptions in MYT
E for first control period and a fresh control period may be started
as and when more reliable data becomes available.
(2) In cases where operations have been much below the norms
for many previous years, the initial starting point in determining
the revenue requirement and the improvement trajectories should
be recognised at “relaxed” levels and not the “desired” levels.
F
Suitable benchmarking studies may be conducted to establish the
“desired” performance standards. Separate studies may be
required for each utility to assess the capital expenditure necessary
to meet the minimum service standards…”
6. In August 2009, MERC published a ‘draft approach paper’ for
G
the purpose of enacting multi year tariff regulations for financial years
2010-11 to 2014-15. On 23 October 2009, the appellant furnished its
suggestions. In 2010, MERC commissioned a report from the Central
Power Research Institute (CPRI) for ascertaining achievable
performance parameters for thermal power plants in Maharashtra and
H
RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 895
MAHARASHTRA [DR. DHANANJAYA Y CHANDRACHUD, J.]

to suggest improvements. CPRI carried out an independent assessment A
in respect of the plant of the appellant (DTPS), Tata Power (Generation)
– TPCG, and Maharashtra State Power Generation Company Limited
(MSPGCL). According to the appellant, no recommendation was made
in respect of their plant since it was performing better than the prescribed
SHR.
B
7. In July 2010, MERC published another draft approach paper in
regard to the proposed multi year tariff regulations for financial years
2011-12 to 2015-16 together with draft regulations. On 26 October 2010,
the appellant made submissions on the draft approach paper. On 4
February 2011, the MERC (Multi Year Tariff) Regulations, 20113 were
notified. Regulation 2(32) defines the Gross Station Heat Rate thus: C

“(32) “Gross Station Heat Rate” means the heat energy input in
kcal required to generate one kWh of electrical energy at generator
terminals.”
Regulation 44 provides norms for the operation of thermal D
generating stations. Regulation 44.2 stipulates gross station heat rates
for existing generating stations in the following terms:
“44.2 Gross Station Heat Rate - For existing Generating Stations:
a) Existing Coal-based Thermal Generating Stations, other than
those covered under clauses (b), (c) and (d), below: E

200/210/250 MW sets 500 MW and above sets

2450 kcal/kW h 2425 kcal/kW h

Note 1 F

In respect of 500 MW and above Units, where the boiler feed
pumps are electrically operated, the gross Station Heat Rate shall
be 40 kcal/kWh lower than the gross Station Heat Rate indicated
above.
G
Note 2
For Generating Stations having combination of 200/210/250 MW
sets and 500 MW and above sets, the normative gross Station
Heat Rate shall be the weighted average station heat rate.
3
Tariff Regulations 2011 H
896 SUPREME COURT REPORTS [2019] 1 S.C.R.

A b) Thermal Generating Stations of Maharashtra State Power
Generation Company Ltd. (MSPGCL):
K cal/kWh
Year Koradi Khaperkheda Chandrapur Nasik Bhusawal Paras Parli
excluding excluding
B Unit Unit
No.3 No.6
FY 2010- 2965 2560 2617 2722 2734 3186 2745
11
FY 2011- 2975 2568 2626 2731 2742 3199 2753
12
C FY 2012- 2985 2575 2635 2740 2751 3212 2762
13
FY 2013- 2873 2424 2539 2664 2671 3225 2679
14
FY 2014- 2881 2429 2544 2670 2677 3237 2684
15
FY 2015- 2889 2433 2549 2677 2683 3250 2690
D 16
Provided that the Commission may revise the norms for heat rate
for the above mentioned Generating Stations in case of Renovation
& Modernisation undertaken for the Generating Station.
c) Thermal Generating Units of the Tata Power Company Ltd.
E
Generation Business (TPC-G):
K cal/kWh
Year Unit-4 Unit-5 Unit-6
With Oil & Gas
F mix.i n
proportion of
50:50*
FY 2011-12 2570 2575 2519
FY 2012-13 2576 2583 2524
FY 2013-14 2581 2591 2529
G FY 2014-15 2586 2573 2534
FY 2015-16 2591 2581 2539
* In case variation in Oil and Gas mix is more than +/- 5%, the
Heat Rate for Unit 6 shall be approved considering the actual Oil
and Gas Mix.
H
RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 897
MAHARASHTRA [DR. DHANANJAYA Y CHANDRACHUD, J.]

d) Thermal Generating Station of Reliance Infrastructure Ltd.- A
Generation Business (RInfra-G):
K cal/kWh

Year Dahanu TPS
FY 2011-12 2350 B
FY 2012-13 2355
FY 2013-14 2360
FY 2014-15 2365
FY 2015-16 2370
C
”
8. The above regulation indicates that save and except for the
excluded categories set out in clauses (b), (c) and (d), the SHR for
existing coal based thermal generating stations is pegged at a uniform
level of 2450 kCal/kWh (for 200/210/250 MW sets) and 2425 kCal/kWh
D
(for 500 MW sets and above). The excluded categories are the generating
stations of (i) MSPGCL; (ii) TPC – G; and (iii) RInfra-G. As the table in
clause (b) of Regulation 44.2 indicates, a relaxed standard for the SHR
has been prescribed for the units of MSPGCL. However, there is an
exclusion within the exclusion for Unit 3 at Paras and Unit 6 at Parli,
since these units are governed by the uniform criterion prescribed in E
clause (a). The dispensation for Units 4, 5 and 6 of TPC-G is prescribed
in clause (c). For Unit 8 of TPC-G, the applicable SHR is in terms of the
uniform rate of 2450 kCal/kWh, since this unit is not specified in clause (c).
Gas 9. The grievance of the appellant arises from the fact that a tighter
standard or norm has been prescribed for its Dahanu TPS. As opposed F
of to the uniform criterion of 2450 kCal/kWh in Regulation 44.2(a), the
SHR for the Dahanu TPS varies between 2350 in financial year 2011-12
to 2370 in financial year 2015-16. Essentially, it is this prescription of a
more stringent SHR in the case of R-Infra’s Dahanu TPS which forms
the focus of dispute in the present case.
G
10. In order to buttress its grievance of discrimination, the appellant
has relied upon the Multi Year Tariff regulations notified by MERC for
the previous period (2005-10) and for the subsequent period (2016-21).
The MERC (Multi Year Tariff) Regulations 20154 which govern the
4
Tariff Regulations 2015
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898 SUPREME COURT REPORTS [2019] 1 S.C.R.

A period 1 April 2016 to 31 March 2020 place the Dahanu TPS of RInfra-
G at par with other coal-based thermal generating stations. Regulation
44.4 is in the following terms:
“44.4 Gross Station Heat Rate for existing coal-based thermal
Generating Stations, other than those covered under Regulation
B 44.5 and 44.6 shall be:

200/210/250 MW 300 MW sets 500 MW sets (sub-
sets critical boilers)
2450 kcal/kWh 2400 kcal/kWh 2375 kcal/kWh

C Note 1
In respect of 500 MW Units, where the boiler feed pumps are
electrically operated, the Gross Station Heat Rate shall be 40 kcal/
kWh lower than the gross Station Heat Rate specified above.
Note 2
D
For Generating Stations having combination of 200/210/250 MW
sets and 300 MW and 500 MW sets, the normative gross Station
Heat Rate shall be weighted average Station Heat Rate.”
Regulation 44.5 contains the SHR for the coal based thermal
E generating stations of MSPGCL. Regulation 44.6 specifies the SHR for
TPC-G. Regulations 44.5 and 44.6 are extracted below:
“44.5 Gross Station Heat Rate for existing coal-based thermal
Generating Stations of Maharashtra State Power Generation
Company Ltd. (MSPGCL) shall be:
F

G

Provided that the Commission may revise the Gross Station Heat
Rate norms for these Generating Stations in case any Renovation
& Modernization is undertaken.

H
RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 899
MAHARASHTRA [DR. DHANANJAYA Y CHANDRACHUD, J.]

44.6 Gross Station Heat Rate for existing thermal Generating A
Stations of The Tata Power Company Ltd- Generation Business
(TPC-G) shall be:

B
s (sub-
ilers)
kWh

C
*In case variation in Oil and Gas mix is more than +/- 5%,
the Gross Station Heat Rate for Unit 6 shall be approved
considering the actual Oil and Gas Mix.”
In Regulation 44.5, Units 4 and 5 at Bhusawal and Units 6 and 7
at Parli have been excluded. Similarly, Unit 8 for TPC-G is excluded D
from the SHR in Regulation 44.6.
11. In order to complete the narration, it may be noted that on 2
September 2011, MERC passed an order on a petition filed by the
appellant for deferring the implementation of the MYT regulations. On
5 May 2012, the appellant submitted a petition for approval of its business E
plan for financial years 2010-11 to 2015-16. The appellant requested
that the norm should be relaxed and brought in line with the normative
SHR. On 25 October 2012, MERC passed an order on the MYT
Business Plan for RInfra-G stating that it had considered the norms for
SHR based on the MYT regulations. MERC held thus:
F
“Station heat rate
4.5.2
RInfra-G submitted that MYT Regulations, 2011 framed the norms
for DTPS based on the plant’s historical performance. RInfra-G
submitted that it believes that all operating parameters, “norms” G
including the secondary oil consumption, auxiliary energy
consumption, station heat rate and transit loss should be specified
to create a level playing field and bring discipline for regulated
entities for the benefit of beneficiaries of the state. RInfra-G
submitted that the essence of the norms should be to create
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900 SUPREME COURT REPORTS [2019] 1 S.C.R.

A benchmarks based on industry-wide performance and let the
market to reward or penalize the performance of the utilities vis-
à-vis those benchmarks. RInfra-G further submitted that such
mechanism will not only force underperforming utilities to perform
but also bring the competitive price of power in the market in
overall benefit of consumers.
B
4.5.3
In its Petition under Case No.45 of 2011, RInfra-G had raised the
issue of specifying separate norms for SHR of DTPS in the MYT
Regulations, 2011 and argued that any norm for generating stations
C should be made based on performance of the industry as a whole
and should not be specific to a plant based on its historical
performance.
4.5.4
RInfra-G submitted that specific relaxations from the norms can,
D however, be provided considering the specific issues of any given
plant. In the said Petition, RInfra-G also highlighted the SHR norms
adopted by other Regulatory Commissions to bring out its point
that the SHR norms should be linked with unit size and ageing and
not driven by the performance of the generating company. RInfra-
E G further added that the tightening of the norms for efficient
generating plant is against the principle of equality and rewarding
efficiency.
4.5.5
Accordingly, RInfra-G has requested the Commission not to tighten
F the norms for DTPS and retain it at industrial normative level of
2450 kCal/kWh. RInfra-G submitted that the Commission, in its
Order in Case No.45 of 2011 dated 2 September, 2011 on the said
Petition did not provide any specific ruling on the said contention
of RInfra-G; however stated that the Commission could invoke
its powers alter the MYT norms for SHR and OEM cost, if
G
required.
4.5.6
The Commission is of the view that norms can be fixed station
wise based on the historical performance of the plant. The SHR
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RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 901
MAHARASHTRA [DR. DHANANJAYA Y CHANDRACHUD, J.]

of the plant is dependent on the age of the plant, the technology A
used, the capital expenditure incurred overhauling the plant, regular
repair and maintenance expenditure incurred and various other
factors. Hence, there could be wide variations on SHR across
plants. Further, if the Commission derives the benchmark
considering only the industry-wide performance capital and
B
operating expenditures incurred, the generating company may not
have sufficient motivation to continue to operate as efficiently as
it had been in the past. Therefore, a balanced approach is to provide
a target which will adequately motivate the generating plant to
perform at existing levels or better and still have room for earning
incentives. Moreover, the MYT Regulations, 2011 have been C
finalised after following appropriate regulatory process after
considering and deliberating on the views of all stakeholders on
various issue. Considering all the facts discussed above, the
Commission does not find any merit in altering the MYT norms
for SHR. Therefore, though RInfra-G has proposed a SHR of
D
2,450 kCal/kWh, the Commission has considered the SHR as per
the MYT Regulations, 2011.
4.5.7
For FY 2011-12, the Commission has considered the SHR as
approved in the ARR Order in Case No.163 of 2011. The SHR E
approved by the Commission for RInfra-G for the second control
period is as below:
Table 5: Approved station heat rate for the second control
period
F
“

G

12. On 7 December 2012, the appellant filed an appeal under
Section 111 of the Electricity Act 2003 before the Appellate Tribunal for
Electricity (APTEL) against the order dated 25 October 2012. The
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902 SUPREME COURT REPORTS [2019] 1 S.C.R.

A appellant submitted that the MERC ought to have exercised its power
under Regulations 99 and 100 of the Tariff Regulations 2011 to amend
and remove difficulties since the SHR which was prescribed for Dahanu
TPS was not the same as for similarly situated generating units.
13. On 3 October 2013, the appellant instituted a writ petition
B under Article 226 of the Constitution before the Bombay High Court for
the purpose of challenging Regulation 44.2(d) which specifies a separate
SHR for the Dahanu TPS as compared to other generating stations in
the State of Maharashtra. The appellant disclosed the pendency of the
appeal before the Tribunal against MERC’s order dated 25 October
2012 disallowing the prayer for relaxing the norms.
C
14. MERC opposed the writ petition. MERC submitted that the
appellant had filed a substantive petition seeking approval of its business
plan for the financial years 2010-11 to 2015-16 and an SHR of 2450
kCal/kWh for 2012-13 to 2015-16. MERC in the course of its adjudication
on the business plan had adopted the same SHR as under the tariff
D regulations. MERC contended that since the appeal before the Tribunal
was pending, the appellant was not entitled to pursue a remedy under
Article 226 of the Constitution.
15. The Appellate Tribunal for Electricity disposed of the appeal
on 8 April 2015, recording that it did not survive in view of the institution
E of the writ proceedings before the Bombay High Court. The appellant
asserts that it drew the attention of the High Court, when the writ petition
was being heard, to the fact that the appeal before the Tribunal was not
pending and had been disposed of.
16. The High Court by its judgment dated 18 April 2016 dismissed
F the writ petition. In coming to the conclusion that the petition was lacking
in merit, the High Court came to the following conclusions:
(i) MERC in framing statutory regulations in exercise of the power
conferred by Section 181 had followed the procedure by granting an
opportunity to stake holders including the appellant to make their
G suggestions on the draft approach paper which was published on the
basis of the CPRI report;
(ii) CPRI was commissioned to undertake a study in order to fix
norms for SHR for different power stations in the State of Maharashtra
and it was only after the technical material collated by CPRI was
H
RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 903
MAHARASHTRA [DR. DHANANJAYA Y CHANDRACHUD, J.]

considered and reviewed that the tariff regulations were notified A
prescribing SHR norms for various power stations;
(iii) MERC has applied the principles evolved in the tariff policy
which stipulates that the operating norms should be “efficient, relatable
to past performance, capable of achievement and progressively reflect
increased efficiencies”. The past performance of the Dahanu TPS of B
the appellant was also taken into consideration;
(iv) The submissions urged by the appellant was not accepted for
two reasons which were formulated by the High Court as follows:
“Firstly, if this submission is accepted then the whole exercise of
undertaking an expert analysis, the working of each of the thermal C
power station to determine the SHR by studying various factors
including the past performance would be rendered nugatory.
Secondly the tariff standards are required to be fixed on realistic
data and its consideration, as public interest is directly involved in
fixation of the electricity tariff. The contention of the petitioner if D
accepted it would also result in a situation that the realistic standards
are deviated to fix unrealistic or a camouflage norms. This is surely
not permissible and is fundamentally against public interest being
against the interest of the consumers of electricity. The submission
of the petitioner is only from the sole consideration of profits of
the petitioner, while disregarding the norms and standards required E
to be followed by the 2nd Respondent in determination of the
electricity tariff.”
(v) In the exercise of its jurisdiction under Article 226 of the
Constitution, the High Court cannot decide on technical parameters or
come to the conclusion that the norms fixed by MERC are inappropriate; F
(vi) The power to frame tariff regulations under Section 181 of
the Electricity Act 2003 is of a legislative character. The regulations
constitute subordinate legislation. Once MERC has followed appropriate
procedures mandated by the Electricity Act, the Court will not interfere
with the regulations merely on the ground that the SHR prescribed for G
the power station of the appellant was fixed at a rate below its peers;
(vii) Profitability of the producer is not the only consideration in
determining the SHR. The regulations are also framed in the interest of
the consumers of electricity; and
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904 SUPREME COURT REPORTS [2019] 1 S.C.R.

A (viii) Having approached the Appellate Tribunal for Electricity,
the appellant was not justified in moving the High Court under Article
226 “on the same issue” when the Tribunal was in a position to provide
adequate relief. Entertaining a writ petition of this nature, when an
alternate remedy is provided by the statute would render the statutory
machinery under the Electricity Act nugatory. The petition under Article
B
226 was held to be an abuse of process.
While dismissing the petition, the High Court imposed costs of
Rs 1 lakh on the appellant.
17. While assailing the decision of the High Court,
C Mr P Chidambaram, learned Senior Counsel, urged that the High Court
was not justified in coming to the conclusion that in view of the pendency
of the appeal before APTEL, recourse to the jurisdiction under Article
226 constituted an abuse of process. Learned Senior Counsel submits
that the pendency of the appeal before APTEL was disclosed in paragraph
27 of the writ petition before the High Court:
D
“27. As stated hereinabove, the Petitioners have preferred Appeal
No.4 of 2013 before the Appellate Tribunal for Electricity
challenging the Order dated 25 th October 2012 insofar as
Respondent No.1 disallows the Petitioners prayer for relaxation
of the norms under Regulations 99 and 100 of the MYT
E Regulations. The present Petition challenges the vires, legality
and validity of Regulation 44.2 (d) of the MYT Regulations that
fixes SHR norms for the 1st Petitioners. Save as aforesaid, the
Petitioners have not filed any other Petition in respect of the subject
matter of the present Petition either before this Hon’ble Court or
F any other High Court or the Supreme Court of India.”
In response to the objection raised by MERC, the following assertion
was contained in the rejoinder filed by the appellant before the High
Court:
“2.3. The Petitioners in the Petition have, inter alia, in paragraph
G 27 thereof disclosed to this Hon’ble Court that they have preferred
Appeal No. 4 of 2013 before the Appellate Tribunal for Electricity
challenging the order dated 25th October 2012 passed in Case
No. 156 of 2011 which disallowed the Petitioners’ prayer for
relaxation of the norms under Regulations 99 and 100 of the MYT
H
RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 905
MAHARASHTRA [DR. DHANANJAYA Y CHANDRACHUD, J.]

Regulations. It is settled law of the Hon’ble Supreme Court of A
India that the Appellate Tribunal for Electricity has no power,
authority or jurisdiction to go into validity or legality of Regulations
framed by a Regulatory Commission. Regulation 44.2 (d) has been
challenged in the present Writ Petition and is not the subject matter
of any other Petition or Appeal in any other Court as stated, inter
B
alia, in paragraph 27 of the Petition. In fact, the Petitioners have
enclosed at Exhibit-K to the Petition a copy of the Memorandum
of Appeal without annexures. It is denied that there is any forum
shopping. The said Appeal has since been heard by the Appellate
Tribunal, in any event, was not pressed by the Petitioners at the
final hearing of the Appeal. The grievance of Respondent No. 2, C
in any event, does not survive.”
The submission of the appellant on the maintainability of the
proceedings under Article 226 is that the scope of the appeal before the
Tribunal was entirely different from the ambit of the writ petition. The
appellant moved the Tribunal against the order of MERC dated 25 October D
2012 which disallowed the prayer for relaxation of the norms under
Regulations 99 and 100 of the Tariff Regulations 2011. The petition
challenged the vires of the regulations before the High Court and the
remedy before the High Court was the only remedy available to challenge
the validity of the regulations.
E
18. On the maintainability of the petition under Article 226, the
High Court, in our view, has overlooked the position in law established
by the judgment of a Constitution Bench of this Court in PTC India
Limited v Central Electricity Regulatory Commission 5. The
Constitution Bench considered whether the Appellate Tribunal for
Electricity has jurisdiction to decide upon the validity of the regulations F
framed by the Central Electricity Regulatory Commission. CERC has
been entrusted with the power to frame regulations under Section 178
of the Electricity Act 2003. The Constitution Bench held that the validity
of a regulation framed under Section 178 can be tested only before the
court exercising judicial review. While the Tribunal may decide upon a G
dispute involving the interpretation of a regulation, for which an appeal
under Section 111 would be maintainable, no appeal can lie before the
Tribunal on the validity of a regulation. The summary of the findings in
the judgment includes, inter alia, the following:
5
(2010) 4 SCC 603
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906 SUPREME COURT REPORTS [2019] 1 S.C.R.

A “(iii) A regulation under Section 178 is made under the authority
of delegated legislation and consequently 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 the power of
judicial review on the Appellate Tribunal. The words “orders”,
“instructions” or “directions” in Section 121 do not confer the
power of judicial review in the Appellate Tribunal for Electricity.
In this judgment, we do not wish to analyse the English authorities
as we find from those authorities that in certain cases in England
C 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 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
D made under Section 178, an appeal 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.”
Hence the conclusion of the Court is in the following terms:
E
“The Appellate Tribunal for Electricity has no jurisdiction to 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
F India.”
Though the above principles emerge in the context of regulations
framed under Section 178 by the CERC, the logic of the judgment extends
to the regulations framed under Section 181 by the State Electricity
Regulatory Commissions. In view of the legal position settled by the
G Constitution Bench, we are of the clear view that the High Court was
not justified in disparaging the appellant for taking recourse to a
constitutional remedy under Article 226. Indeed, a challenge to the validity
of the regulations framed by the MERC could only lie before the High
Court. Hence, the imposition of costs for having adopted the remedy
under Article 226 was unjustified. There was no suppression of fact on
H
RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 907
MAHARASHTRA [DR. DHANANJAYA Y CHANDRACHUD, J.]

the part of the appellant which had indicated the recourse it had taken in A
the appeal before the Tribunal, arising from its prayer for relaxation of
the SHR norms before MERC. The plea before the Appellate Tribunal
was for relaxation of the SHR norms. The plea before the High Court
was that the SHR fixed was discriminatory and ultra vires. Undoubtedly,
if the appellant were to succeed before the Tribunal, it would perhaps
B
obviate the challenge in the High Court. The appellant, as learned Senior
Counsel informed the court, did not press ahead with its plea before the
Tribunal. Hence, the writ petition could not have been held not to be
maintainable.
19. The High Court has dealt with the merits of the challenge to
the validity of the regulations. The constitutional validity of Regulation C
44.2(d) of the Tariff Regulations 2011 is the subject of the challenge in
these proceedings. The basic challenge which has been addressed before
the Court is founded on a plea of discrimination. Elaborating on this
challenge, Mr P. Chidambaram, learned Senior Counsel urged the
following submissions: D
(i) Regulation 44.2(d) is contrary to the national tariff policy. While
framing regulations under Section 181, MERC is required by Section
61(i) to be guided by the “National Electricity Policy and tariff policy”.
Clause 5.3(f) of the national tariff policy notified on 6 January 2006 by
the Union Ministry of Power requires that operating parameters and E
tariffs should be at “normative levels” only and not at “lower of normative
and actuals”. Regulation 44.2(d) lays down a more stringent SHR for
the appellant, based on its energy efficient performance by disregarding
the normative levels;
(ii) The CPRI report, which was commissioned by MERC contains F
the following conclusions on the comparability of RInfra’s Dahanu TPS
with Paras Unit 3 and Parli Unit 6 (of MSPGCL) and TPC-G Unit 8:
“ii. DTPS units are identical to units installed at Parli Unit 6, Paras
Unit 3 & Tata Trombay Unit 8. They are of the general or standard
design of 250 MW duplicated by BHEL in nearly 25 units in India. G
iii. Both DTPS units have operating margins of 8% steam flow in
the boiler side (BMCR flow), 5% power output on the turbine
side (VWO flow) and 16% on the generator side (capability curve)
and 23% on the generator transformer side. These margins are
provided in all 250 BHEL supplied units, including those at Paras
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908 SUPREME COURT REPORTS [2019] 1 S.C.R.

A Unit 3, Parli Unit 6 and Tata Trombay Unit 8 as elaborated in the
text.”
Moreover, the CPRI report observes that:
“vii. Combining all the margins provided by the OEM, R-Infra has
been able to load the unit to 268 MW against the design value of
B 250 MW. Maintaining this load is not harming the life of the unit
as the DTPS has ensured that all parameters are kept within OEM
limits. High loadability is made possible by high energy efficiency
or low unit heart rate of the unit. When the deviation of the unit
heat rate from the design heart rate is low, heat generation in the
C equipment is low which enables the parameters not to exceed
their limits. As many as 66 units in India have clocked average
annual plant loading in excess of 100% UMCR in 2007-08.”
R Infra’s Dahanu TPS unit has been found to be identical to Parli
Unit 6, Paras unit 3 (MSPGCL) and Trombay unit 8 (of Tata power).
D The units have the same design, standard and OEM. Therefore, merely
because the appellant has performed better, this would not be a ground
to subject it to more stringent norms;
(iii) In any event, for the next control period – 2016-20, the
appellant has been equated with other thermal power stations. There
E exists no justifiable reason for making a distinction for the period 2011-
16 and for imposing more stringent norms for SHR in the case of DTPS.
In imposing more stringent norms on the appellant for its DTPS unit for
2011-16, MERC has acted in an arbitrary exercise of power which violates
Article 14 of the Constitution; and

F (iv) As a matter of fact, CPRI did not furnish a “trajectory” for
the appellant’s DTPS unit, as assumed by the High Court. A trajectory
was furnished for less efficient plants.
20. On the other hand, contesting the submissions which were
urged on behalf of the appellant, Mr SK Rungta, learned Senior Counsel
for the respondents urged the following submissions:
G
(i) The SHR represents heat energy required to generate one unit
of electrical energy. The norm determines the cost of coal and
corresponding gas that will be allowed to be recovered. Fixation of the
SHR has an important bearing on the cost of energy which will be
recovered from the consumer;
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RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 909
MAHARASHTRA [DR. DHANANJAYA Y CHANDRACHUD, J.]

(ii) There is a fundamental error in the submission that the CPRI A
report found an equivalence between the appellant’s Dahanu TPS with
Parli Unit 3 and Paras Unit 6 (of MSPGCL) and Trombay Unit 8 (of
Tata Power). CPRI found an equivalence of specifications and not of
performance. The dates on which the above three units commenced
operations were:
B
• Paras 3 31 March 2008;
• Parli 6 1 November 2007;
• TPC 8 31 March 2008.
The appellant’s unit at Dahanu commenced operations in 1995. C
CPRI has not, as a matter of fact, come to the conclusion that the
performance of DTPS was equivalent to Parli Unit 6, Paras Unit 3 and
Trombay Unit 8;
(iii) The CPRI report has separately evaluated DTPS and the
units of Tata Power and MSPGCL. It is factually incorrect to posit that D
the CPRI study was for Parli Unit 6, Paras Unit 3 and Trombay Unit 8;
(iv) After the enactment of the Electricity Act 2003, the first MYT
regulations were promulgated in 2005. All units were placed at par in the
absence of a base line study at that stage;
(v) Section 61(i) requires that the appropriate commission “shall E
be guided by” the principles set out in the tariff policy. The tariff policy
enunciates the factors which have to be taken into account while framing
the tariff regulations;
(vi) In the MYT regulations which governed the period 2011-16,
the sharing of gains occasioned by the SHR, between the producer and F
the consumer, was in the ratio of 2/3:1/3. In the 2015 regulations, the
ratio of sharing has been altered and 2/3rd enures to the benefit of the
consumer; and
(vii) The SHR delivered by the appellant for 2006-07 to 2009-10
would sufficiently explain the basis of fixation. The same principle has G
been applied in the case of Tata power;
(viii) Unless a subordinate legislation is found to suffer from
manifest unreasonableness or from a breach of the principle of
proportionality, it would not be regarded as ultra vires.
H
910 SUPREME COURT REPORTS [2019] 1 S.C.R.

A 21. These submissions fall for our consideration.
22. The power to determine tariffs is of a legislative nature. Section
61 is borne in Part VII of the Electricity Act 2003 which deals with
tariffs. Section 61 provides thus:
“Section 61. Tariff regulations: The Appropriate Commission
B 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 by the following, namely:-
(a) the principles and methodologies specified by the Central
Commission for determination of the tariff applicable to generating
C companies and transmission licensees;
(b) the generation, transmission, distribution and supply of electricity
are conducted on commercial principles;
(c) the factors which would encourage competition, efficiency,
D economical use of the resources, good performance and optimum
investments;
(d) safeguarding of consumer’s interest and at the same time,
recovery of the cost of electricity in a reasonable manner;
(e) the principles rewarding efficiency in performance;
E (f) multi year tariff principles;
(g) that the tariff progressively reflects the cost of supply of
electricity and also reduces cross-subsidies in the manner specified
by the Appropriate Commission;

F (h) the promotion of co-generation and generation of electricity
from renewable sources of energy;
(i) the National Electricity Policy and tariff policy:
Provided that the terms and conditions for determination of tariff
under the Electricity (Supply) Act, 1948, the Electricity Regulatory
G Commission Act, 1998 and the 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.”
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RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 911
MAHARASHTRA [DR. DHANANJAYA Y CHANDRACHUD, J.]

Section 61 provides that the appropriate commission shall, subject A
to the provisions of the Act, specify the terms and conditions for the
determination of tariff. In doing so, it has to be guided by the
considerations which are stipulated in clauses (a) to (i). Among them, in
clause (i) is the national electricity policy and tariff policy.
23. Section 181 empowers the state commissions to make B
regulations consistent with the Act and the rules to carry out the provisions
of the Act. Among the matters for which the regulations may provide
are “the terms and conditions for the determination of tariff under Section
61”6. In specifying the terms and conditions for the determination of
tariff, the appropriate commission (as Section 61 provides) “shall be
guided” by the factors which are set out in clauses (a) to (i). The C
expression “shall be guided” comprises of two elements: the ‘shall’ and,
the ‘guidance’. Clauses (a) to (i) provide guidance to the commission in
specifying the terms and conditions for the determination of tariff. The
expression “shall” indicates that the factors which are specified in clauses
(a) to (i) have to be borne in mind by the appropriate commission. As D
guiding factors, they provide considerations which are material to the
determination of tariffs by the appropriate commission.
24. The national tariff policy has multi-faceted objectives.
Significant among them is the need to ensure to consumers the availability
of electricity at reasonable and competitive rates. The policy also seeks E
to ensure the financial viability of the sector and underlines the need to
attract investments. A financially sustainable electricity sector is an
important facet of the overall regulatory framework. The objectives of
the policy emphasise the need to promote transparency, consistency and
predictability in regulatory approaches across jurisdictions. The policy
emphasises the need to minimise perceptions of regulatory risk. Finally, F
the policy recognises the need to promote competition, efficiency in
operations and improvements in the quality of supply. In designing and
formulating the regulatory framework for tariffs, the delegate of the
legislature has to bring about a balance between the competing goals
which the tariff policy incorporates. G
25. As part of the process, the delegate has to bear in mind the
interests of diverse stake holders including consumers and producers.
The process of framing tariffs is of equal significance, for it is through
the procedural framework that norms of consistency, transparency and
6
Section 181 (2)(zd) H
912 SUPREME COURT REPORTS [2019] 1 S.C.R.

A predictability can be enforced. Competition, efficiency and quality of
supply are key components of the policy framework in designing tariffs.
Clause 5.3(f) of the tariff policy speaks of the need to evolve performance
norms which incorporate incentives and disincentives and provide an
appropriate arrangement that fosters the sharing of gains of efficiency
in operations with consumers. Operating parameters in tariffs are
B
required to be pegged only on a “normative level” and not at the “lower
of normative and actuals”, save and except in those cases referred to in
paragraph 5.3(h)(2). Paragraph 5.3(h)(2) deals with those cases where
operations have been much below the norm for several previous years.
In those cases, the initial starting point in determining the revenue
C requirement and the trajectories are fixed at a relaxed level and not at
desired levels. Under clause 5.3(f), the operating norms must fulfil
several parameters. They must be (i) efficient; (ii) relatable to past
performance; (iii) capable of achievement; and must progressively reflect
increased efficiencies. They may also take into consideration latest
technological advances, fuel, vintage of equipment, nature of operations,
D
level of service to be provided to consumers, among other factors.
Continuous and proven inefficiency has to be controlled and penalised.
The operating norms must be designed to promote efficiency and to
ensure that the gains which accrue on account of efficient operations
are shared with the consumers of electricity. The operating norms will,
E therefore, have due regard to the performance in the past as well as
capacities for future achievement. These must be dovetailed with all
relevant considerations, bearing on the requirements of the policy.
26. The Tariff policy provides guidance to the appropriate
commission when it frames regulations. The power to frame regulations
F is legislative in nature. It is conferred upon the appropriate commission.
The commission weighs numerous factors. Its discretion in carrying out
a complex exercise cannot be constrained. The delegate of the legislature
is therefore under a mandate to bring about a fair and equitable balance
between competing considerations. Standing at the forefront of those
considerations is above all the need to ensure efficiency and to protect
G the interests of consumers. The submission which has been urged on
behalf of the appellant would reduce tariff fixation to a rather simplistic
process of bringing about equality between generating units which have
the same design and manufacturing origin. Such an approach overlooks
the complex factors which have to be borne in mind in the determination
H
RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 913
MAHARASHTRA [DR. DHANANJAYA Y CHANDRACHUD, J.]

of tariffs. The submission which has been urged on behalf of the appellant A
is based on the hypothesis that the CPRI report underlined the similarity
of Parli Unit 6, Paras Unit 3, Tata Trombay Unit 8 and the DTPS unit of
the appellant. At the highest, the CPRI study would indicate a similarity
of specifications but not a similarity of performance. Performance, as
we have seen, is a critical element in designing an appropriate SHR.
B
The SHR has an important co-relationship with efficiency. The CPRI
report indicates a detailed analysis of RInfra’s DTPS. Specifically, in
the context of DTPS, it observed:
“vii. Combining all the margins provided by the OEM, R-Infra has
been able to load the unit to 268 MW against the design value of
250 MW. Maintaining this load is not harming the life of the unit C
as the DTPS has ensured that all parameters are kept within OEM
limits. High loadability is made possible by high energy efficiency
or low unit heart rate of the unit. When the deviation of the unit
heat rate from the design heart rate is low, heat generation in the
equipment is low which enables the parameters not to exceed D
their limits. As many as 66 units in India have clocked an average
annual plant loading in excess of 100% UMCR in 2007-08.”
The CPRI report similarly contained an analysis of Units 5 and 6
of TPC-G and of MSPGCL units. CPRI conducted studies on Units 1
and 2 of R Infra’s DTPS. In its counter affidavit, MERC has tabulated E
the SHR achieved by DTPS for financial years 2006-07 to 2009-10 as
follows:
“Table No: 2 SHR achieved by DTPS from FY 2006-07 to
FY 2009-10
Year Station Heat Rate (SHR) (kcal /kWh) F
RInfra’s Submission MERC Approved DTPS
in Petition Achieved
FY 2006-07 2315 2500 2278
FY 2007-08 2500 2500 2279
FY 2008-09 2500 2500 2300
G
FY 2009-10 2500 2500 2293
“
It has been explained that to anticipate the SHR for financial year
2011-12 till financial year 2015-16, the actual heat rate achieved during
the previous years and predicted deviation due to factors such as H
914 SUPREME COURT REPORTS [2019] 1 S.C.R.

A reduction in boiler efficiency due to coal energy degradation and average
annual aging loss were considered. The anticipated SHR for DTPS for
financial years 2011-12 to 2015-16 was computed in the following manner:
“SHR = 2292* + (Reduction in Boiler Efficiency + Coal Quality
Degradation + Annual Ageing Loss) = 2350 kCal/kWh.
B (* Station Heat Rate of 2292 kCal/kWh was taken from CPRI
Test Reports of March, 2010.)”
On a similar basis, CPRI carried out technical studies for Units 5
and 6 of TPC-G. The SHR achieved by TPC-G Unit 5 (coal fired) from
2006-07 and 2008-09 was computed. On this basis, the SHR, projected
C as an achievable heat rate, was computed and an approved trajectory
for Unit 5 for financial years 2011-12 to 2015-16 was laid down. Similarly,
in respect of Unit 6 of TPC-G, CPRI studies indicated the SHR achieved
for financial years 2006-07 to 2009-10. CPRI projected a heat rate on
the basis of fuel oil firing and fuel gas firing. On the basis of the CPRI
D report, MERC arrived at its findings for TPC-G Units 5 and 6. In this
regard, it has been demonstrated in the counter affidavit that there was
no discrimination in the methodology followed and the same principle
was uniformly applied.
27. The attention of the Court has also been drawn to the fact
E that the Tariff Regulations 2011 contained a stipulation in clause 14 for
the sharing of gains or losses on account of controllable factors. Clause
14 provides as follows:
“14 Mechanism for sharing of gains or losses on account of
controllable factors:
F 14.1 The approved aggregate gain to the Generating Company or
Transmission License or Distribution License on account of
controllable factors shall be dealt with in the following manner:
(a) One-third of the amount of such gain shall be passed on as a
rebate in tariff over such period as may be stipulated in the Order
G of the Commission under Regulation 11.6;
(b) The balance amount, which will amount to two-third of such
gain, may be utilised at the discretion of the Generating Company
or Transmission License or Distribution License.”

H
RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 915
MAHARASHTRA [DR. DHANANJAYA Y CHANDRACHUD, J.]

[The expression ‘controllable factors’ is explained in clause 12.2 A
of the regulations.]
28. Under the Tariff Regulations 2011, the approved aggregate
gain to the generating company was to be shared: one-third was required
to be passed on as a rebate in tariff while the balance of two-thirds
would be utilised at the discretion of the generating company. On the B
other hand, in the Tariff Regulations 2015, Regulation 11 contains a
corresponding mechanism for the sharing of gains on account of
controllable factors. Regulation 11 is in the following terms:
“11 Mechanism for sharing of gains or losses on account of
controllable factors: C
11.1 The approved aggregate gain to the Generating Company or
Licensee or MSLDC on account of controllable factors shall be
dealt with in the following manner:
(a) Two-third of the amount of such gain shall be passed on as a
rebate in Tariff over such period as may be stipulated in the Order D
of the Commission under Regulation 8.4;
(b) The balance amount of such gain shall be retained by the
Generating Company or Licensee or MSLDC.”
While in the Regulations of 2011, one-third of the aggregate gain
E
was to be passed on in the form of a rebate in tariff and the balance
two-thirds was to be utilised by the generating company at its discretion,
in the 2015 regulations, the proportion has been reversed. In the 2015
regulations, two-thirds of the amount of the gain is required to be passed
on as a rebate in tariff while the balance shall be retained by the
generating company. The interests of the consumer are required to be F
borne in mind under the terms of the tariff policy consistent with Section
61. In its expert judgment, the Commission, while formulating the 2015
regulations mandated that an enhanced ratio of the aggregate gain would
be passed on in the form of a rebate on the tariff. This could have
legitimately been borne in mind as a relevant consideration in evaluating
G
what should be appropriately fixed as the SHR for the period in question.
29. The substratum of the case of the appellant is founded on a
plea of discrimination. Simply put, the plea is founded on the hypothesis
that the CPRI report regarded the units of DTPS as identical to Parli
Unit 6 and Paras Unit 3 (of MSPGCL) and Trombay Unit 8 (of TPC-
H
916 SUPREME COURT REPORTS [2019] 1 S.C.R.

A G). The observations contained in the CPRI report must be read in their
entirety. The fact that the manufacturing specifications of the units may
be similar (assuming they are so) is only one aspect of the total range of
considerations which are required to be borne in mind under the terms
of the tariff policy. The tariff policy requires that the operating norms
should be efficient, relatable to past performance, capable of achievement
B
and progressively reflect increased efficiencies. They may also take
into consideration technical advancements, fuel, vintage of equipment,
nature of operations and the level of service among other factors. Mr
Chidambaram laid emphasis on clause 5.3(f) of the tariff policy where it
prescribes that the operating parameters and tariffs should be at
C “normative levels” only and not at the “lower of normative and actuals”
except in the case of those units governed by para 5.3(h)(2). This
submission will not, however, carry the case of the appellant any further.
Normative levels are those which are fixed by the application of the
standards guided by the terms of the tariff policy while actual levels are
those which have been achieved as a matter of fact, in the past. The
D
emphasis in the tariff policy is on creating incentives for achieving higher
efficiency in order to enable the ultimate consumer to have the benefit
of efficient operations.
30. Tariff fixation is a complex exercise involving a careful balance
between numerous considerations. The “shall be guided” prescription
E under Section 61 requires the appropriate commission to bear those
considerations in mind. Deducing past performance on the basis of
historical data, balancing diverse policy objectives and evaluating the
comparative weight to be ascribed to the interests of stakeholders is a
scientific exercise which is carried out by the commission. The nature
F of judicial review that is exercisable in a given subject area depends in a
significant measure on the nature of the area and the body which is
entrusted with the task of framing subordinate legislation. In
Transmission Corporation of Andhra Pradesh Ltd. v Sai
Renewable Power Pvt. Ltd.,7 a two judge Bench of this Court held
thus:
G “17. Fixation of tariff is, primarily, a function to be performed by
the statutory authority in furtherance to the provisions of the relevant
laws. We have already noticed that fixation of tariff is a statutory
function as specified under the provisions of the Reform Act, 1998,
Electricity Regulatory Commissions Act, 1998 and the Electricity
7
H (2011) 11 SCC 34
RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 917
MAHARASHTRA [DR. DHANANJAYA Y CHANDRACHUD, J.]

Act, 2003. These functions are required to be performed by the A
expert bodies to whom the job is assigned under the law… The
functions assigned to the Regulatory Commission are wide enough
to specifically impose an obligation on the Regulatory Commission
to determine the tariff. The specialized performance of functions
that are assigned to Regulatory Commission can hardly be assumed
B
by any other authority and particularly, the Courts in exercise of
their judicial discretion. The Tribunal constituted under the
provisions of the Electricity Act, 2003, again being a specialized
body, is expected to examine such issues, but this Court in exercise
of its powers under Article 136 of the Constitution would not sit
as an appellate authority over the formation of opinion and C
determination of tariff by the specialized bodies.
18. …This Court has consistently taken the view that it would not
be proper for the Court to examine the fixation of tariff rates or
its revision as these matters are policy matters outside the purview
of judicial intervention. The only explanation for judicial intervention D
in tariff fixation/revision is where the person aggrieved can show
that the tariff fixation was illegal, arbitrary or ultra vires the Act.
It would be termed as illegal if statutorily prescribed procedure is
not followed or it is so perverse and arbitrary that it hurts the
judicial ‘conscience’ of the Court making it necessary for the Court
to intervene. Even in these cases the scope of jurisdiction is a E
very limited one.”
MERC is an expert body which is entrusted with the duty and
function to frame regulations, including the terms and conditions for the
determination of tariff. The Court, while exercising its power of judicial
review, can step in where a case of manifest unreasonableness or F
arbitrariness is made out. Similarly, where the delegate of the legislature
has failed to follow statutory procedures or to take into account factors
which it is mandated by the statute to consider or has founded its
determination of tariffs on extraneous considerations, the Court in the
exercise of its power of judicial review will ensure that the statute is not
breached. However, it is no part of the function of the Court to substitute G
its own determination for a determination which was made by an expert
body after due consideration of material circumstances. In Association
of Industrial Electricity Users v State of Andhra Pradesh,8 a three
judge Bench of this Court dealt with the fixation of tariffs and held thus:
8
(2002) 3 SCC 711 H
918 SUPREME COURT REPORTS [2019] 1 S.C.R.

A “11. We also agree with the High Court that the judicial review in
a matter with regard to fixation of tariff has not to be as that of an
Appellate Authority in exercise of its jurisdiction under Article
226 of the Constitution. All that the High Court has to be satisfied
with is that the Commission has followed the proper procedure
and unless it can be demonstrated that its decision is on the face
B
of it arbitrary or illegal or contrary to the Act, the court will not
interfere. Fixing a tariff and providing for cross-subsidy is
essentially a matter of policy and normally a court would refrain
from interfering with a policy decision unless the power exercised
is arbitrary or ex facie bad in law.”
C 31. We commenced our discussion by emphasising, in our prefatory
observations, that the power to frame regulations is of a legislative nature.
The CPRI report was an input before the MERC in carrying out that
exercise. MERC followed the statutory procedures laid down for the
determination of tariffs. It took into account factors which it is mandated
D by the statute to consider. The national tariff policy, suggestions of
stakeholders as well as the assessment carried out by the CPRI were
duly considered. Hence, the present case does not fall in the paradigm
of manifest unreasonableness or arbitrariness to warrant the interference
of this Court. It would be rather formulaic for the Court to accept that
merely because DTPS was placed at par in the immediately previous
E period (2006-07) and the period immediately succeeding (2016-20), that
this must necessarily be extrapolated to the intervening period governed
by the MYT Regulations 2011. A body which is entrusted with the task
of framing subordinate legislation has a range of options including policy
options. If on an appraisal of all the guiding principles, it has chosen a
F particular line of logic or rationale, this Court ought not to interfere.
32. For the reasons which we have recorded in this judgment, we
have come to the conclusion that regulation 44.2(d) of the MERC (Multi
Year Tariff) Regulations, 2011 does not suffer from any constitutional or
statutory infirmity. We have, however, furnished reasons of our own for
G affirming the ultimate decision of the High Court to dismiss the writ
petition. We have disapproved of the view of the High Court that the
writ petition under Article 226 was not maintainable and accordingly set
aside the direction on the imposition of costs. However, we hold that
there is no infirmity in the impugned regulation and accordingly affirm
the ultimate conclusion of the High Court to dismiss the writ petition
H under Article 226.
RELIANCE INFRASTRUCTURE LIMITED v. STATE OF 919
MAHARASHTRA [DR. DHANANJAYA Y CHANDRACHUD, J.]

The Civil Appeal is, accordingly, disposed of. There shall be no A
order as to costs.

Ankit Gyan Appeal disposed of.

B

C

D

E

F

G

H