REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Civil Appeal No. 2451 OF 2007

With

Civil Appeal No. 2452 of 2007

With

Civil Appeal No. 2493 of 2007

With

Civil Appeal No. 3972 of 2007

With

Civil Appeal No. 4231 of 2007

M/s NTPC Ltd.     …Appellant Versus

M.P. State Electricity Board & Ors.  …Respondents

J  U  D  G  M  E  N  T

H.L. Gokhale J.   

All these five appeals arise out of a common order dated 20.4.2007  

passed by Appellate Tribunal for Electricity (‘Appellate Tribunal’ for short) while  

deciding the First Appeals to the Appellate Tribunal under Section 111 of the  

Electricity  Act,  2003  against  the  orders  of  the  Central  Electricity  Regulatory  

Commission (‘The Central Commission’ for short), dated 1.4.2005, 7.4.2005 and  

2.6.2006 passed under Section 62 of the Electricity Act, 2003.  While admitting

these appeals, this Court has stayed the operation of the impugned order until   

further orders.

(a) First of these three Civil Appeals are filed by M/s NTPC Ltd.   The  

Madhya  Pradesh  State  Electricity  Board  (‘MPSEB’  for  short)  and  others  are  

respondents  to  this  Civil  Appeal  No.2451/2007.   The Punjab  State  Electricity  

Board (‘PSEB’ for short), Delhi Vidyut Board and others are the respondents to  

the  other  two  appeals  being  Civil  Appeal  No.2452/2007  and  Civil  Appeal  

No.2493/2007.   

(b) Civil Appeals Nos. 3972 and 4231 of 2007 are filed by the PSEB and  

Delhi Vidyut Board.  The Central Commission, M/s NTPC Ltd. and others are the  

respondents to these two appeals.  

2. M/s  NTPC  Ltd.  is  a  power  ‘generating  company’  within  the  

definition of the concept under Section 2 (28) of the Electricity Act, 2003.  The  

Electricity  Boards  concerned,  receive  the  power  generated  from the  thermal  

power plants of  NTPC situated at  Kawas, Gandhar and Rihand.   The Central  

Commission had determined the tariff payable by the Electricity Boards to NTPC  

by the above referred orders dated 1.4.2005, 7.4.2005 and 2.6.2006.  

(i) The  orders  dated  1.4.2005  and  7.4.2005  were  on  the  Petitions  

No.33 of 2001 and 31 of 2001 respectively filed by NTPC for determining the  

tariff  with respect  to the power supplied by it  during the period 1.4.2001 to  

31.3.2004 to MPSEB and others from Gandhar and Kawas power stations.  

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(ii) The order dated 2.6.2006 was on Petition No.38 of 2001 by NTPC  

for the determination of tariff with respect to power supplied during the same  

period from the Rihand power station to PSEB, Delhi Vidyut Board and others.   

3. The  Central  Commission  while  determining  the  tariff,  had  

determined the final tariff at a rate lesser than the pre-existing tariff, as a result   

of  which  NTPC  was  found  to  have  collected  excess  amounts  during  this  

intervening  period,  and  the  Electricity  Boards  became  entitled  to  get  the  

refund/adjustment of these differential amounts.  Thus, the amount overcharged  

in respect of Gandhar power station is to the tune of Rs.460.52 crores and the  

one  in  respect  of  Kawas  power  station  is  Rs.254.47  crores.   The  Central  

Commission  had  however  disallowed  the  claim  of  the  Electricity  Boards  for  

payment  of  interest  on  the differential  amounts  between  (i)  the tariff  finally  

determined by the Central Commission and (ii) the pre-existing tariff continued  

by the Central Commission until the final determination of the tariff.  There is no  

dispute  that  thereafter  NTPC has  duly  and  immediately  adjusted  the  excess  

amounts in favour of the purchaser Electricity Boards in their subsequent bills.

4. The  MPSEB,  PSEB  and  Delhi  Vidyut  Board,  therefore,  invoked  

Section 111 of the Electricity Act, 2003 and filed appeals against the above three  

orders  of  the  Central  Commission  before  the  Appellate  Tribunal  which  were  

numbered as  Appeal  Nos.64,  212 and 237 of  2006.   The Appellate  Tribunal  

rejected the claim of the Electricity Boards for interest as being payable under  

Section  62(6)  of  the Electricity  Act,  2003.  It  however,  held  by its  impugned  

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common order  dated 20.4.2007, that NTPC was liable to pay interest on the  

differential amounts on the grounds of justice, equity and fair-play.  The NTPC  

has  therefore,  filed  three  Civil  Appeals  being  Civil  Appeal  Nos.  2451/2007,  

2452/2007 and 2493/2007 to challenge this order.  As against that, PSEB and  

Delhi  Vidyut Board have filed Civil  Appeal  Nos. 3972/2007 and 4231/2007 to  

challenge the same order of the Appellate Tribunal to the extent it rejected their  

claim for interest under Section 62(6) of the Electricity Act.

Main questions for determination –

5. These  Civil  Appeals  therefore  raise  two  principle  questions  for  

determination, (a) whether the Appellate Tribunal erred in denying the interest  

on the differential amounts to the concerned Electricity Boards under Section 62  

(6)  of  the Electricity  Act,  2003,  and (b)  whether  the Appellate  Tribunal  was  

justified in allowing interest on the differential amounts on the basis of justice,  

equity and fair-play.  

6. Shri M.G. Ramachandran, learned counsel appeared for NTPC Ltd..  

Shri A.K. Ganguli, Senior Advocate and Mr. Pradeep Misra, learned counsel have  

appeared for the concerned Electricity Boards.  

7. Before we deal with these issues which arise with these appeals,  

we must note that the law concerning the determination of tariff of electricity  

has undergone changes from time to time.

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(i) Earlier  the  Electricity  (Supply)  Act,  1948  was  governing  the  field.  The  

Central Government was then determining the tariff for the power supplied by  

NTPC under Section 43 A (2) of the Act, since NTPC is a Government of India  

enterprise.

(ii) The  Electricity  Regulatory  Commissions  Act  1998  was  enacted  for  

distancing  of  the  Government  from determination  of  tariffs.   It  created  the  

Central  Commission.   The  act,  came  into  force  on  25.4.1998.   Tariff  

determination  and other  Regulatory  functions  as  far  as  power  generation  of  

NTPC was concerned,  no longer  remained with the Central  Government,  and  

came to be vested in the Central Commission.

(iii) The  Electricity  Act,  2003,  came  into  force  from  10.6.2003  as  a  

comprehensive  piece  of  legislation.  Section  185  of  this  Act,  repealed  the  

Electricity Supply Act, 1948 and the Electricity Regulatory Commissions Act, 1988  

as well as the Indian Electricity Act, 1910.  In view of the proviso to Section 61  

of  the  Electricity  Act,  2003,  however  the  act  became  available  for  the  

determination  of  tariff  of  NTPC  from  1.4.2004.   The  Central  Commission  

constituted  under  the  Electricity  Regulatory  Commissions  Act  continued  to  

exercise its functions under the Electricity Act, 2003 in view of Section 76 of the  

Electricity Act, 2003.

8. As noted above earlier, under the Electricity Supply Act, 1948, the  

Central Government was the tariff determining authority for NTPC, since it is a  

wholly owned corporation of the Central Government.  This was on account of  

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proviso of Section 43A (2) of the Electricity Supply Act 1948, which reads as  

follows:-

“43A.Terms, conditions and tariff for sale of electricity   by Generating Company  

(1)….. (2) …… Provided that the terms, conditions and tariffs for such sale   

shall, in respect of a Generating Company, wholly or partly owned   by the Central Government be such as may be determined by the   Central  Government  and  in  respect  of  a  Generating  Company   wholly or partly owned by one or more State Governments be such   as may be determined, from time to time, by the Government or   Governments concerned.”

9. The NTPC has been making bulk supply of power to the concerned  

Electricity Boards from these Power Generating Stations.  The bulk power supply  

agreements mostly provided that the tariff will be as per the notification issued  

by the Government of  India  under Section 43A of  the Electricity  Supply  Act,  

1948.  We may refer to the bulk power supply agreement for Rihand Power  

Station.   The power  supply  agreement  with  respect  to  Rihand Station dated  

2.11.1992 provided that the tariff as per those notifications will be applicable for  

a specified period but it also added thereafter as follows:-

“In  case  a  new  tariff  for  the  period  beyond  above  is  not   finalized before that date, the Beneficiary (ies) shall continue to pay   to NTPC for the power supplied from the STPC beyond this date on   adhoc basis in the manner detailed in this notification.”

Similar was the position with respect to power supply agreements concerning  

Kawas and Gandhar Power Stations.

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10. After the Central Commission was constituted with the authority for  

determining  the  tariff  fixation,  the  Central  Commission  published  Central  

Electricity  Regulatory  Commission  (Conduct  of  Business)  Regulation  1999.  

Second proviso to Regulation 79 (2) thereof provided as follows:-

“Provided  further  that  the  existing  tariff  being  charged  by   generating companies owned by or controlled by the Central   Government shall continue to be charged after the date of the   notification  as  referred  to  in  the  above  regulation  for  such   period as may be specified in the notification without prejudice   to the powers of the Commission to take up any matter relating   to tariff falling within the scope of the Section 13 of the Act.”

Accordingly, the Central Commission issued notifications from time to time on  

12.5.1999,  4.4.2001  and  21.10.2003  continuing  the  existing  tariff  as  on  

31.3.2001 until further orders to be passed by the Commission.  NTPC raised the  

monthly invoices as per the existing tariff and the Electricity Boards honoured the  

same.

11. NTPC  duly  filed  the  tariff  petitions  as  required  by  the  Central  

Commission for  the tariff  determination,  however  the proceedings  before  the  

Central  Commission  took  their  own  time  and  the  petitions  were  ultimately  

decided on 1.4.2005, 7.4.2005 and 2.6.2006. .  As stated earlier when the tariff  

was finalised, the rates were in fact reduced, and the Electricity Boards became  

entitled to receive the excess amounts paid in the meanwhile.  We must note at  

this stage that while determining the tariff, the appropriate Commission has to  

safeguard the consumer’s interest as well as recovery of cost of electricity in a  

reasonable manner under Section 61(d) of the Act which is what is done by the  

Commission.   Subsequently,  NTPC adjusted  the  excess  amount  which  it  had  

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received  in  the  intervening  period  in  the  subsequent  bills  to  the  Electricity  

Boards.

12. As  stated  earlier,  when  the  tariff  was  determined,  the  Central  

Commission  did  not  award  any  interest  on  the  excess  amounts  which  were  

collected by the NTPC in the meanwhile, and therefore, the Electricity Boards  

filed  appeals  before  the  Appellate  Tribunal  by  invoking  Section  111  of  the  

Electricity Act 2003.  The Appellate Tribunal has taken the view that the claim of  

the  Electricity  Boards  could  not  be  entertained  under  Section  62  (6)  of  the  

Electricity Act though they are entitled to it on the basis of justice, equity and  

fair-play.  It is this order which is under consideration in this matter.

Consideration of rival submissions

13. For  deciding  the issue of  applicability  of  Section 62(6),  we may  

refer  to  the relevant  Section  62 of  the Electricity  Act,  2003,  which reads  as  

follows:-

“Section 62 - Determination of tariff  

(1)  The  Appropriate  Commission  shall  determine  the  tariff  in   accordance with the provisions of this Act for--

(a)  supply  of  electricity  by  a  generating  company  to  a   distribution licensee:

PROVIDED that the Appropriate Commission may, in case of   shortage  of  supply  of  electricity,  fix  the  minimum  and   maximum ceiling of tariff for sale or purchase of electricity in   pursuance  of  an  agreement,  entered  into  between  a   generating company and a licensee or between licensees,   for a period not exceeding one year to ensure reasonable   prices of electricity;

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(b) transmission of electricity;

(c) wheeling of electricity;

(d) retail sale of electricity:

Provided that in case of distribution of electricity in the same   area  by  two  or  more  distribution  licensees,  the  Appropriate   Commission may, for the promoting competition among distribution   licensees,  fix  only  maximum  ceiling  of  tariff  for  retail  sale  of   electricity.

(2)  The  Appropriate  Commission  may  require  a  licensee  or  a   generating  company  to  furnish  separate  details,  as  may  be   specified in respect of generation, transmission and distribution for   determination of tariff.

(3) The Appropriate Commission shall not, while determining the   tariff under this Act, show undue preference to any consumer of   electricity but may differentiate according to the consumer's load   factor, power factor, voltage, total consumption of electricity during   any specified period or the time at which the supply is required or   the geographical position of any area, the nature of supply and the   purpose for which the supply is required.

(4) No tariff or part of any tariff may ordinarily be amended, more   frequently than once in any financial year, except in respect of any   changes expressly permitted under the terms of any fuel surcharge   formula as may be specified.

(5)  The  Commission  may  require  a  licensee  or  a  generating   company to comply with such procedure as may be specified for   calculating  the  expected  revenues  from  the  tariff  and  charges   which he or it is permitted to recover.

(6) If any licensee or a generating company recovers a price or   charge  exceeding  the  tariff  determined  under  this  section,  the   excess amount shall be recoverable by the person who has paid   such price or charge along with interest equivalent to the bank rate   without prejudice to any other liability incurred by the licensee.

14.  If we look to this Section 62, sub-section (1) thereof lays down the  

authority of the Appropriate Commission to determine the tariff in accordance  

with the provisions of the Act for supply of electricity by a generating company to  

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a distribution licensee.  It also permits the appropriate commission to fix the  

minimum and maximum ceiling of tariff in certain situations.  Sub-section (2) lays  

down that the Appropriate Commission in its process of determining the tariff  

may call upon the licensee or a generating company to furnish particulars with  

respect to generation, transmission and distribution of power. Sub-section (5)  

permits the commission to require the licensee or the generating company to  

comply with the procedure to be specified by the commission for calculating the  

expected revenue from the tariff which it is permitted to recover. Sub-section (3)  

lays  down  that  while  determining  the  tariff  the  commission  will  take  into  

consideration consumer’s load factor, power factor, voltage, total consumption of  

electricity during any specified period, the geographical position of any area, the  

nature of supply and the purpose for which it is sought.  It may differentiate in  

the matter  of  determining the tariff  on such basis,  though ofcourse it  is  not  

expected to show any undue preference to any consumer of electricity.  Sub-

section  (4)  lays  down  that  the  tariff  once  fixed  will  normally  operate  for  a  

financial year, and will not be amended more frequently than once in a financial  

year.   

15. On this background sub-section (6) lays down that if a licensee or a  

generating  company recovers  a price or  charge exceeding the tariff  which is  

determined under this section, the excess amount shall be recoverable by the  

person who has paid such excess price or charge alongwith interest at bank rate.  

We have noted that the earlier five sub-sections lay down the manner in which  

the tariff is to be determined, and thereafter sub-section (6) lays down that the  

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licensee or a generating company shall not recover a price or charge exceeding  

the tariff  that is  determined.  The words ‘tariff  determined under this section’  

indicate  that  the prohibition  from charging excess  price  is  dependent  on the  

determination of the price under the preceding five sub-sections. The counsel for  

the Electricity  Boards  submitted  that  this  sub-section should be applied  even  

during the period when the tariff was being determined (as in the present case),  

and if in the final determination the price fixed is lesser than what was charged  

during the intervening period, then interest should be read as recoverable for the  

excess amount collected during the intervening period.  In this connection, we  

must note that this sub-section does not refer to the period during which the  

tariff is being determined. It also does not state that if the finally determined  

tariff  is  less  than  the  provisional  tariff  or  an  existing  tariff  continued  by  a  

statutory notification, then interest shall be payable on the differential amount.  

This  sub-section  further  states  that  this  right  to  claim  interest  is  without  

prejudice  to  any  other  liability  incurred  by  the  licensee.   Besides  what  is  

prohibited is recovery of price or charge exceeding the tariff determined under  

this section and then only, the generating company will have to pay the interest  

on the difference.  That is why the Appellate Tribunal has observed that it is only  

when a licensee or generating company deliberately recovers or extracts from a  

person a price or charge in excess of the price determined under section 62 (6),  

that such person can claim the excess price or charge paid by him alongwith  

interest.  For the reasons stated above we are unable to accept the submission  

on behalf of the Electricity Boards, and are in agreement with the view taken by  

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the Appellate Tribunal that Section 62 (6) cannot be pressed into service to claim  

interest on the differential amounts in the present case.

16. The learned counsel for the Electricity Boards pointed out that the  

Central Commission has amended the Central Electricity Regulatory Commission  

(Terms  and  Conditions  of  Tariff)  Regulations,  2004  by  a  notification  dated  

01.06.2006 and has recognized the appropriateness of allowing interest on the  

differential  amount  between the provisional  tariff  and final  tariff  by  inserting  

Regulation 5A which reads as under:-

“5A. Provisional tariff or provisional billing of charges,   wherever  allowed  by  the  Commission  based  on  the  application   made by the generating company or the transmission licensee of   by  the  Commission  on  its  own  motion  or  otherwise,  shall  be   adjusted against the final tariff approved by the Commission.

Provided  that  where  the  provisional  tariff  charged   exceeds the final tariff approved by the Commission under these   regulations, the generating company or the transmission licensee,   as the case may be, shall pay simple interest at the rate of 6% per   annum,  computed  on  monthly  basis,  on  the  excess  amount  so   charged, from the date of payment of such excess amount and up   to the date of adjustment.

Provided  further  that  where  the  provisional  tariff   charged is less than the final tariff approved by the Commission,   the beneficiaries shall  pay simple interest at the rate of 6% per   annum, computed on monthly basis on the deficit amount from the   date on which final tariff will be applicable up to the date of billing   of such deficit amount.

Provided  also  that  excess/deficit  amount  alongwith   simple interest  at the rate of 6% shall  be adjusted within three   months  from the  date  of  the  order  failing  which  the  defaulting   utility/beneficiary  shall  be  liable  to  pay  penal  interest  on   excess/deficit  amount  at  the  rate  as  may  be  decided  by  the   Commission.”

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It was submitted that the principle contained in this regulation should be applied  

during the period covered in the present case also.

17. The counsel for NTPC on the other hand pointed out that the price  

determined in the present case is for the period 1.4.2001 to 31.3.2004 and even  

the orders passed by the Central Commission are dated 1.4.2005, 7.4.2005 and  

2.6.2006, and that this regulation of 1.6.2006 cannot have a retrospective effect.  

What  was  prevalent  at  the  relevant  time  was  regulation  79(2),  the  second  

proviso  of  which  has  been  quoted  above,  and  it  did  not  contain  any  such  

provision for interest during the intervening period.   

18. We have noted the submissions of both the counsel.  It is  very  

clear that prior to 1.6.2006 there was no such specific  provision for claiming  

interest for the intervening period.  The very fact that such a regulation was  

required to be issued, indicates the necessity for having such a regulation, but at  

the  same time  it  is  not  possible  to  make  it  applicable  retrospectively.   The  

provision  for  charging  interest  is  a  substantive  provision  which  has  to  be  

specifically  provided  and  would  become  operative  when  provided.   In  the  

circumstances, the submission based on this new regulation also cannot help the  

Electricity Boards to claim interest on the differential amounts.

19. Now, we come to the issue as to whether the Appellate Tribunal  

was right in awarding the interest on the differential amounts on the basis of  

justice, equity and fair-play.  The Appellate Tribunal has awarded interest at an  

average of the prevailing lending rates (PLR) of the Reserve Bank of India to the  

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Banks during the relevant period.  In this connection, we must note that the  

Central Commission had, by issuing notifications continued the tariff existing on  

31.3.2001 as an interim measure until the final tariff was determined, and the  

notifications did not provide in any way for interest.  The Appellate Tribunal has  

commented that the notifications were issued mechanically without bestowing  

any  prima  facie  consideration  as  to  what  should  be  the  tariff  as  an  interim  

arrangement.  The Appellate Tribunal was of the view that in passing an interim  

or provisional order, an examination of all the pros and cons was necessary.  The  

interim arrangement continued for over a period of four years and according to  

the Appellate Tribunal, it resulted into an undue monetary benefit to the NTPC.  

20. In coming to its conclusion, the Appellate Tribunal relied upon the  

judgment of this Court in  BSES Ltd. Vs. Tata Powers Co. Ltd. reported in  

[2004 (1) SCC 195] wherein it was observed that an interim arrangement is  

normally  based  on  a  prima  facie  consideration  of  the  matter  and  on  broad  

principles without examining the matter in depth.  In this matter the Court held  

that payment by way of interim arrangement to the generating company would  

be subject to the final adjustment by awarding interest.  However, it is material  

to  note  that  in  this  matter  the  dispute  regarding  the  standby  charges  was  

referred for the determination of the commission, and since the same were not  

paid during the pendency of various proceedings, the payment of interest was  

directed in that context.   

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21. The counsel for the Electricity Boards laid stress on the judgment of  

this Court in  South Eastern Coalfields Ltd. Vs. State of M.P. and others  

reported in [2003 (8) SCC 648] wherein this Court had held that a party finally  

found to be  entitled  to  a  relief  in  terms of  money,  would  be entitled  to  be  

compensated by the award of interest which would also be payable in equity.  In  

this matter, the appellants were operating coal mines in the State of Madhya  

Pradesh.  The Central Government enhanced the royalty payable on coal, and  

the State Government was entitled to recover the same from the appellant who  

would  pass  on  the  burden  to  their  purchasers.   The  appellant,  however,  

challenged the hike in royalty in the High Court of M.P.  Initially an interim order   

was passed and subsequently the notification was quashed.   On appeal,  the  

order of  the High Court was set-aside.  Subsequently,  the State Government  

claimed interest from the appellant at the rate of 24% per annum in regard to  

the period when the enhanced royalty was delayed.  The appellant passed on  

this claim to their consumers who challenged the same and succeeded in the  

High Court in reducing the interest from 24% to 12%.  While dismissing the  

appeal filed by the appellant, this Court held that the interest would be payable  

even in equity and on the basis of the principle of restitution which is recognized  

in Section 144 of Code of Civil Procedure.

22. In this connection, it is material to note that the claim in  South  

Eastern Coalfields was essentially covered under Section 61 of Sale of Goods  

Act 1930, and the interest by way of damages was payable as per this statutory  

provision itself.  The liability had been crystallized and the interest had become  

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payable because of the failure to pay the amount as per the liability.  Besides,  

there was nothing in the agreement between the parties to the contrary on the  

issue of grant of interest.  In the present matter, we have the second proviso to  

Regulation 79(2) of 1999 (supra) which permitted the generating company to  

continue to charge the existing tariff for such period as may be specified in the  

notification by the Commission, and the notifications permitted continuation of  

the existing tariff as on 31.3.2011, until the final tariff was determined.  There  

was no provision for payment of interest therein.  The very fact that interest  

came to be provided subsequently by a notification under the Regulations of  

2004 is also indicative of a contrary situation in the present matter, viz. that  

interest was not payable earlier.   

23. Union of India Vs.  Rallia Ram reported in AIR 1963 SC 1685  

was  one  of  the  earliest  cases  where  the  principles  concerning  payment  of  

interest by way of restitution came up for consideration.  In August 1946, the  

Government had entered into a contract with the respondent for sale of a stock  

of American cigarettes lying at different places.  After some deliveries were taken  

by the respondent, he found part of the stock unfit for use.  The Government  

cancelled the contract and asked the respondent to return the cigarettes which  

were unfit for use.  An arbitration followed and compensation was awarded for  

the loss suffered by the supplier alongwith interest.  This Court noted that there  

was no provision for interest in the contract or in the Act, and set-aside the  

award to the extent it granted interest.  The Court laid down the proposition that  

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interest is payable in equity only if there are circumstances attracting equitable  

jurisdiction or under the Interest Act and quoted with approval the propositions  

laid down in  Bengal Nagpur Railway Co.  Vs.  Ruttanji Ramji reported in  

[AIR 1938 PC 67].

24. In Union of India Vs. Watkins Mayor and Co. reported in [AIR  

1966 SC 275],  the plaintiff  had entered into a contract  with the defendant  

Union of India for supply of drums made out of iron sheets to be supplied by  

latter.   Though  the  iron  sheets  were  initially  supplied  to  the  plaintiff,  

subsequently the defendant cancelled the contract and removed the iron sheets  

in small quantities from time to time for a period of nearly five years.  Plaintiff  

claimed the compensation under various heads, claiming that they had acted as  

bailee for the defendants.  This included (a) godown rent, (b) chowkidar’s salary,  

(c) terminal tax, (d) cartage, (e) unloading charges, (f) cooliage and (g) interest.  

This Court accepted the claim of the plaintiff with regards to items (a) to (f) but  

rejected  the  claim  with  respect  to  interest.   The  Court  relied  upon  the  

observations  of  Judicial  Committee  of  the  Privy  Council  in  Bengal  Nagpur  

Railway Co. Vs. Ruttanji Ramji (supra) to the following effect :-

“As  observed  by  Lord  Tomlin  in  Maine  and  New  Brunswick Electrical Power Co. v. Hart (1929) AC 631, at p. 640:   (AIR 1929 PC 185 at p. 188), ‘In order to invoke a rule of equity it   is  necessary in the first instance to establish the existence of a   state of circumstances which attracts the equitable jurisdiction, as,   for example,  the non-performance of a contract  of which equity   can give specific performance.”

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It also referred to the judgment and ratio in  Union of India Vs. Rallia Ram  

(supra)  and  then  held  that  interest  would  be  claimable  only  if  there  is  an  

agreement or when the interest is  payable by the usage of the trade having  

force  of  law or  there is  some substantive statutory  provision.   Thus,  rule  of  

equity could not be brought in to justify the claim of interest.

25. In  Commissioner  of  Sales  Tax  Vs.  Hindustan  Aluminum  

Corporation reported in (2002 (127) STC 258), the dispute was regarding the  

classification of certain products of a dealer for payment for sales tax.  After the  

dispute  was  resolved  by  this  Court,  the  dealer  made  the  payment  of  the  

differential amount of tax.  The department claimed interest only from the date  

of filing of return.  This Court held that there was no liability on the dealer for  

the amount of  tax unpaid which was the subject  matter  of  dispute until  the  

dispute was resolved.  Ideas of equity could not be brought in such manner and  

there could be no liability for interest until assessment was finalised.

26. It is true that the power to make restitution is inherent in every  

Court  as  observed  by  this  Court  in  Kavita  Trehan and  Anr.  Vs.  Balsara  

Hygiene Products Ltd. reported in (1994 (5) SCC 380) which was relied upon  

by the council for the Electricity Boards.  Thus, restitution will apply even where  

the case does not strictly fall under Section 144 of CPC .  However, we must note  

that Kavita Trehan was a case where the submission was made to the effect that  

termination of the contract was wrong and an injunction was sought in a civil suit  

to restrain the respondent from interfering with the disposal of goods.  It was in  

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this context that the principle of restitution was applied.  It is therefore, difficult  

to appreciate as to how the Appellate Tribunal could bring in either the principles  

of justice, equity and fair-play or that of restitution in the present case.  What is  

important to note is that in paragraph 16 of its order the Appellate Tribunal has  

specifically observed in terms that this was not a case where the beneficiaries  

were  made to  pay  the  excess  tariff  at  the  instance  of  NTPC through  force,  

coercion or threat.  This being the position the principles of equity, justice and  

fair-play  could  not  have been  brought  in  to  award interest  to  the  Electricity  

Boards.

27. It is true that there was delay in the process of determination of  

the tariff.   We are informed that the Commission became functional  only on  

15.5.1999.  NTPC had filed the tariff petitions duly as required by the Central  

Commission.  The delay in the case of Kawas and Gandhar Power Stations was  

because of the Commission requiring them to appropriately devise norms and  

parameters.   As far as Rihand Station is concerned, one of the beneficiaries,  

namely  Rajasthan  Rajya  Vidyut  Vitaran  Nigam  Limited  had  obtained  stay  of  

proceedings before the Commission from the High Court of Rajasthan.  NTPC  

was not  in  any way responsible  for  these factors.   Ultimately,  the tariff  was  

reduced, but the tariff charged by the NTPC in the meanwhile was in accordance  

with the rates permitted under the notifications issued by the Commission.  It  

cannot, therefore, be said that NTPC had held on to the excess amount in an  

unjust way to call it unjust enrichment on the part of NTPC, so as to justify the  

claim of the Electricity Boards for interest on this amount.

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28. Submissions  were  advanced  before  us  on  the  question  as  to  

whether the tariff determination under Section 62 was in any way legislative or  

quasi-judicial.   The  counsel  for  NTPC  drew  our  attention  to  a  number  of  

judgments concerning price fixation.

a. In West Bengal Electricity Regulatory Commission V. CESC  

(2002  (8)  SCC  715),  the  court  noted,  in  the  context  of  electricity  tariff  

determination under the Electricity Regulatory Commissions Act, 1998, that price  

fixation is in the nature of a legislative function, and hence, generally, no hearing  

is required.   However,  as the statute provides for a hearing opportunity,  the  

same must be provided.

b. Similar view was taken in this context in the following cases:

(i) Levy sugar pricing under the Essential Commodities Act, 1955 has  

been held to be a legislative function in  Shri Sitaram Sugar Mills Vs. UOI  

(1990 3 SCC 223),  Saraswati Industrial Syndicate V. UOI (1974 (2) SCC  

630),  Malaprabha  Sugars  V.  UOI (1994  1  SCC  648)  and  Mahalakshmi  

Sugar Mills V. UOI (2009 (16) SCC 569).

c. Coal price fixation has been held to be a legislative function under  

the  Essential  Commodities  Act,  1955  in  Pallavi  Refractories  V.  Singareni  

Collieries (2005 (2) SCC 227).

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d. Fixation  of  the  price  of  Natural  Gas  under  the  Essential  

Commodities Act, 1955, is held to be legislative function in ONGC V. Assn. of  

Natural Gas Consuming Industries of Gujarat (1990 Supp. (1) SCC 397).

e. In Prag Ice and Oil Mills V. UOI (1978 (3) SCC 459), the court  

in the context of price fixation of oil  under Essential  Commodities Act, 1955,  

observed as under-

“We  think  that  unless  by  the  terms  of  particular   statute  or  order,  price  fixation  is  made  a  quasi  judicial   function  for  specified  purposes  or  cases,  it  is  really   legislative in character.  The legislative measure does not   concern  itself  to  the  facts  of  an  individual  case.   It  is   meant to lay down a general rule applicable to all persons   or objects or transactions of a particular kind of class.”

29. The counsel for the Electricity Boards, however, drew our attention  

to a recent judgment of a Constitution Bench of this Court in PTC India Ltd. Vs.  

Central Electricity Regulatory Commission reported in (2010 (4) SCC 603),  

wherein this Court has observed in para 50 as follows:-  

“50. 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  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 enabling provision for   framing  of  regulations  containing  generic  propositions  in   accordance with which the appropriate Commission has to   fix the tariff…….”

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30. In the facts of the present case, however, this controversy as to  

whether  tariff  fixation  is  legislative  or  quasi-judicial  need  not  detain  us  any  

further.  As held by the Constitution Bench, price fixation is really legislative in  

character, but since an appeal is provided under Section 111 of the Act, it takes  

a quasi-judicial colour.  That by itself cannot justify the claim for interest during  

the period when the proceedings were pending for the tariff fixation.  The tariff  

that  was  being  charged  at  the  relevant  time  was  as  per  the  previous  

notifications.  Once the tariff was finalized subsequently, NTPC has adjusted the  

excess amount which it has received.  It cannot be said that during this period  

the NTPC was claiming the charges in an unjust way, to make a case in equity.   

Our attention has been drawn to the industry practice which also shows that on  

all such occasions interest has never been either demanded or paid when the  

price fixation takes place.  As held by us hereinabove, claim for interest could not  

be covered under Section 62 (6).  The provision for interest has been introduced  

by regulations subsequent to the period which was under consideration before  

the  Commission.   If  we  apply  the  propositions  in  Rallia  Ram (supra)  and  

Watkins Mayor (supra), we find that the terms of the supply agreement, the  

governing regulation and notifications did not contain any provision for interest.  

The industry practice did not provide for it as well.   In view thereof, interest  

could not be claimed either on the basis of equity or on the basis of restitution.

31. In the circumstances, it is not possible to accept the submission  

that the Appellate Tribunal erred in any way in declining to award interest under  

Section 62 (6) of the Act. There was however, an error on its part in granting the  

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same under the concept of equity, justice and fair-play.  Hence, we allow the  

appeals filed by the NTPC and dismiss those which are filed by the Electricity  

Boards.  Civil Appeal Nos. 2451, 2452 and 2493/2007 are allowed.  Civil Appeal  

Nos. 3972 and 4231/2007 are dismissed. Parties will bear their own costs.  

…………..……………………..J.  (  J.M. Panchal )

  …………………………………..J.  ( H.L. Gokhale  )

New Delhi

Dated: September 29, 2011

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IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Civil Appeal No. 2451 OF 2007

With

Civil Appeal No. 2452 of 2007

With

Civil Appeal No. 2493 of 2007

With

Civil Appeal No. 3972 of 2007

With

Civil Appeal No. 4231 of 2007

M/s NTPC Ltd.     …Appellant Versus

M.P. State Electricity Board & Ors.  …Respondents

Respected Sir,

I am enclosing herewith the draft judgment in the above matter for your  

perusal and  approval.

With Warm regards.

…………………………………..J.  ( H.L. Gokhale  )

Hon’ble Mr. Justice J.M. Panchal  

New Delhi

Dated  28.9.2011

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