1    

IN THE SUPREME COURT OF INDIA    

CIVIL APPELLATE JURISDICTION    

CIVIL APPEAL  NO    879     OF 2019   (@ SPECIAL LEAVE PETITION (C) NO 15754 OF 2016)  

RELIANCE INFRASTRUCTURE LIMITED  ..APPELLANT   

VERSUS  

STATE OF MAHARASHTRA AND ORS.       ..RESPONDENTS   

J U D G M E N T  

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 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  

REPORTABLE

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on 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.    

 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, 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 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:  

“33.1.3. Gross station heat rate   

(a) Gross station heat rate for coal-based generating stations     

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

During stabilization   Period  

2600 kCal/kWh 2550 kCal/kWh  

Subsequent period  2500 kCal/kWh 2450 kCal/kWh  

 Note 1:  

                                                           1 Section 181(2)(zd)  2 Tariff Regulations 2005

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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 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 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 Power Station of the appellant was  

2500 kCal/kWh.  This norm also 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 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) Promote transparency, consistency and predictability in  

regulatory approaches across jurisdictions and minimise  

perceptions of regulatory risks;  

(d) Promote competition, efficiency in operation and  

improvement in quality of supply.”  

Clause 5.0 spells out the “general approach to tariff”. Clause 5(f) stipulates  

operating norms:  

 “(f) Operating Norms   

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Suitable performance norms of operations together with  incentives and dis-incentives would need be evolved along  with appropriate 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 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 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 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 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  

(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 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 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

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not the “desired” levels. 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 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 to suggest improvements.  CPRI carried out an independent  

assessment 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.   

 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:   

“(32) “Gross Station Heat Rate” means the heat energy input  

in kcal required to generate one kWh of electrical energy at  

generator terminals.”  

                                                           3 Tariff Regulations 2011

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Regulation 44 provides norms for the operation of thermal 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:  

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

2450 kcal/kWh 2425 kcal/kWh  

Note 1  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.    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.    b) Thermal Generating Stations of Maharashtra State Power  

Generation Company Ltd. (MSPGCL):    

   K cal/kWh  

Year  Koradi Khaperkheda Chandrapur Nasik Bhusawal Paras  excluding  Unit No.3  

Parli  excluding  Unit No.6  

FY 2010- 11  

2965 2560 2617 2722 2734 3186 2745  

FY 2011- 12  

2975 2568 2626 2731 2742 3199 2753  

FY 2012- 13  

2985 2575 2635 2740 2751 3212 2762  

FY 2013- 14  

2873 2424 2539 2664 2671 3225 2679  

FY 2014- 15  

2881 2429 2544 2670 2677 3237 2684  

FY 2015- 16  

2889 2433 2549 2677 2683 3250 2690  

   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.   

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c) Thermal Generating Units of the Tata Power Company Ltd.  Generation Business (TPC-G):  

K cal/kWh  

Year  Unit-4 Unit-5 Unit-6  With Oil & Gas  mix.in  proportion of  50:50*  

FY 2011-12 2570 2575 2519  

FY 2012-13 2576 2583 2524  

FY 2013-14 2581 2591 2529  

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.  

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

Year Dahanu TPS  

FY 2011-12 2350  

FY 2012-13 2355  

FY 2013-14 2360  

FY 2014-15 2365  

FY 2015-16 2370  

         ”  

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 (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 clause (a).  

The dispensation for Units 4, 5 and 6 of TPC-G is prescribed in clause (c). For Unit

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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).    

 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 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.    

 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 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  44.5 and 44.6 shall be:    

200/210/250 MW  sets  

300 MW sets 500 MW sets (sub- critical boilers)  

2450 kcal/kWh 2400 kcal/kWh 2375 kcal/kWh  

 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  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.”  

                                                           4 Tariff Regulations 2015

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Regulation 44.5 contains the SHR for the coal based thermal 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:  

Year Koradi Khaperkheda Chandrapur Nashik Bhusawal Parli  

FY 2016-17 2864 2606 2688 2764 2761 2859  

FY 2017-18 2874 2614 2697 2773 2770 2868  

FY 2018-19 2884 2622 2706 2783 2779 2878  

FY 2019-20 2893 2630 2715 2792 2787 2887  

Provided that the Commission may revise the Gross Station Heat  Rate norms for these Generating Stations in case any Renovation  & Modernization is undertaken.        44.6 Gross Station Heat Rate for existing thermal Generating  Stations of The Tata Power Company Ltd- Generation Business  (TPC-G) shall be:    

Year Unit-5 Unit- 6  

With 100 % Gas  firing  

With 100 % Oil  firing  

With Oil &  Gas mix in  proportion  of 50:50*  

FY 2016-17 2525 2666 2421 2544  

FY 2017-18 2533 2671 2426 2549  

FY 2018-19 2541 2676 2431 2554  

FY 2019-20 2549 2681 2436 2559  

*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 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

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implementation of the MYT regulations. On 5 May 2012, the appellant submitted a  

petition for approval of its business 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:  

“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” 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 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.  

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 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, 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-G further added that the tightening  

of the norms for efficient generating plant is against the  

principle of equality and rewarding efficiency.

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4.5.5  

Accordingly, RInfra-G has requested the Commission not to  

tighten 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 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  

of the plant is dependent on the age of the plant, the technology  

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 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 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 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  

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    

Station heat  rate  

(kCal/kWh)  

FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY  2015-16  

As submitted  by RIfra-G  

2500 2450 2450 2450 2450

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As approved by  the  Commission  

2500 2355 2360 2365 2370  

                          ”  

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 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 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.    

 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 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.   

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 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 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 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 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 considered and reviewed that the tariff  

regulations were notified 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 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

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thermal 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 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 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;  

(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 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  

(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

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the statutory machinery under the Electricity Act nugatory.  The petition under  

Article 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, 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:  

“27. As stated hereinabove, the Petitioners have preferred  

Appeal No.4 of 2013 before the Appellate Tribunal for  

Electricity challenging the Order dated 25th October 2012  

insofar as Respondent No.1 disallows the Petitioners prayer  

for relaxation of the norms under Regulations 99 and 100 of  

the MYT 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 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 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 Regulations. It is  

settled law of the Hon’ble Supreme Court of India that the  

Appellate Tribunal for Electricity has no power, authority or  

jurisdiction to go into validity or legality of Regulations framed

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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 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, 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 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.   

 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 Commission5. The Constitution Bench considered whether the  

Appellate Tribunal for Electricity has jurisdiction to decide upon the validity of the  

regulations 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  

                                                           5 (2010) 4 SCC 603

17    

framed under Section 178 can be tested only before the court exercising judicial  

review.  While the Tribunal may decide upon a 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:  

“(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.  

(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 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 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:  

“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 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

18    

framed under Section 181 by the State Electricity Regulatory Commissions. In view  

of the legal position settled by the 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 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 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 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 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:   

(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

19    

policy notified on 6 January 2006 by the Union Ministry of Power requires that  

operating parameters and 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 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.  

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 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 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 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).  The units have the same design,

20    

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 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  

(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:  

(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;  

(ii) There is a fundamental error in the submission that the CPRI 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:  

• Paras 3 31 March 2008;

21    

• Parli 6 1 November 2007;  

• TPC 8 31 March 2008.  

The appellant’s unit at Dahanu commenced operations in 1995.  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 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 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 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 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.   

22    

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  

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 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,  

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;   

(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;   

(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 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.”   

23    

Section 61 provides that the appropriate commission shall, subject 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 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 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 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 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  

                                                           6 Section 181 (2)(zd)

24    

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, 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.   

 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 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 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 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.

25    

They may also take into consideration latest technological advances, fuel, vintage  

of equipment, nature of operations, 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, 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 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 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 of tariffs.  The submission which has  

been urged on behalf of the appellant 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

26    

a similarity of specifications but not a similarity of performance.  Performance, as  

we have seen, is a critical element in designing an appropriate SHR. 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 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 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 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)  

RInfra’s Submission in  Petition  

MERC Approved DTPS  Achieved  

FY 2006-07 2315 2500 2278  

FY 2007-08 2500 2500 2279  

FY 2008-09 2500 2500 2300  

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 reduction in boiler efficiency due to coal  

energy degradation and average annual aging loss were considered. The

27    

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.  

(* 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 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 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 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:  

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 of the Commission under Regulation 11.6;  

28    

(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.”  

[The expression ‘controllable factors’ is explained in clause 12.2 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 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:  

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 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 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 borne  

in mind under the terms of the tariff policy consistent with Section 61.  In its expert

29    

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 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-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 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 “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 emphasis in the tariff policy is on creating incentives for

30    

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 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 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:  

“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 Act, 2003. These functions are  

required to be performed by the 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 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  

                                                           7 (2011) 11 SCC 34

31    

formation of opinion and 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 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 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 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 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:  

“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  

                                                           8 (2002) 3 SCC 711

32    

is on the face 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.”  

 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 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 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 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 affirming the ultimate decision of the  

High Court to dismiss the writ petition. We have disapproved of the view of the

33    

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 under Article 226.  

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

.....................................................J                     [Dr Dhananjaya Y Chandrachud]        

.....................................................J              [Hemant Gupta]    New Delhi;  January 21, 2019