REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No.14697 of 2015

STATE OF GUJARAT & ORS. ….Appellants

versus

UTILITY USERS’ WELFARE ASSOCIATION & ORS. ….Respondents

With C.A. No.13451/2015

T.C.(C) No.139/2015

T.C.(C) No.138/2015

T.C.(C) No.137/2015

T.C.(C) No.140/2015

C.A. No.3759-3760/2016

T.P.(C) No.974/2016

J U D G M E N T

SANJAY KISHAN KAUL, J.

1. The Electricity  Act,  2003 (hereinafter  referred to  as  the ‘said

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Act’) provides for Central and State Regulatory Commissions.  Insofar

as  the  appointment  of  the  Chairperson  of  these  Commissions  is

concerned, the relevant provisions stipulate that the Chairperson “may”

be a Judge of a High Court for the State Commission, a Judge of the

Supreme Court or the Chief Justice of a High Court for the Central

Commission.  The common question, which arises for consideration in

these  appeals  is  whether  the  expression  “may”  should  be  read  as

“shall”, i.e., whether it is mandatory to have a judicial mind presiding

over these Commissions in the form of a Judge.

2. The Division Bench of the Madras High Court vide judgment

dated 7.2.2014 took the view in respect of the challenge laid to the

selection process of the Chairman of the Tamil Nadu State Electricity

Commission  that  there  was  no such  mandatory  requirement  though

there was an option to appoint a Judge.

3. The Division Bench of the Gujarat High Court in a similar case

in respect  of  the appointment of  a Chairperson of  the Gujarat State

Regulatory Commission vide impugned order dated 8.10.2015 opined

that it was so mandatory.

4. The  aforesaid  judicial  conflict  being  before  this  Court,  the

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challenges  laid  in  different  States  were  transferred  to  this  Court

through Transfer Petitions vide order dated 3.11.2015.

5. The Union of India, as also some of the State Commissions are

arrayed on the one side to canvas for an interpretation of the provision

as it reads, while on the other side, are consumers, activists and some

affected parties, who canvassed the importance of the State Regulatory

Commissions and the nature of functions it performs, to establish that a

Judge alone should preside over these Commissions.

6. We do not see the necessity of going into individual facts nor

were the pleas advanced on that basis before us.  The submissions have

been  based  on  the  provisions  of  the  said  Act  and  the  legal

pronouncements dealing with the issue of the mandatory requirement

of certain Commissions to be headed by a judicial mind.

The Act:

7. The said Act came into force on 10.6.2003 on publication in the

Gazette.  The Act seeks to consolidate the laws relating to generation,

transmission, distribution, trading and use of electricity. The Preamble

to the said Act states as under:

“An  Act  to  consolidate  the  laws  relating  to  generation,

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transmission,  distribution,  trading  and  use  of  electricity  and generally  for  taking  measures  conducive  to  development  of electricity industry, promoting competition therein, protecting interest  of  consumers  and  supply  of  electricity  to  all  areas, rationalisation of electricity tariff, ensuring transparent policies regarding  subsidies,  promotion  of  efficient  and environmentally  benign  policies,  constitution  of  Central Electricity  Authority,  Regulatory  Commissions  and establishment of Appellate Tribunal and for matters connected therewith or incidental thereto.”

8. The detailed Statement of Objects & Reasons mentions that the

Electricity  Supply  Industry  in  India  was  governed  by  the  Indian

Electricity  Act,  1910,  the  Electricity  (Supply)  Act,  1948  and  the

Electricity Regulatory Commission Act, 1998.  The State Electricity

Boards constituted under the Electricity (Supply) Act, 1948 failed to

perform on account of various factors inter alia fixation of appropriate

tariff  and  the  cross-subsidies  reached  unsustainable  levels.   The

Electricity Regulatory Commission Act of 1998 was an endeavour to

distance  the  Government  from  determination  of  tariffs  by  having

independent regulatory commissions.

9. Part X of the said Act deals with matters relating to Regulatory

Commissions – their constitution, powers and functions, etc.  Sections

76 & 77 of  the said Act are concerned with the constitution of  the

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Central  Commission  and  the  qualifications  for  appointment  of

Members of the Central Commission.  The provisions are similar to the

appointment  of  the  Members  and  Chairperson  of  the  State

Commissions except to the extent that while the relevant sub-section

provides that the Central Government “may” appoint the Chairperson

from amongst  persons who is,  or has been a Judge of  the Supreme

Court or the Chief Justice of a High Court in the case of the Central

Commission,  in the case of State Commissions,  the provision states

that  the  State  Government  “may”  appoint  any  person  as  the

Chairperson from amongst persons who is, or has been, a Judge of a

High Court.  Section 78 of the said Act deals with the constitution of

the Selection Committee to recommend Members, while the functions

of the Central Commission are specified in Section 79 of the said Act.

Section  80 of  the  said  Act  provides  for  establishment  of  a  Central

Advisory Committee with the Chairperson of the Central Commission

being the  ex officio Chairperson of the Central Advisory Committee.

This  Committee  is  to  advise  the  Central  Commission  on  major

questions of policy; quality, continuity and extent of service provided

by the licensees; compliance by the licensees with the conditions and

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requirements  of  their  licence;  protection  of  consumer  interest;

electricity  supply  and  overall  standards  of  performance  by  utilities

(Section 81 of the said Act).

10. Section 82 of the said Act is in respect of constitution of State

Commission  while  Section  84  prescribes  the  qualifications  for

appointment  of  Chairperson  and  Members  of  State  Commissions.

Section  85  of  the  said  Act  provides  for  constitution  of  Selection

Committee to  select  Members of  State  Commission and Section 86

prescribes the functions of State Commission.  Similar to the Central

Advisory Committee, the State Advisory Committee can be constituted

under Section 87 of  the said Act with similarity of  functions under

Section 88 of the said Act.  The relevant provisions, which will have to

be referred to are being reproduced hereunder: “Section 84. Qualifications for appointment of Chairperson and Members of State Commission. – (1) The Chairperson and the  Members  of  the  State  Commission  shall  be  persons  of ability, integrity and standing who have adequate knowledge of, and have shown capacity in, dealing with problems relating to engineering,  finance,  commerce,  economics,  law  or management.

(2) Notwithstanding anything contained in sub-section (1), the State Government may appoint any person as the Chairperson from amongst persons who is, or has been, a Judge of a High Court:

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Provided  that  no  appointment  under  this  sub-section  shall  be made  except  after  consultation  with  the  Chief  Justice  of  that High Court.

(3)  The  Chairperson  or  any  other  Member  of  the  State Commission shall not hold any other office.

(4) The Chairperson shall  be the Chief Executive of the State Commission.

Section  85.  Constitution  of  Selection  Committee  to  select Members of State Commission. –  (1) The State Government shall,  for  the purposes of  selecting  the Members  of  the State Commission, constitute a Selection Committee consisting of –

(a)  a  person  who  has  been  a  Judge  of  the  High  Court…. Chairperson;

(b) the Chief Secretary of the concerned State ….Member;

(c) the Chairperson of the Authority or the Chairperson of the Central Commission   ….... Member:

Provided that nothing contained in this section shall apply to the appointment of a person as the Chairperson who is or has been a Judge of the High Court.

(2) The State Government shall, within one month from the date of occurrence of any vacancy by reason of death, resignation or removal of the Chairperson or a Member and six months before the  superannuation  or  end  of  tenure  of  the  Chairperson  or Member, make a reference to the Selection Committee for filling up of the vacancy.

(3) The Selection Committee shall finalise the selection of the Chairperson and Members within three months from the date on which the reference is made to it.

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(4) The Selection Committee shall recommend a panel of two names for every vacancy referred to it.

(5)  Before  recommending  any  person  for  appointment  as  the Chairperson  or  other  Member  of  the  State  Commission,  the Selection Committee shall satisfy itself that such person does not have  any  financial  or  other  interest  which  is  likely  to  affect prejudicially his functions as such Chairperson or Member, as the case may be.

(6) No appointment of Chairperson or other Member shall  be invalid  merely  by  reason  of  any  vacancy  in  the  Selection Committee

86.  Functions  of  State  Commission.-  (1)  The  State Commission shall discharge the following functions, namely:--

(a) determine the tariff for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail, as the case may be, within the State:

Provided  that  where  open  access  has  been  permitted  to  a category of consumers under section 42, the State Commission shall  determine  only  the  wheeling  charges  and  surcharge thereon, if any, for the said category of consumers;

(b)  regulate  electricity  purchase  and  procurement  process  of distribution  licensees  including  the  price  at  which  electricity shall be procured from the generating companies or licensees or from other sources through agreements for purchase of power for distribution and supply within the State;

(c) facilitate intra-State transmission and wheeling of electricity;

(d)  issue  licences  to  persons  seeking  to  act  as  transmission licensees,  distribution  licensees  and  electricity  traders  with respect to their operations within the State;

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(e)  promote  cogeneration  and  generation  of  electricity  from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee;

(f)  adjudicate  upon  the  disputes  between  the  licensees  and generating companies and to refer any dispute for arbitration;

(g) levy fee for the purposes of this Act;

(h)  specify  State  Grid  Code  consistent  with  the  Grid  Code specified under clause (h) of sub-section (1) of section 79;

(i)  specify  or  enforce  standards  with  respect  to  quality, continuity and reliability of service by licensees;

(j) fix the trading margin in the intra-State trading of electricity, if considered, necessary;

(k) discharge such other functions as may be assigned to it under this Act.

(2) The State Commission shall advise the State Government on all or any of the following matters, namely:--

(i)  promotion  of  competition,  efficiency  and  economy  in activities of the electricity industry;

(ii) promotion of investment in electricity industry;

(iii) reorganisation and restructuring of electricity industry in the State;

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(iv)  matters  concerning  generation,  transmission,  distribution and trading of electricity or any other matter referred to the State Commission by that Government:

(3)  The  State  Commission  shall  ensure  transparency  while exercising its powers and discharging its functions.

(4) In discharge of its functions, the State Commission shall be guided by the National  Electricity  Policy,  National  Electricity Plan and tariff policy published under section 3.”

11. We may note a distinction between the Members of the Central

Commission  and  the  State  Commissions  inasmuch  as  Section  77

dealing  with  the  appointment  of  Members  of  Central  Commission

provides as under:

“77. Qualifications for appointment of Members of Central Commission.- (1)  The Chairperson and the Members of the Central  Commission  shall  be  persons  having  adequate knowledge of, or experience in, or shown capacity in, dealing with,  problems  relating  to  engineering,  law,  economics, commerce, finance or management and shall be appointed in the following manner, namely:--

(a) one person having qualifications and experience in the field of engineering with specialisation in generation, transmission or distribution of electricity;

(b) one person having qualifications and experience in the field of finance;

(c)  two persons  having qualifications  and  experience  in  the field of economics, commerce, law or management:

Provided that not more than one Member shall be appointed

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under the same category under clause (c).”

12. However, for appointment of a Member for State Commission,

there is no such limitation on the number of Members from a particular

field though it  does  state  that  such Members  should  have  adequate

knowledge and shown capacity in, dealing with problems relating to

engineering, law, economics, commerce, finance or management.  Sub-

section (2) of both Sections 77 and Section 84 are similar except for

the person to be appointed.  Thus, irrespective of the provisions in sub-

section (1) of Section 84 stipulating the fields from which the Members

will  have  to  be  appointed,  sub-section  (2)  begins  with  a

‘notwithstanding’ clause  stating  that  the  State  Government  “may”

appoint any person as the Chairperson from amongst those, who have

been, or is a Judge of the High Court.  The proviso to sub-section (2)

stipulates  that  no  appointment  under  sub-section  (2)  shall  be  made

except  after  consultation  with the  Chief  Justice  of  that  High Court.

This,  in  fact,  recognizes  the  pre-eminence  and  requirement  of

consultation  with  the  Chief  Justice  of  the  High  Court  in  case  of

appointment of a Judge as the Chairperson of a State Commission.  For

the Central Commission, the consultation is with the Chief Justice of

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India, because the appointment envisaged is of a Judge of the Supreme

Court or the Chief Justice of a High Court.

13. The Selection Committee under Section 85 of the said Act for

selecting Members of the State Commission is to be headed by a Judge

of the High Court but once again the proviso states that this would not

be applicable to the appointment of a person as the Chairperson who is

or has been a Judge of the High Court.  The effect of this is that, in

case  the  person  to  be  appointed  as  Chairperson  to  the  State

Commission is a Judge, necessary consultation will have to be with the

Chief Justice of the High Court as per the proviso to Section 84(2).

14. It may be noticed that under Section 78 of the said Act, insofar

as  the  Selection  Committee  to  recommend Members  of  the Central

Commission is concerned, the Chairperson of the Selection Committee

has  to  be  a  Member  of  the  Planning  Commission  in-charge  of  the

energy  sector.   Once  again,  the  proviso  to  Section  78  makes  an

exception  to  the  appointment  of  a  person  as  a  Chairperson  of  the

Central Commission, who is, or has been a Judge of the Supreme Court

or the Chief Justice of the High Court, as in that eventuality, the Chief

Justice of India has to be consulted.

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15. The Appellate Tribunal for Electricity is provided in Part XI of

the said Act.   Section 111 of  the said Act  deals  with the appeal  to

Appellate Tribunal from orders made by an adjudicating officer under

the  said  Act,  or  the  Appropriate  Commission  under  the  said  Act.

Section 112 of the said Act deals with the composition of the Appellate

Tribunal.   The  Tribunal  sits  in  Benches  with  at  least  one  judicial

member  and  one  technical  member.  Section  113  of  the  said  Act

provides  for  qualifications  for  appointment  of  Chairperson  and

Member of the Appellate Tribunal.  The Chairperson of the Appellate

Tribunal  has  to  be  someone,  who  is,  or  has  been  a  Judge  of  the

Supreme Court or the Chief Justice of a High Court.  Thus, there is no

quibble over the proposition that there is a senior judicial mind heading

the Appellate Tribunal and that every Bench of the Appellate Tribunal

mandatorily has to have at least one judicial member and one technical

member.

The Attorney General’s Argument:

16. The learned Attorney General, appearing on behalf of the Union

of India and the State of Gujarat, took us through the provisions and

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the scheme of the said Act and referred to the judicial pronouncements.

He  canvassed  for  the  reading  of  the  statute  as  it  stands  and,  thus,

pleaded that  where the legislature in its  wisdom had used the word

“may” consciously, there was no need to read it as “shall”.  Learned

Attorney General sought to emphasise that the functions of both the

Commissions are more technical in nature and really do not have much

of an adjudicatory element requiring a legal mind.  This is apart from

the fact that it is not as if a non-lawyer or non-Judge is incapable of

appreciating a legal point, as even arbitrators are appointed from these

fields when the dispute is more technical in character.  The primary

function is determination of tariff, regulating electricity purchase and

procurement  process  of  distribution  licensees,  facilitating intra-State

transmission,  issuance  of  license,  promotion  of  cogeneration  and

generation of electricity from renewable sources of energy, levying fee,

etc.  Out  of  the  11  functions  enlisted  of  a  State  Commission  under

Section  86  of  the  said  Act  and  for  the  Central  Commission  under

Section 79 of the said Act, adjudication of disputes between licensees

and generating companies and to refer any dispute for arbitration is the

only one, which can be said to have any adjudicatory flavor.  In fact,

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the  argument  advanced  was  that  the  nature  of  work  would  not  be

something which the Judges would be comfortable with, being highly

technical in nature, nor are Judges trained for such technical matters.

In the context  of  the functions  and duties  of  the authority,  relevant

provisions under the said Act were referred to.  Section 16 requires an

Appropriate Commission to specify conditions of license.  Section 45

of the said Act makes provision for power to recover charges, Section

46 of the said Act makes provision for power to recover expenditure.

Section 50 provides for the State Commission to specify an Electricity

Supply Code for recovery, billing, etc., while Section 57 empowers the

Appropriate  Commission  to  specify  standards  of  performance  of  a

licensee.  Section 61 deals with tariff regulations and Section 66 deals

with the development of a market in power, guided by the National

Electricity Policy.  Looking to all these functions, it was canvassed that

a purposive interpretation should be given to the expression used, for

interpreting the provisions of appointment of the Chairperson. Mindful

of the technical nature of functions as they are, it was argued that a

Judge was not required and that this was apparent from the fact that

even  at  present,  all  State  Commissions  are  headed  by  non-Judges,

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except one.  The provision was stated to be only felicitous in character,

as it gives an option to appoint a Judge.  It was argued that there could

be a possibility of a Judge, rarely, as it may be, being an expert in this

field  who  could  be  so  appointed.   However,  if  a  Judge  is  to  be

appointed, the process of appointment is different by reason of his/her

having held a constitutional  post  and thus,  the Selection Committee

constituted  would  not  be  recommending  the  appointment,  but  the

consultation would have to be with the Chief Justice concerned.

17. Learned  Attorney  General  then  proceeded  to  refer  to  the

judgment of this Court in  Tamil Nadu Generation and Distribution

Corporation  Limited  v.  PPN  Power  Generating  Company  Private

Limited1 wherein this very Act was under consideration.  The matter

related to inter alia the jurisdiction of the State Commission in Tamil

Nadu  to  either  adjudicate  a  dispute  or  refer  it  to  arbitration  under

Section 86(1)(f) of the said Act, which was held to be required to be

exercised reasonably and not arbitrarily.  In para 55, the Court gave its

imprimatur to the submission advanced on behalf of the appellant that

adjudicatory functions generally ought not to be conducted by the State

1 (2014) 11 SCC 53

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Commission in the absence of a judicial member, especially in relation

to disputes which are not fairly relative to tariff fixation or the advisory

and recommendatory functions of the State Commission.  In the said

context, a reference was also made to the Constitution Bench judgment

of this Court in  Kihoto Hollohan v. Zachillhu2 which examined the

nature of the power of the Speaker or the chairman under Para 6(1) of

the Tenth Schedule of the Constitution of India.  The finding recorded

is that the State Commission in deciding a lis relating to the generating

company was discharging judicial functions and exercising the judicial

powers of a far reaching effect and must therefore have the essential

‘trappings of the Court’ for which it  was said “….This can only be

achieved by the presence of one or more judicial members in the State

Commission which is called upon to decide complicated contractual or

civil  issues  which  would  normally  have  been  decided  by  a  civil

court…”   It  was  also  observed  that  the  decisions  of  the  State

Commission had far reaching consequences and were final and binding

between the parties subject, of course, to judicial review.

18. The Bench thereafter proceeds to examine Section 84(2) of the

2 1992 Supp (2) SCC 651

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said  Act.   It  was  observed  that  Section  84(2)  “enables”  the  State

Government to appoint any person as the Chairperson from amongst

persons who is, or has been, a Judge of a High Court, and that such

appointment shall be made after consultation with the Chief Justice of

the  High  Court.   Thus,  where  complicated  legal  issues  have  been

raised, it was observed, the presence of one or more judicial members

in  the  State  Commission  would  become  necessary.   No  judicial

member had been appointed in the Tamil Nadu State Commission and,

thus,  the  authorities  concerned  were  required  to  look  into  the

desirability and feasibility for making appointments, of any person, as

the Chairperson from amongst persons, who is or has been a Judge of a

High Court.

19. The provisions of Section 113 of the said Act were referred to, to

conclude that the legislature was aware that the functions performed by

the State Commission as well as the appellate tribunal are judicial in

nature and, thus, the appellate authority has the trappings of the Court.

This essential feature had not been made mandatory under Section 84

of the said Act.  In the opinion of the Bench, it would be “advisable”

for the State Government to exercise the enabling power under Section

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84(2) of the said Act to appoint a person, who is, or has been a Judge

of  a  High  Court  as  Chairperson  of  the  State  Commission.   The

aforesaid discussions were referred to by the learned Attorney General

to canvas that the question involved in the case really did not pertain to

Section 84(2) of the said Act but certain observations had been made,

nonetheless.   The  Tribunals  envisaged  under  Part  XIV  A  of  the

Constitution would stand on a different footing and therefore cannot be

compared  with  the  Commission  in  question.   In  any  case,  the

observations  itself  show  that  the  Bench  was  conscious  of  the

limitations of the said Act and, thus, only rendered an advise to the

State Government, rather than issue a direction.  In the alternative, at

best,  the  discussion  was  with  reference  to  the  desirability  and

feasibility of at least one member having legal knowledge rather than a

mandatory requirement of a Chairman being a Judge.

20. Next, referring to the judgment in Pareena Swarup v. Union of

India3, it was emphasized that the nature of functions of a Commission

under the said Act cannot be equated to the functions being performed

by a Tribunal under the Prevention of Money Laundering Act, 2002, an

3 (2008) 14 SCC 107

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adjudicatory function.  The observations were made in the context of

tribunals  being  created,  which  were  seeking  to  exercise  functions

earlier  performed  by  regular  judicial  forums.   The  functions,  now

vested  with  the  Appropriate  Commission  under  the  said  Act,  were

really being performed under the Electricity Regulatory Commission

Act.

21. The aforesaid judicial pronouncements, it was, thus, canvassed,

could not have been utilized by the Gujarat High Court to come to a

conclusion that the post of the Chairperson of the State Commission

mandatorily has to be occupied by a Judge, though it could be occupied

by a Judge.

22. We may,  however,  note that  the view adopted by the Gujarat

High  Court  is  also  based  on  the  nature  of  powers  vested  with  the

Appropriate Commission under Sections 94, 95 & 96 of the said Act,

which are as under: “94. Powers of Appropriate Commission.- (1) The Appropriate Commission  shall,  for  the  purposes  of  any  inquiry  or proceedings under this Act, have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908) in respect of the following matters, namely:--

(a) summoning and enforcing the attendance of any person and examining him on oath;

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(b) discovery and production of any document or other material object producible as evidence;

(c) receiving evidence on affidavits;

(d) requisitioning of any public record;

(e) issuing commission for the examination of witnesses;

(f) reviewing its decisions, directions and orders;

(g) any other matter which may be prescribed.

(2) The Appropriate Commission shall have the powers to pass such interim order in any proceeding, hearing or matter before the Appropriate Commission, as that Commission may consider appropriate.

(3) The Appropriate Commission may authorise any person, as it deems  fit,  to  represent  the  interest  of  the  consumers  in  the proceedings before it.

95. Proceedings before Commission.- All proceedings before the  Appropriate  Commission  shall  be  deemed  to  be  judicial proceedings within the meaning of sections 193 and 228 of the Indian  Penal  Code  and  the  Appropriate  Commission  shall  be deemed to be a civil court for the purposes of sections 345 and 346 of the Code of Criminal Procedure, 1973 (2 of 1974).

96. Powers of entry and seizure.- The Appropriate Commission or any officer, not below the rank of a Gazetted Officer specially authorised  in  this  behalf  by  the  Commission,  may  enter  any building or place where the Commission has reason to believe that any document relating to the subject matter of the inquiry may be found, and may seize any such document or take extracts or copies there from subject to the provisions of section 100 of the  Code  of  Criminal  Procedure,  1973,  insofar  as  it  may  be applicable.”

Page 21 of 84

23. The conclusion in favour of an Appropriate Commission being

headed  by  a  Judge  in  the  context  of  the  Commission  having  the

‘trappings of a Court’ is drawn on the basis of the aforesaid provisions,

apart from the provisions relating to the appointment of Members and

the Chairperson.

C.A. No.13451/2015 (stand of the State of Tamil Nadu):

24. The  State  Government,  having  succeeded  before  the  Madras

High Court as per the impugned judgment dated 7.2.2014, supported

the view taken by the Madras Bench and adopted the arguments of the

learned  Attorney  General.   Mr.  Shekhar  Naphade,  learned  Senior

Advocate appearing for the State of Tamil Nadu pleaded that the whole

scheme of the said Act ought to be taken into consideration and that

disproportionate  importance  was  being  given  to  sub-section  (2)  of

Section 84 for appointment of a Judge as a Chairperson, not realizing

the variety of functions performed by the Commission, of which the

adjudicatory functions were only a small percentage.

C.A.  No.14697/2015  (plea  of  the  Gujarat  State  Regulatory Commission):

Page 22 of 84

25. Mr. Jayant Bhushan, learned Senior Advocate appearing for the

Gujarat  State  Electricity  Regulatory  Commission,  sought  to  pose  a

question, i.e., where does the judgment in Tamil Nadu Generation and

Distribution Corporation Limited4 make it mandatory for a Judge to

be  the  Chairperson?   The  very  wordings  were  said  to  be

recommendatory in character, which had already been read out by the

learned Attorney General.  In the alternative, it was pleaded that the

observations made were really obiter dicta, as the issue of appointment

of the Chairperson of the State Commission was not the lis before the

Court in that matter.

26. He then posed a question: – when the Act and the judgment does

not make the appointment of a Judge as the Chairperson mandatory,

then  is  there  any  other  material,  which  can  be  said  to  make  the

appointment of the Chairperson as a Judge mandatory?  In this behalf

he submitted that the opposite side could only fall back on  Madras

Bar Association v. Union of India & Anr.5 (MJ-II).  The said judgment

dealt with the creation of the National Tax Tribunal under the National

Tax Tribunal Act, 2005.  The constitution of the Tribunal was held to

4 supra 5 (2014) 10 SCC 1

Page 23 of 84

be one for transfer of the appellate jurisdiction under Tax Laws vested

in the High Courts.  The majority held that the Act could not pass the

test of constitutionality, on account of inter alia, the provisions relating

to the appointment of the Chairpersons and Members of the Tribunals.

In the said case, reference was made to the earlier Constitution Bench

judgment in the  Union of India v. Madras Bar Association6 (MJ-I),

crystallizing  the  legal  position  while  transferring  adjudicatory

functions  from  Courts  to  Tribunals.   It  was  observed  that  such

Tribunals should possess the same independence, security and capacity

as the courts which the Tribunals are mandated to substitute and thus,

Members of the Tribunals discharging judicial functions could only be

drawn from sources possessed of expertise in law and competent to

discharge  judicial  functions.   Technical  members  could  also  be

appointed where such technical expertise is essential.  But where the

adjudicatory process  transferred to  the Tribunal  did not  require  any

specialized  skills,  knowledge  or  expertise,  the  provision  for

appointment  of  technical  Member  would  constitute  a  clear  case  of

delusion and encroachment  upon the  independence  of  the judiciary,

and the “rule of law.”  On the stature of Members, it was observed that

6 (2010) 11 SCC 1

Page 24 of 84

the  same  would  depend  on  the  jurisdiction  transferred,  i.e.,  if  the

jurisdiction  of  the High Court  was  transferred to  the Tribunals,  the

stature  of  the members of  the newly constituted tribunal,  should be

possessed of qualifications akin to the Judges of the High Court.  The

same would be the position qua District Judges appointment.  Such a

process of  judicial  review,  in  Madras Bar Association v.  Union of

India7 (MJ-II),  was  held  to  be  a  part  of  the  basic  structure  of  the

Constitution.

27. In the context of the functions to be carried out under the said

Act,  it  was  observed  that  the  present  case  was  not  one  where  the

powers of judicial review which were vested in a judicial forum was

sought to be transferred.   The importance of judicial  review and its

sanctity was maintained by the composition of the Appellate Tribunal,

which would hear appeals from the orders of the Commission.  The

functions of the Commission were canvassed to be one of technical

nature  largely,  and  thus,  would  not  require  a  Judge  to  head  the

Commission.   In  the  alternative,  it  was  stated  that,  at  best,  the

requirement  of  a  mandatory  legal  Member  may  be  read  into  the

7 supra

Page 25 of 84

provisions, though the explicit terms of the statute do not say so.

28. Learned counsel took us through the provisions of Section 85 of

the said Act to contend that the reference to the Chairperson under sub-

sections (2), (3), (5) & (6) of Section 85 would be made otiose, as in

that eventuality, the Selection Committee would never be called upon

to  appoint  a  Chairperson.   A  Judge  could  be  appointed  as  the

Chairperson only through the alternative route of Section 84(2) read

with the proviso thereto.

29. Learned counsel also referred to  Tamil Nadu Generation and

Distribution Corporation Limited8, more specifically to para 25, which

recorded the submission of the counsel for the appellant therein to the

effect that the State Commission cannot be an adjudicatory body as it

does not have the trappings of the Court,  which would normally be

manned exclusively by the Judges.  The plea was that under Section 84

of  the said  Act,  there  is  no  requirement  for  the Chairperson or  the

Member of a State Commission to be a Judge of a High Court.  No

such  appointment  had  actually  been  made  in  that  case  nor  did  the

Commission have a judicial member and, thus, the same was contrary

to  the  Constitution  Bench  judgment  of  this  Court  in  Madras  Bar

8 supra

Page 26 of 84

Association9 (MJ-I).  He, thus, submitted that it is in the context of this

argument that what was observed by the Bench in that judgment would

have to be construed and nothing more than that.  It is this argument,

which has been dealt with when the observations relied upon in the

impugned order were referred to.  This is stated to be quite apparent

even from para 55, which records the submissions of the then counsel

for  the  appellant  in  Tamil  Nadu  Generation  and  Distribution

Corporation Limited10 and what was accepted by the Court in para 59

of the judgment, i.e., adjudicatory functions generally ought not to be

conducted  by  the  State  Commission  in  the  absence  of  a  Judicial

Member, which are not fairly relative to tariff fixation or the advisory

and recommendatory functions of the State Commission.

30. Learned Senior Advocate next turned to Section 86(1)(f) of the

said Act and referred to the judgment in  Gujarat Urja Vikas Nigam

Ltd. v. Essar Power Ltd.11 (GJ-I) to submit that the expression ‘and’,

used in Sub-Section 86(1)(f) has already been read as ‘or’.  For clarity,

the sub-section is reproduced hereunder: “86.  Functions  of  State  Commission.-  (1)  The  State Commission shall discharge the following functions, namely:--

9 supra 10 supra 11 (2008) 4 SCC 755

Page 27 of 84

xxxx xxxx xxxx xxxx xxxx

(f)  adjudicate  upon  the  disputes  between  the  licensees  and generating companies and to refer any dispute for arbitration;”

(Emphasis supplied)

31. Therefore, the functions of the State Commission in respect of

the aforesaid clause refers to adjudication upon the disputes between

the  licensees  and  generating  companies  as  also  to  the  function  of

reference of any dispute for arbitration.  Our attention was invited to

para  40  in  Tamil  Nadu  Generation  and  Distribution  Corporation

Limited12 to  contend  that  there  is  no  requirement  that  an  arbitrator

should be a judicial person.  A submission was also made that the data

collected in respect of the functioning of the Gujarat State Commission

showed that the adjudicatory functions were not more than 10 per cent.

A large number of functions were of tariff fixation, which was over 30

per cent, while the regulatory functions were 59 per cent and grant of

licenses were a fraction of a percentage.

32. The emphasis on the reading of the judgment in Union of India

v.  Madras  Bar  Association13 (MJ-I),  it  was  contended,  is  on  the

12 supra 13 supra

Page 28 of 84

shifting  of  the  adjudicatory  functions  from the  High  Courts  to  the

Tribunals but when, as in the present case, the State Commission has

not replaced the functioning of the High Court, the same would have

no application.  For example, the Electricity (Supply) Act, 1948, dealt

with the issue of reference to arbitration in Section 76(2) of that Act.

There  was  no  question  of  any  judicial  mind.   The  Electricity

Regulatory Commission Act, 1998 provided for an appeal to the High

Court  in  certain  cases  from  the  order  of  the  State  Commission.

Therefore, the appellate authority constituted as a replacement for the

appeal before the High Court is manned by a sitting or retired Supreme

Court Judge or the Chief Justice of the High Court.  Learned counsel

also  referred  to  the  epilogue in  Gujarat  Urja  Vikas  Nigam Ltd.  v.

Essar  Power  Ltd.14(GJ-II),  which  dealt  with  the  vital  issue  of

composition  and  functioning  of  Tribunals  and  statutory  framework

thereof.  In the context of the observations in Madras Bar Association

v. Union of India & Anr.15 (MJ-II), it was observed in para 33 that the

law laid down by this Court may call  for review of composition of

Tribunals  under  the  Electricity  Act  or  other  corresponding  statutes.

This  was  so  as  an  appeal  to  this  Court  on  questions  of  law  or 14 (2016) 9 SCC 103 15 supra

Page 29 of 84

substantial  questions  of  law  show  that  Tribunals  deal  with  such

questions or substantial questions, and that the direct appeals to this

Court  has  the  result  of  denial  of  access  to  the  High  Court.  Such

Tribunals, thus, become a substitute for the High Courts, without the

manner of appointment to such Tribunals being the same as the manner

of appointment of High Court Judges.

33. Lastly,  learned  counsel  referred  to  Uttar  Pradesh  Power

Corporation  Limited  v.  National  Thermal  Power  Corporation

Limited & Ors.16 where observations were made  qua the function of

the Central Commission constituted under Section 3 of the Electricity

Regulatory Commissions Act, 1998 as an expert body, which had been

entrusted with the task of determination of tariff, which involves highly

technical procedure requiring not only working knowledge of law but

also of engineering, finance, commerce, economics and management.

Thus, it was held that the issues with regard to determination of tariff

should be left to the expert body and ordinarily the High Court and

even this Court should not interfere with the determination of tariff.

34. Mr.  Jayant  Bhushan,  learned  Senior  Advocate  sought  to

16 (2011) 12 SCC 400

Page 30 of 84

crystallize  his  interpretation  of  the  Act  and  the  challenge  to  the

impugned judgment of the Gujarat High Court on a four point basis: i.  The  constitution  of  the  Selection  Committee  for  Members

under Section 85 is not applicable to a Judge for which there is a

separate channel under Section 84(2).  Thus, to the extent that

Section 85 referred to a Chairperson, that portion would be made

otiose, if a Judge alone is to be appointed as the Chairperson. ii. The appointment of a Chairperson under Section 84(2) of the

said Act is an enabling provision and not a mandatory provision. iii.  The  observations  in  Tamil  Nadu  Generation  and

Distribution Corporation Limited17,  if  read  to  give  a  binding

direction for the Chairman being a Judge, would then be obiter

as that was not the issue before the Court. iv. The necessary and mandatory requirement of having a Judge

to head a Tribunal is only where the shifting of the adjudicatory

function from the High Court to the Tribunals are envisaged.

35. Now turning to the other point of view and the various entities,

which canvassed for the Chairperson to be mandatorily a Judge of the

High Court :  

Stand of Interveners (National Solar Energy Federation of India) in Civil Appeal No.13451/2015:

17 supra

Page 31 of 84

36. Mr.  Sajan  Poovayya,  Senior  Advocate  appearing  for  the

aforesaid entity sought  to support  the Gujarat  line of  reasoning and

submitted that there should be, at  least,  one judicial Member in the

Commission, who should be the Chairman.  He seeks to support this

view by reason of the nature of powers vested in the Chairman of the

Commission and has referred to Section 92, which reads as under:

“92.  Proceedings  of  Appropriate  Commission.- (1)  The Appropriate Commission shall meet at the head office or any other place at  such time as the Chairperson may direct,  and shall  observe  such  rules  of  procedure  in  regard  to  the transaction of business at its meetings (including the quorum at its meetings) as it may specify.

(2) The Chairperson, or if he is unable to attend a meeting of the Appropriate Commission, any other Member nominated by the  Chairperson  in  this  behalf  and,  in  the  absence  of  such nomination  or  where  there  is  no  Chairperson,  any  Member chosen  by  the  Members  present  from  amongst  themselves, shall preside at the meeting.

(3)  All  questions which come up before any meeting of  the Appropriate  Commission  shall  be  decided  by  a  majority  of votes of the Members present and voting, and in the event of an equality  of  votes,  the Chairperson or  in  his  absence,  the person presiding shall have a second or casting vote.

(4)  Save  as  otherwise  provided  in  sub-section  (3),  every Member shall have one vote.

(5)  All  orders and decisions of the Appropriate Commission shall be authenticated by its Secretary or any other officer of

Page 32 of 84

the  Commission  duly  authorised  by  the  Chairperson  in  this behalf.”

37. Thus, as per sub-section (2) of Section 92, the Chairperson has a

right  to  nominate  a  member  who  would  chair  the  meeting  in  his

absence and as per sub-section (3), the Chairperson has a casting vote.

This, he contended was vital to the adjudicatory process, which is by

majority  and,  thus,  the necessity  of  having a  judicial  Member  as  a

Chairperson  apart  from  the  aspect  of  power  wielded  by  the

Commission from Sections 94 to 96 of the said Act.

Stand of Madurai Power Corporation Private Limited:

38. Mr. Mohan Parasaran, learned Senior Advocate appearing for the

aforesaid intervener referred to Section 84(1) of the said Act to contend

that  where reference is  made to  a  person of  law,   that  cannot  be a

reference to a judicial Member.  It is only in Section 84(2) that there is

a specific reference to a person, who is or has been a Judge of the High

Court to be a Chairperson.  Thus, the presence of a man of law would

be no substitute  to  the  requirement  of  a  Judge who would  bring a

judicial  thought  process  to  the  decision  making.   In  this  behalf  he

referred to the observations in  Madras Bar Association v. Union of

Page 33 of 84

India & Anr.18 (MJ-II).  We may, however, add at this stage itself that

these are the same observations, which relate to the ground situation

where  the  adjudicatory  functions  of  the  Court  are  shifted  to  the

Tribunal.

39. He also contended that para 59 of the Tamil Nadu Generation

and Distribution Corporation Limited19only records the submission of

the then counsel for the appellant while the ratio is contained in para

60.  The ratio speaks of the enabling character of Section 84(2) of the

said Act to appoint a Judge and in that eventuality the appointment is

to be made after the consultation with the Chief Justice of the High

Court.  In this context, he submitted that the  ratio  of a judgment is

something that has to be culled out on certain established principles

and  not  from  every  line  of  every  observation.   In  this  context  he

referred  to  the  judgment  in  Natural  Resources  Allocation  In  re

Special Reference No.1 of 201220.  Article 141 of the Constitution laid

down that “law declared” by the Supreme Court is binding upon all

Courts within the territory of India and, thus, it was held that “ “law

declared” has to be construed as a principle of law that emanates from

18 supra 19 supra 20 (2012) 10 SCC 1

Page 34 of 84

a judgment or an interpretation of a law or judgment by the Supreme

Court, upon which, the case is decided……the “law declared” is the

principle culled out on the reading of a judgment as a whole in light of

the questions raised, upon which the case is decided.”  What is binding

upon courts, “is the ratio decidendi of the judgment.  It is the essence

of a decision and the principle upon which the case is decided which

has to be ascertained in relation to the subject-matter of the decision.”

Stand of the Madras Bar Association (Original Petitioner) in Civil Appeal No.13451/2015

40. The challenge to the impugned judgment of the Madras High

Court  in  that  matter  was  laid  by  Mr.  Arvind  Datar,  learned  Senior

Advocate.  He sought to contend that the year 1991 saw a paradigm

shift in the economic functioning in the country where State functions

were  opened  up  to  private  players.   This  was  not  supposed  to  be

unregulated and, thus, the Parliament provided a regulatory body.  By

the time the said Act was enacted in 2003, the Parliament had become

wiser and the introduction of the requirement of a Judge to head the

regulatory commission was, thus, introduced in this Act.

41. Turning  to  the  specific  provisions  of  the  Act,  he  referred  to

Page 35 of 84

Section 82(4) of the said Act, which provides that a State Commission

would  consist  of  not  more  than  three  members  including  the

Chairperson.   Section  2(43),  defines  a  Member  to  include  a

Chairperson and reads as under: “2.  Definitions.- In  this  Act,  unless  the  context  otherwise requires,--

xxxx xxxx xxxx xxxx xxxx

(43)  "Member"  means  the  Member  of  the  Appropriate Commission or Authority or Joint Commission, or the Appellate Tribunal, as the case may be, and includes the Chairperson of such Commission or Authority or Appellate Tribunal;”

42. In  the  sittings  of  the  Commissions,  disputes  emanating  from

Section 86(1)(f) of the said Act being adjudicated upon are categorized

as  DRP (Dispute  Resolution  Petition)  cases.   Tariff  fixation  is,  of

course, not adjudicatory.  He submitted that Section 4 of The Telecom

Regulatory Authority of India Act, 1997 was similar to Section 84(2)

of the said Act, but there was no provision for a Judge to be appointed.

Similar was stated to be the position of Section 4 of the Securities and

Exchange Board of India Act, 1992.  On the other hand, the specific

provision made in Section 84(2) of the said Act has to be read in the

context of the objects and reasons for the enactment, i.e., distancing the

regulating body from the Government.

Page 36 of 84

43. Learned Senior Counsel  referred to  the Electricity  Regulatory

Commission Act, 1998 to submit that Section 17 of that Act was the

earlier avatar of Section 84 of the said Act, while Section 18 of that Act

was the earlier avatar of Section 85 of the said Act.  A reference was

also made to The Petroleum and Natural Gas Regulatory Board Act,

2006,  more  specifically  to  Section  3(3)  of  that  Act.   The  tariff

regulatory functions are determined as per Section 62 and 64 of the

said  Act.   On  the  prevalent  provisions  under  different  Acts,  it  was

submitted  that  the  constitution  of  the  Competition  Commission  of

India came to be examined in  Brahm Dutt v. Union of India21.  The

argument was similar, i.e., the functions of the Commission being more

of a judicial body having adjudicatory powers, the right to appoint a

judicial member of the commission should rest with the Chief Justice

of India or his nominee and further the Chairman of the commission

necessarily has to be a retired Chief Justice or Judge of the Supreme

Court or the High Court.  The contention was that the Chairman of the

Commission had to be a person connected with the judiciary picked for

the job by the Head of the Judiciary and should not be a bureaucrat or

21 (2005) 2 SCC 431

Page 37 of 84

other person appointed by the Executive without reference to the Head

of the Judiciary.  In this context, the Supreme Court observed in para 6

that if an expert body is to be created, as submitted on behalf of the

Union  of  India  consistent  with  what  is  said  to  be  the  international

practice, it may be appropriate to consider the creation of two separate

bodies – one with the expertise, i.e., advisory and regulatory and the

other  adjudicatory.   This  is  followed  up  by  an  appellate  body  as

contemplated,  which could go a long way in meeting the challenge

sought to be raised in the writ petition.  Insofar as the working of the

Commission was concerned, it was observed that it had a number of

adjudicatory functions as well.

44. In Gujarat Urja Vikas Nigam Ltd.22 (GJ-I), the implied conflict

between  Section  86(1)(f)  of  the  said  Act  and  Section  11  of  the

Arbitration & Conciliation Act, 1996, was reconciled and applying the

harmonious  construction  principles  (Mimansa  principles)  it  was

observed  that  where  there  is  a  dispute  between  a  licensee  and  the

generating  company,  only  the  State  Commission  or  the  Central

Commission or arbitrator nominated by it could resolve such disputes,

22 supra

Page 38 of 84

whereas all other disputes (unless there is some other provision in the

Electricity Act, 2003) would be decided in accordance with Section 11

of the Arbitration & Conciliation Act, 1996.  This was stated to be also

in consonance with Section 158 of the said Act in Part XVI dealing

with Dispute Resolution where arbitration was provided for in terms of

the Arbitration & Conciliation Act,1996.

45. Learned Senior Counsel sought to point out that no Judge had

ever been appointed as the Chairperson.  The mandate of Section 85(2)

of  the  said  Act,  in  fact,  required  that  six  months  prior  to  the

superannuation or end of the tenure of the Chairperson or Member, a

reference should be made to the Selection Committee to fill  up the

vacancy.  The expression “may”, it was submitted should be read as

“shall”  in  Section  84  of  the  said  Act.   The  alternative  submission

advanced was that when a vacancy of the Chairperson is to arise, it

should be intimated to the Chief Justice of the High Court to confirm

whether any Judge was available or not.  In any case, at least, one legal

mind should be there, who has no baggage or past connection with the

special  area  in  question  directly.   This  was  more  so  as  apart  from

Section  86(1)(f),  it  was  submitted  that  Section  33(4)  deals  with

Page 39 of 84

compliance of  directions,  if  any dispute arises with reference to the

quality  of  electricity  or  safe,  secure and integrated operation of  the

State  grid  and  Section  9(2)  proviso,  which  is  in  reference  to

construction  of  a  captive  generating  plant  and the  maintenance  and

operation of the same being entitled to open access for the purpose of

carrying  the  electricity  from  the  captive  generating  plant  to  the

destination  of  its  use,  with  the  proviso  making  such  open  access

subject  to  availability  of  adequate  transmission  facility  to  be

determined  by  the  Central  Transmission  Utility  or  the  State

Transmission Utility.  As per the second proviso, any dispute regarding

the  availability  of  transmission  facility  has  to  be  referred  to  the

Appropriate Commission for adjudication.  It is submitted that these

are two examples clearly requiring an adjudicatory bend of mind.

T.C.(C) No.139/2015

46. This petition has been filed by a Senior Advocate of the Madras

high Court against the exercise of suo moto power by the Commission

in respect of a tariff hike and in that process sought to challenge the

appointment of the Chairperson and seeks to canvass that there exists a

mandatory requirement for him to be a retired Judge of a High Court.

Page 40 of 84

T.C.(C) No.138/2015

47.  This petition filed before the Madras High Court is, once again,

by  an  Advocate,  purportedly  in  public  interest.   Apart  from  the

fundamental issue raised of a Judge to be appointed as the Chairman of

the State Commission, like in the previous Transfer Petition, certain

notifications have also been assailed.   The Tamil Nadu Government

had  published  a  Notification  dated  26.9.2013,  constituting  a  three

Member  Selection  Committee  for  selection  of  the  Members  of  the

State  Commission  in  terms  of  Section  85  of  the  said  Act.   This

selection process was required to be completed in three months and

had to recommend, at least, two names for the post of Members.  The

Committee recommended the name of Mr. G. Rajagopal (respondent

No.7) on 27.12.2013.  This appointment is specifically assailed on the

ground that he was still working as Director (Finance), TANGEDCO

when his name was recommended by the Selection Committee,  and

that Mr. Rajagopal opted for voluntary retirement after his name had

been recommended by the Selection Committee.  The Notification of

his  appointment  was  issued  on  31.12.2013  whereafter  he  assumed

office on 9.1.2014.

Page 41 of 84

48. The impugned decision of the Madras High Court opining that

the  Chairperson  need  not  be  a  High  Court  Judge  was  rendered  on

7.2.2014.

49. Another Notification dated 27.2.2014 was published constituting

a  Selection  Committee  for  selecting  a  person  for  the  post  of  the

Chairperson. Mr. S. Akshayakumar (respondent No.6) retired from the

post of the Managing Director of TANTRANSCO on 31.5.2014 and

was  appointed  as  the  Chairperson  of  the  State  Commission  vide

Notification dated 6.6.2014, assuming charge on 9.6.2014.

50. On 12.12.2014, the State Commission consisting of these two

persons as  Member  and Chairman and Mr.  S.  Nagalsamy,  passed a

tariff order permitting a tariff hike by TANGEDCO by a majority of

2:1 with respondent Nos.6 & 7 concurring on the issue of tariff hike

while the third Member (Mr. Nagalsamy) was dissenting.  The dissent

was on the legality of the suo moto tariff order.

51. We  have  recited  these  facts  only  to  bring  on  focus  that  the

grievance is only with the tariff order, but under the garb of the same,

the appointment of respondent Nos.6 & 7 is now sought to be assailed

on the ground that the said two persons could not be really categorized

Page 42 of 84

as  not  having  any  financial  or  other  interest,  which  is  likely  to

prejudice their  functioning as Chairperson and Member  in  terms of

Section 85(5) of the said Act.  The two companies TANGEDCO and

TANTRANSCO  were  established  for  power  generation  and

transmission of  power  respectively by restructuring the  Tamil  Nadu

Electricity Board in compliance of Section 131 of the said Act and are

State owned companies.

52. The original petitioner seeks to impute bias against these two

persons because of the post they have held.  Learned counsel appearing

on behalf of the petitioner referred to the judgment of this Court in

Rajesh  Awasthi  v.  Nand  Lal  Jaiswal23 wherein  in  the  process  of

assailing  an  appointment  to  the  Commission,  Section  85(5)  was

analysed.  It was observed that the power under the said sub-section (5)

was  to  be  exercised  by  the  Selection  Committee  and  not  by  the

Government.  Thus, whether the persons named by the panel have any

financial or other interest, which is likely to affect their functioning as

Chairperson was a matter which depended upon the satisfaction of the

Selection Committee before recommending it to the State Government.

In the facts of the case, it was found that the concerned person was

23 (2013) 1 SCC 501

Page 43 of 84

working as Joint President of the JP Power Ventures Limited at the

time  of  selection,  hence  he  had  financial  and  other  interest  in  the

company,  which  would  prejudicially  affect  his  functions  as  the

Chairperson of the Commission.  The judgment of this Court in  Mor

Modern  Cooperative  Transport  Society  Ltd.  v.  Financial

Commissioner & Secretary to Govt. of Haryana and Anr.24 was also

referred to.  The provision in question was Section 68(2) of the Motor

Vehicles  Act,  1988.   Section  68  of  the  Motor  Vehicles  Act,  1988

empowered  the  State  Government  to  constitute  a  State  Transport

Authority and Regional Transport Authorities to exercise powers and

functions specified in Chapter V.  Section 68(2) put a restriction that no

person who has a financial interest whether as proprietor, employee or

otherwise in any transport undertaking was to be appointed and in case

such financial interest was acquired post appointment, the person was

required  to  give  notice  in  writing  to  the  State  Government  of

acquisition of such interest and would vacate office.  The Transport

Commissioner  and  Traffic  Manager  working  in  the  Office  of  the

General Manager of the Haryana Roadways, a State Undertaking, were

held to fall within the mischief of sub-section (2) of Section 68 of that

24 (2002) 6 SCC 269

Page 44 of 84

Act.  The nature of “financial interest” as contemplated by the said

sub-section was examined in the narrower sense and it  was held to

imply direct personal benefit of an economic nature while in the wider

sense it would include direct or indirect interest that a person has in

relation to the finances of an undertaking.  Such an interest was held to

include  the  interest  of  an  official  who manages  the  finances  of  the

undertaking or on whom rests the burden of financial accountability.

The intention of the legislature was deciphered from reading the statute

as a whole.

53. We may, however, note at this stage itself that the factual matrix

in the said case dealt with the situation where a person was holding

both the offices.

T.C.(C) No.140/2015 and T.C.(C) No.137/2015 & IA Nos.3 & 4/2016

54. There was really no fresh material addressed before us so far as

the aforesaid petitions are concerned.

55. Insofar as IA Nos.3 & 4/2016, filed by CLP Wind Farms Private

Limited, seeking intervention in T.C.(C) No.137/2015, are concerned,

the prayer for intervention is made on the ground that the Court issues

appropriate  directions  to  the  Tamil  Nadu  Electricity  Regulatory

Page 45 of 84

Commission for time bound hearing and expeditious adjudication of

the  applicant’s  petitions,  being DRP Nos.62/2014  & 63/2014.   The

Court finds no merit in the applications, as the prayers made in the

applications are outside the lis being adjudicated by the Court.  The

same are accordingly disposed of.

T.P.(C) No.974/2016

56. This Transfer Petition arises from the Delhi High Court.  Ms.

Sujatha  Balachander  on  behalf  of  the  original  petitioner  before  the

High Court sought to plead that  the word “may” should be read as

“shall” keeping in mind the intent of the legislature (Bachahan Devi &

Ar. V. Nagar Nigam, Gorakhpur & Anr25).  Normally, it was observed,

“may” is  an enabling or  discretional  while  “shall”  is  obligatory the

connotation is not inelastic or inviolate.  Thus, where to interpret the

word “may” as directory would render the very object of the Act as

nugatory, the word “may” must mean “shall.”  The Act was actually

enacted  in  the  interest  of  the  public  while  seeking  to  distance  the

Government  from  determination  of  tariff.   Such  distance  from  the

Government, it was contended, could be brought about by appointment

25 (2008) 12 SCC 372

Page 46 of 84

of a High Court Judge with a trained judicial mind as the Chairman of

the Commission.

57. Learned  counsel  referred  to  A.P.  Power  Coordination

Committee & Ors. v. Lanco Kondapalli Power Ltd. & Ors.26, where it

was held that  a claim coming before the Commission could not  be

entertained or allowed if  it  is  barred by limitation prescribed for an

ordinary  suit  before  a  Civil  Court.   This  aspect  was  sought  to  be

emphasized in the context of the discussion that the Commission was

performing judicial functions.  The view taken by this Court in Union

of India v. Namit Sharma27 was sought to be distinguished since no

adjudicatory  functions  were  involved  in  the  performance  of  the

functions of an Information Commissioner.

58. A  reference  was,  once  again,  made  to  the  powers  of  the

Commission under Section 94 to 96 of the said Act as also to Section

97,  which  provides  for  delegation  of  the  power  to  any  Member,

Secretary, Officer of the Commission except the powers to adjudicate

disputes  under  Sections  79  and  86,  and  the  powers  to  make

Regulations under Section 178 or 181 as may be deemed necessary.

26 (2016) 3 SCC 468 27 (2013) 10 SCC 359

Page 47 of 84

59. Our  attention  was  also  drawn  to  the  order  of  the  Appellate

Authority  dated  27.2.2013  in  Appeal  No.184/2011  where  some

observations  have  been  made  on  the  functioning  of  the  State

Commission.  Apparently the State Commission had refused to follow

the judgment of the Tribunal on a specious plea and this attitude of the

State  Commission  was  called  ‘audacious’  and  ‘most  unfortunate’,

‘reflecting a lack of judicial approach, judicial knowledge and judicial

ethics’.   It  was,  thus,  pointed out  that  the absence of  a  Judge as a

Chairperson  is  resulting  in  such  orders  of  the  Commission,  in

ignorance of the well-established principles of law, including that of

precedent.  

Rejoinder Response:

60. We are dealing with the rejoinders of the counsel  only to the

extent that they seek to add something arising from the submissions of

the counsel propagating that a Judge should be the Chairman of the

Commission.  Learned Attorney General referred to the judgment in

Union of  India v.  Namit  Sharma28 but  then we may note  that  the

principle advanced is based on a non-adjudicatory function.  Learned

AG also referred to Part XI dealing with the Appellate Tribunal where 28 supra

Page 48 of 84

under  Section  111(6),  the Appellate  tribunal  can  call  for  records  of

proceedings and make orders and can act even on its own motion.  The

provision reads as under:

“111. Appeal to Appellate Tribunal.-

xxxx xxxx xxxx xxxx xxxx

(6) The Appellate Tribunal may, for the purpose of examining the legality, propriety or correctness of any order made by the adjudicating officer or the Appropriate Commission under this Act, as the case may be, in relation to any proceeding, on its own  motion  or  otherwise,  call  for  the  records  of  such proceedings and make such order in the case as it thinks fit.”

61. Not  only  that,  under  Section  121,  orders,  instructions  or

directions can be made by the Tribunal to the Appropriate Commission

for the purpose of performance of its statutory functions under the Act.

The provision reads as under:

“121. Power of Appellate Tribunal.- The Appellate Tribunal may,  after  hearing  the  Appropriate  Commission  or  other interested party, if any, from time to time, issue such orders, instructions or directions as it may deem fit, to any Appropriate Commission  for  the  performance  of  its  statutory  functions under this Act.”

62. The contention  thus  advanced,  is  that  the  scheme of  the  Act

looks  to  the appellate  authority  as  a  body which is  supervising  the

Commission, and is chaired by a person who is, or has been the Chief

Page 49 of 84

Justice of the High Court or a Judge of the Supreme Court.  Thus, there

is really no need to have a High Court Judge as the Chairperson of the

State Commission albeit an enabling provision having been made.

63. Mr. Naphade, learned Senior Advocate appearing for the State of

Tamil  Nadu submitted that  orders  dated 11.12.2014 and 12.12.2014

had been unsuccessfully carried in appeal and even the Special Leave

Petitions were dismissed. Thus, the merits of the orders passed cannot

be questioned.  He further submitted that  suo moto proceedings were

initiated on 23.9.2013 while the appointment was made on 31.12.2013.

Thus, respondents Nos. 6 & 7 were both appointed after the suo moto

proceedings had been initiated.  The Selection Committee had not been

impleaded  as  a  party  even  though  the  selection  process  was  being

questioned.  This Selection Committee was presided over by a retired

Judge  of  the  High  Court.   It  was  also  submitted  that  a  suo  moto

revisionary  power  was  actually  conferred  on  the  appellate  tribunal

under Section 111(6) of the said Act to cure any defects in the orders

passed by the Commission.

64. Our  attention  was  also  invited  to  the  order  of  the  appellate

authority in OP No.1/2011 dated 11.11.2011.  This arose out of a letter

Page 50 of 84

stated to be sent by the Ministry of Power dated 21.1.2011 complaining

that most of the State Distribution Utilities have failed to file annual

tariff  revision petitions in time and,  thus,  a number of  State’s tariff

revision had not taken place for a number of years.  The Tribunal was

requested to take appropriate action by issuing necessary directions to

all the State Commissions to revise the tariff periodically.  The State

Commission framed two questions out of which the first question was

as under: “(i)  Whether  the  State  Regulatory  Commissions  have  the jurisdiction to suo moto initiate proceedings for determination of tariff under section 62, 64 and 86 of the Electricity Act, 2003 in the absence of the Tariff application to be filed by the Utilities under Section 64 of the Act?”

65. The answer to this question was given by the Commission by

opining that the State Commission must initiate suo moto proceedings

for tariff determination in accordance with Section 64 of the Act read

with clause 8.1 (7) of the tariff policy in the event of the delay in filing

of  the  ARR,  truing-up  and  annual  performance  review  one  month

beyond the scheduled date of submission of the petition.

66. Learned Senior Advocate, turning to the provisions of Section

84(2)  of  the  said  Act  sought  to  emphasise  that  the  same  was  a

Page 51 of 84

“notwithstanding” clause as is apparent from its bare reading and it

clearly states “notwithstanding anything contained in sub-section (1)”.

Thus, it does not take away what is stated in sub-section (1).  Learned

counsel relied upon the Constitution Bench judgment of this Court in

The Dominion of India & Anr. v. Shrinbai A. Irani & Anr.29 for the

proposition as to how a non-obstante clause should be dealt with.  It

was observed that “While recognizing the force of this argument it is

however necessary to observe that although ordinarily there should be

a  close  approximation  between  the  non  obstante  clause  and  the

operative  part  of  the  section,  the  non  obstante  clause  need  not

necessarily and always be co-extensive with the operative part, so as to

have the effect of cutting down the clear terms of an enactment. If the

words  of  the  enactment  are  clear  and  are  capable  of  only  one

interpretation on a plain and grammatical  construction of  the words

thereof, a non obstante clause cannot cut down that construction and

restrict the scope of its operation. In such cases the non obstante clause

has to be read as clarifying the whole position and must be understood

to have been incorporated in the enactment by the Legislature by way

of abundant caution and not by way of limiting the ambit and scope of

29 (1955) 1 SCR 206

Page 52 of 84

the operative part of the enactment.”

67. For the same purpose, the reference was also made to Ajit Singh

(II)  v.  State  of  Punjab30.It  was,  once  again,  emphasized  that  the

appellate tribunal takes care of various concerns, more so when matters

have to be heard by a Bench with at least one judicial member.  It was

also  emphasized  that  under  Section  82(2)  of  the  Act  a  State

Commission has to be a body corporate having perpetual succession

and common seal and the provision reads as under: “82. Constitution of State Commission.-

xxxx xxxx xxxx xxxx xxxx

(2) The State Commission shall be a body corporate by the name aforesaid, having perpetual succession and a common seal, with power to acquire, hold and dispose of property, both movable and immovable, and to contract and shall, by the said name, sue or be sued.”

68. As per Section 84(4) of the said Act, the Chairperson is to be the

Chief Executive of the State Commission.  It was, thus, pleaded that it

may not even be advisable for a Judge to hold this nature of office.

69. It was also emphasized that the reliance placed by the opposite

side  on  Mor  Modern  Cooperative  Transport  Society  Ltd.31 is

30 (1999) 7 SCC 209 31 supra

Page 53 of 84

misplaced as the observations made in para 14 of the judgment have to

be understood in the context of a dual charge being held by the said

person,  an  aspect  we  have  already  noted  while  referring  to  that

argument of the opposite side.

70. Mr.  Jayant  Bhushan,  learned  Senior  Advocate,  in  addition,

referred to the Petroleum and Natural Gas Regulatory Board Act, 2006

to  contend  that  the  Board  constituted  under  the  Act  has  to  have  a

Chairperson and a Member (Legal) as per Section 3 of the said Act

though the functions of the Board provide for adjudicatory functions

under Chapter V, more specifically, in Section 24.  Thus, it is not as if a

non-Judge cannot carry out any adjudicatory functions.

71. He also sought to emphasise the merit of the Chairperson of the

Gujarat Commission, who has a Master of Business Management in

Finance,  Bachelor  of  Engineering  (Electrical),  has  gone  through  a

software course, and a regulatory course on economic regulations from

eminent universities and has total experience of 37 years in the power

sector.   This  includes  more  than 19 years’ experience  in  electricity

regulation  and  is  fully  conversant  with  electricity  laws  and  related

issues.

Page 54 of 84

72. Learned Senior Advocate sought to assail the impugned order of

the Gujarat High Court based on the rule of purposive construction and

contended that this principle cannot be utilized to hold something as

different from what the legislature has expressed in clear words.

Our View:

Section 84(2) of the said Act:

73. The controversy in question would have to be dealt with at two

plains.  The first, is as to how the statute itself has to be read insofar as

the appointment of the Chairperson of the tribunal is concerned.  The

second is, having read the statute in a particular manner, what is the

effect of the judicial pronouncements and the relevant legal literature

in terms of the remaining composition of the tribunal apart from the

Chairperson.   If  we turn to the first  question,  on a plain reading of

Section  84(1)  of  the  said  Act  all  that  is  mandated  is  that  both  the

Chairperson  and  the  Members  of  the  State  Commission  “shall”  be

persons  of  ability,  integrity  and  standing  who  have  adequate

knowledge  of  and  have  shown  capacity  in  dealing  with  problems

relating  to  engineering,  finance,  commerce,  economics,  law  or

management.  A plain grammatical reading of this Section shows that

no distinction has been made  qua the qualifications of a Chairperson

Page 55 of 84

and Member.  All that is required is the mandates contained in the sub-

section, which begin with the word “shall”.  Thus, any person of the

fields mentioned therein, having the ability, integrity and standing can

be appointed as a Member or Chairperson.

74. Section  85  of  the  said  Act  provides  for  constitution  of  a

Selection Committee to select the Members of the State Commission,

which  in  turn  has  to  consist  of  the  persons  as  set  out  therein  and

mandatorily has to have a person, who has been a Judge of the High

Court as the Chairperson of the Selection Committee.  We may also

note that this provision refers to the appointment of ‘Members’ of the

State Commission but then that would also include the Chairperson of

the State Commission, in view of sub-section 43 of Section 2 of the

said Act, which reads as under: “2. Definitions. …. …. …. …. …. (43)  "Member"  means  the  Member  of  the  Appropriate Commission or Authority or Joint Commission, or the Appellate Tribunal, as the case may be, and includes the Chairperson of such Commission or Authority or Appellate Tribunal;”

75. Thus,  the  reading of  sub-section  (1)  of  Section  84 read with

Section 85 of the said Act would leave no manner of doubt as to the

fields from which a Chairperson or a Member of the State Commission

Page 56 of 84

can be chosen from.  However, the controversy has emanated from the

inclusion of sub-section (2) of Section 84 of the said Act.  This is so, as

sub-section (2) begins with a “notwithstanding” clause providing that

the State Government “may” appoint any person as Chairperson from

amongst the persons, who is, or has been, a Judge of the High Court.

This is to be read with the proviso that such an appointment would

have to be made in consultation with the Chief Justice of that High

Court.

76. The proviso only respects and maintains the accepted position

that  in appointment of  persons,  who have been holding such senior

judicial  office,  consultation  with  the  judicial  head,  being  the  Chief

Justice,  should  be  mandatory.   The  question  which  thus  arises,  is

whether sub-section (2) of Section 84 is facilitative in character for the

purposes of appointment of a retired or current Judge of the High Court

as a Chairperson, or is the said provision mandatory in character.  Both

the golden rule and the literal rule of statutory construction are well

established that a statute must be read as it is framed by the legislature.

It is not the function of the Court to supplant or read into the statute

something which is not provided.  This is not to say that there have not

Page 57 of 84

been judicial views taken qua the interchangeability of the expression

“may’ and “shall” in certain provisions.   Thus,  the use of the word

“shall” raises a presumption that a particular provision is imperative.

However, it has been construed as merely directory in certain cases if

the  context  or  intention  of  the  legislature  demands otherwise.   The

Courts may ascertain the real intention of the legislature by carefully

attending to the whole scope of the statute (Sainik Motors v. State of

Rajasthan32and State of U.P. v. Babu Ram33).  We are, however, faced

with a converse situation as to whether “may” can be read as “shall”.

In this behalf we may take recourse to the judicial opinion that where

in the same section the word ‘may’ has been used at one place and

‘shall’ at  another  place,  it  would  strengthen  the  inference  that  the

words have been used in the primary sense (Chairman Canara Bank,

Bangalore v. M.S. Jasra34).

77. A  reference  to  Maxwell  on  The  Interpretation  of  Statutes

(Twelfth  Edition),  more  specifically  the  chapter  on  “Exceptional

Construction” would show that the modification of the language of a

statute is the tool used only if, in its ordinary meaning and grammatical

32 (1962) 1 SCR 517 33 (1961) 2 SCR 679 34 AIR 1992 SC 1341

Page 58 of 84

construction, there is a manifest contradiction of the apparent purpose

of  the  enactment,  or  some inconvenience  or  absurdity  which  could

hardly  have  been  intended.   It  has  been  observed  that  in  ordinary

usage, “may” is permissive and “must” is imperative and that the word

“may” used in a statute would not generally be held to be mandatory.

However,  in  some  cases  where  “may”  is  used  in  the  context  of  a

compulsory  force,  the  meaning  has  been  so  modified  by  judicial

exposition.  The heading of the Chapter itself shows what is intended:

“Modification of the language to meet the intention”.

78. It  is  well-nigh  impossible  to  lay  down  a  general  rule  for

determining whether a provision is imperative or directory.  We extract

the relevant portion as under: ““No universal  rule,”  said  Lord  Campbell  L.C.,  “can  be  laid down for the construction of statues, as to whether mandatory enactments shall be considered directory only or obligatory with an implied nullification for disobedience.  It is the duty of Courts of Justice to try to get at the real intention of the Legislature by carefully  attending  to  the  whole  scope  of  the  statute  to  be construed.”35  And Lord Penzance said: “I believe, as far as any rule is concerned, you cannot safely go further than that, in each case  you  must  look  to  the  subject–matter;  consider  the importance of the provision that has been disregarded, and the relation of  that  provision to the general  object  intended to be secured by the Act; and upon a review of the case in that aspect decide whether the matter is what is called imperative or only directory.”36

35 Liverpool Borough bank v. Turner (1860) 2 De G.F. & J. 502 at pp.507, 508. 36 Howard v. Bodington (1877) 2 P.D. 203, at p. 211.

Page 59 of 84

79. If we turn back to the provisions of Section 84 of the said Act,

we find that the expression “shall” is used in sub-section (1) both in the

context of the requirement of ability, integrity and standing as also in

the  context  of  adequate  knowledge  and  capacity  in  dealing  with

problems relating to engineering, finance, commerce, economics, law

or management.  On the other hand, in sub-section (2) while dealing

with the possibility of appointment of a Chairperson from the pool of

sitting or retired Judges, the expression used is “may” indicating it to

be a discretionary power.

80. We are, thus, inclined to accept the line of reasoning advanced

by the learned counsel led by the learned Attorney General that the

plain  reading  of  the  section  leaves  no  manner  of  doubt  that  the

legislature  only  envisaged  a  possibility  of  appointment  of  a

Chairperson  from the  pool  of  sitting  or  retired  Judges  of  the  High

Court,  in which case the method of appointment would be different

from the one as envisaged under Section 85 of the said Act.

81. We may also look to the nature and functions performed by the

State Commission.  Functions of the State Commission are prescribed

under  Section  86  of  the  said  Act.   The  enumerated  functions  are

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determination  of  tariff,  regulation  of  electricity  purchase  and

procurement  process  of  distribution  licencees,  facilitating  intra-state

transmission, issuing licences to persons, promoting cogeneration and

generation of electricity from renewable sources, levy fee, specify or

enforce  standards,  fix  trading  margins.   All  these  functions  are

regulatory in character rather than adjudicatory.  The real adjudicatory

function is only provided in sub-clause (f) whereupon the Commission

has the option of adjudicating the disputes between the licencees and

generating companies, or to refer such disputes to arbitration.  There is

also  an  advisory  role  to  be  performed by the  State  Commission as

specified  in  sub-section  (2).   The  issue,  however,  is  not  whether  a

Judge would be comfortable doing this function but whether these are

types  of  functions  which  necessarily  mandate  a  Judge  to  be  a

Chairperson.   The  answer  to  this  would  also  be  in  the  negative,

supporting  the  view  we  have  adopted  on  the  plain  reading  of  the

section.

82. We  are  conscious  of  the  observations  made  in  Tamil  Nadu

Generation and Distribution Corporation Limited37 in the context of

37 supra

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Section 86(1)(f) of the said Act opining that the adjudicatory functions

generally ought not to be conducted by the State Commission in the

absence of a judicial Member, but then sub-section (1) of Section 84 of

the said Act provides for a person with knowledge in the field of law

albeit not mandatorily, on a plain reading of the section.  The effect of

this will be dealt with in the latter part of our judgment.

83. We may also  look  at  this  issue  from two other  perspectives.

Firstly, the composition of the Appellate Tribunal under Section 112 of

the said Act which mandates that there has to be a Bench of two or

more persons of which at least one should be a judicial member.  The

Chairperson as per  Section 113,  mandatorily  has to be a  present  or

retired  Judge of  the  Supreme Court  or  a  Chief  Justice  of  the High

Court.  Thus, at the appellate stage there is necessary judicial scrutiny,

which takes place.   Secondly,  looked at from the perspective of the

position prevailing prior to the said Act coming into force, the nature of

functions sought to be performed by the State Commission, were to be

so performed, not by person,  who necessarily held a judicial office.

The observations, thus, made in the context of the “tribunalisation” of

judicial process and the requirement of it to be headed by a Judge have

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to be read in the context of shifting of the adjudicatory role from the

Courts to the Tribunals.

84. There are undoubtedly certain powers vested in the Commission

under Sections 94, 95 & 96 of the said Act, which weighed with the

Gujarat High Court while taking a contrary view inasmuch as they seek

to give the ‘trappings of a court’ to the Commission, but that aspect we

will examine in the latter part of the judgment, i.e., if there are certain

judicial  functions  to  be  performed  by  the  Commission,  what  then

should be the nature of composition of the Commission.

85. Mr.  Jayant  Bhushan,  learned  senior  counsel  also  rightly

emphasized that were it to be presumed that the Chairperson had to be

mandatorily a Judge, the process of appointment would have to be in

terms of the proviso and not in terms of Section 85 of the said Act.

This would make the reference to a Chairperson under Sub-Sections

(2), (3), (5) & (6) of Section 85 otiose as that eventuality would never

arise were such a plea to be accepted.

86. We are, thus, unable to accept the contention advanced on behalf

of the parties, who sought to sustain the view adopted by the Gujarat

High Court.  The fact that the Chairperson has a right to nominate the

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Member, who would chair meetings in his absence as per sub-section

(2) of Section 92, or that the presence of a man of law would be no

substitute to the requirement of a Judge who would bring a judicial

thought  process  to  the  decision  making  as  Chairman,  or  that  the

regulatory  body  should  not  be  unregulated,  are  generalized  pleas,

which  are  difficult  to  accept.   No  doubt,  the  law  declared  by  the

Supreme Court is binding on all Courts within the territory of India,

which would also include principles of law emanating from a judgment

or  interpretation  of  the  law,  but  then  the  ratio  decidendi of  the

judgments of the Supreme Court,  makes the principle of  mandatory

requirement  of  a  Judge  applicable  only  to  cases  where  the  judicial

function is sought to be shifted through the process of ‘tribunalisation’.

87. We may also note that Section 84(2) of the said Act begins with

a non-obstante clause, i.e., Notwithstanding anything contained in sub-

section (1),  it  does not  take away what is  stated in sub-section (1),

which  deals  with  the  requirements  that  are  necessary  in  the

appointment of a Member or Chairperson.  It would not cut down the

clear terms of the enactment being sub-section (1).  The occasion to

use  such a  non-obstante clause  really  arose  because  the  process  of

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appointment of a Chairperson who is, or has been a Judge, is required

to be different,  and thus, the mandatory consultation with the Chief

Justice.  It is nothing more or less.  Further sub-section (1) of Section

85 provides for a Selection Committee to be headed by a Judge of the

High  Court  but  with  the  proviso  that  the  said  provision  would  not

apply for the appointment of a person as a Chairperson who is, or has

been, a Judge of the High Court.  This, in fact, shows that a non-Judge

can  be  appointed  as  the  Chairperson  by  the  Selection  Committee

constituted under Section 85 of the said Act, which in turn is chaired

by a Judge of the High Court.  We are, thus, unequivocally of the view

that Section 84(2) of the said Act only gives the discretionary option to

the State Government to appoint  a Judge as the Chairperson of  the

State Commission. The said provision therefore, is  not mandatory in

nature.

Composition of the State Commission:

88. Our conclusion aforesaid on the appointment of a Chairperson,

necessitates a discussion on the composition of the State Commission

as a whole.  This is so in the context of Section 84(1) of the said Act.

In terms of Section 82(4) of the said Act, the State Commission is to

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consist of not more than three members including the Chairperson.  In

other  words,  there  have  to  be  two  other  members  other  than  the

Chairperson.   Now if  the  Chairperson  is  not  a  Judge,  the  question

arises whether any of the other two members has to be a person from

the legal  field considering the nature of functions performed by the

State  Commission.   Section  84(1)  of  the  said  Act  prescribes  the

requirement  of  knowledge  and  shown  capacity  in  dealing  with

problems  relating  to  six  different  fields,  i.e.,  engineering,  finance,

commerce, economics, law or management.  If the Chairperson is from

a non-legal field, it would imply that he/she would be a person from

any of the other five fields.  That would still leave the appointment of

two members from the fields specified, including law.  Thus, there can

be  a  possibility  and  we  are  informed  that  it  is  so,  where  State

Commissions have no members from the legal field at all.  The moot

point  arises  whether  there  can  be  a  mandatory  provision  read  into

Section 84(1) of the said Act for opining, that at least one person from

the legal field is necessary as a member, although on a plain reading of

the Section it is not so.

89. The  distinguishing  feature,  as  pointed  out  aforesaid  between

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appointment  of  members  to  the  Central  Commission  and  the  State

Commission  is  that,  with  regards  to  the  Central  Commission,  it  is

specifically provided in Section 77 of the said Act, how many persons

from which field are to be appointed.  There is a further proviso to sub-

clause (c) of sub-section (1) of Section 77 of the said Act restricting it

to  not  more than one member  from the fields specified in  the said

clause, viz. economics, commerce, law or management.  This is not the

position insofar as the State Commission is concerned.

90. In order to appreciate any such requirement for a person from

the  legal  field  as  a  member  of  the  State  Commission,  it  becomes

necessary to turn to  the nature of  functions performed by the State

Commission.

91. We  have,  in  the  context  of  Section  84(2)  of  the  said  Act,

discussed the  various  functions  of  the  State  Commission which are

specified under Section 86 of the said Act.  The argument on behalf of

the learned Attorney General and the counsel supporting him was that

other than sub-clause (f) of Section 86, there are really no adjudicatory

functions.  There is, however, no dispute that sub-clause (f) is clearly

an  adjudicatory  function.   It  provides  for  adjudication  of  disputes

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between the licencees and the generating companies.  There is also a

power to refer the dispute to arbitration and the expression “and” in the

said clause has been read as “or” in Gujarat Urja Vikas Nigam Ltd.38

(GJ-I), implying that the option is available to the State Commission to

do either of the two.

92. Now turning to the powers of the State Commission, we may

note that the same are specified from Sections 94 to 96 of the said Act.

The reference in these Sections is to the ‘appropriate commission’, i.e.,

it can either be the Central Commission or the State Commission or the

Joint Commission.  The relevant definition clause is as under: “2. Definitions.-

In this Act, unless the context otherwise requires,-- …. …. …. …. …. 4.     "Appropriate Commission" means the Central Regulatory Commission referred to in sub-section (1) of section 76 or the State Regulatory Commission referred to in section 82 or  the Joint Commission referred to in section 83, as the case may be;”

The powers conferred under these Sections are, thus, undisputedly

exercisable by the State Commission.

93. A perusal of these provisions would show that apart from their

definition, even otherwise, these are powers of a civil court under the

Code  of  Civil  Procedure,  1908  (hereinafter  referred  to  as  the  ‘said

38 supra

Page 68 of 84

Code’).  Powers such as summoning, enforcement of attendance of any

person  and  examination  on  oath,  discovery  and  production  of

documents,  receiving  affidavit  of  evidence,  requisitioning  of  public

records, etc., all form part of Section 94.  In terms of Section 95, all

such proceedings before the State Commission would be deemed to be

judicial proceedings within the meaning of Sections 193 and 228 of the

Indian Penal Code, 1860 and the commission would be a civil court for

purposes of Sections 345 & 346 of the Code of Criminal Procedure,

1973.  Not only that, Section 96 confers the extreme power of entry

and seizure in respect of any building and place where the Commission

has reason to believe that any document relating to the subject matter

of enquiry may be found and may be seized.  The power is conferred

on the  Commission under  Section  129 for  securing compliances  of

orders  and  under  Sections  142  &  146  for  punishment  for  non-

compliance of orders and directions.  This, thus, leaves no manner of

doubt that the State Commission, though defined as a ‘Commission’

has all the ‘trappings of the Court’.

94. We may also  note  that  in  terms  of  what  has  been opined  in

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Gujarat Urja Vikas Nigam Ltd.39 (GJ-I), such adjudication of disputes

between  the  licensees  and  generating  companies  by  the  State

Commission or the arbitrator nominated by it under clause (f) of sub-

section (1) of Section 86 of the said Act extends to all disputes and not

merely to those pertaining to matters referred to in clauses (a) to (e)

and (g)  to (k)  of  Section 86(1) as may arise  between licensees and

generating companies.  In effect, it has been observed that this is the

only process of adjudication which has to be followed as there is no

restriction in Section 86(1)(f) of the nature of the dispute that may be

adjudicated.   Similarly  in  A.P.  Power  Coordination  Committee  &

Ors.40 while referring to the judgment in  Gujarat Urja Vikas Nigam

Ltd.41 (GJ-I),  it  has  been  observed  that  the  Commission  has  been

elevated to the status of a civil court in respect of all disputes between

the licensees and generating companies.  Such disputes need not arise

from exercise of powers under the said Act but even claims or disputes

arising  purely  out  of  contract  have  to  be  either  adjudicated  by  the

Commission  or  be  referred  to  an  arbitrator  nominated  by  the

Commission.   In  that  context  it  has  also  been  observed  that  the

39 supra 40 supra 41 supra

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advisability of having the State Commission presided over by a Judge

of the High Court  as  a Chairperson was mentioned in  Tamil Nadu

Generation and Distribution Corporation Limited42.  The provisions

of  the  Limitation  Act,  1963  like  Sections  5  &  14  have  also  been

imported into the Act as observed.

95. What else can be called the ‘trappings of the court’?  We are

buttressed in our conclusion by judicial pronouncements dealing with

the expression “The trappings of the court”.  The expression “trappings

of  the  court”  initially  found  mention in  a  judgment  of  the  Judicial

Committee  of  The  Privy  Council  in  Shell  Company  of  Australia,

Limited v. Federal Commissioner of Taxation43.  It was observed by

Lord  Chancellor  Sankey  that  there  are  tribunals  with  many  of  the

“trappings of a court” but are not courts in the strict sense of exercising

judicial  power.   In  Bharat  Bank Ltd.  v.  Employees  of  the  Bharat

Bank Ltd.44, while dealing with the Industrial Tribunal, it was observed

that the said Tribunal has powers vested in a civil court under the said

Code while trying a suit, discovery of documents, inspecting, granting

adjournment, reception of evidence on affidavit, enforcing attendance

42 supra 43 (1931) AC 275 44 AIR 1950 SC 188  

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of witnesses, etc.  The observations in R. v. London County Council45,

of  Saville,  L.J.  giving  a  meaning  to  the  word  “court”  or  “judicial

authority” was cited with approval.  Saville, L.J. observed as under: “It is not necessary that it should be a Court in the sense that this Court is a Court, it  is enough if it is exercising, after hearing evidence, judicial functions in the sense that it has to decide on evidence between a  proposal  and an opposition;  and it  is  not necessary to be strictly a Court if it is a tribunal which has to decide rights after hearing evidence and opposition.”

96. The Supreme Court also took note of the definition of “judicial

power”  and  “judicial  decision”  in  Huddart,  Parker  &  Co.  v.

Moorehead46 and Cooper v. Wilson47 respectively.  Griffith, C.J., in the

first judgment observed as under:

“The  words  ‘judicial  power’  as  used  in  sec.  71  of  the Constitution mean the power which every sovereign authority must  of  necessity  have  to  decide  controversies  between  its subjects or between itself and its subjects, whether the rights relate to life,  liberty or property.  The exercise of this power does not begin until some tribunal which has power to give a binding and authoritative decision (whether subject to appeal or not) is called upon to take action.”

97. In the latter judgment, it was observed as under:

“A  true  judicial  decision presupposes  an  existing  dispute between two or more parties, and then involves four requisites: (1) The presentation (not necessarily orally) of their case by the parties  to  the  dispute;  (2)  if  the  dispute  between  them is  a question  of  fact,  the  ascertainment  of  the  fact  by  means  of

45 (1931) 2 KB 215 46 8 CLR 330, 357 47(1937) 2 KB 309, at p. 340

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evidence adduced by the parties to the dispute and often with the assistance of argument by or on behalf of the parties on the evidence; (3) if the dispute between them is a question of law, the  submission  of  legal  argument  by  the  parties,  and  (4)  a decision which disposes of the whole matter by a finding upon the facts in dispute and an application of the law of the land to the facts so found, including where required a ruling upon any disputed  question  of  law.   A quasi-judicial  decision  equally presupposes an existing dispute between two or more parties and involves (1) and (2), but does not necessarily involve (3) and never involves (4).  The place of (4) is in fact taken by administrative action, the character of which is determined by the Minister’s free choice.”

98. The  subsequence  judgments  in  Jaswant  Sugar  Mills  Ltd.  v.

Lakshmi Chand48;Engineering Mazdoor Sabha v. Hind Cycles Ltd.49;

Indo-China Steam Navigation Co. Ltd. v. Jasjit Singh50; Associated

Cement  Companies Ltd.  v.  P.N. Sharma51; Sarojini  Ramaswami v.

Union of India52 and  State of Gujarat v. Gujarat Revenue Tribunal

Bar Association53followed the aforesaid views in the same breath.

99. Once we find that the tribunal has the trappings of the court in

respect of its functions, we turn to the effect of the same.

100. The  judgment  of  this  Court  in  Tamil  Nadu  Generation  and

48 1963 Supp (1) SCR 242 49 AIR 1963 SC 874 50 (1964) 6 SCR 594 51 (1965) 2 SCR 366 52 (1992) 4 SCC 506 53 (2012) 10 SCC 353

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Distribution Corporation Limited54 would first have to be dealt with at

some length, as it deals with the provisions of the very Act.  Of course,

the context was,  inter alia, in respect of the interpretation of Section

86(1) of the said Act.  The Bench took note of the Gujarat Urja Vikas

Nigam  Ltd.55 (GJ-I)  on  account  of  the  observations  made  in  that

judgment, that the State Commission can adjudicate all the disputes,

including the dispute on money claims between the licensees and the

generating companies.  The then counsel for the appellant sought to

canvas that the exercise of such judicial powers should be either by a

civil court or a tribunal having, at least, one judicial member, as the

absence of a judicial member would be an anathema to judicial process

and would directly impinge on the impartiality and the independence

of the judiciary.  It was also contended that the same would undermine

the principle of separation of powers which was sought to be strictly

maintained by the Constitution of India.  The counsel,  in fact, went

further  that  the  function  of  the  Chairman  of  such  a  commission

required only a retired Judge of the High Court to occupy that post, an

aspect,  which  has  been  negated  by  us  hereinbefore.   The  Supreme

Court gave its imprimatur to the submission advanced on behalf of the 54 supra 55 supra

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appellant to the extent that the adjudicatory functions generally ought

not to be conducted by the State Commission in the absence of judicial

members.  It was noticed that no judicial member had been appointed

in  the  Tamil  Nadu  State  Commission,  and  that  the  feasibility  for

making the appointment of a person as the Chairman from amongst

persons,  who is,  or  has been,  a Judge of  the High Court  should be

explored.

101. It  is  undoubtedly  true  that  the  question  which the Court  was

seized of, related to the interpretation of Section 86 of the said Act and

certain other  matters,  which are not  connected with the controversy

herein.  Thus, the issue arises, whether the observations made, albeit to

be  construed  as  advisory  or  suggestive  qua the  appointment  of  a

Chairman and a Member are to be treated as ratio decidendi or obiter

dicta.

102. In order  to  determine  this  aspect,  one  of  the  well-established

tests  is  “The  Inversion  Test”  propounded  inter  alia by  Eugene

Wambaugh, a Professor at The Harvard Law School, who published a

classic text book called “The Study of Cases”56 in the year 1892.  This

56Eugene Wambaugh, The Study of Cases (Boston: Little, Brown, & Co., 1892)

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text  book propounded  inter  alia what  is  known as  the “Wambaugh

Test” or “The Inversion Test” as the means of judicial interpretation.

“The Inversion  Test”  is  used  to  identify  the  ratio  decidendi in  any

judgment.  The central idea, in the words of Professor Wambaugh, is as

under: “In  order  to  make  the  test,  let  him  first  frame  carefully  the supposed  proposition  of  law.  Let  him  then  insert  in  the proposition a word reversing its meaning.  Let him then inquire whether, if the court had conceived this new proposition to be good, and had had it in mind, the decision could have been the same.  If the answer be affirmative, then, however excellent the original proposition may be, the case is not a precedent for that proposition, but if the answer be negative the case is a precedent for the original proposition and possibly for other propositions also.57”

103. In order to test whether a particular proposition of law is to be

treated  as  the  ratio  decidendi of  the  case,  the  proposition  is  to  be

inversed, i.e., to remove from the text of the judgment as if it did not

exist.  If the conclusion of the case would still have been the same even

without examining the proposition, then it cannot be regarded as the

ratio decidendi of the case.  This test has been followed to imply that

the ratio decidendi is what is absolutely necessary for the decision of

the  case.  “In  order  that  an  opinion  may  have  the  weight  of  a

57Eugene Wambaugh, The Study of Cases (Boston: Little, Brown, & Co., 1892)  at pg. 17

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precedent”, according to John Chipman Grey58, “it must be an opinion,

the formation of which, is necessary for the decision of a particular

case.”

104. Now applying the test to the aforesaid judgment, the proposition

is reversed, i.e., “the Chairman need not be a judicial member”, the fact

remains  that  it  would  have  no impact  on the decision  in  that  case,

which was related to inter alia the interpretation of Section 86 of the

said Act.  This, in fact, justifies what we have held aforesaid  qua the

appointment of a Chairperson from the pool of Judges.

105. In the context of the question which we are now dealing with, if

we were to take the proposition as “no member having knowledge of

law is required to be a member of the Commission” then we have a

problem at hand.  This is so because while interpreting Section 86 of

the  said  Act,  it  has  been  expressed  that  the  Commission  has  the

‘trappings of  the Court’,  an aspect  we have agreed to hereinbefore.

Once  it  has  the  ‘trappings  of  the  Court’  and  performs  judicial

functions, albeit limited ones in the context of the overall functioning

of  the  Commission,  still  while  performing  such  judicial  functions 58 Another distinguished jurist who served as a Professor of Law at The  Harvard Law School

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which may be of far reaching effect, the presence of a member having

knowledge of law would become necessary.  The absence of a member

having knowledge of  law would make the composition of  the State

Commission  such  as  would  make  it  incapable  of  performing  the

functions under Section 86(1)(f) of the said Act.

106. In  Madras Bar Association59 (MJ-II),  the Constitution Bench,

referring to the decision in Madras Bar Association60 (MJ-I) observed

that members of tribunals discharging judicial functions could only be

drawn from sources possessed of expertise in law and competent to

discharge judicial functions.  We are conscious of the fact that the case

(MJ-I) dealt with a factual matrix where the powers vested in courts

were sought to be transferred to the tribunal, but what is relevant is the

aspect  of judicial functions with all  the ‘trappings of  the court’ and

exercise  of  judicial  power,  at  least,  in  respect  of  same  part  of  the

functioning of the State Commission.  Thus, if the Chairman of the

Commission is not a man of law, there should,  at least, be a member

who  is  drawn  from  the  legal  field.   The  observations  of  the

Constitution Bench in Madras Bar Association61 (MJ-II) constitutes a

59 supra 60 supra 61 supra

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declaration  on  the  concept  of  basic  structure  with  reference  to  the

concepts  of  “separation  of  powers”,  “rule  of  law”  and  “judicial

review”.  The first question raised before the Constitution Bench as to

whether  judicial  review  was  part  of  the  basic  structure  of  the

Constitution was, thus, answered in the affirmative.

107. We are, thus, of the view that it is mandatory to have a person of

law, as a member of the State Commission.  When we say so, it does

not imply that any person from the field of law can be picked up. It has

to be a person, who is, or has been holding a judicial office or is a

person  possessing  professional  qualifications  with  substantial

experience in the practice of law, who has the requisite qualifications

to have been appointed  as  a  Judge of  the High Court  or  a  District

Judge.

108. In Brahm Dutt v. Union of India62, it has been observed that if

there  are  advisory  and  regulatory  functions  as  well  as  adjudicatory

functions to be performed, it may be appropriate to create two separate

bodies  for  the  same.   That  is,  however,  an  aspect,  which is  in  the

wisdom of  the  legislature  and that  course  is  certainly  open  for  the

future if  the legislature deems it so.  However, at present there is a

62 supra

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single Commission, which  inter alia performs adjudicatory functions

and, thus, the presence of a man of law as a member is a necessity in

order to sustain the provision, as otherwise, it would fall foul of the

principles  of  separation  of  powers  and  judicial  review,  which  have

been read to be a part of the basic structure of the Constitution.

109. We are also not in a position to accept the plea advanced by the

learned Attorney General that since there is a presence of a Judge in the

Appellate Tribunal that would obviate the need of a man of law as a

member of the State Commission.  The original proceedings cannot be

cured of its defect merely by providing a right of appeal.

110. We are, thus, of the unequivocal view that for all adjudicatory

functions, the Bench must necessarily have at least one member, who

is  or  has  been  holding  a  judicial  office  or  is  a  person  possessing

professional qualifications with substantial experience in the practice

of law and who has the requisite qualifications to have been appointed

as a Judge of the High Court or a District Judge.

111. The challenge laid in TC (C) Nos.139/2015 & 138/2015 is to the

appointments  made  to  the  Tamil  Nadu  State  Commission  and  the

exercise of the powers suo moto by the Commission.  The fundamental

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plea is of financial bias of the two members as they were working in

their  erstwhile  avatars.   The  name  of  Mr.  G.  Rajagopal  was

recommended when he was still working as the Director, TANGEDCO

and  he  opted  for  voluntary  retirement  after  his  name  had  been

recommended.  Mr. Akshayakumar retired from the post of Managing

Director  of  TANTRANSCO  on  31.5.14  and  was  appointed  as

Chairman of the Commission on 6.6.14. The tariff hike was approved

by a majority of 2:1 with these two members being part of the majority

view.

112. In respect of the aforesaid, reliance was placed on the judgment

in Rajesh Awasthi63 and Mor Modern Cooperative Transport Society

Ltd.64.  We, however, find that those judgments would not apply in the

present  case.   The nature  of  financial  interest  was  examined in the

narrower sense as well as the wider sense and in the wider sense, it was

held to include the direct or indirect interest of a person in relation to a

financial undertaking.  The situation arose when the person concerned

was  holding  both  the  posts  simultaneously,  which  is  not  so  in  the

present case. (as noticed in para 52 above)  It is also pointed out by the

learned counsel appearing for the State of Tamil Nadu that the orders 63 supra 64 supra

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of appointment have been exclusively assailed right till the Supreme

Court.   It may be added that the Selection Committee was presided

over by a retired Judge of the High Court.

113. We,  thus,  find  no  merit  in  the  plea  sought  to  be  advanced

assailing either the appointment or the suo moto tariff revision.

Conclusion:

114. In view of our observations above, we conclude as under:

i. Section 84(2) of the said Act is only an enabling provision

to appoint a High Court Judge as a Chairperson of the State

Commission of the said Act and it is not mandatory to do so.

ii. It is mandatory that there should be a person of law as a

Member of the Commission, which requires a person, who is,

or has been holding a judicial office or is a person possessing

professional  qualifications  with substantial  experience in  the

practice of  law,  who has the requisite  qualifications to have

been  appointed  as  a  Judge  of  the  High  Court  or  a  District

Judge.

iii. That  in  any  adjudicatory  function  of  the  State

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Commission,  it  is  mandatory  for  a  member  having  the

aforesaid legal expertise to be a member of the Bench.

iv.  The  challenge  to  the  appointment  of  the  Chairman  and

Member of the Tamil Nadu State Commission is rejected as

also the suo moto proceedings carried out by the Commission.

v.  Our  judgment  will  apply  prospectively  and  would  not

affect the orders already passed by the Commission from time

to time.

vi. In case there is no member from law as a member of the

Commission as required aforesaid in para 2 of our conclusion,

the next vacancy arising in every State Commission shall be

filled in by a Member of law in terms of clause (ii) above.

115. Transfer  Petition  (C)  No.974/2016  is  allowed  and  the

Transferred Case arising out of transfer petition stands disposed of.

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116. The appeals as well as the other transferred cases stand disposed

of accordingly leaving the parties to bear their own costs.   Pending

application(s), if any, also stand(s) disposed of.

..….….…………………….J.     (J. Chelameswar)

              ...……………………………J.         (Sanjay Kishan Kaul)

New Delhi. April 12, 2018.

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