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REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION  

CIVIL APPEAL NO(S).971­973 OF 2008

BHASKAR SHRACHI ALLOYS LTD.  ETC.ETC. ….APPELLANT(S)

VERSUS

DAMODAR VALLEY CORPORATION  & ORS. ETC. ….RESPONDENT(S)

WITH CIVIL APPEAL NO(S). 1914 OF 2008

CIVIL APPEAL NO(S).4504­4508 OF 2008 CIVIL APPEAL NO(S).4289 OF 2008

J U D G M E N T

RANJAN GOGOI, J

1. This group of appeals arise out of a common

judgment and order dated 23rd November, 2007 passed by the

learned Appellate Tribunal for Electricity at New Delhi

(hereinafter referred to as “learned Appellate Tribunal”).  The

challenge   in   the appeals   before the   learned   Appellate

Tribunal    was against   the order of the   Central   Electricity

Regulatory   Commission (hereinafter referred to as “CERC”)

dated   3rd  October, 2006  determining     the     tariff

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chargeable   by   the Damodar   Valley   Corporation

(hereinafter referred   to   as   “Corporation”) from the

consumers of electricity generated  and transmitted  by the

Corporation. The tariff has been determined under the

provisions of Section 61 and 62 of the Electricity Act, 2003

(hereinafter referred to as “2003 Act”) read with such other

provisions of the Damodar Valley Corporation Act, 1948

(hereinafter referred  to  as “Act  of  1948”)  which have  been

found to be not inconsistent with the provisions of the 2003

Act.   The appeals being under Section 125 of the 2003 Act

are required to be answered only on such substantial

questions  of law  that  may  arise for  determination  by this

Court.

2. First, the facts.

The Corporation has  been established under the

Act of 1948 for the development of the Damodar Valley area

falling within the States of West Bengal and Jharkhand.   As

evident from the provisions of Section 12 of the Act of 1948,

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three (03) major areas of activity undertaken by the

Corporation under the Act of 1948 are: (i) power generation,

transmission and distribution; (ii) flood control; and (iii)

irrigation and some connected activities like soil

conservation,  afforestation, etc.  

3. Under Section 20 of the Act of 1948, the

Corporation was empowered and authorised to determine the

tariff chargeable by it from its consumers.  Part IV of the Act

of  1948 under  the  heading “Finance,  Accounts  and Audit”

though, superficially,  may appear to be dealing with the

indoor  management of the  Corporation contain provisions

which could have a relevant bearing to tariff fixation under

Section 20 of the Act of 1948.   Some of the said provisions

are to be found in Sections 32, 37, 38, 39 and 40 of the Act of

1948 which deals  with facets  of  expenditure,  depreciation,

allowances, payment of interest, etc. all of which would have

a reasonable bearing on working out the tariff that the

Corporation would be entitled to charge from its consumers

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after taking into  account the  said items of expenditure  or

allowances/disallowances, as may be.   

4. Acting under the provisions of Section 20 of the Act

of 1948, the Corporation had notified its own tariff order on

1st  September,  2000.   The 2003 Act  came  into  force with

effect from 10th June, 2003.  Despite coming into force of the

2003 Act the Corporation had not approached the CERC for

determination of the tariff  chargeable by it.  Consequently,

the CERC initiated suo motu proceedings by order dated 29th

March, 2005 and directed the Corporation to submit an

application for determination of tariff for the period from 1st

April, 2004 to 31st March, 2009.   In terms of the said order

passed by the CERC, the Corporation made an application

dated 8th June, 2005 before the CERC (i.e. Petition No.66 of

2005) for determination of tariff for the period in question.  It

appears that in view of the “complexity” of the issues

involved, the CERC had requested one of its members to go

into the necessary fact­finding exercise and to submit a

report of the detailed facts that would be relevant for

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determination of tariff  by  the  CERC.  On  the  basis  of the

available  inputs received  from the aforesaid single member

Bench of the CERC, the CERC issued a tariff order dated 3rd

October 2006 determining the tariff for generation and

transmission for the period from 1st April, 2006 to 31st March,

2009 by allowing a two­year transition period to the

Corporation i.e. from 1st April, 2004 to 31st March, 2006.   

5. At this stage, it may be appropriate to take note of

the contents of the tariff order dated 3rd October, 2006 passed

by the CERC so as to appreciate and understand the

grievances entertained by the respective appellants before

this Court who were also the appellants before the learned

Appellate Tribunal challenging the order of the CERC dated

3rd October, 2006.

6. The  CERC by its order  dated  3rd  October,  2006

took the view that the matter of determination of tariff

chargeable by the  Corporation  would be governed by the

provisions of the 2003 Act and the Central Electricity

Regulatory Commission (Terms and Conditions of Tariff)

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Regulations, 2004 (hereinafter referred to as “Tariff

Regulations”) framed thereunder.    Accordingly, the  CERC

proceeded to determine the tariff after giving due weightage to

the various relevant factors which are required to be

considered for such determination as spelt out by the

Regulations  in  force.  A  reading of the  order  of the CERC

would go to show that in determining the tariff due

consideration of the following issues was made by the CERC.

(i) Choice between GFA and NFA Method;

(ii) Capital Cost;

(iii) Extra Rupee Liability;

(iv)  Additional Capitalisation;

(v)  Debt­Equity Ratio;

(vi) Return on equity;

(vii) Interest on loan;

(viii) Depreciation including Advance against

Depreciation;

(ix) O & M expenses;

(x) Pension and gratuity fund;

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(xi) Interest on working capital;

(xii) Operational Norms;

(xiii) Energy charges and the fuel component for the

thermal generating stations;

(xiv) Fuel Price Adjustment

7. Aggrieved by the aforesaid order dated 3rd October,

2006, the Corporation, insofar the exclusion of the provisions

of the Act of 1948 while determining the tariff and refusal to

grant claims of certain expenses thereunder; the consumers,

namely, Bhaskar Shrachi Alloys Ltd., Impex Ferro Tech Ltd.,

Shyam Ferro Alloys Ltd., Maithan Alloys Ltd., Anjaney Ferro

Alloys Ltd.,  Dayal  Steel  Ltd.  and Castrol  Technologies  Ltd.

insofar  as transitory  period is concerned  and the  State  of

Jharkhand and West Bengal Electricity Regulatory

Commission insofar as the exclusion of the power of the State

Regulatory Commission to determine the intra­State

transmission of electricity is concerned had approached the

learned Appellate Tribunal by way of separate appeals.

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8. The  learned Appellate  Tribunal  by the impugned

judgment and order dated 23rd November, 2007 took the view

that by virtue of fourth proviso to Section 14 of the 2003 Act,

while the Corporation continued to be a deemed licensee, the

provisions of the Act of 1948, which are not inconsistent with

the provisions of the 2003 Act, shall continue to apply to the

Corporation.   In other words, insofar as the inter­play

between the provisions of the Act of 1948 and the 2003 Act is

concerned, according to the learned Appellate Tribunal, it is

only  the provisions of the earlier  Act inconsistent with  the

later Act that will cease to have effect and such provisions of

the Act of 1948 that are consistent will continue to hold the

field notwithstanding the enactment of the 2003 Act.

Continuing further, the learned Appellate Tribunal held that

while  Section  20  of the  Act of 1948  which empowers the

Corporation to fix the tariff is inconsistent with Section 62 of

the 2003 Act which authorised the “Appropriate Commission”

to determine the tariff  in accordance with the provisions of

the 2003 Act, the specific  provisions contained  in Sections

32,  37,  38,  39  and  40  of  Part IV  of the  Act  of  1948 will

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continue to be relevant in the matter of determination of tariff

in as much as there are no pari materia/parallel provisions in

the 2003 Act. It was further held that though there are

provisions in the Tariff Regulations framed by the CERC

covering  the same field, the said Regulations,  being  in the

nature of subordinate legislation, cannot override the

provisions of a law duly enacted (Act of 1948), particularly, in

the absence of any legislative intention to the said effect in

any of the provisions of the 2003 Act.   Accordingly, the

learned Appellate Tribunal while rejecting the following five

claims and upholding the order of the CERC on the aforesaid

counts thought it proper to remand the matter, for a de novo

consideration of the remaining five issues by the CERC in the

light of the findings recorded by it. The tabular chart,

extracted below, would indicate the five issues that have been

finalized by the learned Appellate Tribunal by upholding the

order of the CERC dated 3rd October, 2006 and the other five

issues which have been remanded for re­determination by the

CERC.

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Issues finalized by the learned Appellate Tribunal by upholding the order of the CERC dated 3rd  October, 2006

Issues remanded for re­determination by the CERC

(i) Higher return on equity; (i) Additional capitalization for the period 2004­ 2005 and 2005­2006;

(ii) Depreciation rate; (ii) Pension and Gratuity contribution;

(iii) Resetting of operating norms at  variance  from the operating norms prescribed in the 2004 regulations;

(iii) Revenue to be allowed to the DVC under the DVC Act;

(iv) Return on capital investment on Head Office,  Regional  Offices, administrative and other technical centres, etc.; and  

(iv) Operation and Maintenance expenses;

(v) Generation projects presently not operating.

(v) Debt Equity Ratio

9. Three substantial questions of law would seem to

arise for determination by this Court in exercise of its

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jurisdiction under Section 125 of the 2003 Act.  The same are

enumerated below:

(a) Whether the view taken by the learned Appellate

Tribunal with regard to the fourth proviso to Section 14 of the

2003 Act and the applicability of the provisions of Sections

32, 37, 38, 39 and 40 contained in Part IV of the Act of 1948

in the matter of tariff  determination under the 2003 Act is

correct?

(b) Whether it is the provisions of the Tariff

Regulations (2004 Regulations) which alone would hold the

field in the matter of determination of tariff to the exclusion of

the provisions of Sections 32, 37, 38, 39 and 40 contained in

Part IV of the Act of 1948?

(c) Whether the conclusions and findings of the

learned Appellate Tribunal on any one or more of the claims

made by any of the stakeholders in the matter of

determination of tariff is vitiated by grave and apparent

errors?

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10. It  will  be  useful to  notice,  at this  stage, that in

terms of the impugned order dated 23rd  November, 2007

passed by the learned Appellate Tribunal the matter has been

de novo  considered and re­determined by the CERC by  its

order dated 6th August, 2009.  This has happened due to the

absence of any interim restraint.  The said order of the CERC

dated 6th  August, 2009 has since been affirmed by the

learned  Appellate  Tribunal  by  a separate order  dated  10th

May, 2010 which is the subject matter of challenge in Civil

Appeal No.4881 of 2010 presently pending before this Court.

The said appeal (Civil Appeal  No.4881 of 2010) has  been

ordered to be heard after disposal of the present appeals.  

11. The arguments advanced by the respective

appellants  who are  also the respondents in the  connected

appeals may be noted at this stage.   

12. On behalf of the CERC, which is the appellant in

Civil  Appeal  No.4289 of  2008, it  has  been contended  that

second part of the fourth proviso to Section 14 of the 2003

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Act cannot be understood to mean, as has been held by the

learned Appellate Tribunal, that the provisions of the Act of

1948 which are not inconsistent with the provisions of the

2003 Act so far as the determination of tariff is concerned

would continue to hold the field.   Two principal basis have

been urged in support of the above.  The first is that a proviso

cannot be  understood to go beyond the  main  part of the

Section which, in the present case, deals only with ‘licensing’

and not  ‘tariff determination’.   Reliance in this regard has

been placed on the decisions of this Court in  Dwaraka

Prasad vs. Dwarka Das Saraf   1 and Union of India & Ors.

vs. Dileep Kumar Singh   2.

The second limb of the argument is based on the

provisions contained in Section 174 of the 2003 Act which

gives an overriding effect to the provisions of the 2003 Act

notwithstanding any inconsistency with any other law for the

time being in force.

1 (1976) 1 SCC 128 [para 18] 2  (2015) 4 SCC 421 [para20]

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13. Without prejudice to the above, it has been further

contended on behalf of the CERC that the learned Appellate

Tribunal  was  clearly in error in  holding that in case  of  a

conflict between the Act of 1948 and the Tariff Regulations

framed under the 2003 Act the provisions of the Regulations

will require to be ignored. The  decisions of this  Court in

Bharathidasan University & Anr. vs.  AICTE & Ors.   3   and

Samsthanan Chethu Thozhilali Union vs. State of Kerala

& Ors.   4  ,  relied upon, has been misconstrued by the learned

Appellate Tribunal, it is urged on behalf of CERC.   It is

further contended on behalf of the CERC that Section 61 of

the 2003 Act lays down the principles for tariff determination

which finds detailed manifestation in the 2004 Regulations.

The Regulations,  it  is contended, embody the principles on

which tariff is required to be determined and the provisions

thereof cannot be overridden by the provisions of any other

statute and, that too, enacted at an anterior point of time i.e.

the Act of 1948.  The mandate of Section 174 of the 2003 Act

3 (2001) 8 SCC 676 [para 14] 4 (2006) 4 SCC 327 [Para 17]

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which is subsequent in point of time will be compromised in

the event such an interpretation is accepted.  

14. So  far  as  the specific  heads of tariff fixation are

concerned, it  has  been urged  on behalf  of the  CERC  that

Section 40 of the Act of 1948 has been wrongly relied upon by

the learned Appellate Tribunal in determining the question of

the extent of depreciation allowable.   It  is emphasised that

Section 40 leaves the question of the percentage of

depreciation to be determined by the Central Government.  It

is contended that the purpose and intent behind the

enactment of 2003 Act is to distance the Central Government

from the determination of tariff under the 2003 Act which is

to be fixed by the Regulatory Commissions on the principles

acknowledged in the Tariff Regulations. Regulation 21(1)(ii) of

the Tariff Regulations, therefore, according to the CERC,

should have been the basis for the determination of the

extent of depreciation.   In this regard, reliance has been

placed on the decision of this Court in  PTC India Ltd.  vs.

Central Electricity Regulatory Commission   5 .   5 (2010) 4 SCC 603 [Para 17]

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15. It is  on  the  same basis that the findings  of the

learned  Appellate  Tribunal so far  as the ‘Sinking  Fund’ is

concerned, which has been held to be recoverable through

the tariff, has been assailed.   It is urged that the Tariff

Regulations do not make any provision for any ‘Sinking Fund’

and, therefore, the recovery  of such  fund  through  tariff is

abhorrent to the provisions of Section 61 of the 2003 Act read

with the Tariff Regulations.  

16. Similarly, the finding of the learned Appellate

Tribunal with regard to the allowability of charging the

expenditure on projects other than electricity from the

common fund as common expenditure has been assailed as

being contrary to the spirit of the 2003 Act inasmuch as it is

opposed to the principle of allowance of cross­subsidy which

the 2003 Act  seeks  to do away with.  Reference has been

made to different provisions of the 2003 Act to contend that

recovery of expenditure unrelated to electricity generation

from the electricity tariff is alien and contrary to the

provisions of the 2003 Act.  

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17. The conclusions of the learned Appellate Tribunal

with regard to the debt­equity ratio  insofar as the projects

completed prior to 1992 (which has been fixed at 50:50) has

also been assailed on the ground that the sole basis thereof is

the practice followed in the case of  another PSU i.e.  NTPC

ignoring the fact that the Regulation 20 of the Tariff

Regulations provide for a ratio of 70:30.

18. Likewise, the findings with regard to Pension and

Gratuity Fund, particularly, the recovery of the entire fund

from the consumers (in reversal of the decision of the CERC

permitting recovery from consumers to the extent of 60% and

contribution by the Corporation of the balance 40%) has been

assailed on the ground that no discernible or rational basis is

disclosed for the view taken, particularly when the

Corporation has been permitted and, in fact, collected tariff at

the rate fixed by the Corporation itself under the Act of 1948

for the years 2004­2005 and  2005­2006  which constitute

40% of the tariff period.

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19. The allowances of capital investment in respect of

Head Office, Regional Offices, Administrative & other

Technical Centres have also been assailed as being contrary

to the provisions of the Tariff Regulations.  

20. The above contentions made on behalf of the CERC

has been reiterated on behalf of the consumers who are the

appellants in Civil Appeal Nos. 971­973 of 2008.   So far as

the interpretation of the provisions contained in the fourth

proviso to Section 14 of the 2003 Act is concerned, learned

counsel for the said appellants (consumers) has additionally

drawn the attention of the Court that  in the course of the

exercise leading to the enactment of 2003 Act, the

Parliamentary Standing Committee on Energy had, in  fact,

recommended that the Corporation, having regard to the

special responsibility entrusted to it under the Act of 1948,

should be exempted  from the  application of the  2003 Act.

Parliament, however, decided not to provide a blanket

exemption in favour of the Corporation. It is pointed out that

under  Section  173 of the  2003 Act it is  only  such of the

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provisions of the 2003 Act which are inconsistent with the

provisions of the Consumer Protection Act, 1986 or the

Atomic Energy Act, 1962 or the Railways Act, 1989 that will

not have any effect.   Instead, insofar as the Corporation is

concerned what was provided for is a limited exemption, the

extent of  which  has  been spelt out  by  Section  14 (fourth

proviso) of the 2003 Act, which, necessarily, has to be

understood to be circumscribed by the provisions of the main

part of Section 14 of the 2003 Act which deals with licensing

as distinguished from tariff determination.  It is further urged

on behalf of the appellants – consumers that the decision to

keep in abeyance the tariff for a period of two years is ultra

vires the provisions of the 2003 Act, there being no authority

in law to order any such relaxation or to postpone the coming

into effect of the tariff fixed under the 2003 Act.   The fact

that the provisions of the Act of 1948 do not find any mention

in the proviso to Section 61 of the 2003 Act has also been

stressed upon.  

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21. In so far as the pension and gratuity fund is

concerned, in addition to the grounds urged in this regard on

behalf of the CERC, it is further urged that almost 99% of the

pension and gratuity liability,  as  assessed by the  Actuary,

has been permitted to be loaded on to the electricity business

without any reference or finding with regard to the percentage

of man­power deployed in the electricity business.   Such a

decision which has been based on the sole submission of the

Corporation is contended to be untenable in law.   

The calculation and allowance of percentage of

depreciation by following the provisions of Section 40 of the

Act of 1948 has also been assailed as being contrary to the

provisions of the Regulations which, according to the

appellants – consumers should hold the field.  

22. The  Corporation  which is the respondent in the

appeals filed by the Regulatory Commissions and the

Consumers had filed its cross­objections in the said appeals.

Emphasis is laid on the status and peculiar characteristics of

the Corporation as envisaged by the statute  i.e. the Act of

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1948 constituting the said body.   Reference has been sought

to be made to the various social  welfare activities that the

Corporation is statutorily mandated to perform over and

above electricity generation and transmission. The aforesaid

peculiar characteristics of the Corporation and its

multifarious   duties,   according     to     the Corporation,

would justify continuity of the due application of the

provisions of the Act   of   1948   as   are   not   inconsistent

with   the   provisions    of    the 2003 Act.      It   is   only

such of the provisions of the Act of 1948 which are in clear

conflict with the provisions of the 2003 Act that will give way.

The provisions of the Act of 1948 that may be in conflict with

those of the Tariff Regulations will however not have the same

effect inasmuch as the provisions of a subsidiary legislation

cannot have an overriding effect over the provisions of the

parent or any other statute.  It has been further urged that in

a given situation the proviso to a statutory provision may act

as a main provision itself going beyond the parameters of the

matter of which the proviso may have been enacted as a part.

In this regard, reliance has been placed on the decisions of

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this Court in  State of Rajasthan  vs.  Leela Jain   6,  S.

Sundaram  Pillai  &  Others  vs.  V.R. Pattabhiraman  &

Others   7,  Shah Bhojraj Kuvarji Oil Mills & Ginning

Factory  vs.  Subhash  Chandra  Yograj Sinha   8,  Motiram

Ghelabhai vs. Jagan Nagar   9.   

23. Coming specifically to the rate of depreciation,

sinking fund, interest on capital, etc., it has been urged that

there being no provisions in the 2003 Act in respect of the

aforesaid  matters  which are dealt  with only by the Tariff

Regulations in contra­distinction to specific provisions of the

Act of 1948 covering the issue i.e. Section 40 of the Act of

1948, it is the provisions of Part IV of the Act of 1948 which

will govern  the  matter.  So far  as the  debt­equity ratio is

concerned, it has been urged that the determination of the

ratio at 50:50 for capital assets created prior to 30th March,

1992 and the ratio of 70:30 for the capital assets after 30 th

March, 1992 is consistent with the principles adopted for all

6 (1965) 1 SCR 276 7 (1985) 1 SCC 591 [Para 27 to 43] 8 (1962) 2 SCR 159 [Para 9 and 10] 9 (1985) 2 SCC 279 [Para 9]

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Central Government Corporations like NTPC Limited,

Powergrid Corporation of India Limited, NHPC etc.   

24. Insofar  as the  pension and  gratuity  contribution

required to be made by the Corporation is concerned,  it  is

contended that the issue has been raised only at the stage of

arguments by the HT­consumers i.e. appellants in Civil

Appeal Nos. 971­973 of 2008. The same has not been raised

by the  Regulatory  Commission at all or even by the  HT­

consumers before the forums below.   That apart, it is

contended that the break­up of the details of the percentage

of employees called for by the CERC in this regard was made

available which fact  is borne out by the documents placed

before  the  learned Appellate  Tribunal  which has also  been

laid before this Court   (Annexure 18 to the Memo of Appeal

before the learned Appellate Tribunal).  

25. Similarly, in so far as the Operation and

Maintenance expenditure is concerned, it is contended that

the same has been rightly allowed as per the Tariff

Regulations in force.

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26. Before delving into the issues arising in the

appeals, two preliminary questions need to be answered

which we propose to do at the outset.   The first pertains to

the grant of a transitory period making the tariff order

effective from 1st April, 2006 instead of 1st April, 2004.

27. We have considered the reasons which had

weighed  with the CERC as  well as the learned Appellate

Tribunal in granting the aforesaid transitory period.   The

present dispute, regardless of the way it  is resolved, would

have  relevance to the quantum of the  tariff,  depending on

whether the determination is made on the basis of the

provisions of Part IV of the Act of 1948 or the provisions of

the Tariff Regulations, as may be.  So far as the grant of the

transitory period  is  concerned, the same, we have noticed,

has been so granted having due regard to the statutory

functions/social responsibilities that the Corporation is

mandated to undertake in terms of the Act of 1948.   The

tariff fixed is also lower than the tariff that has been fixed by

the Jharkhand and West Bengal Electricity Regulatory

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Commission for the general/domestic classes of consumers.

While it is correct that the classes of consumers served by the

Corporation are  HT­Industrial consumers like Steel, Coal,

Railways, etc. beside  bulk supply to  main  beneficiaries of

State Electricity Boards of West Bengal and Jharkhand, the

said fact, itself, is another peculiar feature which

distinguishes the  Corporation  from other licenses.   If in  a

situation  where the  Corporation in addition to generation,

transmission and distribution of electricity is statutorily

required to undertake certain social security/beneficial

measures like flood control, control of soil erosion,

afforestation, navigation, promotion of public health, etc. we

do not see how the grant of transitory period can be faulted

with.   We, therefore, decline to  interfere with the aforesaid

part of the order of the learned Appellate Tribunal.

28. The learned Appellate Tribunal has also taken the

view that having regard to the provisions of Section 79 of the

2003 Act it is the CERC which would be  the “Appropriate

Commission” for determination of tariff inasmuch as the

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Damodar Valley Corporation is a Corporation owned and

controlled by the Central Government.  The detailed inputs to

arrive at the aforesaid conclusion have been duly considered

by us.   On such consideration, we are of the view that the

above conclusion recorded by the learned Appellate Tribunal

is neither unreasonable nor irrelevant so as to warrant our

interference, particularly, in exercise of the limited

jurisdiction under Section 125 of the 2003 Act.

29. We may now turn to the other/larger issues arising

in the appeals.

30. The Damodar Valley Corporation had been

incorporated under the provisions of the Act of 1948.   The

facts antecedent to the incorporation of this entity  would

throw considerable  light on the objects and reasons for  its

incorporation.   Sometime in the year 1943, the  Damodar

River  Valley  had  been  affected  by  severe floods leading to

wide­scale destruction of life and  property. The  Provincial

Government of Bengal had constituted an Enquiry Committee

to suggest ways and means to avoid such catastrophes in the

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future.  The Enquiry Committee had, inter alia, recommended

that a statutory corporation, on the lines of the Tennessee

Valley Authority of the USA, be incorporated to command and

control the  Damodar  River.  The  then British  Government

accepted this proposal of the Committee and had called one

Mr. W.L. Voorduin, a senior Engineer working for the

Tennessee  Valley  Authority to  make recommendations  and

suggestions in this regard.

31. The  preamble to the  Tennessee  Valley  Authority

Act10, 1933, reads that the statute has been enacted by the

Congress “to improve the navigability and to provide for

the flood control of the Tennessee River; to provide for

reforestation and the proper use of marginal lands in the

Tennessee Valley; to provide for the agricultural and

industrial development of said valley; to provide for the

national defence by the creation of a corporation for the

operation of Government properties at and near Muscle

Shoals in the State of Alabama, and for other purposes.”

10 16 U.S. Code § 831

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As can be observed, the primary objective of the Tennessee

Valley Authority Act is to prevent floods across the Tennessee

River Valley and the generation of electricity is incidental to

this activity of flood­control.   

32.  The objects and reasons behind the incorporation

of the Act of 1948 may now be noticed:

“The Damodar River rises in Western Bihar and flows generally in a south-easterly direction into Bengal. It is a seasonal river having a large flow of water during the rains which, apart from being generally wasted, at times causes great damage to life and property. It is now proposed to harness the water of this river and some of its tributaries and  utilize  it  in  multiple  development  of  the Damodar Valley and the adjoining area.

This  Bill  seeks  to  set  up  a  Corporation, called the Damodar Valley Corporation on the lines of the Tennessee Valley Authority in the USA. It will be an autonomous body within the framework of the enactment. Its objects,  constitution  and  powers  are  laid down in the Bill.  Briefly, its main function will  be  to  control  flood  in  the  Damodar, generate electric power for distribution and provide  water  for  irrigation  and  other purposes. In addition, the Corporation will, endeavour  to  promote  economic development  of  the  Damodar  Valley  and the  adjoining  areas. It  will  consist  of  three members  including  the  Chairman.  These  three members  and  the  Secretary  and  the  treasurer will  be  appointed  by  the  Central  Government. The Corporation will  have the power to acquire land and construct  or  cause to  be constructed such  dams,  barrages,  reservoirs,  power-houses and  power  structures,  electrical  transmission

29

line, irrigation and navigation works as may be necessary.  The  capital  required  by  the Corporation  will  be  provided  by  the  Central Government and the Government of  Bihar  and West  Bengal.  The  profits  and  losses  will  be distributed between these three Governments in certain agreed proportions.

The provisions of  this Bill  are designed to give effect  to  the  broad  outlines  of  the  agreement reached  between  the  three  Governments concerned.”

33. Having noticed the objects and reasons behind the

creation  of the incorporated  body  and the  main functions

assigned to it by Parliament, we may now specifically revert to

the issue of determination of tariff for supply/distribution of

the electricity generated by the Corporation.  

34. Insofar as the issue as to whether the Tariff

Regulations  would  have  an  overriding effect to render the

parallel provisions in the Act of 1948 ineffective, the reliance

placed on behalf of the appellants on the decision of a

Constitution Bench of this Court in  PTC India Limited

(supra) may now be considered. The primary issue that was

considered by the Constitution Bench of this Court in  PTC

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India Limited  (supra)  was  “whether the Appellate

Tribunal constituted under the Electricity Act, 2003 has

jurisdiction under Section 111 of the Act to examine the

validity of the Central Electricity Regulatory

Commission (Fixation  of  Trading  Margin)  Regulations,

2006 framed in exercise of power conferred under

Section 178 of the Electricity Act?”

35. The observations of this Court in  PTC India

Limited  (supra)  with regard to the efficacy of the Tariff

Regulations in the light of its statutory character must

necessarily be understood in the above context.  The opinion

rendered in  PTC India Limited  (supra)  itself makes it clear

that the Tariff Regulations though statutory in character are

a species of subordinate delegated legislation, the purport of

which  has  been  described  and  dealt  with in the following

manner:

“52. In  Indian Express Newspapers (Bombay) (P) Ltd. v.  Union  of  India this  Court*  held  that  subordinate legislation  is  outside  the  purview  of  administrative

31

action  i.e.  on  the  grounds  of  violation  of  rules  of natural  justice or  that it  has not  taken into account relevant  circumstances  or  that  it  is  not  reasonable. However,  a  distinction  must  be  made  between delegation  of  legislative  function  and  investment  of discretion to exercise a particular discretionary power by a statute. In the latter case, the impugned exercise of  discretion  may  be  considered  on  all  grounds  on which administrative action may be questioned such as non-application of mind, taking irrelevant matters into consideration, etc. The subordinate legislation is, however,  beyond  the  reach  of  administrative  law. Thus,

___________ *(1985) 1 SCC 641 delegated legislation - otherwise known as secondary, subordinate or administrative legislation - is  enacted by  the  administrative  branch  of  the  government, usually  under  the  powers  conferred  upon  it  by  the primary  legislation.  Delegated  legislation  takes  a number  of  forms  and  a  number  of  terms  -  rules, regulations, by-laws etc; however, instead of the said labels what is of significance is the provisions in the primary legislation which, in the first place, confer  the  power  to  enact  administrative legislation.  Such  provisions  are  also  called  as “enabling  provisions”.  They  demarcate  the extent of the administrator’s legislative power, the  decision-making  power  and  the  policy making  power. However,  any  legislation  enacted outside  the  terms  of  the  enabling  provision  will  be vulnerable to judicial review and ultra vires.”

36. The opinion of a seven Judge Bench of this Court,

though of considerable vintage, in The Presidential Reference,

32

The Delhi Laws Act, 191211 may usefully be recalled at this

stage:

“(In  delegated  legislation),  a  portion  of  the  law- making  power  of  the  legislature  is  conferred  or bestowed upon a subordinate authority and the rules and regulations which are to be framed by the latter constitute an integral portion of the statute itself. As said already, it is within powers of Parliament or any competent legislative body, when legislating within its legislative field, to confer subordinate administrative and legislative powers upon some other authority. The question  is:  What  are  the  limits  within  which  such conferment of bestowing of powers could be properly made?

It is  conceded by the learned Attorney-General that the  legislature  cannot  totally  abdicate  its  functions and invest  another authority with all  the powers of legislation which it possesses. Subordinate legislation, it is not disputed, must operate under the control of the legislature from which it derives its authority, and on the continuing operation of which, its capacity to function  rests.  As was said by Dixton, J.,  (vide, Victoria  Stevedoring  and  General  Contracting Company  v.  Dignan  ,  46  C.L.R.  73)  “a subordinate  legislation  cannot  have  the independent and unqualified authority which is an  attribute  of  true  legislative  power”. It  is pointed out by this learned Judge that several legal consequences flow from this doctrine of subordinate legislation. An offence against subordinate legislation is regarded as an offence against the statute and on the repeal of the statute the regulations automatically collapse.  So far,  the  propositions  cannot,  and  need not,  be  disputed.  But,  according  to  the  learned Attorney-General, all that is necessary in subordinate legislation  is  that  the  legislature  should  not  totally abdicate  its  powers  and  that  it  should  retain  its

11 A.I.R. 1951 S.C. 332; Coram: Hon’ble the Chief Justice H.J. Kania, Hon’ble  Mr.  Justice  Syed  Fazl  Ali,  Hon’ble  Mr.  Justice  Patanjali Sastri, Hon’ble Mr. Justice M.C. Mahajan, Hon’ble Mr. Justice B.K. Mukherjea, Hon’ble Mr. Justice S.R. Das and Hon’ble Mr. Justice Vivian Bose

33

control  over  the  subordinate  agency  which  it  can destroy later at any time it likes. If this is proved to exist in a particular case, then the character or extent of  the powers delegated to or conferred upon such subordinate agent is  quite  immaterial  and into that question the courts have no jurisdiction to enter. This argument seems plausible at first sight, but on closer examination,  I  find  myself  unable  to  accept  it  as sound.  In  my  opinion,  it  is  not  enough  that  the legislature retains control over the subordinate agent and could recall him at any time it likes, to justify its arming  the  delegate  with  the  legislative  powers  in regard to a particular subject. Subordinate legislation not  only  connotes  the  subordinate  or  dependent character of the agency which is entrusted with the power to legislate, but also implies to subordinate or ancillary character of the legislation itself, the making of  which  such  agent  is  entrusted  with.  If  the legislature hands over its essential legislative powers to  an outside  authority,  that  would,  in  my opinion, amount to a virtual abdication of its powers and such an act would be in excess of the limits of permissible delegation.

... On a consideration of all these decisions I have no hesitation in  holding that as regards constitution of the  delegation  of  legislative  powers  the  Indian Legislature  cannot  be  in  the  same  position  as  the prominent British Parliament and how far delegation is permissible has got to be ascertained in India as a matter of construction from the express provisions of the Indian Constitution.  It cannot be said that an unlimited right of delegation is inherent in the legislature power itself.  This is  not warranted by the provisions of  the Constitution and the legitimacy of delegation depends entirely upon its  being  used as  an ancillary  measure which the  legislature  considers  to  be  necessary  for the purpose of exercising its legislative powers effectively and completely. The legislature must retain in its own hands the essential legislative functions  which  consist  in  declaring  the legislative policy and laying down the standard which is to be enacted into a rule of law, and what  can  be  delegated  in  the  task  of subordinate legislation which by its very nature

34

is ancillary to the statute which delegates the power to make it.”

37. It may be wholly unnecessary to detract from the

fundamental principles of law laid down in The Presidential

Reference (supra), which would be an inevitable consequence,

if the contentions advanced on behalf of the appellants to the

effect that the Tariff Regulations must override the provisions

of the Act of 1948 as the said regulations are statutory  in

character is to be accepted.   This is also  what  has  been

subsequently emphasised by this Court in  Bharathidasan

University & Anr.  (supra) and  Samsthanan Chethu

Thozhilali Union  (supra).   No error, therefore, can also be

found in the implicit reliance placed on the ratio of the above

decisions by the learned Appellate Tribunal in its order dated

23rd November, 2007.

38. This will bring us to a consideration of the purport

and effect of the fourth proviso to Section 14 of the 2003 Act

on which much debate and discussion have been generated

in the course of prolonged hearing of the case that had taken

35

place.  Section 14 of the Act may usefully be extracted below

at this stage:  

“14. Grant  of  Licence :   “The  appropriate Commission  may,  on  an  application  made  to  it under Section 15, grant a licence to any person (a)  to  transmit  electricity  as  a  transmission licensee; or (b)  to  distribute  electricity  as  a  distribution licensee; or Provided that the Developer of a Special Economic Zone notified under sub-section (1) of Section 4 of the  Special  Economic  Zones  Act,  2005,  shall  be deemed to  be  a  licensee for  the  purpose of  this clause, with effect from the date of notification of such Special Economic Zone. (c)  to  undertake  trading  in  electricity  as  an electricity trader, In any area as may be specified in the licence: PROVIDED that any person engaged in the business of  transmission  or  supply of  electricity  under the provisions of the repealed laws or any Act specified in the Schedule on or  before the appointed date shall be deemed to be a licensee under this Act for such period  as  may be stipulated in  the  licence, clearance  or  approval  granted  to  him  under  the repealed laws or such Act specified in the Schedule, and the provisions of the repealed laws or such Act specified in the Schedule in respect of such licence shall apply for a period of one year from the date of commencement of this Act or such earlier period as may be specified, at the request of the licensee, by the  Appropriate  Commission  and  thereafter  the provisions of this Act shall apply to such business: PROVIDED FURTHER that the Central Transmission Utility  or  the  State  Transmission  Utility  shall  be deemed to be a transmission licensee under this Act: PROVIDED  also  that  in  case  an  Appropriate Government  transmits  electricity  or  distributes

36

electricity  or  undertakes  trading  in  electricity, whether before or after the commencement of this Act,  such  Government  shall  be  deemed  to  be  a licensee under this Act, but shall not be required to obtain a licence under this Act: PROVIDED  also  that  the  Damodar  Valley Corporation,  established  under  sub-section (1)  of  Section  3  of  the  Damodar  Valley Corporation Act, 1948, shall be deemed to be a  licensee  under  this  Act  but  shall  not  be required  to  obtain  a  licence  under  this  Act and  the  provisions  of  the  Damodar  Valley Corporation Act, 1948, insofar as they are not inconsistent with the provisions of this Act, shall continue to apply to that Corporation: PROVIDED also that the Government company or the  company  referred  to  in  sub-section  (2)  of section  131  of  this  Act  and  the  company  or companies  created  in  pursuance  of  the  Acts specified in the Schedule, shall be deemed to be a licensee under this Act: PROVIDED  also  that  the  Appropriate  Commission may grant  a  licence  to  two or  more  persons  for distribution  of  electricity  through  their  own distribution system within the same area, subject to the conditions that the applicant for grant of licence within the same area shall, without prejudice to the other  conditions  or  requirements  under  this  Act, comply with the additional requirements 1 (relating to the capital adequacy, Credit worthiness or code of conduct)  as may be prescribed by the Central Government, and no such applicant, who complies with all the requirements for grant of licence, shall be refused grant of licence on the ground that there already exists a licensee in the same area for the same purpose: PROVIDED also that in a case where a distribution licensee  proposes  to  undertake  distribution  of electricity  for  a  specified  area  within  his  area  of supply  through  another  person,  that  person shall not be required to obtain any separate licence from the  concerned  State  Commission  and  such distribution  licensee  shall  be  responsible  for distribution of electricity in his area of supply:

37

PROVIDED  also  that  where  a  person  intends  to generate and distribute electricity in a rural area to be notified by the State Government, such person shall  not  require  any licence  for  such  generation and distribution of electricity, but he shall comply with the measures which may be specified by the Authority under section 53: PROVIDED also that a distribution licensee shall not require a licence to undertake trading in electricity.”

39. It is contended on behalf of the appellants that the

application of a proviso must always be confined and

understood  within the  parameters  of the  provisions  of the

main section   of  which the  proviso is  a  part  and  that  a

proviso, in no case,  can be construed to have any general

application.  This argument would require some examination.

In this regard the decision of this Court  Shah Bhojraj

Kuvarji Oil Mills  (supra)  may be usefully recapitulated and

the following observations may be specifically taken note of:

“It  is  contended by  the  learned  Attorney-General that  the  construction  placed  by  the  High  Court upon  the  first  proviso  to  Section  50  (of  Bombay Rents, Hotel and Lodging House Rates Control Act of 1947) is erroneous. Though he concedes that the proviso  must  be  read  as  qualifying  what  the substantive part of Section 50 enacts, he urges that the proviso goes beyond that purpose and enacts a substantive  law  of  its  own.  He  relies  upon  the following  observations  of  Lord  Loreburn,  L.C.,  in Rhondda Urban Council v. Taff Vale Railway, (1909) A.C.  253,  where  a  proviso  to  Section  51  of  the

38

Railway Clauses Consolidation Act, 1845, was under consideration:

“It is true that Section 51 is framed as a proviso upon preceding sections. But it is also true that the latter half of it, though in form a proviso,  is  in  substance  a  fresh  enactment, adding to and not merely qualifying that which goes before.”,

and contends that the latter portion of the proviso, in  question,  being  a  substantive  enactment, comprehends  not  only  those  suits  which  were pending on the date of repeal but also those cases, which came within the language of the latter part of the proviso, whenever the Act was extended to new areas………….. …..…As a general rule, a proviso is added to an  enactment  to  qualify  or  create  an exception to what is  in  the enactment,  and ordinarily,  a  proviso  is  not  interpreted  as stating a general rule. But, provisos are often added not as exceptions or qualifications to the main enactment but as savings clauses, in which cases they will not be construed as controlled by the section.”  

40. Similarly in S. Sundaram Pillai (supra) this Court

has observed:

“A very apt description and extent of a proviso was given by Lord Oreburn in  Rhondda Urban District Council  v.  Taff Vale Railway Co.,  (1909)  A.C.  253, where it was pointed out that insertion of a proviso by the draftsman is not always strictly adhered to its legitimate use and at times a section worded as a proviso may wholly or partly be in substance a fresh  enactment  adding  to  and  not  merely excepting something out of or qualifying what goes before.”

39

41. The fourth proviso to Section 14 of 2003 uses the

expression “….and the provisions of the Damodar Valley

Corporation Act, 1948 in so far as they are not inconsistent

with the provisions of the Act, shall continue to apply to that

Corporation…”.  On a careful reading  of the  aforesaid later

part of the fourth proviso to Section 14 of the Act of 2003, it

is seen that it is clearly a substantive provision to lay down

something more than what a proviso generally deals with. If

the intention of the proviso was to exclude DVC only from the

main part of Section 14 of the Act of 2003 dealing with the

requirement of obtaining licence for

transmission/distribution/trade in electricity, the purpose is

fully achieved by the first part recognising DVC as a ‘deemed

licensee’  and not requiring to apply for and obtain licence.

The Legislature could have simply stopped there. There was

no necessity to incorporate the second part. The second part

of the fourth proviso is to bring in the continued application

of some of the provisions of the Act of 1948 which are not

inconsistent with the provisions of the Act of 2003. To

elaborate it further, let us take the case of the third proviso to

40

Section 14 of the Act of 2003 which provides “that in case an

appropriate  Government transmits electricity  or  distributes

electricity or undertakes trading in electricity whether before

or after the commencement of the Act, such  Government

shall be deemed to be a licensee under the Act but shall not

be required to obtain licence under the Act”. In so far as DVC

is concerned, if the fourth proviso is to be confined only to

licensing as in the case of third proviso, the fourth proviso

also would have stopped with the first  part of  the proviso.

There would have been no necessity to incorporate the second

part of the proviso. The legislature does not incorporate any

words which are irrelevant or redundant and every

expression used in a statutory provision has some purpose.

42. A careful comparative reading of the third and the

fourth provisos to Section 14 of the Act of 2003 clearly

indicates the intention of the legislature that the second part

of the fourth proviso is to bring in the continued application

of some of the provisions of the Act of 1948 which are not

inconsistent with the provisions of the Act of 2003. There are

41

no licensing provisions in the Act of 1948 to be saved. The

obvious reference in the second part of proviso is to provide

for the continued application of the provisions of the Act of

1948 insofar as they are not inconsistent with the provisions

of the Act of 2003.

43. In the course of arguments, the appellants made

reference to Sections 18 and 19 of the Act of 1948 as being

the provisions relating to licensing which could be said to be

considered as saved by virtue of  second part of the  fourth

proviso to Section 14 of the Act of 2003. A perusal of Sections

18 and 19 of the Act of 1948 show that they deal with the

supply and generation of electrical energy and distribution of

electricity within the Damodar Valley area.  The provisions of

the Act of 2003 which authorise the Regulatory Commissions

to grant licence to persons (other than DVC) fully govern the

field and there is no question of continued application of the

Act of 1948 in that respect. Sections 18 and 19 of the Act of

1948 do not deal with licence to DVC. These provisions only

deal  with activities of  other  entities  to distribute electricity

42

within the Damodar Valley area. Further, the provisions of

Electricity Act, 2003 authorizes the Regulatory Commissions

to grant licence to persons other than DVC. Therefore, there

can be  no  question  of continued application  of the  Act  of

1948 over those provisions.

44. The  fourth proviso to Section 14 which uses the

expression “….and the provisions of the Damodar Valley

Corporation Act, 1948 in so far as they are not inconsistent

with the provisions of the Act, shall continue to apply to that

Corporation…”, in our view, is a positive provision enabling

continued application of certain provisions of the Act of 1948

which are not inconsistent with the provisions of the

Electricity Act, 2003. The intention behind both the

provisions needs to be appreciated and given effect to.   

45. There is yet another dimension of the case that has

been urged and, therefore, will require our consideration.

While dealing with the question as to whether Reports

submitted by Parliamentary Standing Committee, can be

taken as permissible external aids for interpretation of a

43

statute, this Court in a recent decision in Kalpana Mehta &

Ors.     vs. Union of India & Ors   .  12 had occasion to observe as

follows:

“xxxx it clear as day that the Court can take aid of the report of the parliamentary committee for the  purpose  of  appreciating  the  historical background of the statutory provisions and it can  also  refer  to  committee  report  or  the speech  of  the  Minister  on  the  floor  of  the House of the Parliament if there is any kind of ambiguity or incongruity in a provision of an enactment. Further,  it  is  quite  vivid  on  what occasions  and  situations  the  Parliamentary Standing Committee Reports or the reports of other Parliamentary Committees can be taken note of by the  Court  and  for  what  purpose.  Relying  on  the same for the purpose of interpreting the meaning of  the  statutory  provision  where  it  is  ambiguous and unclear or, for that matter, to appreciate the background  of  the  enacted  law  is  quite  different from referring to it for the purpose of arriving at a factual  finding.  That  may  invite  a  contest,  a challenge,  a  dispute  and,  if  a  contest  arises,  the Court, in such circumstances, will be called upon to Rule on the same.”

46. The proceedings of the Parliamentary Standing

Committee on Energy (13th  Lok Sabha), insofar as the

Electricity Bill of 2001 presented before the Lok Sabha on

19­12­2002 is concerned, would go to indicate that various

organisations like the Ministry of Railways, the Bhakra Beas

12 2018 (7) SCALE 106

44

Management Board (BBMB)   and also the Corporation had

requested for exemption from the operation of the provisions

of  2003  Act  citing the  peculiar, sensitive and specialised

nature of task that such bodies have been entrusted by the

statutory enactments constituting  and  governing the said

bodies/organizations.   Specifically, in this regard, the

peculiar duties and responsibilities cast on the  DVC by

Section 12 of the Act of 1948 had been highlighted before

the Parliamentary Standing Committee.   It had been urged

before  us that it  was recommended by the  Parliamentary

Standing Committee that exemption from the provisions of

the proposed 2003 Act should be granted to the Corporation

in view of its special statutory status which may get eroded

if the exemptions are not to be granted.   The provisions of

Section 58 of the Act of 1948 which is in the following terms

were also placed before the Parliamentary Standing

Committee while  seeking exemption  from the  operation of

the proposed 2003 Act:

“58. Effect of other laws : The provisions of this  Act  or  any rule  made thereunder  shall  have effect  notwithstanding  anything  contained  in  any

45

enactment  other  than this  Act  or  any instrument having effect by virtue of any enactment other than this Act.”  

47. On the other hand, it would appear from the record

of the proceedings of the Parliamentary Standing Committee

that the Industry represented by Chhotanagpur Chamber of

Commerce & Industry and The Bengal Chamber of Commerce

&  Industry as  well as the  States of  Jharkhand  and  West

Bengal had contested the claims made by the Corporation for

exemption and had pleaded before the Parliamentary

Standing Committee that the Act of 1948 itself be

repealed/amended insofar as all non­power related activities

are concerned which constitute only about 10% of the total

activities of the Corporation.

48. After considering the respective stands taken, the

Parliamentary  Standing  Committee  had recommended that

the Corporation should be exempted from the operation of the

provisions of the proposed 2003 Act  in view of the special

status and responsibilities of the Corporation as envisaged

under the Parliamentary enactment constituting it (i.e the Act

46

of 1948).   However, it appears that Parliament was not

inclined to provide a blanket/total exemption in favour of the

Corporation and the 2003 Act did not include the Corporation

as one of the entities in Section 173 of the 2003 Act which

provides exemption in so far as the provisions of the

Consumer Protection Act, 1986, the Atomic Energy Act, 1962

and the Railways Act, 1989 clearly excluding the provisions of

the  Act  of  1948  therefrom.   Instead, the fourth proviso to

Section 14 of the 2003 Act  was specifically incorporated,

details of which have already been noted. Having regard to

the legislative history behind the enactment of the provision

of Section 173 and the provisions of Section 14 including the

fourth proviso thereto, it may be more in consonance with the

Parliamentary intention to  hold that the fourth  proviso to

Section 14 need not be understood to be confined only to the

question of licensing which is dealt with by the main part of

the Section 14.   Rather, we are inclined to hold that

Parliament had intended to provide partial exemption to the

Corporation by mandating that such provisions of the Act of

1948 which are not inconsistent with the 2003 Act will

47

continue to hold the field.  Viewed thus, the fourth proviso to

Section 14 of the Electricity Act 2003 has to be understood to

be a legislative exercise in the nature of a substantial

provision of law.   Part IV of the  Act of 1948  not being

inconsistent with the provisions of the 2003 Act can,

therefore, be taken into account for determination of  tariff.

Such provisions of the Act of 1948 will also have an

overriding effect over the inconsistent provisions of the Tariff

Regulations. Our view, as above, will also effectuate the

provisions of the Act of 1948 in so far as the activities of the

Corporation, other than generation and transmission of

electricity, is concerned. We, therefore, affirm the above view

taken by the Appellate Tribunal for the reasons afore­stated.

49. The specific heads of tariff fixation on which

grievances have been raised by the appellants in the present

set of appeals are enumerated as hereunder:

(a) Depreciation rate;

(b) Sinking Fund;

(c) Debt Equity ratio;

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(d) Pension & Gratuity Contribution;

(e) Return on Capital Investment on Head Office etc.;

(f) Revenue relating to afforestation etc.,  which are

not  

relatable to power generation;

(g) Period of transition (two years) allowed for the tariff

fixed by the CERC to come into effect;

(h) The treatment of entire transmission as inter­State

transmission lines thereby divesting the

Jharkhand and West Bengal State Electricity

Regulation Commissions of the power to fix tariff

insofar as intra­State transmission of electricity is

concerned;

50. Insofar as the questions under the last two issues

at (g) and (h) above is concerned, the same have already been

dealt with in the present order.   Of the remaining heads of

tariff fixation, it appears that so far as the ‘depreciation rate’

and ‘sinking fund’ is concerned it is the provisions of Section

40 of the Act of 1948 which have been held to be

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determinative.  We have gone through the reasoning adopted

by the learned Appellate Tribunal in this regard. Having

clarified the manner in which the fourth proviso to Section 14

of the 2003 Act has to be understood, we do not find the

reasoning adopted by the learned Appellate Tribunal on the

issues relating to ‘depreciation’ and ‘sinking fund’ to be

fundamentally flawed in any manner so as to give rise to a

substantial question of law requiring our

intervention/interference under Section 125 of the 2003 Act.

51. Insofar as the debt­equity  ratio is  concerned, we

find that except for the projects which have been completed

prior to 1992 in which case the ratio has been worked out at

par with other public­sector organisation at 50:50, the ratio

of 70:30 has been adopted following the prescription under

Regulation 20 of the Tariff Regulations in the absence of any

specific rate under the Act of 1948.

52. So far as the pension and gratuity fund is

concerned, the only issue arising is whether the fund worked

out on Actuary basis at Rs.1534.49 crores should be

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apportioned between the Corporation and the consumers as

held by the CERC in the ratio of  40:60 or the entire  fund

should be allowed to be recovered by way of tariff from the

consumers  as held  by  the learned Appellate  Tribunal.  The

reasoning of the learned Appellate Tribunal in coming to the

aforesaid conclusion is as follows:

“D.3 As  a  general  rule,  once  the Commission, after prudence check,  has agreed with  the  need  for  funding  the  Pension  and Gratuity  Contribution  funds,  DVC  should  have been allowed to recover entire amount from the consumers  through  the  tariff.  Asking  DVC  to contribute  out  of  its  own  resources  would tantamount to denying it the return on equity as assured in terms of Tariff Regulations. However, if  we look  at  it  from the point  of  view of  the consumers,  the  consumers,  particularly  the industrial  and  commercial  ones,  have  now  no option  to  adjust  their  sale  price  to  take  into consideration  the  need  for  meeting  the accumulated  liability.  It  is,  therefore,  an accepted  fact  that  due  to  postponing  of  the creation  of  such  fund,  the  consumers  were enjoying  lesser  tariff  than  the  legitimate  tariff otherwise applicable to them.”

53. A careful consideration of the reasoning adopted by

the learned Appellate Tribunal would not disclose any such

error so as to warrant interference of this Court.  No error or

fallacy, ex facie, is disclosed in the reasoning adopted so as to

justify interference under Section 125 of the 2003 Act.

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54. Insofar as the consumers (appellants in Civil

Appeal Nos. 971­973 of 2008) are concerned, an additional

issue has been struck, as noticed earlier.  This is with regard

to the number of employees engaged in the power sector by

the  Corporation for  whom alone  proportionate recovery  by

way of tariff so far as the pension and gratuity is concerned,

would be justifiable.   Apart from the fact that the issue was

not raised in any of the forums below and had been so raised

before this Court for the first time and that too in the course

of the arguments advanced, the materials on record do not

justify a conclusion to be reached by us which will support

the core basis of the contention  made, namely, that the

Corporation had not laid before the CERC any materials to

show the extent of the  work­force deployed in the power

sector of the Corporation.  In fact, in the counter arguments

advanced on behalf  of the Corporation this contention has

been refuted  and it is asserted that such  materials  were,

indeed, laid  before the  CERC,  a fact  which  we find to  be

correct.

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55. Insofar as the issue of allowance of cost relating to

other  activities  of the  Corporation to  be recovered  through

tariff on electricity is concerned, we have taken note of the

objection(s) raised in this regard which in sum and substance

is that Sections 32 and 33 of the Act of 1948 are in direct

conflict with Sections 41 and 51 of the 2003 Act and,

therefore, recovery of cost incurred in “other works”

undertaken by the Corporation through power tariff is wholly

untenable. Apart from reiterating the basis on which we have

thought it proper to affirm the findings of the learned

Appellate  Tribunal  on the purport and scope of the  fourth

proviso to  Section  14  of the 2003  Act and the continued

operation of the provisions of the Act of 1948 which are not

inconsistent with the provisions of the 2003 Act, we have also

taken note of the specific provisions contained in Sections 41

and 51 of the 2003 Act which, inter alia, require maintenance

of separate  accounts  of the  other  business  undertaken by

transmission/distribution licensees so as to ensure that the

returns from the transmission/distribution business of

electricity  do not  subsidize  any other  such business.  Not

53

only Sections 41 and 51 of the 2003 Act contemplate prior

approval of the Appropriate Commission before a licensee can

engage in any other business other than that of a licensee

under the 2003 Act, what is contemplated by the aforesaid

provisions of the 2003 Act is some return or earning of

revenue from such business. In the instant case, the “other

activities” of the Corporation are not optional as contemplated

under Sections 41/51 of the 2003 Act but are mandatorily

cast by the statute i.e. Act of 1948 which, being in the nature

of socially beneficial measures, per se, do not entail earning of

any revenue so as to require maintenance of separate

accounts. The allowance of recovery of cost incurred in

connection with “other activities” of the Corporation from the

common fund generated by tariff chargeable from the

consumers/customers of  electricity as contemplated by the

provisions of the Act of 1948, therefore, do not collide or is, in

any manner, inconsistent with the provisions of the 2003 Act.

We  will, therefore, have  no occasion to interfere  with the

findings recorded by the  learned Appellate Tribunal on the

above score.

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56. Having dealt with all the issues raised/arising in

the appeals under consideration in the  manner indicated

above, we deem it proper to dismiss all the appeals and affirm

the judgment and order dated 23rd November, 2007 passed by

the learned Appellate Tribunal.  We order accordingly.  

……………………., J.  [RANJAN GOGOI]

……………………., J.  [R. BANUMATHI]

NEW DELHI JULY 23, 2018