Jharkhand State Elect.board & Ors. V. M/s Laxmi Business & Cement Co.p.ld.&anr

Jharkhand State Elect.board & Ors. V. M/s Laxmi Business & Cement Co.p.ld.&anr in India

Jharkhand State Elect.board & Ors. V. M/s Laxmi Business & Cement Co.p.ld.&anr [2014] Insc 144 (28 February 2014)

Court Judgment Information

  • Year: 2014
  • Date: 28 February 2014
  • Court: Supreme Court of India
  • INSC: [2014] INSC 144

Text of the Court Opinion


Civil Appelate Jurisdiction

CIVIL APPEAL No.2909/2014 (arising out of SLP(Civil) No.22047/2011) Jharkhand State Elect.Board & Ors. .(Appelant)s M/s. Laxmi Business & Cement Co.P. Ltd. & Anr. . .Respondents WITH

CA. No.2910/2014 @ SLP(Civil) No.22049/2011, C.A.No.2911/2014 @SLP(Civil) No.6350/2014 @ CC 20307/2012 and CA.

No.2913/2014 @ SLP(Civil) No.6351/2014 @ CC 20360/2012


1. Delay condoned.

2. Leave granted.

3. The appellant in both the cases is Jharkhand State Electricity Board (JSEB), which is aggrieved by the common judgment dated 5th July 2011 passed by the High Court of Jharkhand in two appeals. These appeals were preferred by the appellant JSEB against the orders dated 17th February 2010 passed by the learned Single Judge of that court in the two Writ Petitions which were filed by M/s. Laxmi Business & Cement Co. Pvt. Ltd. and M/s.

Laxmi Ispat Udyog (arrayed as respondent No.1 in each appeal and hereinafter referred to as the ‘consumers’). These respondents had questioned the validity of the bills raised by the JSEB in those Writ Petitions, primarily on the ground that the bills were contrary to and in excess of the tariff fixed by the Jharkhand State Electricity Regulatory Commission (hereinafter referred to as the ‘SERC”). Their contention was accepted by the learned Single Judge and the order of learned Single Judge is affirmed by the Division Bench as well.

4. To give a glimpse of the controversy involved, in the year 1994 HT Agreement was entered into between Bihar State Electricity Board (predecessor in interest of JSEB) and the consumers which, inter-alia, stipulated the tariff that was to be charged by the JSEB from the consumers for supply of electricity to these consumers by the JSEB. In Clause 4(c) of the Agreement there was a provision of Minimum Guarantee Charges. In the year 2003, Electricity Act was enacted. Indubitably, power to frame tariff under this Act is given to SERC. SERC passed order dated framing the new tariff schedule (‘2004 Tariff Schedule’ for short) under Section 86 of the Electricity Act (hereinafter referred to as the Act). The JSEB, however, continued to send the bills as per the Clause 4(c) referred to in the agreement which were paid by the consumers under protest. In May 2010, Writ Petitions were filed by the consumers for quashing of the energy bills on the ground that it had wrongly been raised as per Clause 4(c) of the Agreement which had ceased to have any effect on the framing of 2004 Tariff Schedule by the SERC. The JSEB, however, contended that the HT agreement entered into with the consumers still survived as the 2004 Tariff Schedule saves this Agreement.

5. Since the Writ Petitions of the consumers were allowed and the order of the learned Single Judge is already upheld by the Division Bench, it is obvious that pleas raised by the JSEB have not found favour with the High Court. Before us as well, same very contentions were raised which were raised by the JSEB in the High Court. Additionally, it was also contended that even Section 185 (2)(a) of the Act read with Section 6(B) of the General Clauses Act categorically protects the previous operation of the earlier enactment, duly done or saved thereunder.

It is, thus, clear that questions which arise for consideration in these appeals are the following:

(i) Whether after the enactment of the Electricity Act, 2003 which came into force on 10.6.2003 and after passing of the new tariff order dated 27.12.2003 by Jharkhand State Electricity Regulatory Commission as per the Act of 2003 can the State Electricity Board still charge a tariff determined by itself? (ii) Whether the issue of demand charge to HTS – 1 category of consumers has been left non-considered by the State Commission in the tariff order dated 27.12.2003 so that the same may be continued in the manner existed in the State or whether the same has been considered and given affect to in the tariff order dated 27.12.2003 which came into effect from 1.1.2004? (iii) What would be the effect of Section 185 (Repeal and Saving Clause) of the Electricity Act 2003 upon the HT supply Agreement entered upon the Board and the Consumer prior to Electricity Act, 2003?

6. While dealing with these questions, we will narrate further seminal facts and the details submissions of the learned counsel for the parties of either side.

1. Re.: Power of SERC under Electricity Act 2003. Legal position contained in Act of 2003 is hardly in dispute.

Before this Act was enacted in the year 2003, we had Indian Electricity Act, 1910 and thereafter Electricity (Supply) Act, 1948 was passed. It is the Electricity Board in the respective States which were supplying electricity to the consumers and determining the operation rates at which the electricity was to be supplied. Section 49 of the Act, 1948 empowered the Board to supply electricity to any person upon such terms and conditions as the Board thinks fit and made for the purposes of such supply from time to time and were empowered to frame uniform tariffs for the purpose of such supply. This power to frame tariff under Section 49(1) of the Act 1948 included the power to fix minimum guarantee charges. In State of Bihar, such rates were fixed in the year 1993 tariff. It, inter-alia, provided for tariff for HT consumers. Three categories of HT consumers were mentioned there. HTS-I, II and III. Both the consumers in the instant appeals were put in HT-I category. HT Agreement dated 26.4.1974 was entered into between the Board and the consumers. As per Clause 4 of this Agreement, the consumers were to pay to the Board for the energy so supplied and registered or taken to have been supplied at the appropriate rates applicable to the consumers according to the tariff framed by the Board and in force from time to time. It was subject to the minimum contract demand applicable for the category of supply category in which the consumers fell. Clause 4(b) explained that the maximum demand of the consumer for each month shall be the largest total amount of kilovolt amperes (KVA) that was delivered to the consumers at the point of supply during any consecutive 30 minutes in the months. Since the JSEB has worked out the charges as per Clause 4 (c) which it is demanding, we reproduce the said clause hereinbelow:

“4(c) Maximum demand charges for supply in any month will be based on the maximum KVA demand for the month or 75 per cent of the contract demand whichever is higher, subject to provision of clause 13. For the first twelve months service the maximum demand charges for any month, will however, be based on the actual monthly maximum demand for that month.” Thus, as per the aforesaid clause, JSEB had been raising energy bills on the basis of 75% of the contract demand.

7. As mentioned above, after the Electricity Act, 2003 was enacted, power to frame tariff is given to the SERC. This power is statutorily conferred upon the SERC under the Act. However, it would be relevant to mention herein that before the passing of this Act, Electricity Regulatory Commission Act, 1998 was enacted and under Section 17 of the said Act, Jharkhand State Electricity Regulatory Commission was constituted by the Government of Jharkhand vide Notification No.1763 dated August 22, 2002. Its functions and duties were notified by the Government as per Section 22 of the Electricity Regulatory Commission Act.

8. On the passing of the Electricity Act, 2003, Electricity Act 1910, Electricity (Supply) Act 1948 and Electricity Regulatory Commission Act, 1998 have been repealed. At the same time, Act 2003 recognizes the SERCs constituted under the 1998 Act. The object clause of this Act reads as under:

“An Act to consolidate the laws relating to generation, 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, rationalization 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.”

9. It is also not in dispute that 2004 Tariff Schedule framed by the SERC is in exercise of powers conferred upon it under Section 86 (a) of the Act. In PTC India Ltd. V. Central Electricity Regulatory Commission (2010) 4 SCC 603 this Court has categorically held that Act, 2003 is an exhaustive code on all matters concerning electricity which also provides for “unbundling” of State Electricity Boards into separate utilities for generation, transmission and distribution. Further, Regulatory regime is entrusted to the State Electricity Regulatory Commissions which are given vide ranging responsibilities. This Act has distanced the Government from all forms of regulations, including tariff regulation which is now specifically assigned to SERC. Relevant observations, outlining the scheme of this Act, are reproduced below:

“The 2003 Act is enacted as an exhaustive code on all matters concerning electricity. It provides for unbundling” of SEBs into separate utilities for generation, transmission and distribution.

It repeals the Electricity Act, 1910: the Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions Act, 1998. The 2003 Act, in furtherance of the policy envisaged under the Electricity Regulatory Commissions Act, 1998 (the 1998 Act), mandated the establishment of an independent and transparent regulatory mechanism, and has entrusted wide-ranging responsibilities with the Regulatory Commissions. While the 1998 Act provided for independent regulation in the area of tariff determination: the 2003 Act has distanced the Government from all forms of regulation, namely, licensing, tariff regulation, specifying Grid Code, facilitating competition through open access, etc.”[Paragraph 17] The 2003 Act contains separate provisions for the performance of dual functions by the Commission. Section61 is the enabling provision for framing of regulations by the Central Commission:

the determination of terms and conditions of tariff has been left to the domain of the Regulatory Commissions under Section 61 of the Act whereas actual tariff determination by the Regulatory Commissions is covered by Section 62 of the Act. This aspect is very important for deciding the present case. Specifying the terms and conditions for determination of tariff is an exercise which is different and distinct from actual tariff determination in accordance with the provisions of the Act for supply of electricity by a generating company to a distribution licensee or for transmission of electricity or for wheeling of electricity or for retail sale of electricity.

26. The term “tariff” is not defined in the 2003 Act. The term “tariff” includes within its ambit not only the fixation of rates but also the rules and regulations relating to it. If one reads Section 61 with Section 62 of the 2003 Act, it becomes clear that the appropriate Commission shall determine the actual tariff in accordance with the provisions of the Act, including the terms and conditions which may be specified by the appropriate Commission under Section 61 of the said Act. Under the 2003 Act, if one reads Section 62 with Section 64, it becomes clear that although tariff fixation like price fixation is legislative in character, the same under the Act is made applicable vide Section 111. These provisions, namely, Sections 61, 62 and 64 indicate the dual nature of functions performed by the Regulatory Commissions viz. decision-making and specifying terms and conditions for tariff determination.”[Paragraph 25,26] [Emphasis supplied]

10. It is, thus, beyond the pale of doubt that the State Electricity Boards have no power whatsoever to frame tariff which is under the exclusive domain of the Commission. This legal position has been judicially recognized. [See Gujarat Urja Vikas Nigam Ltd. V. Essar Power Ltd., (2008) 4 SCC 755 and A.P. TRANSCO v. Sai Renewable Power (P) Ltd. (2011) 11 SCC 34.

11. Notwithstanding the aforesaid legal position, JSEB contends that agreement entered into with the consumers in the year 1994 is saved and the JSEB has right to charge the tariff as per Clause 4 (c) thereof. According to the JSEB this is the position because of the reason that Clause 1.4 of the 2004 Tariff Schedule framed by the SERC provides for such a position and further that even Section 186 of the Act 2003 saves this agreement. On these twin aspects, we have already framed question Nos. 2 and 3 above and would now proceed to deal with them.

2. Re: Whether the Agreement dated 26.4.1994 is saved by the 2004 Tariff Schedule? Mr. Sinha, learned senior counsel for the JSEB submitted that in the 2004 Tariff Schedule there was no such provision which is contained in the agreement dated 26.4.19994 particularly in Clause 4(c) and in the absence thereof in the tariff schedule energy bills raised on the basis of 75 % contract demand was saved. It was submitted that the Agreement dated 26.4.1994 is a statutory agreement as it was under the Act of 1948. The learned senior counsel further submitted that it had never been the case of consumers that the aforesaid provision was repealed, repudiated or destroyed. It has not happened either. For this purpose, Mr. Sinha sought to rely upon averments made in the Writ Petitions filed by the consumers and on the basis it was contended that even the consumers admitted that the provision of 75% of contract demand is absent and not provided in the 2004 Tariff Schedule. He also placed strong reliance on Clause 1.4 of 2004 Tariff Schedule of SERC which reads as under:

“All other Terms and Conditions in respect of Meter Rent, Supply at Lower Voltage, Capacitor Charge, Electricity Duty, Rebate, Security Deposit, Surcharge for exceeding contract demand etc., shall remain the same as existing in the State.” Further, the tariff order 2003-04, in Clause 5 under the heading Design of Tariff Structure and Analysis of Tariff, particularly at Clause 5.4 has dealt with the two part tariff structure and Minimum Guarantee Charges wherein it was stated that “Ideally, the fixed/demand charge should be levied in proportion to the demand placed by an individual consumer on the system. This is so because it facilitates the utility in designing an appropriate system to cater to the supply needs of a consumer and is therefore a just and fair mechanism for recovering fixed costs of the system.” Mr. Sinha further argued that Clause 4 (c) of the High Tension Agreement dated 26.8.2004 which the Respondent Consumer has signed with the Board much after 1.1.2004, when the Tariff Order 2003-04 came into effect, clearly specified that after commencement of power supply, the respondent shall be liable to pay KVA/Maximum Demand Charges on actual consumption basis in the first 12 months and after that on the basis of 75% of the contract demand or recorded demand, whichever is higher. This is uniformly applied to similarly situated all the HTS-1 consumers.

12. In order to appreciate this argument, we will have to construe relevant provision of 2004 Tariff Schedule as framed by the SERC. It would be pertinent to observe that the SERC fixed the tariff on the request of the JSEB itself when it approached the SERC for this purpose. We find that in the Tariff Petition filed by the JSEB before the SERC, the JSEB did not propose to continue the manner of 75% of contract demand and the SERC allowed the demand charge 140-KV-Month. On perusal of the Tariff Order, it becomes apparent that this is divided in different sections viz., section 1 is the chapter containing ‘introduction’, section 2 is the chapter containing ‘ARR’ i.e. the Annual Revenue Requirement and tariff proposal submitted by the Board, section 3 is the chapter containing ‘objections’ received from the stake holders, section 4 is the chapter containing ‘Commission’s analysis on ARR’, Section 5 is the chapter containing ‘design of tariff structure and analysis of tariff’, section 6 is the chapter containing ‘Directions to the JSEB’ and finally there is Annexure 5.1 containing the ‘Tariff Schedule’. This Tariff Schedule which is the final outcome of the tariff process is binding on the State as well. The relevant portion of the Annexure 5.1 of the tariff order wherein the State Commission has dealt with the tariff applicability upon the High Tension Service (HTS) consumers i.e. category applicable to Respondent No.1 is reproduced below:

“Category: High Tension Service (HTS)

1. Applicability For consumers having contract demand above 100 kVA

2. Character of service 50 cycles, 3 Phase at 6.6. KV/11 Kv/33 kV or 132 kV.

3. Tariff Tariff for HTS |DESCRIPTION |TARIFF* |RS./kVA/month |DEMAND CHARGE |HTS |140 | |ENERGY CHARGE |KWh/month |Rs/KWh |All consumption |4.00 | |Monthly minimum |charge |For Supply at 11 and 33 kV |Rs.250/kVA |For Supply at 132 KV |Rs.400/kVA |

13. However, as stated above, the JSEB itself in its application/reference to the SERC did not ask for fixing any minimum guarantee charges. It would be relevant to mention that the JSEB in its proposal for fixation of tariff for 2003-04, submitted before the Regulatory Commission, indicated both the existing tariff and the tariff proposed by it in respect of all consumers, including all categories of HTS (High Tension Service) consumers. The SERC after undertaking the necessary exercise, fixed the tariff of all categories. The tariff proposed by the Board for HTS-I consumers along with existing tariff is reproduced in Tables 5.28 and 5.29 of the 2004 Tariff Schedule which will clearly reflect that the aspect of minimum guarantee charges was duly considered by the SERC. To demonstrate it, we reproduce the said two tables hereunder:

Continue reading this Sentence:


Leave a Comment