WP/1471/2004 of THE TATA POWER CO. LTD. and ANR. Vs RELIANCE ENERGY LTD. and ORS. on 24 December 2004

1. This petition is directed against the order dated 31[st] May, 2004

passed by the Maharashtra Electricity Regulatory Commission(for short, 'MERC').

2. The brief facts, which are necessary to dispose of the petition,are recapitulated as under:­are recapitulated as under:­

The Tata Power Company Limited (for short, 'TPC') has enteredinto an agreement with Maharashtra State Electricity Board(MSEB) on 12[th] March, 1985, as a result of which, it has been providing standby facility to TPC. Since 1990, TPC is gettingstandby facility of 550 MVA (Mega Volt Ampere) from MSEB.

3. Reliance Energy limited (REL) also required standby facility of275 MVA, and on the direction MSEB, it was agreed that TPCwould provide standby facility of 275 MVA to REL out of550 MVA received by TPC from MSEB. It was further agreedthat REL would pay Rs.3.5 crores per month to TPC forproviding 275 MVA standby facility to REL. It was agreed thatTPC would pay MSEB Rs. 24.75 crores per month for the entirestandby facility, i.e., 550 MVA. The said amount wascalculated on the basis of the tariff existed at that time andagreement to that effect was entered into between TPC andREL on 31st January, 1998; and inter­connection between thetwo systems was established on 14[th] February, 1998.

4. On 31[st] August, 1998, MSEB served notice on TPC, intimatingits intention to enhance the charges for the standby facility fromRs.24.75 crores per month to Rs.30.25 crores per month with effect from 1[st] December, 1998. TPC, in turn, gave noticedated 30[th] September, 1998 to REL of its intention to enhancethe charges for the standby facility of 275 MVA provided by itfrom Rs.3.5 crores per month to Rs. 15.125 crores permonth with effect from 1[st] December, 1998. It may be pertinent to mentionthat it was for the first time that TPC demanded 50% of thecharges for the standby facility of 275 MVA to REL of the totalcharges by REL for 550 MVA, meaning thereby that before this,TPC never asked REL to pay 50% of the amount paid by it toMSEB.

5. The short controversy, which arises for determination by thisCourt, is regarding the quantum of standby charges payable byREL to TPC for 275 MVA standby facility provided by TPC toREL from its quota of 550 MVA received from MSEB. Court, is regarding the quantum of standby charges payable byREL to TPC for 275 MVA standby facility provided by TPC toREL from its quota of 550 MVA received from MSEB.

6. The dispute between REL and TPC arose after said notice of30[th] September, 1998 was issued to REL by TPC. The Deputy30[th] September, 1998 was issued to REL by TPC. The Deputy

Chief Minister of the State advised the parties to settle the matter and directed REL to pay Rs. 9 crores to TPC and TPC topay Rs.22 crores to MSEB.

7. The Government of Maharashtra constituted a committee under the provisions of the Electricity Regulatory Commissions Act,1998 (“the Act”, for short) to resolve such disputes.

8. It may be pertinent to mention that the Government passed anorder on 22[nd] March, 2000, by which both REL and TPC wereordered to share the standby charges 50% each.

9. REL filed Case No. 7 of 2000 to the said Commission.The Commission, after hearing the parties, suggested a formulafor computing the standby charges. In short, the decision ofthe Commission was that the standby charges ought to becalculated by the ratio of its maximum demand to the totalmaximum demand multiplied by the total standby charges. Onthe said formula, the Commission has mathematically workedout the charges and passed final order on 7[th] December, 2001, directing REL to pay Rs.77.06 crores and TPC to pay balance of Rs.363 crores.

10. Aggrieved by this order of the Commission, both TPC and REL

preferred appeals, being MERC Appeal Nos. 1 and 2 of 2002,respectively, before the High Court. The High Court, whilesetting aside the order of the Commission, directed theCommission for de novo consideration of the matter, becausethe Chairman of the Commission did not participate in theproceedings, and according to Regulation 21 of the CentralElectricity Regulatory Commission (Conduct of Business)Regulations, 1999, the Chairman and the other two membershave to jointly participate in the proceedings. Whilst passing theorder, the High Court also passed interim order of payment ofcharges.

11. TPC preferred Civil Appeal Nos. 8362 and 8363 of 2003arising out of Special Leave Petition (Civil) Nos. 11461 and11462 of 2003 before the Supreme Court. The Supreme Court, while considering the submissions, noted that according toTPC, the standby charge is not an issue of tariff, but is adispute relating to sharing or apportionment of the chargesbeing paid by TPC to MSEB for providing the standby facility.

12. The stand of REL has been that the dispute between theparties was relating to determination of tariff, which fell withinthe exclusive jurisdiction of the Commission under Section 22 ofthe Act. The Commission alone had a right and jurisdiction todecide the dispute, and after the Commission came intoexistence, the State Government could not have passed theorder dated 22[nd] March, 2000. Consequently, the said orderwas set aside.

13. Section 22 of the Act reads as under:­

­­“Functions of the State Commission

(1) Subject to the provisions of Chapter III, the State Commission shall discharge the following functions, namely:­

(a) to determine the tariff for electricity, wholesale, bulk, grid or retail, as thecase may be, in the manner provided in section 29;

(b) to determine the tariff payable for the use of the transmission facilities in themanner provided in section 29;

(c) to regulate power purchase andprocurementprocessofthetransmission utilities and distributionutilities including the price at which thepower shall be procured from thegenerating companies, generatingstations or from other sources fortransmission, sale, distribution andsupply in the State; (d) to promote competition, efficiency and economy in the activities of theelectricity industry to achieve the objectsand purpose of this Act.

(2) Subject to the provisions of Chapter III and without prejudice to the provisions ofsub­section (1), the State Government may,by notification in the Official Gazette, conferany of the following functions upon the StateCommission, namely:­

(a) to regulate the investment approval

for generation, transmission, distributionand supply of electricity to the entitiesoperating within the State;and supply of electricity to the entitiesoperating within the State; (b) to aid and advise the StateGovernment in matters concerningelectricity generation, transmission,distribution and supply in the State;

(c) to regulate the operation of thepower system within the State; (d) to issue licences for transmission, bulk supply, distribution or supply ofelectricity and determine the conditionsto be included in the licences; (e) to regulate the working of thelicensees and other persons authorisedor permitted to engage in the electricityindustry in the State and to promote theworking in an efficient, economical andequitable manner; (f) to require licensees to formulateperspective plans and schemes inco­ordination with others for thepromotion of generation, transmission,distribution, supply and utilisation ofelectricity, quality of service and to devise proper power purchase andprocurement process; (g) to set standards for the electricity industry in the State including standards relating to quality, continuity andreliability of service; (h) to promote competitiveness and make avenues for participation ofprivate sector in the electricity industryin the State, and also to ensure a fairdeal to the customers;

(i) to lay down and enforce safetystandards; (j) to aid and advise the StateGovernment in the formulation of theState power policy; (k) to collect and record informationconcerningthegeneration, generation, transmission, distribution and utilisationof electricity;

(l) to collect and publish data andforecasts on the demand for, and use of,electricity in the State and to require thelicensees to collect and publish suchdata; (m) to regulate the assets, properties and interest in properties concerning orrelated to the electricity industry in theState including the conditions governingentry into, and exit from, the electricityindustry in such manner as to safeguardthe public interest; (n) to adjudicate upon the disputes anddifferences between the licensees andutilities and to refer the matter for arbitration;

(o) to co­ordinate with environmental

regulatory agencies and to evolvepolicies and procedures for appropriate environmental regulation of theelectricity sector and utilities in theState; and (p) to aid and advise the StateGovernment on any other matterreferred to the State Commission bysuch Government;

(3) The State Commission shall exercise its functions in conformity with the national powerplan.”

14. The only other relevant section, which deals with determination of tariff of electricity is Section 29. The section reads as under:­

“DeterminationoftariffbyState

­­Commission

(1) Notwithstanding anything contained in anyother law, the tariff for intra­State transmissionof electricity and the tariff for supply ofelectricity, grid, wholesale, bulk or retail, asthe case may be, in a State (hereinafterreferred to as the tariff), shall be subject to theprovisions of this Act and the tariff shall bedetermined by the State Commission of thatState in accordance with the provisions of thisAct.

Provided that in States or Union territories whereJointElectricityRegulatoryCommission has been constituted, such JointElectricity Regulatory Commission shalldetermine different tariff for each otherparticipating States or Union territories.

(2) The State Commission shall determine by regulations the terms and conditions for thefixation to tariff, and in doing so, shall beguided by the following, namely;­­

(a) the principles and their applications provided in sections 46, 57 and 57A ofthe Electricity (Supply) Act, 1948 (54 of1948) and the Sixth Schedule thereto; (b) in the case of the Board or itssuccessor entities, the principles undersection 59 of the Electricity (Supply) Act,1948 (54 of 1948);

(c) that the tariff progressively reflect thecost of supply of electricity at anadequate and improving level ofefficiency; (d) the factors which would encourage efficiency, economical use of theresources, good performance, optimuminvestments, and other matters whichthe State Commission considersappropriate for the purpose of this Act;(e) the interests of the consumers aresafeguarded and at the same time, theconsumers pay for the use of electricityin a reasonable manner based on theaverage cost of supply of energy; (f)theelectricitygeneration,transmission, distribution and supply areconducted on commercial principles; (g) national power plans formulated bythe Central Government;

(3) The State Commission, while determining thetariff under this Act, shall not show unduepreference to any consumer of electricity, but may differentiate according to the consumer'sload factor, power factor, total consumption ofenergy during any specified period or the timeat which the supply is required or thegeographical position of any area, the natureof supply and the purpose for which thesupply is required.

(4) The holder of each licence and other personsincluding the Board or its successor bodyauthorised to transmit, sell, distribute orsupply electricity wholesale, bulk or retail, inthe State shall observe the methodologiesand procedures specified by the StateCommission from time to time in calculatingthe expected revenue from charges which heis permitted to recover and in determiningtariffs to collect those revenues.

(5) If the State Government requires the grant ofany subsidy to any consumer or class of consumers in the tariff determined by theState Commission under this section, theState Government shall pay the amount tocompensate the person affected by the grantof subsidy in the manner the StateCommission may direct, as a condition for thelicensee or any other person concerned toimplement the subsidy provided for by theState Government.

(6) Notwithstanding anything contained in Sections 57A and 57B of the Electricity(Supply) Act, 1948 (54 of 1948) no ratingcommittee shall be constituted after the dateof commencement of this Act and theCommission shall secure that the licenseescomply with the provisions of their licenceregarding the charges for the sale of electricityboth wholesale and retail and for connectionsand use of their assets or systems in accordance with the provisions of this Act.”

15. The Supreme Court in paragraph 21 of its order had statedthat TPC and MSEB always treated the charges for standbyfacility as a matter relating to tariff. TPC gave notice to theState and MSEB on 30[th] July, 1996 for revision of tariff. In thecorrespondence exchanged amongst TPC, MSEB and REL, thecharges for standby facility are described as a matter relating totariff.that TPC and MSEB always treated the charges for standbyfacility as a matter relating to tariff. TPC gave notice to theState and MSEB on 30[th] July, 1996 for revision of tariff. In thecorrespondence exchanged amongst TPC, MSEB and REL, thecharges for standby facility are described as a matter relating totariff.

16. Mr. Iqbal Chagla, learned Senior Advocate, appearing for TPC,submitted that the order dated 31[st] May, 2004 was in excess ofjurisdiction, without the authority of law and clearly transgressedthe conditions of remand to MERC. According to Mr.Chagla,the remand to MERC was not unconditional. It wascircumscribed by observations made by this Court and by theApex Court.submitted that the order dated 31[st] May, 2004 was in excess ofjurisdiction, without the authority of law and clearly transgressedthe conditions of remand to MERC. According to Mr.Chagla,the remand to MERC was not unconditional. It wascircumscribed by observations made by this Court and by theApex Court.

17. Mr. Chagla submitted that the impugned order was contrary to and in violation of the terms and conditions of the remand order.

18. Mr. Chagla further submitted that the impugned order wasvitiated by Wednesbury principle of unreasonableness, malafide in law and perverse. According to him, MERC ignoredrelevant considerations, whilst relying on irrelevantconsiderations. He also submitted that MERC abdicated itsduty and decided the entire case based on a report by anexpert committee of CEA. According to Mr.Chagla, the conceptand definition of standby and standby charges was not an issuebefore MERC in the remand proceedings. Similarly, the factthat Reliance was entitled to standby facility up to 275 MVAfrom TPC, and TPC was entitled to standby facility of 550 MVAfrom MSEB was not an issue before MERC: The issue beforeMERC was what Reliance should pay, by way of standbycharges, to TPC. According to Mr.Chagla, observations andfindings of this Court were not prima facie. All theseobservations were, in fact, binding upon the MERC in theremand proceedings.

19. The Commission had referred the matter to the CentralElectricity Authority, which is a statutory, technical authority. Ithas stated that the standby support is necessary when systemdemand exceeds the capacity available in the system, as thestandby support is more relevant at peaking load requirements.

20. CEA's statement that Rs.24.75 crores of standby charges arebuilt into the tariff and that hence, only the incremental standbycharges should be shared, presupposes that there has been nochange in TPC's expenses and that TPC has earned its duereasonable return. built into the tariff and that hence, only the incremental standbycharges should be shared, presupposes that there has been nochange in TPC's expenses and that TPC has earned its duereasonable return.

21. Section 29 of the Electricity Regulatory Commission Act givesexclusive jurisdiction to the Commission to determine tariffs inthe State of Maharashtra. The Commission is mandated underSection 22(1)(a) of the Act to determine the tariff for electricity,wholesale, bulk, grid or retail, as the case may be, in themanner provided in Section 29. exclusive jurisdiction to the Commission to determine tariffs inthe State of Maharashtra. The Commission is mandated underSection 22(1)(a) of the Act to determine the tariff for electricity,wholesale, bulk, grid or retail, as the case may be, in themanner provided in Section 29.

22. Mr.Chagla submitted that MERC, by accepting the CEA Report, sought to re­define the concept and nature of standby andstandby charges, in direct negation of the binding observationsof this Court and the Supreme Court.

23. Mr. Chagla contended that the standby facility is required asan insurance against any type of system failure, includingfailure of transmission / distribution system, is completelyerroneous. Standby, it is well settled, is a facility of back upprovided to a generator of electricity and not a distributor ortransmitter of electricity. The standby facility may beutilized by a utility engaged in both generation and distribution.This will, however, always be by reason of tripping or stoppageof its generator. He further submitted that remand wasconfined to determination of charges payable for standbyalready defined by MERC in its previous order dated 7[th]December, 2001 and re­affirmed by the Supreme Court in theimpugned judgment.

24. Mr. Chagla attacked the finding that the amount of standby is based on the largest single contingency of the system ascontrary to law. He also attacked the finding of MERC that therequirement of the standby capacity has to be computed onthe

basis of peak demand, and not on the basis of the largest sizedunit of each utility under the present conditions as contrary tolaw, contrary to admitted facts and transgressed the terms ofthe remand. He submitted that the issue before MERC waswhat should be paid by REL to TPC for the standby facilityprovided by it. Notwithstanding this, MERC purported to makea reference to the CEA in the teeth of the order of the SupremeCourt and far beyond the parameters of the remand. Mr.Chagla pointed out that MERC framed terms of reference forthe CEA, beyond the scope of the dispute between the parties,which were contrary to the judgment and order of the SupremeCourt as well as this Court. He submitted that it was not openfor the MERC to invite the advice of the CEA under Section 73

(n) of the Electricity Act, 2003 on the requirement of standby facility to be availed by TPC and REL as on 31[st] January, 1998.According to him, this was really not an issue and unnecessarilyMERC extended the terms of reference. Similarly, the definitionand/or technical significance of standby facility in view of theneeds of Metropolis of Mumbai was also not an issue to bedetermined by CEA.

25. Mr. Chagla also submitted that MERC, without applying itsmind, has accepted the CEA Report in toto. As a matter offact, MERC has abdicated its responsibility and decided theentire issue on the basis of the report received from CEA.According to him, MERC has not evolved or applied anyprinciple on the basis of which the standby charges payable byREL to TPC could be determined. He referred to theAgreement dated 29[th] June, 1992 according to which standbycapacity to REL may be provided from the standby capacityreserved by TPC with MSEB and appropriate charges for sharing be worked out. He submitted that the standby facilityenjoyed by REL from TPC was similar to the standby facilityenjoyed by TPC from MSEB. If REL enjoyed the same standbyfacility of half the quantum enjoyed by TPC, it would defy logicto hold that REL should pay anything less than half of what TPCpaid to MSEB.

26. Mr. Chagla further contended that MERC ignored and failed to apply any of the principles laid down under Section 29 ofthe Act. Since standby charges have been held to be tariff bythe Supreme Court, it was essential that in the absence of anyof the factors that affected tariff fixation, MERC was bound toapply the same principles in determining that REL pay TPC atthe same rate and on the same basis that TPC pays MSEB forthe identical standby facility.

27. Mr. Chagla argued that MERC failed to appreciate the fact thatby reason of the commencement of operation at DahanuGenerating Station, purchase of electricity by REL from TPCby reason of the commencement of operation at DahanuGenerating Station, purchase of electricity by REL from TPC

had declined significantly from 1995 and TPC consequently had, in 2001, a surplus generating capacity of 317 MVA formeeting its own standby requirements, and found by MERC inits order dated 7[th] December, 2001 in this very dispute.

28. Mr. Chagla further urged that MERC ignored the finding ofDr.Pramod Deo Committee, in which it has been held that RELshould pay to TPC half of what TPC paid to MSEB.Dr.Pramod Deo Committee, in which it has been held that RELshould pay to TPC half of what TPC paid to MSEB.

29. Mr. Chagla submitted that the question as to whether TPC andREL should be pooled into a single system for the purpose ofdetermining standby requirements was also extraneous andirrelevant since the relevant consideration was the requirementof the generator and not the size of the entire Mumbai system. REL should be pooled into a single system for the purpose ofdetermining standby requirements was also extraneous andirrelevant since the relevant consideration was the requirementof the generator and not the size of the entire Mumbai system.

30. Mr. Chagla contended that Basak Committee Report wassubmitted to this Court during the hearing, which was limited totemporarily fixing the standby charges of Rs.3.5 crores payableby REL to TPC for the year 1997­98, which was clearly only pro­tem, and did not lay down any guidance as to how standby charges should be determined and fixed in future.

31. Mr. Chagla also argued that MERC has based its decisionentirely on the report of the CEA and abdicated its obligation todecide the case objectively. Mr.Chagla also levelled allegationof bias. According to him, CEA has been rendering services toREL and acting in close association with REL; and it could nothave objectively and dispassionately advised MERC. He alsosubmitted that Shri R.K. Jain was Chairman of ExpertCommittee appointed by CEA and he was also closelyassociated with REL and had gone abroad, along with officialsof REL. entirely on the report of the CEA and abdicated its obligation todecide the case objectively. Mr.Chagla also levelled allegationof bias. According to him, CEA has been rendering services toREL and acting in close association with REL; and it could nothave objectively and dispassionately advised MERC. He alsosubmitted that Shri R.K. Jain was Chairman of ExpertCommittee appointed by CEA and he was also closelyassociated with REL and had gone abroad, along with officialsof REL.

32. Mr. Rafiq Dada, appearing for respondent No.1 REL, statedthat the petitioners have not complied with the Tariff Order,which came into operation on 1[st] June, 2004. This itself is aground to dismiss this petition. The amount of standby chargesto be paid to TPC by REL has been factored into the tariffs of

both TPC and REL. The order fixing the tariff for TPC has alsoprovided for the repayment of Rs.322 crores directed to berefunded by TPC to REL under the impugned order. Hesubmitted that REL has been a distributor of electricity since1926, and until 1996, purchased its entire requirement ofelectricity from TPC. TPC generates electricity as well aspurchases electricity from MSEB. He submitted that byAgreement dated 12[th] March, 1985 arrived at between TPC andMSEB, TPC agreed to pay a fixed sum per month to MSEB,which sum was defined as “Demand Charges”, and is nowknown as “Standby Charges”. Initially, the sum wascalculated at 300 MVA for the year 1985 to be increased by 50MVA each succeeding year. TPC and MSEB agreed that thesaid figure with the annual increase of 50 MVA, which hadreached 550 MVA in 1990, should be frozen at 550 MVA. TPCwas to pay to MSEB the fixed standby charge at the rate perKVA fixed by MSEB to be applied to figure equivalent to 550MVA.

33. It was submitted that TPC increased its tariff on its customers, including REL, and as part of the tariff, TPC recovered standbycharges paid by TPC to MSEB. REL purchased, andcontinues to purchase, approximately 35% of TPC’s electricitygenerated and as part of payment for tariff, REL bore theburden of standby charges.

34. Mr. Dada submitted that with effect from October 1996, MSEBwas recovering a sum of Rs.24.75 crores per month from TPCtowards standby charges, pursuant to the agreement previouslyarrived at between TPC and MSEB. According to respondentNo.1, TPC unreasonably demanded 50% of the charges extrafrom REL. REL refused to pay the said extra charges towardsthe standby charges as demanded. The Government ofMaharashtra constituted an Expert Committee to determine theamount that would be paid by REL to TPC. According to thereport of the Committee, REL was directed to pay additionalamount of Rs.3.5 crores to TPC. It is further mentioned thatTPC was recovering the entire amount of Rs.24.75 crores by way of tariff from its customers, including 35% from REL.

35. It was submitted by learned counsel appearing for respondentNo.1 that in August, 1998, MSEB gave notice to TPC toincrease the monthly standby charges recoverable from TPCfrom Rs.24.75 crores per month to Rs.30.25 crores per month.Thereupon, TPC demanded a monthly sum of Rs.15.125 croresfrom REL, instead of the figure of Rs.3.5 crores per month.The amount of Rs.15.125 crores is half of Rs.30.25 crores,which MSEB directed TPC to pay. REL disputed the claim ofTPC, and continued to pay only Rs.3.50 crores per month toTPC.

36. Mr. Dada submitted that TPC, on the other hand, unilaterallyand surprisingly, without any objection from MSEB, startedpaying to MSEB a monthly reduced sum of Rs.15.125 croresfrom April, 1999, instead of Rs.24.75 crores.

37. TPC approached the Government of Maharashtra in January, 1999 to mediate in the issue. In March, 1999, Governmentdetermined that REL should pay an ad hoc additional amount ofRs.2.25 crores per month from December, 1998 to March,1999 only and that the amount payable by REL to TPC forthe year 1999­2000 and thereafter should be referred to a Committeewhich would look into the said issue, along with various otherissues, which would also be referred to it and make itsrecommendations thereon. On 27[th]May, 1999, theGovernment constituted a Committee to consider the questionof standby charges to be paid to TPC by REL from April, 1999onwards.

38. According to respondent No.1, the impugned order of MERC is

based on relevant and germane considerations and MERC hasnot re­written the concept of standby.

39. Mr. Dada also submitted that MERC has not abdicated its responsibility and on the contrary, independently applied itsmind to decide the case.

40. Mr. Dada submitted that the judgment of the High Court was, in effect, in the nature of an interim arrangement. He referred tothe judgment of the Supreme Court in the matter ofKunhayammed v. State of Kerala, 2000 (6) SCC 359, andsubmitted that the judgment of this Court, in any event, mergedin the judgment of the Supreme Court.

41. Mr. Dada submitted that recommendations of the Pramod DevCommittee were never acted upon and were always objected toby respondent No.1.

42. Mr. Dada also argued that REL’s standby arrangement withTPC is totally independent of TPC’s standby arrangement withMSEB. He submitted that the rate for standby charges payableby REL to TPC should be lower than the rate payable forstandby charges by TPC to MSEB.

43. Mr. Dada vehemently contended that a basic fallacy in thesubmissions of the petitioners is that respondent No.1 shouldpay 50% to MSEB, because respondent No. 1 is enjoyingfacility of 275 MVA out of the 550 MVA of standby facilitygranted to the petitioners by MSEB. He submitted thatrespondent No.1 is already consumer to the extent of 35% ofTPC’s power supply to the City of Bombay. The balancepower generated by TPC is purchased by TPC’s customers.The total standby burden is distributed amongst the directconsumers of TPC, including REL. Thus, the standby burden isdistributed over all the consumers. If the ratio of 50:50 is to beapplied, as contended by TPC, then, the petitioners, TPC,would recover 50% from its customers, including respondentNo.1, who would contribute 35% of the 50% through its tariffand in addition, would be required to pay 50% tariff fee asstandard charges. Thus, respondent No.1, REL, would beburdened with approximately 67.5% of the standby chargespayable by TPC to MSEB, causing an imbalance as TPC would pay 50%, recover 50% from REL and retain with itself 17.5%.

44. Mr. Dada urged that CEA report is totally unbiased, as CEA isa statutorily constituted authority with eight full­time and sixpart­time members, experienced in various fields, such astechnical, economic, commercial and financial. From time totime, it gives consultancy services to variousgenerating companies. In the instant case, the Committeewas constituted of four persons, who unanimously prepared thereport, and it was placed before the entire body of CEA, whichapproved the said report.

45. It is not necessary to critically analyse and adjudicate therespective contentions of the parties for the reasons indicated inthe succeeding paragraphs.

46. The real controversy involved in this case is regarding thequantum of standby charges payable by REL to TPC for 275MVA standby facility. The matters of standby charges, tariff

and pricing are highly technical and complex matters whereexpertise of various fields, such as management, finance,economics, financial state of the State, cost of generation ofpower, distribution, pay­scale of the employees and many otherfactors have to be taken into consideration. These matters canbe appropriately, justly and equitably decided by expert bodies.

47. It may be pertinent to mention that the electricity supplyindustry in India is presently governed by three Acts, viz., theIndian Electricity Act, 1910, Electricity (Supply) Act, 1948 andElectricity Regulatory Commissions Act, 1998. The ElectricityBill, which now has been passed by both the Houses ofParliament and received the assent of the President on 25[th]May, 2003, came on the Statute Book as “the Electricity Act,2003”. This Act seeks to replace the Indian Electricity Act,1910, Electricity (Supply) Act, 1948 and Electricity RegulatoryCommissions Act, 1998.

48. In the Electricity Act, 2003, there is a provision for Appellate

Tribunal for Electricity. Section 110 of the Electricity Act, 2003

reads as under:­

­­“Establishment of Appellate Tribunal.

The Central Government shall, by notification,establish an Appellate Tribunal to be knownas the Appellate Tribunal for Electricity to hearappeals against the orders of the adjudicatingofficer or the Appropriate Commission underthis Act.”

49. According to Section 111 of the said Act, any person aggrieved by the order made by an adjudicating officer under this Act(except under Section 127) or an order made by theAppropriate Commission under this Act, may prefer an appealto the Appellate Tribunal for Electricity. According to Section111, an appeal under sub­section (1) shall be filed within aperiod of forty­five days from the date on which a copy of theorder by the adjudicating officer or the Appropriate Commissionis received by the aggrieved person. In the instant case, sincethe Tribunal was not set up, therefore, the petitioners preferreda writ petition before this Court, in which directions were passed from time to time. Since the Tribunal was not constituted, thepetitioners obviously could not approach the Tribunal, and onconstitution of the same, the petitioners may prefer appealbefore the Tribunal. Though there is no question of delay infiling the appeal, however, if for any reason it is considered bythe Tribunal that there is delay in filing the appeal, in ourconsidered view, the same be condoned, and appeal be heardon merits.

50. In the succeeding paragraphs, we would try to demonstratehow the Court is not appropriately and justly equipped todetermine the controversy involved in the case. If the Court iscompelled to decide this case, it may decide the controversy onthe basis of parameters demonstrated in the succeedingparagraphs, apart from the view already taken by theCommission in this case. In our considered view, none of thefollowing parameters can justly, equitably, fairly andappropriately decide the controversy involved in this casebecause the Court has no mechanism to take into consideration various other parameters and factors which are necessary for determination of the question:­

(i) One simplistic method of determining the controversy can be, whatever TPC is paying to MSEB for 550 MVA, REL berequired to pay 50% of that because out of 550 MVA, TPC isproviding 50% standby facility i.e. 275 MVA to REL.

(ii) Another method of deciding this controversy can be, whatever

amount REL has been paying to TPC before demand forincrease by MSEB (21[st] August, 1998) REL be required to payincreased amount to TPC in the same proportion.increase by MSEB (21[st] August, 1998) REL be required to payincreased amount to TPC in the same proportion.

(iii) Standby charges paid by TPC to MSEB are recovered fromits customers. REL has been purchasing about 35% of TPC'selectricity generated and as part of payment for tariff, REL borethe burden of standby charges. REL be required to pay 50% ofthe total charges minus the standby charges of 35%, whichits customers. REL has been purchasing about 35% of TPC'selectricity generated and as part of payment for tariff, REL borethe burden of standby charges. REL be required to pay 50% ofthe total charges minus the standby charges of 35%, which REL is already paying to TPC as its consumer.

51. In our considered view, whichever method the Court may adopt out of the methods mentioned above, the Court would notbe able to justly, equitably and fairly decide the controversyinvolved in the case in true sense.

52. In Shri Sitaram Sugar Company Limited v. Union of India & Ors.,(1990) 3 SCC 223, Their Lordships of the Supreme Courtobserved that price fixation is not within the province ofthe Courts. Judicial function in respect of such matters isexhausted when there is found to be a rational basis for theconclusions reached by the concerned authority. Judicialreview is not concerned with matters of economic policy.

53. In a celebrated case in Mississippi Valley Barge Line Company v.

United States of America, 292 US 282, 286­87: 78 L ed 1260, 1265, Justice Cardozo observed that the structure of a rateschedule calls in peculiar measure for the use of thatschedule calls in peculiar measure for the use of that enlightened judgment which the Commission by training and experience is qualified to form.... It is not the province of aCourt to absorb this function to itself.... The judicial function isexhausted when there is found to be a rational basis for theconclusions approved by the administrative body.

54. In Federation of Railway Officers Association & Ors. v. Union of India, (2003) 4 SCC 289, the Supreme Court observed that on matters affecting policy and requiring technical expertise, theCourt would leave the matter for decision of those who arequalified to address the issues. Court would leave the matter for decision of those who arequalified to address the issues.

55. In Association of Industrial Electricity Users v. State of A.P. &

Ors., (2002) 3 SCC 711, the Supreme Court observed thatfixation of electricity tariff or its revision and provision of cross­subsidy are policy matters outside the purview of judicialintervention unless it is shown to be illegal, arbitrary or ultravires the Andhra Pradesh Electricity Reform Act, 1998.

56. In Kerala State Electricity Board v. M/s. S.N. Govinda Prabhu &

Bros & Ors., (1986) 4 SCC 198, the apex Court again remindedthat price fixation is not the function of the Court and it is notwithin the Court's province to examine the price structure inminute detail if it is satisfied that the revision of tariff is notarbitrary and is not the result of the application of any wrongprinciple.that price fixation is not the function of the Court and it is notwithin the Court's province to examine the price structure inminute detail if it is satisfied that the revision of tariff is notarbitrary and is not the result of the application of any wrongprinciple.

57. In India Thermal Power Ltd. v. State of M.P. & Ors., AIR 2000SC 1005, the Court again reiterated that it would not be properfor this Court to examine in details the various assumptions asthey are technical matters and moreover, the techno­economicclearance was given by the CEA on the basis of suchassumptions. SC 1005, the Court again reiterated that it would not be properfor this Court to examine in details the various assumptions asthey are technical matters and moreover, the techno­economicclearance was given by the CEA on the basis of suchassumptions.

58. In Union of India & Anr., v. Cynamide India Ltd. & Anr.,AIR 1987 SC 1802, again, the well­known principles have beenreiterated. Price­fixation is neither the function nor the forte ofthe Court. The Court is concerned neither with the policy norAIR 1987 SC 1802, again, the well­known principles have beenreiterated. Price­fixation is neither the function nor the forte ofthe Court. The Court is concerned neither with the policy nor with the rates. But the Court has jurisdiction to enquire into thequestion, in appropriate proceedings, whether relevantconsiderations have gone in and irrelevant considerations keptout of the determination of the price.

59. Their Lordships of the Supreme Court, in a celebrated case,West Bengal Electricity Regulatory Commission v. CESC Ltd.,(2002) 8 SCC 715, again observed that the Commissionconstituted under Section 17 of the 1998 Act is an expert bodyand the determination of tariff, which has to be made by theCommission, involves a very highly technical procedure,requiring working knowledge of law, engineering, finance,commerce, economics and management. The Court, in thejudgment, observed that it would be more appropriate andeffective if a statutory appeal is provided to a similar expertbody, so that various questions, which are factual and technicalthat arise in such an appeal, get appropriate consideration inthe first appellate stage. The Court also observed that theCentral Electricity Regulatory Commission, which has a judicial member, as also a number of other members having varied qualifications, is better equipped to appreciate the technical andfactual questions involved in the appeals arising from the ordersof the Commission.

60. The apex Court, in West Bengal case mentioned above, furtherobserved, without meaning any disrespect to the Judges, thatneither the High Court, nor the Supreme Court, would in realitybe appropriate appellate forums in dealing with this type offactual and technical matters. The Court also recommendedthat the appellate power against an order of the StateCommission under the 1998 Act should be conferred either onthe Central Electricity Regulatory Commission or on asimilar body. Perhaps, in view of the observations of TheirLordships of the Supreme Court, the Union of India iscontemplating to set up an Appellate Tribunal.

61. It has been the consistent view of the apex Court that thematter pertaining to pricing and tariff must be left to expert

bodies, because Courts have no mechanism or expertise todecide these matters. It is not possible to decide matterspertaining to Tariff or Standby Charges justly and appropriatelyby regular Courts. These issues must be determined by expertcommissions or expert appellate tribunals.

62. It may be pertinent to mention that in Writ Petition No. 2577 of2004 between the same parties, a similar question arose beforethe Court. It seems that in deference of the observation madeby the apex Court in West Bengal (supra) and other cases,Union of India has decided to set up an Appellate Tribunal.The learned Additional Solicitor­General for India,Mr. B.A. Desai, on 18[th] October, 2004, made the statementbefore the Court that within a period of three months, theAppellate Tribunal shall become functional. Again, when thematter came up before the Court on 8[th] December, 2004, thelearned Additional Solicitor­General made the statement thatwithin a period of three months, i.e., within three months from18[th] October, 2004, the Appellate Tribunal shall become functional.

63. The Appellate Tribunal is likely to become functional by 17[th]

January, 2005. Since now, the Appellate Tribunal is going tobecome functional very shortly, in our considered view, thegrievance of the petitioners should be decided by the AppellateTribunal consisting of experts.

64. It is always desirable to decide any controversy promptly;but this is not one of those controversies where because ofslight delay, there would be grave consequences. Ultimately, itis only the question of the amount of standby charges to bepaid by REL to TPC and TPC to MSEB. During theinterregnum period, we direct the parties to pay according to theinterim order passed by this Court. Payments made by theparties, of course, would be without prejudice to the rights andcontentions of the parties to be finally adjudicated by the expertTribunal. Since there has been some delay because of thepetitioners' approaching this Court, we request the Appellate

Tribunal to decide the case as expeditiously as possible, and in any event, within four months from the date of receipt of thejudgment of this Court.

65. We have deliberately refrained from making any observation on the rival contentions of the parties. In our opinion, anyobservation may prejudice the case of the parties before theAppellate Forum. No further directions are necessary in thisWrit Petition.

66. This Writ Petition is accordingly disposed of. In the facts and circumstances of the case, we direct the parties to bear theirown costs.

CHIEF JUSTICE

DR.D.Y.CHANDRACHUD, J.