Hindustan Petroleum Corporation Limited vs Karnataka Electricity Regulatory Commission & Anr on 6 July 2026

J U D G M E N T

PER HON’BLE MR. VIRENDER BHAT, JUDICIAL MEMBER

1. Challenge in this appeal is to the tariff order dated 14.05.2018 passed by 1st respondent Karnataka Electricity Regulatory Commission (hereinafter referred to as “the Commission”) on the limited aspect of categorizing petrol/diesel and oil storage plants in HT-2(b) category i.e. the commercial category for the purposes of levy of tariff.

2. The 2nd respondent Mangalore Electricity Supply Company Limited (in short “MESCOM”) had filed a petition seeking Annual Performance Review for FY 2017, revision of Annual Revenue Requirement for FY 2019 and revision of Retail Supply Tariff for FY 2019 in Multi Year Tariff framework in which the impugned order has been passed by the Commission.

3. The appellant is a Government of India undertaking under the administrative control of the Ministry of Petroleum and Natural Gas and is engaged in the business of refining, processing and supply of petroleum and natural gas products. It has established a petroleum and diesel terminal at Mangalore in the State of Karnataka and is a consumer of 2nd respondent for its activities at the terminal.

4. Apart from assertion that the Commission, in the impugned order has erroneously categorized petrol/diesel and oil storage plants under HT-2(b) category namely commercial category as against HT-2(a) namely industrial category, it is contended on behalf of the appellant that the impugned order is a non-speaking order on this aspect and has been passed without considering the objections as well as written submissions of the appellant. It is further contended that since the Commission has not dealt with the objections/submissions of the appellant raised during the public hearing, the impugned order has been rendered in complete violation of principles of natural justice and therefore cannot be sustained.

5. Even though, none had appeared on behalf of the respondents on 06.02.2026 when the appeal had come up for hearing and the learned senior counsel for the appellant Mr. M G Ramachandran had advanced arguments on behalf of the appellant, yet in terms of the liberty granted to the respondents in this regard, written submissions have been filed on behalf of 2nd respondent which have been perused. In the written submissions, the 2nd respondent has justified the categorization of petrol/diesel and oil storage plants under HT-2(b) category i.e. commercial category while referring to the activities being carried out in those plants and placing reliance upon previous judgment of this Tribunal dated 24.03.2025 in appeal no.149/2018 Hindustan Petroleum

Corporation Limited v. Tamil Nadu Electricity Regulatory Commission & Ors. wherein it has been held that the TNERC has correctly categorized LPG bottling plant under HT-III i.e. commercial category. It is also submitted that there has been no re-categorization of petrol/diesel and oil storage plants by way of the impugned tariff order and these plants have been classified under commercial category since the year 2003 which classification has merely been continued in the impugned tariff order.

6. It is true that petrol/diesel and oil storage plants were placed under commercial category i.e. HT-2(b) since the year 2003. However, it is important to note that in response to the tariff proposal dated 30.11.2017 filed by 2nd respondent MESCOM before the Commission, categorizing the petrol/diesel and oil storage plants under tariff schedule HT-2(b) along with commercial complexes, cinemas, hotels, boarding and lodging, amusement parks etc., the appellant had submitted its comments/suggestions before the Commission to the said proposal seeking categorization of these storage plants under HT-2(a) i.e. industrial category. This fact is nowhere disputed either by the 1st respondent Commission or by the 2nd respondent MESCOM. Even a copy of these comments/suggestions dated 02.03.2018 filed by appellant before the Commission, has been annexed to the Memorandum of Appeal as Annexure-B.

In these

comments/suggestions, the appellant has given reasons as well as justifications as to why the categorization of petrol/diesel and oil storage plants ought to be under industrial category and not under commercial category. We also find from the perusal of the impugned tariff order that a representative of the appellant was present during public hearing held by the Commission on 02.03.2018.

7. There is no reference at all, not to speak of any discussion, about these comments/suggestions of the appellant in the entire impugned tariff order. Annexure-4 to the impugned tariff order which relates to electricity tariff applicable for the FY 2019 merely mentions the tariff schedules and the tariff rates applicable to particular tariff schedule. The relevant portion of the impugned order is extracted hereinbelow: - “TARIFF SCHEDULE HT-2(a) Applicable to Industries, Factories, Workshops, Research & Development Centres, Industrial Estates, Milk dairies, Rice Mills, Phova Mills, Roller Flour Mills, News Papers, Printing Press, Railway Workshops/KSRTC Workshops/ Depots, Crematoriums, Cold Storage, Ice & Ice-cream mfg. Units, Swimming Pools of local bodies, Water Supply Installations of KIADB and other industries, all Defence Establishments. Hatcheries, Poultry Farm, Museum,

Floriculture, Green House, Bio Technical Laboratory, Hybrid Seeds processing Units, Stone Crushers, Stone cutting, Bakery Product Manufacturing Units, Mysore Palace illumination, Film Studios, Dubbing Theatres, Processing, Printing, Developing and Recording Theaters, Tissue Culture, Aqua Culture, Prawn Culture, Information Technology Industries engaged in development of Hardware & Software, Information Technology (IT) enabled Services / Start-ups (As defined in GOI notification dated 17.04.2015)/ Animation / Gaming / Computer Graphics as certified by the IT & BT Department of GOK/GOI, Drug Mfg. Units, Garment Mfg. Units, Tyre retreading units, Nuclear Power Projects, Stadiums maintained by Government and local bodies, Railway Traction, Effluent treatment plants and Drainage water treatment plants owned other than by the local bodies independently serviced outside the premises of Industries/Buildings for which the HT power supply is availed, LPG bottling plants, petroleum pipeline projects, Piggery farms, Analytical Lab for analysis of ore metals, Saw Mills, Toy/wood industries, Satellite communication

centres, Mineral water processing plants / drinking water bottling plants and Solid Waste Processing Plant.

RATE SECEDULE HT-2 (a): Applicable to all areas of MESCOM. Demand charges Rs.200/kVA of billing demand/month Energy charges For the first one lakh units 675 paise per unit For the balance units 700 paise per unit

Tariff applicable to Railway Traction Demand charges Rs.210/kVA of billing demand/month Energy charges 600 paise per unit for all the units

Note: Special Incentive Scheme & ToD Tariff is not applicable to Railway traction installations.

Tariff applicable to Effluent Plants independently serviced outside the premises of any installations under HT2 a Demand charges Rs.210/kVA of billing demand/month Energy charges 640 paise per unit for all the units

Note: The ToD tariff is applicable to these installations if the Special incentive scheme in not opted.

TARIFF SCHEDULE HT-2(b)

Applicable to Commercial Complexes, Cinemas, Hotels, Boarding & Lodging, Amusement Parks, Telephone Exchanges, Race Course, All Clubs, T.V. Station, All India Radio, Railway Stations, Air Port, KSRTC bus stations, All offices, Banks, Commercial Multi-storied buildings.

APMC Yards, Stadiums other than those maintained by Government and Local Bodies, Construction power for irrigation, Power Projects and Konkan Railway Project, Petrol / Diesel and Oil storage plants, I.T. based medical transcription centres, telecom, call centres, BPO/KPO, Diagnostic centres, concrete mixture (Ready Mix Concrete) units and Private Guest Houses / Travellers Bunglows.

RATE SCHEDULE HT-2 (b): Applicable to all areas of MESCOM Demand charges Rs.220/kVA of billing demand/month Energy charges For the first two lakh units 845 paise per unit For the balance units 855 paise per unit ”

8. No reason at all has been given by the Commission in the impugned tariff order for non-consideration of the submissions/comments of the appellant seeking recategorization of

petrol/diesel and oil storage plants under commercial category. We find the order totally non-speaking on this aspect.

9. We may note that while passing tariff orders, the Commission exercises quasi-judicial functions. Therefore, the Commission is bound to take note of every suggestion/objection raised before it by any stake- holder and to give reasons for accepting or rejecting such suggestions/objections. Reasoned order is the hallmark of judicial system. A reasoned order provides a clear understanding of the decision making process and ensures fairness, accountability and credibility. It reinforces fairness as well as rule of law and enables effective review/appeal process. It is the fundamental consideration in decision making process that the party or the parties must know why and on what grounds the order has been passed again him/them. A speaking order introduces fairness in the decision making and helps in minimizing arbitrariness. The purpose of recording reasons is also to serve wider aspect of principle of justice that justice must not only be done, it must also seem to be done. Reasons act as a bridge between the material facts on which conclusion is drawn and the actual order passed. Reasoning in a judicial order is necessary not only for the satisfaction of the parties but also for the appellate court/forum which must know the reasons for arriving at the decision assailed before it.

10. The Hon’ble Supreme Court has also emphasized in several cases, the importance of reasoned orders. The requirement of indicating reasons has been judicially recognized as imperative. In Raj Kishore Jha v. State of Bihar (2003) 11 SCC 519, the Apex Court held: - “8. …. Right to reason is an indispensable part of a sound judicial system; reasons at least sufficient to indicate an application of mind to the matter before court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made;….”

11. Similarly, in Asstt. Commissioner, Commercial Tax Deptt. v. Shukla & Brother (2010) 4 SCC 785, it has been observed as under: - “23. We are not venturing to comment upon the correctness or otherwise of the contentions of law raised before the High Court in the present petition, but it was certainly expected of the High Court to record some kind of reasons for rejecting the revision petition filed by the Department at the very threshold. A litigant has a

legitimate expectation of knowing reasons for rejection of his claim/prayer. It is then alone, that a party would be in a position to challenge the order on appropriate grounds. Besides, this would be for the benefit of the higher or the appellate court. As arguments bring things hidden and obscure to the light of reasons, reasoned judgment where the law and factual matrix of the case is discussed, provides lucidity and foundation for conclusions or exercise of judicial discretion by the courts.

24. Reason is the very life of law. When the reason of a law once ceases, the law itself generally ceases (Wharton's Law Lexicon). Such is the significance of reasoning in any rule of law. Giving reasons furthers the cause of justice as well as avoids uncertainty. As a matter of fact it helps in the observance of law of precedent. Absence of reasons on the contrary essentially introduces an element of uncertainty, dissatisfaction and give entirely different dimensions to the questions of law raised before the higher/appellate courts. In our view, the court should provide its own

grounds and reasons for rejecting claim/prayer of a party whether at the very threshold i.e. at admission stage or after regular hearing, howsoever concise they may be.

25. We would reiterate the principle that when reasons are announced and can be weighed, the public can have assurance that process of correction is in place and working. It is the requirement of law that correction process of judgments should not only appear to be implemented but also seem to have been properly implemented. Reasons for an order would ensure and enhance public confidence and would provide due satisfaction to the consumer of justice under our justice dispensation system. It may not be very correct in law to say, that there is a qualified duty imposed upon the Courts to record reasons.

26. Our procedural law and the established practice, in fact, imposes unqualified obligation upon the courts to record reasons. There is hardly any statutory provision under the Income Tax Act or under the Constitution itself requiring recording of reasons in the judgments but it is

no more res integra and stands unequivocally settled by different judgments of this Court holding that the courts and tribunals are required to pass reasoned judgments/orders. In fact, Order 14 Rule 2 read with Order 20 Rule 1 of the Code of Civil Procedure requires that, the Court should record findings on each issue and such findings which obviously should be reasoned would form part of the judgment, which in turn would be the basis for writing a decree of the Court.

27. By practice adopted in all Courts and by virtue of judge-made law, the concept of reasoned judgment has become an indispensable part of basic rule of law and, in fact, is a mandatory requirement of the procedural law. Clarity of thoughts leads to clarity of vision and proper reasoning is the foundation of a just and fair decision. In Alexander Machinery (Dudley) Ltd. there are apt observations in this regard to say "failure to give reasons amounts to denial of justice". Reasons are the real live links to the administration of justice. With respect we will contribute to this view. There is a rationale, logic and purpose behind a reasoned judgment. A reasoned

judgment is primarily written to clarify own thoughts; communicate the reasons for the decision to the concerned and to provide and ensure that such reasons can be appropriately considered by the appellate/higher court. Absence of reasons thus would lead to frustrate the very object stated hereinabove.”

12. Thus, reason is the heartbeat of every conclusion and without the same, it becomes lifeless. Giving reason furthers the cause of justice and avoids arbitrariness as well as uncertainty. A litigant has a legitimate expectation of knowing the reasons for rejection of his claim/prayer.

13. In the instant case, we note that petrol/diesel and oil storage plants have been categorized under tariff schedule HT-2(b) i.e. commercial category along with commercial complexes, cinemas, hotels, amusement parks, racecourse, railway stations, call centers, diagnostic centers etc. whereas LPG bottling plants, coal storage, ice and ice manufacturing units, information technology industries engaged in development of hardware and software, saw-mills, toys/wood industries, mineral water processing plants/drinking water bottling plants, solid waste processing plants, etc. have been categorized under tariff schedule HT-2(a) i.e. industrial category. It is argued on behalf of the

appellant that there exists no reasonable nexus between the activities grouped under same category in HT-2(b) category where the petrol/diesel and oil storage plants have been included along with malls/multiplexes etc. It is argued that the State Commission has failed to apply the statutory mandate under Section 62(b) and illegally clubbed the appellant’s storage plant with malls/cinemas/hotels and commercial complexes. On this aspect, reliance is placed upon the previous judgment of this Tribunal in appeal no.195/2009 Mumbai International Airport Pvt. Ltd v. Maharashtra Electricity Regulatory Commission and Anr. wherein it has been held as under:- “76. It is settled law that equality before the law does not mean that things which are different shall be treated as they were the same. In this case, the Appellant being an airport, extending services to the public, has been simply put along with the malls, restaurants, shops etc., merely because it does not come under other categories namely, domestic, agriculture and residential, etc. This, in our view, is a wrong approach.

77. The failure on the part of the State Commission to properly exercise the discretion vested under Section 62(3) of the Act not only is violative of the said section

but also violative of Article 14 of the Constitution. As a matter of fact, the Appellant being treated equal with the malls, restaurants and commercial establishments would amount to treating unequal as equals.”

14. The mere fact that petrol/diesel and oil storage units were being categorized under HT-2(b) i.e. commercial category since the year 2003 does not mean that there cannot be a relook on such categorization in view of comments/justifications submitted by the appellant during the public hearing on the petition filed by 2nd respondent. The Commission, being a quasi-judicial forum was bound to take note of every suggestion/objection raised by the appellant and to give reasons for rejecting the same in case those were not found acceptable. The impugned order of the Commission is absolutely bereft of any reasons on this aspect and thus, a non-speaking order. We are unable to find any reason for the Commission to overlook the comments/objections submitted by the appellant during the hearing of petition. Such a cryptic and non-speaking order cannot be sustained.

15. Hence, the impugned order of the Commission is set aside on the limited aspect as noted and discussed hereinabove. Accordingly, the case is remanded back to the Commission with a direction to pass fresh speaking/reasoned order with regards to the categorization of

petrol/diesel and oil storage plants, after providing an opportunity of hearing to all the concerned parties. The needful shall be done by the Commission within two months from the date of receipt of this judgment.

16. The appeal stands allowed in above terms.

Pronounced in the open court on this the 06th day of July, 2026.

Virender Bhat Judicial Member

(Seema Gupta) Officiating Chairperson

✓ REPORTABLE / NON-REPORATBLE

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