BHASKAR SHRACHI ALLOYS LTD. ETC.ETC. versus DAMODAR VALLEY CORPORATION & ORS. ETC. on 23 July 2018

[2018] 10 S.C.R. 773

BHASKAR SHRACHI ALLOYS LTD. ETC.ETC.

v.

DAMODAR VALLEY CORPORATION & ORS. ETC.

(Civil Appeal Nos. 971-973 of 2008)

JULY 23, 2018

[RANJAN GOGOI AND R. BANUMATHI, JJ.]

Electricity – Supply/distribution of electricity generated byDamodar Valley Corporation – Determination of tariff for –Interplay between the provisions of 1948 Act and the 2003 Act –Corporation notified its own tariff order in 2000 – 2003 Act cameinto force – Despite coming into force of the 2003 Act, theCorporation did not approach the Central Electricity RegulatoryCommission (CERC) for determination of the tariff chargeable by it– CERC issued tariff order – Challenged by Corporation beforeAppellate Tribunal – Tribunal inter alia held that provisions of the1948 Act which are not inconsistent with the 2003 Act will continueto hold the field so far as the determination of tariff is concerned –Propriety of – Held: Part IV of the 1948 Act not being inconsistentwith the provisions of the 2003 Act can be taken into account fordetermination of tariff – Such provisions of the 1948 Act will alsohave an overriding effect over the inconsistent provisions of the2004 Tariff Regulations – View taken by the Tribunal affirmed –Central Electricity Regulatory Commission (Terms and Conditionsof Tariff) Regulations, 2004 – Damodar Valley Corporation Act,1948 – Electricity Act, 2003 – ss.61, 62 and 125.

Electricity Act, 2003 – Fourth proviso to s.14 – Purport andeffect of – Plea of appellants that the application of a proviso mustalways be confined and understood within the parameters of theprovisions of the main section of which it is a part – Held: Fourthproviso to s.14 is clearly a substantive provision to lay downsomething more than what a proviso generally deals with – It neednot be understood to be confined only to the question of licensingwhich is dealt with by the main part of s.14 – Damodar ValleyCorporation Act, 1948 – ss.18 and 19.

Electricity – CERC issued tariff order determining the tarifffor generation and transmission for the period from 1[st] April, 2006

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Ato 31[st] March, 2009 by allowing a two-year transition period to theDamodar Valley Corporation i.e. from 1[st] April, 2004 to 31[st] March,2006 – Upheld by the Appellate Tribunal – Propriety of – Held:Corporation in addition to generation, transmission and distributionof electricity is statutorily required to undertake certain socialsecurity/beneficial measures like flood control, control of soil erosion,Bafforestation, navigation, promotion of public health etc. – Grantof transitory period can not be faulted with – Said part of the orderof the Tribunal not interfered with.

Electricity Act, 2003 –s.79 – Held: Having regard to theprovisions of s.79 it is the Central Electricity Regulatory CommissionC(CERC) which would be the “Appropriate Commission” fordetermination of tariff inasmuch as the Damodar Valley Corporationis a Corporation owned and controlled by the Central Government– Said conclusion recorded by the Appellate Tribunal not interferedwith.DDamodar Valley Corporation Act, 1948 – Incorporation ofDamodar Valley Corporation under – Objects and reasons for –Discussed.

Central Electricity Regulatory Commission (Terms andConditions of Tariff) Regulations, 2004 – If have overriding effectEover the parallel provisions in the 1948 Act – Plea of appellant that2004 Regulations must override the provisions of the 1948 Act asthe said regulations are statutory in character – Held: Not accepted –2004 Regulations though statutory in character are a species ofsubordinate delegated legislation – Damodar Valley CorporationFAct, 1948.

Interpretation of Statutes – External aids – Reports submittedby Parliamentary Standing Committee – Discussed.

Conclusion

Electricity – ‘Depreciation rate’ and ‘sinking fund’ – Headsof tariff fixation – Determination of u/s.40 of the 1948 Act –GPropriety of – Discussed – Damodar Valley Corporation Act, 1948 –s.40 – Central Electricity Regulatory Commission (Terms andConditions of Tariff) Regulations, 2004 – Regulation 20.

Electricity – Tariff – Recovery towards Pension and GratuityFund – In reversal of the decision of the Central ElectricityHRegulatory Commission permitting recovery from consumers to the BHASKAR SHRACHI ALLOYS LTD. ETC. ETC. v. DAMODARVALLEY CORPORATION & ORS. ETC.

extent of 60% and contribution of the balance 40% by the DamodarValley Corporation, Appellate Tribunal allowed entire fund to berecovered by way of tariff from the consumers – Propriety of – Held:Ex facie, there is no error in the reasoning adopted by the Tribunalin coming to the aforesaid conclusion so as to justify interference –Electricity Act, 2003 – s.125.

Electricity – Cost relating to “other activities” of the DamodarValley Corporation to be recovered through tariff – Allowed byAppellate Tribunal – Propriety of – Plea of appellants that ss. 32and 33 of the 1948 Act are in direct conflict with ss. 41 and 51 ofthe 2003 Act and, therefore, recovery of cost incurred in “otherworks” undertaken by the Corporation through power tariff iswholly untenable – Held: “Other activities” of the Corporation arenot optional as contemplated u/ss.41/51 of the 2003 Act but aremandatorily cast by the 1948 Act which, being in the nature ofsocially beneficial measures, per se, do not entail earning of anyrevenue so as to require maintenance of separate accounts –Allowance of recovery of cost incurred in connection with “otheractivities” of the Corporation from the common fund generated bytariff chargeable from the consumers/customers of electricity ascontemplated by the provisions of the Act of 1948, therefore, do notcollide or is inconsistent with the provisions of the 2003 Act –Findings of Tribunal not interfered with – Electricity Act, 2003 –ss.41 and 51 – Damodar Valley Corporation Act, 1948 – ss.32and 33.

Dismissing the appeals, the Court

HELD: 1.1 The transitory period has been granted havingdue regard to the statutory functions/social responsibilities thatthe Damodar Valley Corporation (DVC/Corporation) is mandatedto undertake in terms of the Damodar Valley Corporation Act,1948. The tariff fixed is also lower than the tariff that has beenfixed by the Jharkhand and West Bengal Electricity RegulatoryCommission for the general/domestic classes of consumers. Whileit is correct that the classes of consumers served by theCorporation are HT-Industrial consumers like Steel, Coal,Railways, etc. beside bulk supply to main beneficiaries of StateElectricity Boards of West Bengal and Jharkhand, the said fact,itself, is another peculiar feature which distinguishes the A

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776SUPREME COURT REPORTS

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776SUPREME COURT REPORTS

ACorporation from other licenses. If in a situation where theCorporation in addition to generation, transmission anddistribution of electricity is statutorily required to undertakecertain social security/beneficial measures like flood control,control of soil erosion, afforestation, navigation, promotion ofpublic health, etc. the grant of transitory period cannot be faultedBwith. Therefore, the said part of the order of the AppellateTribunal is declined to be interfered with. The Appellate Tribunalalso took the view that having regard to the provisions of Section79 of the Electricity Act, 2003 it is the CERC which would be the“Appropriate Commission” for determination of tariff inasmuchCas the Damodar Valley Corporation is a Corporation owned andcontrolled by the Central Government. The said conclusionrecorded by the Appellate Tribunal is neither unreasonable norirrelevant so as to warrant interference, particularly, in exerciseof the limited jurisdiction under Section 125 of the 2003 Act.[Paras 27, 28] [792-G-H; 793-A-D]D1.2 The Damodar Valley Corporation had been incorporatedunder the provisions of the Damodar Valley Corporation Act,1948. Sometime in the year 1943, the Damodar River Valley hadbeen affected by severe floods leading to wide-scale destructionof life and property. The Provincial Government of Bengal hadEconstituted an Enquiry Committee to suggest ways and means toavoid such catastrophes in the future. The Enquiry Committeehad, inter alia, recommended that a statutory corporation, on thelines of the Tennessee Valley Authority of the USA, beincorporated to command and control the Damodar River. TheFthen British Government accepted this proposal of the Committeeand had called a senior Engineer working for the Tennessee ValleyAuthority to make recommendations and suggestions in thisregard. [Para 30] [793-F-H]

1.3 The Central Electricity Regulatory Commission (TermsGand Conditions of Tariff) Regulations, 2004 though statutory incharacter are a species of subordinate delegated legislation.Further, it may be wholly unnecessary to detract from thefundamental principles of law laid down in The PresidentialReference case which would be an inevitable consequence, if thecontentions advanced on behalf of the appellants to the effectHthat the Tariff Regulations must override the provisions of the BHASKAR SHRACHI ALLOYS LTD. ETC. ETC. v. DAMODARVALLEY CORPORATION & ORS. ETC.

Act of 1948 as the said regulations are statutory in character isto be accepted. This is also what has been subsequentlyemphasised by Supreme Court in Bharathidasan University & Anr.and Samsthanan Chethu Thozhilali Union cases. No error,therefore, can also be found in the implicit reliance placed on theratio of the above decisions by the Appellate Tribunal. [Paras35, 37] [795-F-G; 798-D-E]

The Presidential Reference, Delhi Laws Act, 1912 AIR1951 SC 332 : [1951] SCR 747 – followed.

Bharathidasan University & Anr. v. AICTE & Ors.(2001) 8 SCC 676 : [2001] 3 Suppl. SCR 253;Samsthanan Chethu Thozhilali Union v. State of Kerala& Ors. (2006) 4 SCC 327 : [2006] 3 SCR 420 –referred to.

1.4 The fourth proviso to Section 14 of Electricity Act, 2003uses the expression “….and the provisions of the Damodar ValleyCorporation Act, 1948 in so far as they are not inconsistent withthe provisions of the Act, shall continue to apply to thatCorporation…”. The fourth proviso to Section 14 is clearly asubstantive provision to lay down something more than what aproviso generally deals with. If the intention of the proviso wasto exclude DVC only from the main part of Section 14 dealingwith the requirement of obtaining licence for transmission/distribution/trade in electricity, the purpose is fully achieved bythe first part recognising DVC as a ‘deemed licensee’ and notrequiring to apply for and obtain licence. The Legislature couldhave simply stopped there. There was no necessity to incorporatethe second part. The second part of the fourth proviso is to bringin the continued application of some of the provisions of theDamodar Valley Corporation Act, 1948 which are not inconsistentwith the provisions of the Electricity Act, 2003. The third provisoto Section 14 which provides “that in case an appropriateGovernment transmits electricity or distributes electricity orundertakes trading in electricity whether before or after thecommencement of the Act, such Government shall be deemed tobe a licensee under the Act but shall not be required to obtainlicence under the Act”. In so far as DVC is concerned, if thefourth proviso is to be confined only to licensing as in the case of

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Athird proviso, the fourth proviso also would have stopped withthe first part of the proviso. There would have been no necessityto incorporate the second part of the proviso. The legislaturedoes not incorporate any words which are irrelevant or redundantand every expression used in a statutory provision has somepurpose. A careful comparative reading of the third and the fourthBprovisos to Section 14 clearly indicates the intention of thelegislature that the second part of the fourth proviso is to bringin the continued application of some of the provisions of the Actof 1948 which are not inconsistent with the provisions of theElectricity Act, 2003. There are no licensing provisions in theCDamodar Valley Corporation Act, 1948 to be saved. The obviousreference in the second part of proviso is to provide for thecontinued application of the provisions of the 1948 Act insofar asthey are not inconsistent with the provisions of the ElectricityAct, 2003. [Paras 41, 42] [802-A-H]

D1.5 The appellants made reference to Sections 18 and 19 ofthe Damodar Valley Corporation Act, 1948 as being the provisionsrelating to licensing which could be said to be considered as savedby virtue of second part of the fourth proviso to Section 14 of theAct of 2003. A perusal of Sections 18 and 19 of the 1948 Act showthat they deal with the supply and generation of electrical energyEand distribution of electricity within the Damodar Valley area.The provisions of the Electricity Act, 2003 which authorise theRegulatory Commissions to grant licence to persons (other thanDVC) fully govern the field and there is no question of continuedapplication of the 1948 Act in that respect. Sections 18 and 19 ofFthe 1948 Act do not deal with licence to DVC. These provisionsonly deal with activities of other entities to distribute electricitywithin the Damodar Valley area. Further, the provisions ofElectricity Act, 2003 authorizes the Regulatory Commissions togrant licence to persons other than DVC. Therefore, there can

be no question of continued application of the 1948 Act over thoseGprovisions. The fourth proviso to Section 14, Electricity Act, 2003which uses the expression “….and the provisions of the DamodarValley Corporation Act, 1948 in so far as they are not inconsistentwith the provisions of the Act, shall continue to apply to thatCorporation…” is a positive provision enabling continuedHapplication of certain provisions of the 1948 Act which are not inconsistent with the provisions of the Electricity Act, 2003. Theintention behind both the provisions needs to be appreciated andgiven effect to. [Paras 43, 44] [803-A-E]

1.6 The Parliamentary Standing Committee hadrecommended that the Corporation should be exempted fromthe operation of the provisions of the proposed Electricity Act,2003 in view of the special status and responsibilities of theCorporation as envisaged under the Parliamentary enactmentconstituting it (i.e the Act of 1948). However, it appears thatParliament was not inclined to provide a blanket/total exemptionin favour of the Corporation and the 2003 Act did not include theCorporation as one of the entities in Section 173 of the 2003 Actwhich provides exemption in so far as the provisions of theConsumer Protection Act, 1986, the Atomic Energy Act, 1962and the Railways Act, 1989 clearly excluding the provisions ofthe 1948 Act therefrom. Instead, the fourth proviso to Section14 of the 2003 Act was specifically incorporated. Having regardto the legislative history behind the enactment of the provisionof Section 173 and the provisions of Section 14 including the fourthproviso thereto, it may be more in consonance with theParliamentary intention to hold that the fourth proviso to Section14 need not be understood to be confined only to the question oflicensing which is dealt with by the main part of the Section 14.Rather, the Parliament had intended to provide partial exemptionto the Corporation by mandating that such provisions of the 1948Act which are not inconsistent with the 2003 Act will continue tohold the field. Viewed thus, the fourth proviso to Section 14 ofthe Electricity Act 2003 has to be understood to be a legislativeexercise in the nature of a substantial provision of law. Part IV ofthe Act of 1948 not being inconsistent with the provisions of the2003 Act can, therefore, be taken into account for determinationof tariff. Such provisions of the 1948 Act will also have anoverriding effect over the inconsistent provisions of the CentralElectricity Regulatory Commission (Terms and Conditions ofTariff) Regulations, 2004. Said view, as above, will also effectuatethe provisions of the 1948 Act in so far as the activities of theCorporation, other than generation and transmission of electricity,is concerned. Therefore, the above view taken by the AppellateTribunal is affirmed. [Paras 47, 48] [804-H; 805-A-H]

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A1.7 So far as the ‘depreciation rate’ and ‘sinking fund’ isconcerned it is the provisions of Section 40 of the Damodar ValleyCorporation Act, 1948 which have been held to be determinative.Having clarified the manner in which the fourth proviso to Section14 of the Electricity Act, 2003 has to be understood, one doesnot find the reasoning adopted by the Appellate Tribunal on theBissues relating to ‘depreciation’ and ‘sinking fund’ to befundamentally flawed in any manner so as to give rise to asubstantial question of law requiring intervention/interferenceunder Section 125 of the 2003 Act. Insofar as the debt-equityratio is concerned, it is found that except for the projects whichChave been completed prior to 1992 in which case the ratio hasbeen worked out at par with other public-sector organisation at50:50, the ratio of 70:30 has been adopted following theprescription under Regulation 20 of the Central ElectricityRegulatory Commission (Terms and Conditions of Tariff)Regulations, 2004 in the absence of any specific rate under theDAct of 1948. [Paras 50, 51] [806-E-H]

1.8 So far as the pension and gratuity fund is concerned,the only issue arising is whether the fund worked out on Actuarybasis at Rs.1534.49 crores should be apportioned between theCorporation and the consumers as held by the CERC in the ratioEof 40:60 or the entire fund should be allowed to be recovered byway of tariff from the consumers as held by the Appellate Tribunal.A careful consideration of the reasoning adopted by the AppellateTribunal would not disclose any such error so as to warrantinterference of this Court. No error or fallacy, ex facie, is disclosedFin the reasoning adopted so as to justify interference underSection 125 of the Electricity Act, 2003. [Paras 52, 53] [807-A-B,E-F]

1.9 Sections 41 and 51 of the Electricity Act, 2003 inter alia,require maintenance of separate accounts of the other businessGundertaken by transmission/distribution licensees so as to ensurethat the returns from the transmission/distribution business ofelectricity do not subsidize any other such business. Not onlySections 41 and 51 of the 2003 Act contemplate prior approval ofthe Appropriate Commission before a licensee can engage in anyother business other than that of a licensee under the 2003 Act,H

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what is contemplated by the aforesaid provisions of the 2003 Actis some return or earning of revenue from such business. In theinstant case, the “other activities” of the Corporation are notoptional as contemplated under Sections 41/51 of the 2003 Actbut are mandatorily cast by the statute i.e. Act of 1948 which,being in the nature of socially beneficial measures, per se, do notentail earning of any revenue so as to require maintenance ofseparate accounts. The allowance of recovery of cost incurred inconnection with “other activities” of the Corporation from thecommon fund generated by tariff chargeable from the consumers/customers of electricity as contemplated by the provisions of theDamodar Valley Corporation Act of 1948, therefore, do not collideor is, in any manner, inconsistent with the provisions of the 2003Act. Therefore, there is no occasion to interfere with the findingsrecorded by the Appellate Tribunal on the above score. [Para55] [808-D-H]

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Shah Bhojraj Kuvarji Oil Mills & Ginning Factory v.Subhash Chandra Yograj Sinha [1962] 2 SCR 159 –followed.

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S. Sundaram Pillai & Others v. V.R. Pattabhiraman &Others (1985) 1 SCC 591 : [1985] 2 SCR 643;Kalpana Mehta & Ors. v. Union of India & Ors. 2018(7) SCALE 106 – relied on.

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Dwaraka Prasad v. Dwarka Das Saraf (1976) 1 SCC128 : [1976] 1 SCR 277; Union of India & Ors. v.Dileep Kumar Singh (2015) 4 SCC 421 : [2015] 2 SCR882; PTC India Ltd. v. Central Electricity RegulatoryCommission (2010) 4 SCC 603 : [2010] 3 SCR 609 ;State of Rajasthan v. Leela Jain [1965] 1 SCR 276 ;Motiram Ghelabhai v. Jagan Nagar (1985) 2 SCC279 : [1985] 2 SCR 1051 – referred to.

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Case Law Reference

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CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 971-973Cof 2008

From the Judgment and Order dated 23.11.2007 of the AppellateTribunal for Electricity, New Delhi in Appeal Nos. 271, 272 and 273 of2006

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C.A. Nos. 1914, 4504-4508 and 4289 of 2008.

Sandeep Sethi, ASG, Jaideep Gupta, Sr. Adv., Nikhil Nayyar, N. SaiVinod, Dhananjay Baijal, Ms. Smriti Shah, Divyanshu Rai, Rajiv ShankarDvivedi, S. K. Sarkar, Ms. Arti Dvivedi, Praveen Kumar Singh,EMd. Ziauddin Ahmad, Mohan Prasad Gupta, Ms. Liz Mathew, SachinSharma, Arvind Kumar Sharma, Shibashish Misra, M. G. Ramachandran,K. V. Mohan, Ms. Anushree Bardhan, Ms.Poorva Saigal, Shubham Arya,Amit Kapur, Rajesh Gupta, Sidharth Sharma, Jishnu Chowdhury,Pukhrambam Ramesh Kumar, Ms. Priyanka Tibrewal, Akshat Jain,Ms. Radika Seth, Abhinav Lilothia, Devashish Bharuka, Rajiv Yadav.FMohaq Siddiqi, Anil Kumar Jha, Hiren Dasan, Harish Dasan, ChandQureshi, Mrs. Sarla Chandra, Anupam Lal Das, Saurabh Mishra, SunilKumar Jain, Abhijit Sengupta, Ms. Sharmila Upadhyay, Partha Sil, Advs.for the appearing parties.

The Judgment of the Court was delivered byG

The Judgment of the Court was delivered byG

RANJAN GOGOI, J. 1. This group of appeals arise out of acommon judgment and order dated 23[rd] November, 2007 passed by thelearned Appellate Tribunal for Electricity at New Delhi (hereinafterreferred to as “learned Appellate Tribunal”). The challenge in the appealsbefore the learned Appellate Tribunal was against the order of the Central H

Electricity Regulatory Commission (hereinafter referred to as “CERC”)dated 3[rd] October, 2006 determining the tariff chargeable by the DamodarValley Corporation (hereinafter referred to as “Corporation”) from theconsumers of electricity generated and transmitted by the Corporation.The tariff has been determined under the provisions of Section 61 and62 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 foundto be not inconsistent with the provisions of the 2003 Act.The appealsbeing under Section 125 of the 2003 Act are required to be answeredonly on such substantial questions of law that may arise for determinationby this Court.

2. First, the facts.

The Corporation has been established under the Act of 1948 forthe development of the Damodar Valley area falling within the States ofWest Bengal and Jharkhand. As evident from the provisions of Section12 of the Act of 1948, three (03) major areas of activity undertaken bythe Corporation under the Act of 1948 are: (i) power generation,transmission and distribution; (ii) flood control; and (iii) irrigation andsome connected activities like soil conservation, afforestation, etc.

3. Under Section 20 of the Act of 1948, the Corporation wasempowered and authorised to determine the tariff chargeable by it fromits consumers. Part IV of the Act of 1948 under the heading “Finance,Accounts and Audit” though, superficially, may appear to be dealingwith the indoor management of the Corporation contain provisions whichcould have a relevant bearing to tariff fixation under Section 20 of theAct 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 wouldhave a reasonable bearing on working out the tariff that the Corporationwould be entitled to charge from its consumers after taking into accountthe 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 1[st] September, 2000.The 2003 Act came into force with effect from 10[th] June, 2003. Despitecoming into force of the 2003 Act the Corporation had not approachedthe CERC for determination of the tariff chargeable by it. Consequently, A

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Athe CERC initiated suo motu proceedings by order dated 29[th] March,2005 and directed the Corporation to submit an application fordetermination of tariff for the period from 1[st] April, 2004 to 31[st] March,2009. In terms of the said order passed by the CERC, the Corporationmade an application dated 8[th] June, 2005 before the CERC (i.e. PetitionNo.66 of 2005) for determination of tariff for the period in question. ItBappears that in view of the “complexity” of the issues involved, the CERChad requested one of its members to go into the necessary fact-findingexercise and to submit a report of the detailed facts that would be relevantfor determination of tariff by the CERC. On the basis of the availableinputs received from the aforesaid single member Bench of the CERC,Cthe CERC issued a tariff order dated 3[rd] October 2006 determining thetariff for generation and transmission for the period from 1[st] April, 2006to 31[st] March, 2009 by allowing a two-year transition period to theCorporation i.e. from 1[st] April, 2004 to 31[st] March, 2006.

5. At this stage, it may be appropriate to take note of the contentsDof the tariff order dated 3[rd] October, 2006 passed by the CERC so as toappreciate and understand the grievances entertained by the respectiveappellants before this Court who were also the appellants before thelearned Appellate Tribunal challenging the order of the CERC dated 3[rd]October, 2006.

E6. The CERC by its order dated 3[rd] October, 2006 took the viewthat the matter of determination of tariff chargeable by the Corporationwould be governed by the provisions of the 2003 Act and the CentralElectricity Regulatory Commission (Terms and Conditions of Tariff)Regulations, 2004 (hereinafter referred to as “Tariff Regulations”)framed thereunder. Accordingly, the CERC proceeded to determine theFtariff after giving due weightage to the various relevant factors whichare required to be considered for such determination as spelt out by theRegulations in force. A reading of the order of the CERC would go toshow that in determining the tariff due consideration of the followingissues was made by the CERC.G

(i) Choice between GFA and NFA Method;

(ii) Capital Cost;

(iii) Extra Rupee Liability;

(iv) Additional Capitalisation;

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(v) Debt-Equity Ratio;

(vi) Return on equity;

(vii) Interest on loan;

(viii) Depreciation including Advance against Depreciation;

(ix) O & M expenses;

(x) Pension and gratuity fund;

(xi) Interest on working capital;

(xii) Operational Norms;

(xiii) Energy charges and the fuel component for the thermalgenerating stations;

(xiv) Fuel Price Adjustment

7. Aggrieved by the aforesaid order dated 3[rd] October, 2006, theCorporation, insofar the exclusion of the provisions of the Act of 1948while determining the tariff and refusal to grant claims of certain expensesthereunder; the consumers, namely, Bhaskar Shrachi Alloys Ltd., ImpexFerro Tech Ltd., Shyam Ferro Alloys Ltd., Maithan Alloys Ltd., AnjaneyFerro Alloys Ltd., Dayal Steel Ltd. and Castrol Technologies Ltd. insofaras transitory period is concerned and the State of Jharkhand and WestBengal Electricity Regulatory Commission insofar as the exclusion ofthe power of the State Regulatory Commission to determine the intra-State transmission of electricity is concerned had approached the learnedAppellate Tribunal by way of separate appeals.

8. The learned Appellate Tribunal by the impugned judgment andorder dated 23[rd] November, 2007 took the view that by virtue of fourthproviso to Section 14 of the 2003 Act, while the Corporation continuedto be a deemed licensee, the provisions of the Act of 1948, which are notinconsistent with the provisions of the 2003 Act, shall continue to applyto the Corporation. In other words, insofar as the inter-play betweenthe provisions of the Act of 1948 and the 2003 Act is concerned, accordingto the learned Appellate Tribunal, it is only the provisions of the earlierAct inconsistent with the later Act that will cease to have effect andsuch provisions of the Act of 1948 that are consistent will continue tohold the field notwithstanding the enactment of the 2003 Act. Continuingfurther, the learned Appellate Tribunal held that while Section 20 of the

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AAct of 1948 which empowers the Corporation to fix the tariff isinconsistent with Section 62 of the 2003 Act which authorised the“Appropriate Commission” to determine the tariff in accordance withthe provisions of the 2003 Act, the specific provisions contained in Sections32, 37, 38, 39 and 40 of Part IV of the Act of 1948 will continue to be

relevant in the matter of determination of tariff in as much as there areBno pari materia/parallel provisions in the 2003 Act. It was further heldthat though there are provisions in the Tariff Regulations framed by theCERC covering the same field, the said Regulations, being in the natureof subordinate legislation, cannot override the provisions of a law dulyenacted (Act of 1948), particularly, in the absence of any legislativeCintention to the said effect in any of the provisions of the 2003 Act.Accordingly, the learned Appellate Tribunal while rejecting the followingfive claims and upholding the order of the CERC on the aforesaid countsthought it proper to remand the matter, for a de novo consideration ofthe remaining five issues by the CERC in the light of the findings recordedby it. The tabular chart, extracted below, would indicate the five issuesDthat have been finalized by the learned Appellate Tribunal by upholdingthe order of the CERC dated 3[rd] October, 2006 and the other five issueswhich have been remanded for re-determination by the CERC.

Issues finalized by the Issues remanded for learned Appellate re-determination by ETribunal by upholding the the CERC order of the CERC dated 3rd October, 2006(i)High er return on equity;(i)Additional capitalization for the period 2004-2005 and 2005-2006;F(ii) Depreciation rate; (ii) Pension and Gratuity contribution; (iii) Resetting of operating (iii) Revenue to be allowed norms at variance from the to the DVC under the operating norms prescribed DVC Act; in the 2004 regulations;G(iv)Return on capital investment (iv)Operation and on Head Office, Regional Maintenance expenses; Offices, administrative and other technical centres, etc.; and(v) Generation projects (v) Debt Equity Ratio presently not operating. H

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9. Three substantial questions of law would seem to arise fordetermination by this Court in exercise of its jurisdiction under Section125 of the 2003 Act. The same are enumerated below:

(a) Whether the view taken by the learned Appellate Tribunal with regardto the fourth proviso to Section 14 of the 2003 Act and the applicabilityof the provisions of Sections 32, 37, 38, 39 and 40 contained in Part IVof the Act of 1948 in the matter of tariff determination under the 2003Act is correct?

(b) Whether it is the provisions of the Tariff Regulations (2004Regulations) which alone would hold the field in the matter ofdetermination 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 Tribunalon any one or more of the claims made by any of the stakeholders in thematter of determination of tariff is vitiated by grave and apparent errors?

10. It will be useful to notice, at this stage, that in terms of theimpugned order dated 23[rd] November, 2007 passed by the learnedAppellate Tribunal the matter has been de novo considered and re-determined by the CERC by its order dated 6[th] August, 2009. This hashappened due to the absence of any interim restraint. The said order ofthe CERC dated 6[th] August, 2009 has since been affirmed by the learnedAppellate Tribunal by a separate order dated 10[th] May, 2010 which isthe subject matter of challenge in Civil Appeal No.4881 of 2010 presentlypending before this Court. The said appeal (Civil Appeal No.4881 of2010) has been ordered to be heard after disposal of the present appeals.

11. The arguments advanced by the respective appellants who arealso the respondents in the connected appeals may be noted at this stage.

12. On behalf of the CERC, which is the appellant in Civil AppealNo.4289 of 2008, it has been contended that second part of the fourthproviso to Section 14 of the 2003 Act cannot be understood to mean, ashas been held by the learned Appellate Tribunal, that the provisions ofthe Act of 1948 which are not inconsistent with the provisions of the2003 Act so far as the determination of tariff is concerned would continueto hold the field. Two principal basis have been urged in support of theabove. The first is that a proviso cannot be understood to go beyond themain part of the Section which, in the present case, deals only with‘licensing’ and not ‘tariff determination’. Reliance in this regard has A

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Abeen placed on the decisions of this Court in Dwaraka Prasadvs.Dwarka Das Saraf1 and Union of India & Ors. vs. Dileep Kumar2Singh.

The second limb of the argument is based on the provisionscontained in Section 174 of the 2003 Act which gives an overriding effectBto the provisions of the 2003 Act notwithstanding any inconsistency withany other law for the time being in force.

13. Without prejudice to the above, it has been further contendedon behalf of the CERC that the learned Appellate Tribunal was clearlyin error in holding that in case of a conflict between the Act of 1948 andCthe Tariff Regulations framed under the 2003 Act the provisions of theRegulations will require to be ignored. The decisions of this Court inBharathidasan University & Anr.vs.AICTE & Ors.3 andSamsthananChethu Thozhilali Union vs. State of Kerala & Ors.4, relied upon,has been misconstrued by the learned Appellate Tribunal, it is urged onbehalf of CERC. It is further contended on behalf of the CERC thatDSection 61 of the 2003 Act lays down the principles for tariffdetermination which finds detailed manifestation in the 2004 Regulations.The Regulations, it is contended, embody the principles on which tariff isrequired to be determined and the provisions thereof cannot be overriddenby the provisions of any other statute and, that too, enacted at an anteriorEpoint of time i.e. the Act of 1948. The mandate of Section 174 of the2003 Act which is subsequent in point of time will be compromised in theevent such an interpretation is accepted.

14. So far as the specific heads of tariff fixation are concerned, ithas been urged on behalf of the CERC that Section 40 of the Act ofF1948 has been wrongly relied upon by the learned Appellate Tribunal indetermining the question of the extent of depreciation allowable. It isemphasised that Section 40 leaves the question of the percentage ofdepreciation to be determined by the Central Government. It is contendedthat the purpose and intent behind the enactment of 2003 Act is to distancethe Central Government from the determination of tariff under the 2003GAct which is to be fixed by the Regulatory Commissions on the principlesacknowledged in the Tariff Regulations. Regulation 21(1)(ii) of the Tariff 1(1976) 1 SCC 128 [para 18]

2(2015) 4 SCC 421 [para 20]3(2001) 8 SCC 676 [para 14]H4(2006) 4 SCC 327 [Para 17]

Regulations, therefore, according to the CERC, should have been thebasis for the determination of the extent of depreciation. In this regard,reliance has been placed on the decision of this Court in PTC India5Ltd. vs. Central Electricity Regulatory Commission .

15. It is on the same basis that the findings of the learned AppellateTribunal so far as the ‘Sinking Fund’ is concerned, which has been heldto be recoverable through the tariff, has been assailed. It is urged thatthe Tariff Regulations do not make any provision for any ‘Sinking Fund’and, therefore, the recovery of such fund through tariff is abhorrent tothe provisions of Section 61 of the 2003 Act read with the TariffRegulations.

16. Similarly, the finding of the learned Appellate Tribunal withregard to the allowability of charging the expenditure on projects otherthan electricity from the common fund as common expenditure has beenassailed as being contrary to the spirit of the 2003 Act inasmuch as it isopposed to the principle of allowance of cross-subsidy which the 2003Act seeks to do away with. Reference has been made to differentprovisions of the 2003 Act to contend that recovery of expenditureunrelated to electricity generation from the electricity tariff is alien andcontrary to the provisions of the 2003 Act.

17. The conclusions of the learned Appellate Tribunal with regardto the debt-equity ratio insofar as the projects completed prior to 1992(which has been fixed at 50:50) has also been assailed on the groundthat the sole basis thereof is the practice followed in the case of anotherPSU i.e. NTPC ignoring the fact that the Regulation 20 of the TariffRegulations provide for a ratio of 70:30.

18. Likewise, the findings with regard to Pension and GratuityFund, particularly, the recovery of the entire fund from the consumers(in reversal of the decision of the CERC permitting recovery fromconsumers to the extent of 60% and contribution by the Corporation ofthe balance 40%) has been assailed on the ground that no discernible orrational basis is disclosed for the view taken, particularly when theCorporation has been permitted and, in fact, collected tariff at the ratefixed by the Corporation itself under the Act of 1948 for the years 2004-2005 and 2005-2006 which constitute 40% of the tariff period.

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A19. The allowances of capital investment in respect of Head Office,Regional Offices, Administrative & other Technical Centres have alsobeen assailed as being contrary to the provisions of the Tariff Regulations.

20. The above contentions made on behalf of the CERC has beenreiterated on behalf of the consumers who are the appellants in CivilBAppeal Nos. 971-973 of 2008. So far as the interpretation of the provisionscontained in the fourth proviso to Section 14 of the 2003 Act is concerned,learned counsel for the said appellants (consumers) has additionally drawnthe attention of the Court that in the course of the exercise leading to theenactment of 2003 Act, the Parliamentary Standing Committee on Energyhad, in fact, recommended that the Corporation, having regard to theCspecial responsibility entrusted to it under the Act of 1948, should beexempted 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 ofthe provisions of the 2003 Act which are inconsistent with the provisionsDof the Consumer Protection Act, 1986 or the Atomic Energy Act, 1962or the Railways Act, 1989 that will not have any effect. Instead, insofaras the Corporation is concerned what was provided for is a limitedexemption, the extent of which has been spelt out by Section 14 (fourthproviso) of the 2003 Act, which, necessarily, has to be understood to becircumscribed by the provisions of the main part of Section 14 of theE2003 Act which deals with licensing as distinguished from tariffdetermination. It is further urged on behalf of the appellants – consumersthat the decision to keep in abeyance the tariff for a period of two yearsis ultra vires the provisions of the 2003 Act, there being no authority inlaw to order any such relaxation or to postpone the coming into effect ofFthe tariff fixed under the 2003 Act. The fact that the provisions of theAct of 1948 do not find any mention in the proviso to Section 61 of the2003 Act has also been stressed upon.

21. In so far as the pension and gratuity fund is concerned, inaddition to the grounds urged in this regard on behalf of the CERC, it isGfurther urged that almost 99% of the pension and gratuity liability, asassessed by the Actuary, has been permitted to be loaded on to theelectricity business without any reference or finding with regard to thepercentage of man-power deployed in the electricity business. Such adecision which has been based on the sole submission of the Corporationis contended to be untenable in law.H

The calculation and allowance of percentage of depreciation byfollowing the provisions of Section 40 of the Act of 1948 has also beenassailed 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 filedby the Regulatory Commissions and the Consumers had filed its cross-objections in the said appeals. Emphasis is laid on the status and peculiarcharacteristics of the Corporation as envisaged by the statute i.e. theAct of 1948 constituting the said body. Reference has been sought to bemade to the various social welfare activities that the Corporation isstatutorily mandated to perform over and above electricity generationand transmission. The aforesaid peculiar characteristics of the Corporationand its multifarious duties, according to the Corporation, would justifycontinuity of the due application of the provisions of the Act of 1948 asare not inconsistent with the provisions of the 2003 Act. It is only suchof the provisions of the Act of 1948 which are in clear conflict with theprovisions of the 2003 Act that will give way. The provisions of the Actof 1948 that may be in conflict with those of the Tariff Regulations willhowever not have the same effect inasmuch as the provisions of asubsidiary legislation cannot have an overriding effect over the provisionsof the parent or any other statute. It has been further urged that in agiven situation the proviso to a statutory provision may act as a mainprovision itself going beyond the parameters of the matter of which theproviso may have been enacted as a part. In this regard, reliance hasbeen placed on the decisions of this Court in State of Rajasthanvs.Leela Jain6, S. Sundaram Pillai & Othersvs. V. R. Pattabhiraman& Others7, Shah Bhojraj Kuvarji Oil Mills & Ginning Factoryvs.

Subhash Chandra Yograj Sinha8, Motiram Ghelabhaivs. Jagan9Nagar.

23. Coming specifically to the rate of depreciation, sinking fund,interest on capital, etc., it has been urged that there being no provisionsin the 2003 Act in respect of the aforesaid matters which are dealt withonly by the Tariff Regulations in contra-distinction to specific provisionsof the Act of 1948 covering the issue i.e. Section 40 of the Act of 1948, 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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Ait is the provisions of Part IV of the Act of 1948 which will govern thematter. So far as the debt-equity ratio is concerned, it has been urgedthat the determination of the ratio at 50:50 for capital assets createdprior to 30[th] March, 1992 and the ratio of 70:30 for the capital assetsafter 30[th] March, 1992 is consistent with the principles adopted for allCentral Government Corporations like NTPC Limited, PowergridBCorporation of India Limited, NHPC etc.

24. Insofar as the pension and gratuity contribution required to bemade by the Corporation is concerned, it is contended that the issue hasbeen raised only at the stage of arguments by the HT-consumers i.e.appellants in Civil Appeal Nos. 971-973 of 2008. The same has not beenCraised by the Regulatory Commission at all or even by the HT-consumersbefore the forums below. That apart, it is contended that the break-upof the details of the percentage of employees called for by the CERC inthis regard was made available which fact is borne out by the documentsplaced before the learned Appellate Tribunal which has also been laidDbefore this Court (Annexure 18 to the Memo of Appeal before thelearned Appellate Tribunal).

25. Similarly, in so far as the Operation and Maintenanceexpenditure is concerned, it is contended that the same has been rightlyallowed as per the Tariff Regulations in force.E

26. Before delving into the issues arising in the appeals, twopreliminary questions need to be answered which we propose to do atthe outset. The first pertains to the grant of a transitory period makingthe tariff order effective from 1[st] April, 2006 instead of 1[st] April, 2004.

27. We have considered the reasons which had weighed with theFCERC as well as the learned Appellate Tribunal in granting the aforesaidtransitory period. The present dispute, regardless of the way it is resolved,would have relevance to the quantum of the tariff, depending on whetherthe determination is made on the basis of the provisions of Part IV of theAct of 1948 or the provisions of the Tariff Regulations, as may be. SoGfar as the grant of the transitory period is concerned, the same, we havenoticed, has been so granted having due regard to the statutory functions/social responsibilities that the Corporation is mandated to undertake interms of the Act of 1948. The tariff fixed is also lower than the tariffthat has been fixed by the Jharkhand and West Bengal ElectricityRegulatory Commission for the general/domestic classes of consumers.H

While it is correct that the classes of consumers served by the Corporationare HT-Industrial consumers like Steel, Coal, Railways, etc. beside bulksupply to main beneficiaries of State Electricity Boards of West Bengaland Jharkhand, the said fact, itself, is another peculiar feature whichdistinguishes the Corporation from other licenses. If in a situation wherethe Corporation in addition to generation, transmission and distribution ofelectricity 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 grantof transitory period can be faulted with. We, therefore, decline to interferewith the aforesaid part of the order of the learned Appellate Tribunal.

28. The learned Appellate Tribunal has also taken the view thathaving regard to the provisions of Section 79 of the 2003 Act it is theCERC which would be the “Appropriate Commission” for determinationof tariff inasmuch as the Damodar Valley Corporation is a Corporationowned and controlled by the Central Government. The detailed inputsto arrive at the aforesaid conclusion have been duly considered by us.On such consideration, we are of the view that the above conclusionrecorded by the learned Appellate Tribunal is neither unreasonable norirrelevant so as to warrant our interference, particularly, in exercise ofthe limited jurisdiction under Section 125 of the 2003 Act.

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

30. The Damodar Valley Corporation had been incorporated underthe provisions of the Act of 1948. The facts antecedent to the incorporationof this entity would throw considerable light on the objects and reasonsfor its incorporation. Sometime in the year 1943, the Damodar RiverValley had been affectedby severe floods leading to wide-scale destructionof life and property. The Provincial Government of Bengal had constitutedan Enquiry Committee to suggest ways and means to avoid suchcatastrophes in the future. The Enquiry Committee had, inter alia,recommended that a statutory corporation, on the lines of the TennesseeValley Authority of the USA, be incorporated to command and controlthe Damodar River. The then British Government accepted this proposalof the Committee and had called one Mr. W.L. Voorduin, a seniorEngineer working for the Tennessee Valley Authority to makerecommendations and suggestions in this regard.

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A31. The preamble to the Tennessee Valley Authority Act[10], 1933,reads that the statute has been enacted by the Congress “to improvethe navigability and to provide for the flood control of theTennessee River; to provide for reforestation and the properuse of marginal lands in the Tennessee Valley; to provide for theagricultural and industrial development of said valley; to provideBfor the national defence by the creation of a corporation for theoperation of Government properties at and near Muscle Shoalsin the State of Alabama, and for other purposes.” As can be observed,the primary objective of the Tennessee Valley Authority Act is to preventfloods across the Tennessee River Valley and the generation of electricityCis incidental to this activity of flood-control.

32. The objects and reasons behind the incorporation of the Actof 1948 may now be noticed:

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

EThis Bill seeks to set up a Corporation, called theDamodar Valley Corporation on the lines of the TennesseeValley Authority in the USA. It will be an autonomous bodywithin the framework of the enactment. Its objects,constitution and powers are laid down in the Bill. Briefly,Fits main function will be to control flood in the Damodar,generate electric power for distribution and provide waterfor irrigation and other purposes. In addition, theCorporation will, endeavour to promote economicdevelopment of the Damodar Valley and the adjoiningareas.It will consist of three members including the Chairman.GThese three members and the Secretary and the treasurer willbe appointed by the Central Government. The Corporation willhave the power to acquire land and construct or cause to beconstructed such dams, barrages, reservoirs, power-houses and 10 16 U.S. Code § 831H

power structures, electrical transmission line, irrigation andnavigation works as may be necessary. The capital required bythe Corporation will be provided by the Central Government andthe Government of Bihar and West Bengal. The profits and losseswill be distributed between these three Governments in certainagreed proportions.

The provisions of this Bill are designed to give effect to the broadoutlines of the agreement reached between the threeGovernments concerned.”

33. Having noticed the objects and reasons behind the creation ofthe incorporated body and the main functions assigned to it by Parliament,we may now specifically revert to the issue of determination of tariff forsupply/distribution of the electricity generated by the Corporation.

34. Insofar as the issue as to whether the Tariff Regulations wouldhave an overriding effect to render the parallel provisions in the Act of1948 ineffective, the reliance placed on behalf of the appellants on thedecision of a Constitution Bench of this Court in PTC India Limited(supra) may now be considered. The primary issue that was consideredby the Constitution Bench of this Court in PTC India Limited(supra)was “whether the Appellate Tribunal constituted under the ElectricityAct, 2003 has jurisdiction under Section 111 of the Act to examinethe validity of the Central Electricity Regulatory Commission(Fixation of Trading Margin) Regulations, 2006 framed in exerciseof power conferred under Section 178 of the Electricity Act?”

35. The observations of this Court inPTC India Limited (supra)with regard to the efficacy of the Tariff Regulations in the light of itsstatutory character must necessarily be understood in the above context.The opinion rendered in PTC India Limited (supra) itself makes itclear that the Tariff Regulations though statutory in character are a speciesof subordinate delegated legislation, the purport of which has beendescribed and dealt with in the following manner:

“52. In Indian Express Newspapers (Bombay) (P) Ltd. v. Unionof India this Court* held that subordinate legislation is outsidethe purview of administrative action i.e. on the grounds of violationof rules of natural justice or that it has not taken into account

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Arelevant circumstances or that it is not reasonable. However, adistinction must be made between delegation of legislative functionand investment of discretion to exercise a particular discretionarypower by a statute. In the latter case, the impugned exercise ofdiscretion may be considered on all grounds on whichadministrative action may be questioned such as non-applicationBof mind, taking irrelevant matters into consideration, etc. Thesubordinate legislation is, however, beyond the reach ofadministrative law. Thus, delegated legislation - otherwise knownas secondary, subordinate or administrative legislation - is enactedby the administrative branch of the government, usually underCthe powers conferred upon it by the primary legislation. Delegatedlegislation takes a number of forms and a number of terms -rules, regulations, by-laws etc; however, instead of the said labelswhat is of significance is the provisions in the primarylegislation which, in the first place, confer the power toenact administrative legislation. Such provisions are alsoDcalled as “enabling provisions”. They demarcate theextent of the administrator’s legislative power, thedecision-making power and the policy making power.However, any legislation enacted outside the terms of the enablingprovision will be vulnerable to judicial review and ultra vires.”E36. The opinion of a seven Judge Bench of this Court, though ofconsiderable vintage, in The Presidential Reference, The Delhi LawsAct, 1912[11] may usefully be recalled at this stage:

“(In delegated legislation), a portion of the law-making power ofthe legislature is conferred or bestowed upon a subordinateFauthority and the rules and regulations which are to be framedby the latter constitute an integral portion of the statute itself. Assaid already, it is within powers of Parliament or any competentlegislative body, when legislating within its legislative field, toconfer subordinate administrative and legislative powers uponGsome other authority. The question is: What are the limits withinwhich such conferment of bestowing of powers could be properlymade?

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. JusticeM.C. Mahajan, Hon’ble Mr. Justice B.K. Mukherjea, Hon’ble Mr. Justice S.R.HDas and Hon’ble Mr. Justice Vivian Bose

It is conceded by the learned Attorney-General that the legislature cannottotally abdicate its functions and invest another authority with all thepowers of legislation which it possesses. Subordinate legislation, it is notdisputed, must operate under the control of the legislature from which itderives its authority, and on the continuing operation of which, its capacityto function rests. As was said by Dixton, J., (vide, VictoriaStevedoring and General Contracting Company v. Dignan, 46 C.L.R.73) “a subordinate legislation cannot have the independent andunqualified authority which is an attribute of true legislative”power.It is pointed out by this learned Judge that several legalconsequences flow from this doctrine of subordinate legislation. Anoffence against subordinate legislation is regarded as an offence againstthe statute and on the repeal of the statute the regulations automaticallycollapse. So far, the propositions cannot, and need not, be disputed. But,according to the learned Attorney-General, all that is necessary insubordinate legislation is that the legislature should not totally abdicateits powers and that it should retain its control over the subordinate agencywhich it can destroy later at any time it likes. If this is proved to exist ina particular case, then the character or extent of the powers delegatedto or conferred upon such subordinate agent is quite immaterial and intothat question the courts have no jurisdiction to enter. This argument seemsplausible at first sight, but on closer examination, I find myself unable toaccept it as sound. In my opinion, it is not enough that the legislatureretains control over the subordinate agent and could recall him at anytime it likes, to justify its arming the delegate with the legislative powersin regard to a particular subject. Subordinate legislation not only connotesthe subordinate or dependent character of the agency which is entrustedwith the power to legislate, but also implies to subordinate or ancillarycharacter of the legislation itself, the making of which such agent isentrusted with. If the legislature hands over its essential legislative powersto an outside authority, that would, in my opinion, amount to a virtualabdication of its powers and such an act would be in excess of the limitsof permissible delegation.

... On a consideration of all these decisions I have no hesitationin holding that as regards constitution of the delegation oflegislative powers the Indian Legislature cannot be in the sameposition as the prominent British Parliament and how fardelegation is permissible has got to be ascertained in India as amatter of construction from the express provisions of the Indian AB

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AConstitution. It cannot be said that an unlimited right ofdelegation is inherent in the legislature power itself. Thisis not warranted by the provisions of the Constitution andthe legitimacy of delegation depends entirely upon its beingused as an ancillary measure which the legislatureconsiders to be necessary for the purpose of exercisingBits legislative powers effectively and completely. Thelegislature must retain in its own hands the essentiallegislative functions which consist in declaring thelegislative policy and laying down the standard which is tobe enacted into a rule of law, and what can be delegated inCthe task of subordinate legislation which by its very natureis ancillary to the statute which delegates the power tomake it.”

37. It may be wholly unnecessary to detract from the fundamentalprinciples of law laid down in The Presidential Reference (supra), whichDwould be an inevitable consequence, if the contentions advanced onbehalf of the appellants to the effect that the Tariff Regulations mustoverride the provisions of the Act of 1948 as the said regulations arestatutory in character is to be accepted. This is also what has beensubsequently emphasised by this Court in Bharathidasan University& Anr. (supra) andSamsthanan Chethu Thozhilali Union (supra). NoEerror, therefore, can also be found in the implicit reliance placed on theratio of the above decisions by the learned Appellate Tribunal in its orderdated 23[rd] November, 2007.

38. This will bring us to a consideration of the purport and effectof the fourth proviso to Section 14 of the 2003 Act on which muchFdebate and discussion have been generated in the course of prolongedhearing of the case that had taken place. Section 14 of the Act mayusefully be extracted below at this stage:

“14.Grant of Licence: “The appropriate Commission may, onan application made to it under Section 15, grant a licence to anyGperson (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 notifiedHunder sub-section (1) of Section 4 of the Special Economic Zones

Act, 2005, shall be deemed to be a licensee for the purpose ofthis clause, with effect from the date of notification of suchSpecial Economic Zone.

(c) to undertake trading in electricity as an electricity trader, In any area as may be specifi-ed in the licence:

PROVIDED that any person engaged in the business oftransmission or supply of electricity under the provisions of therepealed laws or any Act specified in the Schedule on or beforethe appointed date shall be deemed to be a licensee under thisAct for such period as may be stipulated in the licence, clearanceor approval granted to him under the repealed laws or such Actspecified in the Schedule, and the provisions of the repealed lawsor such Act specified in the Schedule in respect of such licenceshall apply for a period of one year from the date ofcommencement of this Act or such earlier period as may bespecified, at the request of the licensee, by the AppropriateCommission and thereafter the provisions of this Act shall applyto such business:

PROVIDED FURTHER that the Central Transmission Utilityor the State Transmission Utility shall be deemed to be atransmission licensee under this Act:

PROVIDED also that in case an Appropriate Governmenttransmits electricity or distributes electricity or undertakes tradingin electricity, whether before or after the commencement of thisAct, such Government shall be deemed to be a licensee underthis 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 theDamodar Valley Corporation Act, 1948, shall be deemedto be a licensee under this Act but shall not be required toobtain a licence under this Act and the provisions of theDamodar Valley Corporation Act, 1948, insofar as they arenot inconsistent with the provisions of this Act, shallcontinue to apply to that Corporation:

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Acompany or companies created in pursuance of the Acts specifiedin the Schedule, shall be deemed to be a licensee under this Act:

PROVIDED also that the Appropriate Commission may grant alicence to two or more persons for distribution of electricitythrough their own distribution system within the same area, subjectBto the conditions that the applicant for grant of licence within thesame area shall, without prejudice to the other conditions orrequirements under this Act, comply with the additionalrequirements 1 (relating to the capital adequacy, Creditworthiness or code of conduct) as may be prescribed by theCentral Government, and no such applicant, who complies withCall the requirements for grant of licence, shall be refused grantof licence on the ground that there already exists a licensee inthe same area for the same purpose:

PROVIDED also that in a case where a distribution licenseeproposes to undertake distribution of electricity for a specifiedDarea within his area of supply through another person, that personshall not be required to obtain any separate licence from theconcerned State Commission and such distribution licensee shallbe responsible for distribution of electricity in his area of supply:

PROVIDED also that where a person intends to generate andEdistribute electricity in a rural area to be notified by the StateGovernment, such person shall not require any licence for suchgeneration and distribution of electricity, but he shall comply withthe measures which may be specified by the Authority undersection 53:

FPROVIDED also that a distribution licensee shall not require alicence to undertake trading in electricity.”

39. It is contended on behalf of the appellants that the applicationof a proviso must always be confined and understood within theparameters of the provisions of the main section of which the proviso isGa part and that a proviso, in no case, can be construed to have anygeneral application. This argument would require some examination. Inthis regard the decision of this Court Shah Bhojraj Kuvarji OilMills(supra) may be usefully recapitulated and the following observationsmay be specifically taken note of:

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“It is contended by the learned Attorney-General that theconstruction placed by the High Court upon the first proviso toSection 50 (of Bombay Rents, Hotel and Lodging House RatesControl Act of 1947) is erroneous. Though he concedes that theproviso must be read as qualifying what the substantive part ofSection 50 enacts, he urges that the proviso goes beyond thatpurpose and enacts a substantive law of its own. He relies uponthe following observations of Lord Loreburn, L.C., inRhonddaUrban Council v. Taff Vale Railway, (1909) A.C. 253, where aproviso to Section 51 of the Railway Clauses Consolidation Act,1845, was under consideration:

“It is true that Section 51 is framed as a proviso upon precedingsections. But it is also true that the latter half of it, though inform a proviso, is in substance a fresh enactment, adding toand 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 suitswhich 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 enactmentto qualify or create an exception to what is in theenactment, and ordinarily, a proviso is not interpreted asstating a general rule. But, provisos are often added notas exceptions or qualifications to the main enactment butas savings clauses, in which cases they will not beconstrued as controlled by the section.”

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

“A very apt description and extent of a proviso was given byLord Oreburn in Rhondda Urban District Council v. Taff ValeRailway Co., (1909) A.C. 253, where it was pointed out thatinsertion of a proviso by the draftsman is not always strictlyadhered to its legitimate use and at times a section worded as aproviso may wholly or partly be in substance a fresh enactmentadding to and not merely excepting something out of or qualifyingwhat goes before.”

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A41. The fourth proviso to Section 14 of 2003 uses the expression“….and the provisions of the Damodar Valley Corporation Act, 1948 inso far as they are not inconsistent with the provisions of the Act, shallcontinue to apply to that Corporation…”. On a careful reading of theaforesaid later part of the fourth proviso to Section 14 of the Act of2003, it is seen that it is clearly a substantive provision to lay downBsomething more than what a proviso generally deals with. If the intentionof the proviso was to exclude DVC only from the main part of Section14 of the Act of 2003 dealing with the requirement of obtaining licencefor transmission/distribution/trade in electricity, the purpose is fullyachieved by the first part recognising DVC as a ‘deemed licensee’ andCnot requiring to apply for and obtain licence. The Legislature could havesimply stopped there. There was no necessity to incorporate the secondpart. The second part of the fourth proviso is to bring in the continuedapplication of some of the provisions of the Act of 1948 which are notinconsistent with the provisions of the Act of 2003. To elaborate it further,let us take the case of the third proviso to Section 14 of the Act of 2003Dwhich provides “that in case an appropriate Government transmitselectricity or distributes electricity or undertakes trading in electricitywhether before or after the commencement of the Act, such Governmentshall be deemed to be a licensee under the Act but shall not be requiredto obtain licence under the Act”. In so far as DVC is concerned, if theEfourth proviso is to be confined only to licensing as in the case of thirdproviso, the fourth proviso also would have stopped with the first part ofthe proviso. There would have been no necessity to incorporate thesecond part of the proviso. The legislature does not incorporate anywords which are irrelevant or redundant and every expression used in astatutory provision has some purpose.F

42. A careful comparative reading of the third and the fourthprovisos to Section 14 of the Act of 2003 clearly indicates the intentionof the legislature that the second part of the fourth proviso is to bring inthe continued application of some of the provisions of the Act of 1948which are not inconsistent with the provisions of the Act of 2003. ThereGare no licensing provisions in the Act of 1948 to be saved. The obviousreference in the second part of proviso is to provide for the continuedapplication of the provisions of the Act of 1948 insofar as they are notinconsistent with the provisions of the Act of 2003.

43. In the course of arguments, the appellants made reference toSections 18 and 19 of the Act of 1948 as being the provisions relating tolicensing which could be said to be considered as saved by virtue ofsecond part of the fourth proviso to Section 14 of the Act of 2003. Aperusal of Sections 18 and 19 of the Act of 1948 show that they dealwith the supply and generation of electrical energy and distribution ofelectricity within the Damodar Valley area. The provisions of the Act of2003 which authorise the Regulatory Commissions to grant licence topersons (other than DVC) fully govern the field and there is no questionof continued application of the Act of 1948 in that respect. Sections 18and 19 of the Act of 1948 do not deal with licence to DVC. Theseprovisions only deal with activities of other entities to distribute electricitywithin the Damodar Valley area. Further, the provisions of ElectricityAct, 2003 authorizes the Regulatory Commissions to grant licence topersons other than DVC. Therefore, there can be no question of continuedapplication 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 inso far as they are not inconsistent with the provisions of the Act, shallcontinue to apply to that Corporation…”, in our view, is a positive provisionenabling continued application of certain provisions of the Act of 1948which are not inconsistent with the provisions of the Electricity Act,2003. The intention behind both the provisions needs to be appreciatedand given effect to.

45. There is yet another dimension of the case that has beenurged and, therefore, will require our consideration. While dealing withthe question as to whether Reports submitted by Parliamentary StandingCommittee, can be taken as permissible external aids for interpretationof a statute, this Court in a recent decision in Kalpana Mehta &12 Ors.vs.Union of India & Ors.had occasion to observe as follows:

“xxxxit clear as day that the Court can take aid of the report ofthe parliamentary committee for the purpose ofappreciating the historical background of the statutoryprovisions and it can also refer to committee report orthe speech of the Minister on the floor of the House of AB

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Athe Parliament if there is any kind of ambiguity orincongruity in a provision of an enactment.Further, it is quitevivid on what occasions and situations the Parliamentary StandingCommittee Reports or the reports of other ParliamentaryCommittees can be taken note of by the Court and for whatpurpose. Relying on the same for the purpose of interpreting theBmeaning of the statutory provision where it is ambiguous andunclear or, for that matter, to appreciate the background of theenacted law is quite different from referring to it for the purposeof arriving at a factual finding. That may invite a contest, achallenge, a dispute and, if a contest arises, the Court, in suchCcircumstances, will be called upon to Rule on the same.”

46. The proceedings of the Parliamentary Standing Committee onEnergy (13[th] Lok Sabha), insofar as the Electricity Bill of 2001 presentedbefore the Lok Sabha on 19-12-2002 is concerned, would go to indicatethat various organisations like the Ministry of Railways, the Bhakra BeasDManagement Board (BBMB) and also the Corporation had requestedfor exemption from the operation of the provisions of 2003 Act citing thepeculiar, sensitive and specialised nature of task that such bodies havebeen entrusted by the statutory enactments constituting and governingthe said bodies/organizations. Specifically, in this regard, the peculiarduties and responsibilities cast on the DVC by Section 12 of the Act ofE1948 had been highlighted before the Parliamentary Standing Committee.It had been urged before us that it was recommended by theParliamentary Standing Committee that exemption from the provisionsof the proposed 2003 Act should be granted to the Corporation in viewof its special statutory status which may get eroded if the exemptions Fare not to be granted. The provisions of Section 58 of the Act of 1948which is in the following terms were also placed before the ParliamentaryStanding Committee while seeking exemption from the operation of theproposed 2003 Act:

“58. Effect of other laws : The provisions of this Act or anyGrule made thereunder shall have effect notwithstanding anythingcontained in any enactment other than this Act or any instrumenthaving effect by virtue of any enactment other than this Act.”

47. On the other hand, it would appear from the record of theproceedings of the Parliamentary Standing Committee that the IndustryHrepresented by Chhotanagpur Chamber of Commerce & Industry and The Bengal Chamber of Commerce & Industry as well as the States ofJharkhand and West Bengal had contested the claims made by theCorporation for exemption and had pleaded before the ParliamentaryStanding Committee that the Act of 1948 itself be repealed/amendedinsofar as all non-power related activities are concerned which constituteonly about 10% of the total activities of the Corporation.

48. After considering the respective stands taken, the ParliamentaryStanding Committee had recommended that the Corporation should beexempted from the operation of the provisions of the proposed 2003 Actin view of the special status and responsibilities of the Corporation asenvisaged under the Parliamentary enactment constituting it (i.e the Actof 1948). However, it appears that Parliament was not inclined to providea blanket/total exemption in favour of the Corporation and the 2003 Actdid not include the Corporation as one of the entities in Section 173 ofthe 2003 Act which provides exemption in so far as the provisions of theConsumer Protection Act, 1986, the Atomic Energy Act, 1962 and theRailways Act, 1989 clearly excluding the provisions of the Act of 1948therefrom. Instead, the fourth proviso to Section 14 of the 2003 Actwas specifically incorporated, details of which have already been noted.Having regard to the legislative history behind the enactment of theprovision of Section 173 and the provisions of Section 14 including thefourth proviso thereto, it may be more in consonance with theParliamentary intention to hold that the fourth proviso to Section 14 neednot be understood to be confined only to the question of licensing whichis dealt with by the main part of the Section 14. Rather, we are inclinedto hold that Parliament had intended to provide partial exemption to theCorporation by mandating that such provisions of the Act of 1948 whichare not inconsistent with the 2003 Act will continue to hold the field.Viewed thus, the fourth proviso to Section 14 of the Electricity Act 2003has to be understood to be a legislative exercise in the nature of asubstantial provision of law. Part IV of the Act of 1948 not beinginconsistent with the provisions of the 2003 Act can, therefore, be takeninto account for determination of tariff. Such provisions of the Act of1948 will also have an overriding effect over the inconsistent provisionsof the Tariff Regulations. Our view, as above, will also effectuate theprovisions 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 thereasons afore-stated.

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A49. The specific heads of tariff fixation on which grievances havebeen raised by the appellants in the present set of appeals are enumeratedas hereunder:

(a) Depreciation rate;

(b) Sinking Fund;B

(c) Debt Equity ratio;

(d) Pension & Gratuity Contribution;

(e) Return on Capital Investment on Head Office etc.; (f)Revenue relating to afforestation etc., which are not relatable toCpower generation; (g)Period of transition (two years) allowed for the tariff fixed bythe CERC to come into effect; (h)The treatment of entire transmission as inter-State transmissionDlines thereby divesting the Jharkhand and West Bengal StateElectricity Regulation Commissions of the power to fix tariffinsofar as intra-State 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 theEpresent order. Of the remaining heads of tariff fixation, it appears thatso far as the ‘depreciation rate’ and ‘sinking fund’ is concerned it is theprovisions of Section 40 of the Act of 1948 which have been held to bedeterminative. We have gone through the reasoning adopted by thelearned Appellate Tribunal in this regard. Having clarified the manner inwhich the fourth proviso to Section 14 of the 2003 Act has to beFunderstood, we do not find the reasoning adopted by the learned AppellateTribunal on the issues relating to ‘depreciation’ and ‘sinking fund’ to befundamentally flawed in any manner so as to give rise to a substantialquestion of law requiring our intervention/interference under Section 125of the 2003 Act.G

51. Insofar as the debt-equity ratio is concerned, we find thatexcept for the projects which have been completed prior to 1992 inwhich case the ratio has been worked out at par with other public-sectororganisation at 50:50, the ratio of 70:30 has been adopted following theprescription under Regulation 20 of the Tariff Regulations in the absenceHof any specific rate under the Act of 1948.

52. So far as the pension and gratuity fund is concerned, the onlyissue arising is whether the fund worked out on Actuary basis atRs.1534.49 crores should be apportioned between the Corporation andthe consumers as held by the CERC in the ratio of 40:60 or the entirefund should be allowed to be recovered by way of tariff from theconsumers as held by the learned Appellate Tribunal. The reasoning ofthe learned Appellate Tribunal in coming to the aforesaid conclusion isas follows:

“D.3 As a general rule, once the Commission, after prudencecheck, has agreed with the need for funding the Pension andGratuity Contribution funds, DVC should have been allowed torecover entire amount from the consumers through the tariff.Asking DVC to contribute out of its own resources wouldtantamount to denying it the return on equity as assured in termsof Tariff Regulations. However, if we look at it from the point ofview of the consumers, the consumers, particularly the industrialand commercial ones, have now no option to adjust their saleprice to take into consideration the need for meeting theaccumulated liability. It is, therefore, an accepted fact that dueto postponing of the creation of such fund, the consumers wereenjoying lesser tariff than the legitimate tariff otherwise applicableto them.”

53. A careful consideration of the reasoning adopted by the learnedAppellate Tribunal would not disclose any such error so as to warrantinterference of this Court. No error or fallacy, ex facie, is disclosed inthe reasoning adopted so as to justify interference under Section 125 ofthe 2003 Act.

54. Insofar as the consumers (appellants in Civil Appeal Nos.971-973 of 2008) are concerned, an additional issue has been struck, asnoticed earlier. This is with regard to the number of employees engagedin the power sector by the Corporation for whom alone proportionaterecovery 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 inany of the forums below and had been so raised before this Court forthe first time and that too in the course of the arguments advanced, thematerials on record do not justify a conclusion to be reached by us whichwill support the core basis of the contention made, namely, that theCorporation had not laid before the CERC any materials to show the AB

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Aextent of the work-force deployed in the power sector of the Corporation.In fact, in the counter arguments advanced on behalf of the Corporationthis contention has been refuted and it is asserted that such materialswere, indeed, laid before the CERC, a fact which we find to be correct.

55. Insofar as the issue of allowance of cost relating to otherBactivities of the Corporation to be recovered through tariff on electricityis concerned, we have taken note of the objection(s) raised in this regardwhich in sum and substance is that Sections 32 and 33 of the Act of1948 are in direct conflict with Sections 41 and 51 of the 2003 Act and,therefore, recovery of cost incurred in “other works” undertaken by theCorporation through power tariff is wholly untenable. Apart fromCreiterating the basis on which we have thought it proper to affirm thefindings of the learned Appellate Tribunal on the purport and scope ofthe fourth proviso to Section 14 of the 2003 Act and the continuedoperation of the provisions of the Act of 1948 which are not inconsistentwith the provisions of the 2003 Act, we have also taken note of theDspecific provisions contained in Sections 41 and 51 of the 2003 Act which,inter alia, require maintenance of separate accounts of the other businessundertaken by transmission/distribution licensees so as to ensure thatthe returns from the transmission/distribution business of electricity donot subsidize any other such business. Not only Sections 41 and 51 ofthe 2003 Act contemplate prior approval of the Appropriate CommissionEbefore a licensee can engage in any other business other than that of alicensee under the 2003 Act, what is contemplated by the aforesaidprovisions of the 2003 Act is some return or earning of revenue fromsuch business. In the instant case, the “other activities” of the Corporationare not optional as contemplated under Sections 41/51 of the 2003 ActFbut are mandatorily cast by the statute i.e. Act of 1948 which, being inthe nature of socially beneficial measures, per se, do not entail earningof any revenue so as to require maintenance of separate accounts. Theallowance of recovery of cost incurred in connection with “otheractivities” of the Corporation from the common fund generated by tariff chargeable from the consumers/customers of electricity as contemplatedGby the provisions of the Act of 1948, therefore, do not collide or is, in anymanner, inconsistent with the provisions of the 2003 Act. We will,therefore, have no occasion to interfere with the findings recorded bythe learned Appellate Tribunal on the above score.

56. Having dealt with all the issues raised/arising in the appealsunder consideration in the manner indicated above, we deem it proper todismiss all the appeals and affirm the judgment and order dated 23[rd]November, 2007 passed by the learned Appellate Tribunal. We orderaccordingly.

Divya Pandey Appeals dismissed.

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