STATE OF GUJARAT & ORS. versus UTILITY USERS’ WELFARE ASSOCIATION & ORS. on 12 April 2018

SUPREME COURT REPORTS[2018] 9 S.C.R. 106

[2018] 9 S.C.R.

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STATE OF GUJARAT & ORS.

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UTILITY USERS’ WELFARE ASSOCIATION & ORS.

(Civil Appeal No. 14697 of 2015)

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APRIL 12, 2018

[J. CHELAMESWAR AND SANJAY KISHAN KAUL, JJ.]

Electricity Act 2003: ss. 84 and 86 – Appointment ofChairperson of Central and State Regulatory Commissions –Whether mandatory to have a judicial mind presiding over theseCCommissions in the form of a Judge – Held: Section 84(2) is onlyan enabling provision to appoint a High Court Judge as aChairperson of the State Commission – It is not mandatory to appointa High Court Judge as a Chairperson of the State Commission –However, it is mandatory that there should be a person of law as aDMember of the Commission – Such member should be a personholding a judicial office or is a person possessing professionalqualifications with substantial experience in the practice of law,who has the requisite qualifications to have been appointed as aJudge of the High Court or a District Judge – This is so becausethe State Commission have adjudicatory function and has trappingsEof the court – On facts, challenge to the appointment of theChairman and Member of the Tamil Nadu State Commission isrejected as also the suo moto proceedings carried out by theCommission.

ss. 84 and 86 – Qualifications for appointment of ChairpersonFand Members of State Commission – Constitution of SelectionCommittee to select Members of State Commission – Explained.

Interpretation of Statutes: Statutory construction – Goldenrule and literal rule of – Held: Both the golden rule and the literalrule of statutory construction are well established that a statuteGmust be read as it is framed by the legislature – It is not the functionof the Court to supplant or read into the statute something which isnot provided – Courts may ascertain the real intention of thelegislature by carefully attending to the whole scope of the statute.

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Disposing of the matters, the Court

HELD: 1. Section 84(2) of the Electricity Act 2003 is onlyan enabling provision to appoint a High Court Judge as aChairperson of the State Commission of the said Act and it is notmandatory to do so. It is mandatory that there should be a personof law as a Member of the Commission, which requires a person,who is, or has been holding a judicial office or is a personpossessing professional qualifications with substantial experiencein the practice of law, who has the requisite qualifications to havebeen appointed as a Judge of the High Court or a District Judge.In any adjudicatory function of the State Commission, it ismandatory for a member having the said legal expertise to be amember of the Bench. The challenge to the appointment of theChairman and Member of the Tamil Nadu State Commission isrejected as also the suo moto proceedings carried out by theCommission. The judgment would apply prospectively and wouldnot affect the orders already passed by the Commission fromtime to time. In case there is no member from law as a memberof the Commission as required, the next vacancy arising in everyState Commission would be filled in by a Member of law in theterms stated. [Para 114] [162-D-H; 163-A]

2.1 On a plain reading of Section 84(1), it is mandated thatboth the Chairperson and the Members of the State Commission“shall” be persons of ability, integrity and standing who haveadequate knowledge of and have shown capacity in dealing withproblems relating to engineering, finance, commerce, economics,law or management. A plain grammatical reading of this Sectionshows that no distinction has been made qua the qualifications ofa Chairperson and Member. All that is required is the mandatescontained in the sub-section, which begin with the word “shall”.Thus, any person of the fields mentioned therein, having theability, integrity and standing can be appointed as a Member orChairperson. [Para 73] [147-G-H; 148-A-B]

2.2 Section 85 of the Act provides for constitution of aSelection Committee to select the Members of the StateCommission, which in turn has to consist of the persons as setout therein and mandatorily has to have a person, who has beena Judge of the High Court as the Chairperson of the SelectionCommittee. This provision refers to the appointment of A

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A‘Members’ of the State Commission but then that would alsoinclude the Chairperson of the State Commission, in view of sub-section 43 of Section 2 of the said Act. Thus, the reading of sub-section (1) of Section 84 read with Section 85 would leave nomanner of doubt as to the fields from which a Chairperson or aMember of the State Commission can be chosen from. However,Bthe controversy has emanated from the inclusion of sub-section(2) of Section 84. This is so, as sub-section (2) begins with a“notwithstanding” clause providing that the State Government“may” appoint any person as Chairperson from amongst thepersons, who is, or has been, a Judge of the High Court. This isCto be read with the proviso that such an appointment would haveto be made in consultation with the Chief Justice of that HighCourt. The proviso only respects and maintains the acceptedposition that in appointment of persons, who have been holdingsuch senior judicial office, consultation with the judicial head, being the Chief Justice, should be mandatory. Both the golden ruleDand the literal rule of statutory construction are well establishedthat a statute must be read as it is framed by the legislature. It isnot the function of the Court to supplant or read into the statutesomething which is not provided. This is not to say that therehave not been judicial views taken qua the interchangeability ofEthe expression “may’ and “shall” in certain provisions. Thus,the use of the word “shall” raises a presumption that a particularprovision is imperative. However, it has been construed as merelydirectory in certain cases if the context or intention of thelegislature demands otherwise. The Courts may ascertain thereal intention of the legislature by carefully attending to the wholeFscope of the statute. [Para 74-76] [148-B-C, E-H; 149-A-C]

Sainik Motors v. State of Rajasthan [1962] 1 SCR 517;Chairman Canara Bank, Bangalore v. M.S. Jasra AIR1992 SC 1100 : [1992] 2 SCR 68 – referred to.

G2.3 It is well-nigh impossible to lay down a general rule fordetermining whether a provision is imperative or directory. InSection 84, the expression “shall” is used in sub-section (1) bothin the context of the requirement of ability, integrity and standingas also in the context of adequate knowledge and capacity indealing with problems relating to engineering, finance, commerce,Heconomics, law or management. On the other hand, in sub-section (2) while dealing with the possibility of appointmentof a Chairperson from the pool of sitting or retired Judges, theexpression used is “may” indicating it to be a discretionary power.Thus, the line of reasoning that the plain reading of the sectionleaves no manner of doubt that the legislature only envisaged apossibility of appointment of a Chairperson from the pool of sittingor retired Judges of the High Court, in which case the method ofappointment would be different from the one as envisaged u/s. 85is accepted. [Paras 78-80] [149-H; 150-C-F]

Interpretation of Statutes by Maxwell, 12[th] Edn –referred to.

Interpretation of Statutes by Maxwell, 12[th] Edn –referred to.

2.4 The functions of the State Commission are prescribedunder Section 86 of the Act. The enumerated functions aredetermination of tariff, regulation of electricity purchase andprocurement process of distribution licencees, facilitating intra-state transmission, issuing licences to persons, promotingcogeneration and generation of electricity from renewablesources, levy fee, specify or enforce standards, fix trading margins.All these functions are regulatory in character rather thanadjudicatory. The real adjudicatory function is only provided insub-clause (f) whereupon the Commission has the option ofadjudicating the disputes between the licencees and generatingcompanies, or to refer such disputes to arbitration. There is alsoan advisory role to be performed by the State Commission asspecified in sub-section (2). These types of functions do notnecessarily mandate a Judge to be a Chairperson. [Para 81] [150-G-H; 151-A-B]

Tamil Nadu Generation and Distribution CorporationLimited v. PPN Power Generating Company PrivateLimited [2014] 4 SCR 667:2014 (11) SCC 53 – referredto.

2.5 The composition of the appellate tribunal under Section112 mandates that there has to be a Bench of two or more personsof which at least one should be a judicial member. The Chairpersonas per Section 113, mandatorily has to be a present or retiredJudge of the Supreme Court or a Chief Justice of the High Court.Thus, at the appellate stage there is necessary judicial scrutiny,which takes place. Looked at from the perspective of the position A

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Aprevailing prior to the said Act coming into force, the nature offunctions sought to be performed by the State Commission, wereto be so performed, not by person, who necessarily held a judicialoffice. The observations, in the context of the “tribunalisation”of judicial process and the requirement of it to be headed by aJudge have to be read in the context of shifting of the adjudicatoryBrole from the Courts to the Tribunals. [Para 83] [151-E-G]

2.6 The fact that the Chairperson has a right to nominatethe Member, who would chair meetings in his absence as persub-section (2) of Section 92, or that the presence of a man of lawwould be no substitute to the requirement of a Judge who wouldCbring a judicial thought process to the decision making asChairman, or that the regulatory body should not be unregulated,are generalized pleas, which are difficult to accept. No doubt, thelaw declared by the Supreme Court is binding on all Courts withinthe territory of India, which would also include principles of lawDemanating from a judgment or interpretation of the law, but thenthe ratio decidendi of the judgments of the Supreme Court, makesthe principle of mandatory requirement of a Judge applicable onlyto cases where the judicial function is sought to be shifted throughthe process of ‘tribunalisation’. [Para 86] [152-D-F]

E2.7 Section 84(2) of the said Act begins with a non-obstanteclause, i.e., Notwithstanding anything contained in sub-section(1), it does not take away what is stated in sub-section (1), whichdeals with the requirements that are necessary in the appointmentof a Member or Chairperson. It would not cut down the clearterms of the enactment being sub-section (1). The occasion toFuse such a non-obstante clause really arose because the processof appointment of a Chairperson who is, or has been a Judge, isrequired to be different, and thus, the mandatory consultationwith the Chief Justice. It is nothing more or less. Further sub-section (1) of Section 85 provides for a Selection Committee toGbe headed by a Judge of the High Court but with the proviso thatthe said provision would not apply for the appointment of a personas a Chairperson who is, or has been, a Judge of the High Court.This, in fact, shows that a non-Judge can be appointed as theChairperson by the Selection Committee constituted underSection 85 of the said Act, which in turn is chaired by a Judge ofH

the High Court. Thus, Section 84(2) of the said Act only givesthe discretionary option to the State Government to appoint aJudge as the Chairperson of the State Commission. The saidprovision therefore, is not mandatory in nature. [Para 87] [152-F-H; 153-A-B]

3.1 In terms of Section 82(4) of the said Act, the StateCommission is to consist of not more than three membersincluding the Chairperson. In other words, there have to be twoother members other than the Chairperson. Now if theChairperson is not a Judge, the question arises whether any ofthe other two members has to be a person from the legal fieldconsidering the nature of functions performed by the StateCommission. Section 84(1) of the said Act prescribes therequirement of knowledge and shown capacity in dealing withproblems relating to six different fields, i.e., engineering, finance,commerce, economics, law or management. If the Chairpersonis from a non-legal field, it would imply that he/she would be aperson from any of the other five fields. That would still leave theappointment of two members from the fields specified, includinglaw. Thus, there can be a possibility and it is so, where StateCommissions have no members from the legal field at all. Themoot point arises whether there can be a mandatory provisionread into Section 84(1) of the Act for opining, that at least oneperson from the legal field is necessary as a member, althoughon a plain reading of the Section it is not so. [Para 88] [153-C-G]

3.2 The distinguishing feature between appointment ofmembers to the Central Commission and the State Commissionis that, with regards to the Central Commission, it is specificallyprovided in Section 77, how many persons from which field are tobe appointed. There is a further proviso to sub-clause (c) of sub-section (1) of Section 77 restricting it to not more than onemember from the fields specified in the said clause, viz.economics, commerce, law or management. This is not theposition for the State Commission. [Para 89] [153-G-H; 154-A]

3.3 There is no dispute that sub-clause (f) of s. 86 is clearlyan adjudicatory function. It provides for adjudication of disputesbetween the licencees and the generating companies. There isalso a power to refer the dispute to arbitration. [Para 91] [154-C-D]

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A3.4 A perusal of ss. 94 to 96 would show that apart fromtheir definition, even otherwise, these are powers of a civil courtunder the Code of Civil Procedure, 1908. Powers such assummoning, enforcement of attendance of any person andexamination on oath, discovery and production of documents,receiving affidavit of evidence, requisitioning of public records,Betc., all form part of Section 94. In terms of Section 95, all suchproceedings before the State Commission would be deemed tobe judicial proceedings within the meaning of Sections 193 and228 IPC and the commission would be a civil court for purposesof Sections 345 & 346 CrPC. Not only that, Section 96 confersCthe extreme power of entry and seizure in respect of any buildingand place where the Commission has reason to believe that anydocument relating to the subject matter of enquiry may be foundand may be seized. The power is conferred on the Commissionunder Section 129 for securing compliances of orders and underSections 142 & 146 for punishment for non-compliance of ordersDand directions. This, thus, leaves no manner of doubt that theState Commission, though defined as a ‘Commission’ has all the‘trappings of the Court’. [Para 93] [154-H; 155-A-D]

Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd.(GJ-I) [2008] 4 SCR 822 : 2008 (4) SCC 755; A.P.EPower Coordination Committee & Ors. v. LancoKondapalli Power Ltd. & Ors. [2015] 12 SCR 447 : 2016 (3) SCC 468; Gujarat Urja Vikas Nigam Ltd. v.Essar Power Ltd. (GJ-I) [2008] 4 SCR 822 : 2008 (4)SCC 755; Tamil Nadu Generation and DistributionFCorporation Limited v. PPN Power GeneratingCompany Private Limited [2014] 4 SCR 667 : 2014 (11)SCC 53; Bharat Bank Ltd. v. Employees of the BharatBank Ltd. 1950 AIR 188 : [1950] SCR 45; JaswantSugar Mills Ltd. v. Lakshmi Chand [1963] Supp. 1 SCR242; Engineering Mazdoor Sabha v. Hind Cycles Ltd.G1963 AIR 874 : [1963] Suppl. SCR 625; Indo-ChinaSteam Navigation Co. Ltd. v. Jasjit Singh [1964] 6 SCR594; Associated Cement Companies Ltd. v. P.N. Sharma[1965] 2 SCR 366; Sarojini Ramaswami v. Union ofIndia [1992] 1 Suppl. SCR 108 : 1992 (4) SCC 506; H

State of Gujarat v. Gujarat Revenue Tribunal BarAssociation [2012] 10 SCR 816 : 2012 (10) SCC 353– referred to.

Shell Company of Australia, Limited v. FederalCommissioner of Taxation (1931) AC 275; R. v. LondonCounty Council (1931) 2 KB 215; Huddart, Parker &Co. v. Moorehead 8 CLR 330, 357; Cooper v. Wilson

(1937) 2 KB 309 – referred to.

3.5 The ‘Wambaugh Test’ or ‘The Inversion Test’ ispropounded as the means of judicial interpretation. ‘The InversionTest’ is used to identify the ratio decidendi in any judgment. Inorder to test whether a particular proposition of law is to be treatedas the ratio decidendi of the case, the proposition is to be inversed,i.e., to remove from the text of the judgment as if it did not exist.If the conclusion of the case would still have been the same evenwithout examining the proposition, then it cannot be regarded asthe ratio decidendi of the case. This test has been followed toimply that the ratio decidendi is what is absolutely necessary forthe decision of the case. “In order that an opinion may have theweight of a precedent”, “it must be an opinion, the formation ofwhich, is necessary for the decision of a particular case.” Applyingthe test to the said judgment, the proposition is reversed, i.e.,“the Chairman need not be a judicial member”, the fact remainsthat it would have no impact on the decision in that case, whichwas related to inter alia the interpretation of Section 86 of thesaid Act. This, in fact, justifies what has been held aforesaid quathe appointment of a Chairperson from the pool of Judges. [Para102-104] [159-A-F]

3.7 If this Court was to take the proposition as “no memberhaving knowledge of law is required to be a member of theCommission” then there is a problem at hand. This is so becausewhile interpreting Section 86 of the said Act, it has been expressedthat the Commission has the ‘trappings of the Court’, an aspectwhich has been accepted. Once it has the ‘trappings of the Court’and performs judicial functions, albeit limited ones in the contextof the overall functioning of the Commission, still while performingsuch judicial functions which may be of far reaching effect, the A

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Apresence of a member having knowledge of law would becomenecessary. The absence of a member having knowledge of lawwould make the composition of the State Commission such aswould make it incapable of performing the functions under Section86(1)(f) of the said Act. [Para 105] [159-G; 160-A-C]

BMadras Bar Association v. Union of India & Anr.(MJ-II) [2014] 10 SCR 1 : 2014 (10) SCC 1 – referredto.

3.8 It is mandatory to have a person of law, as a member ofthe State Commission. When it is said, it does not imply that anyCperson from the field of law can be picked up. It has to be a person,who is, or has been holding a judicial office or is a personpossessing professional qualifications with substantial experiencein the practice of law, who has the requisite qualifications to havebeen appointed as a Judge of the High Court or a District Judge.[Para 107] [160-G-H]D

Brahm Dutt v. Union of India 2005 (2) SCC 431 –referred to.

Brahm Dutt v. Union of India 2005 (2) SCC 431 –referred to.

3.9 It cannot be said that since there is a presence of aJudge in the Appellate Tribunal that would obviate the need of aEman of law as a member of the State Commission. The originalproceedings cannot be cured of its defect merely by providing aright of appeal. Thus, for all adjudicatory functions, the Benchmust necessarily have at least one member, who is or has beenholding a judicial office or is a person possessing professionalqualifications with substantial experience in the practice of lawFand who has the requisite qualifications to have been appointedas a Judge of the High Court or a District Judge. [Paras 109-110][161-D-E]

3.10 The challenge laid in Transfer Cases to theappointments made to the Tamil Nadu State Commission and theGexercise of the powers suo moto by the Commission. Thefundamental plea is of financial bias of the two members as theywere working in their erstwhile avatars. The name of ‘GR’ wasrecommended when he was still working as the Director,TANGEDCO and he opted for voluntary retirement after his name had been recommended. ‘AK’ retired from the post of ManagingDirector of TANTRANSCO on 31.5.14 and was appointed asChairman of the Commission on 6.6.14. The tariff hike wasapproved by a majority of 2:1 with these two members being partof the majority view. [Para 111] [161-E-G]

3.11 The nature of financial interest was examined in thenarrower sense as well as the wider sense and in the wider sense,it was held to include the direct or indirect interest of a person inrelation to a financial undertaking. The situation arose when theperson concerned was holding both the posts simultaneously,which is not so in the instant case. It is also pointed out by thecounsel for the State of Tamil Nadu that the orders of appointmenthave been exclusively assailed right till the Supreme Court.Selection Committee was presided over by a retired Judge ofthe High Court. Thus, no merit is found in the plea sought to beadvanced assailing either the appointment or the suo moto tariffrevision.[Para 112-113] [162-A-C]

Rajesh Awasthi v. Nand Lal Jaiswal [2012] 10 SCR 883: 2013 (1) SCC 501; Mor Modern CooperativeTransport Society Ltd. v. Financial Commissioner &Secretary to Govt. of Haryana and Anr. [2002] 1 Suppl.SCR 87 : 2002 (6) SCC 269; Kihoto Hollohan v.Zachillhu [1992] 1 SCR 686 : 1992 (2) Suppl. SCC 651;Pareena Swarup v. Union of India [2008] 13SCR 1217 : 2008 (14) SCC 107; Union of India v.Madras Bar Association (MJ-I) [2010] 6 SCR 857 :2010 (11) SCC 1; Uttar Pradesh Power CorporationLimited v. National Thermal Power Corporation Limited& Ors. (2011) 12 SCC 400; Natural ResourcesAllocation In re Special Reference No. 1 of 2012 [2012]9 SCR 311 : 2012 (10) SCC 1; Bachahan Devi & Anr.v. Nagar Nigam, Gorakhpur & Anr. [2008] 2 SCR 424 :2008 (12) SCC 372; The Dominion of India & Anr. v.Shrinbai A Irani & Anr. [1955] 1 SCR 206; ChairmanCanara Bank, Bangalore v. M.S. Jasra 1992 AIR1100 : [1992] 2 SCR 68; Ajit Singh (II) v. State of Punjab(1999) 7 SCC 209; State of U.P. v. Babu Ram [1961] 2SCR 679 – referred to.

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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 14697of 2015.

From the Judgment and Order dated 08.10.2015 of the High Courtof Gujarat at Ahmedabad in Writ Petition (PIL) No. 172 of 2014

WITH

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C. A. No. 13451 of 2015

T. C. (C) Nos. 139, 138, 137, 140 of 2015

C. A. Nos. 3759-3760 of 2016

T. P. (C) No. 974 of 2016.

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K.K. Venugopal, AG, Atmaram N.S. Nadkarni, ASG, Mr.Subramonium Prasad, Sr. Adv. AAG, Arvind P. Dattar, Shekhar Naphade,Jayant Bhushan, Sr. Advs., M.G. Ramachandran, R. Balasubramanian,Ms. Aarti Sharma, Ms. Liz Mathew, P. K. Mullick, Ms. Hemantika Wahi,Shubham Arya, Gurmeet Singh Makker, Gautam Narayan, R. A. Iyer,Ms. Mahamaya Chatterjee, Anil Kaushik, Abhishek Mishra, VishnuSharma, Mehul M. Gupta, Rajinder Singh, Vishnu Sharma, Abdul Saleem,Vinodh Kanna B., A. Sriram, Buddy Ranganathan, Arjit Moitra, SoumikGhosal, Nikhil Nayyar, N. Sai Vinod, Dhananjai Baijal, Ms. Smriti Shah,Divyanshu Rai, Ms. Sujatha Balachander, Ravjyot Ghuman, ShreyakGupta, Joseph Aristotle S., Poojan Kapoor, Ms. Kamini Jaiswal,Ms. Rani Mishra, Abhimanyu Shrestha, D. L. Chidananda, Syed JafarAlam, Deep Rao, Sandeep Devasisha Das, Ms. Hemantika Wahi,B. Balaji, Rahul Mehra, Ms. Neha Sangwan, Chirag Shroff, E. C.Agrawala, Advs. for the appearing parties.

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AThe Judgment of the Court was delivered by SANJAY KISHAN KAUL, J. 1. The Electricity Act, 2003(hereinafter referred to as the ‘said Act’) provides for Central and StateRegulatory Commissions. Insofar as the appointment of the Chairpersonof these Commissions is concerned, the relevant provisions stipulate thatBthe Chairperson “may” be a Judge of a High Court for the StateCommission, a Judge of the Supreme Court or the Chief Justice of aHigh Court for the Central Commission. The common question, whicharises for consideration in these appeals is whether the expression “may”should be read as “shall”, i.e., whether it is mandatory to have a judicialCmind presiding over these Commissions in the form of a Judge.

2. The Division Bench of the Madras High Court vide judgmentdated 7.2.2014 took the view in respect of the challenge laid to the selectionprocess of the Chairman of the Tamil Nadu State Electricity Commissionthat there was no such mandatory requirement though there was anDoption to appoint a Judge.

3. The Division Bench of the Gujarat High Court in a similar casein respect of the appointment of a Chairperson of the Gujarat StateRegulatory Commission vide impugned order dated 8.10.2015 opinedthat it was so mandatory.

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4. The aforesaid judicial conflict being before this Court, thechallenges laid in different States were transferred to this Court throughTransfer Petitions vide order dated 3.11.2015.

5. The Union of India, as also some of the State Commissions areFarrayed on the one side to canvas for an interpretation of the provisionas it reads, while on the other side, are consumers, activists and someaffected parties, who canvassed the importance of the State RegulatoryCommissions and the nature of functions it performs, to establish that aJudge alone should preside over these Commissions.

6. We do not see the necessity of going into individual facts norwere the pleas advanced on that basis before us. The submissions havebeen based on the provisions of the said Act and the legal pronouncementsdealing with the issue of the mandatory requirement of certainCommissions to be headed by a judicial mind.

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7. The said Act came into force on 10.6.2003 on publication in theGazette. The Act seeks to consolidate the laws relating to generation,transmission, distribution, trading and use of electricity. The Preamble tothe said Act states as under:

“An Act to consolidate the laws relating to generation, transmission,distribution, trading and use of electricity and generally for takingmeasures conducive to development of electricity industry,promoting competition therein, protecting interest of consumersand supply of electricity to all areas, rationalisation of electricitytariff, ensuring transparent policies regarding subsidies, promotionof efficient and environmentally benign policies, constitution ofCentral Electricity Authority, Regulatory Commissions andestablishment of Appellate Tribunal and for matters connectedtherewith or incidental thereto.”

8. The detailed Statement of Objects & Reasons mentions thatthe Electricity Supply Industry in India was governed by the IndianElectricity Act, 1910, the Electricity (Supply) Act, 1948 and the ElectricityRegulatory Commission Act, 1998. The State Electricity Boardsconstituted under the Electricity (Supply) Act, 1948 failed to perform onaccount of various factors inter alia fixation of appropriate tariff andthe cross-subsidies reached unsustainable levels. The ElectricityRegulatory Commission Act of 1998 was an endeavour to distance theGovernment from determination of tariffs by having independentregulatory commissions.

9. Part X of the said Act deals with matters relating to RegulatoryCommissions – their constitution, powers and functions, etc. Sections76 & 77 of the said Act are concerned with the constitution of the CentralCommission and the qualifications for appointment of Members of theCentral Commission. The provisions are similar to the appointment ofthe Members and Chairperson of the State Commissions except to theextent that while the relevant sub-section provides that the CentralGovernment “may” appoint the Chairperson from amongst persons whois, or has been a Judge of the Supreme Court or the Chief Justice of aHigh Court in the case of the Central Commission, in the case of StateCommissions, the provision states that the State Government “may”

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Aappoint any person as the Chairperson from amongst persons who is, orhas been, a Judge of a High Court. Section 78 of the said Act deals withthe constitution of the Selection Committee to recommend Members,while the functions of the Central Commission are specified in Section79 of the said Act. Section 80 of the said Act provides for establishmentof a Central Advisory Committee with the Chairperson of the CentralBCommission being the ex officio Chairperson of the Central AdvisoryCommittee. This Committee is to advise the Central Commission onmajor questions of policy; quality, continuity and extent of service providedby the licensees; compliance by the licensees with the conditions andrequirements of their licence; protection of consumer interest; electricityCsupply and overall standards of performance by utilities (Section 81 ofthe said Act).

10. Section 82 of the said Act is in respect of constitution of StateCommission while Section 84 prescribes the qualifications for appointmentof Chairperson and Members of State Commissions. Section 85 of theDsaid Act provides for constitution of Selection Committee to selectMembers of State Commission and Section 86 prescribes the functionsof State Commission. Similar to the Central Advisory Committee, theState Advisory Committee can be constituted under Section 87 of thesaid Act with similarity of functions under Section 88 of the said Act.The relevant provisions, which will have to be referred to are beingEreproduced hereunder:

“Section 84. Qualifications for appointment of Chairpersonand Members of State Commission. – (1) The Chairpersonand the Members of the State Commission shall be persons ofability, integrity and standing who have adequate knowledge of,Fand have shown capacity in, dealing with problems relating toengineering, finance, commerce, economics, law or management.

(2) Notwithstanding anything contained in sub-section (1), the StateGovernment may appoint any person as the Chairperson fromamongst persons who is, or has been, a Judge of a High Court:

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Provided that no appointment under this sub-section shall be madeexcept after consultation with the Chief Justice of that High Court.

(3) The Chairperson or any other Member of the StateCommission shall not hold any other office.

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STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFAREASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

(4) The Chairperson shall be the Chief Executive of the StateCommission.

Section 85. Constitution of Selection Committee to selectMembers of State Commission. – (1) The State Governmentshall, for the purposes of selecting the Members of the StateCommission, constitute a Selection Committee consisting of –

(a) a person who has been a Judge of the High Court….Chairperson; (b) the Chief Secretary of the concerned State ….Member;

(c) the Chairperson of the Authority or

the Chairperson of the Central Commission ….... Member:

Provided that nothing contained in this section shall apply to theappointment of a person as the Chairperson who is or has been aJudge of the High Court.

(2) The State Government shall, within one month from the dateof occurrence of any vacancy by reason of death, resignation orremoval of the Chairperson or a Member and six months beforethe superannuation or end of tenure of the Chairperson or Member,make a reference to the Selection Committee for filling up of thevacancy.

(3) The Selection Committee shall finalise the selection of theChairperson and Members within three months from the date onwhich the reference is made to it.

(4) The Selection Committee shall recommend a panel of twonames for every vacancy referred to it.

(5) Before recommending any person for appointment as theChairperson or other Member of the State Commission, theSelection Committee shall satisfy itself that such person does nothave any financial or other interest which is likely to affectprejudicially his functions as such Chairperson or Member, as thecase may be.

(6) No appointment of Chairperson or other Member shall beinvalid merely by reason of any vacancy in the SelectionCommittee A

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86. Functions of State Commission.- (1) The State Commissionshall discharge the following functions, namely:—

(a) determine the tariff for generation, supply, transmission andwheeling of electricity, wholesale, bulk or retail, as the case maybe, within the State:

Provided that where open access has been permitted to a categoryof consumers under section 42, the State Commission shalldetermine only the wheeling charges and surcharge thereon, ifany, for the said category of consumers; (b) regulate electricity purchase and procurement process ofdistribution licensees including the price at which electricity shallbe procured from the generating companies or licensees or fromother sources through agreements for purchase of power fordistribution and supply within the State;

(c) facilitate intra-State transmission and wheeling of electricity; (d) issue licences to persons seeking to act as transmissionlicensees, distribution licensees and electricity traders with respectto their operations within the State; (e) promote cogeneration and generation of electricity fromrenewable sources of energy by providing suitable measures forconnectivity with the grid and sale of electricity to any person,and also specify, for purchase of electricity from such sources, apercentage of the total consumption of electricity in the area of adistribution licensee;

(f) adjudicate upon the disputes between the licensees andgenerating companies and to refer any dispute for arbitration; (g) levy fee for the purposes of this Act; (h) specify State Grid Code consistent with the Grid Code specifiedunder clause (h) of sub-section (1) of section 79;

(i) specify or enforce standards with respect to quality, continuityand reliability of service by licensees; (j) fix the trading margin in the intra-State trading of electricity, ifconsidered, necessary; (k) discharge such other functions as may be assigned to it underthis Act.

(2) The State Commission shall advise the State Government onall or any of the following matters, namely:—

(i) promotion of competition, efficiency and economy in activitiesof the electricity industry;

(ii) promotion of investment in electricity industry;

(iii) reorganisation and restructuring of electricity industry in theState;

(iv) matters concerning generation, transmission, distribution andtrading of electricity or any other matter referred to the StateCommission by that Government:

(3) The State Commission shall ensure transparency whileexercising its powers and discharging its functions.

(4) In discharge of its functions, the State Commission shall beguided by the National Electricity Policy, National Electricity Planand tariff policy published under section 3.”

11. We may note a distinction between the Members of the CentralCommission and the State Commissions inasmuch as Section 77 dealingwith the appointment of Members of Central Commission provides asunder:

“77. Qualifications for appointment of Members of CentralCommission.- (1) The Chairperson and the Members of theCentral Commission shall be persons having adequate knowledgeof, or experience in, or shown capacity in, dealing with, problemsrelating to engineering, law, economics, commerce, finance ormanagement and shall be appointed in the following manner,namely:—

(a) one person having qualifications and experience in the field ofengineering with specialisation in generation, transmission ordistribution of electricity; (b) one person having qualifications and experience in the field offinance; A

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A(c) two persons having qualifications and experience in the fieldof economics, commerce, law or management:

Provided that not more than one Member shall be appointed underthe same category under clause (c).”

12. However, for appointment of a Member for State Commission,Bthere is no such limitation on the number of Members from a particularfield though it does state that such Members should have adequateknowledge and shown capacity in, dealing with problems relating toengineering, law, economics, commerce, finance or management. Sub-section (2) of both Sections 77 and Section 84 are similar except for theCperson to be appointed. Thus, irrespective of the provisions in sub-section (1) of Section 84 stipulating the fields from which the Memberswill have to be appointed, sub-section (2) begins with a ‘notwithstanding’clause stating that the State Government “may” appoint any person asthe Chairperson from amongst those, who have been, or is a Judge ofthe High Court. The proviso to sub-section (2) stipulates that noDappointment under sub-section (2) shall be made except after consultationwith the Chief Justice of that High Court. This, in fact, recognizes thepre-eminence and requirement of consultation with the Chief Justice ofthe High Court in case of appointment of a Judge as the Chairperson ofa State Commission. For the Central Commission, the consultation isEwith the Chief Justice of India, because the appointment envisaged is ofa Judge of the Supreme Court or the Chief Justice of a High Court.

13. The Selection Committee under Section 85 of the said Act forselecting Members of the State Commission is to be headed by a Judgeof the High Court but once again the proviso states that this would notFbe applicable to the appointment of a person as the Chairperson who isor has been a Judge of the High Court. The effect of this is that, in casethe person to be appointed as Chairperson to the State Commission is aJudge, necessary consultation will have to be with the Chief Justice ofthe High Court as per the proviso to Section 84(2).

G14. It may be noticed that under Section 78 of the said Act, insofaras the Selection Committee to recommend Members of the CentralCommission is concerned, the Chairperson of the Selection Committeehas to be a Member of the Planning Commission in-charge of the energysector. Once again, the proviso to Section 78 makes an exception to theappointment of a person as a Chairperson of the Central Commission,H

who is, or has been a Judge of the Supreme Court or the Chief Justice ofthe High Court, as in that eventuality, the Chief Justice of India has to beconsulted.

15. The Appellate Tribunal for Electricity is provided in Part XI ofthe said Act. Section 111 of the said Act deals with the appeal to AppellateTribunal from orders made by an adjudicating officer under the said Act,or the Appropriate Commission under the said Act. Section 112 of thesaid Act deals with the composition of the Appellate Tribunal. TheTribunal sits in Benches with at least one judicial member and onetechnical member. Section 113 of the said Act provides for qualificationsfor appointment of Chairperson and Member of the Appellate Tribunal.The Chairperson of the Appellate Tribunal has to be someone, who is, orhas been a Judge of the Supreme Court or the Chief Justice of a HighCourt. Thus, there is no quibble over the proposition that there is asenior judicial mind heading the Appellate Tribunal and that every Benchof the Appellate Tribunal mandatorily has to have at least one judicialmember and one technical member.

The Attorney General’s Argument:

The Attorney General’s Argument:

16. The learned Attorney General, appearing on behalf of theUnion of India and the State of Gujarat, took us through the provisionsand the scheme of the said Act and referred to the judicialpronouncements. He canvassed for the reading of the statute as it standsand, thus, pleaded that where the legislature in its wisdom had used theword “may” consciously, there was no need to read it as “shall”. LearnedAttorney General sought to emphasise that the functions of both theCommissions are more technical in nature and really do not have muchof an adjudicatory element requiring a legal mind. This is apart from thefact that it is not as if a non-lawyer or non-Judge is incapable ofappreciating a legal point, as even arbitrators are appointed from thesefields when the dispute is more technical in character. The primaryfunction is determination of tariff, regulating electricity purchase andprocurement process of distribution licensees, facilitating intra-Statetransmission, issuance of license, promotion of cogeneration andgeneration of electricity from renewable sources of energy, levying fee,etc. Out of the 11 functions enlisted of a State Commission under Section86 of the said Act and for the Central Commission under Section 79 ofthe said Act, adjudication of disputes between licensees and generating A

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Acompanies and to refer any dispute for arbitration is the only one, whichcan be said to have any adjudicatory flavor. In fact, the argumentadvanced was that the nature of work would not be something whichthe Judges would be comfortable with, being highly technical in nature,nor are Judges trained for such technical matters. In the context of thefunctions and duties of the authority, relevant provisions under the saidBAct were referred to. Section 16 requires an Appropriate Commissionto specify conditions of license. Section 45 of the said Act makesprovision for power to recover charges, Section 46 of the said Act makesprovision for power to recover expenditure. Section 50 provides for theState Commission to specify an Electricity Supply Code for recovery,Cbilling, etc., while Section 57 empowers the Appropriate Commission tospecify standards of performance of a licensee. Section 61 deals withtariff regulations and Section 66 deals with the development of a marketin power, guided by the National Electricity Policy. Looking to all thesefunctions, it was canvassed that a purposive interpretation should be given to the expression used, for interpreting the provisions of appointmentDof the Chairperson. Mindful of the technical nature of functions as theyare, it was argued that a Judge was not required and that this was apparentfrom the fact that even at present, all State Commissions are headed bynon-Judges, except one. The provision was stated to be only felicitousin character, as it gives an option to appoint a Judge. It was argued thatEthere could be a possibility of a Judge, rarely, as it may be, being anexpert in this field who could be so appointed. However, if a Judge is tobe appointed, the process of appointment is different by reason of his/her having held a constitutional post and thus, the Selection Committeeconstituted would not be recommending the appointment, but theconsultation would have to be with the Chief Justice concerned.F

17. Learned Attorney General then proceeded to refer to thejudgment of this Court in Tamil Nadu Generation and DistributionCorporation Limited v. PPN Power Generating Company PrivateLimited[1] wherein this very Act was under consideration. The matterrelated to inter alia the jurisdiction of the State Commission in TamilGNadu to either adjudicate a dispute or refer it to arbitration under Section86(1)(f) of the said Act, which was held to be required to be exercisedreasonably and not arbitrarily. In para 55, the Court gave its imprimaturto the submission advanced on behalf of the appellant that adjudicatory 1 (2014) 11 SCC 53H

1 (2014) 11 SCC 53H

functions generally ought not to be conducted by the State Commissionin the absence of a judicial member, especially in relation to disputeswhich are not fairly relative to tariff fixation or the advisory andrecommendatory functions of the State Commission. In the said context,a reference was also made to the Constitution Bench judgment of thisCourt in Kihoto Hollohan v. Zachillhu[2] which examined the nature ofthe power of the Speaker or the chairman under Para 6(1) of the TenthSchedule of the Constitution of India. The finding recorded is that theState Commission in deciding a lis relating to the generating companywas discharging judicial functions and exercising the judicial powers ofa far reaching effect and must therefore have the essential ‘trappings ofthe Court’ for which it was said “….This can only be achieved by thepresence of one or more judicial members in the State Commission whichis called upon to decide complicated contractual or civil issues whichwould normally have been decided by a civil court…” It was alsoobserved that the decisions of the State Commission had far reachingconsequences and were final and binding between the parties subject,of course, to judicial review.

18. The Bench thereafter proceeds to examine Section 84(2) ofthe said Act. It was observed that Section 84(2) “enables” the StateGovernment to appoint any person as the Chairperson from amongstpersons who is, or has been, a Judge of a High Court, and that suchappointment shall be made after consultation with the Chief Justice ofthe High Court. Thus, where complicated legal issues have been raised,it was observed, the presence of one or more judicial members in theState Commission would become necessary. No judicial member hadbeen appointed in the Tamil Nadu State Commission and, thus, theauthorities concerned were required to look into the desirability andfeasibility for making appointments, of any person, as the Chairpersonfrom amongst persons, who is or has been a Judge of a High Court.

19. The provisions of Section 113 of the said Act were referredto, to conclude that the legislature was aware that the functions performedby the State Commission as well as the appellate tribunal are judicial innature and, thus, the appellate authority has the trappings of the Court.This essential feature had not been made mandatory under Section 84of the said Act. In the opinion of the Bench, it would be “advisable” forthe State Government to exercise the enabling power under Section2 1992 Supp (2) SCC 651

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A84(2) of the said Act to appoint a person, who is, or has been a Judge ofa High Court as Chairperson of the State Commission. The aforesaiddiscussions were referred to by the learned Attorney General to canvasthat the question involved in the case really did not pertain to Section84(2) of the said Act but certain observations had been made, nonetheless.The Tribunals envisaged under Part XIV A of the Constitution wouldBstand on a different footing and therefore cannot be compared with theCommission in question. In any case, the observations itself show thatthe Bench was conscious of the limitations of the said Act and, thus,only rendered an advise to the State Government, rather than issue adirection. In the alternative, at best, the discussion was with referenceCto the desirability and feasibility of at least one member having legalknowledge rather than a mandatory requirement of a Chairman being aJudge.

20. Next, referring to the judgment in Pareena Swarup v. Unionof India[3], it was emphasized that the nature of functions of a CommissionDunder the said Act cannot be equated to the functions being performedby a Tribunal under the Prevention of Money Laundering Act, 2002, anadjudicatory function. The observations were made in the context oftribunals being created, which were seeking to exercise functions earlierperformed by regular judicial forums. The functions, now vested with

the Appropriate Commission under the said Act, were really beingEperformed under the Electricity Regulatory Commission Act.

21. The aforesaid judicial pronouncements, it was, thus, canvassed,could not have been utilized by the Gujarat High Court to come to aconclusion that the post of the Chairperson of the State Commissionmandatorily has to be occupied by a Judge, though it could be occupiedFby a Judge.

22. We may, however, note that the view adopted by the GujaratHigh Court is also based on the nature of powers vested with theAppropriate Commission under Sections 94, 95 & 96 of the said Act,which are as under:G“94. Powers of Appropriate Commission.- (1) The AppropriateCommission shall, for the purposes of any inquiry or proceedingsunder this Act, have the same powers as are vested in a civilcourt under the Code of Civil Procedure, 1908 (5 of 1908) inrespect of the following matters, namely:—

H3 (2008) 14 SCC 107

(a) summoning and enforcing the attendance of any person andexamining him on oath; (b) discovery and production of any document or other materialobject producible as evidence;

(c) receiving evidence on affidavits;

(d) requisitioning of any public record; (e) issuing commission for the examination of witnesses; (f) reviewing its decisions, directions and orders; (g) any other matter which may be prescribed.

(2) The Appropriate Commission shall have the powers to passsuch interim order in any proceeding, hearing or matter beforethe Appropriate Commission, as that Commission may considerappropriate.

(3) The Appropriate Commission may authorise any person, as itdeems fit, to represent the interest of the consumers in theproceedings before it.

95. Proceedings before Commission.- All proceedings beforethe Appropriate Commission shall be deemed to be judicialproceedings within the meaning of sections 193 and 228 of theIndian Penal Code and the Appropriate Commission shall bedeemed to be a civil court for the purposes of sections 345 and346 of the Code of Criminal Procedure, 1973 (2 of 1974).

96. Powers of entry and seizure.- The Appropriate Commissionor any officer, not below the rank of a Gazetted Officer speciallyauthorised in this behalf by the Commission, may enter any buildingor place where the Commission has reason to believe that anydocument relating to the subject matter of the inquiry may befound, and may seize any such document or take extracts or copiesthere from subject to the provisions of section 100 of the Code ofCriminal Procedure, 1973, insofar as it may be applicable.”

23. The conclusion in favour of an Appropriate Commission beingheaded by a Judge in the context of the Commission having the ‘trappingsof a Court’ is drawn on the basis of the aforesaid provisions, apart fromthe provisions relating to the appointment of Members and theChairperson.

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AC.A. No.13451/2015 (stand of the State of Tamil Nadu):

24. The State Government, having succeeded before the MadrasHigh Court as per the impugned judgment dated 7.2.2014, supported theview taken by the Madras Bench and adopted the arguments of thelearned Attorney General. Mr. Shekhar Naphade, learned SeniorBAdvocate appearing for the State of Tamil Nadu pleaded that the wholescheme of the said Act ought to be taken into consideration and thatdisproportionate importance was being given to sub-section (2) of Section84 for appointment of a Judge as a Chairperson, not realizing the varietyof functions performed by the Commission, of which the adjudicatoryfunctions were only a small percentage.C

C.A. No.14697/2015 (plea of the Gujarat State RegulatoryCommission):

25. Mr. Jayant Bhushan, learned Senior Advocate appearing forthe Gujarat State Electricity Regulatory Commission, sought to pose aDquestion, i.e., where does the judgment in Tamil Nadu Generation andDistribution Corporation Limited[4] make it mandatory for a Judge tobe the Chairperson? The very wordings were said to be recommendatoryin character, which had already been read out by the learned AttorneyGeneral. In the alternative, it was pleaded that the observations madewere really obiter dicta, as the issue of appointment of the ChairpersonEof the State Commission was not the lis before the Court in that matter.

26. He then posed a question: – when the Act and the judgmentdoes not make the appointment of a Judge as the Chairperson mandatory,then is there any other material, which can be said to make the appointmentof the Chairperson as a Judge mandatory? In this behalf he submittedFthat the opposite side could only fall back on Madras Bar Associationv. Union of India & Anr.[5] (MJ-II). The said judgment dealt with thecreation of the National Tax Tribunal under the National Tax TribunalAct, 2005. The constitution of the Tribunal was held to be one for transferof the appellate jurisdiction under Tax Laws vested in the High Courts.GThe majority held that the Act could not pass the test of constitutionality,on account of inter alia, the provisions relating to the appointment ofthe Chairpersons and Members of the Tribunals. In the said case,reference was made to the earlier Constitution Bench judgment in the 4 supraH5 (2014) 10 SCC 1

Union of India v. Madras Bar Association[6] (MJ-I), crystallizing thelegal position while transferring adjudicatory functions from Courts toTribunals. It was observed that such Tribunals should possess the sameindependence, security and capacity as the courts which the Tribunalsare mandated to substitute and thus, Members of the Tribunals dischargingjudicial functions could only be drawn from sources possessed of expertisein law and competent to discharge judicial functions. Technical memberscould also be appointed where such technical expertise is essential. Butwhere the adjudicatory process transferred to the Tribunal did not requireany specialized skills, knowledge or expertise, the provision forappointment of technical Member would constitute a clear case ofdelusion and encroachment upon the independence of the judiciary, andthe “rule of law.” On the stature of Members, it was observed that thesame would depend on the jurisdiction transferred, i.e., if the jurisdictionof the High Court was transferred to the Tribunals, the stature of themembers of the newly constituted tribunal, should be possessed ofqualifications akin to the Judges of the High Court. The same would bethe position qua District Judges appointment. Such a process of judicialreview, in Madras Bar Association v. Union of India[7] (MJ-II), washeld to be a part of the basic structure of the Constitution.

27. In the context of the functions to be carried out under the saidAct, it was observed that the present case was not one where the powersof judicial review which were vested in a judicial forum was sought tobe transferred. The importance of judicial review and its sanctity wasmaintained by the composition of the Appellate Tribunal, which wouldhear appeals from the orders of the Commission. The functions of theCommission were canvassed to be one of technical nature largely, andthus, would not require a Judge to head the Commission. In the alternative,it was stated that, at best, the requirement of a mandatory legal Membermay be read into the provisions, though the explicit terms of the statutedo not say so.

28. Learned counsel took us through the provisions of Section 85of the said Act to contend that the reference to the Chairperson undersub-sections (2), (3), (5) & (6) of Section 85 would be made otiose, as inthat eventuality, the Selection Committee would never be called upon toappoint a Chairperson. A Judge could be appointed as the Chairperson 6 (2010) 11 SCC 1

7 supra

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Aonly through the alternative route of Section 84(2) read with the provisothereto.

29. Learned counsel also referred to Tamil Nadu Generationand Distribution Corporation Limited[8], more specifically to para 25,which recorded the submission of the counsel for the appellant thereinBto the effect that the State Commission cannot be an adjudicatory bodyas it does not have the trappings of the Court, which would normally bemanned exclusively by the Judges. The plea was that under Section 84of the said Act, there is no requirement for the Chairperson or the Memberof a State Commission to be a Judge of a High Court. No suchappointment had actually been made in that case nor did the CommissionChave a judicial member and, thus, the same was contrary to theConstitution Bench judgment of this Court in Madras Bar Association[9](MJ-I). He, thus, submitted that it is in the context of this argument thatwhat was observed by the Bench in that judgment would have to beconstrued and nothing more than that. It is this argument, which hasDbeen dealt with when the observations relied upon in the impugned orderwere referred to. This is stated to be quite apparent even from para 55,which records the submissions of the then counsel for the appellant inTamil Nadu Generation and Distribution Corporation Limited[10] andwhat was accepted by the Court in para 59 of the judgment, i.e.,adjudicatory functions generally ought not to be conducted by the StateECommission in the absence of a Judicial Member, which are not fairlyrelative to tariff fixation or the advisory and recommendatory functionsof the State Commission.

30. Learned Senior Advocate next turned to Section 86(1)(f) ofthe said Act and referred to the judgment in Gujarat Urja Vikas NigamFLtd. v. Essar Power Ltd.[11] (GJ-I) to submit that the expression ‘and’,used in Sub-Section 86(1)(f) has already been read as ‘or’. For clarity,the sub-section is reproduced hereunder:

“86. Functions of State Commission.- (1) The StateCommission shall discharge the following functions, namely:—G

(f) adjudicate upon the disputes between the licensees andgenerating companies andto refer any dispute for arbitration;”

(Emphasis supplied)

31. Therefore, the functions of the State Commission in respectof the aforesaid clause refers to adjudication upon the disputes betweenthe licensees and generating companies as also to the function of referenceof any dispute for arbitration. Our attention was invited to para 40 inTamil Nadu Generation and Distribution Corporation Limited[12] tocontend that there is no requirement that an arbitrator should be a judicialperson. A submission was also made that the data collected in respectof the functioning of the Gujarat State Commission showed that theadjudicatory functions were not more than 10 per cent. A large numberof functions were of tariff fixation, which was over 30 per cent, whilethe regulatory functions were 59 per cent and grant of licenses were afraction of a percentage.

32. The emphasis on the reading of the judgment in Union ofIndia v. Madras Bar Association[13] (MJ-I), it was contended, is on theshifting of the adjudicatory functions from the High Courts to the Tribunalsbut when, as in the present case, the State Commission has not replacedthe functioning of the High Court, the same would have no application.For example, the Electricity (Supply) Act, 1948, dealt with the issue ofreference to arbitration in Section 76(2) of that Act. There was noquestion of any judicial mind. The Electricity Regulatory CommissionAct, 1998 provided for an appeal to the High Court in certain cases fromthe order of the State Commission. Therefore, the appellate authorityconstituted as a replacement for the appeal before the High Court ismanned by a sitting or retired Supreme Court Judge or the Chief Justiceof the High Court. Learned counsel also referred to the epilogue inGujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd.[14](GJ-II), whichdealt with the vital issue of composition and functioning of Tribunals andstatutory framework thereof. In the context of the observations inMadras Bar Association v. Union of India & Anr.[15] (MJ-II), it wasobserved in para 33 that the law laid down by this Court may call forreview of composition of Tribunals under the Electricity Act or other 12 supra 13 supra 14 (2016) 9 SCC 103

15 supra

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Acorresponding statutes. This was so as an appeal to this Court onquestions of law or substantial questions of law show that Tribunals dealwith such questions or substantial questions, and that the direct appealsto this Court has the result of denial of access to the High Court. SuchTribunals, thus, become a substitute for the High Courts, without themanner of appointment to such Tribunals being the same as the mannerBof appointment of High Court Judges.

33. Lastly, learned counsel referred to Uttar Pradesh PowerCorporation Limited v. National Thermal Power CorporationLimited & Ors.[16] where observations were made qua the function ofthe Central Commission constituted under Section 3 of the ElectricityCRegulatory Commissions Act, 1998 as an expert body, which had beenentrusted with the task of determination of tariff, which involves highlytechnical procedure requiring not only working knowledge of law butalso of engineering, finance, commerce, economics and management.Thus, it was held that the issues with regard to determination of tariffDshould be left to the expert body and ordinarily the High Court and eventhis Court should not interfere with the determination of tariff.34. Mr. Jayant Bhushan, learned Senior Advocate sought tocrystallize his interpretation of the Act and the challenge to the impugnedjudgment of the Gujarat High Court on a four point basis:

i. The constitution of the Selection Committee for Members underESection 85 is not applicable to a Judge for which there is a separatechannel under Section 84(2). Thus, to the extent that Section 85referred to a Chairperson, that portion would be made otiose, if aJudge alone is to be appointed as the Chairperson.

ii. The appointment of a Chairperson under Section 84(2) of theFsaid Act is an enabling provision and not a mandatory provision.

iii. The observations in Tamil Nadu Generation and DistributionCorporation Limited[17], if read to give a binding direction for theChairman being a Judge, would then be obiter as that was not theissue before the Court.G

iv. The necessary and mandatory requirement of having a Judgeto head a Tribunal is only where the shifting of the adjudicatoryfunction from the High Court to the Tribunals are envisaged.

35. Now turning to the other point of view and the various entities,which canvassed for the Chairperson to be mandatorily a Judge of theHigh Court :

Stand of Interveners (National Solar Energy Federation of India)in Civil Appeal No.13451/2015:

36. Mr. Sajan Poovayya, Senior Advocate appearing for theaforesaid entity sought to support the Gujarat line of reasoning andsubmitted that there should be, at least, one judicial Member in theCommission, who should be the Chairman. He seeks to support thisview by reason of the nature of powers vested in the Chairman of theCommission and has referred to Section 92, which reads as under:

“92. Proceedings of Appropriate Commission.- (1) TheAppropriate Commission shall meet at the head office or any otherplace at such time as the Chairperson may direct, and shall observesuch rules of procedure in regard to the transaction of business atits meetings (including the quorum at its meetings) as it mayspecify.

(2) The Chairperson, or if he is unable to attend a meeting of theAppropriate Commission, any other Member nominated by theChairperson in this behalf and, in the absence of such nominationor where there is no Chairperson, any Member chosen by theMembers present from amongst themselves, shall preside at themeeting.

(3) All questions which come up before any meeting of theAppropriate Commission shall be decided by a majority of votesof the Members present and voting, and in the event of an equalityof votes, the Chairperson or in his absence, the person presidingshall have a second or casting vote.

(4) Save as otherwise provided in sub-section (3), every Membershall have one vote.

(5) All orders and decisions of the Appropriate Commission shallbe authenticated by its Secretary or any other officer of theCommission duly authorised by the Chairperson in this behalf.”

37. Thus, as per sub-section (2) of Section 92, the Chairpersonhas a right to nominate a member who would chair the meeting in his A

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Aabsence and as per sub-section (3), the Chairperson has a casting vote.This, he contended was vital to the adjudicatory process, which is bymajority and, thus, the necessity of having a judicial Member as aChairperson apart from the aspect of power wielded by the Commissionfrom Sections 94 to 96 of the said Act.

BStand of Madurai Power Corporation Private Limited:

38. Mr. Mohan Parasaran, learned Senior Advocate appearingfor the aforesaid intervener referred to Section 84(1) of the said Act tocontend that where reference is made to a person of law, that cannot bea reference to a judicial Member. It is only in Section 84(2) that there isCa specific reference to a person, who is or has been a Judge of the HighCourt to be a Chairperson. Thus, the presence of a man of law wouldbe no substitute to the requirement of a Judge who would bring a judicialthought process to the decision making. In this behalf he referred to theobservations in Madras Bar Association v. Union of India & Anr.[18](MJ-II). We may, however, add at this stage itself that these are theDsame observations, which relate to the ground situation where theadjudicatory functions of the Court are shifted to the Tribunal.

39. He also contended that para 59 of the Tamil Nadu Generationand Distribution Corporation Limited[19]only records the submission ofthe then counsel for the appellant while the ratio is contained in para 60.EThe ratio speaks of the enabling character of Section 84(2) of the saidAct to appoint a Judge and in that eventuality the appointment is to bemade after the consultation with the Chief Justice of the High Court. Inthis context, he submitted that the ratio of a judgment is something thathas to be culled out on certain established principles and not from everyFline of every observation. In this context he referred to the judgment inNatural Resources Allocation In re Special Reference No.1 of2012[20]. Article 141 of the Constitution laid down that “law declared”by the Supreme Court is binding upon all Courts within the territory ofIndia and, thus, it was held that “ “law declared” has to be construed asa principle of law that emanates from a judgment or an interpretation ofGa law or judgment by the Supreme Court, upon which, the case isdecided……the “law declared” is the principle culled out on the readingof a judgment as a whole in light of the questions raised, upon which the18 supra19 supraH20 (2012) 10 SCC 1

case is decided.” What is binding upon courts, “is the ratiodecidendiof the judgment. It is the essence of a decision and the principle uponwhich the case is decided which has to be ascertained in relation to thesubject-matter of the decision.”

Stand of the Madras Bar Association (Original Petitioner) in CivilAppeal No.13451/2015

40. The challenge to the impugned judgment of the Madras HighCourt in that matter was laid by Mr. Arvind Datar, learned SeniorAdvocate. He sought to contend that the year 1991 saw a paradigmshift in the economic functioning in the country where State functionswere opened up to private players. This was not supposed to beunregulated and, thus, the Parliament provided a regulatory body. Bythe time the said Act was enacted in 2003, the Parliament had becomewiser and the introduction of the requirement of a Judge to head theregulatory commission was, thus, introduced in this Act.

41. Turning to the specific provisions of the Act, he referred toSection 82(4) of the said Act, which provides that a State Commissionwould consist of not more than three members including the Chairperson.Section 2(43), defines a Member to include a Chairperson and reads asunder:

“2. Definitions.- In this Act, unless the context otherwiserequires,—

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(43) “Member” means the Member of the Appropriate Commissionor Authority or Joint Commission, or the Appellate Tribunal, asthe case may be, and includes the Chairperson of such Commissionor Authority or Appellate Tribunal;”

42. In the sittings of the Commissions, disputes emanating fromSection 86(1)(f) of the said Act being adjudicated upon are categorizedas DRP (Dispute Resolution Petition) cases. Tariff fixation is, of course,not adjudicatory. He submitted that Section 4 of The Telecom RegulatoryAuthority of India Act, 1997 was similar to Section 84(2) of the said Act,but there was no provision for a Judge to be appointed. Similar wasstated to be the position of Section 4 of the Securities and ExchangeBoard of India Act, 1992. On the other hand, the specific provisionmade in Section 84(2) of the said Act has to be read in the context of the A

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43. Learned Senior Counsel referred to the Electricity RegulatoryCommission Act, 1998 to submit that Section 17 of that Act was theearlier avatar of Section 84 of the said Act, while Section 18 of that ActBwas the earlier avatar of Section 85 of the said Act. A reference wasalso made to The Petroleum and Natural Gas Regulatory Board Act,2006, more specifically to Section 3(3) of that Act. The tariff regulatoryfunctions are determined as per Section 62 and 64 of the said Act. Onthe prevalent provisions under different Acts, it was submitted that theconstitution of the Competition Commission of India came to be examinedCin Brahm Dutt v. Union of India[21]. The argument was similar, i.e., thefunctions of the Commission being more of a judicial body havingadjudicatory powers, the right to appoint a judicial member of thecommission should rest with the Chief Justice of India or his nomineeand further the Chairman of the commission necessarily has to be aDretired Chief Justice or Judge of the Supreme Court or the High Court.The contention was that the Chairman of the Commission had to be aperson connected with the judiciary picked for the job by the Head ofthe Judiciary and should not be a bureaucrat or other person appointedby the Executive without reference to the Head of the Judiciary. In thiscontext, the Supreme Court observed in para 6 that if an expert body isEto be created, as submitted on behalf of the Union of India consistentwith what is said to be the international practice, it may be appropriate toconsider the creation of two separate bodies – one with the expertise,i.e., advisory and regulatory and the other adjudicatory. This is followedup by an appellate body as contemplated, which could go a long way inFmeeting the challenge sought to be raised in the writ petition. Insofar asthe working of the Commission was concerned, it was observed that ithad a number of adjudicatory functions as well.

44. In Gujarat Urja Vikas Nigam Ltd.[22] (GJ-I), the impliedconflict between Section 86(1)(f) of the said Act and Section 11 of theGArbitration & Conciliation Act, 1996, was reconciled and applying theharmonious construction principles (Mimansa principles) it was observedthat where there is a dispute between a licensee and the generatingcompany, only the State Commission or the Central Commission or

arbitrator nominated by it could resolve such disputes, whereas all otherdisputes (unless there is some other provision in the Electricity Act, 2003)would be decided in accordance with Section 11 of the Arbitration &Conciliation Act, 1996. This was stated to be also in consonance withSection 158 of the said Act in Part XVI dealing with Dispute Resolutionwhere arbitration was provided for in terms of the Arbitration &Conciliation Act,1996.

45. Learned Senior Counsel sought to point out that no Judge hadever been appointed as the Chairperson. The mandate of Section 85(2)of the said Act, in fact, required that six months prior to the superannuationor end of the tenure of the Chairperson or Member, a reference shouldbe made to the Selection Committee to fill up the vacancy. The expression“may”, it was submitted should be read as “shall” in Section 84 of thesaid Act. The alternative submission advanced was that when a vacancyof the Chairperson is to arise, it should be intimated to the Chief Justiceof the High Court to confirm whether any Judge was available or not.In any case, at least, one legal mind should be there, who has no baggageor past connection with the special area in question directly. This wasmore so as apart from Section 86(1)(f), it was submitted that Section33(4) deals with compliance of directions, if any dispute arises withreference to the quality of electricity or safe, secure and integratedoperation of the State grid and Section 9(2) proviso, which is in referenceto construction of a captive generating plant and the maintenance andoperation of the same being entitled to open access for the purpose ofcarrying the electricity from the captive generating plant to the destinationof its use, with the proviso making such open access subject to availabilityof adequate transmission facility to be determined by the CentralTransmission Utility or the State Transmission Utility. As per the secondproviso, any dispute regarding the availability of transmission facility hasto be referred to the Appropriate Commission for adjudication. It issubmitted that these are two examples clearly requiring an adjudicatorybend of mind.

T.C.(C) No.139/2015

46. This petition has been filed by a Senior Advocate of the Madrashigh Court against the exercise of suo moto power by the Commissionin respect of a tariff hike and in that process sought to challenge the A

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T.C.(C) No.138/2015

47. This petition filed before the Madras High Court is, once again,by an Advocate, purportedly in public interest. Apart from theBfundamental issue raised of a Judge to be appointed as the Chairman ofthe State Commission, like in the previous Transfer Petition, certainnotifications have also been assailed. The Tamil Nadu Government hadpublished a Notification dated 26.9.2013, constituting a three MemberSelection Committee for selection of the Members of the StateCCommission in terms of Section 85 of the said Act. This selection processwas required to be completed in three months and had to recommend, atleast, two names for the post of Members. The Committee recommendedthe name of Mr. G. Rajagopal (respondent No.7) on 27.12.2013. Thisappointment is specifically assailed on the ground that he was still workingas Director (Finance), TANGEDCO when his name was recommendedDby the Selection Committee, and that Mr. Rajagopal opted for voluntaryretirement after his name had been recommended by the SelectionCommittee. The Notification of his appointment was issued on 31.12.2013whereafter he assumed office on 9.1.2014.

48. The impugned decision of the Madras High Court opining thatEthe Chairperson need not be a High Court Judge was rendered on7.2.2014.

49. Another Notification dated 27.2.2014 was published constitutinga Selection Committee for selecting a person for the post of theChairperson. Mr. S. Akshayakumar (respondent No.6) retired from theFpost of the Managing Director of TANTRANSCO on 31.5.2014 andwas appointed as the Chairperson of the State Commission videNotification dated 6.6.2014, assuming charge on 9.6.2014.

50. On 12.12.2014, the State Commission consisting of these twopersons as Member and Chairman and Mr. S. Nagalsamy, passed aGtariff order permitting a tariff hike by TANGEDCO by a majority of 2:1with respondent Nos.6 & 7 concurring on the issue of tariff hike whilethe third Member (Mr. Nagalsamy) was dissenting. The dissent was onthe legality of the suo moto tariff order.

51. We have recited these facts only to bring on focus that thegrievance is only with the tariff order, but under the garb of the same,the appointment of respondent Nos.6 & 7 is now sought to be assailedon the ground that the said two persons could not be really categorizedas not having any financial or other interest, which is likely to prejudicetheir functioning as Chairperson and Member in terms of Section 85(5)of the said Act. The two companies TANGEDCO and TANTRANSCOwere established for power generation and transmission of powerrespectively by restructuring the Tamil Nadu Electricity Board incompliance of Section 131 of the said Act and are State ownedcompanies.

52. The original petitioner seeks to impute bias against these twopersons because of the post they have held. Learned counsel appearingon behalf of the petitioner referred to the judgment of this Court in RajeshAwasthi v. Nand Lal Jaiswal[23] wherein in the process of assailing anappointment to the Commission, Section 85(5) was analysed. It wasobserved that the power under the said sub-section (5) was to be exercisedby the Selection Committee and not by the Government. Thus, whetherthe persons named by the panel have any financial or other interest,which is likely to affect their functioning as Chairperson was a matterwhich depended upon the satisfaction of the Selection Committee beforerecommending it to the State Government. In the facts of the case, itwas found that the concerned person was working as Joint President ofthe JP Power Ventures Limited at the time of selection, hence he hadfinancial and other interest in the company, which would prejudiciallyaffect his functions as the Chairperson of the Commission. The judgmentof this Court in Mor Modern Cooperative Transport Society Ltd. v.Financial Commissioner & Secretary to Govt. of Haryana and Anr.[24]was also referred to. The provision in question was Section 68(2) of theMotor Vehicles Act, 1988. Section 68 of the Motor Vehicles Act, 1988empowered the State Government to constitute a State TransportAuthority and Regional Transport Authorities to exercise powers andfunctions specified in Chapter V. Section 68(2) put a restriction that noperson who has a financial interest whether as proprietor, employee orotherwise in any transport undertaking was to be appointed and in casesuch financial interest was acquired post appointment, the person was 23 (2013) 1 SCC 501

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Arequired to give notice in writing to the State Government of acquisitionof such interest and would vacate office. The Transport Commissionerand Traffic Manager working in the Office of the General Manager ofthe Haryana Roadways, a State Undertaking, were held to fall withinthe mischief of sub-section (2) of Section 68 of that Act. The nature of“financial interest” as contemplated by the said sub-section was examinedBin the narrower sense and it was held to imply direct personal benefit ofan economic nature while in the wider sense it would include direct orindirect interest that a person has in relation to the finances of anundertaking. Such an interest was held to include the interest of anofficial who manages the finances of the undertaking or on whom restsCthe burden of financial accountability. The intention of the legislaturewas deciphered from reading the statute as a whole.53. We may, however, note at this stage itself that the factualmatrix in the said case dealt with the situation where a person washolding both the offices.

DT.C.(C) No.140/2015 and T.C.(C) No.137/2015 & IA Nos.3 & 4/201654. There was really no fresh material addressed before us so faras the aforesaid petitions are concerned.

55. Insofar as IA Nos.3 & 4/2016, filed by CLP Wind FarmsEPrivate Limited, seeking intervention in T.C.(C) No.137/2015, areconcerned, the prayer for intervention is made on the ground that theCourt issues appropriate directions to the Tamil Nadu ElectricityRegulatory Commission for time bound hearing and expeditiousadjudication of the applicant’s petitions, being DRP Nos.62/2014 & 63/2014. The Court finds no merit in the applications, as the prayers madeFin the applications are outside the lis being adjudicated by the Court.The same are accordingly disposed of.

T.P.(C) No.974/2016

56. This Transfer Petition arises from the Delhi High Court. Ms.Sujatha Balachander on behalf of the original petitioner before the HighGCourt sought to plead that the word “may” should be read as “shall”keeping in mind the intent of the legislature (Bachahan Devi & Ar. V.Nagar Nigam, Gorakhpur & Anr[25]). Normally, it was observed, “may”is an enabling or discretional while “shall” is obligatory the connotation isnot inelastic or inviolate. Thus, where to interpret the word “may” as directory would render the very object of the Act as nugatory, the word“may” must mean “shall.” The Act was actually enacted in the interestof the public while seeking to distance the Government from determinationof tariff. Such distance from the Government, it was contended, couldbe brought about by appointment of a High Court Judge with a trainedjudicial mind as the Chairman of the Commission.

57. Learned counsel referred to A.P. Power CoordinationCommittee & Ors. v. Lanco Kondapalli Power Ltd. & Ors.[26], whereit was held that a claim coming before the Commission could not beentertained or allowed if it is barred by limitation prescribed for an ordinarysuit before a Civil Court. This aspect was sought to be emphasized inthe context of the discussion that the Commission was performing judicialfunctions. The view taken by this Court in Union of India v. NamitSharma[27] was sought to be distinguished since no adjudicatory functionswere involved in the performance of the functions of an InformationCommissioner.

58. A reference was, once again, made to the powers of theCommission under Section 94 to 96 of the said Act as also to Section 97,which provides for delegation of the power to any Member, Secretary,Officer of the Commission except the powers to adjudicate disputesunder Sections 79 and 86, and the powers to make Regulations underSection 178 or 181 as may be deemed necessary.

59. Our attention was also drawn to the order of the AppellateAuthority dated 27.2.2013 in Appeal No.184/2011 where someobservations have been made on the functioning of the State Commission.Apparently the State Commission had refused to follow the judgment ofthe Tribunal on a specious plea and this attitude of the State Commissionwas called ‘audacious’ and ‘most unfortunate’, ‘reflecting a lack ofjudicial approach, judicial knowledge and judicial ethics’. It was, thus,pointed out that the absence of a Judge as a Chairperson is resulting insuch orders of the Commission, in ignorance of the well-establishedprinciples of law, including that of precedent.

Rejoinder Response:

60. We are dealing with the rejoinders of the counsel only to theextent that they seek to add something arising from the submissions of 26 (2016) 3 SCC 46827 (2013) 10 SCC 359

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Athe counsel propagating that a Judge should be the Chairman of theCommission. Learned Attorney General referred to the judgment inUnion of India v. Namit Sharma[28] but then we may note that theprinciple advanced is based on a non-adjudicatory function. LearnedAG also referred to Part XI dealing with the Appellate Tribunal whereunder Section 111(6), the Appellate tribunal can call for records ofBproceedings and make orders and can act even on its own motion. Theprovision reads as under:

“111. Appeal to Appellate Tribunal.-

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(6) The Appellate Tribunal may, for the purpose of examining thelegality, propriety or correctness of any order made by theadjudicating officer or the Appropriate Commission under this Act,as the case may be, in relation to any proceeding, on its ownmotion or otherwise, call for the records of such proceedings andmake such order in the case as it thinks fit.”D

61. Not only that, under Section 121, orders, instructions or directionscan be made by the Tribunal to the Appropriate Commission for thepurpose of performance of its statutory functions under the Act. Theprovision reads as under:

E“121. Power of Appellate Tribunal.- The Appellate Tribunalmay, after hearing the Appropriate Commission or other interestedparty, if any, from time to time, issue such orders, instructions ordirections as it may deem fit, to any Appropriate Commission forthe performance of its statutory functions under this Act.”

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F62. The contention thus advanced, is that the scheme of the Actlooks to the appellate authority as a body which is supervising theCommission, and is chaired by a person who is, or has been the ChiefJustice of the High Court or a Judge of the Supreme Court. Thus, thereis really no need to have a High Court Judge as the Chairperson of theState Commission albeit an enabling provision having been made.G

63. Mr. Naphade, learned Senior Advocate appearing for the Stateof Tamil Nadu submitted that orders dated 11.12.2014 and 12.12.2014had been unsuccessfully carried in appeal and even the Special LeavePetitions were dismissed. Thus, the merits of the orders passed cannot H28 supra

be questioned. He further submitted that suo moto proceedings wereinitiated on 23.9.2013 while the appointment was made on 31.12.2013.Thus, respondents Nos. 6 & 7 were both appointed after the suo motoproceedings had been initiated. The Selection Committee had not beenimpleaded as a party even though the selection process was beingquestioned. This Selection Committee was presided over by a retiredJudge of the High Court. It was also submitted that a suo motorevisionary power was actually conferred on the appellate tribunal underSection 111(6) of the said Act to cure any defects in the orders passedby the Commission.

64. Our attention was also invited to the order of the appellateauthority in OP No.1/2011 dated 11.11.2011. This arose out of a letterstated to be sent by the Ministry of Power dated 21.1.2011 complainingthat most of the State Distribution Utilities have failed to file annualtariff revision petitions in time and, thus, a number of State’s tariff revisionhad not taken place for a number of years. The Tribunal was requestedto take appropriate action by issuing necessary directions to all the StateCommissions to revise the tariff periodically. The State Commissionframed two questions out of which the first question was as under:

“(i) Whether the State Regulatory Commissions have thejurisdiction to suo moto initiate proceedings for determination oftariff under section 62, 64 and 86 of the Electricity Act, 2003 in the absence of the Tariff application to be filed by the Utilitiesunder Section 64 of the Act?”

65. The answer to this question was given by the Commission byopining that the State Commission must initiate suo moto proceedingsfor tariff determination in accordance with Section 64 of the Act readwith clause 8.1 (7) of the tariff policy in the event of the delay in filing ofthe ARR, truing-up and annual performance review one month beyondthe scheduled date of submission of the petition.

66. Learned Senior Advocate, turning to the provisions of Section84(2) of the said Act sought to emphasise that the same was a“notwithstanding” clause as is apparent from its bare reading and it clearlystates “notwithstanding anything contained in sub-section (1)”. Thus, itdoes not take away what is stated in sub-section (1). Learned counselrelied upon the Constitution Bench judgment of this Court in TheDominion of India & Anr. v. Shrinbai A. Irani & Anr.[29] for the A

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Aproposition as to how a non-obstante clause should be dealt with. It wasobserved that “While recognizing the force of this argument it is howevernecessary to observe that although ordinarily there should be a closeapproximation between the non obstante clause and the operative partof the section, the non obstante clause need not necessarily and alwaysbe co-extensive with the operative part, so as to have the effect ofBcutting down the clear terms of an enactment. If the words of theenactment are clear and are capable of only one interpretation on a plainand grammatical construction of the words thereof, a non obstante clausecannot cut down that construction and restrict the scope of its operation.In such cases the non obstante clause has to be read as clarifying theCwhole position and must be understood to have been incorporated in theenactment by the Legislature by way of abundant caution and not byway of limiting the ambit and scope of the operative part of theenactment.”

67. For the same purpose, the reference was also made to AjitDSingh (II) v. State of Punjab[30].It was, once again, emphasized that theappellate tribunal takes care of various concerns, more so when mattershave to be heard by a Bench with at least one judicial member. It wasalso emphasized that under Section 82(2) of the Act a State Commissionhas to be a body corporate having perpetual succession and commonseal and the provision reads as under:E

“82. Constitution of State Commission.-

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(2) The State Commission shall be a body corporate by the nameaforesaid, having perpetual succession and a common seal, withFpower to acquire, hold and dispose of property, both movable andimmovable, and to contract and shall, by the said name, sue or besued.”

68. As per Section 84(4) of the said Act, the Chairperson is to bethe Chief Executive of the State Commission. It was, thus, pleaded thatGit may not even be advisable for a Judge to hold this nature of office.

69. It was also emphasized that the reliance placed by the oppositeside on Mor Modern Cooperative Transport Society Ltd.[31] is misplaced

as the observations made in para 14 of the judgment have to beunderstood in the context of a dual charge being held by the said person,an aspect we have already noted while referring to that argument of theopposite side.

70. Mr. Jayant Bhushan, learned Senior Advocate, in addition,referred to the Petroleum and Natural Gas Regulatory Board Act, 2006to contend that the Board constituted under the Act has to have aChairperson and a Member (Legal) as per Section 3 of the said Actthough the functions of the Board provide for adjudicatory functionsunder Chapter V, more specifically, in Section 24. Thus, it is not as if anon-Judge cannot carry out any adjudicatory functions.

71. He also sought to emphasise the merit of the Chairperson ofthe Gujarat Commission, who has a Master of Business Management inFinance, Bachelor of Engineering (Electrical), has gone through asoftware course, and a regulatory course on economic regulations fromeminent universities and has total experience of 37 years in the powersector. This includes more than 19 years’ experience in electricityregulation and is fully conversant with electricity laws and related issues.

72. Learned Senior Advocate sought to assail the impugned orderof the Gujarat High Court based on the rule of purposive constructionand contended that this principle cannot be utilized to hold something asdifferent from what the legislature has expressed in clear words.

Our View:

Section 84(2) of the said Act:

73. The controversy in question would have to be dealt with attwo plains. The first, is as to how the statute itself has to be read insofaras the appointment of the Chairperson of the tribunal is concerned. Thesecond is, having read the statute in a particular manner, what is theeffect of the judicial pronouncements and the relevant legal literature interms of the remaining composition of the tribunal apart from theChairperson. If we turn to the first question, on a plain reading of Section84(1) of the said Act all that is mandated is that both the Chairpersonand the Members of the State Commission “shall” be persons of ability,integrity and standing who have adequate knowledge of and have showncapacity in dealing with problems relating to engineering, finance,commerce, economics, law or management. A plain grammatical reading A

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Aof this Section shows that no distinction has been made qua thequalifications of a Chairperson and Member. All that is required is themandates contained in the sub-section, which begin with the word “shall”.Thus, any person of the fields mentioned therein, having the ability, integrityand standing can be appointed as a Member or Chairperson.

B74. Section 85 of the said Act provides for constitution of a SelectionCommittee to select the Members of the State Commission, which inturn has to consist of the persons as set out therein and mandatorily hasto have a person, who has been a Judge of the High Court as theChairperson of the Selection Committee. We may also note that thisprovision refers to the appointment of ‘Members’ of the State CommissionCbut then that would also include the Chairperson of the State Commission,in view of sub-section 43 of Section 2 of the said Act, which reads asunder:

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E75. Thus, the reading of sub-section (1) of Section 84 read withSection 85 of the said Act would leave no manner of doubt as to thefields from which a Chairperson or a Member of the State Commissioncan be chosen from. However, the controversy has emanated from theinclusion of sub-section (2) of Section 84 of the said Act. This is so, assub-section (2) begins with a “notwithstanding” clause providing thatFthe State Government “may” appoint any person as Chairperson fromamongst the persons, who is, or has been, a Judge of the High Court.This is to be read with the proviso that such an appointment would haveto be made in consultation with the Chief Justice of that High Court.

76. The proviso only respects and maintains the accepted positionGthat in appointment of persons, who have been holding such senior judicialoffice, consultation with the judicial head, being the Chief Justice, shouldbe mandatory. The question which thus arises, is whether sub-section(2) of Section 84 is facilitative in character for the purposes of appointment of a retired or current Judge of the High Court as a Chairperson, or isthe said provision mandatory in character. Both the golden rule and theliteral rule of statutory construction are well established that a statutemust be read as it is framed by the legislature. It is not the function ofthe Court to supplant or read into the statute something which is notprovided. This is not to say that there have not been judicial views takenqua the interchangeability of the expression “may’ and “shall” in certainprovisions. Thus, the use of the word “shall” raises a presumption thata particular provision is imperative. However, it has been construed asmerely directory in certain cases if the context or intention of thelegislature demands otherwise. The Courts may ascertain the realintention of the legislature by carefully attending to the whole scope ofthe statute (Sainik Motors v. State of Rajasthan[32 ]and State of U.P. v.Babu Ram[33]). We are, however, faced with a converse situation as towhether “may” can be read as “shall”. In this behalf we may takerecourse to the judicial opinion that where in the same section the word‘may’ has been used at one place and ‘shall’ at another place, it wouldstrengthen the inference that the words have been used in the primarysense (Chairman Canara Bank, Bangalore v. M.S. Jasra[34]).

77. A reference to Maxwell on The Interpretation of Statutes(Twelfth Edition), more specifically the chapter on “ExceptionalConstruction” would show that the modification of the language of astatute is the tool used only if, in its ordinary meaning and grammaticalconstruction, there is a manifest contradiction of the apparent purposeof the enactment, or some inconvenience or absurdity which could hardlyhave been intended. It has been observed that in ordinary usage, “may”is permissive and “must” is imperative and that the word “may” used ina statute would not generally be held to be mandatory. However, insome cases where “may” is used in the context of a compulsory force,the meaning has been so modified by judicial exposition. The heading ofthe Chapter itself shows what is intended: “Modification of the languageto meet the intention”.

78. It is well-nigh impossible to lay down a general rule fordetermining whether a provision is imperative or directory. We extractthe relevant portion as under:

32 (1962) 1 SCR 51733 (1961) 2 SCR 67934 AIR 1992 SC 1341

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A“No universal rule,” said Lord Campbell L.C., “can be laid downfor the construction of statues, as to whether mandatoryenactments shall be considered directory only or obligatory withan implied nullification for disobedience. It is the duty of Courtsof Justice to try to get at the real intention of the Legislature bycarefully attending to the whole scope of the statute to beBconstrued.”[35] And Lord Penzance said: “I believe, as far as anyrule is concerned, you cannot safely go further than that, in eachcase you must look to the subject–matter; consider the importanceof the provision that has been disregarded, and the relation of thatprovision to the general object intended to be secured by the Act;Cand upon a review of the case in that aspect decide whether thematter is what is called imperative or only directory.”[36]

79. If we turn back to the provisions of Section 84 of the said Act,we find that the expression “shall” is used in sub-section (1) both in thecontext of the requirement of ability, integrity and standing as also in theDcontext of adequate knowledge and capacity in dealing with problems relating to engineering, finance, commerce, economics, law ormanagement. On the other hand, in sub-section (2) while dealing withthe possibility of appointment of a Chairperson from the pool of sitting orretired Judges, the expression used is “may” indicating it to be adiscretionary power.E

80. We are, thus, inclined to accept the line of reasoning advancedby the learned counsel led by the learned Attorney General that the plainreading of the section leaves no manner of doubt that the legislature onlyenvisaged a possibility of appointment of a Chairperson from the pool ofsitting or retired Judges of the High Court, in which case the method ofFappointment would be different from the one as envisaged under Section85 of the said Act.

81. We may also look to the nature and functions performed bythe State Commission. Functions of the State Commission are prescribedunder Section 86 of the said Act. The enumerated functions areGdetermination of tariff, regulation of electricity purchase and procurementprocess of distribution licencees, facilitating intra-state transmission,issuing licences to persons, promoting cogeneration and generation ofelectricity from renewable sources, levy fee, specify or enforce standards, 35 Liverpool Borough bank v. Turner (1860) 2 De G.F. & J. 502 at pp.507, 508.H36 Howard v. Bodington (1877) 2 P.D. 203, at p. 211.

fix trading margins. All these functions are regulatory in character ratherthan adjudicatory. The real adjudicatory function is only provided insub-clause (f) whereupon the Commission has the option of adjudicatingthe disputes between the licencees and generating companies, or to refersuch disputes to arbitration. There is also an advisory role to be performedby the State Commission as specified in sub-section (2). The issue,however, is not whether a Judge would be comfortable doing this functionbut whether these are types of functions which necessarily mandate aJudge to be a Chairperson. The answer to this would also be in thenegative, supporting the view we have adopted on the plain reading ofthe section.

82. We are conscious of the observations made in Tamil NaduGeneration and Distribution Corporation Limited[37] in the context ofSection 86(1)(f) of the said Act opining that the adjudicatory functionsgenerally ought not to be conducted by the State Commission in theabsence of a judicial Member, but then sub-section (1) of Section 84 ofthe said Act provides for a person with knowledge in the field of lawalbeit not mandatorily, on a plain reading of the section. The effect ofthis will be dealt with in the latter part of our judgment.

83. We may also look at this issue from two other perspectives.Firstly, the composition of the Appellate Tribunal under Section 112 ofthe said Act which mandates that there has to be a Bench of two ormore persons of which at least one should be a judicial member. TheChairperson as per Section 113, mandatorily has to be a present or retiredJudge of the Supreme Court or a Chief Justice of the High Court. Thus,at the appellate stage there is necessary judicial scrutiny, which takesplace. Secondly, looked at from the perspective of the position prevailingprior to the said Act coming into force, the nature of functions sought tobe performed by the State Commission, were to be so performed, not byperson, who necessarily held a judicial office. The observations, thus,made in the context of the “tribunalisation” of judicial process and therequirement of it to be headed by a Judge have to be read in the contextof shifting of the adjudicatory role from the Courts to the Tribunals.

84. There are undoubtedly certain powers vested in the Commissionunder Sections 94, 95 & 96 of the said Act, which weighed with theGujarat High Court while taking a contrary view inasmuch as they seek 37 supra A

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Ato give the ‘trappings of a court’ to the Commission, but that aspect wewill examine in the latter part of the judgment, i.e., if there are certainjudicial functions to be performed by the Commission, what then shouldbe the nature of composition of the Commission.

85. Mr. Jayant Bhushan, learned senior counsel also rightlyBemphasized that were it to be presumed that the Chairperson had to bemandatorily a Judge, the process of appointment would have to be interms of the proviso and not in terms of Section 85 of the said Act. Thiswould make the reference to a Chairperson under Sub-Sections (2), (3),(5) & (6) of Section 85 otiose as that eventuality would never arise weresuch a plea to be accepted.C

86. We are, thus, unable to accept the contention advanced onbehalf of the parties, who sought to sustain the view adopted by theGujarat High Court. The fact that the Chairperson has a right to nominatethe Member, who would chair meetings in his absence as per sub-section(2) of Section 92, or that the presence of a man of law would be noDsubstitute to the requirement of a Judge who would bring a judicial thoughtprocess to the decision making as Chairman, or that the regulatory bodyshould not be unregulated, are generalized pleas, which are difficult toaccept. No doubt, the law declared by the Supreme Court is binding onall Courts within the territory of India, which would also include principlesEof law emanating from a judgment or interpretation of the law, but thenthe ratio decidendi of the judgments of the Supreme Court, makes theprinciple of mandatory requirement of a Judge applicable only to caseswhere the judicial function is sought to be shifted through the process of‘tribunalisation’.F87. We may also note that Section 84(2) of the said Act begins F87. We may also note that Section 84(2) of the said Act beginswith a non-obstante clause, i.e., Notwithstanding anything contained insub-section (1), it does not take away what is stated in sub-section (1),which deals with the requirements that are necessary in the appointmentof a Member or Chairperson. It would not cut down the clear terms ofthe enactment being sub-section (1). The occasion to use such a non-Gobstante clause really arose because the process of appointment of aChairperson who is, or has been a Judge, is required to be different, andthus, the mandatory consultation with the Chief Justice. It is nothingmore or less. Further sub-section (1) of Section 85 provides for aSelection Committee to be headed by a Judge of the High Court but with H

the proviso that the said provision would not apply for the appointmentof a person as a Chairperson who is, or has been, a Judge of the HighCourt. This, in fact, shows that a non-Judge can be appointed as theChairperson by the Selection Committee constituted under Section 85 ofthe said Act, which in turn is chaired by a Judge of the High Court. Weare, thus, unequivocally of the view that Section 84(2) of the said Actonly gives the discretionary option to the State Government to appoint aJudge as the Chairperson of the State Commission. The said provisiontherefore, is not mandatory in nature.

Composition of the State Commission:

Composition of the State Commission:

88. Our conclusion aforesaid on the appointment of a Chairperson,necessitates a discussion on the composition of the State Commission asa whole. This is so in the context of Section 84(1) of the said Act. Interms of Section 82(4) of the said Act, the State Commission is to consistof not more than three members including the Chairperson. In otherwords, there have to be two other members other than the Chairperson.Now if the Chairperson is not a Judge, the question arises whether anyof the other two members has to be a person from the legal fieldconsidering the nature of functions performed by the State Commission.Section 84(1) of the said Act prescribes the requirement of knowledgeand shown capacity in dealing with problems relating to six differentfields, i.e., engineering, finance, commerce, economics, law ormanagement. If the Chairperson is from a non-legal field, it would implythat he/she would be a person from any of the other five fields. Thatwould still leave the appointment of two members from the fields specified,including law. Thus, there can be a possibility and we are informed thatit is so, where State Commissions have no members from the legal fieldat all. The moot point arises whether there can be a mandatory provisionread into Section 84(1) of the said Act for opining, that at least oneperson from the legal field is necessary as a member, although on a plainreading of the Section it is not so.

89. The distinguishing feature, as pointed out aforesaid betweenappointment of members to the Central Commission and the StateCommission is that, with regards to the Central Commission, it isspecifically provided in Section 77 of the said Act, how many personsfrom which field are to be appointed. There is a further proviso to sub-clause (c) of sub-section (1) of Section 77 of the said Act restricting it to AB

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Anot more than one member from the fields specified in the said clause,viz. economics, commerce, law or management. This is not the positioninsofar as the State Commission is concerned.

90. In order to appreciate any such requirement for a person fromthe legal field as a member of the State Commission, it becomes necessaryBto turn to the nature of functions performed by the State Commission.

91. We have, in the context of Section 84(2) of the said Act,discussed the various functions of the State Commission which arespecified under Section 86 of the said Act. The argument on behalf ofthe learned Attorney General and the counsel supporting him was thatCother than sub-clause (f) of Section 86, there are really no adjudicatoryfunctions. There is, however, no dispute that sub-clause (f) is clearly anadjudicatory function. It provides for adjudication of disputes betweenthe licencees and the generating companies. There is also a power torefer the dispute to arbitration and the expression “and” in the said clausehas been read as “or” in Gujarat Urja Vikas Nigam Ltd.[38] (GJ-I),Dimplying that the option is available to the State Commission to do eitherof the two.

92. Now turning to the powers of the State Commission, we maynote that the same are specified from Sections 94 to 96 of the said Act.The reference in these Sections is to the ‘appropriate commission’, i.e.,Eit can either be the Central Commission or the State Commission or theJoint Commission. The relevant definition clause is as under:

“2. Definitions.-

In this Act, unless the context otherwise requires,—

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4. “Appropriate Commission” means the Central RegulatoryCommission referred to in sub-section (1) of section 76 or theState Regulatory Commission referred to in section 82 or the JointCommission referred to in section 83, as the case may be;”

GThe powers conferred under these Sections are, thus, undisputedlyexercisable by the State Commission.

93. A perusal of these provisions would show that apart fromtheir definition, even otherwise, these are powers of a civil court under

the Code of Civil Procedure, 1908 (hereinafter referred to as the ‘saidCode’). Powers such as summoning, enforcement of attendance of anyperson and examination on oath, discovery and production of documents,receiving affidavit of evidence, requisitioning of public records, etc., allform part of Section 94. In terms of Section 95, all such proceedingsbefore the State Commission would be deemed to be judicial proceedingswithin the meaning of Sections 193 and 228 of the Indian Penal Code,1860 and the commission would be a civil court for purposes of Sections345 & 346 of the Code of Criminal Procedure, 1973. Not only that,Section 96 confers the extreme power of entry and seizure in respect ofany building and place where the Commission has reason to believe thatany document relating to the subject matter of enquiry may be foundand may be seized. The power is conferred on the Commission underSection 129 for securing compliances of orders and under Sections 142& 146 for punishment for non-compliance of orders and directions. This,thus, leaves no manner of doubt that the State Commission, though definedas a ‘Commission’ has all the ‘trappings of the Court’.

94. We may also note that in terms of what has been opined inGujarat Urja Vikas Nigam Ltd.[39] (GJ-I), such adjudication of disputesbetween the licensees and generating companies by the State Commissionor the arbitrator nominated by it under clause (f) of sub-section (1) ofSection 86 of the said Act extends to all disputes and not merely tothose pertaining to matters referred to in clauses (a) to (e) and (g) to (k)of Section 86(1) as may arise between licensees and generatingcompanies. In effect, it has been observed that this is the only processof adjudication which has to be followed as there is no restriction inSection 86(1)(f) of the nature of the dispute that may be adjudicated.Similarly in A.P. Power Coordination Committee & Ors.[40] whilereferring to the judgment in Gujarat Urja Vikas Nigam Ltd.[41] (GJ-I), ithas been observed that the Commission has been elevated to the statusof a civil court in respect of all disputes between the licensees andgenerating companies. Such disputes need not arise from exercise ofpowers under the said Act but even claims or disputes arising purely outof contract have to be either adjudicated by the Commission or be referredto an arbitrator nominated by the Commission. In that context it has alsobeen observed that the advisability of having the State Commission 39 supra 40 supra 41 supra A

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Apresided over by a Judge of the High Court as a Chairperson wasmentioned in Tamil Nadu Generation and Distribution CorporationLimited[42]. The provisions of the Limitation Act, 1963 like Sections 5 &14 have also been imported into the Act as observed.

95. What else can be called the ‘trappings of the court’? We areBbuttressed in our conclusion by judicial pronouncements dealing with theexpression “The trappings of the court”. The expression “trappings ofthe court” initially found mention in a judgment of the Judicial Committeeof The Privy Council in Shell Company of Australia, Limited v. FederalCommissioner of Taxation[43]. It was observed by Lord ChancellorSankey that there are tribunals with many of the “trappings of a court”Cbut are not courts in the strict sense of exercising judicial power. InBharat Bank Ltd. v. Employees of the Bharat Bank Ltd.[44], whiledealing with the Industrial Tribunal, it was observed that the said Tribunalhas powers vested in a civil court under the said Code while trying a suit,discovery of documents, inspecting, granting adjournment, reception ofDevidence on affidavit, enforcing attendance of witnesses, etc. Theobservations in R. v. London County Council[45], of Saville, L.J. giving ameaning to the word “court” or “judicial authority” was cited withapproval. Saville, L.J. observed as under:

“It is not necessary that it should be a Court in the sense that thisECourt is a Court, it is enough if it is exercising, after hearingevidence, judicial functions in the sense that it has to decide onevidence between a proposal and an opposition; and it is notnecessary to be strictly a Court if it is a tribunal which has todecide rights after hearing evidence and opposition.”

F96. The Supreme Court also took note of the definition of “judicialpower” and “judicial decision” in Huddart, Parker & Co. v.Moorehead[46] and Cooper v. Wilson[47] respectively. Griffith, C.J., in thefirst judgment observed as under:

“The words ‘judicial power’ as used in sec. 71 of the ConstitutionGmean the power which every sovereign authority must of necessity42 supra43 (1931) AC 27544 AIR 1950 SC 18845 (1931) 2 KB 21546 8 CLR 330, 357H47 (1937) 2 KB 309, at p. 340

have to decide controversies between its subjects or betweenitself and its subjects, whether the rights relate to life, liberty orproperty. The exercise of this power does not begin until sometribunal which has power to give a binding and authoritativedecision (whether subject to appeal or not) is called upon to takeaction.”

97. In the latter judgment, it was observed as under:

“A true judicial decision presupposes an existing dispute betweentwo or more parties, and then involves four requisites: (1) Thepresentation (not necessarily orally) of their case by the parties tothe dispute; (2) if the dispute between them is a question of fact,the ascertainment of the fact by means of evidence adduced bythe parties to the dispute and often with the assistance of argumentby or on behalf of the parties on the evidence; (3) if the disputebetween them is a question of law, the submission of legalargument by the parties, and (4) a decision which disposes of thewhole matter by a finding upon the facts in dispute and anapplication of the law of the land to the facts so found, includingwhere required a ruling upon any disputed question of law. Aquasi-judicial decision equally presupposes an existing disputebetween two or more parties and involves (1) and (2), but doesnot necessarily involve (3) and never involves (4). The place of(4) is in fact taken by administrative action, the character of whichis determined by the Minister’s free choice.”

98. The subsequence judgments in Jaswant Sugar Mills Ltd. v.Lakshmi Chand[48];Engineering Mazdoor Sabha v. Hind CyclesLtd.[49]; Indo-China Steam Navigation Co. Ltd. v. Jasjit Singh[50];Associated Cement Companies Ltd. v. P.N. Sharma[51]; SarojiniRamaswami v. Union of India[52] and State of Gujarat v. GujaratRevenue Tribunal Bar Association[53]followed the aforesaid views inthe same breath.

99. Once we find that the tribunal has the trappings of the court inrespect of its functions, we turn to the effect of the same.

48 1963 Supp (1) SCR 24249 AIR 1963 SC 87450 (1964) 6 SCR 59451 (1965) 2 SCR 36652 (1992) 4 SCC 50653 (2012) 10 SCC 353

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A100. The judgment of this Court in Tamil Nadu Generation andDistribution Corporation Limited[54] would first have to be dealt with atsome length, as it deals with the provisions of the very Act. Of course,the context was, inter alia, in respect of the interpretation of Section86(1) of the said Act. The Bench took note of the Gujarat Urja VikasNigam Ltd.[55] (GJ-I) on account of the observations made in thatBjudgment, that the State Commission can adjudicate all the disputes,including the dispute on money claims between the licensees and thegenerating companies. The then counsel for the appellant sought tocanvas that the exercise of such judicial powers should be either by acivil court or a tribunal having, at least, one judicial member, as the absenceCof a judicial member would be an anathema to judicial process and woulddirectly impinge on the impartiality and the independence of the judiciary.It was also contended that the same would undermine the principle ofseparation of powers which was sought to be strictly maintained by theConstitution of India. The counsel, in fact, went further that the function of the Chairman of such a commission required only a retired Judge ofDthe High Court to occupy that post, an aspect, which has been negatedby us hereinbefore. The Supreme Court gave its imprimatur to thesubmission advanced on behalf of the appellant to the extent that theadjudicatory functions generally ought not to be conducted by the StateCommission in the absence of judicial members. It was noticed that noEjudicial member had been appointed in the Tamil Nadu State Commission,and that the feasibility for making the appointment of a person as theChairman from amongst persons, who is, or has been, a Judge of theHigh Court should be explored.

101. It is undoubtedly true that the question which the Court wasFseized of, related to the interpretation of Section 86 of the said Act andcertain other matters, which are not connected with the controversyherein. Thus, the issue arises, whether the observations made, albeit tobe construed as advisory or suggestive qua the appointment of aChairman and a Member are to be treated as ratio decidendi or obiterGdicta.102. In order to determine this aspect, one of the well-establishedtests is “The Inversion Test” propounded inter alia by Eugene Wambaugh,a Professor at The Harvard Law School, who published a classic text 54 supraH55 supra book called “The Study of Cases”[56] in the year 1892. This text bookpropounded inter alia what is known as the “Wambaugh Test” or “TheInversion Test” as the means of judicial interpretation. “The InversionTest” is used to identify the ratio decidendi in any judgment. Thecentral idea, in the words of Professor Wambaugh, is as under:

“In order to make the test, let him first frame carefully thesupposed proposition of law. Let him then insert in the propositiona word reversing its meaning. Let him then inquire whether, if thecourt had conceived this new proposition to be good, and had hadit in mind, the decision could have been the same. If the answerbe affirmative, then, however excellent the original propositionmay be, the case is not a precedent for that proposition, but if theanswer be negative the case is a precedent for the originalproposition and possibly for other propositions also.[57]”

103. In order to test whether a particular proposition of law is tobe treated as the ratio decidendi of the case, the proposition is to beinversed, i.e., to remove from the text of the judgment as if it did notexist. If the conclusion of the case would still have been the same evenwithout examining the proposition, then it cannot be regarded as theratio decidendi of the case. This test has been followed to imply thatthe ratio decidendi is what is absolutely necessary for the decision ofthe case. “In order that an opinion may have the weight of a precedent”,according to John Chipman Grey[58], “it must be an opinion, the formationof which, is necessary for the decision of a particular case.”

104. Now applying the test to the aforesaid judgment, theproposition is reversed, i.e., “the Chairman need not be a judicial member”,the fact remains that it would have no impact on the decision in thatcase, which was related to inter alia the interpretation of Section 86 ofthe said Act. This, in fact, justifies what we have held aforesaid qua theappointment of a Chairperson from the pool of Judges.

105. In the context of the question which we are now dealingwith, if we were to take the proposition as “no member having knowledgeof law is required to be a member of the Commission” then we have a 56 Eugene Wambaugh, The Study of Cases (Boston: Little, Brown, & Co., 1892)57 Eugene Wambaugh, The Study of Cases (Boston: Little, Brown, & Co., 1892) at pg. 17

58 Another distinguished jurist who served as a Professor of Law at The Harvard Law School A

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Aproblem at hand. This is so because while interpreting Section 86 of thesaid Act, it has been expressed that the Commission has the ‘trappingsof the Court’, an aspect we have agreed to hereinbefore. Once it hasthe ‘trappings of the Court’ and performs judicial functions, albeit limitedones in the context of the overall functioning of the Commission, stillwhile performing such judicial functions which may be of far reachingBeffect, the presence of a member having knowledge of law wouldbecome necessary. The absence of a member having knowledge oflaw would make the composition of the State Commission such as wouldmake it incapable of performing the functions under Section 86(1)(f) ofthe said Act.

C106. In Madras Bar Association[59] (MJ-II), the ConstitutionBench, referring to the decision in Madras Bar Association[60] (MJ-I)observed that members of tribunals discharging judicial functions couldonly be drawn from sources possessed of expertise in law and competentto discharge judicial functions. We are conscious of the fact that the Dcase (MJ-I) dealt with a factual matrix where the powers vested incourts were sought to be transferred to the tribunal, but what is relevantis the aspect of judicial functions with all the ‘trappings of the court’ andexercise of judicial power, at least, in respect of same part of thefunctioning of the State Commission. Thus, if the Chairman of the Commission is not a man of law, there should, at least, be a memberEwho is drawn from the legal field. The observations of the ConstitutionBench in Madras Bar Association[61] (MJ-II) constitutes a declarationon the concept of basic structure with reference to the concepts of“separation of powers”, “rule of law” and “judicial review”. The firstquestion raised before the Constitution Bench as to whether judicial reviewFwas part of the basic structure of the Constitution was, thus, answeredin the affirmative.

107. We are, thus, of the view that it is mandatory to have aperson of law, as a member of the State Commission. When we say so,it does not imply that any person from the field of law can be picked up.It has to be a person, who is, or has been holding a judicial office or is aGperson possessing professional qualifications with substantial experiencein the practice of law, who has the requisite qualifications to have beenappointed as a Judge of the High Court or a District Judge.

59 supra60 supraH61 supra

59 supra60 supraH61 supra

108. In Brahm Dutt v. Union of India[62], it has been observedthat if there are advisory and regulatory functions as well as adjudicatoryfunctions to be performed, it may be appropriate to create two separatebodies for the same. That is, however, an aspect, which is in the wisdomof the legislature and that course is certainly open for the future if thelegislature deems it so. However, at present there is a single Commission,which inter alia performs adjudicatory functions and, thus, the presenceof a man of law as a member is a necessity in order to sustain theprovision, as otherwise, it would fall foul of the principles of separationof powers and judicial review, which have been read to be a part of thebasic structure of the Constitution.

109. We are also not in a position to accept the plea advanced bythe learned Attorney General that since there is a presence of a Judge inthe Appellate Tribunal that would obviate the need of a man of law as amember of the State Commission. The original proceedings cannot becured of its defect merely by providing a right of appeal.

110. We are, thus, of the unequivocal view that for all adjudicatoryfunctions, the Bench must necessarily have at least one member, who isor has been holding a judicial office or is a person possessing professionalqualifications with substantial experience in the practice of law and whohas the requisite qualifications to have been appointed as a Judge of theHigh Court or a District Judge.

111. The challenge laid in TC (C) Nos.139/2015 & 138/2015 is tothe appointments made to the Tamil Nadu State Commission and theexercise of the powers suo moto by the Commission. The fundamentalplea is of financial bias of the two members as they were working intheir erstwhile avatars. The name of Mr. G. Rajagopal was recommendedwhen he was still working as the Director, TANGEDCO and he optedfor voluntary retirement after his name had been recommended. Mr.Akshayakumar retired from the post of Managing Director ofTANTRANSCO on 31.5.14 and was appointed as Chairman of theCommission on 6.6.14. The tariff hike was approved by a majority of 2:1with these two members being part of the majority view.

112. In respect of the aforesaid, reliance was placed on thejudgment in Rajesh Awasthi[63] and Mor Modern Cooperative Transport 62 supra 63 supra A

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ASociety Ltd.[64]. We, however, find that those judgments would not applyin the present case. The nature of financial interest was examined inthe narrower sense as well as the wider sense and in the wider sense, itwas held to include the direct or indirect interest of a person in relationto a financial undertaking. The situation arose when the person concernedwas holding both the posts simultaneously, which is not so in the presentBcase. (as noticed in para 52 above) It is also pointed out by the learnedcounsel appearing for the State of Tamil Nadu that the orders ofappointment have been exclusively assailed right till the Supreme Court.It may be added that the Selection Committee was presided over by aretired Judge of the High Court.C113. We, thus, find no merit in the plea sought to be advancedassailing either the appointment or the suo moto tariff revision.

Conclusion:D114. In view of our observations above, we conclude as under:

i. Section 84(2) of the said Act is only an enabling provision toappoint a High Court Judge as a Chairperson of the StateCommission of the said Act and it is not mandatory to do so.

ii. It is mandatory that there should be a person of law as a MemberEof the Commission, which requires a person, who is, or has beenholding a judicial office or is a person possessing professionalqualifications with substantial experience in the practice of law,who has the requisite qualifications to have been appointed as aJudge of the High Court or a District Judge.Fiii. That in any adjudicatory function of the State Commission, it ismandatory for a member having the aforesaid legal expertise tobe a member of the Bench.

iv. The challenge to the appointment of the Chairman and Memberof the Tamil Nadu State Commission is rejected as also the suoGmoto proceedings carried out by the Commission.

v. Our judgment will apply prospectively and would not affect theorders already passed by the Commission from time to time.

STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFAREASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

vi. In case there is no member from law as a member of theCommission as required aforesaid in para 2 of our conclusion, thenext vacancy arising in every State Commission shall be filled inby a Member of law in terms of clause (ii) above.

115. Transfer Petition (C) No.974/2016 is allowed and theTransferred Case arising out of transfer petition stands disposed of.

116. The appeals as well as the other transferred cases standdisposed of accordingly leaving the parties to bear their own costs.Pending application(s), if any, also stand(s) disposed of.

Nidhi Jain

Matters disposed of.

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