SCA/7234/2008 1/11 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 7234 of 2008 with SPECIAL CIVIL APPLICATION No. 7235 of 2008 For Approval and Signature: HONOURABLE MR.JUSTICE ANANT S. DAVE ====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ====================================== SHIHOR STEEL ROLLING MILLS ASSOCIATION Versus PASCHIM GUJARAT VIJ COM LTD & another ====================================== Appearance : MR BK DAMANI for Petitioner Mr. S.N. Shelat, Senior Advocate, with Mr. Premal R. Joshi for respondents ====================================== CORAM : HONOURABLE MR.JUSTICE ANANT S. DAVE Date : 10/09/2008 SCA/7234/2008 2/11 JUDGMENT COMMON ORAL JUDGMENT 1 Rule. Mr. Premal Joshi, learned counsel, waives service of Rule on behalf of the respondents. At the request of learned counsel for the parties, both these petitions being identical in nature are taken up for final hearing. 2 Shihor Steel Rolling Mills Association, an Association of steel re- rolling Mills having 39 members engaged in manufacturing different products of steel and iron, along with Hans Industries Private Limited, have filed these writ petitions under Article 226 of the Constitution of India for quashing and setting aside unjust demand raised by respondent No.1, on behalf of respondent No.2, to pay pro-rara charges at the rate of Rs.850 per KVA [non-refundable]. It is further prayed to quash and set aside Circular No. ACE[R&C]/EE-C/DE-2/370, dated 29th March 2007 issued by the Managing Director of GETCO, respondent No.2 herein, raising such illegal demand. 3 Respondent No.1, a Company incorporated under the provisions of the Companies Act, 1954, is engaged in the business of supplying and transmitting electricity to various consumers in the State of Gujarat. Respondent No.2 is a transmission corporation and is monitoring, inter alia, respondent No.1. 4 The grievance of the petitioners is against respondent No.1 for raising unjust demand to pay pro-rata charges of Rs.850/- per KVA [non- refundable] from the members of the petitioner-Association and the amount so paid to respondent No.2 and being collected by respondent SCA/7234/2008 3/11 JUDGMENT No.1, according to the petitioner, is unjustifiable, in as much as, no reasons for charging the said amount are assigned and, till date, break- up of cost for charging the said amount is not provided to the petitioner. 4.1 When a member of the petitioner-Association submitted an application for new connection/additional power to the existing power supply in view of installation of furnaces of higher capacity of furnace as part of development of plants, the above demand is raised by the respondents uniformly from all the members. It is, therefore, submitted that there is no rational or justification for the respondents to charge the amount of Rs.850/- on pro-rata basis. 5 In answer to the notice issued by this Court, respondent No.2, through its Executive Engineer, has filed affidavit in reply and denied all averments and contentions raised in the petitions. Shri S.N. Shelat, learned Senior Counsel appearing for respondent No.2 has submitted that charges are towards lines transformer center and service connections are strictly to be recovered as per Notification No.9 of 2005 issued by the Gujarat Electricity Regulatory Commission [for short, 'the GERC']. In exercise of the powers conferred by Section 181 read with Sections 45 and 46 of the Electricity Act, 2003, the GERC framed regulations, namely, Gujarat Electricity Regulatory Commission [Licensee's Power to Recover Expenditure incurred in providing Supply and other Miscellaneous Charges] Regulations [for short, 'the Regulation']. It is further submitted that GETCO has number of sub- stations of different voltage class with escalation rate of about 50 numbers of sub-stations annually and equally about 50 to 70 numbers of sub-station are augmented every year. The cost of each sub-station and augmentation will be different at each location and, therefore, recovery SCA/7234/2008 4/11 JUDGMENT at different rates from different locations of sub-station shall further lead to disparity amongst beneficiaries located at different places. It is further submitted that augmentation benefits to the existing consumers in electricity supply to them and the licensees have a universal service obligation to establish power systems and service to all the consumers and the licensees cannot refuse to render service to new consumers. Therefore, two different standards cannot be adopted by the licensee treating the existing and new consumers in a different manner. Therefore, the entire cost of such augmentation is recovered from all new consumers demanding new connection as well as additional load to existing consumers proportionately to maintain uniformity. It is further submitted that even for providing infra-structure, various expenses are incurred. Even for erection of new sub-station and augmentation of existing sub-station, the respondents have to incur expenses. Not only that, but, according to the respondents, to streamline the recovery and to avoid disparity amongst beneficiaries of different areas of the State and even beneficiaries of the same area embedded on different GETCO sources, pro-rata charges are recovered as a policy decision from all beneficiaries evenly and there is no discrimination. The purpose and rational behind recovery of pro-rata charges is to recover the cost involved from the actual beneficiaries instead of loading in the actual transmission charges to be reflected on all existing beneficiaries. It is further submitted that, after considering objections, pro-rata charges have been reduced to Rs.850 per KVA, instead of recovering pro-rata charges depending upon voltage level, and such recovery is in accordance with the miscellaneous charges provided in Chapter V of Notification No.9 of 2005. It is, therefore, submitted that the exercise of powers by the respondents are in consonance with the provisions of Notification No.9 of 2005 published in the official gazette on 31.3.2005. SCA/7234/2008 5/11 JUDGMENT 6 Shri Damani, learned counsel appearing for the petitioner, has vehemently submitted that, for charging Rs.850/- the respondents have not given any justification or rational break up of incurring the cost, if any, to recover such charges over and above service charges, line charges, security, etc. According to the learned counsel for the petitioner, there is no provision under the Electricity Act, under which, such charges can be levied and the justification provided by respondent No.2 for extra expenses incurred by creating facility on pro-rata basis on the demanded power, as provided by Notification No.9 of 2005, is contrary to the provisions of the Act. The respondents have failed to work out the actual expenditure and the decision to charge on pro-rata basis is based on surmises and conjectures. According to Shri Damani, learned counsel for the petitioner, in the rejoinder filed by the petitioner, Clause 5 in Chapter V provides for high tension/extra high tension supply and, according to the above Regulation, for recovery of money and for provision of high tension supply, there are various categories under which charges can be levied in different manner and, therefore, there is no rational to charge Rs.850 on pro-rata basis for all kinds of consumers, which deserves interference by this Court in exercise of power under Article 226 of the Constitution of India. Learned counsel for the petitioner has submitted that the Regulations provide for different mechanism while money that is being charged is being charged totally in different manner and even it is not as per the procedure prescribed in the above Regulations. Thus, charging on pro-rata basis is not based on any basic calculations and, in absence of any justification, the respondents have unjustly enriched themselves, for which, the powers may be exercised by this Court under Article 226 of the Constitution of India. SCA/7234/2008 6/11 JUDGMENT 7 In counter, Shri S.N. Shelat, learned Senior Counsel for respondent No.2, has submitted that Notification No.9 of 2005 has been issued by the respondent in exercise of the powers under Section 181 in consistent with the provisions of Sections 45 and 46 of the Electricity Act, 2003. It provides for regulations under different Chapters, which shall be applicable to all the distribution licensees in their respective licensed areas in the State of Gujarat and more particularly Chapter V is rational in making provisions for high tension/extra high tension supply. According to the learned Senior Counsel, in absence of challenge to power making regulations, mere submission that the notification is to be quashed and set aside as being arbitrary and illegal exercise of power has no substance warranting exercise of power by this Court under Article 226 of the Constitution of India. 8 Having heard the learned counsel for the parties and considering the facts of the case and on perusal of the record and the relevant provisions of the Electricity Act, 2003, the Rules made thereunder and the Regulations framed by GERC, in my opinion, the contentions raised by the learned counsel for the petitioner do not deserve acceptance by this Court, in as much as, Notification No.9 of 2005 issued by GERC is well within the powers conferred by Section 181 read with Sections 45 and 46 of the Electricity Act, 2003. Sections 46 of the Electricity Act, 2003 reads as under: “46. Power to recovery expenditure:- The State Commission may, by regulations, authorise a distribution licensee to charge from a person requiring a supply of electricity in pursuance of section 43 any expenses reasonably incurred in providing any electric line or electrical plant used for the purpose of giving that supply.” SCA/7234/2008 7/11 JUDGMENT 8.1 Thus, the State Commission has power to recover expenditure by Regulations and authorise a distribution licensee to charge from a person requiring a supply of electricity in pursuance of section 43 any expenses reasonably incurred in providing any electric line or electrical plant used for the purpose of giving that supply. No doubt, Section 43 of the Electricity Act casts duty upon the distribution licensee to supply electricity upon certain conditions and Sections 45 and 46 empower the distribution licensee to recover charges and expenditure. 9 Clauses [i] and [ii] of Regulation 5 of Chapter V of Notification No. 9 of 2005 read as under: 5. Provision for high tension/extra high tension supply [i] In case of applications where there is a need to erect a new HT line or EHT line from the sub station or extend the existing HT or EHT line or strengthening of existing HT or EHT line in order to extend supply to the applicants, the Distribution Licensee, on its own in case of HT, and in coordination with Transmission Licensee in case of EHT, shall prepare an estimate of the cost of aforementioned work including the cost of terminal and metering arrangements at the premises of the consumer, but not including the cost of meter. Such estimate shall be based on the latest cost data as published by the Distribution Licensee and/or Transmission Licensee. [ii] In case of applications where there is a need to erect a new sub-station for extending supply to the applicant, the Distribution Licensee, on its own or in co-ordination with Transmission Licensee, shall prepare an estimate of the cost of the necessary works in the same way as indicated in sub-clause 4.2(i) above. In cases of applications when the capacity of existing substation is required to be augmented, the differential cost of existing and new such electrical plant will form the basis of calculation of pro-rata charges. The estimate of the cost of such substation shall be based on the latest cost data as published by the Distribution Licensee and/or the Transmission Licensee.” 10 Regulation 5 of Chapter V of Notification No. 9 of 2005 makes the SCA/7234/2008 8/11 JUDGMENT provision for high tension/extra high tension supply and clauses [i] and [ii] deal with applications for erecting a new HT line or EHT line from the sub-station or extend the existing HT or EHT line so as to provide electricity supply to the applicant, which also empowers the distribution licensee to prepare estimate of the cost of afore-mentioned work including the cost of terminal and other arrangements to be met with like metering, etc. Clause [ii] of Regulation 5 of Chapter V is pertaining to applications in case where there is a need to erect a new sub-station for supply of electricity to the applicant and the rest of the procedure is the same and the distribution licensee on its own or in coordination with Transmission Licensee has to prepare an estimate of the cost of the necessary works and when the applications are with regard to capacity of existing sub-station to be augmented, differential cost of existing and new such electrical plan will form basis of calculation of pro-rata charges. Therefore, both the above-said clauses have provision for preparing an estimate of cost and to charge accordingly. 10.1 The above aspects clearly take care of two types of supply of electricity, namely, for high tension/ extra high tension supply. Besides, the above notification is issued by the Commission after following the procedure and the same, being in consonance with Section 181 and Sections 45 and 46 of the Electricity Act, 2008, cannot be said to be in any manner illegal, which requires interference by this Court in exercise of power under Article 226 of the Constitution of India. 11 Thus, the challenge of the petitioner on the ground that there is no justification or rational for charging Rs.850/- on pro-rata basis falls to ground on both counts, firstly, the respondents have powers as per the Notification No.9 of 2005 issued by GERC in exercise of powers under SCA/7234/2008 9/11 JUDGMENT Section 181 in consistent with Sections 45 and 46 of the Electricity Act, 2003 and the Regulations framed thereunder, namely, Regulation 5 under Chapter V of the said notification, and secondly, justification or rational to charge Rs.850 on pro-rata basis is with a view to streamline the recovery and to avoid disparity amongst the beneficiaries of different areas of the State and the same is recovered as a policy decision. It further transpires and evident from the record that the purpose behind charging on pro-rata basis is to recover cost involved from the actual beneficiaries instead of levying in general transmission charges to be reflected on all the existing beneficiaries. Therefore, the action of the respondents to charge Rs.850/- on pro-rata basis from the members of the petitioners for extra demand of supply of energy cannot be said to be, in any manner, unreasonable, arbitrary, irrational or violative of Article 14 of the Constitution of India. 12. So far as the submission of the learned counsel appearing for the petitioner about justification for extra expenditure incurred by creating facility on pro-rata basis on the demanded power, which is not based on working out of the actual expenditure that would be required at a particular sub-station and, thereafter, dividing the same amongst the applicants who applied for power from a particular sub-station, is concerned, the respondents have worked out the expected expenditure of the entire plant and charged the new applicant on pro-rata basis. The respondents have made it clear that it had become unavoidable for the erstwhile Board to develop infrastructural facilities and continue the same for providing transmission line and sub-stations to meet power requirement of the new applicants as well as existing consumers considering rapid industrial and increasing power demand. As provided in the earlier circular No.676 dated 5.7.1997, the developmental charge SCA/7234/2008 10/11 JUDGMENT was Rs.900/- per KVA and, thereafter, it was reduced, after considering the representation, to Rs.850/- per KVA as per the notification. Thus, the justification to charge Rs.850/- on pro-rata basis has genesis with the object sought to be achieved and to streamline recovery and to avoid disparity amongst beneficiaries of different areas of the State and even certain beneficiaries of the same area embedded on different GETCO sources, so that the charges can be recovered evenly from all the beneficiaries. 13 A reliance has been placed on the decision of the Apex Court in the case of Municipal Corporation of Delhi and others vs. Mohd. Yasin, reported in AIR 1983 Supreme Court 617 by the learned counsel for the respondents wherein his submission finds favour in paragraph 9 that 'others besides those paying the fees are also benefited does not detract from the character of the fee and in fact the special benefit or advantage to the payers of the fees may even be secondary as compared with the primary motive of regulation in the public interest, nor is the Court to assume the role of a cost accountant.” Thus, limited scope exists for the Court in exercise of power under Article 226 of the Constitution of India to upset a decision taken by the regulatory bodies based on analytical assessment of various factors including cost, infrastructural expenditure, etc. and, in absence of unreasonableness or arbitrariness, no case is made out to exercise power under Article 226 of the Constitution of India. 14 Another decision of the Apex Court in the case of Maharashtra State Electricity Distribution Company Limited vs. Lloyds Steels Industries Limited, reported in 2008 (1) G.L.H. 661 also needs to be considered, in as much as, against the individual grievances, special forums are constituted and recourse can be made to such forums for SCA/7234/2008 11/11 JUDGMENT redressal of their grievances under the Act. It is to be noted that, in one of the cases, a member of the petitioner-Association had already approached the Forum and even an appeal was preferred before the Ombudsman on the very subject matter, which came to be rejected, but such order is not challenged before any other higher forum. 15 Considering the above facts and circumstances of the case and position of law, both the petitions are rejected. Rule in each petition stands discharged with no order as to costs. (ANANT S. DAVE, J.) (swamy)