IN THE HIGH COURT OF GUJARAT AT AHMEDABAD FIRST APPEAL No 666 of 2002 WITH FIRST APPEAL NO. 667 OF 2002 For Approval and Signature: Hon'ble MR.JUSTICE R.K.ABICHANDANI and Hon'ble MR.JUSTICE KUNDAN SINGH ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------- MARDIA CHEMICALS LIMITED Versus GUJARAT ELECTRICITY BOARD -------------------------------------------------------------- Appearance: MR SAURABH SOPARKAR, SENIOR ADVOCATE FOR MR DEVESH A BHATT for the Appellant in both appeals MR NIRAV K. MAJMUDAR for Respondent in both the appeals -------------------------------------------------------------- CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH Date of decision: 04/04/2002 ORAL JUDGEMENT (Per : MR.JUSTICE R.K.ABICHANDANI for the Court) 1. Both these appeals are directed against the common order dated 22nd March 2002 of the Gujarat Electricity Regulatory Commission (hereinafter referred to as `the Commission') passed in Petition No. 63 of 2002 and Petition No. 64 of 2002, whereby the Commission rejected the applications of the appellant seeking stay of the operation and execution of the notice dated 30th January 2002 issued by the Gujarat Electricity Board under section 24(1) of the Indian Electricity Act, 1910 (hereinafter referred to as `the Act of 1910'), on the ground that the Commission had no jurisdiction to grant such relief under the provisions of the Electricity Regulatory Commission's Act, 1998 (hereinafter referred to as `the said Act'). Since the interim relief prayed for in the two Petitions No. 63 and 64 of 2002 was identical, the Commission heard and disposed of both the petitions together, upholding the preliminary objection raised on behalf of the respondent - Board against its jurisdiction. 1.1 When these appeals came up for admission hearing, in view of the caveat having been filed on behalf of the Board, the learned counsel for the Board also appeared at that stage. The learned counsel for both the parties, having regard to the fact that the appeals were argued at length and the entire record was made available to the Court by supplying the paper-book, requested the Court to treat the elaborate hearing as a final hearing. We have accordingly heard both these appeals filed under section 27 of the said Act finally at the admission stage itself, at the request of the learned counsel for both the sides. 2. The appellant is a Registered Company engaged in the business of manufacture and sale of chemicals. The Commission, constituted under the said Act, had earlier on being moved by the Gujarat Electricity Board for fixation of tariffs for various categories of consumers, made a Tariff Order dated 10th October 2000 in Case No. 19 of 1999 determining the tariffs for various consumer categories, including HTP-IV category. While those proceedings were undertaken by the Commission in exercise of its functions under section 22 of the said Act, the appellant Company had asked for a special tariff by Application No. 15 of 1999 filed on 4th June 1999. In para 9.8.8 of the Tariff Order dated 10th October 2000, the request of the appellant for a special tariff was rejected by the Commission. 2.1 A separate order dated 27-11-2000 was also made on Application No. 15 of 1999 by the Commission, dealing in detail with the claim of the appellant for special electricity tariff. In para 11 of that order, the Commission noted that it had determined the electricity tariffs of various consumer categories by its order dated 10-10-2000 in Case No. 19 of 1999 and in the said Tariff Order, the Commission had also dealt with the HTP-IV tariff as well as tariff in respect of the present appellant, observing in para 9.8.8 that, as regards the other issues raised by the appellant, separate orders would follow. After considering the contentions of the appellant, including the contention that high tariff would make it uneconomical for the Company to run its industry, and that the Company was situated in a backward area, and further that its total consumption of electricity was very high, it was held that section 29(3) of the said Act did not confer any power of the Commission to give special tariff to any particular individual consumer on such grounds. It was held that the scheme of section 29 of the Act of 1998, which provided guidelines to the Commission and laid down principles for determination of tariff did not enable the Commission to lay down special tariff for any consumer. It was also held that the appellant had not made out a case for award of a special tariff under section 29(3) of the Act of 1998. The application of the appellant for special tariff was thus rejected on 27-11-2000. 2.2 It appears that, during the pendency of the above Application No.15 of 1999, the supply of electricity energy to the appellant was cut off by the Gujarat Electricity Board on the ground of its failure to pay the arrears running in crores of rupees, and an application was made to the Commission for getting re-connection. In that application, the Commission made an order on 28th December 1999 requiring the GEB to restore the supply on the appellant's paying Rs.50 lakhs in seven days and continuing to pay the charges from December 1999 till the disposal of the main application. That order was challenged before the High Court by the Gujarat Electricity Board in First Appeal No. 8073 of 1999. It appears that, during those proceedings, the parties settled the dispute outside the Court and the appeal, therefore, came to be disposed of on 3rd October 2001. As per the arrangement between the parties reached outside the Court, the dues of the Gujarat Electricity Board of Rs.53 crores were agreed to be paid by the appellant in monthly installments of Rs.10 lakhs till the appellant was rehabilitated in the manufacturing and commercial business under the SICA. Later on, the instalment was raised to Rs.25 lakhs by mutual agreement. However, since the dues were mounting up and had reached a figure of more than Rs.83 crores and rehabilitation was not forthcoming, it was decided that no further indulgence could be shown to the appellant and the facility of paying dues by installments could not be continued any more. This decision was taken at a meeting chaired by the Minister of Industries on 12th December 2001 and it was attended also by the Minister for Energy and other high officials as well as the representatives of these parties. 2.3 Thereafter, the impugned notice dated 30th January 2002 came to be issued by the Board calling upon the appellant to pay the entire dues of Rs.85,28,54,838=84 ps. That notice shows that it was issued under section 24(1) of the Indian Electricity Act, 1910. The amount demanded as the dues outstanding on 31-12-2001 was of energy bill including the arrears, and the delayed payment charges. The appellant was informed that if the said amount was not paid within 10 days from the date of issuance of the notice, its electric supply will be cut off without further notice until the amount due together with expenses for cutting off and re-connecting the supply was paid to the Gujarat Electricity Board. 3. On 5th February 2002, the appellant preferred Petition No. 63 of 2002 before the Commission praying for quashing the said notice dated 30th January 2002 and also seeking interim relief therein against disconnection of the power supply on the ground of the non-payment of the dues demanded in the notice. In the application, it was alleged that the electric supply was being cut off at the instance of a rival and the action was therefore malafide and that the question whether the appellant was a Sick Company was under consideration before the B.I.F.R. 3.1 The appellant also filed a review petition in the Application No. 15 of 1999 against the order dated 27th November 2000, rejecting the appellant's prayer for the special tariff. In the said review petition dated 28-6-2001 seeking review under Regulation 105(1) of the Gujarat Electricity Regulatory Commission (Conduct of Business) Regulations of 1999, the appellant had prayed for re-consideration of the order passed by the Commission rejecting the appellant's prayer for special tariff. An application was made on 13-2-2002 in the review application for interim relief on the ground that the appellant apprehended that the respondent may raise issue as to the jurisdiction of the Commission in the other petition (63 of 2002), and therefore, in order to avoid such objection, this application was filed seeking interim order in Case No. 15 of 1999 (in which the review application was made). It was prayed that, pending the hearing and final disposal of Case No. 15 of 1999, the Commission may stay the implementation and execution of the notice dated 30th January 2002, and preventing the respondent from disconnecting the power supply pursuant to that notice. 3.2 Thus, in both the above applications for interim relief which have been heard and decided together by the Commission, the prayer was identical and was aimed against the implementation of the notice issued by the GEB under section 24(1) of the Act of 1910. 4. A preliminary objection was raised on behalf of the Board urging before the Commission that it had no jurisdiction to stay the implementation and execution of the notice dated 30th January 2002 issued by the Board under section 24(1) of the Indian Electricity Act, 1910. The Commission held that, though it had powers to issue interim orders under Regulation 68, since it had no jurisdiction to intervene in the matter of recovery of arrears by issuance of a notice under section 24(1) of the Act of 1910, it had no jurisdiction to issue any interim order affecting the implementation of such notice. It was held that the Commission was not the forum which could adjudicate upon the disputes between consumers and the Board on the question of breach of the supply agreement. In paragraph 59 of its order, the Commission held that it had no jurisdiction, power or authority to entertain and decide the petitions taken out by the applicant. Both the petitions for interim orders were, therefore, disposed of, leaving it open to the appellant to approach the appropriate forum for the redressal of their grievances. 5. It was contended by the learned senior counsel appearing for the appellant in these two appeals that the review proceeding under Regulation 105 of the Regulations of 1999 framed by the Commission was a proceeding in continuation of the original proceeding regarding fixation of special tariff decided on 27-11-2000 by rejecting the application (No.15 of 1999) of the appellant. Therefore, during the pendency of the review proceeding, the Commission had power under Regulation 68 to pass appropriate interim orders. It was further argued that the Commission had, on an earlier occasion, made interim order on 20-12-1999 requiring the Board to re-connect the electric supply and though that order was not implemented due to the appeal filed before the High Court by the Board, during the pendency of the appeal proceedings, a settlement was arrived at out of Court and the appeal was withdrawn. It was submitted that it was, therefore, not open for the Commission to take up a different stand on a subsequent application by saying that it had no jurisdiction in the matter. It was also argued that the interim order sought by the appellant was not beyond the scope of the main review application which was for fixation of special tariff for the appellant. It was submitted that, if special tariff as claimed by the appellant was fixed by the Commission, then nothing would be payable and no ground for taking action under section 24(1) of the Indian Electricity Act, 1910 would survive. It was further submitted that, in view of the draft amendment made in the review application by adding paragraph 8(A) in the Application No. 63 of 2002 in which it was contended that, the Commission was concerned with promoting efficiency and economy in the operation of the Gujarat Electricity Board, the Commission had jurisdiction to decide the issue. Referring to section 52 of the Act, the learned senior counsel argued that the provisions of the said Act had an overriding effect over other laws and the Commission was, therefore, empowered by sections 22(1)(a) and (d), 22(2)(c), (d) and (n), 29(2)(c), (d), (e) and (f) and section 25 (iv) of the said Act to stay the impugned notice under section 24(1) of the Indian Electricity Act, 1910. It was submitted that, under the scheme of the said Act, protection of the interest of consumers was one of the factors to be considered while fixing the tariffs and the interest of consumers would include interest of a particular consumer and therefore, if the act of the utility was contrary to the interest of a consumer, such an issue would fall within the jurisdiction of the Commission. It was, in the alternative, argued that if it is found that an act of the utility does not promote efficiency or economy, then the Commission has power to give necessary directions while fixing tariff and that, what can be done by fixing the tariff could also be done independently, and therefore, the Commission has jurisdiction to entertain a dispute against the validity of the impugned notice. It was submitted that, on the ground of protection of consumer interest and promotion of efficiency and economy in electricity industry, the Commission had jurisdiction to make such interim orders. 6. The learned counsel appearing for the respondent Board supported the reasoning contained in the order of the Commission and argued that, even though the Commission had power to issue interim orders under Regulation 68, such power cannot be exercised when the Commission had no jurisdiction to grant the main relief against the notice issued under section 24(1) of the Act of 1910. The Commission, according to him, could not have examined the validity of such a notice and had no power to set it aside. Therefore, it had no jurisdiction to grant any interim relief against such a notice. It was submitted that the Gujarat Electricity Board was bound to charge the consumer as per the tariff and if payment was not made, it would be justified in proceeding to disconnect the supply under section 24(1) of the Act of 1910. He submitted that the functions of the Commission centered around fixation of tariff and therefore, the dispute sought to be raised by the consumer against the validity of notice under section 24(1) of the said Act could not have been gone into by the Commission. It had, therefore, rightly held that it had no jurisdiction in the matter. Relying upon the decision of the Supreme Court in Consumer Action Group v. State of T.N., reported in (2000) 7 SCC 425, he submitted that no interim relief could be granted, which would have an adverse effect on the public at large. 7. In order to ascertain whether the Commission had jurisdiction to go into the validity of a notice issued under section 24(1) of the Act of 1910 by the Board, it would be essential to examine the provisions of the said Act having bearing on the functions of the Commission. 7.1 The preamble of the Act of 1998 shows that it is an Act to provide for: (i) The establishment of a Central Electricity Regulatory Commission and State Electricity Regulatory Commissions, (ii) Rationalisation of electricity tariff, (iii) Transparent policies regarding subsidies, (iv) Promotion of efficient and environmentally benign policies, and for matters connected therewith or incidental thereto. 7.2 Chapter V of the said Act provides for powers and functions of the State Commission and Chapter VI for energy tariff. Under section 22(1), the State Commission is entrusted with the following functions :- "[a] to determine the tariff for electricity, wholesale, bulk, grid or retail, as the case may be, in the manner provided in section 29; [b] to determine the tariff payable for use of transmission facilities in the manner provided in section 29; [c] to regulate power purchase and procurement process of the transmission utilities and distribution utilities including the price at which the power shall be procured from the Generating Companies, generating stations or from other sources for transmission, sale, distribution and supply in the State; [d] to promote competition, efficiency and economy in the activities of the electricity industry to achieve the object and purposes of this Act." Sub-section (2) of section 22 empowers the State Government to confer any of the functions enumerated therein. Sub-clauses (c), (g) and (n) of sub-section (2) of section 22, on which reliance was placed on behalf of the appellant, are re-produced hereunder : "[a] xxxxx [b] xxxxx [c] to regulate the operation of the power system within the State; [d] xxxxx [e] xxxxx [f] xxxxx [g] to set standards for the electricity industry in the State including standards relating to quality, continuity and reliability of service; [h] xxxxx [n] to adjudicate upon the disputes and differences between the licensees and utilities and to refer the matter for arbitration; [o] xxxxx " 7.3 Under section 25, the objects of the State Advisory Committee which is a creature of the State Commission are indicated and reliance was placed on the following clauses :- "[ii] matters relating to quality, continuity and extent of service provided by the licensees; [iii] xxxxx [iv] protection of consumer interest; and [v] xxxxx " 7.4 Section 26 of the said Act contemplates representation of `interest of the consumers'. On the basis of this provision, it was argued that individual consumer's interest also can be gone into by the State Commission. 7.5 Section 29 of the said Act empowers the State Commission, inter alia, to determine tariffs in accordance with the provisions of the said Act for supply of electricity including retail electricity. As provided by section 29(2), the terms and conditions for fixation of tariffs are to be determined under the Regulations fixed by the Commission, keeping in view the guidelines contained in clauses (a) to (g). Reliance was placed on clauses (d) and (e), which are re-produced hereunder :- "[a] xxxxx [d] the factors which would encourage efficiency, economical use of the resources, good performance, optimum investments, and other matters which the State Commission considers appropriate for the purposes of this Act; [e] the interest of the consumers are safeguarded and at the same time, the consumers pay for the use of electricity in a reasonable manner based on the average cost of supply of energy; [f] xxxxx " 7.6 Section 52 of the said Act lays down that, save as otherwise provided in section 49, the provisions of the Electricity Regulatory Commissions Act, 1998 shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act. On the strength of this provision, it was argued that, notwithstanding the provisions regarding notice of demand and disconnection of supply of electricity contained in the Act of 1910, the Commission can, for protection of interest of a consumer and for improving level of efficiency, exercise power to control and regulate supply of electricity to a particular consumer even in the event of his non-payment of electricity dues. 7.7 Section 58(1) of the said Act empowers the State Commission to make regulations consistent with the Act and the Rules made thereunder to carry out the purposes of the Act. This would mean that the Regulations made by the Commission should be read in a way consistent with the provisions of the said Act. Sub-section (2) of section 58 of the said Act, inter alia, empowers the Commission to make Regulations as to the manner in which charges for energy may be determined under section 29(2) of the Act. 8. In exercise of the power to frame Regulations, the State Commission has framed the Gujarat Electricity Regulatory Commission (Conduct of Business) Regulations, 1999. Regulation 18 thereof provides for the participation of consumer associations. Regulation 62 provides that the orders of the Commission would be in a judgement form and such judgement cannot be altered except for clerical or arithmetic mistake or error arising from any accidental slip or omission or on review of the judgement in accordance with the Regulation 105. Regulation 68, on which reliance has been placed, reads as under :- "Interim Orders : 68. The Commission may pass such interim orders as the Commission may consider appropriate at any stage of the proceedings, having regard to facts and circumstances of case, where such interim orders are sought." 8.1 Chapter III of the Regulations provides for arbitration of disputes between the licensees and utilities. The word `licensee' is defined in section 2(f) of the said Act and it means a person licensed under Part II of The Indian Electricity Act, 1910 to supply energy or a person who has obtained sanction under section 28 of that Act to engage in the business of supplying energy (but does not include the Board or a Generating Company]. The word `utility' as defined in clause (l) of section 2 of the said Act means any person or entity engaged in the generation, transmission, sale, distribution or supply, as the case may be, of energy. Thus, in the Chapter which provides for arbitration of disputes in the said Regulations, there is reference only to disputes between licensees and utilities and there is no provision for resolution of any disputes between the consumers and the utilities. 8.2 Chapter V of the Regulations provides for "Tariff Regulations", and Regulation 78 provides that, no entity engaged in transmission, distribution and supply of electricity, shall charge their customers any tariff for supply of electricity without the general or specific approval of such tariff by the Commission. Regulation 84 provides that, entities engaged in transmission, distribution and supply of electricity who are required to get their tariff approved by the Commission, shall evolve tariff proposals based on the terms and conditions notified by the Commission and shall submit the same for approval, in accordance with the procedure prescribed by the Commission. Under Regulation 86, the Commission may approve the proposed tariff on such stipulations as may be considered appropriate and as may be specified in the Order. By Regulation 88, it is provided that the utilities concerned shall publish the tariff as approved by the Commission in the manner as may be prescribed. The tariff so published shall be in force until any amendment is approved by the Commission and published. 8.3 Thus, once the Tariff Order is made by the Commission, the Gujarat Electricity Board is bound by such Tariff Order and it remains in force unless it is amended by the Commission. The GEB cannot charge its customers any tariff for supply of electricity in a manner different from the tariff approved by the Commission under its Tariff Order. 8.4 Regulation 105(1), which relates to review of decisions, directions and orders of the Commission, on the basis of which, it was urged that the review application having been filed for fixing special tariff for the appellant, it was a proceeding pending and therefore, the interim order could be made under Regulation 68 of the nature sought for, is re-produced hereunder :- "105(1) Any person aggrieved by a decision or order of the Commission, from which no appeal is preferred or allowed, and who, from the discovery of new and important matter or evidence which, after the exercise of due diligence was not within his knowledge or could not be produced by him at the time when the decision / order was passed by the Commission or on account of some mistake or error apparent from the face of record, or for