Case: RELIANCE INFRASTRUCTURE LIMITED Vs. STATE OF MAHARASHTRA


Decision reasoning: 0[ds]18. On the maintainability of the petition under Article 226, the High Court, in our view, has overlooked the position in law established by the judgment of a Constitution Bench of this Court in PTC India Limited v Central Electricity Regulatory Commission (2010) 4 SCC 603 . The Constitution Bench considered whether the Appellate Tribunal for Electricity has jurisdiction to decide upon the validity of the regulations framed by the Central Electricity Regulatory Commission. CERC has been entrusted with the power to frame regulations under Section 178 of the Electricity Act 2003. The Constitution Bench held that the validity of a regulation framed under Section 178 can be tested only before the court exercising judicial review. While the Tribunal may decide upon a dispute involving the interpretation of a regulation, for which an appeal under Section 111 would be maintainable, no appeal can lie before the Tribunal on the validity of a regulation.the above principles emerge in the context of regulations framed under Section 178 by the CERC, the logic of the judgment extends to the regulations framed under Section 181 by the State Electricity Regulatory Commissions. In view of the legal position settled by the Constitution Bench, we are of the clear view that the High Court was not justified in disparaging the appellant for taking recourse to a constitutional remedy under Article 226. Indeed, a challenge to the validity of the regulations framed by the MERC could only lie before the High Court. Hence, the imposition of costs for having adopted the remedy under Article 226 was unjustified. There was no suppression of fact on the part of the appellant which had indicated the recourse it had taken in the appeal before the Tribunal, arising from its prayer for relaxation of the SHR norms before MERC. The plea before the Appellate Tribunal was for relaxation of the SHR norms. The plea before the High Court was that the SHR fixed was discriminatory and ultra vires. Undoubtedly, if the appellant were to succeed before the Tribunal, it would perhaps obviate the challenge in the High Court. The appellant, as learned Senior Counsel informed the court, did not press ahead with its plea before the Tribunal. Hence, the writ petition could not have been held not to be maintainable.19. The High Court has dealt with the merits of the challenge to the validity of the regulations. The constitutional validity of Regulation 44.2(d) of the Tariff Regulations 2011 is the subject of the challenge in these proceedings. The basic challenge which has been addressed before the Court is founded on a plea of discrimination.24. The national tariff policy has multi-faceted objectives. Significant among them is the need to ensure to consumers the availability of electricity at reasonable and competitive rates. The policy also seeks to ensure the financial viability of the sector and underlines the need to attract investments. A financially sustainable electricity sector is an important facet of the overall regulatory framework. The objectives of the policy emphasise the need to promote transparency, consistency and predictability in regulatory approaches across jurisdictions. The policy emphasises the need to minimise perceptions of regulatory risk. Finally, the policy recognises the need to promote competition, efficiency in operations and improvements in the quality of supply. In designing and formulating the regulatory framework for tariffs, the delegate of the legislature has to bring about a balance between the competing goals which the tariff policy incorporates.25. As part of the process, the delegate has to bear in mind the interests of diverse stake holders including consumers and producers. The process of framing tariffs is of equal significance, for it is through the procedural framework that norms of consistency, transparency and predictability can be enforced. Competition, efficiency and quality of supply are key components of the policy framework in designing tariffs. Clause 5.3(f) of the tariff policy speaks of the need to evolve performance norms which incorporate incentives and disincentives and provide an appropriate arrangement that fosters the sharing of gains of efficiency in operations with consumers. Operating parameters in tariffs are required to be pegged only on and not at thef normative andsave and except in those cases referred to in paragraph 5.3(h)(2). Paragraph 5.3(h)(2) deals with those cases where operations have been much below the norm for several previous years. In those cases, the initial starting point in determining the revenue requirement and the trajectories are fixed at a relaxed level and not at desired levels. Under clause 5.3(f), the operating norms must fulfil several parameters. They must be (i) efficient; (ii) relatable to past performance; (iii) capable of achievement; and must progressively reflect increased efficiencies. They may also take into consideration latest technological advances, fuel, vintage of equipment, nature of operations, level of service to be provided to consumers, among other factors. Continuous and proven inefficiency has to be controlled and penalised. The operating norms must be designed to promote efficiency and to ensure that the gains which accrue on account of efficient operations are shared with the consumers of electricity. The operating norms will, therefore, have due regard to the performance in the past as well as capacities for future achievement. These must be dovetailed with all relevant considerations, bearing on the requirements of the policy.26. The Tariff policy provides guidance to the appropriate commission when it frames regulations. The power to frame regulations is legislative in nature. It is conferred upon the appropriate commission. The commission weighs numerous factors. Its discretion in carrying out a complex exercise cannot be constrained. The delegate of the legislature is therefore under a mandate to bring about a fair and equitable balance between competing considerations. Standing at the forefront of those considerations is above all the need to ensure efficiency and to protect the interests of consumers. The submission which has been urged on behalf of the appellant would reduce tariff fixation to a rather simplistic process of bringing about equality between generating units which have the same design and manufacturing origin. Such an approach overlooks the complex factors which have to be borne in mind in the determination of tariffs. The submission which has been urged on behalf of the appellant is based on the hypothesis that the CPRI report underlined the similarity of Parli Unit 6, Paras Unit 3, Tata Trombay Unit 8 and the DTPS unit of the appellant. At the highest, the CPRI study would indicate a similarity of specifications but not a similarity of performance. Performance, as we have seen, is a critical element in designing an appropriate SHR. The SHR has an important co-relationship with efficiency.We commenced our discussion by emphasising, in our prefatory observations, that the power to frame regulations is of a legislative nature. The CPRI report was an input before the MERC in carrying out that exercise. MERC followed the statutory procedures laid down for the determination of tariffs. It took into account factors which it is mandated by the statute to consider. The national tariff policy, suggestions of stakeholders as well as the assessment carried out by the CPRI were duly considered. Hence, the present case does not fall in the paradigm of manifest unreasonableness or arbitrariness to warrant the interference of this Court. It would be rather formulaic for the Court to accept that merely because DTPS was placed at par in the immediately previous period (2006-07) and the period immediately succeeding (2016-20), that this must necessarily be extrapolated to the intervening period governed by the MYT Regulations 2011. A body which is entrusted with the task of framing subordinate legislation has a range of options including policy options. If on an appraisal of all the guiding principles, it has chosen a particular line of logic or rationale, this Court ought not to interfere.