KERALA STATE ELECTRICITY BOARD REP. BY ITS SECRETARY & ANR. versus PRINCIPAL SIR SYED INSTITUTE FOR TECHNICAL STUDIES & ORS.
[2020] 7 S.C.R. 885, Supreme Court of India, 2020
Outcome: Appeal(s) allowed (Granted)
Segment: Facts
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KERALA STATE ELECTRICITY BOARD
REP. BY ITS SECRETARY & ANR.
v.
PRINCIPAL SIR SYED INSTITUTE
FOR TECHNICAL STUDIES & ORS.
(Civil Appeal No.8350 of 2009)
FEBRUARY 20, 2020
[DEEPAK GUPTA AND ANIRUDDHA BOSE, JJ.]
Electricity Act, 2003 – s.62(3) – Scope of – Tariff notification
issued by appellant – Respondents-Self-Financing Educational
Institutions (SFEIs) were segregated from State run and State aided
private educational institutions and subjected to higher category
of tariff – Challenged – Single Judge of the High Court found the
tariff order to be valid – Aforesaid order set aside by Division Bench
– On appeal, held: No undue preference was given to the State run
and State aided institutions in the tariff notification – No error
committed by the appellant in fixing higher tariff for the SFEIs
categorising them as commercial entities – Judicial notice taken of
the fact that the student profile of State run and State aided
institutions is different from those of SFEIs – Students from
comparatively modest background go to these institutions –While
construing the meaning of the expression “purpose” u/s.62(3), for
the purpose of settling the tariff question, who is serving the
“purpose” and for whom such “purpose” is being served have to
be factored in – Nature of service rendered by them cannot be the
sole determinant for the tariff-fixing exercise – The fact that SFEIs
were clubbed together with several commercial service providers
wholly unrelated to education becomes insignificant once it is found
that purpose of the SFEIs could be differentiated from the State run
and State aided educational institutions – Impugned judgment set
aside while that of the Single Judge is restored – Principles of Natural
Justice – Constitution of India – Art.14.
Principles of Natural Justice – When not breached – Self-
Financing Educational Institutions (SFEIs) segregated from State
run and State aided educational institutions and subjected to higher
tariff by Kerala State Electricity Regulatory Commission –
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Challenged inter alia on breach of principles of natural justice
contending that the tariff notification did not contain any reason –
Held: Commission’s role as a quasi-judicial body or it having
trappings of a Court would emerge only if it was called upon to
adjudicate a dispute – Having failed to generate any lis on the tariff
proposal by not raising any kind of objection, it would not be open
to SFEIs to demand disclosure of reasons along with publication of
the tariff rates – Thus, tariff notification being unaccompanied by
reason cannot be faulted for having breached the principles of
natural justice – Electricity Act, 2003.
Electricity Act, 2003 – Tariff fixation – Self-Financing
Educational Institutions (SFEIs) clubbed together with commercial
service providers and subjected to higher tariff – Challenged –
Held: While an educational institution in ordinary perception may
not be performing functions similar to the other entities undertaking
business ventures, a tariff fixing body is not required to proceed on
the basis of such common perception – Duty of such body is to
determine which rate an organisation shall pay, and entities working
in diverse fields can be clubbed together under a common umbrella
to be subjected to a common rate – In that context, for exercise of
this nature, the heading “commercial” cannot be constructed to
restrict the entities that can come under that head on the basis of
the nature of
their activities – Selection of heading is an exercise of
convenience in fixing tariff rates and not necessarily the controlling
factor in choosing the entities included under that heading.
Words & Expressions– “Purpose”, “Commercial” – Meaning
of, in the context of 2003 Act – Electricity Act, 2003.
Allowing the appeals, the Court
HELD: 1. There is a negative mandate of the legislature
upon the Commission in sub-section (3) of Section 62, Electricity
Act, 2003. While fixing tariff, the Commission cannot show undue
preference to any consumer of electricity. The Commission,
however, is vested with the power to prescribe differential rates
according to the consumers’ load factor, power factor, voltage,
total consumption of electricity during any specified period of
time at which supply is required. The other permissible
differentiating factors are geographical position of any area, the
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nature of supply and the purpose for which the supply is required.
[Para 7][896-B-D]
2.1 The requirement for disclosure of reason however could
originate in a case of this nature if there is a lis between the
consumer and the Commission. Unless of course, the statutory
provision prescribe otherwise. Once the Division Bench observed
that publication in the website was sufficient, the respondents-
writ petitioners (SFEIs) may not have had forfeited their right to
challenge the tariff notification in the Writ Court or the appellate
forum. But having failed to generate any lis on the tariff proposal
by not raising any kind of objection, it would not be open to them
to demand disclosure of reasons along with publication of the
tariff rates. The Commission’s role as a quasi-judicial body or it
having trappings of a Court would emerge only if it was called
upon to adjudicate a dispute. No dispute had been generated by
the writ petitioners on the basis of Commission’s proposal which
would have required it to undertake some form of adjudicatory
exercise. In such a situation, the exercise of fixing tariff has to
be undertaken as a quasi-legislative act only, which ordinarily a
tariff-fixing exercise is. Issue of the subject tariff notification
unaccompanied by reason thus cannot be faulted for having
breached the principles of natural justice. The forum of appeal
was open to them. But mere existence of an appellate forum in
the statute would not require a
tariff-fixing body to disclose the
reason for stipulating tariff-rate in each individual case. If any
appeal is preferred in relation to any specific case, the
Commission would then have to justify fixing a tariff rate in such
a case. Not having gone to the appellate forum, the writ petitioners
approached the Writ Court. Before the Writ Court, such tariff
fixation was open to challenge in the same way tariffs fixed in
exercise of quasi-legislative or administrative power is subjected
to judicial review. In absence of any statutory provision to the
contrary, once tariff proposal is published and goes unobjected
to before the State Commission, the question of disclosure of
reason for such fixation would not arise at the stage of finalisation
of tariff. If such tariff orders are later challenged before the
appellate forum or the Writ Court, the Commission would have
to defend its decision the same way an administrative or quasi-
legislative decision on fixing of tariff is defended. [Paras 10, 11]
[897-G-H][898-B-H]
KERALA STATE ELECTRICITY BOARD REP. BY ITS SECY. v. PRINCIPAL
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2.2 SFEIs have been categorised with entities like cinema
studios, hotels and restaurants, construction works etc., and
heading of LT-VII tariff items is “commercial”. While an
educational institution in ordinary perception may not be
performing functions similar to the other entities who undertake
business ventures, a tariff fixing body is not required to proceed
on the basis of such common perception. The duty of such body
is to determine which rate an organisation shall pay, and entities
working in diverse fields can be clubbed together under a
common umbrella to be subjected to a common rate. In that
context, for exercise of this nature, the heading “commercial”
cannot be constructed to restrict the entities that can come under
that head on the basis of the nature of their activities, i.e. whether
such activities have commercial attributes or not. Selection of
heading is an exercise of convenience in fixing tariff rates and
not necessarily the controlling factor in choosing the entities
included under that heading. [Para 14][900-F-H][901-A]
2.3 The expression “purpose” means, as per the Concise
Oxford English Dictionary, Tenth Edition, published by Oxford
University Press:- “1. the reason for which something is done or
for which something exists. 2. resolve or determination.” In the
given context, the noun “purpose” would fit into the first meaning
given in the aforesaid dictionary. The SFEIs have been
specifically
included under the heading “commercial” and it is not a case
where their character is being assessed inferentially, treating their
activities as commercial in a general sense of the term.
Profiteering is not the sole criteria on the basis of which the Tariff
Authorities segregated the two sets of organisations. In the event
the tariff fixing body, in this case, being the Commission, can
distinguish the purpose of the respective categories, they would
be entitled to impose different rates of tariffs for different
categories of educational institutions. [Paras 16-18][901-E-F][902-
A-B][902-D-E]
Rohtas industries Ltd. v. Chairman, Bihar State
Electricity Board & Ors. (1984) Suppl. SCC 161 :
[1984] SCR 59; M.P. Electricity Board & Ors. v. Shiv
Narayan & Ors. (2005) 7 SCC 283 : [2005] 2 Suppl.
SCR 958– held inapplicable.
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2.4 Though the Commission has not demonstrated through
factual evidence the facilities provided by these two sets of
institutions are different, it is of common knowledge, of which
the Court is taking judicial notice, that the student profile of State
run and State aided institutions is different from those of SFEIs.
Students from comparatively modest background go to the State
run or State funded institutions. While the meaning of the
expression “purpose” is construed under sub-section (3) of
Section 62 of the 2003 Act, for the purpose of settling the tariff
question, who is serving the “purpose” and for whom such
“purpose” is being served have to be factored in. The nature of
service rendered by them cannot be the sole determinant for the
tariff-fixing exercise. The State run and State aided institutions
are funded by the tax payers, which is also a material factor in
making distinction between the aforesaid categories of the
institutions. The expression “purpose” has to be understood in
the context of the character or feature of the entity which is
undertaking the activity of imparting education. [Para 19][902-F-
H][903-A-B]
2.5 No error was committed by the appellant in fixing higher
tariff for the Self-Financing Educational Institutions categorising
them as commercial entities. No undue preference has been given
to the State run and State aided institutions in the tariff notification.
The fact that SFEIs have been clubbed together with several
commercial service providers wholly unrelated to education
becomes insignificant once it is found that purpose of the SFEIs
could be differentiated from the Government run and Government
aided educational institutions. [Para 20][903-C-E]
PTC India Limited v. Central Electricity Regulatory
Commission (2010) 4 SCC 603 : [2010] 3 SCR 609;
State of Gujarat v. Utility Users Welfare Association
(2018) 6 SCC 221 – distinguished.
T.M.A Pai Foundation and Anr. v. State of Karnataka
and Ors. (2002) 8 SCC 481 : [2002] 3 Suppl. SCR
587; Social SG of Assisi sisters v. KSEB 1988 (1) KLT
1727; Shri Sitaram Sugars Co. Ltd. v. Union of India &
Ors. (1990) 3 SCC 223 : [1990] 1 SCR 909; The
Siemens Engineering & Manufacturing Co. of India Ltd.
KERALA STATE ELECTRICITY BOARD REP. BY ITS SECY. v. PRINCIPAL
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v. Union of India (1976) 2 SCC 981 : [1976] Suppl.
SCR 489; S.N. Mukherjee v. Union of India (1990) 4
SCC 594 : [1990] 1 Suppl. SCR 44; Kranti Associates
Pvt. Ltd. v. Sh. Masood Ahmed Khan SLP(C) No. 12766
of 2008; P.A. Inamdar & Ors. v. State of Maharashtra
& Ors. (2005) 6 SCC 537 : [2005] 2 Suppl. SCR 603,
Islamic Academy of Education & Another v. State of
Karnataka and Ors. (2003) 6 SCC 697: [2003] 2 Suppl.
SCR 474; Modern School v. Union of India (2004) 5
SCC 583 – referred to.
Case Law Reference
[2002] 3 Suppl. SCR 587
referred to
Para 2
[2010] 3 SCR 609
distinguished
Para 8
(2018) 6 SCC 221
distinguished
Para 8
[1990] 1 SCR 909
referred to
Para 8
[1976] Suppl. SCR 489
referred to
Para 8
[1990] 1 Suppl. SCR 44
referred to
Para 8
[2005]] 2 Suppl. SCR 603
referred to
Para 12
[2003] 2 Suppl. SCR 474
referred to
Para 12
(2004) 5 SCC 583
referred to
Para 12
[1984] SCR 59
held inapplicable
Para 17
[2005] 2 Suppl. SCR 958
held inapplicable
Para 17
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8350
of 2009.
From the Judgment and Order dated 17.08.2009 of the High Court
of  Kerala at Ernakulam in W.A. No. 989 of 2009.
With
Civil Appeal Nos.  8552-8573, 8574-8592, 8593-8605  of 2009,
1027-1046, 1048-1067, 1068-1080, 1009, 1025-1026, 1021-1023, 1003-
1007, 1010-1020, 1085, 1081-1082, 1083, 1084, 1087, 1086, 1088, 3101,
3091, 3093, 3095, 3110, 3102, 3103, 3109, 3112, 3104-3107, 3100, 3111,
3113, 3097, 3098-3099, 3096, 3092,
3108, 4533-4572, 3996, 3993, 3998-
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3999, 4000, 3997, 3990-3992, 3994-3995, 4653-4667, 4670-4672, 4652,
4674, 4673, 4669, 4668 of 2010.
Basava Prabhu Patil, Pallav Shishodia, Jayant Muthuraj, Sr. Advs.,
P.V. Dinesh, Ms. Sindhu T.P., Mukund P. Unny, Bineesh K., R.S.
Lakshman, Ashwini Kumar Singh, G. Prakash, M. T. George, Romy
Chacko, Shakti Chand Jaiswal, Geet Ahuja, Ms. Ojaswi Sharma, V. K.
Sidharthan, E. M. S. Anam, Pawan Kishore Singh, Ms. Madhusmita
Bora, Ms. Bindu Nair, V. K. Monga, Jogy Scaria, Ranjith K. C., Roy
Abraham, Ms. Reena Roy, Ms. Seema Jain, Akhil Abraham, Himinder
Lal, Raghenth Basant, Raghav Mehrotra, Ms. Mahamaya Chatterjee,
Ms. Liz Mathew, Ashwani Bhardwaj, Parmanand Pandey, M/S. Equity
Lex Associates, A. Raghunath, Prakash Ranjan Nayak, K. Rajeev,
Ramesh Babu M. R., Chandy Oommen, Ms. Swati Setia, C. K. Sasi,
Pratap Venugopal, Ms. Surekha Raman, Ms. Viddusshi, Akhil Abraham
Roy (for M/s. K J John and Co.), K. Ramesh, Kumar Gaurav,
Mrs. Neeraj Singh, Ms. Ritu Beniwal, B.N. Dubey, P. Dayal, Mrs.
Swarupama Chaturvedi, Advs. for the appearing parties.
The Judgment of the Court was delivered by
ANIRUDDHA BOSE, J.
1. The legality of a part of a tariff notification issued by the Kerala
State Electricity Regulatory Commission (“Commission”) segregating
Self-Financing Educational Institutions (SFEI) from Government run and
Government Aided Private Educational Institutions and subjecting the
former to a higher category of tariff is the only question involved in this
batch of
appeals. The notification to that effect was issued by the
Commission on 26th November, 2007 bearing Order No.TP 23 and TP
30 of 2007. Such tariff was to take effect from 1st December, 2007.
SFEIs have been categorised under the head Low Tension VII(A)
Commercial in that notification. The Government run or aided private
educational institutions have been placed under Low Tension VI Non-
Domestic tariff category. The Commission is the appellant before us in
this set of appeals. Such tariff notification was published in terms of
Kerala State Electricity Regulatory Commission (Terms and Conditions
of determination of tariff for distribution and retail sale of electricity
under MYT Framework) Regulations, 2006.
2. Several Writ Petitions came to be filed by different SFEIs
questioning legality of such segregation which in effect created a higher
KERALA STATE ELECTRICITY BOARD REP. BY ITS SECY. v. PRINCIPAL
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tariff regime for them. Altogether 52 writ petitions were taken up for
hearing by a learned Single Judge of the Kerala High Court (the First
Court). The learned Single Judge found the tariff order to be valid, relying
on a decision of a Constitution Bench of this Court in the case of
T.M.A Pai Foundation and Anr. v. State of Karnataka and Ors.
2002 (8) SCC 481 and a Bench judgment of the High Court of Kerala in
the case of Social SG of Assisi sisters v. KSEB 1988 (1) KLT 1727.
The First Court decided the issue in favour of the Commission, inter-
alia, on the following reasoning:-
“But, I note that there is no pleading whatsoever for the petitioners
about the Government Order. There is no case in the Writ Petitions
based on the Order. Further, the Higher Secondary Schools are
attached to Schools having Standards upto High School Section,
where as I have already noted, there is no restriction as contained
in relation to Government and Aided Schools. Also, what has been
fixed is the minimum salary of teachers and others. It appears to
be low. What is important is the capability to raise revenue and its
ramifications, and not whether any particular Self-Financing
Educational Institutions is actually making use of its power to raise
revenue, as ordinarily a Self-Financing Educational Institution may
raise.”
3. In appeal by the SFEIs, the Division Bench of the High Court
set aside the judgment of the First Court. The
Division Bench found that
the differentiation was not for any of the grounds specified in Section 62
(3) of the Electricity Act, 2003. That is the provision under which the
State Commission can determine the tariff. Section 62 of the 2003 Act
specifies:-
“62. Determination of tariff:- (1) The Appropriate Commission
shall determine the tariff in accordance with the provisions of this
Act for –
(a) supply of electricity by a generating company to a distribution
licensee:
Provided that the Appropriate Commission may, in case of shortage
of supply of electricity, fix the minimum and maximum ceiling of
tariff for sale or purchase of electricity in pursuance of an
agreement, entered into between a generating company and a
licensee or between licensees, for a period not exceeding one
year to ensure reasonable prices of electricity;
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(b) transmission of electricity;
(c) wheeling of electricity;
(d) retail sale of electricity:
Provided that in case of distribution of electricity in the same area
by two or more distribution licensees, the Appropriate Commission
may, for promoting competition among distribution licensees, fix
only maximum ceiling of tariff for retail sale of electricity.
(2) The Appropriate Commission may require a licensee or a
generating company to furnish separate details, as may be specified
in respect of generation, transmission and distribution for
determination of tariff.
(3)  The Appropriate Commission shall not, while determining the
tariff under this Act, show undue preference to any consumer of
electricity but may differentiate according to the consumer’s load
factor, power factor, voltage, total consumption of electricity during
any specified period or the time at which the supply is required or
the geographical position of any area, the nature of supply and the
purpose for which the supply is required.”
(4) No tariff or part of any tariff may ordinarily be amended,
more frequently than once in any financial year, except in respect
of any changes expressly permitted under the terms of any fuel
surcharge formula as may be specified.
(5) The Commission may require a licensee or a generating
company to comply with such procedures as may be specified for
calculating the expected revenues from the tariff and charges
which he or it is permitted to recover.
 (6) If
any licensee or a generating company recovers a price or
charge exceeding the tariff determined under this section, the
excess amount shall be recoverable by the person who has paid
such price or charge along with interest equivalent to the bank
rate without prejudice to any other liability incurred by the licensee.
4. It was, inter-alia held by the Division Bench:-
“When the supply is to an educational institution, irrespective of
whether it is self-financing or aided or governmental purpose,
cannot be different, as education means to impart knowledge.
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Education in ancient times was not connected with earning. Free
education is what was accord in dharma. Education ought to be
the resource for tradition, loyalty to culture and ideals of service
to society. We cannot, in the absence of materials and evidence,
simply accept that educational institutions, though Self Financing,
are profiteering or run as business. There are also absolutely no
materials placed on the question as to whether electricity is
consumed by the Self-Financing Educational Institutions for any
other purpose. The vague statement that building is air conditioned
without specifying how many institutions are having air conditioned
buildings or apparatus having high consumption of electricity etc.
are not matters on which specific pleas with reference to details
are made available. We may, at the risk of repetition, say that we
are only examining the justifiability of treating Self Financing
Educational Institutions with reference to other institutions-aided/
Governmental-from the point of view of electricity consumption
as borne out by the affidavits filed before this Court and we have
in that attempt considered the factors pleaded by them and found
to be unsustainable.”
5. It is this judgment of the Division Bench of the High Court
delivered on 17th August 2009 which is under appeal before us. Before
the First Court, apart from irrational or arbitrary discrimination, fixation
of tariff was assailed
on certain other grounds as well. These grounds
included breach of the principles of natural justice and lack of power of
the Commission to fix tariff suo motu. The writ petitioners questioned
the reasonableness in clubbing the educational institutions, many of whom
were run by not for profit organisations, with other entities whose object
was ex-facie profit oriented. It was urged that tariff for SFEIs could not
be brought under the head “Commercial”. The Division Bench rejected
the Commission’s plea for dismissal of the writ petitions on the point of
availability of alternative remedy in the form of statutory appeal. We
find from the judgment under appeal that challenge to the tariff notification
on the ground of being violative of the provisions of Article 14 of the
Constitution of India was not pressed by the respondents-writ petitioners.
The writ petitioners also did not seriously press their challenge to the
subject notification on the question of lack of suo motu power of the
Commission to fix tariff before the Division Bench. The main point which
was urged and argued before the Division Bench was as to whether
under the provisions of Section 62(3) of the 2003 Act, the differentiation
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of SFEIs from the other set of institutions for the purpose of fixing of
tariff was legally justifiable or not. The Division Bench decided the issue
in favour of the SFEIs. On behalf of the appellant, the argument that the
respondents (writ petitioners) had alternative remedy in the form of appeal
under Section 111 of the 2003 Act has been reiterated and it has been
submitted that for this reason alone, the writ petitions ought to have been
dismissed. This contention was rejected by the First Court and both the
First Court and the Division Bench have addressed the points raised in
the writ petition on merit. The objection based on subsistence of
alternative remedy having been rejected by the Court of first instance as
also the appellate forum, we do not think upon granting leave under
Article 136 of the Constitution of India, it would be proper on our part to
entertain this question on maintainability of the writ petitions again and
relegate the dispute to the Statutory Authority solely on this ground.
There is no deep factual dispute involved in these proceedings. These
are also not cases where exercise of writ jurisdiction can be held to be
fundamentally flawed, like in a case involving purely private dispute. In
this perspective, entertaining such objection at this stage would result in
wastage of judicial time and also lead to adding unnecessary layers to
the decision making process on a particular lis.
6. Before us, submissions have been made on the
basis of Civil
Appeal No. 8350 of 2009 though both the First Court and the Division
Bench dealt with all the matters in their respective common judgments.
The writ petitioner in this proceeding was Principal Sir Syed Institute for
Technical Studies in Thiruvananthapuram. So far as the issues involved
in all these appeals are concerned, the distinguishing factual elements
are few and insignificant.  Such distinguishing elements of the individual
cases would have no impact on outcome of these appeals. We shall,
accordingly, address the appeals on merit. On behalf of the Commission,
it has been argued before us that the respondents/writ petitioners had
sufficient opportunity to raise objection before the Commission itself as
the proposed tariff was published on its website, but none of the SFEIs
chose to raise any objection at that stage. It is also submission of the
Commission that the purpose of the two categories of educational
institutions can be gathered from the distinguishing features broadly under
the following six heads:-
(i) different fee structure
(ii) different wage structure
KERALA STATE ELECTRICITY BOARD REP. BY ITS SECY. v. PRINCIPAL
SIR SYED INSTT. FOR TECHNICAL STUDIES [ANIRUDDHA BOSE, J. ]
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(iii) employee welfare measures
(iv) larger social purpose the government run and aided institutional
seek to achieve
(v) profit motive not present in the former category of institutions.
(vi) Facilities provided by the respective categories of institutions.
7. What has been addressed in the judgment under appeal relates
to all SFEIs. We shall now come straight to sub-section (3) of Section 62
of the 2003 Act, the text of which we have reproduced in earlier part of
this judgment. Main case of the writ petitioners is that the tariff notification
was issued ignoring the statutory mandate contained in the said provision.
There is a negative mandate of the legislature upon the Commission in
this sub-section. While fixing tariff, the Commission cannot show undue
preference to any consumer of electricity. The Commission, however, is
vested with the power to prescribe differential rates according to the
consumers’ load factor, power factor, voltage, total consumption of
electricity during any specified period of time at which supply is required.
So far as fixing different rates for these two categories of the educational
institutions, these factors did not come into play. The other permissible
differentiating factors are geographical position of any area, the
nature of supply and the purpose for which the supply is required.
As regards this set of differentiating factors, the tariff advantage for
government run and aided
educational institutions do not appear to be
based on geographical position or nature of supply. The Commission
however has justified the classification of the aforesaid two sets of tariffs
on the basis of purpose for which supply is required by the consumers.
8. The writ petitioners’ case on breach of the principles of natural
justice rested on two planks. First was that adequate opportunity for
raising objection was not given to the Self-Financing Educational
Institutions. The second plank of the writ petitioners’ case on this very
principle was that the tariff notification did not contain any reason.
According to the writ petitioners, fixing of tariff order is a quasi-judicial
exercise and disclosure of reason is imperative to support any decision
coming out of such exercise. On nature of tariff-fixing exercise, the
decisions which have been relied upon are the cases of PTC India
Limited v. Central Electricity Regulatory Commission [(2010) 4
SCC 603], State of Gujarat v. Utility Users Welfare Association
[(2018) 6 SCC 221] and Shri Sitaram Sugars Co. Ltd. v. Union of
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India & Ors. [(1990) 3 SCC 223]. On the aspect of requirement for
disclosure of reasons in a quasi-judicial proceeding, The Siemens
Engineering & Manufacturing Co. of India Ltd. v. Union of India
(1976 2 SCC 981), S.N. Mukherjee v. Union of India (1990) 4
SCC 594 and Kranti Associates Pvt. Ltd. v. Sh. Masood Ahmed
Khan [SLP(C) No.12766 of 2008], decided on 8th September, 2010
have been cited.
9. As regards the argument of the writ petitioners on the point of
violation of the principles of natural justice, the Division Bench found
uploading of tariff proposal on the website to be broadly in compliance
with the statutory requirement. We find from the judgment of the First
Court that the Commission had issued notice inviting objections/
suggestions from the Public Consumers and other stake holders. In the
notice only, it was mentioned that the details were available in the website
of the Commission and the same was available on request. Such details
included the proposed higher tariff rate for the SFEIs. We do not find
much discussion on the second plank of the writ petitioners’ argument
on breach of the principles of natural justice in the judgment under appeal.
Neither of the two cases cited on behalf of the writ petitioners on the
point of the Commission being a quasi-judicial body deal with the aspect
of necessity to disclose reason in a tariff fixing order by a statutory body
like the Commission. In the case of State of Gujarat (supra), the question
this Court dealt with was on qualification of a Chairman of the Regulatory
Commission. While dealing with that question, it was held that the State
Commissions have the trappings of a Court. In the case of PTC India
Ltd. (supra), the dispute was on the point as to whether a Regulation
framed under Section 178 of the 2003 Act was appealable under Section
111 of the said statute. While exploring that controversy, a Constitution
Bench of this Court examined the scope of jurisdiction of the Commission
and found tariff fixation under Section 62 of the 2003 Act to be quasi-
judicial function. One of the reasons for such finding was that the tariff
order was appealable under the statute.
10. Now question arises as to whether the Commission, on being
clothed with quasi-judicial character was required to disclose reasons
for issuing the tariff notification, the legality of which is subject of dispute
in these proceedings. The requirement for disclosure of reason however
could originate in a case of this nature if there is a lis between the consumer
and the Commission. Unless of course, the statutory provision prescribe
otherwise. In the present case, the Division Bench observed: -
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“True that the manner in which notice could be issued being
prescribed under the Regulation adherence to that provision by
publishing in the website or in the notice board may be sufficient.
But all that we wish to say is that there is no justification for the
respondents to say that the petitioners did not make any objection
and they can be non suited on that ground…”
11. Once the Division Bench observed that publication in the
website was sufficient, the writ petitioners may not have had forfeited
their right to challenge the tariff notification in the Writ Court or the
appellate forum. But having failed to generate any lis on the tariff proposal
by not raising any kind of objection, it would not be open to them to
demand disclosure of reasons along with publication of the tariff rates.
The Commission’s role as a quasi-judicial body or it having trappings of
a Court would emerge only if it was called upon to adjudicate a dispute.
As we have already discussed, no dispute had been generated by the
writ petitioners on the basis of Commission’s proposal which would have
required it to undertake some form of adjudicatory exercise. In such a
situation, the exercise of fixing tariff has to be undertaken as a quasi-
legislative act only, which ordinarily a tariff-fixing exercise is. Issue of
the subject tariff notification unaccompanied by reason thus cannot be
faulted for having breached the principles of natural justice.
The forum
of appeal was open to them. But mere existence of an appellate forum
in the statute would not require a tariff-fixing body to disclose the reason
for stipulating tariff-rate in each individual case.  If any appeal is preferred
in relation to any specific case, the Commission would then have to
justify fixing a tariff rate in such a case. The duty to disclose reason
would crystallise then only, in a situation where a particular tariff fixing
proposal goes without any objection after its draft publication. Not having
gone to the appellate forum, the writ petitioners approached the Writ
Court. Before the Writ Court, such tariff fixation was open to challenge
in the same way tariffs fixed in exercise of quasi-legislative or
administrative power is subjected to judicial review. Thus, in our opinion,
in absence of any statutory provision to the contrary, once tariff proposal
is published and goes unobjected to before the State Commission, the
question of disclosure of reason for such fixation would not arise at the
stage of finalisation of tariff. If such tariff orders are later challenged
before the appellate forum or the Writ Court, the Commission would
have to defend its decision the same way an administrative or quasi-
legislative decision on fixing of tariff is defended. Since we have taken
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this view, we do not consider it necessary to deal with the authorities
which lay down the dictum of law that a quasi-judicial authority is required
to disclose reasons in support of its decision.
12. Learned counsel for the SFEIs, being the writ petitioners have
asserted that the purpose of both Government or Government Aided
Institutions and Self-financing Institutions is the same, which is imparting
education and discrimination between these two sets of institutions is
not permissible under Section 62(3) of the Act. Countering the appellants’
submission that the self-financing institutions carry profit-motive or it is
some kind of commercial venture, our attention has been drawn to four
authorities of this Court being the cases of T.M.A Pai Foundation
(supra), P.A. Inamdar & Ors. v. State of Maharashtra & Ors.
[(2005) 6 SCC 537], Islamic Academy of Education & Another v.
State of Karnataka and Ors. [(2003) 6 SCC 697] and Modern
School v. Union of India [(2004) 5 SCC 583]. All these authorities
deal with the fee-structures of private educational institutions. In the
case of T.M.A Pai (supra), it has been held and observed:
“56. One also cannot lose sight of the fact that we live in a
competitive world today, where professional education is in
demand. We have been given to understand that a large number
of professional and other institutions have been started by private
parties who do not seek any governmental aid. In a sense, a
prospective student has
various options to him/her, where,
therefore, normally economic forces have a role to play. The
decision on the fee to be charged must necessarily be left to the
private educational institution that does not seek or is not dependent
upon any funds from the Government.
57. We, however, wish to emphasize one point, and that is that in
as much as the occupation of education, is in a sense, regarded as
charitable, the Government can provide regulations that will ensure
excellence in education, while forbidding the charging of capitation
fee and profiteering by the institution. Since the object of setting
up an educational institution is be definition “charitable”, it is clear
that an educational institution cannot charge such a fee as is not
required for the purpose of fulfilling that object. To put it differently,
in the establishment of an educational institution, the object should
not be to make a profit, in as much as education is essentially
charitable in nature. There can, however, be a reasonable revenue
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surplus, which may be generated by the educational institution for
the purpose of development of education and expansion of the
institution.”
13. Referring to the aforesaid passages, it was contended on behalf
of the writ petitioners that there is bar on profiteering even on private
educational institutions though reasonable revenue surplus generation
on their part is permissible. In the case of Modern School v. Union of
India (2004) 5 SCC 583 it has been held:-
“14. At the outset, before analysing the provisions of the 1973
Act, we may state that it is now well settled by a catena of
decisions of this Court that in the matter of determination of the
fee structure unaided educational institutions exercise a great
autonomy as they, like any other citizen carrying on an occupation,
are entitled to a reasonable surplus for development of education
and expansion of the institution. Such institutions, it has been held,
have to plan their investment and expenditure so as to generate
profit. What is however, prohibited is commercialisation of
education. However, in none of the earlier cases, this court has
defined the concept of reasonable surplus, profit, income and yield,
which are the terms used in the various provisions of the 1973
Act.”
14. What these authorities lay down in substance is that the Self
Financing Educational Institutions are not permitted to indulge in
profiteering but that does not imply they cannot
generate reasonable
revenue surplus to enable them to continue with their activities. In addition,
the writ petitioners have submitted that many of them are charitable
organisations and “not for profit” entities and they cannot be clubbed
together with other commercial organisations.  We find from the subject-
notification that SFEIs have been categorised with entities like cinema
studios, hotels and restaurants, construction works etc., and heading of
LT-VII tariff items is “commercial”. While an educational institution in
our ordinary perception may not be performing functions similar to the
other entities who undertake business ventures, a tariff fixing body is not
required to proceed on the basis of such common perception. The duty
of such body is to determine which rate an organisation shall pay, and
entities working in diverse fields can be clubbed together under a common
umbrella to be subjected to a common rate. In that context, for exercise
of this nature, the heading “commercial” cannot be constructed to restrict
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the entities that can come under that head on the basis of the nature of
their activities, i.e. whether such activities have commercial attributes
or not. Selection of heading is an exercise of convenience in fixing tariff
rates and not necessarily the controlling factor in choosing the entities
included under that heading.
15. The counsel for the Commission also has argued that the SFEIs
provide various facilities to their students. But it has been recorded in
the judgment under appeal that such fact was not substantiated before
the Division Bench. Thus, no material is there before us from which the
Commission could demonstrate that the SFEIs provide luxury or semi-
luxury amenities to their students. In the light of these facts can it be
held that purpose of both Government run and aided institutions and
SFEIs was same and hence no differentiation could be made on tariff
rate on that basis? We are not testing here the differentiation on the
anvil of Article 14 of the Constitution of India as the writ petitioners
before the Division Bench do not appear to have had pressed their
challenge to the notification on that ground.
16. The question we shall address now is whether preference
shown by the Commission to the State run and aided educational
institutions in fixing tariff was justified having regard to the purpose for
which supply was required. The expression “purpose” means, as per
the Concise Oxford English Dictionary, Tenth Edition, published
by
Oxford University Press:- “1. the reason for which something is
done or for which something exists. 2. resolve or determination.”
In the given context, the noun “purpose” would fit into the first
meaning given in the aforesaid dictionary, which we have quoted above.
Contention of the writ petitioners is that the purpose of both of these two
sets of educational institutions remain the same being imparting education
and no discrimination in tariff rate could be made between them having
regard to Section 62 (3) of the 2003 Act.
17. The writ petitioners have advanced two-fold submission on
this aspect. First, they have contended that capacity to pay cannot be
the determinant factor in electricity tariff fixing exercise, relying on the
case of Rohtas industries Ltd. vs. Chairman, Bihar State
Electricity Board & Ors. (1984 (Supp) SCC 161). This judgment
was delivered construing Section 49(3) of the Electricity Supply Act,
1948.  In the case of M.P. Electricity Board & Ors. vs. Shiv Narayan
& Ors. (2005) 7 SCC 283, this Court found professional activities of
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an advocate did not constitute commercial activity so as to attract
commercial rate of electricity. But ratio of these two decisions do not
aid the writ petitioners. So far as meaning of the expression “commercial”
is concerned, we have dealt with that issue earlier in this judgment.  The
SFEIs have been specifically included under the heading “commercial”
and it is not a case where their character is being assessed inferentially,
treating their activities as commercial in a general sense of the term.
18. The Writ Petitioners have argued that they cannot indulge in
fixing excessive fees in respect of their schools and in this regard two
statutory instruments have been brought to our notice which postulates
restriction on collection of excessive fees. These are Kerala Professional
Colleges or Institutions (Prohibition of Capitation Fee, Regulation of
Admission, Fixation of Non-Exploitative Fee and Other Measures to
Ensure Equity and Excellence in Professional Education) Act, 2006 and
Kerala Education Rules, the latter having been referred to in the judgment
under appeal. On the basis of these statutory provisions, the Writ
Petitioners seek to contend that they cannot indulge in profiteering and
have to charge fees to the students as regulated by the authorities. But
in our opinion profiteering is not the sole criteria on the basis of which
the Tariff Authorities segregated the two sets of organisations. In the
event
the tariff fixing body, in this case, being the Commission, can
distinguish the purpose of the respective categories, they would be entitled
to impose different rates of tariffs for different categories of educational
institutions.
19. We have already referred to the dictionary meaning of the
expression “purpose”. The writ petitioners’ contention is that the reason
of their formation or existence is imparting education and this is so for
the Government run and aided institutions also. On this basis, they argue
that different tariffs could not be charged to these two sets of institutions.
We are, however, unable to accept this argument. Though the Commission
has not demonstrated through factual evidence the facilities provided by
these two sets of institutions are different, it is of common knowledge,
of which we take judicial notice, that the student profile of state run and
state aided institutions is different from those of SFEIs. Students from
comparatively modest background go to the State run or State funded
institutions. While we construe the meaning of the expression “purpose”
under sub-section (3) of Section 62 of the 2003 Act, we are of the opinion
that for the purpose of settling the tariff question, who is serving the
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“purpose” and for whom such “purpose” is being served have to be
factored in. We also have to take into account that the nature of service
rendered by them cannot be the sole determinant for the tariff-fixing
exercise. The State run and State aided institutions are funded by the
tax payers, which is also a material factor in making distinction between
the aforesaid categories of the institutions. The expression “purpose”
has to be understood in the context of the character or feature of the
entity which is undertaking the activity of imparting education. While
funding educational institutions, the State undertakes to discharge one of
its essential welfare measures. On behalf of the Commission certain
cases decided by the Appellate Tribunal were referred to but since we
are deciding primarily the scope of Section 62(3) of the 2003 Act, we do
not consider it necessary to refer to those cases.
20. Viewing the case of the appellant in that perspective, in our
opinion, no error was committed by them in fixing higher tariff for the
Self-Financing Educational Institutions categorising them as commercial
entities. No undue preference has been given to the State run and State
aided institutions in the tariff notification. The fact that SFEIs have been
clubbed together with several commercial service providers wholly
unrelated to education becomes insignificant once we find that purpose
of the SFEIs could be differentiated from the Government run and
Government
aided educational institutions.
21. For these reasons, we are unable to agree with the view of
the Division Bench. The judgment under appeal is set aside and the
judgment of the First Court is restored. The appeals are allowed in the
above terms. All connected applications are disposed of. Interim orders,
if any, shall stand dissolved. There shall be no order as to costs.
Divya Pandey
Appeals allowed.
KERALA STATE ELECTRICITY BOARD REP. BY ITS SECY. v. PRINCIPAL
SIR SYED INSTT. FOR TECHNICAL STUDIES [ANIRUDDHA BOSE, J. ]