Case: B.S.E.S. Ltd Vs. Tata Power Co. Ltd.

2. The Tata Power Company Ltd. (for shortis a generating company within the meaning of Sub-section 4A of Section 2 and a bulk licensee within the meaning of Sub-section (3) of Section 2 of the Electricity (supply) Act, 1948. An agreement was arrived at between Maharashtra State Electricity Board (for shortand TPC in or about March, 1985, whereby TPC was provided 300 MVA standby facility from MSEB and it was further agreed that in view of the growing requirement of the city of Bombay, the said standby facility would stand enhanced by a quantum of 50 MVA per year. This standby facility increased to 550 MVA by the year 1990 and payment for the same was to be made irrespective of the fact whether electricity was drawn or not and if electricity was drawn, actual payment for the same was to be made over and above the standby charges. In the year 1990, it was agreed that the annual increase in the standby facility would no longer be operational and henceforth TPC would be entitled to avail of and pay for the standby facility of only 550 MVA. This agreement was reduced in writing by way of letter dated 6.7.1990 addressed by MSEB to TPC.3. The Bombay Subraban Electric Supply Company (for shorthad been granted a distribution licence in the year 1926 which was amended in the year 1976 to enable it to become a generator of electricity in order to take care of enhanced demand in the city of Bombay. The licence was further amended on 30.5.1992 and it contained a clause requiring BSES to execute suitable interconnection with the system of TPC with the approval of Central Electricity Authority, New Delhi. A meeting was held between TPC and BSES on 29.6.1992 regarding technical/commercial aspect of said interconnection. It was agreed that as TPC already had an arrangement with MSEB whereby standby facility was provided to it, similar standby facility may be provided to BSES from the standby capacity reserved by TPC with MSEB and appropriate sharing of charges could be worked out. The power plant established by BSES at Dahanu became operational in 1995 and with effect from August 1995 it started supplying power to the city of Bombay as per the conditions of the licence.4. Due to dispute on commercial terms between TPC and BSES the interconnection was not established for a long time though technical arrangements had been made. The Maharashtra Government appointed a Committee under the chairmanship of Principal Secretary, Energy, of which representatives of MSEB, TPC and BSES were members. After taking into account the recommendation of the Committee the Government of Maharashtra on 19.1.1998 directed TPC and BSES to interconnect with one another and further directed TPC to provide to BSES standby supply of 275 MVA. It was further directed that BSES would pay Rs. 3.5 crores per month to TPC for such standby facility. It was also mentioned in the order that standby charges were based upon existing tariffs of TPC and BSES and the same may be reviewed during tariff revision in future. An agreement in that regard was thereafter executed between TPC and BSES on 31.1.1998 and the interconnection between the two systems was established on 14.2.1998.5. The MSEB was charging an amount of Rs. 24.75 crores per month from TPC for providing the standby facility of 550 MVA. On 31.8.1998 MSEB served a notice on TPC intimating its intention to enhance the charges for this standby facility from Rs. 24.75 crores to Rs. 30 crores per month with effect from 1.12.1998. The TPC then gave a notice dated 30.9.1998 to BSEB of its intention to enhance the charges for the standby facility of 275 MVA provided by it from Rs. 3.5 crores per month to Rs. 15.125 crores per month with effect from 1.12.1998. The notices were given under the third provision to para 1 of Sixth Schedule to Electricity (Supply) Act, 1948, which lays down that licensee shall not enhance the charges for the supply of electricity until after the expiry of a notice in writing of not less than sixty clear days of its intention to so enhance the charges. On account of the notice given by TPC for increasing charges of standby supply of 275 MVA, a dispute arose and a meeting was convened on 4.3.1999, wherein the Deputy Chief Minister, Government of Maharashtra and representatives of both the sides were present. The Deputy Chief Minister though advised both the parties to settle to issue amicably between themselves without referring to the Government but at the same time issued certain directions , namely, BSES should share Rs. 9 crores out of Rs. 22 crores additional standby charges levied by MSEB upon TPC for the period 1.12. 1998 to 31.3.1999 and the issue regarding sharing of standby charges for the period 1.4.1999 onwards be referred to a Committee to be constituted by the State Government. The Government of Maharashtra thereafter constituted a Committee on 27.5.1999 to study certain issues including that of standby charges to be paid by BSES to TPC and to submit a report. Shortly, thereafter a notification was issued on 5.8.1999 constituting the Maharashtra Electricity Regulatory Commission (for short ‘theThe Committee constituted by the Government of Maharashtra on 27.5.1999 in its meeting held on 2.5.2000 resolved that in view of constitution of the Commission the question of payment of standby charges could only be determined by the Commission and accordingly resolved that the said issue be referred to the Commission for determination. An intimation in this regard was also sent to the respective parties. However, the Government of Maharashtra passed an order on 22.3.2000 whereby BSES was directed to pay standby charges to TPC at the rate of 50 per cent of the amount of standby charges payable by TPC to MSEB. This was done on the basis that MSEB was providing standby facility of 550 MVA to TPC and as TPC was providing standby facility of 275 MVA to BSES, it should pay half of the said amount. The order further provided that for the period 1.12.1998 to 31.3.1998 BSES should pay Rs. 9 crores as standby charges to TPC. BSES was not satisfied with the aforesaid order of the Government and made repeated requests for review of the same and lastly on 6.10.2000, it sent a detailed letter to the Government requesting for reconsideration of the matter.6. The Government of Maharashtra issued a notification on 27.10.2000 conferring upon the Commission powers to adjudicate upon the disputes and differences between licensees and utilities and to refer the matter for arbitration as provided in clause (n) of Sub-section (2) of Section 22 of the Electricity Regulatory Commissions Act, 1998. The Government wrote a letter to TPC on 30.10.2000 informing that in view of conferment of power under Section 22(2)(n) of the Act upon the Commission the dispute regarding the standby charges between TPC and BSES has to be submitted to the said Commission. Thereafter, BSES filed a petition before the Commission for resolution of dispute regarding the charges for standby facility of 275 MVA provided to it by TPC and the petition was registered as Case No. 7 of 2000. On 5.12.2000, the Government of Maharashtra informed TPC and BSES that its earlier order dated 22.3.2000 is being put on hold till the decision of the Commission is given.7. After considering the submissions made by the representatives for the parties, the Commission decided the petition filed by BSES by the order dated 7.12.2001. The main part of the order was written by two Members of the Commission who directed as under: 1) BSES shall make payment of Rs. 77.06 crores together with interest thereon at the rate then applicable with effect from 1.4.2000 to TPC within four weeks from the date of the order for the year 1999-2000. While making payments due credit shall be made for the amounts paid by them. 2) The TPC shall, in turn, pay the balance amount remaining out of Rs. 363 crores due as standby charges together with interest due thereon at the rate then applicable to MSEB for the year 1999-2000 within a week thereafter and close the matter so far as the year 1999-2000 is concerned. 3) Based on the principles outlined in the order, calculations for the year 2000-2001 should also be made and payments effected suitably by BSES and TPC so that the dues to the MSEB in respect of standby charges are settled for the past period within three months from the date of the order. 4) For the current financial year 2001-2002 such calculations will not be possible till the close of the year, whereafter only the cost and other relevant accounting details will become available. In terms of the minutes of the order passed by Bombay High Court on 19.3.2001 in Writ Petition No.31 of 2001 filed by TPC against BSES, it had undertaken to deposit Rs. 8.25 crores per month with the Commission on the 15th day of each month until the Commission disposed of the petition finally and subject to such adjustments, as may be necessary, as a result thereof. On the same analogy for the year 2001-2002, BSES should pay to TPC Rs. 10 crores per month (Rs. 119.06 crores divided by 12) as their share of standby charges till such time the calculations are made and consequential adjustment is made.8. The Chairman of the Commission gave a separate and dissenting order and he arrived at a different amount.9. Both BSES and TPC were not satisfied with the order passed by the Commission and accordingly preferred separate appeals before the Bombay High Court which have been decided by a common judgment and order dated 3.6.2003 which is the subject matter of challenge in the present appeals. The High Court allowed both the appeals and set aside the orders passed by the Commission and the proceedings have been remitted back to the Commission for de novo consideration and decision in accordance with law in the light of the observations made in the order. It has been directed that during the pendency of the proceedings before the Commission for the period from 1.7.2003, BSES shall pay to TPC 50 per cent of the standby charges that are payable by TPC to MSEB for the standby facility provided to it. It has also been directed that TPC shall pay to MSEB 50 per cent of the standby charges payable to it to MSEB for standby facility of 550 MVA and shall also promptly make over to MSEB the amount paid to it by BSES pursuant to the order. So far as the arrears of standby charges are concerned, it has been directed that 80 per cent of the said amount shall be paid by BSES to TPC and the TPC shall immediately pay that amount to MSEB. The remaining 20 per cent of amount of arrears shall be paid by TPC to MSEB.

Court's reasoning:
is not possible to accept the contention of Shri Nariman that the State Government had the authority or jurisdiction on 22.3.2000 to determine or quantify the charges which BSES had to pay to TPC under the terms of the license granted to the former as this was subsequent to the formation of the Maharashtra Electricity Regulatoryour opinion, the contention raised has no substance. The legal position has undergone a complete change with the enforcement of the Electricity Regulatory Commissions Act, 1998. In view of Section 29 of the Act, the tariff for intra-State transmission of electricity and tariff for supply for electricity in wholesale, bulk or retail has to be determined by the Electricity Regulatory Commission of the State and a licensee cannot by its unilateral action enhance the charges. The provisions of the Act have an overriding effect by virtue of section 29 of the Act and, therefore any provisions of electricity (supply) Act, 1948, which are inconsistent with the Act would cease to apply and consequently the provisions of Sixth Schedule of the said Act can have no application now. The Sixth Schedule has been made by virtue of Section 57 and 57A of the Electricity (Supply) Act, 1948 and Section 57A contemplates constitution of a Rating Committee by the State Government to examinecharges for the supply of electricity. Section 29(6) of the Act specifically lays down that notwithstanding anything contained in Section 57A and 57B of the Electricity (Supply) Act, 1948, no Rating Committee shall be constituted after the date of the commencement of the Act. The effect of Section 29 and Regulations framed thereunder is that it is no longer open to a licensee or utility to unilaterally increase the tariff. The tariff can be enhanced only after approval of the Commission and charging of an enhanced tariff which has not been approved by the Commission will amount to commission of an offence. Therefore, the notice to enhance the charges given by TPC, which was subsequent to the enforcement of the Act, can have no legal effect.20. Shri Nariman has also submitted that even assuming that the standby charges are a matter relating to tariff as the same are passed on to the consumers, but the sharing of standby charges between TPC and BSES is not a matter relating to determination of tariff and, therefore, the Commission can have no jurisdiction to enter into such an exercise under Section 22 of the Act. The submission proceeds on an assumption that the dispute relates to sharing of standbyprocedure adopted by the Commission was not fair and proper inasmuch as the Chairman did not participate in the meetings which other two members had with the Consultants, whereunder a formula was devised. Under Regulation 21, the quorum for proceedings before the Commission shall be three. In these circumstances, the High Court was perfectly justified in remitting the matter to the Commission for de novo consideration and no exception can be taken to such a course of action.25. BSES is aggrieved only against the interim arrangement made by the High Court, whereby it has been directed to pay 50 per cent of the standby charges that are payable by TPC to MSEB for its standby facility of 550 MVA.BSES cannot be saddled with liability to pay half of the amount only on the ground that it has been provided with a standby facility of 275 MVA which is half of the standby facility provided by MSEB to TPC.An interim arrangement is normally made on a prima facie consideration of the matter and on broad principles without examining the matter in depth. The matter has been remitted to the Commission by the High Court by the judgment and order dated 3.6.2003 and a period of nearly three and a half months has already elapsed. Regulation 101 of the Central Electricity Regulatory Commission provides that the Commission may normally dispose of the petitions finally within six months of admission. The State Commissions are also expected to follow this time limit for disposal of petitions. Since the order made by the High Court is only by way of interim arrangement of the Commission is expected to decide the disputes finally within a short period, we do not consider it proper to interfere with the order made by the High court in this regard. After the decision of the Commission, the equities can be adjusted and the excess amount paid by any party can be refunded to it along with appropriate interest or can be adjusted in future