Case: Grid Corpn. Of Orissa Ltd.&amp;Ors Vs. Eastern Metals &amp; Ferro Alloys &amp; Ors Etc

These appeals involve the interpretation of a tariff provision in the provisional supply and distribution Licence issued under the Orissa Electricity Reform Act, 1995for short).2. The State of Orissa enacted the said Act, to restructure and rationalize the generation, transmission, distribution and supply of electricity in the state.2.1 Section 3 of the Act provided for the establishment of the Orissa Electricity Regulatory Commissionfor short), to discharge functions including the issue of licences in accordance with the Act and determine the conditions of such licences.2.2 Chapter VI of the Act deals with licensing of transmission and supply. Section 14(iv) of the said Act authorized the State Government to grant provisional licences for a period not exceeding twelve months, for carrying on the business of transmission or supply of electricity, as a transitional measure till the establishment of the Orissa Electricity Regulatory Commissionfor short).2.3 Section 13 of the Act provided that the Grid Corporation of India Ltd.for short, the appellant herein) incorporated with the main object of engaging in theof the State Government under Section 12 of the Act, would be the principal company to undertake the planning and co-ordination in regard to transmission and to determine the electricity requirements in the State in co-ordination with various stakeholders.2.4 Chapter VIII of the Act dealt with tariffs. It contained two sections - Section 26 dealing withrevenues and tariffs and Section 27 dealing with finances of licensees.3. In exercise of the power under Section 14(iv) of the Act, the State Government, by notification dated 30.3.1996, issued three licences to the appellant — the Provisional Orissa Transmission Licence, 1996, Provisional Orissa Supply Licence (Bulk Supply), 1966 and the Provisional Orissa Supply Licence (Retail Supply and Distribution), 1996 — authorising the appellant to engage in the business of transmission, bulk supply and retail supply and distribution of electrical energy within the State of Orissa, upon the terms and conditions mentioned in those licences. In pursuance of such licences, the appellant took over the transmission, distribution and supply of electricity from the Orissa State Electricity Boardfor short) with effect from 1.4.1996. Part III of the Retail Supply and Distribution Licence (similar provisions were contained in the Provisional Transmission Licence and Provisional Bulk Supply Licence also) related toand it is extractedBasis of Charges9.1 The chargesmade by the licensee shall not exceed on average 117%of those permitted under the interim tariffs issued by the State Government and in force on 1st April, 1996.9.2 The authority granted in clause 9.1 expires with the expiration of thism tariffs in force as on 1.4.1996 issued by the Statereferred to in the said Clause 9.1 were the tariffs which came into effect on 5.11.1995, contained in the Notification dated 28.10.1995 issued by the Orissa State Electricity Board, predecessor of GRIDCO.4. By notification dated 13.5.1996, the appellant revised/prescribed the electricity charges for different categories of consumers of electricity in the State as per the tariff schedule appended to the said notification with effect from 21.5.1996, in supersession of the tariff rates prescribed in the OSEB Notification dated 28.10.1995. The tariff schedule under the Notification dated 13.5.1996, prescribed different tariff rates for, (i) large industries, (ii) medium industries, (iii) small industries, (iv) irrigation pumping and agriculture, (v) public water works and sewerage pumping, (vi) commercial, (vii) domestic, (viii) railway traction supply, (ix) street lighting, (x) direct current service, (xi) power intensive industries, (xii) heavy industries, (xiii) general purpose supply, (xiv) public institutions, (xv) mini-steel plants; and (xvi) emergency power supply to captive power plants.5. Several industries which were consumers of electricity and the Utkal Chamber of Commerce, filed writ petitions before the High Court, challenging (i) the validity of Section 14(iv) of the Act; (ii) the validity of the provisional Retail Supply and Distribution Licence issued by the State Government under Section 14(iv) of the Act to the appellant, in particular the provision of the licence which enabled the appellant to increase the tariff not exceeding on average 117% of those permitted under the interim tariff issued by the State Government; and (iii) the tariff notification dated 13.9.1996 issued by the appellant.6. A Division Bench of the High Court disposed of the said writ petitions by the impugned judgment dated 30.10.1998. The High Court upheld the vires of Section 14 (iv) of the Act and the Notification dated 30.3.1996 of the State of Orissa granting the provisional licences in favour of the appellant. It also upheld the power of the appellant to revise the tariff under the provisional licence. It however held that the increase in tariff rates under the tariff notification dated 13.5.1996 issued by the appellant was more than 17% (over the tariff rates contained in OSEB Notification dated 28.10.1995) in regard to some categories of consumers and as such was in excess of the power given to the appellant under Clause 9.1 of the provisional supply and distribution licence. The High Court held that while the appellant could increase the tariff upto 17% in terms of the licence, there was no power or authority to increase the tariff rates beyond 17% in respect of any particulars; and as the appellant had increased the tariff rates by different percentages in regard to different categories of consumers, in the absence of a specific authorization for enhancement beyond 17% in regard to anyof consumers, itwas not competent for the appellant to enhance the tariff rate beyond 17% in respect of anyr. The High Court negatived the contention of the appellant that it could increase the tariff by more than 17% in regard to some categories, provided the increase in respect of other categories was less than 17%, and the net overall result by way of average did not exceed 17%. As a consequence, the High Court quashed the tariff notification dated 13.5.1996 as also the demands under the respective bills raised against the various writ petitioners. The High Court directed the Commission to redetermine the tariff as per law and further directed that any excess payments collected from the consumers shall be adjusted towards future demand/s.7. The said judgment is challenged in these appeals by special leave.

Court's reasoning:
15. In this case, we have noticed above that Clause 9.1 is reasonably capable of more than one construction, that is at least three interpretations. We may therefore attempt to ascertain the true meaning of the provision by answering the four questions referred in the earlier para. On a careful consideration, the answers to the four questions posed are : (i) The purpose of Clause 9.1 is to provide for an increase in revenue by revising the tariff rates, by balancing the needs of the Licensee with the interests and needs of different categories of electricity consumers. (ii) Clause 9.1 being a fresh provision, the question of considering the position that existed before making of the said provision does not arise. (iii) The interpretation canvassed by the respondents, (that is interpretation (i) that increase in respect of anyrs cannot exceed 17%) which found favour with the High Court and the Commission, though may not lead to an absurd result, would render the words ‘onoccurring in the clause, redundant and otiose. (iv) The interpretation put forth by the appellant gives meaning to every part of the clause and also achieves the object of the clause. We will elaborate the reasons therefor.Re: Interpretation (i)16. The first interpretation of Clause 9.1 is that it permits increase in tariff rates but with a ceiling of 17% in regard to each and everys, and therefore the increase in case of no category can exceed 17%, has found favour with the High Court and the Commission. The fact that there can be different percentages of increases in tariff in regard to different categories is an accepted procedure. For example a lesser tariff is applied to agriculturists using electricity for irrigation purposes when compared to consumers using electricity for commercial or industrial purposes. Therefore, when there is a revision of tariff rates, the percentage of increase will and can vary from category to category. If the aforesaid interpretation is applied by holding that in no case, the increase can be more than 17%, and if in regard to some categories, increases are to be nominal, it will be impossible to achieve a 17% increase which is permitted and contemplated under Clause (9.1). Further, the words ‘onwould be rendered meaningless if by average 17% increase cannot be achieved and if the increases cannot exceed 17% in any case. This interpretation, if accepted, would also prevent the licensee from creating or carving out any newof consumers andfix the tariff rate for such category. Therefore this interpretation apart from rendering the words ‘onredundant and meaningless, militates against the provisions of Clause (9.1).Re : Interpretation (ii)17. The second interpretation is that so long as the average of the different increases does not exceed 17% of the interim tariff rates, the appellant has the discretion to apply different rates of increases to different categories and increases with reference to some categories can exceed 17%. This interpretation will also lead absurd result if put into effect. Let us illustrate with reference to a hypothetical example (not with reference to actuals):S.on share out of total quantity of electricity generated and distributedPercentage in increase over the previous tariff rate1.Industry40%60%2.Domestic30%30%3.Irrigation10%1%4.Railway traction10%2%5.Public Institutions5%3%6.General purposes5%4%The average of the percentages of increase in regard to six categories will be only 16.66% which is less than 17%. But in terms of revenue realization, the increase would exceed not only 17%, but even as much as 40% with reference to revenue at the previous tariff rates. This obviously was not the object. The average should ensure that there is no increase beyond 17% in regard to the total revenue.Re : Interpretation (iii)18. The words used in Clause (9.1) aremade by the licensee shall not exceed on average 117%of those permitted under the interimIt is significant to note that the clause does not use the wordstariff rates prescribed by the licensee shall not exceed 17%of those permitted under the interimThe use of the wordsin the same clauses indicates that they were intended to signify different meanings. As rightly noticed by the Commission, the wordreferred to the schedule of rates. If the object of Clause 9.1 was to refer to ‘tariffprescribed by the Licence, there was no need to use the wordse use of the wordsle referring to 117% has also some significance. If the wordsmade by theare interpreted asrates fixed by thethen, the words `onwould be rendered meaningless and becomes an useless appendage.use of the wordse by these of the wordsnot exceed on averagenecessarily indicates that therates fixed by theappellant should not result in an increase in realization or revenue in excess of 17% of what it would have realized with reference to the tariff rates that were earlier in force under the interim tariff. ‘Chargestherefore refers to the total revenue of appellant by sale of electricity to the different categories of consumers.19. The appellant, discharging the functions of the State Government under the Act, had to ensure that the burden of increase on the agriculturistconsumers, that is those consuming electricity forshould be the minimum. Similarly, increase in the tariff rate for electricity consumed by railway traction had to be kept minimal in national economic interest. Similarly, the increase in tariff for residential user should be comparatively lesser than commercial user. At the same time, the appellant had to ensure an increase in its revenue by 17%. If increase beyond 17% was not permissible in regard to anys, and if some categories had to be subjected to only small increases far below 17%, due to economic or social justice criteria, the appellant would never be able to achieve the increase anything in the range of 17%. Only by adopting the process of applying a higher than 17% increase in the case of some categoriesof consumers, itcan offset the effect of small or marginal increase in the case of some other categories likeTherefore, if appellant chose to charge a lesser increase in percentage to some categoriesof consumers andhigher increases in regard to other categoriesof consumers, itcannot be found fault with so long as its total revenue does not exceed 17% over the corresponding revenue with reference to the old interim tariff rates. If appellant would have realizedamount as revenue at the interim tariff rates which were in force before 21.5.1996, the object of the increase was to provide an increase in revenue by 17% overafter 21.5.1996. That is why the word ‘onis used in Clause 9.1. This gives the discretion to appellant to charge tariff rates with different increases depending upon thes, so long as the overall increase in revenue, that is theby the licensee, does not exceed 17%. Any other interpretation would render the words ‘onotiose and have the effect of substituting the words tariff rate for the word charges.The reliance upon Clause (2) of Explanation to Section 26 of the Act to interpret the wording of Clause 9.1 is misconceived. The explanation to Section 26 does not define the words ‘chargesbut defines the wordUnder the erroneous assumption that the wordreferred to the actual tariff rates that were chargeable to different categories of consumers, the Commission ignored its own conclusions and held that Clause 9.1 placed a ceiling of 17% in respect of increases in the tariff rates applicable to different categories of consumers. It is true that the interpretation by a technical body in regard to purely technical matters deserves acceptance and will not be interfered, unless it is arbitrary or unreasonable. But in this case, on technical issues, the Commission has favoured the stand of the appellant. Having accepted the interpretation of the appellant as being technically sound and correct, it reached a different conclusion only because it thought that the wordhad to be interpreted as ‘tariffIf that is found to be without basis or erroneous, and therefore ignored, the opinion of the Commission fully favours the appellant