TARIFF ORDER 
YEAR : 1999

MADHYA PRADESH ELECTRICITY REGULATORY COMMISSION BHOPAL

Petition No.7/1999

M/s Mahakoushal Vindhya Plaster Nirmatha Sangh, Jabalpur

V/s

The State of Madhya Pradesh, Energy Department, Bhopal

&

   The M.P.Electricity Board, Jablapur - Respondents

O R D E R

This order shall also dispose of petition Nos.1,2,3,4 & 5 of 1999. 

In  another set of petitions Nos. 7, 8 and 9 of 1999, the petitioners, inter alia, on other grounds, have also challenged the jurisdictional competence of respondents – Madhya Pradesh Electricity Board (for short the Board hereafter) and  of Government   in determining the electricity tariff after the establishment of M.P. Electricity Regulatory Commission by the State Government under the Electricity Regulatory Commissions Act, 1998 (hereinafter referred to as the Act).

Since in the former set of petitions, the same legal issue has been raised and forms the sole ground, it was taken up as a preliminary issue in petition Nos. 7,8 and 9 of 1999 and is being decided by this Order.

The State Government under Notification dated 18.8.1998 had declared the establishment of the M.P. Electricity Regulatory Commission (for brevity, addressed as Commission in this order) from the date of its publication in M.P.Gazette.  The Notification was published in the gazette (Extra-ordinary) on 20.8.1998.

Contentions of petitioners in petition Nos. 1,2,3, 4 and5 of 1999:

The contention of the petitioners is that the determination of the tariff by the Board the whole tariff revision, with effect from 1.3.99, is without jurisdiction as it violates the provisions of Sections 17, 22 and 29 of the Act.  It is further submitted that after the establishment of the Commission by the State Government under Section 17 of the Act, the Commission alone could fix or determine the electricity tariff.  By operation of the provisions of Section 29, such jurisdiction was vested only with the Commission and, therefore, the determination of tariff by the Board is illegal and beyond jurisdiction.  The petitioners have prayed that the tariff determined by the Board after the establishment of the Commission be set aside and thereafter the tariff be determined by the Commission itself.

Contention of petitioners in petition Nos. 7, 8 and 9 of 1999:

The petitioners of petition Nos. 7, 8 and 9 of 1999 have firstly challenged the jurisdiction of the Board in fixing the tariff after establishment of the Commission.  In their petitions, they have also challenged the other charges being recovered by the Board from the electricity consumers.  Since one common legal question is raised by all the petitioners in their petitions, those are taken up together for consideration.  The legal issue raised by the petitioners alongwith other contentions in petition Nos. 7, 8 and 9 of 1999 the same has been taken up as preliminary issue.

Contention of respondents:

The respondents while controverting the contentions raised by the petitioners have submitted that the Commission could not be taken to be fully constituted till 1.4.99 as on that date its Member (Economics) had entered upon his office.  It is contended that till the Commission was fully constituted, the Board had the jurisdiction to determine the tariff.  The respondents had acted under the powers conferred under Section 61(3) of the Electricity (Supply) Act, 1948 and the tariff proposal of  Board was also approved by State Legislature.  Thereafter the Board had enhanced the tariff with effect from 1.3.99.

It is further contented by the respondent No.1 that under Section 29(2) of the Act, ‘the Commission should determine by regulations, the terms and conditions of fixation of tariff’ and as the regulations were not framed by Commission, the Board had revised the tariff as per the provisions of the Electricity (Supply) Act, 1948 to prevent unnecessary increase in the tariff rate due to delay.  The respondent No.2 had also taken the similar plea.  It is also contended by the Board that the mere constitution of Commission does not take away the power of the Board of fixation of tariff.  It is further submitted by the Board that the Electricity (Supply) Act, 1948 as well as the Electricity Regulatory Commissions Act, 1998 are two statutes related to the two sources of power and in such a case, power can be exercised under any of the two sources and therefore, the fixation of tariff by the Board cannot be terms as unauthorized.  The Board has also submitted that the revision of tariff done by the Board is just and proper and does not deserve to be disturbed.

Before we proceed to deal with the contention of the parties, it would be relevant to consider the history of power sector legislation earlier to the enforcement of the Act.

History of legislation:

While the country was under the colonial rule, the Indian Electricity Act 1903 was passed recognizing it to be somewhat tentative measure and it was anticipated at that time that amending legislation would be called for at an early date.  After about four years, in the year 1907, the Government of India, on the experience gained in the practical working of the Indian Electricity Act, 1903, which was resulting in the dual administration came to the conclusion that the time had arrived for undertaking an amending legislation and the job was entrusted to a Committee in  which the electro-technical and commercial interests were also represented.  Thus in order to amend the law relating to the supply and use of electrical energy, the Indian Electricity Act, 1910 came to be passed.

Subsequently, in the year 1948 for the rationalization of the production and supply of electricity and generally for taking measures conducive to electrical development, it was felt by the Government that it  was not further possible to precisely legislate within the framework of Indian Electricity Act, 1910, which was conceived for a very different purpose therefore the Electricity (Supply) Act, 1948 was enacted.  It  purported to bring about uniformity in the organization, the development of Grid system and the constitution of semi-autonomous bodies like Electricity Boards to administer the Grid system.    The State Electricity boards were also entrusted with the powers to fix the electricity tariff.

With the passing time and with the policy of economic liberalization of the country, the demand for energy grew rapidly, creating numerous problems.  In order to overcome the problems and other issues which the power sector was facing, the Government of India, after the discussion with the State Governments, considered it necessary to establish regulatory commissions.  Thus, the Electricity Regulatory Commissions Act, 1998 came to be passed by the Parliament.  The Government had felt it essential to ‘implement significant  reforms by focusing on the fundamental issues facing the power sector, namely, the lack of rational retail tariffs, the high level of cross-subsidies, poor planning and operation, inadequate capacity, the neglect of consumer, the limited involvement of power sector skills and resources and the absence of an independent regulatory authority’.

Establishment of M.P.Electricity Regulatory Commission and application of the Act:

Under the Act, the State Government in August 1998 established the Regulatory Commission.  M.P.Gazette (Extra-ordinary) dated 20.8.98 notified such establishment and provisions of the Act came to be  applied  to the State of Madhya Pradesh, with effect from 20.8.98, i.e. the date of publication of Notification.

Object of the Act:

The preamble of the Act itself describes the object of legislation as “An Act to provide for the establishment of a Central Electricity Regulatory Commission and State Electricity Regulatory Commissions, rationalization of electricity tariff, transparent policies regarding subsidies, promotion of efficient and environmentally benign policies and for matters connected therewith or incidental thereto.”

Relevant provisions of the Act and discussion:

With the above objective, Section 22 of the Act in unambiguous terms conferred the power and entrusted some functions on the State Commissions, as described under clauses a), (b), (c) and (d) of its Sub-section (1) including the power of determination of tariff.

The conferral of other functions in whole or in part on the State Commission as enumerated in Sub-section (2) were left at the discretion of the State Governments.  The power and jurisdiction to discharge the functions appearing in Sub-section (1) of Section 22 of the Act, leave no alternative with the State Government or the Electricity Board for the determination of tariff, except by the State Commission.

The discharge of those functions by the State Commission has been mandated by the Act, and in fixing the tariff the regard is required to be had by the Commission to the provisions of Section 29(2) of the Act.  Sub-Section (2) of Section 29 provides the guidelines.  In the process of fixation of tariff by the Commission in relation to licensees it is required to adopt and apply the principles of Sections 46, 57 and 57A of the Electricity (Supply) Act, 1948, whereas in the case of Electricity Board or its successor entities the regard is to be had to the provisions of Section 59, thereof.

From the above, it would be abundantly clear that after the application of the Act and in particular, after the establishment of Regulatory Commission by the State Government, the jurisdiction and the power to determine the tariff came to be vested solely in the Commission.  Although Section 17(1) stipulated that the establishment of the Commission was discretionary with the State Government yet once the Commission was established, the Commission alone and none else could determine the tariff.  It would be relevant in this regard to reproduce Section 17(1) of the Act:-

"17. (1) The State Government may, if it deems fit, by notification in the Official Gazette, establish, for the purpose of this Act, a Commission for the State to be known as the (name of the State) Electricity Regulatory Commission"

Now, we proceed to examine the contention of respondents that although the establishment of Regulatory Commission was notified by the State in Government Gazette dated 20.8.98, the tariff could not be fixed by the Commission as it could not be taken to be constituted till the Chairman and its Members had joined on their posts and since its Members (Power and Economics) had entered upon their office on 9^th March and Ist April, 1999 respectively, the Board in the circumstances had the jurisdiction under Electricity (Supply) Act, 1948 to determine the power tariff, which was made applicable from 1.3.99, earlier to the joining of Members of Commission on their posts.

The contention is wholly misconceived.

The term ‘State Commission’ has been defined under Clause (j) of Section 2 of the Act.  It means:-‘the State Electricity Regulatory Commission established under Sub-Section (1) of Section 17.” (emphasis supplied by us)

The provisions of the Act, confer exclusive jurisdiction on the State Commission to determine electricity tariff.  The operation of the provisions is stipulated by the Act on the establishment of the State Commission without being subjected to its Constitution.Its corporation or the constitution has to be processed under the provisions of the Act at the later stage, which has to follow the establishment.  The respondent State had established the Commission vide Notification dated 18.8.1998, with effect from the date of publication  of the notification in official gazette, which was published on 20.8.1998 whereas for constituting the Commission the order of appointment of Chairman and Members was passed by the Government on 30.1.1999.

Thus, under the Act, after the establishment of Commission, the electricity tariff could be determined only by the Commission under Section 22 read with Section 29,  and in accordance with  the provisions of the Act.  The main function of the Commission under Section 22 of the Act is to determine the tariff for electricity.  Section 29 of the Act confers the exclusive jurisdiction for such determination on the Commission alone, giving over-riding effect to its provisions on the other enactments.  Section 29 of the Act may be reproduced with profit:-

“29. (1) Notwithstanding anything contained in any other law, the tariff for intra-state transmission of electricity and the tariff for supply of electricity, grid, wholesale, bulk or retail, as the case may be, in a State (hereinafter referred to as the “tariff”), shall be subject to the provisions of this Act and the tariff shall be determined  by the State Commission of that State in accordance with the provisions of this Act.

(2)   The State Commission shall determine by regulations the terms and conditions for the fixation of tariff, and in doing so, shall be guided by the following, namely:-

1. The principles and their applications provided in sections 46,57 and 57 A of the Electricity (Supply) Act, 1948, and the Sixth Schedule thereto;
2. In the case of the Board or its successor entities, the principles under section 59 of the Electricity (Supply) Act, 1948;
3. That the tariff progressively reflects the cost of supply of electricity at an adequate and improving level of efficiency;
4. 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;
5. The interests 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;
6. The electricity generation, transmission, distribution and supply are conducted on commercial principles;
7. National power plans formulated by the Central Government.

(3) The State Commission, while determining the tariff under this Act, shall not show undue preference to any consumer of electricity, but may differentiate according to the consumer’s load factor, power factor, total consumption of energy during any specified period or the time at which the supply is required or the geo-graphical position of any area, the nature of supply and the purpose for which the supply is required.

(4) The holder of each licence and other persons including the Board or its successor body authorized to transmit, sell, distribute or supply electricity wholesale, bulk or retail, in the State shall observe the methodologies and procedures specified by the State Commission from time to time in calculating the expected revenue from charges which he is permitted to recover and in determining tariffs to collect those revenues.

(5)   If the State Government requires the grant of any subsidy to any consumer or class of consumers in the tariff determined by the State Commission under this section, the State Government shall pay the amount to compensate the person affected by the grant of subsidy in the manner the State Commission may direct, as a condition for the licence or any other person concerned to implement the subsidy provided for by the State Government.

(6) Notwithstanding anything contained in sections 57A and 57B of the Electricity (Supply) Act, 1948 (54 of 1948) no rating committee shall be constituted after the  date of commencement of this Act and the Commission shall secure that  the licensees comply with the provisions of their licence regarding the charges for the sale of electricity both wholesale and retail and for connections and use of their assets or systems in accordance with the provisions of this Act.”

As may be seen from the above, Section 29(2) provides that while fixing the tariff, the Commission would be guided by the considerations and principles described in Section 59 of the Electricity (Supply) Act, 1948 when those relate  to the Electricity Board.

It is significant to note that appointment of Chairman and Members of Commission was made by Respondent No1 on 30.1.99 prescribing no date for them to enter upon their office.  The Chairman had joined the Commission on 10.2.99.  The Members were also likely to join in the near future.  However, the Act does not stipulate the minimum number of Members for the State Commission.  Under Section 17(4), the Act only prescribed that ‘the State Commission shall consist of not  more than three Members including the Chairperson.   Therefore, the Commission would not be defunct due to the posts remaining vacant of either Chairperson or Member/Members.

Further the Act does not contain any provision that due to the vacancy of the post of Chairman or Member/Members, the jurisdiction and powers vested by the Act, in the Commission for the determination of power tariff would revert to the Board.  Section 29 of the Act in clear terms provides that ‘notwithstanding anything contained in any other law, the tariff shall be  determined by the State Commission of that State in accordance with the provisions of this Act.’  As such the contention of respondents i.e. the Government and of the Electricity Board, that determination of tariff and its application by the Board, since 1.3.99, under  the whole tariff revision, with effect from 1.3.99, is legal and not without jurisdiction, is devoid of substance.

It may also be worth mentioning at this stage that according to respondents themselves, the electricity tariff was not revised by the Board after the year 1996.  The Board under the Electricity (Supply) Act, had the jurisdiction to revise or fix the tariff.  But under the Act on the establishment of the Commission with effect from 20.8.98 it was lost.  Thereafter, the power and jurisdiction of determination of tariff came to be vested exclusively in the Commission.  Thereafter the Board could not determine the tariff nor the stated approval of its proposal for the fixation of tariff by the State Cabinet could be of any avail under the law.

The other contention of the State appearing in para 4 of return that the tariff proposal of Board also had the approval of State Legislature is unfortunate as it was made in order to impress upon the Commission that its legality could not be examined.  We had allowed opportunities to the respondent State to support such a Statement by document, but it failed to produce the document and instead submitted the copy of Cabinet decision.  It is a mis-statement made before this Commission, supported by the affidavit of Officer-incharge of the case.  Instead of taking any stringent action, we only depricate such practice and issue a warning against him.  Shelter of Section 61 of Supply Act, 1948 cannot be availed by respondant.  It only provides that the annual financial statement of the Board shall be submitted to the State Government each year, which shall be caused to be laid  on the table of the House.  The provision does not deal with nor relates to the determination of tariff.  The Section did not vest any power in the State for approving the Board’s tariff determination proposal.  The tariff determination, earlier  under the Electricity (Supply) Act, was exclusively within the jurisdiction of the Board but it did not determine or revise it for the long two years.  After the establishment of the Commission under the Act, the Commission alone and no other ‘body’ can exercise that jurisdiction.  In view of clear legal provisions, the  theory of hardship is of no avail to the respondents.

Now we turn to the sensitive contention of the parties.  The petitioners have attributed delay on the part of Commission in drawing proceedings against the respondents  for their alleged illegal venture of fixing tariff, after its establishment, whereas the respondents have submitted that the determination of tariff can still not be done by the Commission as it has no regulations in that regard, providing the terms and conditions, as stipulated by Section 29(2) of the Act.

In view of the nature of contention, it has become necessary for us to state some broad facts, in order to ensure transparency in the functioning of the Commission, while exercising its powers conferred by the Act.

With all the humility at our command, we are constrained to write that even after the Chairman and the Members of the Commission had entered upon their offices, no vehicle, no staff and no accommodation for the office or residence were provided.  After the Herculian efforts and the long-wait, the small portion occupied by Brahma Swarup Samiti in Urja Bhawan was allotted temporarily for its office.  On its vacation, it came in possession of the Commission on 1.7.1999.  The accommodation is housing and can house only 4-5 officers.  The staffing pattern sent by the Commission on 29.4.99 to the Government is still awaiting its complete approval.  The sanction of the posts under the staffing pattern would be subsequent.  The office accommodation is so insufficient that it cannot accommodate even the sanctioned staff of first phase which was to be taken on deputation from M.P.Electricity Board.  The Board was informed by Government to send the list of its Officers who were willing to go on deputation.  The Commission had also reminded the Board later to send the list, which has just been received.  The Commission, at present, is working with a Deputy Secretary, Deputy director, one Private Secretary, an Assistant Cashier and few peons.  The  Commission after framing the necessary regulations, i.e.Madhya Pradesh Electricity Regulatory Commission (Method of Recruitment and Conditions of Service of Officers and Employees) Regulation 1999 and Madhya Pradesh Electricity Regulatory Commission (Conduct of Business) Regulation 1999 had respectively sent them to the Government for approval on 13.10.99 and for  publication on 30.10.99 which are still begging approval and publication.

The Commission had been writing to the Government about its difficulties and when there was no response even after the lapse of reasonable time of few months, it had a meeting with the Chief Minister and the concerned officers on 15.10.1999.  The decisions were taken by the Chief Minister but the beaurocracy continues to pay its negative role and so far, even all the settled terms, conditions of service of the Members have not been determined.  However, the constraints may only delay but cannot be allowed to debar the functioning of the Commission.  The provisions of the Act cannot be permitted to be circumvented by not providing to the Commission the required working atmosphere and the essentials.

We are pained in writing the above, but the circumstances and the contentions advanced by parties have necessitated the above narration, in order to clear the clouds and inspire faith and confidence of public.  In the above circumstances, it is neither legally nor morally open to the respondents i.e the Government and the Board to raise the above contention.  The Commission is a quasi-judicial body.  The judiciary imparts justice to others, but itself suffers injustice at times.  It has no platform.  It is bound by discipline and the strict judicial norms.  It functions on the strength of public faith and confidence.

The Act is the substantive law.  The function  of substantive law is to define, create or confer substantial legal rights or legal status on the person or body or to impose and define the nature and extent of the legal duties.  The function of procedural law (of practice and procedure) is to provide the machinery or the manner in which legal rights or status and legal duties may be enforced or recognized.

So far as the Act is concerned, it not only confers the exclusive jurisdiction on the Commission of determining the power tariff, on its establishment under Section 29(1), with over-riding effect of the provision on all other laws by specifying that

“the tariff shall be determined by the State Commission of that State in accordance with the provisions of this Act."

It also prescribes under this Section the manner and mode of its determination.  It is to be clearly understood that any act done or performed by any authority, not authorized under the law, would be illegal and without jurisdiction.  The law is to be applied impartially, objectively, clearly and fairly.

The object of the Act, its scheme and the provisions amply indicate that the Board had been divested of its power to determine the tariff under the later legislation i.e. the Act.  For the sake of argument if it be accepted that after the establishment of the Commission, the Board continues to have the power to determine the tariff, it would lead to inconsistency and contradictions in the determination of tariff, which would defeat the very object of the Act.  In Daw V/s Metropolitan Board of Works (1862) 142 ER 1104:31 LJCP, it was observed by Erle, C.J. –

“I think that where the same power is given in two different bodies to number house, the exercise of these powers concurrently by both bodies would be entirely destructive of the object for which they were conferred; they cannot, therefore, exist together, and in accordance with general principles, the power more recently conferred overrides that which was conferred by the prior Act."

However, the provisions of the present Act under Sections 29 and 52 leave no room for doubt as those have been given the overriding effect on the other laws except the Consumer Protection Act, 1986 and Atomic Energy Act, 1962 as provided in Section 49 of the Act.  The provisions of the Act clearly contemplate the conferral of exclusive jurisdiction  on the Commission, for fixing the power tariff.  Hence the above argument of respondents is wholly untenable.

There can be no departure from the mandate of law.  Only that authority which is authorized by law can perform the mandated function, that too in the manner provided.  In the celebrated case of Nazir Ahmad V/s King-Emperor (AIR 1936 Privy Council 253(2), the well recognized rule was applied with approval that –

“where a power is given to do a certain thing in a certain way the thing must be done in that way or not at all."

The rule has also been followed in series of decisions by the Hon’ble Supreme Court.

As such under the mandate of the Act, the power tariff can be determined only by the Commission in the manner provided.  The determination of tariff by the Board is in contravention to the provisions of the Act, hence illegal and without jurisdiction.

Senior Counsel Shri M.L. Jaiswal, appearing  for respondent No.2 has cited Sat Narain Gurwala Vs Hanuman Prasad and another (AIR (33) 1946 Lahore 85), Swadeshi Cotton Mills etc. etc. Vs Union of India, etc.etc.  (AIR 1981 Supreme Court 818), The Marathwada University Vs Sheshrao Balwant Rao Chavan (AIR 1989 Supreme Court 1582), I.J. Rao Vs Bibhuti Bhushan (AIR 1989 Supreme Court 1884), Krishna Kumar Vs State of Rajasthan and others (AIR 1992 Supreme Court  1789) and Collector of Central Excise Vs New Tobacco Co. etc. (AIR 1998 Supreme Court 668), in support of his arguments but none of the authorities deal with the issue involved in these petitions and are of no avail to the respondent.

Conclusion:

On the foregoing discussion, cumulative consideration of the aforementioned provisions of the Act and for the reasons assigned, it is abundantly clear that respondent No. 2, the Electricity Board acted beyond its jurisdiction, in utter disregard to the provisions of the Act, by revising/determining the electricity tariff from 1.3.99, after the establishment of the  Commission and respondent No.2 Government had no authority to accord its approval thereto.  The revision of tariff by Board is unsustainable in law.

The petition alongwith petition Nos. 2,3,4 and 5 of 1999 (list annexed are, therefore allowed.  The notification of respondent No.2 dated 1.3.99 as contained in whole tariff revision, with effect from 1.3.99 filed with the rejoinder is set aside.

In the second set of petitions Nos. 7,8 and 9 of 1999 (as shown in annexed list forming part of this order), the preliminary issue is decided in favour of the petitioners, against the  respondents.  The second set of petitions shall now be listed for the consideration of the other questions raised therein.

Direction:

It is directed that the whole tariff revision, with effect from 1.3.99 having been set aside, shall forthwith cease to have effect and respondent No.2 shall not recover from consumers any charges thereunder.  However, it shall be open to respondent to file a comprehensive tariff proposal in accordance with the regulations framed by the Commission, on their publication in M.P.  Gazette.  The Commission may take up the matter thereafter for the determination of electricity tariff.

The respondents shall bear their own costs as also the cost of petitioners, which we quantify at Rs. 500/- each petition.  The cost shall be paid within one month from to-day.  Let copy of this order be placed on record of each petition.The copy shall be paid within one month from to-day. Let copy of this order be placed on record of each petition.

(Justice Shacheendra Dwivedi)
Chariman
 

(S. Iqbal Hussain)
Member
 

(Rabindra Tripathy)
Member (E)