Wersetgubleantgoarly Ecloemcmtirsisciiotny Vs. C.E.S.C.Ltd [2002] Insc 422 (3 October 2002)
N Santosh Hegde, B.N. Agrawal & B.P. Singh. Santosh Hegde, J.
Appeal (civil) 4045 of 2002 Appeal (civil) 4046 of 2002 Appeal (civil) 4047-49 of 2002 Appeal (civil) 4050-51 of 2002
Leave granted in SLP No. CC 6293/02 & SLP No.CC 6307/02. In the connected appeals, leave has already been granted. All these matters raised common question of law and facts, hence, have been clubbed together.
The West Bengal Electricity Regulatory Commission (the Commission) by an order dated 7.11.2001 determined the tariff for the sale of electricity by the Calcutta Electricity Supply Company Ltd. (the Company) for the years 2000-2001 and 2001-2002. Being aggrieved by the said determination of tariff, the Company preferred an appeal before the High Court of Calcutta under Section 27 of the Electricity Regulatory Commissions Act, 1998 (the 1998 Act). The High Court by the impugned judgment has allowed the appeal of the Company by itself re-determining the tariff and enhancing the same. It is against this judgment of the High Court the above civil appeals are preferred.
C.A.No.4037 of 2002 is preferred by the Commission specifically contending that the Commission is not challenging the tariff fixed by the High Court in its appellate jurisdiction. It contends that it was aggrieved by the interpretation by the High Court of some of the provisions of the 1998 Act as also the High Court's finding in regard to the validity of the Regulations and the procedure to be followed in fixing the tariff which findings, according to the appellant, would make the Commission nugatory and defeat the very object of the 1998 Act.
C.A. No. 4047 of 2002 is filed by the Bharat Chamber of Commerce against the order made by the High Court dated 23.4.2002, whereby the High Court rejected the application filed by the appellant, seeking the recusal of the Judges from hearing the appeal on the ground of bias.
C.A. No. 4048 of 2002 is filed by the same appellant as in C.A.No.4047/02, against an order made by the High Court on 7.5.2002, whereby the High Court declined to hear the arguments of the appellants on merits, on the ground that the said appellants were not entitled to be heard by the High Court, because of the objections raised by the said appellants attributing bias to the Judges.
C.A. No. 4049 of 2002 and other connected appeals are filed by the appellants who are aggrieved, not only by the order of their non impleadment, but also by the final order of the High Court dated 7-14/5/02, by which the High Court set aside the tariff fixed by the Commission and re-fixed and enhanced the tariff.
The first argument addressed on behalf of most of the appellants before us was in regard to bias. It was seriously contended on behalf of these appellants that the Learned Judges who constituted the Appellate Bench ought to have recused themselves from hearing the appeal, since the appellants had a reasonable apprehension of bias being entertained by those Judges who constituted the Bench. They also contended that their apprehension as to the bias of the Bench stands established from certain observations made in the impugned judgment of the High Court. The learned counsel representing the respondent company, have with equal vehemence opposed the argument of the appellants in regard to bias. Be that as it may, all parties before us have unanimously contended that the basic issues involved in these appeals would arise frequently not only between the parties to this case and in the Calcutta High Court, but also all over India and since as of now there is no authoritative pronouncement of this Court on the questions which arise in these appeals, therefore, we should finally decide these issues, whatever be our findings on the question of bias.
In this background, we have decided to consider the question of bias as the last question to be decided, that too, only if need be.
For deciding the issues that arise in these appeals, it is necessary to have a look at the various enactments which have direct bearing on these issues.
The Indian Electricity Act, 1910 (the 1910 Act), was enacted with a view to make an improvement on the then existing legislation controlling the generation, transmission and supply of electricity in this country. Out of the various provisions of this Act, we need only refer to Clause II of the Schedule to the 1910 Act, which read with Section 3(2)(f) of this Act, makes it obligatory for a licensee to follow the procedure as to the audit of the licensee's accounts which, inter alia, requires the same to be audited by such persons as the State Government may appoint or approve in that behalf. Thus, the 1910 Act has made the auditing of the accounts of a licensee a statutory requirement. This statutory requirement continues to operate inspite of subsequent enactments.
By the introduction of the 1948 Act, the legislature has sought to rationalise the provisions pertaining to supply of electricity and to take measures conducive to electrical development. While enacting the same, the legislature was of the opinion that within the framework of 1910 Act, it was not possible to have a coordinated development of electricity in India on a regional basis. Hence, it was necessary that the appropriate Government should be vested with the necessary legislative powers, to link together the supply and transmission of electricity to various parts of the country, by introducing a system known as the "grid system". With this view the 1948 Act in Section 57 mandated that the provisions of Schedule VI shall be deemed to be incorporated in the licence of every licensee subject to the exception provided therein. Section 57A has provided for the constitution of a "Rating Committee" to oversee the procedure adopted by the licensee while fixing the tariff. Schedule VI to the 1948 Act lays down the principles to be followed in fixing the electricity tariff so far as the licensee is concerned. It is to be noticed herein that the said Schedule provides for self-assessment of the tariff by the licensee himself, following the principles laid down in the said Schedule. These are the principal Sections in the 1948 Act which have a bearing on the question of fixation of tariff by the licensee.
By the introduction of the 1998 Act, the Parliament brought about some important changes from that which was provided in the 1948 Act. It is seen from the Statement of Objects and Reasons of the 1998 Act that the Parliament noticed that there was lack of a rational retail tariff. It also noticed that among other defects there were high level cross subsidies, lack of power planning and operation, inadequate capacity, neglect of the consumer, limited involvement of the private sector's skill and resources and the absence of an independent regulatory authority.
Section 3 of the 1998 Act provides for the establishment and incorporation of a Central Electricity Regulatory Commission, while Section 17 of the said Act provides for a similar Commission for the State. This section provides that the State Commission should consist of not more than 3 members including the Chairperson. It also provides that the Chairperson and the members of the State Commission, among other things, shall be persons who have adequate knowledge of, and capacity in dealing with problems relating to engineering, finance, commerce, economics, law or management. These members of the State Commission are to be selected by a Selection Committee constituted by the State Government under Section 18 of this Act. The members of the said Selection Committee consists of, a person who has been a Judge of the High Court, the Chief Secretary of the State concerned and the Chairperson or a member of the Central Electricity Regulatory Authority.
The said section also fixes a time schedule by which the vacancy in the office of the State Commission should be filled up. Section 19 of this Act provides for term of office and service conditions of the members of the State Commission, while Section 20 provides for a special procedure for the removal of members of the State commission which will have to be done by the Government on the ground of proved misbehaviour, after the High Court on reference being made to it by the Governor, has reported that the member concerned ought to be removed on such ground of proved misbehaviour.
The qualification of the members of the State Commission as required under the Act, as also the method of their appointment and conditions of their service, including the protection given to them in reference to their removal and disqualification from holding subsequent office, clearly shows that the State Commission under the Act is constituted as a high power expert committee with autonomous authority and is expected to function independently.
Section 22 of the Act enumerates the functions of the Commission. The most important function to be noticed in this Section, at least so far as these appeals are concerned, is the power of the Commission to determine the tariff for electricity, be it wholesale, bulk, grid or retail. This determination of tariff under the Act will have to be made in the manner provided in Section 29 of the said Act. Section 22(1)(d) obligates the Commission to promote competition, efficiency and economy in the activities of the electricity industries to achieve the objects and purposes of this Act.
Section 26 empowers the Commission to authorise any person as it deems fit to represent the interest of the consumer in all the proceedings before it.
Section 27 of the 1998 Act provides for an appeal to the High Court, by any person aggrieved by any decision or order of the State Commission. It lays down that no appeal or revision would lie to any other court.
Section 29 provides for determination of the tariff by the State Commission. Since the interpretation of this Section is a major bone of contention between the parties in these appeals, it is necessary for us to reproduce the same in its entirety.
"29. Determination of tariff by State Commission.(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 :-- (a) the principles and their applications provided in Secs. 46, 57 and 57-A of the Electricity (Supply) Act, 1948 (54 of 1948) and the Sixth Schedule thereto;
(b) in the case of the Board or its successor entities, the principles under Sec. 59 of The Electricity (Supply) Act, 1948 (54 of 1948);
that the tariff progressively reflects the cost of supply of electricity at an adequate and improving level of efficiency;
(d) 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;
(e) 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;
(f) the electricity generation, transmission, distribution and supply are conducted on commercial principles;
(g) 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 geographical 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 authorised 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 licensee or any other person concerned to implement the subsidy provided for by the State Government.
(6) Notwithstanding anything contained in Secs. 57-A and 57-B 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 licences 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." It is to be seen that this Section provides for the methodology to be followed by the Commission in determination of the tariff.
Section 37 of the Act requires the Commission to ensure transparency while exercising their powers and discharge of their functions.
Section 49 of the Act gives overriding effect over this Act to only two other enactments, namely, the Consumer Protection Act, 1986 and the Atomic Energy Act, 1962. While Section 52 gives overriding effect to the provisions of the 1998 Act, notwithstanding anything inconsistent therewith, in any enactment other than this Act.
Section 57 empowers the State Government to make rules which will have to be notified in the Official Gazette.
Section 58 empowers the Commission to make Regulations, which also have to be notified in the Official Gazette and the Regulations have to be consistent with the Act and the Rules. Sub-section (2) of Section 58 in Clause (d), specifically provides that the Commission is empowered to make Regulations, providing for the manner in which charges for energy may be determined under sub-section (2) of Section 29.
Section 59 obligates that the rules and regulations made under this Act have to be placed before the Houses of the Legislature. It is not in dispute that the rules framed by the State of West Bengal, as also the regulations framed by the State Commission have been placed before the legislature as required under Section 59 of the Act.
The State of West Bengal exercising the power under Section 57 of the 1998 Act enacted the West Bengal Electricity Regulatory Commission (Appointment of Chairperson and Members Functions, Budget and Annual Report) Rules, 1999 (hereinafter called the Rules). Rule 4 of the said Rules provides for the procedure to be adopted by the Commission in the proceedings before it. Sub-rule 1 of the said Rule mandates that before fixing the tariff, the Commission shall notify its intention in this behalf in leading newspapers of West Bengal and shall hold public hearing for the purpose.
In exercise of its power under Section 58 of the 1998 Act, the State Commission herein has framed the West Bengal Electricity Regulatory Commission (Conduct of Business) Regulations, 2000 (the Regulations). Regulation 18 thereof provides for the Commission to permit an association or other bodies corporate, or any group of consumers to participate in any proceeding before the Commission. It also empowers the Commission to control the nature and extent of participation of these groups before the Commission. Regulation 19 thereof provides for recognition of associations, groups, forums or body corporate or registered consumer associations for the purpose of representation before the Commission.
Regulation 24 provides for the coram at the meeting of the Commission. Regulation 30 provides for service of notices which in sub-clause (d) includes the service of notice through publication in newspapers.
Regulation 31 and 32 provides for the manner in which the Commission could regulate the filing of the pleadings as also the method of hearing.
Having noted the various salient features of the 1998 Act, we will now consider the manner in which the impugned tariff has been determined by the State Commission in the instant case.
The Commission while fixing the tariff for the years 2000-2001 and 2001-2002, called for objections/ representations from persons concerned, through newspaper publications. Pursuant to the same, it heard the Company, association or group of consumers in the proceedings before it.
It had also appointed the Administrative Staff College of India (ASCI) as its Consultant.
The Commission before which the Company had filed its application for fixing of tariff for the year 2002-2003, did not entertain the said application, on the ground that the same was belated. But on the Company's application for the year 2000- 01, the Commission after hearing the parties and taking into consideration other materials on record, including the report of the consultants, fixed the tariff for the said year @ Rs.3.39 per unit, which is an increase of 1.5 per cent on the rate of tariff of the Company for the previous year. The Commission also fixed Rs.3.41 per unit for the year 2001-2002. While so determining the tariff, the Commission followed the provisions of the 1998 Act and the regulations framed by it.
Being aggrieved by the said determination of tariff, the Company, as stated above, preferred the statutory appeal before the High Court, making the Commission alone the respondent.
The High Court while rejecting the impleadment application of the appellant-organisations, proceeded to re-fix the tariff by only following the principles of Schedule VI to the 1948 Act and to the exclusion of other requirements of Section 29 of the 1998 Act. In the said process it re-fixed the average tariff for the year 2000-01 at Rs.3.96 per unit and at Rs.4 per unit for the year 2001-02. In the course of its judgment, the High Court also came to the conclusion that the regulations framed by the Commission, especially the ones pertaining to the right of the consumers to be heard in the proceedings, as also applications of the principles to be followed in determining the tariff, were contrary to law and directed in no uncertain terms that these regulations will have to be modified to bring them in conformity with its observations in the judgment, and further stated that failure to do so might result in the invocation of the High Court's power under the Contempt of Courts Act. In deciding the validity of the regulations, the High Court proceeded on the basis that while entertaining the power of appeal under Section 27 of the 1998 Act, it also has the power vested in it under Article 226 and 227 of the Constitution of India. It also held that the non-obstante clause found in Section 29 of the 1998 Act and the other overriding provisions found in the 1998 Act could not come in the way of the application of the VI Schedule to the 1948 Act alone, while determining the tariff by the Commission. On factual aspects, it reversed many of the findings of the Commission to which separate reference will be made by us when we take up those issues for consideration.
It is against this judgment of the High Court, various appeals have been filed.
In these appeals the appellants have questioned each and every finding of the High Court, both in regard to the interpretation of the provisions of the 1998 Act nd the 1948 Act, as also the factual findings given by the High Court in regard to various heads of accounts either accepted or rejected by the High Court in the process of re-determining the tariff.
At one point of time we thought it appropriate to decide the legal issues pertaining to interpretation of the statutes alone and to remit the matter back to the Commission to reconsider the factual issues, to be determined by the Commission in the light of our findings on the legal issues. However, after hearing the parties at length, we thought that the ends of justice would be served if we could finally decide all the important issues arising in these appeals and thereafter to remit the matter to the Commission only, to apply those principles and recalculate the tariff on the basis of our findings and directions given in these appeals. It is in this light that we will now endeavour to settle the questions involved in these appeals.
Locus standi:
One of the important issues which arises for our consideration in these appeals is as to the locus standi of the consumers before the Commission in its proceedings, as also before the High Court in an appeal under Section 27 of the 1998 Act. The Commission in the proceedings before it, issued a newspaper publication calling upon the persons to appear and file objections in case they were interested in the proceedings before it. Pursuant to the said publication, it is stated that a number of organisations including some of the appellants herein, representing sections of the consumers, appeared and filed their objections and submitted their arguments which were taken note of by the Commission in the proceedings before it.
This was not objected to by the respondent company. As noticed above, the respondent company being aggrieved by the final order of fixation of tariff by the Commission preferred the statutory appeal before the High Court. To the said appeal, may be for reasons of convenience, the respondent company impleaded only the Commission as a party respondent, but the High Court in the initial stage thought it appropriate to issue a public notification of the filing of the appeal and called upon the interested parties to represent themselves before it. Pursuant to the said publication, some of the organisations representing consumers sought impleadment before the High Court.
However when the matter came up for final hearing the applications of these consumer organisations were rejected by the High Court holding that the Commission does not have the power to issue indiscriminate notice to the consumers or for hearing them. It also held that the advertisements published in this regard as per the Commission's regulations as also the advertisements issued by the High Court in the appeal were all on an erroneous view that the 1998 Act envisages such procedures.
The question, therefore, for our consideration is whether the consumers have a legal right or not to be heard in the proceedings before the Commission under Section 29(2) of the 1998 Act, as also in an appeal under Section 27 of the said Act.
The High Court in the course of its judgment has negatived this right to the consumers, primarily on the ground that permitting a large number of consumers who in the instant case are to the extent of 17 lacs would amount to an indiscriminate representation. It observed that permitting such large scale interference in the proceedings would lead to absurdity. It also held that normally a rate payer is not heard before such a rate is fixed on the basis of public policy. In support of this conclusion, the High Court relied upon the procedure for fixing the rate of income-tax wherein a tax-payer had no such say in such fixation of the rate of income-tax. It also observed in the course of the judgment that the rates to be fixed cannot be opposed by consumers by observing as follows :
"The rates of the consumers cannot be affected by a general public clamour of the sort, that the rates are too high, that the CESC accounts are in no way reliable, that they cannot be losing money, when they are earning so much. That, this organisation in Mumbai, or that concern of the Tatas, is doing so much better, that in the same State in another area of supply, another Company is managing with such low rates; this sort general 'newspaper' objection has no place in any court of law or a Tribunal which does something to affect the legal rights and liabilities of Companies and citizens. "Such objections according to the learned Judges are irrelevant for the purpose of granting a right of hearing to the consumers. While discussing this question, the High Court also came to the conclusion that since the procedure laid down in Schedule VI to the 1948 Act is the sole consideration for the purpose of fixation of tariff and Schedule VI not having contemplated any role to be played by the consumers, the same procedure should be followed even in regard to fixation of tariff under the 1998 Act, which would mean that the consumers have no say whatsoever in the fixation of tariff. The court also held that if at all any representation of the consumers is permissible, the same should be done only in accordance with Section 26, by the Commission recognising a particular consumer association to represent them. Even in this regard, the High Court expressed some doubt because an organisation chosen to represent the consumers by the Commission may not be acceptable to another section of the consumers and, therefore, in reality, such recognition of a particular organisation by the Commission would also be futile.
Learned counsel appearing for the appellants have very strenuously contended that this view of the High Court is wholly unsustainable. They contend that under the various provisions of the Act, rules and regulations, the Parliament either directly or by subordinate legislation has conferred the right of representation on the consumers and it is not open to the High Court to negative such statutory right. Though, learned counsel representing the respondent company had stated before the High Court that the company had no objection to the impleadment of the consumers either before the Commission or before the High Court, still tried to justify the finding of the High Court before us.
Having considered the finding of the High Court, we are of the opinion that though generally it is true that the price fixation is in the nature of a legislative action and no rule of natural justice is applicable, (See Shri Sitaram Sugar Company Ltd. & Anr. etc. v. Union of India & Ors. [1990 3 SCC 223, para 45]), the said principle cannot be applied where the statute itself has provided a right of representation to the party concerned. Therefore, it will be our endeavour to find out whether, as contended by learned counsel for the appellants, the statute has provided such a right to the consumers or not.
While considering this question, it is relevant to notice that so far as the 1948 Act is concerned, the consumers had no such specific right. But we notice that the 1998 Act brought about a substantial change in the manner in which the determination of tariff has to be made. It not only took away the right of the licensee or a utility to determine the tariff, but also conferred the said power on the Commission. This was done because one of the primary objects of the 1998 Act was to create an independent regulatory authority with the power of determining the tariff, bearing in mind the interests of the consumers whose rights were till then totally neglected. The fact that the Commission was obligated to bear in mind the interests of the consumers is also indicative of the fact that the Commission had to hear the consumers in regard to fixation of tariff. This right of the consumers is further supported by the language of Section 26 of the Act, which specifically mandates the Commission to authorise any person as it deems fit to represent the interest of the consumers in all proceedings before it. If the above provision of the Act is read in conjunction with Sections 22 and 29 read with Section 58(2)(d) of the 1998 Act, it is clear that the Commission while framing the regulations must keep in mind the interests of the consumers for the purpose of determining the tariff. At this stage, it may be worthwhile to notice the mandate of the Parliament in Section 37 of the 1998 Act to the Commission that the Commission should ensure transparency while exercising its powers and discharging its functions which also indicates that the proceedings of the Commission should be public which, in itself, shows participation by interested persons. That apart, the State of West Bengal in exercise of its power under Section 57 of the Act has enacted the West Bengal Electricity Regulatory Commission (Appointment of Chairperson and Members Functions, Budget and Annual Report) Rules, 1999. In the said rule under Rule 4 the State Government has provided that the Commission before taking any decision on the rates of tariff must notify its intention in this behalf, in leading newspapers of West Bengal and hold public hearing for the said purpose (emphasis supplied). Even the Commission under the power conferred on it in Section 58 of the Act, has framed the West Bengal Electricity Regulatory Commission (Conduct of Business) Regulations, 2000 as amended by Regulations dated 3.2.2000, wherein, under Regulation 18 the Commission, can permit an association or other body corporate or any group of consumers to participate in any proceedings before the Commission, on such terms and conditions, including, in regard to the nature and extent of participation as the Commission may consider appropriate. The Commission under Regulation 19 is also empowered to notify a procedure to association, groups, forums or body corporates or registered consumer associations, for the purpose of representation before the Commission. These Regulations also provide for the procedure for the filing of affidavits, pleadings, service of notice and the right of participation. Under Regulation 32 the manner of hearing before the Commission is also provided for. These rules and regulations framed by the State Government and the Commission will have to be placed before the State legislature under Section 59 of the 1998 Act. Thus, these rules and regulations have the necessary statutory force. A combined reading of these provisions of the Act, rules and regulations, clearly shows that the statute has unequivocally provided a right of hearing/representation to the consumers, though the manner of exercise of such right is to be regulated by the Commission.
This right of the consumers is neither indiscriminate nor unregulated as erroneously held by the High Court. It is true that in Calcutta the respondent company supplies energy to nearly 17 lacs consumers, but the statute does not give individual rights to every one of these consumers. The same is controlled by the Regulations. Therefore, the question of indiscriminate hearing as held by the High Court will not arise.
That apart, when a statute confers a right which is in conformity with the principles of natural justice, in our opinion, the same cannot be negatived by a court on an imaginary ground that there is a likelihood of an unmanageable hearing before the forum concerned. As noticed above, though normally price fixation is in the nature of a legislative function and the principles of natural justice are not normally applicable, in cases where such right is conferred under a statute, it becomes a vested right, compliance of which becomes mandatory. While the requirement of the principles of natural justice can be taken away by a statute, such a right when given under the statute cannot be taken away by courts on the ground of practical convenience, even if such inconvenience does in fact exist. In our opinion, statute having conferred a right on the consumer to be heard in the matter pertaining to determination of the tariff, the High Court was in error in denying that right to the consumers. Consequently, the right of the consumer to prefer an appeal under Section 27 of the 1998 Act to the High Court is similar, if they are in any manner aggrieved by any order made by the Commission. Alternatively, if the company is an aggrieved party and if it prefers an appeal, then it has to make such of those consumers who have been heard by the Commission, as party respondent, and such consumers will have the right of audience before the appellate court. In the instant case, none of the consumers/consumer organisations who were allowed to participate in the proceedings by the Commission have been made parties to the appeal. Therefore, the High Court ought to have impleaded and heard the consumer-appellants herein.
Vires of the Regulations:
The High Court in the course of its judgment has held that the Commission by framing Regulations 25 and 31(4) has permitted indiscriminate representation of the consumers before it which is not contemplated under the Act. In the said view of the matter, it had directed the Commission to suitably amend these regulations to bring them in conformity with its judgment.
There is also a threat to the Commission that if it fails to do so, it may have to face contempt of court proceedings.
The question for our consideration is whether the High Court sitting as an appellate court under Section 27 of the Act has the jurisdiction to go into the validity of the Regulations framed under the Act and if so, factually the Regulations as found by the High Court are contrary to the statute.
The High Court while considering the validity of the Regulations came to the conclusion that the 1998 Act does not contemplate hearing of the consumers, and also that the Commission's Regulations have conferred an indiscriminate right of hearing on the consumers. We do not think that these findings of the High Court can be justified. While discussing the right of the consumer to be heard (locus standi), we have already held that the 1998 Act has both expressly and impliedly conferred such right of hearing on the consumers. Proceeding on that basis we now consider whether the Regulations framed by the Commission, in any manner, confer an indiscriminate right of hearing. The Commission in exercise of its power under Section 58 of the 1998 Act has framed the regulations keeping in mind the mandate of the Act. In Regulations 18, 19, 24, 25 and 31(4) the Commission has evolved a procedure by which it could restrict the number of representations as also the method to be followed in the proceedings before it which includes the restriction on hearing. Regulations 18 and 19 require the Commission to recognise such associations or other bodies of consumers which in its opinion, should be permitted to appear before the Commission. The said Regulations also empower the Commission to regulate the nature and extent of participation by such groups. Regulation 31(4)(ii) and (iii) also empower the Commission to control the proceedings before it. From the above Regulations, it is clear that the Commission has the necessary power to regulate the proceedings before it and the apprehension of the High Court that by granting such power the Commission may have to hear all the 17 lacs of consumers of Calcutta is wholly imaginary. That apart, on the facts of the instant case there is no such allegation that the Commission has in fact given indiscriminate hearing to the consumers. As a matter of fact, the respondent Company which was the appellant before the High Court has not even raised this issue and the High Court has suo motu gone into this issue. On the basis of the provisions found in the Regulations framed by the Commission, we are of the opinion that there is no room for any indiscriminate hearing before the Commission. Therefore the finding of the High Court that the Regulations do leave room for such indiscriminate hearing is erroneous.
Having held on merits that the Regulations are not arbitrary and are in conformity with the provisions of the Act, we will now consider whether the High Court could have gone into this issue at all in an appeal filed by the respondent Company. First of all, we notice that the High Court has proceeded to declare the regulations contrary to the Act in a proceeding which was initiated before it in its appellate power under Section 27 of the Act. The appellate power of the High Court in the instant case is derived from the 1998 Act. The Regulations framed by the Commission are under the authority of subordinate legislation conferred on the Commission in Section 58 of the 1998 Act. The Regulations so framed have been placed before the West Bengal Legislature, therefore it has become a part of the statute. That being so, in our opinion the High Court sitting as an appellate court under the 1998 Act could not have gone into the validity of the said Regulations in exercise of its appellate power.
This Court in the case of K.S. Venkataraman & Co. v. State of Madras (1966 2 SCR 229) after discussing the judgment of the Calcutta High Court in the cases of (i) Raleigh Investment Co. Ltd. v. The Governor General in Council (1944 1 Cal. 34), (ii) United Motors (India) Ltd. v. The State of Bombay (1952 55 BLR 246) and (iii) M.S.M.M. Meyappa Chettiar v. Income-tax Officer, Karaikudi (1964 54 ITR 151) held :
"There is, therefore, weighty authority for the proposition that a tribunal, which is a creature of a statute, cannot question the vires of the provisions under which it functions." From the above decision, we hold that the High Court while exercising its statutory appellate power under Section 27 of the 1998 Act could not have gone into the validity of the Regulations which are part of the statute itself.
While deciding the above issue, the High Court also held that while exercising the appellate power by it under any particular statute, it also simultaneously exercises its constitutional power of writ under Articles 226 and 227 of the Constitution of India. In this process, this is what the High Court said :
"From the above provisions it is clear that we are not hearing any proceeding which is akin to a constitutional writ matter. No doubt the High Court remains the High Court and its constitutional powers are not taken away and cannot be taken away even if it is designated as an appellate forum in a particular Act. Our constitutional powers we continue to possess. The additional strength that those constitutional powers render to our judgment is always present." We do not think that the High Court was correct in this view of its.
In the case of Dhulabhai & Ors. v. The State of Madhya Pradesh & Anr. (1968 3 SCR 662), a Constitution Bench of this Court held :
"Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from the decision of the Tribunals." (emphasis supplied) From the above observations of this Court in the said judgment extracted hereinabove, it is clear that even the High Court exercising its power of appeal under a particular statute cannot exercise the constitutional power under Article 226 or 227 of the Constitution. The position of course would be entirely different if the aggrieved party independently challenges the provision by way of a writ petition in the High Court invoking the High Court's constitutional authority to do so. Therefore we are of the considered opinion that the High Court sitting as an appellate court under a statute could not have exercised its writ jurisdiction for the purpose of declaring a provision of that law as invalid when there was no separate challenge by way of a writ petition. In the instant case we notice that as a matter of fact none of the parties had challenged the validity of the Regulations, therefore the question of the High Court's suo motu exercising the writ power in a statutory appeal did not arise. For the reasons stated above we hold that the High Court could not have gone into the question of validity of the Regulations while entertaining a statutory appeal under the 1998 Act. We also hold that the Commission had the necessary statutory power to frame the Regulations conferring the right of hearing on the consumers. We also hold that the Regulations have provided for a controlled procedure for such hearing and there is no room for an indiscriminate hearing. On facts, we hold in the instant case that the Commission has not given any indiscriminate hearing to the consumers.
Tariff Determination:
The next question which arises for our consideration is under the 1998 Act who determines the tariff. The Commission proceeded on the basis that under the 1998 Act i.e. under Section 22 read with Section 29, it was the Commission which had the authority to determine the tariff. As per this understanding, the Commission had also laid down the terms and conditions under which it had to determine the tariff.
However, the High Court proceeded on the basis that inspite of the said Sections viz., Secs. 22 and 29, it is the licensee which in the first instance had to determine the tariff which subsequently had to be scrutinised and approved by the Commission. The High Court was thereby of the opinion that the role of the Commission in determining the tariff was only supervisory. In these appeals learned counsel appearing for the appellants contended that the above view of the High Court is wholly erroneous and contrary to the statute. They also argued that if the view of the High Court in regard to determination of tariff is to be accepted, then the primary object viz., creation of the Commission under the 1998 Act itself would become nugatory. Learned counsel strongly relied upon the provisions of Sections 22, 27, 29, 30, 49, 50 and 58 of the Act in support of their contention. Per contra, the learned counsel appearing for the respondent company supported the judgment of the High Court and contended that the primary duty of the determination of tariff is that of the licensee and the Commission under Section 29 had only to frame the necessary regulation in this regard and thereafter it only had the power of supervising the tariff determined by the licensee.
For deciding this question we will have to first notice the objects and reasons of enacting the 1998 Act. A perusal of the same shows that the Parliament felt that in spite of the existing enactments, it was necessary to bring about a new law which would facilitate the implementation of reforms contemplated by it, which reforms pertained to fundamental issues facing the power sector, namely, lack of rational retail tariff, high level cross subsidies, poor planning and operation, inadequate capacity, neglect of consumer, limited involvement of private sector's skills and resources and the absence of an independent regulatory authority. The view of the Administrative Staff College of India (ASCI) which strongly recommended the creation of an independent electricity regulatory Commission both at the Centre and the State are also noticed. It is with the above object, an Ordinance was promulgated on 25th April, 1998 which later came to be replaced by the 1998 Act. We also notice that while promulgating the said Ordinance it was mentioned that one of the salient features of establishing the Central and State Electricity Commissions was to determine the tariff for electricity, wholesale, bulk, grid and retail, apart from determining the tariff payable for use of the transmission facilities. Therefore, it is to be seen that in spite of the fact that the 1948 Act was in existence, the Parliament thought that it was necessary to constitute a regulatory authority both at the Centre and the State, which was to be an autonomous independent body. We have earlier noticed the composition of this body and the statutory provisions made in the Act to protect the autonomy of this Commission. Therefore from the Objects and Statements of this Act, as also from the provisions of this Act, it is clear that this is an enactment specially to provide for a procedure for determining the tariff for electricity, as also to confer the power of determination of tariff on an expert body like the Commission. In this regard we take note of Section 22(1)(a) of the 1998 Act, which in specific terms lays down that the Commission shall discharge the function of determining the tariff for electricity in the manner provided in Section 29. A plain reading of this Section leaves no room for doubt that so far as the State Commission is concerned, the Act has solely entrusted the responsibility of determining the tariff to it.
Section 29 firstly requires the Commission to determine the tariff in accordance with the provisions of that Act. It then requires the Commission to frame Regulations providing for the terms and conditions for fixation of tariff. In exercise of this latter power of framing the Regulations, the Commission is mandated to be guided by the factors mentioned in clauses (a) to (g) of sub-section (2) of Section 29. Thereafter sub-section (3) of Section 29 mandates the State Commission not to show any undue preference while determining the tariff to any consumer of electricity subject, of course, to the exceptions found in the said sub-section. Sub-section (4) mandates the holder of a licence or other person to distribute or supply electricity, by observing the methodologies and procedures specified by the State Commission from time to time while supplying electricity and in collecting the revenue. Sub-section (5) of that Section provides if the State Government wants any subsidy to be given to any class of consumers in the tariff determined by the Commission, then the State Government is obligated to pay such subsidy in the manner in which the State Commission may direct. Sub-section (6) lays down that notwithstanding anything contained in Section 57 A and B of the 1948 Act no Rating Committee shall be constituted after the date of commencement of the 1998 Act, which is a natural consequence of the creation of the Commission. It also further lays down that the Commission should ensure that the licensees comply with the provisions of their licences, regarding the charges for sale of electricity in accordance with the provisions of the 1998 Act. Section 30 the 1998 Act provides that if the Commission wants to depart from the factors specified in clauses (a) to (d) of Section 28 or (a) to (f) of sub-section (2) of Section 29, the Commission shall record reasons for such departure in writing. A collective reading of these Sections namely 22, 29 and 30, in our opinion, leaves no room for doubt that under the 1998 Act, it is the Commission and the Commission alone which is authorised to determine the tariff and in our opinion the State Commission in this case rightly understood its statutory obligation. However as noticed above we find that the High Court took a totally contrary view. It proceeded on the basis that in view of the reference made to Schedule VI to the 1948 Act and reference to Sections 46, 57 and 57A of the 1948 Act in clause (a) of Section 29(2) of the 1998 Act and in view of the language of Section 57 of the 1948 Act, the primary right to determine the tariff lies with the licensee or the utility concerned and it is only when the concerned licensee or the utility has erred on a matter of principle in so fixing the tariff, the role of Commission comes into play in correcting the same. This is evident from the following observations of the High Court :
"Once, however, a determination has been made and the time and nature of such determination indicates the final and supervening nature of it, the licensee must obey such tariff decision. If after the accounts of the financial year are finalized, it appears to the Commission that the accountants have erred on a matter of principle, then and in that event, it is within the power of the Commission to correct that matter and to compel the licensee to make an adjustment in that regard." (copied in verbatim) It is in this context that the High Court in the operative portion of its judgment held :
"For future years, the CESC shall adjust its rates as per the Sixth Schedule of the 1948 Act without the necessity of any prior approval of any authority but subject to the conditions laid down in the Sixth Schedule; it shall not alter its rates in any form or manner more than once every financial year. However, the final authority for correction of any revenue collected in excess, if shown to be so even after accounts, will lie as per the 1998 Act with the Commission and the High Court." This view of the High Court is strongly supported by learned counsel for the respondent company. It is submitted by them that Section 22 of the 1998 Act enumerates only the functions of the State Commission and the actual power to determine the tariff under the 1998 Act is traceable to Section 29 of the said Act. Learned counsel for the respondent company further contend that even the exercise of power of determining the tariff under Sections 22 and 29 is subject to Section 29(2) of the 1998 Act, which mandates that the determination of the tariff shall be made by framing the Regulations, which according to learned counsel, will have to be in conformity with Sections 46, 57 and 57A as well as Schedule VI to the 1948 Act. If that be so, they contend it is evident that the above provisions of the 1948 Act especially the Sixth Schedule empower only the licensee to determine the tariff and that the Schedule having been retained in the 1998 Act, none else than the licensee can determine the tariff. They also contend that clauses (b) to (g) of sub-section (2) of Section 29 only reiterate the principles already found in Schedule VI and, therefore, do not have any specific significance in the context of the framing of the Regulations. Learned counsel also relied upon sub-clause (4) of Section 29 which, in their opinion, clearly states that the determination of tariff is to be made by the holder of each licence, though in a manner specified by the State Commission.
We have already read sub-section (4) of Section 29 hereinabove to mean that that sub-section requires a licensee to recover and to collect revenue by following the methodologies and procedures specified by the State Commission. In our opinion, though the language of sub-section (4) leaves much to be desired, looking into the scheme of the Act, we have no doubt that sub-section (4) of Section 29 does not contemplate a determination of tariff by the licensee itself. Even sub-section (6) of Section 29 on which reliance is also placed by learned counsel for the respondent company, in our opinion, does not in any manner support the contention that it is the licensee which will have to first determine the tariff exclusively. If Section 29 were to be interpreted in a manner as it is presented to us by learned counsel appearing for the respondent company, then we have no doubt that the contention of the appellants that the role of the Commission under the 1998 Act becomes almost redundant, has to be accepted which is not, what is contemplated by the 1998 Act. We are also unable to infer from Section 29 or for that matter from any other Section in the 1998 Act that the role ascribed to the Commission is only supervisory. Here we do take support of the non obstante clause found in Section 29(1) and (6) read with Section 49 which refers to inconsistency in laws. These Sections provide that the provisions of the 1998 Act override or prevail over any other inconsistent provision found in any other enactment except those mentioned in Section 49 of that Act. The High Court has found, which is supported by the learned counsel for the Company, that there is a non obstante provision in Clause I of Schedule VI to the 1948 Act which, if given its due weight, would override the provisions of the 1998 Act. We will now consider that argument. For this purpose it is necessary to extract the relevant portion of Clause I of Schedule VI to the 1948 Act which reads : "Notwithstanding anything contained in the Indian Electricity Act, 1910 (9 of 1910) x x x the licensee shall so adjust his x x x" Taking advantage of this part of the provision which contains the non obstante clause, it is argued that since Section 57, 57A and Schedule VI to the 1948 Act are protected under sub-section (2) of Section 29 of the 1998 Act, and the said non obstante clause prevails over the non obstante clause found in Section 29 of the 1998 Act as well as the provisions of Sections 49 and 52 of the 1998 Act. With respect to the learned counsel for the Company as well as to the High Court, we are unable to accept this contention.
First of all the non obstante clause in Schedule VI to the 1948 Act refers only to the provisions of the Indian Electricity Act, 1910. Schedule VI which is found in the Act of 1948, the legislature could not have contemplated a subsequent enactment containing a non obstante clause coming into force, nor does it say that this non obstante clause applies to or is in preference to all other enactments including future enactments. Therefore this ground itself is sufficient to reject the argument of the learned counsel for the respondents as to the prevailing effect of the non obstante clause in Schedule VI to the 1948 Act. That apart, a reading of the 1998 Act vis--vis the 1948 Act with reference to Schedule VI, or with special reference to Section 57 and 57A of the 1948 Act. It is seen that Sections 22 and 29 of the 1998 Act are special laws and the 1948 Act is only a general law in regard to determination of tariff. Consequently, because of the accepted principle in law that a general law yields to a special law, the provisions of the 1998 Act must prevail. As a matter of fact, this is the view taken by another Division Bench of the Calcutta High Court in regard to this principle in law, as could be seen from the impugned judgment itself, but surprisingly after noticing the same, the impugned judgment proceeds to take a contrary view without either distinguishing the previous judgment of a Coordinate Bench or referring the matter to a larger Bench. Be that as it may, this question is no more res integra. This Court in the case of Allahabad Bank v. Canara Bank & Anr. (2000 4 SCC 406 at 427) after following an earlier judgment of this Court held :
"40. Alternatively, the Companies Act, 1956 and the RDB Act can both be treated as special laws, and the principle that when there are two special laws, the latter will normally prevail over the former if there is a provision in the latter special Act giving it overriding effect, can also be applied. Such a provision is there in the RDB Act, namely, Section 34. A similar situation arose in Maharashtra Tubes Ltd. v. State Industrial and Investment Corpn. of Maharashtra Ltd. (1993 2 SCC 144) where there was inconsistency between two special laws, the Finance Corporation Act, 1951 and the Sick Industries Companies (Special Provisions) Act, 1985. The latter contained Section 32 which gave overriding effect to its provisions and was held to prevail over the former. It was pointed out by Ahmadi, J. that both special statutes contained non obstante clauses but that the "1985 Act being a subsequent enactment, the non obstante clause therein would ordinarily prevail over the non obstante clause in Section 46- B of the 1951 Act unless it is found that the 1985 Act is a general statute and the 1951 Act is a special one".
(SCC p. 157, para 9) Therefore, in view of Section 34 of the RDB Act, the said Act overrides the Companies Act, to the extent there is anything inconsistent between the Acts." We are, therefore, of the considered opinion that we cannot accept the view of the High Court as well as the arguments advanced by learned counsel for the respondents in this regard.
Having carefully considered the provisions of the Act as also the arguments advanced in this regard, we are of the opinion that under the 1998 Act, it is the Commission concerned and in the instant case the State Commission of West Bengal, which is the sole authority to determine the tariff, of course as per the procedure in the said Act.
Procedure to be followed for determination of tariff :
While considering the question as to the determination of tariff, we will also have to consider the question as to what is the procedure to be followed in such determining. This arises for the following reasons :
Under Section 29(2) of the Act as noticed hereinabove, the Commission has to determine the tariff by framing regulations, providing for terms and conditions for fixation of tariff. There is a further mandate to the Commission, that while so framing the regulations, the Commission shall be guided by the guidelines laid down in sub-clauses (a) to (g) of section 29(2). Sub-clause (a) of section 29(2) states that the principles and their application provided in Sections 46, 57 and 57A of the 1948 Act and Schedule VI thereto will be some of the principles which are to be borne in mind along with other principles enumerated in sub-clauses (b) to (g) of the said Section. We have noticed that the Commission in exercise of its power under Section 58 of the 1998 Act has framed the regulations. Regulation 42 in Chapter IV directs that the Commission shall without prejudice to the generality of its powers keep in view the principles enumerated in sub-clauses (a) to (g) of Section 29(2) of the 1998 Act, which includes all the principles and their application as provided for in clauses (a) to (g) of Section 29(2) of the 1998 Act. On the said basis the Commission following the said principles has determined the tariff. The High Court, however, found fault with this. The High Court was of the opinion that it is Schedule VI and the said Schedule alone, which has to be applied in the determination of the tariff. In this process, the High Court held :
"In so far as the Sixth Schedule permits of interpretation, and in so far as the words of the Sixth Schedule permit of determination of issues within their interstices, the Commission not only can, but should apply the ideas set out under sub- section 29(2)(e) to 29(2)(g). But to obliterate even a single word or a punctuation mark, of the Sixth Schedule, because of any abstract principle which the Commission considers to be important, would be beyond its jurisdiction and an encroachment on the power of the Parliament itself, which only it alone can exercise. The principle which we have hereby formulated, might conveniently be understood as the principle of the continued binding nature of the Sixth Schedule on the Commission, and others." The High Court further held :
"This is a very important point. We have opined already that notwithstanding the provisions of Section 29, the Sixth Schedule of the Supply Act holds the field, with as much vigour and strength, at least in regard to the private licensees (as opposed to the State Boards), as it did before the passing of the 1998 Act. In view of the above judgment, is our decision right ?" Answering the above question posed by itself, the High Court held :
"It cannot disregard the Sixth Schedule of the Supply Act unless the Sixth Schedule is repugnant to the 1998 Act and, even if it is repugnant Section 57 of the Supply Act still has to be obeyed here, the non obstante provisions of Section 29(2), notwithstanding." The High Court also held while discussing the same question, thus :
"but even if there were, any such irreconcilable difference, between the two, the ordinary rules of statutory construction would save both by making Section 57 and the Sixth Schedule applicable to private licensees and by making the contrary or repugnant provisions of 1998 Act applicable to others. Since we are convinced that there is no inconsistency or repugnancy, we do not enter into the possible point, that the Sixth Schedule is meant for private licensees alone and thus our reasoning is substantially an outright victory of Section 57 over Section 29. Any further discussion in this line would involve us in an exercise which we consider to be too academic." It is clear from the above observation of the High Court that it was of the opinion that while determining the tariff even under the 1998 Act it is only the principles found in Schedule VI to the 1948 Act which apply and the other principles found in sub-clauses (b) to (g) of Section 29(2) have no application in the process of determining the tariff.
Learned counsel for the appellants contended that this view of the High Court is wholly erroneous. He pointed out that with reference to Section 29 of the 1998 Act, the Parliament has in specific terms laid down more than one guideline to be followed by the Commission while framing the regulations.
According to the learned counsel for the appellants, even the guidelines referred to in clauses (a) to (g) of Section 29(2) were not exhaustive as could be seen from clause (d) of the said Section which authorises the Commission to bear in mind other matters which the Commission considers appropriate for the purpose of the Act while framing the regulations. Thus according to learned counsel, the guidelines found in sub-clause (a) of Section 29(2) are not so sacrosanct as has been held by the High Court, to override the other guidelines found in the very same Section.
Per contra, learned counsel appearing for the respondent company supported the judgment of the High Court, contending that once the requirements of Sections 46, 57 and 57A and Schedule VI to the 1948 Act were bodily incorporated as a guideline in Section 29(2), all other considerations stand excluded because Schedule VI read with Section 57 and 57A is so exhaustive, so as to form a Code by itself which becomes applicable in the determination of tariff. Hence, the requirements of sub-clauses (b) to (g) of sub-section (2) of Section 29 become unnecessary, more so in view of the non obstante clause in Clause I of Schedule VI. It was also argued that even assuming that it is the Commission which has to determine the tariff under the 1998 Act, even then it is Schedule VI which has to be followed in such determination of the tariff.
In the above background, we will now decide whether the High Court was justified in coming to the conclusion that it is Schedule VI and Schedule VI alone which has to be followed in determination of the tariff. While discussing the issue as to the right of determination of tariff by the Commission, we have already negatived the argument of the respondents as also the finding of the High Court that the non obstante clause found in Schedule VI to the 1948 Act does override the provisions of the 1998 Act. If that be so, Section 29(1) which opens with the non obstante clause prevails over all other provisions. This does not, however, mean that the Commission can totally ignore the provisions of Schedule VI to the 1948 Act. That is because the