Maharashtra State Electricity vs Commission
2011 Latest Caselaw 60 Bom

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    JPP




                                                                      
          IN THE HIGH COURT OF JUDICATURE AT BOMBAY
             ORDINARY ORIGINAL CIVIL JURISDICTION




                                              
                 WRIT PETITION NO. 1679 OF 2011

    Maharashtra State Electricity
    Distribution Company Ltd.                   ... Petitioner.




                                             
          V/s.

    Maharashtra Electricity Regulatory




                                       
    Commission.                                 ...Respondent.
                       
    Mr. N. Rai, Senior Advocate with Mr. Ravi Prakash and Mr.
    Rahul Sinha i/b. Lex Global Legal Consultants for the
    Petitioner.
    Mr. Darius J. Khambata, Addl. Solicitor Genenral with Mr. Arijit
                      
    Maitra, Ms. Shilpa Kapil and Mr. Chidanand Kapil for
    Respondent 1.

                        CORAM : DR. D.Y. CHANDRACHUD &
      

                                    A.A. SAYED, JJ.

15 NOVEMBER 2011.

Oral Judgment (Per Dr. D.Y. Chandrachud, J.) :-

The Maharashtra Electricity Regulatory Commission has

framed Multi Year Tariff Regulations in 2011. These are

statutory regulations made in exercise of the power conferred

inter-alia by Section 181 of the Electricity Act, 2003. The

Petitioner has challenged those regulations on the ground that

the Respondent failed to abide by the procedure more

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particularly contained in the Maharashtra Electricity

Regulatory Commission (Conduct of Business) Regulations,

2004.

2. Counsel appearing on behalf of the Petitioner submits

that under Section 61, an appropriate commission shall

subject to the provisions of the Act specify the terms and

conditions for the determination of tariff and in doing so, shall

be guided by the considerations set out in clauses (a) to (i).

Section 86(3) mandates that the State Commission shall

ensure transparency while exercising its powers and

discharging its functions. Section 181(3) imports the

requirement of previous publication in respect of all

regulations made by the State Commission under the Act.

According to the Petitioner, the Respondent is, by the Conduct

of Business Regulations, 2004, empowered by Regulation 19

to hold hearings, discussions, proceedings and meetings as it

considers appropriate. According to the Petitioner, Regulation

73 further mandates that the Commission shall pass orders in

such proceedings and that every order made by the

Commission shall be a reasoned order. In sum and substance,

the contention of the Petitioner is that the Regulations,

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framed by the Commission were not observed because (i) The

Petitioner was not afforded an opportunity of a personal

hearing at which it could state its objections; and (ii) No

reasoned order has been passed by the Commission. That is

the only ground of challenge set forth at the hearing. No

other point has been urged.

3. In response, the learned Additional Solicitor General

submitted that the Multi Year Tariff Regulations framed by the

Commission

constitute subordinate legislation made in

exercise of the power conferred by Section 181 of the Act.

Subordinate legislation, it is well settled, can be challenged

only on the ground of manifest arbitrariness. There is no

question of the Commission being required to grant a personal

hearing when it discharges a legislative function of framing

regulations and no requirement of a personal hearing has

been imported under the Act. It was urged that the previous

publication in Section 181(3) is enforced by the Electricity

(Procedure for Previous Publication) Rules, 2005 which require

the publication of a draft, specification in a notice of a date on

or after which the draft will be taken into consideration and

the consideration of objections and suggestions. This process,

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it is urged, was followed in the present case and the

objections and suggestions of the Petitioner were duly

considered. In the affidavit in reply, there is an elaboration of

those objections of the Petitioner which have as a matter of

fact been incorporated by making suitable modifications in the

regulations. Finally, it was urged that in this view, the conduct

of business regulations cannot over-ride the rules framed for

previous publication. The Commission when it determines the

stakeholders.

tariff, gives an opportunity of a personal hearing to all

However, there is no warrant for imposing a

requirement of a personal hearing when the Commission

discharges a legislative function of framing subordinate

legislation particularly, in the absence of any such provision

being mandated by law.

4. The power of the State Commission to frame Regulations

for the purpose of the Act is embodied in Section 181 which

empowers the Commission to make regulations consistent

with the Act and the Rules, generally to carry out the

provisions of the Act. Sub-section (3) of Section 181 stipulates

that all regulations made by the State Commission under the

Act shall be subject to the condition of previous publication.

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The Central Government has, in exercise of the power

conferred by Section 181 framed the Electricity (Procedure for

Previous Publication) Rules, 2005. Regulations 3 and 4

provide as follows :-

"3. Procedure of previous publication - For the purpose

of previous publication of regulations under sub-Section (3) of Section 177, sub-Section (3) of Section 178 and sub-Section (3) of Section 181 of the Act, the following

procedure shall apply -

the Authority or the Appropriate Commission shall, before making regulations, publish a draft of the

regulations for the information of persons likely to be affected thereby;

(2) the publication shall be made in such manner as

the Authority or the Appropriate Commission deems to

be sufficient;

(3) there shall be published with the draft regulations, a

notice specifying a date on or after which the draft regulations will be taken into consideration;

(4) the Authority or the Appropriate Commission having

powers to make regulations shall consider any objection or suggestion which may be received by the Authority or the Appropriate Commission from any person with respect to the draft before the date so specified.

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4. The publication in the Official Gazette of the regulations made in exercise of a power to make

regulations after previous publication shall be conclusive

proof that the regulations have been duly made."

5. Regulations 3 stipulates the requirement of (i)

Publication of a draft of the regulations for the information of

persons likely to be affected; (ii) The publication of a notice

specifying a date on or after which the draft regulation will be

taken into consideration; and (iii) The consideration of

objections or suggestions which may be received by the

Authority or by the Appropriate Commission from any person.

Publication in the Official Gazette of the regulations made in

exercise of a power to make regulations after previous

publication shall be conclusive proof that the regulations have

been duly made.

6. The power to frame regulations bears a legislative

character. Regulations constitute subordinate legislation.

The requirement of a hearing is not imported into a legislative

exercise save and except where the statute mandates a right

of representation to the person concerned. In West Bengal

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Electricity Regulatory Commission V/s. CESC Ltd.1, the

Supreme Court has observed as follows in paragraph 40 of the

Judgment :-

" .... 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 inconvenience, even if such inconvenience does in fact exist."

7. Section 181(3) mandates previous publication. The

requirement of previous publication in Section 181(3) is

implemented in the Rules of 2005, which require the

publication of the regulations in draft and the consideration of

objections and suggestions. That procedure has been

observed. In the present case, it would be appropriate for the

Court to extract in its entirety a chart annexed to the affidavit-

    1 (2002) 8 SCC 715





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in-reply. The chart indicates the procedure which was

followed by the State Commission before the Multi Year

Regulations 2011 were notified :-

    Sr.    Particulars                                        Date
    1      Draft MYT Approach Paper uploaded on               01/10/2009




                                                

MERC website & circulated to 53 experts, including Utilities, Consumer Representative, Members of the State Advisory Committee, etc.

2 Full day Workshop wherein above named 09/10/2009 Experts and stakeholders were given the opportunity to provide their inputs on the

proposed MYT Framework 3 Two weeks time after the Workshop was 23/10/2009

given to the stakeholders to submit their comments on the draft Approach Paper in writing

stakeholders in writing -

5 Based on representations from all the 01/12/2009

Utilities, the Commission deferred the implementation of the MYT framework by one year, and specified the Control Period for MYT as FY 2011-12 to FY 2015-16

6 Commission directed all Utilities to submit 14/12/2009 their Business Plan in the stipulated Formats 7 First reminder sent to Utilities on 15/06/2010 submission of Business Plan

8 Second reminder sent to Utilities on 13/07/2010 submission of Business Plan

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9 Modified MYT Approach Paper and draft 01/09/2010 MERC MYT Regulations were uploaded on MERC website and comments were invited,

through Public Notice, under the prior publication requirement

10 Last date for submission of comments on 23/09/2010 draft MYT Regulations 11 Last date for submission of comments on 10/10/2010 draft MYT Regulations was extended to

12 Two-day Workshop wherein all Utilities and 15/10/2010 13 authorised Consumer Representatives __________ were given the opportunity to provide their 16/10/2010 inputs on the draft MYT Regulations

14 Number of comment received from

stakeholders in writing -

15 Consideration of comments and 01/11/2010 suggestions by the Commission - from

16 Consideration of comments and 31/01/2011 suggestions by the Commission - to 17 Issuance of final MYT Regulations on MERC 01/02/2011

website 18 Notification of final MERC MYT Regulations, 04/02/2011

19 Revised Formats for submission of MYT 25/03/2011 Business Plan & MYT Petition sent to all Utilities

8. The affidavit in reply filed by the Respondent contains an

express denial of the allegation that the comments of the

Petitioner were not considered while finalizing the regulations.

As and by way of illustration, the reply has furnished instances

where some of the comments of the Petitioner were accepted

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and incorporated in the regulations. No rejoinder has been

filed to traverse what is stated in the affidavit-in-reply. Even if

the Court were to hold, as contended by the Petitioner, that

the conduct of Business Regulations 2004 would be attracted,

it is evident that what Regulation 19 stipulates is that in the

discharge of its functions under the Act, the Commission may,

from time to time, hold hearings, proceedings, meetings,

discussions, deliberations, inquiries, investigation and

consultations as it considers appropriate.

nature of the proceedings which the Commission must follow Obviously, the

has to be appropriate to the nature of the process, be it

legislative or in a particular case judicial or quasi judicial. For

instance, the conduct of business regulations provides for the

procedure to be followed in the case of adjudication

proceedings. Provisions have been made in regard to the

authority to represent, the initiation of proceedings, petitions

and pleadings, proof of facts, presentation and scrutiny of

pleadings, service of notices, filing of replies, hearing

proceedings ex-parte and the passing of a reasoned order by

the Commission. A reasoned order is an attribute of the

judicial process. Legislation or subordinate legislation does

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not require reasoned orders. The norm which is legislated

upon by the legislature or its delegate speaks for itself.

Legislative bodies and their delegates speak through law

enacted. In the present case, as the affidavit in reply would

disclose, the Commission had followed a fair procedure

consistent with the Rules of 2005 before it framed the Multi

Year Regulations, 2011. There is no merit in the submission

that the Commission ought to have passed a reasoned order.

Legislation or sub-ordinate legislation, unlike the judicial

process does not speak through reasons or judgments.

Reasons constitute the foundation of a judicial or quasi-judicial

order. In the case of a legislative enactment or subordinate

legislation, the mandate of the law is contained in the

provisions as they are enacted. No further reasons are,

therefore, required as a matter of first principle.

9. At this juncture it is necessary to refer to the judgments

of the Supreme Court on this point. A Constitution Bench of

the Supreme Court in M/s. Shri Sitaram Sugar Co. Ltd. v.

Union of India1 followed the decision in Union of India

v. Cynamide India Ltd.2, which held that :

    1    AIR 1990 SC 1277 at ¶ 36-8.
    2    [1987] 2 SCR 841.





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"...legislative action, plenary or subordinate, is not subject to rules of natural justice. In the case of Parliamentary

legislation, the proposition is self-evident. In the case of subordinate legislation, it may happen that Parliament may

itself provide for a notice and for a hearing.... But where the legislature has not chosen to provide for any notice or hearing, no one can insist upon it and it will not be

permissible to read natural justice into such legislative activity. ... A price fixation measure does not concern itself with the interests of an individual manufacturer or

producer. It is generally in relation to a particular commodity or class of commodities or transactions. It is a

direction of a general character, not directed against a particular situation. ..."

In Prag Ice & Oil Mills and Anr. etc. v. Union of India1, it was observed that :

"A legislative measure does not concern itself with the facts

of an individual case. It is meant to lay down a general rule applicable to all persons or objects or transactions of a particular kind or class."

The Constitution Bench of the Supreme Court in K.T. Plantation Pvt. Ltd. and Anr. v. State of Karnataka2 held that :

"52. Delegated legislation which is legislative in character, cannot be questioned on the ground of violation of the

1 1978 Cri LJ 1281a.

2 2011 (8) SCALE 583 at ¶ 52.

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principles of natural justice, especially in the absence any such statutory requirement. Legislature or its delegate is also not

legally obliged to give any reasons for its action while discharging its legislative function.1"

In State of Tamil Nadu and Anr. v. P. Krishnamurthy and Ors.2, the Supreme Court held that,

"A delegated legislation, though legislative in character, will be invalid, on the ground of violation of principles of natural justice if the enabling Act under which the delegated

legislation is made, specifically requires observance of the

principles of natural justice for doing the act. This was made clear in Rameshchandra Kachardas Porwal v. State of

Maharashtra3 itself. "

10. For these reasons, and following these settled principles

of law, we do not find any merit in the contentions which have

been urged on behalf of the Petitioner. The Petition is

accordingly dismissed. There shall be no order as to costs.

(Dr. D.Y. Chandrachud, J.)

(A.A. Sayed, J.)

1 See also, State of Punjab v. Tehal Singh and Ors., (2002) 2 SCC 7; West Bengal Electricity Regulatory Commission v. CESC Ltd., (2002) 8 SCC 715; Pune Municipal Corporation and Anr. v. Promoters and Builders Association and Anr., (2004) 10 SCC 796 and; Bihar State Electricity Board v. Pulak Enterprises and Ors., (2009) 5 SCC 641. 2 AIR 2006 SC 1622 at ¶ 18.

3 [1981] 2 SCR 866.

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