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Friday, September 20, 2013

the Electricity Act, 2003= whether the CERC and the Tribunal have correctly interpreted Regulation 2.5 of the said regulations while permitting capitalisation of the additional expenditure for purposes of determining the tariff. = the respondent-Corporation sought additional capitalisation of the expenditure on the project in question relevant to the period 2001-2004. The Central Commission determined the additional capitalisation and allowed the same to the respondent, which determination was upheld by the Tribunal with the modification to which we have adverted in the beginning of this order. 22. There is no gainsaying that the prayer for additional capitalisation was made by the respondent-Corporation and considered by CERC after the Electricity Act 2003 had come into force, repealing the earlier enactments. The new legislation did not set out any role for the CEA, in the matter of approval of the schemes for the generating companies or the capital expenditure for the completion of such projects. The entire exercise touching the regulation of the tariff of generating companies owned or controlled by the Central Government, like the respondent was entrusted to the Central Commission. The role of the Central Electricity Authority established under Section 7 of the 2003 Act, was limited to matters enumerated under Section 73 of the Act, approval of the scheme for generating companies or the capital expenditure for the completion of such projects or capitalisation of the additional expenditure not being one such function. The CERC was, therefore, right when it said that the Central Electricity Authority had no part to play in the matter of approval for purposes of capitalisation of the extra expenditure incurred on a project. That was so notwithstanding the continuance of Regulation 2.5 of the regulations framed by the CERC providing for such an approval by the CEA. The far reaching changes that came about in the legal framework with the enactment of the 2003 Act, made Regulation 2.5 redundant in so far as the same envisaged a reference to the CEA or an Independent Agency for approval of the additional capitalisation. Insistence on a reference, to the CEA for such approval, despite the sea change in the legal framework would have been both unnecessary as well as opposed to the spirit of new law that reduced the role of CEA to what was specified in Section 73 of the Act. The CERC and the Tribunal were in that view justified in holding that a reference to the CEA was not indicated nor did the absence of such a reference denude the CERC of its authority to fix the tariff after the 2003 Act had come into force. That was so notwithstanding the fact that proviso to Section 61 of the Electricity Act, 2003 continued the terms and conditions for determination of tariff under the enactments mentioned therein and those specified in the Schedule for a period of one year or till such terms were specified under that section whichever was earlier. In the result this appeal fails and is hereby dismissed with costs assessed at Rs.50,000/- Civil Appeal Nos.5361-5362 of 2007 23. In these appeals the order impugned by the appellant places reliance upon the order passed by the Tribunal, in Appeal No.36 of 2006 against which order we have in the foregoing part of this judgment dismissed the appeal preferred by the appellant. On a parity of reasoning these appeals are also destined to be dismissed and are, accordingly, dismissed with costs assessed at Rs.50,000/-.

published in http://judis.nic.in/supremecourt/imgst.aspx?filename=40786

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                        CIVIL APPEAL NO.4117 OF 2006


U.P. Power Corporation Ltd.                             …Appellant

      Versus

N.T.P.C. Ltd. & Ors.                               …Respondents


WITH CIVIL APPEAL NOS.5361-5362 OF 2007







                               J U D G M E N T



T.S. THAKUR, J.

1.    This appeal under Section 125 of the Electricity Act,  2003  calls  in
question the correctness of a  Judgment  and  Order  dated  7th  July,  2006
passed by the Appellate Tribunal for Electricity whereby  the  Tribunal  has
while partially modifying  the  Order  passed  by  the  Central  Electricity
Regulatory Commission (‘CERC’ for short)  dismissed  Appeal  No.36  of  2006
filed by the appellant.

2.    The CERC had  by  the  Order  impugned  before  the  Tribunal  allowed
Petition No.139 of 2004 filed by the  respondent-Corporation  and  permitted
capitalisation of Rs.4.521 crores over the approved cost for the  completion
of Feroz Gandhi Unchahar Thermal Power Station Stage-I for  the  period  1st
April, 2001 to 31st March, 2004.  While doing so the CERC had in Para 37  of
its Order held respondent No.1 entitled to return on equity and interest  on
loan on the said amount payable along with the tariff for the  period  2004-
2009.  What is significant is that both the CERC and the Appellate  Tribunal
rejected the contention urged on behalf of  the  appellant-Corporation  that
the additional capital expenditure incurred  by  the  respondent-Corporation
could not be taken into consideration for tariff fixation without  the  same
having been approved by the Central Electricity Authority (“CEA” for  short)
as required under Regulation 2.5 of  the  CERC  (Terms  and  Conditions  for
Determination of  Tariff)  Regulations,  2001.  The  primary  question  that
therefore falls for consideration in this appeal is  whether  the  CERC  and
the  Tribunal  have  correctly  interpreted  Regulation  2.5  of  the   said
regulations while permitting capitalisation of  the  additional  expenditure
for purposes of  determining  the  tariff.   That  question  arises  in  the
following factual backdrop:

3.    Feroz Gandhi Unchahar Thermal Power Station Stage-I was taken over  by
the respondent-National Thermal Power Corporation from  the  erstwhile  U.P.
State Electricity Board on 13th February, 1992.
The Central  Government  had
approved the takeover cost of Rs.925 crores  in  terms  of  a  communication
dated 2nd May, 1993 issued by  the  Ministry  of  Power.  
By  a  subsequent
letter dated 5th August, 1996 the CEA accorded approval  for  an  additional
Rs.2.85 crores for R&M under Environment Action  Plan,  thereby  taking  the
total approved project cost to Rs.927.85 crores.

4.     The  CERC  (Terms  &  Conditions   for   Determination   of   Tariff)
Regulations, 2001 for the period 1st April, 2001 to 31st  March,  2004  came
to be notified  on  26th  March,  2001,  pursuant  whereto  the  respondent-
Corporation filed Petition No.41 of 2001 for  approval  of  tariff  for  the
relevant tariff period in respect of the generating plant  in  question.  By
an Order dated 24th October, 2003, the CERC approved the tariff taking  into
consideration the capital cost at Rs.940.70 crores as  on  1st  April,  2001
but  did  not  consider  the  additional  capitalisation  claimed   by   the
respondent  since  the  latter  was  based  only  on  an  estimated  capital
expenditure and was unsupported by  an  auditor’s  certificate.  Respondent-
Corporation then moved petition No.139  of  2004  before  the  CERC  on  5th
October, 2004 seeking approval of the revised fixed charges  in  respect  of
the generating plant for the relevant tariff period taking into account  the
additional capital expenditure incurred during the  said  period  which  was
estimated at Rs.6.101 crores.  By an order dated 31st March, 2005, the  CERC
disposed of the  said  petition  approving  an  amount  of  Rs.4.521  crores
towards capital expenditure while disallowing the rest.

5.    The CERC held that the respondent would  not  be  entitled  to  tariff
revision during the relevant period in the light of Regulation 1.10  of  the
CERC  Regulations  which  prohibited  allowance  of  an  additional  capital
expenditure, if such expenditure happened to be less than  20  per  cent  of
the approved project cost.  It all the same held in Para  37  of  its  Order
that the respondent was entitled to relief in the form of return  on  equity
at the rate of 16% and interest on loan on the approved  additional  capital
expenditure for the period 2004-2009.  The CERC observed :

           “37.  As there is nothing in the notification dated 26.3.2001 to
           deny the petitioner the reasonable return to service the capital
           expenditure incurred by the petitioner and found to be justified
           by us, we direct that the petitioner shall earn return on equity
           @ 16% on the equity portion  of  the  additional  capitalization
           approved  by  us.   Similarly,  the  petitioner  shall  also  be
           entitled to the  interest  on  loan  as  applicable  during  the
           relevant period.  Return on equity and interest shall be  worked
           out on the additional capitalization of Rs.4.521 crore  approved
           by us from  1st  April  of  the  financial  year  following  the
           financial year to which additional capital  expenditure  relates
           up to 31.3.2004.  The lump sum of the amount of return on equity
           and interest on loan so arrived  at  shall  be  payable  by  the
           respondents along with the tariff for the period 2004-09  to  be
           approved by  the  Commission.   The  exact  entitlement  of  the
           petitioner on this account shall be considered by the Commission
           while approving tariff for the period 2004-09.”




6.    Aggrieved by the order passed by the  CERC  the  appellant-Corporation
approached the Appellate Tribunal for Electricity in Appeal No.36  of  2006.
The appellant  thereby  questioned  the  CERC’s  authority  to  approve  the
additional capital expenditure of Rs.4.521  crores  as  also  the  power  to
award relief in the nature specified in para 37 supra. It was  contended  on
behalf  of  the  Corporation  that  in  the  absence  of  approval  of   the
expenditure  by  CEA  as  required  under  Regulation  2.5   of   the   CERC
Regulations, the CERC had no authority to hold that the respondent-NTPC  was
entitled  to  additional  capitalisation.   The   Appellate   Tribunal   for
Electricity, however, repelled that  contention  and  dismissed  the  appeal
filed by the appellant on the ground  that  CERC’s  approval  of  additional
capitalisation to  the  tune  of  Rs.4.521  crores  did  not  call  for  any
interference and  that  the  respondent-Corporation  had  placed  sufficient
material before the CERC to substantiate its claim.  The  Tribunal  declared
that the CERC was  empowered  to  undertake  a  prudent  check  and  approve
additional capitalisation after the  deletion  of  Section  43-A(2)  of  the
Electricity (Supply) Act, 1948 because of which deletion CEA ceased to  have
any role in such matters.  The Tribunal further held that  the  project  had
been originally approved by CEA as far back as on 5th August, 1986  and  was
taken over while still  incomplete  by  the  respondent-NTPC  in  1992.  The
incomplete items were then  completed  by  the  respondent  NTPC  after  the
takeover which required investment  of  additional  capital.   The  Tribunal
was, therefore, of the view that the additional capital was well within  the
approved cost of the project  which  remained  unexecuted  on  the  date  of
vesting.   The  Appellate  Tribunal,  however,  accepted   the   appellant’s
contention that the relief regarding the return on equity  and  interest  on
loan could not be granted until the next tariff  period.   Consequently  the
Tribunal directed deletion of Para 37 of the CERC’s order giving liberty  to
the CERC to take the said relief into consideration  while  determining  the
tariff for the next period. The present appeal assails  the  correctness  of
the view taken by the CERC and the Appellate Tribunal.

7.    When this appeal came up for admission on 29th September,  2006,  this
Court admitted the same only to examine the following two questions:

           “a. What is the true scope and ambit of Regulation 2.5  of  CERC
           (Terms and Conditions for Determination of Tariff)  Regulations,
           2001?

           b. xxxxxxx

           c. xxxxxxx

           d.  Whether  the  CERC  could  have   allowed   the   additional
              capitalization  which  was  not  approved  by  the  concerned
              authority i.e. Central Electricity Authority?


           e. xxxxxxx”



8.    Appearing for the appellant Mr. Pradeep  Misra  strenuously  contended
that the CERC and so also the Appellate Tribunal  had  failed  to  correctly
interpret Regulation 2.5 of the Regulations in question.  He submitted  that
Regulation 2.5 of the Regulations  was  much  too  clear  to  admit  of  any
equivocation. A plain reading of the Regulation, argued Mr. Misra,  left  no
manner of doubt that any additional  capital  expenditure  incurred  on  the
completion of the project could be taken into consideration for fixation  of
tariff only if such  excess  was  allowed  by  the  CEA  or  an  appropriate
independent agency constituted under the said Regulations. So  long  as  the
capital expenditure incurred in excess of the approved expenditure  did  not
have the sanction of the CEA or the  independent  agency  nominated  by  the
CERC, the same could not, according to the  learned  Counsel,  constitute  a
valid input for fixing the tariff.  No such approval having been  sought  or
granted either by the CEA or any independent agency in this case,  the  CERC
could not have taken the additional capital expenditure  into  consideration
for purposes of fixing the tariff.  It was also contended that the  CERC  as
also the Appellate Tribunal had fallen in error in holding that deletion  of
Section 43A(2) of the Electricity (Supply) Act, 1948  made  a  reference  to
the CEA in terms of Regulation  2.5  of  the  Regulations  unnecessary.  The
deletion of Section 43A(2) notwithstanding, the CEA  continued  to  exercise
powers in terms of Sections 28 to 32 of the Act. The  statutory  requirement
of an approval from the CEA of the additional cost had not, therefore,  been
rendered a surplusage by reason of the removal of Section  43A(2)  from  the
statute book.

9.    On behalf of the respondent it was contended by Mr. Ramachandran  that
the CERC as also the  Tribunal  were  perfectly  justified  in  taking  into
consideration the additional expenditure incurred on the completion  of  the
project, not only because there was no dispute that such an expenditure  had
in fact been incurred but also because the said expenditure was found to  be
capital in nature.  The  question  of  an  approval  from  the  CEA  or  the
independent agency was,  therefore,  rendered  academic  in  the  facts  and
circumstances of the case.

10.   It was further argued that since the  appellant  itself  accepted  the
expenditure to have been incurred and the nature of the  expenditure  having
been found to be capital in character, the CEA  or  the  independent  agency
could not have, even if a reference  was  made,  declined  approval  to  the
same.  It was also argued  that  the  deletion  of  Section  43A(2)  of  the
Electricity (Supply) Act,  1948  from  the  statute  book  made  a  material
difference and that the CERC and the Tribunal  had  correctly  held  that  a
reference to the CEA or independent agency was on that count unnecessary.

11.   Regulation 2.5 of the Regulations reads as under:

           “2.5 Capital Expenditure

           The capital expenditure of the project shall be financed as  per
           the approved financial package set out  in  the  techno-economic
           clearance of the Authority or  as  approved  by  an  appropriate
           independent agency as the case may be.  The project  cost  shall
           include reasonable amount of capitalized initial spares.

           The actual capital expenditure incurred  on  completion  of  the
           project shall form the basis for fixation of tariff.  Where  the
           actual expenditure exceeds the approved project cost, the excess
           expenditure as  allowed  by  the  Authority  or  an  appropriate
           independent agency  shall  be  considered  for  the  purpose  of
           fixation of tariff.

           Provided that such excess expenditure is not attributable to the
           Generating Company or its suppliers or contractors;

           Provided further that where a Power Purchase  Agreement  entered
           into between the Generating Company and the beneficiary provides
           a ceiling on capital expenditure, the capital expenditure  shall
           not exceed such ceiling for computation of tariff.”




12.   The term “independent agency” referred to in the above  Regulation  is
defined in regulation 1.9 as under:

           “1.9  ‘Independent agency’ means  the  agency  approved  by  the
           Commission by a separate notification.”



13.   A plain reading of the above makes it  manifest  that  the  basis  for
fixation has  to  be  the  “actual  capital  expenditure”  incurred  on  the
completion of the project.  But where the  actual  expenditure  exceeds  the
approved expenditure the excess so incurred can be taken into  consideration
to the extent the same is allowed by the Central  Electricity  Authority  or
an appropriate independent agency nominated for the purpose.   This  implies
that the excess expenditure must go through a process of scrutiny either  by
the CEA or the independent agency before it  can  constitute  an  input  for
determination  of  the  tariff.   Scrutiny  of  the  excess  would  in  turn
primarily involve examination of two distinct aspects viz.
       (a) Whether the excess expenditure has been actually    incurred  or
           is a make believe or an exaggeration by the generating  company;
           and


       (b) Whether the expenditure was capital in nature.


14.   In  cases  where  the  answers  to  these  two  questions  is  in  the
affirmative, the CEA or the Independent  Agency  would  have  no  reason  to
disallow such expenditure, nor would its consideration for  tariff  fixation
present any difficulty.  In case a lesser amount is allowed by  the  CEA  or
the Independent Agency  either  because  the  generating  company  fails  to
substantiate its claim of having incurred  the  expenditure  as  claimed  or
even if the amount is incurred, only a part of the same was  in  the  nature
of capital expenditure, the lesser amount alone  will  constitute  an  input
for tariff determination.  To that extent, there is no  difficulty  nor  was
Mr. Misra, Counsel for the appellant, able to suggest  any  other  dimension
which the CEA or the Independent Agency would be entitled to consider  while
examining the question of allowing or  disallowing  the  excess  expenditure
incurred by the generating unit.  If that be  so,  absence  of  a  reference
under Regulation 2.5 (supra) to the CEA or  Independent  Agency  would  make
little or no difference having regard to the facts of the case at hand.   We
say so because although the respondent-Corporation  had  claimed  an  excess
expenditure of Rs.6.101 crores the amount actually taken into  consideration
for fixation of the tariff was Rs.4.521 crores only.   The  CERC  had  on  a
prudent check disallowed a substantial part of the excess that  was  claimed
by the respondent-Corporation.  What is significant is that  the  appellant-
Corporation had fairly conceded  that  an  amount  of  Rs.4.521  crores  was
indeed spent by the respondent for the completion of the project.   That  is
evident  from  the  following  observation  of  the  Electricity   Appellate
Tribunal, where Mr. Misra learned counsel for the appellant  made  a  candid
admission as to the extent of the expenditure incurred over  and  above  the
approved Project cost:
           “Mr. Pradeep Misra, learned counsel  for  the  appellant,  while
           relying on Regulation 1.10 which provides that there shall be no
           tariff revision if the capital expenditure is less than  20%  of
           the approved cost of the project contended that there  could  be
           no tariff revision at all much less the appellant shall be  made
           liable to pay 16% ROE as well as interest as directed in Para 37
           of the Impugned Order under challenge.  Mr. Pradeep  Misra  also
           contended that the claim of this additional  expenditure,  under
           five Heads, are not  disputed  but  they  are  only  maintenance
           expenditure.  It was also contended by the learned counsel  that
           in the absence of approval of expenditure by CEA and there being
           no proof of such approval, CERC has no authority  to  hold  that
           NTPC had incurred additional capital expenditure and entitled to
           additional capitalisation.”
                                                 (emphasis supplied)
15.   From the above, we have no difficulty in holding  that  the  first  of
the two aspects that may have engaged  the  attention  of  the  CEA  or  the
Independent Agency was concluded by the admission of  the  appellant,  which
was the best evidence, in the matter apart from the  fact  that  the  figure
arrived at by the Commission was based on a fair and prudent  check  of  the
extent of admissible expenditure said to have been incurred.
16.   That  leaves  us  with  the  second  aspect  which,  any  scrutiny  or
examination by the CEA may have involved viz. whether  the  expenditure  was
capital or revenue in nature.  The CERC has  found  the  expenditure  to  be
capital  in  nature  which  finding  has  been  affirmed  by  the  Appellate
Tribunal.  There is nothing perverse about that finding in our  opinion  nor
has this appeal been admitted on the question whether  the  expenditure  was
capital or revenue.  In the absence of any question relating to  the  nature
of the expenditure, we find it difficult to appreciate how the absence of  a
reference to CEA has caused any miscarriage of justice for the appellant  or
vitiated the tariff fixation  by  the  CERC.  It  follows  that  even  if  a
reference to CEA was in the facts of the  case  required  to  be  made,  the
absence of any failure of justice or prejudice would render  it  unnecessary
for us to interfere with the orders passed by the  CERC  and  the  Appellate
Tribunal.
17.   Since the question whether or not a reference  to  CEA  was  necessary
under Regulation 2.5 was argued before us at some  length  we  may  as  well
deal with the same before parting.  A reference to  the  backdrop  in  which
the question arises becomes necessary and may be summarised as under:
18.    The  Electricity  (Supply)  Act,  1948  inter  alia  dealt  with  the
generation and supply of electricity by  generating  companies.   Chapter  V
comprising Sections 28 to 58 of the said Act dealt with the  preparation  of
schemes by generating companies and concurrence of the CEA for such  schemes
including the capital cost to be incurred  by  these  generating  companies.
Section 43A of the Act dealt with sale  of  electricity  by  the  generating
companies and provided norms and parameters to be determined by the CEA  and
notified by the Government of India. Since much of the  debate  at  the  Bar
was around the said provision and the effect of deletion of sub-section  (2)
thereof, it would be useful to reproduce the same at this stage.


           “43A. Terms, conditions and tariff for sale  of  electricity  by
           Generating Company.- (1) A Generating Company may enter  into  a
           contract for the sale of electricity generated by it-

                 (a) with the Board constituted for the State or any of  the
                 States in which a generating station owned or  operated  by
                 the company is located;

                 (b) with the Board constituted for any other State in which
                 it is carrying on  its  activities  in  pursuance  of  sub-
                 section (3) of section 15A; and

                 (c) with any other person with  consent  of  the  competent
                 government or governments.

           (2) The tariff for the  sale  of  electricity  by  a  Generating
           Company to the Board shall be determined in accordance with  the
           norms regarding operation and the Plant Load Factor  as  may  be
           laid down by the Authority and in accordance with the  rates  of
           depreciation and reasonable return and such other factors as may
           be determined, from time to time, by the Central Government,  by
           notification in the Official Gazette:

                 Provided that the terms, conditions  and  tariff  for  such
           sale shall, in respect of a Generating Company wholly or  partly
           owned by the Central Government, be such as may be determined by
           the Central Government and in respect of  a  Generating  Company
           wholly or partly owned by one or more State Governments be  such
           as may be determined, from time to time, by  the  government  or
           governments concerned.”




19.   In the year 1998, came the  Electricity  Regulatory  Commissions  Act,
1998,  which  established  the  Central  Electricity  Regulatory  Commission
(hereinafter  referred  to  as  “the  Central  Commission”).   The   Central
Commission was inter alia charged with the function of  determining  tariffs
of Central Units such as those  owned  and  controlled  by  the  respondent-
Corporation.  Significantly enough Section 51  of  this  Act  empowered  the
Central Government to delete sub-section (2)  of  Section  43A  with  effect
from  such  date  as  the  Central  Government  may  decide.   The   Central
Government, invoked that power and by a notification dated  11th  September,
2000, directed the deletion of Section 43A (2)  of  the  Electricity  Supply
Act, 1948 in respect  of  generating  companies  regulated  by  the  Central
Commission retrospectively w.e.f. 24th July, 1998.  Shortly  thereafter  the
Central  Commission  issued  an  order  in  regard  to   operational   norms
applicable to generating stations owned  among  others  by  respondent-NTPC.
The order was to the following effect:
           “As regards capital costs, the situation is somewhat  difficult.
           As the law  stands  today  in  respect  to  PSUs,  the  required
           approvals from the Government and clearance from CEA have to  be
           obtained before the commencement  of  the  project,  subject  to
           certain limits for which no clearance is  required.   After  the
           completion of the project, if  the  actual  expenditure  or  the
           scope of the  project  vary  beyond  certain  limits,  they  are
           required to be further approved. This  process  of  approval  is
           time consuming, resulting in a provisional clearance,  making  a
           subsequent  retrospective  revision  inevitable.    Changes   in
           legislation are being contemplated by which the  clearance  from
           CEA for projects might be done away with. However,  as  the  law
           stands today, approvals are inevitable. Still it is possible  to
           bring about stability in tariff  in  case  a  time  schedule  is
           worked out by which utilities may submit data of CEA at least  6
           months prior to the completion of a project, so  that  clearance
           could be obtained sufficiently in time before the tariff for the
           station/lines is determined.  It is hoped that any variations on
           actual finalization of accounts thereafter should  be  minor  in
           nature  which  could  be  absorbed  by  the   utility   and   if
           substantial, can be taken care of in the next revision.  In view
           of the above, all utilities seeking determination of  tariff  in
           respect of new projects, shall submit their applications  to  us
           at least  3  months  in  advance  of  the  anticipated  date  of
           completion, along with the  project  cost  as  approved  by  the
           appropriate independent authorities, other  than  the  Board  of
           Directors of the Company. This project cost will constitute  the
           basis for tariff fixation, and no revision would be  entertained
           till the next tariff period.  This  direction  presupposes  that
           CEA  may  hereafter,  unlike  the  past,  clear   capital   cost
           escalations on factors other than the change in scope  as  well.
           We would urge upon CEA to consider and deal with the approval of
           additional capital costs other than those due to change  in  the
           scope of the project as well, in the interest  of  avoidance  of
           tariff shocks down stream. In case the  projects  exempted  from
           CEA clearance, the Commission would  consider  accepting  a  due
           diligence clearance from any recognised agency.”




20.   The above was  followed  by  the  Central  Commission  framing  Tariff
Regulations 2001, in which  Regulation  2.5  extracted  earlier  dealt  with
capital expenditure.  It was  in  the  above  background  that  the  Central
Commission determined the Tariff for the generating  unit  in  question  for
the period 1st April, 1997 to 31st  March,  2001  by  an  order  dated  30th
October,  2002.  Shortly  after  that  order  the  Parliament  enacted   the
Electricity Act, 2003 which came into force w.e.f. 10th June, 2003. The  new
legislation repealed the Electricity (Supply)  Act,  1948.   The  effect  of
this repeal was  that  all  provisions  of  the  1948  Act  including  those
requiring approval by the CEA of the scheme of the generating  stations  and
capital cost which the repealed Act provided  for  became  inapplicable  and
irrelevant under the new Act. The new law aimed at deregulating  electricity
generation.  In the case of Thermal Power Stations the capital cost was  not
required to be approved by the CEA, as was the position  under  the  earlier
law.
21.    In  Petition  No.139  of  2004,
the  respondent-Corporation   sought
additional capitalisation of the expenditure  on  the  project  in  question
relevant to the period 2001-2004.  
The  Central  Commission  determined  the
additional capitalisation and allowed the  same  to  the  respondent,  which
determination was upheld by the Tribunal with the modification to  which  we
have adverted in the beginning of this order.
22.   There is no gainsaying that the prayer for  additional  capitalisation
was made by the respondent-Corporation and  considered  by  CERC  after  the
Electricity Act 2003 had come into force, repealing the earlier  enactments.
The new legislation did not set out any role for the CEA, in the  matter  of
approval of  the  schemes  for  the  generating  companies  or  the  capital
expenditure for the  completion  of  such  projects.   
The  entire  exercise
touching the regulation of the  tariff  of  generating  companies  owned  or
controlled by the Central Government, like the respondent was  entrusted  to
the Central Commission.  
The  role  of  the  Central  Electricity  Authority
established under Section  7  of  the  2003  Act,  was  limited  to  matters
enumerated under  Section  73  of  the  Act,  approval  of  the  scheme  for
generating companies or the capital expenditure for the completion  of  such
projects or capitalisation of the additional expenditure not being one  such
function.  
The CERC was, therefore, right when  it  said  that  the  Central
Electricity Authority had no part to play in  the  matter  of  approval  for
purposes of capitalisation of the extra expenditure incurred on  a  project.
That was so  notwithstanding  the  continuance  of  Regulation  2.5  of  the
regulations framed by the CERC providing for such an approval  by  the  CEA.
The far reaching changes that came about in the  legal  framework  with  the
enactment of the 2003 Act, made Regulation 2.5 redundant in so  far  as  the
same envisaged a reference to the CEA or an Independent Agency for  approval
of the additional capitalisation. 
 Insistence on a  reference,  to  the  CEA
for such approval, despite the sea change in the legal framework would  have
been both unnecessary as well as opposed to  the  spirit  of  new  law  that
reduced the role of CEA to what was specified in  Section  73  of  the  Act.
The CERC and the Tribunal were in that view  justified  in  holding  that  a
reference to the CEA was not  indicated  nor  did  the  absence  of  such  a
reference denude the CERC of its authority to fix the tariff after the  2003
Act had come into force.  
That was so notwithstanding the fact that  proviso
to Section  61  of  the  Electricity  Act,  2003  continued  the  terms  and
conditions for  determination  of  tariff  under  the  enactments  mentioned
therein and those specified in the Schedule for a  period  of  one  year  or
till such terms were specified under that section whichever was earlier.  In
the result this appeal fails and is hereby dismissed with costs assessed  at
Rs.50,000/-


Civil Appeal Nos.5361-5362 of 2007

23.   In these appeals the order impugned by the appellant  places  reliance
upon the order passed by the Tribunal,  in  Appeal  No.36  of  2006  against
which order we have in the foregoing part of  this  judgment  dismissed  the
appeal preferred by the appellant. On a parity of  reasoning  these  appeals
are also destined to be  dismissed  and  are,  accordingly,  dismissed  with
costs assessed at Rs.50,000/-.



                                                          ………………….……….…..…J.
                                                               (T.S. THAKUR)






                                                        .……..…………………..…..…J.
                                                            (VIKRAMAJIT SEN)
New Delhi
September 18, 2013

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