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Thursday, July 26, 2018

The challenge in the appeals before the learned Appellate Tribunal was against the order of the Central Electricity Regulatory Commission (hereinafter referred to as “CERC”) dated 3rd October, 2006 determining the tariff 2 chargeable by the Damodar Valley Corporation (hereinafter referred to as “Corporation”) from the consumers of electricity generated and transmitted by the Corporation. The tariff has been determined under the provisions of Section 61 and 62 of the Electricity Act, 2003 (hereinafter referred to as “2003 Act”) read with such other provisions of the Damodar Valley Corporation Act, 1948 (hereinafter referred to as “Act of 1948”) which have been found to be not inconsistent with the provisions of the 2003 Act. - In the instant case, the “other activities” of the Corporation are not optional as contemplated under Sections 41/51 of the 2003 Act but are mandatorily cast by the statute i.e. Act of 1948 which, being in the nature of socially beneficial measures, per se, do not entail earning of any revenue so as to require maintenance of separate accounts. The allowance of recovery of cost incurred in connection with “other activities” of the Corporation from the common fund generated by tariff chargeable from the consumers/customers of electricity as contemplated by the provisions of the Act of 1948, therefore, do not collide or is, in any manner, inconsistent with the provisions of the 2003 Act.

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S).971­973 OF 2008
BHASKAR SHRACHI ALLOYS LTD.
ETC.ETC. ….APPELLANT(S)
VERSUS
DAMODAR VALLEY CORPORATION
& ORS. ETC. ….RESPONDENT(S)
WITH
CIVIL APPEAL NO(S). 1914 OF 2008
CIVIL APPEAL NO(S).4504­4508 OF 2008
CIVIL APPEAL NO(S).4289 OF 2008
J U D G M E N T
RANJAN GOGOI, J
1. This   group   of   appeals   arise   out   of   a   common
judgment and order dated 23rd November, 2007 passed by the
learned   Appellate   Tribunal   for   Electricity   at   New   Delhi
(hereinafter referred to as “learned Appellate Tribunal”).  The
challenge   in   the appeals   before the   learned   Appellate
Tribunal    was against   the order of the   Central   Electricity
Regulatory   Commission (hereinafter referred to as “CERC”)
dated     3rd  October, 2006 determining         the         tariff
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chargeable       by       the   Damodar     Valley       Corporation
(hereinafter   referred       to       as       “Corporation”)   from   the
consumers of electricity generated and transmitted by the
Corporation.   The   tariff   has   been   determined   under   the
provisions of Section 61 and 62 of the Electricity Act, 2003
(hereinafter referred to as “2003 Act”) read with such other
provisions   of   the   Damodar   Valley   Corporation   Act,   1948
(hereinafter referred to as “Act of 1948”) which have been
found to be not inconsistent with the provisions of the 2003
Act.   The appeals being under Section 125 of the 2003 Act
are   required   to   be   answered   only   on   such   substantial
questions of law that may arise for determination by this
Court.
2. First, the facts.
The Corporation has been established under the
Act of 1948 for the development of the Damodar Valley area
falling within the States of West Bengal and Jharkhand.  As
evident from the provisions of Section 12 of the Act of 1948,
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three   (03)   major   areas   of   activity   undertaken   by   the
Corporation under the Act of 1948 are: (i) power generation,
transmission   and   distribution;   (ii)   flood   control;   and   (iii)
irrigation   and   some   connected   activities   like   soil
conservation,  afforestation, etc.
3. Under   Section   20   of   the   Act   of   1948,   the
Corporation was empowered and authorised to determine the
tariff chargeable by it from its consumers.  Part IV of the Act
of 1948 under the heading “Finance, Accounts and Audit”
though,   superficially,   may   appear   to   be   dealing   with   the
indoor   management   of   the   Corporation   contain   provisions
which could have a relevant bearing to tariff fixation under
Section 20 of the Act of 1948.  Some of the said provisions
are to be found in Sections 32, 37, 38, 39 and 40 of the Act of
1948 which deals with facets of expenditure, depreciation,
allowances, payment of interest, etc. all of which would have
a   reasonable   bearing   on   working   out   the   tariff   that   the
Corporation would be entitled to charge from its consumers
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after taking into account the said items of expenditure or
allowances/disallowances, as may be. 
4. Acting under the provisions of Section 20 of the Act
of 1948, the Corporation had notified its own tariff order on
1
st  September, 2000.     The 2003 Act came into force with
effect from 10th June, 2003.  Despite coming into force of the
2003 Act the Corporation had not approached the CERC for
determination of the tariff chargeable by it.   Consequently,
the CERC initiated suo motu proceedings by order dated 29th
March,   2005   and   directed   the   Corporation   to   submit   an
application for determination of tariff for the period from 1st
April, 2004 to 31st March, 2009.  In terms of the said order
passed by the CERC, the Corporation made an application
dated 8th June, 2005 before the CERC (i.e. Petition No.66 of
2005) for determination of tariff for the period in question.  It
appears   that   in   view   of   the   “complexity”   of   the   issues
involved, the CERC had requested one of its members to go
into   the   necessary   fact­finding   exercise   and   to   submit   a
report   of   the   detailed   facts   that   would   be   relevant   for
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determination of tariff by the CERC.   On the basis of the
available inputs received from the aforesaid single member
Bench of the CERC, the CERC issued a tariff order dated 3rd
October   2006   determining   the   tariff   for   generation   and
transmission for the period from 1st April, 2006 to 31st March,
2009   by   allowing   a   two­year   transition   period   to   the
Corporation i.e. from 1st April, 2004 to 31st March, 2006. 
5. At this stage, it may be appropriate to take note of
the contents of the tariff order dated 3rd October, 2006 passed
by   the   CERC   so   as   to   appreciate   and   understand   the
grievances   entertained   by   the   respective   appellants   before
this Court who were also the appellants before the learned
Appellate Tribunal challenging the order of the CERC dated
3
rd October, 2006.
6. The CERC by its order dated 3rd  October, 2006
took   the   view   that   the   matter   of   determination   of   tariff
chargeable   by   the   Corporation   would   be   governed   by   the
provisions   of   the   2003   Act   and   the   Central   Electricity
Regulatory   Commission   (Terms   and   Conditions   of   Tariff)
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Regulations,   2004   (hereinafter   referred   to   as   “Tariff
Regulations”) framed thereunder.     Accordingly, the CERC
proceeded to determine the tariff after giving due weightage to
the   various   relevant   factors   which   are   required   to   be
considered   for   such   determination   as   spelt   out   by   the
Regulations in force.   A reading of the order of the CERC
would   go   to   show   that   in   determining   the   tariff   due
consideration of the following issues was made by the CERC.
(i) Choice between GFA and NFA Method;
(ii) Capital Cost;
(iii) Extra Rupee Liability;
(iv)  Additional Capitalisation;
(v)  Debt­Equity Ratio;
(vi) Return on equity;
(vii) Interest on loan;
(viii) Depreciation   including   Advance   against
Depreciation;
(ix) O & M expenses;
(x) Pension and gratuity fund;
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(xi) Interest on working capital;
(xii) Operational Norms;
(xiii) Energy charges  and the  fuel component for  the
thermal generating stations;
(xiv) Fuel Price Adjustment
7. Aggrieved by the aforesaid order dated 3rd October,
2006, the Corporation, insofar the exclusion of the provisions
of the Act of 1948 while determining the tariff and refusal to
grant claims of certain expenses thereunder; the consumers,
namely, Bhaskar Shrachi Alloys Ltd., Impex Ferro Tech Ltd.,
Shyam Ferro Alloys Ltd., Maithan Alloys Ltd., Anjaney Ferro
Alloys Ltd., Dayal Steel Ltd. and Castrol Technologies Ltd.
insofar as transitory period is concerned and the State of
Jharkhand   and   West   Bengal   Electricity   Regulatory
Commission insofar as the exclusion of the power of the State
Regulatory   Commission   to   determine   the   intra­State
transmission of electricity is concerned had approached the
learned Appellate Tribunal by way of separate appeals.
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8. The learned Appellate Tribunal by the impugned
judgment and order dated 23rd November, 2007 took the view
that by virtue of fourth proviso to Section 14 of the 2003 Act,
while the Corporation continued to be a deemed licensee, the
provisions of the Act of 1948, which are not inconsistent with
the provisions of the 2003 Act, shall continue to apply to the
Corporation.     In   other   words,   insofar   as   the   inter­play
between the provisions of the Act of 1948 and the 2003 Act is
concerned, according to the learned Appellate Tribunal, it is
only the provisions of the earlier Act inconsistent with the
later Act that will cease to have effect and such provisions of
the Act of 1948 that are consistent will continue to hold the
field   notwithstanding   the   enactment   of   the   2003   Act.
Continuing further, the learned Appellate Tribunal held that
while Section 20 of the Act of 1948 which empowers the
Corporation to fix the tariff is inconsistent with Section 62 of
the 2003 Act which authorised the “Appropriate Commission”
to determine the tariff in accordance with the provisions of
the 2003 Act, the specific provisions contained in Sections
32, 37, 38, 39 and 40 of Part IV of the Act of 1948 will
9
continue to be relevant in the matter of determination of tariff
in as much as there are no pari materia/parallel provisions in
the   2003   Act.   It   was   further   held   that   though   there   are
provisions   in   the   Tariff   Regulations   framed   by   the   CERC
covering the same field, the said Regulations, being in the
nature   of   subordinate   legislation,   cannot   override   the
provisions of a law duly enacted (Act of 1948), particularly, in
the absence of any legislative intention to the said effect in
any   of   the   provisions   of   the   2003   Act.     Accordingly,   the
learned Appellate Tribunal while rejecting the following five
claims and upholding the order of the CERC on the aforesaid
counts thought it proper to remand the matter, for a de novo
consideration of the remaining five issues by the CERC in the
light   of   the   findings   recorded   by   it.   The   tabular   chart,
extracted below, would indicate the five issues that have been
finalized by the learned Appellate Tribunal by upholding the
order of the CERC dated 3rd October, 2006 and the other five
issues which have been remanded for re­determination by the
CERC.
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Issues  finalized  by  the
learned   Appellate
Tribunal   by   upholding
the order of the CERC
dated   3rd  October,
2006
Issues   remanded   for
re­determination   by
the CERC
(i) Higher return on equity; (i) Additional capitalization
for   the   period   2004­
2005 and 2005­2006;
(ii) Depreciation rate; (ii) Pension   and   Gratuity
contribution;
(iii) Resetting   of   operating
norms at variance from
the   operating   norms
prescribed   in   the   2004
regulations;
(iii) Revenue to be allowed to
the DVC under the DVC
Act;
(iv) Return   on   capital
investment   on   Head
Office, Regional Offices,
administrative and other
technical   centres,   etc.;
and
(iv) Operation   and
Maintenance expenses;
(v) Generation   projects
presently not operating.
(v) Debt Equity Ratio
9. Three substantial questions of law would seem to
arise   for   determination   by   this   Court   in   exercise   of   its
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jurisdiction under Section 125 of the 2003 Act.  The same are
enumerated below:
(a) Whether the view taken by the learned Appellate
Tribunal with regard to the fourth proviso to Section 14 of the
2003 Act and the applicability of the provisions of Sections
32, 37, 38, 39 and 40 contained in Part IV of the Act of 1948
in the matter of tariff determination under the 2003 Act is
correct?
(b) Whether   it   is   the   provisions   of   the   Tariff
Regulations (2004 Regulations) which alone would hold the
field in the matter of determination of tariff to the exclusion of
the provisions of Sections 32, 37, 38, 39 and 40 contained in
Part IV of the Act of 1948?
(c) Whether   the   conclusions   and   findings   of   the
learned Appellate Tribunal on any one or more of the claims
made   by   any   of   the   stakeholders   in   the   matter   of
determination   of   tariff   is   vitiated   by   grave   and   apparent
errors?
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10. It will be useful to notice, at this stage, that in
terms   of   the   impugned   order   dated   23rd  November,   2007
passed by the learned Appellate Tribunal the matter has been
de novo  considered and re­determined by the CERC by its
order dated 6th August, 2009.  This has happened due to the
absence of any interim restraint.  The said order of the CERC
dated   6th  August,   2009   has   since   been   affirmed   by   the
learned Appellate Tribunal by a separate order dated 10th
May, 2010 which is the subject matter of challenge in Civil
Appeal No.4881 of 2010 presently pending before this Court.
The said appeal (Civil Appeal No.4881 of 2010) has  been
ordered to be heard after disposal of the present appeals.
11. The   arguments   advanced   by   the   respective
appellants who are also the respondents in the connected
appeals may be noted at this stage. 
12. On behalf of the CERC, which is the appellant in
Civil Appeal No.4289 of 2008, it has been contended that
second part of the fourth proviso to Section 14 of the 2003
13
Act cannot be understood to mean, as has been held by the
learned Appellate Tribunal, that the provisions of the Act of
1948 which are not inconsistent with the provisions of the
2003 Act so far as the determination of tariff is concerned
would continue to hold the field.   Two principal basis have
been urged in support of the above.  The first is that a proviso
cannot be understood to go beyond the main part of the
Section which, in the present case, deals only with ‘licensing’
and not ‘tariff determination’.     Reliance in this regard has
been   placed   on   the   decisions   of   this   Court   in  Dwaraka
Prasad vs.     Dwarka Das Saraf1
 and Union of India & Ors.
vs.     Dileep Kumar Singh2
.
The   second   limb   of   the   argument   is   based   on   the
provisions contained in Section 174 of the 2003 Act which
gives an overriding effect to the provisions of the 2003 Act
notwithstanding any inconsistency with any other law for the
time being in force.
1 (1976) 1 SCC 128 [para 18]
2 (2015) 4 SCC 421 [para20]
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13. Without prejudice to the above, it has been further
contended on behalf of the CERC that the learned Appellate
Tribunal was clearly in error in holding that in case of a
conflict between the Act of 1948 and the Tariff Regulations
framed under the 2003 Act the provisions of the Regulations
will require to be ignored. The decisions of this Court in
Bharathidasan University & Anr. vs.     AICTE & Ors.3
  and
Samsthanan Chethu Thozhilali Union vs. State of Kerala
    & Ors.4
 , relied upon, has been misconstrued by the learned
Appellate  Tribunal,   it   is   urged   on   behalf   of   CERC.     It   is
further contended on behalf of the CERC that Section 61 of
the 2003 Act lays down the principles for tariff determination
which finds detailed manifestation in the 2004 Regulations.
The Regulations, it is contended, embody the principles on
which tariff is required to be determined and the provisions
thereof cannot be overridden by the provisions of any other
statute and, that too, enacted at an anterior point of time i.e.
the Act of 1948.  The mandate of Section 174 of the 2003 Act
3 (2001) 8 SCC 676 [para 14]
4 (2006) 4 SCC 327 [Para 17]
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which is subsequent in point of time will be compromised in
the event such an interpretation is accepted.
14. So far as the specific heads of tariff fixation are
concerned, it has been urged on behalf of the CERC that
Section 40 of the Act of 1948 has been wrongly relied upon by
the learned Appellate Tribunal in determining the question of
the extent of depreciation allowable.   It is emphasised that
Section   40   leaves   the   question   of   the   percentage   of
depreciation to be determined by the Central Government.  It
is   contended   that   the   purpose   and   intent   behind   the
enactment of 2003 Act is to distance the Central Government
from the determination of tariff under the 2003 Act which is
to be fixed by the Regulatory Commissions on the principles
acknowledged in the Tariff Regulations. Regulation 21(1)(ii) of
the   Tariff   Regulations,   therefore,   according   to   the   CERC,
should   have   been   the   basis   for   the   determination   of   the
extent   of   depreciation.     In   this   regard,   reliance   has   been
placed on the decision of this Court in  PTC  India  Ltd.  vs.
    Central Electricity Regulatory Commission5
 . 
5 (2010) 4 SCC 603 [Para 17]
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15. It is on the same basis that the findings of the
learned Appellate Tribunal so far as the ‘Sinking Fund’ is
concerned, which has been held to be recoverable through
the   tariff,   has   been   assailed.     It   is   urged   that   the   Tariff
Regulations do not make any provision for any ‘Sinking Fund’
and, therefore, the recovery of such fund through tariff is
abhorrent to the provisions of Section 61 of the 2003 Act read
with the Tariff Regulations.
16. Similarly,   the   finding   of   the   learned   Appellate
Tribunal   with   regard   to   the   allowability   of   charging   the
expenditure   on   projects   other   than   electricity   from   the
common fund as common expenditure has been assailed as
being contrary to the spirit of the 2003 Act inasmuch as it is
opposed to the principle of allowance of cross­subsidy which
the 2003 Act seeks to do away with.   Reference has been
made to different provisions of the 2003 Act to contend that
recovery   of   expenditure   unrelated   to   electricity   generation
from   the   electricity   tariff   is   alien   and   contrary   to   the
provisions of the 2003 Act. 
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17. The conclusions of the learned Appellate Tribunal
with regard to the debt­equity ratio insofar as the projects
completed prior to 1992 (which has been fixed at 50:50) has
also been assailed on the ground that the sole basis thereof is
the practice followed in the case of another PSU i.e. NTPC
ignoring   the   fact   that   the   Regulation   20   of   the   Tariff
Regulations provide for a ratio of 70:30.
18. Likewise, the findings with regard to Pension and
Gratuity Fund, particularly, the recovery of the entire fund
from the consumers (in reversal of the decision of the CERC
permitting recovery from consumers to the extent of 60% and
contribution by the Corporation of the balance 40%) has been
assailed on the ground that no discernible or rational basis is
disclosed   for   the   view   taken,   particularly   when   the
Corporation has been permitted and, in fact, collected tariff at
the rate fixed by the Corporation itself under the Act of 1948
for the  years  2004­2005  and  2005­2006  which  constitute
40% of the tariff period.
18
19. The allowances of capital investment in respect of
Head   Office,   Regional   Offices,   Administrative   &   other
Technical Centres have also been assailed as being contrary
to the provisions of the Tariff Regulations.
20. The above contentions made on behalf of the CERC
has been reiterated on behalf of the consumers who are the
appellants in Civil Appeal Nos. 971­973 of 2008.  So far as
the interpretation of the provisions contained in the fourth
proviso to Section 14 of the 2003 Act is concerned, learned
counsel for the said appellants (consumers) has additionally
drawn the attention of the Court that in the course of the
exercise   leading   to   the   enactment   of   2003   Act,   the
Parliamentary Standing Committee on Energy had, in fact,
recommended   that   the   Corporation,   having   regard   to   the
special responsibility entrusted to it under the Act of 1948,
should be exempted from the application of the 2003 Act.
Parliament,   however,   decided   not   to   provide   a   blanket
exemption in favour of the Corporation. It is pointed out that
under Section 173 of the 2003 Act it is only such of the
19
provisions of the 2003 Act which are inconsistent with the
provisions   of   the   Consumer   Protection   Act,   1986   or   the
Atomic Energy Act, 1962 or the Railways Act, 1989 that will
not have any effect.   Instead, insofar as the Corporation is
concerned what was provided for is a limited exemption, the
extent of which has been spelt out by Section 14 (fourth
proviso)   of   the   2003   Act,   which,   necessarily,   has   to   be
understood to be circumscribed by the provisions of the main
part of Section 14 of the 2003 Act which deals with licensing
as distinguished from tariff determination.  It is further urged
on behalf of the appellants – consumers that the decision to
keep in abeyance the tariff for a period of two years is ultra
vires the provisions of the 2003 Act, there being no authority
in law to order any such relaxation or to postpone the coming
into effect of the tariff fixed under the 2003 Act.     The fact
that the provisions of the Act of 1948 do not find any mention
in the proviso to Section 61 of the 2003 Act has also been
stressed upon. 
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21. In   so   far   as   the   pension   and   gratuity   fund   is
concerned, in addition to the grounds urged in this regard on
behalf of the CERC, it is further urged that almost 99% of the
pension and gratuity liability, as assessed by the Actuary,
has been permitted to be loaded on to the electricity business
without any reference or finding with regard to the percentage
of man­power deployed in the electricity business.   Such a
decision which has been based on the sole submission of the
Corporation is contended to be untenable in law. 
The   calculation   and   allowance   of   percentage   of
depreciation by following the provisions of Section 40 of the
Act of 1948 has also been assailed as being contrary to the
provisions   of   the   Regulations   which,   according   to   the
appellants – consumers should hold the field.
22. The Corporation which is the respondent in the
appeals   filed   by   the   Regulatory   Commissions   and   the
Consumers had filed its cross­objections in the said appeals.
Emphasis is laid on the status and peculiar characteristics of
the Corporation as envisaged by the statute i.e. the Act of
21
1948 constituting the said body.   Reference has been sought
to be made to the various social welfare activities that the
Corporation   is   statutorily   mandated   to   perform   over   and
above electricity generation and transmission. The aforesaid
peculiar   characteristics   of   the   Corporation   and   its
multifarious     duties,     according       to       the Corporation,
would   justify   continuity   of   the   due   application   of   the
provisions of the Act   of  1948  as  are  not   inconsistent
with   the   provisions    of    the 2003 Act.      It   is   only
such of the provisions of the Act of 1948 which are in clear
conflict with the provisions of the 2003 Act that will give way.
The provisions of the Act of 1948 that may be in conflict with
those of the Tariff Regulations will however not have the same
effect inasmuch as the provisions of a subsidiary legislation
cannot have an overriding effect over the provisions of the
parent or any other statute.  It has been further urged that in
a given situation the proviso to a statutory provision may act
as a main provision itself going beyond the parameters of the
matter of which the proviso may have been enacted as a part.
In this regard, reliance has been placed on the decisions of
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this   Court   in  State   of   Rajasthan  vs.      Leela   Jain6
,  S.
Sundaram   Pillai   &   Others  vs.  V.R.   Pattabhiraman   &
    Others7
,  Shah   Bhojraj   Kuvarji   Oil   Mills   &   Ginning
Factory  vs.      Subhash   Chandra   Yograj   Sinha8
,  Motiram
Ghelabhai vs.     Jagan Nagar9

23. Coming   specifically   to   the   rate   of   depreciation,
sinking fund, interest on capital, etc., it has been urged that
there being no provisions in the 2003 Act in respect of the
aforesaid   matters  which   are   dealt   with   only   by  the  Tariff
Regulations in contra­distinction to specific provisions of the
Act of 1948 covering the issue i.e. Section 40 of the Act of
1948, it is the provisions of Part IV of the Act of 1948 which
will govern the matter.   So far as the debt­equity ratio is
concerned, it has been urged that the determination of the
ratio at 50:50 for capital assets created prior to 30th March,
1992 and the ratio of 70:30 for the capital assets after 30th
March, 1992 is consistent with the principles adopted for all
6 (1965) 1 SCR 276
7 (1985) 1 SCC 591 [Para 27 to 43]
8 (1962) 2 SCR 159 [Para 9 and 10]
9 (1985) 2 SCC 279 [Para 9]
23
Central   Government   Corporations   like   NTPC   Limited,
Powergrid Corporation of India Limited, NHPC etc. 
24. Insofar as the pension and gratuity contribution
required to be made by the Corporation is concerned, it is
contended that the issue has been raised only at the stage of
arguments   by   the   HT­consumers   i.e.   appellants   in   Civil
Appeal Nos. 971­973 of 2008. The same has not been raised
by   the  Regulatory  Commission   at   all  or  even   by  the  HTconsumers
  before   the   forums   below.     That   apart,   it   is
contended that the break­up of the details of the percentage
of employees called for by the CERC in this regard was made
available which fact is borne out by the documents placed
before the learned Appellate Tribunal which has also been
laid before this Court  (Annexure 18 to the Memo of Appeal
before the learned Appellate Tribunal).
25. Similarly,   in   so   far   as   the   Operation   and
Maintenance expenditure is concerned, it is contended that
the   same   has   been   rightly   allowed   as   per   the   Tariff
Regulations in force.
24
26. Before   delving   into   the   issues   arising   in   the
appeals,   two   preliminary   questions   need   to   be   answered
which we propose to do at the outset.  The first pertains to
the   grant   of   a   transitory   period   making   the   tariff   order
effective from 1st April, 2006 instead of 1st April, 2004.
27. We   have   considered   the   reasons   which   had
weighed   with   the   CERC   as   well   as   the   learned   Appellate
Tribunal   in  granting  the  aforesaid transitory  period.    The
present dispute, regardless of the way it is resolved, would
have relevance to the quantum of the tariff, depending on
whether   the   determination   is   made   on   the   basis   of   the
provisions of Part IV of the Act of 1948 or the provisions of
the Tariff Regulations, as may be.  So far as the grant of the
transitory period is concerned, the same, we have noticed,
has   been   so   granted   having   due   regard   to   the   statutory
functions/social   responsibilities   that   the   Corporation   is
mandated to undertake in terms of the Act of 1948.     The
tariff fixed is also lower than the tariff that has been fixed by
the   Jharkhand   and   West   Bengal   Electricity   Regulatory
25
Commission for the general/domestic classes of consumers.
While it is correct that the classes of consumers served by the
Corporation   are   HT­Industrial   consumers   like   Steel,   Coal,
Railways, etc. beside bulk supply to main beneficiaries of
State Electricity Boards of West Bengal and Jharkhand, the
said   fact,   itself,   is   another   peculiar   feature   which
distinguishes the Corporation from other licenses.   If in a
situation where the Corporation in addition to generation,
transmission   and   distribution   of   electricity   is   statutorily
required   to   undertake   certain   social   security/beneficial
measures   like   flood   control,   control   of   soil   erosion,
afforestation, navigation, promotion of public health, etc. we
do not see how the grant of transitory period can be faulted
with.   We, therefore, decline to interfere with the aforesaid
part of the order of the learned Appellate Tribunal.
28. The learned Appellate Tribunal has also taken the
view that having regard to the provisions of Section 79 of the
2003 Act it is the CERC which would be the “Appropriate
Commission”   for   determination   of   tariff   inasmuch   as   the
26
Damodar   Valley   Corporation   is   a   Corporation   owned   and
controlled by the Central Government.  The detailed inputs to
arrive at the aforesaid conclusion have been duly considered
by us.   On such consideration, we are of the view that the
above conclusion recorded by the learned Appellate Tribunal
is neither unreasonable nor irrelevant so as to warrant our
interference,   particularly,   in   exercise   of   the   limited
jurisdiction under Section 125 of the 2003 Act.
29. We may now turn to the other/larger issues arising
in the appeals.
30. The   Damodar   Valley   Corporation   had   been
incorporated under the provisions of the Act of 1948.   The
facts antecedent   to  the  incorporation   of  this  entity  would
throw considerable light on the objects and reasons for its
incorporation.    Sometime   in  the  year   1943,  the   Damodar
River Valley had been affected by severe floods leading to
wide­scale  destruction  of  life  and  property.  The Provincial
Government of Bengal had constituted an Enquiry Committee
to suggest ways and means to avoid such catastrophes in the
27
future.  The Enquiry Committee had, inter alia, recommended
that a statutory corporation, on the lines of the Tennessee
Valley Authority of the USA, be incorporated to command and
control the Damodar River.   The then British Government
accepted this proposal of the Committee and had called one
Mr.   W.L.   Voorduin,   a   senior   Engineer   working   for   the
Tennessee Valley Authority to make recommendations and
suggestions in this regard.
31. The preamble to the Tennessee Valley Authority
Act10, 1933, reads that the statute has been enacted by the
Congress “to improve the navigability and to provide for
the flood control  of the Tennessee River; to provide for
reforestation and the proper use of marginal lands in the
Tennessee   Valley;   to   provide   for   the   agricultural   and
industrial development of said valley; to provide for the
national defence by the creation of a corporation for the
operation  of  Government  properties  at  and  near  Muscle
Shoals in the State of Alabama, and for other purposes.”
10 16 U.S. Code § 831
28
As can be observed, the primary objective of the Tennessee
Valley Authority Act is to prevent floods across the Tennessee
River Valley and the generation of electricity is incidental to
this activity of flood­control. 
32.  The objects and reasons behind the incorporation
of the Act of 1948 may now be noticed:
“The Damodar River rises in Western Bihar and
flows generally in a south-easterly direction into
Bengal. It is a seasonal river having a large flow
of water during the rains which, apart from being
generally wasted, at times causes great damage
to life and property. It is now proposed to harness
the water of this river and some of its tributaries
and utilize it in multiple development of the
Damodar Valley and the adjoining area.
This Bill seeks to set up a Corporation,
called the Damodar Valley Corporation on
the lines of the Tennessee Valley Authority
in the USA. It will be an autonomous body
within the framework of the enactment. Its
objects, constitution and powers are laid
down in the Bill. Briefly, its main function
will be to control flood in the Damodar,
generate electric power for distribution and
provide water for irrigation and other
purposes. In addition, the Corporation will,
endeavour to promote economic
development of the Damodar Valley and
the adjoining areas. It will consist of three
members including the Chairman. These three
members and the Secretary and the treasurer
will be appointed by the Central Government.
The Corporation will have the power to acquire
land and construct or cause to be constructed
such dams, barrages, reservoirs, power-houses
and power structures, electrical transmission
29
line, irrigation and navigation works as may be
necessary. The capital required by the
Corporation will be provided by the Central
Government and the Government of Bihar and
West Bengal. The profits and losses will be
distributed between these three Governments in
certain agreed proportions.
The provisions of this Bill are designed to give
effect to the broad outlines of the agreement
reached between the three Governments
concerned.”
33. Having noticed the objects and reasons behind the
creation of the incorporated body and the main functions
assigned to it by Parliament, we may now specifically revert to
the issue of determination of tariff for supply/distribution of
the electricity generated by the Corporation.
34. Insofar   as   the   issue   as   to   whether   the   Tariff
Regulations would have an overriding effect to render the
parallel provisions in the Act of 1948 ineffective, the reliance
placed   on   behalf   of   the   appellants   on   the   decision   of   a
Constitution   Bench   of   this   Court   in  PTC   India   Limited
(supra) may now be considered. The primary issue that was
considered by the Constitution Bench of this Court in  PTC
30
India   Limited (supra)  was  “whether   the   Appellate
Tribunal constituted under the Electricity Act, 2003 has
jurisdiction under Section 111 of the Act to examine the
validity   of   the   Central   Electricity   Regulatory
Commission   (Fixation   of   Trading   Margin)   Regulations,
2006   framed   in   exercise   of   power   conferred   under
Section 178 of the Electricity Act?”
35. The   observations   of   this   Court   in  PTC   India
Limited  (supra)  with   regard   to   the   efficacy   of   the   Tariff
Regulations   in   the   light   of   its   statutory   character   must
necessarily be understood in the above context.  The opinion
rendered in PTC India Limited (supra) itself makes it clear
that the Tariff Regulations though statutory in character are
a species of subordinate delegated legislation, the purport of
which has been described and dealt with in the following
manner:
“52. In Indian Express Newspapers (Bombay) (P) Ltd.
v. Union of India this Court* held that subordinate
legislation is outside the purview of administrative
31
action i.e. on the grounds of violation of rules of
natural justice or that it has not taken into account
relevant circumstances or that it is not reasonable.
However, a distinction must be made between
delegation of legislative function and investment of
discretion to exercise a particular discretionary power
by a statute. In the latter case, the impugned exercise
of discretion may be considered on all grounds on
which administrative action may be questioned such
as non-application of mind, taking irrelevant matters
into consideration, etc. The subordinate legislation is,
however, beyond the reach of administrative law.
Thus,
___________
*(1985) 1 SCC 641
delegated legislation - otherwise known as secondary,
subordinate or administrative legislation - is enacted
by the administrative branch of the government,
usually under the powers conferred upon it by the
primary legislation. Delegated legislation takes a
number of forms and a number of terms - rules,
regulations, by-laws etc; however, instead of the said
labels what is of significance is the provisions in
the primary legislation which, in the first place,
confer the power to enact administrative
legislation. Such provisions are also called as
“enabling provisions”. They demarcate the
extent of the administrator’s legislative power,
the decision-making power and the policy
making power. However, any legislation enacted
outside the terms of the enabling provision will be
vulnerable to judicial review and ultra vires.”
36. The opinion of a seven Judge Bench of this Court,
though of considerable vintage, in The Presidential Reference,
32
The Delhi Laws Act, 191211 may usefully be recalled at this
stage:
“(In delegated legislation), a portion of the lawmaking
power of the legislature is conferred or
bestowed upon a subordinate authority and the rules
and regulations which are to be framed by the latter
constitute an integral portion of the statute itself. As
said already, it is within powers of Parliament or any
competent legislative body, when legislating within its
legislative field, to confer subordinate administrative
and legislative powers upon some other authority. The
question is: What are the limits within which such
conferment of bestowing of powers could be properly
made?
It is conceded by the learned Attorney-General that
the legislature cannot totally abdicate its functions
and invest another authority with all the powers of
legislation which it possesses. Subordinate legislation,
it is not disputed, must operate under the control of
the legislature from which it derives its authority, and
on the continuing operation of which, its capacity to
function rests. As was said by Dixton, J., (vide,
Victoria Stevedoring and General Contracting
 Company v. Dignan, 46 C.L.R. 73) “a
subordinate legislation cannot have the
independent and unqualified authority which is
an attribute of true legislative power”. It is
pointed out by this learned Judge that several legal
consequences flow from this doctrine of subordinate
legislation. An offence against subordinate legislation
is regarded as an offence against the statute and on
the repeal of the statute the regulations automatically
collapse. So far, the propositions cannot, and need
not, be disputed. But, according to the learned
Attorney-General, all that is necessary in subordinate
legislation is that the legislature should not totally
abdicate its powers and that it should retain its
11 A.I.R. 1951 S.C. 332; Coram: Hon’ble the Chief Justice H.J. Kania,
Hon’ble Mr. Justice Syed Fazl Ali, Hon’ble Mr. Justice Patanjali
Sastri, Hon’ble Mr. Justice M.C. Mahajan, Hon’ble Mr. Justice B.K.
Mukherjea, Hon’ble Mr. Justice S.R. Das and Hon’ble Mr. Justice Vivian
Bose
33
control over the subordinate agency which it can
destroy later at any time it likes. If this is proved to
exist in a particular case, then the character or extent
of the powers delegated to or conferred upon such
subordinate agent is quite immaterial and into that
question the courts have no jurisdiction to enter. This
argument seems plausible at first sight, but on closer
examination, I find myself unable to accept it as
sound. In my opinion, it is not enough that the
legislature retains control over the subordinate agent
and could recall him at any time it likes, to justify its
arming the delegate with the legislative powers in
regard to a particular subject. Subordinate legislation
not only connotes the subordinate or dependent
character of the agency which is entrusted with the
power to legislate, but also implies to subordinate or
ancillary character of the legislation itself, the making
of which such agent is entrusted with. If the
legislature hands over its essential legislative powers
to an outside authority, that would, in my opinion,
amount to a virtual abdication of its powers and such
an act would be in excess of the limits of permissible
delegation.
... On a consideration of all these decisions I have no
hesitation in holding that as regards constitution of
the delegation of legislative powers the Indian
Legislature cannot be in the same position as the
prominent British Parliament and how far delegation
is permissible has got to be ascertained in India as a
matter of construction from the express provisions of
the Indian Constitution. It cannot be said that an
unlimited right of delegation is inherent in the
legislature power itself. This is not warranted
by the provisions of the Constitution and the
legitimacy of delegation depends entirely upon
its being used as an ancillary measure which
the legislature considers to be necessary for
the purpose of exercising its legislative powers
effectively and completely. The legislature must
retain in its own hands the essential legislative
functions which consist in declaring the
legislative policy and laying down the standard
which is to be enacted into a rule of law, and
what can be delegated in the task of
subordinate legislation which by its very nature
34
is ancillary to the statute which delegates the
power to make it.”
37. It may be wholly unnecessary to detract from the
fundamental principles of law laid down in The Presidential
Reference (supra), which would be an inevitable consequence,
if the contentions advanced on behalf of the appellants to the
effect that the Tariff Regulations must override the provisions
of the Act of 1948 as the said regulations are statutory in
character is to be accepted.   This is also what has been
subsequently emphasised by this Court in  Bharathidasan
University   &   Anr.  (supra)   and Samsthanan   Chethu
Thozhilali Union  (supra).   No error, therefore, can also be
found in the implicit reliance placed on the ratio of the above
decisions by the learned Appellate Tribunal in its order dated
23rd November, 2007.
38. This will bring us to a consideration of the purport
and effect of the fourth proviso to Section 14 of the 2003 Act
on which much debate and discussion have been generated
in the course of prolonged hearing of the case that had taken
35
place.  Section 14 of the Act may usefully be extracted below
at this stage:
“14. Grant of Licence : “The appropriate
Commission may, on an application made to it
under Section 15, grant a licence to any person
(a) to transmit electricity as a transmission
licensee; or
(b) to distribute electricity as a distribution
licensee; or
Provided that the Developer of a Special Economic
Zone notified under sub-section (1) of Section 4 of
the Special Economic Zones Act, 2005, shall be
deemed to be a licensee for the purpose of this
clause, with effect from the date of notification of
such Special Economic Zone.
(c) to undertake trading in electricity as an
electricity trader,
In any area as may be specified in the licence:
PROVIDED that any person engaged in the business
of transmission or supply of electricity under the
provisions of the repealed laws or any Act specified
in the Schedule on or before the appointed date
shall be deemed to be a licensee under this Act for
such period as may be stipulated in the licence,
clearance or approval granted to him under the
repealed laws or such Act specified in the Schedule,
and the provisions of the repealed laws or such Act
specified in the Schedule in respect of such licence
shall apply for a period of one year from the date of
commencement of this Act or such earlier period as
may be specified, at the request of the licensee, by
the Appropriate Commission and thereafter the
provisions of this Act shall apply to such business:
PROVIDED FURTHER that the Central Transmission
Utility or the State Transmission Utility shall be
deemed to be a transmission licensee under this
Act:
PROVIDED also that in case an Appropriate
Government transmits electricity or distributes
36
electricity or undertakes trading in electricity,
whether before or after the commencement of this
Act, such Government shall be deemed to be a
licensee under this Act, but shall not be required to
obtain a licence under this Act:
PROVIDED also that the Damodar Valley
Corporation, established under sub-section
(1) of Section 3 of the Damodar Valley
Corporation Act, 1948, shall be deemed to be
a licensee under this Act but shall not be
required to obtain a licence under this Act
and the provisions of the Damodar Valley
Corporation Act, 1948, insofar as they are not
inconsistent with the provisions of this Act,
shall continue to apply to that Corporation:
PROVIDED also that the Government company or
the company referred to in sub-section (2) of
section 131 of this Act and the company or
companies created in pursuance of the Acts
specified in the Schedule, shall be deemed to be a
licensee under this Act:
PROVIDED also that the Appropriate Commission
may grant a licence to two or more persons for
distribution of electricity through their own
distribution system within the same area, subject to
the conditions that the applicant for grant of licence
within the same area shall, without prejudice to the
other conditions or requirements under this Act,
comply with the additional requirements 1 (relating
to the capital adequacy, Credit worthiness or code
of conduct) as may be prescribed by the Central
Government, and no such applicant, who complies
with all the requirements for grant of licence, shall
be refused grant of licence on the ground that there
already exists a licensee in the same area for the
same purpose:
PROVIDED also that in a case where a distribution
licensee proposes to undertake distribution of
electricity for a specified area within his area of
supply through another person, that person shall
not be required to obtain any separate licence from
the concerned State Commission and such
distribution licensee shall be responsible for
distribution of electricity in his area of supply:
37
PROVIDED also that where a person intends to
generate and distribute electricity in a rural area to
be notified by the State Government, such person
shall not require any licence for such generation
and distribution of electricity, but he shall comply
with the measures which may be specified by the
Authority under section 53:
PROVIDED also that a distribution licensee shall not
require a licence to undertake trading in electricity.”
39. It is contended on behalf of the appellants that the
application   of   a   proviso   must   always   be   confined   and
understood within the parameters of the provisions of the
main section     of which the proviso is a part and that a
proviso, in no case, can be construed to have any general
application.  This argument would require some examination.
In   this   regard   the   decision   of   this   Court  Shah   Bhojraj
Kuvarji Oil Mills (supra) may be usefully recapitulated and
the following observations may be specifically taken note of:
“It is contended by the learned Attorney-General
that the construction placed by the High Court
upon the first proviso to Section 50 (of Bombay
Rents, Hotel and Lodging House Rates Control Act
of 1947) is erroneous. Though he concedes that the
proviso must be read as qualifying what the
substantive part of Section 50 enacts, he urges that
the proviso goes beyond that purpose and enacts a
substantive law of its own. He relies upon the
following observations of Lord Loreburn, L.C., in
Rhondda Urban Council v. Taff Vale Railway, (1909)
A.C. 253, where a proviso to Section 51 of the
38
Railway Clauses Consolidation Act, 1845, was under
consideration:
“It is true that Section 51 is framed as a
proviso upon preceding sections. But it is also
true that the latter half of it, though in form a
proviso, is in substance a fresh enactment,
adding to and not merely qualifying that which
goes before.”,
and contends that the latter portion of the proviso,
in question, being a substantive enactment,
comprehends not only those suits which were
pending on the date of repeal but also those cases,
which came within the language of the latter part
of the proviso, whenever the Act was extended to
new areas…………..
…..…As a general rule, a proviso is added to
an enactment to qualify or create an
exception to what is in the enactment, and
ordinarily, a proviso is not interpreted as
stating a general rule. But, provisos are often
added not as exceptions or qualifications to
the main enactment but as savings clauses,
in which cases they will not be construed as
controlled by the section.”
40. Similarly in S. Sundaram Pillai (supra) this Court
has observed:
“A very apt description and extent of a proviso was
given by Lord Oreburn in Rhondda Urban District
Council v. Taff Vale Railway Co., (1909) A.C. 253,
where it was pointed out that insertion of a proviso
by the draftsman is not always strictly adhered to
its legitimate use and at times a section worded as
a proviso may wholly or partly be in substance a
fresh enactment adding to and not merely
excepting something out of or qualifying what goes
before.”
39
41. The fourth proviso to Section 14 of 2003 uses the
expression   “….and   the   provisions   of   the   Damodar   Valley
Corporation Act, 1948 in so far as they are not inconsistent
with the provisions of the Act, shall continue to apply to that
Corporation…”. On a careful reading of the aforesaid later
part of the fourth proviso to Section 14 of the Act of 2003, it
is seen that it is clearly a substantive provision to lay down
something more than what a proviso generally deals with. If
the intention of the proviso was to exclude DVC only from the
main part of Section 14 of the Act of 2003 dealing with the
requirement   of   obtaining   licence   for
transmission/distribution/trade in electricity, the purpose is
fully achieved by the first part recognising DVC as a ‘deemed
licensee’ and not requiring to apply for and obtain licence.
The Legislature could have simply stopped there. There was
no necessity to incorporate the second part. The second part
of the fourth proviso is to bring in the continued application
of some of the provisions of the Act of 1948 which are not
inconsistent   with   the   provisions   of   the   Act   of   2003.   To
elaborate it further, let us take the case of the third proviso to
40
Section 14 of the Act of 2003 which provides “that in case an
appropriate Government transmits electricity or distributes
electricity or undertakes trading in electricity whether before
or  after  the   commencement  of   the   Act,  such   Government
shall be deemed to be a licensee under the Act but shall not
be required to obtain licence under the Act”. In so far as DVC
is concerned, if the fourth proviso is to be confined only to
licensing as in the case of third proviso, the fourth proviso
also would have stopped with the first part of the proviso.
There would have been no necessity to incorporate the second
part of the proviso. The legislature does not incorporate any
words   which   are   irrelevant   or   redundant   and   every
expression used in a statutory provision has some purpose.
42. A careful comparative reading of the third and the
fourth   provisos   to   Section   14   of   the   Act   of   2003   clearly
indicates the intention of the legislature that the second part
of the fourth proviso is to bring in the continued application
of some of the provisions of the Act of 1948 which are not
inconsistent with the provisions of the Act of 2003. There are
41
no licensing provisions in the Act of 1948 to be saved. The
obvious reference in the second part of proviso is to provide
for the continued application of the provisions of the Act of
1948 insofar as they are not inconsistent with the provisions
of the Act of 2003.
43. In the course of arguments, the appellants made
reference to Sections 18 and 19 of the Act of 1948 as being
the provisions relating to licensing which could be said to be
considered as saved by virtue of second part of the fourth
proviso to Section 14 of the Act of 2003. A perusal of Sections
18 and 19 of the Act of 1948 show that they deal with the
supply and generation of electrical energy and distribution of
electricity within the Damodar Valley area.  The provisions of
the Act of 2003 which authorise the Regulatory Commissions
to grant licence to persons (other than DVC) fully govern the
field and there is no question of continued application of the
Act of 1948 in that respect. Sections 18 and 19 of the Act of
1948 do not deal with licence to DVC. These provisions only
deal with activities of other entities to distribute electricity
42
within the Damodar Valley area. Further, the provisions of
Electricity Act, 2003 authorizes the Regulatory Commissions
to grant licence to persons other than DVC. Therefore, there
can be no question of continued application of the Act of
1948 over those provisions.
44. The fourth proviso to Section 14 which uses the
expression   “….and   the   provisions   of   the   Damodar   Valley
Corporation Act, 1948 in so far as they are not inconsistent
with the provisions of the Act, shall continue to apply to that
Corporation…”, in our view, is a positive provision enabling
continued application of certain provisions of the Act of 1948
which   are   not   inconsistent   with   the   provisions   of   the
Electricity   Act,   2003.   The   intention   behind   both   the
provisions needs to be appreciated and given effect to. 
45. There is yet another dimension of the case that has
been   urged   and,   therefore,   will   require   our   consideration.
While   dealing   with   the   question   as   to   whether   Reports
submitted   by   Parliamentary   Standing   Committee,   can   be
taken   as   permissible   external   aids   for   interpretation   of   a
43
statute, this Court in a recent decision in Kalpana Mehta &
    Ors.  vs.     Union of India & Ors.
12 had occasion to observe as
follows:
“xxxx
it clear as day that the Court can take aid of
the report of the parliamentary committee for
the purpose of appreciating the historical
background of the statutory provisions and it
can also refer to committee report or the
speech of the Minister on the floor of the
House of the Parliament if there is any kind of
ambiguity or incongruity in a provision of an
enactment. Further, it is quite vivid on what
occasions and situations the Parliamentary
Standing Committee Reports or the reports of other
Parliamentary Committees can be taken note of by
the Court and for what purpose. Relying on the
same for the purpose of interpreting the meaning
of the statutory provision where it is ambiguous
and unclear or, for that matter, to appreciate the
background of the enacted law is quite different
from referring to it for the purpose of arriving at a
factual finding. That may invite a contest, a
challenge, a dispute and, if a contest arises, the
Court, in such circumstances, will be called upon to
Rule on the same.”
46. The   proceedings   of   the   Parliamentary   Standing
Committee   on   Energy   (13th  Lok   Sabha),   insofar   as   the
Electricity Bill of 2001 presented before the Lok Sabha on
19­12­2002 is concerned, would go to indicate that various
organisations like the Ministry of Railways, the Bhakra Beas
12 2018 (7) SCALE 106
44
Management Board (BBMB)  and also the Corporation had
requested for exemption from the operation of the provisions
of  2003 Act  citing the peculiar, sensitive and specialised
nature of task that such bodies have been entrusted by the
statutory enactments constituting and governing the said
bodies/organizations.     Specifically,   in   this   regard,   the
peculiar   duties   and   responsibilities   cast   on   the   DVC   by
Section 12 of the Act of 1948 had been highlighted before
the Parliamentary Standing Committee.  It had been urged
before us that it was recommended by the Parliamentary
Standing Committee that exemption from the provisions of
the proposed 2003 Act should be granted to the Corporation
in view of its special statutory status which may get eroded
if the exemptions are not to be granted.  The provisions of
Section 58 of the Act of 1948 which is in the following terms
were   also   placed   before   the   Parliamentary   Standing
Committee while seeking exemption from the operation of
the proposed 2003 Act:
“58. Effect of other laws : The provisions of
this Act or any rule made thereunder shall have
effect notwithstanding anything contained in any
45
enactment other than this Act or any instrument
having effect by virtue of any enactment other than
this Act.”
47. On the other hand, it would appear from the record
of the proceedings of the Parliamentary Standing Committee
that the Industry represented by Chhotanagpur Chamber of
Commerce & Industry and The Bengal Chamber of Commerce
& Industry as well as the States of Jharkhand and West
Bengal had contested the claims made by the Corporation for
exemption   and   had   pleaded   before   the   Parliamentary
Standing   Committee   that   the   Act   of   1948   itself   be
repealed/amended insofar as all non­power related activities
are concerned which constitute only about 10% of the total
activities of the Corporation.
48. After considering the respective stands taken, the
Parliamentary Standing Committee had recommended that
the Corporation should be exempted from the operation of the
provisions of the proposed 2003 Act in view of the special
status and responsibilities of the Corporation as envisaged
under the Parliamentary enactment constituting it (i.e the Act
46
of   1948).     However,   it   appears   that   Parliament   was   not
inclined to provide a blanket/total exemption in favour of the
Corporation and the 2003 Act did not include the Corporation
as one of the entities in Section 173 of the 2003 Act which
provides   exemption   in   so   far   as   the   provisions   of   the
Consumer Protection Act, 1986, the Atomic Energy Act, 1962
and the Railways Act, 1989 clearly excluding the provisions of
the Act of 1948 therefrom.   Instead, the fourth proviso to
Section   14   of   the   2003   Act   was   specifically   incorporated,
details of which have already been noted. Having regard to
the legislative history behind the enactment of the provision
of Section 173 and the provisions of Section 14 including the
fourth proviso thereto, it may be more in consonance with the
Parliamentary intention to hold that the fourth proviso to
Section 14 need not be understood to be confined only to the
question of licensing which is dealt with by the main part of
the   Section   14.     Rather,   we   are   inclined   to   hold   that
Parliament had intended to provide partial exemption to the
Corporation by mandating that such provisions of the Act of
1948   which   are   not   inconsistent   with   the   2003   Act   will
47
continue to hold the field.  Viewed thus, the fourth proviso to
Section 14 of the Electricity Act 2003 has to be understood to
be   a   legislative   exercise   in   the   nature   of   a   substantial
provision  of  law.       Part  IV  of  the  Act  of  1948  not  being
inconsistent   with   the   provisions   of   the   2003   Act   can,
therefore, be taken into account for determination of tariff.
Such   provisions   of   the   Act   of   1948   will   also   have   an
overriding effect over the inconsistent provisions of the Tariff
Regulations.   Our   view,   as   above,   will   also   effectuate   the
provisions of the Act of 1948 in so far as the activities of the
Corporation,   other   than   generation   and   transmission   of
electricity, is concerned. We, therefore, affirm the above view
taken by the Appellate Tribunal for the reasons afore­stated.
49. The   specific   heads   of   tariff   fixation   on   which
grievances have been raised by the appellants in the present
set of appeals are enumerated as hereunder:
(a) Depreciation rate;
(b) Sinking Fund;
(c) Debt Equity ratio;
48
(d) Pension & Gratuity Contribution;
(e) Return on Capital Investment on Head Office etc.;
(f) Revenue relating to afforestation etc., which are
not
relatable to power generation;
(g) Period of transition (two years) allowed for the tariff
fixed by the CERC to come into effect;
(h) The treatment of entire transmission as inter­State
transmission   lines   thereby   divesting   the
Jharkhand   and   West   Bengal   State   Electricity
Regulation Commissions of the power to fix tariff
insofar as intra­State transmission of electricity is
concerned;
50. Insofar as the questions under the last two issues
at (g) and (h) above is concerned, the same have already been
dealt with in the present order.   Of the remaining heads of
tariff fixation, it appears that so far as the ‘depreciation rate’
and ‘sinking fund’ is concerned it is the provisions of Section
40   of   the   Act   of   1948   which   have   been   held   to   be
49
determinative.  We have gone through the reasoning adopted
by   the   learned   Appellate   Tribunal   in   this   regard.   Having
clarified the manner in which the fourth proviso to Section 14
of the 2003 Act has to be understood, we do not find the
reasoning adopted by the learned Appellate Tribunal on the
issues   relating   to   ‘depreciation’   and   ‘sinking   fund’   to   be
fundamentally flawed in any manner so as to give rise to a
substantial   question   of   law   requiring   our
intervention/interference under Section 125 of the 2003 Act.
51. Insofar as the debt­equity ratio is concerned, we
find that except for the projects which have been completed
prior to 1992 in which case the ratio has been worked out at
par with other public­sector organisation at 50:50, the ratio
of 70:30 has been adopted following the prescription under
Regulation 20 of the Tariff Regulations in the absence of any
specific rate under the Act of 1948.
52. So   far   as   the   pension   and   gratuity   fund   is
concerned, the only issue arising is whether the fund worked
out   on   Actuary   basis   at   Rs.1534.49   crores   should   be
50
apportioned between the Corporation and the consumers as
held by the CERC in the ratio of 40:60 or the entire fund
should be allowed to be recovered by way of tariff from the
consumers as held by the learned Appellate Tribunal. The
reasoning of the learned Appellate Tribunal in coming to the
aforesaid conclusion is as follows:
“D.3 As a general rule, once the
Commission, after prudence check, has agreed
with the need for funding the Pension and
Gratuity Contribution funds, DVC should have
been allowed to recover entire amount from the
consumers through the tariff. Asking DVC to
contribute out of its own resources would
tantamount to denying it the return on equity as
assured in terms of Tariff Regulations. However,
if we look at it from the point of view of the
consumers, the consumers, particularly the
industrial and commercial ones, have now no
option to adjust their sale price to take into
consideration the need for meeting the
accumulated liability. It is, therefore, an
accepted fact that due to postponing of the
creation of such fund, the consumers were
enjoying lesser tariff than the legitimate tariff
otherwise applicable to them.”
53. A careful consideration of the reasoning adopted by
the learned Appellate Tribunal would not disclose any such
error so as to warrant interference of this Court.  No error or
fallacy, ex facie, is disclosed in the reasoning adopted so as to
justify interference under Section 125 of the 2003 Act.
51
54. Insofar   as   the   consumers   (appellants   in   Civil
Appeal Nos. 971­973 of 2008) are concerned, an additional
issue has been struck, as noticed earlier.  This is with regard
to the number of employees engaged in the power sector by
the Corporation for whom alone proportionate recovery by
way of tariff so far as the pension and gratuity is concerned,
would be justifiable.  Apart from the fact that the issue was
not raised in any of the forums below and had been so raised
before this Court for the first time and that too in the course
of the arguments advanced, the materials on record do not
justify a conclusion to be reached by us which will support
the   core   basis   of   the   contention   made,   namely,   that   the
Corporation had not laid before the CERC any materials to
show   the   extent   of   the   work­force   deployed   in   the   power
sector of the Corporation.  In fact, in the counter arguments
advanced on behalf of the Corporation this contention has
been refuted and it is asserted that such materials were,
indeed, laid before the CERC, a fact which we find to be
correct.
52
55. Insofar as the issue of allowance of cost relating to
other activities of the Corporation to be recovered through
tariff on electricity is concerned, we have taken note of the
objection(s) raised in this regard which in sum and substance
is that Sections 32 and 33 of the Act of 1948 are in direct
conflict   with   Sections   41   and   51   of   the   2003   Act   and,
therefore,   recovery   of   cost   incurred   in   “other   works”
undertaken by the Corporation through power tariff is wholly
untenable. Apart from reiterating the basis on which we have
thought   it   proper   to   affirm   the   findings   of   the   learned
Appellate Tribunal on the purport and scope of the fourth
proviso to Section 14 of the 2003 Act and the continued
operation of the provisions of the Act of 1948 which are not
inconsistent with the provisions of the 2003 Act, we have also
taken note of the specific provisions contained in Sections 41
and 51 of the 2003 Act which, inter alia, require maintenance
of separate accounts of the other business undertaken by
transmission/distribution licensees so as to ensure that the
returns   from   the   transmission/distribution   business   of
electricity do not subsidize any other such business.   Not
53
only Sections 41 and 51 of the 2003 Act contemplate prior
approval of the Appropriate Commission before a licensee can
engage in any other business other than that of a licensee
under the 2003 Act, what is contemplated by the aforesaid
provisions   of   the   2003   Act   is   some   return   or   earning   of
revenue from such business. In the instant case, the “other
activities” of the Corporation are not optional as contemplated
under Sections 41/51 of the 2003 Act but are mandatorily
cast by the statute i.e. Act of 1948 which, being in the nature
of socially beneficial measures, per se, do not entail earning of
any   revenue   so   as   to   require   maintenance   of   separate
accounts.   The   allowance   of   recovery   of   cost   incurred   in
connection with “other activities” of the Corporation from the
common   fund   generated   by   tariff   chargeable   from   the
consumers/customers of electricity as contemplated by the
provisions of the Act of 1948, therefore, do not collide or is, in
any manner, inconsistent with the provisions of the 2003 Act.
We will,  therefore, have  no  occasion to  interfere  with  the
findings recorded by the learned Appellate Tribunal on the
above score.
54
56. Having dealt with all the issues raised/arising in
the   appeals   under   consideration   in   the   manner   indicated
above, we deem it proper to dismiss all the appeals and affirm
the judgment and order dated 23rd November, 2007 passed by
the learned Appellate Tribunal.  We order accordingly.
……………………., J.
 [RANJAN GOGOI]
……………………., J.
 [R. BANUMATHI]
NEW DELHI
JULY 23, 2018

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