U.P.Power Corp.Ltd vs National Thermal Power Corp. Ltd. & Ors

LTD. ...APPELLANT.

VERSUS

N.T.P.C. LTD. & ORS. ..RESPONDENTS.

WITH

C.A.Nos. 725-730 of 2008

J U D G M E N T

ANIL R. DAVE, J.

1. Delay condoned.

2. At the request of the learned counsel appearing for the parties,

all these appeals are heard together as similar issues are involved in

all these appeals. Central Electricity Regulatory Commission

(hereinafter referred to as the `Central Commission') had determined

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tariff for generation and sale of electricity generated by different

units of the respondent-National Thermal Power Corporation

Limited for the period commencing from 1st April, 2001 to 31st

March, 2004 and for some other periods. The tariff so determined

was challenged by the respondent before the Appellate Tribunal for

Electricity by filing several appeals. The said appeals and Review

Petition were decided by different orders and all such orders have

been challenged in the aforesaid appeals filed before this Court.

Though, the issues involved are similar, for the sake of

convenience, wherever facts have been referred to in this judgment,

we have taken the same from Civil Appeal No. 5775 of 2007.

3. Thus, the main issue involved in all these appeals is with regard

to determination of tariff for electricity generated and sold by the

respondent, namely, NTPC, which is a government company

incorporated under the Companies Act, 1956.

4. Generation of electricity is regulated by the government

authorities. The respondent has several power plants in the country

and electricity is generated at those power plants. The electricity so

generated is sold to several State Electricity Boards. There are

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regulations which determine the price at which the electricity

generated by the respondent is to be sold to State Electricity Boards

and the electricity so generated is transmitted to the ultimate

consumers through the State Electricity Boards. The generation and

sale of electricity by the respondent is regulated under the provisions

of Electricity Act, 2003 and prior to enactment of the aforestated

Act, it was regulated by the Central Commission under the

Provisions of Electricity Regulatory Commissions Act, 1998

(hereinafter referred to as "the Act"). The said Act came into force

with effect from 25th April, 1998 and prior thereto the tariff for

generation and sale of electricity was determined by the Central

Government under the Provisions of the Electricity Supply Act

1948. Under the said provisions, the Central Government used to

issue tariff notifications from time to time for determining the tariff,

i.e. the rate at which electricity generated by the respondent was to

be sold to the State Electricity Boards.

5. The Central Government had issued Tariff Notification dated

30th April, 1994 determining tariff for the generation and sale of

electricity from the Kawas Gas Power Station for the period

commencing from 1st January, 1993 to 31st March, 1998.

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Thereafter, another Notification dated 21st December, 2000 was

issued whereby it was directed that the conditions incorporated in

notification dated 30th April, 1994 would continue to be applicable

even for period commencing from 1st April, 1998 to 31st March,

2001. We are also concerned with determination of tariff for the

aforestated period and for other periods in respect of some other

plants of the respondent.

6. The tariff so determined was subject matter of the present

litigation before the Central Commission and the Tribunal. The

respondent was aggrieved by the determination of tariff and,

therefore, the order determining tariff had been challenged by the

respondent before the Tribunal. The final order passed by the

Tribunal with regard to the determination of tariff was reviewed in

pursuance of a Review Petition filed by the respondent. Orders

passed in the Review Petition as well as original order passed by the

Tribunal are subject matter of these appeals.

7. In the said review petition as well as in the orders passed by

the Tribunal, the issues were with regard to some of the factors,

which ultimately decide the amount of tariff, namely, calculation of

interest on loan capital, calculation of the loan capital, non-

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inclusion of value of fuel like Naphtha and other liquid fuel while

determining working capital, etc.. Several factual aspects were

considered by the Tribunal while coming to the final conclusion.

Equity capital, borrowed capital, revenue expenditure in the nature

of fuel, etc. are of vital importance for determining the tariff. After

considering all these relevant factual aspects, based on accounting

principles, the Tribunal finally decided the appeal.

8. We have heard the learned counsel appearing for the parties on

the subject of determination of tariff. The issues were with regard

to necessary ingredients of cost to be considered for the purpose of

determination of tariff to be charged by the power plants of the

respondent in the matter of sale of electricity to different State

Electricity Boards. The issues involved are also with regard to

calculation of interest forming part of the tariff.

9. For the purpose of determining tariff for generation and sale of

electricity by the generating stations of the respondent, cost can be

broadly divided into fix charges and energy charges. It also contains

the amount of interest paid on the capital employed as the capital

employed in all electricity generating power plants is very huge.

The issues with regard to determination of interest as well as capital

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are some of the most important issues which were decided by the

Tribunal.

10. Upon hearing the learned counsel for the parties and upon

perusal of the record, we find that several factual issues with regard

to calculation of capital employed are involved in these appeals.

The issues are not only based on the principles on which the amount

of interest and the energy charges are to be determined but they

also depend upon certain other technical and factual aspects.

11. Our attention was drawn to the judgment delivered by this

Court in the case of WEST BENGAL ELECTRICITY

REGULATORY COMMISSION v. CESC LTD. reported in

(2002) 8 SCC 715 and more particularly to Para 102 of the same

judgment, which reads as under:

"102. We notice that the Commission constituted under

Section 17 of the 1998 Act is an expert body and the

determination of tariff which has to be made by the

Commission involves a very highly technical procedure,

requiring working knowledge of law, engineering,

finance, commerce, economics and management. A

perusal of the report of ASCI as well as that of the

Commission abundantly proves this fact. Therefore, we

think it would be more appropriate and effective if a

statutory appeal is provided to a similar expert body, so

that the various questions which are factual and

technical that arise in such an appeal, get appropriate

consideration in the first appellate stage also. From

7 Section 4 of the 1998 Act, we notice that the Central

Electricity Regulatory Commission which has a judicial

member as also a number of other members having

varied qualifications, is better equipped to appreciate

the technical and factual questions involved in the

appeals arising from the orders of the Commission.

Without meaning any disrespect to the Judges of the

High Court, we think neither the High Court nor the

Supreme Court would in reality be appropriate

appellate forums in dealing with this type of factual and

technical matters. Therefore, we recommend that the

appellate power against an order of the State

Commission under the 1998 Act should be conferred

either on the Central Electricity Regulatory

Commission or on a similar body. We notice that under

the Telecom Regulatory Authority of India Act, 1997 in

Chapter IV, a similar provision is made for an appeal to

a Special Appellate Tribunal and thereafter a further

appeal to the Supreme Court on questions of law only.

We think a similar appellate provision may be

considered to make the relief of appeal more effective."

12. Looking to the observations made by this Court to the

effect that the Central Commission constituted under Section 3 of

the Act is an expert body which has been entrusted with the task of

determination of tariff and as determination of tariff involves highly

technical procedure requiring not only working knowledge of law

but also of engineering, finance, commerce, economics and

management, this Court was firmly of the view that the issues with

regard to determination of tariff should be left to the said expert

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body and ordinarily High Court and even this Court should not

interfere with the determination of tariff.

13. Looking to the aforestated legal position and in view of the

technical aspect involved in the impugned order with regard to

determination of tariff, which we prima facie find to have been

determined in a just and proper manner, we are of the view that the

conclusion arrived at by the Tribunal in the impugned orders do not

appear to be unreasonable or unjustified and therefore, in our

opinion the impugned orders require no interference by this Court

and, therefore, all these appeals are dismissed with no order as to

costs.

.......................

.........................J.

(Dr. MUKUNDAKAM

SHARMA)

....................................................J.

(ANIL R. DAVE)

New Delhi

September 14, 2011.