Supreme Court rules in favour of the Powergrid Corporation of India Limited reinforcing regulatory role of the Central Commission Under Electricity Act, 2003
The Supreme Court today (May 15) ruled that the Central Electricity Regulatory Commission (CERC) is not precluded from exercising its functions under Section 79 of the Electricity Act, 2003 in the absence of regulations framed under Section 178 of the Electricity Act, 2003.
The Judgment arises out of the SLPs filed by Powergrid Corporation of India Limited (PGCIL) against the Order dated 25.02.2021 passed by the High Court of Madhya Pradesh admitting the writ petitions filed by the Madhya Pradesh Power Transmission Company Limited (MPPTCL).
MPPTCL had filed the Writ Petition before the High Court on the ground that the CERC had exercised powers beyond its jurisdiction as per the regulations notified under Section 178 of the Electricity Act, 2003 while passing the orders dated 21.01.2020 and 27.01.2020 in Petition No. 311/TT/2018 and Petition No. 266/TT/2018 filed by PGCIL seeking transmission tariff for its assets.
While setting aside the judgment dated 25.02.2021 passed by the High Court of Madhya Pradesh, the Supreme Court answered the following questions in favour of PGCIL:
i. Whether the CERC, while exercising its functions under Section 79(1) of the Act, 2003, is circumscribed by statutory regulations enacted under Section 178 of the Act, 2003?
ii. Whether the CERC exercises regulatory or adjudicatory functions under Section 79 of the Act, 2003? In other words, what is the scope of the CERC’s power to regulate inter-state transmission of electricity and determine tariff for the same under clauses (c) and (d) of Section 79(1)?
iii. Whether the grant of compensation by the CERC for the delay vide the orders dated 21.01.2020 and 27.01.2020 respectively, is a regulatory or adjudicatory function and to what extent are the principles of natural justice applicable to the exercise of such functions?
iv. Whether the High Court was justified in admitting the writ petition filed by the respondent no. 1 herein challenging the order dated 21.01.2020 of the CERC when there existed an alternative remedy under Section 111 of the Act, 2003?
While dealing with the above questions, the Supreme Court has held as under:
a. CERC functions as both – decision-making and regulation-making authority under Section 79 and 178 of the Act, 2003 respectively.
b. While noting the Constitution Bench judgment in PTC India Limited v. Central Electricity Regulatory Commission (2010) 4 SCC 603, the Supreme Court has held that the Regulations under Section 178 has the effect of interfering with and overriding contractual relationships between the regulated entities, however, on the other hand the orders under Section 79 have to be confined to the existing statutory regulations and do not have the effect of altering the terms of contract between the specific parties before the CERC
c. In view of the law laid down by the Supreme Court in PTC and Energy Watchdog v. CERC reported in (2017) 14 SCC 80, it has been held that the absence of a regulation under Section 178 does not preclude the CERC from exercising its powers under Section 79(1) to make specific regulations or pass orders between the parties before it.
d. In the present case, the Supreme Court held that there is no contractual clause between the parties for establishing the risks of delay in commissioning of a transmission asset. There is also no uniform settled position as regards the liability of transmission charges payable before a particular transmission element is put in operation, in the form of regulations under Section 178. These circumstances, considered together with the prohibition on imposing liability of delayed payments on beneficiaries, leave a regulatory gap. The Supreme Court then proceeded to hold that in light of the dictum in the case of Energy Watchdog case, in the situation of an absence in Regulation, Guidelines or Contractual clauses, the Act, 2003 mandates that the CERC may strike a judicious balance keeping in mind commercial principles and consumers interest in exercise of its general regulatory powers under Section 79.
e. The Supreme Court further held that sources of power for enactment of a regulation under Section 178 and regulatory order under Section 79(1) are different. The former emanates from the power of delegated legislation whereas the latter is an ad hoc power which is limited to the specific parties and situation in context of which the order is given. Since the regulatory powers under Section 79(1) are of an ad hoc nature and are not of general application, the orders thereunder are made appealable under Section 111.
In light of the above findings, the Supreme Court held that CERC is empowered to order for imposition of transmission charges on the party to whom delay is attributable and there was no occasion for High Court to admit the Writ Petitions and CERC . The Supreme Court has concluded that APTEL is the appropriate authority to look into the merits of the matter should MPPTCL choose to prefer an appeal before APTEL under Section 111 of the Act, 2003.
The copy of the judgment has been directed to be circulated to all High Courts.
