State Electricity Regulatory Commissions Are Not ‘Bound’ By Directions Of State Or Central Government: Supreme Court
The Supreme Court held that the State Electricity Regulatory Commissions (SERC) are not “bound” by the directions of the State Government or the Central Government.
The Court noted that SERC has the right to regulate the price at which electricity is procured while holding that policy directives cannot impinge upon the adjudicatory discretion vested in a regulatory authority under Section 108 of the Electricity Act.
The Court upheld the judgment of the Appellate Tribunal for Electricity (APTEL) wherein it was held that a policy directive cannot override the statutory functions already exercised by the Kerala State Electricity Regulatory Commission (KSERC). APTEL had held that Section 86(1)(b) of the Electricity Act, 2003 (the Act) expressly conferred the function of regulating the price at which electricity should be procured by distribution licensees from generating companies to the KSERC.
A Bench of Chief Justice Dhananjaya Y Chandrachud, Justice JB Pardiwala and Justice Manoj Misra held, “That the state regulatory commissions are not ‘bound’ by the directions of the state government, or the Central Government is also evident from the text of Section 108. The provision reads: “In the discharge of its functions, the State Commission shall be guided by such directions in matters of policy …”. This indicates that the state commission shall only be ‘guided’ by the directions issued by the state government and is not automatically bound by them.."
Senior Advocate V. Giri represented the appellant, while Senior Advocates Abhishek Manu Singhvi, C. Aryama Sundaram and Sajan Poovayya appeared for the respondents.
In 2014, Kerala State Electricity Board Ltd. (KSEB) floated two tenders under Section 63 of the Act inviting competitive bids for the procurement of power, respectively. The bidding process resulted in the selection of L1 bidders, but they offered less than the required quantum of power. Subsequently, KSEB invited other bidders to match the tariffs of the L1 bidders, leading to the acceptance of bids exceeding the original requirement.
However, when KSEB sought approval from KSERC for the Power Supply Agreements (PSAs), KSERC prima facie observed that the KSEB had deviated from the standard bidding guidelines issued by the Ministry of Power, Government of India and failed to obtain prior approval from the KSERC or the Central Government in relation to these deviations.
APTEL held that the KSERC was not bound by the directives of the state government. The state government could not have issued a directive to compel the KSERC to exercise its quasi-judicial powers in a particular manner. Such powers are to be exercised independently by the KSERC in accordance with the Act.
The Court also concurred with the the findings of the APTEL on the limited scope of the review “Section 94(f) of the Act provides that the state commission has the same powers as vested in a civil court under the CPC in respect of reviewing its decisions, directions and orders. Order XLVII Rule 1 of the CPC provides for review on limited grounds. An order cannot be made the subject of an appeal under the garb of a review. While reviewing an order, the court or tribunal must be satisfied that there was an error apparent in its previous order, which warrants the exercise of its power to review,” the Bench remarked.
Consequently, the Court held, “We are in agreement with the judgment of APTEL insofar as it holds that the directive which was issued by the State government under Section 108 could not have displaced the adjudicatory function which was entrusted to KSERC. The State government while issuing a policy directive in the exercise of its power under Section 108 cannot impinge on the adjudicatory discretion which is vested in an authority under the Act.”
Accordingly, the Supreme Court disposed of the appeal.
Cause Title: Kerala State Electricity Board Ltd v. Jhabua Power Limited & Ors. (Neutral Citation: 2024 INSC 768)
Appearance:
Appellant: Senior Advocate V. Giri; AOR Prabhas Bajaj; Advocates Rao Vishwaja, Priyanshu Tyagi, Harsh Chauhan, Rahul Narang, Harshed Sunder, Nihar Dharmadhikari and R.K. Nayyar
Respondents: Senior Advocates Abhishek Manu Singhvi, C. Aryama Sundaram and Sajan Poovayya; AOR Divya Roy, Nikunj Dayal and Nishant Kumar; Advocates Matrugupta Mishra, Amit Bhandari, Nipun Dave, Raksha Agrawal, Harshwardhan Sharma, Swapna Seshadri, Pramod Dayal, Zafar Inayat, Harsha Rao, Aishwarya Subramani, Biju Mattam, Ankita Bafna and Gaurav Prakash Pathak
