REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No. 3902 OF 2006

PTC India Ltd. ...Appellant

Versus

Central Electricity Regulatory Commission

Thr. its Secretary …Respondent

(With Civil Appeal Nos. 4354/2006, 4355/2006, 2875/2007, Civil Appeal

D. 9870/2007, SLP (C) No.22080/2005, Civil Appeal Nos. 7437/2005,

7438/2005, 2073/2007, 1471/2007, 2166/2007)

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1.In these appeals and special leave petition, challenge in each case is

to the order passed by the Appellate Tribunal for Electricity (in short the

‘Tribunal’). Challenge before the Tribunal was to the order/decision dated

23.1.2006 of the Central Electricity Regulatory Commission (in short the

‘CERC’) and the Central Electricity Regulatory Commission (Fixation of

Trading Margin) Regulations, 2006 (in short the ‘Regulations’) published in

the Gazette of India on 27.1.2006. The Tribunal by the impugned judgment

held that it has no jurisdiction to deal with the matter. For this purpose the

Tribunal placed reliance on a three-Judge Bench decision of this Court in

West Bengal Electricity Regulatory Commission v. CESC Ltd. (2002 (8)

SCC 715). The conclusion in the said decision was to the effect that the

High Court sitting as an Appellate Court under Section 27 of the Electricity

Regulatory Commission Act, 1998 (in short ‘1998 Act’) has no jurisdiction

to go into the validity of the Regulations. It was ultimately held that there is

weighty authority for the proposition that a Tribunal which is a creature of

the statute cannot question the vires of the provisions under which it

functions.

2.Questioning correctness of the said view the present appeals have

been filed. It has been contended that the decision in West Bengal

Electricity case (supra) has no application to the present case. The

Regulations have been framed under Section 178 of the Electricity Act,

2003 (in short ‘2003 Act’). It is pointed out that there is conceptual

difference between the provisions which have relevance, as contained in

1998 Act and 2003 Act. Section 121 of 2003 Act gives ample power to the

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Tribunal to deal with the matter. The fixation of tariff is conceptually and

contextually different from fixation of trading margin. With reference to

Sections 61 and 62 of 2003 Act it is pointed out that the former relates to

“tariff regulations” and later relates to “determination” of tariff.

3.Therefore, there is no question of dealing with trading margin.

Section 66 deals with the issue of development of market including trading.

Section 79 deals with functioning of CERC. Section 111 deals with

appellate Tribunal. Section 121 confers supervisory powers on the Tribunal

of statutory functions. Section 121 has power to issue orders, instructions

and directions. It is not only in a sense revisional but also supervisory in

character. Its jurisdiction encompasses all aspects relating to statutory

functions under the Act. Section 79(1)(j) deals with fixation of trading

margin. It is the stand of the appellants that this can be done by an order and

not by a Regulation. With reference to Section 178(2)(y) it is submitted that

power is given to prescribe the manner by which development of market in

power sector including trading can be prescribed. Said provision has to be

read alongwith Sections 60, 61 and 62. There is significantly no reference

to Section 79.

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4.Learned counsel for the respondents on the other hand submitted that

the Tribunal is a creature of the statute and therefore cannot go into the

validity or legality of the Regulations and, therefore, the view of the

Tribunal is correct.

5.At this juncture, it is to be noted that sub-section (3) of Section 79

talks of transparency. Section 79 deals with functioning of CERA and

Section 178 deals with power to make Regulations. In terms of Section

179, the Regulations have to be placed before the Parliament and, therefore,

have statutory flavor.

6.It is also to be noted that in West Bengal Electricity case (supra) in

para 102 the need for having an expert body was highlighted and that

appears to be the basis for enacting Section 121 in the 2003 Act.

7.In Clariant International Ltd. and Anr. v. Securities & Exchange

Board of India (2004 (8) SCC 524) certain observations have relevance.

Paras 27, 33, 34, 42, 51 and 52 read as follows:

“27. In Kruger v. Commonwealth of Australia (1997)146 Aus.

L.R. 126) it is stated:

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“Moreover, when a discretionary power is

statutorily conferred on a repository, the power

must be exercised reasonably, for the legislature is

taken to intend that the discretion be so exercised.

Reasonableness can be determined only by

reference to the community standards at the time

of the exercise of the discretion and that must be

taken to be the legislative intention....”

xx xx xx

33. In Black’s Law Dictionary, the word “compensation” has

been defined as under:

“money given to compensate loss or injury”.

34. In a given case where the liability arises during pendency of

a litigation, doctrine of restitution can be invoked. In South

Eastern Coalfields Ltd. v. State of M.P (2003 (8) SCC 648) it

was observed: (SCC pp.662-63, para 26)

“In law, the term ‘restitution’ is used in three

senses: (i) return or restoration of some specific

thing to its rightful owner or status; (ii)

compensation for benefits derived from a wrong

done to another; and (iii) compensation or

reparation for the loss caused to another. (See

Black’s Law Dictionary, 7th Edn., p. 1315.) The

Law of Contracts by John D. Calamari & Joseph

M. Perillo has been quoted by Black to say that

‘restitution’ is an ambiguous term, sometimes

referring to the disgorging of something which has

been taken and at times referring to compensation

for injury done:

‘Often, the result under either meaning

of the term would be the same. ...

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Unjust impoverishment as well as

unjust enrichment is a ground for

restitution. If the defendant is guilty of

a non-tortious misrepresentation, the

measure of recovery is not rigid but, as

in other cases of restitution, such

factors as relative fault, the agreed-

upon risks, and the fairness of

alternative risk allocations not agreed

upon and not attributable to the fault of

either party need to be weighed.’ ”

xx xx xx

42. While determining the cases of commercial transaction

also, fall in rate of interest has been taken note of by this Court

in Citi Bank N.A. v. Standard Chartered Bank 2004 (1) SCC 12

(SCC para 62) and Citibank N.A. v. Standard Chartered Bank

2004 (6) SCC 1 (SCC para 54).

xx xx xx

51. In Palmer’s Company Law, 23rd Edn. at p.154, para 12-07,

it is stated:

“12-07. Subscribers as members.—The

subscribers of the memorandum are deemed to

have agreed to become members of the company,

and on its registration shall be entered as members

in its register of members [1948 Act, Section 26

(1)].”

It is further stated:

“49.04. Other members.—In the case of members

other than the subscribers to the memorandum two

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essential conditions have to be satisfied to

constitute a person a member:

(1) an agreement to become a member; and

(2) entry in the register.

These two conditions are cumulative: unless they

are both satisfied, the person in question has not

acquired the status of member.

Thus, an agreement to become a member

alone does not create the status of membership; it

is a condition precedent to the acquisition of such

status that the shareholder’s name should be

entered in the register. Conversely, the company is

not entitled to place a person’s name on the

register without his having agreed to become a

member; a person improperly registered without

his assent is not bound thereby and may have his

name removed from the register.”

52. In Howrah Trading Co. Ltd. v. CIT 1959 Supp (2) SCR

448) the law is stated thus: (SCR p.456)

“The question that falls for consideration is

whether the meaning given to the expression

‘shareholder’ used in Section 18(5) of the Act by

these cases is correct. No valid reason exists why

‘shareholder’ as used in Section 18(5) should

mean a person other than the one denoted by the

same expression in the Indian Companies Act,

1913. In Wala Wynaad Indian Gold Mining Co.,

In re (1882) 21 Ch D 849) Chitty, J., observed:

‘I use now myself the term which is

common in the courts, “a shareholder”,

that means the holder of the shares. It is

the common term used, and only means

the person who holds the shares by having

his name on the register.’ ”

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(See also Balkrishan Gupta v. Swadeshi Polytex Ltd 1985 (2)

SCC 167))

8.Similarly in Cellular Operators Association of India and Ors. V.

Union of India and Ors. (2003 (3) SCC 186) in paras 27, 33 and 34 it has

been observed as follows:

“27. TDSAT itself is an expert body and its jurisdiction is wide

having regard to sub-section (7) of Section 14-A thereof. Its

jurisdiction extends to examining the legality, propriety or

correctness of a direction/order or decision of the authority in

terms of sub-section (2) of Section 14 as also the dispute made

in an application under sub-section (1) thereof. The approach

of the learned TDSAT, being on the premise that its

jurisdiction is limited or akin to the power of judicial review is,

therefore, wholly unsustainable. The extent of jurisdiction of a

court or a tribunal depends upon the relevant statute. TDSAT is

a creature of a statute. Its jurisdiction is also conferred by a

statute. The purpose of creation of TDSAT has expressly been

stated by Parliament in the amending Act of 2000. TDSAT,

thus, failed to take into consideration the amplitude of its

jurisdiction and thus misdirected itself in law.

xx xx xx

33. The regulatory bodies exercise wide jurisdiction. They lay

down the law. They may prosecute. They may punish.

Intrinsically, they act like an internal audit. They may fix the

price, they may fix the area of operation and so on and so forth.

While doing so, they may, as in the present case, interfere with

the existing rights of the licensees.

34. Statutory recommendations made by it are normally

accepted by the Central Government, as a result of which the

rights and obligations of the parties may seriously be affected.

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It was in the aforementioned premise Parliament thought of

creating an independent expert tribunal which, if an occasion

arises therefor, may interfere with the finding of fact, finding of

law or a mixed question of law and fact of the authority.

Succinctly stated, the jurisdiction of the Tribunal is not

circumscribed in any manner whatsoever.”

9.There are also certain observations in National Sewing Thread Co.

Ltd. v. James Chadwick and Bros. Ltd. (1953 SCR 1028) which have

relevance. It was inter alia observed as follows:

“The second error lies in the assumption that the

appellate jurisdiction exercised by the High Court of

Calcutta is much more limited than that possessed by the

other High Court. The matter has been discussed at

length in an earlier part of this judgment.

We have also not been able to appreciate the

emphasis laid to negative the applicability of clause 15

of the Letters Patent by reference to the provision of

Section 77 of the Act. The provision of that section are

merely enabling provisions and, as already pointed out,

it is open to the High Court to make use of them or not as

it likes. There is nothing in the provisions of that section

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which debars the High Court from hearing appeals under

Section 76 of the Trade Marks Act according to the rules

under which all other appeals are heard, or from framing

rules for the exercise of that jurisdiction under Section

108 of the Government of India Act, 1915, for hearing

those appeals by Single Judges or by Division Benches.

Even if Section 77 had not been enacted it could not be

said that the High Court would then have no power to

make rules for the hearing of appeals under Section 76.

There are a number of legislative enactments which have

conferred appellate jurisdiction on the High Court

without more and the High Court exercises appellate

jurisdiction conferred by these enactments by framing its

own rules under the powers it already possesses under its

different charters and under the various statutes which

have conferred power on it.”

10.In the background of what has been stated above and considering the

importance of the matter we feel it necessary to refer the matter to a larger

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Bench to consider whether the West Bengal Electricity case (supra) can

have application to the cases coming under 2003 Act, where the parties go

before the Tribunal in terms of Section 121 of the 2003 Act. The other

important question would be whether the Tribunal has jurisdiction to decide

the question as to the validity of the Regulations framed by the CERC. The

matter may be placed before Hon’ble the Chief Justice of India for

necessary orders. It is open to the parties to move the Hon’ble Chief Justice

for fixing date for taking up the interim relief prayers.

……………….…………….J.

(Dr. ARIJIT PASAYAT)

……………………..……….J.

(HARJIT SINGH BEDI)

………………………………J.

(ASOK KUMAR GANGULY)

New Delhi,

March 06, 2009

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