Electricity Act - Not Permissible To Amend Tariff Order During 'Truing Up' Excercise : Supreme Court

The Supreme Court held that it is not permissible to amend the tariff order made under Section 64 of the Electricity Act, 2003, during the 'truing up' exercise.

The bench of Justices S. Abdul Nazeer and Krishna Murari held thus while disposing appeals filed by BSES Rajdhani Power Ltd. and BSES Yamuna Power Ltd. against the judgment of the Appellate Tribunal for Electricity. One of the substantial questions raised in the appeal was whether it is permissible to amend the tariff order made under Section 64 of the 2003 Act during the 'truing up' exercise? The appellants (who are are Distribution Licensees) challenged certain findings of the Delhi Electricity Regulatory Commission ('DERC') in the Tariff Order dated 26.08.2012 for Truing Up of financials for FY 2008­-09 and FY 2009-­10 and Aggregate Revenue Requirement ('ARR') for FY 2011­ -12.

'Truing up' is the adjustment of actual amounts incurred by the Licensee against the estimated/projected amounts determined under the d Aggregate Revenue Requirement (ARR).

Senior Advocates Arvind P. Dattar and Dhruv Mehta, who appeared for the appellants, contended that Regulator cannot 'change the rules of the game after it has begun' in the 'truing up exercise and that the tariff order is in the nature of a quasi­judicial determination and that in the guise of truing up, the DERC cannot amend a tariff order. Senior Advocate Nikhil Nayyar, who appeared for the ­DERC, on the other hand, contended that one of the facets of the tariff determination exercise is the process of 'truing up'.

In this regard, the court observed:

"In our opinion, 'truing up' stage is not an opportunity for the DERC to rethink de novo on the basic principles, premises and issues involved in the initial projections of the revenue requirement of the licensee. 'Truing up' exercise cannot be done to retrospectively change the methodology/principles of tariff determination and re­opening the original tariff determination order thereby setting the tariff determination process to a naught at 'trueup' stage...

Revision or re­determination of the tariff already determined by DERC on the pretext of prudence check and truing up would amount to amendment of the tariff order, which can be done only as per the provisions of sub ­Section (6) of Section 64 of the 2003 Act within the period for which the Tariff Order was applicable. In our view, DERC cannot amend the tariff order for the period 01.04.2008 to 31.03.2010 in the guise of 'true­up' after the relevant financial  year is over and the same is replaced by a subsequent tariff Order. This would amount to a retrospective revision of tariff when the relevant period for such tariff order is already over. Therefore, we hold that it is not permissible to amend the tariff order made under Section 64 of the 2003 Act during the 'truing up' exercise."

The bench then answered the issues raised in this appeal based on the above answer to the substantial question of law.

Case details

BSES Rajdhani Power Ltd. vs Delhi Electricity Regulatory Commission | 2022 LiveLaw (SC) 857  | CA 4324 OF 2015 | 18 October 2022 | Justices S. Abdul Nazeer and Krishna Murari

Counsel: Sr. Adv Arvind P. Dattar and Sr. Adv Dhruv Mehta for appellants, Sr. Adv Nikhil Nayyar for respondent

Headnotes

Electricity Act, 2003 ; Section 64 - It is not permissible to amend the tariff order made under Section 64 during the 'truing up' exercise - 'Truing up' exercise cannot be done to retrospectively change the methodology/principles of tariff determination and re­opening the original tariff determination order thereby setting the tariff determination process to a naught at 'trueup' stage - A tariff order is quasi - ­judicial in nature which becomes final and binding on the parties unless it is amended or revoked under Section 64(6) or set aside by the Appellate Authority - At at the stage of 'truing up', the DERC cannot change the rules/methodology used in the initial tariff determination by changing the basic principles, premises and issues involved in the initial projection of ARR. (Para 51-54)

Code of Civil Procedure, 1908 ; Section 100 - Electircity Act, 2003 ; Section 125 -For determining whether a case involves substantial question of law, the test is not merely the importance of the question, but its importance to the case itself necessitating the decision of the question. The appropriate test for determining whether the question of law raised in the case is substantial would be to see whether it directly and substantially affects the rights of the parties. If it is established that the decision is contrary to law or the decision has failed to determine some material issue of law or if there is substantial error or defect in the decision of the case on merits, the court can interfere with the conclusion of the lower court or tribunal. The stakes involved in the case are immaterial as long as the impact or effect of the question of law has a bearing on the lis between the parties - In a second appeal, the appellant is entitled to point out that the order impugned is bad in law because it is de hors the pleadings, or it was based on no evidence or it was based on misreading of material documentary evidence or it was recorded against the provision of law or the decision is one which no Judge acting judicially could reasonably have reached. Once the appellate court is satisfied, after hearing the appeal, that the appeal involves a substantial question of law, it has to formulate the question and direct issuance of notice to the respondent. (Para 30-31)

Electircity Act, 2003 ; Section 125 - The existence of a 'substantial question of law' arising from the judgment of the APTEL is sine qua non for exercise of jurisdiction by this Court under Section 125 of the 2003 Act. (Para 27)

Words and Phrases - Appeal - An appeal is judicial examination of a decision of a subordinate court by a higher court to rectify any possible error(s) in the order under appeal. The law provides the remedy of an appeal in recognition of the fact that those manning the judicial tiers too may commit errors. (Para 28)

Words and Phrases - Substantial Question Of Law - The word 'substantial' as qualifying 'question of law' means, of having substance, essential, real, of sound worth, important or considerable. It is to be understood as something in contradistinction with technical, of no substance or consequence, or academic. (Para 30)

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