Supreme Court Upholds Delhi Municipal Corporation's Powers To Issue Tariff-Based Bids For Waste-To-Energy Project

The Supreme Court on January 2 upheld the Municipal Corporation of Delhi's (MCD) powers to issue tariff-based bids in Waste-to-Energy (WTE) projects under the Electricity Act 2003. 

The bench of Justices BR Gavai and KV Viswanathan was hearing the appeal filed by the Municipal Corporation of Delhi (MCD)  against the order of the Appellate Tribunal for Electricity (APTEL) which set aside the decision of the Delhi Electricity Regulatory Commission (DERC) dated 6th and 7th March 2023. 

The Court observed that the impugned order of APTEL overlooked the larger public interest involved in the disposal of the huge quantity of waste produced in the National Capital.

"The APTEL also failed to take into consideration that the WTE project in question was in the larger public interest thereby providing for disposal of the huge quantity of waste generated in the city of Delhi." 

The DERC orders dismissed the petition filed by Waste to Energy Research & Technology Council (WTERT) challenging the MCD's powers to issue the tariff-based bid and Request for Proposal for setting up the Waste to Energy project at Narela Bawana, Delhi. The WTERT petition was filed after MCD had filed a petition before DERC seeking approval of the bidding process of the project. 

Notably, in its Order dated March 7, 2023, the DERC approved the bid tariff of Rs. 7.38/KWh for the project and directed the Distribution Licensee to negotiate the terms of the Power Purchase Agreement with the MCD. In its Order of March 6, 2023, the DERC held that MCD is  mandated under the Solid Waste Management (SWM) Rules, 2016 to construct, operate, and maintain the solid waste processing facilities. 

In the impugned judgement, the APTEL set aside the DERC orders mainly on the grounds that the DERC lacked jurisdiction to adjudicate upon the petition filed by MCD in the first place and treated MCD as a stranger to the tariff determination procedure. 

The issue of law before the Court was "Whether the application under Section 63 of the Electricity Act 2003 could have been made by the present Appellant MCD which is a “local authority” within the meaning of Section 2(41) of the  2003 Act" 

Notably, S.63 of the Act lays the procedure for the determination of tariffs by bidding process. 

It states " Notwithstanding anything contained in section 62, the Appropriate Commission shall adopt the tariff if such tariff has been determined through a transparent process of bidding in accordance with the guidelines issued by the Central Government." 

S. 62 outlines the general procedure for the determination of tariffs by the Appropriate Commission. 

S. 2(41) defines 'Local Authority' to mean any Nagar Panchayat, Municipal Council, municipal corporation, Panchayat constituted at the village, intermediate and district levels, body of port commissioners or other authority legally entitled to, or entrusted by the Union or any State Government with, the control or management of any area or local fund. 

Notably, S.86(1)(b) lays down the functions of the State Commission regarding electricity purchase and price of electricity procurement from distribution licensees. It states : 

"regulate electricity purchase and procurement process of distribution licensees including the price at which electricity shall be procured from the generating companies or licensees or from other sources through agreements for purchase of power for distribution and supply within the State" 

Arguments By The Parties  

Sr Advocate Ramji Srinivasan appearing for the MCD contended that (1) S. 86(1)(b) of the Electricity Act bestows wide powers on the State Commission for the regulation of electricity price as procured from the generating companies or licensees; (2) MCD is a statutory body under the Delhi Municipal Corporation Act and has been put under a statutory obligation under Rule 15(v)(b) of the SWM Rules 2016 to proceed with setting up the WTE projects. This duty is also recognised in the decision of Pune Municipal Corporation v. Sus Road Baner Vikas Manch and others.

(3) s. 175 of the Act states that provisions of the 2003 Act are in addition to and not in derogation of any other law for the time being in force; (4) Thus, the mandate for setting up the WTE project by MCD has to be read in consonance with the provisions of the Environment (Protection) Act, 1986 and the Rules framed thereunder;

(5) Since no guidelines exist for WTE projects, the DERC exercised powers under S. 86(1)(b) for approving the bidding process and adopting the tariff. This procedure was in consonance with the Court's decision in  Energy Watchdog v. Central Electricity Regulatory Commission and others, wherein this Court has held that in a situation when there are no guidelines, then the general regulatory powers under Section 79(1)(b) can be exercised by the Commission. 

Sr Advocate Basava Prabhu Patil appearing for Respondent no.1 submitted that APTEL's decision was correct in light of Rule 6.4(2) of the National Tariff Policy, 2016 which states that it is exclusively for the Ministry of Power to provide a mechanism for adoption of tariff for WTE projects.  Thus, he stressed that DERC lacked jurisdiction to entertain MCD's application. 

Legislative Intent Of S.63 And APTEL's Deviation From Literal Interpretation: Bench Analyses 

The Court proceeding on a plain reading of S.63 observed :

"A plain reading of Section 63 of the Act would not show that the legislature intended to restrict the invocation of the jurisdiction of the State Commission only by the Discoms or generating companies. In our view, the interpretation as placed by the APTEL is adding words in the provisions of Section 63 of the Act which the legislature did not intend to." 

The court applied the principle of literal interpretation while relying on the decision of the Apex Court in Punjab State Power Corporation Limited and another vs. Emta Coal Limited, and observed : 

 "When a provision in the statute upon its plain reading is capable of giving a meaning to it as intended by the legislature, then it will not be permissible for the courts to add, alter, or delete the words to the said provision. In any case, upon a plain reading of the provisions of Section 63 of the Act, the meaning which we gather does not result in any absurdity. In such a situation, addition of words in the statute by judicial interpretation is wholly impermissible." 

The bench applied the principle of literal interpretation to hold that S.63 was unambiguous in its intent- which is "to empower the Appropriate Commission to adopt the tariff if such tariff has been determined through a transparent process of bidding in accordance with the guidelines issued by the Central Government."

Here, the Court culled that the legislative intent of the provision was that the tariff-setting power was conditional upon a transparent bidding process and as per the rules laid by the Union.

"The legislative purpose appears to be that when the power is being produced through a process of bidding it has to be done in a transparent manner. Another requirement is that the same must be done in accordance with the guidelines issued by the Central Government" 

It further relied on the decision in Energy Watchdog which held that when there are no guidelines, the Central Commission can exercise power under S. 79(1)(b) which was in fact analogous to S. 86(1)(b) in the present case. 

Harmonious Interpretation Of S.63 and S.86(1)(b) 

The Court then turned to understand the legislative purpose of S.86(1)(b). Accordingly, it observed that the provision casts a duty upon the State Commission to regulate (1) the electricity purchase and procurement process of distribution licensees; (2) the price at which electricity shall be procured from the generating companies or licensees or (3) from other sources through agreements for purchase of power for distribution and supply within the State.

Thus, it was stressed that S.63 instead of being seen in isolation had to be read along with the objective of S.86(1)(b) in a harmonious way. Here the Court relied upon the case of Jaipur Vidyut Vitran Nigam Limited and others v. MB Power (Madhya Pradesh) Limited and others to note that " the State Commission is not a mere post office, but a duty is cast upon it to balance the interests of consumers on one hand and that of generators or Discoms on the other hand." 

Thus the Court concluded that the conjoint reading of both provisions required that a tariff be adopted through transparent bidding means all while striking a balance of interests between the power generators/discoms and end consumers. 

"If the provisions of Section 63 of the Act are read in harmony with the provisions of Section 86(1)(b) of the Act, the legislative intent that could be gathered is that the State Commission while exercising its powers under Section 63 of the Act shall adopt the tariff when it has been determined in the bidding process. However, while adopting the same it will have to be satisfied that the same is done in a transparent manner. It will also have to be examined as to whether the interests of the generators/Discoms on one hand are balanced with the interests of the consumers."

To understand the essence of harmonious interpretation, the Court referred to the decision in Sanjay Ramdas Patil v. Sanjay and others which held that the court must construe the statute as a whole and that one provision of the Act has to be construed concerning other provisions to make a consistent enactment of the whole statute. 

The Court conclusively held that the State Commission cannot be excluded from the preview of S. 63 due to the harmonious interpretation of S.63 with S.86(1)(b). 

"We are, therefore, of the considered view that when the provisions of Section 63 of the Act are read in harmony with the provisions of Section 86(1)(b) of the Act, the powers of the State Commission cannot be curtailed by interpreting that the same can be invoked only by the Discoms or the generating companies." 

No Inconsistency Between S.63 And Rule 15 of SWM Of 2016; MCD Has Mandate For WTE Projects 

The Court further observed that as per S. 175 of the 2003 Act, the provisions of the said Act are in addition to and not in derogation of any other law for the time being in force.  While S. 174 states that the provisions of the Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than the Act. 

Thus, the Court held that  Rule 15 of SWM Rules 2016 enacted under the Environment (Protection) Act, 1986, mandate the MCD to undertake WTE project(s), hence there existed no such inconsistency between S.63 and Rule 15. 

"It can thus be seen that insofar as the WTE projects are concerned, the provisions under the Act will have to be read in addition to the provisions under Rule 15 of the SWM Rules 2016 and not in derogation thereof." The Court added. 

The bench further highlighted that Rules 6.4 of the Tariff Policy was notified in compliance with S.63 and provided that distribution licensees compulsorily procure 100% of the power produced from all the WTE plants in the State in the ratio of their procurement of power from all sources including their own. 

 Rule 6.4 read with S.86(1)(e) further encouraged "cogeneration and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee." 

Notably, S.86(1)(e) states "promote cogeneration and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee" 

The Court while allowing the appeals, set aside the order of the APTEL  and restored the original decision of the DERC vide orders dated 6th and 7th March, 2023. 

Case Details : MUNICIPAL CORPORATION OF DELHI v. GAGAN NARANG & ORS. ETC.| CIVIL APPEAL NOS. 7463-7464 OF 2023

Citation : 2025 LiveLaw (SC) 5

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