Fixing 6% Simple Interest Per Annum On Excess/Less Determination Of Provisional Tariff Ultra Vires The Electricity Act: Allahabad High Court

The Allahabad High Court has struck down Regulation 5A of Central Electricity Regulatory Commission (Terms and Conditions of Tariff) (First Amendment), Regulations, 2006 to the extent it provides 6% per annum simple interest on excess/ less determination of provisional tariff as ultra vires Section 62(6) of the Electricity Act, 2003.

Section 62 of the Electricity Act, 2003 provides that manner in which Appropriate Commission is to determine tariff. Section 62(6) provides that if any licensee or a generating company recovers a price or charge exceeding the tariff determined under this section, the excess amount shall be recoverable by the person who has paid such price or charge along with interest equivalent to the bank rate without prejudice to any other liability incurred by the licensee.

Regulation 5A of Central Electricity Regulatory Commission (Terms and Conditions of Tariff) (First Amendment), Regulations, 2006 was added by the Central Electricity Regulatory Commission. By virtue of the amendment, the generating company or the transmission licensee were supposed to pay simple interest at 6% per annum if provisional tariff exceeded the final tariff approved by the Commission.

It further provides that where provisional tariff is less than the final tariff, interest at 6% shall be chargeable on the deficit amount from the date on which final tariff will be applicable up to the date of billing of such deficit amount.

The bench comprising of Justice Vivek Chaudhary and Justice Om Prakash Shukla held

“Bank rate is variable and is based upon large number of considerations. The legislature in its best wisdom has provided the same to be charged while adjusting the amount, therefore, the respondent no.1 Central Electricity Regulatory Commission did not have any power to provide any different rate of interest in its regulations for adjustment which is at variation from the amount payable under Section 62 of the Act of 2003.”

Arguments Advanced

Petitioner prayed for declaration of Regulation 5A of Central Electricity Regulatory Commission (Terms and Conditions of Tariff) (First Amendment), Regulations, 2006 as ultra-vires and inconsistent with Section 62(6) of the Electricity Act, 2003 to the extent it provides payment of simple interest at 6% per annum.

Counsel for petitioner argued that Section 62(6) of the Act provides interest at the rates equivalent to bank rates recovery of price or charge in excess of the determination made under the Section. However, Regulation 5A fixing a 6% per annum simple interest is in direct conflict with Section 62(6) of the Electricity Act. It was argued that since the Regulations have been framed under the Act itself, they cannot be in conflict with the Act.

High Court Verdict

Reliance was placed on the decisions of Supreme Court in Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi, General Officer Commanding-in-Chief v. Subhash Chandra Yadav, St. Johns Teachers Training Institute v. Regional Director, NCTE and Newspapers Ltd. Vs. State Industrial Tribunal, U.P. And Other, where it had been held that Regulations cannot be framed against the provisions of the parent Act. The Apex Court had held that only the power to supplement the main provisions of the Act can be delegated under the statue and no the power to supplant the provisions of the Act.

“The principle of law is well settled that law should be consonant with principles of faith and reason, delegated legislation such as regulations framed under an Act, cannot be in conflict with its principal legislation. Regulations need to be consistent and harmonious with the statutes under which they are formulated.”

The Court held that the framework for regulations is provided in the Electricity Act itself which must be followed while framing the regulations under the Act.

Holding that the interest rate provided by the bank is variable being based on multiple considerations, the Court held that Central Electricity Regulatory Commission was not empowered to change the rate of interest through Regulations when the Legislature had provided the same in the Act.

Accordingly, the writ petition was allowed.

Case Title: U.P.Power Corporation Limited Thru M.D. vs. Central Electricity Regulatory Commission Thru Secy. And Anr. 2024 LiveLaw (AB) 317 [WRIT - C No. - 7368 of 2006]

Citation: 2024 LiveLaw (AB) 317

Counsel for Petitioner: D.D. Chopra, senior advocate assisted by Shailesh Verma

Counsel for Respondent: Madhumita Bose,Rekha Nigam

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