Holding

State electricity regulatory commissions are only guided, not bound, by State Government policy directions under Section 108, and KSERC exceeded its review jurisdiction under Section 94 by relying solely on such directions.

Summary

The Kerala State Electricity Board (KSEB) procured power through competitive bidding but accepted tariffs and quantities that deviated from standard bidding guidelines, leading to the execution of Power Supply Agreements (PSAs) for 865 MW. KSEB sought approval of these PSAs from the Kerala State Electricity Regulatory Commission (KSERC), which initially deferred approval pending central and state government views. The Kerala Government later issued policy directions under Section 108 of the Electricity Act, 2003, urging KSERC to approve the PSAs in the public interest, and KSERC subsequently approved them, claiming it was bound by the government’s directions. APTEL set aside KSERC’s order, holding that the commission was not bound by the government’s Section 108 directions and that KSERC exceeded its review jurisdiction under Section 94. The Supreme Court affirmed APTEL’s reasoning, emphasizing that Section 108 merely guides, not binds, the regulatory commission, and that review under Section 94 requires an error apparent in the original order. While agreeing with APTEL’s setting aside of KSERC’s order, the Court restored the original appeal against KSERC’s May 10, 2023 order to APTEL’s file, disposing of the present appeals.

Issues considered

Whether the Kerala State Electricity Regulatory Commission (KSERC) is bound by policy directions issued by the State Government under Section 108 of the Electricity Act, 2003.
Whether KSERC exceeded its jurisdiction in reviewing its earlier order under Section 94 of the Electricity Act, 2003 in reliance solely on the State Government's Section 108 directions.

Legislation cited

Code of Civil Procedure, 1908s. Order XLVII Rule 1
Electricity Act, 2003s. 108, s. 11, s. 62, s. 63, s. 86(1)(b), s. 94

Subjects

Section 108 of the Electricity Act, 2003Section 94 of the Electricity Act, 2003State Electricity Regulatory CommissionKerala State Electricity Regulatory CommissionAPTELCompetitive bidding processTenderTariffPower Supply AgreementsPublic interestPolicy directionsQuasi-judicial powerReview jurisdictionError apparent

Judgment

[2024] 9 S.C.R. 971 : 2024 INSC 768

Kerala State Electricity Board Ltd.
v.
Jhabua Power Limited and Others
(Civil Appeal Nos. 10046-10047 of 2024)
30 September 2024
[Dr Dhananjaya Y Chandrachud, CJI,
J.B. Pardiwala and Manoj Misra, JJ.]

Issue for Consideration
Whether the Appellate Tribunal for Electricity (APTEL) was right
in passing the impugned judgment holding that the Kerala State
Electricity Regulatory Commission (KSERC) was not bound by
the directives of the State Government issued under Section 108
of the Electricity Act, 2003 and it exceeded its review jurisdiction
under Section 94.

Headnotes†
Electricity Act, 2003 – s.108 – Scope – State Electricity
Regulatory Commissions, if ‘bound’ by the directions issued by
State Government u/s.108 – Kerala State Electricity Regulatory
Commission (KSERC) allowed the review petition filed by
the appellant and approved the Power Supply Agreements in
view of the public interest highlighted in the policy directions
issued by the State Government u/s.108 holding that KSERC
was bound by the directions of the State Government – Order
set aside by APTEL by way of the impugned judgment –
Correctness:
Held: Correct – State regulatory commissions are not ‘bound’ by
the directions of the State Government or the Central Government –
Under Section 108, the State Commission shall only be ‘guided’
by the directions issued by the State Government and is not
automatically bound by them – s.108 does not control the exercise of
quasi-judicial power by the State Commissions based on directions
issued by the State Government. [Paras 17, 18]

Code of Civil Procedure, 1908 – Or. XLVII, r.1 – Electricity Act,
2003 – s.94(f) – Review – Limited scope – Review petitions
filed by the appellant against the order of KSERC declining
972 [2024] 9 S.C.R.

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to grant approval for the Power Supply Agreements (PSAs)
were allowed by KSERC and it approved the PSAs in view of
the public interest highlighted in the policy directions issued
by the State Government – Order set aside by APTEL:
Held: 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 review – However, while allowing the review
petitions, KSERC did not point out any errors in its previous order
instead, sole reliance was placed on the subsequent directions
of the State Government which highlighted the purported ‘public
interest’ that would be served by approving the PSAs – APTEL rightly
set aside the order of KSERC on the ground that it exceeded its
jurisdiction u/s.94 – Original appeal restored to the file of APTEL.
[Para 19]

Case Law Cited
A.P. TRANSCO v. Sai Renewable Power (P) Ltd. [2010] 8 SCR
636 : (2011) 11 SCC 34 – referred to.

List of Acts
Electricity Act, 2003; Code of Civil Procedure, 1908.

List of Keywords
Section 108 of the Electricity Act, 2003; Section 94 of the Electricity
Act, 2003; State Electricity Regulatory Commission; Kerala State
Electricity Regulatory Commission; APTEL; Competitive bidding
process; Tender, Tariff; Bidders; Power Supply Agreements; Power
procurement; Distribution licensees; Generating companies;
Generators; Public interest; Directions of the State Government/
Central Government; ‘bound’; Mandatory; Quasi-judicial power;
Review; Error apparent; Jurisdiction exceeded.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 10046-10047
of 2024
From the Judgment and Order dated 26.07.2024 of the Appellate
Tribunal for Electricity in Apl. No. 38 and 47 of 2024
[2024] 9 S.C.R. 973

Kerala State Electricity Board Ltd. v.
Jhabua Power Limited and Others

Appearances for Parties
V. Giri, Sr. Adv., Prabhas Bajaj, Ms. Rao Vishwaja, Priyanshu
Tyagi, Harsh Chauhan, Rahul Narang, Harshed Sunder, Nihar
Dharmadhikari, R.K. Nayyar, Advs. for the Appellant.
Dr. Abhishek Manu Singhvi, Sajan Poovayya, C. Aryama Sundaram,
Sr. Advs., Mrs. Sanjanthi Sajan Poovayya, Matrugupta Mishra,
Amit Bhandari, Nipun Dave, Ms. Raksha Agrawal, Harshwardhan
Sharma, Ms. Divya Roy, Ms. Swapna Seshadri, Nikunj Dayal,
Pramod Dayal, Zafar Inayat, Ms. Harsha Rao, Ms. Aishwarya
Subramani, Biju Mattam, Ms. Ankita Bafna, Gaurav Prakash Pathak,
Nishant Kumar, Advs. for the Respondents.

Judgment / Order of the Supreme Court

Judgment

1. These appeals arise from a judgment of the Appellate Tribunal for
Electricity1 dated 26 July 2024.
2. Kerala State Electricity Board Limited, the appellant, floated two
separate tenders for the procurement of power through a competitive
bidding process under Section 63 of the Electricity Act 2003.2 The first
was for procuring 450 MW of power and the second was for 400 MW.
3. Two entities emerged as L1 bidders in respect of the two tenders
which were floated. However, the L1 bidders did not bid for the entire
tender quantum. The L1 bidder in the first bid offered to supply only
200 MW out of the total quantum of 450 MW. Similarly, the L1 bidder
in the second bid offered to supply only 100 MW as against the
400 MW for which the bid had been invited. The appellant invited
the other bidders to match the tariff quoted by the L1 bidders for the
remaining quantum. None of the other bidders in the first bid were
willing to match the tariff quoted by the L1 bidder therein. However,
in relation to the second bid, the L2 to L5 bidders conveyed their
willingness to match the tariffs quoted by the L1 bidder.
4. With regard to the first bid, despite the L2 bidder refusing to match
the tariff of the L1 bidder, the appellant accepted its tariff for 115 MW

1 “APTEL”
2 “Act”
974 [2024] 9 S.C.R.

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and justified it on the ground that the tariff was competitive and less
than the tariff quoted by the L1 bidder in the second bid. Since the
tariff quoted by the remaining bidders in the first bid was either equal
to or more than the tariff derived in the second bid, the appellant did
not consider their offers. Therefore, in the first bid out of the tendered
quantity of 450 MW, the appellant accepted offers for a quantum of
315 MW and issued letters of acceptance to L1 and L2 for 200 MW
and 115 MW, respectively.
5. With regard to the second bid, the appellant accepted the offers of
the L2, L3, L4 and L5 bidders, who matched the tariff quoted by the
L1 bidder. As against the tendered quantity of 400 MW, the appellant
accepted offers for a total quantum of 550 MW. The appellant justified
this decision in view of the “likely power shortages in the forthcoming
years” and on the ground that the tariff offered was competitive.
6. Seven Power Supply Agreements3 were accordingly executed with
the various generators for a total quantum of 865 MW of power. The
appellant sought the approval of the Kerala State Electricity Regulatory
Commission4 to adopt the tariff laid down in the respective PSAs.
The KSERC prima facie observed that the appellant had deviated
from the standard bidding guidelines issued by the Ministry of Power,
Government of India5 and failed to obtain prior approval from the
KSERC or the Central Government in relation to these deviations.
Accordingly, by an Order dated 30 August 2016, the KSERC approved
the PSAs with the L1 bidders in both bids, but with regard to the
remaining PSAs, it deferred the decision to obtain the approval of
the Central Government and the views of the Government of Kerala
with respect to the process of bidding which was adopted by the
appellant.6
7. In view of the critical need for power procurement in the state, KSERC
passed orders in 2016-2017 permitting the appellant to provisionally
procure power from the generators and, as a consequence, the
appellant states that it has been procuring power under the four
PSAs since then till 2023.

3 “PSAs”
4 “KSERC”
5 “standard bidding guidelines”
6 OP No. 13 of 2015
[2024] 9 S.C.R. 975

Kerala State Electricity Board Ltd. v.
Jhabua Power Limited and Others

8. In 2020, the appellant moved the KSERC seeking approval of the
fuel surcharge rate under some of the unapproved PPAs in the
second bid. The KSERC did not approve the fuel surcharge rate and
directed the appellant to limit payment at the rate of the L1 bidder
in the second bid until the PSAs were approved. The case travelled
to the APTEL and in parallel, the appellant filed a petition before the
KSERC seeking final orders on the approval of the PSAs. The order
of the APTEL was challenged before this Court, and KSERC was
called upon to decide the petition for final approval expeditiously, in
no later than three months.7
9. By an order dated 10 May 2023, KSERC declined to grant approval
for the PSAs and concluded that the tariff determined by the
appellant did not follow a transparent process and grossly deviated
from the standard bidding guidelines. KSERC further held that the
deviations were against public interest and created long-term financial
implications for the consumers and the state.8 The appellant moved
the APTEL in appeal.
10. On 10 October 2023, while the appeal was pending before the APTEL,
the Government of Kerala invoked the provisions of Section 108 of
the Act9 and issued policy directions highlighting the public interest
that would be served by approving the PSAs. The state government
opined that the non-approval of the PSAs would compel the appellant
to purchase power at higher rates, resulting in immense financial
implications and a power crisis in the state. The liability of higher
rates of power procurement would, it was opined, be passed on to
the consumers, increasing the cost of power in the state. Alternative
means, it was opined, should have been sought earlier and the public
should not be held liable for procedural flaws. The Government of
Kerala, accordingly, directed as follows:
“NOW THEREFORE, after detailed examination of the
matter, considering all facts and observations, without
prejudice to any enquiry ongoing in the matter and without

7 Civil Appeal No. 41/2021
8 OP No. 05 of 2021
9 S.108, Electricity Act 2003. [Section 108. (Directions by State Government): ---- (1) In the discharge
of its functions, the State Commission shall be guided by such directions in matters of policy involving
public interest as the State Government may give to it in writing.
(2) If any question arises as to whether any such direction relates to a matter of policy involving public
interest, the decision of the State Government thereon shall be final]
976 [2024] 9 S.C.R.

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ratifying the procedural irregularities pointed out by
KSERC, keeping in view the larger interest of the public,
the Government deems it appropriate to invoke the power
under section 108 of Electricity Act 2003 and accordingly,
in exercise of the said power, Government hereby direct
Kerala State Electricity Regulatory Commission to
reconsider/review their orders in O.P No.5/2021 filed by
Kerala State Electricity Board Limited, in accordance
with the policy of the Government for the best interest
of the State and public at large.”
(emphasis supplied)
11. In view of the above directive, the appellant withdrew its appeal
before APTEL. While allowing the request for withdrawal, APTEL by
its order dated 31 October 2023, directed as follows:
“We consider it appropriate, in such circumstances,
to permit the Appeal to be withdrawn, with liberty to
the Appellant to invoke the review jurisdiction of the
Commission. It is made clear that the order now passed by
us shall not disable the Appellant, if need be later, from
availing their appellate remedy against the original
order passed by the Commission dated 10.05.2023.”
(emphasis supplied)
12. The appellant moved a petition before the KSERC seeking a review
of its order dated 10 May 2023. On 29 December 2023, KSERC
allowed the review petition and approved the four PSAs in view of
the public interest highlighted in the policy directions issued under
Section 108 by the State government. The KSERC held that it was
bound by the directions of the state government. Further, it was
held that the subsequent directions issued by the state government
fell within the ambit of “any other sufficient reasons” to review a
previous order, as required by Order XLVII Rule 1 of the Code of
Civil Procedure 190810 read with Section 94 of the Act.
13. Two of the generators who are now respondents before this Court,
moved the APTEL in appeal. They contended that the above order
of the KSERC violated Order XLVII Rule 1 of the CPC read with

10 “CPC”
[2024] 9 S.C.R. 977

Kerala State Electricity Board Ltd. v.
Jhabua Power Limited and Others

Section 94 of the Act as it was passed solely on the ground that
a subsequent direction issued by the State Government under
Section 108 is binding on the KSERC.
14. By its impugned judgment, APTEL allowed the appeals and set aside
the order of KSERC. The findings of the APTEL are summarized below.
a. After recapitulating the decisions of this Court pertaining to the
scope of the phrase “any other sufficient reasons” in Order XLVII
Rule 1 of the CPC, the APTEL held that the threshold was not
satisfied in the present case. The KSERC failed to point out
any error in its previous order and instead relied solely on the
subsequent directions issued by the state government under
Section 108 to review its earlier order. None of the grounds
which weighed with the KSERC in its previous order were even
referred to, thereby, defeating the purpose for which the power
of review is exercised;
b. The APTEL traced the decisions of this Court and its own
decisions pertaining to the scope of Section 108 of the Act and
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; and
c. APTEL held that Section 86(1)(b) of the Act expressly confers
the function of regulating the price at which electricity should be
procured by distribution licensees from generating companies to
the KSERC. Under the Act, this power must be exercised solely
in terms of Sections 62 and 63 of the Act. While approving the
tariff under Section 63 of the Act, the KSERC can only adopt
the tariff if it has been determined through a transparent process
of bidding and is in accordance with the standard bidding
guidelines. The KSERC had, in the exercise of its power under
Section 86(1)(b) read with Section 63, already passed an order,
declining to adopt the tariff, since it was satisfied that the process
of bidding was not in accordance with the standard bidding
guidelines. A policy directive could not, therefore, override the
statutory functions already exercised by the KSERC.
15. We have heard Mr V Giri, senior counsel appearing on behalf of
the appellant. Mr Aryama Sundaram, senior counsel appears for
978 [2024] 9 S.C.R.

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the first respondent (Jhabua Power Limited) and Dr Abhishek Manu
Singhvi, senior counsel for the second respondent (Jindal India
Power Thermal Limited).
16. 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. In this regard, we may helpfully refer to the observations of
this Court in A.P. TRANSCO v. Sai Renewable Power (P) Ltd.,11
in the context of a similar provision in the erstwhile Andhra Pradesh
Electricity Reforms Act 1998 (which was repealed by the Electricity
Act 2003). A two-judge bench of this Court, speaking through Justice
Swatanter Kumar, observed:
“59. Section 12 of the Act vests the State Government with
the power to issue policy directions on matters concerning
electricity in the State including the overall planning and
coordination. All policy directions shall be issued by
the State Government consistent with the objects
sought to be achieved by this Act and, accordingly,
shall not adversely affect or interfere with the
functions and powers of the Regulatory Commission
including, but not limited to, determination of the
structure of tariffs for supply of electricity to various
classes of consumers. The State Government is
further expected to consult the Regulatory Commission
in regard to the proposed legislation or rules concerning
any policy direction and shall duly take into account the
recommendation by the Regulatory Commission on all
such matters. Thus the scheme of these provisions is
to grant supremacy to the Regulatory Commission
and the State is not expected to take any policy
decision or planning which would adversely affect
the functioning of the Regulatory Commission or
interfere with its functions. This provision also clearly
implies that fixation of tariff is the function of the

11 [2010] 8 SCR 636 : (2011) 11 SCC 34
[2024] 9 S.C.R. 979

Kerala State Electricity Board Ltd. v.
Jhabua Power Limited and Others

Regulatory Commission and the State Government
has a minimum role in that regard.”
17. 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. This
interpretation is strengthened by the divergence in the language
used in other provisions of the Act, such as Section 11 of the Act
which reads as follows:
“Section 11. (Directions to generating companies): ---
(1) Appropriate Government may specify that a generating
company shall, in extraordinary circumstances operate
and maintain any generating station in accordance with
the directions of that Government.
Explanation. - For the purposes of this section, the
expression “extraordinary circumstances” means
circumstances arising out of threat to security of the
State, public order or a natural calamity or such other
circumstances arising in the public interest.
…”
18. The above provision uses mandatory language and provides that the
generating company “shall … operate and maintain any generating
station in accordance with the directions of that Government” in
extraordinary circumstances. This can be distinguished from the
language in Section 108, which merely requires that the state
commission “be guided by” the directions of the State Government.
The provision, in no manner, seeks to control the exercise of quasi-
judicial power by the state commissions based on directions issued
by the state government.
19. Similarly, the findings of the APTEL on the limited scope of the review
are also consistent with settled law. 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
980 [2024] 9 S.C.R.

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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.
While allowing the review petitions, the KSERC failed to explain
how this threshold was met and did not point out any errors of that
nature in its previous order. Instead, sole reliance was placed on the
subsequent directions of the State Government, which highlighted
the purported ‘public interest’ that would be served by approving the
PSAs. Therefore, there is no infirmity in the decision of the APTEL
to set aside the order of KSERC on the ground that it exceeded its
jurisdiction under Section 94 of the Act.
20. We are in agreement with the judgement of the APTEL on the above
aspects. However, having said so, it emerges from the earlier order of
APTEL dated 31 October 2023, that while permitting the appeal filed
by the appellant to be withdrawn, APTEL had permitted the appellant
to invoke the review jurisdiction of KSERC. APTEL, however, expressly
made it clear that “the order now passed … shall not disable the
appellant, if need be later, from availing their appellate remedy against
the original order passed by the Commission dated 10.05.2023”.
21. Consequently, while we do not find fault with the impugned order of
APTEL insofar as it set aside the order passed by KSERC, at the
same time, the appropriate course of action would be to allow for
restoration of the original appeal filed against the order of KSERC
dated 10 May 2023. This appeal, being Appeal No 518 of 2023, shall
stand restored to the file of APTEL.
22. We, however, clarify that issues which are covered by the impugned
order of APTEL shall not be re-agitated. The appeal which has been
restored to the file of APTEL shall, in other words, be considered
on any other grounds that were raised before APTEL prior to the
withdrawal of the appeal.
23. The appeals shall stand disposed of accordingly.
24. Pending applications, if any, stand disposed of.

Result of the Case: Appeals disposed of.

†
Headnotes prepared by: Divya Pandey