PTC INDIA LTD.versusCENTRAL ELECTRICITY REGULATORY COMMISSION THR. ITS SECRETARY

                          [2009] 4 S.C.R. 134


A                         PTC INDIA LTD.
                                    v.
      CENTRAL ELECTRICITY REGULATORY COMMISSION
                   THR. ITS SECRETARY
               Civil Appeal No. 3902 of 2006
B                         MARCH 6, 2009
       [DR. ARIJIT PASAYAT, HARJIT SINGH BEDI AND
                ASOK KUMAR GANGULY,JJ.]
        Electricity Regulatory Commission Act, 1998 - s. 27 -
C Appellate court under - Jurisdiction - Scope of - Order of
  Central Electricity Regulatory Commission and Central
  Electricity Regulatory Commission (Fixation of Trading
  Margin) Regulations, 2006 - Challenge to - Order of appellate
  tribunal that it has no jurisdiction, relying on West Bengal
D Electricity Regulatory Commission v. CESC Ltd. case - On
  appeal, held: Matter referred to larger Bench as regard
  applicability of West Bengal Electricity case to matters under
  the 2003 Act; and jurisdiction of tribunal to decide the validity
  of the Regulations - Electricity Act, 2003 - Central Electricity
E Regulatory Commission (Fixation of Trading Margin)
  Regulations, 2006.
        West Bengal Electricity Regulatory Commission v. CESC
  Ltd. 2002 (8) SCC 715; Clariant International Ltd. and Anr. v.
F Securities and Exchange Board of India 2004 (8) SCC 524;
  Cellular Operators Association of India and Ors. v. Union of
  India and Ors. 2003 (3) SCC 186; National Sewing Thread
  Co. Ltd. v. James Chadwick and Bros. Ltd. 1953 SCR 1028 -
  referred to.
G                      Case Law Reference
        2004 (8) SCC 524       ·    Referred to.    Para 7
        2003 (3) SCC 186            Referred to.    Para 8

H                                  134
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            CENTRAL ELECTRICITY REGULATORY                       135
             COMMISSION THR ITS SECRETARY

     1953 SCR 1028               Referred to.       Para 9             A
     2002 (8) sec 715            Referred to.       Para 10
     CIVILAPPELLATE JURISDICTION: Civil Appeal No. 3902
of 2006                                               ·

     From the Judgement and Order dated 28.04.2006 of the              8
Appellate Tribunal for Electricity, New Delhi, inter alia, in Appeal
No. 45 of 2006.

                               WITH
                                                           \_;

      Civil Appeal Nos. 4354/2006, 4355/2006, 2875/2007, C
Civil Appeal D. 9870/2007, SLP (C) No.22080/2005, __Civil
Appeal Nos. 7437/2005, 7438/2005, 2073/2007, 1471/2007, -
2166/2007.

     Manish Singhvi, AAG, Harish N. Salve, Vikas Singh, P.S.
                                                                0
Narasimha, Shanti Bhushan, Amit Kapur, Appprva Misra, Vibha
Dutta Makhija, Shrivenketesh Singh, Meenakshri Grover,
Mansoor Alo Shoket, Anupam Verma, A.G. Sharma, Poonam
Verma, Shreshth Sharma, Sanjeev Kumar, Abhinash Menon, .
Kumar Mihir, Vishal Gupta (Mis. Khaitan &Co.) Sridhar Potaraju, E
Prakeik Dhar, C.K. Rai, Julius, D.K. Sinha, M.G. Ramachandran,
K.V. Mohan, Anand K. Ganesm, S. Sheshdari, Ajit Bhasme, ·
Varun Thakur, Brajesh Kumar, Vivek Kishore, Ruchi Gaur Narule,
Sangeeta Bharti Rakesh K. Sharma, G. Umapathy, Vibhu Tiwari,
Rakesh K. Sharma, Nikhit Nayyar, T.V.S. Raghvendra Sreyas,
Ambuj Agrawal, Pradeep Misra, Daleep Dhyani, Suraj Singh, F
Mayur Kumar, K.R. Sasiprabhu, K.V. Mohan, H.K. Puri, R.
Nedumaran, Suresh Chandra Tripathy, Sharmila Upadhayay,
Ashish Kumar, Shibhashish Misra, for the appearing partie$.
     The Judgement of the Court was delivered by .                     G
     DR. ARIJIT PASAYAT, J.
     1. In these appeals and special leave petition, challenge
in each case is.to the order passed by the AppellateTribunal
for Electricity (in short the 'Tribunal'). Challenge before the        H
A
    136       SUPREME COURT REPORTS                    [2009] 4 S.C.R.


  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
B 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)
  sec 715). The conclusion in the said decision was to the effect
c 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
0
  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
E 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
F 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.
G        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.
H   Section 121 has power to issue orders, instructions and
            CENTRAL ELECTRICITY REGULATORY            137
    COMMISSION THR. ITS SECRETARY [DR. ARIJIT PASAYAT, J.]

    directions. It is not only in a sense revisional but also supervisory A
    in character. Its jurisdiction encompasses all aspects relating
    to statutory functions under the Act. Section 79(1 )U) 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 B
    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.
         4. Learned counsel for the respondents on the other hand          c
    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
                                                                         D
    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.
                                                                         E
          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 &        F
    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
                                                                G
          Aus. L.R. 126) it is stated:
         "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 H
    138        SUPREME COURT REPORTS                  [2009] 4 S.C.R.


A         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
B         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
c         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. 6 6 2 -
          63, para 26)
          "In law, the term 'restitution' is used in three senses: (1)
D         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
E         Contracts by John 0. 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:
F          'Often, the result under either meaning of the term would
          be the same .... 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,
G         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
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            CENTRAL ELECTRICITY REGULATORY            139
    COMMISSION THR. ITS SECRETARY [DR. ARIJIT PASAYAT, J.]

        42. While determining the cases of commercial transaction       A
        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        B

        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              c
        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:
                                                                        D
        "49.04. Other members.-ln the case of members other
        than the subscribers to the memorandum two essential
        conditions have to be satisfied to constitute a person a
        member:
        (1) an agreement tcr become a member; and                       E

        (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.                                                      F

        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 G·
        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."
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    140       SUPREME COURT REPORTS                    [2009) 4 S.C.R.


A         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
B         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:
c
          '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.' "
D         (See also Balkrishan Gupta v. Swadeshi Polytex Ltd 1985
          (2J sec 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:
E
          "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        •

F         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
G
          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
H
        CENTRAL ELECTRICITY REGULATORY            141
COMMISSION THR. ITS SECRETARY [DR. ARIJIT PASAYAT, J.]

    amplitude of_its jurisdiction and thus misdirected itself in        A
    law.
    xx                       xx                              xx
    33. The regulatory bodies exercise wide jurisdiction. They
    lay down the law. They may prosecute. They may punish.              8
    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               C
    accepted by the Central Government, as a result of which
    the rights and obligations of the parties may seriously       be·
    affected. 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      D
    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              E
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       F
     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     G
     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 which debars          H
    142        SUPREME COURT REPORTS                 [2009] 4 S.C.R.


A          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
B          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
c          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."
D       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 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
E 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
F parties to move the Hon'ble Chief Justice for fixing date for
  taking up the interim relief prayers.

    N.J.                           Matter referred to Larger Bench.