Holding

Section 84(2) is a discretionary, not mandatory, provision for appointing a High Court Judge as Chairperson, but a member of law is mandatory for the State Commission.

Summary

The Supreme Court examined whether Section 84(2) of the Electricity Act, 2003 obliges a High Court Judge to be appointed as Chairperson of a State Electricity Regulatory Commission and whether a member of law is required on the Commission. By interpreting the statutory language, the Court held that Section 84(2) is merely an enabling provision giving the State Government discretion to appoint a Judge, not a mandatory requirement. However, the Court ruled that at least one member of the Commission must be a person of law with qualifications equivalent to a High Court or District Judge, as the Commission performs adjudicatory functions and bears the trappings of a court. Consequently, the challenge to the appointment of the Chairman and a member of the Tamil Nadu State Commission was rejected, and the suo‑moto tariff proceedings were upheld. The judgment applies prospectively and does not affect past orders of the Commission.

Issues considered

The meaning of the word 'may' versus 'shall' in Section 84(2) of the Electricity Act, 2003 – is the appointment of a High Court Judge as Chairperson mandatory?
Whether the State Commission must have a member of law (a judicial member) to perform its adjudicatory functions.
Interpretation of the non‑obstante clause in Section 84(2) and its effect on Section 84(1).
The impact of the Commission's powers under Sections 94‑96 on the requirement of a judicial member.

Legislation cited

Arbitration & Conciliation Act, 1996
Code of Civil Procedure, 1908
Code of Criminal Procedure, 1973s. 345, s. 346
Electricity Act, 2003s. 111, s. 112, s. 113, s. 121, s. 2(43), s. 82, s. 84, s. 85, s. 86, s. 92, s. 94, s. 95, s. 96
Indian Penal Code, 1860s. 193, s. 228

Subjects

Electricity Act 2003State Electricity Regulatory CommissionChairperson appointmentStatutory interpretationNon‑obstante clauseJudicial memberTribunalisationAdjudicatory functionGolden ruleLiteral rule

Judgment

106 [2018]REPORTS
SUPREME COURT 9 S.C.R. 106 [2018] 9 S.C.R.

A STATE OF GUJARAT & ORS.
v.
UTILITY USERS’ WELFARE ASSOCIATION & ORS.
(Civil Appeal No. 14697 of 2015)
B APRIL 12, 2018
[J. CHELAMESWAR AND SANJAY KISHAN KAUL, JJ.]
Electricity Act 2003: ss. 84 and 86 – Appointment of
Chairperson of Central and State Regulatory Commissions –
Whether mandatory to have a judicial mind presiding over these
C
Commissions in the form of a Judge – Held: Section 84(2) is only
an enabling provision to appoint a High Court Judge as a
Chairperson of the State Commission – It is not mandatory to appoint
a High Court Judge as a Chairperson of the State Commission –
However, it is mandatory that there should be a person of law as a
D Member of the Commission – Such member should be a person
holding a judicial office or is a person possessing professional
qualifications with substantial experience in the practice of law,
who has the requisite qualifications to have been appointed as a
Judge of the High Court or a District Judge – This is so because
the State Commission have adjudicatory function and has trappings
E
of the court – On facts, challenge to the appointment of the
Chairman and Member of the Tamil Nadu State Commission is
rejected as also the suo moto proceedings carried out by the
Commission.
ss. 84 and 86 – Qualifications for appointment of Chairperson
F
and Members of State Commission – Constitution of Selection
Committee to select Members of State Commission – Explained.
Interpretation of Statutes: Statutory construction – Golden
rule and literal rule of – Held: Both the golden rule and the literal
rule of statutory construction are well established that a statute
G must be read as it is framed by the legislature – It is not the function
of the Court to supplant or read into the statute something which is
not provided – Courts may ascertain the real intention of the
legislature by carefully attending to the whole scope of the statute.

H
106
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 107
ASSOCIATION & ORS.

Disposing of the matters, the Court A
HELD: 1. Section 84(2) of the Electricity Act 2003 is only
an enabling provision to appoint a High Court Judge as a
Chairperson of the State Commission of the said Act and it is not
mandatory to do so. It is mandatory that there should be a person
of law as a Member of the Commission, which requires a person, B
who is, or has been holding a judicial office or is a person
possessing professional qualifications with substantial experience
in the practice of law, who has the requisite qualifications to have
been appointed as a Judge of the High Court or a District Judge.
In any adjudicatory function of the State Commission, it is
mandatory for a member having the said legal expertise to be a C
member of the Bench. The challenge to the appointment of the
Chairman and Member of the Tamil Nadu State Commission is
rejected as also the suo moto proceedings carried out by the
Commission. The judgment would apply prospectively and would
not affect the orders already passed by the Commission from D
time to time. In case there is no member from law as a member
of the Commission as required, the next vacancy arising in every
State Commission would be filled in by a Member of law in the
terms stated. [Para 114] [162-D-H; 163-A]
2.1 On a plain reading of Section 84(1), it is mandated that
both the Chairperson and the Members of the State Commission E
“shall” be persons of ability, integrity and standing who have
adequate knowledge of and have shown capacity in dealing with
problems relating to engineering, finance, commerce, economics,
law or management. A plain grammatical reading of this Section
shows that no distinction has been made qua the qualifications of F
a Chairperson and Member. All that is required is the mandates
contained in the sub-section, which begin with the word “shall”.
Thus, any person of the fields mentioned therein, having the
ability, integrity and standing can be appointed as a Member or
Chairperson. [Para 73] [147-G-H; 148-A-B]
G
2.2 Section 85 of the Act provides for constitution of a
Selection Committee to select the Members of the State
Commission, which in turn has to consist of the persons as set
out therein and mandatorily has to have a person, who has been
a Judge of the High Court as the Chairperson of the Selection
Committee. This provision refers to the appointment of H
108 SUPREME COURT REPORTS [2018] 9 S.C.R.

A ‘Members’ of the State Commission but then that would also
include the Chairperson of the State Commission, in view of sub-
section 43 of Section 2 of the said Act. Thus, the reading of sub-
section (1) of Section 84 read with Section 85 would leave no
manner of doubt as to the fields from which a Chairperson or a
Member of the State Commission can be chosen from. However,
B
the controversy has emanated from the inclusion of sub-section
(2) of Section 84. This is so, as sub-section (2) begins with a
“notwithstanding” clause providing that the State Government
“may” appoint any person as Chairperson from amongst the
persons, who is, or has been, a Judge of the High Court. This is
C to be read with the proviso that such an appointment would have
to be made in consultation with the Chief Justice of that High
Court. The proviso only respects and maintains the accepted
position that in appointment of persons, who have been holding
such senior judicial office, consultation with the judicial head, being
the Chief Justice, should be mandatory. Both the golden rule
D
and the literal rule of statutory construction are well established
that a statute must be read as it is framed by the legislature. It is
not the function of the Court to supplant or read into the statute
something which is not provided. This is not to say that there
have not been judicial views taken qua the interchangeability of
E the expression “may’ and “shall” in certain provisions. Thus,
the use of the word “shall” raises a presumption that a particular
provision is imperative. However, it has been construed as merely
directory in certain cases if the context or intention of the
legislature demands otherwise. The Courts may ascertain the
real intention of the legislature by carefully attending to the whole
F
scope of the statute. [Para 74-76] [148-B-C, E-H; 149-A-C]
Sainik Motors v. State of Rajasthan [1962] 1 SCR 517;
Chairman Canara Bank, Bangalore v. M.S. Jasra AIR
1992 SC 1100 : [1992] 2 SCR 68 – referred to.

G 2.3 It is well-nigh impossible to lay down a general rule for
determining whether a provision is imperative or directory. In
Section 84, the expression “shall” is used in sub-section (1) both
in the context of the requirement of ability, integrity and standing
as also in the context of adequate knowledge and capacity in
dealing with problems relating to engineering, finance, commerce,
H economics, law or management. On the other hand, in
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 109
ASSOCIATION & ORS.

sub-section (2) while dealing with the possibility of appointment A
of a Chairperson from the pool of sitting or retired Judges, the
expression used is “may” indicating it to be a discretionary power.
Thus, the line of reasoning that the plain reading of the section
leaves no manner of doubt that the legislature only envisaged a
possibility of appointment of a Chairperson from the pool of sitting
B
or retired Judges of the High Court, in which case the method of
appointment would be different from the one as envisaged u/s. 85
is accepted. [Paras 78-80] [149-H; 150-C-F]
Interpretation of Statutes by Maxwell, 12 th Edn –
referred to.
C
2.4 The functions of the State Commission are prescribed
under Section 86 of the Act. The enumerated functions are
determination of tariff, regulation of electricity purchase and
procurement process of distribution licencees, facilitating intra-
state transmission, issuing licences to persons, promoting
cogeneration and generation of electricity from renewable D
sources, levy fee, specify or enforce standards, fix trading margins.
All these functions are regulatory in character rather than
adjudicatory. The real adjudicatory function is only provided in
sub-clause (f) whereupon the Commission has the option of
adjudicating the disputes between the licencees and generating E
companies, or to refer such disputes to arbitration. There is also
an advisory role to be performed by the State Commission as
specified in sub-section (2). These types of functions do not
necessarily mandate a Judge to be a Chairperson. [Para 81] [150-
G-H; 151-A-B]
F
Tamil Nadu Generation and Distribution Corporation
Limited v. PPN Power Generating Company Private
Limited [2014] 4 SCR 667:2014 (11) SCC 53 – referred
to.
2.5 The composition of the appellate tribunal under Section G
112 mandates that there has to be a Bench of two or more persons
of which at least one should be a judicial member. The Chairperson
as per Section 113, mandatorily has to be a present or retired
Judge of the Supreme Court or a Chief Justice of the High Court.
Thus, at the appellate stage there is necessary judicial scrutiny,
which takes place. Looked at from the perspective of the position H
110 SUPREME COURT REPORTS [2018] 9 S.C.R.

A prevailing prior to the said Act coming into force, the nature of
functions sought to be performed by the State Commission, were
to be so performed, not by person, who necessarily held a judicial
office. The observations, in the context of the “tribunalisation”
of judicial process and the requirement of it to be headed by a
Judge have to be read in the context of shifting of the adjudicatory
B
role from the Courts to the Tribunals. [Para 83] [151-E-G]
2.6 The fact that the Chairperson has a right to nominate
the Member, who would chair meetings in his absence as per
sub-section (2) of Section 92, or that the presence of a man of law
would be no substitute to the requirement of a Judge who would
C bring a judicial thought process to the decision making as
Chairman, or that the regulatory body should not be unregulated,
are generalized pleas, which are difficult to accept. No doubt, the
law declared by the Supreme Court is binding on all Courts within
the territory of India, which would also include principles of law
D emanating from a judgment or interpretation of the law, but then
the ratio decidendi of the judgments of the Supreme Court, makes
the principle of mandatory requirement of a Judge applicable only
to cases where the judicial function is sought to be shifted through
the process of ‘tribunalisation’. [Para 86] [152-D-F]
E 2.7 Section 84(2) of the said Act begins with a non-obstante
clause, i.e., Notwithstanding anything contained in sub-section
(1), it does not take away what is stated in sub-section (1), which
deals with the requirements that are necessary in the appointment
of a Member or Chairperson. It would not cut down the clear
terms of the enactment being sub-section (1). The occasion to
F use such a non-obstante clause really arose because the process
of appointment of a Chairperson who is, or has been a Judge, is
required to be different, and thus, the mandatory consultation
with the Chief Justice. It is nothing more or less. Further sub-
section (1) of Section 85 provides for a Selection Committee to
G be headed by a Judge of the High Court but with the proviso that
the said provision would not apply for the appointment of a person
as a Chairperson who is, or has been, a Judge of the High Court.
This, in fact, shows that a non-Judge can be appointed as the
Chairperson by the Selection Committee constituted under
Section 85 of the said Act, which in turn is chaired by a Judge of
H
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 111
ASSOCIATION & ORS.

the High Court. Thus, Section 84(2) of the said Act only gives A
the discretionary option to the State Government to appoint a
Judge as the Chairperson of the State Commission. The said
provision therefore, is not mandatory in nature. [Para 87] [152-F-
H; 153-A-B]
3.1 In terms of Section 82(4) of the said Act, the State B
Commission is to consist of not more than three members
including the Chairperson. In other words, there have to be two
other members other than the Chairperson. Now if the
Chairperson is not a Judge, the question arises whether any of
the other two members has to be a person from the legal field
considering the nature of functions performed by the State C
Commission. Section 84(1) of the said Act prescribes the
requirement of knowledge and shown capacity in dealing with
problems relating to six different fields, i.e., engineering, finance,
commerce, economics, law or management. If the Chairperson
is from a non-legal field, it would imply that he/she would be a D
person from any of the other five fields. That would still leave the
appointment of two members from the fields specified, including
law. Thus, there can be a possibility and it is so, where State
Commissions have no members from the legal field at all. The
moot point arises whether there can be a mandatory provision
read into Section 84(1) of the Act for opining, that at least one E
person from the legal field is necessary as a member, although
on a plain reading of the Section it is not so. [Para 88] [153-C-G]
3.2 The distinguishing feature between appointment of
members to the Central Commission and the State Commission
is that, with regards to the Central Commission, it is specifically F
provided in Section 77, how many persons from which field are to
be appointed. There is a further proviso to sub-clause (c) of sub-
section (1) of Section 77 restricting it to not more than one
member from the fields specified in the said clause, viz.
economics, commerce, law or management. This is not the G
position for the State Commission. [Para 89] [153-G-H; 154-A]
3.3 There is no dispute that sub-clause (f) of s. 86 is clearly
an adjudicatory function. It provides for adjudication of disputes
between the licencees and the generating companies. There is
also a power to refer the dispute to arbitration. [Para 91] [154-C-D] H
112 SUPREME COURT REPORTS [2018] 9 S.C.R.

A 3.4 A perusal of ss. 94 to 96 would show that apart from
their definition, even otherwise, these are powers of a civil court
under the Code of Civil Procedure, 1908. Powers such as
summoning, enforcement of attendance of any person and
examination on oath, discovery and production of documents,
receiving affidavit of evidence, requisitioning of public records,
B
etc., all form part of Section 94. In terms of Section 95, all such
proceedings before the State Commission would be deemed to
be judicial proceedings within the meaning of Sections 193 and
228 IPC and the commission would be a civil court for purposes
of Sections 345 & 346 CrPC. Not only that, Section 96 confers
C the extreme power of entry and seizure in respect of any building
and place where the Commission has reason to believe that any
document relating to the subject matter of enquiry may be found
and may be seized. The power is conferred on the Commission
under Section 129 for securing compliances of orders and under
Sections 142 & 146 for punishment for non-compliance of orders
D
and directions. This, thus, leaves no manner of doubt that the
State Commission, though defined as a ‘Commission’ has all the
‘trappings of the Court’. [Para 93] [154-H; 155-A-D]
Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd.
(GJ-I) [2008] 4 SCR 822 : 2008 (4) SCC 755; A.P.
E Power Coordination Committee & Ors. v. Lanco
Kondapalli Power Ltd. & Ors. [2015] 12 SCR 447 :
2016 (3) SCC 468; Gujarat Urja Vikas Nigam Ltd. v.
Essar Power Ltd. (GJ-I) [2008] 4 SCR 822 : 2008 (4)
SCC 755; Tamil Nadu Generation and Distribution
F Corporation Limited v. PPN Power Generating
Company Private Limited [2014] 4 SCR 667 : 2014 (11)
SCC 53; Bharat Bank Ltd. v. Employees of the Bharat
Bank Ltd. 1950 AIR 188 : [1950] SCR 45; Jaswant
Sugar Mills Ltd. v. Lakshmi Chand [1963] Supp. 1 SCR
242; Engineering Mazdoor Sabha v. Hind Cycles Ltd.
G 1963 AIR 874 : [1963] Suppl. SCR 625; Indo-China
Steam Navigation Co. Ltd. v. Jasjit Singh [1964] 6 SCR
594; Associated Cement Companies Ltd. v. P.N. Sharma
[1965] 2 SCR 366; Sarojini Ramaswami v. Union of
India [1992] 1 Suppl. SCR 108 : 1992 (4) SCC 506;
H
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 113
ASSOCIATION & ORS.

State of Gujarat v. Gujarat Revenue Tribunal Bar A
Association [2012] 10 SCR 816 : 2012 (10) SCC 353
– referred to.
Shell Company of Australia, Limited v. Federal
Commissioner of Taxation (1931) AC 275; R. v. London
County Council (1931) 2 KB 215; Huddart, Parker & B
Co. v. Moorehead 8 CLR 330, 357; Cooper v. Wilson
(1937) 2 KB 309 – referred to.
3.5 The ‘Wambaugh Test’ or ‘The Inversion Test’ is
propounded as the means of judicial interpretation. ‘The Inversion
Test’ is used to identify the ratio decidendi in any judgment. In C
order to test whether a particular proposition of law is to be treated
as the ratio decidendi of the case, the proposition is to be inversed,
i.e., to remove from the text of the judgment as if it did not exist.
If the conclusion of the case would still have been the same even
without examining the proposition, then it cannot be regarded as
the ratio decidendi of the case. This test has been followed to D
imply that the ratio decidendi is what is absolutely necessary for
the decision of the case. “In order that an opinion may have the
weight of a precedent”, “it must be an opinion, the formation of
which, is necessary for the decision of a particular case.” Applying
the test to the said judgment, the proposition is reversed, i.e., E
“the Chairman need not be a judicial member”, the fact remains
that it would have no impact on the decision in that case, which
was related to inter alia the interpretation of Section 86 of the
said Act. This, in fact, justifies what has been held aforesaid qua
the appointment of a Chairperson from the pool of Judges. [Para
102-104] [159-A-F] F

3.7 If this Court was to take the proposition as “no member
having knowledge of law is required to be a member of the
Commission” then there is a problem at hand. This is so because
while interpreting Section 86 of the said Act, it has been expressed
that the Commission has the ‘trappings of the Court’, an aspect G
which has been accepted. Once it has the ‘trappings of the Court’
and performs judicial functions, albeit limited ones in the context
of the overall functioning of the Commission, still while performing
such judicial functions which may be of far reaching effect, the
H
114 SUPREME COURT REPORTS [2018] 9 S.C.R.

A presence of a member having knowledge of law would become
necessary. The absence of a member having knowledge of law
would make the composition of the State Commission such as
would make it incapable of performing the functions under Section
86(1)(f) of the said Act. [Para 105] [159-G; 160-A-C]
B Madras Bar Association v. Union of India & Anr.
(MJ-II) [2014] 10 SCR 1 : 2014 (10) SCC 1 – referred
to.
3.8 It is mandatory to have a person of law, as a member of
the State Commission. When it is said, it does not imply that any
C person from the field of law can be picked up. It has to be a person,
who is, or has been holding a judicial office or is a person
possessing professional qualifications with substantial experience
in the practice of law, who has the requisite qualifications to have
been appointed as a Judge of the High Court or a District Judge.
[Para 107] [160-G-H]
D
Brahm Dutt v. Union of India 2005 (2) SCC 431 –
referred to.
3.9 It cannot be said that since there is a presence of a
Judge in the Appellate Tribunal that would obviate the need of a
E man of law as a member of the State Commission. The original
proceedings cannot be cured of its defect merely by providing a
right of appeal. Thus, for all adjudicatory functions, the Bench
must necessarily have at least one member, who is or has been
holding a judicial office or is a person possessing professional
qualifications with substantial experience in the practice of law
F and who has the requisite qualifications to have been appointed
as a Judge of the High Court or a District Judge. [Paras 109-110]
[161-D-E]
3.10 The challenge laid in Transfer Cases to the
appointments made to the Tamil Nadu State Commission and the
G exercise of the powers suo moto by the Commission. The
fundamental plea is of financial bias of the two members as they
were working in their erstwhile avatars. The name of ‘GR’ was
recommended when he was still working as the Director,
TANGEDCO and he opted for voluntary retirement after his name
H
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 115
ASSOCIATION & ORS.

had been recommended. ‘AK’ retired from the post of Managing A
Director of TANTRANSCO on 31.5.14 and was appointed as
Chairman of the Commission on 6.6.14. The tariff hike was
approved by a majority of 2:1 with these two members being part
of the majority view. [Para 111] [161-E-G]
3.11 The nature of financial interest was examined in the B
narrower sense as well as the wider sense and in the wider sense,
it was held to include the direct or indirect interest of a person in
relation to a financial undertaking. The situation arose when the
person concerned was holding both the posts simultaneously,
which is not so in the instant case. It is also pointed out by the
counsel for the State of Tamil Nadu that the orders of appointment C
have been exclusively assailed right till the Supreme Court.
Selection Committee was presided over by a retired Judge of
the High Court. Thus, no merit is found in the plea sought to be
advanced assailing either the appointment or the suo moto tariff
revision.[Para 112-113] [162-A-C] D
Rajesh Awasthi v. Nand Lal Jaiswal [2012] 10 SCR 883
: 2013 (1) SCC 501; Mor Modern Cooperative
Transport Society Ltd. v. Financial Commissioner &
Secretary to Govt. of Haryana and Anr. [2002] 1 Suppl.
SCR 87 : 2002 (6) SCC 269; Kihoto Hollohan v. E
Zachillhu [1992] 1 SCR 686 : 1992 (2) Suppl. SCC 651;
Pareena Swarup v. Union of India [2008] 13
SCR 1217 : 2008 (14) SCC 107; Union of India v.
Madras Bar Association (MJ-I) [2010] 6 SCR 857 :
2010 (11) SCC 1; Uttar Pradesh Power Corporation
Limited v. National Thermal Power Corporation Limited F
& Ors. (2011) 12 SCC 400; Natural Resources
Allocation In re Special Reference No. 1 of 2012 [2012]
9 SCR 311 : 2012 (10) SCC 1; Bachahan Devi & Anr.
v. Nagar Nigam, Gorakhpur & Anr. [2008] 2 SCR 424 :
2008 (12) SCC 372; The Dominion of India & Anr. v. G
Shrinbai A Irani & Anr. [1955] 1 SCR 206; Chairman
Canara Bank, Bangalore v. M.S. Jasra 1992 AIR
1100 : [1992] 2 SCR 68; Ajit Singh (II) v. State of Punjab
(1999) 7 SCC 209; State of U.P. v. Babu Ram [1961] 2
SCR 679 – referred to.
H
116 SUPREME COURT REPORTS [2018] 9 S.C.R.

A The Study of Cases”by Eugene Wambaugh Boston :
Little, Brown & Co., 1892 p 17.
Case Law Reference
[2014] 4 SCR 667 referred to Paras 17, 25,
29, 34, 39
B
[1992] 1 SCR 686 referred to Para 17
[2008] 13 SCR 1217 referred to Para 20
[2014] 10 SCR 1 referred to Paras 26, 32
[2010] 6 SCR 857 referred to Paras 26, 29,
C
32, 38
[2008] 4 SCR 822 referred to Paras 30, 32,
44
[2016] 5 SCR 101 referred to Para 32
D
(2011) 12 SCC 400 referred to Para 33
[2012] 9 SCR 311 referred to Para 39
2005 (2) SCC 431 referred to Para 43
E [2012] 10 SCR 883 referred to Para 52
[2002] 1 Suppl. SCR 87 referred to Para 52, 69
[2008] 2 SCR 424 referred to Para 56
[2015] 12 SCR 447 referred to Para 57
F
[2013] 13 SCR 96 referred to Para 57, 60
[1955] 1 SCR 206 referred to Para 66
(1999) 7 SCC 209 referred to Para 67
G
[1962] 1 SCR 517 referred to Para 76
[1961] 2 SCR 679 referred to Para 76
[1992] 2 SCR 68 referred to Para 76

H
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 117
ASSOCIATION & ORS.

[1950] SCR 45 referred to Para 95 A
[1963] Supp. 1 SCR 242 referred to Para 98
[1963] Suppl. SCR 625 referred to Para 98
[1964] 6 SCR 594 referred to Para 98
B
[1965] 2 SCR 366 referred to Para 98
[1992] 1 Suppl. SCR 108 referred to Para 98
[2012] 10 SCR 816 referred to Para 98
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 14697 C
of 2015.
From the Judgment and Order dated 08.10.2015 of the High Court
of Gujarat at Ahmedabad in Writ Petition (PIL) No. 172 of 2014
WITH D
C. A. No. 13451 of 2015
T. C. (C) Nos. 139, 138, 137, 140 of 2015
C. A. Nos. 3759-3760 of 2016
T. P. (C) No. 974 of 2016. E
K.K. Venugopal, AG, Atmaram N.S. Nadkarni, ASG, Mr.
Subramonium Prasad, Sr. Adv. AAG, Arvind P. Dattar, Shekhar Naphade,
Jayant Bhushan, Sr. Advs., M.G. Ramachandran, R. Balasubramanian,
Ms. Aarti Sharma, Ms. Liz Mathew, P. K. Mullick, Ms. Hemantika Wahi,
Shubham Arya, Gurmeet Singh Makker, Gautam Narayan, R. A. Iyer, F
Ms. Mahamaya Chatterjee, Anil Kaushik, Abhishek Mishra, Vishnu
Sharma, Mehul M. Gupta, Rajinder Singh, Vishnu Sharma, Abdul Saleem,
Vinodh Kanna B., A. Sriram, Buddy Ranganathan, Arjit Moitra, Soumik
Ghosal, Nikhil Nayyar, N. Sai Vinod, Dhananjai Baijal, Ms. Smriti Shah,
Divyanshu Rai, Ms. Sujatha Balachander, Ravjyot Ghuman, Shreyak
Gupta, Joseph Aristotle S., Poojan Kapoor, Ms. Kamini Jaiswal, G
Ms. Rani Mishra, Abhimanyu Shrestha, D. L. Chidananda, Syed Jafar
Alam, Deep Rao, Sandeep Devasisha Das, Ms. Hemantika Wahi,
B. Balaji, Rahul Mehra, Ms. Neha Sangwan, Chirag Shroff, E. C.
Agrawala, Advs. for the appearing parties.
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118 SUPREME COURT REPORTS [2018] 9 S.C.R.

A The Judgment of the Court was delivered by
SANJAY KISHAN KAUL, J. 1. The Electricity Act, 2003
(hereinafter referred to as the ‘said Act’) provides for Central and State
Regulatory Commissions. Insofar as the appointment of the Chairperson
of these Commissions is concerned, the relevant provisions stipulate that
B the Chairperson “may” be a Judge of a High Court for the State
Commission, a Judge of the Supreme Court or the Chief Justice of a
High Court for the Central Commission. The common question, which
arises for consideration in these appeals is whether the expression “may”
should be read as “shall”, i.e., whether it is mandatory to have a judicial
C mind presiding over these Commissions in the form of a Judge.
2. The Division Bench of the Madras High Court vide judgment
dated 7.2.2014 took the view in respect of the challenge laid to the selection
process of the Chairman of the Tamil Nadu State Electricity Commission
that there was no such mandatory requirement though there was an
D option to appoint a Judge.
3. The Division Bench of the Gujarat High Court in a similar case
in respect of the appointment of a Chairperson of the Gujarat State
Regulatory Commission vide impugned order dated 8.10.2015 opined
that it was so mandatory.
E
4. The aforesaid judicial conflict being before this Court, the
challenges laid in different States were transferred to this Court through
Transfer Petitions vide order dated 3.11.2015.
5. The Union of India, as also some of the State Commissions are
F arrayed on the one side to canvas for an interpretation of the provision
as it reads, while on the other side, are consumers, activists and some
affected parties, who canvassed the importance of the State Regulatory
Commissions and the nature of functions it performs, to establish that a
Judge alone should preside over these Commissions.

G 6. We do not see the necessity of going into individual facts nor
were the pleas advanced on that basis before us. The submissions have
been based on the provisions of the said Act and the legal pronouncements
dealing with the issue of the mandatory requirement of certain
Commissions to be headed by a judicial mind.

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The Act: A
7. The said Act came into force on 10.6.2003 on publication in the
Gazette. The Act seeks to consolidate the laws relating to generation,
transmission, distribution, trading and use of electricity. The Preamble to
the said Act states as under:
“An Act to consolidate the laws relating to generation, transmission, B
distribution, trading and use of electricity and generally for taking
measures conducive to development of electricity industry,
promoting competition therein, protecting interest of consumers
and supply of electricity to all areas, rationalisation of electricity
tariff, ensuring transparent policies regarding subsidies, promotion C
of efficient and environmentally benign policies, constitution of
Central Electricity Authority, Regulatory Commissions and
establishment of Appellate Tribunal and for matters connected
therewith or incidental thereto.”
8. The detailed Statement of Objects & Reasons mentions that D
the Electricity Supply Industry in India was governed by the Indian
Electricity Act, 1910, the Electricity (Supply) Act, 1948 and the Electricity
Regulatory Commission Act, 1998. The State Electricity Boards
constituted under the Electricity (Supply) Act, 1948 failed to perform on
account of various factors inter alia fixation of appropriate tariff and
the cross-subsidies reached unsustainable levels. The Electricity E
Regulatory Commission Act of 1998 was an endeavour to distance the
Government from determination of tariffs by having independent
regulatory commissions.
9. Part X of the said Act deals with matters relating to Regulatory
Commissions – their constitution, powers and functions, etc. Sections F
76 & 77 of the said Act are concerned with the constitution of the Central
Commission and the qualifications for appointment of Members of the
Central Commission. The provisions are similar to the appointment of
the Members and Chairperson of the State Commissions except to the
extent that while the relevant sub-section provides that the Central G
Government “may” appoint the Chairperson from amongst persons who
is, or has been a Judge of the Supreme Court or the Chief Justice of a
High Court in the case of the Central Commission, in the case of State
Commissions, the provision states that the State Government “may”

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120 SUPREME COURT REPORTS [2018] 9 S.C.R.

A appoint any person as the Chairperson from amongst persons who is, or
has been, a Judge of a High Court. Section 78 of the said Act deals with
the constitution of the Selection Committee to recommend Members,
while the functions of the Central Commission are specified in Section
79 of the said Act. Section 80 of the said Act provides for establishment
of a Central Advisory Committee with the Chairperson of the Central
B
Commission being the ex officio Chairperson of the Central Advisory
Committee. This Committee is to advise the Central Commission on
major questions of policy; quality, continuity and extent of service provided
by the licensees; compliance by the licensees with the conditions and
requirements of their licence; protection of consumer interest; electricity
C supply and overall standards of performance by utilities (Section 81 of
the said Act).
10. Section 82 of the said Act is in respect of constitution of State
Commission while Section 84 prescribes the qualifications for appointment
of Chairperson and Members of State Commissions. Section 85 of the
D said Act provides for constitution of Selection Committee to select
Members of State Commission and Section 86 prescribes the functions
of State Commission. Similar to the Central Advisory Committee, the
State Advisory Committee can be constituted under Section 87 of the
said Act with similarity of functions under Section 88 of the said Act.
The relevant provisions, which will have to be referred to are being
E reproduced hereunder:
“Section 84. Qualifications for appointment of Chairperson
and Members of State Commission. – (1) The Chairperson
and the Members of the State Commission shall be persons of
ability, integrity and standing who have adequate knowledge of,
F and have shown capacity in, dealing with problems relating to
engineering, finance, commerce, economics, law or management.
(2) Notwithstanding anything contained in sub-section (1), the State
Government may appoint any person as the Chairperson from
amongst persons who is, or has been, a Judge of a High Court:
G
Provided that no appointment under this sub-section shall be made
except after consultation with the Chief Justice of that High Court.
(3) The Chairperson or any other Member of the State
Commission shall not hold any other office.
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STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 121
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

(4) The Chairperson shall be the Chief Executive of the State A
Commission.
Section 85. Constitution of Selection Committee to select
Members of State Commission. – (1) The State Government
shall, for the purposes of selecting the Members of the State
Commission, constitute a Selection Committee consisting of – B
(a) a person who has been a Judge of the High Court….
Chairperson;
(b) the Chief Secretary of the concerned State ….Member;
(c) the Chairperson of the Authority or C
the Chairperson of the Central Commission ….... Member:
Provided that nothing contained in this section shall apply to the
appointment of a person as the Chairperson who is or has been a
Judge of the High Court.
D
(2) The State Government shall, within one month from the date
of occurrence of any vacancy by reason of death, resignation or
removal of the Chairperson or a Member and six months before
the superannuation or end of tenure of the Chairperson or Member,
make a reference to the Selection Committee for filling up of the
vacancy. E
(3) The Selection Committee shall finalise the selection of the
Chairperson and Members within three months from the date on
which the reference is made to it.
(4) The Selection Committee shall recommend a panel of two
names for every vacancy referred to it. F

(5) Before recommending any person for appointment as the
Chairperson or other Member of the State Commission, the
Selection Committee shall satisfy itself that such person does not
have any financial or other interest which is likely to affect
prejudicially his functions as such Chairperson or Member, as the G
case may be.
(6) No appointment of Chairperson or other Member shall be
invalid merely by reason of any vacancy in the Selection
Committee
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122 SUPREME COURT REPORTS [2018] 9 S.C.R.

A 86. Functions of State Commission.- (1) The State Commission
shall discharge the following functions, namely:—
(a) determine the tariff for generation, supply, transmission and
wheeling of electricity, wholesale, bulk or retail, as the case may
be, within the State:
B Provided that where open access has been permitted to a category
of consumers under section 42, the State Commission shall
determine only the wheeling charges and surcharge thereon, if
any, for the said category of consumers;
(b) regulate electricity purchase and procurement process of
C 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;
(c) facilitate intra-State transmission and wheeling of electricity;
D
(d) issue licences to persons seeking to act as transmission
licensees, distribution licensees and electricity traders with respect
to their operations within the State;
(e) promote cogeneration and generation of electricity from
renewable sources of energy by providing suitable measures for
E
connectivity with the grid and sale of electricity to any person,
and also specify, for purchase of electricity from such sources, a
percentage of the total consumption of electricity in the area of a
distribution licensee;
(f) adjudicate upon the disputes between the licensees and
F
generating companies and to refer any dispute for arbitration;
(g) levy fee for the purposes of this Act;
(h) specify State Grid Code consistent with the Grid Code specified
under clause (h) of sub-section (1) of section 79;
G (i) specify or enforce standards with respect to quality, continuity
and reliability of service by licensees;
(j) fix the trading margin in the intra-State trading of electricity, if
considered, necessary;

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STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 123
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

(k) discharge such other functions as may be assigned to it under A
this Act.
(2) The State Commission shall advise the State Government on
all or any of the following matters, namely:—
(i) promotion of competition, efficiency and economy in activities
of the electricity industry; B

(ii) promotion of investment in electricity industry;
(iii) reorganisation and restructuring of electricity industry in the
State;
(iv) matters concerning generation, transmission, distribution and C
trading of electricity or any other matter referred to the State
Commission by that Government:
(3) The State Commission shall ensure transparency while
exercising its powers and discharging its functions.
D
(4) In discharge of its functions, the State Commission shall be
guided by the National Electricity Policy, National Electricity Plan
and tariff policy published under section 3.”
11. We may note a distinction between the Members of the Central
Commission and the State Commissions inasmuch as Section 77 dealing
with the appointment of Members of Central Commission provides as E
under:
“77. Qualifications for appointment of Members of Central
Commission.- (1) The Chairperson and the Members of the
Central Commission shall be persons having adequate knowledge
of, or experience in, or shown capacity in, dealing with, problems F
relating to engineering, law, economics, commerce, finance or
management and shall be appointed in the following manner,
namely:—
(a) one person having qualifications and experience in the field of
engineering with specialisation in generation, transmission or G
distribution of electricity;
(b) one person having qualifications and experience in the field of
finance;

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124 SUPREME COURT REPORTS [2018] 9 S.C.R.

A (c) two persons having qualifications and experience in the field
of economics, commerce, law or management:
Provided that not more than one Member shall be appointed under
the same category under clause (c).”
12. However, for appointment of a Member for State Commission,
B there is no such limitation on the number of Members from a particular
field though it does state that such Members should have adequate
knowledge and shown capacity in, dealing with problems relating to
engineering, law, economics, commerce, finance or management. Sub-
section (2) of both Sections 77 and Section 84 are similar except for the
C person to be appointed. Thus, irrespective of the provisions in sub-
section (1) of Section 84 stipulating the fields from which the Members
will have to be appointed, sub-section (2) begins with a ‘notwithstanding’
clause stating that the State Government “may” appoint any person as
the Chairperson from amongst those, who have been, or is a Judge of
the High Court. The proviso to sub-section (2) stipulates that no
D appointment under sub-section (2) shall be made except after consultation
with the Chief Justice of that High Court. This, in fact, recognizes the
pre-eminence and requirement of consultation with the Chief Justice of
the High Court in case of appointment of a Judge as the Chairperson of
a State Commission. For the Central Commission, the consultation is
E with the Chief Justice of India, because the appointment envisaged is of
a Judge of the Supreme Court or the Chief Justice of a High Court.
13. The Selection Committee under Section 85 of the said Act for
selecting Members of the State Commission is to be headed by a Judge
of the High Court but once again the proviso states that this would not
F be applicable to the appointment of a person as the Chairperson who is
or has been a Judge of the High Court. The effect of this is that, in case
the person to be appointed as Chairperson to the State Commission is a
Judge, necessary consultation will have to be with the Chief Justice of
the High Court as per the proviso to Section 84(2).

G 14. It may be noticed that under Section 78 of the said Act, insofar
as the Selection Committee to recommend Members of the Central
Commission is concerned, the Chairperson of the Selection Committee
has to be a Member of the Planning Commission in-charge of the energy
sector. Once again, the proviso to Section 78 makes an exception to the
appointment of a person as a Chairperson of the Central Commission,
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STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 125
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

who is, or has been a Judge of the Supreme Court or the Chief Justice of A
the High Court, as in that eventuality, the Chief Justice of India has to be
consulted.
15. The Appellate Tribunal for Electricity is provided in Part XI of
the said Act. Section 111 of the said Act deals with the appeal to Appellate
Tribunal from orders made by an adjudicating officer under the said Act, B
or the Appropriate Commission under the said Act. Section 112 of the
said Act deals with the composition of the Appellate Tribunal. The
Tribunal sits in Benches with at least one judicial member and one
technical member. Section 113 of the said Act provides for qualifications
for appointment of Chairperson and Member of the Appellate Tribunal.
The Chairperson of the Appellate Tribunal has to be someone, who is, or C
has been a Judge of the Supreme Court or the Chief Justice of a High
Court. Thus, there is no quibble over the proposition that there is a
senior judicial mind heading the Appellate Tribunal and that every Bench
of the Appellate Tribunal mandatorily has to have at least one judicial
member and one technical member. D
The Attorney General’s Argument:
16. The learned Attorney General, appearing on behalf of the
Union of India and the State of Gujarat, took us through the provisions
and the scheme of the said Act and referred to the judicial
pronouncements. He canvassed for the reading of the statute as it stands E
and, thus, pleaded that where the legislature in its wisdom had used the
word “may” consciously, there was no need to read it as “shall”. Learned
Attorney General sought to emphasise that the functions of both the
Commissions are more technical in nature and really do not have much
of an adjudicatory element requiring a legal mind. This is apart from the F
fact that it is not as if a non-lawyer or non-Judge is incapable of
appreciating a legal point, as even arbitrators are appointed from these
fields when the dispute is more technical in character. The primary
function is determination of tariff, regulating electricity purchase and
procurement process of distribution licensees, facilitating intra-State
transmission, issuance of license, promotion of cogeneration and G
generation of electricity from renewable sources of energy, levying fee,
etc. Out of the 11 functions enlisted of a State Commission under Section
86 of the said Act and for the Central Commission under Section 79 of
the said Act, adjudication of disputes between licensees and generating
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126 SUPREME COURT REPORTS [2018] 9 S.C.R.

A companies and to refer any dispute for arbitration is the only one, which
can be said to have any adjudicatory flavor. In fact, the argument
advanced was that the nature of work would not be something which
the Judges would be comfortable with, being highly technical in nature,
nor are Judges trained for such technical matters. In the context of the
functions and duties of the authority, relevant provisions under the said
B
Act were referred to. Section 16 requires an Appropriate Commission
to specify conditions of license. Section 45 of the said Act makes
provision for power to recover charges, Section 46 of the said Act makes
provision for power to recover expenditure. Section 50 provides for the
State Commission to specify an Electricity Supply Code for recovery,
C billing, etc., while Section 57 empowers the Appropriate Commission to
specify standards of performance of a licensee. Section 61 deals with
tariff regulations and Section 66 deals with the development of a market
in power, guided by the National Electricity Policy. Looking to all these
functions, it was canvassed that a purposive interpretation should be
given to the expression used, for interpreting the provisions of appointment
D
of the Chairperson. Mindful of the technical nature of functions as they
are, it was argued that a Judge was not required and that this was apparent
from the fact that even at present, all State Commissions are headed by
non-Judges, except one. The provision was stated to be only felicitous
in character, as it gives an option to appoint a Judge. It was argued that
E there could be a possibility of a Judge, rarely, as it may be, being an
expert in this field who could be so appointed. However, if a Judge is to
be appointed, the process of appointment is different by reason of his/
her having held a constitutional post and thus, the Selection Committee
constituted would not be recommending the appointment, but the
consultation would have to be with the Chief Justice concerned.
F
17. Learned Attorney General then proceeded to refer to the
judgment of this Court in Tamil Nadu Generation and Distribution
Corporation Limited v. PPN Power Generating Company Private
Limited1 wherein this very Act was under consideration. The matter
related to inter alia the jurisdiction of the State Commission in Tamil
G Nadu to either adjudicate a dispute or refer it to arbitration under Section
86(1)(f) of the said Act, which was held to be required to be exercised
reasonably and not arbitrarily. In para 55, the Court gave its imprimatur
to the submission advanced on behalf of the appellant that adjudicatory
1
(2014) 11 SCC 53
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functions generally ought not to be conducted by the State Commission A
in the absence of a judicial member, especially in relation to disputes
which are not fairly relative to tariff fixation or the advisory and
recommendatory functions of the State Commission. In the said context,
a reference was also made to the Constitution Bench judgment of this
Court in Kihoto Hollohan v. Zachillhu2 which examined the nature of
B
the power of the Speaker or the chairman under Para 6(1) of the Tenth
Schedule of the Constitution of India. The finding recorded is that the
State Commission in deciding a lis relating to the generating company
was discharging judicial functions and exercising the judicial powers of
a far reaching effect and must therefore have the essential ‘trappings of
the Court’ for which it was said “….This can only be achieved by the C
presence of one or more judicial members in the State Commission which
is called upon to decide complicated contractual or civil issues which
would normally have been decided by a civil court…” It was also
observed that the decisions of the State Commission had far reaching
consequences and were final and binding between the parties subject,
D
of course, to judicial review.
18. The Bench thereafter proceeds to examine Section 84(2) of
the said Act. It was observed that Section 84(2) “enables” the State
Government to appoint any person as the Chairperson from amongst
persons who is, or has been, a Judge of a High Court, and that such
appointment shall be made after consultation with the Chief Justice of E
the High Court. Thus, where complicated legal issues have been raised,
it was observed, the presence of one or more judicial members in the
State Commission would become necessary. No judicial member had
been appointed in the Tamil Nadu State Commission and, thus, the
authorities concerned were required to look into the desirability and F
feasibility for making appointments, of any person, as the Chairperson
from amongst persons, who is or has been a Judge of a High Court.
19. The provisions of Section 113 of the said Act were referred
to, to conclude that the legislature was aware that the functions performed
by the State Commission as well as the appellate tribunal are judicial in G
nature and, thus, the appellate authority has the trappings of the Court.
This essential feature had not been made mandatory under Section 84
of the said Act. In the opinion of the Bench, it would be “advisable” for
the State Government to exercise the enabling power under Section
2
1992 Supp (2) SCC 651
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128 SUPREME COURT REPORTS [2018] 9 S.C.R.

A 84(2) of the said Act to appoint a person, who is, or has been a Judge of
a High Court as Chairperson of the State Commission. The aforesaid
discussions were referred to by the learned Attorney General to canvas
that the question involved in the case really did not pertain to Section
84(2) of the said Act but certain observations had been made, nonetheless.
The Tribunals envisaged under Part XIV A of the Constitution would
B
stand on a different footing and therefore cannot be compared with the
Commission in question. In any case, the observations itself show that
the Bench was conscious of the limitations of the said Act and, thus,
only rendered an advise to the State Government, rather than issue a
direction. In the alternative, at best, the discussion was with reference
C to the desirability and feasibility of at least one member having legal
knowledge rather than a mandatory requirement of a Chairman being a
Judge.
20. Next, referring to the judgment in Pareena Swarup v. Union
of India3, it was emphasized that the nature of functions of a Commission
D under the said Act cannot be equated to the functions being performed
by a Tribunal under the Prevention of Money Laundering Act, 2002, an
adjudicatory function. The observations were made in the context of
tribunals being created, which were seeking to exercise functions earlier
performed by regular judicial forums. The functions, now vested with
the Appropriate Commission under the said Act, were really being
E performed under the Electricity Regulatory Commission Act.
21. The aforesaid judicial pronouncements, it was, thus, canvassed,
could not have been utilized by the Gujarat High Court to come to a
conclusion that the post of the Chairperson of the State Commission
mandatorily has to be occupied by a Judge, though it could be occupied
F by a Judge.
22. We may, however, note that the view adopted by the Gujarat
High Court is also based on the nature of powers vested with the
Appropriate Commission under Sections 94, 95 & 96 of the said Act,
which are as under:
G “94. Powers of Appropriate Commission.- (1) The Appropriate
Commission shall, for the purposes of any inquiry or proceedings
under this Act, have the same powers as are vested in a civil
court under the Code of Civil Procedure, 1908 (5 of 1908) in
respect of the following matters, namely:—
3
H (2008) 14 SCC 107
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 129
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

(a) summoning and enforcing the attendance of any person and A
examining him on oath;
(b) discovery and production of any document or other material
object producible as evidence;
(c) receiving evidence on affidavits;
B
(d) requisitioning of any public record;
(e) issuing commission for the examination of witnesses;
(f) reviewing its decisions, directions and orders;
(g) any other matter which may be prescribed.
C
(2) The Appropriate Commission shall have the powers to pass
such interim order in any proceeding, hearing or matter before
the Appropriate Commission, as that Commission may consider
appropriate.
(3) The Appropriate Commission may authorise any person, as it D
deems fit, to represent the interest of the consumers in the
proceedings before it.
95. Proceedings before Commission.- All proceedings before
the Appropriate Commission shall be deemed to be judicial
proceedings within the meaning of sections 193 and 228 of the E
Indian Penal Code and the Appropriate Commission shall be
deemed to be a civil court for the purposes of sections 345 and
346 of the Code of Criminal Procedure, 1973 (2 of 1974).
96. Powers of entry and seizure.- The Appropriate Commission
or any officer, not below the rank of a Gazetted Officer specially F
authorised in this behalf by the Commission, may enter any building
or place where the Commission has reason to believe that any
document relating to the subject matter of the inquiry may be
found, and may seize any such document or take extracts or copies
there from subject to the provisions of section 100 of the Code of
Criminal Procedure, 1973, insofar as it may be applicable.” G

23. The conclusion in favour of an Appropriate Commission being
headed by a Judge in the context of the Commission having the ‘trappings
of a Court’ is drawn on the basis of the aforesaid provisions, apart from
the provisions relating to the appointment of Members and the
Chairperson. H
130 SUPREME COURT REPORTS [2018] 9 S.C.R.

A C.A. No.13451/2015 (stand of the State of Tamil Nadu):
24. The State Government, having succeeded before the Madras
High Court as per the impugned judgment dated 7.2.2014, supported the
view taken by the Madras Bench and adopted the arguments of the
learned Attorney General. Mr. Shekhar Naphade, learned Senior
B Advocate appearing for the State of Tamil Nadu pleaded that the whole
scheme of the said Act ought to be taken into consideration and that
disproportionate importance was being given to sub-section (2) of Section
84 for appointment of a Judge as a Chairperson, not realizing the variety
of functions performed by the Commission, of which the adjudicatory
functions were only a small percentage.
C
C.A. No.14697/2015 (plea of the Gujarat State Regulatory
Commission):
25. Mr. Jayant Bhushan, learned Senior Advocate appearing for
the Gujarat State Electricity Regulatory Commission, sought to pose a
D question, i.e., where does the judgment in Tamil Nadu Generation and
Distribution Corporation Limited4 make it mandatory for a Judge to
be the Chairperson? The very wordings were said to be recommendatory
in character, which had already been read out by the learned Attorney
General. In the alternative, it was pleaded that the observations made
were really obiter dicta, as the issue of appointment of the Chairperson
E of the State Commission was not the lis before the Court in that matter.
26. He then posed a question: – when the Act and the judgment
does not make the appointment of a Judge as the Chairperson mandatory,
then is there any other material, which can be said to make the appointment
of the Chairperson as a Judge mandatory? In this behalf he submitted
F that the opposite side could only fall back on Madras Bar Association
v. Union of India & Anr.5 (MJ-II). The said judgment dealt with the
creation of the National Tax Tribunal under the National Tax Tribunal
Act, 2005. The constitution of the Tribunal was held to be one for transfer
of the appellate jurisdiction under Tax Laws vested in the High Courts.
G The majority held that the Act could not pass the test of constitutionality,
on account of inter alia, the provisions relating to the appointment of
the Chairpersons and Members of the Tribunals. In the said case,
reference was made to the earlier Constitution Bench judgment in the

4
supra
5
H (2014) 10 SCC 1
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 131
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

Union of India v. Madras Bar Association6 (MJ-I), crystallizing the A
legal position while transferring adjudicatory functions from Courts to
Tribunals. It was observed that such Tribunals should possess the same
independence, security and capacity as the courts which the Tribunals
are mandated to substitute and thus, Members of the Tribunals discharging
judicial functions could only be drawn from sources possessed of expertise
B
in law and competent to discharge judicial functions. Technical members
could also be appointed where such technical expertise is essential. But
where the adjudicatory process transferred to the Tribunal did not require
any specialized skills, knowledge or expertise, the provision for
appointment of technical Member would constitute a clear case of
delusion and encroachment upon the independence of the judiciary, and C
the “rule of law.” On the stature of Members, it was observed that the
same would depend on the jurisdiction transferred, i.e., if the jurisdiction
of the High Court was transferred to the Tribunals, the stature of the
members of the newly constituted tribunal, should be possessed of
qualifications akin to the Judges of the High Court. The same would be
D
the position qua District Judges appointment. Such a process of judicial
review, in Madras Bar Association v. Union of India7 (MJ-II), was
held to be a part of the basic structure of the Constitution.
27. In the context of the functions to be carried out under the said
Act, it was observed that the present case was not one where the powers
of judicial review which were vested in a judicial forum was sought to E
be transferred. The importance of judicial review and its sanctity was
maintained by the composition of the Appellate Tribunal, which would
hear appeals from the orders of the Commission. The functions of the
Commission were canvassed to be one of technical nature largely, and
thus, would not require a Judge to head the Commission. In the alternative, F
it was stated that, at best, the requirement of a mandatory legal Member
may be read into the provisions, though the explicit terms of the statute
do not say so.
28. Learned counsel took us through the provisions of Section 85
of the said Act to contend that the reference to the Chairperson under G
sub-sections (2), (3), (5) & (6) of Section 85 would be made otiose, as in
that eventuality, the Selection Committee would never be called upon to
appoint a Chairperson. A Judge could be appointed as the Chairperson
6
(2010) 11 SCC 1
7
supra H
132 SUPREME COURT REPORTS [2018] 9 S.C.R.

A only through the alternative route of Section 84(2) read with the proviso
thereto.
29. Learned counsel also referred to Tamil Nadu Generation
and Distribution Corporation Limited8, more specifically to para 25,
which recorded the submission of the counsel for the appellant therein
B to the effect that the State Commission cannot be an adjudicatory body
as it does not have the trappings of the Court, which would normally be
manned exclusively by the Judges. The plea was that under Section 84
of the said Act, there is no requirement for the Chairperson or the Member
of a State Commission to be a Judge of a High Court. No such
appointment had actually been made in that case nor did the Commission
C have a judicial member and, thus, the same was contrary to the
Constitution Bench judgment of this Court in Madras Bar Association9
(MJ-I). He, thus, submitted that it is in the context of this argument that
what was observed by the Bench in that judgment would have to be
construed and nothing more than that. It is this argument, which has
D been dealt with when the observations relied upon in the impugned order
were referred to. This is stated to be quite apparent even from para 55,
which records the submissions of the then counsel for the appellant in
Tamil Nadu Generation and Distribution Corporation Limited10 and
what was accepted by the Court in para 59 of the judgment, i.e.,
adjudicatory functions generally ought not to be conducted by the State
E Commission in the absence of a Judicial Member, which are not fairly
relative to tariff fixation or the advisory and recommendatory functions
of the State Commission.
30. Learned Senior Advocate next turned to Section 86(1)(f) of
the said Act and referred to the judgment in Gujarat Urja Vikas Nigam
F Ltd. v. Essar Power Ltd.11 (GJ-I) to submit that the expression ‘and’,
used in Sub-Section 86(1)(f) has already been read as ‘or’. For clarity,
the sub-section is reproduced hereunder:
“86. Functions of State Commission.- (1) The State
Commission shall discharge the following functions, namely:—
G
xxxx xxxx xxxx xxxx xxxx
8
supra
9
supra
10
supra
11
(2008) 4 SCC 755
H
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 133
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

(f) adjudicate upon the disputes between the licensees and A
generating companies and to refer any dispute for arbitration;”
(Emphasis supplied)
31. Therefore, the functions of the State Commission in respect
of the aforesaid clause refers to adjudication upon the disputes between
the licensees and generating companies as also to the function of reference B
of any dispute for arbitration. Our attention was invited to para 40 in
Tamil Nadu Generation and Distribution Corporation Limited 12 to
contend that there is no requirement that an arbitrator should be a judicial
person. A submission was also made that the data collected in respect
of the functioning of the Gujarat State Commission showed that the C
adjudicatory functions were not more than 10 per cent. A large number
of functions were of tariff fixation, which was over 30 per cent, while
the regulatory functions were 59 per cent and grant of licenses were a
fraction of a percentage.
32. The emphasis on the reading of the judgment in Union of D
India v. Madras Bar Association13 (MJ-I), it was contended, is on the
shifting of the adjudicatory functions from the High Courts to the Tribunals
but when, as in the present case, the State Commission has not replaced
the functioning of the High Court, the same would have no application.
For example, the Electricity (Supply) Act, 1948, dealt with the issue of
reference to arbitration in Section 76(2) of that Act. There was no E
question of any judicial mind. The Electricity Regulatory Commission
Act, 1998 provided for an appeal to the High Court in certain cases from
the order of the State Commission. Therefore, the appellate authority
constituted as a replacement for the appeal before the High Court is
manned by a sitting or retired Supreme Court Judge or the Chief Justice F
of the High Court. Learned counsel also referred to the epilogue in
Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd.14(GJ-II), which
dealt with the vital issue of composition and functioning of Tribunals and
statutory framework thereof. In the context of the observations in
Madras Bar Association v. Union of India & Anr.15 (MJ-II), it was
observed in para 33 that the law laid down by this Court may call for G
review of composition of Tribunals under the Electricity Act or other
12
supra
13
supra
14
(2016) 9 SCC 103
15
supra H
134 SUPREME COURT REPORTS [2018] 9 S.C.R.

A corresponding statutes. This was so as an appeal to this Court on
questions of law or substantial questions of law show that Tribunals deal
with such questions or substantial questions, and that the direct appeals
to this Court has the result of denial of access to the High Court. Such
Tribunals, thus, become a substitute for the High Courts, without the
manner of appointment to such Tribunals being the same as the manner
B
of appointment of High Court Judges.
33. Lastly, learned counsel referred to Uttar Pradesh Power
Corporation Limited v. National Thermal Power Corporation
Limited & Ors.16 where observations were made qua the function of
the Central Commission constituted under Section 3 of the Electricity
C Regulatory Commissions Act, 1998 as an expert body, which had been
entrusted with the task of determination of tariff, which involves highly
technical procedure requiring not only working knowledge of law but
also of engineering, finance, commerce, economics and management.
Thus, it was held that the issues with regard to determination of tariff
D should be left to the expert body and ordinarily the High Court and even
this Court should not interfere with the determination of tariff.
34. Mr. Jayant Bhushan, learned Senior Advocate sought to
crystallize his interpretation of the Act and the challenge to the impugned
judgment of the Gujarat High Court on a four point basis:
E i. The constitution of the Selection Committee for Members under
Section 85 is not applicable to a Judge for which there is a separate
channel under Section 84(2). Thus, to the extent that Section 85
referred to a Chairperson, that portion would be made otiose, if a
Judge alone is to be appointed as the Chairperson.
ii. The appointment of a Chairperson under Section 84(2) of the
F said Act is an enabling provision and not a mandatory provision.
iii. The observations in Tamil Nadu Generation and Distribution
Corporation Limited17, if read to give a binding direction for the
Chairman being a Judge, would then be obiter as that was not the
issue before the Court.
G
iv. The necessary and mandatory requirement of having a Judge
to head a Tribunal is only where the shifting of the adjudicatory
function from the High Court to the Tribunals are envisaged.
16
(2011) 12 SCC 400
17
H supra
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 135
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

35. Now turning to the other point of view and the various entities, A
which canvassed for the Chairperson to be mandatorily a Judge of the
High Court :
Stand of Interveners (National Solar Energy Federation of India)
in Civil Appeal No.13451/2015:
36. Mr. Sajan Poovayya, Senior Advocate appearing for the B
aforesaid entity sought to support the Gujarat line of reasoning and
submitted that there should be, at least, one judicial Member in the
Commission, who should be the Chairman. He seeks to support this
view by reason of the nature of powers vested in the Chairman of the
Commission and has referred to Section 92, which reads as under: C
“92. Proceedings of Appropriate Commission.- (1) The
Appropriate Commission shall meet at the head office or any other
place at such time as the Chairperson may direct, and shall observe
such rules of procedure in regard to the transaction of business at
its meetings (including the quorum at its meetings) as it may D
specify.
(2) The Chairperson, or if he is unable to attend a meeting of the
Appropriate Commission, any other Member nominated by the
Chairperson in this behalf and, in the absence of such nomination
or where there is no Chairperson, any Member chosen by the E
Members present from amongst themselves, shall preside at the
meeting.
(3) All questions which come up before any meeting of the
Appropriate Commission shall be decided by a majority of votes
of the Members present and voting, and in the event of an equality F
of votes, the Chairperson or in his absence, the person presiding
shall have a second or casting vote.
(4) Save as otherwise provided in sub-section (3), every Member
shall have one vote.
(5) All orders and decisions of the Appropriate Commission shall G
be authenticated by its Secretary or any other officer of the
Commission duly authorised by the Chairperson in this behalf.”
37. Thus, as per sub-section (2) of Section 92, the Chairperson
has a right to nominate a member who would chair the meeting in his
H
136 SUPREME COURT REPORTS [2018] 9 S.C.R.

A absence and as per sub-section (3), the Chairperson has a casting vote.
This, he contended was vital to the adjudicatory process, which is by
majority and, thus, the necessity of having a judicial Member as a
Chairperson apart from the aspect of power wielded by the Commission
from Sections 94 to 96 of the said Act.
B Stand of Madurai Power Corporation Private Limited:
38. Mr. Mohan Parasaran, learned Senior Advocate appearing
for the aforesaid intervener referred to Section 84(1) of the said Act to
contend that where reference is made to a person of law, that cannot be
a reference to a judicial Member. It is only in Section 84(2) that there is
C a specific reference to a person, who is or has been a Judge of the High
Court to be a Chairperson. Thus, the presence of a man of law would
be no substitute to the requirement of a Judge who would bring a judicial
thought process to the decision making. In this behalf he referred to the
observations in Madras Bar Association v. Union of India & Anr.18
(MJ-II). We may, however, add at this stage itself that these are the
D same observations, which relate to the ground situation where the
adjudicatory functions of the Court are shifted to the Tribunal.
39. He also contended that para 59 of the Tamil Nadu Generation
and Distribution Corporation Limited 19only records the submission of
the then counsel for the appellant while the ratio is contained in para 60.
E The ratio speaks of the enabling character of Section 84(2) of the said
Act to appoint a Judge and in that eventuality the appointment is to be
made after the consultation with the Chief Justice of the High Court. In
this context, he submitted that the ratio of a judgment is something that
has to be culled out on certain established principles and not from every
F line of every observation. In this context he referred to the judgment in
Natural Resources Allocation In re Special Reference No.1 of
201220. Article 141 of the Constitution laid down that “law declared”
by the Supreme Court is binding upon all Courts within the territory of
India and, thus, it was held that “ “law declared” has to be construed as
a principle of law that emanates from a judgment or an interpretation of
G a law or judgment by the Supreme Court, upon which, the case is
decided……the “law declared” is the principle culled out on the reading
of a judgment as a whole in light of the questions raised, upon which the
18
supra
19
supra
H 20
(2012) 10 SCC 1
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 137
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

case is decided.” What is binding upon courts, “is the ratiodecidendi A
of the judgment. It is the essence of a decision and the principle upon
which the case is decided which has to be ascertained in relation to the
subject-matter of the decision.”
Stand of the Madras Bar Association (Original Petitioner) in Civil
Appeal No.13451/2015 B
40. The challenge to the impugned judgment of the Madras High
Court in that matter was laid by Mr. Arvind Datar, learned Senior
Advocate. He sought to contend that the year 1991 saw a paradigm
shift in the economic functioning in the country where State functions
were opened up to private players. This was not supposed to be C
unregulated and, thus, the Parliament provided a regulatory body. By
the time the said Act was enacted in 2003, the Parliament had become
wiser and the introduction of the requirement of a Judge to head the
regulatory commission was, thus, introduced in this Act.
41. Turning to the specific provisions of the Act, he referred to D
Section 82(4) of the said Act, which provides that a State Commission
would consist of not more than three members including the Chairperson.
Section 2(43), defines a Member to include a Chairperson and reads as
under:
“2. Definitions.- In this Act, unless the context otherwise E
requires,—
xxxx xxxx xxxx xxxx xxxx
(43) “Member” means the Member of the Appropriate Commission
or Authority or Joint Commission, or the Appellate Tribunal, as
the case may be, and includes the Chairperson of such Commission F
or Authority or Appellate Tribunal;”
42. In the sittings of the Commissions, disputes emanating from
Section 86(1)(f) of the said Act being adjudicated upon are categorized
as DRP (Dispute Resolution Petition) cases. Tariff fixation is, of course,
not adjudicatory. He submitted that Section 4 of The Telecom Regulatory G
Authority of India Act, 1997 was similar to Section 84(2) of the said Act,
but there was no provision for a Judge to be appointed. Similar was
stated to be the position of Section 4 of the Securities and Exchange
Board of India Act, 1992. On the other hand, the specific provision
made in Section 84(2) of the said Act has to be read in the context of the
H
138 SUPREME COURT REPORTS [2018] 9 S.C.R.

A objects and reasons for the enactment, i.e., distancing the regulating
body from the Government.
43. Learned Senior Counsel referred to the Electricity Regulatory
Commission Act, 1998 to submit that Section 17 of that Act was the
earlier avatar of Section 84 of the said Act, while Section 18 of that Act
B was the earlier avatar of Section 85 of the said Act. A reference was
also made to The Petroleum and Natural Gas Regulatory Board Act,
2006, more specifically to Section 3(3) of that Act. The tariff regulatory
functions are determined as per Section 62 and 64 of the said Act. On
the prevalent provisions under different Acts, it was submitted that the
constitution of the Competition Commission of India came to be examined
C in Brahm Dutt v. Union of India21. The argument was similar, i.e., the
functions of the Commission being more of a judicial body having
adjudicatory powers, the right to appoint a judicial member of the
commission should rest with the Chief Justice of India or his nominee
and further the Chairman of the commission necessarily has to be a
D retired Chief Justice or Judge of the Supreme Court or the High Court.
The contention was that the Chairman of the Commission had to be a
person connected with the judiciary picked for the job by the Head of
the Judiciary and should not be a bureaucrat or other person appointed
by the Executive without reference to the Head of the Judiciary. In this
context, the Supreme Court observed in para 6 that if an expert body is
E to be created, as submitted on behalf of the Union of India consistent
with what is said to be the international practice, it may be appropriate to
consider the creation of two separate bodies – one with the expertise,
i.e., advisory and regulatory and the other adjudicatory. This is followed
up by an appellate body as contemplated, which could go a long way in
F meeting the challenge sought to be raised in the writ petition. Insofar as
the working of the Commission was concerned, it was observed that it
had a number of adjudicatory functions as well.
44. In Gujarat Urja Vikas Nigam Ltd.22 (GJ-I), the implied
conflict between Section 86(1)(f) of the said Act and Section 11 of the
G Arbitration & Conciliation Act, 1996, was reconciled and applying the
harmonious construction principles (Mimansa principles) it was observed
that where there is a dispute between a licensee and the generating
company, only the State Commission or the Central Commission or
21
(2005) 2 SCC 431
22
H supra
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 139
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

arbitrator nominated by it could resolve such disputes, whereas all other A
disputes (unless there is some other provision in the Electricity Act, 2003)
would be decided in accordance with Section 11 of the Arbitration &
Conciliation Act, 1996. This was stated to be also in consonance with
Section 158 of the said Act in Part XVI dealing with Dispute Resolution
where arbitration was provided for in terms of the Arbitration &
B
Conciliation Act,1996.
45. Learned Senior Counsel sought to point out that no Judge had
ever been appointed as the Chairperson. The mandate of Section 85(2)
of the said Act, in fact, required that six months prior to the superannuation
or end of the tenure of the Chairperson or Member, a reference should
be made to the Selection Committee to fill up the vacancy. The expression C
“may”, it was submitted should be read as “shall” in Section 84 of the
said Act. The alternative submission advanced was that when a vacancy
of the Chairperson is to arise, it should be intimated to the Chief Justice
of the High Court to confirm whether any Judge was available or not.
In any case, at least, one legal mind should be there, who has no baggage D
or past connection with the special area in question directly. This was
more so as apart from Section 86(1)(f), it was submitted that Section
33(4) deals with compliance of directions, if any dispute arises with
reference to the quality of electricity or safe, secure and integrated
operation of the State grid and Section 9(2) proviso, which is in reference
to construction of a captive generating plant and the maintenance and E
operation of the same being entitled to open access for the purpose of
carrying the electricity from the captive generating plant to the destination
of its use, with the proviso making such open access subject to availability
of adequate transmission facility to be determined by the Central
Transmission Utility or the State Transmission Utility. As per the second F
proviso, any dispute regarding the availability of transmission facility has
to be referred to the Appropriate Commission for adjudication. It is
submitted that these are two examples clearly requiring an adjudicatory
bend of mind.
T.C.(C) No.139/2015 G
46. This petition has been filed by a Senior Advocate of the Madras
high Court against the exercise of suo moto power by the Commission
in respect of a tariff hike and in that process sought to challenge the

H
140 SUPREME COURT REPORTS [2018] 9 S.C.R.

A appointment of the Chairperson and seeks to canvass that there exists a
mandatory requirement for him to be a retired Judge of a High Court.
T.C.(C) No.138/2015
47. This petition filed before the Madras High Court is, once again,
by an Advocate, purportedly in public interest. Apart from the
B fundamental issue raised of a Judge to be appointed as the Chairman of
the State Commission, like in the previous Transfer Petition, certain
notifications have also been assailed. The Tamil Nadu Government had
published a Notification dated 26.9.2013, constituting a three Member
Selection Committee for selection of the Members of the State
C Commission in terms of Section 85 of the said Act. This selection process
was required to be completed in three months and had to recommend, at
least, two names for the post of Members. The Committee recommended
the name of Mr. G. Rajagopal (respondent No.7) on 27.12.2013. This
appointment is specifically assailed on the ground that he was still working
as Director (Finance), TANGEDCO when his name was recommended
D by the Selection Committee, and that Mr. Rajagopal opted for voluntary
retirement after his name had been recommended by the Selection
Committee. The Notification of his appointment was issued on 31.12.2013
whereafter he assumed office on 9.1.2014.
48. The impugned decision of the Madras High Court opining that
E the Chairperson need not be a High Court Judge was rendered on
7.2.2014.
49. Another Notification dated 27.2.2014 was published constituting
a Selection Committee for selecting a person for the post of the
Chairperson. Mr. S. Akshayakumar (respondent No.6) retired from the
F post of the Managing Director of TANTRANSCO on 31.5.2014 and
was appointed as the Chairperson of the State Commission vide
Notification dated 6.6.2014, assuming charge on 9.6.2014.
50. On 12.12.2014, the State Commission consisting of these two
persons as Member and Chairman and Mr. S. Nagalsamy, passed a
G tariff order permitting a tariff hike by TANGEDCO by a majority of 2:1
with respondent Nos.6 & 7 concurring on the issue of tariff hike while
the third Member (Mr. Nagalsamy) was dissenting. The dissent was on
the legality of the suo moto tariff order.

H
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 141
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

51. We have recited these facts only to bring on focus that the A
grievance is only with the tariff order, but under the garb of the same,
the appointment of respondent Nos.6 & 7 is now sought to be assailed
on the ground that the said two persons could not be really categorized
as not having any financial or other interest, which is likely to prejudice
their functioning as Chairperson and Member in terms of Section 85(5)
B
of the said Act. The two companies TANGEDCO and TANTRANSCO
were established for power generation and transmission of power
respectively by restructuring the Tamil Nadu Electricity Board in
compliance of Section 131 of the said Act and are State owned
companies.
52. The original petitioner seeks to impute bias against these two C
persons because of the post they have held. Learned counsel appearing
on behalf of the petitioner referred to the judgment of this Court in Rajesh
Awasthi v. Nand Lal Jaiswal23 wherein in the process of assailing an
appointment to the Commission, Section 85(5) was analysed. It was
observed that the power under the said sub-section (5) was to be exercised D
by the Selection Committee and not by the Government. Thus, whether
the persons named by the panel have any financial or other interest,
which is likely to affect their functioning as Chairperson was a matter
which depended upon the satisfaction of the Selection Committee before
recommending it to the State Government. In the facts of the case, it
was found that the concerned person was working as Joint President of E
the JP Power Ventures Limited at the time of selection, hence he had
financial and other interest in the company, which would prejudicially
affect his functions as the Chairperson of the Commission. The judgment
of this Court in Mor Modern Cooperative Transport Society Ltd. v.
Financial Commissioner & Secretary to Govt. of Haryana and Anr. 24 F
was also referred to. The provision in question was Section 68(2) of the
Motor Vehicles Act, 1988. Section 68 of the Motor Vehicles Act, 1988
empowered the State Government to constitute a State Transport
Authority and Regional Transport Authorities to exercise powers and
functions specified in Chapter V. Section 68(2) put a restriction that no
person who has a financial interest whether as proprietor, employee or G
otherwise in any transport undertaking was to be appointed and in case
such financial interest was acquired post appointment, the person was
23
(2013) 1 SCC 501
24
(2002) 6 SCC 269
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142 SUPREME COURT REPORTS [2018] 9 S.C.R.

A required to give notice in writing to the State Government of acquisition
of such interest and would vacate office. The Transport Commissioner
and Traffic Manager working in the Office of the General Manager of
the Haryana Roadways, a State Undertaking, were held to fall within
the mischief of sub-section (2) of Section 68 of that Act. The nature of
“financial interest” as contemplated by the said sub-section was examined
B
in the narrower sense and it was held to imply direct personal benefit of
an economic nature while in the wider sense it would include direct or
indirect interest that a person has in relation to the finances of an
undertaking. Such an interest was held to include the interest of an
official who manages the finances of the undertaking or on whom rests
C the burden of financial accountability. The intention of the legislature
was deciphered from reading the statute as a whole.
53. We may, however, note at this stage itself that the factual
matrix in the said case dealt with the situation where a person was
holding both the offices.
D T.C.(C) No.140/2015 and T.C.(C) No.137/2015 & IA Nos.3 & 4/
2016
54. There was really no fresh material addressed before us so far
as the aforesaid petitions are concerned.
55. Insofar as IA Nos.3 & 4/2016, filed by CLP Wind Farms
E Private Limited, seeking intervention in T.C.(C) No.137/2015, are
concerned, the prayer for intervention is made on the ground that the
Court issues appropriate directions to the Tamil Nadu Electricity
Regulatory Commission for time bound hearing and expeditious
adjudication of the applicant’s petitions, being DRP Nos.62/2014 & 63/
2014. The Court finds no merit in the applications, as the prayers made
F in the applications are outside the lis being adjudicated by the Court.
The same are accordingly disposed of.
T.P.(C) No.974/2016
56. This Transfer Petition arises from the Delhi High Court. Ms.
Sujatha Balachander on behalf of the original petitioner before the High
G Court sought to plead that the word “may” should be read as “shall”
keeping in mind the intent of the legislature (Bachahan Devi & Ar. V.
Nagar Nigam, Gorakhpur & Anr25). Normally, it was observed, “may”
is an enabling or discretional while “shall” is obligatory the connotation is
not inelastic or inviolate. Thus, where to interpret the word “may” as
H 25
(2008) 12 SCC 372
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 143
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

directory would render the very object of the Act as nugatory, the word A
“may” must mean “shall.” The Act was actually enacted in the interest
of the public while seeking to distance the Government from determination
of tariff. Such distance from the Government, it was contended, could
be brought about by appointment of a High Court Judge with a trained
judicial mind as the Chairman of the Commission.
B
57. Learned counsel referred to A.P. Power Coordination
Committee & Ors. v. Lanco Kondapalli Power Ltd. & Ors.26, where
it was held that a claim coming before the Commission could not be
entertained or allowed if it is barred by limitation prescribed for an ordinary
suit before a Civil Court. This aspect was sought to be emphasized in
the context of the discussion that the Commission was performing judicial C
functions. The view taken by this Court in Union of India v. Namit
Sharma27 was sought to be distinguished since no adjudicatory functions
were involved in the performance of the functions of an Information
Commissioner.
58. A reference was, once again, made to the powers of the D
Commission under Section 94 to 96 of the said Act as also to Section 97,
which provides for delegation of the power to any Member, Secretary,
Officer of the Commission except the powers to adjudicate disputes
under Sections 79 and 86, and the powers to make Regulations under
Section 178 or 181 as may be deemed necessary. E
59. Our attention was also drawn to the order of the Appellate
Authority dated 27.2.2013 in Appeal No.184/2011 where some
observations have been made on the functioning of the State Commission.
Apparently the State Commission had refused to follow the judgment of
the Tribunal on a specious plea and this attitude of the State Commission F
was called ‘audacious’ and ‘most unfortunate’, ‘reflecting a lack of
judicial approach, judicial knowledge and judicial ethics’. It was, thus,
pointed out that the absence of a Judge as a Chairperson is resulting in
such orders of the Commission, in ignorance of the well-established
principles of law, including that of precedent.
G
Rejoinder Response:
60. We are dealing with the rejoinders of the counsel only to the
extent that they seek to add something arising from the submissions of
26
(2016) 3 SCC 468
27
(2013) 10 SCC 359 H
144 SUPREME COURT REPORTS [2018] 9 S.C.R.

A the counsel propagating that a Judge should be the Chairman of the
Commission. Learned Attorney General referred to the judgment in
Union of India v. Namit Sharma28 but then we may note that the
principle advanced is based on a non-adjudicatory function. Learned
AG also referred to Part XI dealing with the Appellate Tribunal where
under Section 111(6), the Appellate tribunal can call for records of
B
proceedings and make orders and can act even on its own motion. The
provision reads as under:
“111. Appeal to Appellate Tribunal.-
xxxx xxxx xxxx xxxx xxxx
C (6) The Appellate Tribunal may, for the purpose of examining the
legality, propriety or correctness of any order made by the
adjudicating officer or the Appropriate Commission under this Act,
as the case may be, in relation to any proceeding, on its own
motion or otherwise, call for the records of such proceedings and
D make such order in the case as it thinks fit.”
61. Not only that, under Section 121, orders, instructions or directions
can be made by the Tribunal to the Appropriate Commission for the
purpose of performance of its statutory functions under the Act. The
provision reads as under:
E “121. Power of Appellate Tribunal.- The Appellate Tribunal
may, after hearing the Appropriate Commission or other interested
party, if any, from time to time, issue such orders, instructions or
directions as it may deem fit, to any Appropriate Commission for
the performance of its statutory functions under this Act.”
F 62. The contention thus advanced, is that the scheme of the Act
looks to the appellate authority as a body which is supervising the
Commission, and is chaired by a person who is, or has been the Chief
Justice of the High Court or a Judge of the Supreme Court. Thus, there
is really no need to have a High Court Judge as the Chairperson of the
State Commission albeit an enabling provision having been made.
G
63. Mr. Naphade, learned Senior Advocate appearing for the State
of Tamil Nadu submitted that orders dated 11.12.2014 and 12.12.2014
had been unsuccessfully carried in appeal and even the Special Leave
Petitions were dismissed. Thus, the merits of the orders passed cannot
28
H supra
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 145
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

be questioned. He further submitted that suo moto proceedings were A
initiated on 23.9.2013 while the appointment was made on 31.12.2013.
Thus, respondents Nos. 6 & 7 were both appointed after the suo moto
proceedings had been initiated. The Selection Committee had not been
impleaded as a party even though the selection process was being
questioned. This Selection Committee was presided over by a retired
B
Judge of the High Court. It was also submitted that a suo moto
revisionary power was actually conferred on the appellate tribunal under
Section 111(6) of the said Act to cure any defects in the orders passed
by the Commission.
64. Our attention was also invited to the order of the appellate
authority in OP No.1/2011 dated 11.11.2011. This arose out of a letter C
stated to be sent by the Ministry of Power dated 21.1.2011 complaining
that most of the State Distribution Utilities have failed to file annual
tariff revision petitions in time and, thus, a number of State’s tariff revision
had not taken place for a number of years. The Tribunal was requested
to take appropriate action by issuing necessary directions to all the State D
Commissions to revise the tariff periodically. The State Commission
framed two questions out of which the first question was as under:
“(i) Whether the State Regulatory Commissions have the
jurisdiction to suo moto initiate proceedings for determination of
tariff under section 62, 64 and 86 of the Electricity Act, 2003 in
the absence of the Tariff application to be filed by the Utilities E
under Section 64 of the Act?”
65. The answer to this question was given by the Commission by
opining that the State Commission must initiate suo moto proceedings
for tariff determination in accordance with Section 64 of the Act read
with clause 8.1 (7) of the tariff policy in the event of the delay in filing of F
the ARR, truing-up and annual performance review one month beyond
the scheduled date of submission of the petition.
66. Learned Senior Advocate, turning to the provisions of Section
84(2) of the said Act sought to emphasise that the same was a
“notwithstanding” clause as is apparent from its bare reading and it clearly G
states “notwithstanding anything contained in sub-section (1)”. Thus, it
does not take away what is stated in sub-section (1). Learned counsel
relied upon the Constitution Bench judgment of this Court in The
Dominion of India & Anr. v. Shrinbai A. Irani & Anr.29 for the
29
(1955) 1 SCR 206 H
146 SUPREME COURT REPORTS [2018] 9 S.C.R.

A proposition as to how a non-obstante clause should be dealt with. It was
observed that “While recognizing the force of this argument it is however
necessary to observe that although ordinarily there should be a close
approximation between the non obstante clause and the operative part
of the section, the non obstante clause need not necessarily and always
be co-extensive with the operative part, so as to have the effect of
B
cutting down the clear terms of an enactment. If the words of the
enactment are clear and are capable of only one interpretation on a plain
and grammatical construction of the words thereof, a non obstante clause
cannot cut down that construction and restrict the scope of its operation.
In such cases the non obstante clause has to be read as clarifying the
C whole position and must be understood to have been incorporated in the
enactment by the Legislature by way of abundant caution and not by
way of limiting the ambit and scope of the operative part of the
enactment.”
67. For the same purpose, the reference was also made to Ajit
D Singh (II) v. State of Punjab30.It was, once again, emphasized that the
appellate tribunal takes care of various concerns, more so when matters
have to be heard by a Bench with at least one judicial member. It was
also emphasized that under Section 82(2) of the Act a State Commission
has to be a body corporate having perpetual succession and common
seal and the provision reads as under:
E
“82. Constitution of State Commission.-
xxxx xxxx xxxx xxxx xxxx
(2) The State Commission shall be a body corporate by the name
aforesaid, having perpetual succession and a common seal, with
F power to acquire, hold and dispose of property, both movable and
immovable, and to contract and shall, by the said name, sue or be
sued.”
68. As per Section 84(4) of the said Act, the Chairperson is to be
the Chief Executive of the State Commission. It was, thus, pleaded that
G it may not even be advisable for a Judge to hold this nature of office.
69. It was also emphasized that the reliance placed by the opposite
side on Mor Modern Cooperative Transport Society Ltd.31 is misplaced
30
(1999) 7 SCC 209
31
supra
H
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 147
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

as the observations made in para 14 of the judgment have to be A
understood in the context of a dual charge being held by the said person,
an aspect we have already noted while referring to that argument of the
opposite side.
70. Mr. Jayant Bhushan, learned Senior Advocate, in addition,
referred to the Petroleum and Natural Gas Regulatory Board Act, 2006 B
to contend that the Board constituted under the Act has to have a
Chairperson and a Member (Legal) as per Section 3 of the said Act
though the functions of the Board provide for adjudicatory functions
under Chapter V, more specifically, in Section 24. Thus, it is not as if a
non-Judge cannot carry out any adjudicatory functions.
C
71. He also sought to emphasise the merit of the Chairperson of
the Gujarat Commission, who has a Master of Business Management in
Finance, Bachelor of Engineering (Electrical), has gone through a
software course, and a regulatory course on economic regulations from
eminent universities and has total experience of 37 years in the power
sector. This includes more than 19 years’ experience in electricity D
regulation and is fully conversant with electricity laws and related issues.
72. Learned Senior Advocate sought to assail the impugned order
of the Gujarat High Court based on the rule of purposive construction
and contended that this principle cannot be utilized to hold something as
different from what the legislature has expressed in clear words. E

Our View:
Section 84(2) of the said Act:
73. The controversy in question would have to be dealt with at
two plains. The first, is as to how the statute itself has to be read insofar F
as the appointment of the Chairperson of the tribunal is concerned. The
second is, having read the statute in a particular manner, what is the
effect of the judicial pronouncements and the relevant legal literature in
terms of the remaining composition of the tribunal apart from the
Chairperson. If we turn to the first question, on a plain reading of Section
G
84(1) of the said Act all that is mandated is that both the Chairperson
and the Members of the State Commission “shall” be persons of ability,
integrity and standing who have adequate knowledge of and have shown
capacity in dealing with problems relating to engineering, finance,
commerce, economics, law or management. A plain grammatical reading
H
148 SUPREME COURT REPORTS [2018] 9 S.C.R.

A of this Section shows that no distinction has been made qua the
qualifications of a Chairperson and Member. All that is required is the
mandates contained in the sub-section, which begin with the word “shall”.
Thus, any person of the fields mentioned therein, having the ability, integrity
and standing can be appointed as a Member or Chairperson.
B 74. Section 85 of the said Act provides for constitution of a Selection
Committee to select the Members of the State Commission, which in
turn has to consist of the persons as set out therein and mandatorily has
to have a person, who has been a Judge of the High Court as the
Chairperson of the Selection Committee. We may also note that this
provision refers to the appointment of ‘Members’ of the State Commission
C but then that would also include the Chairperson of the State Commission,
in view of sub-section 43 of Section 2 of the said Act, which reads as
under:
“2. Definitions.
D …. …. …. …. ….
(43) “Member” means the Member of the Appropriate Commission
or Authority or Joint Commission, or the Appellate Tribunal, as
the case may be, and includes the Chairperson of such Commission
or Authority or Appellate Tribunal;”
E 75. Thus, the reading of sub-section (1) of Section 84 read with
Section 85 of the said Act would leave no manner of doubt as to the
fields from which a Chairperson or a Member of the State Commission
can be chosen from. However, the controversy has emanated from the
inclusion of sub-section (2) of Section 84 of the said Act. This is so, as
F sub-section (2) begins with a “notwithstanding” clause providing that
the State Government “may” appoint any person as Chairperson from
amongst the persons, who is, or has been, a Judge of the High Court.
This is to be read with the proviso that such an appointment would have
to be made in consultation with the Chief Justice of that High Court.
76. The proviso only respects and maintains the accepted position
G
that in appointment of persons, who have been holding such senior judicial
office, consultation with the judicial head, being the Chief Justice, should
be mandatory. The question which thus arises, is whether sub-section
(2) of Section 84 is facilitative in character for the purposes of appointment

H
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 149
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

of a retired or current Judge of the High Court as a Chairperson, or is A
the said provision mandatory in character. Both the golden rule and the
literal rule of statutory construction are well established that a statute
must be read as it is framed by the legislature. It is not the function of
the Court to supplant or read into the statute something which is not
provided. This is not to say that there have not been judicial views taken
B
qua the interchangeability of the expression “may’ and “shall” in certain
provisions. Thus, the use of the word “shall” raises a presumption that
a particular provision is imperative. However, it has been construed as
merely directory in certain cases if the context or intention of the
legislature demands otherwise. The Courts may ascertain the real
intention of the legislature by carefully attending to the whole scope of C
the statute (Sainik Motors v. State of Rajasthan32 and State of U.P. v.
Babu Ram33). We are, however, faced with a converse situation as to
whether “may” can be read as “shall”. In this behalf we may take
recourse to the judicial opinion that where in the same section the word
‘may’ has been used at one place and ‘shall’ at another place, it would
D
strengthen the inference that the words have been used in the primary
sense (Chairman Canara Bank, Bangalore v. M.S. Jasra34).
77. A reference to Maxwell on The Interpretation of Statutes
(Twelfth Edition), more specifically the chapter on “Exceptional
Construction” would show that the modification of the language of a
statute is the tool used only if, in its ordinary meaning and grammatical E
construction, there is a manifest contradiction of the apparent purpose
of the enactment, or some inconvenience or absurdity which could hardly
have been intended. It has been observed that in ordinary usage, “may”
is permissive and “must” is imperative and that the word “may” used in
a statute would not generally be held to be mandatory. However, in F
some cases where “may” is used in the context of a compulsory force,
the meaning has been so modified by judicial exposition. The heading of
the Chapter itself shows what is intended: “Modification of the language
to meet the intention”.
78. It is well-nigh impossible to lay down a general rule for G
determining whether a provision is imperative or directory. We extract
the relevant portion as under:

32
(1962) 1 SCR 517
33
(1961) 2 SCR 679
34
AIR 1992 SC 1341 H
150 SUPREME COURT REPORTS [2018] 9 S.C.R.

A “No universal rule,” said Lord Campbell L.C., “can be laid down
for the construction of statues, as to whether mandatory
enactments shall be considered directory only or obligatory with
an implied nullification for disobedience. It is the duty of Courts
of Justice to try to get at the real intention of the Legislature by
carefully attending to the whole scope of the statute to be
B
construed.”35 And Lord Penzance said: “I believe, as far as any
rule is concerned, you cannot safely go further than that, in each
case you must look to the subject–matter; consider the importance
of the provision that has been disregarded, and the relation of that
provision to the general object intended to be secured by the Act;
C and upon a review of the case in that aspect decide whether the
matter is what is called imperative or only directory.”36
79. If we turn back to the provisions of Section 84 of the said Act,
we find that the expression “shall” is used in sub-section (1) both in the
context of the requirement of ability, integrity and standing as also in the
D context of adequate knowledge and capacity in dealing with problems
relating to engineering, finance, commerce, economics, law or
management. On the other hand, in sub-section (2) while dealing with
the possibility of appointment of a Chairperson from the pool of sitting or
retired Judges, the expression used is “may” indicating it to be a
discretionary power.
E
80. We are, thus, inclined to accept the line of reasoning advanced
by the learned counsel led by the learned Attorney General that the plain
reading of the section leaves no manner of doubt that the legislature only
envisaged a possibility of appointment of a Chairperson from the pool of
sitting or retired Judges of the High Court, in which case the method of
F appointment would be different from the one as envisaged under Section
85 of the said Act.
81. We may also look to the nature and functions performed by
the State Commission. Functions of the State Commission are prescribed
under Section 86 of the said Act. The enumerated functions are
G determination of tariff, regulation of electricity purchase and procurement
process of distribution licencees, facilitating intra-state transmission,
issuing licences to persons, promoting cogeneration and generation of
electricity from renewable sources, levy fee, specify or enforce standards,
35
Liverpool Borough bank v. Turner (1860) 2 De G.F. & J. 502 at pp.507, 508.
36
H Howard v. Bodington (1877) 2 P.D. 203, at p. 211.
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 151
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

fix trading margins. All these functions are regulatory in character rather A
than adjudicatory. The real adjudicatory function is only provided in
sub-clause (f) whereupon the Commission has the option of adjudicating
the disputes between the licencees and generating companies, or to refer
such disputes to arbitration. There is also an advisory role to be performed
by the State Commission as specified in sub-section (2). The issue,
B
however, is not whether a Judge would be comfortable doing this function
but whether these are types of functions which necessarily mandate a
Judge to be a Chairperson. The answer to this would also be in the
negative, supporting the view we have adopted on the plain reading of
the section.
82. We are conscious of the observations made in Tamil Nadu C
Generation and Distribution Corporation Limited37 in the context of
Section 86(1)(f) of the said Act opining that the adjudicatory functions
generally ought not to be conducted by the State Commission in the
absence of a judicial Member, but then sub-section (1) of Section 84 of
the said Act provides for a person with knowledge in the field of law D
albeit not mandatorily, on a plain reading of the section. The effect of
this will be dealt with in the latter part of our judgment.
83. We may also look at this issue from two other perspectives.
Firstly, the composition of the Appellate Tribunal under Section 112 of
the said Act which mandates that there has to be a Bench of two or E
more persons of which at least one should be a judicial member. The
Chairperson as per Section 113, mandatorily has to be a present or retired
Judge of the Supreme Court or a Chief Justice of the High Court. Thus,
at the appellate stage there is necessary judicial scrutiny, which takes
place. Secondly, looked at from the perspective of the position prevailing
prior to the said Act coming into force, the nature of functions sought to F
be performed by the State Commission, were to be so performed, not by
person, who necessarily held a judicial office. The observations, thus,
made in the context of the “tribunalisation” of judicial process and the
requirement of it to be headed by a Judge have to be read in the context
of shifting of the adjudicatory role from the Courts to the Tribunals. G
84. There are undoubtedly certain powers vested in the Commission
under Sections 94, 95 & 96 of the said Act, which weighed with the
Gujarat High Court while taking a contrary view inasmuch as they seek
37
supra
H
152 SUPREME COURT REPORTS [2018] 9 S.C.R.

A to give the ‘trappings of a court’ to the Commission, but that aspect we
will examine in the latter part of the judgment, i.e., if there are certain
judicial functions to be performed by the Commission, what then should
be the nature of composition of the Commission.
85. Mr. Jayant Bhushan, learned senior counsel also rightly
B emphasized that were it to be presumed that the Chairperson had to be
mandatorily a Judge, the process of appointment would have to be in
terms of the proviso and not in terms of Section 85 of the said Act. This
would make the reference to a Chairperson under Sub-Sections (2), (3),
(5) & (6) of Section 85 otiose as that eventuality would never arise were
such a plea to be accepted.
C
86. We are, thus, unable to accept the contention advanced on
behalf of the parties, who sought to sustain the view adopted by the
Gujarat High Court. The fact that the Chairperson has a right to nominate
the Member, who would chair meetings in his absence as per sub-section
(2) of Section 92, or that the presence of a man of law would be no
D substitute to the requirement of a Judge who would bring a judicial thought
process to the decision making as Chairman, or that the regulatory body
should not be unregulated, are generalized pleas, which are difficult to
accept. No doubt, the law declared by the Supreme Court is binding on
all Courts within the territory of India, which would also include principles
E of law emanating from a judgment or interpretation of the law, but then
the ratio decidendi of the judgments of the Supreme Court, makes the
principle of mandatory requirement of a Judge applicable only to cases
where the judicial function is sought to be shifted through the process of
‘tribunalisation’.

F 87. We may also note that Section 84(2) of the said Act begins
with a non-obstante clause, i.e., Notwithstanding anything contained in
sub-section (1), it does not take away what is stated in sub-section (1),
which deals with the requirements that are necessary in the appointment
of a Member or Chairperson. It would not cut down the clear terms of
the enactment being sub-section (1). The occasion to use such a non-
G obstante clause really arose because the process of appointment of a
Chairperson who is, or has been a Judge, is required to be different, and
thus, the mandatory consultation with the Chief Justice. It is nothing
more or less. Further sub-section (1) of Section 85 provides for a
Selection Committee to be headed by a Judge of the High Court but with
H
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 153
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

the proviso that the said provision would not apply for the appointment A
of a person as a Chairperson who is, or has been, a Judge of the High
Court. This, in fact, shows that a non-Judge can be appointed as the
Chairperson by the Selection Committee constituted under Section 85 of
the said Act, which in turn is chaired by a Judge of the High Court. We
are, thus, unequivocally of the view that Section 84(2) of the said Act
B
only gives the discretionary option to the State Government to appoint a
Judge as the Chairperson of the State Commission. The said provision
therefore, is not mandatory in nature.
Composition of the State Commission:
88. Our conclusion aforesaid on the appointment of a Chairperson, C
necessitates a discussion on the composition of the State Commission as
a whole. This is so in the context of Section 84(1) of the said Act. In
terms of Section 82(4) of the said Act, the State Commission is to consist
of not more than three members including the Chairperson. In other
words, there have to be two other members other than the Chairperson.
Now if the Chairperson is not a Judge, the question arises whether any D
of the other two members has to be a person from the legal field
considering the nature of functions performed by the State Commission.
Section 84(1) of the said Act prescribes the requirement of knowledge
and shown capacity in dealing with problems relating to six different
fields, i.e., engineering, finance, commerce, economics, law or E
management. If the Chairperson is from a non-legal field, it would imply
that he/she would be a person from any of the other five fields. That
would still leave the appointment of two members from the fields specified,
including law. Thus, there can be a possibility and we are informed that
it is so, where State Commissions have no members from the legal field
at all. The moot point arises whether there can be a mandatory provision F
read into Section 84(1) of the said Act for opining, that at least one
person from the legal field is necessary as a member, although on a plain
reading of the Section it is not so.
89. The distinguishing feature, as pointed out aforesaid between
appointment of members to the Central Commission and the State G
Commission is that, with regards to the Central Commission, it is
specifically provided in Section 77 of the said Act, how many persons
from which field are to be appointed. There is a further proviso to sub-
clause (c) of sub-section (1) of Section 77 of the said Act restricting it to
H
154 SUPREME COURT REPORTS [2018] 9 S.C.R.

A not more than one member from the fields specified in the said clause,
viz. economics, commerce, law or management. This is not the position
insofar as the State Commission is concerned.
90. In order to appreciate any such requirement for a person from
the legal field as a member of the State Commission, it becomes necessary
B to turn to the nature of functions performed by the State Commission.
91. We have, in the context of Section 84(2) of the said Act,
discussed the various functions of the State Commission which are
specified under Section 86 of the said Act. The argument on behalf of
the learned Attorney General and the counsel supporting him was that
C other than sub-clause (f) of Section 86, there are really no adjudicatory
functions. There is, however, no dispute that sub-clause (f) is clearly an
adjudicatory function. It provides for adjudication of disputes between
the licencees and the generating companies. There is also a power to
refer the dispute to arbitration and the expression “and” in the said clause
has been read as “or” in Gujarat Urja Vikas Nigam Ltd.38 (GJ-I),
D implying that the option is available to the State Commission to do either
of the two.
92. Now turning to the powers of the State Commission, we may
note that the same are specified from Sections 94 to 96 of the said Act.
The reference in these Sections is to the ‘appropriate commission’, i.e.,
E it can either be the Central Commission or the State Commission or the
Joint Commission. The relevant definition clause is as under:
“2. Definitions.-
In this Act, unless the context otherwise requires,—
F …. …. …. …. ….
4. “Appropriate Commission” means the Central Regulatory
Commission referred to in sub-section (1) of section 76 or the
State Regulatory Commission referred to in section 82 or the Joint
Commission referred to in section 83, as the case may be;”
G The powers conferred under these Sections are, thus, undisputedly
exercisable by the State Commission.
93. A perusal of these provisions would show that apart from
their definition, even otherwise, these are powers of a civil court under
38
H supra
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 155
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

the Code of Civil Procedure, 1908 (hereinafter referred to as the ‘said A
Code’). Powers such as summoning, enforcement of attendance of any
person and examination on oath, discovery and production of documents,
receiving affidavit of evidence, requisitioning of public records, etc., all
form part of Section 94. In terms of Section 95, all such proceedings
before the State Commission would be deemed to be judicial proceedings
B
within the meaning of Sections 193 and 228 of the Indian Penal Code,
1860 and the commission would be a civil court for purposes of Sections
345 & 346 of the Code of Criminal Procedure, 1973. Not only that,
Section 96 confers the extreme power of entry and seizure in respect of
any building and place where the Commission has reason to believe that
any document relating to the subject matter of enquiry may be found C
and may be seized. The power is conferred on the Commission under
Section 129 for securing compliances of orders and under Sections 142
& 146 for punishment for non-compliance of orders and directions. This,
thus, leaves no manner of doubt that the State Commission, though defined
as a ‘Commission’ has all the ‘trappings of the Court’.
D
94. We may also note that in terms of what has been opined in
Gujarat Urja Vikas Nigam Ltd.39 (GJ-I), such adjudication of disputes
between the licensees and generating companies by the State Commission
or the arbitrator nominated by it under clause (f) of sub-section (1) of
Section 86 of the said Act extends to all disputes and not merely to
those pertaining to matters referred to in clauses (a) to (e) and (g) to (k) E
of Section 86(1) as may arise between licensees and generating
companies. In effect, it has been observed that this is the only process
of adjudication which has to be followed as there is no restriction in
Section 86(1)(f) of the nature of the dispute that may be adjudicated.
Similarly in A.P. Power Coordination Committee & Ors.40 while F
referring to the judgment in Gujarat Urja Vikas Nigam Ltd.41 (GJ-I), it
has been observed that the Commission has been elevated to the status
of a civil court in respect of all disputes between the licensees and
generating companies. Such disputes need not arise from exercise of
powers under the said Act but even claims or disputes arising purely out
of contract have to be either adjudicated by the Commission or be referred G
to an arbitrator nominated by the Commission. In that context it has also
been observed that the advisability of having the State Commission
39
supra
40
supra
41
supra H
156 SUPREME COURT REPORTS [2018] 9 S.C.R.

A presided over by a Judge of the High Court as a Chairperson was
mentioned in Tamil Nadu Generation and Distribution Corporation
Limited42. The provisions of the Limitation Act, 1963 like Sections 5 &
14 have also been imported into the Act as observed.
95. What else can be called the ‘trappings of the court’? We are
B buttressed in our conclusion by judicial pronouncements dealing with the
expression “The trappings of the court”. The expression “trappings of
the court” initially found mention in a judgment of the Judicial Committee
of The Privy Council in Shell Company of Australia, Limited v. Federal
Commissioner of Taxation43. It was observed by Lord Chancellor
Sankey that there are tribunals with many of the “trappings of a court”
C but are not courts in the strict sense of exercising judicial power. In
Bharat Bank Ltd. v. Employees of the Bharat Bank Ltd.44, while
dealing with the Industrial Tribunal, it was observed that the said Tribunal
has powers vested in a civil court under the said Code while trying a suit,
discovery of documents, inspecting, granting adjournment, reception of
D evidence on affidavit, enforcing attendance of witnesses, etc. The
observations in R. v. London County Council45, of Saville, L.J. giving a
meaning to the word “court” or “judicial authority” was cited with
approval. Saville, L.J. observed as under:
“It is not necessary that it should be a Court in the sense that this
E Court is a Court, it is enough if it is exercising, after hearing
evidence, judicial functions in the sense that it has to decide on
evidence between a proposal and an opposition; and it is not
necessary to be strictly a Court if it is a tribunal which has to
decide rights after hearing evidence and opposition.”

F 96. The Supreme Court also took note of the definition of “judicial
power” and “judicial decision” in Huddart, Parker & Co. v.
Moorehead46 and Cooper v. Wilson47 respectively. Griffith, C.J., in the
first judgment observed as under:
“The words ‘judicial power’ as used in sec. 71 of the Constitution
G mean the power which every sovereign authority must of necessity
42
supra
43
(1931) AC 275
44
AIR 1950 SC 188
45
(1931) 2 KB 215
46
8 CLR 330, 357
47
H (1937) 2 KB 309, at p. 340
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 157
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

have to decide controversies between its subjects or between A
itself and its subjects, whether the rights relate to life, liberty or
property. The exercise of this power does not begin until some
tribunal which has power to give a binding and authoritative
decision (whether subject to appeal or not) is called upon to take
action.”
B
97. In the latter judgment, it was observed as under:
“A true judicial decision presupposes an existing dispute between
two or more parties, and then involves four requisites: (1) The
presentation (not necessarily orally) of their case by the parties to
the dispute; (2) if the dispute between them is a question of fact,
the ascertainment of the fact by means of evidence adduced by C
the parties to the dispute and often with the assistance of argument
by or on behalf of the parties on the evidence; (3) if the dispute
between them is a question of law, the submission of legal
argument by the parties, and (4) a decision which disposes of the
whole matter by a finding upon the facts in dispute and an D
application of the law of the land to the facts so found, including
where required a ruling upon any disputed question of law. A
quasi-judicial decision equally presupposes an existing dispute
between two or more parties and involves (1) and (2), but does
not necessarily involve (3) and never involves (4). The place of
(4) is in fact taken by administrative action, the character of which E
is determined by the Minister’s free choice.”
98. The subsequence judgments in Jaswant Sugar Mills Ltd. v.
Lakshmi Chand 48;Engineering Mazdoor Sabha v. Hind Cycles
Ltd.49; Indo-China Steam Navigation Co. Ltd. v. Jasjit Singh50;
Associated Cement Companies Ltd. v. P.N. Sharma 51; Sarojini F
Ramaswami v. Union of India 52 and State of Gujarat v. Gujarat
Revenue Tribunal Bar Association53followed the aforesaid views in
the same breath.
99. Once we find that the tribunal has the trappings of the court in
respect of its functions, we turn to the effect of the same. G
48
1963 Supp (1) SCR 242
49
AIR 1963 SC 874
50
(1964) 6 SCR 594
51
(1965) 2 SCR 366
52
(1992) 4 SCC 506
53
(2012) 10 SCC 353 H
158 SUPREME COURT REPORTS [2018] 9 S.C.R.

A 100. The judgment of this Court in Tamil Nadu Generation and
Distribution Corporation Limited54 would first have to be dealt with at
some length, as it deals with the provisions of the very Act. Of course,
the context was, inter alia, in respect of the interpretation of Section
86(1) of the said Act. The Bench took note of the Gujarat Urja Vikas
Nigam Ltd.55 (GJ-I) on account of the observations made in that
B
judgment, that the State Commission can adjudicate all the disputes,
including the dispute on money claims between the licensees and the
generating companies. The then counsel for the appellant sought to
canvas that the exercise of such judicial powers should be either by a
civil court or a tribunal having, at least, one judicial member, as the absence
C of a judicial member would be an anathema to judicial process and would
directly impinge on the impartiality and the independence of the judiciary.
It was also contended that the same would undermine the principle of
separation of powers which was sought to be strictly maintained by the
Constitution of India. The counsel, in fact, went further that the function
of the Chairman of such a commission required only a retired Judge of
D
the High Court to occupy that post, an aspect, which has been negated
by us hereinbefore. The Supreme Court gave its imprimatur to the
submission advanced on behalf of the appellant to the extent that the
adjudicatory functions generally ought not to be conducted by the State
Commission in the absence of judicial members. It was noticed that no
E judicial member had been appointed in the Tamil Nadu State Commission,
and that the feasibility for making the appointment of a person as the
Chairman from amongst persons, who is, or has been, a Judge of the
High Court should be explored.
101. It is undoubtedly true that the question which the Court was
F seized of, related to the interpretation of Section 86 of the said Act and
certain other matters, which are not connected with the controversy
herein. Thus, the issue arises, whether the observations made, albeit to
be construed as advisory or suggestive qua the appointment of a
Chairman and a Member are to be treated as ratio decidendi or obiter
dicta.
G
102. In order to determine this aspect, one of the well-established
tests is “The Inversion Test” propounded inter alia by Eugene Wambaugh,
a Professor at The Harvard Law School, who published a classic text
54
supra
55
supra
H
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 159
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

book called “The Study of Cases”56 in the year 1892. This text book A
propounded inter alia what is known as the “Wambaugh Test” or “The
Inversion Test” as the means of judicial interpretation. “The Inversion
Test” is used to identify the ratio decidendi in any judgment. The
central idea, in the words of Professor Wambaugh, is as under:
“In order to make the test, let him first frame carefully the B
supposed proposition of law. Let him then insert in the proposition
a word reversing its meaning. Let him then inquire whether, if the
court had conceived this new proposition to be good, and had had
it in mind, the decision could have been the same. If the answer
be affirmative, then, however excellent the original proposition
may be, the case is not a precedent for that proposition, but if the C
answer be negative the case is a precedent for the original
proposition and possibly for other propositions also.57”
103. In order to test whether a particular proposition of law is to
be treated as the ratio decidendi of the case, the proposition is to be
inversed, i.e., to remove from the text of the judgment as if it did not D
exist. If the conclusion of the case would still have been the same even
without examining the proposition, then it cannot be regarded as the
ratio decidendi of the case. This test has been followed to imply that
the ratio decidendi is what is absolutely necessary for the decision of
the case. “In order that an opinion may have the weight of a precedent”, E
according to John Chipman Grey58, “it must be an opinion, the formation
of which, is necessary for the decision of a particular case.”
104. Now applying the test to the aforesaid judgment, the
proposition is reversed, i.e., “the Chairman need not be a judicial member”,
the fact remains that it would have no impact on the decision in that F
case, which was related to inter alia the interpretation of Section 86 of
the said Act. This, in fact, justifies what we have held aforesaid qua the
appointment of a Chairperson from the pool of Judges.
105. In the context of the question which we are now dealing
with, if we were to take the proposition as “no member having knowledge G
of law is required to be a member of the Commission” then we have a
56
Eugene Wambaugh, The Study of Cases (Boston: Little, Brown, & Co., 1892)
57
Eugene Wambaugh, The Study of Cases (Boston: Little, Brown, & Co., 1892) at
pg. 17
58
Another distinguished jurist who served as a Professor of Law at The Harvard
Law School H
160 SUPREME COURT REPORTS [2018] 9 S.C.R.

A problem at hand. This is so because while interpreting Section 86 of the
said Act, it has been expressed that the Commission has the ‘trappings
of the Court’, an aspect we have agreed to hereinbefore. Once it has
the ‘trappings of the Court’ and performs judicial functions, albeit limited
ones in the context of the overall functioning of the Commission, still
while performing such judicial functions which may be of far reaching
B
effect, the presence of a member having knowledge of law would
become necessary. The absence of a member having knowledge of
law would make the composition of the State Commission such as would
make it incapable of performing the functions under Section 86(1)(f) of
the said Act.
C 106. In Madras Bar Association59 (MJ-II), the Constitution
Bench, referring to the decision in Madras Bar Association60 (MJ-I)
observed that members of tribunals discharging judicial functions could
only be drawn from sources possessed of expertise in law and competent
to discharge judicial functions. We are conscious of the fact that the
D case (MJ-I) dealt with a factual matrix where the powers vested in
courts were sought to be transferred to the tribunal, but what is relevant
is the aspect of judicial functions with all the ‘trappings of the court’ and
exercise of judicial power, at least, in respect of same part of the
functioning of the State Commission. Thus, if the Chairman of the
Commission is not a man of law, there should, at least, be a member
E who is drawn from the legal field. The observations of the Constitution
Bench in Madras Bar Association61 (MJ-II) constitutes a declaration
on the concept of basic structure with reference to the concepts of
“separation of powers”, “rule of law” and “judicial review”. The first
question raised before the Constitution Bench as to whether judicial review
F was part of the basic structure of the Constitution was, thus, answered
in the affirmative.
107. We are, thus, of the view that it is mandatory to have a
person of law, as a member of the State Commission. When we say so,
it does not imply that any person from the field of law can be picked up.
It has to be a person, who is, or has been holding a judicial office or is a
G
person possessing professional qualifications with substantial experience
in the practice of law, who has the requisite qualifications to have been
appointed as a Judge of the High Court or a District Judge.
59
supra
60
supra
H 61
supra
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 161
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

108. In Brahm Dutt v. Union of India62, it has been observed A
that if there are advisory and regulatory functions as well as adjudicatory
functions to be performed, it may be appropriate to create two separate
bodies for the same. That is, however, an aspect, which is in the wisdom
of the legislature and that course is certainly open for the future if the
legislature deems it so. However, at present there is a single Commission,
B
which inter alia performs adjudicatory functions and, thus, the presence
of a man of law as a member is a necessity in order to sustain the
provision, as otherwise, it would fall foul of the principles of separation
of powers and judicial review, which have been read to be a part of the
basic structure of the Constitution.
109. We are also not in a position to accept the plea advanced by C
the learned Attorney General that since there is a presence of a Judge in
the Appellate Tribunal that would obviate the need of a man of law as a
member of the State Commission. The original proceedings cannot be
cured of its defect merely by providing a right of appeal.
110. We are, thus, of the unequivocal view that for all adjudicatory D
functions, the Bench must necessarily have at least one member, who is
or has been holding a judicial office or is a person possessing professional
qualifications with substantial experience in the practice of law and who
has the requisite qualifications to have been appointed as a Judge of the
High Court or a District Judge. E
111. The challenge laid in TC (C) Nos.139/2015 & 138/2015 is to
the appointments made to the Tamil Nadu State Commission and the
exercise of the powers suo moto by the Commission. The fundamental
plea is of financial bias of the two members as they were working in
their erstwhile avatars. The name of Mr. G. Rajagopal was recommended F
when he was still working as the Director, TANGEDCO and he opted
for voluntary retirement after his name had been recommended. Mr.
Akshayakumar retired from the post of Managing Director of
TANTRANSCO on 31.5.14 and was appointed as Chairman of the
Commission on 6.6.14. The tariff hike was approved by a majority of 2:1
with these two members being part of the majority view. G
112. In respect of the aforesaid, reliance was placed on the
judgment in Rajesh Awasthi63 and Mor Modern Cooperative Transport

62
supra
63
supra H
162 SUPREME COURT REPORTS [2018] 9 S.C.R.

A Society Ltd.64. We, however, find that those judgments would not apply
in the present case. The nature of financial interest was examined in
the narrower sense as well as the wider sense and in the wider sense, it
was held to include the direct or indirect interest of a person in relation
to a financial undertaking. The situation arose when the person concerned
was holding both the posts simultaneously, which is not so in the present
B
case. (as noticed in para 52 above) It is also pointed out by the learned
counsel appearing for the State of Tamil Nadu that the orders of
appointment have been exclusively assailed right till the Supreme Court.
It may be added that the Selection Committee was presided over by a
retired Judge of the High Court.
C 113. We, thus, find no merit in the plea sought to be advanced
assailing either the appointment or the suo moto tariff revision.

Conclusion:
D 114. In view of our observations above, we conclude as under:
i. Section 84(2) of the said Act is only an enabling provision to
appoint a High Court Judge as a Chairperson of the State
Commission of the said Act and it is not mandatory to do so.
ii. It is mandatory that there should be a person of law as a Member
E
of the Commission, which requires a person, who is, or has been
holding a judicial office or is a person possessing professional
qualifications with substantial experience in the practice of law,
who has the requisite qualifications to have been appointed as a
Judge of the High Court or a District Judge.
F
iii. That in any adjudicatory function of the State Commission, it is
mandatory for a member having the aforesaid legal expertise to
be a member of the Bench.
iv. The challenge to the appointment of the Chairman and Member
of the Tamil Nadu State Commission is rejected as also the suo
G moto proceedings carried out by the Commission.
v. Our judgment will apply prospectively and would not affect the
orders already passed by the Commission from time to time.

64
supra
H
STATE OF GUJARAT & ORS. v. UTILITY USERS’ WELFARE 163
ASSOCIATION & ORS. [SANJAY KISHAN KAUL, J.]

vi. In case there is no member from law as a member of the A
Commission as required aforesaid in para 2 of our conclusion, the
next vacancy arising in every State Commission shall be filled in
by a Member of law in terms of clause (ii) above.
115. Transfer Petition (C) No.974/2016 is allowed and the
Transferred Case arising out of transfer petition stands disposed of. B
116. The appeals as well as the other transferred cases stand
disposed of accordingly leaving the parties to bear their own costs.
Pending application(s), if any, also stand(s) disposed of.

C
Nidhi Jain Matters disposed of.

D

E

F

G

H