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ABOUT TDM
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Dabhol Power Company
This is the judgment which has been appealed in the Indian Supreme Court. I particularly draw your attention to the aspects on arbitration and the mandatory jurisdiction of the Electricity Regulatory Commission.
In The High Court of Judicature At Bombay Ordinary Original Civil Jurisdiction
Writ Petition No. 1205 of 2001
Dabhol Power Company a private company incorporated under the Companies Act, 1956 with its registered office at. Enron Centre Wockbandt Towers East Wing, Level 4 Bandra Kurla Complex Bandra ( East) Mumbai 400051
................Petitioner
vs
1.. Maharashtra State Electricity. Board a statutory board constituted under the provisions of section 5 of the Electricity (Supply) Act 1948 with its registered office at Honkong Rank Building M G Road, Fort Mumbai-400001
2.. Maharashtra Electricity Regulatory Commission, a body corporate established under the provisions of the Electricity Regulatory Commission Act 1998 having its office at Centre 1, 13th floor-World Trade Cuffe Parade. Mumbai-400005
3.. Jayant Deo Esq - Member Maharashtra Electricity Regulatory Commission having his office at Centre 1, 13th floor World Trade Centre Cuffe Parade Mumbai 400005.
4.. P Subramanayan Esq - Chairman Maharashtra Electricity Regulatory Commission, having his office at Centre 1, 13th floor World Trade Centre Cuffe Parade Mumbai 400005
5.. Venkat Chary Esq - Member Maharashtra Electricity Regulatory Commission, having his office at Centre 1, 13th floor World Trade Centre Cuffe Parade Mumbai.40005.
..........Respondents
Mr. P. Chidamabram with Mr Janak Dwarkadas Senior Advocates, Mr. Atul Rajadhyaksha, Mr. Suhas Deval and Mr. Kailas Deval i/b M/s Bhaishankar Kanga and Girdharilal for petitioner.
Mr. Goolam Vahanvati, Advocate General with Mr. Aspi Chinoy, Mr Shyam Diwan, Ms Ayesha Misra, Mr Rameeza Hakeem, Mr Alpana Dhake and Mr. Kiran Gandhi i/b Little and Co for respondent no. 1 Mr.Venkateshwara i/b Shri V.K.Rambhadran for respondent no. 2
Mr. Sunip Sen i/b D.H.Law for Intervenor.
Mr. T.M.Chagla i/b for Intervenor.
CORAM : A. P. SHAH & V. K. TAHIL RAMANI JJ
Dated : 5th March 2002
Oral Judgment: ( Per A. P. Shah J)
1.. In this petition- under Article 226 of the Constitution the controversy revolves around the nature and scope of the jurisdiction, of the Maharashtra Electricity Regulatory , Commission (MERC) constituted under the provisions of .the Electricity Regulatory Commissions Act, 1998, hereinafter referred to as the "ERC Act". The principal issue is whether the disputes and differences between the petitioner Dabhol Power Company (DPC) and respondent no. l Maharashtra State Electricity Board (Board) are required to 'be resolved in terms of the statutory machinery under the ERC Act or whether such disputes must be decided in accordance with the pre-existing arbitration agreement between the parties.
2.. On 8th December 1998 the petitioner and respondent no. l executed a Power Purchase Agreement (PPA). This PPA was subsequently amended and supplemented by agreements dated 2nd February 1995, 26th July 1996 and 9th December 1998. Clause 20.3 of the PPA contains an arbitration clause which reads as follows:
"Arbitration
Where any dispute is not resolved as provided for in clause 20.2 then the following provisions shall apply;
1.. Such arbitration shall be in accordance with the provisions of the UNCITRAL Arbitration Rules (the "Arbitration Rules") as at present in force and shall be conduced by three : arbitrators to be appointed according to the Arbitration Rules.
2.. The arbitration proceedings, shall be held in London, England.
3.. The third arbitrator appointed pursuant to this paragraph shall not be a national of India or of the United States.
4.. The language of any arbitration proceedings shall be English.
5.. Notwithstanding any other provision of this Agreement the law governing this arbitration agreement shall be the law of the place where the arbitration proceedings are held.
6.. Any award given pursuant to "' arbitration in London, England, under paragraph (h) above shall be governed by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958".
Clause 20.1 of the PPA provides that the .agreement shall be construed in accordance with and governed by the Indian law.
3.. In accordance with the provisions of the PPA a baseload combined - cycle power station located at Dabhol in the State of Maharashtra was to be constructed by the petitioner in two phases known as Phase I and Phase II. An escrow agreement was entered into between the parties on 19th September 1998 which was amended on 27th March 1999. Phase I became operational on 13th May 1999. The escrow agreement was activated on trial basis for nine months and thereafter its operation was suspended. Disputes arose between the parties due to alleged defaults in payment, committed by the respondent no. l. According to the petitioner as on 25th January 2001 the respondent no. l Board owed to the petitioner a sum in excess of Rs.269.689 crores in addition to a sum of Rs. 92.5 crores ( including interest) on account of short payments made by the Board in response to the petitioner's billing statements for the period from May 1999 to September 2000. By letter dated 28th February 2001 the respondent no. l, however, maintained that it. Was entitled to rebate under the PPA for the short fall in the availability of the Power Station as provided for in terms of Clause 8.4(b)(ii) of the PPA and after adjusting the outstanding. balance owed by the Board to the petitioner, as per its billing statements the Board was entitled to receive a sum of Rs.143.686 crores from the petitioner. In March 2001 the petitioner sent a notice in order to reactivate the escrow mechanism, which was objected by the respondent no. l describing the action as unjust and unenforceable.
4.. On 12th April 2001, the petitioner served a notice of arbitration indicating its intention to arbitrate pursuant to Clause 20.3 of the PPA and appointed Mr. Andrew John Rogers Q.C. as arbitrator. By notice dated 8th May 2001 the respondent no. l appointed Mr. Justice M. I. .Pendse (retired) as arbitrator. The respondent no.1 alleged in the said notice that there were serious is representations on DPC's part in relation to the PPA and asserted that the consequences thereof as well as its counter claim against the DPC in respect of diverse breaches will be set out in terms of Article 19(3) of the UNCITRAL Arbitration Rules. On 7th April 2001, the petitioner gave notice to the respondent no.1 pursuant to the provisions of Clause 16.3 of the PPA of the occurrence of certain events and circumstances which according to the petitioner. constituted political force majeure. This was followed by two preliminary termination notices dated 19th May 2001 issued by the petitioner under Clause 17.2 of the PPA on the ground that the respondent no. l had failed to pay a sum exceeding US dollars 100:000 on due dates and respondent no. l had evinced an intention not to be bound by the PPA. On 23rd May 2001 the respondent no. l issued notice of rescission of the PPA alleging that material misrepresentation by the petitioner had caused respondent no.1 to consent to the PPA based on the said misrepresentation and that the PPA is either void or voidable at the option of respondent no. l, hence it was being rescinded. This was disputed by the petitioner vide its letter dated 25th May 2001 wherein the allegations of misrepresentation and PPA being either void or voidable were denied and it was asserted that the PPA is valid and effective.
5.. In the background of these facts, the respondent no.1 filed Case No.3 of 2001 on 25th May 2001 before the MERC seeking a declaration that . the PPA has been validly voided/rescinded and that the political force majeure notice and. preliminary' termination notices are illegal, null and void/ and o further seeking damages and economic loss to the tune of Rs.450 crores and 1200 crores respectively together with interest. The respondent no.1 sought permanent injunction restraining the proceedings pursuant to the notice of arbitration and/or ' political force majeure notice and preliminary termination notices. The respondent no. 1 also sought appropriate orders and directions in respect of the power purchase and procurement process including determination of reasonable compensation and quantum merit in respect of the energy supplied by the petitioner to the respondent no.1 . The respondent no.1 appeared before the MERC on 25th May 2001 and filed preliminary statement objecting to the jurisdiction of the MERC.- After hearing both parties the MERC recorded prima facie finding that it had jurisdiction to try Case No. 3 of 2001 and granted ad interim reliefs.
6.. Aggrieved by the order of the MERC the petitioner has filed the present petition seeking to challenge the jurisdiction of the MERC to pass ad interim orders and hear Case no. 3 of 2001. By order of the division bench dated 26th June 2001 the petition came to be dismissed and the , petitioner was directed to agitate the issue of as jurisdiction before the MERC in the pending proceedings. In appeal the Supreme Court set aside the said order and remitted the matter to this court to decide the issue of jurisdiction of the MERC. After the remit order was passed by the Supreme Court petition was amended by the petitioner alleging that Mr. Jayant Deo, a member of o the. MERC, is actually and apparently biased against the petitioner. It needs to be stated that Mr. Jayant Deo has now recused himself from Case No. 3 of 2001. However, the submission of the petitioner is that since two other members had acted in concert with Mr. Jayant Deo during the hearing and after deliberating and meeting together passed the ad interim order, the MERC as a whole is infected by bias of Mr. Jayant Deo.
7.. Mr. Chidambaram, learned counsel appearing for the petitioner, Mr. Vahanvati, learned Advocate General appearing for the respondent Board, Mr Venkateshwara, learned counsel appearing for the MERC, Mr. Chagla, learned counsel appearing for the foreign financial institutions and Mr. Sen, learned counsel appearing for Prayas have made elaborate submissions before us . The oral submissions have been supplemented by written submissions.
8.. Before we proceed to examine the submissions made by the learned counsel, we consider it necessary to briefly refer to the background in which the ERC Act was enacted because it would have a bearing on the interpretation of the provisions of the said Act. Upto 15th October 1991 the entire regime of the Indian Electricity Act, 1910 hereinafter referred to as the 1910 Act, and the Electricity (Supply) Act, 1948, hereinafter referred to as the 1948 Act, revolved around the role of the public sector, the primary role in electricity supply being entrusted to the State Electricity Boards which were charged with broad and basic duties set forth in section 18 of the 1948 Act. The Act of 1948 was in effect a nationalising and controlling Act since government was almost invariably in control of the electricity sector. With the advent of liberalisation in 1991, the provisions of 1948 Act were amended by the Parliament. By Act 50 of 1991 the definition of "generating company" was completely changed and a new sub section 4A was inserted in section 2 which reads as under:
"(4-A) "Generating Company" means a company registered under the Companies Act, 1956(1 of 1956), and which has among its objects the establishment, operation and maintenance of generating stations".
Section 15A was amended and sub-section (1) thereof was omitted. The objects of generating company were changed and two new sub sections (2) and (3) were inserted in section ISA .These read as under:
"(2) The objects of a Generating Company shall include- (a) establishment, operation and maintenance of generating stations and tie-lines, sub-stations, and main transmission lines connected therewith: (b) operation and maintenance of such generating stations, tie lines substations and main transmission lines as are assigned to it by the competent government or governments.
(3) The Generating Company shall carry on its activities within such areas as the competent governments, as the case may be, may, from time to time, specify in this behalf".
9.. A new section being section 43A was inserted which reads as under:
"43-A, Terms, conditions and tariff for sale of electricity by Generating Company:-
(1) A Generating Company may enter into a contract for the sale of electricity generated by it- a) with the Board constituted for the State or any of the States in which a generating station owned or operated by the company is located; b) with the Board constituted for any other State in which it is carrying on its activities in pursuance of sub section (3) of section 15A and c) with any other person with consent the competent government or governments.
(2) The tariff for the sale of electricity by a Generating Company to the Board shall be determined in accordance with the norms regarding operation and the Plant Load Factor as may be laid down by the Authority and in accordance with the rates of depreciation and reasonable return and such other factors as may be determined, from time to time, by the Central Government, by notification in the Official Gazette.
Provided that the terms, conditions and tariff for such sale shall, in respect of a Generating Company , wholly or partly owned by the Central Government, be such as may be determined, from time to time by the Central Government and in respect of a Generating Company wholly or partly Owned by one or more State Governments, be such as may be determined by the government or governments concerned.
10.. This was accompanied by a policy statement in the form of the Resolution dated 22nd October 1991. The opening para of this Resolution gives indication of the objectives :
"With the objective of bringing in additionality of resources, for the capacity addition programme in the electricity sector, Government have formulated a policy to encourage greater participation by privately owned enterprises in the electricity generation, ,supply and distribution field. The policy in this regard has widened the scope of private investment and legal environment, for the private enterprises in the electricity sector towards making investments in the sector by private units attractive. Based on this policy, a scheme has been framed to encourage private enterprises participation in power generation, supply and distribution, the details of which are given below".
Clause 2.2 of the Resolution provided that upto hundred per cent foreign equity participation can be permitted for projects set up by foreign private investors in the Indian electricity sector. Clause 4.5 provided that generating companies can enter into contract for sale of electricity generated by it with the State Electricity Board in any State where it owns/operates generating stations or in any other State it is carrying on its activity with any other person with the consent of the competent government.
11.. By Notification dated 31st March 1992 issued in exercise of powers conferred by subsection (2) of section 43A, the Central Government determined the factors in accordance with which the tariff for sale of electricity by the generating companies to the Board and to other persons shall be determined. This notification was subsequently amended and Clause 3.0 was added which reads as under:
"3.0 General
3.1 The tariff for sale of electricity by Generating Company to the Board shall be computed and fixed for a period of five years each on normative basis as prescribed in this notification. However, the tariff shall be computed and fixed a new for a period of five years each whenever additional generating capacity is commissioned in the same unit or station.
3.2 In case Generating Company is permitted by the competent Government to supply electricity direct to a consumer in terms of clause (c), sub-section (1), section 43A of the said Act, such sale shall be at mutually negotiated rates, agreed upon between the generating company and the other persons, subject to the approval of the competent Government.
This notification shall be applicable for determining the tariff for sale of electricity from such generating stations, whose financial package for investment is approved by the Authority on or after the date of the publication in the Official Gazette".
As a result even norms framed by the Central Government could be deviated from provided same were approved by the State Government or the Central Government as the case may be.
12.. In 1996 the Central Government with a view to restructuring the power sector organised two conferences of Chief Ministers to discuss various issues in the power sector and outcome of these meetings was adoption of Common Minimum National Action Plan for Power ( CMNPP). The CMNPP has recognised that the gap between demand and supply of power is widening and acknowledged that financial position of the State Electricity Boards is fast deteriorating and the future development in the power sector cannot be sustained without viable State Electricity Boards and improvement of their operational performance. The CMNPP indentified creation of Regulatory Commission as a step in this direction and specifically provided for establishment of the Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commissions ( SERCs). After finalisation of the national agenda contained in CMNPP, the Ministry of Power assigned the task of studying the restructuring needs of the regulatory system to Administrative Staff College of India (ASCI), Hyderabad. The ASCI report recommended the creation of independent Electricity Regulatory Commissions both at the Center and the States. To give effect to the aforesaid proposals the electricity Regulatory Commissions Ordinance was promulgated on 25th April 1998 which subsequently became the electricity Regulatory Commissions Act, 1998.
13.. Having noticed the background in which the ERC Act was enacted, we may now notice the provisions of the ERC on which parties have relied, and which call for Interpretation in this petition. Section 2(f) defines "licensee" to mean a person licensed under Part II of the Indian Electricity Act, 1910 to supply energy or a person who has obtained sanction under section 28 of that Act to engage in the business of supplying energy (but does not include the Board or a Generating Company) . Section 2(1) defines "utility " to mean any person or entity engaged in the generation, transmission, sale, distribution or supply, as the case may be. of energy. Section 3 .- provides for establishment and constitution of -the Central Electricity Regulatory Commission. Section 17 provides for establishment and incorporation of State Commission which shall consist of not more than 3 members including the Chairperson. Subsection (5) of section 17 requires that the Chairperson and 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. Sub-section (6) provides that the Chairperson and members of the State Commission shall be appointed by the State Government on the recommendation' of the Selection Committee constituted as per section 18.
14.. Section 22 enumerates the powers and functions of the State Commission. Sub-section (1) of section 22 provides that subject to the provisions of Chapter III the State Commission small discharge the following functions, namely :
1.. to determine the tariff for electricity, wholesale, bulk grid or retail, as the case may be, in the manner provided in sec 29:
2.. to determine the tariff payable for use of transmission facilities in the manner provided in sec.29:
3.. to regulars power purchase and procurement process of the ' transmission utilities and distribution utilities including the price at which the power shall be procured from the Generating Companies, generating stations or from other sources for transmission, sale, distribution and supply in the State:
4.. to promote competition, efficiency and economy in the activities of the electricity industry to achieve the objects and purposes of this Act.
Section 22'21 states that subject to the provisions of Chapter III are without prejudice to the provisions of sub-sections (1), the State Government may by notification in the Official Gazette, confer any off the following functions upon the State Commission, namely:
1.. to regulate the investment approval for generation, transmission, distribution and supply of electricity to the entities operating within the State;
2.. to aid and advise the State Government in matters concerning electricity generation, transmission, distribution and supply in the State;
3.. to regulate the operation of the power system within the State;
4.. to issue licenses for transmission, bulk supply, distribution or supply of electricity and determine the conditions to be included in the licenses;
5.. to regulate the working of the licensees and other persons authorized or permitted to engage in the electricity industry in the State and to promote their working in an efficient economical and equitable manner:
6.. to require licensees to formulate prospective plans and schemes in coordination with others for the promotion of generation , transmission, distribution, supply and utilisation of electricity, quality of service and to devise proper power purchase and procurement process;
7.. to set standards for the electricity industry in the State including standards relating to quality, continuity and reliability of service;
8.. to promote competitiveness and make avenues for participation of private sector in the electricity industry in the State, and also to ensure a fair deal to the customers:
9.. to lay down and enforce safety standards;
10.. to aid and advise the State Government in the formulation of the State power policy;
11.. to collect and record information concerning the generation, transmission, distribution and utilisation of electricity;
12.. to collect, and publish data and forecasts on the demand for, and use of electricity in the State and to require the licensees to collect and publish such data:
13.. to regulate the assets, properties and interest in properties concerning or related to the electricity industry in the State including the conditions governing entry into, and exit from the electricity industry in such manner as to safeguard the public interest:
14.. to adjudicate upon the disputes and differences between the licensees and utilities and to refer the matter for arbitration:
15.. to coordinate with environmental regulatory agencies and to evolve policies and procedures for appropriate environmental regulations of the electricity sector and utilities in the State; and
16.. to aid and advise the State Government on any other matter referred ' to the State Commission by such Government...
Sub-section (3) of section 22 provides that the State Commission shall exercise its function in conformity with the National Power Plan.
15.. Section 29 provides that notwithstanding anything contained in any other law, the tariff for intra State transmission of electricity and the tariff for supply of electricity grid wholesale, bulk or retail, as the case may be, in a State shall be subject to the provisions of the Act and the tariff shall be determined by the State Commission of that State in accordance with the provisions of the Act. "The State Commission is obliged to take into consideration various factors while determining the tariff as set out in sub clauses 2, 3 and 4 of section 29 which read as under:
2. The State Commission shall determine by regulations the terms and conditions for the fixation of tariff, and in doing so shall be guided by the following, namely:
1.. the principles and their application provided in sections 46, 57 and 57A of the Electricity (Supply) Act 1948 ( 54 of 1948) and the Sixth Schedule thereto;
2.. in the case of the Board or its successor entities, the principles under section 59 of the Electricity (Supply) Act 1948 ( 54 of 1948);
3.. that the tariff progressively reflects the cost of supply of electricity at an adequate and improving level of efficiency:
4.. the factors which would encourage , efficiency, economical use of the resources, good performance, optimum investments, and other matters which the State Commission considers appropriate for progress of this Act:
5.. the interests of the consumers are safeguarded and at the same time the consumers pay for the use of electricity in a reasonable manner based on the average cost of supply of energy;
6.. the electricity generation transmission, distribution and supply are conducted on commercial principles;
7.. national power plans formulated by the Central Government.
3. The State Commission while determining the tariff under this Act, shall not show undue preference to any consumer of electricity , but may differentiate according to the consumer's load factor, power factor, total consumption of energy during any specified period or the time to which the supply is required or the geographical position of any area, the nature of supply and the purpose for which the supply is required.
4. The holder of each licence and other persons including the Board or its successor body authorised to transmit, sell, distribute or supply electricity wholesale, bulk, or retail, in the State shall observe the methodologies and procedures specified by the State Commission, from time to time in calculating the expected revenue from charges which he is permitted to recover and in determining tariffs to collect those revenues.
16.. Section 23 provides that the provisions of sections 9,10, and 12 shall apply to a State Commission and shall have the effect, subject to the modification that reference to "Central Commission" shall be construed as reference to a "State Commission". Section 9 lays down the procedure before the Commission. Section 12 lays down that the Commission shall, for the purpose of any enquiry or proceedings under the Act, have the coders as are vested in a Civil Court under the Code of Civil Procedure in respect of the matters mentioned therein. Section 24 provides for constitution of the State Advisory Committee consisting of not more than 21 members to represent the interests of commerce, industry, transport, agriculture, labour, consumers, non- governmental organisations and academic and research bodies in the energy sector. Section 25 sets out the objects of the State Advisory Committee. Section 26 provides that the State Commission can authorise any person as it deems fit to represent the interest of the consumers in all the proceedings before it. Section 27 provides for an appeal to the high Court in following terms:
"27...... Appeal to High Court in certain cases:- (1) Any person aggrieved by any decision or order of the State Commission say file an appeal to the High Court. (2) Except as aforesaid, no appeal or revision shall lie to any court from any decision or order of the State Commission. (3) Every appeal under this section shall be preferred within sixty days from the date of communication of the decision or order of the State Commission to the person aggrieved by the said decision or order.
Provided that the High Court may entertain an appeal after the expiry of the said period of sixty days if it is satisfied that the aggrieved person had sufficient cause for not preferring the appeal within the said period of sixty days.
17.. Section- 39 provides that in the discharge of its functions, the State Commission shall be guided, by such directions in matters of policy involving public interest as the State Government may give to it in writing. If any question arises as to whether any such direction relates to a matter of policy involving public Interest, the Decision of the State Government thereon shall be final. Section 51 of the Act provides that with effect from such date as the Central Government may, by notification in the Official Gazette appoint, sub-section (2) of section 43A of the Electricity (Supply), Act 1948 shall be omitted. Section 52 under the caption "Overriding effect" reads as follows:
"52. Overriding effects- Save as otherwise provided in Section 49, the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than the said Act. "
18.. Section 57 provides that the State Government may, by notification in the Official Gazette, make rules to carry out the provisions of the Act. Section 53 vests in the State Commission power to make regulations and rules to carry out the Purposes of the Act. Section 58 reads as follows :
"58. Power of State Commission to make regulations- (1) The State Government may, by notification in the Official Gazette, make regulations consistent with this Act and the rules made thereunder to carry out the purposes of this Act.
(2) In, particular and without prejudice to the generality of the foregoing power such regulations may provided for all or any of the following matters, namely:- a) the cuties and powers of the Secretary under sub-section (1) of section 21: b) the salary, allowances and other conditions of service of. the Secretary, officers and other employees under sub-section (3) of section 21: c) the term and conditions of consultants appointed under sub-section (4) of section 21 : d) the manner in which charges for energy may be determined under. sub-section (2) of section 29; e) any other matter which is to be, more may be specified. "
Section 59 provides that, the Rules made by the State Government and the Regulations made by the State Commission under the Act shall be laid as soon as may be, after it is made, before each House of the State Legislature where it consists of two Houses, or where such Legislature consists of one House, before that House
19.. In exercise of the power under section 58 the MERC has framed regulations known as Maharashtra Regulatory Commission' (Conduct of Business) Regulations, 1999. Chapter TV of the. Regulations deal with the tariff regulations. Regulations 72 and 73 are material for the purpose . of this petition and reproduced below:
"72. (1) No generating company, except that which has entered into or otherwise has a composite scheme for generation and sale pf electricity in more than one State, shall charge their customers any tariff for supply of electricity without the general or specific approval of such tariff by the Commission.
2) No utility shall fix any tariff for intra state transmission, distribution or supply of electricity and terms and conditions of the supply of electricity without the general or specific approval of the Commission.
Provided that the existing tariff being charged by generating companies shall continue to be charged after the date of effect of these regulations for such period as may be specified by notification, without prejudice to the powers of the Commission to take any matter relating to tariff falling within the scope of section 22 of the Act.
73. Any generating company proposing to enter into any agreement for supply of electricity between the generating company and any buying party shall get the approval of the Commission for the tariff before entering into ' such contracts".
20.. On behalf of the petitioner OPC, Mr. Chidambaram, learned senior counsel submitted that the jurisdiction of the MERC is confined to tariff related matters and does not include the power to adjudicate the disputes between the parties as if it were a civil court or a tribunal. The learned counsel urged that under section 22 of the ERC Act, MERC has power to determine the tariff for electricity as well use of the transmission facilities in the manner provided in section 29 and is also empowered to regulate the process as well as the price at which the power is procured. However, according to him, there are number of other terms and conditions on which the parties would have to react a mutual agreement and, if there is no agreement on those terms and conditions, MERC would not have power to make contract for the parties in respect of these terms and conditions. The learned counsel submitted that under the electricity (Supply ) Act, even in the case of generating company, purchase and sell of electricity is governed by a contract with the Board or with any other person with the consent of the State Government. However, it is only the tariff or price which is determined in accordance with the statutory notification made by the Central Government. All other terms and conditions are consensual. Mr. Chidambaram referred to the decision of the Supreme Court in India Thermal Power United vs. State of M. P. 2000 (3) SEC 379 where the court while construing sections 43 and 43A of the electricity (Supply) Act held that the PPA can be regarded as statutory only to the extent that they contain provisions regarding determination of the tariff. Mr Chidambaram, therefore, submitted that the MERC can exercise jurisdiction amongst consenting parties i.e. the parties who consent to buy and sell electricity. However, MERC cannot make a contract between the parties without their consent.
21.. Mr. Chidambaram next submitted that the power to adjudicate conferred by section 22(2)(n) of the ERC Act is only incidental to and in aid of the function to determine the tariff under section 22 read with section 29 . It is not an independent power but only a step in aid in exercise of regulatory function relating to tariff. The learned counsel submitted that the word "adjudicate" in section 22(2)(n) must be construed to confer only limited jurisdiction on the MERC that a judicial authority is required to undertake before it refers the parties to arbitration under section 8 or section 45 of the Arbitration and Conciliation Act, 1996 as the case may be. The learned- counsel submitted that the foundation of the reference under the Arbitration Act is an arbitration agreement . If there is no arbitration agreement no reference can be made under the Arbitration Act or the ERC Act. If section 22(7)(n) is construed without reference to a pro-existing arbitration agreement it will render the provisions unconstitutional because it will leave in the hands of the Commission arbitrary and uncanalised power to adjudicate some disputes and to refer for arbitration some other disputes. He, therefore, submitted that the provisions of section 22(2) (n) will have to be read down in order to keep them within limits of constitutionality. He placed reliance upon the decisions of the Supreme Court in CST vs Radhakrishnan 1979 (2)SCC 249 and C. P. Gautam vs UOI 1993 (1) SEC 78. Mr. Chidambaram further submitted that section 13(l)(h) of the ERC Act which confers jurisdiction on the Central Regulator/ Commission uses the words "arbitrate or adjudicate upon disputes" whereas section 22(2)(n) uses the, words "to adjudicate upon the disputes and differences and to refer the matter for arbitration.". According to the learned counsel, the power to arbitrate given to the CERC will exclude a pre-existing arbitration agreement. However, the power to refer the matter to arbitration under section 22(2)(n) will necessarily mean a reference in accordance with a pre-existing arbitration agreement. He relied upon the decision of the Supreme Court in Board of Revenue vs A.P. Benthall, AIR 1956 SC 35 and Labour Commissioner M P vs Burhanpur Tapti Mills, AIR 1964 SC 1687 for the proposition that when a statute uses words of different import in two places same meanings cannot be given to both.
22.. As regards the assertion of the Board that FRC Act excludes the jurisdiction of the civil courts, Mr. Chidambaram submitted that it is well settled that exclusion of the jurisdiction of the civil court is not to be readily inferred but such exclusion must be either explicitly expressed or clearly implied. He submitted that when there is no express provision excluding jurisdiction of the civil court, such exclusion can be implied only where right is itself created by the statute and the machinery for enforcement of such a right is also provided by the statute. In this connection he relied on the decision of the Supreme Court in Dhulabhai vs State of M.P., AIR 1969 SC 78. He also relied upon the decisions in Secretary of State vs Mask and Co., 1940 PC 105, Magiti Seswal vs Padma Bissoi , AIR 1962 SC 547, State of Tamil Nadu vs. Ramalinga, AIR 1986 SC 794 and RJC vs India Automobile and Co., 1990 (4) SCC 286. Mr. Chidambaram submitted that section 22(2)(n) does not exclude civil court's jurisdiction, especially so, when there is no finality clause and there are no express words of exclusion in the ERC Act and the Regulatory Commission is not capable of granting reliefs that are ordinarily granted by the civil court such as attachment before judgment, appointment of receiver, order to a garnishee and injunction to preserve property etc. In any event, Mr. Chidambaram urged that the dispute falling under section 22(2)(n) must be a dispute emanating from a character of the disputant i.e. licensee or utility. Therefore, where one of the parties is alleging that the contract is void or voidable, such question cannot be adjudicated by the Regulatory Commission under section 22(2)(n). Mr. Chidambaram referred to the decision of the Supreme Court Vasudeo vs Happy Home Coop Housing Society, AIR 1967 SC 369 holding- that where a person does not set up a claim that the other party is a landlord or tenant the jurisdiction of the ordinary civil court is not displaced.
23.. Mr Chidambaram maintained that no regulatory authority can be raised to the status of a official tribunal which will displace and be a worthy successor to the civil courts and the High Court (Original Side,) by mere use of the word 'adjudicate'. He placed heavy reliance on the following observations of the Supreme Court in Sampathkumar vs Union of India, 1987 (1) SCC 124.
" A law excluding the jurisdiction of a High Court must not leave a void, but it must set up another effective institutional mechanism or authority which can pass the test of constitutionality only if it can be shown that the adjudicating tribunal set up under the impugned act is equally efficacious as the High Court. The tribunal must be a worthy successor of the High Court in all respects".
He also referred to the observations of the Supreme Court in R. K. Jain vs Union of India, 1993(4) SCC 120 that the personnel appointed to the Tribunals set up under Articles 233A and 233B of the Constitution or under the Act of legislature discharge judicial and quasi judicial powers and should have legal expertise and modicum of legal training as on many an occasion difficult and complicated questions of law, which baffles even trained Judges of the High Courts and the Supreme Court would arise for discussion and decision. He submitted that MERC is not equally efficacious or effective tribunal. There is no obligation that any member of the Regulatory Commission should have adequate knowledge of law. Further section 9 provides that any question coming up to the Regulatory Commission shall be decided by a majority of the members present and voting. In the Event of any equality in the voting, the Chairperson of the Commission has a second or a casting vote. He submitted that it is inconceivable that a Chairperson of a court or judicial tribunal will have a second or casting vote. He submitted that MERC as it is presently constituted, consists of two retired civil servants and an engineer. None of them has any legal or judicial experience and not competent to decide complicated questions of fact and law arising under the Contract Act or under common law.
24.. Mr. Chidambaram submitted that Parliament did not intend, while enacting the ERC Act to abrogate or override the international treaty obligations. The New York Convention of recognition and enforcement of awards was duly ratified by the Government of India. The foreign Awards (Recognition and Enforcement) Act, 1961 was enacted by the Parliament to give effect to the .New York Convention and treaty obligations undertaken by India. He submitted that the Statement of Objects and reasons of the Arbitration and Conciliation Ordinance 1955 ( which became Arbitration and Conciliation Act, 1996 ) specifically recognizes the UNCITRAL Model law and says that the Bill seeks to consolidate the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards taking into account the UNCTTRAL Model Law. He submitted that there is a presumption that Parliament intends to fulfill, rather than break the international agreement. Therefore it is the duty of the court to construe legislation so as to be in conformity with the international law and not in conflict with it. In this connection he relied upon Soloman vs Commissioner of Customs and Excise, 1967 (2) QB 116, Corocraft Ltd and and vs American Airways, 1969 (1) All ER 82, Jolly George Varghese vs Bank of Cochin, AIR 1980 SC 470 and People's Union for Civil Liberties vs Union of India, AIR 1997 SC 568.
25.. In regard to the overriding effect of the ERC Act Mr. Chidambaram submitted that there is nothing in the ERC Act to suggest that it is intended to override any contract entered into between the parties . In fact, according to the learned counsel, section 52 which gives overriding effect to the Act, does not override any contract. He drew our attention to the decision of the Supreme Court in Indian Aluminium Company vs Kerala State Electricity Board, AIR 1975 SC 1967 holding that regulations in the nature of subordinate legislation cannot confer authority on the Board to interfere with the contractual rights on obligations, unless specific power to make such regulations is vested in the Board by some provision in the statute expressly or by necessary implication. In the alternative, he submitted that assuming that the ERC Act overrides contracts, section 52 has to be construed as only overriding the contracts which were entered into after the ERC Act came into force and after section 22(2)(n) was notified. Further relying upon the decisions of the Supreme Court in Ramicapati vs Subbaiah Choudhary, AIR 1957 SC 540, Mohanlal vs Administrative General of W. B., AIR 1960 SC 936 and Punjab Tin Supply Co vs Central Government, (1984) 1 SCC 206, Mr. Chidambaram would submit that statutory provisions creating substantive rights or taking away substantive rights are ordinarily prospective, they are retrospective only if by express words or by necessary implication the Legislature has made them retrospective.
26.. Finally, Mr Chidambaram while conceding that Mr. Jayant Deo has recused himself from the case, emphasized that two other members who are members of the MERC and passed ad interim order are also affected by bias of Mr Jayant Deo. He referred to the decision of the Supreme Court in R. L. Sharma vs Managing Committee, AIR 1993 SC 2155 where the Court, after holding that "....the bias of Shri Maru Rarn, one of the members of the Enquiry Committee, rad percolated throughout the enquiry Proceeding..... " , has directed that "if a fresh enquiry proceeding is initiated it should be ensured that the enquiry committee is not composed with, any of the members of the previous enquiry committee. He also relied upon the decision of the Supreme Court in A. K. Kraipak vs Union of India, AIR 1970 SC 150 where the Court held that the decision of the Selection Board was vitiated and consequently the final recommendations made by the UPSC cannot be disassociated from the selections made by the Selection Board. Further it was pointed out that under regulation 21 of the MERC Regulations, the quorum consists of 3 members. Mr. Deo having recused himself, the remaining members, including the Chairman, do not constitute necessary quorum and hence no proceedings can henceforth take place before the Commission. He submitted that even assuming that two members can deal with the present case, in the case of equality, the matter will have to be considered by the full commission with the quorum of three members and that is not possible in the present case.
27.. Mr. Oragla, learned senior counsel appearing for the foreign financial institutions, while adopting the arguments of Mr. Chidambaram particularly highlighted the fact that there is no machinery for enforcement of the orders passed by MERC. It was also urged by Mr.Chagla that MERC cannot be said to be an independent judicial or quasi judicial tribunal as it has to act as per the directives of the State Government as may be issued from, time to time under section 39 of the ERC Act. The learned counsel then referred to the decisions of the American Courts in Parsons & Whittemore Overseas Co Inc v Societe Generale De L Industrie Du Papier (Rakta) and Bank of America, (1974) 508 F 2nd 969, Fritz Scherk v Alberto Culver Co., (1974) 41 L.Ed 2d 270 and Mitsubishi Motors Corporations vs Soler Chryster Plymouth Tnc, (1985) 87 L Ed 2d 444. He submitted that the US Courts have disapproved the parochial refusal by the Court of one country to enforce an International Arbitration Agreement as well as the "parochial concept that all disputes must be resolved under our laws and in our Courts". He submitted that these decisions were cited with approval in Renusagar power Co Ltd v General Electric Co., AIR 1994 SC 860.
28.. In reply, the learned Advocate General contended that the enactment of the ERC Act represents a step in evolution of a policy by the creation of a new regulatory and adjudicatory frame work in the field of electricity supply and this court ought to give full effect to the legislative policy. According to the learned AG the ERC Act and the specific provisions thereof reflect legislative intention based on supervening public policy and social purpose that when the disputes and differences arise between the utilities, it is the Central/State Commission alone would have jurisdiction to adjudicate upon such disputes and differences. He submitted that such disputes are no longer regarded as private lis but disputes or differences affecting consumer interest and, therefore, in greater public interest required to be settled by the special forum adopting transparent dispute resolution procedure. He submitted that having regard to the powers conferred on the State Commission under section 22 read with section 29 of the ERC Act and also having regard to the overriding effect given to the provisions of the ERC Act by section 52, entire system of transmission, sale, distribution and supply of electricity in the State and price thereof is now made subject matter of control and regulation by the Commission. This is a complete departure from the Electricity (Supply) Act, 1948and persons directly affected i.e. consumers have now a major role to play. He submitted that section 22(2)(n) specifically confers powers on. the State Commission to adjudicate upon the disputes and differences between the licensees and utilities and as such disputes and differences can directly or indirectly have ramifications on the matters statutorily entrusted to its exclusive jurisdiction. He submitted that by virtue of the conferment, of powers under section 22(1 )(c) all the terms and conditions of the PPAs are also now subject matter of the regulation.
29.. As regards the scope of powers of MERC the learned AG submitted that the word "regulation" has wide scope and significance and bring within its purview even power to vary the terms of the contract. He placed reliance on the decisions of the Supreme Court in K Ramanathan vs State of Tamil Nadu, AIR 1985 SC 660 and VSR Oil Mills vs State of Andhra-Pradesh. AIR 196.4.SC 1781. He also placed reliance on the decisions of the US Courts in Union Dry Goods vs Georgia Public Service Corporation, 248 US 372 ( 1919), Louisville and Nashville Railroad Co. vs Erasmus L.Motley, 219 US, 467 (1911), Producers Transportation Company vs Rail Road Commission California, 251 US .288(1920) and Exxon Corporation vs Ralpha Eagerton, J.R.s, 462 US 176(1983). He also referred to the decision of the Court of Appeal for British Columbia in Money's Mashrooms Ltd vs British Columbia Marketing Bos-rt, 2001 BCCA 453. He urged that the terms of the contract like escrow, LC etc are matters directly arising out of tariff issue and can certainly be regulated by the State Commission. He submitted that a clear and exhaustive code is set up in the ERC Act and it is not permissible to whittle down the power of the Central and State Commissions by construing them in a narrow and pedantic fashion. He submitted that it is the cardinal principle of interpretation of statutes that when words of a statute are clear, plain and unambiguous then the Courts are bound to give effect to that meaning, irrespective of the consequences. If the plain language of section 22(2)(n) is to be given effect to, it must follow that the Commission has jurisdiction either to adjudicate upon all disputes and differences among the licensees and utilities or to decide to refer the same, for resolution through arbitration. He submitted that the terms and conditions of the contract are not sacrosanct and the legislative and statutory (powers evolved by the legislature can vary or even destroy the contract.
30.. Repelling the submission of Mr. Chidambaram that the State Commission has jurisdiction to regulate only if licensees/utilities are consenting and disputes are raised in the capacity of such licensees/utilities, learned AG submitted that such a construction would render the provisions of the ERC Act completely nugatory. Neither the jurisdiction of the regulatory authority depends upon the consent of the parties nor alleged jurisdictional relationship is a condition precedent for invocation of the powers of the Commission. He submitted that section 18A of the Electricity (Supply) Act,1948 requires utilities to continue with its product and it does not cease to be an utility merely because the transaction is stopped by virtue of the termination of the contract. He submitted that there is no ambiguity in section 22(2)(n) .and there is no need to read down the provisions of the said section as suggested by MR. Chidambaram. In any event, learned A G urged that there is full and complete guidance for the Commission having regard to the nature of its power, scope of functions and purpose underlying the Act Section 22(1)(d) itself refers to the obligations of the Commission by which the objectives and purposes of the Act are achieved.
31.. The learned A G submitted that by operation of the ERG Act, establishment of the MERC and the conferment of powers under section 22(2)(n) on the State" Commission, present, disputes between the MSEB and DPC are non-arbitrable disputes under the Indian law. He submitted that having regard to the specific provisions in the Act and the overriding effect given to the said Act, jurisdiction of the civil court is excluded. He placed strong reliance upon the decisions of the Supreme Court in Decoan Merchants Coop Bank Ltd vs. M/s Dalichand Jivraj Jain, AIR 1969 SC 1320, Natraj Studios (P) Ltd vs Navrang Studios and anr, 1981 1 SCC 523. Mansukhlal Dhanraj Jain vs Eknath Vithal Ogale , 1995 2 SCC 665, and M/s AVR & Co vs Fair Field Coop Hsg Ltd ,1988 4 SCC 408. He also placed reliance upon the decision of the Full Bench of this Court in Romala Jaidev Shroff vs Jaidev Rajnikant Shroff , 2000(4) BCR 122. He submitted that the ERC Act confers finality on the orders of the MERC and no order or decision of the State Commission can be called in question except by way of an appeal to the High Court as provided by section 27(2). He submitted that the United Nations Commission on International Trade Law ( UNCITRAL) is merely a recommendatory body and it proposes model law on international commercial arbitration and there is no violation of treaty obligations even in remote sense. He submitted that the Commission has vide powers under the . MERC Regulations and there exists machinery for implementation of the orders of the Commission. According to him, the process of implementation of the ERC Act would evolve as and when it is found necessary to provide for further or more powers. He submitted that the criticism levelled against the working of the State Commission is totally unwarranted and the reliance placed on the decision in Sampat Kumar's case is totally misconceived. On the issue of bias the learned AG submitted that the issue no longer survives as Mr.Jayant Deo has expressed his desire to recuse himself from the Commission and the other two members can decide the matter. The learned AG further submitted that there is nothing retrospective about operation of the ERC Act to cover arbitration agreement which was entered into prior to the passing of the Act. He submitted that even though the statute may operate prospectively it can certainly have effect of operating in antecedent place and time i.e, place and time before it was enacted. He placed reliance on the decision of the Kings Bench in Master Ladies Tailor v Ministry of Labour, (1912) 2 All ER 525. He also relied upon the decision in Laxmi Narayan Guin v Narayan Modak, AIR 1985 SC 111.
32.. Mr Sen submitted that the ERC Act marks a complete departure from the existing set up in the electricity field. New rights and obligations have been created. The ERC Act has been brought in as a measure of regulation for streamlining the cost and consumer protection . By section 26 of the ERC Act for the first time the consumer is given a right of participating in and fixing his own tariff. In doing so he is also given a right of participating in and fixing input tariff viz. tariff of generating companies which in turn go to determining his own tariff. Mr Sen submitted that the right to decide third parties tariffs or participate therein is a right unknown to any branch of law. It is clearly a new right and a new tribunal is provided for the exercise of that right. He submitted that in the open scenario, with a number of private players, multi party rights and disputes can and will arise. Cause and effects would flow outside state boundaries and will affect functioning of third parties, not limited by contract. With a number of private-players operating in the field multiparty rights and dispute are bound to arise. These will swamp courts if they are brought here. Therefore a composite single tribunal deciding multiparty rights ( including those of consumers, as class actions) was constituted in the form of Central and State Regulatory Commissions. Further, determination of these rights or adjustment thereof will affect functioning of third parties, including State and Regional LDCs, State and Regional Boards and may call into question permissions and conditions imposed by various authorities in the electricity sector. These cannot be decided by private arbitration especially where they affect, third party rights. Mr Sen contended that the dispute, between the DPC and MSEB involve several other parties including consumers. These disputes cannot be resolved by private arbitration and the State Regulatory Authority alone will have jurisdiction to determine these issues.
33.. Mr. Vankatesnwara, learned counsel appearing for the MERC submitted that though Mr. Jayant Deo has recused from the case, the remaining two members can decide the case as the quorum constituted of two members. Thus presence of Mr.Deo could be dispensed with. If two members reach an unanimous decision, the Chairman can pronounce the decision of the Commission. If the two members do not reach an unanimous decision on the issues involved in the case, it would be necessary for Mr. Deo to express his opinion on doctrine of necessity. The natural justice then has to give way to necessity for otherwise there will be no means of deciding and the machinery of the Commission will break down. He placed reliance on the decision of the Supreme Court in the case of Election Commissioner of India vs. Subramanian Swamy, AIR 1996 SC 1810 where the Court while dealing with the allegation by a MLA of bias against the Chief Election Commissioner explained the procedure to be followed by the Election Commissioner.
34.. The main question which falls for consideration is whether the MERC has jurisdiction to entertain the case filed by the respondent no.1 before it and if so, what is the nature of its jurisdiction. The ERC Act undoubtedly represents a complete change in the regulatory structure in the field of electricity supply. The objectives of the ERC Act can be seen from the preamble of the Act, which reads as under:
"An Act to provide for the establishment of a Central Electricity Regulatory Commission and State Electricity Regulatory Commissions rationalization of electricity tariff, transparent policies regarding subsidies, promotion of efficient and environmentally benign policies and for matters connected therewith or incidental thereto".
The Act entrusts the whole range of issues relating to energy supply to the Central Commission for all matters governed by Chapter III of the Act and to the State Electricity Regulatory Commissions for all matters governed by Chapter IV of the Act. Section 22 of the Act lays down various functions required to be discharged by the State Commission. One of the basic functions under section 22(1) requires the State Commission to determine all tariffs for electricity. Such tariff is for wholesale, bulk, grid, or retail as the case may be. This is made subject to section 29. Section 29 incorporates a non-obstante clause which provides that notwithstanding anything contained in any other law, the tariff for intra State transmission of electricity and tariff for supply of electricity to grid, wholesale, bulk or retail as the case may be, shall be subject to the provisions of the ERC Act. Section 29 is in two parts. First is the non-obstante clause which provides that the tariff shall be determined by the State Commission in accordance with the provisions of the ERC Act. The State Commission is obliged to take into consideration various factors while determining the tariff, as set out in subsections 2,3, and 4 of section 29. Clause (c) of sub-section (2) says that the tariff progressively reflects the cost of supply of electricity at an adequate and improving level of efficiency. Clause (d) speaks of the factors which would encourage efficiency, economical use of the resources, good performance, optimum investments and other matters which the State Commission considers appropriate for the purposes of the Act. Clause (e) says that the interests of the consumers are safeguarded and at the same time, the consumers pay for the use of electricity in a reasonable manner based on the average cost of supply of energy and clause (f) says that the electricity generation, transmission, distribution and supply are conducted on commercial principles. All these factors are essential in consumer interest and are so recognized. This is the major departure from the 1948 Act. By the ERC Act. for the first time consumer was given a right of participation in fixing of the tariff. Section 26 of the ERC Act provides that State Commission can authorize any person as it deems fit to represent the interest of the consumer in all proceedings before it. Provisions relating to the State Advisory Committee and its task also emphasised legislative intent to protect consumer interest.
35.. Section 22(1) (a) of the ERC Act covers all tariffs and this would include the price at which the generating company would sell power to a Board under a power purchase agreement. Having regard to the provisions of section 22(1 )(a) read with section 29 it cannot be disputed that no other party would have jurisdiction to determine the tariffs except the State Commission.
One of the important facets of the ERC Act is that the earlier procedure for determination of tariff as set out in section 43A of the 1948 Act is completely done away with. The scheme of section 43A was that the terms and conditions of the contract for sale of electricity by generating companies to the Board can be negotiated by the Board with the generating companies but the tariff for sale of electricity was to be determined as per section 43A(2), in accordance with the norms regarding the operation of Plant Load Factor as may be laid down by the Authority and in accordance with the rates of depreciation and reasonable return- and such other factors which would be determined by the Central Government notifying in the Official Gazette. In India Thermal Power Ltd vs. State of Madhya Pradesh (supra) the Supreme Court rejected the submission that the PPAs were statutory contracts under section 43 and 43A of the 1948 Act and, therefore, the terms and Conditions of such contract could not be altered. The Court held that the PPAs can be regarded as statutory only to the extent that they contain provision regarding determination of tariff and other statutory requirements of section 43AC (2). Section 51 of the ERC Act. provides that section 43A (2) would stand omitted from such date as the Central Government may by notification appoint. Though section 43A(2) has not been omitted for the Maharashtra State, it makes little difference so far as the powers of the State Commission are concerned in view of the non-obstante clause contained in section 29. Subsection (2) of section 29 does not refer to section 43AC (2) at all. In any event, section 43A(2) would loose all its efficacy in view of the direct conflict with the ERC Act. Therefore, even in the absence of notification of deletion of section 43A(2), the provision of ERC Act would clearly override section 43A(2) as it conflicts with the ERC Act. Thus there is clear legislative intent to make all tariffs subject to determination by the Regulatory Commission.
36.. Section 22(1) requires the State Commission to determine the tariffs of electricity. Section 22(1 )(c) confers power on the State Commission to regulate power purchase, to regulate procurement purchase, to regulate power project and procurement process of transmission utilities and distribution utilities and provides that such regulations would include price at which it shall be procured from the generating companies, generating stations and from other sources. The words "including price" are significant and indicate that all the terms and conditions of the PPAs are subject matter of the Regulations. Section 22(1 )(d) refers to the function of the State Commission to promote efficiency and economy in the activities of the electricity industries and to achieve the objects and purposes of the Act. Section 22(2) states that subject to the provisions of Chapter III and without prejudice to the provisions of sub-section (1), the State Government may, by notification in the Official Gazette confer any of the functions to the State Commission as mentioned in sub-section (2) and clause (n) thereof reads as under:
"(n) to adjudicate upon the disputes and differences between the licensees and utilities, and to refer the matter for arbitration".
In order to appreciate the scope and ambit of section 22(2) (n) it would be necessary to notice the legal set up under 1948 Act. Under 1948 Act there are diverse authorities discharging diverse functions . CEA regulates setting up of plants under sections 28 to 30. Load Discharge Centers (LDCs) monitor demand and supply constantly and supervise operation of power plants. In the integrated grid affecting other States and third party purchasers, regional Load Discharge Centers monitor and direct regional operators and control State LDCs. State and Regional Electricity Boards are also authorized to operate in the field. Section 448 of the 1948 Act states that no plant can be put up or modified without the consent of the State Electricity Board. This is therefore controlled and restricted field by the natural monopolies. The ERC Act requires the Electricity Regulatory Commission to promote competitiveness i.e. to thwart monopolies and cartelisation. In the open scenario where a number of suppliers operate within the interconnected grid the legislature obviously intended to establish a composite single tribunal for deciding inter se rights. It would therefore not be proper to give a narrow interpretation to the provisions of section 22(2) (n). The ERC Act has been enacted as a measure of regulation for streamlining costs and consumer protection. By section 26 of the ERC Act for the first time the consumer is given a right of participating in and fixing his own tariff. The right to decide third parties tariff or participate in determination of tariff is as argued by Mr Sen a right unknown to any branch of law. It is clearly a new right and a new tribunal is provided for the exercise of that right.
37.. Section 22(2)(n) confers power on the State Commission to adjudicate upon disputes and differences between the licencees and utilities as such disputes and differences can directly or indirectly have ramifications or implications on the matters statutorily entrusted to its exclusive jurisdiction. Such disputes can no longer be left to be resolved through private dispute resolution mechanisms and have to be adjudicated upon by the Commission in accordance with the provisions of the ERC Act. The word 'adjudicate' clearly denotes wide amplitude of power. The Legal Thesaurus (2nd Edition) defines adjudicate as "to deliver judgment, determine finally, exercise judicial authority". The Blacks Law Dictionary (6th Edition) defines it as "to determine finally. Synonymous with adjudge in its strictest sense". Mr. Chidambaram, however, urged that section 22(2)(n) would cover disputes only between the licensees and utilities and not between two utilities. In other words there must be dispute between licensee on the one hand and the utility on the other hand. The interpretation is based on complete misconceived reading of section 22(2)(n). The submission ignores the well settled meaning of the word "between" which means "among". The Blacks Law Dictionary ( 6th Edition) states that sometimes it is used synonymous with among. In re: Cossentine (1933) CH 119 Maugham J. examined the article in the Oxford Dictionary on the word and pointed out that, today, with reference to a division and particularly to an equal division, the word 'between' was not only the natural word to use, but was just and proper as the word 'among', (see also re: Alcock (1945) 1 Ch.264).
38.. Mr Chidambaram also argued that the use of word 'and' in section 22(2) (n) has made the section totally impracticable and unworkable. The submission fails to impress us. There is ample authority for the view that it is possible for the Courts to construe the word "and" as meaning "or" in suitable cases. In Sukhanandan vs Suraj Bali,AIR 1951 All 119 a question arose whether the word 'and' used in section 13 of the Oudh Laws Act, could be read as 'or' . The case was before a Bench of three Judges and it was decided that it could not; but the principles under which it could be done in suitable cases were laid down in following words at page 120:
"The fundamental principle of construction is that the words used in a Statute must be understood in their ordinary grammatical sense. It is clear that, in that sense the word "and" is used as a conjunction. This will, however, not prevent the court from departing from the ordinary grammatical meaning of a word if it appears, from the context of a consideration of the other provisions of the statute that- it was the intention of the Legislature to give it another meaning. Similarly, if the ordinary grammatical meaning of a word results in creating an absurdity or an anomaly or of rendering the legislation of no effect, a narrower or a broader meaning may be given to the word or it may be construed in such a way as to obviate the absurdity or anomaly on the principle that it could not have been the intention of the Legislature to create absurdities or anomalies or to render its enactments of no effect. In such a situation the word "and' may well be construed in a disjunctive sense 'and be read as "or". "
39.. F.A.R Bennion on Statutory Interpretation 3rd edition, page 924 states as follows:
"Disjunctive use of "and". The word "and" may be used disjunctively as well as conjunctively. Example 363.12E: The Court of Appeal held that in Art 10 of the European Convention on the Recognition and Enforcement of Decisions concerning Custody of Children, given the force of law by the Child Education and Custody Act 1985, the statement that 'recognition and enforcement' of a foreign judgment may be refused was to- be construed disjunctively. This meant that a judgment might be recognized but not enforced. The. Court had regard to the statement in Dicey Morris on the Conflict of Laws (12th ed 1993) 453-454 that Awhile a court must recognise every foreign judgment which it enforces, it need not enforce every judgment which it recognises".
Thus plain reading of section 22(2 )(n) would mean that the State Commission may adjudicate upon the disputes and differences between licensees and utilities or refer the disputes for arbitration.
40.. Another argument which was advanced by Mr. Chidambaram with some vehemence was that the question of adjudication under section 22(2)(n) would arise only if the parties retain the character of licensees or utilities It is sought to be contended that because the PPA has been terminated, parties do not retain their character of utilities. We are afraid this interpretation would lead to serious consequences because generating company would merely have to shut down its plant and contend that it cannot now be described as an utility. This would be totally contrary to the provisions of section 18A of 1948 Act. When a generating company is set up no person setting up such a generating company is allowed to exit from the sector on his own volition. It is in fact the duty of the generating company to operate and maintain the generating station. The interpretation suggested by Mr Chidambaram would practically render section 22(2)(n) unworkable The words 'licensees' and 'utilities' have been used in the section in accordance with well settled and normal legislative practice. In various statutes dealing with rights and obligations arising out of jural or contractual relationship and enforcement of such rights and obligations the parties are described by legal character they bear. Words which describe person's legal character - the character which he either holds or has once held - are used in statutes as means of identification or label to point out the particular rights and obligations which arise out of such relationship either during its subsistence or after its termination i.e. either existed relationship or erstwhile relationship. Therefore the parties do not cease to be utilities within the meaning of the section merely because PPA was terminated.
41.. Mr Chidambaram strenuously contended that if section 22(2)(n) is construed without reference to pre-existing arbitration agreement it will render provisions unconstitutional because it will confer arbitrary and uncanalised powers on the Commission to adjudicate some dispute and to refer for arbitration some other disputes. The submission is that the provisions of section 22(2)(n) will have to be read down in order to keep them within the constitutional purview. We are unable to accede to the submission of Mr. Chidambaram. It has been held by the Privy Council in Province of Bombay vs Bombay Municipal Council, 1947 PC 34 that every statute must be supposed to be for public good atleast in intention and, therefore of few laws can it be said that law confers unfettered discretionary power since the policy of law offers guidance for the exercise of discretionary power. In CST vs Radhakrishan (supra) the Court held that in considering the validity of the statute the presumption is in favour of its constitutionality and burden is upon him who attacks it to show that there has been clear transgration of constitutional principles. For sustaining presumption of constitutionality, the court may take into consideration matters of common knowledge, matters of common report, the history of times, and may assume every state of facts which could be conceived. It must be always presumed that the Legislature understands and correctly appreciates the need of its own people and that discrimination, if any, is based on adequate grounds. It is well settled "that the Courts will be justified in giving liberal interpretation to section in order to; avoid constitutional invalidity. These principles have given rise to rule of reading down the sections if it becomes necessary .to uphold validity of the section. However, as laid down in C.B.Gautam vs Union of India (supra) such a reading down is not permissible where it is negatived by the express language of the statute. Reading down is also not permissible in such a manner as would fly in the face of express terms of the statutory provisions.
42.. It is submitted on behalf of the respondents and not without sufficient force that there is full and complete guidance for the Commission having regard to the nature of its power, scope of functions and the purpose underlying the Act. Section 22(2)(d) itself refers to the obligation of the Commission to ensure that the objects and purposes of the Act are achieved. There may be cases where the disputed matter is required to be referred to arbitration under the provisions of the Indian Electricity Act, 1908 or Electricity Supply Act,1948. In a given case the Commission may come to the conclusion that the dispute would be resolved in a better -manner in arbitration. This, however, does not mean that section 22(2)(n) confers uncanalised and unguided powers on the State Commission. In any event, this would not amount to an absence of jurisdiction but instead is a question of exercise of jurisdiction. In this connection a reference may be made to a Privy Council judgment in SE Asia Fire Bricks v Non Metallic Union, (1980) 2 All ER 692:
"They consider that the law" correctly applied to the circumstances of that case in the dissenting opinion of Geoffery Lane LJ when he said (1979) 1 All" ER at. 375, (1979) OR S6 at 74: - - - - - - - - The only circumstance in which this court can correct what is to my mind the error of the country court Judge is of he was acting in excess of his jurisdiction as opposed to merely making an error of law in his judgment by misinterpreting the meaning of "structural alteration... or addition" .
43.. If the plain language of section 22(2)(n) is to be give,, effect to, it must follow that the Commission has jurisdiction to either adjudicate upon all disputes and differences among licensees and utilities or to decide to refer some for resolution through arbitration." It will not be permissible for the court to curtail the statutory conferment of adjudicatory jurisdiction on the Commission by a process of restrictive construction. In Gurudevdata Vikas Maryadit vs State of Maharashta, (2001) 4 SCC 534 the court held:
"Further we wish to clarify that it is a cardinal principle of interpretation of statute that the words of a statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning, unless such construction leads to some absurdity or unless there is something in the context or in the object of the statute to suggest to the contrary . The golden rule is that the words of a statute must prima facie be given their ordinary meaning. It is yet another rule of construction that when the words of the statute are clear, plan and unambiguous, then the courts are bound to give effect to that meaning, irrespective of the consequences. It is said that the words themselves best declare the intention of the law given. The courts have adhered to the principle that efforts should be made to give meaning to each and every word used by the legislature and it is not a sound 5 principle of construction to brush aside words in a statute a being inapposite surpluses, if they can have a proper application in circumstances conceivable within the contemplation of the statute. "
44.. In Dadi Jagannadham vs Jammulu Ramulu & ors, (2001) 7 SCC 71 the Court held :
"The settled principles of interpretation are that the court must proceed on the assumption that the legislature did not make a mistake and that it did what it intended to do. The court must, as far as possible, adopt a construction, which will carry out the obvious intention of the legislature. Undoubtedly if there is a defect or an omission in the words used by the legislature, the court would not go to its aid to correct or make up the deficiency. The Court could not add words to a statute or read words into it which are not there, especially when the literal reading produces an intelligible result. The Court cannot aid the legislature's defective phrasing of an Act, or add and amend, and, by-construction, makeup deficiencies which are there".
In the light of these settled principles the submission of Mr. Chidambaram that the provisions of section 22(2)(n) should be read down in order to keep them within the limits of constitutionality is liable to be rejected.
45.. Mr. Chidambaram then submitted that sections 22 and 29 confer regulatory powers on the State Commission. The word "regulate" though wide in its scope and amplitude, does not include the power to adjudicate. The power to adjudicate under section 22(2)(n) is only incidental to and in aid of the function to determine the tariff under section 22(l)(a) to (c). This is not an independent power hut only step in aid in exercise of regulatory function relating to tariff. According to Mr. Chidambaram the MERC has jurisdiction to revise the tariff or regulate purchase. and procurement process. However, the MERC would have no power to make the contract for the parties in respect of other terms and conditions on which parties would have to reach mutual agreement. He submitted that adjudication is a judicial power. All judicial powers vest in judicial branch of the State. He referred to the observations of the Supreme Court in Smt Indira Nehru Gandhi vs Raj Narain, AIR 1975 SC 2299:
"60. It is true that no express mention is made in our Constitution of vesting in the judiciary the judicial power as is to be found in the American Constitution. But a division of the three main functions of Government is recognized in our Constitution. Judicial power in the sense of the judicial power of the State is vested in the Judiciary. Similarly, the Executive and the Legislature' are vested with powers in their spheres. Judicial power has lain in the hands of the Judiciary prior to .the Constitution and also since the Constitution. It is not the intention that the powers of the Judiciary should be passed to or be shared by the Executive or the Legislature or that the powers of the Legislature or the Executive should pass to or be shared by the Judiciary."
He also referred to the decision of the Supreme Court in S.P.Gupta vs President of India and ors, AIR 1982 SC 149 where it was observed:
" In all countries where the rule of law prevails, power to adjudicate disputes between a man and a man, a man and the State, a State and a State, a State and the Center, is entrusted to a judicial body, it is natural that such body should be assigned a status free from capricious or whimsical interference from outside "
Mr. Chidambaram further contends that the word "adjudicate" under section 22(2)(n) refers only to the limited jurisdiction as judicial authority is required to undertake before it refers parties to arbitration under sections 8 or 45 of the Arbitration and Conciliation Act, 1996, as the case may be. So read, section 22(2)(n) only means that the Commission will take up the matter for adjudication but if it finds that there is preexisting arbitration agreement it will refer the parties to arbitration in accordance with such preexisting arbitration agreement.
46.. We shall first consider the scope of the word 'regulate' as propounded by the Supreme. Court. In Indu Bhushan vs Rama Sundari, AIR 1970SC 228 the Court observed:
"The dictionary meaning of the word 'regulation' in Short Oxford Dictionary is "the act of regulating" and the word "regulate" is given the meaning "to control, govern, or direct by rule or regulations". This entry thus, gives the power to Parliament to pass legislation for the purpose of directing or controlling all house accommodation in cantonment areas. Clearly, this power to direct or control will include within it all aspects as to who is to make the constructions under that conditions the construction can be altered, who is to occupy the accommodation and for how long, on what terms is to be occupied, when an order what circumstances the occupant is to ceased to occupy it, and the manner in which the accommodation is : to be utilized. All these are ingredients of regulation of house accommodation and we see no reason to hold that this word "regulation" has been used in this wide sense in this entirety."
47.. In K Ramanathan vs State of Tamil Nadu (supra) the Supreme Court's interpretation of word 'regulate' was as follows:
"The word 'regulation' cannot have any rigid or inflexible meaning as to exclude 'prohibition'. The word 'regulate' is difficult to define as having any precise meaning. It is a word of broad import, having a broad meaning, and is very comprehensive in scope. There is a diversity of opinion as to its meaning and its application to a particular state of facts, some courts giving to the term a somewhat restricted and others giving to it a liberal construction. The different shades of meaning are brought out in Corpus Juris Secundum Vol 76 at p 611:
"Regulate" is variously defined as meaning to adjust, order or govern by rule method, or established mode, to adjust or control by rule, method, or established mode or governing principles or laws, to govern by rule, to govern by, or subject to certain rules or restrictions, to govern or direct according to rule, to control govern or direct by rule or regulations. "Regulate" is also defined as meaning, direct, to direct by rule or restriction, to direct or manage according to certain standard laws, or rules, to rule, to conduct, to fixed establish, to restrain to restrict. see also Webster's Third New International Dictionary , Vol II p 1913 and Shorter Oxford Dictionary Vol II 3rd Edn p 1784.
19. It. has been said that the power to regulate does not necessarily include the power to prohibit and ordinarily the word regulate is not synonymous with the word prohibit. This is true in a general sense and in the sense that mere regulation is not the same as absolute prohibition. At the same time, the power to regulate carries with it full power over the things, subject to regulation and in absence of restrictive words, the power must be regarded as plenary over the entire subject. It implies the power to rule, direct and control and involves the adoption of a rule or guiding principle to be followed, or the making of a rule with respect to the subject to -be regulated .The power to regulate implies the power to check and may imply the power to prohibit under certain circumstances, as where the best or only efficacious regulation consists of suppression. It would therefore appear that the word regulation cannot have any inflexible meaning as to exclude prohibition., It has different shades of meaning and must take its colour from the context in which it is used having regard to the purpose and object of the legislation, and the court must necessarily keep in view the mischief which the legislature seeks to remedy".
48.. It is thus clear that the word "regulate is a word of broad import having wide meaning comprehending all facets not only specifically enumerated in the Act but also embracing within its fold the powers incidental to the regulation envisaged in good faith with an eye single to the public welfare. It could also be seen that the assumption that the power to regulate does not include power to vary the terms and conditions of the contract is not correct. In V.S.R Oil Mills vs State of Andhra Pradesh (supra) section 3 of Madras Essential Articles Control and Regulating (Temporary Powers) Act 1949 was consideration by the Supreme Court Section 3(1) read as under:
"The State Government so - far as it appears to them to be necessary or expedient for maintaining increasing or securing supplies of essential articles or for arranging for their equitable distribution and availability at fair price may, by notified order, provide for regulating or prohibiting the supply, distribution and transfer of essential articles and trade and commodities therein."
The dispute which gave rise to the appeals before the Supreme Court pertain to two notified orders passed by the State under section 3(1) purporting to increase electricity rate and the grievance of the appellants was that the State had no authority to change this important term of the contract to the prejudice by taking recourse to section 3(1). Repelling this argument the Supreme Court held that:
"16.Section 3(1) is obviously intended to secure supplies of essential articles and to arrange for their equitable distribution and availability of fair prices. If electrical energy is one of the essential articles mentioned in the Schedule, there can be no difficulty in holding that a notified order can be issued under section 3(1) for regulating the supply of the said energy and making it available at a fair price. Indeed, it is not disputed and cannot be disputed that if electrical energy is produced by a private licensee and is then supplied to the consumers, such a supply would fall within the mischief of sec.3(1) and the terms on which it can and should be made to the consumers can be regulated by a notified order. There can also be no serious dispute that terms of contract entered into between a private supplier of electrical energy and the consumer could be modified by a notified order. Section 3(1) undoubtedly confers power on the State Government to vary and modify contractual terms in respect of the supply or distribution of essential articles. If that be so, on a plain reading of s 3(1) it seems very difficult to accept the argument that the supply of electrical energy which is included in sec 3(1) if it is made by a private producer should go outside the said section as soon as it is produced by the State Government. The emphasis is riot on who produces and supplies, but on the continuance of the equitable distribution and supply of essential articles at fair prices. If the object of section 3(1) has in mind is such equitable distribution and availability at fair prices of essential articles, that object would still continue to attract the provisions of section 3(1) even though the essential article may be produced by the State and may be supplied by it to the consumers. The words used in section 3(1) are so clear, unambiguous and wide that it would be unreasonable to limit their scope artificially on the ground that by giving effect to the wide language of the section, might reach a result which is not completely harmonious or consistent with the assumed object and purpose of the Act. Indeed, as we have just indicated, if the purpose of the Act is to secure the supply of essential articles at fair prices, it would be irrelevant as to who makes the supply. What is relevant is to regulate the supply at a fair price. Therefore, we are not prepared to accede to Mr. Setalvad's argument the Section 3(1) does not confer on the respondent the power to modify the terms of agreements between it and the appellants. "
49.. It would also be convenient to refer to the observations in para 20:
"20...The word "regulate" is wide enough to confer power on the respondent to regulate either by increasing the rate, or decreasing the rate, the test being what, is it that, is necessary or expedient to be done to maintain, increase, or secure supply of the essential articles in question and to arrange for its equitable distribution and its availability at fair prices. The concept of fair prices to which section 3(1) expressly refer does not mean that the price once fixed must either remain stationary, or must be reduced in order to attract the power to regulate. The power to regulate can be exercised for ensuring the payment of fair price, and the fixation of a fair price would inevitably depend upon a consideration of all relevant and economic factors which contribute to the determination of such a fair price. If the fair price indicated en a dispassionate consideration of all relevant factors turns out to be higher than the price fixed and prevailing, then the power to regulate the price must necessarily include the power to increase so as to make it fair..."
50.. This is further supported on the decisions of the American Courts cited by the learned A.G. In Union Dry Goods vs Georgia Public Service Corporation (supra) question arose as to whether contracts could be impaired or destroyed by any subsequent act of the Legislature, the Railroad Commission, or the Courts. The Court observed:
"That private contract rights must yield to the public welfare, where the later is appropriately declared and defined and the two conflict, has been often decided by this court. Thus in Manigault v Springs, 199 US 473, 480, 50 L. ed.274, 278, 26 Sup CT Rep 127, it was declared that:
"It is the settled law of this court that the interdiction of statutes impairing the obligation of contracts does not prevent the state from (properly) exercising such powers, for the general good of the public though contracts previously entered into between individuals may thereby be affected. This on authority of many cases which are cited".
51.. In Producers Transportation Company vs Railroad Commission of California (supra) the court held:
"A common carrier cannot, by making contracts for future transportation or business, mortgaging its property or pledging its income, prevent or postpone the exertion by a state of the power to regulate the carrier's rates and practices, nor doss the contract clause of the Federal Constitution interpose any obstacle to the exertion of such power".
52.. In Money's Mushrooms Ltd vs. British Columbia Marketing Board (supra) the court of appeal confirmed the order of British Columbia Marketing Board taking exception to two clauses of a proposed contract and ordered that these clauses could not limit the regulatory power of the Board in which it was directed that a term should be added in the contra t stating that the agreement was subject to the lawful exercise of the Mushroom Board's authority under the governing legislation:
" 24.The Board addressed the issue thus in its reasons for decision-73. The appellants argue that the Mushroom Board may not lawfully vary or terminate contracts under their scheme. They assert that because the legislature has seen fit to put such express provisions in other legislation such as the Milk Industry Act, these powers should not be implied within the scheme.
75. The Panel disagrees with this analysis as it fails to recognize a fundamental philosophical underpinning of the Act namely that marketing boards must be able to intervene in the private market place. Section 2.02 of the Scheme provides:
"The purpose of this scheme is to promote, control and regulate, under a marketing board, subject to the direction of the Provincial Board, the transportation, packing, storing and marketing of the regulated projects".
76. The very purpose of the Mushroom Board under the scheme is to regulate "marketing.... Manifestly the power to regulate the marketing of mushrooms" in all and any respects" must necessarily include the power to regulate the terms of the contracts that an agency designated by the Mushroom Board enters into with licensed growers.
80. The panel does not believe that the existence of the lawful power to regulate the terms by which agencies seek to obtain product from growers can be seriously debated.
100. We therefore confirm that for the contract in general, a term should be added stating that the Agreement is subject to the lawful exercise of the Mushroom Board's authority under the governing legislation".
53.. The conferment of such power is not without precedent. For example, the adjudication under the Industrial Disputes Act has the power to change, modify the terms of the contract and even to create a new contract. In The Cooperative Central Bank Ltd vs The Addl. Industrial Tribunal, Andhra Pradesh, (1969) 2 SCC A3, the Court said:
"The jurisdiction which is granted to Industrial Tribunals by the Industrial Disputes Act is not the jurisdiction of merely administering the existing laws and enforcing existing contracts. Industrial Tribunals have the right even to vary the contracts of service between the employer and the employees which jurisdiction can never be exercised by a civil court or a Registrar acting under the Cooperative Societies Act, so that the circumstances that, in granting relief on issue No.l, the Tribunal will have to vary the special bye laws framed by the Cooperative Bank does not lead to the inference that Tribunal would be incompetent to grant the reliefs sought in this reference".
In Hindustan Lever Ltd vs the Monopolies and Restrictive Trade Practices Commission, (1977) 3 SCC 227, an agreement between the company and its re-distribution stockist was modified by .the Commission on account of the fact that the arrangement amounted to a restrictive trade practice. The Commission modified clause 5 of the Agreement and deleted clause 9. The company was directed "to bring each agreement in line with the law as now declared and it may do so within six months and file an affidavit showing that it had done so".
54.. The ERG Act brings about a completely new and comprehensive scheme relating to the electricity industry, all within the purview of the regulatory commission. A plain reading of section 22 read with section 29 shows that the entire system of transmission, sale, distribution and supply of electricity in the State and the price thereof is now made the subject matter of control and regulation by the Commission. Section 22(2)(n) confers power on the State Commission to adjudicate upon disputes and differences between the licensees and utilities as such disputes and differences can directly or indirectly have ramification on third parties including the consumer. The conferring of the regulatory powers and adjudicatory jurisdiction .on the Central and State Electricity Regulatory Commissions are matters of public policy. Such disputes are no longer regarded as a private Lis, but disputes affecting the consumer interest and therefore, in the public interest, required to be settled by a special forum constituted under the Act. The ERCs are intended to have extremely wide powers in the electricity field. In exercise of its powers under section 22(1)(d), the Commission can decide upon investment proposals. It. may bar generating companies from taking stakes in each other or in licensee companies or vice versa, to prevent monopolies or cartelization. It can prevent entry into the field or exit therefrom, since power is an infrastructure issue. The ERCs have necessarily to adjust rights or intrude into private proprietary rights as well as rights under contract. In this connection it would be worthwhile to notice the tariff regulations. Regulation 72(1) provides that no generating company- shall charge their customers any tariff for supply of electricity without the general or special approval of such tariff by the Commission. Sub-regulation 2 of Regulation 72 expressly provides that not only the tariff but the terms and conditions for the supply of electricity are subject to obtaining the approval of the Commission. The proviso to Regulation 72 says that the existing tariff being charged by generating companies shall continue to be charged after the date of commencement of the Regulations as may be specified by a notification, without prejudice to the powers of the Commission to take any matter relating to tariff falling within the scope of section 22 of the Act. Regulation 73 provides that any generating company proposing to enter into any agreement for supply of electricity between the generating company and any buying party shall get the approval of the Commission for the tariff before entering into such contracts: It is thus apparent that the power conferred on the ERC is of the widest possible magnitude and would cover the disputes between the petitioner DPC and the Respondent Board. The disputes between the parties essentially pertain to tariff. The non-payment is based on the claim for rebate. The claim for rebate has a direct bearing on the tariff arrangement between DPC and the Board. The rebate is based on rates in the PPA. This is also a tariff issue. The PPA is basically a tariff determination mechanism. The Board's claim arising from the alleged incorrect billing by DPC for capacity statements and the alleged misstatements of Available Capacity for despatch in the Availability Declarations made by DPC have a direct bearing on tariff issues as between the Board and the DPC. The terms of the contract such as escrow, LC, etc are also matters directly arising out of tariff issues. These are all matters directly pertaining to tariff and can be regulated by the Commission. Therefore we are unable to agree with the narrow and restrictive interpretation of section 22(2((n) as suggested by Mr. Chidambaram.
55.. The next question is whether the ERC Act excludes the jurisdiction of the civil courts. The submission of Mr. Chidambaram is that exclusion of the jurisdiction of civil courts is not to be readily inferred but such exclusion must either be explicitly expressed or clearly implied. He submits that there is nothing in the ERG Act, from which it could be inescapably inferred that the Act is intended to displace the jurisdiction of the civil court including the jurisdiction of the High Court on its Original side. There is no finality clause, there are no express words of exclusion, nor the language of the Act lead to any such inference, In support of his submission the learned counsel relied upon a number of decisions. In Secretary of State vs Mask & Co ( supra) the sole question was the jurisdiction of the civil court to entertain a suit to recover an excess amount of customs duty collected from "Mask and Co. The suit was filed after, an appeal to the Collector of Customs and a revision taken to the Government of India under the Land Customs Act, 1924 was dismissed. The suit was dismissed by the trial Judge on the preliminary ground that the civil court had no jurisdiction. In appeal by Mask & Co to the High Court succeeded and there was a remit. The appeal to the Judicial Committee followed. Section 188 of-the Land Customs Act, 1924 provided inter alia: "Every order passed in appeal under this section shall, subject to the power of revision conferred by sec. 191, be final". The Judicial Committee first made a general-observation: "It is settled law that the exclusion of the jurisdiction of the civil courts is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly implied. It is also well settled that even if jurisdiction is so excluded, the Civil Courts have jurisdiction to examine into cases where the provisions of the Act have not been complied with, or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure". Then it proceeded to quote section 1&8 (as above ) and observed: "By sections 188 and 191 a practice and self contained code of appeal is provided in regard to obligations which are created by the statute itself, and it enables the appeal to be carried to the supreme head of the executive Government. It is difficult to conceive what further challenge -of the order -was intended to be excluded other than challenge in the Civil Courts" and came to the conclusion that the jurisdiction of the civil courts was excluded. The decision of the High Court was reversed and that of the trial Judge restored".
56.. In Magiti Sasmal vs Pandab Bisso (supra) the court held that section 7(1) of the Orissa Tenants Protection Act.1947 covers disputes between landlord and tenants which are' specified under clauses (a) to (e) but it does not cover disputes between the parties as to whether the relationship of landlord and tenant exists between them. The court summed up the legal position as follows:
"9. While hearing this principle in mind we must have regard to another important principle of construction and that is that if a statute purports to exclude the ordinary jurisdiction of civil courts, it must do so either by express terms or by the use of such terms as would necessarily lead to the inference of such exclusion. As the Privy Council has observed in Secretary of State v Mask and Co 67 Ind App 222 at p 736: ( AIR 1940 PC 105 at p 110): "It is settled law that the exclusion of the jurisdiction of the civil courts is not to be readily inferred but that such exclusion must either be explicitly expressed or clearly implied".
57.. In Dhulabhai v State of Madhya Pradesh (supra) Hidayatullah, C. 3. , speaking for the Court, on an analysis of the various decisions cited before the Court expressing diverse views, culled out as many as 7 propositions, out of them the first two which are material for our purpose are these: "(1) Where the statute gives a finality to the orders of the special tribunal the civil court's jurisdiction must be held to be excluded if there is adequate remedy to do what the civil courts would normally do in suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have knot been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure (2) Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court. Where there is no express exclusion the examination of the remedies and the scheme of the: particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the tribunals so constituted, and whether remedies normally associated with actions in civil courts are prescribed by the said statute or not".
58.. In State of T.N. vs Ramlinga (supra) the court held:
"A summary decision of this type in an inquiry conducted for revenue purposes cannot be regarded as final or conclusive so as to constitute a bar to a civil court's jurisdiction adjudicating upon the same issue arising in a suit for injunction filed by a ryot on-the "basis of title and/or long and uninterrupted possession. Since a full fledged inquiry on the nature or character of land is provided for under Sec 15 in the case, of an application by a landholder the character of the Settlement Officer's decision on such issue may be different but that question is not before us.
Thirdly, having regard to the principle stated by this Court while enunciating the first proposition in Dhulabhai's case (supra) it is clean that even where the statute has given finality "to the orders of the special tribunal the civil court's jurisdiction can be regarded as having been excluded if there is adequate remedy to do what the civil court would normally do in a suit. In other words,even where finality is accorded to the orders passed by the special tribunal one will have to see whether such special tribunal has powers to grant reliefs which civil court would, normally grant in a suit and if the answer is in the negative it would be difficult to imply or infer exclusion of civil court's jurisdiction..."
59.. Applying these well known and settled tests of exclusion of civil court's jurisdictions, it is clear that all the tests are satisfied. The ERC Act clearly confers finality on the orders of the MERC. This is clear from the use of the expression "adjudicate" in section 22(2)(n) which postulates final determination-. Section 27(2) of the Act provides that except by way of appeal to the High Court under section 27, no order or decision of the State Commission can be called in question in my court. Thus the decision or order of the State Commission cannot be challenged in any court by way of appeal or revision except by way of appeal tot he High Court. The Act creates several rights and liabilities and provision has been made for determination of the rights including the. rights of the consumer to be heard and represented before a special forum in a comprehensive and complete manner with a full' and complete remedy available to the High Court. The State Commission has power as are vested in civil court under the Code of Civil Procedure in respect of matters specified in section 12 of the ERC Act read with section 23. Regulations framed under section 58 make detailed provisions for filing of pleadings, hearing of the matter, pronouncement of orders and judgments. Under regulation 20 the Commission is fully empowered to hold hearings, meetings, discussions, deliberations, enquiries and investigation and consultations as it may consider appropriate in the discharge of its function under the Act. Apart from regulation 20 there are other regulations with regard to the nature of the proceedings relating to adjudication, filing of proceedings, pleadings, etc and pronouncement of judgment in open court. Regulation 63 provides that the majority view of the Commission shall be final. Further as already noticed the non-obstante clauses occur not only in section 29 but also in section 52 of the Act. Section 52 says that save as otherwise provided in section 49, the provisions of the Act shall have the effect, notwithstanding anything inconsistent therewith contained in any enactments other than ERG Act. Keeping in view the provisions of section 22(2)(n) and the non obstante clauses in section 59, it would be clear that the Commission will have exclusive jurisdiction to decide the dispute and differences between the licensees and utilities.
60.. In M/s AVR and Co. vs Fair Field Coop Hsg Society Ltd (supra) it has been held that the non-obstante clauses lead to the inference of exclusive jurisdiction . Paragraph 7 of the AVR & Co.'s case is reproduced below:
""7......... S 91 of the Maharashtra Coop Societies Act 1947 provides that notwithstanding anything contained in other law for the time being in force any dispute touching the constitution, business of the society shall be referred to by any of the parties to the dispute to a coop court if any of the parties thereto is a member or a person claiming through a member. Respondent no. 2 is a member of the disputant society. Appellants 1 and 2 are not members of the society but they as licensees are claiming through respondent no. 2. The dispute touches the business of the society and it falls within the ambit of section 91 of the Man Coop Societies Act 1947. Appellants 1 and 2 are outsiders who have been permitted to possess the suit premises as licensees of respondent no. 2 in contravention of the Rules by laws and regulations of the society. The dispute falls within the provisions of section 91(1) of the Act and the Coop court has exclusive jurisdiction to entertain and decide the dispute and not the court under the Bombay Rent Act".
61.. In Mansukhlal Dhanraj Jain's case (supra) the Court held:
"In order to resolve the controversy posed for our consideration, it will be appropriate to note the relevant statutory provision having a direct bearing on this question. Section 41(1) of the Small Causes Courts Act reads as under:
"41,(1) Notwithstanding anything contained elsewhere in this Act or in any-other law for the time being in force but subject to the provisions of sub-section (2), the Court of Small Causes shall have jurisdiction to entertain and try all suits and proceedings between a licensor End licensee, or a landlord and tenant, relating to the recovery of possession of any immovable property situated in Greater Bombay, or relating to the recovery of license fee or charges or rent thereof, irrespective of the value of the subject matter of such suits or proceedings".
12. A mere look at the aforesaid provision makes it clear' that because of the non obstante clause contained in the section, event if a suit may otherwise lie before any other court, if such a suit falls within the sweep of Section 41(1) it can be entertained only by the Court of Small Causes..."
62.. In Romila J Shroff v Jaidev R Shroff (supra) the Full Bench of this court considered the effect of sections 8 and 20 of the Family Courts Act. The relevant portion of section 8 reads thus:
"8. Exclusion of jurisdiction and pending proceedings
(a) no District Court or any Subordinate Civil Court referred to in sub-section.
(7) shall in relation to such area have or exercise any jurisdiction in respect of any suit, or proceedings of the nature referred to in the Explanation to the sub-section".
Section 20 reads as follows:
"20. Act to have overriding effect- - - The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act".
The Court held that the provisions of the Family Courts Act would exclude jurisdiction of High Court on its Original Side Civil Jurisdiction. The following observations of the Court are pertinent:
"27. Letters Patent would be included in expression any law for the time being in force, and would certainly be covered the expression "instrument". The overriding effect given to the Act is thus. confined not only tot he Code of Civil Procedure but also to the Evidence Act. The Evidence Act is also an instrument having effect by virtue of law. Looking to the provision of the restricted right of an Advocate to appear in a matte obviously, the Advocates Act of 1961 also has effect to that extent.
28. Virtually, the litigation before the Family Court is a mixture of inquisitorial trial, participatory form of grievance redressal and adversorial trial. As the Family Court is left to devise its own practice, it can have a judicious mixture of all three of them and can as well proceed under any of them exclusively.
29. The anomaly would thus be obvious. The Ordinary Original Civil Jurisdiction is held to be retained as per the learned Judges of the Division Bench and the learned Judges of the Full Bench of the Madras High Court. The procedure will be in accordance with the respective rules of the High Court on its Original Side . When legal representation being a certainty with all trapping of a full fledged trail and the Evidence Act, 1872 will apply with force and rigour.
30. The litigants deciding to litigate within the limits of the City of Mumbai will thus continue to operate under the existing system. The litigants other than that litigating with new system will have the benefit of the aforesaid Family Courts Act' which with reference to the aforesaid changes brought about in the conduct of the mattes before the Family Court is clearly radical departure from the accepted form of a trial of a Civil Court. If the legislature in its wisdom has decided to make this departure while interpreting any provision of it, in our opinion, the interpretation should be in furtherance of the objective.
31. When thus interpreted, in our opinion, the conclusion would be inescapable that when the High Court exercises its Ordinary Original Civil Jurisdiction in relation to the matters under the Family Court Act, it would be a District Court as understood therein. It would, therefore, lose its jurisdiction. The reference is answered accordingly".
63.. In Deccan Merchants Cooperative Bank Ltd vs. M/s Dalichand Jugraj Jai (supra), the conflict was on the ground of jurisdiction of the Registrar of the Coop Societies under the Maharashtra Coop Societies Act and the jurisdiction of the court of Small Causes under the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 .The Court held that whether or not the Registrar of the Coop Societies was a court whose jurisdiction was ousted under section 28 of the Bombay Rent Act, the jurisdiction of the Registrar was surely ousted on broader consideration of public policy. The court pointed out that the Rent Act had a specific social objective in view and for the achievement of that objective it was necessary that the court set up under the Rent Act alone should deal with a dispute between a landlord and a tenant and that in accordance with the provisions of the Rent Act. Necessarily the jurisdiction of the Registrar was ousted. The court said:
" The scheme of the various Rent Acts and the public policy underlying them are clear, the policy is to give protection to the tenants. Various powers have been conferred on the authorities under the Rent Acts to grant protection to the tenants against ejectment and other reliefs claimed by the landlords... If the matter is heard by the Registrar, none of these provisions would apply. We can hardly imagine that it was the intention of the legislature to deprive tenants in buildings owned by coop societies of he benefits given by the Rent Act. It seems to us that the Act was passed, in the main, to shorten litigation, lessen its costs and to provide summary procedure for the determination of the disputes relating to the internal management of the societies. But under the Rent Act a different social objective is intended to be achieved and for achieving that social objective it is necessary that dispute between the landlord and the tenant should be dealt with by the courts set up under the Rent Act and in accordance with the special provisions of the Rent Act. This social objective does not impinge of the objective underlying the Act. It seems to us that the two Acts be harmonized but by holding that in matters covered .by the Rent Act, its provisions, rather than the provisions of the Act, should apply".
64.. In Natraj Studio vs Navrang studio (supra) the appellant and the respondent entered into an agreement of which the latter granted the former "leave and license" for the use of their two studios and other premises described in the agreement. The leave and license agreement was in force on February 1, 1973 with effect from which date section 15A was inserted in the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, by an amendment (Maharashtra Act 117 of 1973). The effect of section 15A was that any person who was in occupation of any premises on February 1, 1973 as a licensee was deemed to have become, on the date, for the purpose of the Act, a tenant of the landlord, in respect of the premises or part thereof in his occupation. The leave and license agreement contained an arbitration clause. An application was made to the High Court under section 8 of the Arbitration Act praying for appointment of the Arbitrator. The High Court allowed the application and appointed the 2nd respondent as the sole Arbitrtor. Appeal filed before the Division Bench was dismissed on the ground that it was not maintainable under section 39 of the Arbitration Act. The Supreme Court reversed the High Court and held that in view of section 28 of the Bombay Rent Act the dispute between the parties can only be resolved by the Court of Small Causes and that every other courts' jurisdiction including that of the Arbitrator was excluded. The court observed:
"16. We may now proceed to consider the submission that the Court of Small Causes alone has exclusive jurisdiction to resolve the dispute between the parties. Section 28(1) of the Bombay Rent Act, positively, confers jurisdiction on the Court of Small Causes to entertain and try any suit or proceeding between a landlord and tenant relating to the recovery of rent or possession of any premises or between a licensor and a licensee relating to the recovery of licence fee or charge and to decide any application made sunder the Act and to deal with any claim or question arising out of the Act or any of its provisions, and negatively it excludes , the jurisdiction of any other court from entertaining any such suit, proceeding or application or dealing with such claim or question".
"17. The Bombay Rent Act is a welfare legislation aimed at the definite social objectives of protection of tenants against harassment by landlords in various ways. It is a matter of public policy. The scheme of the Act shows that the conferment of exclusive jurisdiction on certain courts is pursuant to the social objective to which the legislation aims. Public policy requires that contracts to the contrary which nullify the rights conferred on tenants by the Act cannot be permitted. Therefore, public policy requires - that parties cannot also be permitted to contract out of the legislative mandate which requires certain kind of disputes to be settled by Special Courts constituted by the Act, It follows that arbitration agreements between parties whose rights are regulated by the Bombay Rent Act cannot be recognized by a court of law".
65.. The court then referred to the decision of the Division Bench of this court in Subavva Kom Ranmappa Simpiger V Sasappa Andappa Chinniwar, AIR 1955 NUC 2315 where this court held that the expression 'court' occurring in section 28 of the Bombay Rent Act include an arbitrator and therefore, the jurisdiction of the arbitrator to make an award in respect, of any dispute of the nature mentioned in section 28 was excluded. The court further observed:
"24. In the light of the foregoing discussion and the authority of the precedents, we old that both by reason of section 28 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 and by reason of the broader considerations of public policy mentioned by us earlier and also in Deccan Merchants Cooperative Bank Ltd vs M/s Dalichand Jugraj Jain, the Court of Small Causes has and the arbitrator has not the jurisdiction to decide the question whether the respondent - licensor - landlord is entitled to seek possession of the two Studios and other premises together with machinery and equipment from the appellant - licensee - tenant. That this is the real dispute between the parties is abundantly clear from the petition filed by the respondent in the High Court of Bombay, under section 8 of the Arbitration Act seeking a reference to Arbitration. The petition refers to the notices exchanged by the parties, the respondent calling upon the appellant to hand over possession of the studios to him and the appellant claiming to be a tenant or protected licensee in respect of the studios. The relationship between the parties being that of licensor landlord and licensee tenant and the dispute between them relating to the possession of the licensed demised-premises, there is no help .from the conclusion that the Court of Small Causes alone has the jurisdiction and the Arbitrator has none to adjudicate upon the dispute between the parties."
66.. In the light of the judgments of the Supreme Court in Deccan Merchant Cooperative Sank Ltd and Natraj Studios Pvt Ltd, the legislative intent and social objective are clearly determinative to ascertain the exclusion of the jurisdiction of Civil Courts. The ERC Act has been enacted with a definite social objective and bearing in mind the public policy underlying it. The contracts to the contrary cannot be permitted. As indicated earlier, the adjudicatory power has been conferred in respect of disputes and differences between the licensees and utilities keeping in view the character of the parties involved. Such disputes and differences have ramifications and consequences on the matters statutorily entrusted to its exclusive jurisdiction. At the cost of repetition, we may mention that the right of consumers/ groups to be heard in all proceedings of ERCs especially in the fixation of tariff is clearly a new right created by statute and a new tribunal is provided for determination of such rights. Mr. Chidambaram, however, urged that the Commission is not a worthy successor of the civil court. He seeks to support his argument on the basis of the observations made by the Supreme Court in Sampath Kumar v Union of India quoted earlier. Those observation were made by the Supreme Court in the context of challenge to the constitutionality of the Administrative Tribunals Act. The court held that it is implicit in Article 328 A that the law excluding jurisdiction of the High Court under Articles 226 and 227 must not leave a void but it must set up another effective institutional mechanism or authority and vest the power of judicial review in it. Though judicial review is a basic and essential feature of the Constitution and it cannot be abrogated without affecting the basis structure of the Constitution, but if any Constitutional amendment made by Parliament takes away from the High Court the power of judicial review in any particular area and vests it in any other institutional mechanism as authority, it would not be violative of the basic structure doctrine, so long as the essential condition is fulfilled, namely that the alternative constitutional mechanism as authority set up by the Parliamentary amendment is no less effective than the High Court. The Court observed that the Tribunal should be a real substitution of the High Court not only in form and de jure but in content and de facto. This is because Article 226 embodies the principles of judicial review which is held to be the basic feature of the Constitution. However, so far as ERC Act is concerned, High Court's power of judicial review is net affected but on the other hand, under Section 27 of the ERC Act, all the orders and decisions of the. Commission are made subject to an appeal to the High Court. In our view decision in Sampat Kumar's case has no bearing on the issue involved in the present case. The legislature in its wisdom has laid down qualifications for members of the Commission and it would not be permissible for this court in any way whittle down the authority and jurisdiction of the Commission, on the premise that the members of the Commission may not be fully trained or experienced judicial persons. This would lead to startling results that in states where there is an element of judicial membership in the constitution of the Commission, the word 'adjudicate' will have to be given full meaning, whereas it will have to be given a restrictive meaning in the state where such judicial membership is lacking.
67.. Mr. Chidamabaram submitted that assuming the ERC Act overrides contracts, section 52 has to be construed as. only overriding contracts which were entered into after the ERC Act came into force and/or after section 22(2)(n) was notified. The ERC Act came into force on 2nd July 1998. The PPA .in the present case was entered into on 8th December 1993. In that PPA, the petitioner acquired the right to have disputes resolved by arbitration, That right was a vested right. Such vested right cannot be taken away by giving retrospective operation to the ERC Act so as to affect or override pre-existing contracts. If the dispute had arisen after 2nd July 1998 but before 27th October 2002 when section 22(2)(n) came into force, that dispute would naturally have to be decided by the arbitral tribunal or the civil court. Section 52 can have only one construction and that, construction cannot depend on whether section 22 (2) (n) has been notified or not. Hence, section 52 by itself does not override a pre-existing arbitration agreement. He referred to the decision of the Supreme Court in Garikapti v Subbiah Chowdhary (supra) where the Court held:
"The right of appeal is a vested right and such a right to enter the superior court accrues to the litigant and exists as on and from the date the list commences and although it may be actually exercised when the adverse judgment is pronounced such right is to be governed by the law prevailing at the date of the institution of the suit or proceeding and not by the law that prevails at the date of the .decision or at the date of the filing of the appeal. This vested right of appeal can be taken away only by a subsequent enactment if it so provides expressly or by necessary intendment and not otherwise".
He also referred to the observations of the Supreme Curt in the case of Manoharlal v Administrator General of W.B. (supra):
"The principles that have to be applied for interpretation of statutory amendments taking away substantive rights are well established. The first of these is that statutory provisions creating substantive rights or taking away substantive rights are ordinarily prospective, they are retrospective only if by express words or by necessary implication the Legislature has made them retrospective, and the retrospective operation will be limited only tot he extent to which it has been so made by express words, or necessary implication."
The learned counsel also relied upon the decision in Punjab Tin Supply Co. vs Central Government (supra) where the Court held as follows:
"All laws which affect substantive rights generally operate prospectively and there :.is a presumption against their retrospectivity if they affect vested rights and obligations unless the legislative intent is clear and compulsive. Such retrospective effect may be given where there are express words giving retrospective effect or where the language used necessarily implies that such retrospective operation is intended. Hence the question whether a statutory provision has retrospective effect or not depends primarily on the language in which it is couched. If the language is not clear then the court has to decide whether in the light of the surrounding circumstances retrospect we effect should be given to it or not".
68.. In our opinion, the real question is whether the ERG Act can be said to be retrospective merely because it applies to the agreement made prior to the passing of the Act. It is well settled principle of law that even though a statute -may operate prospectively it can have effect and operate in an antecedent space of time i.e. a space of time before it was enacted. In this regard, the King's Bench judgment in Master Ladies Tailor vs Ministry of Labour (supra) is instructive:
"The fact that a prospective benefit is in certain cases to be measured by or depends on antecedent facts does not necessarily and I think does not in this case, make the provisions retrospective."
In R.V.Christchurch (Inhabitants). (1.648) 12 QB 149 a somewhat similar point arose on" a different provision of the same statute. Lord Denman C,J, said:
"The statute is prospective only. A space of time is an essential ingredient in the cases to which it applies, and this space of time may consist in part of time passed before the statute passed, as is the case with statutes in limitation and prescription, but they are not therefore classed with the retrospective statutes".
69.. In Laxmi Naraysn Guin vs Niranjah Modak (supra) the court observed:
"That a change in the law during the pendency of an appeal has to be taken into account and will govern the rights of the parties was laid down by this curt in Ram Sarup v Munshi AIR 1963 SC 553 which was followed by this court, in Muta v Godhu AIR 197V SC 89. We may point out that an Dayawati vs Inderjit AIR 1966 SC 1423 this court observed: If the new law speaks in language which expressly or by clear intendments, takes kin even pending matters, the court of trial as well as then court of appeal must have regard to an intention so expressed and the court of appeal may give effect to such a law even after the judgment of the court of first instance".
70.. In this regard the observations of the US Court In Louisville & Nashville Railroad Co's case (supra) may be noticed:
"The agreement between the railroad company and the Motley's must necessarily be regarded as having been made subject to the possibility that, at some future time, Congress might so exert its whole Constitutional power in regulating inter state commerce as to render that agreement unenforceable, or to impair its value. That the exercise of such power may be hampered or restricted to any extent by contracts previously entered into between individuals or Corporation is inconceivable.
In the Addyston Pipe case above cited the court said we do not assent to the correctness of the proposition that the constitutional guarantee of liberty to the individual to enter into private contracts limits the power of Congress and prevents it from legislating upon the subjects of contracts relating to interstate commerce. Again, But it has never been and in our opinion ought not to be held that the word (liberty) included the right of an individual to enter into private contracts upon all subjects, no matter what their nature, and wholly irrespective (among other things) of the fact that they would, if performed result in the regulation of interstate commerce and in a violation of an Act of Congress upon that subject. After the commerce act came into effect, no contract that was inconsistent with the regulations establishment by the act of Congress could be enforced in any Court".
71.. Elaborate arguments were advanced before us that the Parliament did not intend while passing the ERC Act to abrogate or override international treaty obligations. Reliance was placed on the statement of Objects and Reasons to the Arbitration and Conciliation Bill, 1995, which became the Arbitration Act of 1996, It is contended that the Bill specifically recognizes the UNCITRAL Model Law and seeks to consolidate the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards taking into account the said UNCITRAL Model Laws. It is stated that there is a presumption that the Parliament intends to fulfill rather than break the international agreement. A number of decisions were cited to say that it is the duty of the Courts to construe legislation so as to be in conformity with international law and not in conflict with it. It is true that the Act of 1996 has been enacted on the UNCITRAL Model Law. However, this does not mean that the scope of operation of the ERC Act should be restricted or curtailed, especially baring in mind the public policy underlying the said Act. Section 48(2) of the 1996 Act in terms provides that enforcement of an arbitral award also be refused if the court finds that the subject, matter of the dispute not being capable of settlement by arbitration under the law of India". Further the reference to public policy in section 48(2) (b) has the same effect as words where the "agreement is null and void". Section 23 of the Indian Contract Act provides that the consideration or object of a contract would be unlawful if the Court finds that it has been opposed to public policy as if permitted it would defeat the provisions of any law. If the contention of Mr.Chidambaram is to be accepted, it would mean that the parties by simply entering into a contract in another country with the application of other law could defeat the provisions of Indian Law. Once a conclusion is arrived at that the disputes and differences are required to be adjudicated by the State Commission, it would not be permissible for the parties to resort to private .arbitration agreement.
72.. Turning then to the issue of bias detailed averments have been in made in the writ petition to highlight the association of Mr Jayant Deo a member of the MERC with the Mumbai Grahak Panchayat and his alleged bias against DPC. It is rather unnecessary to go into this question since Mr. Deo has recused himself from the case. However the submission of Mr. Chidambaram is that two other members were party to the hearing which took place on 25th May 2001 and to the interim orders and thus the MERC as a whole is infected with bias of Mr. Deo. There is not an iota of material to suggest that the other members are biased against the petitioner. Merely because the case was heard by all three members does not mean that the Commission as a whole has become incompetent to hear the case. MERC is a statutory body constituted under the ERC Act to discharge important and sensitive functions entrusted by the statute. Mere participation in the hearing at ad interim stage does not preclude the other members from proceeding with the case nor can it be said that the entire proceedings are vitiated or infected. The members of the Commission are independent persons with background of having long experience and competence and it is absurd to suggest that they may be influenced by any alleged attempts on the part of Mr. Deo to impose his views on them which is totally a hypothetical and fanciful argument. Under regulation 21 the Commission has power to delegate the case to two members. We do not see anything wrong if Mr. Deo sits in the Commission: for the purpose of administratively transferring the case. Thereafter the case can be heard by two members committee. If the two members reach a unanimous conclusion, their decision will become the decision of the Commission. If the two members did not reach a unanimous decision on the issue referred to them, it would be necessary for the third member that is Mr. Jayant Deo to express his opinion on the doctrine of necessity. In the special circumstances of the case, this would be the most appropriate course which is in keeping with the decision of the Supreme Court in Election Commission's case.
73.. An argument was also advanced before us that under section 39 of the Act MERC is subject to the directions of the State Government. Section 39 says that the State Commission shall be guided by such directions in matters of policy involving public interest as the State Government may give to it in writing. It is well settled that no authority howsoever, high placed can control the decision of a judicial or quasi-judicial authority ( see Orient Paper Mills vs Union of India, AIR 1969 SC 48).. Having regard to the clear position in law, no State Government can issue any such direction to the Commission and this position was fairly conceded by the learned A.G. It was also contended before us that there is no machinery for effective enforcement of the orders of the MERC. The Regulations do provide power to the Commission to issue order and directions to give effect to its own orders. The learned AG made a statement that, the process of implementation of the ERC Act is evolving and as and when it is found necessary to provide for further and more power for enforcement of orders and giving effect to them, the State Government shall make appropriate*rules in this behalf.
74.. In the result, in view of the foregoing, discussion the petition is dismissed. Parties to bear their own costs.
At this stage the learned counsel for the petitioner seeks leave to appeal to the Supreme Court under Article 132(1) read with. Article 134A of the Constitution of India. The learned counsel submits that substantial questions of law are involved as to the interpretation of the ERC Act. Issue involved herein is also, of great public importance dealing with the scope of jurisdiction of the Electricity Regulatory Commissions established under the ERC Act. The; counsel for the petitioner therefore submits that the petitioner be granted certificate of fitness under Article 134A of the Constitution.
In our opinion, this is a fit case for grant of certificate and accordingly, we grant certificate to the petitioner under Article 132(1) read with Article 134A of the Constitution as the issue involves a substantial question, of law as to the interpretation of the ERC Act.
Devashish Krishan
Assistant Legal Counsel
Permanent Court of Arbitration
Peace Palace ~ Carnegieplein 2
2517 KJ The Hague ~ The Netherlands
Tel: +31(0)70 302 4269
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