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2011 DIGILAW 4881 (MAD)

Madras Cements Limited v. Chairman, Tamil Nadu Generation And Distribution Corporation Ltd.

2011-12-20

M.Y.EQBAL, T.S.SIVAGNANAM

body2011
JUDGMENT M.Y. EQBAL, T.S. SIVAGNANAM ( 1. ) THOUGH the miscellaneous petitions have been listed for hearing, by consent of the parties, the writ appeals are taken up for disposal. Since all these appeals have been filed against the common order dated 21.10.2011 passed by the learned single Judge in a batch of writ petitions, they are being heard together and disposed of by this common judgment. For convenience, the facts in W.P. No. 18799 of 2011 are taken up for discussion. ( 2. ) THE appellants/writ petitioners are reputed industrial establishments with considerable annual turnover. Being encouraged by the Government's policies in relation to wind energy generation, the writ petitioners had invested a large amount of money in wind energy generation and substantial portion of the energy generated by the wind turbines set up by the writ petitioners is being wheeled for its own use. Insofar as the expenditure for the setting up of such wind turbines is concerned, the same is borne by the Wind Energy Generators (WEGs), such as the writ petitioners. As per Section 10 of the Electricity Act, 2003 (in short "the Act"), the generating companies are required to establish, operate and maintain generating stations, substations and transmission lines. Initially, the WEGs were small scale operators and could not erect the facilities required to transmit the electricity generated by them into the Tamil Nadu Electricity Board (TNEB) Grid and, therefore, the TNEB took on the responsibility of erecting separate sub-stations for the benefit of such small scale WEGs. THE TNEB sought to collect the expenditure for erecting such sub-stations from the WEGs in the name of Infrastructure Development Charges (IDC). THE same was being imposed by the TNEB since 1995 and the TNEB had been continuing the regime even after the Act came into force. This action of the TNEB in seeking to impose IDC was was challenged before the Tamil Nadu Electricity Regulatory Commission (TNERC) on the ground that specific permission had not been sought from the TNERC as per Section 32 of the Act and the TNERC held IDC to be invalid on the ground that the same was not contemplated as per the provisions of Section 32. On appeal, the Appellate Tribunal for Electricity overruled the decision of the TNERC and upheld the IDC on the ground that the same was a result of the respective contractual obligations of TNEB and WEGs. On appeal, the Appellate Tribunal for Electricity overruled the decision of the TNERC and upheld the IDC on the ground that the same was a result of the respective contractual obligations of TNEB and WEGs. THE ruling of the Appellate Tribunal has been challenged and the same is pending before the Hon'ble Supreme Court. THE levy was upheld by the Appellate Tribunal only on the ground that it was the wind mill developer who had agreed to pay the IDC by entrusting the task of setting up of the infrastructure to TNEB. THE said judgment has been misconstrued by the respondents to allow them to collect charges on the ground of an agreement between the parties. ( 3. ) ACCORDING to the writ petitioners, after the Act came into force, the statute has, under the provisions contained in Section 10 and 42, introduced the concept of Open Access, which essentially means that any generator would, upon satisfaction of the conditions, be entitled as a matter of right to use the transmission facilities of a distributor/transmission licensee. Such Open Access is statutorily required to be regulated by framing of Regulations. The TNERC has already notified the "Tamil Nadu Electricity Regulatory Commission Intra State Open Access Regulations 2005", in short, "the Regulations" which regulate the open access. The charges for open access have been set out in Regulation 9 of the Regulations and the charges have been approved for (i) Transmission Charge/Wheeling Charge, (ii) Surcharge, (iii) Additional Surcharge, (iv) Scheduling and System Operation Charges, (v) Reactive Energy Charges, (vi) Grid Availability Charges and (vii) Restoration Charges. The Regulations further provide as follows: "19-A. Billing and Payment: (1) The licensee/SLDC shall raise bills and the Open Access customers shall pay the charges as below: (a) Transmission Charges: (i) The STU/Transmission licensee shall raise the bill for transmission charges on the Open Access customers before the 5th day of the succeeding calendar month, (ii) The open access customer shall pay the charges within seven days from the date of the bill. (b) Wheeling Charges: (i) The Distribution licensee shall raise bill towards wheeling charges on the open access customer within five days from the date of meter reading, (ii) The open access customer shall pay the charges within seven days from the date of bill. (b) Wheeling Charges: (i) The Distribution licensee shall raise bill towards wheeling charges on the open access customer within five days from the date of meter reading, (ii) The open access customer shall pay the charges within seven days from the date of bill. (c) Scheduling and system operating charges: (i) The SLDC shall raise bills before the 5th day of the succeeding calendar month, (ii) The open access customer shall pay the charges within seven days from the date of the bill. (d) Surcharge and Additional Surcharge: (i) The Distribution Licensee shall raise bills on the open access customers within five days from the date of meter reading, (ii) The open access customer shall pay the charges within seven days from the date of bill. (e) Grid support charges: (i) The Distribution licensee shall raise bills on the open access customer for the drawal of power from the grid by the consumer as back up supply under the conditions specified in Clause (a) of sub-regulation (7) of Regulation 9, within five days from the date of meter reading, (ii) The open access customer shall pay the charges within seven days from the date of the bill. (2) Failure to pay the charges will result in discontinuation of open access as contemplated in sub-regulation (8) of Regulation 9." ( 4. ) THE stand of the writ petitioners was that it is evident from the above statutory provisions that every aspect of the operations of the transmission and distribution activity has been covered under various heads of charges. THE TNERC has also approved the various rates of levy and the same are being levied and collected by the rsespondent. THErefore, there exists no other activity of Tamil Nadu Electricity Generation and Distribution Company Limited (TANGEDCO), which is not compensated for by the WEG owners for the purposes of wheeling and/or sale of the electricity that is generated. ( 5. ) THE writ petitioners futher stated that any charge that is to be levied by a transmission or a distribution licensee has to be one that is permissible under the Act and the rates in that regard are to be specifically approved by TNERC. THE statutory scheme does not permit a unilateral and unapproved levy of any charge. ( 5. ) THE writ petitioners futher stated that any charge that is to be levied by a transmission or a distribution licensee has to be one that is permissible under the Act and the rates in that regard are to be specifically approved by TNERC. THE statutory scheme does not permit a unilateral and unapproved levy of any charge. THE TNERC has also set out the charges for all other miscellaneous charges and OandM charges of the nature such as the present one are not approved charges. THE above charges cover all possible charges and, therefore, the levy of OandM charges is one without authority and an obvious attempt on the part of TANGEDCO to unjustly enrich itself. THE said charges are being levied only with the objective of shoring up the precarious financial condition of TANGEDCO through illegal means. According to the writ petitioners, Rule 4 of THE Tamil Nadu Electricity Supply Code, 2004, prescribes the charges to be recoverable by the licensee. Accordingly, OandM charge is a tariff related and miscellaneous charge, which cannot be levied without the approval of TNERC. It is further contended by the writ petitioners that there are three types of sub-stations operated for distribution and transmission viz., (i) Owned and operated by TANGEDCO; (ii) Built by the Third Party and given to the TANGEDCO for operation and (iii) Built, operated and maintained by Third Party. Hence, generalizing a common levy of OandM charges is entirely illegal. ( 6. ) THE writ petitioners further contended that the respondents have unilaterally sought to make a levy in respect of operation and maintenance charges in relation to the alleged infrastructure created by the respondents-TANGEDCO. THE said levy has been fixed under the impugned orders dated 16.11.2010 and 25.6.2011 without any basis at Rs.1.60 lakhs per M.W. per year from all the wind energy generators with 5% escalation every year up to the levy period. THErefore, the impugned action of the respondents of levying and collecting OandM charges without the approval or sanction from TNERC is completely untenable. ( 7. ) RESPONDENTS 1 to 4 in W.P. No. 18799 of 2011 have filed a counter affidavit stating, inter alia, that the Electricity Act, 2003, is a comprehensive law, providing for various remedies. THErefore, the impugned action of the respondents of levying and collecting OandM charges without the approval or sanction from TNERC is completely untenable. ( 7. ) RESPONDENTS 1 to 4 in W.P. No. 18799 of 2011 have filed a counter affidavit stating, inter alia, that the Electricity Act, 2003, is a comprehensive law, providing for various remedies. While so, the writ petitioners should have availed all the remedies as available in law before approaching the High Court by way of filing a writ petition under Act 226 of the Constitution of India. ( 8. ) ACCORDING to the respondents, any power project consists of two components viz., (i) Generating Plant and (ii) Power Evacuation Facility. Similarly, the activity of project proponent has two components, namely, (i) establishment of the project and (ii) operation and maintenance of the project. There are three ways for carrying out the above work. They are: (i) Establishment, operation and maintenance by project proponent. (ii) Establishment by project proponent and Operation and Maintenance by the Contractor. (iii) Establishment by Contractor and Operation and Maintenance also by Contractor. ( 9. ) FOR the works (ii) and (iii) stated hereinabove, the project proponent has to pay service charges to the contractor. This is the routine procedure all over the world. Further, the establishment of power plant without evacuation facility does not serve any purpose. Section 10 (1) of the Act mandates the writ petitioners/generating companies to establish generating station and evacuation facility, such as, tie- line, sub-stations and dedicated transmission line and also maintain the same. But in the present case, the writ petitioners/generating companies only establish their part, i.e., generating the plant and maintaining the same, but evacuation facility is not being established and maintained by them. Instead, the said work has been entrusted to TANGEDCO and though they pay for establishment of the evacuation facility by way of IDC, they refuse to pay the consequential operation and maintenance (OandM) charges for maintenance of the same by TANGEDCO. In view of the same, TANGEDCO is entitled to claim OandM charges for the maintenance carried out by it all along. However, TANGEDCO raises bill for OandM Charges only from 6/2011 without retrospective effect, but the writ petitioners approached this Hon'ble Court to evade the liability. In view of the same, TANGEDCO is entitled to claim OandM charges for the maintenance carried out by it all along. However, TANGEDCO raises bill for OandM Charges only from 6/2011 without retrospective effect, but the writ petitioners approached this Hon'ble Court to evade the liability. The writ petitioners, being agreement holders, are bound by the terms and conditions of supply and the various provisions of the Act and are as such estopped from disputing the demand and hence, the writ petitions are liable to be dismissed. ( 10. ) THE learned single Judge, after hearing the arguments of the learned counsel on either side, and after perusing the relevant materials on record, dismissed all the writ petitions holding that the impugned proceedings of the Chief Engineer, NCES, TANGEDCO, Chennai dated 16.11.2010 and the consequential proceedings dated 25.6.2011 in respect of demand of OandM Charges for the writ petitioners-Wind Energy Generators, are in accordance with law. ( 11. ) AGGRIEVED by the order of the learned single Judge, the writ petitioners/appellants herein preferred this batch of appeals. ( 12. ) LEARNED counsel for the appellants assailed the impugned order mainly on the ground that the Operation and Maintenance Charges being a head of tariff, the Tamil Nadu Electricity Generation and Distribution Company Limited (TANGEDCO) is statutorily bound to approach the Tamil Nadu Electricity Regulatory Commission (TNERC) for approval before imposing the said charges. According to the learned counsel, after coming into force of the Electricity Act, 2003, the Tamil Nadu Electricity Generation and Distribution Company Limited TANGEDCO and the Tamil Nadu Transmission Corporation Limited (TANTRANSCO), which are licencees as per the provisions of Section 14 of the Act, are obliged to approach the Commission for determination of the tariff under the provisions of the said Act. LEARNED counsel submitted that the Operation and Maintenance Charges being a tariff head, the respondents are bound to follow the law before taking a decision of their own. This charge cannot find place under any of the Rules of the Tamil Nadu Electricity Code, 2004. ( 13. ) INDISPUTABLY, before filing the appeals before the Appellate Tribunal, the generators had requested TANGEDCO to carry out the substation work. It is also not in dispute that it was only at the request of the wind developers, the Board erected sub-stations and transformers to provide benefits to the generators. ( 13. ) INDISPUTABLY, before filing the appeals before the Appellate Tribunal, the generators had requested TANGEDCO to carry out the substation work. It is also not in dispute that it was only at the request of the wind developers, the Board erected sub-stations and transformers to provide benefits to the generators. In fact, after the erection of the sub-station and transformers, it is the Board which is operating and maintaining the generating stations, tie-lines, sub-stations and dedicated transmission lines connected therewith. For carrying out the maintenance and operation, the Board is incurring heavy expenses. Although it was obligatory on the part of the power generating companies to carry out the duty cast upon them under Section 10 of the Act, it is in fact being done by the Board at the request of the appellants. The appellants have not disputed that the operation and maintenance of the generation station, tie-line, sub-station and the dedicated transmission lines incur recurring expenses, which the appellants were under an obligation to carry out, but based on the contract, the same is being done by the respondents/Board. ( 14. ) THE learned senior counsel appearing for the appellant would contend that the Supreme Court in BSES Ltd. v. Tata Power Co. Ltd and Others, AIR 2004 SC 760 : (2004) 1 SCC 195 , has elaborately considered the definition of the term' 'tariff and held that it is just and necessary that the State Regulatory Commission should be the body that determines the tariff for electricity and also for use of transmission facilities. Further, the Supreme Court has held that Regulatory Commissions have the exclusive power to determine the tariff and that state utilities should approach the State Regulatory Commissions for the fixation of tariff before the same is levied and it is not permissible for TNGEDCO to charge a tariff other than what has been approved and fixed by the State Regulatory Commission. ( 15. ) IN BSES Ltd. v. Tata Power Co. Ltd and Others (supra), the appeals by Special Leave before the Supreme Court were preferred against the judgment of the Bombay High Court in an appeal filed, challenging the order of the Maharastra Electricity Regulatory Commission. The controversy was regarding the payment of stand by charges and whether, the same could only be determined by the Regulatory Commission. Ltd and Others (supra), the appeals by Special Leave before the Supreme Court were preferred against the judgment of the Bombay High Court in an appeal filed, challenging the order of the Maharastra Electricity Regulatory Commission. The controversy was regarding the payment of stand by charges and whether, the same could only be determined by the Regulatory Commission. The Supreme Court took note of the fact that the Government of INdia organized two Conferences of Chief Ministers, to discuss the whole gamut of issues in the power sector and the outcome of these meetings was the adoption of the Common Minimum National Action Plan for Power. Under this action plan, it was considered necessary to create a Regulatory Commission as a step to arrest the deteriorating condition of the State Electricity Boards and to make plans for future development. The organization, which was appointed to study the restructuring, needs of the system, strongly recommended the creation of independent Electricity Commission both at the Centre and States to give effect to such recommendations. The Electricity Regulatory Commission Bill was introduced in the Parliament with the main functions to determine the tariff for electricity; to determine the tariff payable for use of transmission facilities and to regulate power purchase and procurement process of the transmission utilities etc. ( 16. ) THE Supreme Court in the above decision after taking note of Section 22 of the State Electricity Regulatory Commission Act, which deals with functions of State Commission, Section 29, which deals with determination of tariff by State Commission and Section 58, which empowers the State Commission to make regulations, interpreted the word 'tariff, by holding that the word 'tariff has not been defined in the Act and the Supreme Court held that 'tariff is a cartel of commerce and normally it is a book of rates. It will mean a schedule of standard prices or charges provided to the category or categories of consumers specified in the tariff. At this stage, it would be relevant to refer to paragraph 16 of the judgment, which reads as follows: "16. THE word "tariff has not been defined in the Act. "Tariff is a cartel of commerce and normally it is a book of rates. It will mean a schedule of standard prices or charges provided to the category or categories of customers specified in the tariff. THE word "tariff has not been defined in the Act. "Tariff is a cartel of commerce and normally it is a book of rates. It will mean a schedule of standard prices or charges provided to the category or categories of customers specified in the tariff. Sub-section (1) of Section 22 clearly lays down that the State Commission shall determine the tariff for electricity (wholesale, bulk, grid or retail) and also for use of transmission facilities. It has also the power to regulate power purchase of the distribution utilities including the price at which the power shall be procured from the generating companies for transmission, sale, distribution and supply in the State. "Utility" has been defined in Section 2(1) of the Act and it means any person or entity engaged in the generation, transmission, sale, distribution or supply, as the case may be, of energy. Section 29 lays down that the tariff for the intrastate transmission of electricity and tariff for supply of electricity - wholesale, bulk or retail - in a State shall be subject to the provisions of the Act and the tariff shall be determined by the State Commission. Sub-section (2) of Section 29 shows that the terms and conditions for fixation of tariff shall be determined by Regulations and while doing so, the Commission shall be guided by the factors enumerated in Clauses (a) to (g) thereof. THE Regulations referred to earlier show that generating companies and utilities have to first approach the Commission for approval of their tariff whether for generation, transmission, distribution or supply and also for terms and conditions of supply. THEy can charge from their customers only such tariff which has been approved by the Commission. Charging of a tariff which has not been approved by the Commission is an offence which is punishable under Section 45 of the Act. THE provisions of the Act and Regulations show that the Commission has the exclusive power to determine the tariff. THE tariff approved by the Commission is final and binding and it is not permissible for the licensee, utility or anyone else to charge a different tariff." ( 17. THE provisions of the Act and Regulations show that the Commission has the exclusive power to determine the tariff. THE tariff approved by the Commission is final and binding and it is not permissible for the licensee, utility or anyone else to charge a different tariff." ( 17. ) IN the above case, the Supreme Court while considering the question as to whether the charges for stand by facility was a matter relating to tariff, examined the facts of the case and the agreement entered into between the parties and the entire factual matrix, found that both parties therein treated the charges for stand by facility as a matter relating to 'tariff and even in the notice given to the Government of Maharastra and the Maharastra State Electricity Board, the charges for stand by facility given by them, were also described as 'tariff. Similarly all correspondence exchanged between the parties charges for stand by facility have been described as a matter relating to tariff. Therefore, the Supreme Court directed the Maharastra Electricity Regulatory Commission, to decide the dispute. ( 18. ) IN view of the above, the judgment is clearly distinguishable on fact and while interpreting the agreement entered into between the parties before the Supreme Court, it was the conclusively established that the said charges was treated as a matter relating to tariff and in the light of the said factual position, the judgment was rendered and therefore, the judgment cannot in any manner advance the case of the petitioner. ( 19. ) AS seen from the facts of the cases on hand, every power project consist of two components, namely, (i) generating plant and (ii) the power evacuation facility. Similarly, the project proponent has two components, namely, establishment of the project and operation and maintenance of the project. It is stated that there are three ways for carrying out the above two components work, (i) establishment, operation and maintenance by project proponent; (ii) establishment by project proponent and operation and Maintenance by the contractor and (iii) establishment by contractor and operation and maintenance also by the contractor. Sofar as the work (ii) and (iii) above, the project proponent is required to pay service charges to the contractor and it is stated that such is the practice all over the world. It cannot be disputed that establishment of a power plant would not serve any purpose without evacuation facilities. Sofar as the work (ii) and (iii) above, the project proponent is required to pay service charges to the contractor and it is stated that such is the practice all over the world. It cannot be disputed that establishment of a power plant would not serve any purpose without evacuation facilities. Section 10(1)of the Act, mandates the generating company to establish, operate and maintain generating stations, tie-lines, sub-stations and dedicated transmission lines connected therewith in accordance with the provisions of the Act or the Rules or Regulations made thereunder. ( 20. ) IT appears to be not in dispute that the generating company such as Appellants only establish the generating plant and maintain them, but have not established any facility for the purpose of evacuation of the power generated and to maintain such facility required for evacuation. This has been entrusted to the TNGEDCO and it is stated that the appellants were eady to pay for the establishment of evacuation facility, but were contesting or refusing to pay the consequential operation and maintenance charges. Infact, in the counter affidavit, reference has been made to an order passed by the ATE, dated 8.1.2010, wherein it was ordered that it is the responsibility of the generating company to erect sub-station, tie-lines and bring the same to connect to TNEB and this is one of the duties under Section 10(1) of the Act. The establishment of power transformer and sub-station for the purpose of creation of evacuation facility could be a one time payment, but operation and maintenance are bound to recurrent and continuous. ( 21. ) THEREFORE, on a consideration of these facts, we do not agree with the contention raised by the learned counsels for the appellant stating that the operation and maintenance charges should also be construed as a tariff. As held by the Supreme Court "tariff' will mean a schedule of standard prices or charges provided to the category of customers specified in the tariff. Admittedly, there cannot be a standard price for maintenance, for all establishments, which are bound to vary depending upon contingencies. THEREFORE, to term these charges as "tariff would be impermissible. ( 22. ) IN that view of the matter, the Operation and Maintenance Charges, in our considered opinion, cannot be brought within the definition of 'tariff' so as to avoid payment by the appellants. THEREFORE, to term these charges as "tariff would be impermissible. ( 22. ) IN that view of the matter, the Operation and Maintenance Charges, in our considered opinion, cannot be brought within the definition of 'tariff' so as to avoid payment by the appellants. The learned single Judge has, therefore, rightly held that the Operation and Maintenance Charges are payable by the power generating companies. ( 23. ) FOR the aforesaid reasons, we do not find any merit in these appeals, which are accordingly dismissed. However, there shall be no order as to costs. Consequently, all the connected miscellaneous petitions are closed. Appeals dismissed.