2011 (9) TMI 1147 - SC - Indian Laws

Interest on refund of excess electricity charges - Whether the tariff determination u/s 62 of the Electricity Act was in any way legislative or quasi-judicial - The Central Commission while determining the tariff, had determined the final tariff at a rate lesser than the pre-existing tariff, as a result of which NTPC was found to have collected excess amounts during this intervening period, and the Electricity Boards became entitled to get the refund/adjustment of these differential amounts. Thus, the amount overcharged in respect of Gandhar power station is to the tune of ₹ 460.52 crores and the one in respect of Kawas power station is ₹ 254.47 crores. The Central Commission had however disallowed the claim of the Electricity Boards for payment of interest on the differential amounts between (i) the tariff finally determined by the Central Commission and (ii) the pre-existing tariff continued by the Central Commission until the final determination of the tariff. There is no dispute that thereafter NTPC has duly and immediately adjusted the excess amounts in favour of the purchaser Electricity Boards in their subsequent bills. HELD THAT - NTPC had filed the tariff petitions duly as required by the Central Commission. The delay in the case of Kawas and Gandhar Power Stations was because of the Commission requiring them to appropriately devise norms and parameters. As far as Rihand Station is concerned, one of the beneficiaries, namely Rajasthan Rajya Vidyut Vitaran Nigam Limited had obtained stay of proceedings before the Commission from the High Court of Rajasthan. NTPC was not in any way responsible for these factors. Ultimately, the tariff was reduced, but the tariff charged by the NTPC in the meanwhile was in accordance with the rates permitted under the notifications issued by the Commission. It cannot, therefore, be said that NTPC had held on to the excess amount in an unjust way to call it unjust enrichment on the part of NTPC, so as to justify the claim of the Electricity Boards for interest on this amount. In the circumstances, it is not possible to accept the submission that the Appellate Tribunal erred in any way in declining to award interest under Section 62 (6) of the Act. There was however, an error on its part in granting the same under the concept of equity, justice and fair-play. Hence, we allow the appeals filed by the NTPC and dismiss those which are filed by the Electricity Boards.As held by the Constitution Bench, PTC India Ltd. Vs. Central Electricity Regulatory Commission 2010 (3) TMI 1209 - SUPREME COURT , price fixation is really legislative in character, but since an appeal is provided under Section 111 of the Act, it takes a quasi-judicial colour. That by itself cannot justify the claim for interest during the period when the proceedings were pending for the tariff fixation. The tariff that was being charged at the relevant time was as per the previous notifications. Once the tariff was finalized subsequently, NTPC has adjusted the excess amount which it has received. It cannot be said that during this period the NTPC was claiming the charges in an unjust way, to make a case in equity. Our attention has been drawn to the industry practice which also shows that on all such occasions interest has never been either demanded or paid when the price fixation takes place. As held by us hereinabove, claim for interest could not be covered under Section 62 (6). The provision for interest has been introduced by regulations subsequent to the period which was under consideration before the Commission.

Summary

Issues Involved:
1. Denial of interest on differential amounts under Section 62(6) of the Electricity Act, 2003.
2. Justification of awarding interest on the basis of justice, equity, and fair-play.

Detailed Analysis:

Issue 1: Denial of Interest under Section 62(6) of the Electricity Act, 2003
The primary question was whether the Appellate Tribunal erred in denying interest on the differential amounts to the concerned Electricity Boards under Section 62(6) of the Electricity Act, 2003. The relevant section reads:

"If any licensee or a generating company recovers a price or charge exceeding the tariff determined under this section, the excess amount shall be recoverable by the person who has paid such price or charge along with interest equivalent to the bank rate without prejudice to any other liability incurred by the licensee."

The Court noted that sub-section (6) prohibits recovery of a price exceeding the tariff determined under the section. The term "tariff determined under this section" indicates that the prohibition applies only after the tariff is determined. The Court agreed with the Appellate Tribunal that Section 62(6) could not be invoked to claim interest on differential amounts collected during the period when the tariff was being determined. The Court also observed that the Central Commission's regulations at the relevant time did not provide for interest on differential amounts.

Issue 2: Awarding Interest on the Basis of Justice, Equity, and Fair-Play
The second issue was whether the Appellate Tribunal was justified in awarding interest on the differential amounts based on justice, equity, and fair-play. The Appellate Tribunal had awarded interest at the prevailing lending rates of the Reserve Bank of India, citing undue monetary benefit to NTPC due to delayed tariff determination.

The Court examined precedents, including BSES Ltd. Vs. Tata Powers Co. Ltd. and South Eastern Coalfields Ltd. Vs. State of M.P., where interest was awarded based on equity and restitution principles. However, the Court distinguished these cases, noting that the agreements and regulations in the present case did not provide for interest on excess amounts. The Court emphasized that NTPC had charged tariffs as permitted by the Central Commission's notifications and had adjusted the excess amounts promptly upon final tariff determination.

The Court also considered industry practices and found no precedent for awarding interest in similar circumstances. The Court concluded that the principles of justice, equity, and fair-play could not justify awarding interest in this case, as NTPC had not unjustly enriched itself.

Conclusion:
The Supreme Court held that the Appellate Tribunal was correct in denying interest under Section 62(6) of the Electricity Act, 2003, but erred in awarding interest on the basis of justice, equity, and fair-play. Consequently, the appeals filed by NTPC were allowed, and those filed by the Electricity Boards were dismissed.