Writ Petition No. 1679 of 2011

15th November, 2011

Petitioner Counsel: Mr. N. RAI, Senior Advocate with Mr. RAVI PRAKASH and Mr. RAHUL SINHA
Respondent Counsel: Mr. DARIUS J. KHAMBATA, Addl. Solicitor Genenral with Mr. ARIJIT MAITRA, Ms. SHILPA KAPIL and Mr. CHIDANAND KAPIL

Cases Cited:
West Bengal Electricity Regulatory Commission Vs. CESC Ltd., (2002) 8 SCC 715 [Para 6]
M/s. Shri Sitaram Sugar Co. Ltd. Vs. Union of India, AIR 1990 SC 1277 [Para 9]
Union of India Vs. Cynamide India Ltd., (1987) 2 SCR 841 [Para 9]
Prag Ice & Oil Mills and Anr. etc. Vs. Union of India, 1978 Cri LJ 1281a [Para 9]
K.T. Plantation Pvt. Ltd. and Anr. Vs. State of Karnataka, 2011 (8) SCALE 583 [Para 9]
State of Tamil Nadu and Anr. Vs. P. Krishnamurthy and Ors., AIR 2006 SC 1622 [Para 9]

JUDGMENT

DR. D.Y. CHANDRACHUD, J. :- The Maharashtra Electricity Regulatory Commission has framed Multi Year Tariff Regulations in 2011. These are statutory regulations made in exercise of the power conferred inter-alia by Section 181 of the Electricity Act, 2003. The Petitioner has challenged those regulations on the ground that the Respondent failed to abide by the procedure more particularly contained in the Maharashtra Electricity Regulatory Commission (Conduct of Business) Regulations, 2004.

2. Counsel appearing on behalf of the Petitioner submits that under Section 61, an appropriate commission shall subject to the provisions of the Act specify the terms and conditions for the determination of tariff and in doing so, shall be guided by the considerations set out in clauses (a) to (i). Section 86(3) mandates that the State Commission shall ensure transparency while exercising its powers and discharging its functions. Section 181(3) imports the requirement of previous publication in respect of all regulations made by the State Commission under the Act. According to the Petitioner, the Respondent is, by the Conduct of Business Regulations, 2004, empowered by Regulation 19 to hold hearings, discussions, proceedings and meetings as it considers appropriate. According to the Petitioner, Regulation 73 further mandates that the Commission shall pass orders in such proceedings and that every order made by the Commission shall be a reasoned order. In sum and substance, the contention of the Petitioner is that the Regulations, framed by the Commission were not observed because (i) The Petitioner was not afforded an opportunity of a personal hearing at which it could state its objections; and (ii) No reasoned order has been passed by the Commission. That is the only ground of challenge set forth at the hearing. No other point has been urged.

3. In response, the learned Additional Solicitor General submitted that the Multi Year Tariff Regulations framed by the Commission constitute subordinate legislation made in exercise of the power conferred by Section 181 of the Act. Subordinate legislation, it is well settled, can be challenged only on the ground of manifest arbitrariness. There is no question of the Commission being required to grant a personal hearing when it discharges a legislative function of framing regulations and no requirement of a personal hearing has been imported under the Act. It was urged that the previous publication in Section 181(3) is enforced by the Electricity (Procedure for Previous Publication) Rules, 2005 which require the publication of a draft, specification in a notice of a date on or after which the draft will be taken into consideration and the consideration of objections and suggestions. This process, it is urged, was followed in the present case and the objections and suggestions of the Petitioner were duly considered. In the affidavit in reply, there is an elaboration of those objections of the Petitioner which have as a matter of fact been incorporated by making suitable modifications in the regulations. Finally, it was urged that in this view, the conduct of business regulations cannot over-ride the rules framed for previous publication. The Commission when it determines the tariff, gives an opportunity of a personal hearing to all stakeholders. However, there is no warrant for imposing a requirement of a personal hearing when the Commission discharges a legislative function of framing subordinate legislation particularly, in the absence of any such provision being mandated by law.

4. The power of the State Commission to frame Regulations for the purpose of the Act is embodied in Section 181 which empowers the Commission to make regulations consistent with the Act and the Rules, generally to carry out the provisions of the Act. Sub-section (3) of Section 181 stipulates that all regulations made by the State Commission under the Act shall be subject to the condition of previous publication. The Central Government has, in exercise of the power conferred by Section 181 framed the Electricity (Procedure for Previous Publication) Rules, 2005. Regulations 3 and 4 provide as follows :-

"3. Procedure of previous publication - For the purpose of previous publication of regulations under sub-Section (3) of Section 177, sub-Section (3) of Section 178 and sub-Section (3) of Section 181 of the Act, the following procedure shall apply -

(1) the Authority or the Appropriate Commission shall, before making regulations, publish a draft of the regulations for the information of persons likely to be affected thereby;

(2) the publication shall be made in such manner as the Authority or the Appropriate Commission deems to be sufficient;

(3) there shall be published with the draft regulations, a notice specifying a date on or after which the draft regulations will be taken into consideration;

(4) the Authority or the Appropriate Commission having powers to make regulations shall consider any objection or suggestion which may be received by the Authority or the Appropriate Commission from any person with respect to the draft before the date so specified.

4. The publication in the Official Gazette of the regulations made in exercise of a power to make regulations after previous publication shall be conclusive proof that the regulations have been duly made."

5. Regulations 3 stipulates the requirement of (i) Publication of a draft of the regulations for the information of persons likely to be affected; (ii) The publication of a notice specifying a date on or after which the draft regulation will be taken into consideration; and (iii) The consideration of objections or suggestions which may be received by the Authority or by the Appropriate Commission from any person. Publication in the Official Gazette of the regulations made in exercise of a power to make regulations after previous publication shall be conclusive proof that the regulations have been duly made.

6. The power to frame regulations bears a legislative character. Regulations constitute subordinate legislation. The requirement of a hearing is not imported into a legislative exercise save and except where the statute mandates a right of representation to the person concerned. In West Bengal Electricity Regulatory Commission V/s. CESC Ltd., (2002) 8 SCC 715, the Supreme Court has observed as follows in paragraph 40 of the Judgment :-

" .... though normally price fixation is in the nature of a legislative function and the principles of natural justice are not normally applicable, in cases where such right is conferred under a statute, it becomes a vested right, compliance of which becomes mandatory. While the requirement of the principles of natural justice can be taken away by a statute, such a right when given under the statute cannot be taken away by courts on the ground of practical inconvenience, even if such inconvenience does in fact exist."

7. Section 181(3) mandates previous publication. The requirement of previous publication in Section 181(3) is implemented in the Rules of 2005, which require the publication of the regulations in draft and the consideration of objections and suggestions. That procedure has been observed. In the present case, it would be appropriate for the Court to extract in its entirety a chart annexed to the affidavit- in-reply. The chart indicates the procedure which was followed by the State Commission before the Multi Year Regulations 2011 were notified :-

Sr.	Particulars	Date
1	Draft MYT Approach Paper uploaded on MERC website & circulated to 53 experts, including Utilities, Consumer Representative, Members of the State Advisory Committee, etc.	01/10/2009
2	Full day Workshop wherein above named Experts and stakeholders were given the opportunity to provide their inputs on the proposed MYT Framework	09/10/2009
3	Two weeks time after the Workshop was given to the stakeholders to submit their comments on the draft Approach Paper in writing	23/10/2009
4	Number of comment received from stakeholders in writing -	16
5	Based on representations from all the Utilities, the Commission deferred the implementation of the MYT framework by one year, and specified the Control Period for MYT as FY 2011-12 to FY 2015-16	01/12/2009
6	Commission directed all Utilities to submit their Business Plan in the stipulated Formats	14/12/2009
7	First reminder sent to Utilities on submission of Business Plan	15/06/2010
8	Second reminder sent to Utilities on submission of Business Plan	13/07/2010
9	Modified MYT Approach Paper and draft MERC MYT Regulations were uploaded on MERC website and comments were invited, through Public Notice, under the prior publication requirement	01/09/2010
10	Last date for submission of comments on draft MYT Regulations	23/09/2010
11	Last date for submission of comments on draft MYT Regulations was extended to	10/10/2010
12	Two-day Workshop wherein all Utilities and authorised	15/10/2010
13	Consumer Representatives were given the opportunity to provide their inputs on the draft MYT Regulations	16/10/2010
14	Number of comment received from stakeholders in writing -	15
15	Consideration of comments and suggestions by the Commission – from	01/11/2010
16	Consideration of comments and suggestions by the Commission – to	31/01/2011
17	Issuance of final MYT Regulations on MERC website	01/02/2011
18	Notification of final MERC MYT Regulations, 2011	04/02/2011
19	Revised Formats for submission of MYT Business Plan & MYT Petition sent to all Utilities	25/03/2011

8. The affidavit in reply filed by the Respondent contains an express denial of the allegation that the comments of the Petitioner were not considered while finalizing the regulations. As and by way of illustration, the reply has furnished instances where some of the comments of the Petitioner were accepted and incorporated in the regulations. No rejoinder has been filed to traverse what is stated in the affidavit-in-reply. Even if the Court were to hold, as contended by the Petitioner, that the conduct of Business Regulations 2004 would be attracted, it is evident that what Regulation 19 stipulates is that in the discharge of its functions under the Act, the Commission may, from time to time, hold hearings, proceedings, meetings, discussions, deliberations, inquiries, investigation and consultations as it considers appropriate. Obviously, the nature of the proceedings which the Commission must follow has to be appropriate to the nature of the process, be it legislative or in a particular case judicial or quasi judicial. For instance, the conduct of business regulations provides for the procedure to be followed in the case of adjudication proceedings. Provisions have been made in regard to the authority to represent, the initiation of proceedings, petitions and pleadings, proof of facts, presentation and scrutiny of pleadings, service of notices, filing of replies, hearing proceedings ex-parte and the passing of a reasoned order by the Commission. A reasoned order is an attribute of the judicial process. Legislation or subordinate legislation does not require reasoned orders. The norm which is legislated upon by the legislature or its delegate speaks for itself. Legislative bodies and their delegates speak through law enacted. In the present case, as the affidavit in reply would disclose, the Commission had followed a fair procedure consistent with the Rules of 2005 before it framed the Multi Year Regulations, 2011. There is no merit in the submission that the Commission ought to have passed a reasoned order. Legislation or sub-ordinate legislation, unlike the judicial process does not speak through reasons or judgments. Reasons constitute the foundation of a judicial or quasi-judicial order. In the case of a legislative enactment or subordinate legislation, the mandate of the law is contained in the provisions as they are enacted. No further reasons are, therefore, required as a matter of first principle.

9. At this juncture it is necessary to refer to the judgments of the Supreme Court on this point. A Constitution Bench of the Supreme Court in M/s. Shri Sitaram Sugar Co. Ltd. v. Union of India, AIR 1990 SC 1277 at para 36-8. followed the decision in Union of India v. Cynamide India Ltd., [1987] 2 SCR 841, which held that :

"...legislative action, plenary or subordinate, is not subject to rules of natural justice. In the case of Parliamentary legislation, the proposition is self-evident. In the case of subordinate legislation, it may happen that Parliament may itself provide for a notice and for a hearing.... But where the legislature has not chosen to provide for any notice or hearing, no one can insist upon it and it will not be permissible to read natural justice into such legislative activity. ... A price fixation measure does not concern itself with the interests of an individual manufacturer or producer. It is generally in relation to a particular commodity or class of commodities or transactions. It is a direction of a general character, not directed against a particular situation. ..."

In Prag Ice & Oil Mills and Anr. etc. v. Union of India, 1978 Cri LJ 1281a, it was observed that :

"A legislative measure does not concern itself with the facts of an individual case. It is meant to lay down a general rule applicable to all persons or objects or transactions of a particular kind or class."

The Constitution Bench of the Supreme Court in K.T. Plantation Pvt. Ltd. and Anr. v. State of Karnataka, 2011 (8) SCALE 583 at para 52 held that :

"52. Delegated legislation which is legislative in character, cannot be questioned on the ground of violation of the principles of natural justice, especially in the absence any such statutory requirement. Legislature or its delegate is also not legally obliged to give any reasons for its action while discharging its legislative function.

See also State of Punjab v. Tehal Singh and Ors., (2002) 2 SCC 7; West Bengal Electricity Regulatory Commission v. CESC Ltd., (2002) 8 SCC 715; Pune Municipal Corporation and Anr. v. Promoters and Builders Association and Anr., (2004) 10 SCC 796 and; Bihar State Electricity Board v. Pulak Enterprises and Ors., (2009) 5 SCC 641."

In State of Tamil Nadu and Anr. v. P. Krishnamurthy and Ors., AIR 2006 SC 1622 at para 18, the Supreme Court held that,

"A delegated legislation, though legislative in character, will be invalid, on the ground of violation of principles of natural justice if the enabling Act under which the delegated legislation is made, specifically requires observance of the principles of natural justice for doing the act. This was made clear in Rameshchandra Kachardas Porwal v. State of Maharashtra, [1981] 2 SCR 866 itself. "

10. For these reasons, and following these settled principles of law, we do not find any merit in the contentions which have been urged on behalf of the Petitioner. The Petition is accordingly dismissed. There shall be no order as to costs.

Petition dismissed.