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Bhaskar Shrachi Alloys Limited & Ors. v. Damodar Valley Corporation & Ors. and connected matters

Civil Appeal · 2018 INSC 629Decided 23 Jul 2018
Civil Appeal Nos. 971-973 of 2008, Civil Appeal No. 1914 of 2008, Civil Appeal Nos. 4504-4508 of 2008, Civil Appeal No. 4289 of 2008
Justice Ranjan Gogoi · Justice R. Banumathi

Background

This group of appeals (Civil Appeal Nos. 971-973 of 2008, along with connected appeals including C.A. No. 1914 of 2008) arose from a common Appellate Tribunal for Electricity order that upheld the Central Electricity Regulatory Commission's determination of the tariff charged by the Damodar Valley Corporation (DVC), a body set up by a 1948 Act to handle power generation, flood control and irrigation across West Bengal and Jharkhand. High-tension industrial power consumers, including Bhaskar Shrachi Alloys, challenged how much of DVC's costs, particularly its pension/gratuity fund contributions and the costs of its non-power activities like flood control and irrigation, could be passed on to electricity consumers through their tariff.

Decision Breakdown

The Supreme Court examined the 1948 Act alongside the Electricity Act, 2003, and found no legal error in the Appellate Tribunal's reasoning. On the pension and gratuity issue, the Court agreed that once the regulator had done a "prudence check" and accepted the need to fund these liabilities, DVC should be allowed to recover that amount through tariff rather than out of its own resources. On the "other activities" issue, the Court held that DVC's non-power functions (flood control, irrigation) are not optional or revenue-generating business activities but statutorily mandated, socially beneficial functions, so recovering their cost from the common tariff fund does not conflict with the Electricity Act's separate-accounts requirements for other businesses. All the appeals, including the consumers' and connected parties' challenges, were accordingly dismissed and the Appellate Tribunal's order affirmed.

Lesson Learnt

When a statutory corporation performs both a core regulated function (like power supply) and other legally mandated public functions (like flood control), the law does not automatically treat the second as a separate "business" that must pay for itself: it can be funded through the same tariff, provided the cost allocation has been properly scrutinised by the regulator.

Official source (sci.gov.in)View Judgment (PDF)

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