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Maharashtra State Electricity Distribution Co. Ltd. v. Union of India & Ors.

Civil Appeal · 2020 INSC 230Decided 28 Feb 2020
Civil Appeal No. 4304 of 2007
Justice Arun Mishra · Justice M.R. Shah · Justice B.R. Gavai

Background

Maharashtra's state electricity distribution company (MSEDCL) had issued circulars between 1998-2001 regulating captive power plants (CPPs), factories generating their own electricity, covering things like minimum purchase obligations from the grid and penalty charges. The state electricity regulator (MERC), only set up in August 1999, later quashed these circulars retroactively, including ones issued before it even existed, saying they needed its approval. The regulator's Appellate Tribunal upheld this, and MSEDCL was ordered to refund large sums to several CPP companies. MSEDCL appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that circulars issued before the regulator (MERC) was constituted could not be invalidated merely for lacking an approval that no body yet existed to give: until MERC was set up, the power to fix tariffs remained validly with the electricity board under the earlier 1948 law. Relying on its own prior ruling in Binani Zinc Ltd., the Court set aside the regulator's and tribunal's orders as illegal for that period. For the one circular that did arguably fall within MERC's early window, the Court still declined to order a refund, noting that two decades had passed, the regulator had never actually examined the circular's merits, and the CPP companies had already passed on the increased electricity cost to their own customers, so refunding them now would unjustly enrich them at public expense. The appeal was allowed to this extent.

Lesson Learnt

A regulatory body cannot retroactively invalidate decisions made before it was created simply because its own approval process wasn't followed: that approval requirement starts only once the regulator itself exists. Also, courts are reluctant to order refunds decades later when the cost was already passed on to someone else down the chain, since that would let the refund recipient profit twice.

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

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