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Reliance Infrastructure Limited v. State of Maharashtra and Ors.

Civil Appeal · 2019 INSC 63Decided 21 Jan 2019
Civil Appeal No. 879 of 2019
Dr. Justice D.Y. Chandrachud · Justice Hemant Gupta

Background

Reliance Infrastructure's Dahanu Thermal Power Station was held to a stricter efficiency benchmark (the "Station Heat Rate," a measure of how much fuel is needed to produce electricity) than comparable power plants under Maharashtra's 2011-16 tariff regulations, even though its plant was later placed on equal footing with others for both the preceding and following periods. The company argued this was discriminatory and challenged the regulation before the Bombay High Court, which dismissed its writ petition both as not maintainable (because a related appeal was pending before a specialised tribunal) and on the merits, also imposing costs.

Decision Breakdown

The Supreme Court disagreed with the High Court's view that the writ petition was not maintainable, holding (relying on a Constitution Bench ruling in PTC India) that only a High Court, not the specialised Appellate Tribunal for Electricity, can examine the validity of a regulation - so the company was entitled to approach the High Court directly, and the costs imposed on it were unjustified. On the merits, however, the Court held that fixing tariff norms is a complex, expert, legislative-type function entrusted to the regulatory commission, and courts should not second-guess it unless it is shown to be arbitrary or unreasonable. Since the stricter standard was based on the plant's own historical performance data (not an irrational comparison), the Court found no constitutional or statutory defect and upheld the regulation, while removing the cost penalty.

Lesson Learnt

Courts will not override a technical/regulatory body's expert judgment on matters like tariff-fixing unless it is shown to be arbitrary, but a party is entitled to challenge the validity of a regulation directly before a High Court even while a related dispute is pending before a specialised tribunal.

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

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