Interest Burden Passes to DISCOMS in Proportion to Outstandings: Supreme Court 

Gridco Ltd. V/S Western Electricity Supply Company Of Orissa Ltd. & Ors. Etc. [Civil Appeal No.414 Of 2007]

The Supreme Court ruled that the interest burden passes to DISCOMS in proportion to outstandings

The division bench of Justice Sanjay Kishan Kaul and Justice Abhay S. Oka noted that these appeals are preferred invoking Section 125 of the Electricity Act, which provides for an appeal to the Court from a decision or order of the Appellate Tribunal.

The bench said that Section 125 expressly provides that an appeal to the Court will lie on the grounds set out under Section 100 of the Code of Civil Procedure, 1908. Thus, the scope of the appeals is very limited. An appeal against an order or decision of the Appellate Tribunal will lie to the Supreme Court only on substantial questions of law.

The appeals arose out of the decisions of the Appellate Tribunal for Electricity constituted under Section 110 of the Electricity Act, 2003. The appeals before the Appellate Tribunal arose out of the orders fixing tariffs passed by the Orissa Electricity Regulatory Commission, which is constituted in accordance with Section 82 of the Electricity Act. 

Counsel for the GRIDCO submitted that during the pendency of the said appeals, the Commission passed a tariff order for the financial year 2007-2008. DISCOMS challenged the tariff order of the financial year 2007-2008 by filing appeals before the Appellate Tribunal on similar grounds.  

He submitted that the mandatory direction issued for taking Rs.943 crores as revenue earning of GRIDCO from trading is completely illegal as the figure of Rs.943 crores was given only in the written submission and not by way of any statement or oath. 

The Commission submitted that the appeal arose out of the order of the Commission of revoking the licenses granted to three DISCOMS, which the Appellate Tribunal confirmed. While dealing with the appeals challenging the order of revocation of licenses, the Appellate Tribunal held that DISCOMS failed to run the distribution business in a viable, efficient and commercially sustainable manner due to its inability to reduce distribution loss.

His submission is that DISCOMS cannot be allowed to pass on their inefficiency to the consumers by increasing RST. 

The bench concluded that there is a subsequent order of the Commission by which the licenses of DISCOMS were cancelled. The same will have no bearing on the tariff fixation of earlier years.

The order impugned in Civil Appeal no.414 of 2007 is modified to the extent that the interest burden can be passed on to DISCOMS in proportion of their outstandings. Therefore, while passing a fresh order in terms of the final order, the Commission will have to allow the interest on the loan to pass through, as observed above, but the principal loan amount cannot be allowed to pass through.