Supreme Court on bidding process, consumer/public interest, powers and role of the Regulatory Commissions under the Electricity Act

Jaipur Vidyut Vitran Nigam Ltd & Ors v. MB Power (Madhya Pradesh) Ltd & Ors, dated 08.01.2024, 2024 INSC 23

In a landmark decision on the interpretation of Section 63 and Section 86(1)(b) of the Electricity Act, the Supreme Court has held that the Regulatory Commission has sufficient powers to examine the tariff discovered in a bidding process, and choose to reject the same if it is found not to be aligned to market prices. The Commission is not a mere post office and can exercise its powers in public interest and interest of the consumers if the tariff is found to be high and not aligned to market prices. The power to examine tariff discovered and reject any non-market aligned tariff discovered in a bidding process is also clear from Section 86(1)(b) of the Electricity Act.

While adopting the tariff, the Commissions are bound to take into consideration the protection of consumer interest. The Court has sufficiently enlarged the scope of the power of Commissions under Section 63 as against the earlier views of the Appellate Tribunal, when it comes to adoption of tariff to also include the power to reject high tariff.

The Court, while taking into consideration Section 63, 79, and 86 of the Electricity Act, 2003 alongwith the preamble and Clause 5.15 of the Bidding Guidelines and Clause 2.15, 3.5, and the definition of the “successful bidder” in the Bidding Documents, has rejected the contention of the generator that the Rajasthan Discoms were bound to accept all the bids emerged in a competitive bidding process once the bidding process was found to be transparent. The Court has also rejected the contention of the generator that the procurer has to necessarily proceed to the next bidder in order to “fill the bucket”, terming the same to be absurd and defeating public interest. The expression ‘all bids’ in Clause 5.15 of the Guidelines requiring alignment to market prices has to be purposively and pragmatically interpreted to include any and all bids.

The Court has reiterated the balance that needs to be maintained between the interest of the stakeholders, and that consumers interest cannot be ignored by the Commission while considering tariff discovered in a bidding process.

Commercial considerations are paramount while deciding on award of a contract, which is also applicable for public bodies or the State. The role of courts is to examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. Such intervention is warranted only when the court comes to the conclusion that overwhelming public interest requires such interference.

High Court could not issue a mandamus to a State entity to enter into a contract, which is harmful to public interest. Tariff for procurement of electricity is a burden on the consumers and therefore larger consumer interest and consequential public interest was to be taken into consideration.

The Supreme Court has also reiterated that the Electricity Act is an exhaustive code on all matters concerning electricity. Any issue dealing with electricity ought to be dealt with by the authorities constituted under the Act. This is particularly when there are sufficient powers vested in the Regulatory Commissions and Appellate Tribunal, also comprising of technical experts. While availability of alternate remedy is not a complete bar in the exercise of powers of judicial review by High Courts, such exercise ought to be only if extraordinary and exceptional circumstances are made out.

The Supreme Court has allowed the two appeals filed by the Procurers/bid process coordinator in Rajasthan with costs of Rs. 5 lacs in each of the appeals.

The judgment would overrule a line of decisions of the Appellate Tribunal wherein consumer and public interest were held to be extraneous considerations while Commissions were dealing with petitions for adoption of tariff under Section 63. The powers of Regulatory Commissions even under Section 63 of the Electricity Act has been sufficiently enlarged to be exercised in large public interest.

MSA Partners represented the procurers at all stages of the long-drawn litigation over the past 8 years. The Procurers before the Supreme Court were represented by Mr. Anand K Ganesan, Partner, Mr. Amal Nair, Principal Associate and Ms. Shivani Verma, Associate and led by Mr. P. Chidambaram, Senior Advocate.

The judgment may be accessed here.