DELHI ELECTRICITY REGULATORY COMMISSION versus BSES YAMUNA POWER LIMITED AND OTHERS

Citation: [2007] 2 S.C.R. 747 · Decided: 15-02-2007 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

DELHI ELECTRICITY REGULATORY COMMISSION 
A 
v. 
BSES Y AMUNA POWER LIMITED AND OTHERS 
FEBRUARY 15, 2007 
[DR.ARIJITPASAYAT AND S.H. KAPADIA,JJ.] 
B 
Electricity (Supply) Act, 1948-Depreciation of assets in Electricity 
Industry-Ministry of Power prescribing straight-line method as distinguished 
from reducing balance, and rates not to be derived from fair life of asset(s)-
Private companies entering into electricity distribution business based on C 
assurances of government in its policy directions and other documents-
Thereafter, Commission set up under Delhi Electricity Reforms Act, 2000 
reducing rate of depreciation having regard to fair life of assets on the 
ground that private companies who got into business had not undertaken 
any loans and were not obliged to redeem debt-Correctness of-Held- D 
Object of.Ministry of Power in providing for higher rate of depreciation, 
without nexus to fair life of asset(s), was to reduce Asset Replacement Period 
(ARP) and fund rapid increase in replacement cost-It was also keeping in 
view that prior to their privatisation electricity utilities under government 
were making losses, expenses on replacement was heavy and assets needed 
replacement in shorter ARP-After privatisation, aforesaid reduction in rate E 
was not correct as principles of depreciation method prescribed by Ministry 
of Power were reflected in five years tariff, Policy Directions and other 
documents of government based on which private companies entered into 
business-In these circumstances, legitimate expectation of private companies 
to get lawfal and reasonable recovery of expenditure was built into their F 
investments and same was infringed as reduction of rate extended ARP by 
10.55 years and also made overall actual return illusory-Though the 
Commission was entitled to depart from principles set out by Ministry of 
Power, it could not go outside framework of Policy Directions and other 
documents issued by government under Section I 2 of Act of 2000-Jt was not 
a case of Advance Against Depreciation wherein loan repayment was relevant, G 
but case of reduction authorized expenditure viz. depreciation. wherein 
repayment of loan was irrelevant-However, judgment confined to facts of 
case and to transition period of five years. 
747 
H 
) 
748 
SUPREME COURT REPORTS 
[2007] 2 S.C.R. 
A 
Depreciation-Nature of, objects of providing, application of different 
,__ 
methods, and difference between physical life and useful life of asset-
Discussed. 
Delhi Electricity Reforms Act, 2000 was enacted to restructure the 
electricity industry in Delhi, and appellant was a body established under it. 
B Thereafter, the Government of National Capital Territory of Delhi (GoNCTD) 
decided to unbundle DVB, its undertaking dealing with electricity, privatize 
it and vest its assets in successor companies. In order that the investors could 
plan their investments, it issued to the prospective bidders a Request for 
Qualification (RFQ), and Request for Proposal (RFP) accompanied by Policy 
C Directions wherein reference was made to the transition period of five years 
and the Tariff Principles framed by appellant. A Transfer Scheme was also 
notified setting out rules for transfer and vesting of assets, liabilities and 
obligations of DVB. Policy Directions issued by GoNCTD under Section 12 
of the Act of2000 assured the bidders that a Bulk Supply Tariff(BST) Order 
shall be issued by appellant to facilitate investors to have a full idea of various 
D elements in tariff fixation, before bidding. It was also clarified that appellant 
shall be bound by Policy Directions on and from 22.t 1.01 till end of financial 
year 2006-07. Accordingly appellant issued the BST Order approving Bulk 
Supply Tariff to be charged by Delhi Power Supply Company Ltd. to the 
distribution companies on the basis of their paying capacity. Based on this 
E order, the bidders were expected to bid on the basis of annual reduction of 
AT&C losses over a 5 year period. Accordingly, respondents, distribution 
companies (DISCOMs), submitted their bids which were accepted by GoNCTD 
and majority share-holding and management control of the distribution 
companies owned by government was transferred to them. 
p 
Ministry of Power (MOP) had issued a notification dated 31.1.92 stating 
that licens1!e had to provide for depreciation as per straight-line method in 
respect of asset(s), indicated in column no.I, at the rates indicated in the 
columns of S

Excerpt shown. Read the full judgment & AI analysis in Lexace.