POWER GRID CORPORATION OF INDIA versus TAMIL NADU GENERATION AND DISTRIBUTION CO. LTD. & ORS. ETC. ETC

Citation: [2019] 7 S.C.R. 724 · Decided: 09-05-2019 · Supreme Court of India · Bench: N.V. RAMANA · Disposal: Dismissed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2019] 7 S.C.R.
POWER GRID CORPORATION OF INDIA
V.
TAMIL NADU GENERATION AND DISTRIBUTION CO. LTD.
& ORS. ETC. ETC
(Civil Appeal No. 684 of 2007)
MAY 09, 2019
[N. V. RAMANA, MOHAN M. SHANTANAGOUDAR AND
INDIRA BANERJEE, JJ.]
Electricity Regulatory Commission Act, 1998 – Central
Electricity Regulatory Commission (Terms and Conditions of Tariff)
Regulations, 2001 –  rr. 1.3 and 1.7  – Foreign Exchange Rate
Variation (FERV) between debt and equity – Apportionment of –
Appellant contended that any foreign exchange get added to the
capital cost and not individually to debt or equity – It was further
contended that this capital cost is thereafter divided into debt and
equity, on the basis of a normative debt-equity ratio – As a natural
corollary, even the FERV needs to be apportioned both towards
debt and equity – Held: The apportionment of FERV between debt
and equity is not a question of law, much less a substantial question
of law – Further, r.1.3(a) is restricted only to the methodology of
calculation of FERV – No rule, regulation, statute or precedent cited
by the appellant to substantiate that post calculation FERV needs
to be necessarily apportioned in a debt-equity ratio, much less to
substantiate what exactly this ratio is and as what factors the same
is  determined  –  Besides, noting the premise on which the Act,
1998 was enacted and the fact that the Tariff Regulations, 2001
prescribed under the aegis of this Act do not provide for
apportionment of FERV in a particular debt-equity ratio – Thus,
this matter requires no interference – Accordingly, appeals dismissed.
Dismissing the appeals, the Court
HELD : 1. The present question regarding the
apportionment of Foreign Exchange Rate Variation (FERV)
between debt and equity is not a question of law, much less a
substantial question of law. Regulation 1.13(a) of Central
Electricity Regulatory Commission (Terms and Conditions of
Tariff) Regulations, 2001 which has been cited before this Court
   [2019] 7 S.C.R. 724
724
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to buttress the argument of apportionment of FERV does not in
fact provide for apportionment of FERV and rather, is restricted
only to the methodology of calculation of FERV. This methodology
of FERV calculation is not in challenge and has already been
affirmed by the Central Electricity Regulatory Commission
(CERC) as well as the Appellate Tribunal for Electricity, New
Delhi. No rule, regulation, statute or precedent has been cited
by the appellant to substantiate the argument that post calculation
FERV needs to be necessarily apportioned in a debt-equity ratio,
much less to substantiate what exactly this ratio is and on what
factors the same is determined. Thus, on this ground alone, for
lack of a substantial question of law, these appeals ought to be
dismissed. [Para 6] [727-G-H; 728-A-C]
2. In any case, once the FERV is calculated, in terms of
Regulations 1.3 and 1.7 of the Tariff Regulations, 2001, the same
can be recovered by the appellants from respondent no.1 without
even filing a petition before the CERC. However, in the present
case, the FERV is sought to be capitalized by the appellant in the
normative debt-equity ratio of 50:50 as a matter of practice,
without citing any rule, regulation, statute or precedential law.
[Paras 7 and 8] [728-C-D, F]
3. This observation becomes pertinent in light of the fact
that the Act was introduced to reform the problems in the power
sector prior to 1998, inter alia, the lack of rational retail tariffs,
poor planning and operation, the neglect of the consumer and
the absence of an independent regulatory authority. The Act also
aimed at protecting and improving the financial health of the State
Electricity Boards, which were losing heavily on account of
irrational tariffs and lack of budgetary support.  Thus, noting the
premise on which the Act was enacted and the fact that the Tariff
Regulations, 2001 prescribed under the aegis of this Act do not
provide for apportionment of FERV in a particular debt-equity
ratio, this Court is not inclined to interfere in the matter.
[Para 9] [728-G-H; 729-A]
4. Further, the present dispute arises with respect to tariff
charged between 01.04.2001 and 31.03.2004 on account of FERV
calculation and apportionment. Any variation in the apportionment
of FERV now, for the abovementioned period, will consequently
POWER GRID CORPN. OF INDIA V. TAMIL NADU GEN. AND
DIST. CO. LTD.
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