Tribunal gone haywire: Supreme Court undoes five-year-late tariff review, fines Maithan Alloys and SAIL

Justice J.B. Pardiwala and Justice K. Vinod Chandran restore the 2019 Appellate Tribunal order letting DVC recover its bond Sinking Fund through tariff, hold the 2024 review illegal and in breach of Article 141, and impose costs payable within a month.

The Supreme Court on 30 October 2026 set aside an Appellate Tribunal for Electricity order that had reopened, in review, a tariff question the Tribunal had settled five years earlier. A bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran restored the Tribunal’s original order of 17 May 2019 in favour of the Damodar Valley Corporation.

The judgment, written by Justice Vinod Chandran and marked reportable, does not stop at reversal. It imposes Rs 2 lakh in costs on Maithan Alloys Limited, the review petitioner, and Rs 1.5 lakh on Steel Authority of India Limited, which intervened in the Supreme Court to defend the review order.

The dispute was whether DVC may recover its Sinking Fund contribution, money set aside to redeem its bonds, through the tariff for 2009 to 2014 while also claiming depreciation on the assets the bonds financed. The Court held that Bhaskar Shrachi Alloys Limited v. Damodar Valley Corporation, (2018) 8 SCC 281, had already settled that in favour of DVC.

Court opens with Cardozo and judicial discipline

The judgment opens with a reproach. Orders like the one under appeal are rare, Justice Vinod Chandran wrote, but this one was in blatant breach of judicial discipline and in clear violation of Article 141 of the Constitution, and it raised serious doubts about independence as against accountability.

The bench recalled Justice Benjamin Cardozo’s warning in The Nature of the Judicial Process that a judge is not a knight-errant roaming at will after his own ideal of beauty or goodness, but must draw inspiration from consecrated principles. Here, the Court said, was a Tribunal “innovating at pleasure”.

A review that waited five years

Bhaskar Shrachi had determined DVC’s tariff for the period from 1 April 2006 to 2009, after a two-year transition from 1 April 2004 to 31 March 2006 to bring the Corporation under the Electricity Act, 2003. Maithan Alloys was a party to that round as a consumer.

For 2009 to 2014, the Central Electricity Regulatory Commission fixed DVC’s tariff by an order of 2013 under the Electricity Act, the Damodar Valley Corporation Act, 1948 and the CERC Tariff Regulations of 2009. Consumers appealed to the Appellate Tribunal for Electricity.

By the time the Tribunal decided those appeals, Bhaskar Shrachi had been delivered. The Tribunal upheld the CERC order on its own reasoning and on the strength of that binding precedent. Nobody appealed to the Supreme Court.

Instead, one of the appellants filed a review petition. It stayed pending before the Tribunal for five years and was allowed in 2024 by the order now under appeal. DVC challenged it in Civil Appeal No. 11106 of 2024, and SAIL, a public sector undertaking, intervened to support the review order.

What DVC and the consumers argued

Senior Counsel Vikas Singh and Dr Abhishek Manu Singhvi appeared for DVC, Senior Counsel Rajiv Shakdher for SAIL, and Advocate-on-Record Rajiv Yadav for Maithan Alloys, the review petitioner before the Tribunal.

DVC objected first to the review itself. An order five years old, which had noticed and followed a binding Supreme Court precedent, had been reopened for an error said to be apparent on the record. DVC then argued that the Sinking Fund is an expense the statute itself permits in tariff, apart from any accounting principle.

DVC also pointed to its statutory mandate beyond power generation: flood control, irrigation and development of the Damodar Valley. The Court was taken through the Electricity Act, the DVC Act and the Tariff Regulations of 2009.

The consumers argued double benefit. Allowing depreciation on assets and then also loading the Sinking Fund into tariff as an expense burdened consumers and enriched DVC unlawfully. Under the Companies Act, they said, depreciation is a charge on profits reflecting wear and tear, while a reserve to redeem bonds can only be appropriated from profits.

The bonds, they added, had themselves been issued to build infrastructure, which are capital assets. Granting depreciation on those assets and then also treating the redemption reserve as an expense was the double benefit.

Why the Court re-read Bhaskar Shrachi

The review order had proceeded on the premise that the Tribunal, in 2019, never considered whether depreciation plus Sinking Fund was a double benefit. It therefore ruled that DVC could claim only one of the two as a pass-through in tariff.

The Tribunal went further and found that the point had escaped the Supreme Court’s notice in Bhaskar Shrachi as well. If so, the bench said, that was a matter for a properly constituted appeal before the Supreme Court, not for a review.

Even so, the Court examined Bhaskar Shrachi for its own satisfaction. Had the coordinate bench actually erred, the matter could have been referred to a larger bench. It found no reason to doubt the earlier decision.

Bhaskar Shrachi had decided two sets of appeals: from the CERC’s initial common order, challenged on five counts by DVC, the consumers, the State of Jharkhand and the West Bengal Electricity Regulatory Commission, and from the order passed on remand. Only the Sinking Fund, allowed by the CERC and affirmed by the Tribunal even then, mattered now.

The DVC Act survives the Electricity Act

Bhaskar Shrachi had rested on the fourth proviso to Section 14 of the Electricity Act, which deems DVC a licensee without requiring a licence and keeps the DVC Act alive to the extent it is not inconsistent with the 2003 Act. The bench agreed with that reading fully.

The consumers had relied on Section 174, which gives the Electricity Act overriding effect over any other law, and on the omission of the DVC Act from Section 173, which saves only the Consumer Protection Act, the Atomic Energy Act and the Railways Act. A Parliamentary Standing Committee had recommended including the DVC Act; Parliament did not.

The Court accepted that Section 174 would normally reach a 1948 statute. Section 58 of the DVC Act, it noted, conspicuously omits any reference to other laws for the time being in force. But Section 174 nullifies only inconsistent provisions; it does not repeal the DVC Act.

The fourth proviso, the Court held, was Parliament’s abundant caution to make the point explicit. Its first limb exempts DVC from a licence; its second limb is a substantive provision keeping the DVC Act in force for the Corporation. Section 174 does not detract from it.

An argument that the proviso, sitting under the heading on grant of licences, is confined to licensing was rejected. A licence is the sine qua non for transmission, distribution and trading, and it is what lets a generator approach the Regulatory Commission for tariff.

Hence Sections 61, 62, 64 and 79 of the Electricity Act override, and DVC could not fix its own tariff under Section 20 of the DVC Act. On everything else, including the components of that tariff, the DVC Act applies so far as it is consistent.

The Court recalled that DVC was constituted on the lines of the Tennessee Valley Authority to control the Damodar’s floods, generate power, irrigate and develop the valley. Power is its income-earning operation; its profits fund the rest and are apportioned to the participating governments in proportion to their contributions.

Section 40 turns a reserve into an expense

The decisive provision is Section 40 of the DVC Act. It requires the Corporation to make provision for depreciation and for reserve and other funds at rates specified by the Auditor-General of India in consultation with the Centre. Sub-section (2) says net profit under Section 37 is determined only after that provision.

Section 37 then credits net profit from irrigation, power and flood control to the participating governments in proportion to their capital shares, and makes them bear deficits. The flood-control deficit falls entirely on West Bengal.

The scheme has other peculiarities. Section 38 treats interest paid on government capital as part of DVC’s expenditure, and Section 39 allowed interest and all other expenditure in deficit years to be added to capital cost for up to fifteen years from the Corporation’s establishment.

The bench called Section 40 a clear departure from general accounting. Ordinarily depreciation is a charge against gross profit, while a reserve to redeem bonds is capital expenditure appropriated from net profit. Section 40 lets both be deducted before net profit is struck.

That is not inconsistent with Section 61 of the Electricity Act, which directs the Commission to frame tariff terms that encourage efficiency and optimum investment, safeguard consumers while recovering cost reasonably, and progressively reflect the cost of supply.

The CERC gave effect to it in Regulation 43 of the 2009 Tariff Regulations, a special provision for DVC. It fixes debt-equity at 50:50 for projects commissioned before 1 January 1992 and 70:30 after, applies the Comptroller and Auditor General’s depreciation rate under Section 40, and treats funds established under Section 40 as expenditure recoverable through tariff.

The 2004 Regulations, which governed Bhaskar Shrachi, had no such special reference to DVC. The 2009 Regulations spell it out.

The Court also noted Annexure A1, which allows the Sinking Fund as a first charge on DVC’s power surplus, ahead of the Investment Allowance Reserve. The Sinking Fund, though a reserve by nature, is thereby deducted from gross profit and passes into tariff as an expense.

Settled in 2018, reopened in 2024

Paragraph 57 of Bhaskar Shrachi, extracted in the judgment, had recorded that depreciation rate and sinking fund were governed by Section 40 of the 1948 Act. The Tribunal’s reasoning on both, it said, was not fundamentally flawed enough to raise a substantial question of law under Section 125.

Maithan Alloys’ own review petition conceded the ground. Paragraph 7 said it did not challenge the Sinking Fund pass-through, the issue being no longer res integra after Bhaskar Shrachi. Its grievance was narrower: the principal component of the Sinking Fund was allowed twice because capital cost was not reduced correspondingly for depreciation.

In written submissions, however, both Maithan Alloys and SAIL fell back on the broader point that the Sinking Fund is an appropriation of profit, not a cost. The Court said it had answered that through Section 40.

The original 2019 Tribunal order had itself dealt with the double-allowance argument. It had compared interest on a normative loan of at least 70 per cent of capital cost plus depreciation with the Sinking Fund contribution, and found Section 40, as applied by Regulation 43, consistent with the Electricity Act.

The review order nonetheless held that depreciating bond-funded assets while also recovering the Sinking Fund was duplication. It drew a distinction between assets built from bonds and from other sources, and declared, vehemently but erroneously in the bench’s description, that the point had never been raised before the Tribunal or the Supreme Court.

The words duplication and double allowance may not appear in Bhaskar Shrachi, the Court said. But that judgment had upheld both the depreciation allowance and the Sinking Fund as expenditure recoverable through tariff, both under the statutory imprimatur of Section 40.

Review cannot sit in appeal

“We cannot but observe that the Tribunal has gone haywire” (para 27)

The bench apologised for the expression but said it found no substitute for its angst at a review allowed on an issue the Supreme Court had settled for earlier years, and on which the original Tribunal order had relied.

It turned to State of West Bengal v. Kamal Sengupta, (2008) 8 SCC 612, which construed the review power in Section 22(3)(f) of the Administrative Tribunals Act, 1985. That provision, the Court said, is in pari materia with Section 122(f) of the Electricity Act.

Kamal Sengupta holds that an error apparent must be evident from the record itself, without detailed examination or long debate. An order cannot be corrected merely because it is erroneous in law or because a different view was possible, and a tribunal in review cannot sit in appeal over its own decision.

Its paragraph 35 lists eight principles. The review power is akin to Section 114 and Order 47 Rule 1 of the CPC; review lies only on those grounds; an error discovered by long reasoning is not apparent; an erroneous order cannot be corrected in the guise of review.

The list continues: a later judgment of a coordinate, larger or superior court is no ground for review; the tribunal must confine itself to material available at the initial decision; and new matter justifies review only if due diligence could not have produced it earlier.

The impugned order, the Court found, fell under none of them. It called the review clearly illegal, totally misplaced and blatantly in breach of judicial discipline.

Article 141 and the price of defiance

The judgment then dwells on Article 141. The judicial hierarchy, it said, thrives on due weight being given to appellate, revisional and supervisory decisions. Article 141 is the constitutional imprimatur that ensures the decisions of the highest court are followed, “without which there will be mayhem”.

The bench acknowledged the criticism that the Supreme Court’s decisions are supreme not because it is infallible but because it is the final court. Finality and closure, it said, are the expedient need in litigation.

It also recorded consternation that no appeal had been filed against the 2019 order, and that one appellant had instead sought review and waited five years for a hearing. That was an abuse of process.

SAIL drew particular comment. A public sector undertaking claiming to be a Maharatna company had willingly joined an attempt to uphold an order passed in breach of judicial discipline and Article 141. It had been ill-advised, the Court said, and must bear costs for it.

Order

The review order of the Appellate Tribunal for Electricity is set aside and the Tribunal’s original order of 17 May 2019 is restored. Civil Appeal No. 11106 of 2024 is allowed with costs.

In addition, exemplary costs of Rs 2,00,000 are imposed on Maithan Alloys Limited and Rs 1,50,000 on Steel Authority of India Limited, payable to Damodar Valley Corporation within one month of 30 October 2026. On default, interest at 18 per cent per annum applies. Pending applications stand rejected.