Board of Trustees of Cochin Port Trust v. Kerala State Electricity Board Ltd., State Electricity Ombudsman, Kerala State Electricity Regulatory Commission and Fertilizers and Chemicals Travancore Limited

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **WEDNESDAY, THE 25TH DAY OF OCTOBER 2017/3RD KARTHIKA, 1939** ## **W.P(C).No.214 of 2016 (B)** ## **--------------------------------** ## **PETITIONER(S):-** ## **-------------** **THE BOARD OF TRUSTEES OF COCHIN PORT TRUST, WILLINGDON ISLAND, COCHIN-682009, REPRESENTED BY ITS CHAIRMAN - MR. PAUL ANTONY.** **BY ADVS.SRI.JOSEPH MARKOSE (SR.) SRI.BINU MATHEW SRI.TOM THOMAS (KAKKUZHIYIL) SRI.ABRAHAM JOSEPH MARKOS SRI.ISAAC THOMAS SRI.NOBY THOMAS CYRIAC** ## **RESPONDENT(S):-** - **----------------** **1. THE KERALA STATE ELECTRICITY BOARD LTD., REPRESENTED BY ITS SECRETARY, VYDHUTHI BHAVAN, PATTOM PALACE P.O., THIRUVANANTHAPURAM-695004.** **2. THE STATE ELECTRICITY OMBUDSMAN, CHARANGATTU BHAVAN, BUILDING NO.34/895, MAMANGALAM-ANCHUMANA ROAD, EDAPPALLY, KOCHI-682024.** **3. THE KERALA STATE ELECTRICITY REGULATORY COMMISSION, K.P.F.C. BHAVANAM, C.V.RAMAN PILLAI ROAD, VELLAYAMBALAM, THIRUVANANTHAPURAM-695010.** **4. THE FERTILISERS AND CHEMICALS TRAVANCORE LIMITED, COCHIN DIVISION, AMBALAMEDU, KOCHI-682303.** **R1 BY STANDING COUNSEL SRI.N.RAPHY RAJ R1 BY STANDING COUNSEL SMT.NAZEEBA.O.H. R1 BY STANDING COUNSEL SRI.SAJEEVKUMAR K.GOPAL. R3 BY ADV. SRI.N.N.SUGUNAPALAN (SR.) R3 BY ADV. SRI.S.SUJIN R4 BY ADV. SRI.M.GOPIKRISHNAN NAMBIAR R4 BY ADV. SRI.P.GOPINATH R4 BY ADV. SRI.P.BENNY THOMAS R4 BY ADV. SRI.K.JOHN MATHAI R4 BY ADV. SRI.JOSON MANAVALAN R4 BY ADV. SRI.KURYAN THOMAS** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 25-10-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:-** ## **W.P(C).No.214 of 2016 (B)** ## **-------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS:-** ## **-------------------------** **EXHIBIT P1: TRUE COPY OF ORDER DATED 14.8.2014 OF THE KSERC IN PETITION O.P.NO.9 OF 2014. EXHIBIT P2: TRUE COPY OF THE ORDER DATED 5.5.2015 PASSED BY THE CONSUMER GRIEVANCE REDDRESSAL FORUM, COCHIN PORT TRUST. EXHIBIT P3: TRUE COPY OF THE ORDER DATED 29.9.2015 PASSED BY THE 2ND RESPONDENT-OMBUDSMAN. EXHIBIT P4: TRUE COPY OF THE ACTIVITIES SPECIFIED UNDER CURRENT INDUSTRIAL TARIFF. EXHIBIT P5: TRUE COPY OF THE LIST OF THE EXISTING CONSUMER CATEGORY OF THE PETITIONER. RESPONDENT(S)' EXHIBITS:------------------------EXHIBIT R4(a): TRUE COPY OF THE INDUSTRIAL LICENSE ISSUED BY THE DIRECTOR OF FACTORIES AND BOILERS DATED 15.12.2015. EXHIBIT R4(b): TRUE COPY OF THE LETTER DATED 03.11.2014 SUBMITTED BY THE 4TH RESPONDENT BEFORE THE PETITIONER.** **Vku/[ true copy ]** “C.R.” K. Vinod Chandran, J -----------------------------------------W.P.(C).No.214 of 2016-B -----------------------------------------Dated this the 25[th] day of October, 2017 ## **JUDGMENT** The petitioner, an authority constituted under the Major Port Trusts Act, 1963; to manage the Cochin Port and a distribution licensee under Section 14 of the Electricity Act, 2003, impugn the order of the State Electricity Ombudsman [for brevity “Ombudsman”] primarily on the question of lack of jurisdiction. 2. By virtue of the distribution licence; granted by the Kerala State Electricity Board [for brevity “KSEB” or “Board”], the petitioner is in charge of distribution of electricity within the Cochin Port Trust area in Willingdon Island and Vallarpadom; the Special Economic Zone area. The 4[th] respondent, a public sector undertaking under the Government of India and having manufacturing units within the District itself, has taken on lease Fertilizer and Ammonia Berths for facilitating discharge of bulk/liquid cargo from the ships and the further transmission to their manufacturing units. The 4[th] respondent has been granted three electrical service connections; which WP(C) No.214 of 2016 - 2 - connections are existing from the year 1997 **;** commenced and continued under the tariff of Deemed HT; subsequently converted to HT-IV (Commercial). 3. The 4[th] respondent requested, even prior to their energising the HT installations, for re-categorisation of the three electricity connections, to HT-1 Industrial tariff. The petitioner rejected the same finding that though the 3[rd] respondent is primarily engaged in manufacturing activities, no such activity is carried on within the Port area in the leased out premises. The discharge of bulk/liquid cargo from the ships to the berths within the Port area and further transportation to its factories at Ambalamugal and Udyogamandal were held to be commercial. The 4[th] respondent took up the matter before the Consumer Grievance Redressal Forum [for brevity “CGRF” or “Forum”], which, by Exhibit P2, though found the facts to be in favour of the 4[th] respondent, all the same found that since the petitioner is seeking relief of re-categorisation of tariff, the proper forum would be the Kerala State Electricity Regulatory Commission [for brevity “Commission”]. The 4[th] respondent took up the matter before the Ombudsman, which reversed the order of the Forum. It - 3 - WP(C) No.214 of 2016 was found that there is no commercial activity carried on by the 4[th] respondent within the lease-hold area and the power is consumed for pumping of Phosphoric Acid/Sulphuric Acid/Liquid Ammonia from the ships into the berths and from there to the manufacturing units. The said activity was found to be an industrial activity, entitled to the tariff under HT-1 (Industrial). It was also found that it was the duty of the distribution licensee to approach the Commission for any clarification regarding the categorisation. 4. I have heard leaner Senior Counsel appearing for the petitioner and the learned Counsel for the 4[th] respondent, the Commission as also the Board. 5. The learned Senior Counsel would specifically draw the attention of this Court to Section 62 of the Electricity Act, 2003; by virtue of which, determination of tariff is a power exclusively conferred on the appropriate Commission (Central or State:- here we are only concerned with the State Commission). It is also contended that the KSERC (Conduct of Business) Regulations, 2003 by Chapter III delineates the proceedings before the Tribunal. Section 22 deals with initiation of proceedings, which, _inter alia_ , can be upon a petition WP(C) No.214 of 2016 - 4 - filed by an affected party, which any consumer could initiate before the Commission. Exhibit P1 is the Annual Revenue Requirements (ARR), Expected Revenue from Charges (ERC) and Tariff Order of KSEBL 2014-15. The Commission carries out such exercise annually on the petition of the Board after issuing public notice and any distribution licensee or consumer could make their submissions before the Commission with respect to any defect in categorisation. 6. After the tariff order has been issued by the Commission, based on the tariff so fixed; the distribution licensee files an appropriate application before the Commission for determination of their Bulk Supply Tariff. The said application is based on the categorisation made of the consumers within the Port area to whom the distribution licensee supplies electricity. On fixation of such Bulk Supply Tariff, payable to the Electricity Board; based on the categorisation of the consumers, individual tariff is fixed on the consumption of the lessees; with a nominal return to the distribution licensee. Hence, there could not be a re-categorisation after fixation of the tariff for an year by the Commission and the same has to be taken up at the first instance before the Commission itself. It is - 5 - WP(C) No.214 of 2016 pointed out that the Ombudsman noticed the argument of the distribution licensee that a similar re-categorisation was sought for by the Indian Oil Corporation and Hindustan Petroleum; which was declined by the Commission and the said Companies are before the Appellate Authority. 7. The learned Senior Counsel also relies on **2015 (1) KLT 526 [** _**Assistant Executive Engineer, K.S.E.B v. Principal Agricultural Officer**_ **]** to contend that the classification and fixation of tariff is a duty exclusively to be discharged by the Commission and not under the consumer grievance redressal mechanism. The learned Counsel for the Commission alertly points out Section 30 of the Kerala Electricity Supply Code, 2014; which empowers the Commission to classify and re-classify individuals to various tariff categories from time to time and determine tariff for different categories of consumers. Categorisation under the various heads of classification of industrial, commercial etc: is exclusively with the Commission; asserts the learned Counsel. 8. The learned Counsel appearing for the 4[th] respondent would argue that the issue would come clearly within the scope of a - 6 - WP(C) No.214 of 2016 consumer grievance. The Commission is empowered to only list out the heads of classification and enumeration of the respective heads; like “Industrial” or “Commercial”. The categorisation within the heads of classification is made by the distribution licensee. Despite the heads of classification being enumerated by the Commission, a consumer on being included under a category could dispute it before the grievance forum. It is an issue which could be properly addressed by the grievance mechanism itself. In the case of an individual consumer to which the Board itself supplies, the classification is made by the Board and on a dispute being raised by the consumer, it has to be treated as a consumer grievance. Likewise, when a wrongful classification is made by the distribution licensee, the consumer is entitled to take it up as a grievance before the forum constituted for the said purpose. Section 75 of the Supply Code is pointed out to emphasize the exclusive authority of the distribution licensee to make the categorization. The application under Section 75 is to be made by the consumer in Annexure 5 where the consumer could choose the category under Item 11, which however could be changed by the distribution licensee. The application so WP(C) No.214 of 2016 - 7 - filed has to be processed under Sections 76 to 79 of the Supply Code and any grievance on the action of the licensee could be taken up before the Appellate Officer and then before the Grievance Redressal Forum; under Section 80. 9. Specific reference is made to the various types included under the different heads of classification, as found in Exhibit P1 of HT-IV (Commercial) and HT-1 (Industrial). The petitioner’s activity does not come under any of the separate types listed under the classifications. On facts, it has been found that the petitioner is merely unloading liquid cargo from ships and transmitting it to their factories at Ambalamugal and Udyogamandal. One of the types covered under “Industry” as seen from Exhibit P1 is “pumping water for non-agricultural purpose”. The activity carried on by the 4[th] respondent within the leasehold premises is akin to that. With respect to the contention regarding the Oil Companies, it is pointed out that Liquefied Petroleum Gas is a type which specifically falls under HT-IV (Commercial) as classified by the Commission and there is no manufacturing activity involved in bottling the LPG. The learned Counsel would rely on **(1982) 3 SCC 507 [** _**Chandigarh Paper Board**_ WP(C) No.214 of 2016 ## - 8 - _**Mills Pvt. Ltd. Vs. Chief Commissioner**_ **]** and **(2015) 11 SCC 568** _**[Jayaswal Neco Limited v. Commissioner of Central Excise,**_ _**Raipur]**_ to distnguish between commercial and industrial activities. It is the argument that, the activity of unloading raw material from ships and conveying it to the manufacturing units is so inextricably linked with the manufacturing process; so as to classify the respondents activity within the Port as an industrial activity. 10. The petitioner commenced the operations by a Power Purchase Agreement of 1999 and approached the petitioner with a request to include them under the Industrial-category by Exhibit R4 (b) after installation of its new sub-station in November 2014 after the Bulk Supply Tariff was fixed.Before this Court ventures on the issue of classification as such; the jurisdictional aspect has to be dealt with. At first blush the argument with respect to the issue being one squarely covered under a consumer grievance is attractive. This Court in _**Assistant Executive Engineer, K.S.E.B v. Principal Agricultural Officer**_ has categorically found that classification and fixation of tariff are within the exclusive jurisdiction of the Regulatory Commission. It has to be accepted that the inclusion under a - 9 - WP(C) No.214 of 2016 category is not done by the Regulatory Commission and the same is carried out by the KSEB or the distribution licensee. Hence, necessarily it is a dispute between the supplier and the consumer. Despite this, the entire scheme for determination of tariff, the constitution of the Kerala State Electricity Regulatory Commission as also the grievance redressal mechanism has to be emphatically noticed. 11. The State Commission is constituted under Section 82 of the Electricity Act. Its functions are delineated under Section 86 and sub-section(1)(a) speaks of determination of tariff for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail within the State. The KSEB, invoking the power conferred under Section 61 of the Electricity Act; for determination of the tariff, has filed an application for approval of Aggregate Revenue Requirements (ARR) and Expected Revenue from Charges (ERC) with a petition for determination of Tariff for each financial year, before the Commission. The Kerala Electricity Supply Code, 2014 under the heading General Conditions of Supply of Electricity, in Chapter III by Section 30 provides for classification of consumers and tariff - 10 - WP(C) No.214 of 2016 which power is exclusively with the Commission. Exhibit P1 is the KSERC Tariff order dated 14/08/2014, brought out, exercising the authority of the Commission as provided in the Electricity Act and the Supply Code. 12. The petitioner is a distribution licensee as defined under Section 3(17) of the Electricity Act. The power to determine tariff, for supply of electricity by a generating company to a distribution licensee, is again conferred on the Commission by Section 62 of the Electricity Act. Sub-section (3) of Section 62 prohibits any undue preference to a consumer but permits differentiation on the basis of various factors specifically noticed there including the _“purpose for which power is supplied”_ ; which essentially is the basis of the classification. The distribution licensee is also obliged to charge its consumer, only in accordance with the tariff fixed from time to time,by the Commission; under Section 45. It is after the Tariff Order for an year is approved by the Commission, the distribution licensee also approaches the Commission for approval of its Bulk Supply Tariff. The application for approval of Bulk Supply Tariff by the distribution licensee is based on the classification - 11 - WP(C) No.214 of 2016 of the various consumers coming within its supply net and the tariff as prescribed in the KSERC Tariff Order of the subject year. 13. The consumer grievance redressal mechanism is one constituted by the distribution licensee under sub-section (5) of Section 42; as per the guidelines issued by the State Commission. There is also an appellate forum provided under sub-section (6) by way of a representation to an Ombudsman, who is appointed or designated by the State Commission. The Commission has also framed The Kerala State Electricity Regulatory Commission (Consumer Grievance Redressal Forum and Electricity Ombudsman) Regulations, 2005. The general scheme is hence of determination of tariff and classification of consumers, exclusively by the State Commission, who also issues guidelines to constitute a grievance redressal forum with an appeal to the Ombudsman, appointed by the State Commission; which makes the role of the redressal mechanism; subordinate to that of the Commission. 14. A reading of Exhibit P1 also would indicate that classification for the purpose of deciding the tariff, generally and particularly of individual consumers or groups of consumers is WP(C) No.214 of 2016 - 12 - exercised by the State Commission. Specific activities or types coming under the various categories have been delineated under the heads of classification. Such inclusion and presumably exclusions made over the years are on applications raised on disputes of categorisation; either at the instance of the Board, the distribution licensee or the consumer. Under Chapter 8 of Exhibit P1, the issues raised in the public hearing are noticed and under Part-I, Re-categorisation of Consumers, as raised by the Board and the Consumers are separately dealt with. This is the specific function of the Commission as statutorily conferred; which cannot be usurped by the Ombudsman, who is the appellate authority, constituted by the State Commission, under the grievance redressal mechanism. 15. If categorisation/classification were to be raised before the forum constituted for deciding consumer grievances, then the determination of tariff by the Commission especially the Bulk Supply Tariff would be put in jeopardy for reason of the intervention by the orders of the CGRF and the Ombudsman. Section 30 of the Supply Code empowers the Commission to classify and re-classify consumers which is specifically what is sought for by the 4[th] WP(C) No.214 of 2016 - 13 - respondent herein. 16. As was noticed, the determination of tariff for each year is carried out by the Commission after issuing public notice. Based on the tariff so determined, the distribution licensees also seek appropriate determination of Bulk Supply Tariff before the Commission. The Bulk Supply Tariff is applied on the basis of the categorisation made of the various consumers; to whom the distribution licensee supplies electricity. Any issue of categorisation has to be dealt with prior to the application for Bulk Supply Tariff or atleast when the prayer for determination of the classification especially of a consumer under a distribution license is to be made at the time of the annual determination of tariff by the Commission. 17. On the reasoning above, with respect to the general scheme of determination of tariff and the power conferred on the Commission by the Supply Code under Section 30 for classification of consumers, it has to be held that though it is essentially a consumer grievance, the authority to adjudicate on the same is culled out and specifically conferred on the Commission. The Ombudsman having found the tariff being liable to be re-categorised as HT-1A WP(C) No.214 of 2016 - 14 - (Commercial) from the financial year 2015-16, intrudes into the determination of tariff by the Commission; which is on the accepted classification made by the distribution licensee. If the order of the Ombudsman is allowed to stand, then it would result in the petitioner being obliged to seek a revision of Bulk Supply Tarriff before the Commision. Otherwise the petitioner would be obliged to make good the deficiency created by the reduction in tariff of the one single consumer. The Ombudsman has observed that the petitioner could approach the Commission with a 'truing up' petition to compensate the revenue gap; which would lead to an anomalous situation of the Commission being bound by the classification made by the Ombudsman. The 4[th] respondent could have taken up the matter before the Commission at the annual determination of tariff as has been done by the Oil Companies and there would also be an appeal provided therefrom. 18. By virtue of Section 62 of the Electricity Act and Section 30 of the Supply Code, as also the general scheme of determination of tariff; it has to be found that the consumer grievance redressal mechanism is divested of the power to determine tariff; - 15 - WP(C) No.214 of 2016 entering into issues of classification. Exhibit P3, hence, is set aside without any observation on the merits of the matter regarding the claim of the 4[th] respondent to be included in HT-1 (Industrial), leaving open the question to be agitated before the Commission at the point of the next annual determination of tariff. The writ petition is allowed, leaving the parties to suffer their respective costs. Sd/K.Vinod Chandran Judge. vku/- [ true copy ]