Supreme Court of India
Kerala State Electricity Board … vs Principal Sir Syed Institute For … on 20 February, 2020Author: Aniruddha Bose

Bench: Deepak Gupta, Aniruddha Bose





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Date: 2020.02.20
16:50:50 IST
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The legality of a part of a tariff notification issued by the Kerala

State Electricity Regulatory Commission (“Commission”) segregating

Self-Financing Educational Institutions (SFEI) from Government run

and Government Aided Private Educational Institutions and

subjecting the former to a higher category of tariff is the only question

involved in this batch of appeals. The notification to that effect was

issued by the Commission on 26th November, 2007 bearing Order

No.TP 23 and TP 30 of 2007. Such tariff was to take effect from 1 st

December, 2007. SFEIs have been categorised under the head Low

Tension VII(A) Commercial in that notification. The Government run

or aided private educational institutions have been placed under Low

Tension VI Non-Domestic tariff category. The Commission is the

appellant before us in this set of appeals. Such tariff notification was

published in terms of Kerala State Electricity Regulatory Commission

(Terms and Conditions of determination of tariff for distribution and

retail sale of electricity under MYT Framework) Regulations, 2006.

2. Several Writ Petitions came to be filed by different SFEIs

questioning legality of such segregation which in effect created a

higher tariff regime for them. Altogether 52 writ petitions were taken

up for hearing by a learned Single Judge of the Kerala High Court

(the First Court). The learned Single Judge found the tariff order to be

valid, relying on a decision of a Constitution Bench of this Court in

the case of T.M.A Pai Foundation and Anr. v. State of Karnataka

and Ors. 2002 (8) SCC 481 and a Bench judgment of the High Court

of Kerala in the case of Social SG of Assisi sisters v. KSEB 1988 (1)

KLT 1727. The First Court decided the issue in favour of the

Commission, inter-alia, on the following reasoning:-

“But, I note that there is no pleading
whatsoever for the petitioners about the
Government Order. There is no case in the
Writ Petitions based on the Order. Further,
the Higher Secondary Schools are attached
to Schools having Standards upto High
School Section, where as I have already
noted, there is no restriction as contained in
relation to Government and Aided Schools.
Also, what has been fixed is the minimum
salary of teachers and others. It appears to
be low. What is important is the capability
to raise revenue and its ramifications, and
not whether any particular Self-Financing
Educational Institutions is actually making
use of its power to raise revenue, as
ordinarily a Self-Financing Educational
Institution may raise.”

3. In appeal by the SFEIs, the Division Bench of the High Court

set aside the judgment of the First Court. The Division Bench found

that the differentiation was not for any of the grounds specified in

Section 62 (3) of the Electricity Act, 2003. That is the provision under

which the State Commission can determine the tariff. Section 62 of

the 2003 Act specifies:-

“62. Determination of tariff:- (1) The
Appropriate Commission shall determine
the tariff in accordance with the provisions
of this Act for –
(a) supply of electricity by a generating
company to a distribution licensee:
Provided that the Appropriate Commission
may, in case of shortage of supply of
electricity, fix the minimum and maximum
ceiling of tariff for sale or purchase of
electricity in pursuance of an agreement,
entered into between a generating company
and a licensee or between licensees, for a
period not exceeding one year to ensure
reasonable prices of electricity;
(b) transmission of electricity;
(c) wheeling of electricity;
(d) retail sale of electricity:
Provided that in case of distribution of
electricity in the same area by two or more
distribution licensees, the Appropriate
Commission may, for promoting
competition among distribution licensees,
fix only maximum ceiling of tariff for retail
sale of electricity.
(2) The Appropriate Commission may
require a licensee or a generating company
to furnish separate details, as may be
specified in respect of generation,
transmission and distribution for
determination of tariff.
(3) The Appropriate Commission shall not,
while determining the tariff under this Act,
show undue preference to any consumer of

electricity but may differentiate according
to the consumer’s load factor, power factor,
voltage, total consumption of electricity
during any specified period or the time at
which the supply is required or the
geographical position of any area, the
nature of supply and the purpose for which
the supply is required.”
(4) No tariff or part of any tariff may
ordinarily be amended, more frequently
than once in any financial year, except in
respect of any changes expressly permitted
under the terms of any fuel surcharge
formula as may be specified.
(5) The Commission may require a licensee
or a generating company to comply with
such procedures as may be specified for
calculating the expected revenues from the
tariff and charges which he or it is
permitted to recover.
(6) If any licensee or a generating company
recovers a price or charge exceeding the
tariff determined under this section, the
excess amount shall be recoverable by the
person who has paid such price or charge
along with interest equivalent to the bank
rate without prejudice to any other liability
incurred by the licensee.
4. It was, inter-alia held by the Division Bench:-

“When the supply is to an educational
institution, irrespective of whether it is self-
financing or aided or governmental
purpose, cannot be different, as education
means to impart knowledge. Education in

ancient times was not connected with
earning. Free education is what was accord
in dharma. Education ought to be the
resource for tradition, loyalty to culture and
ideals of service to society. We cannot, in
the absence of materials and evidence,
simply accept that educational institutions,
though Self Financing, are profiteering or
run as business. There are also absolutely
no materials placed on the question as to
whether electricity is consumed by the Self-
Financing Educational Institutions for any
other purpose. The vague statement that
building is air conditioned without
specifying how many institutions are
having air conditioned buildings or
apparatus having high consumption of
electricity etc. are not matters on which
specific pleas with reference to details are
made available. We may, at the risk of
repetition, say that we are only examining
the justifiability of treating Self Financing
Educational Institutions with reference to
other institutions-aided/Governmental-from
the point of view of electricity consumption
as borne out by the affidavits filed before
this Court and we have in that attempt
considered the factors pleaded by them and
found to be unsustainable.”

5. It is this judgment of the Division Bench of the High Court

delivered on 17th August 2009 which is under appeal before us. Before

the First Court, apart from irrational or arbitrary discrimination,

fixation of tariff was assailed on certain other grounds as well. These
grounds included breach of the principles of natural justice and lack

of power of the Commission to fix tariff suo motu. The writ

petitioners questioned the reasonableness in clubbing the educational

institutions, many of whom were run by not for profit organisations,

with other entities whose object was ex-facie profit oriented. It was

urged that tariff for SFEIs could not be brought under the head

“Commercial”. The Division Bench rejected the Commission’s plea

for dismissal of the writ petitions on the point of availability of

alternative remedy in the form of statutory appeal. We find from the

judgment under appeal that challenge to the tariff notification on the

ground of being violative of the provisions of Article 14 of the

Constitution of India was not pressed by the respondents-writ

petitioners. The writ petitioners also did not seriously press their

challenge to the subject notification on the question of lack of suo

motu power of the Commission to fix tariff before the Division

Bench. The main point which was urged and argued before the

Division Bench was as to whether under the provisions of Section

62(3) of the 2003 Act, the differentiation of SFEIs from the other set

of institutions for the purpose of fixing of tariff was legally justifiable

or not. The Division Bench decided the issue in favour of the SFEIs.

On behalf of the appellant, the argument that the respondents (writ

petitioners) had alternative remedy in the form of appeal under

Section 111 of the 2003 Act has been reiterated and it has been

submitted that for this reason alone, the writ petitions ought to have

been dismissed. This contention was rejected by the First Court and

both the First Court and the Division Bench have addressed the points

raised in the writ petition on merit. The objection based on

subsistence of alternative remedy having been rejected by the Court of

first instance as also the appellate forum, we do not think upon

granting leave under Article 136 of the Constitution of India, it would

be proper on our part to entertain this question on maintainability of

the writ petitions again and relegate the dispute to the Statutory

Authority solely on this ground. There is no deep factual dispute

involved in these proceedings. These are also not cases where

exercise of writ jurisdiction can be held to be fundamentally flawed,

like in a case involving purely private dispute. In this perspective,

entertaining such objection at this stage would result in wastage of

judicial time and also lead to adding unnecessary layers to the

decision making process on a particular lis.

6. Before us, submissions have been made on the basis of Civil

Appeal No. 8350 of 2009 though both the First Court and the Division

Bench dealt with all the matters in their respective common

judgments. The writ petitioner in this proceeding was Principal Sir

Syed Institute for Technical Studies in Thiruvananthapuram. So far as

the issues involved in all these appeals are concerned, the

distinguishing factual elements are few and insignificant. Such

distinguishing elements of the individual cases would have no impact

on outcome of these appeals. We shall, accordingly, address the

appeals on merit. On behalf of the Commission, it has been argued

before us that the respondents/writ petitioners had sufficient

opportunity to raise objection before the Commission itself as the

proposed tariff was published on its website, but none of the SFEIs

chose to raise any objection at that stage. It is also submission of the

Commission that the purpose of the two categories of educational

institutions can be gathered from the distinguishing features broadly

under the following six heads:-

(i) different fee structure

(ii) different wage structure

(iii) employee welfare measures
(iv) larger social purpose the government run and
aided institutional seek to achieve
(v) profit motive not present in the former category of
(vi) Facilities provided by the respective categories of

7. What has been addressed in the judgment under appeal relates to

all SFEIs. We shall now come straight to sub-section (3) of Section 62

of the 2003 Act, the text of which we have reproduced in earlier part

of this judgment. Main case of the writ petitioners is that the tariff

notification was issued ignoring the statutory mandate contained in

the said provision. There is a negative mandate of the legislature upon

the Commission in this sub-section. While fixing tariff, the

Commission cannot show undue preference to any consumer of

electricity. The Commission, however, is vested with the power to

prescribe differential rates according to the consumers’ load factor,

power factor, voltage, total consumption of electricity during any

specified period of time at which supply is required. So far as fixing
different rates for these two categories of the educational institutions,

these factors did not come into play. The other permissible

differentiating factors are geographical position of any area, the

nature of supply and the purpose for which the supply is required.

As regards this set of differentiating factors, the tariff advantage for

government run and aided educational institutions do not appear to be

based on geographical position or nature of supply. The Commission

however has justified the classification of the aforesaid two sets of

tariffs on the basis of purpose for which supply is required by the


8. The writ petitioners’ case on breach of the principles of natural

justice rested on two planks. First was that adequate opportunity for

raising objection was not given to the Self-Financing Educational

Institutions. The second plank of the writ petitioners’ case on this

very principle was that the tariff notification did not contain any

reason. According to the writ petitioners, fixing of tariff order is a

quasi-judicial exercise and disclosure of reason is imperative to

support any decision coming out of such exercise. On nature of tariff-

fixing exercise, the decisions which have been relied upon are the

cases of PTC India Limited v. Central Electricity Regulatory

Commission [(2010) 4 SCC 603], State of Gujarat v. Utility Users

Welfare Association [(2018) 6 SCC 221] and Shri Sitaram Sugars

Co. Ltd. v. Union of India & Ors. [(1990) 3 SCC 223]. On the

aspect of requirement for disclosure of reasons in a quasi-judicial

proceeding, The Siemens Engineering & Manufacturing Co. of

India Ltd. v. Union of India (1976 2 SCC 981), S.N. Mukherjee v.

Union of India (1990) 4 SCC 594 and Kranti Associates Pvt. Ltd.

v. Sh. Masood Ahmed Khan [SLP(C) No.12766 of 2008], decided

on 8th September, 2010 have been cited.

9. As regards the argument of the writ petitioners on the point of

violation of the principles of natural justice, the Division Bench found

uploading of tariff proposal on the website to be broadly in

compliance with the statutory requirement. We find from the

judgment of the First Court that the Commission had issued notice

inviting objections/suggestions from the Public Consumers and other

stake holders. In the notice only, it was mentioned that the details

were available in the website of the Commission and the same was

available on request. Such details included the proposed higher tariff

rate for the SFEIs. We do not find much discussion on the second

plank of the writ petitioners’ argument on breach of the principles of

natural justice in the judgment under appeal. Neither of the two cases

cited on behalf of the writ petitioners on the point of the Commission

being a quasi-judicial body deal with the aspect of necessity to

disclose reason in a tariff fixing order by a statutory body like the

Commission. In the case of State of Gujarat (supra), the question

this Court dealt with was on qualification of a Chairman of the

Regulatory Commission. While dealing with that question, it was held

that the State Commissions have the trappings of a Court. In the case

of PTC India Ltd. (supra), the dispute was on the point as to

whether a Regulation framed under Section 178 of the 2003 Act was

appealable under Section 111 of the said statute. While exploring that

controversy, a Constitution Bench of this Court examined the scope of

jurisdiction of the Commission and found tariff fixation under Section

62 of the 2003 Act to be quasi-judicial function. One of the reasons

for such finding was that the tariff order was appealable under the


10. Now question arises as to whether the Commission, on being

clothed with quasi-judicial character was required to disclose reasons

for issuing the tariff notification, the legality of which is subject of

dispute in these proceedings. The requirement for disclosure of reason

however could originate in a case of this nature if there is a lis

between the consumer and the Commission. Unless of course, the

statutory provision prescribe otherwise. In the present case, the

Division Bench observed: –

“True that the manner in which notice could
be issued being prescribed under the
Regulation adherence to that provision by
publishing in the website or in the notice
board may be sufficient. But all that we
wish to say is that there is no justification
for the respondents to say that the
petitioners did not make any objection and
they can be non suited on that ground…”

11. Once the Division Bench observed that publication in the

website was sufficient, the writ petitioners may not have had forfeited

their right to challenge the tariff notification in the Writ Court or the

appellate forum. But having failed to generate any lis on the tariff

proposal by not raising any kind of objection, it would not be open to

them to demand disclosure of reasons along with publication of the

tariff rates. The Commission’s role as a quasi-judicial body or it

having trappings of a Court would emerge only if it was called upon

to adjudicate a dispute. As we have already discussed, no dispute had

been generated by the writ petitioners on the basis of Commission’s

proposal which would have required it to undertake some form of

adjudicatory exercise. In such a situation, the exercise of fixing tariff

has to be undertaken as a quasi-legislative act only, which ordinarily a

tariff-fixing exercise is. Issue of the subject tariff notification

unaccompanied by reason thus cannot be faulted for having breached

the principles of natural justice. The forum of appeal was open to

them. But mere existence of an appellate forum in the statute would

not require a tariff-fixing body to disclose the reason for stipulating

tariff-rate in each individual case. If any appeal is preferred in

relation to any specific case, the Commission would then have to

justify fixing a tariff rate in such a case. The duty to disclose reason

would crystallise then only, in a situation where a particular tariff

fixing proposal goes without any objection after its draft publication.

Not having gone to the appellate forum, the writ petitioners

approached the Writ Court. Before the Writ Court, such tariff fixation

was open to challenge in the same way tariffs fixed in exercise of

quasi-legislative or administrative power is subjected to judicial

review. Thus, in our opinion, in absence of any statutory provision to

the contrary, once tariff proposal is published and goes unobjected to

before the State Commission, the question of disclosure of reason for

such fixation would not arise at the stage of finalisation of tariff. If

such tariff orders are later challenged before the appellate forum or

the Writ Court, the Commission would have to defend its decision the

same way an administrative or quasi-legislative decision on fixing of

tariff is defended. Since we have taken this view, we do not consider

it necessary to deal with the authorities which lay down the dictum of

law that a quasi-judicial authority is required to disclose reasons in

support of its decision.

12. Learned counsel for the SFEIs, being the writ petitioners have

asserted that the purpose of both Government or Government Aided

Institutions and Self-financing Institutions is the same, which is

imparting education and discrimination between these two sets of

institutions is not permissible under Section 62(3) of the Act.

Countering the appellants’ submission that the self-financing

institutions carry profit-motive or it is some kind of commercial

venture, our attention has been drawn to four authorities of this Court

being the cases of T.M.A Pai Foundation (supra), P.A. Inamdar &

Ors. v. State of Maharashtra & Ors. [(2005) 6 SCC 537], Islamic

Academy of Education & Another v. State of Karnataka and Ors.

[(2003) 6 SCC 697] and Modern School v. Union of India [(2004) 5

SCC 583]. All these authorities deal with the fee-structures of private

educational institutions. In the case of T.M.A Pai (supra), it has been

held and observed:

“56. One also cannot lose sight of the fact
that we live in a competitive world today,
where professional education is in demand.
We have been given to understand that a
large number of professional and other
institutions have been started by private
parties who do not seek any governmental
aid. In a sense, a prospective student has
various options to him/her, where,
therefore, normally economic forces have a
role to play. The decision on the fee to be
charged must necessarily be left to the
private educational institution that does not
seek or is not dependent upon any funds
from the Government.
57. We, however, wish to emphasize one
point, and that is that in as much as the
occupation of education, is in a sense,
regarded as charitable, the Government can
provide regulations that will ensure
excellence in education, while forbidding
the charging of capitation fee and
profiteering by the institution. Since the
object of setting up an educational
institution is be definition “charitable”, it is
clear that an educational institution cannot
charge such a fee as is not required for the
purpose of fulfilling that object. To put it
differently, in the establishment of an
educational institution, the object should
not be to make a profit, in as much as
education is essentially charitable in nature.
There can, however, be a reasonable
revenue surplus, which may be generated
by the educational institution for the
purpose of development of education and
expansion of the institution.”

13. Referring to the aforesaid passages, it was contended on behalf

of the writ petitioners that there is bar on profiteering even on private

educational institutions though reasonable revenue surplus generation

on their part is permissible. In the case of Modern School v. Union of

India (2004) 5 SCC 583 it has been held:-

“14. At the outset, before analysing the
provisions of the 1973 Act, we may state
that it is now well settled by a catena of
decisions of this Court that in the matter of
determination of the fee structure unaided
educational institutions exercise a great
autonomy as they, like any other citizen

carrying on an occupation, are entitled to a
reasonable surplus for development of
education and expansion of the institution.
Such institutions, it has been held, have to
plan their investment and expenditure so as
to generate profit. What is however,
prohibited is commercialisation of
education. However, in none of the earlier
cases, this court has defined the concept of
reasonable surplus, profit, income and
yield, which are the terms used in the
various provisions of the 1973 Act.”

14. What these authorities lay down in substance is that the Self

Financing Educational Institutions are not permitted to indulge in

profiteering but that does not imply they cannot generate reasonable

revenue surplus to enable them to continue with their activities. In

addition, the writ petitioners have submitted that many of them are

charitable organisations and “not for profit” entities and they cannot

be clubbed together with other commercial organisations. We find

from the subject-notification that SFEIs have been categorised with

entities like cinema studios, hotels and restaurants, construction works

etc., and heading of LT-VII tariff items is “commercial”. While an

educational institution in our ordinary perception may not be

performing functions similar to the other entities who undertake

business ventures, a tariff fixing body is not required to proceed on

the basis of such common perception. The duty of such body is to

determine which rate an organisation shall pay, and entities working

in diverse fields can be clubbed together under a common umbrella to

be subjected to a common rate. In that context, for exercise of this

nature, the heading “commercial” cannot be constructed to restrict the

entities that can come under that head on the basis of the nature of

their activities, i.e. whether such activities have commercial attributes

or not. Selection of heading is an exercise of convenience in fixing

tariff rates and not necessarily the controlling factor in choosing the

entities included under that heading.

15. The counsel for the Commission also has argued that the SFEIs

provide various facilities to their students. But it has been recorded in

the judgment under appeal that such fact was not substantiated before

the Division Bench. Thus, no material is there before us from which

the Commission could demonstrate that the SFEIs provide luxury or

semi-luxury amenities to their students. In the light of these facts can

it be held that purpose of both Government run and aided institutions

and SFEIs was same and hence no differentiation could be made on

tariff rate on that basis? We are not testing here the differentiation on

the anvil of Article 14 of the Constitution of India as the writ

petitioners before the Division Bench do not appear to have had

pressed their challenge to the notification on that ground.

16. The question we shall address now is whether preference shown

by the Commission to the State run and aided educational institutions

in fixing tariff was justified having regard to the purpose for which

supply was required. The expression “purpose” means, as per the

Concise Oxford English Dictionary, Tenth Edition, published by

Oxford University Press:- “1. the reason for which something is

done or for which something exists. 2. resolve or determination.”

In the given context, the noun “purpose” would fit into the first

meaning given in the aforesaid dictionary, which we have quoted

above. Contention of the writ petitioners is that the purpose of both of

these two sets of educational institutions remain the same being

imparting education and no discrimination in tariff rate could be made

between them having regard to Section 62 (3) of the 2003 Act.

17. The writ petitioners have advanced two-fold submission on this

aspect. First, they have contended that capacity to pay cannot be the

determinant factor in electricity tariff fixing exercise, relying on the

case of Rohtas industries Ltd. vs. Chairman, Bihar State

Electricity Board & Ors. (1984 (Supp) SCC 161). This judgment

was delivered construing Section 49(3) of the Electricity Supply Act,

1948. In the case of M.P. Electricity Board & Ors. vs. Shiv

Narayan & Ors. (2005) 7 SCC 283, this Court found professional

activities of an advocate did not constitute commercial activity so as

to attract commercial rate of electricity. But ratio of these two

decisions do not aid the writ petitioners. So far as meaning of the

expression “commercial” is concerned, we have dealt with that issue

earlier in this judgment. The SFEIs have been specifically included

under the heading “commercial” and it is not a case where their

character is being assessed inferentially, treating their activities as

commercial in a general sense of the term.

18. The Writ Petitioners have argued that they cannot indulge in

fixing excessive fees in respect of their schools and in this regard two

statutory instruments have been brought to our notice which

postulates restriction on collection of excessive fees. These are

Kerala Professional Colleges or Institutions (Prohibition of

Capitation Fee, Regulation of Admission, Fixation of Non-

Exploitative Fee and Other Measures to Ensure Equity and Excellence

in Professional Education) Act, 2006 and Kerala Education Rules, the

latter having been referred to in the judgment under appeal. On the

basis of these statutory provisions, the Writ Petitioners seek to

contend that they cannot indulge in profiteering and have to charge

fees to the students as regulated by the authorities. But in our opinion

profiteering is not the sole criteria on the basis of which the Tariff

Authorities segregated the two sets of organisations. In the event the

tariff fixing body, in this case, being the Commission, can distinguish

the purpose of the respective categories, they would be entitled to

impose different rates of tariffs for different categories of educational


19. We have already referred to the dictionary meaning of the

expression “purpose”. The writ petitioners’ contention is that the

reason of their formation or existence is imparting education and this

is so for the Government run and aided institutions also. On this

basis, they argue that different tariffs could not be charged to these

two sets of institutions. We are, however, unable to accept this

argument. Though the Commission has not demonstrated through

factual evidence the facilities provided by these two sets of

institutions are different, it is of common knowledge, of which we

take judicial notice, that the student profile of state run and state aided

institutions is different from those of SFEIs. Students from

comparatively modest background go to the State run or State funded

institutions. While we construe the meaning of the expression

“purpose” under sub-section (3) of Section 62 of the 2003 Act, we are

of the opinion that for the purpose of settling the tariff question, who

is serving the “purpose” and for whom such “purpose” is being served

have to be factored in. We also have to take into account that the

nature of service rendered by them cannot be the sole determinant for

the tariff-fixing exercise. The State run and State aided institutions

are funded by the tax payers, which is also a material factor in making

distinction between the aforesaid categories of the institutions. The

expression “purpose” has to be understood in the context of the

character or feature of the entity which is undertaking the activity of

imparting education. While funding educational institutions, the State

undertakes to discharge one of its essential welfare measures. On

behalf of the Commission certain cases decided by the Appellate

Tribunal were referred to but since we are deciding primarily the

scope of Section 62(3) of the 2003 Act, we do not consider it

necessary to refer to those cases.

20. Viewing the case of the appellant in that perspective, in our

opinion, no error was committed by them in fixing higher tariff for the

Self-Financing Educational Institutions categorising them as

commercial entities. No undue preference has been given to the State

run and State aided institutions in the tariff notification. The fact that

SFEIs have been clubbed together with several commercial service

providers wholly unrelated to education becomes insignificant once

we find that purpose of the SFEIs could be differentiated from the

Government run and Government aided educational institutions.

21. For these reasons, we are unable to agree with the view of the

Division Bench. The judgment under appeal is set aside and the

judgment of the First Court is restored. The appeals are allowed in the

above terms. All connected applications are disposed of. Interim
orders, if any, shall stand dissolved. There shall be no order as to


(Deepak Gupta)
New Delhi,
Dated: 20th February, 2020
(Aniruddha Bose)



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