KERALA STATE ELECTRICITY BOARD REP. BY ITS SECRETARY & ANR. versus PRINCIPAL SIR SYED INSTITUTE FOR TECHNICAL STUDIES & ORS.

KERALA STATE ELECTRICITY BOARDREP. BY ITS SECRETARY & ANR.

PRINCIPAL SIR SYED INSTITUTEFOR TECHNICAL STUDIES & ORS.

(Civil Appeal No.8350 of 2009)

FEBRUARY 20, 2020

[DEEPAK GUPTA AND ANIRUDDHA BOSE, JJ.]

Electricity Act, 2003 – s.62(3) – Scope of – Tariff notificationissued by appellant – Respondents-Self-Financing EducationalInstitutions (SFEIs) were segregated from State run and State aidedprivate educational institutions and subjected to higher categoryof tariff – Challenged – Single Judge of the High Court found thetariff order to be valid – Aforesaid order set aside by Division Bench– On appeal, held: No undue preference was given to the State runand State aided institutions in the tariff notification – No errorcommitted by the appellant in fixing higher tariff for the SFEIscategorising them as commercial entities – Judicial notice taken ofthe fact that the student profile of State run and State aidedinstitutions is different from those of SFEIs – Students fromcomparatively modest background go to these institutions –Whileconstruing the meaning of the expression “purpose” u/s.62(3), forthe purpose of settling the tariff question, who is serving the“purpose” and for whom such “purpose” is being served have tobe factored in – Nature of service rendered by them cannot be thesole determinant for the tariff-fixing exercise – The fact that SFEIswere clubbed together with several commercial service providerswholly unrelated to education becomes insignificant once it is foundthat purpose of the SFEIs could be differentiated from the State runand State aided educational institutions – Impugned judgment setaside while that of the Single Judge is restored – Principles of NaturalJustice – Constitution of India – Art.14.

Principles of Natural Justice – When not breached – Self-Financing Educational Institutions (SFEIs) segregated from Staterun and State aided educational institutions and subjected to highertariff by Kerala State Electricity Regulatory Commission –

CDEF

AChallenged inter alia on breach of principles of natural justicecontending that the tariff notification did not contain any reason –Held: Commission’s role as quasi-judicial body or it havingtrappings of Court would emerge only if it was called upon toadjudicate dispute – Having failed to generate any lis on the tariffproposal by not raising any kind of objection, it would not be openBto SFEIs to demand disclosure of reasons along with publication ofthe tariff rates – Thus, tariff notification being unaccompanied byreason cannot be faulted for having breached the principles ofnatural justice – Electricity Act, 2003.

Electricity Act, 2003 – Tariff fixation – Self-FinancingCEducational Institutions (SFEIs) clubbed together with commercialservice providers and subjected to higher tariff – Challenged –Held: While an educational institution in ordinary perception maynot be performing functions similar to the other entities undertakingbusiness ventures, tariff fixing body is not required to proceed onDthe basis of such common perception – Duty of such body is todetermine which rate an organisation shall pay, and entities workingin diverse fields can be clubbed together under common umbrellato be subjected to common rate – In that context, for exercise ofthis nature, the heading “commercial” cannot be constructed torestrict the entities that can come under that head on the basis ofEthe nature of their activities – Selection of heading is an exercise ofconvenience in fixing tariff rates and not necessarily the controllingfactor in choosing the entities included under that heading.

Words & Expressions– “Purpose”, “Commercial” – Meaningof, in the context of 2003 Act – Electricity Act, 2003.F

Allowing the appeals, the Court

HELD: 1. There is negative mandate of the legislatureupon the Commission in sub-section (3) of Section 62, ElectricityAct, 2003. While fixing tariff, the Commission cannot show undueGpreference to any consumer of electricity. The Commission,however, is vested with the power to prescribe differential ratesaccording to the consumers’ load factor, power factor, voltage,total consumption of electricity during any specified period oftime at which supply is required. The other permissibledifferentiating factors are geographical position of any area, theH

KERALA STATE ELECTRICITY BOARD REP. BY ITS SECY. v. PRINCIPALSIR SYED INSTT. FOR TECHNICAL STUDIES

nature of supply and the purpose for which the supply is required.[Para 7][896-B-D]

2.1 The requirement for disclosure of reason however couldoriginate in case of this nature if there is lis between theconsumer and the Commission. Unless of course, the statutoryprovision prescribe otherwise. Once the Division Bench observedthat publication in the website was sufficient, the respondents-writ petitioners (SFEIs) may not have had forfeited their right tochallenge the tariff notification in the Writ Court or the appellateforum. But having failed to generate any lis on the tariff proposalby not raising any kind of objection, it would not be open to themto demand disclosure of reasons along with publication of thetariff rates. The Commission’s role as quasi-judicial body or ithaving trappings of Court would emerge only if it was calledupon to adjudicate dispute. No dispute had been generated bythe writ petitioners on the basis of Commission’s proposal whichwould have required it to undertake some form of adjudicatoryexercise. In such situation, the exercise of fixing tariff has tobe undertaken as quasi-legislative act only, which ordinarily atariff-fixing exercise is. Issue of the subject tariff notificationunaccompanied by reason thus cannot be faulted for havingbreached the principles of natural justice. The forum of appealwas open to them. But mere existence of an appellate forum inthe statute would not require tariff-fixing body to disclose thereason for stipulating tariff-rate in each individual case. If anyappeal is preferred in relation to any specific case, theCommission would then have to justify fixing tariff rate in sucha case. Not having gone to the appellate forum, the writ petitionersapproached the Writ Court. Before the Writ Court, such tarifffixation was open to challenge in the same way tariffs fixed inexercise of quasi-legislative or administrative power is subjectedto judicial review. In absence of any statutory provision to thecontrary, once tariff proposal is published and goes unobjectedto before the State Commission, the question of disclosure ofreason for such fixation would not arise at the stage of finalisationof tariff. If such tariff orders are later challenged before theappellate forum or the Writ Court, the Commission would haveto defend its decision the same way an administrative or quasi-legislative decision on fixing of tariff is defended. [Paras 10, 11][897-G-H][898-B-H]

A2.2 SFEIs have been categorised with entities like cinemastudios, hotels and restaurants, construction works etc., andheading of LT-VII tariff items is “commercial”. While aneducational institution in ordinary perception may not beperforming functions similar to the other entities who undertakebusiness ventures, tariff fixing body is not required to proceedBon the basis of such common perception. The duty of such bodyis to determine which rate an organisation shall pay, and entitiesworking in diverse fields can be clubbed together under acommon umbrella to be subjected to common rate. In thatcontext, for exercise of this nature, the heading “commercial”Ccannot be constructed to restrict the entities that can come underthat head on the basis of the nature of their activities, i.e. whethersuch activities have commercial attributes or not. Selection ofheading is an exercise of convenience in fixing tariff rates andnot necessarily the controlling factor in choosing the entitiesincluded under that heading. [Para 14][900-F-H][901-A]D

2.3 The expression “purpose” means, as per the ConciseOxford English Dictionary, Tenth Edition, published by OxfordUniversity Press:- “1. the reason for which something is done orfor which something exists. 2. resolve or determination.” In thegiven context, the noun “purpose” would fit into the first meaningEgiven in the aforesaid dictionary. The SFEIs have been specificallyincluded under the heading “commercial” and it is not casewhere their character is being assessed inferentially, treating theiractivities as commercial in general sense of the term.Profiteering is not the sole criteria on the basis of which the Tariff

FAuthorities segregated the two sets of organisations. In the eventthe tariff fixing body, in this case, being the Commission, candistinguish the purpose of the respective categories, they wouldbe entitled to impose different rates of tariffs for differentcategories of educational institutions. [Paras 16-18][901-E-F][902-A-B][902-D-E]G

Rohtas industries Ltd. v. Chairman, Bihar StateElectricity Board & Ors. (1984) Suppl. SCC 161 :[1984] SCR 59; M.P. Electricity Board & Ors. v. ShivNarayan & Ors. (2005) 7 SCC 283 : [2005] 2 Suppl.SCR 958– held inapplicable.

KERALA STATE ELECTRICITY BOARD REP. BY ITS SECY. v. PRINCIPALSIR SYED INSTT. FOR TECHNICAL STUDIES

2.4 Though the Commission has not demonstrated throughfactual evidence the facilities provided by these two sets ofinstitutions are different, it is of common knowledge, of whichthe Court is taking judicial notice, that the student profile of Staterun and State aided institutions is different from those of SFEIs.Students from comparatively modest background go to the Staterun or State funded institutions. While the meaning of theexpression “purpose” is construed under sub-section (3) ofSection 62 of the 2003 Act, for the purpose of settling the tariffquestion, who is serving the “purpose” and for whom such“purpose” is being served have to be factored in. The nature ofservice rendered by them cannot be the sole determinant for thetariff-fixing exercise. The State run and State aided institutionsare funded by the tax payers, which is also material factor inmaking distinction between the aforesaid categories of theinstitutions. The expression “purpose” has to be understood inthe context of the character or feature of the entity which isundertaking the activity of imparting education. [Para 19][902-F-H][903-A-B]

2.5 No error was committed by the appellant in fixing highertariff for the Self-Financing Educational Institutions categorisingthem as commercial entities. No undue preference has been givento the State run and State aided institutions in the tariff notification.The fact that SFEIs have been clubbed together with severalcommercial service providers wholly unrelated to educationbecomes insignificant once it is found that purpose of the SFEIscould be differentiated from the Government run and Governmentaided educational institutions. [Para 20][903-C-E]PTC India Limited v. Central Electricity RegulatoryCommission (2010) 4 SCC 603 : [2010] 3 SCR 609;State of Gujarat v. Utility Users Welfare Association(2018) 6 SCC 221 – distinguished.

T.M.A Pai Foundation and Anr. v. State of Karnatakaand Ors. (2002) 8 SCC 481 : [2002] 3 Suppl. SCR587; Social SG of Assisi sisters v. KSEB 1988 (1) KLT1727; Shri Sitaram Sugars Co. Ltd. v. Union of India &Ors. (1990) 3 SCC 223 : [1990] 1 SCR 909; TheSiemens Engineering & Manufacturing Co. of India Ltd.

ABC

Av. Union of India (1976) 2 SCC 981 : [1976] Suppl.SCR 489; S.N. Mukherjee v. Union of India (1990) 4SCC 594 : [1990] 1 Suppl. SCR 44; Kranti AssociatesPvt. Ltd. v. Sh. Masood Ahmed Khan SLP(C) No. 12766of 2008; P.A. Inamdar & Ors. v. State of Maharashtra& Ors. (2005) 6 SCC 537 : [2005] 2 Suppl. SCR 603,BIslamic Academy of Education & Another v. State ofKarnataka and Ors. (2003) 6 SCC 697: [2003] 2 Suppl.SCR 474; Modern School v. Union of India (2004) 5SCC 583 – referred to.

Case Law Reference

FCIVIL APPELLATE JURISDICTION: Civil Appeal No. 8350of 2009.

From the Judgment and Order dated 17.08.2009 of the High Courtof Kerala at Ernakulam in W.A. No. 989 of 2009.

WithG

Civil Appeal Nos. 8552-8573, 8574-8592, 8593-8605 of 2009,1027-1046, 1048-1067, 1068-1080, 1009, 1025-1026, 1021-1023, 1003-1007, 1010-1020, 1085, 1081-1082, 1083, 1084, 1087, 1086, 1088, 3101,3091, 3093, 3095, 3110, 3102, 3103, 3109, 3112, 3104-3107, 3100, 3111,3113, 3097, 3098-3099, 3096, 3092, 3108, 4533-4572, 3996, 3993, 3998-

3999, 4000, 3997, 3990-3992, 3994-3995, 4653-4667, 4670-4672, 4652,4674, 4673, 4669, 4668 of 2010.

Basava Prabhu Patil, Pallav Shishodia, Jayant Muthuraj, Sr. Advs.,P.V. Dinesh, Ms. Sindhu T.P., Mukund P. Unny, Bineesh K., R.S.Lakshman, Ashwini Kumar Singh, G. Prakash, M. T. George, RomyChacko, Shakti Chand Jaiswal, Geet Ahuja, Ms. Ojaswi Sharma, V. K.Sidharthan, E. M. S. Anam, Pawan Kishore Singh, Ms. MadhusmitaBora, Ms. Bindu Nair, V. K. Monga, Jogy Scaria, Ranjith K. C., RoyAbraham, Ms. Reena Roy, Ms. Seema Jain, Akhil Abraham, HiminderLal, Raghenth Basant, Raghav Mehrotra, Ms. Mahamaya Chatterjee,Ms. Liz Mathew, Ashwani Bhardwaj, Parmanand Pandey, M/S. EquityLex Associates, A. Raghunath, Prakash Ranjan Nayak, K. Rajeev,Ramesh Babu M. R., Chandy Oommen, Ms. Swati Setia, C. K. Sasi,Pratap Venugopal, Ms. Surekha Raman, Ms. Viddusshi, Akhil AbrahamRoy (for M/s. K J John and Co.), K. Ramesh, Kumar Gaurav,Mrs. Neeraj Singh, Ms. Ritu Beniwal, B.N. Dubey, P. Dayal, Mrs.Swarupama Chaturvedi, Advs. for the appearing parties.

The Judgment of the Court was delivered by

ANIRUDDHA BOSE, J.

1. The legality of part of tariff notification issued by the KeralaState Electricity Regulatory Commission (“Commission”) segregatingSelf-Financing Educational Institutions (SFEI) from Government run andGovernment Aided Private Educational Institutions and subjecting theformer to higher category of tariff is the only question involved in thisbatch of appeals. The notification to that effect was issued by theCommission on 26[th] November, 2007 bearing Order No.TP 23 and TP30 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 privateeducational institutions have been placed under Low Tension VI Non-Domestic tariff category. The Commission is the appellant before us inthis set of appeals. Such tariff notification was published in terms ofKerala State Electricity Regulatory Commission (Terms and Conditionsof determination of tariff for distribution and retail sale of electricityunder MYT Framework) Regulations, 2006.

2. Several Writ Petitions came to be filed by different SFEIsquestioning legality of such segregation which in effect created higher

Atariff regime for them. Altogether 52 writ petitions were taken up forhearing by learned Single Judge of the Kerala High Court (the FirstCourt). The learned Single Judge found the tariff order to be valid, relyingon decision of Constitution Bench of this Court in the case ofT.M.A Pai Foundation and Anr. v. State of Karnataka and Ors.2002 (8) SCC 481 and Bench judgment of the High Court of Kerala inBthe 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 petitionersabout the Government Order. There is no case in the Writ PetitionsCbased on the Order. Further, the Higher Secondary Schools areattached to Schools having Standards upto High School Section,where as I have already noted, there is no restriction as containedin relation to Government and Aided Schools. Also, what has beenfixed is the minimum salary of teachers and others. It appears toDbe low. What is important is the capability to raise revenue and itsramifications, and not whether any particular Self-FinancingEducational Institutions is actually making use of its power to raiserevenue, as ordinarily Self-Financing Educational Institution mayraise.”

E3. In appeal by the SFEIs, the Division Bench of the High Courtset aside the judgment of the First Court. The Division Bench found thatthe differentiation was not for any of the grounds specified in Section 62(3) of the Electricity Act, 2003. That is the provision under which theState Commission can determine the tariff. Section 62 of the 2003 Actspecifies:-F

“62. Determination of tariff:- (1) The Appropriate Commissionshall determine the tariff in accordance with the provisions of thisAct for –

(a) supply of electricity by generating company to distributionlicensee:GProvided that the Appropriate Commission may, in case of shortageof supply of electricity, fix the minimum and maximum ceiling oftariff for sale or purchase of electricity in pursuance of anagreement, entered into between generating company and alicensee or between licensees, for period not exceeding oneHyear to ensure reasonable prices of electricity;

KERALA STATE ELECTRICITY BOARD REP. BY ITS SECY. v. PRINCIPALSIR SYED INSTT. FOR TECHNICAL STUDIES [ANIRUDDHA BOSE, J. ]

(b) transmission of electricity;

(c) wheeling of electricity;

(d) retail sale of electricity:

Provided that in case of distribution of electricity in the same areaby two or more distribution licensees, the Appropriate Commissionmay, for promoting competition among distribution licensees, fixonly maximum ceiling of tariff for retail sale of electricity.

(2) The Appropriate Commission may require licensee or agenerating company to furnish separate details, as may be specifiedin respect of generation, transmission and distribution fordetermination of tariff.

(3) The Appropriate Commission shall not, while determining thetariff under this Act, show undue preference to any consumer ofelectricity but may differentiate according to the consumer’s loadfactor, power factor, voltage, total consumption of electricity duringany specified period or the time at which the supply is required orthe geographical position of any area, the nature of supply and thepurpose 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 respectof any changes expressly permitted under the terms of any fuelsurcharge formula as may be specified.

(5) The Commission may require licensee or generatingcompany to comply with such procedures as may be specified forcalculating the expected revenues from the tariff and chargeswhich he or it is permitted to recover.

(6) If any licensee or generating company recovers price orcharge exceeding the tariff determined under this section, theexcess amount shall be recoverable by the person who has paidsuch price or charge along with interest equivalent to the bankrate 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 ofwhether it is self-financing or aided or governmental purpose,cannot be different, as education means to impart knowledge.

DEF

AEducation in ancient times was not connected with earning. Freeeducation is what was accord in dharma. Education ought to bethe resource for tradition, loyalty to culture and ideals of serviceto 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 noBmaterials placed on the question as to whether electricity isconsumed by the Self-Financing Educational Institutions for anyother purpose. The vague statement that building is air conditionedwithout specifying how many institutions are having air conditionedbuildings or apparatus having high consumption of electricity etc.Care not matters on which specific pleas with reference to detailsare made available. We may, at the risk of repetition, say that weare only examining the justifiability of treating Self FinancingEducational Institutions with reference to other institutions-aided/Governmental-from the point of view of electricity consumptionas borne out by the affidavits filed before this Court and we haveDin that attempt considered the factors pleaded by them and foundto be unsustainable.”

5. It is this judgment of the Division Bench of the High Courtdelivered on 17[th] August 2009 which is under appeal before us. Beforethe First Court, apart from irrational or arbitrary discrimination, fixationEof tariff was assailed on certain other grounds as well. These groundsincluded breach of the principles of natural justice and lack of power ofthe Commission to fix tariff suo motu. The writ petitioners questionedthe reasonableness in clubbing the educational institutions, many of whomwere run by not for profit organisations, with other entities whose object

Fwas ex-facie profit oriented. It was urged that tariff for SFEIs could notbe brought under the head “Commercial”. The Division Bench rejectedthe Commission’s plea for dismissal of the writ petitions on the point ofavailability of alternative remedy in the form of statutory appeal. Wefind from the judgment under appeal that challenge to the tariff notification

on the ground of being violative of the provisions of Article 14 of theGConstitution of India was not pressed by the respondents-writ petitioners.The writ petitioners also did not seriously press their challenge to thesubject notification on the question of lack of suo motu power of theCommission to fix tariff before the Division Bench. The main point whichwas urged and argued before the Division Bench was as to whetherHunder 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 oftariff was legally justifiable or not. The Division Bench decided the issuein favour of the SFEIs. On behalf of the appellant, the argument that therespondents (writ petitioners) had alternative remedy in the form of appealunder Section 111 of the 2003 Act has been reiterated and it has beensubmitted that for this reason alone, the writ petitions ought to have beendismissed. This contention was rejected by the First Court and both theFirst Court and the Division Bench have addressed the points raised inthe writ petition on merit. The objection based on subsistence ofalternative remedy having been rejected by the Court of first instance asalso the appellate forum, we do not think upon granting leave underArticle 136 of the Constitution of India, it would be proper on our part toentertain this question on maintainability of the writ petitions again andrelegate the dispute to the Statutory Authority solely on this ground.There is no deep factual dispute involved in these proceedings. Theseare also not cases where exercise of writ jurisdiction can be held to befundamentally flawed, like in case involving purely private dispute. Inthis perspective, entertaining such objection at this stage would result inwastage of judicial time and also lead to adding unnecessary layers tothe decision making process on particular lis.

6. Before us, submissions have been made on the basis of CivilAppeal No. 8350 of 2009 though both the First Court and the DivisionBench dealt with all the matters in their respective common judgments.The writ petitioner in this proceeding was Principal Sir Syed Institute forTechnical Studies in Thiruvananthapuram. So far as the issues involvedin all these appeals are concerned, the distinguishing factual elementsare few and insignificant. Such distinguishing elements of the individualcases 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 hadsufficient opportunity to raise objection before the Commission itself asthe proposed tariff was published on its website, but none of the SFEIschose to raise any objection at that stage. It is also submission of theCommission that the purpose of the two categories of educationalinstitutions can be gathered from the distinguishing features broadly underthe following six heads:-

(i) different fee structure

(ii) different wage structure

[2020] 7 S.C.R.

A(iii) employee welfare measures

(iv) larger social purpose the government run and aided institutionalseek to achieve

(v) profit motive not present in the former category of institutions.

B(vi) Facilities provided by the respective categories of institutions.7. What has been addressed in the judgment under appeal relatesto all SFEIs. We shall now come straight to sub-section (3) of Section 62of the 2003 Act, the text of which we have reproduced in earlier part ofthis judgment. Main case of the writ petitioners is that the tariff notificationCwas issued ignoring the statutory mandate contained in the said provision.There is negative mandate of the legislature upon the Commission inthis sub-section. While fixing tariff, the Commission cannot show unduepreference to any consumer of electricity. The Commission, however, isvested with the power to prescribe differential rates according to theconsumers’ load factor, power factor, voltage, total consumption ofDelectricity during any specified period of time at which supply is required.So far as fixing different rates for these two categories of the educationalinstitutions, these factors did not come into play. The other permissibledifferentiating factors are geographical position of any area, thenature of supply and the purpose for which the supply is required.EAs regards this set of differentiating factors, the tariff advantage forgovernment run and aided educational institutions do not appear to bebased on geographical position or nature of supply. The Commissionhowever has justified the classification of the aforesaid two sets of tariffson the basis of purpose for which supply is required by the consumers.

F8. The writ petitioners’ case on breach of the principles of naturaljustice rested on two planks. First was that adequate opportunity forraising objection was not given to the Self-Financing EducationalInstitutions. The second plank of the writ petitioners’ case on this veryprinciple was that the tariff notification did not contain any reason.According to the writ petitioners, fixing of tariff order is quasi-judicialGexercise and disclosure of reason is imperative to support any decisioncoming out of such exercise. On nature of tariff-fixing exercise, thedecisions which have been relied upon are the cases of PTC IndiaLimited v. Central Electricity Regulatory Commission [(2010) 4SCC 603], State of Gujarat v. Utility Users Welfare Association[(2018) 6 SCC 221] and Shri Sitaram Sugars Co. Ltd. v. Union ofH

India & Ors. [(1990) 3 SCC 223]. On the aspect of requirement fordisclosure of reasons in quasi-judicial proceeding, The SiemensEngineering & Manufacturing Co. of India Ltd. v. Union of India(1976 2 SCC 981), S.N. Mukherjee v. Union of India (1990) 4SCC 594 and Kranti Associates Pvt. Ltd. v. Sh. Masood AhmedKhan [SLP(C) No.12766 of 2008], decided on 8[th] September, 2010have been cited.

9. As regards the argument of the writ petitioners on the point ofviolation of the principles of natural justice, the Division Bench founduploading of tariff proposal on the website to be broadly in compliancewith the statutory requirement. We find from the judgment of the FirstCourt that the Commission had issued notice inviting objections/suggestions from the Public Consumers and other stake holders. In thenotice only, it was mentioned that the details were available in the websiteof the Commission and the same was available on request. Such detailsincluded the proposed higher tariff rate for the SFEIs. We do not findmuch discussion on the second plank of the writ petitioners’ argumenton 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 thepoint of the Commission being quasi-judicial body deal with the aspectof necessity to disclose reason in tariff fixing order by statutory bodylike the Commission. In the case of State of Gujarat (supra), the questionthis Court dealt with was on qualification of Chairman of the RegulatoryCommission. While dealing with that question, it was held that the StateCommissions have the trappings of Court. In the case of PTC IndiaLtd. (supra), the dispute was on the point as to whether Regulationframed under Section 178 of the 2003 Act was appealable under Section111 of the said statute. While exploring that controversy, ConstitutionBench of this Court examined the scope of jurisdiction of the Commissionand 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 tarifforder was appealable under the statute.

10. Now question arises as to whether the Commission, on beingclothed with quasi-judicial character was required to disclose reasonsfor issuing the tariff notification, the legality of which is subject of disputein these proceedings. The requirement for disclosure of reason howevercould originate in case of this nature if there is lis between the consumerand the Commission. Unless of course, the statutory provision prescribeotherwise. In the present case, the Division Bench observed: -

898SUPREME COURT REPORTS

A“True that the manner in which notice could be issued beingprescribed under the Regulation adherence to that provision bypublishing 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 therespondents to say that the petitioners did not make any objectionand they can be non suited on that ground…”B

11. Once the Division Bench observed that publication in thewebsite was sufficient, the writ petitioners may not have had forfeitedtheir right to challenge the tariff notification in the Writ Court or theappellate forum. But having failed to generate any lis on the tariff proposalby not raising any kind of objection, it would not be open to them toCdemand disclosure of reasons along with publication of the tariff rates.The Commission’s role as quasi-judicial body or it having trappings ofa Court would emerge only if it was called upon to adjudicate dispute.As we have already discussed, no dispute had been generated by thewrit petitioners on the basis of Commission’s proposal which would haveDrequired it to undertake some form of adjudicatory exercise. In such asituation, the exercise of fixing tariff has to be undertaken as quasi-legislative act only, which ordinarily tariff-fixing exercise is. Issue ofthe subject tariff notification unaccompanied by reason thus cannot befaulted for having breached the principles of natural justice. The forumof appeal was open to them. But mere existence of an appellate forumEin the statute would not require tariff-fixing body to disclose the reasonfor stipulating tariff-rate in each individual case. If any appeal is preferredin relation to any specific case, the Commission would then have tojustify fixing tariff rate in such case. The duty to disclose reasonwould crystallise then only, in situation where particular tariff fixing

Fproposal goes without any objection after its draft publication. Not havinggone to the appellate forum, the writ petitioners approached the WritCourt. Before the Writ Court, such tariff fixation was open to challengein the same way tariffs fixed in exercise of quasi-legislative oradministrative power is subjected to judicial review. Thus, in our opinion,

in absence of any statutory provision to the contrary, once tariff proposalGis published and goes unobjected to before the State Commission, thequestion of disclosure of reason for such fixation would not arise at thestage of finalisation of tariff. If such tariff orders are later challengedbefore the appellate forum or the Writ Court, the Commission wouldhave to defend its decision the same way an administrative or quasi-Hlegislative decision on fixing of tariff is defended. Since we have taken

KERALA STATE ELECTRICITY BOARD REP. BY ITS SECY. v. PRINCIPALSIR SYED INSTT. FOR TECHNICAL STUDIES [ANIRUDDHA BOSE, J. ]

this view, we do not consider it necessary to deal with the authoritieswhich lay down the dictum of law that quasi-judicial authority is requiredto disclose reasons in support of its decision.

12. Learned counsel for the SFEIs, being the writ petitioners haveasserted that the purpose of both Government or Government AidedInstitutions and Self-financing Institutions is the same, which is impartingeducation and discrimination between these two sets of institutions isnot permissible under Section 62(3) of the Act. Countering the appellants’submission that the self-financing institutions carry profit-motive or it issome kind of commercial venture, our attention has been drawn to fourauthorities 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 ModernSchool v. Union of India [(2004) 5 SCC 583]. All these authoritiesdeal with the fee-structures of private educational institutions. In thecase 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 acompetitive world today, where professional education is indemand. We have been given to understand that large numberof professional and other institutions have been started by privateparties who do not seek any governmental aid. In sense, aprospective student has various options to him/her, where,therefore, normally economic forces have role to play. Thedecision on the fee to be charged must necessarily be left to theprivate educational institution that does not seek or is not dependentupon any funds from the Government.

57. We, however, wish to emphasize one point, and that is that inas much as the occupation of education, is in sense, regarded ascharitable, the Government can provide regulations that will ensureexcellence in education, while forbidding the charging of capitationfee and profiteering by the institution. Since the object of settingup an educational institution is be definition “charitable”, it is clearthat an educational institution cannot charge such fee as is notrequired for the purpose of fulfilling that object. To put it differently,in the establishment of an educational institution, the object shouldnot be to make profit, in as much as education is essentiallycharitable in nature. There can, however, be reasonable revenue

Asurplus, which may be generated by the educational institution forthe purpose of development of education and expansion of theinstitution.”

13. Referring to the aforesaid passages, it was contended on behalfof the writ petitioners that there is bar on profiteering even on privateBeducational institutions though reasonable revenue surplus generationon their part is permissible. In the case of Modern School v. Union ofIndia (2004) 5 SCC 583 it has been held:-

“14. At the outset, before analysing the provisions of the 1973Act, we may state that it is now well settled by catena ofCdecisions of this Court that in the matter of determination of thefee structure unaided educational institutions exercise greatautonomy as they, like any other citizen carrying on an occupation,are entitled to reasonable surplus for development of educationand expansion of the institution. Such institutions, it has been held,have to plan their investment and expenditure so as to generateDprofit. What is however, prohibited is commercialisation ofeducation. However, in none of the earlier cases, this court hasdefined the concept of reasonable surplus, profit, income and yield,which are the terms used in the various provisions of the 1973Act.”E14. What these authorities lay down in substance is that the SelfFinancing Educational Institutions are not permitted to indulge inprofiteering but that does not imply they cannot generate reasonablerevenue surplus to enable them to continue with their activities. In addition,the writ petitioners have submitted that many of them are charitableForganisations and “not for profit” entities and they cannot be clubbedtogether with other commercial organisations. We find from the subject-notification that SFEIs have been categorised with entities like cinemastudios, hotels and restaurants, construction works etc., and heading ofLT-VII tariff items is “commercial”. While an educational institution inour ordinary perception may not be performing functions similar to theGother entities who undertake business ventures, tariff fixing body is notrequired to proceed on the basis of such common perception. The dutyof such body is to determine which rate an organisation shall pay, andentities working in diverse fields can be clubbed together under commonumbrella to be subjected to common rate. In that context, for exerciseHof this nature, the heading “commercial” cannot be constructed to restrictthe entities that can come under that head on the basis of the nature oftheir activities, i.e. whether such activities have commercial attributesor not. Selection of heading is an exercise of convenience in fixing tariffrates and not necessarily the controlling factor in choosing the entitiesincluded under that heading.

15. The counsel for the Commission also has argued that the SFEIsprovide various facilities to their students. But it has been recorded inthe judgment under appeal that such fact was not substantiated beforethe Division Bench. Thus, no material is there before us from which theCommission could demonstrate that the SFEIs provide luxury or semi-luxury amenities to their students. In the light of these facts can it beheld that purpose of both Government run and aided institutions andSFEIs was same and hence no differentiation could be made on tariffrate on that basis? We are not testing here the differentiation on theanvil of Article 14 of the Constitution of India as the writ petitionersbefore the Division Bench do not appear to have had pressed theirchallenge to the notification on that ground.

16. The question we shall address now is whether preferenceshown by the Commission to the State run and aided educationalinstitutions in fixing tariff was justified having regard to the purpose forwhich supply was required. The expression “purpose” means, as perthe Concise Oxford English Dictionary, Tenth Edition, publishedby Oxford University Press:- “1. the reason for which something isdone or for which something exists. 2. resolve or determination.”

In the given context, the noun “purpose” would fit into the firstmeaning given in the aforesaid dictionary, which we have quoted above.Contention of the writ petitioners is that the purpose of both of these twosets of educational institutions remain the same being imparting educationand no discrimination in tariff rate could be made between them havingregard to Section 62 (3) of the 2003 Act.

17. The writ petitioners have advanced two-fold submission onthis aspect. First, they have contended that capacity to pay cannot bethe determinant factor in electricity tariff fixing exercise, relying on thecase of Rohtas industries Ltd. vs. Chairman, Bihar StateElectricity Board & Ors. (1984 (Supp) SCC 161). This judgmentwas 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

Aan advocate did not constitute commercial activity so as to attractcommercial rate of electricity. But ratio of these two decisions do notaid the writ petitioners. So far as meaning of the expression “commercial”is concerned, we have dealt with that issue earlier in this judgment. TheSFEIs have been specifically included under the heading “commercial”and it is not case where their character is being assessed inferentially,Btreating their activities as commercial in general sense of the term.

18. The Writ Petitioners have argued that they cannot indulge infixing excessive fees in respect of their schools and in this regard twostatutory instruments have been brought to our notice which postulatesrestriction on collection of excessive fees. These are Kerala ProfessionalCColleges or Institutions (Prohibition of Capitation Fee, Regulation ofAdmission, Fixation of Non-Exploitative Fee and Other Measures toEnsure Equity and Excellence in Professional Education) Act, 2006 andKerala Education Rules, the latter having been referred to in the judgmentunder appeal. On the basis of these statutory provisions, the WritDPetitioners seek to contend that they cannot indulge in profiteering andhave to charge fees to the students as regulated by the authorities. Butin our opinion profiteering is not the sole criteria on the basis of whichthe Tariff Authorities segregated the two sets of organisations. In theevent the tariff fixing body, in this case, being the Commission, candistinguish the purpose of the respective categories, they would be entitledEto impose different rates of tariffs for different categories of educationalinstitutions.

19. We have already referred to the dictionary meaning of theexpression “purpose”. The writ petitioners’ contention is that the reasonof their formation or existence is imparting education and this is so forFthe Government run and aided institutions also. On this basis, they arguethat different tariffs could not be charged to these two sets of institutions.We are, however, unable to accept this argument. Though the Commissionhas not demonstrated through factual evidence the facilities provided bythese two sets of institutions are different, it is of common knowledge,Gof which we take judicial notice, that the student profile of state run andstate aided institutions is different from those of SFEIs. Students fromcomparatively modest background go to the State run or State fundedinstitutions. While we construe the meaning of the expression “purpose”under sub-section (3) of Section 62 of the 2003 Act, we are of the opinionthat for the purpose of settling the tariff question, who is serving theH

“purpose” and for whom such “purpose” is being served have to befactored in. We also have to take into account that the nature of servicerendered by them cannot be the sole determinant for the tariff-fixingexercise. The State run and State aided institutions are funded by thetax payers, which is also material factor in making distinction betweenthe aforesaid categories of the institutions. The expression “purpose”has to be understood in the context of the character or feature of theentity which is undertaking the activity of imparting education. Whilefunding educational institutions, the State undertakes to discharge one ofits essential welfare measures. On behalf of the Commission certaincases decided by the Appellate Tribunal were referred to but since weare deciding primarily the scope of Section 62(3) of the 2003 Act, we donot consider it necessary to refer to those cases.20. Viewing the case of the appellant in that perspective, in ouropinion, no error was committed by them in fixing higher tariff for theSelf-Financing Educational Institutions categorising them as commercialentities. No undue preference has been given to the State run and Stateaided institutions in the tariff notification. The fact that SFEIs have beenclubbed together with several commercial service providers whollyunrelated to education becomes insignificant once we find that purposeof the SFEIs could be differentiated from the Government run andGovernment aided educational institutions.

21. For these reasons, we are unable to agree with the view ofthe Division Bench. The judgment under appeal is set aside and thejudgment of the First Court is restored. The appeals are allowed in theabove terms. All connected applications are disposed of. Interim orders,if any, shall stand dissolved. There shall be no order as to costs.

Divya Pandey

Appeals allowed.