Institute of Legal and Management Studies

In a notable ruling, the Supreme Court upheld the Central Electricity Regulatory Commission's (CERC) authority under Section 79 of the Electricity Act, 2003, to award compensation for delays in inter-state transmission projects.

The bench of Justices J.B. Pardiwala and R. Mahadevan clarified that CERC's power is regulatory, not adjudicatory, and extends to issuing case-specific orders even in the absence of general regulations under Section 178, to ensure effective transmission planning and execution

The bench was deciding the case where the dispute stemmed from the delayed construction of downstream intra-state transmission infrastructure by the Respondent-MPPTCL, which stalled the operationalization of the Appellant-Power Grid Corporation of India Ltd's completed inter-state transmission work at the Indore substation. Following this, PGCIL sought compensation for revenue loss due to MPPTCL's delay.

CERC, in 2020, granted compensation to PGCIL, but MPPTCL challenged the order in the High Court upon invoking writ jurisdiction, claiming CERC exceeded its jurisdiction because, in the absence of a Regulation under Section 178 for awarding compensation, the CERC erred in passing a regulatory order under Section 79 awarding compensation to the Appellant.

Despite the existence of the statutory remedy under the 2003 Act, the High Court admitted the writ petition, prompting the Appellant-PGCIL to move Supreme Court.

Setting aside the High Court's decision, the judgment authored by Justice Pardiwala relying on the case of Airports Economic Regulatory Authority of India v. Delhi International Airport Ltd. observed that Section 79(1) grants CERC broad regulatory powers, allowing it to issue case-specific orders to fill gaps where general regulations (under Section 178) are absent.

“The respondent no. 1 has averred that the CERC cannot conflate its powers of regulation with its adjudicatory functions and a regulation cannot be brought into force by way of a judicial order. In the specific case of Nuclear Power Corporation (supra), we are inclined to agree with the submission of the respondent no. 1 to the extent that a regulation cannot be done through the process of adjudication. However, could it be said that there is a blanket ban on the CERC to exercise its regulatory functions by way of orders under Section 79(1)? In light of this Court's dictum in AERA (supra), our answer to this question must be an emphatic 'No'.”, the court said.

In support, the Court also referred to the case of Energy Watchdog v. CERC, (2017) 14 SCC 80, where it was held that Section 79(1) is the repository of the regulatory powers of the CERC and such powers must be exercised in consonance with the guidelines or regulations under Section 178. However, if there are no such guidelines or regulations in place, it cannot be said that the hands of the CERC are tied when it encounters a regulatory lacuna.

“In the case on hand, the CERC vide its orders dated 21.01.2020 and 27.01.2020 respectively imposed the liability of payment of compensation for delay onto the respondent no. 1. It is the case of the respondent no. 1 that by doing so, the CERC did not act in conformity with the 2014 Tariff Regulations which do not provide for payment of transmission charges by a party to whom the delay is attributable. In our considered view, the said argument does not hold any water. This Court's dictum in PTC (supra) and Energy Watchdog (supra) respectively settles the law in this regard and the absence of a regulation under Section 178 does not preclude the CERC from exercising its powers under Section 79(1) to make specific regulations or pass orders between the parties before it.”, the court observed.

In terms of the aforesaid, the Court allowed the appeal, upholding the CERC's regulatory power to order compensation under Section 79 despite in absence of a Regulation framed under Section 178.

Case Title: POWER GRID CORPORATION OF INDIA LIMITED Versus MADHYA PRADESH POWER TRANSMISSION COMPANY LIMITED & ORS.

Citation : 2025 LiveLaw (SC) 583

Click here to read/download the judgment

Appearance:

For Petitioner(s) Mr. M.G. Ramachandran, Sr. Adv. Mr. Shubham Arya, Adv. Ms. Poorva Saigal, Adv. Mr. Pramod Dayal, AOR Mr. Nikunj Dayal, Adv. Ms. Reeha Singh, Adv. Ms. Pallavi Saigal, Adv. Ms. Shirin Gupta, Adv. Mr. Aneesh Bajaj, Adv. Ms. Srishti Khindaria, Adv.

For Respondent(s) Mr. Prashant Singh. A.G., MP Mr. Amit Seth, Adv. Mr. Arjun Garg, AOR Ms. Kriti Gupta, Adv. Ms. Sagun Srivastava, Adv. Mr. Brahma Prakash Soni, Adv. Mr. Anup Jain, Adv. Mr. Udit Gupta, Adv. Mr. Vyom Chaturvedi, Adv. Ms. Pragya Gupta, Adv. Mr. Amrnath Sahoo, Adv. Ms. Nishtha Goel, Adv. Ms. Deep Shikha Kumar, Adv. For M/s. Udit Kishan And Associates, AOR Mr. Shirish K. Deshpande, AOR Ms. Rucha Pravin Mandlik, Adv. Mr. Mohit Gautam, Adv. Mr. Apoorv Sharma, Adv. Mr. Sudhanshu S. Choudhari, AOR