DISCOMs Are Instrumentalities Of The State Within Article 12: Supreme Court

The Supreme Court said on Wednesday that every action of the State is required to be guided by the touchstone of non-arbitrariness, reasonableness and rationality and is equally required to be guided by public interest.

It said that power distribution companies (DISCOMS) are instrumentalities of the State within the meaning of Article 12 of the Constitution of India and every holder of a public office is a trustee, whose highest duty is to the people of the country.

The top court deprecated the conduct of DISCOMS in Andhra Pradesh for purchasing power at a higher rate and said rather than acting in the public interest, they have acted contrary to it.  

These remarks were made by a bench of Justices L N Rao and B R Gavai in its verdict on a plea filed by DISCOMS challenging the January 7, 2020 order passed by the Appellate Tribunal for Electricity (APTEL) allowing the appeal of Hinduja National Power Corporation Limited (HNPCL).

APTEL directed the Andhra Pradesh Electricity Regulatory  Commission (APERC) to dispose of a plea filed by HNPCL for determination of capital cost and the plea filed by the DISCOMS for approval of amended and restated Power Purchase Agreement (PPA) on merits.

The top court refused to interfere with the orders of APTEL and asked APERC to decide the pleas pending before it within six months from the date of the judgement.

It further directed, “Needless to say that till…(pleas) are decided by the State Commission, the appellants - DISCOMS shall forthwith start purchasing the power from HNPCL at the rate of Rs 3.82 per unit as per the orders passed by the APTEL dated March 16, 2018, and by this Court dated August 21, 2020”.

The bench said, “Undisputedly, the appellants-DISCOMS are instrumentalities of the State and as such, a State within the meaning of Article 12 of the Constitution of India. Every action of a State is required to be guided by the touchstone of non­-arbitrariness, reasonableness and rationality. Every action of a State is equally required to be guided by public interest”.  

The bench said that every holder of a public office is a trustee, whose highest duty is to the people of the country and the public authority is therefore required to exercise the powers only for the public good.

“We ask a question to ourselves, as to whether the public interest, which is so vociferously pressed into service in the present matter by the appellants - DISCOMS, lies in purchasing the power at the rate of Rs 3.82 per unit from HNPCL or by purchasing it at the rate of Rs 4.33 per unit from KSK Mahanadi. We strongly deprecate such conduct of the appellants - DISCOMS, which are instrumentalities of the State. The appellants - DISCOMS, rather than acting in the public interest, have acted contrary to the public interest,” it said.  

The bench added that for defying the orders passed by this Court, it could very well have initiated the action against the officials of the DISCOMS for having committed contempt of this Court, but it is refraining itself from doing so.

It said that petitions filed by DISCOMS, are acts, which have been done “wrongfully” and “wilfully without reasonable and probable cause” which is affecting the public interest and public good, without there being any rational or reasonable basis for the same.

“Though serious allegations of mala fide have been made by HNPCL, we do not find it necessary to go into those allegations. However, in our view, the present case would squarely fit in the realm of ‘legal malice’ or ‘malice in law’,” the bench said.

It said that the APTEL order impugned before cannot be said to be of such a nature, which can be said to be prejudicial to the interests of any of the parties.

“What has been done by the APTEL is only to direct the State Commission to dispose of...filed for determination of capital cost and...filed for approval of Amended and Restated PPA (Continuation Agreement) on merits”, it said.

The bench noted that pursuant to the interim order dated March 16, 2018, passed by the APTEL, the DISCOMS were purchasing the power at the rate of Rs.3.82 per unit from HNPCL till July 14, 2020.

“It is brought to our notice that though the appellants-DISCOMS could have purchased the power from HNPCL at the rate of Rs.3.82 per unit in view of the orders passed by the APTEL and by this Court, they have chosen to purchase the power at a higher rate from various generators including KSK Mahanadi from whom the power is being purchased at the rate of Rs.4.33 per unit”, the bench said.

The top court said that it is clear from the record that the state had given various facilities/concessions to HNPCL for the execution of its power project and has also allotted thousands of acres of land for the project from the year 2016 till July 14, 2020, the power has been purchased by the DISCOMS from HNPCL.

“For some unknown reasons, exclusively within the knowledge of the DISCOMS, things turned topsy-­turvy between May 15, 2017, and January 4, 2018, on which date, the appellants - DISCOMS did a somersault and filed applications for withdrawal of petitions,” the bench noted.  

It said that every decision of the state is required to be guided by public interest and the power is to be exercised for the public good but for reasons unknown, the DISCOMS took a decision to resile from their earlier stand, due to which, not only the huge investment made by HNPCL would go in waste, but also valuable resources of the public including thousands of acres of land would go in waste.