Supreme Court: Constitutional Courts Must Enable Statutory Regulator To Comprehensively Regulate All Aspects Of Sector So That Remedies Aren’t Fragmented

The Supreme Court observed that the Constitutional Courts must enable the statutory regulator to comprehensively regulate all aspects of the sector such that remedies are not fragmented and certain issues are not left outside the regulator’s domain.

The Court observed thus in a Civil Appeal filed by the State of Himachal Pradesh against JSW Hydro Energy Limited.

The two-Judge Bench of Justice P.S. Narasimha and Justice Joymalya Bagchi emphasised, “Constitutional courts must enable the regulator to comprehensively regulate all aspects of the sector such that remedies are not fragmented and certain issues are not left outside the regulator’s domain. The regulator has the expertise, specialisation, and institutional memory to conduct such an interpretative exercise to further the objective of the regulatory regime and systematically lay down legal principles.”

The Bench said that when a Constitutional Court is interpreting statutes, rules, or regulations that fall within the regulator’s domain, it must bear in mind the need to enable the regulator to exercise comprehensive jurisdiction.

Senior Advocates Kapil Sibal and Parag Tripathi appeared on behalf of the Appellants while Senior Advocates P. Chidambaram, A.M. Singhvi, Nikhil Nayyar, Gurminder Singh, and AOR Preetika Dwivedi appeared on behalf of the Respondents.

Brief Facts

The Respondent-JSW, a generating company, installed and commissioned a 1045MW hydroelectric power project pursuant to a grant followed by an Implementation Agreement with the Appellant-State. Under this Agreement, the Respondent undertook to supply as consideration 18% of net generation free of cost to the Appellant. At the commencement of the obligation to supply 18% free power, the Respondent approached the High Court by way of a Writ Petition to align the Implementation Agreement with the CERC (Terms and Conditions of Tariff) Regulations, 2019.

The aforesaid CERC Regulations, 2019 provide for a maximum of 13% free power to the State Government, on the ground that contractual agreements, to the extent that they are inconsistent with the applicable regulations, shall stand overridden by their operation. Accepting the argument, the High Court entertained the Writ Petition and directed that the Implementation Agreement stood modified. Being aggrieved by this decision, the Appellant was before the Apex Court.

Reasoning

The Supreme Court in view of the above facts, remarked, “This Court has time and again emphasised that since tariff determination, including the power to make regulations for this purpose, has been entrusted to a specialised and expert regulator constituted under the statute itself, it would not be proper for constitutional courts to interfere and assume these functions, or to examine tariff fixation on its merits and substitute its own determination for the one made by the expert body after duly considering all material circumstances. We are of the opinion that this is necessary not only to ensure that these specialised functions are performed by expert regulators but to also facilitate a systematic and consistent development of sectoral laws.”

The Court noted that the Courts must not impair the functioning of the regulator by taking away certain aspects of the sector outside the regulator’s scope, thereby fragmenting regulation and creating plurality of jurisdictions.

“It is in the interest of good governance through regulation to ensure that there is no proliferation of remedies and there are no parallel, multiple remedial forums. Further, this also ensures that the sectoral law is developed in a coordinated and systematic fashion by the regulator that is equipped to deal with not only legal issues but also has specialised knowledge in other areas”, it added.

The Court further said that the Respondent cannot be allowed to approbate and reprobate, or blow hot and cold at the same time to secure relief under the law.

“… the High Court should not have entered into the domain of interpreting these Regulations which deal with tariff determination, as the same falls within the exclusive domain of the CERC. The Electricity Act itself provides the appellate mechanisms by establishing a specialised and permanent tribunal, namely the APTEL, and an appeal before this Court, against the CERC’s orders”, it also noted.

The Court was of the view that the High Court should not have entertained the Writ Petition by interpreting the CERC Regulations, 2019.

Conclusion

The Court, therefore, held that CERC Regulations, 2019 do not prohibit the Respondent from supplying free power beyond 13% to the Appellant, and the Implementation Agreement does not stand overridden by the operation of these Regulations.

“Further, a writ petition before the High Court for aligning the Implementation Agreement with the CERC Regulations, 2019 and the CERC’s order dated 17.03.2022 is not maintainable. Once respondent no. 1’s prayer for relief was rejected by the CERC and it specifically held only the PPA and PSAs to stand overridden, which finding was not further appealed, it would not be open for respondent no. 1 to seek modification of the Implementation Agreement by way of a writ petition before the High Court”, it concluded.

Accordingly, the Apex Court allowed the Appeal and set aside the High Court’s Judgment.

Cause Title- The State of Himachal Pradesh & Anr. v. JSW Hydro Energy Limited & Ors. (Neutral Citation: 2025 INSC 857)

Appearance:

Appellants: Senior Advocates Kapil Sibal, Parag Tripathi, AAG Vaibhav Srivastava, and AOR Sugandha Anand.

Respondents: Senior Advocates P. Chidambaram, A.M. Singhvi, Nikhil Nayyar, Gurminder Singh, AORs Preetika Dwivedi, E. C. Agrawala, Nitin Saluja, Nikunj Dayal, T. V. S. Raghavendra Sreyas, Advocates Mahesh Agarawal, Aman Anand, Shashwat Singh, Madhavi Agarwal, Chirag Nayak, Natasha Debroy, Shidharth Seem, Anand K Ganesan, Amal Nair, Shivani Verma, Abhisek Mohanty, Jatinder Singh Gill, Siddharth Vasudev, Brahma Prakash Soni, and Kshitij Maheshwari.

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