Electricity Act | DVC Entitled To Claim Both Depreciation & Sinking Fund In Tariff; APTEL Cannot Re-examine Settled Precedent In Order 47 Rule 1 CPC Review: Supreme Court

"It is not often, but we do come across orders akin to the one impugned, which is in blatant breach of judicial discipline and in clear violation of Article 141 of the Constitution of India. It raises serious doubts in our minds about independence vis-à-vis accountability." Strongly deprecating the practice of statutory tribunals unsettling binding apex court precedents in exercise of review jurisdiction, the Supreme Court on October 30, 2026, held that the Damodar Valley Corporation is statutorily entitled to claim both depreciation and Sinking Fund contributions as passthrough expenditures in electricity tariff fixation.

A Division Bench comprising Justice J.B. Pardiwala and Justice K. Vinod Chandran set aside an order of the Appellate Tribunal for Electricity, observing that tribunals cannot innovate at pleasure or sit in appeal over their own orders under the guise of review after an unexplained lapse of five years.

The Central Electricity Regulatory Commission fixed the power tariff of Damodar Valley Corporation for the period 2009-2014 under the Electricity Act, 2003, the Damodar Valley Corporation Act, 1948, and the 2009 Tariff Regulations, which was initially affirmed by the Appellate Tribunal relying upon the Supreme Court ruling in Bhaskar Shrachi Alloys Limited. Aggrieved consumers, including Maithan Alloys Limited, preferred a review petition alleging that permitting both asset depreciation and Sinking Fund contributions amounted to an impermissible double allowance. After keeping the review petition pending for five years, the Appellate Tribunal allowed it in 2024 and restricted the Corporation to claiming only one of the two heads, prompting the Corporation to approach the Supreme Court.

Whether the Damodar Valley Corporation is statutorily entitled under Section 40 of the Damodar Valley Corporation Act, 1948 read with the fourth proviso to Section 14 of the Electricity Act, 2003 and Regulation 43 of the 2009 Tariff Regulations to factor both depreciation and Sinking Fund contributions into its power tariff determination?

Whether the Appellate Tribunal for Electricity overstepped the contours of review jurisdiction under Section 122(f) of the Electricity Act, 2003 read with Order 47 Rule 1 CPC by reopening a settled legal issue governed by binding Supreme Court precedents under Article 141 of the Constitution?

Fourth proviso to Section 14 operates as a substantive provision preserving statutory powers under the DVC Act.

The Bench observed that the fourth proviso to Section 14 of the Electricity Act, 2003 is not merely confined to licensing but functions as an independent substantive provision preserving the application of the Damodar Valley Corporation Act, 1948 in so far as it is not inconsistent with the Electricity Act. The court reiterated that while Section 174 of the 2003 Act grants overriding effect to electricity legislation over other enactments, the legislature purposefully carved out a statutory exception to shield the unique mandate of the Corporation.

Special multi-purpose statutory obligations justify departure from orthodox accounting norms.

Analyzing the operational background of the Corporation, the Bench noted that it was established on the model of the Tennessee Valley Authority to spearhead flood control, irrigation, soil conservation, and regional development alongside power generation. The court explained that power generation represents the primary revenue-earning activity through which the Corporation fulfills its statutory socio-economic responsibilities.

Section 40 of DVC Act specifically sanctions Sinking Fund recovery via tariff as a first charge.

The court highlighted that Section 40 of the 1948 Act, read with Regulation 43 of the 2009 Tariff Regulations, creates an express statutory departure from conventional corporate accounting rules. While ordinary accounting standards treat reserves created for bond redemption as capital expenditure to be appropriated only from net profits, the statutory scheme permits the Sinking Fund to be treated as a first charge on gross profits.

The Bench explained that Regulation 43 specifically directs that funds established under Section 40 shall be treated as items of expenditure recoverable through tariff. Consequently, the assets acquired through bond proceeds legitimately earn the statutory benefit of depreciation, while the principal and interest repayments routed through the Sinking Fund remain fully allowable as passthrough expenditures.

Tribunal exceeded the narrow boundaries of Order 47 Rule 1 CPC by re-adjudicating settled claims.

Examining the scope of review exercisable under Section 122(f) of the Electricity Act, 2003, the Supreme Court reiterated that review powers of statutory tribunals are strictly analogous to Order 47 Rule 1 CPC and Section 114 CPC. Relying on State of West Bengal v. Kamal Sengupta, the court emphasized that an error apparent on the face of the record must be self-evident and cannot be discovered through long debates, fresh reasoning, or elaborate scrutiny of legal positions.

The Bench underscored that the Appellate Tribunal committed a patent illegality by entertaining the review after a lapse of five years to examine whether a double allowance had been granted. The court ruled that the argument of duplication had already been substantially rejected in Bhaskar Shrachi Alloys Limited, rendering the issue res integra and completely outside the purview of a review court.

Disregard of Article 141 precedents strikes at the root of judicial hierarchy and discipline.

Expressing acute dismay at the Tribunal's attempt to distinguish a binding precedent by holding that certain arguments escaped the notice of the Supreme Court, the Bench cautioned that no subordinate forum can bypass Article 141 of the Constitution. The court warned that when a tribunal ignores settled precedents and innovates at pleasure, judicial discipline collapses, creating utter mayhem in the administration of justice.

The Supreme Court allowed the appeal, set aside the review order of the Appellate Tribunal for Electricity, and restored the original appellate order dated May 17, 2019. Holding the review proceedings to be an abuse of process, the court imposed exemplary costs of two lakh rupees on the first respondent consumer and one lakh fifty thousand rupees on the intervener, Steel Authority of India Limited, payable to the Corporation within one month.

Date of Decision: October 30, 2026

SUPREME COURT OF INDIA - REPORTABLE

Bench:Justice J.B. Pardiwala and Justice K. Vinod Chandran