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Petitioner: Pakistan Beverage Ltd & Ors VS Respondent: Fed. of Pakistan & Ors
Court Name: Sindh High Court Judge(s): Zulfiqar Ahmad Khan, Syed Hassan Azhar Rizvi Title: Pakistan Beverage Ltd & Ors vs Fed. of Pakistan & Ors Case No.:C.P. No.D-476 of 2020, C.P Nos.D-431, 603, 1961, 2044, 2002, 597, 2108, 2515,
JUDGMENT
Reported As: 2021 SHC 470 Result: Accordingly dismissed Judgment JUDGMENT Zulfiqar Ahmad Khan, J. Petitioners primarily engaged in the manufacturing of steel and other large-scale industrial products have impugned Determination dated 27.12.2019, whereby National Electric Power Regulatory Authority ("NEPRA") awarded respondent K-Electric (also referred to as "KE") monthly Fuel Charge Adjustment ("FCA") for the period of July 2016 to June 2019 stating it to be arbitrary , unlawful, without jurisdiction and contrary to Section 31(7) of the Regulation of Generation, Transmission and Distribution of Electric Power Act of 1997 (the Act, 1997). It is further alleged that NEPRA was not empowered under the provisions of Act, 1997 to allow three (3) years monthly FCA to KE in one go. It was also submitted that NEPRA instead of acting as a regulator has colluded with KE in contradiction to its statutory obligations, hence the impugned Determination is liable to be set aside. As several petitions have been filed before us against the impugned Determination and while all such petitions were clubbed together and being decided by this single judgment, facts of Constitutional Petition No. D-431/2020 are used as a reference while deciding these petitions. 2. As alternate remedy under Section 12-G of the Act, 1997 of filing an appeal before the Appellate Tribunal by any person aggrieved from a decision or order of NEPRA has been provided under the said Act, the petition was posed with the inherent challenge as to its maintainability to which the learned counsel for the petitioner submitted that the said Tribunal was not functional nor any Chairman thereof was appointed till the time of filing of the instant petitions. As such, the instant petitions were maintainable, and the alternate remedy is not available at the moment to the petitioners. In this regard reference was made to the judgment reported at 2014 PLC (CS) 1032 and 2012 CLD 1893 . 3. In the instant case, the Petitioners are also seeking this Court to interpret Section 31(7) of the Act, 1997, and the proviso thereto vis--vis timeframe within which an FCA ought to be applied by KE and approved by NEPRA.
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Moreover , the Petitioners have also requested this court to examine as to whether NEPRA acted in accordance with the powers conferred upon it under the Act, 1997 or otherwise. With regards to the assertions of NEPRA/K- Electric that the Petitioners were barred from filing the instant petition as they had failed to attend the public hearing held on 21.08.2019 when objections were invited before the grant of FCA to KE, the learned counsel of the petitioners submitted that absence of the Petitioners from the said hearing does not operate as an estoppel against them nor does it amount to waiver or acquiescence on the part of the petitioners to the award of retrospective recovery of FCA to KE for the last three (3) years. It was submitted that the Petitioners have challenged the impugned Determination as (allegedly) the same was illegal and without jurisdictio n, and while passing the same, NEPRA has failed to perform its statutory duty of protecting the interest of consumers. 4. Building their arguments in favour of allowing these petitions, the learned counsel stated that KE and NEPRA are well aware that adjustments in the approved tariff on account of variation in fuel prices have to be charged and notified within a specific time frame as provided in the proviso to Section 31(7) of the Act of 1997. Without prejudice to the above, per learned counsel the Hon'ble Supreme Court has passed Consent Order dated 2.05.2018 in C.A. 807 of 2013 where in paragraph 5(a) the Hon'ble Supreme Court fixed 4 month s? time frame for claiming tariff revision on the basis of FCA. Per learned counsel that said consent order is binding on NEPRA being party to the lis hence NEPRA at best could have allowe d FCA of past four months to KE, thus the award of FCA for previous three years by way of impugned Determination is arbitrary , without jurisdiction and contrary to the directions of the Supreme Court of Pakistan. 5. By placing reliance on the case reported as PLD 2011 SC 927, the learned counsel argued that it was an established principle that when the law requires a thing to be done in a prescribed manner it should be done in that manner or not done at all hence, per learned counsel the timeline provided in Section 31(7) of the Act of 1997 was to be considered as directory , which otherwise has been ignored. Per learned counsel, it is also a settled principle of law that timelines provided by a statute must be adhered to in letter and spirit. 6. As an additional line of arguments learned counsel stated that the bills and payments for the period of July 2016 till June 2019 (for which the FCA has been determined through the impugned Determinations) have become a past and closed transaction as the costs and expenses for the productions (for example of steel) during that timeframe had been accounted for by the Petitioners and passed on to the purchasers and the same cannot be reversed at this belated stage. Per learned counsel it was imperative and in fitness of things that KE would have applied FCA on monthly basis so the consumers/petitioners could have adjusted this portion into their costs of production and ought not to have been taken by surprise through the impugned Determination. 7. Learned counsel by placing reliance on 1992 SCMR 1652 and PLD 2001 SC 340 to press their point that it was a settled principle of law that executive orders, notifications (including the impugned Determination) which purports to impair an existing or vested right canno t be applied or given retrospective effect. Resultantly , per learned counsel NEPRA could not have implemented or awarded FCA retrospectively for the period of July 2016 till June 2019. 8. Per learned counsel KE had waived its right to collect FCA as it had complete knowledge of its cost of generating electricity and the resultant losses being accumulated on account of its failure to charge provisional FCA. In the circumstances, the consequence of not charging FCA must be borne by KE alone and the Petitioners cannot be burdened at this belated stage. 9. Last line of argument from the petitioners? counsel was that whilst NEPRA had a statutory duty under Section 7(6) of the Act, 1997 to protect the interest of the Consumers, it has failed to explain as to why provisional FCA was not allowed to KE once MYT Determination dated 20.03.16 was challenged by KE. 10. Learned counsel for respondent K-Electric stated that Act of 1997 provides a comprehensive collaborative mechanism for determination of rate, charges, terms and conditions (tariffs) which allocates defined roles and functions to the K-Electric, NEPRA and the Federal Government acting through the Cabinet. Per learned counsel Section 7 of the Act details out the powers and functions of NEPRA and its clause (3) provides that NEPRA shall determine tariff, rates, charges and other terms and conditions for supply of electric power services by the generation and distribution companies. Per learned counsel Section 31 of the Act of 1997 provides timelines for the discharge of these functions where under its clause (2) NEPRA while making the determinations per standards as
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referred in this clause is required to protect consumers against monopolistic and oligopolistic prices and to determine tariffs so as to eliminate and minimize economic distortions keeping in view the economic and social policy objectives of the Federal Government. 11. By way of background the learned counsel stated that K-Electric has been awarded Multi-Y ear Tariff ("MYT") by NEPRA from time to time to charge tariff from its consumers as of 2002 where first MYT awarded to it was for a period of seven years from 2002 to 2009 vide NEPRA determination dated 10.09.2002 thereafter , another seven year MYT was awarded by the Respondent No. 2 vide determination dated 23.12.2009 for the period 2009 to 2016 which was applicable till June 2016 and thereafter vide determination dated 20.03.2017 K-Electric was awarded a seven year MYT for the period 2017 to 2023 by NEPRA which was to be applicable for period ending June 2023. 12. Learned counsel states that FCA is an adjustment allowed on account of monthly variation in fuel prices, generation mix, and volume and the Act 1997 permits it to be passed on to the consumers in their monthly bills under the Multi Year Tariff of a licensee (K-Electric in this case). Record reflects that NEPRA vide its decision dated 27.12.2019 determined FCA for the period July- 2016 to June-2019 and made it applicable to K-E's consumers from January 2020 onwards. There are negative adjustments in some months and the benefit is passed on to consumers by way of reduction in monthly bills in the month of October 2016, November 2016, January 2017 to July 2017, September 2017, November 2017, December 2017, and January 2019 to March 2019. The Respondent No.1 (Federal Government) determined the monthly FCA of around PKR. 0.44/kWh (on average basis) for the K- Electric's consumers for the period of July 2016 to June 2019. The increase is claimed to be mainly due to the increase in fuel prices as the gas price had increased from Rs. 613/MMBTU to Rs. 936/MMBTU and Furnace Oil price had increased from Rs. 27,000/MT to around Rs.70,000/MT , per learned counsel. 13. Learned counsel next states that the impugned determination dated 27.12.2019 as seen from the material available on record has been passed by the NEPRA after following due procedure whereby a Notice for Public hearing was served to all the stakeholders. It is to be noted that the Petitioners neither participated nor filed any objections at that given time, learned counsel states. 14. Per learned counsel the preceding MYT was issued to K-Electric vide NEPRA's Determination dated 23.12.2009 for a period of seven years which expired on 30.06.2016. However , prior to its expiry K-Electric filed its new MYT petition with NEPRA through on 31.03.2016. Further , while the new MYT of K-Electric was under consideration, the K-Electric filed its monthly FCA requests for each month from July 2016 to November 2016 separately , on provisional basis, which were duly approved by the NEPRA on provisional basis. FCA for the month of December 2016 was filed within prescribed timelines, for which after due publication on website as well as newspaper notices a public hearing was also conducted, however , NEPRA through its decision dated 12.04.2017 decided that FCA from December 2016 will be processed as per the new MYT mechanism, which was yet to be finalized by NEPRA. Per learned counsel the said procedure was in the knowledge of the Petitioners who were well aware that provisional FCAs were not final and that they were subject to revision, after finalization of a new MYT . 15. The learned counsel points out that the petitioners have not challenged the calculation of the FCA amount but merely pray that those FCA charges cannot be recovered at this stage. It was subm itted that the adjustment of FCA of prior periods is not a new phenomenon as NEPRA vide its Decision dated 04.06.2010 allowed K-Electric FCAs for a period of 9 months i.e., July 2009 to March 2010, which were duly recovered over a period of 7 months (June 2010 to December 2010). Similarly , in case of Ex-W APDA distribution Compan ies (XWDISCOs), FCAs for the period July 2012 to May 2013 were allowed by NEPRA vide its determination dated 29.11.2013, which were recovered over a period of 6 months (December 2013 to May 2014). 16. To show that KE acted diligently , learned counsel drew court's attention to the following timeline:- March 31, 2016 - KE filed MYT Petition March 20, 2017 - NEPRA's Determination of MYT @ 12.07/kWh April 20, 2017 - Review Petition filed by KE October 09, 2017 - NEPRA allowed KE's Review Petition and increased the MYT to 12.77/kWh October 26, 2017 - Reconsideration Request filed by the GoP
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July 05, 2018 - NEPRA allowed on GoP's Reconsideration Request on KE's MYT and further increased the MYT to 12.82/kWh July 13, 2018 - KE filed Appeal before the Appellant Tribunal July 26, 2018 - KE filed Suit 1467 of 2018 and stay was granted by the Honorable High Court April 03, 2019 - Suit 1467 of 2018 withdrawn by KE May 22, 2019 - MYT notified by the GoP May 27, 2019 - KE filed for FCA for the period July 2016 to April 2019 within five days of notification. 17. Per learned counsel K-Electric filed a Review Motion seeking increase in the initial MYT of 12.07/kWh to 12.77/kWh which was later increased to 12.82/kWh after a Reconsideration Reque st was filed by the Government of Pakistan. Whereafter K-Electric filed an appeal before the Appellant Tribunal however due to the non-availability of the Learned Bench, the K-Electric having no other option, filed Civil Suit 1467 of 2018 where this High Court vide its order dated 26.07.2018 was pleased to suspend the operation of the impugned determination of NEPRA dated 05.07.2018. However , per learned counsel as the plans of development, grow th, improvement of generation system and transmission and distribution networks, credit lines from financial institutions as well as investment plans of K-Electric were being hampered, K-Electric withdrew the said Suit and decided to continue with their case before the Appellate Tribunal, which is still pending adjudication. Learned counsel next states that the new MYT was notified by the GoP on 22.05.2019 and the K-Electric without any delay filed for the FCAs within seven (07) days of the notification, as per timelines defined in the new MYT. Therefore K-Electric cannot be penalized for exercising its lawful rights. 18. It was further submitted that the disallo wance of FCA will have catastrophic impact on the financial viability of K- Electric as these amounts have already been paid by it at the time of purchase of the fuel. 19. Per learned counsel the petitioners admittedly knew that no FCA is being charged to them by K-Electric for the subject period (not even the provisional FCA) but the petitioners never placed a request before NEPRA in this regard to reduce any sudden impact of such call rather enjoyed the benefit of reduced electricity costs. It was even shown to the court that when FCA was reduced to zero the petitioners did not reduce prices of their commodities and pocketed the FCA differential aimed to unjust enrichment. 20. It was prayed that the instant petition s being meritless be dismissed and at best petitioners may agitate their grievances through civil suits as question of facts are posed through these petitions. 21. Learned Asst. Attorney General supported the version of the counsel for respondent K-Electric and denied that NEPRA had colluded with the said respondent or has committed any legality or irregularity while deciding the impugned determination. 22. Heard the learned counsel of the respective sides, the Addl Attorney General and reviewed the material on record. 23. Let us first look at the legal and factu al submission from the petitioner's coun sel where they have referred to proviso to Section 31 (7) of the Regulations of Generation, Transmission and Distribution of Electric Power Act 1997 ("Act 1997") wherein NEPRA is empowered to make adjustments in the approved tariff on account of variations in the fuel charge. The petitioners have submitted that they are aggrieved by the Respondents' violation of these timelines as envisaged in the above-mentioned provision of law. The petitioners further argued that the provisional determination of the FCAs after awarding of MYT to KE became final determination and could not be subsequently charged by K-Electric or be allowed by NEPRA and that the previous determinations have become past and closed transactions. Section 31(7) which runs as under:- Section 31(7) - Notification of the Authority's approved, tariff, rates, charges and other terms and conditions for the supply of the electric power services by generation, transmission and distribution companies shall be made by the Federal Government in the of ficial Gazette, within fifteen days of intimation of the final tarif f by the Authority: Provided that the Authority may, on a monthly basis and not later than a period of seven days, make adjustments in the approved tariff on account of any variations in the fuel charges and policy guidelines as the Federal Government may issue and notify the tarif f so adjusted in the of ficial Gazette.
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25. As it could be seen, in terms of Section 31(7) of the Act of 1997, a licensee can, on a monthly basis, file petition with NEPRA to adjust and revise the approved tariff to account for fuel cost component due to variation in fuel prices and generation mix and thereafter pass the same to the consumers in the form of FCAs. We note that such mechanism follows the structure laid down through the Multi Year Tariffs (MYT) which lastly concluded on 30.06.2016. Record shows that since FCA is a significant portion of tariff, K-Electric continued to file the monthly FCAs provisionally to NEPRA, for the individual months from July to December 2016, within prescribed timelines, to ensure that K-Electric timely recovers fuel costs incurred by it. The Respondent NEPRA admittedly allowed and issued five (05) monthly provisional FCA decisions from July 2016 to November 2016 but from December 2016 onwards it directed K-Electric that further FCA decisions will only be issued after new MYT is implemented, which for one reason or the other could not be finalized for more than two years. Petitioners have failed to show that they were unaware that they only paid provisional FCA for the months of July-Dec 2016 and no FCA charges were asked from them thereafter . 26. We also observe that since 2008 NEPRA has from time to time been allowing its licensees, including K-Electric FCAs. It is pertinent to note here that while awarding tariffs, NEPRA in its determ ination provide the mechanism and method to the licensees as to how and when they will apply to NEPRA for the FCA. K-Electric has also from time to time applied to NEPRA for such determination which was duly allowed. NEPRA in its MYT awarded to KE in its determination dated 20th March 2017 and by its revised determination on 5th July 2018 in Annex II (Mechanism for Adjustment in Tariff Due to Variation in Fuel Price) and Annex III (Mechanism for Adjustment in Tariff due to Variation in Power Purchase Price ("PPP")) required that K-Electric shall apply within seven days for FCA determination in the following month. It is pertinent to mention here that similar clauses were also available in previous MYT awarded to KE and KE was awarded FCA's in similar terms within the timeframe so provided. Relevant clauses of determination dated 5th July 2018 are reproduced hereunder:- Annex-II v. For the purpose of above adjustment the Current Month would mean the month for which adjustment is required and the Reference Month would mean the last month of the preceding quarter . vi. For the purposes of adjustments for the months from July 01, 2016 to Septembe r 2016, the determined fuel cost component of Rs.2.9265 per kWh, calculated on total units sent out basis, shall be used as reference. xi. K-Electric shall submit its monthly adjustment request within seven days following the current month. The request shall be submitted on a prescribed format as provided in this Mechanism. KE shall submit the following information/data for verification.xii. The approved monthly FCA shall be notified by the Authority and shall be charged in the month intimated by the Authority in the respective monthly FCA decision. The determined FCA shall be charged on the basis of units consumed by each consumer in the month for which it is calculated. Annex- III (PPP) iv. For the purpose of above adjustment, the Current month would mean the month for which adjustment is required and the Reference month would mean the last month of the preceding quarter . For the purpose of adjustment for the months from July 01, 2016 to September , 2016 the fuel cost component of PPP of Rs.2.2622 per kWh, calculated on units sent out basis, shall be used as reference. vi. K-Electric shall, within seven days following the Current Month, request for FCA to compensate for variations in fuel component of PPP . The request shall be submitted on a prescribed form as provided in this Mechanism. viii. The approved monthly FCA shall be notified by the Authority and shall be charged in the month intimated by the Authority in the respective monthly decision. The determined FCA shall be charged on the basis of units consumed by each consumer in the month for which it is calculated. 27. It appears that in terms of the above mechanism K-Electric, while its petition for award of current MYT was pending, applied for the FCA to NEPRA on monthly basis for the month of July, 2016 (applied on 29th August, 2016 to be charged in the month of November , 2016 determined by NEPRA by its decisi on 3rd November 2016), August 2016 (applied on 30th September , 2016 to be charged in the month of November , 2016 determined by NEPRA by its decision 3rd November 2016), Septem ber 2016 (applied on 21st October 2016 to be charged in the month of December 2016 determined by NEPRA by its decision 1st December 2016), October , 2016 (applied on 18th
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November 2016 to be charged in the month of December 2016 determined by NEPRA by its decision 2nd December 2016), November 2016 (applied on 15th December 2016 to be charged in the month of January 2017 determined by NEPRA by its decision 3rd November 2016) which were added to the petitioners' bills as provisional FCA. 28. It is noted from the record that the Decision for FCA for December 2016 was issued after public hearing and Public Notice whereby NEPRA directed that FCA going forward will only be determined after Notification determining KE's new MYT. Thus, the Petitioners were aware that FCAs pertaining to such months will be charged subsequent to determination and notification of KE's new MYT, hence in our view such FCA remained as a debt on the petitioners and at this belated stage the petitioner's cannot sustain their plea of not paying it. It is also important to note that the petitioner never impugned NEPRA's decision dated 12.04.2017 passed on KE's FCA application for the month of December 2016 hence the same attained finality and the question of applicability of FCA for the months of July 2016 to June 2019 did not turn into a past and closed transaction either . 29. The petitioners submitted that the licensee has to apply on monthly basis so that the consumers could adjust the monthly FCA into their costs and productions, in this regard it could be seen that the decision of NEPRA dated 12.04.2017 and MYT determination dated 05.07.2018 have been publicly available and the petitioners ought to be aware of the same and of the expected variations in FCAs. Therefore, the Petitioners were at full liberty to revise their costs of productions in case they had reduced those to pass on the benefit of zero FCA to the customers, which never transpired. 30. From perusal of the record we observe that K-Electric as per the mechanism prescribed in its MYT 2009 submitted its FCA request to NEPRA for the month of December 2016 on 16.01.2017 whereafter NEPRA vide its decision dated 12.04.2017 provided that the proceedings for provisional FCA of K-Electric for the month of December , 2016 shall be initiated in accordance with the mechanism prescribed in the new MYT determination thereafter NEPRA passed its decision dated 27.12.2019 whereby it determined that the FCA for the period July 2016 to June 2019 would be recovered in 9 months from January 2020 as per the mechanism provided by it. To us the said order of NEPRA is in accordance with the applicable law and does not violate the scheme installed by the legislation. Moreover , the stated decision has been passed by NEPRA after following due procedure whereby Notice for Public hearing was served by publications in newspapers of wide circulation however the petitioners did not file any objections at that time. 31. With regards petitioners? claim that K-Electric could have applied for FCA on monthly basis during the pendency of the Suit No. 1467 of 2018 whereby KE had challenged the MYT determination dated 05.07.2018, it is to be noted that K-Electric being aggrieved with MYT decision dated 05.07.2018 initially filed an Appeal before the Appellate Tribunal as a first remedy . However , as no Bench for the said Tribunal was…
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