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Petitioner: LESCO and 501 others VS Respondent: NORTH STAR TEXTILE MILLS and others
Court Name: Islamabad High Court Judge(s): Iqbal Hameed-ur-Rahman, Noor-Ul-Haq N. Qureshi Title: LESCO and 501 others vs NORTH STAR TEXTILE MILLS and others Case No.:Intra-Court Appeals Nos.630-W, 599-W, 606-W to 612-W, 637-W to 727-W,
JUDGMENT
Reported As: 2014 CLC 28 Result: Appeals allowed Judgment JUDGMENT ' NOOR-UL-HAQ N. QURESHI, J.--- Since all the above captioned Intra-Court Appeals/Writ Petitions involve common question of law and facts, therefore, the same are being decided through this consolidated judgment. 2. The above Intra-Court Appeals are directed against the impugned Judgment dated 24-10-2012 passed by learned Single Judge-inChambers allowing 550 Writ Petitions, preferred against levy of Fuel Adjustment Charges. 3. Brief facts; for the disposal of instant Intra-Court Appeals, are that appellants are the Electricity/Distribution Companies, created in consequence of unbundling of WAPDA Power Wing into segment of generation, transmission and distribution to be regulated by National Electric Power Regulatory Authority (herein referred to as NEPRA) and are discharging the function of distribution of electricity in the entire respective licensed territories. The appellants under the National Electric Power Regulatory Authority (Tariff Standards and Procedure Rules), 1998; submitted tariff petitions for determination of its consumer-end tariff for the financial year 2010- 2011 to NEPRA. Accordingly, notices were issued to the public through proclamation in newspaper and letters were also issued to stakeholders. During proceedings and after thorough discussion,
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following mechanism on account of variation in Common Pool Generation Energy Cost was settled:- ' Monthly Fuel Adjustments 5.2.5. The existing practice with respect to the adjustments on account of variation in CPGenE (energy cost component of PPP) on monthly basis would continue. This adjustment would be reflected in the consumers' monthly bill as Fuel Adjustment Charge. This adjustment would be calculated as per mechanism given in Annex-I. Annex-I as mentioned above contains the entire mechanism for fuel price adjustment and forms an integral part of the Tariff Determination by NEPRA. 4. The above tariff determination was sent to the Federal Government for Notification, which was accordingly done and it attained finality. The tariff determination duly notified reference values for every month on the basis of which, the tariff was determined and notified through Notification containing the same and in pursuance thereof, bills were sent to the consumers. 5. Thereafter various writ petitions were filed challenging the notifications of Fuel Price Adjustment for various months, in which, requests for suspension of such adjustment for subsequent months were also sought. On 24-10-2012 through a consolidated short order (reasons were recorded later on), all writ petitions on the above subject were allowed to the effect stated therein. Feeling aggrieved, the appellants have preferred these Intra-Court Appeals challenging impugned judgment/order dated 24-10-2012. 6. On the other hand, there are 35-writ petitions filed by different petitioners/companies against issuance of notice dated 4-4-2013 by the National Accountability Bureau for payment of amount due on account of the electricity consumed. The petitioners have prayed that impugned notices dated above may very kindly be set aside, as the same could not have been issued treating the petitioners as defaulter in view of the fact that retrospective recovery of 'Fuel Adjustment Charges' has been declared unconstitutional through short Order dated 24-10-2012, as well as detailed judgment passed by the learned single Judge-in-Chambers and pendency of the appeal, the same could not have been issued. 7. Learned Counsel for the appellant (LESCO) Mr. Munawar-us-Salam, Advocate argued that LESCO is an electricity distribution and structure of supply of electricity is in three stages i.e. (1) Generation (GENCOs), (2) Transmission (NTDC) and (3) Distribution (DISCOs). According to NEPRA Act NEPRA is to determine the tariff at which GENCOs sell electricity to NTDC, NTDC, to DISCOs and DISCOs to the consumer. It is contended that tariff is determined in 3 stages; (1) Tariff for GENCOs, (2) Tariff of NTDC and (3) Tariff of DISCOs. Tariff of DISCOs includes the first two tariffs and adds to it a small component of Distribution Margin. Fuel prices, and adjustment thereof, is a component for the first two stages and is passed on in the same manner to the DISCOs. Thus Fuel Price variation is the difference between actual and reference fuel cost component. 8. It is further argued that the consumers were charged on the basis of revenue requirements duly assessed by NEPRA and notified by the Federal Government, which have not been challenged at any forum. It is also contended that on account of the instant litigation, the revenue amounting to billions of Rupees in respect of Fuel Price Adjustment for the year ended 30th June, 2012 and 30th June, 2011 has been affected and failure to pay the same would result in less generation and further load management/load-shedding and levy of fuel surcharge on consumers is not arbitrary and violative of the Constitution. In this regard, learned counsel relied upon case-laws reported in 2007 PLC (C.S.) 157; 2006 SCMR 1163; 2009 SCMR 1169, PLD 1987 SC 145; 2002 CLC 971; 2001 YLR 539, PLD 1971 Lah. 462, PLD 1976 SC 254, 1996 CLC 1090, 1997 SCMR 641 and 2009 CLC 1343. 9. It is next contended that NEPRA under section 31(4) of NEPRA Act, has the power to issue notification for Fuel Adjustment and Notification issued after notice, depicts that power was exercised transparently. It is mandate of NEPRA to determine the actual price of energy after
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adding or reducing the Actual Fuel Price in Reference Fuel costs. If the actual fuel cost is less than the Reference Cost, the NEPRA reduces the Reference Fuel cost for the respective month and provides credit to the customer and if the actual Fuel Cost is more than the Reference Fuel Cost, it increases the same. He relied upon case-laws reported in 2010 SCMR 517, 2010 YLR 2872 and PLD 2013 Lahore 182. 10. It is submitted that the learned Single Judge has erred in law by not appreciating the facts and the reasons mentioned in Paragraph 16 and the findings recorded at (ii) of the Impugned judgment are not sustainable as per section 31(2) of NEPRA Act and Rule 17(3)(i) of the Tariff Standard and Procedure Rules, 1998. Learned counsel further contended that the notifications were issued by the DESCO in consequence of the Tariff Determination of NEPRA, which was not challenged before any forum. At the time of consumption, the respondents/petitioners were aware of the fact that the bills for electric powers are being issued on the basis of Reference Fuel Cost Component and the same shall be adjusted as per duly notified formula on the basis of differential with the Actual Fuel Cost Component, therefore, the principles of retroactivity, vested rights and past and closed transaction are not applicable to the instant matter. Reliance has been made on following case-laws reported in PLD 1971 Lah. 462, 1996 CLC 1090, 2010 YLR 2872, PLD 2013 Lahore 182, PLD 1993 Kar. 578; PLD 1978 Lahore 867, PLD 2011 Lahore 61, AIR 1981 Orissa 13, PLD 1965 Lah. 147, 2003 CLD 1299, 1988 SCMR 715, PLD 1970 SC 514, 1992 SCMR 2430 and PLD 2003 Kar. 174. ll. It is next submitted that the reasons mentioned in Paragraph 17 and the findings recorded at (ii) of the impugned Judgment are not sustainable on the basis of following grounds. (1) That no element/factor of mismanagement, bad governance, inefficiency, theft, inability to recover across the board as alleged is included or added in either the Reference Fuel Cost Component or the Actual Fuel Cost. (ii) That the Fuel Adjustment Charge is limited to the mechanism specified in the Tariff Determination. (iii) That the concept of Reference Fuel Cost Component and the rationale thereof as well as the basis for determination of the Actual Fuel Cost Component. (iv) That the impugned judgment does not specify the time period for notifications prior to September, 2011 and post such period. (v) That the impugned judgment reads "may" as "shall". (vi) It was acknowledged that the starting point for the period of seven days is not clear. 1n- such circumstances legal error was committed by applying the declaration of law to event prior thereto in a retrospective manner. Vii) It is trite law that declaration of law is always prospective in nature and cannot affect past matter, the application of the declaration of law to past matter vide the impugned Judgment is not sustainable. 12. In support of his contentions, reliance has been placed by learned counsel on following case- laws reported in PLD 2004 SC 25, AIR 1963 SC 274, AIR 2005 SC 137, 1993 SCMR 73, PLD 1974 SC 134, 2010 PTD 1159, 2011 SCMR 420, 2000 SCMR 1305, 2002 CLD 1018; 2002 CLD 557, 2002 CLD 1170, 2001 SCMR 1001, PLD 2007 Lah. 269, AIR 1998 Cal. 216, PLD 1990 Lah. 9, PLD 1976 Kar. 261, PLD 1971 SC 481, PLD 1961 SC 145, 1998 CLC 206, 1988 CLC 2127, PLD 1976 Kar. 79, 2010 PTD 1159, 2012 PTD 396 and 2012 PTD 377. 13. Learned counsel for the FESCO, Sh. Muhammad Ali, Advocate, mentioned that since the matter revolves common grounds of law and facts, the titled ICA is being adjudicated as the main case. That DISCOS cannot charge more than allowed by NEPRA who even determines the Upper limit of the Technical Losses and denies the adjustment of tariff on ground of additional/extra Technical Losses/Line Losses/ Theft etc.
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14. He further contended that the Tariff includes the Price of Fuel which is the Variable Component liable to be adjusted after recording of actual consumption, therefore, at stage of Determination of Tariff, NEPRA determines a Reference Price on the basis of expected load requirement and nature of available fuel at the relevant time/month. This Reference Price forms the basis of the Bill. 15. He further argued that in Para No.14 of the impugned judgment, the learned Single Judge in Chambers had framed four issues. By the decision of Issue No.1 the learned Court accepted the contentions of the appellants by declaring that the law of Fuel Price Adjustment is intra vires and since the respondents have not challenged this decision, the same has attained finality. 16. It is further argued that the legal objections against the maintainability of petitions have not been considered in the impugned judgment. 17. It is further contended that respondents have earlier approached the honourable Lahore High Court, Lahore on similar questions of law. However, after the modification of interim orders in December, 2011 by the Hon'ble Lahore High Court, the respondents approached this Court. As such, these petitions are barred under principle of res sub judice. 18. It is further argued that the contract between a consumer and electricity distributor is a private contract, containing its own terms and conditions, which provide a variable tariff and the consumers, have agreed to such tariff being applicable to them. Therefore, they cannot, at this stage, question the basis for supply of electricity. 19. It was next contended that the respondents have failed to specify as to which cost, other than the fuel, has been allowed as FPA by NEPRA and though reference has been given to Additional/Dissenting Notes of a Member of NEPRA, yet no notice of it has been taken by the Court that claim based on such cost was denied by NEPRA to be passed on to,,the end Consumers. 20. It is submitted that the decision lacks the appreciation to the effect that Proviso of section 34 is only directory in nature without penalty for non-observance as the cost of the fuel is to be paid to the Power Producers/Fuel Suppliers and cannot be denied for any reason. 21. Similar issue has already been adjudicated by the Hon'ble Lahore High Court, which continued up to the Hon'ble Supreme Court of Pakistan and finally determined. The NEPRA and the modus operandi of Fuel Price Adjustment has been upheld. The monthly price adjustment is in vogue since 2008, which is being paid by the respondents/ petitioners without any objection, therefore, now they cannot agitate again and again on a new monthly determination, unless some illegality committed by the NEPRA. Other factual aspects are not amenable to writ jurisdiction. The respondents/petitioners have mainly based their claims upon factual controversy, which could only be determined after elaborate sifting of the material by adducing evidence, which is not permissible under writ jurisdiction. Our attention was drawn towards admitted fact of inviting objections from public-at-large when no one raised any objection on the impugned notification after final determination by the NEPRA, as such, fully applicable cannot be said to have been issued with retrospective effect. No vested right accrued in favour of the respondents/petitioners, therefore, their claim for legitimate expectancy is devoid of merit. 22. Learned counsel emphasized that Fuel Adjustment is a part of tariff and pre agreed between the parties concerned. As per section 31(4) of the Act, 1997, the NEPRA is vested with the powers to determine the Fuel Price Adjustment in the settled tariff. Since this exercise has been done with application of law in view of direction of Hon'ble Lahore High Court it cannot be called in question, since penal consequences have not been provided in the said law, it should be considered as mandatory not directory. 23. It is pointed out that the Fuel Adjustment Charges have been introduced to be as surcharges, therefore, under no circumstances, it could be termed as surcharge. It is rather a pre-agreed amount to be paid by the supplier as per agreement of supply of energy, the revision of price ensures uniformity of the price. Articles 18 and 19 of the Constitution of Islamic Republic of Pakistan
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stipulate qualification prescribed by law and regulations of any trade or procession can be made by the licensing authority. 24. Since nobody appeared for domestic consumers nor any petition preferred, we invited both the learned counsel for parties to provide such guidance, to which they referred relevant portion of the judgment pronounced by the Hon'ble Lahore High Court in Writ Petition No.26524 of 2011 and expressed that same protect rights of the consumers. The case of "M. Daud Khan and 20 others v. Government of West Pakistan and 2 others (PLD 1971 Lahore 462)" was referred in support of arguments. 25. It is stated that the impugned judgment is based on surmises and conjectures thus not sustainable. In support of his contentions, he relied upon the following case-laws:--- ' PLD 1983 SC 693; 2000 SCMR 1001; 2000 SCMR 1305; 2007 SCMR 1776; PLD 1971 Lahore 462; 1996 CLC 1090; 1997 SCMR 641; 2010 YLR 2872; PLD 2013 Lahore 182 and PLD 2012 SC 132. 26. Mr. Asad Jan, Advocate learned counsel for PESCO, Mr. Khaliq-uz-Zaman, Advocate Supreme Court counsel for IESCO, Syed Kazim Hussain Kazmi, Advocate Supreme Court for GEPCO, Mr. Muhammad Muneer Paracha Advocate Supreme Court and Numan Muneer Paracha, Advocate for HESCO, and Syed Mummtaz Ali Zaidi Advocate for MEPCO also adopted the arguments of learned counsel for the LESCO and FESCO. 27. Learned counsel for NEPRA Mr. Shamshadullah Cheema Advocate Supreme Court with Muhammad Shafique Legal Advisor NEPRA while submitted report in pursuance of the decision of Hon'ble Lahore High Court mainly emphasized that NEPRA, being Regulatory Authority, has got absolute powers to determine the electricity tariff. All the concerned were provided opportunity of hearing before passing the final order. As per procedure prescribed by the rules, the method is to be determined annually, but in view of the direction of Hon'ble Lahore High Court for monthly determination, the NEPRA conducts such exercise month-wise. 28. It is pointed out that none of the respondents ever challenged the method of determination, which being the decree of Civil Court as defined by section 40 of Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997 has got binding effect. Since it has not been challenged, it attained finality. The respondents/petitioners, therefore, cannot agitate such method, which is basic foundation. Lastly, he argued that the impugned determination in Writ Petitions being made after hearing the parties, examining the record and data submitted by the applicant, the lame excuse of unheard is totally vague in nature as notice published in newspapers sufficiently provided invitation to all consumers. 29. Conversely, Mr. Muhammad Anum Saleem Advocate, learned counsel for the respondents argued that Fuel Price Adjustment is violative of Articles 4, 9, 18, 23 and 24 of the Constitution; therefore, the same is liable to be struck down as being unconstitutional. The dissenting notes of Vice-Chairman, NEPRA proves that FCA contains line losses; theft, staff bonus, E-duty, corruption set off and inefficiency of generation units, which are in violation of section 31(2) of NEPRA Act, that during audit conducted by NEPRA, it has been observed that cost of energy provided by some generation companies is booked on estimated basis and no verification is done, that section 31(2) of the NEPRA Act protects the consumers against monopolistic and oligopolistic prices, squarely applicable to the case of WAPDA (being a single producer and having a Monopoly). He further argued that the respondents have the right to claim Electricity as an Occupier under section 43 of the Electricity Act, 2003. 30. It is further argued that the retrospective demand of surcharge from the consumers is the worst kind of exploitation. It is further contended that demand of Fuel Adjustment Charges as arrears with retrospective effect has been declared as unconstitutional and against the principles of natural justice by the superior courts.
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31. That NEPRA being the regulatory authority has not performed legal duties and has failed to consider the most important facts as pointed out by Mr. Shauket Ali Kundi, the member of authority, in his dissenting notes. It is further argued that contract executed between Consumer and WAPDA, who is a single producer by Monopoly, WAPDA has charged the bills not as per consumption. 32. The NEPRA has no power provided by law to re-determine the tariff under the garb of Fuel Adjustment Charges. Likewise DISCO has no power to claim the amount in addition after recovery of the costs for consumed energy, nor such direction could be issued by the NEPRA to recover such difference of redetermination after about 4/5/6/7 months as observed by the learned Single Judge in Chambers in para 17 of the judgment, which is elaborated in Tabular forms at page 60, that in pursuance of the notice, if consumer has not approached, the NEPRA is under obligation to examine and hold a detailed inquiry about the data and other evidence relied by DISCO claiming such Fuel Price as operational charges. NEPRA with cogent reason decided the issue, but NEPRA every time ignored the dissenting view of Vice-Chairman, which responded on material issue favouring the consumers. 33. The consumers after consuming the energy making its full payment are not supposed to pay more against the past and closed transaction being a vested right accrued in their favour. Such levy of subsequent determination with retrospective effect is contrary to the fundamental rights of the consumers. It being legitimate expectation that they will not be burdened with additional amount and not supported to pay, but afterwards, it was surprisingly imposed. Finally it was requested for maintaining the judgment passed by the learned Single Judge in Chambers being on sound legal and factual aspects. In support of his claim, he relied upon the following case-laws reported in:--- ' Muhammad Yasin v. Federation of Pakistan (PLD 2012 SC 132,1, Baz Muhammad Kakar v. Federation of Pakistan (PLD 2012 SC 923), Mehram AU v. Federation of Pakistan (PLD 1998 SC 1445), Liaqat Hussain v. Federation of Pakistan (PLD 1999 SC 504), Civil Aviation Authority v. Union of Civil Aviation Employees (PLD 1997 SC 781), Elahi Cotton Mills Ltd. v. Federation of Pakistan (PLD 1997 SC 582), Pir Sabir Shah v. Shad Muhammad Khan (PLD 1995 SC 66), Federation of Pakistan v. Shaukat Ali Mian (PLD 1999 SC 1026), Wattan Party v. Federation of Pakistan (PLD 2006 SC 697), Muhammad Mubeen- us-Salam v. Federation of Pakistan (PLD 2006 SC 602), Muhammad Nasir Mahmood v. Federation of Pakistan (PLD 2009 SC 107), All Pakistan Newspapers Society v. Federation of Pakistan (PLD 2012 SC 1), 2011 PLC (C.S.) 1076, Bank of Punjab v. Haris Steel Industries (PLD 2010 SC 1109), Nikhil Mazmudar v. Superintending Engineer 2010 INDLAW Cal. 744, Chameli Singh v. State of U.P. 1995 Indlaw SC 888 at paragraph 8, Molay Kumar v. Chairman, West Bengal Elec., Distr. Co. Etc. 2007 INDLAW Cal 133, Munir Hussain Bhatti V. Federation of Pakistan (PLD 2011 SC 407), Watan Party v. Federation of Pakistan (PLD 2012 SC 292), Rana Aamer Raza Ashfaq v. Dr. Minhaj Ahmad Khan (2012 SCMR 6), Government of Balochistan v. Azizullah Memon (PLD 1993 SC 341), Shaheen Cotton Mills v. Federation of Pakistan (PLD 2011 Lahore 120), Shehla Zia v. WAPDA (PLD 1994 SC 693), (1999 SCMR 1379), Zafar Ali Shah v. Parvez Musharraf (2000 SCMR 1137 (Supreme Court)), Messrs Hudaibya Paper Mills Ltd. v. NAB (PLD 2012 Lah. 515), Ch. Muhammad Nazir Cheema v. Mujahid Sher Dil DCO (2012 CLC 764). 34. Ch. Mushtaq Ahmed Kamboh, Mian Mehmood Rashid, Muhammad Naveed Chughtai, Khalid Nawaz Ghumman, Sadequain Gardner, Rana Ali Akbar, Malik Najam Ayub, Muhammad Nawaz, Ch. Muhammad Tahir Mahmood, Mr. Zulqarnain Hamid, Rana Sajid Rasool, Mr. Muhammad Siddique Qazi, Mian Muhammad Hussain Chotiya, Mr. Muhammad Siddique Mehmood, Mr. Shahid Rasool, A. Ammar Sehri, Ch. Mumtaz-ul-Hassan, Ahmad Bilal, Mustafa Kamal, Adnan Ahmad, Muhammad Mohsin Virk, Abdul Waheed, Waheed Zafar Advocates also adopted the argument of learned counsel for the respondents Mr. M. Anum Salem Advocate. 35. Arguments heard and record perused.
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36. Following issues for determination were formulated at the time of passing of impugned judgment.--- (i) Whether proviso to section 3114) of the NEPRA Act, 1997 is ultra vires to the Constitution? (ii) Whether Fuel Adjustment Surcharge can be levied and demanded with retrospective effect? (iii) Whether on expiry of stipulated period of 15 days, provided under section 31(4) of the NEPRA Act, Authority vests with power to levy and demand Fuel Adjustment Surcharge as part of tariff? (iv) Whether scope of Fuel Adjustment Surcharge can be expanded/ enhanced to provide cover to the elements/factors of mismanagement, bad governance, inefficiency, theft, inability to recover across the board? (v) Whether already determined Tariff can be varied in the name of fuel adjustment? 37. Reply to point No.1, thereto was nothing found against the Constitution for issuance of declaration as ultra vires, therefore, same needs not be discussed. 38. The perusal of other issues and the relevant paragraphs, the question arises as to whether Fuel Adjustment Charge is a Surcharge, or operational cost and whether it can be levied or charged with retrospective effect? This is a core issue and basis of the whole findings. The relevant abstract of the findings to the said core issue is as follows:--- "The writ petitioners contended that the notifications with respect to the Fuel Price Adjustment retrospective in nature, therefore, same cannot be recovered. Since on payment of bill on electric consumed, the matter become a past and close transaction, the vested right of the petitioner cannot be subsequently altered." 39. The reasoning of the impugned judgment at page-16 are referred below:--- (a) Tax and surcharge can be demanded by the Government, but the question is whether any taxpayer can be taken by surprise and require to adjust cost of any product which had already been reached to consumer? Answer to this question is a big NO. (b) Constitution of Pakistan does not allow any sort of exploitation or permit economic and social wrongs. (c) The authority of NEPRA for the purposes of adjustment is limited to 15 days. (d) NEPRA is empowered to allow interim levy subject to final determination. (e) Section 31(2) of NEPRARA Act which are mandatory requirements of law obligates NEPRA to protect interest of consumers, (f) Retrospective demand of surcharge from consumers is worst kind of exploitation. 40. First of all, the applicability of section 31 of NEPRA Act and its legal assessment is viewed in its prospective. Section 31 with its provisos is imitated hereinbelow:-- "Tariff: (1)--- As Soon as may be, but not later than six months from the commencement of this…
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