P.S.DATTA, J. - (1.) JUDICIAL Member The two appellants, namely Kanan Devan Hills Plantations Company Private Limited, and M/S Tata Global Beverages Limited (formerly Tata Tea Limited) have preferred this appeal against the order dated 26.4,2011 passed by the Kerala State Electricity Regulatory Commission, the respondent no 1 herein, on series of grounds which we will notice as we proceed to consider the merit of the appeal.
(2.) THE first appellant who is the successor -in interest of the second appellant and supplies electricity as a distribution licensee u/s 14 of the Electricity Act,2003 to various consumers in Munnar including its captive load had filed ARR and ERC petitions for the year 2007 -08, 2008 -09, &2009 -10 for approval of the Commission, the respondent no 1 herein and prior thereto the appellant no 2 had also filed ARR and ERC before the Commission for the years 2 2005 -06 and 2006 -07. The first appellant said to be a transferee from the second appellant in the matter of business of distribution of electricity. The Commission passed orders thereon against which the two appeals were preferred by the first appellant, being the appeals no 160of 2009 and the appeal no 193 of 2009 before this Tribunal which were also disposed of on 24.11.2010.
(3.) IT is the case of the appellants that the Commission took up true up proceedings for a period of five years i.e., FYs 2005 -06 to 2009 -10 out of which the second appellant was the distribution licensee for two years and three months. The business of the second appellant was transferred to the first appellant along with transfer of license by the Commission in favour of the first appellant with effect from 1st July,2007. The Commission is said to have passed an order on 09.01.2007 transferring distribution license in favour of the first appellant. An Indenture was also executed by and between the two appellants on 23.6.2007 in respect of transfer of business of distribution in favour of the first appellant. The first appellant filed truing up petitions for the period of their operation, namely for FY 2007 -08,2008 -09, and 2009 -10 mentioning that it took over the business as a licensee from the second appellant on 01. 7.2007. After the initial hearing held on 3 16.8.2000 the Commission is alleged to had erroneously assumed the second appellant to be the first appellant's major stake holder and the distribution business as a continuing function, directed the first appellant to file true -up petition from the FY 2005 -06 onwards which was illegal because such direction should have been made against the second appellant and that the second appellant was not given an opportunity of being heard particularly when it was the separate distribution business of the second appellant having no nexus with the business of the first appellant. The Commission passed however a composite true -up order covering five financial years on the said truing up petitions on 26.4.2011 which is impugned herein. The grounds of the appeal are as follows: - a) The Commission erred in not distinguishing the first appellant as a distinct entity. The Commission ought to have trued up the accounts of each licensee differently and independent of each other. b) The Commission also erred in computing the revenue from sales during the period 2005 -06 and 2006 -07 under the premise that own consumption should be treated at par with sales to any other consumer when the Commission itself had approved the ARR and ERC petitions filed by the second appellant during the relevant years. The Commission now 4 proceeded to change the operational surplus of the second appellant to true up the account of the first appellant. c) No opportunity was given of hearing to the second appellant as a distribution licensee for the two financial years as mentioned above and the second appellant was a necessary party to the true up proceedings. d) The order impugned is without jurisdiction in the context of the orders passed in the ARR and ERC in respect of the second appellant. e) The Commission erred in including in or adding to the surplus arrived at as regards the operations of the second appellant for the FYs 2005 -06 and 2006 -07 and the first quarter of 2007 - 08 into the first appellant' true -up for the years thereafter up to 200 -09 -10 and thereby creating a totally non -existent, artificial and erroneous surplus in the hands of the first appellant . f) The Commission illegally treated the two appellants as one entity in the impugned order. g) The Commission failed to see the operational differences between the two appellants in the impugned order. h) The method adopted and the conclusions arrived at in the impugned order is legally unsustainable. i) There could not be any surplus in the hands of the first appellant to the tune of Rs622.43lakh. j) The Commission was not justified in imposing the additional cost incurred due to excess T&D loss for the years 2005 - 07and 2006 -07 on the first appellant when the second appellant was operating as the distribution licensee. k) The Commission was not right in holding that own consumption by the second appellant has to be treated at par with sales to any other consumer when such differential amount was allowed to be maintained by the second appellant during its operation as a distribution licensee. l) The Commission was not justified in disallowing the employees' cost of the first appellant without considering that the distribution business of the first appellant was a separate business. m) The Commission was not right in considering the income from sale of scraps in the years 2007 -08 and 2008 -09 as revenue. n) The Commission was not justified in considering Rs.58.62lakh as non -tariff income for the year 2008 -09 when the actual non -tariff income for the first appellant was only Rs.18.94lakh. o) The Commission was not justified in deducting duty and thermal charges for the year 2009 -10 while the same was already deducted by the first appellant in the power purchase cost. The Commission filed a counter affidavit contradicting all the points. It contends as follows: a) Since the second appellant has no stake in the distribution business and the license for distribution of electricity has been rested with the first appellant the second appellant is really a non -entity. b) True up of accounts has to be done for all the years in respect of which orders on ARR and ERC have been issued. The order on true up cannot be limited to the years in which the Appellant has been in operation. c) All the assets, liabilities, interests, rights, obligations etc. have to be transferred to the first appellant and when the first appellant has taken over the distribution business, it is the duty of the first appellant to see that all the necessary records are properly handed over to function as a growing concern. d) The transferee has the responsibility to provide all information regarding the distribution operation. The Executive Director of both the entities is the same individual and it was the first appellant who produced the records needed for truing up for the years 2005 -06 and 2006 -07 before the Commission. It is not practical for the Commission to track the descendents and antecedents of the transferor. e) During the proceedings before the Commission the first Appellant has never argued that the second Appellant should be made a party. f) No major adjustment / disallowance was made on the accounts presented by the licensee even for the period prior to the takeover except for the power purchase in excess T&D loss. g) The presence of the second appellant in the true up proceedings was not necessary and whatever information was provided by the first appellant was sufficient. The Commission accepted the actual accounts provided by the first appellant for the period 2005 -06 and 2006 -07 in respect of which the second appellant in this appeal did not challenge to the accounts. Therefore, the accounts 8 for 2005 -06 and 2006 -07 as produced by the first appellant were correct. h) There was no need of undertaking exercise of true up accounts of the two appellants separately because after the transfer of license the second appellant has no role in the distribution business. i) It is now a settled issue that there cannot be any distinction between licensee's own consumption and sales to other consumers and this issue was upheld in Appeal No.160 of 2009 and 193 of 2009. j) The reconciliation statement provided by the licensee needs to be read along with the revenue from sale of power treating own consumption at the applicable tariff. k) The Commission has taken into consideration the additional cost on account of revision of BST based on the calculation provided by the licensee itself. While truing up, an amount of Rs.667.88lakh has been additionally provided for meeting the cost on account of revision of BST. l) Since the electricity distribution business is a continuous one, the change of ownership should not be allowed to affect the interests of the consumers. After the transfer of 9 license, the first appellant has taken over all liabilities, assets, interest and obligation of the second appellant during continuation of the business. m) Since license has been transferred the first appellant is responsible for having the surplus arrived at after the truing up process for the period prior to the takeover. The surplus available with the transferor over and above Return on Equity allowable has to be ploughed back to the business for the benefit of the consumers. The transferor cannot be allowed to run away with the surplus generated. n) The Commission has treated the own consumption of the second appellant also at par the prevailing tariff in the first ARR&ERC order itself which has been upheld by this Tribunal in Appeal. o) The Commission is correct in treating interest on loan. p) The Commission has allowed employees cost for the distribution business as per the details provided by the first appellant. q) The income received from the sale of asset has to be considered as revenue item and the revenue booked under sale of scraps was on account of sale of existing 10 copper cables which was rejected by the Appellant. As such, the amount of sale has to be treated as an income of the distribution business. r) Thermal surcharge is the fuel surcharge imposed on the consumers which has to be collected from the consumers as per the rate approved by the Commission and passed on to KSEB by other licensees. The licensee cannot treat this amount as cost. s) Electricity duty cannot be a part of the power purchase cost and only the net power purchase cost has been allowed in the impugned order. ;