The Supreme Court held that clubbing of Self-financed educational institutions (SFEIs) with commercial service providers for the purposes of fixing electricity tariffs higher than Government run & aided educational institutions was legally justifiable in terms of the Electricity Act, 2003 ("2003 Act").
The central issue in the instant case was whether under the 2003 Act, the differentiation of SFEIs from the other set of educational institutions for the purpose of fixing of tariff was arbitrary discrimination and antithetical to principles of natural justice.
Rendered by a Bench of Justices Deepak Gupta & Aniruddha Bose, the Judgment held that a tariff fixing body was not required to proceed solely on the basis of "nature of service" rendered by the Institution while fixing tariifs.
"While we construe the meaning of the expression "purpose" under sub-section (3) of Section 62 of the 2003 Act, we are of the opinion that for the purpose of settling the tariff question, who is serving the "purpose" and for whom such "purpose" is being served have to be factored in. We also have to take into account that the nature of service rendered by them cannot be the sole determinant for the tariff-fixing exercise."
The Kerala State Electricity Regulatory Commission ("Commission") issued a notification dated 26th November 2007 categorising SFEIs under the head "Low Tension VII(A) Commercial". The Government run or aided private educational institutions were placed under "Low Tension VI Non-Domestic tariff category".
Several Writ Petitions were filed by different SFEIs questioning the legality of such segregation which in effect created a higher tariff regime for them before the a Single Judge Bench of High Court of Kerala.
The learned Single Judge found the tariff order to be valid, relying on a decision of a Constitution Bench of this Court in the case of T.M.A Pai Foundation and Anr. v. State of Karnataka and Ors.
Subsequently, the Respondents (Appellants before the Division Bench) filed an appeal before the High Court. The Division Bench set aside the order of the Single judge holding that as the Determination of Tariff by the State Commission could only be based on Section 62 of the 2003 Act, the differentiation as put down by the Commission was not for any of the grounds as specified thereto.
The Division Bench, inter alia held that,
"When the supply is to an educational institution, irrespective of whether it is self financing or aided or governmental purpose, cannot be different, as education means to impart knowledge."
Aggrieved, the Electricity State Commission (Appellant) came in Appeal before the Supreme Court.
What the Supreme Court Court Held:
The Bench allowed the appeals and assailed the Division Bench order of the Kerala High Court.
It was held that the Commission was within its right as a tariff fixing body to distinguish the "purpose" of respective categories of educational institutions as the means to an end was dissimilar in nature for both institutions. While both imparted education, the State run & aided institutions were also discharging their duties of welfare of its citizens.
"The expression "purpose" has to be understood in the context of the character or feature of the entity which is undertaking the activity of imparting education. While funding educational institutions, the State undertakes to discharge one of its essential welfare measures."
The Bench further emphasized that fixing higher tariffs for SFEIs and not on the State run educational institutions would not amount to giving "undue preference" to State aided institutions in terms of the tariff notification as the purposes could be of both could be duly differentiated.
It was further noted that,
"The fact that SFEIs have been clubbed together with several commercial service providers wholly unrelated to education becomes insignificant once we find that purpose of the SFEIs could be differentiated from the Government run and Government aided educational institutions"
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