Bombay High Court Quashes MERC's Review Order for Breach of Natural Justice

The court emphasizes the need for stakeholder consultation before modifying Multi-Year Tariff Orders.

In a significant judgment, the Bombay High Court has quashed the Maharashtra Electricity Regulatory Commission's (MERC) review order that substantially modified the Multi-Year Tariff (MYT) Order dated March 28, 2025. The court held that the MERC violated principles of natural justice by not consulting stakeholders before passing the review order, which had far-reaching implications.

The division bench comprising Justices B.P. Colabawalla and Firdosh P. Pooniwalla ruled that the MERC's failure to notify and hear affected parties before modifying the MYT Order constituted a breach of mandatory provisions under the Maharashtra Electricity Regulatory Commission (Transactions of Business and Fees and Charges) Regulations, 2022. The court underscored that transparency and fairness are integral when passing orders with significant consequences.

The court noted that the original MYT Order involved a consultative process with stakeholders, which was absent in the review process. The review order changed key provisions, such as time-of-day slots for solar energy usage and tariff categorization for hotels, without stakeholder consultation, leading to substantial impacts on consumers and energy companies.

Justice Colabawalla emphasized that statutory regulations require MERC to consider public suggestions and objections before determining tariffs. The court pointed out that while the original MYT order adhered to these regulations, the review order did not, thereby rendering it vulnerable to challenge.

The judgment directed MERC to re-evaluate the review petition filed by the Maharashtra State Electricity Distribution Company Limited (MSEDCL) afresh, ensuring comprehensive consultation with all stakeholders. It ordered MERC to provide public notices and copies of the review petition to stakeholders, facilitating their participation in the review process.

The court's decision highlights the critical importance of adhering to procedural fairness and the principles of natural justice, especially in regulatory matters affecting public interest. The judgment offers stakeholders a renewed opportunity to present their views on the tariff modifications.

While MERC and MSEDCL sought a stay on the judgment to appeal to the Supreme Court, the court granted a four-week stay on its order, providing the regulatory bodies an opportunity to contest the decision at a higher judicial forum.

Bottom Line:

Electricity Act, 2003 - Review Order substantially modifying MYT (Multi-Year Tariff) Order - Breach of principles of natural justice and mandatory provisions of MERC regulations - Held, stakeholders and affected parties must be heard before passing such review orders to ensure transparency and fairness.

Statutory provision(s): Electricity Act, 2003 Sections 64(3), 86(3), 111; Maharashtra Electricity Regulatory Commission (Multi-Year Tariff) Regulations, 2024 Regulation 14; Maharashtra Electricity Regulatory Commission (Transactions of Business and Fees and Charges) Regulations, 2022 Regulations 28(f), 39, 40.

O2 Renewable Energy VII Private Limited v. Maharashtra Electricity Regulatory Commission, (Bombay)(DB) : Law Finder Doc Id # 2804861