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Judgment
V. Ramasubramanian, J.—The Tamilnadu Generation and Distribution Corporation Limited, which is one of the successor entities of the
Tamilnadu Electricity Board, has come up with the above writ petition challenging an office memorandum issued by the Ministry of Environment
and Forests, Government of India, directing the petitioner to comply with the Fly Ash Utilisation Amendment Notification S.O. 2804 (E) dated
3.11.2009. Heard Mr. G. Vasudevan, learned counsel for the petitioners, Ms. M. Nirmaladevi, learned Additional Central Government Standing
Counsel for the respondents 1 and 2 and Mr. Rathina Ashokan, learned counsel for the third respondent.
Fly ash, which causes enormous amount of air pollution and which is considered to be hazardous to the environment, is generated in huge
quantity by thermal power plants. In order to reduce the impact of fly ash on the environment, the Government of India issued a Draft Notification
containing certain directions on 22.5.1998 under Rule 5(3) of the Environment (Protection) Rules, 1986. After receiving objections and
suggestions to the Draft Notification, a Final Notification was published by the Government of India on 14.9.1999, in exercise of the powers
conferred by Sub-Section (1) read with Clause (v) of Sub-Section (2) of Section 3 and Section 5 of the Environment (Protection) Act, 1986.
The Final Notification was in three parts, dealing respectively with -
(i) use of fly ash, bottom ash or pond ash in the manufacture of bricks and in other construction activities;
(ii) utilisation of ash by thermal power plants; and
(iii) specifications for use of ash based products. The first part of the Notification imposed a prohibition upon any person carrying on the activity of
manufacturing clay bricks or tiles or blocks for use in construction activities, without mixing at least 25% of fly ash, if the activity is carried on within
the radius of 50 Km from the thermal power stations. The second part of the Final Notification contained a direction to every coal or lignite based
thermal power plant to make available, ash, for at least ten years from the date of publication of the Notification without any payment or any other
consideration, for the purpose of manufacturing ash based products.
Subsequently, the Central Government also issued an amendment to the above Notification by another Notification dated 27.8.2003. By the
said Notification, a mandate was issued to all construction agencies engaged in the construction of buildings within a radius of 50-100 Kms from a
coal or lignite based thermal power plant, to use fly ash bricks or blocks or tiles or clay fly ash bricks, etc., subject to a minimum percentage
mentioned in the order itself. The Amendment Notification preserved intact, the obligation of coal or lignite based thermal power plants to make
available, ash, for the purpose of manufacturing ash based products for any construction activity. Additionally, the Amendment Notification stated
that the thermal power plants have to ensure availability of fair quantity of ash to each user, including brick kilns.
Another Draft Notification was issued on 6.11.2008 proposing several amendments to the original Notification. This Draft Notification was
issued, after taking note of the fact that though the use of fly ash in the manufacture of fly ash bricks or products rose from 1.5 million tonnes in
2002-2003 to 3.15 million tonnes in 2006-2007, the target was not achieved as on 31.8.2007. Out of the several amendments proposed in the
Draft Notification dated 6.11.2008, the portions relating to paragraph 2 of the Original Notification are relevant for our purpose. Hence, they are
extracted as follows:
(1) All coal or lignite based thermal power stations would be free to sell fly ash to the user agencies subject to the following conditions, namely:-
(i) The pond ash and mound ash should be made available free of any charge on ''as is where is'' basis to manufacturers of bricks, blocks or tiles
including clay fly ash product manufacturing unit(s), farmers, the Central Government and the State Road Construction Agencies, Public Works
Department, and to agencies engaged in backfilling or stowing of mines.
(ii) At least 20% of dry ESP fly ash shall be made available free of charge to units manufacturing fly ash or clay-fly ash bricks, blocks and tiles on a
priority basis over other users. If the demand from such agencies falls short of 20% of quantity, the balance quantity can be sold or disposed of by
the power station as may be possible. Provided that the fly ash obtained from the thermal power station should be utilised only for the purpose for
which it was obtained from the thermal power station or plant failing which no fly ash shall be made available to the defaulting users;
and
(6) The amount collected from sale of fly ash and fly ash based products by coal and/or lignite based thermal power stations or their subsidiary or
sister concern unit, as applicable should be kept in a separate account head and shall be utilised only for development of infrastructure or facilities
and promotion/facilitation activities for use of fly ash until 100 percent fly ash utilisation level is achieved. Thereafter as long as 100% fly ash
utilisation levels are maintained, the thermal power station would be free to utilise the amount collected for other development programmes also. In
case, there is a reduction in the fly ash utilisation levels in the subsequent year(s), the use of financial return from fly ash shall get restricted to
development of infrastructure or facilities and promotion or facilitation activities for fly ash utilisation until 100 percent fly ash utilisation level is again
achieved and maintained.
After receiving objections and suggestions to the Draft Notification dated 6.11.2008, the Government of India issued a Final Notification dated
3.11.2009. In so far as paragraph 2 of the Original Notification is concerned, the Final Notification dated 3.11.2009 accepted the draft
amendments. Therefore, paragraphs 2(1) and (6), of the Draft Notification dated 6.11.2008 were retained in the Final Notification dated
3.11.2009.
Though the Tamil Nadu Electricity Board was complying with the aforesaid notifications, they found over a period of time that they were
incurring an expenditure of Rs. 578/- per ton, for the collection of fly ash. Therefore, they decided to recover at least a portion of the cost so
incurred and consequently, started demanding a sum of Rs. 100/- per ton from the units manufacturing fly ash based products. This was done with
effect from 15.10.2009.
Aggrieved by the collection of the charges, the Tamil Nadu Fly Ash Bricks and Blocks Manufacturers Association filed a writ petition in W.P.
No. 3444 of 2010 on the file of this Court, praying for a direction to the Electricity Board to allot 20% of the ESP fly ash free of cost. The said
writ petition was disposed of by a common order dated 30.4.2010, directing the State Government to constitute a Dispute Settlement Committee,
in each Thermal Power Plant, as per the composition indicated in the notification. The State Government was also directed to streamline the
functioning of the State Level Monitoring Committee, for the purpose of resolution of unresolved disputes. The Green Bench of this Court also
observed in paragraph 25 of its order that the Electricity Board and the Thermal Power Stations must implement the notification of the Government
of India in letter and spirit, without allowing their commercial interest to come in the way of fulfilling the social objective of allotting 20% of the fly
ash.
Thereafter, the third respondent herein (Association) filed another writ petition in W.P. No. 12092 of 2010 seeking to forbear the Electricity
Board from collecting service charges. Though they sought an interim order of injunction pending disposal of the writ petition, a learned Judge of
this Court refused to grant interim orders. Therefore, a writ appeal was filed in W.A. No. 1361 of 2010. The said writ appeal was disposed of by
an order dated 16.7.2010, directing the Electricity Board to approach the Secretary to Government, Ministry of Environment and Forests,
Government of India, seeking approval for the collection of service charges. The Secretary to Government, Ministry of Environment and Forests,
was directed to give opportunity of hearing to both parties and to pass orders, within a period of eight weeks.
In pursuance of the said order, the Electricity Board filed an application on 18.8.2010 and the Government of India rejected the same by an
order dated 26.10.2010. Aggrieved by the said order, the petitioner herein filed a writ petition in W.P. No. 91 of 2011. The said writ petition was
allowed by this Court, by an order dated 31.01.2011 and the order of the Ministry of Environment and Forests dated 26.10.2010 was set aside,
on the sole ground that no opportunity was granted to the parties before the impugned order was passed. The matter was remitted back to the
Ministry with a direction to give an opportunity of hearing to both parties and to pass orders thereafter.
In pursuance of the above direction, the Ministry issued notice to both parties, allowed them to make representation and thereafter, passed the
impugned order dated 18.3.2011, holding that any collection of service charges amounts to an interim collection of costs and that the same would
constitute a violation of the notification. The Ministry also observed that the expenditure of freight and handling of coal etc., are all part of the
regular expenses in the operation and that they are factored into the cost of power supplied to the consumers. Aggrieved by the order passed by
the Ministry on 18.3.2011, rejecting the claim made by the petitioner for the collection of service charges, the petitioner has come up with the
above writ petition.
The primary contention of the petitioner in the above writ petition is that their right to collect service charges, to recover the expenditure
incurred in collecting and supplying fly ash, is based on the principle of quid pro quo and that there was no violation of the notification issued by the
Ministry. The main objective of the notifications issued by the Ministry of Environment and Forests is to ensure that the fly ash generated by
Thermal Power Plants is not let into the atmosphere causing air pollution, but recycled in the form of ash based products, such as cements, bricks,
etc. Such recycling would also serve another collateral purpose, namely that of preventing the erosion of top soil, on account of the manufacturers
of bricks excavating top soil. These purposes, according to the petitioner, do not get diluted or hampered by the collection of charges by the
petitioner.
However, the contention of the third respondent, which is an Association of manufacturers of fly ash, bricks and blocks, is that the petitioner is
bound by the statutory notifications issued by the Ministry, in exercise of the powers conferred by the Environment (Protection) Act, 1986. Since
notifications direct the supply of fly ash free of cost, subject to a ceiling of 20%, the petitioner is not entitled, according to the third respondent, to
collect any amount, by whatever name it is called. According to the third respondent, the liability to supply 20% of the generated fly ash, free of
cost, to the brick manufacturers is absolute and that the petitioner is also bound by the order passed by the Division Bench of this Court in W.A.
No. 1361 of 2010. The third respondent also relies upon Section 73 of the Electricity Act, 2003, which empowers the Central Government to
issue such directions as may be necessary, in matters of policy involving in public interest. According to the third respondent, notifications issued by
the Central Government under the Environment (Protection) Act, have overriding effect upon any other law and hence, the petitioner is bound to
supply 20% of fly ash, free of cost, to the manufacturers of ash based products.
I have carefully considered the rival contentions.
Before taking up the contentions one after another, it is necessary to bear in mind certain fundamental aspects, which emanate from the
Environment (Protection) Act, 1986 and the Electricity Act, 2003. Environment (Protection) Act, 1986:
This Act was enacted purportedly with a view to implement the decisions taken at the United Nations Conference on the Human Environment
held at Stockholm in June, 1972. But in reality, it came as a knee jerk reaction to the Bhopal gas tragedy. The object of the Act is to provide for
the protection and improvement of environment and for matters connected therewith. u/s 3(1) of the Act, the Central Government has the power to
take all measures as it deems necessary for the purpose of protecting and improving the quality of environment and preventing, controlling and
abating environmental pollution. Sub-section (2) of Section 3 lists out various matters in respect of which the Central Government may take
measures. Section 5 empowers the Central Government to issue directions to any person, officer or any authority, in exercise of its powers and
performance of its functions under the Act, notwithstanding anything contained in any other law. The power to issue directions includes the power
to direct the closure, prohibition or regulation of any industry, operation or process or the stoppage or regulation of the supply of electricity or
water or any other service. While Section 6 empowers the Central Government to issue Rules to regulate environmental pollution, Section 7
prohibits every person from carrying on any industry, operation or process which discharges or emits any environmental pollutants, in excess of the
standards prescribed. The other provisions of the Act may not be relevant for our purpose and hence, I do not wish to make a reference to them.
There is no dispute about the fact that all the notifications right from the one dated 14.9.1999 were issued in exercise of the power conferred
by Section 5 read with Section 3(2)(v) of the Environment (Protection) Act, 1986. Therefore, the fact that the notifications are actually statutory
directions, cannot be in doubt at all. The Electricity Act, 2003.
The Electricity Act, 2003, is also an Act of Parliament, which was enacted to consolidate three different enactments, namely, The Indian
Electricity Act, 1910, The Electricity (Supply) Act, 1948, and the Electricity Regulatory Commissions Act, 1998. It would be of some interest to
take note of one paragraph of the Statement of Objects and Reasons of the Electricity Act, 2003. It reads as follows:
1.3. Over a period of time, however the performance of SEBs (State Electricity Boards) has deteriorated substantially on account of various
factors. For instance, though power to fix tariff vests with the State Electricity Boards, they have generally been unable to take decisions on tariffs
in a professional and independent manner and tariff determination in practice has been done by the State Governments. The cross-subsidies have
reached unsustainable levels.
Paragraph 4 of the Statement of Objects and Reasons of the Electricity Act, 2003, contains the main features of the Bill, some of which are as
follows:
(i) Generation is being de-licensed and captive generation is being freely permitted; (ii) there is no provision for private transmission licensees; (iii)
distribution licensees would be free to undertake generation and generating companies would be free to take up distribution licenses; (iv) the State
Electricity Regulation Commissions may permit open access in distribution in phases with surcharge for current level of cross subsidy to be
gradually phased out and obligation to supply; and (v) trading as a distant activity is being recognised with the safeguard to the Regulatory
Commissions being authorised to fix ceilings on trading margins, if necessary.
The Act also provides a transfer Scheme, by which, the State Governments were empowered to create companies from out of the State
Electricity Boards. Therefore, in terms of the provisions of Part XIII of the Act, two companies by name Tamil Nadu Generation and Distribution
Corporation Limited (TANGEDCO) and the Tamil Nadu Transmission Corporation Ltd. (TANTRANSCO) were created and all the rights,
assets, liabilities, etc. of the Board were transferred to those companies. The petitioner in this writ petition is one of the two companies, so created
by the State Government.
After the advent of the 2003 Act, the power to determine the tariff vests with the Electricity Regulatory Commission and not even with the
distribution licensees. A procedure is prescribed by the Act, for the determination of tariffs and there are sufficient guidelines for the Commission to
arrive at the amount to be recovered.
Section 173 of the Act declares that nothing contained in the 2003 Act or the Rules and Regulations made thereunder shall have effect insofar
as it is inconsistent with any other provisions of the Consumer Protection Act or the Atomic Energy Act or the Railways Act. But, Section 174
makes it clear that save as otherwise provided in Section 173, the provisions of the Electricity Act, 2003, shall have effect notwithstanding anything
inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this
Act. Though Section 175 of the Act declares that the provisions of the 2003 Act are in addition to and not in derogation of any other law for the
time being in force, the Supreme Court clarified in Gujarat Urja Vikash Nigam Ltd. Vs. Essar Power Ltd., , that Section 175 is subordinate to
Section 174 and hence, Section 174 would prevail over Section 175 in the matter of any conflict. In that case, even the appointment of an
arbitrator u/s 11 of the Arbitration and Conciliation Act, 1986, was held to be illegal, in the light of the special provision contained in Section 86(1)
(f) of the Electricity Act, 2003.
It is needless to point out that Electricity Act, 2003, is a subsequent legislation to the Environment (Protection) Act, 1986. There is a
presumption in law that whenever parliament enacted a legislation, it was aware of the existing legislation. Since the Electricity Act, 2003, is also a
parliamentary enactment, there is a presumption that Section 174 of the Act was incorporated, with full knowledge of the existence of the
provisions of the Environment (Protection) Act, 1986. Keeping this fact in mind, let us now go to the rival contentions.
The Notification issued by the Ministry of Environment and Forests, as stated earlier, is in exercise of the powers conferred by the
Environment (Protection) Act, 1986. Since they are statutory instructions, they are certainly binding on all industries, which tend to cause pollution.
The binding nature of statutory instructions has come up for consideration many a time before the Apex Court and this Court. The law on the point
is too well settled to require citing of any authority. Therefore, any direction issued by the Ministry of Environment and Forests in exercise of the
power conferred by the Environment (Protection) Act will have a binding effect on all industries including the petitioners herein.
But if there is any inconsistency between the Electricity Act, 2003 and the Notification issued under the Environment (Protection) Act, Section
174 of the Electricity Act will go to the rescue of the petitioners herein. Therefore, what is now required to be seen is as to whether there is any
inconsistency.
As seen from the facts narrated above, the object of the Notification issued by the Ministry of Environment and Forests is two fold, namely (a)
to make use of the fly ash generated by coal and thermal power plants, for the production of another product, so that fly ash is not let out into the
atmosphere; and (b) to prevent brick manufacturers from exploiting the top soil on a regular basis. These twin objectives seek to serve different
purposes. While the first objective is a deterrent for the coal or thermal power plants to ensure that fly ash generated by them is not let out into the
atmosphere, the second objective is an incentive for the brick manufacturers to persuade them not to exploit the top soil.
The first objective of the Notification can always be sub-served by making it mandatory for the coal or thermal power plants to use the entire
quantity of fly ash generated by them in the production of fly ash based products. The directive to the coal/thermal power plants to dispose of 80%
of the fly ash generated by them, by way of sale or otherwise, for the purpose of manufacturing ash based products, serves the first objective. The
directive to coal/thermal power plants to supply 20% of the fly ash free of costs to the brick manufacturers, seeks to serve the second objective.
There can be no doubt or dispute that the Ministry of Environment and Forests has necessary powers to issue directions to all polluting
industries to treat air/water pollutants discharged by them. To this extent, any directive issued by the Ministry of Environment and Forests, will not
be inconsistent or in conflict with the Electricity Act, 2003. As a matter of fact, there are Notifications issued to leather industries, chemical
industries, textile industries, etc, for the treatment of effluents. I do not think that there is any directive to those industries as to how they deal with
those effluents after they are treated. This is for the reason that such effluents also form part of the property of the manufacturer. What is curtailed
by the Ministry of Environment and Forests is only the discharge of those effluents into water resources, earth or sea bed. If, by employing any
scientific method prescribed by the Ministry, the effluent released in the manufacturing process is treated and made non-pollutable, there can be no
injunction on the right of the industries to dispose of by way of sale or otherwise, such treated effluents.
Similarly, fly ash, which can be equated to a by-product in the process of generation of electricity, is the property of the generating company.
While what can be curtailed by the Ministry of Environment and Forests is the discharge of that pollutant into the atmosphere, the right of the
generating company to dispose of the same without causing pollution, cannot be curtailed by the Ministry of Environment and Forests. For
instance, if a generating company sets up an ancillary unit such as a brick manufacturing unit, I do not think that the Ministry can compel the
generating company to make use of only 80% of fly ash generated by them for their ancillary unit and to provide the balance 20% to their
competitors, who also manufacture bricks.
In other words, the statutory directions issued by the Ministry compelling the generating companies to sell or otherwise dispose of fly ash to
brick manufacturing companies cannot be said to be illegal or inconsistent with the Electricity Act, 2003, as that portion of the directive seeks to
achieve the first objective of the Notification.
But to direct the generating companies to give free of cost, 20% of fly ash generated by coal/thermal power plants, infringes upon the property
rights of the generating companies. The very object of the Electricity Act, 2003 is to liberate the State from the heavy burden imposed upon them
by the respective State Electricity Boards, in the form of mounting losses. I have already extracted the Statement of Objects and Reasons
elsewhere in this order.
Paragraph 1.3 of the Statement of Objects and Reasons points out that cross-subsidies have reached unsustainable levels. Therefore, the State
Governments have been liberated even from the task of fixation of tariff, to ensure that the Government and the Electricity Boards are not crushed
under the weight of accumulated losses. In para 1.5 of its Tariff Order No. 3 of 2010, issued on 31.7.2010, the Tamil Nadu Electricity Regulatory
Commission (TNERC) presented an overview of the Tamil Nadu Electricity Board, which was created as a statutory body on 1.7.1957 under the
1948 Act. In para 1.7, the TNERC presented the ""Commercial and Financial Performance"" of the Board. The statistics presented therein would
send cold shivers down the spine. It is stated in para 1.7.2 therein that the accumulated deficit of TNEB upto 2008-2009 was Rs. 16,774.47
crores. In para 1.7.4, it is stated that the loans outstanding as at the end of 2008-2009 were Rs. 20,250.32 crores. The gross and net assets value
of the Board as at the end of 2008-2009 are indicated to be Rs. 25,016.17 crores and Rs. 14,841.40 crores respectively. In other words, the
accumulated deficit has gone far beyond the net assets value.
The exercise of revision of tariff is undertaken periodically by the Regulatory Commission, in order to offset the losses. In other words, every
consumer is now liable to share the accumulated losses, by accepting the revision of tariff.
While a portion of the accumulated losses, however negligible it may be, is sought to be recovered by way of revision of tariff, it may not be
proper to compel the petitioner-Corporation to sell a portion of their property free of cost in order to provide incentive to another industry, which
causes environmental degradation. Normally, an industry causing pollution or degradation of environment is imposed with an obligation. But, the
brick manufacturers are provided an incentive in the form of the impugned Notification, at the cost of the electricity generating companies, which
actually suffocate under accumulated losses running to thousands of crores. Therefore, that part of the Notification obliging the petitioner
Corporation to provide free of cost, 20% of the fly ash generated by them to other manufacturers, runs counter to the objects of the Electricity
Act, 2003. Consequently, that portion is inconsistent with the objects of the Electricity Act and hence, it cannot stand in the light of Section 174 of
the Electricity Act, 2003. What is sought to be charged by the petitioner is only the cost of recovery of the expenses incurred in the collection of fly
ash. The Ministry of Environment and Forests, in its impugned order, had gone on a thorough misconception as though the cost of recovering fly
ash is included in the tariff fixed by the Commission. In other words, the impugned order of the Ministry of Environment and Forests seeks to pass
on the burden of providing fly ash free of cost to the brick manufacturers, to the consumers of electricity. If the petitioner seeks to include this
expenditure involved in recovering fly ash, in the tariff proposed to be revised, I am sure that the Regulatory Commission would not permit the
same. In other words, the consumers of electricity cannot be made to bear the costs of 20% of fly ash supplied by the generating companies to the
brick manufacturers, on account of the impugned Notifications.
The respondents have not applied their mind to the above issues, as is obvious from the various Notifications. The earliest Notification on this
subject was issued in 1999. It was amended by another Notification dated 27.8.2003 and by a third Notification dated 3.11.2009. After the
advent of the first Notification of the year 1999, the Electricity Act, 2003 came to be passed. The impact of the Electricity Act, 2003 upon these
Notifications had not been considered by the respondents. Therefore, the impugned order is liable to be set aside. Accordingly, the writ petition is
allowed and the impugned order is set aside. No costs. Consequently, connected miscellaneous petition is closed.