Supreme Court Restores DVC Tariff Treatment of Sinking Fund Contributions

The Supreme Court allowed Damodar Valley Corporation’s appeal and set aside the Appellate Tribunal for Electricity’s review order that had restricted DVC from recovering both depreciation and Sinking Fund contributions through tariff. The Court restored the Tribunal’s original order dated 17 May 2019, holding that the review had departed from a binding Supreme Court precedent and exceeded the permissible limits of review jurisdiction.

Key Highlights :

• The dispute concerned DVC’s tariff for the period 2009–2014 and the treatment of its Sinking Fund, created to redeem bonds.
• The CERC’s tariff order and the Appellate Tribunal’s original decision permitted the relevant Section 40 funds to be treated as expenditure recoverable through tariff.
• The Supreme Court’s earlier decision in Bhaskar Shrachi Alloys Limited v. Damodar Valley Corporation, (2018) 8 SCC 281, had upheld the treatment of depreciation and the Sinking Fund under the DVC Act framework.
• The Tribunal’s review order treated the simultaneous allowance of depreciation and Sinking Fund contributions as impermissible double benefit and allowed only one of the two.
• The Supreme Court set aside the review order and restored the Appellate Tribunal’s order dated 17 May 2019.
• Costs of 2,00,000 were imposed on Maithan Alloys Limited, and n1,50,000 on Steel Authority of India Limited (SAIL), payable to DVC within one month; delay in payment of SAIL’s costs attracts interest at 18 per cent per annum.

Background :

• DVC was established under the Damodar Valley Corporation Act, 1948, with functions extending beyond power generation to flood control, irrigation and regional development.
• The earlier tariff dispute for the preceding period had been considered by the Supreme Court in Bhaskar Shrachi Alloys, which addressed the continued operation of the DVC Act alongside the Electricity Act, 2003.
• For the 2009–2014 period, CERC determined DVC’s tariff under the Electricity Act, the DVC Act and the CERC (Terms and Conditions of Tariff) Regulations, 2009.
• The consumer-side review petition was filed after the Appellate Tribunal had upheld the tariff treatment. It remained pending for about five years before the Tribunal allowed review.

What Has Changed :

• Issue 1 – Whether the Sinking Fund could be recovered through tariff alongside depreciation. Finding: Section 40 of the DVC Act and Regulation 43 of the 2009 Tariff Regulations expressly permit the relevant funds to be treated as expenditure. The Court held that the statutory scheme allows both depreciation and Sinking Fund contributions to be recognised in the manner prescribed. Outcome: The Tribunal’s original treatment was restored; the review-based restriction was set aside (paras 17–26).
• Issue 2 – Whether the Tribunal could revisit the earlier decision through review. Finding: Review is confined to an error apparent on the face of the record and cannot be used as an appeal in disguise or to take a different view after detailed reasoning. The Tribunal’s approach also disregarded the binding ruling in Bhaskar Shrachi Alloys. Outcome: The review order was held illegal and contrary to judicial discipline and Article 141 of the Constitution (paras 22–29).
• Issue 3 – Final relief and costs. Finding: The review proceedings were an abuse of process, and SAIL’s intervention supporting the impugned approach was criticised. Outcome: Appeal allowed; original Tribunal order dated 17 May 2019 restored; costs imposed on the first respondent and SAIL (paras 30–32).

Who Is Affected :

• DVC, whose tariff treatment of the Sinking Fund and depreciation has been restored for the period in dispute.
• Electricity consumers and parties to tariff proceedings involving DVC, since the judgment confirms the applicable statutory treatment for the relevant period.
• CERC and the Appellate Tribunal for Electricity, insofar as they apply the DVC-specific provisions in tariff determination and exercise review jurisdiction.
• No separate class of persons is expressly excluded in the judgment.

Compliance Action Points :

• No direct compliance action is prescribed for regulated entities by this judgment.
• Maithan Alloys Limited must pay n2,00,000 in costs as directed by the Court.
• SAIL must pay 1,50,000 to DVC within one month from 30 October 2026. If payment is not made within that period, interest at 18 per cent per annum applies.

Analysis & Impact :

• For CA / CS / Tax & Legal Professionals: In DVC tariff disputes, examine Section 40 of the DVC Act together with Regulation 43 of the 2009 Tariff Regulations and the binding ruling in Bhaskar Shrachi Alloys. A review petition should identify a genuinely apparent error; it cannot reopen a concluded issue by advancing a different interpretation.
• For Businesses & Consumers: The judgment preserves the tariff treatment previously approved for DVC in the period under consideration. The practical tariff impact will depend on the applicable tariff orders and billing period; the judgment does not quantify a revised consumer charge.
• For News Readers: The Supreme Court has restored the earlier tariff ruling and reinforced that tribunals must follow binding Supreme Court decisions.
• Points to Watch: The judgment concerns the 2009–2014 tariff period and the statutory/regulatory framework considered in the case. Any later tariff period must be assessed under the regulations applicable to that period.

References :

• Electricity Act, 2003 – Section 14, fourth proviso: preserves the application of DVC Act provisions that are not inconsistent with the Electricity Act.
• Electricity Act, 2003 – Sections 61, 173 and 174: tariff principles and statutory rules on inconsistency and overriding effect.
• Damodar Valley Corporation Act, 1948 – Sections 32, 37, 38, 39 and 40: expenditure, profit allocation, interest, capital cost and depreciation/reserve funds.
• CERC (Terms and Conditions of Tariff) Regulations, 2009 – Regulation 43: special provisions for DVC tariff, including depreciation and Section 40 funds.
• Bhaskar Shrachi Alloys Limited v. Damodar Valley Corporation, (2018) 8 SCC 281: binding Supreme Court precedent on the DVC tariff framework and Sinking Fund.
• State of West Bengal v. Kamal Sengupta, (2008) 8 SCC 612: principles governing the scope of review and the meaning of an error apparent.

Source & Attribution :

• Damodar Valley Corporation v. Maithan Alloys Limited & Ors., Civil Appeal No. 11106 of 2024, 2026 INSC 1178, judgment dated 30 October 2026 (supplied PDF).
• No other source used.

Disclaimer: This summary is an editorial aid prepared from publicly available information. It is not legal, tax or investment advice.