Isabella Mariam

The High Court of Judicature at Bombay, Division Bench of Justice B. P. Colabawalla and Justice Firdosh P. Pooniwalla held that the Maharashtra Electricity Regulatory Commission (MERC) acted beyond its authority in revising the Multi-Year Tariff (MYT) order without giving prior notice or a fair hearing to all parties concerned. Emphasizing the importance of procedural consistency, the Court noted that when MERC had followed a participatory process in issuing the original tariff order, it was bound to adopt the same approach while reviewing it. Any departure from this, the Bench observed, would undermine fairness and create administrative disorder. The Court therefore set aside the review order and directed the Commission to undertake the process afresh after consulting affected stakeholders.

The petitions were filed by multiple generating companies, associations, industrial consumers, and other stakeholders challenging the review order dated 25 June 2025 issued by the Maharashtra Electricity Regulatory Commission (MERC). The dispute arose after MERC had issued its Multi-Year Tariff (MYT) order on 28 March 2025 for the control period FY 2025–26 to 2029–30, following the statutory public-consultation procedure under the MERC (Multi Year Tariff) Regulations, 2024.

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MSEDCL subsequently filed an interlocutory application on 1 April 2025 seeking a stay on the MYT order and asserted that it would file a detailed review petition. MERC granted an ex-parte stay on 2 April 2025. MSEDCL then filed Review Petition on 20 April 2025. Several petitioners sought intervention and access to the review documents but were not provided copies. On 6 and 9 May 2025, MERC conducted e-hearings without issuing notice to stakeholders or allowing them participation.

On 25 June 2025, MERC issued the impugned review order, substantially modifying crucial aspects of the original MYT order. The changes included altered TOD-banking rules for renewable generators, re-categorisation of hotels from HT-Industrial to HT-Commercial, and significant increases in capital expenditure approvals, thereby altering ARR and tariff components for consumers.

Petitioners contended that MERC violated mandatory procedural requirements and statutory rights of participation under Section 64(3) and Section 86(3) of the Electricity Act, 2003; Regulation 14 of MYT Regulations, 2024; and Regulations 28, 39 and 40 of the MERC (Transactions of Business) Regulations, 2022. They argued that stakeholders were entitled to notice and hearing before any substantial modification of the MYT order.

MERC and MSEDCL argued that tariff determination was a regulatory/legislative function, that the review was within MERC’s inherent powers, and that Regulation 28(f) did not apply. They contended stakeholders could challenge the review order before APTEL under Section 111.

The Court recorded that the original MYT order was issued after “public hearings between 25th February 2025 and 4th March 2025 at various locations in the State” and after receiving objections from stakeholders. It observed that the review order brought “substantial modifications” to the MYT framework and had “far-reaching consequences.”

The Court noted that MERC had permitted only MSEDCL to participate in the review hearings and stated: “none of the Petitioners or any other stakeholders were ever heard… The only party heard was MSEDCL.” It recorded that the review order altered TOD-banking usage by restricting drawal of solar-banked energy to an “8-hour window,” whereas the original order had permitted “17 hours.” The Court observed that such changes “affect all solar generating companies and their customers.”

Regarding tariff categorisation, the Court stated: “the categorization of the hotels and lodging facilities was changed from HT-I to HT-II… without hearing anyone, other than MSEDCL.” The Court further recorded that MERC approved “additional capitalization of Rs. 55,624.50 Crores… bringing the revised total approved capitalization to Rs. 87,374.33 Crores,” and noted the consequential increase in ARR components.

Interpreting the Regulations, the Court observed that Regulation 14 of MYT Regulations, 2024 mandates publication, stakeholder access to documents, and public objections prior to tariff determination. It stated: “this entire process was followed by MERC… at the time of passing the original MYT order.”

Analysing the TOB Regulations, the Court held that Regulation 28(f) requires notice to affected parties: “no such application will be granted without previous notice to the opposite side or party.”

On Regulation 40(b), the Court recorded: “if the Commission desires to make amendments… it shall provide an opportunity to the parties affected.”

The Court rejected MERC’s reliance on inherent powers, observing: “The inherent powers cannot be invoked to bypass the Act or Regulations.”

Referring to Supreme Court precedent, the Court quoted that generic tariff determined after public notice “can be amended only by following the same procedure.”

Ultimately, the Court held that MERC’s reasoning for excluding stakeholders was “wholly unsustainable.” It stated that the impugned review order was not a mere correction but one with “far-reaching implications” and that depriving stakeholders of participation would be “ludicrous.”

The Court directed that “the impugned review order dated 25th June 2025 is hereby quashed and set aside. The matter is now remanded to MERC to decide the Review Petition filed by MSEDCL afresh after consulting all stakeholders and hearing and taking into consideration their objections, if any.”

“Before MERC embarks upon this journey, it shall ensure that MSEDCL shall forward a copy of its Review Petition [alongwith its annexures, if any] to any stakeholder who seeks it. MERC shall ensure that public notice is given by MSEDCL as contemplated under Regulation 14 of the MYT Regulation, 2024.”

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“Until MERC passes an order on the Review Petition, the parties shall be governed by the MYT order 28th March 2025. Rule is made absolute in the aforesaid terms, and all the above Writ Petitions are also disposed of in terms thereof.”

“In order to enable the MERC and/or MSEDCL to test the correctness of this judgment before the Hon’ble Supreme Court, it would be in the fitness of things, if the operation of this order is stayed for a period of 4 weeks. It accordingly so ordered. The interim order passed by this Court on 1st July 2025, read with the order dated 8th August 2025 and 26th August 2025, shall continue to operate.”

Advocates Representing The Parties

For the Petitioners: Mr. Zal Andhyarujina, Sr. Adv.; Mr. Janak Dwarkadas, Sr. Adv.; Ms. Deepa Chawan, Sr. Adv.; Mr. Ashish Kamat, Sr. Adv.; Mr. Darius Khambata, Sr. Adv.; Mr. Pradeep Sancheti, Sr. Adv.; Multiple advocates as recorded for each writ petition.

For the Respondents: Dr. Birendra Saraf, Advocate General for MERC; Mr. J.P. Sen, Sr. Adv.; Mr. Sajan Poovayya, Sr. Adv.; Mr. Aspi Chinoy, Sr. Adv.; with their respective teams for MERC and MSEDCL.

Case Title: O2 Renewable Energy VII Pvt. Ltd. & Ors. v. Maharashtra Electricity Regulatory Commission & Ors.
Neutral Citation: 2025: BHC-OS:19982-DB
Case Number: Writ Petition (L) No. 19437 of 2025 & connected matters
Bench: Justice B.P. Colabawalla & Justice Firdosh P. Pooniwalla