Punjab and Haryana High Court rejects plea against privatisation of electricity distribution in Chandigarh

The Punjab and Haryana High Court recently dismissed two petitions challenging the decision of the Chandigarh Union Territory administration to privatise electricity distribution in Chandigarh [UT Powermen Union, Chandigarh v. Union of India and Others].

A bench of Chief Justice Sheel Nagu and Justice Anil Kshetarpal said that courts must show restraint when exercising judicial review of policy decisions, especially those driven by economic and operational considerations.

"The scope of judicial review in a policy decision is extremely narrow," the Court said.

It referred to the Supreme Court's ruling in Balco Employees Union v. Union of India, underscoring that courts should not intervene in policy matters unless the decision is arbitrary or violates constitutional or statutory limits.

"The Supreme Court in Balco Employees union (Registered) v. Union of India and Others held that it is neither within the domain of the Courts nor scope of judicial review to embark upon an enquiry as to whether a particular public policy is appropriate or whether better public policy can be evolved," the Court stated.

Hence, it dismissed the  petitions filed by UT Powermen Union, Chandigarh and the Federation of Sectors Welfare Association which questioned the legality and procedural deficiencies of the privatisation process.

In May 2020, as part of the "Atmanirbhar Bharat" initiative, the Union Ministry of Finance announced several structural reforms aimed at improving efficiency and financial sustainability in Union Territories, including plans to privatize power distribution.

Following this, the Chandigarh administration initiated the process to corporatise and privatise its electricity department. In November 2020, it invited bids for a 100% stake in a newly formed electricity distribution company.

The UT Powermen Union and the Federation of Sectors Welfare Association opposed this decision, claiming that the privatisation process was hasty and legally flawed.

They argued that without a finalized transfer scheme under Section 131 of the Electricity Act, 2003, the bidding process was invalid.

The petitioners contended that the process did not comply with Section 131 which mandates a finalised transfer scheme before bid issuance. They argued that the administration should have formalised a company structure before initiating privatisation.

The petitioners also claimed that Chandigarh’s electricity wing was profitable and privatizing this revenue-generating asset was against public interest.

They also contended that the absence of a dedicated electricity board in Chandigarh as mandated by the Punjab Reorganization Act of 1966 should have been a factor against privatisation.

The Court analyzed Section 131 of the Electricity Act of 2003 to determine whether the absence of a finalised transfer scheme before bidding would amount to a violation of law.

The bench noted that Section 131(1) allows for a transfer scheme to be prepared and published “from the effective date” without requiring its finalisation before bids.

Hence, it concluded that the petitioners' interpretation was inconsistent with the Act’s language.

“On the careful reading of Section 131(1) of the 2003 Act, it is evident that a transfer scheme shall come into effect from the date it is published, or such future date as may be stipulated...Section 131 does not envisage existence of a transfer scheme before inviting bids,” the Court said.

Further, the Court emphasized that judicial review of policy decisions must be exercised with caution.

The Court also added that it is not bound by the pleadings or positions taken by parties when interpreting statutory provisions.

“It is significant to note that a Constitutional Court, while interpreting the statutory provisions, is not bound by the pleadings or the stand taken by the respective parties. Once the Statute is capable of its literal interpretation, the Court is expected to follow the same irrespective of the stand taken by the parties,” the judgment stated

Accordingly, the Court dismissed the petitions, ruling that the procedural requirements under Section 131 and arguments on public interest did not justify blocking the privatization.

[Read Judgment]