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Se.14,15 and sec.42, 43 of Electricity Act – Application for Switch over from BEST to TPC FOR ELECTRICITY -BEST rejected permission on the ground that TPC can not supply Electricity in his area – application to Regulatory Commission – allowed – BEST filed appeals – dismissed – Apex court held that It is, therefore, difficult to accept the extreme position taken by the appellant that if local authority is a distribution licensee in a particular area, there cannot be any other distribution licensee in that area without the permission of such a local authority. Not only such a contention would negate the effect of universal supply obligation under Section 43, it will also amount to providing an exception which is not there either in Section 43 or Section 14 of the Act namely to treat local authority in special category and by giving it the benefit even that benefit which is not specified under the Act.= Brihanmumbai Electric Supply & Transport Undertaking ….Appellant Vs. Mahrashtra Electricity Regulatory Commission (MERC) & Ors. ….Respondents = 2014(May.Part) http://judis.nic.in/supremecourt/filename=41519

Se.14,15 and sec.42, 43 of Electricity Act – Application for Switch over from BEST to TPC FOR ELECTRICITY -BEST rejected permission on the ground that TPC can not supply Electricity in his area  – application to Regulatory Commission – allowed – BEST filed appeals – dismissed – Apex court held that It is, therefore, difficult to accept the extreme position taken by the appellant that if local authority is a distribution licensee in a particular area, there cannot be any other distribution licensee  in  that area without the permission of such a local authority.  Not  only such  a  contention  would  negate  the  effect  of  universal  supply obligation under Section 43, it will  also  amount  to  providing   an exception which is not there either in Section 43 or Section 14 of the Act namely to treat local authority in special category and by  giving  it the benefit even that benefit which is not specified under the Act.=

 

  In nutshell,  he

      wants to switch over from BEST to TPC for his electricity requirement.

      In response to his request, TPC advised the consumer vide letter dated

      8.7.2009  to  approach  the  BEST  for  its  permission  to  use   its

      distribution network of the BEST to enable TPC to  supply  electricity

      to the consumer using that network. The consumer, accordingly,  turned

      to BEST requesting it to give the said permission.  It  was,  however,

      denied by BEST vide letter dated 31.7.2009  and  again  on  10.8.2009.

      After  receiving  this  rejection,  the  consumer  approached   Mumbai

      Electricity Regulatory Commission  (hereinafter  referred  to  as  the

      “Regulatory  Commission”)  with   petition   seeking   the   following

      directions:

 

                 “(a) That this Hon’ble Commission may be pleased to direct

           TPC to provide electricity supply to  the  Petitioner  and  make

           such supply available as  early  as  possible,  either  on  BEST

           Network or by extending its own network, as  may  be  necessary,

           failing which TPC’s  distribution license should be cancelled by

           this Hon’ble Commission;

 

                 (b) that the Hon’ble Commission may be pleased  to  direct

           the respondent to  pay  compensation  to  the  petitioner  under

           Regulations 3.2 and 12 of  MERC  (Standards  of  Performance  of

           Distribution   Licensees,   Period   of   Giving   Supply    and

           Determination of Compensation) Regulations 2005;” =

 

 

 

 

  RE: Jurisdiction of the Regulatory Commission.

 

      7.    This contention was raised primarily on the  ground  that  there

      was an alternative remedy  provided  to  the  consumer  to  raise  his

      grievances before  the  Consumer  Grievances  Redressal  Forum  (CGRF)

      established under Section 42 (5) of the Act. Therefore,  the  consumer

      should have approached the  said  Forum  instead  of  filing  petition

      before  the  Regulatory  Commission.  This   contention   is   totally

      misconceived and rightly rejected by the authorities below.

As on that date, he was not the consumer of  TPC  but  wanted  to become its consumer

 

      RE:  Whether TPC is deemed distribution licensee

 

 TPC is the successor of the Bombay Hydroelectric  License,  1907,  the

      Andhra Valley Hydro-electric License, 1919, the Nila Mula Valley Hydro-

      electric License, 1921 and Trombay Thermal Power Electric License 1953

      to supply electricity to consumers in specified areas  in  and  around

      Mumbai (Erstwhile Licenses). The Erstwhile Licenses were  subsequently

      amalgamated and transferred to Tata Power on 12.7.2001.

 

TPC’s  area  of  supply  overlaps   with   that   of   Reliance

      Infrastructure Limited (R Infra) another distribution licensee in  the

      suburban Mumbai area, and with that of the Appellant (BEST)  in  South

      Mumbai. 

the Electricity

      Act, 2003 came into force.

 

On the basis of aforesaid facts TPC claimed that  by  virtue  of

      first proviso to Section 14 of the Act, it was a deemed  licensee  for

      the area of supply of BEST. 

Under Section 14 the Regulatory Commission

      is empowered to grant a license to any person on an  application  made

      to it under Section 15  of  the  Act.  This  license  may  pertain  to

      transmit  electricity  as  a  transmission  licensee;  or   distribute

      electricity as a distribution licensee; or  to  undertake  trading  in

      electricity as an electricity trader, in any area, as may be specified

      in the license.  This  section  has  nine  provisos  which  stipulated

      various circumstances under which no specific license is  required  by

      making  an  application  under  Section  15  and  if  the   conditions

      stipulated in any of these provisos are satisfied, such  a  person  is

      treated as deemed licensee.

Since as on the date of  commencement  of  the  Act,  TPC

      became deemed licensee under the first  proviso  as  its  predecessors

      were holding the distribution licence  under  the  repealed  laws  and

      thereafter specific  conditions  of  licence  are  formulated  by  the

      Regulatory Commission  under  Section  16  mentioning  the  period  of

      15.8.2014, it becomes clear that the combined fact of  that  would  be

      that    YPC    would    be    deemed    licence    till     15.8.2014.

 Once, we come to the conclusion  that  TPC

      can be treated as deemed distribution licensee under the first proviso

      to Section 14 of the Act 2003 and the area of the licence is the  same

      which overlaps with the area covered by BEST, argument  predicated  on

      sixth proviso to Section 14 would not be available to the BEST.

 

RE: AVAILABILLITY OF OPEN ACCESS TO TPC IN THE AREA COVERED BY BEST,

      WHICH IS A LOCAL AUTHORITY

 

                                   AND

 

      PERMISSIBILITY OF TPC TO EXTEND ITS NETWORK IN  BEST  AREA  OF  SUPPLY

      WITHOUT ITS APPROVAL/CONSENT.

Thus, on a conjoint reading of Sections 42 and  43  of  the  Act

      along with the objectives and purpose for which Act 2003  is  enacted,

      it becomes clear that there are two ways in which a consumer stated in

      a  particular area can avail supply of electricity, as pointed out  by

      the  learned  senior  counsel  for  TPC  and  noted  above.   When  an

      application is made by a  consumer  to  a  distribution  licensee  for

      supply of electricity, such a  distribution  licensee  for  supply  of

      electricity,  such  a  distribution   licensee   can   request   other

      distribution licensee in the  area  to  provide  it  network  to  make

      available for wheeling electricity to such  consumers  and  this  open

      access is to be given as per the provisions of section 42 (3)  of  the

      Act.

 Once we read the provisions in the aforesaid manner, it  becomes

      clear that there is no exemption from universal service obligation  to

      any distribution licensee under the Act, on account of the presence of

      a “local authority” as a distribution licensee in the particular  area

      of supply, which is also reinforced by Paragraph 5.4.7 of the National

      Electricity Policy which clearly states that the  second  licensee  in

      the same area shall have the obligation to supply to all consumers  in

      accordance with Section  43.  In  this  context,  it  is  relevant  to

      reproduce the following observations in Chandu Khamaru v. Nayan  Malik

      reported in (2011)  12 SCC 314:

 

                 “7…These provisions in the Electricity Act, 2003  make  it

           amply clear that a distribution licensee has a statutory duty to

           supply electricity to an  owner  of  occupier  of  any  premises

           located in the area of supply of the distribution  licensee,  if

           such owner or occupier of  the  premises  applies  for  it,  and

           correspondingly every owner or occupier of any  premises  has  a

           statutory right to apply for and  obtain  such  electric  supply

           from the distribution licensee.”

 

 

 

 

      25.   It is, therefore, difficult to accept the extreme position taken

      by the appellant that if local authority is a distribution licensee in

      a particular area, there cannot be any other distribution licensee  in

      that area without the permission of such a local authority.  Not  only

      such  a  contention  would  negate  the  effect  of  universal  supply

      obligation under Section 43, it will  also  amount  to  providing   an

      exception which is not there either in Section 43 or Section 14 of the

      Act namely to treat local authority in special category and by  giving

      it the benefit even that benefit which is not specified under the Act.

 While dealing with the issue No.2 above, we  have  already  held

      that TPC and BEST are parallel  distribution  licensee  in  the  South

      Bombay Area. 

 We, thus, do not find any merit in any of the contentions of the

      appellant. As a consequence, this appeal fails and is hereby dismissed

      with cost thereby affirming the order of the Appellate Tribunal.

 

2014(May.Part) http://judis.nic.in/supremecourt/filename=41519

SURINDER SINGH NIJJAR, A.K. SIKRI

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.4223 OF 2012

 
Brihanmumbai Electric Supply &
Transport Undertaking
….Appellant
Vs.

 
Mahrashtra Electricity Regulatory
Commission (MERC) & Ors.
….Respondents

 
J U D G M E N T

 
A.K.SIKRI,J.

1. Respondent No.3 is a consumer (hereinafter referred to as the
“consumer”) of electricity (LT-II Category) whose premises are
situated within area of supply of the appellant namely Brihanmumbai
Electricity Supply and Transport Undertaking (BEST). In April 2009, he
approached respondent No.2 i.e. Tata Power Company Limited (TPC) with
a request that he be supplied the electricity by TPC. In nutshell, he
wants to switch over from BEST to TPC for his electricity requirement.
In response to his request, TPC advised the consumer vide letter dated
8.7.2009 to approach the BEST for its permission to use its
distribution network of the BEST to enable TPC to supply electricity
to the consumer using that network. The consumer, accordingly, turned
to BEST requesting it to give the said permission. It was, however,
denied by BEST vide letter dated 31.7.2009 and again on 10.8.2009.
After receiving this rejection, the consumer approached Mumbai
Electricity Regulatory Commission (hereinafter referred to as the
“Regulatory Commission”) with petition seeking the following
directions:

“(a) That this Hon’ble Commission may be pleased to direct
TPC to provide electricity supply to the Petitioner and make
such supply available as early as possible, either on BEST
Network or by extending its own network, as may be necessary,
failing which TPC’s distribution license should be cancelled by
this Hon’ble Commission;

(b) that the Hon’ble Commission may be pleased to direct
the respondent to pay compensation to the petitioner under
Regulations 3.2 and 12 of MERC (Standards of Performance of
Distribution Licensees, Period of Giving Supply and
Determination of Compensation) Regulations 2005;”

 
2. In the meantime, respondent Nos.4 to 8 also filed similar
petitions before the Regulatory Commission with same relief as they
also wanted to switch over to TPC for their electricity requirement.
Since direction was sought for TPC, only TPC was made party. However,
at the instance of Regulatory Commission BEST and Reliance Industries
Limited (RIL) were also impleaded in these matters. After hearing all
the parties, Regulatory Commission passed orders dated 22.2.2010
holding that TPC was bound to supply electricity in terms of
applicable Regulations and therefore direction was given to the TPC to
supply electricity to the consumers either through BEST wires or its
own wires. The operative part of that order reads as under:

“In view of the above there is no requirement to issue a
direction in regard to the Petitioner’s claim of compensation
under Regulation 3.2 and 12 of the SOP regulations. However, TPC
is bound by Regulation 4.7 of MERC (Standards of Performance of
Distribution Licensees, Period for Giving Supply and
Determination of Compensation) Regulations, 2005 in terms of the
timelines as mentioned in the said Regulation. Time has started
ticking from the date of receipt of applications by TPC from the
Petitioners who have requisitioned for electricity supply. TPC
will have to adhere to the timelines specified in the
regulations.”

 
3. We may point out here that the BEST (the appellant herein) had
resisted the demand of the consumers in their petitions with the
following contentions:

(a) The Regulatory Commission did not have the jurisdiction to

entertain a dispute between the consumer and a distribution licensee;

(b) TPC was not a deemed distribution licensee for the area in
question and therefore was not permitted to supply the electricity to
any consumer in that area;

(c) that unlike other distribution licensees, BEST being a local
authority, no persons situated in BEST’s area of supply could avail
electricity from any other licensee, on account of BEST invoking a
statutory exemption available to a local authority under Section
42(3) of The Electricity Act, 2003 Act (hereinafter referred to as the
Act).

(d) Since TPC had clarified that it was willing to extend its
network and supply electricity, BEST also contended that TPC could not
extend its network in BEST’s area of supply, without BEST’s consent
and agreement.

4. In its order dated 22.2.2010 while issuing the directions
extracted above, the Regulatory Commission rejected BEST’s
contentions and held that Tata Power had a duty under the Act to
extend its distribution network and supply electricity, if the
consumers so required, in the South Mumbai area. In light of TPC’s
position that it was willing to extend its network and supply
electricity, the MERC held that there was no requirement to give any
directions to it. The Regulatory Commission also held that TPC would
be deemed distribution licensee for the area in question.

5. BEST challenged the aforesaid order of the Regulatory Commission
by filing appeal before the Appellate Tribunal for Electricity, New
Delhi (hereinafter referred to as the “Appellate Tribunal”). This
appeal, however, has been dismissed by the Appellate Tribunal vide
orders dated 4.4.2012, thereby affirming the findings and direction of
the Regulatory Commission. Not satisfied, BEST has filed the instant
appeal statutorily provided under Section 125 of the Electricity Act.

 

6. We have already stated in brief the four contentions which were
raised by BEST before the Regulatory Commission. Same contentions were
raised before the Appellate Tribunal, which are the submissions before
us as well. Therefore, we proceed to deal with these submissions
hereinafter:

RE: Jurisdiction of the Regulatory Commission.

7. This contention was raised primarily on the ground that there
was an alternative remedy provided to the consumer to raise his
grievances before the Consumer Grievances Redressal Forum (CGRF)
established under Section 42 (5) of the Act. Therefore, the consumer
should have approached the said Forum instead of filing petition
before the Regulatory Commission. This contention is totally
misconceived and rightly rejected by the authorities below. As noted
above, petition was filed by the consumer seeking direction against
TPC to supply electricity to him. Thus, he approached the Regulatory
Commission to enforce a distribution licensee obligation under the
Act. As on that date, he was not the consumer of TPC but wanted to
become its consumer. In so far as CGRF is concerned, which each
distribution licensee is required to set up under Section 42 (5) of
the Act, it deals with the grievances of the consumer. Consumer is
defined under Section 2 (15) of the Act and reads as under:

“any person who is supplied with electricity for his own use by
a licensee or the Government or by any other person engaged in
the business of supplying electricity to the public under this
Act or any other law for the time being in force and includes
any person whose premises are for the time being connected for
the purposes of receiving electricity with the works of a
licensee, the Government or such other person, as the case may
be.”

 
8. Thus, respondent No.3 not being a consumer could not have
approached CGRF. Further, we find that in Maharashtra Electricity
Regulatory v. Reliance Energy Ltd. (2007) 8 SCC 381, this Court has
held that the Regulatory Commission has the power to require a
licensee to fulfill its obligations under the Act. Thus, we are of the
opinion that the Regulatory Commission had the requisite jurisdiction
to entertain the petition filed by the consumer. Presumably, for this
reason, this contention was pressed half hearted before us and given
up in the middle.

RE: Whether TPC is deemed distribution licensee

9. Before we take note of the argument of the parties on this
aspect and deal with the same, some background facts need a mention.
TPC is the successor of the Bombay Hydroelectric License, 1907, the
Andhra Valley Hydro-electric License, 1919, the Nila Mula Valley Hydro-
electric License, 1921 and Trombay Thermal Power Electric License 1953
to supply electricity to consumers in specified areas in and around
Mumbai (Erstwhile Licenses). The Erstwhile Licenses were subsequently
amalgamated and transferred to Tata Power on 12.7.2001.

10. The Government of Maharashtra, in exercise of powers under the
Indian Electricity Act, 1910 amended the area of supply under the
Erstwhile Licenses from time to time. This included addition of new
areas as well as handing over of certain areas to the Government
owned distribution company, earlier known as the Maharashtra State
Electricity Board.

11. TPC’s area of supply overlaps with that of Reliance
Infrastructure Limited (R Infra) another distribution licensee in the
suburban Mumbai area, and with that of the Appellant (BEST) in South
Mumbai. In 2002, R Infra filed a petition before the Respondent No.1
(MERC) alleging that Tata Power’s license did not authorize Tata Power
to supply electricity to direct retail consumers (with a maximum
demand below 1000KVA). While the petition was pending, the Electricity
Act, 2003 came into force.

12. On the basis of aforesaid facts TPC claimed that by virtue of
first proviso to Section 14 of the Act, it was a deemed licensee for
the area of supply of BEST. Under Section 14 the Regulatory Commission
is empowered to grant a license to any person on an application made
to it under Section 15 of the Act. This license may pertain to
transmit electricity as a transmission licensee; or distribute
electricity as a distribution licensee; or to undertake trading in
electricity as an electricity trader, in any area, as may be specified
in the license. This section has nine provisos which stipulated
various circumstances under which no specific license is required by
making an application under Section 15 and if the conditions
stipulated in any of these provisos are satisfied, such a person is
treated as deemed licensee. We are here concerned with 1st proviso
under which TPC claims to be a deemed distribution licensee as well as
6th proviso which is invoked by BEST in contending TPC cannot be a
deemed distribution licensee in the area where BEST operates.
Therefore, we reproduce both these provisos:

1st Proviso:“Provided that any person engaged in the business of
transmission or supply of electricity under the provisions of
the repealed laws or any Act specified in the Schedule on or
before the appointed date shall be deemed to be a licensee under
this Act for such period as may be stipulated in the licence,
clearance or approval granted to him under the repealed laws or
such Act specified in the Schedule, and the provisions of the
repealed laws or such Act specified in the Schedule in respect
of such licence shall apply for a period of one year from the
date of commencement of this Act or such earlier period as may
be specified, at the request of the licensee, by the Appropriate
Commission and thereafter the provisions of this Act shall apply
to such business.

6thProviso:Provided also that the Appropriate Commission may
grant a licence to two or more persons for distribution of
electricity through their own distribution system within the
same area, subject to the conditions that the applicant for
grant of licence within the same area shall, without prejudice
to the other conditions or requirements under this Act, comply
with the additional requirements [relating to the capital
adequacy, creditworthiness, or code of conduct] as may be
prescribed by the Central Government, and no such applicant, who
complies with all the requirements for grant of licence, shall
be refused grant of license on the ground that there already
exists a licensee in the same area for the same purpose.”

 
13. As per the first proviso if any person was engaged in the
business of transmission or supply of electricity under the provisions
of the repealed laws etc. that person is deemed to be a licensee under
the Act, 2003 as well. The period for such deemed licence is the one
that is stipulated in the licence, clearance or approval granted to
him under the repealed laws. If it is under any Act specified in the
Schedule in respect of such licence, then the period of licence is for
one year from the date of commencement of the Act or such period as
may be specified by the Appropriate Commission. It would mean that
either the period of deemed licence for such a person is the period
which is stipulated in the licence, clearance or approval granted to
him under the repealed laws or for a period of one year from the date
of commencement of the Act or the period which may be specified, at
the request of the licensee by the Regulatory Commission. Once, such a
period is over, then that person is supposed to apply for licence
under Section 14.

Proviso six, on the other hand, deals with a different
situation. As per this provision, the Regulatory Commission is
authorized to grant a licence to two or more persons for distribution
of electricity through their own distribution system within the same
area. It is subject to the conditions that the applicant for grant of
licence within the same area shall apply with the additional
requirements relating to the capital adequacy, creditworthiness, or
code of conduct as may be prescribed by the Central Government. It
further provides that merely because there exists a licensee in the
same area would not be a ground to reject an application for another
applicant for same purpose. This provision deals with open access
policy.

14. As per the TPC, proviso one is applicable in their case since
its predecessor were granted licence under the Act, 1910 and therefore
it continuous to be licensee as per the aforesaid deeming provision
under the Act, 2003 as well. The case set up by the TPC in this behalf
is such a licence granted under the old Act is valid upto 15.8.2014
which is categorical stipulated in the Specific Licence Conditions by
the Regulatory Commission. Therefore, it is only after 15.8.2014 that
the TPC would be required to take fresh licence by making application
under Section 15 of the Act, 2003. This is stated on the ground that
the MERC formulated the MERC (Specific Conditions of License
applicable to the Tata Power Company Limited) Regulations, 2008
(Specific License Conditions) under Section 16 of the Act. The
Specific License Conditions read with the MERC (General Conditions of
Distribution License) Regulations, 2006 set out the terms and
conditions of Tata Power’s license in supersession of the Erstwhile
Licenses, and authorize Tata Power to supply electricity in its area
of supply to the public for all purposes in accordance with the Act.
The Specific License Conditions further stipulate that the term of
Tata Power’s license is up to 15.8.2014.

15. The argument of BEST, on the other hand, is that the Appellate
Tribunal was wrong in holding TPC was a deemed licensee under the
first proviso to Section 14, as well as a parallel licensee under the
sixth proviso to Section 14 of the Act 2003. According to Mr. Naphade,
the Appellate Tribunal gravely erred in failing to appreciate that
network of TPC cannot be allowed or extended within the area of supply
of BEST in the absence of distribution licensee which TPC failed to
obtain from Regulatory Commission, though it is a necessary
requirement under sections 14 and 15 read with Section 12 of the Act.
It was argued that as per the first proviso to Section 14, a person is
treated deemed licensee only if it is engaged in the business of
supply of electricity under the provisions of the repealed laws and
it is for such period “as may be stipulated in the licence granted to
him under the repealed laws”. It was argued that the protection was
only for that period which is stipulated in the licence and not on the
basis of licence and there is no such period specified in the business
up to 15.8.14 specified in the licence. It was, further, argued that
the provisions of the repealed laws in respect of such licences are
applicable for a period of one year within which and thereafter
licence was to be obtained under Section 14 by moving an application
under Section 15, as per the procedure prescribed in the Act 2003. It
was argued that for the deeming fiction in the first proviso to said
Section 14 to arise, (i) a person must be engaged in the business of
supply of electricity under the repealed laws on or before 10.6.2003,
and (ii) a period (being, period of subsistence of licence) be
stipulated in the licence granted to such person under the repealed
laws. It was further pointed out that said deeming fiction applies (i)
to such a person, and (ii) for such stipulated period.

16. There are two facets of the submissions made by Mr. Naphade. In
the first instance it is to be found that there is a stipulation of
period in the manner stated in the first proviso. Second aspect is as
to whether it is incumbent, in all cases, to apply for licence under
the provisions of Sections 14 and 15 of the Act immediately after the
expiry of one year from the date of commencement of the said Act. In
so far as first aspect is concerned, the argument of the appellant
loses sight of the fact that in the first proviso the period for which
any person can be a deemed licensee is not only such period which is
stipulated in the licence, clearance or approval granted to him under
the repealed laws or such Act specified in the Schedule. It also
provides that the provisions of repealed laws or such Act specified in
the Schedule in respect of such a licence shall apply for a period of
one year from the date of commencement of Act 2003 or such earlier
period as may be specified at the request of the licensee by the
Regulatory Commission. In the present case, the Regulatory Commission
formulated MERC (Specific Conditions of License Applicable to TPCL)
Regulation 2008 i.e. Specific Licence Conditions. These were
formulated under Section 16 of the Act 2003 and it is in these
conditions there is a specific stipulation regarding term of TPC
licence up to 15.8.2014. We, therefore, are unable to accept the
submissions of the appellant that the licence was valid for a period
of one year only. It would be useful to refer to Section 16 of the Act
under which aforesaid Specific Licence Conditions of TPC are
formulated.

“16. Conditions of licence.- The Appropriate Commission
may specify any general or specific conditions which shall apply
either to a licensee or class of licensees and such conditions
shall be deemed to be conditions of such licence:

Provided that the Appropriate Commission shall, within one
year from the appointed date, specify any general or specific
conditions of licence applicable to the licensees referred to in
the first, second, third, fourth and fifth provisos to section
14 after the expiry of one year from the commencement of this
Act.”

 
Proviso to the aforesaid section very categorically enables the
Regulatory Commission to specify general or specific condition of
licence applicable to licensees referred to in the first to fifth
proviso to Section 14 after expiry of one year after the commencement
of that Act. Since as on the date of commencement of the Act, TPC
became deemed licensee under the first proviso as its predecessors
were holding the distribution licence under the repealed laws and
thereafter specific conditions of licence are formulated by the
Regulatory Commission under Section 16 mentioning the period of
15.8.2014, it becomes clear that the combined fact of that would be
that YPC would be deemed licence till 15.8.2014.
Tata Power’s license to supply electricity in the South Mumbai area is
clearly established by virtue of the following:

(a) The Erstwhile Licensee authorized Tata Power to supply
electricity to all consumers in Mumbai, including the South Mumbai
area;

(b) When the new Act came into force, by virtue of the 1st
Proviso to Section 14, Tata Power was deemed to be a licensee under
that Act.

This is also clear from Section 172(b) of the Act. It is trite
law that once the purpose of the deeming provision is ascertained,
full effect must be given to the statutory fiction and the fiction is
to be carried to its logical end.

17. An argument was sought to be raised before us that Regulation
2008 laying down specific conditions for TPC are flouted as they were
not made by the Regulatory Commission within the mandatory period of
one year. However, no such argument was raised earlier and there is no
challenge to the validity of the aforesaid Regulations which are made
by the Regulatory Commission under its statutory powers and therefore
are having statutory force. Once, we come to the conclusion that TPC
can be treated as deemed distribution licensee under the first proviso
to Section 14 of the Act 2003 and the area of the licence is the same
which overlaps with the area covered by BEST, argument predicated on
sixth proviso to Section 14 would not be available to the BEST.

RE: AVAILABILLITY OF OPEN ACCESS TO TPC IN THE AREA COVERED BY BEST,
WHICH IS A LOCAL AUTHORITY

AND

PERMISSIBILITY OF TPC TO EXTEND ITS NETWORK IN BEST AREA OF SUPPLY
WITHOUT ITS APPROVAL/CONSENT.

18. It was argued by Mr. Naphade that under the Act neither open
access can be allowed nor distribution system or network of a
purported parallel licensee (such as TPC) can be laid or extended
within area of supply of BEST. The learned senior counsel labored on
the aspect that admittedly BEST was a Public Sector Undertaking and
such bodies are given due recognition of and grant of exemption and/or
protection to a special category of licensee being a local authority
in the business of distribution of electricity before the appointed
day. He submitted that as BEST would be covered by the expression “ a
local authority” protected measures provided under the Act would be
applicable to it as well. According to him, a local authority was
always placed on a special footing under Act, 1910 as well as Act,
1948 and now under Act, 2003 which was clear from the provisions of
Section 42 (3) of the Act that reads as under:

“42(3) Where any person, whose premises are situated within the
area of supply of a distribution licensee, (not being a local
authority) engaged in the business of distribution of
electricity before the appointed day) requires a supply of
electricity from a generating company or any licensee other than
such distribution licensee, such person may, by notice, require
the distribution licensee for wheeling such electricity in
accordance with regulations made by the State Commission and the
duties of the distribution licensee with respect to such supply
shall be of a common carrier providing non-discriminatory open
access.”

 
This provision which deals with the duties of distribution
licensee as well as open access specifically excludes a local
authority.

Mr. Naphade thus argued that if the Legislature, having regard
to the special status of a local authority engaged in the business of
distribution of electricity before the appointed date (such as BEST),
has duly exempted open access in its area of supply, then it is but
consequential and/or a fortiori that a distribution system or network
of a purported parallel licensee (such as TPC) cannot be laid or
extended within the area of supply of a local authority engaged in the
business of distribution of electricity before the appointed date
(such as BEST). His submission was that the Legislature could never
have and in fact, has not intended that such special status (inclusive
of exemption from open access) be in vain or rendered
illusory/infructuous/nugatory, and more so by a mere lay out or
extension of a distribution system or network of the purported
parallel licensee. It is a fundamental principle of law that duly made
legislation can never be and should not be in vain or to no avail.
Hence, such special status (inclusive of exemption from open access)
cannot be ignored, but must necessarily be given full effect to and
enforced. According to him an irrational situation would arise if the
purported parallel licensee (such as TPC) could not supply electricity
under open access in the area of supply of a local authority engaged
in the business of distribution of electricity before the appointed
date (such as BEST), but could lay or extend its distribution system
or network in the area of supply of a local authority engaged in the
business of distribution of electricity before the appointed date
(such as BEST). As such, Section 42 (3) necessarily has to be
interpreted to qualify or restrict aforesaid Sixth Proviso to Section
14, Section 43(1), Section 42(1) and/or Section 42(2), to the extent
that any person, whose premises are situated within the area of supply
of a distribution licensee, (which is a local authority engaged in the
business of distribution of electricity before the appointed
date)cannot require a supply of electricity from a generating company
or any licensee other than such distribution licensee, through (i)
open access and/or(ii)otherwise (including under parallel license).
Moreso, as the provisions of the Electricity Act, 2003, provide for
protection of interest of electricity consumers, and as such ought not
and should not be interpreted to entail unnecessary burden of said
capital expenditure or electricity consumers; a local authority
engaged in the business of distribution of electricity before the
appointed date (such as BEST) is ex-facie placed on a special pedestal
vis-à-vis ordinary distribution licensees, under the Third Proviso to
Section 51 of the Electricity Act, 2003, which has been liberally
interpreted in favour of and to advantage of a local authority
engaged, before the commencement of the Electricity Act, 2003, in the
business of distribution of electricity (such as BEST), by the Hon’ble
Supreme Court of India in the Order dated 8.2.2011 made in Civil
Appeal No.848 of 2011 (Municipal Corporation of Greater Mumbai vs.
Maharashtra Electricity Regulatory Commission & Ors.).

19. On the other hand, Mr. Dhruv Mehta, learned senior counsel
appearing for TPC submitted that by this argument of the appellant was
mixing the otherwise two distinct concepts, namely that of open access
under Section 42 (3) of the Act and that of Universal Service of
Relations contained in Section 43 of the Act. Highlighting the purpose
of the Act which has, inter-alia, provided emphasizing the need for
efficiency and competition in the distribution business as well as
open access system and also multiple licences system in the same area
of supply, he submitted that if the contention of the appellant is
accepted it would negate the very objective which is sought to be
achieved by the aforesaid provisions. Mr. Mehta argued that under the
Act, there are two ways in which a consumer situated in a particular
area can avail supply of electricity: (i) from a distribution licensee
authorized to supply electricity in that area under Section 43; or
(ii) from any other supplier through the distribution network of a
distribution licensee by seeking “open access” in terms of Section
42(3). In the first option, the distribution licensee operating in a
particular area is required to lay down its network if required, in
order to supply electricity to a consumer seeking supply. The second
option, which is known as open access is provided under Section 42
read with Section 2(47) of the 2003 Act. Under Section 42(3) of the
2003 Act, a consumer has the right to require a distribution licensee
to make its network available for wheeling electricity to such
consumer from a third party supplier (i.e. a supplier of electricity
not being a distribution licensee in the area where the consumer is
situated). He submitted that this distinction between the two
different concepts is to be born in mind and the matter is seen in its
proper perspective. Section 42(3) carries out an exception in favour
of local authority only qua open access which would mean that a
consumer is disallowed from seeking open access from a distribution
licensee which is a local authority like BEST. That would mean that a
consumer being supplied by BEST cannot demand that BEST allow a third
party subject to supply electricity to such consumer through the
network of BEST. According to him, this exception would extend to
position contained in section 43 which casts “Universal Service
Obligation” on all distribution licensees to give supply to any owner
or occupier within its supply area. That would only mean if there is
an another distribution licensee in the area in which a local
authority like BEST also operates, a consumer can approach that
distribution licensee to supply him the electricity. However, for that
purpose, the said distribution licensee will have to supply the
electricity from its own laid in the network without using the network
of local authority.

20. After considering the rival contentions, we are of the opinion
that the interpretation suggested by Mr. Mehta needs to prevail and
therefore we do not find any fault with the view taken by the
Appellate Tribunal. We have already reproduced above provisions of
Section 42 (3) of the Act. As pointed out above, Section 42 of the Act
deals with the duties of distribution licensee and open access. Sub-
Section (1) thereof provides that it shall be the duty of a
distribution licensee to develop and maintain an efficient co-
ordinated and economical distribution system in his area of supply and
to supply electricity in accordance with the provisions contained in
the Act. Sub-section (2) casts an obligation upon the State Commission
to introduce open access in phases and subject to such conditions, as
may be specified, these conditions may include the cross subsidies and
other operational constraints. It is thereafter in sub-section (3) of
Section 42 provision is made for wheeling of electricity with respect
to supply stating that duties of distribution licensee shall be of a
common carrier providing non-discriminatory open access. Thus sub-
section (3) provides for open access and casts a duty upon the
distribution licensee in this behalf. Here, it excludes local
authority, as distributor of electricity from such an obligation.
However, when it comes to the duty of distribution licensee to supply
the electricity under section 43, it mandates that same is to be given
to the owner or occupier of any premises on his application within one
month from the receipt of the said application. This duty under
Section 43 imposed upon a distribution licensee does not distinguish
between a local authority and other distribution licensee. It is also
not a case of the appellant that in a particular area where a local
authority is a distribution licensee, there cannot be any other
distribution licensee at all.

21. Thus, on a conjoint reading of Sections 42 and 43 of the Act
along with the objectives and purpose for which Act 2003 is enacted,
it becomes clear that there are two ways in which a consumer stated in
a particular area can avail supply of electricity, as pointed out by
the learned senior counsel for TPC and noted above. When an
application is made by a consumer to a distribution licensee for
supply of electricity, such a distribution licensee for supply of
electricity, such a distribution licensee can request other
distribution licensee in the area to provide it network to make
available for wheeling electricity to such consumers and this open
access is to be given as per the provisions of section 42 (3) of the
Act. It is here only that local authority is exempted from such an
obligation and may refuse to provide makes it network available.
Second option is, under section 43 of the Act, to provide the
electricity to the consumer by the distribution licensee from its own
network. Therefore, if in a particular area local authority has its
network and it does not permit wheeling of electricity from by making
available its network, the other distribution licensee will have to
provide the electricity from its own network. For this purpose, if it
is not having its network, it will have to lay down its network if it
requires in order to supply electricity to a consumer seeking supply.

22. This interpretation of ours is in consonance of the objective
and purpose of the Act. The aforesaid objective is further clarified
by the Tariff Policy and the National Electricity Policy under section
3 of the Act which emphasized the need for efficiency and competition
in the distribution business. On going through the statement of
objects and reasons contained in the new Act, the interpretation,
which we are leading to, gets further facilitated. Prior to this Act,
there were three Acts, namely of 1910, 1948 and 1998 which were
governing the laws relating to electricity and were operating in the
field. Within few years, it was felt that the three Acts of 1910, 1948
and 1998 which were operating in the field needed to be brought in a
new self contained comprehensive legislation with the policy of
encouraging private sector participation in generation, transmission
and distribution and also the objectives of distancing the regulatory
responsibilities from the Government and giving it to the Regulatory
Commissions. With these objectives in mind the Electricity Act, 2003
has been enacted. Significant addition is the provisions for newer
concepts like power trading and open access. Various features of the
2003 Act which are outlined in the statement of objects and reasons to
this Act. Notably, generation is being delicensed and captive
generation is being freely permitted. The Act makes provision for
private transmission licensees. It now provides open access in
transmission from the outset. While open access in transmission
implies freedom to the licensee to procure power from any source of
his choice, open access in distribution, with which we are concerned
here, means freedom to the consumer to get supply from any source of
his choice. The provision of open access to consumers ensures right of
the consumer to get supply from a person other than the distribution
licensee of his area of supply by using the distribution system of
such distribution licensee.

23. The concept of open access under the Act enables competing
generating companies and trading licensees, besides the area
distribution licensees, to sell electricity to consumers when open
access in distribution is introduced by the State Electricity
Regulatory Commissions. Supply by way of open access is a completely
different regime as is also clear from the fact that consumers who
have been allowed open access under Section 42 may enter into an
agreement with any person for supply of electricity on such terms and
conditions, including tariff, as may be agreed upon by them under
Section 49 of the Act unlike consumers who take supply under section
43 of the Act.

24. Once we read the provisions in the aforesaid manner, it becomes
clear that there is no exemption from universal service obligation to
any distribution licensee under the Act, on account of the presence of
a “local authority” as a distribution licensee in the particular area
of supply, which is also reinforced by Paragraph 5.4.7 of the National
Electricity Policy which clearly states that the second licensee in
the same area shall have the obligation to supply to all consumers in
accordance with Section 43. In this context, it is relevant to
reproduce the following observations in Chandu Khamaru v. Nayan Malik
reported in (2011) 12 SCC 314:

“7…These provisions in the Electricity Act, 2003 make it
amply clear that a distribution licensee has a statutory duty to
supply electricity to an owner of occupier of any premises
located in the area of supply of the distribution licensee, if
such owner or occupier of the premises applies for it, and
correspondingly every owner or occupier of any premises has a
statutory right to apply for and obtain such electric supply
from the distribution licensee.”

 
25. It is, therefore, difficult to accept the extreme position taken
by the appellant that if local authority is a distribution licensee in
a particular area, there cannot be any other distribution licensee in
that area without the permission of such a local authority. Not only
such a contention would negate the effect of universal supply
obligation under Section 43, it will also amount to providing an
exception which is not there either in Section 43 or Section 14 of the
Act namely to treat local authority in special category and by giving
it the benefit even that benefit which is not specified under the Act.

26. It is trite that Court should lean in favour of an
interpretation which subserves the objective of the Act namely the
purposive interpretation. In Tata Power Co.Ltd. v. Reliance Energy
Ltd. & Ors. (2008) 10 SCC 321, this Court gave due recognition to
objective behind the Act viz. to promote competition and give the
consumer open to choose the distribution licensee from which it seeks
electricity as is clear from the following paragraphs:

102. On the other hand, in our view, the provisions of
both the 1903 and 1910 Electricity Acts encourage competition in
the electricity trade and the same is also incorporated in the
licences issued in favour of the distribution licensees, which
also include licensees generating power for supply. The element
of competition has been included in the Preamble to the 2003 Act
and permeates the same in its various provisions.
103. As submitted by Mr Chagla, the Act is meant to be
consumer-friendly and one of the objectives it sets out to
achieve is to give the consumer an option to choose the
distribution licensee from whom it wishes to receive supply of
electrical energy. The intervention of MIDC, Marol Industries
Association and the appeals filed by it, has obviously been made
in that context.

 

 

In MSR Leathers vs. S.Palaniappan & Anr. (2013) 1 SCC 177 it was
observed:

“24. That brings us to the question whether an offence
punishable under Section 138 can be committed only once as held
by this Court in Sadanandan case1. The holder of a cheque as
seen earlier can present it before a bank any number of times
within the period of six months or during the period of its
validity, whichever is earlier. This right of the holder to
present the cheque for encashment carries with it a
corresponding obligation on the part of the drawer to ensure
that the cheque drawn by him is honoured by the bank who stands
in the capacity of an agent of the drawer vis-à-vis the holder
of the cheque. If the holder of the cheque has a right, as
indeed is in the unanimous opinion expressed in the decisions on
the subject, there is no reason why the corresponding obligation
of the drawer should also not continue every time the cheque is
presented for encashment if it satisfies the requirements
stipulated in clause (a) of the proviso to Section 138. There is
nothing in that proviso to even remotely suggest that clause (a)
would have no application to a cheque presented for the second
time if the same has already been dishonoured once. Indeed if
the legislative intent was to restrict prosecution only to cases
arising out of the first dishonour of a cheque nothing prevented
it from stipulating so in clause (a) itself. In the absence of
any such provision a dishonour whether based on a second or any
successive presentation of a cheque for encashment would be a
dishonour within the meaning of Section 138 and clause (a) of
the proviso thereto. We have, therefore, no manner of doubt that
so long as the cheque remains unpaid it is the continuing
obligation of the drawer to make good the same by either
arranging the funds in the account on which the cheque is drawn
or liquidating the liability otherwise. It is true that a
dishonour of the cheque can be made a basis for prosecution of
the offender but once, but that is far from saying that the
holder of the cheque does not have the discretion to choose out
of several such defaults, one default, on which to launch such a
prosecution. The omission or the failure of the holder to
institute prosecution does not, therefore, give any immunity to
the drawer so long as the cheque is dishonoured within its
validity period and the conditions precedent for prosecution in
terms of the proviso to Section 138 are satisfied.”

 

While dealing with the issue No.2 above, we have already held
that TPC and BEST are parallel distribution licensee in the South
Bombay Area.

27. The appellant has sought to rely on the expression “Save as
otherwise provided in this Act” in Section 43(1) of the Act to read
into Section 43(1) the exception for local authorities provided for in
Section 42(3). The TPC has successfully refuted this submission by
pointing out that these words in Section 43(1) are required to be read
in the context in which they appear. The said words were inserted in
the section by way of an amendment to the Act in 2007. An
“Explanation” to Section 43(1) was also added by the same amendment
providing that “application” by a consumer in Section 43(1) means an
application complete in all respects along with documents showing
payment of necessary charges and other compliances, meaning thereby
that the obligation of the distribution licensee to supply within the
specified time period will begin only after it has received such
completed application by the applicant. Further, Sections 45 and 46
provide for the distribution licensee’s powers to recover charges for
electricity supplied and the expenditure incurred in providing
electric line or plant for giving supply. Section 47 provides that the
distribution licensee may require any person demanding electricity
supply from him to give a reasonable security, failing which the
distribution licensee may refuse to give supply of electricity to such
consumer. We are of the opinion that it is in this context that the
expression “save as otherwise provided in this Act” in Section 43 (1)
is to be construed.

28. Before we part with we would like to make it clear that there is
a dispute between TPC and R-infra) (respondent No.9) which is the
subject matter of Civil Appeal Nos. 4667-68/2013. R Infra is a
distribution licensee in suburban Bombay where TPC is also a licensee.
Both supply electricity to different consumers. Dispute is between
them with regard to cross subsidiary surcharge (CSS) payable by
consumer taking supply from TPC or R Infra network. We make it clear,
by way of abundant caution, that we have not touched upon the said
dispute and obviously so as even otherwise the subject matter in the
instance case is totally different. Therefore Civil Appeal Nos.4667-
68/2013 shall be decided on its own merits.

29. We, thus, do not find any merit in any of the contentions of the
appellant. As a consequence, this appeal fails and is hereby dismissed
with cost thereby affirming the order of the Appellate Tribunal.

 
……………………………………….J.
(Surinder Singh
Nijjar)

 

 
……………………………………..J.
(A.K.
Sikri)

 

 
New Delhi
May 8, 2014

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