In Civil Appeal Nos.3607-3610 of 2008-SC- Licensee cannot resile from condition of supplying electricity as per authorisation of area of supply indicated in license: Top Court allows appeal against APTEL order whereby distribution licence of Jindal Steel was cancelled
Justices Ajay Rastogi & B.V. Nagarathna [29-09-2022]

Read Judgment: M/s. Jindal Steel And Power Limited And Ors Vs. The Chhattisgarh State Electricity Regulatory Commission And Ors

Tulip Kanth

New Delhi, September 30, 2022: While clarifying that in respect of an area falling within a Municipal Council, Municipal Corporation or a Revenue District, there could be two or more persons who could be granted licence and authorisation to distribute electricity in terms of the respective area of supply specified, the Supreme Court has held that the  Appellate Tribunal for Electricity was not right in cancelling the licence granted to the appellant­-Jindal Steel and Power Ltd. 

Referring to the Electricity Act, 2003 and Rules of 2005, the Division Bench of Justice Ajay Rastogi and Justice B.V. Nagarathna said, “ Therefore, it is clear that within the same area, there could be two or more persons for distribution of electricity. As to what is the area within which there could be grant of licence to two or more persons is concerned under the sixth proviso to Section 14, the Explanation to Rule 3 prescribes the area falling within a Municipal Council or a Municipal Corporation as defined under Article 243 (Q) of the Constitution of India or Revenue District.”

The appellant­-Jindal Steel and Power Ltd. (JSPL) established a sponge iron / steel plant at Raigarh, Chhattisgarh in the year 1990. A captive power plant was also set up by JSPL at a distance of 40 km from the aforesaid steel plant. A proposal for permission to set up an industrial estate in 500 acres of land, adjacent to the existing land at Raigarh, was submitted by JSPL.

 MoU was signed between Chhattisgarh State Industrial Development Corporation acting on behalf of Government of Chhattisgarh and JSPL for setting up the industrial estate. The Government also granted permission for supply of power by JSPL to the new industrial units being set up in the private industrial estate proposed in four villages of Raigarh District.

In 2003,  JSPL made a formal application for sanction under Section 28 of the Indian Electricity Act, 1910. JSPL commenced supply of electricity to the industrial units which were already setup with effect from March 1, 2004. In 2004, JSPL filed an application for grant of distribution licence before the Commission under Section 14 and in 2005, JSPL applied for the licence to the Commission in Form 1­A with all necessary enclosures as per Regulation 3 (1) of the Chhattisgarh State Electricity Regulatory Commission (License Regulations), 2004 along with Demand Draft of Rs 5 Lakh.  The Commission decided to grant distribution licence under Section 14.

The Respondents-Chhattisgarh State Electricity Regulatory Commission, Chhattisgarh State Power Distribution Company and Chhattisgarh Vidyut Mandal Abhiyanta Sangh  filed objections before the Commission and also filed Appeal before the Appellate Tribunal. The appellant also challenged the imposition of penalty of Rs One Lakh before the Appellate Tribunal. On hearing the respective parties, the Commission, granted licence to JSPL on certain terms and conditions. When the respondents challenged the same, the Appellate Tribunal allowed all the appeals filed by the respondents. Thus, JSPL filed an instant appeal before the Top  Court.

Referring to section 14 of the Electricity Act, 2003,the  Bench clarified that the appropriate Commission may, on an application made to it under Section 15 grant a licence to any person in order to transmit electricity as a transmission licensee, to 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 licence. 

Considering that the cases revolved around the interpretation to be given to the Explanation to Rule 3, the Bench noted that the sixth proviso to Section 14 applies to a situation where 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 applicant­JSPL complying with the additional requirements. 

As per the Bench, the ‘area of supply’ must fall ‘within’ the local authority of a Municipal Council or a Municipal Corporation as defined in Section 2(41) of the Act or a Revenue District,  and within which area of supply, licence is granted for distribution of electricity. Therefore, the expression area in the sixth proviso of Section 14 is explained as the ‘area falling within’ a Municipal Council or a Municipal Corporation as defined under Article 243 (Q) of the Constitution of India or a Revenue District which shall be the ‘area of supply’, the Bench further added.

Thus, the Bench opined that within such an area, there could be two or more persons who are granted a licence to distribute electricity which is in terms of the provision granting license. The ‘area within which they are authorised to supply electricity’ is the ‘area of supply’ and such ‘area of supply’ in respect of which authorisation is granted under the licence is the “minimum area of supply”.

 “Thus, on a conjoint reading of the aforesaid provisions, it is clear that the ‘minimum area of supply” would fall ‘within the area’ which is comprising of a Municipal Council or a Municipal Corporation or a Revenue District but it does not imply that the licence to supply electricity for an area or an ‘area of supply which is the ‘minimum area of supply’ must extend to the ‘entire area falling within’ a Municipal Council or a Municipal Corporation or a Revenue District,” the Bench noticed while making it clear that the authorised ‘area of supply’ shall be ‘the minimum area of supply’.

Since, the ‘area of supply’ authorised in the licence granted to the appellant-­JSPL in the instant case was the ‘minimum area of supply’, so the Bench observed that the said appellant was bound to supply electricity in the said area of supply. 

“The licensee cannot resile from the condition of supplying electricity as per the authorisation of the area of supply indicated in the license. This would also mean that the licensee cannot supply electricity in an area beyond the area of supply authorised under the license”, the Bench said while also giving the reasoning that in respect of an area falling within a Municipal Council or a Municipal Corporation or a Revenue District, there could be two or more persons who could be granted licence and authorisation to distribute electricity in terms of the respective area of supply specified.

Hence, noticing that  there had been an application of mind to the licence that was granted to the appellant for distribution of the electricity, the Bench held that the Appellate Tribunal was not right in cancelling/setting aside the licence granted to the appellant­-JSPL. The Bench allowed the appeals while setting aside the impugned common judgment of the Appellate Tribunal.