# A.P. GAS POWER CORPN. LTD v. •- A.P. STATE REGULATORY COMMISSION AND ANR - **Citation:** [2004] 3 S.C.R. 426 - **Court:** Supreme Court of India - **Decided:** 2004-03-23 - **Case number:** Civil Appeal No. 4660 of 2001 - **Bench:** Brijesh Kumar, Arun Kumar - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/a-p-gas-power-corpn-ltd-v-a-p-state-regulatory-commission-and-anr-19774 - **Pages:** 41 ## Headnote Andhra Pradesh Electricity Reforms Act, 1998: ,, c Sections 14, 15 and 16-Licence-Requirement for-Captive consumption and supply and distribution of electricity-Difference between-Power station established by private participation for generation of electricity-participating companies allowed to share electricity generated to the extent of their shareholding-Participating companies also entitled to transfer their shares and the transferee entitled to consume electricity to the extent of its D shareholding-Supply also permitted to sister concerns of participating industries-Held, no licence required for consumption by participating industries or transferees of shares as it would be captive consumption-Licence required for supply of electricity to sister concerns as it would be supply/ , ""\ distribution of electricity-Indian Electricity Act, 1910-Sections 3 and 28. ~ E Sections 56(3)(vi) and 21(4)-Exclusion of provisions a/Section 43A of \.. Electricity (Supply) Act, 1948 by Section 21 (4)-Held, the two provisions deal • with two different aspects-Section 43A of the I 948 Act is an enabling provision whereas Section 21 (4) is a prohi~ition-Hence Section 43A not excluded by Section 21 (4) by virtue a/Section 56(3)(vi)-Electricity (Supply) Act, 1948F Section 43A. Electricity (Supply) Act, 1948-Section 43A(l}(c)-"Any other person"- ~r Meaning of-"Any other person'' does not mean individual or end-consumer but persons/bodies discharging function of generations, transmission, distribution or supply of electricity-Words & phrases. G The State of Andhra Pradesh and the Andhra Pradesh State Electricity Board (APSEB) decided to set up a power station with private participation, and for that purpose the appellant company was incorporated in 1988. The shares of the appellant company were held by H 426 I ~ l' ~ ( A.I'. (iAS POWER CORl'N.1.Tll 1·. A.I'. STATE REGI II.ATOR\' COMMISSION 42 7 Andhra Pradesh State Electricity Board and certain· participating A industries who were to share the power generated by the company in proportion to their respective paid-up share capital. Memorandum of Understanding was signed between the parties which provided that the shareholding companies could supply power to their sister concerns provided that the said sister concern was located within the State of B Andhra Pradesh and a High Tension consumer of the APSEB. Under the A.P. Electricity Reforms Act, 1998 for transmission and supply of electricity a licence was required. under Section 14. Under Section 16 of the Act, the Andhra Pradesh Electricity Regulatory Commission was empowered to grant exemptions from the requirement to have a licence. C Section 56(3)(vi) of the said Act provided that certain Sections of the Electricity (Supply) Act, 1948 would not apply to the extent Andhra Pradesh Electricity Reforms Act, 1998 had made specific provisions therefore. The appellant applied under Section 16 of the A.P. Electricity D Reforms Act, 1998 for grant of exemption from licence for supply of generated power to its shareholders and their sister concerns. The application for exemption was rejected by the Regulatory Commission established under the provisions of the Andhra Pradesh Electricity Reforms Act, 1998. The Regulatory Commission held that no licence was E required for the generating company but a generating company was confined only to generation of power and would not extend to distribution and supply of electricity. Relying upon the provisions of Sections 3 and 28 of the Electricity Act, 1910, it was held that the appellant was required to have licence as it was supplying energy. It was further held that the exemption granted to the generating companies under Section 26A of the p "-( Electricity (Supply) Act, 1948 would not be available to the appellant company as its function was not confined only to generation of power but extended to distribution and supply thereof to the participating industries and the sister concerns. The appellant filed writ p ## Text _Characters 0–39,860 of 103,070. This is a partial read: ask again with offset=39860 for what follows._ I, A A.P. GAS POWER CORPN. LTD. v. •- A.P. STATE REGULATORY COMMISSION AND ANR. MARCH 23, 2004 B .. [BRIJESH KUMAR AND ARUN KUMAR, JJ.] Andhra Pradesh Electricity Reforms Act, 1998: ,, c Sections 14, 15 and 16-Licence-Requirement for-Captive consumption and supply and distribution of electricity-Difference between-Power station established by private participation for generation of electricity-participating companies allowed to share electricity generated to the extent of their shareholding-Participating companies also entitled to transfer their shares and the transferee entitled to consume electricity to the extent of its D shareholding-Supply also permitted to sister concerns of participating industries-Held, no licence required for consumption by participating industries or transferees of shares as it would be captive consumption-Licence required for supply of electricity to sister concerns as it would be supply/ , ""\ distribution of electricity-Indian Electricity Act, 1910-Sections 3 and 28. ~ E Sections 56(3)(vi) and 21(4)-Exclusion of provisions a/Section 43A of \.. Electricity (Supply) Act, 1948 by Section 21 (4)-Held, the two provisions deal • with two different aspects-Section 43A of the I 948 Act is an enabling provision whereas Section 21 (4) is a prohi~ition-Hence Section 43A not excluded by Section 21 (4) by virtue a/Section 56(3)(vi)-Electricity (Supply) Act, 1948F Section 43A. Electricity (Supply) Act, 1948-Section 43A(l}(c)-"Any other person"- ~r Meaning of-"Any other person'' does not mean individual or end-consumer but persons/bodies discharging function of generations, transmission, distribution or supply of electricity-Words & phrases. G The State of Andhra Pradesh and the Andhra Pradesh State Electricity Board (APSEB) decided to set up a power station with private participation, and for that purpose the appellant company was incorporated in 1988. The shares of the appellant company were held by H 426 I ~ l' ~ ( A.I'. (iAS POWER CORl'N.1.Tll 1·. A.I'. STATE REGI II.ATOR\' COMMISSION 42 7 Andhra Pradesh State Electricity Board and certain· participating A industries who were to share the power generated by the company in proportion to their respective paid-up share capital. Memorandum of Understanding was signed between the parties which provided that the shareholding companies could supply power to their sister concerns provided that the said sister concern was located within the State of B Andhra Pradesh and a High Tension consumer of the APSEB. Under the A.P. Electricity Reforms Act, 1998 for transmission and supply of electricity a licence was required. under Section 14. Under Section 16 of the Act, the Andhra Pradesh Electricity Regulatory Commission was empowered to grant exemptions from the requirement to have a licence. C Section 56(3)(vi) of the said Act provided that certain Sections of the Electricity (Supply) Act, 1948 would not apply to the extent Andhra Pradesh Electricity Reforms Act, 1998 had made specific provisions therefore. The appellant applied under Section 16 of the A.P. Electricity D Reforms Act, 1998 for grant of exemption from licence for supply of generated power to its shareholders and their sister concerns. The application for exemption was rejected by the Regulatory Commission established under the provisions of the Andhra Pradesh Electricity Reforms Act, 1998. The Regulatory Commission held that no licence was E required for the generating company but a generating company was confined only to generation of power and would not extend to distribution and supply of electricity. Relying upon the provisions of Sections 3 and 28 of the Electricity Act, 1910, it was held that the appellant was required to have licence as it was supplying energy. It was further held that the exemption granted to the generating companies under Section 26A of the p "-( Electricity (Supply) Act, 1948 would not be available to the appellant company as its function was not confined only to generation of power but extended to distribution and supply thereof to the participating industries and the sister concerns. The appellant filed writ petition before the High Court. The High G Court dismissed the writ petition and confirmed the order passed by the Regulatory Commission. Hence the appeals. The main question that arose for consideration by this Court was whether the appellant was required to take a licence under the law for utilization/sale or supply of power generated by it to the participating H 428 SUPREME COURT REPORTS [2004] 3 S.C.R. A industries, their sister concern and the companies to whom shares of the appellant have been transferred by the participating industries. Partly allowing the appeals, the Court HELD: I.I. The undisputed· position under the law is that no licence B is required for generation of electricity. The electricity generated is to be consumed, sold, distributed or supplied since there is no "Cay to store it. Sections 3 and 28 of the Electricity Act, 1910 are for the purpose of being engaged in the business of supply of energy and does not cover the cases of generation of electricity or its use and consumption by the generating group itself. Thus, no licence is required to be taken by a generating C company consuming the electricity generated by itself. The activity of generating electricity may be by an individual or by a group of persons, no distinction is envisaged on that account io exclude a group of persons, coming together to establish and generate electricity for their own purpose. D (444-A-B; 447-B-Df 1.2. Merely because Sections 12 to 19 of the Electricity Act, 1910 and certain provisions .of the Schedule of the Electricity Act, 1910 have been made applicable to the generating company as well by virtue of provision of sub-section (2) of Section 26A of the Electricity (Supply) Act, 1948, no inference can be drawn that any licence is required to be taken by a E generating company under the provisions of the Electricity Act, 1910. (447-D-Ef 1.3. Consumption of electricity by the participating industries in their unit~ to the extent of their shareholding amounts to captive consumption for which no licence would be required as it would neither be a supply F nor distribution of the electricity produced. It is utilization of the product by the manufacturer itself. There would be no sale, supply or distribution to the self so long as the power produced is utilized by those who are participating in the activity of generating electricity. In the case when it is not a single owner but a joint or collective venture for generation of electricity for their own captive consumption obviously the self G consumption of the power generated would be amongst those who are participating in the activity of generation and it shall not be confine to any one industry. This position is not in view of equity in favour of the participating industries but under the law there is no such requirement for them to have a licence. (453-H; 454-A-B, 448-DI ·H 2.1. So far the sister concern or concerns which have been defined ,, AP GAS POWER CORl'N. I.Tl!." A.P. STATE R[(;UJ.l\TORY COMMISSION 429 as those under the same group as participating industries, it would require A to have a licence if the electricity is made available or provided to them for consumption as it shall foll within the ambit of distribution, sale or supply of the electricity and not captive consumption of power. It would be permissible without licence only in case of exemption if granted in that behalf, by the competent authority. 1455-G-H; 456-AI 2.2. Consumption of power, generated by a generating company, by a concern which may be under the same group as any of the participating 1." industries cannot be said to be consumption or use of the power by the participating industry itself. In absence of the element of self consumption B by the generating company, it would not fall in the category of "captive C consumption". It would surely be a supply to a non-participating industry and in that event it would be necessary to have a licence under the relevant provisions of law. 1449-D-EI 2.3. If there is a legal requirement, merely an agreement amongst certain parties would not exclude the application of law. Provisions of law D regulating the situation, would prevail over any kind of agreement amongst some individuals as or group or otherwise. A clause in the Memorandum of Understanding would not do)lway with the requirement of having a licence for supply of electricity generated by appellant to such concerns which may be under the same group as the participating industries but not the participating industries themselves. 1449-E-G I E State of Uttar Pradesh and Ors. v. Renusagar Power Company and Ors., 119881 4 SCC 59 and State al UP. v. Hindustan Aluminium Corpn. Ltd, 119791 3 sec 229, referred to. 2.4. It is not permissible to transfer or supply the electrical energy F to a sister concern out of the share of the participating industry. 1451-DI 3. After transfer of shares of appellant, the transferee company or industry would not remain an outsider but a shareholding company and it is entitled to utilize the power generated by appellant and would be G confined to the extent of the value of the shares transferred to it. Holding of share capital in appellant company is the basis of participating in the generating activity of appellant and utilization of the power produced to the extent of the shareholding, it would only amount to captive consumption and self supply or distribution of the power and it would not require a licence under Section 3 and 28 of the Electricity Act, 1910 or H 430 SUPREMI·: CO!JRT REPORTS [2004] 3 S.C.R. A under Sections 15 and 16 of the Andhra Pradesh Electricity Reforms Act, 1998. However, as soon as the electricity generated by the appellant goes to anyone who has no shareholding in the company or beyond the extent of the shareholding it would certainly amount to supply or distribution to the public entailing· the liability of obtaining a licence under Sections 3 B and 28 of the Electricity Act, 1910 or for that matter under Sections 15 and 16 of the Reform Act, 1998. [454-C-F) 4. Section 21(4) of the Andhra Pradesh Electricity Retorms Act, 1998 and Section 43A(l)(c).of the Electricity (Supply) Act, 1948 deal with ~· different situations; whereas Section 43A(l)(c) of the Electricity (Supply) C Act, 1948 enables a generating company to sell electricity to any person with the consent of the State Government, Section 21(4) of the Andhra Pradesh Electricity Reforms Act, 1998 is meant fnr holder of a supply or transmission licence to purchase the electricity from a generating company. It is not the same thing as provided for under Section 43A(l)(c) of the Electricity (Supply) Act, 1948. Sub-section (4) of Section 21 of the D Reform Act, 1998 is restricted to the holder of a licence for supply or transmission of the electricity but it would not apply to any other purchaser whereas Section 43A(l)(c) of the Electricity (Supply) Act, 1948 permits a generating company to sell electricity to any person, which is a wider connotation not necessarily a licencee. A generating company will E not be able to sell electricity on the basis of permission taken by a licencee under Section 21(4) of the Andhra Pradesh Electricity Reforms Act, 1998 for purchase of electricity. Therefore, sale of electricity to any person other than a licencee as provided under Section 43A(l)(c) of the Electricity (Supply) Act, 1948 is not covered by Section 21(4) of the Reform Act, 1998. The two provisions have different implications altogether. The provisions F under Section 43A(l)(c) of the Electricity (Supply) Act, 1948 is an enabling provision to sell electricity to any person with the consent of the State Government, whereas the provision contained under Section 21(4) of the Reform Act, 1998 pertains to the prohibition on purchase of electricity which is restricted to. a licencee. Hence, Section 43A(l)(c) of the Electricity G (Supply) Act, 1948 is not dis-applied by virtue of Section 56(3)(vi) of the Andhra Pradesh Electricity Reforms Act, 1998 and the consent granted by the State Government will hold good for the sale of electricity to any person. [458-E-H; 459-A-CI 5.1. The expression "any other person" used in clause (c) of subH section (I) of Section 43A of the Electricity (Supply) Act, 1948 may be A.I'. GAS POWJ:R CORl'N. LT\J ,. A.I'. STATE REC;l!J.ATOR\' COMMISSION 4 3 I A persons or bodies discharging the functions of generation, transmission, A distribution or supply of electricity. Clause ( c) of sub-section (I) of Section 43A of the Electricity (Supply) Act, 1948 docs not envisage a generating company selling/supplying electricity for use in household or domestic purpose or to the small shops, to the showrooms or an individual running , flour mill or a welding workshop etc. 1465-E-FI Mysore State Electricity Board v. Bangalore Woollen, Cotton and Silk Mills ltd and Ors. AIR (1963) SC 128, referred to. B 5.2. If the intention was to include all under the expression "any other person" it was not necessary to specify Electricity Board in clauses (a) and (b). Looking to the provisions of the Electricity (Supply) Act, 1948 in C totality it cannot mean an individual consumer since such a supply to individual consumers is not envisaged nor dealt with under the Electricity (Supply) Act, 1948. Therefore, to assign a wide meaning to the word "any other person'', meaning thereby, to any end consumers would be spreading the meaning too wide going beyond the subject matter dealt with under D the Electricity (Supply) Act, 1948 and not connected with the intent and y· object of legislation. 1463-G; 464-D-F; 465-F-GI 5.3. It is true that as a general principle a plain meaning is to be attached to a word or expression used in the legislation but it cannot be divorced of the context and an isolated meaning attached to it. In such E circumstances, it becomes necessary to assign a meaning which may be reasonably and harmoniously derived from the company of the words and phrases preceding such expression. In this view of the matter, it can well be said that the meaning of the expression "any other person" as used in clause (c) of sub-section (I) of Section 43A of the Electricity (Supply) Act, F ~~ 1948 denotes such bodies or entities which would further the purpose for which the electricity board have been constituted. 1465-G-H; 466-AI Kavalappara Kottarathil Kochuni v. State of Madras, AIR (1960) SC 1080; Tribhuwan Prakash Nayyar v. Union of India, AIR (1970) SC 540 and Amar Chandra v. Collector of Excise, Tripura., AIR (1972) SC 1863, referred G to. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4660 of 2001. From the Judgment and Order dated 8.6.200 I of the Andhra Pradesh High Court in C.M.A. No. 1970 of 2000. H A 432 SUPREME COURT REPORTS [2004] 3 S.C.R. WITH CA Nos. 4661, 4662, 5208 and 6338 of 200 I. K.K. VenugopaL G.L Sanghi, Ranjit Kumar, V.R. Reddy, VA Bobde, Ashok Grover, P.S. Narasimha, C.V. Nagarjuna Reddy, P. Sridhar, Ananga B Bhattacharya. Ms. Seema Bengani, G. Seshagiri Rao, Mrs. Prabha Swami, Krishnamu11hi Swami, T. Mathivanan, Ms. Binu Tamta, Gopal Clnudhary, Ms. Deepa Vishwanathan, Ms. Shilpi Srivastava, Ms. Indu Malhotra, M.G. Ramachandran, K.V. Mohan, K.V. Balakrishnan, Sakya Singha Chaudhuri, ·.,; Ms. Anupama Grover and Rakesh K. Sharma for the appearing pal1ies. C The Judgment of the Coul1 was delivered by BRIJESH KUMAR, J. The above noted appeals have been preferred against the common judgment of the Andhra Pradesh High Court, upholding the order passed by the Andhra Pradesh State Regulatory Commission and its D finding that the extended activities of supply of energy to the sister concern of the participating industries of A.P. Gas Power Corporation Ltd. (for short, 'APGPCL') would require Licence or exemption therefrom under the provisions of Sections I 5 or 16 of the Andhra Pradesh Electricity Reform Act 1998 (for short 'the Reform Act, 1998'). E Shortage of power is felt in most of the parts of the country which, apart from disrupting day-to-day life of the people, quite often than not, creates problem for industries. The States or the Electricity Boards managing the power sector find it difficult to meet the ever increasing demand of electricity. In such circumstances, captive generation of power is not unknown and it is getting quite in vogue but generally it is done in a manner that the F factory or industry would generate and consume the power confining it in its premises to run its manufacturing/processing unit. In such circumstances, finding a via media, it appears that the State .Government of Andhra Pradesh and the Andhra Pradesh Electricity Board mooted the idea of setting up of a 3 X 33 MW gas based combined cycle power station at Vijjeswaram for G establishing a generating station which required high amount of investment, hence they decided to invite private participation in the venture which attracted some of the heavy industries to the proposal. They entered into a Memorandum of Understanding (MOU-I) on I7.10.I988 and another MOU on I9.4.I997, according to which, the Andhra Pradesh State Electricity Board (for short 'APSEB ') had to have 26% share ill the new company to come up viz. H APGPCL, and the rest of the participating industries were to have different A.P. GAS POWER CORPN. I.ID.,. A.P. STATE REGULATORY COMMISSION [BRIJESH KUMAR, J.J 43 3 r-- power to industries and other consumers either directly or through facilities of APSEB. It will be relevant to mention that an Extraodinary General Meeting of G APGPCL was held on November 24, I 989 for amendment of Memorandum of Association in view of the letter dated I I. 9 .1989 received from Department of Power with comments by Central Electricity Authority in connection with - issuance of the concurrence under Section 44 of the Electricity (Supply) .,,, Act. I 948 (For shof! 'Supply Act'). The resolution mentions that according to H the comments of the Central Electricity Authority the objects illustrated in \ ~ A.P. GAS POWER CORPN. LTD. "· A.P. STATE REGULA TORY COMMISSION [BRIJESH KUMAR, .I.] 4 3 5 .-<( the Memorandum of Association are too wide ranging; therefore to satisfy A the Central Electricity Authority it was proposed to amend the Memorandum of Association. Accordingly, a Resolution was passed amending clause (I) of the Memorandum of Association and substitute the existing Clause( I) as follows: "To obtain approval from A PS EB under Section 44 of the Electricity B (Supply) Act, 1948, for establishment of Gas Based Thermal Pow~r station at any place in the State of Andhra Pracesh to generate and If supply electrical energy exclusively for the use of shareholders of the Company through transmission lines of APSEB to take over any gas based Thermal power station whether under construction ·or in c operation at any place in Andhra Pradesh for the said purpose, either from Andhra Pradesh State Electricity Board or from any other person." It is thus evident that the aims and objects as indicated in the Original Articles of Association were amended and restricted. Accordingly, with the D approval and concurrence of the concerned authorities, the power generating plant started its functioning and has been utilising the power generated r according to the Memorandum of Understanding which formed part of the· Articles of Association. Later it appears that APGPCL made a proposal for extension of the E project and thus set up a Combined Cycle Power Plant of 160 MW Gas Turbine station at Vijjeswaram - stage 2. The Central Electricity Authority, Ministry of Power by its letter dated April 26, 1996 conveyed its no objection to the extension. While conveying its approval and no objectio'n to the Chairman, APSEB, the Central Electricity Authority referred to the earlier F letter dated 15.1.1996 and Section 44 of the Supply Act and it also mentioned ~~ "M/s.APGPCL has been formed on the basis of collective captive generation principle. The main objective of the company is.to set up, operate and supply power from the proposed station to all the industries who are shareholders of the Company." With the sanction of extension of the project by setting up another generating station at Vijjeswaram itself a second Memorandum of G Understanding was executed on 19.4.1997 amongst APGPCL, APSEB and 22 other private sector undertakings. The conditions of the Second ')>- Memorandum of Understanding are similar to the earlier one and Article 2 Clause 2 provides for transfer of energy providing that the APGPCL agrees that the participating industries may transfer their share of energy to their H sister concerns, located within the State of Andhra Pradesh and being High 436 SUPREME COURT REPORTS [2004] 3 S.C.R. A Tension consumers of APSEB. ~ On the basis of the facts indicated above, the case of the appellant is that the appellant Company has been generating power and sharing the same amongst its shareholding participating industries as per terms and conditions agreed upon amongst the parties, namely APGPCL, APSEB and other private B sector High Tension consumer industries in Andhra Pradesh. According to the appellant, it is a collective captive power generation company generating power for captive consumption of the participating/shareholding industries. .,., The case of the appellant is that since the power generating company c did not require any licence either under the Indian Electricity Act, 1910 (for short 'the Act of 1910')or under the Supply Act therefore, no licence was ever taken. However, the controversy arose with coming into force of the Refonn Act, 1998 with effect from l .2.1999. Section 3 of the said Act provided for establishment of Andhra Pradesh Electricity Regulatory Commission. One of the functions as indicated in clause (c) of Section 11(1) of the Act is to D issue licences in accordance with the Act and clause ( e) thereof provides as follows : "to regulate the purchase, distribution, supply and utilization of "\ electricity, the quality of service, the tariff and charges payable keeping in view both the interest of the consumer as well as the consideration E that the supply and distribution cannot be maintained unless the charges for the electricity supplied are adequately levied and duly collected." So far the State Government is concerned, under Section 12 it has power to . . issue policy directions on matters concerning electricity in the State including the overall planning and co-ordination. Section 13 relates to the establishment F of Transmission Corporation of Andhra Pradesh Limited (for short 'APTRANSCO') with the objects of engaging in the business of procurement, transll)ission and supply of electric energy. APTRANSCO was to perfonp the functions as were used to be perfonned by APSEB prior to coming into force of the Act. Part VI of the Act deals with licensing of transmission and supply. G The relevant clauses of Section 14 of the Refonn Act 1998 are reproduced below. "14. Licensing:- (I) No person, other than those authorized to do so by licence or by virtue of exemption under this Act or authorized to "( or exempted by any other authority under the Supply Act, shall engage H in the State in the business of,- , A.P. GAS POWER CORPN. LTD.•·. A.P. STATE REGULA TORY COMMISSION [BRIJESH KUMAR, J.J 43 7 (a) transmitting electricity; or (b) supplying electricity. (2) and (3) xxx xxx (4) Notwithstanding anything contained in any other provisions of A this Act and until the establishment of the Commission in terms of B Section 3, the State Government shall have the power to grant provisional licences under this Section having a duration not exceeding twelve months to any person or persons to engage in the State in the business of transmission or supply of electricity on such terms and conditions as the State Government may determine consistent with the provisions of this Act, subject to the following conditions, namely:- C (a) upon the establishment of the Commission, each of the provisional licences granted by the State Government shall be placed before the Commission and shall be deemed to constitute an application for grant of a licence by the Commission under the provisions of this Act; and D (b) each provisional licence granted under this section shall cease to be valid from the date notified by the Commission. xxx xxx" The appellant was accordingly granted a provisional licence by the State E Government under sub-section (4) of Section 14 on 01.02.1999 for a period of 12 months. The relevant clauses of Section 15 are reproduced below : "15. Grant of licences by the Commission :- (1) The Commission may on an application made in such form and on payment of such fee, as may be prescribed grant a licence authorizing any person to,- (a) transmit electricity in a specified area of transmission; or (b) supply electricity in a specified area of supply including bulk supply to licencees or any person. (2) to (4) xxx xxx F G (5) Without-prejudice to the generality of sub-section (3 ), the conditions included in a licence granted by the Commission may require the holder of such a licence to establish a tariff or to calculate its charges from time to time in accordance with the requirements prescribed by H 438 SUPREME COURT REPORTS (2004] 3 S.C.R. A the Comniission." Section 16 of the Act provides as follows : "16. Exemptions from the requirement to have a licence:- (I) The Commission may make regulations to grant exemption from the B requirement to have a supply licence, but subject to compliance with such conditions, if any, as may be specified in the order: c D Provided that the Commission shall not, under any such regulation, grant any exemption except with the consent,- rt (i) of the local authority, if any, constituted in the area where energy is to be supplied; · (ii) in any case where energy is to be supplied in any area forming part of any cantonment, aerodrome, fortress, arsenal, dockyard or camp or any building or place in the occupation of the Central Government for defence purposes, of the Central Government; (iii) in any area falling within the area of supply of a licensee, of that licensee: Provided that, except in a case falling under Clause (ii) no such consent shall be necessary if the Commission is satisfied that such E consent has been unreasonably withheld. F G (2)" An exemption may be granted,- ( a) to persons of a particular category; or (b) to a particular person; or (c) for a particular period; and an exemption to persons of a particular category·or to a particular person shall be published in such manner as the Commission considers appropriate for bringing it to the attention of that person or persons of that category and of the public in general. (3) The exemption granted may be revoked by the Commission at any time for reasons to be recorded in writing. (4) An exemption, unless previously revoked, shall continue in force -( for such period as may be specified in or determined by or under the H exemption. - - .-". -< 1• ~ ........ A.P. GAS POWER CORPN. L m. "· A.P. STATE REGULA TORY COMMISSION [BRJJESH KUMAR, J.) 4 39 (5) Every regulation or exemption made by the Commission under this A.ct shall be published in the Official Gazette." The State Government granted provisional licence to the appellant by order dated 30.1.1999 to be effective from l st February, 1999 for a period of 12 months. The relevant notification is reproduced below : "G.O.MS.No.23 Dated: 30.01.1999 ORDER The following notification regarding Provisional Licence under Section 14(4) of the Andhra Pradesh Electricity Reform Act, 1998 will be published in the Extra-ordinary issue of the Andhra Pradesh Gazette dated the 1st February, 1999. NOTIFICATION In Exercise of the powers conferred by sub-section (4) of section 14 of the Andhra Pradesh Electricity Reform Act, 1998 [Act No.30 of 1998], the Governor of Andhra Pradesh, hereby grants to A.P.Gas Power Corporation Limited at Vijjeswaram [herein after the licensee} provisional licence to undertake activities as specified in G.O.Ms.No.167 EFES&T (Pr.I) Department dated 15.05.1989 and G.0.Ms.No.158, Energy (Power-I) Department, dated 21.12.1995 on the following terms and conditions. I. 2 . 3. the supply of electricity shall be restricted to the area and extent to which the licensee was authorized in terms of the licence granted under section 3 of the Indian Electricity Act, 1910 in the above Government Order. The licensee shall, upon the es!ablishment of the Andhra Pradesh Electricity Regulatory Commission (hereinafter the Commission) place this provisional licence before the Commission as required under sub-section ( 4) of section 14 of the said Act for appropriate orders of the Commission. This licence shall come into force on the First day of February, 1999 and shall cease to be valid and effective. a. on completion of twelve months from the said date of enforcement; or A B c D E F G H 440 A B c D SUPRFMF COlJR I RI l'OR IS [201141 3 S.C.R. b. on the date notified by the Commission under clause (b) of sub-section ( 4) of section ( 14) of the said Act; whichever is earlier. 4. The licensee shall have the same rights, privileges, duties and obligations as provided in the G.O.Ms.No.167 dated 15.05.1989 and in G.O. Ms. No. 158 dt.21.12.1995. 5. The licensee shall comply with the requirements of the provisions of the said Act and the applicable provisions of the Indian Eler.tricity Act, 1910 and Electricity (Supply) Act. 1948, the Indian Electricity Rules, 1956 and other laws and regulations. [BY ORDER AND IN THE NAME OF THE GOVERNOR OF ANDI-IRA PRADESH) Sd/- V.S. SAMPATH SECRETARY TO GOVERNMENT" But before the expiry of the date of the provisional licence, the appellant moved an application under Section 16 of the Act for grant of exemption from licence for supply of generated power to its shareholders and their sister concerns. The reason for seeking exemption, as indicated was that energy E was being supplied to sister concerns and the equity shareholders only and that the operation and maintenance of the power station is carried out by APTRANSCO. The wheeling of the power is also carried on by APTRANSCO. The A.P. Electricity Regulatory Commission. however, rejected the application by order dated 7.7.2000. F The Regulatory Commission recorded a finding that Govt. of Andhra Pradesh had granted a licence to the appellant under Section 3 of the Act of 1910. This inference has been drawn.on the basis of a letter dated 2 l.12.1995 sent by the appellant making a request for setting up a generating plant for captive consumption. In this connection, however, it may be indicated that G grant of any licence under Section 3 of the Act of 1910 has been denied by the appellant. No such licence has been placed on record. A perusal of Section 3 of the Act of 1910 would indicate that licence was required for supply of energy in any specified area and to lay electric supply lines for conveyance and transmission of energy. Th~ appellant company was set up on the proposal of the Government, by the APSEB and the private industries as participating H - ~ A.P. GAS POWER CORPN. LTD., .. A.P. STATEREGULATORY COMMISSION [BRIJESH KUMAR. J.] 44] industries. It was to generate power and energy for captive consumption of A ~' the participating industries and its shareholders and sister concerns. The Regulatory Commission also held that the case of the appellant was not correct that it was not necessary for it to have a licence in view of Section 26A ofthf Supply Act and Section 14 of the Reform Act, 1998. The appellant was not covered under the above provision. It is pointed out that in terms of B Section 28 of the Act of 1910, no person other than a Licensee could engage in business of supplying of energy to the public except with the previous sanction of the State Government. The Regulatory Commission further held r·· that prior to coming into force of the Reform Act 1998, a person intending to supply energy to the public should have had a licence under Section 3 or Section 28 of the Act of I 910. Exception was provided under Section 26A c (1) of the Supply Act, namely, no such licence was required for a generating ,, company. However, the Commission also observed that APGPCL is correct in submitting that generation of electricity does not require a licence under Section 3 of the Act of 19 I 0 or under Section 14 of the Reform Act I 998. Referring to the provisions contained under Section 15A and I SA of the D Supply Act, it has been held that a generating station confined to generation of power and their functions do not extend to distribution and supply of 1.)' electricity. Therefore a generating company supplying electricity, would not be covered by the exception provided under Section 26A of the Supply Act. The Commission took note of the fact that the appellant, under the Memorandum of Association, provides for supply and distribution of power E to the sister concern of the participating industries. It has been held that in case of supply of electricity, Sections 26 and 27 of the Reform Act 1998 would automatically be applicable. Thus the appellant would also be subject to tariff and charges as regulated by the Commission. The Commission then deals with contention of the appellant that a F ~--l( generating company could with consent of the competent government sell electricity to any person in view of Section 43A( I)( c) of the Supply Act. In this connection, the Commission refers to a letter dated 1 I .5.'2000 issued by the Government of Andhra Pradesh that the appellant was carrying on operation of generation and supply of energy to participating industries and their sister G concerns as per Memorandum of Understanding. A letter of formal consent to that effect was also issued by the Government of Andhra Pradesh on 23.6.2000 consenting to sale of energy by the appellant to company's )' shareholders and their sister concern under Section 43A(I )(c) of the Supply Act. It was further mentioned in the letter that the arrangement was to be continued in future also. The Commission held that it was incorrect that H 442 SUPREMF COURT RFYORTS [2004] 3 S.C.R. A APGPCL had any authorization, express or implied. at the time when the Reform Act of 1998 was enforced and that the letter on the subject was issued by the Andhra Pradesh Government on 11.5.2000 for the first time and specific authorization was made on 23.6.2000. The Regulatory Commission fu11her held that Section 43A of the Supply Act was disapplied B by Section 56(3)(vi) of the Reform Act 1998, and that the expression 'any other person' used in clause (c) of sub-section( I) of Section 43A is not referable to an individual consumer like participating industry of APGPCL company or their sister concern. The "other person" referred to in Section 43A could only be any licensee or an exemptee. The Commission has referred to two decisions of this Court viz. AIR ( 1963) SC 1128, Mysore State C Electricity Board versus Bangalore Woolen, Cotton and silk Mills ltd.