# HINDUSTAN ZINC LTD v. RAJASTHAN ELECTRICITY REGULATORY COMMISSION

- **Citation:** [2015] 7 S.C.R. 1104
- **Court:** Supreme Court of India
- **Decided:** 2015-05-13
- **Case number:** Civil Appeal No.4417of2015
- **Bench:** V. Gopala Gowda, R. Banumathi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/hindustan-zinc-ltd-v-rajasthan-electricity-regulatory-commission-30839
- **Pages:** 49

## Headnote

Rajasthan Electricity R&gulatory Commission
c (Renewable Energy Obligation) Regulations, 2007;
Rajasthan Electricity Regulatory Commission (Renewable
Energy Certificate and Renewable Purchase Obligation
Compliance Framework) Regulations, 2010: Constitutional
validity of the Regulations 2007 and 2010 directing the
D captive power plants to p'urchase minimum energy from
renew~ble sources - Held: The object of imposing RE
Obligation is protection of environment anar preventing
pollution by utilising Renewable Energy Sources as much
as possible in larger public interest - The Regulations
E impose reasonable restrictions upon the captive gencos as
permissible u/Art. 19(6) of the Constitution - The impugned
Regulations fall within the four corners of the Act of 2003 as
well as Electricity Policy, 2005 - National Electricity Policy,
2005- Electricity Act, 2003- s. 86(1) - Constitution of India,
F 1950-Articles 19(1)(g), 19(6), 51A(g).
Electricity Act, 2003: ss.2(3), 86(1 )- Captive power plant
- Regulatory jurisdiction of Commission - Heild: The mere
fact that no licence is required for Establishment, Operation
G and Maintenance of a Captive Power Plant would not imply
that the industries engaged in van·ous commercial activities
putting up such Captive Power Plants cannot be subjected
. to Regulatory Jurisdiction of the Commission- RE obligation
H
1104
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1105
REGULATORY COMM.
has been imposed upon the consumption of electricity A
whether purchased from the Distribution Licensee or
consumed from its own Captive Power Plant or through open
access.
Dismissing the appeals and disposing of the l.A.s, B
the Court
HELD: 1. These Regulations are framed by the RERC
with a laudable objective of achieving Directive Principles
of the State Policy as provided in Article 48A read with
Fundamental Duties under Article 51A(g) of the C
Constitution, which mandate upon the State and its
instrumentalities to protect the environment in the area
with a view to see that the citizens/residents of the area
to lead a healthy life. To achieve the same it has framed
the National Electricity Policy, 2005. Further, the D
impugned Regulations framed by the RERC which
impose reasonable restriction as provided under Article
19(6) of the Constitution of India to achieve the Directive
Principles of State Policy and to see that the State and
its instrumentalities shall discharge their fundamental E
duties to protect and maintain environment in the area
to facilitate the residents and living creatures to live
peacefully. [Paras 15, 16] [1122-G-H; 1123-A-B]
2. The Electricity Act of 2003 being a self-contained F
comprehensive legislation in the matter of generation,
transmission and supply of energy to its consumers, the
provisions of Section 82 of the Act of 2003 enjoin upon
every State Government to constitute a Regulatory
Commission in their respective State to regulate the G
implementation of the provisions of the Act of 2003 by
framing suitable Regulations and Rules with reference
to the matters/entries enumerated in Section 181 of the
·Act of 2003 and accordingly the State of Rajasthan has
constituted the RERC. [Para 26] [1130-F-G; 1131-A]
H
3. Where the validity of subordinate legislation is
1106
SUPREME COURT REPORTS
[2015] 7 S.C.R.
A challenged, question to be asked is whether power given
to the rule making authority has been exercised for the
purpose for which it was given. The Court has to
examine the nature, object and scheme of the legislation
as a whole to consider what is the area over which
B powers are conferred upon the rule making authority.
However, the Court has to start with the presumption
that the Rule is intra-vires and has to be read down only
to save it from being declared ultra-vires in case the
Court finds that the above presumptions stand rebutted
C and the impugned regulations are relatable to the
specific provision contained in Section 86(1)(e) of the
Act.
Para 4.2.2 of the National Action Plan

## Text

_Characters 0–39,932 of 91,482. This is a partial read: ask again with offset=39932 for what follows._

A
B
[2015]7S.C.R.1104
HINDUSTAN ZINC LTD.
v.
RAJASTHAN ELECTRICITY REGULATORY COMMISSION
(Civil Appeal No.4417of2015)
MAY 13, 2015
[V. GOPALA GOWDA AND R. BANUMATHI, JJ.]
Rajasthan Electricity R&gulatory Commission
c (Renewable Energy Obligation) Regulations, 2007;
Rajasthan Electricity Regulatory Commission (Renewable
Energy Certificate and Renewable Purchase Obligation
Compliance Framework) Regulations, 2010: Constitutional
validity of the Regulations 2007 and 2010 directing the
D captive power plants to p'urchase minimum energy from
renew~ble sources - Held: The object of imposing RE
Obligation is protection of environment anar preventing
pollution by utilising Renewable Energy Sources as much
as possible in larger public interest - The Regulations
E impose reasonable restrictions upon the captive gencos as
permissible u/Art. 19(6) of the Constitution - The impugned
Regulations fall within the four corners of the Act of 2003 as
well as Electricity Policy, 2005 - National Electricity Policy,
2005- Electricity Act, 2003- s. 86(1) - Constitution of India,
F 1950-Articles 19(1)(g), 19(6), 51A(g).
Electricity Act, 2003: ss.2(3), 86(1 )- Captive power plant
- Regulatory jurisdiction of Commission - Heild: The mere
fact that no licence is required for Establishment, Operation
G and Maintenance of a Captive Power Plant would not imply
that the industries engaged in van·ous commercial activities
putting up such Captive Power Plants cannot be subjected
. to Regulatory Jurisdiction of the Commission- RE obligation
H
1104
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1105
REGULATORY COMM.
has been imposed upon the consumption of electricity A
whether purchased from the Distribution Licensee or
consumed from its own Captive Power Plant or through open
access.
Dismissing the appeals and disposing of the l.A.s, B
the Court
HELD: 1. These Regulations are framed by the RERC
with a laudable objective of achieving Directive Principles
of the State Policy as provided in Article 48A read with
Fundamental Duties under Article 51A(g) of the C
Constitution, which mandate upon the State and its
instrumentalities to protect the environment in the area
with a view to see that the citizens/residents of the area
to lead a healthy life. To achieve the same it has framed
the National Electricity Policy, 2005. Further, the D
impugned Regulations framed by the RERC which
impose reasonable restriction as provided under Article
19(6) of the Constitution of India to achieve the Directive
Principles of State Policy and to see that the State and
its instrumentalities shall discharge their fundamental E
duties to protect and maintain environment in the area
to facilitate the residents and living creatures to live
peacefully. [Paras 15, 16] [1122-G-H; 1123-A-B]
2. The Electricity Act of 2003 being a self-contained F
comprehensive legislation in the matter of generation,
transmission and supply of energy to its consumers, the
provisions of Section 82 of the Act of 2003 enjoin upon
every State Government to constitute a Regulatory
Commission in their respective State to regulate the G
implementation of the provisions of the Act of 2003 by
framing suitable Regulations and Rules with reference
to the matters/entries enumerated in Section 181 of the
·Act of 2003 and accordingly the State of Rajasthan has
constituted the RERC. [Para 26] [1130-F-G; 1131-A]
H
3. Where the validity of subordinate legislation is
1106
SUPREME COURT REPORTS
[2015] 7 S.C.R.
A challenged, question to be asked is whether power given
to the rule making authority has been exercised for the
purpose for which it was given. The Court has to
examine the nature, object and scheme of the legislation
as a whole to consider what is the area over which
B powers are conferred upon the rule making authority.
However, the Court has to start with the presumption
that the Rule is intra-vires and has to be read down only
to save it from being declared ultra-vires in case the
Court finds that the above presumptions stand rebutted
C and the impugned regulations are relatable to the
specific provision contained in Section 86(1)(e) of the
Act.
Para 4.2.2 of the National Action Plan on Climate
Change and Preamble of the Act of 2003 emphasise upon
0
promotion of efficient and environmentally benign
policies to encourage generation and consumption of
green energy to sub-serve the mandate of Article 21 read
with Article 48A of the Directive Principles of the State
Policy and Article 51A{g) of the Fundamental Duties
E enlisted under Chapter IVA of the Constitution of India.
Further1 the said Regulations are consistent with the
International obligations of India, as India has ratified to
the Kyoto Protocol on 26.08.2002. Further, the impugned
Regulations which impose reasonable restrictions upon
F the captive generating plant owners are permissible
under Article 19(6) of the Constitution of India. [Paras 28,
29] (1132-E-G; 1133-A-D]
4. In case, the legislature intended power of the
G Regulatory Commission to be confined to the
Distribution Licensee, the said words and phrases of
Section 86(1 )(e) would have read "total electricity
purchased and supplied by distribution licensee". The
mere fact that no licence is required for Establishment,
H Operation and Maintenance of a Captive Power Plant
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1107
REGULATORY COMM.
does not imply that the industries engaged in various A
commercial activities putting up such Captive Power
Plants cannot be subjected to Regulatory Jurisdiction
of the Commission and required to purchase certain
quantum of energy from Renewable Sources. The RE
obligation has been imposed upon the consumption of B
electricity whether purchased from the Distribution
Licensee or consumed from its own Captive Power Plant
or through open access. [Para 34] [1137-B-E]
5. The term 'in the area of distribution licensee' under C
the provisions has to be read along with definition of
'area of supply' as provided under Section 2(3) of the
Act of 2003 which defines it as the area within which
distribution licensee is authorized by his license to
supply electricity. Further, proviso 6 to Section 14 of the D
Act of 2003 provides that Appropriate Commission may
grant a licence to two or more persons to supply
electricity through their own distribution system within
the same area and therefore, in case there are more than
one distribution licensee within the same area of supply, E
the term 'total consumption in the area of distribution
license' would include the consumption by Captive
Power Plant Consumers also and Open Access
Consumers who fall in the 'area' of distribution licensee. F
The other phrase 'total consumption' has been used by _
the legislature in Section 86(1)(e) and total consumption
in an area of a distribution licensee can be by three ways
either supply through distribution licensee or supply from
Captive Power.Plants by using lines and transmissions G
lines of distribution licensee or from any other source.
The area would always be of distribution licensee as the
transmissio,n lines and the system is of distribution
licensee, the total consumption is very significant The
total consumption has to be seen by consumers of H
1108
SUPREME COURT REPORTS
(2015] 7 S.C.R.
A distribution licensee, Captive Power Plants and on
supply through distribution licensee. [Para 35] (1137-H;
1138-A-E]
6. Section 43(2) of the Act of 2003 provides that open
B access consumers are also located/situated within the
area of distribution licensees and are also connected to
the distribution network of such licensees and therefore,
the electricity consumed by such open access
consumers shall also be necessarily included in the term
C "Total Consumption in the area of distribution licensee".
Similarly, captive power consumers are also located/
situated within area of distribution licensee and are
connected to the Distribution Network of Distribution
licensees either for wheeling electricity or for backup
D power, if needed. Therefore, the term for "Total
Consumption in the area of distribution /icensee"would
also include such captive power consumers also and
accordingly, Section 86(1)(e) grants the State
Commission power to specify a minimum percentage of
E renewal energy to be purchased oat of the total
consumption of electricity in the area of distribution
licensee which would include the distribution licensee/
s, open access consumers and the captive power
F consumers. A distribution licensee is obliged to supply
power to Captive Power Plants and Open Access
Consumer under Section 43 of the Act of 2003, if there is
a request to supply. In such view of the matter, it will be
highly discriminatory to only subject the regular
G consumers of the distribution licensee to bear the cost
of purchase of renewable energy and to exempt the
gencos from the Open Access Consumers or Captive
Power Plants from the obligation to purchase/share the
cost for purchase of renewable power despite being
H connected to the distribution network of the distribution
licensee and despite the fact that they can demand back
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1109
REGULATORY COMM.
up power from such licensee any time they want. Thus, A
in order to realize the attempt of reducing dependence
on fossil fuels, it can be said that the impugned
Regulations are imperative in the larger public interest
and are just reasonable restrictions imposed upon the
captive gencos as permissible under Article 19(6) of the B
Constitution of India. [Paras 36, 39] [1140-H; 1141-A-D]
7. The RERC has enacted 2007 and 2010 Regulations
requiring the Captive Power Plants and Open Access
Consumers to purchase a minimum quantum of Energy C
from Renewable Energy Sources, in order to effectuate
the provisions of the Constitution of India, Electricity Act
and the National Electricity Policy, since energy
generated from Renewable Sources is pollution free. The
Right to live with healthy life guaranteed under Article D
21 of the Constitution of India includes the Right to live
in a pollution free environment. [Para 40] [1141-E-F]
8. In terms of impugned Regulation 9 of the
Regulations, if a default is made in fulfilling RE obligation E
then, obligated entity has to deposit the Renewable
Purchase Obligation (RPO) charge. The deposit of the
RPO charge is compensatory in nature. Sections 142 and
147 of the Act of 2003 provide the statutory back-up for
penal consequences in contravention of the impugned F
Regulations framed under Section 181 r/w Section
86(1)(e) of the Act of 2003. The penalty imposed by the
impugned Regulations upon the Captive Generating
Companies who do not comply with the requirements
as provided under Regulation 9 of the impugned G
Regulations of 2010 are not in nature of 'tax' but it is a
'surcharge' levied under Section 39(2) of the Act but an
alternative mode of enforcement of Regulation upon
them for ensuring its compliance to achieve the laudable H
1110
SUPREME COURT REPORTS
[2015] 7 S.C.R.
A object of the Act, in case obligated entity make default in
fulfilling the renewable purchase obligation as provided
under the Regulation 9 of the impugned Regulations
2010. [Para 43] [1144-D-H; 1145-A-B]
B
9. The impugned Regulations have been enacted in
order to effectuate the object of promotion of generation
of electricity from renewable sources of energy as
against the polluting sources of energy which principle
is enshrined in the Act, the National Electricity Policy of
C 2005 and the Tariff Policy of 2006. The provisions
requiring purchase of minimum percentage of energy
from renewable sources of energy have been framed
with an object of fulfilling the constitutional mandate with
a view to protect environment and prevent pollution in
D the area by utilizing renewable energy squrces as much
as possible in larger public interest. RE obligation
imposed on the captive gencos under the impugned
Regulations is neither ultra vires nor violative of the
provisions of the Act of 2003 and cannot in any manner
E be regarded as a restriction on the fundamental rights
guaranteed to the appellants under the Constitution.
Article 51A(g) of the Constitution of India cast a
fundamental duty on the citizen to protect and improve
F the natural environment. The RE obligation imposed
upon captive power plants and open consumers
through impugned Regulation cannot in any manner be
said to be restrictive or violative of the fundamental rights
conferred on the appellants under Articles 14 and
G 19(1)(g) of the Constitution of India. [Paras 44, 50] [1146E-H; 1147-A; 1151-D, F]
Society For Unaided Pvt. Schools of Rajasthan v. U. 0.1.
& Anr. (2012) 6 SCC 1: 2012 (2) SCR 715; J.K. Industries
H Ltd. & Anr. v. Union of India & Ors. (2007) 13 SCC 673: 2007
· (12) SCR 136 - relied on.
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1111
REGULATORY COMM.
Tata Power Company Ltd. v. Reliance Energy Ltd. and A
Ors. (2009) 16 SCC 659: 2009 (9) SCR 625; Global Energy
Ltd. and Anr. v. Central Electricity Regulatory Commission
(2009) 15 SCC 570: 2009 (9) SCR 22; Dayal Singh & Ors.
v. Union of India & Ors. (2003) 2 SCC 593:2003 (1) SCR
714; M. Chandru v. Member Secretary, Chennai B
Metropolitan Development Authority & Anr. (2009) 4 SCC
72: 2009 (2) SCR 661; Ahmedabad Urban Development
Authon'ty v. Sharadkumar Jayantikumar Pasawala & Ors.
(1992) 3 SCC 285: 1992 (3) SCR 328; Consumer Online
Foundation v. Union of India & Ors. (2011) 5 SCC 360 : 2001 C
(5) SCR 911 - held inapplicable.
Union of India & Ors. v. S. Srinivasan (2012) 7 SCC
683:2012 (6) SCR 34; PTC India Ltd. v. Central Electricity
Regulatory Commission (2010) 4 SCC 603: 2010 (3) SCR D
609; ITW Signoqe India Ltd. v. Collector of Central Excise
(2004) 3 SCC 48: 2003 (5) Suppl. SCR 751; Secretary,
Ministry of Chemicals & Fertilizers, Government of India v.
Gip/a Ltd. And Ors. (2003) 7 see 1: 2003 (2) Suppl SCR
177; Tatoba Bhau Savagave & Anr. v. Vasantrao Dhindiraj E
Deshpande & Ors. (2001) 8 SCC 501; J.K. Cotton Spinning
& Weaving Mills Co. Ltd. v. State of U.P & Ors. AIR 1961
SC 1170: 1961 SCR 185; Aswini Kumar Ghose & Anr. v.
Arabinda Bose & Anr. AIR 1952 SC 369: 1953 SCR 1; F
Subhash Kumar v. State of Bihar & Ors. (1991)1 SCC 598:
1991 (1) SCR 5; fy1.C. Mehta v. Union of India & Ors. 2004)
12 SCC 118: 2004 (3) SCR 128; Municipal Corpn. of
Greater Mumbai & Ors. v. Kohinoor CTNL Infrastructure Co
(P) Ltd. (2014} 4 SCC 538; Chairman, SEBI v. Shriram G
Mutual Funds & Anr. (2006) 5 SCC 361: 2006 (2) Suppl.
SCR 833 - referred to.
CASE LAW REFERENCE
2012 (2) SCR 715
relied on.
Para 16
H
1112
SUPREME COURT REPORTS
[2015] 7 S.C.R.
A
2009 (9) SCR 625
held inapplicable. Para 20
2009 (9) SCR 22
held inapplicable. Para 21
2003 (1) SCR 714
held inapplicable. Para 24
B
2009 (2) SCR 661
held inapplicable. Para 24
1992 (3) SCR 328
held inapplicable. Para 24
2001 (5) SCR 911
held inapplicable. Para 24
c
2012 (6) SCR 34
referred to.
Para 24
2010 (3) SCR 609
referred to.
Para 27
2003 (5) Suppl. SCR 751 referred to.
Para 27
D
2003 (2) Suppl SCR 177 referred to.
Para 27
2001 (3) Suppl. SCR 609referred to.
Para 28
2007 (12) SCR 136
relied on.
Para 28
E
(2001) 8 sec 501
referred to.
Para 31
1961SCR185
referred to.
Para 32
1953 SCR 1
referred to.
Para 33
F
1991 (1) SCR 5
referred to.
Para 40
2004 (3) SCR 128
referred to.
Para 40
(2014) 4 sec 538
referred to.
Para 40
G
2006 (2) Suppl. SCR 833referred to.
Para 43
(2003) 1 sec 1
referred to.
Para 47
H
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
4417of2015.
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1113
REGULATORY COMM.
From the Judgment and Order dated 31.08.2012 of the A
High Court of Judicature for Rajasthan at Jaipur in D. B. Civil
Writ Petition No. 10911of2012.
WITH
C. A. Nos. 4418-4420, 4421-4422, 4423-4424, 4425, B
4426, 4427-4428, 4429, 4430-4431, 4432-4433 and 4434 of
2015.
Jayant Bhushan, S. Ganesh, Meenakshi Arora, S. B.
Upadhyay, Krishnan Venugopal, Dhruv Agarwal, Shiv Mangal C
Sharma, AAG, Sanjeev Kapoor, Prateek Kumar, Divya
Chaturvedi, Shikhar Srivastava, Ajay Bhargava, Vanita
Bhargava, Nitin Mishra (For Khaitan & Co.), Ankur Saigal,
Mahesh Agarwal, Rishi Agrawala, E. C. Agarwala, S. D
Vehkatesh, Anuj P. Agarwala, Moh it D. Ram, Siddhesh Kotwal,
Bansuri Swaraj, Annirudh Sharma, Shreya Bhatnagar,
Nirnimesh Dube, U. A. Rana, Mrinal Alkar Majumdar (For
Gagrat & Co.), P. N. Bhandari, lndu Sharma, Shibashish Misra,
M. Rambabu, N. Eshwara Rao, Tatini Basu, Praveen Kumar, E
Raj Kumar Mehta, Elangbam Premjit Singh, Abhishek
Upadhyay, Vishal Gupta, Hemant Singh, Sharmila Upadhyay,
Saurabh Rajpal, Anjali Chauhan, Kumar Mihir, Udai Rathore,
Vishal Gupta, Praveen Kumar, Kumar Rajesh, Sunaina Kumar
for the appearing parties.
F
The Judgment of the Court was delivered by
V~ GOPALA GOWDA, J. 1. Leave granted.
2. These appeals by way of Special Leave are filed G
seeking to assail the order dated 31.08.2012, passed by the
High Court of Rajasthan at Jaipur, in D.B. Civil Writ Petition
No. 10911 of2012 and batch matters, whereby, the High Court
has upheld the validity of the Rajasthan Electricity Regulatory
Commission (Renewable Energy Obligation) Regulations, H
1114
SUPREME COURT REPORTS
[2015] 7 S.C.R.'
A 2007 and Rajasthan Electricity Regulatory Commission
(Renewable Energy Certificate and Renewable Purchase
Obligation Compliance Framework) Regulations, 2010,
directing the appellants to purchase minimum energy from
renewable sources and comply with their liability under the said
B Regulations.
3. Brief facts which led to the filing of these cases are as
under:
C
The appellants in this group of appeals are companies
engaged in the business of production, manufacturing, selling
non-ferrous metals, zinc and their by-products. They have
establi•,hed their own captive generation power plants in terms
of the Electricity Act, 2003 (for brevity 'Act of 2003'). The
D Rajasthan Electricity Regulatory Commission (for brevity
'RERC') in exercise of its power under Sections 61, 66,
86(1)(e) and 181 of the Act of 2003, vide Notifications dated
23.3.2007 and 23.12.2010, framed RERC (Renewable Energy
Obligation) Regulations, 2007 (for brevity "the Regulations of
E 2007") and RERC (Renewable Energy Certificate and
Renewable Purchase Obligation Compliance Framework)
Regulations, 2010 (for brevity "the Regulations of 201 O"),
respectively. The impugned Regulations imposed Renewable
F Energy obligation (RE obligation) on the Captive Gencos and
other obligated entities including the appellants herein, who
are Captive Gencos and open access consumers, to purchase
minimum energy from renewable source& and to pay surcharge
in case of shortfall in meeting the RE obligation.
G
4. The appellants have challenged the validity of the
above-mentioned Regulations, by filing writ petitions before
the High Court. The High Court vide its common impugned
judgment dated 31.8.2012, after having discussed the legal
H contentions urged on behalf of the parties at length, has
dismissed the writ petitions as being devoid of merit. The High
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1115
REGULATORY COMM. [V. GOPALA GOWDA, J.]
Court held that the RERC is empowered to frame the A
impugned Regulations of 2007 and 2010 and levy charge and
surcharge thereby for not complying with obligations, in
exercise of the powers conferred under Sections 61, 66,
86(1)(e) and 181 of the Act of 2003, in respect of the RE
obligation imposed upon captive power plants and open B
access consumers, to purchase minimum energy from
renewable sources and to pay surcharge in case of shortfall in
fulfilment of such RE obligation. The High Court was of the
opinion that neither the impugned Regulations can be said to
be ultra vires the provisions of the Act of 2003 nor can it be C
said to be repugnant to Articles 14 and 19(1)(g) of the
Constitution of India or the National Electricity Policy, 2005 or
the Tariff Policy, 2006 framed under Section 3 of the Act of
2003. The appellants herein are seeking to assail the above D
common judgment and order dated 31.08.2012 passed by
the Division Bench of the High Court.
5. Learned senior counsel for the appellants contended
thatthe impugned Regulations are ultra viresto Sections 7, 9,
86(1)(a) and (e) and 181 of the Act of 2003, and also the E
fundamental rights guaranteed to the appellants under Articles
14, 19(1 )(g) and it is in violation of Article 265 of the Constitution
of India, the National Electricity Policy, 2005 and the Tariff
Policy, 2006. They have contended that the Act of 2003 has F
been enacted by the Parliament with a view to encourage
participation of private· sectors involved in generation of
electricity and with that objective, generation of electricity was
de-licensed and captive generation was freely promoted and
in this manner the impugned Regulations are violative of the G
basic object and intendment with which the Act was enacted.
Further, it has been asserted that the National Electricity Policy,
2005 as well as the Tariff Policy, 2006 were framed to promote
production of energy and utilization thereof to the maximum
extent in respect of the captive generation plants and not to · H
1116
SUPREME COURT REPORTS
[2015] 7 S.C.R.
A compulsorily force them to lower down their production of
energy by making them purchase renewable energy as per
the newly framed the impugned Regulation No.9 of Regulations
2010. It was. also contended by them thatthe Act of 2003 has
totally liberalized the establishment of captive power plants
B and kept them out of any licensing and regulatory regime,
neither any licence nor any approval from any authority is
required to install a captive power plant and thus, the RERC
had no jurisdiction to impose any obligation for compulsory
purchase of electricity from a renewable energy source; the
C renewable energy source and captive generating plant are both
alternative sources of energy which have to be promoted, one
cannot be placed on higher or lower footing. The RERC by
imposing a compulsory obligation to purchase electricity from
0 renewable source and to pay surcharge in case of shortfall in
meeting out the RE obligation as per the Regulation referred
to supra has acted beyond the object sought to be achieved
under the National Electricity Policy, 2005 as well as the Act of
2003.
E
6. It was further contended by the learned senior counsel
that the provisions relied upon by the RERC can be made
applicable to "distribution licensee" and not to a generator of
electricity. A captive generating plant cannot be said to be a
F distribution licensee. It was alleged that as per Section
86(1)(b) of the Act of 2003, the State Commission has power
to regulate electricity purchase and procurement process of
distribution licensees only including the price at which
electricity shall be procured from the generating companies
G or licensees or from other sources through agreements for
purchase of power for distribution and supply to the consumers
within the State.
7. It was also urged by the learned senior counsel that
H the imposition of surcharge by the RERC in case of shortfall in
meeting with the RE obligatiun, as specified under the
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1117
REGULATORY COMM. [V. GO PALA GOWDA, J.]
impugned Regulations is also without authority of law and A
contrary to Article 265 of the Constitution of India.
8. It is further submitted that the Act of 2003 is enacted
by the Parliament with the object of providing the establishment
of captive power plant and thereby the licensing and regulatory s
regime has been kept out of it. It is further contended by the
learned counsel for the appellants that neither any licence nor
any approval from any authority is required to install a captive
power plant and therefore, the RERC has no jurisdiction to
impose any obligation upon such Captive Power Plant for C
purchase of renewal energy compulsorily. The renewal energy
source and captive generating plants are both alternative
sources of energy to be generated which is the policy that has
to be promoted and therefore, one cannot be placed on a higher
•
or lower footing than the other. The RERC by imposing the RE D
obligation upon the Captive Power Plant Company/owner to
purchase renewal energy compulsorily from renewable source
and to pay such charge in case of shortfall to meet out the
obligation is contrary to the object and intendment sought to
be achieved under the provisions of the Act of 2003 and the E
same is also opposed to the National Electricity Policy, 2005
and the Tariff Policy, 2006.
9. The learned senior counsel on behalf of the appellants
has further placed strong reliance upon the Preamble of the F
Act of 2003, which inter alia provides for the promotion of
efficient and environmentally benign policies and also placed
strong reliance upon the definitions under provisions of the
Act of 2003, namely, Section 2 (3) • 'area of supply', Section
2(17)
·'distribution licensee' and Section 9 ·'captive G
generation'. Strong reliance has been placed upon the said
provisions of the Act to substantiate the legal position. Section
9 of the Act of 2003 provides that notwithstanding anything
contained in the Act of 2003, a person may construct, maintain H
or operate a captive generating plant and dedicated
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SUPREME COURT REPORTS
[2015] 7 S.C.R.
A transmission lines provided that supply of electricity from the
Captive Generating Plant through the grid shall be regulated
in the same manner as the generating station of a generating
company. Second proviso to Section 9 further provides that
no license shall be required under the Act for supply of electricity
B generated from a captive generating plant to any licensee in
accordance with the provisions of the Act and the Rules and
Regulations made there under subject to regulations made
under sub-section (2) of Section 42 of the Act of 2003, which
enables the owner of captive generating plant, who maintains
C and operates such plants shall have the right to open access
for the purposes of carrying electricity from his captive
generating plant to the destination of his use. Learned senior
counsel sought to justify the impugned Regulation 9 placing
0 strong reliance upon Section 61 (h) of the Act of 2003, which
provides that the appropriate Commission should promote
generation and co-generation of electricity from renewable
sources at the time of framing of tariff.
10. On the other hand, with regard to the contention of the
E appellants that the "Cross Subsidy Surcharge" is relevant for
"open access" Consumer under Section 42 and the reference
to Section 42(2) of the Act of 2003 in the present context is
misconceived, the learned counsel on behalf of the RERC
F rebutted the same by contending that Section 42(2) has no
relevance to the function of the State Regulatory Electricity
Commission under Section 86(1) (e) of the Act of 2003.
Sections 42 and 86 of the Act of 2003 operate in different
fields, except proviso to clause (a) of Section 86(1) of the Act
G of2003 which provides for determination of Tariff for wheeling
charges and surcharge thereon in respect of the category of
the consumers permitted open access under Section 42 of
the Act of 2003. The word "only" in the proviso to clause (a) of
Section 86( 1) of the Act of 2003 has no relevance with the
H function of the State Commission as specified in clause (e) of
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1119
REGULATORY COMM. [V. GOPALAGOWDA, J.]
Section 86(1) of the Act of 2003. The renewable energy· A
obligation as specified in the order/Regulation is in discharge
of the function of the RERC and is not violative of Article 265
of the Constitution of India.
11. The learned counsel for the RERC further contended B
that the impugned Regulations are made in exercise of power
of Section 86(1)(e) of the Act of 2003, which provides for
promotion & cogeneration of electricity from renewable
sources of energy. It was stated that the impugned Regulatory
provisions are also consistent with Para 4.2.2 of National Action C
Plan on Climate Change and Preamble of the Act of 2003
which emphasize upon promotion of efficient and
environmentally benign policies and encourage generation and
consumption of green energy to sub-serve the mandate of
Article 21 read with Article 51 A(g) of the Constitution of India. D
Further, it is consistent with the international obligation of India
to protect environment. It was argued that the impugned
Regulation is in consonance with law, which impose
reasonable restriction as provided under Article 19(6) of
Constitution of India. It .was stated that the captive power E
consumers and open access consumers are 'consumers of
electricity in the area of distribution licensee' and they are
connected to the network of the said distribution licensee and
can also demand power as and when they require it and a F
distribution licensee is obligated to supply power to Captive
Power Plant and open access consumers under Section 43
of the Act of 2003. It is th~refore contended that in such
circumstances it would be highly discriminatory to subject only
the regular consumers of the distribution licensee to bear the G
cost of Renewable Purchase Obligation (RPO). They
contended that the appellants have not disclosed to this Court
that Captive Power Plants set up by them are Thermal Power
Plants. Thermal Power Plants consume conventional source
of energy and prillutes the environment. Further, as long as H
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[2015) 7 S.C.R.
A consumer continues to take power from a distribution licensee,
the obligation under Section 86(1)(e) of the Act of 2003 is
fulfilled through the said licensee.
12. The learned counsel appearing on behalf of the RERC
B contended that the impugned Regulation 9 of 2010 is in
conformity with Section 86( 1 )( e) read with Section 3 of the Act
of 2003 as under the said provision the National Electricity
Policy, 2005 is framed by the Central Government to achieve
the relevant constitutional objective enshrined under Article 48A
C of the Directive Principles of the State Policy, which provides
for protection and improvement of environment and
safeguarding of forests and wild life and further it envisages
that the State shall make an endeavour to protect and improve
the environment and to safeguard the forests and wild life of
D the country. Learned counsel has strongly placed reliance upon
Article 51A(g) under the Fundamental Duties-Chapter-IVAof
the Constitution of India which states that it is a fundamental
duty of every citizen to protect and improve the natural
environment including forests, lakes, rivers and wild life and to
E have compassion for living creatures. The above said Articles
of the Constitution of India are extracted hereunder:-
Article 48-A of the Constitution of India:
F
"Protection and improvement of environment and
safeguarding of forests and wild life:
The State shall endeavour to protect and improve the
environment and to safeguard the forests and wild life of
G
the Country."
Article 51-A(g) of the Constitution of India:
"Fundamental Duties :
H
(g) to protect and improve the natural environment including
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1121
REGULATORY COMM. [V. GOPALAGOWDA, J.]
forests, lakes, rivers and wild life, to have compassion for A
living creatures ... "
13.
Further, the learned counsel for the respondents
have rebutted the contention of the appellants that the "Area of
Distribution Licensee" does not bring them under the scope B
of the Regulations. It has been contended that the true import
of Section 86( 1 )( e) of the Act of 2003 would mean that the
area of distribution licensee has a geographical/territorial
meaning and specifies that any person whether any consumer
whosoever resides or has a place of business within a C
geographical area of distribution licensee which is limited by
boundaries shall be under obligation to purchase electricity
from renewable sources at a percentage of their total
consumption as specified in the RPO Regulations. The
contention of the respondents is that the use of the distribution D
line by the consumer is irrelevant since the use of line would
only generate wheeling charges to be charged by the DISCOM.
Therefore, if a captive consumer does not use the line of the
DISCOM, the said licensee cannot charge the wheeling
charges. However, this does not mean that the said consumer E
is not in the area of licensee. In line with Section 86(1) (e) of
the Act of 2003, Para 5.12.2 of the Electricity Policy clearly
provides that the Regulatory Commission will specify a
percentage of the total consumption of Electricity in the area F
of a Distribution Licensee to be purchased from the nonconventional sources of energy which includes Renewable
Sources. The wide language used by the Legislature in Section
86(1 )( e) of the Act which has been incorporated in Para 5.12.2
of the Electricity Policy makes it evident that the emphasis is G
on the total consumption of energy in the area of Distribution
Licensee. The mandate is not confined to the purchase and
supply of Energy by the Distribution Licensee. The wide
language used by thP. Legislature in Section 86(1 )(e) of the
Act and in Clause 5.12.2 of the Electricity Policy clearly shows H
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[2015] 7 S.C.R.
A that the provision takes within its fold total consumption of
energy in the area of the Distribution Licensee. This means
that everyone consuming power in the area of Distribution
Licensee including an Industry having Captive Power Plant will
consume the specified percentage of energy from Renewable
B Sources.
c
14. We have carefully considered the rival contentions
urged on behalf of the parties and perused the impugned
judgment and materials on record.
With reference to the aforesaid rival legal contentions
we are required to answer the same, considering whether the
impugned Regulations imposing RE Obligation upon Captive
Power Plants framed by the RERC in exercise of power under
o Section 86(1)(e) of the Act of 2003, which provides for
promotion, co-generation of electricity from renewal source of
energy are ultra vires the provisions of the Act or repugnantto
Article 14 and 19(1)(g) of the Constitution. Para 4.2.2 of
National Action Plan on Climate Change and Preamble of the
E Act of 2003, emphasise upon the promotion of efficient and
environmentally benign policy of the State to encourage
generation and consumption of green energy to subserve the
mandate of Article 21 read with Article 51A(g) of the
Constitution of India. Further, it is consistent with the
F international obligations of India ratified under Kyoto Protocol
on 26.08.2002.
15. The said Regulations are framed by the RERC with a
laudable objective of achieving Directive Principles of the State
G Policy as provided in Article 48A read with Fundamental Duties
under Article 51A(g) of the Constitution, which mandate upon
the State and its instrumentalities to protect the environment
in the area with a view to see that the citizens/residents of the
area to lead a healthy life. This is the laudable object of the
H State and to achieve the same it has framed the National
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1123
REGULATORY COMM. [V. GOPALAGOWDA, J.)
Electricity Policy, 2005 referred to supra.
A
16. Further, the impugned Regulations framed by the
RERC which impose reasonable restriction as provided under
Article 19(6) of the Constitution of India to achieve the Directive
Principles of State Policy and to see that the State and its B
instrumentalities shall discharge their fundamental duties to
protect and maintain environment in the area to facilitate the
residents and living creatures to live peacefully. Reliance has
rightly been placed upon the decision of the judgment of this
Court in the case of Society For Unaided Pvt. Schools of C
Rajasthan v. U.0.1. &Anr. 1 as under:
"252. Rights protected under Article 19(1 )(g) are
fundamental in nature, inherent and are sacred and
valuable rights of citizens which can be abridged only to D
the extent that is necessary to ensure public peace, health, .
morality etc. and to the extent of the constitutional limitation
provided in that article.
xxx
xxx
XXX
E
255. Parliament can enact a social legislation to give effect
to the directive principles of State policy ... "
17. The contention urged by learned senior counsel on
behalf of the appellants/owners of captive generating plants is F
that the RERC does not have jurisdiction under Section 86( 1 )( e)
read with Section 181 of theAct of 2003 to frame the impugned
Regulation in respect of the industries running their own Captive
Power Plants and it has the power only to frame Regulations
with respect to the distribution licensees and, therefore, it was G
not open for the RERC to impose the RE obligation upon the
appellants having captive power plants to make them
1 c2012) s sec 1
H
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[2015) 7 S.C.R.
A compulsorily purchase energy from renewable source and to
pay surcharge in the event of shortfall to fulfil the RE obligation .
. 18. In support of the aforesaid contention the appellants
placed strong reliance upon the definitions of 'Captive
B Generating Plant' contained in Section 2(8), 'distribution
licensee' mentioned in Section 2(17), 'licensee' appearing in
Section 2(39), 'area of supply' contained in Section 2(3) of the
Act of 2003. The appellants have also relied upon Section
86(4) of the Act of 2003 which provisions of the Act provide
C the power to the RERC to frame Regulations with a view to
discharge its functions to give effect to the provisions of the
Act of 2003.
19. The contention of the learned counsel for the appellants
o that 'the distribution licensees' stand on a different footing and
the industries such as the appellants, who have independent
Captive Power Plants and have been generating energy for
their consumers cannot be treated alike distribution licensees
as they are not required to obtain licences from the Licensing
E Authority for setting up Captive Power Plants and they have to
be given free play and cannot be obligated to purchase energy
from renewable sources. It is submitted that the RERC by
framing the impugned Regulations could not have given
direction to the captive power plants to compulsorily purchase
F energy from renewable sources, which is contrary to the object
and the Scheme of the Act of 2003 and therefore, the impugned
Regulations are liable to be struck down.
20. In support of the aforesaid contention, reliance was
G placed by the learned senior counsel on behalf of the appellants
on the ratio of the judgment in the case of Tata Power
Company Ltd. v. Reliance Energy Ltd. and Ors. 2, the
relevant portion of the observations made in the following
H
2 (2009) 16 sec 659
..
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1125
REGULATORY COMM. [V. GO PALA GOWDA, J.]
paragraphs read thus:
A
"75. The core question which, therefore, arises for
consideration is as to whether despite the Parliamentary
intent of giving a go-bye to its licensing policy to generating
companies, whether through imposing stringent regulatory B
measures the same purpose should be allowed to be
achieved?
76. The Act is a consolidating statute. It brings within its
purview generation, transmission, distribution, trade and c
use of electricity. Whereas generation of electricity has
been brought outside the purview of the licensing regime,
the transmission, distribution and trading are subject to
grant of licence and are kept within the regulatory regime.
The statute provides for measures to be taken which would o
be conducive to development of electricity industry.
Measures are also required to be taken for promoting
competition which would also mean the development of
electricity industry. It, indisputably, provides for measures
relating to the protection of interest of consumers and E
supply of electricity to all areas.
xxx
xxx
xxx
81.