# M/S. JINDAL STEEL AND POWER LIMITED v. THE CHHATTISGARH STATE ELECTRICITY REGULATORY COMMISSION AND ORS

- **Citation:** [2022] 7 S.C.R. 378
- **Court:** Supreme Court of India
- **Decided:** 2022-09-29
- **Case number:** Civil Appeal Nos. 3607-3610 of 2008
- **Bench:** Ajay Rastogi, B. V. Nagarathna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-jindal-steel-and-power-limited-v-the-chhattisgarh-state-electricity-36142
- **Pages:** 40

## Headnote

Electricity Act, 2003: s.14 - Distribution licence/minimum area
of supply u/s.14 of the 2003 Act granted to appellant-JSPL by the
Chattisgarh State Electricity Regulatory Commission (Commission)
- Cancellation of, by the Tribunal - Challenge against - Held: s.14
of the 2003 Act states that appropriate Commission may grant a
license to any person (a) to transmit electricity as a transmission
licensee; or (b) to distribute electricity as a distribution licensee; or
(c) to undertake trading in electricity as an electricity trader, in any
area as may be specified in the license - The sixth proviso to s.14
states that the appropriate Commission may grant a license to two
or more persons for distribution of electricity through their own
distribution system within the same area, subject to the applicant
complying with additional requirements - Explanation to r.3 of 2005
rules prescribes the area falling within a Municipal Council or a
Municipal Corporation as defined under Art.243 (Q) of the
Constitution of India or Revenue District - The area of supply
authorised by the Appropriate Commission shall be the 'minimum
area of supply' - Thus, the expression 'within the same area' cannot
refer to the entire Municipal Council or a Municipal Corporation
or a Revenue District but 'the area falling within' a Municipal
Council or a Municipal Corporation or a Revenue District in respect
of which a distribution licensee is authorised - Hence the authorized
'area of supply' shall be the 'minimum area of supply' - Therefore,
the contention of respondent no. 2 that the 'minimum area of supply'
must comprise of the 'entire' Municipal Council or a Municipal
Corporation or a Revenue District is unsustainable - Thus, the area
in respect of which the license was granted to appellant is the
minimum area of supply and appellant is bound to supply electricity
in the said area of supply - Judgment of tribunal set aside -
Electricity Rules, 2005 - r.3, explanation.
[2022] 7 S.C.R. 378
378
A
B
C
D
E
F
G
H
379
Allowing the appeals, the Court
HELD: 1. The 2003 Act, came into force on 10.06.2003
insofar as Sections 1 to 120 and Sections 122 to 185 are
concerned. The Preamble of the 2003 Act states that it has been
enacted to consolidate the laws relating to generation,
transmission, distribution, trading and use of electricity and
generally for taking measures conducive to development of
electricity industry, promoting competition therein, protecting
interest of consumers and supply of electricity to all areas,
rationalization of electricity tariff, ensuring transparent policies
regarding subsidies, promotion of efficient and environmentally
benign policies, constitution of Central Electricity Authority,
Regulatory Commissions and establishment of Appellate Tribunal
and for matters connected therewith or incidental thereto. [Para
27][407-B-D]
2. On a reading of Section 14 of the 2003 Act, it is clear that
the appropriate Commission may, on an application made to it
under Section 15 grant a licence to any person (a) to transmit
electricity as a transmission licensee; or (b) to distribute
electricity as a distribution licensee; or (c) to undertake trading
in electricity as an electricity trader, in any area as may be
specified in the licence. The sixth proviso which is under
consideration states 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 requirement under the 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 licence on the ground that there already exists a licensee
in the same area fo

## Text

_Characters 0–39,886 of 88,033. This is a partial read: ask again with offset=39886 for what follows._

A
B
C
D
E
F
G
H
378
SUPREME COURT REPORTS
[2022] 7 S.C.R.
M/S. JINDAL STEEL AND POWER LIMITED
v.
THE CHHATTISGARH STATE ELECTRICITY
REGULATORY COMMISSION AND ORS.
(Civil Appeal Nos. 3607-3610 of 2008)
SEPTEMBER 29, 2022
[AJAY RASTOGI AND B. V. NAGARATHNA, JJ.]
Electricity Act, 2003: s.14 - Distribution licence/minimum area
of supply u/s.14 of the 2003 Act granted to appellant-JSPL by the
Chattisgarh State Electricity Regulatory Commission (Commission)
- Cancellation of, by the Tribunal - Challenge against - Held: s.14
of the 2003 Act states that appropriate Commission may grant a
license to any person (a) to transmit electricity as a transmission
licensee; or (b) to distribute electricity as a distribution licensee; or
(c) to undertake trading in electricity as an electricity trader, in any
area as may be specified in the license - The sixth proviso to s.14
states that the appropriate Commission may grant a license to two
or more persons for distribution of electricity through their own
distribution system within the same area, subject to the applicant
complying with additional requirements - Explanation to r.3 of 2005
rules prescribes the area falling within a Municipal Council or a
Municipal Corporation as defined under Art.243 (Q) of the
Constitution of India or Revenue District - The area of supply
authorised by the Appropriate Commission shall be the 'minimum
area of supply' - Thus, the expression 'within the same area' cannot
refer to the entire Municipal Council or a Municipal Corporation
or a Revenue District but 'the area falling within' a Municipal
Council or a Municipal Corporation or a Revenue District in respect
of which a distribution licensee is authorised - Hence the authorized
'area of supply' shall be the 'minimum area of supply' - Therefore,
the contention of respondent no. 2 that the 'minimum area of supply'
must comprise of the 'entire' Municipal Council or a Municipal
Corporation or a Revenue District is unsustainable - Thus, the area
in respect of which the license was granted to appellant is the
minimum area of supply and appellant is bound to supply electricity
in the said area of supply - Judgment of tribunal set aside -
Electricity Rules, 2005 - r.3, explanation.
[2022] 7 S.C.R. 378
378
A
B
C
D
E
F
G
H
379
Allowing the appeals, the Court
HELD: 1. The 2003 Act, came into force on 10.06.2003
insofar as Sections 1 to 120 and Sections 122 to 185 are
concerned. The Preamble of the 2003 Act states that it has been
enacted to consolidate the laws relating to generation,
transmission, distribution, trading and use of electricity and
generally for taking measures conducive to development of
electricity industry, promoting competition therein, protecting
interest of consumers and supply of electricity to all areas,
rationalization of electricity tariff, ensuring transparent policies
regarding subsidies, promotion of efficient and environmentally
benign policies, constitution of Central Electricity Authority,
Regulatory Commissions and establishment of Appellate Tribunal
and for matters connected therewith or incidental thereto. [Para
27][407-B-D]
2. On a reading of Section 14 of the 2003 Act, it is clear that
the appropriate Commission may, on an application made to it
under Section 15 grant a licence to any person (a) to transmit
electricity as a transmission licensee; or (b) to distribute
electricity as a distribution licensee; or (c) to undertake trading
in electricity as an electricity trader, in any area as may be
specified in the licence. The sixth proviso which is under
consideration states 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 requirement under the 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 licence on the ground that there already exists a licensee
in the same area for the same purpose. [Paras 32 and 33][412-AE]
3. 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
M/S. JINDAL STEEL AND POWER LTD. v. THE CHHATTISGARH STATE
ELECTRICITY REGULATORY COMMISSION
A
B
C
D
E
F
G
H
380
SUPREME COURT REPORTS
[2022] 7 S.C.R.
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 area of supply
authorised by the Appropriate Commission shall be the minimum
area of supply. Thus, 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. Thus, the expression 'within
the same area' cannot refer to the entire Municipal Council or a
Municipal Corporation or a Revenue District but 'the area falling
within' a Municipal Council or a Municipal Corporation or a
Revenue District in respect of which a distribution licensee is
authorised by its licence to supply electricity. Therefore, by the
aforesaid interpretation, the authorised 'area of supply' shall be
'the minimum area of supply'. [Paras 37, 40, 42][414-A-B, G-H;
415-A, E-G]
4. On the other hand, on a reading of the licence granted to
the appellant, it is clear that respondent No.1 was conscious of
the fact that it was granting licence to the appellant JSPL having
regard to the fact that the said appellant had established an
industrial park for which it had the responsibility for distribution
of electricity and in addition, two more villages were added to
the area comprised in the industrial park for the purpose of
distribution of electricity. The area in respect of which the licence
was granted and thereby authorisation provided to supply
electricity is the minimum area of supply. The 'area of supply' is
'an area falling within' a Municipal Council or a Municipal
Corporation or a Revenue District and in the instant case, it is a
Revenue District. Since, the 'area of supply' authorised in the
licence granted to the appellant JSPL in the instant case is the
'minimum area of supply', the said appellant is 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
A
B
C
D
E
F
G
H
381
the area of supply authorised under the license. This is because
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. [Para 44][416-A-E]
S. Sundaram Pillai v. V.R. Pattabiraman (1985) 1 SCC
591 : [1985] 2 SCR 643; Global Energy Ltd. v. Central
Electricity Regulatory Commission (2009) 15 SCC 570
: [2009] 9 SCR 22; Bhaskar Shrachi Alloys Ltd. v.
Damodar Valley Corporation (2018) 8 SCC 281 :
[2018] 10 SCR 773; Kerala Samsthana Chethu
Thozhilali Union v. State of Kerala & Ors. (2006) 4
SCC 327 : [2006] 3 SCR 420; Bharathidasan University
& Anr. v. All India Council for Technical Education &
Ors. (2001) 8 SCC 676 : [2001] 3 Suppl. SCR 253;
P. Mahendran v. State of Karnataka (1990) 1 SCC 411
: [1989] 2 Suppl. SCR 385; A.A. Calton v. Director of
Education (1983) 3 SCC 33; Gopal Krushna Rath v.
M.A.A. Baig (dead) by LRs (1999) 1 SCC 544;
Federation of Indian Mineral Industries & Ors. v. Union
of India & Anr. (2017) 16 SCC 186 : [2017] 12 SCR
724; Hindustan Unilever Ltd. v. State of Madhya
Pradesh (2020) 10 SCC 751; Gujarat Electricity Board
v. Shantilal R. Desai [1969] 1 SCR 580; DAV College
Trust and Management Society & Ors. v. Director of
Public Instructions & Ors. (2019) 9 SCC 185 : [2019]
12 SCR 549; C.I.T Andhra Pradesh v. M/s. Taj Mahal
Hotel, Secunderabad (1971) 3 SCC 550 : [1972] 1 SCR
168; Madhav Rao Jivaji Rao Scindia v. Union of India
(1971) 1 SCC 85 : [1971] 3 SCR 9; Ramana Dayaram
Shetty v. International Airport Authority of India (1979)
3 SCC 489 : [1979] 3 SCR 1014; Energy Watchdog v.
Central Electricity Regulatory Commission and Others
(2017) 14 SCC 80 : [2017] 3 SCR 153; Thampanoor
Ravi v. Charupara Ravi (1999) 8 SCC 74 : [1999] 2
Suppl. SCR 419; Peerless General Finance &
Investment Co. Ltd. v. Reserve Bank of India (1992) 2
SCC 343; [1992] 1 SCR 406; Chief Forest Conservator
M/S. JINDAL STEEL AND POWER LTD. v. THE CHHATTISGARH STATE
ELECTRICITY REGULATORY COMMISSION
A
B
C
D
E
F
G
H
382
SUPREME COURT REPORTS
[2022] 7 S.C.R.
(Wildlife) & Ors. v. Nisar Khan (2003) 4 SCC 595 :
[2003] 2 SCR 196; Howrah Municipal Corporation and
Ors. v. Ganges Rope Co. Ltd. and Ors. (2004) 1 SCC
663 : [2003] 6 Suppl. SCR 1212; Union of India and
Ors. v. Indian Charge Chrome and Anr. (1999) 7 SCC
314; M/s. Hiralal Rattanlal Etc. Etc. v. State of U.P.
and Anr. Etc. Etc. (1973) 1 SCC 216 : [1973] 2 SCR
502; Dattatraya Govind Mahajan v. State of
Maharashtra (1977) 2 SCC 548 : [1977] 2 SCR 790 -
referred to.
Case Law Reference
[1985] 2 SCR 643
referred to
Para 22.2
[2009] 9 SCR 22
referred to
Para 22.2
[2018] 10 SCR 773
referred to
Para 22.4
[2006] 3 SCR 420
referred to
Para 22.4
[2001] 3 Suppl. SCR 253
referred to
Para 22.4
[1989] 2 Suppl. SCR 385
referred to
Para 22.6
(1983) 3 SCC 33
referred to
Para 22.6
(1999) 1 SCC 544
referred to
Para 22.6
[2017] 12 SCR 724
referred to
Para 22.6
(2020) 10 SCC 751
referred to
Para 22.6
[1969] 1 SCR 580
referred to
Para 22.6
[2019] 12 SCR 549
referred to
Para 22.8
[1972] 1 SCR 168
referred to
Para 22.8
[1971] 3 SCR 9
referred to
Para 22.8
[1979] 3 SCR 1014
referred to
Para 22.9
[2017] 3 SCR 153
referred to
Para 22.9
[1999] 2 Suppl. SCR 419
referred to
Para 25.3
[1992] 1 SCR 406
referred to
Para 25.5
[2003] 2 SCR 196
referred to
Para 25.5
A
B
C
D
E
F
G
H
383
[2003] 6 Suppl. SCR 1212
referred to
Para 25.10
(1999) 7 SCC 314
referred to
Para 25.10
[1973] 2 SCR 502
referred to
Para 25.10
[1977] 2 SCR 790
referred to
Para 25.10
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 36073610 of 2008.
From the Judgment and Order dated 07.05.2008 of the Appellate
Tribunal for Electricity, New Delhi in Appeal Nos. 179, 188 of 2005, 16
and 27 of 2006.
With
Civil Appeal Nos. 4104-4107 of 2008.
Sanjay Sen, Sr. Adv., Sanjeev K. Kapoor, Ms. Divya C., Saransh
Shaw, Ms. Mandakini Ghosh, Ms. Neha Dabral, Pranav Sood,
M/s Khaitan & Co., Shibashish Misra, Ms. Divya, Ms. Swapna Seshadri,
Anand K. Ganesan, Pramod Dayal, Nikunj Dayal, Ms. Kriti Soni, Rakesh
Kumar, Raj Kumar Mehta, Ms. Rashmi Singh, Pukhrambam Ramesh
Kumar, Damodar Solanki, Karun Sharma, W. Immanuel M., Advs. for
the appearing parties.
The Judgment of the Court was delivered by
NAGARATHNA, J.
1. These Civil Appeals filed under Section 125 of the Electricity
Act, 2003 arise out of common impugned Judgment dated 07.05.2008
passed by the Appellate Tribunal for Electricity, New Delhi ('Appellate
Tribunal', for short). By the said judgment, the Appellate Tribunal has set
aside the order of respondent No.1 dated 29.11.2005 and cancelled the
distribution licence granted to the appellant in C.A. Nos.3607-3610 of
2008. Hence, these appeals.
2. Since the questions of law and facts which arise in both the
above captioned Civil Appeals are similar, these appeals are being disposed
of by this common judgment.
Re: Civil Appeal Nos. 3607-3610 of 2008:
3. The appellant-Jindal Steel and Power Ltd. ('JSPL', for short)
in this civil appeal established a sponge iron/steel plant at Raigarh,
M/S. JINDAL STEEL AND POWER LTD. v. THE CHHATTISGARH STATE
ELECTRICITY REGULATORY COMMISSION
A
B
C
D
E
F
G
H
384
SUPREME COURT REPORTS
[2022] 7 S.C.R.
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.
4. Respondent No.1 is Chhattisgarh State Electricity Regulatory
Commission ('Commission', for short), respondent No.2 is Chhattisgarh
State Electricity Board ('CSEB', for short) later became 'Chhattisgarh
State Power Distribution Company' and respondent No.3 is Chhattisgarh
Vidyut Mandal Abhiyanta Sangh ('CVMAS', for short).
5. The newly created State of Chhattisgarh formulated its industrial
policy for 2001-2006 which encouraged the establishment of industrial
estates in private-public partnership as well as the installation of captive
power plant.
6. 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 vide letter dated 28.12.2001. The land was to comprise of villages
of Kosampali, Dhanagar, Barmuda or at a site in the Tehsil of Gharghoda
comprising villages Tarai Mal and Ujjalpur. JSPL, addressed a letter dated
09.04.2002 to the Department of Mineral Resources, Commerce and
Industries, Government of Chhattisgarh seeking permission for
establishing such an industrial estate at Raigarh. A map showing the
proposed industrial area was annexed with the letter. The Government
of Chhattisgarh, vide letter dated 26.04.2002 informed JSPL that the
Energy Department was taking action to grant permission for sale of
power and to lay transmission lines to various units in the private industrial
estate being established by JSPL and requested JSPL to prepare and
submit a draft of Memorandum of Understanding ('MoU', for short) for
the said purpose for approval. The facilities were to be provided as per
the new industrial policy dated 01.11.2001.
7. JSPL, on 16.07.2002, requested the Chief Minister of
Chhattisgarh to issue appropriate directions for grant of permission to
supply power to the units in the proposed industrial estate. The
Government of Chhattisgarh, on 14.08.2002, sent a reply to the aforesaid
request made by JSPL and informed that it shall have to take certain
actions /steps with regard to the supply of power to the proposed industrial
units. In compliance of the aforesaid letter on 04.09.2002, JSPL addressed
a letter requesting for grant of permission under Section 28 of the Indian
Electricity Act, 1910 ('1910 Act', for short) for sale of power to the
proposed units in the industrial state from its captive power plant and for
A
B
C
D
E
F
G
H
385
grant of permission to set up transmission and distribution lines/system
for supply of power to the industrial units in the proposed industrial estate.
JSPL further stated that they will obtain necessary permission under the
Electricity Supply Act, 1948 ('1948 Act', for short) for setting up
transmission and distribution lines from CSEB.
8. A MoU was signed on 23.10.2002 between Chhattisgarh State
Industrial Development Corporation ('CSIDC', for short) acting on behalf
of Government of Chhattisgarh and JSPL for setting up the industrial
estate. The Government of Chhattisgarh, on 29.01.2003 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 i.e., Punjipathra, Tumdih, Jorapalli and Dhanagarh from its captive
power plant and laid down certain terms and conditions. CSEB, on
31.05.2003 granted permission for laying transmission and distribution
lines of 220 KV for supply of power to the prospective units at the
Industrial Estate in Raigarh, Chhattisgarh by tapping 220 KV from the
captive power plant of JSPL.
9. On 06.10.2003, JSPL made a formal application for sanction
under Section 28 of the 1910 Act wherein it provided details of the project
enclosing relevant documents. The Government of Chhattisgarh passed
two orders on 28.02.2004. Vide its first order exercising power under
Sections 68(1) and 68(3) of the Electricity Act, 2003 ('2003 Act', for
short), the State Government accorded permission for construction of
transmission and distribution lines as recommended by the CSEB on
certain terms and conditions. Vide its second order, relating to the
No-Objection of the State Government regarding direct power supply
by JSPL from their power plant to the industrial units proposed to be set
up in the private industrial estate in Raigarh, Chhattisgarh, the State
Government of Chhattisgarh opined that since the 2003 Act was in force
in the State from 09.12.2003 and the 1910 Act stood repealed, no
permission could be granted under the latter Act.
10. JSPL commenced supply of electricity to the industrial units
which were already setup with effect from 01.03.2004.
11. Thereafter, on 15.09.2004, JSPL filed an application for grant
of distribution licence before the Commission under Section 14 of the
2003 Act. The same was returned by the Commission on 15.09.2004 for
filing in the prescribed format. On 25.01.2005, JSPL applied for the licence
to the Commission in Form 1-A with all necessary enclosures as per
M/S. JINDAL STEEL AND POWER LTD. v. THE CHHATTISGARH STATE
ELECTRICITY REGULATORY COMMISSION [B.V. NAGARATHNA, J.]
A
B
C
D
E
F
G
H
386
SUPREME COURT REPORTS
[2022] 7 S.C.R.
Regulation 3 (1) of the Chhattisgarh State Electricity Regulatory
Commission (License Regulations), 2004 ('State License Regulations',
for short) along with Demand Draft of Rs.5 Lakhs. In the said application,
JSPL stated that the area to which supply was to be made was the Jindal
Industrial Park in the private sector in Punjipathra and Tumdih villages of
Garghoda Tehsil, Raigarh District having an area of 750 acres and shall
accommodate seventy units. Pursuant to the filing of the said application,
notices were published in the newspapers and objections were invited
under Section 15 of the 2003 Act. Three objections were received, one
each from respondent Nos.2 and 3 and the third objection was from
Mr. R.K. Aggarwal. The objection of Mr. R.K. Aggarwal was
subsequently rejected by the Commission on 27.08.2005 being bereft of
any locus standi.
12. Various correspondences and pleadings were exchanged
between JSPL, CSEB, CVMAS and the Commission and thereafter
the Commission framed a total of five issues and vide its Order dated
29.09.2005, decided to grant distribution licence under Section 14 of the
2003 Act. The pertinent findings of the Commission can be encapsulated
as under:
i.
A harmonious reading of Sections 10(2), 42(2), 2(47) & 12
of the 2003 Act, clearly brings out that a generating company
may supply electricity to a consumer under the provisions
of Section 10(2) of the 2003 Act only subject to the provisions
of open access. The scheme of the Act, particularly Part
IV (Licensing) thereof, is such that it cannot authorize a
generator to supply electricity to a consumer without a
licence. That the present application is not for supply through
open access and the same is for distribution of electricity
to a significant number of industries in an industrial area set
up under specific permission of the State Government.
ii.
Section 28 of the 1910 Act is quite clear that supply of
electricity to the public mandates the previous sanction of
the State Government. That, by no stretch of the argument,
can the letter of the State Government dated 29.01.2003
be treated as sanction of the State government. Therefore,
the said letter does not confer any right on JSPL under
Section 28 of the 1910 Act to supply electricity.
A
B
C
D
E
F
G
H
387
iii.
No-objection letter dated 28.02.2004 also does not confer
any such right on the applicant. If the said letter conveyed
any right, either the application for licence would not have
been made or a claim of existing right should have been
made. The application of JSPL clearly stated that it had no
licence. Further, the second letter of the said date, conveying
No-objection of the State Government cannot be said to
be valid since there is no provision for such no objection
from the State Government. Therefore, as on that date,
distribution of electricity by JSPL was without any legal
authority.
iv.
On the aspect of area for which the licence had been applied
for, it was observed that the present case ought to be treated
as an exception to Rule 3 of the Distribution License Rules
and to Para 5.4.7 of the National Electricity Policy since
effective steps for setting up of the industrial estate herein
and an understanding with the State Government to the
effect that JSPL would provide electricity from its captive
power plant were taken much before the National Electrical
Policy was notified. As per the application, supply of
electricity commenced with effect from 01.03.2004 to some
industries on the basis of the letter dated 28.02.2004 and
therefore, the National Electrical Policy notified subsequently
cannot be invoked to deny distribution licence in this case.
v.
That if a distribution licence is refused at this stage, which
is approximately one and half years after supply of electricity
has commenced, whether with or without legal authority,
the same shall impact the consumers of JSPL. CSEB also
conveyed its no objection to lay transmission and distribution
network as early as on 30.05.2003. That JSPL had gone
way ahead with the industrial estate project in full, including
distribution of power on the basis of the understanding with
the State Government. A large investment of Rs.17.79
Crores was made, and there were twenty-four industries,
most of which were power intensive. If a distribution licence
was denied, they will have to close down their industries.
Apart from that, the consumers will be forced to buy power
from CSEB at a much higher rate than at present. Therefore,
M/S. JINDAL STEEL AND POWER LTD. v. THE CHHATTISGARH STATE
ELECTRICITY REGULATORY COMMISSION [B.V. NAGARATHNA, J.]
A
B
C
D
E
F
G
H
388
SUPREME COURT REPORTS
[2022] 7 S.C.R.
the grant of distribution licence in this case may be in the
interest of the competition and in the interest of consumers
who have already entered into a long-term supply contract
with JSPL.
vi.
Further, in view of the overall position of the case, the balance
of convenience would lie in grant of a distribution licence to
JSPL and there was an adequate justification for the same.
Moreover, the CSEB could not clarify as to why it was in
opposition to a distribution licence in a limited area when
CSEB was itself not in a position to supply quality power to
their existing industrial consumers.
vii.
In respect of JSPL's eligibility for grant of such distribution
licence, it was observed that JSPL met all the requirements
of capital adequacy, creditworthiness and code of conduct
as laid down by the Central Government in the Distribution
License Rules.
viii.
In respect of levy of cross-subsidy charges on the consumer
of JSPL, the Commission held that there was no justification
in such levy since the same was not a case of open access.
The scheme of the 2003 Act is such that a distribution
licensee cannot recover cross-subsidy surcharge from
another distribution licensee and that JSPL had undertaken
to supply electricity to all its consumers in the area for which
licence was proposed to be granted.
ix.
Lastly, it was held that JSPL was liable to pay a penalty
of Rs. One Lakh for contravention of Section 12 of the
2003 Act which mandates licence to be obtained for supply
of electricity and violation of the same was punishable under
Section 142 of the 2003 Act.
13. The following conditions, apart from the general and special
conditions applicable to such licenses under the Regulations, were imposed
on JSPL by the Commission for grant of distribution license:
"(i)
The license will be for the area of the two villages, Tumdih
and Punjipathra of Gharghoda Tehsil of Raigarh District.
However, the number of industrial consumers in the Jindal
Industrial Park shall be limited to 70 and their total demand
A
B
C
D
E
F
G
H
389
for electricity not increasing 299 MW, as agreed with the
State Government.
(ii)
The applicant shall lay necessary distribution lines and put-up
sub-station at his own cost in the two villages for supply of
electricity to any person who may apply for it and supply
electricity at a rate not more than Rs.2.50 per unit or at the
supply rate of the Board for that category of consumer,
which is lower. This will include domestic, agriculture,
industrial and other consumers. The option to choose
between the licensee and the Board shall be with the
consumer.
(iii)
All other general and special conditions applicable to a
distribution licensee as per the provisions of the License
Regulations."
14. Respondent Nos.2 and 3 on 07.10.2005, filed objections to
the order dated 29.09.2005 before the Commission. Thereafter, respondent
No.2 filed Appeal No.179/2005 and respondent No.3 filed Appeal No.188/
2005 before the Appellate Tribunal. The appellant herein challenged the
imposition of penalty of Rs. One Lakh before the Appellate Tribunal in
Appeal No.27/2006.
15. On hearing the respective parties, the Commission, vide its
Order dated 29.11.2005, granted licence to JSPL on the following terms
and conditions:
"(i)
The distribution license shall be valid for a period of
twenty-five years from the date of issue, as per the provision
of Section 15(8) of the Act, unless revoked earlier.
(ii)
The area of the license shall be the geographical area of
the villages Tumdih and Punjipathra, including the Jindal
Industrial Park aforementioned, of Gharghoda tahsil of
Raigarh District of the State as indicated in the map enclosed
herewith.
(iii)
The distribution licensee shall abide by all the relevant
provisions of the Electricity Act, 2003, the National
Electricity Policy, i.e. Rules 1956 and Electricity Rules 2005,
as amended from time to time.
M/S. JINDAL STEEL AND POWER LTD. v. THE CHHATTISGARH STATE
ELECTRICITY REGULATORY COMMISSION [B.V. NAGARATHNA, J.]
A
B
C
D
E
F
G
H
390
SUPREME COURT REPORTS
[2022] 7 S.C.R.
(iv)
The licensee shall abide by the general conditions of license
as given in chapter III and the other conditions applicable
to a distribution licensee as given in chapter V of the CSERC
(Licence) Regulations 2005, as amended from time to time.
He shall also comply with the relevant provisions of all the
regulations issued or as may be issued by the Commission,
as amended from time to time.
(v)
The licensee shall abide by all the relevant provisions of
the Chhattisgarh State Electricity Supply Code, 2005.
(vi)
The licensee shall lay necessary distribution lines and put-up
sub-stations at his own cost in the two villages for supply
of electricity to any person who may apply for it and supply
electricity at a provisional rate of not more than Rs.2.50
per unit or at the supply rate of the Board for that category
of consumer, whichever is lower, till the tariff for supply is
determined by the Commission. This will include domestic,
agriculture, industrial and other consumers.
(vii)
The consumers of the area other than area of Jindal
Industrial Park (JIP) shall have the option to choose between
the licensee and the Chhattisgarh State Electricity Board
(CSEB) or its successor entity/entities.
(viii) The existing tariff being charged from the industrial
consumers in the designated area of JIP shall continue to
be charged by the licensee till the tariff is determined by the
Commission.
(ix)
For determination of tariff in the area of supply, the
distribution licensee shall file the necessary application under
Section 64 of the Act and clause 10 of the CSERC (Details
to be 'furnished by licensee or generating company for
determination of tariff and manner of making application)
Regulations, 2004 before the Commission on or before 31st
March 2006, and thereafter in terms of the provisions of
the same Regulations.
(x)
The licensee shall abide by the safety rules and safety
standards issued by the Central Electricity Authority,
Ministry of Power, Govt. of India and other Government
agency/department.
A
B
C
D
E
F
G
H
391
(xi)
The licensee shall not transfer or assign, by sale, lease
exchange or otherwise, this license or part thereof to any
other person without prior approval of the Commission.
(xii)
The licensee shall undertake electrification of villages Tumdih
and Punjipathra as per the norms laid down for rural
electrification within a period of six months, i.e., before
29.05.2006. It shall also provide public lamps in adequate
number in these two villages on the request of the concerned
Gram Panchayat and maintain the same.
(xiii) All issues relating to interpretation of this licence and its
terms and conditions, shall be a matter for determination by
the Commission and the decision of the Commission on such
issues shall be final, subject only to the right of appeal.
(xiii) The conditions of the license may be altered or amended by
the Commission at any time, if it deems fit in the public
interest, in terms of Section 18 of the Act."
16. Respondent No.2 filed Appeal No.16/2006 before the
Appellate Tribunal challenging the order dated 29.11.2005 passed by the
Commission. The Appellate Tribunal, vide it Order dated 11.05.2006,
upheld the order granting distribution licence dated 29.11.2005 passed by
the Commission. Aggrieved by the order dated 11.05.2006 passed by the
Appellate Tribunal, respondent Nos.2 and 3 filed appeals before this Court
being Civil Appeal Nos. 3996 of 2006 and 4268 of 2006. JSPL also
preferred an appeal before this Court being Civil Appeal No.4529 of
2006. This Court, vide its order dated 19.09.2007, allowed the aforesaid
appeals, set-aside the order dated 11.05.2006 passed by the Appellate
Tribunal and remanded the matter to the Appellate Tribunal for fresh
determination.
17. On remand, the Appellate Tribunal reconsidered the matter
and all the aforesaid appeals (Appeal No.179/2005, Appeal No.188/2005,
Appeal No.27/2006 and Appeal No.16/2006) were allowed vide common
impugned order dated 07.05.2008 which is challenged before this Court
by way of the present appeals. The pertinent observations and decision
of the Appellate Tribunal are encapsulated as under:
i.
With respect to JSPL's argument that the MoU had a specific
clause that allowed JSPL to directly sell power to the
M/S. JINDAL STEEL AND POWER LTD. v. THE CHHATTISGARH STATE
ELECTRICITY REGULATORY COMMISSION [B.V. NAGARATHNA, J.]
A
B
C
D
E
F
G
H
392
SUPREME COURT REPORTS
[2022] 7 S.C.R.
industrial units set up in the proposed industrial estate, it
was held that it was not the correct way to read the MoU.
The MoU was entered into when the estate had not even
come into existence and the terms therein only envisioned
what would happen in the future. Therefore, it was too early
to grant licence for supply or distribution of electricity by
JSPL. It was further held that JSPL itself did not treat this
clause in the MoU as grant of license. Had the MoU itself
meant grant of license, there would have been no occasion
for the subsequent correspondence between the JSPL and
the Government of Chhattisgarh. Therefore, neither the
State Government nor JSPL was acting under an
understanding that JSPL had already been granted a license.
ii.
That the letter dated 29.01.2003 which is a 'No-Objection'
from the Government of Chhattisgarh had a clear stipulation
that JSPL was required to take permission under Section
28 of the 1910 Act for direct power supply from its captive
power plant to the industrial estate and the said letter cannot
be read as Government's promise to give license.
iii.
On examining the two letters dated 28.02.2004, it was found
by the Appellate Tribunal that the first order accorded
permission for construction of power, transmission and
distribution lines under Sections 68(1) and (3) of the 2003
Act and the second order dealt with prayer for approval
under Section 28 of the 1910 Act. Vide the second order, it
was made sufficiently clear that JSPL will have to get the
permission/licence from the Commission since Section 28
of the 1910 Act stood repealed and no permission thereof
could be given.
iv.
That there cannot be an estoppel against the statute. The
relevant authority at that time was the Commission and the
licence was to be obtained under Section 14 of the 2003
Act from the Commission, after fulfilling the requisite terms
and conditions. JSPL could not have taken advantage of
the doctrine of promissory estoppel since, even if the
aforesaid letters were construed to be a promise, the same
would only be binding on the Government of the State of
A
B
C
D
E
F
G
H
393
Chhattisgarh and not the Commission which is not
subordinate to the Government or its successor or assignee.
v.
The Appellate Authority, on considering the issue as to
whether JSPL was entitled to the license/minimum area of
supply under Section 14 of the 2003 Act observed that on
the date when the application for licence filed by JSPL under
the 2003 Act was under consideration, the Commission was
required to apply the regulation in force at that point of time
which included the rule of minimum area of supply. It was
observed that the Commission was incorrect in ignoring the
said rule and granting the licence in violation thereof. No
exception to the aforesaid rule could have been made out
by the Commission.
vi.
While interpreting Section 10(2) of the 2003 Act that allowed
a generating company to supply electricity to any licensee
or to any consumer, it was held that the JSPL is a captive
power plant and is governed by Section 9 of the 2003 Act
and not by Section 10 of the said Act.
vii.
That JSPL had applied for a distribution licence because it
intended to purchase power from another generating
company called Jindal Power. JSPL, being a captive power
plant and not a generating company at the relevant time
could not have made any supply to any third person without
a license.
viii.
On considering CSEB's argument that the supply from a
captive power plant or even under Section 10(2) of the
2003 Act is permissible only when the same is made by use
of the grid or the transmission lines of distribution licensee
or transmission licensee by use of open access and that
unless open access is availed, the supply cannot be made, it
was held that open access is an enabling provision that helps
expansion of the electricity sector and not to limit its
development. If it was the intention of the 2003 Act that no
sale was possible except by availing open access, it would
have said so. It was further observed that Section 10(2) of
the 2003 Act prescribes that the supply to a consumer will
be subject to Regulations made under sub-section (2) of
M/S. JINDAL STEEL AND POWER LTD. v. THE CHHATTISGARH STATE
ELECTRICITY REGULATORY COMMISSION [B.V. NAGARATHNA, J.]
A
B
C
D
E
F
G
H
394
SUPREME COURT REPORTS
[2022] 7 S.C.R.
Section 42 of the 2003 Act. While interpreting the use of
the words 'subject to the rules made under sub-section
(2) of Section 42', it was held that the provision under
Section 42(2) of the 2003 Act would only be attracted when
the access through the existing distribution was sought; when
such access was not sought, the aforesaid provision shall
not apply.
ix.
With respect to the Commission's order imposing penalty
of Rs. One Lakh on JSPL, the same was set-aside. This
was because, although JSPL did not have a licence when it
started supplying electricity to Jindal Industrial Park, a
penalty was not automatically attracted. As per Section 142
of the 2003 Act, a person sought to be punished has to be
given an opportunity to be heard. Admittedly, the said
opportunity was not given to JSPL. It was found that the
Commission was merely hearing the application for grant
of distribution license. The issue as to whether JSPL had
rendered itself liable to punishment at all was never an issue
before the Commission.
Re: Civil Appeal Nos. 4104-4107 of 2008:
18. The facts and circumstances in both these appeals are similar
and therefore have not been reproduced to avoid repetition except to the
extent it is necessary to do so.
19. The appellant in these civil appeals is the consumer of
electricity in Jindal Industrial Park in Raigarh, Chhattisgarh who is
aggrieved by the cancellation of distribution licence granted in favour of
JSPL and due to unavailability of an alternative distribution licensee. It is
the grievance of the appellant herein that it was not a party before the
Appellate Tribunal.
20. JSPL, on 08.05.2008, by way of its notice, informed the
appellant in this appeal that since its distribution licence had been
cancelled, it had to stop supplying power to all the industries in the Jindal
Industrial Park whereafter on 09.05.2008, at 1:00 p.m., the electricity
supply to all the units of the appellant was disconnected. The appellant
contends that all the units were brought to a standstill and the appellant
has been facing losses running to crores of rupees. The appellant avers
that it is a third party and an end consumer of JSPL who is deprived
A
B
C
D
E
F
G
H
395
of electricity in the absence of any alternative distributor in place. Hence
these appeals.
21. We have heard Sri Sanjay Sen, learned senior counsel for the
appellant in C.A. Nos. 3607-3610 of 2008 and Sri C.S. Vaidyanathan,
learned senior counsel for the appellant in C.A. Nos. 4104-4107 of 2008
duly assisted by their instructing counsel; Ms. Swapna Seshadri, learned
counsel for the respondent No.1, Sri Raj Kumar Mehta, learned counsel
for the respondent No.2 and perused the material on record.
22. The submissions of the learned senior counsel for the
appellant- JSPL in Civil Appeal Nos.3607-3610 of 2008 are epitomised
as under:
22.1
That the Commission in its order dated 29.11.2005, after
taking note of the Distribution of Electricity (Additional
Requirement of Capital and Adequate Creditworthiness
and Code of Conduct) Rules, 2005 ('2005 Rules', for short)
had proceeded to grant licence keeping in view the
historical background, investment made by the
appellant-JSPL and the benefits that accrued in favour
of industrial consumers who had set up their industrial
plants and had no other source of power supply at the
relevant time. By its Order dated 29.09.2005, the
Commission had specifically noticed the inability of CSEB
to provide electricity for want of physical infrastructure
and unavailability of surplus power. In fact, the State of
Chhattisgarh was suffering from power shortages and
was buying power from the captive power plant of this
appellant-JSPL. On the basis of the permission granted
by the State Government/CSEB, in terms of MoU dated
23.10.2002, the construction of transmission and
distribution network was undertaken and completed and
supply of power on the basis of the long-term agreement
had commenced on or about 01.03.2004 which was much
prior to the coming in to existence of the Commission and
the 2005 Rules. Further, the State Government with the
concurrence of CSEB had acted substantially in terms of
powers vested under the repealed law i.e., Section 28 of
the 1910 Act and the State's Industrial and Energy Policies.
The original application for grant of licence filed on
M/S. JINDAL STEEL AND POWER LTD. v. THE CHHATTISGARH STATE
ELECTRICITY REGULATORY COMMISSION [B.V. NAGARATHNA, J.]
A
B
C
D
E
F
G
H
396
SUPREME COURT REPORTS
[2022] 7 S.C.R.
15.09.2004 and revised application for grant of licence
filed on 25.01.2005 were both before notification of the
2005 Rules.