# TATA POWER COMPANY LTD' v. RELIANCE

- **Citation:** [2008] 10 S.C.R. 293
- **Court:** Supreme Court of India
- **Decided:** 2008-07-08
- **Case number:** Civil Appeal No. 2898 of 2006
- **Bench:** Ashok Bhan, Altamas Kabir
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/tata-power-company-ltd-v-reliance-23465
- **Pages:** 39

## Headnote

ELECTRICITY
Licence to sell, supply and distribute electricity to other ·
distribution licensees and direct consumers of electricity -
C
Licensee supplying electricity also to consumers directly -
Complaint by distribution licensee that the first licensee was
not entitled to supply electricity directly to retail consumers
falling within its area of supply - Held: under the terms and
conditions of the licences held by the first licensee, it is enD
titled to effect supply of electrical energy in retail directly to
consumers whose demand is Jess than 1000 KVA apart from·
its entitlement to supply energy to other licensees for their ·
own purpose and in bulk within its area of supply, subject to·:-
the constraints indicat!;d in sub-clause(/) of Clause 5 of the
E
licences - The Electricity Acts encourage competition in electricity trade and the same is incorporated in the licences issued to distribution licensees - Electricity Act 1910, Electricity
(Supply) Act, 1948 and Electricity Act, 2003 - s. 42.
~- ·
The predecessor-in-interest of the respondent(REL),
F
namely, BSES, filed a petition before the Maharashtra Electricity Regulatory Commission(MERC) complaining_ of encroachment by the appellant(TPC) within its area of supply. Its case before the MERC was that supply of electricity by the appellant directly to retail consumers was G
contrary to the provisions of the Indian Electricity Act,
1910, the Electricity(Supply) Act, 1948, the policy contained in the Schedule to the 1948 Act, as also the Government Policy. The case of the appellant was that un293
H
294
SUPREME COURT REPORTS
[2008] 10 S.C.R.
A der the licences of 1907, 1919 and 19:2(granted to the
companies predecessors-in-interest •.
h~ ·appellant and
the 1953 licence granted to the appe
·t, it was entitled
to sell, supply and distribute electricity not only to other
distribution licensees, such as the respondent, but also
B to direct consumers of electricity.
The MERC though held that the terms and conditions of the licences of the appellant would give it an unfettered right to supply electricity to all ·or any consumer
in the BSES' area of supply, it directed the parties to file
C the terms of ·reference to engage ·a c.onsultancy firm to
study the· issues relating to ss.42 and 14·of the Electricity
Act, 2003 and that the report of the said consultancy firm
would be implemented as per the Commission's Regula-
"tions. Both the parties filed appeals before the Appellate
D •tribunal, which he.Id that the appellant was not granted
licence to undertake retail distribution of electricity in the,
area with.in which the respondent was distributing power
in retaff to consumers directly and that the appellant could ·
~undertake only bulk supplies to licensees such as the reE spondenf. Aggrieved, the TPC and two consumers filed
·the 'instant appeals.
The question for consideration before the Court
was: whether TPC was entitled under the licences granted
to 'it'to effect distribution of electricity directly to consumF
ers. within the area of supply indicated in the licences
granted to BSES /REL.
Allowing the appeals, the. Court
HELD: 1.1. Under-the terms and conditions of the
G licences held by TPC, it is entitled to effect supply of elec-
..
J
.
L
i
r
.'
;-
trical energy in retail directly to co'nsumers, whose maxi-
)'
mum demand is less than 1000 KVA, apart from its entitlement to supply energy to other licensees for their own
purposes and in bulk, within its area of supply as stipuH lated in its l~cences and also subject to the constraints
11
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TATA POWER COMPANY LTD'. v. RELIANCE
295
ENERGY LTD. & ORS.
indicated in sub-clause (I) of Clause 5 of the licences in relaA
tion to factories ai;id the Railways. [para 78] [331-8,C, D]
1.2 .. Clause 5 of the 1919, 1921 and 1953 Licences
held by TPC indicates the purpose of supply and is divided into two parts - (i) for power and (ii) for lighting and
general purposes, other than power. Sub-clause (I) deals 8
with supply to licensees for t

## Text

_Characters 0–39,836 of 80,129. This is a partial read: ask again with offset=39836 for what follows._

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[2008] 10 S.C.R. 293
TA,WER C~MPANY LIMITED
RELi
ENERGY LIMITED & ORS.
(Civi Appeal. No.2898 of 2006)
A
JULY 8, 2008
B
[ASHOK BHAN AND ALTAMAS KABIR, JJ]
ELECTRICITY
Licence to sell, supply and distribute electricity to other ·
distribution licensees and direct consumers of electricity -
C
Licensee supplying electricity also to consumers directly -
Complaint by distribution licensee that the first licensee was
not entitled to supply electricity directly to retail consumers
falling within its area of supply - Held: under the terms and
conditions of the licences held by the first licensee, it is enD
titled to effect supply of electrical energy in retail directly to
consumers whose demand is Jess than 1000 KVA apart from·
its entitlement to supply energy to other licensees for their ·
own purpose and in bulk within its area of supply, subject to·:-
the constraints indicat!;d in sub-clause(/) of Clause 5 of the
E
licences - The Electricity Acts encourage competition in electricity trade and the same is incorporated in the licences issued to distribution licensees - Electricity Act 1910, Electricity
(Supply) Act, 1948 and Electricity Act, 2003 - s. 42.
~- ·
The predecessor-in-interest of the respondent(REL),
F
namely, BSES, filed a petition before the Maharashtra Electricity Regulatory Commission(MERC) complaining_ of encroachment by the appellant(TPC) within its area of supply. Its case before the MERC was that supply of electricity by the appellant directly to retail consumers was G
contrary to the provisions of the Indian Electricity Act,
1910, the Electricity(Supply) Act, 1948, the policy contained in the Schedule to the 1948 Act, as also the Government Policy. The case of the appellant was that un293
H
294
SUPREME COURT REPORTS
[2008] 10 S.C.R.
A der the licences of 1907, 1919 and 19:2(granted to the
companies predecessors-in-interest •.
h~ ·appellant and
the 1953 licence granted to the appe
·t, it was entitled
to sell, supply and distribute electricity not only to other
distribution licensees, such as the respondent, but also
B to direct consumers of electricity.
The MERC though held that the terms and conditions of the licences of the appellant would give it an unfettered right to supply electricity to all ·or any consumer
in the BSES' area of supply, it directed the parties to file
C the terms of ·reference to engage ·a c.onsultancy firm to
study the· issues relating to ss.42 and 14·of the Electricity
Act, 2003 and that the report of the said consultancy firm
would be implemented as per the Commission's Regula-
"tions. Both the parties filed appeals before the Appellate
D •tribunal, which he.Id that the appellant was not granted
licence to undertake retail distribution of electricity in the,
area with.in which the respondent was distributing power
in retaff to consumers directly and that the appellant could ·
~undertake only bulk supplies to licensees such as the reE spondenf. Aggrieved, the TPC and two consumers filed
·the 'instant appeals.
The question for consideration before the Court
was: whether TPC was entitled under the licences granted
to 'it'to effect distribution of electricity directly to consumF
ers. within the area of supply indicated in the licences
granted to BSES /REL.
Allowing the appeals, the. Court
HELD: 1.1. Under-the terms and conditions of the
G licences held by TPC, it is entitled to effect supply of elec-
..
J
.
L
i
r
.'
;-
trical energy in retail directly to co'nsumers, whose maxi-
)'
mum demand is less than 1000 KVA, apart from its entitlement to supply energy to other licensees for their own
purposes and in bulk, within its area of supply as stipuH lated in its l~cences and also subject to the constraints
11
_J
TATA POWER COMPANY LTD'. v. RELIANCE
295
ENERGY LTD. & ORS.
indicated in sub-clause (I) of Clause 5 of the licences in relaA
tion to factories ai;id the Railways. [para 78] [331-8,C, D]
1.2 .. Clause 5 of the 1919, 1921 and 1953 Licences
held by TPC indicates the purpose of supply and is divided into two parts - (i) for power and (ii) for lighting and
general purposes, other than power. Sub-clause (I) deals 8
with supply to licensees for their own purposes and in
bulk. Sub-clause (II) provides for supply of electricity for
lighting and general purposes, other than power, including the supply of energy in bulk to other licensees for distribution by them. Sub-clause (II) is followed by an ExplaC
nation to both Sub-clause (I) and Sub-clause (II) of Clause
5. It has been clarified that the energy supply to any consumer for power, that is, under Sub-clause (I}, could be
used by such consumer for lighting his premises to a
maximum amount of 20% of the total energy supplied to D
such consumer, and it has also been stipulated that TPC
would not supply energy for lighting purposes referred
to in Sub-clause (II) except by agreement with Bombay
Electric Supply and Tramways Company Limited. [para
74] [329-8,C,D,E,F]
E
2.1. MERC, having once held on the principal issue
that TPC was entitled to supply electrical energy to all consumers under the licences granted to it, should have restrained itself from unilaterally making out a third case
regarding establishment of a level playing field when such
F
a case had neither been made out nor any relief in that
regard had been prayed for by BSES. [para 71] [327-A,B]
2.2. MERC also lost sight of the fact that the first three
licences had been granted to TPC long before a separate G
licence was granted in favour of BSES. From the materi-
"'
als on record it stands amply proved
that TPC had all
along been supplying electrical energy directly even to
retail customers, whose maximum demand was less than
1000 KVA, within the area which later came to be included H
296
SUPREME COURT REPORTS
[2008] 10 S.C.R.
A in BSES and subsequently REL's area of supply, and no
objection thereto was raised by either BSES or REL till
the year 1998 when TPC submitted its proposal for domestic tariff for approval to the Board. It was only thereafter that REL raised objection in the form of its petition
B to MERC under Sections 22(2)(e)and (n) of the ERC Act
1998. [para 72 and 73] [327-B; 328-E,F]
3.1. The Appellate Tribunal, in dealing with the appeals filed both by REL .and TPC, misinterpreted the provisions of the licences granted to TPC for supply and disc tribution of electrical energy. The Tribunal ignored not
only the situation prior to 1926 when BSES was granted
licence but also the subsequent. amendments to the. licences held by TPC whereby Clause 5 of the 1919 and ·
1921 licences were altered to permit it to supply electrical
D energy for lighting and general purposes, other than power,
and including the supply of energy in bulk to other .licens- .
ees for distribution by them. [para 73] [327-F,G, 328-A]
3.2. The Appellate Tribunal also overlooked the orE der passed by the Industries Energy and Labour Department of the Government of Maharashtra on 7 .12.1978,
whereby from 1.7.1980 TPC was required .to transfer to
the Maharashtra. State Electricity Board its distribution
rights under the 1907 licence and assets pertaining
thereto as set out in part 2 of the Annexure to the said
F . licence. The Tribunal also overlooked the fact that by virtue of tile aforesaid arrangements, Clause 6 of the 1907 licence relating to "purpose of supply" was also amended to
bring it in parity with the amendments to the First Annexure
to the 1919 and 1921 licences. [para 73] [328-A,B, C]
G
4.1. It is no doubt true that Section 42 of the Electricity Act, 2003 empowers the State Commission to introduce a system of open access within one year of the appointed date fixed by it and· in specifying the extent of
H open access in successive phases and in determining
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1: .
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...
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TATA POWER COMPA~Y LTD. v. RELIANCE
297
ENERGY LTD. & ORS.
the charges for wheeling having due regard to the relA
evant factors. The concept of wheeling has been introduced in the 2003 Act to enable distribution licensees who
.
'
are yet to instal their distribution line to supply electricity
directly to retail consumers, subject to payment of surr
charge in addition to the charges for wheeling as the State s
Commission may determine. [para 75] [329-G, 330-A,B,C]
4.2. Tbe provisions of both the 1903 and 1910 Elec~
tricity Acts encourage competition. in. the electricity trade
and the same is also incorpo-rated in the licences issued
in favour of the distribution licensees, which also incJude C
licencees generating power for supply. The element of
competition has been included in the Preamble to the
2003 Act arid permeates its.various provisions. The Act is'
meant to be consumer-friendly and one of the objectives
it sets out to achieve .is to .give the consumer an option to D
choose the distribution licensee from whom it wishes to
receive supply of electrical energy; The intervention of the
two consumers and the appeals filed by them obviously
are in that context. [para 76] [330-D,E,F,G]
5. MERC overstepped its jurisdiction in making out a E
third case ~hich had not been made out by BSES and had
on the basis thereof issued orders which had not even been
prayed for by BSES. The Appellate Tribunal erred in coming ·
to a finding that under its licences TPC was entitled to supply energy only in bulk and not for general purposes and in
F
. retail to all consumers, irrespective of their demand, except
for those consumers indicated in Sub-clause (I) of clause 5
of the several licenses held by TPC. The orders passed both
by MERC and the Appellate Tribunal for Electricity are·
quashed. [Para 77 and 78] [330-G-331-A,8]
G
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 2898
of 2006
From the Judgment and Order dated 22/5/2006 of the
Appellate Tribunal for Electricity, New Delhi in Appeal No~./ 31
H
298
SUPREME COURT REPORTS
[2.00e] 10 S.C.R.
A
and 43 of 2005
WITH
C.A. Nos. 3466 and 3467 of 2006
.... ),
·,
·Iqbal Chagla, Janak Dwarkadas, Darius Khambata; K.K;
8
Venugopal, J.J. Bhatt, Shrikant Doijod.e·, Ruby Singh Ahuja,
Prachi Goel, Sonia Nigam (for Manik Karanjawala), Jay.Savla.;
Reena Bagga (for Rakhi R~y), Anjali Chandurkar, Smieetaa
Inna, Haripriya '(for Rajesh Kumar), Sushi! ka'ranjakar (for
Ravindra Keshavrao Adsure), Parekh & Co. and A.P. Mayee·
C forJhe Appearing Parties.
·
·-
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'
, .
. The Judgment-of the. Court was delivered by
AL,TAMAS'KABIR,J. 1. As these.three appeals arise.'out
of a comn:ion judgment of the Appellate tribunal for ·El.ectrlcity,
D tlJey w~re taken up for final hearing ·together.
·
· ·
·
· ·
' i
• '
'
- ,
...
~ -
' : • .
-
-
.
2. The genesis of these thr.ee appeals is .a -petition filed by
Mis BSES·Limited on 23.7.2002 before the Maharashtra Electr:icity Regulatory Commission· (hereina.Uer referred to as·
E 'MERC'), under Section 22(2)(e) and (n}of the Electricity. Regu-
. latory Commissions Act, 1998 (hereinafter referred t9 as 'the
: ERG Act'), cciniplaining of allegedencroachmen_t by Tata Pow~r
Compa_ny Limited (hereinafter referred to as 'TPC') within it~·
area of supply .. _ In the said applic~tl~n Mb{BSES; inter: a!ia,
prayed fo.r the following' ·~elie{s:
· ' ·
· · ·
· ··
,
F..
, ... _ .. ,·
7·
f'
a)
That Tata Power Company Limited be ~estrained
fromin any manner selling; supplying and distributing·
electricity to the consumers situated within the area
.of supply of BSES in contravention of the terms arid
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f
· · - ·conditions of their licenses and the poli'cy of the
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:"
.
I
Government of Maharashtra.
{._· ·.b)
That· TPC be ordered· to pay BSES or to the
Government of Maharashtra all profits and gains
made· from January 1998 until TPC discontinued sale
M-1
of energy to such consumers, i.e:situated in BSES's
c)
TATA POWER COMPANY LTD. v. RELIANCE
299
ENERGY LTD. & ORS. [Al TAMAS KABIR,J.]
licensed area of supply and having energy A
requirement below 1000 KVA (maximum demand)
and/or with lighting consumption exceeding 20 per
cent of 'the total;
. ' .
~
That, pending the disposal of the petition TPC be
restrained in terms of the prayer at (a) above and
B
from offering new connections to any entities for sale,
supply or distribution of electricity in BSES's licensed
area of supply, with energy requirement below 1000
KVA (maximum demand) and/or with lighting
consumption exceeding 20 per cent of the total.
C
3. From the materials on record it appears that the principal question which fell for the decision of MERC was whether
TPC was·entitled under the licences granted to it to effect disJ
tribution of electricity directly to customers within the area of D
supply indicated in the licences granted to BSES.
4. In order to appreciate the circumstances giving rise to
the above dispute, it is necessary to set out some of the facts
as also the terms and conditions of the licences granted to the
contesting ·parties for distribution of electricity within Bombay
E
city and its suburbs.
·
5. At the relevant time TPC was holding four licences for
th.e aforesaid purposes, as described hereinbelow:
. .
i)
The 190? Licence- Commonly known as the Bombay
F'
(Hydro-electric) Licence, which was originally granted
on 5.3.1907 to Dorabji J. Tata and Ratanji J. Tata;
ii)
1919 Licence - Known as the Andhra Valley (Hydroelectric) Licence, which was issued on 3.4.1919 in
favour of the Tata Hydro Electricity Supply Company G
iii)
r ltd.;
The 1921 L'icence - Known as Nila Mula Valley
Licence, which was issued on 15.11.1921 in favour
of Tata Power; and .,
H
300
SUPREME COURT REPORTS
[2008] 10 S.C.R.
A
iv)
The 1953 Licence - Known as Trombay Thermal
·- Power Electric Licence Which was issued on
19.11.1953 in favour of the Tata (Hydro-Electric)
Power Supply Company Limited, the Andhra Valley
Power Supply Company and Tata Power.
B
6. Consequent upon amalgamation of the Tata Hydro-Elec.:.
tric Power Supply Company Limited and the Andhra Valley
Power Supply Company Limited.with Tata Power, the Government ofMaharashtra bn 12.7.2001transferred the said 1907 ..
licence, 1919 licence and the 1953 licence to Tata Power and .
C accordingly on and trom 12.7.2001 Tata Power came to hold
the aforesaid four licences· on the b·asis of which it had been
contended on behalf of Tata Power that itwas entitled to sell,
supply and distribute electricity not only to other distributing licensees, such as Reliance ~~ergy Limited and The Bombay
D Electric Supply and Transport Undertaking (hereinafter referred
to as the 'BEST'), but also to direct consumers of el~ctricity.
7. As far as M/s Reliance Energy Limited, hereinafter referred to as "R.E.L.", is concerned it acquir~d a licence known
as the Bombay Suburban Electr]c Licence which had initially
E been issued on 29.5.1926 +nfavour of Killick, Nixon and Com.;.
pany and CaTlender's Cable & Construction Company Limited.
The said licence was assigned to the .Bombay Suburban Electric Supply Limited on 13.5.1930. The Bombay Suburban Electric Supply Limited was first renamed as BSES Limited and
F thereafter as Reliance Energy Limited.
8. Before MERC it was contended on behalf ofBSES that
TPC was contravening the terms and conditions of the licences
which had been granted to it by the State Government, as also
G the stated policy of the Government, by poaching consumers
within the BSES' area of supply. It was contended before the
Commission that _supply of electricity by TPC directly to retail
consumers was contrary to the provisions of the Indian Electricity Act, 1910 (hereinafter referred to as 'the 191 O Act'). The ElecH tricity (Supply) Act. 1948 (hereinafter referred to as 'the 1948
>
I
TATA POWER COMPANY LTD. v. RELIANCE
301
j.
ENERGY LTD. & ORS. [ALTAMAS KABIR,J.]
Act'), and the policy contained in the Schedule to the 1948 Act.
A
9. It was also contended, without prejudice to the above
submission, that TPC could not, in any event, effect any retail
supply of electricity to consumers with a maximum demand
below 1000 KVA, in terms of the licences held by them. It was
B
submitted that such supply by TPC to direct retail consumers
was also contrary to Government policy.
10. It was urged that, in view of the above, the Comm ission, in exercise of its powers under the ERC Act, should restrain TPC from supplying electricity to retail consumers within c
BSES' territory.
11. The aforesaid issue raised on behalf of BSES Limited was considered at length by MERC in relation to the terms
and conditions of the licences held by Tata Power and Reli_,
ance Energy Limited and in para 81.2 of its judgment and orD
der, the Commission observed as follows:
"81 .2 The starting point of both parties is the provisions .
of Clause 5 (1),(1) and (Ill) of TPC's licenses, which are
quoted at para 8 of this order. The contesting arguments E
regarding the interpretation and implications of this Clause
have been set out at length above. After considering the
arguments put forward and the provisions of the licenses
and statutes, the Commission has come to the conclusion
'
that the license to supply energy "for all purposes including
supply to other licensees for their own purposes and in
F
bulk", read with the succeeding terms of Clause 5 and
other provisions, may give TPC an unfettered right to supply
energy directly to all or any consumers in the BSES area
of supply but no obligation to supply power, but it militates,
in particular, against the provisions of Sec. 22(2)(e) of the G
,,
Commission's power of regulating and promoting the
working of licensees in an efficient, economical and
"':
equitable manner and, in general, against the provisions
of Sec. 22(1 )(d) enjoining the Commission to promote
competition, efficiency and economy i'n the activities of H
302
SUPREME COURT REPORTS
[2008] 10 S.C.R.
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the electricity industry."
12. In its aforesaid judgment and order MERC also held:
"Apart from the claimed entitlement under their lice.nses
as interpreted by them, TPC have urged that. thi?
B
entitlement and their consequent actions are also
supported by the mandate given to the Commission under
the ERCAct. Indeed, Sec.22(1)(d) enjoins the Commission
to promote competition, efficiency and economy in the
activities of the electricity industry to achieve the objects
c
and purposes of the Act. The Electricity Act,2003, which
. has replaced the ERC Act after hearings in this case were
concluded, also specifically refers to the promotion of
competition in its Preamble."
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13: It was further held that strictly speaking there was nothD ing in either the 1910 Act o(the 1948 Act which bars the grant
L·
of licences to more than one party for similar purposes in the
same area, which, in effect, is also the aim and object of the
Electricity Act, 2003, which replaced all the earlier enactments.
E
t4. Despite having held in favour of .Tata Power that the
terms and conditions of its licences may give it an unfettered
right to supply electricity to all or any consumers in the BSES'
area of supply without any obligation in that regard, MERC ultimately disposed of the petition fil~d by BSES with the following
directions :
i
F
"(i)
TPC and BSES should file the terms of reference for
engaging a consultancy firm to study the issues
relating to Sections 42 and 14 of the Electricity Act,
2003.
G
(ii)
Select a consultancy firm/s (if need be, international
· · level firms may be considered for selection, severally
.;
or jointly with Indian firms) for the purpose;
(iii) The cost of the study should be equally shared by
t
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both parties;
TATA POWER COMPANY LTD. v. RELIANCE
303
,,,.
ENERGY LTD. & ORS. [ALTAMAS KABIR,J.]
(iv)
The study report should be widely disseminat~d A
among stakeholders in the city;
(v)
Adoption of the report would be decided after a public
hearing; and Implementation of the report would be
i·
undertaken as per the Commission's Regulations."
B
15. While disposing of the petition MERC also restrained
TPC from offering new connections to new consumers with energy requirement below 1000 KVA on the basis of an agreement purported to have been arrived at between TPC a~d
BSES that they would maintain the status-quo till the disposal c
of the petition and would not encourage any existing consumer
·to switch over from one to the other.
16. Two appeals were preferred from the judgment and
order of MERC before the Electricity Appellate Tribunal. Ap-.
peal No.31 of2005 was filed by Reliance Ene.rgy Limited which D
had in the meantime succeeded to the interest of BSES Limited. Appeal No.43 of 2005 was filed by the Tata Power Com-.
pany Limited.
17. In the first appeal, M/s Reliance Energy Limited quesE
tioned the findings of MERC that under the licences issued to
Tata Power Company it could also undertake retail supply of
energy directly to retail consumers and prayed for a declara- ·
tion that Tata Power was not entitled to effect direct supply of
energy to consumers, except to other licensees and consumers contemplated in clause (xv) of the licences granted to Tata
F
Power, read .with clause (VI) of the Schedule to the 1910 Act.
18. In Appeal No.43 of 2005 Tata Power questioned the
findings in the order and directions of MERC contained in paragraphs 81.10, 81.11, 81.12 and 81.14 to the effect that the terms .G
\.
of the licences held by Tata Power militated against the provi-
-·
sions of Sections 22(i)(d) and 22(ii) (e) of the ERC Act. TPC
also questioned the restraint order passed by MERC restraining TPC from offering new connections to consumers with a
maximum demand of less than 1000 KVA and also to stay the H
304
SUPREME COURT REPORTS
[2008] 10 S.C.R.
A directions of MERC directing the parties· to engage a
consultancy firm to study the issues relating, to Section 14 and
14(2) of the Electricity Act, 2003 and from taking further action
in terms of the directions contai'ned in paragraphs 81.12. and
81.1·4 of the order passed by_ MERC.
B
· 19. Both the appeals were disposed of by the Appellate
Tribunal for Electricity, New Delhi, by a common judgment dated
22·.5.2006, iriter alia, holding that Tata Po~er had- not been
granted licence to undertake retail dis_tribution of electricity in
the area within Which REL h·ad been distributing power in retail
C to customets directly. The order and findings recorded by
MERC in that regard were set aside. It was also held that Tata
Power could undertake only bulk supplies to licensees such as
REL under the licenses held by it.
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· 20. _In addition to -the above, it \i\'.asalso held by the Appellate Tribunal that Tata Power was riot undertaking retail distribution of power but was only undertaking distribution of power ,
in bulk to licensees prior to the differences that arose between
REL and Tata Power.
. .
E
21.Although, it was held by the Appellate Tribunal th~t more
than one distribution licence could be granted in terms of Section 62(1) of the Electricity Act, 2003, it held that since th11 Ii- /
cences granted to Tata Power did not entitle it to effect.retail
distribution directly to consumers it was not necess~ryttd·/reF strain Tata Power from effecting such distribution.
1"
22. Accordingly, the appeal preferred by Reliance Energy
Limited was allowed and the appeal preferred by Tata Power
Company Limited was dismissed.
·
·
G
23. The thre.e appeals before us have been filed by' Tata
Power Company Limited and M/s MIDC Marol Industries Association. against the said judgment of the Appellate Tribunal.
While Civil Appeal No.2989 of 2006 has -been filed by Tata
Power Company Limited, Civil Appeals No.3466 of 2006 and
3467 of 2006 have been filed by
1 MIDC Marci Industries AssoH
TATA POWER COMPANY LTD. v. RELIANCE
305
A
ENERGY LTD. & ORS. [Al TAMAS KABIR,J.]
~
ciation. Though the said appellant in Civil Appeal Nos. 3466 A
and 3467 of 2006 was not a party before the MERC, it had
been allowed to intervene during the hearing of the petition filed
by M/s BSES Limited which was subsequently taken over by
Reliance Energy Limited.
24. Appearing for TPC, learned Senior Counsel, Mr. Iqbal
B
Chagla, submitted that of all the distribution licences granted
for supply of electricity within the island city of Bombay, the first
distribution licence was issued to Bombay Electric Supply and
Tramways Company Limited, hereinafter referred to as the
"BEST Licence", on 7.7.1905, under the provisions of the In- c
dian Electricity Act, 1903, hereinafter referred to as "the 1903
Act". Subsequently, on 5.3.1907, the Bombay (Hydro-Electric)
licence was granted to Dorabji J. Tata and Ratanji J. Tata.which
~
is one of the four licences currently held by TPC. Mr. Chagla
submitted that the purpose for which the said licence was D
granted is contained in clause 6 of the licence which is relevant
for arriving at a decision in these appeals. The same is accordingly reproduced hereinbelow:-
"6. Unless herein otherwise expressly provided energy
E
shall be supplied under this licence only -
I.
For Power:-
a.
To other licensees for their own purposes and
' '
in bulk.
F
b.
To Factories within the meaning of the Indian
Factories Act 1881 and to any Railways
previously approved by the Local Government;
provided that the licensees shall not supply any
such Factory or Railway as aforesaid unless G
such Factory or Railway, as the case may be,
\._
shall require not less than 5,00,000 units per
4
annum, such amount being the bona fide
average computed annual consumption of such
Factory or Railway
H
A
B
c
D
E
F
H
306
'
SUPREME COURT REPORTS
. [20,08] 10 S.C.R.
P~ovided .that in regard. to supply unde~ 's.ub-seci(o~~ (a)
.· the licensees shall not be under obligation to sμppJy energy
. in bulk to other licensees for the purpose of enaqling suqh
other licensees for the purpose of en~bling .such'. other
licensees to supply any consumer requiring more than
5,00;000 units per annum calculated as aforesaid. And
provided that no supply by the licensees under the powers
contained in stJb-section (b) shall be open to question as
betWeen the licensees and the Bombay Electric Supply
and Tramways Company Limited, if the licensees· -shall
have given previous notice in writing to the Bombay Elecfric
Supply and Tramways Company Limited of their intentibn
to make such'supply and the Bombay Electric Supply and.
Tramways Company Limited shall not fOr thirty'days after
·delivery of such notice at their office in Born.bay have
objected in writing, and provided that the Bombay' Electric
Supply and Tramways Company Limited, shall not ·be
·en'titled.to take any objection except·upon the·ground that
the consumer intended to be supplied does· not fall within
the scope or does not fulfil the .conditions of sub-section(b).
The energy supplied under this license to any consumer for
power may be used by such consumer for lighting his premises,
provided that the energy used by such consumer for such
lighting purposes shall not ih any' year exeed twenty per cent
of the total amount of energy supplieCf to such consumer and
save as a~oresaid, the licensees sh~ll not supp.ly energy for
· · lighting :purposes except by agreement·with ·the Bombay
· E;lectric Supply and Tramsw~ys Company, Limited.
..
\..
.
. ~; ~..( ' ..
In the event of any dispute ~rrSing between the licensees
and the Bombay EleCtric St.ipplY' arid Tramways Company,
Limited, by reason o(i:my 6ojection by the latter to any
·· > 'supply. by the licensees under:is·tib-section (1)(b) of!his.
clause, or in regard ·tcf the interpretation of the terms of
this clause, such dispute'shall be referred to an Arbitrator ".-
appointed by the Local Government,' whose decision sha)I' ·
be fina;."
' '
,....
'
·,
TATA POWER COMPANY LTD. v. RELIANCE
307
ENERGY LTD. & ORS. [Al TAMAS KABIR,J.)
Mr. Chagla submitted that though TPC did not start generA
ating power till 1915, it purchased electricity from BEST to sell
and distribute the same to Pearl Mills Limited and Simplex Mills
Limited during 1914 and 1915. In 1915 Tata Hydro started generating electricity and between 1917 and 1930, it began to supply electricity directly to a number of consumers within the city
B
of Bombay and to Swadeshi Mills Ltd. and Coorla Mills Ltd. in
the suburbs and also to B.B.& C.I. Railway (now known as West~
ern Railway).
25. Mr. Chagla then referred to the Andhra Valley (HydroElectric) Licence which was issued in favour of Tata Hydro ElecC
tric Supply Co. Ltd. on 3.4.1919. He submitted that the said
licence contained clause 5 which was similar to clause 6 of the
1907 licence reproduced hereinabove, but with two significant
changes. He pointed out that while clause 6 of the 1907 licence entitled Tata Power to supply energy for power "to other D
licences for their own purposes and in bulk", clause 5(11) of the
1919 Licence entitled Tata Power to supply energy for lighting
and general purposes other than power, including the supply of
energy in bulk to other licensees for distribution by them. Furthermore, Tata Power's area of supply was extended beyond
E
the island city of Bombay to the suburbs an'd included C1reas
which from 1926 would also form part of R.E.L's area of supply.
26. Mr. Chagla submitted that the NHa Mula Valley (HydroElectric) Licence was issued to Tata Power on 15.11 .1921 and
it too contained clause 5 which was similar to clauses 6 and 5
F
of the 1907 and the 1919 licences referred to herein above. Mr.
Chagla submitted that under the 1921 Licence Tata Power was
empowered without any restriction to supply eiectriGitydirectly
to consumers, except in the island city of Bombay where an
agreement with BEST was required to be arrived at for making G
such supply.
27. Mr.Chagla submitted that subsequently on 2~.5.1926
the BSES Licence was granted in favour of Killick Nixon and
Company and Callender's Cable and Construction Company
H
308
SUPREME COURT REPORTS
[2008] 10 S.C.R.
A
Ltd. and the area of supply under the said.licence included suburban areas which were covered by the 1919 and 1921 licences
grallted'in favour of Tata :Power. ·The said BSES Licence was
ultimately assigned to Reliance Energy Limited.
28. Mr.Chagla contended that between 1930 ~md 1980
8
TPC continued to supply electricity to consumers directly,_ and
to the distributing licensees, in ·all parts of Bombay, including
the suburbs. Furthermore, by a Gazette Notification dafed
10.3.1934, the First Annexures to the 1907, 1919 and 1921
c
D
·Licences held by TPC were amended to· include:-
i.
. The island of Salsette, a portion of which falls· within
BSES' area of supply; and ·.
·
ii.
An area within a circle of 8 iniles radius around Tata
Power's sub-station at Kalyan:
.
A proviso was, however, added whereby Tata.Power was
required to obtain the written consenfof,the Governrrient to supply to any consumer other.than licensees or permit holders and
.the Governmer:ifwas required. to consu_IJ the.existing licensees
E and permit holders before granting such consent.
.
29. The inclusion of the island· of Salsette and an area
within a c!.rcle of 8 miles in radiu.s around T~ta Power Sub-sta-
.. fion at Kalyan necessitated.a change of the First Annexures to
the licenses held by Tata P_o\l\ler.,, $uch change w.as effected on
F ·. 26)_. 1'94i by the substitution .o'f tb~ FirstAnnexure to the Tata
'f
. Power Licences of .1907, 1919 and 1921 on 26.2.1942 to re-
. gefinejhe.ar~a of ,supply, n,amely ~
... (1) . The area .contained within the limits of the City of
Bombay, as defined by section· 3( 10) of the Bombay
G
General Clauses Act, 1904.
H
(2)
The whole of thafportion of the is.land.of Salsette, as
.:.
is bounded on the so·uth by the Town and island of
Bombay,· and on the North by the Bassein and Thane
Creeks
'
/
(
TATA POWER COMPANY LTD. v. RELIANCE
309
ENERGY LTD. & ORS. [ALTAMAS KABIR,J.]
(3)
The.area contained within a circle of eight miles radius
A
round the Tata Power Company's Sub-station near
Kalyan.
(4)
The area contained within the Municipal limits of
Matheran in the Kolaba District.
(5)
The area contained within the limits of the Municipal
Borough of Lonavla in the Poona District.
(6)
The area contained within the Municipal limits of
Panvel in the Kolaba District.
B
c
(7) · The area contained within a circle of ten miles radius
round the head-quarters of the Collector of Poona in
the Poona City.
Provided however that in the case of area of supply '
mentioned _in items (2), (3) and (7) above the licensees D
shall not, except with the written consent of Government,
'
given after consulting the other licensees, be entitled to
supply energy to any consumer other than such licensees
·within their respective areas of supply."
30. It was submitted that thereafter on 19.11.1953 the E
Trombay Thermal Power Electric Licence was granted to the
Tata Valley Power Supply Company Limited and Tata Power.
The said licence contained provisions which were similar to
those of the earlier 3 licences held by TPC, together with a similar restriction as provided by the 1942 amendment by the addiF
tion of the proviso to the First Annexure.
31. ·on 23.10.64 the restrictions imposed on TPC on
10.3.34 were removed by further amendments to the several
licences held by TPC.
32. In 1965 Tata Power constructed a further 150 MW unit
which was commissioned at Trombay.
G
33. On 7.12.78 an amendment was effected to the several licences held by TPC by which it was indicated that with H
310
SUPREME COURT REPORTS
[2008] 10 S.C.R.
A
effect from 1.7.80 the distributing rights in respect of several
areas would stand transferred from TPC to the Maharashtra
State Electricity Board. Even thereafter, TPC continued to supply electricity to various consumers in different parts of Bombay
and the suburbs. According to Mr.Chagla a meeting was held
B between REL and TPC on 27.1.94 in which suggestions were
made that the parties should avoid the practice of winning away
consumers from one another. Ultimately, however, no such ·
agreement could be arrived at between the parties.
34. Mr. Chagla submitted that in September 1995 REL
C started supplying power to consumers in the suburbs of Bombay
city from the power generated at Dahanu. Mr. Chagla contended
that as on 1.1.1998 the TPC had approximately 114 direct consumers in the city of Bombay, of whom 51 consumers were
t '
common to REL's area of supply, within which 14 had a sane-
}
~
D tioned maximum demand of less than 1000 KVA.
35. Mr.Chagla urged that in September 1998 TPC submitted a proposed tariff for domestic consumers to be effective
from December 1998 which was opposed by REL. He also
urged that prior to the submission of such tariff for domestic
E consumers REL had never objected to the distribution of electricity directly to consumers by TPC in the area of supply contained in the licences granted to TPC. It was only after TPC
submitted the tariff for domestic consumers that the predecessor-in-interest of REL, Mis BSES Ltd., filed the petition before
F
MERC under Section 22(2) (e) and (n) of the ERC Act 1998 on
23. 7.2002 and the same was registered as Case No.14 of
2002. Mr. Chagla submitted that in its said petition BSES Ltd.
prayed for the following reliefs:
G
"(a) That Tata Power be restrained from in any manner
selling, supplying and distributing electricity to consumers
situated within the area of supply of BSES in contravention
of the terms and conditions of their licences and the policy
of the Government of Maharashtra;
H
b) That Tata Power be ordered to pay to BSES or to the
.,
TATA POWER COMPANY LTD. v. RELIANCE
311
ENERGY LTD. & ORS. [AL TAMAS KABIR,J.]
Government of Maharashtra all profits and gains made A
from January 1998 until Tata Power discontinues sale of
energy to such consumers i.e. situated in BSES' licensed
area of supply and having energy requirement below 1000
KVA (maximum demand) and/or with lighting consumption
exceeding 20% of the total;
B
c) That pending disposal of the petition Tata Power be
,
restrained in terms of the prayer at (a) above and from
offering new connections to any entities for sale supply
or distribution of electricity in BSES' licensed area of
supply,
with energy requirement below 1000 KVA p
(maximum demand) and/or with lighting consumption
exceeding 20% of the total".
·
36. Mr. Chagla submitted that after the aforesaid case was
admitted by MERC on 10.10.2002 REL fi1ed a petition for inb
terim relief in the said proceedings on 14.10.2002. The petition was contested by Tata Power, and, ultimately, on 31.10.2002
the parties agreed before MERC that till the next date of hearing they would not lure away any existing consumers of either
party.
37. Ultimately, no interim relief as prayed for by BSES was
granted in its favour but the agreement arrived at between the
parties remained in force pending disposal of the Case. Mr.
Chagla submitted that on 3.7.2003 MERC disposed of the aforeE
,-
said case upon holding, inter alia, that TPC's licences to supF
ply energy for all purposes, including supply to other licensees
for their own purposes and in bulk, read with the terms of clause
5 of the licences and other provisions, might give TPC an unfettered right to supply energy directly to all or any consumer in the
BSES' area of supply without any obligation to supply such
G
power. Despite holding as above, MERC also was of the view
·~
that such provisions of the licence militates in particular against
the provisions of Section 22(2)(e) of the ERC Act, 1998, which
empowers the State Government by notification in the Official
Gazette to confer upon the State Commission the function of lrl
312
SUPREME COURT REPORTS
.[2008] 10 S.C.R.
~
A
regulating the work of the licensees and other persons authorized or permitt~d. to engage in the electricity industry in the
State and to promote their working in an efficient, economical
and equitable' manner.
'•.
.
B
38. Mr.Chagla submitted that MERC also observed in its
..,
judgment and order that there is nothing in the 1910 or the 1948
Act or the terms of the Tata Power's licences to support BSES'
.primary contention.that Tata Power could riot supply energy directly to any consumer apart fromthose to whom they were supplying energy in accordance with their licenced entitlement prior
c to.the amendments of 1964, subject to a minimum demand
stipulation. It was further observed that clause 5 and the other
licence terms do not envisage that Tata Power could supply
energy only to a distributing licensee for onward supply to direct consumers.
D
39. Mr.Chagla pointed out that although BSES had· denied such submission it had itself put forth a possible alternative, namely, that in addition to supply to the distributing licensees Tata Power is also entitled to effect such supply directly to
E
parties in the area of supply common to BSES whose maximum demand exceeds 1000 KVA and Whose consumption for
light is less than 20% of their total consumption.
(
40. Mr. C.hagla submitted that MERC also recorded the
fact that BSES has not only a right but an obligation to supply
~
energy to a large number and category of consumers on de-
.,
F
mand. On the other hand, Tata Power has an obligation to. supply energy to BSES to enable them to serve certain categories
of consumers, but its claim that it also has the unfettered right,
but no obligation, to provide power to consumers·. to whom
G BSES has an obligation to supply, militates against the requirement of a level playing field for promoting competition.
,I
41. It was pointed out that after proposing to engage a
T
consultancy firm to enable it to determine how competitio·n in
~
sale of electricity in each licensed area could be introduced,
H MERC while finally disposing of the petition without assigning
TATA POWER COMPANY LTD. v. RELIANCE
313
~
ENERGY LTD. & ORS. [AL TAMAS KABIR,J.]
any reason and contrary to its own findings restrained TPC from
A
offering new connections to any consumer with energy requirement below 1000 KVA (maximum demand). According to
MERC this direction was required to be made as part of the
process of introducing competition and choice.
42.