# _ TATA POWER COMPANY LTD v. RELIANCE ENERGY LIMITED AND OTHERS

- **Citation:** [2009] 9 S.C.R. 625
- **Court:** Supreme Court of India
- **Decided:** 2009-05-06
- **Case number:** Civil Appeal Nos. 3510-11 of 2008
- **Bench:** S.8. Sinha, Dr. Mukundakam Sharma
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/tata-power-company-ltd-v-reliance-energy-limited-and-others-26231
- **Pages:** 65

## Headnote

y
Electricity Act, 2003:
ss.2(28) and 23 - "Generating Companies" - Directions c
to licensees - HELD: Activities of generating companies are
beyond purview of licensing provisions - s. 23 occurs in
Chapter "licensing" under which generating companies would
not be covered.
s. 42(2) - The Act permits generating companies to D
supply electricity directly to a trader or a consumer - For this
purpose no tariff is required to be determined in terms of
s.42(2). - MERC (Terms and conditions of Tariff) Regulations,
2005 - Regulation 24.
E
ss. 2(70) and 23 - "Supply" - Meaning of - HELD: The
words 'supply' used in s. 23 in the con1ext refers to supply to
'(
consumers only and not to licensees - Interpretation of
Statutes.
ss. 23, 60 and 86 (1 )(b) - HELD: While exercising power F
of 'regulation' in relation to purchase of electricity and
procurement process of distribution, it is not permissible for
the Commission to direct allocation of electricity to different
licensees keeping in view their own need.
G
Interpretation of Statutes:
Interpretation of an enactment - Held: A statute must be
construed having regard to Parliamentary intent, history of
625
H
626
SUPREME COURT REPORTS
[2009] 9 S.C.R. ~
A
legislation including the mischief sought· to be remedied, the
objects and purpose it seeks to achieve - Chapter headings
and marginal notes of the sections are also relevant - For true
and correct construction of the Act, principle of harmonious
construction is required to be resorted to.
B
Consumers of electricity in Mumbai were being
served . by Tata Power Company (TPC), Brihan Mumbai
EJettricity· Transport Corporation (BEST) and Reliance
Infrastructure (Rlnfra). TPC had two divisions -
Generation [TPC (G)] and Distribution [TP(D)]. TPC(D),
C
BEST and Rlnfra were distribution licensees getting bulk
supplies from TPC(G). In the year 1995 Rlnfra also
commissioned its 500 mw generating plant On 23.8.2005
the Maharashtra Electricity Regulatory Commission
(MERC) framed MERC (Terms and Conditions of Tariff)
D
Regulations, 2005, requiring thereunder all power
purchase agreements/arrangements entered into by
Dh;;tribution Licensees to be approved by MERC. On
18.1.2006 BEST executed a Power Purchase Agreement
(PPA) with TPC for 800 mw of power for a period of 10
E
years. On 16.3.2006 TPC(D) entered into a PPA with
TPC(G) for 477 mw power. Both the PPAs were submitted
on 27.12.2006 for. approval of MERC. Rlnfra filed
objections in both the proceedings. Meanwhile TPC made
F
an offer to Rlnfra for sup.ply of 600 mw of electricity, but
since the latter demanded higher quantum of power, no
consensus was reached with respect to PPA between
TPC(G) and Rlnfra. On 2.4.2007 MERC passed generation
tariff order for TPC(G) for the period 2006-2007 holding
that since PPAs had not been approved by way of interim
G arrangement, it would allocate available energy for
TPC(G) on the basis of coincident peak demand of the
distribution licensees. BEST and TPC(G), both
challenged the order in appeals before the Electricity
Appellate Tribunal. The Appellate Tribunal directed the
H
MERC to consider petitions of TPC(G) and BEST for
y
' ..
TATA POWER COMPANY LTD. v. RELIANCE
627
..
ENERGY LIMITED AND ORS.
,_
approval of PPA. Meanwhile Rlnfra initiated proceedings A
u/s. 86 of the 2003 Act before MERC seeking directions
to TPC(G) to allocate· 762 mw of power to it and to enter
into a PPA with it. The Commission by its order dated
6.11.2007 approved the PPAs entered into between
TPC(G) and Best and TPC(G) and TPC(D), for supply of B
800 mw and 477 mw of power respectively w.e.f. 1.4.2008,
holding that it has jurisdiction to issue direction to
tgenerating companies in terms of s.23 of 2003 Act. The
Commission while dealing with the application of Rlnfra
filed u/s. 68 held that for the purpose of fixing the c
distribution tariff of all the three distribution licensees,
namely, BEST, TPC(D) and Rlnfra it would be proceeding
in the manner as directed in its order date 6.11.2007

## Text

_Characters 0–39,960 of 114,496. This is a partial read: ask again with offset=39960 for what follows._

[2009] 9 S.C.R. 625
,_
TATA POWER COMPANY LTD.
A
v.
RELIANCE ENERGY LIMITED AND OTHERS
(Civil Appeal Nos. 3510-11 of 2008)
MAY 6, 2009
B
[S.8. SINHA AND DR. MUKUNDAKAM SHARMA, JJ.]
y
Electricity Act, 2003:
ss.2(28) and 23 - "Generating Companies" - Directions c
to licensees - HELD: Activities of generating companies are
beyond purview of licensing provisions - s. 23 occurs in
Chapter "licensing" under which generating companies would
not be covered.
s. 42(2) - The Act permits generating companies to D
supply electricity directly to a trader or a consumer - For this
purpose no tariff is required to be determined in terms of
s.42(2). - MERC (Terms and conditions of Tariff) Regulations,
2005 - Regulation 24.
E
ss. 2(70) and 23 - "Supply" - Meaning of - HELD: The
words 'supply' used in s. 23 in the con1ext refers to supply to
'(
consumers only and not to licensees - Interpretation of
Statutes.
ss. 23, 60 and 86 (1 )(b) - HELD: While exercising power F
of 'regulation' in relation to purchase of electricity and
procurement process of distribution, it is not permissible for
the Commission to direct allocation of electricity to different
licensees keeping in view their own need.
G
Interpretation of Statutes:
Interpretation of an enactment - Held: A statute must be
construed having regard to Parliamentary intent, history of
625
H
626
SUPREME COURT REPORTS
[2009] 9 S.C.R. ~
A
legislation including the mischief sought· to be remedied, the
objects and purpose it seeks to achieve - Chapter headings
and marginal notes of the sections are also relevant - For true
and correct construction of the Act, principle of harmonious
construction is required to be resorted to.
B
Consumers of electricity in Mumbai were being
served . by Tata Power Company (TPC), Brihan Mumbai
EJettricity· Transport Corporation (BEST) and Reliance
Infrastructure (Rlnfra). TPC had two divisions -
Generation [TPC (G)] and Distribution [TP(D)]. TPC(D),
C
BEST and Rlnfra were distribution licensees getting bulk
supplies from TPC(G). In the year 1995 Rlnfra also
commissioned its 500 mw generating plant On 23.8.2005
the Maharashtra Electricity Regulatory Commission
(MERC) framed MERC (Terms and Conditions of Tariff)
D
Regulations, 2005, requiring thereunder all power
purchase agreements/arrangements entered into by
Dh;;tribution Licensees to be approved by MERC. On
18.1.2006 BEST executed a Power Purchase Agreement
(PPA) with TPC for 800 mw of power for a period of 10
E
years. On 16.3.2006 TPC(D) entered into a PPA with
TPC(G) for 477 mw power. Both the PPAs were submitted
on 27.12.2006 for. approval of MERC. Rlnfra filed
objections in both the proceedings. Meanwhile TPC made
F
an offer to Rlnfra for sup.ply of 600 mw of electricity, but
since the latter demanded higher quantum of power, no
consensus was reached with respect to PPA between
TPC(G) and Rlnfra. On 2.4.2007 MERC passed generation
tariff order for TPC(G) for the period 2006-2007 holding
that since PPAs had not been approved by way of interim
G arrangement, it would allocate available energy for
TPC(G) on the basis of coincident peak demand of the
distribution licensees. BEST and TPC(G), both
challenged the order in appeals before the Electricity
Appellate Tribunal. The Appellate Tribunal directed the
H
MERC to consider petitions of TPC(G) and BEST for
y
' ..
TATA POWER COMPANY LTD. v. RELIANCE
627
..
ENERGY LIMITED AND ORS.
,_
approval of PPA. Meanwhile Rlnfra initiated proceedings A
u/s. 86 of the 2003 Act before MERC seeking directions
to TPC(G) to allocate· 762 mw of power to it and to enter
into a PPA with it. The Commission by its order dated
6.11.2007 approved the PPAs entered into between
TPC(G) and Best and TPC(G) and TPC(D), for supply of B
800 mw and 477 mw of power respectively w.e.f. 1.4.2008,
holding that it has jurisdiction to issue direction to
tgenerating companies in terms of s.23 of 2003 Act. The
Commission while dealing with the application of Rlnfra
filed u/s. 68 held that for the purpose of fixing the c
distribution tariff of all the three distribution licensees,
namely, BEST, TPC(D) and Rlnfra it would be proceeding
in the manner as directed in its order date 6.11.2007 and
approving the PPA entered into between TPC(G) and
BEST and TPC(G) and TPC(D). The Appellate Tribunal by D
its judgment dated 6.5.2008, set aside the judgment and
order of the MERC passed on 6.11.2007. Aggrieved, TPC
and BEST filed the appeals.
The questions for consideration before the Court
were: (i) whether recourse to s.23 of the Electricity Act, E
2003 can be taken for issuance of any direction to the
generating company; (ii) whether the Commission while
applying the provisions of s.86(1 )(b) of the Act could also
take recourse to ss.23 and 60 thereof; and (iii) whether
equitable allocation of power generated by a generating
F
company is permissible.
Allowing the appeals, the Court
HELD: 1.1. For true and correct construction of the
'
.
G
Act, the principle of harmonious construction is required
..
to be resorted to. [Para 157 (11)). [689-B]
1.2. Recourse to the principle of purposive
construction does not militate against the conclusion
H
628
SUPREME COURT REPORTS
[2009] 9 S.C.R.
,,.
'
A reached by the court and in fact in terms of the said
"'
doctrine the purpose and object of the Parliament must
prevail over a narrow and/or literal interpretation, which
would otherwise defeat the purpose and object of the Act.
[Para 157 (12)]. [689-C-D]
B
1.3. A statute must be construed having regard to
Parliamentary intent. For the said purpose it is open to a
court not only to take into consideration the history of the
-1
legislation including the mischief sought to be remedied
c but also the objects and purpose it seeks to achieve.
[Para 91] [668-0-E]
1.4. The Parliament by making Electricity Act, 2003
clearly acknowledged the necessity of providing a
greater room for generation Qf electrical energy so ·as to
D enable the country to meet its requirements. It is only in
that view of the matter, the liberalization policy of the State
provided for de-licensing of the generating companies.
The primary object, therefore, was to free the generating
companies from the shackles of licenstng regime. The
E 2003 Act encourages free generation and more and more
competition amongst the generating companies and the
other licensees so as to achieve customer satisfaction
and equitable distribution of electricity. The generation
company, thus, exercises freedom in respect of choice
F of site and investment ·of the generation unit; choice of
counter-party buyer; freedom from tariff regulation when
the generating company supplies to a trader or directly
to the consumer. [Para 97 and 107-108] [~70-A-B; 672-EH; 673-A]
G
1.5. Keeping in view that de-licensing of the
generation is the prime object of the Act, the courts while
interpreting the provisions of the statute must guard itself
from doing so in such a manner which would defeat the
purpose thereof. It must bear in mind that licensing
H
TATA POWER COMPANY LTD. v. RELIANCE
629
ENERGY LIMITED AND ORS.
provisions are not brought back through the side door A
of Regulations. [Para 109] [673-A-B]
1.6. Fairness· or otherwise of the supply of electricity
---f
to different distribution 'companies being outside the
jurisdiction of the Commission, the same by itself cannot
B
be a ground for bringing back the licence raj, which is not
contemplated by the Act. [157 (10)] [689-A-B]
'
1.7. Chapter headings and the marginal notes are
parts of the statute. They have also been enacted by the
Parliament. There cannot be any doubt that they can be c
used in aid of the construction. Thus, in a case where
..... ,,
interpretation of a Section vis-a-vis the scheme of the Act,
the purport and object of the legislation, particularly
having regard to the mischief it seeks to remedy; the
chapter heading as also the marginal note are relevant.
D
[Para 115 and 131] [674-0-E; 679-H; 680-A]
Chandler v. OPP, (1962) All ER 142; Indian Aluminium
Company v. Kera/a State Electricity Board, [AIR 1975 SC
1967; R. S. Joshi Sales Tax Officer, Gujarat and Ors. v. Ajit E
Mills Limited and Anr. [(1977) 4 SCC 98; Ramesh Chand and
Ors. v. State of U.P. and Ors., [(1979) 4 SCC 776; Indian
Aluminium Company v. Kera/a State Electricity Board, AIR
'
1975 SC 1967; R.S. Joshi, Sales Tax Officer, Gujarat and
'·
Ors. v. Ajit Mills Limited and Anr., (1977) 4 SSC 98. Ramesh
F
Chand and Ors. v. State of UP and Ors. (1979) 4 SCC 776
Bombay Dyeing and Mfg. Co. Ltd. v. Bombay Environmental
Action Group and Ors., (2006) 3 SCC 434; Deewan Singh
and Ors. v. Rajendra Pd. Ardevi and Ors. [2007] (1) SCALE
32 Sarabjit Rick Singh v. Union of India (UOI), (2008) 2 SCC
G
417; Union of India v. Ranbaxy Laboratories Ltd. and others;
j
(2008) 7 SACC 502; and D. Purushotam Reddy and another
ml'!'
v. K. Sateesh, (2008) 11 SCALE 73, referred to.
Justice Frankfurtir, Some Reflextions on the reading of
~
- Statutes, 47 Columbia LR 527, at page 538 (1947), referred
H
630
SUPREME COURT REPORTS
[2009) 9 S.C.R.
-~
A to.
2.1. Activities of a generating company are beyond
the purview of the licensing provisions. [Para 106, 141 and
157 (1)] [687-F]
B
2.2. The Parliament therefore did not think it
necessary to provide for any regulation or issuance of
directions except that which have expressly been stated
~
in the Act. [Para 157(2)] [687-F-G]
'C
2.3. Th~ interpretation clause contained in Section 2
of the Act prefixes the words "unless the context
otherwise requires". The word "supply" has separately
been used even for generation and distribution. Thus,
.t·"'ialthough a broad meaning may be assigned to the said
D term but the same must be held to be 'subject to the
context'. The word "supply" used in Section 23 of 2003
Act for bringing in efficient supply would mean regulate
and consequentially licensing in respect of the
generating company. [Para 111] [673-E-F]
E
2.4. lo a case of this nature the principle of exclusion
,
of the definition of Section by resorting to "unless the
context otherwise requires" should be resorted to. [Para
157(5)] (688-C]
..
-"'
F
2.5. Section 23 occurs in the chapter of "licensing"
under which the generating companies would not be
governed. [Para 157(3)] [687-G-H]
Whirlpool Corporation v. Registrar of Trade Mark,
G Mumbai and others, (1998) 8 SCC 1; Garhwal Manda/ Vikas
Nigam Ltd. v. Krishna Travel Agency (2008) 6 SCC 732 and
A
National Insurance Co. Ltd. v. Deepa Devi, (2008) 1 SCC
.,...,
414, referred to.
2.6. As almost all the sections preceding Section 23
H
~
-(
-.
TATA POWER COMPANY LTD. v. RELIANCE
631
ENERGY LIMITED AND ORS.
!"
as also Section 24 talk about licensee and licensee alone, A
the word "supply" if given its statutorily defined meaning
as contained in Section 2(70) of the Act would lead to an
anomalous situation as by reason thereof supply of
electrical energy by the generating company to the
consumers directly in terms of Section 12(2) of the Act B
as also by the transmission companies to the consumers
would also come within its purview. [Para 157 (4)] [688A-8]
2. 7. The word 'supply' contained in Section 23, in the c
context refers to 'supply to consumers only', and not to
supply to licensees. On the other hand, in Section 86(1)(a)
-
'supply' refers to both consumers and licensees. In
Section 10(2) the word 'supply' is used in two parts of the
said Section to mean two different things. In the first part
D
~eans 'supply to a licensee only' and in the second part
s ~y to a consumer only'. Further in first proviso to
Section ,14, the word 'supply' has been used specifically
to me~m "'distribution of electricity'. In Section 62(2) the
t
word 'supply' has been used to refer to 'supply of
'
electricity by a trader'. [Para 129] [679-8-E]
E
2.8. To assign the same meaning to the word
"supply" in Section 23 of the Act, as is assigned in the
t
interpretation section, it is necessary to take recourse to
the doctrine of harmonious construction and read the F
statute as a whole. Interpretation of Section indisputably
must be premised on the scheme of the statute. For the
purpose of construction of a statute and in particular for
ascertaining the purpose thereof, the entire Act has to be
read as a whole and then chapter by chapter, section by G
J
section and word by word. [Para 130] [679-E-F]
-
Reserve Bank of India, v. Peerless General Finance and
Investment Co. Ltd. (1987) 1 SCC 424; Peerless General
Finance and Investment Co. Ltd. v. Reserve Bank of India,
...
(1992) 2 SCC 343 and National Insurance Co. Ltd. v. Swaran H
-
632
SUPREME· COURT REPORTS
(2009] 9 S.C.R.
A
Singh, (2004) 3 SCC 297, referred to.
3.1. Section 86(1)(a) of the 2003 Act clearly shows the
para meters of supply for the purpose of Regulation, v.iz.
supply of electricity by the distribution company to the
8
consum~r. [Para 157 (6)] [688-0]
3~2. If regulatory clause is sought to be applied in
relation to allocation of power, the same would defeat the
de-licensing provisions. Generating companies have the
freedom to enter into contract and in particular long term
C contracts with a distribution company subject to the
regulatory provisions contained in the 2003 Act. [Para 157
(1)] [688-C-O]
/
3.3. Section 86(1)(b) of the 2003 Act clearly shows
0
that the generating company indirectly comes within the
purvJew of regulatory jurisdiction as and when directions
are issued to the distributing companies by the
appropriate Commission but the same would not mean
that while exercising the said jurisdiction, the
E Commission will bring within its umbrage the generating
company also for the purpose of issuance separate
direction. [Para 157 (13)] [689-0-F]
3.4. Section 86(1 )(b) provides for regulation of
electricity purchase and procurement process of
F distribution licensees. In respect of generation its
function is to determine the tariff for generation as also
in relation to supply; transmission and wheeling of
electricity. Clause (b) of sub-section (1) of Section 86
provides to regulate electricity purchase a'nd
G procurement process of distribution licensees including
the price at which the electricity shall be procured from
the generating companies or licenses or from other
sources through agreements. As a part of the regulation
it can also adjudicate upon disputes between the
H licensees and generating companies in regard to the
TATA POWER COMPANY LTD. v. RELIANCE
633
ENERGY LIMITED AND ORS.
implementation, application or interpretation of the A
provisions of the agreements. [Para 143] ~S83-G-H; 684A-B]
.3.5. While exercising its power of 'Regulation' in
relation to purchase of electricity and procurement 8
process of distribution, it is not permissible for the
Commission to direct allocation of electricity to different
""
licensees keeping in view their own need. Section 8~(1)(b)
read with Section 23 if interpreted differently would
empower the Commission to issue direction to the C
generating company to supply electricity to a licensee
who had not entered into any PPA with it. Such a
•
contingency does not appears to have been
contemplated by the Parliament. [Para 141] (682-E-G]
-
'f
4.1. PPA for a long term is essential for increasing D
and decreasing the capacity of generation of electricity
by the generating company, which purpose by the 2003
Act must be allowed to be achieved. (Para 157 (8)] (688F]
4.2 .. Duration of the contract in regard to· supply of
electricity by and between TPC (G) and Rlnfra prior to
coming into force of the Act is of no consequence,
E
particularly when no written long term Of short term
contract was entered into by and between them. [Para F
157(9)] [688-G-H; 689-A]
4.3. A generating company, if the liberalization and
privatization policy is to be given effect to, must be held
to be free to enter into an agreement and in particular
long term agreement with the distribution agency; terms G
and conditions of such an agreement, however are not
unregulated. Such an agreeme.1t is subject to grant of
approval by the Commission. However, the generating
company is not absolutely free from all regulations. Such
regulations are permissible under the 2003 Act ; one of H
634
SUPREME COURT REPORTS
[2009] 9 S.C.R.
them being fair dealing with the distributor. Thus, other
-+
A
types of regulations should not be brought in, which
were not contemplated under the statutory scheme. If the
company exercising its dominant position, Section 60
would come into play. It is only in a situation where a
B generator may abuse or misuse his position, the
Commission would be entitled to issue a direction. [Para
141-142] [682-G-H; 683-A, D-F]
j
4.4. The Parliament thought it necessary to provide
c
for specific provisions for the purpose of regulating the
functions of the ·generating companies, those provisions
are special provisions vis-a-vis the other general
provisions which take within its abridge the function of
•
the distributor, transmitter and trader. [Para 146] (684-FG]
D
In U.P. Power Corporation Ltd. v. NTPC and others, 2009
(3) SCALE 620; Bank of New South Wales v. Commonwealth
(1948) 76 CLR 1 and Prasar Bharti and others v. Amarjeet
Singh and others, 2007 (2) SCALE 486, referred to.
E
4.5. Short term power procurement refers to an
agreement for procurement of power for a period of less
than one year. Regulation 23.1 requires the distribution
licensee to prepare a five year plan inter alia upon taking
-t
into consideration the sources for procurement thereof.
;:...
-
F
Regulation 24.1 mandates obtaining -of prior approval of
the Commission therefor. Approval by Commission is
granted upon examining the process of procurement
having regard to the factors specified in Regulation 24.2.
It is in this context that grant of approval of the PPA by
G and between TPC (G) on the one hand and BEST and
TPC (D), on the other necessitated. The proposal of TPC
),
--....
(G) that Rlnfra should enter with it a long term agreement
assumes significance. [Para 151] [686-A-C]
H
4.6. The Appellate Tribunal committed a factual error
--
TATA POWER COMPANY LTD. v. RELIANCE
635
ENERGY LIMITED AND ORS.
~
in so far as it failed to notice that no long term PPA exists A
between TPC (G) and Rlnfra. It furt~9rmore was not
correct in opining that the Commission had not
considered the claim of Rlnfra while approving the
arrangements between TPC (G) and TPC (D), despite the
fact that REL Rlnfra not only filed objections to the B
application for grant of approval of PPA filed by the
parties herein, it also filed independent application took
,.,.
part in the deliberations and all its contentions had been
considered. Thus, the Tribunal was not correct opining
that the decision of the Commission was in violation of c
the principle of natural justice. It furthermore took into
consideration_ ,an irrelevant fact, namely, that the
, .'"
Commission in determining the issue between the parties
should have regard to the fact that the consumers of
respective areas have been bearing the 'depreciation' and D
interest on loan elements of the Fixed Cost of tariff. [Para
90] [687 -G-H; 688-A-C]
Case Law Reference:
..
AIR 1975 SC 1967
.referred to
Para 124
E
· (1977} 4 sec 98
referred to
Para 124
(1979) 4 sec 776
referred to
Para 124
•· •
(2006) 3 sec 434
referred to
Para 125
F
(2007) 1 SCALE 32
referred to
Para 125
(2008) 2 sec 417
referred to
Para 125
(1998) 8 sec 1
referred to
Para 128
_.I
(2008) s sec 732
referred to
Para 128
G
(2008) 1 sec 414
referred to
Para 128
(1989) 1 sec 424
referred to
Para 130
H
636
· SUPREME COURT REPORTS
(2009] 9 S.C.R.
·~
(1992) 2 scc· 343
-+
A
referred to
Para 130
(2004) 3 sec 291
r.eferred to
Para 130
loI
(2008) 1 sec so2
referred to
Para 132
'
(2009) 11 SCALE 73
referred to
Para 132
..._
8
(2009) 3"'SCALE 620
referred to
Para 147
(1948) 76·CLR 1
referred to
Para 147
j
:
(2009) 2 SCALE 486
referred to
Para 147
'
c
··~
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
3510-3511 of 2008.
.J ·,
From the Judgment & Order dated 06.05.2008 of the
D
Appellate Tribunal for Electricity, New Delhi in Appeal Nos. 143
of 2007 & I.A.No. 70 of 2008.
WITH
C.A. No. 4269 of 2008, 3593,of 2008, 6098 of 2008, 6099
E
of 2008.
'
Jaideep Gupta, Sitesh Mukherjee, Sakya Singh
Chaudhuri, Vishal Anand and Mega Sen (for Jagjit Singh
Chhabra) for the Appellants.
-f
I ...
F
F;F. Nariman, Ramji Srinivasan,· Dr. A.M. Singhvi, J.J.
IBhatt, Krishan Kumar, M.T. Nair, Praveen Jain, Sumit Gupta,
Mukesh Kumar (for M.V. Kini & Associates) Anjali Chandurkar,
Smieetaa Inna and Amit Bhandari (for Shiv Kumar Suri) for the
Respondents.
G
The Judgment of the Court was delivered by
l-
...
,
.
s.e. SINHA, J.
INTRODUCTION
H
1. These statutory appeals under Section 125 of the
....
TATA POWER COMPANY LTD. v. RELIANCE
637
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]
'IElectricity Act, 2003 (hereinafter called and referred to for the
A
sake of hrevity as 'the 2003 Act') are directed against a
common judgment and order dated 6th May, 2008 passed by
the Appellate Tribunal for Electricity, New Delhi in Appeal
No.143 of 2007 and I.A. No.70 of 2008 whereby and
whereunder a judgment and order dated 6th Novembe~. 2007
B
passed by the Maharashtra Electricity Regulatory Commission
(MERC) was set aside.
THE PARTIES
2. Whereas Appellants, the Tata Power Company Ltd: c
(TPC) has two divisions - 'Generation·· [TPC (G)] and
'Distribution' [TPC (D)]; the Brihan Mumbai Electricity and
Transport Corporation (BEST) is a distribution company;
Respondent - Reliance Energy Ltd. now named as Reliance
Infrastructure Ltd. (Rlnfra) is a generating as well as a
D
distributing company within the meaning and provisions of the
2003 Act.
3. All of them have been operating in the city of Mumbai
including Suburban Mumbai of having approximately 384 sq.
Km in area and the city of Mumbai having approximately 60
E
sq. Km in area.
4. We may place on record that the aggregate capacity
+
to generate electricity of TPC is 1777 MW of power. The
generation capacity of the respondent Rlnfra is 500 MW, but it
F
uses its power, as per its license, only to serve its own
consumers.
BACKGROUND FACTS
5. The following factual matrix relevant for proper
appreciation of the legal issues arising in the present case may
G
J
be noticed.
6. Indisputably TPC has been generating and supplying
electricity to distribution licensees like Rlnfra and BEST for over
a century. On or about 5th March, 1907; 3rd April, 1919; 15th
H
r
)
~
638
SUPREME COURT REPORTS
[2009] 9 S.C.R.
-t
A November, 1921 and 19th November, 1953, the Bombay
(Hydro-Electric) Licence ; the Andhra Valley (Hydro-Electric)
Licence, the Nila Mula Valley (Hydro-Electric) Licence and
Trombay Thermal Power Electric Licence respectively were
granted to TPC to generate and supply power in terms thereof.
B
7. Since 1907 consumers of electricity in Mumbai were
r
served by distribution lisensee, BEST (for the island city of
Mumbai) and since 1926 onwards by Rlnfra (for suburban·
-f
Mumbai). Indisputably demand of electricity earlier was relatively
c
low as compared to the demand post 1990s. Nevertheless TPC
progressively increased its capacity to meet the demand cf both
Rlnfra and BEST. Issues of wrongful inter se allocation between
the various distribution licensee never really arose prior to the
present scenario.
D
8. On or about 1st October, 1916 TPC and BEST (both
Appellants herein) entered into an agreement in terms w~ereof
the former agreed to supply and later agreed to buy power in
..
bulk. This agreement was renewed from time to time.
9. Subsequently a distribution licence was also issued to
'r
.__
E BSES, predecessor in interest of respondent Rlnfra to supply
'
power to the consumers in the suburbs of Mumbai. Under the
,.
said license Rlnfra wss authorized to purchase electricity from
'
the bulk Licensees. Accordingly it began procuring bulk power
~
from TPC generating stations according to its requirements from
....
F time to time, based on its consumer load (TPC had been the
only bulk licensee for Mumbaj). Indisputably, however, no
'
I
agreement in writing had ever been entered into by an~
~
between TPC and Rlnfra. It must be noted in this regard that
since its inception and till a very long time Rlnfra continued to
G buy its entire requireme~t of power from TPC.
~
10. However in 1918 Rlnfra's distribution license was
.>-·
amended to permit it to put up a generation station to supply
power only to its. own consumers. In or about 1995, Rlnfra
'"" t
commissioned its 500MW generating plant at Dahanu,
\_
H
TATA POWER COMPANY LTD. v. RELIANCE
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]
639
pursuant whereto the quantum of power purchased by it from A
TPC was reduced by about 54%. Even then Rlnfra had been
buying nearly 42% of the energy generated by TPC. It had
continued to purchase its remaining requirements of power
from TPC.
11. On or about 1998 a Committee on Review of Power
demand in Mumbai area commonly known as the 'Kukde
Committee' was constituted by the Government of Mahar~sthtra
for the purpose of studying the techno commercial feasibility
B
of new power generation projects at Bhivpuri (500 MW) and C
Palghar (495 MW) proposed to be set up by TPC and Rlnfra
respectively.
12. It is accepted that before the said Committee, Rlnfra
took the stand that it wanted to supply to its existing consumers
with the power generation from its own proposed project D
instead of providing power from TPC. The committee submitted
its report on or about 26th May, 1998. In its report it
recommended for grant of approval for both the said projects.
It was furthermore recommended that the additional power
generated from Rlnfra's project be used only to meet the future E
growth in demand arising from the consume.rs of Mumbai. °The
Kukde Committee also recommended that first the then
existing generation facility of TPC be fully 4tilized to meet the
requirements of the current consumers of Rlnfra so as not to
disturb the existing technical and commercial arrangement
F
between TPC and Rlnfra.
13. Subsequent thereto a 'Principles of Agreement' (POA)
was· executed between TPC and Rlnfra on or about 31st
January, 1998 inter alia providing that there be a minimum
power purchase ('off-take') on the basis of 'pay or take' in each G
financial year by Rlnfra OIJ the basis of its consumer demand
forecast. The POA also envisaged execution of a detailed
Power Purchase Agreement by the parties. However, no such
agreement ever fructified.
H
640
SUPREME COURT REPORTS
(2009] 9 S.C.R.
A
14. Thereafter in 2000 the Maharashtra State Electricity
Board [MSES] gave consent to the Sap hale power project of ..
Rlnfra. Approval however was not granted to the Bhivpur project
of TPC. Against the said order granting approval in favour of
Rlnfra, TPC filed a writ petition being No.916 of 2001 before
B
the Bombay High Court on the premise that it had not approved
TPC's proposal for the Bhivpuri power project despite it having
been submitted aJ an earlier point of time. It was alleged in the
said petition that the impugned decision of the MSES was
illegal and contrary to the 1948 Act, which forbade it from
c granting sanction to any other person to generate electricity if
the existing bulk licensee was able and willing to supply power.
A prayer inter alia was made therein that the recommendations
of the Kukde Committee should not be implemented.
15. In response to the said petition MSES withdrew its
D
approval to Rlnfra's Power project on the ground that TPC being
the bulk licensee was able and willing to supply power to it. On
the withdrawal of the approval TPC too withdrew its petition filed
before the High Court
E
16. Thereafter the 2003 Act came into force with effect from
26th May, 2003: Under the new Act the 'Generating
Companies' have been given freedom of choice to sell power
to any. person or licensee. The Act also introduced the concept
of 'open access' which allows the distribution licensee to source
F
its power from any generating company. The distributors
accordingly under the changed law do not have to depend upon
state based generators to meet their needs.
G
H
PROCEEDING UNDER THE ACT
17. Rlnfra applied to Maharashtra Electricity Regulatory
Commission [MERC] for grant of 'open access' to bring in
power from sources, outside Mumbai, to supply electricity to
its consumers.
18. On or about 11th June, 2004 TPC through its executive
1
'
TATA POWER COMPANY LTD. v. RELIANCE
641
!
ENERGY LIMITED AND ORS. [S.S. SINHA, J.]
~
""
\
summary for Annual Revenue Requirement (ARRA) filed before A
the MERC for the year 2003-04 insisted on having a PPA with
Rlnfra as a condition for supply of power to Rlnfra in the future.
It, however, rejected the said demand on the ground that there
was no 'legal justification' or 'tenable reason' for entering into
such an agreement.
B
19. On or about 23rd August, 2005 the Commission made
Regulations known as MERC (Terms and Conditions of Tariff)
Regulations, 2005, Part-D whereof required all power purchase
agreements/arrangements entered into by the Distribution c
Licensees to be approved by MERC. The regulation also
provided that any amendment to such an agreement or
arrangement would require prior permission of the MERC
irrespective of whether such an agreement or arrangement was
approved by the commission or not.
D
20. MERC, on an application, filed by Rlnfra for direction
to TPC to provide additional outlets, agreed to the position that
distribution licensees, such as Rlnfra, can procure their power
from any generating company in India and because of the said
flexibility in the 2003 Act also directed it to enter into a PPA E
with TPC.
21. On or· about 18th January, 2006, BEST executed a
PPA with TPC for purchase of 800 MW of power for a period
of 10 years which was subsequently revised in terms of the F
MERC's order dated 7th July, 2006. The said PPA was
submitted for approval of MERC on 27th December, 2006 which
was registered as Petition No.87 of 2006.
22. On or about 12th July, 2006 a Minutes of the Meeting
(MoM) was signed between TPC (G) and TPC (0) for allocation G
of power to TPC (D). TPC (D) indicated requirement of 500
MW power from TPC (G) in the said MoM. A minor modification
in the MoM was directed by MERC, pursuant whereto, on or
about 16th March, 2006, TPC (0) entered into a PPA with TPC
(G) for 477 MW power which was submitted for approval of H
642
SUPREME COURT REPORTS
[2009] 9 S.C.R.
1
~
A
MERC on 27th December, 2006 being Petition No.87 of 2006.
23. Rlnfra filed an application for intervention before the
commission in both the applications for approval of both the
PPAs It subsequently also filed its objections in the said
B
proceedings.
24. It appears from the record that in the meanwhile TPC
proposed to enter into PPA with Rlnfra for its balance quantity
after meeting the contractual requirement of BEST for 800 MW
and of TPC (D) for 4 77 MW of electricity . The offer was made
c by TPC to Rlnfra for supply of 600 MW which was not
accepted. The later instead insisted on ·obtaining a much higher
quantum of power based on its consumer demand. TPC
rejected the said demand keeping in view its continuing
obligation to its own consumers and also those of BEST. No
D
consensus was therefore reached with respect to the said PPA
between TPC-G and Rlnfra.
25. On or about 2nd April, 2007 MERC passed generation
tariff order for TPC (G) for the period 2006-2007. Commission,
E
however, took the view that since PPAs had not been
)
approved, by way of an interim arrangement, it would allocate
available energy from TPC (G) on the basis of coincident peak
demand of the distribution licensees.
26. Aggrieved by and dissatisfied therewith BEST
F
preferred an appeal before the Electricity Appellate Tribunal on
26th April, 2007 which was marked as Appeal No.41 of 2007.
Similar appeal was filed by TPC against the tariff order dated
2nd April, 2007 providing for allocation of TPC (G) capacity on
the basis of coincidence peak demand on 4th May, 2007, which
G was marked as Appeal No.51 of 2007.
~
27. By an order dated 17th May, 2007 the Appellate
Tribunal in Appeal No.51 of 2007 filed by TPC directed MERC
to decide BEST's and TPC's petitions for approval of PPA and
H recorded the undertaking of all parties that they would not claim
~
TATA POWER COMPANY LTD. v. RELIANCE
643
"
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]
\
equities on. the basis of order of f0ERC dated 2nd April, 2007.
A
28. Rlnfra in the meantime initiated a proceeding under
Section 86 of 2003 Act before MERC seeking direction against
TPC (G) to allocate 762 MW to it and to enter into a PPA with
. Rlnfra on the said basis, which was marked as Case No. 30
B
of 2007.
29. By reason of a judgment and order dated 6th
November, 2007 the Commission approved PPA between TPC
(G) and BEST and the arrangement between TPC (G) and TPC
(D) for supply of 800 MW and 477 MW of power respectively c
with effect from 1st April, 2008. In relation to its own jurisdiction
it was, however, opined that it can issue direction upon the
generating companies in terms of Section 23 of 2003 Act.
30. Rlnfra preferred an appeal thereagainst which was D
marked as Appeal No.143 of 2007.
31. Two separate appeals were preferred by BEST and
TPC questioning the interpretation of Section 23 of 2003 Act
by the Commission which were marked as Appeal No.159 of
E
2007 and Appeal No. 14 of 2008 respectively.
32. MERC while dealing with the application filed by Rlnfra
for continuing the tariff for financial year 2007-2008 even beyond
1
31st March, 2008 till the tariff year 2008-2009, by an order
dated 1st April, 2008 clearly indicated that for the purpose of F
fixing the distribution tariff of all the three distribution licensees
namely, BEST, TPC (D) and Rlnfra, based on the share of
generation capacity of TPC (G), it will be proceeding in the
manner as· directed by the Commission in its order dated 6th
November, 2007 approving the PPA entered into by and G
between TPC (G) and BEST and TPC (G) and TPC (D).
33. Appellate Tribunal thereafter passed the impugned
)udgment on 7th April, 2008 in Appeal No.51 of 2007 filed by
TPC against the tariff order dated 2nd April, 2007 on the
H
644
SUPREME COURT REPORTS
[2009] 9 S.C.R.
A
submission of appellant-TPC that it was not pressing for the
adjustment of any amount that may be payable by Rlnfra to TPC
for the period 2007-2008 in terms of the interim order of the
Appellate Tribunal dated 17th May, 2007.
B
34. Rlnfra filed petition marked as Case No.6 of 2008
before MERC on 17th April, 2008 seeking equitable allocation
of power generation from TPC (G)'s generation facility under
Section 23 of 2003 Act.
ORDER OF THE COMMISSION
35. The Commission passed a fairly detailed order. It took
into,co'nsideration the factual matrix; the nature of agreements
; submissions of BEST; its earlier orders ; contentions raised
by Bf;ST in its original application as also revised petitions ;
D
firm capacity and other details.
36. It noticed that a Technical Validation Session in case
No. 87 of 2006 was held on 18th April, 2007 including
justification for entering into a long term contract for ten years
taking into account the demand forecast during peak and offE
peak hours and analysis of other sources of power and
availability of transmission capacity in future. It also took into
account the basis for arriving at 10 paise/kwh surcharge
payable by TPC (G) to BEST in case the availability of
generating stations of TPC (G) falls below 85% alongwith
F
supporting computations. It also noticed the mechanism for
assessipg the amount of compensation payable in case of
termination due to events of default may be incorporated in the
PPA. It/furthermore noticed that before it a public hearing was
held oh 17th July, 2007 wherein points were raised by the
G
participants and BEST's response thereto.
H
37. We may also place on record that that Rlnfra did not
make submissions in the technical session but did so only at
the public hearing.
TATA POWER COMPANY LTD. v. RELIANCE
645
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]
38. The Commission took up Case No.88 of 2007 and A
noticed the details of Technical Validation Session in regard
to internal capacity allocation from the generation division of
TPC to its own distribution division including Rlnfra's
intervention application. It also noticed the details in regard to
the public hearing in the aforementioned case which was held
B
on 29th August, 2007. Similarly the application filed by Rlnfra
which was marked as Case No.30 of 2007 was considered in
great details.
39. Submissions of learned counsel appearing for the
parties were noticed. Part IV of its judgment contains 'the C
decision with reasons'. It took into consideration the relevant
"'i
provisions of law. It noticed its functions under Section 86 of
the 2003 Act as also various Regulations framed thereunder.
It placed on record that it had issued certain directives to the
distribution licensees from time to time. It opined that D
~
submission of Power Purchase Agreements (PPA) for approval
are imperative as the objective thereof is to remove any
uncertainty that may be faced by the consumers of a distribution
licensee who does not have any written terms and conditions.
It opined that Rlnfra's recalcitrant attitude in seeking approval
E
of the terms and conditions of its power procurement deserved
to be deprecated, whereupon a warning was administered.
-. -+
40. Submissions of BEST before the Commission were
F
(i)
Ambit of approval process under Section 81(1)(b)
of 2003 Act was required to be restricted to the
price and the Commission had no power to reduce·
the quantu.m agreed by distribution licensee and the
generating company under the PPA submitted for G
approval.
(ii)
Insertion of the word "including" before the words
"the price" makes the intention of the legislature
clear that the scope of the power to regulate is H
A
B
c
D
E
F
G
H
646
SUPREME COURT REPORTS
[2009] 9 S.C.R.
extensive.
(iii)
Power of a Regulatory Body is extensive under
Section 86( 1 )(b) of the 2003 Act. Even the
generator can be subject to Regulations.
(iv)
Section 86(1 )(b) is required to be harmoniously
read. For invoking the provisions of Section 60 of
the Act, the following three situations must
conclusively be shown to exist :
(a)
any agreement has been entered into which
is likely to cause or causes an adverse effect
on competition in electricity industry; or
(b)
dominant position has been abused which is
likely to cause or causes an adverse effect
on competition in electricity industry; or
(c)
a combination has entered into which is likely
to cause or causes an adverse effect on
competition in electricity industry.
FINDINGS OF THE COMMISSION
41. The. Commission discussed clause by clause of the
PPAs entered into by and between TPC-D and BEST and
TPC (G) and TPC (D) in terms of the MERC Regulations. It took
into consideration each of the factors enumerated in those
PPAs to hold that they were justified for meeting the
requirements of BEST and TPC (D), stating :-
"Based on the above analysis, the Commission is satisfied
with ttie data and information submitted by BEST and TPC
substantiating the requirements of Regulation 24 of the
MERC (Terms and Conditions of Tariff) Regulations, 2005"
42. In conclusion the Commission held that Section 86 (1)
(b) of the 2003 Act would be applicable only when the PPA is
i
j
?"';
~
~ ..
~ ....
TATA POWER COMPANY LTD. v. RELIANCE
647
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]
..
produced before it for its approval and not otherwise.
A
43. It also noted that it has the jurisdiction to go into the
question with regard to the quantity of supply of electrical energy
in terms of the PPAs. However, as the PPA took into
consideration the demand of the licensee for the next 10 years,
B
the stipulations contained therein were held to be fair and
~
proper.
44. It was opined that the language of Section 60 of the
Act being restrictive, no cause had been made out for issuance
of any direction thereunder.
c
45.