2004 Supreme(SC) 372

2004(8) Supreme 921
SUPREME COURT OF INDIA
(From Andhra Pradesh High Court)
Brijesh Kumar & Arun Kumar, JJ.
A.P. Gas Power Corpn. Ltd. -Appellant
versus
A.P. State Regulatory Commission & Anr. -Respondents
Civil Appeal No. 4660 of 2001
With
Civil Appeal No. 4661 of 2001
Civil Appeal No. 4662 of 2001
Civil Appeal No. 5208 of 2001
And
Civil Appeal No. 6338 of 2001
Decided on 23-3-2004
Counsel for the Parties :
For the Appearing Parties : K.K. Venugopal, G.L. Sanghi, Ranjit Kumar, V.R. Reddy, V.A. Bobde, Ashok Grover, Sr. Advocates, P.S. Narasimha, C.V. Nagarjuna Reddy, P. Sridhar, Ananga Bhattacharya, Ms. Seema Bengani, G. Seshagiri Rao, Mrs. Prabha Swami, Krishnamurthi Swami, T. Mathivanan, Ms. Binu Tamta, Gopal Chaudhary, Ms. Deepa Vishwanathan, Ms. Shilpi Srivastava, Ms. Indu Malhotra, M.G. Ramachandran, K.V. Mohan, K.V. Balakrishnan, Sakya Singha Chaudhuri, Ms. Anupama Grover, Rakesh K. Sharma, Advocates.

IMPORTANT POINT
No licence is necessary for utilization of energy generated by the generating company and utilized by the participating industries and the concerns holding shares of the generating company transferred to them by the participating industries. It would, however, be necessary to have a licence for supply of energy to the sister concerns.

Headnote:Indian Electricity Act, 1910-Sections 11, 12 and 13-Electricity (Supply) Act, 1948-Section 44-Andhra Pradesh Electricity Reform Act, 1998-Sections 15 and 16-Licensing-Order passed by Andhra Pradesh State Regulatory Commission that extended activities of supply of energy to sister concern of participating industries of A.P. Gas Power Corporation would require licence or exemption therefrom under the provisions of Section 15 or 16 of the Reform Act-Sustainability-Group captive generating venture-Appellant company was set up by a group of persons to generate electricity for their consumption-A generating company is not required to have a licence under the Act of 1910 for carrying on any of its activities-Whether there was any requirement to have a licence for supply of electricity to the sister concern-(Yes).

       Held : That a generating company is not required to have a licence under the Act of 1910 for carrying on any of its activities. The provisions regarding jurisdiction and duties of generating company have also been introduced under Section 15-A and 18-A of the Supply Act. Thus looking to the relevant provisions under the law, we are of the view that no licence is required to be taken by a generating company consuming the electricity generated by itself. The activity of generating electricity may be by an individual or by a group of persons, no distinction is envisaged on that account to exclude a group of persons, coming together to establish and generate electricity for their own purpose. Needless to emphasise that by virtue of sub-section (2) of Section 26-A of the Supply Act, no inference can be drawn that any licence is required to be taken by a generating company under the provisions of the Act of 1910 merely because Sections 12 to 19 and certain provisions of the schedule of the said Act have been made application to the generating company as well. Such a provision as contained under sub-section (2) of Section 26-A of the Supply Act has been made only with a view that a generating company may also have to lay electricity lines for carrying electricity from the point of generation to the place of its consumption or from where it may be diverted to the place of consumption of other participating industries. Therefore, for such matters the same requirements may be applicable as are applicable to the licensees etc. but by no stretch of imagination it can be contended that a licence is required to be taken by the generating company under the Act of 1910. The captive consumption may be in the same premises or at some distance is immaterial. (Paras 29 and 30)

       The electricity generated by APGPCL and consumed by the participating members setting up the plant under the Memorandum of Association incorporating the company, does not require to have any licence for self-utilisation of the power generated by the company. All that we want to clarify is that it is not in view of equity in favour of the participating industries as held by the Regulatory Commission and the High Court but under the law there is no such requirement for them to have a licence. (Para 32)

       From a perusal of para 4 of the Memorandum of Understanding it is clear that a participating industry has been given a right to transfer its share of energy and power to its sister concern. The term "sister concern" has been explained as "a concern under the same group". There is no further clarification or clue as to which are those concerns which may be considered under the same group. The expression `sister concern used in para 4 of Memorandum of Understanding certainly does not mean a concern which is owned or is a subsidiary of the participating industry. It would be a concern or unit different from the participating industry and not a part of it. Maybe that the same group may manage two different independent units carrying on the same nature of activities. They may be addressed as sister concerns but would definitely have separate entity and identity of their own. Consumption of power, generated by a generating company, by a concern which may be under the same group as any of the participating industry cannot be said to be consumption or use of the power by the participating industry itself. In absence of the element of self-consumption by the generating company, it would not fall in the category of "captive consumption". It would surely be a supply to a non-participating industry and in that event it would be necessary to have a licence under the relevant provisions of law. If there is such a legal requirement, merely an agreement amongst certain parties would not exclude the application of law. Provisions of law regulating the situation, would prevail over any kind of agreement amongst some individuals as a group or otherwise. We are, therefore, of the view that such a clause in the Memorandum of Understanding would not do away with the requirement of having a licence for supply of electricity generated by APGPCL to such concerns which may be under the same group as the participating industries but not the participating industries themselves. (Para 35)

       Participating industries and the industries to whom participating industries have transferred their shares, consumption of electricity by them within the limits of the value of their share capital of APGPCL would only amount to captive consumption and for such utilization or consumption of self-generated electricity no licence would be required under any provision of law. So far the sister concern or concerns which have been defined as those under the same group as participating industries, it would require to have a licence if the electricity is made available or provided to them for consumption as, in our view, it shall fall within the ambit of distribution, sale or supply of the electricity and not captive consumption of power. It would be permissible without licence only in case of exemption, if granted in that behalf, by the competent authority. Hereinafter we shall discuss that aspect of the matter. (Para 47)

       In the case in hand, we find that clauses (a) and (b) of Section 43-A(1) specify as to with whom a generating company can enter into a contract to sell electricity namely, the electricity board of the State concerned or in given circumstances to the electricity board of another State and the said clauses (a) and (b) are followed by clause (c) providing for having the contract of sale with "any person" with the consent of the State Government. It is to be noticed that in case contract of sale of electricity could be entered into by a generating company with any person, whomsoever it may be, an individual consumer or any one else, it was then not at all necessary to have specified class of persons as indicated under clauses (a) and (b) preceding clause (c). If the intention was to include all under the expression any person it was not necessary to specify Electricity Board in clauses (a) and (b). (Para 54)

       The fact remains that the legislation in question has not dealt with nor purpose of its being legislated is to deal with supply of electricity to the end consumers. Rather the subject dealt with in the Supply Act is different. It is to be noticed that the power generation was initially confined to government companies, maybe central or the state government. Later by an amendment in 1976 it could be jointly, both by the central and the state government. Later, however, generation was opened up for any company registered under the Companies Act. Earlier, therefore, the sale of electricity generated was confined to the electricity boards but in view of opening up generation to any company a third category was introduced by the amendment of 1991 as contained in clause (c) of Section 43-A (1) of the Supply Act, namely, to any other person. But looking to the provisions of the Act in totality it can t mean an individual consumer since such a supply to individual consumers is not envisaged nor dealt with under the Supply Act. (Para 54)

       The meaning of the expression any person as used in clause (c) of sub-section (1) of Section 43-A denotes such bodies or entities which would further the purpose for which the electricity boards have been constituted. It is for the board to coordinate different activities in discharge whereof to make available the electricity to the licensees, distributors or those who transmit the electricity. It would be reasonable to infer that the consent of the state government may be necessary to have a contract of sale of electricity generated by it with any of such bodies discharging any of such functions like that of the Board indicated above or any other body or entity established for similar purpose. In view of the finding recorded above regarding meaning of the word any person occurring in clause (c) of sub-section (1) of Section 43-A of the Act, it becomes wholly unnecessary to go into the question as to in fact any consent was given by the state government, if so, when and the effect of the same for supply of electricity to the sister concern of the participating industries. We, therefore, hold that no licence is necessary for utilization of energy generated by APGPCL and utilized by the participating industries and the concerns holding shares of APGPCL transferred to them by the participating industries to the extent of value of the shares so transferred. It would, however, be necessary to have a licence for supply of energy to the sister concerns. (Paras 54 to 56)