1. Distribution license granted under Electricity Act, 2003 — Cancellation by Appellate Tribunal over minimum area of supply requirements — Challenge against the cancellation order. (Para 1 , 11 , 17 )
Back
Next 
2022 Supreme(SC) 992
SUPREME COURT OF INDIA
Ajay Rastogi, B.V. Nagarathna, JJ.
M/s. Jindal Steel and Power Limited – Appellant
Versus
The Chhattisgarh State Electricity Regulatory Commission and Ors. – Respondents
Civil Appeal Nos.3607-3610 of 2008
Tirumala Balaji Alloys Pvt. Ltd. – Appellant
Versus
M/s. Jindal Steel and Power Ltd. and Ors. Etc. – Respondents
Civil Appeal Nos. 4104-4107 of 2008
Decided On : 29-09-2022
Important Points
The 'minimum area of supply' for a distribution license under the 2005 Rules refers to an area falling within a Municipal Council, Corporation, or Revenue District, and does not require the licensee to cover the entire area of such a local authority.
Subject
Energy Law - Electricity Licensing
Act Referred
Chhattisgarh State Electricity Regulatory Commission License Regulations: Reg.3(1)
CONSTITUTION OF INDIA: Art.243(q)
DAMODAR VALLEY CORPORATION ACT: S.3(1)
Distribution License Rules: R.3
Distribution of Electricity Additional Requirement of Capital and Adequate Credit-worthiness and Code of Conduct Rule: R.3
ELECTRICITY ACT: S.176(2)(b), S.61(i), S.86(4), S.2, S.3(1), S.43, S.15(1), S.125, S.28, S.68(1), S.14, S.10(2), S.42(2), S.12, S.142, S.9
GENERAL CLAUSES ACT: S.6
CONSTITUTION OF INDIA: Art.243(q)
DAMODAR VALLEY CORPORATION ACT: S.3(1)
Distribution License Rules: R.3
Distribution of Electricity Additional Requirement of Capital and Adequate Credit-worthiness and Code of Conduct Rule: R.3
ELECTRICITY ACT: S.176(2)(b), S.61(i), S.86(4), S.2, S.3(1), S.43, S.15(1), S.125, S.28, S.68(1), S.14, S.10(2), S.42(2), S.12, S.142, S.9
GENERAL CLAUSES ACT: S.6
Headnote
The Court interpreted the provisions of the Electricity Act, 2003 and the Distribution License Rules, 2005 to determine the conditions for granting a distribution license for electricity supply. The Court held that the minimum area of supply for a distribution license is the area falling within a Municipal Council, Municipal Corporation, or Revenue District, but it does not require the licensee to distribute electricity in the entire area. The Court also held that the licensee cannot supply electricity beyond the area of supply authorized under the license.
Fact of the Case:
Jindal Steel and Power Ltd. (JSPL) established a sponge iron/steel plant and a captive power plant in Raigarh, Chhattisgarh. JSPL applied for a distribution license to supply electricity to the industrial units in a private industrial estate being established by it. The Chhattisgarh State Electricity Regulatory Commission (Commission) granted the license, but the Appellate Tribunal for Electricity set it aside. JSPL appealed to the Supreme Court.
Finding of the Court:
The Court held that the minimum area of supply for a distribution license is the area falling within a Municipal Council, Municipal Corporation, or Revenue District, but it does not require the licensee to distribute electricity in the entire area. The Court also held that the licensee cannot supply electricity beyond the area of supply authorized under the license.
Issues: 1. Whether the minimum area of supply for a distribution license is the entire area of a Municipal Council, Municipal Corporation, or Revenue District? 2. Whether a licensee can supply electricity beyond the area of supply authorized under the license?
Ratio Decidendi: The Court interpreted the provisions of the Electricity Act, 2003 and the Distribution License Rules, 2005 to determine the conditions for granting a distribution license for electricity supply. The Court held that the minimum area of supply for a distribution license is the area falling within a Municipal Council, Municipal Corporation, or Revenue District, but it does not require the licensee to distribute electricity in the entire area. The Court also held that the licensee cannot supply electricity beyond the area of supply authorized under the license.
Final Decision: The Court allowed the appeals and set aside the impugned judgment of the Appellate Tribunal. The Court also reserved liberty to the applicants seeking impleadment to seek remedies in accordance with law, if so advised.
Legal Category Hierarchy
Advocates appeared:
For the parties : Mr. Sanjay Sen, Sr. Adv. Ms. Divya Chaturvedi, Adv. Mr. Saransh Shaw, Adv. Mr. Pranav Sood, Adv. M/s. Khaitan & Co., AOR Mr. Shibashish Misra, AOR Ms. Divya Chaturvedi, Adv. Mr. Saransh Shaw, Adv. Mr. Pranav Sood, Adv. M/s. Khaitan & Co., AOR Mr. C.S. Vaidyanathan, Sr. Adv. Ms. Swapna Seshadri, Adv. Mr. Pramod Dayal, AOR Mr. Nikunj Dayal, Adv. Mr. Raj Kumar Mehta, AOR Ms. Himanshi Andley, Adv. Ms. Rashmi Singh, Adv. Ms. Rashmi Singh, AOR
For the parties : Mr. Sanjay Sen, Sr. Adv. Ms. Divya Chaturvedi, Adv. Mr. Saransh Shaw, Adv. Mr. Pranav Sood, Adv. M/s. Khaitan & Co., AOR Mr. Shibashish Misra, AOR Ms. Divya Chaturvedi, Adv. Mr. Saransh Shaw, Adv. Mr. Pranav Sood, Adv. M/s. Khaitan & Co., AOR Mr. C.S. Vaidyanathan, Sr. Adv. Ms. Swapna Seshadri, Adv. Mr. Pramod Dayal, AOR Mr. Nikunj Dayal, Adv. Mr. Raj Kumar Mehta, AOR Ms. Himanshi Andley, Adv. Ms. Rashmi Singh, Adv. Ms. Rashmi Singh, AOR
Table of Contents
2. Whether the minimum area of supply requires the entire revenue district or municipal area, or merely an area located within such boundaries. (Para 22 , 24 , 25 )
3. Analysis of the phrase area falling within — Distinction between an area located inside a boundary and the entire boundary — Avoidance of statutory redundancy. (Para 37 , 38 , 40 , 41 , 42 )
4. Minimum area of supply means the authorized area of supply must fall within a revenue district or municipal area, not encompass the entire area. (Para 40 , 42 )
5. Appeals allowed — Impugned judgment of the Appellate Tribunal set aside — Distribution license restored. (Para 46 , 47 )
6. What constitutes the minimum area of supply for a distribution license under the 2005 Rules?
The minimum area of supply is the authorized area of supply that falls within a Municipal Council, Municipal Corporation, or revenue district. It does not require the licensee to supply the entire area of that district or municipality. (Para 37 , 38 , 40 , 42 )
7. How should the phrase area falling within in the Explanation to Rule 3 be interpreted?
It refers to an area located inside the specified boundary. Interpreting it as the entire area would render the phrase falling within redundant and otiose, as the court seeks to avoid such interpretations. (Para 40 , 41 )
8. Is a distribution licensee bound to supply electricity to all consumers within their authorized area of supply?
Yes. Once the area of supply is authorized in the license, the licensee is bound to supply electricity within that specific area and cannot resile from the condition of supplying electricity as per the authorization. (Para 44 )
JUDGMENT :
Nagarathna, J.
1. These Civil Appeals filed under Section 125 of the Electricity Act, 2003 arise out of common impugned Judgment dated 07.05.2008 passed by the Appellate Tribunal for Electricity, New Delhi (‘Appellate Tribunal’, for short). By the said judgment, the Appellate Tribunal has set aside the order of respondent No.1 dated 29.11.2005 and cancelled the distribution licence granted to the appellant in C.A. Nos.3607-3610 of 2008. Hence, these appeals.
2. Since the questions of law and facts which arise in both the above captioned Civil Appeals are similar, these appeals are being disposed of by this common judgment.
Re: Civil Appeal Nos. 3607-3610 of 2008:
3. The appellant-Jindal Steel and Power Ltd. (‘JSPL’, for short) in this civil appeal established a sponge iron/steel plant at Raigarh, Chhattisgarh in the year 1990. A captive power plant was also set up by JSPL at a distance of 40 km from the aforesaid steel plant.
4. Respondent No.1 is Chhattisgarh State Electricity Regulatory Commission (‘Commission’, for short), respondent No.2 is Chhattisgarh State Electricity Board (‘CSEB’, for short) later became ‘Chhattisgarh State Power Distribution Company’ and respondent No.3 is Chhattisgarh Vidyut Mandal Abhiyanta Sangh (‘CVMAS’, for short).
5. The newly created State of Chhattisgarh formulated its industrial policy for 2001-2006 which encouraged the establishment of industrial estates in private-public partnership as well as the installation of captive power plant.
6. A proposal for permission to set up an industrial estate in 500 acres of land, adjacent to the existing land at Raigarh, was submitted by JSPL vide letter dated 28.12.2001. The land was to comprise of villages of Kosampali, Dhanagar, Barmuda or at a site in the Tehsil of Gharghoda comprising villages Tarai Mal and Ujjalpur. JSPL, addressed a letter dated 09.04.2002 to the Department of Mineral Resources, Commerce and Industries, Government of Chhattisgarh seeking permission for establishing such an industrial estate at Raigarh. A map showing the proposed industrial area was annexed with the letter. The Government of Chhattisgarh, vide letter dated 26.04.2002 informed JSPL that the Energy Department was taking action to grant permission for sale of power and to lay transmission lines to various units in the private industrial estate being established by JSPL and requested JSPL to prepare and submit a draft of Memorandum of Understanding (‘MoU’, for short) for the said purpose for approval. The facilities were to be provided as per the new industrial policy dated 01.11.2001.
7. JSPL, on 16.07.2002, requested the Chief Minister of Chhattisgarh to issue appropriate directions for grant of permission to supply power to the units in the proposed industrial estate. The Government of Chhattisgarh, on 14.08.2002, sent a reply to the aforesaid request made by JSPL and informed that it shall have to take certain actions/steps with regard to the supply of power to the proposed industrial units. In compliance of the aforesaid letter on 04.09.2002, JSPL addressed a letter requesting for grant of permission under Section 28 of the Indian Electricity Act, 1910 (‘1910 Act’, for short) for sale of power to the proposed units in the industrial state from its captive power plant and for grant of permission to set up transmission and distribution lines/system for supply of power to the industrial units in the proposed industrial estate. JSPL further stated that they will obtain necessary permission under the Electricity Supply Act, 1948 (‘1948 Act’, for short) for setting up transmission and distribution lines from CSEB.
8. A MoU was signed on 23.10.2002 between Chhattisgarh State Industrial Development Corporation (‘CSIDC’, for short) acting on behalf of Government of Chhattisgarh and JSPL for setting up the industrial estate. The Government of Chhattisgarh, on 29.01.2003 granted permission for supply of power by JSPL to the new industrial units being set up in the private
