1. SEZ developer — Application for recognition as deemed distribution licensee under Electricity Act — Condition imposed for capital infusion per capital adequacy rules — Challenge to condition. (Para 1 , 2 )
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2024 Supreme(SC) 490
SUPREME COURT OF INDIA
SANJIV KHANNA, DIPANKAR DATTA, JJ.
M/s Sundew Properties Limited – Appellant
Versus
Telangana State Electricity Regulatory Commission & Anr. – Respondents
Civil Appeal No. 8978 of 2019
Decided On : 17-05-2024
Important Points
The SEZ developer is required to make an application in accordance with the 2013 Regulations to qualify as a deemed distribution licensee. The condition stipulated in rule 3(2) of the 2005 Rules, as imposed by the TSERC, was not justified and contrary to the statutory scheme.
Subject
Statutory Appeal - Electricity Act
Act Referred
Andhra Pradesh Electricity Regulatory Commission Distribution Licence Regulations: Reg.12, Reg.13(2), Reg.49
DAMODAR VALLEY CORPORATION ACT: S.3(1)
ELECTRICITY ACT: S.111, S.125, S.14, S.15(1), S.16, S.175, S.176, S.177, S.181, S.2(62)
SPECIAL ECONOMIC ZONES ACT: S.3, S.4, S.49
DAMODAR VALLEY CORPORATION ACT: S.3(1)
ELECTRICITY ACT: S.111, S.125, S.14, S.15(1), S.16, S.175, S.176, S.177, S.181, S.2(62)
SPECIAL ECONOMIC ZONES ACT: S.3, S.4, S.49
Headnote
Electricity Act - Challenge to judgment and order under section 125 of the Indian Electricity Act, 2003 - 14, 49 - The court discussed the applicability of the provisions of the Electricity Act, 2003, and the Special Economic Zones Act, 2005, to the appellant's status as a deemed distribution licensee. The court concluded that the SEZ developer is required to make an application in accordance with the 2013 Regulations to qualify as a deemed licensee and that the condition stipulated in rule 3(2) of the 2005 Rules, as imposed by the TSERC, was not justified and contrary to the statutory scheme.
Fact of the Case:
The appellant, a SEZ developer, sought recognition as a deemed distribution licensee under the Electricity Act, 2003. The TSERC imposed a condition requiring the appellant to infuse additional capital of Rs. 26.90 crore to gain the status of a deemed licensee.
Finding of the Court:
The court found that the SEZ developer is required to make an application in accordance with the 2013 Regulations to qualify as a deemed licensee. The condition stipulated in rule 3(2) of the 2005 Rules, as imposed by the TSERC, was not justified and contrary to the statutory scheme.
Issues: 1. Whether the designation of an entity as a SEZ developer by the MoCI ipso facto qualifies the entity to be a deemed distribution licensee, obviating the need for an application under section 14 of the Electricity Act? 2. Whether regulation 12 of the 2013 Regulations, and by implication rule 3(2) of the 2005 Rules, are applicable to a SEZ developer recognized as a deemed distribution licensee under the proviso to section 14(b) of the Electricity Act read with regulation 13 of the 2013 Regulations?
Ratio Decidendi: The SEZ developer is required to make an application in accordance with the 2013 Regulations to qualify as a deemed licensee. The condition stipulated in rule 3(2) of the 2005 Rules, as imposed by the TSERC, was not justified and contrary to the statutory scheme.
Final Decision: The judgments and orders of the TSERC and the APTEL were set aside to the extent of the condition requiring the appellant to comply with the 2005 Rules and infuse additional capital to gain the status of a deemed licensee. The order of the TSERC, which grants the status of a deemed licensee to the appellant, however, subject to the condition that its promoters infuse additional capital, was modified to exclude such condition.
Legal Category Hierarchy
Advocates appered:
For the Appellant(s) : Mr. Maninder Singh, Sr. Adv. Mr. Mahesh Agarwal, Adv. Mr. Rishi Agrawala,, Adv. Ms. S.lakshim Iyer, Adv. Ms. Anwesha Padhi, Adv. Mr. Abhishek Munot, Adv. Mr. Kunal Kaul, Adv. Mr. Samikrith Rao Puskuri, Adv. Ms. Ashita Chawla, Adv. Mr. Amarpal Singh Dua, Adv. Mr. E. C. Agrawala, AOR
For the Respondent(s): Mr. Somanadri Goud Katam, AOR Mr. Sirajuddin, Adv. Mr. C. S. Vaidyanathan, Sr. Adv. Mr. D. Abhinav Rao, AOR Mr. Vinayak Goel, Adv. Mr. Gunnalan, Adv. Mr. Nitish Raj, Adv. Mr. Rahul Jajoo, Adv. Mr. Devadipta Das, Adv. Ms. Prerna Robin, Adv.
For the Appellant(s) : Mr. Maninder Singh, Sr. Adv. Mr. Mahesh Agarwal, Adv. Mr. Rishi Agrawala,, Adv. Ms. S.lakshim Iyer, Adv. Ms. Anwesha Padhi, Adv. Mr. Abhishek Munot, Adv. Mr. Kunal Kaul, Adv. Mr. Samikrith Rao Puskuri, Adv. Ms. Ashita Chawla, Adv. Mr. Amarpal Singh Dua, Adv. Mr. E. C. Agrawala, AOR
For the Respondent(s): Mr. Somanadri Goud Katam, AOR Mr. Sirajuddin, Adv. Mr. C. S. Vaidyanathan, Sr. Adv. Mr. D. Abhinav Rao, AOR Mr. Vinayak Goel, Adv. Mr. Gunnalan, Adv. Mr. Nitish Raj, Adv. Mr. Rahul Jajoo, Adv. Mr. Devadipta Das, Adv. Ms. Prerna Robin, Adv.
Table of Contents
2. Whether SEZ developers are ipso facto deemed licensees and whether capital adequacy requirements under the 2005 Rules and 2013 Regulations apply to deemed distribution licensees. (Para 3 , 4 , 5 , 6 )
3. Deemed licensees are exempt from regulations 4 to 11; regulation 12 applies only to regular applicants; reading up subordinate legislation to impose conditions not in primary act is impermissible. (Para 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 )
4. Deemed distribution licensees are not required to satisfy capital adequacy requirements prescribed for regular license applicants as they are statutorily exempt from the applicable procedural regulations. (Para 34 , 35 )
5. Appeal partly allowed — Status of deemed distribution licensee upheld — Condition for additional capital infusion set aside. (Para 37 , 38 )
6. Does an SEZ developer automatically become a deemed distribution licensee without any application?
No. While the 2010 Notification confers deemed licensee status, the developer must still make an application under Regulation 13 of the 2013 Regulations to be identified and recognized as a deemed distribution licensee. (Para 24 , 25 , 37 )
7. Are capital adequacy requirements under the 2005 Rules applicable to deemed distribution licensees?
No. Regulation 12, which mandates compliance with the 2005 Rules, applies only to regular applicants subject to Regulations 4 to 11. Since deemed licensees are specifically exempt from Regulations 4 to 11 under Regulation 13, they are also exempt from Regulation 12. (Para 28 , 29 , 34 , 35 )
8. What is the legal principle regarding reading up a statute or subordinate legislation?
Reading up involves interpreting a statute broadly to extend its scope beyond the express text. This is generally impermissible, especially for subordinate legislation, if it militates against the primary legislation or expands the law beyond legislative intent. (Para 30 , 31 , 32 , 33 )
THE CHALLENGE
1. This is a statutory appeal before us under section 125 of the Indian Electricity Act, 2003,1[Electricity Act]. It registers a challenge to the judgment and order dated 27th September, 2019 passed by the Appellate Tribunal for Electricity,2[APTEL] dismissing an appeal carried under section 111 of the Electricity Act by the appellant from the judgment and order dated 15th February, 2016 passed by the Telangana State Electricity Regulatory Commission,3[TSERC]. Consequently, the impugned judgment and order of the TSERC was upheld.
BRIEF FACTS
2. The basic facts giving rise to this appeal are not disputed. A brief overview of the facts and the trajectory of proceedings, relevant for a decision on the present appeal, are set out hereunder :
(a) The appellant was notified by the Ministry of Commerce & Industry (Department of Commerce), Government of India,4[MoCI] as a ‘Developer’, in terms of sections 3 and 4 of the Special Economic Zones Act, 2005,5[SEZ Act], to establish a sector-specific Special Economic Zone,6[SEZ] unit for Information Technology/Information Technology Enabled Services sector in Madhapur, Ranga Reddy District, Hyderabad, in the former State of Andhra Pradesh.
(b) MoCI, vide a Notification bearing No.SO 528(E) dated 3rd March, 2010,7[2010 Notification] introduced a proviso to section 14(b) of the Electricity Act. The proviso accords upon the developer of a SEZ, the status of a deemed distribution licensee under the provisions of the Electricity Act.
(c) Pursuant to the 2010 Notification, the appellant filed an application,8[O.P. No. 10 of 2015] before the erstwhile Andhra Pradesh Electricity Regulatory Commission seeking identification as a deemed distribution licensee, in terms of the proviso to section 14(b) of the Electricity Act read with regulation 13 and Schedule-2 of the Andhra Pradesh Electricity Regulatory Commission (Distribution Licence) Regulations, 2013,9[2013 Regulations] and section 49 of the SEZ Act. Upon the Andhra Pradesh Reorganisation Act, 2014 coming into force, the application was transferred to the TSERC.
(d) By its aforesaid judgment and order dated 15th February, 2016, the TSERC identified and accorded the status of a deemed licensee to the appellant. However, this grant of status was made conditional upon the appellant satisfying the requirements stipulated in rule 3 of the Distribution of Electricity Licence (Additional Requirements of Capital Adequacy, Credit-worthiness and Code of Conduct) Rules, 2005,10[2005 Rules], compliance whereof was mandatory per regulation 12 [which stipulates that an applicant for grant of distribution licence shall, in addition to regulations 4 to 11, comply with the 2005 Rules] read with regulation 49 of the 2013 Regulations [which stipulates that all the general conditions applicable to a distribution licensee are also equally applicable to a deemed licensee]. The appellant was, therefore, directed to infuse an additional capital of Rs. 26.90 crore as equity share capital, contributed by its promoters, into its power distribution business via account payee cheques by 31st March, 2016. The relevant part of the judgment and order of the TSERC is extracted hereunder:
“16. […] On a close reading of the provisions of section 14, we are of the view that the 'provisos' to section 14 are not applicable to a deemed licensee. The status of a deemed licence to a person under Section 14(b) of the Electricity Act, 2003 emanates from the Notification given under Section 49(1) of the SEZ Act to a developer of SEZ provided the deemed Licensee satisfies the other provisions of the Act.
[…]
18. We are of the view that the provisions contained in sub-section (2), (3), (4), (5) & (6) of Section 15 of the Act are not applicable to a deemed licensee. Moreover, [A.P. Distribution Licence Regulations] contains the Rules relating to procedure for granting of a distribution licensee from Rules 4 to 11 […] The Rule 13 of the Regulation stipulates that Rules contained in 4 to 1
