The regulation defining the threshold for captive generating plants was upheld as intra vires; notifications issued without adherence to natural justice were annulled.

1. The main question involved in these writ petitions relates to the validity of R.3(1)(a)(ii) of the Electricity Rules, 2005 (the Rules).

2. THE FACTS
Monnet Ispat and Energy Limited (the petitioner) is a public company registered under the Companies Act. It entered into Memorandum Of Understanding (the MOU) with the State of Chhattisgarh on 21.05.2001, by which it was supposed to set up units to manufacture sponge iron, steel structural rolling mill, and ferro alloys at Raigarh (the Raigarh - unit) and Raipur (the Raipur - unit) districts. Subsequently, another MOU was entered on 04.05.2007, by which the petitioner was required to further invest in the units.

3. By the MOUs, the petitioner was also permitted to establish Captive Generating Plants (CGPs) at both places, referred to as the Raipur - CGP and the Raigarh - CGP.

4. The petitioner had planned to set the CGPs along with the units. The CGPs were installed but due to recession, the units could not be installed to their full capacity. The result was they could not utilise the electricity generated by the CGPs to extent it was supposed to do.

5. In order to use the electricity generated by the CGPs, the petitioner entered into power purchase agreements with the distribution companies and purchasers in and out of the State of Chhattisgarh. In this regard, the petitioner took approval and thereafter received money on the tariffs approved by the Chhattisgarh State Electricity Regulatory Commission (the Commission) and also paid open access charges as determined by it.

6. The Commission issued a show - cause notice dated 10.08.2009 to the petitioner alleging that the Raipur - CGP had not used 51% of the electricity generated by it and as such, there was violation of S.10(2) and S.42(2) of the Electricity Act 2003 (the Act). By the notice, an explanation was asked to show - cause as to why action may not be taken under S.142 of the Act.

7. The petitioner has filed Writ Petition (C) No.3140 of 2011 (the first WP) challenging the validity of R.3(1)(a)(ii) of the Rules, the validity of regulation 11(6)(b)(ii) of the Chhattisgarh State Electricity Regulatory Commission (Intra - State Open Access in Chhattisgarh) Regulations, 2005 (the 2005 - Regulations), and the show - cause notice dated 10.08.2009 issued to the Raipur - unit.

8. Subsequently, the Commission sent a letter dated 10.06.2011 to the Chhattisgarh State Power Distribution Company Limited (the Distribution - Company) mentioning therein that the petitioner had not utilised the prescribed norm of 51% of the electricity generated by its Raipur - CGP and the needful may be done. The names of some other similarly situate companies were also included in this letter.

9. In pursuance of the letter dated 10.06.2011, the Distribution - Company issued a bill dated 13.07.2011 demanding a sum of Rs.9,06,27,250/- as cross - subsidy charges from the Raipur - unit of the petitioner and the draft notice dated 02.08.2011 was also sent requiring the petitioner to pay the amount, otherwise, there would be disconnection of supply of electricity.

10. The petitioner has filed Writ Petition (C) No.4481 of 2011 (the second WP) challenging the validity of R.3(1)(a)(ii) of the Rules, regulation 33(6)(b)(ii) of Chhattisgarh State Electricity Regulatory Commission (Connectivity and Intra - State Open Access) Regulations, 2011 (the 2011 - Regulations), the letter dated 10.06.2011 sent by the Commission, the bill dated 13.07.2011 and the draft notice dated 02.08.2011 issued by the Distribution - Company.

11. POINTS FOR DETERMINATION
We have heard counsel for the parties. The following points arise for determination:
(i) Whether R.3(1)(a)(ii) of the Rules is ultra vires;
(ii