2009 Supreme(SC) 977

Supreme Court of India
THE HONOURABLE MR. JUSTICE S.B. SINHA & THE HONOURABLE DR. JUSTICE MUKUNDAKAM SHARMA
Tata Power Company Ltd. & Another
Versus
Reliance Energy Limited & Others
CIVIL APPEAL NOS. 3510 - 3511 OF 2008 WITH 4269 OF 2008, 3593 OF 2008, 6098 OF 2008 AND 6099 OF 2008
Decided on : 06-05-2009

IMPORTANT POINTS
Activities of a generating company are beyond the purview of the licensing provisions.
Generating companies have the freedom to enter into contract and in particular long term contracts with a distribution company subject to the regulatory provisions contained in the 2003 Act.
PPA for a long term is essential.
For true and correct construction of the Act, the principle of harmonious construction is required to be resorted to.
The generating company indirectly comes within the purview 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 Commission will bring within its umbrage the generating company also for the purpose of issuing separate direction.

Headnote:(a) Administration of justice – Judicial propriety – Decision based on incorrect factual premises – Tribunal failed to notice absence of long term PPA between TPC (G) and RInfra – Erroneously opining that the Commission had not considered the claim of RInfra while approving the arrangements between TPC (G) and TPC (D) – Further, holding Commission’s decision in violation of the principle of natural justice without any basis – Furthermore taking into consideration an irrelevant fact of burden of consumers in respect of ‘depreciation and interest on loan elements of the Fixed Cost of tariff’ – Finally, dismissing appeals No. 159 of 2007 and 14 of 2008 without assigning any reason – Not proper. (Para 88)

       (b) Interpretation of statute – Legislative intent – Mischief rule – While construing a statute regard must be had to the Parliamentary intent for which help of legislative history may be taken – Also, mischief sought to be remedied by the legislation and the objects and purpose it seeks to achieve are important considerations. (Para 89)

       (c) Electricity Act, 2003 – Section 7, 62(1)(a) and 42(2) – Generating company free to chose site and investment – Also free to chose counter-party buyer – Also enjoys freedom from tariff regulation when supplying directly to a trader or the consumer – De-licensing of the generation is the prime object of the Act. (Para 106, 107)

       (d) Electricity Act, 2003 – Section 11(1), 2, 7, 23 – Word ‘supply’ separately used even for generation and distribution – In the context, supply should be read as equitable supply – Central Government empowered by section 11 to issue directions, albeit in specified circumstances – Word supply used in section 23 for bringing in efficient supply – Would only mean regulate and consequentially licensing in respect of the generating company – Commission, while approving a PPA, would keep public interest in mind. (Para 109, 110)

       (e) Interpretation of statute – Chapter headings and marginal notes – Also part of the statute, being enacted by the legislature – May be used in interpreting a provision – However, its use limited because of its necessarily brief and inaccurate nature – further, can be of no use if inconsistent with content of the provision. (Para 113, 119)

       AIR 1975 SC 1967; (1977) 4 SCC 98; (1979) 4 SCC 776; (2006) 3 SCC 434; 2007 (1) SCALE 32; (2008) 2 SCC 417 – Relied upon

       (1962) All ER 142 – Referred

       (f) Electricity Act, 2003 – Section 2(70) and 23 – Supply – Definition clause section 2 qualified with ‘unless there is anything repugnant to the subject or context’ – All terms will have be read subject to this qualification – Read contextually ‘supply’ means differently in different sections – In section 23 it refers to consumers only and not to licensees – In section 86(1)(a) it refers to both consumers and licensees – In section 10(2) it is used in two senses – In first part of section 10(2) supply refers to licensee only and in second part it refers to consumers only – Yet in section 62(2) it refers to trader. (Para 127, 128)

       (1998) 8 SCC 1; (2008) 6 SCC 732; (2008) 1 SCC 414 – Relied upon

       (g) Interpretation of statute – Doctrine of harmonious construction – Interpretation of Section and ascertaining its purpose – Must be premised on the scheme of the statute – Entire Act should be read as a whole and then chapter by chapter, section by section and word by word – Considering chapter heading as also marginal note are relevant. (Para 129, 130)

       (1987) 1 SCC 424; (1992) 2 SCC 343; (2004) 3 SCC 297 – Relied upon

       (h) Interpretation of statute – Purposive construction – Aim and object of the legislation, the mischief it seeks to obviate, inadequacy it seeks to supply, change of policy it seeks to effect and plan of the government it seeks to formulate – Is evidenced in the language of the statute – Can be read in the light of other external manifestations of purpose. (Para 131)

       (2008) 7 SCC 502; 2008 (11) SCALE 73 – Relied upon

       (i) Electricity Act, 2003 – Section 23, 11, 60 – Chapter IV containing section 23 deals with particular kind of licensee – Almost all sections preceding section 23 as also section 24 refer to licensees only – None of them refer to generating companies – Regulation of generating companies is required in extraordinary situations only and are provided in sections 11 and 60 – Transmission of power as also trading in power per se not within purview of section 23 – Power of Commission to give directions being confined to section 23, it cannot issue directions to transmission, generating and trading companies. (Para 134, 135, 136, 138, 139)

       (j) Electricity Act, 2003 – Section 86(1)(a) r/w section 23 and 42 and Regulation 24, MERC (Terms and Conditions of Tariff) Regulations, 2005 – Power Purchase Agreement (PPA) between generating and distribution company – Required to be approved by Commission as per procedure laid down in Regulation 24 – Under power to approve PPA Commission regulates purchase of electricity and procurement process of distribution – However, while doing so, it is not permissible for the Commission to direct allocation of electricity to different licensees keeping in view their own need. (Para 141)

       (k) Electricity Act, 2003 – Section 86 – power of Commission – Section 86(1)(b) provides to regulate electricity purchase and 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 – Commission can also adjudicate upon disputes between the licensees and generating companies in regard to the implementation, application or interpretation of the provisions of the said agreement. (Para 143)

       (l) Electricity Act, 2003 – Section 86(1)(b) r/w Regulation 23 and 24, MERC (Terms and Conditions of Tariff) Regulations, 2005 – PPA – Directly linked with the procurement process of distribution licensee – PPA may be short term or long term – Distribution licensees required to prepare five years plan under Reg. 23.1 after prior approval of Commission under Reg. 24.1 – Commission approving PPA by and between TPC (G) on the one hand and BEST and TPC (D), on the other hand – Therefore TPC (G) proposing RInfra to enter with it a long term agreement assumes significance. (Para 149, 150, 151)

       2009 (3) SCALE 620; (1948) 76 CLR; 2007 (2) SCALE 486 – Referred

       Facts of the case:

       Appellants, the Tata Power Company Ltd. (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. (RInfra) is a generating as well as a distributing company within the meaning and provisions of the 2003 Act.

       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 sq. Km in area.

       TPC has been generating and supplying electricity to distribution licensees like RInfra and BEST for over a century.

       Since 1907 consumers of electricity in Mumbai were served by distribution lisensee, BEST (for the island city of Mumbai) and since 1926 onwards by RInfra (for suburban Mumbai).

       Although no agreement in writing had ever been entered into by and between TPC and RInfra, RInfra had been drawing power from TPC as per requirement.

       In or about 1995, RInfra commissioned its 500MW generating plant at Dahanu, pursuant whereto the quantum of power purchased by it from TPC was reduced by about 54%. Even then RInfra had been buying nearly 42% of the energy generated by TPC. It had continued to purchase its remaining requirements of power from TPC.

       MERC, on an application, filed by RInfra for direction to TPC to provide additional outlets, agreed to the position that distribution licensees, such as RInfra, 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 with TPC.

       In January 2006, BEST executed a PPA with TPC for purchase of 800 MW of power for a period of 10 years. The said PPA was submitted for approval of MERC.

       In July 2006 a Minutes of the Meeting (MoM) was signed between TPC (G) and TPC (D) for allocation of power to TPC (D) wherein TPC (D) indicated requirement of 500 MW power from TPC (G). A minor modification in the MoM was directed by MERC, pursuant whereto TPC (D) entered into a PPA with TPC (G) for 477 MW power which was submitted for approval of MERC.

       On 2nd April, 2007 MERC passed generation tariff order for TPC (G) for the period 2006-2007. Commission, 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.

       BEST preferred an appeal before the Electricity Appellate. 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.

       The Appellate Tribunal in Appeal No.51 of 2007 filed by TPC directed MERC to decide BESTs and TPCs petitions for approval of PPA and recorded the undertaking of all parties that they would not claim equities on the basis of order of MERC dated 2nd April, 2007.

       RInfra 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 RInfra on the said basis.

       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 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.

       RInfra preferred an appeal thereagainst.

       Appellate Tribunal thereafter passed the impugned judgment on 7th April, 2008 in Appeal No.51 of 2007 filed by TPC against the tariff order dated 2nd April, 2007 on the submission of appellant-TPC that it was not pressing for the adjustment of any amount that may be payable by RInfra to TPC for the period 2007-2008 in terms of the interim order of the Appelalte Tribunal dated 17th May, 2007.

       RInfra 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.

       The Appellate Tribunal did not disturb the findings of the Commission in regard to its interpretation of Section 60 as also Section 23 of the 2003 Act.

       It, however, held that having regard to the purpose and object of the Act, the Commission should have taken into consideration the need of the first respondent in regard to the allocation of quantity of supply Upon considering the provisions of the Act and the Regulations.

       The Tribunal set aside the approval of PPAs and remanded the matter to MERC for its reconsideration.

       The Tribunal, furthermore, did not interfere with the tariff order dated 2nd April,2007 while disposing of Appeal No. 41 of 2007 filed by BEST, opining that the period for which allocation was made on the basis of consistent peak demand had already expired.

       Finding of the Court:

       The impugned judgment of the Tribunal cannot be sustained.

       Result:

       Appeals allowed with cost.