Supreme Court Judgments
Tata Power Company
Limited Vs. Reliance Energy Limited & Ors  INSC 1060 (8 July 2008)
ASHOK BHAN &
CIVIL APPEAL NO.2898
OF 2006 With CIVIL APPEAL NOs.3466 and 3467 of 2006 Altamas Kabir,J.
starting point of both parties is the provisions of Clause 5 (I),(I) and (III)
of TPC's licenses, which are quoted at para 8 of this order. The contesting
arguments regarding the interpretation and implications of this Clause have
been set out at length above. After considering the arguments put forward and
the provisions of the licenses and statutes, the Commission has come to the
conclusion that the license to supply energy "for all purposes including
supply to other licensees for their own purposes and in bulk", read with
the succeeding terms of Clause 5 and other provisions, may give TPC an
unfettered right to supply energy directly to all or any consumers in the BSES
area of supply but no obligation to supply power, but it militates, in
particular, against the provisions of Sec. 22(2)(e) of the Commission's power
of regulating and promoting the working of licensees in an efficient,
economical and equitable manner and, in general, against the provisions of Sec.
22(1)(d) enjoining the Commission to promote competition, efficiency and economy
in the activities of the electricity industry."
"Apart from the
claimed entitlement under their licenses as interpreted by them, TPC have urged
that this entitlement and their consequent actions are also supported by the
mandate given to the Commission under the ERC Act. Indeed, Sec.22(1)(d) enjoins
the Commission to promote competition, efficiency and economy in the activities
of the electricity industry to achieve the objects and purposes of the Act. The
Electricity Act,2003, which has replaced the ERC Act after hearings in this
case were concluded, also specifically refers to the promotion of competition
in its Preamble."
TPC and BSES should file the terms of reference for engaging a consultancy firm
to study the issues relating to Sections 42 and 14 of the Electricity Act,
a consultancy firm/s (if need be, international level firms may be considered
for selection, severally or jointly with Indian firms) for the purpose;
cost of the study should be equally shared by both parties;
study report should be widely disseminated among stakeholders in the city;
of the report would be decided after a public hearing; and Implementation of
the report would be undertaken as per the Commission's Regulations."
The order and
findings recorded by MERC in that regard were set aside. It was also held that
Tata Power could undertake only bulk supplies to licensees such as REL under
the licenses held by it.
And provided that no
supply by the licensees under the powers contained in sub-section (b) shall be
open to question as between the licensees and the Bombay Electric Supply and
Tramways Company Limited, if the licensees shall have given previous notice in
writing to the Bombay Electric Supply and Tramways Company Limited of their
intention to make such supply and the Bombay Electric Supply and Tramways Company
Limited shall not for thirty days after delivery of such notice at their office
in Bombay have objected in writing, and provided that the Bombay Electric
Supply and Tramways Company Limited, shall not be entitled to take any
objection except upon the ground that the consumer intended to be supplied does
not fall within the scope or does not fulfil the conditions of sub-section(b).
The energy supplied
under this license to any consumer for power may be used by such consumer for
lighting his premises, provided that the energy used by such consumer for such
lighting purposes shall not in any year exeed twenty per cent of the total
amount of energy supplied to such consumer and save as aforesaid, the licensees
shall not supply energy for lighting purposes except by agreement with the
Bombay Electric Supply and Tramsways Company, Limited.
In the event of any
dispute arising between the licensees and the Bombay Electric Supply and
Tramways Company, Limited, by reason of any objection by the latter to any
supply by the licensees under sub-section (1)(b) of this clause, or in regard
to the interpretation of the terms of this clause, such dispute shall be
referred to an Arbitrator appointed by the Local Government, whose decision
shall be final."
Mr. Chagla submitted
that though TPC did not start generating power till 1915, it purchased
electricity from BEST to sell and distribute the same to Pearl Mills Limited
and Simplex Mills Limited during 1914 and 1915. In 1915 Tata Hydro started
generating electricity and between 1917 and 1930, it began to supply
electricity directly to a number of consumers within the city of Bombay and to
Swadeshi Mills Ltd. and Coorla Mills Ltd. in the suburbs and also to B.B.&
C.I. Railway (now known as Western Railway).
Power's area of supply was extended beyond the island city of Bombay to the
suburbs and included areas which from 1926 would also form part of R.E.L's area
1. "The area
contained within the limits of the City of Bombay, as defined by section 3(10)
of the Bombay General Clauses Act, 1904.
2. The whole of that
portion of the island of Salsette, as is bounded on the South by the Town and
island of Bombay, and on the North by the Bassein and Thane Creeks
3. The area contained
within a circle of eight miles radius round the Tata Power Company's
Sub-station near Kalyan.
4. The area contained
within the Municipal limits of Matheran in the Kolaba District.
5. The area contained
within the limits of the Municipal Borough of Lonavla in the Poona District.
6. The area contained
within the Municipal limits of Panvel in the Kolaba District.
7. The area contained
within a circle of ten miles radius round the head-quarters of the Collector of
Poona in the Poona City.
Provided however that
in the case of area of supply mentioned in items (2), (3) and (7) above the
licensees shall not, except with the written consent of Government, given after
consulting the other licensees, be entitled to supply energy to any consumer
other than such licensees within their respective areas of supply."
Power has not been granted licence to undertake retail distribution of
electricity in the area within which REL has been distributing power in retail
to customers directly.
Power has licences only to undertake bulk supply to licensees like REL.
Power was not undertaking retail distribution of power but only undertaking
distribution of power in bulk to licensees prior to the differences that arose
between REL and Tata Power."
Mr. Chagla submitted
that such direction of MERC was based on the supposition that Tata Power could
supply electricity directly only to consumers whose demand was above 1000 KVA
(maximum demand) but was contrary to its own finding in its judgment that under
the licences granted to it, Tata Power was entitled to supply electricity to
all consumers directly.
means any person who is supplied with energy by a licensee or the Government or
by any other person not only in the absence of supplying energy to the public
under this Act or any other law for the time being in force and includes any
person whose premises are for the time being connected for the purpose of
receiving energy with the works of a licensee, the Government or such other
person as the case may be."
that any person who was being supplied with energy would, therefore, be
recognized as a consumer for the purposes of the Act.
Mr. Savla submitted
that since the appellant would be one of the parties who would be affected by
the outcome of these proceedings it had been permitted to file the aforesaid
two appeals by order dated 7.8.2006.
Central Commission shall advise the Central Government on all or any of the
following matters, namely:-
of competition, efficiency and economy in activities of the electricity
He then referred to
Section 2(j) which defines "general supply" to mean the general
supply of energy to ordinary consumers and includes in the absence of a special
agreement to the contrary with the Government or with a local authority, the
general supply of electricity for public lamps but does not include the supply
of energy to particular consumers under special agreement.
Reference was then
made to Section 2(o) which defines 'service line' to mean any electric supply
line through which energy may be supplied, or is intended to be supplied, by a
licensee to a consumer either from a main or directly from the licensee's
premises. Having regard to the aforesaid definitions, Mr. Venugopal submitted
that the 1903 Act contemplated 3 types of supply, i.e. (i) General supply to
ordinary consumers, (ii) supply to public lamps; and (iii) supply to consumers
under special agreement. Referring to Section 4 (1)(d),(e) and (f) of the 1903
Act Mr.Venugopal submitted that a licence issued under the said Act could
prescribe such terms and conditions as to the limits within which and the
conditions under which the supply of energy was to be compulsory or permissive
and as to the limits of the price to be charged in respect of the supply of
energy and that a grant of a licence under the said enactment for any purpose
would not in any way hinder or restrict the grant of another licence to another
person within the same area of supply for a like purpose. However, as far as
TPC is concerned, restrictions had been imposed on its power of general supply
to consumers, which supply could only be effected under a special agreement
after due sanction from the Government.
It brought such
agreements within the purview of the licences granted to TPC.
It was urged that
such a bar prevented Tata Power from supplying energy directly to consumers
whose capacity of consumption was less than 1000 KVA (maximum demand) and such
bar continued till the year 1964. In this regard, Mr. Venugopal referred to the
amendment effected by the Government of Maharashtra to the 1921 licence held by
Tata Power wherein in amended clause 5 it was provided that although Tata Power
could supply energy under the licence for all purposes, including supply to
other agencies for their own purposes, and in bulk, it would not be under any
obligation to supply energy in bulk to other licensees such as REL, for the
purpose of enabling such other licensees to supply any consumer with power
where the demand exceeded 250 KVA, except for Thana Electric Supply Company
Limited for whom the maximum limit would be 300 KVA; for any consumer in the
area of supply of REL whose maximum demand would be 1000 KVA and 5000 KVA for a
customer of the Maharashtra State Electricity Board.
Mr. Venugopal urged
that Tata Power had not even set up such a distribution system and was not,
therefore, in a position to supply energy to any customer on demand as required
under Section 43 of the said Act. Tata Power, could not, therefore, be
described as a distributing licensee within the meaning of the aforesaid
definition. With regard to the definition of 'consumers' in Section 2(15), Mr.
Venugopal reiterated his earlier submission that only such person could be said
to be a consumer who was being supplied with electricity or was for the time
being connected for the said purpose with the works of a licensee, the
Government or any other person engaged in the supply of electricity to the
public. According to Mr. Venugopal in the absence of any distribution system
within REL's area of supply, TPC could not have any consumer within REL's area
Reference was also
made in this regard to the definition of 'service line' in Section 2(61) to
drive home his point.
domination. The appropriate Commission may issue such directions as it
considers appropriate to a licensee or a generating company if such licensee or
generating company enters into any agreement or abuses its dominant position or
enters into a combination which is likely to cause or causes an adverse effect
on competition in electricity industry."
had determined the tariffs in such a way that the Bulk Supply Tariffs (BST)
applicable to BSES and BEST are significantly lower than the tariffs applicable
to TPCs retail HTLT consumers. The Commission has admitted to rationalize the
bulk and retail tariff supply so that they are in consonance with the
principles that the BST should be lower than the retail tariffs. This will also
facilitate healthy competition between different licensees on a more even
dealing with the grievances projected by BSES, MERC lost sight of the reliefs
prayed for BSES which was based on the contention that according to the terms
and conditions of the licences granted to it Tata Power was not entitled to
supply energy in retail to domestic customers, at least not to consumers whose
demand was less than a maximum demand of 1000 KVA. Having once held on the
principal issue that Tata Power was entitled to supply electrical energy to all
consumers under the licences granted to it, MERC should have restrained itself
from unilaterally making out a third case regarding the establishment of a
level playing field when such a case had neither been made out nor any relief
in that regard had been prayed for by BSES.