TMI Blog2008 (7) TMI 1056X X X X Extracts X X X X X X X X Extracts X X X X ..... e policy of the Government of Maharashtra. b) That TPC be ordered to pay BSES or to the Government of Maharashtra all profits and gains made from January 1998 until TPC discontinued sale of energy to such consumers, i.e. situated in BSES's licensed area of supply and having energy requirement below 1000 KVA (maximum demand) and/or with lighting consumption exceeding 20 per cent of the total; c) That, pending the disposal of the petition TPC be restrained in terms of the prayer at (a) above and from offering new connections to any entities for sale, supply or distribution of electricity in BSES's licensed area of supply, with energy requirement below 1000 KVA (maximum demand) and/or with lighting consumption exceeding 20 per cent of the total. 3. From the materials on record it appears that the principal question which fell for the decision of MERC was whether TPC was entitled under the licences granted to it to effect distribution of electricity directly to customers within the area of supply indicated in the licences granted to BSES. 4. In order to appreciate the circumstances giving rise to the above dispute, it is necessary to set out some of the facts as als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by poaching consumers within the BSES' area of supply. It was contended before the Commission that supply of electricity by TPC directly to retail consumers was contrary to the provisions of the Indian Electricity Act, 1910 (hereinafter referred to as 'the 1910 Act'). The Electricity (Supply) Act, 1948 (hereinafter referred to as 'the 1948 Act'), and the policy contained in the Schedule to the 1948 Act. 9. It was also contended, without prejudice to the above submission, that TPC could not, in any event, effect any retail supply of electricity to consumers with a maximum demand below 1000 KVA, in terms of the licences held by them. It was submitted that such supply by TPC to direct retail consumers was also contrary to Government policy. 10. It was urged that, in view of the above, the Commission, in exercise of its powers under the ERC Act, should restrain TPC from supplying electricity to retail consumers within BSES' territory. 11. The aforesaid issue raised on behalf of BSES Limited was considered at length by MERC in relation to the terms and conditions of the licences held by Tata Power and Reliance Energy Limited and in para 81.2 of its judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , MERC ultimately disposed of the petition filed by BSES with the following directions: (i) 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, 2003. (ii) Select a consultancy firm/s (if need be, international level firms may be considered for selection, severally or jointly with Indian firms) for the purpose; (iii) The cost of the study should be equally shared by both parties; (iv) The study report should be widely disseminated among stakeholders in the city; (v) Adoption of the report would be decided after a public hearing; and Implementation of the report would be undertaken as per the Commission's Regulations. 15. While disposing of the petition MERC also restrained TPC from offering new connections to new consumers with energy requirement below 1000 KVA on the basis of an agreement purported to have been arrived at between TPC and BSES that they would maintain the status-quo till the disposal of the petition and would not encourage any existing consumer to switch over from one to the other. 16. Two appeals were preferred from the judgment and order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be granted in terms of Section 62(1) of the Electricity Act, 2003, it held that since the licences granted to Tata Power did not entitle it to effect retail distribution directly to consumers it was not necessary to restrain Tata Power from effecting such distribution. 22. Accordingly, the appeal preferred by Reliance Energy Limited was allowed and the appeal preferred by Tata Power Company Limited was dismissed. 23. The three appeals before us have been filed by Tata Power Company Limited and M/s MIDC Marol Industries Association, against the said judgment of the Appellate Tribunal. While Civil Appeal No. 2989 of 2006 has been filed by Tata Power Company Limited, Civil Appeals No. 3466 of 2006 and 3467 of 2006 have been filed by MIDC Marol Industries Association. Though the said appellant in Civil Appeal Nos. 3466 and 3467 of 2006 was not a party before the MERC, it had been allowed to intervene during the hearing of the petition filed by M/s BSES Limited which was subsequently taken over by Reliance Energy Limited. 24. Appearing for TPC, learned Senior Counsel, Mr. Iqbal Chagla, submitted that of all the distribution licences granted for supply of electricity within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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 exceed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich falls within BSES' area of supply; and ii. An area within a circle of 8 miles radius around Tata Power's sub-station at Kalyan. A proviso was, however, added whereby Tata Power was required to obtain the written consent of the Government to supply to any consumer other than licensees or permit holders and the Government was required to consult the existing licensees and permit holders before granting such consent. 29. The inclusion of the island of Salsette and an area within a circle of 8 miles in radius around Tata Power Sub-station at Kalyan necessitated a change of the First Annexures to the licenses held by Tata Power. Such change was effected on 26.2.1942 by the substitution of the First Annexure to the Tata Power Licences of 1907, 1919 and 1921 on 26.2.1942 to redefine the area of supply, namely - (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's area of supply, within which 14 had a sanctioned maximum demand of less than 1000 KVA. 35. Mr. Chagla urged that in September 1998 TPC submitted a proposed tariff for domestic consumers to be effective from December 1998 which was opposed by REL. He also urged that prior to the submission of such tariff for domestic consumers REL had never objected to the distribution of electricity directly to consumers by TPC in the area of supply contained in the licences granted to TPC. It was only after TPC submitted the tariff for domestic consumers that the predecessor-in-interest of REL, M/s BSES Ltd., filed the petition before MERC under Section 22(2)(e) and (n) of the ERC Act 1998 on 23.7.2002 and the same was registered as Case No. 14 of 2002. Mr. Chagla submitted that in its said petition BSES Ltd. prayed for the following reliefs: (a) That Tata Power be restrained from in any manner selling, supplying and distributing electricity to consumers situated within the area of supply of BSES in contravention of the terms and conditions of their licences and the policy of the Government of Maharashtra; b) That Tata Power be ordered to pay to BSES or to the Government of Maharas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Power could not supply energy directly to any consumer apart from those to whom they were supplying energy in accordance with their licenced entitlement prior to the amendments of 1964, subject to a minimum demand stipulation. It was further observed that Clause 5 and the other licence terms do not envisage that Tata Power could supply energy only to a distributing licensee for onward supply to direct consumers. 39. Mr. Chagla pointed out that although BSES had denied such submission it had itself put forth a possible alternative, namely, that in addition to supply to the distributing licensees Tata Power is also entitled to effect such supply directly to parties in the area of supply common to BSES whose maximum demand exceeds 1000 KVA and whose consumption for light is less than 20% of their total consumption. 40. Mr. Chagla submitted that MERC also recorded the fact that BSES has not only a right but an obligation to supply energy to a large number and category of consumers on demand. On the other hand, Tata Power has an obligation to supply energy to BSES to enable them to serve certain categories of consumers, but its claim that it also has the unfettered right, but no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed order for a period of eight weeks and upon Tata Power representing that it would maintain status quo with regard to the retail supply to consumers and would not supply in retail to any further consumers, no interim order of stay was passed, but both the statements made on behalf of the respective parties were recorded by the Appellate Tribunal by a separate order. 44. Mr. Chagla submitted that thereafter these three appeals have been filed before this Court, including the two filed by MIDC, Marol Industries Association, being Civil Appeal Nos. 3466 and 3467 of 2006. 45. Mr. Chagla submitted that while holding in favour of TPC that the terms of its licences did not expressly bar TPC from supplying electricity directly to consumers, MERC, erroneously decided to introduce the concept of a level playing field purportedly for introducing competition in the electricity trade. Mr. Chagla submitted that MERC had also erroneously held that apart from its obligation to supply energy to BSES, Tata Power had also the unfettered right, but no obligation, to provide power to consumers to whom BSES had an obligation to supply but that the same militated against the requirement of a level ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept by agreement with the Bombay Electric Supply and Tramways Company Limited. 48. Mr. Chagla referred to a resolution adopted by the Industries and Labour Department of the Government of Maharashtra on 4.6.1962 in exercise of the powers conferred by Section 21(2) of the 1910 Act sanctioning the form of agreement with High Tension consumers. As an example, Mr. Chagla referred to an agreement entered into by Tata Power with Model Woollen Mills on 1.4.1965 agreeing to supply 780 KVA (maximum demand) for operation of its factory. From the said agreement, Mr. Chagla pointed out that in the said case the maximum demand was below 1000 KVA and the Appellate Tribunal had erred on the materials before it in holding in para 50(C) of its judgment that TPC was not supplying electricity/power to the consumers having a maximum demand of less than 1000 KVA. 49. In this regard, Mr. Chagla referred to the definition of the expression 'consumer' as indicated in Section 2(c) of the 1910 Act and provides as follows: 2(c) 'Consumer' 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chagla urged that on account of such directions given by MERC, which were de hors the reliefs prayed for by BSES in its petition under Section 22(2)(e) and (n) of the ERC Act, that TPC had to prefer an appeal before the Electricity Appellate Tribunal, which came to the perverse finding referred to above which necessitated the filing of the appeal by T.P.C. 52. Mr. Chagla submitted that the error in the reasoning of the High Court was required to be corrected so that TPC could continue to supply its current and future consumers in accordance with the provisions of the 2003 Act. 53. Appearing on behalf of the MIDC, Marol Industries Association, the appellant in Civil Appeal Nos. 3466 and 3467 of 2006, Mr. J. Savla, learned advocate, submitted that although the appellant had not been made a party before the Tribunal, it was permitted to intervene in the proceedings by MERC through the Bombay Small Scale Industries Association which was the parent body. 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. 54. While suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 57. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In other words, according to Mr. Venugopal, only a person whose premises were connected for the purpose of receiving energy could be said to be a consumer and not any person who was yet to receive such supply. He then referred to the definition of Public lamp in Section 2(k) meaning an electric lamp used for the lighting of any street. Mr. Venugopal reiterated that in terms of Clause XV of the 1919 licence granted to Tata Power, the requirement of Clauses IV, V, VI of Schedule II of the 1910 Act for supply to public lamps had been omitted, which indicated that Tata Power could supply energy only in bulk and not directly to consumers whose maximum demand was less than 1000 KVA. Mr. Venugopal also submitted that Sub-clause (2) of Clause 5 of the 1919 Licence and those granted thereafter would be rendered tautologous if an attempt was made to read the same in a manner independent of Sub-clause (1), since, if Tata Power was allowed to supply for general purposes no restrictions would have been placed on the supply of power to factories. Mr. Venugopal would have us believe that notwithstanding the provisions of Sub-clause(1) of Clause (5), Sub-clause (2) would have to be read indepen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 61. Mr. Venugopal also referred to the Order passed by the Industries Energy and Labour Department of the Government of Maharashtra on 7.12.1978 making further alterations in the 1907 Licence held by Tata Power whereby from 1.7.1980 Tata Power would transfer to the Maharashtra State Electricity Board its distribution rights and assets pertaining thereto as set out in Part II of the said annexure to the said licence. By virtue of such arrangement Clause 6 relating to the 'purpose of supply' was amended to bring it in parity with the amendment to the First Annexure to the 1921 Licence. Reference was also made to the commencement of discussion with the Maharashtra State Electricity Board for delimitation of the area of supply and distribution. In other words, under the licence in respect of the licensees' area of supply covered by the licence granted in favour of BSES the guiding principle would be that T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constraints as may be specified, within one year of the appointed date fixed by it, and in specifying the extent of open access in successive phases and in determining the charges for wheeling having due regard to all the relevant factors. 64. Mr. Venugopal submitted that by amendment of the proviso on 15.6.2007 it was provided that such open access was to be allowed on payment of a surcharge in addition to the charges for wheeling as might be determined by the State Commission. 65. Referring to the Maharashtra Electricity Regulatory Commission (Distribution, open access), Regulation, 2005, Mr. Venugopal referred to Regulation 3 indicating the right of a consumer of a distribution licensee to seek open access to the distribution system of such distribution licensee for obtaining supply of electricity from a generating company or from a licensee other than such distribution licensee. Mr. Venugopal then referred to the various restrictions relating to the contract demand of the consumer which made it quite clear that the distribution licensee could not of its own accord supply electricity to any consumer, without conforming to the eligibility conditions. Mr. Venugopal submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 footing. 69. Mr.Chagla submitted that the aforesaid order of the Commission put at rest the bogey of a level playing field raised by MERC, which otherwise had completely supported the appellant's case on interpretation of the licences held by it. 70. Mr. Chagla also submitted that the chart submitted on behalf of TPC would clearly show that the Appellate Tribunal had committed an error in coming to a finding that TPC was not engaged in making retail supply directly to consumers, on which basis it had dismissed the appeals filed by TPC. 71. In the opening paragraphs of this judgment we have indicated that the principal question which fell for the decision of MERC was whether Tata Power was entitled under the licences granted to it to effect distribution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal for Electricity misinterpreted the provisions of the licences granted to TPC for supply and distribution of electrical energy. The arguments advanced on behalf of REL before the learned Tribunal, which were also advanced before us by Mr. Venugopal, found favour with the Tribunal which arrived at the conclusion that the terms and conditions of the licences granted to TPC did not entitle it to supply electrical energy directly to consumers whose demand was below 1000 KVA (maximum). In reaching such conclusion the Tribunal not only ignored the situation prior to 1926 when BSES was granted its licence, but also the subsequent amendments to the licences held by TPC whereby Clause 5 of the 1919 and 1921 licences were altered to permit Tata Power to supply electrical energy for lighting and general purposes, other than power and including the supply of energy in bulk to other licensees for distribution by them. The Appellate Tribunal also overlooked the order passed by the Industries Energy and Labour Department of the Government of Maharashtra on 7.12.1978, whereby from 1.7.1980 Tata Power was required to transfer to the Maharashtra State Electricity Board its distribution righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arts - (i) for power and (ii) for lighting and general purposes, other than power. Simply stated, Sub-clause (I) deals with supply to licensees for their own purposes and in bulk. The restriction indicated by Mr. Venugopal is in respect of such bulk supply where the consumer required less than 5,00,000 units per annum which was also stipulated to be the bona fide average computed annual consumption of a Factory or Railway. On the other hand, Sub-clause (II) provides for supply of electricity for lighting and general purposes, other than power, including the supply of energy in bulk to other licensees for distribution by them. Sub-clause (II) is followed by an Explanation to both Sub-clause (I) and Sub-clause (II) of Clause 5. It has been clarified that the energy supply to any consumer for power, that is under Sub-clause (I), could be used by such consumer for lighting his premises to a maximum amount of 20% of the total energy supplied to such consumer, and it has also been stipulated that Tata Power would not supply energy for lighting purposes referred to in Sub-clause (II) except by agreement with Bombay Electric Supply and Tramways Company Limited. 75. Regarding Mr. Venugop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a finding that under its licences Tata Power was entitled to supply energy only in bulk and not for general purposes and in retail to all consumers, irrespective of their demand, except for those consumers indicated in Sub-clause (I) of Clause 5 of the several licenses held by Tata Power. 78. Having earlier held that MERC had overstepped its jurisdiction in making out a third case which had not been made out by BSES and had on the basis thereof issued orders which had not even been prayed for by BSES, we quash the orders passed both by MERC and the Appellate Tribunal for Electricity and allow all these three appeals upon holding that under the terms and conditions of the licences held by it, Tata Power Company Ltd. is entitled to effect supply of electrical energy in retail directly to consumers, whose maximum demand is less than 1000 KVA, apart from its entitlement to supply energy to other licensees for their own purposes and in bulk, within its area of supply as stipulated in its licences and also subject to the constraints indicated in relation to Sub- Clause (I) of Clause 5 in relation to factories and the Railways. 79. The parties shall bear their own costs. - - T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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