TMI Blog2015 (5) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... try herein which will in any case pass on the extra burden, if any, will be as part of the cost of its products and therefore, the same does not burden the Appellants - The provision of RE surcharge in the Statute is only meant for ensuring compliance with the requirement of consumption of the specified quantum of energy from renewable sources and the same is to be used in case of shortfall in compliance of RE obligation. The said provision does not amount to imposition of a pecuniary liability. Article 51A(g) of the Constitution of India cast a fundamental duty on the citizen to protect and improve the natural environment. Considering the global warming, mandate of Articles 21 and 51A(g) of the Constitution, provisions for the Act of 2003, the National Electricity Policy of 2005 and the Tariff Policy of 2006 is in the larger public interest, Regulations have been framed by RERC imposing obligation upon captive power plants and open access consumers to purchase electricity from renewable sources. The RE obligation imposed upon captive power plants and open consumers through impugned Regulation cannot in any manner be said to be restrictive or violative of the fundamental rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act of 2003, vide Notifications dated 23.3.2007 and 23.12.2010, framed RERC (Renewable Energy Obligation) Regulations, 2007 (for brevity the Regulations of 2007 ) and RERC (Renewable Energy Certificate and Renewable Purchase Obligation Compliance Framework) Regulations, 2010 (for brevity the Regulations of 2010 ), respectively. The impugned Regulations imposed Renewable Energy obligation (RE obligation) on the Captive Gencos and other obligated entities including the Appellants herein, who are Captive Gencos and open access consumers, to purchase minimum energy from renewable sources and to pay surcharge in case of shortfall in meeting the RE obligation. 4. The Appellants have challenged the validity of the above-mentioned Regulations, by filing writ petitions before the High Court. The High Court vide its common impugned judgment dated 31.8.2012, after having discussed the legal contentions urged on behalf of the parties at length, has dismissed the writ petitions as being devoid of merit. The High Court held that the RERC is empowered to frame the impugned Regulations of 2007 and 2010 and levy charge and surcharge thereby for not complying with obligations, in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of electricity from a renewable energy source; the renewable energy source and captive generating plant are both alternative sources of energy which have to be promoted, one cannot be placed on higher or lower footing. The RERC by imposing a compulsory obligation to purchase electricity from renewable source and to pay surcharge in case of shortfall in meeting out the RE obligation as per the Regulation referred to supra has acted beyond the object sought to be achieved under the National Electricity Policy, 2005 as well as the Act of 2003. 6. It was further contended by the learned senior Counsel that the provisions relied upon by the RERC can be made applicable to distribution licensee and not to a generator of electricity. A captive generating plant cannot be said to be a distribution licensee. It was alleged that as per Section 86(1)(b) of the Act of 2003, the State Commission has power to regulate electricity purchase and procurement process of distribution licensees only including the price at which electricity shall be procured from the generating companies or licensees or from other sources through agreements for purchase of power for distribution and supply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the same manner as the generating station of a generating company. Second proviso to Section 9 further provides that no license shall be required under the Act for supply of electricity generated from a captive generating plant to any licensee in accordance with the provisions of the Act and the Rules and Regulations made there under subject to Regulations made Under Sub-section (2) of Section 42 of the Act of 2003, which enables the owner of captive generating plant, who maintains and operates such plants shall have the right to open access for the purposes of carrying electricity from his captive generating plant to the destination of his use. Learned senior Counsel sought to justify the impugned Regulation 9 placing strong reliance upon Section 61(h) of the Act of 2003, which provides that the appropriate Commission should promote generation and co-generation of electricity from renewable sources at the time of framing of tariff. 10. On the other hand, with regard to the contention of the Appellants that the Cross Subsidy Surcharge is relevant for open access Consumer Under Section 42 and the reference to Section 42(2) of the Act of 2003 in the present contex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stribution licensee to bear the cost of Renewable Purchase Obligation (RPO). They contended that the Appellants have not disclosed to this Court that Captive Power Plants set up by them are Thermal Power Plants. Thermal Power Plants consume conventional source of energy and pollutes the environment. Further, as long as consumer continues to take power from a distribution licensee, the obligation Under Section 86(1)(e) of the Act of 2003 is fulfilled through the said licensee. 12. The learned Counsel appearing on behalf of the RERC contended that the impugned Regulation 9 of 2010 is in conformity with Section 86(1)(e) read with Section 3 of the Act of 2003 as under the said provision the National Electricity Policy, 2005 is framed by the Central Government to achieve the relevant constitutional objective enshrined Under Article 48A of the Directive Principles of the State Policy, which provides for protection and improvement of environment and safeguarding of forests and wild life and further it envisages that the State shall make an endeavour to protect and improve the environment and to safeguard the forests and wild life of the country. Learned Counsel has strongly place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(e) of the Act which has been incorporated in Para 5.12.2 of the Electricity Policy makes it evident that the emphasis is on the total consumption of energy in the area of Distribution Licensee. The mandate is not confined to the purchase and supply of Energy by the Distribution Licensee. The wide language used by the Legislature in Section 86(1)(e) of the Act and in Clause 5.12.2 of the Electricity Policy clearly shows that the provision takes within its fold total consumption of energy in the area of the Distribution Licensee. This means that everyone consuming power in the area of Distribution Licensee including an Industry having Captive Power Plant will consume the specified percentage of energy from Renewable Sources. 14. We have carefully considered the rival contentions urged on behalf of the parties and perused the impugned judgment and materials on record. With reference to the aforesaid rival legal contentions we are required to answer the same, considering whether the impugned Regulations imposing RE Obligation upon Captive Power Plants framed by the RERC in exercise of power Under Section 86(1)(e) of the Act of 2003, which provides for promotion, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with Section 181 of the Act of 2003 to frame the impugned Regulation in respect of the industries running their own Captive Power Plants and it has the power only to frame Regulations with respect to the distribution licensees and, therefore, it was not open for the RERC to impose the RE obligation upon the Appellants having captive power plants to make them compulsorily purchase energy from renewable source and to pay surcharge in the event of shortfall to fulfil the RE obligation. 18. In support of the aforesaid contention the Appellants placed strong reliance upon the definitions of 'Captive Generating Plant' contained in Section 2(8), 'distribution licensee' mentioned in Section 2(17), 'licensee' appearing in Section 2(39), 'area of supply' contained in Section 2(3) of the Act of 2003. The Appellants have also relied upon Section 86(4) of the Act of 2003 which provisions of the Act provide the power to the RERC to frame Regulations with a view to discharge its functions to give effect to the provisions of the Act of 2003. 19. The contention of the learned Counsel for the Appellants that 'the distribution licensees' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory Authority. It recognised the need of prohibiting transmission licensees. It also for the first time provided for open access in transmission from the outset. It even provides where the distribution licensee proposes to undertake distribution of electricity for a specified area within the area of supply through another person, that person shall not be required to obtain separate licence. XXX 83. The primary object, therefore, was to free the generating companies from the shackles of licensing regime. 84. If de-licensing of the generation is the prime object of the Act, the courts while interpreting the provisions of the statute must guard itself from doing so in such a manner which would defeat the purpose thereof. It must bear in mind that licensing provisions are not brought back through the side door of Regulations. XXX 109. A generating company has to make a huge investment and assurances given to it that subject to the provisions of the Act he would be free to generate electricity and supply the same to those who intend to enter into an agreement with it. Only in terms of the said statutory policy, he makes huge investment. If al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... silent as regards conditions for grant of licence. It does not lay down any pre-qualifications therefor. Provisions for imposition of general conditions of licence or conditions laying down the pre-qualifications therefor and/or the conditions/qualifications for grant or revocation of licence, in absence of such a clear provision may be held to be laying down guidelines by necessary implication providing for conditions/qualifications for grant of licence also. 22. It is very vehemently contended by Mr. Raj Kumar Mehta, learned Counsel on behalf of the RERC that none of the judgments cited supra on behalf of the Appellants have any application to the fact situation of these appeals on hand, since the judgments upon which the reliance is placed by the learned Counsel on behalf of the Appellants are all distinguishable. In Tata Power Company Ltd. (supra), it was held that the Electricity Act having de-licensed generation, provisions for licensing cannot be brought back through the back door. The said judgment involved interpretation of Section 86(1)(b) read with Section 23 of the Act. The Regulations in the present case have been enacted pursuant to Section 86(1)(e) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The impugned Regulations do not fall in the realm of 'fee'. Therefore, the said decision has no application in support of the legal submission made by the Appellants' learned senior Counsel. The other decisions in the cases of Ahmedabad Urban Development Authority v. Sharadkumar Jayantikumar Pasawala and Ors. (1992) 3 SCC 285 and Consumer Online Foundation v. Union of India and Ors. (2011) 5 SCC 360 upon which reliance was placed in support of the proposition of law that in the absence of express provision in the Statute, a delegated authority cannot impose a 'tax' or 'fee' upon the Appellants, if they do not comply with the impugned Regulations. The said decisions have no application in support of the case of the Appellants for the reason that the impugned Regulation is not in the nature of imposing either 'tax' or 'fee' upon them. Therefore, the above contention urged on behalf of the Appellants is wholly untenable in law. Further, reliance was placed upon the case of Union of India and Ors. v. S. Srinivasan (2012) 7 SCC 683, wherein it was held that Regulation making power cannot be exercised by the RERC in the absence of substantive p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia v. Cipla Ltd. and Ors. (2003) 7 SCC 1. 28. Further, Mr. Ganesh, the learned senior Counsel on behalf of some of the Appellants has placed reliance on the decision of this Court in the case of J.K. Industries Ltd. and Anr. v. Union of India and Ors. (2007) 13 SCC 673 and contended that the impugned Regulation is a subordinate legislation which may be struck down as arbitrary, contrary to the Statute and Constitution of India on the ground that the subordinate legislation does not conform to the statutory or constitutional requirement as it offends Article 14 or 19 of the Constitution of India. It is further contended by him that such subordinate legislation, as in this case is the impugned Regulation framed by the RERC, does not carry the same degree of immunity which is enjoyed by a statute passed by a competent legislature, therefore, the impugned Regulation can be questioned on any one of the grounds on which plenary legislation is questioned and also on the ground that it does not conform to the Statute under which it is made, which in this case is Section 86(1)(e) of the Act of 2003. It was contended by him in view of the above that the impugned Regulations under w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 25. In this connection, the first and foremost principle we have to keep in mind is that what is enjoined by the directive principles (in this case Articles 41, 45 and 46) must be upheld as a reasonable restriction Under Articles 19(2) to 19(6). As far back as 1952, in State of Bihar v. Maharaja dhiraja Sir Kameshwar Singh of Darbhanga (1952) SCR 889, this Court has illustrated how a directive principle may guide the Court in determining crucial questions on which the validity of an important enactment may be hinged. Thus, when the courts are required to decide whether the impugned law infringes a fundamental right, the courts need to ask the question whether the impugned law infringes a fundamental right within the limits justified by the directive principles or whether it goes beyond them. For example, the scope of the right of equality of opportunity in matters relating to employment (Article 16) to any office in the State appears more fully defined when read with the obligation of the State to promote with special care the economic and other interests of the weaker sections (Article 46). Similarly, our understanding of the right to practice any profession or occup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or by necessary implication provided. In these appeals, Section 86(1)(e) of the Act of 2003 specifically provides for specifying a percentage of total consumption in the area of Distribution Licensee from renewable sources of energy. In this regard, it is necessary to deal with these contentions urged on behalf of the Appellants' counsel. The contention urged on behalf of the Appellants is that only distribution licensee is obligated towards RPO under the Act. The said contention is wholly untenable in law in view of the provisions referred to supra upon which strong reliance has been placed by the counsel on behalf of the RERC. 32. It is the contention of the learned senior Counsel Mr. Jayant Bhushan on behalf of the Appellants that Under Section 86(1)(e) of the Act of 2003, the phrase- the total consumption of electricity in the area of distribution licensee refers only to the distribution licensee and not to captive gencos and that the captive gencos are generating power and not buying power, thus directions to them to purchase renewable energy cannot be sustained as no authority can compel a genco/generator of energy to become a purchaser of the electricity. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 86(1)(e) would have read total electricity purchased and supplied by distribution licensee . The mere fact that no licence is required for Establishment, Operation and Maintenance of a Captive Power Plant does not imply that the industries engaged in various commercial activities putting up such Captive Power Plants cannot be subjected to Regulatory Jurisdiction of the Commission and required to purchase certain quantum of energy from. Renewable Sources. The RE obligation has been imposed upon the consumption of electricity whether purchased from the Distribution Licensee or consumed from its own Captive Power Plant or through open access. The RE Obligation has not been imposed on the Appellants in their capacity as owners of the Captive Power Plants. It was contended that the 'distribution licensee' has a geographical/territorial meaning and specifies that any person whether any consumer whosoever resides or has a place of business within a geographical area of 'distribution licensee' shall be under an obligation to purchase electricity from renewable sources, a percentage of their total consumption, as specified in the RPO obligation. It was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so be necessarily included in the term Total Consumption in the area of distribution licensee . Similarly, captive power consumers are also located/situated within area of distribution licensee and are connected to the Distribution Network of Distribution licensees either for wheeling electricity or for backup power, if needed. Therefore, the team for Total Consumption in the area of distribution licensee would also include such captive power consumers also and accordingly, Section 86(1)(e) grants the State Commission power to specify a minimum percentage of renewal energy to be purchased out of the total consumption of electricity in the area of distribution licensee which would include the distribution licensee/s, open access consumers and the captive power consumers. The High Court therefore, has rightly found that the total consumption is an area of a distribution licensee can be by three ways-(i) through supply by the distribution licensee; (ii) supply by captive power plants using lines and transmission lines of distribution licensee and (iii) from any other sources by using transmission lines of distribution licensee, and the total consumption has to be seen by consumers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e uppermost in the mind of a Judge. But that principle cannot be extended to reading in the provisions of the Act that which the legislature has not provided either expressly or by necessary implication. (See: Steel Authority of India Ltd. v. National Union Waterfront Workers.... 39. The learned Counsel on behalf of the Respondents have countered the above contentions by submitting that a distribution licensee is obliged to supply power to Captive Power Plants and Open Access Consumer Under Section 43 of the Act of 2003, if there is a request to supply. In such view of the matter, it will be highly discriminatory to only subject the regular consumers of the distribution licensee to bear the cost of purchase of renewable energy and to exempt the gencos from the Open Access Consumers or Captive Power Plants from the obligation to purchase/share the cost for purchase of renewable power despite being connected to the distribution network of the distribution licensee and despite the fact that they can demand back up power from such licensee any time they want. Thus, in order to realize the attempt of reducing dependence on fossil fuels, it can be said that the impugned Regulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by imposing RE obligation on the captive gencos. 42. The learned senior Counsel for the Appellants vehemently made their submissions that payment of penalty in the event of non-compliance of the impugned Regulations is impermissible in law in the absence of specific provisions under the Statute to this effect and the same is in violation of the constitutional provision Under Article 265 of the Constitution of India which specifically provides that No tax shall be levied or collected except by authority of law . The aforesaid submission is rightly countered by the learned Counsel for the RERC inviting our attention that imposing such surcharge upon the generating companies if they commit default of the impugned Regulations has been purportedly in exercise of its power Under Section 86(1)(g) of the Act of 2003, which empowers the State Commission to 'levy fee for the purposes of this Act'. Further, the contention very strenuously urged on behalf of the Appellants that the power to levy fee cannot be extended to impose surcharge in the form of penalty upon them for its failure to purchase the renewable energy fixed by RERC. Fee can only be imposed for service rendere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... infrastructure for evacuation from generating stations based on renewable energy sources. The deposit of the RPO charge is compensatory in nature. Sections 142 and 147 of the Act of 2003 provide the statutory back-up for penal consequences in contravention of the impugned Regulations framed Under Section 181 r/w Section 86(1)(e) of the Act of 2003. The penalty imposed by impugned Regulations is not in nature of 'tax' but to achieve the object and intendment of the Act of 2003. The penalty imposed by the impugned Regulations upon the Captive Generating Companies who do not comply with the requirements as provided Under Regulation 9 of the impugned Regulations of 2010 are not in nature of 'tax' but it is a 'surcharge' levied Under Section 39(2) of the Act but an alternative mode of enforcement of Regulation upon them for ensuring its compliance to achieve the laudable object of the Act, in case obligated entity make default in fulfilling the renewable purchase obligation as provided under the Regulation 9 of the impugned Regulations 2010. Regulation 9 reads as under: 9. Consequences of Default. (1) If the obligated entity does not fulfil th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Electricity Policy of 2005 and the Tariff Policy of 2006. The provisions requiring purchase of minimum percentage of energy from renewable sources of energy have been framed with an object of fulfilling the constitutional mandate with a view to protect environment and prevent pollution in the area by utilizing renewable energy sources as much as possible in larger public interest. The High Court has considered the submissions of the Appellants and has rightly rejected the same on the ground that the RE obligation imposed on the captive gencos under the impugned Regulations is neither ultra vires nor violative of the provisions of the Act of 2003 and cannot in any manner be regarded as a restriction on the fundamental rights guaranteed to the Appellants under the Constitution. 45. The learned senior Counsel on behalf of the Appellants placing strong reliance upon paras 5.2.24 and 5.2.25 of the Electricity Policy framed by the Union of India in exercise of its power Under Section 3 of the Act, contended that the issuance of any direction to captive plant to reduce its generation and insist purchase power from renewable energy is based on the erroneous premise that the impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buying of the said certificates. In this manner there is no need to lower captive electricity generation by a captive consumer for fulfilling the minimum percentage target as provided in the impugned Regulation. Further, Para 6.4 of the Tariff Policy framed Under Section 3 of the Act of 2003, was amended vide Resolution dated 31.3.2008 of the Ministry of Power and published in the Gazette of India, Extraordinary on 22.1.2011. In view of the above, it is a matter of fact that the impugned Regulation does not have the effect of curtailing the power generation of the Captive Power Plant as the Appellants have the right to supply surplus power to the grid. 47. The said paras from the Electricity Policy referred to supra are framed for giving effect to the objects and provisions of the Act and the same cannot be interpreted as restricting the ambit of specific provision contained in Section 86(1)(e) of the Act in any manner. The provision in the Electricity Policy cannot be read and interpreted as a statutory provision as held by this Court in the case of Secretary, Ministry of Chemicals and Fertilizer, Govt. of India v. Cipla Ltd. and Ors. (2003) 7 SCC 1. The relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of Section 86(1)(e) read with Section 86(4) of the Act of 2003 and are covered by Section 181(1) of the Act. In support of the same, reliance was placed on the decision of this Court on the case of PTC India Limited (supra) that the Regulations can be made under the Act as long as two conditions are satisfied, namely, that they are consistent with the Act of 2003 and are made for carrying out for provisions of the Act. 49. The purchase of nominal quantum of energy from renewable resources cannot adversely affect the cost effectiveness of the Captive Power Plant. Moreover, the object being reduction of pollution by promoting renewable source of energy, larger public interest must prevail over the interest of the industry herein which will in any case pass on the extra burden, if any, will be as part of the cost of its products and therefore, the same does not burden the Appellants. The reliance placed upon the aforesaid paras of the policies is mis-conceived as the same pertains to the Captive Power Plants to be set up by group of consumers namely, small and medium industries and other consumers who are not in a position to set up a Captive Power Plant of optimal in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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