TMI Blog2004 (3) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... er Corporation Ltd. (for short, 'APGPCL') would require Licence or exemption therefrom under the provisions of Sections 15 or 16 of the Andhra Pradesh Electricity Reform Act 1998 (for short 'the Reform Act, 1998'). 2. Shortage of power is felt in most of the parts of the country which, apart from disrupting day-to-day life of the people, quite often than not, creates problem for industries. The States or the Electricity Boards managing the power sector find it difficult to meet the ever increasing demand of electricity. In such circumstances, captive generation of power is not unknown and it is getting quite in vogue but generally it is done in a manner that the factory or industry would generate and consume the power confining it in its premises to run its manufacturing/processing unit. In such circumstances, finding a via media, it appears that the State Government of Andhra Pradesh and the Andhra Pradesh Electricity Board mooted the idea of setting up of a 3 X 33 MW gas based combined cycle power station at Vijjeswaram for establishing a generating station which required high amount of investment, hence they decided to invite private participation in the ven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of a new company, under the name and style of APGPCL was to set up a Natural Gas based power generation station in the State of Andhra Pradesh. The APSEB and the various medium and large-scale industries located in Andhra Pradesh had agreed to invest in equity capital of APGPCL. The APSEB joined the parties of the second part namely, the participating industries to form a working group for raising capital of APGPCL and regulation of power generated by it and other related matters. The power and energy to be generated by APGPCL was agreed to be shared amongst the participating industries and the apseb, in proportion to their paid-up share capital. It was further agreed that the energy sharing shall be pro-rata of actual energy generated. 6. In Clause (4) of the Memorandum of Understanding it was provided that the participating industries may transfer their share of energy and power to their sister-concern subject to the condition that the said sister-concern, being located within the State of Andhra Pradesh and a High Tension (HT) consumer of electricity of APSEB. The explanation to Clause (4) provided that the sister-concern means a concern under the same group. We further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Electricity (Supply) Act, 1948, for establishment of Gas Based Thermal Power station at any place in the State of Andhra Pradesh to generate and supply electrical energy exclusively for the use of shareholders of the Company through transmission lines of APSEB to take over any gas based Thermal power station whether under construction or in operation at any place in Andhra Pradesh for the said purpose, either from Andhra Pradesh State Electricity Board or from any other person. 9. It is thus evident that the aims and objects as indicated in the Original Articles of Association were amended and restricted. Accordingly, with the approval and concurrence of the concerned authorities, the power generating plant started its functioning and has been utilising the power generated according to the Memorandum of Understanding which formed part of the Articles of Association. 10. Later it appears that APGPCL made a proposal for extension of the project and thus set up a Combined Cycle Power Plant of 160 MW Gas Turbine station at Vijjeswaram - stage 2. The Central Electricity Authority, Ministry of Power by its letter dated April 26, 1996 conveyed its no objection to the extensio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he consideration that the supply and distribution cannot be maintained unless the charges for the electricity supplied are adequately levied and duly collected. So far the State Government is concerned, under Section 12 it has power to issue policy directions on matters concerning electricity in the State including the overall planning and co-ordination. Section 13 relates to the establishment of Transmission Corporation of Andhra Pradesh Limited (for short 'APTRANSCO') with the objects of engaging in the business of procurement, transmission and supply of electric energy. APTRANSCO was to perform the functions as were used to be performed by APSEB prior to coming into force of the Act. Part VI of the Act deals with licensing of transmission and supply. The relevant clauses of Section 14 of the Reform Act 1998 are reproduced below: 14. Licensing:- (1) No person, other than those authorized to do so by licence or by virtue of exemption under this Act or authorized to or exempted by any other authority under the Supply Act, shall engage in the State in the business of,- (a) transmitting electricity; or (b) supplying electricity. (2) and (3) XXX XXX ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... energy is to be supplied; (ii) in any case where energy is to be supplied in any area forming part of any cantonment, aerodrome, fortress, arsenal, dockyard or camp or any building or place in the occupation of the Central Government for defence purposes, of the Central Government; (iii) in any area falling within the area of supply of a licensee, of that licensee: Provided that, except in a case falling under Clause (ii) no such consent shall be necessary if the Commission is satisfied that such consent has been unreasonably withheld. (2) An exemption may be granted,- (a) to persons of a particular category; or (b) to a particular person; or (c) for a particular period; and an exemption to persons of a particular category or to a particular person shall be published in such manner as the Commission considers appropriate for bringing it to the attention of that person or persons of that category and of the public in general. (3) The exemption granted may be revoked by the Commission at any time for reasons to be recorded in writing. (4) An exemption, unless previously revoked, shall continue in force for such period as may be specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectricity (Supply) Act, 1948, the Indian Electricity Rules, 1956 and others laws and regulations. [BY ORDER AND IN THE NAME OF THE GOVERNOR OF ANDHRA PRADESH] Sd/- V.S. SAMPATH SECRETARY TO GOVERNMENT But before the expiry of the date of the provisional licence, the appellant moved an application under Section 16 of the Act for grant of exemption from licence for supply of generated power to its shareholders and their sister concerns. The reason for seeking exemption, as indicated was that energy was being supplied to sister concerns and the equity shareholders only and that the operation and maintenance of the power station is carried out by APTRANSCO. The wheeling of the power is also carried on by APTRANSCO. The A.P. Electricity Regulatory Commission, however, rejected the application by order dated 7.7.2000. 14. The Regulatory Commission recorded a finding that Govt. of Andhra Pradesh had granted a licence to the appellant under Section 3 of the Act of 1910. This inference has been drawn on the basis of a letter dated 21.12.1995 sent by the appellant making a request for setting up a generating plant for captive consumption. In this connection, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant would also be subject to tariff and charges as regulated by the Commission. 15. The Commission then deals with contention of the appellant that a generating company could with consent of the competent government sell electricity to any person in view of Section 43A(1)(c) of the Supply Act. In this connection, the Commission refers to a letter dated 11.5.2000 issued by the Government of Andhra Pradesh that the appellant was carrying on operation of generation and supply of energy to participating industries and their sister concerns as per Memorandum of Understanding. A letter of formal consent to that effect was also issued by the Government of Andhra Pradesh on 23.6.2000 consenting to sale of energy by the appellant to company's shareholders and their sister concern under Section 43A(1)(c) of the Supply Act. It was further mentioned in the letter that the arrangement was to be continued in future also. The Commission held that it was incorrect that APGPCL had any authorization, express or implied, at the time when the Reform Act of 1998 was enforced and that the letter on the subject was issued by the Andhra Pradesh Government on 11.5.2000 for the first time and spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also be said that any license/permission was granted under Section 3 in 1990 and 1995 for the purpose of establishment of a generating station. We have already indicated that grant of any such licence under Section 3 of the Act of 1910 has been denied by the appellant and no such licence has been placed on record by any of the parties for ascertaining that such a licence was ever granted. The appellant denies issuance of any such licence. The Commission also found that Section 44 does not conceive of a group captive consumption plant and in any case permission is granted only for establishment of a generating station and not a supply company. Initially, in stage one there were 6 participating industries and 21 new concerns were added between 1995 to 2000 whereas in the second stage initially 20 participating industries apart from APSEB were there and 19 more were added. It shows that participating industries were not availing the supply but they were diverting the same to their group/sister concern. 17. The Commission however considered the fact that the scheme of generation of electricity for utilization by the participating industries was approved by the Government of Andhr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consumption of the generating company, hence no licence was required. In the alternative, the appellant's case is that even if any licence is required, it was exempted in view of the provisions contained under Section 26A of the Supply Act, 1948 and in any case there was consent of the State Government in compliance with the provision of Section 43A(1)(c) of the Supply Act, 1948. That being so, the APGPCL was not required to have any licence in view of Section 14 of the Reform Act 1998. The finding of the Commission, it is submitted on behalf of the Appellants, that Section 43A(1)(c) stood dis applied by virtue of Section 56(3)(vi) read with Section 21(4) of the Reform Act, 1998, is erroneous. 22. We think that it will be appropriate to consider the question separately in respect of three categories of users of the electricity generated by APGPCL, namely, the participating industries, their sister concern and the companies which are transferees of shares by the participating industries of APGPCL. 23. The background in which the company APGPCL was incorporated has already been noticed. It was a group captive generating venture as was also mentioned by the central gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fix in this behalf, and any agreement to the contrary shall be void. xxx xxx xxx 25. The above provision is also for the purposes of being engaged in the business of supply of energy to public and does not cover the cases of generation of electricity or its use and consumption by the generating group itself. 26. We find that the term generating company was introduced for the first time in the Supply Act, 1948 by the Amending Act 115 of 1976 and substituted by Act 50 of 1991. Clause (4-A) of Section 2 as amended in 1991, defines generating company as below: A generating company means a company registered under the Companies Act 1956 (1 of 1956) and which has among its objects establishment, operation and maintenance of generating stations. 27. The word licensee has been defined under Clause (6) of Section 2 which reads as under: Section 2(6) Licensee means a person licensed under Part II of the Indian Electricity Act, 1910 (9 of 1910) to supply energy or a person who has obtained sanction under Section 28 of that Act to engage in the business of supplying energy [but the provisions of Section 26 or 26A of this Act notwithstanding, does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Supply Act, no inference can be drawn that any licence is required to be taken by a generating company under the provisions of the Act of 1910 merely because Sections 12 to 19 and certain provisions of the schedule of the said Act have been made applications to the generating company as well. Such a provision as contained under Sub-section (2) of Section 26A of the Supply Act has been made only with a view that a generating company may also have to lay electricity lines for carrying electricity from the point of generation to the place of its consumption or from where it may be diverted to the place of consumption of other participating industries. therefore, for such matters the same requirements may be applicable as are applicable to the licensees etc. but by no stretch of imagination it can be contended that a licence is required to be taken by the generating company under the Act of 1910. The captive consumption may be in the same premises or at some distance is immaterial. 31. We find that later on, the term captive generating plant has been defined under Clause (8) of Section 2 of Electricity Act, 2003, which reads as under: Captive generating plant means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concern under the same group . 34. At this very juncture it may also be relevant to have a look at the provision as contained under para 17(a) of the Memorandum of Understanding. It reads as follows: It is agreed that if the power generating by APGPCL could not be utilized by the Participating Industries either in full or in part, then APSEB shall have first claim to utilize such power. The price for such surplus energy shall be mutually settled between APSEB and APGPCL based on fuel cost plus O M charges plus depreciation but not exceeding rate for energy as per HT category-I of APSEB 35. From a perusal of para 4 of the Memorandum of Understanding it is clear that a participating industry has been given a right to transfer its share of energy and power to its sister concern. The term sister concern has been explained as a concern under the same group . There is no further clarification or clue as to which are those concerns which may be considered under the same group. The expression 'sister concern' used in para 4 of Memorandum of Understanding certainly does not mean a concern which is owned or is a subsidiary of the participating industry. It woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state government the duty called electricity duty on the energy sold to a consumer by licensee/board/the Central Government. The duty on consumption of electricity was leviable even though it may be from his own source of generation. The Renusagar Power Co. Ltd. had also obtained a licence under Section 28 of the Act of 1910. In such circumstances, it was held that even though Renusagar Power Co. Ltd. was a subsidiary company owned by M/s. Hindustan Aluminium Co. Ltd. yet it would amount to supply of electricity by a licensee to a consumer in view of the provisions of the U.P. Act of 1952 which levied duty on consumption of electricity. The situation in the case in hand is similar only to the extent that the participating industries and the sister concerns are different entities and separately incorporated. Distinction may be there in view of the statutory provisions intervening under the U.P. Act of 1952 but that is not material for this case. 37. Yet another case, merely, [1979] 3 SCR709, State of U.P. v. Hindustan Aluminium Corporation Ltd., was referred to on behalf of the respondent in which same parties are involved namely, M/s. Hindustan Aluminium Corporation Ltd. and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e share of the participating industry. 40. We may now come to the question relating to the industries to whom shares have been transferred by the participating industries. 41. So far transfer of shares is concerned Clause (6) of Memorandum of Understanding-I provides as follows: (6) The participating industries may transfer all of their capital or part thereof only with the prior approval of the Board of Directors of APGPCL and subject to the condition that (a) the transferee shall be a HIT consumer of APSEB and shall agree to abide by the all the obligations regarding use and payment for power which shall be guaranteed by the transferor viz. participating industry, who proposes to transfer the share(s). (b) in case of such transfer wheeling charges (dealt with separately in para 10 hereinafter) will then be with reference to the voltage of supply of the transferee. 42. Clause 15(a) which also relates to the shareholders provides as follows: 15(a) it is agreed that such of the consumers of APSEB who become shareholders of APGPCL and who desire to reduce their Contracted Maximum Demand (CMD) with APSEB up to the extent of their share of power in APGPCL, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be named as MOU-I on and from the date of signing of the new MOU. The Memorandum of Understanding provides for the basis upon which power generation is to be shared by the participating industries. 43. With the above provisions in the Memorandum of Understandings and the Article of Association, it is submitted that the participating industries have been defined as those companies who have subscribed to the share capital of the APGPCL. Such companies have been given a right to transfer their shares to any other company who fulfils certain conditions, mainly that it should be a HT consumers of APSEB and abides by all obligations of the Memorandum of Understandings and Articles of Association. It is submitted that transferee of shares to the extent of shares transferred by the participating industries enters into the shoes of the participating industry. therefore, if the transferee companies utilize the power for their own industry, their position would be the same as that of the participating industry. The utilization of power generated by APGPCL to the extent of the shareholding of a transferee company, would be on the same footing as captive consumption and does not amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es transferred to it. Holding of share capital in the APGPCL is the basis of participating in the generating activity of APGPCL and utilization of the power produced to the extent of the shareholding, it would only amount to captive consumption and self supply or distribution of the power and it would not require a licence under Section 3/28 of the Act of 1910 or under Sections 15 and 16 of the Reform Act, 1998. We may, however, clarify here that as soon as the electricity generated by APGPCL goes to any one who has no shareholding in the company or beyond the extent of the shareholding it would certainly amount to supply or distribution to the public entailing the liability of obtaining a licence under Section 3/28 of the Act of 1910 or for that matter under Sections 15 and 16 of the Reform Act, 1998. 45. It has been submitted on behalf of the respondents, including APTRANSCO that even self-consumption of power generated by APGPCL should not be allowed to a company which has obtained shares by transfer by a participating industry and in that connection certain figures have been placed before the Court in indicate that number of such transferee industries has substantially inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law are not required. But the power so generated cannot be supplied to or consumed by the outsiders without a license to supply electricity. 47. As a result of the discussions held above and the findings as recorded by us, the position that emerges is that participating industries and the industries to whom participating industries have transferred their shares, consumption of electricity by them within the limits of the value of their share capital in APGPCL would only amount to captive consumption and for such utilization or consumption of self-generated electricity no licence would be required under any provision of law. So far the sister concern or concerns which have been defined as those under the same group as participating industries, it would require to have a licence if the electricity is made available or provided to them for consumption as, in our view, it shall fall within the ambit of distribution, sale or supply of the electricity and not captive consumption of power. It would be permissible without licence only in case of exemption, if granted in that behalf, by the competent authority. Hereinafter we shall discuss that aspect of the matter. 48. The submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commission the provisions of the Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948 shall in so far as the State is concerned, shall be read subject to the following modifications and reservations. Indian Electricity Act, 1910 xxx xxx xxx Electricity (Supply) Act, 1948 (vi) in respect of matters provided in Sections 5 to 18, 19, 20, 23 to 27, 37, 40 to 45, 46 to 54, 56 to 69, 72 and 75 to 83 of the Electricity (Supply) Act, 1948, to the extent this Act has made specific provisions, the provisions of the Electricity (Supply) Act, 1948 shall not apply in the State; xxx xxx xxx In view of the above provision, it is clear that Section 43A(1)(c), would not be applicable to the extent the Reform Act, 1998 makes a specific provision in respect of matters as contained under Section 43A(1)(c). it is to be examined, as to whether the Reform Act, 1998 makes any specific provision in respect of the matters covered under Section 43A(1)(c) or not. In this connection our attention has been drawn to Section 21(4) of the Reform Act, 1998 which provides as under: 21. Restrictions on licensees and generating companies.(1) No licensee or Generating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference between the two provisions is that while a licensee would purchase electricity from a generating company it shall have to obtain the permission of the Commission whereas a generating company while entering into a contract to sell electricity to any person, will have to obtain the consent of the state government. The two provisions have different implications altogether. The provision under Section 43A(1)(c) of the Supply Act is an enabling provision to sell electricity to any person with the consent of the state government, whereas the provision contained under Section 21(4) of the Reform Act, 1998 pertains to the prohibition on purchase of electricity which is restricted to a licensee. Hence, it is submitted, and in our view rightly, that Section 43A(1)(c) is not dis-applied by virtue of Section 56(3)(vi) of the Reform Act 1998 and the consent granted by the state government will hold good for sale of electricity to any person. 50. The next contention is that any person as provided under Clause (c) of Sub-section (1) of Section 43A of the 1948 Act would not mean an individual or an end-consumer of the electricity. By application of the doctrine of ejusdem generis it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sections which deals with consumers is Section 49 which requires the Board to supply electricity to any person not being a licensee and ultimately, it was also observed, the learned Judge would not wish to pronounce any opinion upon the question, the character of the dispute being different in nature. The order of the High Court was set aside but on different grounds. Thus, a whole reading of the decision in the case of Mysore State Electricity Board (supra) makes it clear that no pronouncement has been made on the question relating to meaning of the expression 'any person' occurring in the Supply Act applying the doctrine of ejusdem generis to mean a 'licensee' or a body of the same colour and character. 52. It is submitted that literal meaning of words and certain phrases cannot always be assigned to it and sometimes it becomes necessary to assign a meaning to a particular word keeping in view the whole purpose and intent of the legislation. If the plain meaning of a word is a far and distant from the purpose for which the legislation has been made it would only be appropriate to give meaning to a particular phrase or word considering the company of the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, the acquisition of necessary legislative power not only to facilitate the establishment of this system in newly licensed areas but also to control the operations of existing licensees so as to secure fully co-ordinated development. Government feel that it is not possible to legislate for this purpose within the framework of the Indian Electricity Act, 1910, which was conceived for a very different purpose. In their view what is needed is specific legislation on the board lines of the Electricity (Supply) Act, 1926, in force in the United Kingdom, which will enable Provincial Government to set up suitable organizations to work out Grid Schemes within the territorial limits of the Provinces. Although executive power under the proposed Bill will necessarily vest in the Provinces, two considerations indicate the necessity for Central legislation,- (i) the need for uniformity in the organization and development of the Grid System , and (ii) the necessity for the constitution of semi-autonomous bodies like Electricity Boards to administer the Grid Systems . In the view of Government it is bodies like those which are likely to be the most suitable organizations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd contains provisions for the supply, transmission and use of electrical energy by licensees and non-licensees and generally with matters connected thereto..... 35. .....It is, therefore, quite plain that one must read a qualification into the section that the dispute must be one touching a matter within the Supply Act..... 53. It is rightly submitted on behalf of the appellants that no such proposition has been laid down in the above noted case i.e. Mysore State Electricity Board (supra) holding that the expression 'other person' occurring in Section 76 of the Supply Act would not mean any individual consumer but a person like a licensee. Yet the fact remains that from the discussion which has been made, the purpose of enactment of the Supply Act has been clarified that the Act is not on the subject of consumption of electricity by end-consumer or an individual consumer. It is also rightly observed that the meaning which is to be assigned to a particular phrase or word should be such as may be covered by the subject dealt with or sought to be brought within the sweep of the legislation in question. 54. This Court, while considering the application of princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectricity to the end consumers. Rather the subject dealt with in the Supply Act is different. It is to be noticed that the power generation was initially confined to government companies, maybe central or the state government. Later by an amendment in 1976 it could be jointly, both by the central and the state government. Later, however, generation was opened up for any company registered under the Companies Act. Earlier, therefore, the sale of electricity generated was confined to the electricity boards but in view of opening up generation to any company a third category was introduced by the amendment of 1991 as contained in Clause (c) of Section 43A(1) of the Supply Act, namely, to any other person. But looking to the provisions of the Act in totality it can't mean an individual consumer since such a supply to individual consumers is not envisaged nor dealt with under the Supply Act. We find that the functions and duties of the electricity board are enumerated under Section 18 of the Supply Act. The same reads as under: Powers and Duties of [State Electricity Boards and Generating Companies] - 18. General duties of the Board. - Subject to the provisions of this Act, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eading the meaning too wide going beyond the subject matter dealt with under the Supply Act and not connected with the intent and object of legislating the said legislation. It is true that as a general principle a plain meaning is to be attached to a word or expression used in the legislation but it cannot be divorced of the context and an isolated meaning attached to it. In such circumstances, it becomes necessary to assign a meaning which may be reasonably and harmoniously derived from the company of the words and phrases preceding such expression. In this view of the matter, it can well be said that the meaning of the expression 'any person' as used in Clause (c) of Sub-section (1) of Section 43A denotes such bodies or entities which would further the purpose for which the electricity boards have been constituted. It is for the board to coordinate different activities in discharge whereof to make available the electricity to the licensees, distributors or those who transmit the electricity. It would be reasonable to infer that the consent of the state government may be necessary to have a contract of sale of electricity generated by it with any of such bodies dischargin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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