M/s. Piccadily Agro Industries Ltd. & Anr vs Haryana Electricity Regulatory Commission & Ors on 17 September 2026

J U D G M E N T

PER HON’BLE MR. VIRENDER BHAT, JUDICIAL MEMBER

1. The Appellants have impugned the order dated 10th November, 2025 passed by the 1st Respondent – Haryana Electricity Regulatory Commission (hereinafter referred to as “the Commission”) in petition No. 44 of 2024 thereby upholding the legality and validity of the notices dated 21st June, 2024 issued by 2nd Respondent – Dakshin Haryana Bijli Vitran Nigam Limited (DHBVNL) calling upon the Appellants to restore the benefit of sum of Rs.68,03,220/- taken by

them as captive users under the Power Banking Agreement dated 24th January, 2020. The said notices had been issued by the 2nd Respondent on the ground that the Appellant No. 2, Piccadily Hotels Private Limited (PHPL) has consumed only 37.24% of the energy generated by the Appellant No. 1 in its 5 MW unit located at Village Bhadson, Umri – Indri Road, Tehsil Indri, Dist. Karnal, Haryana, thereby falling short of the requirement specified in Rule 3(1) (a)(ii) of Electricity Rules, 2005. The Commission in the impugned order, has endorsed the said notices issued by 2nd Respondent by holding that only Appellant No. 2 has admittedly consumed only 37.24% of the energy generated from the unit of 5 MW in the bio-mass based co- generation power project of Appellant No. 1 and, thereby has fallen short to comply with the condition No. 2 provided in Rule 3(1)(a)(ii) of the Electricity Rules, 2005.

2. At the outset, we would like to point out that during the hearing on the application filed by the Appellants for the interim relief, learned Senior Counsel appearing for the Appellant and learned Counsel appearing for Respondent No. 2 submitted that the submissions advanced by them in the interim applications would, in fact, be the submissions which they would urge in the main appeal as well and

requested that if considered appropriate, the appeal itself may be finally disposed of at the present stage itself. This was recorded in the daily order dated 17.02.2026. Accordingly, we proceed to consider the matter on merits and pass final orders in the appeal.

3. According to the Appellants, the entire 17 MW co-generation power plant of Appellant No. 1 Piccadily Agro Industries Ltd. (“PAIL”) is a Captive Generating Plant (CGP) and both the Appellants are its “Captive Users” and the banking agreement dated 24th January, 2020 or any other document does not record anywhere that the Appellant No. 2 alone shall be the captive user for the power generated in the power plant. It is thus contended that the consumption of Appellant No. 1 along with that of Appellant No. 2 ought to be considered jointly for the purpose of requirements of condition No. 2 provided in Rule3(1)(a)(ii) of the Electricity Rules, 2005 in as much as both qualify to be the captive users within the meaning of Section 2(8) of the Electricity Act, 2003 read with Rule3(1)(a) of the Electricity Rules, 2005.

4. The 2nd Respondent would contend that the impugned order is fully consistent with the applicable statutory framework and the express contractual engagements between the parties which unequivocally require that captive status be determined on the basis of energy actually injected into the grid and correspondingly drawn/consumed by Appellant No. 2 M/s Piccadily Hotels Private Limited (“PHPL”) through duly metered mechanism, with the mandatory 51% threshold being a non-negotiable condition. It is further contended that for determining captive status, only the quantum of energy actually injected into the grid and correspondingly drawn/consumed by Appellant No. 2 as recorded by the respective meters at both ends can be the basis.

5. Thus, the core issue which arise for our consideration in this appeal is whether in the light of the applicable statutory framework/Rules as well as contractual arrangements inter-se the parties, Appellant No. 1 also qualifies as captive user of the energy drawn by it from its biomass based co-generation power plant and whether such consumption of Appellant No. 1 is to be added to the consumption of Appellant No. 2 to determine as to whether the requirements specified in Rule3(1)(a)(ii) of the Electricity Rules, 2005 stand fulfilled.

6. The Appellant No. 1 is inter alia engaged in the business of manufacturing and sale of malt spirits in India as well as in Ethanol, Extra Neutral Alcohol (ENA), CO2 and white crystal sugar. In its Indri facility, it has set up and installed : i. Sugar mill for manufacturing white crystal sugar; ii. A distillery facility by the name “Piccadily Distilleries” wherein it manufactures malt spirits, ethanol, ENA, CO2; and iii. A renewable energy/bagasse/biomass-based Co-generation Power Project of 17MW capacity comprising four units of 6 MW, 5 MW, 3 MW and 3 MW capacity each in the same manufacturing facility.

7. It appears that the Appellant No. 1 desired to transfer spare/unutilized power to the extent of maximum 5 MW to Appellant No. 2 by using the transmission network of Haryana Power utilities and accordingly entered into a power banking agreement dated 19th January, 2018 with Haryana Power Purchase Centre in order to facilitate such transfer of power. Thereafter, a tripartite agreement dated 24th January, 2020 was also executed between 3rd Respondent – Haryana Vidhyut Prasaran Nigam Ltd. (HVPNL) , system operations, Uttar Haryana Bijli Vitran Nigam Ltd. (UHBVNL) and Appellant No. 1 in this regard. Accordingly, Appellant No. 2 utilized the power banked by

Appellant No. 1 in the Financial Year 2020-21 to a certain extent. Consequently, no power from the grid was utilized or consumed by Appellant No. 2 during the said period. Under the Power Banking Agreement dated 19.01.2018, Appellant No. 1 intended to transfer spare/ unutilized power up to a maximum of 5 MW to Appellant No.2. Thereafter, for the relevant period, i.e. I 2020-21, the Tripartite Banking Agreement dated 24.01.2020 contemplated banking/ wheeling of power up to 3 MW to Appellant No. 2.

8. In this background, let us proceed to examine the issue raised in this appeal i.e. whether the entire co-generation power plant of Appellant No. 1 with 17 MW capacity qualifies as a Captive Generating Plant and if so, whether the electricity consumed by both the Appellants from the same ought to be taken into account for the purpose of assessing their captive status.

9. A look at the Statement of Objects and Reasons for enactment of the Electricity Act, 2003 reveals that apart from finding it necessary to harmonize and rationalize the provisions of the Indian Electricity Act, 1910, the Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions Act, 1998 by enacting a new legislation for regulating the electricity supply industry in the country to replace the

existing laws, need was also felt to introduce newer concepts like “power trading” and “open access”. The main features of the 2003 Act include delicencing of the electricity generation and promoting “captive generation”.

10. Thus, the concepts of delicensing of generation, open access and promotion of captive generation were introduced in the Act of 2003 with a view to encourage investment in the power sector.

11. “Captive generating plant” is defined in section 2(8) of the Act to mean a power plant set up by any person to generate electricity primarily for his own use. It would include within its ambit a power plant set up by any cooperative society or association of persons for generating electricity primarily for use of members of such co-operative society or association.

12. The manner in which the captive generating plant has been defined in section 2(8) is indicative of the fact that the Parliament was aware of the financial as well as other aspects involved in setting up of a captive generating plant and thought that it might not be possible for a single private individual to do so. Having it in mind, cooperative societies and association of persons were permitted to set up such

power plants so that the policy of encouraging private sector participation in electricity generation gets impetus.

13. Rule 3 of the Electricity Rules, 2005 prescribes requirements for a power plant to qualify as a “Captive Generating Plant”. For the purpose of reference, the said Rule is extracted hereunder :- “The Electricity Rules, 2005

“3. Requirements of Captive Generating Plant.-

(1) No power plant shall qualify as a ‘captive generating plant’ under section 9 read with clause (8) of section 2 of the Act unless- (a) in case of a power plant –

(i) not less than twenty six percent of the ownership is held by the captive user(s), and

(C) not less than fifty one percent of the aggregate electricity generated in such plant, determined on an annual basis, is consumed for the captive use:

Provided that in case of power plant set up by registered cooperative society, the conditions mentioned under paragraphs at (i) and (ii) above shall be satisfied collectively by the members of the co- operative society: Provided further that in case of association of persons, the captive user(s) shall hold not less than twenty six percent of the ownership of the plant in aggregate and such captive user(s)

shall consume not less than fifty one percent of the electricity generated, determined on an annual basis, in proportion to their shares in ownership of the power plant within a variation not exceeding ten percent; (b) in case of a generating station owned by a company formed as special purpose vehicle for such generating station, a unit or units of such generating station identified for captive use and not the entire generating station satisfy (s) the conditions contained in paragraphs (i) and (ii) of sub-clause (a) above including - Explanation :-

(1) The electricity required to be consumed by captive users shall be determined with reference to such generating unit or units in aggregate identified for captive use and not with reference to generating station as a whole; and

(2) the equity shares to be held by the captive user(s) in the generating station shall not be less than twenty-six per cent of the proportionate of the equity of the company related to the generating unit or units identified as the captive generating plant. Illustration: In a generating station with two units of 50 MW each namely Units A and B, one unit of 50 MW namely Unit A may be identified as the Captive Generating Plant. The captive users shall hold not less than thirteen percent of the equity shares in the company (being the twenty six percent proportionate to Unit A of 50 MW) and not less than fifty one percent of the electricity

generated in Unit A determined on an annual basis is to be consumed by the captive users.

(2) It shall be the obligation of the captive users to ensure that the consumption by the Captive Users at the percentages mentioned in sub-clauses (a) and (b) of sub-rule (1) above is maintained and in case the minimum percentage of captive use is not complied with in any year, the entire electricity generated shall be treated as if it is a supply of electricity by a generating company. Explanation. – (1) For the purpose of this rule. –

a. “Annual Basis” shall be determined based on a financial year; b. “Captive User” shall mean the end user of the electricity generated in a Captive Generating Plant and the term “Captive Use” shall be construed accordingly; c. “Ownership” in relation to a generating station or power plant set up by a company or any other body corporate shall mean the equity share capital with voting rights. In other cases ownership shall mean proprietary interest and control over the generating station or power plant; d. “Special Purpose Vehicle” shall mean a legal entity owning, operating and maintaining a generating station and with no other business or activity to be engaged in by the legal entity.”

14. The rule lays down that at least 26% of the ownership of the plant must be held by the captive user(s) and at least 51% of the

aggregate electricity produced in such plant, determined on annual basis, must be consumed for the captive use. Therefore, in case these twin requirements are fulfilled, the power plant would attain the status of a captive generating plant. The use of word “User(s)” in sub rule

(1) (a)(i) of Rule 3 would indicate that there can be more than one captive consumers of a captive generation plant.

15. Rule 3(2)(b) defines “captive user” to mean the end user of the electricity generated in a captive generating plant.

16. Section 9(2) entitles a person, which has constructed a captive generating plant and is maintaining as well as operating such plant, to have open access for the purpose of carrying electricity from the plant to the destination of its use.

17. In the instant case, it is not in dispute that the Appellant No. 1 owns a 17 MW co-generation power plant with four units in one premises at Indri, District – Karnal, Haryana along with a sugar mill and distillery in the same premises. It is also an undisputed fact that banking agreements had been entered between the Appellant No. 1 at one hand and Respondent No. 2 as well as Respondent No. 3 on the other hand with respect to 5 MW unit upto 3 MW and except for such banking

arrangement, entire power generated in the said power project is used and consumed by Appellant No. 1 itself in its distillery and sugar mill.

18. Recitals (i) & (ii) of the agreement for the banking of power dated 19th January, 2018 executed between the Appellant No. 1 and Haryana Power Purchase Centre are relevant for our discussion and are extracted hereinbelow:-

(i) “Whereas, the Company has set up a renewable energy based Co-generation Power project of 17 Megawatt capacity i.e. Four nos. units of 6 MW, 3MW & 3MW at Village Bhadson Block Indri Tensil Indri & Distt. Karnal in the State Haryana.

(ii) Whereas, the Company intends to transfer the spare/unutilized Power to the extent of maximum upto 5 MW at the generator end to Piccadily Hotels Pvt. Ltd. Sector-83, Block Manesar & Distt. Gurugaon in the state of Haryana by using the transmission network of Haryana Power Utilities for a period of 01 (One) year from the date it is signed; as per the open Access Regulations of the Haryana Electricity Regulatory Commission notified vide regulation no. HERC/25/2012 dated 11th January 2012. (Emphasis supplied)

19. Manifestly, it is merely specified in these recitals of the agreement that the Appellant No. 1 is desirous of transferring spare/un-

utilised power to the extent of 5 MW to Appellant No. 2 by using the transmission network of Haryana Power Utilities. Learned Counsel for the 2nd Respondent has laid stress upon Clause “J” of the said agreement to argue that only Appellant No. 2 was projected as a captive user of the power generated from 5 MW power project of Appellant No.

1. We extract the said clause of this agreement hereunder :- “(J) As per undertaking submitted by the Company, the power will be banked and drawn by Piccadilly Hotels Pvt. Ltd. only from 5 MW unit of the Company and 51% power or more will be consumed by the Captive user. In case of violation of any condition of this agreement, benefit of banking will not be allowed and power used by Captive user will be treated as sale of Power.”

20. The clause thus mentions that Appellant No. 2 would draw the power banked by Appellant No. 1 from 5 MW unit and 51% or some of such power will be consumed by the captive user. Referring to the term “Captive User” used in the clause, it is sought to be argued that there was only one captive user i.e. Appellant No. 2. We are unable to countenance the said argument. The term “Captive User” found in the said clause refers to Appellant No. 2 but it is no where indicated either in the said clause of the agreement or anywhere else in the agreement that Appellant No. 2 alone would be the captive user. At best, it is

indicated from the perusal of the said clause of the agreement that Appellant No. 2 would be a captive user but no clause in the entire agreement suggest that Appellant No. 2 alone would be the captive user.

21. Things have been made clear in the tripartite banking agreement dated 24th January, 2020 executed between HVPNL, system operations UHBNNL and Appellant No. 1. Recitals (i), (iii), (iv) &

(v) of said agreement are material and are extracted hereunder :- “i. The Company is a generator who has a RE Bagasse based Captive Generating Plant of Capacity 17MW located at village Bhadson Block Indri Tehsil & Distt – Karnal and connected to the distribution/transmission system of the Discoms/HVPNL through 11 KV Piccadily Agro Industries Independent feeder from the Plant to 132KV Sub Station Bhadson of HVPNL/DHBVN/UHBVN and has executed Connectivity Agreement dated 21.01.2014 with HVPNL to provide connectivity to the Project and will transmit wheel bank upto 3 MW to Piccadily Hotels Pvt. Ltd. Sector 83, Block Manesar Tehsil Manesar, District Gurgaon connected through 11KV Piccadily Agro Industries Independent feeder (A/C No. G- 31-BSHT-0024) power, out of power generated from Captive Generation Plant to the Captive User having equity share holding with voting rights in the Company as under:-

Sr. No. Name of Captive User Unit wise Capacity Share in Company (in MW) % age Equity Shares holding with voting rights

M/s Piccadily Agro Industries Ltd. (PAIL) Bhadson, Karnal 3 MW

1. Siddhartha Vashishta – 22.66%

2. Prachi Setty – 0.21%

3. Piccadily Sugar & Allied Industries Ltd. – 0.001%

4. Soon-N-Sure Holdings Ltd. – 33.46%

5. Piccadily Hotels Pvt. Ltd. – 14.57% Total 70.901%

C. The New and Renewable Energy Department Govt of Haryana / Haryana Renewable Energy Development Agency (HAREDA) vide its Ref. No. 5598-5600 dated 29.01.2014 has accorded sanction to the proposal of the Company for installation of RE Bagasse based Captive Generating Plant of 17MW capacity at Village Bhadson Block Indri Tehsil Indri & Distt – Karnal and the Company plan to construct own operate and maintain/own and operates the above said Power Generating Station. iv. The Company is desirous of availing the banking facility in respect of power up to 3MW to be transmitted/wheeled out of the power generated from the Project for its captive/own use at their Unit located at Piccadily Hotels Pvt. Ltd. Sector 83, Block Manesar Tehsil Manesar & District Gurgaon having contract demand of 3MW connected through 11KV Independent Piccadily Agro Industries feeder (A/C No. G-31-BSHT-0024) by utilizing the transmission and/or distribution network of the

HVPNL/Discoms and for the said purpose intends to enter into a tripartite Banking Agreement with the HVPNL / discoms and System Operation subject to the Terms and Conditions as set out in this agreement. C. The Company shall obtain prior consent for Open Access from the Competent Authority for the period it wishes to transfer wheel bank power upto maximum of 3MW from Village Bhadson Block Indri Tehsil Indri & Distt Karnal to Piccadily Hotels Pvt. Ltd. Sector 83, Block Manesar Tehsil Manesar & District Gurgaon.”

(It appears that due to some inadvertent error, there is no recital

(ii) in the agreement).

22. Perusal of these recitals in the agreement clearly reveal that the agreement was for transmitting/wheeling/banking of power upto 3 MW to Appellant No. 2 out of the entire power generated from 17 MW capacity captive generating plant of the Appellant No. 1. The Appellant No. 1 has been specifically shown as captive user in the table given in recital (i). Recital (iv) makes it clear that power upto 3 MW was intended to be transmitted /wheeled out of the power generated from the entire project for captive/own use of Appellant No. 1 at their unit located at Piccadily Hotels Pvt. Ltd. Sector 83, Block Manesar Tehsil Manesar & District Gurgaon.

23. On behalf of Respondent No. 2, reliance was also placed heavily on the Connection Agreement dated 11th March, 2020 executed between HPVNL, Appellant No. 1 and UHBVN, recital (A) of which is as under:- “WHEREAS: (A) The applicant applied to HVPNL vide letter dated 03.02.2020 for providing connectivity for evacuation of Power to be injected by the applicant from their Project and use of the Transmission/Distribution System of HVPNL/DISCOMs to transmit/wheel electricity from the Project as per HERC (Terms and conditions for grant of connectivity and Open Access for intra-State transmission and distribution system. Regulations, 2012 and HERC (Terms and Conditions for determination of Tariff from Renewable Energy Sources, Renewable Purchase Obligation and Renewable Energy Certificate) Regulations, 2017 as amended from time to time.

Detail of which is as under:

a Quantum of Power to be transmitted 5 MW b Point of injection of Power 132kV sub-station, HVPNL, Bhadson, Karnal c Point of drawl of Power M/s Piccadily Hotel Pvt. Ltd. Gurugram

(B) The HVPNL have consented to the connection of the project through 11 kV independent connectivity at 131kV sub- station, HVPNL Bhadson, Karnal for injection of Power.

(C) That the Parties here to enter into this Connection Agreement to settle its terms & conditions. Estimated cost for works to be carried out by HVPN/DISCOMs i.e. UHBVN/DHBVN related to the interconnection shall be borne by applicant, in accordance with the Connection Agreement.”

24. The connectivity details mentioned in the table in recital (A) do refer to point of injection of power and point of drawl of power. However, these are only in relation to the power to be consumed by Appellant No. 2 as a captive user and do not in any manner indicate or suggest that only Appellant No. 2 is the captive user of the power generated in the power plant of Appellant No. 1.

25. In the above context, we first proceed to examine whether the Appellants satisfied the ownership requirement under Rule 3 of the Electricity Rules, 2005. In this regard, the judgment of the Hon’ble Supreme Court in Chhattisgarh State Power Distribution Company Limited v. Chhattisgarh State Electricity Regulatory Commission & Anr., 2022 SCC OnLine SC 604, dated 12.05.2022 (“CSPDCL judgment”), assumes significance. The brief facts of the aforesaid case were as under:

“M/s Shri Bajrang Power and Ispat Ltd. (“SBPIL”) had established a captive generating plant. M/s Shri Bajrang Metallics and Power Ltd. (“SBMPL”), a sister concern of SBPIL, desired to avail open access and wheeling of power through the transmission system of Chhattisgarh State Power Distribution Company Limited (“CSPDCL”) for captive use by SBMPL. SBMPL held 27.6% of the equity shares of SBPIL, and more than 51% of the electricity generated by the captive power plant was proposed to be consumed by SBPIL and SBMPL together. The orders of the Commission as well as this Tribunal were in favour of SBPIL and SBMPL. The matter finally reached the Hon’ble Supreme Court in an appeal preferred by CSPDCL. The Hon’ble Supreme Court held as under: “14. A combined reading of Section 9 and clause (8) of Section 2 of the said Act would reveal that a person is entitled to construct, maintain or operate a captive generating plant. Such a plant should be primarily for his own use. Clause (8) of Section 2 of the said Act would further show that it includes a power plant set up by any cooperative society or association of persons for generating electricity. The requirement is that it should be primarily for the use of the members of such cooperative society or association.

15. The definition of “person” is wide enough to include any company or body corporate or association or body of individuals, whether incorporated or not, or artificial juridical person.

16. It is thus clear that a person, to get benefit under Section 9 of the said Act, could be an individual or a body corporate or association or body of individuals, whether incorporated or not. It could thus be seen that even an association of corporate bodies can establish a captive power plant. The only requirement would be that the said plant must be established primarily for their own use. The fourth proviso to sub-section

(2) of Section 42 of the said Act would also reveal that surcharge would not be leviable in case open access is provided to a person who has established a captive generating plant for carrying the electricity to the destination of his own use.

17. Therefore, the question that would arise is as to whether the open access for transmitting electricity from Sbpil to Sbmpl would be for own use or not.

18. We find that Rule 3 of the said Rules would clarify the position, which reads thus: “3. Requirements of Captive Generating Plant.—(1) No power plant shall qualify as a “captive generating plant” under Section 9 read with clause

(8) of Section 2 of the Act unless—

(a) in case of a power plant—

(i) not less than twenty-six per cent of the ownership is held by the captive user(s), and

(ii) not less than fifty-one per cent of the aggregate electricity generated in such plant, determined on an annual basis, is consumed for the captive use: Provided that in case of power plant set up by registered cooperative society, the conditions mentioned under paragraphs at (i) and (ii) above shall be satisfied collectively by the members of the cooperative society: Provided further that in case of association of persons, the captive user(s) shall hold not less than twenty-six per cent of the ownership of the plant in aggregate and such captive user(s) shall consume not less than fifty-one per cent of the electricity generated, determined on an annual basis, in proportion to their shares in ownership of the power plant within a variation not exceeding ten per cent; (b) in case of a generating station owned by a company formed as special purpose vehicle for such generating station, a unit or units of such generating station identified for captive use and not the entire generating station satisfy(ies) the conditions contained in paragraphs (i) and (ii) of sub-clause (a) above including—

Explanation.—(1) The electricity required to be consumed by captive users shall be determined with reference to such generating unit or units in aggregate identified for captive use and not with reference to generating station as a whole; and

(2) The equity shares to be held by the captive user(s) in the generating station shall not be less than twenty-six per cent of the proportionate of the equity of the company related to the generating unit or units identified as the captive generating plant.”

19. The provisions made in Rule 3 of the said Rules are clear. Sub-rule

(1) of Rule 3 of the said Rules provides that no power plant shall qualify as a “captive generating plant” under Section 9 read with clause (8) of Section 2 of the said Act unless the conditions stated therein are fulfilled. The first requirement is that not less than 26% of the ownership is held by the captive user(s). The second requirement is that not less than 51% of the aggregate electricity generated in such plant, determined on an annual basis, is consumed for the captive use. The second proviso to Rule 3(1)(a)(ii) of the said Rules provides that in case of association of persons, the captive user(s) shall hold not less than 26% of the ownership of the plant in aggregate and such captive user(s) shall consume not less than 51% of the electricity generated, determined on an annual basis, in proportion to their shares in ownership of the power plant within a variation not exceeding 10%.

20. Admittedly, SBMPL holds 27.6% equity shares in SBPIL. As such, the requirement of not less than 26% of shares is fulfilled by SBMPL. As already discussed hereinabove, even an association of corporate bodies can establish a power plant. Since SBMPL holds 27.6% of the ownership, the use of electricity by it would be for captive use under the provisions of the said Act. The other requirement would be that the consumption of SBIPL and SBMPL together should not be less than 51% of the power generated. Admittedly, the joint consumption by SBIPL and SBMPL is more than 51%. As such, both the conditions as provided under Rule 3 of the said Rules are satisfied.”

26. The decision of the Hon’ble Supreme Court in CSPDCL Judgment is material for determining the status claimed by Appellant No. 2. In that case, the generating plant was established by SBPIL and the electricity

was also consumed by SBMPL, a separate corporate entity. The Hon’ble Supreme Court specifically noted in paragraph 20 of the aforesaid judgement that SBMPL held 27.6% of the equity shares in SBPIL and held that, consequently, the requirement of not less than 26% ownership was fulfilled by SBMPL. The Hon’ble Supreme Court thereafter treated the electricity consumed by SBMPL as captive use and considered its consumption along with that of SBPIL for examining the 51% requirement.

27. It is clear from the above quoted extract of the CSPDCL judgment that, where a generating station is established by one company and another company holds equity shares in that company, the two companies together can qualify as captive users provided the shareholding and consumption requirements prescribed for captive use are satisfied. In particular, the company holding shares in the generating company must hold at least 26% of the equity shares of the generating company, and the consumption of electricity by the two companies, taken together, must be at least 51% of the total annual energy generated by the generating station.

28. For instance, if Company A establishes a generating station and Company B holds equity shares in Company A, Company B must hold at

least 26% of the equity shares in Company A, while the electricity consumed by Company A and Company B together must constitute at least 51% of the total annual energy generated by the generating station, for both A and B to qualify as captive users. Similarly, if we extend this rationale to a situation where companies B and C both hold equity shares in Company A, the requisite 26% equity shareholding would be satisfied by their aggregate shareholding in Company A, while the consumption of A, B and C together must constitute at least 51% of the total annual energy generated by the generating station.

29. The approach adopted in the CSPDCL Judgment proceeds on the basis that the captive user should have a meaningful ownership interest in the generating company and, consequently, a degree of participation in its affairs and important decisions. This approach is also consistent with the treatment of the generating company and the captive user(s) as an association for the purpose of satisfying the requirements of captive use.

30. In the present case, it is admitted position that Piccadily Hotels Pvt. Ltd. (“PHPL”) holds only 14.57% equity in Piccadily Agro Industries Ltd. (“PAIL”). Thus, unlike the factual position in CSPDCL case, where the

separate consuming entity held 27.6% equity in the company owning the generating plant, Appellant No.2 in the present case does not hold the minimum 26% ownership contemplated under Rule 3(1)(a)(i). While examining the first criterion relating to ownership, the Commission concluded as under: “13…………………………… Thus, it is well established that out of four generating units aggregating to 17 MW, only one unit of 5 MW was declared for use by single captive user i.e. M/s. Piccadily Hotels Pvt. Ltd. The equity requirement of 26%, provided in Rule 3(1)(a) (i) of the Electricity Rules, 2005, was accordingly examined with respect to a single unit. of 5 MW only on proportionate basis considering explanation (1) of the Rule 3(1)(b) of the Electricity Rules, 2005. Equity capital requirement for one unit of 5 MW, in proportion to all the units aggregating to 17 MW, was reduced to 29.41% (5/17*100). The equity capital owned by Petitioner No. 2 (M/s. Piccadily Hotels Pvt. Ltd.) in Petitioner No. 1 (M/s. Piccadily Agro Industries Ltd.), was presumed towards captive user unit of 5 MW only. Thus, as against the requirement of 26% equity ownership criterial out of 29.41% equity of captive unit (26x29.41/100 = 7.65%), the captive user (Petitioner No. 2 -M/s. Piccadily Hotels Pvt. Ltd.), was holding 14.57% equity. In case, total plant capacity of 17 MW is considered for determination of captive case, the plant of the Petitioner will not qualify for the equity ownership criteria of 26% provided in Rule 3(1)(a)(i) of the Electricity Rules, 2005”.

31. We are of the opinion that the Commission has adopted an incorrect methodology for determining the equity participation of PHPL in the 5 MW unit from which it was to draw power for captive use. The Explanation relied upon for this calculation pertains to Rule 3(1)(b), which applies to a generating station owned by a Special Purpose Vehicle (“SPV”). The present case does not involve an SPV constituted solely for the purpose of owning the generating station; PAIL carries on other businesses in addition to owning the generating plant. Since PHPL holds 14.57% equity in PAIL as a company, its equity participation cannot be notionally increased merely because it proposes to consume electricity from only one 5 MW unit out of PAIL’s total generating capacity of 17 MW. Its equity participation remains 14.57%, whether considered with reference to the generating plant as a whole or any particular unit thereof.

32. Therefore, applying the principle emerging from CSPDCL to the facts of the present case, Appellant No. 2 cannot establish the ownership requirement. Appellant No. 2 admittedly holds only 14.57% equity in Appellant No.1 and therefore, does not satisfy the minimum 26% ownership requirement and cannot claim the status of a captive user.

33. Since the Appellant No. 2 has failed in the test of ownership, there is no need for us to proceed for analysis of consumption test.

34. We have thus arrived at the same conclusion as the Commission insofar as the captive user status of Appellant No.2 is concerned, albeit for a different reason.

35. We note that while the Commission has referred to the CSPDCL judgment in paragraph 15 of the Impugned order, it has wrongly concluded that this judgement is not applicable in the present case. The Commission has premised their conclusion based on their observation that since drawal point in the agreements was indicated to be PHPL, only PHPL was envisaged as captive user and not the PAIL. The Commission ought to have considered the fact that since power was to be transferred to PHPL using HVPNL network hence there was need to mention drawal point, whereas the power plant is located within the premises of the PAIL so the drawal point is within premises and need not have been mentioned. Further, the Commission failed to take note of the table under para (ii) of the recital of the Tripartite Banking Agreement wherein the first column indicates PAIL as captive use.

36. Having regard to the fact that the recovery would take place pursuant to the present judgment, there will be a time gap between the time when the amount became due and the time when the same is actually recovered by the Discom. The principle of time value of money warrants that the Discom should not be deprived of the financial value of the amount which remained unrecovered during the intervening period. We, therefore, consider it appropriate to direct that the outstanding amount shall carry interest at the rate equal to the State Bank of India Marginal Cost of Funds- based Lending Rate plus one hundred and fifty basis points. This is, in fact, the carrying cost specified in the Haryana Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff for Generation, Transmission, Wheeling and Distribution & Retail Supply under Multi Year Tariff Framework) Regulations, 2024, applicable for the Control Period from FY 2025-26 to FY 2029-30.

Conclusion :-

37. For the reasons recorded above, we are of the view that Appellant No. 2 does not qualify as a captive user and is not entitled to claim the benefit of captive use and is liable for the payment of the outstanding charges raised by the Discom. Thus, we affirm the finding of the

Commission, albeit for a different reason. The impugned order is, to that extent, accordingly upheld.

38. We also direct that the outstanding amount shall be paid by the Appellants along with interest at the rate of the State Bank of India Marginal cost of Funds-based lending Rate in the relevant year plus one hundred and fifty basis points, within four weeks from today.

Pronounced in the open court on this 17th day of September, 2026.

Ajay Talegaonkar Technical Member (Electricity)

Virender Bhat Judicial Member

✓ REPORTABLE / NON REPORTABLE

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