MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD. versus M/S. JSW STEEL LIMITED & ORS. on 10 December 2021

404

SUPREME COURT REPORTS

[2021] 9 S.C.R.

AMAHARASHTRA STATE ELECTRICITY DISTRIBUTIONCO. LTD.

v.

M/S. JSW STEEL LIMITED & ORS.

(Civil Appeal Nos. 5074-5075 of 2019)

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DECEMBER 10, 2021

[M. R. SHAH AND SANJIV KHANNA, JJ.]

Electricity Act, 2003 – ss.2(15), 42(4) – State Commissionheld captive consumers-respondents herein liable to pay additionalCsurcharge – Appeals filed by the captive consumers – Allowed byAppellate Tribunal – On appeal by distribution licensee, held:Captive consumers incur huge expenditure/invest huge amount forconstruction, maintainance or operation of a captive generatingplant and dedicated transmission lines – Such captive consumers/Dcaptive users who form a separate class other than the consumersdefined u/s.2(15) are not liable to pay additional surcharge leviableu/s.42(4), as rightly held by the Appellate Tribunal.

Electricity Act, 2003 – s.9 – Operation of – Discussed.

Electricity Act, 2003 – Class of consumers under – Held: AsEper the scheme of the Act, there can be two classes of consumers-ordinary consumer and captive consumers.

Electricity Act, 2003 – s.42(4) – Applicability of – Discussed.

Dismissing the appeals, the CourtFHELD : 1.1 On a fair reading of Section 9, it can be seenthat captive generation is permitted under sub-section (1) ofSection 9. As per subsection (2), every person, who hasconstructed a captive generating plant and maintains and operatessuch plant, shall have the right to open access for the purposesof carrying electricity from his captive generating plant to theGdestination of his use, but of-course subject to availability ofadequate transmission facility determined by the CentralTransmission Utility or the State Transmission Utility, as the casemay be. So, the captive generation / captive use is statutorilyprovided /available and for which a permission of the StateH

Commission is not required. Construction and/or maintenanceand operation of a captive generating plant and dedicatedtransmission lines is not subjected to any permission by the StateCommission. As provided under Section 9 of the Act, 2003, anyperson may construct, maintain or operate a captive generatingplant and dedicated transmission lines. Merely because the supplyof electricity from the captive generating plant through the gridshall be regulated in the same manner as the generating stationof a generating company or the open access for the purpose ofcarrying electricity from the captive generating plant to thedestination of his use shall be subject to availability of the adequatetransmission facility determined by the Central TransmissionUtility or the State Transmission Utility, it cannot be said that forcaptive generation plant, the State Commission’s permission isrequired. Right to open access to transmit/carry electricity tothe captive user is granted by the Act, and is not subject to anddoes not require the Sate Commission’s permission. The right isconditioned by availability of transmission facility, which aspectcan be determined by the Central or State transmission utility.Only in case of dispute, the State Commission may adjudicate.[Para 9][412-A-G]

1.2 Sub-section (4) of Section 42 shall be applicable only ina case where the State Commission permits a consumer or classof consumers to receive supply of electricity from a person otherthan the distribution licensee of his area of supply and only suchconsumer shall be liable to pay additional surcharge on thecharges of wheeling, as may be specified by the State Commission.Captive user requires no such permission, as he has statutoryright. As per the Scheme of the Act, there can be two classes ofconsumers, (i) the ordinary consumer or class of consumers whois supplied with electricity for his own use by a distributionlicensee / licensee and; (ii) captive consumers, who are permittedto generate for their own use as per Section 9 of the Act, 2003.[Para 11][413-A-C]

1.3 The term “consumer” is defined in Section 2(15).Ordinarily, a consumer or class of consumers has to receive supply AB

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Aof electricity from the distribution licensee of his area of supply.However, with the permission of the State Commission such aconsumer or class of consumers may receive supply of electricityfrom the person other than the distribution licensee of his areaof supply, however, subject to payment of additional surchargeon the charges of wheeling as may be specified by the StateBCommission to meet the fixed cost of such distribution licenseearising out of his obligation to supply. There is a logic behind thelevy of additional surcharge on the charges of wheeling in such asituation and/or eventuality, because the distribution licensee hasalready incurred the expenditure, entered into purchaseCagreements and has invested the money for supply of electricityto the consumers or class of consumers of the area of his supplyfor which the distribution license is issued. Therefore, if aconsumer or class of consumers want to receive the supply ofelectricity from a person other than the distribution licensee ofhis area of supply, he has to compensate for the fixed cost andDexpenses of such distribution licensee arising out of his obligationto supply. Therefore, the levy of additional surcharge undersub-section (4) of Section 42 can be said to be justified and canbe imposed and also can be said to be compensatory in nature.However, sub-section (4) of Section 42 shall be applicable only inEa case where the State Commission permits a consumer or classof consumers to receive supply of electricity from a person otherthan the person – distribution licensee of his area of supply. Sofar as captive consumers/captive users are concerned, no suchpermission of the State Commission is required and by operationof law namely Section 9 captive generation and distribution toFcaptive users is permitted. Therefore, so far as the captiveconsumers / captive users are concerned, they are not liable topay the additional surcharge under Section 42(4) of the Act, 2003.The Appellate Tribunal has rightly held that so far as the captiveconsumers/captive users are concerned, the additional surchargeGunder sub-section (4) of Section 42 of the Act, 2003 shall not beleviable. The consumers defined under Section 2(15) and thecaptive consumers are different and distinct and they form aseparate class by themselves. So far as captive consumers areconcerned, they incur a huge expenditure/invest a huge amount H

for the purpose of construction, maintenance or operation of acaptive generating plant and dedicated transmission lines.However, so far as the consumers defined under Section 2(15)are concerned, they as such are not to incur any expenditureand/or invest any amount at all. Therefore, if the appellant is heldto be right in submitting that even the captive consumers, whoare a separate class by themselves are subjected to levy ofadditional surcharge under Section 42(4), in that case, it will bediscriminatory and it can be said that unequals are treated equally.Therefore, such captive consumers/captive users, who form aseparate class other than the consumers defined under Section2(15) of the Act, 2003, shall not be subjected to and/or liable topay additional surcharge leviable under Section 42(4) of the Act,2003. The additional surcharge already recovered from the captiveconsumers/captive users shall be adjusted in the future wheelingcharges bills. [Paras 12-14, 16][413-C-H; 414-A-G; 415-C]

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 5074-5075 of 2019.

From the Judgment and Order dated 27.03.2019 of the AppellateTribunal for Electricity, New Delhi in Appeal Nos.311 and 315 of 2018.

G. Saikumar, Samir Malik, Aman Malik, Chandra Prakash for M/s D.S.K. Legal, Advs. for the Appellant.

C. S. Vaidyanathan, Gopal Jain, S. K. Rungta, Dr. A. M. Singhvi,Sajan Poovayya, Sr. Advs., Mahesh Agarwal, Rishi Agrawala, AmanAnand, Anshuman Srivastava, Rishabh Parikh, Aman Dixit, ShivamShukla, E. C. Agrawala, Ms. Pratiti Rungta, Prashant Singh, Ms. AmitaSingh Kalkal, Hemant Singh, Lakshyajit Singh Bagdwal, Rishabh Sehgal,Pratibhanu Singh Kharola, Ms. Raksha Agarwal, Sharan Balakrishna,Mridul Chakravarty, Gaurav Mitra, Hasan Murtaza, Varun Pathak, Advs.for the Respondents.

The Judgment of the Court was delivered by

M. R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned judgmentand order passed by the Appellate Tribunal for Electricity, Delhi in AppealNos. 311 and 315 of 2018 whereby the Appellate Tribunal has allowed AB

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Athe said appeals preferred by the respondents herein – the ‘captiveconsumers’ and has set aside the order passed by the MaharashtraElectricity Regulatory Commission (hereinafter referred to as the “StateCommission”) in Petition No.195 of 2017 by which the State Commissionhas held that the group of ‘captive consumers’ are liable to pay additionalsurcharge, Maharashtra State Electricity Distribution Company LimitedB(hereinafter referred to as the “distribution licensee”), has preferred thepresent appeals.

2. That the appellant as distribution licensee filed a petition beforethe State Commission for MYT approval for FY 2014-2015, provisionaltruing up of ARR for FY 2015-2016 and Multi Year Tariff for 3[rd] ControlCPeriod FY 2016-2017 to FY 2019-2020. The said petition was numberedas Case No.48 of 2016. The State Commission held that the additionalsurcharge leviable under Section 42(4) of the Electricity Act, 2003(hereinafter referred to as the “Act, 2003”) is not applicable to captiveusers to the extent of their self-consumption from such plants. The StateDCommission also held that the additional surcharge shall be applicable toall consumers who have availed open access to receive supply fromsources other than the distribution licensee to which they are connected.

3. The appellant – distribution licensee submitted its revised ReviewPetition being Case No.195 of 2017, for approval of final true up ofEARR for FY 2015-2016 and 2016-2017, provisional true up of ARR forFY 2017-2018 and approval for revised forecast of ARR for FY 2018-2019 and 2019-2020, inter alia, including the prayer “to approve additionalsurcharge for all open access consumers including those sourcing powerfrom CPPS as proposed for FY 2018-2019 to FY 2019-2020”. TheCaptive Power Producers Association filed their objections includingFthe objections with respect to levy of additional surcharge on such captiveusers. That by order dated 12.09.2018, the State Commission passedthe order holding that additional surcharge is leviable under Section 42(4)of the Act, 2003 on the captive consumers/captive users.

4. Feeling aggrieved and dissatisfied with the order passed by theGState Commission allowing the levy of additional surcharge from thecaptive consumers/captive users, the respondents herein – captive users/captive consumers approached the Appellate Tribunal. By impugnedorder dated 27.03.2019, the Appellate Tribunal has allowed the saidappeals and has set aside the order passed by the State CommissionHordering/permitting to levy the additional surcharge leviable under Section 42(4) of the Act, 2003 and has held that the group of captive consumersare not liable to pay additional surcharge to the distribution licensee.

5. Feeling aggrieved and dissatisfied with the impugned orderpassed by the Appellate Tribunal holding that the group of captiveconsumers/captive users are not liable to pay the additional surchargeleviable under section 42(4) of the Act, 2003, appellant – distributionlicensee.

6. We have heard the learned counsel appearing for the appellant– distribution licensee as well as learned counsel appearing on behalf ofthe respective respondents – intervenors – the captive consumers/captiveusers at length.

7. The short question which is posed for the consideration of thisCourt is :

“Whether the captive consumers/captive users are liable to paythe additional surcharge leviable under Section 42(4) of theElectricity Act, 2003?

8. While deciding the aforesaid issue/question, the relevantprovisions of Electricity Act, 2003 namely Sections 9 and 42 arerequired to be noted/visited, which reads as under:- “9. Captive generation.- (1) Notwithstanding anything containedin this Act, a person may construct, maintain or operate a captivegenerating plant and dedicated transmission lines:

Provided that the supply of electricity from the captive generatingplant through the grid shall be regulated in the same manner asthe generating station of a generating company:

Provided further that no licence shall be required under this Actfor supply of electricity generated from a captive generating plantto any licencee in accordance with the provisions of this Act andthe rules and regulations made thereunder and to any consumersubject to the regulations made under sub-section (2) of section42.

(2) Every person, who has constructed a captive generating plantand maintains and operates such plant, shall have the right to openaccess for the purposes of carrying electricity from his captivegenerating plant to the destination of his use:

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Provided that such open access shall be subject to availability ofadequate transmission facility and such availability of transmissionfacility shall be determined by the Central Transmission Utility orthe State Transmission Utility, as the case may be:

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Provided further that any dispute regarding the availability ofBtransmission facility shall be adjudicated upon by the AppropriateCommission.

42. Duties of distribution licensees and open access.- (1) Itshall be the duty of a distribution licensee to develop and maintainan efficient, co-ordinated and economical distribution system inChis area of supply and to supply electricity in accordance with theprovisions contained in this Act.

(2) The State Commission shall introduce open access in suchphases and subject to such conditions, (including the cross subsidies,and other operational constraints) as may be specified within oneDyear of the appointed date by it and in specifying the extent ofopen access in successive phases and in determining the chargesfor wheeling, it shall have due regard to all relevant factors includingsuch cross subsidies, and other operational constraints:

Provided that such open access shall be allowed on payment of aEsurcharge in addition to the charges for wheeling as may bedetermined by the State Commission:

Provided further that such surcharge shall be utilised to meet therequirements of current level of cross subsidy within the area ofsupply of the distribution licensee:

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Provided also that such surcharge and cross subsidies shall beprogressively reduced in the manner as may be specified by theState Commission:

Provided also that such surcharge shall not be leviable in caseopen access is provided to a person who has established a captiveGgenerating plant for carrying the electricity to the destination ofhis own use:

Provided also that the State Commission shall, not later than fiveyears from the date of commencement of the Electricity(Amendment) Act, 2003 (57 of 2003) by regulations, provide such H

MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO.LTD. v. M/S. JSW STEEL LIMITED [M. R. SHAH, J.]

open access to all consumers who require a supply of electricitywhere the maximum power to be made available at any timeexceeds one megawatt.

(3) Where any person, whose premises are situated within thearea of supply of a distribution licensee, (not being a local authorityengaged in the business of distribution of electricity before theappointed date) requires a supply of electricity from a generatingcompany or any licensee other than such distribution licensee,such person may, by notice, require the distribution licensee forwheeling such electricity in accordance with regulations made bythe State Commission and the duties of the distribution licenseewith respect to such supply shall be of a common carrier providingnon-discriminatory open access.

(4) Where the State Commission permits a consumer or class ofconsumers to receive supply of electricity from a person otherthan the distribution licensee of his area of supply, such consumershall be liable to pay an additional surcharge on the charges ofwheeling, as may be specified by the State Commission, to meetthe fixed cost of such distribution licensee arising out of hisobligation to supply.

(5) Every distribution licensee shall, within six months from theappointed date or date of grant of licence, whichever is earlier,establish a forum for redressal of grievances of the consumers inaccordance with the guidelines as may be specified by the StateCommission.

(6) Any consumer, who is aggrieved by non-redressal of hisgrievances under sub-section (5), may make a representation forthe redressal of his grievance to an authority to be known asOmbudsman to be appointed or designated by the StateCommission.

(7) The Ombudsman shall settle the grievance of the consumerwithin such time and in such manner as may be specified by theState Commission.

(8) The provisions of sub-sections (5), (6) and (7) shall be withoutprejudice to right which the consumer may have apart from therights conferred upon him by those sub-sections.”

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A9. On a fair reading of Section 9, it can be seen that captivegeneration is permitted under sub-section (1) of Section 9. As per sub-section (2), every person, who has constructed a captive generatingplant and maintains and operates such plant, shall have the right to openaccess for the purposes of carrying electricity from his captive generatingplant to the destination of his use, but of-course subject to availability ofBadequate transmission facility determined by the Central TransmissionUtility or the State Transmission Utility, as the case may be. So, thecaptive generation / captive use is statutorily provided / available and forwhich a permission of the State Commission is not required. Thesubmission on behalf of the appellant that the captive generation underCSection 9 is subject to the regulations as per first proviso to sub-section(1) of Section 9 and that even open access for the purpose of carryingelectricity from his captive generating plant to the destination of his useshall be subject to availability of the adequate transmission facilitydetermined by the Central Transmission Utility or the State TransmissionUtility, as the case may be, sub-section (4) of Section 42 shall be applicableDand such captive users are liable to pay the additional surcharge leviableunder sub-section (4) of section 42, has no substance and has to berejected outright. Construction and/or maintenance and operation of acaptive generating plant and dedicated transmission lines is not subjectedto any permission by the State Commission. As provided under Section9 of the Act, 2003, any person may construct, maintain or operate aEcaptive generating plant and dedicated transmission lines. Merely becausethe supply of electricity from the captive generating plant through thegrid shall be regulated in the same manner as the generating station of agenerating company or the open access for the purpose of carryingelectricity from the captive generating plant to the destination of his useFshall be subject to availability of the adequate transmission facilitydetermined by the Central Transmission Utility or the State TransmissionUtility, it cannot be said that for captive generation plant, the StateCommission’s permission is required. Right to open access to transmit/carry electricity to the captive user is granted by the Act, and is notsubject to and does not require the Sate Commission’s permission. TheGright is conditioned by availability of transmission facility, which aspectcan be determined by the Central or State transmission utility. Only incase of dispute, the State Commission may adjudicate.

10. In light of the above observations and findings, the issuewhether such captive users are subject to levy of additional surchargeHleviable under sub-section (4) of Section 42 is required to be considered.

11. Sub-section (4) of Section 42 shall be applicable only in a casewhere the State Commission permits a consumer or class of consumersto receive supply of electricity from a person other than the distributionlicensee of his area of supply and only such consumer shall be liable topay additional surcharge on the charges of wheeling, as may be specifiedby the State Commission. Captive user requires no such permission, ashe has statutory right. At this stage, it is required to be noted that as perthe Scheme of the Act, there can be two classes of consumers, (i) theordinary consumer or class of consumers who is supplied with electricityfor his own use by a distribution licensee / licensee and; (ii) captiveconsumers, who are permitted to generate for their own use as perSection 9 of the Act, 2003.

12. The term “consumer” is defined in Section 2(15), which readsas under :-

12. The term “consumer” is defined in Section 2(15), which readsas under :- “(15) “consumer” means any person who is supplied withelectricity for his own use by a licensee or the Government or byany other person engaged in the business of supplying electricityto the public under this Act or any other law for the time being inforce and includes any person whose premises are for the timebeing connected for the purpose of receiving electricity with theworks of a licensee, the Government or such other person, as thecase may be;”

13. Ordinarily, a consumer or class of consumers has to receivesupply of electricity from the distribution licensee of his area of supply.However, with the permission of the State Commission such a consumeror class of consumers may receive supply of electricity from the personother than the distribution licensee of his area of supply, however, subjectto payment of additional surcharge on the charges of wheeling as maybe specified by the State Commission to meet the fixed cost of suchdistribution licensee arising out of his obligation to supply. There is alogic behind the levy of additional surcharge on the charges of wheelingin such a situation and/or eventuality, because the distribution licenseehas already incurred the expenditure, entered into purchase agreementsand has invested the money for supply of electricity to the consumers orclass of consumers of the area of his supply for which the distributionlicense is issued. Therefore, if a consumer or class of consumers wantto receive the supply of electricity from a person other than the distributionlicensee of his area of supply, he has to compensate for the fixed cost A

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Aand expenses of such distribution licensee arising out of his obligation tosupply. Therefore, the levy of additional surcharge under sub-section (4)of Section 42 can be said to be justified and can be imposed and also canbe said to be compensatory in nature. However, as observed hereinabove,sub-section (4) of Section 42 shall be applicable only in a case where theState Commission permits a consumer or class of consumers to receiveBsupply of electricity from a person other than the person – distributionlicensee of his area of supply. So far as captive consumers/captive usersare concerned, no such permission of the State Commission is requiredand by operation of law namely Section 9 captive generation anddistribution to captive users is permitted. Therefore, so far as the captiveCconsumers / captive users are concerned, they are not liable to pay theadditional surcharge under Section 42(4) of the Act, 2003. In the case ofthe captive consumers/captive users, they have also to incur theexpenditure and/or invest the money for constructing, maintaining oroperating a captive generating plant and dedicated transmission lines.Therefore, as such the Appellate Tribunal has rightly held that so far asDthe captive consumers/captive users are concerned, the additionalsurcharge under sub-section (4) of Section 42 of the Act, 2003 shall notbe leviable.

14. Even otherwise, it is required to be noted that the consumersdefined under Section 2(15) and the captive consumers are differentEand distinct and they form a separate class by themselves. So far ascaptive consumers are concerned, they incur a huge expenditure/investa huge amount for the purpose of construction, maintenance or operationof a captive generating plant and dedicated transmission lines. However,so far as the consumers defined under Section 2(15) are concerned,Fthey as such are not to incur any expenditure and/or invest any amountat all. Therefore, if the appellant is held to be right in submitting thateven the captive consumers, who are a separate class by themselvesare subjected to levy of additional surcharge under Section 42(4), in thatcase, it will be discriminatory and it can be said that unequals are treated

equally. Therefore, it is to be held that such captive consumers/captiveGusers, who form a separate class other than the consumers defined underSection 2(15) of the Act, 2003, shall not be subjected to and/or liable topay additional surcharge leviable under Section 42(4) of the Act, 2003.

15. In view of the above and for the reasons stated above, thepresent appeals fail and deserve to be dismissed and are accordinglyH

dismissed. However, in the facts and circumstances of the case thereshall be no order as to costs.

16. It is reported that pursuant to the interim order passed by thisCourt dated 01.07.2019, staying the operation and implementation of theimpugned order passed by the Appellate Tribunal, the appellant –distribution licensee has recovered the additional surcharge. Therefore,as such once it is held that the captive consumers/captive users are notliable to pay the additional surcharge leviable under Section 42(4) of theAct, 2003, the appellant – distribution licensee has to refund the same.However, considering the fact that there shall be huge liability on theappellant – distribution license if they have to now refund the amount ofadditional surcharge recovered at a stretch, we direct that the additionalsurcharge already recovered from the captive consumers/captive usersshall be adjusted in the future wheeling charges bills.

17. Present appeals are accordingly dismissed with the aboveobservations.

Divya Pandey

Appeals dismissed.

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