Summary
Shri Bajrang Power and Ispat Ltd (SBPIL), owner of a captive generating plant, sought open access from the Chhattisgarh State Electricity Regulatory Commission to wheel 54 MU a year through the distribution company's grid to its sister concern Shri Bajrang Metallics and Power Ltd (SBMPL), which holds 27.6% of SBPIL's equity, SBPIL itself consuming only 13.22 MU. The distribution company objected. The Commission allowed the petition on conditions and the Appellate Tribunal for Electricity affirmed. The Supreme Court dismissed the appeals: 'person' in Section 2(49) of the Electricity Act, 2003 includes an association of corporate bodies; SBMPL's 27.6% holding satisfies the 26% ownership test in Rule 3 of the Electricity Rules, 2005; the joint consumption of SBPIL and SBMPL exceeds 51%; and the liberal captive-generation provisions must be construed to advance their object.
Issues
- Whether supply of electricity from a captive generating plant owned by one company to its sister concern holding 27.6% of its equity qualifies as consumption for 'own use' under Section 9 read with Section 2(8) of the Electricity Act, 2003 and Rule 3 of the Electricity Rules, 2005, so as to entitle the plant to open access without surcharge, where the plant-owning company itself consumes less than 51% of the generation.
Provisions considered
- Sections 2(8), 2(49), 9 and 42(2) (fourth proviso), Electricity Act, 2003A 'captive generating plant' is one set up by any person primarily for his own use, and 'person' includes any company, body corporate, association or body of individuals, so even an association of corporate bodies may establish a captive plant provided it is primarily for their own use; Section 9 confers the right to construct such a plant and to open access to carry electricity to the destination of use, and the fourth proviso to Section 42(2) exempts such open access from surcharge. (¶¶ 10, 11, 12, 13, 14, 15, 16, 17)
- Rule 3(1)(a)(i) and (ii) with its provisos, Electricity Rules, 2005A plant qualifies as captive only if the captive user(s) hold not less than 26% of its ownership and not less than 51% of the aggregate electricity generated, determined annually, is consumed for captive use; for an association of persons the captive users must collectively meet both thresholds in proportion to their shares within a 10% variation. SBMPL's 27.6% holding met the ownership test and the joint consumption of SBPIL and SBMPL exceeded 51%, so both conditions were satisfied. (¶¶ 18, 19, 20)
- Clauses 5.2.24 to 5.2.26 (captive generation), National Electricity Policy, 2005 (under Section 3 of the Electricity Act, 2003)The Policy, issued under Section 3 and carrying a statutory flavour, explains that the liberal provision for captive plants aims at reliable, cost-effective power and employment through industrial growth, and that group captive plants enable small and medium industries to set up plants of optimal size; an interpretation advancing that object is to be preferred (Dattatraya Dahankar; S. Gopal Reddy; Nilaybhai Thakore). (¶¶ 21, 22, 23, 24)
Held
- Under Section 9 read with Section 2(8) and 2(49) of the Electricity Act, 2003 a captive generating plant may be established by an individual, a company, a body corporate or an association or body of individuals, incorporated or not, including an association of corporate bodies; the only requirement is that the plant be established primarily for their own use, and open access for carrying electricity to the destination of such use attracts no surcharge under the fourth proviso to Section 42(2). (¶¶ 14, 15, 16)
- Rule 3 of the Electricity Rules, 2005 settles whether transmission from SBPIL to its sister concern SBMPL is for own use: SBMPL holds 27.6% of SBPIL's equity, satisfying the requirement that captive users hold not less than 26% of the ownership, so its use of the electricity is captive use; and since the joint consumption of SBPIL and SBMPL exceeds 51% of the generation, the consumption requirement is also met. The distribution company's argument that each consumer must itself consume 51% was rejected. (¶¶ 7, 18, 19, 20)
- The National Electricity Policy, 2005, issued under Section 3 and in tune with Section 9 and Section 2(8), shows that a liberal provision was made to promote captive plants, including group captive plants for small and medium industries; the interpretation that advances the object and purpose of the Act is to be preferred, and no case was made out to interfere with the Commission's order of 14.10.2005 or the APTEL's judgment of 06.12.2007. (¶¶ 21, 22, 23, 24, 25)
Result
Civil Appeal Nos. 2578-2579, 2941-2942 and 2868 of 2008 dismissed as without merit; the Appellate Tribunal for Electricity's judgment of 06.12.2007 affirming the Chhattisgarh State Electricity Regulatory Commission's order of 14.10.2005 granting SBPIL open access to wheel power from its captive plant to its sister concern SBMPL, on conditions, upheld. Pending applications disposed of; no order as to costs.