Summary
With the State's encouragement, Jindal Steel and Power supplied power from its captive plant to units in its Raigarh industrial park from 2004. In 2005 the Chhattisgarh Commission granted it a distribution licence under Section 14 of the Electricity Act, 2003 for the park and two villages. The Appellate Tribunal cancelled it, reading the Explanation to Rule 3 of the 2005 Distribution Rules as requiring a second licensee to cover an entire municipality or revenue district. The Supreme Court reversed. Read with the sixth proviso to Section 14 and the definition of 'area of supply', an 'area falling within' such a unit means an area inside it, not the whole unit. The licensed area within Raigarh district was the minimum area of supply, which the licensee had to serve, and the Commission had applied its mind.
Issues
- Whether the Explanation to Rule 3 of the Distribution of Electricity Licence (Additional Requirements) Rules, 2005 requires a second distribution licensee's area of supply to cover an entire municipal council, municipal corporation or revenue district.
- Whether the Appellate Tribunal was right to cancel the distribution licence granted to JSPL for its industrial park and two villages.
Provisions considered
- Section 14, sixth proviso, Electricity Act, 2003Allows two or more persons to be licensed to distribute electricity through their own systems 'within the same area', subject to additional requirements on capital adequacy, creditworthiness and code of conduct. 'Within the same area' means an area within the standard unit, not the whole of it. (¶¶ 31, 33, 35, 37, 41, 42)
- Section 2(3), Electricity Act, 2003'Area of supply' is the area within which the licence authorises supply. The area authorised in the licence is the minimum area of supply, and the licensee must serve it fully and not beyond it. (¶¶ 28, 38, 39, 44)
- Rule 3, Explanation, Distribution of Electricity Licence (Additional Requirements of Capital Adequacy, Creditworthiness and Code of Conduct) Rules, 2005The 'area falling within' a municipal council, municipal corporation or revenue district identifies the standard unit within which parallel licences may operate. Requiring the entire unit would render 'falling within' otiose. (¶¶ 34, 37, 40, 41, 43)
- Para 5.4.7, National Electricity Policy, 2005The provision on a minimum area for second licensees was noted, but it did not displace the reading that an authorised area within a revenue district satisfies the Rules. (¶¶ 29, 43)
Held
- The sixth proviso to Section 14 contemplates two or more licensees within the same area. The Explanation to Rule 3 fixes the standard unit (municipal council, municipal corporation or revenue district) within which that may happen, not the size of each licensee's area. (¶¶ 35, 37, 41)
- The area of supply authorised by the licence, falling within such a unit, is the minimum area of supply. A licensee must supply throughout that area and may not supply beyond it. (¶¶ 38, 39, 40, 44)
- Reading the Explanation to require the entire district or municipality would make 'area falling within' redundant and would conflict with 'within the same area' in the sixth proviso. The respondents' contention was rejected. (¶¶ 41, 42, 43)
- The Commission had consciously licensed JSPL for its industrial park and two villages within Raigarh revenue district, with service obligations. Its order showed application of mind, and the Tribunal erred in cancelling the licence. (¶¶ 44, 45, 46)
Result
Appeals allowed. The Appellate Tribunal's common judgment cancelling JSPL's distribution licence was set aside. Applicants seeking impleadment were left free to pursue other remedies, and parties were to bear their own costs.