Appellate Tribunal For Electricity
Chhattisgarh State Power Distribution ... vs Chhattisgarh State Electricity ... on 20 April, 2026
IN THE APPELLATE TRIBUNAL FOR ELECTRICITY
(Appellate Jurisdiction)
APPEAL NO.20 OF 2021
Dated: 20.04.2026
Present: Hon'ble Ms. Seema Gupta, Officiating Chairperson
Hon'ble Mr. Virender Bhat, Judicial Member
IN THE MATTER OF:
Chhattisgarh State Power Distribution Co. Limited
Vidyut Seva Bhavan,
Danganiya, Raipur - 492013, Chhattisgarh
Email: [email protected] ... Appellant
Versus
1. Chhattisgarh State Electricity Regulatory Commission
Through its Secretary
Irrigation Colony, Shanti Nagar,
Raipur - 492001, Chhattisgarh
Email: [email protected]
2. M/s Sarda Energy & Minerals Limited
Through Shri P.S. Dutta Gupta
1st Floor, Vanijya Bhawan, Jail Road,
Devendra Nagar Square,
Raipur - 492001, Chhattisgarh
Email: [email protected] ... Respondent (s)
Counsel on record for the Appellant(s) : Suparna Srivastava
Counsel on record for the Respondent(s) : Raunak Jain
for Res. 2
_______________________________________________________________________________
Appeal No.20 of 2021 Page 1 of 28
JUDGMENT
PER HON'BLE MR. VIRENDER BHAT, JUDICIAL MEMBER
1. The distribution company operating in the State of Chhattisgarh namely Chhattisgarh State Power Distribution Company Limited (in short CSPDCL) has come up in appeal against the order dated 28.01.2020 passed by 1st respondent Chhattisgarh State Electricity Regulatory Commission (hereinafter referred to as the Commission) whereby the Commission has held that the 2nd respondent M/s Sarda Energy & Minerals Limited along with its subsidiary M/s Sharda Minerals and Alloys Limited qualify as a captive user with regards to the captive power generating plant setup by the subsidiary company Sharda Minerals and Alloys Limited in the State of Andhra Pradesh and has directed the appellant to allow non- discriminatory open access to the 2nd respondent under sub-sections (2) & (3) of Section 42 of the Electricity Act, 2003 without imposition of cross subsidy surcharge. A further direction has been issued to the appellant to return the cross subsidy surcharge recovered so far from the 2nd respondent within 60 days of the passing of the order.
2. The appellant is the successor of the erstwhile Chhattisgarh State Electricity Board which had been constituted under Section 5 of the Electricity (Supply) Act, 1948 read with Section 58 of the Madhya Pradesh Reorganization Act, 2000. By virtue of the Chhattisgarh State Electricity _______________________________________________________________________________ Appeal No.20 of 2021 Page 2 of 28 Board Transfer Scheme Rules, 2008 and 2010 notified by the State government under Section 131 of the Electricity Act, 2003 which unbundled the Electricity Board into different companies with effect from 01.01.2009, the appellant has been functioning as the distribution licensee in the State and is performing all the functions as well as duties pertaining to distribution of electricity in the State.
3. The 2nd respondent is located at Raipur in the State of Chhattisgarh and is engaged, inter alia, in the business of iron and steel production. It has a 100% wholly owned subsidiary i.e. M/s Sharda Matels and Alloys Limited (in short SMAL) located in the State of Andhra Pradesh. This subsidiary company of 2nd respondent has set up an 80MW captive generating plant in the State of Andhra Pradesh from which it avails power for its own use. The 2nd respondent is also availing power from the said captive generating plant of SMAL through interstate open access.
4. It appears that the appellant levied cross subsidy surcharge (in short "CSS") upon 2nd respondent for the power received by it from the captive generating plant of its subsidiary SMAL in Andhra Pradesh through open access during the financial year 2017-18 and accordingly the 2nd respondent approached the Commission by way of a petition bearing no.42/2018 under Sections 9(2) and 42 of the Electricity Act, 2003 against such recovery of cross subsidy surcharge by the appellant and sought a direction to the _______________________________________________________________________________ Appeal No.20 of 2021 Page 3 of 28 appellant for refund of cross subsidy surcharge already recovered from the 2nd respondent.
5. The appellant contested the petition on the aspect of jurisdiction of the Chhattisgarh Commission to deal with the issue raised in the petition as well as on merits defending the liability of 2nd respondent to pay CSS. The appellant had objected to the jurisdiction of the Commission on following two counts: -
(a) The Chhattisgarh Commission lacked jurisdiction to declare the captive status of a generating plant which is located in the State of Andhra Pradesh i.e. beyond its territorial jurisdiction; and
(b) since the matter relates to inter-state distribution, jurisdiction to adjudicate the same lies with the Central Electricity Regulatory Commission.
6. The Commission held that it has the jurisdiction to adjudicate upon the dispute between the parties and also came to the conclusion that the users of the power produced in the captive generating plant in question i.e. the 2nd respondent as well as its subsidiary SMAL have more than 26% of ownership in the plant and consumed more than 51% of the aggregate electricity generated in the power plant and thus qualify as captive users envisaged under Rule 3 of the Electricity Rules, 2005 notified by the Central _______________________________________________________________________________ Appeal No.20 of 2021 Page 4 of 28 Government. The relevant portion of the impugned order is extracted hereinbelow: -
"...
As regards the consumption of electricity generated by the plant, the documents submitted by the petitioner issued by DISCOM and TRANSCO of Andhra Pradesh go on to prove that both the users i.e. M/s SMAL and M/s SEML together consumed 74 per cent (72 per cent and 2 per cent respectively) of the electricity generated.
Thus, the users in questions i.e. M/s SMAL and M/s SEML have more than 26 per cent of ownership of the plant and consume more than 51 per cent of the aggregate electricity generated by the power plant during FY 2017-18. It is worth mentioning that the provisions in Electricity Rules, 2005 do not contain any mandatory requirement of the users being located in the same state. The qualifying criteria mentioned in the Rules talks about captive user/ users owning not less than twenty six per cent of the ownership and consuming not less than fifty one per cent of the aggregate electricity generated in _______________________________________________________________________________ Appeal No.20 of 2021 Page 5 of 28 such plant. Thus, in the present case, both the conditions laid down in the Electricity Rules have been fulfilled for attaining captive status by the plant.
6. As regards the objection of the respondent regarding the jurisdiction of this Commission to declare the captive status, it is pertinent to mention here that the captive status of one of the users i.e. M/s SMAL has already been certified by the Andhra Pradesh Utilities. As far as the Chhattisgarh State DISCOM and M/s SEML are concerned, DISCOM, being a state distribution licensee, and M/s SEML, being a unit situated in the state, they fall within the jurisdiction of this Commission.
7. As regards the contention of the respondent that since the matter relates to inter-state dispute, the jurisdiction for adjudication lies with CERC, it is relevant to mention here that as per the Electricity Act, the jurisdiction of CERC lies over disputes relating to generation and sale of electricity in more than one State. The instant case is regarding levy of CSS in respect of a consumer, namely, M/s SEML which is located in Chhattisgarh, by the CSPDCL which is, again, a State _______________________________________________________________________________ Appeal No.20 of 2021 Page 6 of 28 Distribution licensee. Since the issue in hand is not a case of inter-state generation and sale of electricity and both the parties to the case are within the jurisdiction of this Commission i.e. the DISCOM being the State distribution licensee and M/s SEML being situated in Chhattisgarh, the respondent's objection as to jurisdiction of this Commission is not sustainable."
7. Accordingly, the Commission finally held as under: -
"8. Coming to the issue of levy of cross subsidy surcharge on the petitioner, the statutory provision, contained in Section 42 of the Act, provides that such surcharge shall 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.
9. In the light of the aforesaid, we are of the considered view that the petitioner, together with SMAL, is a captive user and direct the CSPDCL to allow the petitioner non-discriminatory open access under sub- section (2) and (3) of Section 42 of the Act and Rules _______________________________________________________________________________ Appeal No.20 of 2021 Page 7 of 28 without imposition of CSS. So far as the CSS recovered from the petitioner, the respondent is directed to return the same within 60 days from the date of order. Further, looking into the circumstances of the case, the petitioner is not entitled to any interest on this amount."
8. Feeling aggrieved by these findings arrived at by the Commission in the impugned order, instant appeal has been filed by the appellant.
9. Following issues have been raised by the appellant for determination in this appeal: -
(I) Whether a State Electricity Regulatory Commission performing its functions under Section 86 of the Electricity Act, 2003 is vested with the jurisdiction to determine the status of "captive consumption" by an entity situated within the State with respect to power drawn from a captive power plant situated outside the State?
(II) Whether the State Electricity Regulatory Commission performing its functions under Section 86 of the Electricity Act, 2003 has the jurisdiction to determine disputes arising in relation to payment of cross-subsidy surcharge by "captive users" situated in two _______________________________________________________________________________ Appeal No.20 of 2021 Page 8 of 28 different States and the captive generating plant also situated outside the State or the said jurisdiction vests with the Central Electricity Regulatory Commission performing its functions under Section 79 of the Act?
(III) Whether consumption of power by an entity situated in a State from the captive generating plant of 100% owned subsidiary company in another State qualifies as "captive use" under Rule 3 of the Electricity Rules, 2005 and accordingly by granted the benefit of exemption from payment of cross subsidy surcharge? (IV) Whether supply of power by a 100% wholly owned subsidiary from its captive generating plant situated in one State to its holding company situated in another State is a supply through inter-State open access to a consumer/non-captive user and therefore subject to payment of all open access including cross subsidy surcharge as laid down in the applicable Open Access Regulations of the other State?
10. We have heard learned counsels appearing for the appellant and 2nd respondent. We have also perused the impugned order of the Commission as also the written submissions filed by the learned counsels. _______________________________________________________________________________ Appeal No.20 of 2021 Page 9 of 28
11. We may note at the outset that during the hearing of the appeal, the learned counsel for the appellant fairly conceded on the basis of judgment of this Tribunal dated 31.05.2025 in appeal no.89 of 2019 M/s Bhadreshwar Vidyut Private Limited v. Maharashtra Electricity Regulatory Commission & Anr., that the challenge to the jurisdiction of the Commission in deciding the issues involved in the petition filed by the 2nd respondent does not survive at all, and therefore, the same is not being pressed.
12. Therefore, the only issue which arises for our consideration in the appeal is :-
"Whether supply of power by SMAL, a 100% wholly owned subsidiary of 2nd respondent from its captive generating plant situated in Andhra Pradesh to its holding company i.e. the 2nd respondent situated in another State i.e. Chhattisgarh can be considered as supply of power by a captive generating plant to a captive user through inter state open access and thus is exempt from payment of cross subsidy surcharge in view of fourth proviso attached to sub-Section 2 of Section 42 of the Electricity Act, 2003?"
13. Before adverting to and analysing the rival submissions of the learned counsels, we think it apposite to refer to the relevant statutory/regulatory provisions.
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14. Section 2(8) of the Electricity Act, 2003 defines "captive generating plant" to mean a power plant set up by any person to generate electricity primarily for his own use and includes a power plant set up by any co- operative society or association of persons for generating electricity primarily for use of members of such cooperative society or association.
15. Section 9(2) of the Act entitles a person, who has constructed a captive generating plant and is maintaining as well as operating such plant, to have open access for the purposes of carrying electricity from the plant to the destination of use. The only restriction of such entitlement is put by the proviso attached to this sub-section is with regards to the availability of adequate transmission facility.
16. "Open access" is defined in Section 2(47) of the Act to mean the non- discriminatory provision for the use of transmission lines or distribution system or associated facilities with such lines or system by any licensee or consumer or a person engaged in generation in accordance with the regulations specified by the Appropriate Commission.
17. Section 42(2) of the Act makes it mandatory for the State Regulatory Commissions to introduce open access subject to conditions including cross subsidy and other operational constraints. The fourth proviso attached to this sub-section is material and is extracted hereinbelow: -
_______________________________________________________________________________ Appeal No.20 of 2021 Page 11 of 28 "Provided also that such surcharge shall 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:"
18. Thus, as per the said fourth proviso attached to Section 42(2) of the Electricity Act, 2003, no surcharge is 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.
19. Rule 3 of the electricity Rules, 2005 notified by the Central Government on 08.05.2005 provide the requirements of a captive generating plant. The relevant portion of the said Rule is reproduced hereinbelow: -
"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 _______________________________________________________________________________ Appeal No.20 of 2021 Page 12 of 28
(ii) 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 cooperative 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;
........................................................................... ........................................................................... ........................................................................... (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 _______________________________________________________________________________ Appeal No.20 of 2021 Page 13 of 28 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."
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20. Thus, the requirements for qualifying as a captive generating plant laid down in the said Rule 3 of the 2005 Rules are that not less than 26% of the ownership of the plant is held by the captive user and not less than 51% of the aggregate electricity generated in the plant determined on an annual basis is consumed for the captive use. The term "captive user" has been defined to mean the end user of the electricity generated in the captive generating plant.
21. We may note that the definition of captive user has undergone changes by way of amendments to Rule 3(2) by way of notifications dated 30.06.2023 (1st amendment) and 01.09.2023 (2nd amendment), which would be discussed in the latter part of this judgment.
22. It is argued by learned counsel for the appellant that in view of the scheme of Electricity Act, cross subsidy surcharge is levied to meet the current level of cross subsidy in the State and therefore, the captive consumption of only those captive users who are situated within that State must be taken into consideration for exemption from payment of cross subsidy surcharge. She would submit that the consumption by users outside the State who, otherwise qualify the shareholding requirement under Rule 3 of 2005 Rules qua captive generating plant in the State, ought to be considered as consumption by non-captive user/consumer who are supplied _______________________________________________________________________________ Appeal No.20 of 2021 Page 15 of 28 power from captive generating plant through open access as they are the consumers of the distribution licensees in that other States and thus liable to pay cross subsidy surcharge to the distribution licensee operating in the area where they are situated.
23. On behalf of the 2nd respondent, it is argued that no such restriction, as sought to be placed by the appellant on the definition of captive user is found in the language used in Rule 3 of 2005 Rules. It is further argued that if the constricted interpretation propounded by the appellant is accepted it would totally negate the disposition granted to the captive generating plant under Section 9(2) and Section 42(2) of the Act thereby depriving them of the benefits available to the captive users under fourth proviso to Section 42(2) of the Act. It is argued that on a harmonious reading of Section 9 of the Act and Rule 3 of the 2005 Rules, it is manifest that the term "captive user"
appearing in Rule 3(2)(b) ought to be read as "captive users" and it was only in order to cure this defect in the Rule that the Central Government thought it necessary to amend the same by way of two amendments in the year 2023. Our Analysis: -
24. The conundrum of the appellant's case can be resolved only by meaningful interpretation of Sections 2(8) & 9(2) of the Electricity Act, 2003, along with Rule 3 of the Electricity Rules, 2005.
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25. We may note that a statute is an authentic expression of the legislative will, the function of the court being to interpret the same "according to the intent of them who made it." Interpretation of law is an intellectual activity, a form of activity which aims at explaining, expounding and ascertaining the meaning and scope of the statute. Thus, it is a well settled principle that a statute must be constituted to find out the intention of the legislature. The intention of the legislature can be gathered from the language used in the statute. Attention should be paid to what has been said as also to what has not been said. Any construction which requires, for its support, addition or substitution of words or which results in rejection of words as meaningless has to be avoided.
26. Where, by the use of clear and unequivocal language capable of only one meaning, anything is enacted by the legislature, it must be enforced, however harsh, absurd or contrary to common sense the result may be. Words in a statute must not be construed contrary to their ordinary meaning or to embrace/exclude certain situations or cases merely because no good reason appears for not doing so. The interpretation of statute is not to be done on the basis of any notions which may be entertained by the court as to what is just and expedient. The duty of the court is to expound the law as it stands and leave the remedy, if any required, to the legislature. _______________________________________________________________________________ Appeal No.20 of 2021 Page 17 of 28
27. Where the question arises as to the meaning of certain provision in a statute, it is not only legitimate but also proper to read the provision in the context of statute as a whole, the previous state of law, other statutes in pari materia and the mischief it was intended to remedy. In National Insurance Company v. Anjana Shyam (2007) 7 SCC 628 the Supreme Court held that in order to ascertain the meaning of a clause in a statute, the court must look at whole statute, at what precedes as well as what succeeds that clause and not merely the clause itself.
28. The principle that statute must be read as a whole is equally applicable to different parts of the same section also. The section must be construed as a whole whether or not one of the parts is a saving clause or a proviso.
29. The duty of the judicature is to act upon the true intention of the legislature. It is contrary to all the rules of construction to read words into an Act unless it is absolutely necessary to do so. The language of the statue must be read as it is. It is wrong and dangerous to proceed by substituting some other words for the words of the statute. To be precise, the court can not reframe the drafting of the legislation for the very good reason that it has no power to legislate. The interpreter is not entitled to read words into an Act of Parliament. The court cannot add or amend or make up deficiencies which are left there.
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30. As on one hand, it is not permissible to add words or to fill in a gap or lacuna, on the other hand efforts should be made to give meaning to each and every word or expression used by the legislature. The courts always presume that the legislature inserted every part of the statute thereof for a purpose and the legislative intention is that every part of statute should have effect. The legislature is deemed not to waste its words or to say anything in vain. A construction that attributes redundancy to the legislation is not acceptable. In Aswini Kumar Ghosh v Arabinda Bose AIR 1952 Supreme Court 369, the Supreme Court said that it is not a sound principle of construction to brush aside words in a statute as being inappropriate surplusage, if they can have appropriate application in circumstances conceivably within the contemplation of the statute.
31. In this backdrop, let us now proceed to examine and analyse the relevant provisions of the Electricity Act, 2003 and the Electricity Rules, 2005 framed thereunder.
32. 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 _______________________________________________________________________________ Appeal No.20 of 2021 Page 19 of 28 introduce newer concepts like "power trading" and "open access". The main features of the 2003 Act include delicencing of the electricity generation and allowing "captive generation".
33. Thus, the concepts of "open access" and "captive generation" were introduced in the Act of 2003 with a view to encourage private sector participation in generation, transmission and distribution of electricity.
34. "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 co- operative society or association of persons for generating electricity primarily for use of members of such co-operative society or association.
35. 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.
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36. Rule 3 of the Electricity Rules, 2005 prescribes requirements for a power plant to qualify as a "captive generating plant". The rule laws down that at least 26% of the ownership of the plant must be held by the captive user 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.
37. Rule 3(2)(b) defines "captive user" to mean the end user of the electricity generated in a captive generating plant.
38. There is nothing in the language used in Section 2(8) of the Electricity Act, 2003 and entire Rule 3 of Electricity Rules, 2005 to suggest that the captive generating plant and the captive user ought to be situated in the same State. No such implied restriction can be read into these two legal provisions when language/words used therein are clear, unambiguous and brook no anomaly. According to Rule 3(2)(b), the end user of the electricity generated in a captive generating plant would be captive user. It nowhere says that such end user of the electricity must be located in the same State in which the captive generating plant is situated.
39. Thus, plain and unambiguous language used in these two statutory provisions clearly indicates that it is not necessary that a captive generating _______________________________________________________________________________ Appeal No.20 of 2021 Page 21 of 28 plant and a captive user must be located in the same State. A captive generating plant may have been set up in one State and the captive user may be located in some other State. In case the intention of the legislature would have been that the captive generating plant and the captive user ought to be in the same State, it would have provided so specifically in Rule 3 while prescribing the requirements of a captive generating plant. Any contrary interpretation of these legal provisions would be adding words to the statute/rule which are not present there and thus, not permissible. It would also run contrary to the intention of the legislature.
40. Even Section 9 of the Electricity Act, 2003 also does not prescribe any such stipulation. Section 9(2) entitles a person, who has constructed a captive generating plant and is maintaining as well as operating such plant, to have open access for the purposes of carrying electricity from the plant to the destination of use. It nowhere says that the "destination of use" or the "end ser" must be located in the same State in which the captive generating plant has been set up.
41. Hence, in the instant case, the 2nd respondent does not lose the status of "captive user" merely for the reason that it is located in State of Chhattisgarh whereas the captive generating plant of its subsidiary SMAL is situated in the State of Andhra Pradesh.
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42. Now coming to another limb of the arguments of the learned counsel for the appellant that consumption of electricity by 2nd respondent, a holding company, cannot be added to the consumption of electricity by SMAL itself from its captive generating plant to say that requirements under Rule 3(1)(a) are fulfilled. We do not find any merit in the said argument. As we have already noted that the Parliament being aware about the financial and other constraints that may be experienced by private individuals in setting up captive generating plant, permitted the co-operative societies and associations of persons to set up such plants. First proviso to Rule 3(1)(a) provides that in case such a power plant is set up by a registered cooperative society, the requirement as to minimum 26% ownership of the plant and minimum 51% consumption of electricity generated from the plant for captive use on annual basis, shall be satisfied collectively by all the members of the society. Meaning thereby that the percentage of ownership of the plant and the percentage of consumption of the electricity generated from it by each member of the society has to be added up in order to arrive at the total collective figure to ascertain whether these twin requirements are fulfilled.
43. Similarly, in case of Association of Persons, as per the second proviso attached to Rule 3(1)(a), the aggregate percentage of ownership in the plant of all the persons comprising the association and their respective consumption of power in proportion to their shares in ownership in the power _______________________________________________________________________________ Appeal No.20 of 2021 Page 23 of 28 plant is to be considered for ascertaining the status of such power plant as a captive generating plant.
44. Therefore, we do not see any reason as to why the ownership percentage in a power plant and consumption percentage of electricity generated therein of a holding company and subsidiary company can not be added up to arrive at the figures of 26% and 51% respectively specified in Rule 3(1)(a).
45. Further, we also find Rule 3(2)(c) very material on this aspect. It defines "ownership" in relation to a generating station or power plant set up by a company or any other body corporate to mean the equity share capital with voting rights.
46. In the instant case, it is not disputed that SMAL is the 100% wholly owned subsidiary of the 2nd respondent which means that all the equity shares of SMAL are held by 2nd respondent in its name. Therefore, by virtue of definition of "ownership" of a generating station or a power plant in Rule 3(2)(c), it is the 2nd respondent which owns the captive generating plant set up by SMAL as it has 100% equity shareholding in SMAL. Therefore, both the 2nd respondent and SMAL being the owners of the captive generating plant in question, the Commission has not committed any error by holding in the impugned order that both these entities have more than 26% of _______________________________________________________________________________ Appeal No.20 of 2021 Page 24 of 28 ownership in the power plant and consume more than 51% of the aggregate electricity generated by the power plant thereby fulfilling the criterion envisaged in Rule 3(1)(a).
47. Let us now turn to the amendments to Rule 3 notified in the year 2023. By way of first amendment notified on 30.06.2023, clause (b) appearing after the explanation in Rule 3(2) was substituted by following clause: -
"(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:
Provided that the consumption of electricity by the captive user may be either directly or through Energy Storage System: Provided further that the consumption by a subsidiary company, as defined in clause (87) of section 2 of the Companies Act, 2013 (18 of 2013), of a company which is an existing captive user shall also be admissible as captive consumption by the captive user."
48. Thus, by inserting second proviso to clause (b) of explanation, consumption by a subsidiary company was made admissible as captive _______________________________________________________________________________ Appeal No.20 of 2021 Page 25 of 28 consumption by the captive user to arrive at figure of minimum 51% laid down in Rule 3(1)(a)(ii).
49. The said clause (b) was again amended by way of notification dated 01/09/2023 by substituting the second proviso by following:-
"Provided further that the consumption by a subsidiary company as defined in clause (87) of section 2 of the Companies Act, 2013 (18 of 2013) or the holding company as defined in clause (46) of section 2 of the Companies Act, 2013 (18 of 2013), of a company which is a captive user, shall be admissible as captive consumption by the captive user."
50. The newly substituted second proviso, thus, provided that consumption of both, a holding company as well as a subsidiary company of a company which is captive user, shall be admissible as captive consumption by the captive user to arrive at the figure of minimum 51% as stipulated in Rule 3(1)(a)(ii).
51. Referring to these amendments to Rule 3, it was argued by learned counsel for the appellant that the Commission has applied in the year 2020 what was not there in the statute at that time and what was engrafted in the said Rule 3 in the year 2023 by virtue of these amendments and thus, the _______________________________________________________________________________ Appeal No.20 of 2021 Page 26 of 28 impugned order is patently erroneous which can not be sustained. The argument though appears to be attractive in first blush but evaporates in thin air upon closer scrutiny.
52. It is manifest from our discussion in the foregoing paragraphs that even unamended Rule 3 envisaged combining of the consumption of electricity by a holding company and its subsidiary company, generated by a captive generating plant set up by either of the two, to arrive at the figure of minimum 51% consumption stipulated under Rule 3(1)(a)(ii) where the equity shareholding of the holding company in the subsidiary is more than 26%. What the amendments have done is to clear this position. The amendments are, thus, only clarificatory in nature and do not introduce any new thing in Rule 3 which was not envisaged thereunder before the amendments.
53. It was also argued on behalf of the appellant that Chhattisgarh Regulatory Commission had no power or jurisdiction to declare the captive status of a generating station situated in Andhra Pradesh and therefore, the impugned order suffers from infirmity on this count also. In this regard we may note that status of the generating plant in question as 'captive' and that of SMAL as 'captive user' was already certified by the Andhra Pradesh utilities. What the Chhattisgarh Commission has done in the impugned order is to declare 2nd respondent as "captive user" in relation to the captive generating plant of SMAL. The Commission was competent to do so as _______________________________________________________________________________ Appeal No.20 of 2021 Page 27 of 28 there was dispute in this regard between the appellant and 2nd respondent and both were within the jurisdictional area of the Commission.
54. The issue formulated in paragraph no. 12 hereinabove stands answered accordingly.
Conclusion: -
55. Having regard to the above discussion we do not find that the Commission has committed any error either on facts or on law. The appeal is sans any merit and is dismissed as such.
Pronounced in the open court on this the 20th day of April, 2026.
(Virender Bhat) (Seema Gupta)
Judicial Member Officiating Chairperson
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REPORTABLE / NON-REPORATBLE
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