Andhra HC (Pre-Telangana)
A.P. Gas Power Corporation Ltd. vs A.P. State Electricity Regulatory ... on 8 June, 2001
Equivalent citations: 2001(4)ALT561
ORDER Motilal B. Naik, J.
1. In all these civil miscellaneous appeals, the order passed by the Andhra Pradesh Electricity Regulatory Commission, Hyderabad in OP No.6 of 1999 dated 7-7-2000 is assailed on various grounds.
2. Appellant in CMA No. 1971 of 2000 is the A.P. Gas Power Corporation Limited (for brevity "the company") and the appellants in other CMAs are its shareholders. Since a common issue has been raised in all these appeals, we dispose of all these appeals by this common judgment.
3. Few facts which are germane for the effective adjudication of the issues involved in these appeals are traced hereunder:
The A.P. State Electricity Board (for short "the Board") conceived setting up a 3 x 33 MW gas based combined cycle power station at Vijjeswaram as it could not muster adequate funds required for establishing a generating station which is highly capital incentive. A proposal was, therefore, mooted by the State Government and the Board to invite private participation in the venture to make it a joint venture, in the year 1988 when the State was reeling under severe power crisis. This proposal made by the Government and the Board was a blessing in disguise for some of the heavy industries severely affected by shortage of power. Initially, six heavy industries viz., the Andhra Sugars Ltd., Sree Vishnu Cements Ltd., Nava Bharat Ferro Alloys Ltd., VBC Ferro Alloys Ltd., Mishra Dathu Nigam Ltd., (Midhani, a Govt. of India Undertaking) and Panyam Cements and Mineral Industries Limited accepted the proposal to set up a separate company to generate the electricity to be shared among the company's shareholders comprising the six industries and the Board. Accordingly, a memorandum of understanding (MOU-I) was entered into on 17-10-1988 among the participating industries and the Board who have invested in the equity share capital. It was agreed that the Board should be given 26% share and the other participating industries has different percentage of share in the electricity generated in proportion to their equity share capital.
4. The incorporation of the company was based on the principle of collective captive power plant which is intended to meet the captive requirement of the participating industries. After the incorporation of the company, several permissions were obtained. The company entered into two MOUs on 17-10-1998 and 19-4-1997 which clearly provided for the power generated to be shared only amongst the share-holders and their sister concerns. The other correspondence include the letter dated 30-10-1990 of the company addressed to the Government of Andhra Pradesh wherein it was request that the company may be treated as a collective captive power plant under Section 44 of the Electricity Supply Act instead of treating it as a licensee. Yet another correspondence dated 26-4-1996 with the Central Electricity Authority wherein it has been accepted by the Central Electricity Authority that M/s. A.P. Gas Power Corporation Limited has been formed on the basis of collective captive generation principle. The main object of the company is to set up, operate and supply power from the proposed station to all the industries which are its shareholders.
5. The company having been set up under such background has been running the Generation Station under Stage-I and had also expanded its operations like construction of another generation station under Stage-II to a capacity of 160 MW. The company is strictly adhering to the terms of the two MOUs governing the generation and allotment of power generated by the company in the two stages.
6. Two enactments viz., the Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948 were governing the field pertaining to electricity. While so, the A.P. State Legislature passed A.P. Electricity Reform Act, 1998 (for brevity "the Reform Act") through which the regulatory power which was hitherto vested in the State Government stood transferred to the Regulatory Commission, though the power to issue policy directives of the Commission is vested in the State Government under Section 12 of the said Act.
7. Before the Commission was constituted, the State Government had granted provisional licence to all the generating companies including the appellant company in CM A No. 1971 of 2000, under Section 14(4) of the Reform Act and pursuant to the constitution of the Regulatory Commission, the Commission has asked the appellant company to apply for a regular licence. Under a mistaken impression that the company is liable to obtain licence, it had filed an application under Section 16 of the Reform Act, 1998 to exempt it from the requirement of obtaining a supply licence. However, during the course of hearing of the application filed under Section 16 of the Reform Act before the Regulatory Commission, the company realised, on advice, that being a generating company and having been authorised by the Government which is an authority under the Electricity (Supply) Act, 1948 to sell electricity, it need not obtain a licence and that it does not fall within the regulatory jurisdiction of the Commission. Having realised this, the company filed a memo seeking permission to withdraw its application filed under Section 16 of the Reform Act for exemption. Apart from that, on behalf of the company, the following contentions were raised before the Regulatory Commission, viz., (1) The company is a generating company and does not require a licence to generate electricity under Section 3 of the Indian Electricity Act, 1910 or a licence under Section 14 of the Reform Act, 1998 to transmit and supply electricity nor does it require any exemption under Section 16 of the Reform Act;
(2) The Commission has no power to control the tariff, terms and conditions of supply of electricity by generating companies;
(3) The three statutes, viz., the Indian Electricity Act, 1910, the Electricity (Supply) Act, 1948 and the Reform Act, 1998 distinguish between licensees and generating company and therefore, the regulatory commission cannot compel the company to subject to its jurisdiction either under Sections 14, 15 or 16 of the Reform Act;
(4) By virtue of Section 26-A and Section 43(A)(1)(c) of the Electricity (Supply) Act, the company falls within the exception contained in Section 16(1) of Reform Act and therefore, there is no need for the company to either obtain a licence or exemption under the Reform Act.
8. The Regulatory Commission, however, passed a detailed order on 7-7-2000 in OP No.6 of 1999 rejecting various contentions raised by the company, holding that the company is liable to obtain licence and the company is under legal obligation to seek exemption if it does not seek licence for continuation of its activity. The Commission while granting exemption for a period of two years, inter alia, imposed certain conditions which include that the sister concerns of the shareholders are not entitled to receive the power generated by the company and that only 22 industries which were the shareholders as on 1-9-1999 shall be entitled to receive the power from the company though many more industries have become shareholders subsequently.
9. Aggrieved by the said order dated 7-7-2000 made in OP No.6 of 2000 by the Regulatory Commission, the A.P. Gas Power Corporation Limited has filed CMA No.1971 of 2000 whereas the other share-holders have filed the other appeals.
10. We have heard Sri K.K. Venugopal, learned senior Counsel along with Sri C. V. Nagarjun Reddy, Counsel for the appellant in CMA Nos. 1971, 2079, 2082, and 2326 of 2000, Sri Kapil Sibal, learned senior Counsel along with Sri B. Adinarayana Rao, Counsel for the appellant in CMA No.3016 of 2000 and Sri Mohan Parasaran, learned senior Counsel along with Smt. C. Sindhu Kwnari, Counsel for the appellant in CMA No.3017 of 2000. We have also heard Sri V.R. Reddy, learned senior Counsel along with Sri B. V. Ram Mohan Rao, Counsel for the respondent-A.P. Regulatory Commission and Sri E. Manohar, learned senior Counsel along with Sri K.N. Jwala, Counsel appearing on behalf of the respondent-A.P. Transmission Corporation.
11. Written arguments are also made available on behalf of the Appellant in CMA Nos.1971 and 3016 of 2000 and also on behalf of the Regulatory Commission to the extent possible. All the learned senior Counsel have taken pains, taking us to various provisions of the Indian Electricity Act, 1910, Electricity (Supply) Act, 1948 and also the A.P. Electricity Reform Act, 1998. Learned senior Counsel have also drawn our attention to various judicial pronouncements supporting their respective contentions. Even though extensive submissions are made by all the learned senior Counsel ventilating their points of view touching minute details, we are of the view, the principle issue to be decided in these appeals is:
Whether the A,P. Gas Power Corporation Limited - appellant in CMA No.1971 of 2000 is required to obtain licence or exemption under Section 15 or 16 of the A.P. Electricity Reform Act, 1998 for its activities?
Learned senior Counsel appearing on behalf of the appellant-company contended that there is no need for the APGPCL to obtain licence or exemption under Section 15 or 16 of the Reform Act, 1998 in view of Section 26-A of the Electricity (Supply) Act, 1948 read with Section 14 of the Reform Act, 1998. It is submitted that prior to the enactment of the Reform Act, 1998, in tenns of Section 28 of the Indian Electricity Act, 1910, no person other than a licensee would engage in the business of supply of energy to the public except with the previous sanction of the State Government in accordance with such conditions as the State Government may fix. In other words, according to the learned senior Counsel, prior to the enactment of the Reform Act, a person intending to supply energy to public should either have a licence under Section 3 of the Indian Electricity Act or a sanction under Section 28 of the said Act from the State Government. As an exception to this, Section 26-A(l) of the Electricity (Supply) Act, 1948 provided that nothing in the Indian Electricity Act should be deemed to require a generating company to take out a licence under that Act, or to obtain sanction of the State Government for the purpose of carrying on any of its activities. It is further submitted that the APGPCL is a generating company as defined in the Electricity (Supply) Act and so it does not require a licence or a sanction from the State Government under the Indian Electricity Act by virtue of Section 26-A of the Electricity (Supply) Act. Learned senior Counsel also submitted that this position continued even after enactment of the Reform Act and the same has also been recognised by the Reform Act under Section 14(1).
12. Learned senior Counsel nextly submitted that on 23-6-2000 the Government of Andhra Pradesh has consented to the APGPCL to sale of energy to its shareholders and sister concerns and the appellant company being a generating company need not submit to the authority of the Regulatory Commission. Learned senior Counsel therefore, submitted that the Government of Andhra Pradesh clarified by proceedings dated 11-5-2000 that the APGPCL was carrying on its operation, generation and supply of energy to participating industries and sister concerns as per the Memorandum of Understanding and that the Government of Andhra Pradesh has also issued a formal consent letter under Section 43-A(1)(c) of the Electricity (Supply) Act by clarifying that such arrangement would continue in future also. Learned senior Counsel, submitted that in view of the provisions under Section 26-A and 43-A(l)(c) of the Supply Act, a generating company can sell power to any other person subject to the consent of the Government and when the Government has given consent on 23-6-2000 to the APGPCL, the Regulatory Commission has absolutely no power to interfere with the arrangements made with the Government by the APGPCL.
13. Sri V.R. Reddy, learned senior Counsel along with Sri B. V, Ram Mohan Rao, appearing on behalf of the Regulatory Commission, on the contrary, repelled the contention advanced on behalf of the appellants by submitting that the main object as incorporated in the Memorandum of Association of the company as indicated above, incorporates several activities besides establishment, operation and maintenance of a generating station. It is submitted that one such inclusion is the distribution and supply of energy generated to shareholders and consumers. According to the learned senior Counsel, the definition of a generating company under Section 2(4-A) of the Electricity (Supply) Act prior to its amendment in 1991, a generating company may only be a company set up by either the Central Government or State Government or jointly by Central Government and a State Government or by two or more State Governments and registered under the Companies Act. Thus, only Government could form a generating company prior to 1991 and as such, APGPCL was not a generating company to begin with and until 1991. Elaborating his submissions, learned senior Counsel further took us to the expression 'Generating Company' appearing in Section 2(4-A) of the Electricity (Supply) Act as amended by Act 50 of 1991 with effect from 15-10-1991 and stated it to mean a company registered under the Companies Act, which has among its objects establishment, operation and maintenance of generating stations. The main objects and duties of generating companies are enumerated in Sections 15-A and 18-A of the Electricity (Supply) Act and the activities undertaken by the appellant-APGPCL i.e., supplying energy to the end-users are not covered within the scope of Sections 15-A and 18-A of the Supply Act, and therefore, it requires a licence or exemption under Section 15 or 16 of the Reform Act, 1998.
14. According to Sri V.R. Reddy, learned senior Counsel, supply of electricity requires a licence under Section 3 of the Indian Electricity Act or under Section 14 of the Reform Act. The Electricity laws, viz., Indian Electricity Act, Electricity (Supply) Act or Reform Act do not provide for a licence to be taken for engaging in the business of generation of electricity. Section 26-A of the Electricity (Supply) Act expressly states that "nothing in the Indian Electricity Act, 1910 shall be deemed to require a generating company to take out a licence under that Act or to obtain sanction of the State Government for the purpose of carrying on any of its activities. Learned senior Counsel submifted that the contention of the appellant-company that it does not require a licence under the Reform Act for sale or supply of electricity to public viz., end of users/consumers in view of Section 26-A of the Electricity (Supply) Act is untenable.
15. Before we set out to decide the principal issue raised, it would be appropriate to refer to certain facts relating to the formation of A.P. Gas Power Corporation Limited.
16. The A.P. Gas Power Corporation Limited was formed taking over a generating station of the erstwhile APSEB. The takeover was approved by the Government of Andhra Pradesh as well as the Government of India, Ministry of Power on certain terms and conditions. The APGPCL was conceived as joint venture between the APSEB, certain public sector undertakings and certain private companies and incorporated with the Registrar of Companies, Hyderabad on 31-10-1988.
17. Under clause-III(A) of Memorandum of Association, the main objective of APGPCL is:
"to generate, harness, develop, accumulate, distribute and supply electricity by setting up Thermal Power plants by use of liquid and gaseous fuels for the purpose of light, heat, motive power and for all other purposes for which electric energy can be employed and to transmit, distribute and supply such power either directly or through transmission lines and facilities of the Andhra Pradesh State Electricity Board to industries and to other consumers of electricity and generally to develop, generate accumulate power at any other place or places and to transmit, distribute, sell and supply such power".
18. On 17-10-1988, another object was given effect to a certain Memorandum of Understanding entered into between the APSEB and the participating industries. The said MOU regulated the relations between APGPCL, APSEB and the participating industries. The main provision related to sharing of power generated by APGPCL between the participating industries and the APSEB in proportion to their paid-up share capital. There is also a provision enabling the participating industries to transfer their share of energy and power from APGPCL to their group concerns located in the State of Andhra Pradesh under certain conditions. The above Memorandum of Understanding was in regard to Phase-I of APGPCL's operation.
19. For the Phase-II activity, a separate Memorandum of Understanding was entered into between APSEB and the participating industries in 1997 with an important change that the provision relating to transfer of power/energy to 'group concerns' has been replaced by 'transfer of power/energy to sister concerns' which are defined as concerns under the same management as defined in Section 370(1)(B) of the Companies Act.
20. The number of participating industries in the APGPCL originally was 21 apart from the APSEB. The number of participating industries increased or decreased from time to time. Some new participants were included from time to time and some old participants were excluded. As on the date of application under Section 16 of the Reform Act, 1998 to the Regulatory Commission, the number of participating industries were 32 apart from the APSEB. The number of group sister concerns to whom supply was given also changed from time to time. An interesting feature was from time to time, some of the participants did not receive any power nor did they transfer the power to any sister concern.
21. Objective (III-A) in the Memorandum of Association was amended on 24-11-1989 to read as under:
"to obtain approval from APSE Board under Section 44 of the Electricity (Supply) Act, 1948, for establishment of Gas Board Thermal Power Station at any place in the State of Andhra Pradesh to generate and supply electrical energy exclusively for the use of shareholders of the company through transmission lines of APSE Board and to take over any Gas Based Thermal Power Station whether under construction or in operation at any place in Andhra Pradesh for the said purpose, either from APSE Board or from any other persons".
22. This clause (objective IIl-A) was again amended on 20-8-1993 which reads as under:
"To generate, harness, develop, use, sell, supply and distribute electricity by setting up power plants anywhere in India using Thermal, Hydel, Solar, Wind Energy or any other Natural Resources, Conventional or Non-Conventional; also to transmit, distribute and supply such power to industries and other consumers of electricity either directly or through the facilities of Andhra Pradesh State Electricity Board".
23. It is seen that the original clause in the Memorandum of Association conceives of generation, distribution and supply of electricity and supply to industries and other consumers of electricity. The amendment of 24-11-1989 speaks of generation and supply of electrical energy exclusively for the use of the shareholders of the company. The further amendment of 20-8-1993 virtually restores the earlier position by making a provision to self, supply and distribute electricity to industries and other consumers of electricity.
24. The electricity subject is included at entry 38 of the concurrent list of the Constitution of India. The earliest Act governing the electricity subject is the Indian Electricity Act, 1910. At that time, the generation was completely in the hands of the Government agencies. That was obviously the reason why there was no provision in the entire Act relating to the generation of electricity. The said Act of 1910 mainly contains two provisions relating to supply, viz., Sections 3 and 28. Under Section 3 of the said Act, the State Government was empowered to grant licences to any person to supply electricity in a specified area, subject to the conditions envisaged in the section. Under Section 28, the Government is empowered to accord sanction to persons other than licensees to engage in the business of supplying energy to the public. Another Act, viz., Electricity (Supply) Act, 1948 which'came into force in the year 1948 provided for constitution of Electricity Boards in each State and the Boards are entrusted with the functions ofgeneration and supply of electricity, though the concept of licensee as envisaged in the 1910 Act is continued under the Supply Act subject to certain conditions. The State Electricity Boards have been setting up generating stations laying transmission and distribution lines and directly involved in the supply of electricity to the consumers.
25. By Amendment Act 115 of 1976, the concept of generating companies is introduced by inserting sub-section (4-A) to Section 2 of 1948 Act. However, as per the definition, only the Central Government or State Governments could set up generating companies. With the introduction of the concept of generating companies, certain new provisions such as Section 15-A relating to the objects, jurisdiction of generating companies, Section 18-A pertaining to the duties of generating companies, Section 26-A which, inter alia, exempts generating companies from obtaining licence and Section 43(3) under which a generating company can enter into a contract for sale of electricity generated by it with the consent of the competent Government or Governments were inserted in the 1948 Act by the said Amendment Act. In the year 1991, the provisions of 1948 Act were further amended by permitting generation of electricity in private sector consequent on the policy of liberalisation. While Section 2(4-A) was amended for this purpose including any company registered under Companies Act, 1956 and which has among its objects establishment and operation and maintenance of generating stations within the definition of 'generating company', Section 43(3) was deleted and a new provision by way of Section 43(A) was inserted as a substitution. However, there is no change in the other provisions of the Act which were introduced in the year 1976. A significant change in the scheme of the 1948 Act is discernible from the 1976 amendments which were made consequent upon the origin of generating companies.
26. For the purpose of appreciating the issue involved in these appeals, it is also necessary to extract the relevant provisions contemplated under Sections 15-A, 18-A and 26-A and 43-A of the Electricity (Supply) Act, 1948 and Sections 14, 15 and 16 of the A.P. Electricity Reform Act, 1998.
Section 15-A of Electricity (Supply) Act, 1948: Objects, jurisdiction, etc., of Generating Companies :--
(2) The objects of a Generating Company shall include,--
(a) establishment, operation and maintenance of generating stations and tie-lines, sub-stations, and main transmission lines connected therewith;
(b) operation and maintenance of such generating stations, tie-lines, sub-stalions and main transmission lines as are assigned to it by the competent Government or Governments.
(3) The Generating Company shall carry on its activities within such areas as the competent Government or Governments, as the case may be, may from time to time, specify in this behalf;
(4) xxx x Section 18-A, Duties of Generating Company :--(1) Subject to the provisions of this Act, a generating company shall be charged with the following duties, namely-
(a) to establish, operate and maintain such generating stations and tie-lines, substations and main transmission lines connected therewith, as may be required to be established by the competent Government or Government in relation to the generating company;
(b) to operate and maintain in the most efficient and economical manner the generating stations, tie-lines, substations and main transmission lines, assigned to it by the competent Government or Governments in coordination with the Board or Boards as the case may be, and the Government or agency having control over the power system, if any connected therewith; and
(c) to carry out subject to the provisions of Section 21, detailed investigations and prepare schemes, in co-ordination with the Board or Boards, as the case may be, for establishing generating stations and tie-lines, sub-stations and transmission tines connected therewith, in such manner as may be specified by the Authority.
(2) Without prejudice to the generality of its duties under Section 18, the Board shall, until a generating company begins to operate in any State, perform the duties of a generating company under this Section in that State.
Section 26-A : Applicability of the provisions of Act 9 of 1910 to Generating Company :--(1) Notwithstanding anything contained in sub-section (2), nothing in the Indian Electricity Act, 1910 (9 of 1910) shall be deemed to require a generating company to take out a license under that Act, or to obtain sanction of the State Government for the purpose of carrying on any of its activities.
(2) Subject to the provisions of this Act, Sections 12 to 19 (both inclusive) of the Indian Electricity Act, 1910 (9 of 1910) and clauses XIV to XVII (both inclusive) of the Schedule thereto, shall, as far as may be, apply in relation to a generating company as they apply in relation to a licensee under that Act (hereafter in this section referred to as the licensee) and in particular a generating company may, in connection with the performance of its duties, exercise-
(a) all or any of the powers conferred on a licensee by sub-section (1) of Section 12 of the Indian Electricity Act, 1910 (9 of 1910) as if-
(i) the reference therein a licensee were a reference to the Generating Company;
(ii) the reference to the terms and conditions of licence were a reference to the provisions of this Act and to the articles of association of the generating company; and
(ii) the reference to the terms and conditions of licence were a reference to the provisions of this Act and to the articles of association of the generating company; and
(iii) the reference to the area of supply were a reference to the area specified under sub-section (3) of Section 15-A in relating to the generating company;
(b) all or any of the powers conferred on a licensee by sub-section (1) of Section 14 of the Indian Electricity Act, 1910 (9 of 1910), as if-
(i) the references therein to licensee were references to the generating company; and
(ii) the generating company had the powers of a licensee under the said Act.
(3) The provisions of Section 30 of the Indian Electricity Act, 1910 (9 of 1910) shall not apply to the transmission or use of energy by a generating company.
(4) For the removal of doubts, it is hereby declared that Sections 31 to 34 (both inclusive) of the Indian Electricity Act, 1910 (9 of 1910) shall apply to a generating company.
43-A. Terms, conditions and tariff for sale of electricity by Generating Company :--(1) A generating company may enter into a contract for the sale of electricity generated by it-
(a) with the Board constituted for the State or any of the States in which a generating station owned or operated by the company is located;
(b) will) the Board constituted for any other State in which it is carrying on its aclivities in pursuance of subsection (3) of Section 15-A; and
(c) with any other person with consent of the competent Government or Governments.
(2) The tariff for the sale of electricity by a generating company to the Board shall be determined in accordance with the norms regarding operation and the Plant Load Factor as may be laid down by the Authority and in accordance with the rates of depreciation and reasonable return and such other factors as may be determined, from time to time, by the Central Government, by notification in the Official Gazette :
Provided that the terms, conditions and tariff for such sale shall, in respect of a generating company wholly or partly owned by the Central Government, be such as may be determined by the Central Government and in respect of a generating company wholly or partly owned by one or more State Governments be such as may be determined, from time to time, by the Government or Governments concerned.
Section 14 of the Reform Act. 1998:
14. Licensing :--(1) No person, other than those authorised to do so by licence or by virtue of exemption under this Act or authorised to or exempted by any other authority under the Electricity (Supply) Act, 1948, shall engage in the State in the business of,--
(a) transmitting electricity; or
(b) supplying electricity.
(2) Where any difference or dispute arises as to whether any person is engaged or is not engaged or about to engage in the business of transmitting or supplying electricity as specified in sub-section (1), the matter shall be referred to the commission and the decision of the commission shall be final.
(3) The commission shall have the power to order any unlicensed person to cease operating and disconnect its apparatus.
(4) Notwithstanding anything contained in any other provisions of this Act and until the establishment of the commission in terms of Section 3, the State Government shall have the power to grant provisional licences under this section having a duration not exceeding twelve months to any person or persons to engage in the State in the business of transmission or supply of electricity on such terms and conditions as the State Government may determine consistent with the provisions of this Act, subject to the following conditions, namely:-
(a) Upon the establishment of the Commission, each of the provisional licences granted by the State Government shall be placed before the Commission and shall be deemed to constitute an applicalion for grant of a licence by the Commission under the provisions of this Act; and
(b) Each provisional licence granted under this section shall cease to be valid from the date notified by the Commission.
(5) The State Government, shall be entitled to confer on the provisional licensees under sub-section (4) such powers, rights and authorisation as the Commission is entitled to grant to the licensees under this Act.
15. Grant of licences by the Commission :--(1) The Commission may on an application made in such form and on payment of such fee, as may be prescribed grant a licence authorising any person to,--
(a) transmit electricity in a specified area of transmission; or
(b) supply electricity in a specified area of supply including bulk supply to licensees or any person.
(2) in respect of the grant of any such licence the following procedure shall be followed namely:-
(a) any person applying for a licence shall publish a notice of his application in such manner, and with such particulars as may be prescribed by the Commission within 14 days after making the application;
(b) the Commission shall not grant a licence until,--
(i) all objections received relating to the application for the licence have been considered by the commission; provided that no objection shall be considered by the Commission unless it is received within three months of the date of the first publication of the notice under clause (a) above; and
(ii) in the case of an application for a licence to supply or transmit in a area which includes the whole or part of any cantonment, aerodrome, fortress, arsenal, dockyard or camp or of any building or place in the occupation of the Central Government for defence purposes, the Commission shall ascertain whether there is any objection to the grant of the licence on the part of the Central Government;
(c) Where an objection is received from any local authority concerned, the Commission shall, if in its opinion the objection is insufficient, record in writing and communicate to such local authority its reasons for such opinion; and
(d) No application for a licence shall be made by any local authority except pursuant to a resolution passed at a meeting of such authority held after one month's previous notice of the same specifying the purpose thereof has been given in the manner in which notices of meetings of such local authority are usually given.
(3) A licence shall prescribe the duration, extent to which and the terms and conditions under which the transmission or supply of energy is to be made and contain such other conditions as the Commission may consider appropriate for achieving the purpose of the Act.
(4) Without prejudice to the generality of sub-section (3), the conditions included in a licence by virtue of that sub-section may require the licensee to,--
(a) enter into agreements on specified terms with other person for the use of any electric lines, electrical plant or plants and associated equipment operated by the licensee;
(b) comply with any direction given by the Commission;
(c) act in accordance with the terms of the licence;
(d) refer all disputes arising under the licence for determination by the Commission;
(e) furnish information, documents and details which the Commission may require of its own purpose or for the purposes of the Central or State Government or Central Electricity Authority;
(f) comply with the requirements of the Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948 or rules framed thereunder insofar as they are applicable;
(g) undertake such functions and obligations of the Andhra Pradesh State Electricity Board under the provisions of the Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948 as the Commission may prescribe;
(h) obtain the approval of the Commission of such things that are required under the licence conditions or for deviation from the same;
(i) notify the Commission of any scheme that he is proposing to undertake including the schemes in terms of the provisions of the Electricity (Supply) Act, 1948;
(j) purchase power in an economical manner and under a transparent power purchase process; and
(k) supply in bulk to other licensees or to customers.
(5) Without prejudice to the generality of sub-section (3), the conditions included in a licence granted by the Commission may require the holder of such a licence to establish a tariff or to calculate its charges from time to time in accordance with the requirements prescribed by the Commission.
(6) The provisions contained in the Schedule to the Indian Electricity Act, 1910 shall be deemed to be incorporated with, and to form part of every supply licence granted under this Part save insofar as they are expressly varied or excepted by the supply licence and shall, subject to any such additions, variations or exceptions which the Commission is empowered to make having regard to the purposes of the Act, apply lo the undertaking authorised by the license in relation to its activities in the State :
Provided that where a supply licence is granted by the Commission for the supply of energy to other licensees for distribution by them, then insofar as such licence relates to such supply, the provisions of clauses IV, V, VI, VII, VIII and XII of the said Schedule shall not be deemed to be incorporated within the supply licence.
(7) The conditions included in a licence may contain provision for the conditions to cease to have effect or be modified at such times, in such manner and in such circumstances as may be specified in or determined by or under the conditions.
(8) Any provisions included by virtue of sub-section (7) above in a licence shall have effect in addition to the provision made by sub-section (5) of Section 18 and Section 19 with respect to the amendment of the conditions of a licence.
(9) Unless indicated in the terms of a licence, the grant of a licence under this section to a person shall not in any way hinder or restrict the grant of a licence to another person within the same area of supply for a like purpose and accordingly the licensee shall not claim any exclusivity.
(10) The licence granted by the Commission in terms of this Act may provide that the licensee shall have the powers and authority to take appropriate actions for revenue realisation, prosecution for theft, meter tampering, diversion of electricity and all such and similar matters affecting the distribution and supply of electricity to the consumer.
(11) The Commission shall be entitled to authorise the licensees and persons to exercise such power and authority as the licensees and persons could be given under the provisions of the Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948.
16. Exemptions from the requirement to have a licence :--(1) The Commission may make regulations to grant exemption from the requirement to have a supply licence, but subject to compliance with such conditions, if any, as may be specified in the order :
Provided that the Commission shall not, under any such regulation, grant any exemption except with the consent,--
(i) of the local authority, if any, constituted in the area where energy is to be supplied;
(ii) in any case where energy is to be supplied in any area forming part of any cantonment, aerodrome, fortress, arsenal, dockyard or camp or any building or place in the occupation ofthe Central Government for defence purposes, of the Central Government;
(iii) in any area falling within the area of supply of a licensee, of that licensee;
Provided that, except in a case falling under clause (ii) no such consent shall be necessary if the Commission is satisfied that such consent has been unreasonably withheld.
(2) An exemption may be granted,--
(a) to persons of a particular category; or
(b) to a particular person; or
(c) for a particular period;
and exemption to persons of a particular category or to a particular person shall be published in such manner as the Commission considers appropriate for bringing it to the attention of that person or persons of that category and of the public in general.
(3) The exemption granted may be revoked by the Commission at any time for reasons to be recorded in writing.
(4) An exemption, unless previously revoked, shall continue in force for such a period as may be specified in or determined by or under the exemption, (5) Every regulation or exemption made by the Commission under the Act shall be published in the Official Gazette.
27. A reading of the objects brought under the provisions of Sections 15-A and 18-A of the Electricity (Supply) Act, 1948, would leave no doubt in our minds to understand that the objects/functions of generating companies are confined to the establishment, operation and maintenance of generating stations and do not extend to distribution and supply of electricity. Section 26-A of the said Act also cannot be construed to be authorising the activity of supply of electricity. A generating company chooses to supply the electricity generated by it and goes beyond the activity stipulated under Sections 15-A and 18-A of the Electricity (Supply) Act, it cannot invoke Section 26-A(1) of the Electricity (Supply) Act to contend that it is authorised to undertake such an activity of supply of electricity generated by it.
28. Though it is repeatedly argued by the learned senior Counsel appearing on behalf of the appellants that the generating company is authorised to supply electricity generated to the end users, in view of specific provisions under Sections 15-A and 18-A of the Electricity (Supply) Act, we are convinced that such a stand is not available to the appellant-company unless it is authorised to do so or obtain a licence as provided under Section 15 of the Reform Act, 1998.
29. Section 2(6) of the Electricity (Supply) Act defines a 'licensee' as a person licensed to supply energy or a person I who lias obtained a sanction under Section 28 of the Indian Electricity Act to engage in the business of supplying energy. However, despite the specific stipulation in Section 26-A of the Electricity (Supply) Act that a generating company does not require a licence or sanction for carrying on its activity, Section 2(6) of the Electricity (supply) Act makes an overriding provision that the licensee does not include a Board or a generating company. It must be noted that both Section 26-A and amendment to Section 2(6) were incorporated in the Electricity (Supply) Act at the same time, i.e., by amendment Act 115 of 1976. It is, therefore, manifestly clear that if a generating company wants to carry on the activity of supply of electricity which is beyond those specified in Sections 15-A and 18-A of the Electricity (Supply) Act, it has to seek a licence under Section 3 or a sanction under Section 28 of the Indian Electricity Act, 1910 or licence/exemption as the case may be, as provided under Sections 15 or 16 of the Reform Act, 1998.
30. Section 56(3Xvi) of the Reform Act, 1998 stipulates that in respect of matters provided in Sections 40 to 45 of the Electricity (Supply) Act, the provisions of Electricity (Supply) Act shall not apply in the State to the extent the Reform Act has made a specific provision. Section 43-A of the Electricity (Supply) Act enables a generating company to enter into contract for supply of electricity with the Board or with any other person. Section 14(1) of the Reform Act further provides that no person other than those authorised to do so by licence or by virtue of exemption under Reform Act shall engage in the business of generation or supply of electricity. Section 11(1)(e) of the Reform Act contemplates that the Regulatory Commission shall be responsible to regulate the purchase, distribution, supply and ulitisation of electricity, the quality of service, the tariff and charges payable. From these provisions, it would appear that the domain with respect to purchase, distribution, supply and utilisation of electricity tariff and charges has been brought under the regulatory control of the Commission. In our view as purchases by a licensee, a non-licensee as well as an end-consumer is regulated under the Reform Act, the provisions of Section 43-A shall stand disapplied by virtue of specific provisions under Section 56(3)(vi) of the Reform Act with effect from 1-2-1999.
31. Section 43(A)(1)(c) of the Electricity (Supply) Act though permits a generating company to enter into a contract for sale of electricity generated by it with any person with the consent of Competent Government or Governments, the expression 'any other person' in Section 43(A)(1)(c) of the said Act cannot be referred to an individual end-user like sister concerns as projected by the APGPCL. This view is clear from a decision of the Supreme Court in Mysore State Electricity Board v. Bangalore Woollen, Cotton and Silk Mills Limited, , wherein it is observed by the Supreme Court that the Electricity (Supply) Act did not deal with other matters relating to supply and use of electricity, which are governed by the earlier Indian Electricity Act It was further observed that the consumers find no place in the Electricity (Supply) Act and wherever the words 'other person' occurred in the Electricity (Supply) Act, it invariably meant those who generated and supplied electricity and not those who consumed it. In other words, 'any other person' referred to in Section 43-A of the said Act could only be another licensee or exemptee and not a consumer/end-user as sought to be projected by the APGPCL.
32. On behalf of the APGPCL it is argued that the Government of Andhra Pradesh by proceedings dated 23-6-2000 consented to the sale of energy to the shareholders of the APGPCL and also specifically indicating in the communication that the said arrangement so made be continued in future. Laying emphasis on this communication, learned senior Counsel appearing on behalf of the APGPCL slated that once the State of Andhra Pradesh has consented to sale of energy to its shareholders and sister concerns by the APGPCL under Section 43(A)(1)(c) of the Electricity (Supply) Act, 1948 besides permitting the company to sell energy in future, this intimation would amount to authorising the company to supply energy falling within the ambit of Section 14 of the Reform Act, 1998 and pleaded that the Regulatory Commission has no role to play in between the Government of Andhra Pradesh and the APGPCL. We shall now refer to the provisions under Section 14 of the Reform Act, 1948 in order to appreciate this contention.
14. Licensing :--(1) No person, other than those authorised to do so by licence or by virtue of exemption under this Act or authorised to or exempted by any other authority under the Electricity (Supply) Act, 1948, shall engage in the State in the business of,--
(c) transmitting electricity; or
(d) supplying electricity.
(2) xxxx (3) xxxx (4) Notwithstanding anything contained in any other provisions of this Act and until the establishment of the Commission in terms of Section 3, the State Government shall have the power to grant provisional licences under this section having a duration not exceeding twelve months to any person or persons to engage in the State in the business of transmission or supply of electricity on such terms and conditions as the State Government may determine consistent with the provisions of this Act, subject to the following conditions, namely:-
(c) Upon the establishment of the Commission, each of the provisional licences granted by the State Government shall be placed before the Commission and shall be deemed to constitute an application for grant of a licence by the Commission under the provisions of this Act; and
(d) Each provisional licence granted under this section shall cease to be valid from the date notified by the Commission.
(5) The State Government, shall be entitled to confer on the provisional licensees under sub-section (4) such powers, rights and authorisation as the Commission is entitled to grant to the licensees under this Act.
33. It is clear from a reading of the provisions enumerated above that the persons who are authorised by licence or exempted under the Reform Act or authorised or exempted by any other authority under the Electricity (Supply) Act, 1948 shall only be entitled to engage in the business of transmitting or supplying electricity in the State of Andhra Pradesh. A further reading of clause (4) of Section 14 of the Reform Act would reveal that until the establishment of the Regulatory Commission in terms of Section 3, the State Government shall have the power to grant provisional licence under this section for a period not exceeding 12 months and such provisional licence shall be subjected to scrutiny by the Regulatory Commission as and when it is constituted. It is though submitted on behalf of the APGPCL that a consent has been obtained on 26-3-2000 from the Government of Andhra Pradesh for the sale of energy by APGPCL to its shareholders and sister concerns, the Regulatory Commission in the impugned order at Para 58 has mentioned that while granting provisional licence under Section 14(1) of the Reform Act, the Government of Andhra Pradesh indicated that the APGPCL has to approach the Regulatory Commission on its constitution and the provisional licence so granted by it shall be treated as an application before the Regulatory Commission. Therefore, when the Government of Andhra Pradesh itself while granting provisional licence under Section 14(1) of the Reform Act indicated that the said provisional licence would again be placed before the Regulatory Commission on its constitution, for scrutiny, we are inclined to hold that the contention of the APGPCL, that it need not subject itself to the authority of the Regulatory Commission in view of the consent granted by the Government of Andhra Pradesh by proceedings dated 23-6-2000, is unacceptable.
34. It is relevant at this stage to examine the statement of objects and reasons for which the Andhra Pradesh Electricity Reform Act, 1998 is enacted. The statement of objects and reasons, inter alia, provide thus:
"It is also proposed to establish and incorporate an autonomous statutory Electricity Regulatory Commission to balance the interest of all the stake holders in the electricity industry and to promote healthy growth of the power sector in the State. Consequent to the creation of Electricity Regulatory Commission, the State will be divested of its regulatory functions. However, the State Government shall have the power to issue policy directions and overall planning and co-ordination on the matters concerning electricity in the State. The Commission shall act as the body which issues and enforces licenses for transmission and distribution of electrical energy in the State and strives for optimization of costs and improvement in consumer service by promoting competition. The Commission also prescribes standards of performance for the licensees and would gather information periodically to ensure compliance to the prescribed standards. The Commission has been vested with authority to prevent monopoly abuse and regulate and adjudicate on tariffs and related issues and also to act as a body to resolve or to set up machinery for speedy resolution of disputes between the licensees."
35. Pursuant to these objectives, under Section 11 of the Refonn Act, 1998, the functions of the Commission have been enumerated which includes- under clause (b) to regulate the working of licensees and to promote their working in an efficient, economical and equitable manner including laying down standards of performance for the licensees in regard to services to consumers, under clause (c) to issue licences in accordance with the provisions of this Act and determine the conditions to be included in the licences and under clause (1) to undertake all incidental or ancillary things. The powers of the State Government are enumerated under Section 12 of the Reform Act, 1998.
36. A combined reading of the objects of the Reform Act, 1998 and the powers available to the Regulatory Commission, we arc convinced that the Regulatory Commission is clothed with alt such powers available under Sections 14, 15 and 16 of the Reform Act to issue licences, exemption etc., for transmission and supply of electricity in the State of Andhra Pradesh.
37. The Reform Act, 1998 came into force in the State of Andhra Pradesh with effect from 1-2-1999. Section 56(3)(vi) of the said Act stipulates that "in respect of matters provided in Sections 5 to 18, 19, 20, 23 to 27, 37, 40 to 45, 46 lo 54, to 69, 72 and 75 lo 83 of the Electricity (Supply) Act, 1948 to the extent of this Act has made specific provisions, the provisions of the Electricity (Supply) Act, 1948 shall not apply in the State". Clause vii further provides that the provisions of all other sections of the Electricity (Supply) Act, 1948 shall apply except that (a) the term 'licence', 'licensee', licence holder' shall have the meaning as defined under this Act and the licences shall be construed as having been issued under this Act.
38. In view of the language employed in the aforementioned provisions 56(3)(vi) of the Reform Act, the provisions enumerated under Sections 5 to 18, 19, 20, 23 to 27, 37, 40 to 45, 46 to 54, 56 to 69, 72 and 75 to 83 of the Electricity (Supply) Act shall stand disapplied in the State of Andhra Pradesh. It is, therefore, manifestly clear that the provisional licence obtained by the APGPCL under Section 14(1) of the Reform Act during the interregnum period as found by the Regulatory Commission in its order at para 58 is only a provisional licence/ authorisation and shall be subjected to further scrutiny by the Regulatory Commission as provided under clause (4) of Section 14 of the Reform Act, 1998.
39. The APGPCL was conceived as a joint venture between the APSEB, certain Central Government Undertakings and few participating industries for sharing the generation of power amongst themselves in proportion to their equity share capital. As on 1-9-1999, the participating industries were 22 in number including the APSEB in the joint venlure. The Regulatory Commission itself has observed in ils impugned order that the APGPCL shall be entitled to sell or supply electricity to the participating industries which were 22 in number as on 1-9-1999. However, difficulty arose when the APGPCL tried to extend the supply of electricity to such other industries which are said to be the sister concerns of the participating industries. Having regard to our above discussion and in the light of the finding of the Regulatory Commission in the impugned order, we are of the view, the extended activity of supply of energy to the sister concerns of the participaling industries of the APGPCL, would undoubtedly require a licence or exemption as provided under Section 15 or 16 of the Reform Act, 1998. We are, therefore, inclined to hold that the Regulatory Commission is justified in insisting the APGPCL to seek a licence or exemption for its extended activity of supplying power to the sister concerns.
40. Having regard to our discussion in the foregoing paragraphs, we see no merits in these appeals and they are accordingly dismissed. No costs.