Bombay High Court
The Tata Power Company Limited And ... vs Government Of Maharashtra And Others on 18 January, 2011
Author: D.Y.Chandrachud
Bench: D.Y. Chandrachud, Anoop V.Mohta
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGNAL CIVIL JURISDICTION
WRIT PETITION NO.71 OF 2011
The Tata Power Company Limited and others ..Petitioners.
versus
Government of Maharashtra and others ..Respondents.
.....
Mr. Iqbal Chagla, Senior Advocate with Mr. Janak Dwarkadas, Senior
Advocate, Mr. Zal Andhyarujina, Mr. Sitesh Mukherjee, Mr. Sagar
Divekar, Ms. Nandini Gore, Mr. Vikrant Negi and Ms. Devangee
Ganatra i/b M/s.Trilegal for the Petitioners.
Mr. V.R. Dhond, A panel counsel with Mr. A.B. Ketkar, AGP for
Respondent No.1.
Mr. J.J. Bhatt, Senior Advocate with Ms. Anjali Chandurkar, Mr. D.J.
Kakalia, Mr. H.E. Desai and Mr. Onkar Chandurkar i/b Mulla & Mulla
& CBC for Respondent No.2.
Ms. Kavita Anchan with Ms. Priya Baliga i/b M/s. M.V. Kini & Co. for
Respondent No.3.
Mr. Ashish A. Alaspurkar for Respondent No.5.
Ms. Shilpa Kapil for Respondent No.6.
......
CORAM : DR.D.Y.CHANDRACHUD &
ANOOP V. MOHTA , JJ.
18 January 2011.
ORAL JUDGMENT (PER DR.D.Y.CHANDRACHUD, J) :
Rule, by consent returnable forthwith. With the consent of Counsel and at their request the Petition is taken up for hearing and final disposal.
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2. On diverse dates between 1907 and 1953 licenses were granted to the Petitioner to generate and supply electric power. On 10 June 2003 the Electricity Act 2003 came into force. The Act de-licensed generation activity and allowed generating companies a measure of freedom to supply electric power to consumers and licensees of their choice. Following the enactment of the law the generation and distribution businesses of the Petitioner were separated and, the Court is informed 'ring fenced' pursuant to the de-licensing of generation.
The Statement of Objects and Reasons appended to the Bill introduced in Parliament specifically adverted to the policy of the state of encouraging private sector participation in generation, transmission and distribution and the objective of distancing the regulatory responsibilities from government to Regulatory Commissions. The Act also brought into being a legislative framework for implementing the regime of 'power trading' and open access. Among the main features of the Bill was that generation was being de-licensed. In order to facilitate free movement of electricity, the Act introduced the mechanism of open access by which generating companies were enabled to sell electricity to consumers and to licensees.
3. In August 2005 the Maharashtra Energy Regulatory Commission (Terms and Conditions of Tariff) Regulations 2005 were notified under which it is mandatory for a distribution licensee to plan its procurement for meeting future demand and to enter into long term power purchase agreements for the procurement of power with the approval of the State Commission (MERC). On 12 July and 27 ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 3 WP71-18.1.sxw December 2006 the Petitioner entered into power purchase agreements (PPAS) for the supply of power to the Bombay Electric Supply and Transport Undertaking and to Tata Power Company - Distribution respectively, which were filed before the MERC for approval. Reliance Infrastructure Limited, the Second Respondent filed its objections and independently filed a separate application claiming equitable allocation of power from the generation facility of the Petitioner. On 6 November 2007 MERC approved the PPA between the Petitioner and the BEST and the arrangement between the generation business of the Petitioner and TPC Distribution from 1 April 2008. The Appellate Tribunal for Electricity set aside by its decision dated 6 May 2008 the approval of the PPAs and remanded the matter to MERC for reconsideration. In an appeal filed by the Petitioner before the Supreme Court a final judgment and order was rendered on 6 May 2009.
The Judgment of the Supreme Court:
4. By its decision in Tata Power Company Limited v. Reliance Energy Limited1, the Supreme Court noted that the primary object of the Electricity Act of 2003 was "to free generating companies from the shackles of a licensing regime" and to encourage "free generation and more and more competition amongst generating companies and other licensees so as to achieve customer satisfaction and equitable distribution of electricity."2. The Supreme Court observed that a generation company exercises freedom in respect of the choice of site and investment of the generation unit; choice of 1 2009 (7) Scale 513.
2 para 107 at page 535.
::: Downloaded on - 09/06/2013 16:46:30 :::PNP 4 WP71-18.1.sxw counter-party buyer, freedom from tariff regulation when the generating company supplies to a trader or directly to a consumer.
Courts were commanded, while interpreting the Act to ensure that the purpose of the legislation is not defeated by bringing in licensing provisions through the side door. While construing the powers of the State Electricity Commission under Section 86, the Supreme Court emphasized that "while exercising its power of 'Regulation' in relation to purchase of electricity and procurement process or distribution, it is not permissible for the Commission to direct allocation of electricity to different licensees keeping in view their own need". The rationale underlying the enactment of the Act of 2003 and the interpretation that is to be placed on the regulatory powers conferred upon the State Electricity Commission is emphasized in the following observations :
"A generating company, if the liberalization and privatization policy is to be given effect to, must be held to be free to enter into an agreement and in particular long term agreement with the distribution agency. Terms and conditions of such an agreement, however, are not unregulated. Such an agreement is subject to grant of approval by the Commission. The Commission has a duty to check if the allocation of power is reasonable. If the terms and conditions relating to quantity, price, mode of supply the need of the distributing agency vis-a- vis the consumer, keeping in view its long term need are not found to be reasonable, approval may not be granted. A generating company has to make a huge investment and assurances given to it that subject to the provisions of the Act he would be free to generate electricity and supply the same to those who intend to enter into an agreement with it. Only in terms of the said statutory policy, he makes huge investment. If all his activities are subject to regulatory regime, he may not be interested in making investment. The business in regard to allocation of electricity at the hands of the generating company was the subject matter of the licensing regime. While ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 5 WP71-18.1.sxw interpreting the statute it must be borne in mind that such a mechanism should not come back."
5. The Supreme Court, observed that generating companies were not absolutely free from regulations. Regulations are permissible under the Act of 2003. However, the Court observed that "other types of regulations should not be brought in which were not contemplated under the statutory scheme". If a generating company is in a dominant position, Section 60 empowers the Commission to issue such directions as it considers appropriate if an agreement is entered into in abuse of the dominant position or if a combination is entered into which is likely to cause or causes an adverse effect on competition in the electricity industry. The Supreme Court has emphasized that the regulatory regime of the Commission can be enforced against a generating company if the conditions precedent set out in the statute are attracted. The view of the Supreme Court was that save and except for the exercise of regulatory power which is specifically recognized by the Act, it is not open to government or the Commission to exercise a power which is not incorporated in the statute or in the regulations. Hence, the Court held that the "requirements of a licensee and/or sheer number of its consumers, would be wholly irrelevant for the purpose of construction of a statute". Among the conclusions that were recorded in the judgment of the Supreme Court, those which are relevant to the present case are as follows :
"1) Activities of a generating company are beyond the purview of the licensing provisions.
2) The Parliament therefore did not think it necessary to provide for any regulation or issuance of directions except that ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 6 WP71-18.1.sxw which have expressly been stated in the Act.
...
7) If regulatory clause is sought to be applied in relation to allocation of power, the same would defeat the de-licensing provisions. Generating companies have the freedom to enter into contract and in particular long term contracts with a distribution company subject to the regulatory provisions contained in the 2003 Act.
...
9) Duration of the contract in regard to supply of electricity by and between TPC (G) and RInfra prior to coming into force of the contract is of no consequence, particularly when no written long term or short term contract had been entered into by and between them.
10) Fairness or otherwise of the supply of electricity to different distribution companies being outside the jurisdiction of the Commission, the same by itself cannot be a ground for bringing back the licence raj, which is not contemplated by the Act."
6. On 24 June 2009, following the decision of the Supreme Court the Petitioner by its letter to the Second Respondent indicated that the latter had no right to insist on the supply of electricity from the generation facility of the Petitioner. Following this the Petitioner informed the Second Respondent that it had decided to discontinue further supply of electricity to the Second Respondent. On 23 March 2010 the First Respondent called upon the Petitioner to attend a meeting to discuss the issue pertaining to the stoppage of the supply of electricity to the Second Respondent with effect from 1 April 2010. The Government of Maharashtra by a resolution dated 30 March 2010 set up a five member committee to consider the situation arising out of the decision of the Petitioner not to supply power to the Second Respondent. The Petitioner was directed in the meantime to maintain ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 7 WP71-18.1.sxw the status quo in the interest of consumers. On 29 April 2010 the Petitioner was informed that the committee had submitted its report.
Following this on 7 May 2010 the First Respondent issued a memorandum which forms the subject matter of these proceedings.
Memorandum of the State Government dated 7 May 2010 :
7. Since the challenge in these proceedings is to the memorandum issued by the State Government on 7 May 2010, it would be necessary for the Court to advert in some detail to what was contemplated by the issuance of that memorandum. The memorandum spells out that government received several representations to intervene in public interest following the decision of the generating arm of the Petitioner to stop supplying 460 MW of power from 1 April 2010 to the Second Respondent 'which would have resulted in tariff shock for consumers or load shedding resulting in disruption of public order'. The memorandum refers to the constitution of the committee and thereafter enunciates what is described as the decision of the State Government. The decision of the State Government, notified therein is that government is of the view that in public interest, MERC should take suitable measures at the earliest, taking into account the report of the five member committee and more particularly the broad principles which are spelt out therein together with other relevant circumstances, for taking into account the interest of consumers including the cross-subsidized consumers of the Second Respondent. The considerations which the decision then spells out are as follows :
"(i) M/s. TPC's (Generation) obligation to use its generation capacity (of specified units) to supply power at regulated / ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 8 WP71-18.1.sxw reasonable rates to distribution licensees of Mumbai on priority and not to take advantage of its dominant position in the absence of a PPA with M/s. Reliance Infra to trade power, divert power to TPC (Distribution) or to offer power to M/s.
Reliance Infra at higher rates, thereby adversely affecting the consumers of M/s. Reliance Infrastructure.
(ii) M/s. Reliance Infra's obligation to ensure (subject to suitable penalties to be specified by MERC) that its consumers do not have to suffer any increase in tariff only on account of its failure to procure power at a reasonable cost over and above the quantum of power that M/s. TPC can be reasonably expected to supply to it after taking care of its commitments under the PPA with BEST and genuine requirements of TPC(D).
(iii)The need to put in place a mechanism to ensure that subsidized consumers of M/s. Reliance Infra do not have to suffer abnormal tariff rise only on account of the effect of migration of its cross-subsidizing consumers to M/s. TPC, which is in a dominant position.
(iv)The need to assure that if there is any surplus from the power generation meant for Mumbai licenses at any time, it should be supplied to deficit distribution licenses of Mumbai at the average cost of purchase or any other reasonable rate to be determined by MERC."
8. Paragraph 2.1 of the memorandum then proceeds to spell out what "the government expects the concerned parties" to abide by. The memorandum provides for arrangements, as a "reasonable ad interim solution in public interest" until MERC mandates any other interim order, long term solution or until the government itself considers it necessary to issue directives in public interest. The solution which the memorandum provides is as follows :
"(i) M/s. TPC have already been informed by Secretary, Energy to honour its PPA with the BEST and supply 100 MW of power ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 9 WP71-18.1.sxw accordingly. BEST in turn will utilize this for its own requirements. Whenever there is a surplus, the same should be given to Mumbai licensees only at rates to be decided by MERC.
(ii) The remaining 360 MW power should be continued to be supplied to M/s. Reliance Infra till June 30, 2010 by M/s.TPC at a regulated rate decided by the MERC.
(iii) With effect from 1.7.2010, M/s. TPC may sell 160 MW power to TPC (Distribution) at regulated rates, thereby reducing its supply to M/s. Reliance Infra from 360 MW to 200 MW.
(iv) Whenever, there is any surplus from the generation as mentioned above, the same should be used to meet the deficit of Mumbai licensees.
(v) M/s. Reliance Infra has given in writing to Secretary, Energy that they have got bids for 315 MW of Power from next year as a mid term arrangement. They are confident of meeting the growing requirement of power for Mumbai from 2014 onwards.
(M/s. Reliance Infra's letter to the State Government is at Annexure-II).
In view of the commitments of M/s. Reliance Infra, M/s. TPC may be advised to continue to supply of 200 MW until 31st March 2011 i.e. until M/s. Reliance Infra starts getting its supply of 315 MW under the PPA, which is in the offing."
9. Following the issuance of the memorandum the Petitioner by a letter dated 16 May 2010 addressed to the Maharashtra State Load Center (MSLDC) reiterated its scheduling instructions, pointing out that the memorandum of the State Government did not restrain the supply of 160 MW of power to Tata Power Distribution. According to the Petitioner MSLDC declined to accede to the request on the ground that it had received instructions from a "Senior Authority to ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 10 WP71-18.1.sxw await further instructions as the matter had been referred by the State Government to MERC".
The Memorandum of the State Government dated 19 May 2009 :
10. On 19 May 2010 the State Government issued another memorandum by which it noted that the Petitioner had applied to the State Load Despatch Center to schedule 160 MW of power to its distribution arm, "contrary to the advice of the government" in the memorandum dated 19 May 2010. Government by its memorandum proceeded to issue the following directive :
"The Chief Engineer, State Load Despatch Centre, Kalwa and all the officers and employees working under him, are hereby directed to maintain status quo in respect of scheduling of 360 MW power under reference till further directives are received or obtained from MERC or till further orders / directions in this behalf are issued by State Government."
11. Following the memorandum of the State Government dated 7 May 2010, MERC proceeded to issue a public notice on 18 May 2010 to consider suggestions and objections in the following broad areas:
"(i) The role of the Commission to take measures in regard to the broad principles indicated in the "Memorandum" dated 7th May 2010 along with the report of the Committee;
(ii) The statutory provisions under which the Commission can take measures, if any;
(iii) The measures that the Commission can take which would be suitable in public interest."
12. In the meantime on 29 September 2010 MERC passed an order on a petition filed by the Petitioners herein to challenge the legality of letters dated 16 and 18 May 2010 and of 12 and 30 June 2010 of the State Load Despatch Center. The order of the MERC dated 29 ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 11 WP71-18.1.sxw September 2010 is the subject matter of another Writ Petition, 44 of 2011 which is filed before this Court.
Submissions :
13. On behalf of the Petitioners it has been submitted by learned senior counsel that -
(i) The decisions of the First Respondent as set out in the memorandum dated 7 May 2010 are in violation of the statutory scheme contained in the Electricity Act 2003 as interpreted by the Supreme Court in the judgment inter partes in Tata Power Company Limited v. Reliance Energy Limited (supra). Under the law laid down by the Supreme Court the Petitioner as a generating company has an unfettered right over its generating assets and to sell power generated by it to any consumer or licensee of its choice;
(ii) The State Government can exercise powers in exceptional situations comprehended by Section 11 to issue directions to a generating company. Unless extra ordinary circumstances within the meaning of Section 11 demonstrably exist, the power to issue a direction cannot be exercised. Similarly, under Section 37 the appropriate government may issue directions to the State Load Despatch Centers to take measures as may be necessary for maintaining the smooth and stable transmission of electricity to any region or State. Under Section 108, in the discharge of its functions, the State Commission shall be guided by such directions in matters of policy involving public interest as the State Government may give to it in writing. The power which is conferred upon the State Government under Sections 11, 37 ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 12 WP71-18.1.sxw and 108 can be exercised only subject to the existence of the conditions precedent for the exercise of the statutory power;
(iii)In the present case, the State Government filed an affidavit before the Court and a statement was also made by the Advocate General on 11 June 2010 that the memorandum dated 7 May 2010 was only a request to MERC and was not a statutory directive. The statement which has been made on affidavit on behalf of the State Government ex facie establishes the illegality of the memorandum. Without exercising a statutory power under Sections 11 or, as the case may be, 37 or 108 the State Government has proceeded to communicate what is stated to be a mere advice to the State Commission. This, it is urged, is completely destructive of the object and the underlying scheme of the Act as interpreted by the Supreme Court.
14. On behalf of the State Government, learned counsel submitted that :
(i) The State Government is always entitled to make a request to a statutory regulatory, like any other individual in the interest of consumers;
(ii) No direction was issued by the State Government under Section 11, or Section 108, as a matter of fact;
(iii)No statutory power is required to make a request to the regulatory authority empowered by the statute to take decisions;
(iv)All that the State Government did by its memorandum was to communicate a request to evolve a suitable measure that takes into account the report of the committee appointed by the ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 13 WP71-18.1.sxw State Government and the interests of consumers. Paragraph 2.1 of the memorandum merely communicated an expectation to parties. In any event, it was urged that the process which was initiated by the statutory regulator in pursuance of the memorandum dated 7 May 2010 has been completed by conducting a public hearing and an order of the MERC is awaited.
15. On behalf of the Second Respondent, learned senior counsel submitted that :
(i) The question as to whether MERC considered the request of the State Government to be binding and whether the MERC considered its powers independently of the memorandum were matters which can be adjudicated in an appeal before the appellate tribunal after the final orders of the MERC;
(ii) The correctness of the order passed by MERC on 29 September 2010 should not be prejudged in these proceedings nor should the process that was initiated by MERC upon its notice dated 18 May 2010 be interdicted by this Court. MERC has independent powers under Section 60 of the Act to address a situation of market domination. Consequently, the powers of the MERC to independently exercise its jurisdiction quite apart from the memorandum dated 7 May 2010 should not be curtailed.
The object of the Legislation :
16. In evaluating the rival submissions which have been urged ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 14 WP71-18.1.sxw before the Court, this Court must at the outset advert to the rationale underlying the enactment of the Electricity Act of 2003. The Statement of Objects accompanying the introduction of the bill in Parliament noted that the electricity supply industry in India was governed by the Electricity Act of 1910, the Electricity (Supply) Act. 1948 and the Electricity Regulatory Commission Act of 1998. Over a period of time, the functioning of the State Electricity Boards set up under the Act of 1948 deteriorated. The SEBs were unable to take decisions on tariff in a professional and independent manner and tariff determination was in practice done by the State Governments.
To address this problem, the Act of 1998 was enacted to provide for distancing of government from the determination of tariffs. The Act of 2003 was enacted with the policy of encouraging private sector participation in generation, transmission and distribution of electric power and in furtherance of the objective of distancing regulatory responsibilities from government to the regulatory commissions. The Act inter alia provided for a regime of open access.
Principles enunciated by the Supreme Court in Tata Powers
17. The provisions of the Act have been interpreted in the judgment in Tata Power Company (supra) by the Supreme Court.
The principles which emerge from the judgment of the Supreme Court are as follows :
(i) The primary object of the Act of 2003 is to liberate generating companies from the shackles of a licensing regime. In order to achieve that object the Act of 2003 encourages free generation and greater competition;::: Downloaded on - 09/06/2013 16:46:30 :::
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(ii) Generating companies are entitled to exercise freedom of choice in respect of the site and investment of the generation unit; the buyer to whom electric power would be supplied and freedom from tariff regulation when supplies are made to a trader or directly to the consumer;
(iii)The power of the State Government to issue a directive under sub section (1) of Section 11 is confined only to extra ordinary circumstances of the nature referred to in the explanation such as those arising out of a threat to the security of the State, public order or a natural calamity or such other circumstances arising in the public interest;
(iv)Section 23 of the Act does not contemplate the issuance of any direction by the State Commission;
(v) While exercising the power of regulation under Section 86(1)(b) it is not open to the State Electricity Commission, in relation to the purchase of electricity and the procurement process of distribution to direct the allocation of electricity to different licensees keeping in view their own need;
(vi)While a generating company is entitled to enter into an agreement and in particular a long term agreement with a distribution agency, the terms of such an agreement are not unregulated. Such an agreement is subject to the approval of the Commission and the Commission has a duty to ensure that the allocation of power and the terms and conditions spelt out in the agreement in matters of quantity, price and the mode of supply are reasonable. However, Section 86(1)(b) does not empower the Commission to issue a direction to a generating company to supply electricity to a licensee who has not entered ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 16 WP71-18.1.sxw into a PPA;
(vii)Generating companies, are not free of all regulations.
Regulation, however, is permissible only with reference to the specific provisions of the statute. Regulations which are not contemplated by the statutory scheme are impermissible.
The Affidavit of Government :
18. The State Government has filed an affidavit before this Court in reply to the Petition stating that :
(i) That the State Government has at present not exercised its powers under Section 11 of the Act and the memorandum does not contain any direction under Section 11;
(ii) The first part of the memorandum dated 7 May 2010 contains a request to MERC to take suitable measures and it is for MERC to decide what those measures for protecting the interest of the consumers should be;
(iii)The second part of the memorandum merely suggested a pro-
tem interim arrangement, described as a reasonable ad interim solution in public interest and the memorandum merely records that the government expected the parties concerned to abide by it.
The position which the government has adopted before the Court is that the memorandum dated 7 May 2010 was not a statutory directive but constitutes only a request to MERC. When the Petition was admitted by this Court by a Division Bench of this Court on 11 ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 17 WP71-18.1.sxw June 2010 a statement was made, on the basis of the affidavit, by the Advocate General that the State Government has at that stage not exercised its powers under Section 11. The statement of the Advocate General also makes it clear that no statutory directive was issued by the State Government.
The nature of the power :
-19. The submission which has been urged on behalf of the State Government is that it is always open to government to bring to the notice of a statutory regulator an emergent situation for taking necessary action. Now unquestionably, in a democratic state the government must be responsive to the needs of its constituents.
There cannot be any dispute about the position that it is open to government to take cognizance of emergent situations and, if necessary to bring them to the attention of the regulatory authorities.
That, however, would not in itself sustain the legality of the memorandum dated 7 May 2010. That for one thing is not the import of the memorandum. The memorandum indicates the decision of government that MERC should take suitable measure after taking into account the report of the Committee and the considerations which the memorandum spells out. The memorandum spells out what according to government is a reasonable ad interim solution. The action of the government in this case has to be understood in the context of the object and scheme of the Electricity Act of 2003. The basis of the statutory provisions is to provide a distancing between the government and the State Electricity Commissions. The Act has provided for a comprehensive legislative framework in which generating companies are liberated from the restrictive features of the ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 18 WP71-18.1.sxw licensing regime which held the field in India until the policy of liberalization was enacted into legislation. The Electricity Act of 2003, in this background, confers powers on State governments in specified areas where the statute contemplates the intervention of government. Under Section 11, the government is entitled to issue directions to a generating company in extraordinary circumstances to operate and maintain a generating station in accordance with the directions of government. Extraordinary circumstances have been defined by the explanation to mean circumstances arising out of a threat to the security of the State, public order or a natural calamity or such other circumstances arising in the public interest. Section 37 empowers the appropriate government to issue directions inter alia to the State Load Despatch Center to take such measures as may be necessary for maintaining the smooth and stable transmission of electricity to any region or State. Under Section 108 it is in matters of policy that the State Commission is to be guided by such directions involving public interest as the state government may furnish in writing. Enumerated powers are conferred on the government to issue directives in specified situations.
20. The power that is conferred upon the state government to issue directions is statutorily conditioned upon the existence of circumstances which warrant the exercise of statutory power. The validity of a statutory directive when issued would have to be decided with reference to the existence of those circumstances which condition the exercise of power. In the present case, no statutory directive has been issued. The difficulty in accepting the argument which has been urged on behalf of the state government that its ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 19 WP71-18.1.sxw memorandum is valid because it is only a request is that though the government, when it exercises a statutory directive is bound by the discipline of the Act, a government which makes a mere request in the terms which have been adverted to in the memorandum in question would be virtually bereft of the discipline of the Act. Such a position cannot possibly be countenanced. The government, in the garb of exercising what is termed as a mere request or advice cannot either confer jurisdiction upon a State Electricity Commission, which it lacks, nor can it persuade the Commission to assume jurisdiction on an area which it is not empowered to enter. Undoubtedly, the State Electricity Commission has wide powers but even those powers are structured by the Act as was observed by the Supreme Court in its decision in Tata Power Company. Even in the context of Section 86(1)(b) the Supreme Court observed that these provisions do not empower the State Electricity Commission to issue a direction to a generating company to supply electricity to a licensee who has not entered into a power purchase agreement. State governments are bound by the discipline and rigor of the legislation that has been enacted by Parliament in the Electricity Act of 2003. Accepting a submission which permits the state government to issue requests to regulatory authorities, contrary to the specific statutory scheme enacted in the legislation, would have disruptive consequences. This would result in the reintroduction of .... a fresh regime of licensing which in the first place the Electricity Act of 2003 was intended to disband.
-21. The manner in which the State Government construed its own memorandum dated 7 May 2010 is apparent from the subsequent ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 20 WP71-18.1.sxw memorandum that it issued on 19 May 2010. Government by its subsequent memorandum noted that the Petitioner had, contrary to the advice of government in the memorandum dated 7 May 2010 applied to the State Load Despatch Center to schedule 160 MW of power to its distribution arm. The subsequent memorandum therefore left it beyond a pale of doubt that the State Government was directing the Chief Engineer at the State Load Despatch Center to maintain the status quo in respect of scheduling 360 MW of power till further directives are received or obtained from the MERC or till further orders or directions in this behalf are issued by the State Government. If the State Government believed that circumstances justified the exercise of statutory powers, it ought to have taken the responsibility to issue a statutory directive. Government would then accept responsibility for its action and commit itself to a scrutiny of its action in judicial review. But once it came to the conclusion that the exercise of a statutory directive was not warranted at that stage, it would be impermissible for the State Government to issue what it termed as a request but which it treated as a binding advice by issuing a directive in its subsequent memorandum of 19 May 2010. The Memorandum of 19 May 2010 is consequential to the Memorandum of 7 May 2010.
-22. For all these reasons, we are of the view that the memorandum that was issued by the State Government on 7 May 2010 is clearly ultra vires and would have to be quashed and set aside. There shall be an order in these terms. However, while doing so, it would be necessary for this Court to take note of the fact that subsequent to the memorandum dated 7 May 2010 MERC issued an ::: Downloaded on - 09/06/2013 16:46:30 ::: PNP 21 WP71-18.1.sxw order on 29 September 2010. That order is an appealable order and a remedy against the validity of that order may be espoused in accordance with law. We also clarify that the setting aside of the memorandum dated 7 May 2010 will not interdict the proceedings which have been conducted by the MERC in pursuance of its notice dated 18 May 2010. This would however have to be independent of the Memorandum of 7 May 2010 which is set aside. MERC would be at liberty to consider whether a case has been made out for the exercise of its statutory or regulatory powers independent of the memorandum dated 7 May 2010. This order shall not be construed as precluding the exercise of statutory powers by the Commission in accordance with law.
23. Rule is accordingly made absolute in the aforesaid terms.
24. There shall be no order as to costs.
Stay refused.
(Dr. D.Y. Chandrachud, J.) (Anoop V. Mohta, J.) ::: Downloaded on - 09/06/2013 16:46:30 :::