Appellate Tribunal For Electricity
M/S. Godawari Power & Ispat Ltd vs The Chhattisgarh State Electricity ... on 18 February, 2013
Appeal No.33 of 2012
Appellate Tribunal for Electricity
(Appellate Jurisdiction)
APPEAL No.33 of 2012
Dated:18th Feb, 2013
Present: HON'BLE MR. JUSTICE M KARPAGA VINAYAGAM,
CHAIRPERSON
HON'BLE MR. RAKESH NATH, TECHNICAL MEMBER
In the Matter of:
M/s. Godawari Power & Ispat Ltd.,
428/2, Phase-I, Industrial Area,
Siltara, Distt-Raipur,
Chhattisgarh-493 111
...Appellant
Versus
1. The Chhattisgarh State Electricity Regulatory Commission
Irrigation Colony, Shanti Nagar,
Raipur, Chhattisgarh,
PIN-492 001
2. Chhattisgarh State Power Distribution Company Ltd.,
Daganiya,
Raipur,Chhattisgarh,
PIN-492 014
3. Chief Electrical Inspector,
Government of Chhattisgarh,
Raipur, Chhattisgarh,
PIN-492 001
...Respondent(s)
Counsel for the Appellant(s) : Mr. Raunak Jain
Mr. Sanjay Sen
Counsel for the Respondent(s): Mr. M.G Ramachandran,
Mr. Anand K. Ganesan
Ms. Swapna Seshadri for R-1
Mr. Sudhir Kathpalia
Ms. Suparna Srivastava for R-2
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Appeal No.33 of 2012
J U D G M E NT
PER HON'BLE MR. JUSTICE M. KARPAGA VINAYAGAM,
CHAIRPERSON
1. M/s. Godavari Power and Ispat Limited is the Appellant.
2. Challenging the legality of the order dated 12.12.2011
passed by the Chhattisgarh State Commission rejecting the
prayer of the Appellant to provide relaxation in the norms of
captive consumption of at least 51% for being qualified as a
Captive Power Plant, has presented this Appeal.
3. The Short facts are as under:
(a) The Appellant is an integrated Steel Plant
comprising of manufacturing facilities for Sponge Iron
(DRI), MS Billets, Ferro Alloys and MS Wires. For
meeting its own captive power requirements, the
Appellant has set up generation facility of 53 MW.
(b) On 9.8.2009, the Shed of Steel Melting Shop of
the Appellant suddenly collapsed due to which the
Steel Melting Shop for manufacturing Billets had to be
forcefully shut down.
(c) The Deputy Director, Industrial Health and
Safety, Phaphadih, Raipur, Chhattisgarh also by the
order dated 11.8.2009 directed the Appellant to stop
manufacturing activities in the Steel Melting Shop till
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Appeal No.33 of 2012
the time entire shed was repaired and clearance was
obtained.
(d) The entire repair work of the Shed was
completed by the Appellant on 14.12.2009. Thereafter,
the Appellant made a request to the Deputy Director,
Industrial Health and Safety, Raipur to permit the
Appellant to resume production facilities at the Steel
Melting Shop. Accordingly, the Appellant was allowed
to resume the production activities from January, 2010.
(e) On getting information from the officer
concerned, the third Respondent that the generation of
the Captive Power Plant was not functional for four
months, the State Commission by the order dated
11.3.2011 sought verification from the Appellant with
reference to its not fulfilling the requisite criteria for the
Captive Power Plant for the year 2009-10.
(f) On receipt of the said notice, the Appellant
informed the State Commission regarding the factual
background leading to the inability of the Appellant to
consume 51% of the power generated for captive use.
After considering the reply of the Appellant, the State
Commission declared by the order dated 10.6.2011
that the Appellant was unable to maintain captive
consumption of 51% of the power generated for the
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Appeal No.33 of 2012
Financial Year 2009-10 and consequently, the
Appellant could not maintain the status of Captive
Power Plant for that year.
(g) On the basis of this order, the Distribution
Licensee, Respondent No.2 issued a supplementary
bill on 13.7.2011 demanding the Cross Subsidy
Surcharge for the Financial Year 2009-10 from the
Appellant due to failure to maintain Captive Power
Plant status.
(h) Aggrieved by this, the Appellant on 21.7.2011
filed a Petition before the State Commission praying for
the relaxation from fulfilling the norms laid down
relating to 51% of the captive consumption on account
of Force Majeure condition and consequently for
quashing the supplementary bills.
(i) After conducting the inquiry, the State
Commission, ultimately passed the impugned order
dated 12.12.2011 dismissing the Petition filed by the
Appellant.
(j) Aggrieved over that, the Appellant has filed this
Appeal.
4. The Learned Counsel for the Appellant has submitted the
following submissions to assail the impugned order which is
as follows:
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Appeal No.33 of 2012
"For the Financial Year 2009-10, its Captive Generation
Plant has been unable to achieve the prescribed
consumption requirement of 51% on account of
collapse of the Shed of its Steel Melting Plant leading
to shutdown for the repair and maintenance work for a
few months. The shut down of its plant and
consequent inability to consume the captive power for
its plant during the period of its shut down had been for
the reasons beyond its control and led by a situation of
Force Majeure. Therefore, the Appellant prayed for
relaxation with reference to the norms to the status of
captive generating plant for the year 2009-10. This
relaxation is in accordance with the scheme of the
promotion of captive generation envisaged under the
2003 Act. As a follow up of the relief, supplementary
bill dated 13.7.2011 issued by the Distribution
Company, Respondent 2 has to be quashed. But, the
State Commission without applying its mind merely
dismissed the Petition on the ground that it has no
power to give such relaxation.
5. In reply to above submissions, the Learned Counsel for both
the State Commission as well as the Distribution Company
have elaborately argued defending the impugned order and
submitted that the State Commission has no power to make
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Appeal No.33 of 2012
such a relaxation and as such the impugned order is valid in
law.
6. The State Commission in its impugned order has denied
relaxation in the norms to the Appellant on the following
three grounds:
(a) There is no dispute that the Steel Melting Shop
remained closed on account of collapse of a part of a
shed but it could not be understood as to how it took
four months time just to repair the shed on account of
which the steel melting shop of Appellant remained
closed for that period and also that the Appellant did
not give any justification for it.
(b) The authorities relied upon by the Appellant
would relate to the severe damage of the wind mills on
account of cyclone which is an Act of God and was not
within control of wind mill owner whereas the collapsing
of part of the shed has not been on account of any
such cyclone and hence cannot be considered as a Act
of God.
(c) There is no provision for any relaxation in 51%
consumption for captive use for a generator to fulfil
criteria of CPP as provided in Rule 3 of Electricity
Rules, 2005.
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Appeal No.33 of 2012
7. The three grounds would indicate that the State Commission
though found that the collapsing of the part of the Shed led
to the shut down of the shop, has given a finding that there
is no provision for any relaxation in respect of 51% of
consumption for captive use for generator to fulfil the criteria
of captive power plant either under the Act or under the
Rules. Therefore, the main question to be considered in this
Appeal is this:
"Whether the State Commission is empowered to
pass an order for relaxation in the norms of
captive consumption of at least 51% for being
qualified as a Captive Power Plant within the
meaning and definition of a captive power plant
under the Definition Section 2 (8) of the Act, 2003
and Rule-3 of the Electricity Rule, 2005".
8. On this issue, the Learned Counsel for both the parities
have made their elaborate submissions.
9. We have carefully considered their submissions and given
our thoughtful consideration to the issue.
10. The issue involves interpretation of the relevant Section of
the Act, 2003 as well as the relevant Rule of the Electricity
Rules, 2005.
11. Let us quote those Sections which are as under:
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Appeal No.33 of 2012
Section-2 (8) of the Electricity Act, 2003
"2(8) "Captive generating plant" means 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 co-operative society or association;"
9. Captive generation:
(1) Notwithstanding anything contained in this Act, a
person may construct, maintain or operate a captive
generating plant and dedicated transmission lines;
Provided that the supply of electricity from the
captive generating plant through the grid shall be
regulated in the same manner as the generating
station of a generating company.
(2) Every person, who has constructed a captive
generating plant and maintains and operates such
plant, shall have the right to open access for the
purposes of carrying electricity from his captive
generating plant to the destination of his use:
Provided that such open access shall be subject
to availability of adequate transmission facility
and such availability of transmission facility shall
be determined by the Central Transmission
Utility-or the State Transmission Utility, as the
case may be;
Provided further that any dispute regarding
the availability of transmission facility shall be
adjudicated upon by the Appropriate
Commission".
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Appeal No.33 of 2012
Rule-3 of the Electricity Rules, 2005
3. Requirements of Captive Generating Plants:
(1)No power Plant shall qualify as "Captive
Generating Plant" under Section 9 read
with clause (8) of Section 2 of the Act,
unless-
(a) In case of power plant-
(i) not less than twenty six percent of
the ownership is held by the captive
user(s), and
(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 co-operative society, the
conditions mentioned under paragraphs (i)
and (ii) above shall be satisfied collectively
by the members of the co-operative 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;
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Appeal No.33 of 2012
(b) In case of a generating station owned
by a company formed as special purpose
vehicle for such generating station, a unit or
units of such generating station identified for
captive use and not the entire generating
station satisfy(ies) the conditions contained
in paragraphs (i) and (ii) of sub clause (a)
above including-
Explanation-
(1) The electricity required to be consumed by captive
users shall be determined with reference to such
generating unit or units in aggregate identified for
captive use and not with reference to generating station
as a whole; and
(2) The equity shared to be held by the captive
user(s) in the generating station shall not be less than
twenty six percent of the proportionate of the equity of
the company related to the generating unit or units
identified as the captive generating plant.
Illustration
In a generating station with two units of 50 MW each
namely Units A and B, one unit of 50 MW namely Unit
A may be identified as the Captive Generating Plant.
The Captive users shall hold no less than thirteen
percent of the equity shares in the company (being the
twenty six percent proportionate to Unit A of 50 MW)
and not less than fifty one percent of the electricity
generated in Unit A determined on an annual basis is to
be consumed by the captive users.
(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
Page 10 of 21
Appeal No.33 of 2012
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".
12. Thus, both the Section 2 (8) of Act, 2003 and Rule-3 of the
Electricity Rule-2005 would provide for the criteria to qualify
as a captive power plant. The two requirements to be
satisfied by the Generating Plant to qualify as a captive
power plant are as follows:
(a) Ownership i.e. holding 26% of the ownership;
(b) Consumption of 51% of the units generated.
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Appeal No.33 of 2012
13. Rule-3 of Electricity Rules 2005 specifically prescribes the
conditions to be satisfied by the Power Plant to be qualified
as captive power plant. Therefore, a power plant will be
qualified as a captive power plant only when it satisfies both
the conditions.
14. Even if any one of the conditions is not fulfilled, the captive
power plant will lose its status and become a generating
plant or independent power producer.
15. According to the Appellant, the State Commission has got
the powers for relaxing the provisions of the Electricity
Rules, 2005 to provide relief to captive power plant in view
of the fact that this Tribunal earlier held that the State
Commission has the power to determine whether the power
plant has satisfied the requirements to claim captive status
for a particular year as decided in the judgment in Appeal
No.270 of 2006 dated 21.2.2011 in the matter Chhatisgarh
State Power Distribution Company Vs M/s. J P Saboo and
Others.
16. This contention has no basis as the said decision rendered
by this Tribunal did not lay down the ratio that the State
Commission has got the powers of relaxation of Rule-3 of
the Electricity Rules.
17. On the other hand, the ratio decided in that case was that the
State Commission has got the powers to decide whether the
power plant qualifies as a captive power plant or not and in that
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Appeal No.33 of 2012
process, it has to see whether a power plant qualifies as a
captive power plant strictly in terms of the Rule-3 of the
Electricity Act, 2005. Therefore, the said decision is of no
help to the Appellant.
18. The Learned Counsel for the State Commission has cited an
authority which has been rendered by this Tribunal in the
judgment dated 18.2.2011 in Appeal No.77 of 2010 M/s.
Jayaswal Neco Industries V CSERC which dealt with this
issue. The relevant portion is as under:
"We in the instant case find no absurdity in the
plain meaning of Rule 3 of the Rules (ibid) read
with Section 2(8) and Section 9 of the Act of
2003. On the contrary, the plain meaning, as it
is so obvious to us, harmonizes the object of the
statute.
In New India Sugar Mills Ltd. Vs. Commissioner
of Sales Tax Bihar (AIR 1963 SC 1207) the
Hon'ble Supreme Court held that the
expressions used in a statute should ordinarily
be understood in a sense in which they best
harmonize with the object of the statute. It has
rightly been said by the learned counsel for the
Respondent No. 2 that cross subsidy surcharge
is utilized to meet the requirements of current
level of cross-subsidy within the area of supply
of the distribution licensee and hence, has a
direct bearing on the tariff formulization of the
distribution licensee which in turn has its impact
on the tariff payable by the consumers. Thus,
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Appeal No.33 of 2012
one who is unable to fulfill the twin requirements
of Rule 3 is not permitted under the law to have
exemption from payment of cross-subsidy
surcharge while availing of the open access or
any other rigor of law to which a generating
company or a distribution company is subjected
to. We notice the fourth provisio to Section 42 of
the Act which reads thus:
"Provided also that such surcharge shall not
be leviable in case open access is provided
to a person who has established a captive
generation plant for carrying the electricity
to the destination of his own use."
Therefore, this is not without purpose or object
that the words 'captive generating plant' used in
Section 2(8) and Section 9 of the Act, 2003 and
Rule 3 of the Rules, 2005 framed there under
have been qualified with the prefix 'a' before
them. It is necessary in this connection to read
paragraph (2) below the illustration to the Rule 3
of the Rules:
"(2) It shall be the obligation of the captive
user to ensure that the consumption by the
captive user at the percentage mentioned in
sub-clause (a) and (b) of sub-rule (1)
above, is maintained and in case the
minimum percentage of the captive use is
not complied with in any year, the entire
electricity generated be treated as if it is a
supply of electricity by a generating
company."
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Appeal No.33 of 2012
18. The argument of Mr. Sen that once MUUL is
held to be the captive generation plant of the
Appellant it ceases to be a different plant for the
purpose of applicability of Rule 3 is thus difficult
to accept. Two power plants are distinct having
respective generation capacity of their own and
they cannot be combined with one another,
although legal ownership with respect to the two
plants vests in one and the same person.
19. In effect, what the Appellant is asking for is
deviation from Rules based on equity which we
are unable to concede to. It is well settled
principle of interpretation that statute by
implication imports the equitable principle but
we are not having Court of Equity. The modern
statutes are framed with a view to equitable as
well as legal principles, although equity
subordinates itself to statutes. Therefore,
impliedly equity does not reveal apparent
harshness that is perceived in a modern statue.
Reference may be made on the treaties of
Bennion on Statutory Interpretation (Indian
th
reprint 5 edition page 1064).
19. The above decision lays down the following dictums:
(a) One who is unable to fulfil the twin requirements
of Rule-3, is not permitted under the law to have
exemption from payment of cross subsidy surcharge.
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Appeal No.33 of 2012
(b) Illustration 2 of Rule-3 provides that when the
minimum percentage of the captive use is not complied
with in any year, the entire electricity generated to be
treated as the electricity generated by a generating
company.
(c) This rule cannot be deviated based on equity.
This decision would squarely apply to the present case.
20. The Power of the State Commission to decide about
whether the requirements have been satisfied is one thing.
At the same time, the power of the State Commission to
relax mandates relating to the norms fixed for those
requirements fixed by the Rules and the Act is a different
thing.
21. The Appellant instead of satisfying the mandatory
requirements cannot ask the State Commission for deviation
from these Rules framed under the Central Act based upon
equity which is not permissible under the law. It is well
settled principle of interpretation that the statute by
implication imports the equitable principle. The modern
statutes are framed with a view to equitable as well as legal
principles but equity would subordinate itself to statutes.
22. The question raised in this Appeal is whether the State
Commission has got the powers to relax the Rules framed by
the Central Government with intent to carrying out the
provisions of the Central Act or not. This eligibility
prescription of 51% of annual consumption is in conformity
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Appeal No.33 of 2012
with the statutory requirements as provided U/S 2 (8) of the
Act, 2003. The definition of captive generating plants as per
definition U/S 2 (8) is that the power plant set-up by any
person to generate electricity "primarily for his own use". It
means that the major part of the power produced by the
captive power plant is to be used for captive consumption.
23. Similarly, the Sub Rule 2 of rule-3 wherein the word "shall"
has been used would make it clear that the obligation of the
captive generating plant are mandatorily to be complied with
failing which the provisions of Sub Rule-2 would
automatically come into operation and consequently the
electricity generated in that year by the plant has to be
treated as it is the supply of electricity by a generating
Company. Therefore, it has to be held that the State
Commission does not have any power to relax the rigours of
Rule-3 under any circumstances.
24. The settled legal position is when it is prescribed in a statute
that a particular act is to be done in a particular manner,
then requirement to the Act in that manner is mandatory and
the specified Section of non compliance have necessary to
follow. This principle has been laid down in (1980) 1 SCC
403 in the case of Sharif-Ud-Din Vs Abdul Gani Lone. The
relevant portion of the judgment is as under:
"Where, however, a provision of law prescribes
that a certain act has to be done in a particular
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Appeal No.33 of 2012
manner by a person in order to acquire a right and
it is coupled with another provision which confers
an immunity on another when such act is not done
in that manner, the former has to be regarded as a
mandatory one".
.................................
..................................
"Whenever a statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to a specific consequence, it would be difficult to hold that the requirement is not mandatory and the specified consequence should not follow".
25. The very same principle has been laid down in (2001) 6 SCC 461 in the case of Raj Sekhar Gogoi Vs State of Assam and Others.
26. This ratio which has been laid down by the Hon'ble Supreme Court would indicate that when Rule-3 of 2005, Electricity Rules prescribes that a captive generating plant must consume 51% of the electricity generated from the plant for his own use on an annual basis and further prescribes that when failure to do so, will result in the electricity generated in that year to be treated as the electricity generated by a generating plant, then the provisions of Rule-3 are automatically to be held as mandatory. As such, the State Commission does not have powers for relaxing the provisions of Rule-3 for any reasons.
Page 18 of 21 Appeal No.33 of 201227. The other claim of the Appellant is that the State Commission has in an earlier case pertaining to another captive power plant in the Petition No.17 of 2008 has considered similar force majeure conditions and relaxed the provisions under Rule 3 of the Electricity Act, 2005. When this order in Petition No.17 of 2008 dated 25.5.2009 had been cited by the Appellant before the State Commission in order to substantiate the plea that the State Commission has got the powers for relaxation, the State Commission has rightly distinguished and clarified the said order by stating that it did not lay down that the State Commission has jurisdiction. On the other hand that order would not be applicable to this case.
28. The relevant portion of the observations of the State Commission is as follows:
"From the above, it is evident that there was an error in submission of data of the auxiliary consumption by the generating company on account of which the calculated captive consumption was found less than 51% and subsequently after application of correct data of auxiliary consumption the captive consumption was found 52.42% and thus the status of CPP was maintained. The Commission has not considered the period of breakdown of industry in deciding the captive status of the power plant. Therefore, the conclusion arrived on our order dated 25.5.2009 in Petition No.17 of 2008 will not be applicable here.
Since, there is no provision of any relaxation in 51% consumption for captive use for a generator to fulfil criteria of CPP in Rule-3 of Electricity Rules, 2005; we Page 19 of 21 Appeal No.33 of 2012 do not find any justification in request of petitioner for consideration. The Petition is therefore, dismissed".
29. So, in view of the observations made by the State Commission in the impugned order, the Appellant cannot contend that the State Commission has earlier relaxed the provisions of the Rule-3 of the Electricity Rules in an another case.
30. To Sum Up
(a) Rule 3 of Electricity Rules 2005 specifically prescribes that two conditions are to be satisfied by the power plant to be qualified as a captive power plant. If any one of those conditions is not fulfilled, the captive power plant will lose its status and become a generating plant. Hence, the State Commission does not have any powers to relax the provisions of the Electricity Act, 2005.
(b) In the present case, the Appellant could not satisfy one of the conditions of Rule 3 viz consumption of 51% of the annual aggregate electricity generated by its power plant for captive use during the year 2009-10 due to breakdown in its Steel Plant. Therefore, the power generation from its power plant shall be treated as if it is a supply of electricity by a generating company as per Rule 3(2) of the Electricity Rules, 2005. The State Page 20 of 21 Appeal No.33 of 2012 Commission does not have any power to relax the requirement of consumption of not less than 51% of the electricity generated from the Appellant's power plant for captive use.
31. In view of our above findings, we do not find any ground to hold that the impugned order does suffer from any infirmity warranting any interference by this Tribunal.
32. Thus the Appeal, being devoid of any merit, is liable to be dismissed. Accordingly, the same is dismissed. However, there is no order as to costs.
(Rakesh Nath) (Justice M. Karpaga Vinayagam)
Technical Member Chairperson
Dated:18th Feb, 2013
√REPORTABLE/NON-REPORTABALE
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