Telangana High Court
M/S.Maheswari Plaza Resports Ltd., vs Central Power Distribution Co.Of A.P. ... on 19 December, 2023
HON'BLE THE CHIEF JUSTICE SRI G.S. SINGHVI
AND
HON'BLE SRI JUSTICE C.V. NAGARJUNA REDDY
Writ Petition Nos.12367, 12368, 12369, 12761, 12762, 12950, 12951,
12952, 12992, 13138, 13217, 13221, 13367, 15333, 15343, 15368 and
17238 of 2006
Writ Petition No.12367 of 2006
Between:
M/s.Ravindranath GE Medical Associates
Pvt. Ltd., Hyderabad, represented by its
Senior General Manager and another.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Managing Director and another.
... Respondents
Writ Petition No.12368 of 2006
Between:
M/s. Quality Care India Ltd.,
Hyderabad represented by its Company
Secretary and another.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Managing Director and another.
... Respondents
Writ Petition No.12369 of 2006
Between:
M/s. Annapurna Associates Pvt. Ltd.,
Hyderabad represented by its Company
Secretary and another.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Managing Director and another.
... Respondents
Writ Petition No.12761 of 2006
Between:
M/s.Prasad Media Corporation Limited,
represented by its Chief Engineer and another.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Managing Director and another.
... Respondents
Writ Petition No.12762 of 2006
Between:
M/s. NATL Technologies Limited,
represented by its Managing Director and another.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Managing Director and another.
... Respondents
Writ Petition No.12950 of 2006
Between:
Yashoda Super Specialty Hospital,
represented by its Manager (Finance)
and another.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Managing Director and another.
... Respondents
Writ Petition No.12951 of 2006
Between:
M/s. Hotel Kamal Private Limited,
represented by its Finance Manager
and another.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Managing Director and another.
... Respondents
Writ Petition No.12952 of 2006
Between:
Dr. Reddy's Research Foundation,
represented by its Director-Administration
and another.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Managing Director and another.
... Respondents
Writ Petition No.12992 of 2006
Between:
M/s. Sri Lakshmi Gayatri Hotels Private Limited,
represented by its Managing Director
and another.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Managing Director and another.
... Respondents
Writ Petition No.13138 of 2006
Between:
Sudha Agro Oils and Chemical Industries Limited,
represented by its Managing Director
and others.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Chairman &
Managing Director.
... Respondent.
Writ Petition No.13217 of 2006
Between:
RPP Limited,
represented by its Managing Director
and another.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Chairman &
Managing Director.
... Respondent.
Writ Petition No.13221 of 2006
Between:
Jyoti Bio-Energy Ltd.,
represented by its Executive Director
and others.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Chairman &
Managing Director.
... Respondents
Writ Petition No.13367 of 2006
Between:
HCL Agro Power Limited,
represented by its Managing Director
and others.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Chairman &
Managing Director. ... Respondent
Writ Petition No.15333 of 2006
Between:
M/s. Shri Shakti Resorts (P) Limited,
represented by its Chief Engineer
and another.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Managing Director and another.
... Respondents
Writ Petition No.15343 of 2006
Between:
M/s. Maheswari Plaza Resorts Limited,
represented by its Chief Engineer
and another.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Managing Director
and another.
... Respondents
Writ Petition No.15368 of 2006
Between:
M/s. Spencer and Company (Great
Wholesale Club),
represented by its Assistant Manager -
Maintenance and another.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Managing Director
and another.
... Respondents
Writ Petition No.17238 of 2006
Between:
Sree Rayalseema Green Energy Ltd.,
represented by its Chairman & Managing
Director and others.
... Petitioners
And
Central Power Distribution Co. of A.P.
Ltd. represented by its Chairman & Managing Director.
... Respondent
:: ORDER::
Counsel for the Petitioners in W.P.Nos.12367, 12368, 12369, 12761, 12762, 12950, 12951, 12952, 12992, 15333, 15343 and 15368 of 2006 : Shri C. Kodanda Ram Counsel for the petitioners in W.P.Nos.13138, 13217, 13221, 13367 and 17238 of 2006 : Shri Katragadda Gopal Choudary Counsel for the respondents: Shri T. Anantha Babu, Senior Advocate assisted by Smt.P.V.V.B. Rajeswari and Shri N. Jayasurya, Advocates July, 2007 Per G.S. Singhvi, CJ Whether Central Power Distribution Company of Andhra Pradesh Limited (for short, 'the company') can levy cross-subsidy surcharge on the consumers of electricity generated and supplied by independent power producers from non-conventional energy sources despite the exemption granted by the Central Government under Section 183 of the Electricity Act, 2003 (for short, 'the 2003 Act') is the question which arises for determination in these petitions filed by the petitioners for quashing the notices issued by the Superintending Engineer (Operation Circle), Hyderabad to the scheduled consumers for payment of cross-subsidy surcharge.
For the sake of convenience, we have taken the facts from Writ Petition No.12367 of 2006.
Petitioner Nos.1 and 2 are companies incorporated under the Companies Act, 1956. Petitioner No.1 has established a hospital in the name and style as "Global Hospital" for providing medical services to the people. It has been availing power supply from respondent No.1 vide Service No.HDC 706 with connected load of 300 KV. Petitioner No.2 is engaged in generation of electricity from Biomass and sale thereof.
In 1994, the Government of Andhra Pradesh created Non- Conventional Energy Development Corporation of Andhra Pradesh (for short, 'NEDCAP') as a Nodal Agency for the development of non- conventional energy projects. NEDCAP was notified as Single Window Agency for obtaining clearances. It was also granted power to accord permission for establishing plants up to 20 MW.
In pursuance of the policy evolved by the Government of Andhra Pradesh to encourage development of non-conventional energy by use of natural resources, petitioner No.2 set up Bio-mass based generating unit at Miryalaguda, Nalgonda District with 6 MW capacity. O n 4-1-1999, petitioner No.2 entered into a power wheeling and purchase agreement (hereinafter referred to as 'the agreement') with erstwhile Andhra Pradesh State Electricity Board. The same was approved by Andhra Pradesh Electricity Regulatory Commission (for short, 'the Commission') in terms of Section 24 of the Andhra Pradesh Electricity Reform Act, 1998 (for short, 'the 1998 Act'). After one year and almost ten months, petitioner No.1 entered into an agreement for purchase of power generated by petitioner No.2 with 300 KV CMD at 11 KVA and thereby became one of the scheduled consumers of petitioner No.2.
With a view to encourage private sector participation in generation, transmission and distribution of electricity and reducing the regulatory responsibility of the government, the Parliament enacted the 2003 Act. This Act seeks to rationalise and harmonise the provisions of the Indian Electricity Act, 1910 (for short, 'the 1910 Act'), the Electricity (Supply) Act, 1948 (for short, 'the 1948 Act') and the 1998 Act. This is evident from the preamble of the 2003 Act, which reads as under:
"An Act to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity and generally for taking measures conducive to development of electricity industry, promoting competition therein, protecting interest of consumers and supply of electricity to all areas, rationalisation of electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, constitution of Central Electricity Authority, Regulatory Commissions and establishment of Appellate Tribunal and for matters connected therewith or incidental thereto."
Some of the important features of the 2003 Act are to de-licence generation of electricity and to permit captive generation; development of transmission network in a planned and coordinated manner to meet the requirement of the electricity sector; to provide for private transmission licences, and to introduce open access system in transmission from the outset with provision for levy of surcharge, which could take care of current level of cross subsidy.
Sections 42 and 183 of the 2003 Act, which have bearing on the adjudication of the question noted hereinabove, read as under:
"42. Duties of distribution licensee and open access.-(1) It shall be the duty of a distribution licensee to develop and maintain an efficient, co-ordinated and economical distribution system in his area of supply and to supply electricity in accordance with the provisions contained in this Act.
(2) The State Commission shall introduce open access in such phases and subject to such conditions, (including the cross subsidies, and other operational constraints) as may be specified within one year of the appointed date by it and in specifying the extent of open access in successive phases and in determining the charges for wheeling, it shall have due regard to all relevant factors including such cross subsidies, and other operational constraints:
Provided that such open access may be allowed before the cross subsidies are eliminated, on payment of a surcharge in addition to the charges for wheeling as may be determined by the State Commission:
Provided further that such surcharge shall be utilised to meet the requirements of current level of cross subsidy within the area of supply of the distribution licensee:
Provided also that such surcharge and cross subsidies shall be progressively reduced and eliminated in the manner as may be specified by the State Commission:
Provided also that such surcharge shall not be leviable in case open access is provided to a person who has established a captive generating plant for carrying the electricity to the destination of his own use:
Provided also that the State Government shall, not later than five years from the date of commencement of the Electricity (Amendment) Act, 2003, by regulations, provide such open access to all consumers who require a supply of electricity where the maximum power to be made available at any time exceeds one megawatt."
"183. Power to remove difficulties.-
(1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order published, make such provisions not inconsistent with the provisions of this Act, as may appear to be necessary for removing the difficulty:
Provided that no order shall be made under this section after the expiry of two years from the date of commencement of this Act.
(2) Every order made under this section shall be laid, as soon as may be after it is made, before each House of Parliament."
In exercise of the power vested in it under Section 183 and with a view to give relief to the private generating companies, which were allowed to enter into contract for sale of electricity, the Central Government issued order dated 8.6.2005. The same reads as under:
"S.O.789 (E) - Whereas the Electricity Act, 2003 (36 of 2003) (hereinafter referred to as the Act) came into force on the 10th June, 2003;
And Whereas sub-section (2) of Section 42 of the Act provides that the State Commission shall introduce open access in such phases and subject to such conditions, (including the cross subsidies, and other operational constraints) as may be specified within one year of the appointed date by it and in specifying the extent of open access in successive phases and in determining the charges for wheeling, it shall have due regard to all relevant factors including such cross subsidies, and other operational constraints:
And whereas the first proviso to sub-section (2) of Section 42 of the Act provides that such open access may be allowed before the cross subsidies are eliminated on payment of a surcharge in addition to the charges for wheeling as may be determined by the State Commission;
And whereas the second proviso to sub-section (2) of Section 42 of the Act provides that such surcharge shall be utilised to meet the requirements of current level of cross subsidy within the area of supply of the distribution licensee;
And whereas generating companies were allowed to enter into a contract for sale of electricity with any other person with the consent of the competent governments under the provisions of clause (c) of sub-section (1) of Section 43A of the Electricity (Supply) Act, 1948 (repealed by the Act), and sale of electricity by such companies was not subject to payment of any surcharge under the repealed law:
And whereas distribution licensees were authorized by the State Government to supply energy to any person outside the area of supply under Section 27 of the Indian Electricity Act, 1910 (repealed by the Act), and supply of energy (electricity) by such distribution licensee was not subject to payment of any surcharge under the said repealed law;
And whereas in case of electricity being sold or supplied under permissions from competent government or authorizations of the State Government, as the case may be, under the said repealed laws, there was no element of cross subsidy and, therefore, there was no requirement of any surcharge for the same;
And whereas difficulties have arisen regarding the applicability of the provisions of Section 42 of the Act with regard to the levy of surcharge on the sale of electricity by a generating company under clause (c) of sub-section (1) of Section 43A of the Electricity (Supply) Act, 1948 (repealed law) and also on the electricity being supplied by licensees to any person outside the area of their supply under Section 27 of the Indian Electricity Act, 1910 (repealed law);
Now, therefore, the Central Government in exercise of its power conferred by Section 183 of the Act, hereby makes this order to make provisions in respect of such electricity being sold or supplied under the repealed laws, being not inconsistent with the provisions of the Act, to remove the difficulties, namely:-
1. Short title and commencement:-
(1) This order may be called the Electricity (Removal of Difficulties) second Order, 2005.
(2) It shall come into force on the date of publication in the official gazette.
2. Exemption from payment of surcharge on the sale or supply of electricity:-
No surcharge would be required to be paid, in terms of sub-section (2) of Section 42 of the Act on the electricity being sold by the generating companies with consent of the competent government under clause (c) of sub-section (1) of Section 43A of the Electricity Act, 1949 (now repealed by the Act), and on the electricity being supplied by the distribution licensee on the authorization by the State Government under Section 27 of the Indian Electricity Act, 1910 (now repealed by the Act), till the current validity of such consent or authorization."
Soon after issue of the aforementioned order by the Central Government, the Commission, in exercise of the power conferred upon it under Section 181 (1) read with Sections 42 (2), 42(4), 39(2)(d)(ii) and 40(c)(ii) of the 2003 Act made the Andhra Pradesh Electricity Regulatory Commission (Terms and Conditions of Open Access) Regulations, 2005 (for short, 'the 2005 Regulations'). The preamble and clauses 1(d), 2 (i)(f), 7, 8, 12 and 17 of the 2005 Regulations read as under:
"Preamble:
Subsection (2) of Section 42 of the Electricity Act, 2003, mandates the introduction of open access in such phases and subject to such conditions as may be specified by the State Commission considering the relevant factors including operational constraints. The Commission formulated a draft Regulation on the terms and conditions for allowing open access for supply of electricity to consumers and sought comments / suggestions from interested persons by publishing the same in the Andhra Pradesh Gazette on 4-8-2004 and also putting it on the website of the Commission. Twenty-three (23) persons / organisations including one licensee and some generating companies have offered comments / suggestions on the draft Regulation. The Commission considered these comments / suggestions and finalised the Regulation.
1. Short title, commencement and interpretation:
... ... ...
(d) This Regulation shall be read with the Electricity (Removal of difficulties) Second Order, 2005, notified by Ministry of Power, Government of India, in the Gazette of India, Extraordinary, Part II, Section 3(ii), dated 8th June 2005.
2. Definitions:
(i) In this Regulation, unless the context otherwise requires:-
... ... ...
(f) "open access agreement" means an agreement entered into between a licensee and the applicant to avail open access to the licensee's network for transmission and / or wheeling of electricity;
... ... ... 7. Provision for existing users: 7.1 Existing distribution licensees:
The existing distribution licensee (s) shall be deemed to be the long-term open access user (s) of the Intra-State transmission system (s) and/or the distribution system (s) for the term specified in / under the existing agreement
(s) or arrangement (s) and shall make payment of transmission charges, wheeling charges and other charges, as applicable, and as may be determined by the Commission from time to time.
The existing distribution licensee (s) shall, within 60 days of coming into force of this Regulation, furnish details of their use of intra-state transmission system (s) and/or distribution system (s) to the STU, SLDC and the Commission.
7.2 Existing users other than the distribution licensees:
The existing user (s) other than the existing distribution licensees may continue to avail themselves of the wheeling facility as per the existing agreements for the period(s) specified in those agreement(s), to the extent they are not inconsistent with the Act and this Regulation:
Provided that such existing user (s) shall pay the transmission charges, wheeling charges and other charges as may be determined by the Commission from time to time :
Provided also that any additional capacity sought by such existing user
(s) in addition to the capacity already contracted, shall be treated as new application for open access to the extent of additional capacity sought."
8. Phasing of Open Access:
8.1 Where open access to the Transmission and/or Distribution systems is sought by any user, the Nodal Agency shall permit such open access strictly in accordance with the following phases:
Phase Eligibility Criteria Commencement date
1. Consumers availing of power from NCE developers irrespective of the quantum September, 2005 of contracted capacity
2. Contracted capacity being greater than 5 September, 2005 MW
3. Contracted capacity being greater than September, 2006 2 MW
4. Contracted capacity being greater than April, 2008 1 MW Provided that the Commission shall allow open access to consumers with contracted capacity of 1 MW or less in due course at such time and in such phases as it may consider feasible having due regard to operational constraints and other factors:
Provided further that the Commission may revise the above schedule for the subsequent phases of open access, as considered necessary, not being inconsistent with the provisions of the Act:
Provided also that the Commission may exempt any consumer or a class of consumers from this phasing scheme if it considers necessary or expedient in the public interest:
Provided also that only the consumers availing of supply from the existing users covered under clause 7.2 from a date prior to coming into force of this Regulation shall not be affected by the above phasing.
8.2 The licensees shall make all reasonable attempts to ensure that operational constraints in the Transmission and / or Distribution systems as the case may be, including metering, communication systems, capacity determination, etc. are removed as per the phasing plan indicated above so that, as far as possible, no eligible consumer is denied open access on the grounds of operational constraints in the system.
12. Open Access Agreement 12.1 Based on the intimation by the Nodal Agency to the open access applicant, the applicant shall execute an open access agreement with the concerned Licensee(s), which shall broadly set out the information as given in Annexure-2 to this Regulation. The Licensees shall draft a standard open access agreement format and get the same approved by the Commission within 30 days of coming into effect of this Regulation.
12.2. The open access agreement referred to in clause 12.1 shall be bipartite, tripartite or multi-partite involving the applicant, the concerned Distribution Licensee in whose area of supply the applicant's exit point is located and the concerned Transmission Licensee or Licensees. The Open Access Agreement shall clearly bring out the rights and obligations of all parties which are broadly set out in Annexure - 3 with respect to exit points on transmission and distribution systems separately:
Provided that in cases where the open access applicant's point(s) of entry as well as the point(s) of exit are located within the distribution system of the same Distribution Licensee ( at voltages 33KV and below), the applicant shall be required to execute an open access agreement only with such Distribution Licensee.
12.3 Subject to the capacity being available, the Licensee(s) shall, after the applicant for long-term open access has completed all the pre-requisite formalities, including the execution of open access agreement, make arrangements to provide access to the applicant within the time period specified in the Andhra Pradesh Electricity Regulatory Commission (Licensees' Duty for Supply of Electricity on Request) Regulation, 2004 (No. 3 of 2004):
Provided that in the case of short-term users, the open access shall be allowed as early as possible notwithstanding the time frame specified in the aforementioned Regulation.
12.4 Minimum term and renewal of the Open Access Agreement: The minimum term of an open access agreement is such term as the parties may agree and set out in the agreement subject to the provisions of clause 4 above.
A long-term open access agreement between a long-term user and the licensee may be renewed for a further term of two years or more without the requirement of a fresh open access application, on receipt of at least three (3) months' notice from the concerned long-term user to the concerned licensee(s) and the Nodal Agency, before the expiry of the Agreement. . In case, no notice is provided by the Long-Term user, the Long-Term user shall forgo his right over the allotted capacity.
In case of short-term users, however, no extension of the original open access agreement shall be allowed, and a user wanting extension shall have to apply afresh to the Nodal Agency for open access.
17. Open Access charges 17.1 The charges for the use of the transmission and / or distribution system by an open access user shall be regulated as under:
(i) Open Access users connected to the transmission/distribution system shall pay the transmission charges and / or wheeling charges and any other applicable charges as determined by the Commission from time to time, and notified in the relevant Tariff Order or otherwise, and as per the conditions stipulated therein:
Provided that the wheeling charges so payable shall be subject to a minimum level, as fixed by the Commission in the relevant Tariff Order or otherwise.
(ii) In case of utilization of inter-state transmission system in addition to the intra-state transmission system and/or distribution system by an open access user , the transmission charges and / or wheeling charges shall be payable for the use of intra-state system in addition to the charges for utilization of the inter- state transmission system
(iii) The Open access users of the Transmission and / or Distribution System where such open access is for delivery of electricity to the consumer's premises in the area of supply of a distribution licensee, shall pay to the distribution licensee the (cross-subsidy) surcharge as determined by the Commission from time to time under Section 42 (2) of the Act :
Provided that no (cross-subsidy) surcharge shall be payable if the open access is provided to a person who has established a captive generating plant for carrying the electricity to the destination of his own use.
(iv) The Open Access user shall also be liable to pay additional surcharge on charges of wheeling as may be specified by the Commission from time to time under section 42(4) of the Act, in case open access is sought for receiving supply from a person other than the distribution licensee of such consumer's area of supply, to meet the fixed cost of the distribution licensee arising out of his obligation to supply.
(v) Where an electrical plant or electrical line is to be constructed by the Licensee in order to extend power supply to an open access user, the Licensee may recover such expenditure as per the Andhra Pradesh Electricity Regulatory Commission (Licensee's Duty for Supply of Electricity on Request) Regulation, 2004(Regulation No.3 of 2004).
(vi) If network augmentation is required for providing access to an applicant, the Licensee shall carry out such augmentation only if (a) the Licensee can recover within a reasonable time the costs, the capital investment and a reasonable rate of return on the capital investment in respect of the augmentation, and (b) the Licensee has the ability to raise funds to finance such capital expenditure:
Provided that the Licensee may require the open access user to make a capital contribution towards such network augmentation.
(vii) Scheduling and system operation charges shall be payable by all open access users under scheduling by SLDC. Such charges shall be governed by the relevant Regulations issued by the Commission."
On 21.9.2005, the Commission passed Order No.16 of 2005 determining surcharge and additional surcharge under Sections 39, 40 and 42 of the 2003 Act for open access system. Para 6.2 of that order, which contains reference to order dated 8.6.2005 issued by the Central Government, reads as under:
"Commission's analysis The Commission likes to point out in this regard that the Ministry of Power, Government of India, in exercise of powers under Section 183 of the Electricity Act, 2003, has notified, on 8.6.2005 vide SO.789 (E), the Electricity (Removal of Difficulties) Second Order 2005, effective from 10th June, 2003, the operative provisions whereof read as follows:
"Exemption from payment of surcharge on the sale or supply of electricity:
No surcharge would be required to be paid, in terms of sub- section (2) of Section 42 of the Act on the electricity being sold by the generating companies with consent of the competent government under clause (c) of sub-section (1) of section 43A of the Electricity (Supply) Act, 1948 (now repealed by the Act), and on the electricity being supplied by the distribution licensee on the authorization by the State Government under Section 27 of the Indian Electricity Act, 1910 (now repealed by the Act), till the current validity of such consent or authorizations".
As such, it is beyond the competence of the Commission to levy the cross- subsidy surcharge on those covered by the aforementioned Order of the Government of India. The Commission, however, clarifies that such consumers shall be liable to pay the applicable surcharge on their ceasing to be covered by the aforementioned order.
The Commission expects the Distribution Licensees to take appropriate action as per Law in respect of such users of wheeling facility."
Notwithstanding the exemption order issued by the Central Government under Section 183 of the 2003 Act, Clauses 1(d) and 7 of the 2005 Regulations, and Para 6.2 of order dated 21.9.2005 passed by the Commission, the Superintending Engineer of the company issued notices dated 12.6.2006 to the scheduled consumers of the independent power producers requiring them to pay cross-subsidy surcharge. For the sake of reference, notice issued to petitioner No.1 - M/s. Ravindranath GE Medical Associates Pvt. Ltd. (petitioner No.1 in Writ Petition No.12367 of 2006) is reproduced below:
"For Existing Consumers CENTRAL POWER DISTRIBUTION COMPANY OF ANDHRA PRADESH LIMITED From: To The Superintending Engineer, Ravindranath GE Medical Operation Circle, CPDCL, Associates Pvt. Ltd., CENTRAL D.No.6-1-1070/1, Lakdi-ka-pool, Hyd.
Lr.No.SE/OP/CPDCL/D.No.4422/06, Dt: 12-06-2006 Sub: CPDCL - HT S.C.No.706 of M/s.Ravindranath GE - Availing of open access facility - payment of cross subsidy surcharge - requested - Reg.
Ref: 1. Regulation No.2 of 2005 approved by APERC
2. O.P.No.16 of 2005 dt.21-09-2005 approved by APERC.
*** Please refer to the order of the Regulatory Commission dated 21-09-2005 fixing a tariff for the year 2005-2006 which has been continued for the current year. Under this order we are entitled to collect from you an additional amount to compensate us for cross-subsidization. The commission has also asked us to examine the possible impact of the Central Government's notification dated 8.6.2005. We have been advised that under Section 183, which is invoked by the Central Government, it has no power to nullify any levy authorized by the commission. The Supreme Court has repeatedly held that is prerogative of the Commission to fix the tariff. The order of the Commission has not been challenged and has become final. By some oversight, the monthly bills issued for the period from 01/2006 to 05/2006 omitted this claim. The supplementary bill for the period from 01/2006 to 05/2006 for Rs.1021965/- is being sent herewith. Please pay the same within 15 days. If the payment is not made, we shall be constrained to stop wheeling your power.
Encl. As above.
Yours faithfully, Sd/-
Superintending Engineer, Operation Circle, CENTRAL"
Similar notices have been issued to the consumers, who are petitioners No.1 in each of these petitions. They all have executed agreements with the independent power producers, who had already entered into wheeling agreement with the Board or A.P. TRANSCO.
The petitioners have questioned the demand of cross-subsidy surcharge mainly on the ground that the listed/scheduled consumers of independent power producers are not covered by open access cross- subsidy surcharge prescribed by the Commission. According to them, petitioners No.1 in all the writ petitions are getting supply from independent power generating companies, which have pre-existing wheeling agreements with the Board, and in view of the exemption granted by the Central Government vide notification dated 8.6.2005, the company cannot levy and recover cross subsidy surcharge prescribed as a part of the mechanism evolved for open access system.
The respondents have contested the writ petitions by contending that the independent power producers do not have the locus standi to question the cross subsidy surcharge because the same is being levied on the listed/scheduled consumers and that in the absence of sanction accorded by the State Government under Section 43-A(1), the independent power producers cannot take the benefit of the notification issued by the Central Government under Section 183 of the 2003 Act. It is also the plea of the respondents that notification dated 8-6-2005 is beyond the competence of the Central Government and the same cannot be enforced. In the affidavits filed by Shri M. Narsimhulu, Chief General Manager (Commercial) of the company, it has been averred that the facility of open access has been conferred for the first time on generators by virtue of Section 39 (2)(d) read with Section 42 of the 2003 Act and in terms of Clauses 12 and 17 of the 2005 Regulations, the independent power producers have to execute agreement for enjoying the benefit of open access. According to Shri Narsimhulu, the power purchase agreements cannot be enforced in the face of the provisions of the 2005 Regulations and, in any case, such agreements are liable to be ignored because the same are inconsistent with the provisions of the 2003 Act.
The respondents have also raised an objection to the maintainability of the writ petition by asserting that petitioner No.2 can avail alternative remedy under Section 86(1)(f) of the 2003 Act.
Learned counsel for the petitioners heavily relied on notification dated 8.6.2005 issued by the Central Government under Section 183 of the 2003 Act and Clause 7 of the 2005 Regulations and argued that the petitioners cannot be called upon to pay cross subsidy surcharge. They emphasised that the petitioners cannot be treated as beneficiaries of the open access system because petitioner No.2 had already entered into wheeling and power purchase agreement with the Board. Learned counsel further argued that in the absence of any challenge by the company to notification dated 8.6.2005 issued by the Central Government under Section 183 of the 2003 Act, it cannot ignore the exemption granted to the listed/scheduled consumers and recover cross subsidy surcharge from them. Sri C. Kodandaram invited the Court's attention to G.O.Ms.No.253, dated 15.11.1994 and G.O.Ms.No.93, dated 18.11.1997 and argued that the independent power producers, who have set up power projects in furtherance of the policy framed by the government and who were allowed to sell electricity to third parties, cannot be put to a disadvantageous position by levy of cross subsidy surcharge on the listed/scheduled consumers. He submitted that in terms of paragraph 3 of G.O.Ms.No.112, dated 22.12.1998, independent power producers will be deemed to have acquired the status of licensees within the meaning of Section 28 of the 1910 Act read with Section 3 of the Electricity Duty Act, 1930 and argued that they cannot be subjected to disadvantage by burdening their consumers with cross subsidy surcharge.
Sri K. G. Choudary relied on the judgment of the Division Bench of [1] this Court in RCI Power Limited, Chennai v. Union of India to emphasise that independent power producers are to be treated as licensees. He then referred to Regulations 2 and 7.2 of the 2005 Regulations and argued that the petitioners cannot be compelled to incur the disabilities of open access system.
Sri T. Ananta Babu, Senior Advocate appearing for the respondents argued that the power to levy surcharge under Section 42(2) of the 2003 Act is in the nature of tax and, therefore, the petitioners are liable to pay cross subsidy surcharge in accordance with the provisions contained in the 2005 Regulations. He further argued that the exemption notification dated 8.6.2005 issued by the Central Government has to be construed strictly and as the petitioners do not satisfy the conditions enumerated in the notification, they are not entitled to claim exemption from payment of cross subsidy surcharge. In support of this argument, Sri Ananta Babu relied on the judgment of the Supreme Court in CCE v. Ginni Filaments [2] Ltd. . Learned Senior Counsel then argued that the provisions of Section 43A(1)(c) of the 1948 Act are not applicable to the end users like the listed/ scheduled consumers of the independent power producers. Sri Ananta Babu then argued that the notification issued by the Central Government is contrary to Section 42 of the 2003 Act and, therefore, the same is liable to be ignored.
We have given serious thought to the respective arguments. Section 28 of the 1910 Act, Sections 2 (4A), (6) and 43A of the 1948 Act, which have bearing on the decision of these petitions, read as under:
"The Indian Electricity Act, 1910
28. Sanction required by non-licensees in certain cases:
[(1) No person other than a licensee, shall engage in the business of supplying energy to the public except with the previous sanction of the State Government and in accordance with such conditions as the State Government may fix in this behalf, and any agreement to the contrary shall be void.
(1A) The State Government shall not give any sanction under sub-section (1)
(a) except after consulting the State Electricity Board; and
(b) except with the consent
(i) in any case where energy is to be supplied in any area for which a local authority is constituted, of that local authority;
(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 of any building or place in the occupation of the Government for defence purposes, of the Central Government;
(iii) in any area falling within the area of supply of a licensee, of that licence:
Provided that except in a case falling under sub-clause (ii), no such consent shall be necessary if the State Government is satisfied that such consent has been unreasonably withheld.
(2) Where any difference or dispute arises as to whether any person is or is not engaging or about to engage, in the business of supplying energy to the public within the meaning of sub-section (1), the matter shall be referred to the State Government, and the decision of the State Government thereon shall be final.
The Electricity (Supply) Act, 1948:
2. Interpretation:- In this Act, unless there is anything repugnant in the subject or context -
... ... ...
[4-A) "Generating Company" means a company registered under Companies Act, 1956, and which has among its objects the establishment, operation and maintenance of generating stations;
... ... ...
(6) "licensee" means a person licensed under Electricity Act, 1910 to supply energy or a person who has obtained sanction under Sec. 28 of that Act to engage in the business of supplying energy [but the provisions of Section 26 or Section 26A of this Act notwithstanding, does not include the Board or a Generating Company;
43A Terms, conditions and tariff for sale of electricity by Generating Company:-
(1) A Generating Company may enter into a con- tract 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) with the Board constituted for any other State In which it is carrying on its activities in pursuance of sub-section (3) of Section 15A; 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, by 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 by the government or governments concerned."
A conjoint reading of the various provisions reproduced above along with G.O.Ms.No.112, dated 22.12.1998 makes it clear that independent power producers fall within the scope of Section 28 of the 1910 Act, being sanction-holders to supply power. It is also borne out from the record that vide G.O.Ms.No.93, dated 18.11.1997, the State Government has permitted independent power producers to sell electricity to third parties at the prescribed rates. This was also approved by the Commission. Thereafter, the petitioners entered into power purchase agreement. Such an agreement will be deemed to be covered by Section 43A(1)(c) of the 1948 Act. Therefore, in terms of Clause 2 of the exemption notification issued by the Central Government under Section 183 of the 2003 Act, no surcharge can be levied on the electricity sold by petitioners No.2 to petitioners No.1. It is neither the pleaded case of the respondents nor any material has been placed before the Court to show that the consent given by the government was withdrawn. Therefore, the argument of the learned Senior Counsel appearing for the respondents that the petitioners are not entitled to the benefit of exemption envisaged by Clause 2 of notification dated 8.6.2005 cannot be accepted.
We also do not find any merit in the submission of the learned Senior Counsel that exemption notification is liable to be ignored because it is ultra vires the provisions of Section 43 of the 2003 Act. In this context, it is significant to notice that the respondents have not questioned the legality of notification dated 8.6.2005. Moreover, a reading of the notification makes it clear that the Central Government had granted exemption after taking note of the fact that in terms of Section 42(2) of the 2003 Act, a mandate has been imposed on the State Commission to introduce open access system. The Central Government also noted that the generating companies had been allowed to enter into contract for sale of electricity with the consent of the competent governments and felt that the difficulties arising regarding applicability of Section 42 on the sale of electricity by a generating company deserve to be removed.
In our opinion, notification dated 8.6.2005 cannot per se be regarded ultra vires of the power of the Central Government under Section 183 of the 2003 Act. Therefore, we do not find any reason or justification to ignore the exemption notification and uphold the demand of cross subsidy surcharge from the listed/ scheduled consumers of independent power producers.
In view of the above conclusion, we do not consider it necessary to deal with and decide other issues raised in the writ petitions.
In the result, the writ petitions are allowed. The demands impugned in the writ petitions are quashed. However, liberty is given to the respondent company to challenge notification dated 8-6-2005 issued by the Central Government under Section 183 of the 2003 Act by availing appropriate legal remedy.
As a sequel to disposal of the writ petitions in the manner indicated above, all the miscellaneous petitions are disposed of as infructuous.
G.S. SINGHVI, CJ C.V. NAGARJUNA REDDY, J 24th July, 2007 ARS/SVS [1] 2003 (3) ALD 762 [2] (2005) 3 SCC 378