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Shortage of power is felt in most of the parts of the country which, apart from disrupting day-to-day life of the people, quite often than not, creates problem for industries. The States or the Electricity Boards managing the power sector find it difficult to meet the ever increasing demand of electricity. In such circumstances, captive generation of power is not unknown and it is getting quite in vogue but generally it is done in a manner that the factory or industry would generate and consume the power confining it in its premises to run its manufacturing/processing unit. In such circumstances, finding a via media, it appears that the State Government of Andhra Pradesh and the Andhra Pradesh Electricity Board mooted the idea of setting up of a 3 X 33 MW gas based combined cycle power station at Vijjeswaram for establishing a generating station which required high amount of investment, hence they decided to invite private participation in the venture which attracted some of the heavy industries to the proposal. They entered into a Memorandum of Understanding (MOU-1) on 17.10.1988 and another MOU on 19.4.1997, according to which, the Andhra Pradesh State Electricity Board (for short 'APSEB') had to have 26% share in the new company to come up viz. APGPCL, and the rest of the participating industries were to have different percentage of shares and the power so generated by the company was to be shared proportionately amongst the share holding participating industries and their sister concerns. The Central Electricity Authority is also said to have acceded to the request made to treat APGPCL as collective captive power generation company.

It is thus evident that the aims and objects as indicated in the Original Articles of Association were amended and restricted. Accordingly, with the approval and concurrence of the concerned authorities, the power generating plant started its functioning and has been utilising the power generated according to the Memorandum of Understanding which formed part of the Articles of Association.

Later it appears that APGPCL made a proposal for extension of the project and thus set up a Combined Cycle Power Plant of 160 MW Gas Turbine station at Vijjeswaram - stage 2. The Central Electricity Authority, Ministry of Power by its letter dated April 26, 1996 conveyed its no objection to the extension. While conveying its approval and no objection to the Chairman, APSEB, the Central Electricity Authority referred to the earlier letter dated 15.1.1996 and Section 44 of the Supply Act and it also mentioned "M/s.APGPCL has been formed on the basis of collective captive generation principle. The main objective of the company is to set up, operate and supply power from the proposed station to all the industries who are shareholders of the Company." With the sanction of extension of the project by setting up another generating station at Vijjeswaram itself a second Memorandum of Understanding was executed on 19.4.1997 amongst APGPCL, APSEB and 22 other private sector undertakings. The conditions of the Second Memorandum of Understanding are similar to the earlier one and Article 2 Clause 2 provides for transfer of energy providing that the APGPCL agrees that the participating industries may transfer their share of energy to their sister concerns, located within the State of Andhra Pradesh and being High Tension consumers of APSEB. On the basis of the facts indicated above, the case of the appellant is that the appellant Company has been generating power and sharing the same amongst its shareholding participating industries as per terms and conditions agreed upon amongst the parties, namely APGPCL, APSEB and other private sector High Tension consumer industries in Andhra Pradesh. According to the appellant, it is a collective captive power generation company generating power for captive consumption of the participating/shareholding industries.

We think that it will be appropriate to consider the question separately in respect of three categories of users of the electricity generated by APGPCL, namely, the participating industries, their sister concern and the companies which are transferees of shares by the participating industries of APGPCL.
The background in which the company APGPCLwas incorporated has already been noticed. It was a group captive generating venture as was also mentioned by the central government/Central Electricity Authority. That is to say, the company was set up by a group of persons to generate electricity for their consumption. The Regulatory Commission in its order has found that in equity it would be appropriate that the APGPCL may not be required to have licence for sale of electricity to the participating industries. We, however, feel that it would not be a matter of concession but under the law as well that there would be no requirement to take a licence for use or consumption of the electricity which is self-generated. The phrase "captive consumption", as it may be commonly understood, would mean that any thing which is manufactured or produced, would not go out of the hands of the manufacturers but they consume it for their own purpose. Certainly, in case such a venture, as established for manufacture of goods or a thing for its own consumption, sells it to outsiders for use and consumption by them, it may require to have a licence for such an activity. We may at this juncture have a look at the provisions for licence under different Acts. Section 3 of the Act of 1910 provides for grant of licence. Relevant part of Section 3 is quoted below :
""Captive generating plant means" a power plant set up by any person to generate electricity primarily for his own use and includes the 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."

It is pointed out by the learned counsel for the respondents that this definition of captive generating plant which came later on in the provisions of the Electricity Act, 2003, cannot be taken aid of to assign any meaning to the expression "captive consumption" or "group captive consumption generating plant". We, however, find that there is nothing to exclude the natural and obvious meaning which flows from the expression itself. Therefore, even before the term "captive generating plant" was defined it would carry the same meaning. That is to say, generation of power for the use of the holder of the plant, maybe one single person or a joint venture collectively by many as one unit. We, therefore, hold that the electricity generated by APGPCL and consumed by the participating members setting up the plant under the Memorandum of Association incorporating the company, does not require to have any licence for self- utilisation of the power generated by the company. All that we want to clarify is that it is not in view of equity in favour of the participating industries as held by the Regulatory Commission and the High Court but under the law there is no such requirement for them to have a licence. We then come to the next question regarding the sister concern, as to whether there was any requirement to have a licence for supply of electricity to them or not. It is no doubt mentioned in para 4 of the Memorandum of Understanding dated October 17, 1988 as follows :