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Mr. Seervai further submits that there is not a single provision in the Electricity Act that allowed CERC to issue the impugned Regulations to regulate and control a market that it now purporting to do so. CERC is attempting to do so in the face of a special statute that exclusively bestows that authority on another KPP -21- W.P. NOS. 1197/2010 & 1604/2009 ALONG WITH N.M. NOS. 100 & 71/2010 regulatory body. It is submitted that the FCRA is a statute enacted prior in time as that of the Electricity Act. The petitioner is a recognized Association under the FCRA and is governed by FMC. Mr. Seervai submits that in the original order, CERC has acknowledged that FCRA governs forward contracts in which rights and liabilities are transferable, unless exempted by the Central Government and that the provisions of the FCRA cover certain specific areas which are not covered under any of the provisions of the Electricity Act. It is submitted that in the subsequent review order, CERC suo motu rewrote and reversed the original order dated 28th April, 2009 and deleted crucial observations which expressly stated that there was no conflict between the provisions of the FCRA and the Electricity Act on the ground that these observations were not relevant or germane to the inquiry. Mr. Seervai submits that the impugned orders are without jurisdiction inasmuch as the provisions of Section 79 of the Electricity Act do not give CERC any authority to trespass into the jurisdiction of another unrelated statutory regulator and interpret the provisions of the FCRA. In view of the above, the Regulations, in so far as it pertain to futures contract in electricity, issued by the CERC pending disposal of the writ petition filed by FMC are liable to be quashed and set aside. Mr. Seervai submits that while the original order enunciated a harmonious construction of the two statutes, the review order placed them in a position of irreconcilable conflict, robbing the FMC entirely of its jurisdiction over forward contracts vis-a-vis-electricity. He submits that on a comparison of the two orders KPP -22- W.P. NOS. 1197/2010 & 1604/2009 ALONG WITH N.M. NOS. 100 & 71/2010 it is abundantly clear that the review order is illegal, improper and bad in law, being no more than a motivated attempt to re-write the original order and allow the CERC to usurp power and authority not vested in it or conferred upon it under the Electricity Act. Mr. Seervai further submits that on perusal of the Regulations, it is clear that CERC has once again misused its power as a regulatory authority in order to bring forward contracts in electricity within its jurisdiction. Mr. Seervai finally submits that the futures contracts cannot be dealt with under the Electricity Act as it is in the domain of FCRA and that CERC has no jurisdiction to frame any Regulations in this behalf.

Mr. Dwarkadas submits that by passing the impugned orders and the regulations, CERC has tried to usurp jurisdiction over forward and futures market which fall within the exclusive domain of FMC by virtue of the provisions contained in FCRA enacted by Parliament in exercise of the power vested in it by Entry 48 of List-1 in the Seventh Schedule of the Constitution of India which gives power to the Parliament to legislate on the subject of Stock Exchanges and Futures markets. Mr. Dwarkadas further submits that FMC vide its letter dated 7th January, 2009 explained to the CERC that under the FCRA and the notification issued by the Central Government, through the Ministry of Consumer Affairs, Food and Public Distribution on 9th January, 2006 under Section 15 of FCRA, the FMC alone has jurisdiction to regulate forward contracts in electricity. Spot market and Forward markets in goods can be regulated by two different regulators. Forward trading in electricity comes under the purview of FCRA and this does not take away the jurisdiction of CERC in respect of KPP -27- W.P. NOS. 1197/2010 & 1604/2009 ALONG WITH N.M. NOS. 100 & 71/2010 regulating spot trading in electricity. He submits that the provisions of FCRA were analysed in great detail by the Supreme Court in the case of Raghubir Dayal Jai Prakash and others vs. Union of India and another1 wherein the Supreme Court quoted the Expert Committee's report regarding functioning of forward trading. He submits that the impugned orders of the CERC and the regulations in so far as they relate to forward trading in electricity, therefore, deserve to be quashed. He submits that FMC had granted approval in January, 2009 to MCX, a national level Multi Commodity Exchange, for providing a platform to trade in electricity forward contracts, following the notification issued by the Central Government applying provisions of Section 15 of the FCRA whereby forward contracts in electricity could be traded only through the members of Associations/Exchange which have been granted recognition by the Central Government under Section 6 of the FCRA. MCX had been recognised by the Central Government vide notification dated 26-09-2003. He submits that in view of the provisions of FCRA and the notification issued by the Central Government, FMC alone has jurisdiction to regulate forward contracts in electricity. He submits that spot market and forward markets are two separate and distinct economic realms, the former is concerned with transactions involving payment and delivery within the period specified for ready delivery contracts whereas the latter is concerned with financial contracts mostly settled by payment of differences between the contract rate and the settlement rate. He submits that the futures market is included in List I of Schedule VII of the 1 (1962) 3 SCR 547 KPP -28- W.P. NOS. 1197/2010 & 1604/2009 ALONG WITH N.M. NOS. 100 & 71/2010 Constitution at Entry No. 48 whereas the electricity is included in List III at entry

38. Spot markets in various commodities, agricultural or mineral are governed by the relevant statutes of the Central or State Lists. He submits that as per the allocation of Business Rules, the Ministry of Power has been allocated the administration of the Electricity Act as well as matters relating to CERC, whereas the Ministry of Consumer Affairs, Food and Public Distribution has the control of future trading and FMC. Forward Trading in Electricity comes under the purview of FCRA and this does not take away the jurisdiction of the CERC in respect of regulating spot trading in electricity. He submits that during the pendency of the petition, the CERC gave permission on 31st August, 2009 to PXIL and IEXL which are power exchanges set up under the Electricity Act, 2003 to facilitate spot trading in electricity, to organise month ahead contracts in electricity which are essentially forward contracts in the nature of Non Transferable Specific Delivery Contracts. Neither PXIL nor IEXL have been granted certificate of registration by the FMC under Section 14A nor recognition has been granted by the Central Government under Section 6 of the FCRA. Mr. Dwarkadas further submits that the Regulations notified by the CERC also suffer from other fatal flaws. It speak of derivatives which include options which are specifically prohibited by the FCRA. Mr. Dwarkadas further submits that the inclusion of associations and exchanges recognized or registered by FMC in the list of market participants covered by the Regulations is misconceived because their operations cannot be classified into interstate or intrastate. Mr. Dwarkadas KPP -29- W.P. NOS. 1197/2010 & 1604/2009 ALONG WITH N.M. NOS. 100 & 71/2010 submits that the Regulations cannot be allowed to undo the notification under Section 15 of FCRA issued in January, 2006 introducing forward trading in electricity through recognized exchanges since the law vests no authority in CERC to countermand orders issued by the Government under a statutory provision of FCRA. Mr. Dwarkadas further submits that CERC cannot be said to be an expert body in the field of regulation of forward trading and risk management. He submits that the regulations have sought to define terms like "derivative contracts", "exchange" which means a power exchange and other exchanges, "option position", "other exchange" for the first time. According to Mr. Dwarkadas, these definitions do not find their place in the parent Act which is basically structured to cater to the physical aspect of the market like generation of electricity, licensing, transmission, distribution of electricity, tariff, etc. Mr. Dwarkadas submits that since there is no concept of exchange trading in the Electricity Act, the regulations cannot provide such a structure along with fees. Mr. Dwarkadas submits that the Regulation in so far as they relate to forward contracts deserve to be struck down because (i) they seek to restrict the forward market only to inter-state which is neither feasible nor permissible because there has to be one national market in which all traders need to have access to the trading platform; (ii) they extend the scope of the CERC jurisdiction beyond the power exchanges to embrace "other exchanges" already recognised by the Govt. under the statutory provisions of FCRA; (iii) they encroach on the Central Government's role in deciding when forward trading is KPP -30- W.P. NOS. 1197/2010 & 1604/2009 ALONG WITH N.M. NOS. 100 & 71/2010 to be introduced in a particular commodity. The regulations provide for deferment of introduction of power trading to a future date to be decided by the CERC; (iv) they bring options within the ambit of CERC when they have been specifically prohibited under Section 19 of FCRA and (v) the regulations lack the necessary vires because they seem to derive their authority from an unsustainable broad interpretation of Section 66 of the Electricity Act which provides for the "development of a market (including trading) in power' by the appropriate Commissions. Mr. Dwarkadas submits that the interpretation of the Section and the word "trading" is not supported by either the text or the context contained in the Electricity Act. Sub-section 71 of Section 2 defines trading which means purchase of electricity for resale. This definition has no relevance for forward trading in which "short" and "long" positions are taken by traders based on their perceptions of future trends of prices and these are not connected with a prior purchase or a necessary resale. In view of the aforesaid, Mr. Dwarkadas submits that the two orders of the CERC and the Regulations in so far as they relate to forward trading in electricity deserve to be quashed.

KPP -37- W.P. NOS. 1197/2010 & 1604/2009 ALONG WITH N.M. NOS. 100 & 71/2010

27. By virtue of Section 15 of the FCRA, forward contracts can be entered into only in respect of goods notified by the Central Government in the Official Gazette and the said contracts in respect of the goods so notified are mandatorily required to be entered into only by and between the members of a recognised association or with any such member, failing which a forward contract even in respect of notified goods would be illegal. On a notification being issued in respect of any of the goods by the Central Government, the forward contracts in respect thereof would be regulated under the provisions of FCRA by the regulatory authority being the FCA constituted under Section 3 of the FCRA. Under Section 15 of the FCRA, the Central Government issued a notification dated 9th January, 2006, whereby electricity was specified as goods in respect of which forward contracts could be entered into. Pursuant thereto, forward contracts relating to electricity came to be traded on the platform of MCX. Under Section 4 of the FCRA, FMC is required, inter alia, to keep forward markets under observation and to take such action as necessary in relation to forward markets, collect and publish information regarding trading conditions and to undertake inspection of the accounts and other documents of a recognized association viz. Associations recognized by the Central Government under Section 6, which associations may enter into contracts with respect to specified goods or classes of goods. The FCRA is a complete code which provides for setting up the FMC which advises the Central Government in the matter of forward trading in commodities, registers every association which organizes KPP -38- W.P. NOS. 1197/2010 & 1604/2009 ALONG WITH N.M. NOS. 100 & 71/2010 forward trading and approves Rules and Bye laws of Associations organizing forward trading. FCRA provides for recognition of associations by the Central Government (Ministry of Consumer Affairs, Food and Public Distribution) which may provide for trading in futures in notified commodities. FMC is also responsible for keeping forward market under observation, inspection of associations or their members and working for improving the organization of markets. FCRA provides emergency powers to the FMC and the Central Government to suspend trading, suspend members of Association and even to supersede the governing body of the Exchange. FCRA also provides for penalties for contravention of provisions contained in the Act.