Supreme Court of India
CHHATTISGARH STATE POWER DISTRIBUTION COMPANY LTDversusCHHATTISGARH STATE ELECTRICITY REGULATORY COMMISSION AND ANOTHER
- Citation
- 2022 INSC 557
- Decided
- 12 May 2022
- Disposal
- Dismissed
- Bench
- L NAGESWARA RAO
Holding
The captive generating plant meets the ownership and consumption criteria, and the open‑access supply to SBMPL is permissible as "own consumption" under the Electricity Act, 2003.
Summary
The Supreme Court examined whether a captive generation plant owned by Shri Bajrang Power and Ispat Ltd (SBPIL) could supply electricity to its sister concern Shri Bajrang Metallics and Power Ltd (SBMPL) through the transmission system of Chhattisgarh State Power Distribution Company Ltd (CSPDCL). The Court held that the plant satisfied the statutory requirements of Section 9 of the Electricity Act, 2003 and Rule 3 of the Electricity Rules, 2005 because SBMPL owned 27.6% of SBPIL (exceeding the 26% ownership threshold) and the combined consumption of SBPIL and SBMPL exceeded 51% of the plant’s output. Consequently, the supply qualified as "own consumption" and was entitled to open access without the surcharge under Section 42(4). The Court affirmed the orders of the Chhattisgarh State Electricity Regulatory Commission and the Appellate Tribunal for Electricity, dismissing CSPDCL’s appeals.
Issues considered
- Whether the open‑access supply of electricity from SBPIL to its sister concern SBMPL qualifies as "own consumption" under Section 9 of the Electricity Act, 2003 and Rule 3 of the Electricity Rules, 2005.
- Whether the ownership (≥26%) and consumption (≥51%) thresholds for a captive generating plant are satisfied in the present facts.
- Whether a surcharge under Section 42(4) of the Electricity Act is applicable to such open‑access supply.
- Whether the order of the State Electricity Regulatory Commission is consistent with the statutory scheme.
Legislation cited
- Electricity Act, 2003s. 2(49), s. 2(8), s. 42, s. 9
- Electricity Rules, 2005s. Rule 3
Subjects
captive generating plantopen accessown consumptionElectricity Act 2003Electricity Rules 2005ownership thresholdconsumption thresholdsurchargestate electricity regulatory commissionwheelingpower distribution
Judgment
798 [2022]REPORTS
SUPREME COURT 3 S.C.R. 798 [2022] 3 S.C.R.
A CHHATTISGARH STATE POWER DISTRIBUTION
COMPANY LTD.
v.
CHHATTISGARH STATE ELECTRICITY REGULATORY
COMMISSION AND ANOTHER
B
(Civil Appeal Nos. 2578-2579 of 2008)
MAY 12, 2022
[L. NAGESWARA RAO AND B. R. GAVAI, JJ.]
Electricity Act, 2003: s. 9 rw s. 2(8) – Electricity Rules, 2005
C
– r. 3 – Captive generation plant – Requirement of – On facts, SBPIL
established a captive generation plant and SBMPL is its sister
concern – Petition by SBPIL to State Electricity Regulatory
Commission for providing open access and wheeling of power
through the transmission system of the appellant-State Power
D Distribution Company for capitive use by SBMPL – Allowed by the
Commission holding that SBPIL was entitled to supply electricity to
its sister concern SBMPL and same would qualify to be treated as
own consumption within the ambit of s. 9 – Said order upheld by
APTEL – On appeal, held: Combined reading of s. 9 and 2(8) reveal
that a person is entitled to construct, maintain or operate a captive
E
generating plant and such a plant should be primarily for his own
use – SBMPL holds 27.6% equity shares in SBPIL, as such, the
requirement of not less than 26% of shares is fulfilled by SBMPL
and since SBMPL holds 27.6% of the ownership, the use of electricity
by it would be for captive use – Other requirement that the
F consumption of SBIPL and SBMPL together should not be less than
51% of the power generated and admittedly, the joint consumption
by SBIPL and SBMPL is more than 51% – Thus, both the conditions
as provided u/r 3 are satisfied, thus, the order passed by the
Commission and the APTEL justified.
G Dismissing the appeals, the Court
HELD: 1.1 In view of Section 9 of the Electricity Act, 2003
any person may construct, maintain or operate a captive
generating plant and dedicated transmission lines. The first
proviso to Section 9 provides that the supply of electricity from
H the captive generating plant through the grid shall be regulated
798
CSPDCL v. CHHATTISGARH STATE ELECTRICITY 799
REGULATORY COMMISSION
in the same manner as the generating station of the generating A
company. The second proviso to Section 9 of the said Act provides
that no licence shall be required under the said Act for supply of
electricity generated from a captive generating plant to any
licensee in accordance with the provisions of the said Act and
the rules and regulations made thereunder and to any consumer,
B
subject to the regulations made under sub-section (2) of Section
42. Sub-section (2) of Section 9 provides that 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. The first proviso to sub-section (2) C
of Section 9 provides 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. The second proviso to sub-section (2) of Section 9
D
provides that if there is any dispute regarding the availability of
transmission facility, it shall be adjudicated upon by the
Appropriate Commission. [Para 11][807-A-E]
1.2 Clause (8) of Section 2 of the Act defines “Captive
generating plant”. It states that “Captive generating plant” means
a power plant set up by any person to generate electricity primarily E
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. [Para 12][807-E-F]
1.3 A combined reading of Section 9 and Clause (8) of Section F
2 of the Act would reveal that a person is entitled to construct,
maintain or operate a captive generating plant. Such a plant should
be primarily for his own use. Clause (8) of Section 2 of the said
Act would further show that it includes a power plant set up by
any co-operative society or association of persons for generating G
electricity. The requirement is that it should be primarily for the
use of the members of such co-operative society or association.
The definition of “person” under Clause (49) of Section 2 is wide
H
800 SUPREME COURT REPORTS [2022] 3 S.C.R.
A enough, to include any company or body corporate or association
or body of individuals, whether incorporated or not, or artificial
juridical person. [Paras 13, 14, 15][807-G-H; 808-A-B]
1.4 A person, to get benefit under Section 9, could be an
individual or a body corporate or association or body of individuals,
B whether incorporated or not. It could thus be seen that even an
association of corporate bodies can establish a captive power
plant. The only requirement would be that the said plant must be
established primarily for their own use. The fourth proviso to s.
42(2) reveal that surcharge would not be leviable in case open
access is provided to a person who has established a captive
C
generating plant for carrying the electricity to the destination of
his own use. [Para 16][808-B-D]
1.5 Sub-rule (1) of Rule 3 of the Electricity Rules, 2005
provides that no power plant shall qualify as a “Captive Generating
Plant” under Section 9 read with Clause (8) of Section 2 unless
D
the conditions stated therein are fulfilled. The first requirement
is that not less than 26% of the ownership is held by the captive
user(s). The second requirement is that not less than 51% of the
aggregate electricity generated in such plant, determined on an
annual basis, is consumed for the captive use. The second proviso
E to Rule 3(1)(a)(ii) provides that in case of association of persons,
the captive user(s) shall hold not less than 26% of the ownership
of the plant in aggregate and such captive user(s) shall consume
not less than 51% 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 10%. [Para 19][809-
F
E-H]
1.6 Admittedly, SBMPL holds 27.6% equity shares in
SBPIL. As such, the requirement of not less than 26% of shares
is fulfilled by SBMPL. Even an association of corporate bodies
G can establish a power plant. Since SBMPL holds 27.6% of the
ownership, the use of electricity by it would be for captive use
under the provisions of the said Act. The other requirement would
be that the consumption of SBIPL and SBMPL together should
not be less than 51% of the power generated. Admittedly, the
H
CSPDCL v. CHHATTISGARH STATE ELECTRICITY 801
REGULATORY COMMISSION
joint consumption by SBIPL and SBMPL is more than 51%. As A
such, both the conditions as provided under Rule 3 of the said
Rules are satisfied. [Para 20][809-H; 810-A-B]
1.7 The provision with respect to establishing captive power
plant has been made with a view to not only securing reliable,
quality and cost-effective power but also to facilitate creation of B
employment opportunities through speedy and efficient growth
of industry. The National Electricity Policy, 2005 further states
that the provision relating to captive power plants to be set up by
a group of consumers has been made primarily for enabling small
and medium industries or other consumers that may not
C
individually be in a position to set up plant of optimal size, in a
cost-effective manner. The efficient expansion of small and
medium industries across the country would lead to creation of
enormous employment opportunities. Clause 5.2.26 of the said
Policy further states that the captive and standby generating
stations in India have surplus capacity that could be supplied to D
the grid continuously or during certain time periods. The said
Policy is issued u/s. 3 and as such, has a statutory flavour. In any
case, the said Policy is in tune with the provisions as contained in
Section 9 and Clause (8) of Section 2 of the Act. A liberal provision
has been made in Section 9 so as to promote establishment of
E
captive power plants. The interpretation which advances the
object and purpose of the Act, has to be preferred. Thus, no case
is made out for interfering with the order passed by the
Commission and the APTEL. [Para 22-25][811-C-H; 812-B]
Maharashtra State Electricity Distribution Company
F
Limited v. JSW Steel Limited and Others (2022) 2 SCC
742; Administrator, Municipal Corporation, Bilaspur
v. Dattatraya Dahankar, Advocate and Another (1992)
1 SCC 361 : [1991] 3 Suppl. SCR 112; S. Gopal Reddy
v. State of A.P. (1996) 4 SCC 596 : [1996] 3 Suppl.
SCR 439; Ahmedabad Municipal Corporation and G
Another v. Nilaybhai R. Thakore and Another (1999) 8
SCC 139 : [1999] 3 Suppl. SCR 647 – referred to.
H
802 SUPREME COURT REPORTS [2022] 3 S.C.R.
A Case Law Reference
(2022) 2 SCC 742 referred to Para 8
[1991] 3 Suppl. SCR 112 referred to Para 24
[1996] 3 Suppl. SCR 439 referred to Para 24
B [1999] 3 Suppl. SCR 647 referred to Para 24
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2578-
2579 of 2008.
From the Judgment and Order dated 06.12.2007 of the Appellate
Tribunal for Electricity, New Delhi in Appeal No.164 of 2006 and Revision
C
Petition No.1 of 2007.
With
Civil Appeal Nos. 2941-2942 and 2868 of 2008
Nikhil Nayyar, Sr. Adv., Apoorv Kurup, Ms. Nidhi Mittal, Ojaswa
D Pathak, Dhananjay Baijal, Ms. Aparna Arun, Advs. for the Appellant.
Naveen R. Nath, Sr. Adv., Ms. Swapna Seshadari, Pramod Dayal,
Nikunj Dayal, Ms. Devi Nair, Aditya Dubey, Manish Paliwal, Vikash
Kumar, Nikhil Sharma, Advs. for the Respondents.
E The Judgment of the Court was delivered by
B. R. GAVAI, J.
1. These appeals challenge the judgment dated 6th December 2007
passed by the Appellate Tribunal for Electricity (hereinafter referred to
as the “APTEL”), thereby dismissing the appeals filed by the present
F appellant.
2. The facts in brief giving rise to the present appeals are as
under:
M/s Shri Bajrang Power and Ispat Ltd. (hereinafter referred to
as “SBPIL”) has established a Captive Generation Plant. M/s Shri
G Bajrang Metallics and Power Ltd. (hereinafter referred to as “SBMPL”)
is a sister concern of SBPIL. SBPIL submitted a petition to the
Chhattisgarh State Electricity Regulatory Commission (hereinafter
referred to as “the Commission”) for providing open access and wheeling
of power through the transmission system of the appellant for captive
H use by SBMPL. The petition of the SBPIL was for permission to wheel
CSPDCL v. CHHATTISGARH STATE ELECTRICITY 803
REGULATORY COMMISSION [B. R. GAVAI, J.]
19 lakh units, corresponding to 13 MW, to SBMPL. It was stated in the A
said petition that SBMPL holds 27.6% of the equity shares of SBPIL
and that more than 51% of the electricity generated by the captive power
plant would be consumed by them. It was submitted that the generating
capacity of the captive generation plant set up by SBPIL would be 103.68
MU per annum. It was further submitted that out of the said 103.68 MU
B
per annum power generated, 13.22 MU per annum would be utilized in
its sponge iron plant. It was further submitted that 54 MU per annum
would be supplied to SBMPL through the appellant grid and the balance
would be sold to the appellant.
3. The said petition came to be resisted by the appellant. It was
contended by the appellant that SBPIL holds more than 72% of the C
shares of the company. However, its consumption would be limited only
to 14.16% (13.22 MU), whereas the consumption of SBMPL holding
26.67% shares, would be 57.87% (54 MU). It was submitted that this
was not proportionate to the ownership of the power plant.
4. The Commission, vide its order dated 14th October 2005, rejected D
the contention of the appellant and held that SBPIL was entitled to supply
electricity to its sister concern SBMPL and the same would qualify to be
treated as ‘own consumption’ within the ambit of Section 9 read with
Section 2(8) of the Electricity Act, 2003 (hereinafter referred to as “the
said Act”) and Rule 3 of the Electricity Rules, 2005 (hereinafter referred E
to as “the said Rules”). While allowing the said petition, the Commission
imposed the following conditions:
(i) “The consumption of electricity by the captive users shall
not be less than 51% over a financial year, and in case it is
not so it would be treated as ‘supply of electricity by a
F
generating company’ in terms of provision of rule 3(2) of
the Rules.
(ii) The CSEB is entitled to charge for wheeling of electricity
and levy other charges as per their present rates which
shall be subject to revision as per the provisions in regulations
on the charges for open access to be notified by the G
Commission shortly.
(iii) The company may enter into necessary agreement with
the CSEB for the sale of balance power under the present
terms and conditions of the CSEB, is subject to revision as
per the directions of the Commission from time to time.” H
804 SUPREME COURT REPORTS [2022] 3 S.C.R.
A 5. Being aggrieved thereby, the appellant preferred appeals before
the APTEL. The said appeals came to be dismissed by the APTEL vide
impugned judgment dated 6th December 2007. Being aggrieved thereby,
the present appeals.
6. We have heard Shri Nikhil Nayyar, learned Senior Counsel
B appearing on behalf of the appellant and Shri Naveen R. Nath, learned
Senior Counsel and Smt. Swapna Seshadari, learned counsel appearing
on behalf of the respondents.
7. Shri Nayyar submitted that the order passed by the Commission
and the impugned judgment passed by the APTEL are contrary to the
C plain language used in Rule 3 of the said Rules. He submitted that SBMPL
is a sister concern of SBPIL which has established the captive power
plant. It is submitted that unless SBPIL consumes 51% of the aggregate
electricity generated by it, it will not be entitled to get the benefit under
Section 9 of the said Act. He submitted that in sub-rule (1) of Rule 3 of
the said Rules, the words used are “Captive Generating Plant”. He
D submitted that upon a plain and literal interpretation of Rule 3 of the said
Rules, it will be abundantly clear that unless the sister concern establishes
captive generating plant utilization of 51% of the electricity generated, it
will not be entitled to get benefit under Section 9 of the said Act.
8. Shri Nath submitted that the Commission, as well as the APTEL,
E has rightly construed the provisions of the said Act and the said Rules.
He submitted, that this Court, in the case of Maharashtra State
Electricity Distribution Company Limited v. JSW Steel Limited and
Others1, has held that no permission is required from the Commission
for supply of electricity for its own use. He further submitted that this
F Court has also held that insofar as captive users are concerned, they are
not liable to pay the additional surcharge under Section 42(4) of the said
Act.
9. Smt. Seshadari, learned counsel appearing on behalf of the
Commission submitted that if the arguments advanced on behalf of the
G appellant are accepted, the same would be contrary to the provisions of
the said Act. She, therefore, submitted that the order passed by the
Commission and the impugned judgment passed by the APTEL warrant
no interference.
H 1
(2022) 2 SCC 742
CSPDCL v. CHHATTISGARH STATE ELECTRICITY 805
REGULATORY COMMISSION [B. R. GAVAI, J.]
10. For appreciating the rival contentions, it will be apposite to A
refer to Clauses (8) and (49) of Section 2 as well as Section 9 and sub-
sections (1) and (2) of Section 42 of the said Act, which read thus:
“2. Definitions.-
……….
B
(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 cooperative society or association of
persons for generating electricity primarily for use of members of
such cooperative society or association;
C
…………
(49) “person” shall include any company or body corporate or
association or body of individuals, whether incorporated or not, or
artificial juridical person;
9. Captive generation.—(1) Notwithstanding anything contained D
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: E
Provided further that no licence shall be required under this
Act for supply of electricity generated from a captive generating
plan to any licensee in accordance with the provisions of this Act
and the rules and regulations made thereunder and to any consumer
subject to the regulations made under sub-section (2) of Section F
42.
(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: G
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: H
806 SUPREME COURT REPORTS [2022] 3 S.C.R.
A Provided further that any dispute regarding the availability
of transmission facility shall be adjudicated upon by the Appropriate
Commission.
42. Duties of distribution licensee and open access.—(1) It
shall be the duty of a distribution licensee to develop and maintain
B 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
C 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:
D
Provided that such open access shall be allowed 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
E 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 in the manner as may be specified by
the State Commission:
F 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 Commission shall, not later than
G 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.
H ……….”
CSPDCL v. CHHATTISGARH STATE ELECTRICITY 807
REGULATORY COMMISSION [B. R. GAVAI, J.]
11. It could thus be seen that in view of Section 9 of the said Act, A
any person may construct, maintain or operate a captive generating plant
and dedicated transmission lines. The first proviso to Section 9 of the
said Act provides 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 the generating company. The second proviso to
B
Section 9 of the said Act provides that no licence shall be required under
the said Act for supply of electricity generated from a captive generating
plant to any licensee in accordance with the provisions of the said Act
and the rules and regulations made thereunder and to any consumer,
subject to the regulations made under sub-section (2) of Section 42 of
the said Act. Sub-section (2) of Section 9 of the said Act provides that C
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. The first proviso to sub-section (2) of Section
9 of the said Act provides that such open access shall be subject to
D
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. The second
proviso to sub-section (2) of Section 9 of the said Act provides that if
there is any dispute regarding the availability of transmission facility, it
shall be adjudicated upon by the Appropriate Commission. E
12. Clause (8) of Section 2 of the said Act defines “Captive
generating plant”. It states that “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 F
members of such co-operative society or association.
13. Clause (49) of Section 2 of the said Act defines “person”. It
states that “person” shall include any company or body corporate or
association or body of individuals, whether incorporated or not, or artificial
juridical person. G
14. A combined reading of Section 9 and Clause (8) of Section 2
of the said Act would reveal that a person is entitled to construct, maintain
or operate a captive generating plant. Such a plant should be primarily
for his own use. Clause (8) of Section 2 of the said Act would further
show that it includes a power plant set up by any co-operative society or H
808 SUPREME COURT REPORTS [2022] 3 S.C.R.
A association of persons for generating electricity. The requirement is that
it should be primarily for the use of the members of such co-operative
society or association.
15. The definition of “person” is wide enough to include any
company or body corporate or association or body of individuals, whether
B incorporated or not, or artificial juridical person.
16. It is thus clear that a person, to get benefit under Section 9 of
the said Act, could be an individual or a body corporate or association or
body of individuals, whether incorporated or not. It could thus be seen
that even an association of corporate bodies can establish a captive
C power plant. The only requirement would be that the said plant must be
established primarily for their own use. The fourth proviso to sub-section
(2) of Section 42 of the said Act would also reveal that surcharge would
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.
D
17. Therefore, the question that would arise is as to whether the
open access for transmitting electricity from SBPIL to SBMPL would
be for own use or not.
18. We find that Rule 3 of the said Rules would clarify the position,
E which reads thus:
“3. Requirements of Captive Generating Plant.—(1) No
power plant shall qualify as a ‘captive generating plant’ under
Section 9 read with clause (8) of Section 2 of the Act unless—
(a) in case of a power plant—
F
(i) not less than twenty-six per cent of the ownership is
held by the captive user(s), and
(ii) not less than fifty-one per cent of the aggregate
electricity generated in such plant, determined on an
annual basis, is consumed for the captive use:
G
Provided that in case of power plant set up by registered
cooperative society, the conditions mentioned under paragraphs
at (i) and (ii) above shall be satisfied collectively by the
members of the co-operative society:
H
CSPDCL v. CHHATTISGARH STATE ELECTRICITY 809
REGULATORY COMMISSION [B. R. GAVAI, J.]
Provided further that in case of association of persons, the A
captive user(s) shall hold not less than twenty-six per cent of
the ownership of the plant in aggregate and such captive user(s)
shall consume not less than fifty-one per cent of the electricity
generated, determined on an annual basis, in proportion to their
shares in ownership of the power plant within a variation not
B
exceeding ten per cent;
(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 C
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 D
(2) The equity shares to be held by the captive user(s) in the
generating station shall not be less than twenty-six per cent of the
proportionate of the equity of the company related to the generating
unit or units identified as the captive generating plant.”
E
19. The provisions made in Rule 3 of the said Rules are clear.
Sub-rule (1) of Rule 3 of the said Rules provides that no power plant
shall qualify as a “Captive Generating Plant” under Section 9 read with
Clause (8) of Section 2 of the said Act unless the conditions stated therein
are fulfilled. The first requirement is that not less than 26% of the
ownership is held by the captive user(s). The second requirement is that F
not less than 51% of the aggregate electricity generated in such plant,
determined on an annual basis, is consumed for the captive use. The
second proviso to Rule 3(1)(a)(ii) of the said Rules provides that in case
of association of persons, the captive user(s) shall hold not less than
26% of the ownership of the plant in aggregate and such captive user(s) G
shall consume not less than 51% 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 10%.
20. Admittedly, SBMPL holds 27.6% equity shares in SBPIL. As
such, the requirement of not less than 26% of shares is fulfilled by
H
810 SUPREME COURT REPORTS [2022] 3 S.C.R.
A SBMPL. As already discussed hereinabove, even an association of
corporate bodies can establish a power plant. Since SBMPL holds 27.6%
of the ownership, the use of electricity by it would be for captive use
under the provisions of the said Act. The other requirement would be
that the consumption of SBIPL and SBMPL together should not be less
than 51% of the power generated. Admittedly, the joint consumption by
B
SBIPL and SBMPL is more than 51%. As such, both the conditions as
provided under Rule 3 of the said Rules are satisfied.
21. We find that it will also be appropriate to refer to the National
Electricity Policy, 2005 (hereinafter referred to as “the said Policy”) as
notified by the Government of India, in exercise of its powers under
C Section 3 of the said Act, on 12th February 2005. Clauses 5.2.24 to
5.2.26 deal with the “Captive Generation”, which read thus:
“Captive Generation
5.2.24 The liberal provision in the Electricity Act, 2003 with
D respect to setting up of captive power plant has been made
with a view to not only securing reliable, quality and cost-
effective power but also to facilitate creation of employment
opportunities through speedy and efficient growth of
industry.
E 5.2.25 The provision relating to captive power plants to be
set up by group of consumers is primarily aimed at enabling
small and medium industries or other consumers that may
not individually be in a position to set up plant of optimal
size in a cost-effective manner. It needs to be noted that
efficient expansion of small and medium industries across
F the country would lead to creation of enormous employment
opportunities.
5.2.26 A large number of captive and standby generating
stations in India have surplus capacity that could be supplied
to the grid continuously or during certain time periods.
G These plants offer a sizeable and potentially competitive
capacity that could be harnessed for meeting demand for
power. Under the Act, captive generators have access to
licensees and would get access to consumers who are
allowed open access. Grind inter-connections for captive
H
CSPDCL v. CHHATTISGARH STATE ELECTRICITY 811
REGULATORY COMMISSION [B. R. GAVAI, J.]
generators shall be facilitated as per Section 30 of the Act. A
This should be done on priority basis to enable captive generation
to become available as distributed generation along the grid.
Towards this end, non-conventional energy sources including co-
generation could also play a role. Appropriate commercial
arrangements would need to be instituted between licensees and
B
the captive generators for harnessing of spare capacity energy
from captive power plants. The appropriate Regulatory
Commission shall exercise regulatory oversight on such
commercial arrangements between captive generators and
licensees and determine tariffs when a licensee is the off-taker of
power from captive plant.” C
[emphasis supplied]
22. It could thus be seen that the provision with respect to
establishing captive power plant has been made with a view to not only
securing reliable, quality and cost-effective power but also to facilitate
creation of employment opportunities through speedy and efficient growth D
of industry. The said Policy further states that the provision relating to
captive power plants to be set up by a group of consumers has been
made primarily for enabling small and medium industries or other
consumers that may not individually be in a position to set up plant of
optimal size, in a cost-effective manner. It also states that the efficient E
expansion of small and medium industries across the country would lead
to creation of enormous employment opportunities. Clause 5.2.26 of the
said Policy further states that the captive and standby generating stations
in India have surplus capacity that could be supplied to the grid continuously
or during certain time periods.
F
23. The said Policy is issued under Section 3 of the said Act and
as such, has a statutory flavour. In any case, the said Policy is in tune
with the provisions as contained in Section 9 and Clause (8) of Section 2
of the said Act. A liberal provision has been made in Section 9 of the said
Act so as to promote establishment of captive power plants.
G
24. It is a settled position of law that the interpretation which
advances the object and purpose of the Act, has to be preferred. A
reliance in this respect can be placed on the judgments of this Court in
the cases of Administrator, Municipal Corporation, Bilaspur v.
H
812 SUPREME COURT REPORTS [2022] 3 S.C.R.
A Dattatraya Dahankar, Advocate and Another2, S. Gopal Reddy v.
State of A.P.3 and Ahmedabad Municipal Corporation and Another
v. Nilaybhai R. Thakore and Another4.
25. We are, therefore, of the considered view that no case is
made out for interfering with the order dated 14th October 2005 passed
B by the Commission and the impugned judgment dated 6 th December
2007 passed by the APTEL.
26. In the result, the present appeals are found without merit and
as such, are dismissed.
27. Pending application(s), if any, shall stand disposed of in the
C above terms. No order as to costs.
Nidhi Jain Appeals dismissed.
D
E
F
G
2
(1992) 1 SCC 361
3
(1996) 4 SCC 596
4
H (1999) 8 SCC 139
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