Holding

Section 23 does not confer on the Commission the power to direct generating companies, and Section 86(1)(b) cannot be interpreted to allow allocation of electricity among licensees absent a valid power purchase agreement.

Summary

The Supreme Court examined a dispute between Tata Power Company (TPC), its distribution arm, BEST and Reliance Infrastructure (Rlnfra) over the Maharashtra Electricity Regulatory Commission's (MERC) approval of power purchase agreements (PPAs) and its direction to allocate generation capacity. The core issue was whether the Commission could use Section 23 of the Electricity Act, 2003 to direct a generating company and whether Section 86(1)(b) allowed it to allocate power among licensees without a PPA. The Court applied purposive and harmonious construction, emphasizing that the Act deliberately de‑licensed generating companies and placed them outside the licensing regime. It held that Section 23 does not empower the Commission to issue directions to generators, and Section 86(1)(b) cannot be read to permit allocation of electricity absent a contract. Consequently, the Tribunal’s order directing allocation and setting aside the MERC order was set aside. The appeals were allowed, the Tribunal’s judgment was overturned, and costs were awarded.

Issues considered

Whether Section 23 of the Electricity Act, 2003 can be invoked to issue directions to a generating company.
Whether the Commission, while exercising powers under Section 86(1)(b), can also rely on Sections 23 and 60 to allocate power.
Whether an equitable allocation of power generated by a generating company, without a PPA, is permissible.

Legislation cited

Electricity Act, 2003s. 10(2), s. 10(3), s. 11, s. 11(2), s. 12(2), s. 128(1), s. 128(6), s. 128(7), s. 128(8), s. 129, s. 14, s. 181, s. 2(28), s. 23, s. 24, s. 2(70), s. 33(2), s. 42(2), s. 55(2), s. 55(3), s. 60, s. 62(1), s. 62(2), s. 62(95), s. 81(1)(a), s. 81(1)(b), s. 81(1)(e), s. 81(1)(f), s. 86(1)(b)
MERC (Terms and Conditions of Tariff) Regulations, 2005s. Regulation 22, s. Regulation 23, s. Regulation 24, s. Regulation 24.1, s. Regulation 24.2, s. Regulation 7

Subjects

Electricity Act 2003generating companylicensing provisionsSection 23Section 86power purchase agreementequitable allocationstatutory interpretationharmonious constructionpurposive constructionregulatory jurisdiction

Judgment

[2009] 9 S.C.R. 625
,_

TATA POWER COMPANY LTD. A
v.
RELIANCE ENERGY LIMITED AND OTHERS
(Civil Appeal Nos. 3510-11 of 2008)

MAY 6, 2009
B
[S.8. SINHA AND DR. MUKUNDAKAM SHARMA, JJ.]
y
Electricity Act, 2003:

ss.2(28) and 23 - "Generating Companies" - Directions c
to licensees - HELD: Activities of generating companies are
beyond purview of licensing provisions - s. 23 occurs in
Chapter "licensing" under which generating companies would
not be covered.

s. 42(2) - The Act permits generating companies to D
supply electricity directly to a trader or a consumer - For this
purpose no tariff is required to be determined in terms of
s.42(2). - MERC (Terms and conditions of Tariff) Regulations,
2005 - Regulation 24.
E
ss. 2(70) and 23 - "Supply" - Meaning of - HELD: The
words 'supply' used in s. 23 in the con1ext refers to supply to
'(
consumers only and not to licensees - Interpretation of
Statutes.

ss. 23, 60 and 86 (1)(b) - HELD: While exercising power
F
of 'regulation' in relation to purchase of electricity and
procurement process of distribution, it is not permissible for
the Commission to direct allocation of electricity to different
licensees keeping in view their own need.
G
Interpretation of Statutes:

Interpretation of an enactment - Held: A statute must be
construed having regard to Parliamentary intent, history of
625 H
626 SUPREME COURT REPORTS [2009] 9 S.C.R. ~

A legislation including the mischief sought· to be remedied, the
objects and purpose it seeks to achieve - Chapter headings
and marginal notes of the sections are also relevant - For true
and correct construction of the Act, principle of harmonious
construction is required to be resorted to.
B
Consumers of electricity in Mumbai were being
served .by Tata Power Company (TPC), Brihan Mumbai
EJettricity· Transport Corporation (BEST) and Reliance
Infrastructure (Rlnfra). TPC had two divisions -
Generation [TPC (G)] and Distribution [TP(D)]. TPC(D),
C BEST and Rlnfra were distribution licensees getting bulk
supplies from TPC(G). In the year 1995 Rlnfra also
commissioned its 500 mw generating plant On 23.8.2005
the Maharashtra Electricity Regulatory Commission
(MERC) framed MERC (Terms and Conditions of Tariff)
D Regulations, 2005, requiring thereunder all power
purchase agreements/arrangements entered into by
Dh;;tribution Licensees to be approved by MERC. On
18.1.2006 BEST executed a Power Purchase Agreement
(PPA) with TPC for 800 mw of power for a period of 10
E years. On 16.3.2006 TPC(D) entered into a PPA with ..'
TPC(G) for 477 mw power. Both the PPAs were submitted
on 27.12.2006 for. approval of MERC. Rlnfra filed
objections in both the proceedings. Meanwhile TPC made
y
an offer to Rlnfra for sup.ply of 600 mw of electricity, but
F since the latter demanded higher quantum of power, no
consensus was reached with respect to PPA between
TPC(G) and Rlnfra. On 2.4.2007 MERC passed generation
tariff order for TPC(G) for the period 2006-2007 holding
that since PPAs had not been approved by way of interim
G arrangement, it would allocate available energy for
TPC(G) on the basis of coincident peak demand of the
distribution licensees. BEST and TPC(G), both
challenged the order in appeals before the Electricity
Appellate Tribunal. The Appellate Tribunal directed the
H MERC to consider petitions of TPC(G) and BEST for
... TATA POWER COMPANY LTD. v. RELIANCE
ENERGY LIMITED AND ORS.
627
,_
approval of PPA. Meanwhile Rlnfra initiated proceedings A
u/s. 86 of the 2003 Act before MERC seeking directions
to TPC(G) to allocate· 762 mw of power to it and to enter
into a PPA with it. The Commission by its order dated
6.11.2007 approved the PPAs entered into between
TPC(G) and Best and TPC(G) and TPC(D), for supply of B
800 mw and 477 mw of power respectively w.e.f. 1.4.2008,
holding that it has jurisdiction to issue direction to
t- generating companies in terms of s.23 of 2003 Act. The
Commission while dealing with the application of Rlnfra
filed u/s. 68 held that for the purpose of fixing the c
distribution tariff of all the three distribution licensees,
namely, BEST, TPC(D) and Rlnfra it would be proceeding
in the manner as directed in its order date 6.11.2007 and
approving the PPA entered into between TPC(G) and
BEST and TPC(G) and TPC(D). The Appellate Tribunal by D
its judgment dated 6.5.2008, set aside the judgment and
order of the MERC passed on 6.11.2007. Aggrieved, TPC
and BEST filed the appeals.
The questions for consideration before the Court
were: (i) whether recourse to s.23 of the Electricity Act, E
2003 can be taken for issuance of any direction to the
generating company; (ii) whether the Commission while
applying the provisions of s.86(1 )(b) of the Act could also
take recourse to ss.23 and 60 thereof; and (iii) whether
equitable allocation of power generated by a generating F
company is permissible.

Allowing the appeals, the Court

HELD: 1.1. For true and correct '
construction
.
of the
. Act, the principle of harmonious construction is required G
to be resorted to. [Para 157 (11)). [689-B]

1.2. Recourse to the principle of purposive
construction does not militate against the conclusion
H
628 SUPREME COURT REPORTS [2009] 9 S.C.R. ,,.
'
A reached by the court and in fact in terms of the said "'
doctrine the purpose and object of the Parliament must
prevail over a narrow and/or literal interpretation, which
would otherwise defeat the purpose and object of the Act.
[Para 157 (12)]. [689-C-D]
B
1.3. A statute must be construed having regard to
Parliamentary intent. For the said purpose it is open to a
court not only to take into consideration the history of the -1
legislation including the mischief sought to be remedied
but also the objects and purpose it seeks to achieve.
c [Para 91] [668-0-E]

1.4. The Parliament by making Electricity Act, 2003
clearly acknowledged the necessity of providing a
greater room for generation Qf electrical energy so ·as to
D enable the country to meet its requirements. It is only in
that view of the matter, the liberalization policy of the State
provided for de-licensing of the generating companies.
The primary object, therefore, was to free the generating
companies from the shackles of licenstng regime. The
E 2003 Act encourages free generation and more and more
competition amongst the generating companies and the
other licensees so as to achieve customer satisfaction
and equitable distribution of electricity. The generation
company, thus, exercises freedom in respect of choice
F of site and investment ·of the generation unit; choice of
counter-party buyer; freedom from tariff regulation when
the generating company supplies to a trader or directly
to the consumer. [Para 97 and 107-108] [~70-A-B; 672-E-
H; 673-A]
G 1.5. Keeping in view that de-licensing of the
generation is the prime object of the Act, the courts while
interpreting the provisions of the statute must guard itself
from doing so in such a manner which would defeat the
purpose thereof. It must bear in mind that licensing
H
TATA POWER COMPANY LTD. v. RELIANCE 629
ENERGY LIMITED AND ORS.
provisions are not brought back through the side door A
of Regulations. [Para 109] [673-A-B]

1.6. Fairness· or otherwise of the supply of electricity
---f to different distribution 'companies being outside the
jurisdiction of the Commission, the same by itself cannot B
be a ground for bringing back the licence raj, which is not
contemplated by the Act. [157 (10)] [689-A-B]

' 1.7. Chapter headings and the marginal notes are
parts of the statute. They have also been enacted by the
Parliament. There cannot be any doubt that they can be c
used in aid of the construction. Thus, in a case where
..... ,, interpretation of a Section vis-a-vis the scheme of the Act,
the purport and object of the legislation, particularly
having regard to the mischief it seeks to remedy; the
chapter heading as also the marginal note are relevant. D
[Para 115 and 131] [674-0-E; 679-H; 680-A]

Chandler v. OPP, (1962) All ER 142; Indian Aluminium
Company v. Kera/a State Electricity Board, [AIR 1975 SC
1967; R. S. Joshi Sales Tax Officer, Gujarat and Ors. v. Ajit
E
Mills Limited and Anr. [(1977) 4 SCC 98; Ramesh Chand and
Ors. v. State of U.P. and Ors., [(1979) 4 SCC 776; Indian
Aluminium Company v. Kera/a State Electricity Board, AIR
1975 SC 1967; R.S. Joshi, Sales Tax Officer, Gujarat and
'· ' Ors. v. Ajit Mills Limited and Anr., (1977) 4 SSC 98. Ramesh
F
Chand and Ors. v. State of UP and Ors. (1979) 4 SCC 776
Bombay Dyeing and Mfg. Co. Ltd. v. Bombay Environmental
Action Group and Ors., (2006) 3 SCC 434; Deewan Singh
and Ors. v. Rajendra Pd. Ardevi and Ors. [2007] (1) SCALE
32 Sarabjit Rick Singh v. Union of India (UOI), (2008) 2 SCC
j
417; Union of India v. Ranbaxy Laboratories Ltd. and others; G
(2008) 7 SACC 502; and D. Purushotam Reddy and another
ml'!'
v. K. Sateesh, (2008) 11 SCALE 73, referred to.

Justice Frankfurtir, Some Reflextions on the reading of
~
- Statutes, 47 Columbia LR 527, at page 538 (1947), referred H
630 SUPREME COURT REPORTS [2009) 9 S.C.R.

-~

A to.

2.1. Activities of a generating company are beyond
the purview of the licensing provisions. [Para 106, 141 and
157 (1)] [687-F]
B 2.2. The Parliament therefore did not think it
necessary to provide for any regulation or issuance of
directions except that which have expressly been stated ~
in the Act. [Para 157(2)] [687-F-G]

'C 2.3. Th~ interpretation clause contained in Section 2
of the Act prefixes the words "unless the context
otherwise requires". The word "supply" has separately
been used even for generation and distribution. Thus, .t·"'i-

although a broad meaning may be assigned to the said
D term but the same must be held to be 'subject to the
context'. The word "supply" used in Section 23 of 2003
Act for bringing in efficient supply would mean regulate
and consequentially licensing in respect of the
generating company. [Para 111] [673-E-F]
E ,
2.4. lo a case of this nature the principle of exclusion
of the definition of Section by resorting to "unless the
context otherwise requires" should be resorted to. [Para
157(5)] (688-C]
. -"'

F 2.5. Section 23 occurs in the chapter of "licensing"
under which the generating companies would not be
governed. [Para 157(3)] [687-G-H]

Whirlpool Corporation v. Registrar of Trade Mark,
Mumbai and others, (1998) 8 SCC 1; Garhwal Manda/ Vikas
G Nigam Ltd. v. Krishna Travel Agency (2008) 6 SCC 732 and
A
National Insurance Co. Ltd. v. Deepa Devi, (2008) 1 SCC .,...,
414, referred to.

2.6. As almost all the sections preceding Section 23
H ~
-(

-. TATA POWER COMPANY LTD. v. RELIANCE
ENERGY LIMITED AND ORS.
631

!"
as also Section 24 talk about licensee and licensee alone, A
the word "supply" if given its statutorily defined meaning
as contained in Section 2(70) of the Act would lead to an
anomalous situation as by reason thereof supply of
electrical energy by the generating company to the
consumers directly in terms of Section 12(2) of the Act B
as also by the transmission companies to the consumers
would also come within its purview. [Para 157 (4)] [688-
A-8]

2. 7. The word 'supply' contained in Section 23, in the
context refers to 'supply to consumers only', and not to
c

-
supply to licensees. On the other hand, in Section 86(1)(a)
'supply' refers to both consumers and licensees. In
Section 10(2) the word 'supply' is used in two parts of the
said Section to mean two different things. In the first part
~eans 'supply to a licensee only' and in the second part D
s ~y to a consumer only'. Further in first proviso to
Section ,14, the word 'supply' has been used specifically
to me~m "'distribution of electricity'. In Section 62(2) the
t
word 'supply' has been used to refer to 'supply of
' electricity by a trader'. [Para 129] [679-8-E] E

2.8. To assign the same meaning to the word
"supply" in Section 23 of the Act, as is assigned in the
t interpretation section, it is necessary to take recourse to
the doctrine of harmonious construction and read the F
statute as a whole. Interpretation of Section indisputably
must be premised on the scheme of the statute. For the
purpose of construction of a statute and in particular for
ascertaining the purpose thereof, the entire Act has to be
read as a whole and then chapter by chapter, section by

-
G
J section and word by word. [Para 130] [679-E-F]

Reserve Bank of India, v. Peerless General Finance and
Investment Co. Ltd. (1987) 1 SCC 424; Peerless General
Finance and Investment Co. Ltd. v. Reserve Bank of India,
...- (1992) 2 SCC 343 and National Insurance Co. Ltd. v. Swaran H
632 SUPREME· COURT REPORTS (2009] 9 S.C.R.

A Singh, (2004) 3 SCC 297, referred to.

3.1. Section 86(1)(a) of the 2003 Act clearly shows the
para meters of supply for the purpose of Regulation, v.iz.
supply of electricity by the distribution company to the
consum~r. [Para 157 (6)] [688-0]
8
3~2. If regulatory clause is sought to be applied in
relation to allocation of power, the same would defeat the
de-licensing provisions. Generating companies have the
freedom to enter into contract and in particular long term
C contracts with a distribution company subject to the
regulatory provisions contained in the 2003 Act. [Para 157
(1)] [688-C-O]
/

3.3. Section 86(1)(b) of the 2003 Act clearly shows
0 that the generating company indirectly comes within the
purvJew of regulatory jurisdiction as and when directions
are issued to the distributing companies by the
appropriate Commission but the same would not mean
that while exercising the said jurisdiction, the
E Commission will bring within its umbrage the generating
company also for the purpose of issuance separate
direction. [Para 157 (13)] [689-0-F]

3.4. Section 86(1 )(b) provides for regulation of
electricity purchase and procurement process of
F distribution licensees. In respect of generation its
function is to determine the tariff for generation as also
in relation to supply; transmission and wheeling of
electricity. Clause (b) of sub-section (1) of Section 86
provides to regulate electricity purchase a'nd
G procurement process of distribution licensees including
the price at which the electricity shall be procured from
the generating companies or licenses or from other
sources through agreements. As a part of the regulation
it can also adjudicate upon disputes between the
H licensees and generating companies in regard to the
TATA POWER COMPANY LTD. v. RELIANCE 633
ENERGY LIMITED AND ORS.

implementation, application or interpretation of the A
provisions of the agreements. [Para 143] ~S83-G-H; 684-
A-B]

.3.5. While exercising its power of 'Regulation' in
relation to purchase of electricity and procurement 8
process of distribution, it is not permissible for the
Commission to direct allocation of electricity to different
"" licensees keeping in view their own need. Section 8~(1)(b)
read with Section 23 if interpreted differently would
empower the Commission to issue direction to the C
generating company to supply electricity to a licensee
who had not entered into any PPA with it. Such a
• contingency does not appears to have been
contemplated by the Parliament. [Para 141] (682-E-G]

4.1. PPA for a long term is essential for increasing D
and decreasing the capacity of generation of electricity
by the generating company, which purpose by the 2003
Act must be allowed to be achieved. (Para 157 (8)] (688-
F]
E
4.2 .. Duration of the contract in regard to· supply of
electricity by and between TPC (G) and Rlnfra prior to
coming into force of the Act is of no consequence,
particularly when no written long term Of short term
- 'f
contract was entered into by and between them. [Para F
157(9)] [688-G-H; 689-A]

4.3. A generating company, if the liberalization and
privatization policy is to be given effect to, must be held
to be free to enter into an agreement and in particular
long term agreement with the distribution agency; terms G
and conditions of such an agreement, however are not
unregulated. Such an agreeme.1t is subject to grant of
approval by the Commission. However, the generating
company is not absolutely free from all regulations. Such
regulations are permissible under the 2003 Act ; one of H
634 SUPREME COURT REPORTS [2009] 9 S.C.R.

-+
A them being fair dealing with the distributor. Thus, other
types of regulations should not be brought in, which
were not contemplated under the statutory scheme. If the
company exercising its dominant position, Section 60
would come into play. It is only in a situation where a
B generator may abuse or misuse his position, the
Commission would be entitled to issue a direction. [Para
141-142] [682-G-H; 683-A, D-F]
j
4.4. The Parliament thought it necessary to provide
for specific provisions for the purpose of regulating the
c functions of the ·generating companies, those provisions
are special provisions vis-a-vis the other general
provisions which take within its abridge the function of
the distributor, transmitter and trader. [Para 146] (684-F-
•
G]
D
In U.P. Power Corporation Ltd. v. NTPC and others, 2009
(3) SCALE 620; Bank of New South Wales v. Commonwealth
(1948) 76 CLR 1 and Prasar Bharti and others v. Amarjeet
Singh and others, 2007 (2) SCALE 486, referred to.
E
4.5. Short term power procurement refers to an
agreement for procurement of power for a period of less
than one year. Regulation 23.1 requires the distribution
licensee to prepare a five year plan inter alia upon taking
-t ;:...
into consideration the sources for procurement thereof. -
F Regulation 24.1 mandates obtaining -of prior approval of
the Commission therefor. Approval by Commission is
granted upon examining the process of procurement
having regard to the factors specified in Regulation 24.2.
It is in this context that grant of approval of the PPA by
G and between TPC (G) on the one hand and BEST and ),
TPC (D), on the other necessitated. The proposal of TPC -- ....
(G) that Rlnfra should enter with it a long term agreement
assumes significance. [Para 151] [686-A-C]

H 4.6. The Appellate Tribunal committed a factual error
-- ~
TATA POWER COMPANY LTD. v. RELIANCE
ENERGY LIMITED AND ORS.
635

in so far as it failed to notice that no long term PPA exists A
between TPC (G) and Rlnfra. It furt~9rmore was not
correct in opining that the Commission had not
considered the claim of Rlnfra while approving the
arrangements between TPC (G) and TPC (D), despite the
fact that REL Rlnfra not only filed objections to the B
application for grant of approval of PPA filed by the
,.,.
parties herein, it also filed independent application took
part in the deliberations and all its contentions had been
considered. Thus, the Tribunal was not correct opining
that the decision of the Commission was in violation of c
the principle of natural justice. It furthermore took into
consideration_ ,an irrelevant fact, namely, that the
, .'" Commission in determining the issue between the parties
should have regard to the fact that the consumers of
respective areas have been bearing the 'depreciation' and
D
interest on loan elements of the Fixed Cost of tariff. [Para
90] [687 -G-H; 688-A-C]

. AIR 1975 SC 1967
· (1977} 4 sec 98
Case Law Reference:
.referred to
referred to
Para 124
Para 124
E

(1979) 4 sec 776 referred to Para 124
•·
• (2006) 3 sec 434 referred to Para 125
F
(2007) 1 SCALE 32 referred to Para 125
(2008) 2 sec 417 referred to Para 125
(1998) 8 sec 1 referred to Para 128
_.I (2008) s sec 732 referred to Para 128 G

(2008) 1 sec 414 referred to Para 128
(1989) 1 sec 424 referred to Para 130

H
636 · SUPREME COURT REPORTS (2009] 9 S.C.R. ·~

-+
A (1992) 2 scc· 343 referred to Para 130
(2004) 3 sec 291 r.eferred to Para 130 lo-
I
(2008) 1 sec so2 referred to Para 132
'..._
(2009) 11 SCALE 73 referred to Para 132
8
(2009) 3"'SCALE 620 referred to Para 147
(1948) 76·CLR 1 referred to Para 147 j
:
(2009) 2 SCALE 486 referred to Para 147 '

c ··~
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
3510-3511 of 2008.
.J ·,

From the Judgment & Order dated 06.05.2008 of the
Appellate Tribunal for Electricity, New Delhi in Appeal Nos. 143
D of 2007 & I.A.No. 70 of 2008.

WITH

C.A. No. 4269 of 2008, 3593,of 2008, 6098 of 2008, 6099
of 2008.
E
'
Jaideep Gupta, Sitesh Mukherjee, Sakya Singh
Chaudhuri, Vishal Anand and Mega Sen (for Jagjit Singh
Chhabra) for the Appellants.
-f ... I

I-
F F;F. Nariman, Ramji Srinivasan,· Dr. A.M. Singhvi, J.J.
Bhatt, Krishan Kumar, M.T. Nair, Praveen Jain, Sumit Gupta,
Mukesh Kumar (for M.V. Kini & Associates) Anjali Chandurkar,
Smieetaa Inna and Amit Bhandari (for Shiv Kumar Suri) for the
Respondents.
G The Judgment of the Court was delivered by ...
,
l-.

s.e. SINHA, J.
INTRODUCTION
H ....
1. These statutory appeals under Section 125 of the
TATA POWER COMPANY LTD. v. RELIANCE 637
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]
'I-
Electricity Act, 2003 (hereinafter called and referred to for the A
sake of hrevity as 'the 2003 Act') are directed against a
common judgment and order dated 6th May, 2008 passed by
the Appellate Tribunal for Electricity, New Delhi in Appeal
No.143 of 2007 and I.A. No.70 of 2008 whereby and
whereunder a judgment and order dated 6th Novembe~. 2007 B
passed by the Maharashtra Electricity Regulatory Commission
(MERC) was set aside.
THE PARTIES
2. Whereas Appellants, the Tata Power Company Ltd: c
(TPC) has two divisions - 'Generation·· [TPC (G)] and
'Distribution' [TPC (D)]; the Brihan Mumbai Electricity and
Transport Corporation (BEST) is a distribution company;
Respondent - Reliance Energy Ltd. now named as Reliance
Infrastructure Ltd. (Rlnfra) is a generating as well as a D
distributing company within the meaning and provisions of the
2003 Act.
3. All of them have been operating in the city of Mumbai
including Suburban Mumbai of having approximately 384 sq.
Km in area and the city of Mumbai having approximately 60 E
sq. Km in area.
4. We may place on record that the aggregate capacity
to generate electricity of TPC is 1777 MW of power. The
+
generation capacity of the respondent Rlnfra is 500 MW, but it
uses its power, as per its license, only to serve its own F
consumers.
BACKGROUND FACTS
5. The following factual matrix relevant for proper
appreciation of the legal issues arising in the present case may G
J
be noticed.
6. Indisputably TPC has been generating and supplying
electricity to distribution licensees like Rlnfra and BEST for over
a century. On or about 5th March, 1907; 3rd April, 1919; 15th
H
r
)

~

638 SUPREME COURT REPORTS [2009] 9 S.C.R.

-t
A November, 1921 and 19th November, 1953, the Bombay
(Hydro-Electric) Licence ; the Andhra Valley (Hydro-Electric)
Licence, the Nila Mula Valley (Hydro-Electric) Licence and
Trombay Thermal Power Electric Licence respectively were
granted to TPC to generate and supply power in terms thereof.
B 7. Since 1907 consumers of electricity in Mumbai were
r
served by distribution lisensee, BEST (for the island city of
Mumbai) and since 1926 onwards by Rlnfra (for suburban· -f

Mumbai). Indisputably demand of electricity earlier was relatively
low as compared to the demand post 1990s. Nevertheless TPC
c progressively increased its capacity to meet the demand cf both
Rlnfra and BEST. Issues of wrongful inter se allocation between
the various distribution licensee never really arose prior to the
present scenario.
8. On or about 1st October, 1916 TPC and BEST (both
D
Appellants herein) entered into an agreement in terms w~ereof
the former agreed to supply and later agreed to buy power in .
bulk. This agreement was renewed from time to time.
'r
9. Subsequently a distribution licence was also issued to .__
E BSES, predecessor in interest of respondent Rlnfra to supply
power to the consumers in the suburbs of Mumbai. Under the
said license Rlnfra wss authorized to purchase electricity from
' ,.

'
~
the bulk Licensees. Accordingly it began procuring bulk power
from TPC generating stations according to its requirements from ....

F time to time, based on its consumer load (TPC had been the
only bulk licensee for Mumbaj). Indisputably, however, no '
I

agreement in writing had ever been entered into by an~ ~
between TPC and Rlnfra. It must be noted in this regard that
since its inception and till a very long time Rlnfra continued to
buy its entire requireme~t of power from TPC.
G ~

10. However in 1918 Rlnfra's distribution license was .>-·

amended to permit it to put up a generation station to supply
power only to its. own consumers. In or about 1995, Rlnfra 't""
\_

commissioned its 500MW generating plant at Dahanu,
H
TATA POWER COMPANY LTD. v. RELIANCE 639
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]

pursuant whereto the quantum of power purchased by it from A
TPC was reduced by about 54%. Even then Rlnfra had been
buying nearly 42% of the energy generated by TPC. It had
continued to purchase its remaining requirements of power
from TPC.
B
11. On or about 1998 a Committee on Review of Power
demand in Mumbai area commonly known as the 'Kukde
Committee' was constituted by the Government of Mahar~sthtra
for the purpose of studying the techno commercial feasibility
of new power generation projects at Bhivpuri (500 MW) and C
Palghar (495 MW) proposed to be set up by TPC and Rlnfra
respectively.

12. It is accepted that before the said Committee, Rlnfra
took the stand that it wanted to supply to its existing consumers
with the power generation from its own proposed project D
instead of providing power from TPC. The committee submitted
its report on or about 26th May, 1998. In its report it
recommended for grant of approval for both the said projects.
It was furthermore recommended that the additional power
generated from Rlnfra's project be used only to meet the future E
growth in demand arising from the consume.rs of Mumbai. °The
Kukde Committee also recommended that first the then
existing generation facility of TPC be fully 4tilized to meet the
requirements of the current consumers of Rlnfra so as not to
disturb the existing technical and commercial arrangement F
between TPC and Rlnfra.

13. Subsequent thereto a 'Principles of Agreement' (POA)
was· executed between TPC and Rlnfra on or about 31st
January, 1998 inter alia providing that there be a minimum
power purchase ('off-take') on the basis of 'pay or take' in each G
financial year by Rlnfra OIJ the basis of its consumer demand
forecast. The POA also envisaged execution of a detailed
Power Purchase Agreement by the parties. However, no such
agreement ever fructified.
H
640 SUPREME COURT REPORTS (2009] 9 S.C.R.

A 14. Thereafter in 2000 the Maharashtra State Electricity 1

Board [MSES] gave consent to the Sap hale power project of ..
Rlnfra. Approval however was not granted to the Bhivpur project
of TPC. Against the said order granting approval in favour of
Rlnfra, TPC filed a writ petition being No.916 of 2001 before
B the Bombay High Court on the premise that it had not approved
TPC's proposal for the Bhivpuri power project despite it having
been submitted aJ an earlier point of time. It was alleged in the
said petition that the impugned decision of the MSES was
illegal and contrary to the 1948 Act, which forbade it from
c granting sanction to any other person to generate electricity if
the existing bulk licensee was able and willing to supply power.
A prayer inter alia was made therein that the recommendations
of the Kukde Committee should not be implemented.

15. In response to the said petition MSES withdrew its
D approval to Rlnfra's Power project on the ground that TPC being
the bulk licensee was able and willing to supply power to it. On
the withdrawal of the approval TPC too withdrew its petition filed
before the High Court

E 16. Thereafter the 2003 Act came into force with effect from
26th May, 2003: Under the new Act the 'Generating
Companies' have been given freedom of choice to sell power
to any. person or licensee. The Act also introduced the concept
of 'open access' which allows the distribution licensee to source
F its power from any generating company. The distributors
accordingly under the changed law do not have to depend upon
state based generators to meet their needs.

PROCEEDING UNDER THE ACT

G 17. Rlnfra applied to Maharashtra Electricity Regulatory
Commission [MERC] for grant of 'open access' to bring in
power from sources, outside Mumbai, to supply electricity to
its consumers.

18. On or about 11th June, 2004 TPC through its executive
H
'
!
TATA POWER COMPANY LTD. v. RELIANCE 641
\
~ ENERGY LIMITED AND ORS. [S.S. SINHA, J.]
""
summary for Annual Revenue Requirement (ARRA) filed before A
the MERC for the year 2003-04 insisted on having a PPA with
Rlnfra as a condition for supply of power to Rlnfra in the future.
It, however, rejected the said demand on the ground that there
was no 'legal justification' or 'tenable reason' for entering into
such an agreement. B

19. On or about 23rd August, 2005 the Commission made
Regulations known as MERC (Terms and Conditions of Tariff)
Regulations, 2005, Part-D whereof required all power purchase
agreements/arrangements entered into by the Distribution c
Licensees to be approved by MERC. The regulation also
provided that any amendment to such an agreement or
arrangement would require prior permission of the MERC
irrespective of whether such an agreement or arrangement was
approved by the commission or not.
D
20. MERC, on an application, filed by Rlnfra for direction
to TPC to provide additional outlets, agreed to the position that
distribution licensees, such as Rlnfra, can procure their power
from any generating company in India and because of the said
flexibility in the 2003 Act also directed it to enter into a PPA E
with TPC.

21. On or· about 18th January, 2006, BEST executed a
PPA with TPC for purchase of 800 MW of power for a period
of 10 years which was subsequently revised in terms of the
F
MERC's order dated 7th July, 2006. The said PPA was
submitted for approval of MERC on 27th December, 2006 which
was registered as Petition No.87 of 2006.

22. On or about 12th July, 2006 a Minutes of the Meeting
(MoM) was signed between TPC (G) and TPC (0) for allocation G
of power to TPC (D). TPC (D) indicated requirement of 500
MW power from TPC (G) in the said MoM. A minor modification
in the MoM was directed by MERC, pursuant whereto, on or
about 16th March, 2006, TPC (0) entered into a PPA with TPC
(G) for 477 MW power which was submitted for approval of H
642 SUPREME COURT REPORTS [2009] 9 S.C.R.
1 ~

A MERC on 27th December, 2006 being Petition No.87 of 2006.

23. Rlnfra filed an application for intervention before the
commission in both the applications for approval of both the
PPAs It subsequently also filed its objections in the said
proceedings.
B
24. It appears from the record that in the meanwhile TPC
proposed to enter into PPA with Rlnfra for its balance quantity
after meeting the contractual requirement of BEST for 800 MW
and of TPC (D) for 4 77 MW of electricity . The offer was made
c by TPC to Rlnfra for supply of 600 MW which was not
accepted. The later instead insisted on ·obtaining a much higher
quantum of power based on its consumer demand. TPC
rejected the said demand keeping in view its continuing
obligation to its own consumers and also those of BEST. No
D consensus was therefore reached with respect to the said PPA
between TPC-G and Rlnfra.

25. On or about 2nd April, 2007 MERC passed generation
tariff order for TPC (G) for the period 2006-2007. Commission,
however, took the view that since PPAs had not been )
E
approved, by way of an interim arrangement, it would allocate
available energy from TPC (G) on the basis of coincident peak
demand of the distribution licensees.

26. Aggrieved by and dissatisfied therewith BEST
F preferred an appeal before the Electricity Appellate Tribunal on
26th April, 2007 which was marked as Appeal No.41 of 2007.
Similar appeal was filed by TPC against the tariff order dated
2nd April, 2007 providing for allocation of TPC (G) capacity on
the basis of coincidence peak demand on 4th May, 2007, which
G was marked as Appeal No.51 of 2007. ~

27. By an order dated 17th May, 2007 the Appellate
Tribunal in Appeal No.51 of 2007 filed by TPC directed MERC
to decide BEST's and TPC's petitions for approval of PPA and
recorded the undertaking of all parties that they would not claim
H
~
TATA POWER COMPANY LTD. v. RELIANCE 643
"
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]
\
equities on. the basis of order of f0ERC dated 2nd April, 2007. A

28. Rlnfra in the meantime initiated a proceeding under
Section 86 of 2003 Act before MERC seeking direction against
TPC (G) to allocate 762 MW to it and to enter into a PPA with
. Rlnfra on the said basis, which was marked as Case No. 30 B
of 2007.

29. By reason of a judgment and order dated 6th
November, 2007 the Commission approved PPA between TPC
(G) and BEST and the arrangement between TPC (G) and TPC
(D) for supply of 800 MW and 477 MW of power respectively c
with effect from 1st April, 2008. In relation to its own jurisdiction
it was, however, opined that it can issue direction upon the
generating companies in terms of Section 23 of 2003 Act.

30. Rlnfra preferred an appeal thereagainst which was D
marked as Appeal No.143 of 2007.

31. Two separate appeals were preferred by BEST and
TPC questioning the interpretation of Section 23 of 2003 Act
by the Commission which were marked as Appeal No.159 of
2007 and Appeal No. 14 of 2008 respectively. E

32. MERC while dealing with the application filed by Rlnfra
for continuing the tariff for financial year 2007-2008 even beyond
1 31st March, 2008 till the tariff year 2008-2009, by an order
dated 1st April, 2008 clearly indicated that for the purpose of F
fixing the distribution tariff of all the three distribution licensees
namely, BEST, TPC (D) and Rlnfra, based on the share of
generation capacity of TPC (G), it will be proceeding in the
manner as· directed by the Commission in its order dated 6th
November, 2007 approving the PPA entered into by and G
between TPC (G) and BEST and TPC (G) and TPC (D).

33. Appellate Tribunal thereafter passed the impugned
)udgment on 7th April, 2008 in Appeal No.51 of 2007 filed by
TPC against the tariff order dated 2nd April, 2007 on the
H
644 SUPREME COURT REPORTS [2009] 9 S.C.R.

A submission of appellant-TPC that it was not pressing for the
adjustment of any amount that may be payable by Rlnfra to TPC
for the period 2007-2008 in terms of the interim order of the
Appellate Tribunal dated 17th May, 2007.

B 34. Rlnfra filed petition marked as Case No.6 of 2008
before MERC on 17th April, 2008 seeking equitable allocation
of power generation from TPC (G)'s generation facility under
Section 23 of 2003 Act.

ORDER OF THE COMMISSION

35. The Commission passed a fairly detailed order. It took
into,co'nsideration the factual matrix; the nature of agreements
; submissions of BEST; its earlier orders ; contentions raised
by Bf;ST in its original application as also revised petitions ;
D firm capacity and other details.

36. It noticed that a Technical Validation Session in case
No. 87 of 2006 was held on 18th April, 2007 including
justification for entering into a long term contract for ten years
taking into account the demand forecast during peak and off-
E peak hours and analysis of other sources of power and
availability of transmission capacity in future. It also took into
account the basis for arriving at 10 paise/kwh surcharge
payable by TPC (G) to BEST in case the availability of
generating stations of TPC (G) falls below 85% alongwith
F supporting computations. It also noticed the mechanism for
assessipg the amount of compensation payable in case of
termination due to events of default may be incorporated in the
PPA. It/furthermore noticed that before it a public hearing was
held oh 17th July, 2007 wherein points were raised by the
G participants and BEST's response thereto.

37. We may also place on record that that Rlnfra did not
make submissions in the technical session but did so only at
the public hearing.
H
TATA POWER COMPANY LTD. v. RELIANCE 645
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]

38. The Commission took up Case No.88 of 2007 and A
noticed the details of Technical Validation Session in regard
to internal capacity allocation from the generation division of
TPC to its own distribution division including Rlnfra's
intervention application. It also noticed the details in regard to
the public hearing in the aforementioned case which was held B
on 29th August, 2007. Similarly the application filed by Rlnfra
which was marked as Case No.30 of 2007 was considered in
great details.

39. Submissions of learned counsel appearing for the
parties were noticed. Part IV of its judgment contains 'the C
decision with reasons'. It took into consideration the relevant
"'i provisions of law. It noticed its functions under Section 86 of
the 2003 Act as also various Regulations framed thereunder.
It placed on record that it had issued certain directives to the
distribution licensees from time to time. It opined that D
~ submission of Power Purchase Agreements (PPA) for approval
are imperative as the objective thereof is to remove any
uncertainty that may be faced by the consumers of a distribution
licensee who does not have any written terms and conditions.
It opined that Rlnfra's recalcitrant attitude in seeking approval E
of the terms and conditions of its power procurement deserved
to be deprecated, whereupon a warning was administered.

-. -+ 40. Submissions of BEST before the Commission were
F
(i) Ambit of approval process under Section 81(1)(b)
of 2003 Act was required to be restricted to the
price and the Commission had no power to reduce·
the quantu.m agreed by distribution licensee and the
generating company under the PPA submitted for G
approval.

(ii) Insertion of the word "including" before the words
"the price" makes the intention of the legislature
clear that the scope of the power to regulate is H
646 SUPREME COURT REPORTS [2009] 9 S.C.R.
i
j
A extensive.

(iii) Power of a Regulatory Body is extensive under
Section 86( 1)(b) of the 2003 Act. Even the
generator can be subject to Regulations.
B (iv) Section 86(1 )(b) is required to be harmoniously
read. For invoking the provisions of Section 60 of
the Act, the following three situations must
conclusively be shown to exist :

c (a) any agreement has been entered into which
is likely to cause or causes an adverse effect
on competition in electricity industry; or
?"';

(b) dominant position has been abused which is
likely to cause or causes an adverse effect
D on competition in electricity industry; or
~
(c) a combination has entered into which is likely
to cause or causes an adverse effect on
competition in electricity industry.
E
FINDINGS OF THE COMMISSION

F
41. The. Commission discussed clause by clause of the
PPAs entered into by and between TPC-D and BEST and
TPC (G) and TPC (D) in terms of the MERC Regulations. It took
into consideration each of the factors enumerated in those
~ ..
PPAs to hold that they were justified for meeting the
requirements of BEST and TPC (D), stating :-

"Based on the above analysis, the Commission is satisfied
G with ttie data and information submitted by BEST and TPC
substantiating the requirements of Regulation 24 of the
MERC (Terms and Conditions of Tariff) Regulations, 2005"
~
....
42. In conclusion the Commission held that Section 86 (1)
(b) of the 2003 Act would be applicable only when the PPA is
H
TATA POWER COMPANY LTD. v. RELIANCE 647
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]
..
produced before it for its approval and not otherwise. A

43. It also noted that it has the jurisdiction to go into the
question with regard to the quantity of supply of electrical energy
in terms of the PPAs. However, as the PPA took into
consideration the demand of the licensee for the next 10 years,
B
the stipulations contained therein were held to be fair and
proper.
~

44. It was opined that the language of Section 60 of the
Act being restrictive, no cause had been made out for issuance
of any direction thereunder. c

!"'<.
45. It furthermore noted that Section 23 of the 2003 Act
brought within its fold a generating company but no case had
been made for issuance of any direction thereunder while
considering the question of grant of approval of a long term D
PPA.
Ji

46. On the aforementioned findings the Commission

-
approved the PPA of BEST and TPC (D). It was directed :-

"(C) REL-D is directed to file long-term Power Purchase E
Agreements for procurement of power from generating
Companies and other sources at the earliest. Also, REL-
.., D should submit Power Purchase Arrangement for
1 procurement of power from its own generating unit REL-
G, for the Commission's approval, within one month of the F
issue of this Order.

(D) In the past, in view of the prevailing supply shortage
situation, the Commission has invoked its powers under
Section 23 of the EA 2003, and has directed the
,,.,
distribution licensees to share the available generation G
capacity in a particular ratio, based on the share of non-
coincident peak demand for FY 2006-07, and
subsequently based on the share of the coincident peak
,_ demand for FY 2007-08, since the coincident peak
-< H
1
648 SUPREME COURT REPORTS [2009] 9 S.C.R.
j

A demand data was available by then. The situation in the
previ~us years was compounded by the fact that there
were no approved PPAs between the parties, and an
important aspect like power procurement cannot operate
in a vacuum. However, the Commission's powers to issue
B direcUons under Section 23 of the EA 2003 are wide and
if necessary and found expedient, the Commission may
issue such directions in future also, despite the existence
of any or all the approved PPAs, in case of any shortfall in
cont~acted capacity, -in order to protect interests of

c consumers. During the transition period, in case of
shortage of supply of electricity in the city of Mumbai, the
Commission will assess the situation at the time of conduct
>-
by the' Commission of Annual Performance Review in
terms of Regulation 17 of the MERC (Terms and
- Conditions of Tariff) Regulations, 2005 and assess whether
D
any specific direction to the distribution licensees is ,.._
required to be issued, to ensure that the consumers of all
three distribution licensees in Mumbai city are treated
equitably and for equitable distribution of electricity. It is

E
clarified that the supply in the form of generation capacity
does not necessarily have to be located within Mumbai or
....
even within Maharashtra, and the supply availability
referred to here is in the context of firm long-term power
purchase agreements between the distribution licensees + _,_-,
and power suppliers. With the above observations, the
F Commission disposes of Case No. 87 of 2006, Case No.
88 of 2006 and Case No. 30 of 2007."

APPELLATE TRIBUNAL

. 47. Four appeals were preferred by Rlnfra theregainst.
G Appellants also preferred appeals in regard to the interpretation ~
.,
of Section 23 of 2003 Act.

48. The Tribunal by reason of its impugned judgment dated
6th May, 2008 disposed of the said appeals. _,
H
TATA POWER COMPANY LTD. v. RELIANCE 649
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]
-\"
49. Therein apart from the factual matrix involved in each A
case.• statutory provisions and the submissions made by
learned counsel for the parties were duly noticea. The tribunal
also extracted in details the averments made by TPC in its writ
petition before the High Court, which as noticed hereinbefore,
had ultimately been withdrawn. B
50. The Tribunal in paragraph 93 of the judgment
formulated the questions for its consideration which read as
under:-

"93. The main question in the set of these appeals revolves c
around the approval of PPA between TPC(G) and BEST
,_. and arrangement between TPC(G) and TPC(D). These
appeals raise the question whether the Commission has
the power to disapprove the PPA and allocate the power
of a generating company amongst the distribution D
licensees by regulating the supply in terms of Section 23
~
of the Act?"

51. The Appellate Tribunal did not disturb the findings of
the Commission in regard to its interpretation of Section 60 as
E
also Section 23 of the 2003 Act.

52. It, however, held that having regard to the purpose and

- 1
object of the Act, the Commission should have taken into
consideration the need of the first respondent in regard to the
allocation of quantity of supply F
53. Upon considering the provisions of the Act and the
Regulations, the Tribunal held :

"102. We note from the above regulations that the
G
' ! Commission itself recognizes an agreement or an
arrangement for long-term power procurement by a
Distribution Licensee. Regulaticns require prior approval
of the Commission for any change to an existing
arrangement or agreement for long term procurement.
;r· H
650 SUPREME COURT REPORTS (2009] 9 S.C.R.

A When an arrangement for power procurement between
TPC and BEST as also between TPC and REL does
exist, how the Commission failed to consider the claim of
REL.

103. We conclude from the aforementioned that the
B
Commission has wide powers to regulate the quantity of
energy that may be supplied by a generating company to
a distribution licensee when both are under the jurisdiction
of the same Commission.
c 104. It is not in dispute that the claims of REL have not
been considered by the Commission while approving the
PPA between the TPC(G) and BEST and arrangement .. ~

between TPC(G) and TPC(D). It is also not in dispute that
the approval of PPA and the arrangement has affected the
D allocation of power to REL. The interests of REL have been
adversely affected by the Commission in violation of the
principle of natural justice. The Commission ought tci·have
considered the claim of REL for allocation of power while
considering the approval of PPAs· between TPC(G) and
E BEST and arrangement between TPC(G) and TPC(D).

105. In the circumstances, appeal No. 143 of 2007 is
allowed and order dated November 06, 2007 of the MERC
approving the PPA of TPC and BEST and arrangement . t ,,,,.
between TPC and TPC(D) with reference to allocation of
F power to BEST and TPC(D) is set aside. The Commission
is directed to consider the question of approval of PPA
and the arrangement afresh after taking into consideration
the claims of BEST, REL and TPC(D). While considering
the case of the parties the Commission shall have regard
G to the fact that the consumers of respective areas have
been bearing the Depreciation and Interest on Loan
elements of the Fixed Cost of tariff and also consider all
other submissions of the parties which are permissible in
the law."
,'>I
H
TATA POWER COMPANY LTD. v. RELIANCE 651
ENERGY LIMITED AND ORS. [S.S. SINHA, J.]
,
54. The Tribunal set aside the approval of PPA's and A
remanded the matter to MERC for its reconsideration.

55. The Tribunal, furthermore, did not interfere with the tariff
order dated 2nd April, 2007 while disposing of Appeal No. 41
of 2007 filed by BEST, opining that the period for which
B
allocation was made on the basis of consistence peak demand
had already expired
4
56. Both TPC as also BEST are before us questioning the
legality and/or validity of the final order passed by the Appellate
Tribunal as also the orders disposing of the interim c
applications.
~ ..
SUBMISSIONS OF THE COUNSEL

57. Mr. Jaideep Gupta and Mr. Rohington Nariman,
learned senior counsel appearing on behalf of the appellants D
would submit :-
(i) The Appellate Tribunal misdirected itself in passing
the impugned judgment in so far as it failed to take
into consideration that in terms of the provisions of E
the 2003 Act the Commission had no jurisdiction
to interfere with the functions of the generating
company and its jurisdiction was restricted to
~~
+ regulate the terms of the agreement between a
generating company and a distribution company,
F
particularly when no fault with the approval of the
PPA entered into by and between TPC and BEST
and TPC (G) and TPC (D) was found by it.
(ii) Rlnfra also filed an application and the same having
been considered in great details, it has incorrectly G
been held by the Appellate Tribunal that the
principle of natural justice had not been complied
with.

.
r (iii) Direction of the Tribunal to the Commission to take
H
652 SUPREME COURT REPORTS (2009) 9 S.C.R.

'l
A into consideration contribution towards depreciation
and interest on loan elements of fixed costs of TPC
generation capacity while considering the claim of
Rlnfra is without any basis inasmuch as:-
(a) Such direction of the Appellate Tribunal has
B the effect of recognizing ownership of
consumers over the generation assets. The
Act does not recognize any such right of ~
ownership of consumers over the generating
assets.
c (b) Rlnfra consumers have only paid towards
costs of the generation of the power
consumed by them, which the developer is
,..,
entitled to recover as reasonable cost of
electricity and return of his investment.
D
If this argument is taken to its logical
~
conclusion, every consumer of electricity,
wh~ther domestic, industrial or commercial, I
would claim ownership of generation plants r-I
E for the purpose of supply of power to their
respective areas.

(iv) 2003 Act must be interpreted not only having regard
to history of legislation but also the purpose and
object it seeks to achieve wherefor the Commission
-+ ""i--
F and the Tribunal were not only required to consider
the chapter headings but also the marginal notes.

(v) Principles of harmonious construction of the
.
~

provisions of the statutes having not been resorted
G to either by the Commission or by the Tribunal, they ~

~
committed ·a serious error in opining that Section ·\
23 not only controls distribution of power but also r-
generation thereof.

58. Dr. AM. Singhvi, learned senior counsel appearing on
H """'
I
TATA POWER COMPANY LTD. v. RELIANCE 653
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]
{

behalf of the respondent, on the other hand, urged :- A

(i) The factual matrix involved herein would clearly
demonstrate a long standing commercial
relationship existing between TPC (G) and Rlnfra
and/or its predecessor-in-interest in regard to B
supply of electrical energy for the consumers of
suburb Mumbai (approximately 384 sq. kms. area)
~
being twenty .five lacs in number out of which
(
eighteen lacs being small individual and relatively
economically weaker sections consuming less than
300 units per month vis-a-vis the number of
c
consumers BEST serves, all of being in the town
of Mumbai being approximately of an area of 60 sq.
kms. area who are higher paying consumers and
those of TPC (D) having 23846 consumers, the
Commission must be held to have its jurisdiction D
rightly to allocate supply of power to the licen~ees
in greater public interest.

(ii) 2003 Act does not contemplate exclusion from the
':
purview of the Commission's jurisdiction of _all E
matters relating to generation but also covers
regulation of several aspects thereof including tariff
of generation companies, sale of electricity by
+ generators, maintaining efficient supply, securing
the equitable distribution of electricity, promotion F
competition, preventing abuse of dominant position
by generating companies, preventing adverse effect
on competition in electricity industry etc.

(iii) Regulation of tariff would bring within its fold inter
alia the quantity that a generator supplies to a G
distribution licensee or a consumer and various
interconnected and interrelated issues which have
a t;>earing on generation of electricity.

(iv) It is not that the 2003 Act merely empowers the H
654 SUPREME COURT REPORTS [2009] 9 S.C.R.

A Commission to fix only the generating tariff and to
otherwise adopt a hands off attitude towards the
generation company on the alleged ground that the
Commission did not have any other jurisdiction over
the generating compaflies.
B
(v) The principle of 'purposive interpretation' should be
resorted to for interpreting a statute regulating
;
generation, distribution and supply of electrical
energy which is in short supply in the country I
wherefor endeavour should be made to ascertain
c the object and purport not only by reading one of
the provisions of the Act but the preamble thereof
as also the other important provisions, namely
Sections 2(70)·; 7; .10; 11 ; 23; 60; 86(1)(b) and
86(1)(f) of the 2003Act.
D
(vi) Only because the generation of. electricity was >..
,...
taken o_utside the purview of the licensing. regime,
the same would not mean that a generator of an
electrical energy would be entitled to free wheel its
E entire supply to any person it likes and in any
quantity it likes. ·

(vii) The chapter heading and the marginal note of
Section 23 of 2003 Act cannot be resorted to for -f
its interpretation as it is well settled that marginal
F notes do not control the meaning of the section.

(viii) Chapter heading should not be treated to be
containing provisions dealing with a particular
subject matter as rigid compartment and it is not
G uncommon that a provision, rule or regulation ~
relatable to one chapter is in fact interpreted,
applied or related to other chapters of the same Act.

(ix) The term "supply" having been defined in Section r
2(70) of the 2003 Act, in any event, the jurisdiction
H
TATA POWER COMPANY LTD. v. RELIANCE 655
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]

of the Commission would clearly cover a situation A
where the power of regulation in relation to supply_
and ensuring efficient thereof are required to be
regulated.

(x) Neither Section 23 nor Section 86(1 )(b) of 2003
B
Act provides 'any context to the contrary' for the
purpose of application/ interpretation of term
"supply" as defined in Section 2(70). Context of
Section 86(1)(b) read with Section 23 and~section
2(70) of the Act if construed with the preamble
thereof, upon applying the principle of purposive
c
interpretation, it would be evident that the said
provisions constitute an invisible seamless web
creating a context which, far from being to the
contrary, mutually reinforces each other and points
only in one direction, namely the necessity to D
,. regulate supply of electrical energy not only at the
hands of the licensees but also the generating
companies.

(xi) The basic and overriding purpose of 2003 Act E
being ensuring generation of electricity and efficient
equitable distribution thereof with the interest of the
consumers in mind the generating companies
+ cannot be permitted to act outside the purview of
Regulations of a Regulatory Commission and F
consequently it must be held that the Commission
has full jurisdiction not only to regulate tariff and price
issues but also distribution of quantum of electricity
and other necessary concomitance thereto.

(xii) The word "regulate" reflects a statutory mandate of G
all encompassing jurisdiction.

(xiii) TPC being in a public utility service, it is required
to act fairly, equitably and not in an arbitrary fashion.
H
l
(
656 SUPREME COURT REPORTS [2009] 9 S.C.R. '

A (xiv) The principle of harmonious construction may be
resorted to only in a case where there exists any
contradiction or overlapping as in this case the
·provisions of Sections 11· and 23 apply in different
fields, there is absolutely no necessity to take
B recourse to the.said principle.

(xv)· As TPC (G)'~ acts and omission, despite its status
as commercial entity, constitutes an abuse of its
dominant position, which cannot be permitted to
take recourse to "cherry picking" of Rlnfra's high end
c consumers.
-_}'
ISSUES ARISING HEREIN

5~. Although before us a large number of co~tentions had
D been: raised, the core questions, which arise for our
considerc:ition, are :- ·

(A) Whether recourse to Section 23 of the Act can be
taken for issuance of any direction to the generating
company?
E
(B) · Whether the ·Commission whfle applying the
provisions of Section 86(1)(b) of the Act could also
take recourse to Sections 23 and 60 thereof?
+
. (C) · Whether equitable allocation of power generated
F
a·
by generating company is permissible?
·.,

LEGISLATIVE HISTORY
,,-

. 1910 ACT
G
. 60. Th~ earlie$t statute .relating to control of generation of
supply, distribution of electrical.energy which governed the field ·
was Indian Electricity Act, 1910 (1910 Act). Part-II of the said
Act provided for supply of energy. Section 3 thereof provided
.. H for grant of licence to any person to supply energy in any .
I
I
TATA POWER COMPANY LTD. v. RELIANCE 657
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]

specified area and also to lay down or place electric supply- A
lines for the: conveyance and transmission of energy.

61. However, after coming into force the 1948 Act, such
licences could be granted only upon consulting the State
Electricity Boards constituted and incorporated under Sections . 8
5 and 12 thereof. Section 22-B in the 191 O Act, which was
inserted by Act 32 of 1959, provided for power to control the
distribution and consumption of energy stating :-

"Section 228 - Power to control the distribution and
consumption of energy c
(1) If the State Government is of opinion that it is necessary
or expedient so to do, for maintaining the supply and
securing the equitable distribution of energy, it may by
order provide for regulating the supply, distribution, D
consumption or use thereof.
/

(2) Without prejudice to the generality of the powers
conferred by sub-section (1) an order made thereunder
may direct the licensee not to comply, except with the
permission of the State Government, with- E

(i) the provisions of any contract, agreement or
requisition whether made before or after the
commencement of the Indian Electricity
(Amendment) Act, 1959, for the supply (other than F
the resumption of a supply) or an increase in the
Supply of energy to any person, or

(ii) any requisition for the resumption of supply of
energy to a consumer after a period of six months, G
from the date of its aiscontinuance, or
(
(iii) any requisition for the resumption of supply of
energy made within six months of its
. discontinuance, where the requisitioning consumer
H
658 SUPREME COURT REPORTS (2009) 9 S.C.R.

A was not himself the consumer of the supply at the
time of its discontinuance."

1948 ACT

62. The 1948 Act was enacted to provide for the
B rationalization of the production and supply of electricity and
generally for taking measures conducive to electrical
development. Section 43 conferred power on the Board to
enter into arrangements for purchase or sale of electricity under
.,
certain conditions. Section 43-A provided for terms, conditions
C and tariff for the sale of electricity ge.uerated by it to any other
person with the consent of the competent government or
governments.

63. Section 44 of 1948 Act also placed restrictions on
0 establishment of new generating stations or major additions or
replacement of plant in generating stations except with the
previous consent in writing of the Board, to estab!ish or acquire
a new generating station or to extend or replace any major unit
of plant' or works pertaining to the generation of electricity in a
E generating station.

1998 ACT

64. The Parliament enacted Electricity Regulatory
Commissions Act, 1998 (for short, "the 1998 Act") to provide
F for the establishment of a Central Electricity Regulatory
Commission and State Electricity Regulatory Commissions,
rationalization of electricity tariff, transparent policies regarding
subsidies, promotion of efficient and environmentally benign
policies and for matters connected therewith and incidental
G thereto.

65. In terms of the 1998 Act, the Regulatory Commission
was conferred with the power to determine tariff for all sales
by a generating company in terms of Section 22(1}(c) thereof.
It further required in line with the provisions of the 1910 Act as
H also the 1948 Act, for the State Commission constituted
660 SUPREME COURT REPORTS .(2009] 9 S.C.R. .

A (c) to regulate power purchase and procurement ,.
process of the transmission utilities and distribution
utilities including the price at which the power shall
be procured from the generating companies,
generating stations or from other sources for
B transmission, sale, distribution and supply in the
State;"

2003 ACT

66. The 2003 Act was enacted to consolidate the laws
C relating to generation, transmission, distribution, trading and use
of electricity.

67. Before noticing the relevant provisions of the 2003 Act,
we may place on record the statement of objects and reasons
o for enactment thereof, the relevant portion whereof reads as
under:-

"3. With the policy of encouraging private sector
participation in generation, transmission and distribution
and the objective of distancing the regulatory
E responsibilities from the Government to the Regulatory
Commissions, the need for harmonizing and rationalizing
the provisions in the Indian Electricity Act, 1910, the
Electricity (Supply) Act, 1948 and· the Electricity Regulatory
Commissions Act, 1998 in a new self contained
F comprehensive legislation arose. Accordingly, it became
necessary to enact a new legislation for regulating the
electricity supply industry in the country which would
replace the existing laws, preserve its core features other
than those relating to the mandatory existence of the State
G Electricity Board and the responsibilities of the State
Government and fhe State Electricity Board with respect
to regulating licensees. There is also need to provide for
newer concepts like power trading and open access.
There is also need to obviate the requirement of each State
H Government to pass its own Reforms Act. The Bill has
-I

TATA POWER COMPANY LTD. v. RELIANCE 661
~ ENERGY LIMITED AND ORS. [S.B. SINHA, J.]
+·
progressive features and endeavours to strike the right A
balance given the current realities of the power sector in
India. It gives the·State enough flexibility to develop their
power sector in the manner they consider appropriate. The
Electricity Bill, 2001 has been finalized after extensive
... \
discussions and consultations with the States and all other B
stake holders and experts.

4. The main features of the Bill are as follows:-

(i) Generation is being delicensed and captive
generation is being freely permitted. Hydro projects would, c
however, need approval of the State Government and
clearance from the Central Electricity Authority which would
go into the issues of dam safety and optimal utilization of
water resources.
D
(ii) There would be a Transmission Utility at the
Central as well as State level, which would be a
Government company and have the respon~ibility of
ensuring that the transmission network is developed in a
planned and coordinated manner to meet the requirements
E
of the sector. The load dispatch function could be kept with
the Transmission Utility or separated. In the case of
separation the load dispatch function would have to remain
with a State Government organization/company."
... ~
68. Section 2 is the interpretation section. F
69. Section 2(4) defines "appropriate Commission" to
mean the Central Regulatory Commission referred to in sub7
section (1) of section 76 or the State Regulatory Commission
referred to in section 82 or the Joint Commission referred to in G
section 83, as the case may be.
,,.._

70. "Consumer" has been defined in section 2(15) to mean
any person who is supplied with electricity for his own use by a
· licensee or the Governmel)klr by any other person engaged in
H·
r'
662 SUPREME COURT REPORTS [2009) 9 S.C.R.

A the business of supplying electricity to the public under this Act
or any other law for the time being in force and includes any
person whose premises are for the time being connected for
the purpose of receiving electricity with the works of a licensee,
th~ Government or such other person, as the case may be;
B
Section 2(17) defines "distribution licensee" to mean:-

(17) "distribution licensee" means a licensee authorised
to operate and maintain a distribution system for supplying
electricity to the consumers in his area of supply;
c
(23) "electricity" means electrical energy-

(a) generated, transmitted, supplied or traded for
any purpose; or

D (b) used for any purpose except the transmission
of a message;

(28) ~·generating company" means any company or body
corporate or association or body of individuals, whether
incorporated or not, or artificial juridical person, which owns
E
or operates or maintains a generating station;

(38) "licence" means a licence granted under section 14;

(39) "licensee" means a person who has been granted a
F licence under section 14;

(50) "power system" means all aspects of generation,
transmission, distribution and supply of electricity and
includes one or more of the following, namely:--

G (a) generating stations;

(b) transmission or main transmission lines;

(c) sub-stations;

H
TATA POWER COMPANY LTD. v. RELIANCE 663
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]

(d) tie-lines; A

(e) load despatch activities;

(f) mains or distribution mains;

• .;
(g) electric supply-lines;

(h) overhead lines;

(i) service lines;
B

Q) works; c
(57) "regulations" means regulations made under this Act;
.,__
(71) "trading" means purchase of electricity for resale
thereof and the expression "trade" shall be construed
accordingly D
.. 71. Section 3 provides for the National Electricity Policy
and Plan enabling the Central Government to prepare the

-
National Electricity Policy and tariff policy, in consultation with
the State Government and the Authority for development of the E
power system based on optimal utilization of resources such
as coal, natural'Qas, nuclear substances or materials, hydro and

- 1
renewable sources of energy.

72. Part Ill of the Act provides for generation of electricity.
Section 7 enables a generating company to establish, operate F
and maintain. a generating station without obtaining a licence
if it complies with the technical standards relating to connectivity
with the grid referred to in clause (b) of Section .73.

73. Section 8, however, provides that a generating G
company intending to set up a hydro-generating station shall
prepare and submit to the Authority for its concurrence, a
scheme estimated to involve a capital expenditure exceeding
such sum, as may be fixed by the Central Government from
time to time by Notification. H
664 SUPREME COURT REPORTS (2009] 9 S.C.R.

A 74. Section 9 provides for captive generation. Section 10
lays down duties of generating companies, sub-sections (1) and
2 whereof reads as under:-

"10 - Duties of generating companies
B (1) Subject to the provisions of this Act, the duties ol-
generating company shall be to establish, operate and
maintain generating stations, tie-lines, sub-stations and
dedicated transmission lines connected therewith in
accordance with the provisions of this Act or the rules or
c regulations made thereunder.

(2) A generating company may supply electricity to any
licensee in accordance With this Act and the rules and
regulations made thereunder and may, subject to the
D regulations made under sub-section (2) of section 42,
supply electricity to any consumer."

75. The power to issue. directions to the generating
· companies by the Appropriate Government and appropriate
Commissions are laid down in sub-section (1) of Section 11
E of the 2003 Act stating :- ..
"Section 11 - Directions to generating companies

(1) The Appropriate Government may specify that a
generating company shall, in extraordinary circumstances
f. operate and maintain any generating station in accordance
with the directions of that Government.
-
Explanation:-For the purposes of this section, the
expression "extraordinary circumstances" means
circumstances arising out of threat to security of the
State, public order or a natural calamity or such
other circumstances arising in the public interest."

76. Part IV of the 2003 Act provides for licensing.
H·
.,
'
TATA POWER COMPANY LTD. v. RELIANCE 665
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]
t

- 77. Section 12 prohibits any person to transmit electricity,
or distribute electricity: or undertake trading in el&~ricity, unless
authorized to do so by a licence issued under Section 14 or
exempt under Section 13 of the 2003 Act. Section 14 provides
A

for grant of licence by the Appropriate Commission to any
person - (a) to transmit electricity as a transmission licensee ; 8
a
or (b) to distribute electricity as distribution licensee; or (c)
'( to undertake trading in electricity as an electricity trader in any
''
area as may be specified in the licence. ·.·

78. Section 15 of the 2003 Act provides for procedure for
grant of licence. Section 16 provides for conditions of licence.
c
Section 15 mandates the licensee not to do certain things. The
provisions for amendment of licence is contained in Section 18
thereof. Section 19 provides for revocation of licence. Section
20 provides for sale of utilities of licensees. Section 21 provides
for vesting of utility in purchaser. D

79. Section 23, which is relevant for our purpose, reads
as under:-·
i
"23 - Directions to licensees
'' E
If the Appropriate Commission is of the opinion that it is
necessary or expedient so to do for maintaining the
- ~ . efficient supply, securing the equitable distribution of
electricity and promoting competition, it may, by order,
provide for regulating supply, distribution, consumption or F
use thereof."

80. Section 24 provides for suspension of distribution
licence and sale of utility.
G
;,- 81. Part V deals with transmission of electricity.
I
82. Section 60 provides for market domination. It reads:-

"The Appropriate Commission may issue such directions
as it considers appropriate to a licensee or a generating H
666 SUPREME COURT REPORTS [2009] 9 S.C.R.
·+
A company if such licensee or generating company enters
into any agreement or abuses its dominant position or
enters into a combination which is likely to cause or causes
an adverse effect on competition in electricity industry."

8
83. Section 86 provides for functions of State
Commission, clauses (a), (b) and (f) of sub-section (1) whereof,
read as under:-

"Section 86 - Functions of State Commission

c (1) The State Commission shall discharge the following
functions, namely:-

(a) determine the tariff for generation, supply,
transmission and wheeling of electricity, wholesale,
bulk or retail, as the case may be, within the State:
D
PROVIDED that where open access has been
· permitted to a category of consumers under section
42, the State Commission shall determine only the
wheeling charges and surcharge thereon, if any, for
E the said category of consumers;

(b) regulate electricity purchase and procurement
process of distribution licensees including the price /
·at which electricity shall be procured from the
generating companies· or licensees or from other
F
sources through agreements for purchase of power
for distribution and supply within the State;

.G (f) adjudicate upon the disputes between the licensees and
generating companies and to refer any dispute for
arbitration;

84. Section 181 of 2003 Act empowers the State
Commissions to make regulations, consistent with the
H
TATA POWER COMPANY LTD. v. RELIANCE 667
~· ENERGY LIMITED AND ORS. [S.S. SINHA, J.]

provisions of the Act and the rules generally to carry out the A
provisions of the Act.

85. Pursuant to or in furtherance of the aforementioned
regulations making powers, the Commission has made
regulations known as MERC (Terms and Conditions of Tariff)
B
Regulations, 2005.

86. Regulation 7 deals with determination of generation
tariff.

87. Regulation 22 provides for Power procurement c
guidelines to the following terms :

"22.1 A Distribution Licensee shall follow the guidelines
contained in this Part with respect to:

(a) Procurement of power under any arrangement _or D
agreement with a term or duration exceeding one year (i.e.
long-term power procurement); and

(b) Procurement of power under an·y arrangement or
agreement with a term or duration less than or equal to one E·
year (i.e. short-term power procurement). n

- ~
88. Regulation 23 mandates the distribution of licenses to
prepare long term power procurement plan which should fulfill
the requirements specified thereunder.
F .
. 89. We may now notice that Regulation 24 provides for
approval of power purchase agreemenUarrangement.

PRELIMINARY OBSERVATIONS

90. Before adverting to the rival contentions of the parties G
we may observe :

The Tribunal committed a factual error in so far as it failed
to notice that no long term PPA exists between TPC (G) and
Rlnfra. It furthermore was not correct in opining that the H
,,
668 SUPREME COURT REPORTS (2009] 9 S.C.R.
-I

A Commission had not considered the claim of Rlnfra while
approving the arrangements between TPC (G) and TPC (0),
despite the fact that REL (Rlnfra) not only filed objections to the
application for grant of approval of PPA filed· by the parties
herein, it also filed independent application; took part in the
B deliberations and all its contentions had been considered. On
what basis the Tribunal opined that the decision of the
Commission is in violation of the principle of natural justice is )
beyond anybody's comprehension. It furthermore took into
consideration an irrelevant fact, namely that the Commission
c in determining the issue between the parties should have
regard to the fact ·that the consumers of respective areas have
been bearing the 'depreciation' and interest on loan elements
of the Fixed Cost of tariff. it furthermore without assigning any
reason dismissed the appeals being Nos. 159 of 200.7 and 14
of 2008.
,o f.-
INTERPRETATION OF THE STATUTORY PROVISIONS t.-

91 .. A statute, as is well known, must be construed having
·regard to Parliamentary intent. For the said purpose it is open /'

E to a. court not only to take; into consideration the history of the r-
legislation including the mischief sought to be remedied but
also the objects and purpose it seeks to achieve ..·
,._I
92.The 1910 Act provided for licensing of all the operators j .....,
who were engaged not only in transmission and. distribution of
F electricity but also generation thereof. Indisputably 'electricity'
{
comes within the purview of the public utility service. It, in the
modern context, is a necessary item for the .purpose of better I
living of the citizens. After India became independent and with
the advent of .industrialization as also for other reasons, the ~
G benefit of availing consumption of electrical energy not only I
remained with the urban areas but also extended to rural areas.
With growth in industrialization as also trade and commerce in
the country, its requirements increased many fold. With a view·
to provide for effective contr<:>I and regulation of generation,
H distribution and supply of electrical energy each State was
TATA POWER COMPANY LTD. v. RELIANCE 669
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]

separately required to set up Electricity Boards wherefor the A
Parliament enacted 1948 Act. For all intent and purport the
Boards constituted under the 1948 Act were to exercise
monopoly power. The 1910 Act also made provisions for
purchase of electricity undertakings by the State.
B
93. Section 3 of 1910 Act, as amended in 1959, and
Sections 43-A and 44 of 1948 Act clearly go to show that the
private generating companies were brought under an extensive
control as not only for extension of its existing plants but also
for setting up or acquiring new plants, the previous consent of
the concerned State and the Board became necessary. c
94. The private generating companies, in terms of the
provisions of the statutes governing the field were, thus,
subjected to an extensive control by the States. As the years
rolled by, the activities of the Boards grew by leaps and bounds. D
.4 The Boards, for all intent and purpose, acquired monopoly
status. In terms of Sections 46 and 49 of the 1948 Act, they
were entitled to fix grid tariff and to make provisions for earning
reasonable profits.

95. It was, however, noticed that in the absence of any E
competition from the private operators, the Boards were not in
a position to provide for the desired optional results. It was in
the aforementioned premise and particularly having regard to
the liberalized economic policy of the Central Government since
1991 necessities were felt for providing greater room for the F
private generating companies. For the aforementioned
purposes, the Central Government as also the State
Governments adopted liberalized polices. They invited private
operators to generate electrical energy not -only through
conventional modes, namely, Hydro Electric Power and G
Thermal Power but also generation of power by using other
raw-materials, for example gas, naptha etc.

96. The 1998 Act, 'as notice hereinbefore, did not
envisage delicensing of generating companies. It provided for H
I
670 SUPREME COURT REPORTS (2009] 9 S.C.R.

-I

·-A approval by the Board therefor. It provided for imposition of
other conditions. for generation of electricity.

97. The Parliament by making 2003 Act clearly
acknowledged the necessity of providing a greater room for
generation of electrical energy so as to enable the country to
B meet its requirements. It is only in that view of the matter, the
liberalization policy of the State provided for de-licensing of the
generating companies.

98. In terms of the said provision, the activities of the '
c erstwhile licensees of power generation on the one hand and
those of transmission and distribution in electricity on the other ~I
were separated. The concept of trading _was brought thereunder }
~r the first time. Trading activities are permitted subject to grant
!.icenses. Distribution of electricity was defined as licensed
activity in terms whereof a holder of a license can supply power
D
to a person for his own use. A licensee for the activity of
transmission could own the wires/transmission lines constituting ~
the part of their grid but it could not engage itself in the activity
of buying or selling the electrical energy:

E 99. The core question which, therefore, arises for ·~
consideration is as to whether despite the Parliamentary intent
of giving a go-bye to its licensing policy to generating
companies, whether through imposing stringent regulatory
measures the same purpose should be allowed to be
F achieved?

100. The Act is a consolidating statute. It brings within its
purview generation, transmission, distribution, trade and use of
electricity. Whereas generation of electricity has been brought
outside the purview of the licensing regime, the transmission, \.
G distribution and trading are subject to grant of licence are kept
within the regulatory regime.

101. The statute provides for measures to be taken which
would be conducive to development of electricity industry.
Measures are also required to be taken for promoting
H
TATA POWER COMPANY LTD. v. RELIANCE 671
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]
t
competition which would also mean the development of A
electricity industry. It, ind.isputably, provides for measures
relating to the protection of interest of consumers and supply
of electricity to all areas. The generating companies, however,
despite de-licensing, do not enjoy the monopoly status. They
are subject to rationalization of electricity tariff. The preamble B
envisages ensuring transparent policies, 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. c
102. Electricity is not an essential commodity within the
meaning of the provisions of the Essential Commodities -Act,
1955 or any other statute. It is, however, in short supply. As the
number of consumers as also the nature of consumption have
increased many fold, the necessity of more and more D
generation of electrical energy must be given due importance .
... "
103. The preamble of the 2003 Act, although speaks of
development of electricity industry and promotion of
competition, it does not speak of equitable distribution of E
( electrical energy. The statutes governing essential and other
commodities in respect whereof the State intends to exercise
complete control, provide for equitable distribution thereof
4 amongst the consumers.
F
104. For the purpose of deciphering the object and purport
of the Act, it is well known, the Court can look to the statement
of objects and reasons thereof. One of the principal purposes
which had been taken note of for enactment of 2003 Act by the
Parliament is the poor performance of the State Electricity
Boards. The Government intended to have an independent G
body for determining the tariff which was required to be carried
on in a professional and independent manner. It was felt that
cross-subsidies have reached to unsustainable levels. The
enactment provides for establishment of the Electricity
H
+--.
672 SUPREME COURT REPORTS (2009) 9 S.C.R.

A Regulatory Commissions.

105. Encouraging private sector participation, generation,
transmission and the distribution of electricity became the
statutory policy. The Parliament felt the need of harmonizing
and rationalizing the provisions ot the Act. De-licensing of
8
generation as also grant of free permissi.on of captive
generation is one of the main features of the 2003 Act. It is
clearly provided that only hydro-generating projects would need
the approval of the State Commission and the Central
Electricity Regulatory Authority. It recognized the need of
C prohibiting transmission licensees. It also for the first time
provided for open access in transmission from the outset. It
even provides where the distribution licensee proposes to
undertake distribution of electricity for a specified area within
the area of supply through another person, that person shall not
D be required to obtain separate licence.

106. In terms of Section 7 of the 2003 Act, all persons 13re
permitted to establish, operate and maintain a generating
station. It can, in terms of Section 62(1 )(a) of the 2003 Act,
E supply electricity to any licensee i.e. distribution licensee or
trading licensee. The 2003 Act permits the generating company
to supply the electricity directly to a trader or a consumer. In
terms of Section 42(2) of the 2003 Act even for the said
purpose no tariff is required to be determined. ~-

F 107. The primary object, therefore, was to free the
generating companies from the shackles of licensing regime.
The 2003 Act encourages free generation and more and more
competition amongst the generating companies and the other
licensees so as to achieve customer satisfaction and equitable
G distribution of electricity.

108. The generation company, thus, exercises freedom in
respect of choice of site and investment of the generation unit;
choice of counter-party buyer; freedom from tariff regulation
H
TATA POWER COMPANY LTD. v. RELIANCE 673
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]

when the generating company supplies to a trader or directly A
to the consumer.

109. If de-licensing of the generation is the prime object
. of the Act, the courts while interpreting the provisions of the
'
I ' statute must guard itself from doing so in such a manner which
~ B
. would defeat the purpose thereof. It must bear in mind that
licensing provisions are not brought back through the side door
., · of Regulations.

DIRECTION TO GENERATING COMPANIES
c
110. This brings us to the interpretation of Section 11 of
the 2003 Act. In terms of 1910 Act the State Government was
the licensing authority. It alone, therefore, in the said capacity
was entitled to issue directions. Sub-section (1) of Section 11
of ,2003 Act empowers the Appropriate Government to issue D
directions but such direction can be issued only in extraordinary
-+ circumstances as stated in the explanation appended thereto
i.e. arising out of threat to security of the State, public order or
a natural calamity or such other circumstances arising in the
public interest.
E
111. Interpretation clause contained in Section 2 of the Act
prefixes the words "unless the context otherwise requires". The
.. word "supply" has separately been used even for generation
and distribution. Thus, although a broad meaning may be
assigned to the said term but the same must be held to be F
'subject to the context'. The word "supply" used in Section 23
of 2003 Act for bringing in efficient supply would mean regulate
and consequentially licensing in respect of the generating
company.
G
112. For the aforementioned purpose it cannot be given
a general or popular meaning denoting supplier and receiver.
Once it is held that by reason thereof the Parliament aimed at
ensuring the supply, the purported object it sought to achieve
' by enacting Section 7 would lose its purpose. It, however, does
H
674 SUPREME COURT REPORTS [2009] 9 S.C.R.

A not mean that Section 23 itself becomes unworkable as it would
not be possible to secure equitable distribution and supply. The
agreement of distribution (PPA) being subject to approval,
indisputably the Commission would have the public interest in
mind. It has power to approve a MOU which subserves the
B public interest. It, while granting such approval may also take
into consideration the question as to whether the terms to be
agreed are fair and just.

SECTION 23 - DIRECTION BY THE COMMISSION

C 113. Could a generating company, despite Section 11 be
subjected to any direction by the Commission in terms of
Section 23 of the 2003 Act?
114. Whether chapter headings and marginal notes should ,
be taken into consideration for the purpose of interpretation of '
0
the main provision are the questions?
115. Chapter headings and the marginal note are parts of
the statute. They have also been enacted by the Parliament. .
There cannot, thus, be any doubt that it can be used in aid of
E the construction. It is, however, well settled that if the wordings
of the statutory provision are clear and unambiguous,
construction of the statute with the aid of 'chapter heading' and
'marginal note' may not arise. It may be that heading and
marginal note, however, are of a very limited use in
F interpretation because of its necessarily brief and inaccurate
nature. They are, however, not irrelevant. They certainly cannot
be taken into consideration if they differ from the material they
describe.
116. We may notice some authorities on the subject at the
G outset.
)
117. In Bennion on Statutory Interpretation, Fifth edition,
Section 255, it is stated : "where general words are preceded
by a heading indicating a narrower scope it is legitimate to treat
H the general words as cut down by the heading.",
TATA PO\NER COMPANY LTD. v. RELIANCE 675
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]

118. Section 256 of the said treatise deals with "sidenote, A

•-;
.....
heading or title", wherein it is stated :-

"Use in interpretation - Like anything else in what
Parliament puts out as its Acts, a sidenote or heading is
part of the Act, despite dicta to the contrary. It may B
therefore be used by the interpreter. 'No judge can be
expected to treat something which is before his eyes as
though it were not there. However, the sidenote or section
heading is of very limited use in interpretation because of
its necessarily brief and therefore possibly inaccurate
nature."
c
It was commented:-

"If the sidenote contradicts the text this puts the interpreter
on inquiry; but the answer may be that the drafter chose D
-;
an _inadequate signpost, or neglected to alter i~ to match
an amendment made to the clause d1:.1ring the passage of
the Bill. Such facts are outside the knowledge of the
interpreter, who must therefore adopt a rule not depending
on them.
E

Modern judges believe it proper to consider sidenotes or
headings to sections, and gather what guidance they can
from them. Thus Vinelott J said that the sidenote to the F
Income and Corporation Taxes Act, 1970 s 488 (repealed)
was a permissible and useful guide that threw a light on
the mischief at which the section was aimed. Upjohn LJ
gave a precisely accurate indication of the role of the
sidenote when he said : G
'While the marginal note to a section cannot control
the language used in the section ,· it is at Jeast
..
< permissible to approach a consideration of its
general purpose and the mischief at which it is
H
676 SUPREME COURT REPORTS [2009) 9 S.C.R.

A aimed with the note in mind.'

_The italicised words accurately show the relationship of this
component to the informed interpretation rule. Earlier
inconsistent dicta, a selection of which are now
considered, must be- treated as erroneous."
B
119. In Interpretation of Statutes, Fourth Edition, by Vepa
P. Sarathi at page 347 it is stated :-
I
'The heading of-a ·chapter may be referred to in order to
c determine the sense of any doubtful expression in a
section ranged under it. But it cannot control unambiguous
expressions .

.It is true that a heading cannot control the
interpretation of a clause if its meaning is otherwise plain
D and unambiguous, but it can certainly be referred to as
indicating the general drift of the clause and affording a
key_ to a better understanding of its meaning."

120. Similarly in Principles of Statutory Interpretation by
E Justice G.P. Singh, upon noticing the conflicting opinion, the
learned Author states:-

"The view is now settled that the Headings or Titles
prefixed to section or group of sections can be referred
to in construing an Act of the Legislature."
F
121. Chapter heading, therefore, is a permitted tool of
int~rpretation. It is considered to tfe a preamble of that section
to which ·it pertains. It may be taken recourse to where an
ambiguity exists. However, where there does not exist any
G ambiguity, it cannot be resorted to. Chapter heading and
marginal note, however, can be resorted to for the purpose of
resolving the doubts.

122. It furthermore appears that there is a drift from the old .
'
value in recent times.
H
.... TATA POWER COMPANY LTD. v. RELIANCE
ENERGY LIMITED AND ORS. [S.S. SINHA, J.]
677

123. We may notice that the English decisions whereupon A
reliance had been placed by this Court in various judgments
and in particular Chandler v. DPP, [ (1962) All ER 142 }, str
considered to be a no longer a good law in the country of origin,
as stated in Bennion on Statutory Interpretation Fifth Edition at
page 748 :- B
"Superseded dicta Phillimore L.J referred to a 'general rule
of law' to the effect that marginal notes must be
disregarded 'upon the principle that those notes are
inserted not by Parliament nor under the authority of
{
Parliament, but by irresponsible persons'. In fact, with
c
occasional triffling exceptions, the marginal notes in an Act
are not inserted by parliamentary clerks . , or even drafters
- but are contained either in the Bill as introduced or in
new clauses added by amendment. Furthermore, the
clerks are not 'irresponsible persons', but are subjec! to D
the authority of ParliafT'l-:nt. Avary J. said that 'marginal
notes form no part of a statute' . He added : 'They are not
voted on or passed by Parliament, but are inserted after
the Bill has become law'. This is not the case however. The
entire Act is passed by Parliament and is entered, or E
.( deemed to be entered, in the Parliamenf Roll with all non-
amendable components included. These components
mostly remain unchanged throughout the passage of the
'"'- -.I Bill. They are certainly hot inserted after the Bill has
become law. Willes J. after asserting that the marginal F
notes and other 'appendages' are not part of an Act, said
of any Act, passed after the practice of actually ~ngrossing
Acts on the Parliament Roll ceased in 1849: 'The Act,
when passed, must be looked at just as if it were still
entered upon a roll, which it may be again if Parliament G
should be pleased so to order; in which case it would be

""' without these appendages ... "'

124. It is, however, evident from the decision of this Court
in Indian Aluminium Company v. Kera/a State Electricity
H
~
678 SUPREME COURT REPORTS [2009] 9 S.C.R.
·/

A Board, [ AIR 1975 SC 1967 ], that the modern trend is to take
into consideration the marginal note. It could be used, as has
been held, in R.S. Joshi, Sales Tax Officer, Gujarat and Ors.
v. Ajit Mills Limited and Anr., [ (1977) 4 SCC 98 ]. Relevance
of marginal note was also taken note of in Ramesh Chand and
B Ors. v. State of U.P. and Ors., [ (1979) 4 SCC 776 ].

125. In Bombay Dyeing and Mfg. Co. Ltd. v. Bombay
r
Environmental Action Group and Ors., (2006) 3 SCC 434 ],
)

marginal note has been taken into consideration as an intrinsic
part of the Section. In Deewan Singh and Ors. v. Rajendra Pd.
c Ardevi and Ors., [ 2007 (1) SCALE 32 ] it has been held that
the marginal note may oetaken into consideration for the
purpose of proper construction of the provision although there
is no ambiguity. Sarabjit Rick Singh v. Union of India (UOI), [
(2008) 2 SCC 417 ] follows Oeewan Singh (supra).
D
SUPPLY - CONTEXTUAL MEANING t-

, 126. It was submitted by the respondents that in any event
the word 'supply' as used in Section 23 should be given the
same meaning as is given to it in Section 2(70) of the Act i.e.
E
the sale of electricity to a licensee or consumer. Accordingly
by its very nature, supply would have a supplier and a receiver
and any direction which is aimed at ensuring or regulating
,.. .;p
supply by its very nature would have to be directed to both the
supplier and the receiver.
F
127. However, when the question arises as to the meaning
of a certain t>rovision in a statute, it is not only legitimate but
proper to read that provision in its context.

G 128. The legal principle is that all statutory definitions have
to be read subject to the qualification variously expressed in
the definition clause which created them and it may be that even
,..
where the definition is exhaustive inasmuch as the word defined
is said to mean a certain thing, it is possible for the word to
<'.!.
have some what different meaning in different sections of the
H
TATA POWER COMPANY LTD. v. RE:LIANCE 679
ENERGY LIMITED AND ORS. [S.8. SINHA, J.]

Act depending upon the subject or context. That is why all A
definitions in statutes generally begin with the qualifying words
'unless there is anything repugnant to the subject or context'.
(See Whirlpool Crporation v. Registrar of Trade Marks,
Mumbai and others, { (1998) 8 SCC 1 ; Garhwal Manda/
Vikas Nigam Ltd. v. Krishna Travel Agency, { (2008) 6 SCC 8
732 } and National Insurance Co. Ltd. v. Deepa Devi, [ (2008)
1 sec 414} J.

129. Accordingly the word 'supply' contained in Section 23
refer to 'supply to consumers only' in the context of Section 23
and not to supply to licensees. On the other hand, in Section
c
86(1)(a) 'supply' refers to both consumers and licensees. In
Section 10(2) the word 'supply' is used in two parts of the said
Section to mean two different things. In the first part it means
'supply to a licensee only' and in the second part 'supply to a
consumer only'. Further in first proviso to Section 14, the word D
-\ 'supply' has been used spe<..fically to mean 'distribution of
electricity'. In Section 62(2) the word 'supply' has been used
to refer to 'supply of electricity by a trader'.

130. To assign the same meaning to the word "supply" in E
Section 23 of the Act, as is assigned in the interpretation
section, it is, in our opinion, necessary to take recourse to the
doctrine of harmonious construction and read the statute as a
whole. Interpretation of Section indisputably must be premised
on the scheme of the statute. For the purpose of construction F
of a statute and in particular for ascertaining the purpose
thereof, the entire Act has to be read as a whole and then
chapter by chapter, section by section and word by word.

{See Reserve Bank of India, v. Peerless General
) Finance and Investment Co. Ltd., [ (1987) 1 SCC 424 ] ; G
Peerless General Finance and Investment Co. Ltd. v. Reserve
Bank of India, [ ( 1992) 2 SCC 343 ] and National Insurance
Co. Ltd. v. Swaran Singh, [ (2004) 3 SCC 297 ]. }

131. Thus, in a case where interpretation of a Section vis- H
680 SUPREME COURT REPORTS [2009] 9 S.C.R. ...
:
1
A a-vis the scheme of the Act, the purport and object of the
legislation, particularly having regard o the mischief it seeks to
remedy; the chapter heading as also the marginal note, in our
opinion, are relevant.

PURPOSIVE CONSTRUCTION
B.
132. Legislation has an aim, it seeks to obviate some
mischief, to &upply an inadequacy, to effect a change of policy, )
to formulate a plan of government. That aim, that policy is not
drawn like nitrogen, out of air; it is evidenced in the language
c of the statute, as read in the light of other external manifestations
of purpose. [See Justice FrankfurUr, Some Reflextions on the
reading of Statutes, 47 Columbia LR 527, at page 538 (1947) ~
; Union of India v. Ranbaxy Laboratories Ltd. and others ; {
(2008) 7 SACC 502 }and 0. Purushotam Reddy and anotfler
D vs. K. Sateesh, {(2008) 11 SCALE 73}].

ANALYSIS ~

133. In this case the relevance of chapter heading is more
for the purpose of arriving at a conclusion as to whether the
E arrangement and scheme of the statute is such it can be said
be relatable to different types of licensees on the one hand and
a generating company which does not require a licence on the
other. If by reason of a provision of a statute the generating
companies are excluded from the licensing provisions, one of
F the principal tool of interpretation is that the mischief which was
sought to be remedied may not be brought back by a side door.
It has to be borne in mind that if the licence raj is brought back
through the side door or regulations seeking to achieve the
same purpose which the Parliament intended to avoid, there
G would be a possibility of mis-interpretation and mis-application
of statute.

134. For ~he said purpose even the history of the Act may
be noticed. It is from this point of view that the ambiguity, if any,
H must be found out.
- TATA POWER COMPANY LTD. v. RELIANCE
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]
6$1

135. If the marginal note in this case is given effect to it A
would come within the scheme. If it is not given effect to and
plain meaning is resorted to it will produce anomaly with the
purpose and object of the Act. Chapter IV in which Section 23
occurs deals with a particular category of licensees. Almost all
the sections preceding Section 23 as also Section 24 refer to B
the licensees and the licensees alone. None of the sections in
the said chapter refers to generating companies.

136. Furthermore in the scheme of the Act wherever
regulation of generating companies is necessary the same has
been provided for. Section 11 and Section 60 provide for
c
--!
adequate indication in this behalf. They deal with extra ordinary
____,...., situations.
137. Transmission of electrical energy does not come
within the purview of section 23. Trading therein also does not D
_. per say come within the purview thereof.
138. It has to be construed harmoniously with other
powers. Had the power of the Commission to issue direction
in regard to supply of electrical energy was so pervasive,
i- Section 23 could have been appropriately worded .. It could E
have been placed in an appropriate chapter and not in the
chapter dealing with licensing. There was also no necessity to
-1 bring out transmission of electricity from the purview thereof as
~ 4
the same would also come within the purview of supply of
electricity. If transmission of electricity can be kept outside the F
purview of direction by the Commission, there is no reason why
generation thereof would not be.
139. We, therefore, of the opinion that Section 23 of the
2003 Act does not contemplate issuance of any direction by
) the Commission. G

SECTION 86 - FUNCTION OF THE COMMISSION

140. Section 86 provides for the functions of the Sate
Commission, clause (a) of sub-section (1) whereof empowers
H
682 SUPREME COURT REPORlS [2009] 9 S.C.R.

1
A it to determine the tariff for generation, supply, transmission and
wheeling of electricity. Clause (b) empowers it to regulate
electricity purchase and procurement process of distribution
licensees. Inevitably it speaks of PPA. PPA may provide for
short term plan, a mid term plan or a long term plan. Depending
B upon the tenure of the plan, the requirement of the distribution
licensee vis-a-vis its consumers ; the nature of supply and all
other relevant considerations, approval thereof can be granted
or refused. )

141. While exercising the said function necessarily the
c provisions of Section 23 may not be brought within its purview. (
I
While even exerci~ing the said power the State Commission 1-
must be aware of the limitations thereto as also the purport and .__,
object of the 2003 Act. It has to take into consideration that PPA
will have to be dealt with only in the manner provided therefor.
D The scheme of the Act, namely the generation of electricity is
outside the licensing purview and subject to fulfillment of the
conditions laid down under Section 42 of the Act a generating ~

.company may also supply directly to consumer wherefor no
licence would be required, must be given due consideration.
E The said provision has to be read with Regulation 24. In regard
to the grant of approval of PPA the procedures laid down in
"- l

Regulation 24 are required to be followed. While exercising its
power of 'Regulation' in relation to purchase of electricity and
procurement process of distribution, it is not permissible for the ~ 4
F Commission to direct allocation of electricity to different
licensees keeping in view their own need. Section 86(1 )(b) read
with Section 23 if interpreted differently would empower the
Commission to issue direction to the generating company to
supply electricity to a licensee who had not entered into any
PPA with it. We do not think that such a contingency was
G
contemplated by the Parliament. A generating company, if the
liberalization and privatization policy is to be given effect to,
must be held to be free to enter into an agreement and in
particular long term agreement with the distribution agency,
terms and conditions of such an agreement, however, are not
H
TATA POWER COMPANY LTD. v. RELIANCE 683
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]

unregulated. Such an agreement is subject to grant of approval A
by the Commission. The Commission has a duty to check if
the allocation of power is reasonable. If the terms and conditions
relating to quantity, price, mode of supply the need of the
distributing agency vis-a-vis the consumer, keeping in view its
long term need are not found to be reasonable, approval may B
not be granted. A generating company has to make a huge
investment and assurances given to it that subject to the
provisions of the Act he would be free to generate electricity
and supply the same to those who intend to enter into an
agreement with it. Only in terms of the said statutory policy, he c
makes huge investment. If all his activities are subject to
regulatory regime, he may not be interested in making
investment. The business in regard to allocation of electricity
at the hands of the generating company was the subject matter
of the licensing regime. While interpreting the statute it must D
be borne in mind that such a· mechanism should not come back.
142. That, however, would not mean that the generating
company is absolutely free from all regulations. Such regulations
are permissible under the 2003 Act ; , one of them being fair
dealing with the distributor. Thus, other types of regulations E
should not be brought in which were not contemplated under
the statutory scheme. If he is exercising his dominant position,
Section 60 would come into play. It is only in a situation where
a generator may abuse or misuse his position the Commission
would be entitled to issue a direction. The regulatory regime F
of the Commission, thus, can be enforced against a generating
company if the condition precedent therefor becomes
applicable.
INTERPRETATION OF SECTION 86
143. Section 86(1)(b) provides for regulation of electricity G
purchase and procurement process of distribution licensees.
In respect of generation its function is to determine, the tariff
for generation as also in .relation to supply; transmission and
wheeling of electricity. Clause (b) of sub-section (1) of Section
.. H
684 SUPREME COURT REPORTS [2009] 9 S.C.R.

A 86 provides to ·regulate electricity purchase and procurement
process of distribution licensees including the price at which r-

the electricity shall be procured from the generating companies .
)--

~

or licenses or from other sources through agreements. As a part '

of the regulation it can also adjudicate upon disputes between
B the licensees and generating companies in regard to the
implementation, application or interpretation of the provisions
of the said agreement.
)
144. There are some provisions which provide for
regulation etc. qf generation and/or generating companies,
c namely-
(i) Section 10(3)
(ii) Section 11 (2) "''
'
(iii) Section 23
D (iv) Section 33(2)
(v) Section 55(2) and (3) . ,,
(vi) Section 60
(vii) Section 62(1), (2) and (95)
E (viii) Section 81(1)(a), (b), (e), (f) and sub-section (2) '
(ix) Section 128(1 ), (6), (7) and (8)
(x) Section 129
}
,.. t
(xi) Section 181 'I
F 145. The Parliament thought it necessary to provide for
specific provisions for the purpose of regulating the functions
. of the generating companies, those provisions are special
provisions vis-a-vis the other general provisions which take
\-
within its abridge the function of the distributor, transmitter and r
G trader.
146. In U.P. Power Corporation Ltd. v. NTPC and others,
[2009 (3) SCALE 620] this Court opined :
"
"There cannot be any doubt whatsoever that the word
H
TATA POWER COMPANY LTD. v. RELIANCE 685
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]

'regulation' in some quarters is considered to the unruly A
horse."

[See also Bank of New South Wales v. Commonwealth
{(1948) 76 CLR 1} and Prasar Bharti and others v. Amarjeet
Singh and others, { 2007 (2) SCALE 486 } ].
B
147. We may notice a comparative chart of the provisions
of Section 22(1)(c) of 1998 Act and Section 86(1)(b) of the
f
2003 Act.

Section 22(1)(c) of the 1998 Section 86( 1)(b) of the 2003 c
Act Act
to regulate power purchase regulate electricity purchase
and procurement process of and procurement process of
the· transmission utilities and distribution licensees including
distribution utilities including the price at which electricity D
the price at which the power shall be procured from the
shall be procured from the generating companies or
generating companies, licensees or from other
generating stations or from sources through agreements
other sources for trans- for purchase of power for E
mission, sale, distri-bution distribution and supply within
and supply in the State; the State;

148. A critical comparison of the said provisions would
show that the agreements for purchase of power referred to F
therein is directly linked with the procurement process of
distribution license either from the generating companies or
licensees or from other sources. Regulation of transmission has
been taken out of the regulatory provision. The words 'through
agreements for purchase of power' inserted in Section 86(1)(b)
of the 2003 Act bring about a significance distinction. It is G
neither irrelevant nor immaterial as contended by Dr. Singhvi.

149. A PPA may be a long term one or a short term one.
Regulations have been made by the Commission by making
MERC (Terms and Conditions of Tariff) Regulations, 2005. H
686 SUPREME COURT REPORTS [2009] 9 S.C.R. J

A 150. Short term power procurement refers to an agreement
for procurement of power for a period of less than one year.
Regulation 23.1 requires the distribution licensee to prepare a
five year plan inter alia upon taking into consideration the
sources for procurement thereof. Regulation 24.1 mandates
B obtaining of prior approval of the Commission therefor.
Approval by Commission is granted upon examining the
process of procurement having regard to the factors specified
in Regulation 24.2. It is in the aforementioned context grant of )

approval of the PPA by and between TPC (G) on the one hand
c and BEST and TPC (D), on the other hand, necessitated. The
proposal of TPC (G) that Rlnfra should enter with it a long term
agreement assumes significance.

RE: HARDSHIP OF Rlinfra

D 151. For the purpose of interpretation and/or application
of a statute, this Court cannot base its decision on any
hypothesis. Construction of a statute, save and except some
exceptional cases, cannot be premised on the hardship of a
party which may be suffered by one of the licensees. Enabling
E provisions are made for entering into a free contract. I
c,.

152. A company incorporated under the Companies Act
being not a citizen of India does not have any fundamental right
to carry on business in terms of Article 19(1 )(g) of the
t
Constitution of India; its shareholders and directors have. Even
F otherwise in a free market economy right to enter into contract
by and between two private parties are not to be discouraged ,.
in absence of any statute or statutory regulation. The intendment
of Parliament in making statute is clear and unambiguous.
Requirements of a licensee and/or sheer number of its
G consumers, in our opinion, would be wholly irrelevant for the ~

purpose of the construction of a statute.

RELEVANCE OF SECTION 60
I
153. It is, in the facts and circumstances of this case, not ''"
H
TATA POWER COMPANY LTD. v. RELIANCE 687.
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]

necessary for us to consider an extraordinary situation where A
the Commission may exercise its jurisdiction both under
. Section 86(1)(b) and Section 60 simultaneously. We are also
not concerned with any extra ordinary situation. Assuming that
such a contingency may take place and having regard to
Sections 23 & 60 of the Act while issuing direction to the B
licensee company the right of a generating company may also
be affected., but we are not concerned with such a situation.
( The Commission which is an expert body has not found that
any such case has been made out for exercise of its jurisdiction
in that behalf. c
154. The 2003 Act even permits the generating company
to supply electricity to a consumer directly. For the said purpose
what is necessary is to comply with the provisions of the Act ,
Rules and the Regulations.
D
155. Section 14 of the Act categorically provides for grant
of licnece to any person who is transmitting electricity or
distributing supply or undertaking trading therein, indisputably,
however, the generator of an electrical energy, although is not
subject to the grant of licence but while supplying electrical E
energy to a distributing agency, in turn would be subject to
approval and directions of the Commission.

CONCLUSION·

(1) Activities of a generating company are beyond the F
purview of the licensing provisions.

(2) The Parliament therefor did not think it necessary
to provide for any regulation or issuance of
directions except that which have expressly been G
stated in the Act.

(3) Section 21 occurs in the chapter of "licensing"
under which the generating companies would not
be governed.
H
688 SUPREME COURT REPORTS [2009] 9 S.C.R.

A (4) As almost all the sections preceding Section 23 as i
also Section 24 talk about licensee and licensee
alone, the word "supply" if given its statutorily
defined meaning as contained in Section 2(70) of
the Act would lead to an anomalous situation as by
B reason thereof supply of electrical energy by the
generating company to the consumers directly in
terms of Section 12(2) of the Act as also by the
' ., transmission companies to the consumers would _)
also come within its purview.
c (5) In a case of this nature the principle of exclusion of
the definition of Section by resorting to "unless the
context otherwise requires" should be resorted to.

(6) Section 86(1 )(a) of the 2003 Act clearly shows the
D para meters of supply for the purpose of
Regulation, viz. supply of electricity by the
distribution company to the consumer.

(7) If regulatory clause is sought to be applied in
relation to allocation of power, the same would·
E
defeat the de-licensing provisions. Generating
companies have the freedom to enter into contract
and in particular long term contracts with a
distribution company subject to the regulatory
provisions contained in the 2003 Act. .
F
(8) PPA for a long term is essential for increasing and
decreasing the capacity of generation of electricity
by the generating company, which purpose by the
2003 Act must be allowed to be achieved.
G
(9) Duration of the contract in regard to supply of
electricity by and between TPC (G) and Rlnfra prior
to coming into force of the contract is of no
consequence, particularly when no written long term
or short term contract had been entered into by and
H
__,.
TATA POWER COMPANY LTD. v. RELIANCE 689
ENERGY LIMITED AND ORS. [S.B. SINHA, J.]

between them. A

(10) Fairness or otherwise of the supply of electricity to
different distribution companies being outside the
jurisdiction of the Commission, the same by itself
cannot be a ground for bringing back the licence B
raj, which is not contemplated by the Act.
(
(11) For true and correct construction of the Act, the
principle of harmonious construction is required to
be resorted to.
c
(12) Recourse to the principle of purposive construction
does not militate against the conclusion reached by
us and as indicated hereinbefore in fact in terms
of the said doctrine the purpose and object of the
Parliament must prevail over a narrow and/or literal D
interpretation, which would defeat the purpose and
object of the Act.

(13) Section 86(1)(b) of the 2003 Act clearly shows that
the generating company indirectly comes within the
purview of regulatory jurisdiction as and when E
directions are issued to the distributing companies
by the appropriate Commission but the same would
1 not mean that while exercising the said jurisdiction,
the Commission will bring within its umbrage the
generating company also for the purpose of F
issuance separate direction.

. 156. For the aforementioned reasons, the impugned
Judgment of the Tribunal cannot be sustained. It is set aside
) accordingly. The appeals are allowed with costs. Counsel's fee G
Rs. 1,00,000/- (Rupees one lakh) in each appeal. ·
R.P. Appeals allowed.