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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.4223 OF 2012

Brihanmumbai Electric Supply &

Transport Undertaking ….Appellant

Vs.

Mahrashtra Electricity Regulatory

Commission (MERC) & Ors. ….Respondents

J U D G M E N T

A.K.SIKRI,J.

1.Respondent No.3 is a consumer (hereinafter referred to as

the “consumer”) of electricity (LT-II Category) whose premises

are situated within area of supply of the appellant namely

Brihanmumbai Electricity Supply and Transport Undertaking

(BEST). In April 2009, he approached respondent No.2 i.e. Tata

Power Company Limited (TPC) with a request that he be supplied

the electricity by TPC. In nutshell, he wants to switch over from

BEST to TPC for his electricity requirement. In response to his

request, TPC advised the consumer vide letter dated 8.7.2009 to

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approach the BEST for its permission to use its distribution

network of the BEST to enable TPC to supply electricity to the

consumer using that network. The consumer, accordingly, turned

to BEST requesting it to give the said permission. It was,

however, denied by BEST vide letter dated 31.7.2009 and again

on 10.8.2009. After receiving this rejection, the consumer

approached Mumbai Electricity Regulatory Commission

(hereinafter referred to as the “Regulatory Commission”) with

petition seeking the following directions:

“(a) That this Hon’ble Commission may be

pleased to direct TPC to provide electricity supply to

the Petitioner and make such supply available as early

as possible, either on BEST Network or by extending

its own network, as may be necessary, failing which

TPC’s distribution license should be cancelled by this

Hon’ble Commission;

(b) that the Hon’ble Commission may be pleased

to direct the respondent to pay compensation to the

petitioner under Regulations 3.2 and 12 of MERC

(Standards of Performance of Distribution Licensees,

Period of Giving Supply and Determination of

Compensation) Regulations 2005;”

2.In the meantime, respondent Nos.4 to 8 also filed similar

petitions before the Regulatory Commission with same relief as

they also wanted to switch over to TPC for their electricity

requirement. Since direction was sought for TPC, only TPC was

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made party. However, at the instance of Regulatory Commission

BEST and Reliance Industries Limited (RIL) were also

impleaded in these matters. After hearing all the parties,

Regulatory Commission passed orders dated 22.2.2010 holding

that TPC was bound to supply electricity in terms of applicable

Regulations and therefore direction was given to the TPC to

supply electricity to the consumers either through BEST wires or

its own wires. The operative part of that order reads as under:

“In view of the above there is no requirement to

issue a direction in regard to the Petitioner’s claim of

compensation under Regulation 3.2 and 12 of the SOP

regulations. However, TPC is bound by Regulation 4.7

of MERC (Standards of Performance of Distribution

Licensees, Period for Giving Supply and Determination

of Compensation) Regulations, 2005 in terms of the

timelines as mentioned in the said Regulation. Time

has started ticking from the date of receipt of

applications by TPC from the Petitioners who have

requisitioned for electricity supply. TPC will have to

adhere to the timelines specified in the regulations.”

3.We may point out here that the BEST (the appellant herein)

had resisted the demand of the consumers in their petitions with

the following contentions:

(a) The Regulatory Commission did not have the jurisdiction

to

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entertain a dispute between the consumer and a distribution

licensee;

(b) TPC was not a deemed distribution licensee for the area

in question and therefore was not permitted to supply the

electricity to any consumer in that area;

(c) that unlike other distribution licensees, BEST being a

local authority, no persons situated in BEST’s area of supply could

avail electricity from any other licensee, on account of BEST

invoking a statutory exemption available to a local authority

under Section 42(3) of The Electricity Act, 2003 Act (hereinafter

referred to as the Act).

(d) Since TPC had clarified that it was willing to extend its

network and supply electricity, BEST also contended that TPC

could not extend its network in BEST’s area of supply, without

BEST’s consent and agreement.

4.In its order dated 22.2.2010 while issuing the directions

extracted above, the Regulatory Commission rejected BEST’s

contentions and held that Tata Power had a duty under the Act to

extend its distribution network and supply electricity, if the

consumers so required, in the South Mumbai area. In light of

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TPC’s position that it was willing to extend its network and supply

electricity, the MERC held that there was no requirement to give

any directions to it. The Regulatory Commission also held that

TPC would be deemed distribution licensee for the area in

question.

5.BEST challenged the aforesaid order of the Regulatory

Commission by filing appeal before the Appellate Tribunal for

Electricity, New Delhi (hereinafter referred to as the “Appellate

Tribunal”). This appeal, however, has been dismissed by the

Appellate Tribunal vide orders dated 4.4.2012, thereby affirming

the findings and direction of the Regulatory Commission. Not

satisfied, BEST has filed the instant appeal statutorily provided

under Section 125 of the Electricity Act.

6.We have already stated in brief the four contentions which

were raised by BEST before the Regulatory Commission. Same

contentions were raised before the Appellate Tribunal, which are

the submissions before us as well. Therefore, we proceed to deal

with these submissions hereinafter:

RE: Jurisdiction of the Regulatory Commission .

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7.This contention was raised primarily on the ground that

there was an alternative remedy provided to the consumer to

raise his grievances before the Consumer Grievances Redressal

Forum (CGRF) established under Section 42 (5) of the Act.

Therefore, the consumer should have approached the said Forum

instead of filing petition before the Regulatory Commission. This

contention is totally misconceived and rightly rejected by the

authorities below. As noted above, petition was filed by the

consumer seeking direction against TPC to supply electricity to

him. Thus, he approached the Regulatory Commission to enforce

a distribution licensee obligation under the Act. As on that date,

he was not the consumer of TPC but wanted to become its

consumer. In so far as CGRF is concerned, which each distribution

licensee is required to set up under Section 42 (5) of the Act, it

deals with the grievances of the consumer. Consumer is defined

under Section 2 (15) of the Act and reads as under:

“any person who is supplied with electricity for

his own use by a licensee or the Government or by

any other person engaged in 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 purposes of receiving electricity with the works of

a licensee, the Government or such other person, as

the case may be.”

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8.Thus, respondent No.3 not being a consumer could not have

approached CGRF. Further, we find that in Maharashtra

Electricity Regulatory v. Reliance Energy Ltd. (2007) 8 SCC

381, this Court has held that the Regulatory Commission has the

power to require a licensee to fulfill its obligations under the Act.

Thus, we are of the opinion that the Regulatory Commission had

the requisite jurisdiction to entertain the petition filed by the

consumer. Presumably, for this reason, this contention was

pressed half hearted before us and given up in the middle.

RE: Whether TPC is deemed distribution

licensee

9. Before we take note of the argument of the parties on this

aspect and deal with the same, some background facts need a

mention. TPC is the successor of the Bombay Hydroelectric

License, 1907, the Andhra Valley Hydro-electric License, 1919,

the Nila Mula Valley Hydro-electric License, 1921 and Trombay

Thermal Power Electric License 1953 to supply electricity to

consumers in specified areas in and around Mumbai (Erstwhile

Licenses). The Erstwhile Licenses were subsequently

amalgamated and transferred to Tata Power on 12.7.2001.

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10.The Government of Maharashtra, in exercise of powers

under the Indian Electricity Act, 1910 amended the area of supply

under the Erstwhile Licenses from time to time. This included

addition of new areas as well as handing over of certain areas to

the Government owned distribution company, earlier known as

the Maharashtra State Electricity Board.

11.TPC’s area of supply overlaps with that of Reliance

Infrastructure Limited (R Infra) another distribution licensee in the

suburban Mumbai area, and with that of the Appellant (BEST) in

South Mumbai. In 2002, R Infra filed a petition before the

Respondent No.1 (MERC) alleging that Tata Power’s license did

not authorize Tata Power to supply electricity to direct retail

consumers (with a maximum demand below 1000KVA). While the

petition was pending, the Electricity Act, 2003 came into force.

12.On the basis of aforesaid facts TPC claimed that by virtue of

first proviso to Section 14 of the Act, it was a deemed licensee for

the area of supply of BEST. Under Section 14 the Regulatory

Commission is empowered to grant a license to any person on an

application made to it under Section 15 of the Act. This license

may pertain to transmit electricity as a transmission licensee; or

distribute electricity as a distribution licensee; or to undertake

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trading in electricity as an electricity trader, in any area, as may

be specified in the license. This section has nine provisos which

stipulated various circumstances under which no specific license

is required by making an application under Section 15 and if the

conditions stipulated in any of these provisos are satisfied, such a

person is treated as deemed licensee. We are here concerned

with 1

st

proviso under which TPC claims to be a deemed

distribution licensee as well as 6

th

proviso which is invoked by

BEST in contending TPC cannot be a deemed distribution licensee

in the area where BEST operates. Therefore, we reproduce both

these provisos:

1

st

Proviso:“Provided that any person engaged in the

business of transmission or supply of electricity under

the provisions of the repealed laws or any Act

specified in the Schedule on or before the appointed

date shall be deemed to be a licensee under this Act

for such period as may be stipulated in the licence,

clearance or approval granted to him under the

repealed laws or such Act specified in the Schedule,

and the provisions of the repealed laws or such Act

specified in the Schedule in respect of such licence

shall apply for a period of one year from the date of

commencement of this Act or such earlier period as

may be specified, at the request of the licensee, by

the Appropriate Commission and thereafter the

provisions of this Act shall apply to such business.

6

th

Proviso:Provided also that the Appropriate

Commission may grant a licence to two or more

persons for distribution of electricity through their own

distribution system within the same area, subject to

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the conditions that the applicant for grant of licence

within the same area shall, without prejudice to the

other conditions or requirements under this Act,

comply with the additional requirements [relating to

the capital adequacy, creditworthiness, or code of

conduct] as may be prescribed by the Central

Government, and no such applicant, who complies

with all the requirements for grant of licence, shall be

refused grant of license on the ground that there

already exists a licensee in the same area for the

same purpose.”

13.As per the first proviso if any person was engaged in the

business of transmission or supply of electricity under the

provisions of the repealed laws etc. that person is deemed to be

a licensee under the Act, 2003 as well. The period for such

deemed licence is the one that is stipulated in the licence,

clearance or approval granted to him under the repealed laws. If

it is under any Act specified in the Schedule in respect of such

licence, then the period of licence is for one year from the date of

commencement of the Act or such period as may be specified by

the Appropriate Commission. It would mean that either the

period of deemed licence for such a person is the period which is

stipulated in the licence, clearance or approval granted to him

under the repealed laws or for a period of one year from the date

of commencement of the Act or the period which may be

specified, at the request of the licensee by the Regulatory

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Commission. Once, such a period is over, then that person is

supposed to apply for licence under Section 14.

Proviso six, on the other hand, deals with a different

situation. As per this provision, the Regulatory Commission is

authorized to grant a licence to two or more persons for

distribution of electricity through their own distribution system

within the same area. It is subject to the conditions that the

applicant for grant of licence within the same area shall apply

with the additional requirements relating to the capital adequacy,

creditworthiness, or code of conduct as may be prescribed by the

Central Government. It further provides that merely because

there exists a licensee in the same area would not be a ground to

reject an application for another applicant for same purpose. This

provision deals with open access policy.

14.As per the TPC, proviso one is applicable in their case since

its predecessor were granted licence under the Act, 1910 and

therefore it continuous to be licensee as per the aforesaid

deeming provision under the Act, 2003 as well. The case set up

by the TPC in this behalf is such a licence granted under the old

Act is valid upto 15.8.2014 which is categorical stipulated in the

Specific Licence Conditions by the Regulatory Commission.

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Therefore, it is only after 15.8.2014 that the TPC would be

required to take fresh licence by making application under

Section 15 of the Act, 2003. This is stated on the ground that the

MERC formulated the MERC (Specific Conditions of License

applicable to the Tata Power Company Limited) Regulations,

2008 (Specific License Conditions) under Section 16 of the Act.

The Specific License Conditions read with the MERC (General

Conditions of Distribution License) Regulations, 2006 set out the

terms and conditions of Tata Power’s license in supersession of

the Erstwhile Licenses, and authorize Tata Power to supply

electricity in its area of supply to the public for all purposes in

accordance with the Act. The Specific License Conditions further

stipulate that the term of Tata Power’s license is up to 15.8.2014.

15.The argument of BEST, on the other hand, is that the

Appellate Tribunal was wrong in holding TPC was a deemed

licensee under the first proviso to Section 14, as well as a parallel

licensee under the sixth proviso to Section 14 of the Act 2003.

According to Mr. Naphade, the Appellate Tribunal gravely erred

in failing to appreciate that network of TPC cannot be allowed or

extended within the area of supply of BEST in the absence of

distribution licensee which TPC failed to obtain from Regulatory

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Commission, though it is a necessary requirement under sections

14 and 15 read with Section 12 of the Act. It was argued that as

per the first proviso to Section 14, a person is treated deemed

licensee only if it is engaged in the business of supply of

electricity under the provisions of the repealed laws and it is for

such period “as may be stipulated in the licence granted to him

under the repealed laws”. It was argued that the protection was

only for that period which is stipulated in the licence and not on

the basis of licence and there is no such period specified in the

business up to 15.8.14 specified in the licence. It was, further,

argued that the provisions of the repealed laws in respect of such

licences are applicable for a period of one year within which and

thereafter licence was to be obtained under Section 14 by

moving an application under Section 15, as per the procedure

prescribed in the Act 2003. It was argued that for the deeming

fiction in the first proviso to said Section 14 to arise, (i) a person

must be engaged in the business of supply of electricity under

the repealed laws on or before 10.6.2003, and (ii) a period (being,

period of subsistence of licence) be stipulated in the licence

granted to such person under the repealed laws. It was further

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pointed out that said deeming fiction applies (i) to such a person,

and (ii) for such stipulated period.

16.There are two facets of the submissions made by Mr.

Naphade. In the first instance it is to be found that there is a

stipulation of period in the manner stated in the first proviso.

Second aspect is as to whether it is incumbent, in all cases, to

apply for licence under the provisions of Sections 14 and 15 of

the Act immediately after the expiry of one year from the date of

commencement of the said Act. In so far as first aspect is

concerned, the argument of the appellant loses sight of the fact

that in the first proviso the period for which any person can be a

deemed licensee is not only such period which is stipulated in the

licence, clearance or approval granted to him under the repealed

laws or such Act specified in the Schedule. It also provides that

the provisions of repealed laws or such Act specified in the

Schedule in respect of such a licence shall apply for a period of

one year from the date of commencement of Act 2003 or such

earlier period as may be specified at the request of the licensee

by the Regulatory Commission. In the present case, the

Regulatory Commission formulated MERC (Specific Conditions of

License Applicable to TPCL) Regulation 2008 i.e. Specific Licence

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Conditions. These were formulated under Section 16 of the Act

2003 and it is in these conditions there is a specific stipulation

regarding term of TPC licence up to 15.8.2014. We, therefore, are

unable to accept the submissions of the appellant that the licence

was valid for a period of one year only. It would be useful to refer

to Section 16 of the Act under which aforesaid Specific Licence

Conditions of TPC are formulated.

“16. Conditions of licence.- The Appropriate

Commission may specify any general or specific

conditions which shall apply either to a licensee or

class of licensees and such conditions shall be deemed

to be conditions of such licence:

Provided that the Appropriate Commission shall,

within one year from the appointed date, specify any

general or specific conditions of licence applicable to

the licensees referred to in the first, second, third,

fourth and fifth provisos to section 14 after the expiry

of one year from the commencement of this Act.”

Proviso to the aforesaid section very categorically enables

the Regulatory Commission to specify general or specific

condition of licence applicable to licensees referred to in the first

to fifth proviso to Section 14 after expiry of one year after the

commencement of that Act. Since as on the date of

commencement of the Act, TPC became deemed licensee under

the first proviso as its predecessors were holding the distribution

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licence under the repealed laws and thereafter specific conditions

of licence are formulated by the Regulatory Commission under

Section 16 mentioning the period of 15.8.2014, it becomes clear

that the combined fact of that would be that YPC would be

deemed licence till 15.8.2014. Tata

Power’s license to supply electricity in the South Mumbai area is

clearly established by virtue of the following:

(a) The Erstwhile Licensee authorized Tata Power to supply

electricity to all consumers in Mumbai, including the South

Mumbai area;

(b) When the new Act came into force, by virtue of the 1

st

Proviso to Section 14, Tata Power was deemed to be a licensee

under that Act.

This is also clear from Section 172(b) of the Act. It is trite

law that once the purpose of the deeming provision is

ascertained, full effect must be given to the statutory fiction and

the fiction is to be carried to its logical end.

17.An argument was sought to be raised before us that

Regulation 2008 laying down specific conditions for TPC are

flouted as they were not made by the Regulatory Commission

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within the mandatory period of one year. However, no such

argument was raised earlier and there is no challenge to the

validity of the aforesaid Regulations which are made by the

Regulatory Commission under its statutory powers and therefore

are having statutory force. Once, we come to the conclusion that

TPC can be treated as deemed distribution licensee under the

first proviso to Section 14 of the Act 2003 and the area of the

licence is the same which overlaps with the area covered by

BEST, argument predicated on sixth proviso to Section 14 would

not be available to the BEST.

RE: AVAILABILLITY OF OPEN ACCESS TO TPC IN THE AREA

COVERED BY BEST, WHICH IS A LOCAL AUTHORITY

AND

PERMISSIBILITY OF TPC TO EXTEND ITS NETWORK IN BEST

AREA OF SUPPLY WITHOUT ITS APPROVAL/CONSENT.

18.It was argued by Mr. Naphade that under the Act neither

open access can be allowed nor distribution system or network of

a purported parallel licensee (such as TPC) can be laid or

extended within area of supply of BEST. The learned senior

counsel labored on the aspect that admittedly BEST was a Public

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Sector Undertaking and such bodies are given due recognition of

and grant of exemption and/or protection to a special category of

licensee being a local authority in the business of distribution of

electricity before the appointed day. He submitted that as BEST

would be covered by the expression “ a local authority” protected

measures provided under the Act would be applicable to it as

well. According to him, a local authority was always placed on a

special footing under Act, 1910 as well as Act, 1948 and now

under Act, 2003 which was clear from the provisions of Section

42 (3) of the Act that reads as under:

“42(3) Where any person, whose premises are

situated within the area of supply of a distribution

licensee, (not being a local authority) engaged in the

business of distribution of electricity before the

appointed day) requires a supply of electricity from a

generating company or any licensee other than such

distribution licensee, such person may, by notice,

require the distribution licensee for wheeling such

electricity in accordance with regulations made by the

State Commission and the duties of the distribution

licensee with respect to such supply shall be of a

common carrier providing non-discriminatory open

access.”

This provision which deals with the duties of distribution

licensee as well as open access specifically excludes a local

authority.

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Mr. Naphade thus argued that if the Legislature, having

regard to the special status of a local authority engaged in the

business of distribution of electricity before the appointed date

(such as BEST), has duly exempted open access in its area of

supply, then it is but consequential and/or a fortiori that a

distribution system or network of a purported parallel licensee

(such as TPC) cannot be laid or extended within the area of

supply of a local authority engaged in the business of distribution

of electricity before the appointed date (such as BEST). His

submission was that the Legislature could never have and in fact,

has not intended that such special status (inclusive of exemption

from open access) be in vain or rendered

illusory/infructuous/nugatory, and more so by a mere lay out or

extension of a distribution system or network of the purported

parallel licensee. It is a fundamental principle of law that duly

made legislation can never be and should not be in vain or to no

avail. Hence, such special status (inclusive of exemption from

open access) cannot be ignored, but must necessarily be given

full effect to and enforced. According to him an irrational situation

would arise if the purported parallel licensee (such as TPC) could

not supply electricity under open access in the area of supply of a

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local authority engaged in the business of distribution of

electricity before the appointed date (such as BEST), but could

lay or extend its distribution system or network in the area of

supply of a local authority engaged in the business of distribution

of electricity before the appointed date (such as BEST). As such,

Section 42 (3) necessarily has to be interpreted to qualify or

restrict aforesaid Sixth Proviso to Section 14, Section 43(1),

Section 42(1) and/or Section 42(2), to the extent that any person,

whose premises are situated within the area of supply of a

distribution licensee, (which is a local authority engaged in the

business of distribution of electricity before the appointed

date)cannot require a supply of electricity from a generating

company or any licensee other than such distribution licensee,

through (i) open access and/or(ii)otherwise (including under

parallel license). Moreso, as the provisions of the Electricity Act,

2003, provide for protection of interest of electricity consumers,

and as such ought not and should not be interpreted to entail

unnecessary burden of said capital expenditure or electricity

consumers; a local authority engaged in the business of

distribution of electricity before the appointed date (such as

BEST) is ex-facie placed on a special pedestal vis-à-vis ordinary

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distribution licensees, under the Third Proviso to Section 51 of the

Electricity Act, 2003, which has been liberally interpreted in

favour of and to advantage of a local authority engaged, before

the commencement of the Electricity Act, 2003, in the business of

distribution of electricity (such as BEST), by the Hon’ble Supreme

Court of India in the Order dated 8.2.2011 made in Civil Appeal

No.848 of 2011 (Municipal Corporation of Greater Mumbai vs.

Maharashtra Electricity Regulatory Commission & Ors.).

19.On the other hand, Mr. Dhruv Mehta, learned senior counsel

appearing for TPC submitted that by this argument of the

appellant was mixing the otherwise two distinct concepts, namely

that of open access under Section 42 (3) of the Act and that of

Universal Service of Relations contained in Section 43 of the Act.

Highlighting the purpose of the Act which has, inter-alia, provided

emphasizing the need for efficiency and competition in the

distribution business as well as open access system and also

multiple licences system in the same area of supply, he

submitted that if the contention of the appellant is accepted it

would negate the very objective which is sought to be achieved

by the aforesaid provisions. Mr. Mehta argued that under the Act,

there are two ways in which a consumer situated in a particular

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area can avail supply of electricity: (i) from a distribution licensee

authorized to supply electricity in that area under Section 43; or

(ii) from any other supplier through the distribution network of a

distribution licensee by seeking “open access” in terms of Section

42(3). In the first option, the distribution licensee operating in a

particular area is required to lay down its network if required, in

order to supply electricity to a consumer seeking supply. The

second option, which is known as open access is provided under

Section 42 read with Section 2(47) of the 2003 Act. Under Section

42(3) of the 2003 Act, a consumer has the right to require a

distribution licensee to make its network available for wheeling

electricity to such consumer from a third party supplier (i.e. a

supplier of electricity not being a distribution licensee in the area

where the consumer is situated). He submitted that this

distinction between the two different concepts is to be born in

mind and the matter is seen in its proper perspective. Section

42(3) carries out an exception in favour of local authority only

qua open access which would mean that a consumer is

disallowed from seeking open access from a distribution licensee

which is a local authority like BEST. That would mean that a

consumer being supplied by BEST cannot demand that BEST

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allow a third party subject to supply electricity to such consumer

through the network of BEST. According to him, this exception

would extend to position contained in section 43 which casts

“Universal Service Obligation” on all distribution licensees to give

supply to any owner or occupier within its supply area. That

would only mean if there is an another distribution licensee in the

area in which a local authority like BEST also operates, a

consumer can approach that distribution licensee to supply him

the electricity. However, for that purpose, the said distribution

licensee will have to supply the electricity from its own laid in the

network without using the network of local authority.

20.After considering the rival contentions, we are of the

opinion that the interpretation suggested by Mr. Mehta needs to

prevail and therefore we do not find any fault with the view taken

by the Appellate Tribunal. We have already reproduced above

provisions of Section 42 (3) of the Act. As pointed out above,

Section 42 of the Act deals with the duties of distribution licensee

and open access. Sub-Section (1) thereof provides that it shall be

the duty of a distribution licensee to develop and maintain an

efficient co-ordinated and economical distribution system in his

area of supply and to supply electricity in accordance with the

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provisions contained in the Act. Sub-section (2) casts an

obligation upon the State Commission to introduce open access

in phases and subject to such conditions, as may be specified,

these conditions may include the cross subsidies and other

operational constraints. It is thereafter in sub-section (3) of

Section 42 provision is made for wheeling of electricity with

respect to supply stating that duties of distribution licensee shall

be of a common carrier providing non-discriminatory open

access. Thus sub-section (3) provides for open access and casts a

duty upon the distribution licensee in this behalf. Here, it

excludes local authority, as distributor of electricity from such an

obligation. However, when it comes to the duty of distribution

licensee to supply the electricity under section 43, it mandates

that same is to be given to the owner or occupier of any premises

on his application within one month from the receipt of the said

application. This duty under Section 43 imposed upon a

distribution licensee does not distinguish between a local

authority and other distribution licensee. It is also not a case of

the appellant that in a particular area where a local authority is a

distribution licensee, there cannot be any other distribution

licensee at all.

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21.Thus, on a conjoint reading of Sections 42 and 43 of the Act

along with the objectives and purpose for which Act 2003 is

enacted, it becomes clear that there are two ways in which a

consumer stated in a particular area can avail supply of

electricity, as pointed out by the learned senior counsel for TPC

and noted above. When an application is made by a consumer to

a distribution licensee for supply of electricity, such a distribution

licensee for supply of electricity, such a distribution licensee can

request other distribution licensee in the area to provide it

network to make available for wheeling electricity to such

consumers and this open access is to be given as per the

provisions of section 42 (3) of the Act. It is here only that local

authority is exempted from such an obligation and may refuse to

provide makes it network available. Second option is, under

section 43 of the Act, to provide the electricity to the consumer

by the distribution licensee from its own network. Therefore, if in

a particular area local authority has its network and it does not

permit wheeling of electricity from by making available its

network, the other distribution licensee will have to provide the

electricity from its own network. For this purpose, if it is not

having its network, it will have to lay down its network if it

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requires in order to supply electricity to a consumer seeking

supply.

22.This interpretation of ours is in consonance of the objective

and purpose of the Act. The aforesaid objective is further clarified

by the Tariff Policy and the National Electricity Policy under

section 3 of the Act which emphasized the need for efficiency and

competition in the distribution business. On going through the

statement of objects and reasons contained in the new Act, the

interpretation, which we are leading to, gets further facilitated.

Prior to this Act, there were three Acts, namely of 1910, 1948

and 1998 which were governing the laws relating to electricity

and were operating in the field. Within few years, it was felt that

the three Acts of 1910, 1948 and 1998 which were operating in

the field needed to be brought in a new self contained

comprehensive legislation with the policy of encouraging private

sector participation in generation, transmission and distribution

and also the objectives of distancing the regulatory

responsibilities from the Government and giving it to the

Regulatory Commissions. With these objectives in mind the

Electricity Act, 2003 has been enacted. Significant addition is the

provisions for newer concepts like power trading and open

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access. Various features of the 2003 Act which are outlined in the

statement of objects and reasons to this Act. Notably, generation

is being delicensed and captive generation is being freely

permitted. The Act makes provision for private transmission

licensees. It now provides open access in transmission from the

outset. While open access in transmission implies freedom to the

licensee to procure power from any source of his choice, open

access in distribution, with which we are concerned here, means

freedom to the consumer to get supply from any source of his

choice. The provision of open access to consumers ensures right

of the consumer to get supply from a person other than the

distribution licensee of his area of supply by using the distribution

system of such distribution licensee.

23.The concept of open access under the Act enables

competing generating companies and trading licensees, besides

the area distribution licensees, to sell electricity to consumers

when open access in distribution is introduced by the State

Electricity Regulatory Commissions. Supply by way of open

access is a completely different regime as is also clear from the

fact that consumers who have been allowed open access under

Section 42 may enter into an agreement with any person for

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supply of electricity on such terms and conditions, including tariff,

as may be agreed upon by them under Section 49 of the Act

unlike consumers who take supply under section 43 of the Act.

24.Once we read the provisions in the aforesaid manner, it

becomes clear that there is no exemption from universal service

obligation to any distribution licensee under the Act, on account

of the presence of a “local authority” as a distribution licensee in

the particular area of supply, which is also reinforced by

Paragraph 5.4.7 of the National Electricity Policy which clearly

states that the second licensee in the same area shall have the

obligation to supply to all consumers in accordance with Section

43. In this context, it is relevant to reproduce the following

observations in Chandu Khamaru v. Nayan Malik reported in

(2011) 12 SCC 314:

“7…These provisions in the Electricity Act, 2003

make it amply clear that a distribution licensee has a

statutory duty to supply electricity to an owner of

occupier of any premises located in the area of supply

of the distribution licensee, if such owner or occupier

of the premises applies for it, and correspondingly

every owner or occupier of any premises has a

statutory right to apply for and obtain such electric

supply from the distribution licensee.”

Page 29 29

25.It is, therefore, difficult to accept the extreme position taken

by the appellant that if local authority is a distribution licensee in

a particular area, there cannot be any other distribution licensee

in that area without the permission of such a local authority. Not

only such a contention would negate the effect of universal

supply obligation under Section 43, it will also amount to

providing an exception which is not there either in Section 43 or

Section 14 of the Act namely to treat local authority in special

category and by giving it the benefit even that benefit which is

not specified under the Act.

26.It is trite that Court should lean in favour of an

interpretation which subserves the objective of the Act namely

the purposive interpretation. In Tata Power Co.Ltd. v.

Reliance Energy Ltd. & Ors. (2008) 10 SCC 321, this Court

gave due recognition to objective behind the Act viz. to promote

competition and give the consumer open to choose the

distribution licensee from which it seeks electricity as is clear

from the following paragraphs:

102. On the other hand, in our view, the

provisions of both the 1903 and 1910 Electricity Acts

encourage competition in the electricity trade and the

same is also incorporated in the licences issued in

favour of the distribution licensees, which also include

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licensees generating power for supply. The element of

competition has been included in the Preamble to the

2003 Act and permeates the same in its various

provisions.

103. As submitted by Mr Chagla, the Act is meant

to be consumer-friendly and one of the objectives it

sets out to achieve is to give the consumer an option

to choose the distribution licensee from whom it

wishes to receive supply of electrical energy. The

intervention of MIDC, Marol Industries Association and

the appeals filed by it, has obviously been made in

that context.

In MSR Leathers vs. S.Palaniappan & Anr. (2013) 1 SCC

177 it was observed:

“24. That brings us to the question whether an

offence punishable under Section 138 can be

committed only once as held by this Court in

Sadanandan case1. The holder of a cheque as seen

earlier can present it before a bank any number of

times within the period of six months or during the

period of its validity, whichever is earlier. This right of

the holder to present the cheque for encashment

carries with it a corresponding obligation on the part

of the drawer to ensure that the cheque drawn by him

is honoured by the bank who stands in the capacity of

an agent of the drawer vis-à-vis the holder of the

cheque. If the holder of the cheque has a right, as

indeed is in the unanimous opinion expressed in the

decisions on the subject, there is no reason why the

corresponding obligation of the drawer should also not

continue every time the cheque is presented for

encashment if it satisfies the requirements stipulated

in clause (a) of the proviso to Section 138. There is

nothing in that proviso to even remotely suggest that

clause (a) would have no application to a cheque

presented for the second time if the same has already

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been dishonoured once. Indeed if the legislative intent

was to restrict prosecution only to cases arising out of

the first dishonour of a cheque nothing prevented it

from stipulating so in clause (a) itself. In the absence

of any such provision a dishonour whether based on a

second or any successive presentation of a cheque for

encashment would be a dishonour within the meaning

of Section 138 and clause (a) of the proviso thereto.

We have, therefore, no manner of doubt that so long

as the cheque remains unpaid it is the continuing

obligation of the drawer to make good the same by

either arranging the funds in the account on which the

cheque is drawn or liquidating the liability otherwise. It

is true that a dishonour of the cheque can be made a

basis for prosecution of the offender but once, but that

is far from saying that the holder of the cheque does

not have the discretion to choose out of several such

defaults, one default, on which to launch such a

prosecution. The omission or the failure of the holder

to institute prosecution does not, therefore, give any

immunity to the drawer so long as the cheque is

dishonoured within its validity period and the

conditions precedent for prosecution in terms of the

proviso to Section 138 are satisfied.”

While dealing with the issue No.2 above, we have already

held that TPC and BEST are parallel distribution licensee in the

South Bombay Area.

27.The appellant has sought to rely on the expression “Save

as otherwise provided in this Act” in Section 43(1) of the Act to

read into Section 43(1) the exception for local authorities

provided for in Section 42(3). The TPC has successfully refuted

this submission by pointing out that these words in Section 43(1)

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are required to be read in the context in which they appear. The

said words were inserted in the section by way of an amendment

to the Act in 2007. An “Explanation” to Section 43(1) was also

added by the same amendment providing that “application” by a

consumer in Section 43(1) means an application complete in all

respects along with documents showing payment of necessary

charges and other compliances, meaning thereby that the

obligation of the distribution licensee to supply within the

specified time period will begin only after it has received such

completed application by the applicant. Further, Sections 45 and

46 provide for the distribution licensee’s powers to recover

charges for electricity supplied and the expenditure incurred in

providing electric line or plant for giving supply. Section 47

provides that the distribution licensee may require any person

demanding electricity supply from him to give a reasonable

security, failing which the distribution licensee may refuse to give

supply of electricity to such consumer. We are of the opinion that

it is in this context that the expression “save as otherwise

provided in this Act” in Section 43 (1) is to be construed.

28.Before we part with we would like to make it clear that

there is a dispute between TPC and R-infra) (respondent No.9)

Page 33 33

which is the subject matter of Civil Appeal Nos. 4667-68/2013. R

Infra is a distribution licensee in suburban Bombay where TPC is

also a licensee. Both supply electricity to different consumers.

Dispute is between them with regard to cross subsidiary

surcharge (CSS) payable by consumer taking supply from TPC or

R Infra network. We make it clear, by way of abundant caution,

that we have not touched upon the said dispute and obviously so

as even otherwise the subject matter in the instance case is

totally different. Therefore Civil Appeal Nos.4667-68/2013 shall

be decided on its own merits.

29.We, thus, do not find any merit in any of the contentions of

the appellant. As a consequence, this appeal fails and is hereby

dismissed with cost thereby affirming the order of the Appellate

Tribunal.

……………………………………….J.

(Surinder Singh Nijjar)

……………………………………..J.

(A.K. Sikri)

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New Delhi

May 8, 2014