2026 INSC 464 C.A. Nos. 4652-59/2024 Page 1 of 59

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4652 OF 2024

INDIAN RAILWAYS ...APPELLANT(S)

VERSUS

WEST BENGAL STATE ELECTRICITY

DISTRIBUTION COMPANY

LIMITED & ORS. …RESPONDENT(S)

WITH

CIVIL APPEAL NOS. 4653-4659 OF 2024

J U D G M E N T

SATISH CHANDRA SHARMA, J.

1. This is a batch of statutory Appeals under Section 125 of the

Electricity Act, 2003 (for short, hereinafter referred to as, “The

Electricity Act”) assailing the common judgment and order dated

12.02.2024 passed by the Appellate Tribunal for Electricity at New

Delhi, (“APTEL”), in Appeal Nos. 276/2015, 320/2018, 114/2020,

73/2021, 213/2021, 170/2019, 343/2019 and 133/2020.

C.A. Nos. 4652-59/2024 Page 2 of 59

2. By the said judgment, APTEL has set aside the Order dated

05.11.2015 passed by the Central Electricity Regulatory

Commission (“CERC”) in Petition No. 197/MP/2015 along with

connected appeals arising from Orders passed by other State

Electricity Regulatory Commissions (“SERCs”).

3. The proceedings before APTEL were contested by multiple

Distribution Companies (DISCOMS) and SERCs, including the

West Bengal State Electricity Distribution Company Ltd.

(WBSEDCL), Odisha Electricity Regulatory Commission

(OERC), Kerala State Electricity Regulatory Commission

(KSERC), Madhya Pradesh Electricity Regulatory Commission

(MPERC), Rajasthan Electricity Regulatory Commission (RERC),

Maharashtra Electricity Regulatory Commission (MERC), Haryana

Electricity Regulation Commission (HERC), Punjab State

Electricity Regulatory Commission (PSERC), as against the Indian

Railways, the Appellant herein.

4. The controversy pertained to common issues: (i) whether

Indian Railways qualifies as a deemed distribution licensee (DDL)

under the third proviso to Section 14 of the Electricity Act; and (ii)

if so, whether it remains liable to pay Cross-Subsidy Surcharge to

different distribution licensees for availing open access in terms of

Section 42 of the Electricity Act. Five out of the eight State

Electricity Regulatory Commission (SERCs) had held that the

C.A. Nos. 4652-59/2024 Page 3 of 59

Indian Railways is not a DDL (“DDL”) in terms of the third proviso

to Section 14 of the Electricity Act.

Factual matrix

5. The facts in the case are undisputed and are succinctly

mentioned as under:

5.1. The Appellant, Indian Railways vide Letter dated

17.03.2015 to the Maharashtra State Electricity Transmission

Co. Ltd. (“MSETCL”) sought grant of connectivity for

procuring 100 MW power from Gujarat Urja Vikas Nigam

(“GUVNL”) for 16 traction substations of the Central and

Western railways through inter-state open access in terms of the

Electricity Act. MSETCL refused to grant connectivity and

directed the Indian Railways to obtain an appropriate order from

the competent commission regarding its status as a DDL.

5.2. The Appellant approached the CERC by way of a

petition, inter-alia seeking declaration that the Indian Railways

is entitled to the grant of open access for the power to be procured

from the Generating Station through the Inter-State Transmission

System (“ISTS”) of Central Transmission Utility and Intra-State

Transmission System of the States (viz. Maharashtra, Gujarat,

Jharkhand and West Bengal), to its facilities, i.e., traction points

and network of the Indian Railways, and direct that the Indian

Railways in its capacity as an authorised entity to distribute and

C.A. Nos. 4652-59/2024 Page 4 of 59

supply electricity is a separate participating entity, like any other

State entity notified by the Commission for the purposes of

scheduling and dispatch of electricity. The petition was filed

against the backdrop of the Letter No-25/19/2004-R&R dated

06.05.2014 issued by the Ministry of Power, Government of

India

1

which clarified that the Appellant i.e. the Indian Railways

is a deemed licensee under the third proviso to Section 14 of the

Electricity Act and for all purposes thereunder. It was urged by

the Appellant that:

(a) Firstly, it is a DDL under Section 14 of

Electricity Act, and that being a Department of the

Ministry of Railways, Government of India, the

Appellant qualifies as the “Appropriate Government”

and therefore has the deemed licensee status under the

third proviso to Section 14 of the Electricity Act.

Reliance was placed on Letter dated 06.05.2014 issued

by the Ministry of Power, Government of India that

clarified that “Railways is a deemed licensee under the

third proviso to Section 14 of the Electricity Act”. It

contended that the deeming fiction in the proviso

confers upon it, the status of a DDL and by virtue

thereof shall be subject to benefits and/or privileges

1

Letter No-25/19/2004-R&R dated 06.05.2014 issued by the Ministry of Power,

Government of India

C.A. Nos. 4652-59/2024 Page 5 of 59

emanating therefrom. It was their unilateral assertion

that as regards the grant of open access, a DDL shall be

granted non-discriminatory open access without the

obligation to pay Cross-Subsidy Surcharge and the

Additional Surcharge under the Electricity Act; and

(b) Secondly, it operates the rail systems in India as

per the provisions of the Railways Act (“Railways

Act”), which constitutes a complete code in itself and

overrides the provisions of the Electricity Act by virtue

of the non-obstante provision in Section 11 of the

Railways Act and Section 173 of the Electricity Act.

Therefore, its operations are independent of its status

under the Electricity Act, and it is entitled to distribute

and supply electricity under Section 11 of the Railways

Act.

5.3. The West Bengal State Electricity Distribution

Company Ltd. (“WBSEDCL”) impleaded as a party before the

CERC vide Order dated 12.10.2015, challenged the

maintainability of the Petition filed by the Appellant on the

grounds that, since no application for open access had been filed

in the respective States, and that the process for the grant of inter-

state open access as per the extant regulations had not been

necessarily complied with, therefore, the question of dispute with

respect to the open access did not arise.

C.A. Nos. 4652-59/2024 Page 6 of 59

5.4. The CERC vide Order dated 05.11.2015 observed that

Section 11(g) of the Railways Act authorizes the Railway

Administration “to erect, operate or repair any electric traction

equipment, power supply and distribution installation in

connection with the working of the railway.” It held that the use

of terms “power supply and distribution installations” indicates

that the Railway Administration is entrusted with the function of

establishing and operating a distribution network for supply of

power to the various railway installations. Placing reliance on the

judgment of General Manager, Northern Railways rep. by

Union of India v. Chairman, Uttar Pradesh State Electricity

Board & Ors.

2

and the Letter dated 06.05.2014 issued by the

Ministry of Power, it further held that Indian Railways was

authorised under the Railways Act to undertake transmission and

distribution activities with relation to its operations. Accordingly,

the CERC held:

(a) Indian Railways/Appellant is an authorised

entity under the Railways Act for carrying out

transmission and distribution activities for ensuring

supply of power in connection with the working of the

railways, without having to obtain a license from the

appropriate Commission.

2

[2012] 3 SCC 329

C.A. Nos. 4652-59/2024 Page 7 of 59

(b) Being an authorized entity, it shall be entitled for

grant of open access in connection with the working of

the Railways, as per provisions applicable to a

distribution licensee.

(c) It is a DDL under the third proviso to Section 14

of Act and is bound by the terms and conditions for a

licensee as specified under Section 16. Hence, no

separate declaration to this effect was required.

5.5. Aggrieved by the observations of the CERC, the

WBSEDCL filed Appeal no. 276/2015 before the Appellate

Tribunal. Subsequently, seven appeals as enlisted hereunder

were filed by the Appellant and relevant distribution companies

(DISCOMS), challenging Orders by the respective SERCs on

the identical issue. The following Appeals were heard together

by the APTEL:

WBSEDCL v. CERC

& Ors; Appeal No. 276/2015

CERC Order dated 05.11.2025

Held: Indian Railways is a DDL

under the third proviso to

Section 14 of the Electricity Act.

Indian Railways v. MERC

& Ors.; Appeal No. 343/2019

MERC Order dated: 05.04.2019.

Held: Indian Railways is a DDL.

Indian Railways v. Kerala State

Electricity Board Limited & Ors.;

Appeal No. 73 of 2021

KSERC Order dated: 12.12.2019.

Held: Indian Railways is a DDL and

was directed to pay charges

as applicable for open access.

C.A. Nos. 4652-59/2024 Page 8 of 59

Punjab State Power

Corporation Ltd v. PSERC

& Ors.; Appeal No. 320 of 2018

PSERC Order dated: 28.02.2018.

Held: Indian Railways is not a DDL.

Indian Railways v. Odhisa Power

Transmission Corporation Ltd &

Ors; Appeal No. 114 of 2020

OERC Order dated: 25.02.2020.

Held: Indian Railways is not a DDL.

Indian Railways v. MP Poorv

Kshetra Vidyut Vitran

Company Ltd & Ors.;

Appeal No. 213 of 2012

MPERC order dated: 05.05.2021.

Held: Indian Railways is not a DDL.

Indian Railways v. Jaipur Vidyut

Vitaran Nigam Ltd & Ors.;

Appeal No. 170 of 2019

RERC Order dated: 23.04.2019.

Held: Indian Railways is not a DDL.

Indian Railways v. Dakshin

Haryana BijliVitran Nigam

Ltd & Ors.;

Appeal No. 133 of 2020

HERC Order dated: 17.06.2020.

Held: Indian Railways is not a DDL.

5.6. At the outset, APTEL passed an interim Order dated

16.12.2015 in favour of the Appellant, whilst prima facie

observing that:

(a) By virtue of Section 11 of the Railways Act, the

Appellant appears to have full authority to undertake

distribution and supply of electricity. Section 11 cannot

be given a restricted meaning in light of the decision in

Northern Railways (supra);

(b) The power to erect, maintain and operate

traction equipment, lines, power supply and

C.A. Nos. 4652-59/2024 Page 9 of 59

distribution installation under the said provision

necessarily implies the use of such equipment to

distribute and supply electricity;

(c) The decision in Sesa Sterlite Limited v. Orissa

Electricity Regulatory Commission & Ors.

3

, which

laid an emphasis upon a distribution licensee to operate

and maintain a distribution system and supply power to

consumers, is not applicable to the Appellant herein as

Section 173 of the Electricity Act makes it clear that in

case of inconsistencies in the Railways Act, the latter

shall prevail over the Electricity Act;

(d) The relief sought by the Railways was for the

grant of open access through the Inter-State

Transmission Network of the Central Transmission

Utility, to which it is entitled on a non-discriminatory

basis. For this reason, the Petition before the CERC was

maintainable despite the absence of any independent

applications to State Transmission Utilities or

distribution licensees. The distribution licensees of

various States were also held to be not necessary or

proper parties to the said petition.

3

[2014] 8 SCC 444

C.A. Nos. 4652-59/2024 Page 10 of 59

5.7. Vide its Final Judgment and Order (“Impugned Judgment”)

dated 12.02.2024, however, APTEL rejected the claim of the

Appellant to be recognised as a deemed distribution licensee within

the ambit of the third proviso to Section 14 of the Electricity Act. It

further held that since the entire electricity received by the Railways

is consumed for its own use and its constituents, it is liable to pay

Cross-Subsidy Surcharge and Additional Surcharge to the respective

distribution licenses as any other consumer under Section 42 of the

Electricity Act. The following are the key observations by APTEL:

(a) Appellant cannot be held to be a DDL, insofar as it does

not distribute electricity. A distribution licensee defined under

Section 2(17) of the Electricity Act must (i) operate and

maintain a distribution system, and (ii) supply electricity to

consumers in its area of supply. The distribution installation

and electric traction of the Appellant is not a distribution

system within Section 2(19) of the Electricity Act, insofar as

a distribution system must connect the delivery point on a

transmission line to the point of connection or installation of

the consumer. Locomotives, signal equipment, and station

facilities are constituents of the Appellant itself and do not

qualify as consumers within the meaning of Section 2(15) of

the Electricity Act. Thus, the Appellant itself is a consumer. It

receives electricity at its traction sub-stations (TSSs) from

distribution licensees, supply authorities, and then conveys it

C.A. Nos. 4652-59/2024 Page 11 of 59

to locomotives, stations and other installations within its

operational domain. Conveyance of electricity within this

internal network is for the own consumption of the Appellant

and does not constitute distribution.

(b) The Clarificatory Letter dated 06.05.2014 issued by the

Ministry of Power, relied upon by the Appellant is an

administrative directive under Section 107 of the Electricity

Act, and is not mandatory in nature.

(c) The statutory powers granted to the Railways

administration under Section 11 of the Railways Act are

confined to the construction and maintenance of railway

works for running railway operations. Mere establishment of

distribution installation does not authorise the Appellant to

qualify as a DDL and supply electricity to consumers.

(d) In light of the decision in Sesa Sterlite (supra), even if

the Appellant was treated as a DDL or transmission licensee

and seeks to avail open access, it is still liable to pay Cross-

Subsidy Surcharge and additional surcharge as the electricity

procured by it, is for its own consumption and operation.

(e) The contents of the 31

st

Report of the Parliamentary

Standing Committee on Energy dated 19.12.2002 reflect that

the Appellant had sought exemption from the obligations of

distribution licensees under Sections 12, 42, and 47 of the

C.A. Nos. 4652-59/2024 Page 12 of 59

Electricity Act. The request by the Appellant seeking such an

exemption itself demonstrates that it was well aware that

Section 2(31)(c) read with Section 11(g) & (h) of the

Railways Act did not absolve it from obtaining a distribution

license and/or discharging the obligations of a distribution

licensee under the Electricity Act.

6. Aggrieved, the Appellant has approached this Court

challenging the legality and correctness of the Impugned Judgement

of APTEL dated 12.02.2024. The captioned Appeal was

accompanied by IA no. 80269/2024 seeking stay of the Judgment

under challenge passed by APTEL. Vide Order dated 06.05.2024,

this Court had directed that subject to the final adjudication of the

present Appeals, the Appellant shall not be required to pay either the

Cross-Subsidy Surcharge or Additional Surcharge to the

distribution licensees, and it was made clear that the open access

shall not be denied to the Appellant for that reason.

Submissions on behalf of Railways

7. Mr. M.G. Ramachandran, learned Senior Counsel for the

Appellant challenged the observations of APTEL as unsustainable

in law for the following reasons:

(a) It is the case of the Appellant that it is vested with the

statutory authority under Section 11 read with Section

2(31)(c) of the Railways Act, to lay down an electrical

system, including a transmission and distribution system

C.A. Nos. 4652-59/2024 Page 13 of 59

within its area of operation. The authority under the Railways

Act expressly includes executing all necessary works,

including laying down an electric distribution system over the

length and breadth of the country, and extends to the activities

of conveying electricity necessary for use at different places,

points, and purposes for the operations of the railways, which

cannot be interfered with by the operation of the Electricity

Act.

(b) Section 11 of the Railways Act begins with a non-

obstante clause, and the statutory power thereunder is

absolute in nature. Placing reliance on the decision of

Northern Railways (supra), it is contended that APTEL erred

in distinguishing that the authority under Section 11 was

confined only to transmission and not distribution. The

Appellant submits that Northern Railways (supra)

authoritatively laid down that the act of constructing its

transmission lines, and drawing power from external power

sources, falls within the statutory domain of the Railways Act.

(c) Section 11 has an overriding effect, and several High

Courts across the country have observed that the Railways

Act consolidates the law and is not a mere regulatory statute.

4

It is contended that enactments such as the Environment

4

Ganv Bhavancho Ekvott v. South Western Railways [2022] SCC Online Bom

7184

C.A. Nos. 4652-59/2024 Page 14 of 59

Protection Act have no application over works undertaken by

the Railways in exercise of the powers under Section 11 of

the Railways Act. Learned Senior Counsel submits that

APTEL made a fatal error in construing Section 11 and other

allied provisions of the Railways Act, with reference to the

Act.

(d) Reliance was passionately placed on Ganv Bhavancho

Ekvott v. South Western Railways

5

whereby the High Court

had held that the Southern Railway (SWR) and the Rail Vikas

Nigam Limited (RVL) were not under any statutory

compulsion to obtain environmental clearances or any

building permission from authorities and agencies under the

other legislations. It was held that the exemption for railway

administration to execute the works of construction and

maintenance of railway is conferred by the non-obstante

clause which has an overriding effect on all other laws except

for the Railways Act

6

and the legislation referred to in Section

11 itself. The Appellant herein submitted that power under

section 11 is thus unfettered and unqualified, and the status of

the Appellant under the Electricity Act is inconsequential,

insofar as the authority to distribute electricity is

5

Ganv Bhavancho Ekvott (supra)

6

Union of India (Western Railway) vs MCGM [2017] SCC Online Bom 9424; Goa

Foundation & Anr. vs Konkan Railway Corporation & Ors. [AIR] 1992 Bom 471;

Village Panchayat of Velsao vs Ministry of Railways [2022 SCC Online Bom 3526]

C.A. Nos. 4652-59/2024 Page 15 of 59

independently conferred under the Railways Act. The non-

obstante clause under Section 11 of the Railways Act implies

that the powers under the provision are exclusive. Section 173

of the Electricity Act further settles the dispute by providing

that, in the event of any inconsistencies, only the Railways

Act shall prevail.

(e) The Railways Act is a complete code in itself. The

statute expressly authorises the Appellant to lay down a

“distribution installation” for the operation of railways. By

their very nature, such installations are intended for the

purpose of distribution, thereby implying that the Appellant is

statutorily empowered to distribute electricity. Since this

power flows directly from the parent statute, no separate

authorization or license under any other law is required.

(f) Without prejudice, the Appellant is a DDL as per the

third proviso to Section 14 of the Electricity Act. Being an

entity of the Central Government, the Appellant is an

Appropriate Government within the definition of Section 2(5)

and is therefore exempt from obtaining a license in terms of

the third proviso to Section 14 of the Electricity Act. Further,

electric traction equipment, power supply systems, and

distribution installation used for the purposes of, or in

connection with a railway, fall within the statutory definition

of railways under Section 2(31) of the Railways Act. Thus,

C.A. Nos. 4652-59/2024 Page 16 of 59

distribution of electricity is an inherent function of the

Appellant.

(g) Although the term “distribution” is not defined under

the Railways Act or under the Electricity Act, in the ordinary

and natural sense, the term “distribute” means spreading of

goods anywhere by whatever means, and in the context of the

present case, it would mean any activity that involves the

conveyance of electricity from one point to another for use at

different locations. Accordingly, any activity involving the

conveyance of electricity from one source to another would

fall within the ambit of “distribution.” It is argued that in the

context of railways, the conveyance of electricity from

traction and non-traction substations through wires and

associated electrical systems to points of end use does not

merely amount to transmission or consumption in its area of

operation, but constitutes “distribution of electricity” within

the meaning and scope of the Electricity Act.

(h) Section 2(70) that defines “supply” as the sale of

electricity, is not a licensed activity under the Electricity Act.

Under the previous regime of the Indian Electricity Act, 1910,

its Section 3 specifically provided for the grant of a license to

a person for the supply of energy within a specified area,

along with the laying of electric supply lines for the

conveyance and transmission of energy.

C.A. Nos. 4652-59/2024 Page 17 of 59

(i) The statutory scheme of the Electricity Act consciously

departed from this position and distinguishes the two terms of

“distribution” and “supply”. The present statutory framework

under the Electricity Act reflects a deliberate legislative shift

by excluding “supply of electricity” as a licensed activity,

while retaining the licensing requirement for “distribution”,

thereby maintaining a clear distinction between the two

activities. It is submitted that the distinction has been

overlooked by APTEL, as it held that the Appellant cannot

claim the status of a DDL under Section 14 of the Act, as it is

not in the business of selling electricity to consumers, and is

only an end user of electricity. Being an entity of the Central

Government, it is an Appropriate Government and has the

status of a DDL as per the third proviso to Section 14 of the

Electricity Act. Section 2(5)(a) of the Electricity Act contains

no restriction that the reference to the Central Government

should be only with the references to the activities of other

agencies, supervised or regulated by the Central Government.

8. Ms. Aishwarya Bhati, learned ASG appearing for the Union

of India, submitted that:

(a) The Indian Railways is integrated with the Central

Government, and qualified as the “Appropriate Government”

under Section 2(5)(a)(ii), of insofar as:

C.A. Nos. 4652-59/2024 Page 18 of 59

(i) Railways is a union subject in terms of the

Seventh Schedule of the Constitution of India;

(ii) Rail Budget is part of the General Budget, and

its receipts and expenditure form part of the

Annual Financial Statement under Article 11;

(iii) Revenue generated by the Railways is credited

to the Consolidated Fund of India, confirming

its status as a departmentally run undertaking of

the Union.

(b) The Government of India (Allocation of Business),

Rules, 1961 and the Government of India (Transaction of

Business) Rules, 1961 further reflect the sovereign status of

the Ministries of the Government of India. It is argued that the

fiscal identity of the Ministry of Railways is inseparable from

the Union of India and the national exchequer. The status of

the Appellant flows from the sovereign executive power of

the Union under Article 73 of the Constitution.

9. Based on the aforesaid submissions, learned senior counsels

urged this Court to allow the Appeal and set aside the Impugned

Judgment of APTEL, and further grant non-discriminatory open

access to the Appellant, recognizing its status as a DDL in terms of

the third proviso to Section 14 of the Electricity Act.

C.A. Nos. 4652-59/2024 Page 19 of 59

Submissions on behalf of Respondents

10. Per contra, it has been asserted by the Respondents’

DISCOMS that the Indian Railways is not a DDL under the

Electricity Act. It is submitted that the Appellant is misconstruing

Section 11 read with Section 2(31) of the Railways Act to contend

that it is authorized to distribute electricity. As per the said

contention, the statutory framework under the Railways Act, only

empowers the Appellant to consume electricity for its own use, and

does not extend to the supply of electricity to consumer.

11. The DISCOMS were represented by learned Senior Counsels

Mr. C.A. Sundaram, Mr. Vaidyanathan, Mr. Maninder Singh, Mr. S.

Poovayya, Mr. Parag Tripathi, appearing on behalf of their

respective Respondents. The present submissions are common to all

the Respondents herein and are being advanced collectively under a

single head for the sake of brevity and convenience.

12. The submissions advanced on behalf of the Respondent-

DISCOMS collectively and individually are summarized as follows:

(a) Mr. Vaidyanathan, learned Senior Counsel for

WBSEDCL submitted that distribution is inextricably linked

with the supply by way of sale of electricity to consumers

within an area of supply, and that the levy of Cross-Subsidy

Surcharge and Additional Surcharge is a statutory

C.A. Nos. 4652-59/2024 Page 20 of 59

consequence of a consumer availing open access from a

source other than the distribution licensee within its area.

(b) Section 11(g) of the Railways Act is a provision

appearing under the Chapter titled “Construction and

Maintenance of Works”. It merely authorizes the Appellant to

erect, operate, maintain or repair any electric traction

equipment, power supply and distribution installation in

connection with the working of the railways. The non-

obstante provision therein would only be restricted to clauses

(a) to (h). Furthermore, there is no inconsistency between

Sections 14 and 42 of the Electricity Act and Section 11 of the

Railways Act in terms of Sections 173 of the Electricity Act.

Thus, the Electricity Act shall apply.

(c) Mr. S. Poovayya, learned Senior Counsel for various

TP Odisha DISCOMS, submitted that a system that does not

ultimately connect to the installation of a consumer is not a

distribution system at all under the Electricity Act as Section

2(19) of the Electricity Act defines “distribution system” as

under:

"distribution system" means the system of

wires and associated facilities between the

delivery points on the transmission lines or

the generating station connection and the

point of connection to the installation of the

consumers;

C.A. Nos. 4652-59/2024 Page 21 of 59

(d) He submitted that the definition itself indicates that a

distribution system is intended for connection to the

installation of the consumer or last-mile connectivity. In the

context of Railways, only if the system of wires and facilities

is connected to the end point of transmission lines or a

generator with the point of connection to a consumer, will it

fall within the specific definition of a distribution system

under the Electricity Act.

(e) Adverting to the activities of the Indian Railways, he

submitted that an installation laid down for the functioning of

the Railways, which does not ultimately connect to the

premises of a consumer cannot be considered a consumer

under the Electricity Act. For this reason alone, the Railways’

internal network and conveyance of electricity within its area

of operation, falls outside the scope of a distribution system

set up for the supply of electricity.

(f) He further submitted that “conveyance” of electricity

does not constitute “distribution” of electricity. Even if the

sub-station serves as the delivery point or the final point of

connection, it is only an additional point of internal

distribution installation, and the power procured by the

Railways continues to be consumed solely by itself.

(g) Mr. Maninder Singh, learned Senior Counsel appearing

on behalf of KSEBL submitted that the Petition O.P. No.

C.A. Nos. 4652-59/2024 Page 22 of 59

31/2019 filed by the Appellant before the KSERC had sought

the grant of open access to avail power supply from a

generating station in Bihar or any other source to the Railway

traction substations. It is argued that the nature of relief

sought by the Appellant was itself for its own consumption,

and not for the further distribution or supply to consumers.

Thus, the Appellant is a consumer as it procures electricity for

its own end-use and operations. Hence, KSERC vide Order

dated 12.12.2019 had directed that the DISCOM/KSEBL

shall issue a No-Objection Certificate in favour of the

Appellant to avail open access subject to the payment of

charges applicable to consumers.

(h) Mr. Singh further argued that the Appellant is not an

Appropriate Government in terms of the third proviso to

Section 14 as the definition is context dependent and does not

fulfil the statutory scheme of the Electricity Act. In particular,

Section 2(5)(ii) provides twin conditions that for the Central

Government to be the Appropriate Government there must be

any Inter-State generation, transmission, trading or sale with

respect to the Railways. None of the four activities are

undertaken by the Railways. Accordingly, it is not the

Appropriate Government.

(i) He further submitted that the electricity provided by the

Railways within its premises to its vendors, contractors or

C.A. Nos. 4652-59/2024 Page 23 of 59

agencies is not supply of electricity, as “supply” is defined

under Section 2(70) to mean sale of electricity to consumers.

In the present case, the Railways admittedly does not sell the

electricity to consumers, nor does it have any consumers. The

reliance on Northern Railways (supra) is misplaced as the

judgment dealt with the power of the Railways to construct

its own transmission lines, emphasising the non-obstante

provision in Section 11. It is nowhere held that while

consuming the electricity supplied directly by a Generating

Company, it would be treated as engaged in distribution of

electricity. In fact, the issue of distribution was never

considered or dealt with.

(j) Mr. Singh, also brought our attention to the Draft

Electricity Amendment Bill, 2025, and placed reliance on

Board of Control for Cricket in India v. Kochi Cricket Pvt.

Ltd. & Ors.

7

to assert that the proposed bill to amend a

provision demonstrates that the provision cannot be

interpreted in terms of the proposed amendment which has

not been passed, and buttress the submission of the Appellant

that the exemption in the proposed Electricity Amendment

Bill, 2025 shall be applicable to the Appellant even before the

enactment.

7

[2018] 6 SCC 287

C.A. Nos. 4652-59/2024 Page 24 of 59

(k) Mr. Parag Tripathi, learned Senior Counsel appearing

on behalf of PSPCL, while re-iterating the submission by

other Senior Counsels specifically brought our attention to the

Handbook on Power Supply Installation in Electric Traction

issued by the Indian Railway Engineering Institute which

provided that though the power supply and distribution

system is maintained by the Appellant, power is availed by

the Railways from the ‘supply authority’ either as a consumer

of a distribution licensee or through a bilateral transaction via

open access. This factum alone establishes that the Appellant

is a consumer under the Electricity Act.

(l) Mr. C.A. Sundaram, learned Senior Counsel for

SBPDCL reiterating the submissions made by the other

Counsels, has further vociferously argued that the Railways

is not the Appropriate Government for the purposes of the

third proviso to Section 14 of the Electricity Act. He

submitted that the mere fact that the Central Government is

running the Railways, it will not convert the activity of

carrying on of a business into an activity of the Central

Government as a sovereign body. It was urged that the

“appropriate Government” would necessarily mean the

Government in its sovereign capacity and not the Government

C.A. Nos. 4652-59/2024 Page 25 of 59

running its business and in exercise of its powers vested under

Article 298 of the Constitution

8

.

(m) Mr. Sundaram further brought our attention to the

definition of “railway administration” under section 2(32) of

the Railways Act, and that the mere fact that the Central

Government oversees the operations of the Railways does not

transform the Railways or the railway administration into the

Central Government itself. He further urged that the supply

of electricity by the Appellant to its entities due to a jural

relationship is not supply of electricity.

(n) He further submitted that the proposal of a Draft

Electricity Amendment Bill, 2025 seeks to amend Section

61(g) of the Electricity Act insofar as it aims to reduce and

eliminate the Cross-Subsidy Surcharge for railways within

five years. It is contended that the legislative proposal to

amend the existing legal framework and reduce the Cross-

Subsidy Surcharge for the Indian Railways, itself denotes that

no such provision or privilege exists under the current statute

that absolves the Appellant from payment of the Cross-

Subsidy Surcharge applicable to any consumer in terms of

Section 42 of the Electricity Act.

8

Union of India & Anr. v. Sri Ladulal Jain [1963 SCC Online SC 133]

C.A. Nos. 4652-59/2024 Page 26 of 59

13. Based on the aforesaid submissions, learned Senior Counsels

urged this Court to dismiss the Appeal and uphold the Impugned

Judgment of APTEL.

Issues

14. Based on the submissions of the parties, the specific issues

which arise for determination are:

(i) Whether the activities provided under Section 11(g) and

(h) of the Railways Act pass muster of “distribution” of

electricity, and whether such activities are a necessary

pre-requisite to qualify as a DDL under the Act?

(ii) Whether the Indian Railways, being an entity of the

Central Government, falls within the ambit of

“Appropriate Government” under Section 14 of the Act?

(iii) Whether the Indian Railways, even if held to be a DDL

under the Act, is exempt from the obligation to pay

Cross-Subsidy Surcharge or additional surcharge for the

grant of non-discriminatory open access as per Section

42 of the Act?

(iv) Whether a proposed legislation may be relied upon as an

aid to statutory interpretation for addressing gaps in the

existing framework, and to give effect to the

parliamentary intent to remedy defects thereunder?

C.A. Nos. 4652-59/2024 Page 27 of 59

Analysis

Issue (i): Whether the activities provided under Section 11(g) and

(h) of the Railways Act pass muster of “distribution” of electricity,

and whether such activities are a necessary pre-requisite to qualify

as a DDL under the Act?

15. Before examining whether the activities of the Appellant fall

within the purview of a distribution licensee (or a deemed

distribution licensee, as the case may be), it is crucial to examine the

statutory scheme of the Electricity Act to understand the framework

governing the grant of a license as well as obligations accrued to

such licensee.

16. The distribution of electricity under the Electricity Act is

subject to a strict licensed framework. Section 2(17) defines

“distribution licensee” as a licensee authorised to operate and

maintain a distribution system for supplying electricity to

consumers in its area of supply. The term “distribution system” is

separately defined under Section 2(19) as the system of wires and

associated facilities between delivery points on the transmission

lines or the generating station connection and the point of

connection to the installation of the consumers. A conjoint reading

of the two provisions makes it clear that any person or entity seeking

the grant of a distribution license under Section 14 of the Electricity

Act must mandatorily fulfil the twin requirements- (a) operating and

maintaining a distribution system for supply of electricity to

C.A. Nos. 4652-59/2024 Page 28 of 59

consumers and (b) supplying electricity to consumers within their

area of supply.

17. These twin requirements reiterated under Section 42(1) of the

Electricity Act and Sesa Sterlite (supra), mandate that it is the duty

of a distribution licensee to develop and maintain a distribution

system in his area of supply and to supply electricity in accordance

with the Electricity Act. The term “area of supply” defined under

Section 2(3) of the Act, means the area within which a distribution

licensee is authorised by his license to supply electricity. A bare

reading of the provision indicates that the mere operation and

maintenance of a distribution system is not the exclusive basis for

the grant of a licence for distribution of electricity. Such a system

must ultimately supply electricity and connect to the point of

connection of a consumer as its end-use.

18. A plain reading of the provisions mentioned hereinabove

makes it evident that the obligation of a distribution or a DDL to

supply electricity is mandatory in nature, and is a necessary

corollary of the interpretation of the current statute. For this reason,

the argument raised by the Appellant that ‘supply’ of electricity is

not a licensed activity under the current statutory regime of the

Electricity Act and was a feature only under the Indian Electricity

Act, 1910, is a semantic issue at best.

19. Be that as it may, the Appellant claims it is a DDL in terms of

the third proviso to Section 14 of the Electricity Act. It differentiates

C.A. Nos. 4652-59/2024 Page 29 of 59

between the two terms “distribute” and “supply”, and asserts that

the Railways Act statutorily empowers the Appellant to undertake

distribution of electricity. Section 11(g) of the Railways Act

authorises the Railway Administration to erect, operate, maintain or

repair electric power supply, and distribution in connection with the

working of the railway; and Section 11(h) authorises doing all other

acts necessary for making, maintaining, altering or repairing and

using the railway. Both provisions, empower the Railways to lay,

maintain and operate power supply infrastructure for its operations.

It is contended by the Appellant that the express use of the term

“distribution installation” in Section 11 is equivalent to the term

“distribution system” under the Electricity Act and constitutes an

independent legislative recognition that the Railways is statutorily

empowered to distribute electricity.

20. The submission of the Appellant is that there is no distinction

between a “distribution system” under the Electricity Act or a

“distribution installation” under the Railways Act. The term

“distribution installation” is not defined under either of the statutes,

whereas the term “distribution system” has been specifically defined

as a system of wires and associated facilities between delivery points

on the transmission lines or the generating station connection and

the point of connection to the installation of the consumers.

21. Even if we consider that the term “distribution installation” as

the term suggests, refers to a distribution or electric infrastructure

C.A. Nos. 4652-59/2024 Page 30 of 59

authorised to be set up by the Appellant to ensure power supply for

railway operations, it cannot be considered akin to a distribution

system. The definition of a distribution system is two pronged, it is

a system of wires and associated facilities between the delivery

points on transmission lines or generating companies, which

ultimately terminates at the installation of a consumer or the point

of last-mile connectivity. For this very reason, a distribution

installation which merely conveys electricity within the integrated

railway system, from the overhead equipment to the power

locomotives, communication systems, signals and station facilities,

for its own consumption and use, and does not translate into sale or

supply of electricity to a consumer

against consideration, cannot be

held to be within the meaning and scope of a distribution system

under the Electricity Act.

22. Additionally, a distribution system also extends to a definite

and specific area of supply. The term ‘area of supply’ defined under

Section 2(3) of the Electricity Act, refers to the area within which

the distribution licensee is authorised by his license to supply

electricity. The Appellant has contended that the area of supply

under the Electricity Act, would mean the same as the area of

operation used under the Railways Act.

23. At the outset, although, the parallels drawn by the Appellant

may prima-facie seem justiciable, the two terms area of supply and

area of operation cannot denote the same meaning. The area of

C.A. Nos. 4652-59/2024 Page 31 of 59

supply necessarily refers to a designated or authorised area, where a

distribution licensee has been granted the exclusive (or non-

exclusive) right to supply electricity. As such, the Respondent

DISCOMs hold licences granted by their respective State

Commissions demarcating precise territorial limits within which

they are authorised to distribute electricity.

24. On the other hand, an area of operation refers to the operative

dimensions of an entity. In the context of Railways, it would mean

the integrated railway system spread across the length and breadth

of the country, however only limited to operational use and limit of

the railway network. The Appellant’s contention that boundaries,

fences or gates earmarked by the Central Government under Section

18 of the Railways Act, defines the area of supply for the Appellant

is wholly misconceived. To accept this submission of the Appellant

would be to hold that the pan-India operational footprint of the

Indian Railways, constitutes a single area of supply under the

Electricity Act. This is wholly absurd and inconsistent with the

scheme of the Act, insofar as the term “area of supply” is clearly

defined as a subject of the licensing obligations of a distribution

licensee and not an area of operation.

25. Notably, under certain sub-delegated legislations issued by

the respective State Commissions, the area of supply is also referred

as the area of distribution. In the context that the terms “distribution”

and “supply” have been used interchangeably save as otherwise

C.A. Nos. 4652-59/2024 Page 32 of 59

provided, they refer to the salient act of sale of electricity to a

consumer. In context thereof, it appears that the Appellant has taken

refuge under the two terms of ‘distribution installation’ and ‘area of

operation’ under the Railways Act to suggest that it distributes

electricity and, hence, is a DDL under the Electricity Act.

26. Furthermore, the submission of the Appellant that the non-

obstante clause under Section 11 of the Railways shall override the

licensing requirements of the Electricity Act, is premature and

untenable. It is settled that Section 11 of the Railways Act cannot be

given a restrictive meaning, however it cannot be read so

expansively as to dispense with the mandatory licensing framework

under Section 12 and 14 of the Electricity Act. A non-obstante

clause operates only in the event of a direct and irreconcilable

inconsistency and cannot function as a blanket dispensation from

the applicability of a subsequent and special regulatory statutory

framework qua a specific subject matter. This Court in Central

Bank of India v. State of Kerala & Ors.

9

had clearly opined that the

mere introduction of a non-obstante clause in the legislation is not

sufficient to clothe a provision with an overriding effect, and what

must further be established is that the two provisions are so

inconsistent that they cannot stand together. The Appellant in the

present case has failed to demonstrate that there is a irreconcilable

conflict between the Railways Act and the Electricity Act. There is

9

[2009] 4 SCC 94

C.A. Nos. 4652-59/2024 Page 33 of 59

neither any provision under the Railways Act that prohibits

obtaining a license, nor any provision of the Electricity Act exempts

the railways from being a DDL in terms of section 14. The Appellant

can exercise their operational powers under section 11, while

simultaneously comply with the licensing framework under the

Electricity Act. It is a cardinal principle of statutory interpretation

that when two statutes are capable of being read harmoniously, the

judicial endeavour must be to read them together.

10

27. We further deem it appropriate to also clarify that the reliance

of the Appellant on Ganv Bhavancho Ekvott (supra) is

misconceived. The import and independence of section 11

recognised therein was limited to the exemption to the Railways

from procedural permissions including general environmental

clearances, and local body legislations. The exemption can in no

manner be construed as a blanket immunity from regulatory,

procedural and legislative requirements as noticed in the cited

decision itself. The judgment is distinguishable both on facts, and

on the nature of the conflicting statute, and offers no authority for

the proposition that the Appellant is exempted from the regulatory

framework under the Electricity Act. Additionally, the authority

vested in the Appellant to distribute electricity within its operational

domain cannot be said to be unfettered insofar as it has to meet the

10

Sri Venkataramana Devaru & Ors. v. State of Mysore &Ors. [1957 SCC

OnLine SC 138]

C.A. Nos. 4652-59/2024 Page 34 of 59

fundamental requirements of distribution of electricity, within the

meaning and scope of the Electricity Act. Section 11 on the facts and

circumstances of the present case, cannot be read as a provision of

unlimited sweep, and it is therefore incorrect to contend that Section

11 of the Railways Act operates as an absolute and unrestricted

shield guarding the appellant from its obligations.

28. We are also of the considered view that the omission of the

words “distribution” or “supply” of electricity in Sections 11(g) and

(h) is deliberate and intentional. The legislature while framing these

provisions certainly intended to empower the Appellant solely to

erect and operate a distribution infrastructure necessary for railway

operations. The language clearly confines the purpose of these

installations to the operational use of Railways and does not extend

any authority to the Appellant to undertake a commercial

distribution or supply of electricity, beyond the railway’s internal

domain.

29. We further agree with the observation of APTEL and the

submissions made by the Respondents that the reliance of the

Appellant on the decision of General Manager, Northern Railways

(supra) is misplaced. The decision in the said case expressly dealt

with the power of the Railways to construct transmission lines for

the purpose of its operations, and described the expansive scope of

the non-obstante clause under Section 11 of the Railways Act. The

said decision however, did not construe the scope of Section 11 as

C.A. Nos. 4652-59/2024 Page 35 of 59

being so expansive that it justifies an act that the Railways is not

inherently empowered to do. The erection of transmission lines or

distribution lines as argued by the Appellant, cannot bestow upon

the Appellant the authorisation to carry out supply of electricity that

is procured by it, to third party consumers.

30. At this juncture, we deem it appropriate to also observe that

the submission of the Appellant that it is a deemed distribution

licensee, lacks any substantial basis. The statutory regime under the

Electricity Act regulates the commercial supply of electricity to

consumer through a licensed distribution network.

31. The Appellant, operates a closed and self-contained

electricity network which is for the purposes of meeting the

operational requirements of the railway system, including traction,

signalling, stations. It is only when electricity is sold or provided to

consumers outside the operational domain of the railway, that the

activities undertaken by the Appellant could intersect with the

obligation of a distribution licensee.

32. Further, the purpose of a status of a distribution licensee,

whether obtained vide an application or is extended to the entity

through a deemed fiction, is to supply electricity against

consideration. The term ‘consideration’ for distribution licensees

with generators would mean tariff, and as consumers payable to

licensees would mean additional surcharge/Cross-Subsidy

Surcharge. In the present case, the Railways is procuring electricity

C.A. Nos. 4652-59/2024 Page 36 of 59

from the Respondent DISCOMs in various states for its own use and

for consumption to its constituents.

33. The judgment in K.C. Ninan v. Kerala State Electricity

Board & Ors.

11

has authoritatively re-iterated that supply of

electricity is a primary and defining function of a distribution

licensee. The regulatory regime under the Indian Electricity Act,

1910 also posed an obligation on every licensee to supply energy to

every person within the area of supply. Hence, the statutory

regime/regulatory regime under the Electricity Act has been

consistent. Additionally, electricity is a movable good

12

under the

Sale of Goods Act, 1930. The charges paid by the consumer to the

distribution licensee is essentially the price paid for goods supplied

and consumed. The consumption of electricity by a consumer is

always effected through equipment or appliances installed within

the premises.

34. The tenuous claim of the Appellant is merely based on a thin-

iced assertion that being an entity of the Central Government, the

deeming fiction of an Appropriate Government, as meant to be

under the third proviso to Section 14 of the Electricity Act would

ipso facto devolve upon them without much effort.

11

[2023] 14 SCC 431

12

Commissioner of Sales Tax vs Madhya Pradesh Electricity Board [1961] 1 SCC

200

C.A. Nos. 4652-59/2024 Page 37 of 59

35. More-so, the arguments made by the Appellant are more in

the nature of asserting this misplaced notion than being rooted in the

conviction that the activities carried out by it pass muster for a

distribution license in the first place. Hence, the claim of the

Appellant that it is a DDL is not borne from the activities or

functions performed by the railways, but is aimed at the recognition

of being a distribution licensee under the Act, insofar as it is entitled

to non-discriminatory open access from inter-state transmission

utilities and other distribution licensees, without the payment of

Cross-Subsidy Surcharge or additional surcharge.

36. In light thereof, it is pertinent to reflect on the submissions

made by the Appellant whereby it asserts that it is not claiming the

right to do any other activity outside the purpose of the Railways

operations or unconnected with the workings of the Railways,

including the right to supply electricity to third parties beyond the

network of Railways or enter into any business or trade of

distributing or using the electricity outside its area of operation. This

stated position, in fact, answers the controversy, and underscores

that the Appellant does not seek to assume the scope of functions

associated with a distribution licensee. In effect, the Appellant does

not seek to assume, nor does it accept, the role and obligations of a

distribution licensee under the Electricity Act, 2003 and instead

selectively relies on such status only to the extent it is beneficial.

C.A. Nos. 4652-59/2024 Page 38 of 59

37. This conduct further substantiates the apprehension of the

Respondents that the Appellant’s claim to be treated as a DDL is to

merely circumvent the obligation of payment of the Cross-Subsidy

Surcharge and to evade the corresponding statutory and regulatory

obligations qua a distribution licensee.

Issue No. (ii) Whether the Indian Railways, being an entity of the

Central Government, falls within the ambit of “Appropriate

Government” under section 14 of the Electricity Act, 2003?

38. The Appellant’s claim to be treated as a deemed distribution

licensee under the third proviso to Section 14 of the Electricity Act,

2003 hinges upon whether it is squarely covered by the definition of

‘Appropriate Government’ defined under section 2(5) of the Act,

2003, which reads as under:

“(5) Appropriate Government” means-

(a) the Central Government-

(i) in respect of a generating company wholly or

partly owned by it;

(ii) in relation to any inter-State generation,

transmission, trading or supply of electricity and

with respect to any mines, oil-fields, railways,

national highways, airports, telegraphs,

broadcasting stations and any works of defence,

dockyard, nuclear power installations;

(iii) in respect of the National Load Despatch

Centre and Regional Load Despatch Centre;

C.A. Nos. 4652-59/2024 Page 39 of 59

(iv) in relation to any works or electric installation

belong to it or under its control;

(b) in any other case, the State Government having

jurisdiction under this Act.”

39. The Appellant contends that it is entitled to the status of a

deemed distribution licensee by operation of law, on the ground that

it qualifies as an appropriate Government being an instrumentality

of the State under Article 12 of the Constitution. In contrast, the rival

contention of the Respondent argues that section 2(5) of the

Electricity Act restricts the scope of “Appropriate Government”, and

that an entity can fall within the statutory domain only if it satisfies

the conditions laid down under section 2(5)(a), particularly clause

(ii), having regard to the nature and functions of the entity in

question.

40. Before we advert to the functional test, a plain reading of

section 2(5)(a)(ii) makes it evident that the subject of the definition

is the Central Government, and the term “railways” appears only as

a relative reference, and a subject-matter that triggers the application

of the Central Government. Insofar as the provision does not extend

that the Railways itself is the Appropriate Government, it only

expands the scope of the term to include the Central Government in

matters relating to railways.

C.A. Nos. 4652-59/2024 Page 40 of 59

41. This distinction at the very outset is critical to the

identification of an entity claiming to be clothed with governmental

authority. In arguendo, if the term “railways” in section 2(5)(a)(ii)

were read as conferring the status of an “Appropriate Government”

to the Appellant, the deeming fiction shall extend to all other

authorities mentioned in the provision including mines, oil-fields,

airports, dockyards and nuclear installations. This clearly does not

reflect the legislative intent of this provision. The categories of

functionaries mentioned in section 2(5)(a)(ii) merely reflect a class

of activities, and not stand-alone entities that can be conferred the

status of an “appropriate Government” for the purposes of the

statute.

42. It is also a well-settled principle of law that the mere

classification of an instrumentality or agency as “State” under

Article 12 of the Constitution of India does not automatically render

it as an “Appropriate Government”. This position was

authoritatively settled by this Court in the Steel Authority of India

Ltd. & Ors. v. National Union Waterfront Workers & Ors.

13

This

Court distilling from its earlier decisions in Sukhdev Singh & Ors.

v. Bhagatram Sardar Singh Raghuvanshi & Anr.

14

and Ajay Hasia

& Ors. v. Khalid Mujib Sehravardi & Ors.

15

, laid down a functional

test holding that the determinative criterion is whether the industry

13

(2001) 7 SCC 1

14

(1975) 1 SCC 421

15

(1981) 1 SCC 722

C.A. Nos. 4652-59/2024 Page 41 of 59

is carried on under the authority of the Central Government, and not

merely whether the entity qualifies as “State” under Article 12 of the

Constitution. The relevant extract of the judgment reads as under:

“38.From the above discussion, it follows that the

fact of being an instrumentality of a Central/State

Government or being ‘State’ within the meaning of

Article 12 of the Constitution cannot be

determinative of the question as to whether an

industry carried on by a company/corporation or an

instrumentality of the Government is by or under the

authority of the Central Government for the

purpose of or within the meaning of the definition of

‘appropriate Government’ in the CLRA

Act….Further, the definition of establishment in the

CLRA Act takes in it fold purely private

undertakings which cannot be brought within the

meaning of Article 12 of the Constitution. In such a

case, how is ‘appropriate Government’ determined

for the purposes of the CLRA Act or the Industrial

Disputes Act? In our view, the test which is

determinative is: whether the industry carried on by

the establishment in question is under the authority

of the Central Government. Obviously, there cannot

be one test for one part of the definition of

‘establishment’ and another test for another part.

Thus, it is clear that the criterion is whether an

undertaking/instrumentality of the Government and

not whether the undertaking is an instrumentality or

agency of the Government for purposes of Article

12 of the Constitution, be it of the Central

Government or the State Government.”

C.A. Nos. 4652-59/2024 Page 42 of 59

43. Upon applying the aforesaid test, it is evident that the

Appellant operates as a functionary of the Central Government.

Although, the mention of ‘railways’ in Para 38 of the Court in SAIL

(supra) is cursory and illustrative in nature, the statutory scheme of

the Railways Act and the Statement of Objects and Reason

thereunder confirm that the entire railway system has become part

of the Government of India. The Railway Board constituted under

the Act, functions as an extended arm of the Central Government,

with the powers delegated to it by the Government itself. It is no

doubt that the Central Government has an authoritative control over

the Railways.

44. A fortiori, the Central Government exercises control over the

Appellant insofar as the electric installations comprising traction

sub-stations, the overheard catenary systems, high voltage

transmission lines, the 25 kV and 1.5 kV alternating current systems

etc., are owned by the Central Government. The construction and

maintenance work of these equipments are carried out from public

funds appropriated by the Parliament from the Consolidated Fund

of India.

45. It is thus evident that the nominal, pervasive, administrative

as well as fiscal control of the Appellant lies in the clutches of the

Central Government. The submission of the Respondents to draw a

distinction between the ‘Central Government’ and ‘railway

administration’ is therefore untenable, as such a distinction does not

C.A. Nos. 4652-59/2024 Page 43 of 59

dilute the overarching control exercised by the Central Government

and borders on technicality.

46. We agree with the observation made by APTEL that the

submission urged on behalf of the Respondent merits rejection.

However, we cannot assert enough that even if the Appellant is held

as falling within the ambit of Appropriate Government, under

section 2(5)(a), the benefit of being treated as a deemed distribution

licensee cannot be extended to it. The scheme of the Electricity Act

makes it clear that a distribution licensee is under the statutory

obligation to supply electricity to its consumers within its area of

supply.

47. Notably, the Appellant’s electrical infrastructure including

traction sub-stations, overhead catenary systems, and 25kV

alternating current systems, exists entirely for captive self-

consumption for traction purposes and not for supply to third party

consumers. The case of the Appellant cannot be held in equivalence

with the Military Engineering Services (MES) which is a recognized

deemed distribution licensee and equally operates under the

authority of the Central Government as much as the Appellant. The

distinction between the two entities is apparent such that MES

supplies electricity to consumers which include residents, personnel

and establishment within the defined cantonment and defense areas,

unlike the Appellant. As a matter of fact, it is the own admission on

behalf of the Appellant that it is not claiming the right to give supply

C.A. Nos. 4652-59/2024 Page 44 of 59

or provide electricity to third parties unconnected with the working

of the railways or outside the area of operation of the Railways or

enter into any business or trade of distributing electricity or using

electricity outside its area of operations.

48. Therefore, the deemed status attached to the MES is not by

virtue of it being a government entity, but it is a governmental entity

that actually performs the function of distribution within the

meaning and scope of the Electricity Act. It is apparent on the face

of record that the Appellant has no such analogous relationship with

any consumer, and its claim to the deemed distribution licensee

status fails at the very threshold.

49. At this juncture, we deem it appropriate to clarify that the

Letters dated 06.05.2014 and 03.04.2023 issued by the Ministry of

Power, are not authoritative in nature, and carry no binding legal

force. They are no more than executive communications that neither

amend nor override the statutory provisions under the Act, and

certainly cannot be relied upon to confer or negate jurisdiction. It is

rather unfortunate that the Appellant has pursued this lis for over 10

years based solely on the tenuous claim that, as a Central

Government entity, it automatically qualifies as the “Appropriate

Government” under the third proviso to section 14 of the Electricity

Act. This argument is more a reliance on a misplaced notion than a

demonstration that the Appellant’s activities satisfy the criteria for a

distribution licensee.

C.A. Nos. 4652-59/2024 Page 45 of 59

50. For the reasons mentioned hereinabove and for the limited

purpose of this analysis, the Appellant is regarded as falling within

the ambit of “Appropriate Government” under section 2(5)(a) of the

Act, but the observation carries no determinative consequence for

the relief sought by the Appellant. Nominal virtue, however firmly

established, cannot substitute for the substantive functions that the

statute demands.

Issue No. (iii) Whether the Indian Railways, even if held to be a

deemed distribution licensee under the Act, is exempt from the

obligation to pay Cross-Subsidy Surcharge or Additional Surcharge

for the grant of non-discriminatory open access as per section 42 of

the Act?

51. Section 42 of the Electricity Act mandates the distribution

licensees to develop and maintain an efficient, co-ordinated and

economical distribution system in the area of supply, and to supply

electricity to any consumer, who demands it. To foster competition

and consumer choice, the Electricity Act enables consumers to

procure electricity either from the distribution licensee in their area

of supply or from alternative sources through open access. Section

2(47) defines “open access” as follows:

“(47) “open access” means the non-discriminatory

provision for the use of transmission lines or

distribution system or associated facilities with such

lines or system by any licensee or consumer or a

person engaged in generation in accordance with

C.A. Nos. 4652-59/2024 Page 46 of 59

the regulations specified by the Appropriate

Commission”

52. Where any consumer avails electricity through open access,

two distinct surcharges arise under the Electricity Act. Section 42(2)

levies a Cross-Subsidy Surcharge to meet the requirements of the

current level of cross-subsidy within the area of supply, while

section 42(4) levies an Additional Surcharge to meet the fixed costs

of the distribution licensee arising out of its obligation to supply.

53. Distribution licensees are mandated, as a matter of social

policy, to supply electricity at concessional tariffs to certain

categories of consumers, such as agricultural users and low-income

households. These subsidised tariffs ensure equitable access to

electricity, which is essential to the very existence of citizens, as

held in Anuj Kumar Agarwal v. Registrar of Cooperative Societies

& Ors.

16

54. Cross-Subsidy Surcharge is levied on open-access consumers

to off-set the revenue shortfall experienced by distribution licensees

in providing these subsidised tariffs. Thereby, the financial burden

is equitably shared across different consumer categories instead of

burdening the existing consumer base. Additional Surcharge

operates on a distinct footing and is levied to mitigate the potential

financial losses incurred by distribution licensees due to stranded

16

2024 SCC OnLine Del 5087

C.A. Nos. 4652-59/2024 Page 47 of 59

costs. When high-volume, high-revenue consumers such as the

Indian Railways choose to procure electricity through open-access,

distribution licensees may be left with underutilised infrastructure

and power purchase commitments, leading to financial strain. The

National Tariff Policy, 2016 specifically provides that Additional

Surcharge becomes applicable only upon the conclusive

demonstration that a licensee’s existing power purchase obligations

in the capacity of a licensee, has generated precisely such stranded

costs for the distribution licensees in whose areas its traction

installations are located.

55. Thus, the Cross-Subsidy Surcharge and the Additional

Surcharge are critical for maintaining the financial health and

operational capacity of the distribution sector, enabling it to invest

in infrastructure upgrades, ensure reliable service, and continue to

meet its obligations to all consumer categories.

56. The rationale underlying Cross-Subsidy Surcharge and

Additional Surcharge has been authoritatively articulated in Sesa

Sterlite as follows:

“(3) Cross-Subsidy Surcharge (CSS)—Its rationale

27. The issue of open access surcharge is very

crucial and implementation of the provision of open

access depends on judicious determination of

surcharge by the State Commissions. There are two

aspects to the concept of surcharge — one, the

cross-subsidy surcharge i.e. the surcharge meant to

take care of the requirements of current levels of

C.A. Nos. 4652-59/2024 Page 48 of 59

cross-subsidy, and the other, the additional

surcharge to meet the fixed cost of the distribution

licensee arising out of his obligation to supply. The

presumption, normally is that generally the bulk

consumers would avail of open access, who also

pay at relatively higher rates. As such, their exit

would necessarily have adverse effect on the

finances of the existing licensee, primarily on two

counts — one, on its ability to cross-subsidise the

vulnerable sections of society and the other, in terms

of recovery of the fixed cost such licensee might

have incurred as part of his obligation to supply

electricity to that consumer on demand (stranded

costs). The mechanism of surcharge is meant to

compensate the licensee for both these aspects.

28. Through this provision of open access, the law

thus balances the right of the consumers to procure

power from a source of his choice and the legitimate

claims/interests of the existing licensees. Apart from

ensuring freedom to the consumers, the provision of

open access is expected to encourage competition

amongst the suppliers and also to put pressure on

the existing utilities to improve their performance in

terms of quality and price of supply so as to ensure

that the consumers do not go out of their fold to get

supply from some other source.

29. With this open access policy, the consumer is

given a choice to take electricity from any

distribution licensee. However, at the same time the

Act makes provision of surcharge for taking care of

the current level of cross-subsidy. Thus, the State

Electricity Regulatory Commissions are authorised

to frame open access in distribution in phases with

surcharge for:

C.A. Nos. 4652-59/2024 Page 49 of 59

4. (vi)(a) current level of cross-subsidy to be

gradually phased out along with cross-subsidies;

and

(b) obligation to supply.”

30. Therefore, in the aforesaid circumstances

though CSS is payable by the consumer to the

distribution licensee of the area in question when it

decides not to take supply from that company but to

avail it from another distribution licensee. In a

nutshell, CSS is a compensation to the distribution

licensee irrespective of the fact whether its line is

used or not, in view of the fact that, but for the open

access the consumer would pay tariff applicable for

supply which would include an element of cross-

subsidy surcharge on certain other categories of

consumers. What is important is that a consumer

situated in an area is bound to contribute to

subsidising a low end consumer if he falls in the

category of subsidising consumer. Once a cross-

subsidy surcharge is fixed for an area it is liable to

be paid and such payment will be used for meeting

the current levels of cross-subsidy within the area.

A fortiori, even a licensee which purchases

electricity for its own consumption either through a

“dedicated transmission line” or through “open

access” would be liable to pay cross-subsidy

surcharge under the Act. Thus, cross-subsidy

surcharge, broadly speaking, is the charge payable

by a consumer who opt to avail power supply

through open access from someone other than such

distribution licensee in whose area it is situated.

Such surcharge is meant to compensate such

distribution licensee from the loss of cross-subsidy

that such distribution licensee would suffer by

C.A. Nos. 4652-59/2024 Page 50 of 59

reason of the consumer taking supply from someone

other than such distribution licensee.”

57. The legal chain that flows from the foregoing is direct and

clear. As established in Issues (i) and (ii), the Appellant is a

consumer within the meaning and scope of section 2(15) of the

Electricity Act. It purchases electricity exclusively for its own use

and supplies it to no one but its own constituents. Thus, like any

other consumer, Cross-Subsidy Surcharge and Additional

Surcharge are applicable to the Appellant.

58. In arguendo, even if the Railways is treated as a deemed

distribution licensee (DDL), its procurement of electricity through

open access exclusively for its own consumption renders it a

consumer for that purpose. Sesa Sterlite adopted a functionality test

and held that an entity which has been accorded the status of a DDL,

but which utilises the entire quantum of electricity for its own

consumption and does not have any customers, could not be a

distribution licensee under the Electricity Act and would itself be a

consumer. Thus, a functionality test was adopted, and the operations

of a distribution licensee as a consumer were recognised.

Accordingly, such an entity, like the Railways in the present case,

would be liable to pay Cross-Subsidy Surcharge and Additional

Surcharge if it procures electricity through open access.

C.A. Nos. 4652-59/2024 Page 51 of 59

59. The Appellant cannot escape this conclusion by inverting the

argument and contending that as a deemed distribution licensee, it

is free from any payment obligations applicable to any consumer. In

this respect, the Appellant is claiming a privileged treatment as

compared to other consumers, which is impermissible in law.

Issue No. (iv) Whether a proposed legislation may be relied upon

as an aid to statutory interpretation for addressing gaps in the

existing framework, and to give effect to the parliamentary intent to

remedy defects thereunder?

60. The use of legislative history as an aid to statutory

construction is no longer res integra

17

. This Court, in a catena of

decisions

has held that in understanding the legislative intent and

scheme of a statute, recourse to legislative material is permissible.

In the present case, reliance is placed on a legislative proposal which

seeks to substantially alter the statutory scheme of the Electricity

Act. We are conscious that a legislative proposal does not have a

binding force on the interpretation of the existing statute, but a

careful perusal of the proposed enactment may aid in resolving

apparent incongruencies and identifying perceived gaps in the

existing framework.

61. In the present case, the legislative history of the Electricity

Act reflects that previous proposals

in 2014 and 2018 had sought to

17

Kalpana Mehta vs Union of India [2018] 7 SCC 1

C.A. Nos. 4652-59/2024 Page 52 of 59

confer the statutory status of a licensee in favour of the Appellant,

seeking to save it from the binding statutory obligations of paying

Cross-Subsidy Surcharge and additional surcharge. Insofar as,

Section 9 of the Electricity (Amendment) Bill, 2014 sought to

clarify that the Railways shall be a DDL by adding the following

proviso after the present third proviso to Section 14:

“Provided also that the Railways as defined under

the Indian Railways Act and the Metro Rail

Corporation established under the Metro Railways

(Operation and Maintenance) Act, 2002 be deemed

to be a licensee under this Act, and shall not be

required to obtain a licence under this Act”

Be that as it may, this provision of the 2014 Amendment Bill was

rejected and not passed by the Parliament, showing the legislative

intent that the Railways does not constitute a licensee in terms of

Section 14 of the Electricity Act.

62. The Respondents' DISCOMS brought our attention to the

Fourth Report of the Standing Committee on Energy dated

07.05.2015, which recorded the unequivocal admission by the

Appellant that it is not a DDL under the scheme of the Electricity

Act. APTEL had also placed reliance on the 31

st

Report of the

Parliamentary Standing Committee, which recorded that the

Appellant had sought exemption from the obligations of distribution

licensees under Section 12, 42, and 47 of the Electricity Act. The

request for exemption from the applicability of the Electricity Act

C.A. Nos. 4652-59/2024 Page 53 of 59

was neither acceded to by the Parliamentary Standing Committee

nor accepted by the Parliament.

63. The latest Draft Electricity (Amendment) Bill, 2025,

particularly seeks to amend Section 61(g) of the existing statutory

regime under the Act, to progressively reduce and ultimately

eliminate the Cross-Subsidy Surcharge and Additional Surcharge

for the Appellant.. The proposed provision under Section 12 reads

as under:

“(g) that the tariff reflects the cost of supply of

electricity and also, progressively reduces cross-

subsidies in the manner specified by the

Appropriate Commission;

Provided that cross-subsidy with respect to

Railways, Metro Railways and Manufacturing

Enterprises shall be fully eliminated within five

years from the date of commencement of the

Electricity (Amendment) Act, 2025.”

64. The Explanatory Note on the proposed Amendment Bill

makes a specific mention that the Indian Railways and

metro/monorail systems are currently burdened by cross-subsidies

and surcharges, and proposes to exempt the Appellant from cross-

subsidy within five years. A bare reading of the Note confirms that

under the extant regime, the Appellant is treated like any other

consumer. It reads as under:

“2.2. Reducing Logistics and Mass Transit

Cost: Electricity tariffs for Indian Railways and

Metro/Mono Rail systems are currently burdened by

C.A. Nos. 4652-59/2024 Page 54 of 59

cross-subsidies and surcharges, which increase

costs of transporting goods and people. These

higher costs ultimately raise the price of goods and

services across the economy. To alleviate this

burden, it is proposed to exempt Manufacturing

Enterprises, Railways, and Metro Railways from

cross-subsidy within five years. This measure will

help lower transport and logistics costs, improve

efficiency, and enhance India’s competitiveness in

global markets.”

Further, the Comparative Statement to the Draft Electricity

(Amendment) Bill, 2025, in contrast with the current Act as it

stands, states the following:

“13. Cross Subsidy and Surcharges on

manufacturing and clean/public transport: State

Commissions impose substantial cross-subsidies

and surcharges on industrial consumers. Industrial

electricity tariffs in India remain considerably

higher than those in developed countries such as the

United States and emerging economies like China,

Vietnam, and Indonesia. This practice significantly

undermines the global competitiveness of Indian

manufacturers by inflating electricity

costs. Elevated electricity costs not only hinder

industrial growth but also stunt employment

generation, and deter foreign

investments. Simultaneously, there is a need to

create significant number of job opportunities in the

manufacturing sector. Micro, Small, and Medium

Enterprises (MSMEs) have a high job creation

potential in the manufacturing sector. Reducing

industrial electricity tariffs can significantly

accelerate the growth of the manufacturing sector

C.A. Nos. 4652-59/2024 Page 55 of 59

MSMEs and enable absorption of the large

agricultural workforce. Access to affordable

power would lower production costs, enhance

competitiveness of Indian manufactured goods, and

facilitate their scale-up from micro to small or

medium enterprises. This, in turn, would strengthen

their contribution to employment generation and

gross value added (GVA), supporting the national

goal of achieving “Viksit Bharat @

2047”. Addressing the high industrial tariff

handicap is crucial to enhancing India’s global

industrial competitiveness, and driving economic

growth. The logistics cost in India constitutes

nearly 14 percent of GDP as opposed to about 8

percent in most major economies. There is a need

to reduce this cost in line with the National Logistics

Policy and make Indian industry cost

competitive. Despite being energy efficient and

running on electricity, Indian Railways and

Metro/Mono rail systems across the country are

subjected to elevated electricity tariffs owing to the

imposition of cross-subsidies and surcharges. This

does not align with the goal of electrifying the

transport sector as part of India’s energy transition

and increasing the rate of energy efficiency

improvement. The higher tariffs result in higher

transportation and logistics costs besides

discouraging goods and passenger modal

shifts. Public transport costs, particularly in urban

and semi-urban areas, impact the wage rates and

standards of living of working classes. The

proposed amendment seeks to address these

challenges by exempting Indian Railways, Metro

rail and manufacturing industries, from payment of

cross-subsidy and surcharges, not later than five

years. This reform aligns with the vision of “Viksit

C.A. Nos. 4652-59/2024 Page 56 of 59

Bharat @ 2047”. It will help in fostering industrial

expansion, attracting investments, and generating

employment opportunities. It reduces the transport

costs for urban commuters and promotes

sustainable economic growth.”

65. On a prima-facie view itself, the nature of the proposed

amendment under the Draft Electricity (Amendment) Bill, 2025 is

remedial in nature. The language used is clear and simple, to address

the existing burden of Cross-Subsidy Surcharge payable by the

Appellant by exempting them from payment of cross-subsidy and

surcharges, within the next five years. By this very objective, an

inference can be made that there was a gap or deficiency that needed

to be filled by legislative action and the shift in the statutory regime

would not have been warranted if the existing statute already

provided for such exemption.

66. As already dealt with hereinabove, it is clear that the

Appellant is a consumer and that it procures electricity for its own

consumption and use. In terms of the Act, open access shall be

granted by the distribution licensee subject to the payment of cross-

subsidy and surcharges as decided by the appropriate Commission.

67. This Court, in Vodafone International Holdings BV v. Union

of India & Anr.

18

, had held that a legislative proposal introducing a

specific provision or exemption is indicative that such provision,

18

(2012) 6 SCC 757

C.A. Nos. 4652-59/2024 Page 57 of 59

exemption, or privilege was not covered by the existing framework.

In the present case as well, the very fact that such legislative actions

to exempt the Appellant from payment of Cross-Subsidy Surcharges

have been proposed to be taken, indicate a coherent, consistent, and

current legislative intent about the absence of such exemption under

the prevailing statute. This absence further implies that even by

adopting a purposive construction to the prevailing statute, such an

exemption cannot be read into the statute.

68. It was urged by the Appellant that since the proposed

amendment grants an exemption from payment of Cross-Subsidy

Surcharge and AS, the same should be read into a liberal and

purposive interpretation in its favour. Otherwise, an interpretation to

impose Cross-Subsidy Surcharge and Additional Surcharge under

the current regime would render the proposed amendment otiose.

We are unable to accept this approach.

69. It is a settled canon of statutory interpretation that a legislative

casus omissus cannot be supplied by a judicial interpretative

process. Be that as it may, the proposed legislative framework in the

present case explicates that the legislative intent of the Parliament

under the Electricity Act was not to exempt the Appellant from the

obligations under the Electricity Act. More so, it puts the

controversy to rest as the Appellant, procuring electricity for its own

use and consumption, is an industrial consumer and for availing

C.A. Nos. 4652-59/2024 Page 58 of 59

open access, it is liable to pay Cross-Subsidy Surcharge and

additional surcharge, like any other consumer.

70. Although we are conscious that the proposed legislation is

only a draft amendment bill which has not been enacted by the

Parliament, and lacks any force of law as of today, reliance

thereupon has been crucial to determine the legislative intent of the

Government. Further, the Appellant stands bound by the principle of

estoppel. Being an entity of the Central Government, the Appellant

cannot be permitted to approbate and reprobate or blow hot and cold,

by advancing contentions contrary to the position adopted under the

proposed statutory scheme.

CONCLUSION

71. It is clear, for the reasons elaborated hereinabove, that the

Appellant does not pass muster as a deemed distribution licensee

under the Act, and it can in no circumstances escape the liability

from payment of cross-subsidy surcharge and additional surcharge

as a consumer of electricity through open access.

72. The Respondents are accordingly directed to compute and

issue a detailed calculation of the Cross-Subsidy Surcharge and

Additional Surcharge amounts outstanding qua the Appellant,

disaggregated by the area of supply and the period of availing such

open access. The Appellant shall be afforded a reasonable

opportunity to respond to the said calculations, and be granted time

C.A. Nos. 4652-59/2024 Page 59 of 59

to furnish and respond to such outstanding amount at the discretion

of the respective distribution licensees/companies, subject to the

judicial scrutiny of the Appropriate Commission. Ordered

accordingly.

73. Consequently, all the Appeals are dismissed and the common

judgment and order dated 12.02.2024 passed by the Appellate

Tribunal for Electricity at New Delhi (“APTEL”) in Appeal Nos.

276/2015, 320/2018, 114/2020, 73/2021, 213/2021, 170/2019,

343/2019 and 133/2020 is upheld. Pending application(s), if any,

shall also stand disposed of.

74. No order as to costs.

...…………………………………J.

[DIPANKAR DATTA]

...…………………………………J.

[SATISH CHANDRA SHARMA]

New Delhi

May 08, 2026.