Electricity regulation cannot compel exclusive sale to one buyer where the statute does not clearly authorise that restriction.

Earlier permissions under the Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948 did not displace compliance with the later State electricity regime, so mini power plants were required to obtain the licence or exemption prescribed by the 1998 enactment. The regulatory commission had wide control over transmission and supply, but that power did not extend to a blanket ban on third-party sales or a mandatory direction that all generated power be sold only to the transmission corporation. The court also recognised equitable protection where a generator had altered its position in reliance on official directions and commercial arrangements, and directed reconsideration under the later law while preserving interim arrangements.

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Issues: Whether the mini power plants were required to obtain a licence or exemption under the 1998 State enactment despite earlier sanctions under the pre-existing electricity laws; whether the regulatory commission could direct the generators to sell power only to the transmission corporation and refuse third-party sales or compel execution of a power purchase agreement; and whether the conduct of the parties and the State policy gave rise to equitable relief in favour of the generator.

Analysis: The prior permissions granted under the Indian Electricity Act, 1910 and the Electricity (Supply) Act, 1948 did not dispense with the requirement of compliance with the later regulatory regime. The scheme of the 1998 State enactment made licensing and exemption matters subject to the commission's control, and a person engaged in transmission or supply could not rely on earlier permissions as a complete answer to the new statutory framework. At the same time, the power to regulate purchase and supply was held to be wide but not so wide as to authorise a blanket prohibition of third-party sales or a positive command that the entire generation must be sold only to the transmission corporation. Regulation had to operate consistently with the statutory object of promoting competition and private participation, and the commission was required to consider the policy decision of the State and the surrounding commercial arrangements, including wheeling agreements and investments already made.

Conclusion: The generators were held bound to seek the appropriate licence or exemption under the 1998 State enactment, but the commission lacked jurisdiction to impose a universal direction compelling sale only to the transmission corporation. That part of the commission's order and the contrary view of the High Court could not stand.

Issue (ii): Whether, on the facts of the case, the commission and the transmission corporation could resile from the arrangements already acted upon by the parties and whether equitable considerations required protection of the generator's investment.

Analysis: One generator had substantially altered its position on the basis of the commission's directions and the subsequent negotiations, terminated its third-party agreements, and proceeded with project execution and financing in reliance on the regulatory framework then prevailing. The conduct of the transmission corporation was inconsistent across stages, and the court considered that a quasi-judicial error should not be allowed to inflict avoidable prejudice on a party that had acted on the basis of official directions. In these circumstances, the court invoked equitable principles, including promissory estoppel and the notion that a litigant should not suffer for the wrong of the authority, while also recognising that the matter had to be reconsidered under the later statutory regime.

Conclusion: Equitable relief was warranted to prevent prejudice to the generator, and the matter was directed to be reconsidered afresh by the commission constituted under the later enactment.

Final Conclusion: The impugned judgments were set aside, the matter was remitted for fresh consideration under the later electricity law regime, and the existing interim arrangement was allowed to continue in the meantime.

Ratio Decidendi: A regulatory authority may control transmission and supply of electricity, but unless the statute clearly so permits, regulation does not extend to a compulsory prohibition of third-party sale or a mandatory direction that all generated power must be sold only to one designated purchaser; earlier permissions must also be tested against the later governing statutory framework.

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