2011 (2) TMI 1281 - HC - Indian Laws

Jurisdictional conflict resolved: FMC prevails over CERC in regulating forward contracts in electricity

Multi Commodity Exchange of India Ltd. Versus Central Electricity Regulatory Commission

The court resolved the jurisdictional conflict between the Forward Market Commission (FMC) and the Central Electricity Regulatory Commission (CERC) ... Writ Petition - Conflict between two regulatory authorities - regulatory authority functioning under the Consumer Protection Act i.e., Forward Market Commission (FMC) claims sole right in the matter of forward contract whereas the authority functioning under the Electricity Act, 2003 i.e., Central Electricity Regulatory Commission (CERC) claims exclusive right in the matter of dealing with the trading activities in connection with the electricity including dealing in forward contract - MCX applied to the FMC seeking approval for launching electricity futures contracts, FMC granted its approval - MCX accordingly launched forward trading in electricity - Power Exchange of India Limited (PXIL) challenged the electricity futures contracts formulated by the petitioner, before the CERC on the ground that (i) the CERC has the exclusive jurisdiction over regularising electricity including all forward contracts, futures, etc. (ii) after the enactment of the Electricity Act, 2003, the MCX and the FMC have been denuded of jurisdiction over electricity and (iii) the MCX had commenced launch of trading in electricity futures contracts without any approval of CERC and mere approval FMC had no efficacy in the eyes of law – Held that:- CERC cannot be permitted to have regulations under section 66 and 178(2)(y) by virtue of section 174 of the Electricity Act, to prevail over the provisions of section 14-A and 15 of the forward contracts in such fashion with regard to the futures contracts/forward contracts. domain and jurisdiction of respective authorities/commission is totally different and distinct in every aspect. CERC is a statutory authority being constituted under the Electricity Act, cannot be provided that the power beyond the statutes permitting to do futures, forward, derivative contracts which is admittedly a domain jurisdiction of authorities/commission under the FCR Act. CERC and/or even the Appellate authority under the Electricity Act have no jurisdiction to decide the validity of regulations framed by CERC under section 178 of the Act. It is subject to challenge by invoking judicial power under Article 226 of the Constitution of India Issues Involved:1. Jurisdictional conflict between Forward Market Commission (FMC) and Central Electricity Regulatory Commission (CERC).2. Validity of orders and regulations issued by CERC concerning forward contracts and futures in electricity.3. Overlapping legislative fields under the Forward Contracts (Regulation) Act, 1952 (FCRA) and the Electricity Act, 2003.Issue-Wise Detailed Analysis:1. Jurisdictional Conflict Between FMC and CERC:The judgment addresses the conflict between FMC and CERC, both claiming exclusive jurisdiction over forward contracts in electricity. FMC operates under the Consumer Protection Act and is responsible for regulating forward contracts in commodities, including electricity, as per the FCRA. CERC, established under the Electricity Act, 2003, claims jurisdiction over trading activities in electricity, including forward contracts.2. Validity of Orders and Regulations Issued by CERC:The judgment examines the validity of two orders dated 28-4-2009 and 11-1-2010, and the Central Electricity Regulatory Commission (Power Market) Regulations, 2010, issued by CERC. The court found that CERC had overstepped its jurisdiction by attempting to regulate forward contracts in electricity, which falls under the purview of FMC as per the FCRA. The court noted that CERC's regulations were inoperative concerning forward contracts in electricity, as they conflicted with the specific provisions of the FCRA.3. Overlapping Legislative Fields Under the FCRA and the Electricity Act:The court analyzed the legislative entries and the scope of both the FCRA and the Electricity Act. It concluded that both statutes operate in distinct fields without overlapping. The FCRA, enacted under Entry 48 of List I of the Constitution, governs futures markets and forward contracts, while the Electricity Act, enacted under Entry 38 of List III, deals with the physical trading and delivery of electricity. The court emphasized that forward contracts in electricity should be regulated by FMC, as per the FCRA, and not by CERC.Detailed Analysis:Jurisdictional Conflict:The court observed that FMC and CERC are established under different statutes with distinct functions. FMC, under the FCRA, regulates forward contracts in commodities, including electricity, as notified by the Central Government. CERC, under the Electricity Act, regulates inter-state transmission and trading of electricity. The court noted that the two statutes could operate independently without any conflict, as they govern different aspects of electricity trading.Validity of CERC's Orders and Regulations:The court scrutinized the orders and regulations issued by CERC and found that CERC had misused its regulatory power to bring forward contracts in electricity within its jurisdiction. The court held that CERC's actions were ultra vires and void ab initio, as the Electricity Act does not provide for regulating forward contracts. The court quashed the orders and declared the regulations inoperative concerning forward contracts in electricity.Overlapping Legislative Fields:The court examined the legislative entries and the scope of both the FCRA and the Electricity Act. It concluded that the FCRA, enacted under Entry 48 of List I, governs futures markets and forward contracts, while the Electricity Act, enacted under Entry 38 of List III, deals with the physical trading and delivery of electricity. The court emphasized that forward contracts in electricity should be regulated by FMC, as per the FCRA, and not by CERC.Conclusion:The court held that neither FMC nor CERC has exclusive jurisdiction over forward contracts in electricity. The court declared CERC's regulations concerning forward contracts in electricity inoperative and quashed the orders issued by CERC. The court emphasized the need for a harmonized approach and suggested that both regulatory authorities should work together to regulate forward contracts in electricity, considering the provisions of both the FCRA and the Electricity Act.