2008 (7) TMI 1056 - SC - Indian Laws

Supreme Court allows Tata Power to supply electricity directly, overruling regulatory bodies.

Tata Power Company Limited Versus Reliance Energy Limited and Ors.

The Supreme Court held that Tata Power Company Limited (TPC) was entitled to distribute electricity directly to consumers within Reliance Energy Limited's ... - Issues Involved:1. Entitlement of Tata Power Company Limited (TPC) to distribute electricity directly to consumers within the area of supply of Reliance Energy Limited (REL).2. Interpretation of the terms and conditions of the licenses held by TPC and REL.3. The concept of a level playing field in the electricity distribution sector.4. Jurisdiction and authority of the Maharashtra Electricity Regulatory Commission (MERC) and the Appellate Tribunal for Electricity in issuing directions and orders.5. Historical context and amendments to the licenses held by TPC.Detailed Analysis:1. Entitlement of TPC to Distribute Electricity Directly to Consumers:The central question was whether TPC was entitled under its licenses to effect distribution of electricity directly to customers within REL's area of supply. MERC initially held that TPC was entitled to supply energy directly to all or any consumers in the BSES area of supply. However, it also observed that such entitlement might give TPC an unfettered right but no obligation to supply power, which could be against the provisions of Section 22(2)(e) of the ERC Act. The Appellate Tribunal for Electricity, however, held that TPC had not been granted a license to undertake retail distribution of electricity in the area within which REL had been distributing power in retail to customers directly and could only undertake bulk supplies to licensees such as REL.2. Interpretation of the Terms and Conditions of the Licenses:The interpretation of the terms and conditions of the licenses granted to TPC was a significant issue. The licenses held by TPC included the 1907, 1919, 1921, and 1953 licenses, which allowed TPC to supply electricity for various purposes, including bulk supply to other licensees and direct supply to consumers. The Appellate Tribunal found that TPC's licenses did not entitle it to supply electricity directly to retail consumers, but the Supreme Court disagreed, holding that TPC's licenses did allow it to supply energy directly to all consumers, irrespective of their demand, except for specific consumers indicated in Sub-clause (I) of Clause 5 of the licenses.3. The Concept of a Level Playing Field:MERC introduced the concept of a level playing field to promote competition, efficiency, and economy in the electricity industry. It directed TPC to engage a consultancy firm to study the issues relating to Sections 42 and 14 of the Electricity Act, 2003, and restrained TPC from offering new connections to consumers with energy requirements below 1000 KVA. The Supreme Court found that MERC overstepped its jurisdiction by making out a third case regarding the establishment of a level playing field, which had not been made out by BSES and was not part of the reliefs prayed for.4. Jurisdiction and Authority of MERC and the Appellate Tribunal:MERC's jurisdiction and authority to issue directions and orders were questioned. MERC's decision to restrain TPC from supplying energy to consumers with a demand below 1000 KVA was found to be contrary to its own findings that TPC was entitled to supply energy directly to all consumers. The Appellate Tribunal's interpretation of TPC's licenses was also found to be erroneous by the Supreme Court, which quashed the orders passed by both MERC and the Appellate Tribunal.5. Historical Context and Amendments to the Licenses:The historical context and amendments to the licenses held by TPC were crucial in understanding the scope of TPC's entitlement to supply electricity. The Supreme Court noted that TPC had been supplying energy directly to retail consumers within areas that later came to be included in BSES's area of supply and that no objections were raised until TPC submitted its proposed tariff for domestic consumers in 1998. The amendments to the licenses, including the removal of restrictions on TPC's supply rights in 1964 and the transfer of distribution rights to the Maharashtra State Electricity Board in 1980, were also considered.Conclusion:The Supreme Court quashed the orders passed by MERC and the Appellate Tribunal, holding that TPC was entitled to effect supply of electrical energy in retail directly to consumers whose maximum demand is less than 1000 KVA, apart from its entitlement to supply energy to other licensees for their own purposes and in bulk, within its area of supply as stipulated in its licenses. The court emphasized that MERC had overstepped its jurisdiction and that the Appellate Tribunal had misinterpreted the provisions of the licenses.