IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.2898 OF 2006

With CIVIL APPEAL NOs.3466 and 3467 of 2006

Tata Power Company Limited   ...Appellant

Vs.

Reliance Energy Limited & ors. ...Respondents

J U D G M E N T

Altamas Kabir,J. 1. As these three appeals arise out of a common

judgment  of  the  Appellate  Tribunal  for

Electricity,  they  were  taken  up  for  final

hearing together.

2. The  genesis  of  these  three  appeals  is  a

petition filed by M/s BSES Limited on 23.7.2002

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before the Maharashtra  Electricity Regulatory

Commission (hereinafter referred to as ‘MERC’),

under  Section  22(2)(e)  and  (n)  of  the

Electricity  Regulatory  Commissions  Act,  1998

(hereinafter  referred  to  as  ‘the  ERC  Act’),

complaining  of  alleged  encroachment  by  Tata

Power Company Limited (hereinafter referred to

as ‘TPC’) within its area of supply.  In the

said application M/s BSES, inter alia, prayed

for the following reliefs:

a)  That  Tata  Power  Company  Limited  be restrained  from  in  any  manner selling, supplying and distributing electricity  to  the  consumers situated within the area  of supply of  BSES  in  contravention  of  the terms  and  conditions  of  their licenses  and  the  policy  of  the Government of Maharashtra.

b) That TPC be ordered to pay BSES or to the Government of Maharashtra all profits and gains  made  from  January  1998  until  TPC discontinued  sale  of  energy  to  such consumers,  i.e.  situated  in  BSES’s licensed area of supply and having energy requirement  below  1000  KVA  (maximum demand)  and/or  with  lighting  consumption exceeding 20 per cent of the total;

c) That, pending the disposal of the petition TPC be restrained in terms of the prayer at  (a)  above  and  from  offering  new

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connections  to  any  entities  for  sale, supply or distribution of electricity in BSES’s  licensed  area  of  supply,  with energy requirement below 1000 KVA (maximum demand)  and/or  with  lighting  consumption exceeding 20 per cent of the total.

3. From the materials on record it appears that the

principal question which fell for the decision

of MERC was whether TPC was entitled under the

licences granted to it to effect distribution of

electricity  directly  to  customers  within  the

area of supply indicated in the licences granted

to BSES.

4. In order to appreciate the circumstances giving

rise to the above dispute, it is necessary to

set out some of the facts as also the terms and

conditions  of  the  licences  granted  to  the

contesting  parties  for  distribution  of

electricity within Bombay city and its suburbs.

5. At  the  relevant  time  TPC  was  holding  four

licences  for  the  aforesaid  purposes,  as

described hereinbelow:

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i) The  1907  Licence-  Commonly  known  as  the Bombay (Hydro-electric) Licence, which was originally granted on 5.3.1907 to Dorabji J. Tata and Ratanji J. Tata;

ii) 1919 Licence - Known as the  Andhra Valley (Hydro-electric) Licence, which was issued on 3.4.1919 in favour of the Tata Hydro Electricity Supply Company Ltd.;

iii)The  1921  Licence  –  Known  as  Nila  Mula Valley  Licence,  which  was  issued  on 15.11.1921 in favour of Tata Power; and

iv) The  1953  Licence  –  Known  as   Trombay Thermal Power Electric Licence which was issued on 19.11.1953 in favour of the Tata (Hydro-Electric)  Power  Supply  Company Limited,  the  Andhra  Valley  Power  Supply Company and Tata Power.

6. Consequent upon amalgamation of the Tata Hydro-

Electric Power Supply Company Limited and the

Andhra Valley Power Supply Company Limited with

Tata Power, the Government of Maharashtra on

12.7.2001  transferred the  said 1907  licence,

1919 licence and the 1953 licence to Tata Power

and  accordingly  on  and  from  12.7.2001  Tata

Power came to hold the aforesaid four licences

on the basis of which it had been contended on

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behalf of Tata Power that it was entitled to

sell,  supply  and  distribute  electricity  not

only to other distributing licensees, such as

Reliance Energy Limited and The Bombay Electric

Supply and Transport Undertaking (hereinafter

referred to as the ‘BEST’), but also to direct

consumers of electricity.

7. As  far  as  M/s  Reliance  Energy  Limited,

hereinafter  referred  to  as  “R.E.L.”,  is

concerned it acquired a licence known as the

Bombay  Suburban  Electric  Licence  which  had

initially been issued on 29.5.1926 in favour of

Killick,  Nixon  and  Company  and  Callender’s

Cable & Construction Company Limited. The said

licence  was  assigned  to  the  Bombay  Suburban

Electric  Supply  Limited  on  13.5.1930.  The

Bombay  Suburban  Electric  Supply  Limited  was

first renamed as BSES Limited and thereafter as

Reliance Energy Limited.

8. Before MERC it was contended on behalf of BSES

that  TPC  was  contravening  the  terms  and

conditions  of  the  licences  which  had  been

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granted to it by the State Government, as also

the  stated  policy  of  the  Government,  by

poaching  consumers  within  the  BSES’  area  of

supply.  It was contended before the Commission

that supply of electricity by TPC directly to

retail consumers was contrary to the provisions

of  the  Indian  Electricity  Act,  1910

(hereinafter referred to as ‘the 1910 Act’).

The Electricity (Supply) Act, 1948 (hereinafter

referred to as ‘the 1948 Act’), and the policy

contained in the Schedule to the 1948 Act.

9. It was also contended, without prejudice to the

above submission, that TPC could not, in any

event, effect any retail supply of electricity

to consumers with a maximum demand below 1000

KVA, in terms of the licences held by them. It

was submitted that such supply by TPC to direct

retail  consumers  was  also  contrary  to

Government policy.

10. It was urged that, in view of the above, the

Commission, in exercise of its powers under the

ERC  Act,  should  restrain  TPC  from  supplying

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electricity to retail  consumers  within BSES’

territory.

11. The aforesaid issue raised on behalf of BSES

Limited was considered at length by MERC in

relation to the terms and conditions of the

licences held by Tata Power and Reliance Energy

Limited and in para 81.2 of its judgment and

order, the Commission observed as follows:

”81.2  The starting point of both parties is the provisions of Clause 5  (I),(I)  and  (III)  of  TPC’s licenses, which are quoted at para 8 of this order.   The contesting arguments  regarding  the interpretation and implications of this Clause have been set out at length  above.   After  considering the arguments put forward and the provisions  of  the  licenses  and statutes, the Commission has come to the conclusion that the license to supply energy “for all purposes including supply to other licensees for  their  own  purposes  and  in bulk”,  read  with  the  succeeding terms  of  Clause  5  and  other provisions,  may  give  TPC  an unfettered right to supply energy directly to all or any consumers in the  BSES  area  of  supply  but  no obligation to supply power, but it militates,  in  particular,  against the provisions of Sec. 22(2)(e) of the  Commission’s  power  of regulating  and  promoting  the

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working  of  licensees  in  an efficient, economical and equitable manner and, in general, against the provisions  of  Sec.  22(1)(d) enjoining the Commission to promote competition, efficiency and economy in  the  activities  of  the electricity industry.”

12. In its aforesaid judgment and order MERC also

held:

“Apart from the claimed entitlement under their licenses as interpreted by them, TPC have urged that this entitlement  and  their  consequent actions are also supported by the mandate  given  to  the  Commission under the ERC Act. Indeed, Sec.22 (1)(d)  enjoins  the  Commission  to promote competition, efficiency and economy  in  the  activities  of  the electricity industry to achieve the objects  and  purposes  of  the  Act. The Electricity Act,2003, which has replaced the ERC Act after hearings in this case were concluded, also specifically  refers  to  the promotion  of  competition  in  its Preamble.”   

13. It  was  further  held  that  strictly  speaking

there was nothing in either the 1910 Act or the

1948 Act which bars the grant of licences to

more than one party for similar purposes in the

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same area, which, in effect, is also the aim

and object of the Electricity Act, 2003, which

replaced all the earlier enactments.

14. Despite having held in favour of Tata Power

that the terms and conditions of its licences

may  give  it  an  unfettered  right  to  supply

electricity  to  all  or  any  consumers  in  the

BSES’ area of supply without any obligation in

that regard, MERC ultimately disposed of the

petition  filed  by  BSES  with  the  following

directions :

“(i)  TPC  and  BSES  should  file  the terms  of  reference  for  engaging  a consultancy firm to study the issues relating to Sections 42 and 14 of the Electricity Act, 2003. (ii) Select a consultancy firm/s (if need be, international level firms may be considered for selection, severally or jointly with Indian firms) for the purpose; (iii) The cost of the study should be equally shared by both parties; (iv) The study report should be widely disseminated among stakeholders in the city; (v)  Adoption of the report would be decided  after  a  public  hearing;  and Implementation of the report would be undertaken  as  per  the  Commission’s Regulations.”

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15. While  disposing  of  the  petition  MERC  also

restrained TPC from offering new connections to

new  consumers  with  energy  requirement  below

1000 KVA on the basis of an agreement purported

to have been arrived at between TPC and BSES

that they would maintain the status-quo till

the  disposal  of  the  petition  and  would  not

encourage any existing consumer to switch over

from one to the other.

16. Two appeals were preferred from the judgment

and  order  of  MERC  before  the  Electricity

Appellate Tribunal. Appeal No.31 of 2005 was

filed by Reliance Energy Limited  which had in

the meantime succeeded to the interest of BSES

Limited.  Appeal No.43 of 2005 was filed by the

Tata Power Company Limited.

17. In  the  first  appeal,  M/s  Reliance  Energy

Limited questioned the findings of MERC that

under the licences issued to Tata Power Company

it   could  also  undertake  retail  supply  of

energy directly to retail consumers and prayed

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for  a  declaration  that  Tata  Power  was  not

entitled to effect direct supply of energy to

consumers,  except  to  other  licensees  and

consumers contemplated in clause (xv) of the

licences  granted  to  Tata  Power,  read  with

clause (VI) of the Schedule to the 1910 Act.

18. In Appeal No.43 of 2005 Tata Power questioned

the findings in the order and directions of

MERC  contained  in  paragraphs  81.10,  81.11,

81.12 and 81.14 to the effect that the terms of

the  licences  held  by  Tata  Power  militated

against the provisions of Sections 22(i)(d) and

22(ii) (e) of the ERC Act. TPC also questioned

the restraint order passed by MERC restraining

TPC from offering new connections to consumers

with a maximum demand of less than 1000 KVA and

also to stay the directions of MERC directing

the parties to engage a consultancy firm to

study the issues relating to Section 14 and 14

(2)  of  the  Electricity  Act,  2003  and   from

taking  further   action  in  terms  of  the

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directions contained in paragraphs 81.12. and

81.14 of the order passed by MERC.

19. Both  the  appeals  were  disposed  of  by  the

Appellate Tribunal  for Electricity, New Delhi,

by  a  common  judgment  dated  22.5.2006,  inter

alia,  holding  that  Tata  Power  had  not  been

granted  licence  to  undertake  retail

distribution of electricity in the area within

which REL had been distributing power in retail

to customers directly. The order and findings

recorded by MERC in that regard were set aside.

It  was  also  held  that  Tata  Power  could

undertake only bulk supplies to licensees such

as REL under the licenses held by it.

20. In addition to the above, it was also held by

the Appellate Tribunal that Tata Power was not

undertaking  retail distribution  of power  but

was only undertaking distribution of power in

bulk to licensees prior to the differences that

arose between REL and Tata Power.

21. Although, it was held by the Appellate Tribunal

that more than one distribution licence could

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be granted in terms of Section 62(1) of the

Electricity Act, 2003, it held that since the

licences granted to Tata Power did not entitle

it to effect retail distribution directly to

consumers it was not necessary to restrain Tata

Power from effecting such distribution.

22. Accordingly, the appeal preferred by Reliance

Energy  Limited  was  allowed  and  the  appeal

preferred  by  Tata  Power  Company  Limited  was

dismissed.

23. The three appeals before us have been filed by

Tata Power Company Limited and M/s MIDC Marol

Industries  Association,  against  the  said

judgment  of  the  Appellate  Tribunal.   While

Civil Appeal No.2989 of 2006 has been filed by

Tata  Power  Company  Limited,  Civil  Appeals

No.3466  of  2006  and  3467  of  2006  have  been

filed  by  MIDC  Marol  Industries  Association.

Though the said appellant in Civil Appeal Nos.

3466 and 3467 of 2006 was not a party before

the  MERC,  it  had  been  allowed  to  intervene

during the hearing of the petition filed by M/s

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BSES Limited which was subsequently taken over

by Reliance Energy Limited.

24. Appearing for TPC, learned Senior Counsel, Mr.

Iqbal  Chagla,  submitted  that  of  all  the

distribution  licences  granted  for  supply  of

electricity within the island city of Bombay,

the first distribution licence was issued to

Bombay  Electric  Supply  and  Tramways  Company

Limited, hereinafter referred to as the “BEST

Licence”, on 7.7.1905, under the provisions of

the Indian Electricity Act, 1903, hereinafter

referred to as “the 1903 Act”.  Subsequently,

on  5.3.1907,  the  Bombay  (Hydro-Electric)

licence  was  granted  to  Dorabji  J.  Tata  and

Ratanji  J.  Tata,which  is  one  of  the  four

licences  currently held by TPC. Mr. Chagla

submitted that the purpose for which the said

licence was granted is contained in clause 6 of

the licence which is relevant for arriving at a

decision  in  these  appeals.  The  same  is

accordingly reproduced hereinbelow:-

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“6.  Unless  herein  otherwise  expressly provided energy shall be supplied under this licence only –

I. For Power:-

a.To other licensees for their own purposes and in bulk.

b.To Factories within the meaning of the Indian Factories Act 1881 and  to  any  Railways  previously approved by the Local Government; provided that the licensees shall not  supply  any  such  Factory  or Railway as aforesaid unless such Factory or Railway, as the case may  be,  shall  require  not  less than  5,00,000  units  per  annum, such amount being the bona fide average  computed  annual consumption  of  such  Factory  or Railway

Provided that in regard to supply under  sub-section  (a)  the licensees  shall  not  be  under obligation  to  supply  energy  in bulk to other licensees for the purpose  of  enabling  such  other licensees   for  the  purpose  of enabling such other licensees to supply  any  consumer  requiring more  than  5,00,000  units  per annum  calculated  as  aforesaid. And  provided  that  no  supply  by the  licensees  under  the  powers contained  in  sub-section  (b) shall  be  open  to  question  as between  the  licensees  and  the Bombay  Electric  Supply  and Tramways Company Limited, if the licensees  shall  have  given previous notice in writing to the

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Bombay  Electric  Supply  and Tramways Company Limited of their intention to make such supply and the Bombay Electric Supply  and Tramways  Company  Limited  shall not  for  thirty  days  after delivery of such notice at their office  in  Bombay  have  objected in  writing,   and  provided  that the Bombay Electric Supply  and Tramways  Company  Limited,  shall not  be  entitled  to  take  any objection except upon the ground that the consumer intended to be supplied does not fall within the scope   or  does  not  fulfil  the conditions of sub-section(b).

The  energy  supplied  under  this license to any consumer for power may be used by such consumer for lighting  his  premises,  provided that  the  energy  used  by  such consumer  for  such  lighting purposes  shall  not  in  any  year exeed  twenty  per  cent  of  the total amount of energy supplied to  such  consumer  and  save  as aforesaid,  the  licensees  shall not  supply  energy  for  lighting purposes except by agreement with the  Bombay  Electric  Supply  and Tramsways Company, Limited.

In  the  event  of  any  dispute arising between the licensees and the  Bombay  Electric  Supply  and Tramways  Company,  Limited,  by reason  of  any  objection  by  the latter  to  any  supply  by  the licensees  under  sub-section  (1) (b) of this clause, or in regard to  the  interpretation  of  the

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terms  of  this  clause,  such dispute shall be referred to an Arbitrator appointed by the Local Government, whose decision shall be final.”

Mr. Chagla submitted that though TPC did not start

generating  power  till  1915,  it  purchased

electricity from BEST to sell and distribute the

same  to  Pearl  Mills  Limited  and  Simplex  Mills

Limited during 1914 and 1915.  In 1915 Tata Hydro

started generating electricity and between 1917 and

1930, it began to supply electricity directly to a

number of consumers within the city of Bombay and

to Swadeshi Mills Ltd. and Coorla Mills Ltd. in the

suburbs and also to B.B.& C.I. Railway (now known

as Western Railway).

25. Mr. Chagla then referred to the Andhra Valley

(Hydro-Electric)  Licence which  was issued  in

favour of Tata Hydro Electric Supply Co. Ltd.

on  3.4.1919.   He  submitted  that  the  said

licence contained clause 5 which was similar to

clause  6  of  the  1907  licence  reproduced

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hereinabove, but with two significant changes.

He pointed out that while clause 6 of the 1907

licence entitled Tata Power to supply energy

for  power  “to  other  licences  for  their  own

purposes and in bulk”, clause 5(II) of the 1919

Licence entitled Tata Power to supply energy

for lighting and general purposes other than

power, including the supply of energy in bulk

to other licensees for distribution by them.

Furthermore, Tata Power’s area of supply was

extended beyond the island city of Bombay to

the suburbs and included areas which from 1926

would also form part of R.E.L’s area of supply.

26. Mr. Chagla submitted that the Nila Mula Valley

(Hydro-Electric)  Licence  was  issued  to  Tata

Power on 15.11.1921 and it too contained clause

5 which was similar to clauses 6 and 5 of the

1907  and  the  1919  licences  referred  to

hereinabove.  Mr. Chagla  submitted that  under

the  1921  Licence  Tata  Power  was  empowered

without any restriction to supply electricity

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directly  to  consumers,  except  in  the  island

city of Bombay  where an agreement with BEST

was required to be arrived at for making such

supply.

27. Mr.Chagla  submitted  that  subsequently  on

29.5.1926  the  BSES  Licence  was  granted  in

favour  of  Killick  Nixon  and  Company  and

Callender’s Cable and Construction Company Ltd.

and the area of supply under the said licence

included suburban areas which were covered by

the 1919 and 1921 licences granted in favour of

Tata  Power.   The  said  BSES  Licence  was

ultimately assigned to Reliance Energy Limited.

28. Mr.Chagla contended that between 1930 and 1980

TPC  continued  to  supply  electricity  to

consumers  directly,  and  to  the  distributing

licensees, in all parts of Bombay, including

the  suburbs.   Furthermore,  by  a  Gazette

Notification  dated  10.3.1934,  the  First

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Annexures to the 1907, 1919 and 1921 Licences

held by TPC were amended to include:-

i. The island of Salsette, a portion of

which  falls  within  BSES’  area  of

supply; and

ii. An  area  within  a  circle  of  8  miles

radius around Tata Power’s sub-station

at Kalyan.

A proviso was, however, added whereby Tata Power

was required to obtain the written consent of the

Government  to  supply  to  any  consumer  other  than

licensees or permit holders and the Government was

required  to  consult  the  existing  licensees  and

permit holders before granting such consent.

29. The inclusion of the island of Salsette and an

area  within a circle of 8 miles in radius

around  Tata  Power  Sub-station  at  Kalyan

necessitated a change of the First Annexures to

the licenses held by Tata Power.  Such change

was effected on 26.2.1942 by the substitution

of  the  First  Annexure  to  the  Tata  Power

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Licences of 1907, 1919 and 1921 on 26.2.1942 to

redefine the area of supply, namely –

“(1)  The  area  contained  within  the limits  of  the  City  of  Bombay,  as defined by section 3(10) of the Bombay General Clauses Act, 1904.

(2) The whole of that portion of the island of Salsette, as is bounded on the South by the  Town and island of Bombay,   and  on  the  North  by  the Bassein and Thane Creeks

(3) The area contained within a circle of eight miles radius round the Tata Power  Company’s  Sub-station  near Kalyan.

(4)  The  area  contained  within  the Municipal  limits  of  Matheran  in  the Kolaba District.

(5)  The  area  contained  within  the limits  of  the  Municipal  Borough  of Lonavla in the Poona District.

(6) The  area  contained  within  the Municipal  limits  of  Panvel  in  the Kolaba District.

(7) The area contained within a circle of  ten miles radius round the head- quarters of the Collector of Poona in the Poona City.

Provided however that in the case of area of supply mentioned in items (2), (3) and (7) above the licensees shall not, except with the written consent

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of Government,  given after consulting the  other  licensees,  be  entitled  to supply  energy  to  any  consumer  other than  such  licensees  within  their respective areas of supply.”

30. It was submitted that thereafter on 19.11.1953

the Trombay Thermal Power Electric Licence was

granted to the Tata Valley Power Supply Company

Limited  and  Tata  Power.   The  said  licence

contained  provisions  which  were  similar  to

those of the earlier 3 licences held by TPC,

together with a similar restriction as provided

by the 1942 amendment by the addition of the

proviso to the First Annexure.

31. On 23.10.64 the restrictions imposed on TPC on

10.3.34 were removed by further amendments to

the several licences held by TPC.

32. In 1965 Tata Power constructed a further 150 MW

unit which was commissioned at Trombay.

33. On 7.12.78 an amendment was effected to the

several licences held by TPC by which it was

indicated  that  with  effect  from  1.7.80  the

distributing rights in respect of several areas

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would  stand  transferred  from  TPC  to  the

Maharashtra  State  Electricity  Board.  Even

thereafter, TPC continued to supply electricity

to  various  consumers  in  different  parts  of

Bombay and the suburbs.  According to Mr.Chagla

a  meeting  was  held  between  REL  and  TPC  on

27.1.94 in which suggestions were made that the

parties should avoid the practice of winning

away  consumers from  one another.  Ultimately,

however, no such agreement could be arrived at

between the parties.

34. Mr. Chagla submitted that in September  1995

REL started supplying power to consumers in the

suburbs of Bombay city from the power generated

at  Dahanu.  Mr.  Chagla  contended  that  as  on

1.1.1998 the TPC had approximately 114 direct

consumers in the city of Bombay, of whom 51

consumers were common to REL’s area of supply,

within which 14 had a sanctioned maximum demand

of less than 1000 KVA.

35. Mr.Chagla  urged  that  in  September  1998  TPC

submitted  a  proposed  tariff  for  domestic

23

consumers to be effective from December 1998

which was opposed by REL. He also urged that

prior  to  the  submission  of  such  tariff  for

domestic consumers REL had never objected to

the  distribution  of  electricity  directly  to

consumers  by  TPC  in  the  area  of  supply

contained in the licences granted to TPC. It

was only after TPC submitted the tariff for

domestic  consumers  that  the  predecessor-in-

interest  of  REL,  M/s  BSES  Ltd.,  filed  the

petition before MERC under Section 22(2) (e)

and (n) of the ERC Act 1998 on 23.7.2002 and

the same was registered as Case No.14 of 2002.

Mr. Chagla submitted that in its said petition

BSES Ltd. prayed for the following reliefs:

“(a) That Tata Power be restrained from in  any  manner  selling,  supplying  and distributing  electricity  to  consumers situated  within  the  area  of  supply  of BSES in contravention of the terms and conditions  of  their  licences  and  the policy of the Government of Maharashtra; b) That Tata Power be ordered to pay to  BSES  or  to  the  Government  of Maharashtra all profits and gains made from  January  1998  until  Tata  Power discontinues  sale  of  energy  to  such consumers  i.e.  situated  in  BSES’

24

licensed  area  of  supply  and  having energy  requirement  below  1000  KVA (maximum  demand)  and/or  with  lighting consumption exceeding 20% of the total; c) That  pending  disposal  of  the petition  Tata  Power  be  restrained  in terms  of  the  prayer  at  (a)  above  and from  offering  new  connections   to  any entities   for  sale  supply  or distribution  of  electricity  in  BSES’ licensed  area of supply,   with energy requirement  below  1000  KVA(maximum demand) and/or with lighting consumption exceeding 20% of the total”.

36. Mr. Chagla submitted that after the aforesaid

case was admitted by MERC on 10.10.2002 REL

filed a petition for interim relief in the said

proceedings on 14.10.2002.  The petition was

contested by Tata Power, and, ultimately, on

31.10.2002 the parties agreed before MERC that

till the next date of hearing they would not

lure away any existing  consumers of either

party.

37. Ultimately, no interim relief as prayed for by

BSES  was  granted  in  its  favour  but  the

agreement  arrived  at  between  the  parties

remained in force pending disposal of the Case.

25

Mr.  Chagla  submitted  that  on  3.7.2003  MERC

disposed of the aforesaid case upon holding,

inter  alia,  that  TPC’s  licences  to  supply

energy for all purposes, including supply to

other licensees for their own purposes and in

bulk, read with the terms of clause 5 of the

licences and other provisions, might give TPC

an unfettered right to supply energy directly

to all or any consumer in the BSES’ area of

supply without any obligation to supply such

power. Despite holding as above, MERC also was

of the view that such provisions of the licence

militates in particular against the provisions

of Section 22(2)(e) of the ERC Act, 1998, which

empowers the State Government by notification

in  the  Official  Gazette  to  confer  upon  the

State Commission the function of regulating the

work  of  the  licensees  and  other  persons

authorized  or  permitted  to  engage  in  the

electricity  industry  in  the  State  and  to

promote  their  working  in  an  efficient,

economical and equitable manner.

26

38. Mr.Chagla submitted that MERC also observed in

its judgment and order that there is nothing in

the 1910 or the 1948 Act or the terms of the

Tata Power’s licences to support BSES’ primary

contention  that  Tata  Power  could  not  supply

energy  directly  to  any  consumer  apart  from

those to whom they were supplying energy in

accordance  with  their  licenced  entitlement

prior to the amendments of 1964, subject to a

minimum demand stipulation.  It was  further

observed that clause 5 and the other licence

terms do not  envisage that Tata Power could

supply energy only to a distributing licensee

for onward supply to direct consumers.  

39. Mr.Chagla pointed out that although BSES had

denied such submission it had itself put forth

a  possible  alternative,  namely,  that  in

addition  to  supply  to  the  distributing

licensees Tata Power is also entitled to effect

such supply directly to parties in the area of

supply  common  to  BSES  whose  maximum  demand

exceeds  1000  KVA  and  whose  consumption  for

27

light  is  less  than  20%  of  their  total

consumption.

40. Mr. Chagla submitted that MERC also recorded

the fact that BSES has not only a right but an

obligation  to supply energy to a large number

and category of consumers on demand. On the

other hand, Tata Power has an obligation to

supply energy to BSES to enable them to serve

certain categories of consumers, but its claim

that it also has the unfettered right, but no

obligation, to provide power to consumers, to

whom  BSES  has  an  obligation  to  supply,

militates against the requirement of a level

playing field for promoting competition.

41. It  was  pointed  out  that  after  proposing  to

engage  a  consultancy  firm  to  enable  it  to

determine  how  competition  in  sale  of

electricity  in  each  licensed  area  could  be

introduced, MERC while finally disposing of the

petition  without  assigning  any  reason  and

contrary  to  its  own  findings  restrained  TPC

from offering new connections to any consumer

28

with energy requirement below 1000 KVA (maximum

demand).  According to MERC this direction was

required to be made as part of the process of

introducing competition and choice.

42. Mr.Chagla then submitted that both TPC as well

as  REL  filed  MERC  appeals  before  the  High

Court,  but  the  same  were  dismissed  as  not

maintainable in view of the coming into force

of the Electricity Act, 2003. However, since

the  Appellate  Tribunal  for  Electricity

contemplated under the Act had not been set up

separate writ petitions were filed, which were

also  withdrawn  when  it  was  brought  to  the

notice of the High Court that the Appellate

Tribunal  for  Electricity  had  since  become

operational.  Mr.  Chagla  submitted  that

thereafter  Tata  Power  filed  Appeal  No.43  of

2005 before the Appellate Tribunal challenging

MERC’s order and REL filed Appeal No.31 of 2005

against the same order. It was stated that on

22.5.2006 the order impugned in these present

appeals was passed by the Appellate Tribunal

29

allowing Appeal No.31 of 2005 filed by REL and

dismissing Appeal NO.43 of 2005 filed by Tata

Power, upon holding that:

”(i) Tata Power has not been granted licence  to  undertake  retail distribution  of  electricity  in  the area  within  which  REL  has  been distributing  power  in  retail  to customers directly. ii) Tata Power has licences only to

undertake  bulk  supply  to licensees like REL.

iii) Tata Power was not undertaking retail  distribution  of  power but  only  undertaking distribution  of  power  in  bulk to  licensees  prior  to  the differences  that  arose  between REL and Tata Power.”

43. Mr. Chagla submitted that immediately after the

pronouncement of the impugned order, an oral

application was made on behalf of Tata Power

for stay of operation of the order for a period

of eight weeks. On the statement made by REL’s

counsel that it would not seek implementation

of the impugned order for a period of eight

weeks and upon Tata Power representing that it

would maintain status quo with regard to the

30

retail supply to consumers and would not supply

in retail to any further consumers, no interim

order  of  stay  was  passed,  but  both  the

statements  made  on  behalf  of  the  respective

parties were recorded by the Appellate Tribunal

by a separate order.

44. Mr.  Chagla  submitted  that  thereafter  these

three  appeals  have  been  filed  before  this

Court, including the two filed by MIDC, Marol

Industries  Association,  being  Civil  Appeal

Nos.3466 and 3467 of 2006.

45.  Mr. Chagla submitted that while holding in

favour of TPC that the terms of its licences

did  not  expressly  bar  TPC  from  supplying

electricity  directly  to  consumers,  MERC,

erroneously decided to introduce the concept of

a  level  playing  field  purportedly  for

introducing  competition  in  the  electricity

trade. Mr.Chagla submitted that MERC had also

erroneously held that apart from its obligation

to supply energy to BSES, Tata Power had also

the  unfettered  right,  but  no  obligation,  to

31

provide power to consumers to whom BSES had an

obligation  to  supply  but  that  the  same

militated against the requirement of a level

playing  field  for  the  purpose  of  promoting

competition. Mr. Chagla submitted that only on

the  said  ground,  which  was  without  any

substance  having  regard  to  the  terms  and

conditions of the licences  held by TPC, which

were  duly  recognized  by  MERC,  it  not  only

directed that a consultancy firm be engaged  to

enable it to determine how competition in sale

of electricity in each licensed area could be

introduced, but it also restrained  Tata Power

from offering new connections to any consumer

with energy requirement below 1000 KVA (maximum

demand.  Mr.  Chagla  submitted  that  such

direction of MERC was based on the supposition

that  Tata  Power  could  supply  electricity

directly  only  to  consumers  whose  demand  was

above  1000  KVA  (maximum  demand)  but  was

contrary to its own finding in its judgment

that under the licences granted to it, Tata

32

Power was entitled to supply electricity  to

all consumers directly.  

46. Mr.  Chagla  submitted  that  the  arguments

advanced before MERC should have been confined

only  to  the  question  of  whether  TPC  was

entitled under the licences granted to it to

supply electricity directly to consumers within

its area of supply, which, in certain cases,

overlapped the area of supply included in REL’s

licence. He submitted that even if there may

have  been  some  doubt  with  regard  to  the

wordings of clause 6 of the 1907 licence, such

doubts were removed by the wordings of clause 5

in the subsequent licences where the purpose of

supply was worded in a manner which entitled

Tata Power to supply energy for lighting and

general purposes, other than power, including

the supply of energy in bulk to other licensees

for distribution by them. Mr. Chagla reiterated

that even the area of supply was amended and

extended beyond the island city of Bombay  to

the suburbs and included areas which from 1926

33

onwards  also  formed  part  of  REL’s  area  of

supply.  The  learned  counsel  urged  that  the

right of TPC to supply directly to consumers

was included in the licences of 1919, 1921 and

1953 with the condition that energy supplied to

any consumer for power could be used by such a

consumer  for  lighting  his  premises,  but  the

energy used for such lighting purposes should

not in any year exceed 20% of the total amount

of energy supplied to him.

47. A separate restriction was incorporated in the

licence to the extent that TPC would not supply

energy  for  lighting   purposes  except  by

agreement with the Bombay Electric Supply and

Tramways Company Limited.

48. Mr. Chagla referred to a resolution adopted by

the  Industries  and  Labour  Department  of  the

Government  of  Maharashtra  on  4.6.1962  in

exercise of the powers conferred by Section 21

(2) of the 1910 Act sanctioning the form of

agreement with High Tension consumers. As an

example,  Mr.Chagla  referred  to  an  agreement

34

entered into by Tata Power with Model Woollen

Mills on 1.4.1965 agreeing to supply 780 KVA

(maximum demand) for operation of its factory.

From the said agreement, Mr. Chagla pointed out

that in the said case the maximum demand was

below 1000 KVA and the Appellate Tribunal had

erred on the materials before it in holding in

para 50(C) of its judgment that TPC was not

supplying  electricity/power  to  the  consumers

having a maximum demand of less than 1000 KVA.

49. In  this  regard,  Mr.Chagla  referred  to  the

definition  of  the  expression  ‘consumer’  as

indicated in  Section 2(c) of the  1910 Act and

provides as follows:

“2(c) ‘Consumer’ means any person who is supplied with energy by a licensee or  the  Government  or  by  any  other person  not  only  in  the  absence  of supplying  energy to the public under this Act or any other law for the time being in force and includes any person whose premises are for the time being connected for the purpose of receiving energy with the works of a licensee, the Government or such other person as the case may be.”  

35

Mr.Chagla submitted that any person who was being

supplied  with  energy  would,  therefore,  be

recognized as a consumer for the purposes of the

Act.

50. Urging  that  the  incorporation  of  the

modification in clause 6 of the 1907 Licence in

clause 5 of the licences, common to all the

three  licences  granted  to  Tata  Power  after

1907,  clearly  spelt  out  the  Government’s

intention  of  permitting  TPC  to  supply

electricity to all types of consumers within

its  area  of  supply,  though  with  certain

restrictions,  which if  removed in  individual

cases, would enable TPC to effect supply to

such  consumers   who  were  covered  by  such

restrictions. Mr. Chagla pointed out that right

from  the  1903  Act  it  had  always  been  the

intention  of  the  Government  to  introduce

competition in the electricity trade and the

same was explicitly mentioned not only in the

Preamble  to the Electricity Act, 2003, but

also  in  the  Sixth  proviso  to  Section  14

36

thereof, which deals with  grant of licence,

indicating  that  the  appropriate   Commission

could grant a licence to two or more persons

for distribution of electricity through their

distribution systems within the same area. Mr.

Chagla submitted that after the enactment of

the Electricity Act 2003, it would not have

been necessary to pursue these appeals having

regard to the specific provision that two or

more licences could be granted within a common

area  of  supply,  but  that  in  view  of  the

observations made by the Electricity Appellate

Tribunal that its licences did not entitle it

to  supply  electricity  directly  to  retail

consumers  it  had  become  necessary  to  press

these appeals to correct the erroneous finding

of the said Tribunal.  

51. Mr.  Chagla  submitted  that  while  MERC  had

correctly  interpreted  the  provisions  of  the

licences  granted  to  TPC  regarding  supply  of

electricity to consumers in general, apart from

bulk supply to a consumer whose requirement was

37

above 1000 KVA, it had gone off at a tangent in

directing that a consultancy firm be appointed

to study the issues relating to Sections 42 and

14  of  the  Electricity  Act,  2003,  for  the

purpose of introducing a level playing field.

Mr.  Chagla  urged  that  on  account  of  such

directions given by MERC, which were  de hors

the reliefs prayed for by BSES in its petition

under  Section 22(2)(e) and (n) of the ERC Act,

that TPC had to prefer an appeal before the

Electricity Appellate Tribunal, which came to

the perverse finding referred to  above which

necessitated the filing of the appeal by T.P.C.

52.  Mr. Chagla submitted that the error in the

reasoning of the High Court was required to be

corrected so that TPC could continue to supply

its current and future consumers in accordance

with the provisions of the 2003 Act.

53. Appearing  on  behalf  of  the  MIDC,  Marol

Industries Association, the appellant in Civil

Appeal Nos.3466 and 3467 of 2006, Mr. J. Savla,

learned advocate, submitted that although the

38

appellant had not been made a party before the

Tribunal, it was permitted to intervene in the

proceedings by MERC through the Bombay Small

Scale  Industries  Association  which  was  the

parent body.  Mr. Savla submitted that since

the appellant would be one of the parties who

would  be  affected  by  the  outcome  of  these

proceedings it had been permitted to file the

aforesaid two appeals by order dated 7.8.2006.  

54. While supporting the submissions made on behalf

of TPC, Mr. Savla also referred to the Preamble

and the provisions of Section 14 of the 2003

Act in support of the contention that the Act

encouraged competition so as to give a choice

to  a  consumer  to  opt  for  any  of  the

distributing  licensees  supplying  electricity

directly to the consumers. He urged that many

of  the  members  of  the  aforesaid  Association

receive  supply  of  energy  from  TPC  and  they

would also be adversely affected  if the orders

passed by the Commission and the Tribunal were

allowed to stand. He also referred to Section

39

79(2)(ii) of the 2003 Act which provides as

follows:

“79(2)(ii)  The  Central  Commission shall advise the Central Government on  all  or  any  of  the  following matters, namely:-

(i) ………..

(ii) promotion  of  competition, efficiency  and  economy  in activities  of  the electricity industry;

(iii) …….

(iv) ………….”

55. Mr.  Savla  ended  on  the  note  that

notwithstanding the clarity of the provisions of

the licences granted in favour of Tata Power for

the purpose of distribution of electricity  to all

types of consumers, even if  two interpretations

were possible, the view which was favourable to

the consumers should be accepted by the Court.

56. Appearing for REL, Mr. K.K.Venugopal, learned

senior  counsel,  echoed  Mr.  Chagla’s  contention

40

that in order to arrive at a decision in these

appeals  it  would  be  necessary  to  apply  the

provisions  of  the  different  enactments  to  the

licences granted in favour of Tata Power in order

to identify the purposes for which such licences

had  been  granted.  Referring  to  the  Indian

Electricity  Act,  1903,  Mr.  Venugopal  firstly

referred  to  Section  2(f)  which  defines

“distributing  main”  to  mean  the  portion  of  any

main which is used for transmitting energy to the

service lines for the purpose of general supply.

He  then  referred  to  Section  2(j)  which  defines

“general  supply”  to  mean  the  general  supply  of

energy to ordinary consumers and includes in the

absence  of  a  special  agreement  to  the  contrary

with the Government or with a local authority, the

general supply of electricity for public lamps but

does  not  include  the  supply  of  energy  to

particular  consumers  under  special  agreement.

Reference  was  then  made  to  Section  2(o)  which

defines ‘service line’ to mean any electric supply

line through which energy may be supplied, or is

41

intended  to  be  supplied,  by  a  licensee  to  a

consumer either from a main or directly from the

licensee’s  premises.  Having  regard  to  the

aforesaid  definitions,  Mr.  Venugopal  submitted

that the 1903 Act contemplated  3 types of supply,

i.e.  (i)  General  supply  to  ordinary  consumers,

(ii) supply to public lamps; and (iii) supply to

consumers  under  special  agreement.  Referring  to

Section 4 (1)(d),(e) and (f) of the 1903 Act Mr.

Venugopal submitted that a licence issued under

the  said  Act  could  prescribe  such  terms  and

conditions as to the limits within which and the

conditions under which the supply of energy was to

be compulsory or permissive and as to the limits

of the  price to be charged in respect of the

supply of energy and that a grant of a licence

under the said enactment for any purpose would not

in any way hinder or restrict the grant of another

licence to another person within the same area of

supply for a like purpose.  However,  as far as

TPC is concerned, restrictions had been imposed

on its power of general supply to consumers, which

42

supply  could  only  be  effected  under  a  special

agreement after due sanction from the Government.

It brought such agreements within the purview of

the licences  granted to TPC.  

57.  Mr. Venugopal submitted that clause 2 of the

1907 Licence granted in favour of Tata Power is an

interpretation  clause  where  the  expression  “the

licensees”  used  in  the  Act  was  to  mean   and

include Dorabji J. Tata and Ratanji J. Tata and

subsequently  TPC,   while  the  expression  “other

licensees”  was  meant  to  cover  any  person  or

persons, other than the licensees, who on the date

of the grant of licence was duly  authorized to

supply energy to the public within the area of

supply or to a licensee who may subsequently be

authorized  by  a  licence  to  generate  and  supply

electricity for sections of the Tramways of the

Bombay  Electric  Supply  Company  and  Tramways

Company Limited. Mr. Venugopal urged that clause

(6) of the licence limits the supply by TPC to

bulk supply only and that sub-clause (II) relates

only to a consumer of such bulk supply and not

43

ordinary  consumers.  He  also  urged  that  the

exclusion of clauses VIII, IX, X and XIII of the

Schedule to the Act disentitled TPC  from making

supply  to  public  lamps.  In  comparison,  Mr.

Venugopal  referred  to  REL’s  licence  where  the

purpose of supply has been indicated in clause 6

and provides  that it would be entitled during the

continuance of licence to supply energy for all

purposes within the area of supply.

58.Referring  to  the  Statement  of  Objects  and

Reasons  of  the  1910  Act,  Mr.  Venugopal

submitted that it had been indicated therein

that  various  difficulties  had  arisen  in  the

working of the 1903 Act which were referred by

the Government of India to a Committee on which

technical  and  financial  interests  were

represented.  The  result  was  the  Act  of  1910

which  came into effect on 1.1.1911 and was

altogether a new Act which repealed the 1903

Act. Accordingly, the 1907 licence could not be

a consideration for interpreting the provisions

of the 1919 licence and the licences granted

44

thereafter.   Referring  to  the  definition  of

‘consumer’ in section 2(c) of the 1910 Act, Mr.

Venugopal contended that a consumer would mean

any person who is supplied by a licensee, by

the Government, or by any other person engaged

in  the  business  of  supplying  energy  to  the

public under the said Act or any other law for

the  time  being  in  force,  and  includes  any

person whose premises are for the time being

connected, for the purpose of receiving energy,

with the works of a licensee, the Government or

such other  person, as the case may be.   In

other words, according to Mr. Venugopal, only a

person whose premises were connected for the

purpose of receiving energy could be said to be

a consumer and not any person who was yet to

receive such supply. He then referred to the

definition  of  “Public  lamp”  in  Section  2(k)

meaning an electric lamp used for the lighting

of any street. Mr. Venugopal reiterated that in

terms of clause XV of the 1919 licence granted

to Tata Power, the requirement of clauses IV,

45

V, VI of Schedule II of the 1910 Act for supply

to  public  lamps  had  been  omitted,  which

indicated that Tata Power could supply energy

only  in  bulk  and  not  directly  to  consumers

whose maximum demand was less than 1000 KVA.

Mr.  Venugopal  also  submitted  that  sub-clause

(2) of Clause 5 of the 1919 Licence and those

granted  thereafter  would  be  rendered

tautologous  if an attempt was made to read the

same in a manner independent of sub-clause (1),

since, if Tata Power was allowed to supply for

general  purposes  no  restrictions  would  have

been  placed  on  the  supply  of  power  to

factories. Mr. Venugopal would have us believe

that  notwithstanding  the  provisions  of  Sub-

clause(1) of clause (5), Sub-clause (2) would

have to be read independent of Sub-clause(1) in

relation  to  supply  of  power  for  general

purposes.

59.Mr.  Venugopal  submitted  that,  on  the  other

hand, in accordance with the provisions of its

licence, REL was under compulsion to supply to

46

public lamps at rates which were  lower than

those charged by Tata Power from its consumers,

which gave Tata Power an unfair advantage over

REL  whose  profits  were  thereby  adversely

affected.  Mr. Venugopal submitted that it was

in  such  context  that  the  concept  of  level

playing field arose in the proceedings on the

basis  whereof  MERC  disposed  of  its  petition

under the ERC Act.

60.Mr.  Venugopal   then  referred  to  the

Notification dated 10.3.1934 published by the

Public  Works  Department  informing  the  public

that areas of supply under the licences granted

to Tata Power had been extended  as indicated

hereinbefore so as to include the whole of that

portion of the island  of Salsette as bounded

on the South by the town and island of Bombay

and  on  the  north  by  the  Bassein  and  Thana

creeks  and the area contained  within a circle

of  8  miles  radius  around  the  Tata  Power

company’s  sub-station   near  Kalyan,  subject,

however,  to  the  proviso  that  notwithstanding

47

such  extended  powers  Tata  Power  would  not,

except  with  the  written  consent  of  the

Government given after consulting the existing

licences  or  permit  holders,  be  entitled  to

supply energy to any consumer other than such

licensee  or  permit  holder  within  their

respective  areas.  It  was  urged  that  by  such

amendment Tata Power could not supply energy

directly to consumers, even if it wanted to do

so,  except  with  the  written  consent  of  the

Government  in  the  manner  indicated

hereinabove.  It  was  urged  that  such  a  bar

prevented  Tata  Power  from  supplying  energy

directly  to  consumers  whose  capacity  of

consumption  was  less  than  1000  KVA  (maximum

demand) and such bar continued till the year

1964.  In this regard, Mr. Venugopal referred

to the amendment effected by the Government of

Maharashtra to the 1921 licence held by Tata

Power  wherein  in  amended  clause  5  it  was

provided that although Tata Power could supply

energy  under  the  licence  for  all  purposes,

48

including supply to other agencies for their

own  purposes,  and  in  bulk,  it  would  not  be

under any obligation to supply energy in bulk

to other licensees such as REL, for the purpose

of enabling such other licensees to supply any

consumer with power where the demand exceeded

250  KVA,   except  for  Thana  Electric  Supply

Company  Limited  for  whom  the  maximum  limit

would be 300 KVA; for any consumer in the area

of supply of REL whose maximum demand would be

1000 KVA and 5000 KVA for a customer of the

Maharashtra State Electricity Board.

61.Mr. Venugopal also referred to the Order passed

by the Industries Energy and Labour Department

of the Government of Maharashtra on 7.12.1978

making further alterations in the 1907 Licence

held by Tata Power whereby from 1.7.1980 Tata

Power would transfer to the Maharashtra State

Electricity Board its distribution rights and

assets pertaining thereto as set out in Part II

of the said annexure to the said licence. By

virtue of such arrangement clause 6 relating to

49

the ‘purpose of supply’  was amended to bring

it in parity with the amendment to the First

Annexure  to the 1921 Licence.  Reference was

also  made  to  the  commencement  of  discussion

with  the  Maharashtra  State  Electricity  Board

for  delimitation  of  the  area  of  supply  and

distribution. In other words, under the licence

in  respect  of  the  licensees’  area  of  supply

covered by the licence granted in  favour of

BSES the guiding principle  would be that Tata

Power  would  be  allowed  to  retain  such

distribution rights and loads in the said area

as would be warranted by the surplus generating

capacity  of  Tata  Power  after  meeting  the

requirements in the area served by BEST as well

as the bulk supplied to the Maharashtra State

Electricity Board at various points.  According

to Mr. Venugopal, such discussion was only with

the object of allowing Tata Power to utilise

its surplus generating capacity on account of

the  transfer  of  its  customers  to  the

Maharashtra State Electricity Board.

50

62.Mr.  Venugopal  contended  that  in  order  to

interpret a licence for distribution of energy,

what  is  important  is  not  the  terminology

included  in  such  licence  but  the  purpose  of

supply for which such licence had been granted.

It  was  submitted  that  under  the  Electricity

Act, 2003, a ‘distribution licensee’    was

defined  in  Section  2(17)  to  mean  a  licensee

authorized to operate and maintain distribution

system for supplying electricity to consumers

in his area of supply.   Mr. Venugopal urged

that Tata  Power had not even set up  such a

distribution system and was not, therefore, in

a position to supply energy to any customer on

demand as required under Section 43 of the said

Act.   Tata  Power,  could  not,  therefore,  be

described as a distributing licensee within the

meaning  of  the  aforesaid  definition.  With

regard  to  the  definition  of  ‘consumers’  in

Section  2(15),  Mr.  Venugopal  reiterated  his

earlier submission that only such person could

be said to be a consumer who was being supplied

51

with  electricity  or  was  for  the  time  being

connected for the said purpose with the works

of  a  licensee,  the  Government  or  any  other

person engaged in the supply of electricity to

the public. According to Mr. Venugopal in the

absence  of  any  distribution  system   within

REL’s area of supply, TPC could not have any

consumer within REL’s area of supply. Reference

was also made in this regard to the definition

of  ‘service  line’  in  Section  2(61)  to  drive

home his point.

63. Mr. Venugopal lastly referred to Section 42 of

the  2003  Act  dealing  with  distribution  of

electricity,  the  duties  of  a  distribution

licensee and open access. He pointed out that

sub-section(2) of Section 42 empowers the State

Commission to introduce a system of open access

in such phases and subject to such conditions,

including Trust subsidies and other operational

constraints as may be specified,  within one

year of the appointed date fixed by it, and in

specifying  the  extent  of  open  access  in

52

successive  phases  and  in  determining  the

charges for wheeling having due regard to all

the relevant factors.

64.Mr. Venugopal submitted that by amendment of

the proviso on 15.6.2007  it was provided that

such open access was to be allowed on payment

of a surcharge in addition to the charges for

wheeling as might be determined by the State

Commission.

65.Referring  to  the  Maharashtra  Electricity

Regulatory  Commission  (Distribution,  open

access),  Regulation,  2005,  Mr.  Venugopal

referred to Regulation 3 indicating the right

of  a  consumer  of  a  distribution  licensee  to

seek open access to the distribution system of

such distribution licensee for obtaining supply

of  electricity  from  a  generating  company  or

from a licensee other than such distribution

licensee.  Mr. Venugopal then referred to the

various restrictions relating to the contract

demand  of  the  consumer  which  made  it  quite

clear that the distribution licensee could not

53

of  its  own  accord  supply  electricity  to  any

consumer,   without  conforming  to  the

eligibility  conditions.   Mr.  Venugopal

submitted that the right to such open access

was available to the consumer and not to the

distribution licensee which had to cater to the

demand made by the consumer. In support of the

directions given by MERC in its Order disposing

of  BSES’  application,  Mr.  Venugopal  in

conclusion referred to Section 60 of the 2003

Act which reads as follows:

“60.  Market  domination.   –  The appropriate Commission may issue such directions as it considers appropriate to a licensee or a generating company if such licensee or generating company enters  into  any  agreement  or  abuses its dominant position  or enters into a combination which is likely to cause or  causes  an  adverse  effect  on competition in electricity industry.”

66.Mr.  Venugopal  submitted  that  the  concept  of

level playing field as reflected in the order

passed by MERC was in exercise of the powers

vested in MERC to prevent monopolisation  and

54

to  encourage  competition  and  the  Appellate

Tribunal had chosen not to interfere with such

finding but had, on the other hand, dismissed

the appeal filed by the appellant on the ground

that  under  the  licences  held  by  it  the

appellant was not entitled to supply energy to

any consumer, except in bulk.

67.Mr. Venugopal urged that no interference was

called for  either with the judgment and order

of MERC or that of the Appellate Tribunal and

the appeal filed by the Tata Power was liable

to be dismissed along with the appeals filed by

MIDC, Marol Industries Association.

68.Replying  to  Mr.  Venugopal’s  submissions,  Mr.

Chagla  submitted  that  the  2003  Act  was  a

customer-  friendly  enactment  and  competition

was  accordingly  one  of  its  objects.  He  also

submitted that no appeal had been filed either

by  BSES  or  BEST  against  the  orders  of  the

Appellate  Tribunal.  He  added  that  the

submissions made on behalf of REL supporting

the order  of MERC on the ground of  a level

55

playing field  was wholly erroneous  since in

ground RRR of the appeals filed by TPC in this

Court it has been specifically stated that the

Appellate Tribunal had failed to take note of

the fact that if the root cause of the dispute

was the difference in tariffs, that purportedly

made REL’s tariff less competitive than that of

Tata  Power,  then  such  dispute  had  been  duly

addressed in the Tariff Order dated 11.6.2004

wherein it had been stated in paragraph 10 as

follows:

“The  Commission  had  determined  the tariffs in such a way that the Bulk Supply  Tariffs  (BST)  applicable  to BSES and BEST are significantly lower than the tariffs applicable to TPCs retail HTLT consumers. The Commission has admitted to rationalize the bulk and retail tariff supply so that they are in consonance with the principles that the BST should be lower than the retail  tariffs.   This  will  also facilitate  healthy  competition between different licensees on a more even footing.”

69.Mr.Chagla submitted that the aforesaid order of

the Commission  put at rest the bogey  of a

level  playing  field  raised  by  MERC,  which

56

otherwise  had   completely  supported  the

appellant’s  case  on  interpretation  of  the

licences  held by it.

70.Mr.  Chagla  also  submitted  that  the  chart

submitted on behalf of TPC would clearly show

that the Appellate Tribunal had committed an

error in coming to a finding that TPC was not

engaged  in  making  retail  supply  directly  to

consumers, on which basis it had dismissed the

appeals filed by TPC.

71.In the opening paragraphs of this judgment we

have  indicated  that  the  principal  question

which fell for the decision of MERC was whether

Tata  Power  was  entitled  under  the  licences

granted  to  it  to  effect  distribution  of

electricity directly to consumers within BSES’

(Now  REL’s)  area  of  supply.   While  MERC

answered the said question in favour of Tata

Power upon holding that there was nothing in

the licences granted to Tata Power to prevent

it  from  doing  so  and  that  it  could  effect

supply of electricity to any consumer, it also

57

held that the terms and conditions in the said

licences  gave  it  an  advantage  over  BSES  in

regard to fixation and charge of tariff which

necessitated  the  establishment  of  a  level

playing  field  in  order  to  encourage

competition.   Apparently, while dealing with

the  grievances  projected  by  BSES,  MERC  lost

sight of the reliefs prayed for BSES which was

based on the contention that according to the

terms and conditions of the licences granted to

it Tata Power was not entitled to supply energy

in retail to domestic customers, at least not

to  consumers  whose  demand  was  less  than  a

maximum demand of 1000 KVA.  Having once held

on  the  principal  issue  that  Tata  Power  was

entitled  to  supply  electrical  energy  to  all

consumers  under  the  licences  granted  to  it,

MERC  should  have  restrained  itself  from

unilaterally making out a third case regarding

the establishment of a level playing field when

such a case had neither been made out nor any

58

relief in that regard had been prayed for by

BSES.

72.MERC also appears to have lost sight of the

fact  that  the  first  three  licences  had  been

granted to Tata Power long before a separate

licence was granted in favour of BSES.  There

is sufficient material on record to establish

that Tata Power had been supplying energy to

domestic consumers on retail basis within areas

which subsequently came to be included in BSES’

(and subsequently REL’s) area of supply and no

objection was raised in that regard till TPC

submitted  its  proposed  tariff  for  domestic

retail  consumers  for  approval  in  September,

1998.  MERC appears to have confused the two

issues while dealing with BSES’ petition under

section  22(2)(e)  and  (n)  of  the  Electricity

Regulatory Commissions Act, 1998.  In fact, it

appears that based on the third case made out

by  it,  MERC  restrained  Tata  Power  from

supplying electrical energy to consumers whose

demand was less than 1000 KVA (maximum demand)

59

despite holding that under the licences granted

to it Tata Power was entitled to do so.  

73.In dealing with the appeals filed both by REL

and  Tata  Power,  the  Appellate  Tribunal  for

Electricity  misinterpreted  the  provisions  of

the  licences  granted  to  TPC  for  supply  and

distribution  of  electrical  energy.   The

arguments advanced on behalf of REL before the

learned  Tribunal,  which  were  also  advanced

before us by Mr. Venugopal, found favour with

the Tribunal which arrived at the conclusion

that the terms and conditions of the licences

granted to TPC did not entitle it to supply

electrical energy directly to consumers whose

demand  was  below  1000  KVA  (maximum).   In

reaching such conclusion the Tribunal not only

ignored the situation prior to 1926 when BSES

was  granted  its  licence,  but  also  the

subsequent amendments to the licences held by

TPC  whereby  clause  5  of  the  1919  and  1921

licences were altered to permit Tata Power to

supply  electrical  energy  for  lighting  and

60

general  purposes,  other  than  power  and

including the supply of energy in bulk to other

licensees  for  distribution  by  them.   The

Appellate  Tribunal  also  overlooked  the  order

passed  by  the  Industries  Energy  and  Labour

Department of the Government of Maharashtra on

7.12.1978, whereby from 1.7.1980 Tata Power was

required to transfer to the Maharashtra State

Electricity Board its distribution rights under

the 1907 licence and assets pertaining thereto

as set out in part 2 of the Annexure to the

said licence.  The Tribunal also overlooked the

fact  that  by  virtue  of  the  aforesaid

arrangements,  clause  6  of  the  1907  licence

relating  to  “purpose  of  supply”  was  also

amended  to  bring  it  in  parity  with  the

amendments to the First Annexure to the 1919

and  1921  licences.   Although,  Mr.  Venugopal

tried to convince us that the changes effected

in clause 6 of the 1907 licence and clause 5 of

the remaining three licences held by TPC was

only to compensate TPC for giving up its rights

61

to supply in favour of the Maharashtra State

Electricity Board and to help it to utilise its

surplus generation of power, we are unable to

accept Mr. Venugopal’s contentions, since from

the materials on record it stands amply proved

that Tata Power had all along been supplying

electrical  energy  directly  even  to  retail

customers whose maximum demand was less than

1000 KVA and no objection thereof was raised by

either BSES or REL till the year 1998 when Tata

Power  submitted  its  proposal  for  domestic

tariff for approval to the Board.  It was only

thereafter that REL raised its objection in the

form of its petition to MERC under Section 22

(2)(e) and (n) of the ERC Act 1998.   The list

of consumers to whom retail supply was being

effected by TPC in the island city of Bombay

and  its  suburbs,  discloses  that  at  least  51

such  consumers  were  within  REL’s  area  of

supply.  In fact, Mr. Venugopal by way of an

alternative submission also indicated that Tata

Power  under  the  terms  and  conditions  of  the

62

licences held by it, could supply energy to any

consumer whose demand was above 1000 KVA within

the  area  of  supply  covered  by  the  said

licences.

74.We are also unable to accept Mr. Venugopal’s

interpretation of clause 6 of the 1907 licences

and  clause  5  of  the  other  licences  to  the

effect that Sub-clause (II) thereof would be

rendered  tautologous,  if  the  same  was  read

independently  of  Sub-clause  (I).   His

submission  that  if  Sub-clause  (II)  is  to  be

read in a manner which allowed Tata Power to

supply  energy  for  general  purposes  to  all

consumers,  no  restrictions  would  have  been

placed on the supply of power to factories and

the  Railways,  appears  to  us  to  be  without

substance.

Clause 5 of the 1919, 1921 and 1953 Licences

held by Tata Power indicates the purpose of supply

and is divided into two parts – (i) for power and

(ii) for lighting and general purposes, other than

power.  Simply stated, Sub-clause (I) deals with

63

supply to licensees for their own purposes and in

bulk.  The restriction indicated by Mr. Venugopal

is  in  respect  of  such  bulk  supply  where  the

consumer  required  less  than  5,00,000  units  per

annum which was also stipulated to be the bona

fide  average  computed  annual  consumption  of  a

Factory or Railway. On the other hand, Sub-clause

(II)  provides  for  supply  of  electricity  for

lighting and general purposes, other than power,

including the supply of energy in bulk to other

licensees for distribution by them.  Sub-clause

(II) is followed by an Explanation to both Sub-

clause (I) and Sub-clause (II) of Clause 5. It has

been  clarified  that  the  energy  supply  to  any

consumer for power, that is under Sub-clause (I),

could be used by such consumer for lighting his

premises to a maximum amount of 20% of the total

energy supplied to such consumer, and it has also

been stipulated that Tata Power would not supply

energy for lighting purposes referred to in Sub-

clause  (II)  except  by  agreement  with  Bombay

Electric Supply and Tramways Company Limited.

64

75.Regarding  Mr.  Venugopal’s  other  submission

relating to Section 42 of the 2003 Act, we are

unable to appreciate how the same is relevant

for interpreting the provisions of the licences

held by TPC.  It is no doubt true that Section

42 empowers the State Commission to introduce a

system of open access within one year of the

appointed date fixed by it and in specifying

the extent of open access in successive phases

and  in  determining  the  charges  for  wheeling

having due regard to the relevant factors, but

the  introduction  of  the  very  concept  of

wheeling is against Mr. Venugopal’s submission

that not having a distribution line in place,

disentitles  T.P.C.  to  supply  electricity  in

retail  directly  to  consumers  even  if  their

maximum demand was below 1000 KVA.  The concept

of wheeling has been introduced in the 2003 Act

to enable distribution licensees who are yet to

instal  their  distribution  line  to  supply

electricity  directly  to  retail  consumers,

subject to payment of surcharge in addition to

65

the  charges  for  wheeling  as  the  State

Commission may determine.  We, therefore, see

no substance in the said submissions advanced

by Mr. Venugopal.  

76. Mr. Venugopal’s last submission relating to

market domination has to be considered by the

appropriate Commission separately in terms of

Section  60  of  the  2003  Act  and  cannot  be

pressed into service for interpreting the terms

and conditions of the licences held by TPC.

On the other hand, in our view, the provisions

of  both  the  1903  and  1910  Electricity  Acts

encourage competition in the electricity trade and

the  same  is  also  incorporated  in  the  licences

issued in favour of the distribution licensees,

which also include licencees generating power for

supply.   The  element  of  competition  has  been

included  in  the  Preamble  to  the  2003  Act  and

permeates the same in its various provisions.  As

submitted by Mr. Chagla, the Act is meant to be

consumer-friendly  and  one  of  the  objectives  it

sets out to achieve is to give the consumer an

66

option to choose the distribution licensee from

whom  it  wishes  to  receive  supply  of  electrical

energy.   The  intervention  of  MIDC,  Marol

Industries Association and the appeals filed by

it, has obviously been made in that context.

77.Having regard to the above and the terms and

conditions of the licences held by Tata Power,

we  have  no  hesitation  in  holding  that  the

Appellate  Tribunal  for  Electricity  erred  in

coming  to  a  finding  that  under  its  licences

Tata Power was entitled to supply energy only

in bulk and not for general purposes and in

retail to all consumers, irrespective of their

demand, except for those consumers indicated in

Sub-clause  (I)  of  clause  5  of  the  several

licenses held by Tata Power.

78.Having earlier held that MERC had overstepped

its  jurisdiction  in  making  out  a  third  case

which had not been made out by BSES and had on

the basis thereof issued orders which had not

even  been  prayed  for  by  BSES,  we  quash  the

orders passed both by MERC and the Appellate

67

Tribunal for Electricity and allow all these

three appeals upon holding that under the terms

and conditions of the licences held by it, Tata

Power Company Ltd. is 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 licences and  also subject

to  the  constraints  indicated  in  relation  to

Sub-Clause  (I)  of  Clause  5  in  relation  to

factories and the Railways.

79.The parties shall bear their own costs.

………………………………………J. (ASHOK BHAN)

…………………………………………J. (ALTAMAS KABIR)

New Delhi Dated: July 8, 2008

68