REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Transferred Case No.37 of 2001

Union of India through General Manager            ...      Petitioner Northern Railways

versus

Chairman, UP State Electricity Board & Ors. ...         Respondents

With

Transferred Case No.38 of 2001

U.P. Power Corporation Ltd. & Ors. ...      Petitioners

versus

Railway Board through its Chairman  & Ors. ...         Respondents

J  U  D  G  E  M  E  N  T

H.L. Gokhale J.   

Both  these  transferred  cases  are  concerning  the  legality  of  

construction of the transmission lines by Northern Railways to draw power from the  

power plants of the National Thermal Power Corporation Ltd. (‘NTPC’ for short), and  

no more from the transmission lines of Uttar Pradesh State Electricity Board (‘UPSEB’  

for short), through which they were drawing power earlier.

Facts  leading  to  these transferred cases are as follows:-

2. UPSEB was purchasing power from the power plants of  NTPC, and  

supplying the same to Northern Railways through transmission lines of the UPSEB.  

Railways found the tariff of UPSEB to be excessive, and therefore, decided to enter  

into  a  power  purchasing  agreement  with  NTPC,  and  to  construct  their  own  

transmission lines to carry the supply.  The Railways moved the Central Govt. for  

permission in this  behalf,  and obtained approval  from the cabinet  committee on  

6.6.1990.  This was recorded in the then Railway Minister’s letter addressed to the  

then Minister of Energy dated 24.8.1990.  Later, it was decided that 100 MW power  

will  be allocated to the Railways from Dadri  Gas Station of NTPC.  In case of a  

shortfall, the requirement would be met from the Auraria Gas Station of NTPC.  The  

above allocation to Railways was to be subject to entering into a power purchasing  

agreement with NTPC.  This is recorded in the letter dated 10.2.1998 from Deputy  

Secretary to the Ministry of Power addressed to the Chairman, Central Regulatory  

Electricity  Authority.   Accordingly,  Railways  entered  into  the  necessary  power  

purchasing agreement with NTPC in March 1998.

3. Thereafter, Railways started constructing transmission lines from Dadri  

Gas  Power  Plant  and Auraria  Gas  Power  Plant  of  NTPC upto  the sub-station  of  

Railways at Dadri, District Ghaziabad, U.P.  This led to UPSEB to issue a threat to  

demolish the said transmission lines, and a notice was issued to the Railways on  

7.9.1999.   The  notice  was  issued  by  the  Superintendent  Engineer,  Electricity  

Transmission  Circle,  U.P.  State  Electricity  Board,  Ghaziabad,  U.P.  to  the  Chief  

Electrical  Engineer  (Construction),  Northern  Railways,  Tilak  Bridge,  New  Delhi,  

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calling upon the Railways to immediately stop  the  activity  of  construction  of  

distribution/service lines.  The notice further stated that if the Railways did not stop  

or  refrain  from  these  activities  inspite  of  receipt  of  the  notice,  UPSEB  will  be  

constrained to take steps of its own for demolition of the said lines and will also sue  

for  damages  suffered  or  to  be  suffered  by  UPSEB  consequent  upon  this  

construction.  

4. This notice led the Railways to file Writ Petition No.6802/1999 in the  

High Court of Delhi to challenge the said notice.  The High Court vide its order dated  

9.11.1999  stayed  operation  of  this  notice/order.   The  High  Court  subsequently  

passed another order on 12.5.2000 allowing the Railways to carry on their work of  

construction.

5. After  the  construction  of  transmission  lines  was  completed,  the  

Railways started drawing power from the NTPC power plants through those lines.  

That  led  UPSEB  to  file  Writ  Petition  No.3588/2001  in  Allahabad  High  Court  to  

challenge  the  act  of  Railways  of  drawing  electrical  energy  from  NTPC  through  

Railway’s own service lines.

6. Since, two petitions were filed in two different High Courts arising out  

of the same cause of action, the Railways sought transfer of these two writ petitions  

to the Supreme Court of India, in order to avoid the multiplicity of proceedings and  

conflicting decisions.  The same having been allowed, W.P. No.6802/1999 in Delhi  

High  Court  has  been  numbered  as  Transferred  Case  No.37/2001  and  W.P.  

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3588/2001 in Allahabad High Court has become Transferred Case No.38/2001 in  

this Court.

7. Union  of  India  through General  Manager,  Northern  Railways  is  the  

petitioner  in  Transferred  Case  No.37/2001.   Railway  Board,  General  Manager  

Northern  Railways  and  Dy.  Chief  Engineer/Electrical  (Construction)  of  Northern  

Railways are respondent No.1 to 3 in Transferred Case No.38/2001.  UPSEB is the  

first respondent in Transferred Case No.37/2001 and petitioner in Transferred Case  

No.38/2001.  NTPC and its officer are respondents No.4 to 6 in Transferred Case  

No.38/2001.   The  parties  are  referred  to  as  Railways,  UPSEB  and  NTPC  for  

convenience.  Shri P.P. Malhotra, learned Additional Solicitor General has appeared  

for Railways,  Smt. Rachna Joshi Issar has appeared for NTPC,  and Shri Pradeep  

Misra has appeared for UPSEB.   

The submissions of the rival parties:-

8. It was submitted on behalf of the Railways by Shri Malhotra that the  

action of the Railways  to erect,  operate,  maintain  or repair  any electric  traction  

equipment  was  very  much  within  the  jurisdiction  of  the  Railways,  inasmuch  as  

Sections 11 (a) and (g) of the Railways Act, 1989 empower them to carry out such  

activity and all such necessary works for the purposes of constructing or maintaining  

a railway.  These Sections 11 (a) and (g) read as follows:-

“11.  Power  of  railway  administrations  to  execute  all   necessary works.-  Notwithstanding anything contained in any   other  law  for  the  time  being  in  force,  but  subject  to  the   provisions  of  this  Act  and  the  provisions  of  any  law  for  the   acquisition of land for a public  purpose or for companies,  and   subject also,  in the case of a non-Government Railway, to the   

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provisions  of  any  contract  between the non-Government   railway and the Central Government, a railway administration  may, for the purposes of constructing or maintaining a   railway-  

(a) make or construct in or upon, across, under   or  over  any lands,  or  any streets,  hills,  valley,  roads,  railway,   tramways, or any rivers, canals, brooks, streams or other waters,   or any drains, water-pipes, gas-pipes, oil-pipes, sewers, electric  supply lines, or telegraph lines, such temporary or permanent   inclined-planes,  bridges,  tunnels,  culverts,  embankments,   aqueducts,  roads, lines of railways, passages, conduits,  drains,   pies, cuttings and fences, in-take wells, tube wells, dams, river   training and protection works as it thinks proper;

(b) ………………..

(c)………………….

(d)………………

(e)………………

(f)……………..

(g) erect,  operate,  maintain  or  repair  any  electric  traction  equipment,  power  supply  and   distribution installation in connection with the working of   the railway; and………….”

        (emphasis supplied)

9. The  NTPC  has  also  the  authority  to  sell  power  to  Railways  in  its  

capacity as a generating company under Section 43A of the Electricity Act, 1948  

This section reads as follows:-

“43A. Terms, conditions and tariff for sale of electricity   by Generating Company.  – (1)  A Generating Company  may  enter  into  a  contract  for  the  sale  of  electricity   generated by it-

(a) with the Board constituted for the State or any of the States in   which a generating station owned or operated by the company   is located;

(b) with the Board constituted for any other State in which it  is   carrying  on  its  activities  in  pursuance  of  sub-section  (3)  of   section 15A; and  

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(c) with any other person with  consent  of  the  competent  government or governments.

[(2) The tariff for the sale of electricity by a Generating   Company to the Board shall be determined in accordance with   the norms regarding operation and the Plant  Load Factor  as   may be laid down by the Authority ad in accordance with the   rates  of  depreciation  and  reasonable  return  and  such  other   factors as may be determined, from time to time, by the Central   Government, by notification in this Official Gazette:

Provide that the terms, conditions and tariff  for such sale   shall,  in  respect  of  a  Generating  Company,  wholly  or  partly   owned  by  the  Central  Government,  be  such  as  may  be   determined  by  the  Central  Government  and  in  respect  of  a   Generating Company wholly or partly owned by one or more   State Governments be such as may be determined, from time   to tome, by the government or governments concerned.]]”

    (emphasis supplied)

10. The generating company has, however, to obtain necessary clearance  

from the competent Govt. before entering into a contract for sale of electricity to  

any person other than an Electricity Board.   NTPC is a wholly owned company of  

the  Central  Govt.   It  has,  therefore,  to  obtain  permission  from  the  Central  

Government,  which it had.  ‘Competent Government’ is defined under Section 2  

(3A) of the 1948 Act, which reads as follows:-

“2. Interpretation……………

(3A) “competent  government”  means  the  Central   Government  in  respect  of  a  Generating  Company  wholly  or   partly owned by it and in all other cases the Government of the   State in which the generating station of a Generating Company   is located or proposed to be located.”  

11. Railways  had  also  obtained  the  necessary  permission  from  the  

Government  of  India  and,  thereafter,  they  had  entered  into  the  necessary  

agreement with NTPC.  It was pointed out that the authority of the Railways to act  

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as  above  is  left  unhindered  under Section 173 of the Electricity  Act, 2003  

[which  Act  replaced  the  Electricity  (Supply)  Act  1948].   This  Section  reads  as  

follows:-

“173. Inconsistency in laws.  – Nothing contained in this Act   or  any  rule  or  regulation  made thereunder  or  any  instrument   having effect by virtue of this Act, rule or regulation shall have   effect in so far as it is inconsistent with any other provisions of   the Consumer Protection Act, 1986 (68 of 1986) or the Atomic   Energy Act, 1962 (33 of 1962) or the Railways Act, 1989 (24 of   1989).”

12. The submissions of  Shri  Malhotra,  learned counsel  for  the Railways  

were supported by Smt. Rachana Joshi Issar, learned counsel for NTPC.  She also  

stressed the fact that NTPC was required to obtain only the consent from the Govt.  

of India under Section 43A of the Electricity Supply Act, 1948, and that consent had  

been obtained prior to entering into the agreement from the Central Govt. which  

was the competent government under Section 2 (3A) of 1948 Act.

13. The submissions on behalf of the Railways and NTPC were countered  

by Shri Pradeep Misra, learned counsel for UPSEB.  In his submission, Govt. of India  

was not competent to grant such permission to Railways to buy power from NTPC,  

or  to  construct  these  transmission  lines.   Such  activity  ought  to  have  been  

sanctioned by the UP State Electricity Commission/State Government under Section  

27D of the 1910 Act.  This Section 27D reads as follows:-

“27D. Grant  of  transmission  license  by  the  State   Government:  (1)  Until  the  State  Government  Commission  is   established  the  State  Government  and  thereafter  the  State   Commission may, subject to the provisions of sub section (4),   grant a transmission license to any person.”

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14. With  respect  to  the authority of the Railways under Section  

11 (a) and (g) of the Railways Act, 1989, Shri Misra submitted that this Section can  

be read to authorize the Railways to have their electricity supply and lines only for  

working  and  maintenance  of  railways,  and  not  for  transmitting  energy  from  

generating stations.   If  transmitting lines were to be constructed,  a license was  

necessary to be obtained.  Section 27D of the 1910 act cannot be ignored while  

reading Section 11 (a) and (g) of the Railways Act, 1989.

Consideration of the rival submissions  

15. (i) We have considered the arguments by the rival  parties.   As far as  

reliance on Section 27D of the Electricity Act, 1910 is concerned, it is to be noted  

that this Section came into force on 31.12.1998.  The agreement between Railways  

and NTPC was signed prior thereto in March, 1998.  That apart, it is true that in   

terms of Section 27D of the Indian Electricity Act, 1910 and Sections 12 and 14 of  

the Electricity Act, 2003, no person other those authorized or otherwise exempted  

by an Appropriate Government or the Appropriate Commission shall be entitled to  

engage in the activities of transmission or distribution of electricity.  However, in the  

case of Railways, the transmission of electricity is governed by the provisions of a  

special enactment, i.e. the Railways Act, 1989 and not by the enactments governing  

electricity.   

      (ii)       That apart, Sections 11 (a) and (g) of the Railways Act, 1989 clearly  

authorize the Railways to construct necessary transmission lines, dedicated for their  

own purpose.  It is not possible to read this Section in a restricted manner in which  

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it  was sought to be conveyed.  This is because the principal part of Section 11  

authorizes the Railway administration to execute all necessary works for the purpose  

of constructing or maintaining railways.  Sub-section (a) of this Section authorizes  

Railways to make or construct in or upon, across, under or over any lands electric   

supply lines.  Under sub-Section (g), thereof, the Railways are authorized to erect,   

operate,  maintain  or  repair  any  electric  traction  equipment,  power  supply  and  

distribution installations in connection with working of the railways.  This sub-section  

clearly  empowers  Railways  to  erect  any  electric  traction  equipment,  and  power  

supply  and  distribution  installation  which  is  in  connection  with  the  work  of  the  

Railways.  This will certainly include construction of transmission lines.  That being  

so, there is no substance in this submission made by the UPSEB as well.  

       (iii)    Besides, Section 26A (1) of the Electricity Supply Act, 1948 exempts the   

generating company from the requirement of taking a license under Electricity Act,  

1910.  This section 26A (1) reads as follows:-

“26A. Applicability of the provisions of Act 9 of 1910 to   Generating Company – (1) Notwithstanding  anything  contained in sub-section (2), nothing in the Indian Electricity Act,   1910, shall be deemed to require a Generating Company to take   out a licence under that Act, or to obtain sanction of the State   Government for the purpose of carrying on any of its activities.”

         (iv)     The generating company does have the necessary authority to enter   

into a power purchasing agreement under Section 43A of the Electricity Supply Act,  

1948.   NTPC  has  been  permitted  by  the  Central  Government  to  enter  into  an  

agreement.   Railways  and  NTPC  both  have  obtained  the  permission  from  the  

concerned ministries prior to entering into this agreement.  In the instant case, the  

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Railways found the tariff of UPSEB to be excessive and therefore, they decided to  

construct their own transmission lines.  This being so, the action on the part of the  

Railways of constructing transmission lines, and drawing power from thermal power  

plants of NTPC, was perfectly legal.  Even under the Electricity Act, 2003, a direct  

sale  of  power  by a  generating  company to  a  consumer  is  specifically  permitted  

under Section 10 (2) thereof.   

16. In the circumstances, the notice dated 7.9.1999 given by the UPSEB  

was totally uncalled for, and is required to be quashed and set-aside.  Accordingly,  

the Transferred Case No.37/2001 will  have to be allowed,  and Transferred Case  

No.38/2001 will have to be dismissed.

17. In the circumstances, we pass the following order:-  

(a) Transferred Case No.37/2001 is allowed.  The impugned notice/order  

dated 7.9.1999,  issued  by  UPSEB  to  the  Northern  Railways,  is  hereby  

quashed and set-aside.

(b) Transferred Case No.38/2001 is dismissed.

(c) There will be no order as to costs.   

………..……………………..J.   ( P. Sathasivam )

   ……………………………..J.     ( H.L. Gokhale  )

New Delhi  

Dated:  February 9, 2012.

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