/2022 INSC 0872/
REPORTABLE 
IN   THE   SUPREME   COURT   OF   INDIA
 CIVIL APPELLATE   JURISDICTION  
CIVIL        APPEAL        NOS.3607­3610 OF        2008
M/s. Jindal Steel and Power Limited   …   APPELLANT(S)
Vs.
The Chhattisgarh State Electricity 
Regulatory Commission and Ors.                           ...   RESPONDENT(S)
WITH
CIVIL APPEAL NOS.4104­4107 OF 2008
Tirumala Balaji Alloys Pvt. Ltd.                      …   APPELLANT(S) 
Vs.
M/s. Jindal Steel and Power Ltd. and Ors.  Etc. ...   RESPONDENT(S)  
J       U        D        G        M        E       N        T
NAGARATHNA,        J.
1. These   Civil   Appeals   filed   under   Section   125   of   the   Electricity
Act,   2003   arise   out   of   common   impugned   Judgment   dated
07.05.2008   passed   by   the   Appellate   Tribunal   for   Electricity,   New
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Delhi   (‘Appellate   Tribunal’,   for   short).     By   the   said   judgment,   the
Appellate   Tribunal   has   set   aside   the   order   of   respondent   No.1   dated
29.11.2005   and   cancelled   the   distribution   licence   granted   to   the
appellant in C.A. Nos.3607­3610 of 2008. Hence, these appeals.
2. Since   the   questions   of   law   and   facts   which   arise   in   both   the
above   captioned   Civil   Appeals   are   similar,   these   appeals   are   being
disposed of by this common judgment.
  Re: Civil Appeal Nos. 3607­3610 of 2008:
3. The   appellant­Jindal   Steel   and   Power   Ltd.   (‘JSPL’,   for   short)   in
this   civil   appeal   established   a   sponge   iron   /   steel   plant   at   Raigarh,
Chhattisgarh in the year 1990. A captive power plant was also set up
by JSPL at a distance of 40 km from the aforesaid steel plant. 
4. Respondent   No.1   is   Chhattisgarh   State   Electricity   Regulatory
Commission   (‘Commission’,   for   short),   respondent   No.2   is
Chhattisgarh   State   Electricity   Board   (‘CSEB’,   for   short)   later   became
‘Chhattisgarh   State   Power   Distribution   Company’   and   respondent
No.3   is   Chhattisgarh   Vidyut   Mandal   Abhiyanta   Sangh   (‘CVMAS’,   for
short).
5. The   newly   created   State   of   Chhattisgarh   formulated   its
industrial   policy   for   2001­2006  which   encouraged   the   establishment
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of   industrial   estates   in   private­public   partnership   as   well   as   the
installation of captive power plant.
6. A proposal  for  permission to set up an industrial  estate in 500
acres of land, adjacent to the existing land at Raigarh, was submitted
by   JSPL   vide   letter   dated   28.12.2001.   The   land   was   to   comprise   of
villages of Kosampali, Dhanagar, Barmuda or at a site in the Tehsil of
Gharghoda   comprising   villages   Tarai   Mal   and   Ujjalpur.   JSPL,
addressed   a   letter   dated   09.04.2002   to   the   Department   of   Mineral
Resources,   Commerce   and   Industries,   Government   of   Chhattisgarh
seeking   permission   for   establishing   such   an   industrial   estate   at
Raigarh.   A   map   showing   the   proposed   industrial   area   was   annexed
with   the   letter.   The   Government   of   Chhattisgarh,   vide   letter   dated
26.04.2002   informed   JSPL   that   the   Energy   Department   was   taking
action   to   grant   permission   for   sale   of   power   and   to   lay   transmission
lines to various units in the private industrial estate being established
by   JSPL   and   requested   JSPL   to   prepare   and   submit   a   draft   of
Memorandum of Understanding (‘MoU’, for short) for the said purpose
for   approval.   The   facilities   were   to   be   provided   as   per   the   new
industrial policy dated 01.11.2001.
7.   JSPL,   on   16.07.2002,   requested   the   Chief   Minister   of
Chhattisgarh   to   issue   appropriate   directions   for   grant   of   permission
to   supply   power   to   the   units   in   the   proposed   industrial   estate.   The
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Government   of   Chhattisgarh,   on   14.08.2002,   sent   a   reply   to   the
aforesaid   request   made   by   JSPL   and   informed   that   it   shall   have   to
take certain actions / steps with regard to the supply of power to the
proposed   industrial   units.   In   compliance   of   the   aforesaid   letter   on
04.09.2002,   JSPL   addressed   a   letter   requesting   for   grant   of
permission under Section 28 of the Indian Electricity Act, 1910 (‘1910
Act’, for short) for sale of power to the proposed units in the industrial
state   from   its   captive   power   plant   and   for   grant   of   permission   to   set
up transmission and distribution lines/system for supply of power to
the   industrial   units   in   the   proposed   industrial   estate.   JSPL   further
stated   that   they   will   obtain   necessary   permission   under   the
Electricity   Supply   Act,   1948   (‘1948   Act’,   for   short)   for   setting   up
transmission and distribution lines from CSEB.
8. A   MoU   was   signed   on   23.10.2002   between   Chhattisgarh   State
Industrial   Development   Corporation   (‘CSIDC’,   for   short)   acting   on
behalf   of   Government   of   Chhattisgarh   and   JSPL   for   setting   up   the
industrial   estate.   The   Government   of   Chhattisgarh,   on   29.01.2003
granted permission for supply of power by JSPL to the new industrial
units   being   set   up   in   the   private   industrial   estate   proposed   in   four
villages   of   Raigarh   District   i.e.,   Punjipathra,   Tumdih,   Jorapalli   and
Dhanagarh from its captive power plant and laid down certain terms
and   conditions.   CSEB,   on   31.05.2003   granted   permission   for   laying
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transmission and distribution  lines of 220 KV for supply of power to
the   prospective   units   at   the   Industrial   Estate   in   Raigarh,
Chhattisgarh   by   tapping   220   KV   from   the   captive   power   plant   of
JSPL.
9. On   06.10.2003,   JSPL   made   a   formal   application   for   sanction
under   Section   28   of   the   1910   Act   wherein   it   provided   details   of   the
project   enclosing   relevant   documents.   The   Government   of
Chhattisgarh   passed   two   orders   on   28.02.2004.   Vide   its   first   order
exercising power under Sections 68(1) and 68(3) of the Electricity Act,
2003   (‘2003   Act’,   for   short),   the   State   Government   accorded
permission for construction of transmission and distribution lines as
recommended by the CSEB on certain terms and conditions.   Vide   its
second   order,   relating   to   the   No­Objection   of   the   State   Government
regarding direct power  supply by JSPL from their power plant to  the
industrial units proposed to be set up in the private industrial estate
in   Raigarh,   Chhattisgarh,   the   State   Government   of   Chhattisgarh
opined   that   since   the   2003   Act   was   in   force   in   the   State   from
09.12.2003 and the 1910 Act stood repealed, no permission could be
granted under the latter Act. 
10. JSPL   commenced   supply   of   electricity   to   the   industrial   units
which were already setup with effect from 01.03.2004.
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11. Thereafter, on 15.09.2004, JSPL filed an application for grant of
distribution   licence   before   the   Commission   under   Section   14   of   the
2003 Act. The same was returned by the Commission on 15.09.2004
for   filing   in   the   prescribed   format.   On   25.01.2005,   JSPL   applied   for
the   licence   to   the   Commission   in   Form   1­A   with   all   necessary
enclosures   as   per   Regulation   3   (1)   of   the   Chhattisgarh   State
Electricity Regulatory Commission (License Regulations), 2004 (‘State
License   Regulations’,   for   short)   along   with   Demand   Draft   of   Rs.5
Lakhs.   In   the   said   application,   JSPL   stated   that   the   area   to   which
supply  was to  be made was the Jindal  Industrial  Park in the private
sector   in   Punjipathra   and   Tumdih   villages   of   Garghoda   Tehsil,
Raigarh District having an area of 750 acres and shall accommodate
seventy   units.   Pursuant   to   the   filing   of   the   said   application,   notices
were published in the newspapers and objections were invited under
Section 15 of the 2003 Act. Three objections were received, one each
from   respondent   Nos.2   and   3   and   the   third   objection   was   from   Mr.
R.K.  Aggarwal.   The  objection  of  Mr.  R.K.  Aggarwal   was  subsequently
rejected  by   the  Commission   on  27.08.2005   being  bereft  of   any   locus
standi . 
12. Various   correspondences   and   pleadings   were   exchanged
between JSPL, CSEB, CVMAS and the Commission and thereafter the
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Commission   framed   a   total   of   five   issues   and   vide   its   Order   dated
29.09.2005, decided to grant distribution licence under Section 14 of
the   2003   Act.   The   pertinent   findings   of   the   Commission   can   be
encapsulated as under:
i. A harmonious reading of Sections 10(2), 42(2), 2(47) & 12 of the
2003   Act,   clearly   brings   out   that   a   generating   company   may
supply   electricity   to   a  consumer  under   the   provisions   of   Section
10(2)   of   the   2003   Act   only   subject   to   the   provisions   of   open
access.   The   scheme   of   the   Act,   particularly   Part   IV   (Licensing)
thereof,   is   such   that   it   cannot   authorize   a   generator   to   supply
electricity   to   a   consumer   without   a   licence.   That   the   present
application   is  not  for   supply   through  open   access   and   the  same
is   for   distribution   of   electricity   to   a   significant   number   of
industries in an industrial area set up under specific permission
of the State Government. 
ii. Section 28 of the 1910 Act is quite clear that supply of electricity
to   the   public   mandates   the   previous   sanction   of   the   State
Government. That, by no stretch of the argument, can the letter
of the State Government dated 29.01.2003 be treated as sanction
of the State government. Therefore, the said letter does not confer
any   right   on   JSPL   under   Section   28   of   the   1910   Act   to   supply
electricity.
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iii. No­objection   letter   dated   28.02.2004   also   does   not   confer   any
such right on the applicant. If the said letter conveyed any right,
either the application for licence would not have been made or a
claim of existing right should have been made. The application of
JSPL   clearly   stated   that   it   had   no   licence.   Further,   the   second
letter   of   the   said   date,   conveying   No­objection   of   the   State
Government cannot be said to be valid since there is no provision
for   such   no   objection   from   the   State   Government.   Therefore,   as
on that date, distribution of electricity  by JSPL was without any
legal authority. 
iv. On the aspect of area for which the licence had been applied for,
it   was   observed   that   the   present   case   ought   to   be   treated   as   an
exception to Rule 3 of the Distribution License Rules and to Para
5.4.7   of   the   National   Electricity   Policy   since   effective   steps   for
setting   up   of   the   industrial   estate   herein   and   an   understanding
with the State Government to the effect that JSPL would provide
electricity   from   its   captive   power   plant   were   taken   much   before
the National Electrical Policy was notified. As per the application,
supply   of   electricity   commenced   with   effect   from   01.03.2004   to
some  industries on  the  basis  of  the letter  dated  28.02.2004 and
therefore,   the   National   Electrical   Policy   notified   subsequently
cannot be invoked to deny distribution licence in this case. 
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v. That   if   a   distribution   licence   is   refused   at   this   stage,   which   is
approximately   one   and   half   years   after   supply   of   electricity   has
commenced,   whether   with   or   without   legal   authority,   the   same
shall  impact the consumers of JSPL. CSEB also conveyed its no
objection   to   lay   transmission   and   distribution   network   as   early
as   on   30.05.2003.   That   JSPL   had   gone   way   ahead   with   the
industrial estate project in full, including distribution of power on
the   basis   of   the   understanding   with   the   State   Government.   A
large   investment   of   Rs.17.79   Crores   was   made,   and   there   were
twenty­four   industries,   most   of   which   were   power   intensive.   If   a
distribution licence was denied, they will have to close down their
industries. Apart from that, the consumers will be forced to buy
power   from   CSEB   at   a   much   higher   rate   than   at   present.
Therefore, the grant of distribution licence in this case may be in
the   interest   of   the   competition   and   in   the   interest   of   consumers
who   have   already   entered   into   a   long­term   supply   contract   with
JSPL.
vi. Further, in view of the overall position of the case, the balance of
convenience   would   lie   in   grant   of   a   distribution   licence   to   JSPL
and  there  was  an  adequate   justification  for  the   same.   Moreover,
the   CSEB   could   not   clarify   as   to   why   it   was   in   opposition   to   a
distribution licence in a limited area when CSEB was itself not in
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a   position   to   supply   quality   power   to   their   existing   industrial
consumers. 
vii. In   respect   of   JSPL’s   eligibility   for   grant   of   such   distribution
licence,   it   was   observed   that   JSPL   met   all   the   requirements   of
capital   adequacy,   creditworthiness   and   code   of   conduct   as   laid
down   by   the   Central   Government   in   the   Distribution   License
Rules. 
viii. In   respect   of   levy   of   cross­subsidy   charges   on   the   consumer   of
JSPL,   the   Commission   held   that   there   was   no   justification   in
such   levy   since   the   same   was   not   a   case   of   open   access.   The
scheme   of   the   2003   Act   is   such   that   a   distribution   licensee
cannot   recover   cross­subsidy   surcharge   from   another
distribution   licensee   and   that   JSPL   had   undertaken   to   supply
electricity  to   all  its  consumers  in  the  area  for  which  licence  was
proposed to be granted.
ix. Lastly,   it   was   held   that   JSPL   was   liable   to   pay   a   penalty   of   Rs.
One Lakh for contravention of Section 12 of the 2003 Act which
mandates   licence   to   be   obtained   for   supply   of   electricity   and
violation   of   the   same   was   punishable   under   Section   142   of   the
2003 Act.
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13. The   following   conditions,   apart   from   the   general   and   special
conditions   applicable   to   such   licenses   under   the   Regulations,   were
imposed on JSPL by the Commission for grant of distribution license:
“(i) The   license   will   be   for   the   area   of   the   two
villages,   Tumdih   and   Punjipathra   of   Gharghoda
Tehsil  of  Raigarh  District. However,  the number
of   industrial   consumers  in   the   Jindal  Industrial
Park   shall   be   limited   to   70   and   their   total
demand   for   electricity   not   increasing   299   MW,
as agreed with the State Government.
(ii) The   applicant   shall   lay   necessary   distribution
lines   and   put­up   sub­station   at  his   own   cost  in
the   two   villages   for   supply   of   electricity   to   any
person   who   may   apply   for   it   and   supply
electricity   at   a   rate   not   more   than   Rs.2.50   per
unit   or   at   the   supply   rate   of   the   Board   for   that
category   of   consumer,   which   is   lower.   This   will
include   domestic,   agriculture,   industrial   and
other   consumers.   The   option   to   choose   between
the   licensee   and   the   Board   shall   be   with   the
consumer.
(iii) All   other   general   and   special   conditions
applicable     to a distribution licensee as per the
provisions of the License Regulations.” 
14. Respondent   Nos.2   and   3   on   07.10.2005,   filed   objections   to   the
order   dated   29.09.2005   before   the   Commission.   Thereafter,
respondent No.2 filed Appeal No.179/2005 and respondent No.3 filed
Appeal   No.188/2005   before   the   Appellate   Tribunal.   The   appellant
herein   challenged   the   imposition   of   penalty   of   Rs.   One   Lakh   before
the Appellate Tribunal in Appeal No.27/2006.
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15. On   hearing   the   respective   parties,   the   Commission,   vide   its
Order   dated   29.11.2005,   granted   licence   to   JSPL   on   the   following
terms and conditions:
“(i)  The   distribution   license   shall   be   valid   for   a
period   of   twenty­five   years   from   the   date   of
issue, as per the provision of Section 15(8) of the
Act, unless revoked earlier.
(ii)  The area of the license shall be the geographical
area   of   the   villages   Tumdih   and   Punjipathra,
including   the   Jindal   Industrial   Park
aforementioned,   of   Gharghoda   tahsil   of   Raigarh
District   of   the   State   as   indicated   in   the   map
enclosed herewith.
(iii)   The   distribution   licensee   shall   abide   by   all   the
relevant   provisions   of   the   Electricity   Act,   2003,
the   National   Electricity   Policy,   i.e.   Rules   1956
and   Electricity   Rules   2005,   as   amended   from
time to time.
(iv)  The   licensee   shall   abide   by   the   general
conditions   of   license   as   given   in   chapter   III   and
the  other   conditions  applicable  to  a  distribution
licensee   as   given   in   chapter   V   of   the   CSERC
(Licence)   Regulations   2005,   as   amended   from
time   to   time.   He   shall   also   comply   with   the
relevant   provisions   of   all   the   regulations   issued
or   as   may   be   issued   by   the   Commission,   as
amended from time to time.
(v)   The   licensee   shall   abide   by   all   the   relevant
provisions   of   the   Chhattisgarh   State   Electricity
Supply Code, 2005.
(vi) The licensee shall lay necessary distribution lines
and   put­up   sub­stations   at   his   own   cost   in   the
two   villages   for   supply   of   electricity   to   any
person   who   may   apply   for   it   and   supply
electricity at a provisional rate of not more than
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Rs.2.50   per   unit   or   at   the   supply   rate   of   the
Board   for   that   category   of   consumer,   whichever
is lower, till the tariff for supply is determined by
the   Commission.   This   will   include   domestic,
agriculture, industrial and other consumers.
  
(vii)   The   consumers   of   the   area   other   than   area   of
Jindal Industrial Park (JIP) shall have the option
to   choose   between   the   licensee   and   the
Chhattisgarh   State   Electricity   Board   (CSEB)   or
its successor entity/entities.
(viii)The   existing   tariff   being   charged   from   the
industrial   consumers   in   the   designated   area   of
JIP shall continue to be charged by the licensee
till the tariff is determined by the Commission.
 
(ix)   For  determination   of   tariff   in   the  area  of   supply,
the   distribution   licensee   shall   file   the   necessary
application   under   Section   64   of   the   Act   and
clause 10 of the CSERC (Details to be ' furnished
by   licensee   or   generating   company   for
determination   of   tariff   and   manner   of   making
application)   Regulations,   2004   before   the
Commission on or before 31st March 2006, and
thereafter in terms of the provisions of the same
Regulations.
(x)   The   licensee   shall   abide   by   the   safety   rules   and
safety   standards   issued   by   the   Central
Electricity Authority, Ministry of Power, Govt. of
India   and   other   Government
agency/department.
(xi)  The licensee shall not transfer or assign, by sale,
lease exchange or otherwise, this license or part
thereof   to   any   other   person   without   prior
approval of the Commission.
(xii)   The   licensee   shall   undertake   electrification   of
villages   Tumdih   and   Punjipathra   as   per   the
norms laid down for rural electrification within a
period   of   six   months,   i.e.,   before   29.05.2006.   It
shall   also   provide   public   lamps   in   adequate
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number   in   these   two   villages   on   the   request   of
the   concerned   Gram   Panchayat   and   maintain
the same.
(xiii)   All   issues   relating   to   interpretation   of   this
licence   and   its   terms   and   conditions,   shall   be  a
matter for determination by the Commission and
the   decision   of   the   Commission   on   such   issues
shall be final, subject only to the right of appeal.
(xiii)   The   conditions   of   the   license   may   be   altered   or
amended   by   the   Commission   at   any   time,   if   it
deems   fit   in   the   public   interest,   in   terms   of
Section 18 of the Act.” 
16. Respondent   No.2   filed   Appeal   No.16/2006   before   the   Appellate
Tribunal   challenging   the   order   dated   29.11.2005   passed   by   the
Commission. The Appellate Tribunal,   vide   it Order dated 11.05.2006,
upheld   the   order   granting   distribution   licence   dated   29.11.2005
passed by the Commission. Aggrieved by the order dated 11.05.2006
passed   by   the   Appellate   Tribunal,   respondent   Nos.2   and   3   filed
appeals   before   this   Court   being   Civil   Appeal   Nos.   3996   of   2006   and
4268 of 2006. JSPL also preferred an appeal  before this Court being
Civil   Appeal   No.4529   of   2006.   This   Court,   vide   its   order   dated
19.09.2007,   allowed   the   aforesaid   appeals,   set­aside   the   order   dated
11.05.2006   passed   by   the   Appellate   Tribunal   and   remanded   the
matter to the Appellate Tribunal for fresh determination.
17. On remand, the Appellate Tribunal reconsidered the matter and
all the aforesaid appeals (Appeal No.179/2005, Appeal No.188/2005,
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Appeal   No.27/2006   and   Appeal   No.16/2006)   were   allowed   vide
common   impugned   order   dated   07.05.2008   which   is   challenged
before   this   Court   by   way   of   the   present   appeals.   The   pertinent
observations and decision of the Appellate Tribunal are encapsulated
as under:
i. With   respect   to   JSPL’s   argument   that   the   MoU   had   a   specific
clause   that   allowed   JSPL   to   directly   sell   power   to   the   industrial
units set up in the proposed industrial estate, it was held that it
was not the correct way to read the MoU.   The MoU was entered
into   when   the   estate   had   not   even   come   into   existence   and   the
terms therein only  envisioned  what would happen  in  the future.
Therefore,   it   was   too   early   to   grant   licence   for   supply   or
distribution  of electricity  by  JSPL. It was further  held  that JSPL
itself did not treat this clause in the MoU as grant of license. Had
the MoU itself meant grant of license, there would have been no
occasion   for   the   subsequent   correspondence   between   the   JSPL
and the Government of Chhattisgarh. Therefore, neither the State
Government   nor   JSPL   was   acting   under   an   understanding   that
JSPL had already been granted a license.
ii. That   the   letter   dated   29.01.2003   which   is   a   ‘No­Objection’   from
the   Government   of   Chhattisgarh   had   a   clear   stipulation   that
JSPL   was   required   to   take   permission   under   Section   28   of   the
15

1910 Act for direct power supply from its captive power plant to
the   industrial   estate   and   the   said   letter   cannot   be   read   as
Government’s promise to give license. 
iii. On examining the two letters dated 28.02.2004, it was found by
the   Appellate   Tribunal   that   the   first   order   accorded   permission
for   construction   of   power,   transmission   and   distribution   lines
under   Sections   68(1)   and   (3)   of   the   2003   Act   and   the   second
order dealt with prayer for approval under Section 28 of the 1910
Act.   Vide   the   second   order,   it   was   made   sufficiently   clear   that
JSPL   will   have   to   get   the   permission/licence   from   the
Commission since Section 28 of the 1910 Act stood repealed and
no permission thereof could be given.
iv. That   there   cannot   be   an   estoppel   against   the   statute.   The
relevant   authority   at   that   time   was   the   Commission   and   the
licence was to be obtained under Section 14 of the 2003 Act from
the   Commission,   after   fulfilling   the   requisite   terms   and
conditions. JSPL could not have taken advantage of the doctrine
of   promissory   estoppel   since,   even   if   the   aforesaid   letters   were
construed   to   be   a   promise,   the   same   would   only   be   binding   on
the   Government   of   the   State   of   Chhattisgarh   and   not   the
Commission   which   is   not   subordinate   to   the   Government   or   its
successor or assignee. 
16

v. The   Appellate   Authority,   on   considering   the   issue   as   to   whether
JSPL was entitled to the license/minimum  area of supply under
Section   14   of   the   2003   Act   observed   that   on   the   date   when   the
application   for   licence   filed   by   JSPL   under   the   2003   Act   was
under   consideration,   the   Commission   was   required   to   apply   the
regulation in force at that point of time which included the rule of
minimum   area   of   supply.   It   was   observed   that   the   Commission
was incorrect in ignoring the said rule and granting the licence in
violation   thereof.   No   exception   to   the   aforesaid   rule   could   have
been made out by the Commission.
vi. While   interpreting   Section   10(2)   of   the   2003   Act   that   allowed   a
generating company to supply electricity to any licensee or to any
consumer, it was held that the JSPL is a captive power plant and
is governed by Section 9 of the 2003 Act and not by Section 10 of
the said Act. 
vii. That   JSPL   had   applied   for   a   distribution   licence   because   it
intended   to   purchase   power   from   another   generating   company
called Jindal Power. JSPL, being a captive power plant and not a
generating   company   at   the   relevant   time   could   not   have   made
any supply to any third person without a license.
viii. On considering CSEB’s argument that the supply from a captive
power   plant   or   even   under   Section   10(2)   of   the   2003   Act   is
17

permissible only when the same is made by use of the grid or the
transmission   lines   of   distribution   licensee   or   transmission
licensee   by   use   of   open   access   and   that   unless   open   access   is
availed, the supply cannot be made, it was held that open access
is   an   enabling   provision   that   helps   expansion   of   the   electricity
sector and not to limit its development. If it was the intention of
the   2003   Act   that   no   sale   was   possible   except   by   availing   open
access,   it   would   have   said   so.   It   was   further   observed   that
Section   10(2)   of   the   2003   Act   prescribes   that   the   supply   to   a
consumer will be subject to Regulations made under sub­section
(2) of Section 42 of the 2003 Act. While interpreting the use of the
words   ‘ subject   to   the   rules   made   under   sub­section   (2)   of   Section
42’ ,   it   was   held   that   the   provision   under   Section   42(2)   of   the
2003   Act   would   only   be   attracted   when   the   access   through   the
existing   distribution   was   sought;   when   such   access   was   not
sought, the aforesaid provision shall not apply.
ix. With   respect   to   the   Commission’s   order   imposing   penalty   of   Rs.
One   Lakh   on   JSPL,   the   same   was   set­aside.   This   was   because,
although   JSPL   did   not   have   a   licence   when   it   started   supplying
electricity   to   Jindal   Industrial   Park,   a   penalty   was   not
automatically   attracted.   As   per   Section   142   of   the   2003   Act,   a
person sought to be punished has to be given an opportunity to
18

be heard. Admittedly, the said opportunity was not given to JSPL.
It   was   found   that   the   Commission   was   merely   hearing   the
application   for   grant   of   distribution   license.   The   issue   as   to
whether JSPL had rendered itself liable to punishment at all was
never an issue before the Commission. 
Re: Civil Appeal Nos. 4104­4107 of 2008:
18. The   facts   and   circumstances   in   both   these   appeals   are   similar
and therefore have not been reproduced to avoid repetition except to
the extent it is necessary to do so. 
19. The   appellant   in   these   civil   appeals   is   the   consumer   of
electricity   in   Jindal   Industrial   Park   in   Raigarh,   Chhattisgarh   who   is
aggrieved by the cancellation of distribution licence granted in favour
of   JSPL   and   due   to   unavailability   of   an   alternative   distribution
licensee.   It  is   the   grievance   of   the   appellant  herein   that  it  was   not   a
party before the Appellate Tribunal.
20. JSPL,   on   08.05.2008,   by   way   of   its   notice,   informed   the
appellant   in   this   appeal   that   since   its   distribution   licence   had   been
cancelled,  it  had   to  stop  supplying  power  to   all  the  industries  in  the
Jindal   Industrial   Park   whereafter   on   09.05.2008,   at   1:00   p.m.,   the
electricity   supply   to   all   the   units   of   the   appellant   was   disconnected.
The appellant contends that all the units were brought to a standstill
19

and the appellant has been facing losses running to crores of rupees.
The   appellant   avers   that   it   is   a   third   party   and   an   end   consumer   of
JSPL   who   is   deprived   of   electricity   in   the   absence   of   any   alternative
distributor in place. Hence these appeals.
21. We   have   heard   Sri   Sanjay   Sen,   learned   senior   counsel   for   the
appellant in C.A. Nos. 3607­3610 of 2008 and Sri C.S. Vaidyanathan,
learned   senior   counsel   for   the   appellant   in   C.A.   Nos.   4104­4107   of
2008   duly   assisted   by   their   instructing   counsel;   Ms.   Swapna
Seshadri,   learned   counsel   for   the   respondent   No.1,   Sri   Raj   Kumar
Mehta,   learned   counsel   for   the   respondent   No.2   and   perused   the
material on record.
22. The submissions of the learned senior counsel for the appellant­
JSPL in Civil Appeal Nos.3607­3610 of 2008 are epitomised as under:
22.1  That the Commission in its order dated 29.11.2005, after taking
note of the Distribution of Electricity (Additional Requirement of
Capital   and   Adequate   Creditworthiness   and   Code   of   Conduct)
Rules,   2005   (‘2005   Rules’,   for   short)   had   proceeded   to   grant
licence   keeping   in   view   the   historical   background,   investment
made   by   the   appellant­JSPL   and   the   benefits   that   accrued   in
favour  of  industrial  consumers who  had set up  their  industrial
plants and had no other source of power supply at the relevant
time.   By   its   Order   dated   29.09.2005,   the   Commission   had
20

specifically   noticed   the   inability   of   CSEB   to   provide   electricity
for want of physical infrastructure and unavailability of surplus
power.   In   fact,   the   State   of   Chhattisgarh   was   suffering   from
power shortages and  was buying power from the captive power
plant   of   this   appellant­JSPL.   On   the   basis   of   the   permission
granted by the State Government/CSEB, in terms of MoU dated
23.10.2002,   the   construction   of   transmission   and   distribution
network was undertaken and completed and supply of power on
the   basis   of   the   long­term   agreement   had   commenced   on   or
about   01.03.2004   which   was   much   prior   to   the   coming   in   to
existence   of   the   Commission   and   the   2005   Rules.   Further,   the
State   Government   with   the   concurrence   of   CSEB   had   acted
substantially  in terms  of  powers vested under the  repealed  law
i.e.,   Section   28   of   the   1910   Act   and   the   State’s   Industrial   and
Energy Policies. The original application for grant of licence filed
on  15.09.2004  and  revised  application  for  grant  of  licence  filed
on  25.01.2005  were both  before notification  of  the 2005 Rules.
However,   the   Appellate   Tribunal   has   taken   a   narrow   and
pedantic view solely on the basis of Explanation to Rule 3 of the
2005 Rules. 
22.2  It   was   contended   that   an   ‘explanation’   to   a   provision   is   merely
meant   to   explain   or   clarify   certain   ambiguities   and   cannot   be
21

treated   as   a   substantive   provision.   In   this   regard,   the   learned
senior   counsel   appearing   on   behalf   of   the   appellant­JSPL   has
placed  reliance  on   S.   Sundaram   Pillai  v.  V.R.  Pattabiraman
(1985)   1   SCC   591   and   Global   Energy   Ltd.   v.   Central
Electricity   Regulatory   Commission   (2009)   15   SCC   570 .   He
further states that the Explanation to Rule 3 is not a part of the
statute’s   provisions   or   primary   legislation   but   is   in   the   context
of   subordinate   legislation.   From   a   conjoint   reading   of   Section
2(3),   Section   14   and   sixth   proviso   thereof,   Section   86   and
Section   176(2)(b)   of   the   2003   Act,   it   is   clear   that   the   Central
Government has not been vested with the jurisdiction to define
the   area   of   supply.   It   is   clear   that   the   statute   required   the
Central Government to specify conditions only on three subjects
namely   capital   adequacy,   credit   worthiness   and   code   of
conduct.   If   the   Central   Government   indeed   had   delegated   the
power   to   define   the   area   of   supply   of   a  distribution   licensee,   it
would have made a substantive rule and not inserted it through
an   Explanation.   According   to   learned   senior   counsel,
Explanation to Rule 3, at the highest, can act as a guideline for
discharge   of   regulatory   functions   which   should   be   generally
followed. 
22

22.3  The position that the Explanation to Rule 3 is in the nature of a
guideline   is   strengthened   by   the   fact   that   Clause   5.4.7   of   the
National   Electricity   Policy   has   a   similar   provision   relating   to
minimum   area   of   supply   that   acts   only   as   a   guidance   in
discharge of statutory functions. Sections 61(i) and 86(4) of the
2003 Act clearly  states that both  the  National  Electricity  Policy
and the Tariff Policy will act as a guidance. 
22.4  The   learned   senior   counsel   for   the   appellant­JSPL   reiterated
that the Central Government’s power to introduce a substantive
rule   defining   the   area   of   licence   cannot   be   traced   to   any
provision under the statute. On the contrary, the area of supply
has   to   be   prescribed   in   the   licence   issued   by   the   State
Government   under   Sections   2(3),   14,   15   and   86(1)(d)   of   the
2003 Act to  each  and every  supplier. Therefore, Explanation  to
Rule   3   is   without   authority   of   law.   In   this   behalf,   the   learned
senior   counsel   for   the   appellant   placed   reliance   on   Bhaskar
Shrachi   Alloys   Ltd.   v.   Damodar   Valley   Corporation   (2018)
8 SCC  281 ,   Kerala Samsthana  Chethu  Thozhilali  Union  v.
State   of   Kerala   &   Ors.   (2006)   4   SCC   327   and
Bharathidasan   University   &   Anr.   v.   All   India   Council   for
Technical Education & Ors. (2001) 8 SCC 676 .  
23

22.5  It   was   further   contended   that   in   the   instant   case,   the
distribution   licence   was   granted   on   29.09.2005   and   the   same
was   confirmed   by   the   Appellate   Authority   vide   order   dated
11.05.2006   in   Appeal   No.27   of   2006.   Therefore,   there   was   no
occasion to challenge the   vires   of 2005 Rules. Even if the Rules
have   not   been   specifically   challenged,   the   same   cannot   be
applied if found to violate any provision. 
22.6  It was submitted that if the Explanation to Rule 3 is applied to
the   present   case   as   a   substantive   rule,   it   would   result   in
impairment of vested/accrued rights of the appellant­JSPL and
the consumers of Jindal Industrial Park. At the time of making
a formal application on 15.09.2004, the 2005 Rules were not in
existence.   The   appellant­JSPL   had   acted   bonafide,   in   terms   of
concurrence/permission   of   the   State   Government   under   the
repealed   1910   Act   and   also   under   the   present   2003   Act,   the
same cannot be now made to suffer on account of delay in grant
of   licence   and   introduction   of   the   2005   Rules.   The   learned
senior counsel for the appellant stated that the same cannot be
done in terms of various judgments passed by this Court  viz.  P.
Mahendran   v.   State   of   Karnataka   (1990)   1   SCC   411 ,   A.A.
Calton v. Director of Education (1983) 3 SCC 33   and   Gopal
24

Krushna   Rath   v.   M.A.A.   Baig   (dead)   by   LRs   (1999)   1   SCC
544 .   Placing   reliance   on   Federation   of   Indian   Mineral
Industries   &   Ors.   v.   Union   of   India   &   Anr.   (2017)   16   SCC
186 ,   the   learned   senior   counsel   urged   that   a   subordinate
legislation cannot be made to have a retrospective effect unless
the   parent   statute,   expressly   or   by   necessary   implication
authorizes it to do so.
22.7  The next limb of argument was that the exercise of power by the
State   Government   in   allowing   the   appellant­JSPL   in   these
appeals   to   proceed   with   supply   of   electricity   manifests   in   the
form of the terms of the MoU dated 23.10.2002 as well as letters
dated   29.01.2003   and   28.02.2004.   These   permissions   were   no
less than a sanction contemplated under Section 28 of the 1910
Act and thus saved in terms of Section 6 of the General Clauses
Act,   1897   and   Section   185   of   the   2003  Act.   In   this   regard,   the
learned   senior   counsel   for   the   appellant­JSPL   banked   upon
Hindustan Unilever Ltd. v. State of Madhya Pradesh (2020)
10   SCC   751   and   Gujarat   Electricity   Board   v.   Shantilal   R.
Desai (1969) 1 SCR 580 . 
22.8  It   was   further   submitted   that   on   the   basis   of   amendment   that
came   into   effect   on   27.01.2004,   the   legislature   replaced   the
25

word  ‘including’  with   ‘relating   to’  in  sixth   proviso  to   Section  14
of   the   2003   Act.   The   word   ‘including’   makes   the   provision
expansive   as   has   been   held   by   this   Court   in   the   cases   of   DAV
College   Trust   and   Management   Society   &   Ors.   v.   Director
of   Public   Instructions   &   Ors.   2019   (9)   SCC   185   and   C.I.T
Andhra   Pradesh   v.   M/s.   Taj   Mahal   Hotel,   Secunderabad
1971 (3) SCC 550 . Further, the Parliament curtailed the power
of the Central Government and by an  amendment removed the
word   ‘including’   and   instead   used   the   term   ‘relating   to’.   For
something   to   be   treated   as   ‘relating   to’   a   provision,   it   has   to
established   that   ‘the   dominant   purpose   and   theme   of   the
provision   is   one   and   one   only’   as   was   observed   in   the   case   of
Madhav   Rao   Jivaji   Rao   Scindia   v.   Union   of   India   (1971)   1
SCC 85 .   Therefore, a restrictive meaning must be given to the
sixth proviso. 
22.9  Placing   reliance   on   Ramana   Dayaram   Shetty   v.
International Airport Authority  of India  (1979)  3  SCC 489 ,
it was further urged that the appellant­JSPL has been supplying
electricity   to   its   consumers   since   01.03.2004   and   has   taken
regulatory/contractual/legal   steps   thereof   and   the   decision   to
26

deny   distribution   licence   is   detrimental   to   the   interest   of   the
appellant­JSPL as well as the consumers. 
23. The submissions of the learned senior counsel Sri Vaidyanathan
for   the   appellant   in   Civil   Appeal   Nos.4104­4107   of   2008   are
encapsulated as under:
23.1  The   appellant   herein   is   a   consumer   of   electricity   supplied   by
JSPL   in   Jindal   Industrial   Park.   The   judgment   of   the   Appellate
Tribunal   in   so   far   as   the   same   sets   aside   the   grant   of
distribution  licence  by  the  Commission  without  appointing   any
alternative   distribution   licence   is   ultra   vires   the   2003   Act   read
with the 2005 Rules. 
23.2  The   Appellate   Tribunal   failed   to   appreciate   the   scheme   of   the
2003 Act that does not permit the Commission or the Tribunal
to cancel a distribution licence without hearing the consumers.
The entire purpose and object of the 2003 Act was to liberalise
the   generation,   transmission,   distribution   and   supply   of
electricity   to   prevent   monopolies   from   demanding   heavy
electrical   charges   from   consumers   and   open   access   was
permitted   so   that   any   trader   or   distributor   could,   as   of   right,
distribute and supply electricity to industries or consumers who
demanded   electricity   through   the   particular   trader   or
27

distributor.   The   sixth   proviso   to   Section   14   of   the   2003   Act
makes the aforesaid position even clearer by providing for more
than one licensee distributing and supplying power in the same
area.
23.3  The area of supply is defined under Section 2(3) of the 2003 Act
and   nowhere,   the   Act   has   defined   the   area   of   supply   as
restricted   to   mean   an   entire   district   or   an   entire   area   of   the
municipality under Article 243Q of the Constitution of India. 
23.4 The   Appellate   Tribunal   failed   to   note   that   CSEB   was   not
operating in the Jindal Industrial Park and therefore cancelling
the   distribution   licence   on   this   ground   was   incorrect.   CSEB
itself   expressed   its   inability   to   supply   power   in   the   Jindal
Industrial   Park   during   the   hearing   before   the   Appellate
Tribunal.
23.5 Further,   Explanation   to   Rule   3   does   not   indicate   that   the
second   licensee   must   have   a   minimum   area   of   supply   as
construed   by   the   Appellate   Tribunal.   The   term   ‘same   area’
appearing in the Explanation states what should be the area for
which the two licensees may be said to be operating ‘within the
same   area’.   The   term  same   area  has  not  been  explained  in   the
2003   Act   or   in   the   2005   Rules   and   the   Explanation,   gives   the
28

meaning   that   the   overlapping   must   be   at   least   of   an   area
comprised within a Municipal Corporation or a revenue district,
etc. 
23.6 The   Central   Government   in   making   rules   under   Section   14   of
the 2003 Act has added an Explanation to Rule 3(2) of the 2005
Rules   by   which   it   has   restricted   the   concept   of   same   area   in
terms of the sixth proviso to Section  14 of the 2003 Act to ‘the
area comprising a municipal council or a municipal corporation
as   defined   in   Article   243Q   of   the   Constitution   of   India   or   a
revenue   district,   which   shall   be   the   minimum   area   of   supply.
The   said   construction   is   fully   inconsistent   and   violative   of   the
express provision of sixth proviso to Section 14 of the said 2003
Act and goes counter to the entire spirit, purpose and object of
the 2003 Act.
23.7 The grant of distribution licence is an administrative function of
the Commission and the Appellate Tribunal had no jurisdiction
to   interfere   as   was   rightly   held   in   the   earlier   judgment   of   the
Appellate Tribunal dated 11.05.2006. That under the 2003 Act,
the Appellate Tribunal is neither empowered to grant licence nor
to cancel the same. 
23.8 By virtue of Section 19 of the 2003 Act, only the Commission is
empowered   to   revoke   a   license,   that   too,   after   complying   with
29

the procedural safeguards therein and no such power has been
conferred   upon   the   Appellate   Tribunal.   Further,   no   appeal   can
lie from an executive order passed by the Commission. 
23.9 There  are more  than  thirty  industries that have  been  set up  in
Jindal   Industrial   Park   by   investing   more   than   Rs.600   crores.
More   than   4000   direct   employees   are   provided   employment.
Therefore, cancelling the said distribution licence is opposed to
public policy. 
23.10 Learned senior counsel, Sri C.S. Vaidyanathan appearing for the
appellant   in   C.A.   Nos.   4104­4107   of   2008   contended   that   the
said   appellant   was   one   of   the   consumers   of   electricity   being
supplied   by   JSPL   and   on   account   of   the   cancellation   of   the
licence, the appellant had been adversely affected and therefore
the impugned judgment of  Appellate  Tribunal  may  be  set aside
and the Order of the respondent No.1 may be given effect to.
24. The  submissions  of  the  learned  counsel for respondent No.1  in
Civil Appeal Nos.3607­3610 of 2008 are summarised as under:
24.1  The term ‘within the same area’ appearing in the Explanation to
Rule   3   of   the   2005   Rules   has   to   be   read   as   being   an   area
comprising   of   a   Municipal   Council   or   a   Municipal   Corporation
as   defined   in   Article   243(Q)   of   the   Constitution   of   India   or   a
revenue   district.   The  said  Explanation   provides  for  a  minimum
30

area   of   supply   for   grant   of   a   parallel/   second   distribution
license.   For   a   minimum   area   to   be   provided   as   a   qualifying
condition for grant of distribution license, an interpretation that
the   area   should   merely   fall   within   a   revenue   district   or   the
municipal   council,   would   negate   the   very   provision   of   a
minimum area as a qualifying criterion. Thus, the concept of a
minimum   area   would   be   inherently   inconsistent   or
contradictory   to   the   interpretation   that   the   area   needs   to   fall
within and not equivalent to the area comprised of a municipal
corporation or a revenue district. 
24.2  A  distribution   licensee   has  a  universal   supply   obligation  under
Section   43   of   the   2003   Act,   i.e.,   to   supply   electricity   to   any
person   requiring   the   same   within   the   area   of   its   operation.   It
was submitted that Para 5.4.7 of the National Electricity  Policy
makes   clear   the   intention   of   Government   of   India   on   the
minimum   area   to   be   provided   for   grant   of   a   second/parallel
distribution   license.   The   purpose   of   prescription   of   minimum
area   as   comprising   of   a   municipal   corporation/council   or   a
revenue district is that there would be a mix of all categories of
consumers   within   the   said   area.   Thus,   the   second   distribution
licensee  would also  be  under  an  obligation to  supply  electricity
to all consumers within such area, and not only to high paying
31

consumers.   Hence,   cherry   picking   of   the   consumers   has   to   be
avoided and  therefore the  Government of India thought it fit to
prescribe   a   minimum   area   for   which   a   second   distribution
licence can be granted.
24.3  Thus,   the   minimum   area   condition   specified   in   Explanation   to
Rule 3  needs to  be fulfilled for grant of the second  distribution
license. The said distribution licence is neither co­terminus with
the  existence  of  the  revenue   district nor  would   the   distribution
licence   be   amended,   revoked   or   in   any   manner   affected   by
delimitation   or   consolidation   of   revenue   districts.   Any
subsequent   change   to   the   area   on   account   of   consolidation   of
revenue   district   etc.   would   not   affect   the   area   for   which   the
distribution   licence   has   been   granted   which   is   the   area   of
minimum supply. 
24.4  That   the   cancellation   of   licence   granted   by   the   State
Commission   was   not   proper   in   the   instant   case   as   the   State
Commission,   after   considering   the   entire   factual   situation   and
while   making   an   exception,   has   already   directed   that   JSPL
would   be   required   to   supply   electricity   to   two   villages,   namely,
Tumdih and Punjipathra.
32

24.5  It was therefore  contended that the Appellate Tribunal  was  not
right in setting aside the order of the Commission. 
 
25. The  submissions  of  the  learned  counsel for respondent No.2  in
Civil Appeal Nos.3607­3610 of 2008 are encapsulated as follows: 
25.1  That the National Electricity Policy framed by the Government of
India,   Ministry   of   Power,   under   Section   3   of   the   2003   Act
stipulates   that   the   area   of   supply   under   a   distribution   licence
has   necessarily   to   be   a   minimum   area   comprising   a   revenue
district,   a   municipal   council   for   a   smaller   urban   area   or   a
municipal   corporation   for   a   larger   urban   area.   By   virtue   of
Section   86(4)   of   the   2003   Act,   the   State   Commission   is
statutorily   bound   to   be   guided   by   the   said   National   Electricity
Policy. Placing reliance on the judgment of this Court in  Energy
Watchdog   v.   Central   Electricity   Regulatory   Commission
and   Others   (2017)   14   SCC   80 ,   the   learned   counsel   for
respondent No.2 submitted that in the context of Tariff Policy, a
tariff policy issued under Section 3 of the 2003 Act has the force
of   law.   Similarly,   the   aforesaid   provision   in   National   Electricity
Policy was statutorily embodied in the 2005 Rules. 
33

25.2  Further,   a   combined   reading   of   the   above   provisions   of   the
Electricity   Act,   2003,   the   National   Electricity   Policy   and   2005
Rules, the legal position that emerges is that the ‘minimum area
of supply’ for grant of a distribution licence has to comprise the
entire area of a municipal council or a municipal corporation or
a   revenue   district.   No   distribution   licence   can   be   granted   for   a
lesser   area   even   though   such   lesser   area   forms   a   part   of   the
municipal   council   or   a   municipal   corporation   or   a   revenue
district. 
25.3  The interpretation that it can be ‘any area’ which falls within a
municipal   council   or   a   municipal   corporation   or   a   revenue
district   would   defeat   the   very   object   sought   to   be   achieved   by
the   legislature   by   providing   for   universal   supply   obligation   of
the distribution licence to supply electricity in its area of supply
read   with   Explanation   3   of   2005   Rules.   Such   interpretation
would render the Explanation nugatory and redundant and it is
a   settled   principle   of   interpretation   that   redundancy   cannot   be
attributed to the legislature. Reliance in this regard was placed
on   the   judgment   in   the   case   of   Thampanoor   Ravi   v.
Charupara Ravi (1999) 8 SCC 74 .
34

25.4  The condition of minimum area of supply as mandated by sixth
proviso to  Section  14  of  the 2003 Act read with  Explanation  to
Rule  3(2)  of  the   2005   Rules  is  integral   to  ‘fair   competition’  and
‘level playing field’. The same is necessary to fulfill the statutory
obligations   of   universal   supply   stipulated   under   Section   43   of
the   2003   Act.   Further,   in   the   regime   of   multiple   licenses
introduced under the 2003 Act, insistence upon minimum area
of   supply   prevents   any   form   of   cherry   picking   of   high   end­
consumers only in a self­chosen area of supply as in the present
case.
25.5  While   relying   on   the   judgment   of   this   Court   in   Peerless
General Finance   &  Investment   Co.  Ltd.   v.   Reserve  Bank  of
India   (1992)   2   SCC   343   and   Chief   Forest   Conservator
(Wildlife)   &   Ors.   v.   Nisar   Khan   (2003)   4   SCC   595 ,   it   was
urged   that   the   Explanation   to   Rule   3   of   the   2005   Rules   was
enacted   so   as   to   effectuate   the   working   of   the   2003   Act   and   is
therefore   a   part   of   the   said   Act.   Thus,   the   requirement   of
minimum   area   of   supply   for   grant   of   distribution   licence   is   an
integral part of the scheme of grant of distribution licence under
the 2003 Act read with 2005 Rules.
35

25.6  Therefore,   in   light   of   the   aforesaid   submission,   JSPL   was   not
entitled to a licence under Section 14 of the 2003 Act as it does
not satisfy the condition of ‘minimum area of supply’. 
25.7  The   Commission,   while   granting   license,   vide   order   dated
29.09.2005   was   well­aware   that   the   appellant   JSPL   did   not
satisfy   the   requirement   of   the   ‘minimum   area   of   supply’   as
specified in the Explanation to Rule 3 and was not in a position
to fulfill its statutory duty/universal obligation under Section 43
of   the   2003   Act.   Therefore,   the   Commission   imposed   a   special
condition   on   the   appellant   by   granting   distribution   licence   to
JSPL for two villages namely Tumdih and Punjipathra of Tehsil
Gharghoda,   District   Raigarh   and   remaining   area   of   these   two
villages.   Even   the   said   special   condition   imposed   does   not
amount to compliance of the condition regarding ‘minimum area
of   supply’   for   grant   of   a   second   licence   as   mandated   in   the
Explanation to Rule 3(2).
25.8  The   appellant   was   duty   bound   by   the   special   condition   in   the
order granting distribution licence to provide supply of power to
consumers of the aforesaid two villages. However, the appellant­
JSPL has been making huge profits by supplying electricity only
to   twenty­five   industries   in   the   Jindal   Industrial   Park   and   has
36

completely   failed   to   fulfill   its   obligation   to   supply   power   to   two
villages   namely   Tumdih   and   Punjigraha   of   Tehsil   Gharghoda,
District Raigarh.
25.9  Due to this gross and flagrant violation by the appellant­JSPL of
the   special   condition   imposed   by   the   Commission,   the
Distribution   Company   i.e.,   the   Chhattisgarh   State   Power
Distribution  Company   Limited  has   been   deprived   of  revenue  to
the extent of Crores of rupees per month. Thus, keeping in view
the   above,   the   licence   granted   needs   to   be   quashed   on   this
ground too.
25.10   The   appellant’s   contention   that   the   2005   Rules   were   not   in
existence at the time of filing  of the application for distribution
licence by the appellant­JSPL and that the grant of such licence
cannot   be   faulted   with   on   the   ground   of   violation   of   Rule,   is
highly misconceived, since, it is a settled position of law that the
Authority is required to apply the Rules and legal provisions in
force   on   the   date   when   the   application   is   considered.   Further,
the argument of the appellant­JSPL that the Explanation is only
in   the  nature   of   a  guideline  is  also   devoid   of   any   merit.  In   this
regard,   the   counsel   for   respondent   No.2   placed   reliance   on   the
following judgment passed by this Court in  Howrah Municipal
37

Corporation   and   Ors.   v.   Ganges   Rope   Co.   Ltd.   and   Ors.
(2004) 1 SCC 663 ,  Union of India and Ors. v.   Indian Charge
Chrome and Anr. (1999) 7 SCC 314 ,   M/s. Hiralal Rattanlal
etc. etc. v. State of U.P. and Anr. etc. etc. (1973) 1 SCC 216
and   Dattatraya   Govind   Mahajan   v.   State   of   Maharashtra
(1977) 2 SCC 548 . 
25.11 Explanation to Rule 3 of the 2005 Rules cannot be said to have
no   authority   of   law.   The   2005   Rules   have   been   enacted   in
exercise of power under Section 176(1) and Section 176(2)(b) of
the   2003   Act.   Further   since   the   appellant­JSPL   has   not   even
challenged   the   vires   of   the   2005   Rules,   the   appellant­JSPL   is
estopped from raising the contention that Explanation to Rule 3
of the 2005 Rules has no authority of law.
25.12 The contention that the appellant­JSPL acted  bonafide  in terms
of   the   concurrence/permission   of   the   State   Government   as   the
same   are   saved   under   Section   6   of   the   General   Clauses   Act,
1897   as   also   Section   185   of   the   2003   Act  is   also   misconceived
and untenable. The counsel for respondent No.2 urged that the
Appellate   Tribunal   in   the   impugned   judgment   rightly   pointed
out that all the permissions given by the State Government and
other   authorities   were   specifically   made   subject   to   and
38

conditional   upon   the   licence   being   granted   by   the   Commission
under   the   2003   Act.   It   is,   therefore,   incorrect   for   the   appellant
to   rely   on   the   permissions/concurrences   given   by   the   State
Government   since   the   appellant   does   not   satisfy   the
requirement   of   minimum   area   of   supply   as   mandated   under
Explanation to Rule 3 of 2005 Rules.
 25.13 The submission of the appellant­JSPL that the sixth proviso to
Section   14   has   been   amended   to   narrow   down   the   scope   of
Rule­making power is also misconceived. The substitution of the
word   ‘relating   to’   in   place   of   the   word   ‘including’   does   not
amount   to   restricting   the   scope   of   the   rule­making   power.   The
term  ‘relating to’ is of wide amplitude and cannot be restrictive
in any manner.
25.14   Further,   the   submission   of   appellant   that   the   grant   of
distribution licence was in public interest is devoid of any merit
since the appellant has only been furthering its own interest.
25.15   To   sum   up,   the   counsel   for   respondent   No.2   strenuously
contended that the ‘minimum area of supply’ as provided in the
Explanation   to   Rule   3   of   2005   Rules   is   a   mandatory
requirement   for   grant   of   second   or   subsequent   distribution
licence in the area of supply of an existing distribution  license.
39

It   was   thus   contended   by   respondent   No.2   that   the   Tribunal
was   correct   in   setting   aside   the   order   granting   licence   to   the
appellant.
26. Having   heard   learned   senior   counsel   and   counsel   for   the
respective parties, it is noted that the appellants in both the appeals
are   challenging   the   order   dated   07.05.2008   whereby   the   Appellate
Tribunal allowed the appeals filed by the respondents herein and set­
aside the order passed by the Commission dated 29.05.2005, thereby,
canceling   the   distribution   licence   granted   in   favour   of   the   appellant
for   supply   of   power   by   the   appellant   from   its   captive   power   plant   to
the industrial units in Jindal Industrial Park.
27. Before   delving   further   upon   the   various   issues   in   the   present
matter,   we   shall   analyse   relevant   provisions   of   the   2003   Act.   The
2003 Act, came into force on 10.06.2003 insofar as Sections 1 to 120
and Sections 122 to 185 are concerned. The Preamble of the 2003 Act
states   that   it   has   been   enacted   to   consolidate   the   laws   relating   to
generation,   transmission,   distribution,   trading   and   use   of   electricity
and   generally   for   taking   measures   conducive   to   development   of
electricity industry, promoting competition therein, protecting interest
of   consumers   and   supply   of   electricity   to   all   areas,   rationalization   of
electricity   tariff,   ensuring   transparent   policies   regarding   subsidies,
promotion   of   efficient   and   environmentally   benign   policies,
40

constitution of Central Electricity Authority, Regulatory Commissions
and   establishment   of   Appellate   Tribunal   and   for   matters   connected
therewith or incidental thereto.
28.   Section   2   of   the   2003   Act   is   the   definition   clause   and   the
relevant   definitions   for   the   purposes   of   the   present   cases   read   as
under:
“ Section   2.   (Definitions):   ­­­   In   this
Act,   unless   the   context   otherwise
requires, ­­ 
                    x x x x x x x x x 
(3)   "area   of   supply”   means   the   area
within   which   a   distribution   licensee   is
authorised   by   his   licence   to   supply
electricity; 
4) "Appropriate Commission” means the
Central Regulatory Commission referred
to in sub­Section (1) of Section 76 or the
State   Regulatory   Commission   referred
to   in   Section   82   or   the   Joint
Commission   referred   to   in   Section   83,
as the case may be;
xxxxxx 
(38)   “licence”   means   a   licence   granted
under Section 14;
 (39) “licensee” means a person who has
been   granted   a   licence   under   Section
14;
   xxxxxxxx
(41)   “local   authority”   means   any   Nagar
Panchayat,   Municipal   Council,
Municipal   Corporation,   Panchayat
constituted   at   the   village,   intermediate
41

and   district   levels,   Body   of   Port
Commissioners   or   other   authority
legally   entitled   to,   or   entrusted   by   the
Union   or   any   State   Government   with,
the   control   or   management   of   any   area
or local fund;
                   xxxxxxxx
(64)   "State   Commission"   means   the
State Electricity Regulatory Commission
constituted   under   sub­Section   (1)   of
Section   82   and   includes   a   Joint
Commission   constituted   under   sub­
Section (1) of Section 83;”
29. Part  II of the 2003 Act deals with National Electricity Policy and
Plan.   In   compliance   with   section   3   of   the   2003   Act,   the   Central
Government   has   notified   the   National   Electricity   Policy   dated   12 th
February,   2005,   the   relevant   portions   of   which   are   extracted   as
under:  
“1.0 INTRODUCTION
X.X.X.
1.5   Electricity   industry   is   capital­intensive
having   long   gestation   period.   Resources   of
power   generation   are   unevenly   dispersed
across  the  country.  Electricity   is  a  commodity
that   can   not   be   stored   in   the   grid   where
demand   and   supply   have   to   be   continuously
balanced.   The   widely   distributed   and   rapidly
increasing   demand   requirements   of   the
country   need   to   be   met   in   an   optimum
manner.
42

1.6   Electricity   Act,   2003   provides   an   enabling
framework   for   accelerated   and   more   efficient
development   of   the   power   sector.   The   Act
seeks   to   encourage   competition   with
appropriate   regulatory   intervention.
Competition   is   expected   to   yield   efficiency
gains   and   in   turn   result   in   availability   of
quality   supply   of   electricity   to   consumers   at
competitive rates.
1.7   Section   3   (1)   of   the   Electricity   Act   2003
requires the Central Government to formulate,
inter   alia ,   the   National   Electricity   Policy   in
consultation with Central Electricity Authority
(CEA) and State Governments. The provision is
quoted below:
"The Central Government shall, from
time   to   time,   prepare   the   National
Electricity Policy and tariff policy, in
consultation   with   the   State
Governments   and   the   Authority   for
development   of   the   power   system
based   on   optimal   utilization   of
resources such as coal, natural gas,
nuclear   substances   or   materials,
hydro   and   renewable   sources   of
energy".
Section   3   (3)   of   the   Act   enables   the   Central
Government   to   review   or   revise   the   National
Electricity Policy from time to time.
1.8   The   National   Electricity   Policy   aims   at
laying   guidelines   for   accelerated   development
of   the   power   sector,   providing   supply   of
electricity  to  all  areas and  protecting  interests
43

of   consumers   and   other   stakeholders   keeping
in   view   availability   of   energy   resources,
technology available to exploit these resources,
economics   of   generation   using   different
resources, and energy security issues.
X.X.X.
5.4 DISTRIBUTION
X.X.X.
5.4.7   One   of   the   key   provisions   of   the   Act   on
competition   in   distribution   is   the   concept   of
multiple   licensees   in   the   same   area   of   supply
through   their   independent   distribution
systems.   State   Governments   have   full
flexibility   in   carving   out   distribution   zones
while   restructuring   the   Government   utilities.
For   grant   of   second   and   subsequent
distribution   licence   within   the   area   of   an
incumbent   distribution   licensee,   a   revenue
district,   a   Municipal   Council   for   a   smaller
urban   area   or   a   Municipal   Corporation   for   a
larger   urban   area   as   defined   in   the   Article
243(Q)   of   Constitution   of   India   (74 th
Amendment)   may   be   considered   as   the
minimum   area.   The   Government   of   India
would   notify   within   three   months,   the
requirements   for   compliance   by   applicant   for
second and subsequent distribution licence as
envisaged in Section 14 of the Act. With a view
to provide benefits of competition to all section
of   consumers,   the   second   and   subsequent
licensee for distribution in the same area shall
have   obligation   to   supply   to   all   consumers   in
accordance with provisions of section 43 of the
Electricity   Act,   2003.   The   SERCs   are   required
44

to   regulate   the   tariff   including   connection
charges   to   be   recovered   by   a   distribution
licensee   under   the   provisions   of   the   Act.   This
will   ensure   that   second   distribution   licensee
does   not   resort   to   cherry   picking   by
demanding   unreasonable   connection   charges
from consumers.”
30. Part   III   deals   with   generation   of   electricity.   Part   IV   of   the   2003
Act is of relevance to these cases as it concerns licensing. Section 12
states   that   no   person   shall   (a)   transmit   electricity;   or   (b)   distribute
electricity;   or   (c)   undertake   trading   in   electricity,   unless   he   is
authorised to do so by a licence issued under Section 14, or is exempt
under   Section   13.   The   power   to   exempt   is   prescribed   in   Section   13.
The grant of licence is as per Section 14 and the procedure for grant
of   licence   is   dealt   with   in   Section   15   while   the   conditions   of   licence
are   in   terms   of   Section   16.   Section   18   of   the   said   Act   speaks   of
Amendment   of   licence   while   Section   19   concerns   revocation   of
licence.
31. Section   14   of   the   2003   Act   which   deals   with   grant   of   licence
reads as under:
14.   Grant   of   licence­   The   Appropriate
Commission may, on an application made to
it   under   Section   15,   grant   a   licence   to   any
person – 
(a)   to   transmit   electricity   as   a   transmission
licensee; or 
45

(b)   to   distribute   electricity   as   a   distribution
licensee; or 
(c)   to   undertake   trading   in   electricity   as   an
electricity trader, 
in   any   area   as   may   be   specified   in   the
licence: 
Provided   that   any   person   engaged   in   the
business   of   transmission   or   supply   of
electricity   under   the   provisions   of   the
repealed   laws   or   any   Act   specified   in   the
Schedule   on   or   before   the   appointed   date
shall   be  deemed  to   be   a  licensee   under  this
Act   for   such   period   as   may   be   stipulated   in
the licence, clearance or approval granted to
him   under   the   repealed   laws   or   such   Act
specified in the Schedule, and the provisions
of the repealed laws or such Act specified in
the Schedule in respect of such licence shall
apply for a period of one year from the date
of commencement of this Act or such earlier
period as may be specified, at the request of
the licensee, by the Appropriate Commission
and   thereafter   the   provisions   of   this   Act
shall apply to such business:
  Provided   further   that   the   Central
Transmission   Utility   or   the   State
Transmission Utility shall be deemed to be a
transmission licensee under this Act:
Provided   also   that   in   case   an   Appropriate
Government   transmits   electricity   or
distributes   electricity   or   undertakes   trading
in   electricity,   whether   before   or   after   the
commencement   of   this   Act,   such
Government   shall   be   deemed   to   be   a
licensee   under   this   Act,   but   shall   not   be
required to obtain a licence under this Act:
Provided   also   that   the   Damodar   Valley
Corporation,   established   under   sub­Section
(1)   of   Section   3   of   the   Damodar   Valley
46

Corporation Act, 1948, (14 of 1948), shall be
deemed   to   be   a   licensee   under   this   Act   but
shall   not   be   required   to   obtain   a   licence
under   this   Act   and   the   provisions   of   the
Damodar Valley Corporation Act, 1948, in so
far   as   they   are   not   inconsistent   with   the
provisions   of   this   Act,   shall   continue   to
apply to that Corporation:
Provided also that the Government company
or the company referred to in sub­Section (2)
of   Section   131   of   this   Act   and   the   company
or   companies   created   in   pursuance   of   the
Acts   specified   in   the   Schedule,   shall   be
deemed to be a licensee under this Act: 
Provided   also   that   the   Appropriate
Commission   may   grant   a   licence   to   two   or
more   persons   for   distribution   of   electricity
through   their   own   distribution   system
within   the   same   area,   subject   to   the
conditions   that   the   applicant   for   grant   of
licence   within   the   same   area   shall,   without
prejudice   to   the   other   conditions   or
requirements   under   this   Act,   comply   with
the   additional   requirements   relating   to   the
capital  adequacy,   credit­worthiness,   or  code
of   conduct   as   may   be   prescribed   by   the
Central Government, and no such applicant,
who   complies   with   all   the   requirements   for
grant   of   licence,   shall   be   refused   grant   of
licence   on   the   ground   that   there   already
exists   a   licensee   in   the   same   area   for   the
same purpose: 
Provided   also   that   in   a   case   where   a
distribution   licensee   proposes   to   undertake
distribution of electricity for a specified area
within   his   area   of   supply   through   another
person, that person shall  not be required to
obtain   any   separate   licence   from   the
concerned   State   Commission   and   such
distribution licensee shall be responsible for
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distribution   of   electricity   in   his   area   of
supply: 
Provided also that where a person intends to
generate and distribute electricity in a rural
area to be notified by the State Government,
such person shall not require any licence for
such   generation   and   distribution   of
electricity,   but   he   shall   comply   with   the
measures   which   may   be   specified   by   the
Authority under Section 53: 
Provided   also   that   a   distribution   licensee
shall   not   require   a   licence   to   undertake
trading in electricity.
32. On  a   reading   of  Section  14 of the  2003  Act, it is clear  that the
appropriate   Commission   may,   on   an   application   made   to   it   under
Section 15 grant a licence to any person (a) to transmit electricity as a
transmission licensee; or (b) to distribute  electricity  as a distribution
licensee;   or   (c)   to   undertake   trading   in   electricity   as   an   electricity
trader, in any area as may be specified in the licence.
33. The first   three   provisos to Section 14 of the 2003 Act are in the
nature   of   saving   clauses.   The   fourth   and   fifth   provisions   are   not
relevant   to   these   cases.   The   sixth   proviso   which   is   under
consideration   states   that   the   appropriate   Commission   may   grant   a
licence   to   two   or   more   persons   for   distribution   of   electricity   through
their   own   distribution   system   within   the   same   area,   subject   to   the
conditions   that   the   applicant   for   grant   of   licence   within   the   same
area,   shall,   without  prejudice   to   the  other   conditions   or  requirement
48

under the Act comply with the additional requirements relating to the
capital   adequacy,   creditworthiness,   or   code   of   conduct   as   may   be
prescribed   by   the   Central   Government,   and   no   such   applicant,   who
complies   with   all   the   requirements   for   grant   of   licence,   shall   be
refused   grant   of   licence   on   the   ground   that   there   already   exists   a
licensee in the same area for the same purpose.
34.   The   Central   Government had enunciated the 2005 Rules w.e.f.
23.03.2005 as per Section 176 of the 2003 Act. Rule 3 is relevant for
the purpose of these cases is extracted as under:
3. Requirements of capital adequacy and
creditworthiness.—   (1)   The   Appropriate
Commission   shall,   upon   receipt   of   an
application   for   grant   of   licence   for
distribution of electricity under sub­Section
(1)   of   Section   15   of   the   Electricity   Act,
2003,   decide   the   requirement   of   capital
investment   for   distribution   network   after
hearing   the   applicant   and   keeping   in   view
the   size   of   the   area   of   supply   and   the
service obligation within that area in terms
of Section 43.
(2)   The   applicant   for   grant   of   licence   shall
be   required   to   satisfy   the   Appropriate
Commission  that on  a norm   of  30%  equity
on cost of investment as determined under
sub­rule (1), he including the promoters, in
case  the  applicant  is   a  company,  would   be
in   a   position   to   make   available   resources
for   such   equity   of   the   project   on   the   basis
of   the   networth   and   generation   of   internal
resources   of   his   business   including   of
promoters   in   the   preceding   three   years
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after   excluding   his   other   committed
investments. 
Explanation—For   the   grant   of   a   licence   for
distribution   of   electricity   within   the   same
area in terms of sixth proviso to Section 14
of   the   Act,   the   area   falling   within   a
Municipal   Council   or   a   Municipal
Corporation as defined in the article 243(Q)
of   the   Constitution   of   India   or   a   revenue
district   shall   be   the   minimum   area   of
supply.
 
35. The   controversy   in   these   cases   surrounds   the   interpretation   to
be   given   to   the   Explanation   to   Rule   3.   As   already   noted,   the   2005
Rules, under consideration have been prescribed having regard to the
sixth   proviso   to   Section   14   of   the   Act.   The   said   proviso   would   apply
only   when   the   appropriate   Commission   considers   it   necessary   to
grant   a   licence   to   two   or   more   persons   for   distribution   of   electricity
through their own distribution system within the same area, in which
case,   there   are   certain   additional   requirements   which   the   applicant
must   fulfil   relating   to   capital   adequacy,   creditworthiness   or   code   of
conduct. It is only with regard to the aforesaid three aspects that the
2005 Rules have been prescribed. 
36. In   response  to   the  arguments   of   learned   senior  counsel   for   the
appellants,   the   contention   of   respondent   No.2   herein   is   that   the
appellant­JSPL   does   not   fulfil   the   condition   mentioned   in   the
Explanation to Rule 3 inasmuch as the said appellant does not fulfil
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the   condition   of   minimum   area   of   supply   as   the   area   that   the   said
appellant   is   supplying,   is   not   for   an   entire   Municipal   Council   or   a
Municipal   Corporation   or   a   Revenue   District.   The   area   of   supply   as
per the licence of the appellant­JSPL is for the area comprised in the
industrial park set up by the appellant and for two other villages only.
Hence, the licence issued to the said appellant is vitiated as the area
of   supply   prescribed   in   the   licence   does   not   conform   to   the
Explanation to Rule 3 of the 2005 Rules.
37. In   order   to   answer   the   aforesaid   contention,   it   would   be
necessary   to   consider   the   sixth   proviso   to   Rule   14   in   light   of   the
definition   of   ‘area   of   supply’   and   the   Explanation   to   Rule   3   of   the
2005   Rules.   On   a   conjoint   reading   of   the   same,   it   is   noted   that   the
sixth   proviso   to   Section   14   applies   to   a   situation   where   the
appropriate Commission may grant a licence to   two or more persons
for   distribution   of   electricity   through   their   own   distribution   system
within   the   same   area   subject   to   the   applicant­JSPL   complying   with
the   additional   requirements.   Therefore,   it   is   clear   that   within   the
same   area ,   there   could   be   two   or   more   persons   for   distribution   of
electricity. As to what is the area within which there could be grant of
licence to two or more persons is concerned under the sixth proviso to
Section   14,   the   Explanation   to   Rule   3   prescribes   the   area   falling
within   a   Municipal   Council   or   a   Municipal   Corporation   as   defined
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under Article 243 (Q) of the Constitution of India or Revenue District.
The   area   of   supply   authorised   by   the   Appropriate   Commission   shall
be  the minimum area of supply .
 
38. The ‘ area   of supply’ is defined under sub­section 3 of Section 2
to mean that  area within which  the distribution licensee  is authorised
by   his   licence   to   supply   electricity.   This   ‘area   of   supply’   must   fall
‘within’   a   Municipal   Council   or   a   Municipal   Corporation   as   defined
under   Article   243   (Q)   of   the   Constitution   of   India   or   a   Revenue
District.   That   means   that   the   ‘area   of   supply’   must   fall   ‘within’   the
local authority of a Municipal Council or a Municipal Corporation as
defined   in   sub­section   41   of   Section   2   of   the   Act   or   a   Revenue
District, as the case may be, and  within which area of supply , licence
is granted for distribution of electricity. Therefore, the expression area
in   the   sixth   proviso   of   Section   14   is   explained   as   the   ‘area   falling
within’   a   Municipal   Council   or   a   Municipal   Corporation   as   defined
under   Article   243   (Q)   of   the   Constitution   of   India   or   a   Revenue
District  which   shall   be  the   ‘area   of   supply’.   As   already   noted,   within
such   area,   there   could   be   two   or   more   persons   who   are   granted   a
licence   to   distribute   electricity   which   is   in   terms   of   the   provision
granting license. The ‘area within which they are authorised to supply
electricity’ is the ‘area of supply’ and such ‘area of supply’ in respect
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of which authorisation is granted under the licence is the “minimum
area of supply”. 
39. Therefore ,  when  two or more persons are granted licence within
an area forming a Municipal Council or a Municipal Corporation or a
Revenue   District,   the   authorisation   to   supply   electricity   granted   to   a
distribution   licensee   within   the   aforesaid   area   is   the   actual   area   of
supply   and   the   actual   area   of   supply   in   respect   of   which   the
authorisation is granted under the licence is called the  minimum area
of supply .
40. Thus,   on   a   conjoint   reading   of   the   aforesaid   provisions,   it   is
clear   that   the   ‘minimum   area   of   supply”   would   fall   ‘within   the   area’
which   is   comprising   of   a   Municipal   Council   or   a   Municipal
Corporation   or   a   Revenue   District   but   it   does   not   imply   that   the
licence to supply electricity for an area or an ‘area of supply which is
the   ‘minimum   area   of   supply’   must   extend   to   the   ‘ entire   area   falling
within ’ a Municipal Council or a Municipal Corporation or a Revenue
District.
41. But  if  the interpretation as suggested by the respondent No.2 is
to   be   accepted,   then   the   expression   ‘area   falling   within’   in   the
Explanation   would   become   otiose   or   redundant.   The   object   of
providing   a   Municipal   Council   or   a   Municipal   Corporation   or   a
Revenue   District   as   an   area   is   to   provide   a   standard   area,   within
53

which   area,   two   or   more   persons   could   distribute   electricity.   It   does
not   mean   that   the   licensee   must   distribute   electricity   in   the   entire
standard   area.   The   words   used   are   ‘the   area   falling   within’   a
Municipal  Council or a Municipal  Corporation  or a Revenue District.
The   same   does   not   mean   that   the   area   comprising   of   or   an   area
equivalent   to   a   Municipal   Council   or   a   Municipal   Corporation   or   a
Revenue   District.   It   is   only   in   an   ‘area   falling   within’   a   Municipal
Council or a Municipal Corporation or a Revenue District that two or
more   persons   could   be   granted   licence   for   distribution   of   electricity
which   interpretation   is   supported   by   the   use   of   the   expressions
‘within the same area’ used twice in the sixth proviso to Section 14 of
the 2003 Act. Also, the use of the expression ‘within the same area’ in
the sixth proviso as well as in the Explanation to Rule 3 have to carry
the same meaning.
 
42. Moreover ,   the   expression   ‘within   the   same   area’   in   the   sixth
proviso   to   Section   14   of   the   2003   Act   and   the   Explanation   is
analogous   to   the   expression   ‘the   area   falling   within’   a   Municipal
Council   or   a   Municipal   Corporation   or   a   Revenue   District   in   the
Explanation. Thus, the expression ‘within the same area’ cannot refer
to   the   entire   Municipal   Council   or   a   Municipal   Corporation   or   a
Revenue District but ‘the area falling within’ a Municipal Council or a
Municipal   Corporation   or   a   Revenue   District   in   respect   of   which   a
54

distribution licensee is authorised by its licence to supply electricity.
Therefore,   by   the   aforesaid   interpretation   it   is   held   that   the
authorised ‘area of supply’ shall be ‘the minimum area of supply’.
43. Hence,   the   contention   of   respondent   No.2   that   the   ‘minimum
area   of   supply’   must   comprise   of   the   ‘entire’   Municipal   Council   or   a
Municipal   Corporation   or   a   Revenue   District   is   not   correct.   The
argument   in   the   instant   case   is   that   the   appellant­JSPL,   not
complying with the prescription in Explanation to Rule 3 of the 2005
Rules   as   per   the   terms   of   the   licence   cannot   be   permitted   to   supply
electricity   and   therefore,   the   licence   was   rightly   cancelled   by   the
Appellate Tribunal also cannot be accepted.
44. On   the   other   hand,   on   a   reading   of   the   licence   granted   to   the
appellant,   it   is   clear   that   the   respondent   No.1   was   conscious   of   the
fact that  it  was  granting  licence  to  the appellant­JSPL  having regard
to the fact that the said appellant had established an industrial park
for which it had the responsibility for distribution of electricity and in
addition,   two   more   villages   were   added   to   the   area   comprised   in   the
industrial park for the purpose of distribution of electricity. The area
in respect of which the licence was granted and thereby authorisation
provided   to   supply   electricity   is   the   minimum   area   of   supply.   The
‘area   of   supply’   is   ‘an   area   falling   within ’   a   Municipal   Council   or   a
Municipal Corporation or a Revenue District and in the instant case,
55

it  is  a  Revenue  District.   Since,   the   ‘area  of   supply’  authorised   in   the
licence   granted   to   the   appellant­JSPL   in   the   instant   case   is   the
‘minimum   area   of   supply’,   the   said   appellant   is   bound   to   supply
electricity  in the said area of  supply.  The licensee cannot resile from
the   condition   of   supplying   electricity   as   per   the   authorisation   of   the
area of supply indicated in the license. This would also mean that the
licensee   cannot   supply   electricity   in   an   area   beyond   the   area   of
supply authorised under the license. This is because in respect of an
area   falling   within   a   Municipal   Council   or   a   Municipal   Corporation
or a Revenue District, there could be two or more persons who could
be granted licence and authorisation to distribute electricity in terms
of the respective area of supply specified.
45. In view of the aforesaid interpretation, we find no substance in
the   contentions   advanced   on   behalf   of   the   respondent   No.2.   On   the
other hand, on a reading of the order passed by the respondent No.1­
Commission  in C.A.  Nos.  3607­3610  of  2008, we  find that there has
been   an   application   of   mind   to   the   licence   that   was   granted   to   the
appellant for distribution of the electricity.
46. In   view   of   the   aforesaid   discussion,   we   find   that   the   Appellate
Tribunal was not right in cancelling/setting aside the licence granted
to the appellant­JSPL and hence, the impugned judgment is liable to
be set aside.
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47. In   the   result,   the   appeals   are   allowed   and   the   impugned
common judgment of the Appellate Tribunal is hereby set aside.
48. Consequently, pending applications stand disposed by reserving
liberty   to   the   applicants   seeking   impleadment   to   seek   remedies   in
accordance with law, if so advised.
49. Parties to bear their respective costs.
..………….……………J. 
(AJAY RASTOGI)  
 
..………….……………J. 
(B.V. NAGARATHNA)  
NEW DELHI;
29 th
 September, 2022.
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