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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.4223 OF 2012

Brihanmumbai Electric Supply &  Transport Undertaking                                             ….Appellant

Vs.

Mahrashtra Electricity Regulatory  Commission (MERC) & Ors.                                     ….Respondents

J U D G M E N T

A.K.SIKRI,J.

1. Respondent No.3 is a consumer (hereinafter referred to as  

the  “consumer”)  of  electricity  (LT-II  Category)  whose premises  

are  situated  within  area  of  supply  of  the  appellant  namely  

Brihanmumbai  Electricity  Supply  and  Transport  Undertaking  

(BEST). In April 2009, he approached respondent No.2 i.e. Tata  

Power Company Limited (TPC) with a request that he be supplied  

the electricity by TPC. In nutshell, he wants to switch over from  

BEST to TPC for his  electricity  requirement.  In  response to his  

request, TPC advised the consumer vide letter dated 8.7.2009 to

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approach  the  BEST  for  its  permission  to  use  its  distribution  

network of the BEST to enable TPC to supply electricity to the  

consumer using that network. The consumer, accordingly, turned  

to  BEST  requesting  it  to  give  the  said  permission.  It  was,  

however, denied by BEST vide letter dated 31.7.2009 and again  

on  10.8.2009.  After  receiving  this  rejection,  the  consumer  

approached  Mumbai  Electricity  Regulatory  Commission  

(hereinafter  referred  to  as  the  “Regulatory  Commission”)  with  

petition seeking the following directions:

“(a)  That  this  Hon’ble  Commission  may  be  pleased to direct TPC to provide electricity supply to  the Petitioner and make such supply available as early  as possible, either on BEST Network or by extending  its own network, as may be necessary, failing which  TPC’s  distribution license should be cancelled by this  Hon’ble Commission;

(b) that the Hon’ble Commission may be pleased  to direct the respondent to pay compensation to the  petitioner  under  Regulations  3.2  and  12  of  MERC  (Standards of  Performance of  Distribution Licensees,  Period  of  Giving  Supply  and  Determination  of  Compensation) Regulations 2005;”

2. In the meantime, respondent Nos.4 to 8 also filed similar  

petitions before the Regulatory Commission with same relief as  

they  also  wanted  to  switch  over  to  TPC  for  their  electricity  

requirement. Since direction was sought for TPC, only TPC was

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made party. However, at the instance of Regulatory Commission  

BEST and Reliance Industries Limited  (RIL)  were  also  

impleaded  in  these  matters.  After  hearing  all  the  parties,  

Regulatory Commission passed orders dated 22.2.2010 holding  

that TPC was bound to supply electricity in terms of applicable  

Regulations  and  therefore  direction  was  given  to  the  TPC  to  

supply electricity to the consumers either through BEST wires or  

its own wires. The operative part of that order reads as under:

“In view of the above there is no requirement to  issue a direction in regard to the Petitioner’s claim of  compensation under Regulation 3.2 and 12 of the SOP  regulations. However, TPC is bound by Regulation 4.7  of  MERC  (Standards  of  Performance  of  Distribution  Licensees, Period for Giving Supply and Determination  of  Compensation)  Regulations,  2005 in terms of  the  timelines as mentioned in the said Regulation. Time  has  started  ticking  from  the  date  of  receipt  of  applications  by  TPC  from  the  Petitioners  who  have  requisitioned  for  electricity  supply.  TPC  will  have  to  adhere to the timelines specified in the regulations.”

3. We may point out here that the BEST (the appellant herein)  

had resisted the demand of the consumers in their petitions with  

the following contentions:

(a) The  Regulatory  Commission  did  not  have  the  jurisdiction  

to

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entertain  a  dispute  between  the  consumer  and  a  distribution  

licensee;

(b) TPC was not a deemed distribution licensee for the area  

in  question  and  therefore  was  not  permitted  to  supply  the  

electricity to any consumer in that area;

(c)  that  unlike  other  distribution  licensees,  BEST  being  a  

local authority, no persons situated in BEST’s area of supply could  

avail  electricity  from  any  other  licensee,  on  account  of  BEST  

invoking  a  statutory  exemption  available  to  a   local  authority  

under Section 42(3) of The Electricity Act, 2003 Act (hereinafter  

referred to as the Act).

(d) Since TPC had clarified that it was willing to extend its  

network  and  supply  electricity,  BEST  also  contended  that  TPC  

could not extend its network in BEST’s area of supply, without  

BEST’s  consent and agreement.

4. In  its  order  dated  22.2.2010  while  issuing  the  directions  

extracted  above,  the  Regulatory  Commission  rejected   BEST’s  

contentions and held that Tata Power had a duty under the Act to  

extend  its  distribution  network  and  supply  electricity,  if  the  

consumers  so  required,  in  the  South  Mumbai  area.  In  light  of

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TPC’s position that it was willing to extend its network and supply  

electricity, the MERC held that there was no requirement to give  

any directions to it.  The Regulatory Commission also held that  

TPC  would  be  deemed  distribution  licensee  for  the  area  in  

question.

5. BEST  challenged  the  aforesaid  order  of  the  Regulatory  

Commission  by  filing  appeal  before  the  Appellate  Tribunal  for  

Electricity, New Delhi (hereinafter referred to as the “Appellate  

Tribunal”).  This  appeal,  however,  has  been  dismissed  by  the  

Appellate Tribunal vide orders dated 4.4.2012, thereby affirming  

the  findings  and  direction  of  the  Regulatory  Commission.  Not  

satisfied, BEST has filed the instant appeal statutorily provided  

under Section 125 of the Electricity Act.

6. We have already stated in brief the four contentions which  

were raised by BEST before the Regulatory Commission. Same  

contentions were raised before the Appellate Tribunal, which are  

the submissions before us as well. Therefore, we proceed to deal  

with these submissions hereinafter:

RE:  Jurisdiction of  the Regulatory Commission.

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7. This  contention  was  raised  primarily  on  the  ground  that  

there was an alternative remedy provided to  the consumer to  

raise his grievances before the Consumer Grievances Redressal  

Forum  (CGRF)  established  under  Section  42  (5)  of  the  Act.  

Therefore, the consumer should have approached the said Forum  

instead of filing petition before the Regulatory Commission. This  

contention  is  totally  misconceived  and  rightly  rejected  by  the  

authorities  below.  As  noted  above,  petition  was  filed  by  the  

consumer seeking direction against TPC to supply electricity to  

him. Thus, he approached the Regulatory Commission to enforce  

a distribution licensee obligation under the Act. As on that date,  

he  was  not  the  consumer  of  TPC  but  wanted  to  become  its  

consumer. In so far as CGRF is concerned, which each distribution  

licensee is required to set up under Section 42 (5) of the Act, it  

deals with the grievances of the consumer. Consumer is defined  

under Section 2 (15) of the Act and reads as under:

“any person who is supplied with electricity for  his own use by a licensee or the Government or by  any other person engaged in the business of supplying  electricity to the public under this Act or any other law  for the time being in force and includes any person  whose premises are for the time being connected for  the purposes of receiving electricity with the works of  a licensee, the Government or such other person, as  the case may be.”

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8. Thus, respondent No.3 not being a consumer could not have  

approached  CGRF.  Further,  we  find  that  in  Maharashtra  

Electricity Regulatory v. Reliance Energy Ltd. (2007) 8 SCC  

381, this Court has held that the Regulatory Commission has the  

power to require a licensee to fulfill its obligations under the Act.  

Thus, we are of the opinion that the Regulatory Commission had  

the  requisite  jurisdiction  to  entertain  the  petition  filed  by  the  

consumer.  Presumably,  for  this  reason,  this  contention  was  

pressed half hearted before us and given up in the middle.

RE:   Whether  TPC  is  deemed  distribution  

licensee

9.  Before we take note of the argument of the parties on this  

aspect and deal with the same, some background facts need a  

mention.  TPC  is  the  successor  of  the  Bombay  Hydroelectric  

License,  1907,  the Andhra  Valley Hydro-electric  License,  1919,  

the Nila Mula Valley Hydro-electric License, 1921 and Trombay  

Thermal  Power  Electric  License  1953  to  supply  electricity  to  

consumers in specified areas in and around Mumbai (Erstwhile  

Licenses).  The  Erstwhile  Licenses  were  subsequently  

amalgamated and transferred to Tata Power on 12.7.2001.

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10. The  Government  of  Maharashtra,  in  exercise  of  powers  

under the Indian Electricity Act, 1910 amended the area of supply  

under  the  Erstwhile  Licenses  from time to  time.  This  included  

addition of new areas as well as handing over of certain  areas to  

the Government owned distribution company, earlier known as  

the Maharashtra State Electricity Board.

11. TPC’s  area  of  supply  overlaps  with  that  of  Reliance  

Infrastructure Limited (R Infra) another distribution licensee in the  

suburban Mumbai area, and with that of the Appellant (BEST) in  

South  Mumbai.  In  2002,  R  Infra  filed  a  petition  before  the  

Respondent No.1 (MERC) alleging that Tata Power’s license did  

not  authorize  Tata  Power  to  supply  electricity  to  direct  retail  

consumers (with a maximum demand below 1000KVA). While the  

petition was pending, the Electricity Act, 2003 came into force.

12. On the basis of aforesaid facts TPC claimed that by virtue of  

first proviso to Section 14 of the Act, it was a deemed licensee for  

the  area  of  supply  of  BEST.  Under  Section  14  the  Regulatory  

Commission is empowered to grant a license to any person on an  

application made to it under Section 15 of the Act. This license  

may pertain to transmit electricity as a transmission licensee; or  

distribute electricity  as a distribution licensee;  or  to undertake

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trading in electricity as an electricity trader, in any area, as may  

be specified in the license. This section has nine provisos which  

stipulated various circumstances under which no specific license  

is required by making an application under Section 15 and if the  

conditions stipulated in any of these provisos are satisfied, such a  

person is treated as deemed licensee. We are here concerned  

with  1st proviso  under  which  TPC  claims  to  be  a  deemed  

distribution licensee as well  as 6th proviso which is invoked by  

BEST in contending TPC cannot be a deemed distribution licensee  

in the area where  BEST operates. Therefore, we reproduce both  

these provisos:

1st Proviso:“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. 6thProviso: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

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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  license  on  the  ground  that  there  already  exists  a  licensee  in  the  same  area  for  the  same purpose.”  

13. As per the first proviso if any person was engaged in the  

business  of  transmission  or  supply  of  electricity  under  the  

provisions of the repealed laws etc. that person is deemed to be  

a  licensee  under  the  Act,  2003  as  well.  The  period  for  such  

deemed  licence  is  the  one  that  is  stipulated  in  the  licence,  

clearance or approval granted to him under the repealed laws.  If  

it is under any Act specified in the Schedule in respect of such  

licence, then the period of licence is for one year from the date of  

commencement of the Act or such period as may be specified by  

the  Appropriate  Commission.   It  would  mean  that  either  the  

period of deemed licence for such a person is the period which is  

stipulated in the licence, clearance or approval granted to him  

under the repealed laws or for a period of one year from the date  

of  commencement  of  the  Act  or  the  period  which  may  be  

specified,  at  the  request  of  the  licensee  by  the  Regulatory

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Commission.  Once,  such  a  period  is  over,  then  that  person is  

supposed to apply for licence under Section 14.

Proviso  six,  on  the  other  hand,  deals  with  a  different  

situation.  As  per  this  provision,  the  Regulatory  Commission  is  

authorized  to  grant  a  licence  to  two  or  more  persons  for  

distribution of  electricity  through their  own distribution system  

within  the  same area.  It  is  subject  to  the  conditions  that  the  

applicant for grant of licence within the same area shall  apply  

with the additional requirements relating to the capital adequacy,  

creditworthiness, or code of conduct as may be prescribed by the  

Central  Government.  It  further  provides  that  merely  because  

there exists a licensee in the same area would not be a ground to  

reject an application for another applicant for same purpose. This  

provision deals with open access policy.

14. As per the TPC, proviso one is applicable  in their case since  

its  predecessor were granted licence under  the Act,  1910 and  

therefore  it  continuous  to  be  licensee  as  per  the  aforesaid  

deeming provision under the Act, 2003 as well. The case set up  

by the TPC in this behalf is such a licence granted under the old  

Act is valid upto 15.8.2014 which is categorical stipulated in the  

Specific  Licence  Conditions  by  the  Regulatory  Commission.

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Therefore,   it  is  only  after  15.8.2014  that  the  TPC  would  be  

required  to  take  fresh  licence  by  making  application  under  

Section 15 of the Act, 2003. This is stated on the ground that the  

MERC  formulated  the  MERC  (Specific  Conditions  of  License  

applicable  to  the  Tata  Power  Company  Limited)  Regulations,  

2008 (Specific License Conditions) under Section 16 of the Act.  

The  Specific  License  Conditions  read  with  the  MERC  (General  

Conditions of Distribution License) Regulations, 2006 set out the  

terms and conditions of Tata Power’s license in supersession of  

the  Erstwhile  Licenses,  and  authorize  Tata  Power  to  supply  

electricity in its area of supply to the public for all purposes in  

accordance with the Act. The Specific License Conditions further  

stipulate that the term of Tata Power’s license is up to 15.8.2014.

15. The  argument  of  BEST,  on  the  other  hand,  is  that  the  

Appellate  Tribunal  was  wrong  in  holding  TPC  was  a  deemed  

licensee under the first proviso to Section 14, as well as a parallel  

licensee under the sixth proviso to Section 14 of the Act 2003.  

According to Mr. Naphade, the  Appellate Tribunal gravely erred  

in failing to appreciate that network of TPC cannot be allowed or  

extended within  the area of  supply of  BEST in the absence of  

distribution licensee which TPC failed to obtain from Regulatory

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Commission, though it is a necessary requirement under sections  

14 and 15 read with Section 12 of the Act. It was argued that as  

per the first proviso to Section 14, a person is treated deemed  

licensee  only  if  it  is  engaged  in  the  business  of  supply  of  

electricity under the provisions of  the repealed laws and it is for  

such period “as may be stipulated in the licence granted to him  

under the repealed laws”. It was argued that the protection was  

only for that period which is stipulated in the licence and not on  

the basis of licence and there is no such period specified in the  

business up to 15.8.14 specified in the licence. It  was, further,  

argued that the provisions of the repealed laws in respect of such  

licences are applicable for a period of one year within which and  

thereafter  licence  was  to  be  obtained  under  Section  14  by  

moving an application under Section 15,  as per the procedure  

prescribed in the Act 2003. It was argued that for the deeming  

fiction in the first proviso to said Section 14 to arise, (i) a person  

must be engaged in the business of supply of electricity under  

the repealed laws on or before 10.6.2003, and (ii) a period (being,  

period  of  subsistence  of  licence)  be  stipulated  in  the  licence  

granted to such person under the repealed laws. It was further

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pointed out that said deeming fiction applies (i) to such a person,  

and (ii) for such stipulated period.

16. There  are  two  facets  of  the  submissions  made  by  Mr.  

Naphade. In the first instance it  is  to be found that there is a  

stipulation of  period in  the manner  stated in  the first  proviso.  

Second aspect is as to whether it is incumbent, in all cases, to  

apply for licence under the provisions of Sections 14 and 15 of  

the Act immediately after the expiry of one year from the date of  

commencement  of  the  said  Act.  In  so  far  as  first  aspect  is  

concerned, the argument of the appellant loses sight of the fact  

that in the first proviso the period for which any person can be a  

deemed licensee is not only such period which is stipulated in the  

licence, clearance or approval granted to him under the repealed  

laws or such Act specified in the Schedule. It also provides that  

the  provisions  of  repealed  laws  or  such  Act  specified  in  the  

Schedule in respect of such a licence shall apply for a period of  

one year from the date of commencement of Act 2003 or  such  

earlier period as may be specified at the request of the licensee  

by  the  Regulatory  Commission. In  the  present  case,  the  

Regulatory Commission formulated MERC (Specific Conditions of  

License Applicable to TPCL) Regulation 2008 i.e. Specific Licence

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Conditions. These were formulated under Section 16 of the Act  

2003 and it is in these conditions there is a specific stipulation  

regarding term of TPC licence up to 15.8.2014. We, therefore, are  

unable to accept the submissions of the appellant that the licence  

was valid for a period of one year only. It would be useful to refer  

to Section 16 of the Act under which aforesaid Specific Licence  

Conditions of TPC are formulated.

“16.  Conditions  of  licence.-  The  Appropriate  Commission  may  specify  any  general  or  specific  conditions  which  shall  apply  either  to  a  licensee  or  class of licensees and such conditions shall be deemed  to be conditions of such licence:

Provided that the Appropriate Commission shall,  within one year from the appointed date, specify any  general or specific conditions of licence applicable to  the  licensees  referred  to  in  the  first,  second,  third,  fourth and fifth provisos to section 14 after the expiry  of one year from the commencement of this Act.”

Proviso to the aforesaid section very categorically enables  

the  Regulatory  Commission  to  specify  general  or  specific  

condition of licence applicable to licensees referred to in the first  

to fifth proviso to Section 14 after expiry of one year after the  

commencement  of  that  Act.  Since  as  on  the  date  of  

commencement of the Act, TPC became deemed licensee under  

the first proviso as its predecessors were holding the distribution

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licence under the repealed laws and thereafter specific conditions  

of licence are formulated by the Regulatory Commission under  

Section 16 mentioning the period of 15.8.2014, it becomes clear  

that  the  combined  fact  of  that  would  be  that  YPC  would  be  

deemed licence till 15.8.2014. Tata  

Power’s license to supply electricity in the South Mumbai area is  

clearly established by virtue of the following:

(a) The Erstwhile Licensee authorized Tata Power to supply  

electricity  to  all  consumers  in  Mumbai,  including  the  South  

Mumbai area;

(b) When the new Act came into force, by virtue of the 1st  

Proviso to Section 14, Tata Power was deemed to be a licensee  

under that Act.  

This is also clear from Section 172(b) of the Act. It is trite  

law  that  once  the  purpose  of  the  deeming  provision  is  

ascertained, full effect must be given to the statutory fiction and  

the fiction is to be carried to its logical end.

17. An  argument  was  sought  to  be  raised  before  us  that  

Regulation  2008  laying  down  specific  conditions  for  TPC  are  

flouted as they were not made by the Regulatory Commission

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within  the  mandatory  period  of  one  year.  However,  no  such  

argument  was  raised  earlier  and  there  is  no  challenge  to  the  

validity  of  the  aforesaid  Regulations  which  are  made  by  the  

Regulatory Commission under  its statutory powers and therefore  

are having statutory force. Once, we come to the conclusion that  

TPC can be treated as deemed distribution licensee under the  

first proviso to Section 14 of the Act 2003 and the area of the  

licence  is  the  same which  overlaps  with  the  area  covered  by  

BEST, argument predicated on sixth proviso to Section 14 would  

not be available to the BEST.

 RE: AVAILABILLITY OF OPEN ACCESS TO TPC IN THE AREA  

COVERED BY BEST, WHICH IS A LOCAL AUTHORITY

AND

PERMISSIBILITY OF TPC TO EXTEND ITS NETWORK IN BEST  

AREA OF SUPPLY WITHOUT ITS APPROVAL/CONSENT.

18. It was argued by Mr. Naphade that under the Act neither  

open access can be allowed nor distribution system or network of  

a  purported  parallel  licensee  (such  as  TPC)  can  be  laid  or  

extended  within  area  of  supply  of  BEST.  The  learned  senior  

counsel labored on the aspect that admittedly BEST was a Public

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Sector Undertaking and such bodies are given due recognition of  

and grant of exemption and/or protection to a special category of  

licensee being a local authority in the business of distribution of  

electricity before the  appointed day. He submitted that as BEST  

would be covered by the expression “ a local authority” protected  

measures provided under the Act would be applicable to it  as  

well. According to him, a local authority was always placed on a  

special  footing under  Act,  1910 as well  as Act,  1948 and now  

under Act, 2003 which was clear from the provisions of Section  

42 (3) of the Act that reads as under:

“42(3)  Where  any  person,  whose  premises  are  situated  within  the  area  of  supply  of  a  distribution  licensee, (not being a local authority) engaged in the  business  of  distribution  of  electricity  before  the  appointed day) requires a supply of electricity from a  generating company or any licensee other than such  distribution  licensee,  such  person  may,  by  notice,  require  the  distribution  licensee  for  wheeling  such  electricity in accordance with regulations made by the  State  Commission and the duties  of  the distribution  licensee  with  respect  to  such  supply  shall  be  of  a  common  carrier  providing  non-discriminatory  open  access.”

This  provision  which  deals  with  the  duties  of  distribution  

licensee  as  well  as  open  access  specifically  excludes  a  local  

authority.

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Mr.  Naphade  thus  argued  that  if  the  Legislature,  having  

regard to the special status of a local authority engaged in the  

business of distribution of electricity before the appointed date  

(such as BEST),  has duly exempted open access in its area of  

supply,  then  it  is  but  consequential  and/or  a  fortiori  that  a  

distribution system or network of  a purported parallel  licensee  

(such  as  TPC)  cannot  be  laid  or  extended  within  the  area  of  

supply of a local authority engaged in the business of distribution  

of  electricity  before  the  appointed  date  (such  as  BEST).   His  

submission was that the Legislature could never have and in fact,  

has not intended that such special status (inclusive of exemption  

from  open  access)  be  in  vain  or  rendered  

illusory/infructuous/nugatory, and more so by a mere lay out or  

extension of a distribution system or network of the purported  

parallel  licensee. It  is  a fundamental  principle of  law that duly  

made legislation can never be and should not be in vain or to no  

avail.  Hence,  such special  status  (inclusive  of  exemption  from  

open access) cannot be ignored, but must necessarily be given  

full effect to and enforced. According to him an irrational situation  

would arise if the purported parallel licensee (such as TPC) could  

not supply electricity under open access in the area of supply of a

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local  authority  engaged  in  the  business  of  distribution  of  

electricity before the appointed date (such as BEST), but could  

lay or extend its distribution system or network in the area of  

supply of a local authority engaged in the business of distribution  

of electricity before the appointed date (such as BEST). As such,  

Section  42  (3)  necessarily  has  to  be  interpreted  to  qualify  or  

restrict  aforesaid  Sixth  Proviso  to  Section  14,  Section  43(1),  

Section 42(1) and/or Section 42(2), to the extent that any person,  

whose  premises  are  situated  within  the  area  of  supply  of  a  

distribution licensee, (which is a local authority engaged in the  

business  of  distribution  of  electricity  before  the  appointed  

date)cannot  require  a  supply  of  electricity  from  a  generating  

company or any licensee other than such distribution licensee,  

through  (i)  open  access  and/or(ii)otherwise  (including  under  

parallel license). Moreso, as the provisions of the Electricity Act,  

2003, provide for protection of interest of electricity consumers,  

and as such ought not and should not be interpreted to entail  

unnecessary  burden  of  said  capital  expenditure  or  electricity  

consumers;  a  local  authority  engaged  in  the  business  of  

distribution  of  electricity  before  the  appointed  date  (such  as  

BEST) is ex-facie placed on a special pedestal vis-à-vis ordinary

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distribution licensees, under the Third Proviso to Section 51 of the  

Electricity  Act,  2003,  which  has  been  liberally  interpreted  in  

favour of and to advantage of a local authority engaged, before  

the commencement of the Electricity Act, 2003, in the business of  

distribution of electricity (such as BEST), by the Hon’ble Supreme  

Court of India in the Order dated 8.2.2011 made in Civil Appeal  

No.848  of  2011 (Municipal  Corporation  of  Greater  Mumbai  vs.  

Maharashtra Electricity Regulatory Commission & Ors.).  

19. On the other hand, Mr. Dhruv Mehta, learned senior counsel  

appearing  for  TPC  submitted  that  by  this  argument  of  the  

appellant was mixing the otherwise two distinct concepts, namely  

that of open access under Section 42 (3) of the Act and that of  

Universal Service of Relations contained in Section 43 of the Act.  

Highlighting the purpose of the Act which has, inter-alia, provided  

emphasizing  the  need  for  efficiency  and  competition  in  the  

distribution  business  as  well  as  open  access  system and  also  

multiple  licences  system  in  the  same  area  of  supply,  he  

submitted that if the contention of the appellant is accepted it  

would negate the very objective which is sought to be achieved  

by the aforesaid provisions. Mr. Mehta argued that under the Act,  

there are two ways in which a consumer situated in a particular

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area can avail supply of electricity: (i) from a distribution licensee  

authorized to supply electricity in that area under Section 43; or  

(ii) from any other supplier through the distribution network of a  

distribution licensee by seeking “open access” in terms of Section  

42(3). In the first option, the distribution licensee operating in a  

particular area is required to lay down its network if required, in  

order  to  supply  electricity  to  a  consumer  seeking  supply.  The  

second option, which is known as open access is provided under  

Section 42 read with Section 2(47) of the 2003 Act. Under Section  

42(3)  of  the 2003 Act,  a  consumer has  the right  to  require  a  

distribution licensee to make its network available for wheeling  

electricity  to such consumer from a third  party supplier (i.e.  a  

supplier of electricity not being a distribution licensee in the area  

where  the  consumer  is  situated).  He  submitted  that  this  

distinction between the two different concepts is to be born in  

mind and the matter is seen in its proper perspective. Section  

42(3) carries out an exception in favour of local authority only  

qua  open  access  which  would  mean  that  a  consumer  is  

disallowed from seeking open access from a distribution licensee  

which  is  a  local  authority  like  BEST.  That  would  mean  that  a  

consumer  being  supplied  by  BEST  cannot  demand  that  BEST

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allow a third party subject to supply electricity to such consumer  

through the network of BEST. According to him, this exception  

would  extend  to  position  contained  in  section  43  which  casts  

“Universal Service Obligation” on all distribution licensees to give  

supply  to  any  owner  or  occupier  within  its  supply  area.  That  

would only mean if there is an another distribution licensee in the  

area  in  which  a  local  authority  like  BEST  also  operates,  a  

consumer can approach that distribution licensee to supply him  

the electricity.  However,  for that purpose, the said distribution  

licensee will have to supply the electricity from its own laid in the  

network without using the network of local authority.     

20. After  considering  the  rival  contentions,  we  are  of  the  

opinion that the interpretation suggested by Mr. Mehta needs to  

prevail and therefore we do not find any fault with the view taken  

by the Appellate Tribunal.  We have already reproduced above  

provisions of  Section 42 (3)  of  the Act.  As pointed out above,  

Section 42 of the Act deals with the duties of distribution licensee  

and open access. Sub-Section (1) thereof provides that it shall be  

the duty of a distribution licensee to develop and maintain an  

efficient co-ordinated and economical distribution system in his  

area of supply and to supply electricity in accordance with the

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provisions  contained  in  the  Act.  Sub-section  (2)  casts  an  

obligation upon the State Commission to introduce open access  

in phases  and subject to such conditions, as may be specified,  

these  conditions  may  include  the  cross  subsidies  and  other  

operational  constraints.  It  is  thereafter  in  sub-section  (3)  of  

Section  42  provision  is  made  for  wheeling  of  electricity  with  

respect to supply stating that duties of distribution licensee shall  

be  of  a  common  carrier  providing  non-discriminatory  open  

access. Thus sub-section (3) provides for open access and casts a  

duty  upon  the  distribution  licensee  in  this  behalf.  Here,  it  

excludes local authority, as distributor of electricity from such an  

obligation.  However,  when it  comes to  the duty of  distribution  

licensee to supply the electricity under section 43, it mandates  

that same is to be given to the owner or occupier of any premises  

on his application within one month from the receipt of the said  

application.  This  duty  under  Section  43  imposed  upon  a  

distribution  licensee  does  not  distinguish  between  a  local  

authority and other distribution licensee. It is also not a case of  

the appellant that in a particular area where a local authority is a  

distribution  licensee,  there  cannot  be  any  other  distribution  

licensee at all.

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21. Thus, on a conjoint reading of Sections 42 and 43 of the Act  

along  with  the  objectives  and  purpose  for  which  Act  2003  is  

enacted,  it  becomes clear that there are two ways in which a  

consumer  stated  in  a   particular  area  can  avail  supply  of  

electricity, as pointed out by the learned senior counsel for TPC  

and noted above.  When an application is made by a consumer to  

a distribution licensee for supply of electricity, such a distribution  

licensee for supply of electricity, such a distribution licensee can  

request  other  distribution  licensee  in  the  area  to  provide  it  

network  to  make  available  for  wheeling  electricity  to  such  

consumers  and  this  open  access  is  to  be  given  as  per  the  

provisions of section 42 (3) of the Act. It is here only that local  

authority is exempted from such an obligation and may refuse to  

provide  makes  it  network  available.  Second  option  is,  under  

section 43 of the Act, to provide the electricity to the consumer  

by the distribution licensee from its own network. Therefore, if in  

a particular area local authority has its network and it does not  

permit  wheeling  of  electricity  from  by  making  available  its  

network, the other distribution licensee will have to provide the  

electricity  from its  own  network.  For  this  purpose,  if  it  is  not  

having  its  network,  it  will  have  to  lay  down  its  network  if  it

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requires  in  order  to  supply  electricity  to  a  consumer  seeking  

supply.

22. This interpretation of ours is in consonance of the objective  

and purpose of the Act. The aforesaid objective is further clarified  

by  the  Tariff  Policy  and  the  National  Electricity  Policy  under  

section 3 of the Act which emphasized the need for efficiency and  

competition in the distribution business.  On going through the  

statement of objects and reasons contained in the new Act, the  

interpretation, which we are leading to, gets further facilitated.  

Prior to this Act, there were three Acts, namely  of 1910, 1948  

and 1998 which were governing the laws relating to electricity  

and were operating in the field. Within few years, it was felt that  

the three Acts of 1910, 1948 and 1998 which were operating in  

the  field  needed  to  be  brought  in  a  new  self  contained  

comprehensive legislation with the policy of encouraging private  

sector participation in generation, transmission and distribution  

and  also  the  objectives  of  distancing  the  regulatory  

responsibilities  from  the  Government  and  giving  it  to  the  

Regulatory  Commissions.  With  these  objectives  in  mind  the  

Electricity Act, 2003 has been enacted. Significant addition is the  

provisions  for  newer  concepts  like  power  trading  and  open

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access. Various features of the 2003 Act which are outlined in the  

statement of objects and reasons to this Act. Notably, generation  

is  being  delicensed  and  captive  generation  is  being  freely  

permitted.  The  Act  makes  provision  for  private  transmission  

licensees. It now provides open access in transmission from the  

outset. While open access in transmission implies freedom to the  

licensee to procure power from any source of his choice, open  

access in distribution, with which we are concerned here, means  

freedom to the consumer to get supply from any source of his  

choice. The provision of open access to consumers ensures right  

of  the  consumer  to  get  supply  from a  person  other  than  the  

distribution licensee of his area of supply by using the distribution  

system of such distribution licensee.

23. The  concept  of  open  access  under  the  Act  enables  

competing generating companies and trading licensees, besides  

the area distribution licensees,  to  sell  electricity  to  consumers  

when  open  access  in  distribution  is  introduced  by  the  State  

Electricity  Regulatory  Commissions.  Supply  by  way  of  open  

access is a completely different regime as is also clear from the  

fact that consumers who have been allowed open access under  

Section  42  may enter  into  an  agreement  with  any  person for

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supply of electricity on such terms and conditions, including tariff,  

as may be agreed upon by them under Section 49 of  the Act  

unlike consumers who take supply under section 43 of the Act.

24. Once  we read  the  provisions  in  the  aforesaid  manner,  it  

becomes clear that there is no exemption from universal service  

obligation to any distribution licensee under the Act, on account  

of the presence of a “local authority” as a distribution licensee in  

the  particular  area  of  supply,  which  is  also  reinforced  by  

Paragraph 5.4.7 of  the National  Electricity  Policy  which  clearly  

states that the second licensee in the same area shall have the  

obligation to supply to all consumers in accordance with Section  

43.  In  this  context,  it  is  relevant  to  reproduce  the  following  

observations in  Chandu Khamaru v. Nayan Malik reported in  

(2011)  12 SCC 314:

“7…These provisions in the Electricity Act, 2003  make it amply clear that a distribution licensee has a  statutory  duty  to  supply  electricity  to  an  owner  of  occupier of any premises located in the area of supply  of the distribution licensee, if such owner or occupier  of  the  premises  applies  for  it,  and  correspondingly  every  owner  or  occupier  of  any  premises  has  a  statutory right  to  apply for  and obtain  such electric  supply from the distribution licensee.”

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25. It is, therefore, difficult to accept the extreme position taken  

by the appellant that if local authority is a distribution licensee in  

a particular area, there cannot be any other distribution licensee  

in that area without the permission of such a local authority. Not  

only  such  a  contention  would  negate  the  effect  of  universal  

supply  obligation  under  Section  43,  it  will  also  amount  to  

providing  an exception which is not there either in Section 43 or  

Section 14 of the Act namely to treat local authority in special  

category and by giving it the benefit even that benefit which is  

not specified under the Act.

26. It  is  trite  that  Court  should  lean  in  favour  of  an  

interpretation which subserves the objective of the Act namely  

the  purposive  interpretation.   In  Tata  Power  Co.Ltd.  v.  

Reliance Energy Ltd. & Ors. (2008) 10 SCC 321, this  Court  

gave due recognition to objective behind the Act viz. to promote  

competition  and  give  the  consumer  open  to  choose  the  

distribution  licensee  from which  it  seeks  electricity  as  is  clear  

from the following paragraphs:

102. On  the  other  hand,  in  our  view,  the  provisions of both the 1903 and 1910 Electricity Acts  encourage competition in the electricity trade and the  same  is  also  incorporated  in  the  licences  issued  in  favour of the distribution licensees, which also include

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licensees generating power for supply. The element of  competition has been included in the Preamble to the  2003  Act  and  permeates  the  same  in  its  various  provisions.

103. As submitted by Mr Chagla, the Act is meant  to be consumer-friendly and one of the objectives it  sets out to achieve is to give the consumer an option  to  choose  the  distribution  licensee  from  whom  it  wishes  to  receive  supply  of  electrical  energy.  The  intervention of MIDC, Marol Industries Association and  the appeals  filed by it,  has obviously  been made in  that context.

In MSR Leathers vs. S.Palaniappan & Anr. (2013) 1 SCC  

177 it was observed:

“24. That  brings  us  to  the  question  whether  an  offence  punishable  under  Section  138  can  be  committed  only  once  as  held  by  this  Court  in  Sadanandan case1. The holder of  a cheque as seen  earlier  can present  it  before  a bank any number of  times within the period of  six months or  during the  period of its validity, whichever is earlier. This right of  the  holder  to  present  the  cheque  for  encashment  carries with it a corresponding obligation on the part  of the drawer to ensure that the cheque drawn by him  is honoured by the bank who stands in the capacity of  an  agent  of  the  drawer  vis-à-vis  the  holder  of  the  cheque.  If  the holder  of  the cheque has a right,  as  indeed is in the unanimous opinion expressed in the  decisions on the subject, there is no reason why the  corresponding obligation of the drawer should also not  continue  every  time  the  cheque  is  presented  for  encashment if it satisfies the requirements stipulated  in clause (a) of the proviso to Section 138. There is  nothing in that proviso to even remotely suggest that  clause  (a)  would  have  no  application  to  a  cheque  presented for the second time if the same has already

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been dishonoured once. Indeed if the legislative intent  was to restrict prosecution only to cases arising out of  the first dishonour of a cheque nothing prevented it  from stipulating so in clause (a) itself. In the absence  of any such provision a dishonour whether based on a  second or any successive presentation of a cheque for  encashment would be a dishonour within the meaning  of Section 138 and clause (a) of the proviso thereto.  We have, therefore, no manner of doubt that so long  as  the  cheque  remains  unpaid  it  is  the  continuing  obligation of the drawer to make good the same by  either arranging the funds in the account on which the  cheque is drawn or liquidating the liability otherwise. It  is true that a dishonour of the cheque can be made a  basis for prosecution of the offender but once, but that  is far from saying that the holder of the cheque does  not have the discretion to choose out of several such  defaults,  one  default,  on  which  to  launch  such  a  prosecution. The omission or the failure of the holder  to institute prosecution does not, therefore, give any  immunity  to  the  drawer  so  long  as  the  cheque  is  dishonoured  within  its  validity  period  and  the  conditions precedent for prosecution in terms of the  proviso to Section 138 are satisfied.”

While dealing with the issue No.2 above, we have already  

held that TPC and BEST are parallel distribution licensee in the  

South Bombay Area.

27. The appellant has sought to rely on the expression “Save  

as otherwise provided in this Act” in Section 43(1) of the Act to  

read  into  Section  43(1)  the  exception  for  local  authorities  

provided for in Section 42(3).  The TPC has successfully refuted  

this submission by pointing out that these words in Section 43(1)

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are required to be read in the context in which they appear. The  

said words were inserted in the section by way of an amendment  

to the Act in 2007. An “Explanation” to Section 43(1) was also  

added by the same amendment providing that “application” by a  

consumer in Section 43(1) means an application complete in all  

respects along with documents showing payment of necessary  

charges  and  other  compliances,  meaning  thereby  that  the  

obligation  of  the  distribution  licensee  to  supply  within  the  

specified time period will  begin only after it  has received such  

completed application by the applicant. Further, Sections 45 and  

46  provide  for  the  distribution  licensee’s  powers  to  recover  

charges for electricity supplied and the expenditure incurred in  

providing  electric  line  or  plant  for  giving  supply.  Section  47  

provides that the distribution licensee may require any person  

demanding  electricity  supply  from  him  to  give  a  reasonable  

security, failing which the distribution licensee may refuse to give  

supply of electricity to such consumer. We are of the opinion that  

it  is  in  this  context  that  the  expression  “save  as  otherwise  

provided in this Act” in Section 43 (1) is to be construed.

28. Before  we part  with  we would  like  to  make it  clear  that  

there is a dispute between TPC and R-infra) (respondent No.9)

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which is the subject matter of Civil Appeal Nos. 4667-68/2013. R  

Infra is a distribution licensee in suburban Bombay where TPC is  

also a licensee.  Both supply electricity  to  different  consumers.  

Dispute  is  between  them  with  regard  to  cross  subsidiary  

surcharge (CSS) payable by consumer taking supply from TPC or  

R Infra network. We make it clear, by way of abundant caution,  

that we have not touched upon the said dispute and obviously so  

as  even  otherwise  the  subject  matter  in  the  instance  case  is  

totally  different.  Therefore  Civil  Appeal  Nos.4667-68/2013 shall  

be decided on its own merits.

29. We, thus, do not find any merit in any of the contentions of  

the appellant. As a consequence, this appeal fails and is hereby  

dismissed with cost thereby affirming the order of the Appellate  

Tribunal.

……………………………………….J.         (Surinder Singh Nijjar)

……………………………………..J.                                (A.K. Sikri)

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New Delhi May 8, 2014