Senior Adv Sanjay Sen successfully represents Jindal Steel & Power at the Supreme Court of India

Senior Adv Sanjay Sen successfully represents Jindal Steel & Power at the Supreme Court of India

The Supreme Court in a recent judgement has held that the Appellate Tribunal was wrong to hold that the minimum area for grant of license under the Electricity Rules, 2005 has to necessarily be the entire Municipal area/Municipal Corporation or Revenue District. Instead, the Supreme Court held that the required area for grant of distribution license can be a smaller area within a Municipal area/Municipal Corporation or Revenue District.

Brief:

An appeal was filed by Jindal Steel & Power Ltd. (JSPL) – a Naveen Jindal group company, challenging the cancellation of Jindal's distribution license for supply and distribution of power in the OP Jindal Park, spanning two villages in the State of Chhattisgarh. Jindal was supplying power to 43 power-intensive industries pursuant to terms of Government MoUs and the license granted by the Chhattisgarh State Electricity Regulatory Commission (CSERC). However, the Appellate Tribunal cancelled the distribution license as Jindal allegedly did not fulfill the 'minimum area' requirement under the Electricity Rules, 2005 for grant of license. Jindal moved the Supreme Court challenging the Appellate Tribunal's decision challenging its' distribution rights.

The Counsel for Jindal argued that Jindal was given the necessary permissions by the State under the Indian Electricity Act, 1910 and that Jindal had to step up and supply to the State-based industries as the CSPDCL did not have the power or infrastructure to supply to the industries. This assisted the court to come to a view that the Appellate Tribunal had erred by cancelling Jindal's distribution license and the CSERC was right in granting of license.

In terms of the law laid down by the Supreme Court, a distribution license can be granted for an area falling within a Municipal area/Municipal Corporation or Revenue District. The parallel licensee under the Electricity Act, 2003 now has the ability to apply for a smaller area than the entirety of a Municipal area/Municipal Corporation or Revenue District, which was the view earlier by the Appellate Tribunal.

A bench of Justices Ajay Rastogi and B.V. Nagarathna observed, "The 'area of supply' is defined under sub­section 3 of Section 2 to mean that area within which the distribution licensee is authorized 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 of which authorisation is granted under the licence is the "minimum area of supply".

The Court concluded that, "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, 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."

The Court thus set aside the impugned judgment passed by the appellate tribunal.

Jindal was led by Senior Counsel, Mr. Sanjay Sen along with Ms. Mandakini Ghosh, Adv. The Advocate on Record was Khaitan & Co.