Supreme Court of India
HINDUSTAN ZINC LTDversusRAJASTHAN ELECTRICITY REGULATORY COMMISSION
- Citation
- 2015 INSC 996
- Decided
- 13 May 2015
- Disposal
- Directions issued
- Bench
- V GOPALA GOWDA
Holding
The RERC’s Renewable Energy Obligation Regulations 2007 and 2010 are a valid exercise of its statutory power under Section 86(1)(e) of the Electricity Act, 2003, constitute a reasonable restriction permissible under Article 19(6), and do not violate any constitutional provision.
Summary
The Supreme Court considered appeals by Hindustan Zinc Ltd. and other captive power generators challenging the Rajasthan Electricity Regulatory Commission’s (RERC) Renewable Energy Obligation Regulations of 2007 and 2010, which require them to purchase a minimum quantum of electricity from renewable sources. The appellants argued that the regulations were ultra vires the Electricity Act, 2003, violated Articles 14, 19(1)(g) and 265 of the Constitution, and that the surcharge for non‑compliance was an illegal tax. The Court examined the statutory power conferred on the RERC under Section 86(1)(e) read with Section 181 of the Act, the definition of “total consumption in the area of distribution licensee”, and the constitutional permissibility of reasonable restrictions under Article 19(6). It held that the regulations are a valid exercise of the Commission’s jurisdiction, serve the public‑interest goal of environmental protection, and are consistent with the Act, the National Electricity Policy and the Directive Principles. Consequently, the appeals were dismissed.
Issues considered
- The RERC’s jurisdiction to impose Renewable Energy Obligation on captive power plants and open‑access consumers under Section 86(1)(e) of the Electricity Act, 2003.
- Whether the 2007 and 2010 RE‑Obligation Regulations are ultra vires the Electricity Act, 2003.
- Whether the regulations infringe fundamental rights under Articles 14, 19(1)(g) and 265 of the Constitution.
- Whether the surcharge/penalty under Regulation 9 constitutes a tax prohibited by Article 265.
- Interpretation of “total consumption in the area of distribution licensee” and its applicability to captive generators and open‑access consumers.
Legislation cited
- Constitution of Indias. Article 14, s. Article 19(1)(g), s. Article 19(6), s. Article 21, s. Article 265, s. Article 48A, s. Article 51A(g)
- Electricity Act, 2003s. 14, s. 142, s. 147, s. 181, s. 2(17), s. 2(3), s. 23, s. 2(39), s. 2(8), s. 39(2), s. 43(2), s. 61, s. 66, s. 86(1)(e), s. 86(1)(g), s. 86(4), s. 9
Subjects
Renewable Energy ObligationCaptive Power PlantElectricity Act 2003Article 19(6)Environmental ProtectionRenewable Purchase ObligationSurchargeRegulatory JurisdictionConstitutional Validity
Judgment
[2015]7S.C.R.1104
A HINDUSTAN ZINC LTD.
v.
RAJASTHAN ELECTRICITY REGULATORY COMMISSION
(Civil Appeal No.4417of2015)
B
MAY 13, 2015
[V. GOPALA GOWDA AND R. BANUMATHI, JJ.]
Rajasthan Electricity R&gulatory Commission
c (Renewable Energy Obligation) Regulations, 2007;
Rajasthan Electricity Regulatory Commission (Renewable
Energy Certificate and Renewable Purchase Obligation
Compliance Framework) Regulations, 2010: Constitutional
validity of the Regulations 2007 and 2010 directing the
D captive power plants to p'urchase minimum energy from
renew~ble sources - Held: The object of imposing RE
Obligation is protection of environment anar preventing
pollution by utilising Renewable Energy Sources as much
as possible in larger public interest - The Regulations
E impose reasonable restrictions upon the captive gencos as
permissible u/Art. 19(6) of the Constitution - The impugned
Regulations fall within the four corners of the Act of 2003 as
well as Electricity Policy, 2005 - National Electricity Policy,
2005- Electricity Act, 2003- s. 86(1) - Constitution of India,
F 1950-Articles 19(1)(g), 19(6), 51A(g).
Electricity Act, 2003: ss.2(3), 86(1 )- Captive power plant
- Regulatory jurisdiction of Commission - Heild: The mere
fact that no licence is required for Establishment, Operation
G and Maintenance of a Captive Power Plant would not imply
that the industries engaged in van·ous commercial activities
putting up such Captive Power Plants cannot be subjected
. to Regulatory Jurisdiction of the Commission- RE obligation
H 1104
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1105
REGULATORY COMM.
has been imposed upon the consumption of electricity A
whether purchased from the Distribution Licensee or
consumed from its own Captive Power Plant or through open
access.
Dismissing the appeals and disposing of the l.A.s, B
the Court
HELD: 1. These Regulations are framed by the RERC
with a laudable objective of achieving Directive Principles
of the State Policy as provided in Article 48A read with
Fundamental Duties under Article 51A(g) of the C
Constitution, which mandate upon the State and its
instrumentalities to protect the environment in the area
with a view to see that the citizens/residents of the area
to lead a healthy life. To achieve the same it has framed
the National Electricity Policy, 2005. Further, the D
impugned Regulations framed by the RERC which
impose reasonable restriction as provided under Article
19(6) of the Constitution of India to achieve the Directive
Principles of State Policy and to see that the State and
its instrumentalities shall discharge their fundamental E
duties to protect and maintain environment in the area
to facilitate the residents and living creatures to live
peacefully. [Paras 15, 16] [1122-G-H; 1123-A-B]
2. The Electricity Act of 2003 being a self-contained F
comprehensive legislation in the matter of generation,
transmission and supply of energy to its consumers, the
provisions of Section 82 of the Act of 2003 enjoin upon
every State Government to constitute a Regulatory
Commission in their respective State to regulate the G
implementation of the provisions of the Act of 2003 by
framing suitable Regulations and Rules with reference
to the matters/entries enumerated in Section 181 of the
·Act of 2003 and accordingly the State of Rajasthan has
constituted the RERC. [Para 26] [1130-F-G; 1131-A] H
3. Where the validity of subordinate legislation is
1106 SUPREME COURT REPORTS [2015] 7 S.C.R.
A challenged, question to be asked is whether power given
to the rule making authority has been exercised for the
purpose for which it was given. The Court has to
examine the nature, object and scheme of the legislation
as a whole to consider what is the area over which
B powers are conferred upon the rule making authority.
However, the Court has to start with the presumption
that the Rule is intra-vires and has to be read down only
to save it from being declared ultra-vires in case the
Court finds that the above presumptions stand rebutted
C and the impugned regulations are relatable to the
specific provision contained in Section 86(1)(e) of the
Act. Para 4.2.2 of the National Action Plan on Climate
Change and Preamble of the Act of 2003 emphasise upon
promotion of efficient and environmentally benign
0
policies to encourage generation and consumption of
green energy to sub-serve the mandate of Article 21 read
with Article 48A of the Directive Principles of the State
Policy and Article 51A{g) of the Fundamental Duties
E enlisted under Chapter IVA of the Constitution of India.
Further1 the said Regulations are consistent with the
International obligations of India, as India has ratified to
the Kyoto Protocol on 26.08.2002. Further, the impugned
Regulations which impose reasonable restrictions upon
F the captive generating plant owners are permissible
under Article 19(6) of the Constitution of India. [Paras 28,
29] (1132-E-G; 1133-A-D]
4. In case, the legislature intended power of the
G Regulatory Commission to be confined to the
Distribution Licensee, the said words and phrases of
Section 86(1 )(e) would have read "total electricity
purchased and supplied by distribution licensee". The
mere fact that no licence is required for Establishment,
H Operation and Maintenance of a Captive Power Plant
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1107
REGULATORY COMM.
does not imply that the industries engaged in various A
commercial activities putting up such Captive Power
Plants cannot be subjected to Regulatory Jurisdiction
of the Commission and required to purchase certain
quantum of energy from Renewable Sources. The RE
obligation has been imposed upon the consumption of B
electricity whether purchased from the Distribution
Licensee or consumed from its own Captive Power Plant
or through open access. [Para 34] [1137-B-E]
5. The term 'in the area of distribution licensee' under C
the provisions has to be read along with definition of
'area of supply' as provided under Section 2(3) of the
Act of 2003 which defines it as the area within which
distribution licensee is authorized by his license to
supply electricity. Further, proviso 6 to Section 14 of the D
Act of 2003 provides that Appropriate Commission may
grant a licence to two or more persons to supply
electricity through their own distribution system within
the same area and therefore, in case there are more than
one distribution licensee within the same area of supply, E
the term 'total consumption in the area of distribution
license' would include the consumption by Captive
Power Plant Consumers also and Open Access
Consumers who fall in the 'area' of distribution licensee. F
The other phrase 'total consumption' has been used by _
the legislature in Section 86(1)(e) and total consumption
in an area of a distribution licensee can be by three ways
either supply through distribution licensee or supply from
Captive Power.Plants by using lines and transmissions G
lines of distribution licensee or from any other source.
The area would always be of distribution licensee as the
transmissio,n lines and the system is of distribution
licensee, the total consumption is very significant The
total consumption has to be seen by consumers of H
1108 SUPREME COURT REPORTS (2015] 7 S.C.R.
A distribution licensee, Captive Power Plants and on
supply through distribution licensee. [Para 35] (1137-H;
1138-A-E]
6. Section 43(2) of the Act of 2003 provides that open
B access consumers are also located/situated within the
area of distribution licensees and are also connected to
the distribution network of such licensees and therefore,
the electricity consumed by such open access
consumers shall also be necessarily included in the term
C "Total Consumption in the area of distribution licensee".
Similarly, captive power consumers are also located/
situated within area of distribution licensee and are
connected to the Distribution Network of Distribution
licensees either for wheeling electricity or for backup
D power, if needed. Therefore, the term for "Total
Consumption in the area of distribution /icensee"would
also include such captive power consumers also and
accordingly, Section 86(1)(e) grants the State
Commission power to specify a minimum percentage of
E renewal energy to be purchased oat of the total
consumption of electricity in the area of distribution
licensee which would include the distribution licensee/
s, open access consumers and the captive power
F consumers. A distribution licensee is obliged to supply
power to Captive Power Plants and Open Access
Consumer under Section 43 of the Act of 2003, if there is
a request to supply. In such view of the matter, it will be
highly discriminatory to only subject the regular
G consumers of the distribution licensee to bear the cost
of purchase of renewable energy and to exempt the
gencos from the Open Access Consumers or Captive
Power Plants from the obligation to purchase/share the
cost for purchase of renewable power despite being
H connected to the distribution network of the distribution
licensee and despite the fact that they can demand back
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1109
REGULATORY COMM.
up power from such licensee any time they want. Thus, A
in order to realize the attempt of reducing dependence
on fossil fuels, it can be said that the impugned
Regulations are imperative in the larger public interest
and are just reasonable restrictions imposed upon the
captive gencos as permissible under Article 19(6) of the B
Constitution of India. [Paras 36, 39] [1140-H; 1141-A-D]
7. The RERC has enacted 2007 and 2010 Regulations
requiring the Captive Power Plants and Open Access
Consumers to purchase a minimum quantum of Energy C
from Renewable Energy Sources, in order to effectuate
the provisions of the Constitution of India, Electricity Act
and the National Electricity Policy, since energy
generated from Renewable Sources is pollution free. The
Right to live with healthy life guaranteed under Article D
21 of the Constitution of India includes the Right to live
in a pollution free environment. [Para 40] [1141-E-F]
8. In terms of impugned Regulation 9 of the
Regulations, if a default is made in fulfilling RE obligation E
then, obligated entity has to deposit the Renewable
Purchase Obligation (RPO) charge. The deposit of the
RPO charge is compensatory in nature. Sections 142 and
147 of the Act of 2003 provide the statutory back-up for
penal consequences in contravention of the impugned F
Regulations framed under Section 181 r/w Section
86(1)(e) of the Act of 2003. The penalty imposed by the
impugned Regulations upon the Captive Generating
Companies who do not comply with the requirements
as provided under Regulation 9 of the impugned G
Regulations of 2010 are not in nature of 'tax' but it is a
'surcharge' levied under Section 39(2) of the Act but an
alternative mode of enforcement of Regulation upon
them for ensuring its compliance to achieve the laudable H
1110 SUPREME COURT REPORTS [2015] 7 S.C.R.
A object of the Act, in case obligated entity make default in
fulfilling the renewable purchase obligation as provided
under the Regulation 9 of the impugned Regulations
2010. [Para 43] [1144-D-H; 1145-A-B]
B 9. The impugned Regulations have been enacted in
order to effectuate the object of promotion of generation
of electricity from renewable sources of energy as
against the polluting sources of energy which principle
is enshrined in the Act, the National Electricity Policy of
C 2005 and the Tariff Policy of 2006. The provisions
requiring purchase of minimum percentage of energy
from renewable sources of energy have been framed
with an object of fulfilling the constitutional mandate with
a view to protect environment and prevent pollution in
D the area by utilizing renewable energy squrces as much
as possible in larger public interest. RE obligation
imposed on the captive gencos under the impugned
Regulations is neither ultra vires nor violative of the
provisions of the Act of 2003 and cannot in any manner
E be regarded as a restriction on the fundamental rights
guaranteed to the appellants under the Constitution.
Article 51A(g) of the Constitution of India cast a
fundamental duty on the citizen to protect and improve
F the natural environment. The RE obligation imposed
upon captive power plants and open consumers
through impugned Regulation cannot in any manner be
said to be restrictive or violative of the fundamental rights
conferred on the appellants under Articles 14 and
G 19(1)(g) of the Constitution of India. [Paras 44, 50] [1146-
E-H; 1147-A; 1151-D, F]
Society For Unaided Pvt. Schools of Rajasthan v. U. 0.1.
& Anr. (2012) 6 SCC 1: 2012 (2) SCR 715; J.K. Industries
H Ltd. & Anr. v. Union of India & Ors. (2007) 13 SCC 673: 2007
· (12) SCR 136 - relied on.
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1111
REGULATORY COMM.
Tata Power Company Ltd. v. Reliance Energy Ltd. and A
Ors. (2009) 16 SCC 659: 2009 (9) SCR 625; Global Energy
Ltd. and Anr. v. Central Electricity Regulatory Commission
(2009) 15 SCC 570: 2009 (9) SCR 22; Dayal Singh & Ors.
v. Union of India & Ors. (2003) 2 SCC 593:2003 (1) SCR
714; M. Chandru v. Member Secretary, Chennai B
Metropolitan Development Authority & Anr. (2009) 4 SCC
72: 2009 (2) SCR 661; Ahmedabad Urban Development
Authon'ty v. Sharadkumar Jayantikumar Pasawala & Ors.
(1992) 3 SCC 285: 1992 (3) SCR 328; Consumer Online
Foundation v. Union of India & Ors. (2011) 5 SCC 360 : 2001 C
(5) SCR 911 - held inapplicable.
Union of India & Ors. v. S. Srinivasan (2012) 7 SCC
683:2012 (6) SCR 34; PTC India Ltd. v. Central Electricity
Regulatory Commission (2010) 4 SCC 603: 2010 (3) SCR D
609; ITW Signoqe India Ltd. v. Collector of Central Excise
(2004) 3 SCC 48: 2003 (5) Suppl. SCR 751; Secretary,
Ministry of Chemicals & Fertilizers, Government of India v.
Gip/a Ltd. And Ors. (2003) 7 see 1: 2003 (2) Suppl SCR
177; Tatoba Bhau Savagave & Anr. v. Vasantrao Dhindiraj E
Deshpande & Ors. (2001) 8 SCC 501; J.K. Cotton Spinning
& Weaving Mills Co. Ltd. v. State of U.P & Ors. AIR 1961
SC 1170: 1961 SCR 185; Aswini Kumar Ghose & Anr. v.
Arabinda Bose & Anr. AIR 1952 SC 369: 1953 SCR 1; F
Subhash Kumar v. State of Bihar & Ors. (1991)1 SCC 598:
1991 (1) SCR 5; fy1.C. Mehta v. Union of India & Ors. 2004)
12 SCC 118: 2004 (3) SCR 128; Municipal Corpn. of
Greater Mumbai & Ors. v. Kohinoor CTNL Infrastructure Co
(P) Ltd. (2014} 4 SCC 538; Chairman, SEBI v. Shriram G
Mutual Funds & Anr. (2006) 5 SCC 361: 2006 (2) Suppl.
SCR 833 - referred to.
CASE LAW REFERENCE
2012 (2) SCR 715 relied on. Para 16 H
1112 SUPREME COURT REPORTS [2015] 7 S.C.R.
A 2009 (9) SCR 625 held inapplicable. Para 20
2009 (9) SCR 22 held inapplicable. Para 21
2003 (1) SCR 714 held inapplicable. Para 24
B 2009 (2) SCR 661 held inapplicable. Para 24
1992 (3) SCR 328 held inapplicable. Para 24
2001 (5) SCR 911 held inapplicable. Para 24
c 2012 (6) SCR 34 referred to. Para 24
2010 (3) SCR 609 referred to. Para 27
2003 (5) Suppl. SCR 751 referred to. Para 27
D
2003 (2) Suppl SCR 177 referred to. Para 27
2001 (3) Suppl. SCR 609referred to. Para 28
2007 (12) SCR 136 relied on. Para 28
E
(2001) 8 sec 501 referred to. Para 31
1961SCR185 referred to. Para 32
1953 SCR 1 referred to. Para 33
F
1991 (1) SCR 5 referred to. Para 40
2004 (3) SCR 128 referred to. Para 40
(2014) 4 sec 538 referred to. Para 40
G
2006 (2) Suppl. SCR 833referred to. Para 43
(2003) 1 sec 1 referred to. Para 47
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
H 4417of2015.
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1113
REGULATORY COMM.
From the Judgment and Order dated 31.08.2012 of the A
High Court of Judicature for Rajasthan at Jaipur in D. B. Civil
Writ Petition No. 10911of2012.
WITH
C. A. Nos. 4418-4420, 4421-4422, 4423-4424, 4425, B
4426, 4427-4428, 4429, 4430-4431, 4432-4433 and 4434 of
2015.
Jayant Bhushan, S. Ganesh, Meenakshi Arora, S. B.
Upadhyay, Krishnan Venugopal, Dhruv Agarwal, Shiv Mangal C
Sharma, AAG, Sanjeev Kapoor, Prateek Kumar, Divya
Chaturvedi, Shikhar Srivastava, Ajay Bhargava, Vanita
Bhargava, Nitin Mishra (For Khaitan & Co.), Ankur Saigal,
Mahesh Agarwal, Rishi Agrawala, E. C. Agarwala, S. D
Vehkatesh, Anuj P. Agarwala, Moh it D. Ram, Siddhesh Kotwal,
Bansuri Swaraj, Annirudh Sharma, Shreya Bhatnagar,
Nirnimesh Dube, U. A. Rana, Mrinal Alkar Majumdar (For
Gagrat & Co.), P. N. Bhandari, lndu Sharma, Shibashish Misra,
M. Rambabu, N. Eshwara Rao, Tatini Basu, Praveen Kumar, E
Raj Kumar Mehta, Elangbam Premjit Singh, Abhishek
Upadhyay, Vishal Gupta, Hemant Singh, Sharmila Upadhyay,
Saurabh Rajpal, Anjali Chauhan, Kumar Mihir, Udai Rathore,
Vishal Gupta, Praveen Kumar, Kumar Rajesh, Sunaina Kumar
for the appearing parties. F
The Judgment of the Court was delivered by
V~ GOPALA GOWDA, J. 1. Leave granted.
2. These appeals by way of Special Leave are filed G
seeking to assail the order dated 31.08.2012, passed by the
High Court of Rajasthan at Jaipur, in D.B. Civil Writ Petition
No. 10911 of2012 and batch matters, whereby, the High Court
has upheld the validity of the Rajasthan Electricity Regulatory
Commission (Renewable Energy Obligation) Regulations, H
1114 SUPREME COURT REPORTS [2015] 7 S.C.R.'
A 2007 and Rajasthan Electricity Regulatory Commission
(Renewable Energy Certificate and Renewable Purchase
Obligation Compliance Framework) Regulations, 2010,
directing the appellants to purchase minimum energy from
renewable sources and comply with their liability under the said
B Regulations.
3. Brief facts which led to the filing of these cases are as
under:
C The appellants in this group of appeals are companies
engaged in the business of production, manufacturing, selling
non-ferrous metals, zinc and their by-products. They have
establi•,hed their own captive generation power plants in terms
of the Electricity Act, 2003 (for brevity 'Act of 2003'). The
D Rajasthan Electricity Regulatory Commission (for brevity
'RERC') in exercise of its power under Sections 61, 66,
86(1)(e) and 181 of the Act of 2003, vide Notifications dated
23.3.2007 and 23.12.2010, framed RERC (Renewable Energy
Obligation) Regulations, 2007 (for brevity "the Regulations of
E 2007") and RERC (Renewable Energy Certificate and
Renewable Purchase Obligation Compliance Framework)
Regulations, 2010 (for brevity "the Regulations of 201 O"),
respectively. The impugned Regulations imposed Renewable
F Energy obligation (RE obligation) on the Captive Gencos and
other obligated entities including the appellants herein, who
are Captive Gencos and open access consumers, to purchase
minimum energy from renewable source& and to pay surcharge
in case of shortfall in meeting the RE obligation.
G 4. The appellants have challenged the validity of the
above-mentioned Regulations, by filing writ petitions before
the High Court. The High Court vide its common impugned
judgment dated 31.8.2012, after having discussed the legal
H contentions urged on behalf of the parties at length, has
dismissed the writ petitions as being devoid of merit. The High
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1115
REGULATORY COMM. [V. GOPALA GOWDA, J.]
Court held that the RERC is empowered to frame the A
impugned Regulations of 2007 and 2010 and levy charge and
surcharge thereby for not complying with obligations, in
exercise of the powers conferred under Sections 61, 66,
86(1)(e) and 181 of the Act of 2003, in respect of the RE
obligation imposed upon captive power plants and open B
access consumers, to purchase minimum energy from
renewable sources and to pay surcharge in case of shortfall in
fulfilment of such RE obligation. The High Court was of the
opinion that neither the impugned Regulations can be said to
be ultra vires the provisions of the Act of 2003 nor can it be C
said to be repugnant to Articles 14 and 19(1)(g) of the
Constitution of India or the National Electricity Policy, 2005 or
the Tariff Policy, 2006 framed under Section 3 of the Act of
2003. The appellants herein are seeking to assail the above D
common judgment and order dated 31.08.2012 passed by
the Division Bench of the High Court.
5. Learned senior counsel for the appellants contended
thatthe impugned Regulations are ultra viresto Sections 7, 9,
86(1)(a) and (e) and 181 of the Act of 2003, and also the E
fundamental rights guaranteed to the appellants underArticles
14, 19(1 )(g) and it is in violation of Article 265 of the Constitution
of India, the National Electricity Policy, 2005 and the Tariff
Policy, 2006. They have contended that the Act of 2003 has F
been enacted by the Parliament with a view to encourage
participation of private· sectors involved in generation of
electricity and with that objective, generation of electricity was
de-licensed and captive generation was freely promoted and
in this manner the impugned Regulations are violative of the G
basic object and intendment with which the Act was enacted.
Further, it has been asserted that the National Electricity Policy,
2005 as well as the Tariff Policy, 2006 were framed to promote
production of energy and utilization thereof to the maximum
extent in respect of the captive generation plants and not to · H
1116 SUPREME COURT REPORTS [2015] 7 S.C.R.
A compulsorily force them to lower down their production of
energy by making them purchase renewable energy as per
the newly framed the impugned Regulation No.9 of Regulations
2010. It was. also contended by them thatthe Act of 2003 has
totally liberalized the establishment of captive power plants
B and kept them out of any licensing and regulatory regime,
neither any licence nor any approval from any authority is
required to install a captive power plant and thus, the RERC
had no jurisdiction to impose any obligation for compulsory
purchase of electricity from a renewable energy source; the
C renewable energy source and captive generating plant are both
alternative sources of energy which have to be promoted, one
cannot be placed on higher or lower footing. The RERC by
imposing a compulsory obligation to purchase electricity from
renewable source and to pay surcharge in case of shortfall in
0
meeting out the RE obligation as per the Regulation referred
to supra has acted beyond the object sought to be achieved
under the National Electricity Policy, 2005 as well as the Act of
2003.
E 6. It was further contended by the learned senior counsel
that the provisions relied upon by the RERC can be made
applicable to "distribution licensee" and not to a generator of
electricity. A captive generating plant cannot be said to be a
F distribution licensee. It was alleged that as per Section
86(1)(b) of the Act of 2003, the State Commission has power
to regulate electricity purchase and procurement process of
distribution licensees only including the price at which
electricity shall be procured from the generating companies
G or licensees or from other sources through agreements for
purchase of power for distribution and supply to the consumers
within the State.
7. It was also urged by the learned senior counsel that
H the imposition of surcharge by the RERC in case of shortfall in
meeting with the RE obligatiun, as specified under the
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1117
REGULATORY COMM. [V. GO PALA GOWDA, J.]
impugned Regulations is also without authority of law and A
contrary to Article 265 of the Constitution of India.
8. It is further submitted that the Act of 2003 is enacted
by the Parliament with the object of providing the establishment
of captive power plant and thereby the licensing and regulatory s
regime has been kept out of it. It is further contended by the
learned counsel for the appellants that neither any licence nor
any approval from any authority is required to install a captive
power plant and therefore, the RERC has no jurisdiction to
impose any obligation upon such Captive Power Plant for C
purchase of renewal energy compulsorily. The renewal energy
source and captive generating plants are both alternative
sources of energy to be generated which is the policy that has
to be promoted and therefore, one cannot be placed on a higher •
or lower footing than the other. The RERC by imposing the RE D
obligation upon the Captive Power Plant Company/owner to
purchase renewal energy compulsorily from renewable source
and to pay such charge in case of shortfall to meet out the
obligation is contrary to the object and intendment sought to
be achieved under the provisions of the Act of 2003 and the E
same is also opposed to the National Electricity Policy, 2005
and the Tariff Policy, 2006.
9. The learned senior counsel on behalf of the appellants
has further placed strong reliance upon the Preamble of the F
Act of 2003, which inter alia provides for the promotion of
efficient and environmentally benign policies and also placed
strong reliance upon the definitions under provisions of the
Act of 2003, namely, Section 2 (3) • 'area of supply', Section
2(17) ·'distribution licensee' and Section 9 ·'captive G
generation'. Strong reliance has been placed upon the said
provisions of the Act to substantiate the legal position. Section
9 of the Act of 2003 provides that notwithstanding anything
contained in the Act of 2003, a person may construct, maintain H
or operate a captive generating plant and dedicated
1118 SUPREME COURT REPORTS [2015] 7 S.C.R.
A transmission lines provided that supply of electricity from the
Captive Generating Plant through the grid shall be regulated
in the same manner as the generating station of a generating
company. Second proviso to Section 9 further provides that
no license shall be required under the Act for supply of electricity
B generated from a captive generating plant to any licensee in
accordance with the provisions of the Act and the Rules and
Regulations made there under subject to regulations made
under sub-section (2) of Section 42 of the Act of 2003, which
enables the owner of captive generating plant, who maintains
C and operates such plants shall have the right to open access
for the purposes of carrying electricity from his captive
generating plant to the destination of his use. Learned senior
counsel sought to justify the impugned Regulation 9 placing
strong reliance upon Section 61 (h) of the Act of 2003, which
0
provides that the appropriate Commission should promote
generation and co-generation of electricity from renewable
sources at the time of framing of tariff.
10. On the other hand, with regard to the contention of the
E appellants that the "Cross Subsidy Surcharge" is relevant for
"open access" Consumer under Section 42 and the reference
to Section 42(2) of the Act of 2003 in the present context is
misconceived, the learned counsel on behalf of the RERC
F rebutted the same by contending that Section 42(2) has no
relevance to the function of the State Regulatory Electricity
Commission under Section 86(1) (e) of the Act of 2003.
Sections 42 and 86 of the Act of 2003 operate in different
fields, except proviso to clause (a) of Section 86(1) of the Act
G of2003 which provides for determination of Tariff for wheeling
charges and surcharge thereon in respect of the category of
the consumers permitted open access under Section 42 of
the Act of 2003. The word "only" in the proviso to clause (a) of
Section 86( 1) of the Act of 2003 has no relevance with the
H function of the State Commission as specified in clause (e) of
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1119
REGULATORY COMM. [V. GOPALAGOWDA, J.]
Section 86(1) of the Act of 2003. The renewable energy· A
obligation as specified in the order/Regulation is in discharge
of the function of the RERC and is not violative of Article 265
of the Constitution of India.
11. The learned counsel for the RERC further contended B
that the impugned Regulations are made in exercise of power
of Section 86(1)(e) of the Act of 2003, which provides for
promotion & cogeneration of electricity from renewable
sources of energy. It was stated that the impugned Regulatory
provisions are also consistent with Para 4.2.2 of National Action C
Plan on Climate Change and Preamble of the Act of 2003
which emphasize upon promotion of efficient and
environmentally benign policies and encourage generation and
consumption of green energy to sub-serve the mandate of
Article 21 read with Article 51 A(g) of the Constitution of India. D
Further, it is consistent with the international obligation of India
to protect environment. It was argued that the impugned
Regulation is in consonance with law, which impose
reasonable restriction as provided under Article 19(6) of
Constitution of India. It .was stated that the captive power E
consumers and open access consumers are 'consumers of
electricity in the area of distribution licensee' and they are
connected to the network of the said distribution licensee and
can also demand power as and when they require it and a F
distribution licensee is obligated to supply power to Captive
Power Plant and open access consumers under Section 43
of the Act of 2003. It is th~refore contended that in such
circumstances it would be highly discriminatory to subject only
the regular consumers of the distribution licensee to bear the G
cost of Renewable Purchase Obligation (RPO). They
contended that the appellants have not disclosed to this Court
that Captive Power Plants set up by them are Thermal Power
Plants. Thermal Power Plants consume conventional source
of energy and prillutes the environment. Further, as long as H
1120 SUPREME COURT REPORTS [2015) 7 S.C.R.
A consumer continues to take power from a distribution licensee,
the obligation under Section 86(1)(e) of the Act of 2003 is
fulfilled through the said licensee.
12. The learned counsel appearing on behalf of the RERC
B contended that the impugned Regulation 9 of 2010 is in
conformity with Section 86( 1)(e) read with Section 3 of the Act
of 2003 as under the said provision the National Electricity
Policy, 2005 is framed by the Central Government to achieve
the relevant constitutional objective enshrined underArticle 48A
C of the Directive Principles of the State Policy, which provides
for protection and improvement of environment and
safeguarding of forests and wild life and further it envisages
that the State shall make an endeavour to protect and improve
the environment and to safeguard the forests and wild life of
D the country. Learned counsel has strongly placed reliance upon
Article 51A(g) under the Fundamental Duties-Chapter-IVAof
the Constitution of India which states that it is a fundamental
duty of every citizen to protect and improve the natural
environment including forests, lakes, rivers and wild life and to
E have compassion for living creatures. The above said Articles
of the Constitution of India are extracted hereunder:-
Article 48-A of the Constitution of India:
F "Protection and improvement of environment and
safeguarding of forests and wild life:
The State shall endeavour to protect and improve the
environment and to safeguard the forests and wild life of
G the Country."
Article 51-A(g) of the Constitution of India:
"Fundamental Duties :
H (g) to protect and improve the natural environment including
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1121
REGULATORY COMM. [V. GOPALAGOWDA, J.]
forests, lakes, rivers and wild life, to have compassion for A
living creatures ... "
13. Further, the learned counsel for the respondents
have rebutted the contention of the appellants that the "Area of
Distribution Licensee" does not bring them under the scope B
of the Regulations. It has been contended that the true import
of Section 86( 1)(e) of the Act of 2003 would mean that the
area of distribution licensee has a geographical/territorial
meaning and specifies that any person whether any consumer
whosoever resides or has a place of business within a C
geographical area of distribution licensee which is limited by
boundaries shall be under obligation to purchase electricity
from renewable sources at a percentage of their total
consumption as specified in the RPO Regulations. The
contention of the respondents is that the use of the distribution D
line by the consumer is irrelevant since the use of line would
only generate wheeling charges to be charged by the DISCOM.
Therefore, if a captive consumer does not use the line of the
DISCOM, the said licensee cannot charge the wheeling
charges. However, this does not mean that the said consumer E
is not in the area of licensee. In line with Section 86(1) (e) of
the Act of 2003, Para 5.12.2 of the Electricity Policy clearly
provides that the Regulatory Commission will specify a
percentage of the total consumption of Electricity in the area F
of a Distribution Licensee to be purchased from the non-
conventional sources of energy which includes Renewable
Sources. The wide language used by the Legislature in Section
86(1 )(e) of the Act which has been incorporated in Para 5.12.2
of the Electricity Policy makes it evident that the emphasis is G
on the total consumption of energy in the area of Distribution
Licensee. The mandate is not confined to the purchase and
supply of Energy by the Distribution Licensee. The wide
language used by thP. Legislature in Section 86(1 )(e) of the
Act and in Clause 5.12.2 of the Electricity Policy clearly shows H
1122 SUPREME COURT REPORTS [2015] 7 S.C.R.
A that the provision takes within its fold total consumption of
energy in the area of the Distribution Licensee. This means
that everyone consuming power in the area of Distribution
Licensee including an Industry having Captive Power Plant will
consume the specified percentage of energy from Renewable
B Sources.
14. We have carefully considered the rival contentions
urged on behalf of the parties and perused the impugned
judgment and materials on record.
c
With reference to the aforesaid rival legal contentions
we are required to answer the same, considering whether the
impugned Regulations imposing RE Obligation upon Captive
Power Plants framed by the RERC in exercise of power under
o Section 86(1)(e) of the Act of 2003, which provides for
promotion, co-generation of electricity from renewal source of
energy are ultra vires the provisions of the Act or repugnantto
Article 14 and 19(1)(g) of the Constitution. Para 4.2.2 of
National Action Plan on Climate Change and Preamble of the
E Act of 2003, emphasise upon the promotion of efficient and
environmentally benign policy of the State to encourage
generation and consumption of green energy to subserve the
mandate of Article 21 read with Article 51A(g) of the
Constitution of India. Further, it is consistent with the
F international obligations of India ratified under Kyoto Protocol
on 26.08.2002.
15. The said Regulations are framed by the RERC with a
laudable objective of achieving Directive Principles of the State
G Policy as provided in Article 48A read with Fundamental Duties
under Article 51A(g) of the Constitution, which mandate upon
the State and its instrumentalities to protect the environment
in the area with a view to see that the citizens/residents of the
area to lead a healthy life. This is the laudable object of the
H State and to achieve the same it has framed the National
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1123
REGULATORY COMM. [V. GOPALAGOWDA, J.)
Electricity Policy, 2005 referred to supra. A
16. Further, the impugned Regulations framed by the
RERC which impose reasonable restriction as provided under
Article 19(6) of the Constitution of India to achieve the Directive
Principles of State Policy and to see that the State and its B
instrumentalities shall discharge their fundamental duties to
protect and maintain environment in the area to facilitate the
residents and living creatures to live peacefully. Reliance has
rightly been placed upon the decision of the judgment of this
Court in the case of Society For Unaided Pvt. Schools of C
Rajasthan v. U.0.1. &Anr. 1 as under:
"252. Rights protected under Article 19(1 )(g) are
fundamental in nature, inherent and are sacred and
valuable rights of citizens which can be abridged only to D
the extent that is necessary to ensure public peace, health, .
morality etc. and to the extent of the constitutional limitation
provided in that article.
xxx xxx XXX E
255. Parliament can enact a social legislation to give effect
to the directive principles of State policy ... "
17. The contention urged by learned senior counsel on
behalf of the appellants/owners of captive generating plants is F
that the RERC does not have jurisdiction under Section 86( 1)(e)
read with Section 181 of theAct of 2003 to frame the impugned
Regulation in respect of the industries running their own Captive
Power Plants and it has the power only to frame Regulations
with respect to the distribution licensees and, therefore, it was G
not open for the RERC to impose the RE obligation upon the
appellants having captive power plants to make them
1 c2012) s sec 1 H
1124 SUPREME COURT REPORTS [2015) 7 S.C.R.
A compulsorily purchase energy from renewable source and to
pay surcharge in the event of shortfall to fulfil the RE obligation .
.18. In support of the aforesaid contention the appellants
placed strong reliance upon the definitions of 'Captive
B Generating Plant' contained in Section 2(8), 'distribution
licensee' mentioned in Section 2(17), 'licensee' appearing in
Section 2(39), 'area of supply' contained in Section 2(3) of the
Act of 2003. The appellants have also relied upon Section
86(4) of the Act of 2003 which provisions of the Act provide
C the power to the RERC to frame Regulations with a view to
discharge its functions to give effect to the provisions of the
Act of 2003.
19. The contention of the learned counsel for the appellants
o that 'the distribution licensees' stand on a different footing and
the industries such as the appellants, who have independent
Captive Power Plants and have been generating energy for
their consumers cannot be treated alike distribution licensees
as they are not required to obtain licences from the Licensing
E Authority for setting up Captive Power Plants and they have to
be given free play and cannot be obligated to purchase energy
from renewable sources. It is submitted that the RERC by
framing the impugned Regulations could not have given
direction to the captive power plants to compulsorily purchase
F energy from renewable sources, which is contrary to the object
and the Scheme of the Act of 2003 and therefore, the impugned
Regulations are liable to be struck down.
20. In support of the aforesaid contention, reliance was
G placed by the learned senior counsel on behalf of the appellants
on the ratio of the judgment in the case of Tata Power
Company Ltd. v. Reliance Energy Ltd. and Ors. 2 , the
relevant portion of the observations made in the following
H 2
(2009) 16 sec 659
..
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1125
REGULATORY COMM. [V. GO PALA GOWDA, J.]
paragraphs read thus: A
"75. The core question which, therefore, arises for
consideration is as to whether despite the Parliamentary
intent of giving a go-bye to its licensing policy to generating
companies, whether through imposing stringent regulatory B
measures the same purpose should be allowed to be
achieved?
76. The Act is a consolidating statute. It brings within its
purview generation, transmission, distribution, trade and c
use of electricity. Whereas generation of electricity has
been brought outside the purview of the licensing regime,
the transmission, distribution and trading are subject to
grant of licence and are kept within the regulatory regime.
The statute provides for measures to be taken which would o
be conducive to development of electricity industry.
Measures are also required to be taken for promoting
competition which would also mean the development of
electricity industry. It, indisputably, provides for measures
relating to the protection of interest of consumers and E
supply of electricity to all areas.
xxx xxx xxx
81. Delicensing of generation as also grant of free F
permission for captive generation is one of the main
- features of the 2003 Act. It is clearly provided that only
hydro-generating projects would need the approval of the
State Commission and the Central Electricity Regulatory
Authority. It recognised the need of prohibiting transmission G
licensees. It also for the first time provided for open access
in transmission from the outset. It even provides where
the distribution licensee proposes to undertake
distribution of electricity for a specified area within the area
of. supply through another person, that person shall not be H
1126 SUPREME COURT REPORTS [2015] 7 S.C.R.
A required to obtain separate licence.
xxx xxx xxx
83. The primary object, therefore, was to free the
generating companies from the shackles of licensing
B
regime.
84. If de-licensing of the generation is the prime object of
the Act, the courts while interpreting the provisions of the
statute must guard itself from doing so in such a manner
c which would defeat the purpose thereof. It must bear in
mind that licensing provisions are not brought back through
the side door of Regulations.
xxx xxx xxx
D
109. A generating company has to make a huge
investment and assurances given to it that subject to the
provisions of the Act he would be free to generate electricity
and supply the same to those who intend to enter into an
E agreement with it. Only in terms of the said statutory policy,
he makes huge investment. If all his activities are subject
to regulatory regime, he may not be interested in making
investment. The business in regard to allocation of
electricity at the hands of the generating company was
F the subject matter of the licensing regime ... "
21. Learned counsel for the appellants also placed reliance
on Global Energy Ltd. and Anr. v. Central Electricity
Regulatory Commission3, wherein, this Court has laid down
G that rule making power conferred upon the Regulatory
Commission is only to see that Regulations are framed in
exercise of its statutory power for carrying out the purpose of
the Act of 2003, which is a general delegation and such a
H • (2009) 15 sec 570
HINDUSTAN ZINC LTD. v.-RAJASTHAN
,, -ELECTRICITY 1127
REGULATORY COMM. [V. GO PALA GOWDA, J.]
general delegation may not be held to be laying down any A
guidelines and thus, by reason of such a provision alone, the
regulation making power cannot be exercised by the Regulatory
Commission so as to bring into existence substantive rights
or obligations or disabilities upon the captive generating plants .
which are not contemplated in terms of the provisions of the B
Act of 2003. It would be necessary to extract the relevant portion
from the said judgment.
"25. It is now a well settled principle of law that the rule-
making power 'for carrying out the purpose of the Act' is a C
general delegation. Such a general delegation may not
be held to be laying down any guidelines. Thus, by reason
of such a provision alone, the regulation-making power
cannot be exercised so as to bring into existence
substantive rights or obligations or disabilities which are D
not contemplated in terms of the provisions of the said
Act.
26. We may, in this connection refer to a decision of this
Court in Kunj Behari Lal Butailv. State of H.P. wherein a E
three-Judge Bench of this Court held as under:
"14. We are also of the opinion that a delegated power to
legislate by making rules 'for carrying out the purposes of
the Act' is a general delegation without laying down any F
guidelines; it cannot be so exercised. as to bring into
existence substantive rights or obligations or disabilities
not contemplated by the provisions of the Act itself."
[See also State of Kera/a v. Unni and AP. Electricity G
Regulatory Commission v. R. V.K. Energy (P) Ltd.]
27. The power of the regulation-making authority, thus, must
be interpreted keeping in view the provisions of the Act.
The Act is silent as regards conditions for grant of licence. H
It does not lay down any pre-qualifications therefor.
1128 SUPREME COURT REPORTS [2015] 7 S.C.R.
A Provisions for imposition of general conditions of licence
or conditions laying down the pre-qualifications therefor
and/or the conditions/qualifications for grant or revocation
of licence, in absence of such a clear provision may be
held to be laying down guidelines by necessary implication
B providing for conditions/qualifications for grant of licence
also."
22. It is very vehemently contended by Mr. Raj Kumar
Mehta, learned counsel on behalf of the RERC that none of
C the judgments cited supra on behalf of the appellants have
any application to the fact situation of these appeals on hand,
since the judgments upon which the reliance is placed by the
learned counsel on behalf of the appellants are all
distinguishable. In Tata Power Company Ltd. (supra), it was
D held that the Electricity Act having de-licensed generation,
provisions for licensing cannot be brought back through the
back door. The said judgment involved interpretation of Section
86(1)(b) read with Section 23 of the Act. The Regulations in
the present case have been enacted pursuant to Section
E 86(1 )(e) of the Act, which is independent of Section 86(1)(b)
of the Act. Therefore, the reliance placed on Para 114 in the
case of Tata Power Company Ltd. referred to supra, by the
learned counsel for the appellants has no application to the
F fact situation for the reason that this Court in the aforesaid
decision was examining the provisions of Section 86(1)(b) of
theActof2003.
23. Further, in support of the proposition of law as to
whether directions could be issued by the RERC under Section
G 23 of the Act with Generating Company for equitable
distribution of electricity, reliance was placed by the appellants
on the decision in Tata Power Company Ltd. (supra) wherein,
this Court held, while interpreting the provisions of the Act with
H regard to de-licensing that Courts should bear in mind that
licensing provisions are not brought back through side door of
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1129
REGULATO~Y COMM. [V. GO PALA GOWDA, J.]
Regulations. However, the observations made in para 77 of A
the said judgment show that despite de-licensing, Generating
Companies do not enjoy complete monopoly and are subject
to Regulatory jurisdiction of the Forums under the Act of 2003.
The impugned Regulations are clearly relatable to Section
86(1)(e) of the Act of 2003 read with both the National B
Electricity Policy and Tariff Policy, 2006 which are framed by
the Union of India to achieve the laudable constitutional
objective enshrined both in the directive principles of the State
Policy and the fundamental duties enumerated upon the State
particularly, Article 51-A(g) of the Constitution of India. C
24. Yet another decision in the case of Dayal Singh &
Ors. v. Union oflndia & Ors." upon which reliance was placed
by the learned counsel on behalf of the appellants wherein in
support of their proposition of law that this Court held that what D
cannot be done directly cannot be done indirectly by the
Regulatory Commission. The said principle has no application
to the present case, which is sought to be applied to the facts
of the case of the appellants.
E
25. Further, strong reliance placed by the learned counsel
on behalf of the appellants upon the decision in M. Chandru
v. Member Secretary, Chennai Metropolitan Development
Authority & Anr. 5, wherein this Court has held that Infrastructure
Development Charge was held to be in the nature of 'fee' and F
as such subject to principle of 'quid pro quo'. The impugned
Regulations do not fall in the realm of'fee'. Therefore, the said
decision has no application in support of the legal submission
made by the appellants' learned senior counsel. The other G
decisions in the cases of Ahmedabad Urban Development
Authority v. Sharadkumar Jayantikumar Pasawala &
Ors. 6 and Consumer Online Foundation v. Union of India
• (2003) 2 sec 593
• (2009) 4 sec 12
• (1992) 3 sec ?85 H
1130 SUPREME COURT REPORTS [2015] 7 S.C.R.
A & Ors.7 upon which reliance was placed in support of the
proposition of law that in the absence of express provision in
the Statute, a delegated authority cannot impose a 'tax' or 'fee'
upon the appellants, if they do not comply with the impugned
Regulations. The said decisions have no application in support
B of the case of the appellants for the reason that the impugned
Regulation is not in the nature of imposing either 'tax' or 'fee'
upon them. Therefore, the above contention urged on behalf
of the appellants is wholly untenable in law. Further, reliance
was placed upon the case of Union of India & Ors. v. S.
C Srinivasan8, wherein it was held that Regulation making power
cannot be exercised by the RERC in the absence of
substantive provisions in the Act of 2003. In the instant case,
the substantive provision is as contained in Section 86( 1)(e)
of the Act of 2003 to frame the impugned Regulations and
0
therefore, the above legal submissions by placing reliance upon
the decision of this Court referred to supra is wholly untenable
in law and misplaced.
26. The above said legal contentions urged by the learned
E senior counsel on behalf of the appellants are wholly untenable
in law for the reason that the Parliament with an avowed object
to encourage private sectors participation in power generation,
transmission and distribution of electricity to the consumers
F and in order to distancing itself, the regulatory responsibilities
from the Government has been conferred with the R~gulatory
Commissions in the country. The Electricity Act of 2003 being
a self-contained comprehensive legislation in the matter of
generation and the transmission and supply of energy to its
G consumers, the provisions of Section 82 of the Act of 2003
enjoin upon every State Government to constitute a Regulatory
Commission in their respective State to regulate the
implementation of the provisions of the Act of 2003 by framing
1 c2011) s sec 360
H • c2012) 7 sec 683
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1131
REGULATORY COMM. [V. GOPALA GOWDA, J.]
suitable Regulations and Rules with reference to the matters/ A
entries enumerated in Section 181 of the Act of 2003 and
accordingly the State of Rajasthan has constituted the RERC.
The functions of the Regulatory Commission have been
mentioned under Section 86 of the Act of 2003.
B
27. Reliance was placed by the learned counsel for the
respondent on the decision of this Court in the ~se of PTC
India Ltd. v. Central Electricity Regulatory Commission9,
wherein this Court has categorically held that Regulations can
be framed by the Commission under the Act of 4003 as long C
as two conditions are satisfied, namely, that the regulations
which are framed must be consistent with the provisions of the
Act and are made for carrying out the provisions of the Act.
Further, the National Electricity Policy, 2005 and Tariff Policy,
2006 being the policies framed by the Union of India cannot D
supersede or override the principal Act of 2003. To support
their contention, the appellants have placed reliance upon the
judgments of this Court in the cases of ITW Signode India
Ltd. v. Collector of Central Excise 10 and Secretary,
Ministry of Chemicals & Fertilizers, Government of India E
v. Cipla Ltd. And Ors. 11
28. Further, Mr. Ganesh, the learned senior counsel on
behalf of some of the appellants has placed reliance on the
decision of this Court in the case of J.K. Industries Ltd. & F
Anr. v. Union of India & Ors. 12 and contended that the
impugned regulation is a subordinate legislation which may
be struck down as arbitrary, contrary to the Statute and
Constitution of India on the ground that the subordinate
legislation does not conform to the statutory or constitu\ional G
requirement as it offends Article 14or19 of the Constitution of
• (201 o> 4 sec 603
10 (2004) 3 sec 48
11 (2003) 7 sec 1
12
(2007) 13 sec 673 H
1132 SUPREME COURT REPORTS (2015] 7 S.C.R.
A India. It is further contended by him that such subordinate
legislation, as in this case is the impugned Regulation famed
by the RERC, does not carry the same degree of immunity
which is enjoyed by a statute passed by a competent
legislature, therefore, the impugned regulation can be
B questioned on any one of the grounds on which plenary
legislation is questioned and also on the ground that it does
not conform to the Statute under which it is made, which in this
case is Section 86( 1)(e) of the Act of 2003. It was contended
C by him in view of the above that the impugned Regulations
under which; RE Obligation has been imposed on the
appellants herein, the same is not in conformity with the
provision made under Section 86(1)(e) of the Act of 2003.
The above contention of the learned senior counsel on
D behalf of some of the appellants has been rightly rebutted by
the learned senior counsel on behalf of the RERC by contending
that in the case of J.K. Industries Ltd. & Anr. (supra), it was
held that where the validity of subordinate legislation is
challenged, question to be asked is whether power given to-
E the rule making authority has been exercbad for the purpose
for which it was given. The Court has to examine the nature,
object and schem.e of the legislation as a whole to consider
what is the area over which powers are conferred upon the
F rule making authority. However, the Court has to start with the
presumption that the Rule is intra-vires and has to be read
down only to save it from being declared ultra-vires in case
the Court finds that the above presumptions stand rebutted
and the impugned regulations are relatable to the specific
G provision contained in Section 86(1)(e) of the Act.
29. Further, the impugned Regulation is framed by
RERC in exercise of its power under Section 86(1)(e) read
with Section, 151 of the Act of 2003, which provides for
H promotion and co-generation of electricity from renewable
source of energy in the area. It has been rightly contended by
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1133
REGULATORY COMM. [V. GO PALA GOWDA, J.]
the learned senior counsel for the respondents that Para 4.2.2 A
of the National Action Plan on Climate Change and Preamble
of the Act of 2003 emphasise upon promotion of efficient and
environmentally benign policies to encourage generation and
consumption of green energy to sub-serve the mandate of
Article 21 read with Article 48A of the Directive Principles of B
the State Policy and Article 51A(g) of the Fundamental Duties
enlisted under Chapter IVA of ti ,e Constitution of India. Further,
the said Regulations are consistent with the International
obligations of India, as India has ratified to the Kyoto Protocol
on 26.08.2002. Further, the impugned Regulations which C
impose reasonable restrictions upon the captive generating
plant owners are permissible under Article 19(6) of the
Constitution of India. The respondents have rightly placed
reliance upon the judgment of this Court in the case of Society D
For Unaided Pvt. Schools of Rajasthan (supra), wherein it
was held thus:
25. In this connection, the first and foremost principle we
have to keep in mind is that what is enjoined by the
directive principles (in this case Articles 41, 45 and 12) E
must be upheld as a "reasonable restriction" under Articles
19(2) to 19(6). As far back as 1952, in State of Bihar v.
Maharaja dhiraja Sir Kameshwar Singh of Darbhanga
(1952) SCR 889, this Court has illustrated how a directive F
principle may guide the Court in determining crucial
questions on which the validity of an important enactment
may be hinged. Thus, when the courts are required to
decide whether the impugned law infringes a fundamental
right, the courts need to ask the question whether the G
impugned law infringes a fundamental right within the limits
justified by the directive principles or whether it goes
beyond them. For example, the scope of the right of
equality of opportunity in matters relating to employment
(Article 16) to any office in the State appears more fully H
1134 SUPREME COURT REPORTS [2015] 7 S.C.R.
A defined when read with the obligation of the State to
promote with special care the economic and other
interests of the weaker sections (Article 46). Similarly, our
understanding of the right "to practice any profession or
occupation" (Article 19(1)(g)) is clarified when we read
B along with that right the obligation of the State to see that
the health of the workers and the tender age of the children
are not abused (Article 39). Thus, we need to interpret the
fundamental rights in the light of the directive principles."
C 30. After adverting to the aforesaid legal provisions and
interpreting the same and considering the reliance is placed
by the parties on the decisions of this Court referred to supra
in support of their respective claim and counter claim, we are
of the view that the framing of Regulation No. 9 by the RERC
D is in exercise of its statutory power under Section 181 of the
Act of 2003, the relevant entry to frame the impugned
- Regulation as provided under Section 86(1 )(e) of the Act of
2003 is valid and legal, keeping in view the National Electricity
Policy, 2005 and the Tariff Policy of 2006 which are framed by
E the Union of India, the International obligation under the Kyoto
Protocol to which our Country is a signatory and also most
importantly to discharge the constitutional obligations as
mandated under Article 21 - Fundamental Right of the citizens
F and Article 48-A- the Directive Principles of State Policy and
to discharge the Fundamental Duties by the respondents as
envisaged under Article 51-A(g) of the Constitution of India.
Therefore, the reliance placed upon the decisions of this Court
in the case of Tata Power Company Ltd. (supra), as well as
G the Global Energy Ltd. (supra) and other decisions referred
to supra by the learned senior counsel on behalf of the
appellants have no relevance in support of the legal contentions
urged by them to justify their contention that the impugned
Regulations are ultra vires to the provisions of the Act of 2003
H in view of the statutory rights conferred upon them under the
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1135
REGULATORY COMM. [V. GOPALAGOWDA, J.]
provisions of the Act of 2003 and in view of the Fundamental A
Rights guaranteed to them under Part Ill of the Constitution of
India.
31. Further, the learned senior counsel on behalf of the
appellants have placed reliance on another decision in the B
case of Tatoba Bhau Savagave & Anr. v. Vasantrao
Dhindiraj Deshpande & Ors. 13 , wherein this Court held in
support of the proposition of law that the Directive Principles
of State Policy cannot be extended in reading into the Act of
2003 for which the legislature has not either specifically or by C
necessary implication provided. In these appeals, Section
86( 1)(e) of the Act of 2003 specifically provides for specifying
a percentage of total consumption in the area of Distribution
Licensee from renewable sources of energy. In.this regard, it
is necessary to deal with these contentions urged on behalf of D
the appellants' counsel. The contention urged on behalf of the
appellants is that only distribLtion licensee is obligated towards
RPO under the Act. The said contention is wholly untenable in
law in view of the provisions referred to supra upon which strong
reliance has been placed by the counsel on behalf of the E
RERC.
32. It is the contention of the learned senior counsel Mr.
Jayant Bhushan on behalf of the appellants that under Section
86( 1) (e) of the Act of 2003, the phrase-"the total consumption F
of electricity in the area of distribution licensee" refers only to
the distribution licensee and not to captive gencos and that
the captive gencos are generating power and not buying power,
thus directions to them to purchase renewable energy cannot
be sustained as no authority can compel a genco/generator G
of energy to become a purchaser of the electricity. It is therefore
contended that by imposing such purchase of renewable
energy on the Captive Gencos is surplusage and renders the
:l (;._.
"c2001 > a sec so1 H
1136 SUPREME COURT REPORTS [2015] 7 S.C.R.
A last seven words of Section 86(1 )(e) redundant as the National
Electricity Policy and Tariff Policy (supra) cannot be stretched
to this extent. It is vehemently contended that if Captive Gencos
come under Section 86( 1)(e) of the Act, then such interpretation
of the Act goes beyond the intention of the Parliament by
B placing reliance on the. 'Interpretation of Statutes' by Justice
G.P. Singh, wherein at page 75 the case of J.K. Cotton
Spinning & Weaving Mills Co. Ltd. v. State of U.P. & Ors. 14
is discussed, the relevant portion of which is as hereunder:
C ".... the courts always presume that the Legislature inserted
every part thereof for a purpose and the legislative
intention is that every part of the stature should have effect"
33. It is further contended that the focus of Section 86( 1)(e)
o of the Act, is on the purchase and the classic difference
between Discern and Genco is that the former purchase and
must purchase since, it does not produce its own capacity and
is a licensed activity unlike a genco and therefore, only a
distribution licensee can be forced to purchase from renewable
E sources by Regulation under Section 86( 1)(e) of the Act. It was
submitted by the appellants that it is impermissible to add
words or to fill in a gap or lacuna in the provisions of the Act,
on the other hand effort should be made to give meaning to
each and every word and phrase used by the legislature in the
F statute. In this regard reliance was placed by him upon the
case of Aswini Kumar Ghose & Anr. v. Arabinda Bose &
Anr. 15 wherein it was held as under:-
"25. Much ado ...... It is not a sound principle of construction
G to brush aside words in a statute as being inapposite
surplusage, if they have appropriate application in
circumstances conceivably within the contemplation of the
14 AIR 1961 SC 1170
H 15
AIR 1952 SC 369
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1137
REGULATORY COMM. [V. GOPALA GOWDA, J.]
statute." A
34. The above contention is rightly repelled by the learned
counsel for the respondents that such an interpretation would
render the words "percentage of total consumption of energy
in the area of supply" redundant and nugatory is wholly B
untenable in law. In case, the legislature intended such power
of the Regulatory Commission to be confined to the Distribution
Licensee, the said words and phrases of Section 86(1)(e)
would have read "total electricity purchased and supplied by
distribution liceQsee". The mere fact that no licence is required C
for Establishment, Operation and Maintenance of a Captive
Power Plant does not imply that the industries engaged in
various commercial activities putting up such Captive Power
Plants cannot be subjected to Regulatory Jurisdiction of the
Commission and required to purchase certain quantum of D
energy from Renewable Sources. The RE obligation has been
imposed upon the consumption of electricity whether
purchased from the Distribution Licensee or consumed from
its own Captive Power Plant or through open access. The RE
Obligat.ion has not been imposed on the appellants in their E
capacity as owners of the Captive Power Plants. It was
contended that the 'distribution licensee' has a geographical/
territorial meaning and specifies that any person whether any
consumer whosoever resides or has a place of business within F
a geographical area of 'distribution licensee' shall be under
an obligation to purchase electricity from renewable sources,
a percentage of their total consumption, as specified in the
RPO obligation. It was ~ubmitted by them that gencos are also
connected to the network of the said distribution licensees and G
therefore, it would be unfair to only subject the regular
customers of the distribution licensees to bearthe cost of RPO.
35. The above contentions urged on behalf of the
appellants do not merit consideration of this Court for the H
reason that the term 'in the area of distribution licensee' under
1138 SUPREME COURT REPORTS [2015] 7 S.C.R.
A the provisions has to be read along with definition of 'area of
supply' as provided under Section 2(3) of the Act of 2003 which
defines it as the area within which distribution licensee is
authorized by his license to supply electricity. Further, proviso
6 to Section 14 of the Act of 2003 provides that Appropriate
B Commission may grant a licence to two or more persons to
supply electricity through their own distribution system within
the same area and therefore, in case there are more than one
distribution licensee within the same area of supply, the term
'total consumption in the area of distribution license' would
C include the consumption by Captive Power Plant Consumers
also and Open Access Consumers who fall in the 'area' of
distribution licensee. The other phrase 'total consumption' has
been used by the legislature in Section 86(1)(e) and total
consumption in an area of a distribution licensee can be by
0
three ways either supply through distribution licensee or supply
from Captive Power Plants by using lines and transmissions
lines of distribution licensee or from any other source. The area
would always be of distribution licensee as the transmission
E lines and the system is of distribution licensee, the total
consumption is very significant. The total consumption has to
be seen by consumers of distribution licensee, Captive Power
Plants and on supply through distribution licensee.
F 36. It has been rightly contended by Mr. Krishnan
Venugopal, the learned senior counsel on behalf of the
intervener-Wind Independent Power Producers Association,
by placing reliance on Section 43(2) of the Act of 2003, which
provides for open access and a bare perusal of the said
G provision would show that open access consumers are also
located/situated within the area of distribution licensees and
are also connected to the distribution network of such licensees
and therefore, the electricity consumed by such open access
consumers shall also be necessarily included in the term "Total
H Consumption in the area of distribution licensee". Similarly,
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1139
REGULATORY COMM. [V. GOPALAGOWDA, J.]
captive power consumers are also located/situated within area A
of distribution licensee and are connected to the Distribution
Network of Distribution licensees either for wheeling electricity
or for backup power, if needed. Therefore, the team for" Total
Consumption in the area of distribution licensee" would also
include such captive power consumers also and accordingly, B
Section 86(1 )(e) grants the State Commission power to specify
a minimum percentage of renewal energy to be purchased
out of the total consumption of electricity in the area of
distribution licensee which would include the distribution
licensee/s, open access consumers and the captive power C
consumers. The High Court therefore, has rightly found that
the total consumption is an area of a distribution licensee can
be by three ways- (i) through supply by the distribution licensee;
(ii) supply by captive power plants using lines and transmission D
lines of distribution licensee and (iii) from any other sources
by using transmission lines of distribution licensee, and the
total consumption has to be seen by consumers of distribution
licensee, captive power plant and open access consumers.
37. Further, the contention of the appellants that the E
renewable energy purchase obligation can only be imposed
upon total consumption of the distribution licensee and cannot
include open access consumers or captive power consumers
is also liable to be rejected as the said contention depends on F
an erroneous basic assumption that open access consumers
and captive power consumers are not consumers of the
distribution licensees. The cost of purchasing renewable
energy by a distribution licensee in order to fulfil its renewable
purchase obligation is passed on to the consumers of such G
distribution licensee, in case the contention of the appellants
is accepted, then such open access consumers or captive
power consumers, despite being connected to the distribution
network of the distribution licensee and despite the fact that
they can demand back up power from such distribution licensee H
1140 SUPREME COURT REPORTS [2015] 7 S.C.R.
A any time they want, are not required to purchase/sharing the
cost for purchase of renewable power. The said situation will
clearly put the regular consumers of the distribution licensee
in a disadvantageous situation vis-a-vis the captive power
consumers and open access consumers who apart from getting
B cheaper power, will also not share the costs for more expensive
renewable power.
38. Further, the contention urged on behalf of the appellants
is that the captive gen cos are specially carved out within the
C special category of the generating companies and the statutory
intent of the Act of 2003 is to free the captive gencos and allow
them to operate freely by minimizing the regulatory
requirements, therefore, restricting them from operating to their
fullest capacity would militate against the purpose for which
D they were permitted to set up the captive generating
companies and to utilise the maximum power generated for
their own use. In support of the said contention reliance is
placed upon the decision of this Court in the case of Tatoba
Bhau Savagave (supra), wherein it is held as under:-
E
"10. In regard to the second contention of Mr Lalit, there
can be no gainsaying the fact that while interpreting a
beneficial legislation like the Act under consideration, the
directive principles of State policy contained in Article 38
F and clauses (b) and (c) of Article 39 of the Constitution
should be uppermost in the mind of a Judge. But that
principle cannot be extended to reading in the provisions
of the Act that which the legislature has not provided either
expressly or by necessary implication. (See: Steel
G Authority of India Ltd. v. National Union Waterfront
Workers ... "
39. The learned counsel on behalf of the respondents have
countered the above contentions by submitting that a
H distribution licensee is obliged to supply power to Captive
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1141
REGULATORY COMM. [V. GO PALA GOWDA, J.]
Power Plants and Open Access Consumer under Section 43 A
of the Act of 2003, if there is a request to supply. In such view
of the matter, it will be highly discriminatory to only subject the
regular consumers of the distribution licensee to bear the cost
of purchase of renewable energy and to exempt the gencos
from the Open Access Consumers or Captive Power Plants B
from the obligation to purchase/share the cost for purchase of
renewable power despite being connected to the distribution
network of the distribution licensee and despite the fact that
they can demand back up power from such licensee any time
they want. Thus, in order to realize the attempt of reducing C
dependence on fossil fuels, it can be said that the impugned
Regulations are imperative in 'the larger public interest and
are just reasonable restrictions imposed upon the captive
gencos as permissible under Article 19(6) of the·Constitution D
of India.
40. The RERC has enacted 2007 and 2010 Regulations
requiring the Captive Power Plants and Open Access
Consumers to purchase a minimum quantum of Energy from
Renewable Energy So.urces, in order to effectuate the E
provisions of the Constitution of India, Electricity Act and the
National Electricity Policy, since energy generated from
Renewable Sources is pollution free. The Right to live with
healthy life guaranteed under Article 21 of the Constitution of F
India, it has also been interpreted by this Court. It includes the
Right to live in a pollution free environment and laid down the
law in a catena of cases including Subhash Kumar v. State
ofBihar& Ors. 16 , M.C. Mehta v. Union of India & Ors. 17
and . Municipal Corpn. of Greater Mumbai & Ors. v. G
Kohinoor CTNL Infrastructure Co (P) Ltd. 18• The impugned
Regulations fall within the four corners of the Act of 2003 as
1
• (1991)1 sec 598
11
c2004) 12 sec 118
1
• c2014) 4 sec 538 H
1142 SUPREME COURT REPORTS [2015] 7 S.C.R.
A well as Electricity Policy, 2005. The object of imposing RE
Obligation is protection of environment and preventing pollution
by utilising Renewable Energy Sources as much as possible
in larger public interest.
B 41. Our attention was drawn to the annual report of 2003
of Central Electricity Authority of India (CEA). As per the report,
the installed capacity is 107973 MW in the country, the break
up of which is as under:-
c ~roPoAer 1 TherrrB Nuclear Wm
C?erera:ion Pov.er PcM.e" Pol..e"
' C?ena"ation Ga1erction <?erer.:tion
I
,,
a>910MN : 7f£1J7MN 27.DMN 1733MN
D (24.go/o) (71%) (2,5%) (1.6%)
I
Out of thermal power generation, coal comprises 63801
MW, (gas-11633 MW) and (diesel-1173 MW) representing
E 59.1%, 10.8% and 1.1.% of the total installed capacity
respectively. The Coal dominates the Thermal Power
Generation which results in Green House Gases resulting in
global warming. The said facts were brought to our notice
F that the same would certainly justify the case of the RERC in
framing the impugned Regulation to achieve the object of the
Act and the Constitution by imposing RE obligation on the
captive gencos.
42. The learned senior counsel for the appellants
G vehemently made their submissions that payment of penalty
in the event of non-compliance of the impugned Regulations
is impermissible in law in the absence of specific provisions
under the Statute to this effect and the same is in violation of
H the constitutional provision under Article 265 of the Constitution
of India which specifically provides that "No tax shall be levied
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1143
REGULATORY COMM. [V. GOPALAGOWDA, J.]
or collected except by authority of law". The aforesaid A
submission is rightly countered by the learned counsel for
the RERC inviting our attention that imposing such surcharge
upon the generating companies if they commit default of the
impugned Regulations has been purportedly in exercise of
its power under Section 86(1)(g) of the Act of 2003, which B
empowers the State Commission to 'levy fee for the
purposes of this Act'. Further, the conten!J.Qn..'ielJ'.Strenuously
urged on behalf of the appeHants1hat the power to levy fee
cannot be extended to impose surcharge in the form of penalty
upon them for its failure to purchase the renewable energy C
fixed by RERC. Fee can only be imposed for service
rendered and there should be an element of 'quid pro quo'
therein. He further contended that surcharge could not have
been validly imposed upon the appellants as stated earlier.
D
43. On the contrary, the counsel on behalf of the
respondents refuted the above contentions of the appellants
contending that the penalty under the Regulations amounts
to surcharge. It is further averred by him that the penalty
prescribed in the Regulation is by depositing RE surcharge E
in the separate fund which is compensatory in nature and not
punitive as contended by the learned counsel on behalf of
the appellants. It is submitted that it is based on the concept
of Polluter's p~y principle as laid down by this Court in the F
case of Chairman, SEB/ v. Shriram Mutual Funds &Anr. 19
"35. In our considered opinion, penalty is attracted as
soon as the contravention of the statutory obligation as
contemplated by the Act and the Regulation,s is • G
established and hence the intention of the par;ties
committing such violation becomes wholly irrelevant. A
breach of civil obligation which attracts penalty in the
1
• c2006) s sec 361 H
1144 SUPREME COURT REPORTS [2015] 7 S.C.R.
A nature of fine under the provisions of the Act and the
Regulations would immediately attract the levy of penalty
irrespective of the fact whether contravention must be
made by the defaulter with guilty intention or not. We also
further held that unless the language of the statute
B indicates the need to establish the presence of mens
rea, it is wholly unnecessary to ascertain whether such a
violation was intentional or not. On a careful perusal of
Section 15-D(b) and Section 15-E of the Act, there is
nothing which requires that mens rea must be proved
c before penalty can be imposed under these provisions.
Hence once the contravention is established then the
penalty is to follow."
With reference to the above said rival legal contentions
D urged by the parties we are of the view that in terms of
impugned Regulation 9 of the Regulations, if a default is made
in fulfilling RE obligation then, obligated entity has to deposit
the Renewable Purchase Obligation (RPO) charge, as
determined by the RERC and such amount will put in a
E separate fund, created and maintained for the said purpose
by obligated entity. This fund shall be utilized partly for (a)
purchase of certificates through_ State agency and (b) for
development of transmission and sub-transmission
F infrastructure for evacuation from generating stations based
on renewable energy sources. The deposit of the RPO charge
is compensatory in nature. Sections 142 and 147 of the Act
of 2003 provide the statutory back-up for penal
consequences in contravention of the impugned Regulations
G framed under Section 181 r/w Section 86(1 )(e) of the Act of
2003. The penalty imposed by impugned Regulations is not
in nature of 'tax' but to achieve the object and intendment of
the Act of 2003. The penalty imposed by the impugned
Regulations upon the Captive Generating Companies who
H do not comply with the requirements as provided under
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1145
REGULATORY COMM. [V. GOPALA GOWDA, J.]
Regulation 9 of the impugned Regulations of 2010 are not in A
nature of 'tax' but it is a 'surcharge' levied under Section 39(2)
of the Act but an alternative mode of enforcement of
Regulation upon them for ensuring its compliance to achieve
the laudable object of the Act, in case. obligated entity make
default in fulfilling the renewable purchase obligation as B
provided under the Regulation 9 of the impugned Regulations
2010. Regulation 9 reads as under:
"9.Consequences of Default.
c
(1) If the obligated entity does not fulfil the specified
renewable purchase obligation, the Commission may
direct the obligated entity to deposit into a separate fund,
to be created and maintained by obligated entity, on RPO
charge as the Commission may determine on the basis D
of the short fall in units of RPO and the forbearance price
decided by the Central Commission separately in
respect of solar and non solar REC;
Provided that the fund so created shall be utilized, as E
may be directed by the Commission partly for purchase
of certificates through State Agency and partly for
development of transmission and sub-transmission
infrastructure for evacuation of power from generating
stations based on renewable energy sources. F
(1) Further where any obligated entity falls to comply with
the renewable purchase obligation, it shall also be liable
for penalty as may be decided by the Commission under
Section 142 of the Act; G
Provided that the monetary penalty so imposed shall not
be allowed as a pass through in the ARR in case of
distribution licensee;
Provided further that in case of genuine difficulty in H
1146 SUPREME COURT REPORTS [2015) 7 S.C.R.
A complying with the renewable power purchase obligation
because of non-availability of renewable energy and/or
certificates, the obligated entity can approach the
Commission to carry forward the compliance requirement
to the next year or seek its waiver;
B
Provided also that where the Commission has consented
to carry forward of compliance requirement or its waiver,
the provision of Regulation 9(1) of theses Regulations
or the provision of Section 142 of the Act shall not be
C invoked."
44. In view of the above provision, t~e obligated entity in
case of genuine difficulty may seek to carry forward of RE
obligation or also may seek waiver. Therefore, in view of the
o aforesaid reasons, the contentions urged on behalf of the
appellants in this regard must fail. It is pertinent to note the
submission made on behalf of the RERC that 21 States in
the country have framed similar Regulations imposing such
Renewable Purchase Obligation on both distribution
E licensees as well as captive gencos entities such as the
appellants herein. The impugned Regulations have been
enacted in order to effectuate the object of promotion of
generation of electricity from renewable sources of energy
as against the polluting sources of energy which principle is
F enshrined in the Act, the National Electricity Policy of 2005
and the Tariff Policy of 2006. The provisions requiring
purchase of minimum percentage of energy from renewable
sources of energy have been framed with an object of fulfilling
the constitutional mandate with a view to protect environment
G and prevent pollution in the area by utilizing renewable energy
sources as much as possible in larger public interest. The
High Court has considered the submissions of the appellants
and has rightly rejected the same on the ground that the RE
H obligation imposed on the captive gencos under the impugned
Regulations is neither ultra vires nor violative of the provisions
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1147
REGULATORY COMM. [V. GOPALAGOWDA, J.)
of the Act of 2003 and cannot in any manner be regarded as A
a restriction on the fundamental rights guaranteed to the
appellants under the Constitution.
45. The learned senior counsel on behalf of the appellants
placing strong reliance upon paras 5.2.24 and 5.2.25 of the B
Electricity Policy framed by the Union of India in exercise of
its power under Section 3 of the Act, contended that the
issuance of any direction to captive plant to reduce its
generation and insist purchase power from renewable energy
is based on the erroneous premise that·the impugned C
Regulations would result in curtailing the generation of
electricity by the Captive Power Plants and its resultant effect
is loss to them. The above said paras from the Electricity
Policy on which the learned senior counsel on behalf of the
appellants has placed reliance are extracted as hereunder:- D
"Captive Generation-
5.2.2. The Government of India has initiated several
reform measures to create a favourable E
environment f.or addition of new generating
capacity in the country. The Electricity Act 2003 has
put in place a highly liberal framework for generation.
There is no requirement of licensing for generation. The
requirement of techno-economic clearance of CEA for F
thermal generation project is no longer there. For
hydroelectric generation also, the limit of capital
expenditure, above which concurrence of CEA is
required, would be raised suitable from the present level.
Captive generation has been freed from all controls. G
5.2.24 The liberal provision in the Electricity Act, 2003
with respect to setting up of captive power plant has been
made with a view to not only securing reliable, quality
and cost effective power but also to facilitate creation of H
1148 SUPREME COURT REPORTS [2015) 7 S.C.R.
A employment opportunities through speedy and efficient
growth of industry.
5.2.25 The provision relating to captive power plants to
be set up by group of consumers is primarily aimed at
B enabling small and medium industries or other consumers
that may not individually be in a position to set up plant
of optimal size in a cost effective manner. It needs to be
noted that the efficient expansion of small and medium
industries across the country would lead to creation of
C enormous employment opportunities."
46. In this regard, Mr. S. B. Upadhyay, the senior learned
counsel on behalf of the fourth respondent in SLP No. 39969
of 2012, contended that Regulation 5 of the impugned
o Regulations, 2010 which repealed the earlier 2007
Regulations, contains a mechanism of purchase of Renewable
Energy Certificate, which certificates can be bought from
energy exchanges by the consumers who have opted for a
third party electricity source, including Open Access or captive
E generation. Thus, for the said consumers, instead of buying
physical renewable energy for fulfilling the minimum energy
percentage targets as per the impugned regulation, the
renewable energy can be purchased through buying of the
said certificates. In this manner there is no need to lower
F captive electricity generation by a captive consumer for
fulfilling the minimum percentage target as provided in the
impugned Regulation. Further, Para 6.4 of the Tariff Policy
framed under Section 3 of the Act of 2003, was amended
vide Resolution dated 31.3.2008 of the Ministry of Power and
G published in the Gazette of India, Extraordinary on 22.1.2011.
In view of the above, it is a matter of fact that the
impugned Regulation does not have the effect of curtailing
the power generation of the Captive Power Plant as the
H appellants have the right to supply surplus power to the grid.
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1149
REGULATORY COMM. [V. GOPALA GOWDA, J.]
47. The said paras from the Electricity Policy referred A
to supra are framed for giving effect to the objects and
provisions of the Act and the same cannot be interpreted as
restricting the ambit of specific provision contained in Section
86(1 )(e) of the Act in any manner. The provision in the
Electricity Policy cannot be read and interpreted as a statutory B
provision as held by this Court in the case of Secretary,
Ministry of Chemicals and Fertilizer, Govt of India v. Cipla
Ltd. & Ors. 20• The relevant paragraph of the said case is
extracted hereunder:-
c
"4.1 It is axiomatic that the contents of a policy document
cannot be read and interpreted as statutory provisions.
Too much of legalism cannot be imported in
understanding the scope and meaning of the clauses
contained in policy formulations. At the same time, the D
Central Government which combines the dual role of
policy-maker and the delegate of legislative power,
cannot at its sweet will and pleasure give a go-bye to
the policy guidelines evolved by itself in the matter of
selection of drugs for price control. The Government itself E
stressed the need to evolve and adopt transparent
criteria to be applied across the board so as to minimize
the scope for subjective approach and therefore came
forward with specific criteria. It is nobody's case that for
any good reasons, the policy or norms have been F
changed or became impracticable of compliance. That
being the case, the Government exercising its delegated
legislative power should make a real and earnest attempt
to apply the criteria laid down by itself. The delegated G
legislation that follows the policy formulation should be
broadly and substantially in conformity with that policy;
otherwise it would be vulnerable to attack on the ground
of arbitrariness resulting in violation of Article 14."
20
c2003) 7 sec 1 H
1150 SUPREME COURT REPORTS [2015] 7 S.C.R.
A Therefore, the Regulations do not relate to determination
of tariff, as such reliance placed by the appellants' learned
senior counsel upon Section 62 of the Act, which deals with
the determination of tariff is mis-conceived.
48. Further, the submission of the appellants that the
8
impugned Regulations do not fall under Clause (a) to Clause
(zp) of Section 181 (2) of the Act of 2003, which give power
to the State Commission to frame Regulations is devoid of
any merit. The said contention has been rightly rebutted by
c the learned counsel for the RERC that the said submission
loses sight of Section 181 (1) of the Act of 2003 which
provides that the State Commission may, by notification, make
Regulations consistent with the Act and the Rules generally
to carry out the provisions of the Act. The specific power under
o the various clauses of Section 181(2) of the Act of 2003 is
without prejudice to the general and wider power contained
in Section 181(1) of the Act of 2003. The 2007/2010
Regulations have been framed by the RERC to effectuate
the provisions of Section 86(1)(e) read with Section 86(4) of
E the Act of 2003 and are covered by Section 181 (1) of the
Act. In support of the same, reliance was placed on the
decision of this Court on the case of PTC India Limited
(supra)that the Regulations can be made under the Act as
long as two conditions are satisfied, namely, that they are
F consistent with the Act of 2003 and are made for carrying
out for provisions of the Act.
49. The purchase of nominal quantum of energy from
renewable resources cannot adversely affect the cost
G effectiveness of the Captive Power Plant. Moreover, the object
being reduction of pollution by promoting renewable source
of energy, larger public interest must prevail over the interest
of the industry herein which will in any case pass on the extra
burden, if any, will be as part of the cost of its products and
H therefore, the same does not burden the appellants. The
HINDUSTAN ZINC LTD. v. RAJASTHAN ELECTRICITY 1151
REGULATORY COMM. [V. GO PALA GOWDA, J.]
reliance placed upon the aforesaid paras of the policies is A
mis-conceived as the same pertains to the Captive Power
Plants to be set up by group of consumers namely, small and
medium industries and other consumers vtho are not in a
position to set up a Captive Power Plant of optimal in a cost
effective manner. The aforesaid para in the context of B
Section 2 (8) of the Act has no application to the case of the
appellants which are large industries having individual Captive
Power Plants. The provision of RE surcharge in the Statute
is only meant for ensuring compliance with the requirement
of consumption of the specified quantum of energy from C
renewable sources and the same is to be used in case of
shortfall in compliance of RE obligation. The said provision
does not amount to imposition of a pecuniary liability.
50. Article 51A(g) of the Constitution of India cast a D
fundamental duty on the citizen to protect and improve the
natural environment. Considering the global warming,
mandate of Articles 21 and 51A(g) of the Constitution,
provisions for the Act of 2003, the National Electricity Policy
of 2005 and the Tariff Policy of 2006 is in the larger public E
interest, Regulations have been framed by RERC imposing
obligation upon captive power plants and open access
consumers to purchase electricity from renewable sources.
The RE obligation imposed upon captive power plants and F
open consumers through impugned Regulation cannot in any
manner be said to be restrictive or violative of the fundamental
rights conferred on the appellants under Articles 14 and
19(1 )(g) of the Constitution of India. Upon consideration of
the rival submissions by the well-reasoned order, the High G
Court has ri.ghtly upheld the validity of the impugned
Regulation and we do not find any reason to interfere with
the impugned judgment. All the appeals are dismissed as
the same are devoid of merit.
H
1152 SUPREME COURT REPORTS [2015] 7 S.C.R.
A I.A. No. 1 of 2013 in C.A. arising out of SLP (C)
No.34063 of 2012 for impleadment of Wind Independent
Power Producers Association is allowed. All other
interlocutory applications for impleadment/ intervention/stay/
directions are disposed of.
B
Oevika Gujral Appeals dismissed.
& I.As dispossed of.
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