M/S SUNDEW PROPERTIES LIMITEDversusTELANGANA STATE ELECTRICITY REGULATORY COMMISSION & ANR.

                 [2024] 5 S.C.R. 739 : 2024 INSC 439

            M/s Sundew Properties Limited
                             v.
Telangana State Electricity Regulatory Commission & Anr.
                       (Civil Appeal No. 8978 of 2019)
                                 17 May 2024
             [Sanjiv Khanna and Dipankar Datta,* JJ.]

                            Issue for Consideration
       Whether the designation of an entity as a Special Economic Zone-
       developer ipso facto qualifies the entity to be a deemed distribution
       licensee, obviating the need for an application u/s. 14 of the
       Electricity Act; whether Regn 12 of the Andhra Pradesh Electricity
       Regulatory Commission (Distribution Licence) Regulations, 2013,
       and by implication r. 3(2) of the Distribution of Electricity Licence
       (Additional Requirements of Capital Adequacy, Creditworthiness and
       Code of Conduct) Rules, 2005 are applicable to a SEZ developer
       recognised as a deemed distribution licensee under the proviso to s.
       14(b) read with Regn 13 of the 2013 Regulations; and whether the
       condition imposed by the State Electricity Regulatory Commission
       to infuse additional capital as per r. 3(2) of the 2005 Rules read
       with Regn 12 of the 2013 Regulations, justifiable or extraneous.

                                   Headnotes†
       Electricity Act, 2003 – s. 14(b) proviso – Distribution of
       Electricity Licence (Additional Requirements of Capital
       Adequacy, Creditworthiness and Code of Conduct) Rules,
       2005 – r. 3(2) – Andhra Pradesh Electricity Regulatory
       Commission (Distribution Licence) Regulations, 2013 – Regns
       12, 13 – Application for grant of Distribution Licence in the
       area of supply of an existing Distribution Licensee – Procedure
       to get identified as deemed distribution licensee – On facts,
       designation of an entity-appellant as a Special Economic
       Zone-SEZ developer by the Ministry – Appellant, if ipso facto
       qualifies the entity to be a deemed distribution licensee,
       obviating the need for an application u/s. 14 – Regn 12 of the
       2013 Regulations and by implication r. 3(2) of the 2005 Rules,
       if applicable to a SEZ developer recognised as a deemed
       distribution licensee under the proviso to s. 14(b) read with
       Regn 13 of the 2013 Regulations – Condition imposed by the

* Author
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       State Electricity Regulatory Commission to infuse additional
       capital as per r. 3(2) of the 2005 Rules read with Regn 12 of
       the 2013 Regulations, if justifiable or extraneous:
       Held: Being a SEZ developer in terms of the 2010 Notification
       does not ipso facto confer upon the appellant the status of a
       deemed licensee without any scrutiny and without being under
       any requirement to apply – It is required to make an application in
       accordance with the 2013 Regulations – This condition has been
       fulfilled as the status of the appellant as a deemed licensee was
       upheld pursuant to the application made in accordance with r. 13
       of the 2013 Regulations – As regards the applicability of Regn 12
       of the 2013 Regulations and r. 3(2) of the 2005 Rules, none of the
       nine provisos to s. 14, apply to the appellant – Sixth proviso to s.
       14 does not pertain to deemed licensees and, thus, the 2005 Rules
       not applicable to the appellant – Furthermore, it cannot be said that
       Regn 12 applies implicitly to a deemed licensee as well – Regn
       12 pertains solely to regular distribution licensees not to deemed
       licensees – ‘Reading up’ Regn 12 so as to expand its ambit to include
       within it deemed licensees, especially when the Electricity Act does
       not stipulate any such inclusion, runs counter to proviso to clause
       (b) of s. 14 of the Electricity Act, which is impermissible and cannot
       be approved – Thus, the recognition of the status of a deemed
       distribution licensee cannot hinge on compliance with r. 3(2) of the
       2005 Rules read with Regn 12 of the 2013 Regulations – Having
       been statutorily exempted from complying with Regns 4 to 11, the
       appellant, being a deemed licensee, would also be exempt from
       the concomitant obligation of complying with Regn 12 – Condition
       imposed on appellant to infuse an additional capital, not justified
       and contrary to the statutory scheme – Judgments and orders of
       the State Electricity Regulatory Commission and the Appellate
       Tribunal for Electricity set aside to this extent – Order of the State
       Electricity Regulatory Commission granting the status of a deemed
       licensee to the appellant, subject to the condition that its promoters
       infuse additional capital modified to the extent of excluding such
       condition. [Paras 25, 37, 28, 29, 34, 35, 37]
       Interpretation of statutes – Principles of statutory interpretation –
       Reading down and reading up:
       Held: Reading down and reading up are two principles in the
       realm of statutory interpretation – Reading down refers to the
       practice of interpreting a statute narrowly, limiting its scope or
[2024] 5 S.C.R.                                                               741

           M/s Sundew Properties Limited v. Telangana State
               Electricity Regulatory Commission & Anr.

     application to specific situations or individuals – This approach is
     commonly employed when the language of a statute is ambiguous
     or when there is a need to avoid potential conflicts with other laws
     or constitutional provisions – If a law is unclear about whether
     it applies to certain types of businesses, a court may choose to
     read down the statute to only include those businesses explicitly
     mentioned in the text – Reading up involves interpreting a
     statute broadly, extending its scope or application beyond what
     is expressly stated in the text – Reading up is a concept that is
     invoked with great caution within the legal framework because
     it can lead to judicial activism or judicial overreach – Practice of
     reading up a provision can only be justified when it aligns with
     legislative intent, maintains the fundamental character of the law,
     and ensures that the resulting interpretation remains consistent
     with the original context to which the law applies – This holds
     especially true for subordinate legislation, which require greater
     scrutiny – Reading up a provision of subordinate legislation in
     a manner that it militates against the primary legislation not
     permissible. [Paras 30, 32]
     Legislation – Enabling/primary legislation and subordinate
     legislation – Harmonization between – Requirement:
     Held: Authority to enact subordinate legislation is derived from the
     enabling/primary legislation and it is imperative that such legislation
     harmonizes with the provisions outlined in the primary legislation –
     Electricity Act has conferred power on the Central Government to
     make Rules and on the Central Electricity Authority and the Central
     Commission to make Regulations – All such rules/regulations are
     to be made consistent with the Electricity Act – Rules/Regulations
     are enacted to supplement the main provision, not to supplant
     it – They serve the crucial role of bridging potential gaps within
     the primary legislation, yet, their function is not to create webs
     and voids merely to clog and hamper their implementation – Any
     gaps addressed by Rules/Regulations must be discernible within
     the framework of primary legislation. [Para 33]

                               Case Law Cited
     Sesa Sterlite Limited. v. Orissa Electricity Regulatory Commission
     and Others [2014] 13 SCR 426 : (2014) 8 SCC 444; State of
     Bombay v. Pandurang Vinayak Chaphalkar [1953] 1 SCR 773 :
     (1953) 1 SCC 425; B.R. Kapur v. State of Tamil Nadu [2001] Supp.
     3 SCR 191 : (2001) 7 SCC 231 – referred to.
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                                    List of Acts
       Electricity Act, 2003; Special Economic Zones Act, 2005; Andhra
       Pradesh Electricity Regulatory Commission (Distribution Licence)
       Regulations, 2013; Andhra Pradesh Reorganisation Act, 2014;
       Distribution of Electricity Licence (Additional Requirements of Capital
       Adequacy, Creditworthiness and Code of Conduct) Rules, 2005.

                                 List of Keywords
       Designation of entity; SEZ developer; Deemed distribution licensee;
       Condition to infuse additional capital; 2010 Notification; Deemed
       licensee status; Lack of specificity; Legislative intent; Deemed
       licence; Reading up’; Reading down; Statutory interpretation;
       Primary legislation; Subordinate legislation.

                                Case Arising From
       CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8978 of 2019
       From the Judgment and Order dated 27.09.2019 of the Appellate
       Tribunal for Electricity, New Delhi in Appeal No. 03 of 2017
                              Appearances for Parties
       Maninder Singh, Sr. Adv., Mahesh Agarwal, Rishi Agrawala,, Ms.
       S. Lakshim Iyer, Ms. Anwesha Padhi, Abhishek Munot, Kunal Kaul,
       Samikrith Rao Puskuri, Ms. Ashita Chawla, Amarpal Singh Dua, E.C.
       Agrawala, Advs. for the Appellant.
       C.S. Vaidyanathan, Sr. Adv., Somanadri Goud Katam, Sirajuddin,
       D. Abhinav Rao, Vinayak Goel, Gunnalan, Nitish Raj, Rahul Jajoo,
       Devadipta Das, Ms. Prerna Robin, Advs. for the Respondents.
                       Judgment / Order of the Supreme Court
                                    Judgment
       Dipankar Datta, J.

       THE CHALLENGE
1.     This is a statutory appeal before us under section 125 of the Indian
       Electricity Act, 20031. It registers a challenge to the judgment and



1    Electricity Act
[2024] 5 S.C.R.                                                             743

               M/s Sundew Properties Limited v. Telangana State
                   Electricity Regulatory Commission & Anr.

      order dated 27th September, 2019 passed by the Appellate Tribunal
      for Electricity2 dismissing an appeal carried under section 111 of the
      Electricity Act by the appellant from the judgment and order dated 15th
      February, 2016 passed by the Telangana State Electricity Regulatory
      Commission3. Consequently, the impugned judgment and order of
      the TSERC was upheld.
      BRIEF FACTS
2.    The basic facts giving rise to this appeal are not disputed. A brief
      overview of the facts and the trajectory of proceedings, relevant for
      a decision on the present appeal, are set out hereunder:
      a)       The appellant was notified by the Ministry of Commerce &
               Industry (Department of Commerce), Government of India4 as a
               ‘Developer’, in terms of sections 3 and 4 of the Special Economic
               Zones Act, 20055, to establish a sector-specific Special Economic
               Zone6 unit for Information Technology/Information Technology
               Enabled Services sector in Madhapur, Ranga Reddy District,
               Hyderabad, in the former State of Andhra Pradesh.
      b)       MoCI, vide a Notification bearing No.SO 528(E) dated 3rd March,
               20107 introduced a proviso to section 14(b) of the Electricity
               Act. The proviso accords upon the developer of a SEZ, the
               status of a deemed distribution licensee under the provisions
               of the Electricity Act.
      c)       Pursuant to the 2010 Notification, the appellant filed an
               application8 before the erstwhile Andhra Pradesh Electricity
               Regulatory Commission seeking identification as a deemed
               distribution licensee, in terms of the proviso to section 14(b) of
               the Electricity Act read with regulation 13 and Schedule-2 of the
               Andhra Pradesh Electricity Regulatory Commission (Distribution
               Licence) Regulations, 20139 and section 49 of the SEZ Act.


2    APTEL
3    TSERC
4    MoCI
5    SEZ Act
6    SEZ
7    2010 Notification
8    O.P. No. 10 of 2015
9    2013 Regulations
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             Upon the Andhra Pradesh Reorganisation Act, 2014 coming
             into force, the application was transferred to the TSERC.
       d)    By its aforesaid judgment and order dated 15th February, 2016,
             the TSERC identified and accorded the status of a deemed
             licensee to the appellant. However, this grant of status was
             made conditional upon the appellant satisfying the requirements
             stipulated in rule 3 of the Distribution of Electricity Licence
             (Additional Requirements of Capital Adequacy, Creditworthiness
             and Code of Conduct) Rules, 200510, compliance whereof was
             mandatory per regulation 12 [which stipulates that an applicant
             for grant of distribution licence shall, in addition to regulations
             4 to 11, comply with the 2005 Rules] read with regulation 49
             of the 2013 Regulations [which stipulates that all the general
             conditions applicable to a distribution licensee are also equally
             applicable to a deemed licensee]. The appellant was, therefore,
             directed to infuse an additional capital of Rs. 26.90 crore as
             equity share capital, contributed by its promoters, into its power
             distribution business via account payee cheques by 31st March,
             2016. The relevant part of the judgment and order of the TSERC
             is extracted hereunder:
                  “16. […] On a close reading of the provisions of
                  section 14, we are of the view that the ‘provisos’ to
                  section 14 are not applicable to a deemed licensee.
                  The status of a deemed licence to a person under
                  Section 14(b) of the Electricity Act, 2003 emanates
                  from the Notification given under Section 49(1) of the
                  SEZ Act to a developer of SEZ provided the deemed
                  Licensee satisfies the other provisions of the Act.
                  […]
                  18. We are of the view that the provisions contained
                  in sub-section (2), (3), (4), (5) & (6) of Section 15
                  of the Act are not applicable to a deemed licensee.
                  Moreover, [A.P. Distribution Licence Regulations]
                  contains the Rules relating to procedure for granting
                  of a distribution licensee from Rules 4 to 11 […]


10   2005 Rules
[2024] 5 S.C.R.                                                            745

           M/s Sundew Properties Limited v. Telangana State
               Electricity Regulatory Commission & Anr.

                The Rule 13 of the Regulation stipulates that Rules
                contained in 4 to 11 are not applicable to a deemed
                licensee and these Rules contain the procedure for
                granting of a distribution licence to a person. […]
                19. The Rule 13 of the [A.P. Distribution Licence
                Regulations] stipulates that a deemed licensee shall
                make an application in the form specified in Schedule
                - 2 to the Commission to get identified as a deemed
                licensee and rules 4 to 11 in the Regulations are not
                applicable to a deemed licensee, Thus, the Rule
                13 […] has excluded the application of Rules laid
                down from Rules 4 to 11 […] As observed earlier, the
                Rules 4 to 11 basically deal with the procedure to be
                followed by a person for obtaining a licence from the
                Commission. By implication, Rule 12 is applicable to
                a deemed licensee also […]
                20. We are not able to appreciate the argument
                of the petitioner that Rule 12 is not applicable to a
                deemed licensee. In our view, Rule 49 stipulates that
                all the general conditions applicable to a distribution
                licensee are also equally applicable to a deemed
                licensee. Thus, in our view, the Rule 12 is applicable
                to the petitioner.
                21. The next issue that arises is whether the petitioner
                has complied with the provisions of Rule 12? […] As
                a stand-alone entity the petitioner does riot fulfil the.
                conditions laid down in Rule 3 of the Capital Adequacy
                Rules. However, the Rule 3(2) also stipulates that
                the net worth of the promoters of the petitioner can
                be considered for the purpose of computation of the
                Debt Equity ratio of 30:70 […].
                26(A). The [Commission], in exercise of the powers
                conferred under Section 14 (b) of the Electricity
                Act, hereby identifies and recognises M/s. Sundew
                Properties Ltd. […] as a deemed licensee.
                26(D). […] the promoters have to contribute 30% of
                the total anticipated investment of Rs. 89.53 Crores
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                     which works out to Rs.26.9 Crores on or before
                     31.03.2016.”
       e)    Aggrieved, the appellant carried an appeal11 from the aforesaid
             order of the TSERC to the APTEL. According to the appellant,
             the directions of the TSERC were in excess of jurisdiction.
             APTEL dismissed the appeal, as noticed above. It held that the
             TSERC was justified in ordering infusion of additional equity
             by the appellant to the tune of Rs.26.90 crore (being 30% of
             the total anticipated investment of Rs.89.53 crore) as a pre-
             condition for being identified as a deemed distribution licence.
             The operative part of the judgment and order passed by the
             APTEL reads as follows:
                     “8.14 […] while the Appellant is not required to apply
                     for grant of license but being a deemed distribution
                     licensee has to fulfil other technical and financial
                     requirements as per prevailing rules and regulations of
                     the State Commission which is mandated to regulate
                     the Electricity business in the state whether it is a
                     DISCOM or any other deemed distribution licensee
                     as in the present case. Accordingly, we are of the
                     opinion that the State Commission has passed the
                     impugned order with careful consideration and proper
                     interpretation of the statute and also considering the
                     judgments passed by Hon’ble Supreme Court in Sesa
                     Sterilite [sic] case (supra) […]”
       f)    It is this judgment and final order that the appellant has subjected
             to challenge in this statutory appeal by invoking the appellate
             jurisdiction of this Court under section 125 of the Electricity Act.
       SUBMISSIONS
3.     Mr. Singh, learned senior counsel appearing for the appellant,
       challenged the validity of the orders of the TSERC and the APTEL
       by advancing the following submissions:
       a)    The TSERC and the APTEL erred in failing to recognize that
             under section 14(b) of the Electricity Act, a developer of an SEZ
             is ipso facto and unconditionally deemed to be a distribution


11   Appeal No.3 of 2017
[2024] 5 S.C.R.                                                          747

           M/s Sundew Properties Limited v. Telangana State
               Electricity Regulatory Commission & Anr.

           licensee, thus eliminating the need for a separate licence
           application. Recognition of the status of a deemed distribution
           licensee is a ministerial act, effected automatically upon
           fulfilment of conditions laid down in the SEZ Act, independent
           of rule 3(2) of the 2005 Rules read with regulation 12 of the
           2013 Regulations.
     b)    The status of deemed distribution licensee stands bestowed
           upon the appellant by virtue of the 2010 Notification, requiring no
           further action. This position has been recognized and approved
           by both the TSERC and the APTEL.
     c)    Under the 2013 Regulations, there are two types of licensees:
           first, those who apply for a distribution licence under regulations
           2(d) and 12, and secondly, those already deemed licensees,
           seeking recognition of their status as such, under regulations
           2(h) and 13. The appellant belongs to the latter category.
     d)    Regulation 12 of the 2013 Regulations applies to general
           applicants seeking a distribution licence, mandating compliance
           with both the 2005 Rules and the procedures prescribed in
           regulations 4 to 11. It cannot apply to a deemed licensee under
           regulation 13. The TSERC’s finding, as approved by the APTEL,
           that the 2005 Rules are in-built into the 2013 Regulations and
           therefore have to be satisfied by the appellant because of implied
           application of regulation 12 to deemed licensees, is contrary
           to the provisions of the Electricity Act and the very scheme of
           the 2013 Regulations.
     e)    APTEL erred by agreeing with the TSERC’s reasoning that the
           requirement to infuse Rs. 26.90 crore in equity was imposed
           on the appellant under section 16 of the Electricity Act, despite
           recognising the appellant as a deemed distribution licensee.
           Conditions under section 16, whether general or specific, must
           be ‘specified’ by the Appropriate Commission through regulations
           according to section 2(62) of the Electricity Act.
4.   Resting on the aforesaid submissions, learned senior counsel urged
     this Court to allow the appeal and set-aside the orders of the TSERC
     and the APTEL to the extent requiring the appellant to comply with
     the conditions stipulated in rule 3 of the 2005 Rules and infuse
     additional capital to gain the status of a deemed licensee.
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5.     Per contra, Mr. Vaidyanathan, learned senior counsel appearing for
       the second respondent (Southern Power Distribution Company of
       Telangana Limited), joined by Mr. Goud, learned counsel appearing
       for respondent no. 1 (TSERC), supported the impugned judgment
       and order and advanced the following submissions:
       a)    No doubt, the appellant, a SEZ developer, may be granted the
             status of a deemed licensee; however, the 2005 Rules and the
             2013 Regulations will be applicable to the appellant as per the
             law laid down by this Court in Sesa Sterlite Limited. v. Orissa
             Electricity Regulatory Commission and others12.
       b)    The appellant cannot be deemed to be a distribution licensee
             on its own without making an application under regulation 13.
       c)    There is a necessity to harmoniously interpret the SEZ Act and
             the Electricity Act to uphold the provisions of both enactments.
             The appellant cannot argue that the 2005 Rules and the 2013
             Regulations do not apply to it, being a SEZ developer.
       d)    TSERC is empowered to impose general and specific conditions
             at its discretion. The purpose of requiring the appellant to infuse
             an additional capital under the 2005 Rules was to assess the
             credit-worthiness of the appellant as it had accumulated losses
             at the end of the financial year 2013-2014 and more than 50%
             of its net-worth has been wiped-out, a fact which is reflected
             from the Statutory Auditor’s report.
6.     No case for interference having been set up by the appellant, learned
       counsel for respondents prayed for dismissal of the appeal.
       STATUTORY FRAMEWORK
7.     Before proceeding further, it is imperative to refer to certain statutory
       provisions.
8.     Section 14 of the Electricity Act deals with the grant of a licence:
             “14. Grant of Licence – The Appropriate Commission
             may, on an application made to it under section 15, grant
             a licence to any person –


12   [2014] 13 SCR 426 : (2014) 8 SCC 444
[2024] 5 S.C.R.                                                               749

           M/s Sundew Properties Limited v. Telangana State
               Electricity Regulatory Commission & Anr.

           (a) to transmit electricity as a transmission licensee; or
           (b) to distribute electricity as a distribution licensee; or
           (c) to undertake trading in electricity as an electricity trader,
           in any area as may be specified in the licence:
           Provided that any person engaged in the business of
           transmission or supply of electricity under the provisions
           of the repealed laws or any Act specified in the Schedule
           on or before the appointed date shall be deemed to be
           a licensee under this Act for such period as may be
           stipulated in the licence, clearance or approval granted
           to him under the repealed laws or such Act specified in
           the Schedule, and the provisions of the repealed laws
           or such Act specified in the Schedule in respect of such
           licence shall apply for a period of one year from the date
           of commencement of this Act or such earlier period as
           may be specified, at the request of the licensee, by the
           Appropriate Commission and thereafter the provisions of
           this Act shall apply to such business:
           Provided further that the Central Transmission Utility or
           the State Transmission Utility shall be deemed to be a
           transmission licensee under this Act:
           Provided also that in case an Appropriate Government
           transmits electricity or distributes electricity or undertakes
           trading in electricity, whether before or after the
           commencement of this Act, such Government shall be
           deemed to be a licensee under this Act, but shall not be
           required to obtain a licence under this Act:
           Provided also that the Damodar Valley Corporation,
           established under sub-section (1) of section 3 of the
           Damodar Valley Corporation Act, 1948, shall be deemed
           to be a licensee under this Act but shall not be required
           to obtain a licence under this Act and the provisions of the
           Damodar Valley Corporation Act, 1948, in so far as they
           are not inconsistent with the provisions of this Act, shall
           continue to apply to that Corporation:
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            Provided also that the Government company or the
            company referred to in sub-section (2) of section 131 of this
            Act and the company or companies created in pursuance
            of the Acts specified in the Schedule, shall be deemed to
            be a licensee under this Act:
            Provided also that the Appropriate Commission may grant a
            licence to two or more persons for distribution of electricity
            through their own distribution system within the same
            area, subject to the conditions that the applicant for grant
            of licence within the same area shall, without prejudice
            to the other conditions or requirements under this Act,
            comply with the additional requirements [relating to the
            capital adequacy, credit-worthiness, or code of conduct]
            as may be prescribed by the Central Government, and no
            such applicant, who complies with all the requirements for
            grant of licence, shall be refused grant of licence on the
            ground that there already exists a licensee in the same
            area for the same purpose:
            Provided also that in a case where a distribution licensee
            proposes to undertake distribution of electricity for a
            specified area within his area of supply through another
            person, that person shall not be required to obtain any
            separate licence from the concerned State Commission
            and such distribution licensee shall be responsible for
            distribution of electricity in his area of supply:
            Provided also that where a person intends to generate
            and distribute electricity in a rural area to be notified by
            the State Government, such person shall not require any
            licence for such generation and distribution of electricity,
            but he shall comply with the measures which may be
            specified by the Authority under section 53:
            Provided also that a distribution licensee shall not require
            a licence to undertake trading in electricity.”
9.     To determine who qualifies as a deemed licensee under the Electricity
       Act, we may refer to the 2013 Regulations.
10. Regulation 2(i)(h) of the 2013 Regulations defines “deemed licensee”
    as follows:
[2024] 5 S.C.R.                                                        751

           M/s Sundew Properties Limited v. Telangana State
               Electricity Regulatory Commission & Anr.

           “(h) ‘Deemed Licensee’ means a person authorised under
           sub-section (b) of Section 14 and also under the first,
           second, third, and fifth provisos to section 14 of the Act
           to operate and maintain a distribution system for supply
           of electricity to the consumers in his area of supply.”
11. Regulation 13 of the 2013 Regulations stipulates the procedure to
    get identified as a deemed distribution licensee. It reads:
           “13. The deemed licensees shall make application in the
           form specified in Schedule- 2 to the Commission to get
           identified as the deemed Licensee. Provided that nothing
           in Regulations 4 to 11 shall apply to deemed licensees.”
12. Insofar as a developer under the SEZ Act is concerned, a reference
    may be made to the scheme of the SEZ Act to ascertain its status
    as deemed distribution licensee.
13. The policy for SEZs was introduced with an objective to create a
    competitive export environment and to attract foreign investment. It
    levels the playing field for domestic businesses globally and introduces
    favourable policies in investment, taxation, trade, customs, and labour
    regulations. In line with this, for the purpose of ensuring consistent
    and high-quality power supply to these SEZ units, the MoCI, vide
    the 2010 Notification [under clause (b) of sub-section (1) of section
    49 of the SEZ Act] has specified that the ‘developer’ of the SEZ
    shall be deemed to be a ‘distribution licensee’ under the provisions
    of the Electricity Act. The proviso inserted in clause (b) of section
    14 of the Electricity Act, vide the 2010 Notification, reads as follows:
           “Provided that the Developer of a Special Economic Zone
           notified under sub-section (1) of Section 4 of the Special
           Economic Zones Act, 2005, shall be deemed to be a
           licensee for the purpose of this clause, with effect from
           the date of notification of such Special Economic Zone.”
14. With the inclusion of the aforementioned proviso to section 14(b) of
    the Electricity Act, it is evident that a SEZ developer is deemed to
    be a distribution licensee.
15. The main contention of the parties that whether the TSERC imposed
    condition to infuse additional capital per rule 3(2) of the 2005 Rules
    read with regulation 12 of the 2013 Regulations is justifiable or
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       extraneous is deliberated at length in a later part of this judgment.
       Regulation 12 provides that a person applying for a grant of a
       distribution licence shall, in addition to regulations 4 to 11, comply
       with the 2005 Rules. Regulation 12 is extracted below:
            “12. Application for grant of Distribution Licence in the
            area of supply of an existing Distribution Licensee – A
            person applying for grant of a licence for distribution of
            electricity through his own distribution system within the
            same area of supply of an existing Distribution Licensee
            shall, in addition to the provisions of Regulation 4 to 11,
            comply with “Distribution of Electricity Licence (additional
            requirements of Capital Adequacy, Creditworthiness and
            Code of Conduct) Rules, 2005” issued by the Central
            Government.”
16. Rule 3 is extracted hereunder:
            “3. Requirements of capital adequacy and
            creditworthiness. –
            (1) The Appropriate Commission shall, upon receipt of an
            application for grant of licence for distribution of electricity
            under sub-section (1) of section 15 of the Electricity Act,
            2003, decide the requirement of capital investment for
            distribution network after hearing the applicant and keeping
            in view the size of the area of supply and the service
            obligation within that area in terms of section 43.
            (2) The applicant for grant of licence shall be required to
            satisfy the Appropriate Commission that on a norm of 30%
            equity on cost of investment as determined under sub-
            rule (1), he including the promoters, in case the applicant
            is a company, would be in a position to make available
            resources for such equity of the project on the basis of net
            worth and generation of internal resources of his business
            including of promoters in the preceding three years after
            excluding his other committed investments.”
       ISSUES
17. Having noticed the relevant statutory framework, we are now tasked
    with deciding two short issues:
[2024] 5 S.C.R.                                                             753

              M/s Sundew Properties Limited v. Telangana State
                  Electricity Regulatory Commission & Anr.

      a)     Whether the designation of an entity as a SEZ developer by the
             MoCI ipso facto qualifies the entity to be a deemed distribution
             licensee, obviating the need for an application under section
             14 of the Electricity Act?
      b)     Whether regulation 12 of the 2013 Regulations, and by
             implication rule 3(2) of the 2005 Rules, are applicable to a
             SEZ developer recognised as a deemed distribution licensee
             under the proviso to section 14(b) of the Electricity Act read
             with regulation 13 of the 2013 Regulations?
      ANALYSIS
18. We have considered the submissions advanced by learned counsel
    for the parties and have also perused the materials on record.
      Issue (a)
19. It would not be inapt to be reminded of what was stated by a Bench of
    two Hon’ble Judges of this Court in State of Bombay v. Pandurang
    Vinayak Chaphalkar13 nearly seventy years ago:
             “11. […] When a statute enacts that something shall be
             deemed to have been done, which in fact and truth was
             not done, the court is entitled and bound to ascertain for
             what purposes and between what persons the statutory
             fiction is to be resorted to and full effect must be given to
             the statutory fiction and it should be carried to its logical
             conclusion.”
20. In view of the existing facts, we are inclined to the view that the
    very purpose of the deeming fiction in the proviso to section 14(b)
    of the Electricity Act is to confer upon an entity like the appellant a
    status which is otherwise available in accordance with the Electricity
    Act. In other words, as an effect of the 2010 Notification inserting
    the proviso to section 14(b), the appellant is entitled to the privilege
    of being acknowledged as a (deemed) distribution licensee under
    the Electricity Act for supply of power within its SEZ area. Once the
    appellant is a (deemed) distribution licensee, certain benefits and/
    or privileges do enure in its favour.



13   [1953] 1 SCR 773 : (1953) 1 SCC 425
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21. The respondents have heavily relied on Sesa Sterlite Limited (supra)
    to assert that there has to be a harmonious construction of both the
    SEZ Act and the Electricity Act to give effect to the provisions of both
    the enactments, so long as they are not inconsistent with each other.
22. A Bench of two Hon’ble Judges of this Court in Sesa Sterlite Limited
    (supra) held:
          “43. The reading of Section 49 of the SEZ Act would reveal
          that the Central Government has got the authority to direct
          that any of the provisions of a Central Act and the rules
          and regulations made thereunder would not apply or to
          declare that some of the provisions of the Central Acts
          shall apply with exceptions, modifications and adaptation
          to the special economic zone. So, under the scheme of
          the Special Economic Zones Act, the Central Government
          has to first notify as to what extent the provision of the
          other Acts are to be made applicable or applicable with
          modification or not applicable for the special economic zone
          area. It is in furtherance thereto, the Government of India,
          Ministry of Commerce and Industry through its Notification
          dated 21-3-2012, with regard to power generation in special
          economic zone, has declared that all the provisions of
          the Electricity Act, 2003 and the Electricity Rules, 2005
          shall be applicable to the generation, transmission and
          distribution of power, whether stand-alone or captive power.
          This notification would clarify that there is no inconsistency
          between the Special Economic Zones Act, 2005 and the
          Electricity Act, 2003.
          […]
          46. To recapitulate briefly, in the present case no doubt
          by virtue of the status of a developer in the SEZ area, the
          appellant is also treated as deemed distribution licensee.
          However with this, it only gets exemption from specifically
          applying for licence under Section 14 of the Act.”
23. The question in Sesa Sterlite Limited (supra), was whether the
    appellant - a deemed distribution licensee, being a developer of
    Special Economic Zone (SEZ) and having a unit in the SEZ, is liable
    to pay Cross-Subsidy Surcharge (CSS). It was held that the appellant
[2024] 5 S.C.R.                                                       755

           M/s Sundew Properties Limited v. Telangana State
               Electricity Regulatory Commission & Anr.

     would be liable to pay CSS for several reasons, including on the
     facts that it was using dedicated transmission lines belonging to the
     distribution licensee for the area in question. This Court interpreted
     the expression ‘open access’ and the rationale behind CSS and
     additional surcharge to observe that the former was payable by a
     distribution licensee and the latter was to meet the fixed cost of the
     distribution licensee of the area. The provision of open access, it is
     observed, balances the right of the consumers to purchase from a
     source of their choice. The rationale and the ratio of the decision,
     therefore, is that a deemed distribution licensee is treated at par
     and not different from a distribution licensee. Accordingly, if CSS is
     payable by a distribution licensee, the deemed distribution licensee
     is equally liable to pay the same. This decision, in other words,
     equates deemed distribution licensee with the distribution licensee
     for the purpose of supply of electricity to the consumers. Sesa
     Sterlite Limited (supra) is not a decision for the proposition that
     deemed distribution licensee, to qualify as a deemed distribution
     licensee, must meet the criteria, including the capital requirements
     as applicable by regulations to a distribution licensee.
24. Further, the provisos to section 14 of the Electricity Act distinguish
    between entities that are ipso facto deemed distribution licensees and
    those that are merely declared as deemed licensees without clarity
    on the necessity of making an application to obtain a licence. For
    instance, the third and fourth provisos to section 14 not only confer
    the status of deemed licensees to the State Government and the
    Damodar Valley Corporation, respectively, but also explicitly exempt
    them from the requirement to obtain a licence. Entities not covered
    by these specific provisos would, therefore, be required to obtain a
    licence. The requirement of obtaining a license has to be read into
    the other provisos to section 14 since, for instance, the second and
    fifth provisos to section 14 grant deemed licensee status to Central/
    State Transmission Utility and a government company, respectively,
    but neither specifies the requirement to obtain a license nor exempts
    them from obtaining license.
25. As far as the 2010 Notification is concerned, the proviso to section
    14(b) introduced by the said Notification, confers deemed licensee
    status on SEZ developers. However, such conferment does not
    explicitly exclude the requirement of obtaining a licence. This lack
    of specificity, especially when compared with the clear provisions for
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       other entities, suggests that the legislative intent was not to ipso facto
       grant SEZ developers the status of deemed distribution licensees,
       thereby obliging them to obtain a licence by making an application in
       terms of regulation 13. TSERC is, therefore, empowered to scrutinise
       such applications in accordance with law, however, only limited to
       the provisions which are applicable to deemed licensees. Verification
       and acceptance recognise their status as deemed licensees.
       Issue (b):
26. Issue (b) revolves around rule 3(2) of the 2005 Rules, which per
    the TSERC and the APTEL, the appellant is bound to adhere by
    infusing additional capital in order to qualify as a deemed licensee.
    While the appellant contends that the 2010 Notification, by necessary
    consequence, grants upon the appellant the status of a deemed
    licensee, the respondents submit that the identification of the appellant
    as a deemed distribution licensee is conditional upon the appellant
    satisfying the other requirements of the Electricity Act, specifically
    the sixth proviso to section 14 of the Electricity Act which provides
    for compliance with additional requirements like capital adequacy
    which as per the respondents includes rule 3 of the 2005 Rules read
    with regulation 12 of the 2013 Regulations.
27. It is contended by the respondents that the application of 2005 Rules
    to the appellant, a SEZ developer, stems from the sixth proviso to
    section 14 read with regulation 12 of the 2013 Regulations.
28. Let us now deal with the provisos to section 14. Upon a bare reading
    of the provision, it becomes crystal clear that not only does the sixth
    proviso, but none of the nine provisos to section 14, apply to the
    appellant, a SEZ developer. Even the TSERC and the APTEL are
    ad idem with this view. The status of a SEZ developer as a deemed
    licensee emanates from the 2010 Notification, which introduced the
    proviso to section 14(b), conferring deemed licensee status to SEZ
    developers. Reading anything beyond this would defeat the very
    purpose of the proviso and the concept of the deemed licence. The
    sixth proviso does not pertain to deemed licensees and, therefore,
    the 2005 Rules are not applicable to the appellant.
29. Upon closer examination of regulation 12, it becomes apparent
    that its application does not extend to applicants who are otherwise
    deemed licensees. The interpretation of regulation 12 as requiring
[2024] 5 S.C.R.                                                              757

              M/s Sundew Properties Limited v. Telangana State
                  Electricity Regulatory Commission & Anr.

      additional capital infusion for an applicant for acceptance of a deemed
      licensee status appears to be at odds with the language and intent
      of the 2013 Regulations itself. TSERC has, in essence, interpreted
      regulation 12 by reading it up to mean that it also applies to a person
      who is a deemed licensee, and in doing so, the TSERC has aimed
      to achieve indirectly what it could not directly.
30. Reading down and reading up are two principles often discussed
    in legal contexts, particularly in the realm of statutory interpretation.
    Reading down, which has been firmly ingrained in our jurisprudence,
    refers to the practice of interpreting a statute narrowly, limiting
    its scope or application to specific situations or individuals. This
    approach is commonly employed when the language of a statute
    is ambiguous or when there is a need to avoid potential conflicts
    with other laws or constitutional provisions. For example, if a law
    is unclear about whether it applies to certain types of businesses,
    a court may choose to read down the statute to only include those
    businesses explicitly mentioned in the text. On the other hand,
    reading up involves interpreting a statute broadly, extending its
    scope or application beyond what is expressly stated in the text.
    Reading up is a concept that is invoked with great caution within our
    legal framework because it can lead to judicial activism or judicial
    overreach, where courts expand the reach of laws beyond what the
    legislature intended.
31. A Constitution Bench of this Court in B.R. Kapur v. State of Tamil
    Nadu14, while stating that reading up of a statute is not permissible,
    held thus:
             “39. Section 8(4) opens with the words ‘notwithstanding
             anything in sub-section (1), sub-section (2) or sub-section
             (3)’, and it applies only to sitting members of Legislatures.
             There is no challenge to it on the basis that it violates
             Article 14. If there were, it might be tenable to contend
             that legislators stand in a class apart from non-legislators,
             but we need to express no final opinion. In any case, if it
             were found to be violative of Article 14, it would be struck
             down in its entirety. There would be, and is no question
             of so reading it that its provisions apply to all, legislators


14   [2001] Supp. 3 SCR 191 : (2001) 7 SCC 231
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          and non-legislators, and that, therefore, in all cases the
          disqualification must await affirmation of the conviction
          and sentence by a final court. That would be ‘reading up’
          the provision, not ‘reading down’, and that is not known
          to the law.”
32. The literal rule of interpreting a statute empowers courts to iron out
    the creases within legislation but without altering the very fabric
    of which it is made. The practice of reading up a provision can
    only be justified when it aligns with legislative intent, maintains the
    fundamental character of the law, and ensures that the resulting
    interpretation remains consistent with the original context to which
    the law applies. This holds especially true for subordinate legislation,
    which require greater scrutiny in this regard. Reading up a provision
    of subordinate legislation in a manner that it militates against the
    primary legislation is not permissible.
33. The authority to craft subordinate legislation is derived from the
    enabling/primary legislation and it is imperative that such legislation
    harmonizes with the provisions outlined in the enabling/primary
    legislation. The Electricity Act has conferred power on the Central
    Government to make Rules [see section 175], and on the Central
    Electricity Authority and the Central Commission to make Regulations
    [see sections 176 and 177, respectively]. All such rules/regulations
    are to be made consistent with the Electricity Act. Section 181 of
    the Electricity Act confers power on the State Commissions to make
    Regulations but such regulations too must be consistent with the
    provisions of the primary enactment and the rules framed thereunder
    generally. Rules and Regulations are enacted to supplement the
    main provision, not to supplant it. They serve the crucial role of
    bridging potential gaps within the primary legislation, yet, their
    function is not to create webs and voids merely to clog and hamper
    their implementation. Any gaps addressed by Rules and Regulations
    must be discernible within the framework of the primary legislation.
34. In the present case, the TSERC, in paragraph 19, asserted that
    regulation 12 applies implicitly to a deemed licensee as well. We
    do not agree with this reasoning, mainly for two reasons. First,
    the primary legislation, the Electricity Act, through the proviso
    inserted in section 14(b), confers deemed licensee status upon SEZ
    developers without imposing any specific conditions. Secondly, the
[2024] 5 S.C.R.                                                         759

           M/s Sundew Properties Limited v. Telangana State
               Electricity Regulatory Commission & Anr.

     2013 Regulations make a clear distinction between an applicant
     seeking a licence [as defined under regulation 2(d)] and a deemed
     distribution licensee seeking recognition as such [as defined under
     regulation 2(h)]. Regulation 2(d) defines an “applicant” as “a person
     who has submitted an application to the Commission for the grant of
     a distribution licence”. In contrast, regulation 2(h) defines a “deemed
     licensee” as “a person authorized under sub-section (b) of Section
     14, and also under the first, second, third, and fifth provisos to
     section 14 of the Act, to operate and maintain a distribution system
     for supplying electricity to consumers in their area of supply”. The
     2013 Regulations clearly delineate distinct categories of licensees.
     Regulation 12 pertains solely to regular distribution licensees as
     defined under regulation 2(h), not to deemed licensees. ‘Reading up’
     regulation 12 so as to expand its ambit to include within it deemed
     licensees, especially when the Electricity Act does not stipulate any
     such inclusion, runs counter to the subsequently inserted proviso
     to clause (b) of section 14 of the Electricity Act—an exercise which
     is impermissible and which we cannot approve. Therefore, the
     recognition of the status of a deemed distribution licensee cannot
     hinge on compliance with rule 3(2) of the 2005 Rules read with
     regulation 12 of the 2013 Regulations.
35. The language of regulation 12 merits careful scrutiny. It states that
    an applicant shall, “in addition to the provisions of Regulation 4 to
    11”, comply with the provisions of the 2005 Rules. It is evident that
    it is a normal applicant [as defined under regulation 2(d)], which is
    tasked with complying with regulations 4 to 11, that has to comply
    with the 2005 Rules. However, the appellant herein, as discussed
    previously, is not a regular applicant but a deemed distribution
    licensee [as defined under regulation 2(h)], and is governed by
    regulation 13, the proviso to which specifically states that nothing in
    regulations 4 to 11 would apply to deemed licensees. Having thus
    been statutorily exempted from complying with regulations 4 to 11,
    we are of the opinion that the appellant, being a deemed licensee,
    would also be exempt from the concomitant obligation of complying
    with regulation 12, in view of the language of the provision, which
    imposes the burden of complying with regulation 12 only on those
    applicants who come within the purview of regulations 4 to 11. The
    appellant falling outside the scope of the latter, would thus necessarily
    fall outside the scope of the former too.
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36. TSERC’s reliance on regulation 49 of the 2013 Regulations to
    enforce the applicability of regulation 12 also appears to be flawed.
    Regulation 49, situated within Chapter-4 [General Conditions of
    Distribution Licence] of the 2013 Regulations, specifies that “these
    general conditions shall apply to distribution licensees and to all
    deemed distribution licensees”. A straightforward reading reveals
    that the term ‘general conditions’ in regulation 49 pertains exclusively
    to the general conditions outlined in Chapter-4. By no stretch of
    imagination could the scope of this provision be widened so as to
    include within its ambit regulation 12, which forms part of Chapter-3
    [Procedure for Grant of Distribution Licence] of the 2013 Regulations.
       CONCLUSION
37. To sum up, being a SEZ developer in terms of the 2010 Notification
    does not ipso facto confer upon the appellant the status of a deemed
    licensee without any scrutiny and without being under any requirement
    to apply; it is required to make an application in accordance with the
    2013 Regulations. We have been apprised that this condition has
    been fulfilled as the status of the appellant as a deemed licensee has
    already been upheld pursuant to the application made in accordance
    with rule 13 of the 2013 Regulations. The first issue is answered
    accordingly. As far as the second issue is concerned, the condition
    stipulated in rule 3(2) of the 2005 Rules, as imposed by the TSERC
    with a direction to infuse an additional capital of Rs. 26.90 crore
    is not justified and contrary to the statutory scheme as discussed
    aforesaid. The judgments and orders of the TSERC and the APTEL
    are set aside to this extent. The order of the TSERC, which grants
    the status of a deemed licensee to the appellant, however, subject to
    the condition that its promoters infuse additional capital is accordingly
    modified to the extent of excluding such condition.
38. The appeal is partly allowed in the aforesaid terms. No costs.

       Result of the case: Appeal partly allowed.



       †
           Headnotes prepared by: Nidhi Jain