MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD.versusM/S. JSW STEEL LIMITED & ORS.

404                       [2021]
               SUPREME COURT     9 S.C.R. 404
                              REPORTS                     [2021] 9 S.C.R.


A        MAHARASHTRA STATE ELECTRICITY DISTRIBUTION
                         CO. LTD.
                            v.
                     M/S. JSW STEEL LIMITED & ORS.
                     (Civil Appeal Nos. 5074-5075 of 2019)
B
                             DECEMBER 10, 2021
                [M. R. SHAH AND SANJIV KHANNA, JJ.]
            Electricity Act, 2003 – ss.2(15), 42(4) – State Commission
      held captive consumers-respondents herein liable to pay additional
C     surcharge – Appeals filed by the captive consumers – Allowed by
      Appellate Tribunal – On appeal by distribution licensee, held:
      Captive consumers incur huge expenditure/invest huge amount for
      construction, maintainance or operation of a captive generating
      plant and dedicated transmission lines – Such captive consumers/
D     captive users who form a separate class other than the consumers
      defined u/s.2(15) are not liable to pay additional surcharge leviable
      u/s.42(4), as rightly held by the Appellate Tribunal.
            Electricity Act, 2003 – s.9 – Operation of – Discussed.
            Electricity Act, 2003 – Class of consumers under – Held: As
E     per the scheme of the Act, there can be two classes of consumers-
      ordinary consumer and captive consumers.
            Electricity Act, 2003 – s.42(4) – Applicability of – Discussed.
            Dismissing the appeals, the Court
F           HELD : 1.1 On a fair reading of Section 9, it can be seen
      that captive generation is permitted under sub-section (1) of
      Section 9. As per subsection (2), every person, who has
      constructed a captive generating plant and maintains and operates
      such plant, shall have the right to open access for the purposes
      of carrying electricity from his captive generating plant to the
G
      destination of his use, but of-course subject to availability of
      adequate transmission facility determined by the Central
      Transmission Utility or the State Transmission Utility, as the case
      may be. So, the captive generation / captive use is statutorily
      provided /available and for which a permission of the State
H
                                      404
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO.                            405
         LTD. v. M/S. JSW STEEL LIMITED

Commission is not required. Construction and/or maintenance               A
and operation of a captive generating plant and dedicated
transmission lines is not subjected to any permission by the State
Commission. As provided under Section 9 of the Act, 2003, any
person may construct, maintain or operate a captive generating
plant and dedicated transmission lines. Merely because the supply
                                                                          B
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 or the open access for the purpose of
carrying electricity from the captive generating plant to the
destination of his use shall be subject to availability of the adequate
transmission facility determined by the Central Transmission              C
Utility or the State Transmission Utility, it cannot be said that for
captive generation plant, the State Commission’s permission is
required. Right to open access to transmit/carry electricity to
the captive user is granted by the Act, and is not subject to and
does not require the Sate Commission’s permission. The right is
                                                                          D
conditioned by availability of transmission facility, which aspect
can be determined by the Central or State transmission utility.
Only in case of dispute, the State Commission may adjudicate.
[Para 9][412-A-G]
       1.2 Sub-section (4) of Section 42 shall be applicable only in
a case where the State Commission permits a consumer or class             E
of consumers to receive supply of electricity from a person other
than the distribution licensee of his area of supply and only such
consumer shall be liable to pay additional surcharge on the
charges of wheeling, as may be specified by the State Commission.
Captive user requires no such permission, as he has statutory             F
right. As per the Scheme of the Act, there can be two classes of
consumers, (i) the ordinary consumer or class of consumers who
is supplied with electricity for his own use by a distribution
licensee / licensee and; (ii) captive consumers, who are permitted
to generate for their own use as per Section 9 of the Act, 2003.          G
[Para 11][413-A-C]
     1.3 The term “consumer” is defined in Section 2(15).
Ordinarily, a consumer or class of consumers has to receive supply

                                                                          H
406            SUPREME COURT REPORTS                      [2021] 9 S.C.R.


A     of electricity from the distribution licensee of his area of supply.
      However, with the permission of the State Commission such a
      consumer or class of consumers may receive supply of electricity
      from the person other than the distribution licensee of his area
      of supply, however, subject to payment of additional surcharge
      on the charges of wheeling as may be specified by the State
B
      Commission to meet the fixed cost of such distribution licensee
      arising out of his obligation to supply. There is a logic behind the
      levy of additional surcharge on the charges of wheeling in such a
      situation and/or eventuality, because the distribution licensee has
      already incurred the expenditure, entered into purchase
C     agreements and has invested the money for supply of electricity
      to the consumers or class of consumers of the area of his supply
      for which the distribution license is issued. Therefore, if a
      consumer or class of consumers want to receive the supply of
      electricity from a person other than the distribution licensee of
      his area of supply, he has to compensate for the fixed cost and
D
      expenses of such distribution licensee arising out of his obligation
      to supply. Therefore, the levy of additional surcharge under
      sub-section (4) of Section 42 can be said to be justified and can
      be imposed and also can be said to be compensatory in nature.
      However, sub-section (4) of Section 42 shall be applicable only in
E     a case where the State Commission permits a consumer or class
      of consumers to receive supply of electricity from a person other
      than the person – distribution licensee of his area of supply. So
      far as captive consumers/captive users are concerned, no such
      permission of the State Commission is required and by operation
      of law namely Section 9 captive generation and distribution to
F
      captive users is permitted. Therefore, so far as the captive
      consumers / captive users are concerned, they are not liable to
      pay the additional surcharge under Section 42(4) of the Act, 2003.
      The Appellate Tribunal has rightly held that so far as the captive
      consumers/captive users are concerned, the additional surcharge
G     under sub-section (4) of Section 42 of the Act, 2003 shall not be
      leviable. The consumers defined under Section 2(15) and the
      captive consumers are different and distinct and they form a
      separate class by themselves. So far as captive consumers are
      concerned, they incur a huge expenditure/invest a huge amount
H
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO.                                407
         LTD. v. M/S. JSW STEEL LIMITED

for the purpose of construction, maintenance or operation of a                A
captive generating plant and dedicated transmission lines.
However, so far as the consumers defined under Section 2(15)
are concerned, they as such are not to incur any expenditure
and/or invest any amount at all. Therefore, if the appellant is held
to be right in submitting that even the captive consumers, who
                                                                              B
are a separate class by themselves are subjected to levy of
additional surcharge under Section 42(4), in that case, it will be
discriminatory and it can be said that unequals are treated equally.
Therefore, such captive consumers/captive users, who form a
separate class other than the consumers defined under Section
2(15) of the Act, 2003, shall not be subjected to and/or liable to            C
pay additional surcharge leviable under Section 42(4) of the Act,
2003. The additional surcharge already recovered from the captive
consumers/captive users shall be adjusted in the future wheeling
charges bills. [Paras 12-14, 16][413-C-H; 414-A-G; 415-C]
      CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 5074-                  D
5075 of 2019.
      From the Judgment and Order dated 27.03.2019 of the Appellate
Tribunal for Electricity, New Delhi in Appeal Nos.311 and 315 of 2018.
      G. Saikumar, Samir Malik, Aman Malik, Chandra Prakash for M/
s D.S.K. Legal, Advs. for the Appellant.                                      E

       C. S. Vaidyanathan, Gopal Jain, S. K. Rungta, Dr. A. M. Singhvi,
Sajan Poovayya, Sr. Advs., Mahesh Agarwal, Rishi Agrawala, Aman
Anand, Anshuman Srivastava, Rishabh Parikh, Aman Dixit, Shivam
Shukla, E. C. Agrawala, Ms. Pratiti Rungta, Prashant Singh, Ms. Amita
Singh Kalkal, Hemant Singh, Lakshyajit Singh Bagdwal, Rishabh Sehgal,         F
Pratibhanu Singh Kharola, Ms. Raksha Agarwal, Sharan Balakrishna,
Mridul Chakravarty, Gaurav Mitra, Hasan Murtaza, Varun Pathak, Advs.
for the Respondents.
      The Judgment of the Court was delivered by
                                                                              G
      M. R. SHAH, J.
      1. Feeling aggrieved and dissatisfied with the impugned judgment
and order passed by the Appellate Tribunal for Electricity, Delhi in Appeal
Nos. 311 and 315 of 2018 whereby the Appellate Tribunal has allowed
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408             SUPREME COURT REPORTS                            [2021] 9 S.C.R.


A     the said appeals preferred by the respondents herein – the ‘captive
      consumers’ and has set aside the order passed by the Maharashtra
      Electricity Regulatory Commission (hereinafter referred to as the “State
      Commission”) in Petition No.195 of 2017 by which the State Commission
      has held that the group of ‘captive consumers’ are liable to pay additional
      surcharge, Maharashtra State Electricity Distribution Company Limited
B
      (hereinafter referred to as the “distribution licensee”), has preferred the
      present appeals.
             2. That the appellant as distribution licensee filed a petition before
      the State Commission for MYT approval for FY 2014-2015, provisional
      truing up of ARR for FY 2015-2016 and Multi Year Tariff for 3rd Control
C     Period FY 2016-2017 to FY 2019-2020. The said petition was numbered
      as Case No.48 of 2016. The State Commission held that the additional
      surcharge leviable under Section 42(4) of the Electricity Act, 2003
      (hereinafter referred to as the “Act, 2003”) is not applicable to captive
      users to the extent of their self-consumption from such plants. The State
D     Commission also held that the additional surcharge shall be applicable to
      all consumers who have availed open access to receive supply from
      sources other than the distribution licensee to which they are connected.
             3. The appellant – distribution licensee submitted its revised Review
      Petition being Case No.195 of 2017, for approval of final true up of
E     ARR for FY 2015-2016 and 2016-2017, provisional true up of ARR for
      FY 2017-2018 and approval for revised forecast of ARR for FY 2018-
      2019 and 2019-2020, inter alia, including the prayer “to approve additional
      surcharge for all open access consumers including those sourcing power
      from CPPS as proposed for FY 2018-2019 to FY 2019-2020”. The
      Captive Power Producers Association filed their objections including
F     the objections with respect to levy of additional surcharge on such captive
      users. That by order dated 12.09.2018, the State Commission passed
      the order holding that additional surcharge is leviable under Section 42(4)
      of the Act, 2003 on the captive consumers/captive users.
             4. Feeling aggrieved and dissatisfied with the order passed by the
G     State Commission allowing the levy of additional surcharge from the
      captive consumers/captive users, the respondents herein – captive users/
      captive consumers approached the Appellate Tribunal. By impugned
      order dated 27.03.2019, the Appellate Tribunal has allowed the said
      appeals and has set aside the order passed by the State Commission
H     ordering/permitting to levy the additional surcharge leviable under Section
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO.                              409
   LTD. v. M/S. JSW STEEL LIMITED [M. R. SHAH, J.]

42(4) of the Act, 2003 and has held that the group of captive consumers     A
are not liable to pay additional surcharge to the distribution licensee.
       5. Feeling aggrieved and dissatisfied with the impugned order
passed by the Appellate Tribunal holding that the group of captive
consumers/captive users are not liable to pay the additional surcharge
leviable under section 42(4) of the Act, 2003, appellant – distribution     B
licensee.
       6. We have heard the learned counsel appearing for the appellant
– distribution licensee as well as learned counsel appearing on behalf of
the respective respondents – intervenors – the captive consumers/captive
users at length.                                                            C
      7. The short question which is posed for the consideration of this
Court is :
      “Whether the captive consumers/captive users are liable to pay
      the additional surcharge leviable under Section 42(4) of the
      Electricity Act, 2003?                                                D
      8. While deciding the aforesaid issue/question, the relevant
      provisions of Electricity Act, 2003 namely Sections 9 and 42 are
      required to be noted/visited, which reads as under:-
      “9. Captive generation.- (1) Notwithstanding anything contained
                                                                            E
      in this Act, a person may construct, maintain or operate a captive
      generating plant and dedicated transmission lines:
      Provided that the 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:
                                                                            F
      Provided further that no licence shall be required under this Act
      for supply of electricity generated from a captive generating plant
      to any licencee in accordance with the provisions of this Act and
      the rules and regulations made thereunder and to any consumer
      subject to the regulations made under sub-section (2) of section
      42.                                                                   G

      (2) Every person, who has constructed a captive generating plant
      and maintains and operates such plant, shall have the right to open
      access for the purposes of carrying electricity from his captive
      generating plant to the destination of his use:
                                                                            H
410      SUPREME COURT REPORTS                             [2021] 9 S.C.R.


A     Provided that such open access shall be subject to availability of
      adequate transmission facility and such availability of transmission
      facility shall be determined by the Central Transmission Utility or
      the State Transmission Utility, as the case may be:
      Provided further that any dispute regarding the availability of
B     transmission facility shall be adjudicated upon by the Appropriate
      Commission.
      42. Duties of distribution licensees and open access.- (1) It
      shall be the duty of a distribution licensee to develop and maintain
      an efficient, co-ordinated and economical distribution system in
C     his area of supply and to supply electricity in accordance with the
      provisions contained in this Act.
      (2) The State Commission shall introduce open access in such
      phases and subject to such conditions, (including the cross subsidies,
      and other operational constraints) as may be specified within one
D     year of the appointed date by it and in specifying the extent of
      open access in successive phases and in determining the charges
      for wheeling, it shall have due regard to all relevant factors including
      such cross subsidies, and other operational constraints:
      Provided that such open access shall be allowed on payment of a
E     surcharge in addition to the charges for wheeling as may be
      determined by the State Commission:
      Provided further that such surcharge shall be utilised to meet the
      requirements of current level of cross subsidy within the area of
      supply of the distribution licensee:
F     Provided also that such surcharge and cross subsidies shall be
      progressively reduced in the manner as may be specified by the
      State Commission:
      Provided also that such surcharge shall not be leviable in case
      open access is provided to a person who has established a captive
G     generating plant for carrying the electricity to the destination of
      his own use:
      Provided also that the State Commission shall, not later than five
      years from the date of commencement of the Electricity
      (Amendment) Act, 2003 (57 of 2003) by regulations, provide such
H
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO.                                411
   LTD. v. M/S. JSW STEEL LIMITED [M. R. SHAH, J.]

    open access to all consumers who require a supply of electricity          A
    where the maximum power to be made available at any time
    exceeds one megawatt.
    (3) Where any person, whose premises are situated within the
    area of supply of a distribution licensee, (not being a local authority
    engaged in the business of distribution of electricity before the         B
    appointed date) requires a supply of electricity from a generating
    company or any licensee other than such distribution licensee,
    such person may, by notice, require the distribution licensee for
    wheeling such electricity in accordance with regulations made by
    the State Commission and the duties of the distribution licensee
    with respect to such supply shall be of a common carrier providing        C
    non-discriminatory open access.
    (4) Where the State Commission permits a consumer or class of
    consumers to receive supply of electricity from a person other
    than the distribution licensee of his area of supply, such consumer
    shall be liable to pay an additional surcharge on the charges of          D
    wheeling, as may be specified by the State Commission, to meet
    the fixed cost of such distribution licensee arising out of his
    obligation to supply.
    (5) Every distribution licensee shall, within six months from the
    appointed date or date of grant of licence, whichever is earlier,         E
    establish a forum for redressal of grievances of the consumers in
    accordance with the guidelines as may be specified by the State
    Commission.
    (6) Any consumer, who is aggrieved by non-redressal of his
    grievances under sub-section (5), may make a representation for           F
    the redressal of his grievance to an authority to be known as
    Ombudsman to be appointed or designated by the State
    Commission.
    (7) The Ombudsman shall settle the grievance of the consumer
    within such time and in such manner as may be specified by the            G
    State Commission.
    (8) The provisions of sub-sections (5), (6) and (7) shall be without
    prejudice to right which the consumer may have apart from the
    rights conferred upon him by those sub-sections.”
                                                                              H
412             SUPREME COURT REPORTS                            [2021] 9 S.C.R.


A             9. On a fair reading of Section 9, it can be seen that captive
      generation is permitted under sub-section (1) of Section 9. As per sub-
      section (2), every person, who has constructed a captive generating
      plant and maintains and operates such plant, shall have the right to open
      access for the purposes of carrying electricity from his captive generating
      plant to the destination of his use, but of-course subject to availability of
B     adequate transmission facility determined by the Central Transmission
      Utility or the State Transmission Utility, as the case may be. So, the
      captive generation / captive use is statutorily provided / available and for
      which a permission of the State Commission is not required. The
      submission on behalf of the appellant that the captive generation under
C     Section 9 is subject to the regulations as per first proviso to sub-section
      (1) of Section 9 and that even open access for the purpose of carrying
      electricity from his captive generating plant to the destination of his use
      shall be subject to availability of the adequate transmission facility
      determined by the Central Transmission Utility or the State Transmission
      Utility, as the case may be, sub-section (4) of Section 42 shall be applicable
D     and such captive users are liable to pay the additional surcharge leviable
      under sub-section (4) of section 42, has no substance and has to be
      rejected outright. Construction and/or maintenance and operation of a
      captive generating plant and dedicated transmission lines is not subjected
      to any permission by the State Commission. As provided under Section
      9 of the Act, 2003, any person may construct, maintain or operate a
E     captive generating plant and dedicated transmission lines. Merely because
      the 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 or the open access for the purpose of carrying
      electricity from the captive generating plant to the destination of his use
F     shall be subject to availability of the adequate transmission facility
      determined by the Central Transmission Utility or the State Transmission
      Utility, it cannot be said that for captive generation plant, the State
      Commission’s permission is required. Right to open access to transmit/
      carry electricity to the captive user is granted by the Act, and is not
      subject to and does not require the Sate Commission’s permission. The
G     right is conditioned by availability of transmission facility, which aspect
      can be determined by the Central or State transmission utility. Only in
      case of dispute, the State Commission may adjudicate.
              10. In light of the above observations and findings, the issue
      whether such captive users are subject to levy of additional surcharge
H     leviable under sub-section (4) of Section 42 is required to be considered.
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO.                                   413
   LTD. v. M/S. JSW STEEL LIMITED [M. R. SHAH, J.]

       11. Sub-section (4) of Section 42 shall be applicable only in a case      A
where the State Commission permits a consumer or class of consumers
to receive supply of electricity from a person other than the distribution
licensee of his area of supply and only such consumer shall be liable to
pay additional surcharge on the charges of wheeling, as may be specified
by the State Commission. Captive user requires no such permission, as
                                                                                 B
he has statutory right. At this stage, it is required to be noted that as per
the Scheme of the Act, there can be two classes of consumers, (i) the
ordinary consumer or class of consumers who is supplied with electricity
for his own use by a distribution licensee / licensee and; (ii) captive
consumers, who are permitted to generate for their own use as per
Section 9 of the Act, 2003.                                                      C
      12. The term “consumer” is defined in Section 2(15), which reads
as under :-
       “(15) “consumer” means any person who is supplied with
       electricity for his own use by a licensee or the Government or by
       any other person engaged in the business of supplying electricity         D
       to the public under this Act or any other law for the time being in
       force and includes any person whose premises are for the time
       being connected for the purpose of receiving electricity with the
       works of a licensee, the Government or such other person, as the
       case may be;”                                                             E
       13. Ordinarily, a consumer or class of consumers has to receive
supply of electricity from the distribution licensee of his area of supply.
However, with the permission of the State Commission such a consumer
or class of consumers may receive supply of electricity from the person
other than the distribution licensee of his area of supply, however, subject     F
to payment of additional surcharge on the charges of wheeling as may
be specified by the State Commission to meet the fixed cost of such
distribution licensee arising out of his obligation to supply. There is a
logic behind the levy of additional surcharge on the charges of wheeling
in such a situation and/or eventuality, because the distribution licensee
has already incurred the expenditure, entered into purchase agreements           G
and has invested the money for supply of electricity to the consumers or
class of consumers of the area of his supply for which the distribution
license is issued. Therefore, if a consumer or class of consumers want
to receive the supply of electricity from a person other than the distribution
licensee of his area of supply, he has to compensate for the fixed cost          H
414             SUPREME COURT REPORTS                           [2021] 9 S.C.R.


A     and expenses of such distribution licensee arising out of his obligation to
      supply. Therefore, the levy of additional surcharge under sub-section (4)
      of Section 42 can be said to be justified and can be imposed and also can
      be said to be compensatory in nature. However, as observed hereinabove,
      sub-section (4) of Section 42 shall be applicable only in a case where the
      State Commission permits a consumer or class of consumers to receive
B
      supply of electricity from a person other than the person – distribution
      licensee of his area of supply. So far as captive consumers/captive users
      are concerned, no such permission of the State Commission is required
      and by operation of law namely Section 9 captive generation and
      distribution to captive users is permitted. Therefore, so far as the captive
C     consumers / captive users are concerned, they are not liable to pay the
      additional surcharge under Section 42(4) of the Act, 2003. In the case of
      the captive consumers/captive users, they have also to incur the
      expenditure and/or invest the money for constructing, maintaining or
      operating a captive generating plant and dedicated transmission lines.
      Therefore, as such the Appellate Tribunal has rightly held that so far as
D
      the captive consumers/captive users are concerned, the additional
      surcharge under sub-section (4) of Section 42 of the Act, 2003 shall not
      be leviable.
              14. Even otherwise, it is required to be noted that the consumers
      defined under Section 2(15) and the captive consumers are different
E     and distinct and they form a separate class by themselves. So far as
      captive consumers are concerned, they incur a huge expenditure/invest
      a huge amount for the purpose of construction, maintenance or operation
      of a captive generating plant and dedicated transmission lines. However,
      so far as the consumers defined under Section 2(15) are concerned,
F     they as such are not to incur any expenditure and/or invest any amount
      at all. Therefore, if the appellant is held to be right in submitting that
      even the captive consumers, who are a separate class by themselves
      are subjected to levy of additional surcharge under Section 42(4), in that
      case, it will be discriminatory and it can be said that unequals are treated
      equally. Therefore, it is to be held that such captive consumers/captive
G     users, who form a separate class other than the consumers defined under
      Section 2(15) of the Act, 2003, shall not be subjected to and/or liable to
      pay additional surcharge leviable under Section 42(4) of the Act, 2003.
            15. In view of the above and for the reasons stated above, the
      present appeals fail and deserve to be dismissed and are accordingly
H
MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO.                                   415
   LTD. v. M/S. JSW STEEL LIMITED [M. R. SHAH, J.]

dismissed. However, in the facts and circumstances of the case there             A
shall be no order as to costs.
        16. It is reported that pursuant to the interim order passed by this
Court dated 01.07.2019, staying the operation and implementation of the
impugned order passed by the Appellate Tribunal, the appellant –
distribution licensee has recovered the additional surcharge. Therefore,         B
as such once it is held that the captive consumers/captive users are not
liable to pay the additional surcharge leviable under Section 42(4) of the
Act, 2003, the appellant – distribution licensee has to refund the same.
However, considering the fact that there shall be huge liability on the
appellant – distribution license if they have to now refund the amount of
additional surcharge recovered at a stretch, we direct that the additional       C
surcharge already recovered from the captive consumers/captive users
shall be adjusted in the future wheeling charges bills.
      17. Present appeals are accordingly dismissed with the above
observations.
                                                                                 D
Divya Pandey                                                Appeals dismissed.




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